Red Lion Hotels CORP - FORM 8-K - EX-99.2

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EX-99.1 - EX-99.1 - Red Lion Hotels CORP	d588975dex991.htm
8-K - 8-K - Red Lion Hotels CORP	d588975d8k.htm

Exhibit 99.2

Red Lion Hotels Corporation

Unaudited Pro Forma Condensed Consolidated Balance Sheet

March 31, 2018


	March 31, 2018			Less: Bend Hotel Assets Sold (m)			Less: Hotel Assets Sold				Add: Pro Forma Adjustments				Pro Forma
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	25,426		$	735		$	2,302		(a)	$	418		(g)	$	27,552
												(1,007	)	(h)
												(322	)	(f)
Restricted cash		13,681			(168	)						(418	)	(g)		13,095
Accounts receivable, net		12,957										(98	)	(f)		12,859
Accounts receivable from related parties		1,870			(29	)										1,841
Notes receivable, net		1,239														1,239
Inventories		406														406
Prepaid expenses and other		5,911			(31	)						(36	)	(f)		5,844
Assets held for sale		12,446			(3,133	)		(9,313	)	(b)						—

Total current assets		73,936			(2,626	)		(7,011	)			(1,463	)			62,836

Property and equipment, net		155,849										—				155,849
Goodwill		9,404										—				9,404
Intangible assets		50,255										—				50,255
Other assets, net		4,858														4,858

Total assets	$	294,302		$	(2,626	)	$	(7,011	)		$	(1,463	)		$	283,202


LIABILITIES
Current liabilities:
Accounts payable	$	5,667		$	(16	)					$	(44	)	(f)		5,607
Accrued payroll and related benefits		3,113			(19	)						(45	)	(f)		3,049
Other accrued liabilities		5,551			(60	)						(331	)	(f)		5,160
Long-term debt, due within one year		33,924			(3,779	)		(6,729	)	(d)						23,416
Contingent consideration for acquisition due to related party, due within one year		5,446														5,446

Total current liabilities		53,701			(3,874	)		(6,729	)			(420	)			42,678

Long-term debt, due after one year, net of debt issuance costs		39,593														39,593
Contingent consideration for acquisition due to related party, due after one year																—
Deferred income and other long term liabilities		1,407			(261	)										1,146
Deferred income taxes		2,301														2,301

Total liabilities		97,002			(4,135	)		(6,729	)			(420	)			85,718


Commitments and contingencies

STOCKHOLDERS’ EQUITY
Red Lion Hotels Corporation stockholders’ equity
Preferred stock – 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding		—
Common stock – 50,000,000 shares authorized; $0.01 par value; 24,125,600 shares issued and outstanding		241														241
Additional paid-in capital, common stock		178,318														178,318
Accumulated deficit		(13,390	)		2,251			(282	)	(e)		(36	)	(e)		(11,457	)

Total Red Lion Hotels Corporation stockholders’ equity		165,169			2,251			(282	)			(36	)			167,102
Noncontrolling interest		32,131			(742	)						(1,007	)	(i)		30,382

Total stockholders’ equity		197,300			1,509			(282	)			(1,043	)			197,484

Total liabilities and stockholders’ equity	$	294,302		$	(2,626	)	$	(7,011	)		$	(1,463	)		$	283,202

Manual adjustment made for Pasco Debt as it was not reclassified to all current

12/31/2017 current balance was 122,701

Overall debt payment was $10,080,000

Red Lion Hotels Corporation

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For Year Ended December 31, 2017


	As Reported			Less: Redding, Eureka, Boise, Richland, Pasco and Bend Hotel Assets Sold (m)			Less: Hotel Assets Sold				Pro Forma
	(in thousands)
Revenue:
Company operated hotels	$	119,186		$	(29,189	)	$	(4,339	)	(k)	$	85,658
Other revenues from managed properties		3,914										3,914
Franchised hotels		48,559			2,553			256		(l)		51,368
Other		267										267

Total revenues		171,926			(26,636	)		(4,083	)			141,207

Operating expenses:
Company operated hotels		91,622			(23,501	)		(3,517	)	(k)		64,604
Other costs from managed properties		3,914										3,914
Franchised hotels		34,794			1,554			204		(n)		36,552
Other		(9	)									(9	)
Depreciation and amortization		18,824			(2,893	)		(551	)	(k)		15,380
Hotel facility and land lease		4,806			(70	)						4,736
Gain on asset dispositions, net		(449	)		5							(444	)
General and administrative expenses		15,792			999			142		(o)		16,933
Acquisition and integration costs		1,529										1,529

Total operating expenses		170,823			(23,906	)		(3,722	)			143,195

Operating income (loss)		1,103			(2,730	)		(361	)			(1,988	)
Other income (expense):
Interest expense		(8,252	)		1,591			122		(p)		(6,539	)
Other income, net		818										818

Total other income (expense)		(7,434	)		1,591			122				(5,721	)

Income (loss) from continuing operations before taxes		(6,331	)		(1,139	)		(239	)			(7,709	)
Income tax expense		(4,662	)									(4,662	)

Net income (loss) from continuing operations		(1,669	)		(1,139	)		(239	)			(3,047	)
Net (income) loss attributable to noncontrolling interest		2,069			93			17		(i)		2,179

Net income (loss) attributable to RLH Corporation from continuing operations	$	400		$	(1,046	)	$	(222	)		$	(868	)


Earnings (loss) per share – basic
Income (loss) from continuing operations attributable to RLH Corporation	$	0.01									$	(0.04	)

Earnings (loss) per share – diluted
Income (loss) from continuing operations attributable to RLH Corporation	$	0.01									$	(0.04	)

Weighted average shares – basic		23,669										23,699
Weighted average shares – diluted		24,253										23,699

Red Lion Hotels Corporation

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For Three Months March 31, 2018


	As Reported			Less: Redding, Eureka, Boise, Richland, Pasco and Bend Hotel Assets Sold (m)				Less: Hotel Assets Sold				Pro Forma
	(in thousands)
Revenue:
Company operated hotels	$	22,003		$	(3,372	)		$	(551	)	(k)	$	18,080
Other revenues from managed properties		893											893
Franchised hotels		10,123			191				30		(l)		10,344
Other		20											20

Total revenues		33,039			(3,181	)			(521	)			29,337

Operating expenses:
Company operated hotels		19,547			(3,330	)			(654	)	(k)		15,563
Other costs from managed properties		893											893
Franchised hotels		7,901			69				11		(n)		7,981
Other		(7	)										(7	)
Depreciation and amortization		4,392			—								4,392
Hotel facility and land lease		1,204			(17	)							1,187
Gain on asset dispositions, net		(14,043	)		13,926		(j)						(117	)
General and administrative expenses		3,486			183				38		(o)		3,707
Acquisition and integration costs		104											104

Total operating expenses		23,477			10,831				(605	)			33,703

Operating income (loss)		9,562			(14,012	)			84				(4,366	)
Other income (expense):
Interest expense		(2,247	)		626				68		(p)		(1,553	)
Other income, net		158											158

Total other income (expense)		(2,089	)		626				68				(1,395	)

Income (loss) from continuing operations before taxes		7,473			(13,386	)			152				(5,761	)
Income tax expense		135											135

Net income (loss) from continuing operations		7,338			(13,386	)			152				(5,896	)
Net (income) loss attributable to noncontrolling interest		(4,750	)		5,922				(108	)	(i)		1,064

Net income (loss) attributable to RLH Corporation from continuing operations	$	2,588		$	(7,464	)		$	44			$	(4,832	)


Earnings (loss) per share – basic
Income (loss) from continuing operations attributable to RLH Corporation	$	0.11										$	(0.20	)

Earnings (loss) per share – diluted
Income (loss) from continuing operations attributable to RLH Corporation	$	0.10										$	(0.20	)

Weighted average shares – basic		24,101											24,101
Weighted average shares – diluted		25,166											24,101

Notes to Unaudited Pro Forma Condensed Financial Information

Note 1 — Basis of presentation

The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed financial statements to give effect to pro forma events that are (1) directly attributable to the sale of the asset, (2) factually supportable and (3) with respect to the unaudited pro forma condensed statements of operations, expected to have a continuing impact on the results following the sale of the assets. These proforma financial statements also reflect the impact of the sales of hotels in Eureka, CA, Redding, CA, Boise, ID, Richland, WA Pasco, WA and Bend, OR which were previously reported.

Note 2 — The transaction

On May 11 2018 RL Post Falls, LLC completed the sale of the Red Lion Templin’s Hotel on the River, in Post Falls, Idaho, to KVA Management LLC, a Washington limited liability company (the “Purchaser”). The purchase price for the hotel was $9.25 million, which was paid in cash at closing.

At closing, an affiliate of the Purchaser entered into a franchise agreement with Red Lion Hotels Franchising, Inc., a wholly owned subsidiary of Red Lion Hotels Corporation, to continue to operate the hotel under the Red Lion^® brand. The franchise agreement provides for a 20 year term and the payment of monthly royalty and program fees equal to a percentage of the hotel’s gross room revenue. Either party may terminate the franchise agreement without penalty on the 10^th anniversary of the hotel’s opening date. Termination of the franchise agreement by Red Lion Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee.

RL Post Falls, LLC is a wholly owned subsidiary of RL Venture, LLC. RL Venture, LLC is a variable interest entity in which Red Lion Hotels Corporation holds a 55% interest, and therefore the registrant consolidates the assets, liabilities and results of operations of this entity.

Note 3 — Pro forma adjustments

The following adjustments have been reflected in the unaudited pro forma condensed financial information:

(a)

Reflects the cash from the sale of assets less selling costs and repayment of debt.

(b)

Reflects the basis of the assets sold.

(c)

Not used.

(d)

Represents the related debt payment made at the closing of the sale of the assets.

(e)

Reflects the gain on sale and/or settlement of the assets.

(f)

Reflects the settlement of all other assets and liabilities related to the assets sold.

(g)

Represents the release of restricted cash related to the assets sold.

(h)

Represents the proforma distribution of cash to the noncontrolling interest.

(i)

Reflects the removal of the noncontrolling interest portion of the transaction.

(j)

Removes the gain on the sales of the hotels in Eureka, CA, Redding, CA, Boise, ID, Richland, WA, and Pasco, WA which were reported in the three months ended March 31, 2018.

(k)

Reflects the elimination of direct revenues and expenses related to the assets sold.

(l)

Represents the franchise income that would have been received under the existing intercompany franchise agreement. Does not represent the impact of the franchise agreements with the new owners of the assets.

(m)

Impact of the sales of hotels in Eureka, CA, Redding, CA, Boise, ID, Richland, WA, Pasco, WA and Bend, OR which were previously reported.

(n)

Represents the marketing and other costs to support the franchise income that would have been received under the existing intercompany franchise agreement. Does not represent the impact of the franchise agreements with the new owners of the assets.

(o)

Reflects the corporate and administrative expenses which were previously allocated to the assets sold.

(p)

Reflects interest expense on allocated debt related to assets sold.

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