FCH Felcor Lodging Trust Incorporated (delisted)

FelCor Lodging Trust Incorporated (NYSE: FCH) today reported operating results for the second quarter and six months ended June�30, 2008. Highlights: Met our Adjusted FFO and EBITDA guidance for the quarter. RevPAR increased 8.7 percent for our 53 hotels where renovations were completed in 2007. RevPAR increased 4.7�percent for our 85 consolidated hotels, compared to 1.2 percent for the United States average. Hotel EBITDA margin increased 215 basis points compared to prior year. Market share increased approximately seven percent for our 53 hotels where renovations were completed in 2007, attaining our targeted return on renovations. Market share increased approximately four�percent for our 85 consolidated hotels. Completed renovations at three additional hotels. We now have completed renovations at 78 hotels (comprising approximately 94 percent of our portfolio). Second Quarter Operating Results: Revenue per available room (�RevPAR�) for our 85 consolidated hotels increased 4.7�percent to $105.76, which was driven by increases in both average daily rate (�ADR�) of 1.6�percent and occupancy of 3.0�percent, compared to the same period in 2007. At our 53 hotels where we completed renovations in 2007, RevPAR increased 8.7�percent and ADR increased 2.7�percent compared to the prior year. �Despite softening industry-wide demand, our hotels are benefiting from our comprehensive renovation program and continue to increase RevPAR well above the industry. More importantly, our portfolio gained significant market share from its competitive sets, and we remain on track to earn our targeted returns from completed renovations,� said Richard A. Smith, FelCor�s President and Chief Executive Officer. �We will continue to focus on driving market share and still anticipate that RevPAR for our portfolio will increase significantly higher than the industry average for the remainder of the year and into 2009.� Our Same-Store Adjusted Funds from Operations (�FFO�) increased to $49.5�million, or $0.76�per share, compared to $37.5�million, or $0.59 per share, for the same period in 2007. Our Adjusted FFO was $49.5�million, compared to $54.7�million for the same period in 2007 (including sold hotels). Adjusted FFO per share met the low-end of our expectations. Our Hotel EBITDA increased to $97.4�million, compared to $86.8�million in the same period in 2007, an increase of 12.2 percent. Hotel EBITDA margin was 31.9 percent and represented a 215 basis point increase compared to the same period in 2007, which was at the high-end of our expectations. Our Same-Store Adjusted EBITDA increased to $87.2�million, compared to $77.6�million for the same period in 2007, an increase of 12.3 percent. Our Adjusted EBITDA was $87.2�million in the second quarter, compared to $91.7�million for the same period in 2007 (including sold hotels). Net income applicable to common stockholders was $13.6�million, or $0.22 per share, compared to $45.5�million, or $0.73�per share, for the same period in 2007. Net income for the second quarter of 2007 included $40.7�million from gains on sale of condominiums, gains on sale of hotels, and operating income from hotels sold in 2007. EBITDA, Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO, and Adjusted FFO are all non-GAAP financial measures. See our discussion of �Non-GAAP Financial Measures� beginning on page�13 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. Renovations and Development Projects: During the second quarter, we completed renovations at three hotels. Since we began our renovation program, we have completed 78 hotels, which comprise approximately 94�percent of our portfolio. For the remainder of 2008, we expect the majority of the disruption to be at San Francisco Union Square. The redevelopment of this hotel to a Marriott remains on schedule to be completed in early 2009. Overall, our renovated hotels continue to earn the expected returns on the capital expenditures. For the 53 hotels where we completed renovations during 2007, market share increased approximately seven percent relative to their competitive sets. RevPAR at these hotels increased 8.7�percent for the second quarter and Hotel EBITDA grew 17.6�percent compared to the prior year. We spent $34.6�million on renovations and redevelopment projects at our hotels for the three months ended June�30, 2008, including our pro rata share of joint venture expenditures. Capital Structure: At June 30, 2008, we had $1.5�billion of consolidated debt outstanding with a weighted average life of four years and a weighted average interest rate of 6.3 percent. Our cash and cash equivalents totaled $70.9�million at June�30, 2008. In July, we repaid a $15.5�million single property mortgage loan and exercised the first of three, one-year extension options on our $250�million CMBS loan that was initially scheduled to mature November 2008. We have no scheduled debt maturities for the remainder of 2008. 2008 Dividend and Guidance: We intend to reduce our quarterly common dividend, effective the third quarter of 2008, based on our revised forecast for the second half of the year and limited visibility for 2009. Given this limited visibility and our focus on liquidity and leverage, we are taking a more conservative approach by setting the new dividend to more closely reflect our taxable net income distribution requirement, and will adjust it accordingly to meet our targeted payout ratio. Therefore, we intend to set the dividend at $0.15 per share. Our revised dividend represents a yield in excess of seven percent, based on today�s closing price. The dividend reduction would equate to annual cash flow savings of approximately $50 million. �We are very pleased with what we accomplished during the second quarter, including gains in market share and managing flow-through by reducing costs across the portfolio. We expect that we will continue to outperform the industry in both RevPAR and margin growth,� said Andrew J. Welch, FelCor�s Executive Vice President and Chief Financial Officer. �There is no denying the current economic trends and potential for further deterioration in demand. Demand is being impacted by reductions in airline capacity, higher fuel costs, moderating GDP and negative sentiment towards the economy. As a result, we have revised our outlook for the remainder of the year and have taken a more conservative stance regarding our dividend distribution.� RevPAR at our 85 consolidated hotels is expected to increase between 4.0 and 5.0 percent in 2008, compared to the prior year, which reflects our expectation that RevPAR for our markets will be between negative one percent and flat compared to 2007. Therefore, we continue to expect that RevPAR for our portfolio will increase significantly more than our markets. RevPAR at our 85 consolidated hotels increased 5.0 percent in July 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 our relatively high increase in RevPAR. The moderation in RevPAR growth is impacting our annual net income, FFO and EBITDA guidance. The upward shift in the forward interest-rate curve is further impacting net income and FFO. We currently anticipate: Portfolio RevPAR growth to be between 4.0 and 5.0 percent for the full year, and 4.5 and 6.0�percent for the third quarter; Adjusted EBITDA to be between $283�million and $289�million for the full year, and $64�million and $67�million for the third quarter; Adjusted FFO per share to be between $2.08 and $2.18 for the full year, and $0.43 and $0.47 for the third quarter; Net Income to be between $5�million and $11�million for the full year, and net loss of $1�million and net income of $2�million for the third quarter; Hotel EBITDA margins to increase approximately 40 basis points for the full year; and Capital expenditures, including redevelopment projects, of approximately $150�million for the full year. 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 primarily of upper-upscale hotels, which are flagged under global brands such as Embassy Suites Hotels�, Doubletree�, Hilton�, Renaissance�, Sheraton�, Westin� and Holiday Inn�. Additional information can be found on the Company�s Web site at www.felcor.com. We invite you to listen to our second quarter earnings Conference Call on Wednesday, August�6, 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 �News� pages. The conference call replay will be archived on the Company�s Web site. A telephonic replay will be available from 12:00 p.m. (Central Time), Wednesday, August 6, 2008 through 5:00 p.m. (Central Time), Friday, August 8, 2008, by dialing (800) 642-1687 (conference ID #56198060). 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,� �should� �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. An economic slowdown and its impact on the lodging industry, operating risks associated with the hotel business, relationships with our property managers, risks associated with our level of indebtedness and our ability to meet debt covenants in our debt agreements, our ability to complete acquisitions and dispositions, the availability of capital, the impact on the travel industry from increased fuel prices and security precautions, 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. SUPPLEMENTAL INFORMATION � � INTRODUCTION � The following information is presented in order to help our investors understand the financial position of the Company for the three and six month periods ended June 30, 2008. � � TABLE OF CONTENTS � Consolidated Statements of Operations Discontinued Operations Capital Expenditures Selected Balance Sheet Data Supplemental Financial Data Debt Summary Hotel Portfolio Composition Detailed Operating Statistics by Brand Detailed Operating Statistics for FelCor's Top Markets Non-GAAP Financial Measures Consolidated Statements of Operations (in thousands, except per share data) � � Three Months Ended Six Months Ended June 30, June 30, 2008 � 2007 2008 � 2007 Revenues: Hotel operating revenue: Room $ 239,689 $ 216,813 $ 469,821 $ 421,135 Food and beverage 49,010 35,212 95,518 66,985 Other operating departments 16,538 13,504 31,445 25,948 Other revenue � 931 � 715 � 1,259 � 845 Total revenues � 306,168 � 266,244 � 598,043 � 514,913 � Expenses: Hotel departmental expenses: Room 56,871 53,058 111,522 101,841 Food and beverage 36,096 26,655 71,542 51,190 Other operating departments 7,170 5,835 14,199 10,782 Other property related costs 76,574 68,584 153,699 137,142 Management and franchise fees 15,973 13,943 31,875 27,066 Taxes, insurance and lease expense 28,862 31,422 58,166 60,651 Corporate expenses 4,864 5,255 11,691 12,041 Depreciation and amortization 35,072 27,155 68,840 52,205 Impairment loss - - 17,131 - Other expenses � 900 � 393 � 1,833 � 415 Total operating expenses � 262,382 � 232,300 � 540,498 � 453,333 Operating income 43,786 33,944 57,545 61,580 Interest expense, net � (24,769 ) � (23,207 ) � (50,772 ) � (46,079 ) Income before equity in income from unconsolidated entities, minority interests and gain on sale of assets � 19,017 � 10,737 � 6,773 � 15,501 Equity in income from unconsolidated entities 2,331 3,710 1,709 16,480 Minority interests (1,181 ) 79 (775 ) 116 Gain on involuntary conversion 3,095 - 3,095 - Gain on sale of condominiums � - � 14,858 � - � 18,139 Income from continuing operations 23,262 29,384 10,802 50,236 Discontinued operations � - � 25,792 � (13 ) � 34,099 Net income 23,262 55,176 10,789 84,335 Preferred dividends � (9,678 ) � (9,678 ) � (19,356 ) � (19,356 ) Net income (loss) applicable to common stockholders $ 13,584 $ 45,498 $ (8,567 ) $ 64,979 � Basic per common share data: Net income (loss) from continuing operations $ 0.22 $ 0.32 $ (0.14 ) $ 0.50 Net income (loss) $ 0.22 $ 0.74 $ (0.14 ) $ 1.06 Basic weighted average common shares outstanding � 61,822 � 61,587 � 61,819 � 61,511 � Diluted per common share data: Net income (loss) from continuing operations $ 0.22 � 0.32 $ (0.14 ) $ 0.50 Net income (loss) $ 0.22 � 0.73 $ (0.14 ) $ 1.05 Diluted weighted average common shares outstanding � 61,968 � 62,032 � 61,819 � 61,899 Cash dividends declared on common stock $ 0.35 $ 0.30 $ 0.70 $ 0.55 Discontinued Operations (in thousands) � Discontinued operations include the results of operations of 11 hotels sold in 2007. Condensed financial information for the hotels included in discontinued operations is as follows: � Three Months Ended Six Months Ended June 30, June 30, 2008 � 2007 2008 � 2007 Operating revenue $ - $ 10,949 $ - $ 26,447 Operating expenses � - � (6,215 ) � (13 ) � (18,094 ) Operating income (loss) - 4,734 (13 ) 8,353 Interest income (expense), net - 6 - (19 ) Gain on sale of hotels, net of income tax - 22,457 - 28,488 Loss on early extinguishment of debt - - - (901 ) Minority interests � - � (1,405 ) � - � (1,822 ) Income (loss) from discontinued operations - 25,792 (13 ) 34,099 Depreciation and amortization, net of minority interests - 14 - 14 Minority interest in FelCor LP - 559 - 740 Interest expense, net of minority interests � - � - � - � 27 EBITDA from discontinued operations - 26,365 (13 ) 34,880 Gain on sale of hotels, net of income tax and minority interests - (21,799 ) - (27,830 ) Charges related to early extinguishment of debt, net of minority interests � - � - � - � 811 Adjusted EBITDA from discontinued operations $ - $ 4,566 $ (13 ) $ 7,861 Capital Expenditures (in thousands) � � Three Months Ended June 30, Six Months Ended June 30, 2008 � 2007 2008 � 2007 Improvements and additions to consolidated hotels $ 31,251 $ 68,027 $ 73,625 $ 137,129 Consolidated joint venture partners� prorata share of additions to hotels (962 ) (842 ) (2,218 ) (2,081 ) Prorata share of unconsolidated additions to hotels � 4,335 � 5,815 � 11,306 � 9,508 Total additions to hotels(a) $ 34,624 $ 73,000 $ 82,713 $ 144,556 (a) Includes capitalized interest, property taxes, ground leases and certain employee costs. Selected Balance Sheet Data (in thousands) � � June 30, December 31, � 2008 2007 Investment in hotels $ 3,134,715 $ 3,094,521 Accumulated depreciation � (755,654) � (694,464 ) Investments in hotels, net of accumulated depreciation $ 2,379,061 $ 2,400,057 � Cash and cash equivalents $ 70,862 $ 57,609 Total assets $ 2,663,038 $ 2,683,835 Total debt $ 1,510,535 $ 1,475,607 Total stockholders� equity $ 955,454 $ 1,006,914 Total stockholders� equity less preferred equity $ 476,679 $ 528,140 Book value per common share outstanding $ 7.55 $ 8.42 At June 30, 2008, we had an aggregate of 63,168,272 shares of FelCor common stock and 1,353,771 limited partnership units of FelCor Lodging Limited Partnership outstanding. Supplemental Financial Data (in thousands, except per share information, ratios and percentages) � � June 30, December 31, Total Enterprise Value 2008 2007 Common shares outstanding 63,168 62,707 Units outstanding � 1,354 � 1,354 Combined shares and units outstanding 64,522 64,061 Common stock price at end of period $ 10.50 $ 15.59 Common equity capitalization $ 677,481 $ 998,711 Series A preferred stock 309,362 309,362 Series C preferred stock 169,412 169,412 Consolidated debt 1,510,535 1,475,607 Minority interest of consolidated debt (4,129 ) (7,305 ) Pro rata share of unconsolidated debt 113,376 94,181 Cash and cash equivalents � (70,862 ) � (57,609 ) Total enterprise value (TEV) $ 2,705,175 $ 2,982,359 � Dividends Per Share Dividends declared (year-to-date): Common stock $ 0.70 $ 1.20 Series A preferred stock $ 0.975 $ 1.95 Series C preferred stock (depositary shares) $ 1.00 $ 2.00 Debt Summary (dollars in thousands) � � � � Encumbered Hotels Interest Rate at June 30, 2008 Maturity Date Consolidated Debt Line of credit(a) none L + 0.80 August 2011 $ 45,000 Senior term notes none 8.50 (b) June 2011 299,288 Senior term notes none L + 1.875 December 2011 215,000 Other none L + 0.40 July 2008(c) � 4,554 Total line of credit and senior debt(d) 6.71 � 563,842 � Mortgage debt 12 hotels L + 0.93 (e) November 2009(f) 250,000 Mortgage debt 7 hotels 6.57 June 2009-2014 88,144 Mortgage debt 7 hotels 7.32 March 2009 119,013 Mortgage debt 8 hotels 8.70 May 2010 164,157 Mortgage debt 6 hotels 8.73 May 2010 117,962 Mortgage debt 2 hotels L + 1.55 (g) May 2009(h) 176,124 Mortgage debt 1 hotel L + 2.85 August 2008(c) 15,500 Mortgage debt 1 hotel 5.81 July 2016 12,326 Other 1 hotel various various � 3,467 Total mortgage debt(d) 45 hotels 5.98 � 946,693 � Total 6.25% $ 1,510,535 (a) We have $250�million of borrowing capacity under our line of credit. The interest rate can range from 80 to 150 basis points over LIBOR, based on our leverage ratio as defined in our line of credit agreement. (b) If the credit rating on our senior debt is downgraded by Moody�s to B1 and Standard & Poor�s rating remains below BB-, the interest rate on these senior notes will increase to 9.0%. (c) This loan was repaid in full in July 2008. (d) Interest rates are calculated based on the weighted average debt outstanding at June�30, 2008. (e) We have purchased an interest rate cap at 7.8% for this notional amount that expires in November�2009. (f) This loan provides us three one-year extension options that permit, in our sole discretion, the maturity to be extended to 2011. In July 2008, we exercised our first one-year option to extend the maturity to November 2009. (g) We have purchased interest rate caps of 6.25% for $177�million aggregate notional amounts, which expire in May 2009. (h) These loans provide us three one-year extension options that permit, in our sole discretion, the maturity to be extended to 2012. Weighted average interest � 6.25 % Fixed interest rate debt to total debt 53.2 % Weighted average maturity of debt 4 years Mortgage debt to total assets 35.5 % Hotel Portfolio Composition The following tables set forth, as of June 30, 2008, for 85 Consolidated Hotels distribution by brand, by our top markets, by type of location, and by market segment. Brand � Hotels � Rooms � % of Total Rooms � % of 2007 Hotel EBITDA(a) Embassy Suites Hotels 47 12,129 49 58 Holiday Inn 17 6,306 25 19 Sheraton and Westin 9 3,217 13 14 Doubletree 7 1,472 6 7 Renaissance and Hotel 480 3 1,324 5 - (b) Hilton 2 559 2 2 � Top Markets South Florida 5 1,436 6 7 Atlanta 5 1,462 6 7 Los Angeles area 4 899 4 6 San Francisco area 6 2,141 8 6 Orlando 5 1,690 7 5 Dallas 4 1,333 5 4 Minneapolis 3 736 3 4 Phoenix 3 798 3 4 Northern New Jersey 3 756 3 4 San Diego 1 600 2 3 Washington, D.C. 1 443 2 3 Chicago 3 795 3 3 San Antonio 3 874 4 3 Philadelphia 2 729 3 3 Boston 2 532 2 2 � Location Suburban 33 8,360 33 36 Airport 20 6,206 26 26 Urban 20 6,362 25 25 Resort 12 4,079 16 13 � Segment Upper-upscale 68 18,701 75 81 Full service 17 6,306 25 19 (a) Hotel EBITDA is more fully described on page 20. (b) We acquired the Renaissance Esmeralda Resort & Spa and the Renaissance Vinoy Resort & Golf Club in December 2007. They did not make a significant contribution to our 2007 Hotel EBITDA. Detailed Operating Statistics by Brand (85 consolidated hotels) � � Occupancy (%) Three Months Ended June 30, � Six Months Ended June 30, 2008 � 2007 � %Variance 2008 � 2007 � %Variance Embassy Suites Hotels 78.2 75.3 3.8 75.6 73.9 2.3 Holiday Inn 78.0 73.6 6.0 74.0 68.5 8.0 Sheraton and Westin 70.1 71.6 (2.1 ) 68.1 70.2 (3.0 ) Doubletree 79.9 71.2 12.1 77.7 71.4 8.8 Renaissance and Hotel 480(a) 68.2 78.0 (12.7 ) 69.4 75.8 (8.4 ) Hilton 70.4 74.0 (4.9 ) 61.3 56.5 8.5 � Total hotels 76.5 74.3 3.0 73.7 71.6 2.9 � � � ADR ($) Three Months Ended June 30, Six Months Ended June 30, 2008 2007 %Variance 2008 2007 %Variance Embassy Suites Hotels 142.90 140.99 1.4 147.40 144.62 1.9 Holiday Inn 123.67 117.03 5.7 120.94 115.10 5.1 Sheraton and Westin 128.04 127.65 0.3 129.06 129.62 (0.4 ) Doubletree 145.53 146.22 (0.5 ) 149.64 147.88 1.2 Renaissance and Hotel 480(a) 187.26 186.65 0.3 199.33 197.09 1.1 Hilton 139.77 139.10 0.5 125.53 127.86 (1.8 ) � Total hotels 138.22 136.00 1.6 140.62 138.28 1.7 � � � RevPAR ($) Three Months Ended June 30, Six Months Ended June 30, 2008 2007 %Variance 2008 2007 %Variance Embassy Suites Hotels 111.71 106.18 5.2 111.40 106.86 4.2 Holiday Inn 96.44 86.11 12.0 89.47 78.87 13.4 Sheraton and Westin 89.76 91.38 (1.8 ) 87.91 90.97 (3.4 ) Doubletree 116.21 104.15 11.6 116.32 105.65 10.1 Renaissance and Hotel 480(a) 127.64 145.67 (12.4 ) 138.36 149.36 (7.4 ) Hilton 98.38 102.93 (4.4 ) 77.00 72.28 6.5 � Total hotels 105.76 100.99 4.7 103.66 99.04 4.7 (a) Decreases in occupancy and RevPAR are principally related to renovation-related disruption at Hotel 480 Union Square. We have included historical room statistics for the two Renaissance hotels acquired in December 2007 for periods prior to our ownership of these hotels for comparison purposes. Detailed Operating Statistics for FelCor�s Top Markets (85 consolidated hotels) � Occupancy (%) Three Months Ended June 30, � Six Months Ended June 30, 2008 � 2007 � %Variance 2008 � 2007 � %Variance South Florida 78.3 72.4 8.2 82.7 79.5 4.0 Atlanta 75.9 78.1 (2.8 ) 76.1 76.3 (0.3 ) Los Angeles area 78.1 79.1 (1.2 ) 75.8 78.3 (3.2 ) San Francisco area 79.7 78.9 1.0 75.3 72.9 3.4 Orlando 80.8 80.6 0.3 81.4 79.9 1.9 Dallas 68.6 65.9 4.2 69.2 68.1 1.6 Minneapolis 76.1 78.5 (3.1 ) 71.5 73.9 (3.2 ) Phoenix 66.8 68.0 (1.7 ) 71.4 74.9 (4.8 ) Northern New Jersey 75.6 76.7 (1.3 ) 71.0 68.3 4.0 San Diego 83.0 73.9 12.3 81.8 76.2 7.3 Washington, D.C. 70.6 73.8 (4.3 ) 57.2 68.2 (16.1 ) Chicago 81.7 73.7 10.8 73.3 66.9 9.6 San Antonio 83.1 83.3 (0.2 ) 80.1 77.6 3.2 Philadelphia 82.0 72.4 13.3 72.3 64.2 12.6 Boston 85.3 70.2 21.6 77.2 61.1 26.3 ADR ($) Three Months Ended June 30, Six Months Ended June 30, 2008 2007 %Variance 2008 2007 %Variance South Florida 137.88 136.12 1.3 170.13 169.74 0.2 Atlanta 120.70 121.00 (0.3 ) 123.89 123.11 0.6 Los Angeles area 158.73 158.32 0.3 157.87 154.54 2.2 San Francisco area 142.66 138.57 3.0 139.64 135.16 3.3 Orlando 104.66 103.44 1.2 114.67 112.94 1.5 Dallas 124.23 122.26 1.6 127.23 126.57 0.5 Minneapolis 141.76 142.94 (0.8 ) 143.28 141.12 1.5 Phoenix 134.74 136.17 (1.0 ) 162.11 160.24 1.2 Northern New Jersey 165.94 157.64 5.3 164.09 155.21 5.7 San Diego 169.35 156.12 8.5 161.20 154.28 4.5 Washington, D.C. 162.52 169.09 (3.9 ) 162.57 170.86 (4.9 ) Chicago 132.15 136.50 (3.2 ) 127.09 130.22 (2.4 ) San Antonio 115.80 111.04 4.3 114.83 110.33 4.1 Philadelphia 158.99 145.77 9.1 149.20 135.85 9.8 Boston 167.10 157.89 5.8 153.37 150.49 1.9 RevPAR ($) Three Months Ended June 30, Six Months Ended June 30, 2008 2007 %Variance 2008 2007 %Variance South Florida 107.99 98.50 9.6 140.68 135.02 4.2 Atlanta 91.61 94.51 (3.1 ) 94.25 93.92 0.4 Los Angeles area 123.99 125.21 (1.0 ) 119.72 121.04 (1.1 ) San Francisco area 113.70 109.33 4.0 105.19 98.48 6.8 Orlando 84.56 83.32 1.5 93.31 90.21 3.4 Dallas 85.22 80.52 5.8 88.09 86.23 2.2 Minneapolis 107.82 112.26 (4.0 ) 102.48 104.23 (1.7 ) Phoenix 90.01 92.55 (2.7 ) 115.68 120.05 (3.6 ) Northern New Jersey 125.50 120.84 3.8 116.49 105.98 9.9 San Diego 140.60 115.43 21.8 131.81 117.54 12.1 Washington, D.C. 114.67 124.72 (8.1 ) 93.06 116.59 (20.2 ) Chicago 107.90 100.61 7.2 93.22 87.11 7.0 San Antonio 96.25 92.51 4.0 92.00 85.65 7.4 Philadelphia 130.44 105.59 23.5 107.80 87.19 23.6 Boston 142.60 110.77 28.7 118.35 91.92 28.8 Non-GAAP Financial Measures We refer in this release to certain �non-GAAP financial measures.� These measures, including FFO, Adjusted FFO, EBITDA, Adjusted 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 to FFO, Adjusted FFO and Same-Store Adjusted FFO (in thousands, except per share and unit data) � Three Months Ended June 30, 2008 � 2007 Dollars � Shares � Per Share Amount Dollars � Shares � Per Share Amount Net income $ 23,262 $ 55,176 Preferred dividends � (9,678 ) � (9,678 ) Net income applicable to common stockholders 13,584 61,968 $ 0.22 45,498 62,032 $ 0.73 Depreciation and amortization 35,072 - 0.57 27,155 - 0.44 Depreciation, unconsolidated entities and discontinued operations 3,583 - 0.06 2,848 - 0.05 Gain on involuntary conversion (3,095 ) - (0.05 ) - - - Gain on sale of hotels - - - (21,799 ) - (0.35 ) Minority interest in FelCor LP � 291 1,354 � (0.02 ) � 985 1,355 � (0.01 ) FFO 49,435 63,322 0.78 54,687 63,387 0.86 Conversion costs(a) � 103 - � - � - - � - Adjusted FFO 49,538 63,322 0.78 54,687 63,387 0.86 Preferred dividends on Series A Preferred Stock � 6,279 9,985 � (0.02 ) � 6,279 9,985 � (0.03 ) Adjusted FFO assuming conversion of Series A Preferred Stock for per share computation(b) $ 55,817 73,307 $ 0.76 $ 60,966 73,372 $ 0.83 � Adjusted FFO $ 49,538 63,322 $ 0.78 $ 54,687 63,387 $ 0.86 FFO from discontinued operations - - - (4,566 ) - (0.07 ) FFO from acquired hotels(c) - - - 2,246 - 0.04 Gain on sale of condominiums � - - � - � (14,858 ) - � (0.24 ) Same-Store Adjusted FFO $ 49,538 63,322 $ 0.78 $ 37,509 63,387 $ 0.59 Preferred dividends on Series A Preferred Stock � 6,279 9,985 � (0.02 ) Same-Store Adjusted FFO assuming conversion of Series A Preferred Stock for per share computation(b) $ 55,817 73,307 $ 0.76 (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 completed by early 2009. (b) For calculation of Adjusted FFO per share and Same-Store Adjusted FFO per share it is more dilutive to assume the conversion of our Series A Convertible Preferred Stock into common stock when our quarterly Adjusted FFO or Same-Store Adjusted FFO per share calculation exceeds $0.63. (c) We have included amounts for two Renaissance hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes. Reconciliation of Net Income to FFO, Adjusted FFO and Same-Store Adjusted FFO (in thousands, except per share and unit data) � Six Months Ended June 30, 2008 � 2007 Dollars � Shares � Per Share Amount Dollars � Shares � Per Share Amount Net income $ 10,789 $ 84,335 Preferred dividends � (19,356 ) � (19,356 ) Net income (loss) applicable to common stockholders (8,567 ) 61,819 $ (0.14 ) 64,979 61,899 $ 1.05 Depreciation and amortization 68,840 - 1.11 52,205 - 0.85 Depreciation, unconsolidated entities and discontinued operations 7,133 - 0.12 5,711 - 0.09 Gain on involuntary conversion (3,095 ) - (0.05 ) - - - Gain on sale of hotels - - - (27,830 ) - (0.45 ) Gain on sale of hotels in unconsolidated entities - - - (11,182 ) - (0.18 ) Minority interest in FelCor LP (186 ) 1,354 (0.03 ) 1,412 1,355 (0.01 ) Conversion of options and unvested restricted stock � - 120 � - � - - � - FFO 64,125 63,293 1.01 85,295 63,254 1.35 Abandoned projects - - - 22 - - Charges related to early extinguishment of debt, net of minority interests - - - 811 - 0.01 Impairment loss 17,131 - 0.27 - - - Conversion costs(a) � 362 - � 0.01 � - - � - Adjusted FFO 81,618 63,293 1.29 86,128 63,254 1.36 Preferred dividends on Series A Preferred Stock � 12,558 9,985 � - � 12,558 9,985 � (0.01 ) Adjusted FFO assuming conversion of Series A Preferred Stock for per share computation(b) $ 94,176 73,278 $ 1.29 $ 98,686 73,239 $ 1.35 � Adjusted FFO $ 81,618 63,293 $ 1.29 $ 86,128 63,254 $ 1.36 FFO from discontinued operations 13 - - (7,835 ) - (0.12 ) FFO from acquired hotels(c) - - - 5,630 - 0.09 Gain on sale of condominiums � - - � - � (18,139 ) - � (0.29 ) Same-Store Adjusted FFO $ 81,631 63,293 $ 1.29 $ 65,784 63,254 $ 1.04 Preferred dividends on Series A Preferred Stock � 12,558 � 9,985 � - Same-Store Adjusted FFO assuming conversion of Series A Preferred Stock for per share computation(b) $ 94,189 73,278 $ 1.29 (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 completed by early 2009. (b) For calculation of Adjusted FFO per share and Same-Store Adjusted FFO per share it is more dilutive to assume the conversion of our Series A Convertible Preferred Stock into common stock when our Adjusted FFO per share or Same-Store Adjusted FFO per share for six months exceeds $1.26. (c) We have included amounts for two Renaissance hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes. Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Same-Store Adjusted EBITDA (in thousands) � � Three Months Ended Six Months Ended June 30, June 30, 2008 � 2007 2008 � 2007 Net income $ 23,262 $ 55,176 $ 10,789 $ 84,335 Depreciation and amortization 35,072 27,155 68,840 52,205 Depreciation, unconsolidated entities and discontinued operations 3,583 2,848 7,133 5,711 Interest expense 25,196 24,627 51,745 48,746 Interest expense, unconsolidated entities and discontinued operations 1,327 1,489 2,923 3,063 Amortization of stock compensation 1,457 1,207 2,722 2,614 Minority interest in FelCor Lodging LP � 291 � 985 � (186 ) � 1,412 EBITDA 90,188 113,487 143,966 198,086 Gain on sale of hotels - (21,799 ) - (27,830 ) Gain on sale of hotels in unconsolidated entities - - - (11,182 ) Gain on involuntary conversion (3,095 ) - (3,095 ) - Abandoned projects - - - 22 Charges related to early extinguishment of debt, net of minority interests - - - 811 Impairment loss - - 17,131 - Conversion costs (a) � 103 � - � 362 � - Adjusted EBITDA 87,196 91,688 158,364 159,907 Adjusted EBITDA from discontinued operations - (4,566 ) 13 (7,861 ) EBITDA from acquired hotels(b) - 5,366 - 11,871 Gain on sale of condominiums � - � (14,858 ) � - � (18,139 ) Same-Store Adjusted EBITDA $ 87,196 $ 77,630 $ 158,377 $ 145,778 (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 completed by early 2009. (b) We have included amounts for two Renaissance hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes. Reconciliation of Same-Store Adjusted EBITDA to Hotel EBITDA (in thousands) � � Three Months EndedJune 30, Six Months EndedJune 30, 2008 � 2007 2008 � 2007 Same-Store Adjusted EBITDA $ 87,196 $ 77,630 $ 158,377 $ 145,778 Other revenue (931 ) (715 ) (1,259 ) (845 ) Equity in income from unconsolidated subsidiaries(excluding interest and depreciation expense) (7,831 ) (8,439 ) (12,854 ) (14,847 ) Minority interest in other partnerships(excluding interest and depreciation expense) 1,481 (98 ) 2,050 28 Consolidated hotel lease expense 15,737 17,267 27,933 31,525 Unconsolidated taxes, insurance and lease expense (2,075 ) (1,896 ) (4,197 ) (3,599 ) Interest income (428 ) (1,421 ) (973 ) (2,667 ) Other expenses (excluding abandoned projects and conversion costs) 797 393 1,471 393 Corporate expenses (excluding amortization expense of stock compensation) � 3,407 � 4,048 � 8,969 � 9,427 Hotel EBITDA $ 97,353 $ 86,769 $ 179,517 $ 165,193 Reconciliation of Net Income to Hotel EBITDA (in thousands) � � Three Months EndedJune 30, Six Months EndedJune 30, 2008 � 2007 2008 � 2007 Net income $ 23,262 $ 55,176 $ 10,789 $ 84,335 Discontinued operations - (25,792 ) 13 (34,099 ) EBITDA from acquired hotels(a) - 5,366 - 11,871 Equity in income from unconsolidated entities (2,331 ) (3,710 ) (1,709 ) (16,480 ) Minority interests 1,181 (79 ) 775 (116 ) Consolidated hotel lease expense 15,737 17,267 27,933 31,525 Unconsolidated taxes, insurance and lease expense (2,075 ) (1,896 ) (4,197 ) (3,599 ) Interest expense, net 24,769 23,207 50,772 46,079 Corporate expenses 4,864 5,255 11,691 12,041 Depreciation 35,072 27,155 68,840 52,205 Impairment loss - - 17,131 - Other expenses 900 393 1,833 415 Gain on involuntary conversion (3,095 ) - (3,095 ) - Gain on sale of condominiums - (14,858 ) - (18,139 ) Other revenue � (931 ) � (715 ) � (1,259 ) � (845 ) Hotel EBITDA $ 97,353 $ 86,769 $ 179,517 $ 165,193 (a) We have included amounts for two Renaissance hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes. Hotel EBITDA and Hotel EBITDA Margin (dollars in thousands) � � Three Months Ended Six Months Ended June 30, June 30, 2008 � 2007 2008 � 2007 Total revenues $ 306,168 $ 266,244 $ 598,043 $ 514,913 Other revenue (931 ) (715 ) (1,259 ) (845 ) Revenue from acquired hotels(a) � - � 26,186 � - � 54,171 Same-Store hotel operating revenue 305,237 291,715 596,784 568,239 Same-Store hotel operating expenses � 207,884 � 204,946 � 417,267 � 403,046 Hotel EBITDA $ 97,353 $ 86,769 $ 179,517 $ 165,193 Hotel EBITDA margin(b) 31.9% 29.7% 30.1% 29.1% (a) We have included amounts for two Renaissance hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes. (b) Hotel EBITDA as a percentage of hotel operating revenue. Reconciliation of Ratio of Operating Income to Total Revenues to Hotel EBITDA Margin � � Three Months Ended June 30, Six Months Ended June 30, 2008 � 2007 2008 � 2007 Ratio of operating income to total revenues 14.3 % 11.6 % 9.6 % 10.8 % Other revenue (0.3 ) (0.2 ) (0.2 ) (0.1 ) Revenue from acquired hotels(a) - 9.0 - 9.5 Unconsolidated taxes, insurance and lease expense (0.7 ) (0.7 ) (0.7 ) (0.6 ) Consolidated hotel lease expense 5.2 5.9 4.7 5.5 Other expenses 0.3 0.1 0.3 0.1 Corporate expenses 1.6 1.8 2.0 2.1 Depreciation and amortization 11.5 9.3 11.5 9.2 Impairment loss - - 2.9 - Expenses from acquired hotels(a) - � (7.1 ) - � (7.4 ) Hotel EBITDA margin 31.9 % 29.7 % 30.1 % 29.1 % (a) We have included amounts for two Renaissance hotels acquired in December 2007, prior to our ownership of these hotels, for comparison purposes. Reconciliation of Forecasted Net Income (Loss) to Forecasted FFO, Adjusted FFO, EBITDA and Adjusted EBITDA (in millions, except per share and unit data) � Third Quarter 2008 Guidance Low Guidance � High Guidance Dollars � Per Share Amount Dollars � Per Share Amount Net income (loss) $ (1 ) $ 2 Preferred dividends � (10 ) � (10 ) Net income (loss) applicable to common stockholders (11 ) $ (0.17 ) (8 ) $ (0.13 ) Depreciation � 38 � 38 FFO and Adjusted FFO $ 27 $ 0.43 (a) $ 30 $ 0.47 (a) Net income (loss) $ (1 ) $ 2 Depreciation 38 38 Interest expense 26 26 Amortization expense � 1 � 1 Adjusted EBITDA $ 64 $ 67 (a) Weighted average shares and units are 63.3�million. � Full Year 2008 Guidance Low Guidance � High Guidance Dollars � Per Share Amount Dollars � Per Share Amount Net income $ 5 $ 11 Preferred dividends � (39 ) � (39 ) Net income (loss) applicable to common stockholders (34 ) $ (0.55 ) (28 ) $ (0.45 ) Depreciation 152 152 Impairment charge 17 17 Gain from involuntary conversion � (3 ) � (3 ) Adjusted FFO $ 132 $ 2.08 (a) $ 138 $ 2.18 (a) � Net income $ 5 $ 11 Depreciation 152 152 Impairment charge 17 17 Gain from involuntary conversion (3 ) (3 ) Interest expense 106 106 Amortization expense � 6 � 6 Adjusted EBITDA $ 283 $ 289 (a) Weighted average shares and units are 63.3�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, EBITDA, Adjusted 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 and Adjusted 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 comparisons, we have adjusted Adjusted FFO and Adjusted EBITDA to remove discontinued operations and gains on sales of condominium units; and have added the historical results of operations from the two Renaissance hotels acquired in December 2007. 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 from continuing operations all revenues and expenses not directly associated with hotel operations including 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. Hotel EBITDA and Hotel EBITDA margins are presented on a same-store basis including the historical results of operations from the two Renaissance hotels acquired in December�2007. Limitations of Non-GAAP Measures Our management and Board of Directors use FFO, EBITDA, Hotel EBITDA and Hotel EBITDA margin to evaluate the performance of our hotels and to facilitate comparisons between us and lodging REITs, hotel owners who are not REITs and other capital intensive companies. We use Hotel EBITDA and Hotel EBITDA margin in evaluating hotel-level performance and the operating efficiency of our hotel managers. The use of these non-GAAP financial measures has certain limitations. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin, as presented by us, may not be comparable to FFO, Adjusted FFO, EBITDA, Adjusted 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, EBITDA or Adjusted 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 should not be used as a measure of amounts that accrue directly to the benefit of stockholders. FFO, Adjusted FFO, EBITDA, Adjusted 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.