FelCor Lodging Trust Incorporated (NYSE: FCH), today reported
operating results for the first quarter ended March 31,
2012.
First Quarter Summary:
- Revenue per available room ("RevPAR")
for 69 same-store hotels increased 3.6%. RevPAR for same-store
hotels not under renovation or redevelopment increased 7.1%.
- Hotel EBITDA margin remained the same
as the prior year at 21.8% for the quarter and increased 125 basis
points for hotels not under renovation.
- Adjusted funds from operations ("FFO")
per share were a loss of $0.02, and Adjusted EBITDA was
$41.4 million, both of which met the high end of our
expectations.
- Net loss was $28.9 million.
- Agreed to sell six non-strategic hotels
for $103 million. Proceeds from the sale will be used to repay
$73 million of related debt and other costs with the remaining
proceeds used to pay $30 million of accrued preferred
dividends.
First Quarter Operating Results:
RevPAR (for 69 same-store hotels) was $95.31, a 3.6% increase
compared to the same period in 2011. The increase was driven by a
3.5% increase in average daily rate ("ADR") to $137.02 and a 10
basis point increase in occupancy to 69.6%. RevPAR for hotels not
under renovation increased 7.1%.
Commenting on the first quarter, Richard A. Smith, President and
Chief Executive Officer of FelCor, said, “We continue to execute
our long-term strategic plan. We have six hotels under contract and
expect to sell a majority of the remaining non-strategic hotels on
the market this year. As part of our previously announced balance
restructuring plan, we are using the proceeds to repay debt and pay
accrued preferred dividends as we work to substantially reduce
leverage, stagger debt maturities and lower our cost of borrowing.
The redevelopment projects and value creation plans at our newly
acquired hotels are also progressing as expected. These hotels will
provide the company with substantial RevPAR and EBITDA growth in
the future. For the quarter, RevPAR at our hotels not under
renovation was very strong and FFO per share was at the high end of
our expectations. These results reflect our high-quality and
diversified portfolio as well as strong lodging fundamentals.
Corporate transient demand is strong, and group pace continues to
slowly improve. Coupled with historically low supply growth, our
confidence in a sustained lodging recovery is growing, and we are
raising our 2012 outlook. Last quarter, the lodging industry
experienced the highest quarterly ADR growth since the first
quarter of 2008. As hotels approach prior peak occupancy levels,
ADR growth should continue to accelerate."
Hotel EBITDA was $48.2 million, 3.5% higher than
$46.6 million for the same period in 2011. Hotel EBITDA and
other same-store metrics reflect 69 consolidated hotels (45 core
hotels plus 24 non-strategic hotels). Same-store metrics include
Royalton and Morgans, which were acquired in May 2011, and exclude
six hotels held for sale at March 31, 2012, which are included
in discontinued operations. Hotel EBITDA for the hotels not under
renovation and redevelopment increased 12.6% compared to the prior
year period. Displacement from renovations and redevelopments
during the quarter negatively impacted Hotel EBITDA by
$3 million.
Adjusted FFO was a loss of $2.1 million, or $0.02 per
share, which is the same as the prior year and met the high end of
our expectations.
Adjusted EBITDA (which includes our pro rata share from joint
ventures) was $41.4 million, 6.3% lower than the same period
in 2011. Same-store Adjusted EBITDA was $37.2 million, 7.2%
higher than the $34.7 million for the same period in 2011.
Net loss attributable to common stockholders was
$38.1 million, or $0.31 per share for the quarter, compared to
a net loss of $41.3 million, or $0.43 per share, for the same
period in 2011.
EBITDA, Adjusted EBITDA, same-store Adjusted EBITDA, Hotel
EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Adjusted FFO per
share are all non-GAAP financial measures. See our discussion of
“Non-GAAP Financial Measures” beginning on page 16 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.
Portfolio Repositioning:
We have agreed to sell six non-strategic hotels for
$103.0 million, in aggregate, which represents a 6.8% cap rate
based on 2011 net operating income. The purchaser has made a
$3.9 million hard money deposit toward the purchase price, and
the transaction is expected to close late in the second quarter.
After repaying $73 million of secured debt and other costs at
closing, we will use the remaining $30 million of proceeds to
pay a portion of the accrued preferred dividends (almost half of
the $67.8 million arrearage) in conjunction with paying
regular quarterly preferred dividends on July 31, 2012. We
expect that the remaining accrued dividends will be paid in 2012
using proceeds from future asset sales.
As part of our long-term portfolio repositioning strategy, we
are selling 39 non-strategic hotels, including nine sold to date.
We are currently marketing 10 hotels, and have six additional
hotels currently under contract. We expect to generate
approximately $350 million in gross proceeds from selling
these 16 hotels. We will be using these funds to pay all accrued
preferred dividends, reduce debt and strengthen our balance sheet.
We expect to bring the 14 remaining hotels to market in late 2012
or in early 2013. The proceeds from selling these hotels will allow
us to continue to reduce debt, build a sound and flexible balance
sheet, and improve long-term FFO and stockholder value.
Capital Expenditures:
In the quarter, we spent $41.6 million on capital
improvements at our hotels (including our pro rata share of
joint venture expenditures). During 2012, the company anticipates
spending approximately $85 million on improvements and
renovations, a majority of which is focused on 11 hotels, including
four of our largest properties. Please see page 11 of this release
for more detail on renovations. We expect to spend an additional
$35 million on value-enhancing redevelopment projects at three
hotels: Morgans, Myrtle Beach Oceanfront Resort-Embassy Suites, and
the Boston Copley Plaza-Fairmont.
During the quarter, we were renovating or redeveloping 10
hotels. As of April, we had substantially completed renovations or
redevelopments at seven of these hotels. RevPAR for the 10 hotels
under renovation decreased 19.6% during the quarter. These hotels
are expected to generate above market growth for the remainder of
2012.
Balance Sheet:
At March 31, 2012, we had $1.6 billion of consolidated
debt, with an average interest rate of 7.5% and weighted average
maturity of 4.4 years. We had $98.2 million of cash and cash
equivalents and $189 million available under our line of
credit.
Andrew J. Welch, FelCor's Executive Vice President and Chief
Financial Officer, said, "We have made solid strides laying the
foundation for building a strong and flexible balance sheet, and
expect that the remainder of the year will continue to see
substantial progress. Selling non-strategic hotels and paying
accrued preferred dividends this year are important steps toward
that goal. Also, as we sell hotels this year, we expect to repay
our only loan that matures in 2013 with sale proceeds and to
refinance a $108 million mortgage loan that would otherwise mature
in 2014. By the end of 2014, our balance sheet will reflect
substantially improved financing costs, well-staggered debt
maturities and a significant number of unencumbered hotels."
Outlook:
We are increasing our 2012 operating outlook to reflect strong
first quarter results that were at the high end of our expectations
and higher RevPAR for the remainder of the year. Additionally, we
are adjusting our outlook to reflect anticipated asset sales. Our
previous outlook did not contemplate any asset sales. However,
given the solid progress of the asset sale program and the strong
interest from potential buyers, we now assume (for guidance
purposes) that 18 hotels are sold during 2012 (all of the 16 hotels
currently on the market plus two additional hotels for which we
have received unsolicited offers). The previously announced sale of
the six-hotel portfolio for $103 million is expected to occur
May 31. The revised low end of our outlook reflects the sale of the
12 remaining hotels during the middle of the third quarter. The
high end of our outlook reflects the sale of the 12 remaining
hotels during the middle of the fourth quarter.
The following table reconciles our 2012 Adjusted EBITDA outlook
(in millions):
Low
Mid
High
Previous Adjusted EBITDA Outlook $ 205 $ 209.5 $ 214 Improved
Operations 2 1.5 1
Outlook Adjusted for Operations 207 211 215 Announced Asset
Sales (6 hotels) (5 ) (5 ) (5 ) Additional Asset Sales (12 hotels)
(10 ) (7 ) (4 )
Current Adjusted EBITDA
Outlook $ 192 $ 199 $ 206
For purposes of calculating 2012 same-store EBITDA, we are
providing the following table:
Current Adjusted EBITDA Outlook $ 192
$ 199 $ 206
Discontinued Operations(a)
(24 ) (27 ) (30 )
Same-store Adjusted
EBITDA (57 hotels) $ 168 $ 172 $ 176
(a) EBITDA for assets sold/expected to sell from January 1,
2012, through the date of sale/expected sale.
Based on the above assumptions for 2012, we anticipate:
- Same-store RevPAR (57 hotels) to
increase from 5% to 6.5%;
- Adjusted EBITDA to be between
$192 million and $206 million;
- Adjusted FFO per share to be between
$0.18 and $0.28;
- Net loss attributable to FelCor to be
between $73 million and $65 million; and
- Interest expense to be between
$125 million and $127 million.
About FelCor:
FelCor, a real estate investment trust, is the nation's largest
owner of upper-upscale, all-suite hotels. FelCor owns interests in
76 properties located in major markets throughout 22 states.
FelCor's diversified portfolio of hotels and resorts are flagged
under global brands such as: Doubletree®, Embassy Suites Hotels®,
Hilton®, Fairmont®, 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 1, 2012, at 10:00 a.m. (Central Time).
The conference call will be Webcast simultaneously on FelCor's Web
site at www.felcor.com. Interested
investors and other parties who wish to access the call can 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 also 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 an 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 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 month period ended March 31, 2012.
TABLE OF CONTENTS
Page Consolidated Statements of
Operations(a) 7 Consolidated Balance Sheets(a) 8 Consolidated Debt
Summary 9 Schedule of Encumbered Hotels 10 Capital Expenditures 11
Hotels Under Renovation or Redevelopment During First Quarter 2012
11 Supplemental Financial Data 12 Discontinued Operations 12 Hotel
Portfolio Composition 13 Detailed Operating Statistics by Brand 14
Comparable Hotels Operating Statistics for Our Top Markets 15
Non-GAAP Financial Measures 16
(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,
2012 2011
Revenues: Hotel operating revenue: Room $ 173,016 $ 160,337 Food
and beverage 36,524 34,817 Other operating departments 11,627
11,870 Other revenue 275 225 Total
revenues 221,442 207,249 Expenses:
Hotel departmental expenses: Room 47,733 43,352 Food and beverage
29,749 27,380 Other operating departments 5,734 5,658 Other
property-related costs 64,435 60,532 Management and franchise fees
10,366 9,655 Taxes, insurance and lease expense 22,313 19,778
Corporate expenses 8,212 9,537 Depreciation and amortization 31,573
30,787 Other expenses 963 631 Total
operating expenses 221,078 207,310
Operating income (loss) 364 (61 ) Interest expense, net (31,041 )
(32,769 ) Debt extinguishment (7 ) (245 ) Gain on involuntary
conversion, net — 150 Loss before
equity in loss from unconsolidated entities (30,684 ) (32,925 )
Equity in loss from unconsolidated entities (224 )
(1,583 ) Loss from continuing operations (30,908 ) (34,508 )
Discontinued operations 2,047 2,782 Net
loss (28,861 ) (31,726 ) Net loss (income) attributable to
noncontrolling interests in other partnerships 202 (58 ) Net loss
attributable to redeemable noncontrolling interests in FelCor LP
196 120 Net loss attributable to FelCor
(28,463 ) (31,664 ) Preferred dividends (9,678 )
(9,678 ) Net loss attributable to FelCor common stockholders $
(38,141 ) $ (41,342 ) Basic and diluted per common share data: Loss
from continuing operations $ (0.32 ) $ (0.46 ) Net loss $ (0.31 ) $
(0.43 ) Basic and diluted weighted average common shares
outstanding 123,665 95,350
Consolidated Balance Sheets
(in thousands)
March 31, December
31, 2012 2011
Assets
Investment in hotels, net of accumulated
depreciation of $929,432 and $987,895 at March 31, 2012 and
December 31, 2011, respectively
$ 1,880,472 $ 1,953,795 Hotel development 124,862 120,163
Investment in unconsolidated entities 68,900 70,002 Hotels held for
sale 82,643 — Cash and cash equivalents 98,175 93,758 Restricted
cash 83,354 84,240
Accounts receivable, net of allowance for
doubtful accounts of $396 and $333 at March 31, 2012 and December
31, 2011, respectively
36,737 27,135
Deferred expenses, net of accumulated
amortization of $13,004 and $13,119 at March 31, 2012 and December
31, 2011, respectively
28,784 29,772 Other assets 23,248 24,363
Total assets $ 2,427,175 $ 2,403,228
Liabilities and Equity
Debt, net of discount of $29,559 and
$32,069 at March 31, 2012 and December 31, 2011, respectively
$ 1,625,605 $ 1,596,466 Distributions payable 76,293 76,293 Accrued
expenses and other liabilities 173,530 140,548
Total liabilities 1,875,428 1,813,307
Commitments and contingencies
Redeemable noncontrolling interests in
FelCor LP, 636 units issued and outstanding at March 31, 2012 and
December 31, 2011
3,061 3,026 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, 2012 and December 31, 2011
309,362 309,362
Series C Cumulative Redeemable Preferred
Stock, 68 shares, liquidation value of $169,950, issued and
outstanding at March 31, 2012 and December 31, 2011
169,412 169,412
Common stock, $0.01 par value, 200,000
shares authorized and 124,218 shares issued at March 31, 2012, and
124,281 shares issued at December 31, 2011
1,242 1,243 Additional paid-in capital 2,353,447 2,353,251
Accumulated other comprehensive income 26,044 25,738 Accumulated
deficit (2,335,812 ) (2,297,468 ) Total FelCor
stockholders’ equity 523,695 561,538 Noncontrolling interests in
other partnerships 24,991 25,357 Total
equity 548,686 586,895 Total
liabilities and equity $ 2,427,175 $ 2,403,228
Consolidated Debt Summary
(dollars in thousands)
Encumbered Hotels
Interest Rate
(%)
Maturity Date
March 31, 2012 December 31,
2011 Line of credit(a) 11 L + 4.50 August 2014(b)
$ 36,000 $ —
Hotel mortgage debt Mortgage debt 8
L + 5.10(c)
April 2015 202,767 202,982 Mortgage debt 9 L + 2.20 May 2013(d)
148,504 156,398 Mortgage debt 7 9.02 April 2014 108,473 109,044
Mortgage debt 5(e) 6.66 June - August 2014 66,895 67,375 Mortgage
debt 1 5.81 July 2016 10,760 10,876
Senior notes Senior
secured notes 6 6.75 June 2019 525,000 525,000 Senior secured
notes(f) 11 10.00 October 2014 462,346 459,931
Other(g) — L + 1.50 December 2012 64,860
64,860 Total 58 $ 1,625,605 $ 1,596,466
(a) We currently have $189 million available under our $225
million line of credit.
(b) The line of credit can be extended for one year (to 2015),
subject to satisfying certain conditions.
(c) LIBOR (for this loan) is subject to a 3% floor. We purchased
an interest rate cap ($212 million notional amount) that caps
LIBOR at 5.0% and expires May 2012.
(d) This loan can be extended for six months, subject to
satisfying certain conditions.
(e) The hotels securing this debt are subject to separate loan
agreements and are not cross-collateralized.
(f) These notes have $492 million in aggregate principal
outstanding ($144 million and $96,000 in aggregate principal
amount was redeemed in June 2011 and January 2012, respectively)
and were initially sold at a discount that provided an effective
yield of 12.875% before transaction costs.
(g) This loan is related to our Knickerbocker development
project and is fully secured by restricted cash and a mortgage.
Because we were able to assume an existing loan when we purchased
this hotel, we were not required to pay any local mortgage
recording tax. When that loan is transferred to a new lender and
made part of our construction loan, we expect to only pay such tax
to the extent of the incremental principal amount of the
construction loan.
Schedule of Encumbered Hotels
(dollars in millions)
March 31, 2012 Consolidated Debt
Balance Encumbered Hotels Line of credit $ 36
Boca Raton - ES, Charlotte SouthPark - DT,
Dana Point - DTGS, Houston Medical Center - HI, Myrtle Beach - HLT,
Mandalay Beach - ES, Nashville Airport - ES, Philadelphia
Independence Mall - HI, Pittsburgh University Center - HI, Santa
Barbara Goleta - HI and Santa Monica at the Pier - HI
Mortgage debt $ 203
Atlanta Buckhead - ES, Atlanta Galleria -
SS, Boston Marlboro - ES, Burlington - SH, Ft. Lauderdale Cypress
Creek - SS, Orlando South - ES, Philadelphia Society Hill - SH and
South San Francisco - ES
CMBS debt $ 149
Anaheim - ES, Bloomington - ES, Charleston
Mills House - HI, Deerfield Beach - ES, Jacksonville - ES, Dallas
Love Field - ES, Raleigh/Durham - DTGS, San Antonio Airport - HI
and Tampa Rocky Point - DTGS
Mortgage debt $ 108 Baton Rouge - ES, Birmingham - ES, Ft.
Lauderdale - ES, Miami Airport - ES, Milpitas - ES, Minneapolis
Airport - ES and Napa Valley - ES CMBS debt(a) $ 67 Atlanta Airport
- ES, Austin - DTGS, BWI Airport - ES, Orlando Airport - HI and
Phoenix Biltmore - ES CMBS debt $ 11 Indianapolis North - ES Senior
secured notes $ 525 Boston Copley - FMT, Los Angeles International
Airport - ES, Indian Wells Esmeralda Resort & Spa - REN, St.
Petersburg Vinoy Resort & Golf Club - REN, Morgans and Royalton
Senior secured notes $ 462
Atlanta Airport - SH, Boston Beacon Hill -
HI, Myrtle Beach Resort - ES, Nashville Opryland-Airport - HI, New
Orleans French Quarter - HI, Orlando Walt Disney World® - DTGS, San
Diego on the Bay - HI, San Francisco Waterfront - ES, San Francisco
Fisherman's Wharf - HI, San Francisco Union Square - MAR, and
Toronto Airport - HI
(a) The hotels securing this debt are subject to separate loan
agreements and are not cross-collateralized.
Capital Expenditures
(in thousands)
Three Months Ended March 31,
2012 2011
Improvements and additions to majority-owned hotels $ 41,385 $
15,038 Partners' pro rata share of additions to consolidated joint
venture hotels (360 ) (189 ) Pro rata share of additions to
unconsolidated hotels 562 1,133 Total
additions to hotels(a) $ 41,587 $ 15,982
(a) Includes capitalized interest, property taxes, ground leases
and certain employee costs.
Hotels Under Renovation or
Redevelopment During the First Quarter 2012
Affected
Areas
Start
Date
End
Date
Renovations
Philadelphia Society
Hill-SH
guest rooms, corridors, public areas, meeting space, re-concept
F&B Nov-2011 Apr-2012 Mandalay Beach-ES guestrooms, corridors,
lobby, exterior Oct-2011 May-2012 Napa Valley-ES guestrooms,
corridors, public areas Nov-2011 Apr-2012 (a) Austin-DTGS
guestrooms, corridors, public areas, entrance, F&B upgrade
Jun-2011 Feb-2012 Boston Beacon Hill-HI guestrooms, lobby, F&B
Dec-2011 Apr-2012 Charlotte SouthPark-DT guestrooms, corridors,
exterior, lobby, upgrade F&B Nov-2011 May-2012 Pittsburgh
University
Center-HI
guestrooms, public areas, meeting space Dec-2011 Mar-2012
Redevelopments
Boston Copley Plaza-FMT guestrooms, corridors, public areas,
meeting space, fitness area, re-concept F&B Nov-2011 Apr-2012
(b) Myrtle Beach Oceanfront
Resort-ES
public space, lobby, re-concept F&B Oct-2011 Apr-2012 Morgans
guestrooms, corridors, public areas, meeting space, fitness area,
re-concept F&B Feb-2012 Aug-2012
(a) The public area redevelopment will begin in the fourth
quarter 2012.
(b) The food and beverage redevelopment will be completed in
June 2012.
Supplemental Financial Data
(in thousands, except per share
information)
March 31, December
31,
Total Enterprise
Value
2012 2011 Common shares
outstanding 124,218 124,281 Units outstanding 636
636 Combined shares and units outstanding 124,854
124,917 Common stock price $ 3.60 $ 3.05
Market
capitalization $ 449,474 $ 380,997 Series A preferred stock
309,362 309,362 Series C preferred stock 169,412 169,412
Consolidated debt 1,625,605 1,596,466 Noncontrolling interests of
consolidated debt (2,873 ) (2,894 ) Pro rata share of
unconsolidated debt 74,946 75,178 Cash and cash equivalents
(98,175 ) (93,758 )
Total enterprise value (TEV) $
2,527,751 $ 2,434,763
Discontinued Operations
(in thousands)
Discontinued operations include the results of operations of six
hotels designated as held for sale at March 31, 2012 and eight
hotels sold in 2011. Condensed financial information for the hotels
included in discontinued operations is as follows:
Three Months Ended March 31,
2012 2011
Operating revenue $ 14,362 $ 30,322 Operating expenses
(11,593 ) (26,456 ) Operating income 2,769 3,866 Interest
expense, net (722 ) (1,077 ) Debt extinguishment —
(7 )
Income from discontinued operations 2,047 2,782
Depreciation and amortization 1,419 4,883 Interest expense
722 1,077
EBITDA from discontinued
operations 4,188 8,742 Debt extinguishment —
7
Adjusted EBITDA from discontinued operations
$ 4,188 $ 8,749
Hotel Portfolio
Composition
The following table illustrates the
distribution of same-store hotels.
Brand Hotels
Rooms % of Total Rooms
2011 Hotel EBITDA
(in thousands)(a)
Embassy Suites Hotels 21 5,742 29 79,977 Holiday Inn 9 3,119 16
32,535 Doubletree and Hilton 5 1,206 6 15,347 Sheraton and Westin 4
1,604 8 15,198 Renaissance and Marriott 3 1,321 7 11,354 Fairmont 1
383 1 5,699 Morgans/Royalton 2 282 1 3,845
Core hotels
45 13,657 68 163,955 Non-strategic
hotels 24 6,393 32 56,105 Total same-store hotels 69 20,050 100
220,060
Market San Francisco area 4 1,637 8 16,808
Boston 3 915 5 14,027 Los Angeles area 3 677 3 13,727 South Florida
3 923 5 13,113 Philadelphia 2 728 4 8,805 Atlanta 3 952 5 8,418
Myrtle Beach 2 640 3 7,860 Dallas 2 784 4 7,151 San Diego 1 600 3
6,142 Orlando 2 473 2 5,809 New York 2 282 1 3,845 Other markets 18
5,046 25 58,250
Core hotels 45 13,657
68 163,955 Non-strategic hotels 24 6,393 32 56,105
Total same-store hotels 69 20,050 100 220,060
Location Urban 16 4,930 25 64,841 Airport 10 3,267 16 35,570
Resort 10 2,927 15 35,194 Suburban 9 2,533 12 28,350
Core
hotels 45 13,657 68 163,955
Non-strategic hotels 24 6,393 32 56,105 Total same-store hotels 69
20,050 100 220,060
(a) Hotel EBITDA is more fully described on page 21.
The following tables set forth occupancy, ADR and RevPAR for the
three months ended March 31, 2012 and 2011, and the percentage
changes therein for the periods presented, for our same-store
Consolidated Hotels included in continuing operations.
Detailed Operating Statistics by
Brand
Occupancy (%) Three Months Ended
March 31, 2012
2011 %Variance Embassy Suites Hotels 73.8 73.3 0.7
Holiday Inn 67.3 66.4 1.3 Doubletree and Hilton 62.9 60.7 3.6
Sheraton and Westin 57.6 65.9 (12.6 ) Renaissance and Marriott 73.5
71.0 3.6 Fairmont 27.7 53.0 (47.8 ) Morgans/Royalton 76.0 79.9 (5.0
)
Core hotels (45) 68.1 69.1 (1.4
) Non-strategic hotels (24) 72.6 70.5 3.0 Total same-store
hotels (69) 69.6 69.5 —
ADR ($) Three Months
Ended March 31, 2012 2011 %Variance
Embassy Suites Hotels 145.74 140.47 3.8 Holiday Inn 123.36 116.64
5.8 Doubletree and Hilton 133.10 132.80 0.2 Sheraton and Westin
102.24 110.06 (7.1 ) Renaissance and Marriott 210.58 196.66 7.1
Fairmont 213.15 199.71 6.7 Morgans/Royalton 249.85 246.10 1.5
Core hotels (45) 144.75 140.24 3.2
Non-strategic hotels (24) 121.64 115.91 4.9 Total same-store hotels
(69) 137.02 132.34 3.5
RevPAR ($) Three Months
Ended March 31, 2012 2011 %Variance
Embassy Suites Hotels 107.57 102.98 4.5 Holiday Inn 83.00 77.48 7.1
Doubletree and Hilton 83.72 80.66 3.8 Sheraton and Westin 58.86
72.49 (18.8 ) Renaissance and Marriott 154.82 139.54 10.9 Fairmont
58.96 105.82 (44.3 ) Morgans/Royalton 189.78 196.69 (3.5 )
Core
hotels (45) 98.62 96.88 1.8 Non-strategic
hotels (24) 88.29 81.71 8.1 Total same-store hotels (69) 95.31
92.02 3.6
Comparable Hotels Operating Statistics
for Our Top Markets
Occupancy (%) Three Months Ended
March 31, 2012
2011 %Variance San Francisco area 73.8 69.3 6.5
Boston 49.0 68.6 (28.5 ) Los Angeles area 81.0 72.2 12.2 South
Florida 86.0 85.3 0.9 Philadelphia 48.7 57.8 (15.8 ) Atlanta 72.0
74.9 (3.8 ) Myrtle Beach 42.9 40.8 5.0 Dallas 68.5 69.8 (1.8 ) San
Diego 79.8 73.8 8.1 Orlando 84.8 84.8 — New York 76.0 79.9 (5.0 )
Other markets 66.6 67.1 (0.7 )
Core hotels (45) 68.1
69.1 (1.4 ) Non-strategic hotels (24) 72.6
70.5 3.0 Total same-store hotels (69) 69.6 69.5 —
ADR
($) Three Months Ended March 31, 2012
2011 %Variance San Francisco area 156.02 136.15 14.6
Boston 151.02 146.90 2.8 Los Angeles area 141.27 145.14 (2.7 )
South Florida 184.16 174.04 5.8 Philadelphia 120.14 124.14 (3.2 )
Atlanta 110.84 106.87 3.7 Myrtle Beach 106.24 98.75 7.6 Dallas
107.44 122.49 (12.3 ) San Diego 121.18 122.03 (0.7 ) Orlando 143.72
147.43 (2.5 ) New York 249.85 246.10 1.5 Other markets 146.61
141.38 3.7
Core hotels (45) 144.75 140.24
3.2 Non-strategic hotels (24) 121.64 115.91 4.9 Total
same-store hotels (69) 137.02 132.34 3.5
RevPAR ($)
Three Months Ended March 31, 2012 2011
%Variance San Francisco area 115.14 94.34 22.0 Boston 74.02
100.72 (26.5 ) Los Angeles area 114.41 104.79 9.2 South Florida
158.44 148.41 6.8 Philadelphia 58.49 71.77 (18.5 ) Atlanta 79.82
80.02 (0.2 ) Myrtle Beach 45.55 40.31 13.0 Dallas 73.58 85.46 (13.9
) San Diego 96.66 90.08 7.3 Orlando 121.83 125.00 (2.5 ) New York
189.78 196.69 (3.5 ) Other markets 97.66 94.83 3.0
Core hotels
(45) 98.62 96.88 1.8 Non-strategic hotels
(24) 88.29 81.71 8.1 Total same-store hotels (69) 95.31 92.02 3.6
Non-GAAP Financial MeasuresWe refer in
this release to certain “non-GAAP financial measures.” These
measures, including FFO, 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 and Adjusted
FFO
(in thousands, except per share data)
Three Months Ended March 31,
2012 2011 Dollars
Shares Per Share Amount Dollars
Shares Per Share Amount
Net loss $ (28,861 ) $ (31,726 ) Noncontrolling interests
398 62 Preferred dividends (9,678 ) (9,678 )
Net loss attributable to FelCor common
stockholders
(38,141 ) 123,665 $ (0.31 ) (41,342 ) 95,350 $ (0.43 ) Depreciation
and amortization 31,573 — 0.26 30,787 — 0.32
Depreciation, discontinued operations and
unconsolidated entities
4,256 — 0.03 8,111 — 0.09 Gain on involuntary conversion — — — (150
) — — Noncontrolling interests in FelCor LP (196 ) 636
— (120 ) 285 (0.01 )
FFO (2,508
) 124,301 (0.02 ) (2,714 ) 95,635 (0.03 ) Acquisition costs 38 — —
119 — —
Debt extinguishment, including
discontinued operations
7 — — 252 — 0.01 Severance costs 380 — —
— — —
Adjusted FFO $
(2,083 ) 124,301 $ (0.02 ) $ (2,343 ) 95,635 $ (0.02 )
Reconciliation of Net Loss to EBITDA, Adjusted EBITDA
and Same-store Adjusted EBITDA
(in thousands)
Three Months Ended March 31,
2012 2011
Net loss $ (28,861 ) $ (31,726 ) Depreciation and
amortization 31,573 30,787 Depreciation, discontinued operations
and unconsolidated entities 4,256 8,111 Interest expense 31,089
32,810 Interest expense, discontinued operations and unconsolidated
entities 1,398 2,205 Amortization of stock compensation 1,296 1,803
Noncontrolling interests in other partnerships 202
(58 )
EBITDA 40,953 43,932 Debt extinguishment,
including discontinued operations 7 252 Acquisition costs 38 119
Gain on involuntary conversion — (150 ) Severance costs 380
—
Adjusted EBITDA 41,378 44,153
Adjusted EBITDA from discontinued operations (4,188 ) (8,749 )
Adjusted EBITDA from acquired hotels(a) — (709
)
Same-store Adjusted EBITDA $ 37,190 $ 34,695
(a) For same-store metrics, we have included the two hotels
acquired in May 2011 for all periods presented.
Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands)
Three Months Ended March 31,
2012 2011 Same-store operating
revenue: Room $ 173,016 $ 165,329 Food and beverage 36,524
36,042 Other operating departments 11,627
12,224
Same-store operating revenue 221,167 213,595
Same-store operating expense: Room 47,733 45,798 Food and
beverage 29,749 28,972 Other operating departments 5,734 5,766
Other property related costs 64,435 62,770 Management and franchise
fees 10,366 9,852 Taxes, insurance and lease expense 14,950
13,857
Same-store operating expense
172,967 167,015
Hotel EBITDA $
48,200 $ 46,580
Hotel EBITDA Margin 21.8 %
21.8 %
Reconciliation of Same-store Operating
Revenue and Same-store Operating Expense to Total Revenue,
Total Operating Expense and Operating Income (Loss)
(in thousands)
Three Months Ended March 31,
2012 2011
Same-store operating revenue(a) $ 221,167 $ 213,595 Other revenue
275 225 Revenue from acquired hotels — (6,571
)
Total revenue 221,442 207,249 Same-store operating
expense(a) 172,967 167,015 Consolidated hotel lease expense(b)
9,194 8,304 Unconsolidated taxes, insurance and lease expense
(1,831 ) (1,684 ) Corporate expenses 8,212 9,537 Depreciation and
amortization 31,573 30,787 Expenses from acquired hotels(a) —
(7,280 ) Other expenses 963 631
Total operating expenses 221,078
207,310
Operating income (loss) $ 364 $ (61 )
(a) For same-store metrics, we have included the two hotels
acquired in May 2011 for all periods presented.
(b) Consolidated hotel lease expense represents the percentage
lease expense of our 51% owned operating lessees. The offsetting
percentage lease revenue is included in equity in income from
unconsolidated entities.
Reconciliation of Forecasted Net Loss to
Forecasted Adjusted FFO and Adjusted EBITDA
(in millions, except per share and unit
data)
Full Year 2012 Guidance Low
Guidance High Guidance Dollars
Per Share Amount(a) Dollars
Per Share Amount(a) Net loss
attributable to FelCor(b) $ (73 ) $ (65 ) Preferred
dividends (39 ) (39 )
Net loss attributable to
FelCor common stockholders (112 ) $ (0.90 ) (104 ) $ (0.84 )
Depreciation(c) 135 139
FFO and
Adjusted FFO 23 $ 0.18 35 $ 0.28
Net loss
attributable to FelCor(b) (73 ) (65 ) Depreciation(c)
135 139 Interest expense(c) 125 127 Amortization expense 5
5
EBITDA and Adjusted EBITDA $ 192
$ 206
(a) Weighted average shares and units are
124.8 million.
(b) For guidance, we have assumed no gains or losses on future
asset sales.
(c) 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 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 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, amortization and impairment
losses. FFO for unconsolidated partnerships and joint ventures are
calculated 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 items,
including but not limited to 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 attributable
to FelCor, EBITDA and FFO, is beneficial to an investor's better
understanding of our operating performance.
- Gains and losses related to
extinguishment of debt and interest rate swaps - We exclude gains
and losses related to 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.
- 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 depreciable assets and impairment losses
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 and
impairment losses 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 hotel industry and give investors a more
complete understanding of the operating results over which our
individual hotels and brand/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 that we use in our financial and operational
decision-making. Additionally, using these measures facilitates
comparisons with other hotel REITs and hotel owners. We present
Hotel EBITDA and Hotel EBITDA margin by eliminating all revenues
and expenses from continuing operations not directly associated
with hotel operations, including corporate-level expenses,
depreciation and amortization, 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 into the ongoing operational performance
of our hotels and the effectiveness of management on a
property-level basis.
We eliminate depreciation and amortization because, even though
depreciation and amortization are property-level expenses, 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 diminishes 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 Consolidated Hotels. Hotel EBITDA and Hotel
EBITDA margins are presented on a same-store basis.
Use and Limitations of Non-GAAP Measures
Our management and Board of Directors use FFO, 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 other 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. These non-GAAP financial measures as presented by us,
may not be comparable to non-GAAP financial measures as calculated
by other real estate companies. These measures do not reflect
certain expenses or expenditures that we incurred and will incur,
such as depreciation, interest and 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 most comparable 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. These non-GAAP financial measures 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 a single financial measure.
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