CorePoint Lodging Inc. (CPLG)

[Enterprising Investor]

CorePoint Lodging Reports Second Quarter 2018 Results (8/13/18)

IRVING, Texas, Aug. 13, 2018 (GLOBE NEWSWIRE) -- 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 second quarter ended June 30, 2018.

Second Quarter 2018 Highlights

- Completed spin-off from La Quinta Holdings Inc. ("La Quinta") on May 30, 2018

- Began trading on the New York Stock Exchange as a stand-alone public company on May 31, 2018 and rang the NYSE Opening Bell® to honor the occasion

- Net loss attributable to common stockholders of $48 million; loss from continuing operations of $28 million

- Comparable RevPAR of $63.29, an increase of 5.6% from the same period in 2017 with 230 bps of RevPAR Index market share growth

- Pro Forma Adjusted EBITDAre of $58 million

- Pro Forma Adjusted FFO of $42 million

- Completed the construction phase of 9 significant hotel renovations, bringing the total number of repositioning projects with construction complete to 48 hotels, as part of the Company's strategic repositioning program

- Entered into a new $1.035 billion CMBS facility loan and a new $150 million revolving credit facility

"We are extremely pleased to have completed the spin-off of CorePoint Lodging from La Quinta, which positioned us as the only publicly traded U.S. lodging REIT strategically focused on the ownership of midscale and upper midscale select-service hotels," said Keith Cline, President and Chief Executive Officer of CorePoint. "We have assembled a highly experienced team to execute on our strategic priorities of proactive asset management, value-enhancing investments, disciplined capital allocation, and maintaining a strong balance sheet. We believe CorePoint is well-positioned to capture imbedded growth opportunities for value creation in the near-to-medium term and to grow and diversify its portfolio over time."

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Second Quarter 2018 Financial and Operating Results

The Company reported net loss attributable to common stockholders of $48 million, or $0.82 loss per fully diluted share, for the quarter ended June 30, 2018, compared to net income attributable to common stockholders of $17 million, or $0.29 income per fully diluted share, in the quarter ended June 30, 2017. The year over year difference is primarily due to higher corporate general and administrative expenses, loss on extinguishment of debt, and loss from discontinued operations, each associated with the Company's spin-off completed in the second quarter of 2018.

Comparable RevPAR for the second quarter of 2018 increased 5.6% over the same period of 2017, primarily driven by an increase of 4.7% in comparable ADR. Top performing markets included Atlanta, Dallas Fort Worth, West Texas, and New Orleans.

Pro Forma Adjusted EBITDAre for the second quarter of 2018 was $58 million as compared to $68 million on a pro forma basis for the same period in 2017. Increases in rooms revenue during the second quarter of 2018 were offset by increases in rooms expense, including to payroll and third-party travel agent commissions. With respect to rooms expense, the Company continues to experience competitive wage pressures and an increased need for contract labor. A portion of the payroll expense increase also relates to labor investments made to grow the sales force across the portfolio. The year over year variance in Pro Forma Adjusted EBITDAre is primarily due to a prior year positive insurance expense adjustment of approximately $9 million recognized in the second quarter of 2017.

Hurricane disruption continued to have an impact on the Company's business in the second quarter of 2018, posing significant challenges for certain hotels. The Company estimates that the impact of the hurricanes on second quarter 2018 results was a reduction of approximately $3 million, net of approximately $1 million of business interruption proceeds received, in Adjusted EBITDAre as compared to the same period in 2017. The majority of these losses are expected to be recovered in the future through the Company's business interruption insurance coverage as noted further below.

Hurricanes Harvey and Irma

During the third quarter of 2017, two major hurricanes made landfall impacting areas serviced by CorePoint hotels. Many of the Company's hotels in affected areas were impacted by the storms, sustaining property damage, damage to infrastructure surrounding the hotels, and business interruption.

As of June 30, 2018, approximately 1,000 rooms remain out of service, including approximately 540 rooms at five properties in Florida that remain closed. The Company currently expects four of the five 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.

Capital Investments and Hotel Strategic Repositioning Program

The Company invested $45 million in the second quarter of 2018 on capital improvements, including approximately $18 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 second quarter of 2018, the construction phase of an additional 9 hotel renovations was completed. As a result, as of June 30, 2018, 48 of these hotels had completed the construction phase of the project and have been, or are now in the process of being, reintroduced to their markets with encouraging early results. The Company expects to invest the substantial majority of the remaining approximately $20 million of capital spend associated with the strategic repositioning program in the second half 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.
As of the May 30, 2018 spin-off date, CorePoint and its tax advisors estimated that CorePoint would receive approximately $56 million based on estimated tax gain valuations. These valuations involve complex analysis and assumptions, including the estimate for an adjusted tax basis of CorePoint's assets and liabilities. Due to the complex nature of the analysis, CorePoint recently engaged a second tax advisor to review the calculation and perform its own independent analysis. As a result of this ongoing work, while CorePoint expects the $240 million reserve to be more than sufficient to cover the ultimate tax liability, it now believes that the tax due may be substantially higher than the original estimate, which could significantly reduce the cash payment to CorePoint.

Total cash and cash equivalents were $80 million as of June 30, 2018, excluding lender escrows of approximately $15 million. As of June 30, 2018, the Company had $125 million of availability on its revolving credit facility. Subsequent to June 30, 2018, the Company used a portion of its cash and cash equivalents to repay the $25 million drawn on its revolving credit facility, thereby increasing its total availability to $150 million.

Subsequent to June 30, 2018, the Company sold one hotel located in Huntsville, Texas for a total gross sales price of $2 million, substantially the same as the GAAP carrying value.

Dividend

On August 6, 2018, the Board of Directors declared a cash dividend of $0.067 per share of common stock with respect to the second quarter of 2018, which represents an anticipated regular quarterly dividend of $0.20 per share of common stock prorated for the period of the completion of CorePoint's spin-off from La Quinta on May 30, 2018 through the last day of the second quarter. The second quarter dividend is payable on September 14, 2018 to stockholders of record as of August 30, 2018. All future dividends will be at the sole discretion of CorePoint's Board of Directors.

Outlook

CorePoint anticipates that its full-year 2018 operating results will be in the following range:

Comparable RevPAR Growth
3.00% - 4.25%

Pro Forma Adjusted EBITDAre
$177 - $187


The Company currently estimates the impact of the ongoing disruption caused by Hurricanes Harvey and Irma to result in a reduction of approximately $18 million to $22 million of Pro Forma Adjusted EBITDAre for the full-year 2018, which is captured in its outlook range. The majority of these losses are expected to be recovered in the future through the Company's business interruption insurance coverage.

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 low visibility 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 provide prepared remarks in a call for investors and other interested parties on Monday, August 13, 2018 beginning at 5:00 p.m. Eastern Time.

The call may be accessed by dialing [phone], or [phone] for international participants, and entering the passcode 5695467. 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 8:00 a.m. Eastern Time on August 14, 2018 through midnight Eastern Time on August 21, 2018. To access the replay, the domestic dial-in number is [phone], the international dial-in number is [phone], and the passcode is 5695467. The archive of the webcast will be available on the Company's website for a limited time.

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.

https://www.nasdaq.com/press-release/corepoint-lodging-reports-second-quarter-2018-results-20180813-00845