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Summit Hotel Properties Reports Second Quarter 2013 Results

Stocks in this article: INN

Third Quarter 2013 Outlook

The Company is providing guidance for the third quarter based on 92 current hotels.¹ This outlook includes debt capital markets activity in second quarter and subsequent to quarter end. Except as described in footnote 1 below, it assumes no additional hotels are acquired or sold in the third quarter and no additional issuances of equity securities.

             
Low-end High-end
Pro forma RevPAR (92) ¹ $ 82.50 $ 84.00
Pro forma RevPAR Growth (92) ¹ 5.0% 7.0%
RevPAR (same-store 57) $ 75.50 $ 77.00
RevPAR Growth (same-store 57) 5.5% 7.5%
Adjusted FFO ² $ 16,500 $ 17,900
Adjusted FFO per diluted unit ³ $ 0.24 $ 0.26
Renovation capital deployed $ 15,000 $ 18,000
 
¹  

The Company’s portfolio is 95 hotels (11,127 guestrooms) at June 30, 2013. The Company’s outlook excludes the following three properties held for sale at June 30, 2013: the 63–guestroom Fairfield Inn, Boise, ID; the 63–guestroom Hampton Inn, Boise, ID; and the 78–guestroom SpringHill Suites, Lithia Springs, GA.

²

Adjusted FFO guidance on 95 hotels assumes additional charges in the range of $0.1 million to $0.3 million that are associated with the consolidation of the Company’s corporate office from Sioux Falls, SD to Austin, TX during third quarter 2013.

³

Assumed weighted average diluted common units of 68,960,000 for third quarter 2013.

 

Full Year 2013 Outlook

The Company is providing guidance for full year 2013 based on 92 current hotels.¹ This outlook includes debt capital markets activity in second quarter and subsequent to quarter end. Except as described in footnote 1 below, it assumes no additional hotels are acquired or sold in 2013 and no additional issuances of equity securities. US GDP growth for 2013 is assumed to be in the range of 1.75 to 2.25 percent.

             
Low-end High-end
Pro forma RevPAR (92) ¹ $ 79.50 $ 81.00
Pro Forma RevPAR Growth (92) ¹ 5.0% 7.0%
RevPAR (same-store 57) $ 70.00 $ 71.50
RevPAR Growth (same-store 57) 5.5% 7.5%
Adjusted FFO ² $ 58,000 $ 60,800
Adjusted FFO per diluted unit ³ $ 0.85 $ 0.89
Renovation capital deployed $ 40,000 $ 48,000
 
¹  

The Company’s portfolio is 95 hotels (11,127 guestrooms) at June 30, 2013. The Company’s outlook excludes the following three properties held for sale at June 30, 2013: the 63–guestroom Fairfield Inn, Boise, ID; the 63–guestroom Hampton Inn, Boise, ID; and the 78–guestroom SpringHill Suites, Lithia Springs, GA.

²

Adjusted FFO guidance on 95 hotels assumes additional charges in the range of $0.4 million to $0.6 million that are associated with the consolidation of the Company’s corporate office from Sioux Falls, SD to Austin, TX prior to the end of 2013.

³

Assumed weighted average diluted common units of 68,285,000 for full year 2013.

 

Earnings Call

The Company will conduct its quarterly conference call on Wednesday, August 7, 2013 at 9:00am EST. To participate in the conference call please dial 800-237-9752. The participant passcode for the call is 63872141. 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 Wednesday, August 14, 2013 by dialing 888-286-8010; participant passcode 15903008. A replay of the conference call will also be available on the Company’s website until November 7, 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 August 6, 2013, the Company’s portfolio consisted of 95 hotels with a total of 11,127 guestrooms located in 24 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, dispositions, financings or services; forecasts of the Company’s future financial 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; estimated sources and uses of available capital; 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, 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, 2012 and its quarterly and other periodic filings with the SEC. 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.

The following condensed consolidated balance sheets and statements of operations are those of Summit Hotel OP, LP (the Operating Partnership) and Summit Hotel Properties, Inc.’s (the REIT) 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.

 
 
SUMMIT HOTEL PROPERTIES
Condensed Consolidated Balance Sheets
June 30, 2013 and December 31, 2012

Amounts in thousands

 
    June 30,     December 31,
2013 2012
ASSETS
 
Investment in hotel properties, net $ 1,112,608 $ 734,362
Investment in hotel properties under development 10,457 10,303
Land held for development 18,475 15,802
Assets held for sale 12,339 4,836
Cash and cash equivalents 34,413 13,980
Restricted cash 27,809 3,624
Trade receivables 11,728 5,478
Prepaid expenses and other 6,251 5,311
Derivative financial instruments 199 -
Deferred charges, net 9,696 8,895
Deferred tax asset 3,430 3,997
Other assets   4,137   4,201
TOTAL ASSETS $ 1,251,542 $ 810,789
 
LIABILITIES AND EQUITY
 
LIABILITIES
Debt $ 517,485 $ 312,613
Accounts payable 7,469 5,013
Accrued expenses 26,973 18,985
Derivative financial instruments   19   641
TOTAL LIABILITIES 551,946 337,252
 
COMMITMENTS AND CONTINGENCIES
 
EQUITY   699,596   473,537
 
TOTAL LIABILITIES AND EQUITY $ 1,251,542 $ 810,789
 

 
SUMMIT HOTEL PROPERTIES
Condensed Consolidated Statements of Operations

Amounts in thousands

 
    Three months ended June 30,     Six months ended June 30,
2013     2012 2013     2012
REVENUE
Room revenue $ 79,075 $ 41,842 $ 139,164 $ 77,569
Other hotel operations revenue   4,021     1,636     7,143     3,229  
Total Revenues   83,096     43,478     146,307     80,798  
 
EXPENSES
Hotel operating expenses
Rooms 21,954 11,904 39,575 22,379
Other direct 9,977 5,393 18,221 10,347
Other indirect 21,340 11,387 37,582 21,533
Other   274     221     487     422  
Total hotel operating expenses 53,545 28,905 95,865 54,681
Depreciation and amortization 13,291 7,711 24,447 15,266
Corporate general and administrative
Salaries and other compensation 2,294 1,622 4,715 2,560
Other 1,728 409 2,384 1,292
Hotel property acquisition costs   786     1,170     1,440     1,750  
Total Expenses   71,644     39,817     128,851     75,549  
Income (loss) from operations   11,452     3,661     17,456     5,249  
 
OTHER INCOME (EXPENSE)
Interest income 18 1 36 2
Other income 63 475 223 475
Interest expense (4,899 ) (4,184 ) (8,971 ) (7,379 )
Gain (loss) on disposal of assets - (187 ) 6 (187 )
Gain (loss) on derivative financial instruments   2     (1 )   2     (1 )
Total Other Income (Expense)   (4,816 )   (3,896 )   (8,704 )   (7,090 )
Income (loss) from continuing operations before income taxes 6,636 (235 ) 8,752 (1,841 )
 
Income tax (expense) benefit   (351 )   73     (761 )   220  
 
Income (loss) from continuing operations 6,285 (162 ) 7,991 (1,621 )
Income (loss) from discontinued operations   385     (194 )   562     (1,540 )
Net income (loss) 6,670 (356 ) 8,553 (3,161 )
 
Net income (loss) attributable to noncontrolling interests in joint venture   89     -     52     -  
 
Net income (loss) attributable to Summit Hotel OP, LP 6,581 (356 ) 8,501 (3,161 )
 
Preferred dividends   (3,844 )   (1,157 )   (6,296 )   (2,313 )
Net income (loss) attributable to common unit holders $ 2,737   $ (1,513 ) $ 2,205   $ (5,474 )
 
Weighted average common units outstanding
Basic   68,478     37,382     67,236     37,380  
Diluted   68,952     37,524     67,598     37,451  
 

 
SUMMIT HOTEL PROPERTIES
FFO

Amounts in thousands, except per common unit

(Unaudited)

 
    Three months ended June 30,     Six months ended June 30,
2013     2012 2013     2012
NET INCOME (LOSS) 6,670 (356 ) 8,553 (3,161 )
Preferred dividends (3,844 ) (1,157 ) (6,296 ) (2,313 )
Depreciation and amortization 13,324 8,178 24,814 16,658
Loss on impairment of assets - 1,166 1,500 2,098
(Gain) loss on disposal of assets (26 ) 187 (1,666 ) 187
Noncontrolling interest in joint venture (89 ) - (52 ) -
Adjustments related to joint venture   (83 )   -     (139 )   -  
Funds From Operations $ 15,952 $ 8,018 $ 26,714 $ 13,469
Per common unit $ 0.23 $ 0.21 $ 0.40 $ 0.36
 
Equity based compensation 849 389 1,270 515
Hotel property acquisition costs 786 1,170 1,440 1,750
(Gain) loss on derivative   (2 )   1     (2 )   1  
Adjusted Funds From Operations $ 17,585 $ 9,578 $ 29,422 $ 15,735
Per common share/unit $ 0.26 $ 0.26 $ 0.44 $ 0.42
 
Weighted average diluted common units 68,952 37,524 67,598 37,451
 
 
SUMMIT HOTEL PROPERTIES
EBITDA

Amounts in thousands

(Unaudited)

 
    Three months ended June 30,     Six months ended June 30,
2013     2013 2013     2012
NET INCOME (LOSS) $ 6,670 $ (356 ) $ 8,553 $ (3,161 )
Depreciation and amortization 13,324 8,178 24,814 16,658
Interest income (18 ) (1 ) (36 ) (2 )
Interest expense 4,926 4,305 9,080 7,830
Income tax expense (benefit) 363 (147 ) 815 (430 )
Noncontrolling interest in joint venture (89 ) - (52 ) -
Adjustments related to joint venture   (83 )   -     (139 )   -  
EBITDA $ 25,093 $ 11,979 $ 43,035 $ 20,895
 
 
Equity based compensation 849 389 1,270 515
Hotel property acquisition costs 786 1,170 1,440 1,750
Loss on impairment of assets - 1,166 1,500 2,098
(Gain) loss on disposal of assets (26 ) 187 (1,666 ) 187
(Gain) loss on derivatives   (2 )   1     (2 )   1  
ADJUSTED EBITDA $ 26,700 $ 14,892 $ 45,577 $ 25,446
 

 
SUMMIT HOTEL PROPERTIES
Pro Forma Hotel Operational Data¹
Schedule of Property Level Results

Amounts in thousands

(Unaudited)

 
    Three months ended June 30,     Six months ended June 30,
2013     2012 2013     2012
REVENUE
Room Revenue $ 84,917 $ 80,243 $ 161,647 $ 153,105
Other hotel operations revenue   4,330   3,880   8,600   7,724
Total Revenue   89,247   84,123   170,247   160,829
 
EXPENSES
Hotel operating expenses
Rooms 23,140 21,944 45,185 42,906
Other direct 10,516 9,972 20,804 19,838
Other indirect 22,493 21,330 42,909 41,284
Other   289   274   556   809
Total Operating expenses   56,438   53,520   109,454   104,837
 
Hotel EBITDA $ 32,809 $ 30,603 $ 60,793 $ 55,992
 
¹  

For purposes of this press release, pro forma information includes operating results for 92 hotels owned as of June 30, 2013 as if each hotel had been owned by the Company since January 1, 2012, which excludes the following three hotels that were held for sale at June 30, 2013: the 63–guestroom Fairfield Inn, Boise, ID; the 63–guestroom Hampton Inn, Boise, ID; and the 78–guestroom SpringHill Suites, Lithia Springs, GA. As a result, these pro forma operating measures include operating results for certain hotels prior to the Company’s ownership.

 

 
SUMMIT HOTEL PROPERTIES
Pro Forma¹ and Same-Store² Statistical Data for the Hotels

(Unaudited)

 
    Pro forma three months ended June 30,     Pro forma six months ended June 30,
2013     2012 2013     2012
Total Portfolio (92 hotels)
Rooms Occupied 767,921 754,219 1,459,052 1,433,575
Rooms Available 993,993 994,114 1,979,532 1,988,289
Occupancy 77.3% 75.9% 73.7% 72.1%
ADR $ 110.58 $ 106.39 $ 110.79 $ 106.80
RevPAR $ 85.43 $ 80.72 $ 81.66 $ 77.00
 
Occupancy Growth 140 bps 160 bps
ADR Growth 3.9% 3.7%
RevPAR Growth 5.8% 6.1%
 
Three months ended June 30, Six months ended June 30,
2013 2012 2013 2012
Same-Store (57 hotels)
Rooms Occupied 412,278 400,470 776,627 760,534
Rooms Available 543,998 544,119 1,082,018 1,088,299
Occupancy 75.8% 73.6% 71.8% 69.9%
ADR $ 99.96 $ 95.33 $ 99.25 $ 94.96
RevPAR $ 75.76 $ 70.16 $ 71.24 $ 66.36
 
Occupancy Growth 219 bps 190 bps
ADR Growth 4.9% 4.5%
RevPAR Growth 8.0% 7.4%
 
¹  

For purposes of this press release, pro forma information includes operating results for 92 hotels owned as of June 30, 2013 as if each hotel had been owned by the Company since January 1, 2012, which excludes the following three hotels that were held for sale at June 30, 2013: the 63–guestroom Fairfield Inn, Boise, ID; the 63–guestroom Hampton Inn, Boise, ID; and the 78–guestroom SpringHill Suites, Lithia Springs, GA. As a result, these pro forma operating measures include operating results for certain hotels prior to the Company’s ownership.

²

For purposes of this press release, same-store information includes operating results for same-store properties owned at all times by the Company during the three-month and six-month periods ended June 30, 2013 and 2012 and excludes three hotels that were held for sale at June 30, 2013.

 

 
SUMMIT HOTEL PROPERTIES
Pro Forma Statistical Data for the Hotels¹

Amounts in thousands, except ADR and RevPAR

(Unaudited)

 
    2012     2013    
Q3     Q4 Q1     Q2 T-12
 
Room Revenue $ 79,234 $ 70,566 $ 76,731 $ 84,917 $ 311,447
Other Revenue   3,889   3,906   4,270   4,330   16,396
Total Revenue $ 83,123 $ 74,472 $ 81,001 $ 89,247 $ 327,843
         
Hotel EBITDA $ 28,176 $ 22,338 $ 27,984 $ 32,809 $ 111,309
 
Rooms occupied 754,788 680,319 691,131 767,921 2,894,159
Rooms available 1,005,008 1,004,527 985,539 993,993 3,989,067
 
Occupancy 75.1% 67.7% 70.1% 77.3% 72.6%
ADR $ 104.98 $ 103.73 $ 111.02 $ 110.58 $ 107.61
RevPAR $ 78.84 $ 70.25 $ 77.86 $ 85.43 $ 78.08
 
¹  

For purposes of this press release, pro forma information includes operating results for 92 hotels owned as of June 30, 2013 as if each hotel had been owned by the Company since January 1, 2012, which excludes the following three hotels that were held for sale at June 30, 2013: the 63–guestroom Fairfield Inn, Boise, ID; the 63–guestroom Hampton Inn, Boise, ID; and the 78–guestroom SpringHill Suites, Lithia Springs, GA. 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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