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Griffon Corporation Announces Second Quarter Results

NEW YORK–(BUSINESS WIRE)–
Griffon Corporation (“Griffon” or the “Company”) (NYSE:GFF) today reported results for the second quarter of fiscal 2021 ended March 31, 2021.

Consolidated revenue for the second quarter totaled $634.8 million, a 12% increase compared to the prior year quarter revenue of $566.4 million.

Net income totaled $17.1 million, or $0.32 per share, compared to $0.9 million, or $0.02 per share, in the prior year quarter. Current year adjusted net income was $25.4 million, or $0.48 per share, compared to $10.1 million, or $0.23 per share, in the prior year quarter, a 109% increase (see reconciliation of Net income to Adjusted net income for details).

Adjusted EBITDA for the second quarter was $67.8 million, increasing 41% from the prior year quarter of $48.0 million. Unallocated amounts excluding depreciation (primarily corporate overhead) in each of the second quarter of 2021 and 2020 was $11.9 million. Adjusted EBITDA excluding unallocated amounts totaled $79.7 million in the second quarter of 2021, increasing 33% from the prior year of $59.9 million. Adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization, restructuring charges, loss from debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (see reconciliation of Adjusted EBITDA to Income before taxes).

Ronald J. Kramer, Chairman and Chief Executive Officer, commented, “Our excellent performance in the fiscal second quarter is a result of our continued operating improvement and robust demand for our diverse portfolio of leading brands and essential products. Our team is poised to deliver further improvements in the years ahead as we optimize our businesses through strategic initiatives. Griffon is well-positioned to continue delivering long term shareholder value.”

Segment Operating Results

Consumer and Professional Products (“CPP”)

CPP revenue in the current quarter totaling $331.9 million increased 21% compared to the prior year period, primarily due to increased volume of 17%, driven by continued consumer demand across all geographies, primarily for outdoor decor, landscaping and home organization products, and a favorable foreign currency impact of 4%.

CPP Adjusted EBITDA in the second quarter was $37.4 million, increasing 50% from the prior year quarter primarily from increased revenue noted above and a favorable foreign currency impact of 8%, partially offset by increased distribution and material costs, and COVID-19 related inefficiencies.

Strategic Initiative

In November 2019, Griffon announced the development of a next-generation business platform for CPP to enhance the growth, efficiency, and competitiveness of its U.S. operations, and on November 12, 2020, Griffon announced the broadening of this strategic initiative to include additional North American facilities, the AMES UK and Australia businesses, and a manufacturing facility in China.

The expanded focus of this initiative leverages the same three key development areas being executed within our U.S. operations. First, certain AMES global operations will be consolidated to optimize facilities footprint and talent. Second, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations, and support e-commerce growth. Third, multiple independent information systems will be unified into a single data and analytics platform, which will serve the whole AMES global enterprise.

Expanding the roll-out of the new business platform from our AMES U.S. operations to include AMES’ global operations will extend the duration of the project by one year, with completion now expected by the end of calendar year 2023. When fully implemented, these actions will result in annual cash savings of $30 million to $35 million and a reduction in inventory of $30 million to $35 million, both based on fiscal 2020 operating levels.

The cost to implement this new business platform, over the duration of the project, will include one-time charges of approximately $65 million and capital investments of approximately $65 million. The one-time charges are comprised of $46 million of cash charges, which includes $26 million of personnel-related costs such as training, severance, and duplicate personnel costs as well as $20 million of facility and lease exit costs. The remaining $19 million of charges are non-cash and are primarily related to asset write-downs.

During the six months ended March 31, 2021 and 2020, CPP incurred pre-tax restructuring and related exit costs approximating $10.6 million and $9.5 million, respectively. During the six months ended March 31, 2021, cash charges totaled $7.9 million and non-cash, asset-related charges totaled $2.7 million; the cash charges included $1.1 million for one-time termination benefits and other personnel-related costs and $6.8 million for facility exit costs. During the six months ended March 31, 2020, cash charges totaled $4.8 million and non-cash, asset-related charges totaled $4.7 million; the cash charges included $3.8 million for one-time termination benefits and other personnel-related costs and $1.1 million for facility exit costs.

Home and Building Products (“HBP”)

HBP revenue in the current quarter totaling $242.8 million increased 16% from the prior year quarter, driven by increased volume.

HBP Adjusted EBITDA in the current quarter was $40.1 million, increasing 31% compared to the prior year quarter. EBITDA benefited from increased revenue noted above and volume related benefits on absorption, partially offset by increased material costs and COVID-19 related inefficiencies.

Defense Electronics (“DE”)

DE revenue in the current quarter totaled $60.2 million, decreasing 26% from the prior year quarter. The prior year results include revenue from the SEG business of $7.5 million. Excluding the divestiture of SEG from prior year results, revenue decreased $14.0 million, or 19%. The decrease was driven by reduced volume due to the timing of work performed and deliveries on Communication and Surveillance programs.

DE Adjusted EBITDA in the current quarter was $2.2 million, decreasing 48% from the prior year quarter, driven by the reduced revenue noted above and cost growth on Surveillance programs, partially offset by the reduced headcount related to the reduction in force that occurred in the first quarter.

Contract backlog was $353.9 million at March 31, 2021 compared to $320.2 million at March 31, 2020 (excludes $11.5 million of SEG related backlog) with 65% expected to be fulfilled in the next 12 months. Backlog was approximately $370.0 million at September 30, 2020 (excludes approximately $10.0 million of SEG related backlog). During the current quarter and year-to-date periods, DE was awarded several new contracts and received incremental funding on existing contracts approximating $25 million and $105 million (excludes $5.5 million of SEG awards from the first quarter), respectively; the trailing twelve month book-to-bill ratio was 1.1.

Taxes

The Company reported pretax income for the quarters ended March 31, 2021 and 2020, respectively, and recognized tax provisions of 38.6% and 69.4%, respectively. Excluding all items that affect comparability, the effective tax rates for the quarters ended March 31, 2021 and 2020 were 30.0% and 35.9%, respectively. The current year-to-date effective tax rate was 30.5% and the rate excluding all items that affect comparability was 31.1%.

Balance Sheet and Capital Expenditures

At March 31, 2021, the Company had cash and equivalents of $175.6 million and total debt outstanding of $1.06 billion, resulting in a net debt position of $0.9 billion. Borrowing availability under the revolving credit facility was $363.1 million subject to certain loan covenants. Capital expenditures were $12.1 million for the quarter ended March 31, 2021.

Share Repurchases

As of March 31, 2021, Griffon had $58 million remaining under its Board of Directors authorized repurchase program. There were no purchases under these authorizations during the quarter ended March 31, 2021.

Conference Call Information

The Company will hold a conference call today, April 29, 2021, at 4:30 PM ET.

The call can be accessed by dialing 1-877-407-0792 (U.S. participants) or 1-201-689-8263 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference or provide conference ID number 13719101. Participants are encouraged to dial-in at least 10 minutes before the scheduled start time.

A replay of the call will be available starting on Thursday, April 29, 2021 at 7:30 PM ET by dialing 1-844-512-2921 (U.S.) or 1-412-317-6671 (International), and entering the conference ID number: 13719101. The replay will be available through Thursday, May 13, 2021 at 11:59 PM ET.

Forward-looking Statements

“Safe Harbor” Statements under the Private Securities Litigation Reform Act of 1995: All statements related to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon operates and the United States and global economies that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases. Such forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, among others: current economic conditions and uncertainties in the housing, credit and capital markets; Griffon’s ability to achieve expected savings from cost control, restructuring, integration and disposal initiatives; the ability to identify and successfully consummate, and integrate, value-adding acquisition opportunities; increasing competition and pricing pressures in the markets served by Griffon’s operating companies; the ability of Griffon’s operating companies to expand into new geographic and product markets, and to anticipate and meet customer demands for new products and product enhancements and innovations; reduced military spending by the government on projects for which Griffon’s Telephonics Corporation supplies products, including as a result of defense budget cuts or other government actions; the ability of the federal government to fund and conduct its operations; increases in the cost or lack of availability of raw materials such as resin, wood and steel, components or purchased finished goods, including the impact from tariffs; changes in customer demand or loss of a material customer at one of Griffon’s operating companies; the potential impact of seasonal variations and uncertain weather patterns on certain of Griffon’s businesses; political events that could impact the worldwide economy; a downgrade in Griffon’s credit ratings; changes in international economic conditions including interest rate and currency exchange fluctuations; the reliance by certain of Griffon’s businesses on particular third party suppliers and manufacturers to meet customer demands; the relative mix of products and services offered by Griffon’s businesses, which impacts margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation, regulatory and environmental matters; unfavorable results of government agency contract audits of Telephonics Corporation; Griffon’s ability to adequately protect and maintain the validity of patent and other intellectual property rights; the cyclical nature of the businesses of certain of Griffon’s operating companies; and possible terrorist threats and actions and their impact on the global economy; the impact of COVID-19 on the U.S. and the global economy, including business disruptions, reductions in employment and an increase in business and operating facility failures, specifically among our customers; Griffon’s ability to service and refinance its debt; and the impact of recent and future legislative and regulatory changes, including, without limitation, tax law changes Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, as previously disclosed in the Company’s Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date made. Griffon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

About Griffon Corporation

Griffon Corporation is a diversified management and holding company that conducts business through wholly-owned subsidiaries. Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures. Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth opportunities as well as divestitures. In order to further diversify, Griffon also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Griffon currently conducts its operations through three reportable segments:

• CPP conducts its operations through AMES. Founded in 1774, AMES is the leading North American manufacturer and a global provider of branded consumer and professional tools and products for home storage and organization, landscaping, and enhancing outdoor lifestyles. CPP sells products globally through a portfolio of leading brands including True Temper, AMES, and ClosetMaid.

• HBP conducts its operations through Clopay. Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America. Residential and commercial sectional garage doors are sold through professional dealers and leading home center retail chains throughout North America under the brands Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the CornellCookson brand.

• Defense Electronics conducts its operations through Telephonics Corporation, founded in 1933, a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.

For more information on Griffon and its operating subsidiaries, please see the Company’s website at www.griffon.com.

Griffon evaluates performance and allocates resources based on operating results from continuing operations before interest income and expense, income taxes, depreciation and amortization, restructuring charges, loss from debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Adjusted EBITDA”, a non-GAAP measure). Griffon believes this information is useful to investors.

The following table provides operating highlights and a reconciliation of Adjusted EBITDA to Income before taxes:

(in thousands)	For the Three Months Ended March 31,								For the Six Months Ended March 31,
REVENUE	2021				2020				2021				2020
Consumer and Professional Products	$	331,871			$	274,912			$	622,913			$	515,988
Home and Building Products	242,811				209,829				493,292				451,210
Defense Electronics	60,150				81,609				127,918				147,590
Total consolidated net sales	$	634,832			$	566,350			$	1,244,123			$	1,114,788
ADJUSTED EBITDA
Consumer and Professional Products	$	37,423			$	25,027			$	70,136			$	46,953
Home and Building Products	40,060				30,635				88,429				71,336
Defense Electronics	2,220				4,248				7,805				8,723
Total	79,703				59,910				166,370				127,012
Unallocated amounts, excluding depreciation*	(11,922		)		(11,947		)		(23,949		)		(23,889		)
Adjusted EBITDA	67,781				47,963				142,421				103,123
Net interest expense	(15,527		)		(16,561		)		(31,172		)		(32,511		)
Depreciation and amortization	(15,883		)		(15,719		)		(31,149		)		(31,544		)
Loss from debt extinguishment	—				(6,690		)		—				(6,690		)
Restructuring charges	(7,562		)		(3,104		)		(18,362		)		(9,538		)
Acquisition costs	—				(2,960		)		—				(2,960		)
Gain (adjustment) on sale of SEG business	(949		)		—				5,291				—
Income before taxes	$	27,860			$	2,929			$	67,029			$	19,880
DEPRECIATION and AMORTIZATION
Segment:
Consumer and Professional Products	$	8,620			$	8,222			$	16,819			$	16,453
Home and Building Products	4,379				4,668				8,720				9,468
Defense Electronics	2,734				2,676				5,410				5,320
Total segment depreciation and amortization	15,733				15,566				30,949				31,241
Corporate	150				153				200				303
Total consolidated depreciation and amortization	$	15,883			$	15,719			$	31,149			$	31,544
* Primarily Corporate Overhead

Griffon believes Free Cash Flow (“FCF”, a non-GAAP measure) is a useful measure for investors because it portrays the Company’s ability to generate cash from operations for purposes such as repaying debt, funding acquisitions and paying dividends.

The following table provides a reconciliation of Net cash used in operating activities to FCF:

	For the Six Months Ended March 31,
(in thousands)	2021				2020
Net cash used in operating activities	$	(25,841	)		$	(60,843	)
Acquisition of property, plant and equipment	(23,986		)		(22,519		)
Proceeds from the sale of property, plant and equipment	82				290
FCF	$	(49,745	)		$	(83,072	)

The following tables provide a reconciliation of Gross profit and Selling, general and administrative expenses for items that affect comparability for the three and six month periods ended March 31, 2021 and 2020:

(in thousands)	For the Three Months Ended March 31,								For the Six Months Ended March 31,
	2021				2020				2021				2020
Gross Profit, as reported	$	170,316			$	152,032			$	340,488			$	301,953
% of revenue	26.8		%		26.8		%		27.4		%		27.1		%
Adjusting items:
Restructuring charges	3,337				1,353				9,762				4,076
Gross Profit, as adjusted	$	173,653			$	153,385			$	350,250			$	306,029
% of revenue	27.4		%		27.1		%		28.2		%		27.5		%
(in thousands)	For the Three Months Ended March 31,								For the Six Months Ended March 31,
	2021				2020				2021				2020
Selling, general and administrative expenses, as reported	$	126,827			126,467				248,384				244,265
% of revenue	20.0		%		22.3		%		20.0		%		21.9		%
Adjusting items:
Restructuring charges	(4,225)				(1,751)				(8,600)				(5,462)
Acquisition costs	—				(2,960)				—				(2,960)
Selling, general and administrative expenses, as adjusted	$	122,602			$	121,756			$	239,784			$	235,843
% of revenue	19.3		%		21.5		%		19.3		%		21.2		%

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share data) (Unaudited)
	Three Months Ended March 31,								Six Months Ended March 31,
	2021				2020				2021				2020
Revenue	$	634,832			$	566,350			$	1,244,123			$	1,114,788
Cost of goods and services	464,516				414,318				903,635				812,835
Gross profit	170,316				152,032				340,488				301,953
Selling, general and administrative expenses	126,827				126,467				248,384				244,265
Income from operations	43,489				25,565				92,104				57,688
Other income (expense)
Interest expense	(15,831		)		(16,871		)		(31,521		)		(33,082		)
Interest income	304				310				349				571
Gain (adjustment) on sale of business	(949		)		—				5,291				—
Loss from debt extinguishment, net	—				(6,690		)		—				(6,690		)
Other, net	847				615				806				1,393
Total other expense, net	(15,629		)		(22,636		)		(25,075		)		(37,808		)
Income before taxes	27,860				2,929				67,029				19,880
Provision for income taxes	10,748				2,034				20,417				8,373
Net income	$	17,112			$	895			$	46,612			$	11,507
Basic earnings per common share	$	0.34			$	0.02			$	0.92			$	0.28
Basic weighted-average shares outstanding	50,838				41,565				50,717				41,369
Diluted earnings per common share	$	0.32			$	0.02			$	0.88			$	0.26
Diluted weighted-average shares outstanding	53,264				43,734				53,211				43,826
Dividends paid per common share	$	0.08			$	0.075			$	0.16			$	0.15
Net income	$	17,112			$	895			$	46,612			$	11,507
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments	1,739				(16,471		)		13,862				(10,001		)
Pension and other post retirement plans	1,245				669				2,951				1,341
Change in cash flow hedges	1,791				968				1,103				667
Total other comprehensive income (loss), net of taxes	4,775				(14,834		)		17,916				(7,993		)
Comprehensive income, net	$	21,887			$	(13,939	)		$	64,528			$	3,514

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
	(Unaudited)
	March 31, 2021				September 30, 2020
CURRENT ASSETS
Cash and equivalents	$	175,564			$	218,089
Accounts receivable, net of allowances of $9,594 and $8,505	399,193				340,546
Contract assets, net of progress payments of $20,449 and $24,175	75,000				84,426
Inventories	484,753				413,825
Prepaid and other current assets	55,705				46,897
Assets of discontinued operations	1,525				2,091
Total Current Assets	1,191,740				1,105,874
PROPERTY, PLANT AND EQUIPMENT, net	341,005				343,964
OPERATING LEASE RIGHT-OF-USE ASSETS	154,929				161,627
GOODWILL	446,365				442,643
INTANGIBLE ASSETS, net	357,506				355,028
OTHER ASSETS	27,440				32,897
ASSETS OF DISCONTINUED OPERATIONS	5,295				6,406
Total Assets	$	2,524,280			$	2,448,439
CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	14,913			$	9,922
Accounts payable	257,286				232,107
Accrued liabilities	151,091				163,994
Current portion of operating lease liabilities	30,685				31,848
Liabilities of discontinued operations	4,600				3,797
Total Current Liabilities	458,575				441,668
LONG-TERM DEBT, net	1,043,859				1,037,042
LONG-TERM OPERATING LEASE LIABILITIES	128,714				136,054
OTHER LIABILITIES	122,286				126,510
LIABILITIES OF DISCONTINUED OPERATIONS	6,415				7,014
Total Liabilities	1,759,849				1,748,288
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Total Shareholders’ Equity	764,431				700,151
Total Liabilities and Shareholders’ Equity	$	2,524,280			$	2,448,439

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
	Six Months Ended March 31,
	2021				2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	46,612			$	11,507
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	31,149				31,544
Stock-based compensation	9,501				8,302
Asset impairment charges – restructuring	8,291				4,692
Provision for losses on accounts receivable	194				596
Amortization of debt discounts and issuance costs	1,349				2,267
Loss from debt extinguishment, net	—				6,690
Deferred income taxes	2,334				408
Loss (gain) on sale of assets and investments	151				(274		)
Gain on sale of business	(5,291		)		—
Change in assets and liabilities, net of assets and liabilities acquired:
Increase in accounts receivable and contract assets, net	(47,146		)		(61,815		)
Increase in inventories	(74,186		)		(21,262		)
(Increase) decrease in prepaid and other assets	271				(6,005		)
Increase (decrease) in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities	(1,470		)		(38,053		)
Other changes, net	2,400				560
Net cash used in operating activities	(25,841		)		(60,843		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment	(23,986		)		(22,519		)
Acquired businesses, net of cash acquired	(2,242		)		(10,531		)
Proceeds from sale of business, net	14,725				—
Investment purchases	(2,138		)		—
Proceeds from the sale of property, plant and equipment	82				290
Other, net	27				—
Net cash used in investing activities	(13,532		)		(32,760		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid	(8,678		)		(7,349		)
Purchase of shares for treasury	(2,909		)		(7,479		)
Proceeds from long-term debt	14,029				1,061,343
Payments of long-term debt	(7,573		)		(939,071		)
Financing costs	(571		)		(13,176		)
Other, net	(214		)		83
Net cash provided by (used in) financing activities	(5,916		)		94,351

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
	Six Months Ended March 31,
	2021				2020
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in operating activities	(1,512		)		(1,994		)
Net cash provided by investing activities	2,749				—
Net cash provided by (used in) discontinued operations	1,237				(1,994		)
Effect of exchange rate changes on cash and equivalents	1,527				(2,107		)
NET DECREASE IN CASH AND EQUIVALENTS	(42,525		)		(3,353		)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	218,089				72,377
CASH AND EQUIVALENTS AT END OF PERIOD	$	175,564			$	69,024

Griffon evaluates performance based on Earnings per share and Net income excluding restructuring charges, loss from debt extinguishment, acquisition related expenses, discrete and certain other tax items, as well other items that may affect comparability, as applicable, a non-GAAP measure. Griffon believes this information is useful to investors. The following tables provides a reconciliation of Net income to Adjusted net income and Earnings per common share, a non-GAAP measure, to Adjusted earnings per common share:

(in thousands, except per share data)	For the Three Months Ended March 31,								For the Six Months Ended March 31,
	2021				2020				2021				2020
Net income	$	17,112			$	895			$	46,612			$	11,507
Adjusting items:
Loss from debt extinguishment	—				6,690				—				6,690
Restructuring charges	7,562				3,104				18,362				9,538
(Gain) adjustment on sale of SEG business	949				—				(5,291		)		—
Acquisition costs	—				2,960				—				2,960
Tax impact of above items	(2,094		)		(2,183		)		(4,371		)		(4,469		)
Discrete and certain other tax provisions (benefits), net	1,913				(1,413		)		(115		)		(580		)
Adjusted net income	$	25,442			$	10,053			$	55,197			$	25,646
Diluted earnings per common share	$	0.32			$	0.02			$	0.88			$	0.26
Adjusting items, net of tax:
Loss from debt extinguishment	—				0.12				—				0.12
Restructuring charges	0.11				0.07				0.26				0.16
(Gain) adjustment on sale of SEG business	0.01				—				(0.10		)		—
Acquisition costs	—				0.05				—				0.05
Discrete and certain other tax provisions (benefits), net	0.04				(0.03		)		—				(0.01		)
Adjusted earnings per common share	$	0.48			$	0.23			$	1.04			$	0.59
Weighted-average shares outstanding (in thousands)	53,264				43,734				53,211				43,826

Note: Due to rounding, the sum of earnings per common share and adjusting items, net of tax, may not equal adjusted earnings per common share.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210429006094/en/

Company Contact:

Brian G. Harris

SVP & Chief Financial Officer

Griffon Corporation

(212) 957-5000

Investor Relations Contact:

Michael Callahan

Managing Director

ICR Inc.

(203) 682-8311

KEYWORDS: United States North America New York

INDUSTRY KEYWORDS: Consulting Professional Services Finance

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Posted on April 29, 2021 4:20 pm

Columbia Property Trust Releases First Quarter 2021 Results

Columbia Property Trust Releases First Quarter 2021 Results

NEW YORK–(BUSINESS WIRE)–Columbia Property Trust, Inc. (NYSE: CXP) has released its quarterly update and financial results for the quarterly period ending March 31, 2021, by posting its First Quarter Form 10-Q and Supplemental Information package to the Investor Relations section of its website.

Full results and additional information on the recent highlights summarized below can be found in the Supplemental Information package:

• Announces first quarter results, including Net Income per share and Normalized FFO per share;
• Portfolio 94.0% leased, with 69,000 square feet leased during the quarter at double-digit positive GAAP and cash rent releasing spreads;
• Total rent collections stood at 97.6% for the first quarter, with deferral agreements executed on another 0.2%; and
• On April 8, 2021, announced that the Board has commenced a thorough review of the Company’s business, strategies, and positioning, including undertaking a comprehensive strategic alternatives review process that will include outreach to, and identification of, potential transaction counterparties, and related to which the Company incurred $2.4 million in strategic review costs in the first quarter. There is no deadline or definitive timetable set for completion of this review, and there is no assurance that this process will result in any transaction, including a sale of the Company, privatization, or entry into a business combination.

Direct link to the Supplemental Information Package:

https://ir.columbia.reit/files/doc_financials/2021/q1/CXP-FSP-Q1-2021-FINAL.pdf

To access the Form 10-Q, please visit: https://ir.columbia.reit/financials/sec-filings/

As previously announced, the Company will host a live conference call and audio webcast later today at 5:00 p.m. ET. The number to call to participate in the interactive teleconference is (825) 312-2053 (U.S. and international) – (Conference ID: 7877257). To access the live webcast, interested parties may go to the Investor Relations section of Columbia’s website at least fifteen minutes prior to the start time of the call in order to register and to download and install any necessary audio software.

Direct link to the Conference Call Webcast:

https://event.on24.com/wcc/r/3080303/DB5494DD212CA531E746458D6A16CE29

A replay of the conference call will be available online in the Investor Relations section of the Company’s website at https://ir.columbia.reit shortly after the call and archived for approximately twelve months.

About Columbia Property Trust

Columbia Property Trust (NYSE: CXP) creates storied properties for legendary companies in New York, San Francisco, Washington D.C., and Boston. The Columbia team is deeply experienced in transactions, asset management and repositioning, leasing, development, and property management. It employs these competencies to grow value across its high-quality, well-leased office portfolio of 15 properties that contain more than six million rentable square feet, as well as four properties under development, and also has more than eight million square feet under management for private investors and third parties. Columbia has investment-grade ratings from both Moody’s and S&P Global Ratings. For more information, please visit www.columbia.reit.

Forward-Looking Statements:

Certain statements in this press release, including statements regarding future business operations, may constitute 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 are based on management’s current expectations and involve a number of risks and uncertainties. Our actual results may differ materially from projections. For a discussion of some of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements, see Columbia Property Trust’s filings with the Securities and Exchange Commission, including the most recent annual report on Form 10-K. We caution readers not to place undue reliance on these forward-looking statements, which are based on current expectations and speak as of the date of such statements. We make no representations or warranties (express or implied) about the accuracy of, nor do we intend to publicly update or revise any such forward-looking statements contained herein, whether as a result of new information, future events, or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210429005956/en/

Investor Relations Contact:

Matt Stover

T 404 465 2227

E[email protected]

KEYWORDS: New York United States North America

INDUSTRY KEYWORDS: Commercial Building & Real Estate Construction & Property REIT

MEDIA:

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Company delivers 81st consecutive quarter of topline growth, with 21% growth in revenue and 18% growth in recurring revenue over first quarter 2020

Pebblebrook Hotel Trust Reports First Quarter 2021 Results

BETHESDA, Md.–(BUSINESS WIRE)–
Pebblebrook Hotel Trust (NYSE: PEB):

HOTEL OPERATING TRENDS	Hotel demand and booking trends accelerated throughout Q1, driving March Same-Property Hotel EBITDA(1) to a positive $1.3 million, the first time the portfolio has achieved positive Hotel EBITDA since the pandemic began Occupancy at the Company’s open hotels and resorts increased from 19.3 percent in January to 34.8 percent by March, and RevPAR grew from $43 in January to $65 in February and to $85 in March, roughly doubling from January Three of the Company’s hotels reopened in the first quarter and another 8 reopened in April, for a total of 48 of the Company’s 52 properties
CASH BURN	For January and February 2021, the Company’s total corporate cash burn averaged approximately $21.0 million due to typical winter seasonality and the rise in COVID-19 cases and government restrictions For March 2021, the Company’s total corporate cash burn declined to approximately $12.0 million due to rapidly improving hotel demand trends Assuming continuing progress against the virus and accompanying demand improvement, Pebblebrook believes eliminating its monthly total corporate cash burn could occur in the third quarter
BALANCE SHEET & LIQUIDITY	As of March 31, 2021, cash on hand of $124.6 million and liquidity of $767.8 million, which includes $643.2 million available on the Company’s $650.0 million credit facility Combined with the $157.6 million of net proceeds from the sale of the Sir Francis Drake Hotel in April, Pebblebrook has liquidity of over $900.0 million Net debt to depreciated book value at the end of Q1 2021: 42%
2021 OUTLOOK	Given the uncertainties related to the COVID-19 pandemic, its impact on travel, and variable and unpredictable government restrictions, the Company is unable to provide an outlook for 2021 at this time For Q2 2021, the Company expects both Same-Property Room Revenues(1) and Total Revenues(1) to be down between (66%) and (70%) compared to Q2 2019, much improved from Q1 2021

⁽¹⁾ See tables later in this press release for a description of Same-Property information and reconciliations from net income (loss) to non-GAAP financial measures.

“Improving demand trends during the first quarter exceeded our expectations, with rising confidence in travel as vaccination rates improved and travel restrictions eased. Same-Property Hotel EBITDA in March turned positive due to robust pent-up leisure demand throughout the portfolio. This rapid turnaround is a remarkable accomplishment considering the currently low levels of business transient and group hotel demand. The improvements in operating trends allowed us to reopen 10 more hotels since the end of February, including 7 in San Francisco, and one each in Boston, Portland, and Washington, D.C. As we look forward, we are encouraged with the increased booking activity we are experiencing, which we expect to strengthen further as we near the traditional peak leisure summer season. These accelerating trends should allow us to return to profitability earlier in the second half of this year than we expected just 45 days ago. We are also pleased to report the successful sale of the Sir Francis Drake Hotel in San Francisco, California, generating $157.6 million of net proceeds and a taxable gain of approximately $60.0 million. Strategically, we anticipate reallocating the proceeds from recent property dispositions into new acquisition opportunities that we expect will generate enhanced growth opportunities for our shareholders as they may become available.” –Jon E. Bortz, Chairman, President, and Chief Executive Officer of Pebblebrook Hotel Trust

First Quarter Highlights

		First Quarter
Same-Property and Corporate Highlights		2021	2020 (’21 vs. ’20 growth)	2019 (’21 vs. ’19 growth)
		($ in millions except per share and RevPAR data)
Net income (loss)		($121.4)	$42.1	$5.7
Same-Property Room Revenues(1)		$53.2	$167.8	$222.7
Same-Property Room Revenues growth rate			(68.3%)	(76.1%)
Same-Property Total Revenues(1)		$83.2	$252.8	$328.9
Same-Property Total Revenues growth rate			(67.1%)	(74.7%)
Same-Property Total Expenses(1)		$99.3	$213.1	$239.6
Same-Property Total Expenses growth rate			(53.4%)	(58.5%)
Same-Property EBITDA(1)		($16.1)	$39.7	$89.4
Same-Property EBITDA growth rate			(140.6%)	(118.0%)
Adjusted EBITDAre(1)		($25.0)	$35.9	$90.5
Adjusted EBITDAre growth rate			(169.5%)	(127.6%)
Adjusted FFO(1)		($55.7)	$17.2	$60.7
Adjusted FFO per diluted share(1)		($0.42)	$0.13	$0.46
Adjusted FFO per diluted share growth rate			(423.1%)	(191.3%)
	2021 Monthly Results
Open Portfolio Highlights(2)	January		February	March
	($ in millions except ADR and RevPAR data)
Open Portfolio Occupancy	19%		27%	35%
Open Portfolio ADR	$224		$241	$245
Open Portfolio RevPAR	$43		$65	$85
Open Portfolio Total Revenues	$18.0		$24.9	$37.1
Open Portfolio Total Revenues growth rate (2021 vs. 2019)	(73%)		(68%)	(59%)
Open Portfolio EBITDA	($6.3)		($1.5)	$6.0

(1)	See tables later in this press release for a description of same-property information and reconciliations from net income (loss) to non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), EBITDA for Real Estate (“EBITDAre”), Adjusted EBITDAre, Funds from Operations (“FFO”), FFO per share, Adjusted FFO and Adjusted FFO per share.
	For the details as to which hotels are included in Same-Property Room Revenues, Total Revenues, Expenses and EBITDA appearing in the table above and elsewhere in this press release, refer to the Same-Property Statistical Data table footnotes later in this press release.
(2)	Represents properties at which operations were not temporarily suspended for more than half of each respective month.

“The operating and financial performance of our hotels and resorts improved dramatically each month sequentially through the first quarter of 2021, and this positive trend has continued into April,” noted Mr. Bortz. “Our resorts continued to outperform within our portfolio due to strong leisure demand from an extended spring break season combined with pent-up travel demand. Our South Florida resorts achieved room rates, total revenues and Hotel EBITDA that surpassed comparable 2019 levels for March, and similar trends are continuing in April. As vaccine distribution expands, we expect travel to continue to increase. Our hotel teams have done an exceptional job rehiring associates and rebuilding our operating teams to get them into a position to take advantage of a strengthening environment. Our asset managers have worked closely with our hotel teams to redesign our operating models and best practices. We believe this allows our hotels to be more efficient and more profitable as additional hotel demand segments return over the coming months and quarters. We expect leisure travel will increase materially with huge pent-up demand for vacations and getaways, while we continue to expect business and group travel demand will gradually improve from a very low level over the next few months. However, we are not anticipating a material recovery in business travel until after Labor Day.”

During the first quarter of 2021, occupancy at the Company’s open hotels increased from 19.3 percent in January, to 26.8 percent in February, and to 34.8 percent in March. The Company’s open hotels lost ($1.8) million of Hotel EBITDA in the quarter, though the numbers dramatically improved over the course of the quarter, with March achieving $6.0 million of Hotel EBITDA. The Company’s resort portfolio, of which all 8 properties were open throughout the first quarter, generated $14.5 million of Hotel EBITDA, with an occupancy of 40.8 percent and an ADR of $406.20, a rate that was 30.1 percent higher than the first quarter of 2019.

Estimated Monthly Cash Burn

The Company estimates that its monthly corporate cash burn for the first quarter averaged approximately $18.0 million (excluding capital investments) based on the following:

• Average hotel-level monthly cash losses of approximately $5.7 million, excluding one-time expenses;
• Corporate-level monthly cash G&A of $1.5 million; and
• Corporate finance-related monthly cash utilization of $10.8 million, which includes interest payments on the Company’s outstanding debt as well as both common and preferred dividend payments.

Assuming progress is made to reduce the virus’s impact through mitigation measures and widespread vaccinations, the Company expects its monthly total corporate cash burn to continue to decline, and believes it could potentially reach corporate breakeven sometime in the third quarter.

Capital Investments and Strategic Property Redevelopments

In the first quarter of 2021, the Company completed $9.6 million of capital investments throughout its portfolio. The Company expects to invest an additional $60.0 to $80.0 million during the remainder of 2021, including for the following redevelopments and repositioning projects that the Company believes will generate significant growth and returns on its investment dollars:

• L’Auberge Del Mar (estimated at $10.5 million), a major redevelopment, including guestrooms and suites and a dramatic transformation and expansion of the luxury property’s public spaces, including indoor and outdoor event and meeting spaces, bars, the pool, the creation of an outdoor restaurant with ocean views, and the addition of a coffee café. The renovation is targeted for completion in May 2021;

• Southernmost Beach Resort (estimated at $15.0 million), a comprehensive guestroom renovation, including all case goods, soft goods, and bathrooms, including tub to shower conversions. The renovation is targeted to commence in the third quarter and be completed in the fourth quarter of 2021;

• Hotel Vitale (estimated at $25.0 million), a total transformation to the sustainability-focused, mission-driven, and luxury experiential 1 Hotel San Francisco, which will offer nature-inspired designs and environmentally focused aesthetics throughout guestrooms and suites, public areas, and meeting and event venues. The redevelopment is targeted to commence in the third quarter. The hotel is currently closed due to the pandemic and the Company does not plan to reopen the hotel until the redevelopment is completed at year-end; and

• Grafton on Sunset (estimated at $5.0 million), a comprehensive redevelopment of the hotel’s indoor and outdoor public areas and suites and a refresh of guest rooms, estimated to commence in the fourth quarter and be complete in the first quarter of 2022 when it is renamed and becomes part of the Company’s Unofficial Z Collection.

As fundamentals improve, the Company will evaluate commencing additional previously planned major renovation and repositioning projects later in 2021.

Update on Strategic Capital Reallocation

On April 1, 2021, the Company completed the sale of the Sir Francis Drake Hotel in San Francisco, California, generating $157.6 million of net proceeds after customary closing costs. Since the second quarter of 2020, the Company has generated $222.5 million of net proceeds from property dispositions. The Company intends to strategically reallocate these proceeds into new investment opportunities that it anticipates will offer enhanced growth opportunities, as they may become available.

Update on Curator Hotel and Resort Collection

Curator Hotel and Resort Collection (“Curator”), a distinct collection of hand-selected small brands and independent lifestyle hotels and resorts worldwide, founded by Pebblebrook and seven industry-leading hotel operators, continued to add additional member hotels and new operating partnerships since the start of 2021. Curator now has 62 member hotels with additional member hotels being added on a weekly and monthly basis. Also, Curator announced strategic partnerships with several leading hotel supplier companies, including Avendra and Pure HD, and now has over 18 master service agreements with preferred vendor partners, with over 20 additional agreements pending.

Curator also recently welcomed Sage Hospitality Group as its newest Founding Member. Sage joins a highly respected group of leading independent hotel operators, including Benchmark Global Hospitality, Davidson Hospitality Group, Noble House Hotels & Resorts, Provenance, Springboard Hospitality, and Viceroy Hotels & Resorts.

Balance Sheet and Liquidity

As of March 31, 2021, prior to the $157.6 million of net proceeds generated from the sale of the Sir Francis Drake Hotel, the Company had $124.6 million of consolidated cash, cash equivalents, and restricted cash in addition to $643.2 million of additional undrawn availability on its senior unsecured revolving credit facility, for total liquidity of $767.8 million. The Company had $2.4 billion in consolidated unsecured debt and convertible notes at an effective weighted-average interest rate of 3.3 percent. Approximately $2.3 billion, or 93 percent of the Company’s total outstanding debt and convertible notes, was at a weighted-average fixed interest rate of 3.4 percent, and approximately $0.2 billion, or 7 percent, was at a weighted-average floating interest rate of 2.4 percent. The Company had $1.6 billion of unsecured term loans, and there was no outstanding balance on its $650.0 million senior unsecured revolving credit facility. The Company has no loans maturing until 2022.

Common and Preferred Dividends

On March 15, 2021, the Company declared a quarterly cash dividend of $0.01 per share on its common shares as well as a regular quarterly cash dividend for the following preferred shares of beneficial interest:

• $0.40625 per 6.50% Series C Cumulative Redeemable Preferred Share;
• $0.39844 per 6.375% Series D Cumulative Redeemable Preferred Share;
• $0.39844 per 6.375% Series E Cumulative Redeemable Preferred Share; and
• $0.39375 per 6.30% Series F Cumulative Redeemable Preferred Share.

2021 Outlook

The Company continues to be unable to provide a full-year outlook for 2021 due to the uncertainties caused by the COVID-19 pandemic. The Company intends to issue new guidance when it has more clarity on government restrictions, advances in health solutions, the economy, travel demand, and more predictable overall operating fundamentals and trends.

First Quarter 2021 Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Friday, April 30, 2021, at 9:00 AM ET. Please dial (877) 705-6003 approximately ten minutes before the call begins to participate in the conference call. Additionally, a live webcast of the conference call will be available through the Company’s website. To access the webcast, log on to www.pebblebrookhotels.com ten minutes before the conference call. A replay of the conference call webcast will be archived and available online through the Investor Relations section of www.pebblebrookhotels.com.

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust (NYSE: PEB) is a publicly traded real estate investment trust (“REIT”) and the largest owner of urban and resort lifestyle hotels in the United States. The Company owns 52 hotels, totaling approximately 12,800 guestrooms across 14 urban and resort markets, with a focus on the west coast gateway cities. For more information, visit www.pebblebrookhotels.com and follow us at @PebblebrookPEB.

This press release contains certain “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “assume,” “plan,” references to “outlook” or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections and forecasts and other forward-looking information and estimates. Examples of forward-looking statements include the following: projections and forecasts of the Company’s cash burn rate; descriptions of the Company’s plans or objectives for future capital investment projects, operations or services; forecasts of the Company’s future economic performance; forecasts of hotel industry performance; forecasts of the future value of Curator to shareholders; and descriptions of assumptions underlying or relating to any of the foregoing expectations including assumptions regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy and the supply of hotel properties, and other factors as are described in greater detail in the Company’s filings with the SEC, including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

For further information about the Company’s business and financial results, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the Company’s filings with the U.S. Securities and Exchange Commission, including, but not limited to, its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which may be obtained at the Investor Relations section of the Company’s website at www.pebblebrookhotels.com.

All information in this press release is as of April 29, 2021. The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company’s expectations.

For additional information or to receive press releases via email, please visit our website at

www.pebblebrookhotels.com

Pebblebrook Hotel Trust
Consolidated Balance Sheets
($ in thousands, except share and per-share data)
	March 31, 2021				December 31, 2020
	(Unaudited)
ASSETS
Assets:
Investment in hotel properties, net	$	5,731,727			$	5,882,022
Hotel held for sale		90,384				–
Cash and cash equivalents		113,338				124,274
Restricted cash		11,294				12,026
Hotel receivables (net of allowance for doubtful accounts of $539 and $183, respectively)		16,647				10,225
Prepaid expenses and other assets		45,519				47,819
Total assets	$	6,008,909			$	6,076,366
LIABILITIES AND EQUITY
Liabilities:
Unsecured revolving credit facilities	$	–			$	40,000
Unsecured term loans, net of unamortized deferred financing costs		1,589,752				1,766,545
Senior convertible notes, net of unamortized debt premium and discount and deferred financing costs		744,715				374,333
Senior unsecured notes, net of unamortized deferred financing costs		99,513				99,593
Accounts payable, accrued expenses and other liabilities		239,278				226,446
Lease liabilities – operating leases		254,831				255,106
Deferred revenues		41,202				36,057
Accrued interest		9,087				4,653
Liabilities related to hotel held for sale		2,293				–
Distribution payable		9,082				9,307
Total liabilities		2,989,753				2,812,040
Commitments and contingencies
Shareholders’ Equity:
Preferred shares of beneficial interest, $0.01 par value (liquidation preference $510,000 at
March 31, 2021 and December 31, 2020), 100,000,000 shares authorized; 20,400,000
shares issued and outstanding at March 31, 2021 and December 31, 2020		204				204
Common shares of beneficial interest, $0.01 par value, 500,000,000 shares authorized;
130,812,917 shares issued and outstanding at March 31, 2021 and 130,673,300 shares
issued and outstanding at December 31, 2020		1,308				1,307
Additional paid-in capital		4,038,860				4,169,870
Accumulated other comprehensive income (loss)		(43,917	)			(60,071	)
Distributions in excess of retained earnings		(983,771	)			(853,973	)
Total shareholders’ equity		3,012,684				3,257,337
Non-controlling interests		6,472				6,989
Total equity		3,019,156				3,264,326
Total liabilities and equity	$	6,008,909			$	6,076,366

Pebblebrook Hotel Trust
Consolidated Statements of Operations
($ in thousands, except share and per-share data)
(Unaudited)
	Three months ended March 31,
		2021				2020
Revenues:
Room	$	53,463			$	177,141
Food and beverage		14,809				67,092
Other operating		15,371				24,874
Total revenues	$	83,643			$	269,107
Expenses:
Hotel operating expenses:
Room	$	16,710			$	54,125
Food and beverage		10,743				51,859
Other direct and indirect		45,228				95,470
Total hotel operating expenses		72,681				201,454
Depreciation and amortization		55,443				55,828
Real estate taxes, personal property taxes, property insurance, and ground rent		28,590				29,766
General and administrative		7,646				22,577
Transaction costs		111				36
Impairment loss		14,856				20,570
(Gain) loss on sale of hotel properties		–				(117,448	)
(Gain) loss and other operating expenses		451				1,433
Total operating expenses		179,778				214,216
Operating income (loss)		(96,135	)			54,891
Interest expense		(25,331	)			(23,591	)
Other		29				24
Income (loss) before income taxes		(121,437	)			31,324
Income tax (expense) benefit		(3	)			10,744
Net income (loss)		(121,440	)			42,068
Net income (loss) attributable to non-controlling interests		(858	)			119
Net income (loss) attributable to the Company		(120,582	)			41,949
Distributions to preferred shareholders		(8,139	)			(8,139	)
Net income (loss) attributable to common shareholders	$	(128,721	)		$	33,810
Net income (loss) per share available to common shareholders, basic	$	(0.98	)		$	0.26
Net income (loss) per share available to common shareholders, diluted	$	(0.98	)		$	0.26
Weighted-average number of common shares, basic		130,775,873				130,555,846
Weighted-average number of common shares, diluted		130,775,873				130,678,908

Pebblebrook Hotel Trust
Reconciliation of Net Income (Loss) to FFO and Adjusted FFO
($ in thousands, except share and per-share data)
(Unaudited)
	Three months ended March 31,
		2021				2020				2019
Net income (loss)	$	(121,440	)		$	42,068			$	5,655
Adjustments:
Depreciation and amortization		55,333				55,717				54,243
(Gain) loss on sale of hotel properties		–				(117,448	)			–
Impairment loss		14,856				20,570				–
FFO	$	(51,251	)		$	907			$	59,898
Distribution to preferred shareholders		(8,139	)			(8,139	)			(8,139	)
FFO available to common share and unit holders	$	(59,390	)		$	(7,232	)		$	51,759
Transaction costs		111				36				2,497
Non-cash ground rent		880				959				972
Management/franchise contract transition costs		(44	)			311				3,172
Interest expense adjustment for acquired liabilities		539				241				271
Finance lease adjustment		812				799				691
Non-cash amortization of acquired intangibles		(253	)			(300	)			(437	)
Non-cash interest expense		735				1,364				1,778
One-time operation suspension expenses		132				5,049				–
Non-cash canceled share-based compensation		–				16,001				–
Early extinguishment of debt		756				–				–
Adjusted FFO available to common share and unit holders	$	(55,722	)		$	17,228			$	60,703
FFO per common share – basic	$	(0.45	)		$	(0.06	)		$	0.40
FFO per common share – diluted	$	(0.45	)		$	(0.06	)		$	0.40
Adjusted FFO per common share – basic	$	(0.42	)		$	0.13			$	0.46
Adjusted FFO per common share – diluted	$	(0.42	)		$	0.13			$	0.46
Weighted-average number of basic common shares and units		131,636,686				130,925,802				130,801,030
Weighted-average number of fully diluted common shares and units		131,636,686				131,048,864				130,980,506

This press release includes certain non-GAAP financial measures. These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from similarly titled non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Funds from Operations (“FFO”) – FFO represents net income (computed in accordance with GAAP), excluding gains or losses from sales of properties, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships. The Company considers FFO a useful measure of performance for an equity REIT because it facilitates an understanding of the Company’s operating performance without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, the Company believes that FFO provides a meaningful indication of its performance. The Company also considers FFO an appropriate performance measure given its wide use by investors and analysts. The Company computes FFO in accordance with standards established by the Board of Governors of Nareit in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to that of other REITs. Further, FFO does not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to make distributions. The Company presents FFO per diluted share calculations that are based on the outstanding dilutive common shares plus the outstanding Operating Partnership units for the periods presented.

The Company also evaluates its performance by reviewing Adjusted FFO because it believes that adjusting FFO to exclude certain recurring and non-recurring items described below provides useful supplemental information regarding the Company’s ongoing operating performance and that the presentation of Adjusted FFO, when combined with the primary GAAP presentation of net income (loss), more completely describes the Company’s operating performance. The Company adjusts FFO available to common share and unit holders for the following items, which may occur in any period, and refers to this measure as Adjusted FFO:

– Transaction costs: The Company excludes transaction costs expensed during the period because it believes that including these costs in FFO does not reflect the underlying financial performance of the Company and its hotels. – Non-cash ground rent: The Company excludes the non-cash ground rent expense, which is primarily made up of the straight-line rent impact from a ground lease. – Management/franchise contract transition costs: The Company excludes one-time management and/or franchise contract transition costs expensed during the period because it believes that including these costs in FFO does not reflect the underlying financial performance of the Company and its hotels. – Interest expense adjustment for acquired liabilities: The Company excludes interest expense adjustment for acquired liabilities assumed in connection with acquisitions, because it believes that including these non-cash adjustments in FFO does not reflect the underlying financial performance of the Company. – Finance lease adjustment: The Company excludes the effect of non-cash interest expense from finance leases because it believes that including these non-cash adjustments in FFO does not reflect the underlying financial performance of the Company. – Non-cash amortization of acquired intangibles: The Company excludes the non-cash amortization of acquired intangibles, which includes but is not limited to the amortization of favorable and unfavorable leases or management agreements and above/below market real estate tax reduction agreements because it believes that including these non-cash adjustments in FFO does not reflect the underlying financial performance of the Company. – Non-cash interest expense, one-time operation suspension expenses, non-cash canceled share-based compensation and early extinguishment of debt: The Company excludes these items because the Company believes that including these adjustments in FFO does not reflect the underlying financial performance of the Company and its hotels.

The Company’s presentation of FFO in accordance with the Nareit White Paper, and as adjusted by the Company, should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.

Pebblebrook Hotel Trust
Reconciliation of Net Income (Loss) to EBITDA, EBITDAre and Adjusted EBITDAre
($ in thousands)
(Unaudited)
	Three months ended March 31,
		2021				2020				2019
Net income (loss)	$	(121,440	)		$	42,068			$	5,655
Adjustments:
Interest expense		25,331				23,591				29,328
Income tax expense (benefit)		3				(10,744	)			(5,037	)
Depreciation and amortization		55,443				55,828				54,302
EBITDA	$	(40,663	)		$	110,743			$	84,248
(Gain) loss on sale of hotel properties		–				(117,448	)			–
Impairment loss		14,856				20,570				–
EBITDAre	$	(25,807	)		$	13,865			$	84,248
Transaction costs		111				36				2,497
Non-cash ground rent		880				959				972
Management/franchise contract transition costs		(44	)			311				3,172
Non-cash amortization of acquired intangibles		(253	)			(300	)			(437	)
One-time operation suspension expenses		132				5,049				–
Non-cash canceled share-based compensation		–				16,001				–
Adjusted EBITDAre	$	(24,981	)		$	35,921			$	90,452

This press release includes certain non-GAAP financial measures. These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from similarly titled non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Earnings before Interest, Taxes, and Depreciation and Amortization (“EBITDA”) – The Company believes that EBITDA provides investors a useful financial measure to evaluate its operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).

Earnings before Interest, Taxes, and Depreciation and Amortization for Real Estate (“EBITDAre”) – The Company believes that EBITDAre provides investors a useful financial measure to evaluate its operating performance, and the Company presents EBITDAre in accordance with the National Association of Real Estate Investment Trusts (“Nareit”) guidelines, as defined in its September 2017 white paper “Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate.” EBITDAre adjusts EBITDA for the following items, which may occur in any period, and refers to these measures as Adjusted EBITDAre: (1) gains or losses on the disposition of depreciated property, including gains or losses on change of control; (2) impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate; and (3) adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates.

The Company also evaluates its performance by reviewing Adjusted EBITDAre because it believes that adjusting EBITDAre to exclude certain recurring and non-recurring items described below provides useful supplemental information regarding the Company’s ongoing operating performance and that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income (loss), more completely describes the Company’s operating performance. The Company adjusts EBITDAre for the following items, which may occur in any period, and refers to these measures as Adjusted EBITDAre:

– Transaction costs: The Company excludes transaction costs expensed during the period because it believes that including these costs in EBITDAre does not reflect the underlying financial performance of the Company and its hotels. – Non-cash ground rent: The Company excludes the non-cash ground rent expense, which is primarily made up of the straight-line rent impact from a ground lease. – Management/franchise contract transition costs: The Company excludes one-time management and/or franchise contract transition costs expensed during the period because it believes that including these costs in EBITDAre does not reflect the underlying financial performance of the Company and its hotels. – Non-cash amortization of acquired intangibles: The Company excludes the non-cash amortization of acquired intangibles, which includes but is not limited to the amortization of favorable and unfavorable leases or management agreements and above/below market real estate tax reduction agreements because it believes that including these non-cash adjustments in EBITDAre does not reflect the underlying financial performance of the Company and its hotels. – One-time operation suspension expenses and non-cash canceled share-based compensation: The Company excludes these items because it believes that including these costs in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

The Company’s presentation of EBITDAre, and as adjusted by the Company, should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.

Pebblebrook Hotel Trust
Same-Property Statistical Data
(Unaudited)
	Three months ended March 31,
	2021		2020		2019
Same-Property Occupancy	18.8%		56.7%		75.4%
2021 vs. 2020 Increase/(Decrease)	(66.7%)
2021 vs. 2019 Increase/(Decrease)	(75.0%)
Same-Property ADR	$240.27		$249.64		$251.77
2021 vs. 2020 Increase/(Decrease)	(3.8%)
2021 vs. 2019 Increase/(Decrease)	(4.6%)
Same-Property RevPAR	$45.28		$141.43		$189.81
2021 vs. 2020 Increase/(Decrease)	(68.0%)
2021 vs. 2019 Increase/(Decrease)	(76.1%)
Same-Property Total RevPAR	$70.83		$213.13		$280.37
2021 vs. 2020 Increase/(Decrease)	(66.8%)
2021 vs. 2019 Increase/(Decrease)	(74.7%)

Notes:

While the operations of many of the Company’s hotels were temporarily suspended beginning in March 2020, this schedule of hotel results for the three months ended March 31 includes information from all of the hotels the Company owned as of March 31, 2021 but excludes Hotel Zena Washington DC, formerly known as Donovan Hotel, for Q1 in 2021, 2020 and 2019 because it was closed during the first quarter of 2020 for renovation.

Any differences are a result of rounding.

The information above has not been audited and is presented only for comparison purposes.

Pebblebrook Hotel Trust
Same-Property Statistical Data – by Market
(Unaudited)
	Three months ended March 31,
	2021 vs. 2020		2021 vs. 2019
Same-Property RevPAR variance:
Southern Florida	4.2%		(5.4%)
Portland	(60.8%)		(68.9%)
Other	(62.4%)		(69.8%)
San Diego	(60.9%)		(72.8%)
Boston	(68.6%)		(76.7%)
Los Angeles	(76.9%)		(82.1%)
Washington DC	(78.2%)		(86.4%)
Seattle	(87.3%)		(92.1%)
Chicago	(94.9%)		(95.6%)
San Francisco	(98.3%)		(98.8%)
East Coast	(40.7%)		(52.6%)
West Coast	(80.2%)		(85.8%)

Notes:

While the operations of many of the Company’s hotels were temporarily suspended beginning in March 2020, this schedule of hotel results for the three months ended March 31 includes information from all of the hotels the Company owned as of March 31, 2021 but excludes Hotel Zena Washington DC, formerly known as Donovan Hotel, for Q1 in 2021, 2020 and 2019 because it was closed during the first quarter of 2020 for renovation.

“Other” includes New York City, NY; Philadelphia, PA; and Santa Cruz, CA.

Any differences are a result of rounding.

The information above has not been audited and is presented only for comparison purposes.

Pebblebrook Hotel Trust
Hotel Operational Data
Schedule of Same-Property Results
($ in thousands)
(Unaudited)
	Three months ended March 31,
		2021				2020				2019
Same-Property Revenues:
Room	$	53,156			$	167,776			$	222,691
Food and beverage		14,758				60,817				77,349
Other		15,247				24,244				28,902
Total hotel revenues		83,161				252,837				328,942
Same-Property Expenses:
Room	$	16,475			$	51,552			$	60,103
Food and beverage		10,657				48,153				56,705
Other direct		2,701				4,723				5,421
General and administrative		13,226				24,700				27,185
Information and telecommunication systems		3,196				5,407				5,319
Sales and marketing		8,662				23,655				25,662
Management fees		2,677				6,870				9,064
Property operations and maintenance		6,559				11,380				11,506
Energy and utilities		5,758				7,423				8,269
Property taxes		19,231				19,381				18,776
Other fixed expenses		10,152				9,867				11,542
Total hotel expenses		99,294				213,111				239,552
Same-Property EBITDA	$	(16,133	)		$	39,726			$	89,390
Same-Property EBITDA Margin		(19.4	%)			15.7	%			27.2	%

Notes:

While the operations of many of the Company’s hotels were temporarily suspended beginning in March 2020, this schedule of hotel results for the three months ended March 31 includes information from all of the hotels the Company owned as of March 31, 2021 but excludes Hotel Zena Washington DC, formerly known as Donovan Hotel, for Q1 in 2021, 2020 and 2019 because it was closed during the first quarter of 2020 for renovation.

Any differences are a result of rounding.

The information above has not been audited and is presented only for comparison purposes.

Pebblebrook Hotel Trust
2021 Same-Property Inclusion Reference Table
Hotels		Q1		Q2		Q3		Q4
Sir Francis Drake		X
Hotel Monaco Washington DC		X		X		X		X
Skamania Lodge		X		X		X		X
Le Méridien Delfina Santa Monica		X		X		X		X
Sofitel Philadelphia at Rittenhouse Square		X		X		X		X
Argonaut Hotel		X		X		X		X
The Westin San Diego Gaslamp Quarter		X		X		X		X
Hotel Monaco Seattle		X		X		X		X
Mondrian Los Angeles		X		X		X		X
W Boston		X		X		X		X
Hotel Zetta San Francisco		X		X		X		X
Hotel Vintage Seattle		X		X		X		X
Hotel Vintage Portland		X		X		X		X
W Los Angeles – West Beverly Hills		X		X		X		X
Hotel Zelos San Francisco		X		X		X		X
Embassy Suites San Diego Bay – Downtown		X		X		X		X
The Hotel Zags		X		X		X		X
Hotel Zephyr Fisherman’s Wharf		X		X		X		X
Hotel Zeppelin San Francisco		X		X		X		X
The Nines, a Luxury Collection Hotel, Portland		X		X		X		X
Hotel Colonnade Coral Gables, Autograph Collection		X		X		X		X
Hotel Palomar Los Angeles Beverly Hills		X		X		X		X
Revere Hotel Boston Common		X		X		X		X
LaPlaya Beach Resort & Club		X		X		X		X
Hotel Zoe Fisherman’s Wharf		X		X		X		X
Villa Florence San Francisco on Union Square		X		X		X		X
Hotel Vitale		X		X		X		X
The Marker San Francisco		X		X		X		X
Hotel Spero		X		X		X		X
Harbor Court Hotel San Francisco		X		X		X		X
Chaminade Resort & Spa		X		X		X		X
Viceroy Santa Monica Hotel		X		X		X		X
Le Parc Suite Hotel		X		X		X		X
Montrose West Hollywood		X		X		X		X
Chamberlain West Hollywood Hotel		X		X		X		X
Grafton on Sunset		X		X		X		X
The Westin Copley Place, Boston		X		X		X		X
The Liberty, a Luxury Collection Hotel, Boston		X		X		X		X
Hyatt Regency Boston Harbor		X		X		X		X
George Hotel		X		X		X		X
Viceroy Washington DC		X		X		X		X
Hotel Zena Washington DC						X		X
Paradise Point Resort & Spa		X		X		X		X
Hilton San Diego Gaslamp Quarter		X		X		X		X
L’Auberge Del Mar		X		X		X		X
San Diego Mission Bay Resort		X		X		X		X
Solamar Hotel		X		X		X		X
The Heathman Hotel		X		X		X		X
Southernmost Beach Resort		X		X		X		X
The Marker Key West Harbor Resort		X		X		X		X
The Roger New York		X		X		X		X
Hotel Chicago Downtown, Autograph Collection		X		X		X		X
The Westin Michigan Avenue Chicago		X		X		X		X

Notes:

A property marked with an “X” in a specific quarter denotes that the same-property operating results of that property are included in the Same-Property Statistical Data and in the Schedule of Same-Property Results.

The Company’s first quarter Same-Property RevPAR, RevPAR Growth, Total RevPAR, Total RevPAR Growth, ADR, Occupancy, Revenues, Expenses, EBITDA and EBITDA Margin include all of the hotels the Company owned as of March 31, 2021 but excludes Hotel Zena Washington DC, formerly known as Donovan Hotel, for Q1 in 2021, 2020 and 2019 because it was closed during the first quarter of 2020 for renovation. Operating statistics and financial results may include periods prior to the Company’s ownership of the hotels.

Pebblebrook Hotel Trust
Historical Operating Data
($ in millions except ADR and RevPAR data)
(Unaudited)
Historical Operating Data:
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
	2019		2019		2019		2019		2019
Occupancy	75%		87%		87%		79%		82%
ADR	$249		$269		$263		$247		$257
RevPAR	$187		$233		$230		$195		$211
Hotel Revenues	$317.1		$394.1		$386.8		$342.8		$1,440.7
Hotel EBITDA	$84.9		$144.0		$134.1		$99.6		$462.7
Hotel EBITDA Margin	26.8%		36.5%		34.7%		29.1%		32.1%
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
	2020		2020		2020		2020		2020
Occupancy	56%		3%		20%		21%		25%
ADR	$247		$264		$216		$195		$230
RevPAR	$138		$9		$43		$41		$58
Hotel Revenues	$242.4		$22.0		$76.9		$74.0		$415.4
Hotel EBITDA	$36.8		($39.8)		($18.0)		($19.1)		($40.1)
Hotel EBITDA Margin	15.2%		(180.7%)		(23.5%)		(25.8%)		(9.7%)
	First Quarter
	2021
Occupancy	19%
ADR	$239
RevPAR	$46
Hotel Revenues	$83.5
Hotel EBITDA	($15.5)
Hotel EBITDA Margin	(18.6%)

Notes:

These historical hotel operating results include information for all of the hotels the Company owned as of April 29, 2021 as if they were owned as of January 1, 2019. The information above does not reflect the Company’s corporate general and administrative expense, interest expense, property acquisition costs, depreciation and amortization, taxes and other expenses. Any differences are a result of rounding.

The information above has not been audited and is presented only for comparison purposes.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210429005968/en/

Raymond D. Martz, Chief Financial Officer, Pebblebrook Hotel Trust – (240) 507-1330

KEYWORDS: Maryland United States North America

INDUSTRY KEYWORDS: REIT Lodging Commercial Building & Real Estate Construction & Property Travel

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