Chatham Lodging Trust(CLDT) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents Chatham Lodging Trust's unaudited consolidated financial statements for Q3 2019, including balance sheets, operations, equity, and cash flows Consolidated Balance Sheet Highlights (unaudited) | (In thousands) | September 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | $1,453,500 | $1,439,709 | | Investment in hotel properties, net | $1,352,891 | $1,373,773 | | Cash and cash equivalents | $10,257 | $7,192 | | Total Liabilities | $661,465 | $632,291 | | Mortgage debt, net | $497,640 | $501,782 | | Revolving credit facility | $86,000 | $81,500 | | Total Equity | $792,035 | $807,418 | Consolidated Statements of Operations Highlights (unaudited) | (In thousands, except per share data) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $90,080 | $88,897 | $253,631 | $247,187 | | Operating Income | $19,898 | $20,375 | $45,924 | $49,759 | | Net Income | $10,098 | $14,691 | $21,251 | $31,044 | | Net Income Attributable to Common Shareholders | $10,002 | $14,580 | $21,052 | $30,813 | | Diluted EPS | $0.21 | $0.31 | $0.44 | $0.66 | Consolidated Statements of Cash Flows Highlights (unaudited) | (In thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $69,681 | $71,431 | | Net cash used in investing activities | ($35,696) | ($40,484) | | Net cash used in financing activities | ($39,928) | ($28,793) | | Net change in cash, cash equivalents and restricted cash | ($5,943) | $2,154 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, comparing Q3 and nine-month results, detailing operating expenses, non-GAAP measures, liquidity, and capital plans - The company projects a 2019 RevPAR change of -2.0% to -1.5% compared to 2018, citing elevated room supply growth in the Upscale segment[125] Q3 2019 vs Q3 2018 Performance | Metric | Q3 2019 | Q3 2018 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $90.1M | $88.9M | +1.3% | | Net Income | $10.1M | $14.7M | -31.3% | | Same Property RevPAR | - | - | -0.3% | Nine Months 2019 vs 2018 Performance | Metric | YTD 2019 | YTD 2018 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $253.6M | $247.2M | +2.6% | | Net Income | $21.3M | $31.0M | -31.3% | | Same Property RevPAR | - | - | -0.5% | Adjusted FFO and Adjusted EBITDA (Non-GAAP) | (In thousands) | Q3 2019 | Q3 2018 | YTD 2019 | YTD 2018 | | :--- | :--- | :--- | :--- | :--- | | Adjusted FFO | $28,604 | $28,370 | $72,449 | $72,280 | | Adjusted EBITDA | $39,412 | $38,629 | $105,096 | $102,593 | - The company is developing a hotel in Los Angeles, CA, with expected total development costs of approximately $65 million; as of the report date, $15.2 million in costs have been incurred[221] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate changes on its long-term debt, mitigated by fixed-rate or low-margin variable-rate debt, with a 100 basis point increase in variable rates raising annual interest expense by approximately $0.9 million Debt Profile as of September 30, 2019 | Debt Type | Balance Outstanding (In millions) | Weighted Avg. Interest Rate | | :--- | :--- | :--- | | Floating Rate | $86.0 | 4.45% | | Fixed Rate | $499.1 | 4.66% | - A hypothetical 100 basis points increase on the variable interest rate would result in an additional annual interest expense of approximately $0.9 million[239] - The estimated fair value of the Company's fixed-rate debt was $509.6 million as of September 30, 2019, compared to a carrying value of $499.1 million[237][238] Controls and Procedures The company's disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal control over financial reporting during Q3 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period[242] - No changes occurred in the company's internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[243] PART II. OTHER INFORMATION Legal Proceedings The company's hotel manager, IHM, is defending two class-action lawsuits in California for wage and hour violations, with $0.1 million accrued for potential exposure as of September 30, 2019 - The company's hotel manager, IHM, is defending two class-action lawsuits in California related to alleged misclassification of managerial staff and other wage and hour violations[244] - As of September 30, 2019, the company has accrued $0.1 million, representing its estimated total exposure to the litigation[244] Risk Factors This section supplements the annual report's risk factors, focusing on hotel development risks including construction delays, cost overruns, permitting, and capital raising challenges - The company is exposed to risks associated with its hotel development project in Los Angeles, California[246] - Key development risks include construction delays, cost overruns, obtaining governmental permits, and potential inability to raise capital[246] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the reporting period - None[250] Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None[252] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[254] Other Information No information was reported under this item - None[256] Exhibits This section lists the exhibits filed with the report, including corporate governance documents and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act - The report includes exhibits such as corporate governance documents (Articles of Amendment, Bylaws) and certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act[260]