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Summit Hotel Properties Reports Third Quarter Results

Balance Sheet As of September 30, 2012, the Company had total outstanding debt of $312.3 million, including $69.9 million outstanding on its senior secured credit facility, and the Company had $10.3 million of cash and cash equivalents. As of November 6, 2012, the Company had $69.4 million outstanding on its senior secured credit facility with additional borrowing capacity of $43.0 million on its credit facility and 15 unencumbered hotels available to further expand capacity on its credit facility. The Company’s weighted average interest rate on its secured debt was 5.02% as of November 6, 2012.

2012 Outlook The Company is providing fourth quarter guidance and increasing its 2012 full year outlook to reflect performance in the third quarter and to include its recent acquisitions including the 96 room Residence Inn by Marriott, Dallas (Arlington), TX, 127 room Hyatt Place, Dallas (Arlington), TX, 127 room Hyatt Place-Park Meadows, Denver (Lone Tree), CO, 126 room Hyatt Place-Denver Tech Center, Denver (Englewood), CO, 135 room Hyatt House-Denver Tech Center, Denver (Englewood), CO, 123 room Hyatt Place-Owings Mills, Baltimore (Owings Mills), MD, 151 room Hyatt Place-Lombard, Chicago (Lombard), IL, 127 room Hyatt Place-Phoenix, Phoenix, AZ, 127 room Hyatt Place-Scottsdale, Scottsdale, AZ and 98 room Hilton Garden Inn, Fort Worth, TX and the issuance of 13,800,000 additional common shares described above. The Company’s outlook is based on 82 current hotels owned and assumes no additional hotels acquired or sold for the remainder of 2012 and no additional issuances of equity securities.

   
Fourth Quarter 2012
Low-end     High-end
 
RevPAR $   63.50 $   64.75
RevPAR growth 7.0% 9.0%
RevPAR (same-store 61 hotels) $ 55.50 $ 56.50
RevPAR growth (same-store 61 hotels) 8.0% 10.0%
Adjusted FFO $ 5,700 $ 6,600
Adjusted FFO per diluted share/unit $ 0.11 $ 0.13
Renovation capital deployed $ 8,000 $ 11,000
 
       
Updated Previous
2012 Full Year Outlook 2012 Full Year Outlook
Low-end     High-end Low-end     High-end

RevPAR

$   65.50   66.75 $   71.53 $   72.87

RevPAR Growth

7.0% 9.0% 6.50% 8.50%

RevPAR (same-store 61 hotels)

$ 62.00 $ 63.25 $ 61.54 $ 62.70

RevPAR Growth (Same-store 61 hotels)

8.0% 10.0% 6.50% 8.50%
Adjusted FFO $ 31,900 $ 32,500 $ 28,600 $ 29,800
Adjusted FFO per diluted share/unit $ 0.78 $ 0.80 $ 0.77 $ 0.80
Renovation Capital Deployed $ 25,000 $ 28,000 $ 20,000 $ 25,000
 
(1)   Assumptions include US 2012 GDP growth of 1.75% to 2.0%.
(2) Fourth quarter and full year same-store RevPAR guidance anticipates 150 basis points of RevPAR disruption and $0.2 million of EBITDA disruption in the fourth quarter of 2012 due to renovation work.
(3) Fourth quarter 2012 AFFO guidance includes an anticipated $0.8 million to $1.0 million income tax benefit; resulting in a similar anticipated income tax benefit for the full year.
(4) Assumed weighted average diluted common shares/units of 51,086,000 for fourth quarter and 40,912,000 for the full year 2012.
 

Earnings Call The Company will conduct its quarterly conference call on Thursday, November 8, 2012 at 9:00am EST. To participate in the conference call please dial 800-591-6923. The participant passcode for the call is 95273080. 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 11:59pm EST Thursday, November 15, 2012 by dialing 888-286-8010; participant passcode 75865330. A replay of the conference call will also be available on the Company’s website until February 15, 2013.

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 November 6, 2012, the Company’s portfolio consisted of 82 hotels with a total of 8,674 rooms located in 21 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, room supply and demand, funds from operations and adjusted funds from operations; 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. 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 noncontrolling 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
September 30, 2012 (Unaudited) and December 31, 2011
       
2012 2011
ASSETS
 
Cash and cash equivalents $   10,287,841 $   10,537,132
Restricted cash 4,275,143 1,464,032
Trade receivables 6,666,212 3,424,630
Prepaid expenses and other 4,390,302 4,268,393
Land held for development 19,006,473 20,294,973
Property and equipment, net 572,525,464 498,876,238
Deferred charges and other assets, net 8,986,646 8,923,906
Deferred tax benefit 2,708,849 2,195,820
Other assets     4,257,462     4,019,870
TOTAL ASSETS $   633,104,392 $   554,004,994
 
 
LIABILITIES AND EQUITY
 
LIABILITIES
Accounts payable $ 1,254,050 $ 1,670,994
Derivative liabilities 522,564 -
Accrued expenses 17,723,139 15,781,577
Mortgages and notes payable     312,250,257     217,103,728
TOTAL LIABILITIES     331,750,010     234,556,299
 
COMMITMENTS AND CONTINGENCIES
   
EQUITY     301,354,382     319,448,695
   
TOTAL LIABILITIES AND EQUITY $   633,104,392 $   554,004,994
 

   
SUMMIT HOTEL PROPERTIES
Condensed Consolidated Statements of Operations

(Unaudited)

 
    Company and
Company Predecessor
Three months     Three months     Nine months Nine months
ended 09/30/12 ended 09/30/11 ended 09/30/12 ended 09/30/11
 
REVENUE
Room revenue $ 50,062,745 $ 39,589,802 $ 135,132,550 $ 107,360,347
Other hotel operations revenue   1,171,162     846,774     3,292,311     2,302,943  
Total Revenue   51,233,907     40,436,576     138,424,861     109,663,290  
 
EXPENSES
Hotel operating expenses
Rooms 13,990,364 11,789,795 39,036,709 32,498,487
Other direct 5,957,531 5,371,116 15,983,050 14,839,145
Other indirect 13,690,221 10,354,525 37,492,154 28,486,700
Other   226,496     243,434     669,500     590,557  
Total hotel operating expenses 33,864,612 27,758,870 93,181,413 76,414,889
Depreciation and amortization 8,503,841 8,108,644 24,836,200 21,226,273
Corporate general and administrative:
Salaries and other compensation 1,645,359 791,044 3,563,325 2,168,560
Other 823,480 625,609 2,757,611 2,166,420
Loan transaction costs 227,577 - 650,687 -
Hotel property acquisition costs   245,782     181,892     1,573,015     181,892  
Total Expenses   45,310,651     37,466,059     126,562,251     102,158,034  
 
INCOME (LOSS) FROM OPERATIONS   5,923,256     2,970,517     11,862,610     7,505,256  
 
OTHER INCOME (EXPENSE)
Interest income 17,863 553 19,554 21,919
Other income 22,697 - 497,273 -
Interest expense (4,048,676 ) (3,337,485 ) (11,747,874 ) (14,231,174 )
Gain (loss) on disposal of assets (12,206 ) - (198,795 ) (36,031 )
Gain (loss) on derivatives   (775 )   -     (1,787 )   -  
Total Other Income (Expense)   (4,021,097 )   (3,336,932 )   (11,431,629 )   (14,245,286 )
 
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 1,902,159 (366,415 ) 430,981 (6,740,030 )
 
INCOME TAX (EXPENSE) BENEFIT   (313,199 )   1,688     98,657     (821,206 )
 
INCOME (LOSS) FROM CONTINUING OPERATIONS 1,588,960 (364,727 ) 529,638 (7,561,236 )
 
INCOME (LOSS) FROM DISCONTINUED OPERATIONS   51,866     406,149     (2,050,413 )   385,842  
 
NET INCOME (LOSS)   1,640,826     41,422     (1,520,775 )   (7,175,394 )
 
PREFERRED DIVIDENDS   (1,156,250 )   -     (3,468,750 )   -  
 
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON UNIT HOLDERS $ 484,576   $ 41,422   $ (4,989,525 ) $ (7,175,394 )
 
 
Basic and diluted net income (loss) per unit: $ 0.01   $ 0.00   $ (0.13 ) $ (0.03 )
 
Weighted-average common units outstanding:
 
Basic   37,393,288     37,378,000     37,384,795     37,378,000  
 
Diluted   37,586,027     37,378,000     37,384,795     37,378,000  
 

 
SUMMIT HOTEL PROPERTIES

FFO

(Unaudited)
               
Company and
Company Predecessor
Three months Three months Nine months Nine months
ended 09/30/12 ended 09/30/11 ended 09/30/12 ended 09/30/11
 
NET INCOME (LOSS) $ 1,640,826 $ 41,422 $ (1,520,775 ) $ (7,175,394 )
Preferred dividends (1,156,250 ) - (3,468,750 ) -
Depreciation and amortization 8,503,841 8,391,915 25,161,462 22,069,954
Loss on impairment of assets - - 2,098,000 -
(Gain) loss on disposal of assets   12,206     -   198,795     36,031  
Funds From Operations $ 9,000,623 $ 8,433,337 $ 22,468,732 $ 14,930,591
Per Common share/unit $ 0.24 $ 0.23 $ 0.60 $ 0.40
 
 
Equity based compensation 268,684 51,201 783,253 353,685
Hotel property acquisition costs 245,782 181,892 1,573,015 181,892
Loan transaction costs 227,577 - 650,687 -
Unrealized (gain) loss on derivatives 775 - 1,787 -
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 5,600,000
Income tax expense as result of IPO (1)   -     -   -     339,000  
Adjusted Funds From Operations $ 9,743,441 $ 8,666,430 $ 25,999,247 $ 22,591,168
Per Common share/unit $ 0.26 $ 0.23 $ 0.69 $ 0.60
 
Weighted average diluted Common shares/units 37,586,027 37,378,000 37,491,872 37,378,000
 
Note:  
 
(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 in 2011.
 

 
SUMMIT HOTEL PROPERTIES
EBITDA

(Unaudited)

 
        Company and
Company Predecessor
Three months     Three months     Nine months Nine months
ended 09/30/12 ended 09/30/11 ended 09/30/12 ended 09/30/11
 
NET INCOME (LOSS) $ 1,640,826 $ 41,422 $ (1,520,775 ) $ (7,175,394 )
Depreciation and amortization 8,503,841 8,391,915 25,161,462 22,069,954
Interest expense 4,048,676 3,456,335 11,878,610 14,641,320
Interest income (17,863 ) (553 ) (19,554 ) (21,919 )
Income tax expense (benefit)   315,765     (1,813 )   (113,888 )   853,700  
EBITDA $ 14,491,245 $ 11,887,306 $ 35,385,855 $ 30,367,661
 
 
Equity based compensation 268,684 51,201 783,253 353,685
Hotel property acquisition costs 245,782 181,892 1,573,015 181,892
Loan transaction costs 227,577 - 650,687 -
Unrealized (gain) loss on derivatives 775 - 1,787 -
(Gain) loss on disposal of assets 12,206 - 198,795 36,031
Loss on impairment of assets - - 2,098,000 -
Operating expenses as result of IPO (1) - - - 710,000
Corporate G&A related to IPO (1)   -     -     -     476,000  
ADJUSTED EBITDA $ 15,246,269 $ 12,120,399 $ 40,691,392 $ 32,125,269
 
Note:  
 
(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 in 2011.
 

 
SUMMIT HOTEL PROPERTIES
Pro Forma Hotel Operational Data (1)
Schedule of Property Level Results

(Unaudited)

 
        Company and
Company Predecessor
Three months     Three months     Nine months Nine months
ended 09/30/12 ended 09/30/11 ended 09/30/12 ended 09/30/11
 
REVENUE
Room revenue $ 50,062,745 $ 44,910,387 $ 141,002,892 $ 127,685,513
Other hotel operations revenue   1,171,162   1,005,352   3,340,866   2,972,533
Total Revenue   51,233,907   45,915,739   144,343,758   130,658,046
 
EXPENSES
Hotel operating expenses
Rooms 13,990,364 13,034,164 40,547,552 38,314,821
Other direct 5,957,531 5,550,351 16,601,644

17,455,210

(2)

Other indirect 13,690,221 12,754,534 38,943,218

33,650,438

(2)

Other   226,496   211,016   695,412   791,119
Total hotel operating expenses   33,864,613   31,550,065   96,787,826   90,211,588
 
Hotel EBITDA $ 17,369,294 $ 14,365,674 $ 47,555,931 $ 40,446,458
 
Note:  
 
(1) For purposes of this press release, pro forma information includes operating results for the Company’s 73 hotels owned as of September 30, 2012, as if such hotels had been owned by the Company since January 1, 2011. As a result, these pro forma operating measures include operating results for certain hotels prior to the Company’s ownership.
(2) Includes expenses related to our predecessor in connection with the IPO in 2011.
 

 
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 Nine months Nine months
ended 09/30/12 ended 09/30/11 ended 09/30/12 ended 09/30/11
Total Portfolio (73 hotels)
Rooms Occupied 512,366 485,300 1,465,373 1,373,358
Rooms Available 693,036 693,558 2,065,163 2,054,738
Occupancy 73.9% 70.0% 71.0% 66.8%
ADR $97.71 $92.54 $96.22 $92.97
RevPAR $72.24 $64.75 $68.28 $62.14
 
Occupancy Growth 5.7% 6.2%
ADR Growth 5.6% 3.5%
RevPAR Growth 11.6% 9.9%
 
Note:
 
For purposes of this press release, pro forma information includes operating results for the Company’s 73 hotels owned as of September 30, 2012, as if such hotels had been owned by the Company since January 1, 2011. As a result, these pro forma operating measures include operating results for certain hotels prior to the Company’s ownership.
 

       
Company and
Company Predecessor
Three months     Three months     Nine months Nine months
ended 09/30/12 ended 09/30/11 ended 09/30/12 ended 09/30/11
Same Store (61 hotels)
Rooms Occupied 421,334 397,745 1,197,313 1,124,706
Rooms Available 570,124 570,646 1,698,099 1,693,570
Occupancy 73.9% 69.7% 70.5% 66.4%
ADR $95.87 $90.00 $93.86 $90.25
RevPAR $70.85 $62.73 $66.18 $59.94
 
Occupancy Growth 6.0% 6.2%
ADR Growth 6.5% 4.0%
RevPAR Growth 12.9% 10.4%
 
Note:
 
This schedule includes operating data for same store properties owned at all times by the Company during the three-month and nine-month periods ended September 30, 2012 and 2011.
 

 
SUMMIT HOTEL PROPERTIES
Pro Forma Statistical Data for the Hotels

(Unaudited)

 
Pro Forma Operating Data                
   
2011 2012
Q4 FYE Q1 Q2 Q3
 
Room revenue $ 37,680,985 $ 165,366,498 $ 42,575,353 $ 48,361,475 $ 50,062,745
Other revenue   859,306   3,831,839   1,047,523   1,125,499   1,171,162
Total Revenue $ 38,540,292 $ 169,198,337 $ 43,622,876 $ 49,486,975 $ 51,233,907
         
Hotel EBITDA $ 9,020,495 $ 49,466,952 $ 13,423,447 $ 16,763,190 $ 17,369,294
 
Rooms occupied 415,243 1,788,601 448,820 504,187 512,366
Rooms available 684,603 2,748,173 686,594 685,533 693,036
 
Occupancy 60.7% 65.1% 65.4% 73.5% 73.9%
ADR $ 90.74 $ 92.46 $ 94.86 $ 95.92 $ 97.71
RevPAR $ 55.04 $ 60.17 $ 62.01 $ 70.55 $ 72.24
 
Note:
 
The above pro forma information includes operating results for the Company’s 73 hotels owned as of September 30, 2012, as if such hotels had been owned by the Company since January 1, 2011. As a result, these pro forma operating measures include operating results for certain hotels prior to the Company’s ownership
 

Non-GAAP Financial Measures

FFO and Adjusted FFO (“AFFO”)

As defined by the National Association of Real Estate Investment Trusts, or NAREIT, funds from operations, or FFO, represents net income or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization. We present FFO because we consider it an important supplemental measure of our operational performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and impairment losses, it provides a performance measure that, when compared year over year, reflects the effect to operations from trends in occupancy, room rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. Our computation of FFO may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to such other REITs because the amount of depreciation and amortization we add back to net income or loss includes amortization of deferred financing costs and amortization of franchise royalty fees. FFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions.

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