Document
false--12-31Q320182018-09-300001052595falseAccelerated FilerfalseP3M772000551000P5Y40.0050.0050.005000018100008170003200000159100014360002019000343590000648700064880000.010.0150000000500000002365121224274599236512122427459914000020900014530004260002760001230006291400094810004848300015641000218400014000001740005720000.010.0150000005000000000097600084000013747900088447000123260004568000P3MP1YP2YP3YP4Y0 0001052595 2018-01-01 2018-09-30 0001052595 2018-10-31 0001052595 2018-09-30 0001052595 2017-12-31 0001052595 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-12-31 0001052595 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-09-30 0001052595 2017-01-01 2017-09-30 0001052595 2018-07-01 2018-09-30 0001052595 srt:HotelMember 2017-01-01 2017-09-30 0001052595 2017-07-01 2017-09-30 0001052595 srt:HotelMember 2018-01-01 2018-09-30 0001052595 rlh:ManagedPropertiesOtherMember 2017-07-01 2017-09-30 0001052595 srt:HotelMember 2017-07-01 2017-09-30 0001052595 rlh:ManagedPropertiesOtherMember 2018-07-01 2018-09-30 0001052595 srt:HotelMember 2018-07-01 2018-09-30 0001052595 rlh:FranchisedHotelsMember 2018-07-01 2018-09-30 0001052595 rlh:FranchisedHotelsMember 2018-01-01 2018-09-30 0001052595 us-gaap:HotelOtherMember 2018-07-01 2018-09-30 0001052595 rlh:ManagedPropertiesOtherMember 2018-01-01 2018-09-30 0001052595 rlh:ManagedPropertiesOtherMember 2017-01-01 2017-09-30 0001052595 rlh:FranchisedHotelsMember 2017-07-01 2017-09-30 0001052595 us-gaap:HotelOtherMember 2018-01-01 2018-09-30 0001052595 rlh:FranchisedHotelsMember 2017-01-01 2017-09-30 0001052595 us-gaap:HotelOtherMember 2017-07-01 2017-09-30 0001052595 us-gaap:HotelOtherMember 2017-01-01 2017-09-30 0001052595 2016-12-31 0001052595 2017-09-30 0001052595 rlh:KnightsFranchiseSystemsInc.Member 2018-05-14 2018-05-14 0001052595 us-gaap:FranchisedUnitsMember 2018-09-30 0001052595 us-gaap:ConsolidatedPropertiesMember 2018-09-30 0001052595 us-gaap:FranchiseMember us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2018-01-01 2018-09-30 0001052595 us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2018-01-01 2018-09-30 0001052595 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-01-01 2018-09-30 0001052595 us-gaap:FranchiseMember 2018-01-01 2018-09-30 0001052595 us-gaap:FranchiseMember us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-01-01 2018-09-30 0001052595 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-01-01 0001052595 us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2018-07-01 2018-09-30 0001052595 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-07-01 2018-09-30 0001052595 us-gaap:FranchiseMember 2018-07-01 2018-09-30 0001052595 us-gaap:FranchiseMember us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-07-01 2018-09-30 0001052595 us-gaap:FranchiseMember us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2018-07-01 2018-09-30 0001052595 us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2018-09-30 0001052595 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-09-30 0001052595 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember 2018-07-01 2018-09-30 0001052595 us-gaap:OperatingSegmentsMember rlh:HotelsMember 2018-07-01 2018-09-30 0001052595 us-gaap:OperatingSegmentsMember rlh:HotelsMember 2018-09-30 0001052595 us-gaap:MaterialReconcilingItemsMember 2018-07-01 2018-09-30 0001052595 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember 2018-09-30 0001052595 us-gaap:MaterialReconcilingItemsMember 2018-09-30 0001052595 us-gaap:MaterialReconcilingItemsMember 2017-12-31 0001052595 us-gaap:OperatingSegmentsMember rlh:HotelsMember 2017-01-01 2017-09-30 0001052595 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember 2017-01-01 2017-09-30 0001052595 us-gaap:MaterialReconcilingItemsMember 2017-01-01 2017-09-30 0001052595 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember 2017-12-31 0001052595 us-gaap:OperatingSegmentsMember rlh:HotelsMember 2017-12-31 0001052595 us-gaap:MaterialReconcilingItemsMember 2017-07-01 2017-09-30 0001052595 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember 2017-07-01 2017-09-30 0001052595 us-gaap:OperatingSegmentsMember rlh:HotelsMember 2017-07-01 2017-09-30 0001052595 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember 2018-01-01 2018-09-30 0001052595 us-gaap:MaterialReconcilingItemsMember 2018-01-01 2018-09-30 0001052595 us-gaap:OperatingSegmentsMember rlh:HotelsMember 2018-01-01 2018-09-30 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-07-01 2018-09-30 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-07-01 2017-09-30 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-01-01 2018-09-30 0001052595 rlh:RLSAtlaVentureMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-01-01 2018-09-30 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-07-01 2018-09-30 0001052595 rlh:RLVentureLLCMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember rlh:OneRLVentureOwnedHotelsSoldInApril2018Member us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-04-01 2018-04-30 0001052595 rlh:RLSBaltVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-05-01 2017-05-31 0001052595 rlh:RLVentureLLCMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-05-01 2018-05-31 0001052595 rlh:RLVentureLLCMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember rlh:FiveRLVentureOwnedHotelsSoldinFebruary2018Member us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-02-28 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-07-01 2017-09-30 0001052595 rlh:RLSBaltVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-01-01 2018-09-30 0001052595 rlh:RLSDCVentureMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-01-01 2018-09-30 0001052595 us-gaap:LineOfCreditMember 2018-08-31 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-01-01 2018-09-30 0001052595 rlh:RLVentureLLCMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember rlh:RLPropertySoldInMay2018Member us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-05-31 0001052595 rlh:RLVentureLLCMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember rlh:OneRLVentureOwnedHotelsSoldInApril2018Member us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-04-30 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-01-01 2017-09-30 0001052595 rlh:ShelbourneFalconIIMember rlh:RLSBaltVentureLLCMember 2018-09-30 0001052595 rlh:RLSDCVentureMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-05-01 2018-05-31 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-09-30 2018-09-30 0001052595 rlh:RLSDCVentureMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-05-31 0001052595 rlh:RLSBaltVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-05-01 2018-05-31 0001052595 rlh:ShelbourneCapitalMember rlh:RLVentureLLCMember 2018-09-30 0001052595 rlh:RLVentureLLCMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember rlh:TwoRLPropertiesSoldInJuly2018Member us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-07-31 0001052595 rlh:RLVentureLLCMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember rlh:TwoRLPropertiesSoldInJuly2018Member us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-07-01 2018-07-31 0001052595 rlh:RLSDCVentureMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-05-01 2017-05-31 0001052595 rlh:RLVentureLLCMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-02-01 2018-02-28 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-01-01 2017-09-30 0001052595 rlh:ShelbourneFalconIVMember rlh:RLSDCVentureMember 2018-01-01 2018-09-30 0001052595 rlh:ShelbourneFalconIIIMember rlh:RLSAtlaVentureMember 2018-01-01 2018-09-30 0001052595 rlh:RLSAtlaVentureMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-01-01 2017-09-30 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-01-01 2017-03-31 0001052595 rlh:RLSBaltVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-01-01 2017-09-30 0001052595 rlh:RLSDCVentureMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-01-01 2017-09-30 0001052595 rlh:RLSBaltVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-07-01 2018-09-30 0001052595 us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember 2018-01-01 2018-09-30 0001052595 us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember 2018-07-01 2018-09-30 0001052595 us-gaap:ConstructionInProgressMember 2018-09-30 0001052595 rlh:LandscapingAndLandImprovementsMember 2018-09-30 0001052595 rlh:BuildingsAndEquipmentMember 2017-12-31 0001052595 us-gaap:ConstructionInProgressMember 2017-12-31 0001052595 us-gaap:LandMember 2018-09-30 0001052595 us-gaap:FurnitureAndFixturesMember 2018-09-30 0001052595 rlh:LandscapingAndLandImprovementsMember 2017-12-31 0001052595 rlh:BuildingsAndEquipmentMember 2018-09-30 0001052595 us-gaap:LandMember 2017-12-31 0001052595 us-gaap:FurnitureAndFixturesMember 2017-12-31 0001052595 us-gaap:CustomerContractsMember 2018-09-30 0001052595 us-gaap:TrademarksMember 2018-09-30 0001052595 us-gaap:TradeNamesMember 2017-12-31 0001052595 us-gaap:TrademarksMember 2017-12-31 0001052595 us-gaap:TradeNamesMember 2018-09-30 0001052595 us-gaap:TradeNamesMember 2017-12-31 0001052595 us-gaap:TradeNamesMember 2018-09-30 0001052595 us-gaap:CustomerContractsMember 2017-12-31 0001052595 rlh:HotelsMember 2017-12-31 0001052595 rlh:HotelsMember 2018-09-30 0001052595 us-gaap:FranchiseMember 2017-12-31 0001052595 us-gaap:FranchiseMember 2018-09-30 0001052595 2018-06-30 0001052595 2021-01-01 2018-09-30 0001052595 2022-01-01 2018-09-30 0001052595 2020-01-01 2018-09-30 0001052595 2018-09-30 0001052595 2019-01-01 2018-09-30 0001052595 2018-07-01 2018-09-30 0001052595 2023-01-01 2018-09-30 0001052595 2018-10-01 2018-09-30 0001052595 rlh:RLVentureDebtMember us-gaap:LongTermDebtMember 2017-12-31 0001052595 rlh:RLBaltimoreDebtMember us-gaap:LongTermDebtMember 2017-12-31 0001052595 rlh:RLHAtlantaMember us-gaap:LongTermDebtMember 2018-09-30 0001052595 rlh:RLHDCMember us-gaap:LongTermDebtMember 2018-09-30 0001052595 rlh:SeniorSecuredTermLoanMember us-gaap:LongTermDebtMember 2017-12-31 0001052595 rlh:RLVentureDebtMember us-gaap:LongTermDebtMember 2018-09-30 0001052595 rlh:SeniorSecuredTermLoanMember us-gaap:LongTermDebtMember 2018-09-30 0001052595 rlh:RLHDCMember us-gaap:LongTermDebtMember 2017-12-31 0001052595 rlh:RLBaltimoreDebtMember us-gaap:LongTermDebtMember 2018-09-30 0001052595 rlh:RLHAtlantaMember us-gaap:LongTermDebtMember 2017-12-31 0001052595 rlh:RLBaltimoreMember us-gaap:NotesPayableToBanksMember 2018-09-06 0001052595 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2018-09-06 2018-09-06 0001052595 rlh:RLHCorporationMember us-gaap:LineOfCreditMember 2018-09-30 0001052595 rlh:RLHCorporationMember rlh:TermLoanFacilityMember us-gaap:LineOfCreditMember 2018-05-01 2018-05-31 0001052595 rlh:RLHCorporationMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2018-09-30 0001052595 rlh:RLHCorporationMember rlh:TermLoanFacilityMember us-gaap:LineOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-05-01 2018-05-31 0001052595 rlh:RLHCorporationMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2018-05-31 0001052595 us-gaap:NotesPayableToBanksMember 2018-09-06 0001052595 rlh:RLHCorporationMember rlh:TermLoanFacilityMember us-gaap:LineOfCreditMember 2018-05-31 0001052595 rlh:RLBaltimoreMember us-gaap:LongTermDebtMember 2018-05-01 2018-05-31 0001052595 rlh:RLHAtlantaMember us-gaap:InterestRateCapMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-09-30 0001052595 rlh:RLHDCMember us-gaap:InterestRateCapMember 2018-09-30 0001052595 rlh:RLHAtlantaMember us-gaap:InterestRateCapMember 2018-09-30 0001052595 rlh:RLHDCMember us-gaap:InterestRateCapMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-09-30 0001052595 rlh:CompanyOperatedHotelsMember 2018-09-30 0001052595 rlh:EmployeeStockPurchasePlanESPPMember 2018-07-01 2018-09-30 0001052595 us-gaap:PerformanceSharesMember 2017-07-01 2017-09-30 0001052595 rlh:UnrestrictedStockAwardsMember 2017-01-01 2017-09-30 0001052595 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-09-30 0001052595 rlh:EmployeeStockPurchasePlanESPPMember 2018-01-01 2018-09-30 0001052595 us-gaap:EmployeeStockOptionMember 2017-01-01 2017-09-30 0001052595 us-gaap:EmployeeStockOptionMember 2018-07-01 2018-09-30 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2017-01-01 2017-09-30 0001052595 rlh:UnrestrictedStockAwardsMember 2018-01-01 2018-09-30 0001052595 rlh:UnrestrictedStockAwardsMember 2018-07-01 2018-09-30 0001052595 us-gaap:PerformanceSharesMember 2018-07-01 2018-09-30 0001052595 rlh:EmployeeStockPurchasePlanESPPMember 2017-07-01 2017-09-30 0001052595 us-gaap:PerformanceSharesMember 2017-01-01 2017-09-30 0001052595 us-gaap:EmployeeStockOptionMember 2017-07-01 2017-09-30 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2018-07-01 2018-09-30 0001052595 rlh:UnrestrictedStockAwardsMember 2017-07-01 2017-09-30 0001052595 us-gaap:PerformanceSharesMember 2018-01-01 2018-09-30 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2017-07-01 2017-09-30 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-09-30 0001052595 rlh:EmployeeStockPurchasePlanESPPMember 2017-01-01 2017-09-30 0001052595 rlh:StockIncentivePlanTwoThousandFifteenMember 2017-05-31 0001052595 rlh:StockIncentivePlanTwoThousandFifteenMember 2017-05-01 2017-05-31 0001052595 rlh:StockIncentivePlanTwoThousandFifteenMember 2018-09-30 0001052595 rlh:StockIncentivePlanTwoThousandFifteenMember 2015-12-31 0001052595 us-gaap:PerformanceSharesMember 2018-09-30 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2018-09-30 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2017-12-31 0001052595 us-gaap:PerformanceSharesMember 2017-12-31 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2017-01-01 2017-09-30 0001052595 rlh:ContingentConsiderationMember rlh:VantageHospitalityGroupInc.Member rlh:A90ofRoomCountatCloseYear1AnniversaryMember 2017-09-30 0001052595 rlh:ContingentConsiderationMember rlh:VantageHospitalityGroupInc.Member rlh:A90ofRoomCountatCloseYear2AnniversaryMember 2018-05-31 0001052595 rlh:ContingentConsiderationMember rlh:VantageHospitalityGroupInc.Member rlh:A90ofRoomCountatCloseYear2AnniversaryMember 2018-09-30 0001052595 rlh:ContingentConsiderationMember rlh:VantageHospitalityGroupInc.Member 2016-09-30 2016-09-30 0001052595 us-gaap:WarrantMember 2017-01-01 2017-09-30 0001052595 us-gaap:WarrantMember 2017-07-01 2017-09-30 0001052595 us-gaap:WarrantMember 2018-01-01 2018-09-30 0001052595 us-gaap:PerformanceSharesMember 2017-01-01 2017-09-30 0001052595 rlh:ContingentConsiderationMember 2017-01-01 2017-09-30 0001052595 us-gaap:WarrantMember 2017-09-30 0001052595 us-gaap:PerformanceSharesMember 2017-07-01 2017-09-30 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2017-09-30 0001052595 us-gaap:PerformanceSharesMember 2018-01-01 2018-09-30 0001052595 rlh:ContingentConsiderationMember 2018-09-30 0001052595 us-gaap:EmployeeStockOptionMember 2017-01-01 2017-09-30 0001052595 us-gaap:EmployeeStockOptionMember 2017-09-30 0001052595 us-gaap:WarrantMember 2017-07-01 2017-09-30 0001052595 us-gaap:EmployeeStockOptionMember 2018-09-30 0001052595 us-gaap:WarrantMember 2018-09-30 0001052595 rlh:ContingentConsiderationMember 2018-07-01 2018-09-30 0001052595 rlh:ContingentConsiderationMember 2017-09-30 0001052595 us-gaap:WarrantMember 2017-01-01 2017-09-30 0001052595 us-gaap:PerformanceSharesMember 2018-07-01 2018-09-30 0001052595 rlh:ContingentConsiderationMember 2018-01-01 2018-09-30 0001052595 us-gaap:WarrantMember 2018-07-01 2018-09-30 0001052595 us-gaap:EmployeeStockOptionMember 2018-07-01 2018-09-30 0001052595 rlh:ContingentConsiderationMember 2017-07-01 2017-09-30 0001052595 us-gaap:WarrantMember 2018-07-01 2018-09-30 0001052595 us-gaap:WarrantMember 2018-01-01 2018-09-30 0001052595 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-09-30 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-09-30 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2018-07-01 2018-09-30 0001052595 us-gaap:EmployeeStockOptionMember 2017-07-01 2017-09-30 0001052595 us-gaap:RestrictedStockUnitsRSUMember 2017-07-01 2017-09-30 0001052595 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2017-12-31 0001052595 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-30 0001052595 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0001052595 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-30 0001052595 rlh:ShelbourneCapitalMember rlh:ColumbiaPacificOpportunityFundL.P.Member rlh:RLVentureLLCMember 2018-09-30 0001052595 rlh:VantageHospitalityGroupInc.Member 2018-05-21 0001052595 rlh:RedLionHotelsManagementInc.Member rlh:ManagementAgreementMember rlh:HudsonValleyResortandSpaMember 2018-07-01 2018-09-30 0001052595 rlh:ColumbiaPacificOpportunityFundL.P.Member rlh:CommitmentFeeMember srt:AffiliatedEntityMember 2018-04-17 2018-04-17 0001052595 rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2017-01-01 2017-09-30 0001052595 rlh:RLVentureLLCMember rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2018-01-01 2018-09-30 0001052595 rlh:ColumbiaPacificOpportunityFundL.P.Member srt:AffiliatedEntityMember us-gaap:CommonStockMember us-gaap:WarrantMember 2018-04-17 0001052595 rlh:RedLionHotelsManagementInc.Member rlh:ManagementAgreementMember rlh:HudsonValleyResortandSpaMember 2018-01-01 2018-09-30 0001052595 rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2018-01-01 2018-09-30 0001052595 rlh:RLVentureLLCMember rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2017-01-01 2017-09-30 0001052595 rlh:Messrs.MoyleAndBlossMember us-gaap:ManagementMember 2018-07-01 2018-09-30 0001052595 rlh:VantageHospitalityGroupInc.Member 2018-09-30 0001052595 rlh:RedLionHotelsManagementInc.Member rlh:ManagementAgreementMember rlh:HudsonValleyResortandSpaMember 2017-07-01 2017-09-30 0001052595 rlh:RLVentureLLCMember rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2018-07-01 2018-09-30 0001052595 rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2018-07-01 2018-09-30 0001052595 rlh:TESIMember rlh:ManagementAgreementMember 2018-05-21 2018-05-21 0001052595 rlh:ColumbiaPacificOpportunityFundL.P.Member rlh:TermLoanMember srt:AffiliatedEntityMember 2018-04-17 2018-04-17 0001052595 rlh:VantageHospitalityGroupInc.Member rlh:A90ofRoomCountatCloseYear1AnniversaryMember 2018-01-31 0001052595 rlh:RedLionHotelsManagementInc.Member rlh:ManagementAgreementMember rlh:HudsonValleyResortandSpaMember 2017-01-01 2017-09-30 0001052595 rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2017-07-01 2017-09-30 0001052595 rlh:ColumbiaPacificOpportunityFundL.P.Member srt:AffiliatedEntityMember us-gaap:CommonStockMember 2018-04-17 0001052595 rlh:Messrs.MoyleAndBlossMember us-gaap:ManagementMember 2018-05-21 2018-05-21 0001052595 rlh:HotelManagementAgreementsMember 2018-09-30 0001052595 rlh:Messrs.MoyleAndBlossMember us-gaap:ManagementMember 2018-01-01 2018-09-30 0001052595 rlh:VantageHospitalityGroupInc.Member rlh:A90ofRoomCountatCloseYear1AnniversaryMember 2018-01-01 2018-01-31 0001052595 rlh:RLVentureLLCMember rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2017-07-01 2017-09-30 0001052595 rlh:RLSDCVentureMember rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2018-01-01 2018-09-30 0001052595 rlh:RLSAtlaVentureMember rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2018-01-01 2018-09-30 0001052595 rlh:RLSBaltVentureLLCMember rlh:ShelbourneCapitalMember rlh:InvestorRelationsFeeMember 2018-01-01 2018-09-30 0001052595 rlh:KnightsFranchiseSystemsInc.Member 2018-05-14 0001052595 rlh:KnightsFranchiseSystemsInc.Member 2018-07-01 2018-09-30 0001052595 rlh:VantageHospitalityGroupInc.Member 2018-01-01 2018-09-30 0001052595 rlh:KnightsFranchiseSystemsInc.Member 2018-01-01 2018-09-30 0001052595 rlh:KnightsFranchiseSystemsInc.Member 2017-01-01 2017-09-30 0001052595 rlh:KnightsFranchiseSystemsInc.Member 2017-07-01 2017-09-30 0001052595 rlh:KnightsFranchiseSystemsInc.Member 2018-09-30 0001052595 rlh:KnightsFranchiseSystemsInc.Member us-gaap:TradeNamesMember 2018-05-14 2018-05-14 0001052595 rlh:KnightsFranchiseSystemsInc.Member us-gaap:CustomerContractsMember 2018-05-14 2018-05-14 0001052595 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember rlh:EntertainmentBusinessMember 2017-10-01 2017-12-31 0001052595 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember rlh:EntertainmentBusinessMember 2017-12-31 0001052595 2017-10-01 2017-12-31 0001052595 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember rlh:EntertainmentBusinessMember 2017-01-01 2017-09-30 0001052595 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember rlh:EntertainmentBusinessMember 2017-07-01 2017-09-30 0001052595 rlh:RLVentureLLCMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2017-12-31 0001052595 us-gaap:DiscontinuedOperationsHeldforsaleMember rlh:HotelsMember 2017-12-31 0001052595 rlh:RLSBaltVentureLLCMember us-gaap:SubsequentEventMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2018-10-25 2018-10-25 xbrli:pure rlh:extension iso4217:USD rlh:room rlh:segment xbrli:shares rlh:hotel iso4217:USD xbrli:shares rlh:joint_venture
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-13957 
 
RED LION HOTELS CORPORATION
(Exact name of registrant as specified in its charter)

Washington
 
91-1032187
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
1550 Market St. #350
Denver, Colorado
 
80202
(Address of principal executive offices)
 
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (509) 459-6100 
__________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  o
Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filer
 
o
  
Accelerated filer
 
ý
Non-accelerated filer
 
o
  
Smaller reporting company
 
o
 
 
 
 
Emerging growth company
 
o
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  ý
As of October 31, 2018, there were 24,563,933 shares of the registrant’s common stock outstanding.


Table of Contents

TABLE OF CONTENTS
 
 
 
 
Item No.
Description
Page No.
 
 
 
 
PART I – FINANCIAL INFORMATION
 
 
 
 
Item 1
 
 
Condensed Consolidated Balance Sheets at September 30, 2018 and December 31, 2017
 
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2018 and 2017
 
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017
 
Notes to Condensed Consolidated Financial Statements
Item 2
Item 3
Item 4
 
 
 
 
PART II – OTHER INFORMATION
 
 
 
 
Item 1
Item 1A
Item 2
Item 3
Item 4
Item 5
Item 6
 



2

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements

RED LION HOTELS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, 2018 and December 31, 2017
 
 
September 30,
2018
 
December 31,
2017
 
 
(In thousands, except share data)
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents ($6,488 and $6,487 attributable to VIEs)
 
$
18,218

 
$
32,429

Restricted cash ($4,568 and $12,326 attributable to VIEs)
 
4,671

 
12,429

Accounts receivable, net of an allowance for doubtful accounts $2,019 and $1,436, respectively ($1,591 and $3,200 attributable to VIEs)
 
22,214

 
13,143

Accounts receivable from related parties
 

 
1,520

Notes receivable, net
 
1,642

 
1,098

Inventories ($123 and $276 attributable to VIEs)
 
272

 
443

Prepaid expenses and other ($840 and $976 attributable to VIEs)
 
5,405

 
4,862

Assets held for sale ($0 and $34,359 attributable to VIEs)
 

 
34,359

Total current assets
 
52,422

 
100,283

Property and equipment, net ($88,447 and $137,479 attributable to VIEs)
 
118,810

 
167,938

Goodwill
 
18,607

 
9,404

Intangible assets, net
 
65,439

 
50,749

Other assets, net ($572 and $174 attributable to VIEs)
 
7,758

 
1,976

Total assets
 
$
263,036

 
$
330,350

LIABILITIES
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable ($817 and $1,810 attributable to VIEs)
 
$
5,291

 
$
4,100

Accrued payroll and related benefits ($426 and $1,453 attributable to VIEs)
 
4,208

 
7,457

Other accrued liabilities ($1,400 and $2,184 attributable to VIEs)
 
5,769

 
4,094

Long-term debt, due within one year ($9,481 and $62,914 attributable to VIEs)
 
9,419

 
62,914

Contingent consideration for acquisition due to related party, due within one year
 
3,000

 
9,289

Total current liabilities
 
27,687

 
87,854

Long-term debt, due after one year, net of debt issuance costs ($15,641 and $48,483 attributable to VIEs)
 
24,766

 
48,483

Line of credit, due after one year
 
10,000

 

Deferred income and other long-term liabilities ($551 and $772 attributable to VIEs)
 
2,436

 
1,554

Deferred income taxes
 
774

 
2,219

Total liabilities
 
65,663

 
140,110

 
 
 
 
 
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; 24,274,599 and 23,651,212 shares issued and outstanding
 
242

 
237

Additional paid-in capital, common stock
 
183,412

 
178,028

Accumulated deficit
 
(6,769
)
 
(15,406
)
Total RLH Corporation stockholders' equity
 
176,885

 
162,859

Noncontrolling interest
 
20,488

 
27,381

Total stockholders' equity
 
197,373

 
190,240

Total liabilities and stockholders’ equity
 
$
263,036

 
$
330,350

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Table of Contents

RED LION HOTELS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
For the Three and Nine Months Ended September 30, 2018 and 2017
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
(In thousands, except per share data)
Revenue:
 
 
 
 
 
 
 
 
Company operated hotels
 
$
19,579

 
$
37,244

 
$
65,486

 
$
94,214

Other revenues from managed properties
 
1,278

 
1,054

 
3,272

 
3,047

Franchised hotels
 
15,137

 
12,714

 
38,861

 
36,045

Other
 
6

 
12

 
32

 
128

Total revenues
 
36,000

 
51,024

 
107,651

 
133,434

Operating expenses:
 
 
 
 
 
 
 
 
Company operated hotels
 
14,534

 
25,284

 
50,817

 
70,450

Other costs from managed properties
 
1,278

 
1,054

 
3,272

 
3,047

Franchised hotels
 
9,220

 
8,898

 
26,486

 
26,300

Depreciation and amortization
 
3,621

 
4,660

 
12,714

 
13,742

Hotel facility and land lease
 
1,186

 
1,201

 
3,577

 
3,604

Asset impairment
 
7,100

 

 
7,100

 

Gain on asset dispositions, net
 
(26,196
)
 
(113
)
 
(42,094
)
 
(334
)
General, administrative and other expenses
 
5,398

 
3,631

 
14,588

 
11,346

Acquisition and integration costs
 
95

 
1,235

 
2,196

 
1,246

Total operating expenses
 
16,236

 
45,850

 
78,656

 
129,401

Operating income
 
19,764

 
5,174

 
28,995

 
4,033

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(1,417
)
 
(2,119
)
 
(5,366
)
 
(6,114
)
Loss on early retirement of debt
 
(794
)
 

 
(794
)
 

Other income (loss), net
 
34

 
338

 
214

 
562

Total other income (expense)
 
(2,177
)
 
(1,781
)
 
(5,946
)
 
(5,552
)
Income (loss) from continuing operations before taxes
 
17,587

 
3,393

 
23,049

 
(1,519
)
Income tax expense (benefit)
 
(26
)
 
34

 
(239
)
 
304

Net income (loss) from continuing operations
 
17,613

 
3,359

 
23,288

 
(1,823
)
Discontinued operations:
 
 
 
 
 
 
 
 
Income (loss) from discontinued business unit, net of income tax expense (benefit) of $140 and $209
 

 
268

 

 
402

Net income (loss) from discontinued operations
 

 
268

 

 
402

Net income (loss)
 
17,613

 
3,627

 
23,288

 
(1,421
)
Net (income) loss attributable to noncontrolling interest
 
(8,670
)
 
(871
)
 
(14,079
)
 
507

Net income (loss) and comprehensive income (loss) attributable to RLH Corporation
 
$
8,943

 
$
2,756

 
$
9,209

 
$
(914
)
 
 
 
 
 
 
 
 
 
Earnings (loss) per share - basic
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to RLH Corporation
 
$
0.36

 
$
0.11

 
$
0.38

 
$
(0.06
)
Income from discontinued operations
 

 
0.01

 

 
0.02

Net income (loss) attributable to RLH Corporation
 
$
0.36

 
$
0.12

 
$
0.38

 
$
(0.04
)
 
 
 
 
 
 
 
 
 
Earnings (loss) per share - diluted
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to RLH Corporation
 
$
0.35

 
$
0.10

 
$
0.36

 
$
(0.06
)
Income from discontinued operations
 

 
0.01

 

 
0.02

Net income (loss) attributable to RLH Corporation
 
$
0.35

 
$
0.11

 
$
0.36


$
(0.04
)
 
 
 
 
 
 
 
 
 
Weighted average shares - basic
 
24,545

 
23,609

 
24,334

 
23,542

Weighted average shares - diluted
 
25,729

 
24,176

 
25,437

 
23,542

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents

RED LION HOTELS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, 2018 and 2017
 
 
Nine Months Ended
 
 
September 30,
 
 
2018
 
2017
 
 
(In thousands)
Operating activities:
 
 
 
 
Net income (loss)
 
$
23,288

 
$
(1,421
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
12,714

 
13,806

Amortization of debt issuance costs
 
892

 
892

Gain on disposition of property, equipment and other assets, net
 
(42,094
)
 
(328
)
Loss on early retirement of debt
 
794

 

Impairment loss
 
7,100

 

Deferred income taxes
 
(1,445
)
 
416

Stock based compensation expense
 
2,896

 
2,392

Provision for doubtful accounts
 
651

 
407

Fair value adjustments to contingent consideration
 
581

 
1,325

Change in current assets and liabilities, net of business acquired:
 
 
 
 
Accounts receivable, net
 
(7,293
)
 
(4,345
)
Notes receivable, net
 
(7
)
 
(69
)
Inventories
 
4

 
(32
)
Prepaid expenses and other
 
(6,629
)
 
(1,324
)
Accounts payable
 
1,405

 
(780
)
Other accrued liabilities
 
(484
)
 
(1,936
)
Net cash provided by (used in) operating activities
 
(7,627
)
 
9,003

Investing activities:
 
 
 
 
Capital expenditures
 
(6,190
)
 
(8,024
)
Contingent consideration paid for Vantage acquisition
 
(4,000
)
 

Acquisition of Knights Inn
 
(26,888
)
 

Net proceeds from disposition of property and equipment
 
113,838

 
28

Collection of notes receivable related to property sales
 

 
200

Advances on notes receivable
 
(537
)
 
(408
)
Net cash provided by (used in) investing activities
 
76,223

 
(8,204
)
Financing activities:
 
 
 
 
Borrowings on long-term debt
 
30,000

 
3,237

Repayment of long-term debt
 
(107,899
)
 
(959
)
Proceeds from line of credit borrowing
 
10,000

 

Debt issuance costs
 
(1,317
)
 
(35
)
Distributions to noncontrolling interest
 
(20,972
)
 
(1,388
)
Stock-based compensation awards canceled to settle employee tax withholding
 
(615
)
 
(332
)
Stock option and stock purchase plan issuances, net and other
 
238

 
194

Net cash provided by (used in) financing activities
 
(90,565
)
 
717

 
 
 
 
 
Change in cash, cash equivalents and restricted cash:
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
 
(21,969
)
 
1,516

Cash, cash equivalents and restricted cash at beginning of period
 
44,858

 
47,609

Cash, cash equivalents and restricted cash at end of period
 
$
22,889

 
$
49,125

The accompanying notes are an integral part of these condensed consolidated financial statements.


 
 
 
 
 

5

Table of Contents

RED LION HOTELS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.
Organization

Red Lion Hotels Corporation ("RLH Corporation", "RLHC", "we", "our", "us", or "our company") is a NYSE-listed hospitality and leisure company (ticker symbol: RLH) doing business as RLH Corporation and primarily engaged in the franchising, management and ownership of hotels under the following proprietary brands: Hotel RL, Red Lion Hotels, Red Lion Inn & Suites, GuestHouse, Settle Inn, Americas Best Value Inn, Canadas Best Value Inn, Signature and Signature Inn, Country Hearth Inns & Suites, and Knights Inn.

A summary of our properties as of September 30, 2018, including the approximate number of available rooms, is provided below:
 
 
Franchised
 
Company Operated
 
Total Systemwide
 
 
Hotels
 
Total Available Rooms
 
Hotels
 
Total Available Rooms
 
Hotels
 
Total Available Rooms
Total
 
1,352

 
86,100

 
11

 
2,400

 
1,363

 
88,500



On May 14, 2018, Red Lion Hotels Franchising, Inc., a wholly-owned subsidiary of RLH Corporation (RLH Franchising) completed the purchase of all of the issued and outstanding shares of capital stock of Knights Franchise Systems, Inc. (KFS, Knights Inn), and the purchase of certain operating assets from, and assumption of certain liabilities relating to the business of franchising Knights Inn branded hotels from Wyndham Hotel Group Canada, ULC and Wyndham Hotel Group Europe Limited, pursuant to an Amended and Restated Purchase Agreement dated May 1, 2018. The aggregate purchase price of $26.9 million is subject to a post-closing purchase price adjustment mechanism for the cash, unpaid indebtedness, unpaid transaction expenses and working capital of KFS. See Note 17 for discussion of Business Acquisitions.

2.
Summary of Significant Accounting Policies

The unaudited condensed consolidated financial statements included herein were prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and in accordance with generally accepted accounting principles in the United States of America (GAAP). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations.

The Consolidated Balance Sheet as of December 31, 2017 was derived from the audited balance sheet as of such date. We believe the disclosures included herein are adequate; however, they should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 2017, filed with the SEC in our annual report on Form 10-K on April 2, 2018.

In the opinion of management, these unaudited condensed consolidated financial statements contain all of the adjustments of a normal and recurring nature necessary to present fairly our Condensed Consolidated Balance Sheet at September 30, 2018, the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018 and 2017, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017. The results of operations for the periods presented may not be indicative of that which may be expected for a full year or for any other fiscal period.

Revenue Recognition

Revenue is generally recognized as services are provided. Revenues are primarily derived from franchise contracts with third-party hotel owners, as well as from individual hotel guests and corporate patrons at our owned and leased hotels. Revenues are also derived from management of third-party owned hotels. The majority of compensation received for our performance obligations is variable consideration from our management and franchise contracts or fixed transactional guest consideration through our owned and leased hotels. We recognize the variable fees as the services to which they relate are delivered, applying the prescribed variable consideration allocation guidance. In certain circumstances we defer consideration and recognize consideration over time as the related performance obligations are satisfied.

6

Table of Contents


Franchised hotel revenues

We identified the following services as one performance obligation in connection with our franchise contracts:

Intellectual Property (IP) licenses grant a non-exclusive, limited revocable license to the RLH trademarks and hotel names.
Manual and Training Services provide operational assistance unique to the RLH brands, business model and standards.
Reservation Services are provided through direct or indirect system access.
Marketing Services and Arrangements benefit the overall hotel network and include brand promotions, direct guest marketing, brand name marketing and various other programs targeted at advertising to guests.
Brand Conference is provided typically annually for third party owners to gather and attend educational seminars and brand informational presentations.

The performance obligation related to franchise revenues is delivered over time. While the underlying services may vary from day to day, the nature of the promises are the same each day, other than the Brand Conference, which is recognized in the month the service is provided, and the property owner can independently benefit from each day's services. Franchise fees are typically based on the sales or usage of the underlying hotel, with the exception of fixed upfront fees that usually represent an insignificant portion of the transaction price.

Franchised hotel revenues represent fees earned in connection with the licensing of one of our brands, usually under long-term contracts with the property owner, and include the following:

Royalty fees are generally based on a percentage of a hotel's monthly gross room revenue or a fixed monthly fee based on room count. These fees are typically billed and collected monthly, and revenue is generally recognized at the same time the fees are billed.
Application, initiation and other fees are charged when: (i) new hotels enter our system; (ii) there is a change of ownership; or (iii) contracts with properties already in our system are extended or modified. These fees are typically fixed and collected upfront and are recognized as revenue over the term of the franchise contract.
Reservations services/marketing expenses/other are associated with our brands and shared services, which are paid from fees collected by us from the franchised properties. Revenue is generally recognized on a gross basis as fees are billed, which are based on the underlying hotel's sales or usage (e.g., gross room revenues and number of reservations processed) and expenses are expected to equal the revenues over time.

Any consideration paid or anticipated to be paid to incentivize hotel owners to enter into franchise contracts is capitalized and reduces revenues as amortized. The commission or directs costs of acquiring the contract or modification are recorded as contract acquisition costs and are recognized in franchise costs when amortized.

Company operated hotels revenue

We identified the following performance obligations in connection with our owned and leased hotel revenues, for which revenue is recognized as the respective performance obligations are satisfied, which results in recognizing the amount we expect to be entitled to for providing the goods or services to the hotel customer or guest:

Room reservations or ancillary services are typically satisfied as the good or service is transferred to the hotel guest, which is generally when the room stay occurs.
Other ancillary goods and services are purchased independently of the room reservation at standalone selling prices and are considered separate performance obligations, which are satisfied when the related good or service is provided to the hotel guest.
Hotel management fees represent fees earned from hotels that we manage, usually under long-term contracts with the property owner and are generally based on a percentage of a hotel's monthly gross revenue. Base fees are typically billed and collected monthly, and revenue is generally recognized at the same time the fees are billed.

Company operated hotels revenue primarily consist of hotel room rentals, revenue from accommodations sold in conjunction with other services(e.g., package reservations), food and beverage sales and other ancillary goods and services (e.g., parking) related to owned, leased and consolidated non-wholly owned (joint venture) hotel properties and hotel management fees. Revenue is recognized when rooms are occupied or goods and services have been delivered or rendered, respectively. Payment terms typically align with when the goods and services are provided. The management fees from third-party hotel owners earned under the contract

7

Table of Contents

relate to a specific outcome of providing the services (e.g., hotel room sales). We use time as the measure of progress to recognize as revenue the fees that are allocated to the period earned per the contract.

Revenue from managed properties

Other revenue from managed properties includes direct reimbursements including payroll and related costs and certain other operating costs of the managed properties’ operations, which are contractually reimbursed to us by the property owners as expenses are incurred. Revenue is recognized based on the amount of expenses incurred by us and are presented as other expenses from managed hotels in our Condensed Consolidated Statements of Comprehensive Income (Loss). These expenses are then reimbursed by the property owner typically on a monthly basis, which results in no net effect on operating income (loss) or net income (loss).

Other revenues

Other revenues include revenues generated by the incidental support of hotel operations for owned, leased, managed and franchised hotels, including purchasing operations, and other operating income.

Taxes and fees collected on behalf of governmental agencies

We are required to collect certain taxes and fees from customers on behalf of governmental agencies and remit these back to the applicable governmental agencies on a periodic basis. We have a legal obligation to act as a collection agent. We do not retain these taxes and fees and, therefore, they are not included in our measurement of transaction prices. We have elected to present revenue net of sales taxes and other similar taxes. We record a liability when the amounts are collected and relieve the liability when payments are made to the applicable taxing authority or other appropriate governmental agency.

New and Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), which is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. We adopted the requirements of ASU 2014-09 on January 1, 2018 using the modified retrospective method, as permitted by the standard, resulting in a cumulative adjustment to accumulated deficit of $0.6 million. In implementation, we applied the transition guides to franchise agreements originated by us. No contract liability was recorded for franchise contracts that were acquired in prior business combinations or asset purchases.

The provisions of ASU 2014-09 affected our revenue recognition as follows:

Application, initiation and other fees are recognized over the term of the franchise contract based on the first penalty free termination date, rather than upon execution of the contract. These fees are recognized in franchise hotel revenue.

Certain contract acquisition costs related to our management and franchise contracts are recognized over the term of the contracts rather than upon execution of the contract. The amortization of these costs is recognized in franchised hotel expenses.


8

Table of Contents

Information below represents the effect of the adoption of ASU 2014-09 on our Condensed Consolidated Balance Sheet as of September 30, 2018 and our Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018 (in thousands, except per share data).
 
 
As Reported
 
Adjustment
 
Balances without adoption of topic 606
ASSETS
 
 
 
 
 
 
Prepaid expenses and other
 
$
5,405

 
$
(276
)
 
$
5,129

Other assets, net
 
7,758

 
(824
)
 
6,934

Total assets
 
263,036

 
(1,100
)
 
261,936

 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
Other accrued liabilities
 
$
5,769

 
$
(664
)
 
$
5,105

Deferred income and other long-term liabilities
 
2,436

 
(1,282
)
 
1,154

Total liabilities
 
65,663

 
(1,946
)
 
63,717

 
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
RLH Corporation stockholders' equity:
 
 
 
 
 
 
Accumulated deficit
 
$
(6,769
)
 
$
846

 
$
(5,923
)
Total RLH Corporation stockholders' equity
 
176,885

 
846

 
177,731

Total stockholders' equity
 
197,373

 
846

 
198,219

Total liabilities and stockholders’ equity
 
263,036

 
(1,100
)
 
261,936



Three Months Ended September 30, 2018
 
As Reported
 
Adjustment
 
Balances without adoption of topic 606
Revenue:
 
 
 
 
 
 
Franchised hotels
 
$
15,137

 
$
193

 
$
15,330

Total revenues
 
36,000

 
193

 
36,193

 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
Franchised hotels
 
9,220

 
74

 
9,294

Total operating expenses
 
16,236

 
74

 
16,310

Operating income
 
19,764

 
119

 
19,883

 
 
 
 
 
 
 
Income (loss) from continuing operations before taxes
 
17,587

 
119

 
17,706

Income tax expense (benefit)
 
(26
)
 
(2
)
 
(28
)
Net income (loss) from continuing operations
 
17,613

 
121

 
17,734

Net income (loss)
 
17,613

 
121

 
17,734

Net income (loss) and comprehensive income (loss) attributable to RLH Corporation
 
8,943

 
121

 
9,064

 
 
 
 
 
 
 
Basic earnings (loss) per share from continuing operations
 
$
0.36

 
$
0.01

 
$
0.37

Diluted earnings (loss) per share from continuing operations
 
$
0.35

 
$

 
$
0.35



9

Table of Contents

Nine Months Ended September 30, 2018
 
As Reported
 
Adjustment
 
Balances without adoption of topic 606
Revenue:
 
 
 
 
 
 
Franchised hotels
 
$
38,861

 
$
563

 
$
39,424

Total revenues
 
107,651

 
563

 
108,214

 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
Franchised hotels
 
26,486

 
222

 
26,708

Total operating expenses
 
78,656

 
222

 
78,878

Operating income
 
28,995

 
341

 
29,336

 
 
 
 
 
 
 
Income (loss) from continuing operations before taxes
 
23,049

 
341

 
23,390

Income tax expense (benefit)
 
(239
)
 
(4
)
 
(243
)
Net income (loss) from continuing operations
 
23,288

 
345

 
23,633

Net income (loss)
 
23,288

 
345

 
23,633

Net income (loss) and comprehensive income (loss) attributable to RLH Corporation
 
9,209

 
345

 
9,554

 
 
 
 
 
 
 
Basic earnings (loss) per share from continuing operations
 
$
0.38

 
$
0.01

 
$
0.39

Diluted earnings (loss) per share from continuing operations
 
$
0.36

 
$
0.02

 
$
0.38



In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required. We have assigned an implementation team and
are still assessing the potential impact that ASU 2016-02 will have on our financial statements and disclosures. We had $76.4 million of operating lease obligations as of September 30, 2018 (see Note 10) and upon the adoption of the standard we expect to record an ROU asset and lease liability for the present value of these leases, which will have a material impact on the Condensed Consolidated Balance Sheet.

We have assessed the potential impact of other recently issued, but not yet effective, accounting standards and determined that the provisions are either not applicable to us or are not anticipated to have a material impact on our consolidated financial statements.

3.
Business Segments

We have two operating segments: franchised hotels and company operated hotels. The "other" segment consists of miscellaneous revenues and expenses, cash and cash equivalents, certain receivables, certain property and equipment and general and administrative expenses, which are not specifically associated with an operating segment. Management reviews and evaluates the operating segments exclusive of interest expense, income taxes and certain corporate expenses; therefore, they have not been allocated to the operating segments. All balances are presented after the elimination of inter-segment and intra-segment revenues and expenses.

The results of operations of the entertainment segment were treated as discontinued operations, due to the sale of that business completed on October 3, 2017. As a result, the revenue and operating expenses of the entertainment segment are excluded from the segment disclosures below.


10

Table of Contents

Selected financial information is provided below (in thousands):
Three Months Ended September 30, 2018
 
Franchised Hotels
 
Company Operated Hotels
 
Other
 
Total
Revenue
 
$
15,137

 
$
20,857

 
$
6

 
$
36,000

Operating expenses:
 
 
 
 
 
 
 
 
Segment operating expenses
 
9,220

 
15,812

 

 
25,032

Depreciation and amortization
 
986

 
2,170

 
465

 
3,621

Other operating expenses, acquisition costs, asset impairment and gains on asset dispositions
 
95

 
(17,856
)
 
5,344

 
(12,417
)
Operating income (loss)
 
$
4,836

 
$
20,731

 
$
(5,803
)

$
19,764

 
 
 
 
 
 
 
 
 
Identifiable assets as of September 30, 2018
 
$
109,216

 
$
135,259

 
$
18,561

 
$
263,036


Three Months Ended September 30, 2017
 
Franchised Hotels
 
Company Operated Hotels
 
Other
 
Total
Revenue
 
$
12,714

 
$
38,298

 
$
12

 
$
51,024

Operating expenses:
 
 
 
 
 
 
 
 
Segment operating expenses
 
8,898

 
26,338

 

 
35,236

Depreciation and amortization
 
594

 
3,755

 
311

 
4,660

Other operating expenses, acquisition costs and gains on asset dispositions
 
1,235

 
1,090

 
3,629

 
5,954

Operating income (loss)
 
$
1,987

 
$
7,115

 
$
(3,928
)

$
5,174

 
 
 
 
 
 
 
 
 
Identifiable assets as of December 31, 2017
 
$
70,035

 
$
241,659

 
$
18,656

 
$
330,350



Nine Months Ended September 30, 2018
 
Franchised Hotels
 
Company Operated Hotels
 
Other
 
Total
Revenue
 
$
38,861

 
$
68,758

 
$
32

 
$
107,651

Operating expenses:
 
 
 
 
 
 
 
 
Segment operating expenses
 
26,486

 
54,089

 

 
80,575

Depreciation and amortization
 
3,043

 
8,328

 
1,343

 
12,714

Other operating expenses, acquisition costs, asset impairment and gains on asset dispositions
 
2,195

 
(31,316
)
 
14,488

 
(14,633
)
Operating income (loss)
 
$
7,137

 
$
37,657

 
$
(15,799
)
 
$
28,995

 
 
 
 
 
 
 
 
 
Identifiable assets as of September 30, 2018
 
$
109,216

 
$
135,259

 
$
18,561

 
$
263,036


Nine Months Ended September 30, 2017
 
Franchised Hotels
 
Company Operated Hotels
 
Other
 
Total
Revenue
 
$
36,045

 
$
97,261

 
$
128

 
$
133,434

Operating expenses:
 
 
 
 
 
 
 
 
Segment operating expenses
 
26,300

 
73,497

 

 
99,797

Depreciation and amortization
 
1,721

 
11,096

 
925

 
13,742

Other operating expenses, acquisition costs and gains on asset dispositions
 
1,144

 
3,258

 
11,460

 
15,862

Operating income (loss)
 
$
6,880

 
$
9,410

 
$
(12,257
)
 
$
4,033

 
 
 
 
 
 
 
 
 
Identifiable assets as of December 31, 2017
 
$
70,035

 
$
241,659

 
$
18,656

 
$
330,350




11

Table of Contents

4.
Variable Interest Entities

Our joint venture entities have been determined to be variable interest entities (VIEs), and RLH Corporation has been determined to be the primary beneficiary of each VIE. Therefore, we consolidate the assets, liabilities, and results of operations of (1) RL Venture, (2) RLS Balt Venture LLC (RLS Balt Venture), (3) RLS Atla Venture LLC (RLS Atla Venture) and (4) RLS DC Venture LLC (RLS DC Venture).

RL Venture

We maintain a 55% interest in RL Venture, with the remaining 45% owned by Shelbourne Falcon RLHC Hotel Investors LLC (Shelbourne Falcon), an entity that is led by Shelbourne Capital LLC (Shelbourne). The hotels owned by RL Venture are managed by RL Management, one of our wholly-owned subsidiaries, subject to a management agreement. RL Venture is considered a variable interest entity because our voting rights are not proportional to our financial interest and substantially all of RL Venture's activities involve and are conducted on our behalf. We have determined that we are the primary beneficiary as (a) we exert power over two of the entity's key activities (hotel operations and property renovations) and share power over the remaining key activities with Shelbourne Falcon, which does not have the unilateral ability to exercise kick-out rights, and (b) we have the obligation to absorb losses and right to receive benefits that could be significant to the entity through our 55% equity interest and management fees. As a result, we consolidate RL Venture. The equity interest owned by Shelbourne Falcon is reflected as a noncontrolling interest in the condensed consolidated financial statements.

In February 2018, five of the RL Venture properties were sold for an aggregate sale price of $47.2 million. In April 2018, one of the RL Venture properties sold for $5.5 million. In May 2018, one of the RL Venture property sold for $9.3 million. In July 2018, two additional RL Venture properties sold for $54.5 million. As of September 30, 2018, RL Venture has two remaining properties.

Cash distributions may be made periodically based on calculated distributable income. During the third quarter of 2018 and 2017, RL Venture made a cash distributions totaling $37.5 million and $1.6 million, of which RLH Corporation received $20.6 million and $0.9 million, respectively. During the nine months ended September 30, 2018 and 2017, cash distributions totaled $46.5 million and $3.1 million, of which RLH Corporation received $25.6 million and $1.7 million, respectively. Under our credit agreement with Deutsche Bank AG New York Branch (DB), Capital One, National Association and Raymond James Bank, N.A., as lenders and DB as the administrative agent dated as of May 14, 2018, as amended, (DB Credit Agreement), these funds may be used to pay down the principal outstanding on the Senior Secured Term Loan. In August 2018, RLH Corporation deposited the $20.6 million received from RL Venture in a cash collateral account controlled by DB, which was used to make a prepayment on the balance outstanding under the Senior Secured Term Loan under the DB Credit Agreement.

RLS Balt Venture

As of September 30, 2018, we own a 73% interest in RLS Balt Venture, with the remaining 27% owned by Shelbourne Falcon Charm City Investors LLC (Shelbourne Falcon II), an entity led by Shelbourne. RL Baltimore, LLC (RL Baltimore), which is wholly-owned by RLS Balt Venture, owns the Hotel RL Baltimore Inner Harbor, which is managed by RL Management. RLS Balt Venture is considered a variable interest entity because our voting rights are not proportional to our financial interest and substantially all of RLS Balt Venture's activities involve and are conducted on our behalf. We have determined that we are the primary beneficiary as (a) we exert power over the entity's key activities (hotel operations and property renovations) and share power over the remaining key activities with Shelbourne Falcon II, which does not have the unilateral ability to exercise kick-out rights, and (b) we have the obligation to absorb losses and right to receive benefits that could be significant to the entity through our 73% equity interest and management fees. As a result, we consolidate RLS Balt Venture. The equity interest owned by Shelbourne Falcon II is reflected as a noncontrolling interest in the condensed consolidated financial statements.

In May 2017 and 2018, RLH Corporation provided an additional $2.8 million and $2.0 million, respectively, to RLS Balt Venture to fund operating losses. This funding was not treated as a loan or as a capital contribution. Rather, it is preferred capital of RLS Balt Venture and will be repaid only when the Baltimore hotel property is sold or when RLS Balt Venture is liquidated. Upon such an event, RLH Corporation will receive the preferred capital plus a preferred return of 9% on the May 2017 preferred capital and 11% on the May 2018 preferred capital, compounded annually, prior to any liquidation proceeds being returned to the members.

Cash distributions may be made periodically based on calculated distributable income. There were no cash distributions made during the nine months ended September 30, 2018 or 2017.

12

Table of Contents


RLS Atla Venture

We own a 55% interest in RLS Atla Venture and Falcon Big Peach Investors LLC (Shelbourne Falcon III), an entity led by Shelbourne, owns a 45% interest. RLH Atlanta LLC (RLH Atlanta), which is wholly-owned by RLS Atla Venture, owns a hotel adjacent to the Atlanta International Airport that opened in April 2016 as the Red Lion Hotel Atlanta International Airport. RLS Atla Venture is considered a variable interest entity because our voting rights are not proportional to our financial interest and substantially all of RLS Atla Venture's activities involve and are conducted on our behalf. We have determined that we are the primary beneficiary as (a) we exert power over the entity's key activities (hotel operations and property renovations) and share power over the remaining key activities with Shelbourne Falcon III, which does not have the unilateral ability to exercise kick-out rights, and (b) we have the obligation to absorb losses and right to receive benefits that could be significant to the entity through our 55% equity interest and management fees. As a result, we consolidate RLS Atla Venture. The equity interest owned by Shelbourne Falcon III is reflected as a noncontrolling interest in the condensed consolidated financial statements.

Cash distributions may be made periodically based on calculated distributable income. There were no cash distributions made during the nine months ended September 30, 2018 or 2017.

On August 9, 2018 we announced that we would be marketing for sale the Red Lion Hotel Atlanta International Airport owned by RLH Atlanta.

RLS DC Venture

We own 55% of RLS DC Venture, and Shelbourne Falcon DC Investors LLC (Shelbourne Falcon IV), an entity led by Shelbourne, owns 45%. RLS DC Venture is considered a variable interest entity because our voting rights are not proportional to our financial interest, and substantially all of RLS DC Venture's activities involve and are conducted on our behalf. We have determined that we are the primary beneficiary as (a) we exert power over the entity's key activities (hotel operations and property renovations) and share power over the remaining key activities with Shelbourne Falcon IV, which does not have the unilateral ability to exercise kick-out rights, and (b) we have the obligation to absorb losses and right to receive benefits that could be significant to the entity through our 55% equity interest and management fees. As a result, we consolidate RLS DC Venture. The equity interest owned by Shelbourne Falcon IV is reflected as a noncontrolling interest in the condensed consolidated financial statements.

In May 2017, RLH Corporation provided $950,000 to RLS DC Venture to fund restricted cash required by the loan agreement with Pacific Western Bank. In May 2018, RLH Corporation provided approximately $450,000 to RLS DC Venture to be used as a principal payment on the debt to Pacific Western Bank to bring the loan into compliance with the loan to value debt covenant requirement of the loan agreement. This funding was not treated as a loan or as a capital contribution. Rather, it is preferred capital of RLS DC Venture and will be repaid only when the DC hotel property is sold, when RLS DC Venture is liquidated, or the restricted cash is released per the loan agreement. Upon such an event, RLH Corporation will receive the preferred capital plus a preferred return of 9% on the May 2017 preferred capital and 11% on the May 2018 preferred capital, compounded annually, prior to any liquidation proceeds being returned to the members. In May 2018, the loan was amended to add a $4.5 million principal guarantee by RLH Corporation. The amendment also allows future debt service coverage ratio covenant defaults to be cured by an increase in the RLH Corporation principal guarantee. This option can be exercised a maximum of two times during the remaining term of the loan.

Cash distributions may be made periodically based on calculated distributable income. There were no cash distributions made during the nine months ended September 30, 2018 or 2017.


13

Table of Contents

5.
Property and Equipment

Property and equipment is summarized as follows (in thousands):
 
 
September 30,
2018
 
December 31,
2017
Buildings and equipment
 
$
152,237

 
$
216,618

Furniture and fixtures
 
21,029

 
29,132

Landscaping and land improvements
 
3,094

 
5,104

 
 
176,360

 
250,854

Less accumulated depreciation
 
(82,301
)
 
(118,888
)
 
 
94,059

 
131,966

Land
 
19,372

 
31,710

Construction in progress
 
5,379

 
4,262

Property and equipment, net
 
$
118,810

 
$
167,938



During the three months ended September 30, 2018, we recognized a $7.1 million impairment on our Baltimore joint venture property. The default during the third quarter on the RL Baltimore loan (described further in Note 8) coupled with challenging cash flow results for the asset gave rise to the impairment. The fair value of the asset was determined by a third-party valuation that included an analysis of selling prices for similar assets as well as a discounted cash flow analysis, which are Level 3 fair value measurements. Key inputs to the fair value measurement for these assets included forecasted revenues expected to be generated by the hotel factoring in the market it serves as well as forecasted operating costs and capital expenditure needs based upon the Company’s planning and budgeting process. Other inputs included sales data for similarly situated hotels in the market, adjusted to reflect known differences in the assets.

During the three and nine months ended September 30, 2018, we sold two and nine hotel properties for a total gain of $26.0 million and $41.6 million, respectively.

6.
Goodwill and Intangible Assets