– Net income increased 4.1%
– Pro forma RevPAR increased 1.9%
– Pro forma Hotel EBITDA Margin of 39.2%
– Pro forma Consolidated Hotel EBITDA increased 5.3%
BETHESDA, Md.—-RLJ Lodging Trust (the “Company”) (NYSE: RLJ) today reported results for the three and six months ended June 30, 2016.
Highlights
- Net income increased 4.1% to $58.7 million
- Pro forma RevPAR increased 1.9%, Pro forma ADR increased 1.6%, and Pro forma Occupancy increased 0.4%
- Pro forma Hotel EBITDA Margin of 39.2%
- Pro forma Consolidated Hotel EBITDA increased 5.3% to $123.9 million
- Adjusted FFO increased 4.2% to $102.1 million
- Refinanced $800.0 million of unsecured debt; extended final maturities to 2021, improved pricing, and enhanced financial covenants
- Repurchased 0.1 million common shares for $2.0 million
- Ross H. Bierkan appointed President and Chief Executive Officer
- Leslie D. Hale appointed Chief Operating Officer
“Our ability to drive positive RevPAR growth and maintain robust hotel EBITDA margins despite severe macro-economic headwinds reaffirms the benefits of our geographically diverse portfolio,” commented Ross H. Bierkan, President and Chief Executive Officer. “While the second half of this year is likely to be influenced by increased market volatility, we remain focused on executing our operational strategy, maintaining a fortress balance sheet, and identifying opportunities to unlock additional shareholder value.”
Financial and Operating Results
Performance metrics such as Occupancy, Average Daily Rate (“ADR”), Revenue Per Available Room (“RevPAR”), Hotel EBITDA, and Hotel EBITDA Margin are Pro forma. The prefix “Pro forma” as defined by the Company, denotes operating results which include results for periods prior to its ownership. Pro forma RevPAR and Pro forma Hotel EBITDA Margin are reported on a comparable basis and therefore exclude hotels sold during the period and non-comparable hotels that were not open for operation or were closed for renovation for comparable periods. Explanations of EBITDA, Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA Margin, FFO, and Adjusted FFO, as well as reconciliations of those measures to net income or loss, if applicable, are included within this release.
Net income for the three months ended June 30, 2016, was $58.7 million, compared to $56.4 million for the comparable period in 2015. For the six months ended June 30, 2016, net income was $84.1 million, compared to $104.5 million for the comparable period in 2015.
Pro forma RevPAR for the three months ended June 30, 2016, increased 1.9% over the comparable period in 2015, driven by a Pro forma ADR increase of 1.6%, and a Pro forma Occupancy increase of 0.4%. Excluding Chicago and Houston, which experienced softness in the quarter, Pro forma RevPAR growth was 3.7%. The Company's non-top 10 markets achieved 6.4% RevPAR growth, which included three markets that achieved double-digit RevPAR growth, including San Antonio, Portland, and Indianapolis, which experienced RevPAR growth of 11.6%, 10.9% and 10.7%, respectively. For the six months ended June 30, 2016, Pro forma RevPAR increased 2.0% over the comparable period in 2015, driven by a Pro forma ADR increase of 1.8%, and a Pro forma Occupancy increase of 0.2%.
Pro forma Hotel EBITDA Margin for the three months ended June 30, 2016, decreased 16 basis points over the comparable period in 2015 to 39.2%. For the six months ended June 30, 2016, Pro forma Hotel EBITDA margin increased seven basis points over the comparable period in 2015 to 36.6%.
Pro forma Consolidated Hotel EBITDA includes the results of non-comparable hotels. For the three months ended June 30, 2016, Pro forma Consolidated Hotel EBITDA increased $6.2 million to $123.9 million, representing a 5.3% increase over the comparable period in 2015. For the six months ended June 30, 2016, Pro forma Consolidated Hotel EBITDA increased $12.5 million to $216.3 million, representing a 6.2% increase over the comparable period in 2015.
Adjusted FFO for the three months ended June 30, 2016, increased $4.1 million to $102.1 million, representing a 4.2% increase over the comparable period in 2015. For the six months ended June 30, 2016, Adjusted FFO increased $7.6 million to $172.9 million, representing a 4.6% increase over the comparable period in 2015.
Adjusted FFO per common share and unit-diluted for the three and six months ended June 30, 2016, was $0.82 and $1.39, respectively, based on the Company’s diluted weighted-average number of common shares and units outstanding of 124.5 million and 124.7 million for each period, respectively.
Adjusted EBITDA for the three months ended June 30, 2016, increased $6.7 million to $117.2 million, representing a 6.1% increase over the comparable period in 2015. For the six months ended June 30, 2016, Adjusted EBITDA increased $11.6 million to $203.2 million, representing a 6.1% increase over the comparable period in 2015.
Non-recurring items which were noteworthy for the three months ended June 30, 2016, included a non-cash deferred tax expense of $1.9 million and debt modification and extinguishment costs of $0.6 million.
Non-recurring items are included in net income but are excluded from Adjusted EBITDA and Adjusted FFO, as applicable. A complete listing of non-recurring items is provided in the Non-GAAP reconciliation tables in this press release for the three and six months period ended June 30, 2016 and 2015.
Net cash flow from operating activities for the six months ended June 30, 2016, totaled $164.2 million, compared to $145.9 million for the comparable period in 2015.
Balance Sheet
During the three months ended June 30, 2016, the Company successfully refinanced $800.0 million of unsecured debt.
On April 22, 2016, the Company amended and restated its $400.0 million term loan originally maturing in 2018. The transaction enhanced financial covenants, extended the final maturity to 2021, and improved the pricing by an average of 21 basis points.
The Company also amended and restated its revolving credit facility. The transaction enhanced financial covenants, extended the final maturity from 2017 to 2021, increased the borrowing capacity by an additional $100.0 million to $400.0 million, and improved the pricing by an average of 26 basis points.
As of June 30, 2016, the Company had $160.1 million of unrestricted cash on its balance sheet, $400.0 million available on its revolving credit facility, and $1.6 billion of debt outstanding. The Company’s ratio of net debt to Adjusted EBITDA, pro forma for recent acquisitions and dispositions, for the trailing twelve month period ended June 30, 2016, was 3.7 times.
Dividends
The Company’s Board of Trustees declared a cash dividend of $0.33 per common share of beneficial interest in the second quarter. The dividend was paid on July 15, 2016, to shareholders of record as of June 30, 2016.
Share Buyback
During the second quarter of 2016, the Company repurchased 0.1 million common shares for $2.0 million at an average price per share of $19.80. As of June 30, 2016, the Company's authorized share buyback program had a remaining capacity of $161.5 million.
Subsequent Events
On July 28, 2016, the Board of Trustees appointed Ross H. Bierkan as President and Chief Executive Officer. Mr. Bierkan has served as Chief Investment Officer since the Company's formation and will continue to serve in that role. In addition, Mr. Bierkan has been elected to the Company’s Board of Trustees.
The Board of Trustees also appointed Leslie D. Hale as Chief Operating Officer. Ms. Hale will serve in the dual role of Chief Operating Officer and Chief Financial Officer of the Company.
2016 Outlook
The Company’s outlook has been updated to reflect recent macro-economic headwinds and global volatility. The outlook excludes potential future acquisitions and dispositions, which could result in a material change to the Company’s outlook. The 2016 outlook is also based on a number of other assumptions, many of which are outside the Company’s control and all of which are subject to change.
Pro forma operating statistics include results for periods prior to the Company's ownership and therefore assumes the hotels were owned since January 1, 2015. Pro forma guidance removes income from hotels that have been sold.
For the full year 2016, the Company anticipates:
Current Outlook Prior Outlook Pro forma RevPAR growth (1) 1.5% to 2.5% 3.0% to 5.0% Pro forma Hotel EBITDA Margin (1) 36.5% to 37.0% 36.5% to 37.5% Pro forma Consolidated Hotel EBITDA $415.0M to $425.0M $425.0M to $450.0M
(1) Excludes non-comparable hotels.
To view full financial release and corresponding tables please click the PDF icon or visit:
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