CorePoint Lodging Inc. (NYSE: CPLG) (“CorePoint” or the “Company”),
a pure play select-service hotel owner strategically focused on the
midscale and upper midscale segments, today reported operational
and financial results for the third quarter ended September 30,
2018.
Third Quarter 2018 Highlights
- Net loss attributable to CorePoint Lodging common stockholders
of $13 million, or $0.22 loss per fully diluted share
- Comparable RevPAR of $63.00, an increase of 3.6% from the same
period in 2017 with 390 bps of RevPAR Index market share
growth
- Adjusted EBITDAre of $55 million
- Adjusted FFO of $37 million
- Completed the construction phase of one additional significant
hotel renovation, bringing the total number of repositioning
projects with construction complete to 49 hotels, as part of the
Company’s strategic repositioning program
- Third quarter dividend of $0.20 was paid on October 15, 2018 to
common stockholders of record on October 1, 2018
“We are excited to have completed CorePoint’s first full quarter
as a stand-alone lodging REIT,” said Keith Cline, President and
Chief Executive Officer of CorePoint. “We are extremely
pleased with the revenue and market share growth experienced for
our portfolio this quarter. Our team is focused on executing
a proactive asset management strategy to continue to drive RevPAR
growth with a focus on our repositioned and hurricane-impacted
hotels, to improve EBITDA margins and to optimize our overall
portfolio. We are also hopeful that next year, once CorePoint is
fully integrated into the Wyndham platform we will begin to see the
benefit of its network distribution and scale.”
Cline continued, “As we move through the remainder of
2018, our key strategic priorities are driving growth in
RevPAR and market share, reopening our hurricane effected
properties, completing our hotel repositioning projects, executing
a proactive asset management strategy to drive profit margins, and
closely monitoring the transition and integration of the La Quinta
brand and the management of our hotels to Wyndham Hotels &
Resorts.”
Selected Statistical and Financial Data
(Unaudited, $ in millions, except RevPAR and ADR)
|
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
|
|
|
2018 |
|
|
2017 |
|
|
% Change |
|
|
2018 |
|
|
2017 |
|
|
% Change |
|
|
Net Income (Loss) Attributable to CorePoint Lodging Stockholders
(1)(2) |
|
$ |
(13 |
) |
|
$ |
13 |
|
|
NM |
|
(3) |
$ |
(76 |
) |
|
$ |
31 |
|
|
NM |
|
(3) |
Income (Loss) from continuing operations, net of tax (1)(2) |
|
$ |
(13 |
) |
|
$ |
10 |
|
|
NM |
|
(3) |
$ |
(51 |
) |
|
$ |
34 |
|
|
NM |
|
(3) |
Total Revenues (1) |
|
$ |
234 |
|
|
$ |
227 |
|
|
|
3.1 |
% |
|
$ |
663 |
|
|
$ |
656 |
|
|
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Adjusted EBITDAre (2)(4) |
|
$ |
55 |
|
|
$ |
58 |
|
|
|
(5.1 |
%) |
|
$ |
150 |
|
|
$ |
174 |
|
|
|
(13.8 |
%) |
|
Pro Forma Adjusted FFO (2)(4) |
|
$ |
37 |
|
|
$ |
40 |
|
|
|
(7.5 |
%) |
|
$ |
101 |
|
|
$ |
124 |
|
|
|
(18.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable Occupancy (5) |
|
|
68.8 |
% |
|
|
68.7 |
% |
|
|
10 |
|
bps |
|
66.4 |
% |
|
|
67.0 |
% |
|
|
(60 |
) |
bps |
Comparable ADR (5) |
|
$ |
91.56 |
|
|
$ |
88.50 |
|
|
|
3.5 |
|
% |
$ |
91.02 |
|
|
$ |
87.45 |
|
|
|
4.1 |
|
% |
Comparable RevPAR (5) |
|
$ |
63.00 |
|
|
$ |
60.79 |
|
|
|
3.6 |
|
% |
$ |
60.42 |
|
|
$ |
58.56 |
|
|
|
3.2 |
|
% |
Comparable Hotel Pro Forma Adjusted EBITDAre margin (2)(4) |
|
|
26.0 |
% |
|
|
26.9 |
% |
|
|
(90 |
) |
bps |
|
25.2 |
% |
|
|
27.9 |
% |
|
|
(270 |
) |
bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) For 2017 and the nine months ended September 30, 2018,
historical balance reflects, for accounting and financial reporting
purposes, La Quinta as being spun-off from CorePoint. With
this presentation, the La Quinta franchise and management
businesses are reported as discontinued operations for all periods
presented.(2) For the nine months ended September 30, 2017,
applicable amounts include a positive insurance expense adjustment
of approximately $9 million recognized in the second quarter of
2017.(3) Change in terms of percentage is not meaningful.(4) For
2017 and the nine months ended September 30, 2018, amounts are
calculated on a pro forma basis. Refer to “Pro Forma Financial
Information” below and tables attached to this earnings release for
a discussion and reconciliation of the Pro Forma financial
information and adjusted results of operations.(5) Comparable hotel
portfolio includes 305 hotels of the total 315 hotels owned as of
September 30, 2018.
Third Quarter 2018 Financial and Operating
Results
The Company reported net loss attributable to CorePoint Lodging
stockholders of $13 million, or $0.22 loss per fully diluted share,
for the quarter ended September 30, 2018, compared to net income
attributable to CorePoint Lodging stockholders of $13 million, or
$0.22 income per fully diluted share, for quarter ended September
30, 2017. The year-over-year difference is primarily due to higher
hotel operating expenses, including management and royalty fees,
and higher interest expense.
Comparable RevPAR for the third quarter of 2018 increased 3.6%
over the same period of 2017, primarily driven by an increase of
3.5% in comparable ADR. Top performing markets included
Boston, New Orleans, Phoenix, San Francisco, and West Texas.
Adjusted EBITDAre for the third quarter of 2018 was $55 million
as compared to $58 million on a pro forma basis for the same period
in 2017. Increases in rooms revenue during the third quarter
of 2018 were more than offset by increases in hotel operating
expenses, in particular rooms expense, including payroll, contract
labor, sales team, and third-party travel agent
commissions.
Hurricane disruption continued to have an impact on the
Company’s business in the third quarter of 2018, posing significant
challenges for certain hotels. The Company estimates that the
impact of the hurricanes on third quarter 2018 results was a
reduction of approximately $3 million in Adjusted EBITDAre,
compared to Adjusted EBITDAre on a pro forma basis in the third
quarter of 2017. The majority of these business interruption
claims due to hurricane disruption are expected to be recovered in
the future through the Company’s business interruption insurance
coverage.
Hurricanes Harvey and Irma
During the third quarter of 2017, two major hurricanes made
landfall impacting areas serviced by CorePoint hotels. Many
of the hotels in affected areas sustained property damage and also
experienced business interruption as a result not only of damage to
the hotels themselves but also to damage to surrounding
infrastructure.
As of September 30, 2018, approximately 1% of rooms remain out
of service, primarily at three properties in Florida that remain
closed. The Company currently expects two of the three closed
hotels to be re-opened by the end of 2018. CorePoint expects
that insurance proceeds, excluding any applicable insurance
deductibles, will be sufficient to cover a significant portion of
the property damage to the hotels and the related operating
loss. Through September 30, 2018, the Company has received
approximately $3 million in total business interruption insurance
proceeds, which includes approximately $2 million received during
the second quarter of 2018 that is excluded from Adjusted
EBITDAre.
Hurricane Michael
During October 2018, Hurricane Michael made landfall and
significantly impacted the Company’s hotel located in Panama City,
Florida. It is currently anticipated that this hotel will be
closed for up to nine months with an estimated property damage of
$10 million to $15 million. CorePoint expects that insurance
proceeds, excluding any applicable insurance deductibles, will be
sufficient to cover a significant portion of the property damage to
this hotel and its related operating loss.
Capital Investments and Hotel Strategic Repositioning
Program
The Company invested approximately $40 million in the third
quarter of 2018 on capital improvements, including approximately
$13 million related to its ongoing hotel strategic repositioning
program.
In the fourth quarter of 2016, the Company began execution of a
significant capital investment plan to invest over $200 million in
54 hotels with a focus to reposition these assets upward within
their local markets. The scope of these strategic
repositioning projects includes, but is not limited to, enhancing
guestrooms, expanding public areas and upgrading exterior
elements. Renovations incorporated elements of the “Del Sol”
prototype, which is the newest build and design package for the La
Quinta brand and related assets. During the third quarter of
2018, the construction phase of one additional hotel renovation was
completed. As a result, as of September 30, 2018, 49 of these
hotels had completed the construction phase of the project.
The Company expects to invest the substantial majority of the
remaining approximately $7 million of capital spend associated with
the strategic repositioning program in the fourth quarter of
2018.
Tax Matters Agreement Update
As previously disclosed, in connection with the spin-off and La
Quinta merger transaction, the parties agreed to set aside $240
million as a reserve amount to pay certain taxes that will be due
as a result of the spin-off and related transactions. If the
tax amount due is less than $240 million, the remaining amount will
be paid to CorePoint in cash. While the determination of the
ultimate tax amount due is ongoing, CorePoint currently expects the
$240 million reserve to be more than sufficient to cover such tax
liability.
Balance Sheet and Liquidity
At the end of the third quarter of 2018, the Company had total
debt principal outstanding of $1.035 billion, which consisted of
the following:
(Unaudited, $ in millions)
Debt |
|
Interest Rate |
|
Maturity Date |
|
Principal Balance
Outstanding |
|
|
CMBS Loan (1) |
|
L + 2.75% |
|
June 2025 |
|
$ |
1,035 |
|
|
Revolving Credit Facility (2) |
|
L + 4.50% |
|
May 2021 |
|
|
— |
|
|
Total Principal Amount |
|
|
|
|
|
$ |
1,035 |
|
|
(1) Maturity date
assumes the exercise of all borrower extension options.
Initial maturity date is June 2020, with borrower options to extend
the initial maturity date for five successive terms of one year
each. Amount shown represents gross principal balance
outstanding.
(2) $150 million
revolving credit facility. Maturity date assumes the exercise
of all borrower extension options. Initial maturity date is
May 2020, with borrower option to extend the initial maturity date
for one term of one-year.
Total cash and cash equivalents were $64 million as of September
30, 2018, excluding lender escrows of approximately $15
million. As of September 30, 2018, the Company had $150
million of availability on its revolving credit facility.
On July 3, 2018, the Company sold one hotel located in
Huntsville, Texas for a total gross sales price of $2 million,
substantially the same as the Company’s GAAP net carrying value for
the property.
Dividend
On September 19, 2018, our Board of Directors authorized and the
Company declared a cash dividend of $0.20 per share of common stock
with respect to the third quarter of 2018. The third quarter
dividend was paid on October 15, 2018 to stockholders of record as
of October 1, 2018.
On November 5, 2018, our Board of Directors authorized and the
Company declared a cash dividend of $0.20 per share of common stock
with respect to the fourth quarter of 2018. The fourth
quarter dividend will be paid on January 15, 2019 to stockholders
of record as of December 31, 2018. All future dividends will be at
the sole discretion of CorePoint’s Board of Directors.
Outlook
CorePoint has updated its 2018 outlook that was provided on
August 13, 2018. CorePoint now expects the full-year 2018
operating results to be as follows:
($ in millions)
Metric |
|
Low-End |
|
High-End |
Comparable RevPAR Growth |
|
|
3.25% |
|
|
|
4.25% |
|
Pro Forma Adjusted EBITDAre |
|
$174 |
|
|
$180 |
|
|
|
|
|
|
|
|
|
|
The 2018 outlook range incorporates the impact of disruption
caused by Hurricanes Harvey, Irma, and Michael on the Company’s
operating results. The majority of these business
interruption claims are expected to be recovered in the future
through the Company’s business interruption insurance
coverage. Factoring in recent expense growth trends, the
Company currently estimates its hurricane disruption hotels will
provide an incremental hotel EBITDAre contribution of approximately
$13 million to $17 million in 2019.
Pro Forma Adjusted EBITDAre assumes an annual run rate of
approximately $20 million for corporate general and administrative
expenses, excluding stock-based compensation expense and separation
costs related to the spin-off.
The Company’s achievement of anticipated full-year 2018
operating results is subject to risks and uncertainties, including
those disclosed in the Company’s filings with the Securities and
Exchange Commission (the “SEC”).
A reconciliation of anticipated full-year 2018 Pro Forma
Adjusted EBITDAre to the closest GAAP financial measure is not
available on a forward-looking basis without unreasonable efforts
due to the high variability, complexity and uncertainty with
respect to forecasting and quantifying certain amounts that are
necessary for such reconciliations, including net income (loss) and
adjustments that could be made for the spin-off and other related
expenses, impairment charges, gains or losses on sales of assets,
and the timing and magnitude of other amounts in its reconciliation
of historic numbers. For the same reasons, the Company is
unable to address the probable significance of the unavailable
information, which could have a potentially unpredictable, and
potentially significant, impact on its future GAAP financial
results.
Webcast and Earnings Call
The Company will host a quarterly conference call for investors
and other interested parties on Tuesday, November 6, 2018 beginning
at 10:00 a.m. Eastern Time.
The call may be accessed by dialing (866) 300-4611, or (703)
736-7439 for international participants, and entering the passcode
4685437. Participants may also access the call via webcast by
visiting the Company's investor relations website
at www.corepoint.com/investors. You are encouraged to dial
into the call or link to the webcast at least fifteen minutes prior
to the scheduled start time. The replay of the call will be
available from approximately 10:00 a.m. Eastern
Time on November 7, 2018 through midnight
Eastern Time on November 14, 2018. To access the replay,
the domestic dial-in number is (855) 859-2056, the international
dial-in number is (404) 537-3406, and the passcode is 4685437. The
archive of the webcast will be available on the Company's website
for a limited time.
Forward-Looking Statements
This press release contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements include
statements relating to the expected timing, completion and effects
of the ongoing hotel strategic repositioning program, as well as
other statements representing management’s beliefs about future
events, transactions, strategies, operations and financial results
and other non-historical statements, including, without limitation,
the statements in the “Outlook” section of this press release. Such
forward-looking statements often contain words such as “assume,”
“will,” “anticipate,” “believe,” “predict,” “project,” “potential,”
“contemplate,” “plan,” “forecast,” “estimate,” “expect,” “intend,”
“is targeting,” “may,” “should,” “would,” “could,” “goal,” “seek,”
“hope,” “aim,” “continue” and other similar words or expressions or
the negative thereof or other variations thereon. Forward-looking
statements are made based upon management’s current expectations
and beliefs and are not guarantees of future performance. Such
forward-looking statements involve numerous assumptions, risks and
uncertainties that may cause actual results to differ materially
from those expressed or implied in any such statements. The
Company’s actual business, financial condition or results of
operations may differ materially from those suggested by
forward-looking statements as a result of risks and uncertainties
which include, among others: risks related to the Company’s recent
spin-off from La Quinta and the merger of La Quinta’s management
and franchise business with Wyndham Worldwide Corporation; business
and financial risks inherent to the lodging industry; macroeconomic
and other factors beyond the Company’s control; the geographic
concentration of the Company’s hotels; the Company’s inability to
compete effectively; the Company’s concentration in the La Quinta
brand; the Company’s dependence on the performance of La Quinta and
other third-party hotel managers; covenants in the Company’s hotel
franchise agreements that limit or restrict the sale of its hotels;
risks posed by the Company’s acquisition, redevelopment,
repositioning, renovation and re-branding activities, as well as
its disposition activities; risks resulting from significant
investments in real estate; cyber threats and the risk of data
breaches or disruptions; the growth of internet reservation
channels; and the Company’s substantial indebtedness. Additional
risks and uncertainties include, among others, those risks and
uncertainties described in the Company’s Information Statement
included as Exhibit 99.1 to the Form 10 filed with the SEC on May
7, 2018, as such factors may be updated from time to time in the
Company’s periodic filings with the SEC. You are urged to carefully
consider all such factors. Although it is believed that the
expectations reflected in such forward-looking statements are
reasonable and are expressed in good faith, such expectations may
not prove to be correct and persons reading this communication are
therefore cautioned not to place undue reliance on these
forward-looking statements, which speak only to expectations as of
the date of this communication. The Company does not undertake or
plan to update or revise forward-looking statements to reflect
actual results, changes in plans, assumptions, estimates or
projections, or other circumstances occurring after the date of
this communication, even if such results, changes or circumstances
make it clear that any forward-looking information will not be
realized. If the Company makes any future public statements or
disclosures which modify or impact any of the forward-looking
statements contained in or accompanying this press release, such
statements or disclosures will be deemed to modify or supersede
such statements in this press release.
Non-GAAP Financial Measures
The Company refers to certain non-GAAP financial measures in
this press release including FFO, Adjusted FFO, Pro Forma Adjusted
FFO, EBITDA, EBITDAre, Adjusted EBITDAre, Pro Forma Adjusted
EBITDAre, Hotel Adjusted EBITDAre, Pro Forma Hotel Adjusted
EBITDAre, Hotel Adjusted EBITDAre margin, and Pro Forma Hotel
Adjusted EBITDAre margin. All such non-GAAP financial measures are
unaudited. Please see the tables to this press release for
definitions of such non-GAAP financial measures and reconciliations
of such financial measures to the most directly comparable GAAP
measure for historical periods.
Pro-Forma Financial Information
Certain financial measures and other information have been
adjusted for CorePoint’s historical debt and related balances and
interest expense to give the net effect to financing transactions
that were completed in connection with the spin-off, incremental
fees based on the terms of the post spin-off management and
franchise agreements, the removal of costs incurred related to the
spin-off, the establishment of CorePoint as a separate stand-alone
public company, adjustments to income tax expense based on
CorePoint’s post spin-off REIT tax structure and adjustments to
reflect post spin-off corporate general and administrative costs.
Further adjustments have been made to reflect the effects of hotels
disposed of during the periods presented. When presenting such
information, the amounts are identified as “Pro forma.” The
Pro Forma financial measures are based on preliminary estimates,
accounting judgments and currently available information and
assumptions that management believes are reasonable.
Accordingly, the Pro Forma financial data is not necessarily
indicative of our financial position or results of operations had
the transactions described above for which we are giving Pro Forma
effect actually occurred on the dates indicated.
About CorePoint
CorePoint Lodging Inc. (NYSE: CPLG) is the only pure-play
publicly traded U.S. lodging REIT strategically focused on the
ownership of midscale and upper-midscale select-service
hotels. CorePoint owns a geographically diverse portfolio of
315 hotels and more than 40,000 rooms across 41 states in
attractive locations primarily in or near employment centers,
airports, and major travel thoroughfares. The portfolio consists of
all La Quinta branded hotels, except for one Baymont branded
hotel. For more information, please visit CorePoint’s website
at www.corepoint.com.
Contact: Investor Relations & Media
Kristin
Hays
214-501-5632
investorrelations@corepoint.com
COREPOINT LODGING
INC.CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)AS OF SEPTEMBER 30, 2018 AND DECEMBER
31, 2017(in millions, except share
data)
|
|
September 30,
2018 |
|
|
December 31,
2017 |
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
Real Estate |
|
|
|
|
|
|
|
|
|
Land |
|
$ |
738 |
|
|
$ |
739 |
|
|
Buildings and improvements |
|
|
2,794 |
|
|
|
2,706 |
|
|
Furniture, fixtures, and other equipment |
|
|
382 |
|
|
|
363 |
|
|
Gross operating real estate |
|
|
3,914 |
|
|
|
3,808 |
|
|
Less accumulated depreciation |
|
|
(1,529 |
) |
|
|
(1,425 |
) |
|
Net operating real estate |
|
|
2,385 |
|
|
|
2,383 |
|
|
Construction in progress |
|
|
75 |
|
|
|
75 |
|
|
Total real estate, net |
|
|
2,460 |
|
|
|
2,458 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
64 |
|
|
|
141 |
|
|
Accounts receivable, net |
|
|
42 |
|
|
|
42 |
|
|
Other assets |
|
|
51 |
|
|
|
32 |
|
|
Assets from discontinued operations |
|
|
— |
|
|
|
280 |
|
|
Total Assets |
|
$ |
2,617 |
|
|
$ |
2,953 |
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Debt, net |
|
$ |
1,010 |
|
|
$ |
992 |
|
|
Mandatorily redeemable preferred shares |
|
|
15 |
|
|
|
— |
|
|
Accounts payable and accrued expenses |
|
|
94 |
|
|
|
65 |
|
|
Other liabilities |
|
|
6 |
|
|
|
9 |
|
|
Deferred tax liabilities |
|
|
— |
|
|
|
213 |
|
|
Dividends payable |
|
|
12 |
|
|
|
— |
|
|
Liabilities from discontinued operations |
|
|
— |
|
|
|
846 |
|
|
Total Liabilities |
|
|
1,137 |
|
|
|
2,125 |
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
— |
|
|
|
— |
|
|
Common Stock |
|
|
1 |
|
|
|
1 |
|
|
Additional paid-in-capital |
|
|
973 |
|
|
|
1,181 |
|
|
Retained Earnings (accumulated deficit) |
|
|
503 |
|
|
|
(144 |
) |
|
Treasury stock |
|
|
— |
|
|
|
(212 |
) |
|
Accumulated other comprehensive loss |
|
|
— |
|
|
|
(1 |
) |
|
Noncontrolling interest |
|
|
3 |
|
|
|
3 |
|
|
Total Equity |
|
|
1,480 |
|
|
|
828 |
|
|
Total Liabilities and Equity |
|
$ |
2,617 |
|
|
$ |
2,953 |
|
|
|
|
|
|
|
|
|
|
|
|
COREPOINT LODGING
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2018 AND 2017(in
millions, except per share data)
|
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenues |
|
$ |
230 |
|
|
$ |
223 |
|
|
$ |
650 |
|
|
$ |
644 |
|
Other |
|
|
4 |
|
|
|
4 |
|
|
|
13 |
|
|
|
12 |
|
Total Revenues |
|
|
234 |
|
|
|
227 |
|
|
|
663 |
|
|
|
656 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
|
102 |
|
|
|
94 |
|
|
|
287 |
|
|
|
268 |
|
Other departmental and support |
|
|
33 |
|
|
|
31 |
|
|
|
92 |
|
|
|
89 |
|
Property tax, insurance and other |
|
|
17 |
|
|
|
16 |
|
|
|
52 |
|
|
|
43 |
|
Management and royalty fees |
|
|
23 |
|
|
|
— |
|
|
|
32 |
|
|
|
— |
|
Corporate general and administrative |
|
|
10 |
|
|
|
18 |
|
|
|
73 |
|
|
|
56 |
|
Depreciation and amortization |
|
|
39 |
|
|
|
36 |
|
|
|
115 |
|
|
|
104 |
|
Other, net |
|
|
3 |
|
|
|
3 |
|
|
|
5 |
|
|
|
— |
|
Total Operating Expenses |
|
|
227 |
|
|
|
198 |
|
|
|
656 |
|
|
|
560 |
|
Operating Income |
|
|
7 |
|
|
|
29 |
|
|
|
7 |
|
|
|
96 |
|
OTHER INCOME (EXPENSES): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(17 |
) |
|
|
(12 |
) |
|
|
(48 |
) |
|
|
(36 |
) |
Other income, net |
|
|
2 |
|
|
|
2 |
|
|
|
6 |
|
|
|
2 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
|
|
— |
|
Total Other Expenses, net |
|
|
(15 |
) |
|
|
(10 |
) |
|
|
(52 |
) |
|
|
(34 |
) |
Income (Loss) from Continuing Operations Before Income
Taxes |
|
|
(8 |
) |
|
|
19 |
|
|
|
(45 |
) |
|
|
62 |
|
Income tax expense |
|
|
(5 |
) |
|
|
(9 |
) |
|
|
(6 |
) |
|
|
(28 |
) |
Income (loss) from continuing operations, net |
|
|
(13 |
) |
|
|
10 |
|
|
|
(51 |
) |
|
|
34 |
|
Income (loss) from discontinued operations, net of
tax |
|
|
— |
|
|
|
3 |
|
|
|
(25 |
) |
|
|
(3 |
) |
Net Income (Loss) Attributable to CorePoint Lodging
Stockholders |
|
$ |
(13 |
) |
|
$ |
13 |
|
|
$ |
(76 |
) |
|
$ |
31 |
|
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic from continuing operations |
|
$ |
(0.22 |
) |
|
$ |
0.16 |
|
|
$ |
(0.87 |
) |
|
$ |
0.59 |
|
Basic from discontinued operations |
|
|
— |
|
|
|
0.06 |
|
|
|
(0.43 |
) |
|
|
(0.05 |
) |
Basic earnings (loss) per share |
|
$ |
(0.22 |
) |
|
$ |
0.22 |
|
|
$ |
(1.30 |
) |
|
$ |
0.54 |
|
Diluted from continuing operations |
|
$ |
(0.22 |
) |
|
$ |
0.16 |
|
|
$ |
(0.87 |
) |
|
$ |
0.58 |
|
Diluted from discontinued operations |
|
|
— |
|
|
|
0.06 |
|
|
|
(0.43 |
) |
|
|
(0.06 |
) |
Diluted earnings (loss) per share |
|
$ |
(0.22 |
) |
|
$ |
0.22 |
|
|
$ |
(1.30 |
) |
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATIONS
Prior to the consummation of CorePoint’s spin-off
from LaQuinta on May 30, 2018, CorePoint had no material business
transactions or activities. In connection with the spin-off, La
Quinta conveyed its owned real estate assets and certain related
assets and liabilities to CorePoint and CorePoint completed certain
debt financing transactions.
The unaudited pro forma financial data for the nine months ended
September 30, 2018 and for the three and nine months ended
September 30, 2017 are presented as if the spin-off and related
transactions all had occurred on January 1, 2017. The unaudited pro
forma combined financial information excludes items that are not
expected to have a continuing effect on the Company. Adjustments
include CorePoint’s historical debt and related balances and
interest expense to give the net effect to financing transactions
that were completed in connection with the spin-off, incremental
fees based on the terms of the post spin-off management and
franchise agreements, the removal of costs incurred related to the
spin-off, the establishment of CorePoint as a separate stand-alone
public company, adjustments to income tax expense based on
CorePoint’s post spin-off REIT tax structure, and adjustments to
reflect post spin-off corporate general and administrative costs.
Further adjustments have been made to reflect the effects of hotels
disposed of during the periods presented. The Pro Forma financial
measures are based on preliminary estimates, accounting judgments
and currently available information and assumptions that management
believes are reasonable. Accordingly, the unaudited pro forma
financial data is not necessarily indicative of our financial
position or results of operations had the transactions described
above for which we are giving pro forma effect actually occurred on
the dates indicated.
The tables below provide a reconciliation of the pro forma
financial information, for the Company to the Company’s historical
information, a reconciliation of Hotel Adjusted EBITDAre, Adjusted
EBITDAre, EBITDAre and EBITDA to Net Income, both on a pro forma
and historical basis and a reconciliation of FFO and Adjusted FFO
to Net Income, both on a pro forma and historical basis. We
believe this financial information provides meaningful supplemental
information because it reflects the portion of the La Quinta
business that was conveyed to CorePoint and the ongoing effects of
the other spin-off related transactions. This represents how
management views the business and reviews our operating
performance. It is also used by management when publicly providing
the business outlook. See the definitions of “EBITDA”, “EBITDAre”,
“Adjusted EBITDAre”, “Hotel Adjusted EBITDAre”, “FFO” and “Adjusted
FFO”, including pro forma adjusted amounts for a further
explanation of the use of these measures.
“EBITDA.” EBITDA represents net income or loss, excluding: (i)
interest, (ii) income tax expense, and (iii) depreciation and
amortization. The Company believes EBITDA is useful in
evaluating our operating performance because it provides an
indication of our ability to incur and service debt, to satisfy
general operating expenses, and to make capital expenditures.
We calculate EBITDA excluding discontinued operations. EBITDA
is a commonly used measure in many REIT and non-REIT related
industries.
“EBITDAre.” The Company presents EBITDAre in accordance with
guidelines established by the National Association of Real Estate
Investment Trusts (“NAREIT”). NAREIT defines EBITDAre
as net income or loss, excluding interest expense, income tax
expense, depreciation and amortization, gains or losses on the
disposition of property, impairments, and adjustments to reflect
the entity’s share of EBITDAre of unconsolidated affiliates.
The Company believes EBITDAre is a useful performance measure to
help investors evaluate and compare the results of the Company’s
operations from period to period. EBITDAre is intended to be
a supplemental non-GAAP financial measure that is independent of a
company’s capital structure.
“Adjusted EBITDAre.” The Company adjusts EBITDAre when
evaluating its performance because the Company believes that the
adjustment for certain items, such as reorganization expenses,
acquisition and disposition transaction expenses, equity-based
compensation expense, discontinued operations, and other items not
indicative of ongoing operating performance, provides useful
supplemental information to management and investors regarding its
ongoing operating performance. The Company believes that EBITDAre
and Adjusted EBITDAre provide useful information to investors about
it and its financial condition and results of operations for the
following reasons: (i) EBITDAre and Adjusted EBITDAre are
among the measures used by the Company’s management to evaluate its
operating performance and make day-to-day operating decisions; and
(ii) EBITDAre and Adjusted EBITDAre are frequently used by
securities analysts, investors, lenders and other interested
parties as a common performance measure to compare results or
estimate valuations across companies in and apart from the
Company’s industry sector.
EBITDAre and Adjusted EBITDAre are not recognized terms under
GAAP, have limitations as analytical tools and should not be
considered either in isolation or as a substitute for net (loss)
income, cash flow or other methods of analyzing the Company’s
results as reported under GAAP. Some of these limitations are:
- EBITDAre and Adjusted EBITDAre do not reflect changes in, or
cash requirements for, the Company’s working capital needs;
- EBITDAre and Adjusted EBITDAre do not reflect the Company’s
interest expense, or the cash requirements necessary to service
interest or principal payments, on its indebtedness;
- EBITDAre and Adjusted EBITDAre do not reflect the Company’s tax
expense or the cash requirements to pay its taxes;
- EBITDAre and Adjusted EBITDAre do not reflect historical cash
expenditures or future requirements for capital expenditures or
contractual commitments;
- EBITDAre and Adjusted EBITDAre do not reflect the impact on
earnings or changes resulting from matters that the Company
considers not to be indicative of its future operations, including
but not limited to discontinued operations, impairment, acquisition
and disposition activities and restructuring expenses;
- although depreciation, amortization and impairment are non-cash
charges, the assets being depreciated, amortized or impaired will
often have to be replaced, upgraded or repositioned in the future,
and EBITDAre and Adjusted EBITDAre do not reflect any cash
requirements for such replacements; and
- other companies in the Company’s industry may calculate
EBITDAre and Adjusted EBITDAre differently, limiting their
usefulness as comparative measures.
Because of these limitations, EBITDAre and Adjusted EBITDAre
should not be considered as discretionary cash available to the
Company to reinvest in the growth of its business or as measures of
cash that will be available to the Company to meet its
obligations.
“Hotel Adjusted EBITDAre” measures property-level results before
corporate-level expenses and is a key measure of the hotel’s
profitability. The Company presents Pro Forma Hotel Adjusted
EBITDAre to help the Company and its investors evaluate the ongoing
operating performance of the Company’s properties.
“Hotel Adjusted EBITDAre margin” represents the ratio of Pro
Forma Hotel Adjusted EBITDAre to pro forma total revenues.
Funds from operations (“FFO”) and “Adjusted FFO”. FFO is defined
by NAREIT as net income (loss) (computed in accordance with GAAP),
excluding gains (losses) from sales of property, impairment,
discontinued operations and the cumulative effect of changes in
accounting principles, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint
ventures. We present FFO as a supplemental non-GAAP measure of our
performance. We calculate FFO for a given operating period in
accordance with NAREIT guidelines. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect our pro
rata share of the FFO of those entities on the same basis. As noted
by NAREIT in its April 2002 “White Paper on Funds From Operations,”
since real estate values historically have risen or fallen with
market conditions, many industry investors have considered
presentations of operating results for real estate companies that
use historical cost accounting to be insufficient by themselves.
For these reasons, NAREIT adopted the FFO metric to promote an
industry-wide measure of REIT operating performance. The
Company’s presentation may not be comparable to FFO reported by
other REITs that do not define the terms in accordance with the
NAREIT definition, or that interpret the current NAREIT definition
differently.
We also present Adjusted FFO when evaluating our performance
because management believes that the exclusion of certain
additional items provides useful supplemental information to
investors regarding our ongoing operating performance. We adjust
FFO for the following items, which may occur in any period, and
refer to this measure as Adjusted FFO: stock-based compensation
expense, amortization of deferred finance costs, reorganization and
separation transaction expenses, loss on extinguishment of debt,
straight-line ground lease expense, gains or losses on hedging
instruments, acquisition and disposition transaction expense, and
other items not indicative of our ongoing operating
performance.
FFO and Adjusted FFO do not represent cash generated from
operating activities and are not necessarily indicative of cash
available to fund cash requirements and should not be considered as
an alternative to net income as a performance measure or cash flows
as a liquidity measure. FFO and Adjusted FFO may not be comparable
to similarly titled measures employed by other companies.
PRO FORMA ADJUSTED EBITDAre NON-GAAP
RECONCILIATION(unaudited, in
millions)
|
|
Three Months Ended
September 30, 2018 |
|
|
Three Months Ended
September 30, 2017 |
|
|
Nine Months Ended
September 30, 2018 |
|
|
Nine Months Ended
September 30, 2017 |
|
Net Income (Loss) attributable to CorePoint Lodging
Stockholders |
|
|
(13 |
) |
|
|
13 |
|
|
|
(76 |
) |
|
|
31 |
|
Interest expense |
|
|
17 |
|
|
|
12 |
|
|
|
48 |
|
|
|
36 |
|
Income tax expense |
|
|
5 |
|
|
|
9 |
|
|
|
6 |
|
|
|
28 |
|
Depreciation and amortization |
|
|
39 |
|
|
|
36 |
|
|
|
115 |
|
|
|
104 |
|
Loss from discontinued operations |
|
|
— |
|
|
|
(3 |
) |
|
|
25 |
|
|
|
3 |
|
EBITDA |
|
|
48 |
|
|
|
67 |
|
|
|
118 |
|
|
|
202 |
|
Impairment loss and casualty (gain) loss |
|
|
3 |
|
|
|
3 |
|
|
|
5 |
|
|
|
— |
|
EBITDAre |
|
|
51 |
|
|
|
70 |
|
|
|
123 |
|
|
|
202 |
|
Equity-based compensation |
|
|
3 |
|
|
|
2 |
|
|
|
5 |
|
|
|
6 |
|
Reorganization expenses |
|
|
2 |
|
|
|
6 |
|
|
|
40 |
|
|
|
15 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
Other (income) expenses, net (1) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
1 |
|
Adjusted EBITDAre |
|
|
55 |
|
|
|
77 |
|
|
|
177 |
|
|
|
224 |
|
Pro forma adjustments (2) |
|
|
— |
|
|
|
(19 |
) |
|
|
(27 |
) |
|
|
(50 |
) |
Pro Forma Adjusted EBITDAre |
|
$ |
55 |
|
|
$ |
58 |
|
|
$ |
150 |
|
|
$ |
174 |
|
(1) GAAP reported other (income) expenses, net includes $2
million of business interruption insurance proceeds that are
excluded from Adjusted EBITDAre for the three and nine months ended
September 30, 2018.
(2) Pro forma adjustments include adjustments for
incremental fees based on the terms of the post spin-off management
and franchise agreements, adjustments to reflect the post spin-off
corporate general and administrative costs, and adjustments to
reflect the effects of hotels disposed of during the periods
presented.
PRO FORMA ADJUSTED HOTEL ADJUSTED EBITDA
AND TOTAL REVENUENON-GAAP
RECONCILIATION(1)(unaudited, in
millions)
|
|
Three Months Ended
September 30, 2018 |
|
|
Three Months Ended
September 30, 2017 |
|
|
Nine Months Ended
September 30, 2018 |
|
|
Nine Months Ended
September 30, 2017 |
|
Pro Forma Adjusted EBITDAre |
|
$ |
55 |
|
|
$ |
58 |
|
|
$ |
150 |
|
|
$ |
174 |
|
Corporate, general and administrative expenses
(2) |
|
|
5 |
|
|
|
4 |
|
|
|
15 |
|
|
|
10 |
|
Pro Forma Hotel Adjusted EBITDAre |
|
|
60 |
|
|
|
62 |
|
|
|
165 |
|
|
|
184 |
|
Less: non-comparable hotels |
|
|
— |
|
|
|
(2 |
) |
|
|
1 |
|
|
|
(6 |
) |
Pro Forma Comparable Hotel Adjusted EBITDAre |
|
$ |
60 |
|
|
$ |
60 |
|
|
$ |
166 |
|
|
$ |
178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2018 |
|
|
Three Months Ended
September 30, 2017 |
|
|
Nine Months Ended
September 30, 2018 |
|
|
Nine Months Ended
September 30, 2017 |
|
Total Revenue |
|
$ |
234 |
|
|
$ |
227 |
|
|
$ |
663 |
|
|
$ |
656 |
|
Pro forma adjustments (3) |
|
|
— |
|
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
Pro Forma Total Revenue |
|
|
234 |
|
|
|
228 |
|
|
|
665 |
|
|
|
657 |
|
Less: non-comparable hotels |
|
|
(3 |
) |
|
|
(5 |
) |
|
|
(6 |
) |
|
|
(19 |
) |
Pro Forma Comparable Hotel Revenue |
|
$ |
231 |
|
|
$ |
223 |
|
|
$ |
659 |
|
|
$ |
638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) For 2017 and the nine months ended September 30, 2018,
amounts are calculated on a pro forma basis. Refer to “Pro Forma
Financial Information” above and preceding tables for a discussion
and reconciliation of the Pro Forma financial information.(2)
Includes adjustments to exclude the effects of corporate, general
and administrative costs.(3) Pro forma adjustments include
adjustments to reflects the effects of hotels disposed of during
the periods presented and adjustments related to additional revenue
from loyalty program reimbursements.
PRO FORMA ADJUSTED FFO NON-GAAP
RECONCILIATION(unaudited, in
millions)
|
|
Three Months Ended
September 30, 2018 |
|
|
Three Months Ended
September 30, 2017 |
|
|
Nine Months Ended
September 30, 2018 |
|
|
Nine Months Ended
September 30, 2017 |
|
Net Income (Loss) attributable to CorePoint Lodging
Stockholders |
|
|
(13 |
) |
|
|
13 |
|
|
|
(76 |
) |
|
|
31 |
|
Depreciation and amortization |
|
|
39 |
|
|
|
36 |
|
|
|
115 |
|
|
|
104 |
|
Loss from discontinued operations |
|
|
— |
|
|
|
(3 |
) |
|
|
25 |
|
|
|
3 |
|
Casualty (gain) loss |
|
|
3 |
|
|
|
3 |
|
|
|
5 |
|
|
|
— |
|
NAREIT defined FFO attributable to
stockholders |
|
|
29 |
|
|
|
49 |
|
|
|
69 |
|
|
|
138 |
|
Equity-based compensation |
|
|
3 |
|
|
|
2 |
|
|
|
5 |
|
|
|
6 |
|
Amortization of deferred financing costs |
|
|
4 |
|
|
|
2 |
|
|
|
8 |
|
|
|
5 |
|
Reorganization expenses |
|
|
2 |
|
|
|
6 |
|
|
|
40 |
|
|
|
15 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
Other (income) expenses, net |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
1 |
|
Adjusted FFO attributable to stockholders |
|
$ |
37 |
|
|
$ |
58 |
|
|
$ |
131 |
|
|
$ |
165 |
|
Pro forma adjustments (1) |
|
|
— |
|
|
|
(18 |
) |
|
|
(30 |
) |
|
|
(41 |
) |
Pro forma adjusted FFO attributable to
stockholders |
|
$ |
37 |
|
|
$ |
40 |
|
|
$ |
101 |
|
|
$ |
124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding, diluted
(2) |
|
|
59.6 |
|
|
|
58.4 |
|
|
|
59.1 |
|
|
|
58.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma adjusted funds from operations per share,
diluted |
|
$ |
0.62 |
|
|
$ |
0.68 |
|
|
$ |
1.71 |
|
|
$ |
2.13 |
|
(1) Pro forma adjustments include adjustments for
incremental fees based on the terms of the post spin-off management
and franchise agreements, adjustments to reflect the post spin-off
corporate general and administrative costs, adjustments to reflect
the effects of hotels disposed of during the periods presented,
adjustments to income tax expense based on CorePoint’s post
spin-off REIT tax structure and adjustments for CorePoint’s
historical debt and related balances and interest expense
(including the amortization of deferred financing costs) to give
the net effect to financing transactions that were completed in
connection with the spin-off.
(2) Weighted average shares were adjusted in the
historical periods for the one for two stock split that occurred on
May 30, 2018 and assumes that all shares were fully dilutive for
the three and nine months ended September 30, 2018 and 2017.
This presentation will differ from our GAAP diluted shares for the
anti-dilutive effects when we report a net GAAP loss.
CERTAIN DEFINED TERMS
Average daily rate (“ADR”) represents hotel room revenues
divided by total number of rooms sold in a given period. ADR
measures the average room price attained by a hotel or group of
hotels, and ADR trends provide useful information concerning
pricing policies and the nature of the guest base of a hotel or
group of hotels. Changes in room rates have an impact on overall
revenues and profitability.
“Occupancy” represents the total number of rooms sold in a given
period divided by the total number of rooms available at a hotel or
group of hotels. Occupancy measures the utilization of our hotels’
available capacity. Management uses occupancy to gauge demand at a
specific hotel or group of hotels in a given period. Occupancy
levels also help us determine achievable ADR levels as demand for
hotel rooms increases or decreases.
Revenue per available room (“RevPAR”) is defined as the product
of the ADR charged and the average daily occupancy achieved. RevPAR
does not include other ancillary, non-room revenues, such as food
and beverage revenues or parking, telephone or other guest service
revenues generated by a hotel, which are not significant for
CorePoint.
RevPAR changes that are driven predominately by occupancy have
different implications for overall revenue levels and incremental
hotel operating profit than changes driven predominately by ADR.
For example, increases in occupancy at a hotel would lead to
increases in room revenues, as well as incremental operating costs
(including, but not limited to, housekeeping services, utilities
and room amenity costs). RevPAR increases due to higher ADR,
however, would generally not result in additional operating costs,
with the exception of those charged or incurred as a percentage of
revenue, such as credit card fees and commissions. As a result,
changes in RevPAR driven by increases or decreases in ADR generally
have a greater effect on operating profitability than changes in
RevPAR driven by occupancy levels. Due to seasonality in our
business, we review RevPAR by comparing current periods to budget
and period-over-period.
“RevPAR Index” measures a hotel’s fair market share of its
competitive set’s revenue per available room.
“Comparable hotels” are defined as hotels that were
active and operating in our portfolio for at least one full
calendar year as of the end of the applicable reporting period and
were active and operating as of January 1st of the previous
year; except for: (i) hotels that sustained substantial
property damage or other business interruption; (ii) hotels
that become subject to a purchase and sale agreement; or
(iii) hotels in which comparable results are otherwise not
available. Management uses comparable hotels as the basis upon
which to evaluate ADR, occupancy and RevPAR between periods for the
set of comparable hotels existing at the reporting date versus the
results of the same set of hotels in the prior period. Of the 315
hotels in our portfolio as of September 30, 2018, 305 have been
classified as comparable hotels for the three and nine months ended
September 30, 2018. One hotel located in Rancho Cordova, California
was removed from comparable results following substantial property
damage sustained from water damage in August 2018.
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