Westcoast Hospitality (NYSE:WEH)
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WestCoast Hospitality Corporation Announces Third Quarter
Financial Results; ADR Increases 2.0% and RevPAR Increases 7.0%
SPOKANE, Wash., Oct. 28 /PRNewswire-FirstCall/ -- WestCoast Hospitality
Corporation (NYSE:WEH) today announced financial results for its third quarter
ended September 30, 2004. System-wide RevPAR (revenue per available room) for
comparable hotels (hotels owned, leased, managed and franchised for at least
one year) increased 7.0% in the third quarter of 2004 to $52.71 from $49.27 in
the third quarter of 2003. The increase in RevPAR resulted in part from a 3.2
percentage point increase in average occupancy, to 70.5% in the third quarter
of 2004 from 67.3% for the third quarter of 2003. In addition, ADR (average
daily rate) increased 2.0% to $74.72 in the most recent quarter from $73.23
during the prior year comparable quarter. The Company reported total revenues
of $56.0 million for its third quarter of 2004, compared to $54.5 million for
the comparable period in 2003. Earnings per share were $0.27 in the third
quarter of 2004, compared to earnings per share of $0.20 in the prior year
third quarter. EBITDA (earnings before interest, taxes, depreciation and
amortization) increased 8.1% to $12.7 million for the third quarter of 2004
from $11.7 million in the third quarter of 2003.
Arthur Coffey, President and Chief Executive Officer of WestCoast Hospitality
Corporation, noted, "Our strategy has been to increase occupancy through
strategic marketing and investment in our properties, and then to increase rate
as demand heightens for our rooms. Our occupancy has now increased year on
year for each of the past ten calendar months and the resulting demand allowed
us to increase rates during the third quarter. The combined effect of this
strategy is that during the first nine months of 2004 our RevPAR has increased
at a faster rate than the RevPAR of hotels we identified as our direct
competitors over the past year."
The Company is pleased to announce that its branded websites have become its
single largest source of electronically distributed room revenue. The Company
has also increased its reservation contribution to system hotels over the past
year to 36% during the third quarter of 2004 from 28% during the third quarter
of 2003. John Taffin, Executive Vice President, Hotel Operations, noted, "Our
brand strengthening initiatives, marketing efforts and technology upgrades are
achieving the desired results. Our central reservations system is able to
drive more business to our system hotels and a greater percentage of that
business is coming through the Company's branded websites. This growth in
branded website revenue results in higher yields."
OPERATING RESULTS
The Company reported hotel and restaurant revenue of $50.5 million at owned and
leased hotels for the third quarter of 2004, compared to $49.2 million in the
third quarter of 2003. Owned hotel RevPAR increased 7.0% during the quarter.
Owned hotel ADR increased 1.5% and occupancy increased 3.6 percentage points.
Increased ADR and solid expense management drove improvement in operating
margins, with hotel and restaurant operating income increasing 12% to $11.7
million in third quarter of 2004 from $10.4 million in the third quarter of
2003.
Franchise, central services and development revenue was $759 thousand in the
third quarter of 2004, versus $973 thousand in the comparable period of 2003.
The revenue decline was primarily due to the difference in the number of hotels
franchised by the company and the associated royalty fees.
Entertainment division revenue was $2.5 million in the third quarter of 2004,
compared to $2.0 million in the third quarter of 2003. The increase in revenues
was primarily due to an increase in the number of events presented during the
quarter, compared to the same quarter of 2003. The increase in operating
expenses was largely due to the costs associated with the event presentations,
and partially due to increases in ticketing operating costs during the third
quarter of 2004. Revenues less direct costs for third quarter 2004 increased
slightly when compared to same quarter 2003.
Real estate division revenue declined slightly during the third quarter of 2004
to $2.1 million from $2.2 million. Expenses in the division increased to $1.3
million from $1.2 million. The decrease in revenues was due primarily to lower
percentage rents and rent modifications. The increase in expenses was
related primarily to increased maintenance expenses at owned properties and
increased payroll and commission charges in the division.
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 brokering 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
Title: Vice President, Chief Financial Officer
Phone: 1-509-459-6100
Internet:
http://www.westcoasthotels.com/
http://www.ticketswest.com/
http://www.redlion.com/
http://www.g-b.com/
WestCoast Hospitality Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands)
Three months ended
September 30,
2004 2003 $ Change % Change
Revenue:
Hotels and restaurants $50,469 $49,230 $1,239 2.5%
Franchise, central services and
development 759 973 (214) -22.0%
Entertainment 2,533 2,023 510 25.2%
Real estate 2,144 2,177 (33) -1.5%
Corporate services 82 81 1 1.2%
Total revenues 55,987 54,484 1,503 2.8%
Operating expenses:
Hotels and restaurants 38,807 38,848 (41) -0.1%
Franchise, central services and
development 416 376 40 10.6%
Entertainment 2,349 1,845 504 27.3%
Real estate 1,270 1,191 79 6.6%
Corporate services 78 83 (5) -6.0%
Depreciation and amortization 3,283 4,284 (1,001) -23.4%
Gain on asset dispositions, net (134) (117) (17) 14.5%
Conversion expenses -- 24 (24) -100.0%
Total direct expenses 46,069 46,534 (465) -1.0%
Undistributed corporate expenses 672 712 (40) -5.6%
Total expenses 46,741 47,246 (505) -1.1%
Operating income 9,246 7,238 2,008 27.7%
Other income (expense):
Interest expense (4,082) (2,886) (1,196) 41.4%
Interest income 115 96 19 19.8%
Other income, net 17 87 (70) -80.5%
Equity income in investments, net 81 20 61 305.0%
Minority interest in
partnerships, net (52) 14 (66) -471.4%
Income before income tax expense 5,325 4,569 756 16.5%
Income tax expense 1,827 1,337 490 36.6%
Net income 3,498 3,232 266 8.2%
Preferred stock dividend -- (634) 634 -100.0%
Income applicable to common
shareholders $3,498 $2,598 $900 34.6%
EBITDA(1) $12,690 $11,739 $951 8.1%
EBITDA as a percentage of revenues 22.7% 21.5%
(1) 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 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 Per Share and Hotel Statistics
(unaudited)
(shares in thousands)
Three months ended
September 30,
2004 2003 $ Change % Change
Earnings per common share:
Basic $0.27 $0.20
Diluted $0.26 $0.20
Weighted average shares - basic 13,059 13,003
Weighted average shares - diluted (1) 13,345 13,289
Comparable Hotel Statistics:
Combined (owned, leased, managed and
franchised) (2)
Average occupancy(3) (6) 70.5% 67.3%
ADR(4) $74.72 $73.23 $1.49 2.0%
RevPAR(5) (6) $52.71 $49.27 $3.44 7.0%
(1) For the three months ended September 30, 2004 and 2003 options to
purchase common stock were anti-dilutive and are therefore
not included in the calculation of earnings per common share.
286,161 convertible operating partnership ("OP") units are reflected
in the calculation of diluted weighted average shares for those same
periods.
(2) Includes hotels owned, leased, managed and franchised for greater than
one year by WestCoast Hospitality Corporation.
(3) Average occupancy represents total paid rooms divided by total
available rooms. Total available rooms represents the
number of rooms available multiplied by the number of days in the
reported period.
(4) Average daily rate ("ADR") represents total room revenues divided by
the total number of paid rooms occupied by hotel guests.
(5) Revenue per available room ("RevPAR") represents total room and
related revenues divided by total available rooms.
(6) Rooms under significant renovation were excluded from total available
rooms. Due to the short duration of renovation,
in the opinion of management, excluding these rooms did not have a
material impact on RevPAR or average occupancy.
WestCoast Hospitality Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands)
Nine months ended
September 30,
2004 2003 $ Change % Change
Revenue:
Hotels and restaurants $129,476 $126,671 $2,805 2.2%
Franchise, central services and
development 2,050 2,950 (900) -30.5%
Entertainment 7,952 6,008 1,944 32.4%
Real estate 6,828 6,843 (15) -0.2%
Corporate services 248 256 (8) -3.1%
Total revenues 146,554 142,728 3,826 2.7%
Operating expenses:
Hotels and restaurants 109,548 106,603 2,945 2.8%
Franchise, central services and
development 1,008 1,268 (260) -20.5%
Entertainment 6,998 5,327 1,671 31.4%
Real estate 3,774 3,624 150 4.1%
Corporate services 224 242 (18) -7.4%
Depreciation and amortization 9,574 10,047 (473) -4.7%
(Gain) loss on asset dispositions,
net (530) 579 (1,109) -191.5%
Conversion expenses -- 392 (392) -100.0%
Total direct expenses 130,596 128,082 2,514 2.0%
Undistributed corporate expenses 2,305 2,040 265 13.0%
Total expenses 132,901 130,122 2,779 2.1%
Operating income 13,653 12,606 1,047 8.3%
Other income (expense):
Interest expense (11,452) (8,241) (3,211) 39.0%
Interest income 343 303 40 13.2%
Other income (expense), net 37 (205) 242 -118.0%
Equity income in investments, net 89 99 (10) -10.1%
Minority interest in
partnerships, net 68 144 (76) -52.8%
Income before income tax expense 2,738 4,706 (1,968) -41.8%
Income tax expense 783 1,449 (666) -46.0%
Net income 1,955 3,257 (1,302) -40.0%
Preferred stock dividend (377) (1,915) 1,538 -80.3%
Income applicable to common
shareholders $1,578 $1,342 $236 17.6%
EBITDA(1) $23,764 $22,994 $770 3.3%
EBITDA as a percentage of revenues 16.2% 16.1%
(1) 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 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 Per Share and Hotel Statistics
(unaudited)
(shares in thousands)
Nine months ended
September 30,
2004 2003 $ Change % Change
Earnings per common share:
Basic and Diluted $0.12 $0.10
Weighted average shares - basic 13,043 12,997
Weighted average shares - diluted (1) 13,330 13,283
Comparable Hotel Statistics:
Combined (owned, leased, managed and
franchised) (2)
Average occupancy (3) (6) 61.4% 58.0%
ADR (4) $71.65 $71.14 $0.51 0.7%
RevPAR (5) (6) $44.01 $41.25 $2.76 6.7%
(1) For the nine months ended September 30, 2004, 752 options to purchase
common stock were dilutive and are included in the
calculation of diluted earnings per common share. For the nine months
ended September 30, 2003 all options to purchase
common stock were anti-dilutive and are therefore not included in the
calculation of earnings per common share.
286,161 convertible operating partnership ("OP") units are reflected
in the calculation of diluted weighted average shares
for both periods.
(2) Includes hotels owned, leased, managed and franchised for greater than
one year by WestCoast Hospitality Corporation.
(3) Average occupancy represents total paid rooms divided by total
available rooms. Total available rooms represents the
number of rooms available multiplied by the number of days in the
reported period.
(4) Average daily rate ("ADR") represents total room revenues divided by
the total number of paid rooms occupied by hotel guests.
(5) Revenue per available room ("RevPAR") represents total room and
related revenues divided by total available rooms.
(6) Rooms under significant renovation were excluded from total available
rooms. Due to the short duration of renovation,
in the opinion of management, excluding these rooms did not have a
material impact on RevPAR or average occupancy.
WestCoast Hospitality Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except share data)
September 30, December 31,
2004 2003
Assets:
Current assets:
Cash and cash equivalents $16,261 $8,121
Restricted cash 4,632 4,952
Accounts receivable, net 10,753 9,306
Inventories 2,037 2,140
Prepaid expenses and other 2,879 2,137
Total current assets 36,562 26,656
Property and equipment, net 292,339 264,039
Goodwill 28,042 28,042
Intangible assets, net 13,838 14,412
Other assets, net 10,933 20,076
Total assets $381,714 $353,225
Liabilities:
Current liabilities:
Accounts payable $5,547 $6,990
Accrued payroll and related
benefits 6,034 4,849
Accrued interest payable 800 775
Advance deposits 217 253
Other accrued expenses 10,882 8,069
Long-term debt, due within one
year 8,581 5,667
Total current liabilities 32,061 26,603
Long-term debt, due after one year 147,546 145,770
Deferred income 8,713 9,279
Deferred income taxes 18,808 16,761
Minority interest in partnerships 2,555 2,623
Debentures due WestCoast
Hospitality Capital Trust 47,423 --
Total liabilities 257,106 201,036
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;
13,060,919 and 13,006,361 shares
issued and outstanding 131 130
Additional paid-in capital, common
stock 84,448 84,196
Retained earnings 40,029 38,451
Total stockholders' equity 124,608 152,189
Total liabilities and
stockholders' equity $381,714 $353,225
WestCoast Hospitality Corporation
Consolidated Statement of Cash Flows
(unaudited)
($ in thousands)
Nine months ended
September 30,
Operating activities: 2004 2003
Net income $1,955 $3,257
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation and amortization 9,574 10,047
(Gain) loss on disposition of
property and equipment and
other assets (530) 579
Non-cash reduction of preferred
stock resulting in gain -- (522)
Write-off of deferred loan fees -- 790
Deferred income tax provision 2,047 500
Minority interest in
partnerships (68) (144)
Equity in investments (89) (99)
Compensation expense related to
stock issuance -- 5
Provision for doubtful accounts 188 337
Change in current assets and
liabilities:
Restricted cash 320 (2,140)
Accounts receivable (1,635) (314)
Inventories 103 80
Prepaid expenses and other (742) 114
Accounts payable (1,443) 476
Accrued payroll and related
benefits 1,185 118
Accrued interest payable 25 85
Other accrued expenses and
advance deposits 3,411 997
Net cash provided by operating
activities 14,301 14,166
Investing activities:
Purchases of property and equipment (19,069) (5,141)
Proceeds from disposition of
property and equipment 198 398
Proceeds from disposition of
investment 94 441
Investment in WestCoast Hospitality
Capital Trust (1,423) --
Advances to WestCoast Hospitality
Capital Trust (2,116) --
Proceeds from collections under
note receivable 1,725 --
Distributions from equity investee 449 --
Other, net 30 62
Net cash used in investing
activities (20,112) (4,240)
Financing activities:
Proceeds from note payable to bank 11,000 47,700
Repayment of note payable to bank (11,000) (99,800)
Proceeds from debenture issuance 47,423 --
Repurchase and retirement of
preferred stock (29,412) --
Proceeds from long-term debt 83 55,200
Proceeds from short-term debt -- 2,658
Repayment of long-term debt (3,335) (2,806)
Proceeds from issuance of common
stock under
employee stock purchase plan 113 99
Preferred stock dividend payments (1,011) (1,927)
Principal payments on capital lease
obligations -- (268)
Proceeds from option exercises 140 --
Additions to deferred financing
costs (50) (1,466)
Net cash provided by (used in)
financing activities 13,951 (610)
Change in cash and cash equivalents:
Net increase in cash and cash
equivalents 8,140 9,316
Cash and cash equivalents at
beginning of period 8,121 752
Cash and cash equivalents at end of
period $16,261 $10,068
WestCoast Hospitality Corporation
Reconciliation of EBITDA to Net Income
(unaudited)
($ in thousands)
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
EBITDA $12,690 $11,739 $23,764 $22,994
Income tax expense (1,827) (1,337) (783) (1,449)
Interest expense (4,082) (2,886) (11,452) (8,241)
Depreciation and amortization (3,283) (4,284) (9,574) (10,047)
Net income $3,498 $3,232 $1,955 $3,257
NON-GAAP FINANCIAL MEASURES
EBITDA is defined as net income or 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, Vice President, Chief Financial Officer of
WestCoast Hospitality Corporation, +1-509-459-6100, or
Web site: http://www.ticketswest.com/
Web site: http://www.redlion.com/
Web site: http://www.g-b.com/
Web site: http://www.westcoasthotels.com/