• Comparable RevPAR increased 7.1%
and Hotel EBITDA increased 13%
FelCor Lodging Trust Incorporated (NYSE: FCH), today reported
operating results for the quarter ended September 30,
2013.
Highlights
- Adjusted FFO per share improved 75% to
$0.14.
- Total hotel revenue for 52 comparable
hotels (Same-store hotels excluding eight recently rebranded
Wyndham hotels) increased 7.5% to $204.6 million.
- RevPAR for 52 comparable hotels
increased 7.1%.
- Adjusted EBITDA increased by
$1.6 million to $54.8 million, and Same-store Adjusted
EBITDA increased by $4.4 million to $53.9 million.
- Net loss per share improved by $0.18 to
$0.05.
- Sold five hotels in 2013, including
three hotels since our second quarter earnings release, for a total
of $102.7 million. Currently have executed contracts to sell
three additional hotels this year.
- Reinstating quarterly common stock
dividend; declares $0.02 per share fourth quarter dividend.
Commenting on operating results, Richard A. Smith, President and
Chief Executive Officer of FelCor, said, “Our portfolio continues
to produce solid results. Third quarter comparable Hotel EBITDA
increased by almost 13%, led by a 53% increase for our newly
acquired and recently redeveloped hotels. We are proud that RevPAR
for our comparable portfolio once again outperformed the industry.
Based on the outstanding condition of our portfolio and favorable
industry fundamentals, our outlook for continued RevPAR growth
remains optimistic.”
Mr. Smith added, “We continue to make substantial progress
repositioning our portfolio. We have sold five hotels this year,
for a total of 24 hotels since we began the current phase of
dispositions, and have three hotels under contract. Through the
combination of asset sales and EBITDA growth, we continue to
strengthen our balance sheet, reduce leverage and grow stockholder
value. As a result, we are pleased to announce that we have
reinstated our common dividend.”
Common Dividend:
Our board has declared a $0.02 per share quarterly common stock
dividend for the fourth quarter. The board has reinstated our
common dividend recognizing the ongoing success of our portfolio
repositioning and restructured balance sheet, as well as our
positive funds available for distribution (“FAD”) this year. The
dividend will be paid in January 2014. Future quarterly dividends
will be based on estimates of FAD, reinvestment opportunities
within our portfolio and taxable net income, among other
things.
Summary of Third Quarter Hotel
Results:
Third Quarter 2013
2012 Change Comparable hotels
(52) RevPAR $ 117.18 $ 109.42 7.1 % Total hotel
revenue, in millions $ 204.6 $ 190.3 7.5 % Hotel EBITDA, in
millions $ 52.0 $ 46.2 12.7 % Hotel EBITDA margin 25.4 % 24.3 % 119
bps
Wyndham Hotels (8) RevPAR $ 96.31 $ 120.90 (20.3
)% Total hotel revenue, in millions $ 26.4 $ 32.7 (19.1 )% Hotel
EBITDA, in millions $ 10.0 $ 10.9 (8.4 )% Hotel EBITDA margin 37.8
% 33.4 % 444 bps
Same-store hotels (60) RevPAR $
114.19 $ 111.08 2.8 % Total hotel revenue, in millions $ 231.0 $
223.0 3.6 % Hotel EBITDA, in millions $ 62.0 $ 57.1 8.7 % Hotel
EBITDA margin 26.9 % 25.6 % 126 bps
RevPAR for our 37 comparable core hotels (45 core hotels that
exclude the eight Wyndham hotels) increased 7.4% compared to the
same period in 2012, while RevPAR for our 15 non-strategic hotels
increased 5.5% compared to the same period in 2012.
RevPAR for our 52 comparable hotels (37 comparable core hotels
plus 15 non-strategic hotels) was $117.18, a 7.1% increase compared
to the same period in 2012. The increase reflects a 4.0% increase
in ADR to $151.66 and a 3.0% increase in occupancy to 77.3%.
We believe comparable hotels (which excludes the Wyndham hotels)
is the most appropriate measure to assess the ongoing operating
performance of our portfolio. The eight Wyndham hotels were
rebranded from Holiday Inn to Wyndham on March 1, 2013. RevPAR
for those eight hotels declined 20.3% for the third quarter
compared to the same period in 2012. This decline reflects the
impact of transitioning brands and management companies, including
related renovations. Wyndham Worldwide Corporation has guaranteed
minimum annual NOI for the eight hotels. We have recorded a $5.2
million pro rata portion of the projected 2013 guaranty through
September 30, 2013 (of which $2.4 million is for the third
quarter 2013) as a reduction of Wyndham’s contractual management
and other fees, which is reflected in Hotel EBITDA and Hotel EBITDA
margin. In addition, our outlook assumes EBITDA for our Wyndham
hotels that equates to the annual NOI guaranty level. We expect
revenues at these hotels to show meaningful improvement as the
transitional disruption subsides.
For our 52 comparable hotels, total hotel revenue increased 7.5%
compared to the same period in 2012. Hotel EBITDA was
$52.0 million, 12.7% higher than in the same period in 2012.
Hotel EBITDA margin was 25.4% during the quarter, a 119 basis point
increase from the same period in 2012.
RevPAR for our 60 Same-store hotels (52 comparable hotels plus
the Wyndham hotels) was $114.19, a 2.8% increase compared to the
same period in 2012. The increase reflects a 2.6% increase in ADR
to $150.18 and a 0.2% increase in occupancy to 76.0%.
See page 15 for hotel portfolio composition and pages 16 and 22
for more detail on hotel portfolio operating data.
Summary of Third Quarter Operating
Results:
Third Quarter $ in millions, except for per share
information
2013 2012
Change Same-store Adjusted EBITDA $ 53.9 $ 49.5 9.0 %
Adjusted EBITDA $ 54.8 $ 53.2 3.0 % Adjusted FFO per share $ 0.14 $
0.08 $ 0.06 Net loss per share $ (0.05 ) $ (0.23 ) $ 0.18
Same-store Adjusted EBITDA was $53.9 million compared to
$49.5 million for the same period in 2012. Adjusted EBITDA (which
includes Adjusted EBITDA for sold hotels prior to sale) was
$54.8 million compared to $53.2 million for the same
period in 2012.
Adjusted FFO was $17.1 million, or $0.14 per share,
compared to $0.08 per share in 2012. Net loss attributable to
common stockholders was $6.4 million, or $0.05 per share,
for the quarter, compared to net loss of $28.7 million, or
$0.23 per share, for the same period in 2012. The third quarter
included $11.8 million and $9.9 million in net gains on
asset sales in 2013 and 2012, respectively. The third quarter of
2012 also included $11.8 million in debt extinguishment
charges.
Year-to-Date Operating Results:
RevPAR for 52 comparable hotels was $112.94, a 6.9% increase
compared to the same period in 2012. The increase reflects a 4.3%
increase in ADR to $150.15 and a 2.4% increase in occupancy to
75.2%. Total hotel revenue for the 52 comparable hotels increased
7.3% from the same period in 2012. RevPAR for our 37 comparable
core hotels increased 7.5%, while RevPAR for our 15 non-strategic
hotels increased 4.1%.
Same-store Adjusted EBITDA was $150.5 million compared to $138.9
million, for the same period in 2012. Hotel EBITDA margin was
26.1%, a 67 basis point increase from the same period in 2012.
Adjusted EBITDA was $157.1 million compared to $160.8 million for
the same period in 2012.
Adjusted FFO was $42.3 million, or $0.34 per share, for the
nine months ended September 30, 2013, compared to $0.24 per
share for the same period in 2012. Net loss attributable to common
stockholders was $70.7 million, or $0.57 per share, for
the nine months ended September 30, 2013, compared to a net
loss of $64.7 million, or $0.52 per share, for the same period
in 2012. Net loss for the nine months ended September 30, 2013
included a $19.1 million net gain on asset sales and a
$27.7 million impairment charge. Net loss for the same period
in 2012 included a $26.6 million net gain on asset sales, a
$1.3 million impairment charge and $12.6 million in debt
extinguishment charges.
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 24 (five during 2013) of 39 non-strategic
hotels as part of our portfolio repositioning plan. During the
third quarter, we sold the 278-room Sheraton Suites Galleria -
Atlanta for $21.0 million, the 223-room Embassy Suites - Baton
Rouge for $20.0 million and the 244-room DoubleTree -
Wilmington for $27.7 million. On October 10, we sold the
277-room Embassy Suites - Jacksonville for $10.0 million.
These hotels’ operating performance is included in discontinued
operations for the third quarter and year-to-date.
We are currently marketing six non-strategic hotels, of which we
have agreed to sell three. We will continue using the sale proceeds
to repay debt and reduce leverage. The remaining nine non-strategic
hotels are owned by joint ventures, and we continue to advance
toward agreements with our partners, and expect to begin marketing
those properties in early 2014.
Capital Expenditures:
Capital expenditures at our operating hotels were
$27.6 million during the quarter, including approximately
$13.1 million for redevelopment projects and repositioning our
Wyndham hotels.
During 2013, we are investing approximately $65 million on
capital improvements and renovations, concentrated mostly at seven
hotels, as part of our long-term capital plan. In addition, we are
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.
In addition to the initial acquisition cost, we have spent $55.1
million (excluding capitalized interest) through September 30,
2013, to redevelop the 4+ star Knickerbocker Hotel. The project
remains on budget, and all contracts for hard cost construction
have been secured. We now expect the opening of the hotel to be
summer of 2014. The hotel’s executive team is now in place and
fully engaged in the sales and marketing efforts to ensure a
successful and strong opening.
Balance Sheet:
As of September 30, 2013, we had $1.6 billion of
consolidated debt bearing a 6.3% weighted-average interest rate
(113 basis points below last year) and a seven-year
weighted-average maturity. We had $68.6 million of cash and
cash equivalents as of September 30, 2013. In addition, we had
$78.1 million of restricted cash, of which $64.9 million
secures our Knickerbocker construction loan.
Outlook:
We have tightened our 2013 outlook to reflect third quarter
operating results and updated timing of asset sales. Our previous
outlook assumed selling nine hotels during 2013. As of today, we
have sold three of those hotels. Our revised outlook assumes the
sale of the six remaining hotels (three currently under contract to
close during the fourth quarter and three to close at the end of
the year). Our outlook continues to assume EBITDA for the Wyndham
hotels equates to Wyndham’s annual NOI guaranty.
During 2013, we project:
- Comparable RevPAR will increase between
6.5%-7.0%;
- Adjusted EBITDA will be between
$199.0 million and $200.5 million;
- Adjusted FFO per share will be between
$0.37 and $0.38;
- Net loss attributable to FelCor will be
between $63.5 million and $62.0 million; and
- Interest expense, including pro rata
share from joint ventures, will be $107.5 million.
The following table reconciles our 2013 Adjusted EBITDA to
Same-store Adjusted EBITDA outlook (in millions):
Low
High Previous Adjusted EBITDA $ 197.0
$ 203.5 Third Quarter Operations —
(2.0
) Updated timing of asset sales(a) 2.0 (1.0 )
Current
Adjusted EBITDA $ 199.0 $
200.5
Discontinued Operations(b) (21.0 ) (21.0 )
Same-store Adjusted
EBITDA (54 hotels) $ 178.0 $
179.5
a) The increase of the low-end reflects the
additional EBITDA generated for six hotels that are now assumed to
be sold in the fourth quarter. b) EBITDA from five hotels sold
to-date in 2013 from January 1, 2013 through the dates of sale and
EBITDA that is forecasted to be generated by six additional hotels
assumed to be sold 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 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 third quarter earnings Conference
Call on Thursday, October 31, 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 nine months ended September 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 Nine Months Ended
September 30, September 30, 2013
2012 2013 2012 Revenues: Hotel
operating revenue: Room $ 185,281 $ 179,085 $ 533,618 $ 514,029
Food and beverage 33,460 31,968 113,380 103,578 Other operating
departments 12,238 11,947 35,929 37,246 Other revenue 1,584
1,441 3,034 2,672 Total revenues 232,563
224,441 685,961 657,525 Expenses: Hotel
departmental expenses: Room 48,436 47,095 141,701 136,221 Food and
beverage 28,513 27,609 91,061 84,250 Other operating departments
5,660 5,440 16,990 16,515 Other property-related costs 61,153
59,766 181,942 176,050 Management and franchise fees 9,272 10,425
27,568 30,787 Taxes, insurance and lease expense 25,957 24,771
73,209 70,257 Corporate expenses 5,817 5,695 20,343 20,074
Depreciation and amortization 30,124 30,050 90,407 87,305
Impairment loss — — 24,441 — Conversion expenses (81 ) — 1,134 —
Other expenses 2,102 1,959 6,838 3,722
Total operating expenses 216,953 212,810 675,634
625,181 Operating income 15,610 11,631 10,327 32,344
Interest expense, net (25,996 ) (30,568 ) (79,053 ) (91,013 ) Debt
extinguishment — (10,377 ) — (10,498 ) Gain on involuntary
conversion, net 21 — 21 — Loss before
equity in income from unconsolidated entities (10,365 ) (29,314 )
(68,705 ) (69,167 ) Equity in income from unconsolidated entities
2,100 1,536 4,095 2,674 Loss from
continuing operations (8,265 ) (27,778 ) (64,610 ) (66,493 ) Income
from discontinued operations 12,054 8,223 18,999
30,105 Net income (loss) 3,789 (19,555 ) (45,611 )
(36,388 ) Net loss (income) attributable to noncontrolling
interests in other partnerships (591 ) 386 3,621 440 Net loss
attributable to redeemable noncontrolling interests in FelCor LP 32
144 352 329 Net income (loss)
attributable to FelCor 3,230 (19,025 ) (41,638 ) (35,619 )
Preferred dividends (9,678 ) (9,678 ) (29,034 ) (29,034 ) Net loss
attributable to FelCor common stockholders $ (6,448 ) $ (28,703 ) $
(70,672 ) $ (64,653 ) Basic and diluted per common share data: Loss
from continuing operations $ (0.14 ) $ (0.30 ) $ (0.72 ) $ (0.76 )
Net loss $ (0.05 ) $ (0.23 ) $ (0.57 ) $ (0.52 ) Basic and diluted
weighted average common shares outstanding 123,817 123,640
123,815 123,648
Consolidated Balance Sheets
(in thousands)
September 30,
December 31, 2013 2012 Assets
Investment in hotels, net of accumulated depreciation of $931,375
and $929,298 at September 30, 2013 and December 31, 2012,
respectively $ 1,672,413 $ 1,794,564 Hotel development 195,919
146,079 Investment in unconsolidated entities 51,069 55,082 Hotel
held for sale 9,684 — Cash and cash equivalents 68,589 45,745
Restricted cash 78,134 77,927 Accounts receivable, net of allowance
for doubtful accounts of $221 and $469 at September 30, 2013 and
December 31, 2012, respectively 38,892 25,383 Deferred expenses,
net of accumulated amortization of $18,690 and $13,820 at September
30, 2013 and December 31, 2012, respectively 30,921 34,262 Other
assets 26,741 23,391 Total assets $ 2,172,362
$ 2,202,433
Liabilities and Equity Debt, net of
discount of $6,181 and $10,318 at September 30, 2013 and December
31, 2012, respectively $ 1,648,165 $ 1,630,525 Distributions
payable 8,545 8,545 Accrued expenses and other liabilities 163,464
138,442 Total liabilities 1,820,174 1,777,512
Commitments and contingencies Redeemable noncontrolling
interests in FelCor LP, 618 and 621 units issued and outstanding at
September 30, 2013 and December 31, 2012, respectively 3,804
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 September 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 September
30, 2013 and December 31, 2012 169,412 169,412 Common stock, $0.01
par value, 200,000 shares authorized; 124,126 and 124,117 shares
issued and outstanding at September 30, 2013 and December 31, 2012,
respectively 1,241 1,241 Additional paid-in capital 2,355,086
2,353,581 Accumulated other comprehensive income 25,447 26,039
Accumulated deficit (2,535,640 ) (2,464,968 ) Total FelCor
stockholders’ equity 324,908 394,667 Noncontrolling interests in
other partnerships 23,476 27,352 Total equity 348,384
422,019 Total liabilities and equity $ 2,172,362
$ 2,202,433
Consolidated Debt Summary
(dollars in thousands)
EncumberedHotels
Interest Rate (%)
Maturity Date
September 30, 2013 December 31, 2012
Line of credit 9 LIBOR + 3.375 June 2016(a) $ 73,000
$ 56,000
Hotel mortgage debt Mortgage debt(b) 5 6.66 June -
August 2014 63,877 65,431 Mortgage debt 1 5.81 July 2016 10,032
10,405 Mortgage debt(b) 4 4.95 October 2022 126,839 128,066
Mortgage debt 1 4.94 October 2022 31,832 32,176
Senior notes
Senior secured notes 11 10.00 October 2014 227,724 223,586 Senior
secured notes 6 6.75 June 2019 525,000 525,000 Senior secured notes
9 5.625 March 2023 525,000 525,000
Other(c) —
LIBOR + 1.25 May 2016 64,861 64,861
Total 46 $
1,648,165 $ 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 single hotel. (c) This loan is related to our Knickerbocker
development project and is fully secured by restricted cash and a
mortgage. Because we were able to assume an existing loan when we
purchased this hotel, we were not required to pay any local
mortgage recording tax. 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 September 30, 2013 Debt
Balance Encumbered Hotels Line of credit $ 73
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%) $ 228 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, 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
Nine Months Ended September 30, September 30,
2013 2012 2013
2012 Improvements and additions to majority-owned hotels $
27,433 $ 26,636 $ 74,456 $ 99,985 Partners’ pro rata share of
additions to consolidated joint venture hotels (126 ) (190 ) (434 )
(819 ) Pro rata share of additions to unconsolidated hotels 299
440 1,101 1,804
Total additions to hotels(a)
$ 27,606 $ 26,886 $ 75,123 $ 100,970
(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
LAX South - ES guestrooms Sep-2012 Feb-2013 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 Sep-2013 Ft.
Lauderdale-ES public areas Aug-2013 Nov-2013 Orlando - Walt Disney
World Resort-DT guestrooms, corridors(c) May-2013 Nov-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.
Supplemental Financial Data
(in thousands, except per share data)
September 30, December 31,
Total Enterprise
Value
2013 2012 Common shares outstanding 124,126 124,117
Units outstanding 618 621 Combined shares and units
outstanding 124,744 124,738 Common stock price $ 6.16 $ 4.67
Market capitalization $ 768,423 $ 582,526 Series A
preferred stock(a) 309,362 309,362 Series C preferred stock(a)
169,412 169,412
Consolidated debt(b)
1,648,165 1,630,525 Noncontrolling interests of consolidated debt
(2,742 ) (2,810 ) Pro rata share of unconsolidated debt 73,436
74,198 Hotel development (195,919 ) (146,079 ) Cash, cash
equivalents and restricted cash(b) (146,723 ) (123,672 )
Total
enterprise value (TEV) $ 2,623,414 $ 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 September
30, 2013, four hotels 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
Nine Months Ended September 30, September 30,
2013 2012 2013
2012 Operating revenue $ 5,038 $ 19,353 $ 25,045 $ 86,968
Operating expenses (4,859 ) (18,612 ) (25,180 ) (76,877 ) Operating
income (loss) 179 741 (135 ) 10,091 Interest expense, net — (1,031
) — (4,527 ) Debt extinguishment — (1,409 ) — (2,100 ) Gain on
involuntary conversion, net 66 — 66 — Gain on sale of hotels, net
11,809 9,922 19,068 26,641
Income
from discontinued operations 12,054 8,223 18,999 30,105
Depreciation and amortization, net of noncontrolling interests in
other partnerships 747 2,609 3,586 10,055 Interest expense — 1,031
— 4,527 Noncontrolling interests in other partnerships (878 ) (10 )
(966 ) (59 )
EBITDA from discontinued operations 11,923
11,853 21,619 44,628 Impairment loss — — 3,265 1,335 Hurricane loss
— 433 — 433 Debt extinguishment — 1,409 — 2,100 Gain on involuntary
conversion, net of noncontrolling interests in other partnerships
(57 ) — (57 ) — Gain on sale, net of noncontrolling interests in
other partnerships (10,958 ) (9,922 ) (18,217 ) (26,641 )
Adjusted EBITDA from discontinued operations $ 908 $
3,773 $ 6,610 $ 21,855
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 5,434 $ 256,201 $ 78,370 Wyndham and
Wyndham Grand(b) 8 2,526 120,355 37,951 Renaissance and Marriott 3
1,321 111,976 17,908 DoubleTree by Hilton and Hilton 5 1,206 56,071
16,702 Sheraton and Westin 4 1,604 68,369 14,536 Fairmont 1 383
41,255 4,285 Holiday Inn 2 968 40,512 4,217 Morgans and Royalton 2
285 32,129 3,457
Core hotels 45 13,727
726,868 177,426 Non-strategic hotels 15 3,917 140,475
37,367
Same-store hotels 60 17,644 $
867,343 $ 214,793
Market
San Francisco area 4 1,637 $ 99,659 $ 21,030 Los Angeles area 3 677
33,287 13,757 South Florida 3 923 47,298 13,253 Boston 3 916 68,121
12,123 New York area 4 820 57,052 9,731 Myrtle Beach 2 640 36,974
9,427 Atlanta 3 952 35,410 9,228 Philadelphia 2 728 36,122 8,880
Tampa 1 361 45,152 7,955 San Diego 1 600 26,445 6,687 Other markets
19 5,473 241,348 65,355
Core hotels 45 13,727
726,868 177,426 Non-strategic hotels 15 3,917 140,475
37,367
Same-store hotels 60 17,644 $
867,343 $ 214,793
Location
Urban 17 5,308 $ 316,355 $ 74,428 Resort 10 2,929 183,808 41,465
Airport 9 2,957 126,906 33,734 Suburban 9 2,533 99,799 27,799
Core hotels 45 13,727 726,868
177,426 Non-strategic hotels 15 3,917 140,475 37,367
Same-store hotels 60 17,644 $
867,343 $ 214,793
(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 nine months ended September 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
Nine Months Ended September 30,
September 30, 2013 2012
%Variance 2013 2012 %Variance
Embassy Suites Hotels 79.3 76.4 3.8 77.0 76.4 0.8 Renaissance and
Marriott 66.9 68.3 (2.1 ) 71.6 71.3 0.5 DoubleTree by Hilton and
Hilton 76.1 78.1 (2.6 ) 71.5 71.9 (0.6 ) Sheraton and Westin 70.0
69.0 1.5 67.7 65.8 2.9 Fairmont 85.5 81.7 4.6 75.5 62.0 21.7
Holiday Inn 85.3 80.9 5.5 80.7 74.1 8.9 Morgans and Royalton 88.8
85.6 3.7 86.4 83.2 3.9
Comparable core hotels (37)
77.1 75.5 2.2 74.9 73.3
2.3 Non-strategic hotels (15) 77.6 73.7 5.3 76.0 73.8 2.9
Comparable hotels (52) 77.3 75.0 3.0
75.2 73.4 2.4 Wyndham and Wyndham Grand(a)
68.7 81.1 (15.3 ) 67.8 78.3 (13.4 )
Same-store hotels (60)
76.0 75.9 0.2 74.2 74.1 —
ADR ($) Three Months Ended Nine Months Ended
September 30, September 30, 2013
2012 %Variance 2013 2012
%Variance Embassy Suites Hotels 151.02 146.40 3.2 150.30
145.40 3.4 Renaissance and Marriott 191.81 171.56 11.8 209.87
194.01 8.2 DoubleTree by Hilton and Hilton 147.65 142.08 3.9 147.72
139.02 6.3 Sheraton and Westin 116.63 114.61 1.8 115.95 112.28 3.3
Fairmont 290.21 275.15 5.5 280.17 281.34 (0.4 ) Holiday Inn 176.59
159.36 10.8 144.64 134.56 7.5 Morgans and Royalton 299.78 295.74
1.4 300.11 289.76 3.6
Comparable core hotels (37)
162.42 154.53 5.1 160.67 152.78
5.2 Non-strategic hotels (15) 121.13 120.87 0.2 120.47
119.15 1.1
Comparable hotels (52) 151.66
145.89 4.0 150.15 143.95 4.3
Wyndham and Wyndham Grand(a) 140.19 149.07 (6.0 ) 142.94 146.51
(2.4 )
Same-store hotels (60) 150.18 146.38
2.6 149.20 144.34 3.4 RevPAR ($)
Three Months Ended Nine Months Ended September
30, September 30, 2013 2012
%Variance 2013 2012 %Variance Embassy
Suites Hotels 119.77 111.89 7.0 115.71 111.03 4.2 Renaissance and
Marriott 128.29 117.18 9.5 150.36 138.32 8.7 DoubleTree by Hilton
and Hilton 112.41 111.00 1.3 105.65 99.99 5.7 Sheraton and Westin
81.65 79.09 3.2 78.53 73.91 6.3 Fairmont 248.05 224.93 10.3 211.43
174.41 21.2 Holiday Inn 150.64 128.85 16.9 116.76 99.75 17.0
Morgans and Royalton 266.15 253.11 5.2 259.43 241.05 7.6
Comparable core hotels (37) 125.28 116.60
7.4 120.41 111.96 7.5 Non-strategic
hotels (15) 94.04 89.10 5.5 91.55 87.96 4.1
Comparable hotels
(52) 117.18 109.42 7.1 112.94
105.70 6.9 Wyndham and Wyndham Grand(a) 96.31 120.90
(20.3 ) 96.95 114.69 (15.5 )
Same-store hotels (60)
114.19 111.08 2.8 110.65 107.00
3.4
(a) These hotels converted from Holiday
Inn on March 1, 2013.
Hotel Operating Statistics by
Market
Occupancy (%) Three Months Ended
Nine Months Ended September 30,
September 30, 2013 2012
%Variance 2013 2012 %Variance
San Francisco area 90.7 89.7 1.2 84.4 82.4 2.5 Los Angeles
area 82.2 78.9 4.2 77.1 80.3 (4.0 ) South Florida 77.1 72.7 6.0
82.4 78.5 4.9 Boston 82.1 77.6 5.8 75.1 65.7 14.2 New York area
82.5 78.5 5.1 79.4 76.8 3.3 Myrtle Beach 88.6 82.1 8.0 67.3 66.5
1.2 Atlanta 76.4 75.6 1.1 74.7 75.0 (0.4 ) Philadelphia 70.4 68.3
3.2 67.5 62.6 7.9 Tampa 77.6 80.7 (3.8 ) 81.0 83.7 (3.1 ) Other
markets 68.7 68.6 0.1 70.0 69.0 1.4
Comparable core hotels
(37) 77.1 75.5
2.2 74.9
73.3 2.3
ADR ($) Three Months Ended Nine Months
Ended September 30, September 30,
2013 2012 %Variance 2013 2012
%Variance San Francisco area 219.88 190.07 15.7 190.42
171.84 10.8 Los Angeles area 149.50 149.88 (0.3 ) 142.91 137.77 3.7
South Florida 114.98 115.28 (0.3 ) 148.76 147.52 0.8 Boston 241.44
230.59 4.7 231.03 225.32 2.5 New York area 211.12 205.13 2.9 210.47
202.24 4.1 Myrtle Beach 174.58 174.37 0.1 158.18 153.84 2.8 Atlanta
112.49 107.82 4.3 113.12 108.54 4.2 Philadelphia 155.73 157.43 (1.1
) 165.08 163.95 0.7 Tampa 155.99 151.48 3.0 185.51 178.36 4.0 Other
markets 133.83 131.46 1.8 140.01 134.74 3.9
Comparable core
hotels (37) 162.42
154.53 5.1
160.67 152.78
5.2 RevPAR ($) Three Months
Ended Nine Months Ended September 30,
September 30, 2013 2012
%Variance 2013 2012 %Variance San
Francisco area 199.50 170.41 17.1 160.76 141.59 13.5 Los Angeles
area 122.88 118.23 3.9 110.14 110.57 (0.4 ) South Florida 88.66
83.83 5.8 122.53 115.85 5.8 Boston 198.14 178.94 10.7 173.39 148.06
17.1 New York area 174.14 160.99 8.2 167.08 155.35 7.6 Myrtle Beach
154.70 143.13 8.1 106.39 102.26 4.0 Atlanta 85.93 81.46 5.5 84.52
81.43 3.8 Philadelphia 109.65 107.45 2.0 111.48 102.59 8.7 Tampa
121.02 122.21 (1.0 ) 150.35 149.25 0.7 Other markets 91.94 90.24
1.9 97.98 92.99 5.4
Comparable core hotels (37)
125.28 116.60
7.4 120.41
111.96 7.5
Historical Quarterly Operating Statistics
Occupancy (%) Q4 2012
Q1 2013 Q2 2013 Q3 2013
Comparable core hotels (37) 66.2 70.0 77.6 77.1 Non-strategic
hotels (15) 68.2 72.2 78.1 77.6
Comparable hotels (52)
66.7 70.6 77.7 77.3 Wyndham and Wyndham
Grand (8)(a) 69.7 63.6 71.2 68.7
Same-store hotels (60)
67.1 69.6 76.8 76.0 ADR
($) Q4 2012 Q1 2013 Q2 2013 Q3 2013
Comparable core hotels (37) 154.64 157.30 161.92 162.42
Non-strategic hotels (15) 117.72 119.54 120.66 121.13
Comparable
hotels (52) 145.04 147.32 151.18
151.66 Wyndham and Wyndham Grand (8)(a) 143.45 139.38 148.81
140.19
Same-store hotels (60) 144.81 146.27
150.87 150.18 RevPAR ($) Q4 2012
Q1 2013 Q2 2013 Q3 2013 Comparable core hotels
(37) 102.36 110.15 125.68 125.28 Non-strategic hotels (15) 80.30
86.34 94.20 94.04
Comparable hotels (52) 96.75
104.00 117.53 117.18 Wyndham and Wyndham Grand
(8)(a) 99.92 88.60 105.95 96.31
Same-store hotels (60)
97.20 101.78 115.87 114.19
(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 September 30, 2013
2012 Dollars Shares
PerShareAmount
Dollars Shares
PerShareAmount
Net income (loss) $ 3,789 $ (19,555 ) Noncontrolling
interests (559 ) 530 Preferred dividends (9,678 ) (9,678 )
Net
loss attributable to FelCor common stockholders (6,448 )
123,817 $ (0.05 ) (28,703 ) 123,640 $ (0.23 ) Depreciation and
amortization 30,124 — 0.24 30,050 — 0.25 Depreciation, discontinued
operations and unconsolidated entities 3,461 — 0.03 5,363 — 0.04
Gain on sale of hotels, net of noncontrolling interests in other
partnerships (10,958 ) — (0.09 ) (9,922 ) — (0.08 ) Gain on
involuntary conversion (21 ) — — — — — Gain on involuntary
conversion, discontinued operations, net of noncontrolling
interests in other partnerships (57 ) — — — — — Noncontrolling
interests in FelCor LP (32 ) 618 — (144 ) 626 (0.01 ) Conversion of
unvested restricted stock — 983 — — —
—
FFO 16,069 125,418 0.13 (3,356 ) 124,266
(0.03 )
Acquisition costs
— — — 16 — — Hurricane loss — — — 646 — 0.01 Hurricane loss,
discontinued operations and unconsolidated entities — — — 436 — —
Debt extinguishment, including discontinued operations — — — 11,786
— 0.09 Severance costs 106 — — 71 — — Abandoned projects — — — 219
— — Conversion expenses (81 ) — — — — — Variable stock compensation
151 — — — — — Pre-opening costs, net of noncontrolling interests
814 — 0.01 202 — — Conversion of unvested restricted stock —
— — — 358 0.01
Adjusted
FFO $ 17,059 125,418 $ 0.14 $ 10,020
124,624 $ 0.08
Reconciliation of Net Loss to FFO and Adjusted FFO
(in thousands, except per share data)
Nine Months Ended September 30, 2013
2012 Dollars Shares
Per ShareAmount
Dollars Shares
Per ShareAmount
Net loss $ (45,611 ) $ (36,388 ) Noncontrolling interests
3,973 769 Preferred dividends (29,034 ) (29,034 )
Net loss
attributable to FelCor common stockholders (70,672 ) 123,815 $
(0.57 )
(64,653
) 123,648 $ (0.52 ) Depreciation and amortization 90,407 — 0.73
87,305 — 0.71 Depreciation, discontinued operations and
unconsolidated entities 11,800 — 0.10 18,554 — 0.15 Gain on
involuntary conversion (21 ) — — — — — Gain on involuntary
conversion, discontinued operations, net of noncontrolling
interests in other partnerships (57 ) — — — — — Impairment loss,
net of non-controlling interests in other partnerships 20,382 —
0.16 — — — Impairment loss, discontinued operations 3,265 — 0.03
1,335 — 0.01 Gain on sale of hotels, net of noncontrolling
interests in other partnerships (18,217 ) — (0.15 ) (26,641 ) —
(0.22 ) Noncontrolling interests in FelCor LP (352 ) 620 (0.01 )
(329 ) 630 — Conversion of unvested restricted stock — 672
— — 280 —
FFO 36,535
125,107 0.29 15,571 124,558 0.13 Acquisition costs 23 — — 114 — —
Hurricane loss — — — 646 — 0.01 Hurricane loss, discontinued
operations and unconsolidated entities — — — 436 — — Debt
extinguishment, including discontinued operations — — — 12,598 —
0.10 Severance costs 2,896 — 0.02 451 — — Abandoned projects — — —
219 — — Conversion expenses 1,134 — 0.01 — — — Variable stock
compensation 374 — — — — — Pre-opening costs, net of noncontrolling
interests 1,376 — 0.02 245 — —
Adjusted FFO $ 42,338 125,107 $ 0.34
$ 30,280 124,558 $ 0.24
Reconciliation of Net Income (Loss) to
EBITDA, Adjusted EBITDA and Same-Store Adjusted EBITDA
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30, 2013
2012 2013 2012 Net income
(loss) $ 3,789 $ (19,555 ) $ (45,611 ) $ (36,388 ) Depreciation
and amortization 30,124 30,050 90,407 87,305 Depreciation,
discontinued operations and unconsolidated entities 3,461 5,363
11,800 18,554 Interest expense 26,011 30,602 79,113 91,129 Interest
expense, discontinued operations and unconsolidated entities 681
1,725 2,032 6,595 Noncontrolling interests in other partnerships
(591 ) 386 3,621 440
EBITDA 63,475
48,571 141,362 167,635 Impairment loss, net of noncontrolling
interests in other partnerships — — 20,382 — Impairment loss,
discontinued operations — — 3,265 1,335 Hurricane loss — 646 — 646
Hurricane loss, discontinued operations and unconsolidated entities
— 436 — 436 Debt extinguishment, including discontinued operations
— 11,786 — 12,598 Acquisition costs — 16 23 114 Gain on sale of
hotels, net of noncontrolling interests in other partnerships
(10,958 ) (9,922 ) (18,217 ) (26,641 ) Gain on involuntary
conversion (21 ) — (21 ) — Gain on involuntary conversion,
discontinued operations, net of noncontrolling interests in other
partnerships (57 ) — (57 ) — Amortization of fixed stock and
directors’ compensation 1,397 1,210 4,547 3,748 Severance costs 106
71 2,896 451 Abandoned projects — 219 — 219 Conversion expenses (81
) — 1,134 — Variable stock compensation 151 — 374 — Pre-opening
costs, net of noncontrolling interests 814 202 1,376
245
Adjusted EBITDA 54,826 53,235 157,064
160,786 Adjusted EBITDA from discontinued operations (908 ) (3,773
) (6,610 ) (21,855 )
Same-store Adjusted EBITDA $ 53,918
$ 49,462 $ 150,454 $ 138,931
Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands)
Three Months Ended
Nine Months Ended September 30, September 30,
2013 2012 2013
2012 Same-store operating revenue: Room $ 185,281 $
179,085 $ 533,618 $ 514,029 Food and beverage 33,460 31,968 113,380
103,578 Other operating departments 12,238 11,947
35,929 37,246
Same-store operating revenue
230,979 223,000 682,927 654,853
Same-store operating
expense: Room 48,436 47,095 141,701 136,221 Food and beverage
28,513 27,609 91,061 84,250 Other operating departments 5,660 5,440
16,990 16,515 Other property related costs 61,153 59,766 181,942
176,050 Management and franchise fees 9,272 10,425 27,568 30,787
Taxes, insurance and lease expense 15,907 15,588
45,374 44,410
Same-store operating expense
168,941 165,923 504,636 488,233
Hotel EBITDA $ 62,038 $ 57,077 $ 178,291
$ 166,620
Hotel EBITDA Margin 26.9 % 25.6 %
26.1 % 25.4 %
Three Months Ended
Nine Months Ended September 30,
September 30, 2013 2012 2013
2012 Hotel EBITDA - Comparable core (37) $ 41,659 $
36,549 $ 121,495 $ 107,689 Hotel EBITDA - Non-strategic (15) 10,377
9,613 30,507 28,838
Hotel EBITDA -
Comparable (52) 52,036 46,162 152,002
136,527 Hotel EBITDA - Wyndham (8) 10,002 10,915
26,289 30,093
Hotel EBITDA (60)
$ 62,038 $ 57,077
$ 178,291 $ 166,620
Hotel EBITDA Margin - Comparable core (37) 25.0 % 23.7 %
24.7 % 23.7 % Hotel EBITDA Margin - Non-strategic (15) 27.3 % 26.7
% 27.5 % 27.0 %
Hotel EBITDA Margin - Comparable (52)
25.4 % 24.3 % 25.2 %
24.3 % Hotel EBITDA Margin - Wyndham (8) 37.8 % 33.4
% 33.1 % 32.5 %
Hotel EBITDA Margin (60) 26.9
% 25.6 % 26.1 % 25.4
%
Reconciliation of Same-store Operating
Revenue and Same-store Operating Expense to Total Revenue, Total
Operating Expense and Operating Income
(in thousands)
Three Months Ended Nine
Months Ended September 30, September 30,
2013 2012 2013
2012 Same-store operating revenue $ 230,979 $ 223,000 $
682,927 $ 654,853 Other revenue 1,584 1,441 3,034
2,672
Total revenue 232,563 224,441 685,961
657,525 Same-store operating expense 168,941 165,923 504,636
488,233 Consolidated hotel lease expense(a) 11,849 10,910 33,572
31,339 Unconsolidated taxes, insurance and lease expense (1,799 )
(1,727 ) (5,737 ) (5,492 ) Corporate expenses 5,817 5,695 20,343
20,074 Depreciation and amortization 30,124 30,050 90,407 87,305
Impairment loss — — 24,441 — Conversion expenses (81 ) — 1,134 —
Other expenses 2,102 1,959 6,838 3,722
Total operating expense 216,953 212,810
675,634 625,181
Operating income $ 15,610
$ 11,631 $ 10,327 $ 32,344 (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) $
(63.5
) $ (62.0 ) Preferred dividends (39.0 )
(39.0
)
Net loss attributable to FelCor common stockholders
(102.5
) $ (0.83 ) (101.0 ) $ (0.81 ) Depreciation(c) 138.0 138.0 Gain on
sale of hotels (18.0 ) (18.0 ) Impairment, net of noncontrolling
interests in other partnerships 24.0 24.0 Noncontrolling interests
in FelCor LP (1.0 ) (1.0 )
FFO $
40.5
$ 0.32 $ 42.0 $ 0.34 Pre-opening and conversion costs 3.0 3.0
Severance costs 3.0 3.0
Adjusted FFO $
46.5
$
0.37
$ 48.0 $ 0.38
Net loss $
(67.5
) $ (66.0 ) Depreciation(c) 138.0 138.0 Interest expense(c)
107.5
107.5
Amortization expense 6.0 6.0 Noncontrolling interests in other
partnerships 3.0 3.0
EBITDA 187.0
188.5
Gain on sale of hotels (18.0 ) (18.0 ) Impairment, net of
noncontrolling interests in other partnerships 24.0 24.0
Pre-opening and conversion costs 3.0 3.0 Severance costs 3.0
3.0
Adjusted EBITDA $ 199.0 $
200.5
(a) Weighted average shares are 125.1 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.
FelCor Lodging Trust IncorporatedStephen A. Schafer,
972-444-4912Vice President Strategic Planning & Investor
Relationssschafer@felcor.com
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