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As filed with the Securities and Exchange Commission on
May 1, 2006
Registration No. 333-133287
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
RED LION HOTELS CORPORATION
(Exact name of registrant as specified in its charter)
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WASHINGTON |
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91-1032187 |
(State or other jurisdiction of incorporation or
organization) |
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(I.R.S. Employer Identification Number) |
201 W. North River Drive, Suite 100, Spokane,
Washington 99201 (509) 459-6100
(Address, including zip code, and telephone number, including
area code, of registrants principal executive offices)
Arthur M. Coffey
President and Chief Executive Officer
201 W. North River Drive, Suite 100
Spokane, Washington 99201
(509) 459-6100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
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Frank C. Woodruff, Esq. |
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Peter T. Healy, Esq. |
Erin Joyce Letey, Esq. |
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OMelveny & Myers LLP |
Riddell Williams P.S. |
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Embarcadero Center West |
1001 Fourth Avenue Plaza, Suite 4500 |
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275 Battery Street, Suite 2600 |
Seattle, Washington 98154 |
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San Francisco, California 94111-3305 |
(206) 624-3600 |
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(415) 984-8700 |
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effective date of
this Registration Statement, as determined by market conditions.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following box. o
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, other than
securities offered only in connection with dividend or interest
reinvestment plans, check the following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a registration statement pursuant to General
Instruction I.D. or a post-effective amendment thereto that
shall become effective upon filing with the Commission pursuant
to Rule 462(e) under the Securities Act, check the
following
box. o
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction I.D. filed
to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities
Act, check the following
box. o
CALCULATION OF REGISTRATION FEE
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Proposed Maximum |
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Proposed Maximum |
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Title of Each Class of |
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Amount to be |
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Offering Price Per |
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Aggregate Offering |
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Amount of |
Securities to be Registered |
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Registered(1) |
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Unit(2) |
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Price(2) |
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Registration Fee |
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Common Stock, par value $.01 per share |
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6,480,646 |
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$12.45 per share |
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$80,684,043 |
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$8,633.19(3) |
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(1) |
Includes the underwriters option to purchase an additional
845,302 shares. |
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(2) |
Estimated solely for the purpose of computing the amount of the
registration fee. The registration fee has been calculated in
accordance with Rule 457(c) under the Securities Act of
1933 based on the average of the reported high and low prices of
the Registrants common stock reported on the New York
Stock Exchange on April 12, 2006, which was $12.45. |
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(3) |
$8,425.85 was previously paid. |
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The information
in this prospectus is not complete and may be changed. Neither
we nor the selling shareholders may sell these securities until
the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an
offer to sell these securities, and it is not soliciting an
offer to buy these securities, in any state where the offer or
sale is not permitted.
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Subject to Completion dated
April 28, 2006
PROSPECTUS
5,635,344 Shares
Common Stock
We are offering 5,000,000 shares of common stock and the
selling shareholders identified in this prospectus are offering
635,344 shares of common stock. We will not receive any
proceeds from the sale of shares by the selling shareholders.
Our common stock is traded on the New York Stock Exchange, or
NYSE, under the symbol RLH. On April 27, 2006,
the last reported sale price of our common stock on that
exchange was $12.05 per share.
Investing in our common stock involves risks.
Please read Risk Factors beginning on
page 15 of this prospectus.
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Per Share | |
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Public offering price
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$ |
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Underwriting discounts and commissions
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Proceeds to Red Lion Hotels Corporation
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$ |
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$ |
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Proceeds to the selling shareholders
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$ |
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$ |
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Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the accuracy or adequacy of the disclosures in
this prospectus. Any representation to the contrary is a
criminal offense.
We have granted the underwriters a
30-day option to
purchase up to an additional 845,302 shares of our common
stock to cover over-allotments, if any, at the public offering
price per share, less underwriting discounts and commissions.
The underwriters expect to deliver the shares in
San Francisco, California, on or
about ,
2006.
JMP Securities
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Thomas Weisel
Partners LLC |
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Calyon Securities
(USA) Inc. |
The date of this prospectus
is ,
2006
TABLE OF CONTENTS
You should rely only on the information contained or
incorporated by reference in this prospectus. We have not
authorized any person to provide you with different information.
This prospectus is not an offer to sell, nor is it seeking an
offer to buy, these securities in any state where the offer or
sale is not permitted. Neither the delivery of this prospectus
nor the sale of the common stock offered hereby means that
information contained in this prospectus is correct after the
date of this prospectus.
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EXHIBIT 10.24 |
EXHIBIT 23.1 |
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The rules of the Securities and Exchange Commission, or SEC,
allow us to incorporate by reference information into this
prospectus. This means that we can disclose important
information to you by referring you to another document filed
with the SEC. Any information referred to in this way is
considered part of this prospectus from the date we file that
document.
We incorporate by reference into this prospectus the documents
and information referred to under the heading
Incorporation of Certain Information by Reference on
page 63 of this prospectus, as well as certain additional
documents that we may hereafter file.
The documents incorporated by reference in this prospectus and,
in particular, our Annual Report on
Form 10-K for the
fiscal year ended December 31, 2005, contain important
information about us.
Any reports filed by us with the SEC after the date of this
prospectus and before the date that the offering of the
securities by means of this prospectus is terminated will
automatically update and, where applicable, supersede any
information contained, or incorporated by reference, in this
prospectus.
You should read Incorporation of Certain Information by
Reference on page 63 of this prospectus for
information about how to obtain the documents incorporated by
reference.
In this prospectus we, us,
our, ours and our company
refer to Red Lion Hotels Corporation and, as the context
requires, its wholly and partially owned subsidiaries.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and
should be read in conjunction with the more detailed information
and consolidated financial statements and notes thereto included
or incorporated by reference in this prospectus. Before you
decide to invest in our common stock, you should read the entire
prospectus carefully, including the risk factors included in
this prospectus, as well as our consolidated financial
statements and related notes and other information incorporated
by reference in this prospectus. Unless otherwise specified, the
information in this prospectus assumes that the
underwriters over-allotment option is not exercised and
assumes a stock price of $12.05, which was the last reported
sale price of our common stock on the NYSE on April 27,
2006. Unless otherwise specified, the information contained in
this prospectus is as of December 31, 2005. Reference to
our hotels and our system-wide hotels
includes hotels that we lease, franchise and manage, and nothing
in this prospectus shall imply that we own all such hotels.
Our Company
We are a NYSE-listed hospitality and leisure company primarily
engaged in the ownership, operation and franchising of midscale
and upscale full service hotels under our proprietary Red Lion
brand. As of March 31, 2006, our hotel system contained
61 hotels located in 10 states and one Canadian
province, with 10,687 rooms and 521,537 square feet of
meeting space. Of these 61 hotels, we (i) operated
34 hotels, 21 of which were owned and 13 of which were
leased, (ii) franchised 26 hotels to various
franchisees and (iii) managed one hotel owned by a third
party.
Brand and Lodging Description
The Red Lion brand was established more than thirty years ago
and is associated with full service hotels offering high-quality
lodging, extensive meeting facilities and superior food and
beverage operations. We also deliver personalized service to our
customers and offer contemporary and well-appointed guestrooms.
Our focus on customer service and brand touch-points attracts a
well-balanced customer base, including group, business and
leisure travelers.
The Red Lion brand is well recognized in the western United
States and well regarded by our guests. Consumers consistently
identify the Red Lion brand and the personalized service it
represents when asked to indicate their full service lodging
preferences. To position Red Lion for its next phase of growth,
we are continuing to build upon this strong brand presence by
making significant investments in our hotel product,
revitalizing our brand image, and enhancing our services and
standards.
Business Strategy
In 2004 and 2005, we dedicated significant resources to several
key brand initiatives. We launched an extensive hotel renovation
plan, enhanced our technology infrastructure, introduced our
revitalized brand image, changed our corporate name, and
announced an aggressive five-year growth plan to double the
number of markets in which Red Lion has a presence from
50 to 100.
In 2006 and beyond, we intend to build on the momentum we have
created and continue the implementation of our revitalization
strategies. We are committed to completing our renovation plan,
continuing our expansion program, and ensuring that Red Lion
remains a preferred hotel brand for guests, owners and
investors. We are also committed to optimizing our capital
structure and improving our financial flexibility by reducing
our leverage.
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Growth Strategy
We intend to deliver internal and external growth and drive
shareholder value through the following key initiatives:
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grow average daily rate, or ADR, and occupancy through our
significant renovation program; |
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expand our network of hotels by establishing brand penetration
in a hub and spoke pattern; |
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increase ADR and occupancy by leveraging new operational and
infrastructure initiatives; |
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maximize the value of our owned hotel and real estate portfolio
by capitalizing on market opportunities; and |
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increase flexibility by optimizing our capital structure. |
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Largest renovation program in company history |
We are currently in the final stages of the most significant
capital investment program in our history in order to improve
comfort, freshen décor and upgrade technology at 31 of our
owned and leased hotels. In 2005 we invested approximately
$19.6 million into our owned and leased hotels, and during
2006 we expect to spend an additional $32 million on
capital improvements. The capital improvements are being funded
primarily from cash on hand and the net proceeds received from
divestiture of non-core assets. We believe the initial results
of this program have been positive, as evidenced by the strong
operating performance in the fourth quarter of 2005 for three of
our hotels where renovations were substantially complete.
Revenue per available room, or RevPAR, at these hotels during
the fourth quarter of 2005 increased 14.5% on average as
compared to the fourth quarter of 2004, driven by an increase of
9.4% in ADR, and a 2.7 percentage point increase in
occupancy.
At March 31, 2006, we had substantially completed room
renovations at 11 of the 31 owned and leased hotels. We
expect to complete our room renovation program for all 31 owned
and leased hotels by mid 2006 in time for our peak travel
season. We believe these renovations will further increase our
appeal to our guests and improve operating results at our
renovated hotels.
We have continued to operate the hotels during the renovation
process, which has limited our ability to maximize occupancy and
room rates at these properties. As a result, operating
performance at hotels under renovation has been negatively
impacted during the renovation process. However, as evidenced by
average RevPAR growth of 14.5% for the three renovated hotels in
the fourth quarter of 2005, we believe that our capital
investment will improve our operating results as measured by
RevPAR and earnings before interest, taxes, depreciation and
amortization, or EBITDA.
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Establish brand penetration in a hub and spoke
pattern |
Over the next five years we intend to significantly expand the
number of hotels under the Red Lion brand. Initially, we plan to
concentrate on growth in the western United States and Canada by
pursuing a hub and spoke strategy, where we
establish a strong presence in certain major metropolitan cities
and expand into adjoining markets. Thereafter, we intend to
progressively expand eastward, building on the momentum created
by our established western base. By growing the name recognition
of the Red Lion brand and correspondingly increasing our
customer base, we believe we can increase RevPAR across our
hotel system. We have set forth below our strategy for
accomplishing our external growth initiatives.
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Hotel acquisitions and equity investments. We intend to
selectively make joint venture investments or acquire hotels
located in major metropolitan cities. We believe that having
equity interests in such hotels will allow us to exercise
operational control of the hotels to maximize our brand image in
highly visible markets. San Francisco, Los Angeles, Phoenix
and Dallas are examples of hub markets we are
targeting for expansion. We will evaluate investment
opportunities based upon a number of factors, including price,
strategic fit, potential profitability and geographic
distribution. |
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Franchise the Red Lion brand. We plan to leverage our
brand awareness in the western United States to expand our
presence through franchising in primary and secondary markets.
We believe that this strategy will allow us to continue to
expand our geographic coverage without requiring significant
capital investment, resulting in increased revenues and
profitability. We believe our brand represents an attractive
conversion opportunity for hotel owners in markets where
competing hotel companies have saturated the market with their
multiple brands. Our single focus on the Red Lion brand offers
potential franchisees a brand identity and full service
alternative with a distinctive product and an attractive fee
structure. |
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To facilitate our franchising efforts, we recently named a Vice
President of Brand Development to focus solely on expanding the
Red Lion brand with high-quality, creditworthy franchisees. We
believe we are well positioned to integrate new franchisees into
our hotel system in view of the scalable operational
infrastructure we have implemented in recent years. |
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Implementation of new operational and infrastructure
initiatives |
To accomplish the goals of delivering consistently high-quality
service to our guests and establishing a scalable foundation for
future growth, we have implemented a number of key initiatives.
During the past three years, we have (i) enhanced service
standards, (ii) developed innovative marketing programs,
(iii) implemented state of the art technology, and
(iv) revitalized our brand image.
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Enhanced service standards. We have implemented a new
service standard and training program called The Red Lion
Way, which is designed to provide Red Lion employees more
tools to create a positive, memorable guest experience. We
believe our enhanced service standards will appeal to our guests
and increase brand loyalty, resulting in improved revenues. |
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Innovative marketing programs. The following are some of
our marketing initiatives: |
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GuestAwards loyalty program. Our loyalty program allows
guests to accumulate points that are redeemable for
complimentary hotel stays, air miles, car rentals, merchandise,
entertainment and other incentives, including stays at our
redemption partner hotels. We believe the diverse and appealing
redemption options available to our GuestAwards members builds
guest loyalty. |
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Net4Guests. Our Net4Guests program provides all hotel
guests in our owned and leased hotels access to free high-speed
wireless internet. We believe a unique feature of our Net4Guests
program is that GuestAwards loyalty program members can use our
hotels as a hot spot at anytime, even if they are
not staying at the hotel. |
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Stay Comfortable advertising campaign. Our
advertising campaign is designed to increase awareness of the
brand and our product upgrades. |
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We Promise or We Pay. Our We Promise or
We Pay program encourages guests to reserve rooms on
www.redlion.com through one of the most aggressive rate
guarantee programs in the industry. Guests are guaranteed that
they will not find a lower room rate than that offered on our
branded website at any non-opaque third party website such as
Expedia.com, Travelocity.com or Orbitz.com. |
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State of the art technology |
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Proprietary website. In September 2005, we launched
www.redlion.com, a feature-filled and technologically
advanced proprietary website that allows users to view our hotel
portfolio; compare our room rates with those available at other
websites; reserve rooms; obtain account information and redeem
awards for our GuestAwards loyalty program; and utilize
click-to-call technology to obtain information regarding our
hotels and facilities. The initial results have been positive,
and reservations booked on our website in the fourth quarter of
2005 were 32% higher than in the fourth quarter of 2004. We
believe that the most cost-effective method for securing
internet room reservations is through our website, because that
eliminates the fees otherwise paid to third |
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parties. Any resulting increase in the volume of reservations
booked through our website would further improve our operating
margins. |
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Central reservation system. We recently implemented a
state-of-the-art central reservations platform that seamlessly
interfaces with all electronic distribution channels. We believe
this system increases our exposure to potential guests and
expands our opportunity to capture incremental revenue from
consumers who book travel electronically. |
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Revitalized brand image. In September 2005, we introduced
a new logo and brand identity with a contemporary design to
better reflect our upgraded hotel product and to position Red
Lion as a preferred hotel brand for guests, owners and investors. |
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Maximize the value of our owned hotel and real estate
portfolio |
We continuously review our owned hotel and real estate portfolio
for opportunities to maximize profitability and effectively
redeploy capital. In November 2004, we announced our plan to
divest 11 of our non-strategic owned hotels, one of our
commercial buildings and certain other non-core properties. As
of March 31, 2006, we had completed the sale of eight of
these hotels, the commercial building, and other identified
assets, raising approximately $58.3 million of aggregate
gross proceeds. We are using the proceeds to reduce debt and
fund our renovation program.
We also strive to maximize the value of our real estate
portfolio through redevelopment. We believe opportunities may
exist to redevelop certain of our properties which are located
in resort areas and in urban markets that have recently
experienced significant growth.
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Increase flexibility and improve capital markets
profile |
Our financial strategy is designed to support our business
strategy. Our goal is to have a flexible capital structure that
supports our growth initiatives. We intend to use a majority of
the net proceeds to us from this offering to significantly
reduce our leverage. Following the application of the net
proceeds from this offering, we believe we will be well
positioned to obtain an expanded line of credit, which we
believe will increase our financial flexibility and facilitate
our growth initiatives.
We expect that this offering will attract a significant number
of new shareholders to our company and considerably diversify
our shareholder base. We believe that our improved capital
markets profile will increase the financial services
communitys familiarity with Red Lion, which will allow us
to achieve greater financial flexibility in the future.
Summary of Risk Factors
There are a number of material risks that could prevent us from
successfully implementing the foregoing growth strategy
initiatives or harm our results of operations and financial
condition, including the following, among others:
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certain conditions could decrease the demand for hotel rooms,
such as adverse changes in the economic climate, natural
disasters, actual or threatened terrorist attacks or
international conflicts or increased competition in the industry; |
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we may be unsuccessful in obtaining new franchise or management
arrangements, financing hotel acquisitions or profitably
integrating new hotels into our operations, or our existing
franchisees may terminate or fail to renew their relationship
with us; |
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demand for our hotels may decrease or the value of our name,
image or brand may diminish; |
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if revenues decline, the expenses of our owned hotels are likely
to remain constant or increase resulting in a disproportionately
higher decrease in our earnings; |
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due to the geographic concentration of the hotels in our system,
our results of operations and financial condition are subject to
fluctuations in regional economic conditions; |
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we may lose a member of our senior management team; |
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the cost of energy, insurance, healthcare coverage or other
operating expenses may increase, or our performance may be
adversely impacted by rising interest rates, higher taxes or
increased government regulation; |
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we may be unsuccessful in obtaining the financing required to
implement our growth strategies; and |
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there may be an increase in the use of third-party travel
websites by our customers, which could result in increased costs
to us. |
For details about the risks facing us, see Risk
Factors beginning on page 15 of this prospectus.
Competitive Strengths
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Experienced senior management team |
We have an experienced senior management team led by our
President and Chief Executive Officer, Arthur M. Coffey, who has
been with the company for 25 years. Our executive committee
members have on average more than 20 years of hospitality
industry experience. The balance of our senior management team
has strengths in key areas, including hotel development,
ownership and management; finance;
e-commerce;
franchising; sales and marketing; food and beverage management;
entertainment and real estate. Their extensive and diverse
expertise provides us with a broad perspective from which we can
make strategic management and operational decisions.
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Strong proprietary brand and long operating history |
The Red Lion brand, which we believe projects comfort, value and
memorable experiences for our hotel guests, has been well known
in the western United States for more than 30 years. As the
owner and operator of many of our hotels, we have been able to
control brand standards across the system. In addition, as the
owner of the Red Lion brand, we have diversified our revenue
base by franchising the brand to third-party hotel owners.
Our Red Lion brand is associated with high-quality lodging,
extensive meeting facilities and superior food and beverage
operations. Our hotels provide exceptional and friendly service
and accommodations at competitive prices within the markets we
serve. We seek to ensure consistent quality across our hotel
portfolio, offering valuable services such as dining, fitness
centers, business services and other ancillary services. In
addition, our guest room standards include products that are
important to both leisure and business travelers, including free
wireless high-speed internet service, comfortable work space and
high-quality furnishings, including new pillow-top beds.
We believe we are well positioned against other hotel owners and
operators in the midscale and upscale full service segments of
the lodging industry. In our hub markets, we believe
our primary competitors include Crowne
Plaza®,
Doubletree®,
Four
Points®,
Radisson®,
Hilton®
and
Marriott®.
In our secondary markets, we believe our competitors include
Courtyard®,
Holiday
Inn®
and Hilton Garden
Inn®.
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Attractiveness to franchisees |
We offer a strong support system to our franchisees by providing
a full suite of franchise services, including (i) central
reservations, (ii) revenue management, (iii) national
and regional sales, (iv) marketing, (v) systems,
operations and customer service training, (vi) corporate
purchasing programs and (vii) quality evaluations. As such,
our Red Lion brand is attractive to potential franchisees by
offering a distinctive product valued by customers, backed by a
full suite of support services. During 2005, approximately 36%
of our system-wide total room revenues were delivered through
our reservation channels and our national and regional sales. We
believe that our reservation systems and sales and marketing
initiatives are of great benefit to hotel owners who may not
have the financial or operating resources to efficiently absorb
the high fixed costs associated with the development of their
own systems.
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Strong emphasis on customer service |
We continually challenge ourselves to maintain and maximize
customer service. As a result, in 2005 we created and
implemented a new service standard and training program called
The Red Lion Way, which is designed to provide Red
Lion employees more tools to create a positive and memorable
guest experience. Through this increased level of personal
service, we believe we differentiate Red Lion from our
competitors.
|
|
|
Well positioned to capitalize on industry-wide
growth |
We believe we are well positioned to capitalize on the expected
continued improvement in lodging industry supply and demand
fundamentals, as discussed in Lodging Industry
Outlook below. We believe our newly renovated hotel
portfolio combined with our enhanced service standards will
appeal to our guests and allow us to capture a significant
portion of the increasing demand for lodging facilities in our
markets. To date, we have been successful in attracting new
guests and increasing room rates as evidenced by the consistent
RevPAR growth we have experienced in each of our last eight
consecutive quarters.
Recent Developments
|
|
|
Revised revolving credit facility |
On March 27, 2006, we entered into a revised agreement with
Wells Fargo Bank, N.A. providing for a revolving credit facility
with a total of $10 million in borrowing capacity for
working capital purposes. The facility consists of a two-year
$6 million line of credit secured by two hotels and a
one-year $4 million line of credit secured by personal
property.
In 2005, we completed the sale of seven hotels and a commercial
building. In the first quarter of 2006 we completed the sale of
the Red Lion Hillsboro and the Executive Court portion of the
WestCoast Ridpath Hotel. By March 31, 2006, closings under
our property disposition plan yielded aggregate gross proceeds
of approximately $58.3 million. We have utilized the net
proceeds to pay off approximately $18.1 million of
associated debt, and substantially fund our hotel renovation
program. We continue to actively pursue disposition of the
remaining three hotels originally identified for sale.
|
|
|
Exchange of partnership units for common stock |
We are the general partner and at March 31, 2006 held a
98.9% interest in Red Lion Hotels Limited Partnership, or the
Partnership. The limited partners of the Partnership, who at
March 31, 2006 currently hold 142,663 operating partnership
units, or OP Units, have the right to put those
OP Units to the Partnership, in which event either
(a) the Partnership must redeem the units for cash, or
(b) we, as general partner, may elect to acquire the OP
units for cash or in exchange for a like number of shares of our
common stock.
In the first quarter of 2006, we elected to issue
143,498 shares of our common stock in exchange for a like
number of OP Units that certain former limited partners put
to the Partnership. We granted one of these former limited
partners registration rights with respect to the
135,344 shares it received which it has waived because it
is participating in this offering as a selling shareholder. We
do not expect that the issuance of this common stock will
materially affect our per share operating results.
|
|
|
Sale of real estate management business |
On April 11, 2006, we entered into an agreement to divest
on a tax-free basis the real estate management portion of our
real estate division to Thomas Barbieri, a former company
executive and the brother of two members of our board of
directors, and David Peterson, the longtime head of our real
estate division. The transaction, which was approved unanimously
by our independent directors, is expected to close by the end of
April 2006. The new entity will continue to manage our office
and retail real estate assets after the sale, including Lincoln
Plaza in Spokane and the Kalispell Center in Montana. We believe
this transaction will allow us to further focus our efforts on
our core lodging operations.
6
Lodging Industry Outlook
We believe the U.S. hotel industry and our hotel portfolio
are in a recovery phase following a pronounced downturn. We
believe improving industry fundamentals, with demand outpacing
supply, will lead to improved operating performance at our
hotels. The following is excerpted from PricewaterhouseCoopers
U.S. Lodging Industry Briefing Presented
to Corporate Travel World, April 3, 2006:
Rebound in lodging demand. Following the industry
downturn, which began in 2001, lodging demand, measured by
average daily rooms sold, increased by 0.3% in 2002, 1.4% in
2003, 4.2% in 2004 and 3.3% in 2005. It is projected that
lodging demand will increase by 2.9% in 2006 and 2.8% in 2007.
Limited new supply. New lodging supply increased by 1.6%
in 2002, 1.1% in 2003, 0.6% in 2004 and 0.4% in 2005. It is
projected that lodging supply will increase by 1.1% in 2006 and
2.0% in 2007.
Improving operating performance. The current favorable
supply and demand environment is expected to result in continued
improvement of industry operating fundamentals. RevPAR for the
industry decreased by 2.7% in 2002, but increased by 0.4% in
2003, 7.8% in 2004 and 8.4% in 2005. It is projected that RevPAR
will increase by 7.7% in 2006 and 6.1% in 2007.
Business Segments
As of December 31, 2005, we operated in the four reportable
business segments set forth in the chart below. We focus
primarily on the hotels and franchise and management segments
because we believe our core strengths are in the areas of hotel
operation, ownership and franchising. We also believe the
strongest opportunity to increase our revenues will be through
leveraging our lodging expertise and concentrating our efforts
on our hospitality-related business segments.
|
|
|
|
|
|
|
|
|
Percent of |
|
|
|
|
2005 |
|
|
Business Segment |
|
Revenues |
|
Segment Description |
|
|
|
|
|
Hotels
|
|
|
89 |
% |
|
Revenue is derived primarily from guest room rentals and food
and beverage operations at our owned and leased hotels. |
|
Franchise and management
|
|
|
2 |
% |
|
Revenue is generated from franchise fees that are typically
based on a percent of room revenues. Franchise fees are charged
to hotel owners in exchange for the use of our brands and access
to our central services programs. |
|
|
|
|
|
|
|
Revenue is also derived from management fees charged to the
owners of our managed hotels. Management fees are typically
based on a percentage of the hotels gross revenues, plus
an incentive fee based on operating performance. |
|
Entertainment
|
|
|
6 |
% |
|
Ticketing services; promotion and presentation of entertainment
productions. |
|
Real estate
|
|
|
3 |
% |
|
Owning, leasing, managing and developing commercial retail,
office and multi-residential properties. |
For additional segment information, please refer to
Business Segments in the notes to our consolidated
financial statements incorporated by reference in this
prospectus.
7
Hotel Portfolio Summary
|
|
|
Owned, Leased, Managed and Franchised Hotels as of
March 31, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number | |
|
Number | |
|
Percentage | |
|
Meeting Space | |
|
|
of Hotels | |
|
of Rooms | |
|
of Rooms | |
|
(Square Feet) | |
|
|
| |
|
| |
|
| |
|
| |
Owned
|
|
|
21 |
|
|
|
4,228 |
|
|
|
39.6 |
% |
|
|
227,880 |
|
Leased
|
|
|
13 |
|
|
|
2,183 |
|
|
|
20.4 |
% |
|
|
99,856 |
|
Managed
|
|
|
1 |
|
|
|
254 |
|
|
|
2.4 |
% |
|
|
36,000 |
|
Franchised
|
|
|
26 |
|
|
|
4,022 |
|
|
|
37.6 |
% |
|
|
157,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
61 |
|
|
|
10,687 |
|
|
|
100.0 |
% |
|
|
521,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel Locations
Hotels on the following map represent the locations of our
owned, leased, managed and franchised hotels, as of
March 31, 2006. We have multiple hotels in certain cities
identified below.
8
Geographic Distribution of Hotel System by Number of Rooms
(as of March 31, 2006)
Company History
Our predecessor entered the hotel development and management
business in 1976. As its successor company, we were incorporated
in the State of Washington on April 25, 1978. We grew our
hotel business under the brand name Cavanaughs
throughout the 1980s and 1990s.
|
|
|
Significant corporate events |
Initial public offering. In April 1998, we completed the
initial public offering of our common stock as Cavanaughs
Hospitality Corporation, and listed our common stock on the NYSE.
Acquisition of WestCoast Hotels. We acquired WestCoast
Hotels, Inc. on December 31, 1999, which added 27 hotels
and more than 4,800 rooms in 20 cities to our system of
hotels, enhanced our presence in a number of western markets,
and launched our company into the franchise business. Our
company changed its name to WestCoast Hospitality Corporation in
early 2000.
Acquisition of Red Lion Hotels, Inc. On December 31,
2001, we acquired Red Lion Hotels, Inc., which added 47 hotels
and more than 7,400 rooms in 40 cities to our system of
hotels and further enhanced our presence in a number of western
markets.
Rebranding of WestCoast Hotels to the Red Lion brand.
During the first quarter of 2003, we rebranded 22 WestCoast
Hotels to the Red Lion brand and launched a new central
reservations system.
Largest renovation program in our history. We are in the
final stages of completing the most significant capital
investment program in our companys history, initially
announced in November 2004, to improve comfort, freshen
décor and upgrade technology at 31 of our owned and leased
hotels.
Name change to Red Lion Hotels Corporation. In September
2005, we changed our name to Red Lion Hotels Corporation to
convey our focus on the Red Lion brand, and concurrently
launched our new Red Lion brand image campaign, website and
corporate logo.
Our Principal Office
Our corporate headquarters are located at 201 W. North
River Drive, Suite 100, Spokane, Washington 99201 and our
telephone number is (509) 459-6100. We maintain an internet
website at www.redlion.com. Information on our website is
not incorporated into this prospectus, and you should not
consider it part of this prospectus.
9
THE OFFERING
|
|
|
Common stock offered by us |
|
5,000,000 shares |
|
|
Common stock offered by selling shareholders |
|
635,344 shares |
|
|
Total common stock to be outstanding after this offering(1) |
|
18,299,022 shares |
|
Use of proceeds |
|
We intend to use approximately $16.9 million of the net
proceeds to us from this offering to fund the mandatory
redemption of $16.1 million of the outstanding 9.5% trust
preferred securities of Red Lion Hotels Capital Trust at a
required 5% premium over par. |
|
|
|
|
We intend to use up to $34.5 million of the remaining net
proceeds to us to reduce existing secured debt and pay
associated defeasance costs. |
|
|
|
|
|
We intend to use the remaining net proceeds to us for general
corporate purposes. |
|
|
|
Net proceeds |
|
The estimated net proceeds of this offering to us will be
approximately $56.4 million (after deducting estimated
underwriting discounts and commissions and the offering expenses
payable by us) based on an assumed offering price of $12.05 per
share, the last reported sale price of our common stock on the
NYSE on April 27, 2006. We will not receive any proceeds
from the sale of common stock by the selling shareholders. |
|
|
NYSE Symbol |
|
RLH |
|
|
Risk Factors |
|
See Risk Factors beginning on page 15 and the
other information included or incorporated by reference in this
prospectus for a discussion of factors you should carefully
consider before deciding to invest in shares of our common stock. |
|
|
|
(1) |
The number of shares of common stock to be offered assumes that
the underwriters over-allotment option is not exercised.
The number of shares of our common stock that will be
outstanding after this offering is based on
13,299,022 shares outstanding as of March 31, 2006 and
excludes: |
|
|
|
|
|
1,206,489 shares of common stock issuable upon the exercise
of outstanding stock options with a weighted average exercise
price of $6.64 per share; |
|
|
|
11,121 shares of restricted common stock held by one of our
executive officers; |
|
|
|
|
1,081,865 shares of common stock available for issuance
pursuant to awards that may be granted in the future under our
equity incentive plans for officers, directors, employees and
consultants; |
|
|
|
|
|
142,663 shares of common stock that may be issued in
exchange for a like number of OP Units, if the holders of
such OP units elect to have them redeemed by the Partnership; and |
|
|
|
|
|
shares of common stock that may be issued pursuant to certain of
our bonds, the principal and accrued interest of which are
convertible into common stock at $15.00 per share (the principal
and accrued interest of these bonds totaled $3,270,787 at
March 31, 2006). |
|
10
SUMMARY CONSOLIDATED FINANCIAL AND OPERATIONS DATA
The following table sets forth our summary consolidated
financial and operations data. The summary consolidated
operations data for each of the five years ended
December 31, 2005, and the balance sheet data as of
December 31, 2005, 2004, 2003, 2002 and 2001, are derived
from our audited consolidated financial statements and related
notes. Results for past periods are not necessarily indicative
of results that may be expected for future periods. The summary
consolidated financial and operations data should be read in
conjunction with Managements Discussion and Analysis
of Financial Condition and Results of Operations included
elsewhere and incorporated by reference in this prospectus and
our consolidated financial statements and related notes
incorporated by reference into this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Consolidated operations data:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
165,048 |
|
|
$ |
163,143 |
|
|
$ |
157,528 |
|
|
$ |
166,246 |
|
|
$ |
95,828 |
|
Operating expenses(2)
|
|
|
153,437 |
|
|
|
151,895 |
|
|
|
146,568 |
|
|
|
146,251 |
|
|
|
78,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$ |
11,611 |
|
|
$ |
11,248 |
|
|
$ |
10,960 |
|
|
$ |
19,995 |
|
|
$ |
16,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
$ |
(1,144 |
) |
|
$ |
(890 |
) |
|
$ |
1,560 |
|
|
$ |
7,083 |
|
|
$ |
6,372 |
|
Income (loss) from discontinued operations
|
|
|
5,639 |
|
|
|
(5,395 |
) |
|
|
(341 |
) |
|
|
924 |
|
|
|
1,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
4,495 |
|
|
$ |
(6,285 |
) |
|
$ |
1,219 |
|
|
$ |
8,007 |
|
|
$ |
7,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) applicable to common shareholders(3)
|
|
$ |
4,495 |
|
|
$ |
(6,662 |
) |
|
$ |
(1,321 |
) |
|
$ |
5,430 |
|
|
$ |
7,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
|
$ |
0.35 |
|
|
$ |
0.50 |
|
Discontinued operations
|
|
|
0.43 |
|
|
|
(0.41 |
) |
|
|
(0.03 |
) |
|
|
0.07 |
|
|
|
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.34 |
|
|
$ |
(0.51 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.42 |
|
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
|
$ |
0.34 |
|
|
$ |
0.50 |
|
Discontinued operations
|
|
|
0.43 |
|
|
|
(0.41 |
) |
|
|
(0.03 |
) |
|
|
0.07 |
|
|
|
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.34 |
|
|
$ |
(0.51 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.41 |
|
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic
|
|
|
13,105 |
|
|
|
13,049 |
|
|
|
12,999 |
|
|
|
12,975 |
|
|
|
12,953 |
|
Weighted average shares outstanding diluted
|
|
|
13,105 |
|
|
|
13,049 |
|
|
|
12,999 |
|
|
|
13,285 |
|
|
|
13,239 |
|
EBITDA(4)(5)
|
|
$ |
33,945 |
|
|
$ |
18,268 |
|
|
$ |
25,269 |
|
|
$ |
33,610 |
|
|
$ |
35,352 |
|
EBITDA from continuing operations(4)
|
|
$ |
23,939 |
|
|
$ |
22,602 |
|
|
$ |
21,628 |
|
|
$ |
29,212 |
|
|
$ |
30,048 |
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Consolidated balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital(6)
|
|
$ |
22,693 |
|
|
$ |
2,147 |
|
|
$ |
729 |
|
|
$ |
(9,094 |
) |
|
$ |
(6,373 |
) |
Assets of discontinued operations
|
|
$ |
20,217 |
|
|
$ |
61,757 |
|
|
$ |
63,349 |
|
|
$ |
64,049 |
|
|
$ |
65,302 |
|
Property and equipment, net
|
|
$ |
235,444 |
|
|
$ |
223,132 |
|
|
$ |
204,199 |
|
|
$ |
193,451 |
|
|
$ |
209,157 |
|
Total assets
|
|
$ |
355,596 |
|
|
$ |
364,612 |
|
|
$ |
353,225 |
|
|
$ |
356,710 |
|
|
$ |
359,649 |
|
Liabilities of discontinued operations
|
|
$ |
3,089 |
|
|
$ |
22,879 |
|
|
$ |
23,580 |
|
|
$ |
17,548 |
|
|
$ |
18,419 |
|
Total long-term debt and capital lease obligations
|
|
$ |
130,364 |
|
|
$ |
133,211 |
|
|
$ |
128,687 |
|
|
$ |
89,788 |
|
|
$ |
100,304 |
|
Debentures due Red Lion Hotels Capital Trust
|
|
$ |
47,423 |
|
|
$ |
47,423 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total liabilities
|
|
$ |
234,349 |
|
|
$ |
248,225 |
|
|
$ |
201,036 |
|
|
$ |
202,594 |
|
|
$ |
210,834 |
|
Preferred stock and related additional paid-in capital
|
|
$ |
|
|
|
$ |
|
|
|
$ |
29,412 |
|
|
$ |
30,131 |
|
|
$ |
30,377 |
|
Total stockholders equity
|
|
$ |
121,247 |
|
|
$ |
116,387 |
|
|
$ |
152,189 |
|
|
$ |
154,116 |
|
|
$ |
148,815 |
|
|
|
(1) |
The consolidated balance sheet data reflect the acquisition of
Red Lion Hotels, Inc. as of December 31, 2001. The results
of operations for that entity are included in the consolidated
operations data beginning the day of the acquisition going
forward. The comparability of the data is also affected by a
change in accounting for goodwill amortization beginning with
the year ended December 31, 2002. The activities and
balance sheet of discontinued operations have been reflected on
a comparable basis for all years presented. |
|
(2) |
Operating expenses include all direct segment expenses,
depreciation and amortization, gain or loss on asset
dispositions, hotel facility and land lease, undistributed
corporate expenses, and conversion expenses, if any. |
|
(3) |
Net income or loss applicable to common shareholders represents
net income less earned dividends on preferred stock, if
applicable for the period presented. |
|
(4) |
EBITDA represents earnings before interest, taxes, depreciation
and amortization. EBITDA is not intended to represent net income
as defined by generally accepted accounting principles in the
United States and such information should not be considered as
an alternative to net income, cash flows from operations or any
other measure of performance prescribed by generally accepted
accounting principles in the United States. |
|
(5) |
In 2005 the balance includes a gain on the sale of seven hotels
and an office building of $10.2 million and a non-cash
impairment charge of $4.5 million on four hotels. In 2004
the balance includes a non-cash impairment charge of
$8.9 million on four hotels. |
|
(6) |
Represents current assets less current liabilities, excluding
assets and liabilities of discontinued operations and assets
held for sale. |
12
The following is a reconciliation of our EBITDA to net income
(loss) as presented in our consolidated statements of operations
for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
EBITDA from continuing operations
|
|
$ |
23,939 |
|
|
$ |
22,602 |
|
|
$ |
21,628 |
|
|
$ |
29,212 |
|
|
$ |
30,048 |
|
Income tax benefit (expense) continuing operations
|
|
|
996 |
|
|
|
876 |
|
|
|
(51 |
) |
|
|
(3,860 |
) |
|
|
(3,788 |
) |
Interest expense continuing operations
|
|
|
(14,352 |
) |
|
|
(13,828 |
) |
|
|
(9,679 |
) |
|
|
(9,389 |
) |
|
|
(10,667 |
) |
Depreciation and amortization continuing operations
|
|
|
(11,727 |
) |
|
|
(10,540 |
) |
|
|
(10,338 |
) |
|
|
(8,880 |
) |
|
|
(9,221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
(1,144 |
) |
|
|
(890 |
) |
|
|
1,560 |
|
|
|
7,083 |
|
|
|
6,372 |
|
Income (loss) on discontinued operations
|
|
|
5,639 |
|
|
|
(5,395 |
) |
|
|
(341 |
) |
|
|
924 |
|
|
|
1,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
4,495 |
|
|
$ |
(6,285 |
) |
|
$ |
1,219 |
|
|
$ |
8,007 |
|
|
$ |
7,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)(2)
|
|
$ |
33,945 |
|
|
$ |
18,268 |
|
|
$ |
25,269 |
|
|
$ |
33,610 |
|
|
$ |
35,352 |
|
Income tax benefit (expense)
|
|
|
(2,082 |
) |
|
|
3,781 |
|
|
|
132 |
|
|
|
(4,369 |
) |
|
|
(4,503 |
) |
Interest expense
|
|
|
(15,519 |
) |
|
|
(15,507 |
) |
|
|
(11,150 |
) |
|
|
(10,717 |
) |
|
|
(12,092 |
) |
Depreciation and amortization
|
|
|
(11,849 |
) |
|
|
(12,827 |
) |
|
|
(13,032 |
) |
|
|
(10,517 |
) |
|
|
(10,323 |
) |
Amortization of goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(855 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
4,495 |
|
|
$ |
(6,285 |
) |
|
$ |
1,219 |
|
|
$ |
8,007 |
|
|
$ |
7,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In 2005 the balance includes a gain on the sale of seven hotels
and an office building of $10.2 million and a non-cash
impairment charge of $4.5 million on four hotels. In 2004
the balance includes a non-cash impairment charge of
$8.9 million on four hotels. |
|
(2) |
The reconciling items from EBITDA to net income (loss) include
the income taxes, interest expense, depreciation and
amortization of discontinued operations and therefore cannot be
readily derived from the disclosure presented on our
consolidated statements of operations. Please refer to
Note 3 to our consolidated financial statements
incorporated by reference in this prospectus for disclosure of
the corresponding line items included in calculating the net
income (loss) on discontinued operations. |
13
Comparable Hotel Statistics(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2006 | |
|
Three Months Ended March 31, 2005 | |
|
|
| |
|
| |
|
|
Average | |
|
|
|
Average | |
|
|
|
|
Occupancy (2) | |
|
ADR | |
|
RevPAR | |
|
Occupancy (2) | |
|
ADR | |
|
RevPAR | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Owned and Leased Hotels:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
|
51.3 |
% |
|
$ |
73.84 |
|
|
$ |
37.90 |
|
|
|
54.0 |
% |
|
$ |
67.33 |
|
|
$ |
36.37 |
|
|
Discontinued Operations
|
|
|
28.8 |
% |
|
$ |
59.32 |
|
|
$ |
17.08 |
|
|
|
30.6 |
% |
|
$ |
56.80 |
|
|
$ |
17.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Owned and Leased Hotels
|
|
|
49.1 |
% |
|
$ |
73.02 |
|
|
$ |
35.88 |
|
|
|
51.5 |
% |
|
$ |
66.66 |
|
|
$ |
34.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
System-wide(3)
|
|
|
51.5 |
% |
|
$ |
74.98 |
|
|
$ |
38.65 |
|
|
|
52.0 |
% |
|
$ |
68.34 |
|
|
$ |
35.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Red Lion Hotels(4)
|
|
|
52.9 |
% |
|
$ |
74.16 |
|
|
$ |
39.25 |
|
|
|
53.2 |
% |
|
$ |
67.60 |
|
|
$ |
35.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes all hotels owned, leased, managed and franchised by us
for each of the periods presented. |
|
|
|
(2) |
The total available rooms used to calculate average occupancy
includes rooms taken out of service for renovation. |
|
|
|
(3) |
Includes all hotels owned, leased, managed and franchised by us
for greater than one year. Includes three hotels classified as
discontinued operations. |
|
|
|
(4) |
Includes all hotels owned, leased, managed and franchised by us
for greater than one year that are operated under the Red Lion
brand name. Includes one hotel classified as discontinued
operations. |
|
Hospitality Industry Performance Measures and Definitions
We believe that the following performance measures, which are
widely used in the hospitality industry and appear throughout
this prospectus, are important to our discussion of operating
performance:
|
|
|
Total available rooms represents the number of rooms
available multiplied by the number of days in the reported
period. We use total available rooms as a measure of capacity in
our system of hotels. We do not adjust total available rooms for
rooms temporarily out of service for remodel or other short-term
periods. |
|
|
Average occupancy represents total paid rooms occupied
divided by total available rooms. We use average occupancy as a
measure of the utilization of capacity in our system of hotels. |
|
|
Revenue per available room, or RevPAR, represents
total room and related revenues divided by total available
rooms. We use RevPAR as a measure of performance yield in our
system of hotels. |
|
|
Average daily rate, or ADR, represents total room
revenues divided by the total number of paid rooms occupied by
hotel guests. We use ADR as a measure of room pricing in our
system of hotels. |
|
|
Comparable hotels are hotels that have been owned,
leased, managed or franchised by us for each of the periods
presented. |
Throughout this prospectus, unless otherwise stated, RevPAR, ADR
and average occupancy statistics are calculated using statistics
for comparable hotels. When presented in this prospectus, the
above performance measures will be identified as belonging to a
particular market segment, system-wide, or for continuing
operations versus discontinued operations or total combined
operations.
Unless otherwise indicated, industry statistics are from Smith
Travel Research, an independent statistical research service
that specializes in the lodging industry. Some of the terms used
in this prospectus, such as full service, upscale and midscale
are consistent with Smith Travel Research terms. We are a full
service brand. Smith Travel Research categorizes hotels into
seven chain scales. Our hotels are classified by Smith Travel
Research in the upscale and midscale with food and beverage
chain scales.
14
RISK FACTORS
An investment in our common stock presents risks. You should
carefully consider the following discussion of risks, and the
other information included or incorporated by reference in this
prospectus, including our consolidated financial statements and
notes thereto, before you decide to buy our common stock. The
risks described below are not the only ones facing us.
Additional risks that are presently unknown to us or that we
currently deem immaterial may also impair our business. If any
of the following risks actually occur, our business, financial
condition or results of operations could suffer. In that case,
the market price of our common stock could decline, and you may
lose all or part of your investment.
Risks relating to our business
|
|
|
Our operating results are subject to conditions affecting
the lodging industry. |
Our revenues and our operating results are subject to conditions
affecting the lodging industry. These include:
|
|
|
|
|
changes in the national, regional or local economic climate; |
|
|
|
actual and threatened terrorist attacks and international
conflicts and their impact on travel; |
|
|
|
local conditions such as an oversupply of, or a reduction in
demand for, hotel rooms; |
|
|
|
the attractiveness of the hotels in our system to consumers and
competition from other hotels; |
|
|
|
the quality, philosophy and performance of the managers of the
hotels in our system; |
|
|
|
increases in operating costs due to inflation and other factors
such as increases in the price of energy, healthcare or
insurance; |
|
|
|
travelers fears of exposure to contagious diseases or pest
infestation, either perceived or real; |
|
|
|
changes in travel patterns, extreme weather conditions and
cancellation of or changes in events scheduled to occur in our
markets; and |
|
|
|
the need to periodically repair and renovate the hotels in our
system. |
Changes in any of these conditions could adversely impact hotel
room demand and pricing, result in reduced occupancy, ADR and
RevPAR, or otherwise adversely affect our results of operations
and financial condition. We have a limited ability to pass
through increased operating costs in the form of higher room
rates, so such increased costs could result in lower operating
margins.
|
|
|
Our success depends on the value of our name, image and
brand; if demand for our hotels decreases or the value of our
name, image or brand diminishes, our business and operations
would be harmed. |
Our success depends, to a large extent, on our ability to shape
and stimulate consumer tastes and demands by producing and
maintaining innovative, attractive and exciting properties and
services, as well as our ability to remain competitive in the
areas of design and quality. If we are unable to anticipate and
react to changing consumer tastes and demands in a timely
manner, our results of operations and financial condition could
be harmed.
Furthermore, we believe a high media profile is an integral part
of our ability to shape and stimulate demand for our hotels with
our target customers. One aspect of our marketing strategy is to
focus on attracting media coverage. If we fail to attract that
media coverage, we may need to substantially increase our
advertising and marketing costs, which would harm our results of
operations. In addition, other types of marketing tools, such as
traditional advertising and marketing, may not be successful in
attracting our target customers.
Our business would be harmed if our public image or reputation
were to be diminished by the operations of any of the hotels in
our system. Our brand names and trademarks are integral to our
marketing efforts. If the value of our name, image or brands
were diminished, our business and operations would be harmed.
15
|
|
|
Any failure to protect our trademarks could have a
negative impact on the value of our brand names. |
We believe our trademarks are critical to our success. We rely
on trademark laws to protect our proprietary rights. The success
of our business depends in part upon our continued ability to
use our trademarks to increase brand awareness and further
develop our brand. Monitoring the unauthorized use of our
intellectual property is difficult. The unauthorized
reproduction of our trademarks could diminish the value of our
brand and its market acceptance, competitive advantages or
goodwill, which could harm our business.
|
|
|
If we are unable to compete successfully, our business may
be harmed. |
The lodging industry is highly competitive. Competition in the
industry is primarily based on service quality, range of
services, brand name recognition, convenience of location, room
rates, guest amenities and quality of accommodations. We compete
with other national limited and full service hotel companies as
well as various regional and local hotels. Many of our
competitors have a larger network of hotel locations and greater
financial resources than we do. Additionally, new and existing
competitors may offer significantly lower rates, greater
convenience, services or amenities or superior facilities, which
could attract customers away from our hotels, resulting in a
decrease in occupancy, ADR and RevPAR for our hotels. Changes in
demographics and other changes in our markets may also adversely
impact the convenience or desirability of our hotel locations,
thereby reducing occupancy, ADR and RevPAR at our hotels and
otherwise adversely impacting our results of operations and
financial condition.
|
|
|
Due to the geographic concentration of the hotels in our
system, our results of operations and financial condition are
subject to fluctuations in regional economic conditions. |
Of the 61 hotels in our system at March 31, 2006, 47
are located in Oregon, Washington, Idaho or Montana. Therefore,
our results of operations and financial condition may be
significantly affected by the economy of the Pacific Northwest,
which is dependent in large part on a limited number of major
industries, including agriculture, tourism, technology, timber
and aerospace. These industries may be affected by:
|
|
|
|
|
changes in governmental regulations and economic conditions; |
|
|
|
the relative strength of national and local economies; and |
|
|
|
the rate of national and local unemployment. |
In addition, companies in these industries may decide to
relocate all or part of their businesses outside the Pacific
Northwest. Any of these factors could materially affect the
local economies in which these industries operate and where we
have a presence. Other adverse events affecting the Pacific
Northwest, such as economic recessions or natural disasters,
could cause a loss of revenues for our hotels in this region,
which may be greater as a result of our concentration of assets
in these areas. In addition, we operate or market multiple
hotels within several markets. A downturn in general economic or
other relevant conditions in these specific markets or in any
other market in which we operate could lead to a decline in
demand in these markets and cause a loss of revenues from these
hotels.
|
|
|
Our expenses may remain constant or increase even if
revenues decline. |
The expenses of owning property are not necessarily reduced when
circumstances such as market factors and competition cause a
reduction in income from a hotel. Accordingly, a decrease in our
revenues could result in a disproportionately higher decrease in
our earnings because our expenses are unlikely to decrease
proportionately. In such instances, our financial condition and
ability to service debt could be harmed by:
|
|
|
|
|
interest rate levels; |
|
|
|
the availability of financing; |
|
|
|
the cost of compliance with government regulations, including
zoning and tax laws; and |
|
|
|
changes in government regulations, including those governing
usage, zoning and taxes. |
16
|
|
|
The illiquidity of real estate investments and the lack of
alternative uses of hotel properties could significantly limit
our ability to respond to adverse changes in the performance of
our hotels and harm our financial condition. |
Real estate investments are relatively illiquid and, therefore,
our ability to promptly sell one or more of our hotels in
response to changing economic, financial or investment
conditions is limited. The real estate market, including the
market for our hotels, is affected by many factors, such as
general economic conditions, availability of financing, interest
rates and other factors, including supply and demand, that are
beyond our control. If we decide to sell one or more of our
hotels, we may be unable to do so and, even if we are able to
sell the hotels, it may take us a long time to find willing
purchasers and the sales may be on unfavorable terms. We also
may be required to expend funds to correct defects or to make
improvements before a hotel can be sold. If we do not have funds
available for such purposes, our ability to sell the hotel could
be restricted or the price at which we can sell the hotel may be
less than if these improvements were made.
In addition, it may be difficult or impossible to convert hotels
to alternative uses if they become unprofitable due to
competition, age of improvements, decreased demand or other
factors. The conversion of a hotel to an alternative use would
also generally require substantial capital expenditures.
This inability to respond promptly to changes in the performance
of our hotels could adversely affect our financial condition and
results of operations as well as our ability to service debt,
including our debentures. In addition, sales of appreciated real
property could generate material adverse tax consequences, which
may make it disadvantageous for us to sell certain of our hotels.
|
|
|
If we are unable to effectively integrate new hotels into
our operations, our results of operations and financial
condition may suffer. |
We intend to grow our hotel operations partly by acquiring whole
or partial interests in hotels. However, we cannot assure you
that:
|
|
|
|
|
we will be able to successfully integrate these new hotels or
new hotel products into our operations; |
|
|
|
these new hotels or new hotel products will achieve revenue and
profitability levels comparable to our existing hotels; or |
|
|
|
to the extent integration occurs, our business will be
profitable. |
Based on our experience, newly acquired, developed or converted
hotels typically begin with lower occupancy and room rates,
thereby resulting in lower revenue. Our expansion within our
existing markets could adversely affect the financial
performance of our existing hotels in those markets and, as a
result, negatively impact our overall results of operations.
Expansion into new markets may also present operating and
marketing challenges that are different from those we currently
encounter in our existing markets. Our inability to anticipate
all of the changing demands that expanding operations will
impose on our management and management information and
reservation systems, or our failure to quickly adapt our systems
and procedures to the new markets could result in lost revenue
and increased expenses and otherwise harm our results of
operations and financial condition.
|
|
|
If our franchisees terminate or fail to renew their
relationship with our company, our franchise revenue will
decline. |
As of March 31, 2006, there were 26 hotels in our
system that were owned by others and operated under franchise
agreements with us. At March 31, 2006, four of those hotels
were subject to temporary arrangements that were entered into as
part of the sale of the property by us to a third-party and that
expire in early 2006. For the other 22 hotels, the
franchise agreements generally specify a fixed term and contain
various early termination provisions, such as the right to
terminate upon notice by paying us a termination fee, or the
right to terminate if we fail to contribute a negotiated level
of revenue to the franchisee through our reservation systems. We
cannot assure you that these agreements will be renewed, or that
they will not be terminated prior to the end of their respective
terms for any reason, including a default under these
agreements. If these
17
franchise agreements are not renewed, or are terminated prior to
the expiration of their respective terms, the resulting decrease
in revenue and loss of market penetration could harm our results
of operations and financial condition.
|
|
|
We may be unsuccessful in identifying and completing
acquisition opportunities, which could limit our ability to
implement our long-term growth strategy and result in
significant expenses. |
We intend to pursue a full range of growth opportunities,
including identifying hotels for acquisition, joint venture,
development, management, rebranding and franchising. We compete
for growth opportunities with national and regional hospitality
companies, some of which have greater name recognition,
marketing support, reservation system capacity and financial
resources than we do. Our ability to make acquisitions is
dependent upon, among other things, our relationships with
owners of existing hotels and certain major hotel investors,
financing acquisitions and renovations, and successfully
integrating new hotels into our operations. We may be unable to
find suitable hotels for acquisition, development, management,
rebranding or franchising on acceptable terms, or at all.
Competition with other hotel companies may increase the cost of
acquiring hotels. Even if suitable hotels are identified for
acquisition, we may not be able to find lenders or capital
partners willing to finance the acquisition of the hotels on
acceptable terms or we may incur pursuit costs which are not
recoverable. Further, we may not have adequate cash from
operations to pursue such growth opportunities. Our failure to
compete successfully for acquisitions, to obtain suitable
financing for acquisitions we have identified or to attract and
maintain relationships with hotel owners and major hotel
investors could harm our ability to expand our system of hotels.
An inability to implement our growth strategy could limit our
ability to grow our revenue base and otherwise harm our results
of operations.
|
|
|
Hotel acquisitions could fail to perform in accordance
with our expectations, and our hotel development, redevelopment
and renovation projects might be more costly than we
anticipate. |
We intend to acquire additional hotels and we may acquire other
operations in the future. We also intend to continue the
redevelopment and re-branding of other acquired hotels into Red
Lion hotels. Many of our hotels will have an ongoing need for
renovations and other capital improvements, some of which will
be mandated by applicable laws or regulations or agreements with
third parties. In addition, we may develop new hotels in the
future, depending on market conditions. Hotel redevelopment,
renovation and new project development are subject to a number
of risks, including:
|
|
|
|
|
construction delays or cost overruns; |
|
|
|
possible shortage of cash to fund capital improvements and the
related possibility that financing for these capital
improvements may not be available to us on affordable terms; |
|
|
|
potential environmental problems; |
|
|
|
uncertainties as to market demand or a loss of market demand
after capital improvements have begun; |
|
|
|
disruption in service and room availability causing reduced
demand, occupancy and rates; |
|
|
|
risks that the hotels will not achieve anticipated performance
levels; and |
|
|
|
new project commencement risks such as receipt of zoning,
occupancy and other required governmental permits and
authorizations. |
As a result of these risks, we could incur substantial costs for
projects that are never completed. Further, financing for these
projects may not be available or, even if available, may not be
on terms acceptable to us. Any unanticipated delays or expenses
incurred in connection with the acquisition, development,
redevelopment or renovation of our hotels could impact our
expected revenues, negatively affect our reputation among hotel
customers, owners and franchisees, and otherwise harm our
results of operations and financial condition.
18
|
|
|
Risks associated with real estate ownership may adversely
affect revenue or increase expenses. |
As of March 31, 2006, our hotel system included
61 hotels located in 10 states and one Canadian
province, with 10,687 rooms and 521,537 square feet of
meeting space. Of these 61 hotels, we (i) operated
34 hotels, 21 of which were owned and 13 of which were
leased, (ii) franchised 26 hotels to various
franchisees and (iii) managed one hotel owned by a third
party. We also own commercial and other properties. Accordingly,
we are subject to varying degrees of risk that generally arise
from the ownership of real property. Revenue from our hotels and
other real estate may be harmed by factors beyond our control,
including the following:
|
|
|
|
|
changes in national, regional and local economic conditions; |
|
|
|
changes in local real estate market conditions; |
|
|
|
increases in interest rates, and other changes in the
availability, cost and terms of financing and capital leases; |
|
|
|
increases in property and other taxes; |
|
|
|
the impact of present or future environmental legislation and
adverse changes in zoning laws and other regulations; and |
|
|
|
compliance with environmental laws. |
An increase in interest rates or property and other taxes could
increase expenses and adversely affect our cash flow. Adverse
conditions such as those discussed above could cause the terms
of our borrowings to become unfavorable to us. In such
circumstances, if we were in need of capital to repay
indebtedness in accordance with its terms or otherwise, we could
be required to sell one or more hotels at times that might not
permit realization of the maximum return on our investments.
Unfavorable changes in one or more of these conditions could
also result in unanticipated expenses and higher operating
costs, thereby reducing operating margins and otherwise harming
our results of operations and financial condition.
|
|
|
Our current or future joint venture arrangements may not
reflect solely our best interests and may subject these
investments to increased risks. |
We hold a 50% interest in the Kalispell Center and Mall as part
of a joint venture with an unrelated third party, and we may in
the future acquire interests in other properties through joint
venture arrangements with other entities. Some of these
acquisitions may be financed in whole or in part by loans under
which we are jointly and severally liable for the entire loan
amount along with the other joint venture partners. The terms of
these joint venture arrangements may be more favorable to the
other party or parties than to us. In addition, investing in a
property through a joint venture arrangement may subject that
investment to risks not present with a wholly owned property,
including, among others, the following:
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the other owner(s) of the investment might become bankrupt; |
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the other owner(s) may have economic or business interests or
goals that are inconsistent with ours; |
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the other owner(s) may be unable to make required payments on
loans under which we are jointly and severally liable; |
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the other owner(s) may be in a position to take action contrary
to our instructions or requests or contrary to our policies or
objectives, such as selling the property at a time when to do so
would have adverse consequences to us; |
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actions by the other owner(s) might subject the property to
liabilities in excess of those otherwise contemplated by
us; and |
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it may be difficult for us to sell our interest in the property
at the time we deem a sale to be in our best interests. |
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The results of some of our individual hotels are
significantly impacted by group contract business and other
large customers, and the loss of such customers for any reason
could harm our operating results. |
Group contract business and other large customers, or large
events, can significantly impact the results of operations of
our hotels. These contracts and customers vary from hotel to
hotel and change from time to time. Such contracts are typically
for a limited period of time after which they may be eligible
for competitive bidding. The impact and timing of large events
are not always predictable and are often episodic in nature. The
operating results for our hotels can fluctuate as a result of
these factors, possibly in adverse ways, and these fluctuations
can harm our overall operating results.
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Our properties are subject to risks relating to acts of
God, terrorist activity, war and other hazards, and any such
event could harm our operating results. |
Our financial and operating performance may be adversely
affected by acts of God, such as natural disasters, particularly
in locations where we own and/or operate significant properties.
Some types of losses, such as those from earthquake, hurricane,
terrorism and environmental hazards, may be either uninsurable
or too expensive to justify insuring against. In the event an
uninsured loss or a loss in excess of insured limits occurs, we
could lose all or a portion of the capital we have invested in a
property, as well as the anticipated future revenue from the
property. In that event, we might nevertheless remain obligated
for any mortgage debt or other financial obligations related to
the property. Similarly, war (including the potential for war)
and terrorist activity (including threats of terrorist
activity), epidemics (such as SARS and bird flu), travel-related
accidents, as well as geopolitical uncertainty and international
conflict, which impact domestic and international travel, have
caused in the past, and may cause in the future, our results to
differ in adverse ways. Terrorism incidents such as the events
of September 11, 2001 and wars such as the Iraq war in 2003
significantly reduce international travel and consequently
global demand for hotel rooms. In addition, inadequate
preparedness, contingency planning or recovery capability in
relation to a major incident or crisis may prevent operational
continuity and consequently harm the value of the brand or the
reputation of our business.
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If we fail to comply with privacy regulations, we could be
subject to fines or other restrictions on our business. |
We collect and maintain information relating to our guests for
various business purposes, including maintaining guest
preferences to enhance our customer service and for marketing
and promotion purposes and credit card information. The
collection and use of personal data are governed by privacy laws
and regulations enacted in the U.S. and by various contracts we
operate under from time to time. Privacy regulation is an
evolving area in which different jurisdictions may subject us to
inconsistent compliance requirements. Compliance with applicable
privacy regulations may increase our operating costs and/or harm
our ability to service our guests and market our products,
properties and services to our guests. In addition,
non-compliance with applicable privacy regulations by us (or in
some circumstances non-compliance by third parties engaged by
us) could result in fines or restrictions on our use or transfer
of data.
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We may have disputes with the owners of the hotels that we
manage or franchise. |
Consistent with our focus on management and franchising, we do
not own all the properties in our system of hotels. The nature
of our rights under our management and franchise agreements to
manage hotels and/or enforce brand standards may, in some
instances, be subject to interpretation and may give rise to
disagreements. We seek to resolve disagreements in order to
develop and maintain positive relations with current and
potential franchisees and joint venture partners; however, we
have not always been able to do so. Our failure to resolve such
disagreements may result in litigation, arbitration or other
dispute resolution proceedings.
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Our hotels may be faced with labor disputes that could
harm the operation of our hotels. |
We rely heavily on our employees to provide high-quality
personal service at our hotels, and any labor dispute or
stoppage could harm our ability to provide those services, which
could reduce occupancy and room revenue, tarnish our reputation
and harm our results of operations.
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We are subject to governmental regulations affecting the
lodging industry; the costs of complying with governmental
regulations, or our failure to comply with such regulations,
could harm our financial condition and results of
operations. |
We are subject to numerous federal, state and local government
regulations affecting the lodging industry, including building
and zoning requirements. Increased government regulation could
require us to make unplanned expenditures and result in higher
operating costs. Further, we are subject to laws governing our
relationship with employees, including minimum wage
requirements, overtime, working conditions and work permit
requirements. An increase in the minimum wage rate, employee
benefit costs or other costs associated with employees could
increase expenses and result in lower operating margins. Under
the Americans with Disabilities Act of 1990, or the ADA, all
public accommodations are required to meet certain federal
requirements related to access and use by disabled persons. We
may be required to remove access barriers or make unplanned,
substantial modifications to our hotels to comply with the ADA
or to comply with other changes in governmental rules and
regulations, which could reduce the number of total available
rooms, increase operating costs and have a negative impact on
revenues and earnings. Any failure to comply with ADA
requirements or other governmental regulations could result in
the U.S. government imposing fines or in private litigants
winning damage awards against us.
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Our business is seasonal in nature, and we are likely to
experience fluctuations in our results of operations and
financial condition. |
Our business is seasonal in nature, with the months from May
through October generally accounting for a greater portion of
our annual revenues than the months from November through April.
Therefore, our results for any quarter may not be indicative of
the results that may be achieved for the full fiscal year. The
seasonal nature of our business increases our vulnerability to
risks such as labor force shortages and cash flow problems.
Further, if an adverse event such as an actual or threatened
terrorist attack, international conflict, regional economic
downturn or poor weather conditions should occur during the
months of May through October, the adverse impact to our
revenues could likely be greater as a result of our seasonal
business.
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Failure to retain senior management could harm our
business. |
We place substantial reliance on the lodging industry experience
and the institutional knowledge of members of our senior
management team. Mr. Coffey, Mr. Narayan and
Mr. Taffin are particularly important to our future success
due to their substantial experience in the lodging industry, and
with the Red Lion brand and our company. The loss of the
services of one or more of these members of our senior
management team could hinder our ability to effectively manage
our business and implement our growth strategies. Finding
suitable replacements for Mr. Coffey, Mr. Narayan or
Mr. Taffin could be difficult, and competition for such
personnel of similar experience is intense. We do not carry key
person insurance on any of our senior management team.
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If we are unable to locate lessees for our office and
retail space our revenues and cash flow may be adversely
affected. |
We own and lease to others over 375,000 square feet of
office and retail space in Spokane, Washington and Kalispell,
Montana. We are subject to the risk that leases for this space
might not be renewed upon their expiration, the space may not be
relet or the terms of renewal or reletting such space (including
the cost of required renovations) might be less favorable to us
than current lease terms. Vacancies could result due to the
termination of a lease, the tenants financial failure or a
breach of the tenants obligations. We may be unable to
locate tenants for rental spaces vacated in the future or we may
be limited to renting space on terms
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unfavorable to us. Delays or difficulties in attracting tenants
and costs incurred in preparing for tenant occupancy could
reduce cash flow, decrease the value of a property and
jeopardize our ability to pay our expenses.
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We are subject to risks associated with managing and
leasing commercial properties owned by third parties. |
Until the sale of our real estate management company closes, or
in the event the sale does not close, we will continue to manage
and lease properties owned by third parties. Risks associated
with these activities include the following:
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the contracts (which may be cancelable upon relatively short
notice or upon major events, including sale of the property) may
be terminated by the property owner or expire in connection with
a sale of such property; |
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the contracts might not be renewed upon expiration or might not
be renewed on terms as favorable as current terms; and |
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rental revenues upon which management and leasing fees are based
may decline as a result of general real estate market conditions
or specific market factors affecting properties managed or
leased by us, resulting in decreased management or leasing fee
income. |
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The performance of our entertainment division is
particularly subject to fluctuations in economic
conditions. |
Our entertainment division, which comprised 6% of our total
revenues from continuing operations in 2005, engages in event
ticketing and the presentation and promotion of various
entertainment productions. We have in the past attracted
additional hotel guests by cross-selling to them tickets to
entertainment events through our TicketsWest subsidiary. Our
entertainment division is vulnerable to risks associated with
changes in general regional and economic conditions, the
potential for significant competition and a change in consumer
trends, among other risks. In addition, we face the risk that
Broadway shows and other entertainment productions will not tour
the Pacific Northwest or that such productions will not choose
us as a presenter or promoter.
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We face risks relating to litigation. |
At any given time, we are subject to claims and actions
incidental to the operation of our business. The outcome of
these proceedings cannot be predicted. If a plaintiff is
successful in a claim against us, we could be exposed to the
risk of the payment of a material sum of money and we may not be
insured for such a loss. If this were to occur, it could have an
adverse effect on our financial condition.
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We are subject to environmental risks that could be
costly. |
Our operating costs may be affected by the obligation to pay for
the cost of complying with existing environmental laws,
ordinances and regulations, as well as the cost of compliance
with future environmental legislation. Under current federal,
state and local environmental laws, ordinances and regulations,
a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or
toxic substances on, under or in such property. Such laws often
impose liability whether or not the owner or operator knew of,
or was responsible for, the presence of such hazardous or toxic
substances. In addition, the presence of contamination from
hazardous or toxic substances, or the failure to remediate such
contaminated property properly, may adversely affect the ability
of the owner of the property to borrow using such property as
collateral for a loan or to sell such property. Environmental
laws also may impose restrictions on the manner in which a
property may be used or transferred or in which businesses may
be operated, and may impose remedial or compliance costs. The
costs of defending against claims of liability or remediating
contaminated property and the cost of complying with
environmental laws could have an adverse effect on our results
of operations and financial condition. We have not performed
Phase II environmental assessments on two of our
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owned properties for which Phase II assessments were
recommended, because we determined that any further
investigation was not warranted for materiality reasons. We
cannot assure you that these properties do not have any
environmental risks associated with them. While we have not been
notified by any governmental authority, and we have no other
knowledge of any material noncompliance, liability or claim
relating to hazardous or toxic substances or other environmental
substances in connection with any of our properties, we have not
performed Phase I environmental assessments on all of our
leased properties. We cannot assure you that we will not
discover problems that currently exist, but of which we have no
current knowledge that future laws, ordinances or regulations
will not impose any material environmental liability, or that
the current environmental condition of our existing and future
properties will not be affected by the condition of neighboring
properties (such as the presence of leaking underground storage
tanks) or by third parties (whether neighbors such as dry
cleaners or others) unrelated to us.
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We have incurred debt financing and may incur increased
indebtedness in connection with future acquisitions. |
A substantial portion of our outstanding indebtedness is secured
by individual properties. Neither our articles of incorporation
nor our bylaws limit the amount of indebtedness that we may
incur. Subject to limitations in our debt instruments, we may
incur additional debt in the future to finance acquisitions and
renovations and for general corporate purposes. Accordingly, we
could become highly leveraged, resulting in an increase in debt
service that could adversely affect our operating cash flow. Our
continuing indebtedness could increase our vulnerability to
general economic and lodging industry conditions (including
increases in interest rates) and could impair our ability to
obtain additional financing in the future and to take advantage
of significant business opportunities that may arise. Our
indebtedness is, and will likely continue to be, secured by
mortgages on our owned hotels. We cannot assure you that we will
be able to meet our debt service obligations and, to the extent
that we cannot, we risk the loss of some or all of our assets,
including our hotels, to foreclosure. Adverse economic
conditions could cause the terms on which borrowings become
available to be unfavorable to us. In such circumstances, if we
are in need of capital to repay indebtedness in accordance with
its terms or otherwise, we could be required to sell one or more
of our owned hotels at times that may not permit realization of
the maximum potential return on our investments. Economic
conditions could result in higher interest rates, which would
increase debt service requirements on our variable rate debt and
could reduce the amount of cash available for general corporate
purposes.
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The increasing use of third-party travel websites by
consumers may adversely affect our profitability. |
Some of our hotel rooms may be booked through third-party travel
websites such as Travelocity.com, Expedia.com and Priceline.com.
If these internet bookings increase, these intermediaries may be
able to obtain higher commissions, reduced room rates or other
significant contract concessions from us. Moreover, some of
these internet travel intermediaries are attempting to offer
hotel rooms as a commodity, by increasing the importance of
price and general indicators of quality (such as
three-star downtown hotel) at the expense of brand
identification. We believe that these internet intermediaries
hope that consumers will eventually develop brand loyalties to
their reservation systems. Although most of the business for our
hotels is expected to be derived from traditional channels, if
the amount of sales made through internet intermediaries
increases significantly, our room revenues may flatten or
decrease and our profitability may be adversely affected.
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Due to the shareholdings of our Chairman, together with
other members of the Barbieri family, we may be limited in our
ability to undertake a change of control transaction requiring
shareholder approval. |
As of March 31, 2006, Donald K. Barbieri, our Chairman of
the Board, had sole voting and investment power with respect to
8.1% of our outstanding shares of common stock. Heather
Barbieri, his ex-spouse, had sole voting and investment power
with respect to 7.6% of our outstanding shares of common stock.
Pursuant to a trust agreement, Donald K. Barbieri and Heather
Barbieri share voting and investment power with respect to an
additional 5.7% of our outstanding shares of common stock.
Richard L. Barbieri, who is also a director and Donald K.
Barbieris brother, beneficially owned 3.1% of our
outstanding shares of common stock as of March 31, 2006.
Two of the selling shareholders, who own 5.8% of our outstanding
shares of common stock,
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are also members of the Barbieri family. In addition, we believe
that other members of the Barbieri family who are not directors,
executive officers or 5% shareholders individually hold our
outstanding common stock. As such, to the extent they are
willing and able to act in concert, they may have the ability as
a group to approve or block actions requiring the approval of
our shareholders, including a merger or a sale of all of our
assets or a transaction that results in a change of control.
Risks relating to our common stock and this offering
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Anti-takeover provisions in our charter documents and
under Washington law could make removal of incumbent management
or an acquisition of us, which may be beneficial to our
shareholders, more difficult. |
Provisions of our articles of incorporation and bylaws may have
the effect of deterring or delaying attempts by our shareholders
to remove or replace management, to commence proxy contests, or
to effect changes in control. These provisions include:
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a classified board so that only approximately one third of the
board of directors is elected each year; |
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absence of cumulative voting in the election of directors; |
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requirements for advance notification of shareholder nominations
and proposals; |
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the ability of our board of directors to amend our bylaws
without shareholder approval; and |
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the ability of our board of directors to issue up to
5,000,000 shares of preferred stock without shareholder
approval upon the terms and conditions and with the rights,
privileges and preferences that the board of directors may
determine. |
In addition, as a Washington corporation, we are subject to laws
that impose restrictions on some transactions between a
corporation and certain significant shareholders. These
provisions, alone or together, could have the effect of
deterring or delaying changes in our incumbent management, proxy
contests or changes in control.
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We have not paid cash dividends on our common stock and do
not expect to do so. |
We do not anticipate paying any cash dividends on our common
stock in the foreseeable future. We intend to retain earnings to
provide funds for the anticipated growth and development of our
business.
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The market price for our common stock may be volatile, and
you may not be able to sell our stock at a favorable price or at
all. |
Many factors could cause the market price of our common stock to
rise or fall, including:
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actual or anticipated variations in our quarterly results of
operations; |
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changes in market valuations of companies in the hospitality or
real estate industries; |
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changes in expectations of future financial performance; |
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fluctuations in stock market prices and volumes; |
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issuances of common stock or other securities in the future; |
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the addition or departure of key personnel, including one or
more members of our senior management team; and |
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announcements by us or our competitors of acquisitions,
investments or strategic alliances. |
It is possible that the price for our common stock may decline
below the price you paid for it.
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Substantial sales of our common stock, or the perception
that such sales might occur, could depress the market price of
our common stock. |
Except for shares subject to lock up agreements, as discussed
below, substantially all of the shares of our common stock are
eligible for immediate resale in the public market. Subject to
certain limited exceptions, our directors, executive officers
and the selling shareholders are restricted from selling shares
of common stock until ninety days after the date of this
prospectus. We cannot predict whether future issuances of our
common stock or resales in the open market will decrease the
market price of our common stock. The exercise of the
underwriters over-allotment option, the exercise of any
stock options or the vesting of any restricted stock granted to
directors, executive officers and other employees under our
stock incentive plans, the issuance of common stock or units in
connection with property, portfolio or business acquisitions and
other issuances of our common stock could have an adverse effect
on the market price of our common stock. In addition, future
issuances of our common stock may be dilutive to existing
stockholders. Any sales of substantial amounts of our common
stock in the public market, or the perception that such sales
might occur, could adversely affect the market price of our
common stock.
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Our shareholders will be diluted if we issue additional
capital stock in the future. |
If we require additional capital to pursue hotel acquisition or
other opportunities or for any other reason, we may issue
additional shares of common stock or preferred stock to raise
the necessary capital, or the Partnership may issue
OP Units, which may be redeemable on a
one-to-one basis for
our common stock. Such issuances could result in dilution to our
shareholders.
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Future offerings of debt securities or preferred stock,
which would be senior to our common stock upon liquidation and
for the purpose of distributions, may cause the market price of
our common stock to decline. |
In the future, we may attempt to increase our capital resources
by making additional offerings of debt or equity securities,
including commercial paper, medium-term notes, senior or
subordinated notes and classes of preferred stock or common
stock. We will be able to issue additional shares of common
stock or preferred stock without stockholder approval, unless
stockholder approval is required by applicable law or the rules
of any stock exchange or automated quotation system on which our
securities may be listed or traded. Upon liquidation, holders of
our debt securities, holders of preferred stock and lenders with
respect to other borrowings will receive a distribution of our
available assets prior to the holders of our common stock.
Additional equity offerings may dilute the holdings of our
existing stockholders or reduce the market price of our common
stock, or both. Holders of our common stock are not entitled to
preemptive rights or other protections against dilution.
Preferred stock and debt, if issued, could have a preference on
liquidating distributions or a preference on dividend or
interest payments that could limit our ability to make a
distribution to the holders of our common stock. Because our
decision to issue securities in any future offering will depend
on market conditions and other factors beyond our control, we
cannot predict or estimate the amount, timing or nature of our
future offerings. Thus, our stockholders bear the risk of our
future offerings reducing the market price of our common stock
and diluting their interest.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have
based these statements on our current expectations and
projections about future events. When words such as
anticipate, believe,
estimate, expect, intend,
may, plan, seek,
should, will and similar expressions or
their negatives are used in this prospectus, these are
forward-looking statements. The forward-looking statements
contained in this prospectus reflect our current views about
current events and are subject to risks, uncertainties,
assumption and changes in circumstances that may cause our
actual results to differ significantly from those expressed in
any forward-looking statement. Many possible events or factors,
such as changes in economic, business, competitive market and
regulatory conditions, as well as those discussed in Risk
Factors beginning on page 15 of this prospectus,
could affect our future financial results and performance, and
could cause actual results or performance to differ materially
from those expressed. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only
as of the date of this prospectus. We do not intend, and
disclaim any duty or obligation, to update or revise any
industry information or forward-looking statements set forth in
this prospectus to reflect new information, future events or
otherwise. In light of these risks, uncertainties and
assumptions, the events described by our forward-looking
statements might not occur. We qualify any and all of our
forward-looking statements by these cautionary factors. Please
keep this special note in mind as you read this prospectus.
This prospectus contains market date industry statistics and
other data that have been obtained from, or compiled from,
information made by third parties. We have not independently
verified their data.
USE OF PROCEEDS
We expect to receive net proceeds of approximately
$56.4 million from the sale of 5,000,000 shares of our
common stock in this offering, based on an assumed offering
price of $12.05 per share, the last reported sale price of
our common stock on the NYSE on April 27, 2006, after
deducting the estimated expenses related to this offering and
the underwriting discounts and commissions payable by us. We
will not receive any proceeds from the sale of the common stock
being offered by the selling shareholders.
We intend to use (i) approximately $16.9 million of
the net proceeds to us from this offering to fund the mandatory
redemption of $16.1 million of the outstanding 9.5% trust
preferred securities of Red Lion Hotels Capital Trust, or the
Trust, at a required 5% premium over par, (ii) up to
$34.5 million of the remaining net proceeds to us to reduce
our existing secured debt and pay associated defeasance costs
and (iii) the remaining net proceeds to us for general
corporate purposes. We have not identified any specific items of
debt that will be repaid from the net proceeds to us from this
offering.
The mandatory redemption of the trust preferred securities of
the Trust will be made pursuant to the terms of those
securities, which require us, if we consummate an offering of
our common stock that results in gross proceeds to us of at
least $50 million prior to February 19, 2007, to fund
the redemption of 35% of the aggregate $46 million
principal amount of the Trusts outstanding trust preferred
securities at a redemption price equal to 105% of the principal
amount, plus accrued and unpaid interest to, but excluding, the
redemption date.
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PRICE RANGE OF COMMON STOCK
Our common stock is listed on the NYSE under the symbol
RLH. Prior to September 19, 2005, the stock
traded under the symbol WEH. The following table
sets forth for the periods indicated the high and low closing
sale prices for the common stock on the NYSE.
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High | |
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Low | |
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2006
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Second Quarter (through April 27, 2006)
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$ |
13.30 |
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$ |
11.48 |
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First Quarter (ended March 31, 2006)
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$ |
13.35 |
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$ |
8.46 |
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2005
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Fourth Quarter (ended December 31, 2005)
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$ |
9.30 |
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$ |
6.97 |
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Third Quarter (ended September 30, 2005)
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$ |
7.10 |
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$ |
6.54 |
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Second Quarter (ended June 30, 2005)
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$ |
7.06 |
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$ |
6.61 |
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First Quarter (ended March 31, 2005)
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$ |
7.10 |
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$ |
5.95 |
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2004
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Fourth Quarter (ended December 31, 2004)
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$ |
6.10 |
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$ |
4.92 |
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Third Quarter (ended September 30, 2004)
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$ |
5.74 |
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$ |
4.80 |
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Second Quarter (ended June 30, 2004)
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$ |
6.87 |
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$ |
5.19 |
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First Quarter (ended March 31, 2004)
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$ |
6.65 |
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$ |
4.71 |
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The last reported sale price of our common stock on the NYSE on
April 27, 2006 was $12.05 per share. As of March 31,
2006, we had approximately 114 shareholders of record of
our common stock.
DIVIDEND POLICY
We do not anticipate paying any cash dividends on the common
stock in the foreseeable future. We intend to retain earnings to
provide funds for the anticipated growth and development of our
business. Any determination to pay cash dividends in the future
will be at the discretion of our board of directors and will
depend upon, among other things, our results of operations,
financial condition, contractual restrictions and other factors
deemed relevant by our board. Our board will periodically review
our dividend policy on our shares of common stock.
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CAPITALIZATION
The following table sets forth, as of December 31, 2005,
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our actual capitalization; |
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our capitalization, as adjusted to give effect to the
consummation of this offering, including: |
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the receipt of approximately $56.4 million of estimated net
proceeds to us of this offering, assuming gross proceeds of
approximately $60.3 million, based upon an assumed offering
price of $12.05 per share, the last reported sale price of our
common stock on the NYSE on April 27, 2006, and deduction
of estimated underwriting discounts and commissions and offering
expenses payable by us; |
|
|
|
|
the payment of approximately $16.9 million to fund the
mandatory redemption of $16.1 million of the outstanding
9.5% trust preferred securities of Red Lion Hotels Capital Trust
at a required 5% premium over par; and |
|
|
|
|
|
our capitalization, adjusted as described above and as further
adjusted to reflect the potential application of the remainder
of such net proceeds to repay $34.5 million in outstanding
debt with assumed defeasance costs for early repayment of
$5 million. |
This information should be read in conjunction with Use of
Proceeds in this prospectus and our consolidated financial
statements and notes thereto incorporated by reference in this
prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2005 | |
|
|
| |
|
|
|
|
Pro Forma | |
|
|
|
|
|
|
(As Adjusted for Net | |
|
Pro Forma | |
|
|
|
|
Proceeds From Offering | |
|
(As Further Adjusted | |
|
|
|
|
and Trust Preferred | |
|
for Potential Use of | |
|
|
Actual | |
|
Redemption)(1) | |
|
Remaining Proceeds) | |
|
|
| |
|
| |
|
| |
|
|
|
|
(Unaudited) | |
|
(Unaudited) | |
|
|
(In thousands, except share amounts and par values) | |
Cash and cash equivalents(2)
|
|
$ |
28,729 |
|
|
$ |
68,250 |
|
|
$ |
28,750 |
|
|
|
|
|
|
|
|
|
|
|
Long-term obligations:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion
|
|
|
130,364 |
|
|
|
130,364 |
|
|
|
95,864 |
|
|
Debentures due Red Lion Hotels Capital Trust
|
|
|
47,423 |
|
|
|
30,825 |
|
|
|
30,825 |
|
|
|
|
|
|
|
|
|
|
|
Total long-term obligations
|
|
|
177,787 |
|
|
|
161,189 |
|
|
|
126,689 |
|
Minority interest in partnerships
|
|
|
9,080 |
|
|
|
9,080 |
|
|
|
9,080 |
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, 5,000,000 shares authorized,
$0.01 par value; no shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, 50,000,000 shares authorized, $0.01 par
value; 13,131,282, 18,131,282 and 18,131,282 shares
outstanding
|
|
|
131 |
|
|
|
181 |
|
|
|
181 |
|
Additional paid-in capital, common stock
|
|
|
84,832 |
|
|
|
141,208 |
|
|
|
141,208 |
|
Retained earnings
|
|
|
36,284 |
|
|
|
35,454 |
|
|
|
30,454 |
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
121,247 |
|
|
|
176,843 |
|
|
|
171,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$ |
308,114 |
|
|
$ |
347,112 |
|
|
$ |
307,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Reflects mandatory prepayment at a required 5% premium over par
of $16.1 million of our outstanding debentures related to
the trust preferred securities of Red Lion Hotels Capital Trust
and mandatory prepayment at the same premium of an additional
approximately $498 thousand of our outstanding debentures
related to the trust common securities of the trust held by us.
The proceeds of these redemptions will be used by the trust to
fund the redemption of the related outstanding trust preferred
and common securities. |
|
(2) |
Excludes $66 thousand of cash and cash equivalents related
to discontinued operations. |
|
(3) |
Excludes secured debt of $2.3 million related to
discontinued operations. |
28
DILUTION
Our net tangible book value at December 31, 2005 was
$80.3 million, or $6.12 per share of common stock.
Net tangible book value per share is equal to our total tangible
assets less our total liabilities divided by the number of
outstanding shares of common stock. After giving pro forma
effect to the sale by us of the 5,000,000 shares offered
hereby at an assumed offering price of $12.05 per share,
the last reported sale price of our common stock on the NYSE on
April 27, 2006, and the receipt of the estimated net
proceeds to us from the offering, our pro forma net tangible
book value at December 31, 2005 would have been
approximately $136.8 million, or approximately
$7.54 per share of common stock.
This amount represents an immediate increase in the pro forma
net tangible book value per share of $1.49 per share to our
existing shareholders and an immediate dilution in pro forma net
tangible book value per share to new investors of approximately
$4.70 per share. The following table illustrates this per
share dilution.
|
|
|
|
|
|
Offering price per share
|
|
$ |
12.05 |
|
|
Net tangible book value per share before this offering
|
|
|
6.12 |
|
|
Pro forma net tangible book value increase per share
attributable to this offering
|
|
|
1.42 |
|
Pro forma net tangible book value per share after this offering
|
|
|
7.54 |
|
|
|
|
|
Pro forma net tangible book value dilution per share to new
investors
|
|
$ |
4.51 |
|
|
|
|
|
29
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated
financial data as of and for the years ended December 31,
2005, 2004, 2003, 2002 and 2001. The selected consolidated
statement of operations and balance sheet data are derived from
our audited financial statements. The audited consolidated
financial statements for certain of these periods are
incorporated by reference in this prospectus from our annual
report on
Form 10-K for the
fiscal year ended December 31, 2005. The selected
consolidated financial data set forth below should be read in
conjunction with, and are qualified in their entirety by, our
consolidated financial statements and related notes,
Managements Discussion and Analysis of Financial Condition
and Results of Operations and other financial information
included elsewhere and incorporated by reference in this
prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Consolidated statement of operations data:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$ |
165,048 |
|
|
$ |
163,143 |
|
|
$ |
157,528 |
|
|
$ |
166,246 |
|
|
$ |
95,828 |
|
|
|
Operating expenses(2)
|
|
$ |
153,437 |
|
|
$ |
151,895 |
|
|
$ |
146,568 |
|
|
$ |
146,251 |
|
|
$ |
78,898 |
|
|
|
Operating income
|
|
$ |
11,611 |
|
|
$ |
11,248 |
|
|
$ |
10,960 |
|
|
$ |
19,995 |
|
|
$ |
16,930 |
|
|
|
Net income (loss) from continuing operations
|
|
$ |
(1,144 |
) |
|
$ |
(890 |
) |
|
$ |
1,560 |
|
|
$ |
7,083 |
|
|
$ |
6,372 |
|
|
|
Net income (loss) from continuing operations applicable to
common shareholders(3)
|
|
$ |
(1,144 |
) |
|
$ |
(1,267 |
) |
|
$ |
(980 |
) |
|
$ |
4,506 |
|
|
$ |
6,372 |
|
|
|
Earnings (loss) per share applicable to common shareholders
before discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
|
$ |
0.35 |
|
|
$ |
0.50 |
|
|
|
|
Diluted
|
|
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
|
$ |
0.34 |
|
|
$ |
0.50 |
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on disposal of discontinued business units, net
of income tax expense (benefit)
|
|
$ |
3,702 |
|
|
$ |
(5,770 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Income (loss) from operations of discontinued business units,
net of income tax expense or (benefit)
|
|
$ |
1,937 |
|
|
$ |
375 |
|
|
$ |
(341 |
) |
|
$ |
924 |
|
|
$ |
1,207 |
|
|
|
Earnings (loss) on discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.43 |
|
|
$ |
(0.41 |
) |
|
$ |
(0.03 |
) |
|
$ |
0.07 |
|
|
$ |
0.09 |
|
|
|
|
Diluted
|
|
$ |
0.43 |
|
|
$ |
(0.41 |
) |
|
$ |
(0.03 |
) |
|
$ |
0.07 |
|
|
$ |
0.09 |
|
|
|
Total earnings (loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.34 |
|
|
$ |
(0.51 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.42 |
|
|
$ |
0.59 |
|
|
|
|
Diluted
|
|
$ |
0.34 |
|
|
$ |
(0.51 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.41 |
|
|
$ |
0.59 |
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
13,105 |
|
|
|
13,049 |
|
|
|
12,999 |
|
|
|
12,975 |
|
|
|
12,953 |
|
|
|
|
Diluted
|
|
|
13,105 |
|
|
|
13,049 |
|
|
|
12,999 |
|
|
|
13,285 |
|
|
|
13,239 |
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Consolidated balance sheet data:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital(4)
|
|
$ |
22,693 |
|
|
$ |
2,147 |
|
|
$ |
729 |
|
|
$ |
(9,094 |
) |
|
$ |
(6,373 |
) |
|
Assets of discontinued operations
|
|
$ |
20,217 |
|
|
$ |
61,757 |
|
|
$ |
63,349 |
|
|
$ |
64,049 |
|
|
$ |
65,302 |
|
|
Assets held for sale
|
|
$ |
715 |
|
|
$ |
1,599 |
|
|
$ |
|
|
|
$ |
20,555 |
|
|
$ |
7,581 |
|
|
Property and equipment, net
|
|
$ |
235,444 |
|
|
$ |
223,132 |
|
|
$ |
204,199 |
|
|
$ |
193,451 |
|
|
$ |
209,157 |
|
|
Total assets
|
|
$ |
355,596 |
|
|
$ |
364,612 |
|
|
$ |
353,225 |
|
|
$ |
356,710 |
|
|
$ |
359,649 |
|
|
Notes payable to bank
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
52,100 |
|
|
$ |
54,250 |
|
|
Total long-term debt and capital lease obligation
|
|
$ |
130,364 |
|
|
$ |
133,211 |
|
|
$ |
128,687 |
|
|
$ |
89,788 |
|
|
$ |
100,304 |
|
|
Debentures due Red Lion Hotels Capital Trust
|
|
$ |
47,423 |
|
|
$ |
47,423 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities of discontinued operations
|
|
$ |
3,089 |
|
|
$ |
22,879 |
|
|
$ |
23,580 |
|
|
$ |
17,548 |
|
|
$ |
18,419 |
|
|
Long-term debt included with discontinued operations
|
|
$ |
2,349 |
|
|
$ |
21,743 |
|
|
$ |
22,749 |
|
|
$ |
16,575 |
|
|
$ |
17,377 |
|
|
Total liabilities
|
|
$ |
234,349 |
|
|
$ |
248,225 |
|
|
$ |
201,036 |
|
|
$ |
202,594 |
|
|
$ |
210,834 |
|
|
Preferred stock and related additional paid-in capital
|
|
$ |
|
|
|
$ |
|
|
|
$ |
29,412 |
|
|
$ |
30,131 |
|
|
$ |
30,377 |
|
|
Total stockholders equity
|
|
$ |
121,247 |
|
|
$ |
116,387 |
|
|
$ |
152,189 |
|
|
$ |
154,116 |
|
|
$ |
148,815 |
|
Other data:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(5)(6)
|
|
$ |
33,945 |
|
|
$ |
18,268 |
|
|
$ |
25,269 |
|
|
$ |
33,610 |
|
|
$ |
35,352 |
|
|
EBITDA from continuing operations(5)
|
|
$ |
23,939 |
|
|
$ |
22,602 |
|
|
$ |
21,628 |
|
|
$ |
29,212 |
|
|
$ |
30,048 |
|
|
Net cash provided by operating activities
|
|
$ |
12,559 |
|
|
$ |
10,889 |
|
|
$ |
11,338 |
|
|
$ |
14,306 |
|
|
$ |
16,368 |
|
|
Net cash provided by (used in) investing activities
|
|
$ |
10,581 |
|
|
$ |
(21,876 |
) |
|
$ |
(1,310 |
) |
|
$ |
(8,656 |
) |
|
$ |
(22,928 |
) |
|
Net cash provided by (used in) financing activities
|
|
$ |
(4,256 |
) |
|
$ |
12,777 |
|
|
$ |
(2,659 |
) |
|
$ |
(9,511 |
) |
|
$ |
7,697 |
|
|
|
(1) |
The consolidated balance sheet data reflect the acquisition of
Red Lion Hotels, Inc. as of December 31, 2001. The results
of operations for that entity are included in the consolidated
statements of operations beginning the day of the acquisition
going forward. The comparability of the data is also affected by
a change in accounting for goodwill amortization beginning with
the year ended December 31, 2002. The activities and
balance sheet of discontinued operations have been reflected on
a comparable basis for all years presented. |
|
(2) |
Operating expenses include all direct segment expenses,
depreciation and amortization, gain or loss on asset
dispositions, hotel facility and land lease, undistributed
corporate expenses, and conversion expenses, if any. |
|
(3) |
Net income or loss applicable to common shareholders represents
net income less earned dividends on preferred stock, if
applicable for the period presented. |
|
(4) |
Represents current assets less current liabilities, excluding
assets and liabilities of discontinued operations and assets
held for sale. |
|
(5) |
EBITDA represents earnings before interest, taxes, depreciation
and amortization. EBITDA is not intended to represent net income
as defined by generally accepted accounting principles in the
United States and such information should not be considered as
an alternative to net income, cash flows from operations or any
other measure of performance prescribed by generally accepted
accounting principles in the United States. |
|
(6) |
In 2005, the balance includes a gain on the sale of seven hotels
and an office building of $10.2 million and a non-cash
impairment charge of $4.5 million on four hotels. In 2004,
the balance includes a non-cash impairment charge of
$8.9 million on four hotels. |
31
As noted, EBITDA represents net income (or loss) before interest
expense, income tax benefit or expense, depreciation and
amortization. We utilize EBITDA as a financial measure because
we believe that investors find it to be a useful tool to perform
more meaningful comparisons of past, present and future
operating results and as a means to evaluate the results of core
ongoing operations. We believe it is a complement to net income
and other financial performance measures. EBITDA from continuing
operations is calculated in the same manner, but excludes the
operating activities of business units identified as
discontinued. EBITDA is not intended to represent net income or
loss as defined by generally accepted accounting principles in
the United States and such information should not be considered
as an alternative to net income, cash flows from operations or
any other measure of performance prescribed by generally
accepted accounting principles in the United States.
We use EBITDA to measure the financial performance of our owned
and leased hotels because it excludes interest, taxes,
depreciation and amortization, which bear little or no
relationship to operating performance. By excluding interest
expense, EBITDA measures our financial performance irrespective
of our capital structure or how we finance our properties and
operations. We generally pay federal and state income taxes on a
consolidated basis, taking into account how the applicable
taxing laws apply to our company in the aggregate. By excluding
taxes on income, we believe EBITDA provides a basis for
measuring the financial performance of our operations excluding
factors that our hotels cannot control. By excluding
depreciation and amortization expense, which can vary from hotel
to hotel based on historical cost and other factors unrelated to
the hotels financial performance, EBITDA measures the
financial performance of our hotels without regard to their
historical cost. For all of these reasons, we believe that
EBITDA provides us and investors with information that is
relevant and useful in evaluating our business. We believe that
the presentation of EBITDA from continuing operations is useful
for the same reasons, in addition to using it for comparative
purposes for our intended operations going forward.
However, because EBITDA excludes depreciation and amortization,
it does not measure the capital we require to maintain or
preserve our fixed assets. In addition, because EBITDA does not
reflect interest expense, it does not take into account the
total amount of interest we pay on outstanding debt nor does it
show trends in interest costs due to changes in our borrowings
or changes in interest rates. EBITDA from continuing operations
excludes the activities of operations we have determined to be
discontinued and it does not reflect the totality of operations
as experienced for the periods presented. EBITDA, as defined by
us, may not be comparable to EBITDA as reported by other
companies that do not define EBITDA exactly as we define the
term. Because we use EBITDA to evaluate our financial
performance, we reconcile it to net income, which is the most
comparable financial measure calculated and presented in
accordance with GAAP. EBITDA does not represent cash generated
from operating activities determined in accordance with GAAP,
and should not be considered as an alternative to operating
income or net income determined in accordance with GAAP as an
indicator of performance or as an alternative to cash flows from
operating activities as an indicator of liquidity.
32
The following is a reconciliation of EBITDA and EBITDA from
continuing operations to net income (loss) for the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
EBITDA from continuing operations
|
|
$ |
23,939 |
|
|
$ |
22,602 |
|
|
$ |
21,628 |
|
|
$ |
29,212 |
|
|
$ |
30,048 |
|
|
Income tax benefit (expense) continuing operations
|
|
|
996 |
|
|
|
876 |
|
|
|
(51 |
) |
|
|
(3,860 |
) |
|
|
(3,788 |
) |
|
Interest expense continuing operations
|
|
|
(14,352 |
) |
|
|
(13,828 |
) |
|
|
(9,679 |
) |
|
|
(9,389 |
) |
|
|
(10,667 |
) |
|
Depreciation and amortization continuing operations
|
|
|
(11,727 |
) |
|
|
(10,540 |
) |
|
|
(10,338 |
) |
|
|
(8,880 |
) |
|
|
(9,221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
(1,144 |
) |
|
|
(890 |
) |
|
|
1,560 |
|
|
|
7,083 |
|
|
|
6,372 |
|
Income (loss) on discontinued operations
|
|
|
5,639 |
|
|
|
(5,395 |
) |
|
|
(341 |
) |
|
|
924 |
|
|
|
1,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
4,495 |
|
|
$ |
(6,285 |
) |
|
$ |
1,219 |
|
|
$ |
8,007 |
|
|
$ |
7,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)(2)
|
|
$ |
33,945 |
|
|
$ |
18,268 |
|
|
$ |
25,269 |
|
|
$ |
33,610 |
|
|
$ |
35,352 |
|
|
Income tax benefit (expense)
|
|
|
(2,082 |
) |
|
|
3,781 |
|
|
|
132 |
|
|
|
(4,369 |
) |
|
|
(4,503 |
) |
|
Interest expense
|
|
|
(15,519 |
) |
|
|
(15,507 |
) |
|
|
(11,150 |
) |
|
|
(10,717 |
) |
|
|
(12,092 |
) |
|
Depreciation and amortization
|
|
|
(11,849 |
) |
|
|
(12,827 |
) |
|
|
(13,032 |
) |
|
|
(10,517 |
) |
|
|
(10,323 |
) |
|
Amortization of goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(855 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
4,495 |
|
|
$ |
(6,285 |
) |
|
$ |
1,219 |
|
|
$ |
8,007 |
|
|
$ |
7,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In 2005, the balance includes a gain on the sale of seven hotels
and an office building of $10.2 million and a non-cash
impairment charge of $4.5 million on four hotels. In 2004,
the balance includes a non-cash impairment charge of
$8.9 million on four of our owned hotels. |
|
(2) |
The reconciling items from EBITDA to net income (loss) include
the income taxes, interest expense, depreciation and
amortization of discontinued operations and therefore cannot be
readily derived from the disclosure presented on our
consolidated statements of operations. Please refer to
Note 3 to our consolidated financial statements
incorporated by reference in this prospectus for disclosure of
the corresponding line items included in calculating the net
income (loss) on discontinued operations. |
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142
(SFAS No. 142), Goodwill and
Intangible Assets, which revises the accounting for
purchased goodwill and intangible assets. Under
SFAS No. 142, goodwill and intangible assets with
indefinite lives are no longer amortized, but are tested for
impairment annually and also in the event of an impairment
indicator. The adoption of SFAS No. 142 on
January 1, 2002, resulted in the elimination of goodwill
amortization of $855 thousand for the years ended
December 31, 2005, 2004, 2003, and 2002.
33
Net income and earnings per share adjusted for goodwill
amortization for 2001 compared to fiscal 2005, 2004, 2003 and
2002 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Reported net income (loss) applicable to common
shareholders
|
|
$ |
4,495 |
|
|
$ |
(6,662 |
) |
|
$ |
(1,321 |
) |
|
$ |
5,430 |
|
|
$ |
7,579 |
|
Add back: goodwill amortization, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income (loss) to common shareholders
|
|
$ |
4,495 |
|
|
$ |
(6,662 |
) |
|
$ |
(1,321 |
) |
|
$ |
5,430 |
|
|
$ |
8,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income (loss)
|
|
$ |
0.34 |
|
|
$ |
(0.51 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.42 |
|
|
$ |
0.59 |
|
|
Goodwill amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings (loss) per share basic
|
|
$ |
0.34 |
|
|
$ |
(0.51 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.42 |
|
|
$ |
0.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income (loss)
|
|
$ |
0.34 |
|
|
$ |
(0.51 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.41 |
|
|
$ |
0.59 |
|
|
Goodwill amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings (loss) per share diluted
|
|
$ |
0.34 |
|
|
$ |
(0.51 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.41 |
|
|
$ |
0.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in
connection with our consolidated financial statements and the
notes thereto and the other financial information incorporated
by reference in this prospectus.
A summary of our consolidated results, balance sheet data and
hotel statistics as of and for the years ended December 31,
2005, 2004 and 2003, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands, except % and per share data) | |
Consolidated statement of operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels revenue(1)
|
|
$ |
146,125 |
|
|
$ |
142,424 |
|
|
$ |
138,286 |
|
|
|
Direct margin(2)
|
|
$ |
28,119 |
|
|
$ |
26,191 |
|
|
$ |
25,648 |
|
|
|
Direct margin %
|
|
|
19.2% |
|
|
|
18.4% |
|
|
|
18.5% |
|
|
Franchise and management revenue
|
|
$ |
2,860 |
|
|
$ |
2,575 |
|
|
$ |
4,934 |
|
|
|
Direct margin(2)
|
|
$ |
2,208 |
|
|
$ |
1,440 |
|
|
$ |
3,706 |
|
|
|
Direct margin %
|
|
|
77.2% |
|
|
|
55.9% |
|
|
|
75.1% |
|
|
Entertainment revenue
|
|
$ |
9,827 |
|
|
$ |
11,615 |
|
|
$ |
7,980 |
|
|
|
Direct margin(2)
|
|
$ |
1,432 |
|
|
$ |
1,163 |
|
|
$ |
1,006 |
|
|
|
Direct margin %
|
|
|
14.6% |
|
|
|
10.0% |
|
|
|
12.6% |
|
|
Real estate(1)
|
|
$ |
5,045 |
|
|
$ |
5,416 |
|
|
$ |
5,209 |
|
|
|
Direct margin(2)
|
|
$ |
1,261 |
|
|
$ |
2,026 |
|
|
$ |
1,964 |
|
|
|
Direct margin %
|
|
|
25.0% |
|
|
|
37.4% |
|
|
|
37.7% |
|
|
Total revenues
|
|
$ |
165,048 |
|
|
$ |
163,143 |
|
|
$ |
157,528 |
|
|
Total direct expenses
|
|
$ |
131,765 |
|
|
$ |
132,011 |
|
|
$ |
124,917 |
|
|
Depreciation and amortization
|
|
$ |
11,727 |
|
|
$ |
10,540 |
|
|
$ |
10,338 |
|
|
Hotel facility and land lease expense
|
|
$ |
6,922 |
|
|
$ |
7,219 |
|
|
$ |
7,985 |
|
|
Undistributed corporate expenses
|
|
$ |
4,063 |
|
|
$ |
3,273 |
|
|
$ |
2,640 |
|
|
Total operating expenses
|
|
$ |
153,437 |
|
|
$ |
151,895 |
|
|
$ |
146,568 |
|
|
Operating income
|
|
$ |
11,611 |
|
|
$ |
11,248 |
|
|
$ |
10,960 |
|
|
Operating income %
|
|
|
7.0% |
|
|
|
6.9% |
|
|
|
7.0% |
|
|
Interest expense
|
|
$ |
14,352 |
|
|
$ |
13,828 |
|
|
$ |
9,679 |
|
|
Income (loss) from continuing operations before income taxes
|
|
$ |
(2,140 |
) |
|
$ |
(1,766 |
) |
|
$ |
1,611 |
|
|
Income tax expense (benefit)
|
|
$ |
(996 |
) |
|
$ |
(876 |
) |
|
$ |
51 |
|
|
Income (loss) from discontinued operations
|
|
$ |
5,639 |
|
|
$ |
(5,395 |
) |
|
$ |
(341 |
) |
|
Net income (loss)
|
|
$ |
4,495 |
|
|
$ |
(6,285 |
) |
|
$ |
1,219 |
|
|
Preferred stock dividend
|
|
$ |
|
|
|
$ |
(377 |
) |
|
$ |
(2,540 |
) |
|
Income (loss) applicable to common shareholders
|
|
$ |
4,495 |
|
|
$ |
(6,662 |
) |
|
$ |
(1,321 |
) |
|
Continuing operations earnings (loss) per common
share diluted
|
|
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
|
Earnings (loss) per common share diluted
|
|
$ |
0.34 |
|
|
$ |
(0.51 |
) |
|
$ |
(0.10 |
) |
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands, except % and per share data) | |
Common size operations data:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
88.5 |
% |
|
|
87.3 |
% |
|
|
87.8 |
% |
|
|
Franchise and management
|
|
|
1.7 |
% |
|
|
1.6 |
% |
|
|
3.1 |
% |
|
|
All other segments
|
|
|
9.8 |
% |
|
|
11.1 |
% |
|
|
9.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
71.5 |
% |
|
|
71.2 |
% |
|
|
71.5 |
% |
|
|
Franchise and management
|
|
|
0.4 |
% |
|
|
0.7 |
% |
|
|
0.8 |
% |
|
|
All other segments
|
|
|
7.9 |
% |
|
|
9.0 |
% |
|
|
7.0 |
% |
|
|
Depreciation and amortization
|
|
|
7.1 |
% |
|
|
6.5 |
% |
|
|
6.6 |
% |
|
|
Hotel facility and land lease expense
|
|
|
4.2 |
% |
|
|
4.4 |
% |
|
|
5.1 |
% |
|
|
All other operating expenses
|
|
|
1.9 |
% |
|
|
1.3 |
% |
|
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
93.0 |
% |
|
|
93.1 |
% |
|
|
93.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
8.7 |
% |
|
|
8.5 |
% |
|
|
6.1 |
% |
|
Income tax expense (benefit)
|
|
|
(0.6 |
)% |
|
|
(0.5 |
)% |
|
|
0.0 |
% |
|
Net income (loss) from continuing operations
|
|
|
(0.7 |
)% |
|
|
(0.5 |
)% |
|
|
1.0 |
% |
|
Income (loss) applicable to common shareholders
|
|
|
2.7 |
% |
|
|
(4.1 |
)% |
|
|
(0.8 |
)% |
Other operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$ |
33,945 |
|
|
$ |
18,268 |
|
|
$ |
25,269 |
|
|
EBITDA from continuing operations
|
|
$ |
23,939 |
|
|
$ |
22,602 |
|
|
$ |
21,628 |
|
|
Net cash provided by operating activities
|
|
$ |
12,559 |
|
|
$ |
10,889 |
|
|
$ |
11,338 |
|
|
Net cash provided by (used in) investing activities
|
|
$ |
10,581 |
|
|
$ |
(21,876 |
) |
|
$ |
(1,310 |
) |
|
Net cash provided by (used in) financing activities
|
|
$ |
(4,256 |
) |
|
$ |
12,777 |
|
|
$ |
(2,659 |
) |
|
|
(1) |
Represents results of continuing operations. |
|
(2) |
Revenues less direct operating expenses. |
|
(3) |
Balance as a percentage of total revenues. |
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Consolidated balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital(1)
|
|
$ |
22,693 |
|
|
$ |
2,147 |
|
|
$ |
729 |
|
|
Assets of discontinued operations
|
|
$ |
20,217 |
|
|
$ |
61,757 |
|
|
$ |
63,349 |
|
|
Property and equipment, net
|
|
$ |
235,444 |
|
|
$ |
223,132 |
|
|
$ |
204,199 |
|
|
Total assets
|
|
$ |
355,596 |
|
|
$ |
364,612 |
|
|
$ |
353,225 |
|
|
Liabilities of discontinued operations
|
|
$ |
3,089 |
|
|
$ |
22,879 |
|
|
$ |
23,580 |
|
|
Total long-term debt
|
|
$ |
130,364 |
|
|
$ |
133,211 |
|
|
$ |
128,687 |
|
|
Debentures due Red Lion Hotels Capital Trust
|
|
$ |
47,423 |
|
|
$ |
47,423 |
|
|
$ |
|
|
|
Total liabilities
|
|
$ |
234,349 |
|
|
$ |
248,225 |
|
|
$ |
201,036 |
|
|
Preferred stock and related additional paid-in capital
|
|
$ |
|
|
|
$ |
|
|
|
$ |
29,412 |
|
|
Total stockholders equity
|
|
$ |
121,247 |
|
|
$ |
116,387 |
|
|
$ |
152,189 |
|
|
|
(1) |
Represents current assets less current liabilities, excluding
assets and liabilities of discontinued operations and assets
held for sale. |
Key hotels segment revenue data from continuing operations are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Hotels segment revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenues
|
|
$ |
96,295 |
|
|
$ |
91,140 |
|
|
$ |
86,162 |
|
|
Food and beverage revenues
|
|
|
45,659 |
|
|
|
46,614 |
|
|
|
47,089 |
|
|
Amenities and other department revenues
|
|
|
4,171 |
|
|
|
4,670 |
|
|
|
5,035 |
|
|
|
|
|
|
|
|
|
|
|
Total hotels segment revenues
|
|
$ |
146,125 |
|
|
$ |
142,424 |
|
|
$ |
138,286 |
|
|
|
|
|
|
|
|
|
|
|
We believe that the following performance measures, which are
widely used in the hospitality industry and appear throughout
this prospectus, are important to our discussion of operating
performance:
|
|
|
Total available rooms represents the number of rooms
available multiplied by the number of days in the reported
period. We use total available rooms as a measure of capacity in
our system of hotels. We do not adjust total available rooms for
rooms temporarily out of service for remodel or other short-term
periods. |
|
|
Average occupancy represents total paid rooms occupied
divided by total available rooms. We use average occupancy as a
measure of the utilization of capacity in our system of hotels. |
|
|
Revenue per available room, or RevPAR, represents
total room and related revenues divided by total available
rooms. We use RevPAR as a measure of performance yield in our
system of hotels. |
|
|
Average daily rate, or ADR, represents total room
revenues divided by the total number of paid rooms occupied by
hotel guests. We use ADR as a measure of room pricing in our
system of hotels. |
|
|
Comparable hotels are hotels that have been owned,
leased, managed or franchised, by us for each of the periods
presented. |
Throughout this prospectus, unless otherwise stated, RevPAR, ADR
and average occupancy statistics are calculated using statistics
for comparable hotels. When presented in this prospectus, the
above performance measures will be identified as belonging to a
particular market segment, system-wide, or for continuing
operations versus discontinued operations or total combined
operations.
37
Year ended December 31, 2005 compared with year ended
December 31, 2004
Hotel segment revenues from continuing operations for 2005
increased 2.6%, or $3.7 million, to $146.1 million,
compared to $142.4 million for 2004. The increase was
primarily due to growth of approximately $5.2 million in
room revenue between comparable periods, or 5.7%. Average
occupancy for owned and leased hotels that are part of
continuing operations increased 1.4 percentage points for
2005 as compared to 2004. The total available rooms used to
calculate average occupancy includes rooms taken out of service
for renovation. In addition, ADR increased 3.4% to $73.76. The
resulting $45.61 RevPAR from owned and leased hotels that are
part of 2005 continuing operations was 5.9% higher than RevPAR
of $43.06 in 2004. These increases were partially offset by
decreases of $955 thousand in food and beverage revenue as
compared to 2004, primarily related to a decrease in banquet
revenue resulting from lower convention group business in 2005.
Incidental revenues from guest amenities and other sources of
revenue for the hotel segment decreased by $499 thousand
between comparative periods.
Many of our hotels continue to show increases in occupancy and
ADR, which is driving strong profit growth in room revenue and
economic performance in our hotels overall. As we renovate our
owned and leased hotels, we expect positive impacts from these
upgrades. We have completed renovations, including new plush
pillow top mattresses and upgraded linen and pillow packages and
have begun room renovations in several hotels, including floor
coverings, case goods, bathroom upgrades and shower heads. Guest
reaction to renovations in our hotels has been positive and the
aggregate ADR for those hotels under renovation has increased.
For example, in the fourth quarter of 2005, we substantially
completed room renovations at three of our owned hotels. RevPAR
at these hotels during the fourth quarter increased 14.5% in the
aggregate, which was primarily driven by an increase of 9.4% in
ADR and a 2.7 percentage point increase in occupancy.
During the second quarter of 2005, we completed installation of
the new MICROS Opera Property Management System in 15 of our
owned hotels. This system shares a single database with our
central reservations system allowing for improvement of
delivered rates and availability. These property management
systems and our redesigned websites further enhance our ability
to manage reservations generated through electronic channels and
help position us to take advantage of internet travel bookings.
We believe 2005 was a period of strong growth for us in the
hotels segment and we saw improvement in the segments
underlying fundamentals. Our product and service continue to
gain momentum, consumer demand is steady or growing in many of
our markets, and our active management of ADR has proved
successful -- all before we have completed the significant
renovations at most of our hotels. We believe the lodging
industry as a whole will continue to see increases in ADR and
RevPAR in 2006 and 2007. These expectations appear consistent
with the overall national trends in the lodging industry.
Our strategy had been to initially increase occupancy through
strategic marketing and investment in our hotels, and then to
increase rates as demand increases for our rooms. For six
consecutive quarters through June 2005, we increased occupancy.
We built on this demand by increasing the average daily rate
during 2005 in the majority of our markets. We believe that the
combined effect of this strategy was that RevPAR for our hotels
increased during 2005 at a faster rate than for many of the
hotels in our markets that we consider direct competitors.
Our brand strengthening initiatives, marketing efforts and
technological upgrades are achieving desired results. We
continue to increase the number of reservations we receive
through electronic distribution systems that include our own
branded websites and third-party internet channels (alternative
distribution systems or ADS). Our central reservations and
distribution management technology allows us to manage the yield
on these ADS channels on a real-time, hotel-by-hotel basis. We
have merchant model agreements with leading ADS providers, which
typically entitle the provider to keep a fixed percentage of the
price paid by the customer for each room booked. This allows us
to maximize the yield of a typically lower rated market channel.
Our focus on driving customers to our branded website has made
it one of our fastest growing sources of online reservations
during 2005, allowing us to further maximize our yield on those
types of bookings. We
38
believe our success reflects our management of these
distribution channels and our merchant model agreements.
In 2004 and 2005, we continued to increase bookings as a result
of our focus on direct sales, the Stay Comfortable
advertising campaign and the We Promise or We Pay
branded website booking initiative. The We Promise or We
Pay initiative is designed to encourage guests to book on
our branded website, www.redlion.com. Through this initiative,
we guarantee to our guests that our branded websites will
provide the lowest rate available compared to non-opaque ADS
channels. We also launched a marketing campaign designed
specifically to increase awareness of our Net4Guests and room
amenity upgrade programs known as Stay Comfortable.
Net4Guests provides hotel guests access to free high speed
wireless internet.
Revenue from the franchise and management segment in 2005
increased $285 thousand over 2004, which related primarily to
two additional franchise agreements in place during the second
quarter of 2005, partially offset by one less management
contract in place during 2005 and certain franchise termination
fees received in 2004.
Entertainment segment revenue decreased 15.4% for the
comparative periods. This decrease was primarily due to the
fourth quarter presentation of a six week net
production of Disneys The Lion King, for which it received
commissions for tickets sold and other fees, and incurred only
limited expenses. Comparatively, the entertainment division
generated substantially less revenue, but substantially more
profit, on The Lion King than it did on the two shows it
presented on a gross basis in the fourth quarter of
2004, for which it realized all the revenues but also incurred
all the expenses. Ticketing revenues increased during the year
which offset part of the decrease in show revenues.
Revenue from our real estate segment in 2005 decreased $371
thousand from 2004, primarily due to lower commission fees
(primarily in the first quarter of 2005), lower development fees
between comparative periods, and lower real estate management
fees for low income housing projects during 2005.
In the aggregate, operating expenses for 2005 increased
$1.5 million or 1.0% to $153.4 million from
$151.9 million in 2004. This compares to a 1.2% increase in
total revenues between comparative periods. Operating expenses
include direct operating expenses for each of the operating
segments, hotel facility and land lease expense, depreciation,
amortization, gain or loss on asset dispositions, conversion
expenses, if any, and undistributed corporate expenses.
Resulting operating income was $11.6 million for 2005, as
compared to $11.2 million for 2004. Direct hotel expenses
increased $1.8 million or 1.5% between comparative periods.
The direct margin for the hotels grew from 18.4% of hotel
revenues in 2004 to 19.2% in 2005. The increased revenue and
margin resulted in a 7.4%, or $1.9 million, increase in
hotel profitability. Hotel room related costs accounted for
approximately $1.7 million of the increase in direct hotel
expenses, commensurate with the increase in the number of
occupied rooms. Food and beverage costs decreased $360 thousand,
corresponding with the decrease in revenues and lower food
costs. The remainder of the increase in direct hotels segment
costs resulted from increased sales related costs, including
marketing charges and compensation related to revenue
performance, increased utility costs, benefits expense related
to our health care plan early in 2005 and other administrative
costs directly related to the hotels.
Direct costs for the franchise and management segment decreased
$483 thousand, primarily related to lower labor, travel and
advertising costs in 2005. The entertainment segment direct
costs decreased $2.1 million during 2005. Expenses related
to the presentation of shows for WestCoast Entertainment
accounted for a decrease of $2.7 million of costs due to
the number of shows presented as discussed earlier, however,
ticketing related expenses increased by $289 thousand for the
comparative period. Real estate segment direct expenses from
continuing operations increased 11.6% primarily related to
payroll and operational costs for our commercial properties.
Facility and land lease expense was lower between comparable
periods due to the decreased lease expense from having purchased
the previously leased Red Lion Bellevue Inn property.
Depreciation and amortization increased $1.2 million, or
11.3% between 2005 and 2004. The increase was primarily related
to our capital
39
improvement plan. For 2005 and 2004, the net gain recognized on
asset disposals included the recognition of deferred gains over
time on both a previously sold office building and a hotel. A
gain of $293 thousand was recorded for the sale of a 50%
interest in our Kalispell Center and Mall to an unrelated
third-party and a $79 thousand gain related to the sale of four
condominiums during the third quarter of 2005. During 2005,
gains were partially offset by a small loss on certain personal
property disposed of as part of our reinvestment plan.
Undistributed corporate expenses for 2005 were $4.1 million
compared to $3.3 million for 2004. The increase of $790
thousand was primarily due to higher payroll costs, costs
associated with options issued to directors as part of the Board
compensation plan, and costs associated with compliance with the
Sarbanes-Oxley Act paid to outside consultants. Undistributed
corporate expense includes general and administrative charges
such as corporate payroll, legal expenses, contributions,
directors and officers insurance, bank service charges, outside
accountants and consultants expense, and investor
relations charges. We consider these expenses to be
undistributed because the costs are not directly
related to our business segments and therefore are not
distributed to those segments. In contrast, costs more directly
related to our business segments such as accounting, human
resources and information technology are distributed out to
operating segments and are included in direct expenses.
Interest expense for 2005 was $14.4 million compared to
$13.8 million for 2004. Total outstanding interest bearing
debt, including our debentures due Red Lion Hotels Capital
Trust, was higher in 2005 as compared to 2004 due primarily to
our trust preferred offering in February 2004. The trust
preferred debentures were in place for all of 2005. The average
pre-tax interest rate on debt during the comparative periods was
7.9%. We had no material borrowings during either comparative
period on our revolving credit facility. During the fourth
quarter of 2005, we refinanced the debt for one of our owned
hotels.
Income tax benefit on continuing operations for 2005 was $996
thousand and for 2004 was $876 thousand. The tax rate on pre-tax
net income differed from the statutory combined federal and
state tax rates primarily due to the utilization of certain
incentive tax credits allowed under federal law.
In connection with the November 2004 announcement of plans to
invest to improve comfort, freshen décor and upgrade
technology at our hotels, we implemented a plan to divest 11
non-strategic owned hotels, one real estate office building and
certain other non-core properties, including five condominium
units and certain parcels of excess land (collectively,
the divestment properties). Each of the divestment
properties meets the criteria to be classified as an asset held
for sale. In addition, the activities of those 11 hotels and the
real estate office building are considered discontinued
operations under generally accepted accounting principles.
Depreciation of these assets, if previously appropriate, has
been suspended.
We completed the sale of seven of the 11 hotels and the real
estate office building during 2005, with gross proceeds of
$52.8 million, resulting in a gain on disposition of
discontinued operations of $10.2 million before taxes. The
net impact on consolidated earnings of the activities of the
discontinued operations was $5.6 million of net income for
2005, net of income tax expense. This included $2.0 million
of aggregate net income from the 11 hotels and $3.6 million
of net income from the commercial building. Gains related to the
sale of seven of the hotel properties and office building during
the year accounted for $6.6 million (net of tax expense) of
net income from discontinued operations, offset by the recording
of an additional impairment loss of $2.9 million (net of
tax expense) for four hotel properties. This compares to the
year ended 2004 for which the discontinued operations had a
$5.4 million net loss including the tax benefit. The 2004
results included aggregate activity of the 11 hotels of a $25
thousand net income, offset by the recording of an impairment
loss of $5.8 million (net of tax benefit) and $350 thousand
net income from the office building.
40
|
|
|
Net Income and Income Applicable to Common
Shareholders |
Net income applicable to common shareholders increased
$11.2 million between comparable periods. The higher net
income was primarily due to the net gains on the sale of seven
of the divested hotels and the office building discussed
previously, and the effect of the impairments taken in 2004.
Earnings per share for 2005 were $0.34 compared to a loss of
$0.51 per share for 2004. The net income applicable to
holders of our common stock increased $11.2 million as
described above, while the number of weighted average common
shares outstanding in both periods remained relatively
consistent.
|
|
|
Liquidity, Capital Resources and Financing |
We believe that our recent actions have strengthened our
financial position, particularly for the long term. The
divestment plan is well underway and, we believe, has been
successful to date. As of March 31, 2006, sales of eight of
the hotel properties, one portion of another hotel, and the
office building have closed. We have also refinanced our
existing bank line of credit into an expanded operating and
investment credit facility, sold 50% of our Kalispell Center
project, closed a $46 million offering of trust preferred
securities in the first quarter of 2004, and eliminated our
preferred stock and its associated dividend requirements. We
have also made significant investments in our hotel improvement
program, which focuses on increasing customer comfort,
freshening décor, and new technology. We believe these
improvements have strengthened and will continue to strengthen
our financial position and the value of the Red Lion brand.
As we enter 2006, our cash balances are available to fund our
continuing operations. In general, we expect to meet our
long-term liquidity requirements for the funding of property
development, property acquisitions, renovations and other
non-recurring capital improvements through net cash from
operations, long-term secured and unsecured indebtedness,
including our credit facility, the issuance of debt or equity
securities and joint ventures. As discussed elsewhere in this
prospectus, we are also committed to completing the sale of the
remaining non-core assets to help fund the remainder of our
reinvestment plan in the hotels.
Our short-term liquidity needs include funds for interest
payments on our outstanding indebtedness and on the debentures,
funds for capital expenditures and, potentially, acquisitions.
We expect to meet our short-term liquidity requirements
generally through net cash provided by operations and reserves
established from existing cash and, if necessary, by drawing
upon our credit facility. A majority of our leased and owned
hotels are subject to leases and debt agreements that require us
to spend 3% to 5% of hotel revenues derived from these hotels on
replacement of furniture, fixtures and equipment at these
hotels, or require payment of insurance premiums or real and
personal property taxes with respect to these hotels. This is
consistent with what we would spend on furniture, fixtures and
equipment under normal circumstances to maintain the competitive
appearance of our owned and leased hotels.
Historically, our cash and capital requirements have been
satisfied through cash generated from operating activities,
borrowings under our credit facilities and the issuance of debt
and equity securities. We believe cash flow from operations,
borrowings under credit facilities, the issuance of debt or
equity securities and existing cash on hand will provide
adequate funds for our working capital needs, planned capital
expenditures, debt service and other obligations for the
foreseeable future.
Our ability to fund operations, make planned capital
expenditures, make required payments on any securities we may
issue in the future and remain in compliance with the financial
covenants under our debt agreements will be dependent on our
future operating performance. Our future operating performance
is dependent on a number of factors, many of which are beyond
our control, including occupancy and the room rates we can
charge. These factors also include prevailing economic
conditions and financial, competitive, regulatory and other
factors affecting our business and operations, and may be
dependent on the availability of borrowings under our credit
facility or other borrowings or securities offerings.
Cash flow from operations, which includes the cash flows of
business units identified as discontinued operations for 2005,
totaled $12.6 million compared to $10.9 million for
2004. Net income, after reconciling
41
adjustments to net cash provided by operations (such as non-cash
income statement impacts like gains on disposals, impairment
loss, depreciation, loan fee write-offs, the deferred tax
provision, other gains and losses on assets, and the provision
for doubtful accounts) totaled $8.0 million in 2005. For
2004, net income adjusted for those same items totaled
$13.7 million. Working capital changes, including
restricted cash, receivables, accruals, payables, and
inventories, added $4.5 million in cash during 2005. This
was predominantly due to a decrease in accrued expenses
including taxes payable on the gains recognized in 2005 and a
decrease in prepaid expenses, an increase in accounts payable,
partially offset by an increase in accounts receivable and
restricted cash. In 2004, changes in working capital items
accounted for $2.8 million in negative cash flow.
Net cash provided by investing activities was $10.6 million
for 2005. Net cash used in investing activities was
$21.9 million for 2004. Cash additions to property and
equipment totaled $22.9 million in 2005 compared to
$21.9 million in 2004. However, capital additions for 2004
included $8.7 million of cash paid related to our
acquisition of the Yakima and Bellevue properties under option
agreements. Actual cash additions for capital improvements for
2004 were $13.2 million. Net cash proceeds from the
disposal of assets, including those classified as discontinued
operations, totaled $32.8 million for 2005. The other major
variances between the two periods were the $1.4 million
investment in Red Lion Hotels Capital Trust described below, the
$2.1 million advance to the Trust to cover the trust
preferred offering costs, and the collection of a balloon
payment under a note receivable, all of which occurred in 2004.
Net financing activities used $4.3 million in cash during
2005, including debt pay downs of $12.0 million and
borrowings of $7.9 million. The borrowings were related to
our refinancing of a $3.6 million term note and a
$3.7 million term note, the payments of which were included
in the debt pay-downs for the year. The debt pay-down also
included $4.7 million of scheduled principal payments. This
compares to 2004 which shows cash provided by financing of
$12.8 million, which includes $47.4 million in net
proceeds to us from our debenture sale, offset by
$29.4 million paid by us to redeem the Series A and
Series B preferred shares. We also paid $1.0 million
in preferred dividends during the first quarter of 2004, had
scheduled principal payments on long-term debt of
$4.5 million and had no net activity under the credit
facility note.
At December 31, 2005, we had $28.7 million in cash and
cash equivalents for continuing operations. We also had
$8.8 million of cash restricted under securitized borrowing
arrangements for future payment of furniture, fixtures and
equipment, repairs, insurance premiums and real and personal
property taxes, or by agreement. At December 31, 2005,
$27.0 million of our cash and cash equivalent balance was
held in short-term, liquid investments readily available for our
use. At December 31, 2004, we had $13.7 million in
cash and cash equivalents for continuing operations, including
$4.1 million of cash restricted under securitized borrowing
arrangements for future payment of furniture, fixtures and
equipment, repairs, insurance premiums and real and personal
property taxes. At December 31, 2004, $7.5 million of
the cash balance was held in short-term, liquid investments
readily available for our use. Cash and cash equivalents,
included with assets of discontinued operations were $66
thousand and $334 thousand as of December 31, 2005 and
December 31, 2004, respectively.
Since October 2003, we have maintained our primary revolving
credit agreement with Wells Fargo Bank, N.A., or Wells Fargo.
Our current credit agreement with Wells Fargo is a revolving
credit facility with a total of $10 million in borrowing
capacity for working capital purposes. This includes a
$6 million line of credit secured by two hotels, or Line A,
and a $4 million line of credit secured by our personal
property, or Line B. Interest under Line A is set at 0.5% over
the banks prime rate and does not require any principal
payments until the end of its two year term. Interest under Line
B is set at 1.0% over the banks prime rate and does not
require any principal payments until the end of its one year
term. The revised agreement contains certain restrictions and
covenants, the most restrictive of which required us to maintain
a minimum tangible net worth of $120 million, a minimum
EBITDA (as defined by the bank) coverage ratio of 1.25:1, and a
maximum funded debt to EBITDA ratio of 5.25:1.
At December 31, 2005, we had long-term debt of
$130.4 million for continuing operations, of which
$118.3 million was securitized debt collateralized by
individual hotels, with interest rates ranging from 6.7% to
8.1%. Of the amount of securitized debt, three pools of cross
securitized debt exist, one consisting of five properties with
total borrowings of $21.8 million, a second consisting of
four properties with total borrowings of
42
$24.4 million, and a third consisting of two properties
with total borrowings of $19.6 million. Each pool of
securitized debt and the other collateralized hotel borrowings
include defeasance provisions for early repayment.
In March 2005, we completed the refinancing of our office
building and secured related financing to facilitate the
redevelopment of the project. We borrowed approximately
$3.9 million under a term debt arrangement collateralized
by the real estate property. In addition, we may borrow another
$6.1 million under the agreement to finance the
redevelopment of our office building. The note bears a
6.25% per annum interest rate fixed for the construction
period and for the first five years of the term. After that time
the rate is adjustable in five year intervals based upon
treasury rates. The note is being paid on an interest only basis
through the construction period. The note is due in full on or
before October 1, 2032 and is prepayable, in whole or in
part, with no penalty. Additionally, in connection with that
project, on March 31, 2005, we repaid approximately
$3.7 million of principal due under a term debt
arrangement. That note was collateralized by real property,
including an office building, carried an interest rate of
9.0% per annum, and was due on April 1, 2010. However,
the note was pre-payable on April 1, 2005 without penalty.
In October 2005, we refinanced with another lender on similar
terms a $3.6 million bank term loan secured by one of our
owned hotels that was coming due with a balloon payment.
During the first quarter of 2004, we completed a public offering
of $46 million of trust preferred securities through Red
Lion Hotels Capital Trust, or the Trust. The trust preferred
securities, which mature on February 24, 2044, are listed
on the New York Stock Exchange and entitle holders to cumulative
cash distributions at an annual rate of 9.5%. In addition, we
invested $1.4 million in trust common securities,
representing 3% of the total capitalization of the Trust. The
Trust used the net proceeds of the offering and our investment
to purchase $47.4 million of our junior subordinated
debentures with payment terms that mirror the distribution terms
of the trust preferred securities. The cost of the trust
preferred offering totaled $2.3 million, including
$1.7 million of underwriting commissions and expenses and
$614 thousand of costs incurred directly by the Trust. The Trust
paid these costs utilizing an advance from us. The advance to
the Trust is included with other long-term assets on our
consolidated balance sheet. The proceeds from the debenture
sale, net of the costs of the trust preferred offering and our
investment in the Trust, were $43.7 million. We used
approximately $29.8 million of the net proceeds to pay
accrued dividends on, and redeem in full, all outstanding shares
of our Series A and Series B preferred stock on
February 24, 2004. The terms of the trust preferred
securities require us, if we consummate an offering of our
common stock that results in gross proceeds to us of at least
$50 million prior to February 19, 2007, to fund the
redemption of 35% of the aggregate principal amount of the trust
preferred securities outstanding at a redemption price equal to
105% of the principal amount, plus accrued and unpaid interest
to, but excluding, the redemption date.
At December 31, 2005, we had total debt obligations
(including those of discontinued operations) of
$180.1 million, of which 70.1%, or $126.2 million,
were fixed rate debt securities secured primarily by individual
properties. $47.4 million of the debt obligations of the
Trust are uncollateralized and at a fixed rate, making a total
of 96.4% of our debt fixed rate obligations.
43
BUSINESS
Our Company
We are a NYSE-listed hospitality and leisure company primarily
engaged in the ownership, operation and franchising of midscale
and upscale full service hotels under our proprietary Red Lion
brand. As of March 31, 2006, our hotel system contained 61
hotels located in 10 states and one Canadian province, with
10,687 rooms and 521,537 square feet of meeting space. Of
these 61 hotels, we (i) operated 34 hotels, 21 of
which were owned and 13 of which were leased,
(ii) franchised 26 hotels to various franchisees and
(iii) managed one hotel owned by a third party.
Brand and Lodging Description
The Red Lion brand was established more than thirty years ago
and is associated with full service hotels offering high-quality
lodging, extensive meeting facilities and superior food and
beverage operations. We also deliver personalized service to our
customers and offer contemporary and well-appointed guestrooms.
Our focus on customer service and brand touch-points attracts a
well-balanced customer base, including group, business and
leisure travelers.
The Red Lion brand is well recognized in the western United
States and well regarded by our guests. Consumers consistently
identify the Red Lion brand and the personalized service it
represents when asked to indicate their full service lodging
preferences. To position Red Lion for its next phase of growth,
we are continuing to build upon this strong brand presence by
making significant investments in our product, revitalizing our
brand image, and enhancing our services and standards.
Our Corporate Structure
The following organizational chart illustrates the structure of
our company and our most significant subsidiaries and divisions
as of March 31, 2006. Except as indicated, all of our
subsidiaries are directly or indirectly wholly owned by us.
Business Segments
We operate in four reportable business segments: hotels;
franchise and management; entertainment; and real estate. The
hotels segment derives revenue primarily from guest room rentals
and food and beverage operations at our owned and leased hotels.
The franchise and management segment is engaged primarily in
licensing our brands to franchisees and managing hotels for
third-party owners. This segment generates
44
revenue from franchise fees that are typically based on a
percent of room revenues and are charged to hotel owners in
exchange for the use of our brands and access to our central
services programs. These programs include the reservation
system, guest loyalty program, national and regional sales,
revenue management tools, quality inspections, advertising and
brand standards. It also reflects revenue from management fees
charged to the owners of our managed hotels, typically based on
a percentage of the hotels gross revenues plus an
incentive fee based on operating performance. The entertainment
segment derives revenue primarily from ticketing services and
promotion and presentation of entertainment productions. The
real estate segment generates revenue from owning, managing,
leasing and developing commercial retail and office properties
and multi-unit
residential properties.
Effective April 1, 2005, we re-organized the presentation
of what we consider our operating segments under the provisions
of FASB Statement No. 131 Disclosures about Segments
of an Enterprise and Related Information to more closely
reflect how we evaluate our business lines. The new presentation
is reflected in this prospectus and in our consolidated
financial statements and related notes and other information
incorporated by reference in this prospectus. All comparative
periods have been reclassified to conform to the current
presentation.
The following table illustrates, for the periods indicated,
revenue per reportable business segment and the percentage of
total revenue generated by each segment, excluding the
activities of business units identified as discontinued
operations in our consolidated financial statements. For
additional information regarding segments, please refer to
Business Segments in the notes to our consolidated
financial statements for the fiscal year ended December 31,
2005 that are incorporated by reference into this prospectus.
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2003 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands, except %) | |
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
$ |
146,125 |
|
|
$ |
142,424 |
|
|
$ |
138,286 |
|
|
Franchise and management
|
|
|
2,860 |
|
|
|
2,575 |
|
|
|
4,934 |
|
|
Entertainment
|
|
|
9,827 |
|
|
|
11,615 |
|
|
|
7,980 |
|
|
Real estate
|
|
|
5,045 |
|
|
|
5,416 |
|
|
|
5,209 |
|
|
Other
|
|
|
1,191 |
|
|
|
1,113 |
|
|
|
1,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$ |
165,048 |
|
|
$ |
163,143 |
|
|
$ |
157,528 |
|
|
|
|
|
|
|
|
|
|
|
Revenue by segment as a percentage of total revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
88.5 |
% |
|
|
87.3 |
% |
|
|
87.8 |
% |
|
Franchise and management
|
|
|
1.7 |
% |
|
|
1.6 |
% |
|
|
3.1 |
% |
|
Entertainment
|
|
|
6.0 |
% |
|
|
7.1 |
% |
|
|
5.1 |
% |
|
Real estate
|
|
|
3.1 |
% |
|
|
3.3 |
% |
|
|
3.3 |
% |
|
Other
|
|
|
0.7 |
% |
|
|
0.7 |
% |
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
Hotel Operations
Hotel operations include our hotels (hotel and related
restaurant/banquet operations), as well as our franchise and
management segment.
We owned 21 hotels with a total of 4,228 rooms and more than
227,000 square feet of meeting space as of March 31,
2006. The number of hotels we own includes three hotels for
which some or all of the underlying land is leased. The lease
expiration dates range from 2014 to 2062. For additional
information, refer to
45
Operating Lease Commitments in the notes to our
consolidated financial statements incorporated by reference in
this prospectus. We operate restaurants in 21 of our owned
hotels.
As of March 31, 2006, we leased 13 hotels as tenant with a
total of 2,183 rooms and more than 99,000 square feet of
meeting space. Under these leases, we are responsible for hotel
operations and management. We recognize revenues and associated
expenses with leased hotel operations. Lease terms, with
expiration dates ranging from 2020 to 2033 and having renewal
provisions, typically require us to pay fixed monthly rent and
variable rent based on a percentage of revenue if certain sales
thresholds are reached. In addition, we are responsible for
repairs and maintenance, operating expenses and management of
operations. Refer to Operating Lease Commitments in
the notes to our consolidated financial statements incorporated
by reference in this prospectus for additional information. We
operate restaurants in 10 of our leased hotels.
Of our 21 owned hotels at March 31, 2006, three were
identified as assets held for sale and classified as
discontinued operations on our consolidated balance sheets and
for our consolidated statements of operations. Those three
hotels aggregate 621 rooms and include approximately
28,000 square feet of meeting space.
As of March 31, 2006, we managed one third-party owned
hotel with 254 rooms and 36,000 square feet of meeting
space. Under the management agreement, we manage virtually all
aspects of the hotels operations, while the hotel owner is
responsible for operating and other expenses. Our management
fees are based on a percentage of the hotels gross revenue
plus an incentive fee based on operating performance.
As of March 31, 2006, we had franchise arrangements with
26 hotels that were owned and operated by third parties
under our licensed brand names. These franchised hotels had at
that date a total of 4,022 rooms and more than
157,000 square feet of meeting space. We do not have
management or operational responsibility for franchised hotels.
However, we do make available certain services to those hotels,
which include reservation systems, advertising and national
sales, a guest loyalty program, revenue management tools,
quality inspections and brand standards. We receive royalties
for use of the brand names. We also administer central services
programs for the benefit of our system hotels and franchisees.
The hotels in our system primarily operate under the Red Lion
brand. Our Red Lion brand is nationally recognized and is
typically associated with midscale and upscale full service
hotels. As discussed elsewhere in this prospectus, we plan to
focus our growth strategy on conversion of new hotels to our Red
Lion brand.
46
The following tables provide certain information about our
system of hotels (owned, leased, managed and franchised):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meeting Space |
|
|
Hotels |
|
Rooms |
|
(sq. ft.) |
|
|
|
|
|
|
|
System-wide hotels as of March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased hotels:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Red Lion hotels
|
|
|
31 |
|
|
|
5,796 |
|
|
|
297,628 |
|
|
Other
|
|
|
3 |
|
|
|
615 |
|
|
|
30,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34 |
|
|
|
6,411 |
|
|
|
327,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed hotels
|
|
|
1 |
|
|
|
254 |
|
|
|
36,000 |
|
Red Lion franchised hotels
|
|
|
26 |
|
|
|
4,022 |
|
|
|
157,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
61 |
|
|
|
10,687 |
|
|
|
521,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Red Lion Hotels
|
|
|
57 |
|
|
|
9,818 |
|
|
|
455,429 |
|
|
|
(1) |
Statistics include three hotels identified as discontinued
business units, aggregating 621 rooms and 28,408 square
feet of meeting space. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2006 | |
|
Three Months Ended March 31, 2005 | |
|
|
| |
|
| |
|
|
Average | |
|
|
|
Average | |
|
|
|
|
Occupancy(2) | |
|
ADR | |
|
RevPAR | |
|
Occupancy(2) | |
|
ADR | |
|
RevPAR | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Hotel statistics(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased hotels:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
51.3 |
% |
|
$ |
73.84 |
|
|
$ |
37.90 |
|
|
|
54.0 |
% |
|
$ |
67.33 |
|
|
$ |
36.37 |
|
|
Discontinued operations
|
|
|
28.8 |
% |
|
$ |
59.32 |
|
|
$ |
17.08 |
|
|
|
30.6 |
% |
|
$ |
56.80 |
|
|
|
17.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined owned and leased hotels
|
|
|
49.1 |
% |
|
$ |
73.02 |
|
|
$ |
35.88 |
|
|
|
51.5 |
% |
|
$ |
66.66 |
|
|
|
34.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
System-wide(3)
|
|
|
51.5 |
% |
|
$ |
74.98 |
|
|
$ |
38.65 |
|
|
|
52.0 |
% |
|
$ |
68.34 |
|
|
$ |
35.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Red Lion hotels(4)
|
|
|
52.9 |
% |
|
$ |
74.16 |
|
|
$ |
39.25 |
|
|
|
53.2 |
% |
|
$ |
67.60 |
|
|
$ |
35.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes all hotels owned, leased, managed and franchised by us
for each of the periods presented. |
|
|
|
(2) |
The total available rooms used to calculate average occupancy
includes rooms taken out of service for renovation. |
|
|
|
(3) |
Includes all hotels owned, leased, managed and franchised by us
for greater than one year. Includes three hotels classified as
discontinued operations. |
|
|
|
(4) |
Includes all hotels owned, leased, managed and franchised by us
for greater than one year that are operated under the Red Lion
brand name. Includes one hotel classified as discontinued
operations. |
|
Hotel System Growth Strategy
We intend to grow our hotel operations primarily by increasing
the number of hotels franchised and managed under our Red Lion
brand, with an initial focus on the western region of the United
States and Canada. In 2005, we announced our goal of expanding
our presence to 100 markets in five years from our current base
of 50 markets. We anticipate that most of our growth will come
through conversion of three-and four-star hotels to the
nationally recognized Red Lion brand. Our expansion of the Red
Lion brand will follow our hub and spoke expansion
model. Initially, we will seek to achieve a presence in key hub
cities. Thereafter, we will seek to expand into surrounding
areas to increase brand penetration in the respective markets.
Key to this growth strategy is the completion of our
reinvestment campaign in our existing owned and leased Red Lion
hotels, one of the most significant facility improvement
programs in our history. This
47
investment accelerates our ongoing program to improve hotel
quality by increasing customer comfort, freshening décor
and modernizing with new technology. We believe that by
improving the quality of our existing product in areas where
customers quality expectations are continuing to grow, we
both position our continuing operations to take advantage of the
growth potential in our existing markets, and make the Red Lion
brand more attractive for franchise opportunities.
We intend to increase the number of management agreements we
have with third-party hotel owners by marketing our management
services. We believe that our experience in managing our owned
hotels and those owned by third parties gives us a competitive
advantage to obtain such agreements.
Our strategy has been to initially increase occupancy through
strategic marketing and investment in our properties, and then
to increase rates as demand increases for our rooms. For six
consecutive quarters through June 2005, we increased occupancy.
We built on this demand by increasing the average daily rate
during 2005 in the majority of our markets. We believe that the
combined effect of this strategy was that RevPAR for our hotels
increased at a faster rate during 2005 than for many other
hotels in our markets that we consider direct competitors.
Our brand strengthening initiatives, marketing efforts and
technological upgrades are achieving desired results. We
continue to increase the number of reservations we receive
through electronic distribution systems that include our own
branded websites and third-party internet channels (alternative
distributions systems or ADS). Our central reservations and
distribution management technology allows us to manage the yield
on these ADS channels on a real-time, hotel-by-hotel basis. We
have merchant model agreements with leading ADS providers, which
typically entitle the provider to keep a fixed percentage of the
price paid by the customer for each room booked. This allows us
to maximize the yield of a typically lower rated market channel.
Our focus on driving customers to our branded website made it
one of our fastest growing sources of online reservations during
2005, allowing us to further maximize our yield on those types
of bookings. Our success reflects our management of these
distribution channels and our merchant model agreements.
Through 2004 and 2005, we continued to increase bookings as a
result of our focus on direct sales, the Stay
Comfortable advertising campaign and the We Promise
or We Pay branded website booking initiative. The We
Promise or We Pay initiative is designed to encourage
guests to book on our branded website, www.redlion.com. Through
this initiative, we guarantee to our guests that our branded
websites will provide the lowest rate available compared to
non-opaque ADS channels. We also launched a marketing campaign
designed specifically to increase awareness of our Net4Guests
and room amenity upgrade programs known as Stay
Comfortable. Net4Guests provides all hotel guests in our
owned and leased hotels access to free high-speed wireless
internet. In addition, GuestAward loyalty program members can
use our hotels as a hot spot at anytime.
Guest Loyalty Program
Our GuestAwards guest loyalty program provides our
customer base with the flexibility to earn air miles with each
qualifying hotel stay or points for every eligible dollar
charged to the guest room. GuestAward points are redeemable for
complimentary hotel stays, air miles or travel, car rental,
merchandise, entertainment and other incentives including stays
at our partner hotels. We continue to actively pursue
cooperative redemption arrangements with marketing partners to
expand the appeal and flexibility of our loyalty plan. In 2005,
we added Outrigger Hotels and Resorts in Hawaii as a redemption
partner to add value to our amenity program.
E-Commerce
We maintain a state of the art hotel reservation system that
allows us to manage single image inventory through our
distribution channels and execute rate management strategies
through channels of distribution including voice, global
distribution systems and internet sites. In addition, we provide
effective and efficient guest service including online hotel
reservations, GuestAwards enrollment and ticketing of
TicketsWest events, through our websites, www.redlion.com
and www.ticketswest.com.
48
We are continuing to see positive results from our strategy of
managing the ADS channels to drive incremental revenue and
increase brand exposure. At the same time, revenue growth on our
branded websites has continued to grow. In 2004, we redeveloped
our branded websites with a focus on ease of use and
comprehensiveness of content. Both conversion and unique visitor
traffic have increased. To help drive traffic to the new web
sites, we joined a leading meta-search referral site, Sidestep,
and are in the process of implementing another. We also
implemented a
state-of-the-art
customer relationship management database and special electronic
offers capability, bringing new levels of service to our
system-wide hotels.
Training and Service
As a continuation of our commitment to guest service and the
development of our associates, we expanded our service training
programs in 2005. These initiatives included establishing
training programs for sales, revenue management, and catering.
We also developed The Red Lion Way, a new service
standard and training designed to provide Red Lion employees
more tools to create a positive and memorable guest experience.
Through this increased level of personal service, we believe we
differentiate our company from our competitors.
Marketing
Our marketing strategy provides quality and value to the hotels
in our system. Through consistent national and regional
messaging in high visibility markets, we reach the majority of
our target segments. In addition, we offer intelligence tools
such as rate management strategies, competitive set benchmarking
and market demand reports to the hotels.
Corporate Purchasing
As a benefit to our franchisees and to maximize the purchasing
power of our system of hotels for key products utilized at the
hotels, we offer corporate purchasing services to all of the
hotels in our system.
Environmental Assessments
In connection with our acquisition of a hotel, a Phase I
environmental assessment is conducted by a qualified independent
environmental engineer. A Phase I environmental assessment
involves researching historical usages of a property, databases
containing registered underground storage tanks and other
matters, including an
on-site inspection, to
determine whether an environmental issue exists with respect to
the property which needs to be addressed. If the results of a
Phase I environmental assessment reveal potential issues, a
Phase II environmental assessment, which may include soil
testing, ground water monitoring or borings to locate
underground storage tanks, will be ordered for further
evaluation if we determine that further investigation is
warranted. It is possible that Phase I and Phase II
environmental assessments will not reveal all environmental
liabilities or compliance concerns or that there will be
material environmental liabilities or compliance concerns of
which we will not be aware. Phase I environmental
assessments have been performed on all properties owned by us
and we expect that all of our future hotel acquisitions will be
subject to a Phase I environmental assessment and, if we
determine it is warranted, a Phase II environmental
assessment.
Competition
The lodging industry is comprised of numerous national, regional
and local hotel companies. We compete against these companies in
the midscale and upscale full service hotel segments of the
industry. Competition for occupancy is focused on three,
approximately equal, major segments of traveler: the business
traveler, which is a significant occupancy driver for our hotel
system; the convention and group business traveler, which
utilizes room nights, meeting space and food and beverage
operations; and the leisure traveler. Marketing efforts
throughout the year are geared towards these three major
segments.
We also compete with other hotel operators and management
companies for hotels to add to our system. Our competitors
include management companies as well as large hotel chains that
own and operate their own hotels and franchise their brands.
49
Trademarks
We have registered the following trademarks with the
U.S. Patent and Trademark Office: Red Lion, WestCoast,
GuestAwards, Net4Guests, Stay Comfortable, TicketsWest, and
G&B. We have also registered some of these trademarks in
Canada and Mexico, and are in the process of obtaining trademark
registrations in Asia and Europe. We also own various
derivatives of these trademarks, each of which is registered
with, or has a registration application pending with, the
U.S. Patent and Trademark Office. Our trademarks and the
associated name recognition are valuable to our business.
Employees
As of December 31, 2005, we employed approximately 3,526
persons on either a full-time or a part-time basis, with 3,105
of such persons in hotel operations and the remainder in our
administrative office and our entertainment and real estate
divisions. Approximately 210 persons working in hotel operations
were covered by various collective bargaining agreements
providing, generally, for basic pay rates, working hours, other
conditions of employment and organized settlement of labor
disputes. We believe our employee relations are satisfactory.
Seasonality and Impact of External Influences
Our business is subject to seasonal fluctuations. Significant
portions of our revenues and profits are realized from May
through October. Our 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 national and
regional economic conditions, including the magnitude and
duration of economic slowdowns and rebounds in the United
States, actual and threatened terrorist attacks and
international conflicts and their impact on travel, and weather
conditions.
Non-core Asset Sales
We continue to focus on our hotel operations and, as a result,
may from time to time seek to opportunistically divest our
interests in non-core assets. On November 23, 2004, our
Board of Directors approved a plan for the sale of 11 hotels, a
commercial office building and other real estate owned by us.
The activities of these hotels and the commercial office
building are considered discontinued operations under generally
accepted accounting principles. The net impact of the operations
of these business units is segregated and separately disclosed
on our consolidated statement of operations, comparative for all
periods presented when they existed. Likewise, the assets and
liabilities of the business are segregated and separately stated
on our consolidated balance sheet for all periods presented when
they existed.
In 2005, we completed the sale of seven of those hotels and our
commercial building, with gross proceeds of $52.8 million.
At March 31, 2006, the remaining properties held for sale
were comprised of the following:
|
|
|
Hotels (included as discontinued operations) |
WestCoast
Ridpath Hotel, Spokane, Washington (265 available rooms)
WestCoast
Outlaw Hotel, Kalispell, Montana (218 available rooms)
Red
Lion Hotel on the Falls, Idaho Falls, Idaho (138 available rooms)
|
|
|
Other Real Estate (included as other assets held for
sale) |
Undeveloped
property, Kennewick, Washington
Undeveloped
property, Pasco, Washington
In 2006, we completed the sale of the Red Lion Hotel Hillsboro
and a portion of the WestCoast Ridpath Hotel in transactions
with gross aggregate proceeds to us of approximately
$5.3 million. Net proceeds from these sales have been and
will be used to finance the renovation program discussed
elsewhere in this prospectus. We continue to actively pursue
disposition of the other hotel properties.
The remaining other real estate is considered held for sale
under generally accepted accounting principles, but does not
meet the definition of a discontinued operation. These assets
held for sale are
50
separately disclosed on our consolidated balance sheet as of
December 31, 2005 and 2004 incorporated by reference in
this prospectus.
OUR PROPERTIES
The following table sets forth a complete listing of all our
hotel properties as of March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | |
|
Meeting | |
|
|
|
|
Available | |
|
Space | |
Property |
|
Location |
|
Rooms | |
|
(sq. ft.) | |
|
|
|
|
| |
|
| |
Red Lion Owned Hotels
|
|
|
|
|
|
|
|
|
|
|
|
Red Lion Hotel Eureka
|
|
Eureka, California |
|
|
175 |
|
|
|
4,890 |
|
|
Red Lion Hotel Redding
|
|
Redding, California |
|
|
192 |
|
|
|
6,800 |
|
|
Red Lion Hotel on the Falls(1)
|
|
Idaho Falls, Idaho |
|
|
138 |
|
|
|
8,800 |
|
|
Red Lion Hotel Pocatello
|
|
Pocatello, Idaho |
|
|
150 |
|
|
|
13,000 |
|
|
Red Lion Templins Hotel on the River
|
|
Post Falls, Idaho |
|
|
163 |
|
|
|
11,000 |
|
|
Red Lion Hotel Canyon Springs
|
|
Twin Falls, Idaho |
|
|
112 |
|
|
|
5,085 |
|
|
Red Lion Colonial Hotel
|
|
Helena, Montana |
|
|
149 |
|
|
|
15,500 |
|
|
Red Lion Hotel Salt Lake Downtown
|
|
Salt Lake City, Utah |
|
|
392 |
|
|
|
12,000 |
|
|
Red Lion Hotel Columbia Center
|
|
Kennewick, Washington |
|
|
162 |
|
|
|
9,700 |
|
|
Red Lion Hotel Olympia
|
|
Olympia, Washington |
|
|
191 |
|
|
|
16,500 |
|
|
Red Lion Hotel Pasco
|
|
Pasco, Washington |
|
|
279 |
|
|
|
17,240 |
|
|
Red Lion Hotel Port Angeles
|
|
Port Angeles, Washington |
|
|
186 |
|
|
|
3,010 |
|
|
Red Lion Hotel Richland Hanford House
|
|
Richland, Washington |
|
|
149 |
|
|
|
9,247 |
|
|
Red Lion Bellevue Inn
|
|
Bellevue, Washington |
|
|
181 |
|
|
|
5,700 |
|
|
Red Lion Hotel on Fifth Avenue
|
|
Seattle, Washington |
|
|
297 |
|
|
|
13,800 |
|
|
Red Lion Hotel Seattle Airport
|
|
Seattle, Washington |
|
|
144 |
|
|
|
4,500 |
|
|
Red Lion Hotel at the Park
|
|
Spokane, Washington |
|
|
400 |
|
|
|
30,000 |
|
|
Red Lion Hotel Yakima Center
|
|
Yakima, Washington |
|
|
153 |
|
|
|
11,000 |
|
Other Owned Hotels
|
|
|
|
|
|
|
|
|
|
|
|
WestCoast Kalispell Center(2)
|
|
Kalispell, Montana |
|
|
132 |
|
|
|
10,500 |
|
|
WestCoast Outlaw Hotel(1)
|
|
Kalispell, Montana |
|
|
218 |
|
|
|
14,000 |
|
|
WestCoast Ridpath Hotel(1)
|
|
Spokane, Washington |
|
|
265 |
|
|
|
5,608 |
|
|
|
|
|
|
|
|
|
|
Owned Hotels (21 properties)
|
|
|
|
|
4,228 |
|
|
|
227,880 |
|
|
|
|
|
|
|
|
|
|
Red Lion Leased Hotels
|
|
|
|
|
|
|
|
|
|
|
|
Red Lion Hotel Sacramento
|
|
Sacramento, California |
|
|
376 |
|
|
|
19,644 |
|
|
Red Lion Hotel Boise Downtowner
|
|
Boise, Idaho |
|
|
182 |
|
|
|
8,600 |
|
|
Red Lion Inn Missoula
|
|
Missoula, Montana |
|
|
76 |
|
|
|
640 |
|
|
Red Lion Inn Astoria
|
|
Astoria, Oregon |
|
|
124 |
|
|
|
5,118 |
|
|
Red Lion Inn Bend North
|
|
Bend, Oregon |
|
|
75 |
|
|
|
2,000 |
|
|
Red Lion Hotel Coos Bay
|
|
Coos Bay, Oregon |
|
|
143 |
|
|
|
5,000 |
|
|
Red Lion Hotel Eugene
|
|
Eugene, Oregon |
|
|
137 |
|
|
|
5,600 |
|
|
Red Lion Hotel Medford
|
|
Medford, Oregon |
|
|
185 |
|
|
|
9,552 |
|
|
Red Lion Hotel Pendleton
|
|
Pendleton, Oregon |
|
|
170 |
|
|
|
9,769 |
|
|
Red Lion Hotel Kelso/ Longview
|
|
Kelso, Washington |
|
|
161 |
|
|
|
8,670 |
|
|
Red Lion River Inn
|
|
Spokane, Washington |
|
|
245 |
|
|
|
2,800 |
|
|
Red Lion Hotel Vancouver (at the Quay)
|
|
Vancouver, Washington |
|
|
160 |
|
|
|
14,785 |
|
|
Red Lion Hotel Wenatchee
|
|
Wenatchee, Washington |
|
|
149 |
|
|
|
7,678 |
|
|
|
|
|
|
|
|
|
|
|
Leased Hotels (13 properties)
|
|
|
|
|
2,183 |
|
|
|
99,856 |
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | |
|
Meeting | |
|
|
|
|
Available | |
|
Space | |
Property |
|
Location |
|
Rooms | |
|
(sq. ft.) | |
|
|
|
|
| |
|
| |
Managed Hotel
|
|
|
|
|
|
|
|
|
|
|
|
The Grove
|
|
Boise, Idaho |
|
|
254 |
|
|
|
36,000 |
|
|
|
|
|
|
|
|
|
|
|
Managed Hotel (1 property)
|
|
|
|
|
254 |
|
|
|
36,000 |
|
|
|
|
|
|
|
|
|
|
Red Lion Franchised Hotels
|
|
|
|
|
|
|
|
|
|
|
|
Red Lion Inn & Suites Victoria
|
|
Victoria, BC Canada |
|
|
85 |
|
|
|
450 |
|
|
Red Lion Hotel Bakersfield
|
|
Bakersfield, California |
|
|
165 |
|
|
|
6,139 |
|
|
Red Lion Hotel Modesto
|
|
Modesto, California |
|
|
186 |
|
|
|
6,600 |
|
|
Red Lion Hanalei Hotel San Diego
|
|
San Diego, California |
|
|
416 |
|
|
|
16,000 |
|
|
Red Lion Hotel Denver Central
|
|
Denver, Colorado |
|
|
297 |
|
|
|
15,206 |
|
|
Red Lion Hotel Denver Downtown
|
|
Denver, Colorado |
|
|
170 |
|
|
|
1,240 |
|
|
Red Lion Hotel Lewiston
|
|
Lewiston, Idaho |
|
|
183 |
|
|
|
12,259 |
|
|
Red Lion Hotel Butte
|
|
Butte, Montana |
|
|
131 |
|
|
|
4,250 |
|
|
Red Lion Hotel & Casino Elko
|
|
Elko, Nevada |
|
|
222 |
|
|
|
3,000 |
|
|
Red Lion Hotel & Casino Winnemucca
|
|
Winnemucca, Nevada |
|
|
105 |
|
|
|
1,271 |
|
|
Red Lion Hotel Lawton
|
|
Lawton, Oklahoma |
|
|
169 |
|
|
|
3,100 |
|
|
Red Lion Inn & Suites McMinnville
|
|
McMinnville, Oregon |
|
|
67 |
|
|
|
1,312 |
|
|
Red Lion Inn Portland Airport
|
|
Portland, Oregon |
|
|
68 |
|
|
|
650 |
|
|
Red Lion Hotel Portland Convention Center
|
|
Portland, Oregon |
|
|
174 |
|
|
|
6,000 |
|
|
Red Lion Hotel Salem
|
|
Salem, Oregon |
|
|
150 |
|
|
|
10,000 |
|
|
Red Lion Hotel Austin
|
|
Austin, Texas |
|
|
300 |
|
|
|
12,000 |
|
|
Red Lion Hotel on the River Jantzen Beach
|
|
Portland, Oregon |
|
|
318 |
|
|
|
35,000 |
|
|
Red Lion Hotel Tacoma
|
|
Tacoma, Washington |
|
|
119 |
|
|
|
750 |
|
|
Red Lion Hotel Seattle South
|
|
Seattle, Washington |
|
|
116 |
|
|
|
3,990 |
|
|
Red Lion Inn at Salmon Creek
|
|
Vancouver, Washington |
|
|
89 |
|
|
|
1,100 |
|
|
Selkirk Lodge at Schweitzer Mountain
a Red Lion Hotel
|
|
Sandpoint, Idaho |
|
|
82 |
|
|
|
8,784 |
|
|
White Pine Lodge at Schweitzer Mountain
a Red Lion Hotel
|
|
Sandpoint, Idaho |
|
|
50 |
|
|
|
4,000 |
|
|
Red Lion Inn Aberdeen(3)
|
|
Aberdeen, Washington |
|
|
66 |
|
|
|
|
|
|
Red Lion Hotel Hillsboro(3)
|
|
Hillsboro, Oregon |
|
|
123 |
|
|
|
3,200 |
|
|
Red Lion Inn Kalispell(3)
|
|
Kalispell, Montana |
|
|
63 |
|
|
|
300 |
|
|
Red Lion Klamath Falls(3)
|
|
Klamath Falls, Oregon |
|
|
108 |
|
|
|
1,200 |
|
|
|
|
|
|
|
|
|
|
Franchised Hotels (26 properties)
|
|
|
|
|
4,022 |
|
|
|
157,801 |
|
|
|
|
|
|
|
|
|
|
|
Total All Hotels (61 properties)
|
|
|
|
|
10,687 |
|
|
|
521,537 |
|
|
|
|
|
|
|
|
|
|
Hotel Summary
|
|
|
|
|
|
|
|
|
|
|
|
Red Lion Hotels (57 properties)
|
|
|
|
|
9,818 |
|
|
|
455,429 |
|
|
Other Hotels (4 properties)
|
|
|
|
|
869 |
|
|
|
66,108 |
|
|
|
|
|
|
|
|
|
|
|
Total All Hotels (61 properties)
|
|
|
|
|
10,687 |
|
|
|
521,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
At March 31, 2006 these hotels were included as part of the
discontinued operations. |
|
|
|
(2) |
This hotel is being expanded by 36 rooms, is under renovation,
and will be reflagged as a Red Lion in 2006. |
|
|
|
(3) |
These hotels were previously part of the discontinued operations
and upon sale entered into temporary transitional franchise
agreements ending in 2006. |
|
52
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information regarding our directors and
executive officers as of the date of this prospectus.
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
|
|
|
|
|
Donald K. Barbieri
|
|
|
60 |
|
|
Chairman of the Board |
Richard L. Barbieri
|
|
|
64 |
|
|
Director |
Arthur M. Coffey
|
|
|
50 |
|
|
President and Chief Executive Officer, Director |
Ryland P. Skip Davis
|
|
|
65 |
|
|
Director |
Jon E. Eliassen
|
|
|
59 |
|
|
Director |
Peter F. Stanton
|
|
|
49 |
|
|
Director |
Ronald R. Taylor
|
|
|
58 |
|
|
Director |
Anupam Narayan
|
|
|
52 |
|
|
Executive Vice President, Chief Investment Officer and Chief
Financial Officer |
John M. Taffin
|
|
|
43 |
|
|
Executive Vice President, Hotel Operations |
Thomas L. McKeirnan
|
|
|
37 |
|
|
Senior Vice President, General Counsel and Secretary |
Donald K. Barbieri. Mr. Barbieri has been a director
since 1978 and Chairman of the Board since 1996. He served as
President and Chief Executive Officer from 1978 until April
2003. Mr. Barbieri joined us in 1969 and was responsible
for our development activities in the hotel, entertainment and
real estate areas. Mr. Barbieri is a past Trustee of
Gonzaga University, Chairman of the Board for the Spokane
Regional Chamber of Commerce, served as President of the Spokane
Chapter of the Building Owners and Managers Association, served
as President of the Spokane Regional Convention and Visitors
Bureau, and served as Chairman of the Spokane United Way
Campaign. Mr. Barbieri chaired the State of
Washingtons Quality of Life Task Force. He has served as
board Chairman for the Inland Northwests largest hospital
system, Sacred Heart Medical Center and was founding president
of the Physician Hospital Community Organization. He has served
three governors on the Washington Economic Development Board and
currently chairs the Spokane County Democratic Election
Committee after being a candidate for the Fifth District US
Congressional Seat from the State of Washington.
Mr. Barbieri is the brother of Richard L. Barbieri.
Richard L. Barbieri. Mr. Barbieri has been a
director since 1978. From 1994 until he retired in December
2003, he served as our full-time General Counsel, first as Vice
President, then Senior Vice President and Executive Vice
President. He currently serves as Chairman of the Board of Puget
Sound Neighborhood Health Centers and as a member of the Board
of the Pike Market Foundation, both non-profit organizations.
From 1978 to 1995, Mr. Barbieri served as legal counsel and
Secretary, during which time he was first engaged in the private
practice of law at Edwards and Barbieri, a Seattle law firm, and
then at Riddell Williams P.S., a Seattle law firm.
Mr. Barbieri has also served as chairman of various
committees of the Washington State Bar Association and the King
County (Washington) Bar Association, and as a member of the
governing board of the King County bar association. He also
served as Vice Chairman of the Citizens Advisory Committee
to the Major League Baseball Stadium Public Facilities District
in Seattle in 1996 and 1997. Mr. Barbieri is the brother of
Donald K. Barbieri.
Arthur M. Coffey. Mr. Coffey has been a director
since 1990 and has served as our President and Chief Executive
Officer since April 2003. Mr. Coffey has over 30 years
experience in the hospitality industry and has been with Red
Lion Hotels Corporation since 1981. He has held a variety of
management positions with us, including Executive Vice
President, Chief Financial Officer, and Chief Operating Officer.
Mr. Coffey played a key role in our initial public offering
and listing on the NYSE in 1998. He possesses a unique
combination of expertise in development, operations and
financial disciplines and during his tenure we have grown from
ownership of three hotels into a multi-division hospitality
company that owns, manages and franchises more than 60 hotels.
He previously served as trustee of the Spokane Area Chamber of
Commerce, director of the Washington State Hotel Association,
and President of the Spokane Hotel Association. Mr. Coffey
continues
53
to remain active in the business association community and is
currently a director at the Association of Washington Business.
He also serves on the board for the Inland Northwest Council,
Boy Scouts of America.
Ryland P. Skip Davis. Mr. Davis has been
a director since May 2005. He has served as Chief Executive
Officer of Providence Health Care since 1998 and Chief Executive
Officer of Sacred Heart Medical Center in Spokane since 1996.
From 1993 to 1996, Mr. Davis was Senior Vice President for
the Hunter Group, a hospital management firm specializing in
healthcare consulting and management nationally. From 1988 to
1993, he was Chairman and Chief Executive Officer of Synergos
Neurological Centers, Inc., in Santa Ana and Sacramento,
California. From 1987 to 1988, he was President of Diversified
Health Group, Inc., of Sacramento. From 1982 to 1987, he worked
for American Health Group International as President and Chief
Executive Officer of Amerimed in Burbank, California, and as
Executive Vice President of Operations. From 1981 to 1982, he
worked for Hospital Affiliates International, as Group Vice
President in Sacramento, and as Chief Executive Officer of
Winona Memorial Hospital in Indianapolis, Indiana. From 1972 to
1975, he was Associate Administrator of San Jose Hospital
and Health Care Center in San Jose, California and from
1968 to 1971, Assistant Administrator of Alta Bates Hospital in
Berkeley, California. He has been involved in numerous private
business ventures related to healthcare. Mr. Davis is a
Fellow of the American College of Health Care Executives and has
published articles in Modern Healthcare,
Health Week, and other business publications
regarding healthcare issues and perspectives. Mr. Davis is
currently on the Board and is Chair of the Spokane Area Chamber
of Commerce, on the Boy Scouts of America Inland Northwest
Council Board, and a member of the Washington State University
Advisory Council.
Jon E. Eliassen. Mr. Eliassen has been a director
since September 2003. Mr. Eliassen is currently President
and Chief Executive Officer of the Spokane Area Economic
Development Council. Mr. Eliassen retired in 2003 from his
position as Senior Vice President and Chief Financial Officer of
Avista Corp., a publicly-traded diversified utility.
Mr. Eliassen spent 33 years at Avista, including the
last 16 years as its Chief Financial Officer. While at
Avista, Mr. Eliassen was an active participant in the
development of a number of successful subsidiary company
operations, including technology related startups Itron, Avista
Labs and Avista Advantage. Mr. Eliassen serves on the Board
of Directors of Itron Corporation, IT Lifeline, Inc, and is the
principal of Terrapin Capital Group, LLC.
Mr. Eliassens corporate accomplishments are
complemented by his extensive service to the community in roles
which have included director and President of the Spokane
Symphony Endowment Fund, director of The Heart Institute of
Spokane, Washington State University Research Foundation,
Washington Technology Center, Spokane Intercollegiate Research
and Technology Institute and past director of numerous other
organizations and energy industry associations.
Peter F. Stanton. Mr. Stanton has been a director
since April 1998. Mr. Stanton has served as the Chief
Executive Officer of Washington Trust Bank since 1993 and
its Chairman since 1997. Mr. Stanton previously served as
President of Washington Trust Bank from 1990 to 2000.
Mr. Stanton is also Chief Executive Officer, President and
a director of W.T.B. Financial Corporation (a bank holding
company). In addition to serving on numerous state and local
civic boards, Mr. Stanton was President of the Washington
Bankers Association from 1995 to 1996 and served as Washington
state chairman of the American Bankers Association in 1997 and
1998. He currently serves as a National Trustee for the
Boys and Girls Club of America.
Ronald R. Taylor. Mr. Taylor has been a director
since April 1998. Mr. Taylor is President of Tamarack Bay,
LLC, a private consulting firm and is currently a director of
two other public companies, Watson Pharmaceuticals, Inc. (a
pharmaceutical manufacturer) and ResMed, Inc. (a manufacturer of
equipment relating to the management of sleep-disordered
breathing). Mr. Taylor is also Chairman of the Board of
three privately held companies. From 1998 to 2002,
Mr. Taylor was a general partner of Enterprise Partners, a
venture capital firm. From 1996 to 1998, Mr. Taylor worked
as an independent business consultant. From 1987 to 1996,
Mr. Taylor was Chairman, President and Chief Executive
Officer of Pyxis Corporation (a health care service provider),
which he founded in 1987. Prior to founding Pyxis, he was an
executive with both Allergan Pharmaceuticals and Hybritech, Inc.
Anupam Narayan. Mr. Narayan is our Executive Vice
President and Chief Investment Officer and Chief Financial
Officer. He has been with us since November 2004.
Mr. Narayan has nearly 25 years of experience in the
hospitality industry. From 1998 to March 2004, he served in
various capacities as an
54
executive officer of Best Western International Inc., including
his most recent position as Senior Vice President, Global Brand
Management and Chief Financial Officer and a three-month period
as Acting President and Chief Executive Officer during 2002.
From 1985 to 1998, Mr. Narayan was employed by Doubletree
Corporation and Red Lion Hotels, Inc., serving as Senior Vice
President and Treasurer, respectively, immediately prior to his
move to Best Western.
John M. Taffin. Mr. Taffin has been our Executive
Vice President, Hotel Operations since September 2003. He
originally joined us in 1995 and held the position of Regional
Manager from November 1995 to July 1997 and Vice President Hotel
Operations from August 1997 to September 2002. From August 2002
to August 2003 he was managing partner of Yogo Inn of Lewistown,
Inc., a Montana based hotel company. Mr. Taffin started his
hospitality industry career with Red Lion Hotels in 1982. During
the period from 1982 to 1986 he held mid-management positions
with Red Lion Hotels in Idaho, Washington and Oregon. In 1986 he
was promoted to General Manager and during the following nine
years managed Red Lion Hotels in Idaho, Washington, Oregon and
California. He has served as the President of the Washington
State Hotel and Lodging Association and as a board member of the
Spokane Public Facilities District, the Spokane Lodging Tax
Advisory Committee and the Washington State Tourism Advisory
Committee.
Thomas L. McKeirnan. Mr. McKeirnan has been our
Senior Vice President, General Counsel and Secretary since
February 2005. Prior to that time he served as Vice President,
General Counsel and Secretary from January 2004 through February
2005 and Vice President, Assistant General Counsel from July
2003 to January 2004. Prior to joining us, Mr. McKeirnan
was a partner at the Spokane, Washington law firm of Paine
Hamblen Cofflin Brooke & Miller LLP from January 2002
until July 2003 and an associate attorney at the same firm from
1999 to 2001. Mr. McKeirnan was also an associate attorney
with the Seattle, Washington law firm of Riddell Williams P.S.
from 1995 until 1999. Mr. McKeirnans private legal
practice focused on corporate, transactional, real estate and
securities law, with an emphasis on the hospitality industry.
While in private practice, Mr. McKeirnan represented us as
outside counsel on various strategic and transactional matters
and also represented WestCoast Hotels, Inc. prior to our
acquisition of that company.
Corporate Governance Profile
We believe that we have organized many aspects of our corporate
structure and governance to align our interests with those of
our shareholders. For example:
|
|
|
|
|
our board of directors consists of seven directors, six of whom
are non-employee directors, and four of whom are
independent directors with independence being
determined in accordance with the listing standards established
by the NYSE, and our board of directors makes an affirmative
determination of the independence of each of our directors on an
annual basis; |
|
|
|
our Chairman of the Board is a non-employee director; |
|
|
|
our non-employee directors generally hold executive sessions
without management following each regularly scheduled meeting of
the Board; |
|
|
|
we have adopted a Code of Business Conduct and Ethics, which
addresses, among other things, corporate opportunity and
conflicts of interest issues relevant to our directors,
executive officers and employees; |
|
|
|
we do not have a shareholder rights plan; and |
|
|
|
we have adopted corporate governance guidelines that, among
other things, specify director responsibilities and
qualifications and require our board to conduct an annual
self-evaluation. |
Related-Party Transactions
We conducted various business transactions during 2005, 2004 and
2003 with entities in which certain of our directors and/or
shareholders held ownership interests. The transactions were
limited to the following: our performing certain management and
administrative functions for the entities; our receipt of
commissions for real estate sales for the entities; our leasing
of office space to the entities; and purchases by us from the
entities
55
of products for use in our hotels and restaurants. The total
aggregate value of these transactions in 2005, 2004 and 2003 was
$282 thousand, $398 thousand, and $330 thousand, respectively.
During 2005, 2004 and 2003, we held certain cash and investment
accounts at Washington Trust Bank and had certain notes
payable to this bank. The chairman and chief executive officer
of Washington Trust Bank is a director of our company. At
December 31, 2005 and 2004, we held cash and investment
accounts at this bank totaling approximately $0.5 million
and $3.9 million, respectively, and we had notes payable to
this bank totaling approximately $7.9 million and
$4.5 million, respectively. Our net interest expense paid
to this bank was $172 thousand, $205 thousand, and $312 thousand
during 2005, 2004 and 2003, respectively. Additionally, we
manage this banks corporate office building under the
terms of a management agreement. Management fees from this
agreement during 2005, 2004 and 2003 were $127 thousand, $124
thousand, and $121 thousand, respectively.
It is our policy that any material transaction (or series of
related transactions) between our company and a related party be
approved by a majority of our non-conflicted directors upon such
directors determination that the terms of the transaction
are no less favorable to our company than those that could be
obtained from an unrelated third party.
56
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of our
common stock as of March 31, 2006, by (i) each
shareholder known by us to be the beneficial owner of more than
5% of our outstanding common stock, (ii) each director,
(iii) each named executive officer and (iv) all
directors and executive officers as a group.
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Percentage of |
Beneficial Owner |
|
Shares Owned(1) |
|
Common Stock(1) |
|
|
|
|
|
Donald K. Barbieri(2)(3)
|
|
|
1,856,516 |
|
|
|
13.9 |
% |
Heather H. Barbieri(2)(4)
|
|
|
1,794,813 |
|
|
|
13.5 |
% |
WM Advisors, Inc.(5)
|
|
|
1,392,945 |
|
|
|
10.4 |
% |
Wellington Management Company, LLP(6)
|
|
|
1,223,300 |
|
|
|
9.2 |
% |
Wells Fargo & Company(7)
|
|
|
1,135,800 |
|
|
|
8.5 |
% |
Dimensional Fund Advisors Inc.(8)
|
|
|
946,800 |
|
|
|
7.1 |
% |
Barington Companies Equity Partners, L.P.(9)
|
|
|
865,700 |
|
|
|
6.5 |
% |
DKB and HHB Unity Trust(10)
|
|
|
759,366 |
|
|
|
5.7 |
% |
David M. Bell(11)
|
|
|
566,816 |
|
|
|
4.2 |
% |
Richard L. Barbieri
|
|
|
414,730 |
|
|
|
3.1 |
% |
Arthur M. Coffey(12)
|
|
|
85,162 |
|
|
|
* |
|
Ronald R. Taylor(13)
|
|
|
34,126 |
|
|
|
* |
|
Peter F. Stanton(14)
|
|
|
19,126 |
|
|
|
* |
|
John M. Taffin(15)
|
|
|
13,726 |
|
|
|
* |
|
Jon E. Eliassen
|
|
|
11,000 |
|
|
|
* |
|
Thomas L. McKeirnan(16)
|
|
|
8,870 |
|
|
|
* |
|
Anupam Narayan
|
|
|
7,414 |
|
|
|
* |
|
Ryland P. Skip Davis
|
|
|
2,999 |
|
|
|
* |
|
|
All directors and executive officers as a group (10 persons)
(17)
|
|
|
2,453,669 |
|
|
|
18.4 |
% |
|
|
|
|
* |
Represents less than 1% of the outstanding common stock. |
|
|
|
|
(1) |
For purposes of this table, a person is deemed to have
beneficial ownership of shares of common stock if
such person has the right to acquire beneficial ownership of
such shares within 60 days. For purposes of computing the
percentage of outstanding shares held by each person named
above, any security that such person has the right to acquire
within 60 days after March 31, 2006 is deemed to be
outstanding, but is not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person. |
|
|
(2) |
The shares shown for this beneficial owner include
759,366 shares held by the DKB & HHB Unity Trust
(see footnote 10), as required by the rules of the SEC. |
|
|
(3) |
Mr. Barbieris address is 201 W. North River
Dr., Suite 360, Spokane, Washington 99201. Includes
22,418.50 shares that may be issued to Donald K. Barbieri
if he elects to have a like number of OP Units that he
holds redeemed by the Partnership. |
|
|
(4) |
Ms. Barbieris address is 201 W. North River
Dr., Suite 100, Spokane, Washington 99201. Includes
2,500 shares subject to options exercisable within
60 days of March 31, 2006. Also includes
558,700 shares held by the Heather M. Barbieri Family LLC
of which Ms. Barbieri is a beneficiary but disclaims
beneficial ownership except to the extent of her beneficial
interest therein. Also includes 22,418.50 shares that may
be issued to Ms. Barbieri if she elects to have a like
number of OP Units that she holds redeemed by the
Partnership. |
|
|
(5) |
The address for this beneficial owner is 1201 Third Avenue,
22nd Floor, Seattle, Washington 98101. The shares shown for
this beneficial owner are based solely on the Schedule 13G
filed by this beneficial owner on February 28, 2006. |
57
|
|
|
|
(6) |
The address for this beneficial owner is 75 State Street,
Boston, Massachusetts 02109. The shares shown for this
beneficial owner are based solely on the Schedule 13G filed
by this beneficial owner on February 16, 2006. |
|
|
(7) |
The address for this beneficial owner is 420 Montgomery Street,
San Francisco, California 94104. The shares shown for this
beneficial owner are based solely on the Schedule 13G filed
by this beneficial owner on February 17, 2006. |
|
|
(8) |
The address for this beneficial owner is 1299 Ocean Ave.,
11th Floor, Santa Monica, California 90401. The shares
shown for this beneficial owner are based solely on the
Schedule 13G filed by this beneficial owner on
February 6, 2006. |
|
|
(9) |
The address for this beneficial owner is 888 Seventh Avenue,
17th Floor, New York, NY 10019. The shares shown for this
beneficial owner are based solely on the Schedule 13D filed
by this beneficial owner on July 18, 2005. |
|
|
(10) |
The address for this beneficial owner is 201 W. North
River Dr., Suite 360, Spokane, Washington 99201. This
beneficial owner is an irrevocable trust of which Donald K.
Barbieri and Heather H. Barbieri are co-trustees. The shares
held by this trust are also included in the number of shares
shown for Mr. Barbieri and Ms. Barbieri.
Mr. Barbieri and Ms. Barbieri disclaim beneficial
ownership of the trusts shares. Beneficial ownership of
these shares is required to be duplicated in each of Don
Barbieris and Heather Barbieris respective share
counts. |
|
(11) |
On March 29, 2006, David M. Bell, Executive Vice President,
Development, announced his intention to retire from our company
on or before February 28, 2007. Since that announcement,
Mr. Bell has not served as an executive officer of our
company. The shares shown for Mr. Bell include
40,706 shares subject to options exercisable within
60 days of March 31, 2006. |
|
(12) |
Includes 53,812 shares subject to options exercisable
within 60 days of March 31, 2006. |
|
(13) |
Includes 10,600 shares subject to options exercisable
within 60 days of March 31, 2006. |
|
(14) |
Includes 10,600 shares subject to options exercisable
within 60 days of March 31, 2006. |
|
(15) |
Includes 7,030 shares subject to options exercisable within
60 days of March 31, 2006. |
|
(16) |
Includes 2,612 shares subject to options exercisable within
60 days of March 31, 2006. |
|
(17) |
Includes 84,654 shares subject to options exercisable
within 60 days of March 31, 2006. Also includes
22,418.50 shares that may be issued to a member of this
group if he elects to have a like number of OP Units that
he holds redeemed by the Partnership. |
DESCRIPTION OF CAPITAL STOCK
This summary does not purport to be complete and is subject to,
and qualified in its entirety by, the provisions of our restated
articles of incorporation, and all applicable provisions of
Washington law.
General
We are authorized to issue fifty million shares of common stock,
par value $.01 per share and five million shares of
preferred stock, par value of $.01 per share. As of the
close of business on March 31, 2006, there were
13,299,022 shares of common stock issued and outstanding
and no shares of preferred stock issued and outstanding.
Common Stock
Each holder of common stock is entitled to one vote for each
share held on all matters to be voted upon by the shareholders
and there are no cumulative voting rights. Holders of common
stock are entitled to receive ratably the dividends, if any,
that are declared from time to time by the board of directors
out of funds legally available for that purpose. In the event of
a liquidation, dissolution or winding up of the company, the
holders of common stock are entitled to share in our assets
remaining after the payment of liabilities and the satisfaction
of any liquidation preference granted to the holders of any
outstanding shares of preferred stock.
58
Holders of common stock have no preemptive or subscription
rights to subscribe for additional shares of our capital stock.
The rights, preferences and privileges of the holders of common
stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock
that we may designate in the future.
Preferred Stock
The board of directors has the authority, without action by the
shareholders, to designate and issue preferred stock in one or
more series and to designate the rights, preferences and
privileges of each series, which may be greater than the rights
of the common stock. No shares of preferred stock are
outstanding, and we have no present plans to issue any shares of
preferred stock.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is
American Stock Transfer and Trust Company.
Listing
Our shares of common stock are quoted on the NYSE under the
symbol RLH.
SELLING SHAREHOLDERS
The following table presents information regarding the selling
shareholders and the number of shares they will sell pursuant to
this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership |
|
|
|
Beneficial Ownership |
|
|
Prior to the Offering |
|
|
|
After the Offering |
|
|
|
|
Number of Shares |
|
|
Name |
|
Shares |
|
Percentage |
|
Offered Hereby |
|
Shares |
|
Percentage |
|
|
|
|
|
|
|
|
|
|
|
Richard L. Barbieri(1)
|
|
|
414,730 |
|
|
|
3.1 |
% |
|
|
200,000 |
|
|
|
214,730 |
|
|
|
1.2 |
% |
Mark E. Barbieri(2)
|
|
|
400,000 |
|
|
|
3.0 |
% |
|
|
200,000 |
|
|
|
200,000 |
|
|
|
1.1 |
% |
Barbieri Exempt Marital Trust(3)
|
|
|
377,488 |
|
|
|
2.8 |
% |
|
|
100,000 |
|
|
|
277,488 |
|
|
|
1.5 |
% |
Dunson Ridpath Hotel Associates Limited Partnership(4)
|
|
|
135,344 |
|
|
|
1.0 |
% |
|
|
135,344 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
Richard L. Barbieri is a director of our company. |
|
(2) |
Mark E. Barbieri is the brother of Richard L. Barbieri and
Donald K. Barbieri. Mark Barbieri is not an officer, director or
employee of our company. |
|
|
(3) |
The sole trustee and beneficiary of the Barbieri Exempt Marital
Trust is Kathryn K. Barbieri, who is the mother of Richard L.
Barbieri, Donald K. Barbieri and Mark E. Barbieri.
Ms. Barbieri is not an officer, director or employee of our
company. |
|
|
|
(4) |
Dunson Ridpath Hotel Associates Limited Partnership is a former
limited partner of Red Lion Hotels Limited Partnership. |
|
59
UNDERWRITING
JMP Securities LLC is acting as representative of the
underwriters of this offering. Subject to the terms and
conditions in an underwriting agreement entered into in
connection with the sale of the shares of our common stock
described in this prospectus and dated the date of this
prospectus, the underwriters named below have severally agreed
to purchase the number of shares of our common stock set forth
opposite their respective names.
|
|
|
|
|
|
|
|
Number of Shares |
Underwriter |
|
of Common Stock |
|
|
|
JMP Securities LLC
|
|
|
|
|
Thomas Weisel Partners LLC
|
|
|
|
|
Robert W. Baird & Co. Incorporated
|
|
|
|
|
Calyon Securities (USA) Inc.
|
|
|
|
|
|
Total
|
|
|
|
|
Our common stock is listed on the NYSE under the symbol
RLH.
The underwriting agreement provides that the obligations of the
underwriters to purchase and accept delivery of the shares of
our common stock included in this offering are subject to the
approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to
purchase and accept delivery of all of the shares of our common
stock included in this offering (other than those covered by the
over-allotment option described below) if they purchase any such
shares. Unless the underwriters exercise their over-allotment
option, the underwriters are not required to take or pay for the
shares covered by the underwriters over-allotment option
described below.
The underwriters propose to initially offer the shares of our
common stock included in this offering directly to the public at
the public offering price set forth on the cover page of this
prospectus and to certain dealers at the public offering price
less a concession not to exceed
$ per
share. The underwriters may allow, and these dealers may
reallow, a concession not to exceed
$ per
share on sales to other dealers. After the initial offering of
the shares of our common stock included in this offering to the
public, the underwriters may change the offering price, these
concessions and certain other selling terms from time to time.
The underwriters do not intend to confirm sales to any accounts
over which they exercise discretionary authority.
The following table shows the underwriting discounts and
commissions that we and the selling shareholders are to pay to
the underwriters in connection with this offering. For us, these
amounts are shown assuming both no exercise and full exercise of
the underwriters over-allotment option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid by Us |
|
|
|
|
|
|
|
|
|
No Exercise |
|
Full Exercise |
|
Paid by Selling Shareholders |
|
|
|
|
|
|
|
Per share
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
We estimate that our portion of the total expenses of this
offering will be
$ .
We have granted to the underwriters an option, exercisable for
30 days from the date of the underwriting agreement, to
purchase up to an aggregate of 845,302 additional shares of
our common stock at the public offering price listed on the
cover page of this prospectus, less underwriting discounts and
commissions. The underwriters may exercise this option solely
for the purpose of covering over-allotments, if any, made in
connection with this offering. To the extent the option is
exercised, each underwriter will become obligated, subject to
certain conditions, to purchase a number of additional shares
approximately proportionate to that underwriters initial
purchase commitment.
We and the selling shareholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the
underwriters may be required to make because of any such
liabilities.
60
We have agreed that, without the prior written consent of JMP
Securities LLC, as representative of the underwriters, we will
not, during the period ending 90 days after the date of
this prospectus:
|
|
|
|
|
sell, offer, contract to sell, sell any option or contract to
purchase (including, without limitation, any short sale),
purchase any option or contract to sell, pledge, transfer, grant
any option, right or warrant for the sale of, establish or
increase an open put equivalent position within the
meaning of
Rule 16a-1(h)
under the Exchange Act, liquidate or decrease a call equivalent
position within the meaning of
Rule 16a-1(b)
under the Exchange Act, or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or
securities convertible into or exchangeable or exercisable for
any shares of our common stock or enter into any transactions
that would have the same effect; |
|
|
|
file or cause to be filed or participate in the filing of any
registration statement under the Securities Act relating to any
shares of our common stock not included in this offering; |
|
|
|
engage in any hedging or other transaction which is designed to
or reasonably expected to lead to or result in a disposition of
our securities prohibited during the
90-day
lock-up period, even if
such securities would be disposed of by someone other than the
holder of such securities; or |
|
|
|
|
publicly disclose the intention to take any of the above actions; |
|
whether any transaction described above is to be settled by
delivery of our common stock or other securities, in cash or
otherwise.
The restrictions described in the immediately preceding
paragraph do not apply to:
|
|
|
|
|
the sale to the underwriters of the shares of our common stock
included in this offering; |
|
|
|
|
the issuance by us of shares of our common stock or embedded
options under our employee stock purchase plan, provided that
any option so issued may not be exercised during the
90-day
lock-up period; or |
|
|
|
|
|
grants of stock options pursuant to the terms of a benefit plan
in effect on the date of this prospectus, provided that any
option so issued may not be exercised during the
90-day
lock-up period. |
|
Our directors and executive officers and the selling
shareholders have agreed that, without the prior written consent
of the representative of the underwriters, they will not, during
the period ending 90 days after the date of this prospectus:
|
|
|
|
|
sell, offer, contract to sell, sell any option or contract to
purchase (including, without limitation, any short sale),
purchase any option or contract to sell, pledge, transfer, grant
any option, right or warrant for the sale of, establish or
increase an open put equivalent position within the
meaning of
Rule 16a-1(h)
under the Exchange Act, liquidate or decrease a call equivalent
position within the meaning of
Rule 16a-1(b)
under the Exchange Act, or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or
securities convertible into or exchangeable or exercisable for
any shares of our common stock or enter into any transactions
that would have the same effect; |
|
|
|
file or cause to be filed or participate in the filing of any
registration statement under the Securities Act relating to any
shares of our common stock not included in this offering; |
|
|
|
engage in any hedging or other transaction which is designed to
or reasonably expected to lead to or result in a disposition of
our securities prohibited during the
90-day
lock-up period, even if
such securities would be disposed of by someone other than the
holder of such securities; or |
|
|
|
|
publicly disclose the intention to take any of the above actions; |
|
whether any transaction described above is to be settled by
delivery of our common stock or other securities, in cash or
otherwise.
61
The restrictions described in the immediately preceding
paragraph do not apply to:
|
|
|
|
|
the sale to the underwriters of the shares of our common stock
included in this offering; |
|
|
|
|
sales under any written trading plans dated prior to
March 22, 2006 that are in compliance with
Rule 10b5-1 of the
Exchange Act; or |
|
|
|
|
|
any election by a limited partner of the Partnership to exercise
his or her right under that certain Amended and Restated
Agreement of Limited Partnership of Red Lion Hotels Limited
Partnership dated November 1, 1997, as amended prior to
March 15, 2006 (the Agreement of Limited Partnership), to
put his or her outstanding OP Units, in which event
(a) the Partnership must redeem such units for cash or
(b) we must acquire such units for cash or in exchange for
an equal number of shares of our common stock pursuant to the
terms of the Agreement of Limited Partnership; provided,
however, the restrictions in the immediately preceding paragraph
shall apply to any shares of our common stock received in
exchange for OP Units pursuant to the Agreement of Limited
Partnership. |
|
In connection with this offering the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the
price of the common stock. The representative, on behalf of the
underwriters, may purchase and sell shares of our common stock
in the open market. These transactions may include short sales,
syndicate covering transactions and stabilizing transactions.
Short sales involve syndicate sales of common stock in excess of
the number of shares to be purchased by the underwriters in the
offering, creating a syndicate short position.
Covered short sales are sales of shares made in an
amount up to the number of shares represented by the
underwriters over-allotment option. The underwriters can
close out a covered short sale by exercising the over-allotment
option or purchasing shares in the open market after the
distribution. In determining the source of shares to close out
the covered syndicate short position, the underwriters will
consider, among other things, the price of shares available for
purchase in the open market as compared to the price at which
they may purchase shares through the over-allotment option. The
underwriters may also make naked short sales of
shares in excess of the over-allotment option. The underwriters
must close out any naked short position by purchasing shares of
common stock in the open market. A naked short position is more
likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the shares in the
open market after pricing that could adversely affect investors
who purchase in the offering. In addition, to stabilize the
price of the common stock, the underwriters may bid for, or
purchase, shares in the open market while the offering is in
progress.
The underwriters also may impose a penalty bid. Penalty bids
permit the underwriters to reclaim a selling concession from a
syndicate member when the representative of the underwriters
repurchases shares originally sold by such syndicate member in
order to cover syndicate short positions or make stabilizing
purchases.
Any of these activities may have the effect of preventing or
retarding a decline in the market price of the common stock.
They may also cause the price of the common stock to be higher
than the price that would otherwise exist in the open market in
the absence of these transactions. The underwriters may conduct
these transactions on the NYSE or in the
over-the-counter
market, or otherwise. If the underwriters commence any of these
transactions, they may discontinue them at any time.
A prospectus in electronic format may be made available on the
websites maintained by one or more of the underwriters. The
representative of the underwriters may agree to allocate a
number of shares to underwriters for sale to their online
brokerage account holders. The representative of the
underwriters will allocate shares to underwriters that may make
Internet distributions on the same basis as other allocations.
In addition, shares may be sold by the underwriters to
securities dealers who resell shares to online brokerage account
holders.
62
LEGAL MATTERS
The validity of the common stock offered hereby will be passed
upon for us by Riddell Williams P.S. Certain legal matters will
be passed upon for the underwriters by OMelveny &
Myers LLP, San Francisco, California.
EXPERTS
The consolidated financial statements incorporated by reference
in this prospectus have been audited by BDO Seidman, LLP, an
independent registered public accounting firm, to the extent and
for the periods set forth in their reports incorporated herein
by reference, and are incorporated herein in reliance upon such
report given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements
and other information with the SEC. You can find our SEC
filings, including the registration statement, over the Internet
at the SECs web site at www.sec.gov. You may read
and copy any document we file with the SEC at the SECs
public reference room at 100 F Street N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for more
information about the public reference room. You may also obtain
copies of the documents at prescribed rates by writing to the
Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Our SEC filings are also
available free of charge through our website at
www.redlion.com.
This prospectus is part of a registration statement that we
filed with the SEC (Registration
No. 333-133287).
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference
information into this prospectus, which means that we can
disclose important information to you by referring you to
information in another document we have filed with the SEC. This
information that we incorporate by reference is considered part
of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information.
We are incorporating by reference the following documents filed
by us with the SEC:
|
|
|
|
|
|
our Annual Report on
Form 10-K for the
fiscal year ended December 31, 2005; |
|
|
|
|
|
our Proxy Statement submitted to shareholders in connection with
our 2006 Annual Meeting of Shareholders; |
|
|
|
|
|
our Current Report on
Form 8-K filed
with the SEC on February 8, 2006; |
|
|
|
|
|
our Current Report on
Form 8-K filed
with the SEC on February 22, 2006; |
|
|
|
|
|
our Current Report on
Form 8-K filed
with the SEC on March 1, 2006; |
|
|
|
|
|
our Current Report on
Form 8-K filed
with the SEC on April 17, 2006; and |
|
|
|
|
|
the description of our common stock contained in our
registration statement on Form S 1/ A filed
with the SEC on March 10, 1998, including any amendment or
reports filed for the purpose of updating that description. |
|
We are also incorporating by reference any additional documents
that we may file with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act before termination of this
offering.
63
We will provide without charge to each person, including any
beneficial owner of our common stock, to whom this prospectus is
delivered, upon written or oral request, a copy of any and all
of the documents that have been incorporated by reference in the
prospectus but not delivered with this prospectus (without
exhibits, unless the exhibits are specifically incorporated by
reference but not delivered with this prospectus). Requests
should be directed to:
Thomas L. McKeirnan
Senior Vice President, General Counsel and Secretary
Red Lion Hotels Corporation
201 W. North River Drive, Suite 100
Spokane, WA 99201
509-459-6100
64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
Item 14. |
Other Expenses of Issuance and Distribution |
The expenses of this offering in connection with this
registration statement are estimated as follows:
|
|
|
|
|
|
SEC registration fee
|
|
$ |
8,633.19 |
|
NASD filing fee
|
|
$ |
* |
|
NYSE listing fee
|
|
$ |
24,000.00 |
|
Printing expenses
|
|
$ |
* |
|
Legal fees and expenses
|
|
$ |
* |
|
Accounting fees and expenses
|
|
$ |
* |
|
Transfer agent and registrar fees and expenses
|
|
$ |
* |
|
Miscellaneous fees and expenses
|
|
$ |
* |
|
|
|
|
|
|
Total
|
|
$ |
* |
|
|
|
|
|
|
|
* |
To be furnished by amendment. |
|
|
Item 15. |
Indemnification of Directors and Officers |
The Amended and Restated By-Laws (By-Laws) and
Amended and Restated Articles of Incorporation (the
Articles) of Red Lion Hotels Corporation (the
Company) provide that the Company shall, to the full
extent permitted by the Washington Business Corporation Act (the
WBCA), as amended from time to time, indemnify all
directors and officers of the Company. In addition, the Articles
contain a provision eliminating the personal liability of
directors to the Company or its shareholders for monetary damage
arising out of a breach of fiduciary duty.
Chapter 23B.08.510 and .570 of the WBCA authorizes a
corporation to indemnify its directors, officers, employees, or
agents in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities
(including provisions permitting advances for reasonable
expenses incurred) arising under the Securities Act.
Pursuant to Chapter 23B.08.580 of the WBCA, the Board of
Directors (the Board) may authorize, by a vote of a
majority of a quorum of the Board, the Company to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company, or is or
was serving at the request of the Company as a director,
officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Company would have the
power to indemnify him against such liability under
Chapter 23B.08.510 or 23B.08.520 of the WBCA. The Board has
authorized the Company to purchase and maintain appropriate
policies of insurance on behalf of the Companys directors
and officers against liabilities asserted against any such
person arising out of his or her status as such. The Board may
authorize the Company to enter into a contract with any person
who is or was a director, officer, partner, trustee, employee or
agent of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another
partnership, joint venture, trust, employee benefit plan or
other enterprise providing for indemnification rights equivalent
to or, if the Board so determines, greater than those provided
for in the By-Laws. The Board has authorized the Company to
enter into contracts providing for indemnification with any
person who is or was a director or officer of the Company.
The Company has entered into employment agreements with certain
members of management containing provisions entitling the
executive to indemnification for losses incurred in the course
of service to the Company or its subsidiaries, under certain
circumstances.
II-1
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
1 |
.1* |
|
Underwriting Agreement |
|
3 |
.1(1) |
|
Amended and Restated Articles of Incorporation |
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3 |
.2(2) |
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Amended and Restated By-Laws |
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4 |
.1(3) |
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Specimen Common Stock Certificate |
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4 |
.2(4) |
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Certificate of Trust of Red Lion Hotels Capital Trust |
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4 |
.3(4) |
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Declaration of Trust of Red Lion Hotels Capital Trust |
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4 |
.4(5) |
|
Amended and Restated Declaration of Trust of Red Lion Hotels
Capital Trust |
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4 |
.5(5) |
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Indenture for 9.5% Junior Subordinated Debentures Due
February 24, 2044 |
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4 |
.6(5) |
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Form of Certificate for 9.5% Trust Preferred Securities
(Liquidation Amount of $25 per Trust Preferred Security) of
Red Lion Hotels Capital Trust (included in Exhibit 4.4 as
Exhibit A-1) |
|
4 |
.7(5) |
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Form of 9.5% Junior Subordinated Debenture Due February 24,
2044 (included in Exhibit 4.5 as Exhibit A) |
|
4 |
.8(5) |
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Trust Preferred Securities Guarantee Agreement dated
February 24, 2004 |
|
4 |
.9(5) |
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Trust Common Securities Guarantee Agreement dated
February 24, 2004 |
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5 |
* |
|
Opinion of Riddell Williams P.S. |
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10 |
.1(6) |
|
Employment Agreement dated March 1, 1998 between the
registrant and David M. Bell |
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10 |
.2(3) |
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Employee Stock Purchase Plan |
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10 |
.3(7) |
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1998 Stock Incentive Plan |
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10 |
.4(3) |
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Form of Restricted Stock Award Agreement |
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10 |
.5(6) |
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Form of Nonqualified Stock Option Agreement |
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10 |
.6(8) |
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Form of Notice of Grant of Stock Options and Option Agreement |
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10 |
.7(9) |
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Executive Employment Agreement dated April 13, 2003 between
the registrant and Arthur M. Coffey |
|
10 |
.8(10) |
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Executive Employment Agreement dated May 21, 2003 between
the registrant and Thomas McKeirnan |
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10 |
.9(11) |
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Executive Employment Agreement dated November 22, 2004
between the registrant and Anupam Narayan |
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10 |
.10(12) |
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Executive Officers Variable Pay Plan |
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10 |
.11(13) |
|
Summary Sheet for Director Compensation and Executive Cash
Compensation and Performance Criteria Under Executive Officers
Variable Pay Plan |
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10 |
.12(14) |
|
Amended and Restated Agreement of Limited Partnership of Red
Lion Hotels Limited Partnership dated November 1, 1997 |
|
10 |
.13(4) |
|
First Amendment dated January 1, 1998 to Amended and
Restated Agreement of Limited Partnership of Red Lion Hotels
Limited Partnership dated November 1, 1997 |
|
10 |
.14(4) |
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Second Amendment dated April 20, 1998 to Amended and
Restated Agreement of Limited Partnership of Red Lion Hotels
Limited Partnership dated November 1, 1997 |
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10 |
.15(4) |
|
Third Amendment dated April 28, 1998 to Amended and
Restated Agreement of Limited Partnership of Red Lion Hotels
Limited Partnership dated November 1, 1997 |
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10 |
.16(4) |
|
Fourth Amendment dated May 14, 1999 to Amended and Restated
Agreement of Limited Partnership of Red Lion Hotels Limited
Partnership dated November 1, 1997 |
|
10 |
.17(4) |
|
Fifth Amendment dated January 1, 2000 to Amended and
Restated Agreement of Limited Partnership of Red Lion Hotels
Limited Partnership dated November 1, 1997 |
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10 |
.18(4) |
|
Sixth Amendment dated June 30, 2000 to Amended and Restated
Agreement of Limited Partnership of Red Lion Hotels Limited
Partnership dated November 1, 1997 |
II-2
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Exhibit |
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Number |
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Description |
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|
|
|
10 |
.19(4) |
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Seventh Amendment dated January 1, 2001 to Amended and
Restated Agreement of Limited Partnership of Red Lion Hotels
Limited Partnership dated November 1, 1997 |
|
10 |
.20(15) |
|
Eighth Amendment dated September 20, 2005 to Agreement of
Limited Partnership of Red Lion Hotels Limited Partnership |
|
10 |
.21(15) |
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Ninth Amendment dated February 2, 2006 to Agreement of
Limited Partnership of Red Lion Hotels Limited Partnership |
|
10 |
.22(16) |
|
Tenth Amendment dated February 15, 2006 to Agreement of
Limited Partnership of Red Lion Hotels Limited Partnership |
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10 |
.23(15) |
|
Registration Rights Agreement dated February 2, 2006
between the registrant and Dunson Ridpath Hotel Associates
Limited Partnership |
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10 |
.24 |
|
Amendment dated April 27, 2006 to the Registration Rights
Agreement dated February 2, 2006 between the registrant and
Dunson Ridpath Hotel Associates Limited Partnership |
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10 |
.25(17) |
|
Purchase and Sale Agreement dated December 17, 1999 with
respect to WC Coast Holdings, Inc. |
|
10 |
.26(17) |
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Membership Interest Purchase Agreement dated December 17,
1999 with respect to October Hotel Investors, LLC |
|
10 |
.27(17) |
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First Amendment dated December 30, 1999 to Membership
Interest Purchase Agreement with respect to October Hotel
Investors, LLC |
|
10 |
.28(4) |
|
Fixed Rate Note effective as of June 14, 2001, in the
original principal amount of $36,050,000 issued by WHC809, LLC,
a Delaware limited liability company indirectly controlled by
WestCoast, to Morgan Guaranty Trust Company of New York |
|
10 |
.29(18) |
|
Deed Of Trust and Security Agreement effective as of
June 14, 2001, with WHC809, LLC, as grantor, and Morgan
Guaranty Trust Company of New York, as beneficiary |
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10 |
.30(19) |
|
Promissory Note dated effective as of June 27, 2003, in the
original principal amount of $5,100,000 issued by WHC807, LLC, a
Delaware limited liability company indirectly controlled by Red
Lion Hotels Corporation (WHC807), to Column
Financial, Inc. (Column) (the WHC807
Promissory Note). Nine other Delaware limited liability
companies indirectly controlled by the registrant (the
Other LLCs) simultaneously issued nine separate
Promissory Notes to Column in an aggregate original principal
amount of $50,100,000 and otherwise on terms and conditions
substantially similar to those of the WHC807 Promissory Note
(these Promissory Notes and their respective issuers and
principal amounts are identified in Exhibit D to the Deed
of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing filed as Exhibit 10.30). |
|
10 |
.31(19) |
|
Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing dated effective as of June 27,
2003, with WHC807 as grantor and Column as beneficiary (the
WHC807 Deed of Trust). Each of the Other LLCs
simultaneously executed a separate Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture Filing as
grantor with Column as beneficiary and otherwise on terms and
conditions substantially similar to those of the WHC807 Deed of
Trust (these nine other documents and their respective grantors
and the respective parcels of real property encumbered thereby
are identified in Exhibit E to the WHC807 Deed of Trust). |
|
10 |
.32(19) |
|
Indemnity and Guaranty Agreement dated effective as of
June 27, 2003, between Red Lion Hotels Corporation and
Column with respect to the WHC807 Promissory Note and the WHC807
Deed of Trust. The registrant and Column have entered into nine
separate Indemnity and Guaranty Agreements on substantially
similar terms and conditions with respect to the Other
LLCs Promissory Notes and Deeds of Trust, Assignments of
Leases and Rents, Security Agreements and Fixture Filings
referred to in Exhibits 10.29 and 10.30, respectively. |
|
10 |
.33(20) |
|
First Amended and Restated Credit Agreement dated
February 1, 2005 between the registrant and Wells Fargo
Bank, N.A. |
|
10 |
.34(13) |
|
Second Amended and Restated Credit Agreement dated
February 1, 2006 between the registrant and Wells Fargo
Bank, N.A. |
II-3
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Exhibit |
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Number |
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Description |
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21 |
(13) |
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List of Subsidiaries of the registrant |
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23 |
.1 |
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Consent of BDO Seidman, LLP |
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23 |
.2* |
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Consent of Riddell Williams P.S. |
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* |
To be filed by amendment |
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|
(1) |
Previously filed with the SEC as an exhibit to the
registrants
Form 8-K on
September 20, 2005. |
|
|
(2) |
Previously filed with the SEC as an exhibit to the
registrants
Form 10-K on
March 31, 2003. |
|
|
(3) |
Previously filed with the SEC as an exhibit to the
registrants
Form S-1 on
January 20, 1998. |
|
|
(4) |
Previously filed with the SEC as an exhibit to the
registrants
Form S-1 on
November 4, 2003. |
|
|
(5) |
Previously filed with the SEC as an exhibit to the
registrants
Form 8-K on
March 19, 2004. |
|
|
(6) |
Previously filed with the SEC as an exhibit to the
registrants
Form S-1/A on
March 10, 1998. |
|
|
(7) |
Previously filed with the SEC as an exhibit to the
registrants
Form 10-Q on
May 15, 2001. |
|
|
(8) |
Previously filed with the SEC as an exhibit to the
registrants
Form 8-K on
November 15, 2005. |
|
|
(9) |
Previously filed with the SEC as an exhibit to the
registrants
Form 10-Q on
August 14, 2003. |
|
|
(10) |
Previously filed with the SEC as an exhibit to the
registrants
Form S-1/A on
February 6, 2004. |
|
(11) |
Previously filed with the SEC as an exhibit to the
registrants
Form 8-K on
November 22, 2004. |
|
(12) |
Previously filed with the SEC as an exhibit to the
registrants
Form 8-K on
March 23, 2005. |
|
(13) |
Previously filed with the SEC as Exhibit 10.11 to the
registrants
Form 10-K on
April 3, 2006. |
|
(14) |
Previously filed with the SEC as an exhibit to the
registrants
Form S-1/A on
February 27, 1998. |
|
(15) |
Previously filed with the SEC as an exhibit to the
registrants
Form 8-K on
February 8, 2006. |
|
(16) |
Previously filed with the SEC as an exhibit to the
registrants
Form 8-K on
February 22, 2006. |
|
(17) |
Previously filed with the SEC as an exhibit to the
registrants
Form 8-K on
January 19, 2000. |
|
(18) |
Previously filed with the SEC as an exhibit to the
registrants
Form 10-Q on
August 14, 2001. |
|
(19) |
Previously filed with the SEC as an exhibit to the
registrants
Form 10-Q on
August 14, 2003. |
|
(20) |
Previously filed with the SEC as an exhibit to the
registrants
Form 8-K on
February 15, 2005. |
The undersigned registrant hereby undertakes:
|
|
|
(1) That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the registrants
annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof. |
|
|
(2) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue. |
II-4
|
|
|
(3) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective. |
|
|
(4) To file an application for the purpose of determining
the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust
Indenture Act (the Act) in accordance with the rules
and regulations prescribed by the Securities and Exchange
Commission under Section 305(b)(2) of the Act. |
|
|
(5) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof. |
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on
Form S-3 and has
duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Spokane, State of Washington, on April 28, 2006.
|
|
|
RED LION HOTELS CORPORATION |
|
|
|
|
|
Arthur M. Coffey, President and Chief Executive Officer |
POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities indicated below on April 28, 2006.
|
|
|
|
|
Signature |
|
Title |
|
|
|
|
/s/ Arthur M. Coffey
Arthur M. Coffey |
|
President, Chief Executive Officer and Director
(Principal Executive Officer) |
|
/s/ Anupam Narayan
Anupam Narayan |
|
Executive Vice President, Chief Investment Officer and Chief
Financial Officer (Principal Financial Officer) |
|
/s/ Anthony F. Dombrowik
Anthony F. Dombrowik |
|
Senior Vice President, Corporate Controller
(Principal Accounting Officer) |
|
*
Donald K. Barbieri |
|
Chairman of the Board of Directors |
|
*
Richard L. Barbieri |
|
Director |
|
*
Ryland P. Davis |
|
Director |
|
*
Jon E. Eliassen |
|
Director |
|
*
Peter F. Stanton |
|
Director |
II-6
|
|
|
|
|
Signature |
|
Title |
|
|
|
|
*
Ronald R. Taylor |
|
Director |
|
/s/ Arthur M. Coffey
Arthur M. Coffey
Attorney-in-fact |
|
|
|
|
* |
By Arthur M. Coffey, as attorney-in-fact |
II-7