- Raises Full Year Outlook IRVING, Texas, Aug. 3
/PRNewswire-FirstCall/ -- FelCor Lodging Trust Incorporated
(NYSE:FCH), one of the nation's largest hotel real estate
investment trusts (REITs), today reported operating results for the
second quarter and six months ended June 30, 2005. Highlights:
Second Quarter Results: * Same-Store EBITDA increased to $80
million in the second quarter of 2005, from $68 million in the same
period of 2004, a 17 percent increase. Adjusted EBITDA grew from
$73 million in the second quarter of 2004 to $81 million in the
second quarter of 2005, and exceeded the high end of our guidance.
* Adjusted FFO was $34 million, compared to $22 million for the
same period last year. Adjusted FFO per share was $0.54, compared
to $0.35 for the same period last year, an increase of 54 percent.
Adjusted FFO for the second quarter exceeded our previous guidance
of $0.49 to $0.52 per share. * Net loss applicable to common
stockholders was $5 million, or a net loss of $0.08 per share,
compared to the prior year second quarter net loss of $41 million,
or $0.69 per share. * Revenue per available room ("RevPAR") for the
quarter increased 9.6 percent, compared to the same period in 2004,
exceeding our second quarter forecast RevPAR growth of between six
and seven percent. Average daily rate ("ADR") made up 59 percent of
our RevPAR growth for the quarter. * Hotel operating profit
increased to $75 million for the quarter, compared to $66 million
in the prior year period, an increase of 14 percent. Hotel
operating profit margin during the quarter was 23.1 percent, an
increase of 130 basis points over the 21.8 percent margin last
year. Year to Date Results: * Same-Store EBITDA increased to $142
million in the first half of 2005, from $124 million, a 15 percent
increase, for the six month period ended June 30, 2004. Adjusted
EBITDA grew from $132 million in the first six months of 2004 to
$143 million in the first six months of 2005. * Adjusted FFO for
the year-to-date period was $50 million, compared to $30 million
for the same period last year and Adjusted FFO per share was $0.79
for the current period, compared to $0.49 for the same period last
year, an increase of 61 percent. * Net loss applicable to common
stockholders was $23 million, or a net loss of $0.38 per share,
compared to the prior year six month net loss of $68 million, or
$1.15 per share. * RevPAR for the six months increased 8.2 percent,
compared to the same period in 2004. ADR made up 70 percent of our
RevPAR growth for the period. * Hotel operating profit increased to
$135 million for the first six months, compared to $119 million in
the prior year period, an increase of 13 percent. Hotel operating
profit margin during the six months was 21.7 percent, an increase
of 120 basis points over the 20.5 percent margin during the first
half of last year. "Although a number of our key markets have
recovered, other markets are just beginning to recover and are
starting to show strong growth this year. Coupled with our
portfolio repositioning, the recovery in many of our key markets
has enabled our RevPAR growth to outperform the industry averages
for the second quarter and year-to-date periods," said Thomas J.
Corcoran, Jr., FelCor's President and CEO. "RevPAR and EBITDA in
markets such as Los Angeles, San Diego, Minneapolis, New Orleans
and Washington, D.C. have recovered. However, the recovery in the
San Francisco Bay area, Chicago, northern New Jersey and
Philadelphia markets has just begun and offers significant upside
potential for our EBITDA growth, as these four high- quality,
primary markets represent more than 17 percent of our room
inventory." 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 our
discussion of "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. Capital Structure: At June 30, 2005, we had
$1.7 billion of debt outstanding with a weighted average life of
five years, compared to $1.8 billion at December 31, 2004. Our cash
and cash equivalents totaled approximately $125 million at the end
of the quarter, compared to $119 million at year end. On April 8,
2005, we completed the issuance of 5.4 million depositary shares
representing our 8% Series C preferred stock, with gross proceeds
of $135 million. The gross proceeds were used to redeem a like
number of depositary shares representing our 9% Series B preferred
stock. In the second quarter, we recorded a reduction in net income
applicable to common stockholders of $5 million for the original
issuance cost of the Series B preferred shares redeemed. This
transaction will reduce our preferred dividend obligations by
approximately $1.4 million annually to $39 million. Following the
redemption, we had approximately $34 million of our Series B
preferred stock remaining outstanding. Other Highlights: We expect
our July total portfolio RevPAR to increase approximately eight
percent, compared to the same period in 2004. During 2005, through
July, we have sold five hotels for gross proceeds of $16 million.
We also have one hotel under a firm sale contract for $38 million
that is currently expected to close in the third quarter of 2005.
During the second quarter, we completed the process of surrendering
five of eight limited service hotels, owned by a consolidated joint
venture with Interstate Hotels and Resorts, to their non-recourse
mortgage holders. Two hotels were surrendered in July and the final
hotel is expected to be transferred to the lender before the end of
the third quarter. These eight hotels are generally located in
depressed markets and are expected to generate negative cash flow
for the foreseeable future. These hotels have an aggregate fair
value less than the outstanding debt balance. After disposing of
the previously mentioned hotels, we will have 13 hotels remaining
that we are actively marketing for sale. Gross proceeds from the
disposition of these hotels are expected to be approximately $107
million and we anticipate completing the sale of these hotels by
mid-2006. Our capital expenditures for the most recent quarter
totaled $24 million. We declared and paid second quarter dividends
on our Series A, Series B and Series C preferred stock. 2005
Guidance: As the result of our improving outlook, we have revised
our guidance upward for the remainder of the year. We currently
anticipate: * Adjusted EBITDA to be between $268 and $270 million
for the full year and between $71 and $72 million for the third
quarter; * RevPAR for the full year 2005 to increase 7.5 percent to
8.0 percent over 2004 RevPAR. For the third quarter, we expect
RevPAR growth to be between 7.0 to 8.0 percent; * Adjusted FFO per
share to be between $1.29 and $1.33 for 2005, and to be between
$0.38 and $0.40 for the third quarter; * Net loss applicable to
common stockholders to be between $57 million and $55 million, or
$0.96 to $0.93 per share for the full year 2005, and $9 million and
$8 million, or $0.15 to $0.13 for the third quarter; and * Capital
expenditures for 2005, as previously stated, are expected to total
approximately $100 million. "We are taking advantage of the robust
demand growth and low supply growth. As we move through this
lodging cycle with a higher quality portfolio, we expect strong
RevPAR growth and further improvement in our operating margins,"
said Richard A. Smith, FelCor's Executive Vice President and Chief
Financial Officer. "As a result of the better than expected lodging
trends, we are pleased to raise guidance again for the remainder of
2005." We have published our Second Quarter 2005 Supplemental
Information, which provides additional corporate data, financial
highlights and portfolio statistical data for the quarter and six
months ended June 30, 2005. 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 one of the nation's largest hotel REITs and
the nation's largest owner of full service, all-suite hotels.
FelCor's portfolio is comprised of 130 consolidated hotels, located
in 30 states and Canada. FelCor owns 68 upscale, all-suite hotels,
and is the largest owner of Embassy Suites Hotels(R) and Doubletree
Guest Suites(R) hotels. FelCor's portfolio also includes 60 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 the Company's Web site at
http://www.felcor.com/ . We invite you to listen to our Second
Quarter 2005 Conference Call on Thursday, August 4, 2005, at 9:00
a.m. (Central Daylight Time). The conference call will be webcast
simultaneously via FelCor's Web site at http://www.felcor.com/ .
Interested investors and other parties who wish to access the call
should go to FelCor's Web site and click on the conference call
microphone icon on either the "Investor Relations" or "FelCor News"
pages. A phone replay will be available from Thursday, August 4,
2005, at 12:00 noon (Central Daylight Time), through Friday,
September 2, 2005, at 7:00 p.m. (Central Daylight Time), by dialing
877-244-9051 (access code is 5735). 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 fuel
prices and security precautions, the impact that the bankruptcy of
one or more major air carriers may have on our revenues and
receivables, 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 Six Months
Ended June 30, June 30, 2005 2004 2005 2004 Revenues: Hotel
operating revenue: Room $262,294 $241,784 $500,837 $466,622 Food
and beverage 47,154 45,021 88,810 85,194 Other operating
departments 16,105 15,640 30,834 30,624 Retail space rental and
other revenue 120 180 276 425 Total revenues 325,673 302,625
620,757 582,865 Expenses: Hotel departmental expenses: Room 67,105
63,661 128,721 123,352 Food and beverage 35,856 35,275 68,748
67,676 Other operating departments 8,142 7,869 15,367 15,231 Other
property related costs 89,903 84,240 177,841 167,230 Management and
franchise fees 16,887 15,863 31,687 30,179 Taxes, insurance and
lease expense 32,524 29,628 63,341 59,543 Corporate expenses 4,728
4,380 9,269 7,742 Depreciation 30,485 28,027 60,093 56,503 Asset
disposition costs --- --- 650 --- Total operating expenses 285,630
268,943 555,717 527,456 Operating income 40,043 33,682 65,040
55,409 Interest expense, net (33,471) (39,203) (66,170) (79,797)
Charge-off of deferred financing costs --- (3,944) --- (4,174)
Impairment (732) --- (732) --- Loss on early extinguishment of debt
--- (28,246) --- (28,246) Gain on swap termination --- 1,005 ---
1,005 Income (loss) before equity in income from unconsolidated
entities, minority interests and gain on sale of assets 5,840
(36,706) (1,862) (55,803) Equity in income from unconsolidated
entities 3,837 2,691 4,968 3,673 Minority interests 111 1,617 975
2,764 Gain on sale of assets 389 --- 389 --- Income (loss) from
continuing operations 10,177 (32,398) 4,470 (49,366) Discontinued
operations 174 725 (2,133) (3,006) Net income (loss) 10,351
(31,673) 2,337 (52,372) Preferred dividends (9,809) (8,970)
(19,900) (15,696) Issuance costs of redeemed preferred stock
(5,198) --- (5,198) --- Net loss applicable to common stockholders
$(4,656) $(40,643) $(22,761) $(68,068) Basic and diluted per common
share data: Net loss from continuing operations $(0.08) $(0.70)
$(0.35) $(1.10) Net loss $(0.08) $(0.69) $(0.38) $(1.15) Weighted
average common shares outstanding 59,404 58,950 59,363 58,952
Discontinued Operations (in thousands) Included in discontinued
operations are the results of operations of the 18 hotels disposed
of in 2004, two hotels designated as held for sale at June 30,
2005, and nine hotels disposed of in the first two quarters of
2005. Condensed financial information for the hotels included in
discontinued operations is as follows: Three Months Ended Six
Months Ended June 30, June 30, 2005 2004 2005 2004 Operating
revenue $6,166 $32,811 $14,240 $68,186 Operating expenses 5,710
31,114 15,118 70,154 Operating income (loss) 456 1,697 (878)
(1,968) Direct interest costs, net (40) (534) (581) (1,060)
Impairment loss --- --- (559) --- Loss on sale of assets (234)
(1,214) (214) (941) Minority interests (8) 776 99 963 Income (loss)
from discontinued operations 174 725 (2,133) (3,006) Depreciation
300 2,144 1,189 4,562 Minority interest in FelCor LP 8 37 (99)
(154) Interest expense 40 536 583 1,064 EBITDA from discontinued
operations 522 3,442 (460) 2,466 Loss on sale of assets 234 1,214
214 941 Impairment loss --- --- 559 --- Asset disposition costs ---
--- 650 4,900 Adjusted EBITDA from discontinued operations $756
$4,656 $963 $8,307 Selected Balance Sheet Data (in thousands) June
30, December 31, 2005 2004 Investment in hotels $3,887,365
$3,904,397 Accumulated depreciation (994,414) (948,631) Investments
in hotels, net of accumulated depreciation $2,892,951 $2,955,766
Total cash and cash equivalents $ 124,945 $ 119,310 Total assets
$3,294,836 $3,317,658 Total debt $1,743,420 $1,767,122 Total
stockholders' equity $1,309,272 $1,330,323 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 and unit data) Three Months Ended June
30, 2005 2004 Per Share Per Share Dollars Shares Amount Dollars
Shares Amount Net income (loss) $10,351 $(31,673) Preferred
dividends (9,809) (8,970) Issuance costs of redeemed preferred
stock (5,198) --- Net loss applicable to common stockholders
(4,656) 59,404 $(0.08) (40,643) 58,950 $(0.69) Depreciation from
continuing operations 30,485 0.51 28,027 0.47 Depreciation from
unconsolidated entities and discontinued operations 2,604 0.04
3,991 0.07 Loss (gain) on sale of assets (155) (0.00) 1,214 0.02
Minority interest in FelCor LP (216) 2,788 (0.02) (2,078) 3,033
(0.02) Conversion of options and unvested restricted stock --- 339
--- --- --- FFO 28,062 62,531 $0.45 (9,489) 61,983 (0.15)
Charge-off of deferred debt costs --- --- 3,944 0.06 Early
extinguishment of debt --- 28,246 0.46 Impairment 732 0.01 --- ---
Issuance costs of redeemed preferred stock 5,198 0.08 --- --- Asset
disposition costs --- --- --- --- Gain on swap termination --- ---
(1,005) (0.02) Adjusted FFO $33,992 62,531 $ 0.54 $ 21,696 61,983
$0.35 Reconciliation of Net Loss to FFO and Adjusted FFO (in
thousands, except per share and unit data) Six Months Ended June
30, 2005 2004 Per Share Per Share Dollars Shares Amount Dollars
Shares Amount Net income (loss) $2,337 $(52,372) Preferred
dividends (19,900) (15,696) Issuance costs of redeemed preferred
stock (5,198) --- Net loss applicable to common stockholders
(22,761) 59,363 $(0.38) (68,068) 58,952 $(1.15) Depreciation from
continuing operations 60,093 1.01 56,503 0.96 Depreciation from
unconsolidated entities and discontinued operations 5,758 0.10
8,182 0.14 Loss (gain) on sale of assets (175) 0.00 941 0.02
Minority interest in FelCor LP (1,059) 2,788 (0.06) (3,485) 3,033
(0.07) Conversion of options and unvested restricted stock --- 319
--- FFO 41,856 62,470 0.67 (5,927) 61,985 (0.10) Charge-off of
deferred debt costs --- 4,174 0.07 Early extinguishment of debt ---
28,246 0.46 Issuance costs of redeemed preferred stock 5,198 0.08
--- --- Asset disposition costs 1,300 0.02 4,900 0.08 Gain on swap
termination --- --- (1,005) (0.02) Impairment 1,291 0.02 --- ---
Adjusted FFO $ 49,645 62,470 $ 0.79 $ 30,388 61,985 $ 0.49
Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and
Same-Store EBITDA (in thousands) Three Months Ended Six Months
Ended June 30, June 30, 2005 2004 2005 2004 Net income (loss)
$10,351 $(31,673) $2,337 $(52,372) Depreciation from continuing
operations 30,485 28,027 60,093 56,503 Depreciation from
unconsolidated entities and discontinued operations 2,604 3,991
5,758 8,182 Minority interest in FelCor Lodging LP (216) (2,078)
(1,059) (3,485) Interest expense 34,273 39,798 67,614 81,114
Interest expense from unconsolidated entities and discontinued
operations 1,687 1,943 4,007 3,791 Amortization expense 755 519
1,352 1,022 EBITDA 79,939 40,527 140,102 94,755 Charge off of
deferred debt costs --- 3,944 --- 4,174 Early extinguishment of
debt --- 28,246 --- 28,246 Asset disposition costs --- --- 1,300
4,900 Loss (gain) on sale of assets (155) 1,214 (175) 941 Gain on
swap termination --- (1,005) --- (1,005) Impairment 732 --- 1,291
--- Adjusted EBITDA 80,516 72,926 142,518 132,011 Adjusted EBITDA
from discontinued operations (756) (4,656) (963) (8,307) Same-Store
EBITDA $79,760 $68,270 $141,555 $123,704 Reconciliation of
Estimated Net Loss to Estimated FFO and EBITDA (in millions, except
per share and unit data) Third Quarter 2005 Guidance Low Guidance
High Guidance Per Share Per Share Dollars Amount (A) Dollars Amount
(A) Net income $1 $2 Preferred dividends (10) (10) Issuance costs
of redeemed preferred stock --- --- Net loss applicable to common
stockholders (9) $(0.15) (8) $(0.13) Depreciation 33 33 Minority
interest in FelCor LP --- --- Issuance costs of redeemed preferred
stock --- --- FFO 24 0.38 25 0.40 Asset disposition costs --- ---
Impairment --- --- Adjusted FFO $24 $0.38 $25 $ 0.40 Net income $1
$2 Depreciation 33 33 Minority interest in FelCor LP --- ---
Interest expense 34 34 Interest expense from unconsolidated
entities 2 2 Amortization expense 1 1 EBITDA 71 72 Asset
disposition costs --- --- Impairment --- --- Adjusted EBITDA $71
$72 Reconciliation of Estimated Net Loss to Estimated FFO and
EBITDA (in millions, except per share and unit data) Full Year 2005
Guidance Low Guidance High Guidance Per Share Per Share Dollars
Amount (A) Dollars Amount (A) Net loss $ (13) $ (11) Preferred
dividends (39) (39) Issuance costs of redeemed preferred stock (5)
(5) Net loss applicable to common stockholders (57) $(.96) (55)
$(.93) Depreciation 133 133 Minority interest in FelCor LP (2) (2)
Issuance costs of redeemed preferred stock 5 5 FFO 79 1.26 81 1.29
Asset disposition costs 1 1 Impairment 1 1 Adjusted FFO $81 $1.29
$83 $1.33 Net loss $ (13) $ (11) Depreciation 133 133 Minority
interest in FelCor LP (2) (2) Interest expense 137 137 Interest
expense from unconsolidated entities 8 8 Amortization expense 3 3
EBITDA 266 268 Asset disposition costs 1 1 Impairment 1 1 Adjusted
EBITDA $ 268 $ 270 (A) Weighted average shares are 59.4 million.
Adding minority interest and unvested restricted stock of 3.3
million shares to weighted average shares, provides the weighted
average shares and units of 62.7 million used to compute FFO per
share. Hotel Operating Profit and Hotel Operating Margin (dollars
in thousands) Three Months Ended Six Months Ended June 30, June 30,
2005 2004 2005 2004 Total revenue $325,673 $302,625 $620,757
$582,865 Retail space rental and other revenue (120) (180) (276)
(425) Hotel revenue 325,553 302,445 620,481 582,440 Hotel operating
expenses (250,417) (236,536) (485,705) (463,211) Hotel operating
profit $ 75,136 $ 65,909 $134,776 $119,229 Hotel operating margin
23.1% 21.8% 21.7% 20.5% Hotel Operating Expense Composition
(dollars in thousands) Three Months Ended Six Months Ended June 30,
June 30, 2005 2004 2005 2004 Hotel departmental expenses: Room $
67,105 $ 63,661 $128,721 $123,352 Food and beverage 35,856 35,275
68,748 67,676 Other operating departments 8,142 7,869 15,367 15,231
Other property related costs: Administrative and general 29,406
27,874 57,893 54,982 Marketing and advertising 27,553 25,946 53,859
50,874 Repairs and maintenance 17,518 16,314 34,495 32,666 Energy
15,426 14,106 31,594 28,708 Taxes, insurance and lease expense
32,524 29,628 63,341 59,543 Total other property related costs
122,427 113,868 241,182 226,773 Management and franchise fees
16,887 15,863 31,687 30,179 Hotel operating expenses $250,417
$236,536 $485,705 $463,211 Reconciliation of total operating
expense to hotel operating expense: Total operating expenses
$285,630 $268,943 $555,717 $527,456 Corporate expenses (4,728)
(4,380) (9,269) (7,742) Depreciation (30,485) (28,027) (60,093)
(56,503) Asset disposition costs --- --- (650) --- Hotel operating
expenses $250,417 $236,536 $485,705 $463,211 Supplemental
information: Compensation and benefits expense (included in hotel
operating expenses) $100,618 $97,084 $196,571 $189,629
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 diminishes 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 hotel
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 and gains or losses on disposition of assets 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 and gains or losses on disposition of assets
represent accelerated depreciation, or excess 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 exclude gains or losses on the sale of
assets because we believe that including them in EBITDA is not
consistent with reflecting the 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, 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 with respect to the ongoing operating performance of
our hotels and the effectiveness of management in running our
business on a property-level basis. We eliminate depreciation and
amortization, even though they are property-level expenses, because
we do not believe that these non-cash expenses, which are based on
historical cost accounting for real estate assets and implicitly
assume that the value of real estate assets diminish predictably
over time, accurately reflect an adjustment in the value of our
assets. 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 any 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 Stephen A. Schafer, Vice
President of Investor Relations, +1-972-444-4912, or , or Monica L.
Hildebrand, Vice President of Communications, +1-972-444-4917, or ,
all of FelCor Lodging Trust Incorporated Web site:
http://www.felcor.com/
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