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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR (15)d OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 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
- ------------------------------- ----------------
(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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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 August 8, 2002, there were 12,980,717 shares of the Registrant's common
stock outstanding.
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WESTCOAST HOSPITALITY CORPORATION
Form 10-Q
For the Quarter Ended June 30, 2002
INDEX
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Balance Sheets --
June 30, 2002 (unaudited) and December 31, 2001 3
Consolidated Statements of Income --
Three Months and Six Months Ended June 30, 2002
and 2001 (unaudited) 4-5
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 2002 and 2001 (unaudited) 6-7
Notes to Consolidated Financial Statements 8-12
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-19
PART II - Other Information
Item 4 - Submissions of Matters to a Vote of Security Holders 20
Item 6 - Exhibits and Reports on Form 8-K 20
Signatures 21
2
Part I - Financial Information
ITEM 1. Financial Statements
WESTCOAST HOSPITALITY CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND DECEMBER 31, 2001
(in thousands, except share data)
- --------------------------------------------------------------------------------
(UNAUDITED)
JUNE 30, DECEMBER 31,
2002 2001
---------- ----------
ASSETS:
Current assets:
Cash and cash equivalents $ 6,186 $ 5,735
Accounts receivable 10,102 9,101
Inventories 2,461 2,380
Assets held for sale 21,382 21,403
Prepaid expenses and deposits 3,086 1,410
---------- ----------
Total current assets 43,217 40,029
---------- ----------
Property and equipment, net 248,973 257,656
Intangible assets, net 34,920 34,920
Other assets, net 29,635 27,044
---------- ----------
Total assets $ 356,745 $ 359,649
========== ==========
LIABILITIES:
Current liabilities:
Accounts payable $ 7,081 $ 4,756
Accrued payroll and related benefits 7,741 6,866
Accrued interest payable 741 777
Income taxes payable 2,469 822
Advanced deposits 616 1,542
Other accrued expenses 10,199 7,039
Long-term debt, due within one year 4,486 3,753
Capital lease obligations, due within one year 380 384
---------- ----------
Total current liabilities 33,713 25,939
---------- ----------
Long-term debt, due after one year 101,382 113,277
Notes payable to bank 49,000 54,250
Capital lease obligations, due after one year 84 268
Deferred income 2,769 --
Deferred income taxes 14,360 14,160
Minority interest in partnerships 3,006 2,940
---------- ----------
Total liabilities 204,314 210,834
---------- ----------
Commitments and contingencies
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;
12,970,473 and 12,959,700 shares issued and outstanding 130 130
Additional paid-in capital, common stock 84,022 83,966
Retained earnings 37,902 34,342
---------- ----------
Total stockholders' equity 152,431 148,815
---------- ----------
Total liabilities and stockholders' equity $ 356,745 $ 359,649
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
3
Part I - Financial Information
ITEM 1. Financial Statements
WESTCOAST HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(in thousands, except share data)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
(UNAUDITED) (UNAUDITED)
------------------------ ------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
REVENUES:
Hotels and Restaurants $ 46,736 $ 27,373 $ 83,941 $ 50,317
Franchise, Central Services and Development 1,183 795 1,934 1,463
TicketsWest 1,493 1,723 3,472 3,676
Real Estate Division 2,139 2,469 4,611 4,958
Corporate Services 72 58 134 156
---------- ---------- ---------- ----------
Total revenues 51,623 32,418 94,092 60,570
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Direct:
Hotels and Restaurants 36,869 19,324 71,389 37,544
Franchise, Central Services and Development 568 416 1,019 754
TicketsWest 1,467 1,677 2,911 3,500
Real Estate Division 1,030 1,124 2,242 2,258
Corporate Services 53 45 101 84
Depreciation and amortization 2,659 2,535 5,376 5,028
Amortization of goodwill -- 214 -- 428
---------- ---------- ---------- ----------
Total direct expenses 42,646 25,335 83,038 49,596
Undistributed corporate expenses 637 588 1,209 1,172
---------- ---------- ---------- ----------
Total expenses 43,283 25,923 84,247 50,768
---------- ---------- ---------- ----------
Operating income 8,340 6,495 9,845 9,802
OTHER INCOME (EXPENSE):
Interest expense, net of amounts capitalized (2,655) (2,994) (5,522) (6,351)
Interest income 116 60 158 142
Other income 92 3,787 3,100 4,808
Conversion expenses (6) (3) (7) (5)
Equity in investments 16 18 (12) 27
Minority interest in partnerships (61) (159) (66) (146)
---------- ---------- ---------- ----------
Income before income taxes 5,842 7,204 7,496 8,277
Income tax provision 2,062 2,649 2,646 3,046
---------- ---------- ---------- ----------
Income before extraordinary item 3,780 4,555 4,850 5,231
Extraordinary item -- (23) -- (23)
---------- ---------- ---------- ----------
Net Income 3,780 4,532 4,850 5,208
Preferred stock dividend 645 -- 1,291 --
---------- ---------- ---------- ----------
Net income to common shareholders $ 3,135 $ 4,532 $ 3,559 $ 5,208
========== ========== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
4
Part I - Financial Information
ITEM 1. Financial Statements
WESTCOAST HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME, CONTINUED
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(in thousands, except share data)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
(UNAUDITED) (UNAUDITED)
------------------------ ------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Income per share:
Income per share before preferred stock dividends $ 0.29 $ 0.35 $ 0.37 $ 0.40
Preferred stock dividends (0.05) -- (0.10) --
---------- ---------- ---------- ----------
Net income per share - basic and diluted $ 0.24 $ 0.35 $ 0.27 $ 0.40
========== ========== ========== ==========
Weighted-average shares outstanding - basic 12,970 12,948 12,970 12,947
========== ========== ========== ==========
Weighted-average shares outstanding - diluted 13,314 13,234 13,318 13,233
========== ========== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
5
Part I - Financial Information
ITEM 1. Financial Statements
WESTCOAST HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(in thousands)
- --------------------------------------------------------------------------------
(UNAUDITED)
2002 2001
---------- ----------
Operating activities:
Net income $ 4,850 $ 5,208
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,376 5,456
Gain on disposition of property and equipment (3,095) (1,027)
Gain on insurance settelment -- (3,782)
Deferred income tax provision 200 1,892
Extraordinary item -- 9
Minority interest in partnerships 66 146
Equity in investments 12 (27)
Compensation expense related to stock issuance 7 8
Change in assets and liabilities
Accounts receivable (1,001) (1,888)
Inventories (81) (20)
Prepaid expenses and deposits (1,676) (1,219)
Accounts payable and income taxes payable 3,972 280
Accrued payroll and related benefits 875 131
Accrued interest payable (36) 52
Other accrued expenses 1,495 3,116
---------- ----------
Net cash provided by operating activities 10,964 8,335
========== ==========
Investing activities:
Additions to property and equipment (2,468) (3,749)
Proceeds from disposition of property and equipment 1,828 1,338
Cash received from partnership investments -- 66
Other, net 141 (353)
---------- ----------
Net cash used in investing activities (499) (2,698)
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
6
Part I - Financial Information
ITEM 1. Financial Statements
WESTCOAST HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(in thousands)
- --------------------------------------------------------------------------------
(UNAUDITED)
2002 2001
---------- ----------
FINANCING ACTIVITIES:
Repayment of note payable to bank (7,650) (41,700)
Proceeds from note payable to bank -- 47,550
Repayment of long-term debt (1,563) (11,181)
Proceeds from issuance of common stock under employee
stock purchase plan 49 60
Preferred stock dividend paid (645) --
Principal payments on capital lease obligations (187) (299)
Additions to deferred financing costs (19) (553)
Distribution to stockholders and partners -- (56)
---------- ----------
Net cash used in financing activities (10,015) (6,179)
---------- ----------
CHANGE IN CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and cash equivalents 450 (542)
Cash and cash equivalents at beginning of period 5,735 3,476
---------- ----------
Cash and cash equivalents at end of period $ 6,185 $ 2,934
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period for:
Interest (net of amount capitalized) $ 5,558 $ 6,299
Income taxes $ 801 $ 220
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 $ 1,291 $ --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
7
Part I - Financial Information
ITEM I. Financial Statements
WESTCOAST HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. QUARTERLY INFORMATION
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 June 30, 2002 and the consolidated results of operations for the
three and six months ended June 30, 2002 and 2001, and cash flows for the
six months ended June 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 property located in Pasco, Washington and one leased Doubletree hotel
property located in Boise, Idaho. 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 June 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 arranges Broadway and other entertainment event productions
under its TicketsWest(R) division, including TicketsWest.com(TM), 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 website. The Company owns and manages ticketing
operations 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(R) Real Estate Services division.
8
WESTCOAST HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 and requires that the
Company maintain certain financial ratios, minimum levels of cash flows and
restricts the payment of dividends. Any outstanding borrowings bear
interest based on the prime rate or LIBOR. At June 30, 2002, $46.6 million
is outstanding under the credit facility. The Company was in compliance
with all required covenants at June 30, 2002.
4. BUSINESS SEGMENTS:
The Company has four operating segments: (1) Hotels and Restaurants; (2)
TicketsWest(R); (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(R) has significant inter-segment revenues, which are eliminated
in the consolidated financial statements. Management reviews and evaluates
the operations of TicketsWest(R) 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 SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
Revenues:
Hotels and Restaurants $ 46,736 $ 27,373 $ 83,941 $ 50,317
Franchise, Central Services and Development 1,183 795 1,934 1,463
TicketsWest 1,497 2,034 3,591 4,235
Less: inter-segment revenues (4) (311) (119) (559)
Real Estate Division 2,139 2,469 4,611 4,958
Corporate Services and other 72 58 134 156
-------- -------- -------- --------
$ 51,623 $ 32,418 $ 94,092 $ 60,570
======== ======== ======== ========
Operating income (loss):
Hotels and Restaurants $ 7,680 $ 6,037 $ 8,190 $ 8,772
Franchise, Central Services and Development 534 278 742 508
TicketsWest (54) (61) 405 (36)
Real Estate Division 1,016 1,003 2,118 2,025
Corporate Services and other (836) (762) (1,610) (1,467)
-------- -------- -------- --------
$ 8,340 $ 6,495 $ 9,845 $ 9,802
======== ======== ======== ========
9
WESTCOAST HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
Numerator:
Income before preferred stock dividends and
extraordinary item $ 3,780 $ 4,555 $ 4,850 $ 5,231
Extraordinary item -- (23) -- (23)
Preferred stock dividends (645) -- (1,291) --
-------- -------- -------- --------
Income available to common stockholders 3,135 4,532 3,558 5,208
Income effect of dilutive OP Units 31 85 56 91
-------- -------- -------- --------
Net income-diluted $ 3,166 $ 4,617 $ 3,614 $ 5,299
======== ======== ======== ========
Denominator:
Weighted-average shares outstanding - basic 12,970 12,948 12,970 12,947
Effect of dilutive OP Units 286 286 286 286
Effect of dilutive common stock options and
convertible notes 58 (A) 62 (A)
-------- -------- -------- --------
Weighted-average shares outstanding - diluted 13,314 13,234 13,318 13,233
======== ======== ======== ========
Income per share before preferred
stock dividend $ 0.29 $ 0.35 $ 0.37 $ 0.40
Preferred stock dividends (0.05) -- (0.10) --
-------- -------- -------- --------
Net income per share - basic and diluted $ 0.24 $ 0.35 $ 0.27 $ 0.40
======== ======== ======== ========
(A) At June 30, 2002 and 2001, 1,232,341 and 962,420 stock options
were outstanding, respectively. At June 30, 2002 and 2001,
872,568 and 962,420 of these options respectively have been
excluded from the calculation of diluted earnings per share
because they are anti-dilutive.
The effect of the shares which would be issued upon conversion of
the convertible notes 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.
10
WESTCOAST HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 141 "Business Combinations" which
supersedes APB Opinion No. 16 "Business Combinations" and FASB Statement
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 FASB Statement No. 38. This statement is effective for all
business combinations subsequent to June 30, 2001. The acquisition of Red
Lion was accounted for using SFAS No. 141.
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Intangible
Assets", which revises the accounting for purchased goodwill and intangible
assets. Under SFAS 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 Company
tested the remaining balance of goodwill and determined that no impairment
existed at June 30, 2002. The adoption of SFAS 142 on January 1, 2002,
resulted in the reduction of pre-tax goodwill amortization of $214 thousand
and $428 thousand for the quarter and six months ended June 30, 2002,
respectively.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
2002 2001 2002 2001
--------- --------- --------- ---------
(Dollars in thousands)
Reported net income to common shareholders $ 3,135 $ 4,532 $ 3,559 $ 5,208
Add back: goodwill amortization, net of tax 0 135 0 270
--------- --------- --------- ---------
Total $ 3,135 $ 4,667 $ 3,559 $ 5,478
========= ========= ========= =========
Basic earnings per share
Reported net income $ 0.24 $ 0.35 $ 0.27 $ 0.40
Goodwill amortization 0.00 0.01 0.00 0.02
--------- --------- --------- ---------
Adjusted earnings per share $ 0.24 $ 0.36 $ 0.27 $ 0.42
========= ========= ========= =========
Diluted earnings per share:
Reported net income $ 0.24 $ 0.35 $ 0.27 $ 0.40
Goodwill amortization 0.00 0.01 0.00 0.02
--------- --------- --------- ---------
Adjusted earnings per share $ 0.24 $ 0.36 $ 0.27 $ 0.42
========= ========= ========= =========
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 June 30, 2002, the cost and accumulated amortization of these
contracts was $10.5 million and $1.7 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.
11
WESTCOAST HOSPITALITY CORPORATION
NOTES TO 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"). 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.
Management currently believes that the adoption of SFAS No. 145 will not
have a material impact on the Company's consolidated financial statements.
In July, 2002, the FASB issued SFAS No. 146 ("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
8. SUBSEQUENT EVENT
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. The terms
of the transaction are disclosed in Forms SC TO filed in July and August
2002.
12
Part I - Financial Information
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 six months ended June 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 89.2% of
total revenues in the six months ended June 30, 2002 and increased 66.8% to
$83.9 million in 2002 from $50.3 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 2.1% of the Company's
revenue for the six months ended June 30, 2002. TicketsWest accounted for 3.7%
and Real Estate Division accounted for 4.9% 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.
13
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 SIX MONTHS ENDED
JUNE 30 JUNE 30,
------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
Revenues:
Hotels and Restaurants 90.5 % 84.4 % 89.2 % 83.1 %
Franchise, Central Services and Development 2.3 2.5 2.1 2.4
TicketsWest 2.9 5.3 3.7 6.0
Real Estate Division 4.1 7.6 4.9 8.2
Corporate Services and other 0.2 0.2 0.1 0.3
-------- -------- -------- --------
Total Revenue 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ========
Direct Operating Expenses 82.6% 78.2% 88.3% 81.9%
Undistributed Corporate Operating Expense 1.2 1.8 1.3 1.9
Operating Income 16.2 20.0 10.5 16.2
Interest Expense 5.1 9.2 5.9 10.5
Income Tax Provision 4.0 8.2 2.8 5.0
Net Income 7.3% 14.0% 5.2% 8.6%
Hotel Statustics (1)
Hotels open at end of period 90 46 90 46
Available rooms 15,855 8,607 15,855 8,607
REVPAR (2) (3) $ 50.91 $ 55.45 $ 45.99 $ 50.60
ADR (4) $ 80.71 $ 84.07 $ 79.70 $ 82.67
Occupancy (5) 63.1% 66.0% 57.7% 61.2%
(1) Hotel statistics for the three and six months ended June 30, 2002 and 2001,
are presented for Combined Hotels. Combined Hotels includes 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.
(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.
14
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2002 TO THE THREE MONTHS ENDED JUNE
30, 2001
Total revenues increased $19.2 million, or 59.2%, to $51.6 million in 2002
from $32.4 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 $19.4 million, or 70.7%, to
$46.7 million in 2002 from $27.4 million in 2001. Combined Hotel ADR decreased
$3.36 or 4.0%, to $80.71 in 2002 from $84.07 in 2001. Combined Hotel REVPAR
decreased $4.54, or 8.2%, to $50.91 in 2002 from $55.45 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 fourth quarter 2001 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 $400
thousand or 48.8% to $1.2 million in 2002 from $800 thousand in 2001. This
increase is primarily related to the increase in franchise royalty income from
the Red Lion purchase.
TicketsWest revenues decreased $230 thousand , or 13.3%, to $1.5 million in
2002 primarily from decreased call center income.
Real Estate Division revenue decreased $330 thousand, or 13.4%, to $2.1
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 $17.3 million, or 68.3%, to $42.6
million in 2002 from $25.3 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.
Total undistributed corporate operating expenses increased $49 thousand, or
8.3 % to $637 thousand in 2002 from $588 thousand in 2001. Total undistributed
corporate operating expenses as a percentage of total revenues decreased 0.6% to
1.2% in 2002 from 1.8 % in 2001.
Operating income increased $1.8 million, or 28.4%, to $8.3 million in 2002
from $6.5 million in 2001. As a percentage of total revenues, operating income
decreased to 16.2% in 2002 from 20.0% in 2001. This operating income percentage
decrease is primarily due to the acquisition of Red Lion Hotels, Inc., the
acquired operating lease properties, and the impacts of the weak economy and
seasonality differences of the acquired hotels.
Interest expense decreased $339 thousand, or 11.3%, to $2.7 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 decreased $600 thousand to $2.1 million in 2002 from
$2.7 million in 2001 due to a decrease in income before taxes. The effective
income tax provision rate was 35.3% and 36.7% for 2002 and 2001 respectively.
15
Net income decreased $800 thousand to $3.8 million in 2002 from $4.5
million in 2001. The decrease in net income is attributed primarily to the one
time gain of $3.8 million realized in 2001 from an insurance settlement which
was offset by increased operating income due to the acquisition of Red Lion
Hotels, Inc. on December 31, 2001. Earnings per share to common shareholders
decreased to $0.24 in 2002 from $0.35 in 2001 due to the decrease in net income
and the preferred stock dividend which is related to the Red Lion acquisition.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2002 TO THE SIX MONTHS ENDED JUNE 30,
2001
Total revenues increased $33.5 million, or 55.3%, to $94.1 million in 2002
from $60.6 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 $33.6 million, or 66.8%, to
$83.9 million in 2002 from $50.3 million in 2001. Combined Hotel ADR decreased
$2.97, or 3.6%, to $79.70 in 2002 from $82.67 in 2001. Combined Hotel REVPAR
decreased $4.61, or 9.1%, to $45.99 in 2002 from $50.60 in 2001.
Franchise, Central Services and Development revenues increased $471
thousand, or 32.2%, to $1.9 million in 2002 from $1.5 million in 2001.
TicketsWest revenues decreased $204 thousand, or 5.5%, to $3.5 million in
2002 from $3.7 million in 2001, primary from decreased call center income and a
partially offsetting increase in ticket fee revenue.
Real Estate Division revenue decreased $347 thousand, or 7.0%, to $4.6
million in 2002 from $5.0 million in 2001 primarily from reduced lease revenue
because of the sale of the WHC building which closed March 2002.
Direct operating expenses increased $33.4 million, or 67.4%, to $83.0
million in 2002 from $49.6 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. This represents an
increase in direct operating expenses as a percentage of total revenues to 88.3%
in 2002 from 81.9% in 2001.
Total undistributed corporate operating expenses increased $37 thousand, or
3.1%, to $1.2 million in 2002. Total undistributed corporate operating expenses
as a percentage of total revenues was decreased to 1.3% in 2002, from 1.9% in
2001.
Operating income increased $43 thousand, or 0.4%, to $9.8 million in 2002.
As a percentage of total revenues, operating income decreased to 10.5% in 2002
from 16.2% in 2001.
Interest expense decreased $829 thousand, or 13.1%, to $5.5 million in 2002
from $6.4 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 decreased 13.1%, to $2.6 million in 2002 from $3.1
million in 2001, due to the decrease in income before taxes. The effective
income tax provision rate was 35.3% and 36.8% for 2002 and 2001 respectively.
Net income decreased $358 thousand, or 6.9%, to $4.9 million in 2002 from
$5.2 million in 2001. The decrease in net income is attributed primarily to the
one time gain of $3.8 million realized in 2001 from an insurance settlement
which was offset by increased income due to the acquisition of Red Lion Hotels,
Inc. on December 31, 2001. Earnings per share to common shareholders decreased
to $0.27 in 2002 from $0.40 in 2001.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Historically, 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.
16
The Company's short-term capital needs include food and beverage inventory,
payroll and the repayment of interest expense on outstanding mortgage
indebtedness. 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 the additional debt financing secured by the Hotels, by
unsecured private or public debt offerings or by additional equity offerings or
the issuances of OP Units, along with cash generated from internal operations.
At June 30, 2002, the Company had $6.2 million in cash and cash
equivalents. The Company has made extensive capital expenditures to the existing
hotels and the acquisition of hotel properties of $2.5 million, $ 55.0 million,
$8.5 million and $63.3 million in owned and joint venture properties for the six
months ended June 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. 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 June 30,
2002, the Company had $46.6 million outstanding under the Revolving Credit
Facility and was in compliance with all required covenants. The Revolving Credit
Facility restricted the Company from paying dividends on its common stock as of
June 30, 2002.
17
In addition to the Revolving Credit Facility, as of June 30, 2002, the
Company had debt and capital leases outstanding of approximately $106.3 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 Common Stock or OP Units.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
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 10K.
The more critical accounting policies and estimates used by us relate to (1) the
valuation of long-lived assets (including hotel and commercial office buildings
and intangible assets consisting of brand name, goodwill and management,
marketing and franchise contracts), (2) the allocation of the purchase price of
acquisitions, (3) revenue recognition and (4) the valuation and accounting for
stock options.
NEW ACCOUNTING PRONOUCEMENTS
- ----------------------------
In June 2001, the FASB issued SFAS No. 141 "Business Combinations" which
supersedes APB Opinion No. 16 "Business Combinations" and FASB Statement 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 FASB Statement No.
38. This statement is effective for all business combinations subsequent to June
30, 2001. The acquisition of Red Lion was accounted for using SFAS No. 141.
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Intangible
Assets", which revises the accounting for purchased goodwill and intangible
assets. Under SFAS 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 142 on January 1,
2002 resulted in the reduction of pre-tax goodwill amortization of $214 thousand
and $428 thousand for the quarter and six months ended June 30, 2002.
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 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
financial statements.
18
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"). 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. Management currently believes
that the adoption of SFAS No. 145 will not have a material impact on the
Company's consolidated financial statements.
In July, 2002, the FASB issued SFAS No. 146 ("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.
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.
19
Part II - Other Information
- ---------------------------
ITEMS 1, 2, 3, and 5 of Part II are omitted from this report, as they are not
applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders on May 17, 2002, the following actions
were taken:
Total Outstanding Shares: 12,970,473
1. Election of Directors
Votes Votes
Name Votes For PCT Withhold Abstained
- ------------------ ---------- ----- --------- ---------
Rodney D. Olson 12,372,612 95.4% 17,988
Richard L. Barbieri 10,423,327 80.4% 1,967,273
2. Ratification of BDO Seidman, LLP as independent auditors for the year
ending December 31, 2002.
Votes Votes
Votes For PCT Against Abstained
---------- ----- ------- ---------
12,386,686 95.5% 648 3,266
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - Fourth Amendment to the Amended and Restated Credit Agreement
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 June 30,
2002.
20
WESTCOAST HOSPITALITY CORPORATION
SIGNATURES
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: August 14, 2002 By: /s/ Arthur M. Coffey
-----------------------------------
Arthur M. Coffey, Executive Vice
President and Chief Financial
Officer
21