##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 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(State or other jurisdiction of 
incorporation or organization)
    
    91-1032187(I.R.S. Employer
Identification No.)201 W. North River Drive, Suite 100
Spokane Washington(Address of principal executive offices)
    
    99201(Zip Code)
 (509) 459-6100
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 Item No.
    
    
    Description
    
    Page No.PART I  FINANCIAL INFORMATIONItem 1
    
    Financial Statements (unaudited):Consolidated Balance Sheets March 31, 2011 and December 31, 2010
    
    
    3Consolidated Statements of Operations Three Months Ended March 31, 2011 and 2010
    
    
    4Consolidated Statements of Cash Flows Three Months Ended March 31, 2011 and 2010
    
    
    5Condensed Notes to Consolidated Financial Statements
    
    
    6Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4
    
    Controls and Procedures
    
    
    24PART II  OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    
    25Item 1A.
    
    Risk Factors
    
    
    25Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3
    
    Defaults Upon Senior Securities
    
    
    25Item 4
    
    (Removed and Reserved)
    
    
    25Item 5
    
    Other Information
    
    
    25Item 6
    
    Exhibits
    
    
    26Signatures
    
    
    27EX-10.1EX-10.2EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 RED LION HOTELS CORPORATION
 
 CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 March 31, 2011 and December 31, 2010
 March 31,
    
    
    December 31,2011
    
    
    2010(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,607
    
    
    $
    4,012Restricted cash
    
    
    4,792
    
    
    
    4,120Accounts receivable, net
    
    
    5,992
    
    
    
    5,985Inventories
    
    
    1,322
    
    
    
    1,328Prepaid expenses and other
    
    
    1,920
    
    
    
    1,937Deferred income taxes
    
    
    7,377
    
    
    
    Assets held for sale
    
    
    43,944
    
    
    
    Total current assets
    
    
    70,954
    
    
    
    17,382Property and equipment, net
    
    
    229,458
    
    
    
    272,030Goodwill
    
    
    22,730
    
    
    
    28,042Intangible assets, net
    
    
    7,972
    
    
    
    7,984Other assets, net
    
    
    6,732
    
    
    
    6,044Total assets
    
    $
    337,846
    
    
    $
    331,482LIABILITIESCurrent liabilities:Accounts payable
    
    $
    5,504
    
    
    $
    7,146Accrued payroll and related benefits
    
    
    3,239
    
    
    
    4,367Accrued interest payable
    
    
    291
    
    
    
    276Advance deposits
    
    
    1,079
    
    
    
    487Other accrued expenses
    
    
    11,991
    
    
    
    10,178Revolving credit facility, due within one year
    
    
    25,000
    
    
    
    18,000Current portion of long-term debt
    
    
    24,928
    
    
    
    25,275Total current liabilities
    
    
    72,032
    
    
    
    65,729Long-term debt, due after one year
    
    
    51,391
    
    
    
    51,877Deferred income
    
    
    5,015
    
    
    
    4,859Deferred income taxes
    
    
    11,789
    
    
    
    7,427Debentures due Red Lion Hotels Capital Trust
    
    
    30,825
    
    
    
    30,825Total liabilities
    
    
    171,052
    
    
    
    160,717Commitments and contingenciesSTOCKHOLDERS EQUITYRed Lion Hotels Corporation stockholders equityPreferred 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;
18,993,267 and 18,869,254 shares issued and outstanding
    
    
    190
    
    
    
    189Additional paid-in capital, common stock
    
    
    147,633
    
    
    
    146,834Retained earnings
    
    
    18,975
    
    
    
    23,737Total Red Lion Hotels Corporation stockholders equity
    
    
    166,798
    
    
    
    170,760Noncontrolling interest
    
    
    (4
    )
    
    
    5Total equity
    
    
    166,794
    
    
    
    170,765Total liabilities and stockholders equity
    
    $
    337,846
    
    
    $
    331,482
  3




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##### Table of Contents



RED LION HOTELS CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 For the Three Months Ended March 31, 2011 and 2010
 Three months ended March 31,2011
    
    
    2010(In thousands, except per share data)Revenue:Hotels
    
    $
    30,158
    
    
    $
    30,621Franchise
    
    
    707
    
    
    
    558Entertainment
    
    
    2,800
    
    
    
    2,478Other
    
    
    607
    
    
    
    645Total revenues
    
    
    34,272
    
    
    
    34,302Operating expenses:Hotels
    
    
    27,169
    
    
    
    26,592Franchise
    
    
    894
    
    
    
    578Entertainment
    
    
    2,614
    
    
    
    2,013Other
    
    
    393
    
    
    
    422Depreciation and amortization
    
    
    5,306
    
    
    
    5,210Hotel facility and land lease
    
    
    2,111
    
    
    
    1,747Gain on asset dispositions, net
    
    
    (86
    )
    
    
    (98
    )Undistributed corporate expenses
    
    
    1,344
    
    
    
    2,443Total expenses
    
    
    39,745
    
    
    
    38,907Operating income (loss)
    
    
    (5,473
    )
    
    
    (4,605
    )Other income (expense):Interest expense
    
    
    (2,301
    )
    
    
    (2,236
    )Other income, net
    
    
    4
    
    
    
    37Income (loss) before taxes
    
    
    (7,770
    )
    
    
    (6,804
    )Income tax expense (benefit)
    
    
    (2,999
    )
    
    
    (2,579
    )Net income (loss) from continuing operations
    
    
    (4,771
    )
    
    
    (4,225
    )Discontinued operationsIncome (loss) from discontinued business units, net of income tax (benefit) expense of ($79)
    
    
    
    
    
    
    (154
    )Net income (loss) from discontinued operations
    
    
    
    
    
    
    (154
    )Net income (loss)
    
    
    (4,771
    )
    
    
    (4,379
    )Less: Net income (loss) attributable to noncontrolling interest
    
    
    10
    
    
    
    11Net income (loss) attributable to Red Lion Hotels
Corporation
    
    $
    (4,761
    )
    
    $
    (4,368
    )Earnings per share  basic and dilutedNet income (loss) from continuing operations
    
    $
    (0.25
    )
    
    $
    (0.23
    )Net income (loss) from discontinued operations
    
    $
    
    
    
    $
    (0.01
    )Net income (loss) attributable to Red Lion Hotels Corporation
    
    $
    (0.25
    )
    
    $
    (0.24
    )Weighted average shares -basic and diluted
    
    
    18,974
    
    
    
    18,269
  4




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RED LION HOTELS CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Three Months Ended March 31, 2011 and 2010
 Three months ended March 31,2011
    
    
    2010(In thousands)Operating activities:Net income (loss)
    
    $
    (4,771
    )
    
    $
    (4,379
    )Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    5,306
    
    
    
    5,226Gain on disposition of property, equipment and other assets, net
    
    
    (86
    )
    
    
    (98
    )Deferred income tax provision (benefit)
    
    
    (3,015
    )
    
    
    (2,682
    )Equity in investments
    
    
    10
    
    
    
    11Stock based compensation expense
    
    
    225
    
    
    
    672Provision for doubtful accounts
    
    
    (16
    )
    
    
    37Change in current assets and liabilities:Restricted cash
    
    
    (672
    )
    
    
    (1,224
    )Accounts receivable
    
    
    9
    
    
    
    (1,218
    )Inventories
    
    
    6
    
    
    
    9Prepaid expenses and other
    
    
    17
    
    
    
    10Accounts payable
    
    
    (1,642
    )
    
    
    (1,358
    )Accrued payroll and related benefits
    
    
    (1,128
    )
    
    
    1,423Accrued interest payable
    
    
    15
    
    
    
    17Deferred income
    
    
    275
    
    
    
    Other accrued expenses and advance deposits
    
    
    2,405
    
    
    
    4,984Net cash (used in) provided by operating activities
    
    
    (3,062
    )
    
    
    1,430Investing activities:Purchases of property and equipment
    
    
    (386
    )
    
    
    (1,518
    )Proceeds from disposition of property and equipment
    
    
    1
    
    
    
    Advances to Red Lion Hotels Capital Trust
    
    
    (27
    )
    
    
    (27
    )Other, net
    
    
    (507
    )
    
    
    271Net cash (used in) provided by investing activities
    
    
    (919
    )
    
    
    (1,274
    )Financing activities:Borrowings on revolving credit facility
    
    
    7,000
    
    
    
    3,000Repayment of revolving credit facility
    
    
    
    
    
    
    (2,000
    )Repayment of long-term debt
    
    
    (833
    )
    
    
    (793
    )Proceeds from stock options exercised
    
    
    512
    
    
    
    152Proceeds from issuance of common stock under employee stock
purchase plan
    
    
    63
    
    
    
    71Additions to deferred financing costs
    
    
    (1,166
    )
    
    
    (171
    )Net cash (used in) provided by financing activities
    
    
    5,576
    
    
    
    259Net change in cash from operating activities of discontinued operations
    
    
    
    
    
    
    3Change in cash and cash equivalents:Net (decrease) increase in cash and cash equivalents
    
    
    1,595
    
    
    
    418Cash and cash equivalents at beginning of period
    
    
    4,012
    
    
    
    3,881Cash and cash equivalents at end of period
    
    $
    5,607
    
    
    $
    4,299Supplemental disclosure of cash flow information:Cash paid during periods for:Income taxes
    
    $
    
    
    
    $
    Interest on long-term debt
    
    $
    2,286
    
    
    $
    2,219Cash received during periods for:Income taxes
    
    $
    
    
    
    $
    Noncash operating, investing and financing activities:Reclassification of property and other assets to assets held for sale
    
    $
    38,632
    
    
    $
    Reclassification of goodwill to assets held for sale
    
    $
    5,312
    
    
    $
    
  5




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RED LION HOTELS CORPORATION
 
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization
      2. Basis of Presentation
     6




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##### Table of Contents



3. Liquidity, Financial Condition and Risks of Refinancing Debt
    4. Property and Equipment
  March 31
    
    
    December 31,2011
    
    
    2010Buildings and equipment
    
    $
    251,406
    
    
    $
    301,766Furniture and fixtures
    
    
    43,324
    
    
    
    47,316Landscaping and land improvements
    
    
    9,309
    
    
    
    9,821304,039
    
    
    
    358,903Less accumulated depreciation and amortization
    
    
    (133,256
    )
    
    
    (153,373
    )170,783
    
    
    
    205,530Land
    
    
    57,141
    
    
    
    63,581Construction in progress
    
    
    1,534
    
    
    
    2,919$
    229,458
    
    
    $
    272,030
  5. Assets Held for Sale
  7




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March 312011Buildings and equipment
    
    $
    49,816Furniture and fixtures
    
    
    4,313Landscaping and land improvements
    
    
    18454,313Less accumulated depreciation and amortization
    
    
    (22,831
    )31,482Land
    
    
    6,440Construction in progress
    
    
    102Total property and equipment
    
    
    38,024Goodwill
    
    
    5,312Other assets, net
    
    
    608Assets held for sale
    
    $
    43,944
 6. Credit Facility and Long Term Debt
     7. Business Segments
  8




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Three months ended March 31,2011
    
    2010Revenues:Hotels
    
    $
    30,158
    
    
    $
    30,621Franchise
    
    
    707
    
    
    
    558Entertainment
    
    
    2,800
    
    
    
    2,478Other
    
    
    607
    
    
    
    645$
    34,272
    
    
    $
    34,302Operating income (loss):Hotels
    
    $
    (3,193
    )
    
    $
    (2,145
    )Franchise
    
    
    (520
    )
    
    
    (113
    )Entertainment
    
    
    96
    
    
    
    370Other
    
    
    (1,856
    )
    
    
    (2,717
    )$
    (5,473
    )
    
    $
    (4,605
    )March 31,
    
    December 31,2011
    
    2010Identifiable assets:Hotels
    
    $
    289,920
    
    
    $
    292,436Franchise
    
    
    10,106
    
    
    
    9,811Entertainment
    
    
    5,113
    
    
    
    5,115Other
    
    
    32,707
    
    
    
    24,120$
    337,846
    
    
    $
    331,4828. Net Income (Loss) Per Share


The following table presents a reconciliation of the numerators and denominators used in the
basic and diluted loss per share computations for the three months ended March 31, 2011 and 2010
(in thousands, except per share amounts):Three months ended March 31,2011
    
    2010Numerator  basic and diluted:Net income (loss) from continuing operations
    
    $
    (4,771
    )
    
    $
    (4,225
    )Net income (loss) from discontinued operations
    
    $
    
    
    
    $
    (154
    )Less: Net income (loss) attributable to noncontrolling interest
    
    $
    10
    
    
    $
    11Net income (loss) attributable to Red Lion Hotels Corporation
    
    $
    (4,761
    )
    
    $
    (4,368
    )Denominator:Weighted average shares  basic and diluted
    
    
    18,974
    
    
    
    18,269Net income (loss) per share from continuing operationsBasic and diluted
    
    $
    (0.25
    )
    
    $
    (0.23
    )Net Income (loss) per share from discontinued operationsBasic and diluted
    
    $
    
    
    
    $
    (0.01
    )Net Income (loss) per share attributable to Red Lion Hotels Corporation:Basic and diluted
    
    $
    (0.25
    )
    
    $
    (0.24
    )
 9




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9. Income Taxes
    10. Stock Based Compensation
    WeightedAverageNumber
    
    
    Exerciseof Shares
    
    
    PriceBalance, January 1, 2011
    
    
    478,047
    
    
    $
    7.62Options granted
    
    
    
    
    
    $
    Options exercised
    
    
    (100,652
    )
    
    $
    5.10Options forfeited
    
    
    (27,014
    )
    
    $
    10.76Balance, March 31, 2011
    
    
    350,381
    
    
    $
    8.10Exercisable, March 31, 2011
    
    
    270,862
    
    
    $
    7.85
 10




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WeightedAverage
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    
    
    Remaining
    
    
    
    
    
    Average
    
    Aggregate
    
    
    
    
    
    Average
    
    AggregateExercise
    
    
    
    Number
    
    Contractual
    
    Expiration
    
    Exercise
    
    Intrinsic
    
    Number
    
    Exercise
    
    IntrinsicPrices
    
    
    
    Outstanding
    
    Life (Years)
    
    Date
    
    Price
    
    Value(1)
    
    Exercisable
    
    Price
    
    Value(1)$
    5.10 - $6.07
    
    
    
    
    
    126,596
    
    
    
    2.00
    
    
    
    2011-2014
    
    
    $
    5.57
    
    
    $
    333,208
    
    
    
    126,596
    
    
    $
    5.57
    
    
    $
    333,208$
    7.10 - $7.80
    
    
    
    
    
    27,864
    
    
    
    5.31
    
    
    
    2011-2020
    
    
    
    7.39
    
    
    
    22,650
    
    
    
    22,000
    
    
    
    7.46
    
    
    
    16,200$
    8.74 - $8.80
    
    
    
    
    
    138,099
    
    
    
    7.10
    
    
    
    2011-2018
    
    
    
    8.76
    
    
    
    
    
    
    
    70,422
    
    
    
    8.76
    
    
    
    $
    10.88
    
    
    
    
    
    5,974
    
    
    
    5.32
    
    
    
    2016
    
    
    
    10.88
    
    
    
    
    
    
    
    5,974
    
    
    
    10.88
    
    
    
    $
    12.21-$13.00
    
    
    
    
    
    51,848
    
    
    
    5.88
    
    
    
    2016-2017
    
    
    
    12.60
    
    
    
    
    
    
    
    45,870
    
    
    
    12.55
    
    
    
    350,381
    
    
    
    4.90
    
    
    
    2011-2020
    
    
    $
    8.10
    
    
    $
    355,858
    
    
    
    270,862
    
    
    $
    7.85
    
    
    $
    349,408
 
 (1)
    
    The aggregate intrinsic value is before applicable income taxes
and represents the amount option recipients would have received
if all options had been available to be exercised on the last
trading day of the first three months of 2011, or March 31, 2011,
based upon the Companys closing stock price of $8.20.   WeightedAverageNumber
    
    
    Grant Dateof Shares
    
    
    Fair ValueBalance, January 1, 2011
    
    
    220,816
    
    
    $
    6.40Granted
    
    
    
    
    
    $
    Vested
    
    
    
    
    
    $
    Forfeited
    
    
    (6,320
    )
    
    $
    6.05Balance, March 31, 2011
    
    
    214,496
    
    
    $
    6.41
  11. Fair Value of Financial Instruments
  11




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March 31,
    
    December 31,2011
    
    2010Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial assets:Cash and cash equivalents and restricted cash
    
    $
    10,399
    
    
    $
    10,399
    
    
    $
    8,132
    
    
    $
    8,132Accounts receivable
    
    $
    5,992
    
    
    $
    5,992
    
    
    $
    5,985
    
    
    $
    5,985Financial liabilities:Current liabilities, excluding debt
    
    $
    22,104
    
    
    $
    22,104
    
    
    $
    22,454
    
    
    $
    22,454Total debt
    
    $
    101,319
    
    
    $
    101,524
    
    
    $
    95,152
    
    
    $
    95,400Debentures
    
    $
    30,825
    
    
    $
    31,506
    
    
    $
    30,825
    
    
    $
    31,279
  12. Commitments and Contingencies
  13. Discontinued Operations
   Three months ended March 31,2011
    
    
    2010Revenues
    
    $
    
    
    
    $
    Operating expenses
    
    
    
    
    
    
    (217
    )Depreciation and amortization
    
    
    
    
    
    
    (16
    )Income tax benefit (expense)
    
    
    
    
    
    
    79Net income (loss) from operations
    
    
    
    
    
    
    (154
    )Loss on disposal of discontinued business units
    
    
    Income tax benefitNet loss on disposal of discontinued business units
    
    
    
    
    
    
    Net income (loss) from discontinued operations
    
    $
    
    
    
    $
    (154
    )
 12




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14. Subsequent Events
   13




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
 This quarterly report on Form 10-Q includes forward-looking statements. We have based these
statements on our current expectations and projections about future events. When words such as
anticipate, believe, estimate, expect, intend, may, plan, seek, should, will
and similar expressions or their negatives are used in this quarterly report, these are
forward-looking statements. Many possible events or factors, including those discussed in Risk
Factors under Item 1A of our annual report filed with the Securities and Exchange Commission
(SEC) on Form 10-K for the year ended December 31, 2010, could affect our future financial
results and performance, and could cause actual results or performance to differ materially from
those expressed. You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this quarterly report.
 In this report, we, us, our, our company and the company refer to Red Lion Hotels
Corporation and, as the context requires, all of its wholly and partially owned subsidiaries,
including, but not limited to, its 100% ownership of Red Lion Hotels Holdings, Inc. and Red Lion
Hotels Franchising, Inc. and its approximate 99% ownership of Red Lion Hotels Limited Partnership.
Red Lion refers to the Red Lion brand. The term the system, system-wide hotels or system of
hotels refers to our entire group of owned, leased and franchised hotels.
 The following discussion and analysis should be read in connection with our unaudited
consolidated financial statements and the condensed notes thereto and other financial information
included elsewhere in this quarterly report, as well as in conjunction with the consolidated
financial statements and the notes thereto for the year ended December 31, 2010, previously filed
with the SEC on Form 10-K .
 Introduction
    Total
    
    MeetingAvailable
    
    SpaceHotels
    
    Rooms
    
    (sq. ft.)Owned and Leased Hotels
    
    
    31
    
    
    
    6,121
    
    
    
    304,566Franchised Hotels
    
    
    14
    
    
    
    2,509
    
    
    
    125,231Total Red Lion Hotels
    
    
    45
    
    
    
    8,630
    
    
    
    429,797
  
    
    The hotels segmentderives revenue primarily from guest room rentals and food and
beverage operations at our owned and leased hotels.
 
    
    The franchise segmentis engaged primarily in licensing the Red Lion brand to
franchisees, and generates revenue from franchise fees that are typically based on a
percent of room revenues and are charged to hotel owners. It has also historically
reflected revenue from management fees charged to the owners of managed hotels, although
we have not managed any hotels for third parties since January 2008.
 
    
    The entertainment segmentderives revenue primarily from ticketing services and the
promotion and presentation of entertainment productions.
  14




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##### Table of Contents



Executive Summary
     For the three months ended March 31,2011
    
    2010Average(1)
    
    
    
    
    
    
    
    
    
    Average(1)Occupancy
    
    ADR(2)
    
    RevPAR(3)
    
    Occupancy
    
    ADR(2)
    
    RevPAR(3)Owned and Leased Hotels
    
    
    48.2
    %
    
    $
    80.34
    
    
    $
    38.69
    
    
    
    48.2
    %
    
    $
    80.10
    
    
    $
    38.63Franchised Hotels
    
    
    53.6
    %
    
    $
    74.69
    
    
    $
    40.05
    
    
    
    48.5
    %
    
    $
    75.60
    
    
    $
    36.65Total Red Lion Hotels
    
    
    49.4
    %
    
    $
    78.94
    
    
    $
    39.00
    
    
    
    48.3
    %
    
    $
    79.07
    
    
    $
    38.18Change from prior comparative period:Owned and Leased Hotels
    
    
    
    
    
    
    0.3
    %
    
    
    0.2
    %Franchised Hotels
    
    
    5.1
    
    
    
    -1.2
    %
    
    
    9.3
    %Total Red Lion Hotels
    
    
    1.1
    
    
    
    -0.2
    %
    
    
    2.1
    %
 
 (1)
    
    Average occupancy represents total paid rooms divided by total
available rooms. Total available rooms represents the number of
rooms available multiplied by the number of days in the reported
period and includes rooms taken out of service for renovation.(2)
    
    Average daily rate (ADR) represents total room revenues divided
by the total number of paid rooms occupied by hotel guests.(3)
    
    Revenue per available room (RevPAR) represents total room and
related revenues divided by total available rooms.  Results of Operations
  15




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##### Table of Contents



Three months ended March 31,2011
    
    
    2010Total revenue
    
    $
    34,272
    
    
    $
    34,302Operating expenses
    
    
    39,745
    
    
    
    38,907Operating income (loss)
    
    
    (5,473
    )
    
    
    (4,605
    )Other income (expense):Interest expense
    
    
    (2,301
    )
    
    
    (2,236
    )Other income, net
    
    
    4
    
    
    
    37Income (loss) before taxes
    
    
    (7,770
    )
    
    
    (6,804
    )Income tax expense (benefit)
    
    
    (2,999
    )
    
    
    (2,579
    )Net Income (loss) from continuing operations
    
    
    (4,771
    )
    
    
    (4,225
    )Discontinued operations:Income (loss) from discontinued business units,
net of income tax (benefit) expense of $(79)
    
    
    
    
    
    
    (154
    )Income (loss) on disposal of discontinued business units, net of income tax (benefit) expense
    
    
    
    
    
    
    Net income (loss) from discontinued operations
    
    
    
    
    
    
    (154
    )Net income (loss)
    
    
    (4,771
    )
    
    
    (4,379
    )Less: Net income (loss) attributable to noncontrolling
interest
    
    
    10
    
    
    
    11Net income (loss) attributable to Red Lion Hotels Corporation
    
    $
    (4,761
    )
    
    $
    (4,368
    )EBITDA
    
    $
    (153
    )
    
    $
    436EBITDA as a percentage of revenues
    
    
    -0.4
    %
    
    
    1.3
    %EBITDA from continuing operations
    
    $
    (153
    )
    
    $
    653EBITDA from continuing operations
as a percentage of revenues
    
    
    -0.4
    %
    
    
    1.9
    %
    16




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##### Table of Contents



Three months ended March 31,2011
    
    
    2010EBITDA
    
    $
    (153
    )
    
    $
    436Income tax (expense) benefit
    
    
    2,999
    
    
    
    2,658Interest expense
    
    
    (2,301
    )
    
    
    (2,236
    )Depreciation and amortization
    
    
    (5,306
    )
    
    
    (5,226
    )Net income (loss) attributable to Red Lion
Hotels Corporation
    
    $
    (4,761
    )
    
    $
    (4,368
    )
 Three months ended March 31,2011
    
    
    2010EBITDA from continuing operations
    
    $
    (153
    )
    
    $
    653Income tax (expense) benefit
    
    
    2,999
    
    
    
    2,579Interest expense
    
    
    (2,301
    )
    
    
    (2,236
    )Depreciation and amortization
    
    
    (5,306
    )
    
    
    (5,210
    )Discontinued operations, net of tax
    
    
    
    
    
    
    (154
    )Net income (loss) attributable to Red Lion
Hotels Corporation
    
    $
    (4,761
    )
    
    $
    (4,368
    )
 Revenue
  Three months ended March 31,2011
    
    
    2010Operating revenueHotels:Rooms
    
    $
    21,314
    
    
    $
    21,281Food and beverage
    
    
    7,831
    
    
    
    8,398Other department
    
    
    1,013
    
    
    
    942Total hotels segment
    
    
    30,158
    
    
    
    30,621Franchise
    
    
    707
    
    
    
    558Entertainment
    
    
    2,800
    
    
    
    2,478Other
    
    
    607
    
    
    
    645Total Operating Revenue
    
    $
    34,272
    
    
    $
    34,302
   17




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##### Table of Contents



Operating Expenses
  Three months ended March 31,2011
    
    
    2010(In thousands)Operating ExpensesHotels
    
    $
    27,169
    
    
    $
    26,592Franchise
    
    
    894
    
    
    
    578Entertainment
    
    
    2,614
    
    
    
    2,013Other
    
    
    393
    
    
    
    422Depreciation and amortization
    
    
    5,306
    
    
    
    5,210Hotel facility and land lease
    
    
    2,111
    
    
    
    1,747Gain on asset dispositions, net
    
    
    (86
    )
    
    
    (98
    )Undistributed corporate expenses
    
    
    1,344
    
    
    
    2,443Total operating expenses
    
    $
    39,745
    
    
    $
    38,907Hotels revenue  owned
    
    $
    21,724
    
    
    $
    22,373Direct margin (1)
    
    $
    2,399
    
    
    $
    3,398Direct margin %
    
    
    11.0
    %
    
    
    15.2
    %Hotels revenue  leased
    
    $
    8,434
    
    
    $
    8,248Direct margin (1)
    
    $
    590
    
    
    $
    631Direct margin %
    
    
    7.0
    %
    
    
    7.7
    %Franchise revenue
    
    $
    707
    
    
    $
    558Direct margin (1)
    
    $
    (187
    )
    
    $
    (20
    )Direct margin %
    
    
    -26.4
    %
    
    
    -3.6
    %Entertainment revenue
    
    $
    2,800
    
    
    $
    2,478Direct margin (1)
    
    $
    186
    
    
    $
    465Direct margin %
    
    
    6.6
    %
    
    
    18.8
    %Other revenue
    
    $
    607
    
    
    $
    645Direct margin (1)
    
    $
    214
    
    
    $
    223Direct margin %
    
    
    35.3
    %
    
    
    34.6
    %
 
 (1)
    
    Revenues less direct operating expenses.    18




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Income Taxes
    19




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Liquidity and Capital Resources
        20




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##### Table of Contents



March 31,
    
    December 31,2011
    
    2010Consolidated balance sheet data (in thousands):Cash and cash equivalents
    
    $
    5,607
    
    
    $
    4,012Working capital (1)
    
    $
    (45,022
    )
    
    $
    (48,347
    )Assets held for sale
    
    $
    43,944
    
    
    $
    Property and equipment, net
    
    $
    229,458
    
    
    $
    272,030Total assets
    
    $
    337,846
    
    
    $
    331,482Total debt
    
    $
    101,319
    
    
    $
    95,152Debentures due Red Lion Hotels Capital Trust
    
    $
    30,825
    
    
    $
    30,825Total liabilities
    
    $
    171,052
    
    
    $
    160,717Total stockholders equity
    
    $
    166,794
    
    
    $
    170,765
 
 (1)
    
    Represents current assets less current liabilities, excluding assets held for sale.  Operating Activities
  Investing Activities
  Financing Activities
    21




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##### Table of Contents



Contractual Obligations
  Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 yearsDebt and credit facility (1)
    
    $
    109,907
    
    
    $
    54,755
    
    
    $
    55,152
    
    
    $
    
    
    
    $
    Operating and capital leases (2)
    
    
    64,396
    
    
    
    8,603
    
    
    
    16,183
    
    
    
    15,073
    
    
    
    24,537Service agreements
    
    
    1,414
    
    
    
    655
    
    
    
    759
    
    
    
    
    
    
    
    Debentures due Red LionHotels Capital Trust(1)
    
    
    127,217
    
    
    
    2,928
    
    
    
    5,857
    
    
    
    5,857
    
    
    
    112,575Total contractual obligations(3)
    
    $
    302,934
    
    
    $
    66,941
    
    
    $
    77,951
    
    
    $
    20,930
    
    
    $
    137,112
 
 (1)
    
    Including estimated interest payments and commitment fees over the life of the debt agreement.(2)
    
    Operating lease amounts are net of estimated sublease income of $11.1 million annually.(3)
    
    With regard to purchase obligations, we are not party to any material agreements to purchase
goods or services that are enforceable or legally binding as to fixed or minimum quantities
to be purchased or stated price terms.     Franchise Update
  Off-balance Sheet Arrangements
  22




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Critical Accounting Policies and Estimates
   New and Future Accounting Pronouncements
  23




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
   2011
    
    2012
    
    2013
    
    2014
    
    2015
    
    Thereafter
    
    Total
    
    Fair ValueTotal debt
    
    $
    49,443
    
    
    $
    12,998
    
    
    $
    38,878
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    101,319
    
    
    $
    101,524Average interest
rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.0
    %Debentures due Red Lion
Hotels Capital Trust
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30,825
    
    
    $
    30,825
    
    
    $
    31,506Average interest
rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.5
    %
 
 Item 4. Controls and Procedures
   24




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. (Removed and Reserved)
 
 Item 5. Other Information
  25




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Item 6. Exhibits
 Index to Exhibits
 ExhibitNumber
    
    Description10.1
    
    Employment offer letter to Harry Sladich dated March 17, 201010.2
    
    Employment offer letter to Dan Jackson dated October 26, 201031.1
    
    Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)31.2
    
    Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)32.1
    
    Certification of Chief Executive Officer pursuant to Exchange Act Rule 13(a)-14(b)32.2
    
    Certification of Chief Financial Officer pursuant to Exchange Act Rule 13(a)-14(b)
 26




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##### Table of Contents



SIGNATURES
  Red Lion Hotels Corporation
Registrant Signature
    
    Title
    
    DateBy:
    
    /s/ Jon E. Eliassen

Jon E. Eliassen
    
    President and Chief Executive Officer (Principal
Executive Officer)
    
    May 9, 2011By:
    
    /s/ Dan R. Jackson

Dan R. Jackson
    
    Executive Vice President, Chief Financial Officer (Principal
Financial Officer)
    
    May 9, 2011By:
    
    /s/ Sandra J. Heffernan

Sandra J. Heffernan
    
    Vice President, Corporate Controller (Principal
Accounting Officer)
    
    May 9, 2011
 27