8-K

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

December 20, 2019 (December 19, 2019) 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

(Registrant’s 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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	RLH	New York Stock Exchange

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 December 19, 2019, RL Salt Lake LLC, completed the sale of the Hotel RL Salt Lake City (the “Hotel”) to RL QOZB, LLC a Delaware limited liability company (the “Purchaser”). The purchase price for the Hotel was $33.0 million, which was paid in cash at closing.

RL Salt Lake LLC is a wholly owned subsidiary of RL Venture, LLC. RL Venture, LLC is a variable interest entity in which Red Lion Hotels Corporation (the “Company”) holds a 55% interest, and therefore the Company consolidates the assets, liabilities and results of operations of this entity.

After payment of closing costs, and after the repayment of an $11.0 million property level mortgage, the Company expects to receive a distribution of $12.0 million in net proceeds from the sale of the Hotel. The Company expects to use the net proceeds to retire corporate level term debt of $2.4 million, and use the remaining cash for general operating purposes and reduction of the corporate line of credit.

At closing, an affiliate of the Purchaser entered into a franchise agreement with Red Lion Hotels Franchising, Inc., a wholly owned subsidiary of the Company, to continue to operate the hotel under the Hotel RL^® brand. The franchise agreement provides for a one year term, renewable on a monthly basis thereafter, and requires the payment of monthly royalty and program fees based upon the Hotel’s room count. 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.

Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement

Under the terms of the Credit Agreement dated May 14, 2018 (as amended) between the Company, Deutsche Bank AG New York Branch, as administrative agent and collateral agent (“DB”), and the lenders party thereto, $2.4 million of the net proceeds from the sale of the Hotel that are distributed by RL Venture LLC to the Company are required to be maintained by the Company in a cash collateral account controlled by DB, as administrative agent, and may be used by the Company to prepay the outstanding term loan under the Credit Agreement.

Item 7.01. Regulation FD Disclosure. 

A copy of the company’s press release, dated December 20, 2019 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 the Company’s hotel in Atlanta, GA, as previously reported and (ii) the sale of the Hotel as described in Item 2.01 of this filing:

	Nine Months ended September 30, 2019			Year Ended December 31, 2018
Adjusted EBITDA from continuing operations- as previously reported	$	10,624			15,766
Less: Previously sold hotels		(191	)		(3,613	)
Less: Asset sold with this filing		(1,617	)		(2,397	)
Pro Forma Adjusted EBITDA	$	8,816			9,756

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, 2018 filed on March 8, 2019 and 10-Q for the nine months ended September 30, 2019 filed on November 12, 2019 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 the Company’s hotel in Atlanta, GA and (ii) the sale of the Hotel and the repayment of principal on the property level debt as described in Item 2.01 of this Form 8-K.

(d) Exhibits.

Exhibit Number	Exhibit Title or Description
99.1	Press Release dated December 20, 2019
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: December 20, 2019	By:	/s/ Julie Shiflett
		Julie Shiflett
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

EX-99.1

Exhibit 99.1

RLHC Completes Sale of Hotel RL Salt Lake City for $33 Million

DENVER (December 20, 2019) — RLH Corporation (NYSE:RLH) announced that it has closed on the sale of its Hotel RL Salt Lake City for $33 million in gross proceeds.

The Hotel RL Salt Lake City was held in a joint venture with a secured debt agreement for a term loan principal of $11.0 million. RLHC will receive approximately $12.0 million in net proceeds after closing costs, the repayment of property level mortgage debt and distributions to its joint venture partner. Net proceeds to RLHC will be used to retire corporate level term debt of $2.4 million, while the remaining cash will be used for operating purposes and reduction of the corporate line of credit.

This transaction marks the second closing of four hotels that were announced in September 2019 as under contract to be sold. The net proceeds from the sales of the Atlanta and Salt Lake hotels are $16.8 million, after application to hotel and corporate debt. Subsequent to the sales of the Atlanta and Salt Lake City hotels, the Company’s outstanding debt is comprised of a $10 million line of credit and hotel property level debt of $23.1 million on the Olympia, Washington and Washington, D.C. hotels which are held in joint ventures.

The Company expects to complete the sale of the remaining two hotels by the end of Q1 2020. The completed sales of all four hotels are expected to generate net proceeds to RLHC of $32 million to $36 million after hotel debt repayments and joint venture distributions.

About RLH Corporation

RLH Corporation is an innovative hotel company focused on the franchising 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 company’s 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:

Nikki Sacks

203-682-8263

investorrelations@rlhco.com

Media Contact:

Roxanne Rabasco

303-459-4192

Roxanne.Rabasco@rlhco.com

EX-99.2

Exhibit 99.2

RED LION HOTELS CORPORATION

Unaudited Condensed Consolidated Balance Sheets

As of September 30, 2019

(In thousands, except share data)

	As Reported			Less: Atlanta Hotel Asset Previously Sold			Atlanta Pro Forma Adjustments			Less: SLC Hotel Asset Sold			SLC Pro Forma Adjustments			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents		18,267			3,653	a		93	f		21,211	a		370	f		34,391
								619	g					(9,822	) i
Restricted cash		2,930						(619	) g								2,311
Accounts receivable, net		19,496						(338	) f					(1,022	) f		18,136
Notes receivable, net		4,188															4,188
Other current assets		4,961						(174	) f					(116	) f		4,671
Total current assets		49,842			3,653			(419	)		21,211			(10,590	)		63,697
Property and equipment, net		107,554			(11,500	) b					(26,032	) b					70,022
Operating lease right-of-use assets		48,553															48,553
Goodwill		18,595															18,595
Intangible assets, net		58,233															58,233
Other assets, net		5,085															5,085
Total assets		287,862			(7,847	)		(419	)		(4,821	)		(10,590	)		264,185
LIABILITIES
Current liabilities:
Accounts payable		5,176						(192	) f					(322	) f		4,662
Accrued payroll and related benefits		1,868						(54	) f					(146	) f		1,668
Other accrued liabilities		5,519						(173	) f		(127	) d		(300	) f		4,919
Long-term debt, due within one year		24,628			(8,171	) c											16,457
Operating lease liabilities, due within one year		4,801															4,801
Total current liabilities		41,992			(8,171	)		(419	)		(127	)		(768	)		32,507
Long-term debt, due after one year, net of debt issuance costs		20,496									(10,939	) c					9,557
Line of credit, due after one year		10,000															10,000
Operating lease liabilities, due after one year		46,871															46,871
Deferred income and other long-term liabilities		1,541			(38	) d					(240	) d					1,263
Deferred income taxes		1,217															1,217
Total liabilities		122,117			(8,209	)		(419	)		(11,306	)		(768	)		101,415
Commitments and contingencies
STOCKHOLDERS’ EQUITY
RLH Corporation 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; 25,075,912 and 24,570,158 shares issued and outstanding		252															252
Additional paid-in capital, common stock		182,723						(71	) h								182,652
Accumulated deficit		(26,923	)		199	e					3,567	e					(23,157	)
Total RLH Corporation stockholders’ equity		156,052			199			(71	)		3,567			—			159,747
Noncontrolling interest		9,693			163	e		71	h		2,918	e		(9,822	) i		3,023
Total stockholders’ equity		165,745			362			—			6,485			(9,822	)		162,770
Total liabilities and stockholders’ equity		287,862			(7,847	)		(419	)		(4,821	)		(10,590	)		264,185

a - Reflects the cash from the sale of assets less selling costs and the repayment of debt

b - Reflects the book value of assets sold

c - Reflects the elimination of debt after full repayment

d - Reflects the leases and/or equipment financing assumed by the purchaser

e - Reflects the gain on sale

f - Reflects the settlement of working capital

g - Reflects the release of restricted cash related to the assets sold and repayment of debt

h - Reflects the elimination of the noncontrolling interest

i - Reflects the proforma distribution of cash to the noncontrolling interest.

RED LION HOTELS CORPORATION

Unaudited Pro Forma Condensed Consolidated Statements of Comprehensive Income (Loss)

For the year ended December 31, 2018

(In thousands, except per share data)

	As Reported			Less: Previously Sold Hotels (j)			Prev Sold Pro Forma Adjustments			Less: SLC Hotel Asset Sold			SLC Pro Forma Adjustments			Pro Forma
Revenue:
Royalty		22,309						317	l					244	l		22,870
Other franchise		5,537															5,537
Company operated hotels		82,021			(20,510	)					(9,574	)					51,937
Marketing, reservations and reimbursables		25,948						978	l					508	l		27,434
Other		34															34
Total revenues		135,849			(20,510	)		1,295			(9,574	)		752			107,812
Operating expenses:
Selling, general, administrative and other expenses		32,122															32,122
Company operated hotels		67,314			(17,665	)					(7,568	)					42,081
Marketing, reservations and reimbursables		26,877						978	l					508	l		28,363
Depreciation and amortization		17,003			(2,448	)					(1,918	)					12,637
Asset impairment		10,582															10,582
Loss (gain) on asset dispositions, net		(42,021	)		40,713						830						(478	)
Acquisition and integration costs		2,219															2,219
Total operating expenses		114,096			20,600			978			(8,656	)		508			127,526
Operating income (loss)		21,753			(41,110	)		317			(918	)		244			(19,714	)
Other income (expense):
Interest expense		(6,209	)		2,479						478						(3,252	)
Loss on early retirement of debt		(794	)														(794	)
Other income (expense), net		265			(2	)											263
Total other income (expense)		(6,738	)		2,477			—			478			—			(3,783	)
Income (loss) from continuing operations before taxes		15,015			(38,633	)		317			(440	)		244			(23,497	)
Income tax expense (benefit)		(71	)														(71	)
Net income (loss)		15,086			(38,633	)		317			(440	)		244			(23,426	)
Net (income) loss attributable to noncontrolling interest		(13,129	)		17,385						198						4,454
Net income (loss) and comprehensive income (loss) attributable to RLHC		1,957			(21,248	)		317			(242	)		244			(18,972	)
Earnings (loss) per share - basic	$	0.08														$	(0.78	)
Earnings (loss) per share - diluted	$	0.08														$	(0.78	)
Weighted average shares - basic		24,392															24,392
Weighted average shares - diluted		25,477															24,392

j - Includes the actual results for the nine company operated hotels sold during the year ended December 31, 2018 and one company operated hotel sold in November 2019.

l - Reflects the franchise income and related expenses 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.

RED LION HOTELS CORPORATION

Unaudited Pro Forma Condensed Consolidated Statements of Comprehensive Income (Loss)

For the nine months ended September 30, 2019

(In thousands, except per share data)

	As Reported			Less: Previously Sold Hotels (j)			Prev Sold Pro Forma Adjustments			Less: SLC Asset Sold			SLC Pro Forma Adjustments			Pro Forma
Revenue:
Royalty		17,516						104	l					192	l		17,812
Other franchise		3,772															3,772
Company operated hotels		43,839			(3,665	)					(7,464	)					32,710
Marketing, reservations and reimbursables		22,632						256	l					276	l		23,164
Other		13															13
Total revenues		87,772			(3,665	)		360			(7,464	)		468			77,471
Operating expenses:
Selling, general, administrative and other expenses		21,921															21,921
Company operated hotels		36,750			(3,190	)					(5,871	)					27,689
Marketing, reservations and reimbursables		22,088						256	l					276	l		22,620
Depreciation and amortization		11,192			(510	)					(1,377	)					9,305
Asset impairment		5,382															5,382
Loss (gain) on asset dispositions, net		45															45
Transaction costs		436															436
Total operating expenses		97,814			(3,700	)		256			(7,248	)		276			87,398
Operating income (loss)		(10,042	)		35			104			(216	)		192			(9,927	)
Other income (expense):
Interest expense		(3,690	)		803						311						(2,576	)
Loss on early retirement of debt		(164	)														(164	)
Other income (expense), net		121			(2	)											119
Total other income (expense)		(3,733	)		801			—			311			—			(2,621	)
Income (loss) from continuing operations before taxes		(13,775	)		836			104			95			192			(12,548	)
Income tax expense (benefit)		676															676
Net income (loss)		(14,451	)		836			104			95			192			(13,224	)
Net (income) loss attributable to noncontrolling interest		4,040			(376	)					(43	)					3,621
Net income (loss) and comprehensive income (loss) attributable to RLHC		(10,411	)		460			104			52			192			(9,603	)
Earnings (loss) per share - basic	$	(0.42	)													$	(0.39	)
Earnings (loss) per share - diluted	$	(0.42	)													$	(0.39	)
Weighted average shares - basic		24,859															24,859
Weighted average shares - diluted		24,859															24,859

j - Includes the actual results for the one company operated hotel sold in November 2019.

l - Reflects the franchise income and related expenses 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.