FelCor Reports 2004 Results - '04 Is Done and We Made $1.01 IRVING,
Texas, Feb. 9 /PRNewswire-FirstCall/ -- FelCor Lodging Trust
Incorporated (NYSE:FCH), today reported operating results for the
fourth quarter and year ended December 31, 2004. For the fourth
quarter ended December 31, 2004, our RevPAR increased 3.9 percent,
with ADR growth accounting for 74 percent of that increase,
Adjusted EBITDA increased 11.7 percent, and Adjusted FFO per share
totaled $0.08, consistent with the low end of our previous
guidance. During the quarter, we incurred a net loss applicable to
common shareholders of $0.35 per share, compared to a loss of $2.55
per share for the same period of 2003, and FFO per share was a loss
of $0.10, compared to a loss of $2.06 for last year. HIGHLIGHTS
Fourth Quarter 2004 * Adjusted EBITDA grew from $47 million in 2003
to $53 million in 2004, and Same-Store EBITDA increased from $45
million in 2003 to $52 million in 2004, a 15.1% increase. *
Adjusted FFO was $5 million for the quarter, a $9 million
improvement from the loss of $4 million in the prior year period. *
Net loss applicable to common shareholders was $21 million for the
quarter, compared to a net loss of $150 million for the same period
in 2003, and FFO was a loss of $6 million, compared to a loss of
$128 million in the same period of 2003. * RevPAR for the quarter
was $59.94, as compared to $57.70 in the same period of 2003, and
ADR was $99.28 in the current quarter, compared to $96.45 last
year. * Hotel operating profit increased to $50 million for the
quarter, compared to $43 million in the prior year, an increase of
14.7%. Hotel operating profit margin during the quarter was 17.5%,
an increase of 141 basis points over the 16.1% margin of the prior
year. * We sold five hotels, resulting in gross proceeds of $86
million. Full Year 2004 For the full year 2004, our RevPAR
increased 4.9 percent, with ADR improvement accounting for 35
percent of the increase, Adjusted EBITDA increased 7.1 percent, and
Adjusted FFO per share totaled $1.01, consistent with the low end
of our previous guidance. During the year, we incurred a net loss
applicable to common shareholders of $2.29 per share, compared to a
per share loss of $5.75 in 2003, and FFO per share was a loss of
$0.49, as compared to a per share loss of $3.35 in 2003. * Adjusted
EBITDA for the year was $259 million, compared to $242 million in
2003, and Same-Store EBITDA was $242 million in 2004, as compared
to $227 million in 2003, a 6.5% improvement. * Adjusted FFO was $63
million, compared to $38 million in 2003. * Net loss applicable to
common shareholders was $135 million, compared to a net loss of
$337 million in 2003, and FFO was a loss of $31 million, compared
to a loss of $207 million last year. * RevPAR was $64.91, as
compared to $61.89 in 2003, and ADR was $99.07, as compared to
$97.38 in 2003. * Hotel operating profit increased to $231 million,
from $215 million in the prior year, an increase of 7.4%. Hotel
operating margin improved to 19.5%, from 19.4% in the prior year. *
A labor lockout in San Francisco adversely affected hotel operating
profit by an estimated $2 million, and major renovations took room
nights out of service and reduced hotel operating profit by an
estimated additional $2 million. * The Margate condominium tower at
Kingston Plantation in Myrtle Beach, S.C., was completed and sold,
realizing a gain of approximately $12 million. * We spent
approximately $102 million on capital improvements during 2004. *
We sold 17 hotels, resulting in aggregate gross proceeds of $157
million and a net gain of $19 million, and terminated the lease on
one hotel. * We issued $524 million in debt, and $160 million in
preferred equity. * We prepaid $775 million of debt. * We incurred
impairment charges of $38 million. "In 2004, we exceeded our
expectations, with RevPAR, Adjusted EBITDA and Adjusted FFO
exceeding the targets set forth at the beginning of the year. In
accordance with our strategic plan, we completed $680 million in
financings, redeemed early all $600 million of our 10 percent
interest rate debt due 2008, and disposed of 18 non-strategic
hotels," said Thomas J. Corcoran, Jr., FelCor's President and CEO.
Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA"), Adjusted EBITDA, Same-Store EBITDA, Funds From
Operations ("FFO"), Adjusted FFO, hotel operating profit and hotel
operating margin are all non-GAAP financial measures. See "Non-GAAP
Financial Measures" for a reconciliation of each of these measures
to our net loss and for information regarding the use, limitations
and importance of these non-GAAP financial measures. DISCUSSION
Fourth Quarter 2004 RevPAR. This is our fourth consecutive quarter
of revenue per available room ("RevPAR") increases over the prior
year period. During the quarter, occupancy grew by only 0.9
percent, while average daily rate ("ADR") grew by 2.9 percent.
Average daily rate has been the principal component of RevPAR
growth beginning with the third quarter of 2004. We anticipate that
the majority of near-term RevPAR growth will come from increases in
ADR, which should help to improve hotel operating profit margins in
future periods. Hotel Operating Profit and Margins. Hotel operating
profit for our hotels included in continuing operations increased
14.7 percent over the same period last year, primarily as a result
of the increase in RevPAR. As a percentage of revenues, both energy
expenses and administrative and general expenses increased over the
prior year. The 141 basis point improvement in hotel operating
margin over last year was achieved largely as the result of
reductions in property taxes and insurance expense. We are placing
increased focus on working with our management companies to improve
operating margins at our hotels above those anticipated in 2005.
Net Loss and EBITDA. Our net loss applicable to common shareholders
and EBITDA for the fourth quarter of 2004 included the following
items, aggregating to a gain of $6 million, or $0.11 per share: *
$5 million ($0.08 per share) of impairment charges related to four
non-strategic hotels, which had previously been written down to our
then estimated fair value; * $6 million ($0.09 per share) of costs
associated with the early retirement of $96 million of Senior
Notes; and * $17 million ($0.29 per share) net gain on the sale of
non-strategic hotels. Included in the prior year fourth quarter net
loss and EBITDA was a net asset impairment charge of $123 million,
or $1.99 per share. FFO. Our fourth quarter 2004 FFO included the
following items, aggregating to $11 million, or $0.18 per share: *
$5 million ($0.08 per share) of asset impairment charges; and * $6
million ($0.09 per share) of costs associated with the early
retirement of debt. Included in prior year fourth quarter FFO was a
net asset impairment charge of $123 million, or $1.99 per share.
Other Events Affecting Operations. During the third quarter, our
Holiday Inn(R) hotel in Cocoa Beach, Fla., suffered major hurricane
damage and was reopened in January 2005. We recorded approximately
$2 million in anticipated business interruption insurance proceeds
during the quarter, which are expected to cover the loss of income
during the period the hotel was closed. A labor dispute in San
Francisco, which resulted in a lockout at two of our hotels,
adversely affected fourth quarter RevPAR by 0.7 percent and hotel
operating profits by $2 million. The lockout ended in November and
contract negotiations are ongoing. We spent $39 million in capital
improvements during the fourth quarter. Major renovations took room
nights out of service during the fourth quarter resulting in an
estimated reduction of hotel operating profit of approximately $1
million. Full Year 2004 RevPAR. The 4.9 percent increase in RevPAR
resulted from a 1.7 percent increase in ADR and a 3.1 percent
increase in occupancy during the year. This is the first annual
RevPAR increase that we have experienced since 2000. Hotel
Operating Profit and Margins. Hotel operating profit for our hotels
included in continuing operations increased 7.4 percent, primarily
as a result of the increase in RevPAR. The hotel operating margins
were 19.5 percent, a six basis point increase compared to 2003. The
increase in hotel operating margins is attributed to decreases in
property taxes and insurance expense, which were largely offset by
increases in labor related costs. Net Loss and EBITDA. Our net loss
applicable to common shareholders and EBITDA for the full year 2004
included the following items, aggregating to a loss of $74 million,
or $1.17 per share: * $38 million ($0.62 per share) of asset
impairment charges related to non-strategic hotels; * $50 million
($0.80 per share) of costs associated with the early retirement of
$775 million of Senior Notes; * $5 million ($0.08 per share) of
lease termination cost; and * $19 million ($0.33 per share) gain on
sale of non-strategic hotels. Included in the prior year net loss
and EBITDA was a net asset impairment charge of $244 million, or
$3.94 per share. FFO. Our full year 2004 FFO included the following
items, aggregating to a loss of $93 million, or $1.50 per share: *
$38 million ($0.62 per share) of asset impairment charges; * $50
million ($0.80 per share) of costs associated with the early
retirement of debt; and * $5 million ($0.08 per share) of lease
termination expense. Included in prior year FFO was a net asset
impairment charge of $244 million ($3.94 per share) and $2 million
($0.03 per share) of costs associated with the early retirement of
debt. Other Events Affecting Operations. Included in operating
results for the year are $2 million ($0.03 per share) of hurricane
losses sustained in the third quarter at 13 of our hotels and a
gain of $12 million from the development and sale of the 251-unit
Margate condominium tower at the Kingston Plantation in Myrtle
Beach, S.C. A labor lockout in San Francisco adversely affected our
RevPAR by 0.2 percent and resulted in a decrease in hotel operating
profit by an estimated $2 million. January 2005 RevPAR Our January
total portfolio RevPAR increased 7.2 percent, with ADR increasing
4.9 percent and occupancy increasing 2.2 percent, compared to
January 2004. The month of January is our 14th consecutive month of
RevPAR increases. Our ADR has increased for three consecutive
quarters, with each quarter becoming a more meaningful share of the
RevPAR growth. "We anticipate continued positive RevPAR growth.
With ADR becoming a larger percentage of the RevPAR improvement, we
are focused on improving margins in 2005 over our current
guidance," said Richard A. Smith, FelCor's Executive Vice President
and Chief Financial Officer. Capital Structure At December 31,
2004, we had $1.77 billion of debt outstanding, with a weighted
average life of five years, a weighted average cost of 7.4 percent,
and approximately $119 million in cash and cash equivalents. At
December 31, 2003, we had $2.04 billion of debt outstanding with a
weighted average cost of 7.8 percent. We have no significant
remaining debt maturities (other than those that may be extended at
our option, subject to the satisfaction of certain contingencies)
until 2007, at which time $125 million of our Senior Notes mature.
2004 Transactions * We sold 17 non-strategic hotels for gross
proceeds of approximately $157 million and terminated the lease on
one hotel at a cost of $5 million; * We acquired the 132-room
Holiday Inn hotel in Santa Monica, Calif., for $27 million; * We
completed the development and sale of the 251-unit Margate
condominium tower at the Kingston Plantation in Myrtle Beach, S.C.,
at a gain of $12 million; * We retired $600 million of Senior Notes
paying 10% interest that were scheduled to mature in 2008; * We
retired early $175 million of Senior Notes due in October 2004; *
We issued $290 million of floating rate Senior Notes due 2011; * We
issued $234 million in mortgage debt; * We issued $160 million of
convertible preferred stock; and * We spent approximately $102
million in our ongoing capital plan. We currently have 18 remaining
hotels identified for sale, with expected gross proceeds of
approximately $155 million, substantially all of which are expected
to be sold over the next 18 months. 2005 GUIDANCE "We are
encouraged by the ADR and RevPAR trends in our portfolio, and our
2005 guidance reflects continued improvement. While RevPAR will be
somewhat impacted by our capital expenditures to a number of our
largest hotels during 2005, we are pleased with the expected
Same-Store EBITDA growth rate of 1.8 times the RevPAR growth," said
Mr. Smith. "We are encouraged by the anticipated 17 percent EBITDA
gain in 2005 from our hotels that completed renovations last year.
Notwithstanding the impact of renovations in 2005, our non-sale
hotel portfolio is forecasted to grow RevPAR in excess of six
percent over prior year. Further, the improvements in operating
performance will lead to the establishment of a new dividend policy
this year," he added. We are currently under contract to sell our
Embassy Suites Hotel(R) in downtown St. Louis, Mo., for $38
million, which is expected to close in March 2005. We expect to
realize a gain of approximately $6 million in the first quarter
from the sale of this hotel. This hotel had $2.8 million of EBITDA
in 2004, of which only $0.1 million is included in our 2005
guidance, and its sale will affect future Same-Store EBITDA
comparisons. No other assets sales or capital transactions are
assumed in the preparation of our guidance. We currently anticipate
that for the First Quarter 2005: * Hotel portfolio RevPAR will
increase approximately 4.0% to 5.0%, with 75% of the increase
coming from ADR improvements; * EBITDA will be between $59 to $61
million; * Hotel operating margins will be approximately 18.9% to
19.3%, or an increase of 10 to 50 basis points over first quarter
2004; * Total interest expense will be $36 million; * FFO per share
will be within the range of $0.19 to $0.22; and * Net loss will be
between $11 and $13 million or a loss per share of $0.19 to $0.22.
We anticipate that for the Full Year 2005: * Hotel portfolio RevPAR
will increase approximately 5.0% to 6.0%, with 75% of the increase
coming from ADR improvements; * EBITDA will be between $259 and
$265 million, an increase of 8% to 11% on a same-store basis; *
Hotel operating margins will be between 19.9% to 20.2%, an increase
of 40 to 70 basis points * Total interest expense will be $146
million; * FFO per share will be within the range of $1.11 to
$1.21; * Ending cash balance will be approximately $112 million;
and * Net loss will be between $29 and $35 million or a loss per
share of $0.49 to $0.59. Our anticipated capital expenditures in
2005 will be approximately $100 million, with approximately 42
percent in routine capital replacement, 16 percent for new bedding
and technology standards, and 42 percent for major upgrades. We
expect to undertake major upgrade projects at 38 hotels during
2005. "We are allocating our 2005 capital to upgrade those hotels
that will drive the most revenue and profit. As we execute our 2005
capital improvement plan, we expect to see a high return on that
investment through accelerated RevPAR growth in 2006," added Mr.
Corcoran. We have published our Supplemental Information for the
Three Months and Year Ended December 31, 2004, which provides
additional corporate data, financial highlights and portfolio
statistical data. Investors are encouraged to access the
Supplemental Information on our Web site at http://www.felcor.com/
, on the Investor Relations page in the "Financial Reports"
section. The Supplemental Information also will be furnished upon
request. Requests may be made by e-mail to or by writing to the
Vice President of Investor Relations, FelCor Lodging Trust
Incorporated, 545 E. John Carpenter Freeway, Suite 1300, Irving,
Texas, 75062. FelCor is the nation's second largest public hotel
real estate investment trust and the largest owner of full service,
all-suite hotels. FelCor's consolidated portfolio is comprised of
143 hotels, located in 31 states and Canada. FelCor owns 69
upscale, all-suite hotels, and is the owner of the largest number
of Embassy Suites Hotels and Doubletree Guest Suites(R) hotels in
the U.S. FelCor's portfolio also includes 65 hotels in the upscale
and full service segments. FelCor has a current market
capitalization of approximately $3.2 billion. Additional
information can be found on our Web site at http://www.felcor.com/
. We invite you to listen to our Year End 2004 conference call on
Thursday, February 10, 2005, at 9:00 a.m. (Central Standard Time).
The conference call will be webcast simultaneously via our Web site
at http://www.felcor.com/ . Interested investors and other parties
who wish to access the call should go to our Web site and click on
the conference call microphone icon on either the Investor
Relations or FelCor News pages. In addition, a phone replay will be
available from Thursday, February 10, 2005, at 12:00 p.m. (Central
Standard Time), through Friday, March 4, 2005, at 7:00 p.m.
(Central Standard Time), by dialing 866-475-2020 (access code is
1443). A recording of the call also will be archived and available
at http://www.felcor.com/ . With the exception of historical
information, the matters discussed in this news release include
"forward looking statements" within the meaning of the federal
securities laws. Forward looking statements are not guarantees of
future performance. Numerous risks and uncertainties, and the
occurrence of future events, may cause actual results to differ
materially from those currently anticipated. General economic
conditions, including the anticipated continuation of the current
economic recovery, the impact of U.S. military involvement in the
Middle East and elsewhere, future acts of terrorism, the impact on
the travel industry of increased security precautions, the
availability of capital, the ability to effect sales of
non-strategic hotels at anticipated prices, and numerous other
factors may affect future results, performance and achievements.
Certain of these risks and uncertainties are described in greater
detail in our filings with the Securities and Exchange Commission.
Although we believe our current expectations to be based upon
reasonable assumptions, we can give no assurance that our
expectations will be attained or that actual results will not
differ materially. Consolidated Statements of Operations (in
thousands, except per share data) Three Months Ended Year Ended
December 31, December 31, 2004 2003 2004 2003 Revenues: Hotel
operating revenue: Room $220,964 $209,291 $945,938 $883,834 Food
and beverage 48,888 46,535 180,398 167,883 Other operating
departments 14,638 13,949 62,527 59,011 Retail space rental and
other revenue 131 184 2,721 1,022 Total revenues 284,621 269,959
1,191,584 1,111,750 Expenses: Hotel departmental expenses: Room
62,537 59,454 257,016 234,242 Food and beverage 37,624 36,675
143,079 133,412 Other operating departments 7,842 6,608 31,887
27,024 Other property related costs 87,638 82,463 349,274 324,202
Management and franchise fees 14,090 14,224 61,579 58,711 Taxes,
insurance and lease expense 24,898 26,870 114,648 117,662 Corporate
expenses 5,525 3,807 17,094 14,266 Depreciation 30,410 28,959
118,855 123,968 Total operating expenses 270,564 259,060 1,093,432
1,033,487 Operating income 14,057 10,899 98,152 78,263 Interest
expense, net (33,413) (42,025) (149,623) (165,175) Impairment loss
(5,262) (54,205) (33,760) (107,409) Hurricane loss --- --- (2,125)
--- Charge-off of deferred financing costs (866) --- (6,960)
(2,834) Loss on early extinguishment of debt (4,983) --- (44,216)
--- Gain on swap termination --- --- 1,005 --- Loss before equity
in income from unconsolidated entities, minority interests and gain
on sale of assets (30,467) (85,331) (137,527) (197,155) Equity in
income from unconsolidated entities 1,429 118 17,121 2,370 Gain on
sale of assets 73 178 1,167 284 Minority interests 2,098 6,769
7,928 13,912 Loss from continuing operations (26,867) (78,266)
(111,311) (180,589) Discontinued operations 16,097 (64,667) 11,184
(129,555) Net loss (10,770) (142,933) (100,127) (310,144) Preferred
dividends (10,091) (6,727) (35,130) (26,908) Net loss applicable to
common stockholders $(20,861) $(149,660) $(135,257) $(337,052)
Basic and diluted per common share data: Net loss from continuing
operations $(0.62) $(1.45) $(2.48) $(3.54) Net loss $(0.35) $(2.55)
$(2.29) $(5.75) Weighted average common shares outstanding 59,192
58,801 59,045 58,657 Discontinued Operations (in thousands)
Included in discontinued operations are the results of operations
of the 18 hotels disposed of in 2004, one hotel designated as held
for sale at December 31, 2004, and 16 hotels sold in 2003.
Condensed financial information for the hotels included in
discontinued operations is as follows: Three Months Ended Year
Ended December 31, December 31, 2004 2003 2004 2003 Hotel operating
revenue $5,677 $26,617 $69,298 $146,317 Hotel operating expenses
6,135 27,096 67,566 147,798 Operating income (loss) (458) (479)
1,732 (1,481) Direct interest costs, net --- --- 12 (636) Gain on
the early extinguishment of debt --- --- --- 1,611 Impairment loss
--- (70,778) (4,529) (138,100) Lease termination expense from asset
disposition --- --- (4,900) --- Gain on sale of assets 17,306 3,258
19,422 2,376 Minority interest in FelCor LP (751) 3,332 (553) 6,675
Gain (loss) from discontinued operations 16,097 (64,667) 11,184
(129,555) Depreciation --- 2,153 3,797 16,258 Minority interest 751
(3,332) 553 (6,675) Interest expense --- --- --- 665 EBITDA from
discontinued operations 16,848 (65,846) 15,534 (119,307) Gain on
sale of assets (17,306) (3,258) (19,422) (2,376) Impairment loss
--- 70,778 4,529 138,100 Loss on early extinguishment of debt ---
--- (1,611) Lease termination expense from asset disposition ---
--- 4,900 --- Adjusted EBITDA from discontinued operations $(458)
$1,674 $5,541 $14,806 Selected Balance Sheet Data (in thousands)
December 31, 2004 2003 Investment in hotels $3,909,021 $3,989,964
Accumulated depreciation (948,631) (886,168) Investment in hotels,
net of accumulated depreciation $2,960,390 $3,103,796 Total cash
and cash equivalents $ 119,310 $ 231,885 Total assets $3,317,658
$3,590,893 Total debt $1,767,122 $2,037,355 Total stockholders'
equity $1,330,323 $1,296,272 Non-GAAP Financial Measures We refer
in this press release to certain "non-GAAP financial measures."
These measures, including FFO, Adjusted FFO, EBITDA, Adjusted
EBITDA, Same- Store EBITDA, hotel operating profit and hotel
operating margin, are measures of our financial performance that
are not calculated and presented in accordance with generally
accepted accounting principles ("GAAP"). The following tables set
forth the adjustments made and reconcile each of these non-GAAP
measures to the most comparable GAAP financial measure. Immediately
following the reconciliations, we include a discussion of why we
believe these measures are useful supplemental measures of our
performance and of the limitations upon such measures.
Reconciliation of Net Loss to FFO and Adjusted FFO (in thousands,
except per share data) Three Months Ended December 31, 2004 2003
Per Share Per Share Dollars Shares Amount Dollars Shares Amount Net
loss $(10,770) $(142,933) Preferred dividends (10,091) (6,727) Net
loss applicable to common stockholders (20,861) 59,192 $(0.35)
(149,660) 58,801 $(2.55) Depreciation from continuing operations
30,410 --- 0.51 28,959 --- 0.49 Depreciation from unconsolidated
entities and discontinued operations 2,659 --- 0.04 4,231 --- 0.07
Gain on sale of assets (17,306) --- (0.29) (3,444) --- (0.06)
Minority interest in FelCor LP (974) 2,789 (0.01) (7,712) 3,050
(0.01) FFO (6,072) 61,981 (0.10) (127,626) 61,851 (2.06) Charge-off
of deferred debt costs 866 --- 0.01 --- --- --- Loss on early
extinguishment of debt 4,983 --- 0.08 --- --- --- Impairment 5,262
--- 0.08 124,983 --- 2.02 Minority interest share of impairment ---
--- --- (1,770) --- (0.03) Dilutive effect of unvested stock grants
--- 438 0.01 --- --- --- Adjusted FFO $5,039 62,419 $0.08 $(4,413)
61,851 $(0.07) Year Ended December 31, 2004 2003 Per Share Per
Share Dollars Shares Amount Dollars Shares Amount Net loss
$(100,127) $(310,144) Preferred dividends (35,130) (26,908) Net
loss applicable to common stockholders (135,257) 59,045 $(2.29)
(337,052) 58,657 $(5.75) Depreciation from continuing operations
118,855 --- 2.01 123,968 --- 2.11 Depreciation from unconsolidated
entities and discontinued operations 11,897 --- 0.20 26,067 ---
0.44 Gain on sale of assets (19,422) --- (0.33) (2,668) --- (0.05)
Minority interest in FelCor LP (6,681) 2,939 (0.08) (17,777) 3,188
(0.10) FFO (30,608) 61,984 (0.49) (207,462) 61,845 (3.35)
Charge-off of deferred debt costs 6,960 --- 0.11 2,834 --- 0.04
Loss (gain) on early extinguishment of debt 44,216 --- 0.71 (1,611)
--- (0.03) Gain on swap termination (1,005) --- (0.02) --- --- ---
Lease termination expense from asset disposition 4,900 --- 0.08 ---
--- --- Impairment 38,289 --- 0.62 245,509 --- 3.97 Minority
interest share of impairment --- --- --- (1,770) --- (0.03)
Dilutive effect of unvested stock grants --- 359 --- --- 303 ---
Adjusted FFO $62,752 62,343 $1.01 $37,500 62,148 $0.60
Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and
Same-Store EBITDA (in thousands) Three Months Ended Year Ended
December 31, December 31, 2004 2003 2004 2003 Net loss $(10,770)
$(142,933) $(100,127) $(310,144) Depreciation from continuing
operations 30,410 28,959 118,855 123,968 Depreciation from
unconsolidated entities and discontinued operations 2,659 4,231
11,897 26,067 Minority interest in FelCor Lodging LP (974) (7,712)
(6,681) (17,777) Interest expense 34,322 42,871 152,394 167,431
Interest expense from unconsolidated entities and discontinued
operations 1,773 1,294 5,667 7,713 Amortization expense 1,330 565
2,945 2,210 EBITDA 58,750 (72,725) 184,950 (532) Charge-off of
deferred debt costs 866 --- 6,960 2,834 Loss (gain) on early
extinguishment of debt 4,983 --- 44,216 (1,611) Gain on swap
termination --- --- (1,005) --- Lease termination expense from
asset disposition --- --- 4,900 --- Gain on sale of assets (17,306)
(3,444) (19,422) (2,668) Impairment 5,262 124,983 38,289 245,509
Minority interest share of impairment loss --- (1,770) --- (1,770)
Adjusted EBITDA 52,555 47,044 258,888 241,762 Adjusted EBITDA from
discontinued operations 458 (1,674) (5,541) (14,806) Gain on
development and sale of Margate Condominiums (808) --- (11,664) ---
Same-Store EBITDA $52,205 $45,370 $241,683 $226,956 Reconciliation
of Estimated Net Loss to Estimated FFO and EBITDA (in millions,
except per share and unit data) First Quarter 2005 Guidance Low
Guidance High Guidance Per Share Per Share Dollars Amount(A)
Dollars Amount(A) Net loss $(13) $(0.22) $(11) $(0.19) Depreciation
36 36 Preferred Dividends (10) (10) Minority interest in FelCor LP
(1) (1) FFO $ 12 $ 0.19 $ 14 $ 0.22 Net loss $(13) $(11)
Depreciation 36 36 Minority interest in FelCor LP (1) (1) Interest
expense 34 34 Interest expense from unconsolidated entities 2 2
Amortization expense 1 1 EBITDA $ 59 $ 61 Full Year 2005 Guidance
Low Guidance High Guidance Per Share Per Share Dollars Amount(A)
Dollars Amount(A) Net loss $ (35) $(0.59) $ (29) $(0.49)
Depreciation 147 147 Preferred Dividends (40) (40) Minority
interest in FelCor LP (2) (2) FFO $ 70 $ 1.11 $ 76 $ 1.21 Net loss
$ (35) $ (29) Depreciation 147 147 Minority interest in FelCor LP
(2) (2) Interest expense 139 139 Interest expense from
unconsolidated entities 7 7 Amortization expense 3 3 EBITDA $259
$265 (A) Weighted average shares are 59.4 million. Adding minority
interest and unvested restricted stock of 3.4 million shares to
weighted average shares, provides the weighted average shares and
units of 62.8 million used to compute FFO per share. Hotel
Operating Profit (dollars in thousands) Three Months Year Ended
Ended December 31, December 31, 2004 2003 2004 2003 Total revenue
$284,621 $269,959 $1,191,584 $1,111,750 Retail space rental and
other revenue (131) (184) (2,721) (1,022) Hotel revenue 284,490
269,775 1,188,863 1,110,728 Hotel operating expenses (234,629)
(226,294) (957,483) (895,253) Hotel operating profit $49,861
$43,481 $231,380 $215,475 Hotel operating margin 17.5% 16.1% 19.5%
19.4% Hotel Operating Expense Composition (dollars in thousands)
Three Months Ended Year Ended December 31, December 31, 2004 2003
2004 2003 Hotel departmental expenses: Room $62,537 $59,454
$257,016 $234,242 Food and beverage 37,624 36,675 143,079 133,412
Other operating departments 7,842 6,608 31,887 27,024 Other
property related costs: Administrative and general 29,860 26,948
115,422 106,466 Marketing and advertising 25,042 24,506 102,897
96,400 Repairs and maintenance 17,111 16,953 67,827 63,696 Energy
15,625 14,056 63,128 57,640 Taxes, insurance and lease expense
24,898 26,870 114,648 117,662 Total other property related costs
220,539 212,070 895,904 836,542 Management and franchise fees
14,090 14,224 61,579 58,711 Hotel operating expenses $234,629
$226,294 $957,483 $895,253 Reconciliation of total operating
expense to hotel operating expense: Total operating expenses
$270,564 $259,060 $1,093,432 $1,033,487 Corporate expenses (5,525)
(3,807) (17,094) (14,266) Depreciation (30,410) (28,959) (118,855)
(123,968) Hotel operating expenses $234,629 $226,294 $957,483
$895,253 Substantially all of our non-current assets consist of
real estate. Historical cost accounting for real estate assets
implicitly assumes that the value of real estate assets diminish
predictably over time. Since real estate values instead have
historically risen or fallen with market conditions, most industry
investors consider supplemental measures of performance, which are
not measures of operating performance under GAAP, to be helpful in
evaluating a real estate company's operations. These supplemental
measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA,
Same-Store EBITDA, hotel operating profit and hotel operating
margin, are not measures of operating performance under GAAP.
However, we consider these non-GAAP measures to be supplemental
measures of a REIT's performance and should be considered along
with, but not as an alternative to, net income as a measure of our
operating performance. FFO and EBITDA The White Paper on Funds From
Operations approved by the Board of Governors of the National
Association of Real Estate Investment Trusts ("NAREIT,") defines
FFO as net income or loss (computed in accordance with GAAP),
excluding gains or losses from sales of property, plus depreciation
and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect FFO on
the same basis. We compute FFO in accordance with standards
established by NAREIT. This may not be comparable to FFO reported
by other REITs that do not define the term in accordance with the
current NAREIT definition, or that interpret the current NAREIT
definition differently than we do. EBITDA is a commonly used
measure of performance in many industries. We define EBITDA as net
income or loss (computed in accordance with GAAP) plus interest
expenses, income taxes, depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures are
calculated to reflect EBITDA on the same basis. Adjustments to FFO
and EBITDA We adjust FFO and EBITDA when evaluating our performance
because management believes that the exclusion of certain
additional recurring and non-recurring items described below
provides useful supplemental information to investors regarding our
ongoing operating performance and that the presentation of Adjusted
FFO, Adjusted EBITDA and Same-Store EBITDA, when combined with GAAP
net income, EBITDA and FFO, is beneficial to an investor's better
understanding of our operating performance. * Gains and losses
related to early extinguishment of debt and interest rate swaps --
We exclude gains and losses related to early extinguishment of debt
and interest rate swaps from FFO and EBITDA because we believe that
it is not indicative of ongoing operating performance of our hotel
assets. This also represents an acceleration of interest expense or
a reduction of interest expense, and interest expense is excluded
from EBITDA. * Impairment losses -- We exclude the effect of
impairment losses in computing Adjusted FFO and Adjusted EBITDA
because we believe that including these is not consistent with
reflecting the ongoing performance of our remaining assets.
Additionally, we believe that impairment charges represent
accelerated depreciation, and depreciation is excluded from FFO by
the NAREIT definition and from EBITDA. * Cumulative effect of a
change in accounting principle -- Infrequently, the Financial
Accounting Standards Board promulgates new accounting standards
that require the consolidated statements of operations to reflect
the cumulative effect of a change in accounting principle. We
exclude these one-time adjustments in computing Adjusted FFO and
Adjusted EBITDA because they do not reflect our actual performance
for that period. In addition, to derive Adjusted EBITDA, we adjust
EBITDA for gains or losses on the disposition of assets because we
believe that including them in EBITDA is not consistent with
reflecting ongoing performance of our remaining assets.
Additionally, the gain or loss on sale of depreciable assets
represents either accelerated depreciation or excess depreciation
in previous periods, and depreciation is excluded from EBITDA. To
derive Same-Store EBITDA, we make the same adjustments to EBITDA as
for Adjusted EBITDA and, additionally, exclude EBITDA from
discontinued operations and gains and losses on the disposition of
non-hotel related assets. Hotel Operating Profit and Operating
Margin Hotel operating profit and operating margin are commonly
used measures of performance in the industry and give investors a
more complete understanding of the operating results over which our
individual hotels and operating managers have direct control. We
believe that hotel operating profit and operating margin is useful
to investors by providing greater transparency with respect to two
significant measures used by us in our financial and operational
decision-making. Additionally, using these measures facilitate
comparisons with other hotel REITs and hotel owners. We present
hotel operating profit and hotel operating margin by eliminating
corporate-level expenses, depreciation and expenses related to our
capital structure. We eliminate corporate-level costs and expenses
because we believe property-level results provide investors with
supplemental information into the ongoing operation performance of
our hotels and the effectiveness of management in running our
business on a property-level basis. We eliminate depreciation and
amortization because, even though depreciation and amortization are
property- level expenses, these non-cash expenses, which are based
on historical cost accounting for real estate assets, implicitly
assumes that the value of real estate assets diminishes predictably
over time. Use and Limitations of Non-GAAP Measures Our management
and Board of Directors use FFO, Adjusted FFO, EBITDA and Adjusted
EBITDA to evaluate the performance of our hotels and to facilitate
comparisons between us and other lodging REITs, hotel owners who
are not REITs and other capital intensive companies. Same-Store
EBITDA is used to provide investors with supplemental information
as to the ongoing operating performance of our hotels without
regard to those hotels sold or held for sale at the date of
presentation. The use of these non-GAAP financial measures has
certain limitations. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA,
Same-Store EBITDA, hotel operating profit and hotel operating
margin, as presented by us, may not be comparable to FFO, Adjusted
FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, hotel operating
profit and hotel operating margin as calculated by other real
estate companies. These measures do not reflect certain expenses
that we incurred and will incur, such as depreciation, interest and
capital expenditures. Management compensates for these limitations
by separately considering the impact of these excluded items to the
extent they are material to operating decisions or assessments of
our operating performance. Our reconciliations to the GAAP
financial measures, and our consolidated statements of operations
and cash flows, include interest expense, capital expenditures, and
other excluded items, all of which should be considered when
evaluating our performance, as well as the usefulness of our
non-GAAP financial measures. These non-GAAP financial measures are
used in addition to and in conjunction with results presented in
accordance with GAAP. They should not be considered as alternatives
to operating profit, cash flow from operations, or any other
operating performance measure prescribed by GAAP. Neither should
FFO, FFO per share, Adjusted FFO, Adjusted FFO per share, EBITDA,
Adjusted EBITDA or Same-Store EBITDA be considered as measures of
our liquidity or indicative of funds available for our cash needs,
including our ability to make cash distributions. FFO per share
does not measure, and should not be used as a measure of, amounts
that accrue directly to the benefit of stockholders. FFO, Adjusted
FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, hotel operating
profit and hotel operating margin reflect additional ways of
viewing our operations that we believe when viewed with our GAAP
results and the reconciliations to the corresponding GAAP financial
measures provide a more complete understanding of factors and
trends affecting our business than could be obtained absent this
disclosure. Management strongly encourages investors to review our
financial information in its entirety and not to rely on a single
financial measure. DATASOURCE: FelCor Lodging Trust Incorporated
CONTACT: Thomas J. Corcoran, Jr., President and CEO,
+1-972-444-4901, or , or Richard A. Smith, Executive Vice President
and CFO, +1-972-444-4932, or , or Monica L. Hildebrand, Vice
President of Communications, +1-972-444-4917, or , or Stephen A.
Schafer, Vice President of Investor Relations, +1-972-444-4912, or
, all of FelCor Lodging Trust Incorporated Web site:
http://www.felcor.com/
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