FelCor Lodging Trust Incorporated (NYSE: FCH) today reported
operating results for the second quarter ended June 30,
2013.
Highlights:
- Adjusted FFO per share improved to
$0.21.
- Total revenue for comparable hotels
(same-store hotels excluding eight recently rebranded Wyndham
hotels) increased 6.3%.
- RevPAR for comparable hotels increased
5.7%.
- Adjusted EBITDA was $64.6 million.
- Net loss per share was $0.23.
- Sold two hotels since the first
quarter.
- Entered into contracts to sell three
hotels (one with a non-refundable deposit) and are negotiating to
sell two others.
Commenting on operating results, Richard A. Smith, President and
Chief Executive Officer of FelCor, said, “Our high quality, diverse
portfolio produced strong results during the second quarter,
building on our momentum for the year. As the U.S. economy
continues to improve, and demand for hotel rooms outpaces new
supply, our industry should experience solid growth. Our portfolio
is well-positioned to take advantage of this trend and outperformed
the industry in the second quarter, as RevPAR at our comparable
hotels increased 5.7%. Furthermore, FelCor is the only hotel REIT
which has outperformed the upper-upscale segment over the past five
years.”
Mr. Smith added, “We continue to make substantial progress
transforming FelCor and repositioning the company, to provide
sustainable and growing stockholder value. We have sold 21 hotels
and are currently marketing nine, three of which are under contract
and two of which have contracts under negotiations. We continue to
strengthen our balance sheet through asset sales and EBITDA growth.
As a result, we have created greater financial flexibility, which
will continue to improve as our leverage decreases.”
Summary of Second Quarter Hotel Results:
Second Quarter 2013 2012
Change Comparable hotels (55)
RevPAR $ 116.12 $ 109.88 5.7 % Total hotel revenue, in
millions $ 219.1 $ 206.1 6.3 % Hotel EBITDA, in millions $ 61.7 $
57.0 8.3 % Hotel EBITDA margin 28.2 % 27.6 % 52 bps
Wyndham Hotels (8) RevPAR $ 105.95 $ 127.67 (17.0 )% Total
hotel revenue, in millions $ 28.9 $ 34.0 (14.9 )% Hotel EBITDA, in
millions $ 11.2 $ 12.8 (12.2 )% Hotel EBITDA margin 38.7 % 37.5 %
128 bps
Same-store hotels (63) RevPAR $ 114.72 $
112.34 2.1 % Total hotel revenue, in millions $ 248.0 $ 240.1 3.3 %
Hotel EBITDA, in millions $ 72.9 $ 69.7 4.5 % Hotel EBITDA margin
29.4 % 29.0 % 35 bps
RevPAR for our 37 comparable core hotels (45 core hotels
excluding the eight Wyndham hotels) increased 5.7% compared to the
same period in 2012, while RevPAR for our 18 non-strategic hotels
increased 5.2% compared to the same period in 2012.
RevPAR for our 55 comparable hotels (37 comparable core hotels
plus 18 non-strategic hotels) was $116.12, a 5.7% increase compared
to the same period in 2012. The increase reflects a 3.7% increase
in ADR to $149.38 and a 1.9% increase in occupancy to 77.7%.
We believe comparable hotels (which excludes the eight Wyndham
hotels) is the most appropriate measure on which to assess the
operating performance of our portfolio. The eight Wyndham hotels
were rebranded from Holiday Inn to Wyndham and transitioned
management on March 1, 2013. RevPAR for the eight hotels
declined 17.0% for the second quarter compared to the same period
in 2012. This decline reflects the impact of changing brands and
management companies, including related renovations. Furthermore,
Wyndham Worldwide Corporation is providing a guarantee which
ensures minimum annual NOI for the eight hotels. We have recorded a
$2.7 million pro rata portion of the projected 2013 guarantee
through June 30, 2013 as a reduction of Wyndham’s contractual
management and other fees. This is reflected in Hotel EBITDA and
Hotel EBITDA margin. In addition, our outlook assumes the minimum
EBITDA amount for the Wyndham hotels based on the annual guarantee.
However, we expect the performance of our Wyndham portfolio to
improve meaningfully throughout the year, as the transitional
disruption subsides.
For the 55 comparable hotels, total revenue increased 6.3%
compared to the same period in 2012; Hotel EBITDA was
$61.7 million, 8.3% higher than the same period in 2012; and
Hotel EBITDA margin was 28.2% during the quarter, a 52 basis point
increase from the same period in 2012.
RevPAR for our 63 same-store hotels (55 comparable hotels plus
the eight Wyndham hotels) was $114.72, a 2.1% increase compared to
the same period in 2012. The increase reflects a 2.5% increase in
ADR to $149.31 offset by a 30 basis point decrease in occupancy to
76.8%.
See page 15 for hotel portfolio composition and pages 16 and 22
for more detail on hotel portfolio operating data.
Summary of Second Quarter Operating Results:
Second Quarter $ in millions, except for per share
information
2013 2012
Change Same-store Adjusted EBITDA $ 63.2 $ 60.5 4.5 %
Adjusted EBITDA $ 64.6 $ 66.2 (2.4 )% Adjusted FFO per share $ 0.21
$ 0.18 $ 0.03 Net income (loss) per share $ (0.23 ) $ 0.02 $ (0.25
)
Same-store Adjusted EBITDA was $63.2 million compared to
$60.5 million for the same period in 2012. Adjusted EBITDA (which
includes Adjusted EBITDA for sold hotels prior to sale) was
$64.6 million compared to $66.2 million for the same
period in 2012.
Adjusted FFO was $26.1 million, or $0.21 per share,
compared to $0.18 per share in 2012. Net loss attributable to
common stockholders was $28.4 million, or $0.23 per
share, for the quarter, compared to net income of
$2.2 million, or $0.02 per share, for the same period in 2012.
Net loss for the second quarter of 2013 included a
$7.3 million net gain on asset sales and a $27.7 million
impairment charge. Net income in the second quarter of 2012
included a $16.7 million net gain on asset sales and a
$1.3 million impairment charge.
Year-to-Date Operating Results:
RevPAR for 55 comparable hotels was $109.41, a 6.6% increase
compared to the same period in 2012. The increase reflects a 4.3%
increase in ADR to $147.61 and a 2.2% increase in occupancy to
74.1%. Total revenue for the 55 comparable hotels increased 7.1%
from the same period in 2012. RevPAR for our 37 comparable core
hotels increased 7.6%, while RevPAR for our 18 non-strategic hotels
increased 3.2%.
Same-store Adjusted EBITDA was $100.1 million compared to
$92.9 million, for the same period in 2012. Hotel EBITDA
margin was 25.8%, a 36 basis point increase from the same period in
2012. Adjusted EBITDA was $102.2 million compared to
$107.6 million for the same period in 2012.
Adjusted FFO was $25.3 million, or $0.20 per share, for the
six months ended June 30, 2013, compared to $0.16 per share
for the same period in 2012. Net loss attributable to common
stockholders was $64.2 million, or $0.52 per share, for
the six months ended June 30, 2013, compared to a net loss of
$36.0 million, or $0.29 per share, for the same period in
2012. Net loss for the six months ended June 30, 2013 included
a $7.3 million net gain on asset sales and a
$27.7 million impairment charge for the current period. Net
loss for the same period in 2012 included a $16.7 million net
gain on asset sales and a $1.3 million impairment charge.
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:
During the second quarter, we sold the 160-room Holiday Inn -
Santa Barbara/Goleta for $24.0 million. On July 18, we sold
the 278-room Sheraton Suites Galleria - Atlanta for
$21.0 million. The hotels’ operating performance is included
in discontinued operations for the second quarter and
year-to-date.
On July 30, we received a non-refundable deposit pursuant to an
agreement to sell the 244-room DoubleTree Hotel in Wilmington for
$27.7 million. We expect to close the sale in August.
To date, we have sold 21 of 39 non-strategic hotels as part of
our portfolio repositioning plan. We are currently marketing nine
non-strategic hotels, of which we have agreed to sell three,
including the DoubleTree in Wilmington, and are negotiating to sell
two others. We will use the sale proceeds to repay debt and reduce
leverage. The other nine non-strategic hotels are owned by joint
ventures, and we continue to advance toward agreements with our
partners to facilitate marketing those properties.
Capital Expenditures:
Capital expenditures at our operating hotels (including our
pro rata share of joint ventures) were $24.0 million
during the quarter (including approximately $10.3 million for
redevelopment projects and repositioning our 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 the
Knickerbocker) and repositioning our Wyndham hotels. Please see
page 12 of this release for more detail on renovations.
Through June 30, 2013, we have spent $49.4 million, in
addition to the initial acquisition cost, to redevelop the 4+ star
Knickerbocker Hotel. The project remains on budget and is scheduled
to open in early 2014.
Balance Sheet:
At June 30, 2013, we had $1.7 billion of consolidated
debt bearing a 6.3% weighted-average interest rate (approximately
150 basis points below last year) and a seven-year weighted-average
maturity. We had $66.2 million of cash and cash equivalents at
June 30, 2013. In addition, we had $77.9 million of
restricted cash, of which $64.9 million secures our
Knickerbocker construction loan.
Outlook:
We updated our 2013 outlook to reflect second quarter results
and revised timing of asset sales. Our 2013 outlook reflects
selling the remaining nine hotels currently on the market. We
assume the sale of three hotels, currently under contract, in
August. The low-end of our outlook assumes that we sell the
remaining hotels at the end of the third quarter, and the high-end
of our outlook assumes that we sell the remaining hotels at the end
of 2013. Our outlook also assumes the minimum EBITDA amount for the
Wyndham hotels based on the annual NOI guarantee.
During 2013, we anticipate:
- Comparable RevPAR will increase between
6.0%-6.75%;
- Adjusted EBITDA will be between
$197.0 million and $203.5 million;
- Adjusted FFO per share will be between
$0.36 and $0.41;
- Net loss attributable to FelCor will be
between $76.5 million and $72.5 million; and
- Interest expense, including pro rata
share from joint ventures, will be between $106.5 million and
$107.0 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) $ 204.0 $
208.5 EBITDA of two sold hotels from closing to December 31
(2.5 ) (2.5 ) Change in operations 0.5 (0.5 )
Adjusted EBITDA Outlook (63 hotels) $ 202.0
$ 205.5 EBITDA of nine non-strategic hotels
from closing to December 31(a) (5.0 ) (2.0 )
Adjusted EBITDA Outlook (54 hotels) $ 197.0
$ 203.5 Discontinued Operations(b) (19.0 )
(22.0 )
Same-store Adjusted EBITDA (54 hotels)
$ 178.0 $ 181.5
(a) EBITDA that would have been
recognized with respect to nine hotels assumed to be sold during
2013 from the dates of sale through December 31, 2013.
(b) EBITDA from two hotels sold
in 2013 from January 1, 2013 through the dates of sale and
EBITDA that is forecasted to be generated by nine additional hotels
assumed to be sold during 2013 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 64 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 second quarter earnings
Conference Call on Thursday, August 1, 2013 at 11:00 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 will also 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 and six months ended June 30, 2013.
TABLE OF CONTENTS
Page Consolidated Statements of
Operations(a) 8 Consolidated Balance Sheets(a) 9 Consolidated Debt
Summary 10 Schedule of Encumbered Hotels 11 Capital Expenditures 12
Hotels Under Renovation or Redevelopment During 2013 12
Supplemental Financial Data 13 Discontinued Operations 14 Hotel
Portfolio Composition 15 Hotel Operating Statistics by Brand 16
Hotel Operating Statistics by Market 17 Historical Quarterly
Operating Statistics 18 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 Six Months Ended June
30, June 30, 2013 2012
2013 2012 Revenues: Hotel operating
revenue: Room $ 191,982 $ 186,906 $ 359,293 $ 345,656 Food and
beverage 43,397 38,632 81,367 72,974 Other operating departments
12,598 14,595 23,982 25,591 Other revenue 1,050
956 1,449 1,231 Total
revenues 249,027 241,089 466,091
445,452 Expenses: Hotel departmental expenses:
Room 49,363 47,694 96,091 91,853 Food and beverage 32,610 29,799
63,655 57,732 Other operating departments 6,038 5,843 11,470 11,240
Other property-related costs 62,650 60,699 124,648 120,059
Management and franchise fees 9,315 11,254 18,845 20,898 Taxes,
insurance and lease expense 25,245 24,423 47,754 45,990 Corporate
expenses 6,694 6,167 14,526 14,379 Depreciation and amortization
31,132 29,773 62,146 59,310 Impairment loss 27,706 — 27,706 —
Conversion expenses 587 — 1,215 — Other expenses 3,916
800 4,737 1,763
Total operating expenses 255,256 216,452
472,793 423,224 Operating income
(loss) (6,229 ) 24,637 (6,702 ) 22,228 Interest expense, net
(26,574 ) (30,933 ) (53,057 ) (61,328 ) Debt extinguishment
— (137 ) — (144 ) Loss before
equity in income from unconsolidated entities (32,803 ) (6,433 )
(59,759 ) (39,244 ) Equity in income from unconsolidated entities
1,905 1,362 1,994
1,138 Loss from continuing operations (30,898 ) (5,071 )
(57,765 ) (38,106 ) Income from discontinued operations
8,103 17,099 8,365 21,273
Net income (loss) (22,795 ) 12,028 (49,400 ) (16,833 ) Net
loss (income) attributable to noncontrolling interests in other
partnerships 3,972 (148 ) 4,212 54 Net loss (income) attributable
to redeemable noncontrolling interests in FelCor LP 140
(11 ) 320 185 Net income
(loss) attributable to FelCor (18,683 ) 11,869 (44,868 ) (16,594 )
Preferred dividends (9,678 ) (9,678 ) (19,356
) (19,356 ) Net income (loss) attributable to FelCor common
stockholders $ (28,361 ) $ 2,191 $ (64,224 ) $ (35,950 )
Basic and diluted per common share data: Loss from continuing
operations $ (0.29 ) $ (0.12 ) $ (0.59 ) $ (0.46 ) Net income
(loss) $ (0.23 ) $ 0.02 $ (0.52 ) $ (0.29 ) Basic and
diluted weighted average common shares outstanding 123,814
123,638 123,814 123,651
Consolidated Balance
Sheets
(in thousands)
June 30, December 31, 2013 2012
Assets Investment in hotels, net of accumulated depreciation
of $945,192 and $929,298 at June 30, 2013 and December 31, 2012,
respectively $ 1,718,269 $ 1,794,564 Hotel development 170,084
146,079 Investment in unconsolidated entities 52,751 55,082 Hotel
held for sale 19,252 — Cash and cash equivalents 66,235 45,745
Restricted cash 77,881 77,927 Accounts receivable, net of allowance
for doubtful accounts of $212 and $469 at June 30, 2013 and
December 31, 2012, respectively 41,029 25,383 Deferred expenses,
net of accumulated amortization of $17,052 and $13,820 at June 30,
2013 and December 31, 2012, respectively 32,543 34,262 Other assets
31,123 23,391 Total assets $ 2,209,167
$ 2,202,433
Liabilities and Equity Debt, net
of discount of $7,606 and $10,318 at June 30, 2013 and December 31,
2012, respectively $ 1,691,946 $ 1,630,525 Distributions payable
8,545 8,545 Accrued expenses and other liabilities 149,868
138,442 Total liabilities 1,850,359
1,777,512 Commitments and contingencies
Redeemable noncontrolling interests in FelCor LP, 621 units issued
and outstanding at June 30, 2013 and December 31, 2012 3,672
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 June 30, 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
June 30, 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 June 30, 2013 and December 31,
2012, respectively 1,241 1,241 Additional paid-in capital 2,354,659
2,353,581 Accumulated other comprehensive income 25,120 26,039
Accumulated deficit (2,529,192 ) (2,464,968 ) Total
FelCor stockholders’ equity 330,602 394,667 Noncontrolling
interests in other partnerships 24,534 27,352
Total equity 355,136 422,019
Total liabilities and equity $ 2,209,167 $ 2,202,433
Consolidated Debt Summary
(dollars in thousands)
EncumberedHotels
Interest
Rate (%)
Maturity Date
June 30,2013
December 31,2012
Line of credit 9 L + 3.375 June 2016(a) $ 117,000 $ 56,000
Hotel mortgage debt Mortgage debt(b) 5 6.66 June - August
2014 64,396 65,431 Mortgage debt 1 5.81 July 2016 10,157 10,405
Mortgage debt(b) 4 4.95 October 2022 127,289 128,066 Mortgage debt
1 4.94 October 2022 31,945 32,176
Senior notes Senior
secured notes 11 10.00 October 2014 226,298 223,586 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(c) — L + 1.25
May 2016 64,861 64,861
Total 47 $ 1,691,946 $
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) 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 June 30, 2013 Debt
Balance Encumbered Hotels Line of credit $ 117
Charleston Mills House - WYN, Charlotte SouthPark - DT, Dana
Point - DT, 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) $ 64 Atlanta Airport - ES, Austin - DTGS,
BWI Airport - ES, Orlando Airport - HI and Phoenix Biltmore - ES
CMBS debt $ 10 Indianapolis North - ES CMBS debt(a) $ 127
Birmingham - ES, Ft. Lauderdale - ES, Minneapolis Airport - ES and
Napa Valley - ES CMBS debt $ 32 Deerfield Beach - ES Senior secured
notes (10.00%) $ 226 Atlanta Airport - SH, Boston Beacon Hill -
WYN, Myrtle Beach Resort - ES, Nashville Opryland - Airport - HI,
New Orleans French Quarter - WYN, Orlando Walt Disney World® - DT,
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, LAX
South - 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 Six Months Ended June
30, June 30, 2013 2012
2013 2012 Improvements and additions to
majority-owned hotels $ 23,681 $ 31,964 $ 47,023 $ 73,349 Partners’
pro rata share of additions to consolidated joint venture hotels
(151 ) (270 ) (308 ) (630 ) Pro rata share of additions to
unconsolidated hotels 465 803
802 1,365 Total additions to hotels(a) $
23,995 $ 32,497 $ 47,517 $ 74,084
(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 addition, public areas, fitness center,
re-concept F&B Feb-2012 Aug-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)
June 30, 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 $
5.91 $ 4.67
Market capitalization $ 737,231 $
582,526 Series A preferred stock(a) 309,362 309,362 Series C
preferred stock(a) 169,412 169,412 Consolidated debt(b) 1,691,946
1,630,525 Noncontrolling interests of consolidated debt (2,765 )
(2,810 ) Pro rata share of unconsolidated debt 73,690 74,198 Hotel
development (170,084 ) (146,079 ) Cash, cash equivalents and
restricted cash(b) (144,116 ) (123,672 )
Total
enterprise value (TEV) $ 2,664,676 $ 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 primarily include the results of
operations for one hotel designated as held for sale at June 30,
2013, one hotel sold in 2013 and ten hotels sold in 2012. Condensed
financial information for the hotels included in discontinued
operations is as follows:
Three Months Ended Six Months
Ended June 30, June 30, 2013
2012 2013 2012 Operating revenue
$ 3,688 $ 23,804 $ 7,313 $ 55,247 Operating expenses (2,844
) (21,511 ) (6,207 ) (47,413 ) Operating
income 844 2,293 1,106 7,834 Interest expense, net — (1,245 ) —
(2,612 ) Debt extinguishment — (668 ) — (668 ) Gain on sale, net
7,259 16,719 7,259
16,719
Income from discontinued operations 8,103
17,099 8,365 21,273 Depreciation and amortization 491 2,015 1,049
5,471 Interest expense — 1,245 —
2,612
EBITDA from discontinued
operations 8,594 20,359 9,414 29,356 Impairment loss — 1,335 —
1,335 Debt extinguishment — 668 — 668 Gain on sale, net
(7,259 ) (16,719 ) (7,259 ) (16,719 )
Adjusted EBITDA from discontinued operations $ 1,335
$ 5,643 $ 2,155 $ 14,640
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 $ 78,381
Wyndham and Wyndham Grand(b) 8 2,526 120,354 37,957 Renaissance and
Marriott 3 1,321 111,976 17,911 DoubleTree by Hilton and Hilton 5
1,206 56,071 16,705 Sheraton and Westin 4 1,604 68,369 14,539
Fairmont 1 383 41,255 4,286 Holiday Inn 2 968 40,512 4,218 Morgans
and Royalton 2 282 32,129 3,457
Core hotels 45 13,723 726,866
177,454 Non-strategic hotels 18 4,661
164,498 44,071
Same-store hotels
63 18,384 $ 891,364
$ 221,525
Market
San Francisco area 4 1,637 $ 99,659 $ 21,034 Los Angeles area 3 677
33,287 13,759 South Florida 3 923 47,298 13,255 Boston 3 916 68,121
12,125 New York area 4 817 57,052 9,732 Myrtle Beach 2 640 36,973
9,428 Atlanta 3 952 35,410 9,229 Philadelphia 2 728 36,122 8,882
Tampa 1 361 45,152 7,956 San Diego 1 600 26,445 6,688 Other markets
19 5,472 241,347 65,366
Core hotels 45 13,723 726,866
177,454 Non-strategic hotels 18 4,661
164,498 44,071
Same-store hotels
63 18,384 $ 891,364
$ 221,525
Location
Urban 17 5,305 $ 316,354 $ 74,439 Resort 10 2,928 183,807 41,472
Airport 9 2,957 126,906 33,739 Suburban 9 2,533
99,799 27,804
Core hotels
45 13,723 726,866 177,454 Non-strategic
hotels 18 4,661 164,498 44,071
Same-store hotels 63 18,384
$ 891,364 $ 221,525
(a) Hotel EBITDA is more fully
described on page 26.
(b) These hotels converted from
Holiday Inn on March 1, 2013.
The following tables set forth occupancy, ADR and RevPAR for the
three and six months ended June 30, 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
Six Months Ended June
30, June 30, 2013 2012
%Variance 2013 2012
%Variance Embassy Suites Hotels 78.5 78.6 (0.2 ) 75.8 76.3
(0.7 ) Renaissance and Marriott 73.2 72.1 1.6 74.0 72.8 1.7
DoubleTree by Hilton and Hilton 76.9 74.7 3.0 69.2 68.8 0.6
Sheraton and Westin 69.7 70.9 (1.6 ) 66.6 64.2 3.7 Fairmont 80.3
76.3 5.2 70.4 52.0 35.3 Holiday Inn 88.3 81.0 9.0 78.4 70.7 10.8
Morgans and Royalton 89.4 88.0 1.6 85.3 82.0 4.0
Comparable core
hotels (37) 77.6 76.7 1.2 73.8
72.2 2.3 Non-strategic hotels (18) 78.0 75.2 3.7 74.8
73.4 2.0
Comparable hotels (55) 77.7 76.3
1.9 74.1 72.5 2.2 Wyndham and Wyndham
Grand(a) 71.2 82.1 (13.2 ) 67.4 76.9 (12.3 )
Same-store hotels
(63) 76.8 77.1 (0.3 ) 73.2
73.1 0.1 ADR ($) Three Months
Ended Six Months Ended June 30, June 30,
2013 2012 %Variance 2013 2012
%Variance Embassy Suites Hotels 146.80 143.36 2.4 149.91
144.90 3.5 Renaissance and Marriott 214.91 198.38 8.3 218.02 204.53
6.6 DoubleTree by Hilton and Hilton 148.39 140.78 5.4 147.76 137.27
7.6 Sheraton and Westin 122.30 118.13 3.5 115.59 111.01 4.1
Fairmont 313.17 312.75 0.1 273.98 286.27 (4.3 ) Holiday Inn 138.09
127.93 7.9 126.97 120.24 5.6 Morgans and Royalton 336.33 318.31 5.7
300.28 286.60 4.8
Comparable core hotels (37) 161.92
154.90 4.5 159.74 151.86 5.2
Non-strategic hotels (18) 119.38 117.63 1.5 118.78 117.31 1.3
Comparable hotels (55) 149.38 144.03
3.7 147.61 141.52 4.3 Wyndham and
Wyndham Grand(a) 148.81 155.56 (4.3 ) 144.36 145.14 (0.5 )
Same-store hotels (63) 149.31 145.73
2.5 147.19 142.05 3.6 RevPAR
($) Three Months Ended Six Months Ended June
30, June 30, 2013 2012 %Variance
2013 2012 %Variance Embassy Suites Hotels
115.19 112.75 2.2 113.65 110.60 2.8 Renaissance and Marriott 157.39
142.95 10.1 161.40 148.88 8.4 DoubleTree by Hilton and Hilton
114.13 105.12 8.6 102.22 94.42 8.3 Sheraton and Westin 85.29 83.72
1.9 76.94 71.29 7.9 Fairmont 251.44 238.79 5.3 192.81 148.87 29.5
Holiday Inn 121.92 103.58 17.7 99.53 85.05 17.0 Morgans and
Royalton 300.74 280.12 7.4 256.00 234.95 9.0
Comparable core
hotels (37) 125.68 118.85 5.7
117.95 109.62 7.6 Non-strategic hotels (18)
93.13 88.51 5.2 88.86 86.07 3.2
Comparable hotels (55)
116.12 109.88 5.7 109.41 102.65
6.6 Wyndham and Wyndham Grand(a) 105.95 127.67 (17.0 ) 97.27
111.55 (12.8 )
Same-store hotels (63) 114.72
112.34 2.1 107.74 103.88 3.7
(a) These hotels converted from
Holiday Inn on March 1, 2013.
Hotel Operating Statistics by
Market
Occupancy (%) Three Months Ended
Six Months Ended June
30, June 30, 2013 2012
%Variance 2013 2012
%Variance San Francisco area 87.4 83.7 4.5 81.2 78.7 3.2 Los
Angeles area 80.7 81.1 (0.6 ) 74.5 80.9 (8.0 ) South Florida 79.3
76.9 3.2 85.0 81.5 4.4 Boston 79.9 76.6 4.3 71.5 59.7 19.7 New York
area 84.8 83.7 1.4 77.8 76.0 2.4 Myrtle Beach 75.7 74.3 1.9 56.5
58.6 (3.5 ) Atlanta 73.3 77.5 (5.3 ) 73.9 74.7 (1.2 ) Philadelphia
79.0 79.0 — 66.1 59.7 10.7 Tampa 81.8 86.0 (4.8 ) 82.8 85.2 (2.8 )
Other markets 72.3 71.5 1.0 70.6 69.2 2.1
Comparable core hotels
(37) 77.6 76.7
1.2 73.8
72.2 2.3 ADR ($)
Three Months Ended Six Months Ended June 30,
June 30, 2013 2012 %Variance
2013 2012 %Variance San Francisco area 182.98
166.10 10.2 173.76 161.38 7.7 Los Angeles area 141.67 137.24 3.2
139.22 131.81 5.6 South Florida 134.39 137.36 (2.2 ) 164.33 162.07
1.4 Boston 251.75 249.28 1.0 224.95 221.86 1.4 New York area 223.10
212.20 5.1 210.12 200.73 4.7 Myrtle Beach 162.69 158.37 2.7 145.28
139.29 4.3 Atlanta 113.40 107.12 5.9 113.45 108.91 4.2 Philadelphia
182.05 179.46 1.4 170.15 167.72 1.4 Tampa 182.67 181.15 0.8 199.34
191.09 4.3 Other markets 140.96 135.67 3.9 143.07 136.39 4.9
Comparable core hotels (37) 161.92
154.90 4.5
159.74 151.86
5.2 RevPAR ($) Three Months
Ended Six Months Ended June 30, June 30,
2013 2012 %Variance 2013 2012
%Variance San Francisco area 159.95 138.97 15.1 141.14
127.05 11.1 Los Angeles area 114.30 111.34 2.7 103.66 106.70 (2.8 )
South Florida 106.63 105.64 0.9 139.74 132.04 5.8 Boston 201.17
191.05 5.3 160.81 132.45 21.4 New York area 189.28 177.59 6.6
163.49 152.50 7.2 Myrtle Beach 123.19 117.65 4.7 82.16 81.60 0.7
Atlanta 83.16 82.99 0.2 83.80 81.41 2.9 Philadelphia 143.82 141.84
1.4 112.41 100.13 12.3 Tampa 149.46 155.73 (4.0 ) 165.02 162.76 1.4
Other markets 101.85 97.02 5.0 101.04 94.38 7.1
Comparable core
hotels (37) 125.68 118.85
5.7 117.95
109.62 7.6
Historical Quarterly Operating
Statistics
Occupancy (%) Q3 2012 Q4
2012 Q1 2013 Q2 2013
Comparable core hotels (37) 75.5 66.2 70.0 77.6 Non-strategic
hotels (18) 72.5 67.7 71.6 78.0
Comparable hotels (55)
74.6 66.6 70.5 77.7 Wyndham and Wyndham
Grand (8)(a) 81.1 69.7 63.6 71.2
Same-store hotels (63)
75.5 67.0 69.5 76.8 ADR
($) Q3 2012 Q4 2012 Q1 2013 Q2 2013
Comparable core hotels (37) 154.53 154.64 157.30 161.92
Non-strategic hotels (18) 119.48 116.89 118.12 119.38
Comparable
hotels (55) 144.44 143.56 145.64
149.38 Wyndham and Wyndham Grand (8)(a) 149.07 143.45 139.38
148.81
Same-store hotels (63) 145.13 143.55
144.85 149.31 RevPAR ($) Q3 2012
Q4 2012 Q1 2013 Q2 2013 Comparable core hotels
(37) 116.60 102.36 110.15 125.68 Non-strategic hotels (18) 86.64
79.16 84.56 93.13
Comparable hotels (55) 107.73
95.66 102.65 116.12 Wyndham and Wyndham Grand
(8)(a) 120.90 99.92 88.60 105.95
Same-store hotels (63)
109.55 96.24 100.70 114.72
(a) These hotels converted from
Holiday Inn on March 1, 2013.
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 Income (Loss) to FFO and Adjusted
FFO
(in thousands, except per share data)
Three Months Ended June 30, 2013
2012 Dollars Shares
PerShareAmount
Dollars Shares
PerShareAmount
Net income (loss) $ (22,795 ) $ 12,028 Noncontrolling
interests 4,112 (159 ) Preferred dividends (9,678 )
(9,678 )
Net income (loss) attributable to FelCor common
stockholders (28,361 ) 2,191 Less: Undistributed earnings
allocated to unvested restricted stock — (10 )
Numerator for basic and diluted income (loss) available to common
stockholders (28,361 ) 123,814 $ (0.23 ) 2,181 123,638 $ 0.02
Depreciation and amortization 31,132 — 0.25 29,773 — 0.24
Depreciation, discontinued operations and unconsolidated entities
3,214 — 0.03 4,844 — 0.04 Impairment loss, net of non-controlling
interests in other partnerships 23,647 — 0.19 — — — Impairment
loss, discontinued operations — — — 1,335 — 0.01 Gain on sale of
hotels, net (7,259 ) — (0.06 ) (16,719 ) — (0.14 ) Noncontrolling
interests in FelCor LP (140 ) 621 — 11 628 — Undistributed earnings
allocated to unvested restricted stock — — — 10 — — Conversion of
unvested restricted stock — 792 —
— 278 —
FFO 22,233 125,227 0.18
21,435 124,544 0.17 Acquisition costs — — — 59 — — Debt
extinguishment, including discontinued operations — — — 805 — 0.01
Severance costs 2,791 — 0.02 — — — Conversion expenses 587 — 0.01 —
— — Variable stock compensation 121 — — — — — Pre-opening costs,
net of noncontrolling interests 322 — —
43 — —
Adjusted FFO $ 26,054
125,227 $ 0.21 $ 22,342 124,544 $ 0.18
Reconciliation of Net Loss to FFO and Adjusted
FFO
(in thousands, except per share data)
Six Months Ended June 30, 2013
2012 Dollars Shares
PerShareAmount
Dollars Shares
PerShareAmount
Net loss $ (49,400 ) $ (16,833 ) Noncontrolling interests
4,532 239 Preferred dividends (19,356 ) (19,356 )
Net loss attributable to FelCor common stockholders (64,224
) 123,814 $ (0.52 ) (35,950 ) 123,651 $ (0.29 ) Depreciation and
amortization 62,146 — 0.50 59,310 — 0.48 Depreciation, discontinued
operations and unconsolidated entities 6,478 — 0.05 11,136 — 0.09
Impairment loss, net of non-controlling interests in other
partnerships 23,647 — 0.19 — — — Impairment loss, discontinued
operations — — — 1,335 — 0.01 Gain on sale of hotels, net (7,259 )
— (0.06 ) (16,719 ) — (0.14 ) Noncontrolling interests in FelCor LP
(320 ) 621 — (185 ) 632 — Conversion of unvested restricted stock
— 565 — — 233 —
FFO 20,468 125,000 0.16 18,927 124,516 0.15 Acquisition
costs 23 — — 97 — — Debt extinguishment, including discontinued
operations — — — 812 — 0.01 Severance costs 2,791 — 0.02 380 — —
Conversion expenses 1,215 — 0.01 — — — Variable stock compensation
223 — — — — — Pre-opening costs, net of noncontrolling interests
563 — 0.01 43 — —
Adjusted FFO $ 25,283 125,000 $ 0.20 $ 20,259
124,516 $ 0.16
Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA
and Same-Store Adjusted EBITDA
(in thousands)
Three Months Ended Six Months Ended June
30, June 30, 2013 2012
2013 2012 Net income (loss) $
(22,795 ) $ 12,028 $ (49,400 ) $ (16,833 ) Depreciation and
amortization 31,132 29,773 62,146 59,310 Depreciation, discontinued
operations and unconsolidated entities 3,214 4,844 6,478 11,136
Interest expense 26,596 30,968 53,102 61,411 Interest expense,
discontinued operations and unconsolidated entities 680 1,943 1,352
3,987 Noncontrolling interests in other partnerships 3,972
(148 ) 4,212 54
EBITDA 42,799 79,408 77,890 119,065 Impairment loss, net of
noncontrolling interests in other partnerships 23,647 — 23,647 —
Impairment loss, discontinued operations — 1,335 — 1,335 Debt
extinguishment, including discontinued operations — 805 — 812
Acquisition costs — 59 23 97 Gain on sale of hotels, net (7,259 )
(16,719 ) (7,259 ) (16,719 ) Amortization of fixed stock and
directors’ compensation 1,572 1,242 3,150 2,538 Severance costs
2,791 — 2,791 380 Conversion expenses 587 — 1,215 — Variable stock
compensation 121 — 223 — Pre-opening costs, net of noncontrolling
interests 322 43 563
43
Adjusted EBITDA 64,580 66,173 102,243
107,551 Adjusted EBITDA from discontinued operations (1,335
) (5,643 ) (2,155 ) (14,640 )
Same-store
Adjusted EBITDA $ 63,245 $ 60,530 $ 100,088
$ 92,911
Hotel
EBITDA and Hotel EBITDA Margin
(dollars in thousands)
Three Months Ended Six Months Ended June
30, June 30, 2013 2012
2013 2012 Same-store operating
revenue: Room $ 191,982 $ 186,906 $ 359,293 $ 345,656 Food and
beverage 43,397 38,632 81,367 72,974 Other operating departments
12,598 14,595 23,982
25,591
Same-store operating revenue 247,977
240,133 464,642 444,221
Same-store operating expense: Room
49,363 47,694 96,091 91,853 Food and beverage 32,610 29,799 63,655
57,732 Other operating departments 6,038 5,843 11,470 11,240 Other
property related costs 62,650 60,699 124,648 120,059 Management and
franchise fees 9,315 11,254 18,845 20,898 Taxes, insurance and
lease expense 15,119 15,120
29,969 29,326
Same-store operating
expense 175,095 170,409
344,678 331,108
Hotel EBITDA $ 72,882
$ 69,724 $ 119,964 $ 113,113
Hotel
EBITDA Margin 29.4 % 29.0 % 25.8 % 25.5 %
Three
Months Ended Six Months Ended June 30, June
30, 2013 2012 2013 2012 Hotel
EBITDA - Comparable core (37) $ 47,988 $ 44,745 $ 79,841 $ 71,158
Hotel EBITDA - Non-strategic (18) 13,694
12,216 23,835 22,770
Hotel
EBITDA - Comparable (55) 61,682 56,961
103,676 93,928 Hotel EBITDA - Wyndham (8)
11,200 12,763 16,288
19,185
Hotel EBITDA (63) $ 72,882
$ 69,724 $ 119,964
$ 113,113 Hotel EBITDA Margin -
Comparable core (37) 27.6 % 27.4 % 24.5 % 23.6 % Hotel EBITDA
Margin - Non-strategic (18) 30.4 % 28.7 % 27.8 % 27.3 %
Hotel
EBITDA Margin - Comparable (55) 28.2 %
27.6 % 25.2 % 24.4 %
Hotel EBITDA Margin - Wyndham (8) 38.7 % 37.5 % 30.8 % 32.1 %
Hotel EBITDA Margin (63) 29.4 % 29.0
% 25.8 % 25.5 %
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 Six Months Ended June
30, June 30, 2013 2012
2013 2012 Same-store operating revenue
$ 247,977 $ 240,133 $ 464,642 $ 444,221 Other revenue 1,050
956 1,449 1,231
Total revenue 249,027 241,089 466,091 445,452 Same-store
operating expense 175,095 170,409 344,678 331,108 Consolidated
hotel lease expense(a) 12,166 11,236 21,723 20,429 Unconsolidated
taxes, insurance and lease expense (2,040 ) (1,933 ) (3,938 )
(3,765 ) Corporate expenses 6,694 6,167 14,526 14,379 Depreciation
and amortization 31,132 29,773 62,146 59,310 Impairment loss 27,706
— 27,706 — Conversion expenses 587 — 1,215 — Other expenses
3,916 800 4,737 1,763
Total operating expense 255,256
216,452 472,793 423,224
Operating income (loss) $ (6,229 ) $ 24,637 $ (6,702
) $ 22,228
(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 Dollars
Per
ShareAmount(a)
Dollars
Per
ShareAmount(a)
Net loss attributable to FelCor(b) $ (76.5 ) $ (72.5
) Preferred dividends (39.0 ) (39.0 )
Net loss
attributable to FelCor common stockholders (115.5 ) $ (0.93 )
(111.5 ) $ (0.90 ) Depreciation(c) 139.0 141.0 Gain on sale of
hotels (7.0 ) (7.0 ) Impairment, net of noncontrolling interests in
other partnerships 24.0 24.0
FFO
$ 40.5 $ 0.32 $ 46.5 $ 0.37 Pre-opening and conversion costs 2.0
2.0 Severance costs 3.0 3.0
Adjusted
FFO $ 45.5 $ 0.36 $ 51.5 $ 0.41
Net
loss attributable to FelCor(b) $ (76.5 ) $ (72.5 )
Depreciation(c) 139.0 141.0 Interest expense(c) 106.5 107.0
Amortization expense 6.0 6.0
EBITDA 175.0 181.5 Gain on sale of hotels (7.0 ) (7.0 )
Impairment, net of noncontrolling interests in other partnerships
24.0 24.0 Pre-opening and conversion costs 2.0 2.0 Severance costs
3.0 3.0
Adjusted EBITDA $ 197.0
$ 203.5
(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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