2009-11-10 00:46:01 -
NORFOLK, NE -- (Marketwire) -- 11/09/09 -- Supertel Hospitality, Inc. (NASDAQ: SPPR), a real estate investment trust (REIT) which owns 115 hotels in 23 states, today announced results for the third quarter ended September 30, 2009.
Revenues from continuing operations for the 2009 third quarter declined 11.7 percent to $28.2 million, compared to the 2008 third quarter. Net loss attributable to common shareholders in the 2009 third quarter was $(1.4) million, or $(0.06) per diluted share, compared to $1.7 million, or $0.08 per diluted share, in the 2008 third quarter. The 2009 third quarter loss included an aggregate $693,000 impairment charge for hotels held for sale, compared to no impairment charges recorded in the 2008 like period.
Funds from operations (FFO) in the 2009 third quarter was $2.1 million, or $0.09 per diluted share, compared to $5.5 million, or $0.26 per diluted share, in the 2008 third quarter. Adjusted earnings before interest, taxes, depreciation and amortization, noncontrolling interest and preferred stock dividends (Adjusted EBITDA) decreased 43.1 percent to $5.5 million, compared to the 2008 third quarter.
Third Quarter Highlights
-- Continued to outperform the hotel industry in revenue per available
room (RevPAR) with a decline of 11.6 percent, compared to an industry-wide
decline of 16.9 percent, according to Smith Travel Research data.
-- Completed the disposition of four hotels, generating approximately
$3.3 million of net cash after direct debt repayments. Sold two additional
hotels following the close of the quarter.
Operating Results
"We continue to experience a very difficult operating environment, as is the rest of the hotel industry," said Kelly A. Walters, Supertel's president and chief executive officer. "Our strategy of concentrating on the limited-service segment due to its historically lower volatility was effective, as our portfolio's third quarter RevPAR declined 11.6 percent, compared to 16.9 percent for the industry as a whole, according to Smith Travel Research (STR) data."
The majority of the RevPAR decline was a result of a 7.0 percent drop in occupancy, while average daily rate (ADR) was off 5.0 percent. Industry occupancy and ADR fell 7.9 percent and 9.8 percent, respectively.
"We are seeing continuing signs that the decline in RevPAR is beginning to moderate somewhat," he noted. "Our third quarter downturn was less than the second quarter. However, we are still closely tied to the economy and until it gets healthier, producing positive RevPAR numbers will continue to be a challenge. We are still in the very early stages of a slowing in the downward trend and agree with industry consultants that it will be at least until the 2010 second half before we get any meaningful traction, as the industry historically lags a rebound in the economy by some six months."
Walters commented that the company's newly reorganized senior management team stepped up appropriately to the ever-increasing challenges it faces as asset managers in this environment. "We are working closely with our operators to find the right balance between cutting costs and continuing to provide the proper levels of service and value to our guests."
The company outperformed both the industry and its respective segments in RevPAR, according to STR data. For the company's 77 same store economy hotels, which account for about two-thirds of the same store portfolio, RevPAR was off 11.1 percent, compared to a 15.9 percent decline for the economy hotels, according to STR. ADR declined 3.7 percent, and occupancy was off 7.7 percent. RevPAR for the company's 29 same store midscale without food and beverage properties declined 14.1 percent, compared to a 15.5 percent decline for such properties, according to STR, with ADR down 6.6 percent and occupancy off 8.1 percent. The company's eight extended stay properties reported a 2.2 percent decline in RevPAR, as occupancy remained essentially flat at 62.6 percent and ADR was off 1.8 percent.
Revenues from continuing operations for the 2009 third quarter decreased $3.7 million, or 11.7 percent, to $28.2 million, compared to the 2008 third quarter. Lower occupancy and ADR were attributable to the continuation of unfavorable economic conditions. Hotel and property operations expense from continuing operations for the 2009 third quarter decreased $1.0 million, or 4.6 percent, to $21.3 million, compared to the 2008 third quarter. The decline resulted primarily from lower occupancy levels, with payroll expense down $0.3 million, hotel-franchise-related expenses down $0.3 million, management fees down $0.2 million, utilities expense down $0.1 million and miscellaneous expenses down $0.1 million.
Interest expense from continuing operations, which includes several one-time pre-payment penalties incurred as a result of the company's debt reduction efforts, and depreciation and amortization expense from continuing operations both remained relatively flat, compared to the same period a year earlier. Due to a one-time restructuring charge associated with a re-organization within the REIT's staff, the general and administrative expense increased $0.2 million from the year ago period.
Property operating income (POI), defined as revenue from room rentals and other hotel services less hotel and property operating expenses, decreased $2.7 million from the year-ago period to $6.9 million. "The key remains striking the proper balance between cost cutting and attracting and retaining guests," he noted. "Strategically, we simply cannot afford to disappoint customers by failing to continue to provide safe, clean rooms and guest friendly service at a competitive rate. We not only need customers for today, we need to make sure that they will return when the economy rebounds."
Dispositions
During the quarter, the company sold four hotels. The company took a $760,000 impairment charge on two hotels, which was partially offset by a $67,000 recapture of previously recorded impairment related to the gain on the sale of two hotels.
Through the end of the third quarter, the company has sold six hotels for approximately $12 million with a net gain of $1.2 million. The sale of the six hotels generated approximately $5.4 million of net cash after direct debt repayments. Approximately $2.4 million of the $5.4 million was used to pay down additional GE Capital debt with the remainder applied to the company's revolving line of credit.
Properties sold in the 2009 third quarter were:
-- Masters Inn, 116 rooms, Kissimmee, Fla., $1.6 million
-- Masters Inn, 120 rooms, Orlando, Fla., $3.6 million
-- Comfort Inn, 63 rooms, Ellsworth, Maine, $2.2 million
-- Super 8, 35 rooms, Anamosa, Iowa, $0.85 million.
Following the end of the 2009 third quarter, the company sold two
additional properties:
-- Comfort Inn, 59 rooms, Dahlgren, Va., $3.5 million
-- Masters Inn, 187 rooms, Kissimmee, Fla., $1.7 million
In October the company classified an additional three properties as held for sale.
"We currently have four hotels listed as held for sale," Walters said. "We continue to evaluate our portfolio and periodically will sell, upgrade or reflag certain assets to improve the strength and returns of our portfolio.
We have received solid valuations for our properties, despite poor current market conditions. We have benefited from the fact that these assets are priced at levels under $10 million, asset levels for which attractive financing may still be obtained from local or regional banks. We are not selling at 'fire sale' prices. Our focus has been, and will continue to be, on selling some of our older properties to reduce the average age of our portfolio and to retain those assets that we believe will provide the highest possible return on a risk-adjusted basis over a sustained period."
Balance Sheet
The company continues to take positive steps to strengthen its balance sheet through paying down debt and refinancing or extending debt with pending maturities. Year to date, the company has paid down or refinanced $24.9 million of debt.
"On September 28, 2009, our Wells Fargo Bank credit facility of $9.0 million maturing on the same date was extended to November 12, 2009,"
Walters said. "We are negotiating with Wells Fargo to extend the maturity another six months.
"The loan-to-value ratio on this near-term obligation is conservative, even in the context of today's market," he added. "While the credit markets remain very tight and lenders remain very cautious, we believe that we will successfully procure attractive intermediate-term replacement debt prior to the new extended maturity. Once we complete this last near-term debt refinancing, we will not have another major debt maturity until 2011."
Dividend
The company did not declare a common stock dividend for the 2009 third quarter. The company will monitor requirements to maintain its REIT status and will regularly evaluate the dividend policy.
Outlook
"It remains a difficult economy and travel levels continue to be down meaningfully from the prior year," Walters said. "Preliminary results for October continue to show a slight slowing of the downward arc in RevPAR.
However, it is too early and not significant enough to call it a reversal.
Nonetheless, the signs provide us with some optimism.
"We also are encouraged that the development pipeline continues to drop off sharply, bringing less new competition to the marketplace," he commented.
"This will not only help for the short-term, but into the expected rebound, as well, which should help us recover room rates and occupancy more quickly.
"We are clearly focused on the short-term operations of our properties but are looking ahead and putting plans together to respond to the growth opportunities that we believe will become available as the economy recovers."
About Supertel Hospitality, Inc.
As of November 9, 2009, Supertel Hospitality, Inc. (NASDAQ: SPPR) owns 115 hotels comprised of 10,028 rooms in 23 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, Sleep Inn, Savannah Suites, Masters Inn, Key West Inn and Baymont 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 :
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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.
SELECTED FINANCIAL DATA:
The following table sets forth the company's balance sheet as of September 30, 2009 and December 31, 2008. The company owned 117 hotels (including three hotels held for sale) at September 30, 2009 and owned 123 hotels at December 31, 2008, (in thousands, except share data).
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The following table sets forth the Company's unaudited results of operations for the three and nine months ended September 30, 2009 and 2008, respectively (in thousands, except per share data).
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FFO is a non-GAAP financial measure. We consider 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 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. 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 our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. All REITs do not calculate FFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO for similar REITs.
We use FFO as a performance measure to facilitate a periodic evaluation of our operating results relative to those of our peers, who, like us, are typically members of NAREIT. We consider FFO a useful additional measure 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 provides a meaningful indication of our performance.
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Adjusted EBITDA is a financial measure that is not calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We calculate 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 Adjusted EBITDA also does not represent an amount that accrues directly to common shareholders. In calculating Adjusted EBITDA, we also add back preferred stock dividends and noncontrolling interests, which are cash charges.
Adjusted 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. Adjusted EBITDA is not a measure of our liquidity, nor is Adjusted EBITDA indicative of funds available to fund our cash needs, including our ability to make cash distributions. Neither does the measurement reflect cash expenditures for long-term assets and other items that have been and will be incurred. 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.
The following table sets forth the statistics of the Company's same store continuing operations hotel properties for the three and nine months ended September, 2009 and 2008, respectively.
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The following presentation includes some non-GAAP financial measures. The Company believes that the presentation of hotel property operating results (POI) for the three and nine months ended September 30, 2009 and 2008 respectively, is helpful to investors, and represents a more useful description of its core operations, as it better communicates the comparability of its hotels' operating results for all of the company's continuing operations hotel properties.
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The following table presents our RevPAR, ADR and Occupancy, by region, for the three months ended September 30, 2009 and 2008, respectively. The comparisons of same store operations are for 114 hotels in continuing operations owned by the company as of July 1, 2008.
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The following table presents our RevPAR, ADR and Occupancy, by region, for the nine months ended September 30, 2009 and 2008, respectively. The comparisons of same store operations are for 104 hotels in continuing operations owned as of January 1, 2008 and ten hotels acquired as of January 2, 2008.
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Contact:
Corrine L. Scarpello
Supertel Hospitality
Chief financial officer
402.371.2520
Email Contact :
Jerry Daly, Carol McCune
Daly Gray
(Media Contact)
703.435.6293
Email Contact :
