SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
July 13, 2019 (July 9, 2018)
Date of Report (Date of earliest event reported)
RED LION HOTELS CORPORATION
(Exact Name of Registrant as Specified in Charter)
Washington | 001-13957 | 91-1032187 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission file number) |
(I.R.S. Employer Identification No.) |
1550 Market St. #350
Denver, CO 80202
(Address of Principal Executive Offices, Zip Code)
(509) 459-6100
(Registrants Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.01. Completion of Acquisition or Disposition of Assets.
On July 9, 2018 RL Port Angeles, LLC completed the sale of the Red Lion Hotel Port Angeles in Port Angeles, Washington to BGP PA, LLC, an Oregon limited liability company (the Purchaser). The purchase price for the hotel was $19.5 million, which was paid in cash at closing.
At closing, an affiliate of the Purchaser entered into a franchise agreement with Red Lion Hotels Franchising, Inc., a wholly owned subsidiary of Red Lion Hotels Corporation, to continue to operate the hotel under the Red Lion® brand. The franchise agreement provides for a 10 year term and the payment of monthly royalty and program fees equal to a percentage of the hotels gross room revenue. Early termination of the franchise agreement by Red Lion Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee.
RL Port Angeles, LLC is a wholly owned subsidiary of RL Venture, LLC. RL Venture, LLC is a variable interest entity in which Red Lion Hotels Corporation holds a 55% interest, and therefore the registrant consolidates the assets, liabilities and results of operations of this entity.
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement
Immediately following the sale of the hotel described in Item 2.01, RL Venture, LLC repaid the remaining outstanding principal balance of $15.6 million under its loan agreement with Pacific Western Bank.
Item 7.01. Regulation FD Disclosure.
A copy of the companys press release, dated July 13, 2018 announcing the completion of the sale is furnished as Exhibit 99.1 hereto.
Non-GAAP Financial Measures
The following is a reconciliation of pro forma Adjusted EBITDA to amounts previously reported, to reflect (i) the sale of hotels in Eureka, CA, Redding, CA, Boise, ID, Post Falls, ID, Richland, WA, Pasco, WA, and Bend, OR which were previously reported and (ii) the sale of the Port Angeles hotel asset as described in Item 2.01 of this filing:
Three Months Ended March 31, |
Year Ended December 31, |
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2018 | 2017 | |||||||
Adjusted EBITDA from continuing operations as previously reported |
$ | 421 | $ | 22,374 | ||||
Less: Redding, Eureka, Boise, Richland, Pasco, Bend, and Post Falls asset sales |
(373 | ) | (7,926 | ) | ||||
Less: Asset sold with this filing |
(288 | ) | (2,315 | ) | ||||
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Pro Forma Adjusted EBITDA |
$ | (240 | ) | $ | 12,133 | |||
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EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. We believe it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness. Adjusted EBITDA is an additional measure of financial performance. We believe that the inclusion or exclusion of certain special items, such as gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results. Refer to our previously filed 10-K for the year ended December 31, 2017 filed on April 2, 2018 and 10-Q for the three months ended March 31, 2018 filed on May 9, 2018 for the reconciliation from net income to adjusted EBITDA and further discussion of Non-GAAP measures.
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
Attached hereto as Exhibit 99.2 and incorporated by reference herein is unaudited pro forma consolidated financial information of the registrant that gives effect to (i) the sale of hotels in Eureka, CA, Redding, CA, Boise, ID, Post Falls, ID, Richland, WA, Pasco, WA and Bend, OR which were previously reported, (ii) the sale of the hotel as described in Item 2.01 of this Form 8-K and (iii) the repayment of principal as required by the registrants loan agreement with Pacific Western Bank described in Item 2.04 of this Form 8-K.
Exhibit Number |
Exhibit Title or Description | |
99.1 | Press Release dated July 13, 2018 | |
99.2 | Unaudited pro forma consolidated financial information |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
RED LION HOTELS CORPORATION | ||||||
Date: July 13, 2018 | By: | /s/ Douglas L. Ludwig | ||||
Douglas L. Ludwig Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 99.1
RLH CORPORATION CLOSES SALE OF
RED LION HOTEL PORT ANGELES FOR $19.5 MILLION
Company continues advancing asset light strategy
DENVER (July 13, 2018) RLH Corporation (NYSE:RLH) announced today the sale of Red Lion Hotel Port Angeles, for $19.5 million. The hotel is the eighth of 11 hotels being marketed for sale previously disclosed in October 2017. Red Lion Hotel Port Angeles, along with all other sold hotels, has signed a franchise license agreement to retain their Red Lion brand.
RLH Corporations total gain on the sale is expected to be approximately $11.5 million. With this sale, RLH Corporation fully retired the remaining $24.2 million of debt held by Pacific Western Bank applying $15.6 million of proceeds from the sale and the restricted cash associated with the debt. Together with the other seven previously announced sales, RLH Corporations gain on sales is approximately $27.4 million.
So far in 2018, we have sold eight of the 11 hotels we announced we would be marketing for sale late last year, said RLH Corporation President and Chief Executive Officer Greg Mount. With these sales, we have continued progress on our commitment to an asset light company and have been able to repay the long-term debt relating to those assets and increase cash reserves and debt capacity to fund additional growth of our franchise business.
Red Lion Hotel Port Angeles accounted for $1.0 million in revenue in Q1 2018 and $7.2 million in revenue on an annual basis in 2017. The hotels adjusted EBITDA on consolidated reporting was $0.3 million and RLH Corporations share of the adjusted EBITDA was approximately $0.2 million for Q1 2018. On an annual basis in 2017, the hotels adjusted EBITDA on consolidated reporting was $2.3 million and RLH Corporations share of the adjusted EBITDA was approximately $1.3 million This impact does not take into account the previously announced corporate overhead adjustments to reduce operating costs.
To learn more about franchising with RLH Corporation, visit franchise.rlhco.com. We dont wait for the future. We create it.
About RLH Corporation
Red Lion Hotels Corporation is an innovative hotel company doing business as RLH Corporation and focuses on the franchising, management and ownership of upscale, midscale and economy hotels. The company focuses on maximizing return on invested capital for hotel owners across North America through relevant brands, industry-leading technology and forward-thinking services. For more information, please visit the companys website at www.rlhco.com.
Social Media:
www.Facebook.com/myhellorewards
www.Twitter.com/myhellorewards
www.Instagram.com/myhellorewards
www.Linkedin.com/company/rlhco
Investor Relations Contact:
Amy Koch
O: 509-777-6417
investorrelations@rlhco.com
Media Contact:
Dan Schacter
Director, Social Engagement and Public Relations
509-777-6222
dan.schacter@rlhco.com
Exhibit 99.2
Unaudited Proforma Financial Statements
The following Unaudited Pro Forma Financial Statements are based on Red Lion Hotels Corporations (the Companys) historical consolidated results of operations and financial position, adjusted to give effect to the asset sales described in Item 2.01 of this Form 8-K, as if they had been completed on March 31, 2018 with respect to the pro forma unaudited condensed balance sheet and as of January 1, 2017 with respect to the pro forma unaudited condensed statements of operations. This transaction does not represent discontinued operations under ASC 205, Presentation of Financial Statements.
The Unaudited Pro Forma Financial Statements and the accompanying notes should be read together with the Companys audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2017, and Managements Discussion and Analysis of Financial Condition and Results of Operations included in the Companys Annual Report on Form 10-K for the year ended December 31, 2017 (Annual Report). The Unaudited Pro Forma Financial Statements may differ materially from the future financial position or results of operations due to a number of factors described in Risk Factors under Item 1A of Part 1 of our Annual Report and Forward-Looking Statements under Item 1 of Part 1 of our Annual Report.
Red Lion Hotels Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2018
March 31, 2018 | Less: Bend and Post Falls Hotel Assets(q) |
Less: Port Angeles Hotel Assets Sold |
Add: Pro Forma Adjustments |
Pro Forma | ||||||||||||||||
ASSETS |
(in thousands) | |||||||||||||||||||
Current assets: |
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Cash and cash equivalents |
$ | 25,426 | $ | 2,380 | $ | 4,830 | (a) | $ | 645 | (f) | $ | 30,878 | ||||||||
(3,178 | )(h) | |||||||||||||||||||
775 | (g) | |||||||||||||||||||
Restricted cash |
13,681 | (585 | ) | (775 | )(g) | 12,321 | ||||||||||||||
Accounts receivable, net |
12,957 | (98 | ) | (91 | )(f) | 12,768 | ||||||||||||||
Accounts receivable from related parties |
1,870 | (29 | ) | 1,841 | ||||||||||||||||
Notes receivable, net |
1,239 | 1,239 | ||||||||||||||||||
Inventories |
406 | (44 | )(f) | 362 | ||||||||||||||||
Prepaid expenses and other |
5,911 | (67 | ) | (60 | )(f) | 5,784 | ||||||||||||||
Assets held for sale |
12,446 | (12,446 | ) | 0 | ||||||||||||||||
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Total current assets |
73,936 | (10,845 | ) | 4,830 | (2,728 | ) | 65,193 | |||||||||||||
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Property and equipment, net |
155,849 | (7,778 | )(b) | 148,071 | ||||||||||||||||
Goodwill |
9,404 | 9,404 | ||||||||||||||||||
Intangible assets |
50,255 | 50,255 | ||||||||||||||||||
Other assets, net |
4,858 | 4,858 | ||||||||||||||||||
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Total assets |
$ | 294,302 | $ | (10,845 | ) | $ | (2,948 | ) | $ | (2,728 | ) | $ | 277,781 | |||||||
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LIABILITIES |
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Current liabilities: |
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Accounts payable |
$ | 5,667 | $ | (60 | ) | $ | (38 | )(f) | 5,569 | |||||||||||
Accrued payroll and related benefits |
3,113 | (64 | ) | (47 | )(f) | 3,002 | ||||||||||||||
Other accrued liabilities |
5,551 | (366 | ) | (34 | )(c) | (136 | )(f) | 5,015 | ||||||||||||
Long-term debt, due within one year |
33,924 | (10,509 | ) | (14,477 | )(d) | 8,938 | ||||||||||||||
Contingent consideration for acquisition due to related party, due within one year |
5,446 | 5,446 | ||||||||||||||||||
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Total current liabilities |
53,701 | (10,998 | ) | (14,511 | ) | (221 | ) | 27,971 | ||||||||||||
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Long-term debt, due after one year, net of debt issuance |
39,593 | 39,593 | ||||||||||||||||||
Contingent consideration for acquisition due to related party, due after one year |
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Deferred income and other long term liabilities |
1,407 | (0 | ) | 1,407 | ||||||||||||||||
Deferred income taxes |
2,301 | 2,301 | ||||||||||||||||||
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Total liabilities |
97,002 | (10,998 | ) | (14,511 | ) | (221 | ) | 71,272 | ||||||||||||
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Commitments and contingencies |
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STOCKHOLDERS EQUITY |
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Red Lion Hotels Corporation stockholders equity Preferred stock - 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding |
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Common stock - 50,000,000 shares authorized; $0.01 par value: 24,125,600 shares issued and outstanding |
241 | 241 | ||||||||||||||||||
Additional paid-in capital, common stock |
178,318 | 178,318 | ||||||||||||||||||
Accumulated deficit |
(13,390 | ) | 1,902 | 11,563 | (e) | (104 | )(e) | (29 | ) | |||||||||||
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Total Red Lion Hotels Corporation stockholders |
165,169 | 1,902 | 11,563 | (104 | ) | 178,530 | ||||||||||||||
Noncontrolling interest |
32,131 | (1,749 | ) | (2,403 | )(i) | 27,979 | ||||||||||||||
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Total stockholders equity |
197,300 | 153 | 11,563 | (2,507 | ) | 206,509 | ||||||||||||||
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Total liabilities and stockholders equity |
$ | 294,302 | $ | (10,845 | ) | $ | (2,948 | ) | $ | (2,728 | ) | $ | 277,781 | |||||||
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Red Lion Hotels Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For Year Ended December 31, 2017
As Reported | Less: Redding, Eureka, Boise, Richland, Pasco, Bend, and Post Falls Hotel Assets(m) |
Less: Port Angeles Hotel Asset Sold |
Pro Forma | |||||||||||||
(in thousands) | ||||||||||||||||
Revenue: |
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Company operated hotels |
$ | 119,186 | $ | (33,528 | ) | $ | (7,230 | )(k) | $ | 78,428 | ||||||
Other revenues from managed properties |
3,914 | 3,914 | ||||||||||||||
Franchised hotels |
48,559 | 2,887 | 662 | (l) | 52,108 | |||||||||||
Other |
267 | 267 | ||||||||||||||
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Total revenues |
171,926 | (30,641 | ) | (6,568 | ) | 134,717 | ||||||||||
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Operating expenses: |
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Company operated hotels |
91,622 | (27,018 | ) | (4,365 | )(k) | 60,239 | ||||||||||
Other costs from managed properties |
3,914 | 3,914 | ||||||||||||||
Franchised hotels |
34,794 | 1,758 | 403 | (n) | 36,954 | |||||||||||
Other |
(9 | ) | (9 | ) | ||||||||||||
Depreciation and amortization |
18,824 | (3,444 | ) | (549 | )(k) | 14,831 | ||||||||||
Hotel facility and land lease |
4,806 | (70 | ) | 4,736 | ||||||||||||
Gain on asset dispositions, net |
(449 | ) | 5 | (444 | ) | |||||||||||
General and administrative expenses |
15,792 | 1,142 | 177 | (o) | 17,110 | |||||||||||
Acquisition and integration costs |
1,529 | 1,529 | ||||||||||||||
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Total operating expenses |
170,823 | (27,627 | ) | (4,334 | ) | 138,862 | ||||||||||
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Operating income (loss) |
1,103 | (3,014 | ) | (2,234 | ) | (4,145 | ) | |||||||||
Other income (expense): |
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Interest expense |
(8,252 | ) | 1,714 | 542 | (p) | (5,996 | ) | |||||||||
Other income, net |
818 | 818 | ||||||||||||||
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Total other income (expense) |
(7,434 | ) | 1,714 | 542 | (5,178 | ) | ||||||||||
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Income (loss) from continuing operations before taxes |
(6,331 | ) | (1,301 | ) | (1,691 | ) | (9,323 | ) | ||||||||
Income tax expense |
(4,662 | ) | (4,662 | ) | ||||||||||||
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Net income (loss) from continuing operations |
(1,669 | ) | (1,301 | ) | (1,691 | ) | (4,661 | ) | ||||||||
Net (income) loss attributable to noncontrolling interest |
2,069 | (110 | ) | 644 | (i) | 2,602 | ||||||||||
Net income (loss) attributable to RLH Corporation from continuing operations |
$ | 400 | $ | (1,411 | ) | $ | (1,048 | ) | $ | (2,058 | ) | |||||
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Earnings (loss) per share - basic |
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Income (loss) from continuing operations attributable to RLH Corporation |
$ | 0.01 | $ | (0.09 | ) | |||||||||||
Earnings (loss) per share - diluted |
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Income (loss) from continuing operations attributable to RLH Corporation |
$ | 0.01 | $ | (0.09 | ) | |||||||||||
Weighted average shares - basic |
23,669 | 23,699 | ||||||||||||||
Weighted average shares - diluted |
24,253 | 23,699 |
Red Lion Hotels Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For Three Months March 31, 2018
As Reported | Less: Redding, Eureka, Boise, Richland, Pasco, Bend, and Post Falls Hotel Assets(m) |
Less: Port Angeles Hotel Asset Sold |
Pro Forma | |||||||||||||
(in thousands) | ||||||||||||||||
Revenue: |
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Company operated hotels |
$ | 22,003 | $ | (3,924 | ) | $ | (1,018 | )(k) | $ | 17,061 | ||||||
Other revenues from managed properties |
893 | 893 | ||||||||||||||
Franchised hotels |
10,123 | 221 | 62 | (l) | 10,406 | |||||||||||
Other |
20 | 20 | ||||||||||||||
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Total revenues |
33,039 | (3,703 | ) | (956 | ) | 28,380 | ||||||||||
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Operating expenses: |
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Company operated hotels |
19,547 | (3,986 | ) | (834 | )(k) | 14,728 | ||||||||||
Other costs from managed properties |
893 | 893 | ||||||||||||||
Franchised hotels |
7,901 | 80 | 22 | (n) | 8,004 | |||||||||||
Other |
(7 | ) | (7 | ) | ||||||||||||
Depreciation and amortization |
4,392 | (130 | )(k) | 4,262 | ||||||||||||
Hotel facility and land lease |
1,204 | (17 | ) | 1,187 | ||||||||||||
Gain on asset dispositions, net |
(14,043 | ) | 13,926 | (i) | (117 | ) | ||||||||||
General and administrative expenses |
3,486 | 221 | 46 | (o) | 3,753 | |||||||||||
Acquisition and integration costs |
104 | | 104 | |||||||||||||
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Total operating expenses |
23,477 | 10,224 | (895 | ) | 32,807 | |||||||||||
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Operating income (loss) |
9,562 | (13,927 | ) | (61 | ) | (4,426 | ) | |||||||||
Other income (expense): |
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Interest expense |
(2,247 | ) | 694 | 114 | (p) | (1,439 | ) | |||||||||
Other income, net |
158 | 158 | ||||||||||||||
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Total other income (expense) |
(2,089 | ) | 694 | 114 | (1,281 | ) | ||||||||||
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Income (loss) from continuing operations before taxes |
7,473 | (13,233 | ) | 53 | (5,707 | ) | ||||||||||
Income tax expense |
135 | 135 | ||||||||||||||
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Net income (loss) from continuing operations |
7,338 | (13,233 | ) | 53 | (5,842 | ) | ||||||||||
Net (income) loss attributable to noncontrolling interest |
(4,750 | ) | 5,833 | (50 | )(i) | 1,033 | ||||||||||
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Net income (loss) attributable to RLH Corporation from continuing operations |
$ | 2,588 | $ | (7,400 | ) | $ | 3 | $ | (4,810 | ) | ||||||
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Earnings (loss) per share - basic |
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Income (loss) from continuing operations attributable to RLH Corporation |
$ | 0.11 | $ | (0.20 | ) | |||||||||||
Earnings (loss) per share - diluted |
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Income (loss) from continuing operations attributable to RLH Corporation |
$ | 0.10 | $ | (0.20 | ) | |||||||||||
Weighted average shares - basic |
24,101 | 24,101 | ||||||||||||||
Weighted average shares - diluted |
25,166 | 24,101 |
Notes to Unaudited Pro Forma Condensed Financial Information
Note 1 Basis of presentation
The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed financial statements to give effect to pro forma events that are (1) directly attributable to the sale of the asset, (2) factually supportable and (3) with respect to the unaudited pro forma condensed statements of operations, expected to have a continuing impact on the results following the sale of the assets. These proforma financial statements also reflect the impact of the sales of hotels in Eureka, CA, Redding, CA, Boise, ID, Post Falls, ID, Richland, WA Pasco, WA and Bend, OR which were previously reported.
Note 2 The transaction
On July 9, 2018 RL Port Angeles, LLC completed the sale of the Red Lion Hotel Port Angeles in Port Angeles, Washington to BGP PA, LLC, an Oregon limited liability company (the Purchaser). The purchase price for the hotel was $19.5 million, which was paid in cash at closing.
At closing, an affiliate of the Purchaser entered into a franchise agreement with Red Lion Hotels Franchising, Inc., a wholly owned subsidiary of Red Lion Hotels Corporation, to continue to operate the hotel under the Red Lion® brand. The franchise agreement provides for a 10 year term and the payment of monthly royalty and program fees equal to a percentage of the hotels gross room revenue. Early termination of the franchise agreement by Red Lion Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee.
RL Port Angeles, LLC is a wholly owned subsidiary of RL Venture, LLC. RL Venture, LLC is a variable interest entity in which Red Lion Hotels Corporation holds a 55% interest, and therefore the registrant consolidates the assets, liabilities and results of operations of this entity.
Note 3 Pro forma adjustments
The following adjustments have been reflected in the unaudited pro forma condensed financial information:
(a) | Reflects the cash from the sale of assets less selling costs and repayment of debt. |
(b) | Reflects the basis of the assets sold. |
(c) | Reflects the capital leases assumed by the purchaser. |
(d) | Represents the related debt payment made at the closing of the sale of the assets. |
(e) | Reflects the gain on sale and/or settlement of the assets. |
(f) | Reflects the settlement of all other assets and liabilities related to the Port Angeles assets sold. |
(g) | Represents the release of restricted cash related to the assets sold. |
(h) | Represents the proforma distribution of cash to the noncontrolling interest. |
(i) | Reflects the removal of the noncontrolling interest portion of the transaction. |
(j) | Removes the gain on the sales of the hotels in Eureka, CA, Redding, CA, Boise, ID, Richland, WA, and Pasco, WA which were reported in the three months ended March 31, 2018. |
(k) | Reflects the elimination of direct revenues and expenses related to the Port Angeles assets sold. |
(l) | Represents the franchise income that would have been received under the existing intercompany franchise agreement. Does not represent the impact of the franchise agreements with the new owners of the assets. |
(m) | Impact of the sales of hotels in Eureka, CA, Redding, CA, Boise, ID, Post Falls, ID, Richland, WA, Pasco, WA and Bend, OR which were previously reported. |
(n) | Represents the marketing and other costs to support the franchise income that would have been received under the existing intercompany franchise agreement. Does not represent the impact of the franchise agreements with the new owners of the assets. |
(o) | Reflects the corporate and administrative expenses which were previously allocated to the assets sold. |
(p) | Reflects interest expense on allocated debt related to assets sold. |
(q) | Reflects the sales of the hotels in Bend, OR and Post Falls, ID as these transactions closed after March 31, 2018. |
(d) Exhibits.