Company Quick10K Filing
Four Corners Property Trust
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 69 $1,970
10-Q 2019-10-31 Quarter: 2019-09-30
10-Q 2019-07-31 Quarter: 2019-06-30
10-Q 2019-04-25 Quarter: 2019-03-31
10-K 2019-02-20 Annual: 2018-12-31
10-Q 2018-10-30 Quarter: 2018-09-30
10-Q 2018-07-26 Quarter: 2018-06-30
10-Q 2018-04-26 Quarter: 2018-03-31
10-K 2018-02-27 Annual: 2017-12-31
10-Q 2017-11-03 Quarter: 2017-09-30
10-Q 2017-08-08 Quarter: 2017-06-30
10-Q 2017-05-04 Quarter: 2017-03-31
10-K 2017-02-27 Annual: 2016-12-31
10-Q 2016-11-04 Quarter: 2016-09-30
10-Q 2016-08-04 Quarter: 2016-06-30
10-Q 2016-05-11 Quarter: 2016-03-31
10-K 2016-03-22 Annual: 2015-12-31
10-Q 2015-12-04 Quarter: 2015-09-30
8-K 2020-02-12 Earnings, Exhibits
8-K 2020-01-29 Officers, Regulation FD, Exhibits
8-K 2020-01-21 Regulation FD, Exhibits
8-K 2019-11-12 Other Events, Exhibits
8-K 2019-10-30 Regulation FD, Exhibits
8-K 2019-10-29 Earnings, Exhibits
8-K 2019-07-30 Earnings, Exhibits
8-K 2019-06-14 Shareholder Vote
8-K 2019-05-31 Regulation FD, Exhibits
8-K 2019-04-23 Earnings, Exhibits
8-K 2019-04-01 Regulation FD
8-K 2019-03-22 Other Events, Exhibits
8-K 2019-02-13 Earnings, Exhibits
8-K 2018-12-13 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-11-28 Officers, Exhibits
8-K 2018-10-30 Other Events, Exhibits
8-K 2018-10-29 Earnings, Exhibits
8-K 2018-10-24 Exhibits
8-K 2018-10-01 M&A, Regulation FD, Exhibits
8-K 2018-09-24 Regulation FD, Exhibits
8-K 2018-08-08 M&A, Regulation FD, Exhibits
8-K 2018-08-02 Other Events, Exhibits
8-K 2018-08-01 Enter Agreement, Regulation FD, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-06-15 Shareholder Vote
8-K 2018-06-01 Regulation FD, Exhibits
8-K 2018-04-30 Other Events, Exhibits
8-K 2018-04-25 Earnings, Exhibits
8-K 2018-03-29 Regulation FD, Exhibits
8-K 2018-02-20 Earnings, Exhibits
8-K 2018-01-29 Officers
FCPT 2019-09-30
Part I. Financial Information
Item 1. Financial Statements
Note 1 - Organization
Note 2 - Summary of Significant Accounting Policies
Note 3 - Concentration of Credit Risk
Note 4 - Real Estate Invesments, Net and Intangible Assets and Liabilities, Net
Note 5 - Leases
Note 6 - Supplemental Detail for Certain Components of Consolidated Balance Sheets
Note 7 - Long-Term Debt, Net of Deferred Financing Costs
Note 8 - Derivative Financial Instruments
Note 9 - Income Taxes
Note 10 - Equity
Note 11 - Stock-Based Compensation
Note 12 - Fair Value Measurements
Note 13 - Commitments and Contingencies
Note 14 - Segments
Note 15 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures 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. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.A ex31a-fcptq3201910.htm
EX-31.B ex31b-fcptq3201910.htm
EX-32.A ex32a-fcptq3201910.htm
EX-32.B ex32b-fcptq3201910.htm

Four Corners Property Trust Earnings 2019-09-30

FCPT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
ROIC 2,132 2,969 1,694 298 0 50 212 2,122 0% 10.0 2%
RWT 2,125 13,852 12,288 0 0 126 504 4,446 8.8 1%
IVR 2,114 22,038 19,368 0 0 -57 378 20,684 54.8 -0%
DRH 2,104 3,295 1,470 905 0 94 231 3,091 0% 13.4 3%
ALX 1,981 1,276 1,008 170 0 54 108 1,691 0% 15.7 4%
FCPT 1,970 1,345 662 153 0 74 123 1,931 0% 15.7 6%
CLNC 1,968 9,040 6,377 582 130 -272 -59 4,889 22% -82.6 -3%
SNH 1,883 7,099 4,062 1,092 0 -76 398 1,822 0% 4.6 -1%
UNIT 1,871 4,790 6,192 1,049 0 61 854 6,807 0% 8.0 1%
LTC 1,854 1,499 712 167 0 107 175 2,525 0% 14.4 7%

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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 1-37538
Four Corners Property Trust, Inc.
(Exact name of registrant as specified in its charter)
Maryland
47-4456296
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
591 Redwood Highway,
 Suite 1150,
Mill Valley,
CA
94941
(Address of principal executive offices)
(415) 965-8030
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: 
Title of each class
Trading Symbol
Name of Exchange on Which Registered
Common Stock, $0.0001 par value per share
FCPT
New York Stock Exchange
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. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
Non-accelerated filer
Smaller reporting company
Emerging growth company
 
 
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Number of shares of common stock outstanding as of October 30, 2019: 68,917,182



FOUR CORNERS PROPERTY TRUST, INC.
FORM 10 - Q
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019
TABLE OF CONTENTS
 
 
Page
Part I
FINANCIAL INFORMATION
 
Item 1.
Financial Statements:
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
Part II
OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
 
 
 
 
 
 





PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOUR CORNERS PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

 
 
September 30, 2019
(Unaudited)
 
December 31, 2018
ASSETS
 
 
 
 
Real estate investments:
 
 
 
 
Land
 
$
608,601

 
$
569,057

Buildings, equipment and improvements
 
1,256,857

 
1,236,224

Total real estate investments
 
1,865,458

 
1,805,281

Less: Accumulated depreciation
 
(629,876
)
 
(614,584
)
Total real estate investments, net
 
1,235,582

 
1,190,697

Intangible lease assets, net
 
35,988

 
18,998

Total real estate investments and intangible lease assets, net
 
1,271,570

 
1,209,695

Cash and cash equivalents
 
29,789

 
92,041

Straight-line rent adjustment
 
37,151

 
30,141

Derivative assets
 
143

 
5,982

Other assets
 
9,127

 
5,239

Total Assets
 
$
1,347,780

 
$
1,343,098

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Long-term debt, net of deferred financing costs
 
$
617,428

 
$
615,892

Dividends payable
 
19,641

 
19,580

Rent received in advance
 
8,831

 
1,609

Derivative liabilities
 
7,955

 

Other liabilities
 
15,414

 
7,053

Total liabilities
 
669,269

 
644,134

 
 
 
 
 
Equity:
 
 
 
 
Preferred stock, par value $0.0001 per share; 25,000,000 authorized, zero shares issued and outstanding
 

 

Common stock, par value $0.0001 per share; 500,000,000 shares authorized, 68,417,182 and 68,204,045 shares issued and outstanding, respectively
 
7

 
7

Additional paid-in capital
 
639,790

 
639,116

Retained earnings
 
40,812

 
46,018

Accumulated other comprehensive (loss) income
 
(7,780
)
 
5,956

Noncontrolling interest
 
5,682

 
7,867

Total equity
 
678,511

 
698,964

Total Liabilities and Equity
 
$
1,347,780

 
$
1,343,098



The accompanying notes are an integral part of this financial statement.
1


FOUR CORNERS PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)


 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
 
Rental revenue
 
$
35,209

 
$
31,324

 
$
103,832

 
$
90,509

Restaurant revenue
 
4,974

 
4,798

 
15,520

 
15,091

Total revenues
 
40,183

 
36,122

 
119,352

 
105,600

Operating expenses:
 
 
 
 
 
 
 
 
General and administrative
 
3,389

 
3,116

 
10,766

 
9,809

Depreciation and amortization
 
6,653

 
5,743

 
19,532

 
16,312

Property expenses
 
346

 
109

 
1,071

 
289

Restaurant expenses
 
4,805

 
4,713

 
14,742

 
14,370

Total operating expenses
 
15,193

 
13,681

 
46,111

 
40,780

Interest expense
 
(6,665
)
 
(4,934
)
 
(19,969
)
 
(14,667
)
Other income
 
153

 
164

 
872

 
752

Realized gain on sale, net
 

 

 

 
10,879

Income tax expense
 
(69
)
 
(64
)
 
(198
)
 
(189
)
Net income
 
18,409

 
17,607

 
53,946

 
61,595

Net income attributable to noncontrolling interest
 
(78
)
 
(111
)
 
(244
)
 
(402
)
Net Income Available to Common Shareholders
 
$
18,331

 
$
17,496

 
$
53,702

 
$
61,193

 
 
 
 
 
 
 
 
 
Basic net income per share:
 
$
0.27

 
$
0.27

 
$
0.79

 
$
0.97

Diluted net income per share:
 
$
0.27

 
$
0.27

 
$
0.78

 
$
0.97

Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
68,315,915

 
65,347,842

 
68,274,167

 
62,804,123

Diluted
 
68,527,187

 
65,577,975

 
68,495,013

 
62,987,282

Dividends declared per common share
 
$
0.2875

 
$
0.2750

 
$
0.8625

 
$
0.8250










The accompanying notes are an integral part of this financial statement.
2


FOUR CORNERS PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except for share and per share data)
(Unaudited)

 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
Net income
 
$
18,409

 
$
17,607

 
$
53,946

 
$
61,595

Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
Effective portion of change in fair value of derivative instruments
 
(3,226
)
 
1,132

 
(12,189
)
 
9,234

Reclassification adjustment of derivative instruments included in net income
 
(420
)
 
(748
)
 
(1,610
)
 
(1,562
)
Other comprehensive (loss) income
 
(3,646
)
 
384

 
(13,799
)
 
7,672

Comprehensive income
 
14,763

 
17,991

 
40,147

 
69,267

Less: comprehensive income attributable to noncontrolling interest
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interest
 
78

 
111

 
244

 
402

Other comprehensive (loss) income attributable to noncontrolling interest
 
(15
)
 
3

 
(63
)
 
51

Comprehensive income attributable to noncontrolling interest
 
63

 
114

 
181

 
453

Comprehensive Income Attributable to Common Shareholders
 
$
14,700

 
$
17,877

 
$
39,966

 
$
68,814



The accompanying notes are an integral part of this financial statement.
3


FOUR CORNERS PROPERTY TRUST, INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)

For the Three Months Ended September 30, 2019
 
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interest
 
Total
 
 
Shares
 
Par Value
Balance at June 30, 2019
 
68,418,243

 
$
7

 
$
638,988

 
$
42,122

 
$
(4,149
)
 
$
5,703

 
$
682,671

Net income
 

 

 

 
18,331

 

 
78

 
18,409

Other comprehensive income
 

 

 

 

 
(3,631
)
 
(15
)
 
(3,646
)
Dividends and distributions to equity holders
 

 

 

 
(19,641
)
 

 
(84
)
 
(19,725
)
Stock-based compensation, net
 
(1,061
)
 

 
802

 

 

 

 
802

Balance at
September 30, 2019
 
68,417,182

 
$
7

 
$
639,790

 
$
40,812

 
$
(7,780
)
 
$
5,682

 
$
678,511



For the Nine Months Ended September 30, 2019
 
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interest
 
Total
 
 
Shares
 
Par Value
Balance at December 31, 2018
 
68,204,045

 
$
7

 
$
639,116

 
$
46,018

 
$
5,956

 
$
7,867

 
$
698,964

Net income
 

 

 

 
53,702

 

 
244

 
53,946

Other comprehensive income
 

 

 

 

 
(13,736
)
 
(63
)
 
(13,799
)
Redemption of OP units
 
5,966

 

 
(1,068
)
 

 

 
(2,099
)
 
(3,167
)
ATM proceeds, net of issuance costs
 
59,638

 

 
1,652

 

 

 

 
1,652

Dividends and distributions to equity holders
 

 

 

 
(58,908
)
 

 
(267
)
 
(59,175
)
Stock-based compensation, net
 
147,533

 

 
90

 

 

 

 
90

Balance at
September 30, 2019
 
68,417,182

 
$
7

 
$
639,790

 
$
40,812

 
$
(7,780
)
 
$
5,682

 
$
678,511




The accompanying notes are an integral part of this financial statement.
4


For the Three Months Ended September 30, 2018
 
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interest
 
Total
 
 
Shares
 
Par Value
Balance at June 30, 2018
 
62,930,370

 
$
6

 
$
510,235

 
$
45,418

 
$
12,185

 
$
7,896

 
$
575,740

Net income
 

 

 

 
17,496

 

 
111

 
17,607

Other comprehensive income
 

 

 

 

 
381

 
3

 
384

ATM proceeds, net of issuance costs
 
488,174

 
1

 
12,696

 

 

 

 
12,697

Equity offering, net of issuance costs
 
4,025,000

 

 
96,355

 

 

 

 
96,355

Dividends and distributions to equity holders
 

 

 

 
(18,521
)
 

 
(114
)
 
(18,635
)
Stock-based compensation, net
 
(1,852
)
 

 
930

 

 

 

 
930

Balance at
September 30, 2018
 
67,441,692

 
$
7

 
$
620,216

 
$
44,393

 
$
12,566

 
$
7,896

 
$
685,078


For the Nine Months Ended September 30, 2018
 
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interest
 
Total
 
 
Shares
 
Par Value
Balance at December 31, 2017
 
61,329,489

 
6

 
473,685

 
36,318

 
4,478

 
7,781

 
522,268

ASU 2017-12 cumulative effect adjustment
 

 

 

 
(467
)
 
467

 

 

Net income
 

 

 

 
61,193

 

 
402

 
61,595

Other comprehensive income
 

 

 

 

 
7,621

 
51

 
7,672

ATM proceeds, net of issuance costs
 
2,022,106

 

 
47,305

 

 

 

 
47,305

Equity offering, net of issuance costs
 
4,025,000

 
1

 
96,355

 

 

 

 
96,356

Dividends and distributions to equity holders
 

 

 

 
(52,651
)
 

 
(338
)
 
(52,989
)
Stock-based compensation, net
 
65,097

 

 
2,871

 

 

 

 
2,871

Balance at
September 30, 2018
 
67,441,692

 
$
7

 
$
620,216

 
$
44,393

 
$
12,566

 
$
7,896

 
$
685,078



The accompanying notes are an integral part of this financial statement.
5


FOUR CORNERS PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
Nine Months Ended September 30,
 
 
2019
 
2018
Cash flows - operating activities
 
 
 
 
Net income
 
$
53,946

 
$
61,595

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
19,532

 
16,312

Gain on disposal of land, building, and equipment
 

 
(10,879
)
Gain on exchange of non-financial assets
 

 
(228
)
Amortization of financing costs
 
1,539

 
1,368

Stock-based compensation expense
 
2,792

 
3,037

Changes in assets and liabilities:
 
 
 
 
Derivative assets and liabilities
 
(5
)
 
27

Straight-line rent adjustment
 
(7,008
)
 
(6,857
)
Rent received in advance
 
7,222

 
5

Other assets and liabilities
 
3,278

 
1,601

Net cash provided by operating activities
 
81,296

 
65,981

Cash flows - investing activities
 
 
 
 
Purchases of real estate investments
 
(81,136
)
 
(216,272
)
Proceeds from sale of real estate investments
 

 
15,714

Advance deposits on acquisition of operating real estate
 
(282
)
 
(86
)
Net cash used in investing activities
 
(81,418
)
 
(200,644
)
Cash flows - financing activities
 
 
 
 
Net proceeds from ATM equity issuance
 
1,652

 
47,305

Net proceeds from equity offering
 

 
96,356

Payment of dividends to shareholders
 
(58,847
)
 
(50,975
)
Distributions to non-controlling interests
 
(267
)
 
(338
)
Redemption of non-controlling interests
 
(3,167
)
 

Employee shares withheld for taxes
 
(2,702
)
 
(166
)
Net cash (used in) provided by financing activities
 
(63,331
)
 
92,182

Net decrease in cash and cash equivalents, including restricted cash
 
(63,453
)
 
(42,481
)
Cash and cash equivalents, including restricted cash, at beginning of period
 
93,242

 
69,371

Cash and cash equivalents, including restricted cash, at end of period
 
$
29,789

 
$
26,890

Supplemental disclosures:
 
 
 
 
Interest paid
 
$
14,075

 
$
13,199

Income taxes paid
 
$
548

 
$
615

Operating lease payments received (lessor)
 
$
96,113

 
$

Operating lease payments remitted (lessee)
 
$
312

 
$

Non-cash investing and financing activities:
 
 
 
 
Dividends declared but not paid
 
$
19,641

 
$
18,521

Change in fair value of derivative instruments
 
$
(13,794
)
 
$
7,637


The accompanying notes are an integral part of this financial statement.
6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 1 – ORGANIZATION
Four Corners Property Trust, Inc. (together with its consolidated subsidiaries, “FCPT”) is an independent, publicly traded, self-administered company, primarily engaged in the ownership, acquisition and leasing of restaurant properties. Substantially all of our business is conducted through Four Corners Operating Partnership, LP (“FCPT OP”), a Delaware limited partnership of which we are the initial and substantial limited partner. Our wholly owned subsidiary, Four Corners GP, LLC (“FCPT GP”), is its sole general partner.
FCPT was incorporated as a Maryland corporation on July 2, 2015 as a wholly owned indirect subsidiary of Darden Restaurants, Inc., (together with its consolidated subsidiaries “Darden”), for the purpose of owning, acquiring and leasing properties on a triple-net basis, for use in the restaurant and other retail industries. On November 9, 2015, Darden completed a spin-off of FCPT whereby Darden contributed to us 100% of the equity interest in entities that owned 418 properties in which Darden operates restaurants, representing five of their brands, and six LongHorn Steakhouse® restaurants located in the San Antonio, Texas area (the “Kerrow Restaurant Operating Business”) along with the underlying properties or interests therein associated with the Kerrow Restaurant Operating Business. In exchange, we issued to Darden all of our common stock and paid to Darden $315.0 million in cash. Subsequently, Darden distributed all of our outstanding shares of common stock pro rata to holders of Darden common stock whereby each Darden shareholder received one share of our common stock for every three shares of Darden common stock held at the close of business on the record date, which was November 2, 2015, as well as cash in lieu of any fractional shares of our common stock which they would have otherwise received (the “Spin-Off”).
We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a real estate investment trust (a “REIT”) for federal income tax purposes commencing with our taxable year ended December 31, 2016, and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our adjusted taxable income to our shareholders, subject to certain adjustments and excluding any net capital gain. As a REIT, we will not be subject to federal corporate income tax on that portion of net income that is distributed to our shareholders.  However, FCPT’s taxable REIT subsidiaries (“TRS”) will generally be subject to federal, state, and local income taxes. We made our REIT election upon the filing of our 2016 tax return.
Any references to “the Company,” “we,” “us,” or “our” refer to FCPT as an independent, publicly traded, self-administered company.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements (the “Consolidated Financial Statements”) include the accounts of Four Corners Property Trust, Inc. and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
The Consolidated Financial Statements reflect all adjustments which are, in the opinion of management, necessary to a fair presentation of the results for the interim periods presented. These adjustments are considered to be of a normal, recurring nature.
Use of Estimates
The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The estimates and assumptions used in the accompanying Consolidated Financial Statements are based on management’s evaluation of the relevant facts and circumstances. Actual results may differ from the estimates and assumptions used in preparing the accompanying Consolidated Financial Statements, and such differences could be material.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Real Estate Investments, Net
Real estate investments, net are recorded at cost less accumulated depreciation. Building components are depreciated over estimated useful lives ranging from seven to fifty-five years using the straight-line method. Leasehold improvements, which are reflected on our Consolidated Balance Sheets as a component of buildings, equipment, and improvements, net are amortized over the lesser of the non-cancelable lease term or the estimated useful lives of the related assets using the straight-line method. Equipment is depreciated over estimated useful lives ranging from two to fifteen years also using the straight-line method. Real estate development and construction costs for newly constructed restaurants are capitalized in the period in which they are incurred. Gains and losses on the disposal of land, buildings, and equipment are included in realized gain on sale, net, in our accompanying Consolidated Statements of Income (“Income Statements”).
Our accounting policies regarding land, buildings, equipment, and improvements, include our judgments regarding the estimated useful lives of these assets, the residual values to which the assets are depreciated or amortized, the determination of what constitutes a reasonably assured lease term, and the determination as to what constitutes enhancing the value of or increasing the life of existing assets. These judgments and estimates may produce materially different amounts of reported depreciation and amortization expense if different assumptions were used. As discussed further below, these judgments may also impact our need to recognize an impairment charge on the carrying amount of these assets as the cash flows associated with the assets are realized, or as our expectations of estimated future cash flows change.
Acquisition of Real Estate
The Company evaluates acquisitions to determine whether transactions should be accounted for as asset acquisitions or business combinations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2017-01. The Company has determined the land, building, site improvements, and in-places leases (if any) of assets acquired were each single assets as the building and property improvements are attached to the land and cannot be physically removed and used separately from the land without incurring significant costs or reducing their fair value. Additionally, the Company has not acquired a substantive process used to generate outputs. As substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset and there were no processes acquired, the acquisitions do not qualify as a business and are accounted for as asset acquisitions. Related transaction costs are generally capitalized and amortized over the useful life of the acquired assets.
The Company allocates the purchase price (including acquisition and closing costs) of real estate acquisitions to land, building, and improvements based on their relative fair values. The determination of the building fair value is on an ‘as-if-vacant’ basis. Value is allocated to acquired lease intangibles (if any) based on the costs avoided and revenue recognized by acquiring the property subject to lease and avoiding an otherwise ‘dark period’. In making estimates of fair values for this purpose, the Company uses a third-party specialist that obtains various information about each property, as well as the pre-acquisition due diligence of the Company and prior leasing activities at the site.
Lease Intangibles
Lease intangibles, if any, acquired in conjunction with the purchase of real estate represent the value of in-place leases and above- or below-market leases. For real estate acquired subject to existing lease agreements, acquired lease intangibles are valued based on the Company’s estimates of costs related to tenant acquisition and the asset carrying costs, including lost revenue, that would be incurred during the time it would take to locate a tenant if the property were vacant, considering current market conditions and costs to execute similar leases at the time of the acquisition. Above-market and below-market lease intangibles are recorded based on the present value of the difference between the contractual amounts to be paid pursuant to the leases at the time of acquisition of the real estate and the Company’s estimate of current market lease rates for the property, measured over a period equal to the remaining initial term of the lease.
In-place lease intangibles are amortized on a straight-line basis over the remaining initial term of the related lease and included in depreciation and amortization expense. Above-market lease intangibles are amortized over the remaining initial terms of the respective leases as a decrease in rental revenue. Below-market lease intangibles are generally amortized as an increase to rental revenue over the remaining initial term of the respective leases, but may be amortized over the renewal periods if the Company believes it is likely the tenant will exercise the renewal option. Should a lease terminate early, the unamortized portion of any

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

related lease intangible is immediately recognized as an impairment loss included in depreciation and amortization expense. To date, the Company has not had significant early terminations.
Finance ground lease assets are also included in lease intangible assets, net on the Consolidated Balance Sheets. See Leases below for additional information.
Impairment of Long-Lived Assets
Land, buildings and equipment and certain other assets, including definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets. Identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities, generally at the restaurant level. If these assets are determined to be impaired, the amount of impairment recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Fair value is generally determined by appraisals or sales prices of comparable assets.
The judgments we make related to the expected useful lives of long-lived assets and our ability to realize undiscounted cash flows in excess of the carrying amounts of these assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, changes in usage or operating performance, desirability of the restaurant sites and other factors, such as our ability to sell our assets held for sale. As we assess the ongoing expected cash flows and carrying amounts of our long-lived assets, significant adverse changes in these factors could cause us to realize a material impairment loss.
Exit or disposal activities include the cost of disposing of the assets and are generally expensed as incurred. Upon disposal of the assets, any gain or loss is recorded in the same caption within our Income Statements as the original impairment. Provisions for impairment are included in depreciation and amortization expense. We did not record impairment expense during the nine months ended September 30, 2019 or 2018.
Real Estate Held for Sale
Real estate is classified as held for sale when the sale is probable, will be completed within one year, purchase agreements are executed, the buyer has a significant deposit at risk, and no financing contingencies exist which could prevent the transaction from being completed in a timely manner. Restaurant sites and certain other assets to be disposed of are included in assets held for sale when the likelihood of disposing of these assets within one year is probable. Assets whose disposal is not probable within one year remain in land, buildings, equipment and improvements until their disposal within one year is probable. Disposals of assets that have a major effect on our operations and financial results or that represent a strategic shift in our operating businesses meet the requirements to be reported as discontinued operations. Real estate held for sale is reported at the lower of carrying amount or fair value, less estimated costs to sell. There was no real estate held for sale at September 30, 2019 or December 31, 2018.
Cash, Cash Equivalents, and Restricted Cash
We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents can consist of cash and money market accounts. Restricted cash consists of 1031 tax deferred real estate exchange proceeds and is included in Other assets on our Consolidated Balance Sheets.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash in our Consolidated Balance Sheets to the total amount shown in our Consolidated Statements of Cash Flows:
 
 
September 30,
 
December 31,
(In thousands)
 
2019
 
2018
Cash and cash equivalents
 
$
29,789

 
$
92,041

Restricted cash (included in Other assets)
 

 
1,201

Total Cash, Cash Equivalents, and Restricted Cash
 
$
29,789

 
$
93,242



9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Long-term Debt
Long-term debt is carried at unpaid principal balance, net of deferred financing costs. All of our long-term debt is currently unsecured and interest is paid monthly on our non-amortizing term loans and revolving credit facility and semi-annually on our senior fixed rate notes.
Deferred Financing Costs
Financing costs related to long-term debt are deferred and amortized over the remaining life of the debt using the effective interest method. These costs are presented as a direct deduction from their related liabilities on the Consolidated Balance Sheets.
See Note 7 - Long-term Debt, Net of Deferred Financing Costs for additional information.
Derivative Instruments and Hedging Activities
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments as required by FASB ASC Topic 815, Derivatives and Hedging, and those utilized as economic hedges. Our use of derivative instruments is currently limited to interest rate hedges. These instruments are generally structured as hedges of the variability of cash flows related to forecasted transactions (cash flow hedges). We do not enter into derivative instruments for trading or speculative purposes, where changes in the cash flows of the derivative are not expected to offset changes in cash flows of the hedged item. All derivatives are recognized on the balance sheet at fair value. For those derivative instruments for which we intend to elect hedge accounting, at the time the derivative contract is entered into, we document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various hedge transactions. This process includes linking all derivatives designated as cash flow hedges to specific assets and liabilities on the consolidated balance sheet or to specific forecasted transactions. We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.
To the extent our derivatives are effective in offsetting the variability of the hedged cash flows, and otherwise meet the cash flow hedge accounting criteria in accordance with United States generally accepted accounting principles (“U.S. GAAP”), changes in the derivatives’ fair value are not included in current earnings but are included in accumulated other comprehensive income, net of tax. These changes in fair value will be reclassified into earnings at the time of the forecasted transaction. Ineffectiveness measured in the hedging relationship is recorded in earnings in the period in which it occurs.
See Note 8 - Derivative Financial Instruments for additional information.
Other Assets and Liabilities
Other assets primarily consist of right of use operating lease assets, pre-acquisition costs, prepaid assets, food and beverage inventories for use by our Kerrow operating subsidiary, escrow deposits, and accounts receivable. Other liabilities primarily consist of accrued compensation, accrued interest, accrued operating expenses, and operating lease liabilities.
See Note 6 - Supplemental Detail for Certain Components of Consolidated Balance Sheets for additional information.
Leases
Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (“ASC 842”), using the effective date method. Consolidated Financial Statements for reporting periods beginning on or after January 1, 2019, are presented under the new guidance, while prior periods amounts are not adjusted and continue to be reported in accordance with previous guidance. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported Consolidated Financial Statements and did not result in a cumulative adjustment to equity.
All significant lease arrangements are generally recognized at lease commencement. For leases where the Company is the lessee upon adoption of ASC 842, operating or finance lease right-of-use (“ROU”) assets and lease liabilities are recognized at commencement based on the present value of lease payments over the lease term. ROU assets represent our right to use an

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

underlying asset during the reasonably certain lease term and lease liabilities represent our obligation to make lease payments arising from the lease. 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 is recognized on a straight-line basis over the lease term.
As part of certain real estate investment transactions, the Company may enter into long-term ground leases as a lessee. The Company recognizes a ground lease (or right-of-use) asset and related lease liability for each of these ground leases. Ground lease assets and lease liabilities are recognized based on the present value of the lease payments. The Company uses its estimated incremental borrowing rate, which is the estimated rate at which the Company could borrow on a collateralized basis with similar payments over a similar term, in determining the present value of the lease payments.
For leases where Company is the lessor, we determine the classification upon commencement. At September 30, 2019, all such leases are classified as operating leases. These operating leases may contain both lease and non-lease components. The Company accounts for lease and non-lease components as a single component. Prior to adoption of ASC 842, lease origination fees were deferred and amortized over the related lease term as an adjustment to depreciation expense. Subsequent to the adoption of ASC 842 on January 1, 2019, the Company expenses certain initial direct costs that are not incremental in obtaining a lease.
See Note 5 - Leases for additional information.
Revenue Recognition
Rental Revenue
For those net leases that provide for periodic and determinable increases in base rent, base rental revenue is recognized on a straight-line basis over the applicable lease term when collectability is probable. Recognizing rental revenue on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a deferred rent receivable.
We assess the collectability of our lease receivables, including deferred rents receivable, on several factors, including payment history, the financial strength of the tenant and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of these factors indicates it is not probable that we will be to recover substantially all of the receivable, we derecognize the deferred rent receivable asset and record as a reduction in rental revenue.
For those leases that provide for periodic increases in base rent only if certain revenue parameters or other substantive contingencies are met, the increased rental revenue is recognized as the related parameters or contingencies are met, rather than on a straight-line basis over the applicable lease term. Prior to the adoption of ASC 842, lessor costs reimbursed by the lessee were presented on a net basis in our Consolidated Financial Statements. Subsequent to the adoption of ASC 842 on January 1, 2019, costs paid by the lessor and reimbursed by the lessees will be included in variable lease payments and presented on a gross basis within rental revenue. Sales taxes collected from lessees and remitted to governmental authorities are presented on a net basis within rental revenue.
Restaurant Revenue
Restaurant revenue represents food, beverage, and other products sold and is presented net of the following discounts: coupons, employee meals, complimentary meals and gift cards. Revenue from restaurant sales, whether received in cash or by credit card, is recognized when food and beverage products are sold. At September 30, 2019 and December 31, 2018, credit card receivables, included in other assets, totaled $49 thousand and $82 thousand, respectively. We recognize sales from our gift cards when the gift card is redeemed by the customer. Sales taxes collected from customers and remitted to governmental authorities are presented on a net basis within restaurant revenue on our Consolidated Income Statements.
Restaurant Expenses
Restaurant expenses include restaurant labor, general and administrative expenses, rent expense, and food and beverage costs. Food and beverage costs include inventory, warehousing, related purchasing and distribution costs. Vendor allowances received in connection with the purchase of a vendor’s products are recognized as a reduction of the related food and beverage costs as earned.

11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Income Taxes
We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT commencing with our taxable year ended December 31, 2016, and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT. So long as we qualify as a REIT, we generally will not be subject to federal income tax on our net income that we distribute currently to our shareholders. To maintain our qualification as a REIT, we are required under the Code to distribute at least 90% of our REIT taxable income (without regard to the deduction for dividends paid and excluding net capital gains) to our shareholders and meet certain other requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates. Even if we qualify as a REIT, we may also be subject to certain state, local and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on our undistributed taxable income.
The Kerrow Restaurant Operating Business is a TRS and is taxed as a C corporation.
See Note 9 - Income Taxes for additional information.
Earnings Per Share
Basic earnings per share (“EPS”) are computed by dividing net income allocated to common shareholders by the weighted-average number of common shares outstanding for the reporting period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. No effect is shown for any securities that are anti-dilutive. Net income allocated to common shareholders represents net income less income allocated to participating securities and non-controlling interests. None of the Company’s equity awards are participating securities.
See Note 10 - Equity for additional information.
Stock-Based Compensation
The Company’s stock-based compensation plan provides for the grant of restricted stock awards (“RSAs”), deferred stock units (“DSUs”), performance-based awards, including performance stock units (“PSUs”), dividend equivalents (“DEUs”), restricted stock units (“RSUs”), and other types of awards to eligible participants. DEUs are earned during the vesting period and received upon vesting of award. Upon forfeiture of an award, DEUs earned during the vesting period are also forfeited. We classify stock-based payment awards either as equity awards or liability awards based upon cash settlement options. Equity classified awards are measured based on the fair value on the date of grant. Liability classified awards are remeasured to fair value each reporting period. We recognize costs resulting from the Company’s stock-based compensation awards on a straight-line basis over their vesting periods, which range between one and five years, less estimated forfeitures. No compensation cost is recognized for awards for which employees do not render the requisite services.
See Note 11 - Stock-Based Compensation for additional information.
Fair Value of Financial Instruments
We use a fair value approach to value certain assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. We use a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 - Quoted market prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than level one inputs that are either directly or indirectly observable; and
Level 3 - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Application of New Accounting Standards
We consider the applicability and impact of all ASUs issued by the FASB. ASUs not yet adopted were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated result of operations, financial position and cash flows.
NOTE 3 – CONCENTRATION OF CREDIT RISK
Our tenant base and the restaurant brands operating our properties are highly concentrated. With respect to our tenant base, Darden leases represent approximately 74% of the scheduled base rents from the properties we own. As our revenues predominately consist of rental payments, we are dependent on Darden for a significant portion of our leasing revenues. The audited and unaudited
financial statements for Darden are included in its filings with the SEC, which can be found on the SEC’s internet website at www.sec.gov. Reference to Darden’s filings with the SEC is solely for the information of investors. We do not intend this website to be an active link or to otherwise incorporate the information contained on such website (including Darden’s filings with the SEC) into this report or our other filings with the SEC.
We also are subject to concentration risk in terms of the restaurant brands that operate our properties. As of September 30, 2019, FCPT had 302 Olive Garden branded locations in our portfolio, which comprise approximately 46% of our leased properties and approximately 56% of the revenues received under leases. Our properties, including the Kerrow Restaurant Operating Business, are located in 45 states, with concentrations of 10% or greater of total rental revenue in two states: Texas (12%) and Florida (11%).
We are exposed to credit risk with respect to cash held at various financial institutions, access to our credit facility, and amounts due or payable under our derivative contracts. At September 30, 2019, our exposure to risk related to our derivative instruments totaled $7.8 million including accrued interest, and the counterparty to such instruments are investment grade financial institutions. Our credit risk exposure with regard to our cash and the $250.0 million available capacity under the revolver portion of our credit facility is spread among a diversified group of investment grade financial institutions.
NOTE 4 – REAL ESTATE INVESMENTS, NET AND INTANGIBLE ASSETS AND LIABILITIES, NET
Real Estate Investments, Net
Real estate investments, net, which consist of land, buildings and improvements leased to others subject to net operating leases and those utilized in the operations of Kerrow Restaurant Operating Business are summarized as follows:
 
 
September 30,
 
December 31,
(In thousands)
 
2019
 
2018
Land
 
$
608,601

 
$
569,057

Buildings and improvements
 
1,122,156

 
1,099,591

Equipment
 
134,701

 
136,633

Total gross real estate investments
 
1,865,458

 
1,805,281

Less: Accumulated depreciation
 
(629,876
)
 
(614,584
)
Total real estate investments, net
 
1,235,582

 
1,190,697

Intangible lease assets, net
 
35,988

 
18,998

Total Real Estate Investments and Intangible Lease Assets, Net
 
$
1,271,570

 
$
1,209,695


During the nine months ended September 30, 2019, the Company invested $81.1 million, including transaction costs, in 40 restaurant properties located in eighteen states, and allocated the investment as follows: $39.5 million to land, $22.6 million to buildings and improvements, and $19 million to intangible assets, including finance ROU assets. There was no contingent consideration associated with these acquisitions. These properties are 100% occupied under net leases, with a weighted average remaining lease term of 10.9 years as of September 30, 2019. The Company did not dispose of any properties during the nine months ended September 30, 2019.
During the nine months ended September 30, 2018, the Company invested $216.1 million, including transaction costs, in 77 restaurant properties located in twenty-nine states, and allocated the investment as follows: $101.9 million to land, $105 million to buildings and improvements, and $9.2 million to intangible assets principally related to the value of the in-place leases acquired. During the nine months ended September 30, 2018, the Company sold one property with a net book value of $4.6 million for a realized gain on sale of $10.9 million.
Intangible Lease Assets and Liabilities, Net
Acquired in-place lease intangibles are amortized over the remaining lease term as depreciation and amortization expense. Above-market and below-market leases are amortized over the initial term of the respective leases as an adjustment to rental revenue. Intangible lease liabilities are included in Other liabilities on our Consolidated Balance Sheets.

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

The following tables detail intangible lease assets and liabilities.
 
 
September 30,
 
December 31,
(In thousands)
 
2019
 
2018
Acquired in-place lease intangibles
 
$
28,793

 
$
19,079

Above-market leases
 
3,913

 
1,318

Finance leases - right of use asset (1)
 
6,961

 

Total
 
39,667

 
20,397

Less: Accumulated amortization
 
(3,679
)
 
(1,399
)
Intangible Lease Assets, Net
 
$
35,988

 
$
18,998


(1)    See Note 5 - Leases for additional information on finance leases - right of use assets.
 
 
September 30,
 
December 31,
(In thousands)
 
2019
 
2018
Below-market leases
 
$
854

 
$
610

Less: Accumulated amortization
 
(120
)
 
(33
)
Intangible Lease Liabilities, Net
 
$
734

 
$
577


The value of acquired in-place leases amortized and included in depreciation and amortization expense was $813 thousand and $297 thousand for the three months ended September 30, 2019 and 2018, respectively, and $2.1 million and $542 thousand for the nine months ended September 30, 2019 and 2018, respectively. The value of above-market and below-market leases amortized as an adjustment to revenue was $25 thousand and $15 thousand for the three months ended September 30, 2019 and 2018, respectively, and $49 thousand and $46 thousand for the nine months ended September 30, 2019 and 2018, respectively.
At September 30, 20