Published: August 14, 2006
Supertel Hospitality, Inc. Reports Increased Revenues for the Second Quarter 2006
Supertel Hospitality, Inc. (NASDAQ: SPPR), a
real estate investment trust which owns 79 hotels in 17 mid-western and
eastern states, today announced its results for the second quarter ended
June 30, 2006. The Company posted revenue of $20.1 million and net income
of $1.6 million for the quarter ended June 30, 2006 compared to revenue of
$16.1 million and net income of $1.4 million for the year ago period. The
Company posted revenue of $35.9 million and net income of $1.4 million for
the six months ended June 30, 2006 compared to revenue of $28.4 million and
net income of $1.0 million for the year ago period.
"Our controlled growth acquisition strategy focuses on the revenue and
earning potential of individual properties which results in increased value
for our shareholders," said Paul J. Schulte, chairman, president and chief
executive officer of Supertel Hospitality, Inc. "Supertel has added 10
hotels and 894 rooms to our portfolio since September 2005. We will
continue to seek hotel acquisitions which fit our model of providing,
clean, friendly and affordable accommodations while simultaneously
providing opportunities to implement operational efficiencies to improve
the bottom line."
Second Quarter Results
The Company had net income of $1.6 million for the three months ended June
30, 2006 compared to net income of $1.4 million from continuing operations
for the year ago period. Net income available to common shareholders was
$1.3 million, or $0.11 per diluted share, for the three months ended June
30, 2006, compared with net income available to common shareholders of $1.4
million, or $0.12 per diluted share, for the year ago period. The net
income available to common shareholders was reduced by a $305,000 preferred
stock dividend which was not incurred in the year ago period.
Revenues for the three months ended June 30, 2006 compared to the three
months ended June 30, 2005, increased $4.0 million or 24.9%. In the last
four months of 2005, the Company acquired seven additional hotels. In the
first quarter of 2006, the Company purchased a Super 8 located in Clarinda,
Iowa. The second quarter of 2006 two additional hotels were added, one
located in Erlanger, Kentucky was acquired on May 7, 2006 and on June 30,
2006 a 41-unit Supertel Inn and Conference Center located in Creston, Iowa
was opened. The additional hotel revenue generated by these ten additional
hotels, was $3.7 million during the second quarter of 2006. The increase
in room revenues was also due, in part, to an increase in average daily
rate (ADR) of $3.27 or 6.0% and a 0.7% increase in occupancy, which
resulted in a $2.49 or 6.8% increase of revenue per available room (RevPAR)
for the second quarter of 2006, compared to the year ago period.
Hotel and property operations expenses for the three months ended June 30,
2006 increased $2.8 million or 25.9%. The expenses generated by the ten
additional hotels for the second quarter of 2006 were $2.4 million. The
remaining increase of $400,000 is primarily due to advertising, maintenance
and utilities expense.
Interest expense increased by $461,000, due primarily to increased debt
used for hotel acquisitions. The depreciation and amortization expense
increased $426,000 for the second quarter of 2006 over the same period in
2005, which is primarily related to the ten additional hotels as well as
asset additions outpacing the amount of assets exceeding their useful life.
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 $1.3 million or
23.4% for the second quarter of 2006, compared to the year ago period.
The general and administration expense for the three months ended June 30,
2006 increased $62,000 or 9.6%. This is primarily related to professional
consulting fees.
Funds from operations (FFO) available to common shareholders were $3.4
million, or $0.28 per basic share and $0.25 per diluted share for the
second quarter of 2006, compared to $3.1 million or $0.26 for both the
basic and diluted share calculations, for the same quarter of 2005.
Six Months Results
The Company had net income of $1.4 million for the six months ended June
30, 2006 compared to net income of $1.0 million from continuing operations
for the year ago period. Net income available to common shareholders was
$802,000, or $0.07 per diluted share, for the six months ended June 30,
2006, compared with net income available to common shareholders of $1.0
million, or $0.09 per diluted share, for the year ago period. The net
income available to common shareholders was reduced by a $609,000 preferred
stock dividend which was not incurred in the year ago period.
Revenues for the six months ended June 30, 2006 compared to the year ago
period, increased $7.4 million or 26.1%. The additional hotel revenue
generated by the ten hotels acquired since September 2005 was $6.6 million
during the six months ended June 30, 2006. The increase in room revenues
was also due, in part, to an increase in ADR of $3.38 or 6.4% and a 2.3%
increase in occupancy, which resulted in a $2.87 or 8.8% increase in RevPAR
for the six months ended June 30, 2006, compared to the year ago period.
Hotel and property operations expenses for the six months ended June 30,
2006 increased $5.1 million or 25.5%. The expenses generated by the ten
additional hotels for the same period was $4.5 million. The remaining
increase of $600,000 is primarily due to advertising, franchise fees and
utilities expense.
Interest expense increased by $824,000, this is due primarily to increased
debt used for hotel acquisitions. The depreciation and amortization
expense increased $818,000 for the six months ended June 30, 2006 over the
same period in 2005, which is primarily related to the ten additional
hotels as well as asset additions outpacing the amount of assets exceeding
their useful life.
Property operating income, increased by $2.4 million or 28.4% for the six
months ended June 30, 2006, compared to the year ago period.
The general and administration expense for the six months ended June 30,
2006 increased $139,000 or 11.1% compared to the year ago period. This is
primarily related to professional consulting fees.
FFO available to common shareholders were $4.9 million, or $0.41 per basic
share and $0.38 per diluted share for the six months ended June 30, 2006,
compared to $4.4 million or $0.36 for both the basic and diluted share
calculations, for the year ago period.
Significant events for the three months ended June 30, 2006 include:
-- The Company declared a dividend of $.10 per share for the quarter
ended June 30, 2006 an increase of $.04 from the $.06 per share dividend
for the quarter ended June 30, 2005.
-- The Company acquired a 145-room Comfort Inn Conference Center in
Erlanger, Kentucky, located near the Cincinnati/Northern Kentucky
International Airport. The purchase price was approximately $3.4 million.
-- On June 30, 2006, the Company opened its 41-room Supertel Inn and
Conference Center in Creston, Iowa. The Conference Center will have a
capacity of approximately 200 people.
-- Supertel's operating partnership entered into agreements dated June
15, 2006, to purchase Savannah Suites extended-stay hotel facilities from
affiliated entities of Savannah Suites for approximately $33 million
expected to be funded from exisiting credit facilities and new borrowings
to be negotiated. Closing of this purchase transaction is anticipated for
August and is subject to customary closing conditions including inspections
(i.e., property and title surveys, environmental surveys and appraisals),
accuracy of representations and warranties and compliance with covenants
and obligations under the purchase agreements. The closing of each
transaction is also conditioned upon the closing of the other transactions.
-- On May 1, 2006, the Company entered into a loan agreement with
BankFirst in the amount of $3 million. This revolving credit facility will
be used for acquisitions and general corporate purposes. The loan is
secured by the corporate office building, located at 309 N. 5th St.,
Norfolk, NE.
About Supertel Hospitality, Inc.
Supertel Hospitality, Inc. (NASDAQ: SPPR) owns 79 hotels in 17 mid-western
and eastern states. The Company's hotel portfolio includes Super 8,
Comfort Inn/Comfort Suites, Hampton Inn, Holiday Inn Express, Supertel Inn,
Days Inn, Ramada Limited, Guest House Inn and Sleep Inn. This diversity
enables the Company to participate in the best practices of each of these
respected hospitality partners. The Company specializes in limited service
hotels, which do not normally offer food and beverage service. For more
information or to make a hotel reservation, visit www.supertelinc.com.
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.
The following table sets forth the Company's unaudited results of
operations for the three and six months ended June 30, 2006 and 2005,
respectively.
Unaudited - In thousands, except per share data:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
REVENUES
Room rentals and other hotel
services $ 20,118 $ 16,084 $ 35,808 $ 28,347
Other 31 42 61 87
-------- -------- -------- --------
20,149 16,126 35,869 28,434
-------- -------- -------- --------
EXPENSES
Hotel and property operations 13,470 10,696 25,166 20,057
Depreciation and amortization 2,077 1,651 4,133 3,315
General and administrative 708 646 1,387 1,248
-------- -------- -------- --------
16,255 12,993 30,686 24,620
-------- -------- -------- --------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE NET GAIN (LOSS) ON
DISPOSITIONS OF ASSETS, INTEREST
EXPENSE AND MINORITY INTEREST 3,894 3,133 5,183 3,814
Net gain (loss) on dispositions of
assets (1) 1 (5) -
Interest expense (1,867) (1,406) (3,623) (2,799)
Minority interest (103) (55) (151) (108)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 1,923 1,673 1,404 907
Income tax benefit (expense) (317) (239) 7 137
-------- -------- -------- --------
NET INCOME 1,606 1,434 1,411 1,044
Preferred stock dividend (305) - (609) -
NET INCOME AVAILABLE -------- -------- -------- --------
TO COMMON SHAREHOLDERS $ 1,301 $ 1,434 $ 802 $ 1,044
======== ======== ======== ========
NET INCOME PER COMMON SHARE - BASIC
AND DILUTED:
Net income available to common -------- -------- -------- --------
shareholders $ 0.11 $ 0.12 $ 0.07 $ 0.09
======== ======== ======== ========
Unaudited - In thousands, except per share data:
Three months Six months
ended June 30, ended June 30,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Weighted average number of shares
outstanding - basic and diluted 12,064 12,061 12,064 12,060
======== ======== ======== ========
Weighted average number of shares
outstanding for:
calculation of FFO per share -
basic 12,064 12,061 12,064 12,060
calculation of FFO per share -
diluted 14,757 12,061 14,757 12,060
Reconciliation of net income to FFO
Net income available to common
shareholders $ 1,301 $ 1,434 $ 802 $ 1,044
Depreciation and amortization 2,077 1,648 4,133 3,309
(Gain) loss on disposition of real
estate assets 1 (1) 5 -
-------- -------- -------- --------
FFO available to common
shareholders (1) $ 3,379 $ 3,081 $ 4,940 $ 4,353
======== ======== ======== ========
FFO per share - basic $ 0.28 $ 0.26 $ 0.41 $ 0.36
======== ======== ======== ========
FFO per share - diluted $ 0.25 $ 0.26 $ 0.38 $ 0.36
======== ======== ======== ========
(1) 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 six months ended June 30, 2006 and 2005,
respectively. The continuing operations comparisons below include the
Company's 79 and 69 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 per share data:
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Continuing operations:
Revenue per available room
(RevPAR) $ 39.25 $ 36.76 $ 35.40 $ 32.53
Average daily room rate (ADR) $ 57.60 $ 54.33 $ 56.44 $ 53.06
Occupancy percentage 68.2% 67.7% 62.7% 61.3%
Room rentals and other hotel
services from continuing
operations
69 Hotels owned 12 months and
longer $ 16,379 $ 16,084 $ 29,256 $ 28,347
10 Hotels owned less than 12
months 3,739 - 6,552 -
-------- -------- -------- --------
Total room rental and other
hotel services $ 20,118 $ 16,084 $ 35,808 $ 28,347
======== ======== ======== ========
Hotel and property operations
expense from continuing operations
69 Hotels owned 12 months and
longer $ 11,035 $ 10,696 $ 20,713 $ 20,057
10 Hotels owned less than 12
months 2,435 - 4,453 -
-------- -------- -------- --------
Total hotel and property
operations expense $ 13,470 $ 10,696 $ 25,166 $ 20,057
======== ======== ======== ========
Property Operating Income ("POI")
69 Hotels owned 12 months and
longer $ 5,344 $ 5,388 $ 8,543 $ 8,290
10 Hotels owned less than 12
months 1,304 - 2,099 -
-------- -------- -------- --------
Total property operating
income $ 6,648 $ 5,388 $ 10,642 $ 8,290
======== ======== ======== ========
POI as a percentage of continuing
operations revenue from room
rentals and other hotel services
("POI Margin")
69 Hotels owned 12 months and
longer 32.6% 33.5% 29.2% 29.2%
10 Hotels owned less than 12
months 34.9% - 32.0% -
Total POI as a percentage of
revenue 33.0% 33.5% 29.7% 29.2%
RECONCILIATION OF POI TO NET INCOME
POI $ 6,648 $ 5,388 $ 10,642 $ 8,290
Depreciation and amortization (2,077) (1,651) (4,133) (3,315)
Gain (Loss) on disposition of
assets (1) 1 (5) -
Interest expense (1,867) (1,406) (3,623) (2,799)
Minority interest (103) (55) (151) (108)
General and administrative expense (708) (646) (1,387) (1,248)
Income tax (expense) benefit (317) (239) 7 137
Other revenues 31 42 61 87
-------- -------- -------- --------
Net income $ 1,606 $ 1,434 $ 1,411 $ 1,044
======== ======== ======== ========
Net income as a percentage of
continuing operations revenue
from room rentals and other hotel
services 8.0% 8.9% 3.9% 3.7%
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