FelCor Lodging Trust Incorporated (NYSE: FCH) today reported
operating results for the first quarter ended March 31,
2010.
Summary:
•
Today, we closed a $212 million
mortgage loan secured by nine hotels. Proceeds were used to repay
six mortgage loans totaling $210 million that were secured by 11
hotels (we unencumbered two hotels) and were scheduled to mature in
May.
•
Adjusted EBITDA was $38.5 million
for the quarter, which was significantly better than internal
expectations. Adjusted FFO per share was $(0.17) for the quarter.
These were $5 million and $0.08 better than analysts’ original
estimates.
• RevPAR at our 83 consolidated hotels decreased only 0.5%
for the quarter, compared to a 2.1% decline nationally. Our
portfolio continues to gain market share. • Hotel EBITDA
margin decreased only 177 basis points for the quarter. Positive
flow-through on the improvement to budgeted revenue was 63%,
notwithstanding the improvement in revenue was from increased
occupancy. • Net loss for the quarter was $62.9 million.
First Quarter Operating Results:
Revenue per available room (“RevPAR”) for our 83 consolidated
hotels was $82.87, a 0.5% decline compared to the same period in
2009, which was better than the 2.1% decline for the industry
(according to Smith Travel Research) and better than our hotels’
competitive sets. Our slight RevPAR decline was driven by a 7.9%
increase in occupancy to 67.9%, but offset by a 7.8% decline in
average daily rate (“ADR”) to $122.06, compared to the same period
in 2009. Occupancy increased at 65 of our hotels during the
quarter. Market share in the quarter for our portfolio continued to
improve. RevPAR for our 83 consolidated hotels increased 4.9%
during March, compared to prior year, as occupancy increased 11.3%.
Additionally, the rate decline improved in March relative to the
quarter.
“The pace of the recovery in the lodging industry has been more
robust than anticipated, leading to much stronger than expected
RevPAR. The corporate transient, leisure and group segments are
improving. Importantly, occupancy gains were strong throughout the
week, led by Tuesday and Wednesday, and corporate transient room
nights increased 7% during the quarter. Although corporate
transient and group occupancies have begun to grow, our visibility
into future trends remains somewhat limited, and booking windows
are exceptionally short. Therefore, we remain intently focused on
gaining market share and optimizing the mix of business to maximize
rates,” said Richard A. Smith, FelCor’s President and Chief
Executive Officer.
“As the recovery takes hold, we will continue to benefit from
our diversified, high-quality portfolio which should continue to
outperform the industry. We now have completed our near-term
balance sheet initiatives and are well-positioned to benefit from a
broad economic recovery. We are ready to take advantage of
opportunities to augment growth and continue to seek ways to
increase shareholder value,” added Mr. Smith.
Hotel EBITDA for the quarter was $51.0 million, compared to
$55.5 million for the same period in 2009. Hotel EBITDA margin
was 22.6%, a 177 basis point decrease compared to 2009. Positive
flow-through on the improvement to budgeted revenue was 63%,
notwithstanding the improvement in revenue was from increased
occupancy. Hotel EBITDA represents EBITDA generated by our 83
consolidated hotels prior to corporate expenses and joint venture
adjustments.
Adjusted EBITDA for the quarter was $38.5 million, compared
to $47.4 million in 2009. Adjusted EBITDA in the prior year
period includes EBITDA from hotels sold in 2009.
Adjusted funds from operations (“FFO”) for the quarter was
$(10.6) million, or $(0.17) per share, compared to
$13.8 million, or $0.22 per share, in 2009. The change in
Adjusted FFO is largely attributed to a $14.9 million increase
in interest expense, compared to 2009.
Net loss attributable to common stockholders for the quarter was
$72.1 million, or $1.14 per share, compared to a net loss of
$30.7 million, or $0.49 per share, for 2009. Net loss in the
current year included a $21.1 million impairment charge
related to two hotels that we expect to transfer to the lenders in
satisfaction of the related debt.
EBITDA, Adjusted EBITDA, Same Store Adjusted EBITDA, Hotel
EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Same-Store
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 March 31, 2010, we had $1.77 billion of
consolidated debt outstanding, with a weighted average interest
rate of 7.28%, and $276 million of cash and cash
equivalents.
Today, we entered into a new $212 million loan, secured by
nine hotels, that matures in 2015. The new loan bears interest at
LIBOR (subject to a 3.0% floor) plus 5.1%. The proceeds were used
to repay $210 million in loans that were secured by 11 hotels
and were scheduled to mature in May. With this financing, we
resolved all of our remaining 2010 debt maturities on terms that
are significantly more favorable than the debt it refinanced, and
we were able to unencumber two previously mortgaged hotels. Two
remaining loans (totaling $32 million) mature in May 2010. The
cash flows for the hotels that secure those loans do not cover debt
service, and we stopped funding the shortfalls in December 2009. We
have been unable to negotiate an acceptable debt modification or
reduction that made sense for our stockholders with regard to these
loans. Therefore, these two hotels will be transferred to the
lenders in full satisfaction of the debt.
“We are very pleased with the successful refinancing of our
near-term debt maturities. Our efforts are complete, as we have now
resolved all of our remaining 2010 maturities. The most recent
refinancing improves our balance sheet by lowering our average
interest rate and providing us with two additional unencumbered
hotels. We will continue to look for additional opportunities to
strengthen our balance sheet as the capital markets improve,” said
Andrew J. Welch, FelCor’s Executive Vice President and Chief
Financial Officer.
Portfolio Management:
For the quarter ended March 31, 2010, we spent
$8.6 million on capital expenditures at our hotels (including
our pro rata share of joint venture expenditures).
During the quarter, we sold the Holiday Inn Express in Salina,
Kansas for $3.7 million. This hotel was part of an
unconsolidated joint venture that involved three other hotels
located in Kansas, all of which have been sold.
Outlook:
The pace of the recovery in the lodging industry has increased,
reflecting improved corporate transient and group demand. Recent
economic data indicates that demand will continue to improve as the
capital markets, business activity and consumer confidence improve.
Although occupancy is recovering, our hotels still have not
achieved sufficient compression to begin widespread changes in the
customer mix, which are necessary to boost rates. Therefore, ADR
remains below prior year levels. Although we continue to implement
strict cost controls, higher occupancy and lower rates will impact
operating margins.
We expect our portfolio RevPAR to outperform the industry as a
result of our high-quality, renovated portfolio. Additionally, our
hotels are relatively less affected by new supply growth because
the average number of rooms under construction in our markets is
28% lower than the industry.
For 2010 we anticipate:
• RevPAR to increase between 0% and 3%; •
Adjusted EBITDA to be between $166 million and $177 million;
• Adjusted FFO per share to be between $(0.47) and $(0.30);
• Net loss to be between $157 million and $146 million; and
• Interest expense to be approximately $151 million.
FelCor, a real estate investment trust, is the nation’s largest
owner of upper-upscale, all-suite hotels. FelCor owns interests in
84 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 first quarter earnings Conference
Call on Tuesday, May 4, 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 FelCor’s financial position as of and for the
three months ended March 31, 2010.
TABLE OF CONTENTS
PAGE
Consolidated Statements of Operations(a) 6 Consolidated Balance
Sheets(a) 7 Capital Expenditures 8 Supplemental Financial Data 8
Debt Summary 9 Schedule of Encumbered Hotels 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 Quarterly Report on Form 10-Q.
Consolidated Statements of
Operations
(in thousands, except per share
data)
Three Months Ended
March 31,
2010 2009
Revenues: Hotel operating revenue: Room $ 177,260 $ 178,179 Food
and beverage 35,496 35,851 Other operating departments 13,283
13,703 Other revenue 365 286 Total
revenues 226,404 228,019 Expenses:
Hotel departmental expenses: Room 47,787 45,222 Food and beverage
27,909 27,887 Other operating departments 6,086 6,136 Other
property related costs 65,604 65,354 Management and franchise fees
10,535 11,141 Taxes, insurance and lease expense 24,680 24,662
Corporate expenses 9,847 6,122 Depreciation and amortization 37,598
36,651 Impairment loss 21,060 - Other expenses 561
696 Total operating expenses 251,667
223,871 Operating income (loss) (25,263 )
4,148 Interest expense, net (36,240 ) (21,292 ) Loss
before equity in income (loss) from unconsolidated entities (61,503
) (17,144 ) Equity in income (loss) from unconsolidated entities
(1,474 ) (3,424 ) Loss from continuing operations
(62,977 ) (20,568 ) Discontinued operations 35
(854 ) Net loss (62,942 ) (21,422 ) Net loss attributable to
noncontrolling interests in other partnerships 229 216 Net loss
attributable to redeemable noncontrolling interests in FelCor LP
325 142 Net loss attributable to FelCor
(62,388 ) (21,064 ) Preferred dividends (9,678 )
(9,678 ) Net loss attributable to FelCor common stockholders $
(72,066 ) $ (30,742 ) Basic and diluted per common share data: Loss
from continuing operations $ (1.14 ) $ (0.47 ) Net loss $ (1.14 ) $
(0.49 ) Basic and diluted weighted average common shares
outstanding 63,475 62,989
Consolidated Balance
Sheets
(in thousands)
March 31,2010
December 31,2009
Assets
Investment in hotels, net of
accumulated depreciation of $936,120 at March 31, 2010 and $916,604
at December 31, 2009
$
2,131,646
$
2,180,394
Investment in unconsolidated entities 80,230 82,040 Cash and cash
equivalents 276,008 263,531 Restricted cash 18,943 18,708
Accounts receivable, net of
allowance for doubtful accounts of $317 at March 31, 2010 and $406
at December 31, 2009
35,285 28,678
Deferred expenses, net of
accumulated amortization of $16,130 at March 31, 2010 and $14,502
at December 31, 2009
19,825 19,977 Other assets 32,902 32,666
Total assets $ 2,594,839 $ 2,625,994
Liabilities and Equity
Debt, net of discount of $61,764
at March 31, 2010 and $64,267 at December 31, 2009
$
1,771,115
$
1,773,314
Distributions payable 47,258 37,580 Accrued expenses and other
liabilities 162,859 131,339
Total liabilities 1,981,232 1,942,233
Commitments and contingencies
Redeemable noncontrolling
interests in FelCor LP at redemption value, 295 units issued and
outstanding at March 31, 2010 and December 31, 2009
1,681 1,062 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 March 31, 2010 and December 31, 2009
309,362 309,362
Series C Cumulative Redeemable
Preferred Stock, 68 shares, liquidation value of $169,950, issued
and outstanding at March 31, 2010 and December 31, 2009
169,412 169,412
Common stock, $.01 par value,
200,000 shares authorized and 69,413 shares issued, including
shares in treasury, at March 31, 2010 and December 31, 2009
694 694 Additional paid-in capital 2,022,235 2,021,837 Accumulated
other comprehensive income 25,598 23,528 Accumulated deficit
(1,864,898 ) (1,792,822 )
Less: Common stock in treasury, at
cost, of 3,985 shares at March 31, 2010 and 3,845 shares at
December 31, 2009
(72,229 )
(71,895
)
Total FelCor stockholders’ equity 590,174 660,116
Noncontrolling interests in other partnerships 21,752
22,583 Total equity 611,926
682,699 Total liabilities and equity $ 2,594,839
$ 2,625,994
Capital Expenditures
(in thousands)
Three Months Ended
March 31,
2010 2009
Improvements and additions to majority-owned hotels $ 8,200 $
25,274 Consolidated joint venture partners’ pro rata share of
additions to hotels (36 ) (254 ) Pro rata share of unconsolidated
additions to hotels 426 1,462 Total
additions to hotels(a) $ 8,590 $ 26,482
(a) Includes capitalized interest, property taxes, ground leases
and certain employee costs.
Supplemental Financial
Data
(in thousands, except per share
information)
March 31, December 31, Total Enterprise
Value 2010 2009
Common shares outstanding 65,428 65,568 Units outstanding
295 295 Combined shares and units outstanding
65,723 65,863 Common stock price $ 5.70 $ 3.60 Market
capitalization $ 374,621 $ 237,107 Series A preferred stock 309,362
309,362 Series C preferred stock 169,412 169,412 Consolidated debt
1,771,115 1,773,314 Noncontrolling interests of consolidated debt
(3,904 ) (3,971 ) Pro rata share of unconsolidated debt 105,635
107,481 Cash and cash equivalents (276,008 ) (263,531
) Total enterprise value (TEV) $ 2,450,233 $ 2,329,174
Consolidated Debt
Summary
(dollars in thousands)
Interest Rate Maturity Date March 31,
2010 Pro Forma(a) Mortgage debt(b) 8.73 % May
2010 $ 111,758 $ - CMBS debt(c) 8.70 May 2010 97,933 - CMBS debt(d)
8.62 May 2010 31,740 31,740 Senior notes 8.50 (e) June 2011 86,622
86,622 CMBS debt 6.15 June 2011 13,631 13,631 Mortgage debt L +
3.50 (f) August 2011(g) 199,675 199,675 CMBS debt L + 0.93 (h)
November 2011(i) 250,000 250,000 Mortgage debt L + 1.55 (j) May
2012(k) 176,627 176,627 CMBS debt 8.77 May 2013 27,770 27,770
Mortgage debt 9.02 April 2014 116,407 116,407 CMBS debt 6.66
June-August 2014 70,484 70,484 Senior secured notes(l) 10.00
October 2014 574,913 574,913 Mortgage debt L + 5.10
(m)
April 2015 - 212,000 CMBS debt 5.81 July 2016 11,636 11,636 Capital
lease and other 9.09 Various 1,919 1,919 Total $
1,771,115 $ 1,773,424 (a) Pro forma reflects the new $212
million mortgage loan and repayment of loans aggregating $210
million as if they occurred on March 31, 2010. (b)
This loan was refinanced in May
2010. As the result of this refinancing, two previously encumbered
hotels were unencumbered.
(c)
These loans were refinanced in May
2010.
(d)
We have been unable to negotiate
an acceptable debt modification or reduction that made sense for
our stockholders with regard to these loans. Therefore, these two
hotels will be transferred to the lenders in full satisfaction of
the debt.
(e) As a result of a rating down-grade in February 2009, the
interest rate on our 8½% senior notes due 2011 increased to 9%. (f)
LIBOR for this loan is subject to a 2% floor. (g) This loan can be
extended for as many as two years, subject to satisfying certain
conditions. (h) We have purchased an interest rate cap that caps
LIBOR at 7.8% and expires in November 2010 for this notional
amount. (i) 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. (j) We have purchased interest rate caps that cap
LIBOR at 6.5% and expire in May 2010 for aggregate notional amounts
of $177 million. (k) 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.
(l) These notes have $636 million in aggregate principal and were
sold at a discount for an effective yield of 12.875% before
transaction costs.
(m)
LIBOR for this loan is subject to
a 3% floor. We have purchased interest rate caps that cap LIBOR at
5% and expire in May 2012 for notional amounts aggregating $212
million.
Pro Forma Schedule of
Encumbered Hotels(a)
(dollars in millions)
Consolidated Debt
March 31, 2010 Balance
Encumbered Hotels
CMBS debt(b) $ 32 Chicago Deerfield – ES and Piscataway – ES
CMBS debt(b) $ 14 Boca Raton – ES and Wilmington – DT
Mortgage debt $ 200
Charlotte SouthPark – DT, Houston
Medical Center – HI, Myrtle Beach – HLT, Mandalay Beach – ES,
Nashville Airport – ES, Philadelphia Independence Mall – HI,
Pittsburgh University Center – HI and Santa Monica at the Pier –
HI
CMBS debt $ 250
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
Mortgage debt(b) $ 177
Esmeralda Resort & Spa – REN
and Vinoy Resort & Golf Club – REN
CMBS debt $ 28 New Orleans Convention Center – ES
Mortgage debt $ 116
Baton Rouge – ES, Birmingham – ES,
Ft. Lauderdale – ES, Miami Airport – ES, Milpitas – ES, Minneapolis
Airport – ES and Napa Valley – ES
CMBS debt(b) $ 70
Atlanta Airport – ES, Austin –
DTGS, BWI Airport – ES, Orlando Airport – HI and Phoenix Biltmore –
ES
Senior secured notes $ 575
Atlanta Airport – SH, Boston
Beacon Hill – HI, Dallas Market Center – ES, Myrtle Beach Resort –
ES, Nashville Opryland – Airport – HI, New Orleans French Quarter –
HI, Orlando North – ES, Orlando Walt Disney World® - DTGS, 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
Mortgage debt $ 212
Atlanta Buckhead – ES, Atlanta
Galleria – SS, Boston Marlboro – ES, Burlington – SH, Corpus
Christi – ES, Ft. Lauderdale Cypress Creek – SS, Orlando South –
ES, Philadelphia Society Hill – SH and South San Francisco – ES
CMBS debt $ 12 Indianapolis North – ES Capital lease
and other $ 2 St. Paul – ES
(a) Pro forma reflects the new $212 million mortgage loan
and repayment of loans aggregating $210 million as if they
occurred on March 31, 2010.
(b) The hotels under this debt are subject to separate loan
agreements and are not cross collateralized.
Hotel Portfolio
Composition
The following table illustrates the distribution of our 83
Consolidated Hotels by brand, market and location at March 31,
2010.
Brand
Hotels
Rooms
% of
Total Rooms
% of 2009
Hotel EBITDA(a)
Embassy Suites Hotels 47 12,132 51 60 Holiday Inn 15 5,154 22 18
Sheraton and Westin 9 3,217 13 9 Doubletree 7 1,471 6 7 Renaissance
and Marriott 3 1,321 6 3 Hilton 2 559 2 3
Market
South Florida 5 1,439 6 8 Los Angeles area 4 899 4 6 Atlanta 5
1,462 6 6 Orlando 4 1,038 4 4 Philadelphia 2 729 3 4 Minneapolis 3
736 3 4 San Francisco area 6 2,138 9 4 Dallas 4 1,333 6 4 Central
California Coast 2 408 2 4 San Antonio 3 874 4 3 Myrtle Beach 2 640
3 3 Boston 2 532 2 3 San Diego 1 600 3 3 Northern New Jersey 3 756
3 3 Other 37 10,270 42 41
Location
Suburban 35 8,781 37 32 Urban 20 6,358 27 27 Airport 18 5,788 24 24
Resort 10 2,927 12 17
(a) Hotel EBITDA is more fully described on page 19.
Detailed Operating Statistics
by Brand
(83 consolidated hotels)
Occupancy (%) Three Months Ended March 31,
2010 2009 %Variance Embassy
Suites Hotels 70.2 66.5 5.6 Holiday Inn 67.6 62.5 8.1 Sheraton and
Westin 63.4 55.0 15.2 Doubletree 70.0 63.6 10.1 Renaissance and
Marriott 65.3 56.3 16.0 Hilton 46.2 47.3 (2.3 ) Total hotels
67.9 62.9 7.9
ADR ($) Three Months
Ended March 31, 2010 2009 %Variance
Embassy Suites Hotels 128.79 138.64 (7.1 ) Holiday Inn 104.30
110.45 (5.6 ) Sheraton and Westin 104.88 118.11 (11.2 ) Doubletree
118.75 139.17 (14.7 ) Renaissance and Marriott 183.84 201.68 (8.8 )
Hilton 95.75 97.59 (1.9 ) Total hotels 122.06 132.37 (7.8 )
RevPAR ($) Three Months Ended March
31, 2010 2009 %Variance Embassy Suites
Hotels 90.43 92.22 (1.9 ) Holiday Inn 70.52 69.06 2.1 Sheraton and
Westin 66.51 65.01 2.3 Doubletree 83.12 88.47 (6.0 ) Renaissance
and Marriott 120.08 113.55 5.8 Hilton 44.21 46.13 (4.2 )
Total hotels 82.87 83.30 (0.5 )
Detailed Operating Statistics
for FelCor’s Top Markets
(83 consolidated hotels)
Occupancy (%) Three Months Ended March 31,
2010 2009 % Variance South
Florida 85.1 79.3 7.4 Los Angeles area 70.5 68.6 2.7 Atlanta 75.2
65.6 14.7 Orlando 80.9 75.1 7.7 Philadelphia 60.4 49.4 22.3
Minneapolis 67.0 60.9 10.1 San Francisco area 65.3 55.9 16.8 Dallas
65.4 59.4 10.0 Central California Coast 69.7 76.6 (8.9 ) San
Antonio 74.7 69.6 7.4 Myrtle Beach 44.1 48.2 (8.5 ) Boston 77.1
70.6 9.2 San Diego 71.5 64.0 11.7 Northern New Jersey 59.9 59.6 0.5
ADR ($) Three Months Ended March 31,
2010 2009 % Variance South Florida 163.64
170.57 (4.1 ) Los Angeles area 132.32 138.48 (4.4 ) Atlanta 105.48
111.22 (5.2 ) Orlando 114.47 131.55 (13.0 ) Philadelphia 111.42
129.62 (14.0 ) Minneapolis 125.73 131.14 (4.1 ) San Francisco area
122.73 120.64 1.7 Dallas 112.99 126.94 (11.0 ) Central California
Coast 138.16 136.52 1.2 San Antonio 98.33 105.65 (6.9 ) Myrtle
Beach 96.37 98.43 (2.1 ) Boston 120.19 126.00 (4.6 ) San Diego
115.09 132.31 (13.0 ) Northern New Jersey 132.26 151.68 (12.8 )
RevPAR ($) Three Months Ended March 31,
2010 2009 % Variance South Florida 139.33
135.25 3.0 Los Angeles area 93.23 95.04 (1.9 ) Atlanta 79.36 72.99
8.7 Orlando 92.65 98.84 (6.3 ) Philadelphia 67.34 64.05 5.1
Minneapolis 84.26 79.80 5.6 San Francisco area 80.11 67.43 18.8
Dallas 73.89 75.44 (2.1 ) Central California Coast 96.33 104.53
(7.8 ) San Antonio 73.46 73.48 - Myrtle Beach 42.53 47.49 (10.4 )
Boston 92.67 88.95 4.2 San Diego 82.33 84.72
(2.8 ) Northern New Jersey 79.22 90.37 (12.3 )
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 March 31, 2010
2009 Dollars Shares
Per ShareAmount
Dollars Shares
Per ShareAmount
Net loss $ (62,942 ) $ (21,422 ) Noncontrolling interests
554 358 Preferred dividends(a) (9,678 ) (9,678 )
Net loss attributable to FelCor
common stockholders
(72,066 ) 63,475 $ (1.14 ) (30,742 ) 62,989 $ (0.49 ) Depreciation
and amortization 37,598 - 0.59 36,651 - 0.58 Depreciation,
discontinued operations and unconsolidated entities 3,663 - 0.06
4,421 - 0.07 Gain on sale of unconsolidated subsidiary (559 ) -
(0.01 ) - - - Noncontrolling interests in FelCor LP (325 ) 295 -
(142 ) 296 -
Conversion of options and unvested
restricted stock
- - - - 128
-
FFO (31,689 ) 63,770 (0.50 ) 10,188 63,413 0.16
Impairment loss 21,060 - 0.33 - - - Impairment loss, discontinued
operations and unconsolidated entities - - - 3,436 - 0.06
Conversion costs(b) - - - 38 - - Severance costs - -
- 135 - -
Adjusted
FFO (10,629 ) 63,770 (0.17 ) 13,797 63,413 0.22 Adjusted FFO
from discontinued operations (35 ) - -
(1,248 ) - (0.02 )
Same-Store Adjusted FFO $ (10,664
) 63,770 $ (0.17 ) $ 12,549 63,413 0.20
(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
EBITDA
(in thousands)
Three Months Ended March 31,
2010 2009 Net loss
$ (62,942 ) $ (21,422 ) Depreciation and amortization 37,598 36,651
Depreciation, discontinued operations and unconsolidated entities
3,663 4,421 Interest expense 36,345 21,469 Interest expense,
unconsolidated entities 1,500 1,020 Amortization of stock
compensation 1,616 1,398 Noncontrolling interests in other
partnerships 229 216
EBITDA
18,009 43,753 Impairment loss 21,060 - Impairment loss,
discontinued operations and unconsolidated entities - 3,436
Conversion costs(a) - 38 Severance costs - 135 Gain on sale of
unconsolidated subsidiary (559 ) -
Adjusted
EBITDA 38,510 47,362 Adjusted EBITDA from discontinued
operations (35 ) (1,248 )
Same-Store Adjusted
EBITDA $ 38,475 $ 46,114
(a) 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 EndedMarch 31, 2010
2009 Adjusted EBITDA $
38,510 $ 47,362 Other revenue (365 ) (286 ) Equity in income from
unconsolidated subsidiaries (excluding interest,depreciation and
impairment expense) (3,751 ) (3,999 ) Noncontrolling interests in
other partnerships (excluding interest, depreciationand severance
expense) 392 443 Consolidated hotel lease expense 9,493 10,060
Unconsolidated taxes, insurance and lease expense (1,888 ) (1,934 )
Interest income (105 ) (177 )
Other expenses (excluding
conversion costs and severance costs)
561 512 Corporate expenses (excluding amortization expense of stock
compensation) 8,231 4,724 Adjusted EBITDA from discontinued
operations (35 ) (1,248 )
Hotel EBITDA $
51,043 $ 55,457
Reconciliation of Net Loss to
Hotel EBITDA
(in thousands)
Three Months EndedMarch 31, 2010
2009 Net loss $
(62,942 ) $ (21,422 ) Discontinued operations (35 ) 854 Equity in
loss from unconsolidated entities 1,474 3,424 Consolidated hotel
lease expense 9,493 10,060 Unconsolidated taxes, insurance and
lease expense (1,888 ) (1,934 ) Interest expense, net 36,240 21,292
Corporate expenses 9,847 6,122 Depreciation and amortization 37,598
36,651 Impairment loss 21,060 - Other expenses 561 696 Other
revenue (365 ) (286 )
Hotel EBITDA $ 51,043
$ 55,457
Hotel EBITDA and Hotel EBITDA
Margin
(dollars in thousands)
Three Months EndedMarch 31, 2010
2009 Total revenues $ 226,404 $
228,019 Other revenue (365 ) (286 ) Hotel operating
revenue 226,039 227,733 Hotel operating expenses (174,996 )
(172,276 ) Hotel EBITDA $ 51,043 $ 55,457
Hotel EBITDA margin(a) 22.6 % 24.4 %
(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
March 31,
2010 2009 Total
operating expenses $ 251,667 $ 223,871 Unconsolidated taxes,
insurance and lease expense 1,888 1,934 Consolidated hotel lease
expense (9,493 ) (10,060 ) Corporate expenses (9,847 ) (6,122 )
Depreciation and amortization (37,598 ) (36,651 ) Impairment loss
(21,060 ) - Other expenses (561 ) (696 ) Hotel
operating expenses $ 174,996 $ 172,276
Reconciliation of Ratio of
Operating Income (Loss) to Total Revenues to Hotel EBITDA
Margin
Three Months Ended March 31, 2010
2009 Ratio of operating income (loss) to total
revenues (11.2 )% 1.8 % Other revenue (0.2 ) (0.1 ) Unconsolidated
taxes, insurance and lease expense (0.8 ) (0.8 ) Consolidated hotel
lease expense 4.2 4.4 Other expenses 0.3 0.3 Corporate expenses 4.4
2.7 Depreciation and amortization 16.6 16.1 Impairment loss 9.3
- Hotel EBITDA margin 22.6 % 24.4 %
Reconciliation of Forecasted
Net Loss Attributable to FelCor to Forecasted Adjusted FFO and
Adjusted EBITDA
(in millions, except per share and
unit data)
Full Year 2010 Guidance Low Guidance
High Guidance Dollars
Per
ShareAmount(a)
Dollars
Per
ShareAmount(a)
Net loss attributable to FelCor $ (157 ) $ (146 ) Preferred
dividends (39 ) (39 )
Net loss applicable to
FelCor common stockholders (196 ) $ (3.11 ) (185 ) $ (2.94 )
Depreciation(b) 159 159 Gain on sale of assets (1 ) (1 )
Noncontrolling interests in FelCor LP (1 ) (1 )
FFO (39 ) $ (0.61 ) (28 ) $ (0.44 ) Impairment 21 21 Gain on
extinguishment of debt (12 ) (12 )
Adjusted
FFO $ (30 ) $ (0.47 ) $ (19 ) $ (0.30 )
Net loss
attributable to FelCor $ (157 ) $ (146 ) Depreciation(b) 159
159 Interest expense(b) 151 151 Amortization expense 6 6
Noncontrolling interests in FelCor LP (1 ) (1 )
EBITDA 158 169 Impairment 21 21 Gain on extinguishment of
debt (12 ) (12 ) Gain on sale of assets (1 ) (1 )
Adjusted EBITDA $ 166 $ 177
(a) Weighted average shares and units are 63.8 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.
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