UNITED STATES 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 March 31, 2003
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
WESTCOAST HOSPITALITY CORPORATION
(Exact name of registrant as specified in its charter)
Washington 91-1032187
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
201 W. North River Drive, Suite 100, Spokane, WA 99201
(Address of principal executive office)
(509) 459-6100
(Registrant's telephone number, including area code)
Indicated 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
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes |X| No
As of May 14, 2003 there were 12,994,163 shares of the Registrant's common stock
outstanding.
WESTCOAST HOSPITALITY CORPORATION
Form 10-Q
For the Quarter Ended March 31, 2003
INDEX
Part I - Financial Information
Item 1 - Financial Statements (unaudited):
Consolidated Balance Sheets --
March 31, 2003 and December 31, 2002 3
Consolidated Statements of Operations --
Three months ended March 31, 2003 and 2002 4
Consolidated Statements of Cash Flows --
Three months ended March 31, 2003 and 2002 5-6
Notes to Consolidated Financial Statements 7-10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-18
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 19
Item 4 - Controls and Procedures 19
PART II - Other Information
Item 5 - Other Information 19
Item 6 - Exhibits and Reports on Form 8-K 19
Signature 20
Part I - Financial Information
ITEM 1. Financial Statements
WestCoast Hospitality Corporation
Consolidated Balance Sheets (unaudited)
March 31, 2003 and December 31, 2002
(in thousands, except share data)
March 31, December 31,
2003 2002
Assets:
Current assets:
Cash and cash equivalents $ 4,480 $ 2,701
Accounts receivable, net 9,269 9,559
Inventories 1,905 2,040
Assets held for sale 34,517 34,408
Prepaid expenses and other 4,075 2,693
------------------ ------------------
Total current assets 54,246 51,401
------------------ ------------------
Property and equipment, net 241,174 241,255
Goodwill 28,042 28,042
Other intangible assets, net 14,991 15,188
Other assets, net 20,593 20,824
------------------ ------------------
Total assets $ 359,046 $ 356,710
================== ==================
Liabilities:
Current liabilities:
Accounts payable $ 6,289 $ 6,773
Accrued payroll and related benefits 5,731 6,173
Accrued interest payable 705 695
Advanced deposits 363 198
Other accrued expenses 10,756 8,494
Notes payable to bank 54,300 52,100
Note payable 1,800 -
Long-term debt, due within one year 4,977 4,889
Capital lease obligations,
due within one year 169 268
------------------ ------------------
Total current liabilities 85,090 79,590
------------------ ------------------
Long-term debt and capital lease
obligations, due after one year 100,225 101,206
Deferred revenue 2,554 2,626
Deferred income taxes 16,611 16,261
Minority interest in partnerships 2,799 2,911
------------------ ------------------
Total liabilities 207,279 202,594
------------------ ------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock - 5,000,000 shares authorized;
$0.01 par value;
$50 per share liquidation value:
Class A - 301,315 shares issued and outstanding 3 3
Class B - 301,315 shares issued and outstanding 3 3
Additional paid-in capital, preferred stock 30,125 30,125
Common stock - 50,000,000 shares authorized;
$0.01 par value;
12,994,163 and 12,981,878 shares issued and outstanding 130 130
Additional paid-in capital, common stock 84,143 84,083
Retained earnings 37,363 39,772
------------------ ------------------
Total stockholders' equity 151,767 154,116
------------------ ------------------
Total liabilities and stockholders' equity $ 359,046 $ 356,710
================== ==================
The accompanying notes are an integral part of the consolidated financial
statements.
Page 3
WestCoast Hospitality Corporation
Consolidated Statements of Operations (unaudited)
For the three months ended March 31, 2003 and 2002
(in thousands, except share and per share data)
2003 2002
Revenues:
Hotels and restaurants $ 34,096 $ 37,205
Franchise, central services and development 1,089 751
TicketsWest 2,601 1,979
Real estate division 2,302 2,472
Corporate services 88 62
---------------- ----------------
Total revenues 40,176 42,469
---------------- ----------------
Operating expenses:
Hotels and restaurants 32,631 34,520
Franchise, central services and development 479 451
TicketsWest 2,190 1,444
Real estate division 1,217 1,212
Corporate services 77 48
Depreciation and amortization 2,607 2,717
(Gain)/loss on asset dispositions including recoveries 332 (3,011)
Conversion expense 288 1
---------------- ----------------
Total direct expenses 39,821 37,382
Undistributed corporate expenses 740 572
---------------- ----------------
Total expenses 40,561 37,954
---------------- ----------------
Operating income/(loss) (385) 4,515
Other income/(expense):
Interest expense, net of amounts capitalized (2,642) (2,867)
Interest income 104 42
Other income/(expense) 19 (3)
Equity income/(loss) in investments 58 (28)
Minority interest in partnerships 112 (5)
---------------- ----------------
Income/(loss) before income taxes (2,734) 1,654
Income tax (benefit)/expense (965) 584
---------------- ----------------
Net income/(loss) (1,769) 1,070
Preferred stock dividend (640) (646)
---------------- ----------------
Net income/(loss) to common shareholders $ (2,409) $ 424
================ ================
Net earnings/(loss) per share:
Basic $ (0.19) $ 0.03
Diluted $ (0.19) $ 0.03
Weighted average shares - basic 12,992,341 12,970,473
================ ================
Weighted average shares - diluted 12,992,341 (a) 13,322,834
================ ================
(a) Options and operating partnership units were anti-dilutive.
The accompanying notes are an integral part of the consolidated financial
statements.
Page 4
WestCoast Hospitality Corporation
Consolidated Statements of Cash Flows (unaudited)
For the three months ended March 31, 2003 and 2002
(in thousands)
2003 2002
Operating activities:
Net income/(loss) $ (1,769) $ 1,070
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,607 2,717
(Gain)/loss on disposition of property and equipment 332 (3,011)
Deferred income tax provision 350 100
Minority interest in partnerships (112) 5
Equity in investments (58) 28
Compensation expense related to stock issuance 5 7
Provision for doubtful accounts 111 95
Change in current assets and liabilities:
Accounts receivable 139 414
Inventories 135 3
Prepaid expenses and other (1,345) (1,251)
Accounts payable (484) 1,528
Accrued payroll and related benefits (442) 943
Accrued interest payable 10 27
Other accrued expenses and advance deposits 2,427 3,704
-------------- -------------
Net cash provided by operating activities 1,906 6,379
-------------- -------------
Investing activities:
Purchases of property and equipment (2,658) (1,110)
Proceeds from disposition of property and equipment 5 1,738
Other, net 136 (212)
-------------- -------------
Net cash (used in)/provided by investing activities (2,517) 416
-------------- -------------
The accompanying notes are an integral part of the consolidated financial
statements.
Page 5
WestCoast Hospitality Corporation
Consolidated Statements of Cash Flows (unaudited), Continued
For the three months ended March 31, 2003 and 2002
(in thousands)
2003 2002
Financing activities:
Proceeds from note payable to bank 22,200 6,900
Repayment of note payable to bank (20,000) (12,150)
Proceeds from short-term debt 1,800 -
Repayment of long-term debt (893) (795)
Proceeds from issuance of common stock under employee
stock purchase plan 55 49
Preferred stock dividend payments (646) -
Principal payments on capital lease obligations (99) (94)
Additions to deferred financing costs (27) -
------------------------------
Net cash provided by/(used in) financing activities 2,390 (6,090)
------------------------------
Change in cash and cash equivalents:
Net increase in cash and cash equivalents 1,779 705
Cash and cash equivalents at beginning of period 2,701 5,735
------------------------------
Cash and cash equivalents at end of period $ 4,480 $ 6,440
==============================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,632 $ 2,839
Income taxes $ 81 $ 750
Noncash investing and financing activities:
Preferred stock dividends accrued $ 640 $ -
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
The accompanying notes are an integral part of the consolidated financial
statements.
Page 6
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, 2002 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, 2002 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 March 31,
2003 and the consolidated results of operations and cash flows for the three
months ended March 31, 2003 and 2002. 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 of America 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
WestCoast Hospitality Corporation is primarily engaged in the ownership,
management, development, and franchising of mid-scale, full service hotels. As
of March 31, 2003, the system contained 82 properties in 15 states, totaling
over 14,000 rooms and over 673,000 square feet of meeting space. The Company
owned an interest in and operated 29 hotels, leased 14 hotels, managed seven
hotels owned by others and franchised 32 hotels owned and operated by third
parties at March 31, 2003. The Company's hotel brands include WestCoast(R) and
RedLion(R). All properties are located in the United States of America. A total
of 13 agreements related to franchised hotels and one managed property agreement
will expire during the current year and will not be renewed. Four of those
properties left the WestCoast system during the three months ended March 31,
2003. In May 2003 the Company entered into two new franchise license agreements.
The Company is also engaged in activities related or supplementary to the
operation of hotels. These activities include computerized ticketing services
and presenting entertainment productions through its TicketsWest division and
owning, leasing, developing and managing commercial and residential properties
through its G&B real estate services division.
The Company was incorporated in the State of Washington on April 25, 1978. A
substantial portion of the Company's assets are held in WestCoast Hospitality
Limited Partnership ("WHLP"). WHLP was formed in the State of Delaware on
October 23, 1997. The Company is the sole general partner and approximately 98%
owner of WHLP and manages its operations.
The consolidated financial statements include the accounts of WestCoast
Hospitality Corporation, its wholly owned subsidiaries, its general and limited
partnership interest in WHLP, a 50% interest in a limited partnership and its
equity basis investment in other limited partnerships. All of these entities are
collectively referred to as "the Company" or "WestCoast". All significant
intercompany transactions and accounts have been eliminated in the consolidated
financial statements.
3. FINANCIAL LIQUIDITY
At March 31, 2003 the Company has a deficit working capital position of $30.8
million. This position is a direct result of the classification of $54.3 million
of obligations outstanding under the Company's primary revolving credit facility
with a bank as a current liability. As further discussed in Note 4, the
classification is due to the anticipatory breach of certain financial covenants
to be measured in June, September and December 2003.
The Company intends to refinance its revolving credit facility either with its
existing lender or other lenders into non-recourse fixed rate debt and revolving
debt. Management believes that an adequate borrowing base exists to secure the
necessary financing. The Company is also pursuing the sale of certain non-core
real estate assets, some of which are included in assets held for sale discussed
in Note 8. Management has implemented certain operational efficiencies and cost
reduction plans that are expected to improve covenant ratios. These actions are
intended to reduce the Company's dependence on the revolving credit facility.
Page 7
The historical cash flow of the Company has been adequate to service all its
normal operating needs, service all interest and regularly scheduled principal
payments and capital improvements. Due to the uncertain international state of
affairs and the perception of a weak economy there can be no assurance that
future operating performance will provide adequate cash flow for the Company's
needs. The ability of the Company to improve its working capital position
through the refinance of its revolving credit facility, improve operating
results and dispose of non-core assets is dependent upon lending market
conditions, the achievement of future operating efficiencies and the liquidity
of the real estate market where the Company's assets are located. There can be
no assurance that these efforts will be successful.
4. LINE OF CREDIT
At March 31, 2003 and December 31, 2002, $54.3 million and $52.1 million,
respectively, was outstanding under the credit facility. Any outstanding
borrowings bear interest based on the prime rate or LIBOR plus a variable
interest margin. At March 31, 2003, the interest rates in effect on outstanding
borrowings ranged from 4.82% to 5.50%. Interest only payments are due monthly.
The credit facility matures on June 30, 2005. The credit facility is
collateralized by certain properties and requires the Company to maintain
certain financial ratios, minimum levels of cash flows and restricts the payment
of dividends.
On December 23, 2002, the debt agreement was amended and the credit facility was
reduced to $58.5 million and three of the financial covenants were modified such
that compliance with them shall not be required until June 30, 2003. The Company
was not in compliance with one of the required financial covenants at March 31,
2003. The Company has obtained a waiver of the debt non-compliance from the bank
as of March 31, 2003. The entire outstanding balance at March 31, 2003 and
December 31, 2002 has been classified as a current liability due to anticipatory
breach of some of the existing covenants in June, September and December 2003,
which currently have not been waived. If the Company breaches its covenants and
the breach is not waived by the lender, one of the lenders remedies under the
credit facility is to call the debt due at that time. The debt agreement allows
the Company to pay dividends as long as certain minimum financial ratios are
maintained. Due to the covenant violation, at March 31, 2003 the Company was
restricted from paying all dividends, and therefore did not pay its April 2003
scheduled preferred stock dividend.
5. 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 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.
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
March 31
2003 2002
Revenues:
Hotels and restaurants $ 34,096 $ 37,205
Franchise, central services and development 1,089 751
TicketsWest 2,601 1,979
Real estate division 2,302 2,472
Corporate services 88 62
----------- --------------
$ 40,176 $ 42,469
=========== ==============
Operating income/(loss):
Hotels and restaurants $(1,432) $ 511
Franchise, central services and development 535 209
TicketsWest 334 458
Real estate division 1,062 4,110
Corporate services (884) (773)
----------- --------------
$ (385) $ 4,515
=========== ==============
Page 8
6. EARNINGS/(LOSS) PER SHARE
The following table presents a reconciliation of the numerators and denominators
used in the basic and diluted EPS computations (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
March 31
2003 2002
Numerator:
Income/(loss) available to common shareholders $ (1,769) $ 1,070
Preferred stock dividends (640) (646)
------------- -------------
Net income/(loss) - basic (2,409) 424
Effect of dilutive OP units (a) 25
------------- -------------
Net income/(loss) - diluted $ (2,409) $ 449
============= =============
Denominator:
Weighted-average shares - basic 12,992 12,970
Effect of dilutive OP units (a) 286
Effect of dilutive common stock options and
convertible notes (a) 66
------------- -------------
Weighted-average shares - diluted 12,992 13,322
============= =============
Earnings/(loss) per share - basic & diluted $ (0.19) $ 0.03
============= =============
(a) At March 31, 2003 796,333 stock options were outstanding. The effects of the
shares which would be issued upon the exercise of these options have been
excluded from the calculation of diluted earnings per share because they are
anti-dilutive. The operating partnership (OP) units are excluded from the March
31, 2003 weighted-average share calculation because they are anti-dilutive. At
March 31, 2002, 1,283,462 stock options were outstanding of which, 1,217,262
were excluded from the calculation of diluted earnings per share because they
are anti-dilutive.
7. BUILDING SALE
In the first quarter of 2002, the Company entered into an agreement for the sale
of an 80.1% interest in an office 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 $5.8 million. Due to the Company
retaining a partial ownership of the building and leasing space in the facility,
a portion of the gain is being deferred. The deferral related to the lease back
of office space is being amortized over the six year term of the lease.
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 March 31, 2003 of $12.9
million is classified as assets held for sale in the accompanying balance
sheets.
Additionally, two office buildings owned by the Company have been listed for
sale. The total net book value of these buildings as of March 31, 2003 of $21.6
million and are also classified as assets held for sale in the accompanying
balance sheets.
9. STOCK BASED COMPENSATION
In July 2002, the Company offered eligible common stock option holders the
opportunity to exchange certain common stock options for new common stock
options. The new common stock options offered were to 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 granted 261,251 new options in February 2003. The terms of
the transaction are disclosed in a Schedule TO and amendments thereto filed in
July and August 2002.
As permitted by Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation", the Company has chosen to measure
compensation cost for stock-based employee compensation plans using the
intrinsic value method of accounting prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and to provide the
disclosure only requirements of SFAS 123.
Page 9
On December 31, 2002, the Financial Accounting Standards Board (the "FASB")
amended the transition and disclosure requirements of SFAS No. 123 through the
issuance of FASB Statement No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure ("SFAS No. 148"). SFAS No. 148 amends the existing
disclosures to make more frequent and prominent disclosure of stock-based
compensation expense beginning with financial statements for fiscal years ending
after December 15, 2002.
The Company has chosen not to record compensation expense using fair value
measurement provisions in the statement of income. Had compensation cost for
plans been determined based on the fair value at the grant dates for awards
under the plans, reported net income/(loss) and earnings/(loss) per share would
have been changed to the pro forma amounts indicated below (dollars in
thousands, except per share amounts):
Three Months Ended
March 31,
2003 2002
Reported net income/(loss) applicable to common shareholders $ (2,409) $ 424
Add back: Stock based employee compensation - -
expense, net of related tax effects
Deduct: Total stock-based employee compensation (74) (202)
expense determined under fair valued based
method for all awards, net of related tax effects ------------ -------------
$ (2,483) $ 222
============ =============
Basic and diluted earnings/(loss) per share:
Reported net income/(loss) $ (0.19) $ 0.03
Stock-based employee compensation, fair value (0.01) (0.02)
------------ --------------
Pro forma $ (0.20) $ 0.01
============ ==============
10. RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements" ("FIN 46'). FIN 46 clarifies the
application of Accounting Research Bulletin No. 51 to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
FIN 46 is effective for WestCoast starting July 1, 2003 and is not expected to
have a material effect on the Company's consolidated financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 149 is effective for all contracts created or modified
after June 30, 2003 except for hedging relationships designated after June 30,
2003. In addition, except as stated below, all provisions of SFAS No. 149 should
be applied prospectively. The provisions of SFAS No. 149 that relate to SFAS No.
133 Implementation Issues that have been effective for fiscal quarters that
began prior to June 15, 2003, should continue to be applied in accordance with
their respective effective dates. In addition, paragraphs 7(a) and 23(a), which
relate to forward purchases or sales of when-issued securities or other
securities that do not yet exist, should be applied to both existing contracts
and new contracts entered into after June 30, 2003. The Company does not believe
that the adoption of this standard will have a material effect on the Company's
consolidated financial statements.
Page 10
ITEM II. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Safe Harbor for Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934. The Company
is including the following cautionary statement to make applicable, and to take
advantage of, the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 for any forward-looking statements made by, or on behalf of,
the Company. Forward-looking statements include 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). Forward-looking statements are all statements other than
statements of historical fact, including without limitation those that are
identified by the use of words such as, but not limited to, "will,"
"anticipates," "seeks to," "estimates," "expects," "intends," "plans,"
"predicts," and similar expressions, but the absence of these words does not
mean a statement is not forward-looking. From time to time, the Company may
publish or otherwise make available forward-looking statements of this nature.
All such subsequent forward-looking statements, whether written or oral and
whether made by or on behalf of the Company, are also expressly qualified by
these cautionary statements.
Such statements 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:
o magnitude and duration of international conflicts, economic cycles, including
fluctuations in regional economic conditions and seasonality of lodging industry
o actual and threatened terrorist attacks and international conflicts, and their
impacts on travel
o changes in future demand and supply for hotel rooms
o competitive conditions in the lodging industry
o relationships with franchisees and properties
o changes in energy, healthcare, insurance and other operating expenses
o impact of government regulations
o ability to obtain financing through debt and/or equity issuance
o ability to sell non-core assets held for sale and the related effect of
potential depreciation recapture
o ability to locate lessees for rental property and managing and leasing
properties owned by third parties
o dependency upon the ability and experience of executive officers and ability
to retain or replace such officers
The Company's expectations, beliefs and projections are expressed in good faith
and are believed by the Company to have a reasonable basis, including without
limitation management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that the Company's expectations, beliefs or
projections will be achieved or accomplished. Furthermore, any forward-looking
statement speaks only as of the date on which such statement is made, and the
Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances that occur after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for management to
predict all of such factors, nor can it assess the impact of each such factor on
the Company's business or the extent to which any such factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statement.
GENERAL
The following discussion and analysis addresses the results of operations for
the Company for three months ended March 31, 2003. 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 above in "Safe Harbor".
The Company's revenues are derived primarily from the hotel and restaurants and
reflect revenue from rooms, food and beverage, third party management and other
sources, including telephone, guest services, banquet room rentals, gift shops
and other amenities. Hotel and restaurants revenue accounted for 84.9% of total
revenues in the three months ended March 31, 2003 and decreased 8.4% to $34.1
million in 2003 from $37.2 million in 2002. 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, development
fees and rents. Franchise, central services and development accounted for 2.7%
of the Company's revenue for the three months ended March 31, 2003. TicketsWest
accounted for 6.5% and real estate division accounted for 5.7% 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.
Page 11
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 of operations 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 2002 consolidated financial statements included in our Form 10-K.
The more critical accounting policies and estimates used by us relate to:
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 other consolidated 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 and collection is reasonably
assured.
Real estate division revenue represents both lease income on owned commercial
and retail properties as well as property management income, development fees
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 derives revenue primarily from computerized event ticketing services
and promotion of Broadway shows and other special events. 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.
Property and equipment are stated at cost less accumulated depreciation. The
Company also has investments in partnerships that own and operate hotel
properties. The assessment of long-lived assets for possible impairment requires
the Company to make judgments, regarding real estate values, estimated future
cash flow from the respective properties and other matters. The Company reviews
the recoverability of its long-lived assets when events or circumstances
indicate that the carrying amount of an asset may not be recoverable.
The Company accounts for assets held for sale in accordance with Statement of
Financial Accounting Standard No. 144 (SFAS 144). The Company's assets held for
sale are recorded at the lower of their historical carrying value (cost less
accumulated depreciation) or market value. Depreciation is terminated when the
asset is determined to be held for sale. If the assets are ultimately not sold
within the guidelines of SFAS 144, depreciation is reinstated for the period
they were held for sale. The Company believes that its assets held for sale will
be completed in 2003, unless circumstances arise that were previously considered
unlikely.
The Company's intangible assets include brands and goodwill. The Company
accounts for its brands and goodwill in accordance with Statement of Financial
Accounting Standard No. 142 (SFAS 142). The Company expects to receive future
benefits from previously acquired brands and goodwill over an indefinite period
of time and therefore, effective January 1, 2002, no longer amortizes its brands
and goodwill in accordance with SFAS 142. The annual impairment review requires
the Company to make certain judgments, including estimates of future cash flow
with respect to brands and estimates of the Company's fair value and its
components with respect to goodwill and other intangible assets.
The Company's other intangible assets include management, marketing and lease
contracts. The value of these contracts is amortized on a straight-line basis
over the weighted average life of the agreements. The assessment of these
contracts requires the Company to make certain judgments, including estimated
future cash flow from the applicable properties.
The Company is self-insured for employee medical and dental coverage. Insurance
reserves include the present values of projected settlements for claims.
Projected settlements are estimated based on, among other things, historical
trends and actuarial data.
Page 12
The Company reviews accounts receivable for collectibility on a routine basis.
The Company records an allowance for doubtful accounts based on specifically
identified amounts that it believes to be uncollectible and amounts that are
past due beyond a certain date. The receivable is written off against the
allowance for doubtful accounts if collection attempts fail. The Company's
estimate for its allowance for doubtful accounts is impacted by, among other
things, national and regional economic conditions, including the magnitude and
duration of the economic downturn of the United States.
Effective January 1, 2002 the Company established the WestCoast Central Program
Fund (CPF), organized in accordance with various domestic franchise agreements.
The CPF is responsible for certain advertising services, frequent guest program
administration, reservation services, national sales promotions and brand and
revenue management services intended to increase sales and enhance the
reputation of the Company and its franchise owners including the WestCoast and
Red Lion branded properties. Contributions by the Company to the CPF for owned
and managed hotels and contributions by the franchisees, through the individual
franchise agreements, total up to 5% of room revenue or can be based on
reservation fees, frequent guest program dues and other services. While the
Company administers the functions of the CPF, the net assets and transactions of
the CPF are not commingled with the working capital of the Company. The net
assets and transactions of the CPF are, therefore, not included in the
accompanying consolidated financial statements in accordance with FASB No. 45,
"Accounting for Franchise Fee Revenue".
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 materially from those
estimates.
Page 13
OPERATING RESULTS AND STATISTICS
The following table sets forth-selected items from the consolidated statements
of operations as a percent of total revenues and certain other selected data:
Three Months Ended
March 31,
2003 2002
Revenues:
Hotels and restaurants 84.9 % 87.6 %
Franchise, central services and development 2.7 1.8
TicketsWest 6.5 4.7
Real estate division 5.7 5.8
Corporate services 0.2 0.1
----------- -----------
Total revenues 100.0 % 100.0 %
=========== ===========
Direct expenses 99.1 % 87.9 %
Undistributed corporate expenses 1.8 1.3
Operating income/(loss) (1.0) 10.8
Interest expense 6.6 6.8
Income tax (benefit)/expense (2.4) 1.4
Net income/(loss) (4.4)% 2.5 %
Hotel Statistics (1)
Hotels open at end of period (2) 82 92
Available rooms 14,274 15,997
RevPAR (5)(6) $ 35.50 $ 37.41
ADR (4) $ 70.62 $ 74.73
Average Occupancy (3)(6) 50.3 % 50.1 %
EBITDA (in thousands)(7) $ 2,554 $ 4,221
(1) Includes hotels owned, managed and franchised for greater than one year by
WestCoast Hospitality Corporation.
(2) A total of 13 agreements related to franchised hotels and one managed
property agreement will expire during the current year and will not be renewed.
Four of those properties left the WestCoast system during the three months ended
March 31, 2003. In May 2003 the Company entered into two new franchise license
agreements.
(3) Average occupancy represents total paid 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.
(4) Average daily rate (ADR) represents total room revenues divided by the total
number of paid rooms occupied by hotel guests.
(5) Revenue per available room (RevPAR) represents total room and related
revenues divided by total available rooms, net of rooms out of service due to
significant renovations.
(6) Rooms 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.
(7) EBITDA represents income before income taxes, interest expense, interest
income, depreciation, amortization, gain/loss on asset disposal, equity in
investments, minority interest, and other income/expenses. EBITDA is not
intended to represent cash flow from operations as defined by generally accepted
accounting principles and such information should not be considered as an
alternative to net income, cash flow from operations or any other measure of
performance prescribed by generally accepted accounting principles. While not
all companies calculate EBITDA in the same fashion and therefore EBITDA as
presented may not be comparable to similarly titled measures of other companies,
EBITDA is included herein because management believes that certain investors
find it to be a useful tool for measuring the Company's ability to service debt.
EBITDA is not necessarily available for management's discretionary use due to
restrictions included in the Revolving Credit Facility and other considerations.
Page 14
The following is a reconciliation of EBITDA to its comparable measurement in
accordance with generally accepted accounting principles for each of the years
presented (in thousands):
Three months ended
March 31,
2003 2002
EBITDA (as presented above) $ 2,554 $ 4,221
Income tax provision 965 (584)
Deferred income tax provision 350 100
Interest expense (2,642) (2,867)
Interest and other income, net 123 39
Other non-cash operating activities 116 102
Change in working capital accounts 440 5,368
-------------- -------------
Net cash provided by operating activities $ 1,906 $ 6,379
============== =============
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2003 TO THE THREE MONTHS
ENDED MARCH 31, 2002
Revenues
Total revenues for the first quarter of 2003 were $40.2 million, a decrease of
$2.3 million or 5.4% from the same quarter in 2002. The overall decrease in
revenues is attributed to the following:
Total hotel and restaurant revenues decreased $3.1 million, or 8.4%, to $34.1
million in 2003 from $37.2 million in 2002. Dominant factors include the
continued soft U.S. economy and the uncertainty of heightened terrorist alerts
which affected most of the hotel industry in the first quarter of 2003.
Additionally, in the first quarter of 2002, the Company's hotel in Salt Lake
City was positively impacted by the Winter Olympics and the lack of similar
activity during the first quarter of 2003 accounted for $1.3 million of the
decrease in sales. Lower room rates resulted and these factors contributed to
the Company's decrease in RevPAR compared to the first quarter of 2003. Hotel
ADR decreased $4.11, or 5.5%, to $70.62 in 2003 from $74.73 in 2002. Hotel
RevPAR decreased $1.91, or 5.1%, to $35.50 in 2003 from $37.41 in 2002.
Franchise, central services and development revenues increased $338 thousand or
45.0% to $1.1 million in 2003 from $751 thousand in 2002. This increase is
primarily due to certain one time revenue items related to the termination of a
franchise agreement during the period.
TicketsWest revenues increased $622 thousand, or 31.4%, to $2.6 million in 2003
from $2.0 million in 2002. This increase was primarily the result of the
increase in number of events at the venues serviced and the mix or type of
events held. During the quarter, TicketsWest added new contracts in Seattle,
Yakima and the Tri-Cities area of Washington state and rebranded its Oregon
operation from the name Fastixx to TicketsWest.
Real estate division revenues decreased $170 thousand, or 6.9%, to $2.3 million
in 2003 from $2.5 million in 2002 primarily from reduced lease revenue because
of the sale of an office building which closed March 2002.
Direct Expenses
Direct operating expenses increased $2.4 million, or 6.5%, to $39.8 million in
2003 from $37.4 million in 2002. The increase is primarily due to the $3.0
million gain on the sale of an office building in the first quarter of 2002. The
other major variance is the $403 thousand charge due to the disposition of
signage and various other fixed assets as a result of the Red Lion rebranding.
During the first quarter of 2003, the Company completed the transition of its
Red Lion brand into the system by rebranding 22 of its owned and managed hotels
to Red Lion hotels. As a result, the Company incurred $288 thousand for various
conversion activities and for the costs of new branded amenities.
Undistributed Corporate Expenses
Total undistributed corporate operating expenses increased $168 thousand, or
29.4 % to $740 thousand in 2003 from $572 thousand in 2002. Total undistributed
corporate operating expenses as a percentage of total revenues was 1.8% in 2003
versus 1.3% for the same quarter of 2002.
Interest Expense
Interest expense decreased $225 thousand, or 7.8%, to $2.6 million in 2003 from
$2.9 million in 2002. This decrease is attributed to a decrease in the interest
rates charged on the Company's variable rate debt.
Page 15
Income Taxes
The effective income tax rate for the first quarter of 2003 remained consistent
at 35.3% compared to the same quarter in 2002. As a result of the operating loss
in the first quarter of 2003, the Company recognized an income tax benefit of
$965 thousand compared to income tax expense of $584 thousand in the first
quarter of 2002.
Net Income/(Loss)
The net loss for the first quarter of 2003 was ($1.8) million compared to net
income of $1.1 million for the same quarter of 2002. Income applicable to common
shareholders decreased $2.8 million from $424 thousand in the first quarter of
2002 to a net loss to common shareholders of ($2.4) million for the first
quarter of 2003 due to lower operating results based on the reasons previously
discussed.
Net Earnings/(Loss) Per Share
Net earnings per share decreased $0.22 to a net loss per share of ($0.19) for
the first quarter of 2003 from $0.03 earnings per share for the same quarter of
2002. This is the result of the lower operating results based on the reasons
previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Net cash provided by operating activities totaled approximately $1.9 million for
the first quarter of 2003 compared to $6.4 million for the same quarter of 2002.
The decrease in 2003 compared to 2002 was primarily the result of lower
operating results and working capital variances.
Net cash used in investing activities was $2.5 million for the first quarter of
2003 compared to $416 thousand of cash provided by investing activities in 2002.
Additions to property and equipment totaled $2.7 million in 2003 compared to
$1.1 million in 2002. Capital additions included an investment in the new
central reservations system, signage related to rebranding and various other
projects in the operating divisions. The other major variance between the two
quarters is the $1.7 million of proceeds from asset dispositions received in the
first quarter of 2002.
Net cash provided by financing activities totaled $2.4 million in 2003 which
generally relates to the short-term borrowing for the payment of the central
reservations system, further borrowings on the line of credit and the payment of
preferred stock dividends. Net cash used in financing activities totaled $6.1
million in the first quarter of 2002 which consists primarily of revolving debt
repayments.
At March 31, 2003, the Company had $4.5 million in cash and cash equivalents.
The Company believes that its operating cash flow, ability to amend and
refinance its revolving credit facility with long-term non-recourse debt by
securing mortgages on certain hotel properties financing secured by hotels and
proceeds from the sale of its non-core assets will be sufficient to meet its
liquidity needs. However, projections of sources of working capital and future
financial needs are subject to uncertainty. Refer to "Safe Harbor" for
additional information of conditions that could affect future financial needs
and sources of working capital.
Financing
The Company has a revolving credit facility. In 2001, the Company refinanced a
portion of its revolving credit facility with long term fixed rate mortgages on
certain properties and lowered its commitment to $70 million. In December 2002,
the Company reduced its commitment to $58.5 million. As of March 31, 2003, $54.3
million of borrowings were outstanding under its $58.5 million revolver.
Although the revolving credit facility matures in June 2005, the Company
classified its outstanding borrowings under its $58.5 million revolver as
current debt as of March 31, 2003 and December 31, 2002 due to an anticipatory
breach of some of the existing covenants in 2003, which have currently not been
waived by the lenders. If the Company breaches its covenants and the breach is
not waived by the lender one of the lender's remedies under the credit facility
is to call the debt due at that time.
The Company intends to refinance its revolving credit facility either with its
existing lender and other lenders into non-recourse and revolving debt.
Management believes that an adequate borrowing base exists to secure the
necessary financing. The Company is also pursuing the sale of certain non-core
real estate assets, some of which are included in assets held for sale discussed
in Note 8. Management has implemented certain operational efficiencies and cost
reduction plans that are expected to improve covenant ratios. These actions are
intended to reduce the Company's dependence on the revolving credit facility.
The historical cash flow of the Company has been adequate to service all its
normal operating needs, service all interest and regularly scheduled principal
payments and capital improvements. Due to the perception of a weak economy,
there can be no assurance that future operating performance will provide
adequate cash flow for the Company's needs. The ability of the Company to
improve its working capital position through the refinance of its revolving
credit facility, improve operating results and disposal of non-core assets is
dependent upon lending market conditions, the achievement of future operating
efficiencies and the liquidity of the real estate market where the Company's
assets are located. There can be no assurance that these efforts will be
successful.
Page 16
Provisions under the Company's revolving credit facility agreement require the
Company to comply with certain covenants which include limiting the amount of
total outstanding indebtedness and other financial measurement covenants. The
Company did not meet one of the covenants at the end of the first quarter of
2003, however a waiver has been received from the bank. Also, the covenants for
total funded debt ratio, recourse funded debt ratio and fixed charge ratio were
amended in December 2002 to provide greater flexibility during the softer
economic environment.
In addition to the $54.3 million outstanding on the revolver, the Company has
debt and capital lease obligations of approximately $107.2 million as of March
31, 2003 primarily consisting of variable and fixed rate debt secured by
individual properties.
Assets Held for Sale
The Company continues to seek opportunities to divest its interest in its
non-core assets. The Company recently entered into an agreement subject to
various contingencies for the sale of an owned hotel property, a mall and excess
land. In addition, the Company has two office buildings with a net book value of
approximately $21.6 million classified as assets held for sale as of March 31,
2003. The Company anticipates completing the sale of these assets in 2003 and
using the net proceeds of up to approximately $21 million to pay down its
revolving credit facility, if the transaction is consummated prior to the
Company's anticipated refinance of its $58.5 million revolver, and/or to further
expand operations. Two of these properties have been held for sale for a year.
There can be no assurance that the Company will be able to successfully sell
these properties.
Preferred Stock Dividends
As discussed in Note 4 to the consolidated financial statements, the Company did
not make its scheduled dividend payment to holders of its Class A or Class B
preferred stock in April 2003 as it was restricted from paying any dividends due
to certain violations of its debt covenants with a bank. Dividends on both the
Class A and Class B preferred stock are cumulative and the next dividend date is
in July 2003. Under the terms of the Class A preferred share agreement, if two
consecutive dividend payments are not made the dividend rate increases from 7%
per annum to 12% per annum. Under the terms of the Class B preferred share
agreement, if two consecutive dividend payments are not made the dividend rate
increases from 10% per annum to 15% per annum.
SEASONALITY
The Company's business is subject to seasonal fluctuations. Significant portions
of the Company's revenues and profits are realized from May through October. The
Company's results for any quarter may not be indicative of the results that may
be achieved for the full fiscal year. In addition, results are affected by the
Company's rapid growth; national and regional economic conditions, including the
magnitude and duration of the current economic slowdown in the United States;
actual and threatened terrorist attacks and international conflicts and their
impact on travel; and weather conditions.
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.
OTHER MATTERS
Changes in Key Personnel
In April 2003 the Company announced that Arthur M. Coffey was named President
and Chief Executive Officer of the Company. Previously Mr. Coffey served as
Executive Vice President and Chief Financial Officer of WestCoast Hospitality
Corporation and as President of WestCoast Hotels. Also in April 2003, the
Company announced that Peter P. Hausback was named Vice President and Chief
Financial Officer. In March 2003, Donald K. Barbieri retired as President and
Chief Executive Officer of the Company. Mr. Barbieri will remain as chairman of
the WestCoast Hospitality Corporation Board of Directors.
Page 17
Recent Accounting Pronouncements
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements" ("FIN 46"). FIN 46 clarifies the
application of Accounting Research Bulletin No. 51 to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
FIN 46 is effective for WestCoast starting July 1, 2003 and is not expected to
have a material effect on the Company's consolidated financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 149 is effective for all contracts created or modified
after June 30, 2003 except for hedging relationships designated after June 30,
2003. In addition, except as stated below, all provisions of SFAS No. 149 should
be applied prospectively. The provisions of SFAS No. 149 that relate to SFAS No.
133 Implementation Issues that have been effective for fiscal quarters that
began prior to June 15, 2003, should continue to be applied in accordance with
their respective effective dates. In addition, paragraphs 7(a) and 23(a), which
relate to forward purchases or sales of when-issued securities or other
securities that do not yet exist, should be applied to both existing contracts
and new contracts entered into after June 30, 2003. The Company does not believe
that the adoption of this standard will have a material effect on the Company's
consolidated financial statements.
Page 18
ITEM III - Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk has not changed significantly for the three months
ended March 31, 2003. See Item 7A of the Company's Form 10K for the year ended
December 31, 2002.
ITEM IV - 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 March 31,
2003.
Changes in Internal Controls
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
March 31, 2003.
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
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 - Arthur M. Coffey - Certification - pursuant to 18 U.S.C. ss1350,
as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002
99.2 - Peter P. Hausback -Certification - pursuant to 18 U.S.C. ss1350,
as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
January 7, 2003
Item 7: Fifth Amendment to Amended and Restated Credit Agreement
March 3, 2003
Item 9: WestCoast Hospitality Corporation CEO Announces Change of Role
with Company
Page 19
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: May 14, 2003 By: /s/ Peter P. Hausback
Peter P. Hausback,
Vice President, Chief Financial Officer
and Principal Accounting Officer
Page 20
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Arthur M. Coffey, President, Chief Executive Officer and Director 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: May 14, 2003
/s/ Arthur M. Coffey
President, Chief Executive Officer and Director
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Peter P. Hausback, Vice President, Chief Financial Officer and Principal
Accounting 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: May 14, 2003
/s/ Peter P. Hausback
Vice President, Chief Financial Officer and Principal Accounting Officer
Exhibit 99.1
WESTCOAST HOSPITALITY CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WestCoast Hospitality Corporation
(the "Company") on Form 10-Q for the period ending March 31, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Arthur M. Coffey, President, Chief Executive Officer and Director of the
Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ Arthur M. Coffey
Arthur M. Coffey
President, Chief Executive Officer and Director
May 14, 2003
Exhibit 99.2
WESTCOAST HOSPITALITY CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WestCoast Hospitality Corporation
(the "Company") on Form 10-Q for the period ending September 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Peter P. Hausback, Vice President, Chief Financial Officer and Principal
Accounting Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ Peter P. Hausback
Peter P. Hausback
Vice President, Chief Financial Officer and Principal Accounting Officer
May 14, 2003