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Business Wire 10-May-2019 7:00 AM
First Quarter Net Income of $1.37 Per Common Share
First Quarter Normalized FFO of $0.88 Per Common Share
Hospitality Properties Trust (NASDAQ:HPT) today announced its financial results for the quarter ended March 31, 2019:
Three Months Ended March 31, | |||||||||
2019 | 2018 | ||||||||
($ in thousands, except per share and RevPAR data) | |||||||||
Net income | $ | 225,787 | $ | 80,206 | |||||
Net income per common share | $ | 1.37 | $ | 0.49 | |||||
Adjusted EBITDAre (1) | $ | 195,901 | $ | 202,956 | |||||
Normalized FFO (1) | $ | 144,640 | $ | 154,868 | |||||
Normalized FFO per common share (1) | $ | 0.88 | $ | 0.94 | |||||
Portfolio Performance |
|||||||||
Comparable hotel RevPAR | $ | 87.02 | $ | 89.91 | |||||
Change in comparable hotel RevPAR | (3.2 | %) | — | ||||||
RevPAR (all hotels) | $ | 87.77 | $ | 90.62 | |||||
Change in RevPAR (all hotels) | (3.1 | %) | — | ||||||
Coverage of HPT's minimum returns and rents for hotels |
0.71 |
x |
0.82x | ||||||
Coverage of HPT's minimum rents for travel centers |
1.71 |
x |
1.74x | ||||||
(1) Additional information and reconciliations of net income determined in accordance with U.S. generally accepted accounting principles, or GAAP, to certain non-GAAP measures including EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Normalized FFO, for the quarters ended March 31, 2019 and 2018 appear later in this press release.
John Murray, President and Chief Executive Officer of HPT, made the following statement:
"HPT's first quarter 2019 comparable hotel RevPAR declined 3.2% compared to the prior year period due to occupancy decreases from twenty-eight hotels under renovation, non-recurring business related to significant weather events, the first quarter 2019 U.S. government shutdown and competition from new hotels. For hotels not impacted by these events, comparable RevPAR increased 1.6%.
HPT's 179 TA properties performed well during the three months ended March 31, 2019. Total fuel volumes were up 2.2% versus the same period last year, and non-fuel gross margins increased 2.9% with increases in the store, quick service restaurants and truck services businesses.
In April 2019, HPT announced a dividend increase to $0.54 per common share ($2.16 per share per year) which marks the eighth year in a row it has raised its common share dividend."
Results for the Quarter Ended March 31, 2019 and Recent Activities:
Tenants and Managers: As of March 31, 2019, HPT had eight operating agreements with six hotel operating companies for 327 hotels with 50,882 rooms, which represented 71% of HPT's total annual minimum returns and rents, and five lease agreements with TA for 179 travel centers, which represented 29% of HPT's total annual minimum returns and rents.
Conference Call:
At 10:00 a.m. Eastern Time this morning, President and Chief Executive Officer, John Murray, and Chief Financial Officer and Treasurer, Brian Donley, will host a conference call to discuss HPT's first quarter 2019 financial results. The conference call telephone number is (877) 329-3720. Participants calling from outside the United States and Canada should dial (412) 317-5434. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through Friday, May 17, 2019. To access the replay, dial (412) 317-0088. The replay pass code is 10130293.
A live audio webcast of the conference call will also be available in a listen-only mode on HPT's website, www.hptreit.com. Participants wanting to access the webcast should visit HPT's website about five minutes before the call. The archived webcast will be available for replay on HPT's website for about one week after the call. The transcription, recording and retransmission in any way of HPT's first quarter conference call is strictly prohibited without the prior written consent of HPT.
Supplemental Data:
A copy of HPT's First Quarter 2019 Supplemental Operating and Financial Data is available for download at HPT's website, www.hptreit.com. HPT's website is not incorporated as part of this press release.
Hospitality Properties Trust is a real estate investment trust, or REIT, which owns a diverse portfolio of hotels and travel centers located in 45 states, the District of Columbia, Puerto Rico and Canada. HPT's properties are operated under long term management or lease agreements. HPT is managed by the operating subsidiary of The RMR Group Inc. (NASDAQ:RMR), an alternative asset management company that is headquartered in Newton, Massachusetts.
Non-GAAP Financial Measures:
HPT presents certain "non-GAAP financial measures" within the meaning of applicable Securities and Exchange Commission, or SEC, rules, including EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Normalized FFO. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income as indicators of HPT's operating performance or as measures of HPT's liquidity. These measures should be considered in conjunction with net income as presented in HPT's condensed consolidated statements of income. HPT considers these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income. HPT believes these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of HPT's operating performance between periods and with other REITs.
Please see the pages attached hereto for a more detailed statement of HPT's operating results and financial condition and for an explanation of HPT's calculation of FFO and Normalized FFO, EBITDA, EBITDAre and Adjusted EBITDAre and a reconciliation of those amounts to amounts determined in accordance with GAAP.
HOSPITALITY PROPERTIES TRUST | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
(amounts in thousands, except share data) |
||||||||||
(Unaudited) |
||||||||||
Three Months Ended March 31, | ||||||||||
2019 | 2018 | |||||||||
Revenues: | ||||||||||
Hotel operating revenues (1) | $ | 455,385 | $ | 445,276 | ||||||
Rental income (2) | 68,151 | 81,993 | ||||||||
FF&E reserve income (3) | 1,372 | 1,364 | ||||||||
Total revenues | 524,908 | 528,633 | ||||||||
Expenses: | ||||||||||
Hotel operating expenses (1) | 319,125 | 314,982 | ||||||||
Depreciation and amortization | 99,365 | 99,617 | ||||||||
General and administrative (4) | 12,235 | 11,734 | ||||||||
Total expenses | 430,725 | 426,333 | ||||||||
Gain on sale of real estate (5) | 159,535 | — | ||||||||
Dividend income | 876 | 626 | ||||||||
Unrealized gains and losses on equity securities, net (6) | 20,977 | 24,955 | ||||||||
Interest income | 637 | 292 | ||||||||
Interest expense (including amortization of debt issuance costs and debt discounts and premiums of $2,570 and $2,478, respectively) | (49,766 | ) | (47,540 | ) | ||||||
Income before income taxes and equity in earnings of an investee | 226,442 | 80,633 | ||||||||
Income tax expense | (1,059 | ) | (471 | ) | ||||||
Equity in earnings of an investee | 404 | 44 | ||||||||
Net income | $ | 225,787 | $ | 80,206 | ||||||
Weighted average common shares outstanding (basic) | 164,278 | 164,199 | ||||||||
Weighted average common shares outstanding (diluted) | 164,322 | 164,219 | ||||||||
Net income per common share (basic and diluted) | $ | 1.37 | $ | 0.49 | ||||||
|
See Notes on page 8
HOSPITALITY PROPERTIES TRUST | ||||||||||
RECONCILIATIONS OF FUNDS FROM OPERATIONS, | ||||||||||
NORMALIZED FUNDS FROM OPERATIONS, EBITDA, EBITDAre AND ADJUSTED EBITDAre | ||||||||||
(amounts in thousands, except share data) |
||||||||||
(Unaudited) |
||||||||||
Three Months Ended March 31, | ||||||||||
2019 | 2018 | |||||||||
Calculation of FFO and Normalized FFO: (7) | ||||||||||
Net income | $ | 225,787 | $ | 80,206 | ||||||
Add (Less): Depreciation and amortization | 99,365 | 99,617 | ||||||||
Gain on sale of real estate (5) | (159,535 | ) | — | |||||||
Unrealized gains and losses on equity securities, net (6) | (20,977 | ) | (24,955 | ) | ||||||
FFO and Normalized FFO | $ | 144,640 | $ | 154,868 | ||||||
Weighted average common shares outstanding (basic) | 164,278 | 164,199 | ||||||||
Weighted average common shares outstanding (diluted) | 164,322 | 164,219 | ||||||||
Basic and diluted per common share amounts: | ||||||||||
FFO and Normalized FFO | $ | 0.88 | $ | 0.94 | ||||||
Distributions declared per share | $ | 0.53 | $ | 0.52 | ||||||
Three Months Ended March 31, | |||||||||||||
2019 | 2018 | ||||||||||||
Calculation of EBITDA, EBITDAre and Adjusted EBITDAre: (8) | |||||||||||||
Net income | $ | 225,787 | $ | 80,206 | |||||||||
Add: |
Interest expense |
49,766 | 47,540 | ||||||||||
Income tax expense | 1,059 | 471 | |||||||||||
Depreciation and amortization | 99,365 | 99,617 | |||||||||||
EBITDA | 375,977 | 227,834 | |||||||||||
Less: |
Gain on sale of real estate (5) |
(159,535 | ) | — | |||||||||
EBITDAre | 216,442 | 227,834 | |||||||||||
Add (Less): |
General and administrative expense paid in common shares (9) |
436 | 77 | ||||||||||
Unrealized gains and losses on equity securities, net (6) | (20,977 | ) | (24,955 | ) | |||||||||
Adjusted EBITDAre | $ | 195,901 | $ | 202,956 | |||||||||
See Notes on page 8
(1) As of March 31, 2019, HPT owned 327 hotels; 325 of these hotels were managed by hotel operating companies and two hotels were leased to hotel operating companies. As of March 31, 2019, HPT also owned 179 travel centers; all 179 of these travel centers were leased to TA under five lease agreements. HPT's condensed consolidated statements of income include hotel operating revenues and expenses of managed hotels and rental income from its leased hotels and travel centers. Certain of HPT's managed hotels had net operating results that were, in the aggregate, $42,839 and $27,586 less than the minimum returns due to HPT for the three months ended March 31, 2019 and 2018, respectively. When managers of these hotels are required to fund the shortfalls under the terms of HPT's management agreements or their guarantees, HPT reflects such fundings (including security deposit applications) in its condensed consolidated statements of income as a reduction of hotel operating expenses. The reduction to hotel operating expenses was $22,465 and $10,851 for the three months ended March 31, 2019 and 2018, respectively. When HPT reduces the amounts of the security deposit it holds for any of its operating agreements for payment deficiencies, it does not result in additional cash flows to HPT of the deficiency amounts, but reduces the refunds due to the respective tenants or managers who have provided HPT with these deposits upon expiration of the respective operating agreement. The security deposits are non-interest bearing and are not held in escrow. HPT had shortfalls at certain of its managed hotel portfolios not funded by the managers of these hotels under the terms of its management agreements of $20,676 and $17,769 for the three months ended March 31, 2019 and 2018, respectively, which represent the unguaranteed portions of HPT's minimum returns from its Marriott, Sonesta and Wyndham agreements. Certain of HPT's managed hotel portfolios had net operating results that were, in the aggregate, $1,275 more than the minimum returns due to HPT for the three months ended March 31, 2018. The net operating results of HPT's managed hotel portfolios did not exceed the minimum returns due to HPT for the three months ended March 31, 2019. Certain of HPT's guarantees and its security deposits may be replenished by a share of future cash flows from the applicable hotel operations in excess of the minimum returns due to HPT pursuant to the terms of the respective agreements. When HPT's guarantees and security deposits are replenished by cash flows from hotel operations, HPT reflects such replenishments in its condensed consolidated statements of income as an increase to hotel operating expenses. HPT had $1,275 of guaranty and security deposit replenishments for the three months ended March 31, 2018. There were no replenishments for the three months ended March 31, 2019.
(2) Rental income includes decreases of $1,132 and increases of $3,079 for the three months ended March 31, 2019 and 2018, respectively, of adjustments necessary to record scheduled rent changes under certain of HPT's leases, the deferred rent obligations under HPT's travel center leases and the estimated future payments to HPT under its travel center leases for the cost of removing underground storage tanks on a straight line basis.
(3) Various percentages of total sales at certain of HPT's hotels are escrowed as reserves for future renovations or refurbishment, or FF&E reserve escrows. HPT owns all the FF&E reserve escrows for its hotels. HPT reports deposits by its tenants into the escrow accounts under its hotel leases as FF&E reserve income. HPT does not report the amounts which are escrowed as FF&E reserves for its managed hotels as FF&E reserve income.
(4) Incentive fees under HPT's business management agreement with The RMR Group LLC are payable after the end of each calendar year, are calculated based on common share total return, as defined, and are included in general and administrative expense in HPT's condensed consolidated statements of income. In calculating net income in accordance with GAAP, HPT recognizes estimated business management incentive fee expense, if any, in the first, second and third quarters. Although HPT recognizes this expense, if any, in the first, second and third quarters for purposes of calculating net income, HPT does not include these amounts in the calculation of Normalized FFO or Adjusted EBITDAre until the fourth quarter, which is when the business management incentive fee expense amount for the year, if any, is determined. No estimated business management incentive fee expense was recorded for the three months ended March 31, 2019 or 2018.
(5) HPT recorded a $159,535 gain on sale of real estate during the three months ended March 31, 2019 in connection with the sales of 20 travel centers.
(6) Unrealized gains and losses on equity securities, net represent the adjustment required to adjust the carrying value of HPT's investments in The RMR Group Inc. and TA common shares to their fair value as of March 31, 2019 and 2018.
(7) HPT calculates funds from operations, or FFO, and Normalized FFO as shown above. FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, or Nareit, which is net income, calculated in accordance with GAAP, excluding any gain or loss on sale of properties and loss on impairment of real estate assets, if any, plus real estate depreciation and amortization, less any unrealized gains and losses on equity securities, as well as certain other adjustments currently not applicable to HPT. In calculating Normalized FFO, HPT includes business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of HPT's core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO and Normalized FFO are among the factors considered by HPT's Board of Trustees when determining the amount of distributions to its shareholders. Other factors include, but are not limited to, requirements to maintain HPT's qualification for taxation as a REIT, limitations in its credit agreement and public debt covenants, the availability to HPT of debt and equity capital, HPT's expectation of its future capital requirements and operating performance, and HPT's expected needs for and availability of cash to pay its obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than HPT does.
(8) HPT calculates earnings before interest, taxes, depreciation and amortization, or EBITDA, EBITDA for real estate, or EBITDAre, and Adjusted EBITDAre as shown above. EBITDAre is calculated on the basis defined by Nareit which is EBITDA, excluding gains and losses on the sale of real estate, loss on impairment of real estate assets, if any, as well as certain other adjustments currently not applicable to HPT. In calculating Adjusted EBITDAre, HPT adjusts for the items shown above and includes business management incentive fees only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of HPT's core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. Other real estate companies and REITs may calculate EBITDA, EBITDAre and Adjusted EBITDAre differently than HPT does.
(9) Amounts represent the equity compensation for HPT's trustees, its officers and certain other employees of HPT's manager.
HOSPITALITY PROPERTIES TRUST | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
(amounts in thousands, except share data) |
||||||||||
(Unaudited) |
||||||||||
March 31, | December 31, | |||||||||
2019 | 2018 | |||||||||
ASSETS | ||||||||||
Real estate properties: | ||||||||||
Land | $ | 1,671,210 | $ | 1,626,239 | ||||||
Buildings, improvements and equipment | 7,962,010 | 7,896,734 | ||||||||
Total real estate properties, gross | 9,633,220 | 9,522,973 | ||||||||
Accumulated depreciation | (2,979,795 | ) | (2,973,384 | ) | ||||||
Total real estate properties, net | 6,653,425 | 6,549,589 | ||||||||
Cash and cash equivalents | 23,675 | 25,966 | ||||||||
Restricted cash | 75,129 | 50,037 | ||||||||
Due from related persons | 79,710 | 91,212 | ||||||||
Other assets, net | 423,865 | 460,275 | ||||||||
Total assets | $ | 7,255,804 | $ | 7,177,079 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
Unsecured revolving credit facility | $ | 141,000 | $ | 177,000 | ||||||
Unsecured term loan, net | 397,442 | 397,292 | ||||||||
Senior unsecured notes, net | 3,600,314 | 3,598,295 | ||||||||
Security deposits | 116,448 | 132,816 | ||||||||
Accounts payable and other liabilities | 250,925 | 211,332 | ||||||||
Due to related persons | 13,109 | 62,913 | ||||||||
Total liabilities | 4,519,238 | 4,579,648 | ||||||||
Commitments and contingencies | ||||||||||
Shareholders' equity: | ||||||||||
Common shares of beneficial interest, $.01 par value; 200,000,000 shares authorized; 164,441,709 shares issued and outstanding | 1,644 | 1,644 | ||||||||
Additional paid in capital | 4,545,917 | 4,545,481 | ||||||||
Cumulative other comprehensive loss | (200 | ) | (266 | ) | ||||||
Cumulative net income available for common shareholders | 3,457,682 | 3,231,895 | ||||||||
Cumulative common distributions | (5,268,477 | ) | (5,181,323 | ) | ||||||
Total shareholders' equity | 2,736,566 | 2,597,431 | ||||||||
Total liabilities and shareholders' equity | $ | 7,255,804 | $ | 7,177,079 | ||||||
Warning Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever HPT uses words such as "believe", "expect", "anticipate", "intend", "plan", "estimate", "will", "may" and negatives or derivatives of these or similar expressions, HPT is making forward-looking statements. These forward-looking statements are based upon HPT's present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by HPT's forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond HPT's control. For example:
The information contained in HPT's filings with the SEC, including under the caption "Risk Factors" in HPT's periodic reports, or incorporated therein, identifies other important factors that could cause differences from HPT's forward-looking statements. HPT's filings with the SEC are available on the SEC's website at www.sec.gov.
You should not place undue reliance upon forward-looking statements.
Except as required by law, HPT does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190510005055/en/