Market Overview

Stratus Properties Inc. Reports Second-Quarter and Six-Month 2018 Results, Announces New Development Project in Kingwood, Texas

Share:

Stratus Properties Inc. (NASDAQ:STRS), a diversified real estate
company with multi-family and single-family residential real estate
development, real estate leasing, hotel and entertainment businesses in
the Austin, Texas area and other select Texas markets, today reported
second-quarter 2018 results and a new development project in Kingwood,
Texas.

Highlights:

  • In August, completed a series of financing transactions used to
    purchase a 54-acre tract of land in Kingwood, Texas, for Kingwood
    Place,
    a new H-E-B, L.P. (HEB)-anchored, mixed-use project.
  • Obtained project financing and commenced construction of The Saint
    Mary
    , a 240-unit luxury garden-style apartment project in the
    Circle C Community in Austin, Texas.
  • Increased the revolving credit facility with Comerica Bank by 33
    percent to $60.0 million and extended the maturity date to June 29,
    2020.
  • Sold six developed properties for a total of $6.9 million, including
    two Amarra Villas townhomes, one condominium at the W Austin
    Hotel & Residences
    and three Amarra Drive Phase III
    lots. Since the end of second-quarter 2018, Stratus closed on the sale
    of one Amarra Drive Phase III lot for $0.7 million. Two Amarra Villa
    townhomes and three Amarra Drive Phase III lots are currently under
    contract.
  • Anchor tenant Moviehouse & Eatery opened in May 2018 at Lantana
    Place
    , a mixed-use development in southwest Austin consisting of
    approximately 320,000 square feet of retail, hotel and office space.
    Construction of phase one is nearing completion and Stratus has signed
    leases for a Marriott A/C hotel and approximately 25 percent of the
    in-line retail space.
  • Leasing reached 80 percent for the retail component of Jones
    Crossing
    , an HEB-anchored, mixed-use development in College
    Station, Texas, and construction of the retail component is nearing
    completion. The HEB grocery store is currently scheduled to open in
    September 2018.
  • Robust leasing activity continues at West Killeen Market, a
    retail development project anchored by a 90,000-square-foot HEB
    grocery store. As of June 30, 2018, Stratus has executed leases for
    approximately 70 percent of the 44,000 square feet of tenant leasing
    space. Stratus intends to explore opportunities to sell West Killeen
    Market later this year depending on leasing progress and market
    conditions.
  • Construction of Santal Phase II, a 212-unit garden style,
    multi-family project located directly adjacent to Santal Phase I in
    the upscale, highly populated Barton Creek community is advancing on
    schedule and on budget. Stratus expects the first Phase II units to be
    available for occupancy in August 2018 and to substantially complete
    construction by year-end 2018.

William H. Armstrong III, Chairman, President and Chief Executive
Officer, stated, "Stratus has reached a new peak of development
activity. Today we announced our new Kingwood Place project, our sixth
mixed-use development project anchored by HEB. This 54-acre project
located in Kingwood, Texas, a thriving master-planned community 20 miles
northeast of Houston, will include, in addition to an HEB grocery,
upscale shopping, dining, entertainment, and multi-family residences.
Kingwood is the second largest master-planned community within the
10-county greater Houston metropolitan area. Adding Kingwood Place to
our portfolio of multi-use development projects further expands our
geographic footprint in vibrant and growing Texas communities. We look
forward to completing these projects and creating value for
shareholders."

New Development Project in Kingwood, Texas

Stratus announced today that it completed a series of financing
transactions used to purchase a 54-acre tract of land in Kingwood,
Texas, for Kingwood Place, an HEB-anchored mixed-use project. The
financing transactions included (1) a private placement of limited
partnership interests in Stratus Kingwood Place, L.P., a Texas limited
partnership and a subsidiary of Stratus, to a limited number of
investors for $10.7 million, representing approximately 70 percent of
the projected total required equity, on August 3, 2018 and (2) a $6.8
million land loan with Comerica Bank with a 12-month term and interest
of LIBOR plus 4 percent closed on August 6, 2018, in connection with the
land purchase. Kingwood Place will include a 103,000-square-foot HEB
grocery store, 41,000 square feet of retail space, six retail pads, and
an 11-acre parcel planned for approximately 300 multi-family units.
Construction financing and building permits are being arranged, and
Stratus currently plans to break ground in November 2018 to meet HEB's
current projected store opening.

Second-Quarter 2018 Financial Results

Stratus reported a net loss attributable to common stockholders of $0.9
million, $0.11 per share, in both the second quarters of 2018 and 2017.

Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) totaled $2.8 million in second-quarter 2018, compared with
$2.1 million in second-quarter 2017. For a reconciliation of net loss
attributable to common stockholders to Adjusted EBITDA, see the
supplemental schedule on page V, "Adjusted EBITDA," which is available
on Stratus' website.

 

Summary Financial Results

      Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
(In Thousands, Except Per Share Amounts)

Revenues

Real Estate Operations $ 6,987 $ 4,029 $ 8,189 $ 6,206
Leasing Operations 2,556 2,032 4,811 4,523
Hotel 9,643 9,847 19,037 20,252
Entertainment 4,451 5,917 9,710 11,862
Eliminations and other (327 ) (396 ) (672 ) (750 )
Total Consolidated Revenue $ 23,310   $ 21,429   $ 41,075   $ 42,093  
 
 

Summary Financial Results (continued)

 
      Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
(In Thousands, Except Per Share Amounts)
 

Operating income (loss)

Real Estate Operations $ 1,363 a $ 104 $ 938 a $ 248
Leasing Operations 487 484 919 (904 )
Hotel 1,565 1,602 3,026 3,839
Entertainment 499 1,091 1,234 2,152
Corporate and other (3,140 ) (2,986 ) (6,246 ) (6,539 )
Total Consolidated Operating Income (Loss) $ 774   $ 295   $ (129 ) $ (1,204 )
 
Net loss attributable to common stockholders $ (857 ) $ (893 ) $ (2,727 ) $ (3,563 )
 
Diluted net loss per share $ (0.11 ) $ (0.11 ) $ (0.33 ) $ (0.44 )
 
Adjusted EBITDA $ 2,835 $ 2,054 $ 3,882 $ 4,107
 
Capital expenditures and purchases and development of real estate
properties
$ 22,693 $ 7,105 $ 50,681 $ 13,074
 
Diluted weighted-average shares of common stock outstanding 8,153 8,127 8,145 8,114
 

a. Includes $0.4 million of reductions to cost of sales
associated with collection of prior-years' assessments of
properties in Barton Creek.

 

The significant increases in revenue and operating income from the Real
Estate Operations
segment in second-quarter 2018, compared to
second-quarter 2017, primarily reflect higher developed property sales.

During second-quarter 2018, Stratus sold three Amarra Drive Phase III
lots, two Amarra Villas townhomes and one of the two remaining
condominium units at the W Austin Hotel & Residences for a total of $6.9
million.

The increases in revenue from the Leasing Operations segment in
second-quarter 2018, compared to second-quarter 2017, primarily reflect
leasing activity at West Killeen Market and Santal Phase I.

The slight decreases in revenue and operating income from the Hotel
segment in second-quarter 2018, compared to second-quarter 2017,
primarily reflect lower room revenues resulting from competition from
several newly completed hotels in the downtown Austin area. Revenue per
available room (RevPAR), which is calculated by dividing total room
revenue by the average number of total rooms available, was $254 in
second-quarter 2018, compared with $263 for second-quarter 2017. An
increase in competition resulting from the anticipated opening of
additional hotel rooms in downtown Austin during the second-half of 2018
is expected to continue to impact Stratus' hotel revenues. Stratus
remains positive on the long-term outlook of the W Austin Hotel based on
continued population growth and increased tourism in the Austin market.

The decreases in revenue and operating income from the Entertainment
segment in second-quarter 2018, compared to second-quarter 2017,
primarily reflect a decrease in the number of events hosted and the
number of tickets sold at ACL Live. ACL Live hosted 45 events and sold
approximately 29 thousand tickets in second-quarter 2018, compared with
60 events and the sale of approximately 51 thousand tickets in
second-quarter 2017. Additionally, 3TEN ACL Live, hosted 57 events in
second-quarter 2018, compared with 60 events in second-quarter 2017.

Debt and Liquidity

On June 29, 2018, Stratus increased its revolving credit facility by 33
percent to $60.0 million, of which $12.0 million was available as of
June 30, 2018. The new maturity date is June 29, 2020.

At June 30, 2018, consolidated debt totaled $265.9 million and
consolidated cash totaled $12.7 million, compared with consolidated debt
of $221.5 million and consolidated cash of $14.6 million at December 31,
2017.

Purchases and development of real estate properties (included in
operating cash flows) and capital expenditures (included in investing
cash flows) totaled $50.7 million for the first six months of 2018,
primarily for the development of Barton Creek properties, Santal Phase
II, Lantana Place and Jones Crossing. This compares with $13.1 million
for the first six months of 2017, primarily for the development of
Barton Creek properties, Lantana Place and West Killeen Market.

----------------------------------------------

Conference Call Information

Stratus will conduct an investor conference call to discuss its
unaudited second-quarter 2018 financial results today, August 9, 2018,
at 11:00 a.m. ET. The public is invited to listen to the conference call
by dialing (877) 418-4843 for domestic access and (412) 902-6766 for
international access. A replay of the conference call will be available
at the conclusion of the call for five days by dialing (877) 344-7529
domestically and (412) 317-0088 internationally. Please use replay ID:
10121895. The replay will be available on Stratus' website at stratusproperties.com
until August 14, 2018.

____________________________

CAUTIONARY STATEMENT AND REGULATION G DISCLOSURE. This press
release contains forward-looking statements in which Stratus discusses
factors it believes may affect its future performance. Forward-looking
statements are all statements other than statements of historical fact,
such as statements regarding the implementation and potential results of
Stratus' active development plan, projections or expectations related to
operational and financial performance or liquidity, reimbursements for
infrastructure costs, financing and regulatory matters, development
plans and sales of properties, including, but not limited to, Amarra
Drive lots and townhomes and exploring opportunities to sell West
Killeen Market, leasing activities, timeframes for development,
construction and completion of Stratus' projects, capital expenditures,
possible joint venture or other arrangements, Stratus' projections with
respect to its obligations under the master lease agreements entered
into in connection with the sale of The Oaks at Lakeway, and other plans
and objectives of management for future operations and activities and
future dividend payments. The words "anticipates," "may," "can,"
"plans," "believes," "potential," "estimates," "expects," "projects,"
"intends," "likely," "will," "should," "to be" and any similar
expressions and/or statements that are not historical fact are intended
to identify those assertions as forward-looking statements. Under
Stratus' loan agreement with Comerica Bank, Stratus is not permitted to
pay dividends on common stock without Comerica's prior written consent,
which was obtained in connection with the special dividend paid in April
2017. The declaration of dividends is at the discretion of Stratus'
Board of Directors (Board), subject to restrictions under Stratus' loan
agreement with Comerica Bank, and will depend on Stratus' financial
results, cash requirements, projected compliance with covenants in its
debt agreements, outlook and other factors deemed relevant by the Board.

Stratus cautions readers that forward-looking statements are not
guarantees of future performance, and its actual results may differ
materially from those anticipated, projected or assumed in the
forward-looking statements. Important factors that can cause Stratus'
actual results to differ materially from those anticipated in the
forward-looking statements include, but are not limited to, Stratus'
ability to refinance and service its debt and the availability of
financing for development projects and other corporate purposes,
Stratus' ability to sell properties at prices its Board considers
acceptable, a decrease in the demand for real estate in the Austin,
Texas area and other select Texas markets where Stratus operates,
changes in economic and business conditions, reductions in discretionary
spending by consumers and corporations, competition from other real
estate developers, hotel operators and/or entertainment venue operators
and promoters, the termination of sales contracts or letters of intent
due to, among other factors, the failure of one or more closing
conditions or market changes, Stratus' ability to secure qualifying
tenants for the space subject to the master lease agreements entered
into in connection with the sale of The Oaks at Lakeway and to assign
such leases to the purchaser and remove the corresponding property from
the master leases, the failure to attract customers for its developments
or such customers' failure to satisfy their purchase commitments,
increases in interest rates, declines in the market value of Stratus'
assets, increases in operating costs, including real estate taxes and
the cost of construction materials, changes in external perception of
the W Austin Hotel, changes in consumer preferences, changes in laws,
regulations or the regulatory environment affecting the development of
real estate, opposition from special interest groups with respect to
development projects, weather-related risks and other factors described
in more detail under the heading "Risk Factors" in Stratus' Annual
Report on Form 10-K for the year ended December 31, 2017, filed with the
SEC.

This press release also includes Adjusted EBITDA, which is not
recognized under U.S. generally accepted accounting principles (GAAP).
Stratus believes this measure can be helpful to investors in evaluating
its business. Adjusted EBITDA is a financial measure frequently used by
securities analysts, lenders and others to evaluate Stratus' recurring
operating performance. Adjusted EBITDA is intended to be a performance
measure that should not be regarded as more meaningful than a GAAP
measure. Other companies may calculate Adjusted EBITDA differently. As
required by SEC Regulation G, a reconciliation of Stratus' net loss
attributable to common stockholders to Adjusted EBITDA is included in
the supplemental schedules of this press release.

Investors are cautioned that many of the assumptions upon which
Stratus' forward-looking statements are based are likely to change after
the forward-looking statements are made. Further, Stratus may make
changes to its business plans that could affect its results. Stratus
cautions investors that it does not intend to update its forward-looking
statements more frequently than quarterly notwithstanding any changes in
its assumptions, business plans, actual experience, or other changes,
and Stratus undertakes no obligation to update any forward-looking
statements.

A copy of this release is available on Stratus' website, stratusproperties.com.

 

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

(In Thousands, Except Per Share Amounts)

                 
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Revenues:
Real estate operations $ 6,979 $ 4,021 $ 8,173 $ 6,185
Leasing operations 2,331 1,811 4,335 4,092
Hotel 9,593 9,765 18,915 20,079
Entertainment 4,407   5,832   9,652   11,737  
Total revenues 23,310 21,429 41,075 42,093
Cost of sales:
Real estate operations 5,560 3,868 7,126 5,844
Leasing operations 1,323 973 2,505 2,658
Hotel 7,149 7,436 14,178 14,601
Entertainment 3,436 4,255 7,404 8,632
Depreciation 2,053   1,756   3,995   3,897  
Total cost of sales 19,521 18,288 35,208 35,632
General and administrative expenses 3,015 2,846 5,996 6,242
Profit participation in sale of The Oaks at Lakeway 2,538
Gain on sales of assets       (1,115 )
Total 22,536   21,134   41,204   43,297  
Operating income (loss) 774 295 (129 ) (1,204 )
Interest expense, net (1,742 ) (1,508 ) (3,301 ) (3,483 )
Gain (loss) on interest rate derivative instruments 80 (4 ) 258 82
Loss on early extinguishment of debt (532 )
Other income, net 11   13   22   18  

Loss before income taxes and equity in unconsolidated affiliates'
loss

(877 ) (1,204 ) (3,150 ) (5,119 )
Equity in unconsolidated affiliates' loss (3 ) (2 ) (6 ) (19 )
Benefit from income taxes 23   321   429   1,583  
Net loss and total comprehensive loss (857 ) (885 ) (2,727 ) (3,555 )
Total comprehensive income attributable to noncontrolling interests
in subsidiaries
  (8 )   (8 )
Net loss and total comprehensive loss attributable to common
stockholders
$ (857 ) $ (893 ) $ (2,727 ) $ (3,563 )
 
Basic and diluted net loss per share attributable to common
stockholders
$ (0.11 ) $ (0.11 ) $ (0.33 ) $ (0.44 )
 
Basic and diluted weighted average common shares outstanding 8,153   8,127   8,145   8,114  
 
Dividends declared per share of common stock $   $   $   $ 1.00  
 
 

STRATUS PROPERTIES INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In Thousands)

     

June 30,
2018

   

December 31,
2017

ASSETS
Cash and cash equivalents $ 12,660 $ 14,611
Restricted cash 24,637 24,779
Real estate held for sale 19,677 22,612
Real estate under development 140,210 118,484
Land available for development 15,428 14,804
Real estate held for investment, net 210,425 188,390
Deferred tax assets 12,114 11,461
Other assets 13,537   10,852  
Total assets $ 448,688   $ 405,993  
 
LIABILITIES AND EQUITY
Liabilities:
Accounts payable $ 22,195 $ 22,809
Accrued liabilities, including taxes 7,834 13,429
Debt 265,872 221,470
Deferred gain 10,480 11,320
Other liabilities 10,485   9,575  
Total liabilities 316,866   278,603  
 
Commitments and contingencies
 
Equity:
Stockholders' equity:
Common stock 93 93
Capital in excess of par value of common stock 185,757 185,395
Accumulated deficit (39,848 ) (37,121 )
Common stock held in treasury (21,260 ) (21,057 )
Total stockholders' equity 124,742 127,310
Noncontrolling interests in subsidiaries 7,080   a 80  
Total equity 131,822   127,390  
Total liabilities and equity $ 448,688   $ 405,993  
 

a. Includes $7.0 million of contributions from investors
associated with financing The Saint Mary development project.

 
 
STRATUS PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In Thousands)

         
Six Months Ended
June 30,
2018 2017
Cash flow from operating activities:
Net loss $ (2,727 ) $ (3,555 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 3,995 3,897
Cost of real estate sold 5,053 3,897
Gain on sale of assets (1,115 )
Gain on interest rate derivative contracts (258 ) (82 )
Loss on early extinguishment of debt 532
Debt issuance cost amortization and stock-based compensation 791 647
Equity in unconsolidated affiliates' loss 6 19
Increase (decrease) in deposits 588 (851 )
Deferred income taxes (653 ) (12,607 )
Purchases and development of real estate properties (7,699 ) (7,974 )
Municipal utility district reimbursement 2,172
(Increase) decrease in other assets (2,297 ) 910
Decrease in accounts payable, accrued liabilities and other (5,505 ) (895 )
Net cash used in operating activities (8,706 ) (15,005 )
 
Cash flow from investing activities:
Capital expenditures (42,982 ) (5,100 )
Proceeds from sale of assets 117,261
Payments on master lease obligations (932 ) (927 )
Other, net (87 ) (48 )
Net cash (used in) provided by investing activities (44,001 ) 111,186  
 
Cash flow from financing activities:
Borrowings from credit facility 22,336 20,200
Payments on credit facility (4,225 ) (51,775 )
Borrowings from project loans 29,948 7,766
Payments on project and term loans (3,266 ) (63,723 )
Cash dividend paid (8,127 )
Stock-based awards net payments (203 ) (234 )
Noncontrolling interests contributions 7,000 a
Financing costs (976 ) (375 )
Net cash provided by (used in) financing activities 50,614   (96,268 )
Net decrease in cash, cash equivalents and restricted cash (2,093 ) (87 )
Cash, cash equivalents and restricted cash at beginning of year 39,390   25,489  
Cash, cash equivalents and restricted cash at end of period $ 37,297   $ 25,402  
 

a. Represents contributions from investors associated with
financing The Saint Mary development project.

 

STRATUS PROPERTIES INC.
BUSINESS SEGMENTS

Stratus currently has four operating segments: Real Estate Operations,
Leasing Operations, Hotel and Entertainment.

The Real Estate Operations segment is comprised of Stratus' real estate
assets (developed, under development and available for development),
which consists of its properties in Austin, Texas (the Barton Creek
community, including Santal Phase II; the Circle C community, including
The Saint Mary; the Lantana community, including Lantana Place; and the
condominium units at the W Austin Hotel & Residences); in Lakeway, Texas
located in the greater Austin area (Lakeway); in College Station, Texas
(Jones Crossing); and in Magnolia, Texas, located in the greater Houston
area (Magnolia).

The Leasing Operations segment includes the office and retail space at
the W Austin Hotel & Residences, a retail building in Barton Creek
Village, Santal Phase I and the West Killeen Market in Killeen, Texas,
and portions of the Lantana Place and Jones Crossing projects.

The Hotel segment includes the W Austin Hotel located at the W Austin
Hotel & Residences in downtown Austin, Texas.

The Entertainment segment includes ACL Live, a live music and
entertainment venue and production studio at the W Austin Hotel &
Residences. In addition to hosting concerts and private events, this
venue is the home of Austin City Limits, a television program showcasing
popular music legends. The Entertainment segment also includes revenues
and costs associated with events hosted at other venues, including 3TEN
ACL Live, which opened in March 2016 on the site of the W Austin Hotel &
Residences.

Stratus uses operating income or loss to measure the performance of each
segment. General and administrative expenses, which primarily consist of
employee salaries, wages and other costs, are managed on a consolidated
basis and are not allocated to Stratus' operating segments. The
following segment information reflects management determinations that
may not be indicative of what the actual financial performance of each
segment would be if it were an independent entity.

Segment information presented below was prepared on the same basis as
Stratus' consolidated financial statements (in thousands).

                         

Real Estate
Operationsa

Leasing
Operations

Hotel Entertainment

Eliminations
and Otherb

Total
Three Months Ended June 30, 2018:
Revenues:
Unaffiliated customers $ 6,979 $ 2,331 $ 9,593 $ 4,407 $ $ 23,310
Intersegment 8 225 50 44 (327 )
Cost of sales, excluding depreciation 5,560 c 1,331 7,184 3,560 (167 ) 17,468
Depreciation 64 738 894 392 (35 ) 2,053
General and administrative expenses           3,015     3,015
Operating income (loss) $ 1,363 $ 487 $ 1,565 $ 499 $ (3,140 ) $ 774

Capital expenditures and purchases and development of real estate
properties

$ 4,087 $ 18,486 $ 97 $ 23 $ $ 22,693
Total assets at June 30, 2018 207,437 95,954 101,487 36,263 7,547 448,688
 
Three Months Ended June 30, 2017:
Revenues:
Unaffiliated customers $ 4,021 $ 1,811 $ 9,765 $ 5,832 $ $ 21,429
Intersegment 8 221 82 85 (396 )
Cost of sales, excluding depreciation 3,868 980 7,456 4,449 (221 ) 16,532
Depreciation 57 568 789 377 (35 ) 1,756
General and administrative expenses           2,846     2,846
Operating income (loss) $ 104 $ 484 $ 1,602 $ 1,091 $ (2,986 ) $ 295
Capital expenditures and purchases and development of real estate
properties
$ 4,306 $ 2,748 $ 11 $ 40 $ $ 7,105
Total assets at June 30, 2017 160,713 69,629 103,154 37,392 24,566 395,454
 
 
STRATUS PROPERTIES INC.
BUSINESS SEGMENTS (continued)
 
     

Real Estate
Operationsa

   

Leasing
Operations

    Hotel     Entertainment    

Eliminations
and Otherb

    Total
Six Months Ended June 30, 2018:
Revenues:
Unaffiliated customers $ 8,173 $ 4,335 $ 18,915 $ 9,652 $ $ 41,075
Intersegment 16 476 122 58 (672 )
Cost of sales, excluding depreciation 7,126 c 2,521 14,222 7,696 (352 ) 31,213
Depreciation 125 1,371 1,789 780 (70 ) 3,995
General and administrative expenses   5,996   5,996  
Operating income (loss) $ 938 $ 919   $ 3,026 $ 1,234 $ (6,246 ) $ (129 )
Capital expenditures and purchases and development of real estate
properties
$ 7,699 $ 42,285 $ 336 $ 361 $ $ 50,681
 
Six Months Ended June 30, 2017:
Revenues:
Unaffiliated customers $ 6,185 $ 4,092 $ 20,079 $ 11,737 $ $ 42,093
Intersegment 21 431 173 125 (750 )
Cost of sales, excluding depreciation 5,844 2,673 14,645 8,957 (384 ) 31,735
Depreciation 114 1,331 1,768 753 (69 ) 3,897
General and administrative expenses 6,242 6,242
Profit participation 2,538 2,538
Gain on sales of assets (1,115 )   (1,115 )
Operating income (loss) $ 248 $ (904 ) $ 3,839 $ 2,152 $ (6,539 ) $ (1,204 )
Capital expenditures and purchases and development of real estate
properties
$ 7,974 $ 4,779 $ 258 $ 63 $ $ 13,074
 

a. Includes sales commissions and other revenues together
with related expenses.

b. Includes consolidated general and administrative expenses
and eliminations of intersegment amounts.

c. Includes $0.4 million of reductions to cost of sales
associated with collection of prior-years' assessments of
properties in Barton Creek.

 

RECONCILIATION OF NON-GAAP MEASURE
ADJUSTED EBITDA

Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) is a non-GAAP (U.S. generally accepted accounting
principles) financial measure that is frequently used by securities
analysts, investors, lenders and others to evaluate companies' recurring
operating performance, including, among other things, profitability
before the effect of financing and similar decisions. Because securities
analysts, investors, lenders and others use Adjusted EBITDA, management
believes that Stratus' presentation of Adjusted EBITDA affords them
greater transparency in assessing its financial performance. This
information differs from net income (loss) attributable to common
stockholders determined in accordance with GAAP and should not be
considered in isolation or as a substitute for measures of performance
determined in accordance with GAAP. Adjusted EBITDA may not be
comparable to similarly titled measures reported by other companies, as
different companies may calculate such measures differently. Management
strongly encourages investors to review Stratus' consolidated financial
statements and publicly filed reports in their entirety. A
reconciliation of Stratus' net loss attributable to common stockholders
to Adjusted EBITDA follows (in thousands).

         
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Net loss attributable to common stockholders $ (857 ) $ (893 ) $ (2,727 ) $ (3,563 )
Depreciation 2,053 1,756 3,995 3,897
Interest expense, net 1,742 1,508 3,301 3,483
Benefit from income taxes (23 ) (321 ) (429 ) (1,583 )
Profit participation in sale of The Oaks at Lakeway 2,538
Gain on sales of assets (1,115 )
Gain on interest rate derivative instruments (80 ) 4 (258 ) (82 )
Loss on early extinguishment of debt       532  
Adjusted EBITDA $ 2,835   $ 2,054   $ 3,882   $ 4,107  

View Comments and Join the Discussion!