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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 June 30, 2020
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. #425
Denver
Colorado
80202
(Address of Principal Executive Offices)
(Zip Code)

(509) 459-6100
Registrant's telephone number, including area code
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockRLHNew 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 August 3, 2020, there were 25,401,421 shares of the registrant’s common stock outstanding.



TABLE OF CONTENTS
 
Item No.DescriptionPage No.
PART I – FINANCIAL INFORMATION
Item 1
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Comprehensive 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


PART I – FINANCIAL INFORMATION
Item 1.Financial Statements

RED LION HOTELS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

June 30,
2020
December 31,
2019
 (In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents ($972 and $1,819 attributable to VIEs)
$33,702  $29,497  
Restricted cash ($100 and $2,311 attributable to VIEs)
100  2,311  
Accounts receivable ($398 and $1,033 attributable to VIEs), net of an allowance for doubtful accounts of $8,611 and $4,589, respectively
11,463  15,143  
Notes receivable, net286  5,709  
Other current assets ($130 and $311 attributable to VIEs)
4,255  5,849  
Total current assets49,806  58,509  
Property and equipment, net ($11,296 and $29,848 attributable to VIEs)
34,492  68,668  
Operating lease right-of-use assets ($ and $10,810 attributable to VIEs)
5,337  48,283  
Goodwill18,595  18,595  
Intangible assets, net47,081  48,612  
Other assets, net ($ and $703 attributable to VIEs)
2,635  3,851  
Total assets$157,946  $246,518  
LIABILITIES
Current liabilities:
Accounts payable ($134 and $589 attributable to VIEs)
$4,093  $5,510  
Accrued payroll and related benefits ($90 and $349 attributable to VIEs)
1,031  2,709  
Other accrued liabilities ($182 and $455 attributable to VIEs)
4,900  5,469  
Long-term debt, due within one year ($5,582 and $16,984 attributable to VIEs)
5,582  16,984  
Operating lease liabilities, due within one year ($ and $966 attributable to VIEs)
1,520  4,809  
Total current liabilities17,126  35,481  
Long-term debt, due after one year, net of debt issuance costs ($ and $5,576 attributable to VIEs)
  5,576  
Line of credit, due after one year  10,000  
Operating lease liabilities, due after one year ($ and $11,938 attributable to VIEs)
5,059  46,592  
Deferred income and other long-term liabilities ($ and $28 attributable to VIEs)
842  1,105  
Deferred income taxes823  743  
Total liabilities23,850  99,497  
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; 25,342,104 and 25,148,005 shares issued and outstanding
254  251  
Additional paid-in capital, common stock179,770  181,608  
Accumulated deficit(48,936) (36,875) 
Total RLH Corporation stockholders' equity131,088  144,984  
Noncontrolling interest3,008  2,037  
Total stockholders' equity134,096  147,021  
Total liabilities and stockholders’ equity$157,946  $246,518  
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


RED LION HOTELS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
 Three Months EndedSix Months Ended
June 30,June 30,
 2020201920202019
 (In thousands, except per share data)
Revenue:
Royalty$3,584  $5,867  $7,941  $11,607  
Marketing, reservations and reimbursables4,473  7,603  10,278  14,332  
Other franchise701  1,214  1,475  1,756  
Company operated hotels1,471  14,236  7,800  27,206  
Other  5    8  
Total revenues10,229  28,925  27,494  54,909  
Operating expenses:
Selling, general, administrative and other expenses4,770  6,660  21,035  14,051  
Company operated hotels2,139  12,532  8,817  24,077  
Marketing, reservations and reimbursables3,791  7,847  9,549  15,008  
Depreciation and amortization2,410  4,109  4,947  7,556  
Asset impairment    1,760    
Loss (gain) on asset dispositions, net331  38  (7,561) 44  
Transaction and integration costs1,002  173  1,400  235  
Total operating expenses14,443  31,359  39,947  60,971  
Operating loss(4,214) (2,434) (12,453) (6,062) 
Other income (expense):
Interest expense(49) (1,109) (555) (1,991) 
Loss on early retirement of debt  (164) (1,309) (164) 
Other income, net199  44  247  77  
Total other income (expense)150  (1,229) (1,617) (2,078) 
Loss before taxes(4,064) (3,663) (14,070) (8,140) 
Income tax expense (benefit)148  108  (604) 190  
Net loss(4,212) (3,771) (13,466) (8,330) 
Net loss attributable to noncontrolling interest250  774  1,405  1,060  
Net loss and comprehensive loss attributable to RLH Corporation$(3,962) $(2,997) $(12,061) $(7,270) 
Loss per share - basic$(0.16) $(0.12) $(0.48) $(0.29) 
Loss per share - diluted$(0.16) $(0.12) $(0.48) $(0.29) 
Weighted average shares - basic25,335  24,856  25,267  24,730  
Weighted average shares - diluted25,335  24,856  25,267  24,730  

The accompanying notes are an integral part of these condensed consolidated financial statements.
4


RED LION HOTELS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)

Red Lion Hotels Corporation Stockholders' Equity
Common StockRetained
Earnings (Accumulated Deficit)
RLH Corporation Total EquityEquity Attributable to Noncontrolling Interest
SharesAmountAdditional
Paid-In Capital
Total
Equity
(In thousands, except share data)
Balances, December 31, 201824,570,158  $246  $182,018  $(17,846) $164,418  $21,164  $185,582  
Net income (loss)—  —  —  (4,273) (4,273) (286) (4,559) 
Shared based payment activity56,301  1  685  —  686  —  686  
Distributions to noncontrolling interests—  —  —  —  —  (7,431) (7,431) 
Balances, March 31, 201924,626,459  247  182,703  (22,119) 160,831  13,447  174,278  
Net income (loss)—  —  —  (2,997) (2,997) (774) (3,771) 
Shared based payment activity449,453  4  (1,034) —  (1,030) —  (1,030) 
Balances, June 30, 201925,075,912  251  181,669  (25,116) 156,804  12,673  169,477  
Net income (loss)—  —  —  (3,672) (3,672) (2,980) (6,652) 
Shared based payment activity42,600  1  1,054  —  1,055  —  1,055  
Balances, September 30, 201925,118,512  252  182,723  (28,788) 154,187  9,693  163,880  
Net income (loss)—  —  —  (8,087) (8,087) 2,096  (5,991) 
Shared based payment activity29,493  (1) (739) —  (740) —  (740) 
Reclassification of noncontrolling interest—  —  (376) —  (376) 376    
Distributions to noncontrolling interests—  —  —  —  —  (10,128) (10,128) 
Balances, December 31, 201925,148,005  251  181,608  (36,875) 144,984  2,037  147,021  
Net income (loss)—  —  —  (8,099) (8,099) (1,155) (9,254) 
Shared based payment activity60,978  2  336  —  338  —  338  
Distributions to noncontrolling interests—  —  (2,376) —  (2,376) 2,376    
Balances, March 31, 202025,208,983  253  179,568  (44,974) 134,847  3,258  138,105  
Net income (loss)—  —  —  (3,962) (3,962) (250) (4,212) 
Shared based payment activity133,121  1  202  —  203  —  203  
Balances, June 30, 202025,342,104  $254  $179,770  $(48,936) $131,088  $3,008  $134,096  

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

5


RED LION HOTELS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months Ended
June 30,
 20202019
 (In thousands)
Operating activities:
Net loss$(13,466) $(8,330) 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization4,947  7,556  
Noncash PIK interest and amortization of debt issuance costs187  249  
Amortization of key money and contract costs514  459  
Amortization of contract liabilities(301) (534) 
Loss (gain) on asset dispositions, net(7,561) 44  
Noncash loss on early retirement of debt750  67  
Asset impairment1,760    
Deferred income taxes80  98  
Stock-based compensation expense575  1,562  
Provision for doubtful accounts10,328  472  
Change in operating assets and liabilities:
Accounts receivable(1,085) (820) 
Key money disbursements(329) (535) 
Other current assets1,299  839  
Accounts payable(1,483) 2,827  
Other accrued liabilities(1,984) (899) 
Net cash provided by (used in) operating activities(5,769) 3,055  
Investing activities:
Capital expenditures(1,374) (2,843) 
Net proceeds from disposition of property and equipment36,896    
Collection of notes receivable  242  
Advances on notes receivable  (90) 
Net cash provided by (used in) investing activities35,522  (2,691) 
Financing activities:
Borrowings on long-term debt, net of discounts4,234  32,935  
Repayment of long-term debt and finance leases(21,958) (20,283) 
Repayment of line of credit borrowing(10,000)   
Debt issuance costs  (542) 
Distributions to noncontrolling interest  (7,431) 
Stock-based compensation awards canceled to settle employee tax withholding(81) (2,131) 
Stock option and stock purchase plan issuances, net and other46  105  
Net cash provided by (used in) financing activities(27,759) 2,653  
Change in cash, cash equivalents and restricted cash:
Net increase (decrease) in cash, cash equivalents and restricted cash1,994  3,017  
Cash, cash equivalents and restricted cash at beginning of period31,808  19,789  
Cash, cash equivalents and restricted cash at end of period$33,802  $22,806  

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

6


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, Americas Best Value Inn, Canadas Best Value Inn, Signature and Signature Inn, Knights Inn, and Country Hearth Inns & Suites.

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, 2019 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, 2019, filed with the SEC in our annual report on Form 10-K on February 27, 2020.

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 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.

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 December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which amends the existing guidance related to the accounting for income taxes. The ASU eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The ASU is effective the first quarter of 2021, 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.

7


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.

Selected financial information is provided below (in thousands):
Three Months Ended June 30, 2020Franchised HotelsCompany Operated HotelsOtherTotal
Revenue$8,758  $1,471  $  $10,229  
Operating expenses:
Segment and other operating expenses5,647  2,426  2,627  10,700  
Depreciation and amortization894  423  1,093  2,410  
Loss (gain) on asset dispositions, net  111  220  331  
Transaction and integration costs  21  981  1,002  
Operating income (loss)$2,217  $(1,510) $(4,921) $(4,214) 

Three Months Ended June 30, 2019Franchised HotelsCompany Operated HotelsOtherTotal
Revenue$14,684  $14,236  $5  $28,925  
Operating expenses:
Segment and other operating expenses10,084  12,863  4,092  27,039  
Depreciation and amortization1,110  1,917  1,082  4,109  
Loss (gain) on asset dispositions, net(1) 37  2  38  
Transaction and integration costs34    139  173  
Operating income (loss)$3,457  $(581) $(5,310) $(2,434) 

Six Months Ended June 30, 2020Franchised HotelsCompany Operated HotelsOtherTotal
Revenue$19,694  $7,800  $  $27,494  
Operating expenses:
Segment and other operating expenses23,187  9,456  6,758  39,401  
Depreciation and amortization1,776  1,289  1,882  4,947  
Asset impairment  1,760    1,760  
Loss (gain) on asset dispositions, net  (7,781) 220  (7,561) 
Transaction and integration costs  53  1,347  1,400  
Operating income (loss)$(5,269) $3,023  $(10,207) $(12,453) 

8


Six Months Ended June 30, 2019Franchised HotelsCompany Operated HotelsOtherTotal
Revenue$27,695  $27,206  $8  $54,909  
Operating expenses:
Segment and other operating expenses19,706  25,324  8,106  53,136  
Depreciation and amortization2,024  3,873  1,659