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Summit Hotel Properties, Inc. Reports Fourth Quarter And Full Year 2011 Results

Stocks in this article: INN

For the fourth quarter of 2011, net loss attributable to common stockholders was approximately $2.4 million compared to a net loss of approximately $14.0 million for the fourth quarter of 2010. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter of 2011 were $4.9 million, which were negatively affected by $0.7 million of legal costs associated with the Choice arbitration. Funds from operations (FFO) for the fourth quarter of 2011 were $4.1 million, or $0.11 per fully diluted common share. The company estimates the effect of the termination of franchise licenses for 11 hotels in the first quarter of 2011 was an approximate $0.03 reduction in FFO per fully diluted common share for the fourth quarter of 2011. Adjusted funds from operations (AFFO) for the fourth quarter of 2011 was $4.2 million, or $0.11 per fully diluted common share.

Full Year 2011 Operating and Financial Results

For 2011, the company’s total portfolio (70 hotels) had $148.9 million in revenues, a 9.7 percent increase compared to $135.6 million for 2010 for the company’s total portfolio (65 hotels). RevPAR for 2011 rose 4.0 percent, led by a 2.8 percent increase in ADR to $90.03 and a 1.2 percent increase in occupancy to 64.5 percent. Income from hotel operations for 2011 was $42.1 million, an increase of 6.1 percent compared to $39.7 million for 2010. Hotel operating margins were 28.3 percent for 2011, a contraction of 100 bps when compared to 29.3 percent for 2010. Hotel operating margins for 2011 expanded by 160 basis points when adjustments for additional public company costs (including hotel and revenue management fees, accounting and information technology expenses and royalty fees imposed by certain franchisors as a requirement of consent at IPO) of $2.8 million were applied to income from hotel operations for 2010 on a pro forma basis. These costs were not incurred by the company’s private company predecessor in 2010. As previously reported, the company amended its management agreement with Interstate Management Company (“Interstate”) to address the operational challenges experienced at the hotels during the second quarter 2011, which resulted in a one-time $565,000 reduction in other indirect hotel operating expenses that would have otherwise been incurred under the management agreement during the period. The amendment to the hotel management agreement provided Interstate the opportunity to earn the $565,000 as an additional incentive fee in future periods, which Interstate earned in full during the fourth quarter of 2011. As a result of the rebranding of certain hotels during the past year, the company incurred $0.3 million of one-time expenses which included guest supplies, logoed items and linens.

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