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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 September 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

Securities registered pursuant to Section 12(b) of the Act:
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 every Interactive Data File required to be submitted 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 such files).     Yes    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer," "accelerated filer,” "smaller reporting company" and "emerging growth 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 2, 2020, there were 25,464,735 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)

September 30,
2020
December 31,
2019
 (In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents ($1,190 and $1,819 attributable to VIEs)
$33,974 $29,497 
Restricted cash ($100 and $2,311 attributable to VIEs)
100 2,311 
Accounts receivable ($184 and $1,033 attributable to VIEs), net of an allowance for doubtful accounts of $9,023 and $4,589, respectively
10,772 15,143 
Notes receivable, net424 5,709 
Other current assets ($181 and $311 attributable to VIEs)
4,258 5,849 
Total current assets49,528 58,509 
Property and equipment, net ($11,079 and $29,848 attributable to VIEs)
32,422 68,668 
Operating lease right-of-use assets ($ and $10,810 attributable to VIEs)
5,000 48,283 
Goodwill18,595 18,595 
Intangible assets, net46,319 48,612 
Other assets, net ($ and $703 attributable to VIEs)
2,762 3,851 
Total assets$154,626 $246,518 
LIABILITIES
Current liabilities:
Accounts payable ($186 and $589 attributable to VIEs)
$3,632 $5,510 
Accrued payroll and related benefits ($91 and $349 attributable to VIEs)
1,103 2,709 
Other accrued liabilities ($223 and $455 attributable to VIEs)
5,309 5,469 
Long-term debt, due within one year ($5,588 and $16,984 attributable to VIEs)
5,588 16,984 
Operating lease liabilities, due within one year ($ and $966 attributable to VIEs)
1,521 4,809 
Total current liabilities17,153 35,481 
Long-term debt, due after one year, net of debt issuance costs ($ 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 $11,938 attributable to VIEs)
4,770 46,592 
Deferred income and other long-term liabilities ($ and $28 attributable to VIEs)
762 1,105 
Deferred income taxes830 743 
Total liabilities23,515 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; 25,402,241 and 25,148,005 shares issued and outstanding
255 251 
Additional paid-in capital, common stock180,069 181,608 
Accumulated deficit(52,073)(36,875)
Total RLH Corporation stockholders' equity128,251 144,984 
Noncontrolling interest2,860 2,037 
Total stockholders' equity131,111 147,021 
Total liabilities and stockholders’ equity$154,626 $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 EndedNine Months Ended
September 30,September 30,
 2020201920202019
 (In thousands, except per share data)
Revenue:
Royalty$4,058 $5,909 $11,999 $17,516 
Marketing, reservations and reimbursables5,271 8,300 15,549 22,632 
Other franchise692 2,016 2,167 3,772 
Company operated hotels3,262 16,633 11,062 43,839 
Other 5  13 
Total revenues13,283 32,863 40,777 87,772 
Operating expenses:
Selling, general, administrative and other expenses4,748 8,401 25,783 22,452 
Company operated hotels2,961 12,673 11,778 36,750 
Marketing, reservations and reimbursables4,594 7,080 14,143 22,088 
Depreciation and amortization2,509 3,636 7,456 11,192 
Asset impairment729 5,382 2,489 5,382 
Loss (gain) on asset dispositions, net107 1 (7,454)45 
Transaction and integration costs860 201 2,260 436 
Total operating expenses16,508 37,374 56,455 98,345 
Operating loss(3,225)(4,511)(15,678)(10,573)
Other income (expense):
Interest expense(44)(1,699)(599)(3,690)
Loss on early retirement of debt  (1,309)(164)
Other income, net2 44 249 121 
Total other income (expense)(42)(1,655)(1,659)(3,733)
Loss before taxes(3,267)(6,166)(17,337)(14,306)
Income tax expense (benefit)18 486 (586)676 
Net loss(3,285)(6,652)(16,751)(14,982)
Net loss attributable to noncontrolling interest148 2,980 1,553 4,040 
Net loss and comprehensive loss attributable to RLH Corporation$(3,137)$(3,672)$(15,198)$(10,942)
Loss per share - basic$(0.12)$(0.15)$(0.60)$(0.44)
Loss per share - diluted$(0.12)$(0.15)$(0.60)$(0.44)
Weighted average shares - basic25,397 25,112 25,311 24,859 
Weighted average shares - diluted25,397 25,112 25,311 24,859 

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 
Net income (loss)— — — (3,137)(3,137)(148)(3,285)
Shared based payment activity60,137 1 299 — 300 — 300 
Balances, September 30, 202025,402,241 $255 $180,069 $(52,073)$128,251 $2,860 $131,111 

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)
 Nine Months Ended
September 30,
 20202019
 (In thousands)
Operating activities:
Net loss$(16,751)$(14,982)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization7,456 11,192 
Noncash PIK interest and amortization of debt issuance costs194 929 
Amortization of key money and contract costs694 997 
Amortization of contract liabilities(458)(994)
Loss (gain) on asset dispositions, net(7,454)45 
Loss on early retirement of debt1,309 67 
Asset impairment2,489 5,382 
Deferred income taxes87 445 
Stock-based compensation expense840 2,503 
Provision for doubtful accounts10,712 1,780 
Change in operating assets and liabilities:
Accounts receivable(1,050)(2,148)
Key money disbursements(429)(665)
Other current assets1,232 998 
Accounts payable(2,018)45 
Other accrued liabilities(1,420)(639)
Net cash provided by (used in) operating activities(4,567)4,955 
Investing activities:
Capital expenditures(1,637)(4,104)
Net proceeds from disposition of property and equipment36,896  
Collection of notes receivable12 262 
Advances on notes receivable(150)(90)
Net cash provided by (used in) investing activities35,121 (3,932)
Financing activities:
Borrowings on long-term debt, net of discounts4,234 32,935 
Repayment of long-term debt and finance leases(21,964)(22,510)
Repayment of line of credit borrowing(10,000) 
Prepayment penalty on long-term debt(559) 
Debt issuance costs (692)
Distributions to noncontrolling interest (7,430)
Stock-based compensation awards canceled to settle employee tax withholding(81)(2,135)
Stock option and stock purchase plan issuances, net and other82 217 
Net cash provided by (used in) financing activities(28,288)385 
Change in cash, cash equivalents and restricted cash:
Net increase (decrease) in cash, cash equivalents and restricted cash2,266 1,408 
Cash, cash equivalents and restricted cash at beginning of period31,808 19,789 
Cash, cash equivalents and restricted cash at end of period$34,074 $21,197 

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, through its subsidiaries, in the franchising and ownership of hotels of its proprietary brands, including the following brands that are being actively sold in the United States and Canada: Hotel RL, Red Lion Hotels, Red Lion Inn & Suites, GuestHouse Extended Stay, Americas Best Value Inn, Canadas Best Value Inn, Signature and Signature Inn, and Knights Inn.

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 September 30, 2020Franchised HotelsCompany Operated HotelsOtherTotal
Revenue$10,021 $3,262 $ $13,283 
Operating expenses:
Segment and other operating expenses6,170 3,248 2,885 12,303 
Depreciation and amortization927 512 1,070 2,509 
Asset impairment 729  729 
Loss (gain) on asset dispositions, net 104 3 107 
Transaction and integration costs  860 860 
Operating income (loss)$2,924 $(1,331)$(4,818)$(3,225)

Three Months Ended September 30, 2019Franchised HotelsCompany Operated HotelsOtherTotal
Revenue$16,225 $16,633 $5 $32,863 
Operating expenses:
Segment and other operating expenses10,963 13,007 4,184 28,154 
Depreciation and amortization1,015 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)$4,253 $(3,699)$(5,065)$(4,511)

Nine Months Ended September 30, 2020Franchised HotelsCompany Operated HotelsOtherTotal
Revenue$29,715 $11,062 $ $40,777 
Operating expenses:
Segment and other operating expenses29,357 12,704 9,643 51,704 
Depreciation and amortization2,703 1,801 2,952 7,456 
Asset impairment 2,489  2,489 
Loss (gain) on asset dispositions, net (7,677)223 (7,454)
Transaction and integration costs 53 2,207 2,260 
Operating income (loss)$(2,345)$1,692 $(15,025)$(15,678)

8


Nine Months Ended September 30, 2019Franchised HotelsCompany Operated HotelsOtherTotal
Revenue$43,920 $43,839 $13 $87,772 
Operating expenses:
Segment and other operating expenses30,669 38,331 12,290 81,290 
Depreciation and amortization3,039 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 costs90 164 182 436 
Operating income (loss)$10,123 $(5,733)$(14,963)$(10,573)

The following table presents identifiable assets for our reportable segments (in thousands):

September 30,
2020
December 31,
2019
Franchised Hotels$79,905 $91,832 
Company Operated Hotels58,617 138,477 
Other16,104 16,209 
Total$154,626 $246,518 


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"). Subsequent to the hotel sales in the fourth quarter of 2019 and the first quarter of 2020 discussed further below, RLS Atla Venture and RLS DC Venture have had no additional financial statement activity and have no remaining asset or liability balances.

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, 2020 or 2019 except as otherwise described below.

RL Venture

For all periods presented, RLH Corporation owns 55% of RL Venture and our JV Partner owns 45%. In March 2019, secured loans with an aggregate principal of $16.6 million were entered into for two RL Venture properties, Hotel RL Salt Lake City and Hotel RL Olympia. Shortly thereafter the net loan proceeds were distributed to us and our joint venture partner in accordance with our respective ownership percentages. Accordingly, during the nine months ended September 30, 2019, cash distributions totaled $16.5 million, of which RLH Corporation received $9.1 million.

In December 2019, the Hotel RL Salt Lake City was sold for an aggregate sales price of $33.0 million. Proceeds from the sale were used to repay in full the secured loan entered into in 2019 for the Hotel RL Salt Lake City property. As of September 30, 2020, RL Venture has one remaining property, the Hotel RL Olympia, owned through RL Olympia, LLC. The equity interest owned by our JV Partner is reflected as a noncontrolling interest in the condensed consolidated financial statements.



9



RLS DC Venture

As of December 31, 2019, RLH Corporation owned 55% of RLS DC Venture and our Joint Venture Partner owned 45%. In May 2019, a secured loan with principal and accrued exit fee of $17.4 million was executed by RLS DC Venture. The net loan proceeds were used to pay off the previous debt with a principal balance of approximately $15.9 million. There were no cash distributions resulting from the refinancing. In February 2020, the Hotel RL in Washington DC, which was wholly-owned by RLS DC Venture, was sold for $16.4 million. Using proceeds from the sale, together with the release of $2.3 million in restricted cash held by CP Business Finance I, LP, RLS DC Venture repaid the remaining outstanding principal balance and accrued exit fee under the secured loan agreement. The $2.4 million balance remaining in non-controlling interest for the entity was reclassified to Additional paid-in capital on the Condensed Consolidated Balance Sheets as no remaining distributions to the joint venture partner are required.

RLS Atla Venture

In November 2019, RLH Atlanta LLC, which is wholly owned by RLS Atla Venture, sold the Red Lion Hotel Atlanta International Airport Hotel. Upon completion of the sale, no remaining distributions to our joint venture partner were required and the remaining noncontrolling interest for the entity was reclassified to Additional paid-in capital on the Condensed Consolidated Balance Sheets.

5.    Property and Equipment

Property and equipment is summarized as follows (in thousands):
September 30,
2020
December 31,
2019
Buildings and equipment$44,618 $101,619 
Furniture and fixtures5,034 12,407 
Landscaping and land improvements487 2,038 
50,139 116,064 
Less accumulated depreciation(25,289)(57,491)
24,850 58,573 
Land6,871 6,871 
Construction in progress701 3,224 
Property and equipment, net$32,422 $68,668 

A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the World Health Organization on March 11, 2020. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. The economic impact of the pandemic thus far has been extremely punitive to travel related businesses across the nation, significantly affecting the operating results of companies within the hospitality industry. In the first quarter of 2020, we considered the actual and anticipated economic impacts of the COVID-19 pandemic on our financial results to be an indicator that the carrying value of our long-lived assets might not be recoverable. Accordingly, we performed a test for recoverability using probability-weighted undiscounted cash flows on our long-lived assets as of March 31, 2020. Only the Red Lion Hotel Seattle Airport ("RLH Seattle"), one of our company operated hotel properties under a lease through February 2024, did not recover the carrying value of the long-lived asset group in the test for recoverability, due to the short useful life and lack of terminal value. After calculating the fair value of the RLH Seattle property long-lived asset group, we recognized an impairment loss of $1.8 million in the first quarter of 2020.

During the third quarter of 2020, we noted an additional indicator that the carrying value of our long-lived assets might not be recoverable at RLH Seattle as the impacts of COVID-19 on business travel have been worse than initially projected in the first quarter of 2020, particularly impacting this airport location. We performed an updated test for recoverability using probability-weighted cash flows on the long-lived assets of RLH Seattle as of September 30, 2020, noting they did not recover the carrying value of the long-lived asset group. After calculating the fair value of the property's asset group, we recognized an additional impairment loss of $0.7 million in the third quarter of 2020.

10


Fair values for the RLH Seattle property were determined based on a discounted cash flow analysis, which is a Level 3 fair value measurement. The impairment losses were allocated to the assets within the long-lived asset group on a pro rata basis, with $2.1 million applied against the hotel building leasehold interest and other equipment, included within Property and equipment, net and $0.4 million applied against the Operating lease right-of-use asset on the Condensed Consolidated Balance Sheets. There were no other impairments of our long-lived assets in 2020.

During the three months ended September 30, 2019, we entered into individual non-binding sales agreements with third parties for four of our company operated hotels. Due to the potential for disposition within 12 months, we performed a test for recoverability using probability-weighted undiscounted cash flows on each of these four properties, noting only our Hotel RL Washington DC joint venture property did not recover the carrying value of the long-lived asset group. After calculating the fair value of the Hotel RL Washington DC joint venture property long-lived asset group, we recognized an impairment loss of $5.4 million. The fair value was determined based on the contractual selling price less expected costs to sell, which is a Level 3 fair value measurement. The impairment loss was allocated to the assets within the long-lived asset group on a pro rata basis, with $3.4 million applied against the hotel building, included within Property and equipment, net and $2.0 million applied against the Operating lease right-of-use asset on the Condensed Consolidated Balance Sheets. There were no impairments at the other three properties.

In February 2020, we sold the Hotel RL Washington DC joint venture hotel property, and our leasehold interest in the Red Lion Anaheim for a combined net gain of $7.9 million. There were no hotels sold during the three months ended September 30, 2020, or the three and nine months ended September 30, 2019.

6.     Goodwill and Intangible Assets

Interim Impairment Assessment

In the first quarter of 2020, we considered the actual and anticipated economic impacts of the COVID-19 pandemic on our financial results to be an indicator that the fair value of our goodwill and indefinite-lived intangible assets might be less than their carrying amounts. Accordingly, we performed quantitative assessments to measure the fair values of these assets as of March 31, 2020. No impairments were identified based on the quantitative impairment calculations of our goodwill and other indefinite-lived intangible assets. No additional indicators of impairment were identified in the second or third quarter of 2020.

The following table summarizes the balances of goodwill and other intangible assets (in thousands):
September 30,
2020
December 31,
2019
Goodwill$18,595 $18,595 
Intangible assets
Brand name - indefinite lived$32,532 $32,532 
Trademarks - indefinite lived128 128 
Brand name - finite lived, net3,020 3,554 
Customer contracts - finite lived, net10,639 12,398 
Total intangible assets, net$46,319 $48,612 

The following table summarizes the balances of amortized customer contracts and finite-lived brand names (in thousands):
September 30,
2020
December 31,
2019
Customer contracts$20,773 $20,773 
Brand name - finite lived5,395 5,395 
Accumulated amortization(12,509)(10,216)
Net carrying amount$13,659 $15,952 

11


7.     Revenue from Contracts with Customers

Inner Circle

In July 2019, the parent entities for eight Inner Circle franchisees and the operating entities for two other Inner Circle franchisees all filed for voluntary bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.
Of the $7.1 million in accounts receivable and notes receivable balances related to these franchisees, including unamortized key money converted to notes receivable upon termination of contracts, we recognized bad debt expense and an allowance of $0.8 million in 2019 and bad debt expense and an allowance for the remaining $6.3 million in the first quarter of 2020 when the reduction in fair value of collateral combined with timing of bankruptcy proceedings made it apparent the balances were highly unlikely to be recoverable. There has been no additional activity recorded by RLHC related to these franchisees since the first quarter and the related balances continue to be fully reserved, but we continue to monitor the ongoing bankruptcy proceedings for any potential changes.
Other Allowances
We recognized additional bad debt expense of $3.4 million in the first quarter of 2020, primarily related to large balances under legal dispute and aged balances from terminated agreements that were negatively impacted by the economic effects of the COVID-19 pandemic. In the second and third quarters of 2020 we recognized an additional $0.6 million and $0.4 million of bad debt expense, respectively, primarily related to terminated franchise agreements.

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in thousands):
Financial Statement Line Item(s)September 30,
2020
December 31,
2019
Accounts receivableAccounts receivable, net$10,772 $15,143 
Key money disbursedOther current assets and Other assets, net2,381 2,228 
Capitalized contract costsOther current assets and Other assets, net706 941 
Contract liabilitiesOther accrued liabilities and Deferred income and other long-term liabilities1,178 1,448 

Significant changes in the key money disbursements, capitalized contract costs, and contract liabilities balances during the period are as follows (in thousands):
Key Money DisbursedCapitalized Contract CostsContract Liabilities
Balance as of January 1, 2020$2,228 $941 $1,448 
Key money disbursed429 — — 
Key money converted from accounts receivable675 — — 
Key money converted to notes receivable(639)— — 
Costs incurred to acquire contracts— 147 — 
Cash received in advance— — 188 
Revenue or expense recognized that was included in the January 1, 2020 balance(241)(358)(437)
Revenue or expense recognized in the period for the period(71)(24)(21)
Balance as of September 30, 2020$2,381 $706 $1,178 

12


Estimated revenues and expenses expected to be recognized related to performance obligations that were unsatisfied as of September 30, 2020, including revenues related to application, initiation and other fees were as follows (in thousands):
Year Ending December 31,Contra RevenueExpenseRevenue
2020 (remainder)$155 $57 $115 
2021524 195 394 
2022404 176 296 
2023359 132 181 
2024270 84