Chatham Lodging Trust(CLDT) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Chatham Lodging Trust's unaudited interim consolidated financial statements, including balance sheets, statements of operations, equity, cash flows, and detailed notes on key financial matters Consolidated Financial Statements Consolidated financial statements show total assets slightly decreased to $1,336.7 million as of June 30, 2023, with net income improving to $4.3 million and operating cash flow increasing to $32.7 million for the six months ended June 30, 2023 | Financial Metric | Six Months Ended June 30, 2023 (USD) | Six Months Ended June 30, 2022 (USD) | | :--- | :--- | :--- | | Total Revenue | $152.1 million | $136.6 million | | Net Income (Loss) | $4.3 million | ($0.4 million) | | Net Income (Loss) per Share (Diluted) | $0.01 | ($0.09) | | Net Cash from Operations | $32.7 million | $21.7 million | | Balance Sheet Item | June 30, 2023 (USD) | December 31, 2022 (USD) | | :--- | :--- | :--- | | Total Assets | $1,336.7 million | $1,343.7 million | | Total Liabilities | $522.2 million | $525.7 million | | Total Equity | $814.5 million | $818.0 million | Notes to the Consolidated Financial Statements Notes detail the company's structure as a REIT owning 39 hotels, its $465.9 million debt, equity components, lease obligations, and related-party transactions with Island Hospitality Management - As of June 30, 2023, the Company owned 39 hotels with an aggregate of 5,915 rooms located in 16 states and the District of Columbia[171] - Total debt outstanding as of June 30, 2023, was $465.9 million, which includes mortgage debt, an unsecured term loan, and excludes unamortized debt issue costs[157] - All 39 of the company's hotels are managed by Island Hospitality Management LLC (IHM), wholly owned by the Company's Chairman, President, and CEO, Jeffrey H. Fisher[172][202] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial condition and results, highlighting recovery, revenue and expense trends, non-GAAP measures, liquidity, capital resources, and debt management Overview The company, a self-advised REIT, focuses on upscale extended-stay and select-service hotels, showing significant business improvement in 2022-2023, with a 25.8% leverage ratio and $466.7 million total debt as of June 30, 2023 - The company's business experienced significant improvement through 2022 and into 2023, driven by leisure travel and recovering corporate demand segments[26] - The company's investment strategy focuses on upscale extended-stay and premium-branded select-service hotels near strong demand generators[27] - As of June 30, 2023, the leverage ratio was 25.8%, with total debt of $466.7 million at a weighted average interest rate of approximately 5.0%[268] Results of Operations For the six months ended June 30, 2023, total revenue increased by 11.3% to $152.1 million, with net income improving to $4.3 million, driven by a 13.9% increase in same-property RevPAR | Metric | Three Months Ended June 30, 2023 (USD) | Three Months Ended June 30, 2022 (USD) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $84.5 million | $81.8 million | 3.3% | | Net Income | $9.4 million | $9.3 million | 0.5% | | Same Property RevPAR | $143.96 | $137.68 | 4.6% | | Metric | Six Months Ended June 30, 2023 (USD) | Six Months Ended June 30, 2022 (USD) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $152.1 million | $136.6 million | 11.3% | | Net Income (Loss) | $4.3 million | ($0.4 million) | N/A | | Same Property RevPAR | $130.00 | $114.17 | 13.9% | Non-GAAP Financial Measures The company utilizes non-GAAP measures like FFO, Adjusted FFO, EBITDA, and Adjusted Hotel EBITDA, with FFO at $29.1 million and Adjusted EBITDA at $49.6 million for the six months ended June 30, 2023 | Non-GAAP Measure (Six Months Ended June 30) | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | FFO attributable to common share and unit holders | $29.1 million | $23.8 million | | Adjusted FFO attributable to common share and unit holders | $29.7 million | $24.2 million | | Adjusted EBITDA | $49.6 million | $44.4 million | | Adjusted Hotel EBITDA | $55.4 million | $52.0 million | - Management considers FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA, and Adjusted Hotel EBITDA as key supplemental measures of operating performance[75] Liquidity and Capital Resources As of June 30, 2023, the company held $47.7 million in cash, with net cash from operations at $32.7 million, and plans to invest $15.0 million in renovations, while remaining compliant with debt covenants - Cash, cash equivalents, and restricted cash totaled $47.7 million as of June 30, 2023, an increase of $2.5 million from year-end 2022[52] - Net cash provided by operating activities increased by $11.0 million to $32.7 million for the six months ended June 30, 2023, primarily due to improving hotel operating results[80] - The company expects to invest approximately $15.0 million on renovations and other expenditures on existing hotels during the remainder of 2023[53] - The company was in compliance with all financial covenants at June 30, 2023[317] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate changes, with $90.0 million in floating-rate debt, where a 100 basis point SOFR increase would raise annual interest expense by $0.9 million - The company's main market risk is interest rate changes affecting its long-term debt[301] - A hypothetical 100 basis point increase in SOFR would increase annual interest expense by approximately $0.9 million, based on the $90.0 million of floating rate debt outstanding as of June 30, 2023[302] | Debt Type | Total Principal (in thousands USD) | Weighted Average Interest Rate | | :--- | :--- | :--- | | Floating Rate Debt | $90,000 | 6.40% | | Fixed Rate Debt | $376,705 | 4.66% | Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the last quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[110] - There were no changes in internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[89] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is subject to routine litigation in the ordinary course of business, which management believes will not materially impact its financial condition or results of operations - The Company is subject to routine litigation arising in the ordinary course of business but does not expect these proceedings to have a material adverse impact on its financial condition[90] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K were reported - No material changes to the Risk Factors disclosed in the 2022 Annual Report on Form 10-K were reported[326] Item 5. Other Information No trustees or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2023 - No trustees or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[92] Item 6. Exhibits This section lists exhibits filed with the quarterly report, including CEO and CFO certifications and various Inline XBRL documents - The report includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[93]