U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR (15)d OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ---------------- to -----------------------
Commission file number 001-13957
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WESTCOAST HOSPITALITY CORPORATION
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(Exact name of registrant as specified in its charter)
Washington 91-1032187
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 W. North River Drive, Suite 100, Spokane, WA 99201
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(Address of principal executive office)
(509) 459-6100
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
As of October 23, 2002 there were 12,981,878 shares of the Registrant's common
stock outstanding.
WESTCOAST HOSPITALITY CORPORATION
Form 10-Q
For the Quarter Ended September 30, 2002
INDEX
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Balance Sheets --
September 30, 2002 (unaudited) and December 31, 2001 3
Consolidated Statements of Income --
Three Months and Nine months Ended September 30, 2002
and 2001 (unaudited) 4-5
Consolidated Statements of Cash Flows --
Nine months Ended September 30, 2002 and 2001 (unaudited) 6-7
Notes to Consolidated Financial Statements 8-13
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 14-22
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 23
Item 4 - Controls and Procedures 23
PART II - Other Information
Item 5 - Other Information 23
Item 6 - Exhibits and Reports on Form 8-K 23
Signature 24
Part I - Financial Information
ITEM 1. Financial Statements
WestCoast Hospitality Corporation
Consolidated Balance Sheets
September 30, 2002 and December 31, 2001
(in thousands, except share data)
September 30, December 31,
(Unaudited)
2002 2001
---- ----
Assets:
Current assets:
Cash and cash equivalents $ 7,569 $ 5,735
Accounts receivable, net 10,003 9,101
Inventories 2,164 2,380
Assets held for sale 34,241 21,403
Prepaid expenses and deposits 2,311 1,410
----- -----
Total current assets 56,288 40,029
------ ------
Property and equipment, net 238,461 257,656
Intangible assets, net 34,920 34,920
Other assets, net 29,632 27,044
------ ------
Total assets $ 359,301 $ 359,649
=========== ==========
Liabilities:
Current liabilities:
Accounts payable $ 7,648 $ 4,756
Accrued payroll and related benefits 7,459 6,866
Accrued interest payable 680 777
Income taxes payable 1,703 822
Advanced deposits 374 1,542
Other accrued expenses 12,823 7,039
Long-term debt, due within one year 4,099 3,753
Capital lease obligations, due within one year 368 384
--- ---
Total current liabilities 35,154 25,939
------ ------
Long-term debt, due after one year 103,411 113,277
Notes payable to bank 44,200 54,250
Capital lease obligations, due after one year - 268
Deferred income 2,696 -
Deferred income taxes 14,460 14,160
Minority interest in partnerships 3,025 2,940
----- -----
Total liabilities 202,946 210,834
======= =======
Stockholders' equity:
Preferred stock - 5,000,000 shares authorized;
$0.01 par value;
Class A - 303,771 shares issued and outstanding 3 3
Class B - 303,771 shares issued and outstanding 3 3
Additional paid-in capital, preferred stock 30,371 30,371
Common stock - 50,000,000 shares authorized;
$0.01 par value; 12,981,878 and 12,959,700
shares issued and outstanding 130 130
Additional paid-in capital, common stock 84,083 83,966
Retained earnings 41,765 34,342
------ ------
Total stockholders' equity 156,355 148,815
------- -------
Total liabilities and stockholders' equity $ 359,301 $ 359,649
=========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
Part I - Financial Information
ITEM 1. Financial Statements
WestCoast Hospitality Corporation
Consolidated Statements of Income
For the Three and Nine months ended September 30, 2002 and 2001
(in thousands, except per share data)
Three Months ended Nine Months ended
September 30 September 30
(Unaudited) (Unaudited)
----------- -----------
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Hotels and restaurants $ 50,518 $ 28,224 $ 134,459 $ 78,541
Franchise, central services and development 1,406 1,108 3,340 2,571
TicketsWest 1,508 1,969 4,980 5,645
Real estate division 2,186 2,453 6,797 7,411
Corporate services 67 90 201 246
-- -- --- ---
Total revenues 55,685 33,844 149,777 94,414
------ ------ ------- ------
Operating expenses:
Direct:
Hotels and restaurants 39,634 19,630 111,023 57,174
Franchise, central services and development 535 500 1,554 1,254
TicketsWest 1,245 1,842 4,156 5,342
Real estate division 1,293 1,154 3,535 3,412
Corporate services 61 48 162 132
Depreciation and amortization 2,562 2,609 7,938 7,637
Amortization of goodwill - 214 - 642
--- --- --- ---
Total direct expenses 45,330 25,997 128,368 75,593
Undistributed corporate expenses 936 584 2,145 1,756
--- --- ----- -----
Total expenses 46,266 26,581 130,513 77,349
------ ------ ------- ------
Operating income 9,419 7,263 19,264 17,065
Other income (expense):
Interest expense, net of amounts capitalized (2,613) (2,961) (8,135) (9,312)
Interest income 96 61 254 203
Other income 70 325 3,170 5,133
Conversion expenses (1) (25) (8) (30)
Equity in investments 42 49 30 76
Minority interest in partnerships (42) (85) (108) (231)
--- --- ---- ----
Income before income taxes 6,971 4,627 14,467 12,904
Income tax provision 2,461 1,703 5,107 4,749
----- ----- ----- -----
Income before extraordinary item 4,510 2,924 9,360 8,155
Extraordinary item, net of tax benefit - - - (23)
--- --- --- ---
Net income 4,510 2,924 9,360 8,132
Preferred stock dividend 646 - 1,937 -
--- --- ----- ---
Net income to common shareholders $ 3,864 $ 2,924 $ 7,423 $ 8,132
========= ========== ========= ========
Income per share:
Income per share before preferred stock dividends $ 0.35 $ 0.23 $ 0.72 $ 0.63
Preferred stock dividends (0.05) - (0.15) -
----- ----- ----- -----
Net income per share - basic $ 0.30 $ 0.23 $ 0.57 $ 0.63
====== ====== ====== ======
Net income per share - diluted $ 0.29 $ 0.23 $ 0.56 $ 0.63
====== ====== ====== ======
Weighted-average shares outstanding - basic 12,982 12,960 12,975 12,951
====== ====== ====== ======
Weighted-average shares outstanding - diluted 13,268 13,246 13,302 13,237
====== ====== ====== ======
The accompanying notes are an integral part of the consolidated
financial statements.
Part I - Financial Information
ITEM 1. Financial Statements
WestCoast Hospitality Corporation
Consolidated Statements of Cash Flows
For the Nine months ended September 30, 2002 and 2001
(in thousands)
Nine Months ended
September 30
(Unaudited)
2002 2001
---- ----
Operating activities:
Net income $ 9,360 $ 8,132
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 7,938 8,279
Gain on disposition of property and equipment (3,163) (1,353)
Gain on insurance settlement - (3,782)
Deferred income tax provision 300 2,142
Extraordinary item - 9
Minority interest in partnerships 107 231
Equity in investments (30) (76)
Compensation expense related to stock issuance 15 15
Change in assets and liabilities:
Accounts receivable (902) (529)
Inventories 216 (29)
Prepaid expenses and deposits (901) (617)
Accounts payable and income taxes payable 3,773 1,498
Accrued payroll and related benefits 593 1,803
Accrued interest payable (97) 90
Other accrued expenses and advance deposits 3,875 870
----- ---
Net cash provided by operating activities 21,084 16,683
------ ------
Investing activities:
Additions to property and equipment (6,201) (5,573)
Proceeds from disposition of property and equipment 1,839 1,796
Distribution from partnership investments 165 67
Other, net 44 (413)
-- ----
Net cash used in investing activities (4,153) (4,123)
------ ------
Financing activities:
Repayment of note payable to bank (10,050) (73,400)
Proceeds from long-term debt - 74,400
Repayment of long-term debt (2,842) (11,812)
Proceeds from issuance of common stock under employee
stock purchase plan 103 106
Preferred stock dividend paid (1,291) -
Principal payments on capital lease obligations (284) (429)
Additions to deferred financing costs (710) (1,212)
Distribution to stockholders and partners (23) (102)
--- ----
Net cash used in financing activities (15,097) (12,449)
------- -------
Change in cash and cash equivalents:
Net increase in cash and cash equivalents 1,834 111
Cash and cash equivalents at beginning of period 5,735 3,476
----- -----
Cash and cash equivalents at end of period $ 7,569 $ 3,587
======== =======
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest (net of amount capitalized) $ 8,233 $ 9,222
Income taxes $ 3,928 $ 232
Noncash investing and financing activities:
Addition of note receivable on sale of building $ 2,607 $ -
Investment in real estate venture $ 1,194 $ -
Assignment of debt to purchaser of building $ 7,198 $ -
Preferred stock dividends accrued $ 1,937 $ -
Note payable $ 520 $ -
The accompanying notes are an integral part of the consolidated
financial statements.
Part I - Financial Information
ITEM I. Financial Statements
WestCoast Hospitality Corporation
Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared by WestCoast Hospitality Corporation (the Company or WestCoast)
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as permitted by such rules and
regulations. The balance sheet as of December 31, 2001 has been compiled from
the audited balance sheet as of such date. The Company believes that the
disclosures included herein are adequate; however, these consolidated statements
should be read in conjunction with the financial statements and the notes
thereto for the year ended December 31, 2001 previously filed with the SEC on
Form 10-K.
In the opinion of management, these unaudited consolidated financial statements
contain all of the adjustments of a normal and recurring nature necessary to
present fairly the consolidated financial position of the Company at September
30, 2002 and the consolidated results of operations for the three and nine
months ended September 30, 2002 and 2001, and cash flows for the nine months
ended September 30, 2002 and 2001. The results of operations for the periods
presented may not be indicative of those which may be expected for a full year.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements, the reported amounts of sales and expenses
during the reporting period and the disclosures of contingent liabilities.
Accordingly, ultimate results could differ from those estimates.
2. ORGANIZATION
In December, 2001, WestCoast acquired all of the capital stock of Red Lion
Hotels, Inc. Red Lion's hotel portfolio consisted of eight owned Red Lion hotel
properties, 11 leased Red Lion hotel properties, 22 franchised Red Lion hotel
properties, four licensed Red Lion Hotels, one owned Doubletree hotel and one
leased Doubletree hotel property. Operating results of Red Lion are included
from the date of acquisition.
As a result of that acquisition, and taking into account all other increases and
losses in franchised or managed properties, as of September 30, 2002, the
Company has ownership interests and operates 44 hotel properties, manages an
additional 10 properties and franchises an additional 36 properties, totaling 90
hotels in 16 states, including Alaska, Arizona, California, Colorado, Hawaii,
Idaho, Minnesota, Missouri, Montana, Nebraska, Nevada, Oregon, Texas, Utah,
Washington and Wyoming. Additionally, the Company provides computerized
ticketing for entertainment events and promotes Broadway and other entertainment
event productions under its TicketsWest division, including TicketsWest.com, its
internet ticketing service offering consumers up-to-the-minute information on
live entertainment and the ability to make real-time ticket purchases to events
through the web site. The Company provides services to venues in British
Columbia, California, Colorado, Idaho, Kansas, Montana, Nebraska, Oregon,
Washington and Wisconsin. The Company also leases retail and office space in
buildings owned by the Company and manages residential and commercial properties
for others in Idaho, Montana and Washington through its G&B Real Estate Services
division.
3. LINE OF CREDIT
The Company obtained an $80 million revolving secured credit facility with a
consortium of banks. In December 1998, the Company received a commitment to
amend the credit facility to increase the total amount available under the
facility to $100 million. In December 1999, in connection with the WestCoast
Hotels Inc. acquisition, the credit facility was amended to increase the total
amount available under the facility to $120 million. During 2001, in connection
with the refinancing of certain properties under long term debt facilities the
revolving credit facility was amended and reduced to $70 million. In June 2002
the credit facility was amended to extend the maturity date to June 30, 2005,
and reduce the total commitment to $68.5 million. The credit facility is
collateralized by certain property, requires that the Company maintain certain
financial ratios and minimum levels of cash flows, and restricts the payment of
dividends. Any outstanding borrowings bear interest based on the prime rate or
LIBOR. At September 30, 2002, $44.2 million was outstanding under the credit
facility. The Company was in compliance with all required covenants except the
Fixed Charge Ratio covenant for which it has received a waiver.
4. BUSINESS SEGMENTS:
The Company has four operating segments: (1) Hotels and Restaurants; (2)
TicketsWest; (3) Real Estate Division and (4) Franchise, Central Services and
Development. Corporate services and other consists primarily of miscellaneous
revenues and expenses, cash and cash equivalents, certain receivables and
certain property and equipment, which are not specifically associated with an
operating segment.
TicketsWest has inter-segment revenues, which are eliminated in the consolidated
financial statements. Management reviews and evaluates the operations of
TicketsWest including the inter-segment revenues. Therefore, the total revenues,
including inter-segment revenues are included in the segment information below.
Management reviews and evaluates the operating segments exclusive of interest
expense. Therefore, interest expense is not allocated to the segments.
Selected information with respect to the segments is as follows (in thousands):
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Hotels and restaurants $ 50,518 $ 28,224 $ 134,459 $78,541
Franchise, central services and development 1,406 1,108 3,340 2,571
TicketsWest 1,511 2,230 5,101 6,488
Less: inter-segment revenues (3) (261) (121) (843)
Real estate division 2,186 2,453 6,797 7,411
Corporate services and other 67 90 201 246
-- -- --- ---
$ 55,685 $ 33,844 $ 149,777 $94,414
======== ======== ========= =======
Operating income (loss):
Hotels and restaurants $ 8,717 $ 6,556 $ 16,907 $15,329
Franchise, central services and development 789 506 1,531 1,014
TicketsWest 177 - 582 (37)
Real estate division 873 938 2,991 2,963
Corporate services and other (1,137) (737) (2,747) (2,204)
------ ---- ------ ------
$ 9,419 $ 7,263 $ 19,264 $17,065
======= ======== ======== =======
5. EARNINGS PER SHARE:
The following table presents a reconciliation of the numerators and denominators
used in the basic and diluted EPS computations (in thousands, except per share
amounts). Also shown is the number of stock options that would have been
considered in the diluted EPS computation if they were not anti-dilutive.
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
Numerator:
Income before preferred stock dividends and
extraordinary item $ 4,510 $ 2,924 $ 9,360 $ 8,155
Extraordinary item - - - (23)
Preferred stock dividends (646) - (1,937) -
---- ---- ------ ----
Income available to common stockholders 3,864 2,924 7,423 8,132
Income effect of dilutive OP Units 27 48 82 141
--- --- --- ---
Net income-diluted $ 3,891 $ 2,972 $ 7,505 $ 8,273
======= ======= ======= =======
Denominator:
Weighted-average shares outstanding - basic 12,982 12,960 12,975 12,951
Effect of dilutive OP Units 286 286 286 286
Effect of dilutive common stock options (A) (A) 41 (A)
--- --- --- ---
Weighted-average shares outstanding - diluted 13,268 13,246 13,302 13,237
====== ====== ====== ======
Income per share before preferred
stock dividend $ 0.35 $0.23 $0.72 $ 0.63
Preferred stock dividends (0.05) - (0.15) -
----- ----- ----- -----
Net income per share - basic $ 0.30 $0.23 $0.57 $ 0.63
====== ===== ===== ======
Net income per share - diluted $ 0.29 $0.23 $0.56 $ 0.63
====== ===== ===== ======
(A) At September 30, 2002 and 2001, 543,075 and 941,041 stock options were
outstanding, respectively. For the three months ended September 30,
2002 and 2001, 543,075 and 941,041 of these options respectively have
been excluded from the calculation of diluted earnings per share
because they are anti-dilutive. For the nine months ended September
30, 2002 and 2001, 208,207 and 941,041 of these options respectively
have been excluded from the calculation of diluted earnings per share
because they are anti-dilutive.
6. BUILDING SALE
In the first quarter of 2002, the Company entered into an agreement for the sale
of an 80.1% interest in the WHC Building, while retaining the management of the
building, its lease of space, and the remaining ownership interest. The sale of
the building resulted in a pre-tax gain of $4.9 million. Due to retaining a
partial lease of the building, a portion of the gain is being deferred over the
six-year lease term.
7. STOCK INCENTIVE PLAN
In July 2002, the Company offered eligible option holders the opportunity to
exchange certain options for new options. The new options offered will be issued
at the fair market value of the stock on or after the first business day that is
six months and one day after the date the original options were cancelled in the
exchange.
On July 31, 2002, 571,661 options were cancelled pursuant to the terms of the
offer. The Company expects to grant 285,851 new non-qualified options in 2003.
Under current accounting guidance, the Company does not anticipate any impact on
its financial condition and results of operations as a result of the exchange
offer. The terms of the transaction are disclosed in a Schedule TO and
amendments thereto filed in July and August 2002.
8. ASSETS HELD FOR SALE
In connection with the Company's decision in 2001 to sell non-core assets, on
October 10, 2002, the Company and American Capital Group, LLC entered into a
purchase and sale agreement for the WestCoast Kalispell Hotel and Kalispell
Center Mall. The agreement is subject to due diligence and is scheduled to close
in the next several months. After the close, the WestCoast Kalispell Center
Hotel will remain under the WestCoast Hospitality Corporation brand and
management, while American Capital Group, LLC will oversee management for the
mall. The total net book value of these buildings as of September 30, 2002 of
$12.8 million is classified as assets held for sale
Additionally, three office buildings owned by the Company have been listed for
sale. The total net book value of these buildings as of September 30, 2002 of
$21.4 million are also classified as assets held for sale.
9. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations" which
supersedes APB Opinion No. 16 "Business Combinations" and SFAS No. 38
"Accounting for Preacquisition Contingencies of Purchased Enterprises." The
provisions of this statement require that all business combinations be accounted
for using "purchase accounting" and it disallows the use of "pooling of
interests" as previously allowed under APB Opinion No. 16 and SFAS No. 38. This
statement is effective for all business combinations subsequent to September 30,
2001. The acquisition of Red Lion was accounted for using SFAS No. 141.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Intangible Assets",
which revises the accounting for purchased goodwill and intangible assets. Under
SFAS No. 142, goodwill and intangible assets with indefinite lives will no
longer be amortized, but will be tested for impairment annually and also in the
event of an impairment indicator. The adoption of SFAS No. 142 on January 1,
2002, resulted in the reduction of pre-tax goodwill amortization of $214
thousand and $642 thousand for the quarter and nine months ended September 30,
2002, respectively. Net income and earnings per share for three and nine months
adjusted for goodwill amortization is as follows:
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(Dollars in thousands except per share data)
Reported net income to common shareholders $ 3,864 $ 2,924 $ 7,423 $ 8,132
Add back: goodwill amortization, net of tax 0 135 0 406
- --- - ---
Total $ 3,864 $ 3,059 $ 7,423 $ 8,538
======= ======= ======= =======
Basic earnings per share:
Reported net income $0.30 $ 0.23 $0.57 $0.63
Goodwill amortization 0.00 0.01 0.00 0.03
---- ---- ---- ----
Adjusted earnings per share-basic $0.30 $ 0.24 $0.57 $0.66
===== ====== ===== =====
Diluted earnings per share:
Reported net income $0.29 $ 0.23 $0.56 $0.63
Goodwill amortization 0.00 0.01 0.00 0.03
---- ---- ---- ----
Adjusted earnings per share-diluted $0.29 $ 0.24 $0.56 $0.66
===== ====== ===== =====
The Company's other intangible assets, primarily consisting of management,
marketing, franchising and lease contracts, have finite lives and will continue
to be amortized over the weighted average remaining term of the contracts. At
September 30, 2002, the cost and accumulated amortization of these contracts was
$10.5 million and $1.9 million, respectively. Annual amortization expense
related to these contracts approximates $844 thousand.
In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations," which amends SFAS No. 19. This statement addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. This
statement requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The requirements of this statement must be
implemented for fiscal years beginning after June 15, 2002; however, early
adoption is encouraged. The adoption of this statement is not expected to have a
material effect on the Company's consolidated financial statements.
The FASB also issued SFAS No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets." This Statement addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. It supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business. The
provisions of this statement are effective for financial statements issued for
fiscal years beginning after December 15, 2001. The provisions of this statement
generally are to be applied prospectively. The adoption of this statement did
not have a material effect on the Company's consolidated financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections".
SFAS No. 145 updates, clarifies and simplifies existing accounting
pronouncements, by rescinding SFAS No. 4, which required all gains and losses
from extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. As a result, the criteria
in Accounting Principles Board Opinion No. 30 will now be used to classify those
gains and losses. Additionally, SFAS No. 145 amends SFAS No. 13 to require that
certain lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions.
Finally, SFAS No. 145 also makes technical corrections to existing
pronouncements. While those corrections are not substantive in nature, in some
instances, they may change accounting practice. The provisions of SFAS No. 145
that amend SFAS No. 13 are effective for transactions occurring after May 15,
2002 with all other provisions of SFAS No. 145 being required to be adopted by
the Company in its consolidated financial statements for the first quarter of
fiscal 2003. The adoption of SFAS No. 145 has not had a material impact on the
Company's consolidated financial statements.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS No. 146
replaces the prior guidance that was provided by EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 is
to be applied prospectively to exit or disposal activities initiated after
December 31, 2002. Management currently believes that the adoption of SFAS NO.
146 will not have a material impact on the Company's consolidated financial
statements.
ITEM II. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
- -------
The following discussion and analysis addresses the results of operations for
the Company for the quarter and nine months ended September 30, 2002 and 2001.
The following should be read in conjunction with the unaudited Consolidated
Financial Statements and the notes thereto. In addition to historical
information, the following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
significantly from those anticipated in these forward-looking statements as a
result of certain factors, including those discussed in "Risk Factors" and
elsewhere in the Form 10-K for the year ended December 31, 2001, previously
filed by the Company with the Securities and Exchange Commission.
The Company's revenues are derived primarily from the Hotels and reflect revenue
from rooms, food and beverage, third party management and franchise contracts,
and other sources, including telephone, guest services, banquet room rentals,
gift shops and other amenities. Hotel revenues accounted for 89.8% of total
revenues in the nine months ended September 30, 2002 and increased 71.2% to
$134.5 million in 2002 from $78.5 million in 2001. The balance of the Company's
revenues is derived from its Franchise, Central Services and Development,
TicketsWest, Real Estate Division, and Corporate Services divisions. These
revenues are generated from franchise fees, ticket distribution handling fees,
internet services, real estate management fees, sales commissions and rents.
Franchise, Central Services and Development accounted for 2.2% of the Company's
revenue for the nine months ended September 30, 2002. TicketsWest accounted for
3.3% and Real Estate Division accounted for 4.5% of total revenues for the
period.
As is typical in the hospitality industry, REVPAR, ADR and occupancy levels are
important performance measures. The Company's operating strategy is focused on
enhancing revenue and operating margins by increasing REVPAR, ADR, occupancy and
operating efficiencies of the Hotels. These performance measures are impacted by
a variety of factors including national, regional and local economic conditions,
degree of competition with other hotels in their respective market areas and, in
the case of occupancy levels, changes in travel patterns.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
- ------------------------------------------
A critical accounting policy is one which is both important to the portrayal of
the Company's financial condition and results and requires management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. All of
the Company's significant accounting policies are described in Note 2 to our
2001 consolidated financial statements included in our Form 10-K. The more
critical accounting policies and estimates used by us relate to:
Revenue Recognition
Revenue is generally recognized as services are performed. Hotel and restaurant
revenues primarily represent room rental and food and beverage sales from owned,
leased and consolidated joint venture hotels and are recognized at the time of
the hotel stay or sale of the restaurant services. Hotel and restaurant revenues
also include management fees the Company earns from managing third party owned
hotels. Franchise, Central Services and Development fees represent fees received
in connection with the franchise of the Company's brand name as well as central
purchasing, development and other fees. Franchise fees are recognized as earned
in accordance with the contractual terms of the franchise agreements. Other fees
are recognized when the services are provided.
Real Estate Division income represents both lease income on owned commercial and
retail properties as well as property management income and leasing and sales
commissions from residential and commercial properties managed by the Company,
typically under long-term contracts with the property owner. Lease revenues are
recognized over the period of the leases. The Company records rental income from
operating leases which contain fixed escalation clauses on the straight-line
method. The difference between income earned and lease payments received from
the tenants is included in other assets on the consolidated balance sheets.
Rental income from retail leases which is contingent upon the lessees' revenues
is recorded as income in the period earned. Management fees and leasing and
sales commissions are recognized as these services are performed.
TicketsWest income includes primarily earnings from ticketing and entertainment
operations. Where the Company acts as an agent and receives a net fee or
commission, it is recognized as revenue in the period the services are
performed. When the Company is the promoter of an event and is at risk for the
production, revenues and expenses are recorded in the period of the event
performance.
Valuation of Long-Lived Assets
The carrying value of the Company's long-lived assets are reviewed when events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. If it is determined that an impairment loss has occurred
based on expected net future cash flows of the asset, then an impairment loss is
recognized in the income statement using a fair value based method.
Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
The following table sets forth-selected items from the consolidated statements
of income as a percent of total revenues and certain other selected data:
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Hotels and Restaurants 90.7 % 83.4 % 89.8 % 83.2 %
Franchise, Central Services and Development 2.5 3.3 2.2 2.7
TicketsWest 2.7 5.8 3.3 6.0
Real Estate Division 3.9 7.2 4.5 7.8
Corporate Services 0.1 0.3 0.1 0.3
--- --- --- ---
Total Revenue 100.0 % 100.0 % 100.0 % 100.0 %
===== ===== ===== =====
Direct Operating Expenses 81.4 % 76.8 % 85.7 % 80.1 %
Undistributed Corporate Operating Expense 1.7 1.7 1.4 1.9
Operating Income 16.9 21.5 12.9 18.1
Interest Expense 4.7 8.7 5.4 9.9
Income Tax Provision 4.4 5.0 3.4 5.0
Net Income 8.1 % 8.6 % 6.2 % 8.6 %
Hotels open at end of period 90 46 90 46
Available rooms 15,781 8,607 15,781 8,607
Hotel Statistics (1)
REVPAR (2) (3) $ 54.07 $ 56.35 $ 49.24 $ 51.71
ADR (4) $ 79.58 $ 82.77 $ 80.23 $ 83.95
Occupancy (5) 67.9 % 68.1 % 61.4 % 61.6 %
(1) Hotel statistics for the three and nine months ended September 30,
2002 and 2001, are presented for Combined Hotels. Combined Hotels
includes hotels owned, managed and Franchised for greater than one
year by the WestCoast Hospitality Corporation and Red Lion Hotels,
Inc. with same hotel statistics for prior period.
(2) REVPAR represents the total room revenues divided by total available
rooms, net of rooms out of service due to significant renovations.
(3) Rooms, which were under renovation, were excluded from REVPAR and
average occupancy percentage. Due to the short duration of renovation,
in the opinion of management, excluding these rooms did not have a
material impact on REVPAR and average occupancy percentage.
(4) ADR represents total room revenues divided by the total number of
rooms occupied by hotel guests on a paid basis.
(5) Average occupancy percentage represents total rooms occupied divided
by total available rooms. Total available rooms represents the number
of rooms available multiplied by the number of days in the reported
period.
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2002 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 2001
Total revenues increased $21.8 million, or 64.5%, to $55.7 million in 2002 from
$33.8 million in 2001. This increase in revenue is primarily the result of the
acquisition of Red Lion Hotels, Inc., which closed on December 31, 2001.
Total hotel and restaurant revenues increased $22.3 million, or 79.0%, to $50.5
million in 2002 from $28.2 million in 2001. Combined Hotel ADR decreased $3.19
or 3.9%, to $79.58 in 2002 from $82.77 in 2001. Combined Hotel REVPAR decreased
$2.28, or 4.0%, to $54.07 in 2002 from $56.35 in 2001. The reduced REVPAR is a
result of both lower occupancy and ADR which have both been impacted by the
September 11 terror attacks and the weak economy. Declines in occupancy and ADR
have continued to narrow in the post 9/11 period, and showed smaller decreases
when compared to second quarter 2002 results. Combined hotel statistics include
hotels owned, managed or franchised by the WestCoast Hospitality Corporation and
Red Lion Hotels, Inc. in the current period, with same hotel pro forma
statistics for prior period.
Franchise, Central Services and Development revenues increased $298 thousand or
26.9% to $1.4 million in 2002 from $1.1 million in 2001. This increase is
primarily related to the increase in franchise royalty income from the Red Lion
purchase.
TicketsWest revenues decreased $461 thousand, or 23.4%, to $1.5 million in
2002. This decrease was due to the removal of the call center services from
TicketsWest; these services are now provided by a central program fund for all
franchisees. All revenue and expense for call center reservations was removed as
of January 2002.
Real Estate Division revenue decreased $267 thousand, or 10.9%, to $2.2 million
in 2002 from $2.5 million in 2001 primarily from reduced lease revenue because
of the sale of the WHC building which closed March 2002.
Direct operating expenses increased $19.3 million, or 74.4%, to $45.3 million in
2002 from $26.0 million in 2001. The increase in the direct operating expenses
was primarily from the additional hotels operated by the Company due to the
acquisition of Red Lion Hotels, Inc. This increase was partially offset by the
elimination of $214 thousand of goodwill amortization due to the adoption of
SFAS No. 142 on January 1, 2002 and reduced call center expenses due to call
center services being provided by a central program fund for all franchisees as
of January 2002.
Total undistributed corporate operating expenses increased $352 thousand, or
60.3 % to $936 thousand in 2002 from $584 thousand in 2001. The increase is
primarily due to a one-time severance payment related to the integration of the
Red Lion acquisition. Total undistributed corporate operating expenses as a
percentage of total revenues was 1.7% in both periods.
Operating income increased $2.2 million, or 29.7%, to $9.4 million in 2002 from
$7.3 million in 2001. As a percentage of total revenues, operating income
decreased to 16.9% in 2002 from 21.5% in 2001. This operating income percentage
decrease is primarily due to the combination of the operating leases, mix of
business, property size and location of the hotels acquired in the Red Lion
acquisition. As part of the acquisition of Red Lion Hotels, Inc. the company
acquired 12 hotels that are controlled through an operating lease. The operating
lease costs are an expense that affects the direct operating expense and
operating income percentages.
Interest expense decreased $348 thousand, or 11.8%, to $2.6 million in 2002 from
$3.0 million in 2001. This decrease is attributed to a decrease in the total
debt outstanding and a decrease in the interest rates charged on the Company's
variable rate debt.
Income tax provision increased $758 thousand to $2.5 million in 2002 from $1.7
million in 2001 due to a increase in income before taxes. The effective income
tax provision rate was 35.3% and 36.8% for 2002 and 2001 respectively.
Net income increased $1.6 million to $4.5 million in 2002 from $2.9 million in
2001. The increase in net income is attributed primarily to the acquisition of
Red Lion on December 31, 2001. Basic earnings per share before the preferred
stock dividend increased 52.2% to $0.35 per share in 2002 from $0.23 per share
in 2001 due to the increase in net income. Diluted earnings per share to common
shareholders increased 26.1% to $0.29 per share in 2002 from $0.23 per share in
2001 due to the increase in net income partially offset by the preferred stock
dividend which is related to the Red Lion acquisition.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2002 TO THE NINE MONTHS
ENDED SEPTEMBER 30, 2001
Total revenues increased $55.4 million, or 58.6%, to $149.8 million in 2002 from
$94.4 million in 2001. This increase is primarily the result of the acquisition
of Red Lion which closed on December 31, 2001.
Total hotel and restaurant revenues increased $55.9 million, or 71.2%, to $134.5
million in 2002 from $78.5 million in 2001. Combined Hotel ADR decreased $3.72,
or 4.4%, to $80.23 in 2002 from $83.95 in 2001. Combined Hotel REVPAR decreased
$2.47, or 4.8%, to $49.24 in 2002 from $51.71 in 2001. The reduced REVPAR is a
result of both lower occupancy and ADR which have been impacted by the September
11 terror attacks and the weak economy. Combined hotel statistics include
hotels, owned managed or franchised by the WestCoast Hospitality Corporation and
Red Lion Hotels, Inc. in the current period, with same hotel pro forma
statistics for prior period.
Franchise, Central Services and Development revenues increased $769 thousand, or
29.9%, to $3.3 million in 2002 from $2.6 million in 2001. This increase is
primarily related to the increase in franchise royalty income fron the Red Lion
purchase.
TicketsWest revenues decreased $665 thousand, or 11.8%, to $5.0 million in 2002
from $5.6 million in 2001. This decrease was due to the removal of the call
center services from TicketsWest; these services are now provided by a central
program fund for all franchisees. All revenue and expense for call center
reservations was removed as of January 2002.
Real Estate Division revenue decreased $614 thousand, or 8.3%, to $6.8 million
in 2002 from $7.4 million in 2001 primarily from reduced lease revenue because
of the sale of the WHC building which was sold in March 2002.
Direct operating expenses increased $52.8 million, or 69.8%, to $128.4 million
in 2002 from $75.6 million in 2001. The increase in direct operating expenses is
primarily a result of the additional hotels operated by the Company due to the
acquisition of Red Lion and offset with reduced expense for amortization of
goodwill and reduced call center expenses due to call center services being
provided by a central program fund for all franchisees as of January 2002.
Operating income increased $2.2 million, or 12.9%, to $19.3 million in 2002 from
$17.1 million in 2001. As a percentage of total revenues, operating income
decreased to 12.9% in 2002 from 18.1% in 2001. This operating income percentage
decrease is primarily due to the combination of the operating leases, mix of
business, property size and location of the hotels acquired in the Red Lion
acquisition. As part of the acquisition of Red Lion Hotels, Inc. the company
acquired 12 hotels that are controlled through an operating lease. The operating
lease costs are an expense that affects the direct operating expense and
operating income percentages.
Total undistributed corporate operating expenses increased $389 thousand, or
22.2%, to $2.1 million in 2002. The increase is primarily due to a one-time
severance payment related to the integration of the Red Lion acquisition. Total
undistributed corporate operating expenses as a percentage of total revenues was
decreased to 1.4% in 2002, from 1.9% in 2001.
Interest expense decreased $1.2 million, or 12.6%, to $8.1 million in 2002 from
$9.3 million in 2001. This decrease is attributed to a decrease in the total
debt outstanding and a decrease in the interest rates charged on the Company's
variable rate debt.
Income tax provision increased 7.5%, to $5.1 million in 2002 from $4.7 million
in 2001, due to the increase in income before taxes. The effective income tax
provision rate was 35.3% and 36.8% for 2002 and 2001 respectively.
Net income increased $1.3 million, or 15.1%, to $9.4 million in 2002 from $8.1
million in 2001. The increase in net income is attributed primarily to the
increased income due to the acquisition of Red Lion Hotels, Inc. on December 31,
2001. Basic earnings per share before the preferred stock dividend increased
14.3% to $0.72 per share in 2002 from $0.63 per share in 2001 due to the
increase in net income. Diluted earnings per share to common shareholders
decreased 11.1% to $0.56 per share in 2002 from $0.63 per share in 2001 due to
the preferred stock dividend related to the Red Lion acquisition.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's principal sources of liquidity have been cash on hand, cash
generated by operations and borrowings under a $68.5 million revolving credit
facility. Cash generated by operations in excess of operating expenses is used
for capital expenditures and to reduce amounts outstanding under the Revolving
Credit Facility.
The Company's short-term capital needs include food and beverage inventory,
payroll, interest expense on outstanding mortgage indebtedness, and dividends on
the Company's preferred stock. Historically, the Company has met these needs
through internally generated cash. The Company's long-term capital needs include
funds for property acquisitions, scheduled debt maturities and renovations and
other non-recurring capital improvements. The Company anticipates meeting its
future long-term capital needs through additional debt financing secured by the
Hotels, unsecured private or public debt offerings, additional offerings of
WestCoast stock, and proceeds from the sale of non-core assets, along with cash
generated from internal operations.
At September 30, 2002, the Company had $7.6 million in cash and cash
equivalents. The Company has made extensive capital expenditures to the existing
hotels and the acquisition of hotel properties of $6.5 million, $ 55.0 million,
$8.5 million and $63.3 million in owned and joint venture properties for the
nine months ended September 30, 2002, and the years ended December 31, 2001,
2000, and 1999, respectively. These expenditures included guest room, lounge and
restaurant renovations, public area refurbishment, telephone and computer system
upgrades, tenant improvements, property acquisitions, construction, and
corporate expenditures and were funded from common and preferred stock issuance,
issuance of operating partnership units, operating cash flow and debt. The
Company establishes reserves for capital replacement in the amount of 4.0% of
the prior year's actual gross hotel income to maintain the Hotels at acceptable
levels. Acquired hotel properties have a separate capital budget for purchase,
construction, renovation, and branding costs. Capital expenditures planned for
Hotels in 2002 are expected to be approximately $7.7 million. Management
believes the consistent renovation and upgrading of the Hotels and other
properties is imperative to its long-term reputation and customer satisfaction.
To fund its acquisition program and meet its working capital needs, the Company
has a Revolving Credit Facility. The Revolving Credit Facility has a term ending
June 2005 and an annualized fee for the unutilized portion of the facility. The
Company selects from four different interest rates when it draws funds: the
lender's prime rate or one, three, or six month LIBOR plus the applicable margin
of 180 to 325 basis points, depending on the Company's ratio of EBITDA-to-total
funded debt. The Revolving Credit Facility allows for the Company to draw funds
based on the trailing 12 months performance on a pro forma basis for both
acquired and owned properties. Funds from the Revolving Credit Facility may be
used for acquisitions, renovations, construction and general corporate purposes.
The Company believes the funds available under the Revolving Credit Facility and
additional debt instruments will be sufficient to meet the Company's near term
growth plans. Substantially all of WestCoast's assets, including the hotels, are
owned by or for the benefit of WestCoast Hospitality Limited Partnership, a
Delaware limited partnership, ("the Operating Partnership"). WestCoast manages
the day to day operations of the Operating Partnership in its capacity as sole
general partner. The Operating Partnership is the borrower under the Revolving
Credit Facility. The obligations of the Operating Partnership under the
Revolving Credit Facility are fully guaranteed by the Company. Under the
Revolving Credit Facility, the Company is permitted to grant new deeds of trust
on any future acquired properties. Mandatory prepayments are required to be made
in various circumstances including the disposition of any property, or future
acquired property, by the Operating Partnership.
The Revolving Credit Facility contains various representations, warranties,
covenants and events of default deemed appropriate for a Credit Facility of
similar size and nature. Covenants and provisions in the definitive credit
agreement governing the Revolving Credit Facility include, among other things,
limitations on: (i) substantive changes in the Company's and Operating
Partnership's current business activities, (ii) liquidation, dissolution,
mergers, consolidations, dispositions of material property or assets involving
the Company and its affiliates or their assets, as the case may be, and
acquisitions of property or assets of others, (iii) the creation or existence of
deeds of trust or other liens on property or assets, (iv) the addition or
existence of indebtedness, including guarantees and other contingent
obligations, (v) loans and advances to others and investments in others, (vi)
redemption of subordinated debt, (vii) amendment or modification of certain
material documents or of the Articles in a manner adverse to the interests of
the lenders under the Revolving Credit Facility, (viii) payment of dividends or
distributions on the Company's capital stock, and (ix) maintenance of certain
financial ratios. Each of the covenants described above provides for certain
ordinary course of business and other exceptions. If the Company breaches any of
these covenants and does not obtain a waiver of that breach, the breach will
constitute an event of default under the Revolving Credit Facility. At September
30, 2002, the Company had $44.2 million outstanding under the Revolving Credit
Facility. The Company was in compliance with all required covenants except the
Fixed Charge Ratio covenant for which it has received a waiver. The Revolving
Credit Facility restricted the Company from paying dividends on its common stock
as of September 30, 2002. Historically, the Company has not paid dividends to
common shareholders.
In addition to the Revolving Credit Facility, as of September 30, 2002, the
Company had debt and capital leases outstanding of approximately $107.9 million
consisting of primarily variable and fixed rate debt secured by individual
properties.
The Company believes that cash generated by operations will be sufficient to
fund the Company's operating strategy for the foreseeable future, and that any
remaining cash generated by operations, together with capital available under
the Revolving Credit Facility (subject to the terms and covenants to be included
therein) and additional debt financing, will be adequate to fund the Company's
growth strategy in the near term. Thereafter, the Company expects that future
capital needs, including those for property acquisitions, will be met through a
combination of net cash provided by operations, borrowings and additional
issuances of capital stock. In addition, the Company expects to generate cash
from the sale of the assets held for sale.
SEASONALITY
- -----------
The lodging industry is seasonal in nature, with the months from May through
October generally accounting for a greater portion of annual revenues than the
months from November through April. For example, for the year ended December 31,
2001, our revenues in the first through fourth quarters were 23.3%, 26.9%, 28.1%
and 21.7%, respectively, of our total revenue for such year and our net income
(loss) for the first through fourth quarters was 8.9%, 59.8%, 38.6% and (7.3)%,
respectively, of our total net income for that year. Quarterly earnings also may
be adversely affected by events beyond our control, such as extreme weather
conditions, economic factors and other considerations affecting travel.
INFLATION
- ---------
The effect of inflation, as measured by fluctuations in the Consumer Price
Index, has not had a material impact on the Company's revenues or net income
during the periods under review.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk has not changed significantly for the nine months
ended September 30, 2002. See Item 7A of the Company's Form 10K for the year
ended December 31, 2001.
Item 4 - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of
the Company's management, including the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's management, including the CEO and CFO, concluded that
the Company's disclosure controls and procedures were effective as of September
30, 2002.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
September 30, 2002.
Part II - Other Information
- ---------------------------
ITEMS 1, 2, 3 and 4 of Part II are omitted from this report, as they are not
applicable.
ITEM 5. OTHER INFORMATION
On October 22, 2002, the Company announced its plan to convert more than 20
WestCoast Hotels containing more than 4,500 rooms and approximately 240,000
square feet of meeting space to the Red Lion brand name. This conversion is
anticipated to be completed by February 2003, increasing the number of Red Lion
hotels to more than 65 and further positioning the brand for national and
international growth.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 - Donald K. Barbieri - Certification - pursuant to 18 U.S.C.
ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002
99.2 - Arthur M. Coffey - Certification - pursuant to 18 U.S.C.
ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended
September 30, 2002.
WESTCOAST HOSPITALITY CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacities stated and on the date indicated.
WESTCOAST HOSPITALITY CORPORATION
(Registrant)
Date: November 13, 2002 By: /s/ Peter P. Hausback
--------------------------------------
Peter P. Hausback, Controller and
Principal Accounting Officer
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Donald K. Barbieri, Chairman, President and Chief Executive Officer of
WestCoast Hospitality Corporation certify that:
1. I have reviewed this quarterly report on Form 10-Q of WestCoast Hospitality
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
/s/ Donald K. Barbieri
- ---------------------------
Chairman, President and Chief Executive Officer
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Arthur M. Coffey , Executive Vice President and Chief Financial Officer of
WestCoast Hospitality Corporation certify that:
1. I have reviewed this quarterly report on Form 10-Q of WestCoast Hospitality
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
/s/ Arthur M. Coffey
- ------------------------
Executive Vice President and Chief Financial Officer