Red Lion Hotels Corporation (“RLHC,” “Red Lion,” the “Company”)
(NYSE: RLH), a hospitality company doing business as RLH
Corporation that franchises midscale and economy hotels, today
reported third quarter 2020 results and provided an update
regarding financial and operational activities.
Third Quarter Financial
Results
Red Lion reported a net loss of $(3.1) million,
or $(0.12) per share compared to a net loss of $(3.7) million or
$(0.15) per share the prior year period. Adjusted EBITDA was
$1.5 million compared to $5.9 million for the same period in
2019. Core Adjusted EBITDA, which excludes company operated
hotels and reflects Red Lion’s primary franchise business, was $1.2
million, compared to $1.9 million in the prior year third
quarter.
Red Lion’s balance sheet remained strong with
cash and cash equivalents totaling $34.1 million on September
30.
The 2020 financial results reflect reductions in
revenue and Adjusted EBITDA from the sale of four company-owned
hotels, franchise agreement terminations, as well as the effects of
reduced travel due to COVID-19.
Red Lion CEO John Russell stated, “We are
pleased with the performance of our brands in the third quarter as
they outperformed their competitive sets on RevPAR index as
reported by STR. With our franchisees concentrated in drive-to
markets, our hotels benefitted from increased travel during the
summer months as shelter-in-place restrictions lifted. To
help our franchisees drive future profitability, we have continued
to enhance our franchise support, including a new more
user-friendly revenue-generating program, expanded marketing
opportunities, and local sales solutions. Activities such as
these contributed to our improved year-over-year franchisee
retention.”
Mr. Russell continued, “We are excited that our
brand reputation scores have improved across all of our brands,
with the strongest gains from Americas Best Value Inn, Canadas Best
Value Inn, and Knights Inn. We are also pleased to have our
ABVI brand ranked #2 by JD Power for all economy brands. We
are focusing our efforts on ensuring the continued success of our
franchisees while also maintaining financial discipline through
cost controls initiated at the beginning of the year. We are
encouraged by our progress particularly in light of the ongoing
impact of the pandemic.”
Operating Summary
Through the end of the third quarter, RLHC
signed 129 franchise agreements including adding 23 new franchised
locations. Progress on ROAR initiatives and the introduction of
additional franchise support tools and marketing programs continue
to contribute to improved retention rates, with 33% and 26% fewer
franchisees leaving the brand than in the prior year third quarter
and year to date, respectively. During the quarter, RLHC
relaunched GuestHouse International as GuestHouse Extended Stay,
targeting efforts to meet demand for longer stays with an economy
offering. The Company also launched new franchising
initiatives for Americas Best Value Inn and Knights Inn geared
toward capitalizing on elevated franchisee movement that typically
accompanies industry disruptions such as the current COVID-19
crisis.
Royalties for the third quarter were $4.1
million compared to $5.9 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 revenue.
Royalty revenue mix for the third quarter of 2020 was 71%
from economy hotels and 29% from midscale hotels. The 71% of
royalty revenue generated from economy hotels is primarily fixed as
a per room, per month rate and therefore is less affected by
occupancy.
Selling, general, administrative, and other
expenses, which include franchise sales, operations and corporate
costs, and bad debt expense were $4.7 million, a 43% improvement
from $8.4 million in the year-ago period. The improvement was
driven by cost containment efforts initiated earlier in 2020 and
lower bad debt expense.
Transaction costs for the quarter were $0.9
million, comprised of fees paid to advisors in connection with
exploring strategic alternatives.
Strategic Alternatives
As previously disclosed, RLHC has engaged
advisors to review and respond to bona fide inquiries received from
parties considering an investment in or acquisition of the
Company. The Board remains committed to evaluating strategic
alternatives that it believes are in the best interest of
shareholders, particularly as RLHC has attracted attention from
those who recognize that its portfolio of franchised hotels are
located in areas that are less impacted by a reduction in leisure
travel, and are well positioned to respond quickly to upticks in
travel, especially drive-to travel. RHLC does not intend to discuss
or disclose further developments during this process until its
Board of Directors has approved a specific action or otherwise
determined that further disclosure is appropriate or required.
Balance Sheet and Liquidity
As of September 30, 2020, cash and cash
equivalents totaled $34.1 million, a $0.3 million increase from
June 30, 2020 and a $2.3 million increase from year-end 2019.
The sequential quarter improvement was driven by adjusted EBITDA
performance, strong accounts receivable collections, reduced
capital and key money outlays, and favorable summer
seasonality.
Adjusted free cash flow for the nine months
ended September 30, 2020 was $3.0 million as compared to $3.8
million for the nine months ended September 30, 2019. Cash flow
from operations was $(4.6) million and $5.0 million for the same
periods, respectively. RLHC has $5.6 million of debt on its
balance sheet related to a non-recourse mortgage on the Hotel RL
Olympia held in a joint venture in which RLHC holds a 55% equity
interest.
Red Lion expects to end the year with
approximately $30 million of cash on hand. Fourth quarter net
cash outflows include capital expenditures, key money as part of
signing new franchise agreements, payment of transaction fees, and
the usual seasonally lower cash collections. The Company also
expects to benefit from favorable working capital as the previously
disclosed sales tax settlements and wage settlement payments
totaling an estimated $2.0 to $2.5 million are now expected to be
paid in 2021.
Webcast and Conference Call
Red Lion’s senior management team plans to host
a webcast and conference call to review its financial results at
9:00 a.m. ET, Thursday, November 5, 2020.
The live webcast can be accessed through the
Investor Relations section of RLHC’s website
http://ir.redlion.com/events-and-presentations/events.
For those unable to access the webcast, the
conference call will be accessible domestically or internationally,
by dialing 877-407-8289 or 201-689-8341, respectively, and
requesting the Red Lion Hotel Corporation Third Quarter 2020
Earnings Conference Call.
A replay of the conference call will be
available after 11:30 a.m. ET on Thursday, November 5, 2020 through
11:59 p.m. ET on Thursday, November 19, 2020. To access the replay,
listeners may use 877-660-6853 (domestic) or 201-612-7415
(international). The passcode for the replay is 13698294. The
recorded replay will be available on the Company’s website for one
year after the call date.
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, explorations of
possible transactions and strategic alternatives; 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
Loss |
(unaudited) |
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue: |
|
|
|
|
|
|
|
|
Royalty |
|
$ |
4,058 |
|
|
$ |
5,909 |
|
|
$ |
11,999 |
|
|
$ |
17,516 |
|
Marketing, reservations and reimbursables |
|
5,271 |
|
|
8,300 |
|
|
15,549 |
|
|
22,632 |
|
Other franchise |
|
692 |
|
|
2,016 |
|
|
2,167 |
|
|
3,772 |
|
Company operated hotels |
|
3,262 |
|
|
16,633 |
|
|
11,062 |
|
|
43,839 |
|
Other |
|
— |
|
|
5 |
|
|
— |
|
|
13 |
|
Total revenues |
|
13,283 |
|
|
32,863 |
|
|
40,777 |
|
|
87,772 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general, administrative and other expenses |
|
4,748 |
|
|
8,401 |
|
|
25,783 |
|
|
22,452 |
|
Company operated hotels |
|
2,961 |
|
|
12,673 |
|
|
11,778 |
|
|
36,750 |
|
Marketing, reservations and reimbursables |
|
4,594 |
|
|
7,080 |
|
|
14,143 |
|
|
22,088 |
|
Depreciation and amortization |
|
2,509 |
|
|
3,636 |
|
|
7,456 |
|
|
11,192 |
|
Asset impairment |
|
729 |
|
|
5,382 |
|
|
2,489 |
|
|
5,382 |
|
Loss (gain) on asset dispositions, net |
|
107 |
|
|
1 |
|
|
(7,454 |
) |
|
45 |
|
Transaction and integration costs |
|
860 |
|
|
201 |
|
|
2,260 |
|
|
436 |
|
Total operating expenses |
|
16,508 |
|
|
37,374 |
|
|
56,455 |
|
|
98,345 |
|
Operating loss |
|
(3,225 |
) |
|
(4,511 |
) |
|
(15,678 |
) |
|
(10,573 |
) |
Other
income (expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
(44 |
) |
|
(1,699 |
) |
|
(599 |
) |
|
(3,690 |
) |
Loss on early retirement of debt |
|
— |
|
|
— |
|
|
(1,309 |
) |
|
(164 |
) |
Other income, net |
|
2 |
|
|
44 |
|
|
249 |
|
|
121 |
|
Total other income (expense) |
|
(42 |
) |
|
(1,655 |
) |
|
(1,659 |
) |
|
(3,733 |
) |
Loss
before taxes |
|
(3,267 |
) |
|
(6,166 |
) |
|
(17,337 |
) |
|
(14,306 |
) |
Income tax expense (benefit) |
|
18 |
|
|
486 |
|
|
(586 |
) |
|
676 |
|
Net
loss |
|
(3,285 |
) |
|
(6,652 |
) |
|
(16,751 |
) |
|
(14,982 |
) |
Net loss attributable to noncontrolling interest |
|
148 |
|
|
2,980 |
|
|
1,553 |
|
|
4,040 |
|
Net loss and comprehensive
loss attributable to RLH Corporation |
|
$ |
(3,137 |
) |
|
$ |
(3,672 |
) |
|
$ |
(15,198 |
) |
|
$ |
(10,942 |
) |
|
|
|
|
|
|
|
|
|
Loss per
share - basic |
|
$ |
(0.12 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.60 |
) |
|
$ |
(0.44 |
) |
Loss per
share - diluted |
|
$ |
(0.12 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.60 |
) |
|
$ |
(0.44 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average shares - basic |
|
25,397 |
|
|
25,112 |
|
|
25,311 |
|
|
24,859 |
|
Weighted
average shares - diluted |
|
25,397 |
|
|
25,112 |
|
|
25,311 |
|
|
24,859 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
(1) |
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
(714 |
) |
|
$ |
(831 |
) |
|
$ |
(9,282 |
) |
|
$ |
576 |
|
Adjusted
EBITDA |
$ |
1,538 |
|
|
$ |
5,899 |
|
|
$ |
(8,517 |
) |
|
$ |
10,624 |
|
(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) |
|
|
|
|
|
|
|
September 30,2020 |
|
December 31,2019 |
ASSETS |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents ($1,190 and $1,819 attributable to
VIEs) |
|
$ |
33,974 |
|
|
$ |
29,497 |
|
Restricted cash ($100 and $2,311 attributable to VIEs) |
|
100 |
|
|
2,311 |
|
Accounts receivable ($184 and $1,033 attributable to VIEs), net of
an allowance for doubtful accounts of $9,023 and $4,589,
respectively |
|
10,772 |
|
|
15,143 |
|
Notes receivable, net |
|
424 |
|
|
5,709 |
|
Other current assets ($181 and $311 attributable to VIEs) |
|
4,258 |
|
|
5,849 |
|
Total current assets |
|
49,528 |
|
|
58,509 |
|
Property
and equipment, net ($11,079 and $29,848 attributable to VIEs) |
|
32,422 |
|
|
68,668 |
|
Operating lease right-of-use assets ($0 and $10,810 attributable to
VIEs) |
|
5,000 |
|
|
48,283 |
|
Goodwill |
|
18,595 |
|
|
18,595 |
|
Intangible assets, net |
|
46,319 |
|
|
48,612 |
|
Other
assets, net ($0 and $703 attributable to VIEs) |
|
2,762 |
|
|
3,851 |
|
Total assets |
|
$ |
154,626 |
|
|
$ |
246,518 |
|
LIABILITIES |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable ($186 and $589 attributable to VIEs) |
|
$ |
3,632 |
|
|
$ |
5,510 |
|
Accrued payroll and related benefits ($91 and $349 attributable to
VIEs) |
|
1,103 |
|
|
2,709 |
|
Other accrued liabilities ($223 and $455 attributable to VIEs) |
|
5,309 |
|
|
5,469 |
|
Long-term debt, due within one year ($5,588 and $16,984
attributable to VIEs) |
|
5,588 |
|
|
16,984 |
|
Operating lease liabilities, due within one year ($0 and $966
attributable to VIEs) |
|
1,521 |
|
|
4,809 |
|
Total current liabilities |
|
17,153 |
|
|
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) |
|
4,770 |
|
|
46,592 |
|
Deferred
income and other long-term liabilities ($0 and $28 attributable to
VIEs) |
|
762 |
|
|
1,105 |
|
Deferred
income taxes |
|
830 |
|
|
743 |
|
Total liabilities |
|
23,515 |
|
|
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;
25,402,241 and 25,148,005 shares issued and outstanding |
|
255 |
|
|
251 |
|
Additional paid-in capital, common stock |
|
180,069 |
|
|
181,608 |
|
Accumulated deficit |
|
(52,073 |
) |
|
(36,875 |
) |
Total RLH Corporation stockholders' equity |
|
128,251 |
|
|
144,984 |
|
Noncontrolling interest |
|
2,860 |
|
|
2,037 |
|
Total stockholders’ equity |
|
131,111 |
|
|
147,021 |
|
Total liabilities and stockholders’ equity |
|
$ |
154,626 |
|
|
$ |
246,518 |
|
|
|
|
|
|
|
|
|
|
RED LION HOTELS CORPORATION |
Condensed Consolidated Statements of Cash
Flows |
(unaudited) |
(In thousands) |
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
Operating
activities: |
|
|
|
Net loss |
$ |
(16,751 |
) |
|
$ |
(14,982 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
Depreciation and amortization |
7,456 |
|
|
11,192 |
|
Noncash PIK interest and amortization of debt issuance costs |
194 |
|
|
929 |
|
Amortization of key money and contract costs |
694 |
|
|
997 |
|
Amortization of contract liabilities |
(458 |
) |
|
(994 |
) |
Loss (gain) on asset dispositions, net |
(7,454 |
) |
|
45 |
|
Loss on early retirement of debt |
1,309 |
|
|
67 |
|
Asset impairment |
2,489 |
|
|
5,382 |
|
Deferred income taxes |
87 |
|
|
445 |
|
Stock-based compensation expense |
840 |
|
|
2,503 |
|
Provision for doubtful accounts |
10,712 |
|
|
1,780 |
|
Change in operating assets and liabilities: |
|
|
|
Accounts receivable |
(1,050 |
) |
|
(2,148 |
) |
Key money disbursements |
(429 |
) |
|
(665 |
) |
Other current assets |
1,232 |
|
|
998 |
|
Accounts payable |
(2,018 |
) |
|
45 |
|
Other accrued liabilities |
(1,420 |
) |
|
(639 |
) |
Net cash provided by (used in) operating activities |
(4,567 |
) |
|
4,955 |
|
Investing
activities: |
|
|
|
Capital expenditures |
(1,637 |
) |
|
(4,104 |
) |
Net proceeds from disposition of property and equipment |
36,896 |
|
|
— |
|
Collection of notes receivable |
12 |
|
|
262 |
|
Advances on notes receivable |
(150 |
) |
|
(90 |
) |
Net cash provided by (used in) investing activities |
35,121 |
|
|
(3,932 |
) |
Financing
activities: |
|
|
|
Borrowings on long-term debt, net of discounts |
4,234 |
|
|
32,935 |
|
Repayment of long-term debt and finance leases |
(21,964 |
) |
|
(22,510 |
) |
Repayment of line of credit borrowing |
(10,000 |
) |
|
— |
|
Prepayment penalty on long-term debt |
(559 |
) |
|
— |
|
Debt issuance costs |
— |
|
|
(692 |
) |
Distributions to noncontrolling interest |
— |
|
|
(7,430 |
) |
Stock-based compensation awards canceled to settle employee tax
withholding |
(81 |
) |
|
(2,135 |
) |
Stock option and stock purchase plan issuances, net and other |
82 |
|
|
217 |
|
Net cash provided by (used in) financing activities |
(28,288 |
) |
|
385 |
|
|
|
|
|
Change in cash, cash
equivalents and restricted cash: |
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted
cash |
2,266 |
|
|
1,408 |
|
Cash, cash equivalents and restricted cash at beginning of
period |
31,808 |
|
|
19,789 |
|
Cash, cash equivalents and restricted cash at end of period |
$ |
34,074 |
|
|
$ |
21,197 |
|
|
|
|
|
|
|
|
|
RED LION HOTELS
CORPORATIONAdditional Hotel
Statistics(unaudited)
A summary of activity relating to our open
franchise and company operated hotels by type from January 1, 2020
through September 30, 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 |
2 |
|
|
100 |
|
|
22 |
|
|
1,200 |
|
|
24 |
|
|
1,300 |
|
Change in brand |
1 |
|
|
100 |
|
|
(1 |
) |
|
(100 |
) |
|
— |
|
|
— |
|
Terminated properties |
(14 |
) |
|
(2,600 |
) |
|
(116 |
) |
|
(7,200 |
) |
|
(130 |
) |
|
(9,800 |
) |
Ending quantity, September 30,
2020 |
85 |
|
|
11,100 |
|
|
871 |
|
|
48,100 |
|
|
956 |
|
|
59,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of activity relating to our open
midscale franchise and company operated hotels by brand from
January 1, 2020 through September 30, 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 |
|
Newly opened |
|
— |
|
|
— |
|
|
2 |
|
|
— |
|
|
— |
|
|
2 |
|
Change in brand |
|
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
— |
|
|
1 |
|
Terminated properties |
|
(1 |
) |
|
(7 |
) |
|
(4 |
) |
|
— |
|
|
(2 |
) |
|
(14 |
) |
Ending quantity, September 30,
2020 |
|
8 |
|
|
32 |
|
|
39 |
|
|
4 |
|
|
2 |
|
|
85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending rooms, September 30,
2020 |
|
1,400 |
|
|
6,200 |
|
|
3,000 |
|
|
300 |
|
|
200 |
|
|
11,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of activity relating to our open
economy franchise hotels by brand from January 1, 2020 through
September 30, 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 |
|
14 |
|
|
8 |
|
|
— |
|
|
— |
|
|
— |
|
|
22 |
|
Change in brand |
|
— |
|
|
— |
|
|
— |
|
|
(1 |
) |
|
— |
|
|
(1 |
) |
Terminated properties |
|
(74 |
) |
|
(31 |
) |
|
(4 |
) |
|
(2 |
) |
|
(5 |
) |
|
(116 |
) |
Ending quantity, September 30,
2020 |
|
597 |
|
|
209 |
|
|
43 |
|
|
16 |
|
|
6 |
|
|
871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending rooms, September
30, 2020 |
|
31,600 |
|
|
12,800 |
|
|
2,100 |
|
|
1,200 |
|
|
400 |
|
|
48,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of our executed agreements for the
nine months ended September 30, 2020 is provided below:
|
|
|
|
|
|
|
Midscale Brand |
|
Economy Brand |
|
Total |
Executed franchise license
agreements, nine months ended September 30, 2020: |
|
|
|
|
|
New locations |
3 |
|
|
20 |
|
|
23 |
|
New contracts for existing locations |
6 |
|
|
100 |
|
|
106 |
|
Total executed franchise license agreements, nine months ended
September 30, 2020 |
9 |
|
|
120 |
|
|
129 |
|
|
|
|
|
|
|
|
|
|
RED LION HOTELS
CORPORATIONReconciliation 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 nine months ended
September 30, 2020 and 2019 (in thousands):
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
Net cash provided by (used in) operating
activities |
$ |
(4,567 |
) |
|
$ |
4,955 |
|
Less: Capital expenditures |
(1,637 |
) |
|
(4,104 |
) |
Free Cash
Flow |
(6,204 |
) |
|
851 |
|
Net proceeds from disposition of property and equipment |
36,896 |
|
|
— |
|
Borrowings on long-term debt, net of discounts |
4,234 |
|
|
32,935 |
|
Repayment of line of credit borrowing |
(10,000 |
) |
|
— |
|
Repayment of long-term debt and finance leases |
(21,964 |
) |
|
(22,510 |
) |
Distributions to noncontrolling interest |
— |
|
|
(7,430 |
) |
Adjusted Free Cash
Flow |
$ |
2,962 |
|
|
$ |
3,846 |
|
|
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 and 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 September 30,
2020 (in thousands):
|
Core |
|
Non-Core |
|
Total |
Net loss |
$ |
(2,200 |
) |
|
$ |
(1,085 |
) |
|
$ |
(3,285 |
) |
Depreciation and amortization |
1,997 |
|
|
512 |
|
|
2,509 |
|
Interest expense |
2 |
|
|
42 |
|
|
44 |
|
Income tax expense |
18 |
|
|
— |
|
|
18 |
|
EBITDA |
(183 |
) |
|
(531 |
) |
|
(714 |
) |
Stock-based compensation (1) |
265 |
|
|
— |
|
|
265 |
|
Asset impairment(2) |
— |
|
|
729 |
|
|
729 |
|
Transaction and integration costs (3) |
860 |
|
|
— |
|
|
860 |
|
Employee separation and transition costs (4) |
227 |
|
|
— |
|
|
227 |
|
Loss on asset dispositions |
3 |
|
|
104 |
|
|
107 |
|
Non-income tax expense assessment (5) |
64 |
|
|
— |
|
|
64 |
|
Adjusted
EBITDA |
1,236 |
|
|
302 |
|
|
1,538 |
|
Adjusted EBITDA attributable to noncontrolling interests |
— |
|
|
32 |
|
|
32 |
|
Adjusted EBITDA
attributable to RLH Corporation |
$ |
1,236 |
|
|
$ |
334 |
|
|
$ |
1,570 |
|
|
(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 Loss. |
(2) During the third quarter of 2020, we recognized an impairment
on our Red Lion Hotel Seattle Airport leased property. |
(3) Transaction and
integration costs relate primarily to costs incurred with advisors
who have been engaged to review and vet inquires received by
interested parties. |
(4) The costs
primarily relate to severance payments due to our Chief Operating
Officer upon the announcement of his departure in September 2020.
These costs are included within Selling, general, administrative
and other expenses on the Condensed Consolidated Statements of
Comprehensive Loss. |
(5) Costs relate to estimated non-income taxes we have
concluded we are probable of being assessed. We accrued these
estimated taxes in Selling, general, administrative and other
expenses on the Condensed Consolidated Statements of Comprehensive
Loss. |
|
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 September 30,
2019 (in thousands):
|
Core |
|
Non-Core |
|
Total |
Net loss |
$ |
(1,889 |
) |
|
$ |
(4,763 |
) |
|
$ |
(6,652 |
) |
Depreciation and amortization |
1,859 |
|
|
1,777 |
|
|
3,636 |
|
Interest expense |
302 |
|
|
1,397 |
|
|
1,699 |
|
Income tax expense |
486 |
|
|
— |
|
|
486 |
|
EBITDA |
758 |
|
|
(1,589 |
) |
|
(831 |
) |
Stock-based compensation (1) |
941 |
|
|
— |
|
|
941 |
|
Asset impairment (2) |
— |
|
|
5,382 |
|
|
5,382 |
|
Transaction and integration costs (3) |
37 |
|
|
164 |
|
|
201 |
|
(Gain) loss on asset dispositions |
(1 |
) |
|
2 |
|
|
1 |
|
Non-income tax expense assessment (4) |
205 |
|
|
— |
|
|
205 |
|
Adjusted
EBITDA |
1,940 |
|
|
3,959 |
|
|
5,899 |
|
Adjusted EBITDA attributable to noncontrolling interests |
— |
|
|
(660 |
) |
|
(660 |
) |
Adjusted EBITDA
attributable to RLH Corporation |
$ |
1,940 |
|
|
$ |
3,299 |
|
|
$ |
5,239 |
|
|
(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 Loss. |
(2) During the third quarter of 2019, we recognized an impairment
on our Hotel RL Washington DC joint venture property. |
(3) Transaction and integration costs include incremental expenses
incurred for potential and executed acquisitions and dispositions
of assets. |
(4) 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 Loss. |
|
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 nine months ended September 30, 2020 (in
thousands):
|
Core |
|
Non-Core |
|
Total |
Net income (loss) |
$ |
(18,028 |
) |
|
$ |
1,277 |
|
|
$ |
(16,751 |
) |
Depreciation and amortization |
5,655 |
|
|
1,801 |
|
|
7,456 |
|
Interest expense |
176 |
|
|
423 |
|
|
599 |
|
Income tax benefit |
(586 |
) |
|
— |
|
|
(586 |
) |
EBITDA |
(12,783 |
) |
|
3,501 |
|
|
(9,282 |
) |
Stock-based compensation (1) |
840 |
|
|
— |
|
|
840 |
|
Asset impairment (2) |
— |
|
|
2,489 |
|
|
2,489 |
|
Transaction and integration costs (3) |
2,207 |
|
|
53 |
|
|
2,260 |
|
Employee separation and transition costs (4) |
1,023 |
|
|
— |
|
|
1,023 |
|
Loss on early retirement of debt (5) |
223 |
|
|
1,086 |
|
|
1,309 |
|
Loss (gain) on asset dispositions (6) |
223 |
|
|
(7,677 |
) |
|
(7,454 |
) |
Non-income tax expense assessment (7) |
298 |
|
|
— |
|
|
298 |
|
Adjusted
EBITDA |
(7,969 |
) |
|
(548 |
) |
|
(8,517 |
) |
Adjusted EBITDA attributable to noncontrolling interests |
— |
|
|
76 |
|
|
76 |
|
Adjusted EBITDA
attributable to RLH Corporation |
$ |
(7,969 |
) |
|
$ |
(472 |
) |
|
$ |
(8,441 |
) |
|
(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 Loss. |
(2) In the first and third quarters of 2020, we recognized
impairments on our Red Lion Hotel Seattle Airport leased
property. |
(3) Transaction and integration costs relate primarily to costs
incurred with advisors who have been engaged to review and vet
inquires received by interested parties. |
(4) The costs relate
to the accrual of severance payments due to our Chief Financial
Officer upon her departure in March 2020 and to our Chief Operating
Officer upon the announcement of his departure in September 2020,
along with two reductions in force that were implemented in the
first and second quarters of 2020. These costs are included within
Selling, general, administrative and other expenses and Marketing,
reservations and reimbursables on the Condensed Consolidated
Statements of Comprehensive Loss. |
(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 gain
primarily relates 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. We accrued these estimated taxes in
Selling, general, administrative and other expenses on the
Condensed Consolidated Statements of Comprehensive Loss. |
|
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 nine months ended September 30,
2019 (in thousands):
|
Core |
|
Non-Core |
|
Total |
Net loss |
$ |
(7,813 |
) |
|
$ |
(7,169 |
) |
|
$ |
(14,982 |
) |
Depreciation and amortization |
5,542 |
|
|
5,650 |
|
|
11,192 |
|
Interest expense |
831 |
|
|
2,859 |
|
|
3,690 |
|
Income tax expense |
676 |
|
|
— |
|
|
676 |
|
EBITDA |
(764 |
) |
|
1,340 |
|
|
576 |
|
Stock-based compensation (1) |
2,503 |
|
|
— |
|
|
2,503 |
|
Asset impairment (2) |
— |
|
|
5,382 |
|
|
5,382 |
|
Transaction and integration costs (3) |
272 |
|
|
164 |
|
|
436 |
|
Employee separation and transition costs (4) |
35 |
|
|
— |
|
|
35 |
|
Loss on early retirement of debt (5) |
— |
|
|
164 |
|
|
164 |
|
Loss on asset dispositions |
— |
|
|
45 |
|
|
45 |
|
Legal settlement expense (6) |
— |
|
|
952 |
|
|
952 |
|
Non-income tax expense assessment (7) |
531 |
|
|
— |
|
|
531 |
|
Adjusted
EBITDA |
2,577 |
|
|
8,047 |
|
|
10,624 |
|
Adjusted EBITDA attributable to noncontrolling interests |
— |
|
|
(1,665 |
) |
|
(1,665 |
) |
Adjusted EBITDA
attributable to RLH Corporation |
$ |
2,577 |
|
|
$ |
6,382 |
|
|
$ |
8,959 |
|
|
(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 Loss. |
(2) During the third quarter of 2019, we recognized an impairment
on our Hotel RL Washington DC joint venture property. |
(3) Transaction and integration costs include incremental expenses
incurred for potential and executed acquisitions and dispositions
of assets. |
(4) The costs relate to a reduction in force that was implemented
in the second quarter of 2019. These costs are included within
Selling, general, administrative and other expenses on the
Condensed Consolidated Statements of Comprehensive Loss. |
(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 mortgage loan at RLS DC Venture, which was
replaced through a new mortgage loan with a different lender. |
(6) Legal settlement expense relates to a settlement agreement with
current and former hotel workers regarding a wage dispute in
California. This expense is included in Company operated hotels
expense on the Condensed Consolidated Statements of Comprehensive
Loss. |
(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 Loss. |
|
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