As of
September 30, December 31,
2007 2006
------------- -------------
(unaudited)
ASSETS
Investments in hotel properties $ 372,403 $ 254,241
Less accumulated depreciation 72,049 63,509
------------- -------------
300,354 190,732
Cash and cash equivalents 1,751 5,436
Accounts receivable 2,656 1,332
Prepaid expenses and other assets 4,739 3,116
Deferred financing costs, net 1,871 1,532
------------- -------------
$ 311,371 $ 202,148
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable, accrued expenses and other
liabilities $ 17,191 $ 8,905
Debt 188,956 94,878
------------- -------------
206,147 103,783
------------- -------------
Minority interest in consolidated
partnerships 10,387 3,528
------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 40,000,000
and 10,000,000 shares authorized;
1,010,585 and 1,515,258 shares outstanding,
liquidation preference of $10,106 and $15,153 10 15
Preferred stock warrants - 53
Common stock, $.01 par value, 100,000,000
and 25,000,000 shares authorized;
20,557,079 and 19,074,903 shares
outstanding. 206 191
Additional paid-in capital 112,770 109,319
Distributions in excess of retained earnings (18,149) (14,741)
------------- -------------
94,837 94,837
------------- -------------
$ 311,371 $ 202,148
============= =============
The following table sets forth the company's unaudited results of
operations for the three and nine months ended September 30, 2007 and 2006,
respectively.
Unaudited - In thousands, except per share data:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
REVENUES
Room rentals and other hotel
services $ 34,057 $ 22,441 $ 84,225 $ 58,249
-------- -------- -------- --------
EXPENSES
Hotel and property operations 23,120 14,777 58,378 39,943
Depreciation and amortization 3,275 2,195 8,877 6,329
General and administrative 940 705 2,791 2,092
-------- -------- -------- --------
27,335 17,677 70,046 48,364
-------- -------- -------- --------
EARNINGS BEFORE NET LOSS
ON DISPOSITIONS OF
ASSETS, OTHER INCOME, INTEREST
EXPENSE, MINORITY INTEREST AND
INCOME TAX EXPENSE 6,722 4,764 14,179 9,885
Net loss on dispositions of assets (13) (1) (13) (6)
Other income 38 47 115 108
Interest expense (3,759) (2,181) (9,249) (5,804)
Minority interest (167) (122) (309) (272)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX EXPENSE 2,821 2,507 4,723 3,911
Income tax expense (341) (268) (230) (261)
-------- -------- -------- --------
NET INCOME 2,480 2,239 4,493 3,650
Preferred stock dividend (211) (304) (749) (912)
-------- -------- -------- --------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $ 2,269 $ 1,935 $ 3,744 $ 2,738
======== ======== ======== ========
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS
EPS Basic $ 0.11 $ 0.16 $ 0.19 $ 0.23
======== ======== ======== ========
EPS Diluted $ 0.11 $ 0.15 $ 0.19 $ 0.23
======== ======== ======== ========
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Unaudited - In thousands, except per share data:
Three months Nine months
ended September 30, ended September 30,
2007 2006 2007 2006
---------- ---------- ---------- ----------
Weighted average shares
outstanding for:
calculation of earnings per
share - basic 20,448 12,073 20,062 12,067
========== ========== ========== ==========
calculation of earnings per
share - diluted 20,472 14,762 20,084 12,072
========== ========== ========== ==========
Weighted average shares
outstanding for:
calculation of FFO per share
- basic 20,448 12,073 20,062 12,067
========== ========== ========== ==========
calculation of FFO per share
- diluted 22,360 14,957 22,327 14,762
========== ========== ========== ==========
Reconciliation of net income to
FFO
Net income available to common
shareholders $ 2,269 $ 1,935 $ 3,744 $ 2,738
Depreciation and amortization 3,275 2,195 8,877 6,329
Net loss on disposition of
assets 13 1 13 6
---------- ---------- ---------- ----------
FFO available to common
shareholders $ 5,557 $ 4,131 $ 12,634 $ 9,073
========== ========== ========== ==========
FFO per share - basic $ 0.27 $ 0.34 $ 0.63 $ 0.75
========== ========== ========== ==========
FFO per share - diluted $ 0.26 $ 0.30 $ 0.60 $ 0.68
========== ========== ========== ==========
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 Nine months
ended September 30, ended September 30,
2007 2006 2007 2006
--------- --------- --------- ---------
RECONCILIATION OF NET INCOME TO
EBITDA
Net income available to common
shareholders $ 2,269 $ 1,935 $ 3,744 $ 2,738
Interest 3,759 2,181 9,249 5,804
Income tax expense 341 268 230 261
Depreciation and amortization 3,275 2,195 8,877 6,329
Minority interest 167 122 309 272
Preferred stock dividend 211 304 749 912
--------- --------- --------- ---------
EBITDA $ 10,022 $ 7,005 $ 23,158 $ 16,316
========= ========= ========= =========
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 nine months ended September 30, 2007 and
2006, respectively. The comparisons below include the company's 115 and 85
hotels for September 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; 79
hotels owned as of July 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 Nine months
ended September ended September
30, 30,
2007 2006 2007 2006
-------- -------- -------- --------
Same Store:
Revenue per available room
(RevPAR):
Midscale w/o F&B $ 55.73 $ 55.01 $ 50.95 $ 50.53
Economy $ 34.62 $ 32.16 $ 30.45 $ 29.32
-------- -------- -------- --------
Total $ 42.89 $ 41.11 $ 38.26 $ 37.39
======== ======== ======== ========
Average daily room rate (ADR):
Midscale w/o F&B $ 76.92 $ 74.53 $ 75.43 $ 71.88
Economy $ 48.97 $ 48.75 $ 48.16 $ 47.75
-------- -------- -------- --------
Total $ 60.08 $ 59.55 $ 58.98 $ 57.71
======== ======== ======== ========
Occupancy percentage:
Midscale w/o F&B 72.4% 73.8% 67.5% 70.3%
Economy 70.7% 66.0% 63.2% 61.4%
-------- -------- -------- --------
Total 71.4% 69.0% 64.9% 64.8%
======== ======== ======== ========
--------------------------------------------------------------------------
Entire Portfolio:
Revenue from room rentals and other
hotel services consists of:
Room rental revenue $ 33,136 $ 21,839 $ 81,863 $ 56,710
Telephone revenue 129 70 375 148
Other hotel service revenues 792 532 1,987 1,391
-------- -------- -------- --------
Total revenue from room rentals
and other hotel services $ 34,057 $ 22,441 $ 84,225 $ 58,249
======== ======== ======== ========
Room rentals and other hotel
services
Midscale w/o F&B $ 11,509 $ 11,409 $ 29,192 $ 29,006
Economy 11,048 10,282 28,180 27,177
-------- -------- -------- --------
Same Store locations 22,557 21,691 57,372 56,183
-------- -------- -------- --------
Midscale w/o F&B 1,019 - 3,592 738
Economy 8,273 - 17,178 578
Extended Stay 2,208 750 6,083 750
-------- -------- -------- --------
Acquisitions 11,500 750 26,853 2,066
-------- -------- -------- --------
Total room rental and other hotel
services $ 34,057 $ 22,441 $ 84,225 $ 58,249
======== ======== ======== ========
Hotel and property operations
expense
Midscale w/o F&B $ 7,435 $ 7,048 $ 19,434 $ 18,793
Economy 7,706 7,253 20,728 19,632
-------- -------- -------- --------
Same Store locations 15,141 14,301 40,162 38,425
-------- -------- -------- --------
Midscale w/o F&B 656 - 2,515 563
Economy 5,833 - 11,660 475
Extended Stay 1,490 476 4,041 480
-------- -------- -------- --------
Acquisitions 7,979 476 18,216 1,518
-------- -------- -------- --------
Total hotel and property
operations expense $ 23,120 $ 14,777 $ 58,378 $ 39,943
======== ======== ======== ========
Property Operating Income ("POI")
Midscale w/o F&B $ 4,074 $ 4,361 $ 9,758 $ 10,213
Economy 3,342 3,029 7,452 7,545
-------- -------- -------- --------
Same Store locations 7,416 7,390 17,210 17,758
-------- -------- -------- --------
Midscale w/o F&B 363 - 1,077 175
Economy 2,440 - 5,518 103
Extended Stay 718 274 2,042 270
-------- -------- -------- --------
Acquisitions 3,521 274 8,637 548
-------- -------- -------- --------
Total property operating income $ 10,937 $ 7,664 $ 25,847 $ 18,306
======== ======== ======== ========
Unaudited-In thousands, except statistical data:
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
-------- -------- -------- --------
POI as a percentage of revenue from
room rentals and other hotel
services
Midscale w/o F&B 35.4% 38.2% 33.4% 35.2%
Economy 30.2% 29.5% 26.4% 27.8%
-------- -------- -------- --------
Same Store locations 32.9% 34.1% 30.0% 31.6%
-------- -------- -------- --------
Midscale w/o F&B 35.6% - 30.0% 23.7%
Economy 29.5% - 32.1% 17.8%
Extended Stay 32.5% 36.5% 33.6% 36.0%
-------- -------- -------- --------
Acquisitions 30.6% 36.5% 32.2% 26.5%
-------- -------- -------- --------
Total POI as a percentage of
revenue 32.1% 34.2% 30.7% 31.4%
======== ======== ======== ========
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
-------- -------- -------- --------
RECONCILIATION OF NET INCOME TO POI
Net income $ 2,480 $ 2,239 $ 4,493 $ 3,650
Depreciation and amortization 3,275 2,195 8,877 6,329
Net loss on disposition of assets 13 1 13 6
Other income (38) (47) (115) (108)
Interest expense 3,759 2,181 9,249 5,804
Minority interest 167 122 309 272
General and administrative expense 940 705 2,791 2,092
Income tax expense 341 268 230 261
-------- -------- -------- --------
POI $ 10,937 $ 7,664 $ 25,847 $ 18,306
======== ======== ======== ========
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