Form 8-K Amendment

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K/A

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 21, 2012

 

 

CHESAPEAKE LODGING TRUST

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   001-34572   27-0372343

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

1997 Annapolis Exchange Parkway, Suite 410

Annapolis, MD

  21401
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (410) 972-4140

Not Applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


This Form 8-K/A amends and supplements the registrant’s Form 8-K, as filed on August 21, 2012, to include the historical financial statements and pro forma financial information required by Item 9.01(a) and (b).

Item 9.01. Financial Statements and Exhibits.

(a) Financial statements of businesses acquired.

W Chicago – Lakeshore

Independent Auditors’ Report

Balance Sheets as of June 30, 2012 (unaudited), and December 31, 2011 and 2010

Statements of Operations for the six-month periods ended June 30, 2012 and 2011 (unaudited) and for the years ended December 31, 2011 and 2010

Statements of Net Assets for the six-month period ended June 30, 2012 (unaudited) and for the years ended December 31, 2011 and 2010

Statements of Cash Flows for the six-month periods ended June 30, 2012 and 2011 (unaudited) and for the years ended December 31, 2011 and 2010

Notes to Financial Statements

(b) Pro forma financial information.

Chesapeake Lodging Trust

Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2012

Unaudited Pro Forma Consolidated Statement of Operations for the six months ended June 30, 2012

Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2011

(d) Exhibits.

Incorporated by reference to the Exhibit Index filed herewith and incorporated herein by reference.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: September 10, 2012   CHESAPEAKE LODGING TRUST
  By:  

/s/ Graham J. Wootten

    Graham J. Wootten
    Senior Vice President and Chief Accounting Officer


Exhibit Index

 

Exhibit
Number

  

Exhibit Description

23.1    Consent of Ernst & Young LLP


Report of Independent Auditors

To the Owners of W Chicago – Lakeshore

We have audited the accompanying balance sheets of W Chicago – Lakeshore (the Hotel), as of December 31, 2011 and 2010, and the related statements of operations, net assets and cash flows for the years then ended. These financial statements are the responsibility of the Hotel’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Hotel’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Hotel’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Hotel at December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

 

/s/ Ernst & Young LLP

August 30, 2012


W Chicago – Lakeshore

Balance Sheets

 

     June 30,
2012
     December 31,
2011
     December 31,
2010
 
     (Unaudited)                

Assets

        

Real estate, net

   $ 76,914,261       $ 78,021,037       $ 79,547,739   

Cash and cash equivalents

     107,538         208,611         60,580   

Accounts receivable, net

     2,556,432         918,679         1,336,725   

Inventory

     239,965         268,611         205,403   

Prepaid expense and other assets

     311,894         123,157         101,167   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 80,130,090       $ 79,540,095       $ 81,251,614   
  

 

 

    

 

 

    

 

 

 

Liabilities and net assets

        

Liabilities:

        

Accounts payable

   $ 1,627,581       $ 1,159,478       $ 1,137,114   

Accrued expenses and other liabilities

     4,636,902         3,964,871         4,105,259   

Due to affiliate

     65,541,599         68,685,866         78,559,943   
  

 

 

    

 

 

    

 

 

 

Total liabilities

     71,806,082         73,810,215         83,802,316   

Net assets

     8,324,008         5,729,880         (2,550,702
  

 

 

    

 

 

    

 

 

 

Total liabilities and net assets

   $ 80,130,090       $ 79,540,095       $ 81,251,614   
  

 

 

    

 

 

    

 

 

 

See accompanying notes.

 

2


W Chicago – Lakeshore

Statements of Operations

 

     Six-Month Period Ended      Year Ended  
     June 30,      June 30,      December 31,      December 31,  
     2012      2011      2011      2010  
     (Unaudited)      (Unaudited)                

Departmental revenues:

           

Rooms

   $ 13,042,564       $ 12,568,203       $ 28,107,350       $ 26,410,226   

Food and beverage

     4,167,614         4,462,099         10,123,801         9,999,912   

Other

     1,297,891         1,374,138         3,057,950         3,048,122   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total departmental revenues

     18,508,069         18,404,440         41,289,101         39,458,260   
  

 

 

    

 

 

    

 

 

    

 

 

 

Departmental expenses:

           

Rooms

     4,017,507         3,926,102         8,188,685         8,047,262   

Food and beverage

     3,516,327         3,443,860         7,804,008         7,825,562   

Other

     1,058,706         987,458         2,019,310         1,945,226   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total departmental expenses

     8,592,540         8,357,420         18,012,003         17,818,050   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses:

           

Administrative and general

     1,545,107         1,483,294         3,177,880         3,003,810   

Marketing and sales

     1,501,772         1,358,558         3,113,026         2,891,718   

Depreciation

     1,837,113         2,201,898         4,280,865         4,516,004   

Property operation and maintenance

     834,496         889,437         1,792,754         1,874,957   

Utilities

     376,969         408,037         786,895         855,702   

Real estate and other property taxes

     1,018,440         1,563,967         1,377,251         919,193   

Other fixed expense

     11,096         13,915         24,736         29,022   

Insurance

     196,408         219,890         443,109         437,758   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     7,321,401         8,138,996         14,996,516         14,528,164   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 2,594,128       $ 1,908,024       $ 8,280,582       $ 7,112,046   
  

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying notes.

 

3


W Chicago – Lakeshore

Statements of Net Assets

 

Balance at January 1, 2010

   $ (9,662,748

Net income

     7,112,046   
  

 

 

 

Balance at December 31, 2010

     (2,550,702

Net income

     8,280,582   
  

 

 

 

Balance at December 31, 2011

     5,729,880   

Net income

     2,594,128   
  

 

 

 

Balance at June 30, 2012 (unaudited)

   $ 8,324,008   
  

 

 

 

See accompanying notes.

 

4


W Chicago – Lakeshore

Statements of Cash Flows

 

     Six-Month Period Ended     Year Ended  
     June 30,     June 30,     December 31,     December 31,  
     2012     2011     2011     2010  
     (Unaudited)     (Unaudited)              

Operating activities

        

Net income

   $ 2,594,128      $ 1,908,024      $ 8,280,582      $ 7,112,046   

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

        

Depreciation

     1,837,113        2,201,898        4,280,865        4,516,004   

Bad debt expense

     15,761        (19,478     205        20,892   

Changes in operating assets and liabilities:

        

Accounts receivable, net

     (1,653,514     (854,567     417,841        (399,799

Inventory

     28,646        (66,747     (63,208     (51,097

Prepaid expense and other assets

     (188,737     (237,870     (21,990     83,711   

Accounts payable and accrued expenses

     1,140,134        1,439,077        (118,024     (349,477

Due to/from affiliate

     (3,144,267     (3,138,885     (9,874,077     (9,076,339
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     629,264        1,231,452        2,902,194        1,855,941   
  

 

 

   

 

 

   

 

 

   

 

 

 

Investing activities

        

Building improvement costs and equipment purchases

     (730,337     (1,238,977     (2,754,163     (1,861,257
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (730,337     (1,238,977     (2,754,163     (1,861,257
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (101,073     (7,525     148,031        (5,316

Cash and cash equivalents at beginning of period

     208,611        60,580        60,580        65,896   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 107,538      $ 53,055      $ 208,611      $ 60,580   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes.

 

5


W Chicago – Lakeshore

Notes to Financial Statements

June 30, 2012 (unaudited) and December 31, 2011 and 2010

1. Organization

The financial statements of W Chicago – Lakeshore (the Hotel) present the financial position, results from operations and cash flows of the Hotel’s operations. The Hotel is a full-service, luxury property with 520 guest rooms located at 644 North Lake Shore Drive in Chicago, Illinois.

The Hotel is owned by Starwood Chicago Lakeshore Realty LLC (the Owner), a wholly owned subsidiary of Starwood Hotels & Resorts, Worldwide Inc. (Parent or Starwood).

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared for purposes of enabling Chesapeake Lodging Trust (see Note 7) to comply with certain requirements of the Securities and Exchange Commission. The financial statements of the Hotel are prepared in conformity with U.S. generally accepted accounting principles (GAAP). The financial statements present the assets, liabilities and results of operations of the Hotel, and not of a legal entity.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the realizability of accounts receivable, useful lives of real estate for purposes of determining depreciation expense and assessments as to whether there is impairment in the value of long-lived assets. Actual results could differ from those estimates.


W Chicago – Lakeshore

Notes to Financial Statements (continued)

 

2. Summary of Significant Accounting Policies (continued)

 

Real Estate

Real estate is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are as follows:

 

Classification

   Years

Building

   40

Building improvements

   15

Furniture, fixtures and equipment

   3–10

Maintenance, minor repairs and replacements are expensed when incurred. Disposals and abandonments, if any, are recognized at occurrence as a charge to depreciation expense.

The Hotel reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recognized when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposal is less than its carrying amount. Impairment loss, if any, is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. No impairment loss has been identified or recorded in the six months ended June 30, 2012, or the years ended December 31, 2011 and 2010.

Cash and Cash Equivalents

Cash and cash equivalents include all cash on hand, cash held in financial institutions and other highly liquid investments with an initial maturity of three months or less when purchased. The cash balance may at times exceed federal depository insurance limits.


W Chicago – Lakeshore

Notes to Financial Statements (continued)

 

2. Summary of Significant Accounting Policies (continued)

 

Revenue Recognition

Hotel income represents revenue derived from room, food, beverage, parking and rental income. Room revenue is recognized as room-stays occur. Food, beverage, and parking revenue are recognized when services have been provided. Other revenue includes rental income on service and retail space, which is recognized over the non-cancelable term of each respective lease on a straight-line basis. Deposits received for future services are recorded within accrued expenses and other liabilities and are recognized as revenue when the services are provided. Ongoing credit evaluations are performed and an allowance for potential credit losses is provided against the portion of accounts receivable that is estimated to be uncollectible. The Hotel recorded $4,881 (unaudited), $2,923, and $20,038 as an allowance for doubtful accounts at June 30, 2012, and December 31, 2011 and 2010, respectively, which is included in accounts receivable net on the accompanying balance sheets.

Income Taxes

The Owner is a limited liability company (LLC) and under the existing provisions of the Internal Revenue Code, income and losses of the LLC flow through to the member of the LLC; accordingly, no provision for income taxes has been provided for in the accompanying financial statements of the Hotel.

Risks and Uncertainties

The Company is exposed to the credit worthiness of its guests and tenants. The Company manages these risks, regularly evaluating the risk exposure and taking the appropriate measures to mitigate the risks.

Fair Value of Financial Instruments

As cash equivalents have maturities of less than three months, the carrying value of cash and cash equivalents approximates fair value. The fair values of the Hotel’s other financial instruments (including such items in the financial statement captions as accounts receivable, accounts payable and accrued expenses and other liabilities approximate their carrying values based on their nature and terms.


W Chicago – Lakeshore

Notes to Financial Statements (continued)

 

3. Real Estate

Real estate as of June 30, 2012 (unaudited) and December 31, 2011 and 2010, is comprised of the following:

 

     June 30,
2012
    December 31,
2011
    December 31,
2010
 
     (Unaudited)              

Land and land improvements

   $ 11,845,142      $ 11,845,142      $ 11,761,543   

Building and building improvements

     91,819,233        91,779,553        87,788,964   

Furniture, fixtures and equipment

     22,907,410        22,557,287        22,163,919   

Construction in progress

     1,438,639        1,098,105        2,811,498   
  

 

 

   

 

 

   

 

 

 

Total real estate

     128,010,424        127,280,087        124,525,924   

Accumulated depreciation

     (51,096,163     (49,259,050     (44,978,185
  

 

 

   

 

 

   

 

 

 

Real estate, net

   $ 76,914,261      $ 78,021,037      $ 79,547,739   
  

 

 

   

 

 

   

 

 

 

4. Related-Party Transactions

Starwood sweeps all funds from operations into a centralized banking system and then funds cash for operations as needed. The Hotel incurs charges which are included in the accompanying statements of operations for services, programs and allocated costs from Starwood. Additionally, the Hotel reimburses Starwood for salary, related benefits and employment costs of Starwood employees who work for the Hotel. The financial statements reflect net due to affiliate balances as a result of these transactions of $65,541,599 (unaudited) as of June 30, 2012, and $68,685,866 and $78,559,943 as of December 31, 2011 and 2010, respectively.

5. Rental Income

The Owner leases space in the Hotel to a service and retail company under an operating lease which expires in October 2015. Future minimum lease payments under the non-cancelable operating lease are as follows:


W Chicago – Lakeshore

Notes to Financial Statements (continued)

 

Years Ending December 31:

  

2012

   $ 211,652   

2013

     215,885   

2014

     220,203   

2015

     224,607   
  

 

 

 

Total

   $ 872,347   
  

 

 

 

6. Commitments and Contingencies

Litigation

The Hotel is subject to legal proceedings and claims that arise in the normal course of business. As of June 30, 2012 and December 31, 2011 and 2010, management is not aware of any asserted or pending litigation or claims against the Hotel that it expects to have a material adverse effect on the Hotel’s financial condition, results of operations or liquidity.

7. Subsequent Events

On August 5, 2012, the Owner entered into a definitive agreement with Chesapeake Lodging Trust for the sale of the Hotel for $126 million. The sale closed on August 21, 2012.

The Hotel evaluated subsequent events through August 30, 2012, which is the date the financial statements were available to be issued.


UNAUDITED PRO FORMA FINANCIAL INFORMATION OF CHESAPEAKE LODGING TRUST

On August 21, 2012, Chesapeake Lodging Trust (the “Trust”) acquired the 520-room W Chicago – Lakeshore in Chicago, Illinois for a purchase price of $126.0 million, plus customary pro-rated amounts and closing costs.

The following unaudited pro forma balance sheet as of June 30, 2012 reflects the acquisition of the W Chicago – Lakeshore as if the acquisition had occurred on that date. The unaudited pro forma balance sheet also includes a pro forma adjustment for the preferred share offering completed on July 17, 2012 as it is needed to present the funding of the acquisition on June 30, 2012.

The following unaudited pro forma statements of operations for the six months ended June 30, 2012 and the year ended December 31, 2011 reflect the acquisition of the W Chicago – Lakeshore and the completion of the preferred share offering described above as if both had occurred on January 1, 2011. The unaudited pro forma statement of operations for the year ended December 31, 2011 also includes pro forma adjustments for the acquisitions of the W Chicago – City Center (acquired on May 10, 2011), the Courtyard Washington Capitol Hill/Navy Yard (acquired on June 30, 2011), and the Denver Marriott City Center (acquired on October 3, 2011), all deemed to be significant acquisitions under Rule 3-05 of Regulation S-X, for the common share offering completed on March 4, 2011, and for the debt assumed in conjunction with the acquisition of the Courtyard Washington Capitol Hill/Navy Yard, as if all transactions had been completed on January 1, 2011.

The unaudited pro forma financial information does not purport to represent what the Trust’s results of operations or financial condition would actually have been if the completion of these transactions had in fact occurred at the beginning of the periods presented, or to project the Trust’s results of operations or financial condition for any future period. In addition, the unaudited pro forma financial information is based upon available information and upon assumptions and estimates, some of which are set forth in the notes to the unaudited pro forma financial statements, which the Trust believes are reasonable under the circumstances. The unaudited pro forma financial information and accompanying notes should be read in conjunction with the Trust’s audited financial statements included in its 2011 Annual Report on Form 10-K.


CHESAPEAKE LODGING TRUST

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2012

(in thousands, except share data)

 

     Historical
Chesapeake Lodging
Trust
    Preferred Share
Offering (1)
    Acquisition of
W Chicago –
Lakeshore (2)
    Pro Forma
Chesapeake Lodging
Trust
 

ASSETS

        

Property and equipment, net

   $ 877,696      $ —        $ 126,000      $ 1,003,696   

Intangible assets, net

     39,682        —          —          39,682   

Cash and cash equivalents

     19,908        —          —          19,908   

Restricted cash

     17,665        —          —          17,665   

Accounts receivable, net

     11,816        —          1,097        12,913   

Prepaid expenses and other assets

     13,271        —          478        13,749   

Deferred financing costs

     4,479        —          —          4,479   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 984,517      $ —        $ 127,575      $ 1,112,092   
  

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

        

Long-term debt

   $ 419,658      $ (120,623   $ 125,860      $ 424,895   

Accounts payable and accrued expenses

     27,442        —          2,693        30,135   

Other liabilities

     22,196        —          —          22,196   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     469,296        (120,623     128,553        477,226   
  

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and contingencies

        

Preferred shares, $.01 par value; 100,000,000 shares authorized; no shares (actual) and 5,000,000 shares (pro forma) issued and outstanding

     —          50        —          50   

Common shares, $.01 par value; 400,000,000 shares authorized; 32,133,386 shares issued and outstanding

     321        —          —          321   

Additional paid-in capital

     544,804        120,573        —          665,377   

Cumulative dividends in excess of net income

     (28,804     —          (978     (29,782

Accumulated other comprehensive loss

     (1,100     —          —          (1,100
  

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     515,221        120,623        (978     634,866   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 984,517      $ —        $ 127,575      $ 1,112,092   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Footnote:

 

(1) Reflects the proceeds, net of underwriting fees and offering costs, from the Trust’s preferred share offering completed on July 17, 2012. The Trust used the net proceeds to repay outstanding borrowings under its revolving credit facility.
(2) Reflects the acquisition of the W Chicago – Lakeshore as if it had occurred on June 30, 2012 for $124,920 and was funded by borrowing under the Trust’s revolving credit facility. The pro forma adjustment reflects the following:

Cash paid of $978 for hotel acquisition costs;

Proceeds from borrowing under the revolving credit facility of $125,860;

Purchase of land, building, and furniture, fixtures and equipment of $126,000; and

Assumption of net working capital deficit of $1,080, including hotel cash acquired of $38.


CHESAPEAKE LODGING TRUST

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2012

(in thousands, except share and per share data)

 

    Historical
Chesapeake Lodging
Trust
    Acquisition of
W Chicago –
Lakeshore (1)
    Pro Forma
Adjustments
    Pro Forma
Chesapeake Lodging
Trust
 

REVENUE

       

Rooms

  $ 89,762      $ 13,042      $ —        $ 102,804   

Food and beverage

    23,811        4,168        —          27,979   

Other

    3,743        1,298        —          5,041   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

    117,316        18,508        —          135,824   
 

 

 

   

 

 

   

 

 

   

 

 

 

EXPENSES

       

Hotel operating expenses:

       

Rooms

    20,677        4,018        —          24,695   

Food and beverage

    17,382        3,516        —          20,898   

Other direct

    1,836        1,059        —          2,895   

Indirect

    39,600        5,484        —          45,084   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total hotel operating expenses

    79,495        14,077        —          93,572   

Depreciation and amortization

    13,207        1,837        (456 ) (2)      14,588   

Air rights contract amortization

    260        —          —          260   

Corporate general and administrative:

       

Share-based compensation

    1,565        —          —          1,565   

Hotel acquisition costs

    443        —          —          443   

Other

    4,031        —          —          4,031   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    99,001        15,914        (456     114,459   
 

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    18,315        2,594        456        21,365   

Interest income

    22        —          —          22   

Interest expense

    (10,190     —          (92 ) (3)      (10,282
 

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    8,147        2,594        364        11,105   

Income tax benefit (expense)

    110        —          (89 ) (4)      21   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    8,257        2,594        275        11,126   

Preferred share dividends

    —          —          (4,844 ) (5)      (4,844
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available to common shareholders

  $ 8,257      $ 2,594      $ (4,569   $ 6,282   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income available per share – basic and diluted

  $ 0.26          $ 0.19   

Weighted-average number of common shares outstanding – basic and diluted

    31,892,431            31,892,431   

 

Footnotes:

 

(1) Reflects the results of operations of the W Chicago – Lakeshore for the six months ended June 30, 2012.
(2) Reflects adjustment to depreciation expense based on the Trust’s cost basis in the acquired hotel and its accounting policy for depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 years for building and seven years for furniture, fixtures and equipment.
(3) Reflects adjustment for interest expense related to a borrowing under the revolving credit facility in conjunction with the acquisition of the W Chicago – Lakeshore.
(4) Reflects adjustment to record pro forma income taxes related to the Trust’s taxable REIT subsidiary as if the acquisition had occurred on January 1, 2011.
(5) Reflects adjustment to record dividends accrued on 5,000,000 7.75% Series A Preferred Shares as if the preferred share offering had occurred on January 1, 2011.


CHESAPEAKE LODGING TRUST

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2011

(in thousands, except share and per share data)

 

    Historical
Chesapeake Lodging
Trust
    Previous Hotel
Acquisitions
Adjustment (1)
    Acquisition of
W Chicago –
Lakeshore (2)
    Pro Forma
Adjustments
    Pro Forma
Chesapeake Lodging
Trust
 

REVENUE

         

Rooms

  $ 128,730      $ 30,162      $ 28,107      $ —        $ 186,999   

Food and beverage

    37,781        11,175        10,124        —          59,080   

Other

    5,680        1,159        3,058        —          9,897   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

    172,191        42,496        41,289        —          255,976   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EXPENSES

         

Hotel operating expenses:

         

Rooms

    30,110        6,863        8,189        —          45,162   

Food and beverage

    27,682        7,406        7,804        —          42,892   

Other direct

    2,785        577        2,019        —          5,381   

Indirect

    55,550        15,525        10,715        —          81,790   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total hotel operating expenses

    116,127        30,371        28,727        —          175,225   

Depreciation and amortization

    18,382        7,266        4,281        (3,975 ) (3)      25,954   

Air rights contract amortization

    520        —          —          —          520   

Corporate general and administrative:

         

Share-based compensation

    3,094        —          —          —          3,094   

Hotel acquisition costs

    5,081        —          —          (2,638 ) (4)      2,443   

Other

    6,902        —          —          —          6,902   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    150,106        37,637        33,008        (6,613     214,138   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    22,085        4,859        8,281        6,613        41,838   

Interest income

    145        —          —          —          145   

Interest expense

    (12,868     (2,305     —          (2,711 ) (5)      (17,884

Loss on early extinguishment of debt

    (208     —          —          —          (208
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    9,154        2,554        8,281       
3,902
  
    23,891   

Income tax expense

    (118     —          —          (494 ) (6)      (612
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    9,036        2,554        8,281        3,408        23,279   

Preferred share dividends

    —          —          —          (9,688 ) (7)      (9,688
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available to common shareholders

  $ 9,036      $ 2,554      $ 8,281      $ (6,280   $ 13,591   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income available per share – basic and diluted

  $ 0.31            $ 0.42   

Weighted-average number of common shares outstanding – basic and diluted

    29,413,841              31,790,280  (8) 

 

Footnotes:

 

(1) Reflects the results of operations of the W Chicago – City Center, Courtyard Washington Capitol Hill/Navy Yard, and the Denver Marriott City Center for the periods prior to their acquisition.
(2) Reflects the results of operations of the W Chicago – Lakeshore for the year ended December 31, 2011.
(3) Reflects adjustment to depreciation expense based on the Trust’s cost basis in the acquired hotels and its accounting policy for depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 years for building and seven years for furniture, fixtures and equipment.
(4) Reflects removal of historical transaction costs related to the acquisitions of the W Chicago – City Center, the Courtyard Washington Capital Hill/Navy Yard, and the Denver Marriott City Center.
(5) Reflects removal of historical interest expense related to debt not assumed in conjunction with the acquisition of the Denver Marriott City Center and includes adjustment for interest expense related to borrowings under the Trust’s revolving credit facility in conjunction with the acquisitions of the W Chicago – City Center, the Courtyard Washington Capitol Hill/Navy Yard, the Denver Marriott City Center, and the W Chicago – Lakeshore.
(6) Reflects adjustment to record pro forma income taxes related to the Trust’s taxable REIT subsidiary as if all acquisitions had occurred on January 1, 2011.
(7) Reflects adjustment to record dividends accrued on 5,000,000 7.75% Series A Preferred Shares as if the preferred share offering had occurred on January 1, 2011.
(8) Reflects number of common shares issued and outstanding as if the Trust’s common share offering had occurred on January 1, 2011.