Red Lion Hotels CORP (Form: 8-K, Received: 11/19/2019 06:02:42)

RED LION HOTELS CORPORATION

Date: November 18, 2019

/s/ Julie Shiflett

Julie Shiflett

Executive Vice President and Chief Financial Officer (Principal Financial Officer and interim Principal Executive Officer)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

November 18, 2019 (November 15, 2019) Date of Report (Date of earliest event reported)

RED LION HOTELS CORPORATION

(Exact Name of Registrant as Specified in Charter)

Washington

001-13957

91-1032187

(State or Other Jurisdiction

of Incorporation)

(Commission

file number)

(I.R.S. Employer

Identification No.)

1550 Market St. #350

Denver, CO 80202

(Address of Principal Executive Offices, Zip Code)

(509) 459-6100

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Title of each class

Trading

Symbol

Name of each exchange

on which registered

Common Stock

RLH

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.01. Completion of Acquisition or Disposition of Assets.

On November 15, 2019, RLH Atlanta LLC completed the sale of the Red Lion Hotel Atlanta Airport (the “Hotel”) to YC Atlanta Hotel LLC, a Georgia limited liability company (the “Purchaser”). The purchase price for the Hotel was $12.25 million, which was paid in cash at closing.

RLH Atlanta, LLC is a wholly owned subsidiary of RLS Atla Venture, LLC. RLS Atla Venture, LLC is a variable interest entity in which Red Lion Hotels Corporation (the “Company”) holds a 55% interest, and therefore the Company consolidates the assets, liabilities and results of operations of this entity.

After payment of closing costs, and after the repayment of property level mortgage, the Company expects to receive a payment of $4.8 million from RLS Atla Venture. As the Company’s preferred equity position and accounts receivable balance with RLS Atla Venture exceeds the net proceeds from the sale of the Hotel, no distributions will be made to the joint venture partner.

At closing, the Purchaser entered into a franchise agreement with Red Lion Hotels Franchising, Inc., which is intended to allow the Purchaser to continue to operate the Property under the Red Lion Brand for ninety (90) days following closing, after which the Purchaser may elect to terminate the franchise agreement.

Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement

Under the terms of the Credit Agreement dated May 14, 2018 between the Company, Deutsche Bank AG New York Branch, as administrative agent and collateral agent (“DB”), and the lenders party thereto, all net proceeds from the sale of the Hotel that are distributed by RLS Atla Venture, LLC to the Company are required to be maintained by the Company in a cash collateral account controlled by DB, as administrative agent, and may be used by the Company to prepay any outstanding term loans under the Credit Agreement. $1.8 Million of the proceeds from this sale are considered distributions subject to the Credit Agreement.

Item 7.01. Regulation FD Disclosure.

A copy of the company’s press release, dated November 18, 2019 announcing the completion of the sale is furnished as Exhibit 99.1 hereto.

Non-GAAP Financial Measures

The following is a reconciliation of pro forma Adjusted EBITDA to amounts previously reported, to reflect the sale of the Hotel as described in Item 2.01 of this filing:


	Nine Months ended September 30, 2019			Year Ended December 31, 2018
Adjusted EBITDA from continuing operations - as previously reported	$	10,624		$	15,766
Less: Hotels sold in 2018		—			(3,293	)
Less: Asset sold with this filing		(191	)		(320	)

Pro Forma Adjusted EBITDA	$	10,433		$	12,153

EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. We believe it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness. Adjusted EBITDA is an additional measure of financial performance. We believe that the inclusion or exclusion of certain special items, such as gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results. Refer to our previously filed 10-K for the year ended December 31, 2018 filed on March 8, 2019 and 10-Q for the nine months ended September 30, 2019 filed on November 12, 2019 for the reconciliation from net income to adjusted EBITDA and further discussion of Non-GAAP measures.

Item 9.01. Financial Statements and Exhibits.

(b) Pro Forma Financial Information.

Attached hereto as Exhibit 99.2 and incorporated by reference herein is unaudited pro forma consolidated financial information of the registrant that gives effect to the sale of the Hotel and the repayment of principal on the property level debt as described in Item 2.01 of this Form 8-K.

(d)

Exhibits.


Exhibit Number		Exhibit Title or Description

99.1		Press Release dated November 18, 2019

99.2		Unaudited pro forma consolidated financial information

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 99.1

LOGO

RLH Completes Sale of Red Lion Hotel Atlanta Airport for $12.25 Million

DENVER (Nov. 18, 2019) — RLH Corporation (NYSE:RLH) announced that it has closed on the sale of its Red Lion Airport Hotel Atlanta for $12.25 million in gross proceeds.

The Red Lion Airport Hotel Atlanta was held in a joint venture. RLH Corporation will receive $4.8 million in net proceeds after closing costs and the repayment of property level mortgage. Net proceeds to RLH will be primarily used to reduce corporate level debt.

There are an additional three hotels that are under non-binding contract to be sold. It is the Company’s expectation the hotel sales will be completed by the end of Q1 2020.

About RLH Corporation

RLH Corporation is an innovative hotel company focused on the franchising of upscale, midscale and economy hotels. The company focuses on maximizing return on invested capital for hotel owners across North America through relevant brands, industry-leading technology and forward-thinking services. For more information, please visit the company’s website at www.rlhco.com.

Social Media:

www.Facebook.com/myhellorewards

www.Twitter.com/myhellorewards

www.Instagram.com/myhellorewards

www.Linkedin.com/company/rlhco

Investor Relations Contact:

Nikki Sacks

203-682-8263

investorrelations@rlhco.com

Media Contact:

Roxanne Rabasco

303-459-4192

Roxanne.Rabasco@rlhco.com

Exhibit 99.2

RED LION HOTELS CORPORATION

Unaudited Condensed Consolidated Balance Sheets

As of September 30, 2019

(In thousands, except share data)


	As Reported			Less: Atlanta Hotel Asset Sold			Atlanta Pro Forma Adjustments			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents ($6,074 and $4,564 attributable to VIEs)		18,267			3,653	a		93	f		22,632
								619	g
Restricted cash ($2,888 and $2,652 attributable to VIEs)		2,930						(619	)g		2,311
Accounts receivable ($2,161 and $1,064 attributable to VIEs), net of an allowance for doubtful accounts of $2,638 and $2,345, respectively		19,496						(338	)f		19,158
Notes receivable, net		4,188									4,188
Other current assets ($490 and $680 attributable to VIEs)		4,961						(175	)f		4,786

Total current assets		49,842			3,653			(419	)		53,076

Property and equipment, net ($71,902 and $74,250 attributable to VIEs)		107,554			(11,500	)b					96,054
Operating lease right-of-use assets ($12,909 and $0 attributable to VIEs)		48,553									48,553
Goodwill		18,595									18,595
Intangible assets, net		58,233									58,233
Other assets, net ($703 and $705 attributable to VIEs)		5,085									5,085

Total assets		287,862			(7,847	)		(419	)		279,596

LIABILITIES
Current liabilities:
Accounts payable ($2,047 and $650 attributable to VIEs)		5,176						(192	)f		4,984
Accrued payroll and related benefits ($474 and $369 attributable to VIEs)		1,868						(54	)f		1,814
Other accrued liabilities ($1,437 and $1,092 attributable to VIEs)		5,519						(173	)f		5,346
Long-term debt, due within one year ($24,101 and $25,056 attributable to VIEs)		24,628			(8,171	)c					16,457
Operating lease liabilities, due within one year ($966 and $0 attributable to VIEs)		4,801									4,801

Total current liabilities		41,992			(8,171	)		(419	)		33,402

Long-term debt, due after one year, net of debt issuance costs ($16,487 and $0 attributable to VIEs)		20,496									20,496
Line of credit, due after one year		10,000									10,000
Operating lease liabilities, due after one year ($11,943 and $0 attributable to VIEs)		46,871									46,871
Deferred income and other long-term liabilities ($387 and $480 attributable to VIEs)		1,541			(38	)d					1,503
Deferred income taxes		1,217									1,217

Total liabilities		122,117			(8,209	)		(419	)		113,489

Commitments and contingencies
STOCKHOLDERS’ EQUITY
RLH 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; 25,075,912 and 24,570,158 shares issued and outstanding		252									252
Additional paid-in capital, common stock		182,723						(71	)h		182,652
Accumulated deficit		(26,923	)		199	e					(26,724	)

Total RLH Corporation stockholders’ equity		156,052			199			(71	)		156,180
Noncontrolling interest		9,693			163	e		71	h		9,927

Total stockholders’ equity		165,745			362			—			166,107

Total liabilities and stockholders’ equity		287,862			(7,847	)		(419	)		279,596

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

b -	Reflects the book value of assets sold

c -	Reflects the elimination of debt after full repayment

d -	Reflects the finance leases assumed by the purchaser

e -	Reflects the gain on sale and portion of gain attributable to noncontrolling interest

f -	Reflects the settlement of working capital

g -	Reflects the release of restricted cash related to the assets sold and repayment of debt

h -	Reflects the elimination of the noncontrolling interest

RED LION HOTELS CORPORATION

Unaudited Pro Forma Condensed Consolidated Statements of Comprehensive Income (Loss)

For the year ended December 31, 2018

(In thousands, except per share data)


	As Reported			Less: Previously Sold Hotels (i)			Prev Sold Pro Forma Adjustments			Less: Atlanta Hotel Asset Sold			Atlanta Pro Forma Adjustments			Pro Forma
Revenue:
Royalty		22,309						178	j					139	j		22,626
Other franchise		5,537															5,537
Company operated hotels		82,021			(15,292	)					(5,218	)					61,511
Marketing, reservations and reimbursables		25,948						692	j					286	j		26,926
Other		34															34

Total revenues		135,849			(15,292	)		870			(5,218	)		425			116,634

Operating expenses:
Selling, general, administrative and other expenses		32,122															32,122
Company operated hotels		67,314			(12,545	)					(5,120	)					49,649
Marketing, reservations and reimbursables		26,877						692	j					286	j		27,855
Depreciation and amortization		17,003			(1,407	)					(1,041	)					14,555
Asset impairment		10,582															10,582
Loss (gain) on asset dispositions, net		(42,021	)		40,713												(1,308	)
Acquisition and integration costs		2,219															2,219

Total operating expenses		114,096			26,761			692			(6,161	)		286			135,674

Operating income (loss)		21,753			(42,053	)		178			943			139			(19,040	)
Other income (expense):
Interest expense		(6,209	)		1,600						879						(3,730	)
Loss on early retirement of debt		(794	)														(794	)
Other income (expense), net		265									(2	)					263

Total other income (expense)		(6,738	)		1,600			—			877			—			(4,261	)

Income (loss) from continuing operations before taxes		15,015			(40,453	)		178			1,820			139			(23,301	)
Income tax expense (benefit)		(71	)														(71	)

Net income (loss)		15,086			(40,453	)		178			1,820			139			(23,230	)
Net (income) loss attributable to noncontrolling interest		(13,129	)		18,204						(819	)					4,256

Net income (loss) and comprehensive income (loss) attributable to RLHC		1,957			(22,249	)		178			1,001			139			(18,974	)

Earnings (loss) per share - basic	$	0.08														$	(0.78	)
Earnings (loss) per share - diluted	$	0.08														$	(0.78	)
Weighted average shares - basic		24,392															24,392
Weighted average shares - diluted		25,477															24,392

i -	Includes the actual results for the nine company operated hotels sold during the year ended December 31, 2018.

j -	Reflects the franchise income and related expenses 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.

RED LION HOTELS CORPORATION

Unaudited Pro Forma Condensed Consolidated Statements of Comprehensive Income (Loss)

For the nine months ended September 30, 2019

(In thousands, except per share data)


	As Reported			Less: Atlanta Hotel Asset Sold			Atlanta Pro Forma Adjustments			Pro Forma
Revenue:
Royalty		17,516						104	j		17,620
Other franchise		3,772									3,772
Company operated hotels		43,839			(3,665	)					40,174
Marketing, reservations and reimbursables		22,632						256	j		22,888
Other		13									13

Total revenues		87,772			(3,665	)		360			84,467

Operating expenses:
Selling, general, administrative and other expenses		21,921									21,921
Company operated hotels		36,750			(3,190	)					33,560
Marketing, reservations and reimbursables		22,088						256	j		22,344
Depreciation and amortization		11,192			(510	)					10,682
Asset impairment		5,382									5,382
Loss (gain) on asset dispositions, net		45									45
Transaction costs		436									436

Total operating expenses		97,814			(3,700	)		256			94,370

Operating income (loss)		(10,042	)		35			104			(9,903	)
Other income (expense):
Interest expense		(3,690	)		803						(2,887	)
Loss on early retirement of debt		(164	)								(164	)
Other income (expense), net		121			(2	)					119

Total other income (expense)		(3,733	)		801			—			(2,932	)

Income (loss) from continuing operations before taxes		(13,775	)		836			104			(12,835	)
Income tax expense (benefit)		676									676

Net income (loss)		(14,451	)		836			104			(13,511	)
Net (income) loss attributable to noncontrolling interest		4,040			(376	)					3,664

Net income (loss) and comprehensive income (loss) attributable to RLHC		(10,411	)		460			104			(9,847	)

Earnings (loss) per share - basic	$	(0.42	)							$	(0.40	)
Earnings (loss) per share - diluted	$	(0.42	)							$	(0.40	)
Weighted average shares - basic		24,859									24,859
Weighted average shares - diluted		24,859									24,859

j -	Reflects the franchise income and related expenses 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.