FCH Felcor Lodging Trust Incorporated (delisted)

FelCor Lodging Trust Incorporated (NYSE: FCH) today reported operating results for the fourth quarter and year ended December 31, 2009.

Summary:

• We issued $636 million of senior notes due 2014 (with net proceeds of $558 million), which allowed us to refinance our existing senior notes that were to mature in 2011.
• We extended the maturity on three mortgage loans, totaling $42 million, two of which matured in June 2009 and one that was to mature in May 2010.
• RevPAR at our 83 consolidated hotels decreased 10.9 percent for the fourth quarter and 17.6 percent for the full year.
• Market share at our 83 consolidated hotels increased approximately 1.3 percent for the fourth quarter and 1.4 percent for the full year.
• RevPAR at the San Francisco Marriott-Union Square, where we completed redevelopment in June, increased 73 percent in the fourth quarter.
• Our strict expense controls limited the effect of 2009 reduced revenue on flow-through to Adjusted EBITDA to 48 percent compared to the prior year. Hotel EBITDA margin decreased 530 basis points and 496 basis points for the quarter and full year, respectively, which was better than anticipated.
• Adjusted FFO per share was a loss of $0.29 and Adjusted EBITDA was $30.4 million for the fourth quarter. We exceeded the high end of our 2009 FFO per share and EBITDA expectations by $0.05 and $3 million, respectively.
• Net loss for the fourth quarter was $51.2 million.

Fourth Quarter Operating Results:

Revenue per available room (“RevPAR”) for our 83 consolidated hotels was $75.01, a 10.9 percent decline compared to the same period in 2008, which is better than the 11.7 percent decline for the industry (according to Smith Travel Research). Our RevPAR decline was driven mainly by lower average daily rate (“ADR”) (which fell 10.4 percent to $118.59), while average occupancy declined only 0.6 percent to 63.2 percent, compared to the same period in 2008.

“Last year presented unprecedented challenges for the industry, and I am pleased with our accomplishments under those circumstances. Our performance over the last two years has been superior to our peer group and the industry in terms of RevPAR and flow-through. We gained 1.4 percent in market share during 2009, while only 48 percent of the revenue declines flowed through to the bottom line. These successes translated into better than expected fourth quarter results, driven by higher than expected demand and better margins. At the same time, our balance sheet initiatives are enabling us to withstand the downturn and position us to benefit from the lodging recovery. In total, we refinanced or extended nearly $1 billion in debt, including all of our 2009 debt maturities and a significant portion of our 2010 and 2011 maturities,” said Richard A. Smith, FelCor’s President and Chief Executive Officer.

Adjusted funds from operations (“FFO”) for the fourth quarter was a loss of $18.7 million, or $0.29 per share, compared to $15.6 million, or $0.25 per share, in 2008.

Hotel EBITDA for the fourth quarter was $42.3 million, compared to $61.2 million in 2008. Hotel EBITDA margin was 19.3 percent, a 530 basis point decrease compared to 2008. Prior to accounting for taxes, insurance and land leases, Hotel EBITDA margins declined 373 basis points. Hotel EBITDA represents EBITDA generated by our hotels before corporate expenses and joint venture adjustments.

Adjusted EBITDA for the fourth quarter was $30.4 million, compared to $52.3 million in 2008.

Net loss attributable to common stockholders for the fourth quarter was $60.4 million, or $0.96 per share, compared to a net loss of $98.1 million, or $1.57 per share, for 2008.

Full Year Operating Results:

RevPAR for our 83 consolidated hotels decreased by 17.6 percent to $81.62, driven by decreases in both ADR (an 11.2 percent decrease to $123.23) and occupancy (a 7.2 percent decrease to 66.2 percent), compared to 2008.

Adjusted FFO for 2009 was $25.0 million, or $0.39 per share, compared to $125.9 million, or $1.99 per share, for 2008.

Hotel EBITDA for 2009 decreased to $211.7 million, compared to $311.6 million in 2008. Hotel EBITDA margin was 23.4 percent, a 496 basis point decrease compared to 2008. Hotel operating expenses decreased 11.9 percent compared to 2008. The decline in expenses reflects various factors including: decreased labor costs and improved efficiencies (including permanent hotel staffing reductions), decreased other room expenses, and decreased incentive management fees. Employee headcount at our hotels declined 14% compared to 2008. Prior to accounting for taxes, insurance and land leases, Hotel EBITDA margins declined 374 basis points.

Same-Store Adjusted EBITDA for 2009 was $177.1 million, compared to $271.4 million for 2008. Adjusted EBITDA for 2009 was $178.9 million, compared to $275.8 million for 2008.

Net loss attributable to common stockholders for 2009 was $146.8 million, or $2.33 per share, compared to a net loss of $158.0 million, or $2.57 per share, for 2008.

EBITDA, Adjusted EBITDA, Same Store EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO and Adjusted FFO are all non-GAAP financial measures. See our discussion of “Non-GAAP Financial Measures” beginning on page 14 for a reconciliation of each of these measures to the most comparable GAAP financial measure and for information regarding the use, limitations and importance of these non-GAAP financial measures.

Balance Sheet:

At December 31, 2009, we had $1.8 billion of consolidated debt outstanding with a weighted average interest rate of 7.3 percent, and our cash and cash equivalents totaled $264 million.

In October, we issued $636 million in aggregate principal amount of senior notes. The new notes bear interest at 10 percent and mature in 2014. The net proceeds of the offering were approximately $558 million after original issue discount, fees and expenses. The proceeds were used to fund the redemption of all of our floating-rate notes ($215 million) and the repurchase of $213 million of our 8½ percent notes, with the remainder available for general corporate purposes. $87 million of our 8½ percent notes were not tendered and remain outstanding; they mature in June 2011.

In February 2010, we extended the maturity dates on two secured loans, totaling $14 million that matured in June 2009. The maturity dates were extended to June 2011; all other terms remain substantially unchanged. We have refinanced or extended all of our 2009 maturities.

In February 2010, we refinanced a $28 million secured loan that was to mature in May 2010. The loan now matures in May 2013. We are also in active discussions regarding our remaining secured debt that matures in 2010. We have seven remaining CMBS loans that mature in May 2010. Six have been transferred to special servicers; and we are in negotiations to refinance and/or extend their maturities. With regard to two of these loans, the mortgaged hotels’ cash flows do not cover debt service, and we stopped funding the short-falls in December 2009. We also have a $113 million mortgage loan, secured by six hotels, that matures in May 2010 and are in negotiations with that lender.

“I am pleased with our progress to extend and refinance our maturing debt and ensure we have adequate liquidity. With our 2009 maturities resolved, we are focused on 2010 maturities. We have made good progress in those negotiations, having already refinanced the first of nine loans that mature in May on favorable terms. We are continuing discussions concerning the remaining loans, and we are pursuing an appropriate solution,” said Andrew J. Welch, FelCor’s Executive Vice President and Chief Financial Officer. “We have also strengthened our liquidity position, to enhance our flexibility in the face of uncertain economic conditions.”

Portfolio Management:

For the quarter and year ended December 31, 2009, we spent $14.0 million and $79.3 million, respectively, on capital expenditures at our hotels (including our pro rata share of joint venture expenditures). Capital expenditures for the year include $37 million spent to complete the remaining renovation and redevelopment projects.

In December, we sold two Holiday Inn hotels (Cocoa Beach and Orlando – International Drive) for $26.0 million in aggregate gross proceeds. The hotels were previously identified for sale. None of our other hotels are currently being marketed for sale.

In June, we completed the comprehensive redevelopment of the San Francisco Marriott - Union Square (which was reflagged as a Marriott hotel in April). Fourth quarter RevPAR at that hotel increased 73 percent, compared to 2008. We are progressing with approval and entitlement processes for additional redevelopment projects in the interest of building long-term value. However, we are committed to a disciplined approach toward capital allocation and will commit capital to new projects only when prudent.

Outlook:

We have seen indications from economic data that demand should begin to recover in 2010. The credit markets are slowly beginning to improve, corporate earnings growth is improving, the unemployment rate has stabilized, consumer confidence is rising, and manufacturers are beginning to increase production. While demand appears to have stabilized in certain of our markets, it has not stabilized on a widespread basis, particularly with corporate demand. Moreover, booking windows remain short, and the economy is fragile and has not yet shown consistent, stable growth. Consequently, visibility into future demand trends is limited, and predictions about the industry’s performance are difficult and uncertain. Therefore, our RevPAR guidance range is wider than in the past. Our outlook assumes RevPAR for our 83 consolidated hotels decreases between one and five percent, compared to 2009.

We will continue to benefit from our high-quality, renovated portfolio and the success of the San Francisco Marriott-Union Square. Additionally, average supply growth is lower in our markets relative to the industry. Our RevPAR decreased 6.9 percent in January, compared to 2009 and outperformed the industry average (7.4 percent decrease, according to Smith Travel Research).

We continue to work with our operators to mix customer segments aggressively to optimize revenue and to achieve the most efficient cost structure, given demand trends. However, we expect hotel EBITDA margins to decline in 2010, which reflects declining ADR and certain hotel expense increases that did not occur in 2009. These expenses include hotel-level wage increases, higher hotel-level bonus expense and higher utility rates. In addition, the composition of food and beverage revenue has changed, which also impacts margins.

Our interest expense will increase in 2010, reflecting the issuance of our new senior notes and continued interest expense associated with our untendered 8½ percent notes ($87 million) that remain outstanding and will accrue interest through maturity in June 2011.

For 2010, we anticipate:

• RevPAR to decrease between one and five percent;
• Adjusted EBITDA to be between $150 million and $162 million;
• Adjusted FFO loss per share to be between $0.80 and $0.61;
• Net loss to be between $169 million and $157 million; and
• Interest expense to be approximately $155 million.

FelCor, a real estate investment trust, is the nation’s largest owner of upper-upscale, all-suite hotels. FelCor owns interests in 85 hotels and resorts, located in 23 states and Canada. FelCor’s portfolio consists primarily of upper-upscale hotels, which are flagged under global brands - Embassy Suites Hotels®, Doubletree ®, Hilton®, Marriott®, 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 fourth quarter earnings Conference Call on Thursday, February 25, 2010, at 11:00 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 Releases” page. The conference call replay will be archived on the Company’s Web site.

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. Current economic circumstances or a further economic slowdown and the 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, dispositions and debt refinancing, 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 as of and for the three month and year ended December 31, 2009.

 

TABLE OF CONTENTS

   

 

PAGE

Consolidated Statements of Operations(a) 7 Consolidated Balance Sheets(a) 8 Capital Expenditures 9 Supplemental Financial Data 9 Debt Summary 10 Hotel Portfolio Composition 11 Detailed Operating Statistics by Brand 12 Detailed Operating Statistics for FelCor’s Top Markets 13 Non-GAAP Financial Measures 14  

(a) Our consolidated statements of operations and balance sheets have been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The consolidated statements of operations and balance sheets should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent Annual Report on Form 10-K.

    Consolidated Statements of Operations

(in thousands, except per share data)

  Three Months Ended Year Ended December 31, December 31, Revenues: 2009   2008 2009   2008 Hotel operating revenue: Room $ 166,596 $ 187,815 $ 710,530 $ 864,980 Food and beverage 38,632 46,173 139,045 173,432 Other operating departments 13,618 14,677 56,283 61,517 Other revenue   289   328   2,843   2,983 Total revenues   219,135   248,993   908,701   1,102,912   Expenses: Hotel departmental expenses: Room 47,826 49,117 189,587 211,732 Food and beverage 30,122 34,107 111,514 132,732 Other operating departments 6,562 6,675 25,603 27,855 Other property operating costs 64,869 70,357 258,546 293,969 Management and franchise fees 9,971 11,540 43,221 55,720 Taxes, insurance and lease expense 24,476 25,576 98,751 112,374 Corporate expenses 8,387 3,619 24,216 20,698 Depreciation and amortization 37,600 35,962 147,445 137,570 Impairment loss - 43,691 - 60,822 Hurricane loss - - - 952 Other expenses   602   1,990   4,089   4,869 Total operating expenses   230,415   282,634   902,972   1,059,293   Operating income (loss) (11,280 ) (33,641 ) 5,729 43,619 Interest expense, net (37,136 ) (23,903 ) (105,637 ) (98,789 ) Charges related to debt extinguishment   (1,127 )   -   (1,721 )   -   Loss before equity in income of unconsolidated entities, noncontrolling interests and gain on sale of assets (49,543 ) (57,544 ) (101,629 ) (55,170 ) Equity in income (loss) from unconsolidated entities (1,617 ) (9,868 ) (4,814 ) (10,932 ) Gain on involuntary conversion - - - 3,095 Gain on sale of assets   -   -   723   -   Loss from continuing operations (51,160 ) (67,412 ) (105,720 ) (63,007 ) Discontinued operations   (67 )   (22,070 )   (3,371 )   (57,480 )   Net loss (51,227 ) (89,482 ) (109,091 ) (120,487 ) Net loss (income) attributable to noncontrolling interests in other partnerships 231 (65 ) 297 (1,191 ) Net loss attributable to redeemable noncontrolling interests in FelCor LP   273   1,153   672   2,433 Net loss attributable to FelCor (50,723 ) (88,394 ) (108,122 ) (119,245 ) Preferred dividends   (9,679 )   (9,679 )   (38,713 )   (38,713 )   Net loss attributable to FelCor common stockholders $ (60,402 ) $ (98,073 ) $ (146,835 ) $ (157,958 )   Basic and diluted per common share data: Loss from continuing operations $ (0.96 ) $ (1.22 ) $ (2.27 ) $ (1.65 ) Net loss $ (0.96 ) $ (1.57 ) $ (2.33 ) $ (2.57 ) Basic and diluted weighted average common shares outstanding   63,087   62,429   63,114   61,979     Consolidated Balance Sheets

(in thousands)

  2009 2008 Assets Investment in hotels, net of accumulated depreciation of $916,604 at December 31, 2009 and $816,271 at December 31, 2008 $ 2,180,394 $ 2,279,026 Investment in unconsolidated entities 82,040 94,506 Cash and cash equivalents 263,531 50,187 Restricted cash 18,708 13,213 Accounts receivable, net of allowance for doubtful accounts of $406 at December 31, 2009 and $521 at December 31, 2008 28,678 35,240 Deferred expenses, net of accumulated amortization of $14,502 at December 31, 2009 and $13,087 at December 31, 2008 19,977 5,556 Other assets   32,666   34,541 Total assets $ 2,625,994 $ 2,512,269   Liabilities and Equity Debt, net of discount of $64,266 at December 31, 2009 and $1,544 at December 31, 2008 $ 1,773,314 $ 1,551,686 Distributions payable 37,580 8,545 Accrued expenses and other liabilities   131,339   132,604   Total liabilities   1,942,233   1,692,835   Commitments and contingencies   Redeemable noncontrolling interests in FelCor LP at redemption value, 295 and 296 units issued and outstanding at December 31, 2009 and 2008, respectively   1,062   545   Equity: Preferred stock, $0.01 par value, 20,000 shares authorized: Series A Cumulative Convertible Preferred Stock, 12,880 shares, liquidation value of $322,011, issued and outstanding at December 31, 2009 and 2008 309,362 309,362 Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at December 31, 2009 and 2008 169,412 169,412 Common stock, $.01 par value, 200,000 shares authorized and 69,413 shares issued, including shares in treasury, at December 31, 2009 and 2008 694 694 Additional paid-in capital 2,021,837 2,045,482 Accumulated other comprehensive income 23,528 15,347 Accumulated deficit (1,792,822 ) (1,645,947 ) Less: Common stock in treasury, at cost, of 3,845 and 5,189 shares at December 31, 2009 and 2008, respectively   (71,895 )   (99,245 )   Total FelCor stockholders’ equity 660,116 795,105 Noncontrolling interests in other partnerships   22,583   23,784 Total equity   682,699   818,889   Total liabilities and equity $ 2,625,994 $ 2,512,269     Capital Expenditures

(in thousands)

  Three Months Ended Year Ended December 31, December 31, 2009   2008 2009   2008 Improvements and additions to consolidated hotels $ 13,484 $ 33,998 $ 75,949 $ 142,897

Consolidated joint venture partners’ prorata share

of additions to hotels (52 ) (251 ) (805 ) (3,257 ) Prorata share of unconsolidated additions to hotels   556   2,651   4,201   16,549 Total additions to hotels(a) $ 13,988 $ 36,398 $ 79,345 $ 156,189

(a) Includes capitalized interest, property taxes, ground leases and certain employee costs.

  Supplemental Financial Data

(in thousands, except per share information)

  December 31, Total Enterprise Value 2009   2008 Common shares outstanding 65,568 64,224 Units outstanding   295   296 Combined shares and units outstanding 65,863 64,520 Common stock price $ 3.60 $ 1.84 Equity capitalization $ 237,107 $ 118,717 Series A preferred stock 309,362 309,362 Series C preferred stock 169,412 169,412 Consolidated debt 1,773,314 1,551,686 Noncontrolling interests of consolidated debt (3,971 ) (4,078 ) Pro rata share of unconsolidated debt 107,481 112,220 Cash and cash equivalents   (263,531 )   (50,187 ) Total enterprise value (TEV) $ 2,329,174 $ 2,207,132         Debt Summary

(dollars in thousands)

  Maturity Consolidated Encumbered Hotels Interest Rate Date Debt CMBS debt(a) 7 hotels(b) 8.68% May 2010 $ 130,379 Mortgage debt 6 hotels(c) 8.73 May 2010 112,703 Senior notes none 8.50(d) June 2011 86,604 CMBS debt(a) Boca Raton-ES,

Wilmington-DT

6.15 June 2011(e) 14,150 Mortgage debt 9 hotels(f) L +3.50(g) August 2011(h) 200,425 CMBS debt 12 hotels(i) L +0.93(j) November 2011(k) 250,000 Mortgage debt(a) Esmeralda-REN,

Vinoy-REN

L +1.55(l) May 2012(m) 176,555 CMBS debt New Orleans-ES 8.77 May 2013(n) 27,829 Mortgage debt 7 hotels(o) 9.02 April 2014 117,422 CMBS debt(a) 5 hotels(p) 6.66 June-August 2014 70,917 Senior secured notes(q) 14 hotels 10.00 October 2014 572,500 CMBS debt Indianapolis North-ES 5.81 July 2016 11,741 Capital lease and other St. Paul-ES and other 9.44 Various   2,089 Total $ 1,773,314 (a)   The hotels under this debt are subject to separate loan agreements and are not cross collateralized. (b) The hotels that secure this debt are: South San Francisco-ES, Orlando South-ES, Atlanta Buckhead-ES, Chicago Deerfield-ES, Boston Marlboro-ES, Piscataway-ES, and Corpus Christi-ES. (c) The hotels that secure this debt are: Phoenix Crescent-SH, Ft. Lauderdale Cypress Creek-SS, Atlanta Galleria-SS, Chicago O’Hare-SS, Philadelphia Society Hill-SH, and Burlington-SH. (d) As a result of a rating down-grade in February 2009, the interest rate on our 8½% senior notes due 2011 increased to 9%. (e) In February 2010, the maturity dates on these loans were extended from June 2009 to June 2011. (f) The hotels that secure this debt are: Charlotte SouthPark-DT, Houston Medical Center-HI, Myrtle Beach-HLT, Mandalay Beach-ES, Nashville Airport-ES, Philadelphia Independence Mall-HI, Pittsburgh University Center-HI, Santa Barbara-HI, and Santa Monica-HI. (g) LIBOR for this loan is subject to a 2% floor. (h) This loan can be extended for as many as two years, subject to satisfying certain conditions. (i) The hotels that secure this debt are: Anaheim-ES, Bloomington-ES, Charleston Mills House-HI, Dallas DFW South-ES, Deerfield Beach-ES, Jacksonville-ES, Lexington-HS, Dallas Love Field-ES, Raleigh/Durham-DTGS, San Antonio Airport-HI, Tampa Rocky Point-DTGS, and Phoenix Tempe-ES. (j) We have purchased an interest rate cap that caps LIBOR at 7.8% and expires in November 2010 for this notional amount. (k) The maturity date assumes that we will exercise the remaining one-year extension option that is exercisable, at our sole discretion, and would extend the current November 2010 maturity to 2011. (l) We have purchased interest rate caps that cap LIBOR at 6.5% and expire in May 2010 for aggregate notional amounts of $177 million. (m) We have exercised the first of three successive one-year extension options that permit, at our sole discretion, the original May 2009 maturity to be extended to 2012. (n) In February 2010, the maturity date on this loan was extended from May 2010 to May 2013. (o) The hotels that secure this debt are: Milpitas-ES, Napa Valley-ES, Minneapolis Airport-ES, Birmingham-ES, Baton Rouge-ES, Miami Airport-ES, and Ft. Lauderdale-ES. (p) The hotels that secure this debt are: Atlanta Airport-ES, Austin-DTGS, BWI Airport-ES, Orlando Airport-HI, and Phoenix Biltmore-ES. (q)

These senior notes have $636 million in aggregate principal and were sold at a discount for an effective yield of 12.875% before transaction costs. The hotels that secure this debt are: Atlanta Airport-SH, Boston Beacon Hill-HI, Dallas Market Center-ES, Myrtle Beach-ES, Nashville Opryland – Airport-HI, New Orleans French Quarter-HI, Orlando North-ES, Orlando Walt Disney World®-DGS, San Diego on the Bay-HI, San Francisco Burlingame-ES, San Francisco Fisherman’s Wharf-HI, San Francisco Union Square-MAR, Toronto Airport-HI and Toronto Yorkdale-HI.

 

Hotel Portfolio Composition

The following tables set forth, as of December 31, 2009, for 83 Consolidated Hotels distribution by top markets and location type.

        % of % of 2009

Top Markets

Hotels Rooms Total Rooms Hotel EBITDA((a)) South Florida 5 1,439 6 8 Los Angeles area 4 899 4 6 Atlanta 5 1,462 6 6 Orlando 4 1,038 4 5 Philadelphia 2 729 3 4 Minneapolis 3 736 3 4 San Francisco area 6 2,138 9 4 Dallas 4 1,333 6 4 Central California Coast 2 408 2 4 San Antonio 3 874 4 3 Myrtle Beach 2 640 3 3 Boston 2 532 2 3 San Diego 1 600 2 3 Northern New Jersey 3 756 3 3  

Location

Suburban 35 8,781 37 32 Urban 20 6,358 27 27 Airport 18 5,788 24 24 Resort 10 2,927 12 17

(a) Hotel EBITDA is more fully described on page 21.

  Detailed Operating Statistics by Brand (83 consolidated hotels)   Occupancy (%) Three Months Ended     Year Ended   December 31, December 31, 2009   2008 %Variance 2009   2008 %Variance Embassy Suites Hotels 64.3 65.8 (2.3 ) 67.7 72.9 (7.1 ) Holiday Inn 66.6 65.9 1.1 68.7 74.0 (7.2 ) Sheraton and Westin 58.1 59.1 (1.7 ) 60.2 65.8 (8.5 ) Doubletree 63.6 64.9 (2.0 ) 65.5 73.5 (10.8 ) Renaissance and Marriott 60.7 53.7 13.0 61.4 62.8 (2.1 ) Hilton 45.0 48.1 (6.3 ) 60.0 60.6 (0.9 )   Total hotels 63.2 63.6 (0.6 ) 66.2 71.3 (7.2 )     ADR ($) Three Months Ended Year Ended December 31, December 31, 2009 2008 %Variance 2009 2008 %Variance Embassy Suites Hotels 122.01 136.24 (10.4 ) 127.92 143.54 (10.9 ) Holiday Inn 109.12 122.73 (11.1 ) 112.22 128.04 (12.4 ) Sheraton and Westin 105.57 122.64 (13.9 ) 108.47 124.61 (13.0 ) Doubletree 112.46 131.92 (14.7 ) 122.59 141.62 (13.4 ) Renaissance and Marriott 159.14 162.65 (2.2 ) 163.16 173.97 (6.2 ) Hilton 104.01 105.22 (1.2 ) 115.46 126.12 (8.5 )   Total hotels 118.59 132.36 (10.4 ) 123.23 138.75 (11.2 )     RevPAR ($) Three Months Ended Year Ended December 31, December 31, 2009 2008 %Variance 2009 2008 %Variance Embassy Suites Hotels 78.47 89.66 (12.5 ) 86.55 104.57 (17.2 ) Holiday Inn 72.71 80.85 (10.1 ) 77.11 94.81 (18.7 ) Sheraton and Westin 61.32 72.43 (15.3 ) 65.34 82.05 (20.4 ) Doubletree 71.56 85.64 (16.4 ) 80.35 104.03 (22.8 ) Renaissance and Marriott 96.65 87.42 10.6 100.21 109.17 (8.2 ) Hilton 46.84 50.58 (7.4 ) 69.32 76.38 (9.2 )   Total hotels 75.01 84.20 (10.9 ) 81.62 99.00 (17.6 )   Detailed Operating Statistics for FelCor’s Top Markets (83 consolidated hotels)   Occupancy (%) Three Months Ended December 31,   Year Ended December 31,   2009   2008   %Variance 2009   2008 %Variance South Florida 72.1 71.4 1.1 73.0 76.9 (5.1 ) Los Angeles area 67.8 65.1 4.2 71.6 74.5 (3.9 ) Atlanta 66.6 63.6 4.7 69.7 72.4 (3.7 ) Orlando 75.2 75.1 0.1 74.0 79.8 (7.3 ) Philadelphia 69.0 67.6 2.0 66.4 72.9 (8.9 ) Minneapolis 61.8 60.7 1.7 66.6 70.6 (5.7 ) San Francisco area 67.7 64.7 4.6 69.1 74.6 (7.4 ) Dallas 56.0 57.6 (2.8) 58.6 65.9 (11.0 ) Central California Coast 57.0 62.8 (9.2) 72.8 73.1 (0.4 ) San Antonio 61.7 66.4 (7.1) 70.0 78.1 (10.4 ) Myrtle Beach 40.0 43.4 (7.7) 59.6 58.5 1.8 Boston 76.1 77.3 (1.6) 77.8 79.2 (1.7 ) San Diego 75.2 70.2 7.1 72.6 78.5 (7.5 ) Northern New Jersey 61.8 66.9 (7.6) 62.2 71.1 (12.5 )     ADR ($) Three Months Ended December 31, Year Ended December 31, 2009 2008 %Variance 2009 2008 %Variance South Florida 118.65 135.70 (12.6) 129.18 148.82 (13.2 ) Los Angeles area 127.95 142.73 (10.4) 135.63 157.20 (13.7 ) Atlanta 99.90 115.13 (13.2) 104.71 120.93 (13.4 ) Orlando 102.12 121.01 (15.6) 110.75 125.68 (11.9 ) Philadelphia 139.07 160.70 (13.5) 135.22 151.60 (10.8 ) Minneapolis 122.63 135.72 (9.6) 127.53 144.82 (11.9 ) San Francisco area 136.41 138.69 (1.6) 129.66 143.35 (9.5 ) Dallas 108.92 123.53 (11.8) 114.92 124.48 (7.7 ) Central California Coast 140.15 149.05 (6.0) 156.45 172.03 (9.1 ) San Antonio 95.70 108.70 (12.0) 102.74 112.90 (9.0 ) Myrtle Beach 103.63 99.23 4.4 133.48 141.71 (5.8 ) Boston 131.99 148.69 (11.2) 133.97 154.30 (13.2 ) San Diego 117.34 145.89 (19.6) 124.75 157.47 (20.8 ) Northern New Jersey 134.51 157.47 (14.6) 140.38 162.37 (13.5 )     RevPAR ($) Three Months Ended December 31, Year Ended December 31, 2009 2008 %Variance 2009 2008 %Variance South Florida 85.58 96.84 (11.6) 94.28 114.42 (17.6 ) Los Angeles area 86.69 92.85 (6.6) 97.07 117.10 (17.1 ) Atlanta 66.58 73.26 (9.1) 73.01 87.60 (16.7 ) Orlando 76.79 90.90 (15.5) 81.93 100.34 (18.3 ) Philadelphia 95.91 108.64 (11.7) 89.81 110.55 (18.8 ) Minneapolis 75.75 82.40 (8.1) 84.88 102.21 (17.0 ) San Francisco area 92.41 89.79 2.9 89.54 106.87 (16.2 ) Dallas 60.98 71.12 (14.3) 67.34 81.99 (17.9 ) Central California Coast 79.90 93.60 (14.6) 113.95 125.80 (9.4 ) San Antonio 59.07 72.22 (18.2) 71.89 88.21 (18.5 ) Myrtle Beach 41.50 43.04 (3.6) 79.49 82.89 (4.1 ) Boston 100.39 114.90 (12.6) 104.22 122.15 (14.7 ) San Diego 88.28 102.48 (13.9) 90.58 123.64 (26.7 ) Northern New Jersey 83.13 105.37 (21.1) 87.35 115.49 (24.4 )

Non-GAAP Financial Measures

We refer in this release to certain “non-GAAP financial measures.” These measures, including FFO, Adjusted FFO, Same-Store Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store 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 Loss to FFO

(in thousands, except per share data)

  Three Months Ended December 31, 2009   2008     Per Share     Per Share Dollars Shares Amount Dollars Shares Amount Net loss $ (51,227 ) $ (89,482 ) Noncontrolling interests 504 1,088 Preferred dividends(a)   (9,679 )   (9,679 ) Net loss attributable to FelCor common stockholders (60,402 ) 63,087 $ (0.96 ) (98,073 ) 62,429 $ (1.57 ) Depreciation and amortization 37,600 - 0.60 35,962 - 0.58 Depreciation, discontinued operations and unconsolidated entities 4,128 - 0.07 3,832 - 0.06 Gain on sale of hotels (910 ) - (0.01 ) - - - Noncontrolling interests in FelCor LP   (273 ) 295   (0.01 )   (1,153 )   745   (0.01 ) FFO (19,857 ) 63,382 (0.31 ) (59,432 ) 63,174 (0.94 ) Impairment loss - - 43,691 - 0.69 Impairment loss, discontinued operations and unconsolidated entities - - - 19,395 - 0.31 Charges related to debt extinguishment 1,127 - 0.02 - - - Conversion costs(b) - - - 26 - - Severance costs 61 - - 850 - 0.01 Liquidated damages, discontinued operations - - - 11,060 - 0.18 Conversion of unvested restricted stock   - -   -   - 22   - Adjusted FFO (18,669 ) 63,382 (0.29 ) 15,590 63,196 0.25 Adjusted FFO from discontinued operations   513 -   -   (235 ) -   (0.01 ) Same-Store Adjusted FFO $ (18,156 ) 63,382 $ (0.29 ) $ 15,355 63,196 $ 0.24

(a) We suspended our preferred dividends in March 2009 and unpaid preferred dividends continue to accrue until paid.

(b) Costs related to the conversion of our San Francisco Union Square hotel to a Marriott.

  Reconciliation of Net Loss to FFO

(in thousands, except per share data)

  Year Ended December 31, 2009   2008     Per Share     Per Share Dollars Shares Amount Dollars Shares Amount Net loss $ (109,091 ) $ (120,487 ) Noncontrolling interests 969 1,242 Preferred dividends(a)   (38,713 )   (38,713 ) Net loss attributable to FelCor common stockholders (146,835 ) (157,958 ) Less: Dividends declared on unvested restricted stock compensation   -   (1,041 ) Numerator for basic and diluted loss attributable to common stockholders (146,835 ) 63,114 $ (2.33 ) (158,999 ) 61,979 $ (2.57 ) Depreciation and amortization 147,445 - 2.34 137,570 - 2.22 Depreciation, discontinued operations and unconsolidated entities 17,204 - 0.27 18,261 - 0.29 Gain on involuntary conversion - - - (3,095 ) - (0.05 ) Gain on sale of hotels (910 ) - (0.01 ) (1,193 ) - (0.02 ) Noncontrolling interests in FelCor LP (672 ) 296 (0.01 ) (2,433 ) 1,199 (0.03 ) Dividend declared on unvested restricted stock compensation - - - 1,041 - 0.02 Conversion of unvested restricted stock   - 331   (0.01 )   - -   - FFO 16,232 63,741 0.25 (8,848 ) 63,178 (0.14 ) Impairment loss - - - 60,822 - 0.96 Impairment loss, discontinued operations and unconsolidated entities 5,516 - 0.08 59,837 - 0.95 Charges related to debt extinguishment 1,721 - 0.03 - - - Hurricane loss(b) - - - 952 - 0.01 Hurricane loss, discontinued operations and unconsolidated entities - - - 767 - 0.01 Conversion costs(c) 447 - 0.01 507 - 0.01 Severance costs 612 - 0.01 850 - 0.01 Liquidated damages, discontinued operations - - - 11,060 - 0.18 Lease termination costs 469 - 0.01 - - - Conversion of unvested restricted stock   - -   -   - 98   - Adjusted FFO 24,997 63,741 0.39 125,947 63,276 1.99 Adjusted FFO from discontinued operations   (1,850 ) -   (0.03 )   (4,343 ) -   (0.07 ) Same-Store Adjusted FFO $ 23,147 63,741 $ 0.36 $ 121,604 63,276 $ 1.92

(a) We suspended our preferred dividends in March 2009 and unpaid preferred dividends continue to accrue until paid.

(b) Represents hurricane-related expenses.

(c) Costs related to the conversion of our San Francisco Union Square hotel to a Marriott.

    Reconciliation of Net Loss to EBITDA

(in thousands)

  Three Months Ended Year Ended December 31, December 31, 2009   2008 2009   2008 Net loss $ (51,227 ) $ (89,482 ) $ (109,091 ) $ (120,487 ) Depreciation and amortization 37,600 35,962 147,445 137,570 Depreciation, discontinued operations and unconsolidated entities 4,128 3,832 17,204 18,261 Interest expense 37,263 24,299 106,337 100,411 Interest expense, unconsolidated entities 916 2,032 3,724 6,237 Amortization of stock compensation 1,241 656 5,165 4,451 Noncontrolling interests in other partnerships   231   (65 )   297   (1,191 ) EBITDA 30,152 (22,766 ) 171,081 145,252 Gain on sale of hotels (910 ) - (910 ) (1,193 ) Gain on involuntary conversion - - - (3,095 ) Charges related to debt extinguishment 1,127 - 1,721 - Impairment loss - 43,691 - 60,822 Impairment loss, discontinued operations and unconsolidated entities - 19,395 5,516 59,837 Hurricane loss(a) - - - 952 Hurricane loss, discontinued operations and unconsolidated entities - - - 767 Conversion costs(b) - 26 447 507 Severance costs 61 850 612 850 Liquidated damages, discontinued operations - 11,060 - 11,060 Lease termination costs   -   -   469   - Adjusted EBITDA 30,430 52,256 178,936 275,759 Adjusted EBITDA from discontinued operations   513   (235 )   (1,850 )   (4,343 ) Same-Store Adjusted EBITDA $ 30,943 $ 52,021 $ 177,086 $ 271,416

(a) Represents hurricane-related expenses.

(b) Costs related to the conversion of our San Francisco Union Square hotel to a Marriott.

    Reconciliation of Adjusted EBITDA to Hotel EBITDA

(in thousands)

  Three Months Ended Year Ended December 31, December 31, 2009   2008 2009   2008 Adjusted EBITDA $ 30,430 $ 52,256 $ 178,936 $ 275,759 Other revenue (289 ) (328 ) (2,843 ) (2,983 ) Equity in income from unconsolidated subsidiaries (excluding interest, depreciation and impairment expense) (3,586 ) (4,800 ) (18,106 ) (24,576 ) Noncontrolling interests in other partnerships (excluding interest, depreciation and severance expense) 406 814 2,305 3,648 Consolidated hotel lease expense 9,315 11,822 41,121 54,266 Unconsolidated taxes, insurance and lease expense (2,038 ) (1,884 ) (8,079 ) (8,212 ) Interest income (127 ) (395 ) (700 ) (1,622 ) Other expenses (excluding conversion costs, severance costs and lease termination costs) 526 1,019 2,566 3,417 Corporate expenses (excluding amortization expense of stock compensation) 7,146 2,963 19,051 16,247 Gain on sale of assets - - (723 ) - Adjusted EBITDA from discontinued operations   514   (236 )   (1,850 )   (4,343 ) Hotel EBITDA $ 42,297 $ 61,231 $ 211,678 $ 311,601    

Reconciliation of Net Loss to Hotel EBITDA

(in thousands)

  Three Months Ended Year Ended December 31, December 31, 2009   2008 2009   2008 Net loss $ (51,227 ) $ (89,482 ) $ (109,091 ) $ (120,487 ) Discontinued operations 67 22,070 3,371 57,480 Equity in loss (income) from unconsolidated entities 1,617 9,868 4,814 10,932 Consolidated hotel lease expense 9,315 11,822 41,121 54,266 Unconsolidated taxes, insurance and lease expense (2,038 ) (1,884 ) (8,079 ) (8,212 ) Interest expense, net 37,136 23,903 105,637 98,789 Charges related to debt extinguishment 1,127 - 1,721 - Corporate expenses 8,387 3,619 24,216 20,698 Depreciation and amortization 37,600 35,962 147,445 137,570 Impairment loss - 43,691 - 60,822 Hurricane loss - - - 952 Gain on sale of assets - - (723 ) - Gain on involuntary conversion - - - (3,095 ) Other expenses 602 1,990 4,089 4,869 Other revenue   (289 )   (328 )   (2,843 )   (2,983 ) Hotel EBITDA $ 42,297 $ 61,231 $ 211,678 $ 311,601     Hotel EBITDA and Hotel EBITDA Margin

(dollars in thousands)

  Three Months Ended Year Ended December 31, December 31, 2009   2008 2009   2008 Total revenues $ 219,135 $ 248,993 $ 908,701 $ 1,102,912 Other revenue   (289 )   (328 )   (2,843 )   (2,983 ) Hotel operating revenue 218,846 248,665 905,858 1,099,929 Hotel operating expenses   (176,549 )   (187,434 )   (694,180 )   (788,328 ) Hotel EBITDA $ 42,297 $ 61,231 $ 211,678 $ 311,601 Hotel EBITDA margin(a) 19.3% 24.6% 23.4% 28.3%

(a) Hotel EBITDA as a percentage of hotel operating revenue.

    Reconciliation of Total Operating Expenses to Hotel Operating Expenses

(dollars in thousands)

  Three Months Ended Year Ended December 31, December 31, 2009   2008 2009   2008 Total operating expenses $ 230,415 $ 282,634 $ 902,972 $ 1,059,293 Unconsolidated taxes, insurance and lease expense

2,038

1,884

8,079

8,212

Consolidated hotel lease expense (9,315 ) (11,822 ) (41,121 ) (54,266 ) Corporate expenses (8,387 ) (3,619 ) (24,216 ) (20,698 ) Depreciation and amortization (37,600 ) (35,962 ) (147,445 ) (137,570 ) Impairment loss - (43,691 ) - (60,822 ) Hurricane loss - - - (952 ) Other expenses   (602 )   (1,990 )   (4,089 )   (4,869 ) Hotel operating expenses $ 176,549 $ 187,434 $ 694,180 $ 788,328    

Reconciliation of Ratio of Operating Income (Loss) to Total Revenues to Hotel EBITDA Margin

  Three Months Ended Year Ended December 31, December 31, 2009   2008 2009   2008 Ratio of operating income (loss) to total revenues (5.1 )% (13.5 )% 0.6 % 4.0 % Other revenue (0.1 ) (0.1 ) (0.3 ) (0.3 ) Unconsolidated taxes, insurance and lease expense (0.9 ) (0.8 ) (0.9 ) (0.7 ) Consolidated hotel lease expense 4.2 4.7 4.5 4.9 Other expenses 0.2 0.8 0.5 0.4 Corporate expenses 3.8 1.4 2.7 1.9 Depreciation and amortization 17.2 14.5 16.3 12.5 Impairment loss - 17.6 - 5.5 Hurricane loss -   -   -   0.1   Hotel EBITDA margin 19.3 % 24.6 % 23.4 % 28.3 %   Reconciliation of Forecasted Net Loss Attributable to FelCor to Forecasted FFO and EBITDA

(in millions, except per share and unit data)

  Full Year 2010 Guidance Low Guidance   High Guidance   Per Share   Per Share Dollars Amount Dollars Amount Net loss attributable to FelCor $ (169 ) $ (157 ) Preferred dividends   (39 )   (39 ) Net loss applicable to FelCor common stockholders (208 ) $ (3.30) (196 ) $ (3.11) Depreciation(b) 158 158 Noncontrolling interests in FelCor LP   (1 )   (1 ) FFO $ (51 ) $ (0.80)(a) $ (39 ) $ (0.61)(a)   Net loss attributable to FelCor $ (169 ) $ (157 ) Depreciation(b) 158 158 Interest expense(b) 155 155 Amortization expense 7 7 Noncontrolling interests in FelCor LP   (1 )   (1 ) EBITDA $ 150 $ 162

(a) Weighted average shares and units are 64.0 million.

(b) Includes pro rata portion of unconsolidated entities.

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 Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store 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 (loss) attributable to FelCor 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 attributable to parent (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 attributable to parent (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, including but not limited to these described below, provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted FFO, Same-Store Adjusted FFO, Adjusted EBITDA and Same-Store Adjusted EBITDA when combined with GAAP net income attributable to FelCor, 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, Same-Store Adjusted FFO, Adjusted EBITDA and Same-Store 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, Same-Store Adjusted FFO, Adjusted EBITDA and Same-Store Adjusted EBITDA because they do not reflect our actual performance for that period.

In addition, to derive Adjusted EBITDA and Same-Store Adjusted EBITDA we exclude gains or losses on the sale of depreciable 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.

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 noncontrolling interests 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.

Limitations of Non-GAAP Measures

Our management and Board of Directors use FFO, Adjusted FFO, Same-Store Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store Adjusted 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, Same-Store Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin, as presented by us, may not be comparable to the same measures 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, Same-Store Adjusted FFO, Adjusted FFO per share, EBITDA, Adjusted EBITDA or Same-Store 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, Same-Store Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store 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.