Business Context and Reporting Period
Company: Hospitality Properties Trust (HPT)
Filing Type: Form 8-K (Current Report)
Date of Report: August 21, 2009
Purpose: This filing solely addresses the retrospective adoption of Financial Accounting Standards Board Staff Position APB 14-1 (FSP 14-1) regarding the accounting for the company's 3.8% convertible senior notes due 2027. The filing updates historical financial information for the years ended December 31, 2007, and 2008, originally reported in the 2008 Form 10-K.
Key Financial Metrics and Adjustments
The filing details specific non-cash accounting adjustments resulting from the adoption of FSP 14-1. No operational revenue, profit, or cash flow data for the current period is provided in this report.
- Net Income Impact: Annual net income per share decreased by approximately $0.08 for 2007 and $0.10 for 2008.
- Interest Expense: Increased by non-cash amortization of $7.6 million for 2007 and $9.7 million for 2008.
- Debt Carrying Value: The carrying value of convertible senior notes decreased by approximately $37.4 million as of December 31, 2007, and $29.2 million as of December 31, 2008.
- Shareholders' Equity: Corresponding increases to shareholders' equity were recorded to offset the reduction in debt carrying value.
- Cash Flow: The filing explicitly states there was no effect on cash interest payments.
Material Changes Versus Prior Period
The material changes disclosed are strictly accounting restatements for the years 2007 and 2008 to comply with FSP 14-1. The standard requires the separate accounting of liability and equity components for convertible debt instruments that may be settled in cash. Consequently, historical earnings per share and net income figures for these periods are lower than previously reported, while interest expense is higher due to non-cash amortization. The filing clarifies that no events occurring on or after February 28, 2009, are reflected in this report.
Guidance, Outlook, and Risks
Management Commentary: Management notes that the adoption of FSP 14-1 was effective as of January 1, 2009, with retrospective application to all presented periods. Early adoption was not permitted under the standard.
Risks and Contingencies: The filing does not disclose new operational risks or contingencies. It serves as a technical update to financial statements. Investors are advised to read this report in conjunction with the 2008 Form 10-K and subsequent filings.
Important Facts for Investor Verification
- Verify the restated earnings per share figures for 2007 and 2008 in the amended 10-K to reflect the $0.08 and $0.10 decreases, respectively.
- Confirm that the increase in interest expense ($7.6M for 2007, $9.7M for 2008) is non-cash and does not impact liquidity or cash interest obligations.
- Review the updated balance sheet presentation showing the reduced carrying value of the 3.8% convertible senior notes and the corresponding increase in equity.
- Note that this 8-K does not contain updated operational results or guidance for the period following February 28, 2009.