First quarter earnings out with a few hotels sold:
http://boardvote.com/symbol/SPPR/communique/647397
2014 First Quarter Key Events
Increased occupancy at the same store hotels by 0.6 percent from the prior year.
Reduced net loss attributable to common shareholders by $3.5 million to $(1.4) million for the first quarter of 2014 compared to the same period in 2013.
Sold the 55-room Super 8 hotel in Shawano, Wisconsin in the first quarter and two hotels following the close of the quarter.
Reported revenues from continuing operations of $11.8 million for the 2014 first quarter, essentially unchanged compared to the same period in 2013.
Recorded a 1.3 percent decline in same store revenue per available room (RevPAR) to $31.19 partially due to weakness of the Washington DC market.
First Quarter Operating and Financial Results
First quarter 2014 revenues from continuing operations were $11.8 million, essentially unchanged compared to the same year-ago period. The effects of rebranding at two of the four reflagged hotels and the performance of four hotels hampered by softness in the Washington DC market continue to impact revenue.
Supertel had a 2014 first quarter net loss attributable to common shareholders of $(1.4) million, or $(0.47) per diluted share, compared to a net loss of $(4.9) million or $(1.70) per diluted share, a $3.5 million improvement for the same 2013 period.
Funds from operations (FFO) was $0.2 million for the 2014 first quarter, compared to $(2.4) million in the same 2013 period. Adjusted funds from operations (AFFO), which is FFO adjusted to exclude gains and losses on derivative liabilities, acquisition and termination expense, and terminated equity transactions expense, in the 2014 first quarter was $(1.9) million, compared to $(2.0) million in the same 2013 period.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $2.5 million for the 2014 first quarter, compared to a net loss of $(0.4) million in the same year-ago period. Adjusted EBITDA, which is EBITDA before noncontrolling interest, net gain/loss on disposition of assets, impairment, preferred stock dividends, unrealized gain/loss on derivatives, acquisition and termination expense and terminated equity transactions expense, was $1.1 million, down from $1.3 million for the 2013 first quarter.
In the first quarter 2014, the 50-hotel same store portfolio had a 0.6 percent improvement in occupancy to 52.9 percent, offset by a decline in revenue per available room (RevPAR) of 1.3 percent to $31.19, and a 1.9 percent decline in average daily rate (ADR) to $58.94, compared to the 2013 first quarter. The results were impacted by several factors including rebranding at four core hotels. While two of four properties which were rebranded in 2013 have stabilized and are beginning to show improvement, the other two continue to adjust operations and costs to align with the lower daily rates for the new brands. Supertel's four hotels in the Washington DC market were also impacted by the general weakness in this market. Offsetting improvements occurred at six hotels which had significant capital investments during 2012 and 2013.
The hotel industry is seasonal in nature. Generally, occupancy rates, revenues and operating results for hotels operating in the geographic areas in which Supertel operates are greater in the second and third quarters of the calendar year than in the first and fourth quarters, with the exception of Supertel's hotel located in Florida, which experiences peak demand in the first and fourth quarters of the year.
Disposition Program
In the 2014 first quarter the company sold the 55-room Super 8 in Shawano, Wisconsin for $1.1 million. Proceeds were used to reduce debt and lower overall debt service.
Following the close of the 2014 first quarter, the company sold the 65-room Baymont Inn and Suites in Brooks, Kentucky for $1.7 million and the 101-room Super 8 hotel in Omaha, West Dodge, Nebraska for $1.6 million. Proceeds were used to retire debt.
As of March 31, 2014, the company is marketing 18 hotels for sale and expects to generate approximately $40.5 million in gross proceeds to be used primarily to pay off the underlying loans and provide capital to reinvest in existing core properties.
Capital Reinvestment
The company invested $0.4 million in capital improvements in the 2014 first quarter to upgrade its properties and maintain brand standards. During 2014 the company expects to invest approximately $6.0 million in its hotels for capital improvements and renovations.
Balance Sheet
As of March 31, 2014, Supertel had $91.0 million in outstanding debt on its continuing operations hotels with an average term of 2.5 years and weighted average annual interest rate of 6.3 percent.
Dividends
The company did not declare a dividend on common stock in the 2014 first quarter. The company's board of directors elected to suspend the payment of monthly dividends commencing December 31, 2013 on the outstanding shares of its 8.00% Series A Cumulative Convertible Preferred Stock (NASDAQ: SPPRP), quarterly dividends on the outstanding shares of its 10.00% Series B Preferred Cumulative Stock (NASDAQ: SPPRO), and the quarterly dividends on the outstanding shares of its 6.25% Series C Cumulative Convertible Preferred Stock to preserve capital and improve liquidity. The board of directors will continue to monitor the dividend policy.
Outlook 2014
"While our top line first quarter results were clearly hampered by franchisor driven reflagging, and the overall weakness in the greater DC market area where some of our largest properties are located, the plan to transform Supertel into a leaner and more agile hotel owner continues," Walters said. "Our debt levels continue to decrease, our operators are responding to our more active management style instituted by our new COO, and the outlook for the economy chain scale segment is positive as it has been since the recovery started in 2010."
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