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RLHC Reports Third Quarter 2016 Results

Systemwide Same Store RevPAR Increases 3.4%

Acquired Vantage Hospitality Group

SPOKANE, Wash., Nov. 08, 2016 (GLOBE NEWSWIRE) -- Red Lion Hotels Corporation (“RLHC" or the "company”) (NYSE:RLH), a growing hospitality company that operates and franchises upscale, midscale and economy hotels, today reported third quarter 2016 results.

Highlights Third Quarter 2016

  • Consolidated net income rose 185% to $2.3 million from $0.8 million in 2015
  • GAAP EPS was $0.11 in 2016 – an increase of $0.07 year-over-year
  • Franchise operating income increased 200% for the quarter and 900% year to date
  • Adjusted EBITDA grew 25% year-over-year
  • System wide RevPAR grew 3.4%
  • Opened 4 new franchise hotels and converted 3 company operated hotels to Hotel RL
  • Acquired Vantage for $39.5 million with over 58,000 rooms and 1,000 hotels – extending our distribution into Canada
  • Appointed Roger Bloss Executive Vice President and President of Global Development and Bernard “Bernie” T. Moyle to Executive Vice President and Chief Operating Officer

RLHC President and Chief Executive Officer Greg T. Mount stated, “We are very encouraged that RLHC delivered another quarter of strong RevPAR growth across all segments versus the industry, with system same store RevPAR growing 3.4% year over year. These positive results can be attributed to the transformation the Company has undergone over the last 18 months. Furthermore, with the recent addition of Vantage and more than 58,000 rooms to the system, we have already started selling our full spectrum of brands with immediate success, and the integration is progressing as planned. Our transformation to an asset light franchise model is complete and our efforts to create additional long-term shareholder value are well underway.”

Third Quarter 2016 Results

Systemwide same store midscale RevPAR grew 3.4%, and Adjusted EBITDA was $10.9 million in the quarter increasing by 25%.

Franchise hotels revenue reached $4.8 million, up 25% compared with the third quarter of 2015. Segment operating margins for the quarter improved significantly to 30% versus 12% in the same period of 2015.

Outperforming the industry, same store franchised economy RevPAR increased 7.8%, and same store franchised midscale increased 5.5%, driven primarily by the implementation of RevPak for both economy and midscale.

Comparable revenue from company operated hotels was $33.6 million, down 2%, compared with the same period a year ago. RevPAR for company operated hotels was roughly flat, primarily due to the previously communicated disruption caused by our extensive renovation program. Comparable company operated hotel gross profit was $13.4 million versus $13.7 million in the prior year.

Entertainment revenue for the third quarter was $1.9 million compared with $1.8 million in the prior year period. Segment operating income was $0.3 million versus $0.1 million in the third quarter of 2015.

Consolidated net income attributable to RLHC in the third quarter of 2016 nearly tripled to $2.3 million compared with $0.8 million in the same period a year ago. Net income per share for the third quarter of 2016 was $0.11 versus $0.04 for the prior year period.

After adjusting for special items, adjusted net income per share for the third quarter 2016 was $0.24 versus $0.16 in 2015. The adjustments are related to costs associated with the Vantage acquisition and employee separation.

Balance Sheet

At September 30, 2016, the company had $18.9 million in cash and cash equivalents and $9.2 million in restricted cash. Additionally, the company had consolidated long-term debt of $107.8 million, borrowed by the company’s joint venture entities, of which RLHC’s pro rata share was $61.7 million.

Capital expenditures for the nine months ended September 30, 2016 totaled $30.3 million; the majority of which was funded with proceeds from debt financing associated with the company’s joint ventures.

Brand Portfolio Developments

For the year, RLHC has enjoyed accretive additions to its brand portfolio, along with the Vantage acquisition, that included openings, new franchises, conversions from non-RLHC brands and conversions from Red Lion Hotels to Hotel RLs within the system. The company has executed more than 20 franchise agreements in 2016.

Properties opened since our second quarter earnings release include the following locations:

  • Opened Red Lion Hotel and Convention Center, Billings, Montana – Conversion, Franchise
  • Opened Red Lion Inns & Suites, Fargo, North Dakota, Conversion, Franchise
  • Opened Red Lion Inn & Suites, Byram, Mississippi, Conversion, Franchise
  • Opened Red Lion Inn & Suites, Ontario, Oregon, Conversion, Franchise

Vantage Acquisition

RLHC acquired substantially all of the assets of Vantage during the third quarter for cash and stock. Consideration for the acquisition consists of an initial payment of $23 million in cash and $5.8 million in stock. There are potential additional payments of up to $7 million in cash and 690,000 shares of stock to be paid over the next twenty-four months, which are contingent on the achievement of certain performance metrics for the Vantage brands.

As a result of the acquisition, the Company added approximately 1,000 franchise hotel agreements and over 58,000 rooms in the U.S. and Canada.

The transaction is expected to be accretive to cash flow and earnings per share within the first twelve months.

Subsequent Events

On October 1, 2016, the Company’s board of directors appointed Roger J. Bloss to the position of Executive Vice President and President of Global Development of RLHC. In addition, the board of directors appointed Bernard “Bernie” T. Moyle as the Executive Vice President and Chief Operating Officer of RLHC. Messrs. Bloss and Moyle joined RLHC from Vantage where they were Chief Executive Officer and Chief Operating and Financial Officer, respectively.

2016 Outlook

The company is issuing refined financial guidance for full year 2016, based on the outlook for the markets in which they operate, and its current expectations:

  • EBITDA is expected to be between $17 to $20 million
  • Capital expenditures to range from $32 to $35 million, primarily funded at the joint venture level
  • Full year 2016 RevPAR guidance for systemwide same store hotels in the range of 2.5% to 4.5%.
  • Addition of 25 to 35 hotels to the system-wide portfolio (excluding the acquisition of Vantage properties)

The company is revising its full year RevPAR guidance for comparable company operated hotels to increase 0% to 1% over 2015. The 2016 performance was unfavorably impacted by the renovations in the majority of its company operated hotels during the second and third quarters.

Conference Call Information

The company will conduct a conference call on November 8, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time), to discuss the results for interested investors, analysts and portfolio managers. Hosting the call will be President and Chief Executive Officer Greg Mount and Vice President and Interim Chief Financial Officer David Wright.

To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (877) 407-8289. International callers should dial (201) 689-8341.

This conference call will also be webcast live on www.rlhco.com in the Investor Relations section of the website. To listen to the live call, please go to the RLHC website at least fifteen minutes prior to the start of the call to register and to download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available at 3:30 p.m. Pacific Time on November 8, 2016 through November 22, 2016, at (877) 660-6853 or (201) 612-7415 (International), using access code 13647200. The replay will also be available shortly after the call on the RLHC website.

About RLHC

Red Lion Hotels Corporation, established in 1959, is an international hospitality company primarily engaged in the franchising, management and ownership of upscale, midscale and economy hotels under the Hotel RL, Red Lion Hotels, Red Lion Inn & Suites, GuestHouse, Settle Inn, Vantage Hotels, Americas Best Value Inn, Canadas Best Value Inn, Lexington by Vantage, America’s Best Inns & Suites; Country Hearth Inns; Jameson Inn; Signature Inn and 3 Palms Hotels & Resorts brands. The company also owns and operates an entertainment and event ticket distribution business under the brand name TicketsWest. For more information, please visit the company's website at www.rlhco.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of federal securities law, including statements concerning plans, objectives, goals, strategies, projections of future events or performance and underlying assumptions (many of which are based, in turn, upon further assumptions). The forward-looking statements in this press release are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Such risks and uncertainties include, among others, economic cycles; international conflicts; changes in future demand and supply for hotel rooms; competitive conditions in the lodging industry; relationships with franchisees and properties; impact of government regulations; ability to obtain financing; changes in energy, healthcare, insurance and other operating expenses; ability to sell non-core assets; ability to locate lessees for rental property; dependency upon the ability and experience of executive officers and ability to retain or replace such officers as well as other matters discussed in the company's annual report on Form 10-K for the year ended December 31, 2015, and in other documents filed by the company with the Securities and Exchange Commission.

Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes and per share amounts)
Three Months Ended September 30,
2016 2015 $ Change % Change
Revenue:
Company operated hotels$37,157 $36,972 $185 0.5
Other revenues from managed properties1,733 1,147 586 51.1
Franchised hotels4,766 3,800 966 25.4
Entertainment1,936 1,800 136 7.6
Other16 16
Total revenues45,608 43,735 1,873 4.3
Operating expenses:
Company operated hotels25,363 25,439 (76) (0.3)
Other costs from managed properties1,733 1,147 586 51.1
Franchise3,214 3,087 127 4.1
Entertainment1,605 1,666 (61) (3.7)
Other22 10 12 120.0
Depreciation and amortization3,814 3,484 330 9.5
Hotel facility and land lease1,197 1,894 (697) (36.8)
Gain on asset dispositions, net(101) (88) (13) 14.8
General and administrative expenses2,031 2,676 (645) (24.1)
Total operating expenses38,878 39,315 (437) (1.1)
Operating income (loss)6,730 4,420 2,310 52.3
Other income (expense):
Interest expense(1,805) (1,989) 184 9.3
Other income (expense), net(1,246) 75 (1,321) (1,761.3)
Total other income (expense)(3,051) (1,914) (1,137) 59.4
Income (loss) before taxes3,679 2,506 1,173 46.8
Income tax expense (benefit)166 (49) 215 n/m
Net income (loss)3,513 2,555 958 37.5
Net (income) loss attributable to noncontrolling interests(1,207) (1,746) 539 (30.9)%
Net income (loss) attributable to RLHC$2,306 $809 $1,497 (185.0)%
Earnings per share - basic
Net income (loss) attributable to RLHC$0.11 $0.04
Earnings per share - diluted
Net income (loss) attributable to RLHC$0.11 $0.04
Weighted average shares - basic20,781 20,028
Weighted average shares - diluted21,158 20,607
Non-GAAP Financial Measures(1)
EBITDA$9,298 $7,979 $1,319 16.5
Adjusted EBITDA$10,932 $8,729 $2,203 25.2
Adjusted net income (loss)$5,147 $3,305 $1,842 (55.7)
(1) The definitions of "EBITDA", "Adjusted EBITDA" and Adjusted net income (loss) and how those measures relate to net income (loss) are discussed further in this release under Non-GAAP Financial Measures.


Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes and per share amounts)
Nine Months Ended September 30,
2016 2015 $ Change % Change
Revenue:
Company operated hotels$93,515 $91,092 $2,423 2.7
Other revenues from managed properties4,498 2,274 2,224 97.8
Franchised hotels12,194 9,123 3,071 33.7
Entertainment13,014 7,537 5,477 72.7
Other40 38 2 5.3
Total revenues123,261 110,064 13,197 12.0
Operating expenses:
Company operated hotels71,035 68,578 2,457 3.6
Other costs from managed properties4,498 2,274 2,224 97.8
Franchise10,034 8,494 1,540 18.1
Entertainment11,183 7,041 4,142 58.8
Other44 26 18 69.2
Depreciation and amortization11,354 9,603 1,751 18.2
Hotel facility and land lease3,543 5,089 (1,546) (30.4)
Gain on asset dispositions, net(730) (16,590) 15,860 95.6
General and administrative expenses7,781 7,803 (22) (0.3)
Total operating expenses118,742 92,318 26,424 28.6
Operating income (loss)4,519 17,746 (13,227) (74.5)
Other income (expense):
Interest expense(4,753) (5,228) 475 9.1
Loss on early retirement of debt (1,159) 1,159 n/m
Other income (expense), net(1,193) 380 (1,573) (413.9)
Total other income (expense)(5,946) (6,007) 61 (1.0)
Income (loss) before taxes(1,427) 11,739 (13,166) (112.2)
Income tax expense (benefit)258 37 221 n/m
Net income (loss)(1,685) 11,702 (13,387) (114.4)
Net (income) loss attributable to noncontrolling interest(645) (2,653) 2,008 (75.7)%
Net income (loss) attributable to RLHC$(2,330) $9,049 $(11,379) (125.7)%
Earnings per share - basic
Net income (loss) attributable to RLHC$(0.11) $0.45
Earnings per share - diluted
Net income (loss) attributable to RLHC$(0.11) $0.45
Weighted average shares - basic20,343 19,960
Weighted average shares - diluted20,343 20,131
Non-GAAP Financial Measures(1)
EBITDA$14,680 $26,570 $(11,890) (44.7)
Adjusted EBITDA$16,685 $13,242 $3,443 26.0
Adjusted net income (loss)$320 $(1,626) $1,946 119.7
(1) The definitions of "EBITDA", "Adjusted EBITDA" and Adjusted net income (loss) and how those measures relate to net income (loss) are discussed further in this release under Non-GAAP Financial Measures.


Red Lion Hotels Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except per share data)
September 30,
2016
December 31,
2015
(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents $18,930 $23,898
Restricted cash 9,181 11,304
Short-term investments 25 18,085
Accounts receivable, net 14,401 8,164
Notes receivable, net 1,166 929
Inventories 658 721
Prepaid expenses and other 4,440 2,149
Assets held for sale 3,936
Total current assets 52,737 65,250
Property and equipment, net 210,991 195,390
Goodwill 8,824 8,512
Intangible assets 53,588 15,301
Notes receivable, long term 1,676
Other assets, net 1,496 1,089
Total assets $327,636 $287,218
LIABILITIES
Current liabilities:
Accounts payable $14,110 $9,263
Accrued payroll and related benefits 2,800 6,163
Other accrued entertainment liabilities 7,817 9,211
Other accrued liabilities 13,240 3,225
Long-term debt, due within one year 5,912
Total current liabilities 43,879 27,862
Long-term debt, due after one year, net of debt issuance costs 101,840 87,557
Deferred income and other long term liabilities 5,768 1,326
Deferred income taxes 3,105 2,872
Total liabilities 154,592 119,617
Commitments and contingencies
STOCKHOLDERS’ EQUITY
RLHC stockholders' equity
Preferred stock- 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding
Common stock - 50,000,000 shares authorized; $0.01 par value; 20,919,014 and 20,051,145 shares issued and outstanding 209 201
Additional paid-in capital 151,960 143,901
Accumulated deficit (12,440) (10,110)
Total RLHC stockholders' equity 139,729 133,992
Noncontrolling interest 33,315 33,609
Total stockholders’ equity 173,044 167,601
Total liabilities and stockholders’ equity $327,636 $287,218


RED LION HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, 2016 and 2015
Nine Months Ended
September 30,
2016 2015
(In thousands)
Operating activities:
Net income (loss) $(1,685) $11,702
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 11,354 9,603
Amortization of debt issuance costs 880 583
Gain on disposition of property, equipment and other assets, net (730) (16,592)
Loss on early retirement of debt 1,074
Deferred income taxes 233
Equity in investments (171) 101
Stock based compensation expense 1,960 1,008
Provision for doubtful accounts 212 580
Change in current assets and liabilities:
Restricted cash for interest payments and other (1,049) (7,922)
Accounts receivable (4,664) (2,748)
Notes receivable (68) (177)
Inventories 63 (110)
Prepaid expenses and other (1,959) (899)
Accounts payable 3,697 2,681
Accrued other liabilities (2,046) 8,953
Net cash provided by (used in) operating activities 6,027 7,837
Investing activities:
Purchase of Vantage, net assets acquired (22,694)
Capital expenditures (30,266) (17,128)
Purchase of GuestHouse International assets (8,855)
Proceeds from disposition of property and equipment 434 37,730
Collection of notes receivable related to property sales 1,781 3,499
Advance of note receivable (328) (27)
Sales of short-term investments 18,060
Purchase of short-term investments (7,866)
Change in restricted cash for property improvements 3,172 (5,156)
Other, net 78
Net cash provided by (used in) investing activities (29,763) 2,197
Financing activities:
Borrowings on long-term debt 19,547 74,380
Repayment of long-term debt (30,528)
Debt issuance costs (192) (3,479)
Proceeds from sale of interests in joint ventures 3,194 21,565
Distributions to noncontrolling interest (3,594) (1,319)
Stock based compensation awards withheld for tax liability (343)
Other, net 156 110
Net cash provided by financing activities 18,768 60,729
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents (4,968) 70,763
Cash and cash equivalents at beginning of period 23,898 5,126
Cash and cash equivalents at end of period $18,930 $75,889


Red Lion Hotels Corporation
Additional Hotel Statistics
(unaudited)
Systemwide Hotels as of September 30, 2016Hotels Rooms
Company operated hotels
Majority owned and consolidated15 3,000
Leased and consolidated4 900
Managed3 700
Franchised hotels93 10,300
Franchised hotels newly acquired from Vantage 1,042 58,300
Total systemwide1,157 73,200


Comparable Hotel Statistics(1)
For the three months ended September 30,
2016 2015
Average
Occupancy(2)
ADR (3) RevPAR (4) Average
Occupancy(2)
ADR (3) RevPAR (4)
Company operated hotels
Midscale 80.2% $109.91 $88.11 83.1% $106.19 $88.26
Franchised hotels
Midscale 72.0% $97.01 $69.84 69.9% $94.65 $66.18
Economy (pro forma) (5) 64.6% $76.43 $49.36 62.0% $73.83 $45.78
Systemwide
Midscale 76.1% $103.83 $79.00 76.5% $100.94 $77.25
Economy (pro forma) (5) 64.6% $76.43 $49.36 62.0% $73.83 $45.78
Total Systemwide 72.7% $96.63 $70.24 72.2% $94.06 $67.95
Change from prior comparative period:Average
Occupancy(2)
ADR (3) RevPAR (4)
Company operated hotels
Midscale(290) bps 3.5% (0.2)%
Franchised hotels
Midscale210 bps 2.5% 5.5%
Economy (pro forma) (5)260 bps 3.5% 7.8%
Systemwide
Midscale(40) bps 2.9% 2.3%
Economy (pro forma) (5)260 bps 3.5% 7.8%
Total Systemwide50 bps 2.7% 3.4%


(1)Certain operating results for the periods included in this report are shown on a comparable hotel basis. With the exception of pro forma economy hotels, comparable hotels are defined as hotels that were in the system for at least one full calendar year as of the beginning of the current year under materially similar operations.
(2)Average occupancy represents total paid rooms divided by total available rooms. Total available rooms represents the number of rooms available multiplied by the number of days in the reported period and includes rooms taken out of service for renovation.
(3)Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests.
(4)Revenue per available room ("RevPAR") represents total room and related revenues divided by total available rooms.
(5)We acquired the franchise license agreements of GuestHouse International and Settle Inn & Suites properties on April 30, 2015. Results presented prior to that date are attributable to and provided by the prior owner.


Comparable Hotel Statistics(1)
For the nine months ended September 30,
2016 2015
Average
Occupancy(2)
ADR (3) RevPAR (4) Average
Occupancy(2)
ADR (3) RevPAR (4)
Company operated hotels
Midscale 71.9% $99.60 $71.60 72.4% $98.18 $71.10
Franchised hotels
Midscale 63.8% $92.11 $58.79 62.2% $88.94 $55.35
Economy (pro forma) (5) 57.2% $69.46 $39.71 54.2% $68.90 $37.33
Systemwide
Midscale 67.9% $96.09 $65.22 67.3% $93.92 $63.24
Economy (pro forma) (5) 57.2% $69.46 $39.71 54.2% $68.90 $37.33
Total Systemwide 64.7% $89.09 $57.63 63.5% $87.63 $55.61
Change from prior comparative period:Average
Occupancy(2)
ADR (3) RevPAR (4)
Company operated hotels
Midscale(50) bps 1.4% 0.7%
Franchised hotels
Midscale160 bps 3.6% 6.2%
Economy (pro forma) (5)300 bps 0.8% 6.4%
Systemwide
Midscale60 bps 2.3% 3.1%
Economy (pro forma) (5)300 bps 0.8% 6.4%
Total Systemwide120 bps 1.7% 3.6%


(1)Certain operating results for the periods included in this report are shown on a comparable hotel basis. With the exception of pro forma economy hotels, comparable hotels are defined as hotels that were in the system for at least one full calendar year as of the beginning of the current year under materially similar operations.
(2)Average occupancy represents total paid rooms divided by total available rooms. Total available rooms represents the number of rooms available multiplied by the number of days in the reported period and includes rooms taken out of service for renovation.
(3)Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests.
(4)Revenue per available room ("RevPAR") represents total room and related revenues divided by total available rooms.
(5)We acquired the franchise license agreements of GuestHouse International and Settle Inn & Suites properties on April 30, 2015. Results presented prior to that date are attributable to and provided by the prior owner.


Red Lion Hotels Corporation
Comparable Operations and Data From Operations
(unaudited)
($ in thousands)
Certain operating results for the periods included in this report are shown on a comparable hotel basis. Comparable hotels are defined as properties that were operated by our company for at least one full calendar year as of the beginning of the current period other than hotels for which comparable results were not available. Comparable results excludes one hotel that was converted from owned to managed, one hotel that was converted from owned to franchised and one hotel that was closed. In addition, Hotel RL Baltimore, Hotel RL Washington DC, and Red Lion Hotel Atlanta International Airport are excluded as these properties have not been open since the beginning of both comparable periods.
We utilize these comparable measures because management finds them 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 they are a complement to reported operating results. Comparable operating results are not intended to represent reported operating results defined by generally accepted accounting principles in the United States ("GAAP"), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP.
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Company operated hotel revenue $37,157 $36,972 $93,515 $91,092
less: revenue from sold and closed hotels (1,643) (5,255)
less: revenue from hotels without comparable results (3,549) (1,088) (9,561) (1,406)
Comparable company operated hotel revenue $33,608 $34,241 $83,954 $84,431
Company operated hotel operating expenses $25,363 $25,439 $71,035 $68,578
less: hotel divisional general and administrative expenses (2,237) (2,510) (8,249) (7,774)
less: operating expenses from sold and closed hotels (1,195) (4,115)
less: operating expenses from hotels without comparable results (2,958) (1,198) (7,823) (1,590)
Comparable company operated hotel operating expenses $20,168 $20,536 $54,963 $55,099
Company operated hotel direct operating profit $11,794 $11,533 $22,480 $22,514
less: hotel divisional general and administrative expenses 2,237 2,510 8,249 7,774
less: operating profit from sold and closed hotels (448) (1,140)
less: operating profit from hotels without comparable results (591) 110 $(1,738) $184
Comparable company operated hotel direct profit $13,440 $13,705 $28,991 $29,332
Comparable company operated hotel direct margin % 40.0% 40.0% 34.5% 34.7%


Red Lion Hotels Corporation
Reconciliation of Non-GAAP Measures
(unaudited)
($ in thousands)
EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. We believe it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness.
Adjusted EBITDA and Adjusted net income (loss) are additional measures of financial performance. We believe that the inclusion or exclusion of certain special items, such as gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results.
EBITDA, Adjusted EBITDA and Adjusted net income (loss) are commonly used measures of performance in the industry. We utilize these measures because management finds them 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 they are a complement to reported operating results. EBITDA, Adjusted EBITDA and Adjusted net income (loss) are not intended to represent net income (loss) defined by generally accepted accounting principles in the United States ("GAAP"), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP. In addition, other companies in our industry may calculate EBITDA and in particular Adjusted EBITDA and Adjusted net income (loss) differently than we do or may not calculate them at all, limiting the usefulness of EBITDA, Adjusted EBITDA and Adjusted net income (loss) as comparative measures.
The following is a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Net income (loss) $3,513 $2,555 $(1,685) $11,702
Depreciation and amortization 3,814 3,484 11,354 9,603
Interest expense 1,805 1,989 4,753 5,228
Income tax expense (benefit) 166 (49) 258 37
EBITDA $9,298 $7,979 $14,680 $26,570
Gain on asset dispositions (1) (393) (16,362)
Acquisition and integration costs (2) 1,413 1,653
Employee separation costs (3) 221 617
Lease termination costs (4) 750 1,875
Loss on early retirement of debt (5) 1,159
Reserve for environmental cleanup (6) 128
Adjusted EBITDA $10,932 $8,729 $16,685 $13,242


(1)In the second quarter of 2016, we recorded a gain on sale of intellectual property, net of brokerage fees, of $0.4 million. In the first quarter of 2015, we recorded $16.4 million in gain on the sales of the Bellevue and Wenatchee properties. These amounts are included in the line item "Gain on asset dispositions, net" on the accompanying consolidated statements of operations.
(2)On September 30, 2016 RLHC acquired Vantage. Expenses associated with the acquisition totaling $1.7 million are reflected in both the second and third quarters of 2016.
(3)The costs recorded in the second and third quarters of 2016 consisted of employee separation costs including expenses associated with the separation of the former Executive Vice President and Chief Financial Officer and other legal and consulting services associated with the CFO transition.
(4) In the fourth quarter of 2014, we amended the lease for the Red Lion Hotel Vancouver at the Quay and we recorded $1.1 million of amortized lease termination fees in the first and second quarters of 2015 and $0.8 million in the third quarter of 2015.
(5)In the first quarter of 2015, we recorded a $1.2 million loss on the early retirement of debt.
(6)In the first quarter of 2016, a reserve account was recorded for environmental cleanup at one of our hotel properties.


Red Lion Hotels Corporation
Reconciliation of Adjusted Net Income (Loss) to Net Income (Loss)
(unaudited)
($ in thousands)
The following is a reconciliation of adjusted net income to net income (loss) for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Net income (loss) $3,513 $2,555 $(1,685) $11,702
Gain on asset dispositions (1) (393) (16,362)
Acquisition and integration costs (2) 1,413 1,653
Employee separation costs (3) 221 617
Lease termination costs (4) 750 1,875
Loss on early retirement of debt (5) 1,159
Reserve for environmental cleanup (6) 128
Adjusted net income (loss) $5,147 $3,305 $320 $(1,626)
Adjusted net income (loss) per share $0.24 $0.16 $0.02 $(0.08)
Weighted average shares - basic 20,781 20,028 20,343 19,960
Weighted average shares - diluted 21,158 20,607 20,819 20,131


(1) In the second quarter of 2016, we recorded a gain on sale of intellectual property, net of brokerage fees, of $0.4 million. In the first quarter of 2015, we recorded $16.4 million in gain on the sales of the Bellevue and Wenatchee properties. These amounts are included in the line item "Gain on asset dispositions, net" on the accompanying consolidated statements of operations.
(2)On September 30, 2016 RLHC acquired Vantage. Expenses associated with the acquisition totaling $1.7 million are reflected in both the second and third quarters of 2016.
(3)The costs recorded in the second and third quarters of 2016 consisted of employee separation costs including expenses associated with the separation of the former Executive Vice President and Chief Financial Officer and other legal and consulting services associated with the CFO transition.
(4) In the fourth quarter of 2014, we amended the lease for the Red Lion Hotel Vancouver at the Quay and we recorded $1.1 million of amortized lease termination fees in the first and second quarters of 2015 and $0.8 million in the third quarter of 2015.
(5)In the first quarter of 2015, we recorded a $1.2 million loss on the early retirement of debt.
(6)In the first quarter of 2016, a reserve account was recorded for environmental cleanup at one of our hotel properties.

Investor Relations Contact Evelyn Infurna O: 203-682-8265 C: 203-856-2088 Investor.relations@redlion.com

Source: RLHC (Red Lion Hotels Corporation)