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Share Name | Share Symbol | Market | Type |
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Hospitality Properties Trust | NASDAQ:HPT | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 25.28 | 25.00 | 25.51 | 0 | 01:00:00 |
Second Quarter Net Income of $0.34 per share
Normalized FFO of $1.09 per share for the Second Quarter
Comparable Hotel RevPAR for the Second Quarter Grows 4.9% Year Over Year
Hospitality Properties Trust (Nasdaq: HPT) today announced its financial results for the quarter and six months ended June 30, 2016.
Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 ($ in thousands, except per share and RevPAR data) Net income available for common shareholders $ 50,895 $ 77,980 $ 97,780 $ 114,395 Net income available for common shareholders per share $ 0.34 $ 0.52 $ 0.65 $ 0.76 Adjusted EBITDA (1) $ 215,608 $ 191,059 $ 403,311 $ 358,454 Normalized FFO available for common shareholders (1) $ 165,714 $ 148,139 $ 305,868 $ 272,888 Normalized FFO available for common shareholders per share (1) $ 1.09 $ 0.99 $ 2.02 $ 1.81Portfolio Performance
Comparable hotel RevPAR $ 103.34 $ 98.52 $ 96.72 $ 92.42 Comparable hotel RevPAR growth 4.9% - 4.7% — RevPAR (all hotels) $ 102.30 $ 98.67 $ 95.42 $ 92.51 RevPAR growth (all hotels) 3.7% - 3.1% — Coverage of HPT’s minimum returns and rents for hotels 1.34x 1.28x 1.14x 1.11x Coverage of HPT's minimum rents for travel centers 1.64x 1.73x 1.51x 1.82x(1) Reconciliations of net income determined in accordance with U.S. generally accepted accounting principles, or GAAP, to earnings before interest, taxes, depreciation and amortization, or EBITDA, and EBITDA as adjusted, or Adjusted EBITDA, and net income available for common shareholders determined in accordance with GAAP to funds from operations, or FFO, and Normalized FFO available for common shareholders, for the quarters and six months ended June 30, 2016 and 2015 appear later in this press release.
Results for the Three and Six Months Ended June 30, 2016 and Recent Activities:
Tenants and Managers: As of June 30, 2016, HPT had nine operating agreements with seven hotel operating companies for 305 hotels with 46,347 rooms, which represented 65% of HPT’s total annual minimum returns and rents, and five lease agreements with one travel center operating company for 197 travel centers, which represented 35% of HPT’s total annual minimum returns and rents.
Conference Call:
On Tuesday, August 9, 2016, at 10:00 a.m. Eastern Time, John Murray, President and Chief Operating Officer, and Mark Kleifges, Chief Financial Officer and Treasurer, will host a conference call to discuss the results for the quarter ended June 30, 2016. 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 Tuesday, August 16, 2016. To hear the replay, dial (412) 317-0088. The replay pass code is 10088732.
A live audio webcast of the conference call will also be available in a listen only mode on HPT’s website, which is located at 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 second quarter conference call is strictly prohibited without the prior written consent of HPT.
Supplemental Data:
A copy of HPT’s Second Quarter 2016 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, 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.
Please see the following pages for a more detailed statement of HPT’s operating results and financial condition and for an explanation of HPT’s calculation of FFO available for common shareholders and Normalized FFO available for common shareholders, EBITDA and Adjusted EBITDA.
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”, “MAY” 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 AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:
THE INFORMATION CONTAINED IN HPT’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, OR 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.
HOSPITALITY PROPERTIES TRUST CONDENSED CONSOLIDATED STATEMENTS OF INCOME(amounts in thousands, except per share data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Revenues: Hotel operating revenues (1) $ 471,910 $ 436,977 $ 868,413 $ 806,573 Rental income (2) 77,293 69,063 153,552 133,814 FF&E reserve income (3) 1,096 1,026 2,452 2,191 Total revenues 550,299 507,066 1,024,417 942,578 Expenses: Hotel operating expenses (1) 324,922 304,428 601,227 562,086 Depreciation and amortization 88,782 80,582 176,053 159,551 General and administrative (4) 37,365 12,685 53,388 33,989 Acquisition related costs (5) 117 797 729 1,135 Total expenses 451,186 398,492 831,397 756,761 Operating income 99,113 108,574 193,020 185,817 Dividend income 749 - 749 - Interest income 40 10 138 21 Interest expense (including amortization of debt issuance costs and debt discounts of $2,127 and $1,458 and $3,993 and $2,916, respectively) (41,698 ) (35,836 ) (83,284 ) (71,290 ) Loss on early extinguishment of debt (6) - - (70 ) - Income before income taxes, equity in earnings of an investee and gain on sale of real estate 58,204 72,748 110,553 114,548 Income tax expense (2,160 ) (640 ) (2,535 ) (931 ) Equity in earnings of an investee 17 23 94 95 Income before gain on sale of real estate 56,061 72,131 108,112 113,712 Gain on sale of real estate (7) - 11,015 - 11,015 Net income 56,061 83,146 108,112 124,727 Preferred distributions (5,166 ) (5,166 ) (10,332 ) (10,332 ) Net income available for common shareholders $ 50,895 $ 77,980 $ 97,780 $ 114,395 Weighted average common shares outstanding (basic) 151,408 150,260 151,405 150,028 Weighted average common shares outstanding (diluted) 151,442 150,292 151,428 150,594 Net income available for common shareholders per common share: Basic and diluted $ 0.34 $ 0.52 $ 0.65 $ 0.76See Notes on pages 9 and 10
HOSPITALITY PROPERTIES TRUST RECONCILIATIONS OF FUNDS FROM OPERATIONS, NORMALIZED FUNDS FROM OPERATIONS, EBITDA AND ADJUSTED EBITDA(amounts in thousands, except per share data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Calculation of Funds from Operations (FFO) and Normalized FFOavailable for common shareholders: (8)
Net income available for common shareholders $ 50,895 $ 77,980 $ 97,780 $ 114,395 Add (Less): Depreciation and amortization 88,782 80,582 176,053 159,551 Gain on sale of real estate (7) - (11,015 ) - (11,015 ) FFO available for common shareholders 139,677 147,547 273,833 262,931 Add (Less): Acquisition related costs (5) 117 797 729 1,135 Estimated business management incentive fees (4) 25,920 (205 ) 31,236 8,822 Loss on early extinguishment of debt (6) - - 70 - Normalized FFO available for common shareholders $ 165,714 $ 148,139 $ 305,868 $ 272,888 Weighted average common shares outstanding (basic) 151,408 150,260 151,405 150,028 Weighted average common shares outstanding (diluted) 151,442 150,292 151,428 150,594 Basic and diluted per common share amounts: FFO available for common shareholders (basic and diluted) $ 0.92 $ 0.98 $ 1.81 $ 1.75 Normalized FFO available for common shareholders (basic) $ 1.09 $ 0.99 $ 2.02 $ 1.82 Normalized FFO available for common shareholders (diluted) $ 1.09 $ 0.99 $ 2.02 $ 1.81 Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Calculation of EBITDA and Adjusted EBITDA: (9) Net income $ 56,061 $ 83,146 $ 108,112 $ 124,727 Add: Interest expense 41,698 35,836 83,284 71,290 Income tax expense 2,160 640 2,535 931 Depreciation and amortization 88,782 80,582 176,053 159,551 EBITDA 188,701 200,204 369,984 356,499 Add (less): Acquisition related costs (5) 117 797 729 1,135 General and administrative expense paid in common shares (10) 870 1,278 1,292 3,013 Estimated business management incentive fees (4) 25,920 (205 ) 31,236 8,822 Loss on early extinguishment of debt (6) - - 70 - Gain on sale of real estate (7) - (11,015 ) - (11,015 ) Adjusted EBITDA $ 215,608 $ 191,059 $ 403,311 $ 358,454See Notes on pages 9 and 10
(1) At June 30, 2016, HPT owned 305 hotels; 302 of these hotels are managed by hotel operating companies and three hotels are leased to hotel operating companies. At June 30, 2016, HPT also owned 197 travel centers; all 197 of these travel centers are leased to a travel center operating company 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. Net operating results of HPT’s managed hotel portfolios exceeded the minimum returns due to HPT in both the three months ended June 30, 2016 and 2015. Certain of HPT’s managed hotel portfolios had net operating results that were, in the aggregate, $11,544 and $11,443 less than the minimum returns due to HPT in the six months ended June 30, 2016 and 2015, respectively. When the managers of these hotels fund the shortfalls under the terms of HPT’s operating 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. There was no reduction to hotel operating expenses in the three months ended June 30, 2016 or 2015 and reductions of $1,766 and $1,903 in the six months ended June 30, 2016 and 2015, respectively, as a result of such fundings. HPT had shortfalls at certain of its managed hotel portfolios not funded by the managers of these hotels under the terms of its operating agreements of $9,778 and $9,540 in the six months ended June 30, 2016 and 2015, respectively, which represent the unguaranteed portions of HPT’s minimum returns from Sonesta. Certain of HPT’s managed hotel portfolios had net operating results that were, in the aggregate, $43,440 and $35,902 more than the minimum returns due to HPT in the three months ended June 30, 2016 and 2015, respectively, and $46,918 and $37,611 more than the minimum returns due to HPT in the six months ended June 30, 2016 and 2015, respectively. Certain of HPT’s guarantees and HPT’s security deposits may be replenished by future cash flows from the applicable hotel operations pursuant to the terms of the respective operating agreements. When HPT’s guarantees and its 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. Hotel operating expenses were increased by $20,057 and $14,976 in the three months ended June 30, 2016 and 2015, respectively, and $19,968 and $16,189 in the six months ended June 30, 2016 and 2015, respectively, as a result of such replenishments.
(2) Rental income includes $3,693 and $1,511 in the three months ended June 30, 2016 and 2015, respectively, and $7,445 and $2,056 in the six months ended June 30, 2016 and 2015, respectively, of adjustments necessary to record scheduled rent increases 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. In calculating net income in accordance with GAAP, HPT generally recognizes percentage rental income received for the first, second and third quarters in the fourth quarter, which is when all contingencies have been met and the income is earned. Rental income for the second quarter of 2015 includes $2,048 of percentage rent recorded as a result of HPT’s lease modifications with TA because the amount was no longer contingent.
(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 three 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 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, each quarter. Although HPT recognizes this expense, if any, each quarter for purposes of calculating net income, HPT does not include these amounts in the calculation of Normalized FFO available for common shareholders or Adjusted EBITDA until the fourth quarter, which is when the actual incentive fee expense amount for the year, if any, is determined. HPT recorded $25,920 and reversed $205 of estimated business management incentive fees during the three months ended June 30, 2016 and 2015, respectively. HPT recorded $31,236 and $8,822 of estimated business management incentive fees during the six months ended June 30, 2016 and 2015, respectively.
HPT recorded a liability for the amount by which the estimated fair value for accounting purposes exceeded the price HPT paid for its investment in RMR common stock in June 2015. A portion of this liability is being amortized on a straight line basis through December 31, 2035, as a reduction to business management fees, which are included in general and administrative expense. General and administrative expense was reduced by $896 and $231 during the three months ended June 30, 2016 and 2015, respectively, and by $1,793 and $231 during the six months ended June 30, 2016 and 2015, respectively, as a result of this amortization.
(5) Represents costs associated with HPT’s acquisition activities.
(6) HPT recorded a $70 loss on early extinguishment of debt in the first quarter of 2016 in connection with the redemption of certain senior unsecured notes.
(7) HPT recorded an $11,015 gain on sale of real estate in the second quarter of 2015 in connection with the sale of five travel centers.
(8) HPT calculates FFO available for common shareholders and Normalized FFO available for common shareholders as shown above. FFO available for common shareholders is calculated on the basis defined by The National Association of Real Estate Investment Trusts, or NAREIT, which is net income available for common shareholders calculated in accordance with GAAP, excluding any gain or loss on sale of properties and loss on impairment of real estate assets, plus real estate depreciation and amortization, as well as certain other adjustments currently not applicable to HPT. HPT’s calculation of Normalized FFO available for common shareholders differs from NAREIT’s definition of FFO available for common shareholders because HPT includes business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as 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 ultimately be payable when all contingencies for determining any such fees are determined at the end of the calendar year and HPT excludes acquisition related costs and loss on early extinguishment of debt. HPT considers FFO available for common shareholders and Normalized FFO available for common shareholders to be appropriate supplemental measures of operating performance for a REIT, along with net income, net income available for common shareholders, operating income and cash flow from operating activities. HPT believes that FFO available for common shareholders and Normalized FFO available for common shareholders provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation expense, FFO available for common shareholders and Normalized FFO available for common shareholders may facilitate a comparison of HPT’s operating performance between periods and with other REITs. FFO available for common shareholders and Normalized FFO available for common shareholders are among the factors considered by HPT’s Board of Trustees when determining the amount of distributions to shareholders. Other factors include, but are not limited to, requirements to maintain HPT’s qualification for taxation as a REIT, limitations in its unsecured revolving credit facility and unsecured term loan 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. FFO available for common shareholders and Normalized FFO available for common shareholders do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net income, net income available for common shareholders or operating income as an indicator of HPT’s operating performance or as a measure of HPT’s liquidity. These measures should be considered in conjunction with net income, net income available for common shareholders, operating income and cash flow from operating activities as presented in HPT’s condensed consolidated statements of income and condensed consolidated statements of cash flows. Other real estate companies and REITs may calculate FFO available for common shareholders and Normalized FFO available for common shareholders differently than HPT does. Effective with the quarter ended June 30, 2016, HPT has changed its calculation of Normalized FFO to no longer include adjustments for estimated percentage rent. Historically, when calculating Normalized FFO, HPT estimated an amount of percentage rental income for each of the first three quarters of the year and then, in the fourth quarter, excluded the amounts that had been included in the first three quarters. In calculating net income in accordance with GAAP, HPT recognizes percentage rental income for the full year in the fourth quarter, which is when all contingencies are met and the income is earned. Normalized FFO for historical periods has been restated to be comparable with the current period calculation.
(9) HPT calculates EBITDA and Adjusted EBITDA as shown above. HPT considers EBITDA and Adjusted EBITDA to be appropriate supplemental measures of its operating performance, along with net income, net income available for common shareholders, operating income and cash flow from operating activities. HPT believes that EBITDA and Adjusted EBITDA provide useful information to investors because by excluding the effects of certain historical amounts, such as interest, depreciation and amortization expense, EBITDA and Adjusted EBITDA may facilitate a comparison of current operating performance with HPT’s past operating performance. In calculating Adjusted EBITDA, HPT includes business management incentive fees only in the fourth quarter versus the quarter when they are recognized as 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 ultimately be payable when all contingencies for determining any such fees are determined at the end of the calendar year. EBITDA and Adjusted EBITDA do not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders or operating income as an indicator of operating performance or as a measure of HPT’s liquidity. These measures should be considered in conjunction with net income, net income available for common shareholders, operating income and cash flow from operating activities as presented in HPT’s condensed consolidated statements of income and condensed consolidated statements of cash flows. Other real estate companies and REITs may calculate EBITDA and Adjusted EBITDA differently than HPT does. Effective with the quarter ended June 30, 2016, HPT has changed its calculation of Adjusted EBITDA to no longer include adjustments for estimated percentage rent. Historically, when calculating Adjusted EBITDA, HPT estimated an amount of percentage rental income for each of the first three quarters of the year and then, in the fourth quarter, excluded the amounts that had been included in the first three quarters. In calculating net income in accordance with GAAP, HPT recognizes percentage rental income for the full year in the fourth quarter, which is when all contingencies are met and the income is earned. Adjusted EBITDA for historical periods has been restated to be comparable with the current period calculation.
(10) Amounts represent the portion of business management fees that were payable in HPT’s common shares as well as equity based compensation for HPT’s trustees, its officers and certain other employees of HPT’s manager. Beginning June 1, 2015, all business management fees are paid in cash.
HOSPITALITY PROPERTIES TRUST CONDENSED CONSOLIDATED BALANCE SHEETS(amounts in thousands, except share data)
(Unaudited)
June 30, December 31, 2016 2015 ASSETS Real estate properties: Land $ 1,547,774 $ 1,529,004 Buildings, improvements and equipment 6,993,371 6,740,423 Total real estate properties, gross 8,541,145 8,269,427 Accumulated depreciation (2,361,264 ) (2,218,499 ) Total real estate properties, net 6,179,881 6,050,928 Cash and cash equivalents 20,347 13,682 Restricted cash (FF&E reserve escrow) 61,419 51,211 Due from related persons 58,991 50,987 Other assets, net 288,697 227,989 Total assets $ 6,609,335 $ 6,394,797 LIABILITIES AND SHAREHOLDERS’ EQUITY Unsecured revolving credit facility $ 232,000 $ 465,000 Unsecured term loan, net 398,088 397,756 Senior unsecured notes, net 2,862,800 2,403,439 Convertible senior unsecured notes 8,478 8,478 Security deposits 77,269 53,579 Accounts payable and other liabilities 190,304 179,783 Due to related persons 40,724 69,514 Dividends payable 5,166 5,166 Total liabilities 3,814,829 3,582,715 Commitments and contingencies Shareholders’ equity: Preferred shares of beneficial interest, no par value; 100,000,000 shares authorized: Series D preferred shares; 7 1/8% cumulative redeemable; 11,600,000 shares issued and outstanding, aggregate liquidation preference of $290,000 280,107 280,107 Common shares of beneficial interest, $.01 par value; 200,000,000 shares authorized; 151,559,788 and 151,547,288 shares issued and outstanding, respectively 1,516 1,515 Additional paid in capital 4,166,301 4,165,911 Cumulative net income 2,989,769 2,881,657 Cumulative other comprehensive income (loss) 21,793 (15,523 ) Cumulative preferred distributions (331,645 ) (321,313 ) Cumulative common distributions (4,333,335 ) (4,180,272 ) Total shareholders’ equity 2,794,506 2,812,082 Total liabilities and shareholders’ equity $ 6,609,335 $ 6,394,797A 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: http://www.businesswire.com/news/home/20160809005502/en/
Hospitality Properties TrustKatie Strohacker, 617-796-8232Senior Director, Investor Relations
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