Red Lion Hotels Corporation (“RLHC”, “Red Lion”) (NYSE: RLH), a
hospitality company doing business as RLH Corporation which
franchises midscale and economy hotels, today reported second
quarter 2020 results and provided an update regarding financial and
operational activities.
Second Quarter Financial Results
Red Lion reported a net loss of ($4.0) million, or ($0.16) per
share compared to a net loss of ($3.0) million or ($0.12) per share
in the prior year period. Adjusted EBITDA was $0.3 million
compared to $3.7 million for the same period in 2019.
In the core franchise hotel segment, which excludes company
operated hotels, second quarter revenues were $8.8 million compared
to $14.7 million in the prior year period and Core Adjusted EBITDA
was $0.8 million, compared to $1.1 million in the prior year
period.
Year-over-year results continue to reflect the loss of income
from the sale of four company owned and operated hotels, franchise
agreement terminations, as well as reduced travel due to
COVID-19.
Cash and equivalents at quarter end were $33.8 million, up $2.0
million from year end.
Red Lion CEO John Russell stated, “We continue to make positive
strides with respect to franchisee retention as we focus on our
ROAR initiatives. Our franchised hotels remain ideally
positioned to benefit from a resurgence in drive-to travel as
economies re-open, however due to ongoing uncertainty caused by the
pandemic, we are also continuing with our cost savings and cash
preservation initiatives. We were encouraged by having 98% of
our franchisees’ hotels open and we remain confident that we are
well positioned to benefit as travel, especially drive-to, picks
up.”
Operating Summary
As a result of the renewed focus on its ROAR initiatives, RLHC
signed 92 franchise agreements in the first half of 2020, including
adding 19 new franchised locations. This pace of signings
reflects the value franchisees find in the Red Lion brands and is
even more impressive considering the uncertain environment COVID
has created. Additionally, by reestablishing the important
relationship with franchisees — Promises Made, Promises Kept— RLHC
improved retention trends, seeing 22% fewer franchisees leaving the
brand year over year.
Royalty fees for the second quarter were $3.6 million compared
to $5.9 million in the prior year quarter primarily due to
terminated franchise 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 second quarter of 2020 was 83% from economy hotels and 17%
from midscale hotels.
Selling, general, administrative, and other expenses, which
include franchise sales; operations and corporate costs; and bad
debt expense were $4.8 million, a 28% improvement from $6.7 million
in the year-ago period. The improvement was driven by cost
containment efforts initiated earlier in 2020.
Transaction costs for the quarter were $1.0 million comprised of
fees paid to advisors engaged 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 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.
Balance Sheet and Liquidity
As of June 30, 2020, cash and cash equivalents totaled $33.8
million, a $4.1 million decrease from March 31, 2020. The
decrease included a portion of the $1.1 million in fee deferrals
offered to assist franchisees through this difficult period; $0.3
million in severance and other costs to implement the cost-savings
measures established at the onset of COVID; and $0.2 million of
advisor fees as previously described.
Adjusted free cash flow for the six months ended June 30, 2020,
was $2.0 million as compared to $5.4 million for the six months
ended June 30, 2019. Cash flow from operations was ($5.8)
million and $3.1 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.
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, August 6, 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 Second Quarter 2020 Earnings Conference
Call.
A replay of the conference call will be available after 11:30
a.m. ET on Thursday, August 6, 2020 through 11:59 p.m. ET on
Thursday, August 20, 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, 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 |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue: |
|
|
|
|
|
|
|
|
Royalty |
|
$ |
3,584 |
|
|
$ |
5,867 |
|
|
$ |
7,941 |
|
|
$ |
11,607 |
|
Marketing, reservations and reimbursables |
|
4,473 |
|
|
7,603 |
|
|
10,278 |
|
|
14,332 |
|
Other franchise |
|
701 |
|
|
1,214 |
|
|
1,475 |
|
|
1,756 |
|
Company operated hotels |
|
1,471 |
|
|
14,236 |
|
|
7,800 |
|
|
27,206 |
|
Other |
|
— |
|
|
5 |
|
|
— |
|
|
8 |
|
Total revenues |
|
10,229 |
|
|
28,925 |
|
|
27,494 |
|
|
54,909 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general, administrative and other expenses |
|
4,770 |
|
|
6,660 |
|
|
21,035 |
|
|
14,051 |
|
Company operated hotels |
|
2,139 |
|
|
12,532 |
|
|
8,817 |
|
|
24,077 |
|
Marketing, reservations and reimbursables |
|
3,791 |
|
|
7,847 |
|
|
9,549 |
|
|
15,008 |
|
Depreciation and amortization |
|
2,410 |
|
|
4,109 |
|
|
4,947 |
|
|
7,556 |
|
Asset impairment |
|
— |
|
|
— |
|
|
1,760 |
|
|
— |
|
Loss (gain) on asset dispositions, net |
|
331 |
|
|
38 |
|
|
(7,561 |
) |
|
44 |
|
Transaction and integration costs |
|
1,002 |
|
|
173 |
|
|
1,400 |
|
|
235 |
|
Total operating expenses |
|
14,443 |
|
|
31,359 |
|
|
39,947 |
|
|
60,971 |
|
Operating loss |
|
(4,214 |
) |
|
(2,434 |
) |
|
(12,453 |
) |
|
(6,062 |
) |
Other
income (expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
(49 |
) |
|
(1,109 |
) |
|
(555 |
) |
|
(1,991 |
) |
Loss on early retirement of debt |
|
— |
|
|
(164 |
) |
|
(1,309 |
) |
|
(164 |
) |
Other income, net |
|
199 |
|
|
44 |
|
|
247 |
|
|
77 |
|
Total other income (expense) |
|
150 |
|
|
(1,229 |
) |
|
(1,617 |
) |
|
(2,078 |
) |
Loss
before taxes |
|
(4,064 |
) |
|
(3,663 |
) |
|
(14,070 |
) |
|
(8,140 |
) |
Income tax expense (benefit) |
|
148 |
|
|
108 |
|
|
(604 |
) |
|
190 |
|
Net
loss |
|
(4,212 |
) |
|
(3,771 |
) |
|
(13,466 |
) |
|
(8,330 |
) |
Net loss attributable to noncontrolling interest |
|
250 |
|
|
774 |
|
|
1,405 |
|
|
1,060 |
|
Net loss and comprehensive
loss attributable to RLH Corporation |
|
$ |
(3,962 |
) |
|
$ |
(2,997 |
) |
|
$ |
(12,061 |
) |
|
$ |
(7,270 |
) |
|
|
|
|
|
|
|
|
|
Loss per
share - basic |
|
$ |
(0.16 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.48 |
) |
|
$ |
(0.29 |
) |
Loss per
share - diluted |
|
$ |
(0.16 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.48 |
) |
|
$ |
(0.29 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average shares - basic |
|
25,335 |
|
|
24,856 |
|
|
25,267 |
|
|
24,730 |
|
Weighted
average shares - diluted |
|
25,335 |
|
|
24,856 |
|
|
25,267 |
|
|
24,730 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
(1) |
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
(1,605 |
) |
|
$ |
1,555 |
|
|
$ |
(8,568 |
) |
|
$ |
1,407 |
|
Adjusted
EBITDA |
$ |
260 |
|
|
$ |
3,726 |
|
|
$ |
(10,055 |
) |
|
$ |
4,725 |
|
(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) |
|
|
|
|
|
|
|
June 30, 2020 |
|
December 31, 2019 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents ($972 and $1,819 attributable to
VIEs) |
|
$ |
33,702 |
|
|
$ |
29,497 |
|
Restricted cash ($100 and $2,311 attributable to VIEs) |
|
100 |
|
|
2,311 |
|
Accounts receivable ($398 and $1,033 attributable to VIEs), net of
an allowance for doubtful accounts of $8,611 and $4,589,
respectively |
|
11,463 |
|
|
15,143 |
|
Notes receivable, net |
|
286 |
|
|
5,709 |
|
Other current assets ($130 and $311 attributable to VIEs) |
|
4,255 |
|
|
5,849 |
|
Total current assets |
|
49,806 |
|
|
58,509 |
|
Property and equipment, net
($11,296 and $29,848 attributable to VIEs) |
|
34,492 |
|
|
68,668 |
|
Operating lease right-of-use
assets ($0 and $10,810 attributable to VIEs) |
|
5,337 |
|
|
48,283 |
|
Goodwill |
|
18,595 |
|
|
18,595 |
|
Intangible assets, net |
|
47,081 |
|
|
48,612 |
|
Other assets, net ($0 and $703
attributable to VIEs) |
|
2,635 |
|
|
3,851 |
|
Total assets |
|
$ |
157,946 |
|
|
$ |
246,518 |
|
LIABILITIES |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable ($134 and $589 attributable to VIEs) |
|
$ |
4,093 |
|
|
$ |
5,510 |
|
Accrued payroll and related benefits ($90 and $349 attributable to
VIEs) |
|
1,031 |
|
|
2,709 |
|
Other accrued liabilities ($182 and $455 attributable to VIEs) |
|
4,900 |
|
|
5,469 |
|
Long-term debt, due within one year ($5,582 and $16,984
attributable to VIEs) |
|
5,582 |
|
|
16,984 |
|
Operating lease liabilities, due within one year ($0 and $966
attributable to VIEs) |
|
1,520 |
|
|
4,809 |
|
Total current liabilities |
|
17,126 |
|
|
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) |
|
5,059 |
|
|
46,592 |
|
Deferred income and other
long-term liabilities ($0 and $28 attributable to VIEs) |
|
842 |
|
|
1,105 |
|
Deferred income taxes |
|
823 |
|
|
743 |
|
Total liabilities |
|
23,850 |
|
|
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;
25,342,104 and 25,148,005 shares issued and outstanding |
|
254 |
|
|
251 |
|
Additional paid-in capital, common stock |
|
179,770 |
|
|
181,608 |
|
Accumulated deficit |
|
(48,936 |
) |
|
(36,875 |
) |
Total RLH Corporation stockholders' equity |
|
131,088 |
|
|
144,984 |
|
Noncontrolling interest |
|
3,008 |
|
|
2,037 |
|
Total stockholders’ equity |
|
134,096 |
|
|
147,021 |
|
Total liabilities and stockholders’ equity |
|
$ |
157,946 |
|
|
$ |
246,518 |
|
|
|
|
|
|
|
|
|
|
RED LION HOTELS CORPORATION |
Condensed Consolidated Statements of Cash
Flows |
(unaudited) |
(In thousands) |
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
Operating
activities: |
|
|
|
|
Net loss |
|
$ |
(13,466 |
) |
|
$ |
(8,330 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
|
Depreciation and amortization |
|
4,947 |
|
|
7,556 |
|
Noncash PIK interest and amortization of debt issuance costs |
|
187 |
|
|
249 |
|
Amortization of key money and contract costs |
|
514 |
|
|
459 |
|
Amortization of contract liabilities |
|
(301 |
) |
|
(534 |
) |
Loss (gain) on asset dispositions, net |
|
(7,561 |
) |
|
44 |
|
Noncash loss on early retirement of debt |
|
750 |
|
|
67 |
|
Asset impairment |
|
1,760 |
|
|
— |
|
Deferred income taxes |
|
80 |
|
|
98 |
|
Stock-based compensation expense |
|
575 |
|
|
1,562 |
|
Provision for doubtful accounts |
|
10,328 |
|
|
472 |
|
Change in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
|
(1,085 |
) |
|
(820 |
) |
Key money disbursements |
|
(329 |
) |
|
(535 |
) |
Other current assets |
|
1,299 |
|
|
839 |
|
Accounts payable |
|
(1,483 |
) |
|
2,827 |
|
Other accrued liabilities |
|
(1,984 |
) |
|
(899 |
) |
Net cash provided by (used in) operating activities |
|
(5,769 |
) |
|
3,055 |
|
Investing
activities: |
|
|
|
|
Capital expenditures |
|
(1,374 |
) |
|
(2,843 |
) |
Net proceeds from disposition of property and equipment |
|
36,896 |
|
|
— |
|
Collection of notes receivable |
|
— |
|
|
242 |
|
Advances on notes receivable |
|
— |
|
|
(90 |
) |
Net cash provided by (used in) investing activities |
|
35,522 |
|
|
(2,691 |
) |
Financing
activities: |
|
|
|
|
Borrowings on long-term debt, net of discounts |
|
4,234 |
|
|
32,935 |
|
Repayment of long-term debt and finance leases |
|
(21,958 |
) |
|
(20,283 |
) |
Repayment of line of credit borrowing |
|
(10,000 |
) |
|
— |
|
Debt issuance costs |
|
— |
|
|
(542 |
) |
Distributions to noncontrolling interest |
|
— |
|
|
(7,431 |
) |
Stock-based compensation awards canceled to settle employee tax
withholding |
|
(81 |
) |
|
(2,131 |
) |
Stock option and stock purchase plan issuances, net and other |
|
46 |
|
|
105 |
|
Net cash provided by (used in) financing activities |
|
(27,759 |
) |
|
2,653 |
|
|
|
|
|
|
Change in cash, cash
equivalents and restricted cash: |
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted
cash |
|
1,994 |
|
|
3,017 |
|
Cash, cash equivalents and restricted cash at beginning of
period |
|
31,808 |
|
|
19,789 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
33,802 |
|
|
$ |
22,806 |
|
|
|
|
|
|
|
|
|
|
RED LION HOTELS CORPORATION |
Additional Hotel Statistics |
(unaudited) |
|
A summary of
activity relating to our open franchise and company operated hotels
by type from January 1, 2020 through June 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 |
1 |
|
|
100 |
|
|
12 |
|
|
700 |
|
|
13 |
|
|
800 |
|
Change in brand |
1 |
|
|
100 |
|
|
(1 |
) |
|
(100 |
) |
|
— |
|
|
— |
|
Terminated properties |
(10 |
) |
|
(1,900 |
) |
|
(80 |
) |
|
(4,500 |
) |
|
(90 |
) |
|
(6,400 |
) |
Ending quantity, June 30,
2020 |
88 |
|
|
11,800 |
|
|
897 |
|
|
50,300 |
|
|
985 |
|
|
62,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of activity relating to our open
midscale franchise and company operated hotels by brand from
January 1, 2020 through June 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 |
|
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
— |
|
|
1 |
|
Change in brand |
|
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
— |
|
|
1 |
|
Terminated properties |
|
(1 |
) |
|
(5 |
) |
|
(2 |
) |
|
— |
|
|
(2 |
) |
|
(10 |
) |
Ending quantity, June 30,
2020 |
|
8 |
|
|
34 |
|
|
40 |
|
|
4 |
|
|
2 |
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending rooms, June 30,
2020 |
|
1,400 |
|
|
6,700 |
|
|
3,200 |
|
|
300 |
|
|
200 |
|
|
11,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of activity relating to our open
economy franchise hotels by brand from January 1, 2020 through
June 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 |
|
8 |
|
|
4 |
|
|
— |
|
|
— |
|
|
— |
|
|
12 |
|
Change in brand |
|
— |
|
|
— |
|
|
— |
|
|
(1 |
) |
|
— |
|
|
(1 |
) |
Terminated properties |
|
(49 |
) |
|
(23 |
) |
|
(4 |
) |
|
(2 |
) |
|
(2 |
) |
|
(80 |
) |
Ending quantity, June 30,
2020 |
|
616 |
|
|
213 |
|
|
43 |
|
|
16 |
|
|
9 |
|
|
897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending rooms, June 30,
2020 |
|
32,800 |
|
|
13,000 |
|
|
2,100 |
|
|
1,200 |
|
|
1,200 |
|
|
50,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of our executed agreements for the six
months ended June 30, 2020 is provided below:
|
|
|
|
|
|
|
|
|
Midscale Brand |
|
Economy Brand |
|
Total |
Executed franchise license
agreements, six months ended June 30, 2020: |
|
|
|
|
|
|
New locations |
|
3 |
|
|
16 |
|
|
19 |
|
New contracts for existing locations |
|
4 |
|
|
69 |
|
|
73 |
|
Total executed franchise license agreements, six months ended June
30, 2020 |
|
7 |
|
|
85 |
|
|
92 |
|
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 six months ended June 30, 2020 and 2019 (in
thousands): |
|
|
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
Net cash provided by (used in) operating
activities |
|
$ |
(5,769 |
) |
|
$ |
3,055 |
|
Less: Capital expenditures |
|
(1,374 |
) |
|
(2,843 |
) |
Free Cash
Flow |
|
(7,143 |
) |
|
212 |
|
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 |
|
(21,958 |
) |
|
(20,283 |
) |
Distributions to noncontrolling interest |
|
— |
|
|
(7,431 |
) |
Adjusted Free Cash
Flow |
|
$ |
2,029 |
|
|
$ |
5,433 |
|
|
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. |
|
During the fourth quarter of
2018, we modified the definition of Adjusted EBITDA as used in
prior periods to exclude 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 and we have
applied this modification to all prior periods presented. |
|
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. |
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 June 30, 2020 (in thousands): |
|
|
Core |
|
Non-Core |
|
Total |
Net loss |
|
$ |
(3,108 |
) |
|
$ |
(1,104 |
) |
|
$ |
(4,212 |
) |
Depreciation and amortization |
|
1,987 |
|
|
423 |
|
|
2,410 |
|
Interest expense |
|
2 |
|
|
47 |
|
|
49 |
|
Income tax expense |
|
148 |
|
|
— |
|
|
148 |
|
EBITDA |
|
(971 |
) |
|
(634 |
) |
|
(1,605 |
) |
Stock-based compensation (1) |
|
202 |
|
|
— |
|
|
202 |
|
Transaction and integration costs (2) |
|
981 |
|
|
21 |
|
|
1,002 |
|
Employee separation and transition costs (3) |
|
268 |
|
|
— |
|
|
268 |
|
Loss on asset dispositions (4) |
|
220 |
|
|
111 |
|
|
331 |
|
Non-income tax expense assessment (5) |
|
62 |
|
|
— |
|
|
62 |
|
Adjusted
EBITDA |
|
762 |
|
|
(502 |
) |
|
260 |
|
Adjusted EBITDA attributable to noncontrolling interests |
|
— |
|
|
122 |
|
|
122 |
|
Adjusted EBITDA
attributable to RLH Corporation |
|
$ |
762 |
|
|
$ |
(380 |
) |
|
$ |
382 |
|
|
(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 relate primarily to fees paid
to advisors engaged to review and respond to bona fide inquiries
received from parties considering an investment in or acquisition
of the Company. |
(3) The costs relate
to a reduction in force that was implemented in the second quarter
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 Income (Loss). |
(4) The losses
relate primarily to the disposal of various fixed assets during the
three months ended June 30, 2020. |
(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
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 June 30, 2019 (in thousands): |
|
|
Core |
|
Non-Core |
|
Total |
Net loss |
|
$ |
(2,479 |
) |
|
$ |
(1,292 |
) |
|
$ |
(3,771 |
) |
Depreciation and amortization |
|
2,192 |
|
|
1,917 |
|
|
4,109 |
|
Interest expense |
|
226 |
|
|
883 |
|
|
1,109 |
|
Income tax expense |
|
108 |
|
|
— |
|
|
108 |
|
EBITDA |
|
47 |
|
|
1,508 |
|
|
1,555 |
|
Stock-based compensation (1) |
|
646 |
|
|
— |
|
|
646 |
|
Transaction and integration costs (2) |
|
173 |
|
|
— |
|
|
173 |
|
Employee separation and transition costs (3) |
|
35 |
|
|
— |
|
|
35 |
|
Loss on early retirement of debt (4) |
|
— |
|
|
164 |
|
|
164 |
|
Loss on asset dispositions |
|
1 |
|
|
37 |
|
|
38 |
|
Legal settlement expense (5) |
|
— |
|
|
952 |
|
|
952 |
|
Non-income tax expense assessment (6) |
|
163 |
|
|
— |
|
|
163 |
|
Adjusted
EBITDA |
|
1,065 |
|
|
2,661 |
|
|
3,726 |
|
Adjusted EBITDA attributable to noncontrolling interests |
|
— |
|
|
(458 |
) |
|
(458 |
) |
Adjusted EBITDA
attributable to RLH Corporation |
|
$ |
1,065 |
|
|
$ |
2,203 |
|
|
$ |
3,268 |
|
|
(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) 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 Income
(Loss). |
(4) 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. |
(5) 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 Statement of Comprehensive Income (Loss). |
(6) 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 six
months ended June 30, 2020 (in thousands): |
|
|
Core |
|
Non-Core |
|
Total |
Net income
(loss) |
$ |
(15,828 |
) |
|
$ |
2,362 |
|
|
$ |
(13,466 |
) |
Depreciation and amortization |
|
3,658 |
|
|
1,289 |
|
|
4,947 |
|
Interest expense |
|
174 |
|
|
381 |
|
|
555 |
|
Income tax benefit |
|
(604 |
) |
|
— |
|
|
(604 |
) |
EBITDA |
(12,600 |
) |
|
4,032 |
|
|
(8,568 |
) |
Stock-based compensation (1) |
|
575 |
|
|
— |
|
|
575 |
|
Asset impairment (2) |
|
— |
|
|
1,760 |
|
|
1,760 |
|
Transaction and integration costs (3) |
|
1,347 |
|
|
53 |
|
|
1,400 |
|
Employee separation and transition costs (4) |
|
796 |
|
|
— |
|
|
796 |
|
Loss on early retirement of debt (5) |
|
223 |
|
|
1,086 |
|
|
1,309 |
|
Loss (gain) on asset dispositions (6) |
|
220 |
|
|
(7,781 |
) |
|
(7,561 |
) |
Non-income tax expense assessment (7) |
|
234 |
|
|
— |
|
|
234 |
|
Adjusted
EBITDA |
|
(9,205 |
) |
|
(850 |
) |
|
(10,055 |
) |
Adjusted EBITDA attributable to noncontrolling interests |
|
— |
|
|
44 |
|
|
44 |
|
Adjusted EBITDA attributable to RLH
Corporation |
|
$ |
(9,205 |
) |
|
$ |
(806 |
) |
|
$ |
(10,011 |
) |
|
(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 first quarter of 2020, we recognized an impairment on
our Red Lion Hotel Seattle Airport leased property. |
(3) Transaction and
integration costs relate primarily to fees paid to advisors engaged
to review and respond to bona fide inquiries received from parties
considering an investment in or acquisition of the
Company. |
(4) The costs relate
to severance payments due to our Chief Financial Officer upon her
departure in March 2020, along with two reductions in force that
were implemented in the first six months 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 Income (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 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 six
months ended June 30, 2019 (in thousands): |
|
|
Core |
|
Non-Core |
|
Total |
Net loss |
|
$ |
(5,924 |
) |
|
$ |
(2,406 |
) |
|
$ |
(8,330 |
) |
Depreciation and amortization |
|
3,683 |
|
|
3,873 |
|
|
7,556 |
|
Interest expense |
|
529 |
|
|
1,462 |
|
|
1,991 |
|
Income tax expense |
|
190 |
|
|
— |
|
|
190 |
|
EBITDA |
|
(1,522 |
) |
|
2,929 |
|
|
1,407 |
|
Stock-based compensation (1) |
|
1,562 |
|
|
— |
|
|
1,562 |
|
Transaction and integration costs (2) |
|
235 |
|
|
— |
|
|
235 |
|
Employee separation and transition costs (3) |
|
35 |
|
|
— |
|
|
35 |
|
Loss on early retirement of debt (4) |
|
— |
|
|
164 |
|
|
164 |
|
Loss on asset dispositions |
|
1 |
|
|
43 |
|
|
44 |
|
Legal settlement expense (5) |
|
— |
|
|
952 |
|
|
952 |
|
Non-income tax expense assessment (6) |
|
326 |
|
|
— |
|
|
326 |
|
Adjusted
EBITDA |
|
637 |
|
|
4,088 |
|
|
4,725 |
|
Adjusted EBITDA attributable to noncontrolling interests |
|
— |
|
|
(1,005 |
) |
|
(1,005 |
) |
Adjusted EBITDA
attributable to RLH Corporation |
|
$ |
637 |
|
|
$ |
3,083 |
|
|
$ |
3,720 |
|
|
(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) 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 Income
(Loss). |
(4) 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. |
(5) 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 Statement of Comprehensive
Income (Loss). |
(6) 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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