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Summit Hotel Properties Reports Second Quarter 2019 Results And Announces Newly-Formed Joint Venture With GIC

Net Income Increases to $45.2 million;

Adjusted EBITDAre of $52.4 million; Adjusted FFO per share of $0.37

Initial GIC Joint Venture Acquisition Announced

AUSTIN, Texas, July 31, 2019 /PRNewswire/ -- Summit Hotel Properties, Inc. (INN) (the "Company"), today announced results for the quarter ended June 30, 2019.

Summit Hotel Properties, Inc. Logo. (PRNewsFoto/Summit Hotel Properties, Inc.)

"We continue to be pleased with the financial performance of our portfolio as stable top line growth and a focus on cost controls held operating margins generally unchanged during the quarter.  Additionally, RevPAR growth for our well-located and diverse portfolio of high-quality hotels exceeded the STR Upscale average by 160 basis points in the second quarter and also surpassed RevPAR growth for the overall industry," said Dan Hansen, the Company's Chairman, President and Chief Executive Officer.  "We are also thrilled to announce our partnership with GIC, a well-respected and highly regarded investor that shares our disciplined, long-term approach to creating value.  The pending acquisition of the Hampton Inn & Suites Silverthorne will serve as our first investment in the joint venture and we look forward to growing the scale of the partnership," commented Mr. Hansen.

Second Quarter 2019 Highlights

  • Net Income:  Net income attributable to common stockholders increased 33.6 percent to $45.2 million, or $0.43 per diluted share, compared with $33.9 million, or $0.32 per diluted share, in the same period of 2018.
  • Pro Forma RevPAR:  Pro forma revenue per available room ("RevPAR") increased 1.2 percent to $133.51 from the same period in 2018.  Pro forma average daily rate ("ADR") increased 1.2 percent to $163.15 compared to the same period in 2018 and pro forma occupancy increased 0.1 percent to 81.8 percent.
  • Same-Store RevPAR:  Same-store RevPAR increased 1.1 percent to $131.91 from the same period in 2018.  Same-store ADR increased 1.3 percent to $161.64 compared to the same period in 2018 and occupancy decreased 0.2 percent to 81.6 percent.
  • Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $55.2 million, an increase of 2.7 percent from the same period in 2018.  Pro forma hotel EBITDA margin contracted by 3 basis points to 39.0 percent from 39.1 percent in the same period of 2018. 
  • Adjusted EBITDAreAdjusted EBITDAre decreased 5.0 percent to $52.4 million from $55.2 million in the same period of 2018.
  • Adjusted FFO:  AFFO decreased 6.7 percent to $38.6 million, or $0.37 per diluted share, from $41.4 million, or $0.40 per diluted share, in the same period of 2018.
  • Dispositions:  The Company sold six hotels, containing 815 guestrooms, for an aggregate gross sales price of $135.0 million.  The sale price, plus estimated near-term capital improvements, represented a 12.8x EBITDA multiple and 6.9 percent capitalization rate for the trailing twelve months ended March 31, 2019 and resulted in a net gain of $36.6 million.

The Company's results for the three and six months ended June 30, 2019 and 2018 are as follows:


For the Three Months Ended

June 30,


For the Six Months Ended

June 30,


2019


2018


2019


2018


unaudited


(Dollars in thousands, except per share amounts)

Net income attributable to

common stockholders

$        45,248


$        33,867


$        54,416


$        34,735

Net income per diluted share

$            0.43


$            0.32


$            0.52


$            0.33

Total revenues

$      142,930


$      152,222


$      281,882


$      292,421

EBITDAre (1)

$        49,409


$        55,812


$        94,812


$      100,354

Adjusted EBITDAre (1)

$        52,420


$        55,155


$        99,145


$      101,902

FFO (1)

$        35,202


$        41,472


$        65,652


$        67,509

Adjusted FFO (1)

$        38,648


$        41,438


$        70,912


$        73,574

FFO per diluted share and unit (1,2)

$            0.34


$            0.40


$            0.63


$            0.65

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

$            0.37


$            0.40


$            0.68


$            0.71









Pro Forma (3)








RevPAR

$        133.51


$        131.90


$        129.36


$        126.43

RevPAR Growth

1.2%




2.3%



Hotel EBITDA

$        55,191


$        53,715


$      103,365


$        98,646

Hotel EBITDA margin

39.0%


39.1%


37.9%


37.6%

Hotel EBITDA margin growth

-3 bps




27 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"), EBITDAre, adjusted EBITDAre, funds from operations ("FFO"), FFO per diluted share and unit, adjusted FFO ("AFFO"), and AFFO per diluted share and unit, as well as a reconciliation of operating income to hotel EBITDA.  See "Non-GAAP Financial Measures" at the end of this release.



(2)

Amounts are based on 104,255,000 weighted average diluted common shares and units and 104,273,000 weighted average diluted common shares and units for the three months ended June 30, 2019, and 2018, respectively, and 104,261,000 weighted average diluted common shares and units and 104,360,000 weighted average diluted common shares and units for the six months ended June 30, 2019, and 2018, 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 69 hotels owned as of June 30, 2019, as if each hotel had been owned by the Company since January 1, 2018.  As a result, all pro forma information includes operating and financial results for hotels acquired since January 1, 2018, which includes periods prior to the Company's ownership.  Pro forma and non-GAAP financial measures are unaudited.

Year-To-Date 2019 Highlights

  • Net Income:  Net income attributable to common stockholders increased 56.7 percent to $54.4 million, or $0.52 per diluted share, compared with $34.7 million, or $0.33 per diluted share, in the same period of 2018.
  • Pro Forma RevPAR:  Pro forma RevPAR increased 2.3 percent to $129.36 from the same period in 2018.  Pro forma ADR grew to $163.34, an increase of 1.9 percent from the same period in 2018 and pro forma occupancy increased 0.4 percent to 79.2 percent
  • Same-Store RevPAR:  Same-store RevPAR increased 2.1 percent to $128.21 from the same period in 2018.  Same-store ADR increased 2.0 percent to $162.45 compared to the same period in 2018 and same-store occupancy increased 0.1 percent to 78.9 percent.
  • Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $103.4 million, an increase of 4.8 percent from the same period in 2018.  Pro forma hotel EBITDA margin expanded by 27 basis points to 37.9 percent from 37.6 percent in the same period of 2018.
  • Adjusted EBITDAreAdjusted EBITDAre decreased 2.7 percent to $99.1 million from $101.9 million in the same period of 2018.
  • Adjusted FFO:  AFFO decreased 3.6 percent to $70.9 million, or $0.68 per diluted share, from $73.6 million, or $0.71 per diluted share, in the same period of 2018.
  • Dispositions:  The Company sold eight hotels containing 945 guestrooms for an aggregate gross sales price of $146.6 million, or $155,100 per key.  The eight properties were sold at an average trailing capitalization rate of 7.0 percent and resulted in the realization of an aggregate net gain on sale of $40.8 million.

GIC Joint Venture (the "Joint Venture")

The Company has entered into the Joint Venture with GIC, Singapore's sovereign wealth fund, to acquire assets that align with the Company's current investment strategy and criteria.  The Company will serve as general partner and asset manager of the Joint Venture and intends to invest 51% of the equity capitalization of the limited partnership, with GIC investing the remaining 49%.  The Joint Venture intends to finance assets with an anticipated 50% overall leverage target.  The Company will earn fees for providing services to the Joint Venture and will have the potential to earn incentive fees based on the Joint Venture achieving certain return thresholds.  The pending acquisition of the Hampton Inn & Suites in Silverthorne, CO is expected to be acquired by the Joint Venture.  Financial results of the Joint Venture will be consolidated into the Company's consolidated financial statements.

Pending Acquisition

An affiliate of the Joint Venture is currently under contract to acquire the 88-guestroom Hampton Inn & Suites located in Silverthorne, Colorado for a purchase price of $25.5 million.  Ideally situated near popular ski destinations including Keystone, Breckenridge, Copper Mountain, and Arapahoe Basin, the hotel benefits from strong, year-round leisure demand and a local corporate base.  Opened in December 2015, the hotel will require minimal initial capital investment, had trailing twelve-month RevPAR of $153, and hotel EBITDA margin of 45.1 percent for the period ended June 30, 2019, which are premiums to the Company's pro forma portfolio average.  The Company estimates a capitalization rate of 8.3 percent based on management's current estimate of the hotel's forward twelve-month net operating income and expects the hotel to generate $0.8 million of EBITDAre from the scheduled acquisition date through the remainder of 2019. 

An affiliate of the Joint Venture is also under contract to acquire two adjacent, contiguous land parcels to the Hampton Inn & Suites Silverthorne, totaling 1.3 acres, for an aggregate purchase price of $2.4 million, which offers an attractive opportunity for a potential future development.

The Joint Venture expects to close the transactions concurrently during the third quarter.  The transactions remain subject to customary closing conditions, and no assurances can be made that the transactions will close on the intended timeline, or at all.

Capital Improvements

The Company invested $15.3 million and $32.6 million in capital improvements during the three and six months ended June 30, 2019 and anticipates investing a total of $50.0 million to $60.0 million in capital improvements across its portfolio during 2019.

Capital Markets & Balance Sheet

At June 30, 2019, the Company had the following:

  • Total outstanding debt of $834.4 million with a weighted average interest rate of 4.21 percent.
  • After giving effect to interest rate derivative agreements, $550.8 million, or 66 percent, of the Company's debt had fixed interest rates, and $283.6 million, or 34 percent had variable interest rates.
  • Undrawn availability on its senior unsecured revolving credit facility of $375.0 million.
  • Total net debt, which the Company defines as total outstanding debt less cash and cash equivalents, to trailing twelve-month pro forma adjusted EBITDAre of 4.2x.

At July 24, 2019, the Company had the following:

  • Total outstanding debt of $834.2 million with a weighted average interest rate of 4.16 percent.
  • After giving effect to interest rate derivative agreements, $550.6 million, or 66 percent, of our debt had fixed interest rates, and $283.6 million, or 34 percent had variable interest rates.
  • Undrawn availability on its senior unsecured revolving credit facility of $375.0 million.
  • Total net debt to trailing twelve-month pro forma adjusted EBITDAre of 4.2x.

Dividends

On July 29, 2019, the Company declared a quarterly cash dividend of $0.18 per share on its common stock and per common unit of limited partnership interest in Summit Hotel OP, LP.  The annualized dividend of $0.72 per share and per unit represents an annual dividend yield of 6.2 percent based on the July 30, 2019 closing stock price.

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

  • $0.403125 per share on its 6.45% Series D Cumulative Redeemable Preferred Stock.
  • $0.390625 per share on its 6.25% Series E Cumulative Redeemable Preferred Stock.

The common and preferred dividends are payable on August 30, 2019 to holders of record as of August 16, 2019.

2019 Outlook

The Company is providing its updated outlook for the full year 2019 which includes 69 hotels owned as of July 31, 2019 and the pending acquisition of the Hampton Inn & Suites Silverthorne in partnership with GIC, which is expected to close during the third quarter.  There are no future acquisitions, dispositions, or additional capital markets activities assumed in the Company's outlook for full year 2019 beyond those previously mentioned.

FULL YEAR 2019

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


Low


High

Pro forma RevPAR (70) 1

$123.75


$126.25

Pro forma RevPAR growth (70) 1

0.50%


2.50%

RevPAR (same-store 67) 2

$122.00


$124.50

RevPAR growth (same-store 67) 2

0.00%


2.00%

Adjusted EBITDAre

$179,600


$187,900

Adjusted FFO

$125,400


$133,800

Adjusted FFO per diluted unit 3

$1.20


$1.28

Capital improvements

$50,000


$60,000



(1)

As of July 31, 2019, the Company owned 69 hotels and is also under contract to purchase the Hampton Inn & Suites Silverthorne which has been included in the Company's updated outlook.  Pro forma outlook information for the full year 2019 includes operating estimates for 70 hotels as if each hotel had been owned since January 1, 2018.



(2)

As of July 31, 2019, the Company owned 67 same-store hotels.  The same-store outlook information includes operating estimates for 67 hotels owned by the Company since January 1, 2018.



(3)

Assumes weighted average diluted common shares and units outstanding of 104,300,000 for the full year 2019.

Second Quarter 2019 Earnings Conference Call

The Company will conduct its quarterly conference call on Thursday, August 1, 2019, at 9:00 AM ET.  To participate in the conference call, please dial 877-930-8101.  The conference identification code for the call is 3438916.  Additionally, a live webcast of the quarterly conference call will be available through the Company's website, www.shpreit.com.  A replay of the quarterly conference call webcast will be available until 12:00 PM ET Thursday, August 8, 2019, by dialing 855-859-2056, conference identification code 3438916.  A replay will also be available in the Investor Relations section of the Company's website until October 31, 2019.

About Summit Hotel Properties

Summit Hotel Properties, Inc. is a publicly-traded real estate investment trust focused on owning premium-branded hotels with efficient operating models primarily in the Upscale segment of the lodging industry.  As of July 31, 2019, the Company's portfolio consisted of 69 hotels with a total of 10,715 guestrooms located in 24 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 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, EBITDAre, Adjusted EBITDAre, 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, 2018, 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.

Condensed Consolidated Balance Sheets

(Dollars in thousands)



June 30,


December 31,


2019


2018


(unaudited)



ASSETS




Investment in hotel properties, net

$      1,941,674


$      2,065,554

Undeveloped land

2,267


2,267

Assets held for sale, net

493


7,633

Investment in real estate loans, net

31,856


30,700

Right-of-use assets

29,313


-

Cash and cash equivalents

48,796


44,088

Restricted cash

27,066


28,468

Trade receivables, net

21,253


13,978

Prepaid expenses and other

7,634


10,111

Deferred charges, net

4,118


4,691

Other assets

8,751


14,807

Total assets

$      2,123,221


$      2,222,297

LIABILITIES AND EQUITY




Liabilities:




Debt, net of debt issuance costs

$         829,001


$         958,712

Lease liabilities

18,887


-

Accounts payable

5,288


5,391

Accrued expenses and other

72,988


66,050

Total liabilities

926,164


1,030,153





Total stockholders' equity

1,194,803


1,189,849

Non-controlling interests in operating partnership

2,254


2,295

Total equity

1,197,057


1,192,144

Total liabilities and equity

$      2,123,221


$      2,222,297

 


Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except per share amounts)










For the Three Months Ended


For the Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Revenues:








Room

$      131,656


$      140,650


$      259,756


$      270,222

Food and beverage

6,280


6,517


12,442


12,846

Other

4,994


5,055


9,684


9,353

Total revenues

142,930


152,222


281,882


292,421

Expenses:








Room

28,413


31,113


56,253


60,118

Food and beverage

4,688


5,107


9,288


10,106

Other hotel operating expenses

39,422


41,578


79,219


81,036

Property taxes, insurance and other

10,695


11,032


22,103


22,030

Management fees

4,458


5,388


9,604


10,740

Depreciation and amortization

23,779


24,954


49,315


50,200

Corporate general and administrative

5,920


5,620


11,910


12,227

Loss on impairment of assets

1,685


-


1,685


-

Total expenses

119,060


124,792


239,377


246,457

Gain on disposal of assets, net

35,520


17,331


39,686


17,288

Operating income

59,390


44,761


82,191


63,252

Other income (expense):








Interest expense

(9,766)


(10,402)


(20,618)


(19,731)

Other income, net

146


3,470


1,447


4,259

Total other income (expense)

(9,620)


(6,932)


(19,171)


(15,472)

Income from continuing operations before income taxes

49,770


37,829


63,020


47,780

Income tax expense

(701)


(152)


(1,051)


(412)

Net income

49,069


37,677


61,969


47,368

Non-controlling interest in Operating Partnership

(112)


(101)


(135)


(104)

Net income attributable to Summit Hotel Properties, Inc.

48,957


37,576


61,834


47,264

Preferred dividends

(3,709)


(3,709)


(7,418)


(9,252)

Premium on redemption of preferred stock

-


-


-


(3,277)

Net income attributable to common stockholders

$        45,248


$        33,867


$        54,416


$        34,735

Earnings per share:








Basic

$            0.43


$            0.33


$            0.52


$            0.33

Diluted

$            0.43


$            0.32


$            0.52


$            0.33

Weighted average common shares outstanding:








Basic

103,896


103,643


103,823


103,572

Diluted

103,937


103,883


103,888


103,892

Dividends per share

$            0.18


$            0.18


$            0.36


$            0.36

 

Summit Hotel Properties, Inc.

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

(Unaudited)

(Dollars in thousands, except per share and unit amounts)



For the Three Months Ended


For the Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Net income

$        49,069


$        37,677


$        61,969


$        47,368

Preferred dividends

(3,709)


(3,709)


(7,418)


(9,252)

Premium on redemption of preferred stock

-


-


-


(3,277)

Net income applicable to common shares and common units

$        45,360


$        33,968


$        54,551


$        34,839

Real estate-related depreciation (1)

23,677


24,835


49,102


49,958

Loss on impairment of assets

1,685


-


1,685


-

Gain on disposal of assets, net

(35,520)


(17,331)


(39,686)


(17,288)

FFO applicable to common shares and common units

$        35,202


$        41,472


$        65,652


$        67,509

Amortization of lease-related intangible assets, net

36


181


71


362

Amortization of deferred financing costs

333


504


714


998

Amortization of franchise fees (1)

102


119


213


242

Equity-based compensation

1,964


1,821


3,316


4,048

Debt transaction costs

1,122


129


1,835


217

Premium on redemption of preferred stock

-


-


-


3,277

Non-cash interest income (2)

(512)


(502)


(1,019)


(1,011)

Non-cash lease expense, net

123


-


279


-

Casualty losses (recoveries), net

278


(2,286)


(149)


(2,068)

AFFO applicable to common shares and common units

$        38,648


$        41,438


$        70,912


$        73,574

Weighted average diluted common shares / common units (3)

104,255


104,273


104,261


104,360

FFO per common share / common unit

$            0.34


$            0.40


$            0.63


$            0.65

AFFO per common share / common unit

$            0.37


$            0.40


$            0.68


$            0.71



(1)

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



(2)

Non-cash interest income relates to the amortization of the discount on certain notes receivable.  The discount on these notes receivable was recorded at inception of the related loans based on the estimated value of the embedded purchase options in the notes receivable.



(3)

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 – EBITDAre

(Unaudited)

(Dollars in thousands)










For the Three Months Ended


For the Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Net income

$        49,069


$        37,677


$        61,969


$        47,368

Depreciation and amortization

23,779


24,954


49,315


50,200

Interest expense

9,766


10,402


20,618


19,731

Interest income

(71)


(42)


(140)


(69)

Income tax expense

701


152


1,051


412

EBITDA

$        83,244


$        73,143


$      132,813


$      117,642

Loss on impairment of assets

1,685


-


1,685


-

Gain on disposal of assets, net

(35,520)


(17,331)


(39,686)


(17,288)

EBITDAre

$        49,409


$        55,812


$        94,812


$      100,354

Amortization of lease-related intangible assets, net

36


181


71


362

Equity-based compensation

1,964


1,821


3,316


4,048

Debt transaction costs

1,122


129


1,835


217

Non-cash interest income (1)

(512)


(502)


(1,019)


(1,011)

Non-cash lease expense, net

123


-


279


-

Casualty losses (recoveries), net

278


(2,286)


(149)


(2,068)

Adjusted EBITDAre

$        52,420


$        55,155


$        99,145


$      101,902



(1)

Non-cash interest income relates to the amortization of the discount on certain notes receivable.  The discount on these notes receivable was recorded at inception of the related loans based on the estimated value of the embedded purchase options in the notes receivable.

 

Summit Hotel Properties, Inc.

Pro Forma Hotel Operating Data

(Unaudited)

(Dollars in thousands)



For the Three Months Ended


For the Six Months Ended


June 30,


June 30,

Pro Forma Operating Data (1) (2)

2019


2018


2019


2018

Pro forma room revenue

$      130,182


$      126,656


$      250,873


$      241,296

Pro forma other hotel operations revenue

11,228


10,869


21,834


20,825

Pro forma total revenues

141,410


137,525


272,707


262,121

Pro forma total hotel operating expenses

86,219


83,810


169,342


163,475

Pro forma hotel EBITDA

$        55,191


$        53,715


$      103,365


$        98,646

Pro forma hotel EBITDA Margin

39.0%


39.1%


37.9%


37.6%


Reconciliations of Non-GAAP financial measures to comparable GAAP financial measures


Revenue:







Total revenues

$      142,930


$      152,222


$      281,882


$      292,421

Total revenues - acquisitions (1)

-


3,271


-


5,306

Total revenues - dispositions (2)

(1,520)


(17,968)


(9,175)


(35,606)

Pro forma total revenues

141,410


137,525


272,707


262,121









Hotel Operating Expenses:








Total hotel operating expenses

87,676


94,218


176,467


184,030

Hotel operating expenses - acquisitions (1)

-


1,314


-


2,455

Hotel operating expenses - dispositions (2)

(1,457)


(11,722)


(7,125)


(23,010)

Pro forma hotel operating expenses

86,219


83,810


169,342


163,475









Hotel EBITDA:








Operating income

59,390


44,761


82,191


63,252

(Gain) loss on disposal of assets, net

(35,520)


(17,331)


(39,686)


(17,288)

Loss on impairment of assets

1,685


-


1,685


-

Corporate general and administrative

5,920


5,620


11,910


12,227

Depreciation and amortization

23,779


24,954


49,315


50,200

Hotel EBITDA

55,254


58,004


105,415


108,391

Hotel EBITDA - acquisitions (1)

-


1,957


-


2,851

Hotel EBITDA - dispositions (2)

(63)


(6,246)


(2,050)


(12,596)

Pro forma hotel EBITDA

$        55,191


$        53,715


$      103,365


$        98,646



(1)

Unaudited pro forma information includes operating results for 69 hotels owned as of June 30, 2019, as if all such hotels had been owned by the Company since January 1, 2018.  For hotels acquired by the Company after January 1, 2018 (the "Acquired Hotels"), the Company has included in the pro forma information the financial results of each of the Acquired Hotels for the period from January 1, 2018, to the date the Acquired Hotels were purchased by the Company (the "Pre-acquisition Period").  The financial results for the Pre-acquisition Period were provided by the third-party owner of such Acquired Hotel prior to purchase by the Company and have not been audited or reviewed by our auditors or adjusted by us.   The pro forma information is included to enable comparison of results for the current reporting period to results for the comparable period of the prior year and are not indicative of future results.



(2)

For hotels sold by the Company between January 1, 2018 and June 30, 2019 (the "Disposed Hotels"), the unaudited pro forma information excludes the financial results of each of the Disposed Hotels for the period of ownership by the Company from January 1, 2018 through the date that the Disposed Hotels were sold by the Company.

 

Summit Hotel Properties, Inc.

Pro Forma Hotel Operating Data

(Unaudited)

(Dollars in thousands, except operating statistics)



2018


2019



Pro Forma Operating Data (1) (2)

Q3


Q4


Q1


Q2


Trailing Twelve

Months Ended

June 30, 2019


Pro forma room revenue

$       122,117


$       113,523


$       120,691


$       130,182


$          486,513


Pro forma other hotel operations revenue

10,621


10,455


10,606


11,228


42,910


Pro forma total revenues

132,738


123,978


131,297


141,410


529,423


Pro forma total hotel operating expenses

83,396


79,576


83,123


86,219


332,314


Pro forma hotel EBITDA

$         49,342


$         44,402


$         48,174


$         55,191


$          197,109


Pro forma hotel EBITDA Margin

37.2%


35.8%


36.7%


39.0%


37.2%







Pro Forma Statistics (1) (2)











Rooms sold

781,137


734,631


737,988


797,948


3,051,704


Rooms available

985,657


985,688


964,260


975,035


3,910,640


Occupancy

79.3%


74.5%


76.5%


81.8%


78.0%


ADR

$         156.33


$         154.53


$         163.54


$         163.15


$            159.42


RevPAR

$         123.89


$         115.17


$         125.17


$         133.52


$            124.41













Actual Statistics











Rooms sold

855,950


799,113


796,661


808,354


3,260,078


Rooms available

1,082,225


1,072,628


1,043,070


988,075


4,185,998


Occupancy

79.1%


74.5%


76.4%


81.8%


77.9%


ADR

$         153.55


$         152.40


$         160.80


$         162.87


$            157.35


RevPAR

$         121.44


$         113.54


$         122.81


$         133.25


$            122.54



Reconciliations of Non-GAAP financial measures to comparable GAAP financial measures


Revenue:










Total revenues

$       142,340


$       132,509


$       138,952


$       142,930


$          556,731


Total revenues from acquisitions (1)

2,553


-


-


-


2,553


Total revenues from dispositions (2)

(12,155)


(8,531)


(7,655)


(1,520)


(29,861)


Pro forma total revenues

$       132,738


$       123,978


$       131,297


$       141,410


$          529,423













Hotel Operating Expenses:











Total hotel operating expenses

$         90,383


$         85,535


$         88,791


$         87,676


$          352,385


Total hotel operating expenses from acquisitions (1)

1,089


-


-


-


1,089


Total hotel operating expenses from dispositions (2)

(8,076)


(5,959)


(5,668)


(1,457)


(21,160)


Pro forma total hotel operating expenses

$         83,396


$         79,576


$         83,123


$         86,219


$          332,314













Hotel EBITDA:











Operating income

$         46,990


$         14,957


$         22,801


$         59,390


$          144,138


(Gain) loss on disposal of assets, net

(24,826)


640


(4,166)


(35,520)


(63,872)


Loss on impairment of assets

-


1,075


-


1,685


2,760


Corporate general and administrative

4,852


4,430


5,990


5,920


21,192


Depreciation and amortization

24,941


25,872


25,536


23,779


100,128


Hotel EBITDA

51,957


46,974


50,161


55,254


204,346


Hotel EBITDA from acquisitions (1)

1,464


-


-


-


1,464


Hotel EBITDA from dispositions (2)

(4,079)


(2,572)


(1,987)


(63)


(8,701)


Pro forma hotel EBITDA

$         49,342


$         44,402


$         48,174


$         55,191


$          197,109




(1)

Unaudited pro forma information includes operating results for 69 hotels owned as of June 30, 2019 as if all such hotels had been owned by the Company since July 1, 2018.  For hotels acquired by the Company after July 1, 2018 (the "Acquired Hotels"), the Company has included in the pro forma information the financial results of each of the Acquired Hotels for the period from July 1, 2018 to the date the Acquired Hotels were purchased by the Company (the "Pre-acquisition Period").  The financial results for the Pre-acquisition Period were provided by the third-party owner of such Acquired Hotel prior to purchase by the Company and have not been audited or reviewed by our auditors or adjusted by us.   The pro forma information is included to enable comparison of results for the current reporting period to results for the comparable period of the prior year and are not indicative of future results.



(2)

For hotels sold by the Company between July 1, 2018 and June 30, 2019 (the "Disposed Hotels"), the pro forma information excludes the financial results of each of the Disposed Hotels for the period of ownership by the Company from July 1, 2018 through the date that the Disposed Hotels were sold by the Company.

 


Summit Hotel Properties, Inc.

Pro Forma and Same-Store Data

(Unaudited)



For the Three Months Ended


For the Six Months Ended



June 30,


June 30,



2019


2018


2019


2018


Pro Forma (69) (¹)









Rooms sold

797,948


785,454


1,535,936


1,505,675


Rooms available

975,035


960,267


1,939,295


1,908,597


Occupancy

81.8%


81.8%


79.2%


78.9%


ADR

$        163.15


$        161.25


$        163.34


$        160.26


RevPAR

$        133.51


$        131.90


$        129.36


$        126.43











Occupancy change

0.1%




0.4%




ADR change

1.2%




1.9%




RevPAR change

1.2%




2.3%














For the Three Months Ended


For the Six Months Ended



June 30,


June 30,



2019


2018


2019


2018


Same-Store (67) (2)









Rooms sold

772,098


773,254


1,485,162


1,482,526


Rooms available

946,097


945,945


1,881,737


1,880,775


Occupancy

81.6%


81.7%


78.9%


78.8%


ADR

$        161.64


$        159.64


$        162.45


$        159.26


RevPAR

$        131.91


$        130.49


128.21


$        125.54











Occupancy change

-0.2%




0.1%




ADR change

1.3%




2.0%




RevPAR change

1.1%




2.1%








(1)

Unaudited pro forma information includes operating results for 69 hotels owned as of June 30, 2019, as if each hotel had been owned by the Company since January 1, 2018.  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 67 hotels owned by the Company as of January 1, 2018, and at all times during the three and six months ended June 30, 2019, and 2018.

 

Summit Hotel Properties, Inc. 

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

(Unaudited)

(Dollars in thousands, except per share and unit)  



For the Year Ending


December 31, 2019


Low


High


Net income

$        73,900


$        82,300


Preferred dividends

(14,800)


(14,800)


Net income applicable to common shares and units

59,100


67,500


Real estate-related depreciation

96,300


96,300


Loss on impairment of assets

1,700


1,700


Gain on disposal of assets, net

(39,700)


(39,700)


Income from non-controlling interest in consolidated joint venture

(200)


(200)


Adjustments from non-controlling interest in consolidated joint venture

(200)


(200)


FFO applicable to common shares and common units

117,000


125,400


Amortization of lease-related intangible assets, net

200


200


Amortization of deferred financing costs

1,400


1,400


Amortization of franchise fees

400


400


Equity-based compensation

6,200


6,200


Debt transaction costs

1,900


1,900


Non-cash interest income

(2,100)


(2,100)


Non-cash lease expense, net

500


500


Casualty recoveries, net

(100)


(100)


AFFO applicable to common shares and common units

$125,400


$133,800


Weighted average diluted common shares/common units (1)

104,300


104,300


FFO per common share and common unit

$            1.12


$            1.20


AFFO per common share and common unit

$            1.20


$            1.28




(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.

 

Summit Hotel Properties, Inc. 

Reconciliation of Net Income to Non-GAAP Measures – EBITDA for Financial Outlook

(Unaudited)

(Dollars in thousands)



For the Year Ending


December 31, 2019


Low


High

Net income

$        73,900


$        82,300

Depreciation and amortization

96,700


96,700

Interest expense

39,800


39,700

Interest income

(300)


(300)

Income tax expense

1,300


1,300

EBITDA

211,400


219,700

Loss on impairment of assets

1,700


1,700

Gain on disposal of assets, net

(39,700)


(39,700)

EBITDAre

173,400


181,700

Amortization of lease-related intangible assets, net

200


200

Equity-based compensation

6,200


6,200

Debt transaction costs

1,900


1,900

Non-cash interest income

(2,100)


(2,100)

Non-cash lease expense, net

500


500

Casualty recoveries, net

(100)


(100)

Income from non-controlling interest in consolidated joint venture

(200)


(200)

Adjustments from non-controlling interest in consolidated joint venture

(200)


(200)

Adjusted EBITDAre

$      179,600


$      187,900

Non-GAAP Financial Measures

We disclose certain "non-GAAP financial measures," which are measures of our historical financial performance. Non-GAAP financial measures are financial measures not prescribed by Generally Accepted Accounting Principles ("GAAP"). These measures are as follows: (i) Funds From Operations ("FFO") and Adjusted Funds from Operations ("AFFO"), (ii) Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre"), Adjusted EBITDAre, and hotel EBITDA (as described below). We caution investors that amounts presented in accordance with our definitions of non-GAAP financial measures may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP financial measures in the same manner. Our non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of our operating performance. Our non-GAAP financial measures 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 our non-GAAP financial measures 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 measure prescribed by GAAP such as net income (loss).

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

As defined by 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. AFFO represents FFO excluding amortization of deferred financing costs, franchise fees, equity-based compensation expense, debt transaction costs, premiums on redemption of preferred shares, losses from net casualties, non-cash lease expense, non-cash interest income and non-cash income tax related adjustments to our deferred tax assets. Unless otherwise indicated, we present FFO and AFFO applicable to our common shares and common units. We present FFO and AFFO because we consider FFO and AFFO 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 and AFFO when reporting their results. FFO and AFFO are 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 and AFFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and AFFO provide performance measures that, when compared year over year, reflect 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. Our computation of FFO differs slightly from the computation of Nareit-defined FFO related to the reporting of corporate depreciation and amortization expense. Our computation of FFO may also differ from the methodology for calculating FFO used by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO and AFFO 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.  Where indicated in this release, FFO is based on our computation of FFO and not the computation of Nareit-defined FFO unless otherwise noted.

EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA

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 an investor 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 team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

EBITDAre and Adjusted EBITDAre

EBITDAre is based on EBITDA and is expected to provide additional relevant information about REITs as real estate companies in support of growing interest among generalist investors. EBITDAre is intended to be a supplemental non-GAAP performance measure that is independent of a company's capital structure and will provide a uniform basis to measure the enterprise value of a company compared to other REITs.

EBITDAre, as defined by Nareit, is calculated as EBITDA, excluding: (i) loss and gains on disposition of property and (ii) asset impairments, if any. We believe EBITDAre is useful to an investor 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.

We make additional adjustments to EBITDAre when evaluating our performance because we believe that the exclusion of certain additional non-recurring or certain non-cash items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is useful to an investor 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.

Hotel EBITDA

With respect to hotel EBITDA, we believe that excluding the effect of corporate-level expenses and non-cash items 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, EBITDAre, adjusted EBITDAre, 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, EBITDAre, adjusted EBITDAre, and hotel EBITDA should not be considered as an alternative measure of our net income (loss) or operating performance. EBITDA, EBITDAre adjusted EBITDAre, 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, EBITDAre, adjusted EBITDAre, 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, EBITDAre, adjusted EBITDAre and hotel EBITDA to the most directly comparable GAAP financial performance measure, which is net income (loss) and operating income (loss).

 

Cision

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