WestCoast Hospitality Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes)
Three months ended June 30,
2005 2004
$ Change % Change
Revenue:
Hotels
$39,423 $37,364
$2,059 5.5%
Franchise and
management
607 712
(105) -14.7%
Entertainment
2,613 1,833
780 42.6%
Real estate
1,229 1,316
(87) -6.6%
Other
348 313
35 11.2%
Total revenues
44,220 41,538
2,682 6.5%
Operating expenses:
Hotels
30,437 29,323
1,114 3.8%
Franchise and
management
165 257
(92) -35.8%
Entertainment
2,321 1,847
474 25.7%
Real estate
890 777
113 14.5%
Other
246 206
40 19.4%
Depreciation and
amortization
2,881 2,600
281 10.8%
Hotel facility and
land lease
1,745 1,798
(53) -2.9%
Gain on asset
dispositions, net
(119) (208)
89 42.8%
Undistributed
corporate expenses
1,051 848
203 23.9%
Total expenses
39,617 37,448
2,169 5.8%
Operating income
4,603 4,090
513 12.5%
Other income (expense):
Interest expense
(3,598) (3,657)
59 1.6%
Minority interest in
partnerships, net
(34) (8)
(26) -325.0%
Other income
(expense), net
90 124
(34) -27.4%
Income from continuing
operations before
income taxes
1,061 549
512 93.3%
Income tax expense
279 135
144 106.7%
Net income from
continuing operations
782 414
368 88.9%
Discontinued operations:
Income from operations
of discontinued
business units, net of
income tax expense
of $577 and $211
951 391
560 143.2%
Net income and income
applicable to common
shareholders
$1,733 $805
$928 115.3%
EBITDA(1)
$9,479 $8,449
$1,030 12.2%
EBITDA as a percentage
of revenues(2)
18.4% 17.3%
EBITDA from continuing
operations(1)
$7,540 $6,806
$734 10.8%
EBITDA from continuing
operations(2)
as a percentage
of revenues
17.1% 16.4%
(1) 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.
(2) The calculation of EBITDA
as a percentage of revenues is based upon
total
operating revenues, from both continuing and discontinued
operations,
of $51,601,000 and $48,936,000 for the three months ended
June
30, 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 June 30,
2005 2004
Earnings per common share:
Basic
Income applicable to common
shareholders
before discontinued
operations(1)
$0.06 $0.03
Income from discontinued
operations
0.07 0.03
Income applicable to common
shareholders $0.13
$0.06
Diluted
Income applicable to common
shareholders
before discontinued
operations(1)
$0.06 $0.03
Income on discontinued
operations
0.07 0.03
Income applicable to common
shareholders $0.13
$0.06
Weighted average shares - basic
13,092 13,046
Weighted average shares - diluted(2)
13,416 13,335
Key Comparable
Hotel Statistics:
Three months ended June 30,
2005 2004
$ Change % Change
Combined (owned, leased,
managed and franchised)(3)
Average occupancy(4)
64.7% 61.8%
ADR(5)
$73.68 $71.06
$2.62 3.7%
RevPAR(6)
$47.64 $43.90
$3.74 8.5%
(1) The net income used to calculate
the net earnings per share
applicable
to common shareholders before discontinued operations
includes
all dividends on the retired cumulative preferred shares if
applicable
for the period presented.
(2) For the three months ended
June 30, 2005, 38,644 outstanding options
to purchase
common shares were considered dilutive, of the 1,024,019
options
outstanding as of that date. For the three months ended
June
30, 2004, 3,596 outstanding options to purchase common shares
were
considered dilutive, of the 675,445 options outstanding as of
that
date. In addition, the 286,161 convertible operating partnership
("OP")
units were considered dilutive and are therefore included in
the
calculation of diluted weighted average shares for both those
same
periods.
(3) Includes all hotels owned,
leased, managed and franchised for greater
than
one year by WestCoast Hospitality Corporation.
No adjustment
has been made for hotels classified as discontinued
operations.
(4) Average occupancy represents
total paid rooms divided by total
available
rooms. Total available rooms represents the number of
rooms
available multiplied by the number of days in the reported
period.
(5) Average daily rate ("ADR")
represents total room revenues divided by
the
total number of paid rooms occupied by hotel guests.
(6) Revenue per available room
("RevPAR") represents total room and
related
revenues divided by total available rooms.
WestCoast Hospitality Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes)
Six months ended June 30,
2005 2004
$ Change % Change
Revenue:
Hotels
$69,765 $67,431
$2,334 3.5%
Franchise and
management
1,418 1,321
97 7.3%
Entertainment
5,418 5,418
-- 0.0%
Real estate
2,458 2,937
(479) -16.3%
Other
633 575
58 10.1%
Total revenues
79,692 77,682
2,010 2.6%
Operating expenses:
Hotels
58,086 56,502
1,584 2.8%
Franchise and
management
262 463
(201) -43.4%
Entertainment
4,789 4,649
140 3.0%
Real estate
1,728 1,705
23 1.3%
Other
462 412
50 12.1%
Depreciation and
amortization
5,720 5,076
644 12.7%
Hotel facility and
land lease
3,485 3,778
(293) -7.8%
Gain on asset
dispositions, net
(307) (396)
89 22.5%
Undistributed
corporate expenses
2,003 1,633
370 22.7%
Total expenses
76,228 73,822
2,406 3.3%
Operating income
3,464 3,860
(396) -10.3%
Other income (expense):
Interest expense
(7,199) (6,503)
(696) -10.7%
Minority interest
in partnerships, net
15 43
(28) -65.1%
Other income, net
86 254
(168) -66.1%
Loss from continuing
operations before
income taxes
(3,634) (2,346)
(1,288) -54.9%
Income tax benefit
(1,416) (960)
(456) -47.5%
Net loss from
continuing operations
(2,218) (1,386)
(832) -60.0%
Discontinued operations:
Income (loss) from
operations of
discontinued business
units, net of income
tax expense (benefit)
of $456 and ($85)
828 (157)
985 627.4%
Net loss
(1,390) (1,543)
153 9.9%
Preferred stock dividend
-- (377)
377 100.0%
Loss applicable to
common shareholders
$(1,390) $(1,920)
$530 27.6%
EBITDA(1)
$11,391 $11,073
$318 2.9%
EBITDA as a percentage
of revenues(2)
12.3% 12.2%
EBITDA from continuing
operations(1)
$9,285 $9,233
$52 0.6%
EBITDA from continuing
operations (2) as a
percentage of revenues
11.7% 11.9%
(1) 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.
(2) The calculation of EBITDA
as a percentage of revenues is based upon
total
operating revenues, from both continuing and discontinued
operations,
of $92,238,000 and $90,566,000 for the six months ended
June
30, 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)
Six months ended June 30,
2005 2004
Earnings per common share:
Basic
Loss applicable to common
shareholders
before discontinued operations(1)
$(0.17) $(0.14)
Income (loss) on discontinued
operations 0.06
(0.01)
Loss applicable to common
shareholders $(0.11)
$(0.15)
Diluted
Loss applicable to common
shareholders
before discontinued
operations(1)
$(0.17) $(0.14)
Income (loss) on discontinued
operations 0.06
(0.01)
Loss applicable to common
shareholders $(0.11)
$(0.15)
Weighted average shares - basic
13,085 13,035
Weighted average shares - diluted(2)
13,085 13,035
Key Comparable
Hotel Statistics:
Six months ended June 30,
2005 2004
$ Change % Change
Combined (owned,
leased, managed
and franchised)(3)
Average occupancy(4)
58.4% 56.2%
ADR(5)
$71.37 $70.00
$1.37 2.0%
RevPAR(6)
$41.70 $39.36
$2.34 5.9%
(1) The net income or loss used
to calculate the net earnings or loss per
share
applicable to common shareholders before discontinued
operations
includes all dividends on the retired cumulative preferred
shares
if applicable for the period presented.
(2) For the six months ended
June 30, 2005 and 2004, all 1,024,019 and
675,455
options outstanding to purchase common stock were
anti-dilutive
and are therefore not included in the calculation of
earnings
per common share. In addition, the 286,161 convertible
operating
partnership ("OP") units were anti-dilutive and are
therefore
not included in the calculation of diluted weighted average
shares
for those same periods.
(3) Includes all hotels owned,
leased, managed and franchised for greater
than
one year by WestCoast Hospitality Corporation.
No adjustment
has been made for hotels classified as discontinued
operations.
(4) Average occupancy represents
total paid rooms divided by total
available
rooms. Total available rooms represents the number of
rooms
available multiplied by the number of days in the reported
period.
(5) Average daily rate ("ADR")
represents total room revenues divided by
the
total number of paid rooms occupied by hotel guests.
(6) Revenue per available room
("RevPAR") represents total room and
related
revenues divided by total available rooms.
WestCoast Hospitality Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except share data)
June 30, December 31,
2005 2004
Assets:
Current assets:
Cash and cash equivalents
$7,756 $9,577
Restricted cash
3,468 4,092
Accounts receivable, net
9,093 8,464
Inventories
1,779 1,831
Prepaid expenses and other
5,806 3,286
Assets held for sale:
Assets of
discontinued operations
62,452 61,757
Other assets
held for sale
1,599 1,599
Total current assets
91,953 90,606
Property and equipment, net
226,048 223,132
Goodwill
28,042 28,042
Intangible assets, net
13,248 13,641
Other assets, net
8,507 9,191
Total assets
$367,798 $364,612
Liabilities:
Current liabilities:
Accounts payable
$6,031 $4,841
Accrued payroll and related
benefits
5,154 4,597
Accrued interest payable
671 700
Advance deposits
546 188
Other accrued expenses
11,499 7,322
Long-term debt, due within
one year
7,181 7,455
Liabilities of discontinued
operations 22,508
22,879
Total current liabilities
53,590 47,982
Long-term debt, due after one
year
124,393 125,756
Deferred income
8,147 8,524
Deferred income taxes
16,592 15,992
Minority interest in partnerships
2,533 2,548
Debentures due WestCoast Hospitality
Capital Trust
47,423 47,423
Total liabilities
252,678 248,225
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; 13,106,670
and 13,064,626 shares
issued and outstanding 131
131
Additional paid-in capital,
common stock 84,590
84,467
Retained earnings
30,399 31,789
Total stockholders' equity
115,120 116,387
Total liabilities and
stockholders' equity
$367,798 $364,612
WestCoast Hospitality Corporation
Consolidated Statement of Cash Flows
(unaudited)
($ in thousands)
Six months ended June 30,
2005 2004
Operating activities:
Net loss
$(1,390) $(1,543)
Adjustments to reconcile net
loss
to net cash provided by
operating activities:
Depreciation and amortization
5,788 6,291
(Gain) on disposition of property,
equipment and other assets
(214) (396)
Write-off of deferred loan fees
5
--
Deferred income tax provision
600 500
Minority interest in partnerships
(15) (120)
Equity in investments
30
(8)
Compensation expense related
to stock issuance 9
--
Provision for (recovery of)
doubtful accounts 73
(2)
Change in current assets and
liabilities:
Restricted cash
612 432
Accounts receivable
(1,084) (1,423)
Inventories
83 105
Prepaid expenses and other
(2,788) (3,736)
Accounts payable
1,134 (824)
Accrued payroll and related
benefits
559 664
Accrued interest payable
(33)
19
Other accrued expenses
and advance deposits 4,778
3,908
Net cash provided by operating
activities 8,147
3,867
Investing activities:
Purchases of property and equipment
(8,276) (15,094)
Proceeds from disposition of
property and equipment
30
40
Proceeds from disposition of
investment
--
94
Investment in WestCoast Hospitality
Capital Trust --
(1,403)
Advances to WestCoast Hospitality
Capital Trust (20)
(2,065)
Distributions from equity investee
117 449
Proceeds from collections under
note receivable 480
1,718
Other, net
92 (184)
Net cash used in investing
activities
(7,577) (16,445)
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
3,835
83
Repayment of long-term debt
(6,027) (2,189)
Proceeds from issuance of common
stock under employee stock
purchase plan
67
50
Preferred stock dividend payments
-- (1,011)
Proceeds from option exercises
46 140
Additions to deferred financing
costs
(279) (47)
Net cash provided by (used
in)
financing activities
(2,358) 15,037
Net cash in discontinued
operations
(33) (231)
Change in cash and cash equivalents:
Net increase (decrease) in cash
and cash equivalents
(1,821) 2,228
Cash and cash equivalents at
beginning of period
9,577 7,884
Cash and cash equivalents at
end of period $7,756
$ 10,112
WestCoast Hospitality Corporation
Additional Hotel Statistics
(unaudited)
System Hotels as of June 30, 2005
Meeting Space
Hotels Rooms
(sq. ft.)
Owned or Leased Hotels:(1)
Red Lion Hotels
38 6,637
312,528
WestCoast Hotels
3
692 40,500
Other Brands
1
153 3,945
42 7,482
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
22 3,665
153,101
WestCoast Hotels
1
257 15,000
23 3,922
168,101
Total
68 11,880
568,108
Comparable Hotel Statistics(2)
Three months ended Three
months ended
June 30, 2005
June 30, 2004
Average
Average
Occupancy(3) ADR(4) RevPAR(5)Occupancy(3)ADR(4) RevPAR(5)
Owned or
Leased Hotels:
Continuing
Operations
67.1% $74.32 $49.87 63.7%
$71.37 $45.46
Discontinued
Operations
53.9% 61.67 33.23
53.5% 59.61 31.88
64.1% 71.91 46.10
61.4% 69.05 42.38
Combined System
Wide (6)
64.7% $73.68 $47.64 61.8%
$71.06 $43.90
Red Lion Hotels
(Owned, Leased,
Managed and
Franchised) (7)
65.5% $72.51 $47.46 62.3%
$69.88 $43.54
Six months ended
Six months ended
June 30, 2005
June 30, 2004
Average
Average
Occupancy(3) ADR(4) RevPAR(5)Occupancy(3)ADR(4) RevPAR(5)
Owned or
Leased Hotels:
Continuing
Operations
60.6% $71.22 $43.16 57.5%
$69.81 $40.14
Discontinued
Operations
45.7% 59.57 27.23
45.9% 57.19 26.23
57.2% 69.11 39.55
54.9% 67.42 36.99
Combined System
Wide (6)
58.4% $71.37 $41.70 56.2%
$70.00 $39.36
Red Lion Hotels
(Owned, Leased,
Managed and
Franchised) (7)
59.4% $70.14 $41.67 57.0%
$69.00 $39.30
(1) Statistics include 11 hotels
previously identified as discontinued
business
units, aggregating 1,694 rooms and 57,645 square feet of
meeting
space.
(2) Includes all hotels owned,
leased, managed and franchised for greater
than
one year by WestCoast Hospitality Corporation.
(3) Average occupancy represents
total paid rooms divided by total
available
rooms. Total available rooms represents the number of
rooms
available multiplied by the number of days in the reported
period.
(4) Average daily rate ("ADR")
represents total room revenues divided by
the
total number of paid rooms occupied by hotel guests.
(5) Revenue per available room
("RevPAR") represents total room and
related
revenues divided by total available rooms.
(6) Includes all hotels owned,
leased, managed and franchised for greater
than
one year by WestCoast Hospitality Corporation.
No adjustment
has been made for hotels classified as discontinued
operations.
(7) Includes all hotels owned,
leased, managed and franchised for greater
than
one year operated under the Red Lion brand name.
No adjustment
has been made for hotels classified as discontinued
operations.
WestCoast Hospitality Corporation
Reconciliation of EBITDA to Net Income
(unaudited)
($ 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
Six months ended
June 30,
June 30,
2005 2004
2005 2004
EBITDA from
continuing operations
$7,540 $6,806
$9,285 $9,233
Income tax (expense)
benefit - continuing
operations
(279) (135)
1,416 960
Interest expense -
continuing
operations
(3,598) (3,657)
(7,199) (6,503)
Depreciation and
amortization -
continuing operations
(2,881) (2,600)
(5,720) (5,076)
Net income (loss) from
continuing operations
782 414
(2,218) (1,386)
Income (loss) on
discontinued operations
951 391
828 (157)
Net income (loss)
$1,733 $805
$(1,390) $(1,543)
EBITDA
$9,479 $8,449
$11,391 $11,073
Income tax (expense)
benefit
(856) (346)
960 1,045
Interest expense
(3,975) (4,083)
(7,953) (7,370)
Depreciation and
amortization
(2,915) (3,215)
(5,788) (6,291)
Net income (loss)
$1,733 $805
$(1,390) $(1,543)
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. |