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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR 
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)
 

(509) 459-6100
Registrant's telephone number, including area code
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
RLH
New York Stock Exchange
__________________________________________
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      No  
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer," "accelerated filer,” and "smaller reporting company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
 
  
Accelerated filer
 
Non-accelerated filer
 
  
Smaller reporting company
 
 
 
 
 
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. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  
As of November 4, 2019, there were 25,147,382 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
 
Condensed Consolidated Statements of Comprehensive Income (Loss)
 
Condensed Consolidated Statements of Stockholders' Equity
 
Condensed Consolidated Statements of Cash Flows
 
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,
2019
 
December 31,
2018
 
 
(In thousands, except share data)
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents ($4,363 and $4,564 attributable to VIEs)
 
$
18,267

 
$
17,034

Restricted cash ($2,930 and $2,652 attributable to VIEs)
 
2,930

 
2,755

Accounts receivable ($1,405 and $1,064 attributable to VIEs), net of an allowance for doubtful accounts of $3,377 and $2,345, respectively
 
19,496

 
18,575

Notes receivable, net
 
4,188

 
2,103

Other current assets ($716 and $680 attributable to VIEs)
 
4,961

 
6,218

Total current assets
 
49,842

 
46,685

Property and equipment, net ($67,514 and $74,250 attributable to VIEs)
 
107,554

 
115,522

Operating lease right-of-use assets ($10,855 and $0 attributable to VIEs)
 
48,553

 

Goodwill
 
18,595

 
18,595

Intangible assets, net
 
58,233

 
60,910

Other assets, net ($703 and $705 attributable to VIEs)
 
5,085

 
8,075

Total assets
 
$
287,862

 
$
249,787

 
 
 
 
 
LIABILITIES
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable ($890 and $650 attributable to VIEs)
 
$
5,176

 
$
5,322

Accrued payroll and related benefits ($342 and $369 attributable to VIEs)
 
1,868

 
5,402

Other accrued liabilities ($895 and $1,092 attributable to VIEs)
 
5,519

 
4,960

Long-term debt, due within one year ($24,628 and $25,056 attributable to VIEs)
 
24,628

 
25,056

Operating lease liabilities, due within one year ($966 and $0 attributable to VIEs)
 
4,801

 

Total current liabilities
 
41,992

 
40,740

Long-term debt, due after one year, net of debt issuance costs ($16,468 and $0 attributable to VIEs)
 
20,496

 
9,114

Line of credit, due after one year
 
10,000

 
10,000

Operating lease liabilities, due after one year ($11,941 and $0 attributable to VIEs)
 
46,871

 

Deferred income and other long-term liabilities ($330 and $480 attributable to VIEs)
 
1,541

 
2,245

Deferred income taxes
 
1,217

 
772

Total liabilities
 
122,117

 
62,871

 
 
 
 
 
Commitments and contingencies (Note 10)
 


 


 
 
 
 
 
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; 25,118,512 and 24,570,158 shares issued and outstanding
 
252

 
246

Additional paid-in capital, common stock
 
182,723

 
182,018

Accumulated deficit
 
(26,923
)
 
(16,512
)
Total RLH Corporation stockholders' equity
 
156,052

 
165,752

Noncontrolling interest
 
9,693

 
21,164

Total stockholders' equity
 
165,745

 
186,916

Total liabilities and stockholders’ equity
 
$
287,862

 
$
249,787

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)
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(In thousands, except per share data)
Revenue:
 
 
 
 
 
 
 
 
Royalty
 
$
5,909

 
$
6,530

 
$
17,516

 
$
16,575

Other franchise
 
2,016

 
1,016

 
3,772

 
2,412

Company operated hotels
 
16,633

 
20,857

 
43,839

 
68,758

Marketing, reservations and reimbursables
 
8,300

 
7,591

 
22,632

 
19,874

Other
 
5

 
6

 
13

 
32

Total revenues
 
32,863

 
36,000

 
87,772

 
107,651

Operating expenses:
 
 
 
 
 
 
 
 
Selling, general, administrative and other expenses
 
8,196

 
8,112

 
21,921

 
23,590

Company operated hotels
 
12,673

 
16,051

 
36,750

 
54,924

Marketing, reservations and reimbursables
 
7,080

 
7,453

 
22,088

 
20,226

Depreciation and amortization
 
3,636

 
3,621

 
11,192

 
12,714

Asset impairment
 
5,382

 
7,100

 
5,382

 
7,100

Loss (gain) on asset dispositions, net
 
1

 
(26,196
)
 
45

 
(42,094
)
Transaction and integration costs
 
201

 
95

 
436

 
2,196

Total operating expenses
 
37,169

 
16,236

 
97,814

 
78,656

Operating income (loss)
 
(4,306
)
 
19,764

 
(10,042
)
 
28,995

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(1,699
)
 
(1,417
)
 
(3,690
)
 
(5,366
)
Loss on early retirement of debt
 

 
(794
)
 
(164
)
 
(794
)
Other income (loss), net
 
44

 
34

 
121

 
214

Total other income (expense)
 
(1,655
)
 
(2,177
)
 
(3,733
)
 
(5,946
)
Income (loss) before taxes
 
(5,961
)
 
17,587

 
(13,775
)
 
23,049

Income tax expense (benefit)
 
486

 
(26
)
 
676

 
(239
)
Net income (loss)
 
(6,447
)
 
17,613

 
(14,451
)
 
23,288

Net (income) loss attributable to noncontrolling interest
 
2,980

 
(8,670
)
 
4,040

 
(14,079
)
Net income (loss) and comprehensive income (loss) attributable to RLH Corporation
 
$
(3,467
)
 
$
8,943

 
$
(10,411
)
 
$
9,209

 
 
 
 
 
 
 
 
 
Earnings (loss) per share - basic
 
$
(0.14
)
 
$
0.36

 
$
(0.42
)
 
$
0.38

Earnings (loss) per share - diluted
 
$
(0.14
)
 
$
0.35

 
$
(0.42
)
 
$
0.36

 
 
 
 
 
 
 
 
 
Weighted average shares - basic
 
25,112

 
24,545

 
24,859

 
24,334

Weighted average shares - diluted
 
25,112

 
25,729

 
24,859

 
25,437


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 STOCKHOLDERS' EQUITY
(Unaudited)

 
 
Red Lion Hotels Corporation Stockholders' Equity
 
 
 
 
 
 
Common Stock
 
Retained
Earnings (Accumulated Deficit)
 
RLH Corporation Total Equity
 
Equity Attributable to Noncontrolling Interest
 
 
 
 
Shares
 
Amount
 
Additional
Paid-In Capital
 
 
 
 
Total
Equity
 
 
(In thousands, except share data)
Balances, January 1, 2018
23,651,212

 
$
237

 
$
178,028

 
$
(18,042
)
 
$
160,223

 
$
27,381

 
$
187,604

 
Net income (loss)

 

 

 
2,588

 
2,588

 
4,750

 
7,338

 
Cumulative effect of adopting ASC Topic 606

 

 

 
(427
)
 
(427
)
 

 
(427
)
 
Shared based payment activity
60,388

 

 
294

 

 
294

 

 
294

 
Vantage contingent consideration settled
414,000

 
4

 
(4
)
 

 

 

 

Balances, March 31, 2018
24,125,600

 
241

 
178,318

 
(15,881
)
 
162,678

 
32,131

 
194,809

 
Net income (loss)

 

 

 
(2,322
)
 
(2,322
)
 
659

 
(1,663
)
 
Shared based payment activity
120,918

 
1

 
1,004

 

 
1,005

 

 
1,005

 
Vantage contingent consideration settled

 

 
2,870

 

 
2,870

 

 
2,870

 
Distributions to noncontrolling interests

 

 

 

 

 
(4,081
)
 
(4,081
)
Balances, June 30, 2018
24,246,518

 
242

 
182,192

 
(18,203
)
 
164,231

 
28,709

 
192,940

 
Net income (loss)

 

 

 
8,943

 
8,943

 
8,670

 
17,613

 
Shared based payment activity
28,080

 

 
1,219

 

 
1,219

 

 
1,219

 
Distributions to noncontrolling interests

 

 

 

 

 
(16,891
)
 
(16,891
)
Balances, September 30, 2018
24,274,598

 
242

 
183,411


(9,260
)
 
174,393

 
20,488

 
194,881

 
Net income (loss)

 

 

 
(7,252
)
 
(7,252
)
 
(950
)
 
(8,202
)
 
Shared based payment activity
19,560

 

 
1,018

 

 
1,018

 

 
1,018

 
Vantage contingent consideration settled
276,000

 
4

 
4

 

 
8

 

 
8

 
Buyout of noncontrolling interest

 

 
(2,415
)
 

 
(2,415
)
 
2,111

 
(304
)
 
Distributions to noncontrolling interests

 

 

 

 

 
(485
)
 
(485
)
Balances, December 31, 2018
24,570,158

 
246

 
182,018

 
(16,512
)
 
165,752

 
21,164

 
186,916

 
Net income (loss)

 

 

 
(4,110
)
 
(4,110
)
 
(286
)
 
(4,396
)
 
Shared based payment activity
56,301

 
1

 
685

 

 
686

 

 
686

 
Distributions to noncontrolling interests

 

 

 

 

 
(7,431
)
 
(7,431
)
Balances, March 31, 2019
24,626,459

 
247

 
182,703

 
(20,622
)
 
162,328

 
13,447

 
175,775

 
Net income (loss)

 

 

 
(2,834
)
 
(2,834
)
 
(774
)
 
(3,608
)
 
Shared based payment activity
449,453

 
4

 
(1,034
)
 

 
(1,030
)
 

 
(1,030
)
Balances, June 30, 2019
25,075,912

 
251

 
181,669

 
(23,456
)
 
158,464

 
12,673

 
171,137

 
Net income (loss)

 

 

 
(3,467
)
 
(3,467
)
 
(2,980
)
 
(6,447
)
 
Shared based payment activity
42,600

 
1

 
1,054

 

 
1,055

 

 
1,055

Balances, September 30, 2019
25,118,512

 
$
252

 
$
182,723

 
$
(26,923
)
 
$
156,052

 
$
9,693

 
$
165,745


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


5

Table of Contents

RED LION HOTELS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Nine Months Ended
 
 
September 30,
 
 
2019
 
2018
 
 
(In thousands)
Operating activities:
 
 
 
 
Net income (loss)
 
$
(14,451
)
 
$
23,288

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
11,192

 
12,714

Noncash PIK interest and amortization of debt issuance costs
 
929

 
892

Amortization of key money and contract costs
 
997

 
535

Amortization of contract liabilities
 
(994
)
 
(563
)
Loss (gain) on asset dispositions, net
 
45

 
(42,094
)
Noncash loss on early retirement of debt
 
67

 
794

Asset impairment
 
5,382

 
7,100

Deferred income taxes
 
445

 
(1,445
)
Stock-based compensation expense
 
2,503

 
2,896

Provision for doubtful accounts
 
1,780

 
651

Fair value adjustments to contingent consideration
 

 
581

Change in operating assets and liabilities, net of business acquired:
 
 
 
 
Accounts receivable
 
(2,148
)
 
(7,293
)
Notes receivable
 
(16
)
 
(7
)
Key money disbursements
 
(665
)
 
(5,420
)
Other current assets
 
1,014

 
(1,740
)
Accounts payable
 
45

 
1,405

Other accrued liabilities
 
(1,170
)
 
79

Net cash provided by (used in) operating activities
 
4,955

 
(7,627
)
Investing activities:
 
 
 
 
Capital expenditures
 
(4,104
)
 
(6,190
)
Acquisition of Knights Inn
 

 
(26,888
)
Net proceeds from disposition of property and equipment
 

 
113,838

Collection of notes receivable
 
262

 

Advances on notes receivable
 
(90
)
 
(537
)
Net cash provided by (used in) investing activities
 
(3,932
)
 
80,223

Financing activities:
 
 
 
 
Borrowings on long-term debt, net of discounts
 
32,935

 
30,000

Repayment of long-term debt and finance leases
 
(22,510
)
 
(107,899
)
Proceeds from line of credit borrowing
 

 
10,000

Debt issuance costs
 
(692
)
 
(1,317
)
Distributions to noncontrolling interest
 
(7,430
)
 
(20,972
)
Contingent consideration paid for Vantage Hospitality acquisition
 

 
(4,000
)
Stock-based compensation awards canceled to settle employee tax withholding
 
(2,135
)
 
(615
)
Stock option and stock purchase plan issuances, net and other
 
217

 
238

Net cash provided by (used in) financing activities
 
385

 
(94,565
)
 
 
 
 
 
Change in cash, cash equivalents and restricted cash:
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
 
1,408

 
(21,969
)
Cash, cash equivalents and restricted cash at beginning of period
 
19,789

 
44,858

Cash, cash equivalents and restricted cash at end of period
 
$
21,197

 
$
22,889


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


6

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 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, Knights Inn, and Country Hearth Inns & Suites.

A summary of our properties as of September 30, 2019, including the approximate number of available rooms, is provided below:
 
 
Upscale Service Brand ("USB")
 
Select Service Brand ("SSB")
 
Total
 
 
Hotels
 
Total Available Rooms
 
Hotels
 
Total Available Rooms
 
Hotels
 
Total Available Rooms
Beginning quantity, January 1, 2019
 
112

 
15,900

 
1,215

 
69,800

 
1,327

 
85,700

Newly opened / acquired properties
 
7

 
600

 
28

 
1,400

 
35

 
2,000

Change in brand
 
(1
)
 
(100
)
 
1

 
100

 

 

Terminated properties
 
(17
)
 
(1,900
)
 
(159
)
 
(10,100
)
 
(176
)
 
(12,000
)
Ending quantity, September 30, 2019
 
101

 
14,500

 
1,085

 
61,200

 
1,186

 
75,700



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, 2018 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, 2018, filed with the SEC in our annual report on Form 10-K on March 8, 2019.

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 Sheets, the Condensed Consolidated Statements of Comprehensive Income (Loss), the Condensed Consolidated Statements of Stockholders' Equity, and the Condensed Consolidated Statements of Cash Flows. 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.

Leases

We determine if an arrangement is a lease or contains a lease at inception. If an arrangement is a lease or contains a lease, we then determine whether the lease meets the criteria of a finance lease or an operating lease. Finance leases are included in Property and equipment, net, Other accrued liabilities, and Deferred income and other long-term liabilities in our Condensed Consolidated Balance Sheets. Operating leases are included in Operating lease right-of-use assets, Operating lease liabilities, due within one year, and Operating lease liabilities, due after one year, in our Condensed Consolidated Balance Sheets. We reassess if an arrangement is or contains a lease upon modification of the arrangement.

At the commencement date of a lease, we recognize a lease liability for contractual fixed lease payments and a corresponding right-of-use asset representing our right to use the underlying asset during the lease term. The lease liability is measured initially as the present value of the contractual fixed lease payments during the lease term. The lease term additionally includes renewal periods only if it is reasonably certain that we will exercise the options. Contractual fixed lease payments are discounted at the rate implicit in the lease when readily determinable. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date. For the adoption of Accounting Standards Update ("ASU") 2016-02, we measured our lease liabilities using our incremental borrowing rate as of January 1, 2019. Additionally, we

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elected not to recognize leases with lease terms of 12 months or less at the commencement date in our Condensed Consolidated Balance Sheets. The right-of-use asset is recognized at the amount of the lease liability with certain adjustments, if applicable. These adjustments include lease incentives, prepaid rent, and initial direct costs.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments, as amended by multiple subsequent ASUs, which will change how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU will replace the current "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For trade and other receivables, held to maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. In October 2019, an update was issued to the standard that deferred the effective date of the guidance to the first quarter of 2023 for smaller reporting companies such as us. We are currently evaluating the effects of this ASU on our financial statements, and such effects have not yet been determined.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which provides modifications to the disclosure requirements over fair value measurements. The ASU is effective in the first quarter of 2020, with early adoption permitted. We are currently evaluating the effects of this ASU on our financial statements, and such effects have not yet been determined.

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.

New Accounting Pronouncements Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which we adopted on January 1, 2019. The new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification effecting the pattern of expense recognition in the income statement. Upon adoption, we applied the package of practical expedients included therein, which allows us to carry forward our historical assessments of whether contracts are leases or contain leases, the lease classification of each existing lease, and recognition of initial direct costs. The standard was adopted using the modified retrospective transition method and we did not apply the standard to the comparative periods presented in the year of adoption.

Due to the existence of certain operating lease obligations as of January 1, 2019, we recognized $51.1 million of ROU assets and corresponding lease liabilities of $52.2 million, with reductions of other accrued liabilities and deferred income and other long-term liabilities of $1.1 million. However, there was no impact to accumulated deficit and the future recognition of lease related expenses will not differ from the previous methodology in the Condensed Consolidated Statements of Comprehensive Income (Loss) for leases that existed at the adoption date.

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. We allocate selling, general, administrative and other expenses to our operating segments. All balances have been presented after the elimination of inter-segment and intra-segment revenues and expenses.


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Selected financial information is provided below (in thousands):
Three Months Ended September 30, 2019
 
Franchised Hotels
 
Company Operated Hotels
 
Other
 
Total
Revenue
 
$
16,225

 
$
16,633

 
$
5

 
$
32,863

Operating expenses:
 
 
 
 
 
 
 
 
Segment and other operating expenses
 
10,758

 
13,007

 
4,184

 
27,949

Depreciation and amortization
 
1,015

 
1,777

 
844

 
3,636

Asset impairment
 

 
5,382

 

 
5,382

Loss (gain) on asset dispositions, net
 

 
2

 
(1
)
 
1

Transaction and integration costs
 
(6
)
 
164

 
43

 
201

Operating income (loss)
 
$
4,458

 
$
(3,699
)
 
$
(5,065
)

$
(4,306
)

Three Months Ended September 30, 2018
 
Franchised Hotels
 
Company Operated Hotels
 
Other
 
Total
Revenue
 
$
15,137

 
$
20,857

 
$
6

 
$
36,000

Operating expenses:
 
 
 
 
 
 
 
 
Segment and other operating expenses
 
9,220

 
16,999

 
5,397

 
31,616

Depreciation and amortization
 
986

 
2,170

 
465

 
3,621

Asset impairment
 

 
7,100

 

 
7,100

Loss (gain) on asset dispositions, net
 

 
(26,143
)
 
(53
)
 
(26,196
)
Transaction and integration costs
 
95

 

 

 
95

Operating income (loss)
 
$
4,836

 
$
20,731

 
$
(5,803
)

$
19,764



Nine Months Ended September 30, 2019
 
Franchised Hotels
 
Company Operated Hotels
 
Other
 
Total
Revenue
 
$
43,920

 
$
43,839

 
$
13

 
$
87,772

Operating expenses:
 
 
 
 
 
 
 
 
Segment and other operating expenses
 
30,138

 
38,331

 
12,290

 
80,759

Depreciation and amortization
 
3,039

 
5,650

 
2,503

 
11,192

Asset impairment
 

 
5,382

 

 
5,382

Loss (gain) on asset dispositions, net
 
(1
)
 
45

 
1

 
45

Transaction and integration costs
 
90

 
164

 
182

 
436

Operating income (loss)
 
$
10,654

 
$
(5,733
)
 
$
(14,963
)
 
$
(10,042
)

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

 
$
68,758

 
$
32

 
$
107,651

Operating expenses:
 
 
 
 
 
 
 
 
Segment and other operating expenses
 
26,486

 
57,667

 
14,587

 
98,740

Depreciation and amortization
 
3,044

 
8,328

 
1,342

 
12,714

Asset impairment
 

 
7,100

 

 
7,100

Loss (gain) on asset dispositions, net
 

 
(41,994
)
 
(100
)
 
(42,094
)
Transaction and integration costs
 
2,196

 

 

 
2,196

Operating income (loss)
 
$
7,135

 
$
37,657

 
$
(15,797
)
 
$
28,995




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4.
Variable Interest Entities

Our joint venture entities have been determined to be variable interest entities ("VIEs") because our voting rights are not proportional to our financial interest and substantially all of each joint 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 our joint venture partners, which do 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 equity interest and management fees. As a result, we consolidate the assets, liabilities, and results of operations of (1) RL Venture LLC ("RL Venture"), (2) RLS Atla Venture LLC ("RLS Atla Venture"), and (3) RLS DC Venture LLC ("RLS DC Venture"). The equity interests owned by our joint venture partners are reflected as a noncontrolling interest in the condensed consolidated financial statements.

In October 2018, we purchased the remaining 27% ownership interest in RLS Balt Venture LLC ("RLS Balt Venture") from our joint venture partner, which dissolved the joint venture relationship, thus making the entity a wholly owned subsidiary and no longer a variable interest entity.

The following table includes the ownership percentages for each of our joint ventures as of September 30, 2019 and December 31, 2018:
 
 
RLH Corporation
 
Joint Venture Partner
RL Venture
 
55
%
 
45
%
RLS Atla Venture
 
55
%
 
45
%
RLS DC Venture
 
55
%
 
45
%


There were no cash contributions or distributions by partners to any of the joint venture entities during the three and nine months ended September 30, 2019 or 2018 except as otherwise described below.

RL Venture

In February 2018, five of the RL Venture properties were sold for an aggregate sales price of $47.2 million. In April 2018, one RL Venture property sold for $5.5 million, in May 2018, one RL Venture property sold for $9.3 million, and in July 2018 two additional RL Venture properties sold for $54.5 million. As of September 30, 2019, RL Venture has two remaining properties.

In March 2019, secured loans with an aggregate principal of $16.6 million were entered into for the two remaining properties. Shortly thereafter the net loan proceeds were distributed to us and our joint venture partner in accordance with our respective ownership percentages. Cash distributions may also be made periodically based on calculated distributable income. During the nine months ended September 30, 2019 and 2018, cash distributions totaled $16.5 million and $46.5 million, of which RLH Corporation received $9.1 million and $25.6 million, respectively.

RLS Atla Venture

In March 2019, $2.8 million of cash previously contributed to RLS Atla Venture by RLH Corporation was classified as preferred capital and will be repaid only when the Atlanta hotel property is sold or when RLS Atla Venture is liquidated. Upon such event, RLH Corporation will receive the $2.8 million plus a preferred return of 9%, compounded annually, prior to any liquidation proceeds being returned to members.

RLS DC Venture