Summit Hotel Properties Results

Summit Hotel Properties Reports Fourth Quarter And Full Year 2016 Results

Net Income of $87.4 million for 2016; Adjusted FFO climbs 14.0 percent to $1.41 per share for 2016; Annual Pro Forma RevPAR Increases 3.8 percent

Summit Hotel Properties

Summit Hotel Properties, Inc. (NYSE:  INN) last week announced results for the fourth quarter and full year ended December 31, 2016. 

"Our diverse portfolio of premium select-service hotels performed exceptionally well during 2016 while achieving an all-time high pro forma hotel EBITDA margin of 38.0 percent," said Dan Hansen, the Company's Chairman, President and Chief Executive Officer. "For five years in a row, our portfolio has outperformed the Smith Travel Research Upscale RevPAR growth rate by an average of nearly 200 basis points. This track record of outperformance demonstrates our ability to actively manage our portfolio and drive shareholder value," commented Mr. Hansen.

Full Year 2016 Highlights

  • Net Income:  Net income attributable to common stockholders decreased to $87.4 million, or $1.00 per diluted share, compared with $107.8 million, or $1.24 per diluted share, in the same period of 2015. When excluding the $49.9 million and $65.1 millionpretax gain on disposal of assets in 2016 and 2015, respectively, and the $9.1 million non-recurring transaction fee income in 2015, net income attributable to common stockholders in 2016 increased by $3.9 million as compared to 2015. 
  • Pro Forma RevPAR: Pro forma revenue per available room ("RevPAR") grew to $112.89, an increase of 3.8 percent over the same period in 2015. Pro forma average daily rate ("ADR") grew to $144.26, an increase of 3.1 percent from the same period in 2015. Pro forma occupancy increased by 0.7 percent to 78.3 percent in 2016. 
  • Same-Store RevPAR: Same-store RevPAR grew to $107.83, an increase of 3.3 percent over the same period in 2015. Same-store ADR grew to $138.75, an increase of 2.6 percent from the same period in 2015. Same-store occupancy increased by 0.7 percent to 77.7 percent compared to the same period in 2015. 
  • Pro Forma Hotel EBITDA: Pro forma hotel EBITDA grew to $184.4 million, an increase of 8.0 percent over the same period in 2015. Pro forma hotel EBITDA margin expanded by 93 basis points to 38.0 percent compared to 37.1 percent in the same period of 2015. 
  • Adjusted EBITDA:  Adjusted EBITDA increased to $166.5 million from $153.6 million in the same period of 2015, an increase of $12.9 million or 8.4 percent. 
  • Adjusted FFO:  Adjusted Funds from Operations ("AFFO") increased to $123.8 million, or $1.41 per diluted share, an increase in AFFO per diluted share of 13.1 percent over the same period in 2015. 
  • Acquisitions:  The Company acquired four hotels containing 749 guestrooms for a total purchase price of $244.2 million, or $326,000 per key. 
  • Dispositions: The Company sold ten hotels containing 1,212 guestrooms for an aggregate sales price of $147.3 million, or $121,500 per key.

The Company's results for the three and twelve months ended December 31, 2016 and 2015 are as follows:

 

For the Three Months Ended December 31,

 

For the Year Ended

December 31,

 

2016

 

2015

 

2016

 

2015

 

(Unaudited)

 
 

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

Net income attributable to common stockholders

$ 3,302

 

$ 80,012

 

$ 87,448

 

$ 107,849

Net income per diluted share and unit

$ 0.04

 

$ 0.92

 

$ 1.00

 

$ 1.24

Total revenues

$ 110,322

 

$ 110,039

 

$ 473,935

 

$ 463,455

EBITDA (1)

$ 34,009

 

$ 108,370

 

$ 207,286

 

$ 219,277

Adjusted EBITDA (1)

$ 36,099

 

$ 33,614

 

$ 166,481

 

$ 153,554

FFO (1)

$ 22,051

 

$ 32,221

 

$ 110,689

 

$ 108,391

Adjusted FFO (1)

$ 26,728

 

$ 23,685

 

$ 123,773

 

$ 108,608

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

$ 0.25

 

$ 0.37

 

$ 1.26

 

$ 1.24

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

$ 0.30

 

$ 0.27

 

$ 1.41

 

$ 1.25

               

Pro Forma (3)

             

RevPAR

$ 103.05

 

$ 102.02

 

$ 112.89

 

$ 108.75

RevPAR growth

1.0%

     

3.8%

   

Hotel EBITDA 

$ 39,827

 

$ 38,708

 

$ 184,440

 

$ 170,826

Hotel EBITDA margin

35.7%

 

34.9%

 

38.0%

 

37.1%

Hotel EBITDA margin growth

79 bps

     

93 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 89,086,000 weighted average diluted common shares and units and 87,217,000 weighted average diluted common shares and units for the three months ended December 31, 2016 and 2015, respectively, and 87,798,000 weighted average diluted common shares and units and 87,144,000 weighted average diluted common shares and units for the twelve months ended December 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 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 81 hotels owned as of December 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, which includes periods prior to the Company's ownership. Pro forma and non-GAAP financial measures are unaudited.

Fourth Quarter 2016 Highlights

  • Net Income: Net income attributable to common stockholders decreased to $3.3 million, or $0.04 per diluted share, compared with $80.0 million, or $0.92 per diluted share, for the same period of 2015. When excluding the $2.1 million non-recurring premium on redemption of preferred shares in 2016, the $65.8 million pretax gain on disposal of assets primarily related to the sale of hotels and $9.1 million of non-recurring transaction fee income in 2015, net income attributable to common stockholders increased by $0.3 million. 
  • Pro Forma RevPAR: Pro forma RevPAR grew to $103.05, an increase of 1.0 percent over the same period in 2015. Pro forma ADR grew to $139.90, an increase of 2.2 percent from the same period in 2015. Pro forma occupancy decreased by 1.1 percent to 73.7 percent in 2016. 
  • Same-Store RevPAR: Same-store RevPAR grew to $97.74, an increase of 0.3 percent over the same period in 2015. Same-store ADR grew to $133.67, an increase of 2.0 percent from the same period in 2015. Same-store occupancy decreased by 1.6 percent to 73.1 percent compared to the same period in 2015. 
  • Pro Forma Hotel EBITDA: Pro forma hotel EBITDA grew to $39.8 million, an increase of 2.9 percent over the same period in 2015. Pro forma hotel EBITDA margin expanded by 79 basis points to 35.7 percent compared to 34.9 percent in the same period of 2015. 
  • Adjusted EBITDA:  Adjusted EBITDA increased to $36.1 million from $33.6 million in the same period of 2015, an increase of $2.5 million or 7.4 percent. 
  • Adjusted FFO:  AFFO increased to $26.7 million, or $0.30 per diluted share, an increase in AFFO per diluted share of 10.5 percent over the same period in 2015. 
  • Acquisitions:  The Company acquired the 206-guestroom Hyatt Place Chicago Downtown – The Loop for a total purchase price of $73.8 million, or $358,000 per key. The hotel had RevPAR of $170.62 for the year ended December 31, 2016.

 

Summit vs. Industry Results (% change)

For the Year Ended December 31, 2016

 
   

Occupancy

 

ADR

 

RevPAR

             

Summit Pro Forma (81)

 

0.7%

 

3.1%

 

3.8%

             

Summit Same-Store (70)

 

0.7%

 

2.6%

 

3.3%

             

STR Total US

 

0.1%

 

3.1%

 

3.2%

             

STR Upscale

 

-0.6%

 

2.7%

 

2.1%

 

 

Source: Smith Travel Research Monthly Hotel Review, Volume 16, Issue M12

Acquisitions

During 2016, the Company acquired four hotels containing 749 guestrooms for an aggregate purchase price of $244.2 million. Pro forma RevPAR for the full year 2016 for the four hotels was $156.13, as compared to $107.83 for the 70 hotels classified as same-store in 2016, representing a 44.8 percent RevPAR premium.

On January 19, 2016, the Company acquired the 226-guestroom Courtyard by Marriott located in Nashville, Tennessee, for a total purchase price of $71.0 million.

On January 20, 2016, the Company acquired the 160-guestroom Residence Inn by Marriott located in Atlanta, Georgia, for a total purchase price of $38.0 million.

On August 9, 2016, the Company acquired the 157-guestroom Marriott in Boulder, Colorado, for a total purchase price of $61.4 million.

On October 28, 2016, the Company acquired the 206-guestroom Hyatt Place Chicago Downtown for a total purchase price of $73.8 million.

Dispositions

During 2016, the Company disposed of ten hotels for an aggregate sales price of $147.3 million.

On February 11, 2016, the Company sold a portfolio of six hotels totaling 707 guestrooms for an aggregate sales price of $108.3 million.

On May 13, 2016, the Company sold the 128-guestroom Holiday Inn Express & Suites located in Irving (Las Colinas), Texas, for a total sales price of $10.5 million.

On June 1, 2016, the Company sold the 136-guestroom Aloft in Jacksonville, Florida, for a total sales price of $8.6 million.

On June 7, 2016, the Company sold the 119-guestroom Holiday Inn Express located in Vernon Hills, Illinois, for a total sales price of $5.9 million.

On July 6, 2016, the Company sold the 122-guestroom Hyatt Place located in Irving (Las Colinas), Texas, for a total sales price of $14.0 million.

Capital Markets

On October 28, 2016, the Company paid $50.7 million to redeem all 2,000,000 shares of its issued and outstanding 9.25% Series A Cumulative Redeemable Preferred Stock at a redemption price of $25.00 per share plus accrued and unpaid dividends. The redemption was funded using a portion of the net proceeds from its 6.45% Series D Cumulative Redeemable Preferred Stock issuance in June 2016.

During the fourth quarter, the Company sold and issued 6,151,514 shares under its at-the-market ("ATM") offering program at an average price of $14.63 per share, for total net proceeds of $89.1 million. The net proceeds were used to reduce the outstanding balance of its senior unsecured revolving credit facility, which had been used for acquisitions and other general corporate purposes.

Capital Investment & Asset Management

The Company invested $11.3 million and $42.4 million in capital improvements during the three and twelve months ended December 31, 2016, respectively. For 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.

During the fourth quarter, the Company substantially completed a full renovation of the Hyatt House located in Miami, Florida. The Company added seven additional guestrooms to the hotel during the renovation to better utilize existing space, bringing the total number of guestrooms to 163. The new guestrooms were placed into service on January 1, 2017, at a cost of approximately $99,600per key. Management expects the additional guestrooms to yield a 21.3 percent cash-on-cash return in 2017.

Balance Sheet

At December 31, 2016, the Company had the following:

  • Total outstanding debt of $657.6 million with a weighted average interest rate of 3.69 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 $200.0 million outstanding and $250.0 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 of 3.7x.

Looking ahead, the balance sheet continues to be well-positioned with only 2.2 percent of total debt maturing over the next two years and an average time to maturity of 4.3 years.

At February 15, 2017, the Company had the following:

  • Total outstanding debt of $641.2 million with a weighted average interest rate of 3.72 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 $185.0 million outstanding and $265.0 million available to borrow. 
  • Total net debt to trailing twelve month adjusted EBITDA of 3.6x.

Common Dividend

During 2016, the Company announced common dividend increases in April 2016 and October 2016 of 12.8 percent and 22.6 percent, respectively, resulting in an annualized dividend rate of $0.65 per share. The common dividend increases validate the continued strong cash flows generated by our diversified portfolio of high-quality hotels.

On January 24, 2017, the Company declared a quarterly cash dividend of $0.1625 per share on its common stock and per common unit of limited partnership interest in Summit Hotel OP, LP. The quarterly common dividend of $0.1625 per share represents an annualized dividend yield of 4.0 percent based on the February 22, 2017 closing stock price.

In addition, the Company declared a quarterly cash dividend of:

  • $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. 
  • $0.403125 per share on its 6.45% Series D Cumulative Redeemable Preferred Stock.

The dividends are payable on February 28, 2017 to holders of record as of February 14, 2017.

Subsequent Events

Disposition Update

On January 12, 2017, the Company and an affiliate of American Realty Capital Hospitality Trust, Inc. ("ARCH") entered into an agreement to extend the scheduled closing date on the remaining hotels under contract for sale to ARCH from December 30, 2016 to April 27, 2017 to allow ARCH the necessary time to close on their $400 million convertible preferred investment commitment from an affiliate of Brookfield Asset Management.

As consideration for the closing date extension, ARCH, as borrower, entered into a loan agreement with an affiliate of the Company, as lender, in the amount of $3.0 million. If ARCH defaults under the terms of the purchase and sale agreement, the loan shall be in force, with the principal balance and any accrued and unpaid interest due and payable on July 31, 2017. If ARCH acquires the remaining hotels on or before April 27, 2017, the loan shall be rescinded. 

The original $27.5 million loan to ARCH, of which $22.5 million is currently outstanding, along with any accrued and unpaid interest, will be due and payable on the earlier of the closing date of the remaining hotels or February 11, 2018. If the remaining hotels do not close on or before April 27, 2017, all accrued and unpaid payment-in-kind interest due shall immediately become payable and ARCH shall be required to make $1.0 million principal amortization payments in August and September 2017. For additional details, please see the Company's Form 8-K filed with the SEC on January 13, 2017.

2017 Outlook

The Company is providing its outlook for the first quarter and full year 2017 based on its 81 hotels owned as of February 23, 2017. The Company's Adjusted FFO outlook for the first quarter and full year 2017 reflects the sale of the 90-guestroom Courtyard by Marriott located in El Paso, Texas, for a total sales price of $11.0 million in the first quarter 2017, the sale of the remaining seven ARCH hotels containing 651 guestrooms for a total sales price of $66.8 million in the second quarter 2017, and the acquisition of a 129-guestroom hotel for $38.0 million in the second quarter of 2017. All of the transactions are subject to customary closing conditions and no assurances can be given that the transactions will close within the expected timeframe or at all.

 

FIRST QUARTER 2017

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

 

Low

 

High

Pro forma RevPAR (81) (1)

$ 110.25

 

$ 112.25

Pro forma RevPAR growth (81) (1)

0.00%

 

2.00%

RevPAR (same-store 77) (2)

$ 108.75

 

$ 111.00

RevPAR growth (same-store 77) (2)

(0.50%)

 

1.50%

Adjusted FFO 

$ 27,100

 

$ 29,000

Adjusted FFO per diluted share and unit (3)

$ 0.29

 

$ 0.31

       

FULL YEAR 2017

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

 

Low

 

High

Pro forma RevPAR (81) (1)

$ 113.50

 

$ 115.75

Pro forma RevPAR growth (81) (1)

0.50%

 

2.50%

RevPAR (same-store 77) (2)

$ 110.25

 

$ 112.50

RevPAR growth (same-store 77) (2)

0.50%

 

2.50%

Adjusted FFO 

$ 125,600

 

$ 133,100

Adjusted FFO per diluted share and unit (3)

$ 1.34

 

$ 1.42

Capital improvements

$ 35,000

 

$ 45,000

 

   

(1)

As of February 23, 2017, the Company owned 81 hotels. The pro forma outlook information includes operating estimates for 81 hotels as if each hotel had been owned since January 1, 2016.

   

(2)

As of February 23, 2017, the Company owned 77 same-store hotels. The same-store outlook information includes operating estimates for 77 hotels owned by the Company as of January 1, 2016.

   

(3)

Assumes weighted average diluted common shares and units outstanding of 93,500,000 for the first quarter and 93,700,000 for the full year 2017. 

About Summit Hotel Properties

Summit Hotel Properties, Inc., is a publicly-traded real estate investment trust focused on owning primarily premium-branded, select-service hotels in the Upscale segment of the lodging industry. As of February 23, 2017, the Company's portfolio consisted of 81 hotels with a total of 10,964 guestrooms located in 23 states. 

 

SUMMIT HOTEL PROPERTIES, INC.

Consolidated Balance Sheets

(Amounts in thousands)

 
 
 

December 31,

 

2016

 

2015

       

ASSETS

     

Investment in hotel properties, net

$ 1,538,868

 

$ 1,333,407

Land held for development

5,742

 

5,742

Assets held for sale

62,695

 

133,138

Investment in real estate loans, net

17,585

 

12,803

Cash and cash equivalents

34,694

 

29,326

Restricted cash

24,881

 

23,073

Trade receivables, net

11,807

 

9,437

Prepaid expenses and other

6,474

 

15,281

Deferred charges, net

3,727

 

3,628

Other assets

12,032

 

9,559

Total assets

$ 1,718,505

 

$ 1,575,394

LIABILITIES AND EQUITY

     

Liabilities:

     

Debt, net of debt issuance costs

$ 652,414

 

$ 671,536

Accounts payable

4,623

 

2,947

Accrued expenses and other

46,880

 

42,174

Derivative financial instruments

1,118

 

1,811

Total liabilities

705,035

 

718,468

       

Total stockholders' equity

1,010,042

 

852,711

Non-controlling interests in operating partnership

3,428

 

4,215

Total equity

1,013,470

 

856,926

Total liabilities and equity

$ 1,718,505

 

$ 1,575,394

 

SUMMIT HOTEL PROPERTIES, INC.

Consolidated Statements of Operations

(Amounts in thousands, except per share amounts) 

 
 
 

For the Three Months Ended December 31, 

 

For the Year Ended December 31, 

 

2016

 

2015

 

2016

 

2015

Revenues:

(unaudited)

       

Room

$ 102,613

 

$ 102,771

 

$ 443,270

 

$ 436,202

Other hotel operations revenue

7,709

 

7,268

 

30,665

 

27,253

Total revenues

110,322

 

110,039

 

473,935

 

463,455

Expenses:

             

Hotel operating expenses:

             

Room

27,262

 

27,181

 

110,221

 

109,844

Other direct

16,012

 

16,042

 

64,608

 

64,010

Other indirect

27,982

 

29,666

 

120,852

 

121,974

Total hotel operating expenses

71,256

 

72,889

 

295,681

 

295,828

Depreciation and amortization

18,691

 

17,469

 

72,406

 

64,052

Corporate general and administrative

4,934

 

4,429

 

19,292

 

21,204

Hotel property acquisition costs

683

 

296

 

3,492

 

1,246

Loss on impairment of assets

-

 

-

 

577

 

1,115

Total expenses

95,564

 

95,083

 

391,448

 

383,445

Operating income

14,758

 

14,956

 

82,487

 

80,010

Other income (expense):

             

Interest expense

(6,859)

 

(7,429)

 

(28,091)

 

(30,414)

Gain (loss) on disposal of assets, net

(142)

 

65,779

 

49,855

 

65,067

Other income, net

706

 

10,419

 

2,560

 

11,146

Total other income (expense)

(6,295)

 

68,769

 

24,324

 

45,799

Income from continuing operations before income taxes

8,463

 

83,725

 

106,811

 

125,809

Income tax benefit (expense)

1,911

 

1,033

 

1,450

 

(553)

Net income

10,374

 

84,758

 

108,261

 

125,256

Less - Income attributable to Operating Partnership

(2)

 

(599)

 

(456)

 

(819)

Net income attributable to Summit Hotel Properties, Inc.

10,372

 

84,159

 

107,805

 

124,437

Preferred dividends

(4,945)

 

(4,147)

 

(18,232)

 

(16,588)

Premium on redemption of preferred shares

(2,125)

 

-

 

(2,125)

 

-

Net income attributable to common stockholders

$ 3,302

 

$ 80,012

 

$ 87,448

 

$ 107,849

Earnings per share:

             

Basic

$ 0.04

 

$ 0.93

 

$ 1.00

 

$ 1.25

Diluted

$ 0.04

 

$ 0.92

 

$ 1.00

 

$ 1.24

Weighted average common shares outstanding:

             

Basic 

88,201

 

86,146

 

86,874

 

85,920

Diluted

88,671

 

87,217

 

87,343

 

87,144

Dividends per share

$ 0.16

 

$ 0.12

 

$ 0.55

 

$ 0.47

 

SUMMIT HOTEL PROPERTIES, INC. 

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

(Unaudited)

(In thousands except per share and unit amounts) 

 
 
 

For the Three Months Ended December 31,

 

For the Year Ended

December 31,

 

2016

 

2015

 

2016

 

2015

               

Net income

$ 10,374

 

$ 84,758

 

$ 108,261

 

$ 125,256

Preferred dividends

(4,945)

 

(4,147)

 

(18,232)

 

(16,588)

Premium on redemption of preferred shares

(2,125)

 

-

 

(2,125)

 

-

Net income applicable to common shares and units

3,304

 

80,611

 

87,904

 

108,668

Net income per common share and unit

$ 0.04

 

$ 0.92

 

$ 1.00

 

$ 1.25

               

Real estate-related depreciation (1)

18,605

 

17,389

 

72,063

 

63,675

Loss on impairment of assets

-

 

-

 

577

 

1,115

(Gain) loss on disposal of assets

142

 

(65,779)

 

(49,855)

 

(65,067)

FFO applicable to common shares and units

22,051

 

32,221

 

110,689

 

108,391

FFO per common share and unit

$ 0.25

 

$ 0.37

 

$ 1.26

 

$ 1.24

               

Amortization of deferred financing costs

518

 

473

 

2,143

 

1,723

Amortization of franchise fees (1)

86

 

80

 

343

 

377

Equity based compensation

1,019

 

785

 

4,221

 

4,753

Hotel property acquisition costs

683

 

296

 

3,492

 

1,246

Debt transaction costs

24

 

472

 

538

 

809

Loss on derivative instruments

-

 

-

 

-

 

1

Premium on redemption of preferred shares

2,125

 

-

 

2,125

 

-

(Gain) loss from transaction termination fee and net casualty recoveries

222

 

(10,530)

 

222

 

(10,530)

Reversal of deferred tax asset valuation allowance

-

 

(112)

 

-

 

(112)

Expenses related to the transition of directors

-

 

-

 

-

 

1,950

Adjusted Funds From Operations

$ 26,728

 

$ 23,685

 

$ 123,773

 

$ 108,608

AFFO per common share and unit

$ 0.30

 

$ 0.27

 

$ 1.41

 

$ 1.25

               

Weighted average diluted common units (2)

89,086

 

87,217

 

87,798

 

87,144

 

   

(1) 

The total 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)

 
 
 

For the Three Months Ended December 31,

 

For the Year Ended

December 31,

 

2016

 

2015

 

2016

 

2015

Net income

$ 10,374

 

$ 84,758

 

$ 108,261

 

$ 125,256

Depreciation and amortization

18,691

 

17,469

 

72,406

 

64,052

Interest expense

6,859

 

7,429

 

28,091

 

30,414

Interest income

(4)

 

(253)

 

(22)

 

(998)

Income tax (benefit) expense

(1,911)

 

(1,033)

 

(1,450)

 

553

EBITDA

$ 34,009

 

$ 108,370

 

$ 207,286

 

$ 219,277

               

Equity based compensation

1,019

 

785

 

4,221

 

4,753

Hotel property acquisition costs

683

 

296

 

3,492

 

1,246

Loss on impairment of assets

-

 

-

 

577

 

1,115

Debt transaction costs

24

 

472

 

538

 

809

(Gain) loss on disposal of assets

142

 

(65,779)

 

(49,855)

 

(65,067)

Loss on derivative instruments

-

 

-

 

-

 

1

(Gain) loss from transaction termination fee and net casualty recoveries

222

 

(10,530)

 

222

 

(10,530)

Expenses related to the transition of directors

-

 

-

 

-

 

1,950

Adjusted EBITDA

$ 36,099

 

$ 33,614

 

$ 166,481

 

$ 153,554

 

SUMMIT HOTEL PROPERTIES, INC.

Pro Forma (1) Operational and Statistical Data

(Dollars in thousands, except operating metrics)

(Unaudited)

 
 
     

For the Three Months Ended December 31,

 

For the Year Ended

December 31,

     

2016

 

2015

 

2016

 

2015

REVENUES

                 

Room

   

$ 103,882

 

$ 102,840

 

$ 452,715

 

$ 428,670

Other hotel operations revenue

   

7,769

 

8,147

 

32,274

 

31,752

Total revenues

   

111,651

 

110,987

 

484,989

 

460,422

                   

EXPENSES

                 

Hotel operating expenses

                 

Room

   

27,507

 

26,721

 

111,834

 

104,675

Other direct

   

16,239

 

17,597

 

68,285

 

75,210

Other indirect

   

28,078

 

27,961

 

120,430

 

109,711

Total hotel operating expenses

   

71,824

 

72,279

 

300,549

 

289,596

Hotel EBITDA

   

$ 39,827

 

$ 38,708

 

$ 184,440

 

$ 170,826

 
 
 

2016

   
 

Q1

 

Q2

 

Q3

 

Q4

 

FYE 2016

                   

Room

$ 109,830

 

$ 123,067

 

$ 115,936

 

$ 103,882

 

$ 452,715

Other hotel revenue

8,032

 

8,486

 

7,987

 

7,769

 

32,274

Total revenues

$ 117,862

 

$ 131,553

 

$ 123,923

 

$ 111,651

 

$ 484,989

                   

Hotel EBITDA

$ 44,250

 

$ 53,057

 

$ 47,306

 

$ 39,827

 

$ 184,440

Hotel EBITDA Margin

37.5%

 

40.3%

 

38.2%

 

35.7%

 

38.0%

                   

Rooms occupied

768,816

 

828,736

 

798,109

 

742,541

 

3,138,202

Rooms available

997,087

 

997,087

 

1,008,044

 

1,008,044

 

4,010,262

                   

Occupancy

77.1%

 

83.1%

 

79.2%

 

73.7%

 

78.3%

ADR

$ 142.86

 

$ 148.50

 

$ 145.26

 

$ 139.90

 

$ 144.26

RevPAR

$ 110.15

 

$ 123.43

 

$ 115.01

 

$ 103.05

 

$ 112.89

 

   
   

(1) 

Pro forma information includes operating results for 81 hotels owned as of December 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.

 

SUMMIT HOTEL PROPERTIES, INC.

Pro Forma and Same-Store Data

(Unaudited)

 
 
 

For the Three Months Ended December 31,

 

For the Year Ended

December 31,

 

2016

 

2015

 

2016

 

2015

Pro Forma 1 (81 hotels)

             

Rooms occupied

742,541

 

750,970

 

3,138,202

 

3,063,082

Rooms available

1,008,044

 

1,008,044

 

4,010,262

 

3,941,644

Occupancy

73.7%

 

74.5%

 

78.3%

 

77.7%

ADR

$ 139.90

 

$ 136.94

 

$ 144.26

 

$ 139.95

RevPAR

$ 103.05

 

$ 102.02

 

$ 112.89

 

$ 108.75

               

Occupancy growth

-1.1%

     

0.7%

   

ADR growth

2.2%

     

3.1%

   

RevPAR growth

1.0%

     

3.8%

   
             
 

For the Three Months Ended December 31,

 

For the Year Ended

December 31,

 

2016

 

2015

 

2016

 

2015

Same-Store 2 (70 hotels)

             

Rooms occupied

616,603

 

626,718

 

2,607,197

 

2,580,592

Rooms available

843,272

 

843,272

 

3,354,756

 

3,345,295

Occupancy

73.1%

 

74.3%

 

77.7%

 

77.1%

ADR

$ 133.67

 

$ 131.10

 

$ 138.75

 

$ 135.27

RevPAR

$ 97.74

 

$ 97.43

 

$ 107.83

 

$ 104.35

               

Occupancy growth

-1.6%

     

0.7%

   

ADR growth

2.0%

     

2.6%

   

RevPAR growth

0.3%

     

3.3%

   

 

   

(1) 

Pro forma information includes operating results for 81 hotels owned as of December 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 70 hotels owned by the Company as of January 1, 2015, and at all times during the three and twelve months ended December 31, 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) 

 
 
 

For the Three Months Ending March 31, 2017

 

For the Year Ending December 31, 2017

 

Low

 

High

 

Low

 

High

Net income

$ 10,900

 

$ 12,800

 

$ 88,500

 

$ 96,000

Preferred dividends

(4,200)

 

(4,200)

 

(16,800)

 

(16,800)

Net income applicable to common shares and units

6,700

 

8,600

 

71,700

 

79,200

Net income per common share and unit

$ 0.07

 

$ 0.09

 

$ 0.77

 

$ 0.85

               

Real estate-related depreciation (1)

19,100

 

19,100

 

76,100

 

76,100

Gain on disposal of assets

-

 

-

 

(30,100)

 

(30,100)

FFO applicable to common shares and units

25,800

 

27,700

 

117,700

 

125,200

FFO per common share and unit

$ 0.28

 

$ 0.30

 

$ 1.26

 

$ 1.34

               

Amortization of deferred financing costs

500

 

500

 

1,900

 

1,900

Amortization of franchise fees (1)

100

 

100

 

300

 

300

Equity based compensation

1,100

 

1,100

 

5,900

 

5,900

Hotel property acquisition costs

-

 

-

 

200

 

200

Gain from net casualty recoveries

(400)

 

(400)

 

(400)

 

(400)

Adjusted Funds From Operations

$ 27,100

 

$ 29,000

 

$ 125,600

 

$ 133,100

AFFO per common share and unit

$ 0.29

 

$ 0.31

 

$ 1.34

 

$ 1.42

               

Weighted average diluted common units (1)

93,500

 

93,500

 

93,700

 

93,700

 

   

(1) 

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.

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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