Hotel and property operations expenses for the nine months ended September 30, 2006 increased $8.6 million or 27.5%. The expenses generated by the fifteen additional hotels for the same period were $7.0 million. The remaining increase of $1.6 million is primarily due to increases in payroll, advertising, franchise fees and utilities expense. Interest expense increased by $1.6 million, this is due primarily to increased debt used for hotel acquisitions. The depreciation and amortization expense increased $1.3 million for the nine months ended September 30, 2006 over the same period in 2005, which is primarily related to the fifteen additional hotels as well as asset additions outpacing the amount of assets exceeding their useful life. Property operating income increased by $4.0 million or 27.6% for the nine months ended September 30, 2006, compared to the year ago period. The general and administrative expense for the nine months ended September 30, 2006 increased $267,000 or 14.6% compared to the year ago period. This is primarily related to shareholder relation expenses and professional fees. FFO available to common shareholders were $9.1 million, or $0.75 per basic share and $0.68 per diluted share for the nine months ended September 30, 2006, compared to $8.0 million or $0.66 for both the basic and diluted share calculations, for the year ago period. Significant events for the three months ended September 30, 2006 include:
-- The Company declared a dividend of $.10 1/2 per share for the quarter
ended September 30, 2006 an increase of $.03 1/2 from the $.07 per share
dividend for the quarter ended September 30, 2005.
-- On August 18, 2006, the Company closed on the purchase of six Savannah
Suites hotels, with a total of 934 rooms, for a purchase price of $27.65
million, which we financed with borrowings from a new term loan, a bridge
loan and our existing credit facilities. Five hotels are located in
Georgia and one hotel is located in South Carolina. The Company expects to
complete the purchase of a seventh Savannah Suites hotel for $5.35 million
during November 2006.
About Supertel Hospitality, Inc.
Supertel Hospitality, Inc. (
Unaudited - In thousands, except per share data:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
REVENUES
--------
Room rentals and other hotel
services $ 22,441 $ 17,332 $ 58,249 $ 45,679
Other 47 40 108 127
-------- -------- -------- --------
22,488 17,372 58,357 45,806
-------- -------- -------- --------
EXPENSES
--------
Hotel and property operations 14,777 11,278 39,943 31,336
Depreciation and amortization 2,195 1,668 6,329 4,982
General and administrative 705 577 2,092 1,825
-------- -------- -------- --------
17,677 13,523 48,364 38,143
-------- -------- -------- --------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE NET GAIN (LOSS) ON
DISPOSITIONS OF ASSETS, INTEREST
EXPENSE AND MINORITY INTEREST 4,811 3,849 9,993 7,663
Net gain (loss) on dispositions of
assets (1) 1 (6) 1
Interest expense (2,181) (1,446) (5,804) (4,245)
Minority interest (122) (73) (272) (181)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,507 2,331 3,911 3,238
Income tax expense (268) (372) (261) (235)
-------- -------- -------- --------
NET INCOME 2,239 1,959 3,650 3,003
Preferred stock dividend (304) - (912) -
NET INCOME AVAILABLE
-------- -------- -------- --------
TO COMMON SHAREHOLDERS $ 1,935 $ 1,959 $ 2,738 $ 3,003
======== ======== ======== ========
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS:
-------- -------- -------- --------
EPS Basic $ 0.16 $ 0.16 $ 0.23 $ 0.25
======== ======== ======== ========
EPS Diluted $ 0.15 $ 0.16 $ 0.23 $ 0.25
======== ======== ======== ========
Unaudited - In thousands, except per share data:
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
-------- ------- -------- -------
Weighted average shares outstanding -
Basic 12,073 12,064 12,067 12,062
======== ======= ======== =======
Weighted average shares outstanding -
Diluted 14,762 12,064 12,072 12,062
======== ======= ======== =======
Weighted average number of shares
outstanding for:
calculation of FFO per share - basic 12,073 12,064 12,067 12,062
calculation of FFO per share - diluted 14,957 12,064 14,762 12,062
Reconciliation of net income to FFO
-----------------------------------
Net income available to common
shareholders $ 1,935 $ 1,959 $ 2,738 $ 3,003
Depreciation and amortization 2,195 1,668 6,329 4,982
Net (gain) loss on disposition of real
estate assets 1 (1) 6 (1)
-------- ------- -------- -------
FFO available to common shareholders $ 4,131 $ 3,626 $ 9,073 $ 7,984
======== ======= ======== =======
FFO per share - basic $ 0.34 $ 0.30 $ 0.75 $ 0.66
======== ======= ======== =======
FFO per share - diluted $ 0.30 $ 0.30 $ 0.68 $ 0.66
======== ======= ======== =======
FFO is a non-GAAP financial measure. The Company considers FFO to be a
market accepted measure of an equity REIT's operating performance, which is
necessary, along with net earnings, for an understanding of the Company's
operating results. FFO, as defined under the National Association of Real
Estate Investment Trusts (NAREIT) standards, consists of net income
computed in accordance with U. S. generally accepted accounting principles
("GAAP"), excluding gains (or losses) from sales of real estate assets,
plus depreciation and amortization of real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures. The Company
believes its method of calculating FFO complies with the NAREIT definition.
FFO does not represent amounts available for management's discretionary use
because of needed capital replacement or expansion, debt service
obligations, or other commitments and uncertainties. FFO should not be
considered as an alternative to net income (loss) (computed in accordance
with GAAP) as an indicator of the Company's liquidity, nor is it indicative
of funds available to fund the Company's cash needs, including its ability
to pay dividends or make distributions. All REITs do not calculate FFO in
the same manner; therefore, the Company's calculation may not be the same
as the calculation of FFO for similar REITs.
The Company uses FFO as a performance measure to facilitate a periodic
evaluation of its operating results relative to those of its peers, who
like Supertel Hospitality, Inc., are typically members of NAREIT. The
Company considers FFO a useful additional measure of performance for an
equity REIT because it facilitates an understanding of the operating
performance of its properties without giving effect to real estate
depreciation and amortization, which assumes that the value of real estate
assets diminishes predictably over time. Since real estate values have
historically risen or fallen with market conditions, the Company believes
that FFO provides a meaningful indication of our performance.
The following table sets forth the continuing operations of the Company's
hotel properties for the three and nine months ended September 30, 2006 and
2005, respectively. The continuing operations comparisons below include
the Company's 85 and 70 hotels for the respective periods. This
presentation includes non-GAAP financial measures. The Company believes
that the presentation of hotel property operating income (POI) on a
continuing operations basis is helpful to investors, and represents a more
useful description of its core operations, as it better communicates the
comparability of its hotels' results.
Unaudited - In thousands, except statistical data:
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
-------- -------- -------- --------
Continuing operations:
Revenue per available room
(RevPAR) $ 39.34 $ 38.95 $ 36.82 $ 34.70
Average daily room rate (ADR) $ 56.81 $ 55.92 $ 56.58 $ 54.11
Occupancy percentage 69.3% 69.6% 65.1% 64.1%
Room rentals and other hotel
services from continuing operations
Hotels owned 12 months and longer $ 17,652 $ 17,332 $ 47,763 $ 45,679
Hotels owned less than 12 months 4,789 - 10,486 -
-------- -------- -------- --------
Total room rental and other
hotel services $ 22,441 $ 17,332 $ 58,249 $ 45,679
======== ======== ======== ========
Hotel and property operations
expense from continuing operations
Hotels owned 12 months and longer $ 11,757 $ 11,278 $ 32,993 $ 31,336
Hotels owned less than 12 months 3,020 - 6,950 -
-------- -------- -------- --------
Total hotel and property
operations expense $ 14,777 $ 11,278 $ 39,943 $ 31,336
======== ======== ======== ========
Property Operating Income ("POI")
Hotels owned 12 months and longer $ 5,895 $ 6,054 $ 14,770 $ 14,343
Hotels owned less than 12 months 1,769 - 3,536 -
-------- -------- -------- --------
Total property operating income $ 7,664 $ 6,054 $ 18,306 $ 14,343
======== ======== ======== ========
POI as a percentage of continuing
operations revenue from room
rentals and other hotel services
("POI Margin")
Hotels owned 12 months and longer 33.4% 34.9% 30.9% 31.4%
Hotels owned less than 12 months 36.9% - 33.7% -
Total POI as a percentage of
revenue 34.2% 34.9% 31.4% 31.4%
RECONCILIATION OF POI TO NET INCOME
POI $ 7,664 $ 6,054 $ 18,306 $ 14,343
Depreciation and amortization (2,195) (1,668) (6,329) (4,982)
Gain (Loss) on disposition of assets (1) 1 (6) 1
Interest expense (2,181) (1,446) (5,804) (4,245)
Minority interest (122) (73) (272) (181)
General and administrative expense (705) (577) (2,092) (1,825)
Income tax expense (268) (372) (261) (235)
Other revenues 47 40 108 127
-------- -------- -------- --------
Net income $ 2,239 $ 1,959 $ 3,650 $ 3,003
======== ======== ======== ========
Net income as a percentage of
continuing operations revenue from
room rentals and other hotel
services 10.0% 11.3% 6.3% 6.6%
Contact Information: Contact: Supertel Hospitality, Inc. Donavon A. Heimes 402/371-2520 Email Contact