WEH Westcoast Hosp Cp

Execution of Key Strategic Elements Positions Red Lion Brand for Future Growth SPOKANE, Wash., Oct. 27 /PRNewswire-FirstCall/ -- Red Lion Hotels Corporation (NYSE:RLH) today announced results for the third quarter and the nine months ended September 30, 2005. Key Third Quarter Results -- RevPAR at system wide hotels increased by 5.5%, to $55.90 -- Revenues from continuing operations increased to $47.2 million -- Net income from continuing operations increased to $2.8 million -- Net income applicable to common shareholders increased to $6.8 million -- EBITDA from continuing operations increased to $10.8 million -- Completed the sale of six hotel properties -- Changed the company name to Red Lion Hotels Corporation -- Launched a new brand image and growth initiatives "This was a very active and positive quarter for our company. We demonstrated our commitment to the Red Lion brand by changing our company name, introducing our new brand image and announcing our plan to expand to 100 markets. We completed the sale of six non-core hotel properties under our asset sale program and our capital reinvestment program is on track. Renovations progressed at three of our company-owned hotels and we are pleased with the gains in ADR achieved at these hotels. The results were in line with our expectations and validate our renovation strategy," said Mr. Arthur M. Coffey, President and CEO of Red Lion Hotels Corporation. Financial Results Total revenues from continuing operations during the quarter were $47.2 million, up 0.3% from the same quarter of 2004. Revenues in the hotel segment were up 1.7% to $43.0 million. This increase was due to a 4.2% increase in RevPAR, which was partially offset by a decline in banquet revenue from reduced group business. Franchise and management revenues increased 15.9% to $0.8 million. Revenues in the entertainment segment were down $0.7 million or 27.8%, due to the fact that no shows were presented during the quarter, compared to four shows in the same quarter last year. Revenues in the real estate segment grew modestly to $1.3 million. EBITDA from continuing operations was $10.8 million, up 4.6% from the same quarter of 2004, reflecting a slightly improved profit margin. Net income from continuing operations was $2.8 million, or $0.22 per fully diluted share, up 6.1% from the same quarter last year. Net income applicable to common shareholders was $6.8 million, or $0.51 per fully diluted share, up 93.2% from the same quarter last year, and includes a $2.7 million net after-tax gain from the sale of non-core hotel properties. Total revenues from continuing operations for the nine months ended September 30, 2005 were $126.9 million, up 1.7% from the same period last year. EBITDA from continuing operations increased 2.7%, to $20.1 million. Net income from continuing operations was $0.6 million, or $0.05 per fully diluted share, down 53.2%% from the same period last year. Net income applicable to common shareholders was $5.4 million, or $0.41 per fully diluted share, up 240% from the same period last year, and includes a $2.7 million net after-tax gain from the sale of non-core hotel properties. Hotel Operations In the third quarter of 2005, RevPAR (revenue per available room) for comparable system-wide hotels (hotels owned, leased, managed and franchised for at least one year) increased by 5.5% over the same quarter of the previous year, to $55.90. This increase was primarily the result of a 4.7% increase in ADR (average daily rate) to $78.92, and a 0.6 point increase in average occupancy. RevPAR from continuing operations at owned and leased hotels increased by 4.2%, driven by a 4.7% increase in ADR and offset by a 0.3 point decline in average occupancy. Average occupancy has not been adjusted to reflect out-of-service rooms related to the renovation program. Hotel revenues from continuing operations increased 1.7%, to $43.0 million. This was due to the 4.2% increase in RevPAR, and partially offset by the previously discussed decline in banquet revenue associated with reduced group business. Hotel operating expenses increased 1.6%, to $31.4 million. Hotel gross margin was unchanged at 27.0%. "This marks the seventh consecutive quarter of RevPAR growth at Red Lion Hotels. We continued to improve our hotel metrics despite the potential for disruptions related to our renovation program. This demonstrates that our plan to minimize disruption and displacement at locations undergoing renovation is proceeding successfully," commented John Taffin, Executive Vice President, Hotel Operations. "We also continued to focus on elevating our service standards. Our newly expanded service training program is designed to reinforce the high standards of personal connection and service that represent the 'Red Lion Way.'" The company's new service training program will be implemented across all hotels in the Red Lion network, beginning with the newly renovated hotels. This first phase of the program is designed to capitalize on the synergies between the physical enhancements made to the hotels and the company's increased focus on connecting with guests on a personal level. The program will be instituted at all owned, managed and franchised hotels. Capital Reinvestment Program and Renovation Update In the quarter, the company continued renovations at the Red Lion Hotel Seattle Airport in Washington, Red Lion Hotel Boise Downtowner in Idaho and the Red Lion Hotel Kelso in Washington. Third quarter results from these three hotels showed significant growth in ADR that contributed to their aggregate RevPAR growth, despite lower occupancy rates caused by renovated rooms being out of service. Renovations at these hotels are scheduled to be completed during the fourth quarter of 2005. In October, renovations commenced at additional hotels and by year-end, 17 hotels will either be undergoing or have completed the renovation process. The company expects rate increases at these hotels, followed by growth in average occupancy as the upgrades are completed and all of the rooms are made available. The full scope of this $40 million capital reinvestment plan involves the upgrade of 31 company-owned Red Lion Hotels by mid-2006, giving the company a strong network of upgraded hotels as it enters the high travel season in the summer of 2006. Recent Events In the quarter, the company completed the sales of six hotel properties generating aggregate gross proceeds of $25.4 million. In addition, the company has non-contingent sale agreements in place for another hotel and the Crescent Court commercial complex, which are expected to close in the fourth quarter and generate gross proceeds of $24.2 million. The company also has contingent agreements for the sale of two other hotels. The company is selling these non-core assets to finance its $40 million capital reinvestment program. There are two remaining hotel properties that the company continues to market under this program. In July, the company completed the sale of a fifty percent interest in the Kalispell Center retail and hotel complex in Kalispell, Montana. The purchaser was GVD Commercial Properties, Inc., an experienced developer that will help drive a multi-phase expansion and renovation of the retail property and allow the company to focus on its core hotel business. Also in July 2005, Red Lion launched its newly designed website, http://www.redlion.com/, another key element in the company's plan to enhance its infrastructure. Among the site's many industry-leading tools and functions are reference rates that give a guest an idea of costs even if the guest does not know travel dates, the ability to compare Red Lion's rates against rates on other travel sites, online access to a live reservation agent and online redemption of the company's proprietary "Only4Me Web Deals." After focusing for the past several years on developing a modern, scalable and efficient infrastructure, the company unveiled its new and revitalized brand image in September 2005. To demonstrate its commitment to the Red Lion brand, the company also changed its name from WestCoast Hospitality Corporation (NYSE:WEH) to Red Lion Hotels Corporation (NYSE:RLH). In addition, the company adopted a new corporate logo which communicates the strength, vitality and aggressiveness that represent today's Red Lion. The new logo is available for viewing at http://www.redlion.com/graphics. Also in September 2005, the company announced its growth strategy that leverages its brand equity in the Western U.S. to expand the Red Lion brand to more than 100 markets over the next five years. The initial focus of the expansion program will be in major cities in California, Arizona, Colorado, Minnesota and Texas. At the end of September 2005, the company highlighted the revitalized Red Lion brand and launched its new franchise initiative at The Lodging Conference in Phoenix, Arizona. "This is an exciting time for our company. During the quarter, we continued to execute on our plan to rejuvenate the Red Lion brand and implement our growth strategy. We are laying the foundation that will support our growth, and we will continue to implement our strategies to expand the Red Lion brand," Coffey concluded. Conference Call The company will host a conference call at 11:00 a.m. PDT (2:00 p.m. EDT) on Thursday, October 27, 2005 to discuss earnings for the third quarter of 2005. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-639-6205. International callers should dial 703-925-2608. There is no pass code required for this call. This conference call will also be broadcast live over the Internet and can be accessed by all interested parties at http://www.redlion.com/, in the Investor Relations portion 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 shortly after the call on the Red Lion website for 90 days. About Red Lion Hotels Corporation Red Lion Hotels Corporation is a hospitality and leisure company primarily engaged in the ownership, management, development and franchising of upper mid-scale, full service hotels under its Red Lion(R) brand. The RLH hotel network is comprised of over 66 hotels located in 11 states and one Canadian province, with more than 11,600 rooms and 564,000 square feet of meeting space. The company also operates an entertainment and event ticket distribution business and a real estate business that develops, manages and brokers sales and leases of commercial real estate. The company is headquartered in Spokane, WA. For more information, please visit our website at http://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 and managing and leasing properties owned by third parties; 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 2004 fiscal year and in other documents filed by the company with the Securities and Exchange Commission. Contact: Red Lion Hotels Corporation Julie Langenheim, Investor Relations Manager 509-777-6322 or CCG Investor Relations Crocker Coulson, President 310-231-8600 ext. 103 Red Lion Hotels Corporation Consolidated Statements of Operations (unaudited) ($ in thousands, except footnotes) Three months ended September 30, 2005 2004 $ Change % Change Revenue: Hotels $43,021 $42,295 $726 1.7% Franchise and management 810 699 111 15.9% Entertainment 1,828 2,533 (705) -27.8% Real estate 1,258 1,234 24 1.9% Other 298 296 2 0.7% Total revenues 47,215 47,057 158 0.3% Operating expenses: Hotels 31,417 30,920 497 1.6% Franchise and management 145 360 (215) -59.7% Entertainment 1,607 2,349 (742) -31.6% Real estate 961 799 162 20.3% Other 248 195 53 27.2% Depreciation and amortization 2,950 2,657 293 11.0% Hotel facility and land lease 1,718 1,728 (10) -0.6% Gain on asset dispositions, net (550) (133) (417) -313.5% Undistributed corporate expenses 1,058 672 386 57.4% Total expenses 39,554 39,547 7 0.0% Operating income 7,661 7,510 151 2.0% Other income (expense): Interest expense (3,607) (3,661) 54 1.5% Minority interest in partnerships, net (168) (55) (113) -205.5% Other income, net 374 226 148 65.5% Income from continuing operations before income taxes 4,260 4,020 240 6.0% Income tax expense 1,449 1,371 78 5.7% Net income from continuing operations 2,811 2,649 162 6.1% Discontinued operations: Income from operations of discontinued business units, net of income tax expense of $685 and $457 1,245 849 396 46.6% Net gain on disposal of discontinued business units, net of income tax expense of $1,487 2,702 -- 2,702 Income from discontinued operations 3,947 849 3,098 364.9% Net income and income applicable to common shareholders $6,758 $3,498 $3,260 93.2% EBITDA(1) $17,248 $12,690 $4,558 35.9% EBITDA as a percentage of revenues(2) 31.5% 22.7% EBITDA from continuing operations(1) $10,817 $10,338 $479 4.6% EBITDA from continuing operations(2) as a percentage of revenues 22.9% 22.0% (1) The definition of "EBITDA" and how that measure relates to net income is discussed further in this release under Non-GAAP Financial Measures. EBITDA represents net income (or loss) before interest expense, income tax benefit or expense, depreciation, and amortization. EBITDA is not intended to represent net income as defined by generally accepted accounting principles in the United States and such information should not be considered as an alternative to net income, cash flows from operations or any other measure of performance prescribed by generally accepted accounting principles in the United States. We utilize EBITDA because management believes that investors find it to be a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core on- going operations. EBITDA from continuing operations is calculated in the same manner, but excludes the operating activities of business units identified as discontinued. (2) The calculation of EBITDA as a percentage of revenues is based upon total operating revenues, from both continuing and discontinued operations, of $54,819,000 and $55,987,000 for the three months ended September 30, 2005 and 2004, respectively. EBITDA from continuing operations as a percentage of revenues is based upon the operating results of continuing business units as presented in the statements. Red Lion Hotels Corporation Earnings Per Share and Hotel Statistics (unaudited) (shares in thousands) Three months ended September 30, 2005 2004 Earnings per common share: Basic Income applicable to common shareholders before discontinued operations(1) $0.22 $0.20 Income from discontinued operations 0.30 0.07 Income applicable to common shareholders $0.52 $0.27 Diluted Income applicable to common shareholders before discontinued operations(1) $0.22 $0.20 Income on discontinued operations 0.29 0.06 Income applicable to common shareholders $0.51 $0.26 Weighted average shares - basic 13,120 13,059 Weighted average shares - diluted(2) 13,445 13,345 Key Comparable Hotel Statistics: Three months ended September 30, 2005 2004 $ Change % Change Combined (owned, leased, managed and franchised)(3) Average occupancy(4) 70.8% 70.3% ADR(5) $78.92 $75.39 $3.53 4.7% RevPAR(6) $55.90 $52.97 $2.93 5.5% (1) The net income used to calculate the net earnings per share applicable to common shareholders before discontinued operations includes all dividends on the retired cumulative preferred shares if applicable for the period presented. (2) For the three months ended September 30, 2005, 39,113 outstanding options to purchase common shares were considered dilutive, of the 1,018,895 options outstanding as of that date. For the three months ended September 30, 2004, none of the 593,033 options to purchase common shares outstanding as of that date were considered dilutive. In addition, the 286,161 convertible operating partnership ("OP") units were considered dilutive and are therefore included in the calculation of diluted weighted average shares for both those same periods. (3) Includes all hotels owned, leased, managed and franchised for greater than one year by Red Lion Hotels Corporation. No adjustment has been made for hotels classified as discontinued operations. (4) Average occupancy represents total paid rooms divided by total available rooms. Total available rooms represents the number of rooms available multiplied by the number of days in the reported period. (5) Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests. (6) Revenue per available room ("RevPAR") represents total room and related revenues divided by total available rooms. Red Lion Hotels Corporation Consolidated Statements of Operations (unaudited) ($ in thousands, except footnotes) Nine months ended September 30, 2005 2004 $ Change % Change Revenue: Hotels $112,786 $109,726 $3,060 2.8% Franchise and management 2,228 2,021 207 10.2% Entertainment 7,246 7,951 (705) -8.9% Real estate 3,716 4,171 (455) -10.9% Other 931 870 61 7.0% Total revenues 126,907 124,739 2,168 1.7% Operating expenses: Hotels 89,503 87,422 2,081 2.4% Franchise and management 408 823 (415) -50.4% Entertainment 6,396 6,998 (602) -8.6% Real estate 2,689 2,504 185 7.4% Other 709 607 102 16.8% Depreciation and amortization 8,671 7,733 938 12.1% Hotel facility and land lease 5,203 5,506 (303) -5.5% Gain on asset dispositions, net (857) (529) (328) -62.0% Undistributed corporate expenses 3,061 2,305 756 32.8% Total expenses 115,783 113,369 2,414 2.1% Operating income 11,124 11,370 (246) -2.2% Other income (expense): Interest expense (10,806) (10,164) (642) -6.3% Minority interest in partnerships, net (153) (11) (142) 1290.9% Other income, net 459 480 (21) -4.4% Income from continuing operations before income taxes 624 1,675 (1,051) -62.7% Income tax expense (benefit) 33 411 (378) 92.0% Net income from continuing operations 591 1,264 (673) -53.2% Discontinued operations: Income from operations of discontinued business units, net of income tax expense of $1,137 and $372 2,073 691 1,382 -200.0% Net gain on disposal of discontinued business units, net of income tax expense of $1,487 2,702 -- 2,702 Income from discontinued operations 4,775 691 4,084 591.0% Net income 5,366 1,955 3,411 174.5% Preferred stock dividend -- (377) 377 100.0% Income applicable to common shareholders $5,366 $1,578 $3,788 240.1% EBITDA(1) $28,638 $23,764 $4,874 20.5% EBITDA as a percentage of revenues(2) 19.5% 16.2% EBITDA from continuing operations(1) $20,101 $19,572 $529 2.7% EBITDA from continuing operations (2) as a percentage of revenues 15.8% 15.7% (1) The definition of "EBITDA" and how that measure relates to net income is discussed further in this release under Non-GAAP Financial Measures. EBITDA represents net income (or loss) before interest expense, income tax benefit or expense, depreciation, and amortization. EBITDA is not intended to represent net income as defined by generally accepted accounting principles in the United States and such information should not be considered as an alternative to net income, cash flows from operations or any other measure of performance prescribed by generally accepted accounting principles in the United States. We utilize EBITDA because management believes that investors find it to be a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core on- going operations. EBITDA from continuing operations is calculated in the same manner, but excludes the operating activities of business units identified as discontinued. (2) The calculation of EBITDA as a percentage of revenues is based upon total operating revenues, from both continuing and discontinued operations, of $147,057,000 and $146,553,000 for the nine months ended September 30, 2005 and 2004, respectively. EBITDA from continuing operations as a percentage of revenues is based upon the operating results of continuing business units as presented in the statements. Red Lion Hotels Corporation Earnings Per Share and Hotel Statistics (unaudited) (shares in thousands) Nine months ended September 30, 2005 2004 Earnings per common share: Basic Income applicable to common shareholders before discontinued operations(1) $0.05 $0.07 Income on discontinued operations 0.36 0.05 Income applicable to common shareholders $0.41 $0.12 Diluted Income applicable to common shareholders before discontinued operations(1) $0.05 $0.07 Income on discontinued operations 0.36 0.05 Income applicable to common shareholders $0.41 $0.12 Weighted average shares - basic 13,096 13,043 Weighted average shares - diluted(2) 13,317 13,330 Key Comparable Hotel Statistics: Nine months ended September 30, 2005 2004 $ Change % Change Combined (owned, leased, managed and franchised)(3) Average occupancy(4) 62.8% 61.1% ADR(5) $74.49 $72.36 $2.13 2.9% RevPAR(6) $46.78 $44.19 $2.59 5.9% (1) The net income or loss used to calculate the net earnings or loss per share applicable to common shareholders before discontinued operations includes all dividends on the retired cumulative preferred shares if applicable for the period presented. (2) For the nine months ended September 30, 2005, 28,606 outstanding options to purchase common shares were considered dilutive, of the 1,018,895 options outstanding as of that date. For the nine months ended September 30, 2004, 752 options of the 593,033 options to purchase common shares outstanding as of that date were considered dilutive. In addition, the 286,161 convertible operating partnership ("OP") units were considered dilutive and are therefore included in the calculation of diluted weighted average shares for both those same periods. (3) Includes all hotels owned, leased, managed and franchised for greater than one year by Red Lion Hotels Corporation. No adjustment has been made for hotels classified as discontinued operations. (4) Average occupancy represents total paid rooms divided by total available rooms. Total available rooms represents the number of rooms available multiplied by the number of days in the reported period. (5) Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests. (6) Revenue per available room ("RevPAR") represents total room and related revenues divided by total available rooms. Red Lion Hotels Corporation Consolidated Balance Sheets (unaudited) ($ in thousands, except share data) September 30, December 31, 2005 2004 Assets: Current assets: Cash and cash equivalents $27,327 $9,577 Restricted cash 8,863 4,092 Accounts receivable, net 10,053 8,464 Inventories 1,792 1,831 Prepaid expenses and other 2,147 3,286 Assets held for sale: Assets of discontinued operations 42,567 61,757 Other assets held for sale 715 1,599 Total current assets 93,464 90,606 Property and equipment, net 229,080 223,132 Goodwill 28,042 28,042 Intangible assets, net 13,050 13,641 Other assets, net 8,727 9,191 Total assets $372,363 $364,612 Liabilities: Current liabilities: Accounts payable $4,128 $4,841 Accrued payroll and related benefits 5,068 4,597 Accrued interest payable 672 700 Advance deposits 250 188 Other accrued expenses 14,948 7,322 Long-term debt, due within one year 3,581 7,455 Liabilities of discontinued operations 14,058 22,879 Total current liabilities 42,705 47,982 Long-term debt, due after one year 127,145 125,756 Deferred income 7,958 8,524 Deferred income taxes 15,977 15,992 Minority interest in partnerships 9,044 2,548 Debentures due Red Lion Hotels Capital Trust 47,423 47,423 Total liabilities 250,252 248,225 Stockholders' equity: Preferred stock - 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding -- -- Common stock - 50,000,000 shares authorized; $0.01 par value; 13,127,200 and 13,064,626 shares issued and outstanding 131 131 Additional paid-in capital, common stock 84,825 84,467 Retained earnings 37,155 31,789 Total stockholders' equity 122,111 116,387 Total liabilities and stockholders' equity $372,363 $364,612 Red Lion Hotels Corporation Consolidated Statement of Cash Flows (unaudited) ($ in thousands) Nine months ended September 30, 2005 2004 Operating activities: Net income $5,366 $1,955 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,774 9,574 Gain on disposition of property, equipment and other assets, net (752) (530) Gain on disposition of discontinued operations, net (4,189) -- Deferred income tax provision (15) 2,047 Minority interest in partnerships 153 (68) Equity in investments 53 (89) Compensation expense related to stock issuance 138 -- Provision for doubtful accounts 160 188 Change in current assets and liabilities: Restricted cash (2,105) 320 Accounts receivable (1,920) (1,635) Inventories 80 103 Prepaid expenses and other 1,061 (742) Accounts payable (682) (1,443) Accrued payroll and related benefits 261 1,185 Accrued interest payable (41) 25 Other accrued expenses and advance deposits 7,818 3,411 Net cash provided by operating activities 14,160 14,301 Investing activities: Purchases of property and equipment (13,615) (19,069) Proceeds from disposition of property and equipment 4,808 198 Proceeds from disposition of discontinued operations 14,938 -- Proceeds from disposition of investment -- 94 Investment in Red Lion Hotels Capital Trust -- (1,423) Advances to Red Lion Hotels Capital Trust (20) (2,116) Distributions from equity investee 117 449 Proceeds from collections under note receivable 493 1,725 Other, net 82 30 Net cash provided by (used in) investing activities 6,803 (20,112) Financing activities: Proceeds from note payable to bank 50 11,000 Repayment of note payable to bank (50) (11,000) Proceeds from debenture issuance -- 47,423 Repurchase and retirement of preferred stock -- (29,412) Proceeds from long-term debt 3,875 83 Repayment of long-term debt (7,164) (3,335) Proceeds from issuance of common stock under employee stock purchase plan 151 113 Preferred stock dividend payments -- (1,011) Proceeds from option exercises 69 140 Additions to deferred financing costs (318) (50) Net cash provided by (used in) financing activities (3,387) 13,951 Net cash in discontinued operations 174 (224) Change in cash and cash equivalents: Net increase (decrease) in cash and cash equivalents 17,750 7,916 Cash and cash equivalents at beginning of period 9,577 7,884 Cash and cash equivalents at end of period $27,327 $15,800 Red Lion Hotels Corporation Additional Hotel Statistics (unaudited) System Hotels as of September 30, 2005 Meeting Space Hotels Rooms (sq. ft.) Owned or Leased Hotels:(1) Red Lion Hotels 33 6,089 308,828 WestCoast Hotels 3 692 40,500 36 6,781 349,328 Managed Hotels: Red Lion Hotels 1 150 5,234 WestCoast Hotels 1 72 1,800 Other Brands 1 254 36,000 3 476 43,034 Franchised Hotels: Red Lion Hotels 26 4,138 156,801 WestCoast Hotels 1 257 15,000 27 4,395 171,801 Total 66 11,652 564,163 Comparable Hotel Statistics(2) Three months ended Three months ended September 30, 2005 September 30, 2004 Average Average Occupancy(3) ADR(4) RevPAR(5)Occupancy(3) ADR(4)RevPAR(5) Owned or Leased Hotels: Continuing Operations 73.0% $79.47 $57.99 73.3% $75.90 $55.64 Discontinued Operations 63.8% 69.20 44.16 59.8% 65.63 39.28 71.6% 78.13 55.96 71.3% 74.64 53.24 Combined System Wide(6) 70.8% $78.92 $55.90 70.3% $75.39 $52.97 Red Lion Hotels (Owned, Leased, Managed and Franchised)(7) 70.6% $77.81 $54.96 70.8% $74.51 $52.72 Nine months ended Nine months ended September 30, 2005 September 30, 2004 Average Average Occupancy(3) ADR(4) RevPAR(5)Occupancy(3) ADR(4)RevPAR(5) Owned or Leased Hotels: Continuing Operations 64.8% $74.35 $48.16 62.8% $72.20 $45.35 Discontinued Operations 48.2% 65.23 31.47 46.7% 62.95 29.39 62.3% 73.32 45.71 60.5% 71.15 43.01 Combined System Wide(6) 62.8% $74.49 $46.78 61.1% $72.36 $44.19 Red Lion Hotels (Owned, Leased, Managed and Franchised)(7) 63.6% $73.31 $46.62 61.9% $71.46 $44.26 (1) Statistics include 5 hotels identified as discontinued business units, aggregating 993 rooms and 50,000 square feet of meeting space. (2) Includes all hotels owned, leased, managed and franchised for greater than one year by Red Lion Hotels Corporation. (3) Average occupancy represents total paid rooms divided by total available rooms. Total available rooms represents the number of rooms available multiplied by the number of days in the reported period. (4) Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests. (5) Revenue per available room ("RevPAR") represents total room and related revenues divided by total available rooms. (6) Includes all hotels owned, leased, managed and franchised for greater than one year by Red Lion Hotels Corporation. No adjustment has been made for hotels classified as discontinued operations. (7) Includes all hotels owned, leased, managed and franchised for greater than one year operated under the Red Lion brand name. No adjustment has been made for hotels classified as discontinued operations. Red Lion Hotels Corporation Reconciliation of EBITDA to Net Income (unaudited) ($ in thousands) The following is a reconciliation of EBITDA and EBITDA from continuing operations to net income for the periods presented: Three months ended Nine months ended September 30, September 30, 2005 2004 2005 2004 EBITDA from continuing operations $10,817 $10,338 $20,101 $19,572 Income tax expense - continuing operations (1,449) (1,371) (33) (411) Interest expense - continuing operations (3,607) (3,661) (10,806) (10,164) Depreciation and amortization - continuing operations (2,950) (2,657) (8,671) (7,733) Net income from continuing operations 2,811 2,649 591 1,264 Income from discontinued operations 3,947 849 4,775 691 Net income $6,758 $3,498 $5,366 $1,955 EBITDA $17,248 $12,690 $28,638 $23,764 Income tax expense (3,621) (1,827) (2,662) (783) Interest expense (3,884) (4,082) (11,836) (11,452) Depreciation and amortization (2,985) (3,283) (8,774) (9,574) Net income $6,758 $3,498 $5,366 $1,955 NON-GAAP FINANCIAL MEASURES EBITDA is defined as net income (or loss), before interest, taxes, depreciation and amortization. EBITDA is considered a non-GAAP financial measurement. We believe it is a useful financial performance measure for us and for our shareholders and is a complement to net income and other financial performance measures provided in accordance with generally accepted accounting principles in the United States ("GAAP"). EBITDA from continuing operations is calculated in the same manner, but excludes the operating results of business units identified as discontinued under GAAP. We use EBITDA to measure the financial performance of our owned and leased hotels because it excludes interest, taxes, depreciation and amortization, which bear little or no relationship to operating performance. By excluding interest expense, EBITDA measures our financial performance irrespective of our capital structure or how we finance our properties and operations. We generally pay federal and state income taxes on a consolidated basis, taking into account how the applicable taxing laws apply to our company in the aggregate. By excluding taxes on income, we believe EBITDA provides a basis for measuring the financial performance of our operations excluding factors that our hotels and other operations cannot control. By excluding depreciation and amortization expense, which can vary from hotel to hotel based on historical cost and other factors unrelated to the hotels' financial performance, EBITDA measures the financial performance of our hotels without regard to their historical cost. For all of these reasons, we believe that EBITDA provides us and investors with information that is relevant and useful in evaluating our business. However, because EBITDA excludes depreciation and amortization, it does not measure the capital we require to maintain or preserve our long-lived assets. In addition, because EBITDA does not reflect interest expense, it does not take into account the total amount of interest we pay on outstanding debt nor does it show trends in interest costs due to changes in our borrowings or changes in interest rates. EBITDA, as defined by us, may not be comparable to EBITDA as reported by other companies that do not define EBITDA exactly as we define the term. Because we use EBITDA to evaluate our financial performance, we reconcile all EBITDA measures to net income, which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity. DATASOURCE: Red Lion Hotels Corporation CONTACT: Julie Langenheim, Investor Relations Manager of Red Lion Hotels Corporation, +1-509-777-6322, or ; or Crocker Coulson, President of CCG Investor Relations, +1-310-231-8600, ext. 103, or , for Red Lion Hotels Corporation Web site: http://www.redlion.com/

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