Press Release

Summit Hotel Properties Reports Second Quarter 2016 Results

Net Income increases to $17.7 million;

Pro Forma RevPAR increases 6.4 percent;

Adjusted FFO per share increases 22.5 percent to $0.42 per share

Company Release - 8/2/2016 4:40 PM ET

AUSTIN, Texas, Aug. 2, 2016 /PRNewswire/ -- Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), today announced results for the second quarter 2016.

Summit Hotel Properties, Inc. Logo

"We are thrilled with the strong results our diversified portfolio of premium select-service hotels delivered in the second quarter.  Our second quarter pro forma RevPAR growth of 6.4 percent, paired with an exceptional 156 basis points of margin expansion, once again exceeded the Smith Travel Research Upscale RevPAR growth rate of 3.1 percent marking outperformance in sixteen of the last seventeen quarters," said Dan Hansen, the Company's President and Chief Executive Officer.  "In addition to our robust operating results, we continue to demonstrate our ability to strategically dispose of non-core hotels and recycle capital," commented Mr. Hansen.

Second Quarter 2016 Highlights

  • Net Income:  Net income attributable to common stockholders increased 47.0 percent to $17.7 million, or $0.20 per diluted share, compared to $12.1 million, or $0.14 per diluted share, in the same period of 2015.
  • Pro Forma RevPAR:  Pro forma revenue per available room ("RevPAR") grew to $120.74, an increase of 6.4 percent over the same period in 2015.  Pro forma average daily rate ("ADR") grew to $145.47, an increase of 4.0 percent from the same period in 2015. Pro forma occupancy increased by 2.4 percent to 83.0 percent.
  • Same-Store RevPAR:  Same-store RevPAR grew to $117.44, an increase of 6.5 percent over the same period in 2015.  Same-store ADR grew to $142.22, an increase of 3.7 percent from the same period in 2015.  Same-store occupancy increased by 2.7 percent to 82.6 percent compared to the same period in 2015.
  • Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA grew to $50.1 million, an increase of 10.7 percent over the same period in 2015. 
  • Pro Forma Hotel EBITDA Margin:  Pro forma hotel EBITDA margin expanded by 156 basis points to 39.9 percent compared to 38.3 percent in the same period of 2015.
  • Adjusted EBITDA:  Adjusted EBITDA increased to $47.4 million from $41.7 million in the same period of 2015, an increase of $5.7 million or 13.6 percent.
  • Adjusted FFO:  Adjusted Funds from Operations ("AFFO") increased to $36.5 million, or $0.42 per diluted share, an increase in AFFO per diluted share of 22.5 percent over the same period in 2015.
  • Dispositions:  The Company sold three hotels containing 383 guestrooms for a total sales price of $25.0 million.  The three hotels sold had RevPAR of $67.37 for the twelve months ended March 31, 2016.

The Company's results for the three and six months ended June 30, 2016, and 2015 included the following:


Three months ended June 30,


Six months ended June 30,


2016


2015


2016


2015


(Unaudited)


($ in thousands, except per unit and RevPAR data)

Net income attributable to common stockholders

$      17,718


$      12,057


$     62,056


$     18,444

Total revenues

$    127,195


$    120,677


$   245,277


$   228,325

EBITDA (1)

$      46,897


$      40,002


$   122,824


$     73,372

Adjusted EBITDA (1)

$      47,364


$      41,695


$     88,277


$     76,205

FFO (1)

$      32,681


$      27,663


$     58,545


$     49,755

Adjusted FFO (1)

$      36,500


$      29,671


$     64,779


$     52,917

FFO per diluted share and unit (1) (2)

$          0.37


$          0.32


$         0.67


$         0.57

Adjusted FFO per diluted share and unit (1) (2)

$          0.42


$          0.34


$         0.74


$         0.61









Pro Forma (3)








RevPAR

$      120.74


$      113.43


$     115.16


$     109.58

RevPAR growth

6.4%




5.1%



Hotel EBITDA

$      50,127


$      45,274


$     93,294


$     84,505

Hotel EBITDA margin

39.9%


38.3%


38.9%


37.6%

Hotel EBITDA margin growth

156 bps




130 bps





(1)

See tables later in this press release for a discussion and reconciliation of net income to non-GAAP financial measures, including earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, funds from operations ("FFO"), FFO per diluted share and unit, adjusted FFO ("AFFO"), and AFFO per diluted share and unit, as well as a discussion of hotel EBITDA.  See "Non-GAAP Financial Measures" at the end of this release.  Non-GAAP financial measures are unaudited.



(2) 

Amounts are based on 87,355,000 weighted average diluted common shares and units and 87,008,000 weighted average diluted common shares and units for the three months ended June 30, 2016, and 2015, respectively, and 87,264,000 weighted average diluted common shares and units and 86,947,000 weighted average diluted common shares and units for the six months ended June 30, 2016, and 2015, respectively.  The Company includes the outstanding common units of limited partnership interests ("OP Units") in Summit Hotel OP, LP, the Company's operating partnership, held by limited partners other than the Company in the determination of weighted average diluted common shares and units because the OP Units are redeemable for cash or, at the Company's option, shares of the Company's common stock on a one-for-one basis.



(3) 

Unless stated otherwise in this release, all pro forma information includes operating and financial results for 80 hotels owned as of June 30, 2016, as if each hotel had been owned by the Company since January 1, 2015.  As a result, all pro forma information includes operating and financial results for hotels acquired since January 1, 2015 for periods prior to the Company's ownership.  Pro forma and non-GAAP financial measures are unaudited.

 

Year-To-Date 2016 Highlights

  • Net Income:  Net income attributable to common stockholders increased to $62.1 million, or $0.71 per diluted share, compared to $18.4 million, or $0.21 per diluted share, for the same period of 2015.  Net income attributable to common stockholders includes a $39.5 million pretax gain related to the sale of nine hotels during the six months ended June 30, 2016.
  • Pro Forma RevPAR:  Pro forma RevPAR grew to $115.16, an increase of 5.1 percent over the same period in 2015.  Pro forma ADR grew to $143.95, an increase of 2.8 percent from the same period in 2015. Pro forma occupancy increased by 2.3 percent to 80.0 percent.
  • Same-Store RevPAR:  Same-store RevPAR grew to $112.94, an increase of 5.5 percent over the same period in 2015.  Same-store ADR grew to $141.25, an increase of 2.5 percent from the same period in 2015.  Same-store occupancy increased by 3.0 percent to 80.0 percent compared to the same period in 2015.
  • Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA grew to $93.3 million, an increase of 10.4 percent over the same period in 2015. 
  • Pro Forma Hotel EBITDA Margin:  Pro forma hotel EBITDA margin expanded by 130 basis points to 38.9 percent compared to the same period in 2015.
  • Adjusted EBITDA:  Adjusted EBITDA increased to $88.3 million from $76.2 million in the same period of 2015, an increase of $12.1 million or 15.8 percent.
  • Adjusted FFO:  AFFO increased to $64.8 million, or $0.74 per diluted share, an increase in AFFO per diluted share of 22.0 percent over the same period in 2015.
  • Acquisitions:  The Company acquired two hotels containing 386 guestrooms for a total purchase price of $109.0 million.  The two acquired hotels had RevPAR of $128.16 for the year ended December 31, 2015.
  • Dispositions:  The Company sold nine hotels containing 1,090 guestrooms for a total sales price of $133.3 million.  The nine hotels sold had RevPAR of $84.74 for the year ended December 31, 2015.

 

Summit vs. Industry Results (% change)

Three Months Ended June 30, 2016



Occupancy


ADR


RevPAR




Summit Pro Forma (80)


2.4%


4.0%


6.4%








Summit Same-Store (71)


2.7%


3.7%


6.5%








STR Overall US


0.6%


2.9%


3.5%








STR Upscale


0.2%


2.9%


3.1%


Source: Smith Travel Research Quarterly Hotel Review, Volume 16, Issue Q2

 

Dispositions

On May 13, 2016, the Company completed the sale of the 128-guestroom Holiday Inn Express & Suites located in Irving (Las Colinas), Texas, for a total sales price of $10.5 million.  The sales price represents a capitalization rate of 7.7 percent on the hotel's net operating income, including planned capital improvements, for the trailing twelve months ended March 31, 2016.  The Company estimates that the hotel would have contributed approximately $0.2 million and $0.6 million of EBITDA from the sale date through the second quarter and full year 2016, respectively.  This hotel was not part of the previously announced disposition of 26 hotels to affiliates of American Realty Capital Hospitality Trust, Inc. ("ARCH").

In addition to the sale mentioned above, the Company completed the sale of two hotels containing 255 guestrooms for a combined sales price of $14.5 million.  The 136-guestroom Aloft in Jacksonville, Florida, and 119-guestroom Holiday Inn Express in Vernon Hills, Illinois were sold on June 1, 2016, and June 7, 2016, respectively.  The combined sales price represents a capitalization rate of 6.1 percent on the hotels' net operating income, including planned capital improvements, for the trailing twelve months ended March 31, 2016.  The Company estimates that the hotels would have contributed approximately $0.2 million and $0.7 million of EBITDA from the sale dates through the second quarter and full year 2016, respectively.  Both of these hotels were sold to parties that are unrelated to ARCH, but were part of the previously announced disposition of 26 hotels to affiliates of ARCH.

Capital Investment

The Company invested $8.5 million in capital improvements during the second quarter of 2016.  Among the properties renovated during the quarter, the scope of work ranged from common space improvements to complete guestroom renovations, including furniture, soft goods and guest bathrooms.

6.45% Series D Preferred Stock Issuance

On June 28, 2016, the Company closed on a public offering of 3,000,000 shares of its 6.45% Series D Cumulative Redeemable Preferred Stock for gross proceeds of $75.0 million.  The Company contributed the net proceeds to its operating partnership to reduce the outstanding balance of its senior unsecured revolving credit facility and for other general corporate purposes, which may include, among other things, redeeming the outstanding 9.25% Series A Preferred Stock on or after October 28, 2016, which is generally the date it becomes redeemable by the Company.

Balance Sheet

At June 30, 2016, the Company had the following:

  • Total outstanding debt of $628.6 million with a weighted average interest rate of 3.84 percent.
  • Maximum borrowing capacity of $450.0 million under its senior unsecured credit facility, including both the revolver and term loan portions of the facility, with $150.0 million outstanding and $300.0 million available to borrow.
  • Total net debt, which the Company defines as total outstanding debt less cash and cash equivalents, to trailing twelve month adjusted EBITDA was 3.3x.

During the quarter, the Company repaid two mortgage loans totaling $18.4 million with a weighted average interest of 5.86 percent with advances on its senior unsecured revolving credit facility.  The three hotels that previously collateralized the repaid loans were added to the Company's unencumbered asset pool in the second quarter 2016.

At July 29, 2016, the Company had the following:

  • Total outstanding debt of $627.9 million with a weighted average interest rate of 3.77 percent.
  • Maximum borrowing capacity of $450.0 million under its senior unsecured credit facility, including both the revolver and term loan portions of the facility, with $150.0 million outstanding and $300.0 million available to borrow.
  • Total net debt to trailing twelve month adjusted EBITDA was 3.3x.

Dividends

On July 29, 2016, the Company declared a quarterly cash dividend of:

  • $0.1325 per share on its common stock and per OP Unit in Summit Hotel OP, LP.
  • $0.578125 per share on its 9.25% Series A Cumulative Redeemable Preferred Stock.
  • $0.4921875 per share on its 7.875% Series B Cumulative Redeemable Preferred Stock.
  • $0.4453125 per share on its 7.125% Series C Cumulative Redeemable Preferred Stock.
  • $0.28219 per share on its 6.45% Series D Cumulative Redeemable Preferred Stock. The Series D preferred stock dividend reflects the time period of June 28, 2016, to August 31, 2016.

The dividends are payable on August 31, 2016, to holders of record as of August 16, 2016.

Subsequent Events

Dispositions

On July 6, 2016, the Company completed the sale of the 122-guestroom Hyatt Place located in Irving (Las Colinas), Texas, for a total sales price of $14.0 million.  The sales price represents a capitalization rate of 7.0 percent on the hotel's net operating income, including planned capital improvements, for the trailing twelve months ended June 30, 2016.  The Company estimates that the hotel would have contributed approximately $0.3 million and $0.6 million of EBITDA from the sale date through the third quarter and full year 2016, respectively.  This hotel was not part of the previously announced disposition of 26 hotels to affiliates of ARCH.

Acquisitions

The Company is currently under contract to purchase a 157-guestroom hotel property for $61.4 million.  The purchase is expected to close during August 2016.

Balance Sheet

On August 1, 2016, the Company repaid a mortgage loan that had an interest rate of 6.22 percent, a principal balance of $17.0 million and a maturity date of November 1, 2016.  There was no prepayment penalty related to the early repayment of the mortgage loan and the Company expects to add the hotel to its unencumbered asset pool during the third quarter 2016.  As a result of the loan repayment, the Company does not have any scheduled debt maturities for the next twelve months and only 2.4 percent of its total debt is scheduled to mature through 2018.

2016 Outlook

"Despite our strong second quarter results, we are tempering our outlook for the full year as result of softening corporate demand and limited visibility that continues in the industry," said Hansen.

The Company is providing its outlook for the third quarter and full year 2016 based on its 79 hotels owned as of August 2, 2016.  In addition to the 79 hotels, the Company's outlook for the third quarter and full year 2016 assumes the acquisition of one hotel containing 157 guestrooms for a purchase price of $61.4 million in August 2016, the sale of eight hotels containing 741 guestrooms for an aggregate sales price of $77.2 million in October 2016, and the redemption of its 9.25% Series A Preferred Stock for $50.0 million plus any accrued and unpaid dividends in October 2016.

THIRD QUARTER 2016

($ in thousands, except RevPAR and per unit data)


Low


High

Pro forma RevPAR (80) (1)

$       112.00


$       114.00

Pro forma RevPAR growth (80) (1)

1.00%


3.00%

RevPAR (same-store 70) (2)

$       107.00


$       109.00

RevPAR growth (same-store 70) (2)

1.00%


3.00%

Adjusted FFO

$       27,900


$       29,700

Adjusted FFO per diluted share and unit (3)

$           0.32


$           0.34





FULL YEAR 2016

($ in thousands, except RevPAR and per unit data)


Low


High

Pro forma RevPAR (80) (1)

$       111.50


$       113.00

Pro forma RevPAR growth (80) (1)

3.00%


4.50%

RevPAR (same-store 70) (2)

$       107.50


$       109.00

RevPAR growth (same-store 70) (2)

3.00%


4.50%

Adjusted FFO

$     115,200


$     118,700

Adjusted FFO per diluted share and unit (3)

$           1.32


$           1.36

Capital improvements

$       42,000


$       48,000



(1)

Pro forma outlook information includes operating estimates for 79 hotels owned by the Company as of August 2, 2016, and an additional hotel expected to be acquired in August 2016 as if each hotel had been owned by the Company since January 1, 2015. As a result, these pro forma operating and financial measures include operating results for certain hotels for periods prior to the Company's ownership.



(2)

Same-store outlook information includes operating results for 70 hotels that are currently owned by the Company and have been owned since January 1, 2015.



(3)

Assumes weighted average diluted common shares and units outstanding of 87,300,000 for the third quarter and 87,300,000 for the full year of 2016.

 

Second Quarter 2016 Earnings Conference Call

The Company will conduct its quarterly conference call on Wednesday, August 3, 2016, at 9:00 a.m. ET.  To participate in the conference call, please dial 877-930-8101.  The conference identification code for the call is 47111045.  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 11:59 p.m. ET on Wednesday, August 10, 2016, by dialing 855-859-2056; conference identification code 47111045.  A replay of the conference call will also be available on the Company's website until November 2, 2016.

About Summit Hotel Properties

Summit Hotel Properties, Inc., is a publicly-traded real estate investment trust focused primarily on owning premium-branded, select-service hotels in the Upscale segment of the lodging industry.  As of August 2, 2016, the Company's portfolio consisted of 79 hotels with a total of 10,594 guestrooms located in 23 states. 

For additional information, please visit the Company's website, www.shpreit.com, and follow the Company on Twitter at @SummitHotel_INN.

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 Litigation 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," "likely," "would" 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: the Company's ability to realize embedded growth from the deployment of renovation capital; 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, redemptions or services; forecasts of the Company's future financial performance and potential increases in average daily rate, occupancy, RevPAR, room supply and demand, FFO and AFFO; the Company's outlook with respect to pro forma RevPAR, pro forma RevPAR growth, RevPAR, RevPAR growth,  AFFO,  AFFO per diluted share and unit and renovation capital deployed; 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"). 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, 2015, filed with the SEC, 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.

 

SUMMIT HOTEL PROPERTIES, INC.

Consolidated Balance Sheets

(Amounts in thousands)



June 30, 2016


December 31,
2015


(Unaudited)



ASSETS




  Investment in hotel properties, net

$     1,416,633


$     1,333,407

  Land held for development

5,742


5,742

  Assets held for sale

69,162


133,138

  Investment in real estate loans, net

17,582


12,803

  Cash and cash equivalents

76,437


29,326

  Restricted cash

25,363


23,073

  Trade receivables, net

14,937


9,437

  Prepaid expenses and other

8,319


15,281

  Deferred charges, net

3,694


3,628

  Other assets

9,307


9,559

          Total assets

$     1,647,176


$     1,575,394

LIABILITIES AND EQUITY




Liabilities:




  Debt, net of debt issuance costs

$        622,397


$        671,536

  Accounts payable

4,830


2,947

  Accrued expenses and other

46,982


42,174

  Derivative financial instruments

2,477


1,811

          Total liabilities

676,686


718,468





          Total stockholders' equity

966,493


852,711

  Non-controlling interests in operating partnership

3,997


4,215

          Total equity

970,490


856,926

          Total liabilities and equity

$     1,647,176


$     1,575,394

 

SUMMIT HOTEL PROPERTIES, INC.

Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands, except per share amounts)




For the Three Months Ended
June 30,


For the Six Months Ended
June 30,


2016


2015


2016


2015

Revenues:


  Room

$      119,285


$        113,714


$        229,880


$         215,139

  Other hotel operations revenue

7,910


6,963


15,397


13,186

Total revenues

127,195


120,677


245,277


228,325

Expenses:








Hotel operating expenses:








Room

26,985


27,729


54,254


53,235

Other direct

16,843


15,860


33,083


30,895

Other indirect

32,929


31,688


63,558


60,415

Total hotel operating expenses

76,757


75,277


150,895


144,545

Depreciation and amortization

17,685


15,403


35,828


30,667

Corporate general and administrative

5,391


5,363


9,970


9,878

Hotel property acquisition costs

1,728


113


2,282


113

Total expenses

101,561


96,156


198,975


185,203

Operating income

25,634


24,521


46,302


43,122

Other income (expense):








Interest expense

(7,123)


(7,655)


(14,606)


(14,902)

Gain (loss) on disposal of assets, net

2,726


(208)


39,506


(711)

Other income (expense)

853


546


1,193


785

Total other income (expense)

(3,544)


(7,317)


26,093


(14,828)

Income from continuing operations before income taxes

22,090


17,204


72,395


28,294

Income tax expense

(135)


(903)


(1,706)


(1,402)

Net income

21,955


16,301


70,689


26,892

Less - Income attributable to Operating Partnership

(90)


(97)


(339)


(154)

Net income attributable to Summit Hotel Properties, Inc.

21,865


16,204


70,350


26,738

Preferred dividends

(4,147)


(4,147)


(8,294)


(8,294)

Net income attributable to common stockholders

$       17,718


$         12,057


$         62,056


$          18,444

Earnings per share:








Basic net income per share

$           0.20


$             0.14


$             0.72


$              0.21

Diluted net income per share

$           0.20


$             0.14


$             0.71


$              0.21

Weighted average common shares outstanding:








Basic

86,433


85,831


86,396


85,768

Diluted

87,355


87,008


87,264


86,947

 

SUMMIT HOTEL PROPERTIES, INC.

Reconciliation of Net Income to Non-GAAP Measures – Funds From Operations

(Unaudited)

(Amounts in thousands except per share and unit)



Three months ended June 30,


Six months ended June 30,


2016


2015


2016


2015









Net income

$       21,955


$       16,301


$       70,689


$       26,892

Preferred dividends

(4,147)


(4,147)


(8,294)


(8,294)

Net income applicable to common shares and units

17,808


12,154


62,395


18,598









Real estate-related depreciation (1)

17,599


15,301


35,656


30,446

(Gain) loss on disposal of assets

(2,726)


208


(39,506)


711

FFO applicable to common shares and units

32,681


27,663


58,545


49,755

FFO per common share and common unit

$           0.37


$           0.32


$           0.67


$           0.57









Amortization of deferred financing costs

540


421


1,103


819

Amortization of franchise fees (1)

86


102


172


221

Equity-based compensation

1,389


1,372


2,182


2,008

Hotel property acquisition costs

1,728


113


2,282


113

Debt transaction costs

57


-


476


-

Loss (gain) on derivative instruments

19


-


19


1

Adjusted Funds From Operations

$       36,500


$       29,671


$       64,779


$       52,917

AFFO per common share and common unit

$           0.42


$           0.34


$           0.74


$           0.61









Weighted average diluted common units (2)

87,355


87,008


87,264


86,947



(1) 

The summation of these line items represents depreciation and amortization as reported on the Company's Consolidated Statements of Operations for the periods presented.



(2) 

The Company includes the outstanding OP units issued by Summit Hotel OP, LP, the Company's operating partnership, held by limited partners other than the Company because the OP units are redeemable for cash or, at the Company's option, shares of the Company's common stock on a one-for-one basis.

 

SUMMIT HOTEL PROPERTIES, INC.

Reconciliation of Net Income to Non-GAAP Measures – EBITDA

(Amounts in thousands)

(Unaudited)



Three months ended June 30,


Six months ended June 30,


2016


2015


2016


2015

Net income

$       21,955


$       16,301


$       70,689


$       26,892

Depreciation and amortization

17,685


15,403


35,828


30,667

Interest expense

7,123


7,655


14,606


14,902

Interest income

(1)


(260)


(5)


(491)

Income tax expense

135


903


1,706


1,402

EBITDA

$       46,897


$       40,002


$     122,824


$       73,372









Equity-based compensation

1,389


1,372


2,182


2,008

Hotel property acquisition costs

1,728


113


2,282


113

Debt transaction costs

57


-


476


-

(Gain) loss on disposal of assets

(2,726)


208


(39,506)


711

Loss on derivatives

19


-


19


1

Adjusted EBITDA

$       47,364


$       41,695


$       88,277


$       76,205

 



SUMMIT HOTEL PROPERTIES, INC.

Pro Forma (1) Operational and Statistical Data

(Dollars in thousands, except operating metrics)

 (Unaudited)



Three months ended June 30,


Six months ended June 30,


2016


2015


2016


2015

REVENUES








Room

$     117,741


$     110,321


$     224,598


$     210,156

Other hotel operations revenue

7,861


7,752


15,308


14,649

Total revenues

125,602


118,073


239,906


224,805









EXPENSES








Hotel operating expenses:








Room

26,534


26,816


52,714


51,671

Other direct

16,562


15,338


32,144


29,988

Other indirect

32,379


30,645


61,754


58,641

Total hotel operating expenses

75,475


72,799


146,612


140,300

Hotel EBITDA

$       50,127


$       45,274


$       93,294


$       84,505









2015


2016


TTM Ended



Q3


Q4


Q1


Q2


June 30,
2016












Room


$  107,746


$    98,981


$  106,857


$  117,741


$     431,325

Other hotel operations revenue


7,530


7,639


7,447


7,861


30,477

Total revenues


$  115,276


$  106,620


$  114,304


$  125,602


$     461,802












Hotel EBITDA


$    43,068


$    37,020


$    43,167


$    50,127


$     173,382

Hotel EBITDA Margin


37.4%


34.7%


37.8%


39.9%


37.5%












Rooms occupied


784,530


734,364


750,902


809,399


3,079,195

Rooms available


985,872


985,872


975,156


975,156


3,922,056












Occupancy


79.6%


74.5%


77.0%


83.0%


78.5%

ADR


$    137.34


$    134.78


$    142.30


$    145.47


$       140.08

RevPAR


$    109.29


$    100.40


$    109.58


$    120.74


$       109.97



(1) 

Pro forma information includes operating results for 80 hotels owned as of June 30, 2016, as if each hotel had been owned by the Company since January 1, 2015.  As a result, these pro forma operating and financial measures include operating results for certain hotels for periods prior to the Company's ownership.

 

SUMMIT HOTEL PROPERTIES, INC.

Pro Forma and Same-Store Data

(Unaudited)



Three months ended June 30,


Six months ended June 30,


2016


2015


2016


2015

Pro Forma 1 (80 hotels)








Rooms occupied

809,399


788,759


1,560,301


1,500,184

Rooms available

975,156


972,624


1,950,312


1,917,779

Occupancy

83.0%


81.1%


80.0%


78.2%

ADR

$       145.47


$       139.87


$       143.95


$       140.09

RevPAR

$       120.74


$       113.43


$       115.16


$       109.58









Occupancy growth

2.4%




2.3%



ADR growth

4.0%




2.8%



RevPAR growth

6.4%




5.1%












Three months ended June 30,


Six months ended June 30,


2016


2015


2016


2015

Same-Store 2 (71 hotels)








Rooms occupied

697,947


679,699


1,351,596


1,304,517

Rooms available

845,208


845,208


1,690,416


1,680,833

Occupancy

82.6%


80.4%


80.0%


77.6%

ADR

$       142.22


$       137.11


$       141.25


$       137.87

RevPAR

$       117.44


$       110.26


$       112.94


$       107.00









Occupancy growth

2.7%




3.0%



ADR growth

3.7%




2.5%



RevPAR growth

6.5%




5.5%













(1) 

Pro forma information includes operating results for 80 hotels owned as of June 30, 2016, as if each hotel had been owned by the Company since January 1, 2015.  As a result, these pro forma operating and financial measures include operating results for certain hotels for periods prior to the Company's ownership.



(2) 

Same-store information includes operating results for 71 hotels owned by the Company as of January 1, 2015, and at all times during the three and six months ended June 30, 2016 and 2015. 

 


SUMMIT HOTEL PROPERTIES, INC.

Reconciliation of Net Income to Non-GAAP Measures – Funds From Operations for Financial Outlook

(Unaudited)

(Amounts in thousands except per share and unit)



Three months ended
September 30, 2016


Year ended
December 31, 2016


Low


High


Low


High

Net income

$       22,000


$       23,800


$     112,300


$     115,800

Preferred dividends

(5,000)


(5,000)


(18,200)


(18,200)

Net income applicable to common shares and units

17,000


18,800


94,100


97,600









Real estate-related depreciation

19,600


19,600


75,200


75,200

Gain on disposal of assets

(10,600)


(10,600)


(64,000)


(64,000)

FFO applicable to common shares and units

26,000


27,800


105,300


108,800

FFO per common share and common unit

$           0.30


$           0.32


$           1.21


$           1.25









Amortization of deferred financing costs

500


500


2,200


2,200

Amortization of franchise fees

100


100


400


400

Equity based compensation

1,000


1,000


4,200


4,200

Hotel property acquisition costs

300


300


2,600


2,600

Debt transaction costs

-


-


500


500

Loss (gain) on derivative instruments

-


-


-


-

Adjusted Funds From Operations

$       27,900


$       29,700


$     115,200


$     118,700

AFFO per common share and common unit

$           0.32


$           0.34


$           1.32


$           1.36









Weighted average diluted common units

87,300


87,300


87,300


87,300

 

Non-GAAP Financial Measures

Funds From Operations ("FFO") and Adjusted FFO ("AFFO")

As defined by the National Association of Real Estate Investment Trusts ("NAREIT"), FFO represents net income or loss (computed in accordance with GAAP), excluding preferred dividends, gains (or losses) from sales of real property, impairment losses on real estate assets, items classified by GAAP as extraordinary, the cumulative effect of changes in accounting principles, plus depreciation and amortization related to real estate assets, and adjustments for unconsolidated partnerships and joint ventures.  Unless otherwise indicated, we present FFO applicable to our common shares and common units.  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 related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, it provides a performance measure that, when compared year over year, reflects the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income.  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.  References to FFO are based on the NAREIT-defined measure unless otherwise noted.

We further adjust FFO for certain additional items that are not included in the definition of FFO, such as hotel transaction and pursuit costs, equity-based compensation, loan transaction costs, prepayment penalties and certain other expenses, which we refer to as AFFO. We believe that AFFO provides investors with another financial measure that may facilitate comparisons of operating performance between periods and between REITs.

We caution investors that amounts presented in accordance with our definitions of FFO and AFFO may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP measures in the same manner. FFO and AFFO should be considered along with, but not as an alternative to, net income (loss) as a measure of our operating performance. FFO and AFFO may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, debt service obligations and other commitments and uncertainties. Although we believe that FFO and AFFO can enhance the understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily better indicators of any trend as compared to a comparable GAAP measure such as net income (loss). Above we have included a quantitative reconciliation of FFO and AFFO to the most directly comparable GAAP financial performance measure, which is net income (loss). Dollar amounts in such reconciliation are in thousands.

EBITDA, Adjusted EBITDA, and Hotel EBITDA

EBITDA represents net income or loss, excluding: (i) interest, (ii) income tax expense and (iii) depreciation and amortization. We believe EBITDA is useful to investors in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures, and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management also uses EBITDA as one measure in determining the value of acquisitions and dispositions. We further adjust EBITDA by adding back hotel transaction and pursuit costs, equity based compensation, impairment losses, and certain other nonrecurring expenses. We believe that adjusted EBITDA provides investors with another financial measure that may facilitate comparisons of operating performance between periods and between REITs.

With respect to hotel EBITDA, we believe that excluding the effect of corporate-level expenses, non-cash items, and the portion of these items related to discontinued operations, provides a more complete understanding of the operating results over which individual hotels and operators have direct control.  We believe the property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the third-party management companies operating our business on a property-level basis.

We caution investors that amounts presented in accordance with our definitions of EBITDA, adjusted EBITDA, and hotel EBITDA may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP measures in the same manner. EBITDA, adjusted EBITDA, and hotel EBITDA should not be considered as an alternative measure of our net income (loss) or operating performance. EBITDA, adjusted EBITDA, and hotel EBITDA may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that EBITDA, adjusted EBITDA, and hotel EBITDA can enhance your understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily a better indicator of any trend as compared to a comparable GAAP measure such as net income (loss). Above, we include a quantitative reconciliation of EBITDA and adjusted EBITDA to the most directly comparable GAAP financial performance measure, which is net income (loss). Because hotel EBITDA is specific to individual hotels or groups of hotels and not to the Company as a whole, it is not directly comparable to any GAAP measure. Accordingly, hotel EBITDA has not been reconciled back to net income or loss, or any other GAAP measure, and hotel EBITDA should not be relied on as a measure of performance for our portfolio of hotels taken as a whole. Dollar amounts in such reconciliation are in thousands.

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SOURCE Summit Hotel Properties, Inc.