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Summit Hotel Properties Reports Second Quarter Results

Balance sheet As of June 30, 2012, the Company had total outstanding debt of $298.4 million, including $54.4 million outstanding on its senior secured credit facility. As of August 9, 2012, the Company had additional borrowing capacity of $43.8 million on its credit facility. In addition, the Company had $11.6 million of cash and cash equivalents. As of quarter end, the Company’s weighted average interest rate was 5.02%.

2012 Outlook The Company is updating its 2012 outlook to include its recent acquisition of the 96 room Residence Inn – Dallas (Arlington), TX, the 103 room Courtyard by Marriott – Dallas (Arlington), TX, the 112 room Hilton Garden Inn – Nashville (Smyrna), TN and the 83 room Hampton Inn & Suites – Nashville (Smyrna), TN and the recent disposition of three hotels in Twin Falls, ID, including the 111 room AmericInn Hotel and Suites, 91 room Holiday Inn Express and the 75 room Hampton Inn. The Company’s outlook is based on current hotels owned (73 hotels) and assumes no additional hotels acquired or sold for the remainder of 2012 and no additional issuances of equity securities. RevPAR outlook excludes the AmericInn Hotel and Suites in Missoula, MT, which is currently held for sale. The outlook reflects recently revised downward U.S. GDP growth of 1.5% to 2.5% for the remainder of 2012.

       
Third Quarter, 2012 Revised 2012 Full Year Outlook
Low-end     High-end Low-End     High-End
 

Pro Forma RevPAR (73 hotels)

$   68.96 $   70.26 $   71.53 $   72.87
Growth 6.5 % 8.5 % 6.5 % 8.5 %

RevPAR (61 hotels)

$ 66.81 $ 68.07 $ 61.54 $ 62.70
Growth 6.5 % 8.5 % 6.5 % 8.5 %
AFFO $ 8,800,000 $ 9,600,000 $ 28,600,000 $ 29,800,000
AFFO/Sh. $ 0.24 $ 0.26 $ 0.77 $ 0.80
Cap Renovation $ 5,000,000 $ 8,000,000 $ 20,000,000 $ 25,000,000
 

Earnings Call The Company will conduct its quarterly conference call on Friday, August 10, 2012 at 9:00am EDT. To participate in the conference call please dial 866-510-0705. The participant passcode for the call is 56026047. Additionally, a live webcast of the call will be available through the Company’s website, www.shpreit.com. A replay of the conference call will be available until Friday, August 17, 2012 by dialing 888-286-8010; participant passcode 14085000. A replay of the conference call will be available on the Company’s website until November 15, 2012.

About Summit Hotel Properties Summit Hotel Properties, Inc. is a publicly traded real estate investment trust focused primarily on acquiring and owning premium-branded select-service hotels in the upscale and upper midscale segments of the lodging industry. As of June 30, 2012, the Company’s portfolio consisted of 73 hotels with a total of 7,489 guestrooms located in 20 states. Additional information about Summit may be found at the Company’s website, www.shpreit.com.

Forward-Looking Statements This press release contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “plan” or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Examples of forward-looking statements include the following: projections of the Company’s revenues and expenses, capital expenditures or other financial items; descriptions of the Company’s plans or objectives for future operations, acquisitions or services; forecasts of the Company’s future economic performance and potential increases in average daily rate, occupancy, RevPAR and room supply and demand; US GDP growth and descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, not all of which are known to the Company and many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy, supply and demand in the hotel industry and other factors as are described in greater detail in the Company’s filings with the Securities and Exchange Commission (“SEC”), including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012. Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

For information about the Company’s business and financial results, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and its quarterly and other periodic filings with the SEC.

The following condensed consolidated balance sheets and statements of operations are those of Summit Hotel OP, LP (the Operating Partnership), Summit Hotel Properties, Inc’s. (the REIT’s) consolidated operating partnership. Such financial results for the periods presented are identical to those of the REIT; however, we believe the reconciliation of FFO, AFFO, EBITDA and Adjusted EBITDA to net income (loss) presented in the Operating Partnership’s statement of operations is more beneficial, as it eliminates the presentation of non-controlling interests represented by the equity interests held by limited partners of the Operating Partnership, other than the REIT. In addition, FFO and AFFO results on a total per common unit basis provides for a more consistent period over period presentation now and in future periods.

The Company undertakes no duty to update the statements in this release to conform the statements to actual results or changes in the Company’s expectations.

 
 
SUMMIT HOTEL PROPERTIES
Condensed Consolidated Balance Sheets
June 30, 2012 (Unaudited) and December 31, 2011
 
    2012     2011
ASSETS
 
 
Cash and cash equivalents $   11,623,207 $   10,537,132
Restricted cash 3,107,998 1,464,032
Trade receivables 6,946,025 3,424,630
Prepaid expenses and other 3,329,337 4,268,393
Land held for development 19,006,473 20,294,973
Assets held for sale 1,629,412 -
Property and equipment, net 558,546,155 498,876,238
Deferred charges and other assets, net 9,574,069 8,923,906
Deferred tax benefit 2,971,350 2,195,820
Other assets     4,758,390     4,019,870
TOTAL ASSETS $   621,492,416 $   554,004,994
 
 
LIABILITIES AND EQUITY
 
LIABILITIES
Accounts payable $ 1,933,060 $ 1,670,994
Derivative liabilities 280,841 -
Liabilities related to assets held for sale 55,410 -
Accrued expenses 15,351,899 15,781,577
Mortgages and notes payable     298,432,922     217,103,728
TOTAL LIABILITIES     316,054,132     234,556,299
 
COMMITMENTS AND CONTINGENCIES
   
EQUITY     305,438,284     319,448,695
 
TOTAL LIABILITIES AND EQUITY $   621,492,416 $   554,004,994
 

   
SUMMIT HOTEL PROPERTIES
Condensed Consolidated Statements of Operations

(Unaudited)

 
            Company and
Company Predecessor
Three months Three months Six months Six months
ended 06/30/12 ended 06/30/11 ended 06/30/12 ended 06/30/11
 
REVENUE
Room revenue $ 46,153,920 $ 36,233,265 $ 85,069,804 $ 67,770,544
Other hotel operations revenue   1,126,223     763,619     2,121,149     1,456,169  
Total Revenue   47,280,143     36,996,884     87,190,953     69,226,713  
 
EXPENSES
Hotel operating expenses
Rooms 13,318,174 11,252,600 25,046,345 20,708,692
Other direct 5,274,760 4,856,876 10,025,519 9,468,029
Other indirect 12,617,580 8,849,929 23,801,932 18,132,175
Other   232,318     201,047     443,004     347,123  
Total hotel operating expenses 31,442,832 25,160,452 59,316,800 48,656,019
Depreciation and amortization 8,143,923 6,546,156 16,332,359 13,116,629
Corporate general and administrative:
Salaries and other compensation 711,770 699,014 1,523,408 1,066,032
Other 912,622 751,749 1,772,117 1,513,482
Equity based compensation 388,695 175,656 514,569 302,484
Loan transaction costs 423,110 - 423,110 -
Hotel property acquisition costs   747,295     -     1,327,233     -  
Total Expenses   42,770,247     33,333,027     81,209,596     64,654,646  
 
INCOME (LOSS) FROM OPERATIONS   4,509,896     3,663,857     5,981,357     4,572,067  
 
OTHER INCOME (EXPENSE)
Interest income 300 10,280 1,691 21,366
Other income 474,576 - 474,576 -
Interest expense (4,270,723 ) (2,923,852 ) (7,699,198 ) (10,893,689 )
Gain (loss) on disposal of assets (186,589 ) (36,031 ) (186,589 ) (36,031 )
Unrealized gain (loss) on derivatives   (1,012 )   -     (1,012 )   -  
       
Total Other Income (Expense)   (3,983,448 )   (2,949,603 )   (7,410,532 )   (10,908,354 )
 
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 526,448 714,254 (1,429,175 ) (6,336,287 )
 
INCOME TAX (EXPENSE) BENEFIT   144,101     (329,981 )   411,856     (822,894 )
 
INCOME (LOSS) FROM CONTINUING OPERATIONS 670,549 384,273 (1,017,319 ) (7,159,181 )
 
INCOME (LOSS) FROM DISCONTINUED OPERATIONS   (1,027,340 )   219,588     (2,144,282 )   (57,635 )
 
NET INCOME (LOSS)   (356,791 )   603,861     (3,161,601 )   (7,216,816 )
 
PREFERRED DIVIDENDS   (1,156,250 )   -     (2,312,500 )   -  
 
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON UNIT HOLDERS   (1,513,041 )   603,861     (5,474,101 )   (7,216,816 )
 
 
Basic and diluted net income (loss) per unit   ($0.04 ) $0.02     ($0.15 )   ($0.19 )
 
Weighted-average common units outstanding:
Basic and diluted   37,383,096     37,378,000     37,380,548     37,378,000  
 

 
SUMMIT HOTEL PROPERTIES
FFO

(Unaudited)

 
        Company and
Company Predecessor
Three months     Three months       Six months Six months
ended 06/30/12 ended 06/30/11 ended 06/30/12 ended 06/30/11
 
NET INCOME (LOSS) (356,791 ) 603,861 (3,161,601 ) (7,216,816 )
Preferred Dividends (1,156,250 ) - (2,312,500 ) -
Depreciation and amortization 8,177,333 6,819,608 16,657,621 13,678,039
Loss on Impairment 1,166,000 - 2,098,000 -
Gain (loss) on disposal of assets   186,589     36,031   186,589     36,031  
Funds From Operations 8,016,881 7,459,500 13,468,109 6,497,254
Per Common share/unit $ 0.21 $ 0.20 $ 0.36 $ 0.17
 
 
Equity based Compensation 388,695 175,656 514,569 302,484
Hotel property acquisition costs 747,295 - 1,327,233 -
Loan transaction costs 423,110 - 423,110 -
Gain (loss) on derivatives 1,012 - 1,012 -
Operating expenses as result of IPO (1) - - - 710,000
Corporate G&A related to IPO (1) - - - 476,000
Interest expense on prepayment penalties (1) 521,773 - 521,773 5,600,000
Income tax expense as result of IPO (1)   -     -   -     339,000  
Adjusted Funds From Operations 10,098,766 7,635,156 16,255,806 13,924,738
Per Common share/unit $ 0.27 $ 0.20 $ 0.43 $ 0.37
 
Number of weighted average Common shares/units 37,383,096 37,378,000 37,380,548 37,378,000
 
(1)   Includes non-recurring expenses related to the transfer and assumption of indebtedness and other contractual obligations of our predecessor in connection with the IPO and our formation transactions.
 

 
SUMMIT HOTEL PROPERTIES
EBITDA

(Unaudited)

 
   

 

    Company and

Company

Predecessor
Three months     Three months       Six months Six months
ended 06/30/12 ended 06/30/11 ended 06/30/12 ended 06/30/11
 
NET INCOME (LOSS) (356,791 ) 603,861 (3,161,601 ) (7,216,816 )
Depreciation and amortization 8,177,333 6,819,608 16,657,621 13,678,039
Interest Expense 4,304,431 3,007,640 7,829,934 11,184,985
Interest Income (300 ) (10,280 ) (1,691 ) (21,366 )
Income Tax (146,662 ) 344,177   (429,653 ) 855,513  
EBITDA 11,978,011 10,765,006 20,894,610 18,480,355
 
 
Equity based compensation 388,695 175,656 514,569 302,484
Hotel property acquisition costs 747,295 - 1,327,233 -
Loan transaction costs 423,110 - 423,110 -
Unrealized gain (loss) on derivatives 1,012 - 1,012 -
Gain (loss) on disposal of assets 186,589 36,031 186,589 36,031
Loss on impairment of assets 1,166,000 - 2,098,000 -
Operating expenses as result of IPO (1) - - - 710,000
Corporate G&A related to IPO (1) -   -   -   476,000  
ADJUSTED EBITDA 14,890,712 10,976,693 25,445,123 20,004,870
 
(1)   Includes non-recurring expenses related to the transfer and assumption of indebtedness and other contractual obligations of our predecessor in connection with the IPO and our formation transactions.
 

 
SUMMIT HOTEL PROPERTIES
Pro Forma Hotel Operational Data
Schedule of Property Level Results

(Unaudited)

 
        Company and
Company Predecessor
Three months     Three months       Six months Six months
ended 06/30/12 ended 06/30/11 ended 06/30/12 ended 06/30/11
 
REVENUE
Room revenue $ 47,459,645 $ 42,530,684 $ 89,687,626 $ 81,224,487
Other hotel operations revenue   1,145,594   1,032,579   2,246,190   2,016,987
Total Revenue   48,605,239   43,563,263   91,933,816   83,241,474
 
EXPENSES
Hotel operating expenses
Rooms 13,682,972 13,209,776 26,292,222 24,693,251
Other direct (1) 5,419,241 5,701,637 10,524,217 11,289,772
Other indirect (1) 12,963,188 10,389,206 24,985,908 21,620,987
Other   238,681   236,015   465,040   413,913
Total hotel operating expenses   32,304,083   29,536,636   62,267,387   58,017,923
 
Hotel EBITDA   16,301,156   14,026,627   29,666,429   25,223,551
 
Note:
     
(1) For purposes of this press release, pro forma RevPAR, pro forma RevPAR growth, pro forma Hotel EBITDA, pro forma Hotel EBITDA margin and pro forma Hotel EBITDA margin growth includes operating results for the Company’s 72 hotels owned as of June 30, 2012, excluding 3 hotels sold including Twin Falls, ID AmericInn & Suites, Twin Falls, ID Hampton Inn, and Twin Falls, ID Holiday Inn Express & Suites and the Missoula, MT AmericInn Hotel & Suites held for sale, as if such hotels had been owned since January 1, 2011. As a result, these pro forma operating measures include operating results for certain hotels prior to the Company’s period of ownership.
 
(2) Includes expenses related to our predecessor in connection with the IPO
 

 

SUMMIT HOTEL PROPERTIES
Pro Forma and Same-Store Statistical Data for the Hotels

(Unaudited)

 
        Company and
Company Predecessor
Pro Forma     Pro Forma       Pro Forma Pro Forma
Three months Three months Six months Six months
ended 06/30/12 ended 06/30/11 ended 06/30/12 ended 06/30/11
Total Portfolio (72 hotels)
Rooms Occupied 496,847 467,968 939,344 875,398
Rooms Available 676,797 677,404 1,354,655 1,343,804
Occupancy 73.4% 69.1% 69.3% 65.1%
ADR $95.52 $90.88 $95.48 $92.79
RevPAR $70.12 $62.78 $66.21 $60.44
 
Occupancy Growth 6.3% 6.4%
ADR Growth 5.1% 2.9%
RevPAR Growth 11.7% 9.5%
 

Note:

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