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Section 1: 10-Q (10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________
FORM 10-Q
____________________________________________________________________________________
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2019

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.
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________
Maryland
 
27-2962512
(State or other jurisdiction
 
(I.R.S. Employer Identification No.)
of incorporation or organization)
 
 
 
13215 Bee Cave Parkway, Suite B-300
Austin, TX  78738
(Address of principal executive offices, including zip code)
 
(512) 538-2300
(Registrant’s telephone number, including area code)
________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
INN
 
New York Stock Exchange
Series D Cumulative Redeemable Preferred Stock, $0.01 par value
 
INN-PD
 
New York Stock Exchange
Series E Cumulative Redeemable Preferred Stock, $0.01 par value
 
INN-PE
 
New York Stock Exchange

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. Yes  No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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). Yes  No
 



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
 
As of October 24, 2019, the number of outstanding shares of common stock of Summit Hotel Properties, Inc. was 105,165,347.
 
 
 
 
 



TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
i




PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Summit Hotel Properties, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
 
 
 
September 30, 2019
 
December 31, 2018
 
 
(Unaudited)
 
 
ASSETS
 
 

 
 

Investment in hotel properties, net
 
$
1,949,160

 
$
2,065,554

Undeveloped land
 
2,267

 
2,267

Assets held for sale, net
 
17,370

 
7,633

Investment in real estate loans, net
 
31,028

 
30,700

Right-of-use assets
 
28,942

 

Cash and cash equivalents
 
48,091

 
44,088

Restricted cash
 
27,819

 
28,468

Trade receivables, net
 
18,453

 
13,978

Prepaid expenses and other
 
10,507

 
10,111

Deferred charges, net
 
4,125

 
4,691

Other assets
 
11,596

 
14,807

Total assets
 
$
2,149,358

 
$
2,222,297

LIABILITIES AND EQUITY
 
 

 
 

Liabilities:
 
 

 
 

Debt, net of debt issuance costs
 
$
843,531

 
$
958,712

Lease liabilities
 
18,580

 

Accounts payable
 
5,273

 
5,391

Accrued expenses and other
 
84,917

 
66,050

Total liabilities
 
952,301

 
1,030,153

Commitments and contingencies (Note 10)
 


 


Equity:
 
 

 
 

Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:
 
 

 
 

6.45% Series D - 3,000,000 shares issued and outstanding at September 30, 2019 and December 31, 2018 (aggregate liquidation preference of $75,403 and $75,417 at September 30, 2019 and December 31, 2018, respectively)
 
30

 
30

6.25% Series E - 6,400,000 shares issued and outstanding at September 30, 2019 and December 31, 2018 (aggregate liquidation preference of $160,833 and $160,861 at September 30, 2019 and December 31, 2018, respectively)
 
64

 
64

Common stock, $0.01 par value per share, 500,000,000 shares authorized, 105,165,347 and 104,783,179 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
 
1,052

 
1,048

Additional paid-in capital
 
1,189,501

 
1,185,310

Accumulated other comprehensive loss
 
(20,395
)
 
(1,441
)
Retained earnings
 
11,103

 
4,838

Total stockholders’ equity
 
1,181,355

 
1,189,849

Non-controlling interests in operating partnership
 
1,861

 
2,295

Non-controlling interest in joint venture (Note 8)
 
13,841

 

Total equity
 
1,197,057

 
1,192,144

Total liabilities and equity
 
$
2,149,358

 
$
2,222,297

 
See Notes to the Condensed Consolidated Financial Statements

1


Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share amounts)
 
 
For the
Three Months Ended
September 30,
 
For the
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 

 
 

 
 

 
 

Room
 
$
123,112

 
$
131,429

 
$
382,868

 
$
401,651

Food and beverage
 
5,540

 
5,817

 
17,982

 
18,663

Other
 
5,033

 
5,094

 
14,717

 
14,447

Total revenues
 
133,685

 
142,340

 
415,567

 
434,761

Expenses:
 
 

 
 

 
 

 
 

Room
 
27,898

 
30,854

 
84,151

 
90,972

Food and beverage
 
4,493

 
4,684

 
13,781

 
14,790

Other hotel operating expenses
 
38,913

 
40,437

 
118,132

 
121,473

Property taxes, insurance and other
 
10,696

 
10,220

 
32,799

 
32,250

Management fees
 
3,676

 
4,188

 
13,280

 
14,928

Depreciation and amortization
 
23,202

 
24,941

 
72,517

 
75,141

Corporate general and administrative
 
5,532

 
4,852

 
17,442

 
17,079

Loss on impairment of assets
 

 

 
1,685

 

Total expenses
 
114,410

 
120,176

 
353,787

 
366,633

(Loss) gain on disposal of assets, net
 
(31
)
 
24,826

 
39,655

 
42,114

Operating income
 
19,244

 
46,990

 
101,435

 
110,242

Other income (expense):
 
 

 
 

 
 

 
 

Interest expense
 
(9,450
)
 
(10,848
)
 
(30,068
)
 
(30,579
)
Other income, net
 
1,808

 
1,327

 
3,255

 
5,586

Total other income (expense)
 
(7,642
)
 
(9,521
)
 
(26,813
)
 
(24,993
)
Income from continuing operations before income taxes
 
11,602

 
37,469

 
74,622

 
85,249

Income tax benefit (expense) (Note 12)
 
24

 
532

 
(1,027
)
 
120

Net income
 
11,626

 
38,001

 
73,595

 
85,369

Less - Income attributable to non-controlling interests:
 
 
 
 
 
 
 
 
Operating Partnership
 
(15
)
 
(100
)
 
(150
)
 
(204
)
Joint venture
 
(77
)
 

 
(77
)
 

Net income attributable to Summit Hotel Properties, Inc.
 
11,534

 
37,901

 
73,368

 
85,165

Preferred dividends
 
(3,710
)
 
(3,710
)
 
(11,128
)
 
(12,962
)
Premium on redemption of preferred stock
 

 

 

 
(3,277
)
Net income attributable to common stockholders
 
$
7,824

 
$
34,191

 
$
62,240

 
$
68,926

Earnings per share:
 
 
 
 
 
 
 
 

Basic and diluted
 
$
0.07

 
$
0.33

 
$
0.60

 
$
0.66

Weighted average common shares outstanding:
 
 

 
 

 
 

 
 

Basic
 
103,935

 
103,666

 
103,861

 
103,603

Diluted
 
103,970

 
103,821

 
103,916

 
103,868

 
See Notes to the Condensed Consolidated Financial Statements

2


Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands)
 
 
For the
Three Months Ended
September 30,
 
For the
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
Net income
 
$
11,626

 
$
38,001

 
$
73,595

 
$
85,369

Other comprehensive income, net of tax:
 
 

 
 

 
 

 
 

Changes in fair value of derivative financial instruments
 
(4,140
)
 
2,495

 
(18,972
)
 
6,601

Comprehensive income
 
7,486

 
40,496

 
54,623

 
91,970

Less - Comprehensive income attributable to non-controlling interests:
 
 

 
 

 
 

 
 

Operating Partnership
 
(6
)
 
(107
)
 
(104
)
 
(223
)
Joint venture
 
(77
)
 

 
(77
)
 

Comprehensive income attributable to Summit Hotel Properties, Inc.
 
7,403

 
40,389

 
54,442

 
91,747

Preferred dividends
 
(3,710
)
 
(3,710
)
 
(11,128
)
 
(12,962
)
Premium on redemption of preferred stock
 

 

 

 
(3,277
)
Comprehensive income attributable to common stockholders
 
$
3,693

 
$
36,679

 
$
43,314

 
$
75,508

 
See Notes to the Condensed Consolidated Financial Statements


3


Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Changes in Equity
For the Three Months Ended September 30, 2019 and 2018
(Unaudited)
(in thousands, except share amounts)
 
 
Shares
 of Preferred
Stock
 
Preferred
Stock
 
Shares
of
Common
Stock
 
Common
Stock
 
Additional
Paid-In Capital
 
Accumulated Other
Comprehensive
Income (Loss)
 
Retained Earnings
and
Distributions
 
Total
Stockholders’
Equity
 
Non-controlling Interests
Total
Equity
 
 
 
 
 
 
 
 
 
 
Operating
Partnership
 
Joint
Venture
 
Balance at June 30, 2019
 
9,400,000

 
$
94

 
105,126,626

 
$
1,051

 
$
1,187,715

 
$
(16,236
)
 
$
22,179

 
$
1,194,803

 
$
2,254

 
$

 
$
1,197,057

Contribution by non-controlling interest in joint venture
 

 

 

 

 

 

 

 

 

 
13,764

 
13,764

Common stock redemption of common units
 

 

 
40,000

 
1

 
383

 
(28
)
 

 
356

 
(356
)
 

 

Dividends
 

 

 

 

 

 

 
(22,610
)
 
(22,610
)
 
(46
)
 

 
(22,656
)
Equity-based compensation
 

 

 
(1,279
)
 

 
1,447

 

 

 
1,447

 
3

 

 
1,450

Other
 

 

 

 

 
(44
)
 

 

 
(44
)
 

 

 
(44
)
Other comprehensive loss
 

 

 

 

 

 
(4,131
)
 

 
(4,131
)
 
(9
)
 

 
(4,140
)
Net income
 

 

 

 

 

 

 
11,534

 
11,534

 
15

 
77

 
11,626

Balance at September 30, 2019
 
9,400,000

 
$
94

 
105,165,347

 
$
1,052

 
$
1,189,501

 
$
(20,395
)
 
$
11,103

 
$
1,181,355

 
$
1,861

 
$
13,841

 
$
1,197,057

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2018
 
9,400,000

 
$
94

 
104,744,101

 
$
1,047

 
$
1,182,398

 
$
5,545

 
$
6,310

 
$
1,195,394

 
$
2,662

 
$

 
$
1,198,056

Dividends
 

 

 

 

 

 

 
(22,563
)
 
(22,563
)
 
(54
)
 

 
(22,617
)
Equity-based compensation
 

 

 
1,609

 

 
1,315

 

 

 
1,315

 
4

 

 
1,319

Other
 

 

 

 

 
(19
)
 

 

 
(19
)
 

 

 
(19
)
Other comprehensive income
 

 

 

 

 

 
2,488

 

 
2,488

 
7

 

 
2,495

Net income
 

 

 

 

 

 

 
37,901

 
37,901

 
100

 

 
38,001

Balance at September 30, 2018
 
9,400,000

 
$
94

 
104,745,710

 
$
1,047

 
$
1,183,694

 
$
8,033

 
$
21,648

 
$
1,214,516

 
$
2,719

 
$

 
$
1,217,235

 
See Notes to the Condensed Consolidated Financial Statements


4


Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Changes in Equity
For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
(in thousands, except share amounts)
 
 
Shares
 of Preferred
Stock
 
Preferred
Stock
 
Shares
of
Common
Stock
 
Common
Stock
 
Additional
Paid-In Capital
 
Accumulated Other
Comprehensive
Income (Loss)
 
Retained Earnings
and
Distributions
 
Total
Stockholders’
Equity
 
Non-controlling Interests
 
Total
Equity
 
 
 
 
 
 
 
 
 
 
Operating
Partnership
 
Joint
Venture
 
Balance at December 31, 2018
 
9,400,000

 
$
94

 
104,783,179

 
$
1,048

 
$
1,185,310

 
$
(1,441
)
 
$
4,838

 
$
1,189,849

 
$
2,295

 
$

 
$
1,192,144

Contribution by non-controlling interest in joint venture
 

 

 

 

 

 

 

 

 

 
13,764

 
13,764

Common stock redemption of common units
 

 

 
46,076

 
1

 
436

 
(28
)
 

 
409

 
(409
)
 

 

Dividends
 

 

 

 

 

 

 
(67,103
)
 
(67,103
)
 
(140
)
 

 
(67,243
)
Equity-based compensation
 

 

 
410,432

 
4

 
4,751

 

 

 
4,755

 
11

 

 
4,766

Shares acquired for employee withholding requirements
 

 

 
(74,340
)
 
(1
)
 
(838
)
 

 

 
(839
)
 

 

 
(839
)
Other
 

 

 

 

 
(158
)
 

 

 
(158
)
 

 

 
(158
)
Other comprehensive loss
 

 

 

 

 

 
(18,926
)
 

 
(18,926
)
 
(46
)
 

 
(18,972
)
Net income
 

 

 

 

 

 

 
73,368

 
73,368

 
150

 
77

 
73,595

Balance at September 30, 2019
 
9,400,000

 
$
94

 
105,165,347

 
$
1,052

 
$
1,189,501

 
$
(20,395
)
 
$
11,103

 
$
1,181,355

 
$
1,861

 
$
13,841

 
$
1,197,057

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 
12,800,000

 
$
128

 
104,287,128

 
$
1,043

 
$
1,262,679

 
$
1,451

 
$
9,201

 
$
1,274,502

 
$
2,874

 
$

 
$
1,277,376

Redemption of preferred stock
 
(3,400,000
)
 
(34
)
 

 

 
(81,689
)
 

 
(3,277
)
 
(85,000
)
 

 

 
(85,000
)
Common stock redemption of common units
 

 

 
25,839

 

 
227

 

 

 
227

 
(227
)
 

 

Dividends
 

 

 

 

 

 

 
(69,441
)
 
(69,441
)
 
(167
)
 

 
(69,608
)
Equity-based compensation
 

 

 
620,593

 
6

 
5,345

 

 

 
5,351

 
16

 

 
5,367

Shares acquired for employee withholding requirements
 

 

 
(187,850
)
 
(2
)
 
(2,722
)
 

 

 
(2,724
)
 

 

 
(2,724
)
Other
 

 

 

 

 
(146
)
 

 

 
(146
)
 

 

 
(146
)
Other comprehensive income
 

 

 

 

 

 
6,582

 

 
6,582

 
19

 

 
6,601

Net income
 

 

 

 

 

 

 
85,165

 
85,165

 
204

 

 
85,369

Balance at September 30, 2018
 
9,400,000

 
$
94

 
104,745,710

 
$
1,047

 
$
1,183,694

 
$
8,033

 
$
21,648

 
$
1,214,516

 
$
2,719

 
$

 
$
1,217,235

 
See Notes to the Condensed Consolidated Financial Statements


5


Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
 
For the
Nine Months Ended
September 30,
 
 
2019
 
2018
OPERATING ACTIVITIES
 
 
 
 

Net income
 
$
73,595

 
$
85,369

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
72,517

 
75,141

Amortization of deferred financing costs
 
1,041

 
1,495

Loss on impairment of assets
 
1,685

 

Equity-based compensation
 
4,766

 
5,367

Gain on disposal of assets, net
 
(39,655
)
 
(42,114
)
Non-cash interest income
 
(1,713
)
 
(1,528
)
Debt transaction costs
 
1,847

 
265

Other
 
369

 
(123
)
Changes in operating assets and liabilities:
 
 

 
 

Trade receivables, net
 
(4,514
)
 
(7,054
)
Prepaid expenses and other
 
1,754

 
2,729

Accounts payable
 
126

 
(627
)