##### 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 June 30, 2010
 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
    
    91-1032187(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)201 W. North River Drive, Suite 100
Spokane Washington
    
    99201(Address of principal executive offices)
    
    (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 June 30, 2010 and December 31, 2009
    
    
    3Consolidated Statements of Operations Three and Six Months Ended June 30, 2010 and 2009
    
    
    4Consolidated Statements of Cash Flows Six Months Ended June 30, 2010 and 2009
    
    
    5Condensed Notes to Consolidated Financial Statements
    
    
    6Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4
    
    Controls and Procedures
    
    
    25PART II  OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    
    26Item 1A.
    
    Risk Factors
    
    
    26Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3
    
    Defaults Upon Senior Securities
    
    
    26Item 4
    
    Reserved
    
    
    26Item 5
    
    Other Information
    
    
    26Item 6
    
    Exhibits
    
    
    27Signatures
    
    
    28EX-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)
 June 30, 2010 and December 31, 2009
 June 30,
    
    
    December 31,2010
    
    
    2009(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,146
    
    
    $
    3,885Restricted cash
    
    
    5,223
    
    
    
    3,801Accounts receivable, net
    
    
    8,400
    
    
    
    6,995Inventories
    
    
    1,281
    
    
    
    1,350Prepaid expenses and other
    
    
    3,845
    
    
    
    3,245Total current assets
    
    
    21,895
    
    
    
    19,276Property and equipment, net
    
    
    279,469
    
    
    
    285,782Goodwill
    
    
    28,042
    
    
    
    28,042Intangible assets, net
    
    
    10,111
    
    
    
    10,199Other assets, net
    
    
    7,373
    
    
    
    7,337Total assets
    
    $
    346,890
    
    
    $
    350,636LIABILITIESCurrent liabilities:Accounts payable
    
    $
    9,581
    
    
    $
    6,080Accrued payroll and related benefits
    
    
    5,034
    
    
    
    2,404Accrued interest payable
    
    
    301
    
    
    
    318Advance deposits
    
    
    974
    
    
    
    496Other accrued expenses
    
    
    10,337
    
    
    
    7,936Long-term debt, due within one year
    
    
    3,258
    
    
    
    3,171Total current liabilities
    
    
    29,485
    
    
    
    20,405Revolving credit facility
    
    
    21,000
    
    
    
    26,000Long-term debt, due after one year
    
    
    75,494
    
    
    
    77,151Deferred income
    
    
    8,258
    
    
    
    8,638Deferred income taxes
    
    
    9,669
    
    
    
    12,595Debentures due Red Lion Hotels Capital Trust
    
    
    30,825
    
    
    
    30,825Total liabilities
    
    
    174,731
    
    
    
    175,614STOCKHOLDERS 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;
18,452,656 and 18,180,104 shares issued and outstanding
    
    
    185
    
    
    
    182Additional paid-in capital, common stock
    
    
    144,055
    
    
    
    142,479Retained earnings
    
    
    27,913
    
    
    
    32,346Total Red Lion Hotels Corporation stockholders equity
    
    
    172,153
    
    
    
    175,007Noncontrolling interest
    
    
    6
    
    
    
    15Total equity
    
    
    172,159
    
    
    
    175,022Total liabilities and stockholders equity
    
    $
    346,890
    
    
    $
    350,636
  3




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RED LION HOTELS CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 For the Three and Six Months Ended June 30, 2010 and 2009
 Three months ended June 30,
    
    
    Six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except per share data)Revenue:Hotels
    
    $
    38,632
    
    
    $
    40,956
    
    
    $
    69,253
    
    
    $
    71,760Franchise
    
    
    889
    
    
    
    1,262
    
    
    
    1,447
    
    
    
    1,799Entertainment
    
    
    2,340
    
    
    
    2,584
    
    
    
    4,818
    
    
    
    5,107Other
    
    
    594
    
    
    
    661
    
    
    
    1,239
    
    
    
    1,394Total revenues
    
    
    42,455
    
    
    
    45,463
    
    
    
    76,757
    
    
    
    80,060Operating expenses:Hotels
    
    
    28,759
    
    
    
    28,969
    
    
    
    55,499
    
    
    
    55,631Franchise
    
    
    810
    
    
    
    502
    
    
    
    1,388
    
    
    
    1,116Entertainment
    
    
    1,986
    
    
    
    2,273
    
    
    
    3,999
    
    
    
    4,388Other
    
    
    413
    
    
    
    544
    
    
    
    835
    
    
    
    1,081Depreciation and amortization
    
    
    5,175
    
    
    
    5,306
    
    
    
    10,400
    
    
    
    10,263Hotel facility and land lease
    
    
    1,824
    
    
    
    1,834
    
    
    
    3,640
    
    
    
    3,650Gain on asset dispositions, net
    
    
    (57
    )
    
    
    (45
    )
    
    
    (155
    )
    
    
    (47
    )Undistributed corporate expenses
    
    
    1,362
    
    
    
    1,721
    
    
    
    3,804
    
    
    
    2,987Total expenses
    
    
    40,272
    
    
    
    41,104
    
    
    
    79,410
    
    
    
    79,069Operating income (loss)
    
    
    2,183
    
    
    
    4,359
    
    
    
    (2,653
    )
    
    
    991Other income (expense):Interest expense
    
    
    (2,314
    )
    
    
    (2,182
    )
    
    
    (4,550
    )
    
    
    (4,029
    )Other income, net
    
    
    9
    
    
    
    23
    
    
    
    46
    
    
    
    62Income (loss) before taxes
    
    
    (122
    )
    
    
    2,200
    
    
    
    (7,157
    )
    
    
    (2,976
    )Income tax expense (benefit)
    
    
    (60
    )
    
    
    723
    
    
    
    (2,715
    )
    
    
    (1,167
    )Net income (loss)
    
    
    (62
    )
    
    
    1,477
    
    
    
    (4,442
    )
    
    
    (1,809
    )Net (income) loss attributable to noncontrolling interest
    
    
    (2
    )
    
    
    (5
    )
    
    
    9
    
    
    
    Net income (loss) attributable
to Red Lion Hotels Corporation
    
    $
    (64
    )
    
    $
    1,472
    
    
    $
    (4,433
    )
    
    $
    (1,809
    )Earnings (loss) per share attributable
to Red Lion Hotels Corporation:Basic
    
    $
    
    
    
    $
    0.08
    
    
    $
    (0.24
    )
    
    $
    (0.10
    )Diluted
    
    $
    
    
    
    $
    0.08
    
    
    $
    (0.24
    )
    
    $
    (0.10
    )Weighted average shares  basic
    
    
    18,420
    
    
    
    18,095
    
    
    
    18,345
    
    
    
    18,054Weighted average shares  diluted
    
    
    18,420
    
    
    
    18,140
    
    
    
    18,345
    
    
    
    18,054
  4




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RED LION HOTELS CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, 2010 and 2009
 Six months ended June 30,2010
    
    
    2009(In thousands)Operating activities:Net loss
    
    $
    (4,442
    )
    
    $
    (1,809
    )Adjustments to reconcile net loss attributable to Red Lion Hotels Corporation
to net cash provided by operating activities:Depreciation and amortization
    
    
    10,400
    
    
    
    10,263Gain on disposition of property, equipment and other assets, net
    
    
    (155
    )
    
    
    (47
    )Deferred income tax benefit
    
    
    (2,926
    )
    
    
    (1,323
    )Equity in investments
    
    
    25
    
    
    
    31Stock based compensation expense
    
    
    1,050
    
    
    
    554Provision for doubtful accounts
    
    
    131
    
    
    
    64Change in current assets and liabilities:Restricted cash
    
    
    (1,422
    )
    
    
    1,224Accounts receivable
    
    
    (1,851
    )
    
    
    2,256Inventories
    
    
    69
    
    
    
    115Prepaid expenses and other
    
    
    (600
    )
    
    
    (831
    )Accounts payable and related benefits
    
    
    3,501
    
    
    
    (4,674
    )Accrued payroll and related benefits
    
    
    2,868
    
    
    
    (423
    )Accrued interest payable
    
    
    (17
    )
    
    
    (30
    )Deferred lease income
    
    
    
    
    
    
    900Other accrued expenses and advance deposits
    
    
    2,733
    
    
    
    3,235Net cash provided by operating activities
    
    
    9,364
    
    
    
    9,505Investing activities:Purchases of property and equipment
    
    
    (3,832
    )
    
    
    (12,479
    )Non-current restricted cash for sublease tenant improvements, net
    
    
    
    
    
    
    (576
    )Proceeds from disposition of property and equipment
    
    
    8
    
    
    
    8Advances to Red Lion Hotels Capital Trust
    
    
    (27
    )
    
    
    (27
    )Other, net
    
    
    198
    
    
    
    (423
    )Net cash used in investing activities
    
    
    (3,653
    )
    
    
    (13,497
    )Financing activities:Borrowings on revolving credit facility
    
    
    4,500
    
    
    
    Repayment of revolving credit facility
    
    
    (9,500
    )
    
    
    (6,000
    )Repayment of long-term debt
    
    
    (1,570
    )
    
    
    (1,491
    )Proceeds from stock options exercised
    
    
    304
    
    
    
    Proceeds from issuance of common stock under employee stock purchase plan
    
    
    71
    
    
    
    51Additions to deferred financing costs
    
    
    (171
    )
    
    
    Common stock redeemed
    
    
    (84
    )
    
    
    (11
    )Net cash used in financing activities
    
    
    (6,450
    )
    
    
    (7,451
    )Change in cash and cash equivalents:Net decrease in cash and cash equivalents
    
    
    (739
    )
    
    
    (11,443
    )Cash and cash equivalents at beginning of period
    
    
    3,885
    
    
    
    18,222Cash and cash equivalents at end of period
    
    $
    3,146
    
    
    $
    6,779Supplemental disclosure of cash flow information:Cash paid during periods for:Interest on long-term debt
    
    $
    4,567
    
    
    $
    4,515Noncash investing activities:Conversion of accounts receivable to note receivable
    
    $
    322
    
    
    $
    
  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. Property and Equipment
  June 30,
    
    
    December 31,2010
    
    
    2009Buildings and equipment
    
    $
    300,100
    
    
    $
    296,032Furniture and fixtures
    
    
    46,640
    
    
    
    46,383Landscaping and land improvements
    
    
    8,959
    
    
    
    8,967355,699
    
    
    
    351,382Less accumulated depreciation and amortization
    
    
    (143,954
    )
    
    
    (134,375
    )211,745
    
    
    
    217,007Land
    
    
    63,430
    
    
    
    66,146Construction in progress
    
    
    4,294
    
    
    
    2,629$
    279,469
    
    
    $
    285,782
 4. Notes Payable to Bank and Long-Term Debt
    7




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##### Table of Contents



5. Business Segments
  Three months ended June 30,
    
    
    Six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Hotels
    
    $
    38,632
    
    
    $
    40,956
    
    
    $
    69,253
    
    
    $
    71,760Franchise
    
    
    889
    
    
    
    1,262
    
    
    
    1,447
    
    
    
    1,799Entertainment
    
    
    2,340
    
    
    
    2,584
    
    
    
    4,818
    
    
    
    5,107Other
    
    
    594
    
    
    
    661
    
    
    
    1,239
    
    
    
    1,394$
    42,455
    
    
    $
    45,463
    
    
    $
    76,757
    
    
    $
    80,060Operating income (loss):Hotels
    
    $
    3,621
    
    
    $
    5,634
    
    
    $
    1,245
    
    
    $
    3,762Franchise
    
    
    (14
    )
    
    
    677
    
    
    
    (127
    )
    
    
    505Entertainment
    
    
    263
    
    
    
    203
    
    
    
    634
    
    
    
    504Other
    
    
    (1,687
    )
    
    
    (2,155
    )
    
    
    (4,405
    )
    
    
    (3,780
    )$
    2,183
    
    
    $
    4,359
    
    
    $
    (2,653
    )
    
    $
    991
 June 30,
    
    
    December 31,2010
    
    
    2009Identifiable assets:Hotels
    
    $
    300,387
    
    
    $
    301,122Franchise
    
    
    17,422
    
    
    
    16,853Entertainment
    
    
    5,731
    
    
    
    5,143Other
    
    
    23,350
    
    
    
    27,518$
    346,890
    
    
    $
    350,636
 8




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6. Earnings (Loss) Per Share
  Three months ended June 30,
    
    
    Six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator  basic and diluted:Net income (loss)
    
    
    (62
    )
    
    
    1,477
    
    
    
    (4,442
    )
    
    
    (1,809
    )Net (income) loss attributable to noncontrolling interest
    
    
    (2
    )
    
    
    (5
    )
    
    
    9
    
    
    
    Net income (loss) attributable to Red Lion Hotels
Corporation
    
    
    (64
    )
    
    
    1,472
    
    
    
    (4,433
    )
    
    
    (1,809
    )Denominator:Weighted average shares  basic
    
    
    18,420
    
    
    
    18,095
    
    
    
    18,345
    
    
    
    18,054Weighted average shares  diluted
    
    
    18,420
    
    
    
    18,140
    
    
    
    18,345
    
    
    
    18,054Earnings (loss) per share attributable to Red Lion Hotels Corporation:Basic
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.24
    )
    
    $
    (0.10
    )Diluted
    
    $
    
    
    
    $
    0.08
    
    
    $
    (0.24
    )
    
    $
    (0.10
    )
   7. Change in Executive Officers
  8. Stock Based Compensation
   9




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Number
    
    
    Exerciseof Shares
    
    
    PriceBalance, December 31, 2009
    
    
    1,194,460
    
    
    $
    7.36Options granted
    
    
    5,864
    
    
    $
    7.10Options exercised
    
    
    (58,197
    )
    
    $
    5.24Options forfeited
    
    
    (237,938
    )
    
    $
    9.32Balance, June 30, 2010
    
    
    904,189
    
    
    $
    6.98Exercisable, June 30, 2010
    
    
    770,478
    
    
    $
    6.62
  WeightedAverage
    
    
    
    
    
    
    Weighted
    
    
    Aggregate
    
    
    
    
    
    
    Weighted
    
    
    AggregateRange of
    
    
    
    
    
    Remaining
    
    
    
    
    
    
    Average
    
    
    Intrinsic
    
    
    
    
    
    
    Average
    
    
    IntrinsicExercise
    
    Number
    
    
    Contractual
    
    
    Expiration
    
    
    Exercise
    
    
    Value(1)
    
    
    Number
    
    
    Exercise
    
    
    Value(1)Prices
    
    Outstanding
    
    
    Life (Years)
    
    
    Date
    
    
    Price
    
    
    (in thousands)
    
    
    Exercisable
    
    
    Price
    
    
    (in thousands)5.10 - 6.07
    
    
    499,516
    
    
    
    1.30
    
    
    
    2010-2014
    
    
    $
    5.31
    
    
    $
    334,834
    
    
    
    499,516
    
    
    $
    5.31
    
    
    $
    334,8347.10 - 7.80
    
    
    150,256
    
    
    
    2.55
    
    
    
    2010-2020
    
    
    
    7.45
    
    
    
    
    
    
    
    123,196
    
    
    
    7.46
    
    
    
    8.74 - 8.80
    
    
    172,286
    
    
    
    7.85
    
    
    
    2010-2018
    
    
    
    8.76
    
    
    
    
    
    
    
    86,159
    
    
    
    8.76
    
    
    
    10.88
    
    
    5,974
    
    
    
    6.07
    
    
    
    2016
    
    
    
    10.88
    
    
    
    
    
    
    
    4,481
    
    
    
    10.88
    
    
    
    12.21-13.00
    
    
    76,157
    
    
    
    6.64
    
    
    
    2010-2017
    
    
    
    12.61
    
    
    
    
    
    
    
    57,126
    
    
    
    12.61
    
    
    
    904,189
    
    
    
    3.24
    
    
    
    2010-2020
    
    
    $
    6.98
    
    
    $
    334,834
    
    
    
    770,478
    
    
    $
    6.62
    
    
    $
    334,834
 
 (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 six months of 2010, or June 30, 2010, based upon the Companys closing
stock price of $5.97.   WeightedAverageNumber
    
    
    Exerciseof Shares
    
    
    PriceBalance, December 31, 2009
    
    
    239,318
    
    
    $
    5.24Granted
    
    
    147,039
    
    
    $
    7.10Vested
    
    
    (123,673
    )
    
    $
    5.32Balance, June 30, 2010
    
    
    262,684
    
    
    $
    6.24
   10




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9. Fair Value of Financial Instruments
  June 30,
    
    
    December 31,2010
    
    
    2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assets:Cash and cash equivalents and
restricted cash
    
    $
    8,369
    
    
    $
    8,369
    
    
    $
    7,686
    
    
    $
    7,686Accounts receivable
    
    $
    8,400
    
    
    $
    8,400
    
    
    $
    6,995
    
    
    $
    6,995Financial liabilities:Current liabilities, excluding debt
    
    $
    26,227
    
    
    $
    26,227
    
    
    $
    17,234
    
    
    $
    17,234Long-term debt
    
    $
    99,752
    
    
    $
    96,221
    
    
    $
    106,322
    
    
    $
    105,073Debentures
    
    $
    30,825
    
    
    $
    30,574
    
    
    $
    30,825
    
    
    $
    25,897
  10. Commitments and Contingencies
  11. Change in Accounting Principle
 Variable Interest Entities
   11




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12. Recent Accounting Pronouncements
 Fair Value Measurements
 12




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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 on Form 10-K for the year ended December 31,
2009, 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, 2009, previously filed
with the SEC on Form 10-K .
 Introduction
   Total
    
    
    MeetingAvailable
    
    
    SpaceHotels
    
    
    Rooms
    
    
    (sq. ft.)Red Lion Owned and Leased
Hotels
    
    
    31
    
    
    
    6,121
    
    
    
    304,566Red Lion Franchised Hotels
    
    
    12
    
    
    
    2,263
    
    
    
    115,421Total Red Lion Hotels
    
    
    43
    
    
    
    8,384
    
    
    
    419,987
  
    
    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
promotion and presentation of entertainment productions.
  13




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##### Table of Contents



Executive Summary
    For the three months ended June 30,
    
    
    For the six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Average(1)
    
    
    
    
    
    
    
    
    
    
    Average(1)
    
    
    
    
    
    
    
    
    
    
    Average(1)
    
    
    
    
    
    
    
    
    
    
    Average(1)Occupancy
    
    
    ADR(2)
    
    
    RevPAR(3)
    
    
    Occupancy
    
    
    ADR(2)
    
    
    RevPAR(3)
    
    
    Occupancy
    
    
    ADR(2)
    
    
    RevPAR(3)
    
    
    Occupancy
    
    ADR(2)
    
    RevPAR(3)Owned and Leased Hotels
    
    
    59.3
    %
    
    $
    84.58
    
    
    $
    50.13
    
    
    
    60.5
    %
    
    $
    84.40
    
    
    $
    51.07
    
    
    
    53.8
    %
    
    $
    82.59
    
    
    $
    44.41
    
    
    
    53.3
    %
    
    $
    82.54
    
    
    $
    43.98Franchised Hotels
    
    
    53.8
    %
    
    $
    78.15
    
    
    $
    42.04
    
    
    
    55.4
    %
    
    $
    80.29
    
    
    $
    44.46
    
    
    
    49.3
    %
    
    $
    76.59
    
    
    $
    37.79
    
    
    
    50.8
    %
    
    $
    79.12
    
    
    $
    40.20Total Red Lion Hotels
    
    
    57.8
    %
    
    $
    83.01
    
    
    $
    48.01
    
    
    
    59.2
    %
    
    $
    83.39
    
    
    $
    49.34
    
    
    
    52.6
    %
    
    $
    81.11
    
    
    $
    42.67
    
    
    
    52.6
    %
    
    $
    81.67
    
    
    $
    42.99Change from prior comparative period:Owned and Leased
Hotels
    
    
    (1.2
    )
    
    
    0.2
    %
    
    
    -1.8
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.1
    %
    
    
    1.0
    %Franchised Hotels
    
    
    (1.6
    )
    
    
    -2.7
    %
    
    
    -5.4
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.5
    )
    
    
    -3.2
    %
    
    
    -6.0
    %Total Red Lion Hotels
    
    
    (1.4
    )
    
    
    -0.5
    %
    
    
    -2.7
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -0.7
    %
    
    
    -0.7
    %
 
 (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
   14




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##### Table of Contents



Six months endedJune 30, 2010(in thousands)Separation costs
    
    $
    (1,219
    )Income tax benefit
    
    
    433Impact of separation costs on net loss
    
    $
    (786
    )Separation costs
    
    $
    (0.07
    )Income tax benefit
    
    
    0.02Impact of separation costs on loss per share
    
    $
    (0.05
    )Impact of separation costs on EBITDA
    
    $
    (1,219
    )
  Three months ended June 30,
    
    
    Six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Total revenue
    
    $
    42,455
    
    
    $
    45,463
    
    
    $
    76,757
    
    
    $
    80,060Operating expenses
    
    
    40,272
    
    
    
    41,104
    
    
    
    79,410
    
    
    
    79,069Operating income
    
    
    2,183
    
    
    
    4,359
    
    
    
    (2,653
    )
    
    
    991Other income (expense):Interest expense
    
    
    (2,314
    )
    
    
    (2,182
    )
    
    
    (4,550
    )
    
    
    (4,029
    )Other income, net
    
    
    9
    
    
    
    23
    
    
    
    46
    
    
    
    62Income (loss) before taxes
    
    
    (122
    )
    
    
    2,200
    
    
    
    (7,157
    )
    
    
    (2,976
    )Income tax expense (benefit)
    
    
    (60
    )
    
    
    723
    
    
    
    (2,715
    )
    
    
    (1,167
    )Net income (loss)
    
    
    (62
    )
    
    
    1,477
    
    
    
    (4,442
    )
    
    
    (1,809
    )(Income) loss attributable to noncontrolling interest
    
    
    (2
    )
    
    
    (5
    )
    
    
    9
    
    
    
    Net income (loss) attributable to Red Lion Hotels
Corporation
    
    $
    (64
    )
    
    $
    1,472
    
    
    $
    (4,433
    )
    
    $
    (1,809
    )EBITDA
    
    $
    7,365
    
    
    $
    9,683
    
    
    $
    7,802
    
    
    $
    11,316EBITDA as a percentage of revenues
    
    
    17.3
    %
    
    
    21.3
    %
    
    
    10.2
    %
    
    
    14.1
    %
   15




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##### Table of Contents



Three months ended June 30,
    
    
    Six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009EBITDA
    
    $
    7,365
    
    
    $
    9,683
    
    
    $
    7,802
    
    
    $
    11,316Income tax (expense) benefit
    
    
    60
    
    
    
    (723
    )
    
    
    2,715
    
    
    
    1,167Interest expense
    
    
    (2,314
    )
    
    
    (2,182
    )
    
    
    (4,550
    )
    
    
    (4,029
    )Depreciation and amortization
    
    
    (5,175
    )
    
    
    (5,306
    )
    
    
    (10,400
    )
    
    
    (10,263
    )Net income (loss) attributable to Red Lion Hotels Corporation
    
    $
    (64
    )
    
    $
    1,472
    
    
    $
    (4,433
    )
    
    $
    (1,809
    )
 16




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##### Table of Contents



Revenue
  Three months ended June 30,
    
    
    Six months ended June 30,Operating revenue
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Hotels:Rooms
    
    $
    27,919
    
    
    $
    28,877
    
    
    $
    49,199
    
    
    $
    49,317Food and beverage
    
    
    9,469
    
    
    
    11,046
    
    
    
    17,867
    
    
    
    20,583Other department
    
    
    1,244
    
    
    
    1,033
    
    
    
    2,187
    
    
    
    1,860Total hotels segment
    
    
    38,632
    
    
    
    40,956
    
    
    
    69,253
    
    
    
    71,760Franchise
    
    
    889
    
    
    
    1,262
    
    
    
    1,447
    
    
    
    1,799Entertainment
    
    
    2,340
    
    
    
    2,584
    
    
    
    4,818
    
    
    
    5,107Other
    
    
    594
    
    
    
    661
    
    
    
    1,239
    
    
    
    1,394Total Operating Revenue
    
    $
    42,455
    
    
    $
    45,463
    
    
    $
    76,757
    
    
    $
    80,060
 Three Months Ended June 30, 2010 and 2009
    Six Months Ended June 30, 2010 and 2009
   Operating Expenses
  17




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##### Table of Contents



Three months ended June 30,
    
    
    Six months ended June 30,Operating Expenses
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Hotels
    
    $
    28,759
    
    
    $
    28,969
    
    
    $
    55,499
    
    
    $
    55,631Franchise
    
    
    810
    
    
    
    502
    
    
    
    1,388
    
    
    
    1,116Entertainment
    
    
    1,986
    
    
    
    2,273
    
    
    
    3,999
    
    
    
    4,388Other
    
    
    413
    
    
    
    544
    
    
    
    835
    
    
    
    1,081Depreciation and amortization
    
    
    5,175
    
    
    
    5,306
    
    
    
    10,400
    
    
    
    10,263Hotel facility and land lease
    
    
    1,824
    
    
    
    1,834
    
    
    
    3,640
    
    
    
    3,650Gain on asset dispositions, net
    
    
    (57
    )
    
    
    (45
    )
    
    
    (155
    )
    
    
    (47
    )Undistributed corporate expenses
    
    
    1,362
    
    
    
    1,721
    
    
    
    3,804
    
    
    
    2,987Total operating expenses
    
    $
    40,272
    
    
    $
    41,104
    
    
    $
    79,410
    
    
    $
    79,069Hotels revenue  owned
    
    $
    27,893
    
    
    $
    29,287
    
    
    $
    50,266
    
    
    $
    52,190Direct margin (1)
    
    $
    7,539
    
    
    $
    9,197
    
    
    $
    10,937
    
    
    $
    13,397Direct margin %
    
    
    27.0
    %
    
    
    31.4
    %
    
    
    21.8
    %
    
    
    25.7
    %Hotels revenue  leased
    
    $
    10,739
    
    
    $
    11,669
    
    
    $
    18,987
    
    
    $
    19,570Direct margin (1)
    
    $
    2,334
    
    
    $
    2,790
    
    
    $
    2,817
    
    
    $
    2,731Direct margin %
    
    
    21.7
    %
    
    
    23.9
    %
    
    
    14.8
    %
    
    
    14.0
    %Franchise revenue
    
    $
    889
    
    
    $
    1,262
    
    
    $
    1,447
    
    
    $
    1,799Direct margin (1)
    
    $
    79
    
    
    $
    760
    
    
    $
    59
    
    
    $
    683Direct margin %
    
    
    8.9
    %
    
    
    60.2
    %
    
    
    4.1
    %
    
    
    38.0
    %Entertainment revenue
    
    $
    2,340
    
    
    $
    2,584
    
    
    $
    4,818
    
    
    $
    5,107Direct margin (1)
    
    $
    354
    
    
    $
    311
    
    
    $
    819
    
    
    $
    719Direct margin %
    
    
    15.1
    %
    
    
    12.0
    %
    
    
    17.0
    %
    
    
    14.1
    %Other revenue
    
    $
    594
    
    
    $
    661
    
    
    $
    1,239
    
    
    $
    1,394Direct margin (1)
    
    $
    181
    
    
    $
    117
    
    
    $
    404
    
    
    $
    313Direct margin %
    
    
    30.5
    %
    
    
    17.7
    %
    
    
    32.6
    %
    
    
    22.5
    %
 
 (1)
    
    Revenues less direct operating expenses. Three Months Ended June 30, 2010 and 2009
     18




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##### Table of Contents



Three months ended June 30, 2010
    
    
    Three months ended June 30, 2009Amounts
    
    
    
    
    
    
    
    
    
    
    Amountsbefore
    
    
    Impact of
    
    
    
    
    
    
    before
    
    
    Impact ofCPF
    
    
    CPF
    
    
    As reported
    
    
    CPF
    
    
    CPF
    
    
    As reportedRevenue:Hotels
    
    $
    38,632
    
    
    $
    
    
    
    $
    38,632
    
    
    $
    40,956
    
    
    $
    
    
    
    $
    40,956Franchise
    
    
    364
    
    
    
    525
    
    
    
    889
    
    
    
    733
    
    
    
    529
    
    
    
    1,262Entertainment
    
    
    2,340
    
    
    
    
    
    
    
    2,340
    
    
    
    2,584
    
    
    
    
    
    
    
    2,584Other
    
    
    594
    
    
    
    
    
    
    
    594
    
    
    
    661
    
    
    
    
    
    
    
    661Total revenues
    
    
    41,930
    
    
    
    525
    
    
    
    42,455
    
    
    
    44,934
    
    
    
    529
    
    
    
    45,463Operating expenses:Hotels
    
    
    28,251
    
    
    
    508
    
    
    
    28,759
    
    
    
    28,633
    
    
    
    336
    
    
    
    28,969Franchise
    
    
    297
    
    
    
    513
    
    
    
    810
    
    
    
    8
    
    
    
    494
    
    
    
    502Entertainment
    
    
    1,986
    
    
    
    
    
    
    
    1,986
    
    
    
    2,273
    
    
    
    
    
    
    
    2,273Other
    
    
    413
    
    
    
    
    
    
    
    413
    
    
    
    544
    
    
    
    
    
    
    
    544Depreciation and amortization
    
    
    5,175
    
    
    
    
    
    
    
    5,175
    
    
    
    5,306
    
    
    
    
    
    
    
    5,306Hotel facility and land lease
    
    
    1,824
    
    
    
    
    
    
    
    1,824
    
    
    
    1,834
    
    
    
    
    
    
    
    1,834Gain on asset dispositions, net
    
    
    (57
    )
    
    
    
    
    
    
    (57
    )
    
    
    (45
    )
    
    
    
    
    
    
    (45
    )Undistributed corporate
expenses
    
    
    1,362
    
    
    
    
    
    
    
    1,362
    
    
    
    1,721
    
    
    
    
    
    
    
    1,721Total expenses
    
    
    39,251
    
    
    
    1,021
    
    
    
    40,272
    
    
    
    40,274
    
    
    
    830
    
    
    
    41,104Operating income (loss)
    
    
    2,679
    
    
    
    (496
    )
    
    
    2,183
    
    
    
    4,660
    
    
    
    (301
    )
    
    
    4,359Other income (expense):Interest expense
    
    
    (2,314
    )
    
    
    
    
    
    
    (2,314
    )
    
    
    (2,182
    )
    
    
    
    
    
    
    (2,182
    )Other income, net
    
    
    119
    
    
    
    (110
    )
    
    
    9
    
    
    
    172
    
    
    
    (149
    )
    
    
    23Income (loss) before income taxes
    
    
    484
    
    
    
    (606
    )
    
    
    (122
    )
    
    
    2,650
    
    
    
    (450
    )
    
    
    2,200Income tax expense
    
    
    (60
    )
    
    
    
    
    
    
    (60
    )
    
    
    723
    
    
    
    
    
    
    
    723Net income (loss)
    
    $
    544
    
    
    $
    (606
    )
    
    $
    (62
    )
    
    $
    1,927
    
    
    $
    (450
    )
    
    $
    1,477Net earnings (loss) per share
    
    $
    0.03
    
    
    $
    (0.03
    )
    
    $
    
    
    
    $
    0.11
    
    
    $
    (0.03
    )
    
    $
    0.08Weighted-average shares outstanding
    
    
    18,420
    
    
    
    18,420
    
    
    
    18,420
    
    
    
    18,140
    
    
    
    18,140
    
    
    
    18,140EBITDA
    
    $
    7,971
    
    
    $
    (606
    )
    
    $
    7,365
    
    
    $
    10,133
    
    
    $
    (450
    )
    
    $
    9,683
   19




---



##### Table of Contents



Six Months Ended June 30, 2010 and 2009
   Six months ended June 30, 2010
    
    
    Six months ended June 30, 2009Amounts
    
    
    
    
    
    
    
    
    
    
    Amountsbefore
    
    
    Impact of
    
    
    
    
    
    
    before
    
    
    Impact ofCPF
    
    
    CPF
    
    
    As reported
    
    
    CPF
    
    
    CPF
    
    
    As reportedRevenue:Hotels
    
    $
    69,253
    
    
    $
    
    
    
    $
    69,253
    
    
    $
    71,760
    
    
    $
    
    
    
    $
    71,760Franchise
    
    
    629
    
    
    
    818
    
    
    
    1,447
    
    
    
    1,008
    
    
    
    791
    
    
    
    1,799Entertainment
    
    
    4,818
    
    
    
    
    
    
    
    4,818
    
    
    
    5,107
    
    
    
    
    
    
    
    5,107Other
    
    
    1,239
    
    
    
    
    
    
    
    1,239
    
    
    
    1,394
    
    
    
    
    
    
    
    1,394Total revenues
    
    
    75,939
    
    
    
    818
    
    
    
    76,757
    
    
    
    79,269
    
    
    
    791
    
    
    
    80,060Operating expenses:Hotels
    
    
    54,920
    
    
    
    579
    
    
    
    55,499
    
    
    
    55,036
    
    
    
    595
    
    
    
    55,631Franchise
    
    
    436
    
    
    
    952
    
    
    
    1,388
    
    
    
    144
    
    
    
    972
    
    
    
    1,116Entertainment
    
    
    3,999
    
    
    
    
    
    
    
    3,999
    
    
    
    4,388
    
    
    
    
    
    
    
    4,388Other
    
    
    835
    
    
    
    
    
    
    
    835
    
    
    
    1,081
    
    
    
    
    
    
    
    1,081Depreciation and amortization
    
    
    10,400
    
    
    
    
    
    
    
    10,400
    
    
    
    10,263
    
    
    
    
    
    
    
    10,263Hotel facility and land lease
    
    
    3,640
    
    
    
    
    
    
    
    3,640
    
    
    
    3,650
    
    
    
    
    
    
    
    3,650Gain on asset dispositions, net
    
    
    (155
    )
    
    
    
    
    
    
    (155
    )
    
    
    (47
    )
    
    
    
    
    
    
    (47
    )Undistributed corporate
expenses
    
    
    3,804
    
    
    
    
    
    
    
    3,804
    
    
    
    2,987
    
    
    
    
    
    
    
    2,987Total expenses
    
    
    77,879
    
    
    
    1,531
    
    
    
    79,410
    
    
    
    77,502
    
    
    
    1,567
    
    
    
    79,069Operating income (loss)
    
    
    (1,940
    )
    
    
    (713
    )
    
    
    (2,653
    )
    
    
    1,767
    
    
    
    (776
    )
    
    
    991Other income (expense):Interest expense
    
    
    (4,550
    )
    
    
    
    
    
    
    (4,550
    )
    
    
    (4,029
    )
    
    
    
    
    
    
    (4,029
    )Other income, net
    
    
    284
    
    
    
    (238
    )
    
    
    46
    
    
    
    348
    
    
    
    (286
    )
    
    
    62Loss before income taxes
    
    
    (6,206
    )
    
    
    (951
    )
    
    
    (7,157
    )
    
    
    (1,914
    )
    
    
    (1,062
    )
    
    
    (2,976
    )Income tax benefit
    
    
    (2,715
    )
    
    
    
    
    
    
    (2,715
    )
    
    
    (1,167
    )
    
    
    
    
    
    
    (1,167
    )Net loss
    
    $
    (3,491
    )
    
    $
    (951
    )
    
    $
    (4,442
    )
    
    $
    (747
    )
    
    $
    (1,062
    )
    
    $
    (1,809
    )Net loss per share
    
    $
    (0.19
    )
    
    $
    (0.05
    )
    
    $
    (0.24
    )
    
    $
    (0.04
    )
    
    $
    (0.06
    )
    
    $
    (0.10
    )Weighted-average shares outstanding
    
    
    18,345
    
    
    
    18,345
    
    
    
    18,345
    
    
    
    18,054
    
    
    
    18,054
    
    
    
    18,054EBITDA
    
    $
    8,753
    
    
    $
    (951
    )
    
    $
    7,802
    
    
    $
    12,378
    
    
    $
    (1,062
    )
    
    $
    11,316
  20




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##### Table of Contents



Income Taxes
  Liquidity and Capital Resources
     June 30,
    
    
    December 31,2010
    
    
    2009Consolidated balance sheet data (in thousands):Cash and cash equivalent
    
    $
    3,146
    
    
    $
    3,885Working capital (1)
    
    $
    (7,590
    )
    
    $
    (1,129
    )Property and equipment, net
    
    $
    279,469
    
    
    $
    285,782Total assets
    
    $
    346,890
    
    
    $
    350,636Total long-term debt
    
    $
    99,752
    
    
    $
    106,322Debentures due Red Lion Hotels Capital Trust
    
    $
    30,825
    
    
    $
    30,825Total liabilities
    
    $
    174,731
    
    
    $
    175,614Total stockholders equity
    
    $
    172,153
    
    
    $
    175,022
 
 (1)
    
    Represents current assets less current liabilities.  21




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##### Table of Contents



Operating Activities
  Investing Activities
   Financing Activities
    22




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##### Table of Contents



Contractual Obligations
  Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 yearsLong-term debt(1)
    
    $
    112,747
    
    
    $
    9,154
    
    
    $
    54,444
    
    
    $
    49,149
    
    
    $
    Operating leases(2)
    
    
    53,186
    
    
    
    7,831
    
    
    
    11,681
    
    
    
    9,344
    
    
    
    24,330Service agreements
    
    
    1,879
    
    
    
    655
    
    
    
    1,034
    
    
    
    190
    
    
    
    Debentures due Red LionHotels Capital Trust(1)
    
    129,413
    
    
    2,928
    
    
    5,857
    
    
    5,857
    
    
    114,771Total contractual obligations(3)
    
    $
    297,225
    
    
    $
    20,568
    
    
    $
    73,016
    
    
    $
    64,540
    
    
    $
    139,101
 
 (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 $11.9 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 Contracts
  Off-balance Sheet Arrangements
  23




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##### Table of Contents



Critical Accounting Policies and Estimates
   New Accounting Pronouncements
 Variable Interest Entities
   Fair Value Measurements
 
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  24




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##### Table of Contents



2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueLong-term debtFixed rate
    
    $
    1,600
    
    
    $
    46,274
    
    
    $
    1,975
    
    
    $
    49,903
    
    
    $
    
    
    
    $
    
    
    
    $
    99,752
    
    
    $
    96,221Average interest
rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.9
    %Debentures due Red LionHotels Capital Trust
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30,825
    
    
    $
    30,825
    
    
    $
    30,574Average interest
rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.5
    %
 
 Item 4.
    
    Controls and Procedures
   25




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##### Table of Contents



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.
    
    Reserved
 
 Item 5.
    
    Other Information
  26




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##### Table of Contents



Item 6.
    
    Exhibits
 Index to Exhibits
 ExhibitNumber
    
    Description31.1
    
    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)
 27




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##### Table of Contents



SIGNATURES
  Red Lion Hotels Corporation
Registrant Signature
    
    Title
    
    DateBy:
    
    /s/ Jon E. Eliassen
    
    President and Chief Executive Officer
    
    August 5, 2010Jon E. Eliassen
    
    (Principal Executive Officer)By:
    
    /s/ Anthony F. Dombrowik
    
    Senior Vice President, Chief Financial Officer
    
    August 5, 2010Anthony F. Dombrowik
    
    (Principal Financial and Accounting Officer)
 28