Westcoast Hospitality (NYSE:WEH)
Historical Stock Chart
From Aug 2019 to Aug 2024
WestCoast Hospitality Corporation Announces First Quarter
Financial Results; RevPAR Increases 6.2%
SPOKANE, Wash., May 5 /PRNewswire-FirstCall/ -- WestCoast Hospitality
Corporation today announced financial results for the first quarter ended
March 31, 2004. The Company reported total revenues of $41.6 million for the
first quarter of 2004, compared to $40.2 million for the comparable period in
2003. RevPAR (revenue per available room) for comparable hotels (hotels owned,
leased, managed and franchised for at least one year) increased 6.2% from
$33.03 in the first quarter of 2003 to $35.08 in the comparable period of 2004.
The increase in RevPAR resulted from an increase in average occupancy, from
48.3% in the first quarter of 2003 to 51.3% for the first quarter of 2004, and
a slight increase in average daily rate, to $68.39. EBITDA (earnings before
interest, taxes, depreciation and amortization) was $2.6 million in the first
quarter of 2004 compared to $2.5 million for the first quarter of 2003. Loss
per share was $0.21 in the first quarter of 2004, compared to a per share loss
of $0.19 in the prior year first quarter.
Hotel and restaurant revenue increased during the quarter, from $34.1 million
in the first quarter of 2003 to $34.9 million in the comparable period of 2004.
The Company was able to increase revenue by executing on its previously stated
strategy of growing market share by increasing occupancy levels, while
maintaining average daily rate. Central reservation technology upgrades that
were implemented in 2003 and distribution strategies enabled by this new
technology contributed to this success. During the quarter the total room
revenue contribution to hotels from the central reservation system increased,
raising system wide hotel room revenue contribution from 25.4% to 29.9%. The
majority of the rooms contribution increase was derived from third party
Internet sites, also referred to as alternate distribution systems (ADS).
"We are happy with the positive impact of the investment in technology and
inventory management strategies we implemented last year," stated John Taffin,
Executive Vice President of Hotel Operations. "The benefits of our approach to
ADS merchant models are beginning to take hold and we are competing well on
third party Internet sites. Our guaranteed lowest rate program for our
proprietary sites is also beginning to have a positive impact by driving
traffic to our sites."
During the quarter the Company implemented its "We Promise or We Pay"
initiative, which guarantees that hotel rates found at its
http://www.redlion.com/ and http://www.westcoasthotels.com/ websites are at
least as competitive as any rates found elsewhere on the Internet. The Company
also will be implementing two other important guest initiatives during the
second quarter of 2004. First, high speed Internet access was installed in many
of the Company's owned hotels during the first quarter of 2004 with the
remaining hotel installations to be completed during the second quarter.
Second, the Company will be upgrading most of its guestrooms with new pillowtop
mattresses, linens, carpets and coverlets as part of a program designed to
enhance guest comfort.
While departmental operating expenses in the hotel division were well managed,
hotel and restaurant non-departmental operating expenses increased during the
quarter. The increase was due in part to additional sales personnel training
costs and higher sales department salaries and wages associated with the
deployment of a stronger sales force. Utility costs were also higher as
compared to the prior year. These increases negatively impacted year on year
margins in the division.
During 2004, the Company closed on two hotel acquisitions, in Yakima and
Bellevue, Washington. Both transactions utilized proceeds from the 2003 sale of
the Red Lion River Inn, which accommodated a Section 1031 tax deferred
exchange.
Franchise, central services and development revenue was $576 thousand compared
to $1.1 million in the prior year period. The decrease in revenue was primarily
due to a reduction in royalty fees resulting from a net decline in the number
of hotels franchised by the Company, from 31 franchises in place during the
first quarter of 2003 to 22 during the first quarter of 2004. Operating
expenses for the first quarter of 2004 declined $212 thousand compared to the
prior year.
Entertainment division revenue increased 37.8% during the quarter, from $2.6
million in the first quarter of 2003 to $3.6 million in the comparable period
of 2004, while departmental profit margins increased from 15.8% to 21.9%. The
strong financial performance for the division was primarily the result of
WestCoast Entertainment presenting three major Broadway shows in the first
quarter of 2004 as compared to two in the same period of 2003, and partly the
result of favorable ticket sales in the majority of our geographic regions.
Oregon and Washington regions both returned positive revenue results and the
Company's ticketing presence in the Seattle area was expanded during the
quarter. New opportunities in both states are being explored. Colorado region
market share continues to increase, and while most revenue segments in the
region had positive results for the quarter, ski lift ticket sales declined
approximately 8% to 11% for most Colorado resorts. In April 2004, the Company
announced the expansion of ticketing services into the Green Bay, Wisconsin
market with a ticketing services agreement with Event Pro, LLC.
Real estate division revenue increased during the quarter, from $2.3 million in
the first quarter of 2003 to $2.5 million in the first quarter of 2004. The
revenue increase was primarily due to additional leasing income and residential
development fees earned during the first quarter. Additional costs were
incurred for leasing commissions associated with the new leasing contracts
while energy costs and certain other expenses increased as well.
During the first quarter, the Company closed on a public offering through
WestCoast Hospitality Capital Trust of $46 million of trust preferred
securities, the holders of which are entitled to cumulative cash distributions
at a 9.5% annual rate. The trust used the offering proceeds to acquire
debentures from the Company having payment terms that mirror the distribution
terms of the trust preferred securities. The net proceeds from the offering,
after offering costs of $2.3 million, were $43.7 million. The transaction
successfully completed a year long effort to positively reposition the
Company's debt and capital structure.
For three main reasons, depreciation and amortization increased $469 thousand
during the quarter. First, capital additions added to the depreciable base of
property and equipment. Second, the amortization of deferred finance costs
associated with the borrowing made during 2003 increased amortization expense.
Finally, the first quarter of 2004 included depreciation of certain assets
previously held for sale for which no expense was recognized in the first
quarter of 2003.
Interest expense increased during the quarter from $2.6 million in the first
quarter of 2003 to $3.3 million in the first quarter of 2004. The increase was
due to a greater average amount of outstanding interest-bearing debt, primarily
due to the debentures issued in connection with the trust preferred offering.
While interest on these new debentures is payable at a 9.5% rate, the interest
is deductible under current Federal tax law, which gives the debentures an
effective post tax rate of approximately 6.2%. Proceeds from the sale of the
debentures were used in part to redeem all of the Company's outstanding
preferred stock, resulting in a reduced preferred stock dividend as compared to
the first quarter of 2003 because the preferred stock dividend only accrued
during the portion of the first quarter that the preferred stock was
outstanding. Dividends on the preferred stock were payable at an average rate
of 8.5%, and were not tax deductible, which gave the stock a higher effective
post tax rate than that of the new debentures. 97.7% of the Company's
outstanding debt is now fixed-rate debt. The Company believes this is favorable
as the economic outlook points towards rising interest rates in the upcoming
year.
The Company's President and CEO, Arthur Coffey, continues to satisfactorily
recuperate from a snowmobile accident on February 14, 2004. Mr. Coffey recently
participated in the Company's senior management team retreat on April 19, 2004.
He has also been progressively increasing his review of the Company's
operations, and periodically provides management with recommendations and
insights regarding the Company's initiatives. The Company expects Mr. Coffey to
return to the office during the second quarter of 2004.
WestCoast Hospitality Corporation is a hospitality and leisure company
primarily engaged in the ownership, management, development and franchising of
mid-scale, full service hotels under its WestCoast(R) and Red Lion(R) brands.
In addition, through its entertainment division, which includes its
TicketsWest.com, Inc. subsidiary, it engages in event ticket distribution and
promotes and presents a variety of entertainment productions. G&B Real Estate
Services, its real estate division, engages in traditional real estate-related
services, including developing, managing and acting as a broker for sales and
leases of commercial and multi-unit residential properties.
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 and managing and leasing
properties owned by third parties; 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
2003 fiscal year and in other documents filed by the Company with the
Securities and Exchange Commission.
CONTACT:
Peter Hausback
VP, Chief Financial Officer
+1-509-777-6338
WestCoast Hospitality Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands)
Three months ended March 31,
2004 2003 $ Change % Change
Revenue:
Hotels and restaurants $34,866 $34,096 $ 770 2.3%
Franchise, central services
and development 576 1,089 (513) -47.1%
Entertainment 3,585 2,601 984 37.8%
Real estate 2,513 2,302 211 9.2%
Corporate services 90 88 2 2.3%
Total revenues 41,630 40,176 1,454 3.6%
Operating expenses:
Hotels and restaurants 34,070 32,631 1,439 4.4%
Franchise, central services
and development 267 479 (212) -44.3%
Entertainment 2,801 2,190 611 27.9%
Real estate 1,448 1,217 231 19.0%
Corporate services 72 77 (5) -6.5%
Depreciation and amortization 3,076 2,607 469 18.0%
(Gain) loss on asset dispositions (189) 332 (521) -156.9%
Conversion expenses -- 288 (288) -100.0%
Total direct expenses 41,545 39,821 1,724 4.3%
Undistributed corporate expenses 785 740 45 6.1%
Total expenses 42,330 40,561 1,769 4.4%
Operating loss (700) (385) (315) 81.8%
Other income (expense):
Interest expense (3,287) (2,642) (645) 24.4%
Interest income 95 104 (9) -8.7%
Other income, net 16 19 (3) -15.8%
Equity income in investments, net 19 58 (39) -67.2%
Minority interest in partnerships 119 112 7 6.3%
Loss before income tax benefit (3,738) (2,734) (1,004) 36.7%
Income tax benefit (1,390) (965) (425) 44.0%
Net loss (2,348) (1,769) (579) 32.7%
Preferred stock dividend (377) (640) 263 -41.1%
Loss applicable to
common shareholders $(2,725) $(2,409) $(316) 13.1%
EBITDA(A) $2,625 $2,515 $ 110 4.4%
EBITDA as a percentage of revenues 6.3% 6.3%
(A) The definition of "EBITDA" and how that measure relates to net income is
discussed below under Non-GAAP Financial Measures. EBITDA represents net
income, or in this case net loss, before interest expense, income tax benefit
or expense, 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. We
utilize EBITDA because management believes 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 on-going
operations.
WestCoast Hospitality Corporation
Earnings (Loss) Per Share and Hotel Statistics
(unaudited)
(shares in thousands)
Three months ended March 31,
2004 2003 $ Change % Change
Loss per common share:
Basic and diluted $ (0.21) $ (0.19)
Weighted average shares - basic 13,024 12,992
Weighted average shares - diluted(A) 13,024 12,992
Comparable Hotel Statistics:
Combined (owned, leased, managed
and franchised)(B)
Average occupancy(C)(F) 51.3% 48.3%
ADR (D) $ 68.39 $ 68.35 $ 0.04 0.1%
RevPAR (E)(F) $ 35.08 $ 33.03 $ 2.05 6.2%
(A) For the three months ended March 31, 2004 and 2003 both operating
partnership units outstanding and options to purchase common stock
were anti-dilutive and are therefore not included in the calculation
of loss per common share.
(B) Includes hotels owned, leased, managed and franchised for greater
than one year by WestCoast Hospitality Corporation.
(C) 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.
(D) Average daily rate ("ADR") represents total room revenues divided by
the total number of paid rooms occupied by hotel guests.
(E) Revenue per available room ("RevPAR") represents total room and
related revenues divided by total available rooms.
(F) Rooms under significant renovation were excluded from total available
rooms. Due to the short duration of renovation, in the opinion of
management, excluding these rooms did not have a material impact on
RevPAR or average occupancy.
WestCoast Hospitality Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except share data)
March 31, December 31,
2004 2003
Assets:
Current assets:
Cash and cash equivalents $ 14,337 $8,121
Restricted cash 5,288 4,952
Accounts receivable, net 10,166 9,306
Inventories 1,990 2,140
Prepaid expenses and other 3,626 2,137
Total current assets 35,407 26,656
Property and equipment, net 269,294 264,039
Goodwill 28,042 28,042
Intangible assets, net 14,217 14,412
Other assets, net 22,378 20,076
Total assets $369,338 $353,225
Liabilities:
Current liabilities:
Accounts payable $5,977 $6,990
Accrued payroll and related benefits 6,028 4,849
Accrued interest payable 773 775
Advance deposits 454 253
Other accrued expenses 9,528 8,069
Long-term debt, due within one year 5,763 5,667
Total current liabilities 28,523 26,603
Long-term debt, due after one year 144,594 145,770
Deferred income 9,090 9,279
Deferred income taxes 16,961 16,761
Minority interest in partnerships 2,504 2,623
Debentures due WestCoast Hospitality Capital Trust 47,423 --
Total liabilities 249,095 201,036
Stockholders' equity:
Preferred stock - 5,000,000 shares authorized;
$0.01 par value 588,236 issued
and outstanding at December 31, 2003 -- 6
Additional paid-in capital, preferred stock -- 29,406
Common stock - 50,000,000 shares authorized;
$0.01 par value; 13,045,549 and 13,006,361
shares issued and outstanding 130 130
Additional paid-in capital, common stock 84,387 84,196
Retained earnings 35,726 38,451
Total stockholders' equity 120,243 152,189
Total liabilities
and stockholders' equity $369,338 $353,225
WestCoast Hospitality Corporation
Consolidated Statement of Cash Flows
(unaudited)
($ in thousands)
Three months ended March 31,
Operating activities: 2004 2003
Net loss $(2,348) $(1,769)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 3,076 2,607
(Gain) loss on disposition of property
and equipment and other assets (189) 332
Deferred income tax provision 200 350
Minority interest in partnerships (119) (112)
Equity in investments (19) (58)
Compensation expense related to stock issuance -- 5
Provision for (recovery of) doubtful accounts (23) 111
Change in current assets and liabilities:
Restricted cash (336) (341)
Accounts receivable (837) 139
Inventories 150 135
Prepaid expenses and other (1,489) (1,345)
Accounts payable and income taxes payable (1,013) (484)
Accrued payroll and related benefits 1,179 (442)
Accrued interest payable (2) 10
Other accrued expenses and advance deposits 2,293 2,427
Net cash provided by operating activities 523 1,565
Investing activities:
Additions to property and equipment (7,019) (2,658)
Proceeds from disposition of property
and equipment 7 5
Proceeds from investment distribution 122 --
Investment in WestCoast Hospitality Capital Trust (1,423) --
Advances to WestCoast Hospitality Capital Trust (2,065)
Other, net (14) 136
Net cash used in investing activities (10,392) (2,517)
Financing activities:
Proceeds from note payable to bank 11,000 22,200
Repayment of note payable to bank (11,000) (20,000)
Proceeds from debenture issuance 47,423 --
Repurchase and retirement of preferred stock (29,412) --
Proceeds from short-term debt -- 1,800
Repayment of long-term debt (1,080) (893)
Proceeds from issuance of common stock under
employee stock purchase plan 51 55
Preferred stock dividend payments (1,011) (646)
Principal payments on capital lease obligations -- (99)
Proceeds from option exercises 140 --
Additions to deferred financing costs (26) (27)
Net cash provided by financing activities 16,085 2,390
Change in cash and cash equivalents:
Net increase in cash and cash equivalents 6,216 1,438
Cash and cash equivalents at beginning of period 8,121 752
Cash and cash equivalents at end of period $14,337 $2,190
WestCoast Hospitality Corporation
Reconciliation of EBITDA to Net Income
(unaudited)
($ in thousands)
The following is a reconciliation of EBITDA to net loss for the period
presented:
Three months ended
March 31,
2004 2003
EBITDA $ 2,625 $ 2,515
Income tax benefit 1,390 965
Interest expense (3,287) (2,642)
Depreciation and amortization (3,076) (2,607)
Net loss $ (2,348) $ (1,769)
NON-GAAP FINANCIAL MEASURES
EBITDA is defined as net income, or in this case net loss, before interest,
taxes, depreciation and amortization. EBITDA is considered a non-GAAP financial
measurement. We believe it is a useful financial performance measure for us and
for our shareholders and is a complement to net income and other financial
performance measures provided in accordance with generally accepted accounting
principles in the United States ("GAAP").
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.
However, because EBITDA excludes depreciation and amortization, it does not
measure the capital we require to maintain or preserve our long-lived 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, 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.
DATASOURCE: WestCoast Hospitality Corporation
CONTACT: Peter Hausback, VP, Chief Financial Officer of WestCoast
Hospitality Corporation, +1-509-777-6338, or
Web site: http://www.redlion.com/
Web site: http://www.ticketswest.com/
Web site: http://www.g-b.com/
Web site: http://www.westcoasthotels.com/