Westcoast Hospitality (NYSE:WEH)
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WestCoast Hospitality Corporation Continues RevPAR Growth;
Announces First Quarter 2005 Results
SPOKANE, Wash., April 28 /PRNewswire-FirstCall/ -- WestCoast Hospitality
Corporation (NYSE:WEH) today announced results for the quarter ended March 31,
2005.
Hotel Statistics
During the first quarter of 2005, system-wide RevPAR (revenue per available
room) for comparable hotels (hotels owned, leased, managed and franchised for
at least one year) increased 2.5% over the 2004 first quarter level to $35.71.
This increase was due to a 1.4 point increase in average occupancy, to 52.1%,
offset by a slight decrease of 0.3% in ADR (average daily rate), to $68.49.
Consolidated Company Performance
In the first quarter, total revenue from continuing operations was $35.4
million, down 2.1% from the comparable period in 2004. Revenues in the hotels
and restaurants division were higher as a result of a 4.4% increase in RevPAR
from continuing operations at owned and leased hotels. The company increased
hotels and restaurants division revenues despite the traditionally slow Easter
holiday travel period falling in March this year as opposed to April in 2004
and one less day in February compared to a leap year in 2004. Revenues for the
entertainment division decreased $0.8 million, primarily due to fewer shows and
performances scheduled in the first quarter of 2005 compared to 2004. Revenues
in the company's real estate division were lower due to a slight reduction in
management fees in the first quarter of 2005 and higher than usual commissions
earned in the first quarter of 2004.
The company's interest expense increased by $0.8 million in the quarter,
primarily as a result of the issuance in 2004 of trust preferred securities to
replace previously outstanding preferred stock. For the first quarter of 2005,
the loss applicable to common shareholders was $3.1 million ($0.24 per share)
compared to a loss of $2.7 million ($0.21 per share) in the first quarter of
2004. EBITDA (earnings before interest, taxes, depreciation and amortization)
from continuing operations was $1.9 million, down from $2.4 million in the
prior year quarter.
Arthur Coffey, President and Chief Executive Officer, said, "We are on schedule
with our accelerated product improvement plan announced late last year and
expect that execution of this plan, along with the growth in industry demand,
will make 2005 a very positive year for the company. We believe our continued
increase in RevPAR, the two recent full service franchise additions in
Portland, Oregon and Tacoma, Washington and the franchise term extensions with
two other hotels reflect the growing confidence in our product and our Red Lion
brand. Our hotels performed well during the quarter given the challenges of
comparing to a leap year in 2004 and Easter occurring during the seasonally
slow first quarter of 2005."
Recent Events
During the first quarter, the company announced the addition of the 318 room,
full service Red Lion Hotel on the River, Jantzen Beach, in Portland, Oregon to
its franchise network. On April 14, the company announced the addition of the
119 room, full service Red Lion Hotel Tacoma, in Tacoma, Washington, to its
franchise network. With the addition of these two hotels to its system, there
are now 61 Red Lion hotels operating in North America. The company is also
pleased to announce that the new owner of the Red Lion Hotel Austin, in Austin,
Texas, and the new lessee of the Red Lion Hotel Modesto, in Modesto,
California, have each recently signed new franchise license agreements to
continue the Red Lion brand at their hotels.
The entertainment division has secured Disney's The Lion King for a six-week
engagement for 46 performances at the Spokane Opera House beginning October
2005. With this engagement, the total number of performances the company
presents in 2005 will substantially exceed the number of performances in 2004.
This engagement is expected to have a positive impact on the division's
revenues and profits and on the company's Spokane hotels, which are already
booking hotel packages for show patrons.
The real estate division recently announced the redevelopment of Lincoln Plaza
in Spokane, Washington, a 110,000 square foot office and retail center it owns
that will feature newly renovated retail and Class A office space near key
downtown amenities. This redevelopment is expected to be substantially
complete by mid 2006 and is expected to have a favorable impact on the
division's profits.
In November 2004, the company announced its plan to invest $40 million to
improve comfort, freshen decor and upgrade technology at its Red Lion hotels.
The company also announced its plan to sell 11 non-strategic hotels and other
non-core properties and use the proceeds from the sales to support this
accelerated $40 million hotel investment. In connection with the company's
announcement, it reclassified 11 hotels and one office building as discontinued
operations. To date, the company has received acceptable offers on a number of
the hotels and associated transactions are in various stages of completion.
The office building is being marketed in a "calls for offer" process that is
expected to be completed in May 2005. Arthur Coffey added, "We are pleased
with the level of interest in these properties for sale and we are on schedule
with our planned timeline for completion of the hotel improvements."
Hotels and Restaurant Division Performance
For the first quarter, the company reported hotel and restaurant revenue from
continuing operations of $30.8 million, up $0.5 million from the previous
comparable quarter. Direct expenses increased $0.4 million to $27.7 million.
RevPAR from continuing operations was up 4.4% from the first quarter of 2004,
generated by a 2.7 point increase in occupancy. John Taffin, Executive Vice
President, Hotel Operations, said, "We achieved solid occupancy gains in our
seasonally slow first quarter and maintained ADR." The company expects to
complete the installation of its beds, pillows and linens package at all owned
Red Lion Hotels by the end of the second quarter. In mid April, as part of the
previously announced $40 million accelerated investment plan, renovations began
at three Red Lion Hotels in Boise, Idaho; Kelso, Washington; and Seattle,
Washington at the SeaTac International Airport. These renovations are expected
to be completed in June to take advantage of the busy summer travel season.
The company is in the process of installing new Micros property management
systems in 15 of its Red Lion hotels, and the company's new website is expected
to be launched in May. "We are looking forward to completing many of our
improvement initiatives before the summer travel season begins. We expect to
be able to increase rates to take advantage of seasonal demand and maximize
returns on our investment in hotel renovations," said Mr. Taffin.
Franchise, central services and development revenue was $0.6 million in the
first quarter of 2005, a slight increase from the first quarter of 2004.
Expenses decreased slightly to $0.2 million in the first quarter of 2005. "We
continue to experience strong interest in our Red Lion brand from prospective
franchisees, as demonstrated this year by the addition of two new franchised
hotels and the term extensions of two existing franchised hotels by new
operators," said John Taffin, Executive Vice President, Hotel Operations.
About WestCoast Hospitality Corporation
WestCoast Hospitality Corporation is a hospitality and leisure company
primarily engaged in the ownership, management, development and franchising of
upper mid-scale, full service hotels under its Red Lion(R) and WestCoast(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
2004 fiscal year and in other documents filed by the company with the
Securities and Exchange Commission.
CONTACT: Anupam Narayan, Executive Vice President, Chief Financial Officer of
West Coast, +1-509-459-6100, or .
WestCoast Hospitality Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes)
Three months ended March 31,
2005 2004 $ Change % Change
Revenue:
Hotels and
restaurants $30,773 $30,272 $501 1.7%
Franchise, central
services and
development 598 576 22 3.8%
Entertainment 2,804 3,585 (781) -21.8%
Real estate 1,149 1,621 (472) -29.1%
Corporate services 68 90 (22) -24.4%
Total revenues 35,392 36,144 (752) -2.1%
Operating expenses:
Hotels and
restaurants 27,650 27,251 399 1.5%
Franchise, central
services and
development 158 267 (109) -40.8%
Entertainment 2,468 2,801 (333) -11.9%
Real estate 627 928 (301) -32.4%
Corporate services 82 72 10 13.9%
Hotel facility and
land lease 1,741 1,981 (240) -12.1%
Depreciation and
amortization 2,839 2,477 362 14.6%
Gain on asset
dispositions, net (189) (188) (1) -0.5%
Total direct expenses 35,376 35,589 (213) -0.6%
Undistributed corporate
expenses 952 785 167 21.3%
Total expenses 36,328 36,374 (46) -0.1%
Operating loss (936) (230) (706) -307.0%
Other income (expense):
Interest expense (3,601) (2,846) (755) -26.5%
Interest income 97 95 2 2.1%
Other income
(expense), net (94) 17 (111) 652.9%
Equity income (loss)
in investments, net (9) 19 (28) -147.4%
Minority interest in
partnerships, net 50 52 (2) -3.8%
Loss from continuing
operations before
income taxes (4,493) (2,893) (1,600) -55.3%
Income tax benefit (1,696) (1,094) (602) -55.0%
Net loss from
continuing operations (2,797) (1,799) (998) -55.5%
Discontinued operations:
Loss from operations
of discontinued
business units, net of
income tax benefit of
$121 and $295 (326) (549) 223 40.6%
Net loss (3,123) (2,348) (775) -33.0%
Preferred stock dividend -- (377) 377 100.0%
Loss applicable to
common shareholders $(3,123) $(2,725) $(398) -14.6%
EBITDA (A)(B) $1,912 $2,625 $(713) -27.2%
EBITDA as a percentage
of revenues (B) 4.7% 6.3%
EBITDA from continuing
operations (A) $1,947 $2,430 $(483) -19.9%
EBITDA from continuing
operations (A)(B) as a
percentage of revenues 5.5% 6.7%
(A) The definition of "EBITDA" and how that measure relates to net income
is discussed further in this release 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.
EBITDA from continuing operations is calculated in the same manner,
but excludes the operating activities of business units identified as
discontinued.
(B) The calculation of EBITDA as a percentage of revenues is based upon
total operating revenues, from both continuing and discontinued
operations, of $40,637,000 and $41,630,000 for the three months ended
March 31, 2005 and 2004, respectively. EBITDA from continuing
operations as a percentage of revenues is based upon the operating
results of continuing business units as presented in the statements.
WestCoast Hospitality Corporation
Earnings Per Share and Hotel Statistics
(unaudited)
(shares in thousands)
Three months ended March 31,
2005 2004 $ Change % Change
Earnings per common share:
Basic
Loss applicable to
common shareholders
before discontinued
operations (A) $(0.21) $(0.17)
Loss on discontinued
operations (0.03) (0.04)
Loss applicable to
common shareholders $(0.24) $(0.21)
Diluted
Loss applicable to
common shareholders
before discontinued
operations (A) $(0.21) $(0.17)
Loss on discontinued
operations (0.03) (0.04)
Loss applicable to
common shareholders $(0.24) $(0.21)
Weighted average
shares - basic 13,078 13,024
Weighted average
shares - diluted (B) 13,078 13,024
Key Comparable
Hotel Statistics:
Combined (owned, leased,
managed and franchised) (C)
Average
occupancy (D)(G) 52.1% 50.7%
ADR (E) $68.49 $68.72 $(0.23) -0.3%
RevPAR (F)(G) $35.71 $34.83 $0.88 2.5%
(A) The net loss used to calculate the net earnings or loss per share
applicable to common shareholders before discontinued operations
includes all dividends on the retired cumulative preferred shares if
applicable for the period presented.
(B) For the three months ended March 31, 2005 and 2004, all 1,066,400 and
680,755 options outstanding to purchase common stock were
anti-dilutive and are therefore not included in the calculation of
earnings per common share. In addition, the 286,161 convertible
operating partnership ("OP") units were anti-dilutive and are
therefore not included in the calculation of diluted weighted average
shares for those same periods.
(C) Includes all hotels owned, leased, managed and franchised for greater
than one year by WestCoast Hospitality Corporation.
No adjustment has been made for hotels classified as discontinued
operations.
(D) Average occupancy represents total paid rooms divided by total
available rooms. Total available rooms represents the number of
rooms available multiplied by the number of days in the reported
period.
(E) Average daily rate ("ADR") represents total room revenues divided by
the total number of paid rooms occupied by hotel guests.
(F) Revenue per available room ("RevPAR") represents total room and
related revenues divided by total available rooms.
(G) Rooms under significant renovation were excluded from total available
rooms. Due to the short duration of renovation, in the opinion of
management, excluding these rooms did not have a material impact on
RevPAR or average occupancy.
WestCoast Hospitality Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except share data)
March 31, December 31,
2005 2004
Assets:
Current assets:
Cash and cash equivalents $7,185 $9,577
Restricted cash 4,312 4,092
Accounts receivable, net 9,272 8,464
Inventories 1,826 1,831
Prepaid expenses and other 5,189 3,286
Assets held for sale:
Assets of discontinued operations 62,191 61,757
Other assets held for sale 1,599 1,599
Total current assets 91,574 90,606
Property and equipment, net 222,804 223,132
Goodwill 28,042 28,042
Intangible assets, net 13,445 13,641
Other assets, net 9,192 9,191
Total assets $365,057 $364,612
Liabilities:
Current liabilities:
Accounts payable $5,208 $4,841
Accrued payroll and related benefits 5,526 4,597
Accrued interest payable 664 700
Advance deposits 571 188
Other accrued expenses 9,854 7,322
Long-term debt, due within one year 7,205 7,455
Liabilities of discontinued operations 22,908 22,879
Total current liabilities 51,936 47,982
Long-term debt, due after one year 125,203 125,756
Deferred income 8,335 8,524
Deferred income taxes 16,292 15,992
Minority interest in partnerships 2,499 2,548
Debentures due WestCoast Hospitality
Capital Trust 47,423 47,423
Total liabilities 251,688 248,225
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;
13,086,176 and 13,064,626 shares
issued and outstanding 131 131
Additional paid-in capital, common stock 84,572 84,467
Retained earnings 28,666 31,789
Total stockholders' equity 113,369 116,387
Total liabilities and stockholders' equity $365,057 $364,612
WestCoast Hospitality Corporation
Consolidated Statement of Cash Flows
(unaudited)
($ in thousands)
Three months ended March 31,
2005 2004
Operating activities:
Net loss $(3,123) $(2,348)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 2,874 3,076
(Gain) loss on disposition of property,
equipment and other assets (99) (189)
Write-off of deferred loan fees 5 --
Deferred income tax provision 300 200
Minority interest in partnerships (50) (119)
Equity in investments 9 (19)
Compensation expense related to stock issuance 5 --
Provision for doubtful accounts (28) (23)
Change in current assets and liabilities:
Restricted cash (280) (336)
Accounts receivable (927) (837)
Inventories 23 150
Prepaid expenses and other (1,846) (1,489)
Accounts payable 304 (1,013)
Accrued payroll and related benefits 1,036 1,179
Accrued interest payable (34) (2)
Other accrued expenses and advance deposits 3,171 2,293
Net cash provided by operating activities 1,340 523
Investing activities:
Purchases of property and equipment (2,283) (7,019)
Proceeds from disposition of
property and equipment -- 7
Proceeds from disposition of investment -- 122
Investment in WestCoast Hospitality Capital Trust -- (1,423)
Advances to WestCoast Hospitality Capital Trust (11) (2,065)
Proceeds from collections under note receivable 4 --
Other, net 65 (14)
Net cash used in investing activities (2,225) (10,392)
Financing activities:
Proceeds from note payable to bank 50 11,000
Repayment of note payable to bank (50) (11,000)
Proceeds from debenture issuance -- 47,423
Repurchase and retirement of preferred stock -- (29,412)
Proceeds from long-term debt 3,794 --
Repayment of long-term debt (4,871) (1,080)
Proceeds from issuance of common stock
under employee stock purchase plan 67 51
Preferred stock dividend payments -- (1,011)
Proceeds from option exercises 33 140
Additions to deferred financing costs (270) (26)
Net cash provided by (used in)
financing activities (1,247) 16,085
Net cash in discontinued operations (260) 29
Change in cash and cash equivalents:
Net increase (decrease) in cash
and cash equivalents (2,392) 6,245
Cash and cash equivalents at
beginning of period 9,577 7,884
Cash and cash equivalents at end of period $7,185 $ 14,129
WestCoast Hospitality Corporation
Additional Hotel Statistics
(unaudited)
System Hotels as of March 31, 2005
Meeting
Space
Hotels Rooms (sq. ft.)
Owned or Leased
Hotels: (A)
Red Lion Hotels 38 6,642 312,528
WestCoast Hotels 3 692 40,500
Other Brands 1 153 3,945
42 7,487 356,973
Managed Hotels:
Red Lion Hotels 1 150 5,234
WestCoast Hotels 1 72 1,800
Other Brands 1 254 36,000
3 476 43,034
Franchised Hotels:
Red Lion Hotels 21 3,548 151,351
WestCoast Hotels 1 257 15,000
22 3,805 166,351
Total 67 11,768 566,358
Comparable Hotel
Statistics (B)
Three months ended Three months ended
March 31, 2005 March 31, 2004
Average Average
Occupancy ADR RevPAR Occupancy ADR RevPAR
(C)(F) (D) (E)(F) (C)(F) (D) (E)(F)
Owned or Leased Hotels:
Continuing
Operations 54.0% $67.33 $36.37 51.3% $67.87 $34.83
Discontinued
Operations 37.5% 56.51 21.17 38.2% 53.82 20.57
50.3% 65.51 32.93 48.4% 65.36 31.60
Combined System
Wide (G) 52.1% $68.49 $35.71 50.7% $68.72 $34.83
Red Lion Hotels
(Owned, Leased,
Managed and
Franchised) (H) 53.3% $67.21 $35.83 51.6% $67.94 $35.06
(A) Statistics include 11 hotels previously identified as discontinued
business units, aggregating 1,649 rooms and 57,645 square feet of
meeting space.
(B) Includes all hotels owned, leased, managed and franchised for greater
than one year by WestCoast Hospitality Corporation.
(C) Average occupancy represents total paid rooms divided by total
available rooms. Total available rooms represents the number of
rooms available multiplied by the number of days in the reported
period.
(D) Average daily rate ("ADR") represents total room revenues divided by
the total number of paid rooms occupied by hotel guests.
(E) Revenue per available room ("RevPAR") represents total room and
related revenues divided by total available rooms.
(F) Rooms under significant renovation were excluded from total available
rooms. Due to the short duration of renovation, in the opinion of
management, excluding these rooms did not have a material impact on
RevPAR or average occupancy.
(G) Includes all hotels owned, leased, managed and franchised for greater
than one year by WestCoast Hospitality Corporation.
No adjustment has been made for hotels classified as discontinued
operations.
(H) Includes all hotels owned, leased, managed and franchised for greater
than one year operated under the Red Lion brand name.
No adjustment has been made for hotels classified as discontinued
operations.
WestCoast Hospitality Corporation
Reconciliation of EBITDA to Net Income
(unaudited)
($ in thousands)
The following is a reconciliation of EBITDA and EBITDA from continuing
operations to net income (loss) for the periods presented:
Three months ended
March 31,
2005 2004
EBITDA from continuing operations $1,947 $2,430
Income tax benefit - continuing operations 1,696 1,094
Interest expense - continuing operations (3,601) (2,846)
Depreciation and
amortization - continuing operations (2,839) (2,477)
Net loss from continuing operations (2,797) (1,799)
Loss on discontinued operations (326) (549)
Net loss $(3,123) $(2,348)
EBITDA $1,912 $2,625
Income tax benefit 1,817 1,390
Interest expense (3,978) (3,287)
Depreciation and amortization (2,874) (3,076)
Net loss $(3,123) $(2,348)
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"). EBITDA from continuing operations is calculated
in the same manner, but excludes the operating results of business units
identified as discontinued under 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 and
other operations 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
all EBITDA measures 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: Anupam Narayan, Executive Vice President, Chief Financial
Officer of West Coast, +1-509-459-6100, or
Web site: http://www.westcoasthotels.com/
Web site: http://www.redlion.com/
Web site: http://www.westcoasthotels.com/
Web site: http://www.ticketswest.com/
Web site: http://www.g-b.com/