SOURCE: Supertel Hospitality, Inc.

Supertel Hospitality, Inc.

August 10, 2012 08:00 ET

Supertel Hospitality Reports 2012 Second Quarter Results

NORFOLK, NE--(Marketwire - Aug 10, 2012) - Supertel Hospitality, Inc. (NASDAQ: SPPR), a real estate investment trust (REIT) which currently owns 94 hotels in 23 states, today announced its results for the second quarter ended June 30, 2012. 

Second Quarter 2012 Highlights

  • Increased revenues from continuing operations 5.5 percent to $21.6 million.
  • Advanced RevPAR 3.9 percent to $35.69 for the 74 same store hotels in continuing operations.
  • Reduced loss from continuing operations to $2.7 million, an improvement of 36.6 percent over the same year-ago period.
  • Improved continuing operations Property Operating Income (POI) $0.7 million, or 13.3 percent.
  • Improved net income attributable to common shareholders to $1.6 million, primarily on gains from the sale of four non-strategic hotels.
  • Improved Adjusted EBITDA by $0.4 million, or 6.5% percent, over the same year-ago period.
  • Sold four economy hotels generating gross proceeds of $9.6 million.
  • Moved into the upscale segment with the purchase of a 100-room Hilton Garden Inn on Solomons Island in Maryland.

Second Quarter Operating and Financial Results

Revenues from continuing operations for the 2012 second quarter rose $1.1 million, or 5.5 percent, to $21.6 million, compared to the same year-ago period. The improved performance primarily was due to the increased average daily rate (ADR) of the same store portfolio, in addition to the acquisition of the Hilton Garden Inn.

The company reported net income attributable to common shareholders of $1.6 million, or $0.07 per diluted share for the 2012 second quarter, compared to a net loss of $(4.5) million or $(0.20) per diluted share for the same 2011 period. The second quarter increase of $6.1 million is primarily attributable to a $4.4 million increase in gains related to dispositions of hotels, a $0.9 million unrealized gain from the reduction in fair market value of the derivative liabilities, and a $0.7 million decrease in total non cash impairment losses; the total non cash impairment losses for the three months ended June 30, 2012 were $4.1 million versus $4.8 million for the like prior period.

Funds from operations (FFO) in the 2012 second quarter was $3.1 million, compared to $2.6 million in the same 2011 period. Adjusted funds from operations (AFFO), which is FFO adjusted to include gain or exclude losses on derivatives and exclude acquisition expense, in the 2012 second quarter was $2.4 million, compared to $2.6 million in the same 2011 period. 

Earnings before interest, taxes, depreciation and amortization, (EBITDA) increased to $6.7 million, compared to $1.0 million for the second quarter of 2011. Adjusted EBITDA, which is EBITDA before non-controlling interest, net gain on disposition of assets, impairment, preferred stock dividends, unrealized gain/loss on derivatives and acquisition expense, increased to $6.2 million, or 6.5 percent compared to $5.8 million for the second quarter of 2011.

In the 2012 second quarter, the 74-hotel same store portfolio reported an increase in revenue per available room (RevPAR) of 3.9 percent led by a 3.1 percent improvement in ADR and a 0.7 percent increase in occupancy, compared to the 2011 second quarter.

"The significantly improved results in the 2012 second quarter reflect the full ramp-up of our management companies, the continued improvement in our portfolio make-up and the benefits of the infusion of $30 million in new equity in the 2012 first quarter," said Kelly A. Walters, Supertel president and CEO. 

     
    Second Quarter 2012 vs Second Quarter 2011
    Occ %   ADR ($)   RevPAR ($)
    2012   2011   Variance   2012   2011   Variance   2012   2011   Variance
Industry - Total US Market   65.1%   63.2%   3.1%   106.41   101.63   4.7%   69.32   64.22   7.9%
Supertel - Same Store Operations (74 hotels)   67.9%   67.4%   0.7%   52.54   50.98   3.1%   35.69   34.34   3.9%
                                     
Chain Scale                                    
                                     
Industry - Upper Midscale   67.7%   65.4%   3.4%   98.29   94.38   4.2%   66.50   61.73   7.7%
Supertel - Upper Midscale (21)   71.2%   69.5%   2.4%   72.99   71.23   2.5%   51.95   49.51   4.9%
                                     
Industry - Midscale   58.9%   56.6%   4.0%   74.96   72.53   3.4%   44.17   41.08   7.5%
Supertel - Midscale (6)   56.6%   47.6%   18.9%   64.83   63.53   2.0%   36.68   30.24   21.3%
                                     
Industry - Economy   57.6%   56.3%   2.2%   52.76   50.47   4.5%   30.36   28.42   6.8%
Supertel - Economy (40)   66.5%   66.9%   -0.6%   50.47   49.46   2.0%   33.54   33.07   1.4%
                                     
Industry - Extended Stay   n/a   n/a   n/a   n/a   n/a   n/a   n/a   n/a   n/a
Supertel - Extended Stay (7)   71.7%   73.1%   -1.9%   24.71   23.75   4.0%   17.72   17.37   2.0%
                                     
Industry Source: STR Monthly Review
 

Upscale Hotels

The operating results for the Hilton Garden Inn, which was purchased on May 25, 2012, are not reflected in the 74 same store hotel operating results. The hotel generated RevPAR of $93.04, driven by $126.05 ADR and 73.8 percent occupancy during the period of May 25, 2012, through June 30, 2012. 

Upper Midscale Hotels

Second quarter RevPAR for the company's 21 continuing operations, upper midscale hotels rose 4.9 percent to $51.95, led by a 2.5 percent improvement in ADR to $72.99 and a 2.4 percent increase in occupancy. Upper midscale hotel brands currently in the company's portfolio include Comfort Inns, Comfort Suites, Hampton Inn and Holiday Inn Express.

Midscale Hotels

RevPAR for the company's six continuing operations midscale hotels rose sharply, 21.3 percent, to $36.68. Occupancy increased 18.9 percent with an ADR increase of 2.0 percent to $64.83. Supertel's midscale brands include Quality Inn, Sleep Inn, Baymont Inn and Ramada Limited.

Economy Hotels

The company's 40 continuing operations economy hotels reported a 1.4 percent increase in RevPAR to $33.54 in the 2012 second quarter as a result of a 2.0 percent rise in ADR to $50.47, partially offset by a 0.6 percent decrease in occupancy. Supertel's branded properties in this segment include Days Inn, Super 8, Key West Inns and Guesthouse Inn.

Extended Stay Hotels

The company's seven continuing operations, extended-stay hotels reported a 2.0 percent increase in RevPAR to $17.72, led by a 4.0 percent increase in ADR to $24.71, partially offset by a 1.9 percent decline in occupancy. Hotels in this segment include the Savannah Suites brand.

"While we are not yet satisfied with our performance in the midscale segment, overall, our hotels continue to achieve above average occupancy compared to the industry, which provides opportunities to increase ADR," Walters noted. "We have instructed our operators to evaluate raising room rates as aggressively as possible, while carefully monitoring market conditions and adjusting accordingly. We believe there is still room for ADR improvement, without materially impacting occupancy."

"Our operators have done a noteworthy job in controlling costs, which is reflected in our 4.6 percent increase for the quarter in property operating income of the total portfolio," he added. "Year-to-date through the second quarter, revenues rose at twice the rate of incremental labor costs; and management fees remained essentially flat on higher revenues when compared with last year. We attribute the bulk of these improvements to our 2011 decision to move to regional operators from one centralized management company.

"What makes these results all the more gratifying is that many of our markets are in smaller population centers," he noted. "While they did not suffer as much in the downturn, many of these markets continue to lag behind in the rebound. Although our results were not as strong as the industry as a whole in the 2012 second quarter, we believe they showed good growth given the local economies in which they operate."

Interest expense from continuing operations decreased slightly to $2.1 million for the quarter. In addition, the company temporarily paid its credit line down to zero by applying the unused portion of its recent equity infusion. A portion of the credit line is expected to be invested in hotel acquisitions by year end. Depreciation and amortization expense from continuing operations declined $0.1 million from the 2011 second quarter to $2.2 million.

Property operating income (POI) from continuing operations for the 2012 second quarter rose $0.7 million, or 13.3 percent, compared to the same period a year earlier. The increase was led by higher same store room revenue, and improved expense management by our new operators, and $0.1 million of POI from the new Hilton Garden Inn in Solomons, Maryland. POI is calculated as revenue from room rentals and other hotel services less hotel and property operations expenses. See attached chart (Property Operating Income Percent Second Quarter 2012 versus Second Quarter 2011).

Year-to-Date Operating and Financial Results

Revenues from continuing operations for the six months ended June 30, 2012 rose $1.5 million or 4.2 percent, to $38.2 million, compared to $36.7 million for the same year-ago period.

Net loss attributable to common shareholders was $(3.0) million, or $(0.13) per diluted share for the six months ended June 30, 2012, compared to a net loss of $(8.5) million, or $(0.37) per diluted share for the same 2011 period.

RevPAR for the 74 same store hotels was $31.82, a 2.9 percent increase compared to the same period in 2011.

FFO for the six months ended June 30, 2012 was $1.6 million, compared to $1.6 million for the same 2011 period. The company's Adjusted FFO for six months ended June 30, 2012 was $2.1 million, which is an increase of $0.5 million over the $1.6 million reported at June 30, 2011. 

Earnings before interest, taxes, depreciation and amortization, impairment, non controlling interest, net gain on disposition of assets, preferred stock dividends, unrealized gain/loss on derivatives and acquisition expense (Adjusted EBITDA) increased to $8.5 million, compared to $7.2 million for the prior year.

Acquisition Activity

On May 25, the company purchased, in an all cash transaction, the 100-room Hilton Garden Inn in Solomons Island, Maryland for $11.5 million, excluding closing costs and fees. The purchase was funded with proceeds from the company's first quarter preferred equity capital raise. The company currently is negotiating a mortgage loan for the property, which it expects to complete by year-end.

"While we've only owned the property for two months, we already are seeing a positive impact on our overall portfolio," Walters said. "The hotel has performed to our expectations and continues to hold a substantial market share RevPAR premium over its competitive set. This hotel has multiple, year-round demand generators, and we are quite positive about this acquisition."

Walters noted, "The company is pursuing several other acquisitions with a similar profile: premium-branded, select-service hotels in healthy secondary markets with identifiable and durable sources of business."

Disposition Program

During the 2012 second quarter, the company sold four hotels: a 49-room Super 8 hotel located in El Dorado, Kansas, for $1.6 million, an 87-room Super 8 in Sedalia, Missouri for $1.8 million; a 119-room Super 8 in Wichita, Kansas for $4.1 million; and a 127-room Masters Inn in Tampa, Florida for $2.05 million. Proceeds were used to reduce associated mortgage debt by $7.8 million.

"We continue to average selling a non-core hotel approximately every six to eight weeks," Walters noted. "Financing has eased somewhat, but still takes time for the buyers to obtain. Most of our transactions remain single sales, but we are exploring opportunities for targeted portfolio sales." 

Property Renovations

The company invested $1.6 million in property improvements in the 2012 second quarter. "Based on our experience with renovations at similar hotels, while it causes a temporary displacement in revenues, we typically see improved bottom line results through steady RevPAR growth and improved market share," Walters said.

Balance Sheet

"Our balance sheet is stronger now than at any point in the last few years," said Connie Scarpello, chief financial officer. "We have reduced our debt by $32.2 million, or 18.9 percent, in the past 12 months. We will continue to reduce our debt leverage ratios, with a long-term goal of approximately 50 percent debt-to-total enterprise value over time."

Outstanding debt on hotels in continuing operations totaled $117.6 million, and has an average term to maturity of 3.2 years and a weighted average annual interest rate of 6.4 percent. 

"We are in negotiations to finance $28.6 million debt mortgage that matures this year," Scarpello said. "We also expect to place a prudent amount of debt on our recently acquired Hilton Garden Inn to free up funds to acquire additional hotels."

"The terms of the preferred capital raise require the company to invest $20 million of equity in hotels meeting the firm's investment criteria, $11.7 million, including acquisition expenses, of which was used to purchase the Hilton Garden Inn in Solomons, Maryland, initially for cash. The remaining $8.3 million was used to pay down the Great Western revolver until other core acquisitions are ready to close which will then involve drawing down on our credit lines as well as using the proceeds from the financing of the Hilton Garden Inn. By year end, the company has plans to invest as much as $40 million in equity and debt as we begin to rebuild our portfolio," Walters said. "We continue to focus on balance sheet improvements through additional de-levering measures."

Subsequent Events

Following the close of the second quarter, the company closed on the sale of its 57-room Super 8 hotel in Watertown, South Dakota for $1.55 million. The associated mortgage debt was fully retired with excess proceeds applied to general corporate purposes.

Dividends

The company did not declare a common stock dividend for the 2012 second quarter. Preferred dividends continued uninterrupted. The company will monitor requirements to maintain its REIT status and will routinely evaluate the dividend policy. The company intends to continue to meet its dividend requirements to retain its REIT status.

Outlook

"We are making steady progress in implementing our business plan," Walters said. "We have made meaningful strides in improving operations, are improving our portfolio make up by selling off non-strategic assets while launching an acquisition program. The weak economic recovery in many markets where we own hotels keeps us cautious, but our dependency on tertiary markets is decreasing steadily as we sell non-core properties. On balance, with proper execution of our business plan, we believe Supertel has a promising future." 

About Supertel Hospitality, Inc.

Supertel Hospitality, Inc. (NASDAQ: SPPR) is a self-administered real estate investment trust that specializes in the ownership of select-service hotels. The company currently owns 94 hotels comprising 8,283 rooms in 23 states. Supertel's hotels are franchised by a number of the industry's most well-regarded brand families, including Hilton, IHG, Choice and Wyndham. For more information or to make a hotel reservation, visit www.supertelinc.com.

Forward Looking Statement

Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. These risks are discussed in the Company's filings with the Securities and Exchange Commission.

   
Supertel Hospitality, Inc.  
Balance Sheet  
As of June 30, 2012, and December 31, 2011  
(dollars in thousands, except share and per share data)  
   
The Company owned 95 hotels (including 20 hotels in discontinued operations) at June 30, 2012, and 105 hotels as of December 31, 2011 respectively.  
   
    As of  
    June 30,     December 31,  
    2012     2011  
    (unaudited)        
             
ASSETS                
  Investments in hotel properties   $ 263,534     $ 255,677  
  Less accumulated depreciation     78,326       76,777  
      185,208       178,900  
                 
  Cash and cash equivalents     1,167       279  
  Accounts receivable, net of allowance for doubtful accounts of $194 and $194     2,808       1,891  
  Prepaid expenses and other assets     10,287       8,917  
  Deferred financing costs, net     709       850  
  Investment in hotel properties, held for sale, net     22,121       30,335  
    $ 222,300     $ 221,172  
                 
LIABILITIES AND EQUITY                
LIABILITIES                
  Accounts payable, accrued expenses and other liabilities   $ 13,051     $ 10,704  
  Derivative liabilities, at fair value     16,035       -  
  Debt related to hotel properties held for sale     20,824       35,173  
  Long-term debt     117,625       130,672  
      167,535       176,549  
                 
  Redeemable noncontrolling interest in consolidated partnership, at redemption value     114       114  
                 
  Redeemable preferred stock                
    10% Series B, 800,000 shares authorized; $.01 par value, 332,500 shares outstanding, liquidation preference of $8,312      
7,662
       
7,662
 
                 
EQUITY                
Shareholders' equity                
  Preferred stock, 40,000,000 shares authorized; 8% Series A, 2,500,000 shares authorized, $.01 par value, 803,270 shares outstanding, liquidation preference of $8,033    

8
     

8
 
  6.25% Series C, 3,000,000 shares authorized, $.01 par value, 3,000,000 shares outstanding, liquidation preference of $30,000    
 30
     
-
 
  Common stock, $.01 par value, 200,000,000 shares authorized; 23,128,477 and 23,070,387 shares outstanding    
231
     
231
 
  Common stock warrants     252       252  
  Additional paid-in capital     134,762       121,619  
  Distributions in excess of retained earnings     (88,425 )     (85,398 )
    Total shareholders' equity     46,858       36,712  
Noncontrolling interest                
  Noncontrolling interest in consolidated partnership, redemption value $92 and $64    
131
     
135
 
                 
    Total equity     46,989       36,847  
                 
COMMITMENTS AND CONTINGENCIES                
    $ 222,300     $ 221,172  
                 

 

Supertel Hospitality, Inc.  
Results of Operations  
For the three and six months ended June 30, 2012 and 2011, respectively  
(Unaudited-Dollars in thousands, except per share data)  
   
             
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
REVENUES                                
  Room rentals and other hotel services   $ 21,562     $ 20,433     $ 38,243     $ 36,703  
                                 
EXPENSES                                
  Hotel and property operations     15,269       14,878       28,810       28,366  
  Depreciation and amortization     2,226       2,313       4,350       4,559  
  General and administrative     921       1,001       2,014       2,104  
  Acquisition expense     162       -       162       1  
  Termination cost     -       -       -       540  
      18,578       18,192       35,336       35,570  
                                 
EARNINGS BEFORE NET LOSS ON DISPOSITIONS OF ASSETS, OTHER INCOME, INTEREST EXPENSE AND INCOME TAXES    

2,984
     

2,241
     

2,907
     

1,133
 
                                 
Net loss on dispositions of assets     (4 )     (8 )     (7 )     (14 )
Other income (expense)     872       20       (341 )     105  
Interest expense     (2,057 )     (2,147 )     (4,173 )     (4,482 )
Impairment     (4,096 )     (4,198 )     (3,714 )     (4,392 )
                                 
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES    
(2,301
)    
(4,092
)    
(5,328
)    
(7,650
)
                                 
Income tax (expense) benefit     (353 )     (97 )     111       512  
                                 
LOSS FROM CONTINUING OPERATIONS     (2,654 )     (4,189 )     (5,217 )     (7,138 )
                                 
Gain (loss) from discontinued operations, net of tax     5,094       77       3,686       (685 )
                                 
NET INCOME (LOSS)     2,440       (4,112 )     (1,531 )     (7,823 )
                                 
Noncontrolling interest     (8 )     3       (2 )     14  
                                 
NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTERESTS     2,432       (4,109 )     (1,533 )     (7,809 )
                                 
Preferred stock dividends     (837 )     (369 )     (1,494 )     (737 )
                                 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS   $
1,595
    $
(4,478
)   $
(3,027
)   $
(8,546
)
                                 
NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED                                
EPS from continuing operations   $ (0.15 )   $ (0.20 )   $ (0.29 )   $ (0.34 )
EPS from discontinued operations   $ 0.22     $ -     $ 0.16     $ (0.03 )
EPS basic and diluted   $ 0.07     $ (0.20 )   $ (0.13 )   $ (0.37 )
                                 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FFO and AFFO

FFO and Adjusted FFO ("AFFO") are non-GAAP financial measures. We consider FFO and AFFO to be market accepted measures of an equity REIT's operating performance, which are necessary, along with net earnings (loss), for an understanding of our operating results. FFO, as defined under the National Association of Real Estate Investment Trusts (NAREIT) standards, consists of net income computed in accordance with GAAP, excluding gains (or losses) from sales of real estate assets, plus depreciation and amortization of real estate assets. We believe our method of calculating FFO complies with the NAREIT definition. AFFO is FFO adjusted to include gain or exclude losses on derivative liabilities, which is a non-cash charge against income and which does not represent results from our core operations. AFFO also adds back acquisition costs. FFO and AFFO do 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 and AFFO should not be considered as alternatives to net income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. All REITs do not calculate FFO and AFFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO and AFFO for similar REITs.

Diluted FFO per share and diluted Adjusted FFO per share are computed after adjusting the numerator and denominator of the basic computation for the effects of any dilutive potential common shares outstanding during the period. Up to 30,000,000 shares of common stock may be issued upon conversion of the Series C convertible preferred stock, and adjustments are made for these shares in the computation of diluted FFO per share and diluted Adjusted FFO per share. The Company's outstanding warrants to purchase common stock and stock options would be antidilutive and are not included in the dilution computation.

We use FFO and AFFO as performance measures to facilitate a periodic evaluation of our operating results relative to those of our peers. We consider FFO and AFFO to be useful additional measures of performance for an equity REIT because it facilitates an understanding of the operating performance of our 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, we believe that FFO and AFFO provide a meaningful indication of our performance. 

(Unaudited-In thousands, except per share data)

    Three months     Six Months  
    ended June 30,     ended June 30,  
    2012     2011     2012     2011  
RECONCILIATION OF NET INCOME (LOSS) TO FFO                                
Net income (loss) attributable to common shareholders   $ 1,595     $ (4,478 )   $ (3,027 )   $ (8,546 )
Depreciation and amortization     2,226       2,643       4,396       5,263  
Net gain on disposition of assets     (4,772 )     (354 )     (5,263 )     (335 )
Impairment     4,083       4,813       5,517       5,262  
FFO available to common shareholders   $ 3,132     $ 2,624     $ 1,623     $ 1,644  
Unrealized (gain) loss on derivatives     (867 )     -       346       -  
Acquisition expense     162       -       162       1  
Adjusted FFO   $ 2,427     $ 2,624     $ 2,131     $ 1,645  
                                 
FFO available to common shareholders   $ 3,132     $ 2,624     $ 1,623     $ 1,644  
Dividends paid on Series C convertible preferred stock     469       -       758       -  
FFO for FFO per share - diluted   $ 3,601     $ 2,624     $ 2,381     $ 1,644  
                                 
Adjusted FFO available to common shareholders   $ 2,427     $ 2,624     $ 2,131     $ 1,645  
Dividends paid on Series C convertible preferred stock     469       -       758       -  
Adjusted FFO for Adjusted FFO per share - diluted   $ 2,896     $ 2,624     $ 2,889     $ 1,645  
                                 
Weighted average shares outstanding for:                                
  calculation of FFO per share - basic     23,075       22,964       23,073       22,941  
  calculation of FFO per share - diluted     53,075       22,964       47,271       22,941  
                                 
FFO per share - basic   $ 0.14     $ 0.11     $ 0.07     $ 0.07  
Adjusted FFO per share - basic   $ 0.11     $ 0.11     $ 0.09     $ 0.07  
FFO per share - diluted   $ 0.07     $ 0.11     $ 0.05     $ 0.07  
Adjusted FFO per share - diluted   $ 0.05     $ 0.11     $ 0.06     $ 0.07  
                                 

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are financial measures that are not calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We calculate EBITDA and Adjusted EBITDA by adding back to net earnings (loss) available to common shareholders certain non-operating expenses and non-cash charges which are based on historical cost accounting and we believe may be of limited significance in evaluating current performance. We believe these adjustments can help eliminate the accounting effects of depreciation and amortization and financing decisions and facilitate comparisons of core operating profitability between periods, even though EBITDA and Adjusted EBITDA also do not represent an amount that accrues directly to common shareholders. In calculating Adjusted EBITDA, we add back noncontrolling interest, net (gain) loss on disposition of assets, preferred stock dividends and acquisition expenses which are cash charges. We also add back impairment and unrealized gain or loss on derivatives, which are non-cash charges.

EBITDA and Adjusted EBITDA do not represent cash generated from operating activities determined by GAAP and should not be considered as alternatives to net income, cash flow from operations or any other operating performance measure prescribed by GAAP. EBITDA and Adjusted EBITDA are not measures of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to make cash distributions. Neither do the measurements reflect cash expenditures for long-term assets and other items that have been and will be incurred. EBITDA and Adjusted 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 our operating performance. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

(Unaudited-In thousands, except statistical data)

    Three months     Six months  
    ended June 30,     ended June 30,  
    2012     2011     2012     2011  
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA                                
Net income (loss) attributable to common shareholders   $ 1,595     $ (4,478 )   $ (3,027 )   $ (8,546 )
Interest expense, including discontinued operations     2,549       2,862       5,227       5,964  
Income tax expense (benefit), including discontinued operations     354       (55 )     (308 )     (1,127 )
Depreciation and amortization, including discontinued operations     2,226       2,643       4,396       5,263  
  EBITDA     6,724       972       6,288       1,554  
Noncontrolling interest     8       (3 )     2       (14 )
Net gain on disposition of assets     (4,772 )     (354 )     (5,263 )     (335 )
Impairment     4,083       4,813       5,517       5,262  
Preferred stock dividend     837       369       1,494       737  
Unrealized (gain) loss on derivatives     (867 )     -       346       -  
Acquisition expense     162       -       162       1  
  ADJUSTED EBITDA   $ 6,175     $ 5,797     $ 8,546     $ 7,205  
                                   

 

Supertel Hospitality, Inc.  
Operating Statistics by Chain Scale Classification - Hotels in Continuing Operations  
For the three and six months ended June 30, 2012 and 2011, respectively  
(Unaudited - In thousands, except per share data)  
   
    Three months     Six months  
    ended June 30,     ended June 30,  
    2012     2011     2012     2011  
Same Store:*                                
  Revenue per available room (RevPAR):                                
    Upper Midscale   $ 51.95     $ 49.51     $ 46.03     $ 42.99  
    Midscale   $ 36.68     $ 30.24     $ 32.27     $ 29.00  
    Economy   $ 33.54     $ 33.07     $ 29.48     $ 29.65  
    Extended Stay   $ 17.72     $ 17.37     $ 17.63     $ 17.69  
      Total   $ 35.69     $ 34.34     $ 31.82     $ 30.92  
                                 
Average daily room rate (ADR):                                
    Upper Midscale   $ 72.99     $ 71.23     $ 69.85     $ 68.63  
    Midscale   $ 64.83     $ 63.53     $ 62.66     $ 61.43  
    Economy   $ 50.47     $ 49.46     $ 49.25     $ 48.16  
    Extended Stay   $ 24.71     $ 23.75     $ 24.55     $ 23.61  
      Total   $ 52.54     $ 50.98     $ 50.57     $ 48.92  
                                 
Occupancy percentage:                                
    Upper Midscale     71.2 %     69.5 %     65.9 %     62.6 %
    Midscale     56.6 %     47.6 %     51.5 %     47.2 %
    Economy     66.5 %     66.9 %     59.9 %     61.6 %
    Extended Stay     71.7 %     73.1 %     71.8 %     74.9 %
      Total     67.9 %     67.4 %     62.9 %     63.2 %
                                 

*Same store reflects 74 hotels.

   
Supertel Hospitality, Inc.  
Property Operating Income (POI) - Continuing and Discontinued Operations  
   
Note: 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 useful description of its operations, as it communicates the comparability of its hotels' operating results.  
   
Unaudited-In thousands, except statistical data:   Three months     Six months  
    ended June 30,     ended June 30,  
    2012     2011     2012     2011  
Total Same Store Hotels (74 hotels):                                
  Revenue per available room (RevPAR):   $ 35.69     $ 34.34     $ 31.82     $ 30.92  
  Average daily room rate (ADR):   $ 52.54     $ 50.98     $ 50.57     $ 48.92  
  Occupancy percentage:     67.9 %     67.4 %     62.9 %     63.2 %
                                 
Continuing Operations                                
                                 
Revenue from room rentals and other hotel services consists of:                                
Room rental revenue   $ 20,927     $ 19,854     $ 37,084     $ 35,560  
Telephone revenue     71       75       148       146  
Other hotel service revenues     564       504       1,011       997  
  Total revenue from room rentals and other hotel services   $ 21,562     $ 20,433     $ 38,243     $ 36,703  
                                 
Hotel and property operations expense                                
  Total hotel and property operations expense   $ 15,269     $ 14,878     $ 28,810     $ 28,366  
                                 
Property Operating Income ("POI") from Continuing Operations                                
  Total POI - continuing operations   $ 6,293     $ 5,555     $ 9,433     $ 8,337  
                                 
                                 
POI - continuing operations as a percentage of revenue from room rentals and other hotel services                                
  POI - continuing operations as a percentage of revenue     29.2 %     27.2 %     24.7 %     22.7 %
                                 
Discontinued Operations                                
                                 
Room rentals and other hotel services                                
  Total room rental and other hotel services   $ 4,847     $ 6,314     $ 9,036     $ 11,619  
                                 
Hotel and property operations expense                                
  Total hotel and property operations expense   $ 4,049     $ 5,091     $ 7,914     $ 10,162  
                                 
Property Operating Income ("POI") from discontinued operations                                
  POI - discontinued operations   $ 798     $ 1,223     $ 1,122     $ 1,457  
                                 
POI - discontinued operations as a percentage of revenue from room rentals and other hotel services                                
  POI - discontinued operations as a percentage of revenue     16.5 %     19.4 %     12.4 %     12.5 %
                                 
      Three months       Six months  
      ended June 30       ended June 30  
      2012       2011       2012       2011  
Reconciliation of net loss from continuing operations to POI from continuing operations                                
Net loss from continuing operations   $ (2,654 )   $ (4,189 )   $ (5,217 )   $ (7,138 )
Depreciation and amortization     2,226       2,313       4,350       4,559  
Net loss on disposition of assets     4       8       7       14  
Other (income) expense     (872 )     (20 )     341       (105 )
Interest expense     2,057       2,147       4,173       4,482  
General and administrative expense     921       1,001       2,014       2,104  
Acquisition, termination expense     162       -       162       1  
Termination cost     -       -       -       540  
Income tax (benefit) expense     353       97       (111 )     (512 )
Impairment expense     4,096       4,198       3,714       4,392  
POI - continuing operations   $ 6,293     $ 5,555     $ 9,433     $ 8,337  
                                 
Net income (loss) as a percentage of continuing operations revenue from room rentals and other hotel services    
-12.3
%    
-20.5
%    
-13.6
%    
-19.4
%

 

Reconciliation of loss from discontinued operations to POI from discontinued operations:   Three months
ended June 30,
    Six months
ended June 30,
 
    2012     2011     2012     2011  
                                 
Gain (loss) from discontinued operations   $ 5,094     $ 77     $ 3,686     $ (685 )
Depreciation and amortization from discontinued operations     -       330       46       704  
Net gain on disposition of assets from discontinued operations     (4,776 )     (362 )     (5,270 )     (349 )
Interest expense from discontinued operations     492       715       1,054       1,482  
General and administrative expense from discontinued operations     -       -       -       50  
Impairment losses from discontinued operations     (13 )     615       1,803       870  
Income tax benefit from discontinued operations     1       (152 )     (197 )     (615 )
POI - discontinued operations   $ 798     $ 1,223     $ 1,122     $ 1,457  

 

Reconciliation of Total POI:   Three months     Six months  
    ended June 30,     ended June 30,  
    2012     2011     2012     2011  
POI - Continuing operations     6,293       5,555       9,433       8,337  
POI - Discontinued operations     798       1,223       1,122       1,457  
Total - POI   $ 7,091     $ 6,778     $ 10,555     $ 9,794  
                                 
Total POI as a percentage of revenues     26.9 %     25.3 %     22.3 %     20.3 %

 

Supertel Hospitality, Inc.
Operating Statistics by Region
For the three months ended June 30, 2012 and 2011, respectively
(Unaudited - In thousands, except per share data)
 
The comparisons of same store operations are for 74 hotels in continuing operations as of April 1, 2011.
               
      Three months ended June 30, 2012       Three months ended June 30, 2011
  Room               Room            
Region Count   RevPAR   Occupancy   ADR   Count   RevPAR   Occupancy   ADR
Mountain 214   $ 40.06   77.8%   $ 51.47   214   $ 35.03   69.2%   $ 50.60
West North Central 1,559     36.13   69.9%     51.65   1,559     33.71   67.4%     50.04
East North Central 978     37.78   61.1%     61.88   978     37.78   61.4%     61.51
Middle Atlantic 142     51.10   82.0%     62.33   142     47.62   79.9%     59.63
South Atlantic 2,525     32.66   69.4%     47.05   2,525     31.66   69.7%     45.43
East South Central 563     46.03   68.2%     67.52   563     41.20   61.9%     66.52
West South Central 373     24.31   55.4%     43.89   373     30.26   69.4%     43.57
Total Same Store (74 hotels) 6,354   $ 35.69   67.9%   $ 52.54   6,354   $ 34.34   67.4%   $ 50.98
                                       
South Atlantic Acquisitions 100   $ 93.04   73.8%   $ 126.05   -   $ -   0.0%   $ -
Total Acquisitions 100   $ 93.04   73.8%   $ 126.05   -   $ -   0.0%   $ -
                                       
Total 6,454   $ 36.05   68.0%   $ 53.05   6,354   $ 34.34   67.4%   $ 50.98
                                       
States included in the Regions                                      
Mountain Idaho and Montana
West North Central Iowa, Kansas, Missouri, Nebraska and South Dakota
East North Central Indiana and Wisconsin
Middle Atlantic Pennsylvania
South Atlantic Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia
East South Central Kentucky and Tennessee
West South Central Arkansas and Louisiana

 

Supertel Hospitality, Inc.
Operating Statistics by Region
For the six months ended June 30, 2012 and 2011, respectively
(Unaudited - In thousands, except per share data)
 
The comparisons of same store operations are for 74 hotels in continuing operations as of January 1, 2011.
                               
      Six months ended June 30, 2012       Six months ended June 30, 2011
  Room               Room            
Region Count   RevPAR   Occupancy   ADR   Count   RevPAR   Occupancy   ADR
Mountain 214   $ 32.78   65.8%   $ 49.79   214   $ 29.22   60.8%   $ 48.06
West North Central 1,559     30.64   60.9%     50.27   1,559     29.61   61.2%     48.37
East North Central 978     33.39   55.6%     60.01   978     33.16   55.5%     59.76
Middle Atlantic 142     42.86   71.9%     59.62   142     39.62   69.9%     56.71
South Atlantic 2,525     30.57   67.9%     45.03   2,525     29.48   68.3%     43.19
East South Central 563     39.67   60.1%     65.99   563     36.59   55.8%     65.61
West South Central 373     24.19   55.6%     43.55   373     29.36   67.5%     43.47
Total Same Store (74 hotels) 6,354   $ 31.82   62.9%   $ 50.57   6,354   $ 30.92   63.2%   $ 48.92
                                       
South Atlantic Acquisitions 100   $ 93.04   73.8%   $ 126.05   -   $ -   0.0%   $ -
Total Acquisitions 100   $ 93.04   73.8%   $ 126.05   -   $ -   0.0%   $ -
                                       
Total 6,454   $ 32.01   63.0%   $ 50.85   6,354   $ 30.92   63.2%   $ 48.92
                                       
States included in the Regions                                      
Mountain Idaho and Montana
West North Central Iowa, Kansas, Missouri, Nebraska and South Dakota
East North Central Indiana and Wisconsin
Middle Atlantic Pennsylvania
South Atlantic Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia
East South Central Kentucky and Tennessee
West South Central Arkansas and Louisiana

Note: During the reporting periods above, no properties were moved from the same store portfolio and reclassified as held for sale and no properties which were included in discontinued operations (held for sale) were reclassified as held for use.

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