FelCor Lodging Trust Incorporated (NYSE: FCH) today reported
operating results for the fourth quarter and year ended
December�31, 2007. Fourth Quarter Summary: Exceeded operating
expectations for our 49 hotels where renovations had been completed
for at least a full quarter. Hotel EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization) for these hotels
exceeded budget by 1.8�percent. This represents a return on capital
greater than our 12 percent goal. Increased Revenue per Available
Room (�RevPAR�) by 13.9 percent at our 49 hotels where renovations
had been completed for at least a full quarter. RevPAR increased
6.2�percent for our 83 consolidated hotels owned the entire
quarter. Completed renovations at 12 hotels during the fourth
quarter and an additional five hotels in the first two months of
2008. We have now completed renovations at 66 hotels, which
comprise 80 percent of the hotels in our portfolio. We expect to
complete renovations at 75 hotels by March�31, 2008 and at the
remaining hotels by the end of 2008. During the fourth quarter, we
had 27 hotels under renovation. While performance continues to be
affected by renovation, the amount of disruption during the fourth
quarter was lower than any other quarter during 2007. Acquired two
upper-upscale destination resorts, the Renaissance Vinoy Resort
& Golf Club in St. Petersburg, Florida and the Renaissance
Esmeralda Resort & Spa in Indian Wells, California. These
hotels meet our objectives of acquiring upper-upscale hotels in
markets with high barriers to entry that offer returns that exceed
our weighted average cost of capital. Increased our quarterly
common dividend by $0.05 to $0.35 per share. Fourth Quarter and
Year Ended Operating Results: In the fourth quarter, RevPAR at our
83 consolidated hotels owned the entire quarter, increased
6.2�percent and Average Daily Rate (�ADR�) increased 6.4�percent,
compared to the same period in 2006. RevPAR at our 49 hotels where
renovations had been completed for at least a full quarter,
increased 13.9 percent and ADR increased 6.2�percent, compared to
the prior year period. At our 34 hotels where renovations were not
complete at September�30, 2007, RevPAR decreased 3.7�percent. This
decrease in RevPAR resulted from a 10.0 percent decrease in
occupancy and is attributed principally to renovation-related
disruptions. For the full year 2007, RevPAR at our 83 consolidated
hotels owned the entire period, increased 3.3 percent and ADR
increased 6.5 percent, compared to the same period in 2006. �We
have nearly completed our renovation program and will soon be back
to normal renovation schedules. Overall, the renovation program has
been a tremendous success. Based on the performance of the
renovated hotels, we are achieving our expected return on capital
investment,� said Richard A. Smith, FelCor�s President and Chief
Executive Officer. �As a result of our renovation program, our
RevPAR growth is expected to be significantly above the industry
average in 2008. We expect this trend to continue into 2009 from
our hotels where we are completing renovations in late 2007 and
2008 and from our redevelopment projects, despite the anticipated
softening in travel demand. Given the uncertain economic
environment, our focus will continue to be on the prudent
allocation of capital.� In the fourth quarter our loss from
continuing operations was $2.7�million, an improvement of
$12.3�million from the same period in 2006. Net loss applicable to
common stockholders was $13.0�million, or $0.21 per share, compared
to net income applicable to common stockholders of $1.3�million, or
$0.02 per share, for the same period in 2006. For the year, our
income from continuing operations was $55.7�million, a
$47.1�million increase from the same period in 2006. Net income
applicable to common stockholders was $50.3�million, or $0.81 per
share, compared to $12.3�million, or $0.20 per share. In the fourth
quarter, Same-Store Funds from Operations (�FFO�) increased to
$22.3�million, or $0.35 per share, compared to $15.2�million, or
$0.24 per share, for the same period in 2006. Our Adjusted FFO was
$21.2�million, a $274,000 increase from the same period in 2006.
Adjusted FFO per share was $0.34, an increase of $0.01. For the
year, Same-Store FFO increased to $112.2�million, or $1.77 per
share, compared to $89.8�million, or $1.42 per share, for the same
period in 2006. Adjusted FFO was $137.2�million, a $12.4�million
increase from 2006. Adjusted FFO per share increased to $2.17 for
the year, compared to $1.98 in the prior year, an increase of
9.6�percent. In the fourth quarter, Same-Store EBITDA increased to
$59.2�million, compared to $53.1�million for the same period in
2006. Our Adjusted EBITDA (including sold hotels) decreased to
$58.8�million in the fourth quarter, compared to $59.0�million for
the same period in 2006. For the year, Same-Store EBITDA increased
by $4.4�million, to $259.4�million, or 1.7 percent. Adjusted EBITDA
(including sold hotels) decreased $6.1�million, to $285.1�million
compared to the same period in 2006. In the fourth quarter, our
Hotel EBITDA increased to $67.3�million, compared to $62.3�million
in the same period in 2006. Hotel EBITDA margin was 27.1 percent,
representing a 39�basis point increase compared to the same period
in 2006. For the year ended December�31, 2007, Hotel EBITDA
increased to $293.7�million, compared to $292.4�million in the same
period in 2006, an increase of $1.3�million. Hotel EBITDA margin
was 28.8�percent, representing a 68�basis point decrease. Adjusted
FFO, Adjusted EBITDA and net income were impacted by significant
disruption related to the renovation of 68 hotels during the year.
Adjusted FFO, Adjusted EBITDA and net income (loss) include a gain
from the sale of condominium units of $129,000 for the fourth
quarter and $18.6�million for the year. Net income includes gains
from the sale of hotels of $28.0�million for the year. Prior year
net income for the quarter includes gains from the sale of hotels
of $25.9�million and impairment losses of $1.3�million, and gains
from sale of hotels of $41.2�million and impairment losses of
$16.5�million for the full year. EBITDA, Adjusted EBITDA,
Same-Store EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO,
Same-Store FFO and Adjusted FFO are all non-GAAP financial
measures. See our discussion of �Non-GAAP Financial Measures�
beginning on page 11 for a reconciliation of each of these measures
to our net income (loss) and for information regarding the use,
limitations and importance of these non-GAAP financial measures.
Renovation Program Update: During the fourth quarter, 27 of our
hotels were undergoing some form of renovation. We completed major
renovations at 12 of our hotels during the quarter, and through
February 2008, we completed renovations at an additional five
hotels. Since we started our renovation program, we have completed
renovations at 66 hotels, which comprise 80 percent of the hotels
in our portfolio. We expect to complete renovations at 75 hotels by
March�31, 2008 and our remaining hotels by the end of 2008. We had
approximately 85,000 room nights out of service in the fourth
quarter of 2007 and 450,000 for the full year, which impacted our
2007 EBITDA by approximately $18�million. We spent $265.9�million
on renovations and redevelopment projects at our hotels during
2007, including our pro rata share of joint venture expenditures.
Overall, our hotels where we have completed renovations are
exceeding our targeted 12 percent return on the guest impact
portion of total capital expenditures. Similarly, during the fourth
quarter, RevPAR, Hotel EBITDA and Hotel EBITDA margin exceeded
budget for these hotels. For our 49 hotels where renovations had
been completed for at least a full quarter, RevPAR increased
13.9�percent for the fourth quarter, compared to the prior year
period. For these same hotels, Hotel EBITDA grew 31�percent
compared to prior year, which was approximately two percent greater
than budget, and Hotel EBTIDA margin grew approximately 400 basis
points, compared to prior year, which was approximately 50 basis
points greater than budget. Development: We continue to progress
with the redevelopment and rebranding of our San Francisco - Union
Square hotel. Marriott International, Inc. took over management of
this hotel in December 2007, and the hotel is currently operating
under the name Hotel 480. Upon completion of the project, which we
expect to occur by early 2009, the hotel will be rebranded as a
Marriott�. Additionally, the 35,000 square foot convention center
adjacent to our Myrtle Beach Hilton� Resort opened in January 2008,
hosting its first group on January 10, and the addition of a spa at
our Embassy Suites Hotel� - Deerfield Beach Resort was completed
this month. Our other announced redevelopment project, adding
meeting space at our Doubletree Guest Suites� in Dana Point,
California, should be completed by April 2008. We are currently in
various planning and entitlement stages for our remaining projects.
Our asset management approach includes seeking additional
value-added enhancements to our hotels, such as new restaurant
concepts and maximizing the use of public area space, which will
provide additional EBITDA growth. Two of these recent projects
include opening a Ruth's Chris Steak House at our Atlanta-Buckhead
property and converting unused space to meeting rooms at our Ft.
Lauderdale hotel. In the fourth quarter, we recognized a gain of
$129,000 on the sale of one unit at our Royale Palms condominium
project in Myrtle Beach, South Carolina. During the year 2007, we
sold 179 units and recognized a gain on sale of $18.6�million. We
have five condominium units remaining to be sold, which we expect
to sell on a selective basis to maximize prices. Capital Structure:
At December�31, 2007, we had $1.5�billion of consolidated debt
outstanding with a weighted average life of four years and a
weighted average interest rate of 7.2 percent. However, LIBOR has
since decreased, resulting in reductions to our weighted average
interest expense of nearly 75 basis points. Our cash and cash
equivalents totaled approximately $58�million at December�31, 2007.
We refinanced a CMBS loan secured by eight joint-venture hotels
that matured in January 2008. The loan amount of $140�million was
used principally to repay the existing $87�million loan and a
$12�million loan secured by one additional joint-venture hotel. Our
pro rata share of the remaining proceeds was used for general
corporate purposes. The new loan bears interest of LIBOR plus 175
basis points. We also have a $250�million mortgage loan secured by
12 hotels scheduled to mature in November 2008, on which we have
three one-year extension options that we currently expect to
exercise. We have no other material debt maturities in 2008. We
increased our quarterly common dividend from $0.30 to $0.35 per
share, effective the fourth quarter of 2007. Acquisitions: In
December 2007, we purchased two upper-upscale destination resorts,
the Renaissance� Esmeralda Resort & Spa located in Indian
Wells, California and the Renaissance Vinoy Resort & Golf Club
located in St. Petersburg, Florida, for a combined purchase price
of $225 million. Marriott International, Inc. will continue to
manage the properties under long-term management agreements. The
two hotels typify our strategy of acquiring upper-upscale hotels in
high barrier to entry markets, and to further diversify our
portfolio by customer, market and brand. There are opportunities at
both hotels to upgrade and enhance the existing facilities,
including the spa and pool areas, as well as other redevelopment
opportunities (such as maximizing the value of excess land) that
would generate greater EBITDA growth. �We are very pleased with the
progress we made in completing our initiatives in 2007 including
the renovation and disposition programs and the debt reduction
plan. We continue to strengthen our balance sheet capacity and
flexibility in a very tough credit market, as evidenced by the
amendment to our line of credit, which increased capacity and
lowered the interest rate, and the recent successful refinancing of
the maturing CMBS loan,� said Andrew J. Welch, FelCor�s Executive
Vice President and Chief Financial Officer. �Looking into 2008, we
will continue to seek opportunities to improve our portfolio
quality through further asset sales and improve our operating
margins through our active asset management approach. Our
brand-operators are also prepared to implement contingency plans at
our hotels, if necessary, to combat a softening in demand.� 2008
Guidance: Our 2008 guidance assumes that our portfolio will
increase RevPAR at a significantly higher rate than the industry
average. RevPAR at our 85 consolidated hotels increased 7.4�percent
in January 2008, compared to the same period in 2007. The benefits
of our renovation program, including achieving the expected returns
from our capital investment, are driving the relatively high
increase in RevPAR. Due to slowing economic growth and its
potential impact on the hotel industry, we are assuming demand
growth will further moderate beyond current levels, resulting in
low single-digit RevPAR growth for our markets. This assumption
also accounts for the potential impact on travel demand due to
weaknesses in the financial and housing sectors as well as the
general economy. As we complete our remaining renovations,
primarily occurring during the first part of the year, and the
redevelopment of our Union Square hotel, we will have continued
disruption in 2008. As a result, we currently anticipate: Portfolio
RevPAR growth between 6.5 and 8.5 percent for the full year and 4.0
and 5.5 percent for the first quarter; Adjusted EBITDA to be
between $293�million and $301�million for the full year and between
$69�million and $71�million for the first quarter; Adjusted FFO per
share to be between $2.29 and $2.42 for the full year and between
$0.48 and $0.51 for the first quarter; Net Income to be between
$33�million and $41 million for the full year and between
$2�million and $4�million for the first quarter; Hotel EBITDA
margins to increase between 50 and 100 basis points for the full
year; Capital expenditures including redevelopment projects of
$150�million; and Gain of $400,000 from the sale of three Royale
Palms condominium units during the year. Guidance for 2008 assumes
the following: RevPAR for our markets is expected to grow between
1.0 and 3.0 percent for the full year. We expect our RevPAR to grow
an additional 6.5 percent as we earn the targeted 12 percent return
on renovated hotels and recapture displaced business from 2007.
This is offset by approximately 1.0 percent of RevPAR, or
approximately $8�million of EBITDA, related to disruption in 2008,
attributable equally to completing the renovations at 22 hotels and
the redevelopment at our Union Square hotel. 2007 EBITDA for 85
hotels, of $273�million, is expected to grow 9�percent, or
$24�million, based on the mid-point of guidance. 2007 EBITDA for 85
hotels includes $14�million for the acquired Renaissance hotels,
and excludes the $19�million gain from the Royale Palms project and
$8�million from hotels sold in 2007. The mid-point of our 2008
Same-Store EBITDA guidance assumes the following: Recapturing
displaced business from 2007 and the expected returns to be
recognized from renovations completed in 2007 of $36 million; � Two
percent growth in market RevPAR, and a three percent increase in
expenses, including above average inflationary increases in
Property and State & Franchise Taxes, resulting in EBITDA that
is slightly negative to prior year; � Disruption of $8 million from
completing the remaining renovations; and � Decline of $2 million
in interest income as a result of smaller cash balances. The
following table reconciles 2007 Same-Store EBITDA to the mid-point
of our anticipated 2008 EBITDA (in millions): 2007 Same-Store
EBITDA $ 259 2007 EBITDA for the acquired Renaissance hotels � 14
2007 EBITDA for 85 hotels 273 � 2007 renovation returns and
disruption recapture 36 Market change (2 ) Interest income (2 )
2008 Disruption � (8 ) 2008 EBITDA $ 297 Hotel EBITDA margin in
2007 for 85 hotels was 27.7 percent. Same-Store FFO for 85 hotels
is expected to grow between 29 and 37 percent, compared to prior
year. This reflects the benefits of our renovation program and a
lower weighted average interest rate from a reduction in LIBOR. The
following table reconciles 2007 Same-Store FFO to the mid-point of
our anticipated 2008 FFO (in millions): 2007 Same-Store FFO $ 112
2007 FFO for the acquired Renaissance hotels � 2 2007 FFO for 85
hotels 114 � 2007 renovation returns and disruption recapture 36
Market change (2 ) Interest income (2 ) 2008 Disruption (8 )
Interest expense savings � 11 2008 FFO $ 149 2008 FFO per share $
2.35 FelCor, a real estate investment trust, is the nation�s
largest owner of upper-upscale, all-suite hotels. FelCor�s
portfolio is comprised of 85 consolidated hotels and resorts,
located in 23 states and Canada. FelCor�s portfolio consists mostly
of upper upscale hotels, which are flagged under global brands such
as Embassy Suites Hotels�, Doubletree�, Hilton�, Renaissance�,
Sheraton�, Westin� and Holiday Inn�. FelCor has a current
enterprise value of approximately $2.8�billion. Additional
information can be found on the Company�s Web site at
www.felcor.com. We invite you to listen to our fourth quarter
earnings Conference Call on Friday, February�29, 2008, at
10:00�a.m. (Central Time). The conference call will be Web cast
simultaneously via the internet on FelCor�s Web site at
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 telephonic replay will be available from
Friday, February�29, 2008, at 1:00�p.m. (Central Time), through
Tuesday, March�4, at 1:00�p.m. (Central Time), by dialing
800-642-1687 (conference ID 35492875). A recording of the call will
also be archived and available at 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. These forward-looking
statements are identified by their use of terms and phrases such as
�anticipate,� �believe,� �could,� �estimate,� �expect,� �intend,�
�may,� �plan,� �predict,� �project,� �will,� �continue� and other
similar terms and phrases, including references to assumptions and
forecasts of future results. 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 anticipated at the time the
forward-looking statements are made. General economic conditions,
operating risks associated with the hotel business, 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 availability of capital,
the ability to execute our renovation program on budget in a timely
manner, the cyclical nature of the real estate markets, our ability
to continue to qualify as a Real Estate Investment Trust for
federal income tax purposes 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. We
undertake no obligation to update any forward-looking statement to
conform the statement to actual results or changes in our
expectations. � � Consolidated Statements of Operations (in
thousands, except per share data) � Three Months Ended Year Ended
December 31, December 31, 2007 � 2006 2007 � 2006 Revenues: Hotel
operating revenue: Room $ 197,495 $ 185,491 $ 830,978 $ 809,466
Food and beverage 37,647 34,928 136,793 129,200 Other operating
departments 12,887 12,473 51,024 52,293 Other revenue � 477 � 10 �
3,089 � 79 Total revenues � 248,506 � 232,902 � 1,021,884 � 991,038
� Expenses: Hotel departmental expenses: Room 50,032 47,690 204,426
199,283 Food and beverage 27,873 25,249 104,086 97,012 Other
operating departments 5,397 5,602 20,924 23,436 Other property
related costs 67,957 66,168 275,217 270,301 Management and
franchise fees 12,790 11,775 53,508 51,237 Taxes, insurance and
lease expense 28,872 27,926 121,259 112,052 Abandoned projects - 33
22 33 Corporate expenses 4,986 4,778 20,718 23,308 Other expenses
1,112 - 2,803 - Depreciation � 30,022 � 24,483 � 110,751 � 94,579
Total operating expenses � 229,041 � 213,704 � 913,714 � 871,241 �
Operating income 19,465 19,198 108,170 119,797 Interest expense,
net (23,755 ) (24,021 ) (92,489 ) (110,867 ) Charge-off of deferred
financing costs - (2,599 ) - (3,562 ) Early extinguishment of debt,
net - (12,033 ) - (12,471 ) Gain on swap termination � - � 1,715 �
- � 1,715 Income (loss) before equity in income from unconsolidated
entities, minority interests and sale of assets � (4,290 � ) �
(17,740 � ) � 15,681 � (5,388 � ) Equity in income from
unconsolidated entities 846 1,829 20,357 11,537 Minority interests
570 867 1,033 2,508 Loss on sale of other assets - - - (92 ) Gain
on sale of condominiums � 129 � - � 18,622 � - Income (loss) from
continuing operations (2,745 ) (15,044 ) 55,693 8,565 Discontinued
operations � (547 ) � 26,030 � 33,346 � 42,480 Net income (loss)
(3,292 ) 10,986 89,039 51,045 Preferred dividends � (9,679 ) �
(9,691 ) � (38,713 ) � (38,713 ) Net income (loss) applicable to
common stockholders $ (12,971 ) $ 1,295 $ 50,326 $ 12,332 � Basic
per common share data: Net income (loss) from continuing operations
$ (0.20 ) $ (0.40 ) $ 0.28 $ (0.50 ) Net income (loss) $ (0.21 ) $
0.02 $ 0.82 $ 0.20 Basic weighted average common shares outstanding
� 61,649 � 61,268 � 61,600 � 60,734 Diluted per common share data:
Net income (loss) from continuing operations $ (0.20 ) $ (0.40 ) $
0.27 $ (0.50 ) Net income (loss) $ (0.21 ) $ 0.02 $ 0.81 $ 0.20
Diluted weighted average common shares outstanding � 61,649 �
61,268 � 61,897 � 60,734 Cash dividends declared on common stock $
0.35 $ 0.25 $ 1.20 $ 0.80 � � Discontinued Operations (in
thousands) � Discontinued operations include the results of
operations of 11 hotels sold in 2007 and 31 hotels sold in 2006.
Condensed financial information for the hotels included in
discontinued operations is as follows: � Three Months Ended Year
Ended December 31, December 31, 2007 � 2006 2007 � 2006 Operating
revenue $ - $ 32,268 $ 26,522 $ 204,494 Operating expenses � (59 )
� (31,891 ) � (18,430 ) � (200,958 ) Operating income (loss) (59 )
377 8,092 3,536 Interest expense, net - (259 ) (14 ) (1,206 ) Gain
(loss) on sale of hotels, net of income tax (500 ) 25,902 27,988
41,222 Gain on sale of land - 1,958 - 1,958 Debt extinguishment -
(1,071 ) (902 ) (1,311 ) Minority interests � 12 � (877 ) � (1,818
) � (1,719 ) Income (loss) from discontinued operations (547 )
26,030 33,346 42,480 Depreciation and amortization, net of minority
interests - 2,548 14 15,451 Minority interest in FelCor LP (12 )
569 724 903 Interest expense, net of minority interests � - � 241 �
27 � 1,168 EBITDA from discontinued operations (559 ) 29,388 34,111
60,002 Loss (gain) on sale of hotels, net of income tax and
minority interests 500 (25,902 ) (27,330 ) (40,650 ) Impairment
loss, net of minority interests - 1,332 - 15,547 Charges related to
early extinguishment of debt, net of minority interests - 1,069 811
1,285 Abandoned projects � - � 79 � - � 79 Adjusted EBITDA from
discontinued operations $ (59 ) $ 5,966 $ 7,592 $ 36,263 � �
Selected Balance Sheet Data (in thousands) � December 31, December
31, 2007 2006 Investment in hotels $ 3,094,521 $ 2,656,571
Accumulated depreciation � (694,464 ) � (612,286 ) Investments in
hotels, net of accumulated depreciation $ 2,400,057 $ 2,044,285 �
Total cash and cash equivalents $ 57,609 $ 124,179 Total assets $
2,683,835 $ 2,583,249 Total debt $ 1,475,607 $ 1,369,153 Total
stockholders� equity $ 1,006,914 $ 1,010,931 At December�31, 2007,
we had an aggregate of 62,707,499 shares of FelCor common stock and
1,353,771 limited partnership units of FelCor Lodging Limited
Partnership outstanding. � � � � Debt Summary (dollars in
thousands) � Encumbered Interest Rate at Maturity Consolidated
Hotels December 31, 2007 Date Debt Line of credit(a) none L + 0.80
August 2011 $- Senior term notes none 8.50(b) June 2011 299,163
Senior term notes none L + 1.875 December 2011 215,000 Other none L
+ 0.40 March 2008 8,350 Total line of credit and senior debt(c)
7.65 522,513 � Mortgage debt 12 hotels L + 0.93(d) November 2008(e)
250,000 Mortgage debt 7 hotels 6.57 June 2009-2014 89,087 Mortgage
debt 7 hotels 7.32 March 2009 120,827 Mortgage debt 8 hotels 8.70
May 2010 165,981 Mortgage debt 6 hotels 8.73 May 2010 119,568
Mortgage debt 2 hotels L + 1.55(f) May 2009(g) 175,980 Mortgage
debt 1 hotel L + 2.85 August 2008 15,500 Mortgage debt 1 hotel 5.81
July 2016 12,509 Other 1 hotel 9.17 August 2011 3,642 Total
mortgage debt(c) 45 hotels 6.99 953,094 Total 7.22% $1,475,607 (a)
We have a borrowing capacity of $250�million on our line of credit.
The interest on this line can range from 80 to 150 basis points
over LIBOR, based on our leverage ratio as defined in our line of
credit agreement. (b) The interest rate on these senior notes will
increase to 9.0% if the credit rating on our senior debt is
downgraded by Moody�s to B1 and Standard & Poor�s rating
remains below BB-. (c) Interest rates are calculated based on the
weighted average debt outstanding at December�31, 2007. (d) We have
purchased an interest rate cap for this notional amount with a cap
rate of 7.8% that expires in November�2008. (e) This loan has three
one-year extension options that permit the maturity to be extended
to 2011, at our option. (f) We have purchased interest rate caps
for $177�million aggregate notional amounts with cap rates of 6.25%
which expire in May 2009. (g) These loans have three one-year
extension options that permit the maturity to be extended to 2012,
at our option. Debt Statistics at December 31, 2007 � Weighted
average interest 7.22% Fixed interest rate debt to total debt 54.9%
Weighted average maturity of debt 4 years Mortgage debt to total
assets 35.5% Non-GAAP Financial Measures We refer in this release
to certain �non-GAAP financial measures.� These measures, including
FFO, Adjusted FFO, Adjusted FFO per share, Same-Store 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 the limitations of such measures. �
Reconciliation of Net Income (Loss) to FFO, Adjusted FFO and
Same-Store FFO (in thousands, except per share and unit data) �
Three Months Ended December 31, 2007 � 2006 Dollars � Shares � Per
Share Amount Dollars � Shares � Per Share Amount Net income (loss)
$ (3,292 ) $ 10,986 Preferred dividends � (9,679 ) � (9,691 ) Net
income (loss) applicable to common stockholders (12,971 ) 61,649 $
(0.21 ) 1,295 61,268 $ 0.02 Depreciation, continuing operations
30,022 - 0.49 24,483 - 0.40 Depreciation, unconsolidated entities
and discontinued operations 3,465 - 0.06 5,533 - 0.09 Loss (gain)
on sale of hotels, net of income tax and minority interests 500 -
0.01 (25,902 ) - (0.43 ) Minority interest in FelCor LP (281 )
1,354 (0.02 ) 28 1,355 0.01 Conversion of options and unvested
restricted stock � - 341 � - � - 371 � - FFO 20,735 63,344 0.33
5,437 62,994 0.09 Impairment loss, net of minority interests - - -
1,332 - 0.02 Abandoned projects - - - 112 - - Charges related to
early extinguishment of debt, net of minority interests - - -
15,786 - 0.25 Gain on swap termination - - - (1,715 ) - (0.03 )
Conversion costs(a) � 491 - � 0.01 � - - � - Adjusted FFO 21,226
63,344 0.34 20,952 62,994 0.33 Adjusted FFO from discontinued
operations and acquired hotels 1,154 - 0.01 (5,728 ) - (0.09 ) Gain
on sale of condominiums � (129 ) - � - � - - � - Same-Store FFO $
22,251 63,344 $ 0.35 $ 15,224 62,994 $ 0.24 (a) These costs relate
to the conversion of our Hotel 480 Union Square in San Francisco to
a Marriott. The conversion is expected to be complete by early
2009. � Reconciliation of Net Income to FFO, Adjusted FFO and
Same-Store FFO (in thousands, except per share and unit data) �
Year Ended December 31, 2007 � 2006 Dollars � Shares � Per Share
Amount Dollars � Shares � Per Share Amount Net income $ 89,039 $
51,045 Preferred dividends � (38,713 ) � (38,713 ) Net income
applicable to common stockholders 50,326 61,897 $ 0.81 12,332
60,734 $ 0.20 Depreciation, continuing operations 110,751 - 1.79
94,579 - 1.56 Depreciation, unconsolidated entities and
discontinued operations 12,071 - 0.20 26,911 - 0.44 Gain on sale of
hotels, net of income tax and minority interests (27,330 ) - (0.44
) (40,650 ) - (0.67 ) Gain on sale of hotels in unconsolidated
entities (10,993 ) - (0.18 ) - - - Minority interest in FelCor LP
1,094 1,354 (0.03 ) 279 1,864 (0.04 ) Conversion of options and
unvested restricted stock � - - � - � - 327 � - FFO 135,919 63,251
2.15 93,451 62,925 1.49 Impairment loss, net of minority interests
- - - 15,547 - 0.24 Abandoned projects 22 - - 112 - - Charges
related to early extinguishment of debt, net of minority interests
811 - 0.01 17,472 - 0.28 Gain on swap termination - - - (1,715 ) -
(0.03 ) Conversion costs(a) � 491 - � 0.01 � - - � - Adjusted FFO
137,243 63,251 2.17 124,867 62,925 1.98 Adjusted FFO from
discontinued operations and acquired hotels (6,470 ) - (0.11 )
(35,111 ) - (0.55 ) Gain on sale of condominiums � (18,622 ) - �
(0.29 ) � - - � - Same-Store FFO $ 112,151 63,251 $ 1.77 $ 89,756
62,925 $ 1.43 (a) These costs relate to the conversion of our Hotel
480 Union Square in San Francisco to a Marriott. The conversion is
expected to be complete by early 2009. � � Reconciliation of Net
Income (Loss) to EBITDA, Adjusted EBITDA and Same-Store EBITDA (in
thousands) � Three Months EndedDecember 31, Year EndedDecember 31,
2007 � 2006 2007 � 2006 Net income (loss) $ (3,292 ) $ 10,986 $
89,039 $ 51,045 Depreciation, continuing operations 30,022 24,483
110,751 94,579 Depreciation, unconsolidated entities and
discontinued operations 3,465 5,533 12,071 26,911 Minority interest
in FelCor Lodging LP (281 ) 28 1,094 279 Interest expense 25,318
25,538 98,929 114,909 Interest expense, unconsolidated entities and
discontinued operations 1,417 2,104 5,987 7,657 Amortization
expense � 1,127 � 741 � 4,255 � 5,080 EBITDA 57,776 69,413 322,126
300,460 Loss (gain) on sale of hotels, net of income tax and
minority interests 500 (25,902 ) (27,330 ) (40,650 ) Gain on sale
of hotels in unconsolidated entities - - (10,993 ) - Impairment
loss, discontinued operations - 1,332 - 15,547 Abandoned projects -
112 22 112 Charges related to debt extinguishment, net of minority
interests - 15,786 811 17,472 Gain on swap termination - (1,715 ) -
(1,715 ) Conversion costs(a) � 491 � - � 491 � - Adjusted EBITDA
58,767 59,026 285,127 291,226 Adjusted EBITDA from discontinued
operations and acquired hotels 552 (5,966 ) (7,099 ) (36,263 ) Gain
on sale of condominiums � (129 ) � - � (18,622 ) � - Same-Store
EBITDA $ 59,190 $ 53,060 $ 259,406 $ 254,963 (a) These costs relate
to the conversion of our Hotel 480 Union Square in San Francisco to
a Marriott. The conversion is expected to be complete by early
2009. � � Reconciliation of Adjusted EBITDA to Hotel EBITDA (in
thousands) � Three Months EndedDecember 31, Year EndedDecember 31,
2007 � 2006 2007 � 2006 Adjusted EBITDA $ 58,767 $ 59,026 $ 285,127
$ 291,226 Other revenue (477 ) (10 ) (3,089 ) (79 ) Adjusted EBITDA
from discontinued operations 59 (5,966 ) (7,592 ) (36,263 ) Equity
in income from unconsolidated subsidiaries(excluding interest and
depreciation expense) (6,233 ) (7,139 ) (29,095 ) (31,309 )
Minority interest in other partnerships(excluding interest and
depreciation expense) 203 51 311 (215 ) Consolidated hotel lease
expense 13,923 15,190 61,652 61,054 Unconsolidated taxes, insurance
and lease expense (1,726 ) (1,377 ) (7,314 ) (6,273 ) Interest
income (1,563 ) (1,517 ) (6,440 ) (4,042 ) Other expenses 622 -
2,312 - Corporate expenses (excluding amortization expense) 3,859
4,037 16,463 18,228 Loss on sale of other assets - - - 92 Gain on
sale of condominiums � (129 ) � - � (18,622 ) � - Hotel EBITDA $
67,305 $ 62,295 $ 293,713 $ 292,419 � � Reconciliation of Net
Income (Loss) to Hotel EBITDA (in thousands) � Three Months
EndedDecember 31, Year EndedDecember 31, 2007 � 2006 2007 � 2006
Net income (loss) $ (3,292 ) $ 10,986 $ 89,039 $ 51,045
Discontinued operations 547 (26,030 ) (33,346 ) (42,480 ) Equity in
income from unconsolidated entities (846 ) (1,829 ) (20,357 )
(11,537 ) Minority interests (570 ) (867 ) (1,033 ) (2,508 )
Consolidated hotel lease expense 13,923 15,190 61,652 61,054
Unconsolidated taxes, insurance and lease expense (1,726 ) (1,377 )
(7,314 ) (6,273 ) Interest expense, net 23,755 24,021 92,489
110,867 Charges related to debt extinguishment - 14,632 - 16,033
Gain on swap termination - (1,715 ) - (1,715 ) Corporate expenses
4,986 4,778 20,718 23,308 Depreciation 30,022 24,483 110,751 94,579
Other expenses 1,112 - 2,803 - Abandoned projects - 33 22 33 Loss
on sale of other assets - - - 92 Gain on sale of condominiums (129
) - (18,622 ) - Other revenue � (477 ) � (10 ) � (3,089 ) � (79 )
Hotel EBITDA $ 67,305 $ 62,295 $ 293,713 $ 292,419 � � Hotel
Operating Revenue and Hotel EBITDA Margin (dollars in thousands) �
Three Months EndedDecember 31, Year EndedDecember 31, 2007 � 2006
2007 � 2006 Total revenue $ 248,506 $ 232,902 $ 1,021,884 $ 991,038
Retail space rental and other revenue � (477 ) � (10 ) � (3,089 ) �
(79 ) Hotel operating revenue 248,029 232,892 1,018,795 990,959
Hotel operating expenses � (180,724 ) � (170,597 ) � (725,082 ) �
(698,540 ) Hotel EBITDA $ 67,305 $ 62,295 $ 293,713 � $ 292,419
Hotel EBITDA margin 27.1% 26.7% 28.8% 29.5% � � Reconciliation of
Ratio of Operating Income to Total Revenue to Hotel EBITDA Margin �
Three Months Ended December 31, Year Ended December 31, 2007 � 2006
2007 � 2006 Ratio of operating income to total revenue 7.8 % 8.2 %
10.6 % 12.1 % Other revenue (0.2 ) - (0.3 ) - Unconsolidated taxes,
insurance and lease expense (0.7 ) (0.6 ) (0.7 ) (0.6 )
Consolidated hotel lease expense 5.6 6.5 6.1 6.2 Other expenses 0.5
- 0.2 - Corporate expenses 2.0 2.1 2.0 2.3 Depreciation 12.1 � 10.5
� 10.9 � 9.5 � Hotel EBITDA margin 27.1 % 26.7 % 28.8 % 29.5 % � �
Hotel Operating Expense Composition � Three Months EndedDecember
31, Year EndedDecember 31, 2007 � 2006 2007 � 2006 Reconciliation
of total operating expenses to hotel operating expenses: Total
operating expenses $ 229,041 $ 213,704 $ 913,714 $ 871,241
Unconsolidated taxes, insurance and lease expense 1,726 1,377 7,314
6,273 Consolidated hotel lease expense (13,923 ) (15,190 ) (61,652
) (61,054 ) Corporate expenses (4,986 ) (4,778 ) (20,718 ) (23,308
) Other expenses (1,112 ) - (2,803 ) - Abandoned projects - (33 )
(22 ) (33 ) Depreciation � (30,022 ) � (24,483 ) � (110,751 ) �
(94,579 ) Hotel operating expenses $ 180,724 $ 170,597 $ 725,082 $
698,540 � � Reconciliation of Forecasted Net Income to Forecasted
FFO, Adjusted FFO, EBITDA and Adjusted EBITDA (in millions, except
per share and unit data) � First Quarter 2008 Guidance Low Guidance
� High Guidance Dollars � Per Share Amount(a) Dollars � Per Share
Amount(a) Net income $ 2 $ 4 Preferred dividends � (10 ) � (10 )
Net income (loss) applicable to common stockholders (8 ) $ (0.12 )
(6 ) $ (0.10 ) Depreciation 39 39 Minority interest in FelCor LP �
- � - FFO and Adjusted FFO $ 31 $ 0.48 $ 33 $ 0.51 Net income $ 2 $
4 Depreciation 39 39 Interest expense 27 27 Amortization expense �
1 � 1 Adjusted EBITDA $ 69 $ 71 (a) Weighted average shares and
units are 63.4�million. � Full Year 2008 Guidance Low Guidance �
High Guidance Dollars � Per Share Amount(a) Dollars � Per Share
Amount(a) Net income $ 33 $ 41 Preferred dividends � (39 ) � (39 )
Net income (loss) applicable to common stockholders (6 ) $ (0.10 )
2 $ 0.03 Depreciation 151 151 Minority interest in FelCor LP � - �
- FFO and Adjusted FFO $ 145 $ 2.29 $ 153 $ 2.42 � Net income $ 33
$ 41 Depreciation 151 151 Interest expense 103 103 Amortization
expense � 6 � 6 Adjusted EBITDA $ 293 $ 301 (a) Weighted average
shares and units are 63.4�million. 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, Same-Store 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 such as those described below
provides useful supplemental information to investors regarding our
ongoing operating performance and that the presentation of Adjusted
FFO, Same-Store 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 FFO, we
make the same adjustments to FFO as for Adjusted FFO and
additionally, exclude FFO from discontinued operations, FFO from
hotels acquired during the most recent year, and gains and losses
from the disposition of non-depreciable assets. To derive
Same-Store EBITDA, we make the same adjustments to EBITDA as for
Adjusted EBITDA and, additionally, exclude EBITDA from discontinued
operations, EBITDA from hotels acquired during the most recent
year, and gains and losses from the disposition of non-depreciable
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 are 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 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. We also 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. Limitations of Non-GAAP Measures The use
of these non-GAAP financial measures has certain limitations. FFO,
Adjusted FFO, Same-Store 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, Same-Store 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, Adjusted FFO,
Adjusted FFO per share, Same-Store FFO, 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. Adjusted 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,
Same-Store 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.
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