##### Table of Contents



UNITED
STATESSECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Quarterly Period Ended June 30, 2006
 OR
 o
    
    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: 000-51955
 SUMMIT HOTEL PROPERTIES, LLC
  South Dakota
 20-0617340
 2701 South Minnesota Avenue, Suite 6
Sioux Falls, SD 57105
 (605) 361-9566
 o þ
  o o þ
 o þ




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##### 



TABLE OF CONTENTS
 PagePART IItem 1.
    
    Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005
    
    
    3Condensed Consolidated Statements of Operations for the three month and six month periods ended June 30, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Changes in Members Equity for the six months ended June 30, 2006
    
    
    5Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2005
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    23Item 4.
    
    Controls and Procedures
    
    
    23PART IIItem 1.
    
    Legal Proceedings
    
    
    23Item 1.A.
    
    Risk Factors
    
    
    24Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 6.
    
    Exhibits
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  2




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PART I
FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 SUMMIT HOTEL PROPERTIES, LLC
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 JUNE 30, 2006 AND DECEMBER 31, 2005
 (Unaudited)
    
    
    (Audited)2006
    
    
    2005ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    24,592,997
    
    
    $
    7,339,976Restricted cash
    
    
    3,047,916
    
    
    
    2,288,962Trade receivables
    
    
    4,375,181
    
    
    
    3,406,756Prepaid expenses and other
    
    
    969,814
    
    
    
    1,172,480Assets held for sale
    
    
    
    
    
    
    5,151,442Total current assets
    
    
    32,985,908
    
    
    
    19,359,616PROPERTY AND EQUIPMENT, NET
    
    
    322,217,540
    
    
    
    288,485,564OTHER ASSETSDeferred charges and other assets, net
    
    
    4,739,385
    
    
    
    4,582,014Restricted cash
    
    
    786,282
    
    
    
    4,850,879Total other assets
    
    
    5,525,667
    
    
    
    9,432,893TOTAL ASSETS
    
    $
    360,729,115
    
    
    $
    317,278,073LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESCurrent portion of long-term debt
    
    $
    5,200,000
    
    
    $
    4,222,000Lines of credit and notes payable
    
    
    6,597,670
    
    
    
    11,271,788Accounts payable
    
    
    1,216,809
    
    
    
    997,467Related party accounts payable
    
    
    910,366
    
    
    
    2,264,440Accrued expenses
    
    
    6,821,172
    
    
    
    7,585,654Total current liabilities
    
    
    20,746,017
    
    
    
    26,341,349LONG-TERM DEBT, NET OF CURRENT PORTION
    
    
    219,365,623
    
    
    
    180,668,493COMMITMENTS AND CONTINGENCIESMINORITY INTERESTS
    
    
    (1,258,370
    )
    
    
    (1,203,398
    )MEMBERS EQUITY
    
    
    121,875,845
    
    
    
    111,471,629TOTAL LIABILITIES AND MEMBERS EQUITY
    
    $
    360,729,115
    
    
    $
    317,278,073
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SUMMIT HOTEL PROPERTIES, LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
 Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005REVENUESRoom revenues
    
    $
    31,498,406
    
    
    $
    21,401,650
    
    
    $
    59,399,189
    
    
    $
    39,352,260Other hotel operations revenues
    
    
    486,245
    
    
    
    339,364
    
    
    
    995,089
    
    
    
    701,55231,984,651
    
    
    
    21,741,014
    
    
    
    60,394,278
    
    
    
    40,053,812COSTS AND EXPENSESDirect hotel operations
    
    
    10,124,859
    
    
    
    6,382,343
    
    
    
    18,803,861
    
    
    
    11,593,545Other hotel operating expenses
    
    
    3,295,760
    
    
    
    2,344,044
    
    
    
    6,562,228
    
    
    
    4,621,192General, selling and administrative
    
    
    5,603,064
    
    
    
    3,881,286
    
    
    
    10,561,108
    
    
    
    6,869,978Repairs and maintenance
    
    
    2,791,299
    
    
    
    1,225,583
    
    
    
    5,034,270
    
    
    
    1,890,872Depreciation and amortization
    
    
    4,306,557
    
    
    
    2,756,220
    
    
    
    8,232,956
    
    
    
    5,277,78226,121,539
    
    
    
    16,589,476
    
    
    
    49,194,423
    
    
    
    30,253,369INCOME FROM OPERATIONS
    
    
    5,863,112
    
    
    
    5,151,538
    
    
    
    11,199,855
    
    
    
    9,800,443OTHER INCOME (EXPENSE)Interest income
    
    
    105,334
    
    
    
    51,611
    
    
    
    212,141
    
    
    
    99,421Interest (expense)
    
    
    (3,374,285
    )
    
    
    (2,220,960
    )
    
    
    (6,447,638
    )
    
    
    (4,244,903
    )State income tax (expense)
    
    
    (284,101
    )
    
    
    (7,190
    )
    
    
    (395,839
    )
    
    
    (7,190
    )(Loss) on disposal of assets
    
    
    (80,287
    )
    
    
    (92,188
    )
    
    
    (211,380
    )
    
    
    (116,327
    )(3,633,339
    )
    
    
    (2,268,727
    )
    
    
    (6,842,716
    )
    
    
    (4,268,999
    )INCOME BEFORE
MINORITY INTERESTS
    
    
    2,229,773
    
    
    
    2,882,811
    
    
    
    4,357,139
    
    
    
    5,531,444MINORITY INTERESTS IN
OPERATIONS OF CONSOLIDATED
PARTNERSHIP
    
    
    234,037
    
    
    
    136,977
    
    
    
    455,028
    
    
    
    286,838INCOME FROM CONTINUING
OPERATIONS
    
    
    1,995,736
    
    
    
    2,745,834
    
    
    
    3,902,111
    
    
    
    5,244,606INCOME (LOSS) FROM
DISCONTINUED OPERATIONS
    
    
    2,095,385
    
    
    
    200,436
    
    
    
    2,303,305
    
    
    
    (63,075
    )NET INCOME
    
    $
    4,091,121
    
    
    $
    2,946,270
    
    
    $
    6,205,416
    
    
    $
    5,181,531BASIC AND DILUTED EARNINGS PER
CAPITAL UNIT
    
    $
    2,631.23
    
    
    $
    2,403.49
    
    
    $
    4,049.45
    
    
    $
    4,345.28WEIGHTED AVERAGE NUMBER OF
UNITS OUTSTANDING FOR
CALCULATION OF BASIC AND
DILUTED EARNINGS PER
CAPITAL UNIT
    
    
    1,554.83
    
    
    
    1,225.83
    
    
    
    1,532.41
    
    
    
    1,192.45
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SUMMIT HOTEL PROPERTIES, LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS EQUITY
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2006
 # of CapitalUnits
    
    Class A
    
    Class A-1
    
    Class B
    
    Class C
    
    TotalBALANCES, JANUARY 1, 2006
    
    
    1,421.58
    
    
    $
    95,596,821
    
    
    $
    
    
    
    $
    6,133,132
    
    
    $
    9,741,676
    
    
    $
    111,471,629Proceeds from Class A-1
units
issued in private placement
    
    
    133.25
    
    
    
    
    
    
    
    12,457,500
    
    
    
    
    
    
    
    
    
    
    
    12,457,500Net Income
    
    
    
    
    
    
    6,205,416
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,205,416Distributions to members
    
    
    
    
    
    
    (6,434,605
    )
    
    
    (517,059
    )
    
    
    (239,255
    )
    
    
    (1,067,781
    )
    
    
    (8,258,700
    )BALANCES, JUNE 30, 2006
    
    
    1,554.83
    
    
    $
    95,367,632
    
    
    $
    11,940,441
    
    
    $
    5,893,877
    
    
    $
    8,673,895
    
    
    $
    121,875,845
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SUMMIT HOTEL PROPERTIES, LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
 2006
    
    
    2005OPERATING ACTIVITIESNet income
    
    $
    6,205,416
    
    
    $
    5,181,531Adjustments to reconcile net income to
net cash from operating activities:Depreciation
    
    
    7,831,591
    
    
    
    5,549,098Amortization
    
    
    612,862
    
    
    
    104,252Minority interests in operations of
consolidated partnership
    
    
    455,028
    
    
    
    286,838(Gain) on disposal of assets
    
    
    (2,117,768
    )
    
    
    Changes in current assets and liabilities:Trade receivables
    
    
    (968,425
    )
    
    
    (1,102,657
    )Prepaid expenses and other
    
    
    202,666
    
    
    
    (92,502
    )Accounts payable
    
    
    (1,134,732
    )
    
    
    619,945Accrued expenses
    
    
    (764,482
    )
    
    
    686,329NET CASH FROM OPERATING ACTIVITIES
    
    
    10,322,156
    
    
    
    11,232,834INVESTING ACTIVITIESPurchases of hotel properties and other
property & equipment
    
    
    (45,531,759
    )
    
    
    (57,218,384
    )Proceeds from asset dispositions
    
    
    11,094,969
    
    
    
    Restricted cash (fundings) withdrawls
    
    
    3,305,643
    
    
    
    (1,401,986
    )NET CASH (USED FOR) INVESTING ACTIVITIES
    
    
    (31,131,147
    )
    
    
    (58,620,370
    )FINANCING ACTIVITIESProceeds from issuance of long-term debt
    
    
    55,960,800
    
    
    
    53,340,783Principal payments on long-term debt
    
    
    (16,285,670
    )
    
    
    (10,251,152
    )Financing fees on long-term debt
    
    
    (627,800
    )
    
    
    (470,799
    )Net change in notes payable
    
    
    (4,674,118
    )
    
    
    Proceeds from equity contributions
    
    
    12,457,500
    
    
    
    9,271,500Distributions to members
    
    
    (8,258,700
    )
    
    
    (6,348,820
    )Distributions to minority interests
    
    
    (510,000
    )
    
    
    (255,000
    )NET CASH FROM FINANCING ACTIVITIES
    
    
    38,062,012
    
    
    
    45,286,512NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    17,253,021
    
    
    
    (2,101,024
    )CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD
    
    
    7,339,976
    
    
    
    13,763,531CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    24,592,997
    
    
    $
    11,662,507SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:Cash payments for interest
    
    $
    6,447,638
    
    
    $
    2,270,823Cash payments for state income taxes
    
    $
    1,125,839
    
    
    $
    130,195
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SUMMIT HOTEL PROPERTIES, LLC
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 1  SELECTED SUPPLEMENTARY INFORMATION
 Basis of Presentation
   Use of Estimates
  Discontinued Operations
   7




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SUMMIT HOTEL PROPERTIES, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005REVENUES
    
    $
    548,811
    
    
    $
    1,395,652
    
    
    $
    1,513,790
    
    
    $
    2,305,583COSTS AND EXPENSESDirect hotel operations
    
    
    214,092
    
    
    
    455,673
    
    
    
    494,169
    
    
    
    826,565Other hotel operating expenses
    
    
    99,304
    
    
    
    192,694
    
    
    
    249,080
    
    
    
    410,728General, selling and administrative
    
    
    104,718
    
    
    
    230,346
    
    
    
    260,822
    
    
    
    404,887Repairs and maintenance
    
    
    45,182
    
    
    
    73,862
    
    
    
    91,864
    
    
    
    270,242Depreciation and amortization
    
    
    82,321
    
    
    
    187,784
    
    
    
    211,497
    
    
    
    375,568545,617
    
    
    
    1,140,359
    
    
    
    1,307,432
    
    
    
    2,287,990INCOME FROM OPERATIONS
    
    
    3,194
    
    
    
    255,293
    
    
    
    206,358
    
    
    
    17,593OTHER INCOME (EXPENSE)Interest income
    
    
    7,995
    
    
    
    11,222
    
    
    
    14,100
    
    
    
    28,912Interest (expense)
    
    
    
    
    
    
    (49,863
    )
    
    
    
    
    
    
    (94,808
    )State income tax (expense)
    
    
    
    
    
    
    (13,005
    )
    
    
    
    
    
    
    (13,005
    )Gain (loss) on disposal of assets
    
    
    2,084,196
    
    
    
    (3,211
    )
    
    
    2,082,847
    
    
    
    (1,767
    )2,092,191
    
    
    
    (54,857
    )
    
    
    2,096,947
    
    
    
    (80,668
    )INCOME (LOSS) BEFORE
MINORITY INTERESTS
    
    
    2,095,385
    
    
    
    200,436
    
    
    
    2,303,305
    
    
    
    (63,075
    )MINORITY INTERESTS IN
OPERATIONS OF
CONSOLIDATED PARTNERSHIP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    INCOME (LOSS) FROM
DISCONTINUED OPERATIONS
    
    $
    2,095,385
    
    
    $
    200,436
    
    
    $
    2,303,305
    
    
    $
    (63,075
    )
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SUMMIT HOTEL PROPERTIES, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Acquisitions
 Business Combinations
    2/1/06
    
    
    4/12/06Current assets
    
    $
    
    
    
    $
    Property and equipment
    
    
    15,000,000
    
    
    
    11,577,000Intangible assets
    
    
    
    
    
    
    Total assets acquired
    
    
    15,000,000
    
    
    
    11,577,000Current liabilities
    
    
    
    
    
    
    Long-term debt
    
    
    
    
    
    
    Total liabilities assumed
    
    
    
    
    
    
    Net assets acquired
    
    $
    15,000,000
    
    
    $
    11,577,000
  9




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SUMMIT HOTEL PROPERTIES, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
    Accrued Expenses
 2006
    
    
    2005Accrued taxes
    
    $
    3,985,769
    
    
    $
    4,309,392Accrued salaries and benefits
    
    
    670,578
    
    
    
    1,523,194Accrued interest
    
    
    709,474
    
    
    
    536,336Other accrued expenses
    
    
    1,455,351
    
    
    
    1,216,732$
    6,821,172
    
    
    $
    7,585,654
 Note Obligations
  Members Equity
  Subsequent Events
   10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
  Overview
   11




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Critical Accounting Policies
 Property and Equipment
  Impairment of Long-Lived Assets
    12




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Consolidation Policy
   Revenue Recognition
  Results of Operations
    13




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Three Months Ended June 30, 2006 Compared with Three Months Ended June 30, 2005
 Continuing Operations
  Revenues
   Three Months Ended
    
    Three Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    Increase/DecreaseAll Company HotelsRevPAR
    
    $
    63.81
    
    
    $
    56.13
    
    
    $
    7.68Average Daily Rate
    
    $
    87.60
    
    
    $
    78.34
    
    
    $
    9.26Occupancy Rate
    
    
    72.8
    %
    
    
    71.7
    %
    
    
    1.1
    %
   14




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Hotel Operating Expenses
  Depreciation
  Management Expense
  Repairs and Maintenance
  15




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Six Months Ended June 30, 2006 Compared with Six Months Ended June 30, 2005
 Continuing Operations
 Revenues
   Six Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    IncreaseAll Company HotelsRevPAR
    
    $
    61.70
    
    
    $
    52.95
    
    
    $
    8.75Average Daily Rate
    
    $
    88.03
    
    
    $
    78.50
    
    
    $
    9.53Occupancy Rate
    
    
    70.08
    %
    
    
    67.45
    %
    
    
    2.63
    %
   16




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Hotel Operating Expenses
  Depreciation
  Management Expense
  Repairs and Maintenance
    17




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Seasonality and Diversification
  Liquidity and Capital Resources
 Cash From Operating Activities
   Cash From Investing Activities
   18




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Cash From Financing Activities
     1 4
   19




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Uses of Cash
   Additional Information Concerning Sources and Uses of Cash
    20




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Recent Developments
 Refinance Loans
   Acquisitions and Dispositions
  21




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Location
    
    # Rooms
    
    Franchise
    
    Property Purchased
    
    Status
    

Closing Date (1)Ft. Wayne, IN
    
    
    119
    
    
    Hampton Inn
    
    Hotel
    
    Purchased
    
    2/1/06Ft. Wayne, IN
    
    
    109
    
    
    Residence Inn
    
    Hotel
    
    Purchased
    
    2/1/06East Point, GA
    
    
    152
    
    
    AmeriSuites(2)
    
    Hotel
    
    Purchased
    
    4/12/06Jackson, MS (3)
    
    
    104
    
    
    Residence Inn
    
    Land
    
    Under Construction
    
    1/26/06Ft. Collins, CO (3)
    
    
    120
    
    
    Hilton Garden Inn
    
    Land
    
    Purchased
    
    3/31/06Flagstaff, AZ (3)
    
    
    155
    
    
    Courtyard by Marriott
    
    Land
    
    Purchased
    
    4/5/06Ft. Worth, TX (3)
    
    
    93
    
    
    Hampton Inn & Suites
    
    Land
    
    Purchased
    
    5/10/06Denver, CO (3)
    
    
    123
    
    
    SpringHill Suites
    
    Land
    
    Purchased
    
    7/19/06Bloomington, MN (3)
    
    
    113
    
    
    Cambria Suites
    
    Land
    
    Purchased
    
    4/21/06Bloomington, MN (3)
    
    
    150
    
    
    Hampton Inn & Suites
    
    Land
    
    Purchased
    
    4/21/06Boise, ID (4)
    
    
    119
    
    
    Cambria Suites
    
    Land
    
    Under ConstructionBradford, PA
    
    
    48
    
    
    Comfort Inn
    
    Hotel
    
    Sold
    
    4/7/06Sioux Falls, SD
    
    
    77
    
    
    Baymont Inn
    
    Hotel
    
    Sold
    
    5/4/06Jackson, MS
    
    
    94
    
    
    TownePlace Suites
    
    Hotel
    
    Sold
    
    6/29/06Baton Rogue, LA (3)
    
    
    100
    
    
    Cambria Suites
    
    Land
    
    Purchased
    
    7/11/06
 
 (1)
    
    For properties under contract, the closing date is estimated.(2)
    
    We intend to convert the AmeriSuites to a Hyatt Place during 2006.(3)
    
    Number of units and franchise indicate our plans as of June 30, 2006, which are subject
to change.(4)
    
    Land owned by Company prior to December 31, 2005.  Commitments and Contingencies
  22




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Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
  
 PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  23




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Item 1.A. Risk Factors
  
 Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds
 October 2005 Offering
  
 Item 6. Exhibits
  ExhibitNumber
    
    Description of Exhibit31.1
    
    Certification pursuant to
Rule 13a-14 under the Securities Exchange Act of 1934  Chief
Executive Officer.31.2
    
    Certification pursuant to Rule 13a-14 under the Securities Exchange Act of 1934  Chief
Financial Officer.32.1
    
    Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States
Code  Chief Executive Officer.32.2
    
    Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States
Code  Chief Financial Officer.
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##### Table of Contents



SIGNATURES
  SUMMIT HOTEL PROPERTIES, LLCDate: August 21, 2006
    
    By:
    /s/ Kerry W. BoekelheideKerry W. BoekelheideChief Executive Officer and ManagerDate: August 21, 2006
    
    By:
    /s/ Christopher D. BillsChristopher D. BillsChief Financial Officer and Manager
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##### Table of Contents



EXHIBIT INDEX
 31.1
    
    Certification pursuant to Rule 13a-14 under the
Securities Exchange Act of 1934  Chief
Executive Officer.31.2
    
    Certification pursuant to Rule 13a-14 under the Securities Exchange Act of 1934  Chief
Financial Officer.32.1
    
    Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States
Code  Chief Executive Officer.32.2
    
    Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States
Code  Chief Financial Officer.
 26