- Reinstates Common Dividend IRVING, Texas, Oct. 31
/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
third quarter and nine months ended September 30, 2005. Third
Quarter Results: * Same-Store Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA") increased by $10.1 million
to $68.3 million, or 17.3 percent to prior year. Adjusted EBITDA
decreased $4.6 million to $69.7 million, or 6.2 percent to prior
year. * Adjusted Funds From Operations ("FFO") were $23.1 million,
a $4.3 million decrease from the prior year period. Adjusted FFO
per share was $0.37, a decrease of 15.9 percent from the prior year
of $0.44 per share. * Included in prior year third quarter Adjusted
EBITDA, Adjusted FFO and net loss applicable to common stockholders
is an $11 million gain from sale of the Margate condominiums in
Myrtle Beach, South Carolina. * The net effect of Katrina was a
negative impact to EBITDA of $2.6 million, and $0.04 to Adjusted
FFO per share. But for these hurricane-related losses, we would
have exceeded the high end of our FFO per share and EBITDA
guidance. * Net income applicable to common stockholders was $0.1
million, or less than $0.01 per share, compared to a net loss of
$46.3 million, or $0.78 per share, in the third quarter of 2004. *
Revenue per available room ("RevPAR") increased 10.8 percent,
compared to the same period in 2004, exceeding our third quarter
forecast of RevPAR growth of seven to eight percent. Average daily
rate ("ADR") made up 55 percent of our RevPAR growth for the
quarter. * Hotel operating profit increased to $64.0 million,
compared to $57.3 million in the prior year period, an increase of
11.6 percent. Hotel operating margin was 20.4 percent, representing
a 48 basis point increase to the prior year hotel operating margin
of 20.0 percent. Year to Date Results: * Same-Store EBITDA
increased $24.9 million, to $207.2 million, or 13.7 percent to
prior year. Adjusted EBITDA grew by $5.9 million, to $212.3
million, a 2.9 percent increase to prior year. * Adjusted FFO was
$72.7 million, a $15.0 million improvement from the prior year
period. Adjusted FFO per share was $1.16, an increase of $0.23 per
share, or 24.7 percent over the prior year. * Net loss applicable
to common stockholders was $22.7 million, or $0.38 per share,
compared to a net loss of $114.4 million, or $1.94 per share, in
2004. * RevPAR for the nine months increased nine percent, compared
to the same period in 2004. ADR made up 66 percent of our RevPAR
growth for the period. * Hotel operating profit increased to $196.1
million, compared to $174.2 million in the prior year period, an
increase of 12.5 percent. Hotel operating margin was 21.2 percent,
an increase of 92 basis points over the 20.3 percent margin of the
prior year. Third Quarter Events: Included in the third quarter
Adjusted EBITDA, Adjusted FFO and net loss applicable to common
stockholders is the impact of hurricane Katrina. The net impact
includes a $2.3 million charge for hurricane losses, representing
our best estimate of uninsured losses (including our insurance
deductible). In addition, our two owned hotels and one joint
venture hotel in New Orleans lost approximately $1.0 million of
EBITDA during September (which we ultimately expect to recover
under our business interruption insurance), compared to forecast.
This was partially offset by the positive impact of approximately
$0.7 million, compared to forecast, from hotels in Texas,
Louisiana, Alabama and Georgia. The preceding adjustments aggregate
to an unfavorable impact for the quarter of $2.6 million, or $0.04
per share. Our New Orleans hotels sustained limited physical damage
from hurricane Katrina and partially re-opened for business in
early October. While we still have rooms out of service for
renovation and the housing of some employees, we have been able to
fill all available rooms at these hotels with a mix of FEMA
contractors and construction and renovation crews. We believe our
property and business interruption insurance proceeds should cover
our losses in excess of the amount that was expensed in the third
quarter. The bankruptcy filings of Delta(R) Air Lines and
Northwest(R) Airlines resulted in a bad debt charge-off aggregating
$1.6 million during the quarter. This loss was partially offset by
a favorable settlement of a lawsuit in which we recovered $1.4
million. The combined effect of the hurricane and airline
bankruptcies negatively affected hotel operating margins by
approximately 66 basis points for the quarter and approximately 23
basis points for the nine month period. Better than expected
increases in the number of room nights sold and in average daily
rate, in both the transient and group segments, resulted in double
digit RevPAR increases in many of our key markets, including
Dallas, San Francisco, Houston, Los Angeles, Phoenix, Chicago,
Philadelphia, San Diego, San Antonio and Washington, DC. "We are
pleased with the continued improvement and positive momentum in
earnings from operations," said Thomas J. Corcoran, Jr., FelCor's
President and CEO. "We are seeing the benefits from our portfolio
repositioning strategy and the capital improvements to our hotels.
We are well positioned to take advantage of the expected strong
growth over the next few years." EBITDA, Adjusted EBITDA,
Same-Store EBITDA, 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 income and for information
regarding the use, limitations and importance of these non-GAAP
financial measures. Common Dividend: We have reinstated the payment
of a dividend on our common stock, beginning with a fourth quarter
dividend of $0.15 per common share. The common dividend will be
payable on December 1, 2005, to our common stockholders of record
on November 15, 2005. Future dividends will be determined by our
board of directors, based primarily upon our expected annual cash
flow from operations in excess of approximately five percent of
total revenues, for maintenance capital. "Due to the continued
improvement in operating performance and the future prospects, we
are pleased to reestablish our common dividend. We look forward to
providing a meaningful yield to our shareholders," said Richard A.
Smith, FelCor's Executive Vice President and Chief Financial
Officer. Capital Structure: At September 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 $171 million at the end of
the quarter, compared to $119 million at year end. In August 2005,
we completed the issuance of 1.4 million depositary shares
representing our 8% Series C Preferred Stock, with gross proceeds
of $34.4 million. The proceeds were used to redeem 1.4 million
depositary shares representing all of the remaining shares of our
9% Series B Preferred Stock then outstanding. In the third quarter
we recorded a reduction in net income applicable to common
stockholders of $1 million for the original issuance cost of the
Series B preferred stock redeemed. Other Highlights: We expect our
October total portfolio RevPAR to increase approximately 11
percent, compared to the same period in 2004. During 2005, through
October 31, we have sold seven hotels for gross proceeds of $58
million. We also have one hotel under a firm sale contract for $7
million that is currently expected to close in November. During the
third quarter, we completed the process of surrendering the final
three of eight limited service hotels, owned by a consolidated
joint venture with Interstate Hotels and Resorts, to their
non-recourse mortgage holders. These hotels are generally located
in depressed markets and were expected to generate negative cash
flow for the foreseeable future. These hotels had an aggregate fair
value less than the outstanding debt balance. We currently have 11
hotels remaining that we are actively marketing for sale. Gross
proceeds from the disposition of these hotels are expected to be
approximately $96 million. Our capital expenditures for the most
recent quarter and nine month periods totaled $32 million and $86
million, respectively. We declared and paid the third quarter
dividends on our Series A and Series C preferred stock. Guidance:
The fundamental operating assumptions upon which our prior fourth
quarter and full year 2005 guidance were based have not changed,
but the impact that hurricane Wilma may have on the remainder of
the year is not yet known. Accordingly, we are not adjusting our
prior guidance until the impact of hurricane Wilma becomes clearer.
When that information becomes available, if necessary, we will
publish an update to our prior guidance. We have published our
Third Quarter 2005 Supplemental Information, which provides
additional corporate data, financial highlights and portfolio
statistical data for the quarter and nine months ended September
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 129 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 59 hotels in the
upscale and full service segments. FelCor has a current market
capitalization of approximately $3.1 billion. Additional
information can be found on the Company's Web site at
http://www.felcor.com/ . We invite you to listen to our Third
Quarter 2005 Conference Call on Tuesday, November 1, 2005, at 9:00
a.m. (Central Standard 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 Tuesday, November 1,
2005, at 12:00 p.m. (Central Standard Time), through Friday,
December 2, 2005, at 7:00 p.m. (Central Standard Time), by dialing
888-440-6193 (access code is 6420). 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
additional 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 Nine Months
Ended September 30, September 30, 2005 2004 2005 2004 Revenues:
Hotel operating revenue: Room $256,721 $232,089 $748,519 $688,338
Food and beverage 40,123 39,960 127,993 124,176 Other operating
departments 16,174 15,105 46,447 44,979 Retail space rental and
other revenue 1,632 2,166 1,908 2,590 Total revenues 314,650
289,320 924,867 860,083 Expenses: Hotel departmental expenses: Room
67,307 63,166 193,581 183,633 Food and beverage 32,890 32,461
100,829 99,240 Other operating departments 8,208 7,451 23,282
22,232 Other property related costs 92,758 83,026 267,744 246,430
Management and franchise fees 16,100 15,355 47,087 44,712 Taxes,
insurance and lease expense 31,792 28,389 94,359 87,006 Corporate
expenses 4,839 3,787 14,108 11,529 Depreciation 30,390 28,533
89,534 83,943 Total operating expenses 284,284 262,168 830,524
778,725 Operating income 30,366 27,152 94,343 81,358 Interest
expense, net 33,173 34,303 98,960 113,090 Charge-off of deferred
financing costs --- 1,920 --- 6,094 Impairment loss 569 --- 569 ---
Hurricane loss 2,309 2,125 2,309 2,125 Loss on early extinguishment
of debt --- 10,987 --- 39,233 Gain on swap termination --- --- ---
(1,005) Loss before equity in income from unconsolidated entities,
minority interests and gain on sale of assets (5,685) (22,183)
(7,495) (78,179) Equity in income from unconsolidated entities
3,260 12,019 8,229 15,692 Minority interests 963 260 1,938 3,285
Gain on sale of assets 344 1,094 733 1,094 Income (loss) from
continuing operations (1,118) (8,810) 3,405 (58,108) Discontinued
operations 12,376 (28,175) 10,190 (31,249) Net income (loss) 11,258
(36,985) 13,595 (89,357) Preferred dividends (9,829) (9,343)
(29,729) (25,039) Issuance costs of redeemed preferred stock
(1,324) --- (6,522) --- Net income (loss) applicable to common
stockholders $105 $(46,328) $(22,656) $(114,396) Basic and diluted
per common share data: Net loss from continuing operations $(0.21)
$(0.31) $(0.55) $(1.41) Net loss $ --- $(0.78) $(0.38) $(1.94)
Weighted average common shares outstanding 59,442 59,075 59,398
58,993 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 September 30, 2005, and 15 hotels disposed of in the first nine
months of 2005. Condensed financial information for the hotels
included in discontinued operations is as follows: Three Months
Ended Nine Months Ended September 30, September 30, 2005 2004 2005
2004 Operating revenue $4,881 $30,212 $29,655 $110,501 Operating
expenses 3,924 29,421 28,516 110,474 Operating income 957 791 1,139
27 Direct interest costs, net --- (1,037) (963) (3,108) Impairment
loss --- (33,027) (1,291) (33,027) Gain on early extinguishment of
debt 2,538 --- 2,538 --- Gain on sale of depreciable assets 9,449
3,058 9,235 2,116 Minority interests (568) 2,040 (468) 2,743 Income
(loss) from discontinued operations 12,376 (28,175) 10,190 (31,249)
Depreciation 123 2,646 2,261 7,277 Minority interest in FelCor LP
568 (1,318) 468 (1,462) Interest expense --- 1,041 967 1,716 EBITDA
from discontinued operations 13,067 (25,806) 13,886 (23,718) Gain
on sale of assets (9,449) (3,058) (9,235) (2,116) Impairment loss
--- 33,027 1,291 33,027 Gain on early extinguishment of debt
(2,538) --- (2,538) --- Asset disposition costs --- --- 1,300 4,900
Adjusted EBITDA from discontinued operations $1,080 $4,163 $4,704
$12,093 Selected Balance Sheet Data (in thousands) September 30,
December 31, 2005 2004 Investment in hotels $3,870,303 $3,904,397
Accumulated depreciation (1,008,200) (948,631) Investments in
hotels, net of accumulated depreciation $2,862,103 $2,955,766 Total
cash and cash equivalents $ 170,923 $ 119,310 Total assets
$3,277,980 $3,317,658 Total debt $1,708,642 $1,767,122 Total
stockholders' equity $1,314,768 $1,330,323 At September 30, 2005,
we had an aggregate of 60,209,499 shares of FelCor common stock and
2,762,540 units or FelCor LP limited partnership interest
outstanding. Non-GAAP Financial Measures We refer in this
supplement 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 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
September 30, 2005 2004 Per Share Per Share Dollars Shares Amount
Dollars Shares Amount Net income (loss) $11,258 $(36,985) Preferred
dividends (9,829) (9,343) Issuance costs of redeemed preferred
stock (1,324) --- Net income (loss) applicable to common
stockholders 105 59,442 $--- (46,328) 59,075 $(0.78) Depreciation
from continuing operations 30,390 --- 0.51 28,533 --- 0.48
Depreciation from unconsolidated entities and discontinued
operations 2,654 --- 0.04 4,465 --- 0.08 Loss (gain) on sale of
depreciable assets (9,449) --- (0.16) (3,058) --- (0.05) Minority
interest in FelCor LP 5 2,773 (0.01) (2,222) 2,903 (0.03)
Conversion of unvested restricted stock --- 620 --- --- --- --- FFO
23,705 62,835 0.38 (18,610) 61,978 (0.30) Charge-off of deferred
financing costs --- --- --- 1,920 --- 0.03 Loss (gain) on early
extinguishment of debt (2,538) --- (0.04) 10,987 --- 0.18
Impairment loss 569 --- 0.01 --- --- --- Impairment loss on
discontinued operations --- --- --- 33,027 --- 0.53 Issuance costs
of redeemed preferred stock 1,324 --- 0.02 --- --- --- Conversion
of unvested restricted stock --- --- --- --- 405 --- Adjusted FFO
$23,060 62,835 $0.37 $27,324 62,383 $0.44 Reconciliation of Net
Loss to FFO and Adjusted FFO (in thousands, except per share and
unit data) Nine Months Ended September 30, 2005 2004 Per Share Per
Share Dollars Shares Amount Dollars Shares Amount Net income (loss)
$13,595 $(89,357) Preferred dividends (29,729) (25,039) Issuance
costs of redeemed preferred stock (6,522) --- Net loss applicable
to common stockholders (22,656) 59,398 $(0.38) (114,396) 58,993
$(1.94) Depreciation from continuing operations 89,534 --- 1.51
83,943 --- 1.42 Depreciation from unconsolidated entities and
discontinued operations 9,362 --- 0.16 13,740 --- 0.23 Gain on sale
of depreciable assets (9,624) --- (0.16) (2,116) --- (0.04)
Minority interest in FelCor LP (1,055) 2,783 (0.08) (5,707) 2,989
(0.07) Conversion of unvested restricted stock --- 543 --- --- ---
--- FFO 65,561 62,724 1.05 (24,536) 61,982 (0.40) Charge-off of
deferred financing costs --- --- --- 6,094 --- 0.10 Loss (gain) on
early extinguishment of debt (2,538) --- (0.04) 39,233 --- 0.63
Asset disposition costs 1,300 --- 0.02 4,900 --- 0.08 Impairment
loss 569 --- 0.01 --- --- --- Impairment loss on discontinued
operations 1,291 --- 0.02 33,027 --- 0.54 Issuance costs of
redeemed preferred stock 6,522 --- 0.10 --- --- --- Gain on swap
termination --- --- --- (1,005) --- (0.02) Conversion of unvested
restricted stock --- --- --- --- 306 --- Adjusted FFO $72,705
62,724 $1.16 $57,713 62,288 $0.93 Reconciliation of Net Loss to
EBITDA, Adjusted EBITDA and Same-Store EBITDA (in thousands) Three
Months Ended Nine Months Ended September 30, September 30, 2005
2004 2005 2004 Net income (loss) $11,258 $(36,985) $13,595
$(89,357) Depreciation from continuing operations 30,390 28,533
89,534 83,943 Depreciation from unconsolidated entities and
discontinued operations 2,654 4,465 9,362 13,740 Minority interest
in FelCor Lodging LP 5 (2,222) (1,055) (5,707) Interest expense
34,216 34,230 101,187 113,341 Interest expense from unconsolidated
entities and discontinued operations 1,823 2,833 6,474 8,627
Amortization expense 820 593 2,171 1,615 EBITDA $81,166 $31,447
$221,268 $126,202 Charge-off of deferred financing costs --- 1,920
--- 6,094 Loss (gain) on early extinguishment of debt (2,538)
10,987 (2,538) 39,233 Asset disposition costs --- --- 1,300 4,900
Gain on sale of depreciable assets (9,449) (3,058) (9,624) (2,116)
Gain on swap termination --- --- --- (1,005) Impairment loss 569
--- 569 --- Impairment loss on discontinued operations --- 33,027
1,291 33,027 Adjusted EBITDA $69,748 $74,323 $212,266 $206,335
Adjusted EBITDA from discontinued operations (1,080) (4,163)
(4,704) (12,093) Gain on development and sale of Margate
condominiums --- (10,856) --- (10,856) Gain on the sale of land
(344) (1,094) (344) (1,094) Same-Store EBITDA $68,324 $58,210
$207,218 $182,292 Hotel Operating Profit and Hotel Operating Margin
(dollars in thousands) Three Months Ended Nine Months Ended
September 30, September 30, 2005 2004 2005 2004 Total revenue
$314,650 $289,320 $924,867 $860,083 Retail space rental and other
revenue (1,632) (2,166) (1,908) (2,590) Hotel operating revenue
313,018 287,154 922,959 857,493 Hotel operating expenses (249,055)
(229,848) (726,882) (683,253) Hotel operating profit $63,963
$57,306 $196,077 $174,240 Hotel operating margin 20.4% 20.0% 21.2%
20.3% Hotel Operating Expense Composition (dollars in thousands)
Three Months Ended Nine Months Ended September 30, September 30,
2005 2004 2005 2004 Hotel departmental expenses: Room $67,307
$63,166 $193,581 $183,633 Food and beverage 32,890 32,461 100,829
99,240 Other operating departments 8,208 7,451 23,282 22,232 Other
property related costs: Administrative and general 31,249 26,810
88,221 80,459 Marketing and advertising 26,471 24,234 79,584 74,191
Repairs and maintenance 17,114 15,676 51,010 47,461 Energy 17,924
16,306 48,929 44,319 Taxes, insurance and lease expense 31,792
28,389 94,359 87,006 Total other property related costs 124,550
111,415 362,103 333,436 Management and franchise fees 16,100 15,355
47,087 44,712 Hotel operating expenses $249,055 $229,848 $726,882
$683,253 Reconciliation of total operating expense to hotel
operating expense: Total operating expenses $284,284 $262,168
$830,524 $778,725 Corporate expenses (4,839) (3,787) (14,108)
(11,529) Depreciation (30,390) (28,533) (89,534) (83,943) Hotel
operating expenses $249,055 $229,848 $726,882 $683,253 Supplemental
information: Compensation and benefits expense (included in hotel
operating expenses) $98,561 $93,842 $292,255 $279,819 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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