Red Lion Hotels Corporation (the “Company”) (NYSE: RLH), a
hospitality company doing business as RLH Corporation which
franchises midscale and economy hotels, today reported first
quarter 2020 results and provided an update regarding financial and
operational activities in light of the ongoing COVID-19 pandemic.
First Quarter Highlights
- Closed the quarter with $37.8
million in cash and cash equivalents, no corporate debt, and only
$5.6 million in debt secured by our hotel RL Olympia in our joint
venture.
- Net loss attributable to RLH
Corporation for the first quarter of 2020 was $(8.1) million or
$(0.32) per share compared to a net loss of $(4.3) million or
$(0.17) per share in the prior year period. The year-over-year
change was primarily driven by $9.7 million of bad debt expense
largely resulting from the economic impact of COVID-19 on
receivable balances such as those associated with Inner Circle and
other former franchisees. Net loss this quarter also included a
$1.8 million asset impairment on the Red Lion Hotel Seattle Airport
primarily due to the impact of COVID-19, a $1.3 million loss
associated with the retirement of debt, and $0.5 million of
employee separation costs. This was partially offset by a
$7.9 million gain from the disposal of two hotel properties.
- Adjusted EBITDA for the quarter was
$(10.3) million compared to $1.0 million for the prior year
period.
- In the core franchise hotel
segment, first quarter revenues were $10.9 million compared to
$13.0 million in the prior year period; Core Adjusted EBITDA was a
loss of $(10.0) million, compared to a loss of $(0.4) million in
the prior year period.
- Executed 70 franchise agreements,
an increase of 25% year-over-year. The agreements are comprised of
6 midscale hotels and 64 economy hotels; of these, 16 are for new
locations. Offsetting new franchise agreements were 44
terminations, a 21% improvement year-over-year, comprised of 1
midscale hotel and 43 economy hotels.
- Completed the sale of Hotel RL
Washington D.C. and Red Lion Hotel Anaheim for net proceeds of $9.0
million, after closing costs, property level debt repayments and
required credit facility repayment.
RLH Corporation Interim CEO John Russell stated,
“At the start of the year, we were seeing positive results from the
strategic plan we implemented to focus on our franchise growth.
This was evident with the increase in signed contracts and decrease
in terminations year-over-year. However, as the impact of COVID-19
became more prevalent across the industry, the effect of
stay-at-home orders and the unprecedented reduction of travel
stalled our positive momentum meaningfully and new signings have
slowed in April. In response, we took difficult but decisive action
that allowed us to best concentrate our focus on the long-term
success of our franchisees and our Company. While occupancy is down
significantly, the vast majority of the Company’s franchise hotels
have remained open and we have implemented programs to support our
franchisees. Our franchisees are there to support the front-line
heroes in this fight including health care providers, long distance
truckers and traveling front line workers. We applaud these heroes
for their efforts and recognize our franchisees for continuing to
offer respite to these essential workers.”
Mr. Russell continued, “We ended the quarter
with nearly $38 million of cash and no corporate level debt. We
have taken significant steps to withstand this temporary
disruption, including accelerating our reduction in cost structure.
As we navigate through this difficult time, we will continue to
work with our franchisees to make sure they have the resources
necessary to operate their hotels now, and a plan for their full
return in the future. We would like to thank all of our franchisees
and RLHC team members for their dedication as we work toward
building a strong recovery.”
First Quarter 2020 Financial
Results
The Company reported a net loss to RLH
Corporation of $(8.1) million or $(0.32) per share in the first
quarter compared to a net loss of $(4.3) million or $(0.17) per
share in the prior year period. The year-over-year change is
attributable to first quarter bad debt expense of $9.7 million
largely resulting from the economic impact of COVID-19 on
receivable balances such as those associated with Inner Circle and
other former franchisees, a $1.8 million asset impairment on the
Red Lion Hotel Seattle Airport primarily due to the impact of
COVID-19, a $1.3 million loss associated with the retirement of
debt, and $0.5 million of employee separation costs. This was
partially offset by a $7.9 million gain from the sale of two hotel
properties.
Adjusted EBITDA for the first quarter was a loss
of $(10.3) million compared to $1.0 million for the first quarter
of 2019. The change reflects lower contribution from the sale of
the owned hotels, lower royalty revenues due to the impact of
franchise terminations and increased expenses primarily related to
bad debt.
Royalty fees were $4.4 million compared to $5.7
million in the prior year quarter primarily due to terminated hotel
agreements and the impact of COVID-19 on midscale brands, which
generally pay royalties and marketing fees as a percentage of gross
rooms’ revenues.
Selling, general, administrative and other
expenses, which include franchise sales, operations and corporate
costs and bad debt expense, were $16.3 million compared to $7.4
million in the year-ago period. The increase was driven by
recognition of $9.7 million in bad debt expense which includes $6.3
million related to Inner Circle.
Core Franchise Operations
The following table provides results for the
Company’s core franchised hotel segment:
($ in thousands) |
For the quarter ended March 31, |
|
|
|
2020 |
|
2019 |
Change |
|
Revenue: |
|
|
|
|
|
|
|
|
Royalty |
$ |
4,357 |
|
|
|
$ |
5,740 |
|
|
(24.1 |
)% |
|
Marketing, reservations and reimbursables |
5,805 |
|
|
|
|
|
6,729 |
|
|
(13.7 |
)% |
|
Other franchise |
774 |
|
|
|
|
|
542 |
|
|
42.8 |
% |
|
Total revenues |
10,936 |
|
|
|
|
|
13,011 |
|
|
(15.9 |
)% |
|
Core Adjusted
EBITDA: |
|
|
|
|
|
|
|
|
Core Adjusted EBITDA |
(9,967 |
) |
|
|
|
(428 |
) |
|
NM |
|
Royalty revenue mix for the first quarter of
2020 was 72% from economy hotels and 28% from midscale hotels.
During the first quarter of 2020, the Company
executed 70 franchise agreements an increase of 25% year-over-year,
comprised of 6 midscale hotels and 64 economy hotels, versus 56
agreements in the year-ago period. Of the 70 contracts signed
during the quarter, 16 are for new locations.
Offsetting new contracts in the quarter were 44
terminations, a 21% improvement year-over-year, which included 1
midscale hotel and 43 economy hotels.
COVID-19 Update
The Company has taken a number of steps in response to the
pandemic, which include the following:
- Reduced spend to enhance liquidity- Reduction of workforce and
compensation across executive ranks, staff and board of
directors- Consolidation of office space by closing the
Spokane office and sub-leasing surplus office space- Suspension of
non-essential CapEx programs
- Measures to support franchisees- Royalty and Marketing Fee
deferral program for all brands- Temporary fee reduction for review
responses, guest relations and other fees- Delay of capital
intensive brand standards- Provided information on legislative
relief that may be available to franchisees
On April 23 the Company announced the receipt of $4.2 million in
proceeds from a loan entered into pursuant to the Paycheck
Protection Program. Subsequent to our receipt of those funds, the
US government issued new guidance, effective retroactively, that
introduced significant ambiguity to certain eligibility
requirements, particularly for publicly traded companies. While the
Company believes that the eligibility requirements in place at the
time of the loan application were met, it does not appear that the
new eligibility requirements are met. The Company made the decision
to return the proceeds of the loan in May.
While the Company saw solid momentum in
franchise sales in the first quarter, as travel has been
meaningfully impacted by COVID-19, the Company saw a notable
slowdown in agreements to date in the second quarter. On April 2,
2020, the Company announced it has withdrawn its guidance of
signing 60 to 80 franchise agreements for new locations in 2020 due
to the impact of COVID-19.
Balance Sheet and Liquidity
As of March 31, 2020, RLH Corporation had cash
and cash equivalents of $37.8 million. The Company had debt of $5.6
million comprised solely of one hotel mortgage in its joint
venture. Adjusted free cash flow for the three months ended March
31, 2020 was approximately $6.1 million as compared to $5.4 million
for the three months ended March 31, 2019.
Hotel Sales
On February 7, 2020, the Company completed the
sale of its Hotel RL Washington D.C. for $16.35 million in gross
proceeds.
On February 27, 2020, the Company completed the
sale of its Red Lion Hotel Anaheim for $21.5 in gross proceeds.
Proceeds were used to repay the Company’s $10 million credit
facility, with the remaining funds being used to fund franchise
growth opportunities and general business purposes.
In addition, the Company has listed its Hotel RL
Baltimore for sale and continues the marketing process for the
Hotel RL Olympia. The timing and proceeds of the hotel sales are
subject to buyer negotiation, market conditions, and the
availability of buyer financing, all of which have been disrupted
due to the COVID-19 pandemic.
Conference Call Information
RLH Corporation will host a conference call on
Friday, May 8 at 9:00 AM Eastern Time, to discuss the results for
interested investors, analyst and portfolio managers. To
participate in the conference call, please dial the following
number 10 minutes prior to the scheduled time: (877) 407-8289.
International callers should dial (201) 689-8341.
This conference call will also be webcast live
on www.rlhco.com in the Investor Relations section of the website.
To listen to the live call, please go to the RLH Corporation
website at least 15 minutes prior to the start of the call to
register and to download and install any necessary audio software.
For those unable to participate during the live broadcast, a replay
will be available at approximately 11:00 AM Eastern Time on May 8
through midnight May 22, 2020 at (877) 660-6853 or (International)
(201) 612-7415, using access code 13698294. The replay will also be
available shortly after the call on the RLH Corporation
website.
To learn more about franchising with RLH Corporation, visit
franchise.rlhco.com. We don’t wait for the future. We create
it.
About RLH Corporation
Red Lion Hotels Corporation is an innovative
hotel company doing business as RLH Corporation, which focuses on
the franchising of midscale and economy hotels. The Company strives
to maximize return on invested capital for hotel owners across
North America through relevant brands, industry-leading technology
and forward-thinking services. For more information, please visit
the company’s website at www.rlhco.com.
Forward Looking Statements
This press release contains forward-looking
statements within the meaning of federal securities law, including
statements concerning operational and financial impacts of the
COVID-19 pandemic, 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,
risks associated with our asset light model; relationships with our
franchisees and properties; competitive conditions in the lodging
industry; economic cycles; changes in future demand and supply for
hotel rooms; international conflicts and conditions; impact of
government regulations; ability to obtain financing; changes in
energy, healthcare, insurance and other operating expenses; ability
to sell non-core assets; the extent and duration of the COVID-19
pandemic; dependency upon the ability and experience of executive
officers and ability to retain or replace such officers as well as
other risks and uncertainties discussed in the Company's annual
report on Form 10-K for the year ended December 31, 2019, and
in other documents filed by the Company with the Securities
and Exchange Commission. The forward-looking statements contained
herein speak only to the date of this press release. The
Company undertakes no obligation to update or revise any
forward-looking statements except as required by law.
Social Media:
www.Facebook.com/myhellorewards www.Twitter.com/myhellorewards www.Instagram.com/myhellorewards www.Linkedin.com/company/rlhco
Investor Relations Contact:
Nikki SacksInvestor Relations
203-682-8263investorrelations@rlhco.com
RED LION HOTELS CORPORATION |
Condensed Consolidated Statements of Comprehensive Income
(Loss) |
(unaudited) |
(In thousands, except per share data) |
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2020 |
|
2019 |
Revenue: |
|
|
|
|
Royalty |
|
$ |
4,357 |
|
|
|
$ |
5,740 |
|
|
Marketing, reservations and reimbursables |
|
5,805 |
|
|
|
6,729 |
|
|
Other franchise |
|
774 |
|
|
|
542 |
|
|
Company operated hotels |
|
6,329 |
|
|
|
12,970 |
|
|
Other |
|
— |
|
|
|
3 |
|
|
Total revenues |
|
17,265 |
|
|
|
25,984 |
|
|
Operating expenses: |
|
|
|
|
Selling, general, administrative and other expenses |
|
16,265 |
|
|
|
7,391 |
|
|
Company operated hotels |
|
6,678 |
|
|
|
11,545 |
|
|
Marketing, reservations and reimbursables |
|
5,758 |
|
|
|
7,161 |
|
|
Depreciation and amortization |
|
2,537 |
|
|
|
3,447 |
|
|
Asset impairment |
|
1,760 |
|
|
|
— |
|
|
Loss (gain) on asset dispositions, net |
|
(7,892 |
) |
|
|
6 |
|
|
Transaction and integration costs |
|
398 |
|
|
|
62 |
|
|
Total operating expenses |
|
25,504 |
|
|
|
29,612 |
|
|
Operating income (loss) |
|
(8,239 |
) |
|
|
(3,628 |
) |
|
Other income (expense): |
|
|
|
|
Interest expense |
|
(506 |
) |
|
|
(882 |
) |
|
Loss on early retirement of debt |
|
(1,309 |
) |
|
|
— |
|
|
Other income (expense), net |
|
48 |
|
|
|
33 |
|
|
Total other income (expense) |
|
(1,767 |
) |
|
|
(849 |
) |
|
Income (loss) before taxes |
|
(10,006 |
) |
|
|
(4,477 |
) |
|
Income tax expense (benefit) |
|
(752 |
) |
|
|
82 |
|
|
Net income (loss) |
|
(9,254 |
) |
|
|
(4,559 |
) |
|
Net (income) loss attributable to noncontrolling interest |
|
1,155 |
|
|
|
286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) and
comprehensive income (loss) attributable to RLH Corporation |
|
$ |
(8,099 |
) |
|
|
$ |
(4,273 |
) |
|
|
|
|
|
|
Earnings (loss) per share -
basic |
|
$ |
(0.32 |
) |
|
|
$ |
(0.17 |
) |
|
Earnings (loss) per share -
diluted |
|
$ |
(0.32 |
) |
|
|
$ |
(0.17 |
) |
|
|
|
|
|
|
Weighted average shares -
basic |
|
25,199 |
|
|
|
24,603 |
|
|
Weighted average shares -
diluted |
|
25,199 |
|
|
|
24,603 |
|
|
|
|
|
|
|
Non-GAAP Financial Measures
(1) |
|
|
|
|
EBITDA |
|
$ |
(6,963 |
) |
|
|
$ |
(148 |
) |
|
Adjusted EBITDA |
|
$ |
(10,315 |
) |
|
|
$ |
999 |
|
|
(1) The definitions of "EBITDA" and "Adjusted EBITDA" and how those
measures relate to net income (loss) are discussed further in this
release under Reconciliation of Non-GAAP Financial Measures. |
RED LION HOTELS CORPORATION |
Condensed Consolidated Balance Sheets |
(unaudited) |
(In thousands, except share data) |
|
|
|
|
|
|
|
March 31, 2020 |
|
December 31, 2019 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents ($1,914 and $1,819 attributable to
VIEs) |
|
$ |
37,775 |
|
|
|
$ |
29,497 |
|
|
Restricted cash ($100 and $2,311 attributable to VIEs) |
|
100 |
|
|
|
2,311 |
|
|
Accounts receivable ($718 and $1,033 attributable to VIEs), net of
an allowance for doubtful accounts of $8,125 and $4,589,
respectively |
|
10,701 |
|
|
|
15,143 |
|
|
Notes receivable, net |
|
286 |
|
|
|
5,709 |
|
|
Other current assets ($144 and $311 attributable to VIEs) |
|
5,156 |
|
|
|
5,849 |
|
|
Total current assets |
|
54,018 |
|
|
|
58,509 |
|
|
Property and equipment, net
($11,520 and $29,848 attributable to VIEs) |
|
36,071 |
|
|
|
68,668 |
|
|
Operating lease right-of-use
assets ($0 and $10,810 attributable to VIEs) |
|
5,552 |
|
|
|
48,283 |
|
|
Goodwill |
|
18,595 |
|
|
|
18,595 |
|
|
Intangible assets, net |
|
47,845 |
|
|
|
48,612 |
|
|
Other assets, net ($0 and $703
attributable to VIEs) |
|
2,427 |
|
|
|
3,851 |
|
|
Total assets |
|
$ |
164,508 |
|
|
|
$ |
246,518 |
|
|
LIABILITIES |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable ($543 and $589 attributable to VIEs) |
|
$ |
6,251 |
|
|
|
$ |
5,510 |
|
|
Accrued payroll and related benefits ($68 and $349 attributable to
VIEs) |
|
1,184 |
|
|
|
2,709 |
|
|
Other accrued liabilities ($176 and $455 attributable to VIEs) |
|
4,915 |
|
|
|
5,469 |
|
|
Long-term debt, due within one year ($5,576 and $16,984
attributable to VIEs) |
|
5,576 |
|
|
|
16,984 |
|
|
Operating lease liabilities, due within one year ($0 and $966
attributable to VIEs) |
|
1,519 |
|
|
|
4,809 |
|
|
Total current liabilities |
|
19,445 |
|
|
|
35,481 |
|
|
Long-term debt, due after one
year, net of debt issuance costs ($0 and $5,576 attributable to
VIEs) |
|
— |
|
|
|
5,576 |
|
|
Line of credit, due after one
year |
|
— |
|
|
|
10,000 |
|
|
Operating lease liabilities, due
after one year ($0 and $11,938 attributable to VIEs) |
|
5,339 |
|
|
|
46,592 |
|
|
Deferred income and other
long-term liabilities ($3 and $28 attributable to VIEs) |
|
941 |
|
|
|
1,105 |
|
|
Deferred income taxes |
|
678 |
|
|
|
743 |
|
|
Total liabilities |
|
26,403 |
|
|
|
99,497 |
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
RLH Corporation 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;
25,208,983 and 25,148,005 shares issued and outstanding |
|
253 |
|
|
|
251 |
|
|
Additional paid-in capital, common stock |
|
179,568 |
|
|
|
181,608 |
|
|
Accumulated deficit |
|
(44,974 |
) |
|
|
(36,875 |
) |
|
Total RLH Corporation stockholders' equity |
|
134,847 |
|
|
|
144,984 |
|
|
Noncontrolling interest |
|
3,258 |
|
|
|
2,037 |
|
|
Total stockholders’ equity |
|
138,105 |
|
|
|
147,021 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
164,508 |
|
|
|
$ |
246,518 |
|
|
RED LION HOTELS CORPORATION |
Condensed Consolidated Statements of Cash
Flows |
(unaudited) |
(In thousands) |
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2020 |
|
2019 |
Operating
activities: |
|
|
|
|
Net income (loss) |
|
$ |
(9,254 |
) |
|
|
$ |
(4,559 |
) |
|
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: |
|
|
|
|
Depreciation and amortization |
|
2,537 |
|
|
|
3,447 |
|
|
Noncash PIK interest and amortization of debt issuance costs |
|
182 |
|
|
|
47 |
|
|
Amortization of key money and contract costs |
|
264 |
|
|
|
206 |
|
|
Amortization of contract liabilities |
|
(165 |
) |
|
|
(197 |
) |
|
Loss (gain) on asset dispositions, net |
|
(7,892 |
) |
|
|
6 |
|
|
Noncash loss on early retirement of debt |
|
750 |
|
|
|
— |
|
|
Asset impairment |
|
1,760 |
|
|
|
— |
|
|
Deferred income taxes |
|
(65 |
) |
|
|
52 |
|
|
Stock-based compensation expense |
|
373 |
|
|
|
916 |
|
|
Provision for doubtful accounts |
|
9,739 |
|
|
|
245 |
|
|
Change in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
|
501 |
|
|
|
(1,009 |
) |
|
Key money disbursements |
|
(129 |
) |
|
|
(236 |
) |
|
Other current assets |
|
504 |
|
|
|
(616 |
) |
|
Accounts payable |
|
459 |
|
|
|
1,383 |
|
|
Other accrued liabilities |
|
(1,858 |
) |
|
|
(1,717 |
) |
|
Net cash provided by (used in) operating activities |
|
(2,294 |
) |
|
|
(2,032 |
) |
|
Investing
activities: |
|
|
|
|
Capital expenditures |
|
(782 |
) |
|
|
(1,500 |
) |
|
Net proceeds from disposition of property and equipment |
|
36,896 |
|
|
|
— |
|
|
Collection of notes receivable |
|
— |
|
|
|
21 |
|
|
Advances on notes receivable |
|
— |
|
|
|
(90 |
) |
|
Net cash provided by (used in) investing activities |
|
36,114 |
|
|
|
(1,569 |
) |
|
Financing
activities: |
|
|
|
|
Borrowings on long-term debt, net of discounts |
|
— |
|
|
|
16,513 |
|
|
Repayment of long-term debt and finance leases |
|
(17,717 |
) |
|
|
(170 |
) |
|
Repayment of line of credit borrowing |
|
(10,000 |
) |
|
|
— |
|
|
Distributions to noncontrolling interest |
|
— |
|
|
|
(7,431 |
) |
|
Stock-based compensation awards canceled to settle employee tax
withholding |
|
(81 |
) |
|
|
(342 |
) |
|
Stock option and stock purchase plan issuances, net and other |
|
45 |
|
|
|
112 |
|
|
Net cash provided by (used in) financing activities |
|
(27,753 |
) |
|
|
8,682 |
|
|
|
|
|
|
|
Change in cash, cash
equivalents and restricted cash: |
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted
cash |
|
6,067 |
|
|
|
5,081 |
|
|
Cash, cash equivalents and restricted cash at beginning of
period |
|
31,808 |
|
|
|
19,789 |
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
37,875 |
|
|
|
$ |
24,870 |
|
|
RED LION HOTELS CORPORATION |
Additional Hotel Statistics |
(unaudited) |
|
A summary of
activity relating to our open franchise and company operated hotels
from January 1, 2020 through March 31, 2020, including the
approximate number of available rooms, is provided below: |
|
|
|
|
|
|
|
|
|
|
Midscale Brand |
|
Economy Brand |
|
Total |
|
Hotels |
|
Total Available Rooms |
|
Hotels |
|
Total Available Rooms |
|
Hotels |
|
Total Available Rooms |
Beginning quantity, January 1,
2020 |
96 |
|
|
|
13,500 |
|
|
|
966 |
|
|
|
54,200 |
|
|
|
1,062 |
|
|
|
67,700 |
|
|
Newly opened |
— |
|
|
|
— |
|
|
|
6 |
|
|
|
300 |
|
|
|
6 |
|
|
|
300 |
|
|
Terminated properties |
(1 |
) |
|
|
(300 |
) |
|
|
(43 |
) |
|
|
(2,800 |
) |
|
|
(44 |
) |
|
|
(3,100 |
) |
|
Ending quantity, March 31,
2020 |
95 |
|
|
|
13,200 |
|
|
|
929 |
|
|
|
51,700 |
|
|
|
1,024 |
|
|
|
64,900 |
|
|
A summary of activity relating to our open
midscale franchise and company operated hotels by brand from
January 1, 2020 through March 31, 2020 is provided below:
Midscale Brand
Hotels |
|
Hotel RL |
|
Red Lion Hotels |
|
Red Lion Inn and Suites |
|
Signature |
|
Other |
|
Total |
Beginning quantity, January 1, 2020 |
|
9 |
|
|
39 |
|
|
|
40 |
|
|
4 |
|
|
4 |
|
|
96 |
|
|
Terminated properties |
|
— |
|
|
(1 |
) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1 |
) |
|
Ending quantity, March 31,
2020 |
|
9 |
|
|
38 |
|
|
|
40 |
|
|
4 |
|
|
4 |
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending rooms, March 31,
2020 |
|
1,400 |
|
|
7,700 |
|
|
|
3,300 |
|
|
300 |
|
|
500 |
|
|
13,200 |
|
|
A summary of activity relating to our open
economy franchise hotels by brand from January 1, 2020 through
March 31, 2020 is provided below:
Economy Brand
Hotels |
|
ABVI and CBVI |
|
Knights Inn |
|
Country Hearth |
|
Guest House |
|
Other |
|
Total |
Beginning quantity, January 1, 2020 |
|
657 |
|
|
|
232 |
|
|
|
47 |
|
|
|
19 |
|
|
|
11 |
|
|
|
966 |
|
|
Newly opened |
|
3 |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
Terminated properties |
|
(28 |
) |
|
|
(11 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(43 |
) |
|
Ending quantity, March 31,
2020 |
|
632 |
|
|
|
224 |
|
|
|
45 |
|
|
|
18 |
|
|
|
10 |
|
|
|
929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending rooms, March 31,
2020 |
|
33,500 |
|
|
|
13,500 |
|
|
|
2,200 |
|
|
|
1,200 |
|
|
|
1,300 |
|
|
|
51,700 |
|
|
A summary of our executed agreements for the
three months ended March 31, 2020 is provided below:
|
|
|
|
|
|
|
|
|
Midscale Brand |
|
Economy Brand |
|
Total |
Executed franchise license
agreements, three months ended March 31, 2020: |
|
|
|
|
|
|
New locations |
|
2 |
|
|
14 |
|
|
16 |
|
New contracts for existing locations |
|
4 |
|
|
50 |
|
|
54 |
|
Total executed franchise license agreements, three months ended
March 31, 2020 |
|
6 |
|
|
64 |
|
|
70 |
|
RED LION HOTELS CORPORATION |
Reconciliation of Non-GAAP Financial Measures |
(unaudited) |
|
Free Cash Flow is a non-GAAP measured defined as net cash provided
by or used in operating activities less capital expenditures. The
Company believes it is an important liquidity measure that provides
useful information to management and investors about the amount of
cash generated by the business. |
Adjusted Free Cash Flow is a non-GAAP measure defined as Free Cash
Flow adjusted to reflect the impact of certain investing or
financing cash flows such as acquisitions, proceeds from
dispositions of properties, borrowings and repayments of long-term
debt, and distributions to non-controlling interests. We believe
this information is necessary as reflecting significant cash flows
from strategic investing and financing decisions provides the most
accurate overall measure of cash generated or used by the
business. |
Free Cash Flow and
Adjusted Free Cash Flow are commonly used measures of performance.
We utilize these measures because management finds them a useful
tool to calculate more meaningful comparisons of past, present and
future cash generation and as a means to evaluate the results of
core, ongoing operations. We believe they are a complement to
reported net cash provided by (used in) operating activities,
investing activities, and financing activities. Free Cash Flow and
Adjusted Free Cash Flow are not intended to represent net cash
provided by (used in) operating activities, investing activities,
or financing activities defined by generally accepted accounting
principles in the United States of America ("GAAP"), and such
information should not be considered as an alternative to reported
information or any other measure of performance prescribed by GAAP.
In addition, other companies may calculate Free Cash Flow and, in
particular, Adjusted Free Cash Flow differently than we do or may
not calculate them at all, limiting the usefulness of Free Cash
Flow and Adjusted Free Cash Flow as comparative measures. |
The following is
a reconciliation of GAAP net cash provided by (used in) operating
activities to non-GAAP Free Cash Flow and Adjusted Free Cash Flow
for the three months ended March 31, 2020 and 2019 (in
thousands): |
|
|
Three Months Ended March 31, |
|
|
2020 |
|
2019 |
Net cash used in
operating activities |
|
$ |
(2,294 |
) |
|
|
$ |
(2,032 |
) |
|
Less: Capital expenditures |
|
(782 |
) |
|
|
(1,500 |
) |
|
Free Cash
Flow |
|
(3,076 |
) |
|
|
(3,532 |
) |
|
Net proceeds from disposition of property and equipment |
|
36,896 |
|
|
|
— |
|
|
Borrowings on long-term debt, net of discounts |
|
— |
|
|
|
16,513 |
|
|
Repayment of line of credit borrowing |
|
(10,000 |
) |
|
|
— |
|
|
Repayment of long-term debt and finance leases |
|
(17,717 |
) |
|
|
(170 |
) |
|
Distributions to noncontrolling interest |
|
— |
|
|
|
(7,431 |
) |
|
Adjusted Free Cash
Flow |
|
$ |
6,103 |
|
|
|
$ |
5,380 |
|
|
|
RED LION HOTELS CORPORATION |
Reconciliation of Non-GAAP Financial Measures |
(unaudited) |
|
EBITDA is defined as net income (loss), before interest, taxes,
depreciation and amortization. The Company believes it is a useful
financial performance measure due to the significance of our
long-lived assets and level of indebtedness. |
Adjusted EBITDA is an additional measure of financial performance.
The Company believes that the inclusion or exclusion of certain
special items, such as stock-based compensation, gains and losses
on asset dispositions and impairments, is necessary to provide the
most accurate measure of core operating results and as a means to
evaluate comparative results. Adjusted EBITDA also excludes the
effect of non-cash stock compensation expense. We believe that the
exclusion of this item is consistent with the purposes of the
measure described below. |
EBITDA and Adjusted EBITDA are commonly used measures of
performance in the industry. RLH Corporation utilizes these
measures because management finds them a useful tool to calculate
more meaningful comparisons of past, present and future operating
results and as a means to evaluate the results of core, ongoing
operations. Our board of directors and executive management team
consider Adjusted EBITDA to be a key performance metric and
compensation measure. The Company believes the measures are a
complement to reported operating results. EBITDA and Adjusted
EBITDA are not intended to represent net income (loss) defined by
generally accepted accounting principles in the United States of
America ("GAAP"), and such information should not be considered as
an alternative to reported information or any other measure of
performance prescribed by GAAP. In addition, other companies in the
industry may calculate EBITDA and, in particular, Adjusted EBITDA
differently than the Company does or may not calculate them at all,
limiting the usefulness of EBITDA and Adjusted EBITDA as
comparative measures. |
Non-Core Adjusted EBITDA includes the results of our Company
Operated Hotels. Core Adjusted EBITDA is comprised of franchise and
all other results, including all Selling, general, administrative
and other expenses. Management believes this presentation provides
a meaningful comparison of our financial results as Core Adjusted
EBITDA represents the results of our Company as a franchise only
business. |
The following is
a reconciliation of Core and Non-Core GAAP net income (loss) to
Core and Non-Core non-GAAP EBITDA and Adjusted EBITDA for the three
months ended March 31, 2020 (in thousands): |
|
|
Core |
|
Non-Core |
|
Total |
Net (loss)
income |
|
$ |
(12,720 |
) |
|
|
$ |
3,466 |
|
|
|
$ |
(9,254 |
) |
|
Depreciation and amortization |
|
1,671 |
|
|
|
866 |
|
|
|
2,537 |
|
|
Interest expense |
|
172 |
|
|
|
334 |
|
|
|
506 |
|
|
Income tax benefit |
|
(752 |
) |
|
|
— |
|
|
|
(752 |
) |
|
EBITDA |
|
(11,629 |
) |
|
|
4,666 |
|
|
|
(6,963 |
) |
|
Stock-based compensation (1) |
|
373 |
|
|
|
— |
|
|
|
373 |
|
|
Asset impairment(2) |
|
— |
|
|
|
1,760 |
|
|
|
1,760 |
|
|
Transaction and integration costs (3) |
|
366 |
|
|
|
32 |
|
|
|
398 |
|
|
Employee separation and transition costs (4) |
|
528 |
|
|
|
— |
|
|
|
528 |
|
|
Loss on early retirement of debt (5) |
|
223 |
|
|
|
1,086 |
|
|
|
1,309 |
|
|
Gain on asset dispositions (6) |
|
— |
|
|
|
(7,892 |
) |
|
|
(7,892 |
) |
|
Non-income tax expense assessment (7) |
|
172 |
|
|
|
— |
|
|
|
172 |
|
|
Adjusted
EBITDA |
|
(9,967 |
) |
|
|
(348 |
) |
|
|
(10,315 |
) |
|
Adjusted EBITDA attributable to noncontrolling interests |
|
— |
|
|
|
(78 |
) |
|
|
(78 |
) |
|
Adjusted EBITDA
attributable to RLH Corporation |
|
$ |
(9,967 |
) |
|
|
$ |
(426 |
) |
|
|
$ |
(10,393 |
) |
|
|
(1) Costs represent total stock-based compensation for the period.
These costs are included within Selling, general, administrative
and other expenses and Marketing, reservations and reimbursables on
the Condensed Consolidated Statements of Comprehensive Income
(Loss). |
(2) In the three months ended March 31, 2020, we recognized an
impairment on our Red Lion Hotel Seattle Airport leased
property. |
(3) Transaction and integration costs include incremental expenses
incurred for potential and executed acquisitions and dispositions
of assets. |
(4) The costs
recognized relate to severance payments due to our Chief Financial
Officer upon her departure in March 2020, along with areduction in
force that was implemented in the first quarter of 2020. These
costs are included within Selling, general, administrative andother
expenses and Marketing, reservations and reimbursables on the
Condensed Consolidated Statements of Comprehensive Income. |
(5) The Loss on early retirement of debt relates to
unamortized deferred debt issuance costs and prepayment fees
incurred related to the payoff of a secured debt agreement at RL
Venture - Olympia and the outstanding balance on our Line of
Credit. |
(6) The gains relate to the sale of two properties during the
first quarter of 2020. |
(7) Costs relate to estimated non-income taxes we have
concluded we are probable of being assessed. These estimated taxes
have been accrued in Selling, general, administrative and other
expenses on the Condensed Consolidated Statements of Comprehensive
Income (Loss). |
RED LION HOTELS CORPORATION |
Reconciliation of Non-GAAP Financial Measures |
(unaudited) |
|
The following is
a reconciliation of Core and Non-Core GAAP net income (loss) to
Core and Non-Core non-GAAP EBITDA and Adjusted EBITDA for the three
months ended March 31, 2019 (in thousands): |
|
|
Core |
|
Non-Core |
|
Total |
Net loss |
|
$ |
(3,445 |
) |
|
|
$ |
(1,114 |
) |
|
|
$ |
(4,559 |
) |
|
Depreciation and amortization |
|
1,491 |
|
|
|
1,956 |
|
|
|
3,447 |
|
|
Interest expense |
|
303 |
|
|
|
579 |
|
|
|
882 |
|
|
Income tax expense |
|
82 |
|
|
|
— |
|
|
|
82 |
|
|
EBITDA |
|
(1,569 |
) |
|
|
1,421 |
|
|
|
(148 |
) |
|
Stock-based compensation (1) |
|
916 |
|
|
|
— |
|
|
|
916 |
|
|
Transaction and integration costs (2) |
|
62 |
|
|
|
— |
|
|
|
62 |
|
|
Loss on asset dispositions |
|
— |
|
|
|
6 |
|
|
|
6 |
|
|
Non-income tax expense assessment (3) |
|
163 |
|
|
|
— |
|
|
|
163 |
|
|
Adjusted
EBITDA |
|
(428 |
) |
|
|
1,427 |
|
|
|
999 |
|
|
Adjusted EBITDA attributable to noncontrolling interests |
|
— |
|
|
|
(547 |
) |
|
|
(547 |
) |
|
Adjusted EBITDA
attributable to RLH Corporation |
|
$ |
(428 |
) |
|
|
$ |
880 |
|
|
|
$ |
452 |
|
|
|
(1) Costs represent total stock-based compensation for the period.
These costs are included within Selling, general, administrative
and other expenses and Marketing, reservations and reimbursables on
the Condensed Consolidated Statements of Comprehensive Income
(Loss). |
(2) Transaction and integration costs include incremental expenses
incurred for potential and executed acquisitions and dispositions
of assets. |
(3) Costs relate to estimated non-income taxes we have concluded we
are probable of being assessed. These estimated taxes have been
accrued in Selling, general, administrative and other expenses on
the Condensed Consolidated Statements of Comprehensive Income
(Loss). |
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