RLHC Reports Second Quarter 2016 Results

Systemwide Same Store RevPAR Increases 4.3%
Achieves Strong EBITDA Growth

SPOKANE, Wash., Aug. 02, 2016 (GLOBE NEWSWIRE) — Red Lion Hotels Corporation (“RLHC” or the “company”) (NYSE:RLH), a growing hospitality company that operates and franchises upscale, midscale and economy hotels, today reported second quarter 2016 results.

Highlights Second Quarter 2016

  • Systemwide same store RevPAR grew 4.3%
  • Total revenues increased 23% year-over-year
  • Consolidated net income increased to $0.2 million from a net loss of $1.9 million in 2015; EPS was $0.01 in 2016 – an increase of $0.11 year-over-year
  • Adjusted EBITDA grew 45% year-over-year
  • Opened two new franchise hotels and one company operated hotel in the second quarter
  • Launched Hello Rewards App with Keyless Entry & announced innovative Wi-Fi Customer Affinity Program

RLHC President and Chief Executive Officer Greg T. Mount stated, “RLHC delivered another strong quarter of RevPAR growth across all of our segments and ahead of comparable industry segments.   The success of our initiatives is improving our EBITDA, and we are encouraged by the revenue gains in our franchise operations. The majority of the renovations in our joint venture hotels are substantially complete and we anticipate improved productivity from these repositioned hotels. The fundamental changes we have initiated over a year ago have equipped RLHC to perform well in a challenging lodging environment.  We are well positioned to pursue various growth avenues and remain on track to meeting our goal of 100 hotels in 100 weeks.”

Second Quarter 2016 Results

Franchise hotels revenue reached $4.1 million, up 28% compared to the second quarter of 2015. Segment operating income for the quarter improved significantly to 13.7% versus 0.9% in the same period of 2015.

Comparable revenue from company operated hotels was $28.5 million, flat, compared to the same period a year ago.  RevPAR for company operated hotels increased 1.5%, generated primarily by a 1.0% increase in rate and occupancy increase of 40 basis points.   RevPAR was adversely impacted by our extensive renovations and upgrade activities at our company operated hotels. Comparable company operated hotel gross profit was $10.0 million, comparable to $10.1 million in the prior year.  Systemwide same store midscale RevPAR grew 3.5%. Outperforming the industry, same store franchised economy RevPAR increased 7.7%, and same store franchised midscale increased 6.0%.

Entertainment revenue for the second quarter was $7.0 million compared with $2.1 million in the prior year period, increasing more than 240% year over year. Segment operating income was $0.9 million versus a loss of $0.3 million in the second quarter of 2015. The strong results in the Entertainment segment were driven by high demand for The Book of Mormon, which debuted in Hawaii for a limited production run and ended in early May. The company does not anticipate the pace of revenue contribution from its Entertainment segment to continue into the second half of 2016.

Consolidated net income attributable to RLHC in the second quarter of 2016 was $0.2 million compared to net loss of $1.9 million in the same period a year ago.  Net income per share for the second quarter of 2016 was $0.01 versus net loss per share of $0.10 for the prior year period.

After adjusting for special items, adjusted net income per share for the second quarter 2016 was $0.04 versus an adjusted loss per share of $0.02 in 2015.  Total company Adjusted EBITDA for the second quarter was $6.4 million compared to $4.4 million in the prior year period.

Balance Sheet

At June 30, 2016, the company had $27.4 million in cash and cash equivalents, $10.0 million in restricted cash and $12.7 million in short-term investments. Additionally, the company had consolidated long-term debt of $100.4 million, borrowed by the company’s joint venture entities.

Capital expenditures for the six months ended June 30, 2016, totaled $21.0 million; the majority of which was funded with proceeds from debt financing associated with the company’s joint ventures.

Brand Portfolio Developments

Since the first quarter earnings release, RLHC enjoyed accretive additions to its brand portfolio that included openings, new franchises, conversions from non-RLHC brands and conversions from Red Lion Hotels to Hotel RLs within the system.   The announced changes are listed below.

Additions to the portfolio include the following:

  • Executed Red Lion Inn & Suites, Fargo, North Dakota – Conversion, Franchise
  • Opened Red Lion Hotel, Jacksonville, Florida – Conversion, Franchise
  • Opened Red Lion Inn & Suites, Susanville, California – Conversion, Franchise
  • Opened Red Lion Hotel, Atlanta, Georgia – Conversion, Joint Venture
  • Executed Hotel RL, Houston, Texas – New Build, Franchise
  • Executed Red Lion Hotel & Convention Center, Billings, Montana – Conversion, Franchise
  • Opened Red Lion Inn & Suites, Hattiesburg, Mississippi – Conversion, Franchise
  • Opened Hotel RL, Olympia, Washington – Brand conversion from a Red Lion Hotel, Joint Venture
  • Opened Hotel RL, Salt Lake, Utah – Brand conversion from a Red Lion Hotel, Joint Venture
  • Opened Hotel RL, Spokane, Washington – Brand conversion from a Red Lion Hotel, Joint Venture, grand opening coming up on August 17th

Subsequent Events

On August 1st, the company filed a Universal Shelf Registration on Form S-3 with the Securities and Exchange Commission in the amount of $100 million.  The company, who has been shelf-eligible, has never had a shelf filing in place.  Management and the Board of Directors collectively decided that going forward RLHC should have an active shelf registration as a best practice for the company, which will provide it optionality and flexibility to support growth initiatives over time.

2016 Outlook

The company is reiterating the following financial guidance for full year 2016, based on the outlook for the markets in which they operate, and its current expectations:

  • EBITDA is expected to be between $17 to $20 million
  • Capital expenditures to range from $25 to $35 million, primarily funded at the joint venture level
  • Addition of 25 to 35 hotels to the system-wide portfolio

The company is revising its full year 2016 RevPAR guidance for comparable company operated hotels to increase 2% to 4% over 2015.

The company is introducing full year 2016 RevPAR guidance for systemwide same store to increase 2.5% to 4.5% over 2015. Systemwide same store RevPAR in 2015 was $51.95.

Conference Call Information

The company will conduct a conference call on August 2, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time), to discuss the results for interested investors, analysts and portfolio managers. Hosting the call will be President and Chief Executive Officer Greg Mount and Vice President and Interim Chief Financial Officer David Wright.

To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (877) 407-8289. International callers should dial (201) 689-8341.

This conference call will also be webcast live on www.redlion.com in the Investor Relations section of the website. To listen to the live call, please go to the RLHC website at least fifteen minutes prior to the start of the call to register and to download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available at 3:30 p.m. Pacific Time on August 2, 2016 through August 16, 2016, at (877) 660-6853 or (201) 612-7415 (International), using access code 13640744. The replay will also be available shortly after the call on the RLHC website.

About RLHC

Red Lion Hotels Corporation, established in 1959, is a national hospitality company primarily engaged in the franchising, management and ownership of upscale, midscale and economy hotels under the Hotel RL, Red Lion Hotel, Red Lion Inn & Suites, GuestHouse and Settle Inn brands. The company also owns and operates an entertainment and event ticket distribution business under the brand name TicketsWest. For more information, please visit the company’s website at www.redlion.com.

Forward Looking Statements

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, 2015, and in other documents filed by the company with the Securities and Exchange Commission.

 

Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes and per share amounts)
               
  Three Months Ended June 30,        
  2016   2015   $ Change   % Change
Revenue:              
Company operated hotels $ 32,209     $ 30,348     $ 1,861     6.1  
Other revenues from managed properties 1,580     964     616     n/m  
Franchised hotels 4,131     3,229     902     27.9  
Entertainment 7,047     2,060     4,987     242.1  
Other 12     12          
Total revenues 44,979     36,613     8,366     22.8  
Operating expenses:              
Company operated hotels 24,072     22,218     1,854     8.3  
Other costs from managed properties 1,580     964     616     n/m  
Franchise 3,464     3,031     433     14.3  
Entertainment 6,140     2,249     3,891     173.0  
Other 9     9          
Depreciation and amortization 4,037     3,144     893     28.4  
Hotel facility and land lease 1,185     1,594     (409 )   (25.7 )
Gain on asset dispositions, net (512 )   (88 )   (424 )   481.8  
General and administrative expenses 2,695     2,800     (105 )   (3.8 )
Total operating expenses 42,670     35,921     6,749     18.8  
Operating income (loss) 2,309     692     1,617     233.7  
Other income (expense):              
Interest expense (1,487 )   (1,738 )   251     14.4  
Loss on early retirement of debt             n/m  
Other income, net (166 )   35     (201 )   (574.3 )
Total other income (expense) (1,653 )   (1,703 )   50     (2.9 )
Income (loss) before taxes 656     (1,011 )   1,667     (164.9 )
Income tax expense (benefit) 34     (25 )   59     n/m  
Net income (loss) 622     (986 )   1,608     (163.1 )
Net (income) loss attributable to noncontrolling interests (459 )   (936 )   477     n/m  
Net income (loss) attributable to RLHC $ 163     $ (1,922 )   $ 2,085     108.5 %
               
Earnings per share – basic              
Net income (loss) attributable to RLHC $ 0.01     $ (0.10 )        
Earnings per share – diluted              
Net income (loss) attributable to RLHC $ 0.01     $ (0.10 )        
Weighted average shares – basic 20,155     19,955          
Weighted average shares – diluted 20,649     19,955          
               
Non-GAAP Financial Measures(1)              
EBITDA $ 6,180     $ 3,871     $ 2,309     59.6  
Adjusted EBITDA $ 6,423     $ 4,434     $ 1,989     44.9  
Adjusted net income (loss) $ 865     $ (423 )   $ 1,288     304.5  
               
(1) The definitions of “EBITDA”, “Adjusted EBITDA” and Adjusted net income (loss) and how those measures relate to net income (loss) are discussed further in this release under Non-GAAP Financial Measures.

Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes and per share amounts)
               
  Six Months Ended June 30,        
  2016   2015   $ Change   % Change
Revenue:              
Company operated hotels $ 56,358     $ 54,120     $ 2,238     4.1  
Other revenues from managed properties 2,766     1,127     1,639     n/m  
Franchised hotels 7,427     5,322     2,105     39.6  
Entertainment 11,078     5,736     5,342     93.1  
Other 25     23     2     8.7  
Total revenues 77,654     66,328     11,326     17.1  
Operating expenses:              
Company operated hotels 45,672     43,139     2,533     5.9  
Other costs from managed properties 2,766     1,127     1,639     n/m  
Franchise 6,820     5,407     1,413     26.1  
Entertainment 9,577     5,375     4,202     78.2  
Other 21     17     4     23.5  
Depreciation and amortization 7,540     6,119     1,421     23.2  
Hotel facility and land lease 2,346     3,195     (849 )   (26.6 )
Gain on asset dispositions, net (629 )   (16,503 )   15,874     96.2  
General and administrative expenses 5,751     5,126     625     12.2  
Total operating expenses 79,864     53,002     26,862     50.7  
Operating income (loss) (2,210 )   13,326     (15,536 )   (116.6 )
Other income (expense):              
Interest expense (2,948 )   (3,240 )   292     9.0  
Loss on early retirement of debt     (1,159 )   1,159     n/m  
Other income, net 52     306     (254 )   (83.0 )
Total other income (expense) (2,896 )   (4,093 )   1,197     (29.2 )
Income (loss) before taxes (5,106 )   9,233     (14,339 )   (155.3 )
Income tax expense (benefit) 92     87     5     n/m  
Net income (loss) (5,198 )   9,146     (14,344 )   (156.8 )
Net (income) loss attributable to noncontrolling interest 562     (906 )   1,468     n/m  
Net income (loss) attributable to RLHC $ (4,636 )   $ 8,240     $ (12,876 )   (156.3 )%
               
Earnings per share – basic              
Net income (loss) attributable to RLHC $ (0.23 )   $ 0.41          
Earnings per share – diluted              
Net income (loss) attributable to RLHC $ (0.23 )   $ 0.41          
Weighted average shares – basic 20,121     19,926          
Weighted average shares – diluted 20,121     20,116          
               
Non-GAAP Financial Measures(1)              
EBITDA $ 5,382     $ 18,592     $ (13,210 )   (71.1 )
Adjusted EBITDA $ 5,753     $ 4,514     $ 1,239     27.4  
Adjusted net income (loss) $ (4,827 )   $ (4,932 )   $ 105     2.1  
               
(1) The definitions of “EBITDA”, “Adjusted EBITDA” and Adjusted net income (loss) and how those measures relate to net income (loss) are discussed further in this release under Non-GAAP Financial Measures.

Red Lion Hotels Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except per share data)
         
    June 30,
 2016
  December 31,
 2015
    (In thousands, except share data)
ASSETS        
Current assets:        
Cash and cash equivalents   $ 27,426     $ 23,898  
Restricted cash   10,048     11,304  
Short-term investments   12,695     18,085  
Accounts receivable, net   10,513     8,164  
Notes receivable, net   1,214     929  
Inventories   658     721  
Prepaid expenses and other   2,779     2,149  
Assets held for sale   3,942      
Total current assets   69,275     65,250  
Property and equipment, net   204,959     195,390  
Goodwill   8,512     8,512  
Intangible assets   15,291     15,301  
Notes receivable, long term   1,658     1,676  
Other assets, net   1,230     1,089  
Total assets   $ 300,925     $ 287,218  
LIABILITIES        
Current liabilities:        
Accounts payable   $ 13,974     $ 9,263  
Accrued payroll and related benefits   3,969     6,163  
Other accrued entertainment expenses   9,021     9,211  
Other accrued expenses   4,359     3,225  
Long-term debt, due within one year   5,838      
Total current liabilities   37,161     27,862  
Long-term debt, due after one year, net of discount   94,531     87,557  
Deferred income and other long term liabilities   1,428     1,326  
Deferred income taxes   2,940     2,872  
Total liabilities   136,060     119,617  
Commitments and contingencies        
STOCKHOLDERS’ EQUITY        
RLHC 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; 20,176,911 and 20,051,145 shares issued and outstanding   202     201  
Additional paid-in capital, common stock   145,504     143,901  
Retained earnings (accumulated deficit)   (14,746 )   (10,110 )
Total RLHC stockholders’ equity   130,960     133,992  
Noncontrolling interest   33,905     33,609  
Total stockholders’ equity   164,865     167,601  
Total liabilities and stockholders’ equity   $ 300,925     $ 287,218  

RED LION HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, 2016 and 2015
     
    Six Months Ended
    June 30,
    2016   2015
    (In thousands)
Operating activities:        
Net income (loss)   $ (5,198 )   $ 9,146  
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Depreciation and amortization   7,540     6,119  
Amortization of debt issuance costs   593     325  
Gain on disposition of property, equipment and other assets, net   (629 )   (16,503 )
Loss on early retirement of debt       1,074  
Deferred income taxes   68     38  
Equity in investments   (171 )   100  
Stock based compensation expense   1,268     478  
Provision for doubtful accounts   175     252  
Change in current assets and liabilities:        
Restricted cash for interest payments and other   (763 )   (7,281 )
Accounts receivable   (2,470 )   (1,387 )
Notes receivable   (45 )   (177 )
Inventories   63     1  
Prepaid expenses and other   (717 )   (174 )
Accounts payable   3,308     2,684  
Accrued other liabilities   (914 )   4,022  
Net cash used in operating activities   2,108     (1,283 )
Investing activities:        
Capital expenditures   (19,638 )   (7,782 )
Proceeds from sale of intellectual property   393      
Purchase of GuestHouse International assets       (8,855 )
Proceeds from disposition of property and equipment   2     37,729  
Collection of notes receivable related to property sales   52     3,492  
Advance of note receivable   (328 )   (27 )
Sales of short-term investments   5,390      
Change in restricted cash for property improvements   2,019      
Other, net   78      
Net cash provided by (used in) investing activities   (12,032 )   24,557  
Financing activities:        
Borrowings on long-term debt   12,325     67,543  
Repayment of long-term debt       (30,528 )
Debt issuance costs   (67 )   (3,203 )
Proceeds from sale of interests in joint ventures   3,194     19,071  
Distributions to noncontrolling interest   (1,797 )    
Stock based compensation awards withheld for tax liability   (271 )    
Other, net   68     49  
Net cash provided by financing activities   13,452     52,932  
         
Change in cash and cash equivalents:        
Net increase (decrease) in cash and cash equivalents   3,528     76,206  
Cash and cash equivalents at beginning of period   23,898     5,126  
Cash and cash equivalents at end of period   $ 27,426     $ 81,332  

Red Lion Hotels Corporation
Additional Hotel Statistics
(unaudited)
 
Systemwide Hotels as of June 30, 2016 Hotels Rooms
Company operated hotels    
Majority owned and consolidated 15   3,007  
Leased and consolidated 4   867  
Managed 3   684  
Franchised hotels 92   9,980  
Total systemwide 114   14,538  

Comparable Hotel Statistics (1)            
  For the three months ended June 30,
   2016     2015 
  Average Occupancy (2)     ADR (3)   RevPAR (4)   Average Occupancy (2)   ADR (3)   RevPAR (4)
Company operated hotels                        
Midscale   74.7 %     $ 97.63     $ 72.97       74.3 %   $ 96.70     $ 71.88  
Franchised hotels                        
Midscale   65.1 %     $ 93.60     $ 60.92       66.0 %   $ 87.06     $ 57.45  
Economy (pro forma) (5)   60.1 %     $ 68.22     $ 41.01       56.3 %   $ 67.66     $ 38.09  
Systemwide                        
Midscale   69.9 %     $ 95.76     $ 66.96       70.2 %   $ 92.18     $ 64.68  
Economy (pro forma) (5)   60.1 %     $ 68.22     $ 41.01       56.3 %   $ 67.66     $ 38.09  
Total Systemwide   67.0 %     $ 88.28     $ 59.11       66.0 %   $ 85.87     $ 56.66  
                         
Change from prior comparative period: Average Occupancy (2)     ADR (3)   RevPAR (4)            
Company operated hotels                        
Midscale   40   bps     1.0 %     1.5 %            
Franchised hotels                        
Midscale   (90 ) bps     7.5 %     6.0 %            
Economy (pro forma) (5)   380   bps     0.8 %     7.7 %            
Systemwide                        
Midscale   (30 ) bps     3.9 %     3.5 %            
Economy (pro forma) (5)   380   bps     0.8 %     7.7 %            
Total Systemwide   100   bps     2.8 %     4.3 %            

(1 ) Certain operating results for the periods included in this report are shown on a comparable hotel basis. With the exception of pro forma economy hotels, comparable hotels are defined as hotels that were in the system for at least one full calendar year as of the beginning of the current period under materially similar operations.
(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.
(5 ) We acquired the franchise license agreements of GuestHouse International and Settle Inn & Suites properties on April 30, 2015. Results presented prior to that date are attributable to and provided by the prior owner.

Comparable Hotel Statistics (1)            
  For the six months ended June 30,
   2016     2015 
  Average Occupancy (2)     ADR (3)   RevPAR (4)   Average Occupancy (2)   ADR (3)   RevPAR (4)
Company operated hotels                        
Midscale   67.7 %     $ 93.43     $ 63.25       67.0 %   $ 93.13     $ 62.37  
Franchised hotels                        
Midscale   59.7 %     $ 89.12     $ 53.21       58.3 %   $ 85.46     $ 49.85  
Economy (pro forma) (5)   53.1 %     $ 65.46     $ 34.79       49.8 %   $ 65.54     $ 32.65  
Systemwide                        
Midscale   63.7 %     $ 91.42     $ 58.25       62.7 %   $ 89.57     $ 56.12  
Economy (pro forma) (5)   53.1 %     $ 65.46     $ 34.79       49.8 %   $ 65.54     $ 32.65  
Total Systemwide   60.5 %     $ 84.52     $ 51.15       58.8 %   $ 83.49     $ 49.11  
                         
Change from prior comparative period: Average Occupancy (2)     ADR (3)   RevPAR (4)            
Company operated hotels                        
Midscale   70   bps     0.3 %     1.4 %            
Franchised hotels                        
Midscale   140   bps     4.3 %     6.7 %            
Economy (pro forma) (5)   330   bps     -0.1 %     6.6 %            
Systemwide                        
Midscale   100   bps     2.1 %     3.8 %            
Economy (pro forma) (5)   330   bps     (0.1 )%     6.6 %            
Total Systemwide   170   bps     1.2 %     4.2 %            

(1 ) Certain operating results for the periods included in this report are shown on a comparable hotel basis. With the exception of pro forma economy hotels, comparable hotels are defined as hotels that were in the system for at least one full calendar year as of the beginning of the current period under materially similar operations.
(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.
(5 ) We acquired the franchise license agreements of GuestHouse International and Settle Inn & Suites properties on April 30, 2015. Results presented prior to that date are attributable to and provided by the prior owner.

.

Red Lion Hotels Corporation  
Comparable Operations and Data From Operations  
(unaudited)  
($ in thousands)  
                   
Certain operating results for the periods included in this report are shown on a comparable hotel basis. Comparable hotels are defined as properties that were operated by our company for at least one full calendar year as of the beginning of the current period other than hotels for which comparable results were not available. Comparable results excludes one hotel that was converted from owned to managed, one hotel that was converted from owned to franchised and one hotel that was closed.  In addition, Hotel RL Baltimore, Hotel RL Washington DC, and Red Lion Hotel Atlanta International Airport are excluded as these properties have not been open since the beginning of both comparable periods.  
   
We utilize these comparable measures because management finds them a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. We believe they are a complement to reported operating results. Comparable operating results are not intended to represent reported operating results defined by generally accepted accounting principles in the United States (“GAAP”), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP.  
           
    Three Months Ended June 30,   Six Months Ended June 30,  
    2016   2015   2016   2015  
Company operated hotel revenue   $ 32,209     $ 30,348     $ 56,358     $ 54,120    
less: revenue from sold and closed hotels       (1,484 )       (3,612 )  
less: revenue from hotels without comparable results   (3,700 )   (285 )   (6,012 )   (317 )  
Comparable company operated hotel revenue   $ 28,509     $ 28,579     $ 50,346     $ 50,191    
                   
Company operated hotel operating expenses   $ 24,072     $ 22,218     $ 45,672     $ 43,139    
less: hotel divisional general and administrative expenses   (2,756 )   (2,304 )   (6,053 )   (5,264 )  
less: operating expenses from sold and closed hotels       (1,083 )       (2,921 )  
less: operating expenses from hotels without comparable results   (2,760 )   (313 )   (4,865 )   (392 )  
Comparable company operated hotel operating expenses   $ 18,556     $ 18,518     $ 34,754     $ 34,562    
                   
Company operated hotel direct operating profit   $ 8,137     $ 8,130     $ 10,686     $ 10,981    
less: hotel divisional general and administrative expenses   2,756     2,304     6,053     5,264    
less: operating profit from sold and closed hotels       (401 )       (691 )  
less: operating profit from hotels without comparable results   (940 )   28     $ (1,147 )   $ 75    
Comparable company operated hotel direct profit   $ 9,953     $ 10,061     $ 15,592     $ 15,629    
Comparable company operated hotel direct margin %   34.9 %   35.2 %   31.0 %   31.1 %  

Red Lion Hotels Corporation  
Reconciliation of Non-GAAP Measures  
(unaudited)  
($ in thousands)  
                     
EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. We believe it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness.

Adjusted EBITDA and Adjusted net income (loss) are additional measures of financial performance. We believe that the inclusion or exclusion of certain special items, such as 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.

EBITDA, Adjusted EBITDA and Adjusted net income (loss) are commonly used measures of performance in the industry. We utilize these measures because management finds them a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. We believe they are a complement to reported operating results. EBITDA, Adjusted EBITDA and Adjusted net income (loss) are not intended to represent net income (loss) defined by generally accepted accounting principles in the United States (“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 our industry may calculate EBITDA and in particular Adjusted EBITDA and Adjusted net income (loss) differently than we do or may not calculate them at all, limiting the usefulness of EBITDA, Adjusted EBITDA and Adjusted net income (loss) as comparative measures.

 
                     
The following is a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) for the periods presented:  
                     
      Three Months Ended June 30,   Six Months Ended June 30,  
      2016   2015   2016   2015  
Net income (loss)   $ 622     $ (986 )   $ (5,198 )   $ 9,146    
  Depreciation and amortization   4,037     3,144     7,540     6,119    
  Interest expense   1,487     1,738     2,948     3,240    
  Income tax expense (benefit)   34     (25 )   92     87    
EBITDA   $ 6,180     $ 3,871     $ 5,382     $ 18,592    
  Gain on asset dispositions (1)   (393 )       (393 )   (16,362 )  
  Loss on early retirement of debt (2)               1,159    
  Lease termination costs (3)       563         1,125    
  Reserve for environmental cleanup (4)           128        
  Transition and other costs (5)   636         636        
Adjusted EBITDA   $ 6,423     $ 4,434     $ 5,753     $ 4,514    
                     

(1 ) In the second quarter of 2016, we recorded a gain on sale of intellectual property, net of brokerage fees, of $0.4 million. In the first quarter of 2015, we recorded $16.4 million in gain on the sales of the Bellevue and Wenatchee properties. These amounts are included in the line item “Gain on asset dispositions, net” on the accompanying consolidated statements of operations.  
(2 ) In the first quarter of 2015, we recorded $1.2 million in loss on the early retirement of debt.  
(3 ) In the fourth quarter of 2014, we amended the lease for the Red Lion Hotel Vancouver at the Quay and recorded $0.6 million of additional amortized lease termination fees in the first and second quarters of 2015.  
(4 ) In the first quarter of 2016, a reserve account was recorded for environmental cleanup at one of our hotel properties.  
(5 ) The costs recorded in the second quarter of 2016 consisted primarily of expenses associated with the separation of the former Executive Vice President and Chief Financial Officer and other legal and consulting services associated with the CFO transition and other non-recurring transaction costs.  

Red Lion Hotels Corporation  
Reconciliation of Adjusted Net Income (Loss) to Net Income (Loss)  
(unaudited)  
($ in thousands)  
                     
The following is a reconciliation of adjusted net income to net income (loss) for the periods presented:  
                     
      Three Months Ended June 30,   Six Months Ended June 30,  
      2016   2015   2016   2015  
 Net income (loss)   $ 622     $ (986 )   $ (5,198 )   $ 9,146    
  Gain on asset dispositions (1)   (393 )       (393 )   (16,362 )  
  Loss on early retirement of debt (2)               1,159    
  Lease termination costs (3)       563         1,125    
  Reserve for environmental cleanup (4)           128        
  Transition and other costs (5)   636         636        
Adjusted net income (loss)   $ 865     $ (423 )   $ (4,827 )   $ (4,932 )  
                     
Adjusted net income (loss) per share   $ 0.04     $ (0.02 )   $ (0.24 )   $ (0.25 )  
Weighted average shares – basic   20,155     19,955     20,121     19,926    
Weighted average shares – diluted   20,649     19,955     20,121     20,116    

(1 ) In the second quarter of 2016, we recorded a gain on sale of intellectual property, net of brokerage fees, of $0.4 million. In the first quarter of 2015, we recorded $16.4 million in gain on the sales of the Bellevue and Wenatchee properties. These amounts are included in the line item “Gain on asset dispositions, net” on the accompanying consolidated statements of operations.  
(2 ) In the first quarter of 2015, we recorded $1.2 million in loss on the early retirement of debt.  
(3 ) In the fourth quarter of 2014, we amended the lease for the Red Lion Hotel Vancouver at the Quay and recorded $0.6 million of additional amortized lease termination fees in the first and second quarters of 2015.  
(4 ) In the first quarter of 2016, a reserve account was recorded for environmental cleanup at one of our hotel properties.  
(5 ) The costs recorded in the second quarter of 2016 consisted primarily of expenses associated with the separation of the former Executive Vice President and Chief Financial Officer and other legal and consulting services associated with the CFO transition and other non-recurring transaction costs.  
       
CONTACT: Investor Relations Contact
Evelyn Infurna
O: 203-682-8265
C: 203-856-2088
Investor.relations@redlion.com