SPOKANE, WA, August 4, 2011 - Red Lion Hotels Corporation (NYSE: RLH), a western U.S. based owner and franchisor of midscale hotels, today announced its results for the second quarter ended June 30, 2011.
Comparable hotel basis operating results for the periods included in this release exclude the results of the Red Lion Hotel on Fifth Avenue in Seattle, which was sold in the second quarter of 2011. Following the sale, this property continues to operate as a franchised hotel and, therefore, the company is required to report its financial results in continuing operations.
Total revenue reported during the second quarter was $45.4 million. Revenue from hotels of $39.3 million increased slightly compared to $38.6 million in the prior year period. Second quarter 2011 reported net income was $18.6 million, or $0.97 per diluted share, compared to a net loss of $0.1 million, or $0.00 per share, for the prior year period. Second quarter 2011 results include a $33.5 million gain on the sale of Seattle Fifth Avenue which is classified as a special item. EBITDA from continuing operations before special items for the second quarter of 2011 was $5.6 million, compared to $7.5 million for the second quarter of 2010. On a comparable hotel basis, EBITDA from continuing operations before special items was $4.6 million for the quarter compared to $6.1 million in the prior year period.
"The completion of the sale of our Seattle Fifth Avenue property was an important first step in our strategy to restructure our balance sheet and reduce debt," said President and Chief Executive Officer Jon E. Eliassen. "Unlocking the real estate value on the Seattle property while maintaining the hotel as a franchise affords us the balance sheet flexibility to reduce debt, retire leases or use sale proceeds for other company needs."
Summary results for the second quarter and six months ended June 30, 2011 and June 30, 2010 follow:
Second Quarter 2011 Results
In the second quarter of 2011, comparable owned and leased hotels occupancy increased 290 basis points to 61.3 percent and ADR increased 1.2 percent to $82.20, both contributing to a 6.3 percent increase in comparable RevPAR year over year. Including franchised hotels, system wide RevPAR on a comparable basis for the quarter increased 6.5 percent, due to a 390 basis point increase in occupancy, with ADR remaining relatively flat.
Second quarter hotel revenue on a comparable basis of $36.1 million increased 3.7 percent from $34.8 million in the prior year period. Rooms revenue increased approximately $1.6 million or 6.3 percent, due to an increase in occupancy and ADR. Food and beverage revenue on a comparable basis declined slightly to $8.6 million versus $8.8 million in the prior year period primarily due to reduced banquet business. Hotel direct operating margin on a comparable basis declined to 22.2 percent during the quarter from 24.6 percent in the same period in 2010. This decline was driven by an increase in operating expenses including labor cost, utility costs and repairs and maintenance.
Franchise revenue remained essentially flat at $0.9 million in the second quarter of 2011. Profitability in the segment was impacted by an increase in lease costs relating to the company's subleased and franchised Sacramento property.
Revenue in the entertainment segment increased $2.3 million to $4.6 million, driven by a successful 11-day run of Wicked in the Best of Broadway series. Profitability in the entertainment segment was $0.5 million, despite reduced margins in the ticketing portion of the business.
Six Months Ended June 30, 2011 Results
Total revenue on a comparable hotel basis for the six months ended June 30, 2011 was $73.7 million versus $70.2 million in the prior year period. Comparable revenue from hotels of $63.4 million was up $0.8 million, or 1.3 percent. Comparable hotel direct operating margin declined to 16.2 percent from 19.2 percent in the prior year period.
RevPAR for comparable owned and leased hotels increased 3.2 percent driven by a 140 basis point increase in occupancy and a 0.6 percent increase in ADR. Including franchised hotels, system wide RevPAR on a comparable basis for the period increased 4.7 percent due to a 250 basis point increase in occupancy, while ADR remained flat.
Liquidity and Balance Sheet
As of June 30, 2011, the company had approximately $51.5 million in cash and cash equivalents. The company used a portion of the proceeds from the sale of the Seattle Fifth Avenue property to retire the line of credit that was secured by the property. The balance of the proceeds will be used to further reduce debt and lease obligations and for other corporate purposes.
As of June 30, 2011, the company had outstanding debt of $106.3 million, including $30.8 million of trust preferred securities. The company is negotiating a refinance of $24.6 million in debt classified as current.
Capital expenditures for the six months ended June 30, 2011, totaled $3.1 million for hotel improvement projects.
On June 14, 2011, the company entered into a franchise agreement on the Seattle Fifth Avenue property under which the hotel will continue to operate as a Red Lion.
On May 19, 2011, the company announced that a 109-room limited service hotel in Rancho Cordova officially converted to the Red Lion brand. The Red Lion Inn Rancho Cordova is located near Sacramento, increasing the company's brand presence in California.
Outlook for 2011
The company is reaffirming its RevPAR guidance for 2011, previously provided on May 5, 2011, based on the outlook for the markets in which the company operates and information available today:
Conference Call Information
The company will conduct a conference call on August 4, 2011 at 2:00 p.m. Pacific Time (5:00 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 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) 230-1085. International callers should dial (612) 288-0329.
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 4:00 p.m. Pacific Time on August 4, 2011, through September 4, 2011, at (800) 475-6701 or (320) 365-3844 (International) access code - 210796. 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 June 30, 2011, the RLH hotel network was comprised of 44 hotels located in eight states and one Canadian province, with 8,457 rooms and 424,387 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