- RevPAR Increases 16 Percent IRVING, Texas, Feb. 7
/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
fourth quarter and year ended December 31, 2005. Fourth Quarter
Results: * Revenue Per Available Room ("RevPAR") increased 16.2
percent, compared to the same period in 2004. Average Daily Rate
("ADR") increased 7.1 percent. * Hotel Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") increased to $72.2
million, compared to $60.1 million in the prior year quarter, an
increase of 20.2 percent. Hotel EBITDA margin was 24.1 percent,
representing a 166 basis point improvement to the prior year Hotel
EBITDA margin of 22.4 percent. * Adjusted Funds From Operations
("FFO") were $13.3 million, an $8.3 million increase from the prior
year period. Adjusted FFO per share increased to $0.21, compared to
$0.08 in the prior year, an increase of 163 percent. * Same-Store
EBITDA increased by $6.7 million to $58.5 million, or 13.0 percent
to prior year. Adjusted EBITDA increased $6.2 million to $58.7
million, or 11.7 percent to prior year. * Included in Adjusted
EBITDA and Adjusted FFO is a $4.2 million, or $0.07 per share,
negative impact stemming from hurricane losses related to insurance
deductibles as a result of Hurricane Wilma. * Net loss applicable
to common stockholders was $274.9 million, or $4.62 per share,
compared to a net loss of $20.9 million, or $0.35 per share, in the
fourth quarter of 2004. * Included in the net loss applicable to
common stockholders was a fourth quarter impairment charge of
$263.1 million associated with the repositioning of our portfolio
and the identification of additional non-strategic hotels following
an amendment of the InterContinental Hotels Group ("IHG")
agreements. Full Year Results: * RevPAR for the year increased 10.8
percent, compared to 2004. ADR increased 6.2 percent. * Hotel
EBITDA increased to $305.4 million, compared to $268.1 million in
the prior year, an increase of 13.9 percent. Hotel EBITDA margin
was 25.2 percent, an increase of 115 basis points over the 24.1
percent prior year margin. * Adjusted FFO was $86.0 million, a
$23.3 million improvement from the prior year period. Adjusted FFO
per share was $1.37, an increase of $0.36 per share, or 35.6
percent over the prior year. * Same-Store EBITDA increased $31.7
million, to $264.8 million, or 13.6 percent to prior year. Adjusted
EBITDA grew by $12.1 million, to $271.0 million, a 4.7 percent
increase to prior year. * Included in Adjusted EBITDA and Adjusted
FFO is a $6.5 million negative impact stemming from hurricane
losses related to insurance deductibles in 2005 and $2.1 million in
2004. * Net loss applicable to common stockholders was $297.5
million, or $5.01 per share, compared to a net loss of $135.3
million, or $2.29 per share, in 2004. * Included in the net loss
applicable to common stockholders was a fourth quarter impairment
charge of $263.1 million associated with the repositioning of our
portfolio and the identification of additional non-strategic hotels
following an amendment of the IHG agreements. Fourth Quarter
Events: Included in the fourth quarter Adjusted EBITDA, Adjusted
FFO and net loss applicable to common stockholders are hurricane
losses aggregating $4.2 million, representing our best estimate of
uninsured losses at five of our hotels in southern Florida
(including our insurance deductible) from Hurricane Wilma. In the
fourth quarter, we recorded an impairment charge in continuing
operations associated with the repositioning of our portfolio
following an agreement with IHG amending our management agreements.
This resulted in the identification of 38 non-strategic hotels
owned on December 1, 2005, 31 of which were IHG-managed hotels.
These non-strategic hotels are located primarily in secondary and
tertiary markets, including Texas and Atlanta, Georgia, where we
have an excess concentration of hotels. Although these hotels
represent 31 percent of our hotel rooms, they represent only 15
percent of our Hotel EBITDA. These hotels have significantly lower
RevPAR and Hotel EBITDA margins than our remaining 90 core hotels.
During the fourth quarter, we refinanced or retired indebtedness
totaling $259 million which was secured by 25 of our hotels using a
$225 million unsecured term loan facility and excess cash. In
conjunction with the refinancing and the debt retirement, we
incurred $14.5 million of costs associated with the early
extinguishment of debt. Better than expected increases in the
number of room nights sold and in ADR, in both the transient and
group segments, resulted in double digit RevPAR increases in most
of our key markets, including Atlanta, Los Angeles, Dallas,
Phoenix, New Orleans, Washington D.C., San Francisco Bay area,
Philadelphia and Chicago. RevPAR was especially strong in Atlanta
and Texas, following Hurricane Katrina, as RevPAR increased 29
percent in Atlanta and 31 percent in Texas during the fourth
quarter, primarily from gains in average occupancy. This was
partially offset by the softness in Florida, as the hotels there
were recovering from the effects of Hurricane Wilma. We had rooms
out of service in the fourth quarter at our three New Orleans
hotels and certain Florida hotels as a result of damage sustained
from hurricanes Katrina and Wilma. Notwithstanding the unusually
high increases in utility and property and liability insurance
expense, the strong RevPAR performance provided a 166 basis point
improvement in our Hotel EBITDA margin for the quarter. "This is an
exciting time for FelCor. We are pleased with our continued strong
performance in RevPAR and ADR in 2005, as well as far exceeding our
expectations. Our repositioning plan has set the stage for further
growth," said Thomas J. Corcoran, Jr., FelCor's Chairman of the
Board. "FelCor has entered a new era and the future is very bright
for our Company." Capital Structure: At December 31, 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 $95 million at the end
of 2005. During 2005, we issued 6.8 million depositary shares
representing our 8% Series C Preferred Stock, with gross proceeds
of $169.4 million. The proceeds were used to redeem all of the
shares outstanding of our 9% Series B Preferred Stock. As a result
of this redemption, we recorded a reduction in net income
applicable to common stockholders of $6.5 million for the original
issuance cost of the Series B preferred stock which was redeemed.
In January, we retired our $225 million unsecured term loan
facility and established a new $125 million unsecured line of
credit. The New FelCor: On January 25, 2006, we announced the
completion of an agreement modifying the current management
agreements covering all our owned hotels managed by IHG. This
agreement enables us to complete our repositioning program and
creates the "New FelCor." The completion of the agreement with IHG
enables us to sell our non- strategic hotels and use the proceeds
to reduce debt and invest in high return-on-investment capital
projects at our remaining core hotels. The New FelCor will be a
lower-leveraged company with a much stronger and fully renovated
portfolio. Our repositioned portfolio will provide a solid platform
for future growth in today's strong RevPAR environment. Following
the sale of the non-strategic hotels, New FelCor will have
significantly lower exposure to markets with low barriers to entry,
such as Atlanta, Dallas, Houston and Omaha and will be more
geographically diverse with no market contributing more than six
percent of EBITDA. "Our asset disposition program continues to be a
success. As we complete our repositioning program and focus on
improving the existing portfolio through renovations and
repositionings, our portfolio will be positioned to have above
average growth," said Richard A. Smith, FelCor's President and CEO.
Hotel Dispositions: In 2005, we disposed of 19 hotels for gross
proceeds and forgiveness of debt aggregating $128 million. During
January 2006, we sold eight hotels for gross proceeds of $163
million. We currently have 27 hotels that we are actively marketing
for sale. Gross proceeds from the disposition of these hotels are
expected to be approximately $325 and $375 million. Other
Highlights: In 2005, we started construction on the Royale Palms
condominium development in Myrtle Beach, South Carolina. This
project is more than 90 percent pre-sold and is expected to be
completed in the summer of 2007. Our consolidated capital
expenditures for the fourth quarter and full year totaled $38
million and $124 million, respectively. In the fourth quarter of
2005 we resumed paying a common dividend, with a $0.15 per share
dividend paid on December 1, 2005, and declared and paid fourth
quarter dividends on our Series A and Series C preferred stock. We
will evaluate the level of the common dividend each quarter. 2006
Guidance: We anticipate that during 2006, RevPAR will increase 7 to
9 percent for the consolidated hotels, with the majority of the
increase attributable to gains in ADR. RevPAR during the first
quarter is expected to increase between 10 and 12 percent to prior
year. Based on those expectations, we currently anticipate: *
Adjusted EBITDA to be between $282 and $289 million for the full
year and between $70 and $72 million for the first quarter; *
Adjusted FFO per share to be between $1.79 and $1.90 for the full
year, and to be between $0.42 and $0.45 for the first quarter; *
Hotel EBITDA margin will increase at least 100 basis points for the
year; and * Capital expenditures to be between $175 and $200
million for the full year. Our January RevPAR increased
approximately 18 percent to prior year. Our first quarter estimates
include the receipt of $5 million in business interruption proceeds
as a result of hurricane losses from 2005. There are no future
asset sales assumed in our guidance. We will adjust our quarterly
guidance as asset sales occur. Consequently, we are assuming no
further debt reduction, beyond what has occurred to date. EBITDA,
Adjusted EBITDA, Same-Store EBITDA, Hotel EBITDA, Hotel EBITDA
margin, FFO and Adjusted FFO 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. We have published our Year End 2005
Supplemental Information, which provides additional corporate data,
financial highlights and portfolio statistical data for the quarter
and year ended December 31, 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 117 consolidated hotels,
located in 28 states and Canada. FelCor's portfolio includes 64
upper upscale, all-suite hotels, and FelCor is the largest owner of
Embassy Suites Hotels(R) and Doubletree Guest Suites(R) hotels.
FelCor's hotels are flagged under global brands such as Embassy
Suites Hotels, Doubletree(R), Hilton(R), Sheraton(R), Westin(R),
and Holiday Inn(R). 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 2005 Conference Call on Wednesday, February 8, 2006,
at 9:00 a.m. (Central Standard Time). The conference call will be
Web cast 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 Wednesday, February 8, 2006, at 12:00 p.m. (Central Standard
Time), through Friday, March 3, 2006, at 7:00 p.m. (Central
Standard Time), by dialing 877-461-2816 (access code is 1180#). 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 Year Ended December 31, December 31, 2005 2004
2005 2004 Revenues: Hotel operating revenue: Room $237,041 $208,121
$975,128 $886,478 Food and beverage 48,200 45,919 174,537 168,391
Other operating departments 14,479 13,796 60,465 58,284 Retail
space rental and other revenue 141 129 2,049 2,721 Total revenues
299,861 267,965 1,212,179 1,115,874 Expenses: Hotel departmental
expenses: Room 63,183 58,235 253,563 238,807 Food and beverage
36,546 34,967 135,558 132,561 Other operating departments 7,492
7,220 30,356 29,028 Other property related costs 89,556 81,342
353,070 323,587 Management and franchise fees 14,854 13,161 61,348
57,305 Taxes, insurance and lease expense 29,181 23,513 122,186
109,310 Abandoned projects 265 --- 265 --- Corporate expenses 4,917
5,506 19,025 17,035 Depreciation 30,528 28,668 119,323 111,836
Total operating expenses 276,522 252,612 1,094,694 1,019,469
Operating income 23,339 15,353 117,485 96,405 Interest expense, net
(31,948) (32,552) (130,954) (145,666) Impairment loss (263,091)
(3,494) (263,091) (3,494) Hurricane loss (4,172) --- (6,481)
(2,125) Loss on early extinguishment of debt (11,921) (4,983)
(11,921) (44,216) Charge-off of deferred financing costs (2,659)
(866) (2,659) (6,960) Gain on swap termination --- --- --- 1,005
Loss before equity in income from unconsolidated entities, minority
interests and gain on sale of assets (290,452) (26,542) (297,621)
(105,051) Equity in income from unconsolidated entities 1,941 1,428
10,169 17,121 Minority interests 21,891 1,923 23,813 5,229 Gain on
sale of assets --- 73 733 1,167 Loss from continuing operations
(266,620) (23,118) (262,906) (81,534) Discontinued operations 1,410
12,348 11,291 (18,593) Net loss (265,210) (10,770) (251,615)
(100,127) Preferred dividends (9,679) (10,091) (39,408) (35,130)
Issuance costs of redeemed preferred stock --- --- (6,522) --- Net
loss applicable to common stockholders $(274,889) $(20,861)
$(297,545) $(135,257) Basic and diluted per common share data: Net
loss from continuing operations $(4.65) $(0.56) $(5.20) $(1.98) Net
loss $(4.62) $(0.35) $(5.01) $(2.29) Weighted average common shares
outstanding 59,453 59,192 59,436 59,045 Discontinued Operations (in
thousands) Included in discontinued operations are the results of
operations of the 18 hotels disposed of in 2004, and 19 hotels
disposed of in 2005. Condensed financial information for the hotels
included in discontinued operations is as follows: Three Months
Ended Year Ended December 31, December 31, 2005 2004 2005 2004
Operating revenue $3,813 $22,333 $45,970 $145,007 Operating
expenses (3,781) (24,087) (43,299) (141,530) Operating income
(loss) 32 (1,754) 2,671 3,477 Direct interest costs, net --- (861)
(918) (3,943) Impairment loss (1,800) (1,768) (3,660) (34,795)
Asset disposition costs --- --- (1,300) (4,900) Gain on early
extinguishment of debt 742 --- 3,280 --- Gain on sale of
depreciable assets 2,501 17,306 11,736 19,422 Minority interests
(65) (575) (518) 2,146 Income (loss) from discontinued operations
1,410 12,348 11,291 (18,593) Depreciation 212 1,742 3,212 9,680
Minority interest in FelCor LP 65 575 518 (865) Interest expense
--- 864 922 2,465 EBITDA from discontinued operations 1,687 15,529
15,943 (7,313) Gain on sale of assets (2,501) (17,306) (11,736)
(19,422) Impairment loss 1,800 1,768 3,660 34,795 Gain on early
extinguishment of debt (742) --- (3,280) --- Asset disposition
costs --- --- 1,300 4,900 Adjusted EBITDA from discontinued
operations $244 $(9) $5,887 $12,960 Selected Balance Sheet Data (in
thousands) December 31, December 31, 2005 2004 Investment in hotels
$3,606,502 $3,904,397 Accumulated depreciation (1,019,123)
(948,631) Investments in hotels, net of accumulated depreciation
$2,587,379 $2,955,766 Total cash and cash equivalents $ 94,564 $
119,310 Total assets $2,919,094 $3,317,658 Total debt $1,675,280
$1,767,122 Total stockholders' equity $1,031,793 $1,330,323 At
December 31, 2005, we had an aggregate of 60,209,499 shares of
FelCor common stock and 2,762,540 units of FelCor LP limited
partnership interest outstanding. Debt Summary (dollars in
thousands) Interest Rate at Encumbered December 31, Maturity
Consolidated Hotels 2005 Date Debt Promissory note none 6.31 June
2016 $650 Senior unsecured term notes none 7.63 October 2007
123,358 Senior unsecured term notes none 9.00 June 2011 298,660
Term loan (A) none 5.81 October 2006 225,000 Senior unsecured term
notes none 8.48 (B) June 2011 290,000 Total unsecured debt 7.89
937,668 Mortgage debt 9 hotels 6.52 July 2014 104,282 Mortgage debt
8 hotels 6.63 May 2006 (C) 117,913 Mortgage debt 7 hotels 7.32
April 2009 127,455 Mortgage debt 4 hotels 7.55 June 2009 41,912
Mortgage debt 8 hotels 8.70 May 2010 172,604 Mortgage debt 7 hotels
8.73 May 2010 133,374 Mortgage debt 1 hotel 6.77 August 2008 15,500
Mortgage debt 1 hotel 7.91 December 2007 10,457 Other 1 hotel 9.17
August 2011 5,204 Construction loan (D) --- 6.47 October 2007 8,911
Total secured debt 46 hotels 7.69 737,612 Total 7.80% $1,675,280
(A) This note was paid off in January 2006. (B) The stated interest
rate on this debt is six month LIBOR (4.58% at December 31, 2005)
plus 4.25%. We have swapped $100 million of this floating rate debt
for a fixed rate of 7.80%. The resulting weighted average rate on
these notes was 8.48% at December 31, 2005. (C) This debt has two,
one-year extension options, subject to certain contingencies. (D)
The Company has a $69.8 million recourse construction loan facility
for the development of a 184-unit condominium project in Myrtle
Beach, South Carolina. The interest on this facility is currently
based on LIBOR plus 225 basis points and is being capitalized as
part of the cost of the project. The interest rate may be reduced
to LIBOR plus 200 basis points when the project is 55% complete and
upon satisfaction of certain other requirements. Fixed interest
rate debt to total debt 67.2% Weighted average maturity of debt 5
years Secured debt to total assets 25.3% Preferred Stock (dollars
in thousands) Liquidation Value at December 31, 2005 Series A
Cumulative Convertible Preferred Stock $322,012 Series C Cumulative
Redeemable Preferred Stock $169,950 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 EBITDA and Hotel EBITDA 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 December 31,
2005 2004 Per Share Per Share Dollars Shares Amount Dollars Shares
Amount Net loss $(265,210) $(10,770) Preferred dividends (9,679)
(10,091) Net loss applicable to common stockholders (274,889)
59,453 $(4.62) (20,861) 59,192 $(0.35) Depreciation from continuing
operations 30,528 0.51 28,668 0.48 Depreciation from unconsolidated
entities and discontinued operations 2,784 0.05 4,401 0.07 Gain on
sale of depreciable assets (2,501) 0.04 (17,306) (0.29) Minority
interest in FelCor LP (12,623) 2,763 (0.11) (974) 2,789 (0.01) FFO
(256,701) 62,216 (4.13) (6,072) 61,981 (0.10) Charge-off of
deferred financing costs 2,659 0.04 866 0.01 Loss on early
extinguishment of debt 11,180 0.18 4,983 0.08 Abandoned projects
265 --- --- --- Impairment loss 263,091 4.23 3,494 0.05 Impairment
loss on discontinued operations 1,800 0.03 1,768 0.03 Minority
interest share of impairment loss (8,976) (0.14) --- --- Unvested
restricted stock --- 787 --- --- 438 0.01 Adjusted FFO $13,318
63,003 $0.21 $5,039 62,419 $0.08 Reconciliation of Net Loss to FFO
and Adjusted FFO (in thousands, except per share and unit data)
Year Ended December 31, 2005 2004 Per Share Per Share Dollars
Shares Amount Dollars Shares Amount Net loss $(251,615) $(100,127)
Preferred dividends (39,408) (35,130) Issuance costs of redeemed
preferred stock (6,522) --- Net loss applicable to common
stockholders (297,545) 59,436 $(5.01) (135,257) 59,045 $(2.29)
Depreciation from continuing operations 119,323 2.01 111,836 1.89
Depreciation from unconsolidated entities and discontinued
operations 12,884 0.22 18,916 0.32 Gain on sale of depreciable
assets (12,124) (0.20) (19,422) (0.33) Minority interest in FelCor
LP (13,677) 2,778 (0.09) (6,681) 2,939 (0.08) FFO (191,139) 62,214
$(3.07) (30,608) 61,984 (0.49) Charge-off of deferred financing
costs 2,659 0.04 6,960 0.11 Loss on early extinguishment of debt
8,641 0.14 44,216 0.71 Abandoned projects 265 --- --- ---
Impairment loss 263,091 4.23 3,494 0.06 Impairment loss on
discontinued operations 3,660 0.06 34,795 0.56 Minority interest
share of impairment (8,976) (0.14) --- --- Asset disposition costs
1,300 0.02 4,900 0.08 Issuance costs of redeemed preferred stock
6,522 0.10 --- --- Gain on swap termination --- --- (1,005) (0.02)
Unvested restricted stock --- 647 (0.01) --- 359 --- Adjusted FFO
$86,023 62,861 $1.37 $62,752 62,343 $1.01 Reconciliation of Net
Loss to EBITDA, Adjusted EBITDA and Same-Store EBITDA (in
thousands) Three Months Ended Year Ended December 31, December 31,
2005 2004 2005 2004 Net loss $(265,210) $(10,770) $(251,615)
$(100,127) Depreciation from continuing operations 30,528 28,668
119,323 111,836 Depreciation from unconsolidated entities and
discontinued operations 2,783 4,401 12,884 18,916 Minority interest
in FelCor Lodging LP (12,623) (974) (13,677) (6,681) Interest
expense 33,414 33,459 135,054 148,430 Interest expense from
unconsolidated entities and discontinued operations 1,580 2,636
7,602 9,631 Amortization expense 733 1,330 2,904 2,945 EBITDA
$(208,795) $58,750 $12,475 $184,950 Charge-off of deferred
financing costs 2,659 866 2,659 6,960 Loss on early extinguishment
of debt 11,180 4,983 8,641 44,216 Abandoned projects 265 --- 265
--- Impairment loss 263,091 3,494 263,091 3,494 Impairment loss on
discontinued operations 1,800 1,768 3,660 34,795 Minority interest
share of impairment (8,976) --- (8,976) --- Asset disposition costs
--- --- 1,300 4,900 Gain on swap termination --- --- --- (1,005)
Gain on sale of depreciable assets (2,501) (17,306) (12,124)
(19,422) Adjusted EBITDA $58,723 $52,555 $270,991 $258,888 Adjusted
EBITDA from discontinued operations (244) 9 (5,887) (12,960) Gain
on development and sale of Margate condos --- (808) --- (11,664)
Gain on sale of land --- --- (344) (1,167) Same-Store EBITDA
$58,479 $51,756 $264,760 $233,097 Reconciliation of Adjusted EBITDA
to Hotel EBITDA (in thousands) Three Months Ended Year Ended
December 31, December 31, 2005 2004 2005 2004 Adjusted EBITDA
$58,723 $52,555 $270,991 $258,888 Retail space rental and other
revenue (141) (129) (2,049) (2,721) Adjusted EBITDA from
discontinued operations (244) 9 (5,887) (12,960) Equity in income
from unconsolidated entities (excluding interest and depreciation
expense) (6,635) (6,476) (28,859) (35,764) Minority interest in
other partnerships (excluding interest and depreciation expense)
315 243 1,694 2,828 Consolidated hotel lease expense 14,243 12,256
57,004 51,261 Unconsolidated taxes, insurance and lease expense
(964) (1,577) (5,673) (5,737) Interest income (1,466) (907) (4,100)
(2,764) Hurricane loss 4,172 --- 6,481 2,125 Corporate expenses
(excluding amortization expense) 4,184 4,176 16,121 14,090 Gain on
sale of land --- (73) (344) (1,167) Hotel EBITDA $72,187 $60,077
$305,379 $268,079 Reconciliation of Net Loss to Hotel EBITDA (in
thousands) Three Months Ended Year Ended December 31, December 31,
2005 2004 2005 2004 Net loss $(265,210) $(10,770) $(251,615)
$(100,127) Discontinued operations (1,410) (12,348) (11,291) 18,593
Equity in income from unconsolidated entities (1,941) (1,428)
(10,169) (17,121) Minority interest (21,891) (1,923) (23,813)
(5,229) Consolidated hotel lease expense 14,243 12,256 57,004
51,261 Unconsolidated taxes, insurance and lease expense (964)
(1,577) (5,673) (5,737) Interest expense, net 31,948 32,552 130,954
145,666 Impairment loss 263,091 3,494 263,091 3,494 Hurricane loss
4,172 --- 6,481 2,125 Loss on early extinguishment of debt 11,921
4,983 11,921 44,216 Charge-off of deferred financing costs 2,659
866 2,659 6,960 Gain on swap termination --- --- --- (1,005)
Corporate expenses 4,917 5,506 19,025 17,035 Depreciation 30,528
28,668 119,323 111,836 Retail space rental and other revenue (141)
(129) (2,049) (2,721) Abandoned projects 265 --- 265 --- Gain on
sale of assets --- (73) (733) (1,167) Hotel EBITDA $72,187 $60,077
$305,380 $268,079 Hotel EBITDA and Hotel EBITDA Margin (dollars in
thousands) Three Months Ended Year Ended December 31, December 31,
2005 2004 2005 2004 Total revenue $299,861 $267,965 $1,212,179
$1,115,874 Retail space rental and other revenue (141) (129)
(2,049) (2,721) Hotel operating revenue 299,720 267,836 1,210,130
1,113,153 Hotel operating expenses 227,533 207,759 904,750 845,074
Hotel EBITDA $72,187 60,077 $305,380 268,079 Hotel EBITDA margin
24.1% 22.4% 25.2% 24.1% Reconciliation of Ratio of Operating Income
to Total Revenue to Hotel EBITDA Margin Three Months Ended Year
Ended December 31, December 31, 2005 2004 2005 2004 Ratio of
operating income to total revenue 7.8% 5.7% 9.7% 8.6% Retail space
rental and other revenue 0.0 0.0 (0.2) (0.2) Unconsolidated taxes,
insurance and lease expense (0.3) (0.7) (0.4) (0.5) Consolidated
hotel lease expense 4.7 4.6 4.7 4.6 Corporate expenses 1.6 2.1 1.6
1.5 Depreciation 10.2 10.7 9.8 10.1 Abandoned projects 0.1 --- 0.0
--- Hotel EBITDA margin 24.1% 22.4% 25.2% 24.1% Hotel Operating
Expense Composition (dollars in thousands) Three Months Ended Year
Ended December 31, December 31, 2005 2004 2005 2004 Reconciliation
of total operating expense to hotel operating expense: Total
operating expenses $276,522 $252,612 $1,094,694 $1,019,469
Unconsolidated taxes, insurance and lease expense 964 1,577 5,673
5,737 Consolidated hotel lease expense (14,243) (12,256) (57,004)
(51,261) Corporate expenses (4,917) (5,506) (19,025) (17,035)
Depreciation (30,528) (28,668) (119,323) (111,836) Abandoned
projects (265) --- (265) --- Hotel operating expenses $227,533
$207,759 $ 904,750 $ 845,074 Supplemental information: Compensation
and benefits expense (included in hotel operating expenses) $
96,188 $ 89,122 $ 383,632 $ 364,299 Reconciliation of Estimated Net
Income to Estimated FFO and EBITDA (in millions, except per share
and unit data) First Quarter 2006 Guidance Full Year 2006 Guidance
Low Guidance High Guidance Low Guidance High Guidance Per Share Per
Share Per Share Per Share Amount Amount Amount Amount Dollars (A)
Dollars (A) Dollars (A) Dollars (A) Net income (B) $ 6 $ 8 $ 23 $
30 Preferred dividends (10) (10) (39) (39) Net loss applicable to
common stockholders (B) (4) $(0.07) (2) $(0.04) (16) $(0.27) (9)
$(0.15) Depreciation 31 31 130 130 Minority interest in FelCor LP
--- --- (1) (1) FFO $ 27 $ 0.42 $ 29 $ 0.45 $113 $ 1.79 $120 $ 1.90
Net income (B) $ 6 $ 8 $ 23 $ 30 Depreciation 31 31 130 130
Minority interest in FelCor LP --- --- (1) (1) Interest expense 32
32 126 126 Amortization expense 1 1 4 4 EBITDA $ 70 $ 72 $282 $289
(A) Weighted average shares are 59.7 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 63.1 million used to compute FFO per share. (B) Excludes
gains or losses from asset sales and debt extinguishment.
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 EBITDA and Hotel EBITDA 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 from the
disposition of non-hotel related assets. Hotel EBITDA and Hotel
EBITDA Margin Hotel EBITDA and Hotel EBITDA 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 EBITDA and Hotel EBITDA 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 EBITDA and Hotel EBITDA 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. To enhance the comparability of our
hotel-level operating results with other hotel REITs and hotel
owners, we are now disclosing Hotel EBITDA and Hotel EBITDA margin
rather than hotel operating profit and hotel operating margin,
previously disclosed. The purpose of the change is to remove any
distortion created by unconsolidated entities and to reflect
hotel-level operations as if they were fully consolidated. To
reflect this, we eliminate consolidated percentage rent paid to
unconsolidated entities, which is effectively eliminated by
minority interest expense and equity in income from unconsolidated
subsidiaries, and include the cost of unconsolidated taxes,
insurance and lease expense, to reflect the entire operating costs
applicable to our hotels. Use and Limitations of Non-GAAP Measures
Our management and Board of Directors use FFO, Adjusted FFO,
EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin 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 EBITDA and Hotel EBITDA margin, as
presented by us, may not be comparable to FFO, Adjusted FFO,
EBITDA, Adjusted EBITDA, Same-Store EBITDA, Hotel EBITDA and Hotel
EBITDA margin as calculated by other real estate companies. These
measures do not reflect certain expenses that we incurred and will
incur, such as depreciation and interest or 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 EBITDA and Hotel EBITDA
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., Chairman of the Board, +1-972-444-4901, or , or
Richard A. Smith, President and CEO, +1-972-444-4932, or , or
Andrew J. Welch, Executive Vice President and CFO, +1-972-444-4982,
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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