Summit Hotel Properties (INN) 8-K/A Financial Statements and Exhibits

Exhibit 99.1

SUMMIT HOTEL PROPERTIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED

BALANCE SHEET

AS OF MARCH 31, 2016

(in thousands)

	Historical			Pro Forma			Pro Forma
	Summit Hotel			Adjustments			Summit Hotel
	Properties, Inc.			(see Note 2a)			Properties, Inc.
ASSETS
Investment in hotel properties, net	$	1,434,015		$	—		$	1,434,015
Land held for development	5,742			—			5,742
Assets held for sale	86,785			(79,960		)	6,825
Investment in real estate loans, net	17,664			—			17,664
Cash and cash equivalents	33,972			(240		)	33,732
Restricted cash	24,775			—			24,775
Trade receivables, net	15,009			(533		)	14,476
Prepaid expenses and other	6,258			(143		)	6,115
Deferred charges, net	3,842			—			3,842
Other assets	9,375			—			9,375
Total assets	$	1,637,437		$	(80,876	)	$	1,556,561
LIABILITIES AND EQUITY
LIABILITIES
Debt, net of debt issuance costs	$	697,298		$	(78,765	)	$	618,533
Accounts payable	3,782			(50		)	3,732
Accrued expenses and other	43,112			(2,294		)	40,818
Derivative financial instruments	2,443			—			2,443
Total liabilities	746,635			(81,109		)	665,526
EQUITY
Preferred stock	84			—			84
Common stock	872			—			872
Additional paid-in capital	894,482			—			894,482
Accumulated other comprehensive loss	(2,294		)	—			(2,294		)
Accumulated deficit and distributions	(6,495		)	234			(6,261		)
Total stockholders’ equity	886,649			234			886,883
Non-controlling interests in Operating Partnership	4,153			(1		)	4,152
Total equity	890,802			233			891,035
Total liabilities and equity	$	1,637,437		$	(80,876	)	$	1,556,561

See Notes to Unaudited Pro Forma Condensed Combined Financial Information

SUMMIT HOTEL PROPERTIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(in thousands, except per share amounts)

				Historical
				Noble Completed
	Historical			Acquisitions -		Pro Forma			Pro Forma
	Summit Hotel			2016		Adjustments			Summit Hotel
	Properties, Inc.			(2 Hotels)		(see Note 2b)			Properties, Inc.
Revenues:
Room	$	110,595		$	636	$	(8,893	)	$	102,338
Other hotel operations revenue	7,487			104		(342		)	7,249
Total revenues	118,082			740		(9,235		)	109,587
Expenses:
Hotel operating expenses:
Room	27,269			157		(2,452		)	24,974
Other direct	16,240			269		(1,646		)	14,863
Other indirect	30,629			44		(2,530		)	28,143
Total hotel operating expenses	74,138			470		(6,628		)	67,980
Depreciation and amortization	18,143			—		436			18,579
Corporate general and administrative	4,579			—		—			4,579
Hotel property acquisition costs	554			—		—			554
Total expenses	97,414			470		(6,192		)	91,692
Operating income	20,668			270		(3,043		)	17,895
Other income (expense):
Interest expense	(7,483		)	—		995			(6,488		)
Gain on disposal of assets, net	36,780			—		(36,763		)	17
Other income (expense)	340			—		81			421
Total other expense, net	29,637			—		(35,687		)	(6,050		)
Income from continuing operations before income taxes	50,305			270		(38,730		)	11,845
Income tax expense	(1,571		)	—		—			(1,571		)
Net income	48,734			270		(38,730		)	10,274
Less - Income attributable to Operating Partnership	(249		)	—		196			(53		)
Net income before preferred dividends	48,485			270		(38,534		)	10,221
Preferred dividends	(4,147		)	—		—			(4,147		)
Net income attributable to common stockholders	$	44,338		$	270	$	(38,534	)	$	6,074
Earnings per share:
Basic and diluted net income per share	$	0.51							$	0.07
Weighted average common shares outstanding:
Basic	86,360								86,360
Diluted	87,170								87,170

See Notes to Unaudited Pro Forma Condensed Combined Financial Information

SUMMIT HOTEL PROPERTIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2015

(in thousands, except per share amounts)

				Historical Noble Portfolio				Historical
				Completed		Completed		Residence Inn			Historical
	Historical			Acquisitions -		Acquisitions -		Portfolio			Additional		Pro Forma			Pro Forma
	Summit Hotel			2015		2016		Acquisition			Acquisitions		Adjustments			Summit Hotel
	Properties, Inc.			(2 Hotels)		(2 Hotels)		(2 Hotels)			(2 Hotels)		(see Note 2c)			Properties, Inc.
Revenues:
Room	$	436,202		$	12,793	$	18,056	$	6,073		$	5,665	$	(79,783	)	$	399,006
Other hotel operations revenue	27,253			1,844		2,233		121			571		(3,006		)	29,016
Total revenues	463,455			14,637		20,289		6,194			6,236		(82,789		)	428,022
Expenses:
Hotel operating expenses:
Room	109,844			2,606		3,430		1,127			877		(20,147		)	97,737
Other direct	64,010			4,894		6,070		1,557			2,890		(12,015		)	67,406
Other indirect	121,974			1,180		1,631		703			382		(21,604		)	104,266
Total hotel operating expenses	295,828			8,680		11,131		3,387			4,149		(53,766		)	269,409
Depreciation and amortization	64,052			2,282		3,997		512			—		1,409			72,252
Corporate general and administrative	21,204			—		—		—			—		—			21,204
Hotel property acquisition costs	1,246			—		—		—			—		—			1,246
Loss on impairment of assets	1,115			—		—		—			—		—			1,115
Total expenses	383,445			10,962		15,128		3,899			4,149		(52,357		)	365,226
Operating income	80,010			3,675		5,161		2,295			2,087		(30,432		)	62,796
Other income (expense):
Interest expense	(30,414		)	—		—		(279		)	—		1,699			(28,994		)
Gain on disposal of assets, net	65,067			—		—		—			—		(66,344		)	(1,277		)
Other income (expense)	11,146			48		3		—			—		259			11,456
Total other expense, net	45,799			48		3		(279		)	—		(64,386		)	(18,815		)
Income from continuing operations before income taxes	125,809			3,723		5,164		2,016			2,087		(94,818		)	43,981
Income tax expense	(553		)	—		—		—			—		—			(553		)
Net income	125,256			3,723		5,164		2,016			2,087		(94,818		)	43,428
Less - Income attributable to Operating Partnership	(819		)	—		—		—			—		542			(277		)
Net income before preferred dividends	124,437			3,723		5,164		2,016			2,087		(94,276		)	43,151
Preferred dividends	(16,588		)	—		—		—			—		—			(16,588		)
Net income attributable to common stockholders	$	107,849		$	3,723	$	5,164	$	2,016		$	2,087	$	(94,276	)	$	26,563
Earnings per share:
Basic net income per share	$	1.25														$	0.31
Diluted net income per share	$	1.24														$	0.30
Weighted average common shares outstanding:
Basic	85,920															85,920
Diluted	87,144															87,144

See Notes to Unaudited Pro Forma Condensed Combined Financial Information

SUMMIT HOTEL PROPERTIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL INFORMATION

(dollars in thousands)

1.Basis of Pro Forma Presentation

The unaudited pro forma condensed combined balance sheet at March 31, 2016 adjusts the Company’s historical consolidated balance sheet for the dispositions of the hotel properties described in the Explanatory Note that have been or are expected to be completed subsequent to March 31, 2016 (the “Pro Forma Transactions”) as if the Pro Forma Transactions had been completed on March 31, 2016.  No pro forma adjustments have been made to the Company’s historical consolidated balance sheet as of March 31, 2016 for acquisitions or dispositions of hotel properties that occurred prior to March 31, 2016 (the “Completed Transactions”) as the balance sheet information related to the Completed Transactions is already included in the Company’s historical consolidated balance sheet at March 31, 2016.

The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015 combine the Company’s historical consolidated statements of income with the historical statements of operations of the completed and pending acquisitions and dispositions described in the Explanatory Paragraph as if the transactions had been completed on January 1, 2015.  Certain financing transactions (the “Modification Transactions”) were undertaken to facilitate the disposition of hotel properties reflected in the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015.  The Modification Transactions are included in the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015 as if the Modification Transactions had occurred on January 1, 2015.  The Modification Transactions include the following:

1.The modification of the term loan with Voya Retirement Insurance and Annuity Company (“Voya”) on September 24, 2015.  The ARCH Sale includes eight properties which serve as collateral for two term loans with Voya totaling $93.9 million. To avoid significant yield maintenance costs associated with an early pay-off of the portion of these term loans related to the sale of the eight properties that are a part of the ARCH Sale, the Company modified the term loans to change the interest rate and to substitute certain existing collateral with properties that are not part of the ARCH Sale.

2.The early settlement of interest swaps related to mortgage debt on certain properties sold in the First Closing as a result of the repayment of the mortgage debt at closing.

The pro forma adjustments described below were developed based on management’s assumptions and estimates.  The historical financial information related to acquired hotel properties is unaudited information provided by the prior owners of the hotel properties acquired by the Company.  Such information may be abbreviated or prepared on a basis other than in accordance with generally accepted accounting principles in the United States of America.  In management’s opinion, all adjustments necessary to reflect the effect of the transactions in all material respects have been made.

SUMMIT HOTEL PROPERTIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL INFORMATION

(dollars in thousands)

2.             Pro Forma Adjustments

(a) The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet are as follows:

																									NON- CONTROLLING
	ASSETS												LIABILITIES									EQUITY			INTERESTS
	Assets held for sale			Cash and equivalents			Trade receivables, net			Prepaid expenses and other			Debt			Accounts payable			Accrued expenses and Other			Accumulated deficit and distributions			Non-controlling interests
ARCH Tranche 2 Properties - sold to new buyers (two hotel properties)
Adjustment to reflect sale of assets(1)	$	(18,211	)	$	(41	)	$	(143	)	$	(41	)	$	—		$	(7	)	$	(563	)	$	(17,866	)	$	—
Adjustment to reflect paydown of revolving line of credit from net cash proceeds													(2,711		)							2,711
Pending ARCH Tranche 2 Sale (eight hotel properties)
Adjustment to reflect expected sale of assets to ARCH(2)	(61,749		)	(199		)	(390		)	(102		)	—			(43		)	(1,731		)	(60,666		)
Adjustment to reflect paydown of revolving line of credit from net cash proceeds													(76,054		)							76,054
Other
Adjustment to reflect the effect of pro forma adjustments on non-controlling interests																						1			(1		)
	$	(79,960	)	$	(240	)	$	(533	)	$	(143	)	$	(78,765	)	$	(50	)	$	(2,294	)	$	234		$	(1	)

(1)The sale of the two properties in June 2016 that were formerly part of Tranche 2 of the ARCH Sale resulted in a net loss of $4.1 million.    The estimated loss on the sale has not been reflected in the pro forma condensed combined statement of operations as it is considered to be non-recurring in nature.

(2)The sale of the remaining eight hotel properties included in Tranche 2 of the ARCH Sale is expected to result in an estimated gain of $14.3 million.  The estimated gain on the sale has not been reflected in the pro forma condensed combined statement of operations as it is considered to be non-recurring in nature.  No adjustment has been made to the sale proceeds to give effect to any potential post-closing adjustments under the terms of the purchase and sale agreement.

SUMMIT HOTEL PROPERTIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL INFORMATION

(dollars in thousands)

(b)           The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2016 are as follows:

																										NON- CONTROLLING
	REVENUES						EXPENSES											OTHER INCOME (EXPENSE)								INTERESTS
							Hotel operating expenses
	Room			Other Hotel Operations Revenue			Room			Other Direct			Other Indirect			Depreciation and Amortization		Interest Expense			Gain on Disposal of Assets, net			Other Income (Expense)		Income Attributable to Non- controlling Interests
ARCH Tranche 3 - Sale (six hotels)
Adjustment to eliminate operating results of sold properties	$	(2,068	)	$	(61	)	$	(592	)	$	(513	)	$	(622	)	$	—	$	56		$	(36,763	)	$	72	$	—
Adjustment to reflect reduction in interest expense due to paydown of revolving line of credit from sales proceeds																		261
ARCH Tranche 2 - Property Sales to New Buyers (two hotels)
Adjustment to eliminate operating results of sold properties	(1,383		)	(57		)	(431		)	(251		)	(422		)	—		42			—			2		—
Adjustment to reflect reduction in interest expense due to paydown of revolving line of credit from sales proceeds																		83
ARCH Tranche 2 - Pending Sale (eight hotels)
Adjustment to eliminate operating results of sold properties	(5,442		)	(224		)	(1,429		)	(882		)	(1,471		)	18		237			—			7		—
Adjustment to reflect reduction in interest expense due to paydown of revolving line of credit from sales proceeds																		442
Hotel Properties Acquired in 2016 (two hotels)
Adjustment for difference in management fees paid by prior owner and the Company													(15		)
Adjustment to reflect difference between depreciation and amortization expense recorded by prior owner and amounts based on our basis in the property																418
Adjustment to reflect increase in interest expense due to drawdown of revolving line of credit to fund the acquisition																		(126		)
Other
Adjustment to reflect the effect of pro forma adjustments on non-controlling interests																										196
	$	(8,893	)	$	(342	)	$	(2,452	)	$	(1,646	)	$	(2,530	)	$	436	$	995		$	(36,763	)	$	81	$	196

No adjustment has been made for the income tax effects of the pro forma adjustments in the interim period, as the pro forma adjustments would not have a material tax effect.

SUMMIT HOTEL PROPERTIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL INFORMATION

(dollars in thousands)

(c)           The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015:

																												NON- CONTROLLING
	REVENUES						EXPENSES												OTHER INCOME (EXPENSE)									INTERESTS
							Hotel operating expenses
	Room			Other Hotel Operations Revenue			Room			Other Direct			Other Indirect			Depreciation and Amortization			Interest Expense			Gain on Disposal of Assets, net			Other Income (Expense)			Income Attributable to Non-controlling Interests
ARCH Tranche 1 - Sale (10 hotel properties)
Adjustment to eliminate operating results of sold properties	$	(28,194	)	$	(873	)	$	(6,473	)	$	(4,019	)	$	(7,333	)	$	(2,218	)	$	—		$	(66,350	)	$	331		$	—
Adjustment to reflect reduction in interest expense due to paydown of revolving line of credit from sales proceeds																			2,064
Adjustment to reflect reduction in interest expense due to pay-off of mortgage loans related to certain sold properties																			818
ARCH Tranche 2 Properties - sold to new buyers (two hotel properties)
Adjustment to eliminate operating results of sold properties	(5,700		)	(298		)	(1,815		)	(1,188		)	(1,751		)	(273		)	—			3			—			—
Adjustment to reflect reduction in interest expense due to paydown of revolving line of credit from sales proceeds																			294
Pending ARCH Tranche 2 Sale (eight hotel properties)
Adjustment to eliminate operating results of sold properties	(21,506		)	(894		)	(5,797		)	(3,716		)	(5,796		)	(1,692		)	—			2			—			—
Adjustment to reflect reduction in interest expense due to paydown of revolving line of credit from sales proceeds																			1,574
ARCH Tranche 3 - Sale (six hotels)
Adjustment to eliminate operating results of sold properties	(24,383		)	(941		)	(6,062		)	(3,092		)	(6,616		)	(1,397		)	327			1			(72		)	—
Adjustment to reflect reduction in interest expense due to paydown of revolving line of credit from sales proceeds																			2,067
Hotel Properties Acquired in 2015 (six hotels)
Adjustment for difference in management fees paid by prior owner and the Company													(379		)
Adjustment to reflect difference between property taxes paid by prior owner and amounts expected to be paid by the Company													564
Adjustment to reflect difference between depreciation and amortization expense recorded by prior owner and amounts based on our basis in the property																5,968
Adjustment to reflect increase in interest expense due to drawdown of revolving line of credit to fund the acquisition																			(2,633		)
Hotel Properties Acquired in 2016 (two hotels)
Adjustment for difference in management fees paid by prior owner and the Company													(423		)
Adjustment to reflect difference between property taxes paid by prior owner and amounts expected to be paid by the Company													181
Adjustment to reflect amortization related to ground lease													(51		)
Adjustment to reflect difference between depreciation and amortization expense recorded by prior owner and amounts based on our basis in the property																1,021
Adjustment to reflect increase in interest expense due to drawdown of revolving line of credit to fund the acquisition																			(2,262		)
ING Debt Modification
Adjustment to reflect difference in interest expense between original loans and modified loans																			(404		)
Adjustment to reflect the amortization of additional deferred financing costs and third party expenses related to the modified loans																			(146		)
Other
Adjustment to reflect the effect of pro forma adjustments on non-controlling interests																												542
	$	(79,783	)	$	(3,006	)	$	(20,147	)	$	(12,015	)	$	(21,604	)	$	1,409		$	1,699		$	(66,344	)	$	259		$	542

No adjustment has been made for the income tax effects of the pro forma adjustments as we had cumulative losses and a valuation allowance against substantially all our deferred tax assets for period presented and the pro forma adjustments would not have a material tax effect.