UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  ________________________________________________________________________
FORM 8-K

________________________________________________________________________
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 2, 2015
 ________________________________________________________________________
CHESAPEAKE LODGING TRUST
(Exact name of registrant as specified in its charter)
 ________________________________________________________________________
Maryland
 
001-34572
 
27-0372343
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
1997 Annapolis Exchange Parkway, Suite 410
Annapolis, MD
 
21401
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (410) 972-4140
Not Applicable
(Former name or former address, if changed since last report.)
 ________________________________________________________________________
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 (see General Instruction A.2. below):
 
o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02. Results of Operations and Financial Condition.
On November 2, 2015, Chesapeake Lodging Trust issued a press release announcing its financial results for the quarter ended September 30, 2015. A copy of the press release is filed as Exhibit 99.1 to this report and is incorporated by reference herein.
The information contained in this Form 8-K is furnished under “Item 2.02 Results of Operations and Financial Condition” in accordance with SEC Release 33-8216. The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.

Exhibit No.
Exhibit Description
99.1
Press release dated November 2, 2015.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
Date: November 2, 2015
 
 
 
CHESAPEAKE LODGING TRUST
 
 
 
 
 
 
 
 
By:
 
/s/ Graham J. Wootten
 
 
 
 
 
 
Graham J. Wootten
 
 
 
 
 
 
Senior Vice President and Chief Accounting Officer







 
 
 
 
 
Exhibit 99.1
 
PRESS RELEASE
For Immediate Release
 Contact: Douglas W. Vicari (410) 972-4142
 
 
 


 CHESAPEAKE LODGING TRUST REPORTS THIRD QUARTER RESULTS

ANNAPOLIS, MD, November 2, 2015 – Chesapeake Lodging Trust (NYSE:CHSP), a lodging real estate investment trust (REIT), reported today its financial results for the quarter ended September 30, 2015.

HIGHLIGHTS
RevPAR: 7.2% pro forma increase for the hotel portfolio over the same period in 2014.
Adjusted Hotel EBITDA Margin: 110 basis point pro forma increase to 35.2% for the hotel portfolio over the same period in 2014.
Adjusted Hotel EBITDA: $58.1 million.
Adjusted Corporate EBITDA: $54.1 million.
Adjusted FFO: $42.9 million or $0.73 per diluted common share.
Dividend: Increased third quarter 2015 dividend by 14% to $0.40 per common share (5.8% annualized yield based on the closing price of the Trust’s common shares on October 30, 2015).
Share Repurchase Program: Authorized to acquire up to $100.0 million of its common shares.













 
 
 
 
 
 
 
PRESS RELEASE
For Immediate Release
 Contact: Douglas W. Vicari (410) 972-4142
 
 
 







CONSOLIDATED FINANCIAL RESULTS
The following is a summary of the consolidated financial results for the three and nine months ended September 30, 2015 and 2014 (in millions, except share and per share amounts):
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Total revenue
 
$
165.0

 
$
130.8

 
$
436.4

 
$
354.5

 
 
 
 
 
 
 
 
 
Net income available to common shareholders
 
$
24.8

 
$
26.3

 
$
45.5

 
$
44.8

Net income per diluted common share
 
$
0.42

 
$
0.52

 
$
0.78

 
$
0.89

 
 
 
 
 
 
 
 
 
Adjusted Hotel EBITDA
 
$
58.1

 
$
47.2

 
$
142.8

 
$
116.3

 
 
 
 
 
 
 
 
 
Adjusted Corporate EBITDA
 
$
54.1

 
$
43.5

 
$
129.7

 
$
104.8

 
 
 
 
 
 
 
 
 
AFFO available to common shareholders
 
$
42.9

 
$
32.8

 
$
97.1

 
$
76.4

AFFO per diluted common share
 
$
0.73

 
$
0.65

 
$
1.69

 
$
1.53

 
 
 
 
 
 
 
 
 
Weighted-average number of diluted common shares outstanding
 
58,991,087

 
50,567,849

 
57,536,971

 
49,758,044


HOTEL OPERATING RESULTS
Management assesses the operating performance of its hotels irrespective of the hotel owner during the periods compared using the following key operating metrics: occupancy, ADR, RevPAR, Adjusted Hotel EBITDA, and Adjusted Hotel EBITDA Margin. The Trust uses the term "pro forma" to refer to metrics that include, or comparisons of metrics that are based on, the operating results of hotels under previous ownership for either a portion of or the entire period. As of September 30, 2015, the Trust owned 22 hotels. Since two of its hotels owned as of September 30, 2015 were acquired during 2015 and another one was acquired in October 2014, the key operating metrics below reflect the pro forma operating results for those hotels for all, or a certain period, of the three and nine months ended September 30, 2015 and 2014.
Included in the following table are comparisons of the key operating metrics for the hotel portfolio for the three and nine months ended September 30, 2015 and 2014 (in thousands, except for ADR and RevPAR):




 
 
 
 
 
 
 
PRESS RELEASE
For Immediate Release
 Contact: Douglas W. Vicari (410) 972-4142
 
 
 







 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2015
 
2014(1)
 
Change
 
2015(1)
 
2014(1)
 
Change
Pro forma Occupancy
 
87.9
%
 
83.5
%
 
440 bps
 
82.0
%
 
80.8
%
 
120 bps
Pro forma ADR
 
$
237.33

 
$
233.06

 
1.8%
 
$
230.75

 
$
220.30

 
4.7%
Pro forma RevPAR
 
$
208.58

 
$
194.50

 
7.2%
 
$
189.32

 
$
178.09

 
6.3%
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro forma Adjusted Hotel EBITDA
 
$
58,087

 
$
52,989

 
9.6%
 
$
149,630

 
$
137,445

 
8.9%
Pro forma Adjusted Hotel EBITDA Margin
 
35.2
%
 
34.1
%
 
110 bps
 
32.8
%
 
31.8
%
 
100 bps

__________
(1)
Includes results of operations for certain hotels prior to their acquisition by the Trust.
Hotel EBITDA, Adjusted Hotel EBITDA, Adjusted Hotel EBITDA Margin, Corporate EBITDA, Adjusted Corporate EBITDA, FFO, FFO available to common shareholders and AFFO available to common shareholders are non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission. See the discussion included in this press release for information regarding these non-GAAP financial measures.
CAPITAL MARKETS ACTIVITY
On September 29, 2015, the Trust's board of trustees authorized a share repurchase program pursuant to which the Trust may acquire up to $100.0 million of its common shares using cash on hand and borrowings under its revolving credit facility. The timing and volume of repurchases will be determined by the Trust's management based on its ongoing assessments of the capital needs of the business, prevailing market prices, general economic and market conditions and other considerations. The repurchase program authorizes the Trust to repurchase its common shares from time to time through open market purchases, negotiated transactions or other means, including Rule 10b5-1 trading plans, in accordance with applicable securities laws and other restrictions. The repurchase program expires in September 2018, but may be suspended or discontinued at any time, and does not obligate the Trust to acquire any particular amount of its shares. As of November 2, 2015, $100.0 million remained available for the repurchase of common shares.
The Trust has not sold any common shares under its continuous at-the-market (ATM) program during 2015.
DIVIDENDS
On July 15, 2015, the Trust paid dividends in the amounts of $0.35 per share to its common shareholders and $0.484375 per share to its preferred shareholders, both of record as of June 30, 2015. On July 30, 2015, the Trust declared dividends in the amounts of $0.40 per share payable to its common shareholders and $0.484375 per share payable to its preferred shareholders, both of record as of September 30, 2015. Both dividends were paid on October 15, 2015.




 
 
 
 
 
 
 
PRESS RELEASE
For Immediate Release
 Contact: Douglas W. Vicari (410) 972-4142
 
 
 







2015 OUTLOOK
The Trust is updating its 2015 outlook previously provided on September 29, 2015 to incorporate its third quarter results and recent operating trends and fundamentals. The updated outlook assumes no additional acquisitions, dispositions, or financing transactions (in millions, except RevPAR and per share amounts):
 
Fourth Quarter 2015
 
Outlook
 
 
Low
 
High
CONSOLIDATED:
 
 
 
 
 
 
 
 
 
Net income available to common shareholders
 
$
13.6

 
$
15.2

Net income per diluted common share
 
$
0.23

 
$
0.26

 
 
 
 
 
Adjusted Corporate EBITDA
 
$
43.4

 
$
45.2

 
 
 
 
 
AFFO available to common shareholders
 
$
31.5

 
$
33.1

AFFO per diluted common share
 
$
0.53

 
$
0.56

 
 
 
 
 
Corporate cash general and administrative expense
 
$
2.1

 
$
2.3

Corporate non-cash general and administrative expense
 
$
2.0

 
$
2.0

 
 
 
 
 
Weighted-average number of diluted common shares outstanding
 
59.0

 
59.0

 
 
 
 
 
HOTEL PORTFOLIO:
 
 
 
 
 
 
 
 
 
RevPAR
 
$
179.00

 
$
182.00

Pro forma RevPAR increase over 2014(1)
 
5.5
%
 
7.5
%
Adjusted Hotel EBITDA
 
$
47.5

 
$
49.5

Adjusted Hotel EBITDA Margin
 
32.1
%
 
32.9
%
Pro forma Adjusted Hotel EBITDA Margin increase over 2014(1)
 
185 bps

 
260 bps


___________
(1)
The comparable 2014 period includes results of operations for certain hotels prior to their acquisition by the Trust.





 
 
 
 
 
 
 
PRESS RELEASE
For Immediate Release
 Contact: Douglas W. Vicari (410) 972-4142
 
 
 







Full Year 2015
 
Updated Outlook
 
Previous Outlook
 
 
Low
 
High
 
Low
 
High
CONSOLIDATED:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income available to common shareholders
 
$
58.7

 
$
60.3

 
$
60.2

 
$
62.4

Net income per diluted common share
 
$
1.01

 
$
1.04

 
$
1.04

 
$
1.08

 
 
 
 
 
 
 
 
 
Adjusted Corporate EBITDA
 
$
173.1

 
$
174.9

 
$
173.9

 
$
176.5

 
 
 
 
 
 
 
 
 
AFFO available to common shareholders
 
$
128.6

 
$
130.2

 
$
129.8

 
$
132.0

AFFO per diluted common share
 
$
2.22

 
$
2.25

 
$
2.24

 
$
2.28

 
 
 
 
 
 
 
 
 
Corporate cash general and administrative expense
 
$
9.6

 
$
9.8

 
$
9.3

 
$
9.7

Corporate non-cash general and administrative expense
 
$
7.6

 
$
7.6

 
$
7.6

 
$
7.6

 
 
 
 
 
 
 
 
 
Weighted-average number of diluted common shares outstanding
 
57.9

 
57.9

 
57.9

 
57.9

 
 
 
 
 
 
 
 
 
HOTEL PORTFOLIO:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro forma RevPAR
 
$
186.00

 
$
187.00

 
$
187.00

 
$
189.00

Pro forma RevPAR increase over 2014(1)
 
6.1
%
 
6.6
%
 
6.5
%
 
7.25
%
Pro forma Adjusted Hotel EBITDA
 
$
197.1

 
$
199.1

 
$
197.7

 
$
200.7

Pro forma Adjusted Hotel EBITDA Margin
 
32.6
%
 
32.8
%
 
32.6
%
 
32.8
%
Pro forma Adjusted Hotel EBITDA Margin increase over 2014(1)
 
120 bps

 
140 bps

 
115 bps

 
140 bps


___________
(1)
The comparable 2014 period includes results of operations for certain hotels prior to their acquisition by the Trust.
"We are adjusting our full year outlook to reflect more conservative growth expectations for November and December given weaker than expected business transient demand in October predominantly at our hotels located in the San Francisco and New York markets,” said James L. Francis, Chesapeake Lodging Trust’s President and Chief Executive Officer. "We continue to believe positive fundamentals for the U.S. lodging industry and for the majority of our markets remain intact as we look into 2016 based on favorable convention calendars, our group pace, and the continued expectation that lodging demand growth will exceed lodging supply growth.”
NON-GAAP FINANCIAL MEASURES
The Trust reports the following eight non-GAAP financial measures that it believes are useful to investors as key measures of its operating performance: (1) Hotel EBITDA, (2) Adjusted Hotel EBITDA, (3) Adjusted Hotel EBITDA Margin, (4) Corporate EBITDA, (5) Adjusted Corporate EBITDA, (6) FFO, (7) FFO available to common shareholders and (8) AFFO available to common shareholders. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measure are included in the accompanying financial tables.




 
 
 
 
 
 
 
PRESS RELEASE
For Immediate Release
 Contact: Douglas W. Vicari (410) 972-4142
 
 
 







Hotel EBITDA – Hotel EBITDA is defined as net income before interest, income taxes, depreciation and amortization, air rights amortization, corporate general and administrative, and hotel acquisition costs. The Trust believes that Hotel EBITDA provides investors a useful financial measure to evaluate the Trust’s hotel operating performance, excluding the impact of the Trust’s capital structure (primarily interest), the Trust’s asset base (primarily depreciation and amortization), and the Trust’s corporate-level expenses (corporate general and administrative and hotel acquisition costs).
Adjusted Hotel EBITDA – The Trust further adjusts Hotel EBITDA for certain additional recurring and non-recurring items. Specifically, the Trust adjusts for non-cash amortization of intangible assets and liabilities, including ground lease assets and unfavorable contract liabilities, deferred franchise costs, and deferred key money, all of which are recurring items. The Trust believes that Adjusted Hotel EBITDA provides investors with another useful financial measure to evaluate the Trust’s hotel operating performance, excluding the effect of these non-cash items.
Adjusted Hotel EBITDA Margin – Adjusted Hotel EBITDA Margin is defined as Adjusted Hotel EBITDA as a percentage of total revenues. The Trust believes that Adjusted Hotel EBITDA Margin provides investors another useful financial measure to evaluate the Trust’s hotel operating performance.
Corporate EBITDA – Corporate EBITDA is defined as net income before interest, income taxes, and depreciation and amortization. The Trust believes that Corporate EBITDA provides investors a useful financial measure to evaluate the Trust’s operating performance, excluding the impact of the Trust’s capital structure (primarily interest expense) and the Trust’s asset base (primarily depreciation and amortization).
Adjusted Corporate EBITDA – The Trust further adjusts Corporate EBITDA for certain additional recurring and non-recurring items. Specifically, the Trust adjusts for hotel acquisition costs and non-cash amortization of intangible assets and liabilities, including air rights contracts, ground lease assets and unfavorable contract liabilities, deferred franchise costs, and deferred key money, all of which are recurring items, and gains (losses) from sales of real estate, which is a non-recurring item. The Trust believes that Adjusted Corporate EBITDA provides investors with another financial measure of its operating performance that provides for greater comparability of its core operating results between periods.
FFO – The Trust calculates FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which defines FFO as net income (calculated in accordance with GAAP), excluding depreciation and amortization, impairment charges of depreciable real estate, gains (losses) from sales of real estate, the cumulative effect of changes in accounting principles, and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. By excluding the effect of depreciation and amortization and gains (losses)




 
 
 
 
 
 
 
PRESS RELEASE
For Immediate Release
 Contact: Douglas W. Vicari (410) 972-4142
 
 
 







from sales of real estate, both of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, the Trust believes that FFO provides investors a useful financial measure to evaluate the Trust’s operating performance.
FFO available to common shareholders – The Trust reduces FFO for preferred share dividends and dividends declared on and earnings allocated to unvested time-based awards (consistent with adjustments required by GAAP in reporting net income available to common shareholders and related per share amounts). FFO available to common shareholders provides investors another financial measure to evaluate the Trust’s operating performance after taking into account the interests of holders of the Trust’s preferred shares and unvested time-based awards.
AFFO available to common shareholders – The Trust further adjusts FFO available to common shareholders for certain additional recurring and non-recurring items that are not in NAREIT’s definition of FFO. Specifically, the Trust adjusts for hotel acquisition costs and non-cash amortization of intangible assets and liabilities, including air rights contracts, ground lease assets and unfavorable contract liabilities, deferred franchise costs, and deferred key money, all of which are recurring items. The Trust believes that AFFO available to common shareholders provides investors with another financial measure of its operating performance that provides for greater comparability of its core operating results between periods.
CONFERENCE CALL
The Trust will host a conference call on Monday, November 2, 2015 at 5:00 p.m. Eastern Time to discuss its financial results. Interested individuals are invited to listen to the call by dialing (877) 683-0303 (U.S./Canadian callers) or (706) 643-5037 (International callers). The conference call ID is 53678101. A simultaneous webcast of the call will be available on the Trust’s website at www.chesapeakelodgingtrust.com. It is recommended that participants call or log on 10 minutes ahead of the scheduled start time to ensure proper connection.
A replay of the conference call will be available two hours after the live call until midnight on November 9, 2015. To access the replay, dial (855) 859-2056 (U.S./Canadian callers) or (404) 537-3406 (International callers). The conference call ID is 53678101. A webcast replay and transcript of the conference call will be archived and available on the Trust’s website for 12 months.
ABOUT CHESAPEAKE LODGING TRUST
Chesapeake Lodging Trust is a self-advised lodging real estate investment trust (REIT) focused on investments primarily in upper-upscale hotels in major business and convention markets and, on a selective basis, premium select-service hotels in urban settings or unique locations in the United States. The Trust owns 22 hotels with an aggregate of 6,699 rooms in nine states and the District of Columbia. Additional information can be found on the Trust’s website at www.chesapeakelodgingtrust.com.




 
 
 
 
 
 
 
PRESS RELEASE
For Immediate Release
 Contact: Douglas W. Vicari (410) 972-4142
 
 
 







Note: This press release contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “plan,” “predict,” “project,” “will,” “continue” and other similar terms and phrases, including references to assumptions and forecasts, such as the Trust’s expectations regarding the future Hotel EBITDA and Adjusted Hotel EBITDA of its existing hotels and the Trust’s fourth quarter and full year 2015 outlook. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: U.S. economic conditions generally and the real estate market and the lodging industry specifically; management and performance of the Trust's hotels; supply and demand for hotel rooms in the Trust's markets; the Trust's competition; the Trust’s ability to continue to satisfy complex rules in order for it to remain a REIT for federal income tax purposes; and other risks and uncertainties associated with the Trust’s business described in its filings with the SEC. Although the Trust believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of November 2, 2015, and the Trust undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Trust’s expectations, except as required by law.





CHESAPEAKE LODGING TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 


 
 
September 30, 2015
 
December 31, 2014
 
 
(unaudited)
 
 
ASSETS
 
 
 
 
Property and equipment, net
 
$
1,939,257

 
$
1,580,427

Intangible assets, net
 
36,558

 
36,992

Cash and cash equivalents
 
45,735

 
29,326

Restricted cash
 
42,548

 
43,387

Accounts receivable, net
 
26,514

 
13,102

Prepaid expenses and other assets
 
18,150

 
10,637

Deferred financing costs, net
 
6,965

 
6,064

Total assets
 
$
2,115,727

 
$
1,719,935

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Long-term debt
 
$
783,915

 
$
551,723

Accounts payable and accrued expenses
 
66,636

 
53,442

Other liabilities
 
46,475

 
32,788

Total liabilities
 
897,026

 
637,953

 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
Preferred shares, $.01 par value; 100,000,000 shares authorized;
Series A Cumulative Redeemable Preferred Shares; 5,000,000 shares
issued and outstanding ($127,422 liquidation preference)
 
50

 
50

Common shares, $.01 par value; 400,000,000 shares authorized;
59,658,985 shares and 54,818,064 shares issued and outstanding, respectively
 
597

 
548

Additional paid-in capital
 
1,295,970

 
1,138,391

Cumulative dividends in excess of net income
 
(77,120
)
 
(57,007
)
Accumulated other comprehensive loss
 
(796
)
 

Total shareholders’ equity
 
1,218,701

 
1,081,982

Total liabilities and shareholders’ equity
 
$
2,115,727

 
$
1,719,935

 
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL CREDIT INFORMATION:
 
 
 
 
Fixed charge coverage ratio(1)
 
2.95

 
2.65

Leverage ratio(1)
 
33.1
%
 
31.1
%
______________ 
(1)
Calculated as defined under the Trust’s revolving credit facility.




CHESAPEAKE LODGING TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
 


 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
REVENUE
 
 
 
 
 
 
 
 
Rooms
 
$
128,388

 
$
102,473

 
$
332,948

 
$
271,430

Food and beverage
 
29,620

 
22,883

 
86,032

 
69,214

Other
 
7,001

 
5,484

 
17,464

 
13,835

Total revenue
 
165,009

 
130,840


436,444


354,479

 
 
 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
 
 
Hotel operating expenses:
 
 
 
 
 
 
 
 
Rooms
 
27,826

 
21,985

 
75,070

 
61,930

Food and beverage
 
22,769

 
17,860

 
64,730

 
52,800

Other direct
 
2,061

 
2,234

 
5,300

 
6,013

Indirect
 
54,111

 
42,641

 
148,140

 
118,423

Total hotel operating expenses
 
106,767

 
84,720


293,240


239,166

Depreciation and amortization
 
18,306

 
12,466

 
51,162

 
37,488

Air rights contract amortization
 
130

 
130

 
390

 
390

Corporate general and administrative
 
4,019

 
3,694

 
13,094

 
11,505

Hotel acquisition costs
 
19

 
60

 
854

 
60

Total operating expenses
 
129,241

 
101,070


358,740


288,609

 
 
 
 
 
 
 
 
 
Operating income
 
35,768

 
29,770


77,704


65,870

 
 
 
 
 
 
 
 
 
Interest income
 

 
8

 

 
8

Interest expense
 
(8,287
)
 
(6,963
)
 
(23,634
)
 
(20,477
)
Gain on sale of hotel
 

 
7,006

 

 
7,006

 
 
 
 
 
 
 
 
 
Income before income taxes
 
27,481

 
29,821


54,070


52,407

 
 
 
 
 
 
 
 
 
Income tax expense
 
(301
)
 
(1,133
)
 
(1,293
)
 
(292
)
 
 
 
 
 
 
 
 
 
Net income
 
27,180

 
28,688


52,777


52,115

 
 
 
 
 
 
 
 
 
Preferred share dividends
 
(2,422
)
 
(2,422
)
 
(7,266
)
 
(7,266
)
Net income available to common shareholders
 
$
24,758

 
$
26,266


$
45,511


$
44,849

 
 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.42

 
$
0.52

 
$
0.79

 
$
0.90

Diluted
 
$
0.42

 
$
0.52

 
$
0.78

 
$
0.89

 
 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
58,552,800

 
50,141,513

 
57,107,919

 
49,364,637

Diluted
 
58,991,087

 
50,567,849

 
57,536,971

 
49,758,044







CHESAPEAKE LODGING TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) 



 
 
Nine Months Ended September 30,
 
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
Net income
 
$
52,777

 
$
52,115

Adjustments to reconcile net income to net cash provided by
operating activities:
 
 
 
 
Depreciation and amortization
 
51,162

 
37,488

Air rights contract amortization
 
390

 
390

Deferred financing costs amortization
 
1,410

 
1,950

Gain on sale of hotel
 

 
(7,006
)
Share-based compensation
 
5,640

 
4,311

Other
 
(613
)
 
771

Changes in assets and liabilities:
 
 
 
 
Accounts receivable, net
 
(11,590
)
 
(8,958
)
Prepaid expenses and other assets
 
(4,821
)
 
26

Accounts payable and accrued expenses
 
8,311

 
4,629

Other liabilities
 
5,972

 
(22
)
Net cash provided by operating activities
 
108,638

 
85,694

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Acquisition of hotels, net of cash acquired
 
(255,249
)
 

Disposition of hotel, net of cash sold
 

 
31,933

Deposit on hotel acquisition
 

 
(42,142
)
Improvements and additions to hotels
 
(30,044
)
 
(67,500
)
Change in restricted cash
 
839

 
(5,680
)
Net cash used in investing activities
 
(284,454
)
 
(83,389
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from sale of common shares, net of underwriting fees
 
153,962

 
144,320

Payment of offering costs related to sale of common shares
 
(276
)
 
(378
)
Borrowings under revolving credit facility
 
315,000

 
85,000

Repayments under revolving credit facility
 
(200,000
)
 
(50,000
)
Proceeds from issuance of mortgage debt
 

 
90,000

Scheduled principal payments on mortgage debt
 
(7,650
)
 
(67,326
)
Payment of deferred financing costs
 
(2,311
)
 
(1,980
)
Payment of dividends to common shareholders
 
(57,536
)
 
(42,455
)
Payment of dividends to preferred shareholders
 
(7,266
)
 
(7,266
)
Repurchase of common shares
 
(1,698
)
 
(438
)
Net cash provided by financing activities
 
192,225

 
149,477

Net increase in cash
 
16,409

 
151,782

Cash and cash equivalents, beginning of period
 
29,326

 
28,713

Cash and cash equivalents, end of period
 
$
45,735

 
$
180,495







CHESAPEAKE LODGING TRUST
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
(unaudited)


The following table reconciles net income to Hotel EBITDA, Adjusted Hotel EBITDA, pro forma Adjusted Hotel EBITDA, and pro forma Adjusted Hotel EBITDA Margin for the three and nine months ended September 30, 2015 and 2014:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net income
 
$
27,180

 
$
28,688

 
$
52,777

 
$
52,115

Add: Interest expense
 
8,287

 
6,963

 
23,634

 
20,477

Income tax expense
 
301

 
1,133

 
1,293

 
292

Depreciation and amortization
 
18,306

 
12,466

 
51,162

 
37,488

Air rights contract amortization
 
130

 
130

 
390

 
390

Corporate general and administrative
 
4,019

 
3,694

 
13,094

 
11,505

Hotel acquisition costs
 
19

 
60

 
854

 
60

Less: Interest income
 

 
(8
)
 

 
(8
)
Hotel EBITDA
 
58,242

 
53,126

 
143,204

 
122,319

 
 
 
 
 
 
 
 
 
Less: Non-cash amortization(1)
 
(155
)
 
1,119

 
(416
)
 
970

Gain on sale of hotel
 

 
(7,006
)
 

 
(7,006
)
Adjusted Hotel EBITDA
 
58,087

 
47,239

 
142,788

 
116,283

 
 
 
 
 
 
 
 
 
Add: Prior owner Hotel EBITDA(2)
 

 
6,500

 
6,842

 
23,255

Less: Hotel EBITDA of hotel sold(3)
 

 
(750
)
 

 
(2,093
)
Pro forma Adjusted Hotel EBITDA
 
$
58,087

 
$
52,989

 
$
149,630

 
$
137,445

 
 
 
 
 
 
 
 
 
Total revenue
 
$
165,009

 
$
130,840

 
$
436,444

 
$
354,479

Add: Prior owner total revenue(2)
 

 
26,439

 
20,286

 
82,970

Less: Total revenue of hotel sold(3)
 

 
(1,803
)
 

 
(5,166
)
Pro forma total revenue
 
$
165,009

 
$
155,476

 
$
456,730

 
$
432,283

 
 
 
 
 
 
 
 
 
Pro forma Adjusted Hotel EBITDA Margin
 
35.2
%
 
34.1
%
 
32.8
%
 
31.8
%
_____________
(1)
Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, and unfavorable contract liability.
(2)
Reflects results of operations for certain hotels prior to our acquisition.
(3)
Reflects results of operations for the Courtyard Anaheim at Disneyland Resort which was sold on September 30, 2014.






CHESAPEAKE LODGING TRUST
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
(unaudited)


The following table reconciles net income to Corporate EBITDA and Adjusted Corporate EBITDA for the three and nine months ended September 30, 2015 and 2014:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net income
 
$
27,180

 
$
28,688

 
$
52,777

 
$
52,115

Add: Interest expense
 
8,287

 
6,963

 
23,634

 
20,477

Income tax expense
 
301

 
1,133

 
1,293

 
292

Depreciation and amortization
 
18,306

 
12,466

 
51,162

 
37,488

Less: Interest income
 

 
(8
)
 

 
(8
)
Corporate EBITDA
 
54,074

 
49,242

 
128,866

 
110,364

 
 
 
 
 
 
 
 
 
Add: Hotel acquisition costs
 
19

 
60

 
854

 
60

Less: Non-cash amortization(1)
 
(25
)
 
1,248

 
(26
)
 
1,359

Gain on sale of hotel
 

 
(7,006
)
 

 
(7,006
)
Adjusted Corporate EBITDA
 
$
54,068

 
$
43,544

 
$
129,694

 
$
104,777

____________ 
(1)
Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.

The following table reconciles net income to FFO, FFO available to common shareholders, and AFFO available to common shareholders for the three and nine months ended September 30, 2015 and 2014:
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net income
 
$
27,180

 
$
28,688

 
$
52,777

 
$
52,115

Add: Depreciation and amortization
 
18,306

 
12,466

 
51,162

 
37,488

Less: Gain on sale of hotel
 

 
(7,006
)
 

 
(7,006
)
FFO
 
45,486

 
34,148

 
103,939

 
82,597

 
 
 
 
 
 
 
 
 
Less: Preferred share dividends
 
(2,422
)
 
(2,422
)
 
(7,266
)
 
(7,266
)
Dividends declared on unvested time-based awards
 
(153
)
 
(128
)
 
(426
)
 
(385
)
Undistributed earnings allocated to unvested time-based awards
 
(8
)
 
(84
)
 

 

FFO available to common shareholders
 
42,903

 
31,514

 
96,247

 
74,946

 
 
 
 
 
 
 
 
 
Add: Hotel acquisition costs
 
19

 
60

 
854

 
60

Less: Non-cash amortization(1)
 
(25
)
 
1,248

 
(26
)
 
1,359

AFFO available to common shareholders
 
$
42,897

 
$
32,822

 
$
97,075

 
$
76,365

 
 
 
 
 
 
 
 
 
FFO per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.73

 
$
0.63

 
$
1.69

 
$
1.52

Diluted
 
$
0.73

 
$
0.62

 
$
1.67

 
$
1.51

 
 
 
 
 
 
 
 
 
AFFO per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.73

 
$
0.65

 
$
1.70

 
$
1.55

Diluted
 
$
0.73

 
$
0.65

 
$
1.69

 
$
1.53






CHESAPEAKE LODGING TRUST
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
(unaudited)


___________ 
(1)
Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.

The following table reconciles forecasted net income to Hotel EBITDA, Adjusted Hotel EBITDA, pro forma Adjusted Hotel EBITDA, and pro forma Adjusted Hotel EBITDA Margin for the three months and year ending December 31, 2015:
 
Three Months Ending December 31, 2015
 
Year Ending December 31, 2015
 
Low
 
High
 
Low
 
High
Net income
$
16,160

 
$
17,760

 
$
68,960

 
$
70,560

Add: Interest expense
8,220

 
8,220

 
31,850

 
31,850

Income tax expense
1,100

 
1,300

 
2,390

 
2,590

Depreciation and amortization
17,940

 
17,940

 
69,100

 
69,100

Air rights contract amortization
130

 
130

 
520

 
520

Corporate general and administrative
4,100

 
4,300

 
17,190

 
17,390

Hotel acquisition costs

 

 
860

 
860

Hotel EBITDA
47,650

 
49,650

 
190,870

 
192,870

 
 
 
 
 
 
 
 
Less: Non-cash amortization(1)
(150
)
 
(150
)
 
(580
)
 
(580
)
Adjusted Hotel EBITDA
47,500

 
49,500

 
190,290

 
192,290

 
 
 
 
 
 
 
 
Add: Prior owner Hotel EBITDA(2)

 

 
6,840

 
6,840

Pro forma Adjusted Hotel EBITDA
$
47,500

 
$
49,500

 
$
197,130

 
$
199,130

 
 
 
 
 
 
 
 
Total revenue
$
147,750

 
$
150,500

 
$
584,190

 
$
586,940

Add: Prior owner total revenue(2)

 

 
20,290

 
20,290

Pro forma total revenue
$
147,750

 
$
150,500

 
$
604,480

 
$
607,230

 
 
 
 
 
 
 
 
Pro forma Adjusted Hotel EBITDA Margin
32.1
%
 
32.9
%
 
32.6
%
 
32.8
%
_____________
(1)
Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, and unfavorable contract liability.
(2)
Reflects results of operations for certain hotels prior to our acquisition.



















CHESAPEAKE LODGING TRUST
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
(unaudited)


The following table reconciles forecasted net income to Corporate EBITDA and Adjusted Corporate EBITDA for the three months and year ending December 31, 2015:
 
Three Months Ending December 31, 2015
 
Year Ending December 31, 2015
 
Low
 
High
 
Low
 
High
Net income
$
16,160

 
$
17,760

 
$
68,960

 
$
70,560

Add: Interest expense
8,220

 
8,220

 
31,850

 
31,850

Income tax expense
1,100

 
1,300

 
2,390

 
2,590

Depreciation and amortization
17,940

 
17,940

 
69,100

 
69,100

Corporate EBITDA
43,420

 
45,220

 
172,300

 
174,100

 
 
 
 
 
 
 
 
Add: Hotel acquisition costs

 

 
860

 
860

Less: Non-cash amortization(1)
(20
)
 
(20
)
 
(60
)
 
(60
)
Adjusted Corporate EBITDA
$
43,400

 
$
45,200

 
$
173,100

 
$
174,900



____________
(1)
Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.

































CHESAPEAKE LODGING TRUST
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
(unaudited)


The following table reconciles forecasted net income to FFO, FFO available to common shareholders, and AFFO available to common shareholders for the three months and year ending December 31, 2015:
 
Three Months Ending December 31, 2015
 
Year Ending December 31, 2015
 
Low
 
High
 
Low
 
High
Net income
$
16,160

 
$
17,760

 
$
68,960

 
$
70,560

Add: Depreciation and amortization
17,940

 
17,940

 
69,100

 
69,100

FFO
34,100

 
35,700

 
138,060

 
139,660

 
 
 
 
 
 
 
 
Less: Preferred share dividends
(2,420
)
 
(2,420
)
 
(9,690
)
 
(9,690
)
Dividends declared on unvested time-based awards
(130
)
 
(130
)
 
(560
)
 
(560
)
Undistributed earnings allocated to unvested time-based awards

 

 

 

FFO available to common shareholders
31,550

 
33,150

 
127,810

 
129,410

 
 
 
 
 
 
 
 
Add: Hotel acquisition costs

 

 
860

 
860

Less: Non-cash amortization(1)
(20
)
 
(20
)
 
(60
)
 
(60
)
AFFO available to common shareholders
$
31,530

 
$
33,130

 
$
128,610

 
$
130,210

 
 
 
 
 
 
 
 
FFO per common share:
 
 
 
 
 
 
 
Basic
$
0.54

 
$
0.57

 
$
2.22

 
$
2.25

Diluted
$
0.53

 
$
0.56

 
$
2.21

 
$
2.23

 
 
 
 
 
 
 
 
AFFO per common share:
 
 
 
 
 
 
 
Basic
$
0.54

 
$
0.57

 
$
2.24

 
$
2.27

Diluted
$
0.53

 
$
0.56

 
$
2.22

 
$
2.25

 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
58,559

 
58,559

 
57,474

 
57,474

Diluted
59,019

 
59,019

 
57,915

 
57,915

____________ 
(1)
Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.





CHESAPEAKE LODGING TRUST
CURRENT HOTEL PORTFOLIO








Hotel
 
Location
 
Rooms
 
Acquisition Date
1
 
Hyatt Regency Boston
 
Boston, MA
 
502
 
March 18, 2010
2
 
Hilton Checkers Los Angeles
 
Los Angeles, CA
 
193
 
June 1, 2010
3
 
Boston Marriott Newton
 
Newton, MA
 
430
 
July 30, 2010
4
 
Le Meridien San Francisco
 
San Francisco, CA
 
360
 
December 15, 2010
5
 
Homewood Suites Seattle Convention Center
 
Seattle, WA
 
195
 
May 2, 2011
6
 
W Chicago – City Center
 
Chicago, IL
 
403
 
May 10, 2011
7
 
Hotel Indigo San Diego Gaslamp Quarter
 
San Diego, CA
 
210
 
June 17, 2011
8
 
Courtyard Washington Capitol Hill/Navy Yard
 
Washington, DC
 
204
 
June 30, 2011
9
 
Hotel Adagio San Francisco, Autograph Collection
 
San Francisco, CA
 
171
 
July 8, 2011
10
 
Denver Marriott City Center
 
Denver, CO
 
613
 
October 3, 2011
11
 
Hyatt Herald Square New York
 
New York, NY
 
122
 
December 22, 2011
12
 
W Chicago – Lakeshore
 
Chicago, IL
 
520
 
August 21, 2012
13
 
Hyatt Regency Mission Bay Spa and Marina
 
San Diego, CA
 
429
 
September 7, 2012
14
 
The Hotel Minneapolis, Autograph Collection
 
Minneapolis, MN
 
222
 
October 30, 2012
15
 
Hyatt Place New York Midtown South
 
New York, NY
 
185
 
March 14, 2013
16
 
W New Orleans – French Quarter
 
New Orleans, LA
 
97
 
March 28, 2013
17
 
Le Meridien New Orleans
 
New Orleans, LA
 
410
 
April 25, 2013
18
 
Hyatt Fisherman’s Wharf
 
San Francisco, CA
 
316
 
May 31, 2013
19
 
Hyatt Santa Barbara
 
Santa Barbara, CA
 
205
 
June 27, 2013
20
 
JW Marriott San Francisco Union Square
 
San Francisco, CA
 
337
 
October 1, 2014
21
 
Royal Palm South Beach Miami, a Tribute Portfolio Resort
 
Miami Beach, FL
 
393
 
March 9, 2015
22
 
Ace Hotel and Theater Downtown Los Angeles
 
Los Angeles, CA
 
182
 
April 30, 2015
 
 
 
 
 
 
6,699
 
 



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