FCH Felcor Lodging Trust Incorporated (delisted)

• RevPAR increased 7.7% for Comparable Hotels

FelCor Lodging Trust Incorporated (NYSE: FCH) reported operating results for the quarter and year ended December 31, 2013.

Highlights for the Quarter

• Adjusted FFO per share improved from $(0.01) to $0.05.
• RevPAR for 51 comparable hotels increased 7.7%.
• Adjusted EBITDA increased by $1.2 million to $43.2 million, and Same-store Adjusted EBITDA increased by $4.4 million to $42.9 million.
• Net loss per share improved by $0.59, from $0.83 to $0.24.
• Sold, or agreed to sell, three hotels for total gross proceeds of $51 million.
• Reinstated quarterly common stock dividend ($0.02 per share).

Commenting on operating results, Richard A. Smith, President and Chief Executive Officer of FelCor, said, “ I am very pleased with our fourth quarter performance, as we generally exceeded our expectations, and RevPAR for our comparable portfolio once again outperformed the industry. Our six recently acquired and redeveloped hotels performed extremely well throughout 2013, with RevPAR and EBITDA growing 11% and 28%, respectively. Our outlook remains optimistic based on the outstanding condition of our portfolio, favorable industry fundamentals and improving ADR growth.”

Mr. Smith added, “We remain focused on our balance sheet restructuring and portfolio repositioning program, with six hotels being actively marketed and more hotels going to market later this year. Since December 2010, we have sold 25 hotels, with another under contract. During 2014, we intend to sell most of our 20 remaining non-strategic hotels and repay our 2014 debt maturities. Through the combination of asset sales and EBITDA growth, we will continue to reduce leverage and increase the quality of our portfolio. Given our successful execution to-date and meaningful cash flow growth, we were pleased to reinstate our common dividend.”

   

Summary of Fourth Quarter Hotel Results

  Fourth Quarter 2013     2012     Change Comparable hotels (51) RevPAR $ 104.61 $ 97.11 7.7% Total hotel revenue, in millions $ 189.3 $ 182.6 3.6% Hotel EBITDA, in millions $ 43.9 $ 39.9 10.0% Hotel EBITDA margin 23.2 % 21.9 % 135 bps   Wyndham Hotels (8) RevPAR $ 88.30 $ 99.92 (11.6)% Total hotel revenue, in millions $ 24.5 $ 27.8 (11.8)% Hotel EBITDA, in millions $ 8.8 $ 7.9 11.6% Hotel EBITDA margin 35.7 % 28.2 % 744 bps   Same-store hotels (59) RevPAR $ 102.27 $ 97.51 4.9% Total hotel revenue, in millions $ 213.8 $ 210.4 1.6% Hotel EBITDA, in millions $ 52.7 $ 47.8 10.3% Hotel EBITDA margin 24.6 % 22.7 % 194 bps  

RevPAR for our 31 comparable core hotels (39 core hotels that exclude the eight Wyndham hotels) increased 9.5% compared to the same period in 2012, while RevPAR for our 20 non-strategic hotels increased 4.2% compared to the same period in 2012.

RevPAR for our 51 comparable hotels (31 comparable core hotels plus 20 non-strategic hotels) was $104.61, a 7.7% increase compared to the same period in 2012. The increase reflects a 3.2% increase in ADR to $150.43 and a 4.4% increase in occupancy to 69.5%.

We believe the comparable hotels metric (which excludes the Wyndham hotels) is the most appropriate measure to assess the current 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 11.6% for the fourth quarter compared to the same period in 2012, an improvement from the third quarter 2013 decline of 20.3%. 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 over the ten-year term of the management agreement. We have recorded $8 million (of which approximately $3 million is for the fourth quarter 2013) as a reduction of Wyndham’s contractual management and other fees, which is reflected in Hotel EBITDA and Hotel EBITDA margin. We expect revenues at these hotels to grow meaningfully during 2014 and beyond, as the transitional disruption subsides.

RevPAR for our 59 Same-store hotels (51 comparable hotels plus the Wyndham hotels) was $102.27, a 4.9% increase compared to the same period in 2012. The increase reflects a 3.4% increase in ADR to $150.29 and a 1.5% increase in occupancy to 68.0%.

For our 51 comparable hotels, Hotel EBITDA was $43.9 million, an increase of 10.0%, and Hotel EBITDA margin was 23.2% during the quarter, a 135 basis point increase.

See page 16 for hotel portfolio composition and pages 17 and 23 for more detailed hotel portfolio operating data.

   

Summary of Fourth Quarter Operating Results

  Fourth Quarter $ in millions, except for per share information 2013     2012     Change Same-store Adjusted EBITDA $ 42.9 $ 38.5 11.6% Adjusted EBITDA $ 43.2 $ 42.0 2.9% Adjusted FFO per share $ 0.05 $ (0.01 ) $0.06 Net loss per share $ (0.24 ) $ (0.83 ) $0.59  

Same-store Adjusted EBITDA was $42.9 million compared to $38.5 million for the same period in 2012. Adjusted EBITDA (which includes Adjusted EBITDA for sold hotels prior to sale) was $43.2 million compared to $42.0 million for the same period in 2012.

Adjusted FFO was $6.3 million, or $0.05 per share, in 2013 compared to a loss of $1.5 million, or $0.01 per share, in 2012. Net loss attributable to common stockholders was $29.5 million, or $0.24 per share, in 2013 compared to a net loss of $102.1 million, or $0.83 per share, in 2012. We recorded $373,000 and $27.8 million in net gains on asset sales in the fourth quarters of 2013 and 2012, respectively. We also recorded $62.5 million in debt extinguishment charges in the fourth quarter of 2012.

Full Year Operating Results

RevPAR for 51 comparable hotels in 2013 was $111.22, a 7.1% increase compared to 2012. The increase reflects a 4.1% increase in ADR to $150.75 and a 2.9% increase in occupancy to 73.8%. Total hotel revenue for the 51 comparable hotels increased 6.4% in 2013. RevPAR for our 31 comparable core hotels increased 8.4%, while RevPAR for our 20 non-strategic hotels increased 3.9%, in 2013. RevPAR for our 59 Same-store hotels in 2013 was $108.83, a 3.8% increase compared to 2012.

Same-store Adjusted EBITDA was $191.9 million in 2013 compared to $176.1 million in 2012. Hotel EBITDA margin was 25.8%, a 99 basis point increase from 2012. Adjusted EBITDA was $200.3 million in 2013 compared to $202.8 million in 2012.

Adjusted FFO was $48.7 million, or $0.39 per share, in 2013 compared to $28.8 million, or $0.23 per share, in 2012. Net loss attributable to common stockholders was $100.2 million, or $0.81 per share in 2013, compared to a net loss of $166.7 million, or $1.35 per share, in 2012. Net loss in 2013 included a $19.4 million net gain on asset sales and a $28.8 million impairment charge. Net loss in 2012 included $54.5 million in net gains on asset sales, a $1.3 million impairment charge and $75.1 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 19 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

Since December 2010, we have sold 25 non-strategic hotels as part of our portfolio repositioning plan. During 2013, we sold five hotels for total gross proceeds of $102.7 million. In January, we also sold the 232-room Embassy Suites hotel in Atlanta for $17.2 million. These hotels’ operating performance is included in discontinued operations for the fourth quarter and in 2013.

We have also agreed to sell our 218-room Embassy Suites hotel in Bloomington for $24 million. The purchaser has paid a non-refundable deposit toward the purchase price, and we expect the sale to close in March.

We have 20 remaining non-strategic hotels, including the one hotel that is under contract. Of the remaining hotels, we are currently marketing six and expect to begin marketing three more later this year. We indirectly own 50% interests in the other 10 non-strategic hotels, which are owned by a joint venture with one of our brand-managers. We are working diligently to unwind that joint venture, as a consequence of which we would own five of those hotels outright (our joint venture partner would own the other five). When the joint venture is unwound (which we are targeting to occur in the second quarter), we intend to begin marketing those hotels immediately.

Capital Expenditures

During the quarter, we invested $27.2 million in capital expenditures at our operating hotels, including approximately $12.8 million for redevelopment projects and repositioning our Wyndham hotels. During 2013, we invested $102.3 million on capital improvements and renovations on a pro rata basis.

During 2014, we will invest approximately $60 million in capital improvements and renovations (including $10 million for 2013 projects), concentrated mostly at seven hotels, as part of our long-term capital plan. In addition, we are investing approximately $25 million to complete the repositioning of our Wyndham portfolio. Please see page 13 of this release for more detail on renovations.

Knickerbocker

We have spent $65.3 million (excluding the initial acquisition costs and capitalized interest) through December 31, 2013 to redevelop the 4+ star Knickerbocker Hotel, located in the heart of Times Square in Manhattan. Our total project cost is expected to be $240 million (net of historic tax credit), which is within 5% of our original estimate.

We expect the hotel to open in early fall, as winter weather delays have slightly disrupted the schedule. The hotel’s executive team is in place and fully engaged in the sales and marketing efforts to ensure a successful and strong opening. In early 2014, we finalized an agreement with one of the nation’s most recognized Master Chefs, Charlie Palmer, to manage the food and beverage operations. Mr. Palmer’s flagship restaurant, the Michelin-starred Aureole, is located adjacent to the hotel, which will create sales and marketing synergies.

Our Knickerbocker Hotel venture raised $45 million through the sale of 3.5% preferred equity through the EB-5 immigrant investor program. The venture received $40 million in proceeds in February 2014, and the remaining $5 million will be received as investors’ visas are approved by the government. We are using our 95% share of the proceeds to repay borrowings under our line of credit.

Balance Sheet

As of December 31, 2013, we had $1.7 billion of consolidated debt bearing a 6.3% weighted-average interest rate and a six-year weighted-average maturity. We had $45.6 million of cash and cash equivalents and $77.2 million of restricted cash, of which $64.9 million secures our Knickerbocker construction loan.

Common Dividend

Our Board of Directors reinstated a quarterly common dividend in October 2013 in recognition of our ongoing and successful portfolio repositioning and balance sheet restructuring, as well as our positive funds available for distribution (“FAD”) during 2013. At that time, we declared a $0.02 per share fourth quarter common stock dividend, which was paid in January. Future quarterly dividends will be based on estimates of FAD, reinvestment opportunities within our portfolio and taxable income, among other things.

Outlook

Our 2014 outlook reflects continued strong fundamentals in the lodging industry. Our expected RevPAR growth reflects a premium to the industry, because of our high-quality, diversified portfolio and continued strong growth at our recently acquired and redeveloped hotels. Our outlook reflects the sale of all 20 non-strategic hotels. Both the low and high-end of our guidance includes the March sale of one hotel under contract. The low-end of our outlook assumes that nine hotels are sold in the second quarter, and the remaining hotels are sold in the third quarter. The high-end of our outlook assumes six hotels are sold in the third quarter, and the remaining hotels are sold during the fourth quarter. Our outlook assumes EBITDA for the Wyndham hotels equals the amount of Wyndham’s annual NOI guaranty.

During 2014, we project:

• RevPAR for comparable hotels (51 hotels) will increase 6.25% to 7.25% and RevPAR for Same-store hotels (59 hotels) will increase 7.5% to 8.5%;
• Adjusted EBITDA will be $202.0 million to $217.0 million ($216.0 million to $221.0 million prior to asset sales);
• Adjusted FFO per share will be $0.50 to $0.58;
• Net loss attributable to FelCor will be $44.0 million to $40.0 million; and
• Interest expense, including pro rata share from joint ventures, will be $94.0 million to $99.0 million.

The following table reconciles our 2014 Adjusted EBITDA to Same-store Adjusted EBITDA outlook (in millions):

    Low     High 2013 Same-store Adjusted EBITDA (59 hotels) $ 191.9 $ 191.9 Knickerbocker Hotel (opening early Fall 2014) 1.1 1.1 2014 Growth 23.0   28.0   2014 Adjusted EBITDA (prior to asset sales) $ 216.0 $ 221.0 EBITDA of non-strategic hotels from closing to December 31(a) (14.0 ) (4.0 ) 2014 Adjusted EBITDA 202.0 217.0 Discontinued Operations(b) (22.0 ) (32.0 )

Core Adjusted EBITDA (40 hotels)

$ 180.0   $ 185.0    

a)

EBITDA that would be recognized with respect to 20 hotels assumed to be sold during 2014 from the dates of sale through December 31, 2014

b)

EBITDA that is forecasted to be generated by 20 hotels assumed to be sold from January 1, 2014 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 fourth quarter earnings Conference Call on Tuesday, February 25, 2014 at 10:00 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 months and year ended December 31, 2013.

   

TABLE OF CONTENTS

 

Page

Consolidated Statements of Operations(a) 9 Consolidated Balance Sheets(a) 10 Consolidated Debt Summary 11 Schedule of Encumbered Hotels 12 Capital Expenditures 13 Hotels Under Renovation During 2014 13 Supplemental Financial Data 14 Discontinued Operations 15 Hotel Portfolio Composition 16 Hotel Operating Statistics by Brand 17 Hotel Operating Statistics by Market 18 Historical Quarterly Operating Statistics 19 Non-GAAP Financial Measures 19  

(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 Year Ended December 31, December 31, 2013     2012 2013     2012 Revenues: Hotel operating revenue: Room $ 163,525 $ 158,739 $ 692,016 $ 667,708 Food and beverage 39,011 40,313 151,233 142,962 Other operating departments 11,282 11,395 46,757 48,271 Other revenue 396   513   3,430   3,185   Total revenues 214,214   210,960   893,436   862,126   Expenses: Hotel departmental expenses: Room 44,734 44,811 184,840 179,602 Food and beverage 30,043 31,291 120,287 114,815 Other operating departments 5,179 5,338 21,954 21,682 Other property-related costs 58,159 57,885 238,115 231,929 Management and franchise fees 8,487 9,309 35,735 39,785 Taxes, insurance and lease expense 23,340 22,302 96,194 92,166 Corporate expenses 6,653 6,054 26,996 26,128 Depreciation and amortization 30,149 30,073 119,624 116,384 Impairment loss — — 24,441 — Conversion expenses — 31,197 1,134 31,197 Other expenses 1,913   905   8,749   4,626   Total operating expenses 208,657   239,165   878,069   858,314   Operating income (loss) 5,557 (28,205 ) 15,367 3,812 Interest expense, net (25,330 ) (31,155 ) (103,787 ) (121,552 ) Debt extinguishment — (61,852 ) — (72,350 ) Gain on involuntary conversion, net 20   —   41   —   Loss before equity in income from unconsolidated entities (19,753 ) (121,212 ) (88,379 ) (190,090 ) Equity in income from unconsolidated entities 491   105   4,586   2,779   Loss from continuing operations (19,262 ) (121,107 ) (83,793 ) (187,311 ) Income (loss) from discontinued operations (910 ) 28,081   18,010   57,897   Net loss (20,172 ) (93,026 ) (65,783 ) (129,414 ) Net loss attributable to noncontrolling interests in other partnerships 161 125 3,782 565 Net loss attributable to redeemable noncontrolling interests in FelCor LP 145   513   497   842   Net loss attributable to FelCor (19,866 ) (92,388 ) (61,504 ) (128,007 ) Preferred dividends (9,679 ) (9,679 ) (38,713 ) (38,713 ) Net loss attributable to FelCor common stockholders $ (29,545 ) $ (102,067 ) $ (100,217 ) $ (166,720 ) Basic and diluted per common share data: Loss from continuing operations $ (0.23 ) $ (1.05 ) $ (0.95 ) $ (1.81 ) Net loss $ (0.24 ) $ (0.83 ) $ (0.81 ) $ (1.35 ) Basic and diluted weighted average common shares outstanding 123,827   123,635   123,818   123,634            

Consolidated Balance Sheets

(in thousands)

  December 31, December 31, 2013 2012 Assets Investment in hotels, net of accumulated depreciation of $929,801 and $929,298 at December 31, 2013 and 2012, respectively $ 1,653,267 $ 1,794,564 Hotel development 216,747 146,079 Investment in unconsolidated entities 46,943 55,082 Hotel held for sale 16,319 — Cash and cash equivalents 45,645 45,745 Restricted cash 77,227 77,927 Accounts receivable, net of allowance for doubtful accounts of $262 and $469 at December 31, 2013 and 2012, respectively 35,747 25,383 Deferred expenses, net of accumulated amortization of $20,362 and $13,820 at December 31, 2013 and 2012, respectively 29,325 34,262 Other assets 23,060   23,391   Total assets $ 2,144,280   $ 2,202,433   Liabilities and Equity Debt, net of discount of $4,714 and $10,318 at December 31, 2013 and 2012, respectively $ 1,663,226 $ 1,630,525 Distributions payable 11,047 8,545 Accrued expenses and other liabilities 150,738   138,442   Total liabilities 1,825,011   1,777,512   Commitments and contingencies Redeemable noncontrolling interests in FelCor LP, 618 and 621 units issued and outstanding at December 31, 2013 and 2012, respectively 5,039   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 December 31, 2013 and 2012 309,362 309,362 Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at December 31, 2013 and 2012 169,412 169,412 Common stock, $0.01 par value, 200,000 shares authorized; 124,051 and 124,117 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively 1,240 1,241 Additional paid-in capital 2,354,328 2,353,581 Accumulated other comprehensive income 24,937 26,039 Accumulated deficit (2,568,350 ) (2,464,968 ) Total FelCor stockholders’ equity 290,929 394,667 Noncontrolling interests in other partnerships 23,301   27,352   Total equity 314,230   422,019   Total liabilities and equity $ 2,144,280   $ 2,202,433                      

Consolidated Debt Summary

(dollars in thousands)

 

EncumberedHotels

Interest

Rate (%)

Maturity Date

December 31, 2013 December 31, 2012 Line of credit 9   LIBOR + 3.375 June 2016(a) $ 88,000 $ 56,000 Hotel mortgage debt Mortgage debt(b) 5 6.66 June - August 2014 63,337 65,431 Mortgage debt 1 5.81 July 2016 9,904 10,405 Mortgage debt(b) 4 4.95 October 2022 126,220 128,066 Mortgage debt 1 4.94 October 2022 31,714 32,176 Senior notes Senior secured notes 11 10.00 October 2014 229,190 223,586 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   $ 1,663,226   $ 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 Hotel 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 December 31, 2013 Debt Balance Encumbered Hotels Line of credit   $ 88   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) $ 63 Atlanta Airport - ES, Austin - DTGS, BWI Airport - ES, Orlando Airport - HI and Phoenix Biltmore - ES CMBS debt $ 10 Indianapolis North - ES CMBS debt(a) $ 126 Birmingham - ES, Ft. Lauderdale - ES, Minneapolis Airport - ES and Napa Valley - ES CMBS debt $ 32 Deerfield Beach - ES

Senior securednotes (10.00%)

$ 229 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 securednotes (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 securednotes (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 Year Ended December 31, December 31, 2013     2012 2013     2012 Improvements and additions to majority-owned hotels $ 26,901 $ 21,490 $ 101,357 $ 121,475 Partners’ pro rata share of additions to consolidated joint venture hotels (88 ) (104 ) (521 ) (923 ) Pro rata share of additions to unconsolidated hotels 369   500   1,470   2,304   Total additions to hotels(a) $ 27,182   $ 21,886   $ 102,306   $ 122,856    

(a)

Includes capitalized interest, property taxes, property insurance, ground leases and certain employee costs.

             

Hotels Under Renovation During 2014

  Primary Areas Start Date End Date Burlington - SH guestrooms, exterior Nov-2013 Apr-2014 San Francisco Fisherman’s Wharf - HI guestrooms, public areas, F&B Nov-2013 Mar-2014 San Diego - WYN(a) guestrooms, public areas Nov-2013 May-2014 San Francisco Waterfront-ES(b) guestrooms, F&B Dec-2013 June-2014 LAX- ES(c) public areas, F&B Feb-2014 May-2014 New Orleans - WYN(a) guestrooms, public areas May-2014 Oct-2014 Dallas Love Field - ES guestrooms, F&B June 2014 Sep 2014 Nashville - HI public areas, F&B July 2014 Oct 2014 Ft. Lauderdale - ES(d) guestrooms Aug 2014 Dec 2014  

(a) Repositioning from Holiday Inn to Wyndham.

(b) Public areas renovation completed in May 2013.

(c) Guestrooms renovation completed in February 2013.

(d) Public areas renovation completed in November 2013.

         

Supplemental Financial Data

(in thousands, except per share data)

  December 31, December 31,

Total Enterprise Value

2013 2012 Common shares outstanding 124,051 124,117 Units outstanding 618   621   Combined shares and units outstanding 124,669 124,738 Common stock price $ 8.16   $ 4.67   Market capitalization $ 1,017,299 $ 582,526 Series A preferred stock(a) 309,362 309,362 Series C preferred stock(a) 169,412 169,412 Consolidated debt(b) 1,663,226 1,630,525 Noncontrolling interests of consolidated debt (2,719 ) (2,810 ) Pro rata share of unconsolidated debt 73,179 74,198 Hotel development (216,747 ) (146,079 ) Cash, cash equivalents and restricted cash(b) (122,872 ) (123,672 ) Total enterprise value (TEV) $ 2,890,140   $ 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 Hotel.

         

Discontinued Operations

(in thousands)

 

Discontinued operations primarily include the results of operations for one hotel designated as held for sale at December 31, 2013, five 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 Year Ended December 31, December 31, 2013     2012 2013     2012 Operating revenue $ 2,065 $ 14,311 $ 33,849 $ 107,637 Operating expenses (3,151 ) (12,692 ) (34,553 ) (95,600 ) Operating income (loss) (1,086 ) 1,619 (704 ) 12,037 Interest expense, net (197 ) (689 ) (793 ) (5,832 ) Debt extinguishment — (667 ) — (2,767 ) Gain on involuntary conversion, net — — 66 — Gain on sale of hotels, net 373   27,818   19,441   54,459   Income (loss) from discontinued operations (910 ) 28,081 18,010 57,897 Depreciation and amortization, net of noncontrolling interests in other partnerships 295 1,898 4,814 12,948 Interest expense 197 689 793 5,832 Noncontrolling interests in other partnerships 3   (35 ) (963 ) (93 ) EBITDA from discontinued operations (415 ) 30,633 22,654 76,584 Impairment loss 1,089 — 4,354 1,335 Hurricane loss — 46 — 479 Debt extinguishment — 667 — 2,767 Gain on involuntary conversion, net of noncontrolling interests in other partnerships — — (59 ) — Gain on sale, net of noncontrolling interests in other partnerships (373 ) (27,818 ) (18,590 ) (54,459 ) Adjusted EBITDA from discontinued operations $ 301   $ 3,528   $ 8,359   $ 26,706                      

Hotel Portfolio Composition

 

 

The following table illustrates the distribution of same-store hotels.

 

Brand

Hotels Rooms

2013 Hotel OperatingRevenue(in thousands)

2013 HotelEBITDA(in thousands)(a)

Embassy Suites Hotels 18   4,982   $ 255,744   $ 81,074 Wyndham and Wyndham Grand(b) 8 2,526 103,931 35,050 Renaissance and Marriott 3 1,321 119,838 21,344 DoubleTree by Hilton and Hilton 3 802 41,106 12,623 Sheraton and Westin 2 673 37,996 10,176 Fairmont 1 383 49,104 7,846 Holiday Inn 2 968 46,403 6,406 Morgans and Royalton 2   285   34,340   3,514 Core hotels 39 11,940 688,462 178,033 Non-strategic hotels 20   5,472   201,544   51,479 Same-store hotels 59   17,412   $ 890,006   $ 229,512  

Market

San Francisco area 5 1,903 $ 124,825 $ 31,592 Boston 3 916 76,510 17,796 South Florida 3 923 50,011 14,307 Los Angeles area 2 481 23,760 10,452 Myrtle Beach 2 640 37,955 10,121 Tampa 1 361 46,423 7,436 New York area 3 546 48,045 6,762 Philadelphia 2 728 34,271 7,568 Austin 1 188 13,126 5,681 Atlanta 1 316 14,016 5,491 Other markets 16   4,938   219,520   60,827 Core hotels 39 11,940 688,462 178,033 Non-strategic hotels 20   5,472   201,544   51,479 Same-store hotels 59   17,412   $ 890,006   $ 229,512  

Location

Urban 17 5,308 $ 323,304 $ 81,361 Resort 9 2,733 185,264 41,300 Airport 8 2,621 122,734 37,369 Suburban 5   1,278   57,160   18,003 Core hotels 39 11,940 688,462 178,033 Non-strategic hotels 20   5,472   201,544   51,479 Same-store hotels 59   17,412   $ 890,006   $ 229,512  

(a) Hotel EBITDA is more fully described on page 27.

(b) These hotels were converted from Holiday Inn on March 1, 2013.

   

The following tables set forth occupancy, ADR and RevPAR for the three months and year ended December 31, 2013 and 2012, and the percentage changes therein for the periods presented, for our same-store Consolidated Hotels included in continuing operations.

     

Hotel Operating Statistics by Brand

  Occupancy (%) Three Months Ended         Year Ended     December 31, December 31, 2013     2012

%Variance

2013     2012

%Variance

Embassy Suites Hotels 73.4 69.7 5.4 76.7 75.3 1.9 Renaissance and Marriott 65.8 63.8 3.2 70.2 69.0 1.7 DoubleTree by Hilton and Hilton 59.1 54.5 8.5 68.3 67.5 1.2 Sheraton and Westin 63.1 62.5 0.9 68.0 65.6 3.6 Fairmont 70.3 68.1 3.3 74.2 63.5 16.8 Holiday Inn 69.8 68.7 1.7 78.0 72.8 7.2 Morgans and Royalton 90.9 85.1 6.8 87.6 83.7 4.7 Comparable core hotels (31) 70.4 67.2 4.8 74.8 72.6 3.1 Non-strategic hotels (20) 68.0 65.6 3.7 72.0 70.2 2.6 Comparable hotels (51) 69.5 66.6 4.4 73.8 71.7 2.9 Wyndham and Wyndham Grand(a) 59.1 69.7 (15.1 ) 65.7 76.1 (13.7 ) Same-store hotels (59) 68.0 67.1 1.5 72.6 72.3 0.4   ADR ($) Three Months Ended Year Ended December 31, December 31, 2013 2012 %Variance 2013 2012 %Variance Embassy Suites Hotels 150.27 144.78 3.8 153.17 147.46 3.9 Renaissance and Marriott 208.65 188.45 10.7 209.58 192.43 8.9 DoubleTree by Hilton and Hilton 138.95 137.21 1.3 148.99 140.79 5.8 Sheraton and Westin 146.73 141.06 4.0 145.71 143.07 1.8 Fairmont 300.62 283.77 5.9 285.06 282.00 1.1 Holiday Inn 143.08 131.28 9.0 144.29 133.78 7.9 Morgans and Royalton 358.54 361.66 (0.9 ) 315.50 308.14 2.4 Comparable core hotels (31) 170.40 163.07 4.5 169.91 161.56 5.2 Non-strategic hotels (20) 114.83 114.26 0.5 116.46 114.96 1.3 Comparable hotels (51) 150.43 145.74 3.2 150.75 144.78 4.1 Wyndham and Wyndham Grand(a) 149.34 143.45 4.1 144.37 145.80 (1.0 ) Same-store hotels (59) 150.29 145.40 3.4 149.92 144.94 3.4   RevPAR ($) Three Months Ended Year Ended December 31, December 31, 2013 2012 %Variance 2013 2012 %Variance Embassy Suites Hotels 110.36 100.86 9.4 117.55 111.08 5.8 Renaissance and Marriott 137.37 120.23 14.3 147.11 132.76 10.8 DoubleTree by Hilton and Hilton 82.16 74.77 9.9 101.71 94.97 7.1 Sheraton and Westin 92.54 88.15 5.0 99.09 93.92 5.5 Fairmont 211.36 193.12 9.4 211.41 179.11 18.0 Holiday Inn 99.94 90.19 10.8 112.52 97.35 15.6 Morgans and Royalton 325.78 307.83 5.8 276.27 257.83 7.2 Comparable core hotels (31) 120.03 109.63 9.5 127.13 117.26 8.4 Non-strategic hotels (20) 78.07 74.91 4.2 83.82 80.67 3.9 Comparable hotels (51) 104.61 97.11 7.7 111.22 103.80 7.1 Wyndham and Wyndham Grand(a) 88.30 99.92 (11.6 ) 94.79 110.98 (14.6 ) Same-store hotels (59) 102.27 97.51 4.9 108.83 104.84 3.8  

(a) These hotels were converted from Holiday Inn on March 1, 2013.

     

Hotel Operating Statistics by Market

  Occupancy (%) Three Months Ended         Year Ended     December 31, December 31, 2013     2012 %Variance 2013     2012 %Variance San Francisco area 75.5 74.0   1.9 81.4 79.4   2.5 Boston 68.9 67.5 2.0 73.5 66.2 11.1 South Florida 78.4 74.1 5.8 81.4 77.4 5.1 Los Angeles area 76.7 63.9 20.1 82.2 79.7 3.2 Myrtle Beach 47.4 39.5 20.2 62.3 59.7 4.3 Tampa 78.7 75.1 4.9 80.5 81.0 (0.7 ) New York area 85.7 85.5 0.3 83.2 81.4 2.2 Philadelphia 62.5 60.0 4.1 66.3 61.9 7.0 Austin 73.3 71.5 2.6 78.9 75.5 4.6 Atlanta 73.3 73.2 0.2 75.4 77.7 (3.0 ) Other markets 66.3 62.9 5.5 69.6 68.3 1.9 Comparable core hotels (31)     70.4         67.2         4.8         74.8         72.6         3.1     ADR ($) Three Months Ended Year Ended December 31, December 31, 2013 2012 %Variance 2013 2012 %Variance San Francisco area 194.25 176.61 10.0 187.91 169.89 10.6 Boston 247.73 232.27 6.7 234.97 227.10 3.5 South Florida 143.52 139.84 2.6 147.49 145.67 1.2 Los Angeles area 131.43 131.55 (0.1 ) 136.89 132.45 3.3 Myrtle Beach 101.86 102.31 (0.4 ) 147.36 145.27 1.4 Tampa 177.50 165.07 7.5 183.55 174.57 5.1 New York area 277.31 270.17 2.6 250.72 242.16 3.5 Philadelphia 171.14 163.79 4.5 166.52 163.91 1.6 Austin 214.15 204.27 4.8 200.90 185.35 8.4 Atlanta 134.69 134.03 0.5 140.41 135.12 3.9 Other markets 139.35 134.61 3.5 143.47 138.62 3.5 Comparable core hotels (31)     170.40         163.07         4.5         169.91         161.56         5.2     RevPAR ($) Three Months Ended Year Ended December 31, December 31, 2013 2012 %Variance 2013 2012 %Variance San Francisco area 146.58 130.75 12.1 152.91 134.84 13.4 Boston 170.57 156.80 8.8 172.68 150.25 14.9 South Florida 112.51 103.59 8.6 120.00 112.77 6.4 Los Angeles area 100.79 84.01 20.0 112.54 105.55 6.6 Myrtle Beach 48.31 40.37 19.7 91.75 86.70 5.8 Tampa 139.78 123.89 12.8 147.71 141.44 4.4 New York area 237.73 230.94 2.9 208.57 197.14 5.8 Philadelphia 106.88 98.31 8.7 110.32 101.51 8.7 Austin 156.96 145.98 7.5 158.59 139.92 13.3 Atlanta 98.75 98.06 0.7 105.87 105.01 0.8 Other markets 92.42 84.65 9.2 99.88 94.66 5.5 Comparable core hotels (31)     120.03         109.63         9.5         127.13         117.26         8.4        

Historical Quarterly Operating Statistics

  Occupancy (%)   Q1 2013     Q2 2013     Q3 2013     Q4 2013 Comparable core hotels (31) 70.9 79.0 78.9 70.4 Non-strategic hotels (20) 69.7 75.6 74.6 68.0 Comparable hotels (51) 70.5 77.8 77.3 69.5 Wyndham and Wyndham Grand (8)(a) 63.6 71.2 68.7 59.1 Same-store hotels (59) 69.4 76.8 76.1 68.0   ADR ($) Q1 2013 Q2 2013 Q3 2013 Q4 2013 Comparable core hotels (31) 166.29 171.23 171.37 170.40 Non-strategic hotels (20) 115.92 117.00 117.88 114.83 Comparable hotels (51) 148.03 151.85 152.38 150.43 Wyndham and Wyndham Grand (8)(a) 139.38 148.81 140.19 149.34 Same-store hotels (59) 146.87 151.44 150.78 150.29   RevPAR ($) Q1 2013 Q2 2013 Q3 2013 Q4 2013 Comparable core hotels (31) 117.93 135.30 135.17 120.03 Non-strategic hotels (20) 80.76 88.45 88.00 78.07 Comparable hotels (51) 104.30 118.08 117.82 104.61 Wyndham and Wyndham Grand (8)(a) 88.60 105.95 96.31 88.30 Same-store hotels (59) 102.00 116.32 114.70 102.27  

(a) These hotels were 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 Loss to FFO and Adjusted FFO

(in thousands, except per share data)

  Three Months Ended December 31, 2013     2012 Dollars     Shares    

PerShareAmount

Dollars     Shares    

PerShareAmount

Net loss $ (20,172 ) $ (93,026 ) Noncontrolling interests 306 638 Preferred dividends (9,679 ) (9,679 ) Numerator for basic and diluted loss attributable to common stockholders (29,545 ) 123,827 $ (0.24 ) (102,067 ) 123,635 $ (0.83 ) Depreciation and amortization 30,149 — 0.24 30,073 — 0.25 Depreciation, discontinued operations and unconsolidated entities 3,263 — 0.03 4,665 — 0.04 Impairment loss, discontinued operations 1,089 — 0.01 — — — Gain on sale of hotels (373 ) — — (27,818 ) — (0.23 ) Gain on involuntary conversion, net of noncontrolling interests in other partnerships (18 ) — — — — — Noncontrolling interests in FelCor LP (145 ) 617 — (513 ) 622 — Conversion of unvested restricted stock —   866   —   —   —   —   FFO 4,420 125,310 0.04 (95,660 ) 124,257 (0.77 ) Acquisition costs — — — 19 — — Hurricane loss — — — 146 — — Hurricane loss, discontinued operations — — — 46 — — Debt extinguishment, including discontinued operations — — — 62,519 — 0.50 Severance costs 372 — — 102 — — Conversion expenses — — — 31,197 — 0.25 Variable stock compensation 590 — — — — — Pre-opening costs, net of noncontrolling interests 939 — 0.01 154 — — Conversion of unvested restricted stock —   —   —   —   —   0.01   Adjusted FFO $ 6,321   125,310   $ 0.05   $ (1,477 ) 124,257   $ (0.01 )      

Reconciliation of Net Loss to FFO and Adjusted FFO

(in thousands, except per share data)

  Year Ended December 31, 2013     2012 Dollars     Shares     Per Share Amount Dollars     Shares     Per Share Amount Net loss $ (65,783 ) $ (129,414 ) Noncontrolling interests 4,279 1,407 Preferred dividends (38,713 ) (38,713 ) Numerator for basic and diluted loss attributable to common stockholders (100,217 ) 123,818 $ (0.81 ) (166,720 ) 123,634 $ (1.35 ) Depreciation and amortization 119,624 — 0.97 116,384 — 0.94 Depreciation, discontinued operations and unconsolidated entities 15,996 — 0.13 24,216 — 0.20 Gain on involuntary conversion, net of noncontrolling interests in other partnerships (37 ) — — — — — Gain on involuntary conversion, discontinued operations, net of noncontrolling interests in other partnerships (59 ) — — — — — Impairment loss, net of non-controlling interests in other partnerships 20,382 — 0.16 — — — Impairment loss, discontinued operations 4,354 — 0.04 1,335 — 0.01 Gain on sale of hotels, net of noncontrolling interests in other partnerships (18,590 ) — (0.15 ) (54,459 ) — (0.44 ) Noncontrolling interests in FelCor LP (497 ) 619 (0.01 ) (842 ) 628 — Conversion of unvested restricted stock —   547   —   —   —   —   FFO 40,956 124,984 0.33 (80,086 ) 124,262 (0.64 ) Acquisition costs 23 — — 132 — — Hurricane loss — — — 792 — 0.01 Hurricane loss, discontinued operations and unconsolidated entities — — — 482 — — Debt extinguishment, including discontinued operations — — — 75,117 — 0.60 Severance costs 3,268 — 0.02 553 — — Abandoned projects — — — 219 — — Conversion expenses 1,134 — 0.01 31,197 — 0.25 Variable stock compensation 963 — 0.01 — — — Pre-opening costs, net of noncontrolling interests 2,314 — 0.02 398 — — Conversion of unvested restricted stock —   —   —   —   11   0.01   Adjusted FFO $ 48,658   124,984   $ 0.39   $ 28,804   124,273   $ 0.23            

Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and Same-store Adjusted EBITDA

(in thousands)

  Three Months Ended Year Ended December 31, December 31, 2013     2012 2013     2012 Net loss $ (20,172 ) $ (93,026 ) $ (65,783 ) $ (129,414 ) Depreciation and amortization 30,149 30,073 119,624 116,384 Depreciation, discontinued operations and unconsolidated entities 3,263 4,665 15,996 24,216 Interest expense 25,349 31,176 103,865 121,690 Interest expense, discontinued operations and unconsolidated entities 868 1,376 3,496 8,586 Noncontrolling interests in other partnerships 161   125   3,782   565   EBITDA 39,618 (25,611 ) 180,980 142,027 Impairment loss, net of noncontrolling interests in other partnerships — — 20,382 — Impairment loss, discontinued operations 1,089 — 4,354 1,335 Hurricane loss — 146 — 792 Hurricane loss, discontinued operations and unconsolidated entities — 46 — 482 Debt extinguishment, including discontinued operations — 62,519 — 75,117 Acquisition costs — 19 23 132 Gain on sale of hotels, net of noncontrolling interests in other partnerships (373 ) (27,818 ) (18,590 ) (54,459 ) Gain on involuntary conversion, net of noncontrolling interests in other partnerships (18 ) — (37 ) — Gain on involuntary conversion, discontinued operations, net of noncontrolling interests in other partnerships — — (59 ) — Amortization of fixed stock and directors’ compensation 1,023 1,254 5,570 5,003 Severance costs 372 102 3,268 553 Abandoned projects — — — 219 Conversion expenses — 31,197 1,134 31,197 Variable stock compensation 590 — 963 — Pre-opening costs, net of noncontrolling interests 939   154   2,314   398   Adjusted EBITDA 43,240 42,008 200,302 202,796 Adjusted EBITDA from discontinued operations (301 ) (3,528 ) (8,359 ) (26,706 ) Same-store Adjusted EBITDA $ 42,939   $ 38,480   $ 191,943   $ 176,090          

Hotel EBITDA and Hotel EBITDA Margin

(dollars in thousands)

  Three Months Ended Year Ended December 31, December 31, 2013     2012 2013     2012 Same-store operating revenue: Room $ 163,525 $ 158,739 $ 692,016 $ 667,708 Food and beverage 39,011 40,313 151,233 142,962 Other operating departments 11,282   11,395   46,757   48,271   Same-store operating revenue 213,818 210,447 890,006 858,941 Same-store operating expense: Room 44,734 44,811 184,840 179,602 Food and beverage 30,043 31,291 120,287 114,815 Other operating departments 5,179 5,338 21,954 21,682 Other property related costs 58,159 57,885 238,115 231,929 Management and franchise fees 8,487 9,309 35,735 39,785 Taxes, insurance and lease expense 14,545   14,062   59,563   58,080   Same-store operating expense 161,147   162,696   660,494   645,893   Hotel EBITDA $ 52,671   $ 47,751   $ 229,512   $ 213,048   Hotel EBITDA Margin 24.6 % 22.7 % 25.8 % 24.8 %   Three Months Ended Year Ended December 31, December 31, 2013 2012 2013 2012 Hotel EBITDA - Comparable core (31) $ 32,574 $ 28,839 $ 142,983 $ 126,729 Hotel EBITDA - Non-strategic (20) 11,336   11,061   51,479   48,371   Hotel EBITDA - Comparable (51) 43,910 39,900 194,462 175,100 Hotel EBITDA - Wyndham (8) 8,761   7,851   35,050   37,948   Hotel EBITDA (59) $ 52,671   $ 47,751   $ 229,512   $ 213,048     Hotel EBITDA Margin - Comparable core (31) 23.0 % 21.1 % 24.5 % 23.3 % Hotel EBITDA Margin - Non-strategic (20) 23.9 % 24.0 % 25.5 % 24.8 % Hotel EBITDA Margin - Comparable (51) 23.2 % 21.9 % 24.7 % 23.7 % Hotel EBITDA Margin - Wyndham (8) 35.7 % 28.2 % 33.7 % 31.5 % Hotel EBITDA Margin (59) 24.6 % 22.7 % 25.8 % 24.8 %    

Reconciliation of Same-store Operating Revenue and Same-store Operating Expense to Total Revenue, Total Operating Expense and Operating Income (Loss)

(in thousands)

  Three Months Ended Year Ended December 31, December 31, 2013   2012 2013   2012 Same-store operating revenue $ 213,818 $ 210,447 $ 890,006 $ 858,941 Other revenue 396   513   3,430   3,185   Total revenue 214,214 210,960 893,436 862,126 Same-store operating expense 161,147 162,696 660,494 645,893 Consolidated hotel lease expense(a) 10,515 10,004 44,087 41,342 Unconsolidated taxes, insurance and lease expense (1,720 ) (1,764 ) (7,456 ) (7,256 ) Corporate expenses 6,653 6,054 26,996 26,128 Depreciation and amortization 30,149 30,073 119,624 116,384 Impairment loss — — 24,441 — Conversion expenses — 31,197 1,134 31,197 Other expenses 1,913   905   8,749   4,626   Total operating expense 208,657   239,165   878,069   858,314   Operating income (loss) $ 5,557   $ (28,205 ) $ 15,367   $ 3,812    

(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 FFO

and EBITDA

(in millions, except per share data)

  Full Year 2014 Guidance Low     High Dollars    

Per ShareAmount(a)

Dollars    

Per ShareAmount(a)

Net loss attributable to FelCor(b) $ (44 ) $ (40 ) Preferred dividends(c) (40 ) (40 ) Net loss attributable to FelCor common stockholders (84 ) $ (0.68 ) (80 ) $ (0.65 ) Depreciation(d) 146   152   FFO and Adjusted FFO $ 62   $ 0.50 $ 72   $ 0.58   Net loss attributable to FelCor(b) $ (44 ) $ (40 ) Depreciation(d) 146 152 Interest expense(d) 94 99 Amortization expense 6   6   EBITDA and Adjusted EBITDA $ 202   $ 217    

(a)

Weighted average shares are 124.8 million.

(b)

Excludes any gains or losses on future asset sales.

(c)

Includes $1 million of preferred dividends related to the preferred equity issued in February 2014 for our Knickerbocker development.

(d)

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