Company Quick10K Filing
Quick10K
Ashford
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$53.59 2 $132
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
8-K 2019-08-02 Regulation FD, Exhibits
8-K 2019-08-01 Earnings, Exhibits
8-K 2019-07-18 Sale of Shares
8-K 2019-05-31 Enter Agreement, Sale of Shares, Other Events, Exhibits
8-K 2019-05-16 Shareholder Vote
8-K 2019-05-15 Regulation FD, Exhibits
8-K 2019-05-03 Regulation FD, Exhibits
8-K 2019-05-02 Earnings, Exhibits
8-K 2019-03-05 Regulation FD, Exhibits
8-K 2019-03-01 Regulation FD, Exhibits
8-K 2019-02-28 Earnings, Exhibits
8-K 2019-01-18 Regulation FD, Exhibits
8-K 2019-01-15 Enter Agreement, Regulation FD, Exhibits
8-K 2019-01-09 Earnings, Exhibits
8-K 2018-11-02 Regulation FD, Exhibits
8-K 2018-11-01 Earnings, Exhibits
8-K 2018-10-05 Regulation FD
8-K 2018-10-02 Regulation FD, Exhibits
8-K 2018-09-25 Enter Agreement, Exhibits
8-K 2018-09-25 Regulation FD, Exhibits
8-K 2018-09-24 Regulation FD, Exhibits
8-K 2018-08-30 Regulation FD, Exhibits
8-K 2018-08-22 Regulation FD, Exhibits
8-K 2018-08-10 Regulation FD, Exhibits
8-K 2018-08-09 Earnings, Exhibits
8-K 2018-08-08 Regulation FD, Exhibits
8-K 2018-06-27 Regulation FD, Exhibits
8-K 2018-06-26 Enter Agreement, Other Events, Exhibits
8-K 2018-06-25 Regulation FD, Exhibits
8-K 2018-06-15 Shareholder Vote
8-K 2018-06-01 Amend Bylaw, Exhibits
8-K 2018-05-24 Other Events, Exhibits
8-K 2018-05-10 Other Events, Exhibits
8-K 2018-05-04 Regulation FD, Exhibits
8-K 2018-05-03 Earnings, Exhibits
8-K 2018-04-06 Enter Agreement, Shareholder Rights, Other Events, Exhibits
8-K 2018-04-04 Enter Agreement, Exhibits
8-K 2018-04-02 Regulation FD, Exhibits
8-K 2018-03-21 Other Events, Exhibits
8-K 2018-03-14 Officers
8-K 2018-03-12 Officers, Regulation FD, Exhibits
8-K 2018-03-01 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-02-27 Amend Bylaw, Exhibits
8-K 2018-01-08 Other Events, Exhibits
BHGE Baker Hughes A Ge 23,450
NI Nisource 10,260
ASH Ashland Global Holdings 4,770
SPPI Spectrum Pharmaceuticals 1,040
NGD New Gold 465
FISI Financial Institutions 456
CSV Carriage Services 350
RBTK Zhen Ding Resources 0
ACLZ Accelerize 0
MESS Messagebgone 0
AINC 2019-06-30
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Default Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ainc2019q2new10-qxex311.htm
EX-31.2 ainc2019q2new10-qxex312.htm
EX-32.1 ainc2019q2new10-qxex321.htm
EX-32.2 ainc2019q2new10-qxex322.htm

Ashford Earnings 2019-06-30

AINC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 ainc2019q2new10-q.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number: 001-36400

ASHFORD INC.
(Exact name of registrant as specified in its charter)
Maryland
 
82-5237353
(State or other jurisdiction of incorporation or organization)
 
(IRS employer identification number)
 
 
 
14185 Dallas Parkway, Suite 1100
 
 
Dallas, Texas
 
75254
(Address of principal executive offices)
 
(Zip code)
(972) 490-9600
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
þ
 
 
 
 
Non-accelerated filer
¨
Smaller reporting company
þ
 
 
 
 
 
 
Emerging growth company
þ
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes þ No

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock
 
AINC
 
NYSE American LLC
    
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $0.01 par value per share
 
2,613,884
(Class)
 
Outstanding at August 6, 2019




ASHFORD INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2019

TABLE OF CONTENTS

 
 
 




PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS (unaudited)
ASHFORD INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share amounts)
 
June 30, 2019
 
December 31, 2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
40,039

 
$
51,529

Restricted cash
13,276

 
7,914

Accounts receivable, net
9,232

 
4,928

Due from affiliates
93

 
45

Due from Ashford Trust OP
4,872

 
5,293

Due from Braemar OP
1,830

 
1,996

Inventories
1,504

 
1,202

Prepaid expenses and other
3,875

 
3,902

Total current assets
74,721

 
76,809

Investments in unconsolidated entities
2,990

 
500

Furniture, fixtures and equipment, net
62,546

 
47,947

Operating lease right-of-use assets
21,597

 

Goodwill
65,040

 
59,683

Intangible assets, net
189,742

 
193,194

Other assets
1,542

 
872

Total assets
$
418,178

 
$
379,005

LIABILITIES


 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
26,154

 
$
24,880

Dividends payable
2,791

 

Due to affiliates
726

 
2,032

Deferred income
138

 
148

Deferred compensation plan
77

 
173

Notes payable, net
2,933

 
2,595

Operating lease liabilities
2,066

 

Other liabilities
14,532

 
8,418

Total current liabilities
49,417

 
38,246

Deferred income
11,088

 
13,396

Deferred tax liability, net
31,750

 
31,506

Deferred compensation plan
6,347

 
10,401

Notes payable, net
21,925

 
15,177

Operating lease liabilities
19,546

 

Other liabilities
2,670

 

Total liabilities
142,743

 
108,726

Commitments and contingencies (note 10)


 


MEZZANINE EQUITY
 
 
 
Series B convertible preferred stock, $25 par value, 8,120,000 shares issued and outstanding, net of discount at June 30, 2019 and December 31, 2018
201,822

 
200,847

Redeemable noncontrolling interests
3,615

 
3,531

EQUITY
 
 
 
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
 
 
 
Series A cumulative preferred stock, no shares issued and outstanding at June 30, 2019 and December 31, 2018

 

Common stock, $0.01 par value, 100,000,000 shares authorized, 2,475,848 and 2,391,541 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
25

 
24

Additional paid-in capital
289,821

 
280,159

Accumulated deficit
(219,965
)
 
(214,242
)
Accumulated other comprehensive income (loss)
(293
)
 
(498
)
Total stockholders’ equity of the Company
69,588

 
65,443

Noncontrolling interests in consolidated entities
410

 
458

Total equity
69,998

 
65,901

Total liabilities and equity
$
418,178

 
$
379,005


See Notes to Condensed Consolidated Financial Statements.

2


ASHFORD INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
REVENUE
 
 
 
 
 
 
 
Advisory services
$
21,220

 
$
24,570

 
$
40,407

 
$
47,102

Audio visual
30,127

 
23,376

 
61,102

 
46,686

Project management
7,700

 

 
15,490

 

Other
4,419

 
6,865

 
9,787

 
9,191

Total revenue
63,466

 
54,811

 
126,786

 
102,979

EXPENSES
 
 
 
 
 
 
 
Salaries and benefits
18,157

 
15,710

 
40,857

 
42,227

Cost of revenues for audio visual
22,229

 
17,021

 
43,668

 
33,608

Cost of revenues for project management
2,697

 

 
5,488

 

Depreciation and amortization
4,934

 
1,193

 
9,461

 
2,233

General and administrative
11,368

 
9,125

 
19,350

 
15,420

Impairment

 

 

 
1,919

Other
3,138

 
892

 
4,477

 
1,738

Total expenses
62,523

 
43,941

 
123,301

 
97,145

OPERATING INCOME (LOSS)
943

 
10,870

 
3,485

 
5,834

Equity in earnings (loss) of unconsolidated entities
(298
)
 

 
(573
)
 

Interest expense
(445
)
 
(161
)
 
(742
)
 
(304
)
Amortization of loan costs
(70
)
 
(24
)
 
(139
)
 
(47
)
Interest income
9

 
73

 
29

 
185

Other income (expense)
(42
)
 
(221
)
 
(95
)
 
(260
)
INCOME (LOSS) BEFORE INCOME TAXES
97

 
10,537

 
1,965

 
5,408

Income tax (expense) benefit
(426
)
 
(1,605
)
 
(1,726
)
 
(2,311
)
NET INCOME (LOSS)
(329
)
 
8,932

 
239

 
3,097

(Income) loss from consolidated entities attributable to noncontrolling interests
131

 
118

 
294

 
291

Net (income) loss attributable to redeemable noncontrolling interests
310

 
(90
)
 
289

 
(151
)
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY
112

 
8,960

 
822

 
3,237

Preferred dividends
(2,791
)
 

 
(5,583
)
 

Amortization of preferred stock discount
(484
)
 

 
(975
)
 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
$
(3,163
)
 
$
8,960

 
$
(5,736
)
 
$
3,237

 
 
 
 
 
 
 
 
INCOME (LOSS) PER SHARE - BASIC AND DILUTED
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders
$
(1.28
)
 
$
4.26

 
$
(2.35
)
 
$
1.54

Weighted average common shares outstanding - basic
2,462

 
2,095

 
2,441

 
2,094

Diluted:
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders
$
(3.00
)
 
$
0.93

 
$
(3.94
)
 
$
(1.40
)
Weighted average common shares outstanding - diluted
2,717

 
2,487

 
2,583

 
2,219

See Notes to Condensed Consolidated Financial Statements.

3


ASHFORD INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
NET INCOME (LOSS)
$
(329
)
 
$
8,932

 
$
239

 
$
3,097

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX


 


 
 
 
 
Foreign currency translation adjustment
204

 
(137
)
 
234

 
(251
)
COMPREHENSIVE INCOME (LOSS)
(125
)
 
8,795

 
473

 
2,846

Comprehensive (income) loss attributable to noncontrolling interests
131

 
139

 
294

 
329

Comprehensive (income) loss attributable to redeemable noncontrolling interests
294

 
(90
)
 
259

 
(151
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY
$
300

 
$
8,844

 
$
1,026

 
$
3,024

See Notes to Condensed Consolidated Financial Statements.


4


ASHFORD INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(unaudited, in thousands)

 
Common Stock
 
Additional Paid-in Capital
 
Accumulated
 Deficit
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests in Consolidated Entities
 
Total
 
Convertible Preferred Stock
 
Redeemable Noncontrolling Interests
 
Shares
 
Amount
 
Shares
 
Amount
Balance at March 31, 2019
2,470

 
$
25

 
$
287,129

 
$
(216,703
)
 
$
(483
)
 
$
627

 
$
70,595

 
8,120

 
$
201,338

 
$
3,810

Equity-based compensation
5

 

 
2,681

 

 

 
(27
)
 
2,654

 

 

 

Acquisition of BAV Services

 

 
(7
)
 

 

 

 
(7
)
 

 

 

Investment in Real Estate Advisory Holdings LLC

 

 
(113
)
 

 

 

 
(113
)
 

 

 

Amortization of preferred stock discount

 

 

 
(484
)
 

 

 
(484
)
 

 
484

 

Dividends declared - preferred stock

 

 

 
(2,791
)
 

 

 
(2,791
)
 

 

 

Deferred compensation plan distribution
1

 

 
27

 

 

 

 
27

 

 

 

Employee advances

 

 
104

 

 

 

 
104

 

 

 

Redemption value adjustment

 

 

 
(99
)
 

 

 
(99
)
 

 

 
99

Distributions to consolidated noncontrolling interests

 

 

 

 

 
(59
)
 
(59
)
 

 

 

Foreign currency translation adjustment

 

 

 

 
190

 

 
190

 

 

 
16

Net income (loss)

 

 

 
112

 

 
(131
)
 
(19
)
 

 

 
(310
)
Balance at June 30, 2019
2,476

 
$
25

 
$
289,821

 
$
(219,965
)
 
$
(293
)
 
$
410

 
$
69,998

 
8,120

 
$
201,822

 
$
3,615

 
Common Stock
 
Additional Paid-in Capital
 
Accumulated
 Deficit
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests in Consolidated Entities
 
Total
 
Convertible Preferred Stock
 
Redeemable Noncontrolling Interests
 
Shares
 
Amount
 
Shares
 
Amount
Balance at December 31, 2018
2,392

 
$
24

 
$
280,159

 
$
(214,242
)
 
$
(498
)
 
$
458

 
$
65,901

 
8,120

 
$
200,847

 
$
3,531

Equity-based compensation
5

 

 
4,836

 

 

 
(24
)
 
4,812

 

 

 

Acquisition of BAV Services
60

 
1

 
3,747

 

 

 

 
3,748

 

 

 

Investment in Real Estate Advisory Holdings LLC
17

 

 
887

 

 

 

 
887

 

 

 

Amortization of preferred stock discount

 

 

 
(975
)
 

 

 
(975
)
 

 
975

 

Dividends declared - preferred stock

 

 

 
(5,583
)
 

 

 
(5,583
)
 

 

 

Deferred compensation plan distribution
2

 

 
73

 

 

 

 
73

 

 

 

Employee advances

 

 
353

 

 

 

 
353

 

 

 

Contributions from noncontrolling interests

 

 

 

 

 
455

 
455

 

 

 

Reallocation of carrying value

 

 
(234
)
 

 

 
(122
)
 
(356
)
 

 

 
356

Redemption value adjustment

 

 

 
13

 

 

 
13

 

 

 
(13
)
Distributions to consolidated noncontrolling interests

 

 

 

 

 
(63
)
 
(63
)
 

 

 

Foreign currency translation adjustment

 

 

 

 
205

 

 
205

 

 

 
30

Net income (loss)

 

 

 
822

 

 
(294
)
 
528

 

 

 
(289
)
Balance at June 30, 2019
2,476

 
$
25

 
$
289,821

 
$
(219,965
)
 
$
(293
)
 
$
410

 
$
69,998

 
8,120

 
$
201,822

 
$
3,615


5


 
Common Stock
 
Additional Paid-in Capital
 
Accumulated
Deficit
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests in Consolidated Entities
 
Total
 
Convertible Preferred Stock
 
Redeemable Noncontrolling Interests
 
Shares
 
Amount
 
Shares
 
Amount
Balance at March 31, 2018
2,103

 
$
21

 
$
255,037

 
$
(224,281
)
 
$
(232
)
 
$
1,560

 
32,105

 

 
$

 
$
4,662

Equity-based compensation
4

 

 
2,272

 

 

 

 
2,272

 

 

 

Deferred compensation plan distribution
2

 

 
54

 

 

 

 
54

 

 

 

Employee advances

 

 
(60
)
 

 

 

 
(60
)
 

 

 

Redemption value adjustment

 

 

 
(100
)
 

 

 
(100
)
 

 

 
100

Distributions to consolidated noncontrolling interests

 

 

 
(14
)
 

 

 
(14
)
 

 

 

Foreign currency translation adjustment

 

 

 

 
(116
)
 
(21
)
 
(137
)
 

 

 

Net income (loss)

 

 

 
8,960

 

 
(118
)
 
8,842

 

 

 
90

Balance at June 30, 2018
2,109

 
$
21

 
$
257,303

 
$
(215,435
)
 
$
(348
)
 
$
1,421

 
$
42,962

 

 
$

 
$
4,852

 
Common Stock
 
Additional Paid-in Capital
 
Accumulated
 Deficit
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests in Consolidated Entities
 
Total
 
Convertible Preferred Stock
 
Redeemable Noncontrolling Interests
 
Shares
 
Amount
 
Shares
 
Amount
Balance at December 31, 2017
2,094

 
$
21

 
$
249,695

 
$
(219,396
)
 
$
(135
)
 
$
772

 
30,957

 

 
$

 
$
5,111

Equity-based compensation
4

 

 
6,061

 

 

 
8

 
6,069

 

 

 

Deferred compensation plan distribution
2

 

 
134

 

 

 

 
134

 

 

 

Employee advances

 

 
45

 

 

 

 
45

 

 

 

Purchase of OpenKey shares from noncontrolling interest holder
9

 

 
838

 

 

 

 
838

 

 

 
(838
)
Contributions from noncontrolling interests

 

 

 

 

 
2,666

 
2,666

 

 

 

Reallocation of carrying value

 

 
530

 

 

 
(1,696
)
 
(1,166
)
 

 

 
1,166

Redemption value adjustment

 

 

 
738

 

 

 
738

 

 

 
(738
)
Distributions to consolidated noncontrolling interests

 

 

 
(14
)
 

 

 
(14
)
 

 

 

Foreign currency translation adjustment

 

 

 

 
(213
)
 
(38
)
 
(251
)
 

 

 

Net income (loss)

 

 

 
3,237

 

 
(291
)
 
2,946

 

 

 
151

Balance at June 30, 2018
2,109

 
$
21

 
$
257,303

 
$
(215,435
)
 
$
(348
)
 
$
1,421

 
$
42,962

 

 
$

 
$
4,852

See Notes to Condensed Consolidated Financial Statements.

6


ASHFORD INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Six Months Ended June 30,
 
2019
 
2018
Cash Flows from Operating Activities
 
 
 
Net income (loss)
$
239

 
$
3,097

Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
 
 
 
Depreciation and amortization
11,835

 
3,614

Change in fair value of deferred compensation plan
(4,077
)
 
(5,814
)
Equity-based compensation
4,862

 
6,069

Equity in (earnings) loss in unconsolidated entities
573

 

Deferred tax expense (benefit)
244

 

Change in fair value of contingent consideration
1,639

 
559

Impairment of furniture, fixtures and equipment

 
1,919

(Gain) loss on sale of furniture, fixtures and equipment
48

 
(80
)
Amortization of loan costs
139

 
47

Changes in operating assets and liabilities, exclusive of the effect of acquisitions:
 
 
 
Accounts receivable
(3,578
)
 
(782
)
Due from affiliates
(48
)
 

Due from Ashford Trust OP
421

 
(121
)
Due from Braemar OP
166

 
1,396

Inventories
(301
)
 
(157
)
Prepaid expenses and other
58

 
5

Operating lease right-of-use assets
874

 

Other assets
3

 
(658
)
Accounts payable and accrued expenses
799

 
351

Due to affiliates
(1,236
)
 
319

Other liabilities
5,011

 
3,313

Operating lease liabilities
(859
)
 

Deferred income
(2,319
)
 
(813
)
Net cash provided by (used in) operating activities
14,493

 
12,264

Cash Flows from Investing Activities
 
 
 
Purchases of furniture, fixtures and equipment under the Ashford Trust ERFP Agreement
(13,089
)
 

Purchases of furniture, fixtures and equipment under the Braemar ERFP Agreement
(1,420
)
 

Additions to furniture, fixtures and equipment
(3,665
)
 
(4,535
)
Proceeds from disposal of furniture, fixtures and equipment, net
58

 

Acquisition of BAV Services
(4,267
)
 

Investment in Real Estate Advisory Holdings LLC
(2,176
)
 

Acquisition of assets related to RED Hospitality and Leisure LLC
(988
)
 
(3,670
)
Net cash provided by (used in) investing activities
(25,547
)
 
(8,205
)
Cash Flows from Financing Activities
 
 
 
Payments for dividends on preferred stock
(2,791
)
 

Payments on revolving credit facilities
(16,256
)
 
(10,064
)
Borrowings on revolving credit facilities
17,245

 
10,263

Proceeds from notes payable
7,336

 
1,765

Payments on notes payable and capital leases
(1,297
)
 
(939
)
Payments of loan costs
(41
)
 
(15
)
Employee advances
353

 
45

Contributions from noncontrolling interest
455

 
2,666

Distributions to noncontrolling interests in consolidated entities
(63
)
 
(14
)
Net cash provided by (used in) financing activities
4,941

 
3,707

Effect of foreign exchange rate changes on cash and cash equivalents
(15
)
 
(65
)
Net change in cash, cash equivalents and restricted cash
(6,128
)
 
7,701

Cash, cash equivalents and restricted cash at beginning of period
59,443

 
45,556

Cash, cash equivalents and restricted cash at end of period
$
53,315

 
$
53,257


7


 
Six Months Ended June 30,
 
2019
 
2018
Supplemental Cash Flow Information
 
 
 
Interest paid
$
610

 
$
278

Income taxes paid
1,344

 
598

Supplemental Disclosure of Non-Cash Investing and Financing Activities
 
 
 
Distribution from deferred compensation plan
73

 
134

Capital expenditures accrued but not paid
632

 
2,497

Capital lease additions
69

 

Ashford Inc. common stock consideration for purchase of OpenKey shares

 
838

Amortization of discount on preferred stock
975

 

Ashford Inc. common stock consideration for BAV Services acquisition
3,748

 

Ashford Inc. common stock consideration for investment in Real Estate Advisory Holdings LLC
887

 

 
 
 
 
Supplemental Disclosure of Cash, Cash Equivalents and Restricted Cash
 
 
 
Cash and cash equivalents at beginning of period
$
51,529

 
$
36,480

Restricted cash at beginning of period
7,914

 
9,076

Cash, cash equivalents and restricted cash at beginning of period
$
59,443

 
$
45,556

 
 
 
 
Cash and cash equivalents at end of period
$
40,039

 
$
40,868

Restricted cash at end of period
13,276

 
12,389

Cash, cash equivalents and restricted cash at end of period
$
53,315

 
$
53,257

See Notes to Condensed Consolidated Financial Statements.

8

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



1. Organization and Description of Business
Ashford Inc. (the “Company”) is a Maryland corporation that provides asset management services, advisory services and other products and services primarily to clients in the hospitality industry. We became a public company in November 2014, when Ashford Hospitality Trust, Inc. (“Ashford Trust”) completed the spin-off of Ashford Inc. through the distribution of approximately 70% of our outstanding common stock to Ashford Trust stockholders and unitholders in Ashford Trust's operating partnership, collectively. Our common stock is listed on the NYSE American LLC (“NYSE American”). As of June 30, 2019, Ashford Trust held approximately 598,000 shares of our common stock, which represented an approximate 24.2% ownership interest in Ashford Inc., and Braemar Hotels & Resorts Inc. (“Braemar”) held approximately 195,000 shares, which represented an approximate 7.9% ownership interest in the Company.
We are currently the advisor for Ashford Trust and Braemar. In our capacity as the advisor to Ashford Trust and Braemar, we are responsible for implementing the investment strategies and managing the day-to-day operations of Ashford Trust and Braemar, in each case subject to the supervision and oversight of the respective board of directors of Ashford Trust and Braemar. Ashford Trust commenced operating in August 2003 and is focused on investing in full service hotels in the upscale and upper-upscale segments in the U.S. that have revenue per available room (“RevPAR”) generally less than twice the U.S. national average. Braemar invests primarily in luxury hotels and resorts with RevPAR of at least twice the U.S. national average. Braemar became a publicly traded company in November 2013 upon the completion of its spin-off from Ashford Trust. Each of Ashford Trust and Braemar is a real estate investment trust (“REIT”) as defined in the Internal Revenue Code, and the common stock of each of Ashford Trust and Braemar is traded on the NYSE.
We provide the personnel and services that we believe are necessary for each of Ashford Trust and Braemar to conduct their respective businesses. We may also perform similar functions for new or additional platforms. We are not responsible for managing the day-to-day operations of the individual hotel properties owned by either Ashford Trust or Braemar, which duties are, and will continue to be, the responsibility of the hotel management companies that operate the hotel properties owned by Ashford Trust and Braemar.
We conduct our advisory business primarily through an operating entity, Ashford Hospitality Advisors LLC (“Ashford LLC”), our hospitality products and services business primarily through an operating entity, Ashford Hospitality Services LLC (“Ashford Services”), and our project management business through an operating entity, Premier Project Management LLC (“Premier”). We own substantially all of our assets and conduct substantially all of our business through Ashford LLC, Ashford Services and Premier.
On January 16, 2018, the Company closed on the acquisition of a passenger vessel and other assets related to RED Hospitality & Leisure LLC (“RED”), a provider of watersports activities and other travel and transportation services. This transaction was accounted for as an asset acquisition recorded at cost and did not result in the recognition of goodwill. During 2018, RED acquired additional passenger vessels and a ferry. The Company owns an 80.0% interest in RED. See notes 2, 11 and 15.
On June 26, 2018, the Company entered into the Enhanced Return Funding Program Agreement and Amendment No. 1 to the Amended and Restated Advisory Agreement (the “Ashford Trust ERFP Agreement”) with Ashford Trust. The independent members of the board of directors of each of the Company and Ashford Trust, with the assistance of separate and independent legal counsel, engaged to negotiate the Ashford Trust ERFP Agreement on behalf of the Company and Ashford Trust, respectively. Under the Ashford Trust ERFP Agreement, the Company agreed to provide $50 million (the “ERFP Commitment”) to Ashford Trust in connection with Ashford Trust’s acquisition of hotels recommended by us, with the option to increase the ERFP Commitment to up to $100 million upon mutual agreement by the parties. Under the Ashford Trust ERFP Agreement, the Company’s ERFP Commitment will be fulfilled as the Company pays Ashford Trust 10% of each acquired hotel’s purchase price in exchange for furniture fixtures and equipment (“FF&E”), which is subsequently leased to Ashford Trust rent-free. Ashford Trust must provide reasonable advance notice to the Company to request ERFP funds in accordance with the Ashford Trust ERFP Agreement. The Ashford Trust ERFP Agreement requires that the Company acquire the related FF&E either at the time of the property acquisition or at any time generally within two years of Ashford Trust acquiring the hotel property. The Company recognizes the related depreciation tax deduction at the time such FF&E is purchased by the Company and placed into service at Ashford Trust’s hotel properties. However, the timing of the FF&E being purchased and placed into service is subject to uncertainties outside of the Company’s control that could delay the realization of any tax benefit associated with the purchase of FF&E. See notes 2, 10 and 15.

9

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


On August 8, 2018, we completed the acquisition of Premier, the project management business formerly conducted by certain affiliates of Remington Holdings, LP (“Remington”), for a total transaction value of $203 million. As a result, the project management services that were previously provided by Remington Lodging & Hospitality, LLC (“Remington Lodging”) are now provided by a subsidiary of Ashford Inc. under the respective project management agreement with each customer, including Ashford Trust and Braemar. The purchase price was paid by issuing 8,120,000 shares of the Series B Convertible Preferred Stock to the sellers of Premier (the “Remington Sellers”), primarily MJB Investments, LP (which is wholly-owned by Monty J. Bennett, our Chief Executive Officer and Chairman of our board of directors), and his father Archie Bennett, Jr., the Chairman Emeritus of Ashford Trust (together, the “Bennetts”). The Series B Convertible Preferred Stock has a conversion price of $140 per share and would convert into 1,450,000 shares of our common stock. Cumulative dividends on the Series B Convertible Preferred Stock are payable at an annual rate of 5.5% in the first year, 6.0% in the second year, and 6.5% in the third year and each year thereafter. In addition to certain separate class voting rights, the holders of the Series B Convertible Preferred Stock vote on an as-converted basis with the holders of the common stock on all matters submitted for approval by the holders of our capital stock possessing general voting rights. However, for five years following the closing of the acquisition of Premier, the Remington Sellers and their transferees are subject to certain voting restrictions with respect to shares in excess of 25% of the combined voting power of the Company’s outstanding capital stock. The holders of the Series B Convertible Preferred Stock have certain conversion rights upon certain events constituting a change of control of the Company. See notes 4 and 12.
In connection with the acquisition of Premier, we effected a holding company reorganization. The change in holding company organizational structure was effected by a merger, pursuant to which each issued and outstanding share of common stock, par value $0.01 per share, of our predecessor publicly-traded parent Ashford OAINC Inc. (formerly named Ashford Inc.) (“Old Ashford”) was converted into one share of common stock, par value $0.01 per share, of the Company having the same rights, powers and preferences and the same qualifications, limitations and restrictions as a share of common stock of Old Ashford. As a result of the foregoing, we became the successor issuer of Old Ashford under Rule 12g-3 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Our common stock continues to be listed on the NYSE American under the symbol “AINC.”
On September 28, 2018, we completed a public offering of 270,000 shares of common stock at a price to the public of $74.50 per share, resulting in gross proceeds of $20.1 million. The net proceeds from the sale of the shares, after discounts and commissions to the underwriters and offering expenses, were approximately $18.2 million. We also sold an additional 10,000 shares of common stock to the underwriters on October 10, 2018, in connection with the underwriters’ partial exercise of their over-allotment option that had been granted to them in connection with the transaction. The net proceeds from the sale of the over-allotment shares, after discounts and commissions to the underwriters, were approximately $700,000.
Effective January 1, 2019, we acquired a 30% noncontrolling ownership interest in Real Estate Advisory Holdings LLC (“REA Holdings”), a real estate advisory firm that provides financing, advisory and property sales services primarily to clients in the hospitality and leisure industry, for a purchase price of approximately $3.0 million which was paid in the form of $2.1 million cash and the issuance of 16,529 shares of our common stock (approximately $890,000) to the seller pursuant to the exemption from the registration requirements under the Securities Act, provided under Section 4(a)(2) thereunder. We have an option to acquire an additional 50% of the ownership interests in REA Holdings for $12.5 million beginning on January 1, 2022. Our investment in REA Holdings is accounted for under the equity method as we have significant influence over the voting interest entity.
On January 15, 2019, the Company entered into the Enhanced Return Funding Program Agreement and Amendment No. 1 to the Fifth Amended and Restated Advisory Agreement (the “Braemar ERFP Agreement”) with Braemar. The independent members of the board of directors of each of the Company and Braemar, with the assistance of separate and independent legal counsel, engaged to negotiate the Braemar ERFP Agreement on behalf of the Company and Braemar, respectively. Under the Braemar ERFP Agreement, the Company agreed to provide $50 million (the “ERFP Commitment”) to Braemar in connection with Braemar’s acquisition of hotels recommended by us, with the option to increase the ERFP Commitment to up to $100 million upon mutual agreement by the parties. Under the Braemar ERFP Agreement, the Company’s ERFP Commitment will be fulfilled as the Company pays Braemar 10% of each acquired hotel’s purchase price in exchange for FF&E, which is subsequently leased to Braemar rent-free. Braemar must provide reasonable advance notice to the Company to request ERFP funds in accordance with the Braemar ERFP Agreement. The Braemar ERFP Agreement requires that the Company acquire the related FF&E either at the time of the property acquisition or at any time generally within two years of Braemar acquiring the hotel property. The Company recognizes the related depreciation tax deduction at the time such FF&E is purchased by the Company and placed into service at Braemar’s hotel properties. However, the timing of the FF&E being purchased and placed into service is subject to uncertainties outside of the Company’s control that could delay the realization of any tax benefit associated with the purchase of FF&E. See notes 2, 10 and 15.

10

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


On March 1, 2019, J&S Audio Visual (“JSAV”), our consolidated subsidiary, acquired a privately-held company, BAV Services in the United States (“BAV”). BAV is an audio visual rental, staging, and production company focused on meeting and special event services. As a result of the acquisition, our ownership interest in JSAV, which we consolidate under the voting interest model, increased from 85% to approximately 88%. The purchase price consisted of: (i) $5.0 million in cash (excluding working capital adjustments) funded by an existing JSAV term loan; (ii) $4.0 million in the form of Ashford Inc. common stock consisting of (a) 61,387 shares issued on March 1, 2019, which was determined based on an agreed upon value of $3.5 million using a thirty-day volume weighted average price per share (“30-Day VWAP”) of $57.01 and had an estimated fair value of approximately $3.8 million as of the acquisition date and (b) $500,000 of stock to be issued 18 months after the acquisition date, subject to certain conditions; and (iii) contingent consideration related to the achievement of certain performance targets with an estimated fair value of approximately $1.4 million, payable, if earned, 12 to 18 months after the acquisition date. Additionally, the transaction includes a stock consideration collar. See note 4.
On May 31, 2019, Ashford Inc. signed a Combination Agreement, dated May 31, 2019, between the Bennetts, Remington, Remington Holdings GP, LLC, MJB Investments, LP, the Company, James L. Cowen, Jeremy J. Welter, Ashford Nevada Holding Corp. and Ashford Merger Sub Inc. (which was subsequently amended on July 17, 2019) (the “Combination Agreement”) to acquire the Hotel Management business of Remington, a privately held company. The transaction, which is expected to close sometime in the fourth quarter of 2019, is subject to approval by Ashford Inc.’s stockholders, the receipt of an acceptable Private Letter Ruling (“PLR”) from the Internal Revenue Service and customary closing conditions. Under the terms of the agreement, Ashford Inc. will acquire Remington’s Hotel Management business for a purchase price of $275 million, payable by the issuance of $275 million of a new Series D Convertible Preferred Stock. In the previous transaction for Remington’s Project Management business, the sellers received $203 million of Series B Convertible Preferred Stock. For this transaction involving Remington’s Hotel Management business, that $203 million of Series B Convertible Preferred Stock will be exchanged for $203 million of Series D Convertible Preferred Stock (such that, after the transactions, $478 million of Series D Convertible Preferred Stock, and no Series B Convertible Preferred Stock, will be outstanding). The new Series D Convertible Preferred Stock will be convertible into shares of common stock at a price of $117.50 per share (a 164% premium to the closing price of Ashford’s common stock on the agreement date of May 31, 2019). Dividends on the Series D Convertible Preferred Stock will be payable at an annual rate of 6.59% in the first year, 6.99% in the second year, and 7.28% in the third year and each year thereafter. Voting rights of the Series D Convertible Preferred Stock will be on an as-converted basis, and the holders of the Series D Convertible Preferred Stock will have a voting limit of 40% of the total voting power of Ashford Inc. until August 8, 2023. The holders of the Series D Convertible Preferred Stock have certain conversion rights upon certain events constituting a change of control of the Company. Remington is currently owned by Monty J. Bennett, Ashford Inc.’s Chairman and Chief Executive Officer, and his father, Archie Bennett, Jr., the Chairman Emeritus of Ashford Trust. Ashford Inc.’s Board of Directors formed a special committee of independent and disinterested directors to analyze, negotiate, and recommend the transaction to Ashford Inc.’s Independent Directors. Ashford Inc.’s Independent Directors have unanimously recommended approval of the acquisition by Ashford Inc.’s stockholders.
The accompanying condensed consolidated financial statements reflect the operations of our advisory and asset management business, hospitality products and services business, and entities that we consolidate. In this report, the terms the “Company,” “we,” “us” or “our” refers to Ashford Inc. and all entities included in its condensed consolidated financial statements.
2. Significant Accounting Policies
Basis of Presentation and Principles of Consolidation—The accompanying historical unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed consolidated financial statements include the accounts of Ashford Inc., its majority-owned subsidiaries and entities which it controls. All significant intercompany accounts and transactions between these entities have been eliminated in these historical condensed consolidated financial statements. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the condensed consolidated financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in our 2018 Annual Report on Form 10-K filed with the SEC on March 8, 2019.
A variable interest entity (“VIE”) must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. We determine whether we are the primary

11

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


beneficiary of a VIE upon our initial involvement with the VIE and we reassess whether we are the primary beneficiary of a VIE on an ongoing basis. Our determination of whether we are the primary beneficiary of a VIE is based upon the facts and circumstances for each VIE and requires significant judgment.
Noncontrolling Interests—The following tables present information about noncontrolling interests in our consolidated subsidiaries, including those related to consolidated VIEs, as of June 30, 2019 and December 31, 2018 (in thousands):

 
June 30, 2019
 
Ashford
Holdings
 
JSAV (3)
 
OpenKey(4)
 
Pure
Wellness
(5)
 
RED (6)
Ashford Inc. ownership interest
99.83
%
 
88.20
%
 
46.59
%
 
70.00
%
 
80.00
%
Redeemable noncontrolling interests(1) (2)
0.17
%
 
11.80
%
 
28.15
%
 
%
 
%
Noncontrolling interests in consolidated entities
%
 
%
 
25.26
%
 
30.00
%
 
20.00
%
 
100.00
%
 
100.00
%
 
100.00
%
 
100.00
%
 
100.00
%
 
 
 
 
 
 
 
 
 
 
Carrying value of redeemable noncontrolling interests
$
131

 
$
1,980

 
$
1,504

 
n/a

 
n/a

Redemption value adjustment, year-to-date
(73
)
 

 
60

 
n/a

 
n/a

Redemption value adjustment, cumulative
105

 

 
2,093

 
n/a

 
n/a

Carrying value of noncontrolling interests

 

 
288

 
130

 
(8
)
Assets, available only to settle subsidiary's obligations (7)
n/a

 
59,802

 
1,505

 
1,913

 
8,796

Liabilities (8)
n/a

 
43,078

 
471

 
1,846

 
4,225

Notes payable (8)
n/a

 
18,903

 

 

 
3,300

Revolving credit facility (8)
n/a

 
2,899

 

 

 

 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
Ashford
Holdings
 
JSAV (3)
 
OpenKey(4)
 
Pure
Wellness
(5)
 
RED (6)
Ashford Inc. ownership interest
99.83
%
 
85.00
%
 
45.61
%
 
70.00
%
 
80.00
%
Redeemable noncontrolling interests(1) (2)
0.17
%
 
15.00
%
 
29.65
%
 
%
 
%
Noncontrolling interests in consolidated entities
%
 
%
 
24.74
%
 
30.00
%
 
20.00
%
 
100.00
%
 
100.00
%
 
100.00
%
 
100.00
%
 
100.00
%
 
 
 
 
 
 
 
 
 
 
Carrying value of redeemable noncontrolling interests
$
215

 
$
1,858

 
$
1,458

 
n/a

 
n/a

Redemption value adjustment, year-to-date
(180
)
 

 
12

 
n/a

 
n/a

Redemption value adjustment, cumulative
178

 

 
2,033

 
n/a

 
n/a

Carrying value of noncontrolling interests

 

 
308

 
218

 
(68
)
Assets, available only to settle subsidiary's obligations (7)
n/a

 
37,141

 
1,410

 
2,267

 
6,807

Liabilities (8)
n/a

 
24,836

 
421

 
1,977

 
2,839

Notes payable (8)
n/a

 
13,614

 

 

 
2,480

Revolving credit facility (8)
n/a

 
1,733

 

 
60

 
118

________
(1) 
Redeemable noncontrolling interests are included in the “mezzanine” section of our condensed consolidated balance sheets as they may be redeemed by the holder for cash or registered shares in certain circumstances outside of the Company’s control. The carrying value of the noncontrolling interests is based on the greater of the accumulated historical cost or the redemption value, which is generally fair value.

12

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


(2) 
Redeemable noncontrolling interests in Ashford Hospitality Holdings LLC (“Ashford Holdings”) represent the members’ proportionate share of equity in earnings/losses of Ashford Holdings. Net income/loss attributable to the common unit holders is allocated based on the weighted average ownership percentage of the members’ interest.
(3) 
Represents ownership interests in JSAV, which we consolidate under the voting interest model. JSAV provides audio visual products and services in the hospitality industry. See also notes 1, 11 and 12.
(4) 
Represents ownership interests in OpenKey, a VIE for which we are considered the primary beneficiary and therefore we consolidate it. OpenKey is a hospitality focused mobile key platform that provides a universal smartphone app for keyless entry into hotel guest rooms. See also notes 1, 11 and 12.
(5) 
Represents ownership interests in Pure Wellness, a VIE for which we are considered the primary beneficiary and therefore we consolidate it. Pure Wellness provides hypoallergenic premium rooms in the hospitality industry. See also notes 1 and 11.
(6) 
Represents ownership interests in RED, a VIE for which we are considered the primary beneficiary and therefore we consolidated it. We are provided a preferred return on our investment in RED which is accounted for in our income allocation based on the applicable partnership agreement. RED is a provider of watersports activities and other travel and transportation services. See also notes 1, 11 and 18.
(7) 
Total assets consist primarily of cash and cash equivalents, FF&E and other assets that can only be used to settle the subsidiaries’ obligations.
(8) 
Liabilities consist primarily of accounts payable, accrued expenses and notes payable for which creditors do not have recourse to Ashford Inc. except in the case of the term loans and line of credit held by RED, for which the creditor has recourse to Ashford Inc.
Investments in Unconsolidated Entities—We hold “investments in unconsolidated entities” in our condensed consolidated balance sheets, which are considered to be variable interests and voting interests in the underlying entities. Certain of our investments in variable interests are not consolidated because we have determined that we are not the primary beneficiary. Certain other investments are not consolidated as the underlying entity does not meet the definition of a VIE and we do not control more than 50% of the voting interests. We review our “investments in unconsolidated entities” for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of our investment. Any impairment is recorded in “equity in earnings (loss) of unconsolidated entities.” No such impairment was recorded during the three and six months ended June 30, 2019 and 2018.
We held an investment in an unconsolidated variable interest entity with a carrying value of $500,000 at June 30, 2019 and December 31, 2018. We account for the investment at estimated fair value based on recent observable transactions as we do not exercise significant influence over the entity. No equity in earnings (loss) of unconsolidated entities due to a change in fair value of the investment was recognized during the three and six months ended June 30, 2019 and 2018.
Effective January 1, 2019, we acquired a 30% noncontrolling ownership interest in Real Estate Advisory Holdings LLC (“REA Holdings”), a real estate advisory firm that provides financing, advisory and property sales services primarily to clients in the hospitality and leisure industry, for a purchase price of approximately $3.0 million which was paid in the form of $2.1 million cash and the issuance of 16,529 shares of our common stock (approximately $890,000) to the seller pursuant to the exemption from the registration requirements under the Securities Act, provided under Section 4(a)(2) thereunder. We have an option to acquire an additional 50% of the ownership interests in REA Holdings for $12.5 million beginning on January 1, 2022. Our investment in REA Holdings is accounted for under the equity method as we have significant influence over the voting interest entity.

13

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


The following table summarizes our carrying value and ownership interest in REA Holdings (in thousands):
 
June 30, 2019
Carrying value of the investment in REA Holdings
$
2,490

Ownership interest in REA Holdings
30
%
The following table summarizes our equity in earnings (loss) in REA Holdings (in thousands):
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Equity in earnings (loss) in unconsolidated entities
$
(298
)
 
$
(573
)
AcquisitionsWe account for acquisitions and investments in businesses as business combinations if the target meets the definition of a business and (a) the target is a VIE and we are the target's primary beneficiary, and therefore we must consolidate its financial statements, or (b) we acquire more than 50% of the voting interest of the target and it was not previously consolidated. We record business combinations using the acquisition method of accounting, which requires all of the assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill. The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price consideration between assets that are depreciated and amortized from goodwill. The fair value assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Significant assumptions and estimates include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset, if applicable. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the condensed consolidated financial statements may be exposed to potential impairment of the intangible assets and goodwill.
Certain of our business combinations include contingent consideration arrangements that require additional consideration to be paid based on the achievement of established objectives, most commonly related to post-combination period performance targets and stock consideration collars. We assess contingent consideration to determine if it is part of the business combination or if it should be accounted for separately from the business combination in the post-combination period. Contingent consideration is recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved, with changes in fair value recognized in earnings. See note 4 for additional information regarding contingent consideration arising from business acquisitions. 
If our investment involves the acquisition of an asset or group of assets that does not meet the definition of a business, the transaction is accounted for as an asset acquisition. An asset acquisition is recorded at cost, which includes capitalizing transaction costs, and does not result in the recognition of goodwill.
Use of Estimates—The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States 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 condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Furniture, Fixtures and Equipment, net—We record FF&E at cost. We also capitalize certain costs incurred related to the development of internal use software. We capitalize costs incurred during the application development stage related to the development of internal use software. We expense costs incurred related to the planning and post-implementation phases of development as incurred. Assets are depreciated using the straight-line method over the estimated useful lives of the assets. As of June 30, 2019 and December 31, 2018, FF&E, net of accumulated depreciation, included ERFP assets of $29.0 million and $16.1 million, audio visual equipment at JSAV of $16.7 million and $13.4 million and marine vessels at RED of $5.7 million and $5.7 million, respectively.
Impairment of Furniture, Fixtures and Equipment—FF&E are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of the asset is measured by comparison of the carrying amount of the asset to the estimated future undiscounted cash flows, which take into account current market conditions and our intent with respect to holding or disposing of the asset. If our analysis indicates that the carrying value of the

14

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


asset is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the asset net book value exceeds its estimated fair value, or fair value, less cost to sell. In evaluating impairment of assets, we make many assumptions and estimates, including projected cash flows, expected holding period, and expected useful life. Fair value is determined through various valuation techniques, including internally developed discounted cash flow models, comparable market transactions and third-party appraisals, where considered necessary. Assets not yet placed into service are also reviewed for impairment whenever events or changes in circumstances indicate that all or a portion of the assets will not be placed into service. No impairment charges were recorded for the three and six months ended June 30, 2019. We recorded impairment charges of $0 and $1.9 million for the three and six months ended June 30, 2018, respectively. The impairment in 2018 was recognized upon determination that a portion of capitalized software that was not eligible for reimbursement would not be placed into service.
Goodwill and Indefinite-Lived Intangible Assets—Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination as of the acquisition date. Indefinite-lived intangible assets primarily include trademark rights resulting from our acquisition of JSAV. We assess goodwill and indefinite-lived intangible assets, neither of which is amortized, for impairment annually as of October 1, or more frequently, if events and circumstances indicate impairment may have occurred. In the evaluation of goodwill for impairment, we typically perform a qualitative assessment to determine whether the fair value of the goodwill is more likely than not impaired. In considering the qualitative approach, we evaluated factors including, but not limited to, the operational stability and the overall financial performance of the reporting units. We may choose to bypass the qualitative assessment and perform a quantitative assessment and compare the fair value of the reporting unit to the carrying value and, if applicable, record an impairment charge based on the excess of the reporting unit's carrying amount over its fair value. We determine the fair value of a reporting unit based on either a market valuation approach or an analysis of discounted projected future operating cash flows using a discount rate that is commensurate with the risk inherent in our current business model. We base our measurement of fair value of trademarks using the relief-from-royalty method. This method assumes that the trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. Based on the results of our annual impairment assessments, no impairment of goodwill or trademark rights was indicated. In the second quarter of 2019, the Company identified a potential indicator of goodwill impairment in our reporting units due to a decline in the price of our common stock. We performed an interim qualitative assessment to determine whether it was more likely than not that the carrying value of goodwill in our reporting units was impaired as of June 30, 2019. Based on our assessment, goodwill was not impaired as of June 30, 2019.
Definite-Lived Intangible Assets—Definite-lived intangible assets primarily include customer relationships and management contracts resulting from our acquisitions of Premier, JSAV, BAV and Pure Wellness. Definite-lived intangible assets are amortized over their respective estimated useful lives in a manner that approximates the pattern of the assets’ economic benefit to the Company, or using the straight-line method if not materially different. We review the carrying amount of the assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the fair value. No indicators of impairment were identified as of June 30, 2019.
Other Liabilities—As of June 30, 2019 and December 31, 2018, other current liabilities included reserves in the amount of $13.4 million and $7.8 million, respectively, related primarily to Ashford Trust and Braemar properties’ casualty insurance claims and related fees. The liability for casualty insurance claims and related fees is established based upon an analysis of historical data and actuarial estimates. We record the related funds received from Ashford Trust and Braemar in “restricted cash” in our condensed consolidated balance sheets. See note 15. Other non-current liabilities were $2.7 million and $0 as of June 30, 2019 and December 31, 2018, respectively. As of June 30, 2019, other non-current liabilities included our remaining consideration of $500,000 and the fair value of contingent consideration of $2.2 million due to the sellers of BAV resulting from JSAV’s acquisition of BAV in March of 2019. See note 4.
Revenue Recognition—See note 3.
Salaries and Benefits—Salaries and benefits are expensed as incurred. Salaries and benefits includes expense for equity grants of Ashford Trust and Braemar common stock and performance-based Long-Term Incentive Plan (“LTIP”) units awarded to our officers and employees in connection with providing advisory services equal to the grant date fair value of the award in proportion to the requisite service period satisfied during the period. There is an offsetting amount, included in “advisory services” revenue. Salaries and benefits also includes changes in fair value in the deferred compensation plan liability. See note 14.
Depreciation and Amortization—Our FF&E is depreciated on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life of the related assets. Furniture and equipment, excluding our RED vessels, are depreciated using the straight-line method over lives ranging from 3 to 7.5 years and computer software placed into service is amortized on a straight-line basis over estimated useful lives ranging from 3 to 5

15

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


years. Our RED vessels are depreciated using the straight-line method over a useful life of 20 years. While we believe our estimates are reasonable, a change in estimated useful lives could affect depreciation expense and net income/loss as well as resulting gains or losses on potential sales. See also the “Definite-Lived Intangible Assets” above.
Equity-Based Compensation—Our equity incentive plan provides for the grant of restricted or unrestricted shares of our common stock, share appreciation rights, performance shares, performance units and other equity-based awards or any combination of the foregoing. Equity-based compensation included in “salaries and benefits” is accounted for at fair value based on the market price of the shares/options on the date of grant in accordance with applicable authoritative accounting guidance. The fair value is charged to compensation expense on a straight-line basis over the vesting period of the shares/options. Grants of restricted stock to independent directors are recorded at fair value based on the market price of our shares at grant date, and this amount is fully expensed in “general and administrative” expense as the grants of stock are fully vested on the date of grant. Our officers and employees can be granted common stock and LTIP units from Ashford Trust and Braemar in connection with providing advisory services that result in expense, included in “salaries and benefits,” equal to the grant date fair value of the award in proportion to the requisite service period satisfied during the period, as well as offsetting revenue in an equal amount included in “advisory services” revenue.
Prior to the adoption of ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”) in the third quarter of 2018, equity-based awards granted to non-employees were accounted for at fair value based on the market price of the awards at period end, which resulted in recording expense equal to the fair value of the award in proportion to the requisite service period satisfied during the period. After the adoption of ASU 2018-07 in the third quarter of 2018, equity-based awards granted to non-employees are measured at the grant date and expensed ratably over the vesting period based on the original measurement date as the grant date. This results in the recording of expense equal to the ratable amount of the grant date fair value based on the requisite service period satisfied during the period.
Other Comprehensive Income (Loss)—Comprehensive income consists of net income (loss) and foreign currency translation adjustments. The foreign currency translation adjustment represents the unrealized impact of translating the financial statements of the JSAV operations in Mexico and the Dominican Republic from their respective functional currencies to U.S. dollars. This amount is not included in net income and would only be realized upon the sale or upon complete or substantially complete liquidation of the foreign businesses. The accumulated other comprehensive income (loss) is presented on the condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018.
Due to Affiliates—Due to affiliates represents current payables resulting primarily from general and administrative expense, and FF&E reimbursements. Due to affiliates is generally settled within a period not exceeding one year.
Leases—We determine if an arrangement is a lease at the inception of the contract. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Short-term leases are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. See note 7.
Income Taxes—We are a taxable corporation for federal and state income tax purposes. Income tax expense includes U.S. federal and state income taxes and, beginning November 1, 2017, Mexico and Dominican Republic income taxes. In accordance with authoritative accounting guidance, we account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.
The “Income Taxes” topic of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance requires us to determine whether tax positions we have taken or expect to take in a tax return are more likely than not to be sustained upon examination by the appropriate taxing authority based on the technical merits of the positions. Tax positions that do not meet the more likely than not threshold would be recorded as additional tax expense in the current period. We analyze all open tax years, as defined by the statute of limitations for each jurisdiction, which includes the federal jurisdiction and various states. We classify interest and penalties related to underpayment of income taxes as income tax expense. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and cities, and, beginning November 1, 2017, in Mexico and the Dominican Republic. Tax years 2014 through 2018 remain subject to potential examination by certain federal and state taxing authorities.

16

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


Recently Adopted Accounting Standards—In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”) and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease and lease term and purchase option. The amendments in ASU 2018-11 provide an optional transition method for adoption of the new standard, which will allow entities to continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented in the year of adoption.
Effective January 1, 2019, we have adopted the new standard using the modified retrospective approach and implemented internal controls to enable the preparation of financial information upon adoption. We elected to adopt both the transition relief provided in ASU 2018-11 and the package of practical expedients which allowed us, among other things, to retain historical lease classifications and accounting for any leases that existed prior to adoption of the standard. Additionally, we elected the practical expedients allowing us not to separate lease and non-lease components and not record leases with an initial term of twelve months or less (“short-term leases”) on the balance sheet across all existing asset classes.
Adoption of the new standard resulted in the recording of operating lease assets and operating lease liabilities of $26.2 million as of January 1, 2019, which primarily relates to certain office space, warehouse facilities, vehicles and equipment. The standard did not materially impact our condensed consolidated statements of operations or cash flows. Adopting the new standard did not have a material impact on the accounting for leases under which we are the lessor, except as it pertains to our rent-free leases of FF&E with Ashford Trust and Braemar. The new standard requires leases with related parties entered into on or after January 1, 2019, to be accounted for in accordance with the legally enforceable terms and conditions of the lease (i.e. zero rent payments). Therefore, we will no longer allocate a portion of base advisory fee revenue to lease revenue in an amount equal to the estimated fair value of the lease payments that would have been made because ERFP leases are rent-free. For historical leases related to our key money and ERFP programs that were in place upon adoption of the new standard on January 1, 2019, we will continue allocating a portion of base advisory fee revenue to lease revenue consistent with our historical accounting for the remainder of the applicable lease terms. See note 7.
Recently Issued Accounting Standards—In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 sets forth an “expected credit loss” impairment model to replace the current “incurred loss” method of recognizing credit losses. The standard requires measurement and recognition of expected credit losses for most financial assets held. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for periods beginning after December 15, 2018. We are currently evaluating the impact that ASU 2016-13 will have on the condensed consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, ASU 2017-04 clarifies that an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are evaluating the impact that ASU 2017-04 will have on our condensed consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies certain disclosure requirements related to fair value measurements including requiring disclosures on changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value measurements and a requirement to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that ASU 2018-13 will have on our condensed consolidated financial statements.

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ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that ASU 2018-15 will have on our condensed consolidated financial statements.
3. Revenues
Revenue Recognition—Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, we satisfy a performance obligation
In determining the transaction price, we include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved.

The following provides detailed information on the recognition of our revenues from contracts with customers:
Advisory Services Revenue
Advisory services revenue is reported within our REIT Advisory segment and primarily consists of advisory fees and expense reimbursements that are recognized when services have been rendered. Advisory fees consist of base fees and incentive fees. For Ashford Trust, prior to June 26, 2018, the base fee was paid quarterly and ranged from 0.50% to 0.70% per annum of the total market capitalization ranging from less than $6.0 billion to greater than $10.0 billion plus the Key Money Asset Management Fee, as defined in the amended and restated advisory agreement, subject to certain minimums. Upon effectiveness of the Enhanced Return Funding Program Agreement and Amendment No. 1 to the Amended and Restated Advisory Agreement on June 29, 2018, the base fee is paid monthly and ranges from 0.50% to 0.70% per annum of the total market capitalization ranging from less than $6.0 billion to greater than $10.0 billion plus the Net Asset Fee Adjustment, as defined in the amended and restated advisory agreement, as amended, subject to certain minimums. For Braemar, prior to January 15, 2019, the base fee was paid monthly and was fixed at 0.70% of Braemar’s total market capitalization plus the Key Money Asset Management Fee, as defined in the advisory agreement, subject to certain minimums. Upon effectiveness of the Enhanced Return Funding Program Agreement and Amendment No. 1 to the Fifth Amended and Restated Advisory Agreement on January 15, 2019, the base fee is paid monthly and is fixed at 0.70% of Braemar’s total market capitalization plus the Net Asset Fee Adjustment, as defined in the advisory agreement, as amended, subject to certain minimums. Reimbursements for overhead, internal audit, risk management advisory services and asset management services, including compensation, benefits and travel expense reimbursements, are recognized when services have been rendered. We record advisory revenue for equity grants of Ashford Trust and Braemar common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the grant date fair value of the award in proportion to the requisite service period satisfied during the period, as well as an offsetting expense in an equal amount included in “salaries and benefits.”
Incentive advisory fees are measured annually in each year that Ashford Trust’s and/or Braemar’s annual total stockholder return exceeds the average annual total stockholder return for each company’s respective peer group, subject to the Fixed Charge Coverage Ratio Condition (the “FCCR Condition”), as defined in the respective advisory agreements. Incentive advisory fees are paid over a three-year period and each payment is subject to the FCCR Condition, which relates to the ratio of adjusted EBITDA to fixed charges for Ashford Trust or Braemar, as applicable. Incentive advisory fees are a form of variable consideration and therefore must be (i) deferred until such fees are probable of not being subject to significant reversal, and (ii) tied to a performance obligation in the contract with the customer so that revenue recognition depicts the transfer of the related advisory services to the customer. Accordingly, the Company does not record incentive advisory fee revenue in interim periods prior to the fourth quarter

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ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


of the year in which the incentive fee is measured. The first year installment of incentive advisory fees will generally be recognized only upon measurement in the fourth quarter of the first year of the three year period. The second and third year installments of incentive advisory fees are recognized as revenue on a pro-rata basis each quarter as such amounts are not subject to significant reversal.
Audio Visual Revenue
Audio visual revenue primarily consists of revenue generated within our JSAV segment by providing event technology services such as audio visual services, audio visual equipment rental, staging and meeting services and event-related communication systems as well as related technical support, to our customers in various venues including hotels and convention centers. Revenue is recognized in the period in which services are provided pursuant to the terms of the contractual arrangements with our customers. We also evaluate whether it is appropriate to present (i) the gross amount that our customers pay for our services as revenue, and the related commissions paid to the venue as cost of revenue, or (ii) the net amount (gross revenue less the related commissions paid to the venue) as revenue. We are responsible for the delivery of the services, including providing the necessary labor and equipment to perform the services. We are generally subject to inventory risk, have latitude in establishing prices and selecting suppliers and, while in many cases the venue bills the end customer on our behalf, we bear the risk of collection from the customer. The venues’ commissions are not dependent on collections. As a result, our revenue is primarily reported on a gross basis. Cost of revenues for audio visual principally includes commissions paid to venues, direct labor costs, the cost of equipment sub-rentals, depreciation of equipment, amortization of signing bonuses, as well as other costs such as supplies, freight, travel and other overhead from our venue and customer facing operations and any losses on equipment disposal.
Project Management Revenue
Project management revenue primarily consists of revenue generated within our Premier segment by providing development and construction, capital improvements, refurbishment, project management, and other services such as purchasing, interior design, architectural services, freight management, and construction management services at properties. Premier receives fees for these services and recognizes revenue over time as services are provided to the customer. Project management revenue also includes revenue from reimbursable costs for accounting, overhead and project manager services provided to projects owned by affiliates of Ashford Trust, Braemar and other owners.
Other Revenue
Other revenue includes revenues provided by certain of our hospitality products and service businesses, including RED. RED’s revenue is primarily generated through provision of ferry services. The revenue is recognized as services are provided based on contractual customer rates. Debt placement fees include revenues earned from providing debt placement services by Lismore Capital (“Lismore”), our wholly-owned subsidiary. These fees are recognized based on a stated percentage of the loan amount when services have been rendered and the subject loan has closed. In connection with our ERFP Agreements and legacy key money transaction with Ashford Trust and Braemar, we lease FF&E to Ashford Trust and Braemar rent-free. Consistent with our accounting treatment prior to adopting ASC 842, a portion of the base advisory fee for leases, which commenced prior to our adoption, is allocated to lease revenue each period equal to the estimated fair value of the lease payments that would have been made.
Certain of our consolidated entities enter into contracts with customers that contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our consolidated entities’ overall pricing objectives taking into consideration market conditions and other factors, including the customer and the nature and value of the performance obligations within the applicable contracts.

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ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


Deferred Revenue and Contract Balances
Deferred revenue primarily consists of customer billings in advance of revenues being recognized from our advisory agreements and other hospitality products and services contracts. Generally, deferred revenue that could result in a cash payment within the next twelve-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent. The increase in the deferred revenue balance is primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by revenues recognized that were included in the deferred revenue balance at the beginning of the period. The following tables summarize our consolidated deferred revenue activity (in thousands):
 
Deferred Revenue
 
2019
 
2018
Balance as of March 31
$
13,171

 
$
13,194

Increases to deferred revenue
703

 
1,553

Recognition of revenue (1)
(2,648
)
 
(1,636
)
Balance as of June 30
$
11,226

 
$
13,111

________
(1) 
Deferred revenue recognized in the three months ended June 30, 2019, includes (a) $656,000 of advisory revenue primarily related to our advisory agreements with Ashford Trust and Braemar, (b) $1.4 million of audio visual revenue and (c) $592,000 of “other services” revenue earned by our hospitality products and services companies. Deferred revenue recognized in the three months ended June 30, 2018, includes (a) $542,000 of advisory revenue primarily related to our advisory agreements with Ashford Trust and Braemar, (b) $833,000 of audio visual revenue and (c) $261,000 of “other services” revenue earned by our hospitality products and services companies.
 
Deferred Revenue
 
2019
 
2018
Balance as of January 1
$
13,544

 
$
13,899

Increases to deferred revenue
2,749

 
3,588

Recognition of revenue (1)
(5,067
)
 
(4,376
)
Balance as of June 30
$
11,226

 
$
13,111

________
(1) 
Deferred revenue recognized in the six months ended June 30, 2019, includes (a) $1.4 million of advisory revenue primarily related to our advisory agreements with Ashford Trust and Braemar, (b) $2.4 million of audio visual revenue and (c) $1.2 million of “other services” revenue earned by our hospitality products and services companies. Deferred revenue recognized in the six months ended June 30, 2018, includes (a) $890,000 of advisory revenue primarily related to our advisory agreements with Ashford Trust and Braemar, (b) $2.7 million of audio visual revenue and (c) $772,000 of “other services” revenue earned by our hospitality products and services companies.
We do not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was primarily related to (i) reimbursed software costs that will be recognized evenly over the period the software is used to provide advisory services to Ashford Trust and Braemar, and (ii) a $5.0 million cash payment received in June 2017 from Braemar in connection with our Fourth Amended and Restated Braemar Advisory Agreement, which is recognized evenly over the 10-year initial contract period that we are providing Braemar advisory services. Incentive advisory fees that are contingent upon future market performance are excluded as the fees are considered variable and not included in the transaction price at June 30, 2019.

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ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


The timing of revenue recognition may differ from the timing of payment by customers. We record a receivable when revenue is recognized prior to payment and we have an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, we record deferred revenue until the performance obligations are satisfied. We had receivables related to revenues from contracts with customers of $9.2 million and $4.9 million included in “accounts receivable, net” primarily related to our hospitality products and services segment, $4.9 million and $5.3 million in “due from Ashford Trust OP”, and $1.8 million and $2.0 million included in “due from Braemar OP” related to REIT advisory services at June 30, 2019 and December 31, 2018, respectively. We had no significant impairments related to these receivables during the three and six months ended June 30, 2019 and 2018.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


Disaggregated Revenue
Our revenues were comprised of the following for the three and six months ended June 30, 2019 and 2018 (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Advisory services revenue:
 
 
 
 
 
 
 
Base advisory fee 
$
11,190

 
$
11,174

 
$
21,812

 
$
21,885

Incentive advisory fee
169

 
452

 
339

 
904

Reimbursable expenses
3,220

 
2,496

 
5,729

 
4,445

Equity-based compensation
6,511

 
10,318

 
12,269

 
19,610

Other advisory revenue
130

 
130

 
258

 
258

Total advisory services revenue (2)
21,220

 
24,570

 
40,407

 
47,102

 
 
 
 
 
 
 
 
Audio visual revenue
30,127

 
23,376

 
61,102

 
46,686

 
 
 
 
 
 
 
 
Project management revenue
7,700

 

 
15,490