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