Summit Hotel Properties Reports Fourth Quarter And Full Year 2017 Results

For the Three Months Ended
December 31,

For the Year Ended

December 31,

2017

2016

2017

2016

(Unaudited)

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

Net income attributable to common stockholders

$          2,389

$          3,302

$        79,234

$        87,448

Net income per diluted share and unit

$            0.02

$            0.04

$            0.79

$            1.00

Total revenues

$      131,745

$      110,322

$      515,377

$      473,935

EBITDA ⁽¹⁾

$        42,909

$        34,009

$      216,705

$      207,286

Adjusted EBITDA ⁽¹⁾

$        44,479

$        36,099

$      180,148

$      166,481

FFO ⁽¹⁾

$        26,487

$        22,051

$      121,856

$      110,689

Adjusted FFO ⁽¹⁾

$        31,499

$        26,728

$      134,111

$      123,773

FFO per diluted share and unit ^{(1) (2)}

$            0.25

$            0.25

$            1.21

$            1.26

Adjusted FFO per diluted share and unit ^{(1) (2)}

$            0.30

$            0.30

$            1.34

$            1.41

Pro Forma ⁽³⁾

RevPAR

$        111.96

$        106.10

$        117.69

$        116.21

RevPAR growth

5.5%

1.3%

Hotel EBITDA

$        48,837

$        46,957

$      211,730

$      217,414

Hotel EBITDA margin

35.8%

36.4%

37.3%

38.7%

Hotel EBITDA margin growth

-65 bps

-136 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 reconciliation of operating income to hotel EBITDA.  See "Non-GAAP Financial Measures" at the end of this release.  Non-GAAP financial measures are unaudited.

⁽²⁾

Amounts are based on 104,184,000 weighted average diluted common shares and units and 89,086,000 weighted average diluted common shares and units for the three months ended December 31, 2017, and 2016, respectively, and 100,372,000 weighted average diluted common shares and units and 87,798,000 weighted average diluted common shares and units for the twelve months ended December 31, 2017, and 2016, 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 83 hotels owned as of December 31, 2017, as if each hotel had been owned by the Company since January 1, 2016.  As a result, all pro forma information includes operating and financial results for hotels acquired since January 1, 2016, which includes periods prior to the Company's ownership.  Pro forma and non-GAAP financial measures are unaudited.

FIRST QUARTER 2018

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

Low

High

Pro forma RevPAR (83) ¹

$115.25

$117.50

Pro forma RevPAR growth (83) ¹

0.00%

2.00%

RevPAR (same-store 69) ²

$112.50

$114.75

RevPAR growth (same-store 69) ²

(2.00%)

0.00%

Adjusted FFO

$29,200

$32,300

Adjusted FFO per diluted unit ³

$0.28

$0.31

FULL YEAR 2018

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

Low

High

Pro forma RevPAR (84) ¹

$117.75

$121.25

Pro forma RevPAR growth (84) ¹

0.00%

3.00%

RevPAR (same-store 69) ²

$116.00

$119.50

RevPAR growth (same-store 69) ²

(1.00%)

2.00%

Adjusted FFO

$138,900

$151,400

Adjusted FFO per diluted unit ³

$1.33

$1.45

Capital improvements

$45,000

$65,000

(1)

As of February 21, 2018, the Company owned 83 hotels.  Pro forma outlook information for the first quarter 2018 includes operating estimates for 83 hotels as if each hotel had been owned since January 1, 2017.  Pro forma outlook information for the full year 2018 includes operating estimates for 84 hotels as if each hotel had been owned since January 1, 2017.

(2)

As of February 21, 2018, the Company owned 69 same-store hotels.  The same-store outlook information includes operating estimates for 69 hotels owned by the Company as of January 1, 2017.

(3)

Assumes weighted average diluted common shares and units outstanding of 104,300,000 for the first quarter 2018 and 104,400,000 for the full year 2018.

SUMMIT HOTEL PROPERTIES, INC.

Condensed Consolidated Balance Sheets

(Amounts in thousands)

December 31,

2017

2016

ASSETS

  Investment in hotel properties, net

$     2,059,492

$     1,545,122

  Investment in hotel properties under development

23,793

-

  Land held for development

2,942

5,742

  Assets held for sale

1,193

62,695

  Investment in real estate loans, net

12,356

17,585

  Cash and cash equivalents

36,545

34,694

  Restricted cash

29,462

24,881

  Trade receivables, net

16,985

11,807

  Prepaid expenses and other

9,454

6,474

  Deferred charges, net

5,221

3,727

  Other assets

12,431

5,778

          Total assets

$     2,209,874

$     1,718,505

LIABILITIES AND EQUITY

Liabilities:

  Debt, net of debt issuance costs

$        868,236

$        652,414

  Accounts payable

7,774

4,623

  Accrued expenses and other

56,488

47,998

          Total liabilities

932,498

705,035

          Total stockholders' equity

1,274,502

1,010,042

  Non-controlling interests in operating partnership

2,874

3,428

          Total equity

1,277,376

1,013,470

          Total liabilities and equity

$     2,209,874

$     1,718,505

SUMMIT HOTEL PROPERTIES, INC.

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share amounts)

 For the Three Months Ended
December 31,

 For the Year Ended
December 31,

2017

2016

2017

2016

Revenues:

(unaudited)

  Room

$      121,824

$      102,613

$      479,934

$      443,270

  Other hotel operations revenue

9,921

7,709

35,443

30,665

Total revenues

131,745

110,322

515,377

473,935

Expenses:

Hotel operating expenses:

Room

31,908

27,262

123,129

110,221

Other direct

18,001

16,012

67,256

64,608

Other indirect

34,922

27,982

135,219

120,852

Total hotel operating expenses

84,831

71,256

325,604

295,681

Depreciation and amortization

23,875

18,691

85,927

72,406

Corporate general and administrative

4,599

4,934

19,597

19,292

Hotel property acquisition costs

-

683

354

3,492

Loss on impairment of assets

-

-

-

577

Total expenses

113,305

95,564

431,482

391,448

Operating income

18,440

14,758

83,895

82,487

Other income (expense):

Interest expense

(8,201)

(6,859)

(29,687)

(28,091)

(Loss) gain on disposal of assets, net

(322)

(142)

43,209

49,855

Other income, net

931

706

3,778

2,560

Total other (expense) income, net

(7,592)

(6,295)

17,300

24,324

Income from continuing operations before income taxes

10,848

8,463

101,195

106,811

Income tax (expense) benefit

(1,061)

1,911

(1,674)

1,450

Net income

9,787

10,374

99,521

108,261

Less - Income attributable to Operating Partnership

(18)

(2)

(307)

(456)

Net income attributable to Summit Hotel Properties, Inc.

9,769

10,372

99,214

107,805

Preferred dividends

(4,808)

(4,945)

(17,408)

(18,232)

Premium on redemption of preferred shares

(2,572)

(2,125)

(2,572)

(2,125)

Net income attributable to common stockholders

$         2,389

$         3,302

$       79,234

$       87,448

Earnings per share:

Basic

$           0.02

$           0.04

$           0.79

$           1.00

Diluted

$           0.02

$           0.04

$           0.79

$           1.00

Weighted average common shares outstanding:

Basic

103,265

88,201

99,406

86,874

Diluted

103,653

88,671

99,780

87,343

Dividends per share

$           0.17

$           0.16

$           0.67

$           0.55

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,

2017

2016

2017

2016

Net income

$          9,787

$        10,374

$        99,521

$      108,261

Preferred dividends

(4,808)

(4,945)

(17,408)

(18,232)

Premium on redemption of preferred shares

(2,572)

(2,125)

(2,572)

(2,125)

Net income applicable to common shares and units

2,407

3,304

79,541

87,904

Net income per common share and unit

$            0.02

$            0.04

$            0.79

$            1.00

Real estate-related depreciation ⁽¹⁾

23,758

18,605

85,524

72,063

Loss on impairment of assets

-

-

-

577

Loss (gain) on disposal of assets

322

142

(43,209)

(49,855)

FFO applicable to common shares and units

26,487

22,051

121,856

110,689

FFO per common share and unit

$            0.25

$            0.25

$            1.21

$            1.26

Amortization of deferred financing costs

469

518

2,022

2,143

Amortization of franchise fees ⁽¹⁾

117

86

403

343

Equity based compensation

1,404

1,019

5,887

4,221

Hotel property acquisition costs

-

683

354

3,492

Debt transaction costs

15

24

195

538

Premium on redemption of preferred shares

2,572

2,125

2,572

2,125

Loss from net casualties

113

222

500

222

Non-cash interest income ⁽²⁾

(284)

-

(284)

-

Non-cash income tax related to adjustment to deferred tax asset ⁽³⁾

606

-

606

-

Adjusted Funds From Operations

$        31,499

$        26,728

$      134,111

$      123,773

AFFO per common share and unit

$            0.30

$            0.30

$            1.34

$            1.41

Weighted average diluted common units ⁽⁴⁾

104,184

89,086

100,372

87,798

⁽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⁾ 

Includes $0.6 million of non-recurring, non-cash income tax expense related to the adjustment of our deferred tax asset as a result of the lower corporate income tax rate enacted by the passing of the Tax Cuts and Jobs Act.

⁽⁴⁾ 

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

(Unaudited)

(Amounts in thousands)

For the Three Months Ended
December 31,

For the Year Ended

December 31,

2017

2016

2017

2016

Net income

$          9,787

$        10,374

$        99,521

$      108,261

Depreciation and amortization

23,875

18,691

85,927

72,406

Interest expense

8,201

6,859

29,687

28,091

Interest income

(15)

(4)

(104)

(22)

Income tax expense (benefit)

1,061

(1,911)

1,674

(1,450)

EBITDA

$        42,909

$        34,009

$      216,705

$      207,286

Equity based compensation

$          1,404

$          1,019

$          5,887

$          4,221

Hotel property acquisition costs

-

683

354

3,492

Loss on impairment of assets

-

-

-

577

Debt transaction costs

15

24

195

538

Loss (gain) on disposal of assets

322

142

(43,209)

(49,855)

Loss from net casualties

113

222

500

222

Non-cash interest income ⁽¹⁾

(284)

-

(284)

-

Adjusted EBITDA

$        44,479

$        36,099

$      180,148

$      166,481

(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
December 31,

For the Year Ended

December 31,

2017

2016

2017

2016

Pro forma room revenue

$      126,098

$      119,425

$      525,868

$      519,722

Pro forma other hotel operations revenue

10,419

9,508

41,474

42,308

Pro forma total revenues

136,517

128,933

567,342

562,030

Pro forma total hotel operating expenses

87,680

81,976

355,612

344,616

Pro forma hotel EBITDA

$        48,837

$        46,957

$      211,730

$      217,414

Pro forma hotel EBITDA Margin

35.8%

36.4%

37.3%

38.7%

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

Revenue:

Total revenues

$      131,745

$      110,322

$      515,377

$      473,935

Total revenues from acquisitions ⁽¹⁾

4,772

26,741

65,367

132,451

Total revenues from dispositions ⁽²⁾

-

(8,130)

(13,402)

(44,356)

Pro forma total revenues

136,517

128,933

567,342

562,030

Hotel Operating Expenses:

Total hotel operating expenses

$        84,831

$        71,256

$      325,604

$      295,681

Total hotel operating expenses from acquisitions ⁽¹⁾

2,877

16,557

39,739

80,233

Total hotel operating expenses from dispositions ⁽²⁾

(28)

(5,837)

(9,731)

(31,298)

Pro forma total hotel operating expenses

$        87,680

$        81,976

$      355,612

$      344,616

Hotel EBITDA:

Operating income

$        18,440

$        14,758

$        83,895

$        82,487

Loss on impairment of assets

-

-

-

577

Hotel property acquisition costs

-

683

354

3,492

Corporate general and administrative expenses

4,599

4,934

19,597

19,292

Depreciation and amortization

23,875

18,691

85,927

72,406

Hotel EBITDA

46,914

39,066

189,773

178,254

Hotel EBITDA from acquisitions ⁽¹⁾

1,895

10,184

25,628

52,218

Hotel EBITDA from dispositions ⁽²⁾

28

(2,293)

(3,671)

(13,058)

Pro forma hotel EBITDA

$        48,837

$        46,957

$      211,730

$      217,414

(1)

Pro forma information includes operating results for 83 hotels owned as of December 31, 2017 as if all such hotels had been owned by the Company since January 1, 2016.  For hotels acquired by the Company after January 1, 2016 (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, 2016 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, 2016 and December 31, 2017 (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 January 1, 2016 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 metrics)

2017

Pro Forma Operating Data ^{(1) (2)}

Q1

Q2

Q3

Q4

Year Ended
Dec 31, 2017

Pro forma room revenue

$    126,871

$    137,991

$    134,908

$    126,098

$           525,868

Pro forma other hotel operations revenue

9,927

10,823

10,305

10,419

41,474

Pro forma total revenues

136,798

148,814

145,213

136,517

567,342

Pro forma total hotel operating expenses

86,206

90,766

90,960

87,680

355,612

Pro forma hotel EBITDA

$      50,592

$      58,048

$      54,253

$      48,837

$           211,730

Pro forma hotel EBITDA Margin

37.0%

39.0%

37.4%

35.8%

37.3%

Pro Forma Statistics ^{(1) (2)}

Rooms occupied

832,355

904,445

907,325

859,854

3,503,979

Rooms available

1,101,780

1,114,019

1,126,264

1,126,264

4,468,327

Occupancy

75.5%

81.2%

80.6%

76.3%

78.4%

ADR

$      152.42

$      152.57

$      148.69

$      146.65

$             150.08

RevPAR

$      115.15

$      123.87

$      119.78

$      111.96

$             117.69

Actual Statistics

Rooms occupied

761,358

813,577

860,672

835,078

3,270,685

Rooms Available

990,913

986,998

1,069,100

1,097,576

4,144,587

Occupancy

76.8%

82.4%

80.5%

76.1%

78.9%

ADR

$      144.94

$      148.13

$      147.84

$      145.88

$             146.74

RevPAR

$      111.36

$      122.10

$      119.02

$      110.99

$             115.80

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

Revenue:

Total revenues

$    117,989

$    129,056

$    136,587

$    131,745

$            515,377

Total revenues from acquisitions ⁽¹⁾

27,544

24,007

9,044

4,772

65,367

Total revenues from dispositions ⁽²⁾

(8,735)

(4,249)

(418)

-

(13,402)

Pro forma total revenues

$    136,798

$    148,814

$    145,213

$    136,517

$            567,342

Hotel Operating Expenses:

Total hotel operating expenses

$      75,204

$      79,499

$      86,070

$      84,831

$            325,604

Total hotel operating expenses from acquisitions ⁽¹⁾

17,208

14,399

5,255

2,877

39,739

Total hotel operating expenses from dispositions ⁽²⁾

(6,206)

(3,132)

(365)

(28)

(9,731)

Total pro forma hotel operating expenses

$      86,206

$      90,766

$      90,960

$      87,680

$            355,612

Hotel EBITDA:

Operating income

$      18,567

$      24,515

$      22,373

$      18,440

$              83,895

Hotel property acquisition costs

354

-

-

-

354

Corporate general and administrative expenses

5,138

5,310

4,550

4,599

19,597

Depreciation and amortization

18,726

19,732

23,594

23,875

85,927

Hotel EBITDA

42,785

49,557

50,517

46,914

189,773

Hotel EBITDA from acquisitions ⁽¹⁾

10,336

9,608

3,789

1,895

25,628

Hotel EBITDA from dispositions ⁽²⁾

(2,529)

(1,117)

(53)

28

(3,671)

Pro forma hotel EBITDA

$      50,592

$      58,048

$      54,253

$      48,837

$            211,730

(1)

Pro forma information includes operating results for 83 hotels owned as of December 31, 2017 as if all such hotels had been owned by the Company since January 1, 2017.  For hotels acquired by the Company after January 1, 2017 (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, 2017 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, 2017 and December 31, 2017 (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 January 1, 2017 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
December 31,

For the Year Ended

December 31,

2017

2016

2017

2016

Pro Forma ¹ (83 hotels)

Rooms occupied

859,854

819,020

3,503,979

3,457,811

Rooms available

1,126,264

1,125,620

4,468,327

4,472,133

Occupancy

76.3%

72.8%

78.4%

77.3%

ADR

$        146.65

$        145.81

$        150.08

$        150.30

RevPAR

$        111.96

$        106.10

$        117.69

$        116.21

Occupancy change

4.9%

1.4%

ADR change

0.6%

-0.2%

RevPAR change

5.5%

1.3%

For the Three Months Ended
December 31,

For the Year Ended

December 31,

2017

2016

2017

2016

Same-Store ² (65 hotels)

Rooms occupied

633,925

613,280

2,605,750

2,586,364

Rooms available

832,692

832,048

3,303,612

3,310,104

Occupancy

76.1%

73.7%

78.9%

78.1%

ADR

$        140.64

$        140.27

$        144.09

$        145.15

RevPAR

$        107.07

$        103.39

$        113.65

$        113.41

Occupancy change

3.3%

0.9%

ADR change

0.3%

-0.7%

RevPAR change

3.6%

0.2%

⁽¹⁾ 

Pro forma information includes operating results for 83 hotels owned as of December 31, 2017, as if each hotel had been owned by the Company since January 1, 2016.  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 65 hotels owned by the Company as of January 1, 2016, and at all times during the three and twelve months ended December 31, 2017, and 2016.

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, 2018

For the Year Ending
December 31, 2018

Low

High

Low

High

Net income

$          7,300

$        10,400

$        47,000

$        59,500

Preferred dividends

(5,600)

(5,600)

(16,700)

(16,700)

Premium on redemption of preferred shares

(3,300)

(3,300)

(3,300)

(3,300)

Net income applicable to common shares and units

(1,600)

1,500

27,000

39,500

Net income per common share and unit

$         (0.02)

$            0.01

$            0.26

$            0.38

Real estate-related depreciation

25,000

25,000

101,100

101,100

Amortization of lease-related intangible assets, net

200

200

600

600

FFO applicable to common shares and units

23,600

26,700

128,700

141,200

FFO per common share and unit

$            0.23

$            0.26

$            1.23

$            1.35

Amortization of deferred financing costs

500

500

1,800

1,800

Amortization of franchise fees

100

100

500

500

Equity based compensation

2,100

2,100

6,400

6,400

Debt transaction costs

100

100

200

200

Premium on redemption of preferred shares

3,300

3,300

3,300

3,300

Non-cash interest income

(500)

(500)

(2,000)

(2,000)

Adjusted Funds From Operations

$        29,200

$        32,300

$      138,900

$      151,400

AFFO per common share and unit

$            0.28

$            0.31

$            1.33

$            1.45

Weighted average diluted common units ⁽¹⁾

104,300

104,300

104,400

104,400

⁽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.