FelCor Lodging Trust Incorporated (NYSE: FCH), today reported
operating results for the first quarter ended March 31,
2013.
Highlights:
- RevPAR for 45 core hotels increased
6.7%.
- Total revenue increased 6.1%, driven by
a 5.5% increase in RevPAR at 65 same-store hotels.
- Same-store Adjusted EBITDA was
$37.7 million, a 13.3% increase.
- Adjusted FFO per share improved to a
loss of $0.01 and net loss per share was $0.29.
- Currently under negotiations or have
agreed to sell six non-strategic hotels.
Commenting on operating results, Richard A. Smith, President and
Chief Executive Officer of FelCor, said, “I am very pleased with
our performance during the quarter. Our high quality, diverse
portfolio continues to produce strong results. Industry
fundamentals remain very favorable, as demand growth remains robust
and supply growth remains historically low. We expect these trends
to continue for the foreseeable future, which will provide
favorable conditions for sustained RevPAR growth.”
Added Mr. Smith, “We continue to make substantial progress
toward completing the transformation and repositioning of FelCor,
building a first-class REIT and driving stockholder value. We have
sold 19 of 39 non-strategic hotels, with six more either under
contract or in negotiations. Our portfolio has improved
significantly, as more than 90% of our EBITDA is now generated by
upper upscale and luxury hotels strategically located around the
country in gateway and resort markets with high barriers-to-entry
and dynamic demand generators. We have also strengthened our
balance sheet significantly. As asset sales continue and EBITDA
increases, we are building greater financial flexibility and
leverage will continue to decline.”
Summary of First Quarter Operating Results:
First Quarter $ in
millions, except for per share information
2013
2012 Change Total
revenue $ 220.7 $ 208.0 6.1 % Same-store Adjusted EBITDA $ 37.7 $
33.3 13.3 % Adjusted EBITDA $ 37.7 $ 41.4 (9.0 )% Adjusted FFO per
share $ (0.01 ) $ (0.02 ) $ 0.01 Net loss per share $ (0.29 ) $
(0.31 ) $ 0.02
Revenue per available room (“RevPAR”) for 65 same-store hotels
was $100.17, a 5.5% increase compared to the same period in 2012.
The increase reflects a 5.0% increase in average daily rate (“ADR”)
to $143.90 and a 30 basis point increase in occupancy to 69.6%.
RevPAR for our 45 core hotels increased 6.7%, while RevPAR for our
20 non-strategic hotels increased 1.2%. RevPAR at the six
newly-acquired and recently-redeveloped hotels increased 17.8%
during the quarter. Total revenue increased 6.1% from the same
period in 2012.
Hotel EBITDA was $48.0 million, 8.3% higher than the same
period in 2012. Hotel EBITDA margin was 21.8% during the quarter, a
44 basis point increase from the same period in 2012. Adjusted
EBITDA (which includes Adjusted EBITDA for sold hotels prior to
sale) was $37.7 million compared to $41.4 million for the
same period in 2012.
Adjusted funds from operations (“Adjusted FFO”) was a loss of
$773,000, or $0.01 per share, compared to a loss of $0.02 per share
in 2012. Net loss attributable to common stockholders was
$35.9 million, or $0.29 per share for the quarter ended
March 31, 2013, compared to a net loss of $38.1 million,
or $0.31 per share, for the same period in 2012.
Summary of Core Hotel Results:
First Quarter 2013
2012 Change
Hotel RevPAR $ 106.16 $ 99.47 6.7 % Hotel EBITDA, in millions $
37.0 $ 32.8 12.6 % Hotel EBITDA margin 21.0 % 20.1 % 91
bps
Total revenue for our 45 core hotels increased 7.7% compared to
the same period in 2012, driven by a 6.7% increase in RevPAR to
$106.16. The increase in RevPAR reflects a 6.0% increase in ADR to
$154.23 and a 40 basis point increase in occupancy to 68.8%.
Hotel EBITDA at our core hotels increased 12.6% to $37.0 million.
Hotel EBITDA margin at our core hotels was 21.0% during the
quarter, a 91 basis point increase compared to the same period in
2012.
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 18 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:
To date, we have sold 19 of 39 non-strategic hotels as part of
our portfolio repositioning plan. We are currently marketing 11
non-strategic hotels and are evaluating offers or have agreed to
sell six of those, including one under contract. We will use the
proceeds from dispositions to repay debt and reduce leverage. The
other nine non-strategic hotels are owned by joint ventures, and we
are progressing on discussions with our partners to facilitate
marketing those properties.
In March, we successfully re-branded and transitioned management
at eight Holiday Inn hotels to Wyndham brands. Wyndham Worldwide
Corporation is providing a $100 million guaranty over the
10-year term of the agreement, with an annual guaranty of up to
$21.5 million, that ensures a minimum annual NOI for the eight
hotels. In addition, the management fee structure is more
consistent with prevailing industry practices, and we expect to
save approximately $50 million in management fees over the
initial term. The guaranty protects approximately 20% of our core
hotel-level EBITDA from future lodging cycle fluctuations, in
addition to ensuring a return on investment that is superior to the
hotels' historical performance.
Capital Expenditures:
Capital expenditures at our operating hotels (including our
pro rata share of joint ventures), were $23.5 million
during the quarter (including approximately $6.4 million for
redevelopment projects and repositioning the eight Wyndham
hotels).
During 2013, we anticipate investing approximately
$65 million on capital improvements and renovations,
concentrated mostly at seven hotels, as part of our 20-year capital
plan. In addition, we anticipate investing approximately
$40 million on redevelopment projects (excluding
Knickerbocker) and repositioning the Wyndham hotels. Please see
page 12 of this release for more detail on renovations.
Through March 31, 2013, we have spent $35 million to
redevelop the 4+ star Knickerbocker Hotel, in midtown Manhattan.
The project remains on budget and is scheduled to open in early
2014.
Balance Sheet:
At March 31, 2013, we had $1.7 billion of consolidated
debt bearing a weighted-average interest rate of 6.3%
(approximately 120 basis points below last year). Our debt has a
weighted-average maturity of seven years, and none of our debt
matures before June 2014. We had $61.8 million of cash and
cash equivalents at March 31, 2013. In addition, at
March 31, 2013 we had $77.1 million of restricted cash,
of which $64.9 million secures our Knickerbocker construction
loan.
Andrew J. Welch, FelCor's Executive Vice President and Chief
Financial Officer, said, “Our balance sheet is stronger today
because of our low borrowing costs, extended weighted-average debt
maturity and ample liquidity. We are committed to making our
balance sheet even stronger, as we repay higher-cost debt with net
sale proceeds, further improve our maturity profile and continue to
reduce our overall leverage.”
Outlook:
Our 2013 outlook assumes continued strength in lodging
fundamentals and has been updated to reflect first quarter results
and timing of asset sales. Our outlook reflects selling all 11
hotels during 2013. The low-end of our outlook assumes all sales
occur in June, and the high-end of our outlook assumes all sales
close at the beginning of the fourth quarter.
During 2013, we anticipate:
- Same-store RevPAR to increase between
5-6%;
- Adjusted EBITDA to be between
$190.5 million and $205.0 million;
- Adjusted FFO per share to be between
$0.33 and $0.43;
- Net loss attributable to FelCor to be
between $59 million and $51 million; and
- Interest expense, including pro rata
share of joint ventures, to be between $104 million and
$106 million.
The following table reconciles our 2013 Adjusted EBITDA to
Same-store Adjusted EBITDA outlook (in millions):
Low High
Previous Adjusted EBITDA Outlook (65 hotels) $
203.5 $ 208.5 Improved Operations 0.5 —
Adjusted EBITDA Outlook (65 hotels) $
204.0 $ 208.5 EBITDA of sold hotels
from closing to December 31(a) (13.5 ) (3.5 )
Adjusted EBITDA
Outlook (54 hotels) $ 190.5 $ 205.0
Discontinued Operations(b) (12.5 ) (22.5 )
Same-store Adjusted
EBITDA (54 hotels) $ 178.0 $
182.5
(a)
EBITDA of 11 hotels assumed to be sold during 2013 that
would have been recognized from the dates of sale through December
31, 2013. (b) EBITDA of 11 hotels assumed to be sold during 2013
that is forecasted to be generated from January 1, 2013 through the
dates of sale.
About FelCor:
FelCor, a real estate investment trust, owns a diversified
portfolio of primarily upper-upscale and luxury hotels that are
located in major and resort markets. FelCor partners with leading
hotel companies to operate its 66 hotels, which are flagged under
globally renowned brands and premier independent hotels. Additional
information can be found on the Company’s website at
www.felcor.com.
We invite you to listen to our first quarter earnings Conference
Call on Tuesday, April 30, 2013 at 10:30 a.m. (Central
Time). The conference call will be webcast simultaneously on
FelCor’s website at www.felcor.com.
Interested investors and other parties who wish to access the call
can go to FelCor’s website and click on the conference call
microphone icon on the “Investor Relations” page. The conference
call replay also will be archived on the Company’s website.
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 months ended March 31, 2013.
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 2013 11 Supplemental Financial Data 12 Discontinued
Operations 13 Hotel Portfolio Composition 14 Hotel Operating
Statistics by Brand 15 Hotel Operating Statistics by Market 16
Historical Quarterly Operating Statistics 17 Non-GAAP Financial
Measures 18 (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 March 31, 2013
2012 Revenues: Hotel operating revenue: Room $
170,379 $ 161,779 Food and beverage 38,464 34,821 Other operating
departments 11,448 11,090 Other revenue 399 275 Total
revenues 220,690 207,965 Expenses: Hotel departmental
expenses: Room 47,593 44,971 Food and beverage 31,462 28,345 Other
operating departments 5,480 5,445 Other property-related costs
63,108 60,482 Management and franchise fees 9,654 9,778 Taxes,
insurance and lease expense 22,667 21,710 Corporate expenses 7,832
8,212 Depreciation and amortization 31,570 30,068 Conversion
expenses 628 — Other expenses 821 963 Total operating
expenses 220,815 209,974 Operating loss (125 ) (2,009
) Interest expense, net (26,483 ) (30,814 ) Debt extinguishment —
(7 ) Loss before equity in income (loss) from unconsolidated
entities (26,608 ) (32,830 ) Equity in income (loss) from
unconsolidated entities 89 (224 ) Loss from continuing
operations (26,519 ) (33,054 ) Income (loss) from discontinued
operations (86 ) 4,193 Net loss (26,605 ) (28,861 ) Net loss
attributable to noncontrolling interests in other partnerships 240
202 Net loss attributable to redeemable noncontrolling interests in
FelCor LP 180 196 Net loss attributable to FelCor
(26,185 ) (28,463 ) Preferred dividends (9,678 ) (9,678 ) Net loss
attributable to FelCor common stockholders $ (35,863 ) $ (38,141 )
Basic and diluted per common share data: Loss from continuing
operations $ (0.29 ) $ (0.34 ) Net loss $ (0.29 ) $ (0.31 ) Basic
and diluted weighted average common shares outstanding 123,814
123,665
Consolidated Balance
Sheets
(in thousands)
March 31, December 31,
2013 2012 Assets Investment in hotels, net of
accumulated depreciation of $948,095 and $929,298 at March 31, 2013
and December 31, 2012, respectively $ 1,787,016 $ 1,794,564 Hotel
development 156,081 146,079 Investment in unconsolidated entities
52,867 55,082 Cash and cash equivalents 61,796 45,745 Restricted
cash 77,102 77,927 Accounts receivable, net of allowance for
doubtful accounts of $243 and $469 at March 31, 2013 and December
31, 2012, respectively 34,293 25,383 Deferred expenses, net of
accumulated amortization of $15,438 and $13,820 at March 31, 2013
and December 31, 2012, respectively 34,035 34,262 Other assets
26,096 23,391 Total assets $ 2,229,286 $
2,202,433
Liabilities and Equity Debt, net of
discount of $8,985 and $10,318 at March 31, 2013 and December 31,
2012, respectively $ 1,683,756 $ 1,630,525 Distributions payable
8,545 8,545 Accrued expenses and other liabilities 147,715
138,442 Total liabilities 1,840,016 1,777,512
Commitments and contingencies Redeemable noncontrolling interests
in FelCor LP, 621 units issued and outstanding at March 31, 2013
and December 31, 2012 3,697 2,902 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, 2013 and
December 31, 2012 309,362 309,362 Series C Cumulative Redeemable
Preferred Stock, 68 shares, liquidation value of $169,950, issued
and outstanding at March 31, 2013 and December 31, 2012 169,412
169,412 Common stock, $0.01 par value, 200,000 shares authorized;
124,122 and 124,117 shares issued and outstanding at March 31, 2013
and December 31, 2012, respectively 1,241 1,241 Additional paid-in
capital 2,353,275 2,353,581 Accumulated other comprehensive income
25,684 26,039 Accumulated deficit (2,500,831 ) (2,464,968 ) Total
FelCor stockholders’ equity 358,143 394,667 Noncontrolling
interests in other partnerships 27,430 27,352 Total
equity 385,573 422,019 Total liabilities and equity $
2,229,286 $ 2,202,433
Consolidated
Debt Summary
(dollars in thousands)
EncumberedHotels
Interest Rate (%)
Maturity Date
March 31, 2013 December 31, 2012
Line of credit 9 L + 3.375 June 2016(a) $ 109,000 $
56,000
Hotel mortgage debt Mortgage debt(b) 5 6.66 June -
August 2014 64,906 65,431 Mortgage debt 1 5.81 July 2016 10,280
10,405 Mortgage debt(b) 4 4.95 October 2022 127,733 128,066
Mortgage debt 1 4.94 October 2022 32,057 32,176
Senior notes
Senior secured notes(c) 11 10.00 October 2014 224,919 223,586
Senior secured notes 6 6.75 June 2019 525,000 525,000 Senior
secured notes 10 5.625 March 2023 525,000 525,000
Other(d) — L + 1.25 May 2016 64,861
64,861
Total 47 $ 1,683,756 $ 1,630,525 (a)
Our $225 million line of credit can be extended for one year
(to 2017), subject to satisfying certain conditions. (b) This debt
is comprised of separate non-cross-collateralized loans each
secured by a mortgage of a different hotel. (c) We originally
issued $636 million (face amount) of these notes. After redemptions
in 2011 and 2012, $234 million (face amount) of these notes were
outstanding at March 31, 2013 and December 31, 2012. (d) This loan
is related to our Knickerbocker redevelopment 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. This loan, which
allows us to borrow up to $85 million, can be extended for one year
subject to satisfying certain conditions.
Schedule of Encumbered Hotels
(dollars in millions)
Consolidated March 31, 2013 Debt
Balance Encumbered Hotels Line of credit $ 109
Charleston Mills House - WYN, Charlotte SouthPark - DT, Dana
Point - DTGS, Houston Medical Center - WYN, Mandalay Beach - ES,
Miami International Airport - ES, Philadelphia Historic District -
WYN, Pittsburgh University Center - WYN and Santa Monica at the
Pier - WYN CMBS debt(a) $ 65 Atlanta Airport - ES, Austin - DTGS,
BWI Airport - ES, Orlando Airport - HI and Phoenix Biltmore - ES
CMBS debt $ 10 Indianapolis North - ES CMBS debt(a) $ 128
Birmingham - ES, Ft. Lauderdale - ES, Minneapolis Airport - ES and
Napa Valley - ES CMBS debt $ 32 Deerfield Beach - ES Senior secured
notes (10.00%) $ 225
Atlanta Airport - SH, Boston Beacon Hill -
WYN, Myrtle Beach Resort - ES, Nashville Opryland - Airport - HI,
New Orleans French Quarter - WYN, Orlando Walt Disney World® -
DTGS, San Diego Bayside - WYN, San Francisco Waterfront - ES, San
Francisco Fisherman’s Wharf - HI, San Francisco Union Square - MAR
and Toronto Airport - HI
Senior secured notes (6.75%) $ 525 Boston Copley - FMT, Indian
Wells Esmeralda Resort & Spa - REN, Los Angeles International
Airport - ES, Morgans, Royalton and St. Petersburg Vinoy Resort
& Golf Club - REN Senior secured notes (5.625%) $ 525 Atlanta
Buckhead - ES, Baton Rouge - ES, Boston Marlboro - ES, Burlington -
SH, Dallas Love Field - ES, Milpitas - ES, Myrtle Beach Resort -
HIL, Orlando South - ES, Philadelphia Society Hill - SH and SF
South San Francisco - ES (a) This debt is comprised of
separate non-cross-collateralized loans each secured by a mortgage
of a different hotel.
Capital
Expenditures
(in thousands)
Three Months Ended March 31, 2013
2012 Improvements and additions to majority-owned
hotels $ 23,342 $ 41,385 Partners’ pro rata share of additions to
consolidated joint venture hotels (158 ) (360 ) Pro rata share of
additions to unconsolidated hotels 337 562 Total
additions to hotels(a) $ 23,521 $ 41,587 (a)
Includes capitalized interest, property taxes, property insurance,
ground leases and certain employee costs.
Hotels Under Renovation or
Redevelopment During 2013
Renovations
Primary
Areas
Start
Date
End
Date
Myrtle Beach Resort-HIL guestrooms Oct-2012 Mar-2013 Napa Valley-ES
public areas(a) Nov-2012 Mar-2013 Mandalay Beach-ES public areas,
meeting rooms, F&B(b) Jan-2013 May-2013 San Francisco
Waterfront-ES public areas Feb-2013 May-2013 Santa Monica Beach -
at the Pier-WYN guestrooms, corridors, public areas May-2013
Aug-2013 Ft. Lauderdale-ES public areas Aug-2013 Oct-2013 Orlando -
Walt Disney World Resort-DT guestrooms, corridors(c) May-2013
Nov-2013
LAX South-ES
public areas, corridors(d) Sep-2013 Dec-2013 Houston Medical
Center-WYN guestrooms, corridors, public areas Jul-2013 Dec-2013
Philadelphia - Historic District-WYN guestrooms, corridors, public
areas Aug-2013 Jan-2014 Charleston Mills House-WYN guestrooms,
corridors, public areas Aug-2013 Jan-2014
Redevelopments
Morgans guestroom additions, public areas, fitness area, re-concept
F&B Feb-2012 June-2013 (a) Guestroom renovations were
completed in April 2012. (b) Guestroom renovations were completed
in May 2012. (c) Public area renovations were completed in June
2012. (d) Guest room renovations were completed in February 2013.
Supplemental Financial Data
(in thousands, except per share data)
March 31, December
31,
Total Enterprise
Value
2013 2012 Common shares outstanding 124,122 124,117
Units outstanding 621 621 Combined shares and units
outstanding 124,743 124,738 Common stock price $ 5.95 $ 4.67
Market capitalization $ 742,221 $ 582,526 Series A
preferred stock(a) 309,362 309,362 Series C preferred stock(a)
169,412 169,412 Consolidated debt(b) 1,683,756 1,630,525
Noncontrolling interests of consolidated debt (2,787 ) (2,810 ) Pro
rata share of unconsolidated debt 73,943 74,198 Hotel development
(156,081 ) (146,079 ) Cash, cash equivalents and restricted cash(b)
(138,898 ) (123,672 )
Total enterprise value (TEV) $
2,680,928 $ 2,493,462 (a) Book value based on
issue price. (b) Restricted cash includes $64.9 million of cash
fully securing $64.9 million of debt that was assumed when we
purchased the Knickerbocker.
Discontinued Operations(in
thousands)
Discontinued operations include the results of operations for
ten hotels sold in 2012. Condensed financial information for the
hotels included in discontinued operations is as follows:
Three Months Ended March
31, 2013 2012 Operating revenue $ —
$ 27,840 Operating expenses (86 ) (22,699 ) Operating income (loss)
(86 ) 5,141 Interest expense, net — (948 )
Income (loss)
from discontinued operations (86 ) 4,193 Depreciation and
amortization — 2,924 Interest expense — 948
Adjusted EBITDA from discontinued operations $ (86 ) $ 8,065
Hotel Portfolio Composition
The following table illustrates the
distribution of same-store hotels.
Brand Hotels Rooms
2012 Hotel
OperatingRevenue
(in thousands)
2012 HotelEBITDA (in
thousands)(a)
Embassy Suites Hotels 20 5,433 $ 256,200 $
78,389 Wyndham and Wyndham Grand(b) 8 2,526 120,354 37,960
Renaissance and Marriott 3 1,321 111,976 17,912 DoubleTree by
Hilton and Hilton 5 1,206 56,071 16,706 Sheraton and Westin 4 1,604
68,369 14,540 Fairmont 1 383 41,255 4,286 Holiday Inn 2 968 40,512
4,218 Morgans and Royalton 2 282 32,129 3,458
Core hotels 45 13,723 726,866
177,469 Non-strategic hotels 20 5,099 179,474
48,044
Same-store hotels 65
18,822 $ 906,340 $
225,513 Market San Francisco area 4 1,637 $
99,659 $ 21,036 Los Angeles area 3 677 33,287 13,760 South Florida
3 923 47,298 13,257 Boston 3 916 68,121 12,126 New York area 4 817
57,052 9,733 Myrtle Beach 2 640 36,973 9,429 Atlanta 3 952 35,410
9,230 Philadelphia 2 728 36,122 8,882 Tampa 1 361 45,152 7,957 San
Diego 1 600 26,445 6,688 Other markets 19 5,472
241,347 65,371
Core hotels 45 13,723
726,866 177,469 Non-strategic hotels 20 5,099
179,474 48,044
Same-store hotels 65
18,822 $ 906,340 $
225,513 Location Urban 17 5,305 $ 316,354 $
74,446 Resort 10 2,928 183,807 41,475 Airport 9 2,957 126,906
33,742 Suburban 9 2,533 99,799 27,806
Core
hotels 45 13,723 726,866 177,469
Non-strategic hotels 20 5,099 179,474 48,044
Same-store hotels 65 18,822
$ 906,340 $ 225,513 (a)
Hotel EBITDA is more fully described on page 24. (b) These
hotels converted from Holiday Inn on March 1, 2013.
The following tables set forth occupancy, ADR and RevPAR for the
three months ended March 31, 2013 and 2012, and the percentage
changes therein for the periods presented, for our same-store
Consolidated Hotels included in continuing operations.
Hotel Operating Statistics by
Brand
Occupancy (%) Three Months Ended
March 31, 2013 2012
%Variance Embassy Suites Hotels 73.1 74.0 (1.2 ) Wyndham and
Wyndham Grand(a) 63.6 71.6 (11.3 ) Renaissance and Marriott 74.8
73.5 1.7 DoubleTree by Hilton and Hilton 61.4 62.9 (2.4 ) Sheraton
and Westin 63.4 57.6 10.1 Fairmont 60.3 27.7 118.2 Holiday Inn 68.4
60.5 13.0 Morgans and Royalton 81.0 76.0 6.7
Core hotels
(45) 68.8 68.4 0.6 Non-strategic hotels
(20) 71.7 71.6 0.1
Same-store hotels (65) 69.6
69.3 0.5 ADR ($) Three Months
Ended March 31, 2013 2012 %Variance
Embassy Suites Hotels 153.28 146.52 4.6 Wyndham and Wyndham
Grand(a) 139.38 133.20 4.6 Renaissance and Marriott 221.01 210.58
5.0 DoubleTree by Hilton and Hilton 146.97 133.10 10.4 Sheraton and
Westin 108.13 102.24 5.8 Fairmont 221.26 213.15 3.8 Holiday Inn
112.44 109.95 2.3 Morgans and Royalton 260.05 249.85 4.1
Core
hotels (45) 154.23 145.45 6.0
Non-strategic hotels (20) 117.07 115.80 1.1
Same-store hotels
(65) 143.90 137.10 5.0 RevPAR
($) Three Months Ended March 31, 2013
2012 %Variance Embassy Suites Hotels 112.08 108.45
3.3 Wyndham and Wyndham Grand(a) 88.60 95.43 (7.2 ) Renaissance and
Marriott 165.32 154.82 6.8 DoubleTree by Hilton and Hilton 90.18
83.72 7.7 Sheraton and Westin 68.51 58.86 16.4 Fairmont 133.52
58.96 126.5 Holiday Inn 76.89 66.52 15.6 Morgans and Royalton
210.76 189.78 11.1
Core hotels (45) 106.16
99.47 6.7 Non-strategic hotels (20) 83.98 82.97 1.2
Same-store hotels (65) 100.17 94.97 5.5
(a)
These hotels converted from Holiday Inn on March 1, 2013.
Hotel Operating Statistics by
Market
Occupancy (%) Three Months Ended
March 31, 2013
2012 %Variance San Francisco area 75.0 73.8 1.7 Los
Angeles area 69.5 81.0 (14.2 ) South Florida 90.8 86.0 5.5 Boston
64.6 49.0 31.8 New York area 70.7 68.3 3.6 Myrtle Beach 37.0 42.9
(13.7 ) Atlanta 74.4 72.0 3.3 Philadelphia 50.6 48.7 3.9 Tampa 83.7
84.4 (0.8 ) San Diego 66.5 79.8 (16.7 ) Other markets 68.1 68.3
(0.3 )
Core hotels (45) 68.8 68.4 0.6
Non-strategic hotels (20) 71.7 71.6 0.1
Same-store hotels
(65) 69.6 69.3
0.5 ADR ($) Three
Months Ended March 31, 2013 2012
%Variance San Francisco area 162.99 156.02 4.5 Los Angeles
area 149.72 141.27 6.0 South Florida 190.78 184.16 3.6 Boston
167.50 151.02 10.9 New York area 194.37 186.66 4.1 Myrtle Beach
108.94 106.24 2.5 Atlanta 113.51 110.84 2.4 Philadelphia 131.03
120.14 9.1 Tampa 215.29 201.21 7.0 San Diego 121.51 121.18 0.3
Other markets 146.74 138.15 6.2
Core hotels (45)
154.23 145.45 6.0 Non-strategic hotels (20)
117.07 115.80 1.1
Same-store hotels (65)
143.90 137.10
5.0 RevPAR ($) Three Months
Ended March 31, 2013 2012 %Variance
San Francisco area 122.28 115.14 6.2 Los Angeles area 104.03 114.41
(9.1 ) South Florida 173.22 158.44 9.3 Boston 108.19 74.02 46.1 New
York area 137.42 127.41 7.9 Myrtle Beach 40.30 45.55 (11.5 )
Atlanta 84.45 79.82 5.8 Philadelphia 66.25 58.49 13.3 Tampa 180.26
169.79 6.2 San Diego 80.75 96.66 (16.5 ) Other markets 99.89 94.32
5.9
Core hotels (45) 106.16 99.47 6.7
Non-strategic hotels (20) 83.98 82.97 1.2
Same-store hotels
(65) 100.17
94.97 5.5
Historical Quarterly Operating
Statistics
Occupancy (%) Q2 2012
Q3 2012 Q4 2012 Q1 2013 Core
hotels (45) 77.7 76.5 66.8 68.8 Non-strategic hotels (20) 75.1 73.0
67.3 71.7 Same-store hotels (65) 77.0 75.5 66.9 69.6
ADR
($) Q2 2012 Q3 2012 Q4 2012 Q1 2013
Core hotels (45) 155.03 153.45 152.54 154.23 Non-strategic hotels
(20) 117.02 119.71 116.10 117.07 Same-store hotels (65) 144.93
144.57 142.76 143.90
RevPAR ($) Q2 2012 Q3
2012 Q4 2012 Q1 2013 Core hotels (45) 120.49
117.40 101.92 106.16 Non-strategic hotels (20) 87.89 87.37 78.13
83.98 Same-store hotels (65) 111.61 109.22 95.57 100.17
Non-GAAP Financial Measures
We 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,
2013 2012 Dollars
Shares Per Share Amount Dollars
Shares Per Share Amount
Net loss $ (26,605 ) $ (28,861 ) Noncontrolling interests
420 398 Preferred dividends (9,678 ) (9,678 ) Net loss attributable
to FelCor common stockholders (35,863 ) 123,814 $ (0.29 ) (38,141 )
123,665 $ (0.31 ) Depreciation and amortization 31,570 — 0.25
30,068 — 0.24 Depreciation, discontinued operations and
unconsolidated entities 2,706 — 0.02 5,761 — 0.05 Noncontrolling
interests in FelCor LP (180 ) 621 0.01 (196 ) 636
—
FFO (1,767 ) 124,435 (0.01 ) (2,508 )
124,301 (0.02 ) Acquisition costs 23 — — 38 — — Debt extinguishment
— — — 7 — — Severance costs — — — 380 — — Conversion expenses 628 —
— — — — Pre-opening costs, net of noncontrolling interests 241 — —
— — — Variable stock compensation 102 — — —
— —
Adjusted FFO $ (773 ) 124,435
$ (0.01 ) $ (2,083 ) 124,301 $ (0.02 )
Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and
Same-store Adjusted EBITDA
(in thousands)
Three Months Ended March 31,
2013 2012 Net loss $ (26,605 ) $
(28,861 ) Depreciation and amortization 31,570 30,068 Depreciation,
discontinued operations and unconsolidated entities 2,706 5,761
Interest expense 26,505 30,862 Interest expense, discontinued
operations and unconsolidated entities 672 1,625 Noncontrolling
interests in other partnerships 240 202
EBITDA
35,088 39,657 Debt extinguishment — 7 Acquisition costs 23 38
Amortization of fixed stock and directors’ compensation 1,578 1,296
Severance costs — 380 Conversion expenses 628 — Pre-opening costs,
net of noncontrolling interests 241 — Variable stock compensation
102 —
Adjusted EBITDA 37,660 41,378 Adjusted
EBITDA from discontinued operations 86 (8,065 )
Same-store Adjusted EBITDA $ 37,746 $ 33,313
Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands)
Three Months Ended March 31,
2013 2012
Same-store operating revenue: Room $ 170,379 $ 161,779 Food
and beverage 38,464 34,821 Other operating departments
11,448 11,090
Same-store operating
revenue 220,291 207,690
Same-store operating expense:
Room 47,593 44,971 Food and beverage 31,462 28,345 Other operating
departments 5,480 5,445 Other property related costs 63,108 60,482
Management and franchise fees 9,654 9,778 Taxes, insurance and
lease expense 15,007 14,347
Same-store operating expense 172,304
163,368
Hotel EBITDA $ 47,987 $ 44,322
Hotel EBITDA Margin 21.8 % 21.3 %
Three Months
Ended March 31, 2013
2012 Hotel EBITDA - Core (45) $ 36,952 $ 32,822 Hotel
EBITDA - Non-strategic (20) 11,035 11,500
Hotel EBITDA $ 47,987 $ 44,322 Hotel
EBITDA Margin - Core (45) 21.0 % 20.1 % Hotel EBITDA Margin -
Non-strategic (20) 24.9 % 26.0 %
Reconciliation of
Same-store Operating Revenue and Same-store Operating Expense to
Total Revenue, Total Operating Expense and Operating
Loss
(in thousands)
Three Months Ended March 31,
2013 2012 Same-store operating revenue
$ 220,291 $ 207,690 Other revenue 399 275
Total
revenue 220,690 207,965 Same-store operating expense 172,304
163,368 Consolidated hotel lease expense(a) 9,558 9,194
Unconsolidated taxes, insurance and lease expense (1,898 ) (1,831 )
Corporate expenses 7,832 8,212 Depreciation and amortization 31,570
30,068 Conversion expenses 628 — Other expenses 821 963
Total operating expense 220,815 209,974
Operating loss $ (125 ) $ (2,009 ) (a) 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
attributable to FelCor to Forecasted Adjusted FFO and
Adjusted EBITDA
(in millions, except per share data)
Full Year 2013 Guidance Low
High Per Share
Per Share Dollars Amount((a))
Dollars Amount((a)) Net loss attributable to
FelCor(b) $ (59.0 ) $ (51.0 ) Preferred dividends (39.0
) (39.0 )
Net loss attributable to FelCor common
stockholders (98.0 ) $ (0.79 ) (90.0 ) $ (0.73 )
Depreciation(c) 138.5 143.0
FFO $ 40.5 $ 0.32
$ 53.0 $ 0.43 Pre-opening and conversion costs 1.0 1.0
Adjusted FFO $ 41.5 $ 0.33 $ 54.0 $
0.43
Net loss attributable to FelCor(b) $
(59.0 ) $ (51.0 ) Depreciation(c) 138.5 143.0 Interest expense(c)
104.0 106.0 Amortization expense 6.0 6.0
EBITDA 189.5 204.0 Pre-opening and conversion costs 1.0
1.0
Adjusted EBITDA $ 190.5 $ 205.0
(a) Weighted average shares are 125.0 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
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.
- Other transaction costs - From time to
time, we periodically incur costs that are not indicative of
ongoing operating performance. Such costs include, but are not
limited to, conversion costs, acquisition costs, pre-opening costs
and severance costs. We exclude these costs from the calculation of
Adjusted FFO and Adjusted EBITDA.
- Variable stock compensation - We
exclude the cost associated with our variable stock compensation.
This cost is subject to volatility related to the price and
dividends of our common stock that does not necessarily correspond
to our operating performance.
In addition, to derive Adjusted EBITDA, we exclude gains or
losses on the sale of depreciable assets and impairment losses
because including them in EBITDA is inconsistent with reporting 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. We
also exclude the amortization of our fixed stock and directors’
compensation. While this amortization is included in corporate
expenses and is not separately stated on our statement of
operations, excluding this amortization is consistent with the
EBITDA definition.
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 in a manner consistent with
Adjusted EBITDA, however, we also eliminate all revenues and
expenses from continuing operations not directly associated with
hotel operations, including other income and corporate-level
expenses. We eliminate these additional items 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
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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