10-Q 1 a50619924.htm SUMMIT HOTEL PROPERTIES, INC. 10-Q a50619924.htm
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________

FORM 10-Q
_________________


[x]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2013

OR

[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______________ to _______________

Commission File Number:  001-35074 (Summit Hotel Properties, Inc.)
Commission File Number:  001-54273 (Summit Hotel OP, LP)

SUMMIT HOTEL PROPERTIES, INC.
SUMMIT HOTEL OP, LP
(Exact name of registrant as specified in its charter)
_________________

 
Maryland (Summit Hotel Properties, Inc.)
  
27-2962512 (Summit Hotel Properties, Inc.)
Delaware (Summit Hotel OP, LP)  
27-0617340 (Summit Hotel OP, LP)
(State or other jurisdiction
  
(I.R.S. Employer Identification No.)
of incorporation or organization)
    
 
 
12600 Hill Country Boulevard, Suite R-100
Austin, TX  78738
(Address of principal executive offices, including zip code)

(512) 538-2315
(Registrant’s telephone number, including area code)
_________________
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
  Summit Hotel Properties, Inc. [x] Yes [ ]  No Summit Hotel OP, LP [x] Yes [ ]  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405) of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
  Summit Hotel Properties, Inc. [x] Yes [ ]  No Summit Hotel OP, LP [x] Yes [ ]  No
 
 
 
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company in Rule 12b-2 of the Exchange Act.
 
  Summit Hotel Properties, Inc.  
    Large accelerated filer  [ ]  Accelerated filer  [X] 
    Non-accelerated filer  [ ] Smaller reporting company  [ ]
       
 
Summit Hotel OP, LP
  
    Large accelerated filer  [ ] Accelerated filer  [X]
    Non-accelerated filer  [ ] Smaller reporting company  [ ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
  Summit Hotel Properties, Inc. [ ] Yes [x]  No Summit Hotel OP, LP [ ] Yes [x]  No
 
As of May 1, 2013, the number of outstanding shares of common stock of Summit Hotel Properties, Inc. was 65,931,900 and the number of outstanding units of partnership interest in Summit Hotel OP, LP designated as Common Units was 2,997,831, excluding 65,931,900 Common Units held by Summit Hotel Properties, Inc. and its wholly owned subsidiary which is the general partner of Summit Hotel OP, LP.
 
 
 
 
 

EXPLANATORY NOTE
 
This report combines the Quarterly Reports on Form 10-Q for the period ended March 31, 2013 of Summit Hotel Properties, Inc., a Maryland corporation, and Summit Hotel OP, LP, a Delaware limited partnership.

Unless stated otherwise or the context otherwise requires, references in this report to:

●     
“Summit REIT” mean Summit Hotel Properties, Inc., a Maryland corporation;
 
●     
“Summit OP” or “our operating partnership” mean Summit Hotel OP, LP, a Delaware limited partnership, our operating partnership, and its consolidated subsidiaries; and
 
●     
“we,” “our,” “us,” “our company” or “the company” mean Summit REIT, Summit OP and their consolidated subsidiaries taken together as one company.

Summit REIT is the sole member of Summit Hotel GP, LLC, a Delaware limited liability company, which is the sole general partner (the “General Partner”) of Summit OP. As of March 31, 2013, Summit REIT owned approximately 95% of the issued and outstanding common units of partnership interest of Summit OP (“Common Units”), including the sole general partnership interest held by the General Partner.  As of March 31, 2013, Summit REIT owned all of the issued and outstanding 9.25% Series A Cumulative Redeemable Preferred Units of Summit OP (“Series A Preferred Units”), all of the issued and outstanding 7.875% Series B Cumulative Redeemable Preferred Units of Summit OP (“Series B Preferred Units”), and all of the issued and outstanding 7.125% Series C Cumulative Redeemable Preferred Units of Summit OP (“Series C Preferred Units,” the Series C Preferred Units, Series B Preferred Units and Series A Preferred Units collectively referred to as “Preferred Units”). As the sole member of the General Partner, Summit REIT has exclusive control of Summit OP’s day-to-day management.  The remaining Common Units of Summit OP are owned by third parties.

We believe combining the Quarterly Reports on Form 10-Q of Summit REIT and Summit OP into this single report provides the following benefits:

●     
it enhances investors’ understanding of Summit REIT and Summit OP by enabling investors to view the business as a whole in the same manner as management views and operates the business;
 
●     
it eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both Summit REIT and Summit OP; and
 
●     
it creates time and cost efficiencies for both companies through the preparation of one combined report instead of two separate reports.

We believe it is important to understand the few differences between Summit REIT and Summit OP in the context of how Summit REIT and Summit OP operate as a consolidated company. Summit REIT has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its short taxable year ended December 31, 2011.

As of March 31, 2013, Summit REIT’s only material assets were its ownership of Common Units and Preferred Units of Summit OP and its ownership of the membership interests in the General Partner. As a result, Summit REIT does not conduct business itself, other than controlling, through the General Partner, Summit OP, raising capital through issuances of equity securities from time to time and guaranteeing certain debt of Summit OP and its subsidiaries. Summit OP and its subsidiaries hold all the assets of the consolidated company. Except for net proceeds from securities issuances by Summit REIT, which are contributed to Summit OP in exchange for partnership units of Summit OP, Summit OP and its subsidiaries generate capital from the operation of our business and through borrowings and the issuance of partnership units of Summit OP.

Stockholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of Summit REIT and those of Summit OP. As of March 31, 2013, Summit OP’s capital interests include Common Units, representing general and limited partnership interests, and Preferred Units. The Common Units owned by limited partners other than Summit REIT and its subsidiaries are accounted for in partners’ capital in Summit OP’s consolidated financial statements and (within stockholders’ equity) as noncontrolling interests in Summit REIT’s consolidated financial statements.

 
 
 
 
In order to highlight the differences between Summit REIT and Summit OP, there are sections in this report that separately discuss Summit REIT and Summit OP, including separate financial statements and certain notes thereto and separate Exhibit 31 and Exhibit 32 certifications. In the sections that combine disclosure for Summit REIT and Summit OP (i.e., where the disclosure refers to the consolidated company), this report refers to actions or holdings as our actions or holdings and, unless otherwise indicated, means the actions or holdings of Summit REIT and Summit OP and their respective subsidiaries, as one consolidated company.

As the sole member of the General Partner, Summit REIT consolidates Summit OP for financial reporting purposes, and Summit REIT does not have assets other than its investment in the General Partner and Summit OP. Therefore, while stockholders’ equity and partners’ capital differ as discussed above, the assets and liabilities of Summit REIT and Summit OP are the same on their respective financial statements.

Finally, we refer to a number of other entities and events in this report as follows. Unless the context otherwise requires or indicates, references to:

●     
“our TRSs” refer to Summit Hotel TRS, Inc., a Delaware corporation, and Summit Hotel TRS II, Inc., a Delaware corporation, and any other taxable REIT subsidiaries (“TRSs”) that we may form in the future;
 
●     
“our TRS lessees” refer to the subsidiaries of our TRSs that lease our hotels from Summit OP or subsidiaries of Summit OP.  All but one of our TRS lessees are wholly owned by our TRSs.
 
 
ii
 
 
TABLE OF CONTENTS

     
Page
PART I — FINANCIAL INFORMATION
       
Item 1.
1
     
 
Summit Hotel Properties, Inc.
  
    1
    2
    3
    4
   
5
   
 
  
 
Summit Hotel OP, LP
  
    6
    7
    8
    9
   
10
       
   
11
   
 
  
Item 2.
23
       
Item 3.
35
       
Item 4.
36
       
PART II — OTHER INFORMATION
       
Item 1.
36
       
Item 1A.
37
       
Item 2.
37
       
Item 3.
37
       
Item 4.
37
       
Item 5.
37
       
Item 6.
38

 
iii
 
 
PART I — FINANCIAL INFORMATION
 
 
SUMMIT HOTEL PROPERTIES, INC.
MARCH 31, 2013 (UNAUDITED) AND DECEMBER 31, 2012
 
   
March 31,
    
December 31,
  
   
2013
    
2012
  
ASSETS
            
             
Investment in hotel properties, net
   $ 934,842     $ 734,362  
Investment in hotel properties under development
     10,380       10,303  
Land held for development
     13,844       15,802  
Assets held for sale
     26,920       4,836  
Cash and cash equivalents
     20,790       13,980  
Restricted cash
     22,261       3,624  
Trade receivables
     12,677       5,478  
Prepaid expenses and other
     2,889       5,311  
Deferred charges, net
     9,324       8,895  
Deferred tax asset
     3,894       3,997  
Other assets
     4,169       4,201  
TOTAL ASSETS
   $ 1,061,990     $ 810,789  
                 
                 
LIABILITIES AND EQUITY
                
                 
LIABILITIES
                
Debt
   $ 325,673     $ 312,613  
Debt related to assets held for sale
     6,715       -  
Accounts payable
     3,875       5,013  
Accrued expenses
     21,886       18,985  
Derivative financial instruments
     534       641  
TOTAL LIABILITIES
     358,683       337,252  
                 
COMMITMENTS AND CONTINGENCIES
                
                 
EQUITY
                
Preferred stock, $.01 par value per share, 100,000,000 shares authorized:
    
 
          
9.25% Series A - 2,000,000 shares issued and outstanding at March 31, 2013
    
 
          
and December 31, 2012 (liquidation preference of $50,393 at March 31,
    
 
          
2013 and December 31, 2012)
     20       20  
7.875% Series B - 3,000,000 shares issued and outstanding at March 31, 2013
    
 
          
and December 31, 2012 (liquidation preference of $75,502 and $75,324 at
    
 
          
March 31, 2013 and December 31, 2012, respectively)
     30       30  
7.125% Series C - 3,400,000 shares issued and outstanding at March 31, 2013
    
 
          
(liquidation preference of $85,183 at March 31, 2013)
     34       -  
Common stock, $.01 par value per share, 450,000,000 shares authorized,
    
 
          
65,678,025 and 46,159,652 shares issued and outstanding at March 31, 2013
    
 
          
and December 31, 2012, respectively
     657       462  
Additional paid-in capital
     705,683       468,820  
Accumulated other comprehensive income (loss)
     (426 )     (528 )
Accumulated deficit and distributions
     (39,916 )     (31,985 )
Total stockholders' equity
     666,082       436,819  
Noncontrolling interests in Operating Partnership
     29,762       36,718  
Noncontrolling interests in joint venture
     7,463       -  
TOTAL EQUITY
     703,307       473,537  
                 
TOTAL LIABILITIES AND EQUITY
   $ 1,061,990     $ 810,789  
 
See Notes to the Consolidated Financial Statements
 
1
 
 
SUMMIT HOTEL PROPERTIES, INC.
FOR THE QUARTERS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)
 
   
First Quarter
  
   
2013
    
2012
  
             
REVENUES
            
Room revenue
   $ 60,089     $ 35,727  
Other hotel operations revenue
     3,122       1,593  
Total Revenues
     63,211       37,320  
                 
EXPENSES
                
Hotel operating expenses:
                
Rooms
     17,621       10,475  
Other direct
     8,244       4,954  
Other indirect
     16,242       10,146  
Other
     213       201  
Total hotel operating expenses
     42,320       25,776  
Depreciation and amortization
     11,156       7,555  
Corporate general and administrative:
                
 Salaries and other compensation
     2,421       938  
Other
     656       883  
Hotel property acquisition costs
     654       580  
Total Expenses
     57,207       35,732  
                 
INCOME (LOSS) FROM OPERATIONS
     6,004       1,588  
                 
OTHER INCOME (EXPENSE)
                
Interest income
     18       1  
Other income
     160       -  
Interest expense
     (4,072 )     (3,195 )
Gain (loss) on disposal of assets
     6       -  
Total Other Income (Expense)
     (3,888 )     (3,194 )
                 
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
     2,116       (1,606 )
                 
INCOME TAX (EXPENSE) BENEFIT
     (410 )     147  
                 
INCOME (LOSS) FOR CONTINUING OPERATIONS
     1,706       (1,459 )
                 
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
     177       (1,346 )
                 
NET INCOME (LOSS)
     1,883       (2,805 )
                 
NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS
    
 
          
Operating Partnership
     (28 )     (1,070 )
Joint venture
     (37 )     -  
                 
NET INCOME (LOSS) ATTRIBUTABLE TO SUMMIT HOTEL PROPERTIES, INC.
     1,948       (1,735 )
                 
PREFERRED DIVIDENDS
     (2,452 )     (1,156 )
                 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
   $ (504 )   $ (2,891 )
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                
Basic
     62,684       27,278  
                 
Diluted
     62,950       27,278  
                 
EARNINGS PER SHARE
                
Basic and diluted net income (loss) per share from continuing operations
   $ (0.01 )   $ (0.07 )
Basic and diluted net income (loss) per share from discontinued operations
     0.00       (0.04 )
                 
Basic and diluted net income (loss) per share
   $ (0.01 )   $ (0.11 )
 
See Notes to the Consolidated Financial Statements
 
 
2
 
 
SUMMIT HOTEL PROPERTIES, INC.
FOR THE QUARTERS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)
 
   
First Quarter
  
   
2013
    
2012
  
             
             
NET INCOME (LOSS)
   $ 1,883     $ (2,805 )
                 
Other comprehensive income (loss), net of tax:
                
Changes in unrealized loss on derivatives
     107       -  
Total other comprehensive income (loss)
     107       -  
                 
COMPREHENSIVE INCOME (LOSS)
     1,990       (2,805 )
                 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO
                
NONCONTROLLING INTERESTS
                
Operating Partnership
     (23 )     (1,070 )
Joint venture
     (37 )     -  
                 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO
                
SUMMIT HOTEL PROPERTIES, INC.
     2,050       (1,735 )
                 
PREFERRED DIVIDENDS
     (2,452 )     (1,156 )
                 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO
                
COMMON STOCKHOLDERS
   $ (402 )   $ (2,891 )
 
See Notes to the Consolidated Financial Statements
 
 
3
 
 
SUMMIT HOTEL PROPERTIES, INC.
FOR THE QUARTERS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)
 
                                 
Accumulated
                              
   
Shares of
        
Shares of
              
Other
  
Accumulated
  
Total
  
Noncontrolling Interests
      
   
Preferred
  
Preferred
  
Common
  
Common
  
Additional
  
Comprehensive
  
Deficit and
  
Stockholders'
  
Operating
        
Total
  
   
Stock
  
Stock
  
Stock
  
Stock
  
Paid-In Capital
  
Income (Loss)
  
Distributions
  
Equity
  
Partnership
  
Joint Venture
  
Equity
  
                                                                   
BALANCES, DECEMBER 31, 2012
     5,000,000     $ 50       46,159,652     $ 462     $ 468,820     $ (528 )   $ (31,985 )   $ 436,819     $ 36,718     $ -     $ 473,537  
                                                                                         
Net proceeds from sale of
                                                                                  
common stock
     -       -       17,250,000       172       147,981       -       -       148,153       -       -       148,153  
Net proceeds from sale of
                                                                                  
preferred stock
     3,400,000       34       -       -       81,917       -       -       81,951       -       -       81,951  
Common stock redemption of
                                                                            
common units
     -       -       1,974,669       20       6,547       -       -       6,567       (6,567 )     -       -  
Contribution by noncontrolling
 
                                                                          
interests in joint venture
     -       -       -       -       -       -       -       -       -       7,500       7,500  
Dividends paid
     -       -       -       -       -       -       (9,879 )     (9,879 )     (366 )     -       (10,245 )
Equity-based compensation
     -       -       293,704       3       418       -       -       421       -       -       421  
Other comprehensive
                                                                                  
income (loss)
     -       -       -       -       -       102       -       102       5       -       107  
Net income (loss)
     -       -       -       -       -       -       1,948       1,948       (28 )     (37 )     1,883  
                                                                                         
BALANCES, MARCH 31, 2013
     8,400,000     $ 84       65,678,025     $ 657     $ 705,683     $ (426 )   $ (39,916 )   $ 666,082     $ 29,762     $ 7,463     $ 703,307  
                                                                                         
                                                                                         
                                                                                         
BALANCES, DECEMBER 31, 2011
     2,000,000     $ 20       27,278,000     $ 273     $ 288,902     $ -     $ (11,020 )   $ 278,175     $ 41,274     $ -     $ 319,449  
                                                                                         
Regristration and offering costs
     -       -       -       -       (323 )     -       -       (323 )     -       -       (323 )
Dividends paid
     -       -       -       -       -       -       (4,225 )     (4,225 )     (1,136 )     -       (5,361 )
Equity-based compensation
     -       -       -       -       126       -       -       126       -       -       126  
Net income (loss)
     -       -       -       -       -       -       (1,735 )     (1,735 )     (1,070 )     -       (2,805 )
                                                                                         
BALANCES, MARCH 31, 2012
     2,000,000     $ 20       27,278,000     $ 273     $ 288,705     $ -     $ (16,980 )   $ 272,018     $ 39,068     $ -     $ 311,086  
 
See Notes to the Consolidated Financial Statements
 
 
4
 
 
SUMMIT HOTEL PROPERTIES, INC.
FOR THE QUARTERS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)
 
   
First Quarter
  
   
2013
    
2012
  
             
OPERATING ACTIVITIES
            
Net income (loss)
   $ 1,883     $ (2,805 )
Adjustments to reconcile net income (loss) to
                
  net cash from operating activities:
                
Depreciation and amortization
     11,490       8,480  
Amortization of prepaid lease
     12       12  
Loss on impairment of assets
     1,500       932  
Equity-based compensation
     421       126  
Deferred tax asset
     104       (463 )
(Gain) loss on disposal of assets
     (1,640 )     -  
Changes in operating assets and liabilities:
                
Restricted cash released (funded)
     871       258  
Trade receivables
     (7,199 )     (2,544 )
Prepaid expenses and other
     2,423       549  
Accounts payable and accrued expenses
     1,220       (1,639 )
                 
NET CASH PROVIDED BY (USED IN)
                
  OPERATING ACTIVITIES
     11,085       2,906  
                 
INVESTING ACTIVITIES
                
Acquisitions of hotel properties
     (213,135 )     (29,738 )
Investment in hotel properties under development
     (77 )     -  
Improvements and additions to hotel properties
     (8,520 )     (6,833 )
Purchases of office furniture and equipment
     (224 )     -  
Proceeds from asset dispositions, net of closing costs
     9,198       2  
Restricted cash released (funded)
     (14,030 )     (337 )
                 
NET CASH PROVIDED BY (USED IN)
                
  INVESTING ACTIVITIES
     (226,788 )     (36,906 )
                 
FINANCING ACTIVITIES
                
Proceeds from issuance of debt
     74,000       111,550  
Principal payments on debt
     (77,649 )     (70,550 )
Financing fees on debt
     (1,196 )     (983 )
Proceeds from equity offerings, net of offering costs
     237,603       (323 )
Dividends paid and distributions to members
     (10,245 )     (5,361 )
                 
NET CASH PROVIDED BY (USED IN)
                
  FINANCING ACTIVITIES
     222,513       34,333  
                 
NET CHANGE IN CASH AND CASH EQUIVALENTS
     6,810       333  
                 
CASH AND CASH EQUIVALENTS
                
  BEGINNING OF PERIOD
     13,980       10,537  
 
                
END OF PERIOD
   $ 20,790     $ 10,870  
                 
SUPPLEMENTAL DISCLOSURE OF
                
  CASH FLOW INFORMATION
                
Cash payments for interest
   $ 3,925     $ 3,388  
                 
Capitalized interest
   $ 77     $ -  
                 
Cash payments for income taxes, net of refunds
   $ 81     $ 120  
 
See Notes to the Consolidated Financial Statements
 
 
5
 
 
SUMMIT HOTEL OP, LP
MARCH 31, 2013 (UNAUDITED) AND DECEMBER 31, 2012
 
   
March 31,
    
December 31,
  
   
2013
    
2012
  
ASSETS
            
             
Investment in hotel properties, net
   $ 934,842     $ 734,362  
Investment in hotel properties under development
     10,380       10,303  
Land held for development
     13,844       15,802  
Assets held for sale
     26,920       4,836  
Cash and cash equivalents
     20,790       13,980  
Restricted cash
     22,261       3,624  
Trade receivables
     12,677       5,478  
Prepaid expenses and other
     2,889       5,311  
Deferred charges, net
     9,324       8,895  
Deferred tax asset
     3,894       3,997  
Other assets
     4,169       4,201  
TOTAL ASSETS
   $ 1,061,990     $ 810,789  
                 
                 
LIABILITIES AND EQUITY
                
                 
LIABILITIES
                
Debt
   $ 325,673     $ 312,613  
Debt related to assets held for sale
     6,715       -  
Accounts payable
     3,875       5,013  
Accrued expenses
     21,886       18,985  
Derivative financial instruments
     534       641  
TOTAL LIABILITIES
     358,683       337,252  
                 
COMMITMENTS AND CONTINGENCIES
                
                 
EQUITY
                
Summit Hotel Properties, Inc., 65,678,025 and 46,159,652 common units outstanding
                
at March 31, 2013 and December 31, 2012, respectively, and 8,400,000 and
                
5,000,000 preferred units outstanding at March 31, 2013 and December 31, 2012,
                
respectively (preferred units liquidation preference of $211,078 and $125,717 at
                
March 31, 2013 and December 31, 2012, respectively)
     666,082       436,819  
Unaffiliated limited partners, 3,251,706 and 5,226,375 common units outstanding at
                
March 31, 2013 and December 31, 2012, respectively
     29,762       36,718  
Total partners' equity
     695,844       473,537  
Noncontrolling interests in joint venture
     7,463       -  
TOTAL EQUITY
     703,307       473,537  
                 
TOTAL LIABILITIES AND EQUITY
   $ 1,061,990     $ 810,789  
 
See Notes to the Consolidated Financial Statements
 
 
6
 
 
SUMMIT HOTEL OP, LP
FOR THE QUARTERS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)
 
   
First Quarter
  
   
2013
    
2012
  
             
REVENUE
            
Room revenue
   $ 60,089     $ 35,727  
Other hotel operations revenue
     3,122       1,593  
Total Revenue
     63,211       37,320  
                 
EXPENSES
                
Hotel operating expenses:
                
Rooms
     17,621       10,475  
Other direct
     8,244       4,954  
Other indirect
     16,242       10,146  
Other
     213       201  
Total hotel operating expenses
     42,320       25,776  
Depreciation and amortization
     11,156       7,555  
Corporate general and administrative:
                
Salaries and other compensation
     2,421       938  
Other
     656       883  
Hotel property acquisition costs
     654       580  
Total Expenses
     57,207       35,732  
                 
INCOME (LOSS) FROM OPERATIONS
     6,004       1,588  
                 
OTHER INCOME (EXPENSE)
                
Interest income
     18       1  
Other income
     160       -  
Interest expense
     (4,072 )     (3,195 )
Gain (loss) on disposal of assets
     6       -  
Total Other Income (Expense)
     (3,888 )     (3,194 )
                 
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
     2,116       (1,606 )
                 
INCOME TAX (EXPENSE) BENEFIT
     (410 )     147  
                 
INCOME (LOSS) FROM CONTINUING OPERATIONS
     1,706       (1,459 )
                 
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
     177       (1,346 )
                 
NET INCOME (LOSS)
     1,883       (2,805 )
                 
NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS
    
 
          
IN JOINT VENTURE
     (37 )     -  
                 
NET INCOME (LOSS) ATTRIBUTABLE TO SUMMIT HOTEL OP, LP
     1,920       (2,805 )
                 
PREFERRED DIVIDENDS
     (2,452 )     (1,156 )
                 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON UNIT HOLDERS
   $ (532 )   $ (3,961 )
                 
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
                
Basic
     65,979       37,378  
                 
Diluted
     66,245       37,378  
                 
EARNINGS PER UNIT
                
Basic and diluted net income (loss) per unit from continuing operations
   $ (0.01 )   $ (0.07 )
Basic and diluted net income (loss) per unit from discontinued operations
     0.00       (0.04 )
                 
Basic and diluted net income (loss) per unit
   $ (0.01 )   $ (0.11 )
 
See Notes to the Consolidated Financial Statements
 
 
7
 
 
SUMMIT HOTEL OP, LP
FOR THE QUARTERS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)
 
   
First Quarter
  
   
2013
    
2012
  
             
             
NET INCOME (LOSS)
   $ 1,883     $ (2,805 )
                 
Other comprehensive income (loss), net of tax:
                
Changes in unrealized loss on derivatives
     107       -  
Total other comprehensive income (loss)
     107       -  
                 
COMPREHENSIVE INCOME (LOSS)
     1,990       (2,805 )
                 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO
                
NONCONTROLLING INTERESTS IN JOINT VENTURE
     (37 )     -  
                 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO
                
SUMMIT HOTEL OP, LP
     2,027       (2,805 )
                 
PREFERRED DIVIDENDS
     (2,452 )     (1,156 )
                 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO
                
COMMON UNIT HOLDERS
   $ (425 )   $ (3,961 )
 
See Notes to the Consolidated Financial Statements
 
 
8
 
 
SUMMIT HOTEL OP, LP
FOR THE QUARTERS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)
 
   
Preferred
    
Common
              
               
Total
    
Noncontrolling
        
   
Summit Hotel
    
Summit Hotel
    
Unaffiliated Limited
    
Interests in
    
Total
  
   
Properties, Inc.
    
Properties, Inc.
    
Partners' Equity
    
Joint Venture
    
Equity
  
                               
BALANCES, DECEMBER 31, 2012
   $ 120,328     $ 316,491     $ 36,718     $ -     $ 473,537  
                                         
Contributions
     81,951       148,153       -       7,500       237,604  
Common stock redemption of common units
     -       6,567       (6,567 )     -       -  
Distributions
     (2,452 )     (7,427 )     (366 )     -       (10,245 )
Equity-based compensation
     -       421       -       -       421  
Other comprehensive income (loss)
     -       102       5       -       107  
Net income (loss)
     2,452       (504 )     (28 )     (37 )     1,883  
                                         
BALANCES, MARCH 31, 2013
   $ 202,279     $ 463,803     $ 29,762     $ 7,463     $ 703,307  
                                         
                                         
BALANCES, DECEMBER 31, 2011
   $ 47,875     $ 230,300     $ 41,274     $ -     $ 319,449  
                                         
Registration and offering costs
     -       (323 )     -       -       (323 )
Distributions
     (1,156 )     (3,069 )     (1,136 )     -       (5,361 )
Equity-based compensation
     -       126       -       -       126  
Net income (loss)
     1,156       (2,891 )     (1,070 )     -       (2,805 )
                                         
BALANCES, MARCH 31, 2012
   $ 47,875     $ 224,143     $ 39,068     $ -     $ 311,086  
 
See Notes to the Consolidated Financial Statements
 
 
9
 
 
SUMMIT HOTEL OP, LP
FOR THE QUARTERS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)
 
   
First Quarter
  
   
2013
    
2012
  
             
OPERATING ACTIVITIES
            
Net income (loss)
   $ 1,883     $ (2,805 )
Adjustments to reconcile net income (loss) to
                
  net cash from operating activities:
                
Depreciation and amortization
     11,490       8,480  
Amortization of prepaid lease
     12       12  
Loss on impairment of assets
     1,500       932  
Equity-based compensation
     421       126  
Deferred tax asset
     104       (463 )
(Gain) loss on disposal of assets
     (1,640 )     -  
Changes in operating assets and liabilities:
                
Restricted cash released (funded)
     871       258  
Trade receivables
     (7,199 )     (2,544 )
Prepaid expenses and other
     2,423       549  
Accounts payable and accrued expenses
     1,220       (1,639 )
                 
NET CASH PROVIDED BY (USED IN)
                
  OPERATING ACTIVITIES
     11,085       2,906  
                 
INVESTING ACTIVITIES
                
Acquisitions of hotel properties
     (213,135 )     (29,738 )
Investment in hotel properties under development
     (77 )     -  
Improvements and additions to hotel properties
     (8,520 )     (6,833 )
Purchases of office furniture and equipment
     (224 )     -  
Proceeds from asset dispositions, net of closing costs
     9,198       2  
Restricted cash released (funded)
     (14,030 )     (337 )
                 
NET CASH PROVIDED BY (USED IN)
                
  INVESTING ACTIVITIES
     (226,788 )     (36,906 )
                 
FINANCING ACTIVITIES
                
Proceeds from issuance of debt
     74,000       111,550  
Principal payments on debt
     (77,649 )     (70,550 )
Financing fees on debt
     (1,196 )     (983 )
Contributions
     237,603       (323 )
Distributions
     (10,245 )     (5,361 )
                 
NET CASH PROVIDED BY (USED IN)
                
  FINANCING ACTIVITIES
     222,513       34,333  
                 
NET CHANGE IN CASH AND CASH EQUIVALENTS
     6,810       333  
                 
CASH AND CASH EQUIVALENTS
                
  BEGINNING OF PERIOD
     13,980       10,537  
 
                
  END OF PERIOD
   $ 20,790     $ 10,870  
                 
SUPPLEMENTAL DISCLOSURE OF
                
  CASH FLOW INFORMATION:
                
Cash payments for interest
   $ 3,925     $ 3,388  
                 
Capitalized interest
   $ 77     $ -  
                 
Cash payments for income taxes, net of refunds
   $ 81     $ 120  
 
See Notes to the Consolidated Financial Statements
 
 
10
 
 
SUMMIT HOTEL PROPERTIES, INC. AND SUMMIT HOTEL OP, LP
 
NOTE 1 - DESCRIPTION OF BUSINESS

Summit Hotel Properties, Inc. (the “Company”) is a self-advised hotel investment company that was organized on June 30, 2010 as a Maryland corporation. The Company holds both general and limited partnership interests in Summit Hotel OP, LP (the “Operating Partnership”), a Delaware limited partnership also organized on June 30, 2010. Unless the context otherwise requires, “we” and “our” refer to the Company and the Operating Partnership collectively.
 
At March 31, 2013, our portfolio consists of 91 upscale, upper midscale and midscale hotel properties containing 10,309 guestrooms located in 22 states. Of our 91 hotel properties, six are classified as held for sale. Our hotel properties are leased to subsidiaries (“TRS Lessees”) of our taxable REIT subsidiaries (“TRSs”). We indirectly own 100% of the outstanding equity interests in all but one of our TRS Lessees. We indirectly own an 80% controlling interest in the TRS Lessee associated with the recently acquired Holiday Inn Express & Suites in San Francisco, CA.

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements of the Company include the accounts of the Company, the Operating Partnership, and their subsidiaries, including joint ventures. The accompanying consolidated financial statements of the Operating Partnership include the accounts of the Operating Partnership and its subsidiaries, including joint ventures. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements.

We prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results for first quarter 2013 may not be indicative of the results that may be expected for the full year 2013. For further information, please read the financial statements included in our Form 10-K for the year ended December 31, 2012.

We made certain reclassifications to the first quarter 2012 financial information to conform to our 2013 presentation, which included the reclassification of $0.6 million of food and beverage costs previously included as a reduction of other hotel operations revenue to other direct expenses. This reclassification had no effect on previously reported results of operations or equity.

Noncontrolling Interests

Noncontrolling interests represent the portion of equity in a subsidiary held by owners other than the consolidating parent. Noncontrolling interests are reported in the consolidated balance sheets within equity, separately from stockholders’ equity. Revenue, expenses and net income (loss) attributable to both the Company and the noncontrolling interests are reported in the consolidated statements of operations.

Our consolidated financial statements include noncontrolling interests related to Common Units of the Operating Partnership held by unaffiliated third parties and third-party ownership of joint ventures.
 
 
11
 
 
SUMMIT HOTEL PROPERTIES, INC. AND SUMMIT HOTEL OP, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
New Accounting Standards

In first quarter 2013, we adopted Accounting Standards Update (“ASU”) 2013–02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU 2013–02 required an entity to separately provide information about the effects on net income of certain significant amounts reclassified out of each component of accumulated other comprehensive income.

Adoption of this new standard did not have a material effect on the consolidated financial statements of the Company or our Operating Partnership.

NOTE 3 - HOTEL PROPERTY ACQUISITIONS

Hotel property acquisitions in first quarter 2013 and 2012 include (in thousands):
 
Date Acquired
  
Franchise/Brand
  
Location
  
Purchase Price
  
Debt Assumed
                     
First Quarter 2013
  
 
                
January 22
  
Hyatt Place
  
Chicago (Hoffman Estates), IL
   $ 8,706     $ -  
January 22
  
Hyatt Place
  
Orlando (Convention), FL
     13,547       -  
January 22
  
Hyatt Place
  
Orlando (Universal), FL
     13,872       -  
February 11
  
Holiday Inn Express & Suites (1)
  
San Francisco, CA
     60,500       23,423  
March 11
  
SpringHill Suites by Marriott
  
New Orleans, LA
     33,500       -  
March 11
  
Courtyard by Marriott
  
New Orleans (Convention), LA
     31,500       -  
March 11
  
Courtyard by Marriott
  
New Orleans (French Quarter), LA
     26,000       -  
March 11
  
Courtyard by Marriott
  
New Orleans (Metairie), LA
     24,000       -  
March 11
  
Residence Inn by Marriott
  
New Orleans (Metairie), LA
     20,000       -  
                         
Total First Quarter 2013
  
9 hotel properties
   $ 231,625     $ 23,423  
                         
First Quarter 2012
                    
January 12
  
Courtyard by Marriott (2)
  
Atlanta, GA
   $ 28,900     $ 19,011  
February 28
  
Hilton Garden Inn
  
Birmingham (Liberty Park), AL
     11,500       -  
February 28
  
Hilton Garden Inn
  
Birmingham (Lakeshore), AL
     8,625       -  
                         
Total First Quarter 2012
  
3 hotel properties
   $ 49,025     $ 19,011  
                         
(1) This hotel property was acquired by a joint venture in which we own an 80% controlling interest.
  
(2) We acquired a 90% controlling interest in this hotel property and we are obligated to acquire the remaining ownership in
  
     2016 for $0.4 million. The $0.4 million has been accrued as a liability and is included in the purchase price above.
  
 
The allocation of the aggregate purchase prices to the fair value of assets and liabilities acquired for the above acquisitions follows (in thousands):
 
   
First Quarter