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Share Name | Share Symbol | Market | Type |
---|---|---|---|
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 |
Third Quarter Net Income Available for Common Shareholders of $0.71 Per Share
Third Quarter Normalized FFO Available for Common Shareholders of $1.06 Per Share
Hospitality Properties Trust (Nasdaq: HPT) today announced its financial results for the quarter and nine months ended September 30, 2018:
Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 ($ in thousands, except per share and RevPAR data) Net income available for common shareholders $ 117,099 $ 85,728 $ 294,594 $ 172,270 Net income available for common shareholders per share $ 0.71 $ 0.52 $ 1.79 $ 1.05 Adjusted EBITDA (1) $ 225,676 $ 223,469 $ 655,530 $ 638,342 Normalized FFO available for common shareholders (1) $ 174,653 $ 175,458 $ 505,714 $ 497,869 Normalized FFO available for common shareholders per share (1) $ 1.06 $ 1.07 $ 3.08 $ 3.03Portfolio Performance
Comparable hotel RevPAR $ 101.75 $ 102.28 $ 99.08 $ 98.07 Change in comparable hotel RevPAR (0.5 %) — 1.0 %—
RevPAR (all hotels) $ 100.29 $ 102.07 $ 98.00 $ 98.45 Change in RevPAR (all hotels) (1.7 %) — (0.5 %)—
Coverage of HPT’s minimum returns and rents for hotels 1.08x 1.18x 1.04x 1.11x Coverage of HPT's minimum rents for travel centers 1.68x 1.73x 1.64x 1.51x(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, available for common shareholders, and Normalized FFO available for common shareholders, for the three and nine months ended September 30, 2018 and 2017 appear later in this press release.
John Murray, President and Chief Executive Officer of HPT, made the following statement:
“HPT’s third quarter 2018 comparable hotel RevPAR declined 0.5% compared to the prior year period due to occupancy declines associated with renovations, competition from supply growth and the negative impact from hurricane related activity. Excluding our recently acquired hotels and the sixteen comparable hotels that underwent renovation for all or part of the third quarter 2018, RevPAR increased 0.4%. Additional returns for the third quarter 2018, in excess of our minimum returns, totaled $9.3 million, and coverage of hotel minimum returns and rents for the third quarter 2018 was 1.08 times.
Our TA properties' total gross margin increased by $12.7 million, or 4.1%, versus the same period last year driven by a 9.9% increase in fuel margin and a 2.6% increase in non-fuel margin. Travel center minimum rent coverage was 1.68 times for the third quarter 2018.”
Results for the Three and Nine Months Ended September 30, 2018 and Recent Activities:
Tenants and Managers: As of September 30, 2018, HPT had eight operating agreements with six hotel operating companies for 325 hotels with 50,379 rooms, which represented 67% of HPT’s total annual minimum returns and rents, and five lease agreements with one travel center operating company for 199 travel centers, which represented 33% of HPT’s total annual minimum returns and rents.
Conference Call:
At 1:00 p.m. Eastern Time this afternoon, President and Chief Executive Officer, John Murray, and Chief Financial Officer and Treasurer, Mark Kleifges, will host a conference call to discuss HPT's third quarter 2018 financial results. They will be joined by Brian Donley, who will assume his role as Chief Financial Officer and Treasurer of the Company effective January 1, 2019. 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, November 13, 2018. To access the replay, dial (412) 317-0088. The replay pass code is 10123839.
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 third quarter conference call is strictly prohibited without the prior written consent of HPT.
Supplemental Data:
A copy of HPT’s Third Quarter 2018 Supplemental Operating and Financial Data is available for download at HPT’s website, which is located at 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 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 available for common shareholders and Normalized FFO available for common shareholders, EBITDA and Adjusted EBITDA and a reconciliation of those amounts to amounts determined in accordance with GAAP.
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 AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:
THE INFORMATION CONTAINED IN HPT’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, OR 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.
HOSPITALITY PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except share data)
(Unaudited)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2018 2017 2018 2017 Revenues: Hotel operating revenues (1) $ 521,250 $ 495,550 $ 1,496,125 $ 1,392,995 Rental income (2) 80,690 80,896 243,701 240,274 FF&E reserve income (3) 1,213 1,142 3,911 3,524 Total revenues 603,153 577,5881,743,737 1,636,793 Expenses: Hotel operating expenses (1) 366,994 343,274 1,056,057 965,546 Depreciation and amortization 101,007 98,205 300,308 286,811
General and administrative (4)
13,425 13,404 38,280 76,097Total expenses
481,426 454,883 1,394,645 1,328,454 Gain on sale of real estate (5) — 9,348 — 9,348 Dividend income 626 626 1,878 1,878 Unrealized gains on equity securities (6) 43,453 — 89,348 — Interest income 478 211 1,093 590 Interest expense (including amortization of debt issuance costs and debt discounts and premiums of $2,570, $2,194, $7,607 and $6,541, respectively) (49,308 ) (46,574 ) (145,589 ) (135,329 ) Loss on early extinguishment of debt (7) — — (160 ) — Income before income taxes and equity in earnings of an investee 116,976 86,316 295,662 184,826 Income tax expense (707 ) (619 ) (1,949 ) (1,761 ) Equity in earnings of an investee 830 31 881 533 Net income 117,099 85,728 294,594 183,598 Preferred distributions — — — (1,435 )Excess of liquidation preference over carrying value of preferred shares redeemed (8)
— — — (9,893 ) Net income available for common shareholders $ 117,099 $ 85,728 $ 294,594 $ 172,270 Weighted average common shares outstanding (basic) 164,232 164,149 164,212 164,131 Weighted average common shares outstanding (diluted) 164,274 164,188 164,242 164,168 Net income available for common shareholders per common share (basic and diluted) $ 0.71 $ 0.52 $ 1.79 $ 1.05HOSPITALITY PROPERTIES TRUST
RECONCILIATIONS OF FUNDS FROM OPERATIONS,
NORMALIZED FUNDS FROM OPERATIONS, EBITDA AND ADJUSTED EBITDA
(amounts in thousands, except share data)
(Unaudited)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2018 2017 2018 2017 Calculation of FFO and Normalized FFO available for common shareholders: (9) Net income available for common shareholders $ 117,099 $ 85,728 $ 294,594 $ 172,270Add (Less):
Depreciation and amortization
101,007 98,205 300,308 286,811 Gain on sale of real estate (5) — (9,348 ) — (9,348 )FFO available for common shareholders
218,106 174,585 594,902 449,733Add (Less):
Estimated business management incentive fees (4)
— 873 — 38,243 Loss on early extinguishment of debt (7) — — 160 — Excess of liquidation preference over carrying value of preferred shares redeemed (8) — — — 9,893 Unrealized gains on equity securities (6) (43,453 ) — (89,348 ) — Normalized FFO available for common shareholders $ 174,653 $ 175,458 $ 505,714 $ 497,869 Weighted average common shares outstanding (basic) 164,232 164,149 164,212 164,131 Weighted average common shares outstanding (diluted) 164,274 164,188 164,242 164,168 Basic and diluted per common share amounts: FFO available for common shareholders $ 1.33 $ 1.06 $ 3.62 $ 2.74 Normalized FFO available for common shareholders $ 1.06 $ 1.07 $ 3.08 $ 3.03 Distributions declared per share $ 0.53 $ 0.52 $ 1.58 $ 1.55Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2018 2017 2018 2017Calculation of EBITDA and Adjusted EBITDA: (10)
Net income
$ 117,099 $ 85,728 $ 294,594 $ 183,598Add:
Interest expense
49,308 46,574 145,589 135,329 Income tax expense 707 619 1,949 1,761 Depreciation and amortization 101,007 98,205 300,308 286,811EBITDA
268,121 231,126 742,440 607,499Add (Less):
General and administrative expense paid in common shares (11)
1,008 818 2,278 1,948 Estimated business management incentive fees (4) — 873 — 38,243 Loss on early extinguishment of debt (7) — — 160 — Gain on sale of real estate (5) — (9,348 ) — (9,348 ) Unrealized gains on equity securities (6) (43,453 ) — (89,348 ) —Adjusted EBITDA
$ 225,676 $ 223,469 $ 655,530 $ 638,342 (1) As of September 30, 2018, HPT owned 325 hotels; 323 of these hotels were managed by hotel operating companies and two hotels were leased to hotel operating companies. As of September 30, 2018, HPT also owned 199 travel centers; all 199 of these travel centers were 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. Certain of HPT's managed hotels had net operating results that were, in the aggregate, $9,216 and $5,699 less than the minimum returns due to HPT for the three months ended September 30, 2018 and 2017, respectively, and $31,030 and $18,971 less than the minimum returns due to HPT for the nine months ended September 30, 2018 and 2017, 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 $299 for the three months ended September 30, 2018 and $2,377 and $2,689 for the nine months ended September 30, 2018 and 2017, respectively. There was no reduction to hotel operating expenses for the three months ended September 30, 2017. 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 $9,818 and $28,653 for the three and nine months ended September 30, 2018, respectively, which represent the unguaranteed portions of HPT's minimum returns from its Sonesta and Wyndham agreements. 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 $5,699 and $16,282 for the three and nine months ended September 30, 2017, respectively, which represents the unguaranteed portion of HPT's minimum returns from its Sonesta agreement. Certain of HPT’s managed hotel portfolios had net operating results that were, in the aggregate, $21,321 and $31,355 more than the minimum returns due to HPT for the three months ended September 30, 2018 and 2017, respectively, and $47,901 and $67,052 more than the minimum returns due to HPT for the nine months ended September 30, 2018 and 2017, respectively. 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 $5,204 and $10,099 of guarantee and security deposit replenishments for the three months ended September 30, 2018 and 2017, respectively, and $14,299 and $26,319 of guarantee and security deposit replenishments for the nine months ended September 30, 2018 and 2017, respectively. (2) Rental income includes $3,136 and $3,087 in the three months ended September 30, 2018 and 2017, respectively, and $9,359 and $9,208 in the nine months ended September 30, 2018 and 2017, 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. (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 available for common shareholders or Adjusted EBITDA until the fourth quarter, which is when the business management incentive fee expense amount for the year, if any, is determined. General and administrative expense includes $873 and $38,243 of estimated business management incentive fee expense for the three and nine months ended September 30, 2017, respectively. No business management incentive fee expense was recorded for the three and nine months ended September 30, 2018. (5) HPT recorded a $9,348 gain on sale of real estate during the three months ended September 30, 2017 in connection with the sales of three hotels. (6) Unrealized gains on equity securities 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 September 30, 2018 in accordance with new GAAP standards effective January 1, 2018. (7) HPT recorded a loss of $160 on early extinguishment of debt in the three months ended June 30, 2018 in connection with the amendment of its revolving credit facility and term loan. (8) In February 2017, HPT redeemed all 11,600,000 of its outstanding 7.125% Series D cumulative redeemable preferred shares at the stated liquidation preference of $25.00 per share plus accrued and unpaid distributions to the date of redemption (an aggregate of $291,435). The liquidation preference of the redeemed shares exceeded the carrying amount for the redeemed shares as of the date of redemption by $9,893, or $0.06 per share, and HPT reduced net income available to common shareholders in the three months ended March 31, 2017 by that excess amount. (9) 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, if any, 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 be payable when all contingencies for determining such fees are known at the end of the calendar year, and HPT excludes the loss on early extinguishment of debt, excess of liquidation preference over carrying value of preferred shares redeemed and unrealized gains on equity securities. 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 and net income available for common shareholders. 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 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. 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 alternatives to net income or net income available for common shareholders as indicators of HPT’s operating performance or as measures of HPT’s liquidity. These measures should be considered in conjunction with net income and net income available for common shareholders as presented in HPT’s condensed consolidated statements of income. Other real estate companies and REITs may calculate FFO available for common shareholders and Normalized FFO available for common shareholders differently than HPT does. (10) 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 and net income available for common shareholders. 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 be payable when all contingencies for determining such fees are known 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 alternatives to net income or net income available for common shareholders as indicators of operating performance or as measures of HPT’s liquidity. These measures should be considered in conjunction with net income and net income available for common shareholders as presented in HPT’s condensed consolidated statements of income. Other real estate companies and REITs may calculate EBITDA and Adjusted EBITDA differently than HPT does. (11) 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)
September 30, December 31, 2018 2017 ASSETS Real estate properties: Land $ 1,673,113 $ 1,668,797 Buildings, improvements and equipment 7,964,429 7,758,862 Total real estate properties, gross 9,637,542 9,427,659 Accumulated depreciation (2,998,741 ) (2,784,478 ) Total real estate properties, net 6,638,801 6,643,181 Cash and cash equivalents 19,849 24,139 Restricted cash 65,644 73,357 Due from related persons 88,164 78,513 Other assets, net 439,095 331,195 Total assets $ 7,251,553 $ 7,150,385 LIABILITIES AND SHAREHOLDERS’ EQUITY Unsecured revolving credit facility $ 143,000 $ 398,000 Unsecured term loan, net 397,143 399,086 Senior unsecured notes, net 3,596,275 3,203,962 Security deposits 133,770 126,078 Accounts payable and other liabilities 178,321 184,788 Due to related persons 10,473 83,049 Total liabilities 4,458,982 4,394,963 Commitments and contingencies Shareholders’ equity: Common shares of beneficial interest, $.01 par value; 200,000,000 shares authorized; 164,442,379 and 164,349,141 shares issued and outstanding, respectively 1,644 1,643 Additional paid in capital 4,544,449 4,542,307 Cumulative net income 3,684,167 3,310,017 Cumulative other comprehensive income (loss) (108 ) 79,358 Cumulative preferred distributions (343,412 ) (343,412 ) Cumulative common distributions (5,094,169 ) (4,834,491 ) Total shareholders’ equity 2,792,571 2,755,422 Total liabilities and shareholders’ equity $ 7,251,553 $ 7,150,385A 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/20181106005199/en/
Hospitality Properties TrustKatie Strohacker, 617-796-8232Senior Director, Investor Relations
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