RLH CORPORATION ANNOUNCES ORGANIZATIONAL CHANGES; IMPLEMENTS REDUCTION IN FORCE AND OTHER COST SAVINGS; PROVIDES OPERATIONAL UPDATE RELATED TO COVID-19
Organizational Changes & Cost Reduction Measures
The Company announced the following organizational changes:
Nate Troupwas promoted to Chief Financial Officer effective April 1, 2020; previously Mr. Troupwas the Company’s Chief Accounting Officer.
Paul Moernerwas promoted to Chief Accounting Officer; previously Mr. Moernerwas Senior Director, Technical Accounting and Reporting.
Julie Shiflett, existing Chief Financial Officer is leaving the Company to pursue other interests.
- The Board of Directors has also suspended the Company’s search for a permanent Chief Executive Officer at this time.
John Russell, as interim CEO, will continue to lead the organization through this economic challenge.
The Company has implemented the following additional measures as part of an accelerated cost-cutting program:
- A reduction in force. RLHC will be reducing its corporate workforce by roughly 40% to approximately 100 full-time equivalent employees. After this reduction, the Company has reduced 48% of the corporate workforce on a quarter-to-date basis. The workforce reduction was part of the cost cutting measures begun in late 2019; the Board elected to accelerate these measures in response to the impact of the COVID-19 pandemic. Severance expense of approximately
$0.6 millionwill be recorded related to this reduction in force.
- Company-wide compensation reductions. Virtually all associates will be taking salary reductions.
John Russell, interim CEO will be taking a 25% reduction in compensation. Most remaining staff from EVP to more junior staff levels will be subject to compensation cuts between 5% and 25%. The Board has also agreed to a 25% reduction in their base retainer for the second quarter.
- The consolidation of its office space. The Company will be closing its Spokane Office and has successfully sub-leased its surplus office space in Denver. Cost savings related to the reduction of office space are an estimated
$0.3Mfor the remainder of 2020 and $0.5 millionon an annualized basis.
- A reduction in capital spend. The Company is reducing its 2020 capital expenditures to include only essential projects for an estimated savings of
$2.9 million. Furthermore, additional key money commitments for franchisees will be reduced during this challenging economic time.
Operational Update Related to COVID-19
“The safety of our guests and team members around the country is a top priority,” said
Measures taken to support our franchisees include:
- Royalty and Marketing Fee deferral program for all brands
- Temporary fee reductions for review responses, guest relations fees, and certain other fees
- Delay capital intensive brand standards
- Providing information on new legislative relief that may be available to them
The COVID-19 pandemic has been extremely punitive to travel related businesses across the nation, significantly affecting the cash flows and related valuations of lodging properties. This industry-wide change in values has impacted RLHC’s expected value of collateral supporting certain receivables from the
Suspending New Contract Signings Guidance
Prior to the escalation of the pandemic, the Company was seeing a resurgence in interest for its franchise agreements that has slowed in the last several weeks. Given the lack of visibility on how long travel restrictions and social distancing may remain in place, which is having a disproportionate unfavorable impact on the lodging sector, the Company has decided to suspend its guidance on new location contract signings.
Conference Call and Investor Presentation Information
This conference call will also be webcast live on www.rlhco.com in the Investor Relations section of the website. To listen to the live call, please go to the
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Forward Looking Statements
This press release contains forward-looking statements within the meaning of federal securities law, including statements concerning plans, objectives, goals, strategies, projections of future events or performance and underlying assumptions (many of which are based, in turn, upon further assumptions), and including statements concerning operational and financial impacts of the COVID-19 pandemic. The forward-looking statements in this press release are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Such risks and uncertainties include, among others, risks associated with pandemics, contagious diseases or health epidemics, including the effects of the COVID-19 pandemic; restructuring or organizational changes; our asset light model; relationships with our franchisees and properties; competitive conditions in the lodging industry; economic cycles and general economic conditions; changes in future demand and supply for hotel rooms; international conflicts and conditions; impact of government regulations; ability to obtain financing; changes in energy, healthcare, insurance and other operating expenses; ability to sell non-core assets; dependency upon the ability and experience of executive officers and ability to retain or replace such officers as well as other risks and uncertainties discussed in the Company's annual report on Form 10-K for the year ended
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Source: RLHC (Red Lion Hotels Corporation