GlobeNewswire Inc | Nov 4, 2020 04:05PM EST

November 04, 2020

Year-Over-Year Franchisee Retention Improved 33%Launched GuestHouse Extended Stay Brand

DENVER, Nov. 04, 2020 (GLOBE NEWSWIRE) -- Red Lion Hotels Corporation (RLHC, Red Lion, the Company) (NYSE: RLH), a hospitality company doing business as RLH Corporation that franchises midscale and economy hotels, today reported third quarter 2020 results and provided an update regarding financial and operational activities.

Third Quarter Financial Results

Red Lion reported a net loss of $(3.1) million, or $(0.12) per share compared to a net loss of $(3.7) million or $(0.15) per share the prior year period. Adjusted EBITDA was $1.5 million compared to $5.9 million for the same period in 2019. Core Adjusted EBITDA, which excludes company operated hotels and reflects Red Lions primary franchise business, was $1.2 million, compared to $1.9 million in the prior year third quarter.

Red Lions balance sheet remained strong with cash and cash equivalents totaling $34.1 million on September 30.

The 2020 financial results reflect reductions in revenue and Adjusted EBITDA from the sale of four company-owned hotels, franchise agreement terminations, as well as the effects of reduced travel due to COVID-19.

Red Lion CEO John Russell stated, We are pleased with the performance of our brands in the third quarter as they outperformed their competitive sets on RevPAR index as reported by STR. With our franchisees concentrated in drive-to markets, our hotels benefitted from increased travel during the summer months as shelter-in-place restrictions lifted. To help our franchisees drive future profitability, we have continued to enhance our franchise support, including a new more user-friendly revenue-generating program, expanded marketing opportunities, and local sales solutions. Activities such as these contributed to our improved year-over-year franchisee retention.

Mr. Russell continued, We are excited that our brand reputation scores have improved across all of our brands, with the strongest gains from Americas Best Value Inn, Canadas Best Value Inn, and Knights Inn. We are also pleased to have our ABVI brand ranked #2 by JD Power for all economy brands. We are focusing our efforts on ensuring the continued success of our franchisees while also maintaining financial discipline through cost controls initiated at the beginning of the year. We are encouraged by our progress particularly in light of the ongoing impact of the pandemic.

Operating Summary

Through the end of the third quarter, RLHC signed 129 franchise agreements including adding 23 new franchised locations. Progress on ROAR initiatives and the introduction of additional franchise support tools and marketing programs continue to contribute to improved retention rates, with 33% and 26% fewer franchisees leaving the brand than in the prior year third quarter and year to date, respectively. During the quarter, RLHC relaunched GuestHouse International as GuestHouse Extended Stay, targeting efforts to meet demand for longer stays with an economy offering. The Company also launched new franchising initiatives for Americas Best Value Inn and Knights Inn geared toward capitalizing on elevated franchisee movement that typically accompanies industry disruptions such as the current COVID-19 crisis.

Royalties for the third quarter were $4.1 million compared to $5.9 million in the prior year quarter, primarily due to terminated hotel agreements and the impact of COVID-19 on midscale brands, which generally pay royalties and marketing fees as a percentage of gross rooms revenue. Royalty revenue mix for the third quarter of 2020 was 71% from economy hotels and 29% from midscale hotels. The 71% of royalty revenue generated from economy hotels is primarily fixed as a per room, per month rate and therefore is less affected by occupancy.

Selling, general, administrative, and other expenses, which include franchise sales, operations and corporate costs, and bad debt expense were $4.7 million, a 43% improvement from $8.4 million in the year-ago period. The improvement was driven by cost containment efforts initiated earlier in 2020 and lower bad debt expense.

Transaction costs for the quarter were $0.9 million, comprised of fees paid to advisors in connection with exploring strategic alternatives.

Strategic Alternatives

As previously disclosed, RLHC has engaged advisors to review and respond to bona fide inquiries received from parties considering an investment in or acquisition of the Company. The Board remains committed to evaluating strategic alternatives that it believes are in the best interest of shareholders, particularly as RLHC has attracted attention from those who recognize that its portfolio of franchised hotels are located in areas that are less impacted by a reduction in leisure travel, and are well positioned to respond quickly to upticks in travel, especially drive-to travel. RHLC does not intend to discuss or disclose further developments during this process until its Board of Directors has approved a specific action or otherwise determined that further disclosure is appropriate or required.

Balance Sheet and Liquidity

As of September 30, 2020, cash and cash equivalents totaled $34.1 million, a $0.3 million increase from June 30, 2020 and a $2.3 million increase from year-end 2019. The sequential quarter improvement was driven by adjusted EBITDA performance, strong accounts receivable collections, reduced capital and key money outlays, and favorable summer seasonality.

Adjusted free cash flow for the nine months ended September 30, 2020 was $3.0 million as compared to $3.8 million for the nine months ended September 30, 2019. Cash flow from operations was $(4.6) million and $5.0 million for the same periods, respectively. RLHC has $5.6 million of debt on its balance sheet related to a non-recourse mortgage on the Hotel RL Olympia held in a joint venture in which RLHC holds a 55% equity interest.

Red Lion expects to end the year with approximately $30 million of cash on hand. Fourth quarter net cash outflows include capital expenditures, key money as part of signing new franchise agreements, payment of transaction fees, and the usual seasonally lower cash collections. The Company also expects to benefit from favorable working capital as the previously disclosed sales tax settlements and wage settlement payments totaling an estimated $2.0 to $2.5 million are now expected to be paid in 2021.

Webcast and Conference Call

Red Lions senior management team plans to host a webcast and conference call to review its financial results at 9:00 a.m. ET, Thursday, November 5, 2020.

The live webcast can be accessed through the Investor Relations section of RLHCs website http://ir.redlion.com/events-and-presentations/events.

For those unable to access the webcast, the conference call will be accessible domestically or internationally, by dialing 877-407-8289 or 201-689-8341, respectively, and requesting the Red Lion Hotel Corporation Third Quarter 2020 Earnings Conference Call.

A replay of the conference call will be available after 11:30 a.m. ET on Thursday, November 5, 2020 through 11:59 p.m. ET on Thursday, November 19, 2020. To access the replay, listeners may use 877-660-6853 (domestic) or 201-612-7415 (international). The passcode for the replay is 13698294. The recorded replay will be available on the Companys website for one year after the call date.

About RLH Corporation

Red Lion Hotels Corporation is an innovative hotel company doing business as RLH Corporation, which focuses on the franchising of midscale and economy hotels. The Company strives to maximize return on invested capital for hotel owners across North America through relevant brands, industry-leading technology and forward-thinking services. For more information, please visit the companys website at www.rlhco.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of federal securities law, including statements concerning operational and financial impacts of the COVID-19 pandemic, plans, objectives, goals, strategies, projections of future events or performance and underlying assumptions (many of which are based, in turn, upon further assumptions). The forward-looking statements in this press release are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Such risks and uncertainties include, among others, explorations of possible transactions and strategic alternatives; risks associated with our asset light model; relationships with our franchisees and properties; competitive conditions in the lodging industry; economic cycles; changes in future demand and supply for hotel rooms; international conflicts and conditions; impact of government regulations; ability to obtain financing; changes in energy, healthcare, insurance and other operating expenses; ability to sell non-core assets; the extent and duration of the COVID-19 pandemic; dependency upon the ability and experience of executive officers and ability to retain or replace such officers, as well as other risks and uncertainties discussed in the Company's annual report on Form 10-K for the year endedDecember 31, 2019, and in other documents filed by the Company with theSecurities and Exchange Commission. The forward-looking statements contained herein speak only to the date of this press release. The Company undertakes no obligation to update or revise any forward-looking statements except as required by law.

Social Media:

www.Facebook.com/myhellorewardswww.Twitter.com/myhellorewardswww.Instagram.com/myhellorewardswww.Linkedin.com/company/rlhco

Investor Relations Contact:

Nikki SacksInvestor Relations 203-682-8263investorrelations@rlhco.com

RED LION HOTELS CORPORATIONCondensed Consolidated Statements of Comprehensive Loss(unaudited)(In thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Revenue: Royalty $ 4,058 $ 5,909 $ 11,999 $ 17,516 Marketing, reservations 5,271 8,300 15,549 22,632 and reimbursablesOther franchise 692 2,016 2,167 3,772 Company operated hotels 3,262 16,633 11,062 43,839 Other ? 5 ? 13 Total revenues 13,283 32,863 40,777 87,772 Operating expenses: Selling, general,administrative and other 4,748 8,401 25,783 22,452 expensesCompany operated hotels 2,961 12,673 11,778 36,750 Marketing, reservations 4,594 7,080 14,143 22,088 and reimbursablesDepreciation and 2,509 3,636 7,456 11,192 amortizationAsset impairment 729 5,382 2,489 5,382 Loss (gain) on asset 107 1 (7,454 ) 45 dispositions, netTransaction and 860 201 2,260 436 integration costsTotal operating expenses 16,508 37,374 56,455 98,345 Operating loss (3,225 ) (4,511 ) (15,678 ) (10,573 )Other income (expense): Interest expense (44 ) (1,699 ) (599 ) (3,690 )Loss on early retirement ? ? (1,309 ) (164 )of debtOther income, net 2 44 249 121 Total other income (42 ) (1,655 ) (1,659 ) (3,733 )(expense)Loss before taxes (3,267 ) (6,166 ) (17,337 ) (14,306 )Income tax expense 18 486 (586 ) 676 (benefit)Net loss (3,285 ) (6,652 ) (16,751 ) (14,982 )Net loss attributable to 148 2,980 1,553 4,040 noncontrolling interestNet loss andcomprehensive loss $ (3,137 ) $ (3,672 ) $ (15,198 ) $ (10,942 )attributable to RLHCorporation Loss per share - basic $ (0.12 ) $ (0.15 ) $ (0.60 ) $ (0.44 )Loss per share - diluted $ (0.12 ) $ (0.15 ) $ (0.60 ) $ (0.44 ) Weighted average shares - 25,397 25,112 25,311 24,859 basicWeighted average shares - 25,397 25,112 25,311 24,859 diluted Non-GAAP Financial Measures ^(1)EBITDA $ (714 ) $ (831 ) $ (9,282 ) $ 576 Adjusted EBITDA $ 1,538 $ 5,899 $ (8,517 ) $ 10,624 ^(1) The definitions of "EBITDA" and "Adjusted EBITDA" and how those measuresrelate to net income (loss) are discussed further in this release underReconciliation of Non-GAAP Financial Measures.

RED LION HOTELS CORPORATIONCondensed Consolidated Balance Sheets(unaudited)(In thousands, except share data) September December 30, 31, 2020 2019ASSETS Current assets: Cash and cash equivalents ($1,190 and $1,819 $ 33,974 $ 29,497 attributable to VIEs)Restricted cash ($100 and $2,311 attributable to 100 2,311 VIEs)Accounts receivable ($184 and $1,033 attributableto VIEs), net of an allowance for doubtful accounts 10,772 15,143 of $9,023 and $4,589, respectivelyNotes receivable, net 424 5,709 Other current assets ($181 and $311 attributable to 4,258 5,849 VIEs)Total current assets 49,528 58,509 Property and equipment, net ($11,079 and $29,848 32,422 68,668 attributable to VIEs)Operating lease right-of-use assets ($0 and $10,810 5,000 48,283 attributable to VIEs)Goodwill 18,595 18,595 Intangible assets, net 46,319 48,612 Other assets, net ($0 and $703 attributable to 2,762 3,851 VIEs)Total assets $ 154,626 $ 246,518 LIABILITIES Current liabilities: Accounts payable ($186 and $589 attributable to $ 3,632 $ 5,510 VIEs)Accrued payroll and related benefits ($91 and $349 1,103 2,709 attributable to VIEs)Other accrued liabilities ($223 and $455 5,309 5,469 attributable to VIEs)Long-term debt, due within one year ($5,588 and 5,588 16,984 $16,984 attributable to VIEs)Operating lease liabilities, due within one year 1,521 4,809 ($0 and $966 attributable to VIEs)Total current liabilities 17,153 35,481 Long-term debt, due after one year, net of debt ? 5,576 issuance costs ($0 and $5,576 attributable to VIEs)Line of credit, due after one year ? 10,000 Operating lease liabilities, due after one year ($0 4,770 46,592 and $11,938 attributable to VIEs)Deferred income and other long-term liabilities ($0 762 1,105 and $28 attributable to VIEs)Deferred income taxes 830 743 Total liabilities 23,515 99,497 Commitments and contingencies STOCKHOLDERS? EQUITY RLH Corporation stockholders' equity Preferred stock - 5,000,000 shares authorized; ? ? $0.01 par value; no shares issued or outstandingCommon stock - 50,000,000 shares authorized; $0.01par value; 25,402,241 and 25,148,005 shares issued 255 251 and outstandingAdditional paid-in capital, common stock 180,069 181,608 Accumulated deficit (52,073 ) (36,875 )Total RLH Corporation stockholders' equity 128,251 144,984 Noncontrolling interest 2,860 2,037 Total stockholders? equity 131,111 147,021 Total liabilities and stockholders? equity $ 154,626 $ 246,518

RED LION HOTELS CORPORATIONCondensed Consolidated Statements of Cash Flows(unaudited)(In thousands)

Nine Months Ended September30, 2020 2019Operating activities: Net loss $ (16,751 ) $ (14,982 )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization 7,456 11,192 Noncash PIK interest and amortization of debt 194 929 issuance costsAmortization of key money and contract costs 694 997 Amortization of contract liabilities (458 ) (994 )Loss (gain) on asset dispositions, net (7,454 ) 45 Loss on early retirement of debt 1,309 67 Asset impairment 2,489 5,382 Deferred income taxes 87 445 Stock-based compensation expense 840 2,503 Provision for doubtful accounts 10,712 1,780 Change in operating assets and liabilities: Accounts receivable (1,050 ) (2,148 )Key money disbursements (429 ) (665 )Other current assets 1,232 998 Accounts payable (2,018 ) 45 Other accrued liabilities (1,420 ) (639 )Net cash provided by (used in) operating activities (4,567 ) 4,955 Investing activities: Capital expenditures (1,637 ) (4,104 )Net proceeds from disposition of property and 36,896 ? equipmentCollection of notes receivable 12 262 Advances on notes receivable (150 ) (90 )Net cash provided by (used in) investing activities 35,121 (3,932 )Financing activities: Borrowings on long-term debt, net of discounts 4,234 32,935 Repayment of long-term debt and finance leases (21,964 ) (22,510 )Repayment of line of credit borrowing (10,000 ) ? Prepayment penalty on long-term debt (559 ) ? Debt issuance costs ? (692 )Distributions to noncontrolling interest ? (7,430 )Stock-based compensation awards canceled to settle (81 ) (2,135 )employee tax withholdingStock option and stock purchase plan issuances, net 82 217 and otherNet cash provided by (used in) financing activities (28,288 ) 385 Change in cash, cash equivalents and restricted cash: Net increase (decrease) in cash, cash equivalents and 2,266 1,408 restricted cashCash, cash equivalents and restricted cash at 31,808 19,789 beginning of periodCash, cash equivalents and restricted cash at end of $ 34,074 $ 21,197 period

RED LION HOTELS CORPORATIONAdditional Hotel Statistics(unaudited)

A summary of activity relating to our open franchise and company operated hotels by type from January 1, 2020 through September 30, 2020, including the approximate number of available rooms, is provided below:

Midscale Brand Economy Brand Total Total Total Total Hotels Available Hotels Available Hotels Available Rooms Rooms RoomsBeginningquantity, January 96 13,500 966 54,200 1,062 67,700 1, 2020Newly opened 2 100 22 1,200 24 1,300 Change in brand 1 100 (1 ) (100 ) ? ? Terminated (14 ) (2,600 ) (116 ) (7,200 ) (130 ) (9,800 )propertiesEnding quantity,September 30, 85 11,100 871 48,100 956 59,200 2020

A summary of activity relating to our open midscale franchise and company operated hotels by brand from January 1, 2020 through September30, 2020 is provided below:

Red RedMidscale Brand Hotel Lion Lion Signature Other TotalHotels RL Hotels Inn and SuitesBeginningquantity, January 9 39 40 4 4 96 1, 2020Newly opened ? ? 2 ? ? 2 Change in brand ? ? 1 ? ? 1 Terminated (1 ) (7 ) (4 ) ? (2 ) (14 )propertiesEnding quantity, 8 32 39 4 2 85 September 30, 2020 Ending rooms, 1,400 6,200 3,000 300 200 11,100 September 30, 2020

A summary of activity relating to our open economy franchise hotels by brand from January 1, 2020 through September30, 2020 is provided below:

Economy Brand ABVI and Knights Country Guest Other TotalHotels CBVI Inn Hearth HouseBeginningquantity, January 657 232 47 19 11 966 1, 2020Newly opened 14 8 ? ? ? 22 Change in brand ? ? ? (1 ) ? (1 )Terminated (74 ) (31 ) (4 ) (2 ) (5 ) (116 )propertiesEnding quantity, 597 209 43 16 6 871 September 30, 2020 Ending rooms, 31,600 12,800 2,100 1,200 400 48,100 September 30, 2020

A summary of our executed agreements for the nine months ended September 30, 2020 is provided below:

Midscale Economy Total Brand BrandExecuted franchise license agreements, nine months ended September 30, 2020:New locations 3 20 23 New contracts for existing locations 6 100 106 Total executed franchise license agreements, nine 9 120 129 months ended September 30, 2020

RED LION HOTELS CORPORATIONReconciliation of Non-GAAP Financial Measures(unaudited)

Free Cash Flow is a non-GAAP measured defined as net cash provided by or used in operating activities less capital expenditures. The Company believes it is an important liquidity measure that provides useful information to management and investors about the amount of cash generated by the business.

Adjusted Free Cash Flow is a non-GAAP measure defined as Free Cash Flow adjusted to reflect the impact of certain investing or financing cash flows such as acquisitions, proceeds from dispositions of properties, borrowings and repayments of long-term debt, and distributions to non-controlling interests. We believe this information is necessary as reflecting significant cash flows from strategic investing and financing decisions provides the most accurate overall measure of cash generated or used by the business.

Free Cash Flow and Adjusted Free Cash Flow are commonly used measures of performance. We utilize these measures because management finds them a useful tool to calculate more meaningful comparisons of past, present and future cash generation and as a means to evaluate the results of core, ongoing operations. We believe they are a complement to reported net cash provided by (used in) operating activities, investing activities, and financing activities. Free Cash Flow and Adjusted Free Cash Flow are not intended to represent net cash provided by (used in) operating activities, investing activities, or financing activities defined by generally accepted accounting principles in the United States of America ("GAAP"), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP. In addition, other companies may calculate Free Cash Flow and, in particular, Adjusted Free Cash Flow differently than we do or may not calculate them at all, limiting the usefulness of Free Cash Flow and Adjusted Free Cash Flow as comparative measures.

The following is a reconciliation of GAAP net cash provided by (used in) operating activities to non-GAAP Free Cash Flow and Adjusted Free Cash Flow for the nine months ended September 30, 2020 and 2019 (in thousands):

Nine Months Ended September 30, 2020 2019Net cash provided by (used in) operating activities $ (4,567 ) $ 4,955 Less: Capital expenditures (1,637 ) (4,104 )Free Cash Flow (6,204 ) 851 Net proceeds from disposition of property and equipment 36,896 ? Borrowings on long-term debt, net of discounts 4,234 32,935 Repayment of line of credit borrowing (10,000 ) ? Repayment of long-term debt and finance leases (21,964 ) (22,510 )Distributions to noncontrolling interest ? (7,430 )Adjusted Free Cash Flow $ 2,962 $ 3,846

EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. The Company believes it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness.

Adjusted EBITDA is an additional measure of financial performance. The Company believes that the inclusion or exclusion of certain special items, such as stock-based compensation and gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results.

Adjusted EBITDA also excludes the effect of non-cash stock compensation expense. We believe that the exclusion of this item is consistent with the purposes of the measure described below.

EBITDA and Adjusted EBITDA are commonly used measures of performance in the industry. RLH Corporation utilizes these measures because management finds them a useful tool to calculate more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. Our board of directors and executive management team consider Adjusted EBITDA to be a key performance metric and compensation measure. The Company believes the measures are a complement to reported operating results. EBITDA and Adjusted EBITDA are not intended to represent net income (loss) defined by generally accepted accounting principles in the United States of America ("GAAP"), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP. In addition, other companies in the industry may calculate EBITDA and, in particular, Adjusted EBITDA differently than the Company does or may not calculate them at all, limiting the usefulness of EBITDA and Adjusted EBITDA as comparative measures.

Non-Core Adjusted EBITDA includes the results of our Company Operated Hotels. Core Adjusted EBITDA is comprised of franchise and all other results, including all Selling, general, administrative and other expenses. Management believes this presentation provides a meaningful comparison of our financial results as Core Adjusted EBITDA represents the results of our Company as a franchise only business.

The following is a reconciliation of Core and Non-Core GAAP net income (loss) to Core and Non-Core non-GAAP EBITDA and Adjusted EBITDA for the three months ended September 30, 2020 (in thousands):

Core Non-Core TotalNet loss $ (2,200 ) $ (1,085 ) $ (3,285 )Depreciation and amortization 1,997 512 2,509 Interest expense 2 42 44 Income tax expense 18 ? 18 EBITDA (183 ) (531 ) (714 )Stock-based compensation ^(1) 265 ? 265 Asset impairment^(2) ? 729 729 Transaction and integration costs ^(3) 860 ? 860 Employee separation and transition costs ^ 227 ? 227 (4)Loss on asset dispositions 3 104 107 Non-income tax expense assessment ^(5) 64 ? 64 Adjusted EBITDA 1,236 302 1,538 Adjusted EBITDA attributable to ? 32 32 noncontrolling interestsAdjusted EBITDA attributable to RLH $ 1,236 $ 334 $ 1,570 Corporation

^(1) Costs represent total stock-based compensation for the period. These costsare included within Selling, general, administrative and other expenses andMarketing, reservations and reimbursables on the Condensed ConsolidatedStatements of Comprehensive Loss.^(2) During the third quarter of 2020, we recognized an impairment on our RedLion Hotel Seattle Airport leased property.^(3) Transaction and integration costs relate primarily to costs incurred withadvisors who have been engaged to review and vet inquires received byinterested parties.^(4) The costs primarily relate to severance payments due to our ChiefOperating Officer upon the announcement of his departure in September 2020.These costs are included within Selling, general, administrative and otherexpenses on the Condensed Consolidated Statements of Comprehensive Loss.^(5) Costs relate to estimated non-income taxes we have concluded we areprobable of being assessed. We accrued these estimated taxes in Selling,general, administrative and other expenses on the Condensed ConsolidatedStatements of Comprehensive Loss.

The following is a reconciliation of Core and Non-Core GAAP net income (loss) to Core and Non-Core non-GAAP EBITDA and Adjusted EBITDA for the three months ended September 30, 2019 (in thousands):

Core Non-Core TotalNet loss $ (1,889 ) $ (4,763 ) $ (6,652 )Depreciation and amortization 1,859 1,777 3,636 Interest expense 302 1,397 1,699 Income tax expense 486 ? 486 EBITDA 758 (1,589 ) (831 )Stock-based compensation ^(1) 941 ? 941 Asset impairment ^(2) ? 5,382 5,382 Transaction and integration costs ^(3) 37 164 201 (Gain) loss on asset dispositions (1 ) 2 1 Non-income tax expense assessment ^(4) 205 ? 205 Adjusted EBITDA 1,940 3,959 5,899 Adjusted EBITDA attributable to ? (660 ) (660 )noncontrolling interestsAdjusted EBITDA attributable to RLH $ 1,940 $ 3,299 $ 5,239 Corporation

^(1) Costs represent total stock-based compensation for the period. These costsare included within Selling, general, administrative and other expenses andMarketing, reservations and reimbursables on the Condensed ConsolidatedStatements of Comprehensive Loss.^(2) During the third quarter of 2019, we recognized an impairment on our HotelRL Washington DC joint venture property.^(3) Transaction and integration costs include incremental expenses incurredfor potential and executed acquisitions and dispositions of assets.^(4) Costs relate to estimated non-income taxes we have concluded we areprobable of being assessed. These estimated taxes have been accrued in Selling,general, administrative and other expenses on the Condensed ConsolidatedStatements of Comprehensive Loss.

The following is a reconciliation of Core and Non-Core GAAP net income (loss) to Core and Non-Core non-GAAP EBITDA and Adjusted EBITDA for the nine months ended September 30, 2020 (in thousands):

Core Non-Core TotalNet income (loss) $ (18,028 ) $ 1,277 $ (16,751 )Depreciation and amortization 5,655 1,801 7,456 Interest expense 176 423 599 Income tax benefit (586 ) ? (586 )EBITDA (12,783 ) 3,501 (9,282 )Stock-based compensation ^(1) 840 ? 840 Asset impairment ^(2) ? 2,489 2,489 Transaction and integration costs ^(3) 2,207 53 2,260 Employee separation and transition 1,023 ? 1,023 costs ^(4)Loss on early retirement of debt ^(5) 223 1,086 1,309 Loss (gain) on asset dispositions ^(6) 223 (7,677 ) (7,454 )Non-income tax expense assessment ^(7) 298 ? 298 Adjusted EBITDA (7,969 ) (548 ) (8,517 )Adjusted EBITDA attributable to ? 76 76 noncontrolling interestsAdjusted EBITDA attributable to RLH $ (7,969 ) $ (472 ) $ (8,441 )Corporation

^(1) Costs represent total stock-based compensation for the period. These costsare included within Selling, general, administrative and other expenses andMarketing, reservations and reimbursables on the Condensed ConsolidatedStatements of Comprehensive Loss.^(2) In the first and third quarters of 2020, we recognized impairments on ourRed Lion Hotel Seattle Airport leased property.^(3) Transaction and integration costs relate primarily to costs incurred withadvisors who have been engaged to review and vet inquires received byinterested parties.^(4) The costs relate to the accrual of severance payments due to our ChiefFinancial Officer upon her departure in March 2020 and to our Chief OperatingOfficer upon the announcement of his departure in September 2020, along withtwo reductions in force that were implemented in the first and second quartersof 2020. These costs are included within Selling, general, administrative andother expenses and Marketing, reservations and reimbursables on the CondensedConsolidated Statements of Comprehensive Loss.^(5) The loss on early retirement of debt relates to unamortized deferred debtissuance costs and prepayment fees incurred related to the payoff of a secureddebt agreement at RL Venture - Olympia and the outstanding balance on our Lineof Credit.^(6) The gain primarily relates to the sale of two properties during the firstquarter of 2020.^(7) Costs relate to estimated non-income taxes we have concluded we areprobable of being assessed. We accrued these estimated taxes in Selling,general, administrative and other expenses on the Condensed ConsolidatedStatements of Comprehensive Loss.

The following is a reconciliation of Core and Non-Core GAAP net income (loss) to Core and Non-Core non-GAAP EBITDA and Adjusted EBITDA for the nine months ended September 30, 2019 (in thousands):

Core Non-Core TotalNet loss $ (7,813 ) $ (7,169 ) $ (14,982 )Depreciation and amortization 5,542 5,650 11,192 Interest expense 831 2,859 3,690 Income tax expense 676 ? 676 EBITDA (764 ) 1,340 576 Stock-based compensation ^(1) 2,503 ? 2,503 Asset impairment ^(2) ? 5,382 5,382 Transaction and integration costs ^(3) 272 164 436 Employee separation and transition costs ^ 35 ? 35 (4)Loss on early retirement of debt ^(5) ? 164 164 Loss on asset dispositions ? 45 45 Legal settlement expense^ (6) ? 952 952 Non-income tax expense assessment ^(7) 531 ? 531 Adjusted EBITDA 2,577 8,047 10,624 Adjusted EBITDA attributable to ? (1,665 ) (1,665 )noncontrolling interestsAdjusted EBITDA attributable to RLH $ 2,577 $ 6,382 $ 8,959 Corporation

^(1) Costs represent total stock-based compensation for the period. These costsare included within Selling, general, administrative and other expenses andMarketing, reservations and reimbursables on the Condensed ConsolidatedStatements of Comprehensive Loss.^(2) During the third quarter of 2019, we recognized an impairment on our HotelRL Washington DC joint venture property.^(3) Transaction and integration costs include incremental expenses incurredfor potential and executed acquisitions and dispositions of assets.^(4) The costs relate to a reduction in force that was implemented in thesecond quarter of 2019. These costs are included within Selling, general,administrative and other expenses on the Condensed Consolidated Statements ofComprehensive Loss.^(5) The loss on early retirement of debt relates to unamortized deferred debtissuance costs and prepayment fees incurred related to the payoff of a mortgageloan at RLS DC Venture, which was replaced through a new mortgage loan with adifferent lender.^(6) Legal settlement expense relates to a settlement agreement with currentand former hotel workers regarding a wage dispute in California. This expenseis included in Company operated hotels expense on the Condensed ConsolidatedStatements of Comprehensive Loss.^(7) Costs relate to estimated non-income taxes we have concluded we areprobable of being assessed. These estimated taxes have been accrued in Selling,general, administrative and other expenses on the Condensed ConsolidatedStatements of Comprehensive Loss.