Red Lion Hotels Corporation
WESTCOAST HOSPITALITY CORP(Form: 8-K/A, Received: 03/15/2002 12:19:48)      

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): December 31, 2001

WESTCOAST HOSPITALITY CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

WASHINGTON

(State or Other Jurisdiction of Incorporation)

       001-13957                                                  91-1032187
------------------------                                     -------------------
(Commission File Number)                                      (I.R.S. Employer
                                                             Identification No.)

201 W. North River Drive, Suite 100
Spokane, Washington 99201

(Address of Principal Executive Offices)

(509) 459-6100

(Registrant's Telephone Number, Including Area Code)



 
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS

On December 31, 2001, WestCoast Hospitality Corporation (Company) acquired all of the outstanding stock of Red Lion Hotels, Inc., a Delaware corporation (Red Lion). The seller was Doubletree Corporation, a Delaware corporation (Seller).

As of the date of the acquisition and this disclosure, Red Lion owns nine hotel properties, holds the lessee interest on long term leases for 12 hotel properties (one of which is held through its wholly owned subsidiary Boise-Red Lion/Down-Towner, Inc., an Idaho corporation), franchises the Red Lion brand and system to 22 independently owned hotel properties, holds marketing and brand license agreements with four hotels located in Seattle and Yakima, Washington; Austin, Texas; and Denver, Colorado, and holds operating assets supporting those assets and operations. Red Lion used those assets and operations prior to the acquisition in the conduct of its hospitality business, which the Company intends to continue.

The transaction is fully described in and was completed in accordance with a Purchase Agreement dated December 21, 2001, among the Company, Seller and Hilton Hotels Corporation.

The total purchase price was Fifty Million Six Hundred Twenty-Eight Thousand Six Hundred Thirty-Nine Dollars ($50,628,639), which was paid at closing as follows:
Forty percent (40%) (Twenty Million Two Hundred Fifty One Thousand Five Hundred Thirty Nine Dollars ($20,251,539)) in cash; thirty percent (30%) by issuance to Seller of 303,771 shares of the Company's Series A Preferred Stock; and thirty percent (30%) by issuance to Seller of 303,771 shares of the Company's Series B Preferred Stock. The source of funds for the cash portion of the purchase price was loan proceeds from the Company's credit facility with U.S. Bank National Association and the other financial institutions party thereto.

The purchase price was negotiated at arm's length between the Company and Seller, which is an unrelated third party.

This Form 8-K/A amends the Form 8-K filed on January 15, 2002 to include the financial information required under Regulation S-X.


 
ITEM 7. Financial Statements and Exhibits

(a) Financial statements of business acquired

See Exhibits 99.4 and 99.5

(b) Pro forma financial information

See Exhibit 99.6

(c) Exhibits

99.4 Audited combined financial statements of Red Lion

99.5 Unaudited combined financial statements of Red Lion

99.6 Pro forma condensed combined balance sheet and statement of operations of WestCoast Hospitality Corporation and Red Lion as of and for the nine months ended September 30, 2001 and for the year ended December 31, 2000.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.


Dated: March 15, 2002           WESTCOAST HOSPITALITY CORPORATION


                                By:  /s/  Arthur M. Coffey
                                ------------------------------------------------
                                Executive Vice President/Chief Financial Officer


 


 
EXHIBIT 99.4

Red Lion

Combined Financial Statements
Year Ended December 31, 2000


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Red Lion Hotels, Inc.

We have audited the accompanying combined balance sheet of certain Red Lion and Doubletree Hotels (collectively "Red Lion"), as defined in Note 1, as of December 31, 2000 and the related combined statements of income and stockholder's net investment, and cash flows for the year then ended. These financial statements are the responsibility of Red Lion's management. Our responsibility is to express an opinion on these combined financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. These statements require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such combined financial statements present fairly, in all material respects, the financial position of Red Lion at December 31, 2000 and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

BDO Seidman, LLP

February 8, 2002
Spokane, Washington


RED LION

COMBINED BALANCE SHEET


DECEMBER 31, 2000

ASSETS

CURRENT ASSETS

      Cash and equivalents                                      $  3,687,830
      Accounts receivable, net of allowance for possible
           losses of approximately $111,500                        3,277,276
      Inventories                                                    775,473
      Prepaid expenses, deposits and other                           894,102
      Deferred income taxes (Note 6)                                 411,297
------------------------------------------------------------------------------


TOTAL CURRENT ASSETS                                               9,045,978

PROPERTY AND EQUIPMENT, net (Notes 1, 3 and 7)                    45,486,263
INTANGIBLE ASSETS, net (Notes 1 and 4)                            46,529,467
------------------------------------------------------------------------------

TOTAL ASSETS                                                    $101,061,708
==============================================================================

LIABILITIES AND STOCKHOLDER'S NET INVESTMENT

CURRENT LIABILITIES

      Accounts payable                                          $  1,476,982
      Accrued expenses (Note 5)                                    3,833,559
------------------------------------------------------------------------------

TOTAL CURRENT LIABILITIES                                          5,310,541

DEFERRED INCOME TAXES (Note 6)                                    13,123,382
------------------------------------------------------------------------------

TOTAL LIABILITIES                                                 18,433,923

COMMITMENTS (Note 7)

STOCKHOLDER'S NET INVESTMENT                                      82,627,785
------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDER'S NET INVESTMENT              $101,061,708
==============================================================================

See accompanying notes to combined financial statements.

3

RED LION

COMBINED STATEMENT OF INCOME AND STOCKHOLDER'S NET INVESTMENT


YEAR ENDED DECEMBER 31, 2000

REVENUES

      Hotels and restaurants                                       $ 81,811,772
      Other fees and income                                           2,696,678
--------------------------------------------------------------------------------

TOTAL REVENUES                                                       84,508,450
--------------------------------------------------------------------------------

OPERATING EXPENSES
      Hotel and restaurant operations                                50,515,812
      Management fees (Note 8)                                        2,535,277
      Other operating expenses (Note 8)                              24,644,067
      Depreciation and amortization of tangible assets (Note 3)       4,235,675
      Amortization of intangible assets (Note 4)                      1,256,800
--------------------------------------------------------------------------------

TOTAL EXPENSES                                                       83,187,631
--------------------------------------------------------------------------------

OPERATING INCOME                                                      1,320,819

OTHER EXPENSE                                                           707,020
--------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                              613,799

INCOME TAX PROVISION (Note 6)                                           118,000
--------------------------------------------------------------------------------

NET INCOME                                                              495,799

NET TRANSFERS TO HILTON (Note 1)                                       (553,134)

STOCKHOLDER'S NET INVESTMENT, beginning of year                      82,685,120
--------------------------------------------------------------------------------

STOCKHOLDER'S NET INVESTMENT, end of year                          $ 82,627,785
================================================================================

See accompanying notes to combined financial statements.

4

RED LION

COMBINED STATEMENT OF CASH FLOWS


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

YEAR ENDED DECEMBER 31, 2000

CASH FLOWS FROM OPERATING ACTIVITIES

      Net income                                                    $   495,799
      Adjustments to reconcile net income to net cash provided by
           operating activities:
                Depreciation and amortization                         5,492,475
                Deferred income tax benefit                            (859,659)
      Changes in assets and liabilities:
           Accounts receivable                                          (86,257)
           Inventories                                                  (89,925)
           Prepaid expenses, deposits and income taxes refundable       317,715
           Accounts payable and accrued expenses                        754,559
--------------------------------------------------------------------------------

Net cash provided by operating activities                             6,024,707
--------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
      Additions to property and equipment                            (3,258,865)
--------------------------------------------------------------------------------

Net cash used by investing activities                                (3,258,865)
--------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
      Net transfers to Hilton                                          (553,134)
--------------------------------------------------------------------------------


Net cash used by financing activities                                  (553,134)
--------------------------------------------------------------------------------

CHANGE IN CASH AND CASH EQUIVALENTS
      Net increase in cash and cash equivalents                       2,212,708
      Cash and cash equivalents, beginning of year                    1,475,122
--------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, end of year                              $ 3,687,830
================================================================================

See accompanying notes to combined financial statements.

5

RED LION

NOTES TO COMBINED FINANCIAL STATEMENTS


1.   ORGANIZATION    Red Lion Hotels, Inc. is a wholly-owned subsidiary of
     AND BASIS OF    Doubletree Corporation. Red Lion Hotels, Inc. and
     PRESENTATION    Doubletree Corporation are primarily engaged in the
                     ownership, management and development of hotels and the
                     franchising of lodging properties.

                     On November 30, 1999, Red Lion Hotels, Inc. and Doubletree
                     Corporation were included with numerous other entities that
                     were acquired by Hilton Hotels Corporation ("Hilton")
                     through Hilton's acquisition of Promus Hotel Corporation
                     ("Promus"). The acquisition of Promus by Hilton was a
                     business combination accounted for under the purchase
                     method of accounting. The purchase price was allocated to
                     the estimated fair values of the liabilities assumed and
                     the assets acquired (including identifiable intangibles
                     related to leases and the Red Lion brand name). At the time
                     of the Promus acquisition, Red Lion Hotels, Inc.'s assets
                     and operations included several hotels in addition to the
                     hotels owned by Red Lion Hotels, Inc., which were sold in
                     2001 to WestCoast Hospitality Corporation ("WestCoast").

                     On December 31, 2001, WestCoast acquired all of the
                     outstanding stock of Red Lion Hotels, Inc. from Doubletree
                     Corporation. As of the date of the acquisition, Red Lion
                     Hotels, Inc. owned nine hotel properties, held the lessee
                     interest on long-term leases for 12 hotel properties,
                     franchised the Red Lion brand and system to 22
                     independently owned hotel properties, held marketing and
                     brand license agreements with four hotels located in
                     Seattle and Yakima, Washington; Austin, Texas; and Denver,
                     Colorado, and held operating assets supporting those assets
                     and operations. Red Lion Hotels, Inc. uses those assets and
                     operations in the conduct of its hospitality business in
                     select markets throughout the United States, predominately
                     in the western states.

                     The combined financial statements include the accounts of
                     the nine owned and 12 leased hotel properties, which were
                     owned by Red Lion Hotels, Inc. at the time Red Lion Hotels,
                     Inc. was acquired by WestCoast and reflect the historical
                     results of operations and cash flows of these hotel
                     properties, and certain intangible assets of Red Lion
                     Hotels, Inc. related to those operations. All of these
                     properties were

                                                                               6



                                                                        RED LION


                                          NOTES TO COMBINED FINANCIAL STATEMENTS


under the common ownership of Red Lion Hotels, Inc. as of and for the year ended December 31, 2000; and are collectively referred to as "Red Lion." All significant intercompany transactions and accounts have been eliminated in the combined financial statements. The combined financial statements do not include the franchise and marketing operations of Red Lion Hotels, Inc., which was also acquired by WestCoast, as these revenues and expenses were not separated from other corporate operations. The accounts of other entities and properties or franchises under the common ownership of Red Lion Hotels, Inc., which were not included in the acquisition by WestCoast, have also not been included in the combined financial statements.

During the period presented in these financial statements, Red Lion was an integral part of Hilton's overall operations and separate financial statements were not prepared for Red Lion. The accompanying financial statements have been prepared from the historical accounting records of Red Lion and are based upon the purchase price allocation of the assets and liabilities acquired by Hilton in the Promus acquisition and the historical results of operations of the Red Lion properties.

7

RED LION

NOTES TO COMBINED FINANCIAL STATEMENTS


The properties included in the combined financial statements are as follows:


Owned properties:

Red Lion Eureka
Red Lion Port Angeles
Red Lion Redding
Red Lion Richland - Hanford House
Red Lion Aberdeen
Red Lion Bend - South
Red Lion Kalispell
Red Lion Klamath Falls
Doubletree Pasco

Leased properties:
Red Lion Sacramento
Red Lion Missoula
Red Lion Astoria
Red Lion Bend - North
Red Lion Coos Bay
Red Lion Eugene
Red Lion Medford
Red Lion Pendleton
Red Lion Kelso/Longview
Red Lion at the Quay
Red Lion Wenatchee
Doubletree Boise - Downtown

Stockholder's net investment in these combined financial statements represents Hilton's net investment in Red Lion (through Hilton's wholly-owned subsidiaries, Red Lion Hotels, Inc. and Doubletree Corporation). The net transfers to Hilton represent the change in intercompany payables and receivables between Hilton and the Red Lion properties for the period, which had not been settled as of December 31, 2000. The financial information included herein may not reflect the financial status, operating results, changes in stockholder's net investment and cash flows of Red Lion in the future or what they would have been had Red Lion been a separate stand-alone entity during the period presented.

8

RED LION

NOTES TO COMBINED FINANCIAL STATEMENTS


                     The combined financial statements of Red Lion include fees
                     paid to Hilton affiliates in connection with the management
                     of the hotels, including centralized legal, accounting,
                     treasury, real estate, information technology,
                     distribution, customer service, sales and marketing, and
                     other Hilton corporate services and infrastructure costs.
                     These fees have been determined on the bases that Hilton
                     and Red Lion consider to be reasonable reflections of the
                     utilization of services provided or the benefit received by
                     Red Lion. Additionally, the combined financial statements
                     include an allocated marketing fee, which is paid to Hilton
                     for centralized marketing expenses related to the Red Lion
                     properties. The management fee and other costs and expenses
                     were principally allocated to Red Lion based on revenues,
                     headcount, or number of hotel rooms. No intercompany
                     interest expense has been allocated to, or included in, the
                     accompanying combined financial statements.

                     These allocated costs and expenses, which management
                     believes are reasonable, may not necessarily be indicative
                     of the results that would have been attained by Red Lion
                     had it been operated as a separate entity.

2.   SUMMARY OF      CASH AND CASH EQUIVALENTS
     ACCOUNTING
     POLICIES        Cash equivalents consist of short-term, highly liquid
                     investments with remaining maturities at time of purchase
                     of three months or less. Red Lion places its cash with high
                     quality credit institutions. At times, cash balances may be
                     in excess of federal insurance limits.

                     INVENTORIES

                     Inventories consist of food and beverage products held for
                     sale at the properties operated by Red Lion. Inventories
                     are valued at the lower of cost, determined on a first-in,
                     first-out basis, or net realizable value.

                                                                               9



                                                                        RED LION


                                          NOTES TO COMBINED FINANCIAL STATEMENTS


PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. The cost of some property and equipment is based upon the estimated fair value determined in the acquisition by Hilton (Note 1). Depreciation is provided using the straight-line method over the lesser of the estimated useful lives of the related assets or the lease term. The service lives of assets are generally 40 years for buildings and eight years for building improvements and furniture and equipment.

Major additions and betterments are capitalized. Costs of maintenance and repairs, which do not improve or extend the lives of the respective assets are expensed currently. When items are disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized in operations.

INTANGIBLE ASSETS

Intangible assets consist of amounts allocated to the Red Lion brand name and long-term leases arising from the allocation of the purchase price of the acquisition which was in excess of the estimated fair values of tangible assets acquired and liabilities assumed (see Note 1).

The brand name was valued based on an independent valuation of the estimate of the amount of royalty income that could be generated from the brand name if it was licensed to an independent third-party owner. The resulting cash flow was discounted using the estimated weighted average cost of capital for the brand name. The brand name is amortized on a straight-line basis over 40 years. Accumulated amortization of the brand totaled approximately $705,000 at December 31, 2000.

Leases arising in connection with the purchase acquisition are amortized over the term of the related leases using the straight-line method. Accumulated amortization of leases totaled approximately $656,500 at December 31, 2000.

10

RED LION

NOTES TO COMBINED FINANCIAL STATEMENTS


IMPAIRMENT OF LONG-LIVED ASSETS

The carrying value of the Red Lion's long-lived assets are reviewed when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment loss has occurred based on expected future cash flows, then a loss is recognized in the statement of income using a fair value based model.

INCOME TAXES

The income tax attributes and operating results of Red Lion historically have been included in Hilton's consolidated U.S. and state income tax returns. The provision for income taxes in Red Lion's combined financial statements has been determined on a separate-return basis. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts.

REVENUE RECOGNITION

Revenue is generally recognized as services are performed. Owned and leased hotel revenue represents primarily room rental and food and beverage sales from owned and leased hotels.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that a company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase

11

RED LION

NOTES TO COMBINED FINANCIAL STATEMENTS


business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142 that a company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141.

SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that a company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires a company to complete a transitional goodwill impairment test six months from the date of adoption. Red Lion is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142.

The acquisition of Promus (which included Red Lion Hotels, Inc.) by Hilton was accounted for using the purchase method and no goodwill was allocated to the Red Lion Hotels, Inc. portion. As of December 31, 2000, the net carrying amount of intangible assets other than goodwill is approximately $46,529,000. Amortization expense during the year ended December 31, 2000 was approximately $1,256,800. Currently, Red Lion is assessing but has not yet determined how the adoption of SFAS 141 and SFAS 142 will impact its financial position and results of operations.

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES." The effective date for implementation of this new standard is January 1, 2001. Adoption of the statement had no impact on Red Lion's combined financial statements.

12

RED LION

NOTES TO COMBINED FINANCIAL STATEMENTS


In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101, which summarized the SEC's views and provides guidance on the topic of revenue recognition. Adoption of the SAB did not have any impact on Red Lion's results of operations.

ESTIMATES

                     The preparation of financial statements in conformity with
                     accounting principles generally accepted in the United
                     States of America requires management to make estimates and
                     assumptions that affect the reported amounts of assets and
                     liabilities and disclosure of contingent assets and
                     liabilities at the date of the financial statements and the
                     reported amounts of revenues and expenses during the
                     reporting periods. Actual results could differ from those
                     estimates.

3.   PROPERTY AND    Property and equipment at December 31, 2000 were as
     EQUIPMENT       follows:

                     Buildings and leasehold improvements      $   29,153,266
                     Furniture, fixtures and equipment             18,141,053
                     Landscaping and land improvements              1,119,692
                     -----------------------------------------------------------
                                                                   48,414,011

                     Less accumulated depreciation and
                     amortization                                   5,721,417
                     -----------------------------------------------------------
                                                                   42,692,594

                     Land                                           2,793,669
                     -----------------------------------------------------------

                                                               $   45,486,263
                     ===========================================================

4.   INTANGIBLE      Intangible assets at December 31, 2000 were as follows:
     ASSETS
                     Brand name                                $   26,032,000
                     Leases                                        21,859,000
                     -----------------------------------------------------------

                                                                   47,891,000

                     Less accumulated amortization                 (1,361,533)
                     -----------------------------------------------------------
                                                               $   46,529,467
                     ===========================================================




                                                                        RED LION

NOTES TO COMBINED FINANCIAL STATEMENTS


5. ACCRUED Accrued expenses at December 31, 2000 were as follows:
EXPENSES

Accrued compensation and benefits         $    2,855,582
Deposits                                         253,332
Accrued sales and occupancy tax                  536,706
Accrued property tax                              30,020
Other accrued expenses                           157,919
-----------------------------------------------------------

Total                                     $    3,833,559
===========================================================

6. INCOME TAXES Income taxes for the year ended December 31, 2000 were as follows:

Current:
     Federal                              $      795,659
     State                                       182,000
-----------------------------------------------------------

Total current expense                            977,659
-----------------------------------------------------------

Deferred:
     Federal                                    (718,659)
     State                                      (141,000)
-----------------------------------------------------------

Total deferred benefit                          (859,659)
-----------------------------------------------------------

Income tax provision                      $      118,000
===========================================================

The reconciliation of the federal income tax rate to Red Lion's effective rate for December 31, 2000 is as follows:

                                              Amount               Percent
-----------------------------------------------------------------------------
Provision at statutory rate               $      208,692              34.0%
Effect of tax credits                           (141,100)            (23.0)
State taxes, net of federal benefit               27,000               4.4
Other                                             23,408               3.8
-----------------------------------------------------------------------------
                                          $      118,000              19.2%
=============================================================================

14

RED LION

NOTES TO COMBINED FINANCIAL STATEMENTS


Components of the net deferred tax assets and liabilities at December 31, 2000 were as follows:

                                                               Deferred
                                             Deferred             Tax
                                            Tax Assets        Liabilities
-----------------------------------------------------------------------------
Property and equipment                    $    4,557,754    $            -
Compensation                                     368,910                 -
Reserves                                          42,387                 -
Intangible assets                                      -        17,681,136
-----------------------------------------------------------------------------

Totals                                         4,969,051        17,681,136

Current deferred taxes                           411,297                 -
-----------------------------------------------------------------------------

Noncurrent deferred taxes                 $    4,557,754    $   17,681,136
=============================================================================

7.   OPERATING       Red Lion leases certain hotel properties and land under
     LEASES          operating leases. As of December 31, 2000, 12 of the hotel
                     properties are leased. The leases require the payment of
                     rent equal to the greater of a fixed base rent or
                     percentage rent based on a percentage of revenue, and
                     expire through July 2020, with varying renewal options. The
                     lessor has a security interest in the leasehold
                     improvements on the properties.

                     The land leases represent ground leases for certain owned
                     hotels and, in addition to minimum base rental payments,
                     may require the payment of additional rents based on
                     varying percentages of revenue or income. Total rent
                     expense incurred under the hotel property and land leases
                     was approximately $6.1 million in 2000. Minimum lease
                     commitments under noncancellable operating leases,
                     approximate $5.3 million annually through 2002, $5.1
                     million annually from 2003 through 2005 and an aggregate
                     commitment thereafter of $76.7 million through 2020.

8.   RELATED PARTY   During 2000, Red Lion paid approximately $2.5 million for
     TRANSACTIONS    management fees and $1.6 million for marketing fees to
                     Hilton and affiliated entities (See Note 1).

15

RED LION

NOTES TO COMBINED FINANCIAL STATEMENTS


9.   FAIR VALUE      The following estimated fair value amounts have been
     OF FINANCIAL    determined using available market information and
     INSTRUMENTS     appropriate valuation methodologies. However, considerable
                     judgment is required to interpret market data and to
                     develop the estimates of fair value. Accordingly, the
                     estimates presented herein are not necessarily indicative
                     of the amounts Red Lion could realize in a current market
                     exchange.

                     The following methods and assumptions were used to estimate
                     the fair value of each class of financial instruments for
                     which it is practicable to estimate that value. Potential
                     income tax ramifications related to the realization of
                     unrealized gains and losses that would be incurred in an
                     actual sale or settlement have not been taken into
                     consideration.

                     The carrying amounts for cash and cash equivalents,
                     accounts receivable and current liabilities are reasonable
                     estimates of their fair values.

                     The estimated fair values of financial instruments at

December 31, 2000 is as follows:

                                             Carrying           Fair
                                              Amount            Value
-----------------------------------------------------------------------------
Financial assets:
     Cash and cash equivalents            $    3,687,830    $    3,687,830
     Accounts receivable                       3,277,276         3,277,276

Financial liabilities:
     Current liabilities                  $    5,310,541    $    5,310,541
=============================================================================

16

 


 
EXHIBIT 99.5

Red Lion

Combined Financial Statements
As of September 30, 2001
and for the nine months ended
September 30, 2001 and 2000

RED LION

COMBINED BALANCE SHEET (UNAUDITED)


SEPTEMBER 30, 2001

ASSETS

CURRENT ASSETS

      Cash and equivalents                                      $ 2,126,461
      Accounts receivable, net of allowance for possible
            losses of approximately $90,500                       3,380,279
      Inventories                                                   740,069
      Prepaid expenses, deposits and other                        1,101,063
      Deferred income taxes                                         411,297
--------------------------------------------------------------------------------

TOTAL CURRENT ASSETS                                              7,759,169

PROPERTY AND EQUIPMENT, net                                      45,952,755
INTANGIBLE ASSETS, net                                           45,586,867
--------------------------------------------------------------------------------

TOTAL ASSETS                                                    $99,298,791
================================================================================

LIABILITIES AND STOCKHOLDER'S NET INVESTMENT

CURRENT LIABILITIES

      Accounts payable and accrued expenses                     $ 6,172,401
--------------------------------------------------------------------------------

TOTAL CURRENT LIABILITIES                                         6,172,401

DEFERRED INCOME TAXES                                            13,123,382
--------------------------------------------------------------------------------

TOTAL LIABILITIES                                                19,295,783

STOCKHOLDER'S NET INVESTMENT                                     80,003,008
--------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDER'S NET INVESTMENT              $99,298,791
================================================================================

See accompanying notes to combined financial statements.

2

RED LION

COMBINED STATEMENT OF INCOME AND STOCKHOLDER'S NET INVESTMENT
(UNAUDITED)


NINE MONTHS ENDED SEPTEMBER 30, 2001 2000

REVENUES

      Hotels and restaurants                     $ 62,454,800      $ 63,541,222
      Other fees and income                         1,803,467         2,124,264
--------------------------------------------------------------------------------

TOTAL REVENUES                                     64,258,267        65,665,486
--------------------------------------------------------------------------------

OPERATING EXPENSES
      Hotel and restaurant operations              33,696,111        31,361,320
      Other operating expenses                     24,169,502        27,374,955
      Depreciation and amortization of
          tangible assets                           4,199,245         3,379,516
      Amortization of intangible assets               942,600           942,600
--------------------------------------------------------------------------------

TOTAL EXPENSES                                     63,007,458        63,058,391
--------------------------------------------------------------------------------

OPERATING INCOME                                    1,250,809         2,607,095

OTHER EXPENSE (INCOME)                                 (2,441)          192,371
--------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                          1,253,249         2,414,724

INCOME TAX PROVISION                                  352,000           770,000
--------------------------------------------------------------------------------

NET INCOME                                       $    901,249         1,644,724
================================================================================

See accompanying notes to combined financial statements.

3

RED LION

COMBINED STATEMENT OF CASH FLOWS (UNAUDITED)


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

NINE MONTHS ENDED SEPTEMBER 30,                                            2001             2000
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                                       $   901,249      $ 1,644,724
      Adjustments to reconcile net income to net cash provided by
            operating activities:
                  Depreciation and amortization                          5,141,845        4,648,971
      Changes in assets and liabilities:
            Accounts receivable                                           (103,002)        (971,525)
            Inventories                                                     35,404          685,548
            Prepaid expenses, deposits and income taxes refundable        (206,961)        (637,159)
            Accounts payable and accrued expenses                          861,860        1,515,887
------------------------------------------------------------------------------------------------------

Net cash provided by operating activities                                6,630,395       (6,886,446)
------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
      Additions to property and equipment                               (4,665,737)      (6,091,142)
------------------------------------------------------------------------------------------------------

Net cash used by investing activities                                   (4,665,737)      (6,091,142)
------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
      Net transfers to Hilton                                           (3,526,027)        (571,949)
------------------------------------------------------------------------------------------------------

Net cash used by financing activities                                   (3,526,027)        (571,949)
------------------------------------------------------------------------------------------------------

CHANGE IN CASH AND CASH EQUIVALENTS
      Net increase (decrease) in cash and cash equivalents              (1,561,369)         223,355
      Cash and cash equivalents, beginning of period                     3,687,830        1,475,122
------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, end of period                               $ 2,126,461      $ 1,698,477
======================================================================================================

See accompanying notes to combined financial statements.

4

RED LION

NOTES TO COMBINED FINANCIAL STATEMENTS


1.   ORGANIZATION     Red Lion Hotels, Inc. is a wholly-owned subsidiary of
     AND BASIS OF     Doubletree Corporation. Red Lion Hotels, Inc. and
     PRESENTATION     Doubletree Corporation are primarily engaged in the
                      ownership, management and development of hotels and the
                      franchising of lodging properties.

                      On December 31, 2001, WestCoast Hospitality Corporation
                      acquired all of the outstanding stock of Red Lion Hotels,
                      Inc. from Doubletree Corporation. The combined financial
                      statements include the accounts of the nine owned and 12
                      leased hotel properties, which were owned by Red Lion
                      Hotels, Inc. at the time Red Lion Hotels, Inc. was
                      acquired by WestCoast and reflect the historical results
                      of operations and cash flows of these hotel properties,
                      and certain intangible assets of Red Lion Hotels, Inc.
                      related to those operations. (collectively referred to as
                      "Red Lion").

2.   INTERIM          The unaudited combined financial statements included
     FINANCIAL        herein have been prepared by Red Lion (the Company)
     INFORMATION      pursuant to the rules and regulations of the Securities
                      and Exchange Commission (SEC). Certain and footnote
                      disclosures normally included in financial statements
                      prepared in accordance accepted accounting principles have
                      been condensed or omitted as permitted by such rules and
                      regulations. The Company believes that the disclosures
                      included herein are adequate; however, these combined
                      statements should be read in conjunction with the
                      financial statements and the notes thereto for the year
                      ended December 31, 2000 filed as Exhibit 99.4 of this Form
                      8-K/A.

                      In the opinion of management, these unaudited financial
                      statements contain all of the adjustments (normal and
                      recurring in nature) necessary to present fairly the
                      combined financial position of the Company at September
                      30, 2001 and the combined results of operations for the
                      nine months ended September 30, 2001 and 2000 and cash
                      flows for the nine months ended September 30, 2001 and
                      2000. The results of operations for the periods presented
                      may not be indicative of those, which may be expected for
                      a full year.

5

 


 
EXHIBIT 99.6

CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION

The following condensed pro forma combined balance sheet and condensed pro forma combined statements of operations, collectively, the "Pro Forma Financial Statements", were prepared by WestCoast Hospitality Corporation ("WestCoast"), to illustrate the estimated effects of the business combination to be accounted for as a purchase under generally accepted accounting principles. Effective December 31, 2001, WestCoast acquired all of the outstanding stock of Red Lion Hotels, Inc. (Red Lion).

The financial information of WestCoast and Red Lion has been combined as if the acquisition occurred as of January 1, 2000 for purposes of the condensed pro forma combined statement of operations, and as of September 30, 2001, for purposes of the condensed pro forma combined balance sheet. There are no differences between WestCoast's and Red Lion's accounting policies which are expected to have a material impact on the Pro Forma Financial Statements. The Pro Forma Financial Statements do not purport to present the combined financial position or results of operations if the combination had occurred at the beginning of the period or to project the combined financial position or results of operations for any future date or period.

The Pro Forma Financial Statements should be read in conjunction with the historical consolidated financial statements, including the notes thereto, of WestCoast Hospitality Corporation, which are included in the Company's 2000 Form 10K and the audited combined financial statements of Red Lion, which are included elsewhere in this document. The combined financial statements of Red Lion presented in Exhibit 99.4 include the accounts of the nine owned hotel properties and the 12 leased hotel properties which were acquired by WestCoast and reflect the historical results of operations and cash flows of these hotel properties, and certain intangible assets of Red Lion Hotels, Inc. related to those operations. The combined financial statements do not include the franchise and marketing operations of Red Lion Hotels, Inc., which was also acquired by WestCoast, as these revenues and expenses could not be specifically carved out of the corporate operations of Red Lion Hotels, Inc. for the separate combined financial statements. Therefore, the Pro Forma Financial Statements also exclude these revenues and expenses.

The Pro Forma Financial Statements are presented utilizing the purchase method of accounting whereby the fair value of the identified tangible and intangible assets acquired and the fair value of the liabilities assumed have been recorded. The purchase price was not in excess of these net assets acquired and therefore no goodwill has been recorded. The combined pro forma results of operations presented herein are not necessarily indicative of the future results of operations.


WESTCOAST/RED LION
CONDENSED COMBINED BALANCE SHEET AT SEPTEMBER 30, 2001 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
--------------------------------------------------------------------------------------------------------------------------
                                                            WESTCOAST         RED LION        PRO FORMA         PRO FORMA
                                                            HISTORICAL       HISTORICAL      ADJUSTMENTS        COMBINED
                                                           ------------     ------------     ------------     ------------
ASSETS:
   Current assets:
      Cash and cash equivalents                            $      3,587     $      2,127     $                $      5,714
      Accounts receivable                                         6,761            3,380                            10,141
      Inventories                                                 1,159              740                             1,899
      Prepaid expenses and deposits                               1,355            1,101                             2,456
      Deferred income taxes                                                          411             (411)(e)            0
                                                           ------------     ------------     ------------     ------------
            Total current assets                                 12,862            7,759             (411)          20,210

   Property and equipment, net                                  244,847           45,953          (10,624)(a)      280,176
   Intangible assets, net                                        28,255           45,587          (33,568)(b)       40,274
   Other assets, net                                             22,409                                             22,409
                                                           ------------     ------------     ------------     ------------
            Total assets                                   $    308,373     $     99,299     $    (44,603)    $    363,069
                                                           ============     ============     ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
   Current liabilities:
      Accounts payable and other accrued expenses          $      3,360     $      2,860     $      2,605 (c) $      8,825
      Accrued payroll and related benefits                        4,256            3,313                             7,569
      Accrued interest payable                                    2,362                                              2,362
      Income taxes payable                                        5,922                                              5,922
      Long-term debt, due within one year                         3,189                                              3,189
      Capital lease obligations, due within one year                393                                                393
                                                           ------------     ------------     ------------     ------------
            Total current liabilities                            19,482            6,173            2,605           28,260

   Long-term debt, due after one year                           114,653                                            114,653
   Notes payable to bank                                         33,100                            20,252 (d)       53,352
   Capital lease obligations, due after one year                    365                                                365
   Deferred income taxes                                         18,773           13,123          (17,834)(e)       14,062
   Minority interest in partnerships                              3,009                                              3,009
                                                           ------------     ------------     ------------     ------------
            Total liabilities                                   189,382           19,296            5,023          213,701
                                                           ------------     ------------     ------------     ------------

STOCKHOLDERS' EQUITY:
   Preferred stock                                         $          0                            30,377 (f)       30,377
   Common stock                                                     130                                                130
   Additional paid-in capital                                    83,966                                             83,966
   Retained earnings                                             34,895                                             34,895
   Stockholders' net investment                                                   80,003          (80,003)(g)
                                                           ------------     ------------     ------------     ------------
            Total stockholders' equity                          118,991           80,003          (49,626)         149,368
                                                           ------------     ------------     ------------     ------------
            Total liabilities and stockholders' equity     $    308,373     $     99,299     $    (44,603)    $    363,069
                                                           ============     ============     ============     ============

SEE NOTES TO CONDENSED PRO FORMA COMBINED BALANCE SHEET AND STATEMENT OF OPERATIONS


WESTCOAST/RED LION
CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------------------------------------------------
                                                            WESTCOAST         RED LION        PRO FORMA         PRO FORMA
                                                            HISTORICAL       HISTORICAL      ADJUSTMENTS        COMBINED
                                                           ------------     ------------     ------------     ------------
REVENUES:
   Hotels and Restaurants                                  $    106,540     $     84,508     $                $    191,048
   Franchise, Central Services and Development                    3,643                                              3,643
   TicketsWest                                                    5,705                                              5,705
   Real Estate Division                                           9,540                                              9,540
   Corporate Services                                               378                                                378
                                                           ------------     ------------     ------------     ------------
            Total revenues                                      125,806           84,508                0          210,314
                                                           ------------     ------------     ------------     ------------

OPERATING EXPENSES:
   Direct:
      Hotels and Restaurants                                     78,626           77,695                           156,321
      Franchise, Central Services and Development                 1,207                                              1,207
      TicketsWest                                                 5,702                                              5,702
      Real Estate Division                                        4,378                                              4,378
      Corporate Services                                            227                                                227
      Depreciation and amortization of tangible assets            9,578            4,236           (3,537)(h)       10,277
      Amortization of intangible assets                             874            1,257           (1,023)(h)        1,108
                                                           ------------     ------------     ------------     ------------
            Total direct expenses                               100,592           83,188           (4,560)         179,220

   Undistributed corporate expenses                               1,666                0                             1,666
                                                           ------------     ------------     ------------     ------------
            Total expenses                                      102,258           83,188           (4,560)         180,886
                                                           ------------     ------------     ------------     ------------

Operating income                                                 23,548            1,320            4,560           29,428

Other income (expense), net                                     (14,421)            (707)            (980)(i)      (16,108)
                                                           ------------     ------------     ------------     ------------
Income before income taxes                                        9,127              613            3,580           13,320
Income tax provision (benefit)                                    3,306              118            1,400 (j)        4,824
                                                           ------------     ------------     ------------     ------------
Income from continuing operations before
   nonrecurring charges or credits directly
   attributable to the transaction                         $      5,821     $        495            2,180     $      8,496
                                                           ============     ============
Preferred stock dividends                                                                          (2,582)          (2,582)
                                                                                             ------------     ------------
Income available to common shareholders                                                      $       (402)    $      5,914
                                                                                             ============     ============

Net income per share - basic and diluted                   $       0.45                                       $       0.46
                                                           ============                                       ============

Weighted average shares outstanding - basic                      12,941                                             12,941
                                                           ============                                       ============

Weighted average shares outstanding - diluted                    13,237                                             13,237
                                                           ============                                       ============

SEE NOTES TO CONDENSED PROFORMA COMBINED BALANCE SHEET AND STATEMENT OF OPERATIONS
WESTCOAST/RED LION
CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------------------------------------------------
                                                            WESTCOAST         RED LION        PRO FORMA         PRO FORMA
                                                            HISTORICAL       HISTORICAL      ADJUSTMENTS        COMBINED
                                                           ------------     ------------     ------------     ------------
REVENUES:
   Hotels and Restaurants                                  $     78,541     $     64,258     $                $    142,799
   Franchise, Central Services and Development                    2,571                                              2,571
   TicketsWest                                                    5,645                                              5,645
   Real Estate Division                                           7,411                                              7,411
   Corporate Services                                               246                                                246
                                                           ------------     ------------     ------------     ------------
            Total revenues                                       94,414           64,258                0          158,672
                                                           ------------     ------------     ------------     ------------
OPERATING EXPENSES:
   Direct:
      Hotels and Restaurants                                     57,174           57,865                           115,039
      Franchise, Central Services and Development                 1,254                                              1,254
      TicketsWest                                                 5,342                                              5,342
      Real Estate Division                                        3,412                                              3,412
      Corporate Services                                            132                                                132
      Depreciation and amortization of tangible assests           7,637            4,199           (3,675)(h)        8,161
      Amortization of goodwill and intangible assets                642              943             (767)(h)          818
                                                           ------------     ------------     ------------     ------------
            Total direct expenses                                75,593           63,007           (4,442)         134,158

      Undistributed corporate expenses                            1,756                                              1,756
                                                           ------------     ------------     ------------     ------------
            Total expenses                                       77,349           63,007           (4,442)         135,914
                                                           ------------     ------------     ------------     ------------

Operating income                                                 17,065            1,251            4,442           22,758

Other income (expense), net                                      (4,161)               2             (735)(i)       (4,894)
                                                           ------------     ------------     ------------     ------------
Income before income taxes                                       12,904            1,253            3,707           17,864
Income tax provision                                              4,749              352            1,473 (j)        6,574
                                                           ------------     ------------     ------------     ------------
Income from continuing operations before
   nonrecurring charges or credits directly
   attributable to the transaction                         $      8,155     $        901            2,234           11,290
                                                           ============     ============
Preferred stock dividends                                                                          (1,937)(k)       (1,937)
                                                                                             ------------     ------------
Income available to common shareholders                                                      $        297     $      9,353
                                                                                             ============     ============

Net income per share - basic and diluted                   $       0.63                                       $       0.72
                                                           ============                                       ============

Weighted average shares outstanding - basic                      12,951                                             12,951
                                                           ============                                       ============

Weighted average shares outstanding - diluted                    13,237                                             13,237
                                                           ============                                       ============

SEE NOTES TO CONDENSED PROFORMA COMBINED BALANCE SHEET AND STATEMENT OF OPERATIONS
NOTES TO CONDENSED PRO FORMA COMBINED BALANCE SHEET AND STATEMENTS OF OPERATIONS

WestCoast acquired Red Lion Hotels, Inc. on December 31, 2001. The acquisition has been accounted for as a purchase. The purchase price has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed as follows (in thousands):

Purchase price and liabilities assumed:

   Cash paid through draw on line-of-credit                      $  20,252
   Preferred stock issued                                           30,377
   Cost of acquisition and other liabilities assumed                 2,673
                                                                 ---------
Total purchase price and liabilities assumed                     $  53,302
                                                                 =========

Fair value of assets acquired:
   Identified intangibles                                        $  12,019
   Deferred taxes related to the acquisition                         4,711
   Net current assets                                                1,243
   Property and equipment                                           35,329
                                                                 ---------
                                                                 $  53,302
                                                                 =========

The following balance sheet adjustments were made to reflect the combination of WestCoast and Red Lion as of September 30, 2001.

(a) The purchase price has been allocated to the acquired land, buildings, furniture and fixtures as follows based upon the estimated fair value of the components (in thousands):

                                                          Depreciable
                                              Amount         Life
                                            ----------    -----------
Land                                        $   11,993
Buildings                                       20,559      35 years
Furniture and fixtures                           2,777      15 years
                                            ----------
                                            $   35,329
Red Lion historical carrying value              45,953
                                            ----------
Pro forma adjustment                        $  (10,624)
                                            ==========


(b) The fair value of the identified intangible assets are as follows (in thousands):

Brand name                                  $    6,878
Leases                                           4,332
Franchise agreements                               809
                                            ----------
                                            $   12,019

Red Lion historical carrying value              45,587
                                            ----------
Pro forma adjustment                        $  (33,568)
                                            ==========

The leases and franchise agreements are being amortized over the average remaining term of the agreements of 30 years and 9 years, respectively. The brand name is considered to have an indefinite remaining life and is therefore not being amortized.

(c) Represents the cost of acquisition and other liabilities assumed of $2,673,000 reduced by $68,000 as the difference between the actual net current assets (excluding deferred taxes) at September 30, 2001 and the net current assets of $1,234,000 as defined by the purchase agreement.

(d) Represents the amount of the purchase price which will be financed by the Company's revolving line-of-credit agreement.

(e) Represents the net adjustment to recognize deferred tax assets resulting from the difference between the historical tax basis of the assets and the purchase price of the acquisition as follows (in thousands):

Net deferred tax asset                                $   4,711
Red Lion historical net deferred tax liability          (12,712)
                                                      ---------
Pro forma adjustment                                  $ (17,423)
                                                      =========

(f) Represents the amount of the purchase price which will be financed through issuance of preferred stock.

(g) Represents the elimination of Red Lion historical net equity.

The following adjustments were made to the pro forma statements of operations to reflect the combination of WestCoast and Red Lion as if they occurred on January 1, 2000. The combined pro forma results of operations presented herein are not necessarily indicative of the future results of operations of the combined companies.


(h) Represents the change in depreciation and amortization expense from the historical amounts for Red Lion based on the depreciation and amortization of the allocated purchase price over the estimated remaining lives of the acquired assets as follows (in thousands):

                                           Depreciation      Amortization
                                            ----------        ----------
Year ended December 31, 2000
   Red Lion historical expense              $    4,236        $    1,257
   Expense based on allocation
       of purchase price                           699               234
                                            ----------        ----------
   Pro Forma Adjustment                     $   (3,537)       $   (1,023)
                                            ==========        ==========

Nine months ended September 30, 2001
   Red Lion historical expense                   4,199               943
   Expense based on allocation
       of purchase price                           524               176
                                            ----------        ----------
   Pro Forma adjustment                     $   (3,675)       $     (767)
                                            ==========        ==========

(i) Represents the additional interest expense which would be incurred by the Company based on the purchase price of Red Lion, which will be financed under the Company's revolving line-of-credit agreement. The interest rate used in the pro forma adjustments was 4.8375% based upon the borrowing rate under the Company's line-of-credit agreement as of December 31, 2001. If the rate increased or decreased by 0.25%, the Company's pro forma interest expense, net income and earnings per share for the nine months ended September 30, 2001 would increase or decrease by approximately $38 thousand, $25 thousand, and $0.0, respectively. If the rate increased or decreased by 0.25%, the Company's pro forma interest expense, net income and earnings per share for the year ended December 31, 2000 would increase or decrease by approximately $51 thousand, $32 thousand and $0.0, respectively.

(j) Represents estimated income taxes related to the tax effects of the acquisition and the pro forma adjustments based on the Company's historical effective tax rate.

(k) Represents dividends which would be incurred by the Company related to the $30,377,000 of preferred stock issued as part of the purchase price.