8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

June 16, 2011 (June 14, 2011)
Date of Report (Date of earliest event reported)

RED LION HOTELS CORPORATION

(Exact Name of Registrant as Specified in Charter)

Washington	001-13957	91-1032187
(State or Other Jurisdiction of Incorporation)	(Commission file number)	(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
(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets

On June 14, 2011, WHC809, LLC, a more than 99% indirectly owned subsidiary of the registrant, completed the previously announced sale of the Red Lion Hotel on Fifth Avenue in Seattle, Washington to Lowe Enterprises Investors (the “Purchaser”), an affiliate of Lowe Enterprises. The hotel was purchased for $71 million in cash. The Purchaser entered into a franchise agreement with Red Lion Hotels Franchising, Inc. at closing and will operate the hotel under the Red Lion® brand. It is anticipated that Destination Hotels & Resorts, a wholly owned subsidiary of Lowe Enterprises, will manage the hotel following the closing.

A copy of the June 15, 2011 press release announcing the closing of the sale of the hotel is included as Exhibit 99.1 to this report.

Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement

Immediately following the sale of the hotel described in Item 2.02, the registrant repaid the entire $28 million principal balance then outstanding under its revolving credit agreement with KeyBank National Association, as required by the terms of that agreement.

Item 9.01 Financial Statements and Exhibits.

(b) Pro Forma Financial Information.

Attached hereto as Exhibit 99.2 and incorporated by reference herein is unaudited pro forma consolidated financial information of the registrant that gives effect to (i) the sale of the hotel and the related franchise agreement described in Item 2.01 of this Form 8-K, and (ii) the repayment of the entire principal balance outstanding under the registrant’s revolving credit facility with KeyBank National Association.

(d) Exhibits.

Exhibit No.	Exhibit
99.1	Press Release dated June 15, 2011
99.2	Unaudited pro forma consolidated financial information

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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.

	RED LION HOTELS CORPORATION
Dated: June 16, 2011	By:	/s/ Thomas L. McKeirnan
		Thomas L. McKeirnan
		Senior Vice President, General Counsel and Secretary

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EX-99.1

Exhibit 99.1

Contact: Pam Scott
Red Lion Hotels Corporation
509-777-6393 (d)
509-570-4610 (c)
Pam.Scott@redlion.com
www.RedLion.com

Sale Closes on Red Lion Hotel Fifth Avenue Seattle

Lowe Enterprises Investors completes acquisition of the property

Spokane, WA, June 14, 2011 — Red Lion Hotels Corporation (NYSE: RLH) announced today that it closed the previously announced sale of the Red Lion Hotel on Fifth Avenue in Seattle, WA. The property was purchased for $71 million, or approximately $239,000 a key, by an affiliate of Lowe Enterprises Investors (LEI).

At closing, LEI entered into a franchise agreement with Red Lion Hotels Franchising, Inc. to continue to operate the property as a Red Lion hotel, managed by LEI affiliate, Destination Hotels & Resorts. The company also entered into an affiliation agreement with a subsidiary of Destination Hotels & Resorts to facilitate the cross-promotion of hotels between the companies.

“This transaction is very positive for Red Lion. It allows the Red Lion brand to continue on a flagship hotel in downtown Seattle and allows us to deploy the hotel’s equity to recapitalize our balance sheet and reinvest in our hotels and brand,” said Jon E. Eliassen, President and Chief Executive Officer of Red Lion Hotels Corporation. “We know that the Red Lion Hotel Fifth Avenue will continue to provide the highest level of service to our guests under the management of Destination Hotels & Resorts.”

“The ability to add guest rooms and to expand the available meeting space creates the opportunity to increase revenue. Meeting space, such as we plan, which will be designed with the most modern technologies, high-end finishes and flexible configuration, will attract the abundant corporate meeting business that already exists in the market. And given the hotel’s recent high quality renovations and its attractive location, the Red Lion will have a competitive advantage over other existing nearby options,” said Charlie Peck, president of Destination Hotels & Resorts. “The Red Lion name carries with it a long tradition as a great brand in downtown Seattle.”

The 297-room property is centrally located in downtown Seattle, just a few blocks from Pike Place Market and the Washington State Convention Center. Red Lion Hotels Corporation announced in January 2011 it was listing the hotel for sale. Chris Burdett of CBRE Hotels in Seattle represented Red Lion in the sale.

About Red Lion Hotels Corporation:

Red Lion Hotels Corporation is a hospitality and leisure Company primarily engaged in the ownership, operation and franchising of midscale hotels under its Red Lion® brand. As of March 31, 2011, the RLH hotel network was comprised of 45 hotels located in eight states and one Canadian province, with 8,630 rooms and 429,797 square feet of meeting space. The Company also owns and operates an entertainment and event ticket distribution business. For more information, please visit the Company’s website at www.redlion.com.

About Lowe Enterprises Investors

Lowe Enterprises Investors (LEI) is owned by a strategic partnership of The Guardian Life Insurance Company of America, Lowe Enterprises, Inc. and senior members of the LEI management team. LEI provides real estate investment management services on behalf of a select list of institutional and high net worth clients and partners through both individually managed and commingled fund relationships. The firm has been responsible for $6 billion in real estate assets, including commercial, hospitality and debt investments, since inception in the late 1980s. LEI has been a leading value-added investor through multiple cycles, employing equity and structured debt in its investment strategies. For more information about LEI, please visit: www.LoweInvestors.com

About Destination Hotels & Resorts

Destination Hotels & Resorts began in 1972 with the development and management of condominium resorts. Since then, the company has been consistently ranked as one of the top 10 hospitality and property management companies in the country (ranked by Hotel Business Magazine), with more than 7,100 employees, over 7,000 hotel rooms and condominium units, and more than $2.2 billion in assets under management. Destination Hotels & Resorts is a wholly owned subsidiary of Los Angeles-based Lowe Enterprises, a privately-held, national real estate organization active in commercial and hospitality property investment, management and development. For more information, please visit the company’s website, www.destinationhotels.com.

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EX-99.2

Exhibit 99.2

RED LION HOTELS CORPORATION UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION

     The following unaudited pro forma consolidated financial information gives effect to (a) the sale of the hotel and the related franchise agreement described in Item 2.01 of this Form 8-K, and (b) the repayment of the entire principal balance outstanding under the registrant’s revolving credit facility with KeyBank National Association (collectively, the “Transactions”).

     The following unaudited pro forma consolidated balance sheet as of March 31, 2011 gives effect to the Transactions as if they were consummated on March 31, 2011. The information included in this unaudited pro forma consolidated balance sheet was derived from the registrant’s unaudited March 31, 2011 historical consolidated balance sheet included in its Quarterly Report filed on Form 10-Q for the quarter ended March 31, 2011.

     The following unaudited pro forma consolidated statement of operations for the fiscal year ended December 31, 2010 gives effect to the Transactions as if they were consummated at the beginning of that fiscal year. The information included in this unaudited pro forma consolidated statement of operations was derived from the registrant’s historical audited consolidated statement of operations for the fiscal year ended December 31, 2010, which was included in the registrant’s Annual Report filed on Form 10-K for the fiscal year ended December 31, 2010.

     The following unaudited pro forma consolidated statement of operations for the three months ended March 31, 2011 gives effect to the Transactions as if they were consummated at the beginning of that three-month period. The information included in this unaudited pro forma consolidated statement of operations was derived from the registrant’s consolidated statement of operations for the three months ended March 31, 2011, which was included in the registrant’s Quarterly Report filed on Form 10-Q for the quarter ended March 31, 2011.

     The historical consolidated financial information has been adjusted to give effect to pro forma events that are directly attributable to the Transactions, are factually supportable and, in the case of the pro forma consolidated statements of operations, have a recurring impact. The following unaudited pro forma consolidated financial information has been prepared by management of the registrant for illustrative purposes only. The unaudited pro forma consolidated financial information is not intended to represent or be indicative of the registrant’s financial position or results of operations in future periods or the results that actually would have been realized had the registrant not included the business operations of its Red Lion Hotel on Fifth Avenue property during the specified periods.

     The assumptions and estimates used and pro forma adjustments derived from such assumptions and estimates are based on currently available information. Management of the registrant believes such assumptions and estimates are reasonable under the circumstances. The unaudited pro forma consolidated financial information, including the notes thereto, is qualified in its entirety by reference to, and should be read in conjunction with, the historical consolidated financial statements of the registrant included in its Form 10-K filed with the SEC on March 16, 2011 and its Form 10-Q filed with the SEC on May 9, 2011.

RED LION HOTELS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2011

(Amounts in thousands)

	Historical
	Consolidated			Sale of
	Red Lion Hotels			Red Lion Hotel on			Unaudited
	Corporation			Fifth Avenue			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	5,607		$	(137	)(1)	$	49,009
					43,539	(3)
Restricted cash		4,792			(38	)(1)		4,754
Accounts receivable, net		5,992			(202	)(1)		5,790
Inventories		1,322			(54	)(1)		1,268
Prepaid expenses and other		1,920			(50	)(1)		1,870
Deferred income taxes		7,377			(4,651	)(4)		2,726
Assets held for sale		43,944			(34,138	)(1)		9,806
Total current assets		70,954			4,269			75,223
Property and equipment, net		229,458			—			229,458
Goodwill		22,730			—			22,730
Intangible assets, net		7,972			—			7,972
Other assets, net		6,732			(895	)(5)		5,837
Total assets	$	337,846		$	3,374		$	341,220
LIABILITIES
Current liabilities:
Accounts payable	$	5,504		$	(58	)(1)	$	5,446
Income Taxes Payable		—			8,827	(4)		8,827
Accrued payroll and related benefits		3,239			(150	)(1)		3,089
Accrued interest payable		291			—			291
Advance deposits		1,079			(102	)(1)		977
Other accrued expenses		11,991			(327	)(1)		11,664
Revolving credit facility, due within one year		25,000			(25,000	)(6)		—
Current portion of long-term debt		24,928			—			24,928
Total current liabilities		72,032			(16,810	)		55,222
Long-term debt, due after one year		51,391			—			51,391
Deferred income		5,015			—			5,015
Deferred income taxes		11,789			—			11,789
Debentures due Red Lion Hotels Capital Trust		30,825			—			30,825
Total liabilities		171,052			(16,810	)		154,242
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Red Lion Hotels Corporation stockholders’ equity
Preferred stock - 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding		—			—			—
Common stock - 50,000,000 shares authorized; $0.01 par value; 18,993,267 shares issued and outstanding		190			—			190
Additional paid-in capital, common stock		147,633			—			147,633
Retained earnings		18,975			20,184	(12)		39,159
Total Red Lion Hotels Corporation stockholders’ equity		166,798			20,184			186,982
Noncontrolling interest		(4	)		—			(4	)
Total equity		166,794			20,184			186,978
Total liabilities and stockholders’ equity	$	337,846		$	3,374		$	341,220

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RED LION HOTELS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010

(Amounts in thousands, except per share data)

	Historical
	Consolidated			Sale of
	Red Lion Hotels			Red Lion Hotel on			Unaudited
	Corporation			Fifth Avenue			Pro Forma
Revenue:
Hotels	$	148,568		$	(14,279	)(2)	$	134,289
Franchise		3,209			669	(7)		3,878
Entertainment		9,236			—			9,236
Other		2,481			—			2,481
Total revenues		163,494			(13,610	)		149,884
Operating expenses:
Hotels		116,574			(9,465	)(2)		107,216
					107	(8)
Franchise		3,118			396	(7)		3,514
Entertainment		7,769			—			7,769
Other		1,598			—			1,598
Depreciation and amortization		20,885			(1,851	)(2)		18,803
					(231	)(9)
Impairment Loss		5,733			—			5,733
Hotel facility and land lease		5,840			—			5,840
Gain (loss) on asset dispositions, net		(25	)		(2	)(2)		(27	)
Undistributed corporate expenses		6,304			—			6,304
Total expenses		167,796			(11,046	)		156,750
Operating income (loss)		(4,302	)		(2,564	)		(6,866	)
Other income (expense):
Interest expense		(9,073	)		843	(10)		(8,230	)
Other income, net		409			—			409
Income (loss) before taxes		(12,966	)		(1,721	)		(14,687	)
Income tax expense (benefit)		(4,736	)		(627	)(11)		(5,363	)
Net income (loss) from continuing operations		(8,230	)		(1,094	)		(9,324	)
Less: Net income (loss) attributable to noncontrolling interest		10			(10	)(2)		—
Net income (loss) from continuing operations attributable to Red Lion Hotels Corporation	$	(8,220	)	$	(1,104	)	$	(9,324	)
Earnings per share — basic and diluted
Net income (loss) from continuing operations	$	(0.45	)				$	(0.50	)
Weighted average shares -basic and diluted		18,485						18,485

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RED LION HOTELS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011

(Amounts in thousands, except per share data)

	Historical
	Consolidated			Sale of
	Red Lion Hotels			Red Lion Hotel on			Unaudited
	Corporation			Fifth Avenue			Pro Forma
Revenue:
Hotels	$	30,158		$	(2,841	)(2)	$	27,317
Franchise		707			135	(7)		842
Entertainment		2,800			—			2,800
Other		607			—			607
Total revenues		34,272			(2,706	)		31,566
Operating expenses:
Hotels		27,169			(2,143	)(2)		25,054
					28	(8)
Franchise		894			85	(7)		979
Entertainment		2,614			—			2,614
Other		393			—			393
Depreciation and amortization		5,306			(457	)(2)		4,523
					(326	)(9)
Hotel facility and land lease		2,111			—			2,111
Gain (loss) on asset dispositions, net		(86	)		—			(86	)
Undistributed corporate expenses		1,344			—			1,344
Total expenses		39,745			(2,813	)		36,932
Operating income (loss)		(5,473	)		107			(5,366	)
Other income (expense):
Interest expense		(2,301	)		283	(10)		(2,018	)
Other income, net		4			—			4
Income (loss) before taxes		(7,770	)		390			(7,380	)
Income tax expense (benefit)		(2,999	)		151	(11)		(2,848	)
Net income (loss)		(4,771	)		239			(4,532	)
Less: Net income (loss) attributable to noncontrolling interest		10			(1	)(2)		9
Net income (loss) attributable to Red Lion Hotels Corporation	$	(4,761	)	$	238		$	(4,523	)
Earnings per share — basic and diluted
Net income (loss)	$	(0.25	)				$	(0.24	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(0.25	)				$	(0.24	)
Weighted average shares -basic and diluted		18,974						18,974

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RED LION HOTELS CORPORATION
ADJUSTMENTS TO UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(1) These adjustments reflect the elimination of the assets transferred and liabilities assumed by the buyer.

(2) These adjustments reflect the elimination of the operating results of the Red Lion Hotel on Fifth Avenue.

(3) Reflects cash proceeds received at the closing of the sale of $71 million, net of estimated transaction and selling costs, and the repayment of the principal balance outstanding under the registrant’s revolving credit facility. The credit facility was secured by the hotel sold and the registrant was required to repay the outstanding principal balance with proceeds from the sale.

(4) Reflects the tax impact of the sale on income taxes payable and deferred income taxes. It is estimated that the sale will result in income taxes payable of approximately $8.8 million after utilizing net operating loss carry forwards and credits, the impact of which can be seen in the adjustment to deferred income taxes. Note that the pro forma tax adjustments are subject to further refinement and adjustment based on a more comprehensive tax analysis and review. Such income taxes payable are reflected as an adjustment in the pro forma consolidated balance sheet as of March 31, 2011. However, as the charge is non-recurring, such amount is not reflected in the pro forma consolidated statements of operations for any periods presented.

(5) To record the reduction of deferred financing costs associated with the credit facility.

(6) To record the repayment of the principal balance outstanding under the credit facility.

(7) To record franchise revenue and expense associated with operating the hotel as a franchise.

(8) To record the retained corporate expenses previously allocated to this hotel.

(9) To record the reduction of loan fee amortization expense related to the credit facility.

(10) To record elimination of interest expense under the credit facility.

(11) Adjustment to reflect the income tax effect of the pro forma adjustments at the applicable tax rates.

(12) To record the impact of adjustments made, including the gain on sale. The estimated gain, net of tax, has been included as an adjustment to retained earnings but has not been reflected in the pro forma consolidated statements of operations as it is non-recurring in nature.

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