NOTE 13 - EARNINGS (LOSS) PER SHARE/UNIT

We apply the two-class method of computing earnings per share, which requires the calculation of separate earnings per share amounts for our non-vested, time-based restricted stock awards with nonforfeitable dividends and for our common stock. Our non-vested, time-based restricted stock awards with nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. Our non-vested, time-based restricted stock awards with nonforfeitable dividends do not have such an obligation so they are not allocated losses.

In second quarter 2013, our outstanding stock options had a dilutive effect of 16,725 shares. In second quarter 2012 and the first six months 2013 and 2012, our outstanding stock options were not included in the computation of diluted earnings per share, as the options’ exercise price was greater than the average market price of our common shares.

In second quarter and first six months 2012, our basic and diluted earnings per share are based on basic weighted average common shares outstanding due to our loss from continuing operations.

Summit Hotel Properties, Inc.

A summary of the components used to calculate basic and diluted earnings per share follows (in thousands, except per share):

		Second Quarter					First Six Months
		2013		2012			2013		2012
Numerator:
Income (loss) from continuing operations		$	6,285	$	(162	)	$	7,991	$	(1,621	)
Less:	Preferred dividends	3,844		1,157			6,296		2,313
	Allocation to participating securities	18		12			27		12
	Attributable to noncontrolling interest	205		(247		)	131		(953		)
Income (loss) attributable to common stockholders from continuing operations		2,218		(1,084		)	1,537		(2,993		)
Income (loss) attributable to common stockholders from discontinued operations		368		(166		)	536		(1,148		)

Net income (loss) attributable to common stockholders		$	2,586	$	(1,250	)	$	2,073	$	(4,141	)

Denominator:
Weighted average common shares outstanding - basic		65,480		30,553			64,090		28,916
Dilutive effect of equity-based compensation awards		474		142			362		71

Weighted average common shares outstanding - diluted		65,954		30,695			64,452		28,987

Earnings per common share - basic and diluted:
Net income (loss) from continuing operations		$	0.03	$	(0.03	)	$	0.02	$	(0.10	)
Net income (loss) from discontinued operations		0.01		$	(0.01	)	0.01		$	(0.04	)

Net income (loss)		$	0.04	$	(0.04	)	$	0.03	$	(0.14	)

Summit Hotel OP, LP

A summary of the components used to calculate basic and diluted earnings per unit follows (in thousands, except per unit):

		Second Quarter					First Six Months
		2013		2012			2013		2012
Numerator:
Income (loss) from continuing operations		$	6,285	$	(162	)	$	7,991	$	(1,621	)
Less:	Preferred dividends	3,844		1,157			6,296		2,313
	Attributable to noncontrolling interest	89		—			52		—
Income (loss) attributable to common unit holders from continuing operations		2,352		(1,319		)	1,643		(3,934		)
Income (loss) attributable to common unit holders from discontinued operations		385		(194		)	562		(1,540		)

Net income (loss) attributable to common unit holders		$	2,737	$	(1,513	)	$	2,205	$	(5,474	)

Denominator:
Weighted average common units outstanding - basic		68,478		37,383			67,236		37,381
Dilutive effect of equity-based compensation awards		474		142			362		71

Weighted average common units outstanding - diluted		68,952		37,525			67,598		37,452

Earnings per common unit - basic and diluted:
Net income (loss) from continuing operations		$	0.03	$	(0.03	)	$	0.02	$	(0.11	)
Net income (loss) from discontinued operations		0.01		(0.01		)	0.01		(0.04		)

Net income (loss)		$	0.04	$	(0.04	)	$	0.03	$	(0.15	)