Form 8-K Summit Hotel Properties, For: May 03
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 3, 2016
SUMMIT HOTEL PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
| Maryland (State or Other Jurisdiction of Incorporation or Organization) |
001-35074 (Commission File Number) |
27-2962512 (I.R.S. Employer Identification No.) |
12600 Hill Country Boulevard, Suite R-100
Austin, Texas 78738
(Address of Principal Executive Offices) (Zip Code)
(512) 538-2300
(Registrants’ telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 240.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On May 3, 2016, Summit Hotel Properties, Inc. (the “Company”) issued a press release announcing the consolidated operating results of the Company and its subsidiaries for the quarter ended March 31, 2016.
A copy of the press release is furnished as Exhibit 99.1 to this report.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release issued on May 3, 2016.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SUMMIT HOTEL PROPERTIES, INC. | ||
| (Registrant) | ||
| By: | /s/ Christopher R. Eng | |
| Christopher R. Eng | ||
| Executive Vice President, General Counsel | ||
| Date: May 3, 2016 | Chief Risk Officer and Secretary | |
EXHIBIT INDEX
| Exhibit No. | Description |
| 99.1 | Press release issued May 3, 2016. |
Exhibit 99.1
 |
12600 Hill Country Blvd. Suite R-100, Austin, Texas 78738 Telephone: 512-538-2300 Fax: 512-538-2333 www.shpreit.com |
NEWS RELEASE
SUMMIT HOTEL PROPERTIES REPORTS FIRST QUARTER 2016 RESULTS
AND INCREASES 2016 OUTLOOK
Same-Store RevPAR increases 4.5 percent
Adjusted FFO per share climbs 21.2 percent to $0.32 per share
Common Dividend Increase of 12.8 percent
Austin, Texas, May 3, 2016 --- Summit Hotel Properties, Inc. (NYSE: INN) (the “Company”) today announced results for the first quarter 2016.
“We are extremely pleased with the results that our diverse portfolio of premium select-service hotels delivered in the first quarter,” said Dan Hansen, the Company’s President and Chief Executive Officer. “The strength of our portfolio is evidenced by same-store RevPAR growth of 4.5 percent, more than double that of the Smith Travel Research upscale RevPAR growth rate of 2.2 percent,” commented Mr. Hansen.
First Quarter 2016 Highlights
| · | Pro Forma RevPAR: Pro forma revenue per available room (“RevPAR”) grew to $108.08, an increase of 3.8 percent over the same period of 2015. Pro forma average daily rate (“ADR”) grew to $140.97, an increase of 1.5 percent from the same period of 2015. Pro forma occupancy increased by 2.3 percent to 76.7 percent. |
| · | Pro Forma Hotel EBITDA: Pro forma hotel EBITDA grew to $43.8 million, an increase of 10.3 percent over the same period in 2015. |
| · | Pro Forma Hotel EBITDA Margin: Pro forma hotel EBITDA margin expanded by 112 basis points to 37.5 percent compared to the same period of 2015. |
| · | Same-Store RevPAR: Same-store RevPAR grew to $106.76, an increase of 4.5 percent over the same period in 2015. Same-store ADR grew to $138.75, an increase of 1.2 percent from the same period of 2015. Same-store occupancy increased by 3.3 percent to 76.9 percent compared to the same period in 2015. |
| · | Adjusted EBITDA: Adjusted EBITDA increased to $40.9 million from $34.5 million in the same period of 2015, an increase of $6.4 million or 18.6 percent. |
| · | Adjusted FFO: Adjusted Funds from Operations (“AFFO”) increased to $28.3 million, or $0.32 per diluted share, which is a per diluted share increase of 21.2 percent compared to the same period in 2015. |
| · | Net Income: Net income attributable to common stockholders increased to $44.3 million, or $0.51 per diluted share, compared with $6.4 million, or $0.07 per diluted share, in the same period of 2015. Net income attributable to common stockholders includes a $36.8 million pretax gain on the sale of six hotels during the first quarter of 2016. |
| · | Acquisitions: The Company acquired two hotels containing 386 guestrooms for a total purchase price of $109.0 million. The two hotels acquired had a RevPAR of $128.16 for the year-ended December 31, 2015. |
| · | Dispositions: The Company sold six hotels containing 707 guestrooms for a total sales price of $108.3 million. The six hotels sold had a RevPAR of $94.49 for the year-ended December 31, 2015. |
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The Company’s results for the three months ended March 31, 2016 and 2015 included the following:
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| (Unaudited) | ||||||||
| ($ in thousands, except per unit and RevPAR data) | ||||||||
| Total revenue | $ | 118,082 | $ | 107,648 | ||||
| Net income attributable to common stockholders | $ | 44,338 | $ | 6,387 | ||||
| EBITDA (1) | $ | 75,927 | $ | 33,370 | ||||
| Adjusted EBITDA (1) | $ | 40,913 | $ | 34,510 | ||||
| FFO (1) | $ | 25,864 | $ | 22,092 | ||||
| Adjusted FFO (1) | $ | 28,279 | $ | 23,246 | ||||
| FFO per diluted share and unit (1) (2) | $ | 0.30 | $ | 0.25 | ||||
| Adjusted FFO per diluted share and unit (1) (2) | $ | 0.32 | $ | 0.27 | ||||
| Pro Forma (3) | ||||||||
| RevPAR | $ | 108.08 | $ | 104.15 | ||||
| RevPAR growth | 3.8 | % | ||||||
| Hotel EBITDA | $ | 43,813 | $ | 39,716 | ||||
| Hotel EBITDA margin | 37.5 | % | 36.4 | % | ||||
| Hotel EBITDA margin growth | 112 | 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 (hotel revenues less hotel operating expenses). See “Non-GAAP Financial Measures” at the end of this release. Non-GAAP financial measures are unaudited. |
| (2) | Amounts are based on 87,170,000 weighted average diluted common shares and units and 86,875,000 weighted average diluted common shares and units for the three months ended March 31, 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 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 83 hotels owned as of March 31, 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. |
|
Summit vs. Industry Results (% change) * | ||||||
| For the Three Months Ended March 31, 2016 | ||||||
| Occupancy | ADR | RevPAR | ||||||||||
| Summit Pro Forma (83) | 2.3 | % | 1.5 | % | 3.8 | % | ||||||
| Summit Same-Store (74) | 3.3 | % | 1.2 | % | 4.5 | % | ||||||
| STR Overall US | (0.5 | %) | 3.2 | % | 2.7 | % | ||||||
| STR Upscale | (0.9 | %) | 3.2 | % | 2.2 | % | ||||||
*Source: Smith Travel Research Monthly Hotel Review, Volume 16, Issue M3
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Acquisitions
| Residence Inn Atlanta (Midtown), GA |
| In mid-January, the Company acquired two hotels for a total purchase price of $109.0 million and entered into management agreements with Interstate Hotels & Resorts for both hotels. The 226-guestroom Courtyard by Marriott® located in Nashville, TN was acquired for $71.0 million. The 160-guestroom Residence Inn by Marriott® located in Atlanta, GA was acquired for $38.0 million. The hotels require minimal near term capital investment and the Company estimates a combined capitalization rate in the range of 8.25 and 8.75 percent based on management’s current estimate of net operating income for the hotels in 2016. |  |
Dispositions
On February 11, 2016, the Company completed the sale of six hotels containing 707 guestrooms to affiliates of American Realty Capital Hospitality Trust, Inc. (“ARCH”) for an aggregate sales price of $108.3 million. Simultaneous with the sale, the Company entered into a $27.5 million loan agreement with ARCH, and $20.0 million of the loan proceeds were applied by ARCH toward the purchase price of the six hotels. The loan has an initial maturity date of February 11, 2017, and two one-year extension options that may be exercised by ARCH subject to certain conditions. Interest accrues at a rate of 13.0 percent in year one, of which 9.0 percent shall be paid monthly, and the remainder will accrue and is required to be paid at maturity or prior to the exercise of any extension period.
On February 11, 2016, the Company entered into an agreement with ARCH to reinstate the purchase and sale agreement dated June 2, 2015, relating to the sale of ten hotels containing 996 guestrooms for an aggregate purchase price of $89.1 million. As part of the agreement, ARCH made a $7.5 million non-refundable earnest money deposit using a portion of the loan proceeds, and the Company has the right to continue to market and sell the hotels. The closing of the sale is required to occur on or before December 30, 2016.
Capital Investment
The Company invested $9.7 million in capital improvements during the first 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.
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Balance Sheet and Capital Activity
On January 15, 2016, the Company closed on a new $450 million senior unsecured credit facility. The increased credit facility is comprised of a $300 million unsecured revolving line of credit and a $150 million unsecured term loan and replaced the Company’s former $300 million senior unsecured credit facility. The $300 million revolving line of credit matures in March 2020 and can be extended to March 2021 at the Company’s option, subject to certain conditions. The $150 million term loan matures in March 2021. The new credit facility includes a $150 million accordion feature that will allow the Company to request additional lender commitments up to a total of $600 million for the senior unsecured credit facility. As a result of the new credit facility, the Company has less than ten percent of its total debt maturing through 2018.
At March 31, 2016, the Company had the following:
| · | Total outstanding debt of $704.1 million with a weighted average interest rate of 3.76 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 $205.0 million outstanding and $245.0 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 4.2x. |
At April 21, 2016, the Company had the following:
| · | Total outstanding debt of $693.3 million with a weighted average interest rate of 3.78 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 $195.0 million outstanding and $255.0 million available to borrow. |
| · | Total net debt to trailing twelve month adjusted EBITDA was 4.1x. |
Common Dividend Increase
On April 29, 2016, the Company increased its quarterly cash dividend to $0.1325 per share on its common stock and per common unit of limited partnership interest in Summit Hotel OP, LP. The increase represents a 12.8 percent increase over the Company’s previous quarterly common dividend of $0.1175 per share and an annualized yield of 4.6 percent based on the April 29, 2016 closing stock price.
In addition, the Company declared a quarterly cash dividend of:
| · | $0.578125 per share on its 9.25 percent Series A Cumulative Redeemable Preferred Stock. |
| · | $0.4921875 per share on its 7.875 percent Series B Cumulative Redeemable Preferred Stock. |
| · | $0.4453125 per share on its 7.125 percent Series C Cumulative Redeemable Preferred Stock. |
The dividends are payable on May 31, 2016, to holders of record as of May 16, 2016.
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2016 Outlook
“We remain encouraged about 2016 as the benefits of premium select-service hotels, limited supply growth in our submarkets, and broad geographic diversification continues to show our differentiated investment strategy,” said Hansen.
The Company is providing its outlook for the second quarter and full year 2016 based on its 83 hotels owned as of May 3, 2016. The Company’s adjusted FFO outlook for the full year 2016 assumes the sale of ten hotels containing 996 guestrooms for an aggregate sales price of $89.1 million with an estimated date of sale of July 1, 2016, and no additional hotel acquisitions.
| SECOND QUARTER 2016 | |||||
| ($ in thousands, except RevPAR and per unit data) | |||||
| Low | High | |||||||
| Pro forma RevPAR (83) (1) | $ | 118.00 | $ | 120.00 | ||||
| Pro forma RevPAR growth (83) (1) | 5.00 | % | 7.00 | % | ||||
| RevPAR (same-store 74) (2) | $ | 114.00 | $ | 116.00 | ||||
| RevPAR growth (same-store 74) (2) | 5.00 | % | 7.00 | % | ||||
| Adjusted FFO | $ | 34,000 | $ | 35,800 | ||||
| Adjusted FFO per diluted share and unit (3) | $ | 0.39 | $ | 0.41 | ||||
| FULL YEAR 2016 | |||
| ($ in thousands, except RevPAR and per unit data) | |||
| Low | High | |||||||
| Pro forma RevPAR (83) (1) | $ | 110.00 | $ | 112.00 | ||||
| Pro forma RevPAR growth (83) (1) | 4.00 | % | 5.50 | % | ||||
| RevPAR (same-store 74) (2) | $ | 106.50 | $ | 108.50 | ||||
| RevPAR growth (same-store 74) (2) | 4.00 | % | 5.50 | % | ||||
| Adjusted FFO | $ | 114,400 | $ | 119,600 | ||||
| Adjusted FFO per diluted share and unit (3) | $ | 1.31 | $ | 1.37 | ||||
| Capital improvements | $ | 40,000 | $ | 50,000 | ||||
| (1) | Pro forma outlook information includes operating results for 83 hotels owned by the Company as of May 3, 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 74 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 second quarter and 87,300,000 for the full year of 2016. |
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First Quarter 2016 Earnings Conference Call
The Company will conduct its quarterly conference call on Wednesday, May 4, 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 90289806. 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 PM ET on Wednesday, May 11, 2016 by dialing 855-859-2056; conference identification code 90289806. A replay of the conference call will also be available on the Company’s website until August 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 May 3, 2016, the Company’s portfolio consisted of 83 hotels with a total of 11,099 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.
Contact:
Adam Wudel
Vice President – Finance
Summit Hotel Properties, Inc.
(512) 538-2325
(1) Includes all acquisitions and dispositions closed as of May 3, 2016.
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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 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 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.
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SUMMIT HOTEL PROPERTIES, INC.
Consolidated Balance Sheets
(Amounts in thousands)
| March 31, 2016 | December 31, 2015 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Investment in hotel properties, net | $ | 1,434,015 | $ | 1,333,407 | ||||
| Land held for development | 5,742 | 5,742 | ||||||
| Assets held for sale | 86,785 | 133,138 | ||||||
| Investment in real estate loans, net | 17,664 | 12,803 | ||||||
| Cash and cash equivalents | 33,972 | 29,326 | ||||||
| Restricted cash | 24,775 | 23,073 | ||||||
| Trade receivables, net | 15,009 | 9,437 | ||||||
| Prepaid expenses and other | 6,258 | 15,281 | ||||||
| Deferred charges, net | 3,842 | 3,628 | ||||||
| Other assets | 9,375 | 9,559 | ||||||
| Total assets | $ | 1,637,437 | $ | 1,575,394 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Liabilities: | ||||||||
| Debt, net of debt issuance costs | $ | 697,298 | $ | 671,536 | ||||
| Accounts payable | 3,782 | 2,947 | ||||||
| Accrued expenses and other | 43,112 | 42,174 | ||||||
| Derivative financial instruments | 2,443 | 1,811 | ||||||
| Total liabilities | 746,635 | 718,468 | ||||||
| Total stockholders' equity | 886,649 | 852,711 | ||||||
| Non-controlling interests in Operating Partnership | 4,153 | 4,215 | ||||||
| Total equity | 890,802 | 856,926 | ||||||
| Total liabilities and equity | $ | 1,637,437 | $ | 1,575,394 | ||||
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SUMMIT HOTEL PROPERTIES, INC.
Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
| For the Three Months Ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Revenues: | (Unaudited) | |||||||
| Room | $ | 110,595 | $ | 101,425 | ||||
| Other hotel operations revenue | 7,487 | 6,223 | ||||||
| Total revenues | 118,082 | 107,648 | ||||||
| Expenses: | ||||||||
| Hotel operating expenses: | ||||||||
| Room | 27,269 | 25,506 | ||||||
| Other direct | 16,240 | 15,035 | ||||||
| Other indirect | 30,629 | 28,727 | ||||||
| Total hotel operating expenses | 74,138 | 69,268 | ||||||
| Depreciation and amortization | 18,143 | 15,264 | ||||||
| Corporate general and administrative | 4,579 | 4,515 | ||||||
| Hotel property acquisition costs | 554 | - | ||||||
| Total expenses | 97,414 | 89,047 | ||||||
| Operating income | 20,668 | 18,601 | ||||||
| Other income (expense): | ||||||||
| Interest expense | (7,483 | ) | (7,247 | ) | ||||
| Gain (loss) on disposal of assets, net | 36,780 | (503 | ) | |||||
| Other income (expense) | 340 | 239 | ||||||
| Total other expense, net | 29,637 | (7,511 | ) | |||||
| Income from continuing operations before income taxes | 50,305 | 11,090 | ||||||
| Income tax expense | (1,571 | ) | (499 | ) | ||||
| Net income | 48,734 | 10,591 | ||||||
| Less – Income attributable to Operating Partnership | (249 | ) | (57 | ) | ||||
| Net income attributable to Summit Hotel Properties, Inc. | 48,485 | 10,534 | ||||||
| Preferred dividends | (4,147 | ) | (4,147 | ) | ||||
| Net income attributable to common stockholders | $ | 44,338 | $ | 6,387 | ||||
| Earnings per share: | ||||||||
| Basic and diluted net income per share | $ | 0.51 | $ | 0.07 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 86,360 | 85,704 | ||||||
| Diluted | 87,170 | 86,875 | ||||||
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SUMMIT HOTEL PROPERTIES, INC.
Reconciliation of Net Income to Non-GAAP Measures – Funds From Operations
(Amounts in thousands except per share and unit)
(Unaudited)
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Net income | $ | 48,734 | $ | 10,591 | ||||
| Preferred dividends | (4,147 | ) | (4,147 | ) | ||||
| Net income applicable to common shares and units | 44,587 | 6,444 | ||||||
| Real estate-related depreciation (1) | 18,057 | 15,145 | ||||||
| (Gain) loss on disposal of assets | (36,780 | ) | 503 | |||||
| FFO applicable to common shares and units | 25,864 | 22,092 | ||||||
| FFO per common share and unit | $ | 0.30 | $ | 0.25 | ||||
| Amortization of deferred financing costs | 563 | 398 | ||||||
| Amortization of franchise fees (1) | 86 | 119 | ||||||
| Equity-based compensation | 793 | 636 | ||||||
| Hotel property acquisition costs | 554 | - | ||||||
| Debt transaction costs | 419 | - | ||||||
| Loss on derivative instruments | - | 1 | ||||||
| Adjusted Funds From Operations | $ | 28,279 | $ | 23,246 | ||||
| AFFO per common share and unit | $ | 0.32 | $ | 0.27 | ||||
| Weighted average diluted common units (2) | 87,170 | 86,875 | ||||||
| (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. |
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SUMMIT HOTEL PROPERTIES, INC.
Reconciliation of Net Income to Non-GAAP Measures – EBITDA
(Amounts in thousands)
(Unaudited)
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Net income | $ | 48,734 | $ | 10,591 | ||||
| Depreciation and amortization | 18,143 | 15,264 | ||||||
| Interest expense | 7,483 | 7,247 | ||||||
| Interest income | (4 | ) | (231 | ) | ||||
| Income tax expense | 1,571 | 499 | ||||||
| EBITDA | $ | 75,927 | $ | 33,370 | ||||
| Equity-based compensation | 793 | 636 | ||||||
| Hotel property acquisition costs | 554 | - | ||||||
| Debt transaction costs | 419 | - | ||||||
| (Gain) loss on disposal of assets | (36,780 | ) | 503 | |||||
| Loss on derivatives | - | 1 | ||||||
| Adjusted EBITDA | $ | 40,913 | $ | 34,510 | ||||
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SUMMIT HOTEL PROPERTIES, INC.
Pro Forma (1) Operational and Statistical Data
(Dollars in thousands, except operating metrics)
(Unaudited)
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| REVENUE | ||||||||
| Room revenue | $ | 109,162 | $ | 102,027 | ||||
| Other hotel operations revenue | 7,531 | 7,008 | ||||||
| Total revenue | 116,693 | 109,035 | ||||||
| EXPENSES | ||||||||
| Hotel operating expenses | ||||||||
| Rooms | 26,807 | 25,525 | ||||||
| Other direct | 15,964 | 15,046 | ||||||
| Other indirect | 30,109 | 28,748 | ||||||
| Total operating expenses | 72,880 | 69,319 | ||||||
| Hotel EBITDA | $ | 43,813 | $ | 39,716 | ||||
| 2015 | 2016 | |||||||||||||||||||
| Q2 | Q3 | Q4 | Q1 | TTM Ended March 31, 2016 | ||||||||||||||||
| Room revenue | $ | 112,923 | $ | 110,190 | $ | 101,074 | $ | 109,162 | $ | 433,349 | ||||||||||
| Other revenue | 7,862 | 7,623 | 7,714 | 7,531 | 30,730 | |||||||||||||||
| Total revenue | $ | 120,785 | $ | 117,813 | $ | 108,788 | $ | 116,693 | $ | 464,079 | ||||||||||
| Hotel EBITDA | $ | 45,994 | $ | 43,763 | $ | 37,367 | $ | 43,813 | $ | 170,937 | ||||||||||
| Hotel EBITDA margin | 38.1 | % | 37.1 | % | 34.3 | % | 37.5 | % | 36.8 | % | ||||||||||
| Rooms occupied | 815,588 | 810,539 | 756,523 | 774,391 | 3,157,041 | |||||||||||||||
| Rooms available | 1,007,477 | 1,021,108 | 1,021,108 | 1,010,009 | 4,059,702 | |||||||||||||||
| Occupancy | 81.0 | % | 79.4 | % | 74.1 | % | 76.7 | % | 77.8 | % | ||||||||||
| ADR | $ | 138.46 | $ | 135.95 | $ | 133.60 | $ | 140.97 | $ | 137.26 | ||||||||||
| RevPAR | $ | 112.08 | $ | 107.91 | $ | 98.98 | $ | 108.08 | $ | 106.74 | ||||||||||
| (1) | Pro forma information includes operating results for 83 hotels owned as of March 31, 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. |
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SUMMIT HOTEL PROPERTIES, INC.
Pro Forma and Same-Store Data
(Unaudited)
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Pro Forma (1) (83 hotels) | ||||||||
| Rooms occupied | 774,391 | 734,500 | ||||||
| Rooms available | 1,010,009 | 979,625 | ||||||
| Occupancy | 76.7 | % | 75.0 | % | ||||
| ADR | $ | 140.97 | $ | 138.91 | ||||
| RevPAR | $ | 108.08 | $ | 104.15 | ||||
| Occupancy growth | 2.3 | % | ||||||
| ADR growth | 1.5 | % | ||||||
| RevPAR growth | 3.8 | % | ||||||
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Same-Store (2) (74 hotels) | ||||||||
| Rooms occupied | 677,138 | 647,893 | ||||||
| Rooms available | 880,061 | 870,095 | ||||||
| Occupancy | 76.9 | % | 74.5 | % | ||||
| ADR | $ | 138.75 | $ | 137.14 | ||||
| RevPAR | $ | 106.76 | $ | 102.12 | ||||
| Occupancy growth | 3.3 | % | ||||||
| ADR growth | 1.2 | % | ||||||
| RevPAR growth | 4.5 | % | ||||||
| (1) | Pro forma information includes operating results for 83 hotels owned as of March 31, 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 74 hotels
owned by the Company as of January 1, 2015, and at all times during the three months ended March 31, 2016 and 2015. |
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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.
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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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