<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported)
October 16, 1996
DELAWARE 0-34392 56-0762415
(State or Other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation
410 North 44th Street, Suite 700
Phoenix, Arizona 85009
(Address of principal executive offices)
Registrant's telephone number, including area code:
(802) 220-6666
------------------
================================================================================
<PAGE> 2
ITEM 5. OTHER EVENTS.
On October 16, 1996, Doubletree Corporation, a Delaware corporation (the
"Company"), issued a press release regarding, among other things, the
consolidated financial condition of the Company and its subsidiaries as of
September 30, 1996 and the results of operations thereof for the period
then ended. A copy of such press release is filed as Exhibit 99.1 and is
incorporated herein by reference.
As previously announced, the Company has agreed to acquire Red Lion
Hotels, Inc., a Delaware corporation ("Red Lion"). On October 16, 1996, Red
Lion, issued a press release regarding, among other things, the consolidated
financial condition of Red Lion and its subsidiaries as of September 30, 1996,
and the results of operations thereof for the period then ended. A copy of such
press release is filed as Exhibit 99.2 and is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
99.1 Press Release of Doubletree Corporation dated October
16, 1996.
99.2 Press Release of Red Lion dated October 16, 1996.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DOUBLETREE CORPORATION
/s/ William L. Perocchi
-----------------------
William L. Perocchi
Executive Vice President, Chief
Financial Officer and Treasurer
Dated: October 16, 1996
<PAGE> 1
EXHIBIT 99.1
DOUBLETREE CORPORATION
410 North 44th Street
Suite 700
Phoenix, Arizona 85008
602 220-6666
FOR IMMEDIATE RELEASE
Contact: William L. Perocchi
Executive VP & CFO
Phone: (602) 220-6810
DOUBLETREE ANNOUNCES THIRD QUARTER NET INCOME
UP 51 PERCENT
PHOENIX, OCTOBER 16, 1996 -- Doubletree Corporation (NASDAQ: TREE), a
leading hotel management and franchise company, announced results for the third
quarter of 1996. Net income of $8.0 million increased 51 percent over pro forma
third quarter 1995 results. Earnings per share were 34 cents compared to 24
cents in the year-ago pro forma period, a gain of 42 percent. Revenues
increased 30 percent to $68.6 million.
On February 27, 1996, the Company acquired all of the outstanding stock
of RFS, Inc. (RFS), a privately-held hotel operator, in exchange for
approximately 2.7 million shares of the Company's common stock. The business
combination was accounted for as a pooling-of-interests combination and,
accordingly, the Company's 1995 financial results have been restated to include
the results of RFS. Also, RFS, as a Subchapter S corporation, was generally not
liable for income taxes during 1995. A pro forma adjustment to increase RFS's
provision for income taxes to the Company's effective tax rate of 35 percent,
has been reflected in the pro forma 1995 results.
In the third quarter of 1996, the average room rate at the Company's
comparable hotels managed under the Doubletree brand increased 10.8 percent
from the year-ago period to $96, and occupancy improved one percentage point to
76 percent, resulting in a 12.2 percent increase in revenue per available room
(REVPAR) for the quarter. Comparable hotels managed under other franchisors'
brands or as independents experienced an 8.8 percent increase in average room
rate to $78 for the third quarter of 1996 over the prior year period and
occupancy was essentially flat at 80 percent, resulting in an 8.1 percent
increase in REVPAR for the quarter.
-more-
<PAGE> 2
Doubletree Third Quarter Results
Page 2
For the first nine months of 1996, Doubletree reported a 44 percent
increase in net income to $20.4 million and a 38 percent increase in earnings
per share to 88 cents over the comparable pro forma 1995 period. Nine month
revenues increased 29 percent to $186.0 million from $144.2 million in the
comparable 1995 period.
During the first nine months of 1996, the average room rate at the
Company's comparable hotels managed under the Doubletree brand increased 8.6
percent from the year-ago period to $96, and occupancy improved one and
one-half percentage points to 75 percent, resulting in a 10.8 percent increase
in REVPAR. Comparable hotels managed under other franchisors' brands or as
independents experienced a 7.2 percent increase in average room rate to $74 for
the first nine months of 1996 over the prior year period and occupancy
increased nearly one percentage point to 78 percent, resulting in an 8.3
percent increase in REVPAR.
The Company added eight new contracts totaling 1,890 rooms during the
third quarter and terminated three contracts totaling 686 rooms, resulting in a
net addition of five contracts aggregating 1,204 rooms. For the first nine
months of 1996, the Company added 68 contracts totaling 11,821 rooms (net of
terminations and including the RFS acquisition of 50 contracts totaling 6,979
rooms). As of September 30, 1996, the Company had a portfolio of 184 properties
totaling 42,436 rooms under management contract or franchise agreement. This
represents a 41 percent increase in the number of rooms compared to September
30, 1995 and an 18 percent increase excluding the RFS acquisition.
In addition, the Company announced on September 12, 1996 that it had
entered into a definitive agreement to acquire Red Lion Hotels, Inc. ("Red
Lion")(NYSE:RL) in a cash-and-stock merger valued at approximately $1.2
billion including the assumption of approximately $200 million of debt. As
of September 30, 1996, Red Lion operated 56 hotels containing approximately
14,900 rooms. Red Lion has
-more-
<PAGE> 3
Doubletree Third Quarter Results
Page 3
called a special meeting of its stockholders to be held on Friday, November 8,
1996 to vote on the proposed merger transaction. Assuming that the proposed
merger transaction is approved by Red Lion's stockholders and assuming that all
other closing conditions have been satisfied, the Company expects to close the
proposed merger transaction as soon as practicable after Red Lion's special
stockholders' meeting.
Doubletree Corporation is a leading hotel management company and is the
exclusive franchisor of Doubletree Hotels, Doubletree Guest Suites and Club
Hotels by Doubletree hotel brands.
###
<PAGE> 4
DOUBLETREE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1996 1995 1996 1995
Actual Pro Forma(a) Actual Pro Forma(a)
------- ------------ -------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Management and franchise fees $ 9,739 $ 7,695 $ 28,258 $ 22,231
Owned hotel revenues 1,993 1,892 5,972 5,200
Leased hotel revenues 51,380 38,794 137,701 104,328
Purchasing and service fees 4,215 4,064 11,800 11,542
Other fees and income 1,261 448 2,233 941
------- ------- -------- --------
Total revenues 68,588 52,893 185,964 144,242
------- ------- -------- --------
OPERATING COSTS AND EXPENSES:
General and administrative 4,170 3,735 12,811 10,841
Owned hotel expenses 1,523 1,467 4,740 4,403
Leased hotel expenses 47,418 36,257 127,153 97,265
Purchasing and service expenses 3,046 3,338 8,694 9,684
Depreciation and amortization 1,477 1,196 4,417 3,252
------- ------- -------- --------
Total operating costs and expenses 57,634 45,993 157,815 125,445
------- ------- -------- --------
Operating income 10,954 6,900 28,149 18,797
Interest expense (32) (49) (175) (181)
Interest income 1,388 1,236 3,478 3,094
------- ------- -------- --------
Income before income taxes and minority
interest 12,310 8,087 31,452 21,710
Minority interest share of net loss 28 84 6 77
------- ------- -------- --------
Income before income taxes 12,338 8,171 31,458 21,787
Income tax expense 4,318 2,860 11,011 7,625
------- ------- -------- --------
Net income $ 8,020 $ 5,311 $ 20,447 $ 14,162
======= ======= ======== ========
Earnings per share $ 0.34 $ 0.24(a) $ 0.88 $ 0.64(a)
------- ------- -------- --------
Weighted average common and
common equivalent shares outstanding 23,879 22,443 23,183 22,137
======= ======= ======== ========
</TABLE>
(a) On February 27, 1996, the Company acquired the outstanding common stock of
RFS, Inc. (RFS), a privately-held hotel operator, in exchange for approximately
2.7 million shares of the Company's common stock. The business combination was
accounted for as a pooling-of-interests combination and, accordingly, the
Company's 1995 financial results have been restated to include the results of
RFS. Also, RFS, as a Subchapter S corporation, was generally not liable for
income taxes during 1995. A pro forma adjustment to increase the provision for
income taxes by $297,000 and $833,000 to the Company's effective tax rate of
35%, has been reflected in the 1995 pro forma results for the quarter and nine
months ended September 30, 1995, respectively.
<PAGE> 1
EXHIBIT 99.2
TUESDAY OCTOBER 15 6:56 PM EDT
RED LION HOTELS, INC. REPORTS 24 PERCENT INCREASE IN THIRD QUARTER EARNINGS
VANCOUVER, Wash., Oct. 15 /PRNewswire/ -- Red Lion Hotels, Inc. today reported
its net income increased 24 percent to $15.1 million, or $.48 per share, in the
third quarter of 1996. In the comparable quarter of 1995, Red Lion earned pro
forma net income of $12.1 million, or $.39 per share.
For the nine months ended September 30, 1996, Red Lion's net income increased
28 percent to $33.9 million, or $1.08 per share. Red Lion earned pro forma net
income of $26.5 million, or $.85 per share, for the first nine months of 1995.
Increasing revenues and operating margins combined with lower net interest
costs contributed most of the earnings improvement in both periods.
"I am pleased to report another strong quarter for Red Lion," said David J.
Johnson, Red Lion's chairman and chief executive officer. "Our ongoing record of
operating and financial success continues to reflect Red Lion's commitment to
customer service, strong market position and a culture of high individual
performance."
Revenues for the third quarter of 1996 increased 9.5 percent to $141.8 million,
compared to pro forma revenues of $129.5 million for the third quarter of 1995.
Revenue per available room (REVPAR) increased 5.2 percent to $65.32. Red Lion's
average daily rate rose 7.1 percent to $82.39 in the third quarter of 1996,
while occupancy decreased 1.4 percentage points to 79.3 percent.
Gross operating profit margin improved to 40.1 percent in the third quarter of
1996, compared to 39.7 percent in the comparable period of 1995. Operating
income for the third quarter of 1996 increased to $29.4 million, compared to
pro forma operating income of $10.4 million in the third quarter of 1995.
Expenses resulting from Red Lion's formation and offering(1) reduced the 1995
operating income, but had no material impact on net income due to a related
deferred tax benefit which substantially offset those expenses.
During the third quarter of 1996, Red Lion completed the previously announced
acquisitions of hotels in Houston, Texas and Modesto, California. These
acquisitions did not materially affect Red Lion's third
<PAGE> 2
quarter results.
For the first nine months of 1996, revenues increased 8.0 percent to $399.8
million, compared to pro forma revenues of $370.3 million for the comparable
period of 1995. REVPAR for the first nine months of 1996 increased 4.9 percent
to $59.59. Red Lion's average daily rate for the first nine months increased
6.7 percent to $80.72, and occupancy declined 1.3 percentage points to 73.8
percent.
Gross operating profit margin for the first nine months of 1996 increased to
37.3 percent, compared to 36.3 percent in the comparable period of 1995.
Operating income increased to $68.1 million for the first nine months of 1996,
compared to pro forma operating income of $42.8 million in the comparable
period of 1995.
Headquartered in Vancouver, Washington, Red Lion Hotels, Inc. is a leading full
service hospitality company operating 56 hotels containing 14,859 rooms in the
western United States. In September 1996, Red Lion agreed to be acquired by
Doubletree Corporation in a cash-and-stock merger valued at approximately $1.2
billion. The transaction is expected to close prior to year-end 1996.
Note: Statements in this press release which are not strictly historical are
"forward-looking" and are subject to risks and uncertainties which affect the
Company's business. Those uncertainties would include such factors as general
business conditions and growth in the hospitality industry, the balance between
supply and demand for hotel rooms, competition for hotel acquisitions,
continued access to financial markets and other factors as described in the
Company's filings with the Securities and Exchange Commission.
CONTACT: Randall Oliver, Investor Relations (360) 750-4347
RED LION HOTELS, INC.
Consolidated Statements of Income
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
Actual Pro Forma(1) Actual Pro Forma(1)
<S> <C> <C> <C> <C>
REVENUES
Rooms $ 88,572 $ 79,248 $236,017 $215,166
Food and beverage 38,889 38,128 120,278 118,921
Other 14,377 12,094 43,510 36,208
Total revenues 141,838 129,470 399,805 370,295
OPERATING COSTS AND EXPENSES
Departmental direct expenses
Rooms 20,428 17,941 57,419 51,475
Food and beverage 30,715 29,587 94,349 93,060
Other 4,920 4,578 14,999 13,738
Property indirect expenses 28,841 26,023 84,004 77,583
Other costs 8,303 8,882 26,331 25,836
Depreciation and amortization 5,470 4,646 14,637 14,530
Payments due to owners of
managed hotels 13,805 12,733 39,983 36,591
Expenses resulting from
Formation and Offering -- 14,662 -- 14,662
OPERATING INCOME 29,356 10,418 68,083 42,820
EQUITY (LOSS) IN EARNINGS
OF UNCONSOLIDATED
JOINT VENTURES (146) 196 1,277 1,885
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C>
INTEREST EXPENSE, NET (3,987) (4,572) (11,766) (14,613)
INCOME BEFORE JOINT
VENTURERS' INTEREST 25,223 6,042 57,594 30,092
INCOME ATTRIBUTABLE TO JOINT
VENTURERS' INTERESTS (376) (304) (1,354) (463)
INCOME BEFORE INCOME TAXES 24,847 5,738 56,240 29,629
INCOME TAX BENEFIT (EXPENSE) (9,739) 6,409 (22,296) (3,147)
NET INCOME $15,108 $12,147 $ 33,944 $ 26,482
EARNINGS PER COMMON SHARE $ 0.48 $ 0.39 $ 1.08 $ 0.85
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 31,312,600 31,312,500 31,312,500 31,312,500
</TABLE>
<TABLE>
<CAPTION>
At September 30,
1996 1995
<S> <C> <C>
SUMMARY OPERATING DATA
Number of Hotels: (2)
Owned Hotels 24 21
Management Contracts 15 15
Leased Hotels 17 17
Total 56 53
Number of Rooms: (2)
Owned Hotels 5,983 5,117
Management Contracts 4,887 4,777
Leased Hotels 3,989 3,989
Total 14,859 13,883
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
Actual Pro Forma(1)
<S> <C> <C>
EBITDA (3) $85,627 $59,872
</TABLE>
(1) On August 1, 1995, Red Lion, a California Limited Partnership (the
"Partnership") operating 53 hotels, contributed substantially all of its assets
(excluding 17 hotels, the "Leased Hotels," and certain other assets) and
certain liabilities to Red Lion Hotels, Inc. (the "Formation"). Also effective
August 1, 1995, Red Lion Hotels, Inc. entered into a long-term master lease
with the Partnership for the Leased Hotels. Pro forma results reported above
represent the actual results of Red Lion Hotels, Inc. since March 1, 1995, plus
the Partnership's historical results for the first quarter of 1995, which have
been adjusted to give effect to the Formation, the leasing of the Leased Hotels
and the repayment and refinancing of substantially all debt with borrowings
under a new credit facility and the net proceeds of the public offering (the
"Offering"), assuming that such events were completed on January 1, 1995.
Income taxes have been provided on a pro forma basis assuming an effective tax
rate of 40%. Common shares outstanding is based on the number of shares of
common stock outstanding after the Offering (including 1,312,500 shares issued
to cover over allotments) plus 350,000 shares issued in connection with the
termination of an incentive unit plan.
(2) The information reflects the 17 Red Lion Leased Hotels, which were owned
prior to August 1, 1995, as if the hotels were leased on each date presented.
(3) EBITDA represents earnings before interest expense, income taxes, income
(loss) attributable to joint venturers' interest, depreciation and amortization
and certain other non-cash charges. EBITDA is not intended to represent cash
flow operations as defined by GAAP, and such information should not be
considered as an alternative to net income, cash flow from operations or any
other measure of performance prescribed by GAAP. EBITDA is included herein
because management believes that certain investors find it to be a useful tool
for measuring the ability to service debt. SOURCE Red Lion Hotels, Inc.
