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 March 6, 2018 (February 28, 2018) 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 (Commission (I.R.S. Employer of Incorporation) file number) Identification No.) 1550 Market St. #350 Denver, CO 80202 (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: Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2). Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.01. Completion of Acquisition or Disposition of Assets. On February 28, 2018, RL Pasco, LLC completed the sale of the Red Lion Hotel in Pasco, Washington and an adjacent lot to JODH s Development, LLC, a Washington limited liability company, and RRR Investment, LLC, a Washington limited liability company (collectively, the Pasco Purchasers ). The purchase price for the hotel and adjacent property was $13.1 million, which was paid in cash at closing. At closing, Sunrise Hotel s, LLC, an affiliate of the Pasco Purchasers, entered into a franchise agreement with Red Lion Hotels Franchising, Inc., a wholly owned subsidiary of Red Lion Hotels Corporation ( RL Franchising ), and will continue to operate the Pasco hotel under the Red Lion brand. The franchise agreement provides for a 20 year term and the payment of monthly royalty and program fees set at a percentage of the hotel s gross room revenue. Either party may terminate the franchise agreement without penalty on the 10th anniversary of the hotel s opening date, by providing at least 180 days notice of termination. Termination of the franchise agreements by RL Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee. The obligations of the franchisee under the franchise agreement has been guaranteed by its manager, Kamaljit Singh, and his wife Sukhbans Shahi. On February 28, 2018, RL Boise, LLC completed the sale of the Red Lion Hotel in Boise, ID to Boise Downtowner Hospitality, LLC, an Idaho limited liability company, and RL Richland, LLC completed the sale of the Red Lion Hotel in Richland, WA to Hanford House Hospitality, LLC, a Washington limited liability company, in related transactions. The purchase price for the two hotels was $16.75 million, which was paid in cash at closing. At closing, each purchaser entered into a franchise agreement with RL Franchising and will continue to operate the hotels under the Red Lion brand. The franchise agreements each provide for a 20 year term and the payment of monthly royalty and program fees set at a percentage of the hotel s gross room revenue. Either party may terminate the franchise agreement without penalty on the 5th or 10th anniversary of the hotel s opening date, by providing at least 180 days notice of termination. Termination of the franchise agreements by RL Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee. The obligations of Boise Downtowner Hospitality under the franchise agreement have been guaranteed by Sukhbir and Rajbir Sandhu, husband and wife, and owners of Boise Downtowner Hospitality. The obligations of Hanford House Hospitality, LLC under the franchise agreement have been guaranteed by Gurbir Sandhu, its owner. Both Sukhbir Sandhu and Gurbir Sandhu are existing franchisees of Red Lion, owning and franchising the Red Lion Hotel Wenatchee and Red Lion Hotel Columbia Center, Kennewick. Gurbir Sandhu also owns and franchises the Red Lion Hotel and Suites, Kennewick. Each of RL Pasco, LLC, RL Richland, LLC and RL Boise, LLC is a wholly owned subsidiary of RL Venture, LLC. RL Venture, LLC is a variable interest entity in which Red Lion Hotels Corporation holds a 55% interest, and therefore the registrant consolidates the assets, liabilities and results of operations of this entity. 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 three hotels described in Item 2.01, RL Venture, LLC repaid $22.8 million in principal balance outstanding under its loan agreement with Pacific Western Bank, as required by the terms of that agreement.
Item 7.01. Regulation FD Disclosure. A copy of the company s press release, dated March 6, 2018, announcing the completion of the sale is furnished as Exhibit 99.1 hereto. Non-GAAP Financial Measures The following is a reconciliation of pro forma Adjusted EBITDA to amounts previously reported, to reflect (i) the deconsolidation of the TicketsWest business, including WestCoast Entertainment, (comprising the Entertainment reportable segment), (ii) the sale of two hotel assets on February 21, 2018, as previously reported, and (iii) the sale of three hotel assets as described in Item 2.01 of this filing: Nine Months Ended September 30, 2017 Year Ended December 31, 2016 2015 2014 Adjusted EBITDA from continuing operations- as previously reported $ 19,683 $19,472 $12,463 $13,350 Less: Deconsolidation of the Entertainment Segment (2,243) (986) (2,348) Less: Redding and Eureka asset sales (1,430) (1,800) (1,453) (1,493) Less: Assets sold with this filing (2,674) (3,495) (3,604) (3,662) Pro Forma Adjusted EBITDA $ 15,579 $11,934 $ 6,420 $ 5,847 EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. We believe 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. We believe that the inclusion or exclusion of certain special items, such as 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. provide the most accurate measure of core operating results and as a means to evaluate comparative results. Refer to our previously filed 10-Q (filed on November 6, 2017) and 10-Ks (filed on March 31, 2017, March 1, 2016, February 27, 2015, respectively) for the reconciliation from net income to adjusted EBITDA and further discussion of Non-GAAP measures. 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 entertainment division as described in the 8-K and related proforma financials statement filed on October 10, 2017, (ii) the sale of two hotels and the entry into the related franchise agreements and the repayment of principal under the registrant s loan agreement with Pacific Western Bank as described in the 8-K and related proforma financial statements filed on February 27, 2018, (iii) the sale of the three hotels and the entry into the related franchise agreements described in Item 2.01 of this Form 8-K, and (iv) the repayment of principal under the registrant s loan agreement with Pacific Western Bank described in Item 2.04 of this Form 8-K.
(d) Exhibits. Exhibit Number Exhibit Title or Description 99.1 Press release dated March 6, 2018 99.2 Unaudited pro forma consolidated financial information
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. RED LION HOTELS CORPORATION Date: March 6, 2018 By: /s/ Douglas L. Ludwig Douglas L. Ludwig Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
Exhibit 99.1 RLH CORPORATION CLOSES SALE OF THREE ADDITIONAL HOTELS FOR $29.9 MILLION Red Lion Hotels in Boise, Idaho; and Pasco and Richland, Washington to retain brand DENVER (March 6, 2018) RLH Corporation (NYSE:RLH) announced today the sale of Red Lion Hotels in Boise, Idaho; and Pasco and Richland, Washington for $29.9 million. The three hotels are in addition to the sale of two hotels in California announced last week for $17.4 million. All buyers signed franchise license agreements to retain the Red Lion Hotels brand. RLH Corporation s total gain on the sales is expected to be approximately $8.0 million, and $22.8 million of the proceeds of the sales were used for debt repayment at the closing. We are pleased to announce the close on the sale of the next three of the 11 hotels we have listed, said RLH Corporation President and Chief Executive Officer Greg Mount. The sale of these five properties over the last week is a major step in becoming an asset light company. This effort requires less capital to grow and will provide higher profit margins. Together with the Redding and Eureka Red Lion Hotels announced last week, the five properties accounted for $26.6 million combined revenue on an annual basis for 2017. The hotels combined adjusted EBITDA on consolidated reporting was $4.7 million and RLH Corporation s share of the adjusted EBITDA was approximately $2.6 million for 2017. This impact does not take into account the previously announced corporate overhead adjustments to reduce operating costs. To learn more about franchising with RLH Corporation, visit franchise.rlhco.com. We don t wait for the future. We create it. About RLH Corporation Red Lion Hotels Corporation is an innovative hotel company doing business as RLH Corporation and focuses on the franchising, management and ownership of upscale, midscale and economy hotels. The company focuses on maximizing 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 company s website at www.rlhco.com. Social Media: www.facebook.com/myhellorewards www.twitter.com/myhellorewards www.instagram.com/myhellorewards www.linkedin.com/company/rlhco
Investor Relations Contact: Amy Koch O: 509-777-6417 C: 917-579-5012 investorrelations@rlhco.com Media Contact: Dan Schacter Director, Social Engagement and Public Relations 509-777-6222 dan.schacter@rlhco.com
Exhibit 99.2 Unaudited Proforma Financial Statements The following Unaudited Pro Forma Financial Statements are based on Red Lion Hotels Corporation s (the Company s ) historical consolidated results of operations and financial position, adjusted to give effect to the asset sales described in Item 2.01 of this Form 8-K, as if they had been completed on September 30, 2017 with respect to the pro forma unaudited condensed balance sheet and as of January 1, 2014 with respect to the pro forma unaudited condensed statements of operations. The Unaudited Pro Forma Financial Statements and the accompanying notes should be read together with the Company s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2016, and Management s Discussion and Analysis of Financial Condition and Results of Operations included in the Company s Annual Report on Form 10-K for the year ended December 31, 2016 ( Annual Report ) and its unaudited condensed consolidated financial statements and accompanying notes as of and for the nine months ended September 30, 2017 and Management s Discussion and Analysis of Financial Condition and Results of Operations included in the Company s Quarterly Report on Form 10-Q ( Quarterly Report ) for the nine months ended September 30, 2017. The Unaudited Pro Forma Financial Statements may differ materially from the future financial position or results of operations due to a number of factors described in Risk Factors under Item 1A of Part 1 of our Annual Report and Forward-Looking Statements under Item 1 of Part 1 of our Annual Report.
Red Lion Hotels Corporation Unaudited Pro Forma Condensed Consolidated Balance Sheet September 30, 2017 As Reported Adjustments from sale of the Entertainment Segment (j) Less: Redding and Eureka Hotel Assets Sold (m) Less: Hotel Assets Sold Add: Pro Forma Adjustments Pro Forma ASSETS Current assets: Cash and cash equivalents $ 36,179 $ (2,928) $ 1,565 $ 6,494 (a) $ 148 (f) $ 39,312 948 (g) (3,094) (h) Restricted cash 12,946 (964) (948) (g) 11,034 Accounts receivable, net 14,450 (266) (923) (f) 13,261 Accounts receivable from related parties 1,824 1,824 Notes receivable, net 1,572 1,572 Inventories 631 (65) (113) (b) 453 Prepaid expenses and other 5,156 300 (115) (165) (f) 5,176 Assets held for sale 4,285 (4,285) Total current assets 77,043 (6,913) 155 6,381 (4,034) 72,632 Property and equipment, net 204,131 (10,814) (21,355) (b) 171,962 Goodwill 9,404 9,404 Intangible assets 51,306 51,306 Other assets, net 1,843 300 2,143 Total assets $ 343,727 $ (6,613) $ (10,659) $ (14,974) $ (4,034) $ 307,447 LIABILITIES Current liabilities: Accounts payable $ 5,555 $ (76) $ (139) (f) 5,340 Accrued payroll and related benefits 5,516 (128) (278) (f) 5,110 Other accrued entertainment liabilities held for sale 6,757 (6,757) Other accrued liabilities 6,087 (337) (43) (c) (358) (f) 5,349 Long-term debt, due within one year 24,422 (148) (242) (d) 24,032 Contingent consideration for acquisition due to related party, due within one year 7,581 7,581 Liabilities related to assets held for sale 739 (739) Total current liabilities 56,657 (7,496) (689) (285) (775) 47,412 Long-term debt, due after one year, net of debt issuance costs 87,040 (15,156) (22,581) (d) 49,303 Contingent consideration for acquisition due to related party, due after one year 4,944 4,944 Deferred income and other long term liabilities 1,666 (84) (145) (c) 1,437 Deferred income taxes 6,132 6,132 Total liabilities 156,439 (7,496) (15,929) (23,011) (775) 109,228 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; 23,611,519 and 23,434,480 shares issued and outstanding 236 236 Additional paid-in capital, common stock 173,341 173,341 Accumulated deficit (16,901) 883 6,093 8,037 (e) (165) (e) (2,053) Total Red Lion Hotels Corporation stockholders equity 156,676 883 6,093 8,037 (165) 171,524 Noncontrolling interest 30,612 (823) (3,094) (i) 26,695 Total stockholders equity 187,288 883 5,270 8,037 (3,259) 198,219 Total liabilities and stockholders equity $ 343,727 $ (6,613) $ (10,659) $ (14,974) $ (4,034) $ 307,447
Red Lion Hotels Corporation Unaudited Pro Forma Condensed Consolidated Statement of Operations Nine Months Ended September 30, 2017 Less: Redding and Eureka As Reported Hotel Assets Sold (m) Less: Hotel Assets Sold Pro Forma Revenue: Company operated hotels $ 94,214 $ (7,718) $ (12,978) (k) $ 73,518 Other revenues from managed properties 3,047 3,047 Franchised hotels 36,045 737 1,074 (l) 37,856 Entertainment Other 128 128 Total revenues 133,434 (6,981) (11,904) 114,549 Operating expenses: Company operated hotels 70,450 (6,253) (10,257) (k) 53,940 Other costs from managed properties 3,047 3,047 Franchised hotels 26,300 435 642 (n) 27,377 Entertainment Other (2) (2) Depreciation and amortization 13,742 (664) (1,298) (k) 11,780 Hotel facility and land lease 3,604 (1) (51) (k) 3,552 Gain on asset dispositions, net (334) 5 (329) General and administrative expenses 11,348 263 436 (o) 12,047 Acquisition and integration costs 1,246 1,246 Total operating expenses 129,401 (6,215) (10,528) 112,658 Operating income (loss) 4,033 (766) (1,376) 1,891 Other income (expense): Interest expense (6,114) 391 668 (p) (5,055) Other income, net 562 562 Total other income (expense) (5,552) 391 668 (4,493) Income (loss) from continuing operations before taxes (1,519) (375) (708) (2,602) Income tax expense 513 513 Net income (loss) from continuing operations (2,032) (375) (708) (3,115) Net (income) loss attributable to noncontrolling interest 507 (11) 51 (i) 547 Net income (loss) attributable to RLH Corporation from continuing operations $ (1,525) $ (386) $ (657) $ (2,568) Earnings (loss) per share basic Income (loss) from continuing operations attributable to RLH Corporation $ (0.06) $ (0.11) Earnings (loss) per share diluted Income (loss) from continuing operations attributable to RLH Corporation $ (0.06) $ (0.11) Weighted average shares basic 23,542 23,542 Weighted average shares diluted 23,542 23,542
Red Lion Hotels Corporation Unaudited Pro Forma Condensed Consolidated Statement of Operations Year Ended December 31, 2016 Less: Deconsolidation of the Entertainment Segment (j) Less: Redding and Eureka Hotel Assets Sold (m) Less: Hotel Assets Sold As Reported Pro Forma Revenue: Company operated hotels $ 117,641 $ $ (9,845) $ (16,315) (k) $ 91,481 Other revenues from managed properties 5,948 5,948 Franchised hotels 24,634 915 1,291 (l) 26,840 Entertainment 15,719 (15,719) Other 128 128 Total revenues 164,070 (15,719) (8,930) (15,024) 124,397 Operating expenses: Company operated hotels 91,572 (8,111) (12,934) (k) 70,527 Other costs from managed properties 5,948 5,948 Franchised hotels 19,315 642 900 (n) 20,857 Entertainment 13,635 (13,635) Other 42 42 Depreciation and amortization 16,281 (186) (938) (1,884) (k) 13,273 Hotel facility and land lease 4,740 (2) (68) (k) 4,670 Gain on asset dispositions, net (2,437) 1 3 14 (k) (2,419) General and administrative expenses 11,109 337 559 (o) 12,005 Acquisition and integration costs 2,112 2,112 Total operating expenses 162,317 (13,820) (8,069) (13,413) 127,015 Operating income (loss) 1,753 (1,899) (861) (1,611) (2,618) Other income (expense): Interest expense (6,764) 452 744 (p) (5,568) Other income, net 483 158 641 Total other income (expense) (6,281) 158 452 744 (4,927) Income from operations before taxes (4,528) (1,741) (409) (867) (7,545) Income tax expense 312 312 Net income (4,840) (1,741) (409) (867) (7,857) Net (income) loss attributable to noncontrolling interest 163 (44) 90 (i) 209 Net income (loss) attributable to Red Lion Hotels Corporation $ (4,677) $ (1,741) $ (453) $ (777) $ (7,648) Earnings (loss) per share basic $ (0.23) $ (0.37) Earnings (loss) per share diluted $ (0.23) $ (0.37) Weighted average shares basic 20,427 20,427 Weighted average shares diluted 20,427 20,427
Red Lion Hotels Corporation Unaudited Pro Forma Condensed Consolidated Statement of Operations Year Ended December 31, 2015 Less: Deconsolidation of the Entertainment Segment (j) Less: Redding and Eureka Hotel Assets Sold (m) Less: Hotel As Reported Assets Sold Pro Forma Revenue: Company operated hotels $ 116,187 $ $ (9,300) $ (16,953) (k) $ 89,934 Other revenues from managed properties 3,586 3,586 Franchised hotels 12,039 825 1,266 (l) 14,130 Entertainment 11,057 (11,057) Other 51 51 Total revenues 142,920 (11,057) (8,475) (15,687) 107,701 Operating expenses: Company operated hotels 92,057 (7,947) (13,512) (k) 70,598 Other costs from managed properties 3,586 3,586 Franchised hotels 11,233 658 1,028 (n) 12,919 Entertainment 10,118 (10,118) Other 35 35 Depreciation and amortization 13,315 (254) (967) (1,654) (k) 10,440 Hotel facility and land lease 6,569 (1) (68) (k) 6,500 Gain on asset dispositions, net (17,692) (36) (20) (k) (17,748) General and administrative expenses 9,819 304 489 (o) 10,612 Acquisition and integration costs 779 779 Total operating expenses 129,819 (10,372) (7,989) (13,737) 97,721 Operating income 13,101 (685) (486) (1,950) 9,980 Other income (expense): Interest expense (6,979) 396 628 (p) (5,955) Loss on early retirement of debt (2,847) (2,847) Other income, net 826 (46) 780 Total other income (expense) (9,000) (46) 396 628 (8,022) Income from operations before taxes 4,101 (731) (90) (1,322) 1,958 Income tax expense 85 85 Net income 4,016 (731) (90) (1,322) 1,873 Net (income) loss attributable to noncontrolling interest (1,297) 113 (406) (i) (1,590) Net income attributable to Red Lion Hotels Corporation $ 2,719 $ (731) $ 23 $ (1,728) $ 283 Earnings per share basic $ 0.14 $ 0.01 Earnings per share diluted $ 0.13 $ 0.01 Weighted average shares basic 19,983 19,983 Weighted average shares diluted 20,200 20,200
Red Lion Hotels Corporation Unaudited Pro Forma Condensed Consolidated Statement of Operations Year Ended December 31, 2014 Less: Deconsolidation of the Entertainment Segment (j) Less: Redding and Eureka Hotel Assets Sold (m) Less: Hotel As Reported Assets Sold Pro Forma Revenue: Company operated hotels $ 118,616 $ $ (8,944) $ (16,892) (k) $ 92,780 Franchised hotels 9,618 743 1,161 (l) 11,522 Entertainment 17,115 (17,115) Other 77 77 Total revenues 145,426 (17,115) (8,201) (15,731) 104,379 Operating expenses: Company operated hotels 94,241 (7,599) (13,442) (k) 73,200 Franchised hotels 7,004 622 999 (n) 8,625 Entertainment 14,785 (14,785) Other 318 318 Depreciation and amortization 12,762 (349) (954) (1,672) (k) 9,787 Hotel facility and land lease 5,210 (1) (68) (k) 5,141 Gain on asset dispositions, net (4,006) (1) (7) (k) (4,014) General and administrative expenses 8,353 271 451 (o) 9,075 Acquisition and integration costs Total operating expenses 138,667 (15,134) (7,662) (13,739) 102,132 Operating income 6,759 (1,981) (539) (1,992) 2,247 Other income (expense): Interest expense (4,575) (4,575) Loss on early retirement of debt Other income, net 339 (17) 322 Total other income (expense) (4,236) (17) (4,253) Income from operations before taxes 2,523 (1,998) (539) (1,992) (2,006) Income tax expense 31 31 Net income from continuing operations 2,492 (1,998) (539) (1,992) (2,037) Earnings (loss) per share basic: Income from continuing operations attributable to RLHC $ 0.13 $ (0.10) Earnings (loss) per share diluted Income from continuing operations attributable to RLHC $ 0.13 $ (0.10) Weighted average shares basic 19,785 19,785 Weighted average shares diluted 19,891 19,891
Notes to Unaudited Pro Forma Condensed Financial Information Note 1 Basis of presentation The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed financial statements to give effect to pro forma events that are (1) directly attributable to the sale of the assets, (2) factually supportable and (3) with respect to the unaudited pro forma condensed statements of operations, expected to have a continuing impact on the results following the sale of the assets. These proforma financial statements also reflect the impact of the sale of the entertainment division as disclosed in the 8-K and related proforma financial statements filed on October 10, 2017 and the sale of two hotels as disclosed in the 8-K and related proforma financial statements filed on February 27, 2018. Note 2 The transaction On February 28, 2018, RL Pasco, LLC completed the sale of the Red Lion Hotel in Pasco, Washington and an adjacent lot to JODH s Development, LLC, a Washington limited liability company, and RRR Investment, LLC, a Washington limited liability company (collectively, the Pasco Purchasers ). The purchase price for the hotel and adjacent property was $13.1 million, which was paid in cash at closing. At closing, Sunrise Hotel s, LLC, an affiliate of the Pasco Purchasers, entered into a franchise agreement with Red Lion Hotels Franchising, Inc., a wholly owned subsidiary of Red Lion Hotels Corporation ( RL Franchising ), and will continue to operate the Pasco hotel under the Red Lion brand. The franchise agreement provides for a 20 year term and the payment of monthly royalty and program fees set at a percentage of the hotel s gross room revenue. Either party may terminate the franchise agreement without penalty on the 10th anniversary of the hotel s opening date, by providing at least 180 days notice of termination. Termination of the franchise agreements by RL Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee. The obligations of the franchisee under the franchise agreement has been guaranteed by its manager, Kamaljit Singh, and his wife Sukhbans Shahi. On February 28, 2018, RL Boise, LLC completed the sale of the Red Lion Hotel in Boise, ID to Boise Downtowner Hospitality, LLC, an Idaho limited liability company, and RL Richland, LLC completed the sale of the Red Lion Hotel in Richland, WA to Hanford House Hospitality, LLC, a Washington limited liability company, in related transactions. The purchase price for the two hotels was $16.75 million, which was paid in cash at closing. At closing, each purchaser entered into a franchise agreement with RL Franchising and will continue to operate the hotels under the Red Lion brand. The franchise agreements each provide for a 20 year term and the payment of monthly royalty and program fees set at a percentage of the hotel s gross room revenue. Either party may terminate the franchise agreement without penalty on the 5th or 10th anniversary of the hotel s opening date, by providing at least 180 days notice of termination. Termination of the franchise agreements by RL Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee. The obligations of Boise Downtowner Hospitality under the franchise agreement have been guaranteed by Sukhbir and Rajbir Sandhu, husband and wife, and owners of Boise Downtowner Hospitality. The obligations of Hanford House Hospitality, LLC under the franchise agreement have been guaranteed by Gurbir Sandhu, its owner. Both Sukhbir Sandhu and Gurbir Sandhu are existing franchisees of Red Lion, owning and franchising the Red Lion Hotel Wenatchee and Red Lion Hotel Columbia Center, Kennewick. Gurbir Sandhu also owns and franchises the Red Lion Hotel and Suites, Kennewick. Each of RL Pasco, LLC, RL Richland, LLC and RL Boise, LLC is a wholly owned subsidiary of RL Venture, LLC. RL Venture, LLC is a variable interest entity in which Red Lion Hotels Corporation holds a 55% interest, and therefore the registrant consolidates the assets, liabilities and results of operations of this entity.
Note 3 Pro forma adjustments The following adjustments have been reflected in the unaudited pro forma condensed financial information: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) Reflects the cash from the sale of assets less selling costs and repayment of debt. Reflects the basis of the assets sold. Reflects the capital leases assumed by the purchaser. Represents the related debt payment made at the closing of the sale of the assets. Reflects the gain on sale and/or settlement of the assets. Reflects the settlement of all other assets and liabilities related to the assets sold. Represents the release of restricted cash related to the assets sold. Represents the proforma distribution of cash to the noncontrolling interest. Reflects the removal of the noncontrolling interest portion of the transaction. As reflected in the 8-K filed on October 10, 2017 describing the sale of certain specified liabilities and substantially all of the assets of our entertainment division. Reflects the elimination of direct revenues and expenses related to the assets sold. Represents the franchise income that would have been received under the existing intercompany franchise agreement. Does not represent the impact of the franchise agreements with the new owners of the assets. As reflected in the 8-K filed on February 27, 2018 describing the sale of two hotels in Eureka, CA and Redding, CA. Represents the marketing and other costs to support the franchise income that would have been received under the under the existing intercompany franchise agreement. Does not represent the impact of the franchise agreements with the new owners of the assets. Reflects the corporate and administrative expenses which were previously allocated to the assets sold. Reflects interest expense on allocated debt related to assets sold.