Published:
Red Lion Reports Third Quarter 2009 Results
SPOKANE, Wash., Nov. 4 /PRNewswire-FirstCall/ -- Red Lion Hotels Corporation (NYSE: RLH) today announced its results for the third quarter and nine-month period ended September 30, 2009. Summary results for the three and nine-month periods follow:
($ in thousands, except per share)
Three months Nine months
ended ended
September 30, September 30,
% %
2009 2008 change 2009 2008 change
---- ---- ------ ---- ---- ------
Total revenue,
as reported $50,467 $56,886 -11.3% $129,736 $146,256 -11.3%
Results before
2008 Special
Item: (1)
EBITDA $12,447 $14,113 -11.8% $24,825 $27,755 -10.6%
Net income (loss) $3,208 $4,435 -27.7% $2,100 $4,584 -54.2%
Earnings (loss) per
share - diluted $0.18 $0.24 -25.0% $0.12 $0.25 -52.0%
Results as
reported:
EBITDA $12,447 $14,113 -11.8% $24,825 $24,101 3.0%
Net income (loss) $3,208 $4,435 -27.7% $2,100 $2,227 -5.7%
Earnings (loss) per
share - diluted $0.18 $0.24 -25.0% $0.12 $0.12 0.0%
(1) Excludes $3.7 million of cash and non-cash separation costs
incurred in the first quarter of 2008 related to the retirement of
the company's former President and CEO, net of its impact on income
taxes. A schedule called "Disclosure of Special Items" is included
with this release.
In addition, key hotel operating metrics, on a comparable basis, and reported hotel operating margins for the three and nine-month periods ended September 30, 2009 and September 30, 2008 are highlighted below for owned and leased hotels:
Three months ended Nine months ended
September 30, September 30,
% %
2009 2008 change 2009 2008 change
---- ---- -------- ---- ---- --------
RevPAR (revenue per
available room) $58.94 $68.38 -13.8% $50.69 $58.56 -13.4%
ADR (average
daily rate) $85.91 $93.95 -8.6% $85.15 $90.49 -5.9%
Occupancy 68.6% 72.8% -420 bp 59.5% 64.7% -520 bp
Hotel Direct
Operating Margin 31.5% 30.1% +140 bp 26.5% 25.5% +100 bp
Commenting on the third quarter results, President and Chief Executive Officer Anupam Narayan said, "The weak economic and industry environment continued to drive declines in RevPAR; however, I was pleased with our aggressive sales and marketing efforts and revenue management during the quarter. Those efforts and our continued focus on cost controls enabled us to once again increase our hotel operating margin from the prior-year quarter."
Narayan continued, "We have no debt maturities until September 2011 and we expect to end the year funding all of our operational and capital needs from operating cash flow. The industry continues to have limited forward visibility, and as such we will continue to focus on maximizing our profitability and cash flow by keeping a close eye on our cost structure and driving revenues through our sales and marketing efforts. General expectations are for some stabilization in the industry in the second half of 2010, and we are managing the company with that outlook in mind."
Third Quarter Results
Red Lion's total revenue during the third quarter of 2009 was $50.5 million, compared to $56.9 million for the prior-year period. Revenue from hotels was $45.6 million, down 14.7% from the third quarter of 2008. RevPAR for owned and leased hotels on a comparable basis for the third quarter of 2009 was down 13.8%, due to a 420 basis point decrease in occupancy and an 8.6% decrease in ADR. Despite the lower revenues, hotel direct operating margin for the quarter was 31.5%, an increase of 140 basis points from the prior-year period. System-wide RevPAR (which includes franchised hotels) on a comparable basis for the quarter decreased 15.0%, caused by a 510 basis point decrease in occupancy and an 8.4% decrease in ADR.
Franchise and management revenue was $0.4 million, a decrease of $0.4 million from the prior-year period due primarily to the receipt of $0.3 million in franchise termination fees in the third quarter of 2008. Entertainment revenue was $3.9 million, an increase of $2.0 million compared to the same quarter in 2008 which was due to the successful production of various shows during the quarter with no comparables during the prior-year period.
EBITDA for the third quarter of 2009 was $12.4 million, compared to $14.1 million for the third quarter of 2008, an 11.8% decline on a year-over-year basis. The company's net income was $3.2 million, compared to net income of $4.4 million for the prior-year period. Diluted earnings per share were $0.18, compared to diluted earnings per share of $0.24 for the third quarter of 2008.
Nine Months 2009 Results
Red Lion's total revenue for the nine months ended September 30, 2009 was $129.7 million, compared to $146.3 million in the same period in 2008. Reported revenue from hotels was $117.4 million, down 13.3% from the prior-year period, primarily due to the weak economic and industry environment. Hotel direct operating profit decreased 10.1% to $31.1 million, although direct operating margin increased approximately 100 basis points to 26.5%.
RevPAR for owned and leased hotels on a comparable basis for the first nine months of 2009 was down 13.4%, due to a 520 basis point decrease in occupancy and a 5.9% decrease in ADR. System-wide, RevPAR on a comparable basis decreased 13.1% from the prior-year period, with a 530 basis point decrease in occupancy and a 5.2% decrease in ADR.
Franchise and management revenue was $1.4 million, down $0.2 million from the prior-year period. Entertainment revenue was $9.0 million, up $2.0 million from the prior-year period.
EBITDA for the nine-month period ending September 30, 2009 was $24.8 million, compared to $27.8 million for the prior-year period before a one-time expense for separation costs. The company's net income was $2.1 million, compared to net income of $4.6 million for the prior-year period before the one-time expense for separation costs. Diluted earnings per share for the nine-month period ending September 30, 2009 was $0.12, compared to diluted earnings of $0.25 per share for the prior-year period before the one-time expense for separation costs.
Liquidity and Balance Sheet
As of September 30, 2009, the company had approximately $5.1 million in cash and cash equivalents, and outstanding debt of $133.9 million. The company's debt balance is comprised of $22.0 million outstanding under its variable rate credit facility, $13.3 million under a variable rate note with a bank, $30.8 million of publicly traded unsecured debt in the form of deeply subordinated trust preferred securities and a total of $67.8 million in fixed-rate non-recourse notes collateralized by individual hotels. The company's first term debt maturity is in September 2011 in the aggregate amount of $22.2 million. Only the credit facility, which also matures in September 2011, and the variable rate bank note have restrictive financial covenants, with which the company is in compliance as of September 30, 2009. During the seasonally strong third quarter, the company paid down $8 million of its variable rate credit facility.
Capital expenditures for the first nine months of 2009 totaled $15.1 million, including $5.7 million and $2.6 million spent on renovations at the company's Anaheim and Denver Southeast properties, respectively. The company expects to spend another $0.7 million on additional renovations at Denver Southeast in the fourth quarter of 2009 and another $2.3 million on normal capital expenditures at other properties. Combined, the total expected capital expenditures for 2009 will be approximately $18 million. Given current economic conditions, the company will continue to closely monitor capital spending.
Outlook for 2009
Based on currently available information, the company is revising its guidance for 2009 as follows:
-- 2009 RevPAR for company owned and leased hotels is expected to decline
12% to 14% from 2008
-- 2009 direct hotel operating margin is expected to range from flat to up
100 basis points
-- EBITDA is expected to be $27 to $29 million, before any special items
Conference Call Information
The company will hold a conference call at 11:00 a.m. Pacific Time (2:00 p.m. Eastern Time) on November 5, 2009, to discuss the results for interested investors, analysts and portfolio managers. Management on the call will include President and CEO Anupam Narayan and Chief Financial Officer Anthony Dombrowik.
To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (888) 428-4474. International callers should dial (612) 234-9960.
This conference call will also be webcast live at http://www.redlion.com in the Investor Relations section of the website. To listen to the live call, please go to the Red Lion website at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available at 1:30 p.m. PST on November 5, 2009, through December 5, 2009 at (800) 475-6701 or (320) 365-3844 (International) access code - 119376. The replay will also be available shortly after the call on the Red Lion website.
About Red Lion Hotels Corporation:
Red Lion Hotels Corporation is a hospitality and leisure company primarily engaged in the ownership, operation and franchising of upscale and midscale hotels under its Red Lion® brand. As of September 30, 2009, the RLH hotel network was comprised of 45 hotels located in eight states and one Canadian province, with 8,671 rooms and 431,244 square feet of meeting space. The company also owns and operates an entertainment and event ticket distribution business. For more information, please visit the company's website at www.redlion.com.
This press release contains forward-looking statements within the meaning of federal securities law, including statements concerning plans, objectives, goals, strategies, projections of future events or performance and underlying assumptions (many of which are based, in turn, upon further assumptions). The forward-looking statements in this press release are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Such risks and uncertainties include, among others, economic cycles; international conflicts; changes in future demand and supply for hotel rooms; competitive conditions in the lodging industry; relationships with franchisees and properties; impact of government regulations; ability to obtain financing; changes in energy, healthcare, insurance and other operating expenses; ability to sell non-core assets; ability to locate lessees for rental property; dependency upon the ability and experience of executive officers and ability to retain or replace such officers as well as other matters discussed in the company's annual report on Form 10-K for the year ended December 31, 2008 and in other documents filed by the company with the Securities and Exchange Commission.
Contact:
Red Lion Hotels Corporation
Julie Langenheim, Investor Relations Manager
(509) 777-6322
Investor Relations:
ICR Inc.
William Schmitt
(203) 682-8200
Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes)
Three months
ended
September 30,
2009 2008 $ Change % Change
---- ---- -------- --------
Revenue:
Hotels $45,625 $53,472 $(7,847) -14.7%
Franchise 389 769 (380) -49.4%
Entertainment 3,861 1,869 1,992 106.6%
Other 592 776 (184) -23.7%
--- --- ---- -----
Total revenues 50,467 56,886 (6,419) -11.3%
------ ------ ------ -----
Operating expenses:
Hotels 31,253 37,375 (6,122) -16.4%
Franchise 153 81 72 88.9%
Entertainment 2,987 1,712 1,275 74.5%
Other 528 483 45 9.3%
Depreciation and amortization 5,340 4,966 374 7.5%
Hotel facility and land lease 1,826 1,850 (24) -1.3%
Gain on asset dispositions, net (85) (64) 21 32.8%
Undistributed corporate expenses 1,542 1,746 (204) -11.7%
----- ----- ---- -----
Total expenses 43,544 48,149 (4,605) -9.6%
------ ------ ------ ----
Operating income 6,923 8,737 (1,814) -20.8%
Other income (expense):
Interest expense (2,268) (2,321) 53 2.3%
Other income, net 189 420 (231) -55.0%
--- --- ---- -----
Income before income taxes 4,844 6,836 (1,992) -29.1%
Income tax expense 1,631 2,391 (760) -31.8%
----- ----- ---- -----
Net income 3,213 4,445 (1,232) -27.7%
----- ----- ------ -----
Net income attributable to
noncontrolling interest (5) (10) 5 -50.0%
-- --- --- -----
Net income attributable to Red
Lion Hotels Corporation 3,208 4,435 (1,227) -27.7%
===== ===== ====== =====
Earnings per share attributable
to Red Lion Hotels Corporation:
Basic $0.18 $0.24
Diluted $0.18 $0.24
Weighted average shares -
basic (1) 18,157 18,267
Weighted average shares -
diluted (1) 18,306 18,551
EBITDA (2) $12,447 $14,113 $(1,666) -11.8%
EBITDA as a percentage of revenues 24.7% 24.8%
(1) For the three months ended September 30, 2009, 72,258 of the
1,212,771 options to purchase common shares outstanding as of that
date were considered dilutive, as were 31,310 of the 250,195
restricted stock units outstanding were considered dilutive during
the third quarter of 2009. For the three months ended September 30,
2008, 234,658 of the 1,429,794 options to purchase common shares
outstanding as of that date were considered dilutive. Of the 55,715
restricted stock units outstanding, 4,298 shares were considered
dilutive during the third quarter of 2008. For both comparative
periods, all of the 44,837 convertible operating partnership units,
respectively, were considered dilutive.
(2) The definition of "EBITDA" and how that measure relates to net income
attributable to Red Lion Hotels Corporation is discussed further in
this release under Non-GAAP Financial Measures.
Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes)
Nine months ended
September 30,
2009 2008 $ Change % Change
---- ---- -------- --------
Revenue:
Hotels $117,385 $135,401 $(18,016) -13.3%
Franchise 1,397 1,549 (152) -9.8%
Entertainment 8,968 6,975 1,993 28.6%
Other 1,986 2,331 (345) -14.8%
----- ----- ---- -----
Total revenues 129,736 146,256 (16,520) -11.3%
------- ------- ------- -----
Operating expenses:
Hotels 86,289 100,827 (14,538) -14.4%
Franchise 297 226 71 31.4%
Entertainment 7,375 6,886 489 7.1%
Other 1,609 1,547 62 4.0%
Depreciation and amortization 15,603 13,993 1,610 11.5%
Hotel facility and land lease 5,476 5,496 (20) -0.4%
Gain on asset dispositions, net (132) (204) (72) -35.3%
Undistributed corporate expenses 4,529 8,710 (4,181) -48.0%
----- ----- ------ -----
Total expenses 121,046 137,481 (16,435) -12.0%
------- ------- ------- -----
Operating income 8,690 8,775 (85) -1.0%
Other income (expense):
Interest expense (6,297) (6,955) 658 9.5%
Other income, net 537 1,331 (794) -59.7%
--- ----- ---- -----
Income before income taxes 2,930 3,151 (221) -7.0%
Income tax (benefit) expense 825 926 (101) -10.9%
--- --- ---- -----
Net income 2,105 2,225 (120) -5.4%
----- ----- ---- ----
Net (income) loss attributable to
noncontrolling interest (5) 2 (7) nm
-- --- -- --
Net income attributable to Red
Lion Hotels Corporation $2,100 $2,227 (127) -5.7%
====== ====== ==== ====
Earnings per share attributable
to Red Lion Hotels Corporation:
Basic $0.12 $0.12
Diluted $0.12 $0.12
Weighted average shares -
basic (1) 18,089 18,245
Weighted average shares -
diluted (1) 18,119 18,508
EBITDA (2) $24,825 $24,101 $724 3.0%
EBITDA as a percentage of revenues 19.1% 16.5%
(1) For the nine months ended September 30, 2009, none of the 1,212,771
options to purchase common shares outstanding as of that date were
considered dilutive, as the grant date stock price of all options
outstanding were below the weighted average price of the Company's
common stock during that period. Similarly, none of the 250,195
restricted stock units outstanding were considered dilutive. For
the nine months ended September 30, 2008, 227,037 of the 1,429,794
options to purchase common shares outstanding as of that date were
considered dilutive. Of the 55,715 restricted stock units
outstanding, 5,805 shares were considered dilutive. For the nine
months ended September 30, 2009 and 2008, 29,946 of the 44,837
convertible operating partnership units were considered dilutive.
(2) The definition of "EBITDA" and how that measure relates to net
income attributable to Red Lion Hotels Corporation is discussed
further in this release under Non-GAAP Financial Measures.
Red Lion Hotels Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except share data)
September 30, December 31,
2009 2008
---- ----
Assets:
Current assets:
Cash and cash equivalents $5,050 $18,222
Restricted cash 3,712 3,890
Accounts receivable, net 10,374 11,337
Inventories 1,311 1,375
Prepaid expenses and other 3,284 2,574
----- -----
Total current assets 23,731 37,398
------ ------
Property and equipment, net 298,349 298,496
Goodwill 28,042 28,042
Intangible assets, net 10,245 10,376
Other assets, net 7,164 6,460
----- -----
Total assets $367,531 $380,772
======== ========
Liabilities:
Current liabilities:
Accounts payable $5,750 $10,990
Accrued payroll and related benefits 4,064 4,925
Accrued interest payable 315 314
Advance deposits 689 398
Other accrued expenses 12,041 7,756
Long-term debt, due within one year 3,130 3,008
Total current liabilities 25,989 27,391
------ ------
Revolving credit facility 22,000 36,000
Long-term debt, due after one year 77,964 80,323
Deferred income 8,828 8,476
Deferred income taxes 17,380 16,366
Debentures due Red Lion Hotels Capital Trust 30,825 30,825
------ ------
Total liabilities 182,986 199,381
------- -------
Stockholders' equity:
Red Lion Hotels 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;
18,162,143 and 17,977,205 shares
issued and outstanding 182 180
Additional paid-in capital, common stock 142,184 141,137
Retained earnings 42,155 40,055
------ ------
Total Red Lion Hotels Corporation
stockholders' equity 184,521 181,372
Noncontrolling interest 24 19
-- --
Total equity 184,545 181,391
------- -------
Total liabilities and
stockholders' equity $367,531 $380,772
======== ========
Red Lion Hotels Corporation
Consolidated Statement of Cash Flows
(unaudited)
($ in thousands)
Nine months ended
September 30,
2009 2008
---- ----
Operating activities:
Net income $2,105 $2,225
Adjustments to reconcile net income
attributable to Red Lion Hotels
Corporation to net cash provided by
operating activities:
Depreciation and amortization 15,603 13,993
Gain on disposition of property, equipment
and other assets, net (132) (204)
Deferred income tax provision (benefit) 1,014 (71)
Equity in investments 16 (147)
Imputed interest expense - 111
Stock based compensation expense 941 2,104
Provision for doubtful accounts 103 65
Change in current assets and liabilities:
Restricted cash 178 523
Accounts receivable 912 (1,230)
Inventories 64 (12)
Prepaid expenses and other (710) 931
Accounts payable (5,265) 4,056
Accrued payroll and related benefits (861) (1,707)
Accrued interest payable 1 (60)
Deferred lease income 900 -
Other accrued expenses and advance deposits 4,379 368
----- ---
Net cash provided by operating activities 19,248 20,945
------ ------
Investing activities:
Purchases of property and equipment (15,106) (43,306)
Non-current restricted cash for sublease
tenant improvements, net - 2,072
Proceeds from disposition of property
and equipment 16 5
Advances to Red Lion Hotels Capital Trust (27) (27)
Other, net (1,021) 429
------ ---
Net cash used in investing activities (16,138) (40,827)
------- -------
Financing activities:
Borrowings on revolving credit facility 5,000 23,000
Repayment of revolving credit facility (19,000) (2,000)
Repayment of long-term debt (2,237) (13,234)
Borrowings on long-term debt - 14,000
Common stock redeemed (11) (926)
Additions to deferred financing costs (153) (192)
Proceeds from issuance of common stock
under employee stock purchase plan 119 164
--- ---
Net cash (used in) provided by
financing activities (16,282) 20,812
------- ------
Change in cash and cash equivalents:
Net (decrease) increase in cash and
cash equivalents (13,172) 930
Cash and cash equivalents at
beginning of period 18,222 15,044
------ ------
Cash and cash equivalents at end of period $5,050 $15,974
====== =======
Red Lion Hotels Corporation
Additional Hotel Statistics
(unaudited)
System-wide Hotels as of September 30, 2009
-------------------------------------------
Meeting Space
Hotels Rooms (sq. ft.)
------ ----- ---------
Red Lion
Owned and
Leased
Hotels 32 6,243 309,684
Red Lion
Franchised
Hotels 13 2,428 121,560
-- ----- -------
Total Red
Lion
Hotels 45 8,671 431,244
== ===== =======
Comparable
Hotel
Statistics (1)
---------------
Three months ended Three months ended
September 30, 2009 September 30, 2008
------------------- -------------------
Average Average
Occupancy ADR RevPAR Occupancy ADR RevPAR
(2) (3) (4) (2) (3) (4)
------ ------ ------- ----- ------ ------
Owned
and
Leased
Hotels 68.6% $85.91 $58.94 72.8% $93.95 $68.38
Franchised
Hotels 62.6% $75.42 $47.20 70.4% $82.37 $57.97
---- ------ ------ ---- ------ ------
Total
System
Wide 67.0% $83.24 $55.73 72.1% $90.87 $65.53
==== ====== ====== ==== ====== ======
Change from
prior
comparative
period:
Owned and
Leased
Hotels (4.2) -8.6% -13.8%
Franchised
Hotels (7.8) -8.4% -18.6%
---- ---- -----
Total
System
Wide (5.1) -8.4% -15.0%
==== ==== =====
Nine months ended Nine months ended
September 30, 2009 September 30, 2008
------------------- -------------------
Average Average
Occupancy ADR RevPAR Occupancy ADR RevPAR
(2) (3) (4) (2) (3) (4)
------ ------ ------- ----- ------ ------
Owned and
Leased
Hotels 59.5% $85.15 $50.69 64.7% $90.49 $58.56
Franchised
Hotels 55.5% $76.33 $42.38 61.1% $78.99 $48.24
---- ------ ------ ---- ------ ------
Total
System
Wide 58.4% $82.73 $48.29 63.7% $87.30 $55.58
==== ====== ====== ==== ====== ======
Change from
prior
comparative
period:
Owned and
Leased
Hotels (5.2) -5.9% -13.4%
Franchised
Hotels (5.6) -3.4% -12.1%
---- ---- -----
Total
System
Wide (5.3) -5.2% -13.1%
==== ==== =====
(1) Includes all hotels owned, leased and franchised, presented on a
comparable basis for hotel statistics.
(2) Average occupancy represents total paid rooms divided by total
available rooms. Total available rooms represents the number of
rooms available multiplied by the number of days in the reported
period and includes rooms taken out of service for renovation.
(3) Average daily rate ("ADR") represents total room revenues divided
by the total number of paid rooms occupied by hotel guests.
(4) Revenue per available room ("RevPAR") represents total room and
related revenues divided by total available rooms.
Red Lion Hotels Corporation
Disclosure of Special Items
(unaudited)
In the first quarter of 2008, the Company recorded an expense of
$3.7 million in separation costs from the retirement of the Company's
former President and Chief Executive Officer. As a result, the
operations as presented in the accompanying financial statements for the
nine months ended September 30, 2009 compared to 2008 do not reflect a
meaningful comparison between periods. The follow table represents a
reconciliation of certain earnings measures before special items to
income after special items.
Nine months ended Nine months ended
September 30, 2009 September 30, 2008
($ in thousands
except per share Net Diluted Net Diluted
data) Income EBITDA EPS Income EBITDA EPS
------- ------ ----- ------ ------ -----
Amount before
special item $2,100 $24,825 $0.12 $4,584 $27,755 $0.25
Special items:
Separation
costs (1) - - - (3,654) (3,654) (0.20)
Income tax
expense of
special
item (2) - - - 1,297 - 0.07
--- --- --- ----- --- ----
Amount per
consolidated
statement of
operations $2,100 $24,825 $0.12 $2,227 $24,101 $0.12
====== ======= ===== ====== ======= =====
Change from
the comparative
period:
Amount before
special item -54.2% -10.6% -52.0%
Amount per
consolidated
statement of
operations -5.7% 3.0% -
(1) Amount as included in the line item "Undistributed corporate
expenses" on the accompanying consolidated statements of operations.
(2) Represents taxes on special items at the Company's expected
incremental tax rate as applicable.
Red Lion Hotels Corporation
Reconciliation of EBITDA to Net Income Attributable to Red Lion
Hotels Corporation
(unaudited)
($ in thousands)
The following is a reconciliation of EBITDA to net income attributable
to Red Lion Hotels Corporation for the periods presented:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
EBITDA $12,447 $14,113 $24,825 $24,101
Income tax expense (1,631) (2,391) (825) (926)
Interest expense (2,268) (2,321) (6,297) (6,955)
Depreciation and amortization (5,340) (4,966) (15,603) (13,993)
------ ------ ------- -------
Net income $3,208 $4,435 $2,100 $2,227
====== ====== ====== ======
NON-GAAP FINANCIAL MEASURES
---------------------------
EBITDA is defined as net income attributable to Red Lion Hotels
Corporation, before interest, taxes, depreciation and amortization.
EBITDA is considered a non-GAAP financial measurement. We believe it is a
useful financial performance measure for us and for our shareholders and
is a complement to net income attributable to Red Lion Hotels Corporation
and other financial performance measures provided in accordance with
generally accepted accounting principles in the United States ("GAAP").
We use EBITDA to measure the financial performance of our owned and leased
hotels because it excludes interest, taxes, depreciation and amortization,
which bear little or no relationship to operating performance. By
excluding interest expense, EBITDA measures our financial performance
irrespective of our capital structure or how we finance our properties
and operations. We generally pay federal and state income taxes on a
consolidated basis, taking into account how the applicable taxing laws
apply to our company in the aggregate. By excluding taxes on income, we
believe EBITDA provides a basis for measuring the financial performance
of our operations excluding factors that our hotels and other operations
cannot control. By excluding depreciation and amortization expense,
which can vary from hotel to hotel based on historical cost and other
factors unrelated to the hotels' financial performance, EBITDA measures
the financial performance of our hotels without regard to their historical
cost. For all of these reasons, we believe that EBITDA provides us and
investors with information that is relevant and useful in evaluating our
business.
However, because EBITDA excludes depreciation and amortization, it does
not measure the capital we require to maintain or preserve our long-lived
assets. In addition, because EBITDA does not reflect interest expense, it
does not take into account the total amount of interest we pay on
outstanding debt nor does it show trends in interest costs due to changes
in our borrowings or changes in interest rates. EBITDA, as defined by us,
may not be comparable to EBITDA as reported by other companies that do
not define EBITDA exactly as we define the term. Because we use EBITDA
to evaluate our financial performance, we reconcile all EBITDA measures
to net income attributable to Red Lion Hotels Corporation, which is the
most comparable financial measure calculated and presented in accordance
with GAAP. EBITDA does not represent cash generated from operating
activities determined in accordance with GAAP, and should not be
considered as an alternative to operating income or net income
attributable to Red Lion Hotels Corporation determined in accordance
with GAAP as an indicator of performance or as an alternative to cash
flows from operating activities as an indicator of liquidity.
SOURCE Red Lion Hotels Corporation
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