-- Increased its dividends by $0.0025 per share in the second quarter and raised the dividend $0.01 per share for the 2007 third quarter. -- Acquired four hotels located in Virginia and Louisiana from Waterloo Hospitality, Inc. for approximately $30.9 million. -- Purchased the Tara Inn and Suites, located in Jonesboro, Ga., for approximately $6 million. -- Obtained 15 Masters Inn hotels for approximately $42.7 million. -- Following the close of the second quarter, acquired a Days Inn hotel located in Bossier City, La. and a Days Inn in Fredericksburg, Va. from Budget Motels, Inc. for $6.9 million of limited partnership interests in the company's operating partnership.Second Quarter Operating Results Supertel's portfolio consists of limited-service hotels, including mid-scale without food and beverage, economy and economy extended-stay hotels. For the second quarter 2007 compared to the same period a year ago, the company's mid-scale hotels' RevPAR increased 2 percent, driven by a 5.1 percent increase in average daily rate (ADR). The company's economy hotels' RevPAR rose 3.3 percent, primarily due to a 4.7 percent increase in occupancy. The company did not own extended-stay hotels in the same period a year ago and therefore comparisons are not available. Since the economy extended-stay hotels have a significantly lower ADR than the mid-scale and economy hotels, the overall impact of the newly added economy extended-stay hotels on the company's portfolio was a 9.7 percent reduction in ADR and an 8.7 percent decline in the portfolio's RevPAR. "The first two quarters of 2006 were very favorable, making for tougher than normal comparisons for same-store hotels in the first half of 2007," Schulte said. "However, we are seeing steady improvement in the third quarter and are returning to more normal patterns." During the 2007 second quarter, hotel and property operations expenses increased $7.1 million, of which $6.5 million can be attributed to hotels acquired after April 1, 2006. Same store operating expenses rose $0.6 million, primarily due to advertising, business promotion, repairs and room supplies, including linen upgrades. Interest expense rose $1.5 million, due primarily to increased debt in conjunction with hotel acquisitions. The depreciation and amortization expense increased $0.9 million in the 2007 second quarter due primarily to hotel acquisitions. The company believes property operating income, which is revenue from room rentals and other hotel services less hotel and property operations expenses, is a useful measure of the company's operating efficiency of its hotel properties. Property operating income increased by $3.6 million, or 54.0 percent for the 2007 second quarter, compared to the same year-ago period, due primarily to hotel acquisitions. General and administration expense for the 2007 second quarter rose $0.2 million, compared to the same period last year, primarily as a result of increases in salaries and professional fees, associated principally with the company's acquisition activities. Hotel Acquisitions During the quarter, the company acquired 20 hotels, a 21.5 percent increase in the size of the portfolio, for a total purchase price of $79.6 million. The hotels were purchased using advances from its revolving lines of credit and new first mortgage obligations. On July 31, the company acquired two Days Inn hotels that it had leased and managed since April 4, 2007. The properties, located in Bossier City, La. and Fredericksburg, Va., were purchased from Budget Motels, Inc. for $6.9 million limited partnership interests in the company's operating partnership. "We have an active pipeline and continue to review a substantial number of acquisition candidates, both portfolios and individual properties," Schulte noted. "Concurrently, we expect to periodically prune our portfolio of properties that no longer fit our long-term growth strategy. We are the only publicly traded REIT to concentrate on hotels in the mid-market and economy limited-service and economy extended-stay sectors. As a result, we do not experience the same pricing pressures as some other hotel REITs and typically acquire hotels at more attractive cap rates," he said. "Our acquisition strategy remains to buy properties that can generate strong cash flow and benefit from our scale, distribution and asset management." "Our portfolio is in very good physical condition," he said. "We continue to invest in our properties and have spent $4.4 million in renovations and upgrades during the first half of 2007." Balance Sheet Information In the 2007 second quarter, shareholders approved an increase in the number of shares of common stock available for issuance to 100 million shares and an increase in the number of preferred stock shares to 40 million. Dividend Increases The board of directors declared a $0.12 1/2 dividend for the 2007 third quarter, payable October 31, 2007 to shareholders of record September 28, 2007, a $0.01 increase over the second quarter dividend. Based on the closing price of the common shares at the close of business on August 10, 2007, the annualized dividend represents a yield of approximately 6.3 percent. "This increase will result in a 35 percent compounded annual growth rate of our dividend since the first quarter of 2003," Schulte said. "This increase also reflects the confidence that the board has in our recent acquisitions and our outlook for the industry and our specific markets. We will continue to evaluate our dividend policy on a quarterly basis." About Supertel Hospitality, Inc. As of August 10, 2007, Supertel Hospitality, Inc. (
As of June 30, Dec. 31, 2007 2006 --------- --------- (unaudited) ASSETS Investments in hotel properties $ 369,299 $ 254,241 Less accumulated depreciation 68,926 63,509 --------- --------- 300,373 190,732 Cash and cash equivalents 3,040 5,436 Accounts receivable 2,905 1,332 Prepaid expenses and other assets 4,521 3,116 Deferred financing costs, net 1,979 1,532 --------- --------- $ 312,818 $ 202,148 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Accounts payable, accrued expenses and other liabilities $ 15,106 $ 8,905 Debt 199,136 94,878 --------- --------- 214,242 103,783 --------- --------- Minority interest in consolidated partnerships 3,478 3,528 --------- --------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, 40,000,000 and 10,000,000 shares authorized; 1,096,218 and 1,515,258 shares outstanding, liquidation preference of $10,962 11 15 Preferred stock warrants 53 53 Common stock, $.01 par value, 100,000,000 and 25,000,000 shares authorized; 20,361,531 and 19,074,903 shares outstanding 203 191 Additional paid-in capital 112,679 109,319 Distributions in excess of retained earnings (17,848) (14,741) --------- --------- 95,098 94,837 --------- --------- $ 312,818 $ 202,148 ========= =========The following table sets forth the company's unaudited results of operations for the three and six months ended June 30, 2007 and 2006, respectively. Unaudited - In thousands, except per share data:
Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2007 2006 2007 2006 -------- -------- -------- -------- REVENUES Room rentals and other hotel services $ 30,820 $ 20,118 $ 50,167 $ 35,808 -------- -------- -------- -------- EXPENSES Hotel and property operations 20,582 13,470 35,258 25,166 Depreciation and amortization 3,018 2,077 5,602 4,133 General and administrative 927 708 1,850 1,387 -------- -------- -------- -------- 24,527 16,255 42,710 30,686 -------- -------- -------- -------- EARNINGS BEFORE LOSS ON DISPOSITIONS OF ASSETS, OTHER INCOME, INTEREST EXPENSE, MINORITY INTEREST AND INCOME TAX BENEFIT (EXPENSE) 6,293 3,863 7,457 5,122 Net loss on dispositions of assets - (1) - (5) Other income 42 31 77 61 Interest expense (3,392) (1,867) (5,491) (3,623) Minority interest (99) (103) (142) (151) -------- -------- -------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2,844 1,923 1,901 1,404 Income tax benefit (expense) (438) (317) 112 7 -------- -------- -------- -------- NET INCOME 2,406 1,606 2,013 1,411 Preferred stock dividend (248) (305) (538) (609) NET INCOME AVAILABLE -------- -------- -------- -------- TO COMMON SHAREHOLDERS $ 2,158 $ 1,301 $ 1,475 $ 802 ======== ======== ======== ======== NET INCOME AVAILABLE TO COMMON SHAREHOLDERS EPS Basic $ 0.11 $ 0.11 $ 0.07 $ 0.07 ======== ======== ======== ======== EPS Diluted $ 0.11 $ 0.11 $ 0.07 $ 0.07 ======== ======== ======== ========RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Unaudited - In thousands, except per share data:
Three Months Six Months ended June 30, ended June 30, 2007 2006 2007 2006 ------- ------- ------- ------- Weighted average shares outstanding - Basic 20,083 12,064 19,866 12,064 ======= ======= ======= ======= Weighted average shares outstanding - Diluted 20,105 12,064 19,888 12,064 ======= ======= ======= ======= Weighted average number of shares outstanding for: calculation of FFO per share - basic 20,083 12,064 19,866 12,064 ======= ======= ======= ======= calculation of FFO per share - diluted 22,356 14,757 22,335 14,757 ======= ======= ======= ======= Reconciliation of net income to FFO Net income available to common shareholders $ 2,158 $ 1,301 $ 1,475 $ 802 Depreciation and amortization 3,018 2,077 5,602 4,133 Net loss on disposition of assets - 1 - 5 ------- ------- ------- ------- FFO available to common shareholders $ 5,176 $ 3,379 $ 7,077 $ 4,940 ======= ======= ======= ======= FFO per share - basic $ 0.26 $ 0.28 $ 0.36 $ 0.41 ======= ======= ======= ======= FFO per share - diluted $ 0.24 $ 0.25 $ 0.34 $ 0.38 ======= ======= ======= =======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 (loss), 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 accounting principles generally accepted in the United States of America ("GAAP"), excluding gains (or losses) from sales of real estate assets, plus depreciation and amortization of real estate assets. 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 assume 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 its performance. Unaudited - In thousands:
Three Months Six Months ended June 30, ended June 30, 2007 2006 2007 2006 --------- --------- -------- -------- RECONCILIATION OF NET INCOME TO EBITDA Net income available to common shareholders $ 2,158 $ 1,301 $ 1,475 $ 802 Interest 3,392 1,867 5,491 3,623 Income tax expense (benefit) 438 317 (112) (7) Depreciation and amortization 3,018 2,077 5,602 4,133 Minority interest 99 103 142 151 Preferred stock dividend 248 305 538 609 --------- --------- -------- -------- EBITDA $ 9,353 $ 5,970 $ 13,136 $ 9,311 ========= ========= ======== ========EBITDA is a non-GAAP financial measure. With respect to EBITDA, the company believes that excluding the effect of non-operating expenses and non-cash charges, all of which are also based on historical cost accounting and may be of limited significance in evaluating current performance, can help eliminate the accounting effects of depreciation and amortization, and financing decisions and facilitate comparisons of core operating profitability between periods and between REITs, even though EBITDA also does not represent an amount that accrues directly to common shareholders. EBITDA doesn't represent cash generated from operating activities determined by GAAP and should not be considered as an alternative to net income, cash flow from operations or any other operating performance measure prescribed by GAAP. EBITDA is not a measure of the company's liquidity, nor is EBITDA indicative of funds available to fund the company's cash needs, including its ability to make cash distributions. Neither measurement reflects cash expenditures for long-term assets and other items that have been and will be incurred. EBITDA may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of the company's operating performance. The following table sets forth the continuing operations of the company's hotel properties for the three and six months ended June 30, 2007 and 2006, respectively. The comparisons below include the company's 115 and 79 hotels for June 30, 2007 and 2006. This presentation includes non-GAAP financial measures. The company believes that the presentation of hotel property operating income (POI) is helpful to investors, and represents a more useful description of its core operations, as it better communicates the comparability of its hotels' results. "Same Store locations" reflect 76 hotels owned as of January 1, 2006, used for YTD 2007 and 2006; 77 hotels owned as of April 1, 2006 used for the three months ended 2007 and 2006. The company refers to its entire hotel portfolio as limited service hotels which can be further described as mid-scale without food and beverage, economy and economy extended stay.
Unaudited-In thousands, except statistical data: Three Months ended Six Months ended June 30, June 30, 2007 2006 2007 2006 --------- --------- -------- -------- Average daily room rate (ADR): Midscale w/o F&B $ 75.14 $ 71.48 $ 72.69 $ 69.13 Economy $ 47.24 $ 47.86 $ 47.23 $ 47.39 Economy Extended Stay $ 26.92 $ - $ 26.76 $ - --------- --------- -------- -------- Total $ 52.00 $ 57.60 $ 51.53 $ 56.44 ========= ========= ======== ======== Revenue per available room (RevPAR): Midscale w/o F&B $ 52.88 $ 51.86 $ 46.75 $ 47.18 Economy $ 32.32 $ 31.28 $ 29.65 $ 28.10 Economy Extended Stay $ 18.35 $ - $ 17.49 $ - --------- --------- -------- -------- Total $ 35.82 $ 39.25 $ 32.77 $ 35.40 ========= ========= ======== ======== Occupancy percentage: Midscale w/o F&B 70.4% 72.6% 64.3% 68.3% Economy 68.4% 65.4% 62.8% 59.3% Economy Extended Stay 68.2% - 65.4% - --------- --------- -------- -------- Total 68.9% 68.2% 63.6% 62.7% ========= ========= ======== ======== Revenue from room rentals and other hotel services consists of: Room rental revenue $ 29,991 $ 19,602 $ 48,726 $ 34,871 Telephone revenue 135 45 246 78 Other hotel service revenues 694 471 1,195 859 --------- --------- -------- -------- Total revenue from room rentals and other hotel services $ 30,820 $ 20,118 $ 50,167 $ 35,808 ========= ========= ======== ======== Room rentals and other hotel services Midscale w/o F&B $ 10,267 $ 10,056 $ 18,212 $ 18,052 Economy 10,006 9,777 17,482 17,212 --------- --------- -------- -------- Same Store locations 20,273 19,833 35,694 35,264 --------- --------- -------- -------- Midscale w/o F&B 1,614 284 2,043 284 Economy 6,790 1 8,555 260 Economy Extended Stay 2,143 - 3,875 - --------- --------- -------- -------- Acquisitions 10,547 285 14,473 544 --------- --------- -------- -------- Total room rental and other hotel services $ 30,820 $ 20,118 $ 50,167 $ 35,808 ========= ========= ======== ======== Hotel and property operations expense Midscale w/o F&B $ 6,640 $ 6,369 $ 12,405 $ 12,102 Economy 7,153 6,858 13,256 12,627 --------- --------- -------- -------- Same Store locations 13,793 13,227 25,661 24,729 --------- --------- -------- -------- Midscale w/o F&B 1,015 206 1,453 207 Economy 4,407 37 5,593 230 Economy Extended Stay 1,367 - 2,551 - --------- --------- -------- -------- Acquisitions 6,789 243 9,597 437 --------- --------- -------- -------- Total hotel and property operations expense $ 20,582 $ 13,470 $ 35,258 $ 25,166 ========= ========= ======== ======== Property Operating Income ("POI") Midscale w/o F&B $ 3,627 $ 3,687 $ 5,807 $ 5,950 Economy 2,853 2,919 4,226 4,585 --------- --------- -------- -------- Same Store locations 6,480 6,606 10,033 10,535 --------- --------- -------- -------- Midscale w/o F&B 599 78 590 77 Economy 2,383 (36) 2,962 30 Economy Extended Stay 776 - 1,324 - --------- --------- -------- -------- Acquisitions 3,758 42 4,876 107 --------- --------- -------- -------- Total property operating income $ 10,238 $ 6,648 $ 14,909 $ 10,642 ========= ========= ======== ======== Unaudited-In thousands, except Percentages: Three Months ended Six Months ended June 30, June 30, 2007 2006 2007 2006 --------- --------- -------- -------- POI as a percentage of revenue from room rentals and other hotel services Midscale w/o F&B 35.3% 36.7% 31.9% 33.0% Economy 28.5% 29.9% 24.2% 26.6% --------- --------- -------- -------- Same Store locations 32.0% 33.3% 28.1% 29.9% ========= ========= ======== ======== Midscale w/o F&B 37.1% 27.5% 28.9% 27.1% Economy 35.1% - 34.6% 11.5% Economy Extended Stay 36.2% - 34.2% - --------- --------- -------- -------- Acquisitions 35.6% 14.7% 33.7% 19.7% --------- --------- -------- -------- Total POI as a percentage of revenue 33.2% 33.0% 29.7% 29.7% ========= ========= ======== ======== RECONCILIATION OF NET INCOME TO POI Net income $ 2,406 $ 1,606 $ 2,013 $ 1,411 Depreciation and amortization 3,018 2,077 5,602 4,133 Loss on disposition of assets - 1 - 5 Other Income (42) (31) (77) (61) Interest expense 3,392 1,867 5,491 3,623 Minority interest 99 103 142 151 General and administrative expense 927 708 1,850 1,387 Income tax expense (benefit) 438 317 (112) (7) --------- --------- -------- -------- POI $ 10,238 $ 6,648 $ 14,909 $ 10,642 ========= ========= ======== ========
Contact Information: Contact: Donavon A. Heimes Supertel Hospitality Chief financial officer 402.371.2520 Jerry Daly, Carol McCune Daly Gray (Media contact) 703.435.6293