• Same-store Adjusted EBITDA
increased 17%
• Raising 2014 Operating
Outlook
FelCor Lodging Trust Incorporated (NYSE: FCH) reported operating
results for the second quarter ended June 30, 2014.
Highlights
- RevPAR for comparable hotels increased
9.2%.
- Adjusted FFO per share improved to
$0.26 up from $0.21.
- Adjusted EBITDA increased $4.6 million
to $69.2 million, and Same-store Adjusted EBITDA increased
$9.9 million, or 17.3%, to $67.0 million.
- Net income per share improved $0.35 to
$0.12.
- Two non-strategic hotels were sold
during the quarter for gross proceeds of $54 million. Agreed
to sell five other hotels (four with non-refundable deposits) for
gross proceeds of $115 million.
- The exchange of interests in 10
non-strategic hotels that were owned in joint ventures was
completed in July. We now wholly-own five of these non-strategic
hotels and will begin marketing them in early September.
- A $140 million term loan, bearing
interest at LIBOR plus 2.5%, and maturing in 2017, closed in July.
Proceeds, along with cash and our line of credit, will be used to
redeem our remaining $234 million of 10% senior secured notes
in August.
- Redevelopment of the Knickerbocker
hotel remains on track to open in early fall.
“I am very pleased with our performance in the second quarter.
We exceeded our expectations, as Same-store Adjusted EBITDA
increased 17%, and RevPAR growth for our portfolio once again
outperformed the industry,” said Richard A. Smith, President and
Chief Executive Officer of FelCor. “Our success in executing our
strategic plan continues to drive positive results, and we have
positioned FelCor to deliver sustainable growth by assembling a
high-quality and diverse portfolio. We will continue to leverage
our strengths to outperform the industry to create long-term
shareholder value.”
Mr. Smith added, “We continue to make very good progress on our
portfolio positioning and balance sheet restructuring programs.
After unwinding some of our joint ventures, we now have
12 remaining non-strategic hotels. We have agreed to sell five
of these hotels. In addition, we obtained a flexible and low-cost
term loan that will be used to redeem our 10% senior notes. After
that redemption, our cost of borrowing and maturity profile will be
greatly improved. We will use proceeds from future asset sales to
repay the term loan and our line of credit, thereby completing the
final phase of our balance sheet restructuring.”
Hotel Results
Second Quarter 2014
2013 Change Comparable hotels
(46) RevPAR $ 132.17 $ 121.06 9.2 % Total hotel revenue, in
millions $ 212.9 $ 196.6 8.3 % Hotel EBITDA, in millions $ 63.6 $
55.3 15.0 % Hotel EBITDA margin 29.9 % 28.1 % 175 bps
Wyndham Hotels (8) RevPAR $ 127.59 $ 105.95 20.4 % Total
hotel revenue, in millions $ 35.3 $ 28.9 21.9 % Hotel EBITDA, in
millions $ 13.9 $ 11.2 24.3 % Hotel EBITDA margin 39.5 % 38.7 % 74
bps
Same-store hotels (54) RevPAR $ 131.45 $ 118.69
10.8 % Total hotel revenue, in millions $ 248.2 $ 225.5 10.1 %
Hotel EBITDA, in millions $ 77.5 $ 66.5 16.6 % Hotel EBITDA margin
31.3 % 29.5 % 175 bps
RevPAR for our 46 comparable hotels (31 comparable core hotels
plus 15 non-strategic hotels) was $132.17, a 9.2% increase compared
to the same period in 2013. The increase reflects a
6.3% increase in ADR to $164.79 and a 2.7% increase in
occupancy to 80.2%. Hotel EBITDA for our 46 comparable hotels was
$63.6 million, a 15.0% increase, and Hotel EBITDA margin was 29.9%
during the quarter, a 175 basis point increase.
RevPAR for our 31 comparable core hotels (39 core hotels that
exclude Wyndham hotels converted from Holiday Inn on March 1,
2013) increased 9.7% compared to the same period in 2013, while
RevPAR for our 15 non-strategic hotels increased 7.5%.
Hotel EBITDA for our acquired and recently redeveloped hotels
increased 23%, compared to the same period in 2013.
RevPAR for the eight hotels converted to Wyndham in 2013
increased 20.4% for the second quarter, compared to the same period
in 2013. We expect revenues at these hotels will continue to grow
meaningfully during 2014 and beyond, as transitional disruption
subsides. Wyndham Worldwide Corporation has guaranteed minimum
annual NOI for the eight hotels over the ten-year term of the
management agreement. We do not expect any amount funded for 2014
by Wyndham under the guaranty to be significant.
RevPAR for our 54 Same-store hotels (46 comparable hotels plus
the recently-converted Wyndham hotels) was $131.45, a 10.8%
increase compared to the same period in 2013. The increase reflects
a 7.0% increase in ADR to $164.81 and a 3.5% increase in occupancy
to 79.8%.
See page 14 for hotel portfolio composition and pages 15-17 and
21-22 for more detailed hotel portfolio operating data.
Second Quarter Operating Results
Second Quarter $ in millions, except for per share
information
2014 2013
Change Same-store Adjusted EBITDA $ 67.0 $ 57.1 17.3
% Adjusted EBITDA $ 69.2 $ 64.6 7.2 % Adjusted FFO per share $ 0.26
$ 0.21 $ 0.05 Net income (loss) per share $ 0.12 $ (0.23 ) $ 0.35
Same-store Adjusted EBITDA was $67.0 million, compared to
$57.1 million for the same period in 2013, a 17.3% increase.
Adjusted EBITDA (which includes Adjusted EBITDA for sold hotels
prior to sale) was $69.2 million compared to
$64.6 million for the same period in 2013.
Adjusted FFO was $32.9 million, or $0.26 per share,
compared to $26.1 million, or $0.21 per share in 2013. Net
income attributable to common stockholders was $14.6 million,
or $0.12 per share in 2014, compared to a net loss of
$28.4 million, or $0.23 per share, in 2013. Net income in 2014
included a $15.6 million net gain on asset sales. Net loss in 2013
included a $24.4 million impairment loss partially offset by a
$7.3 million gain.
Year-to-Date Operating Results
RevPAR for 46 comparable hotels was $123.57, an 8.3% increase
compared to the same period in 2013. The increase reflects a 5.9%
increase in ADR to $162.12 and a 2.3% increase in occupancy to
76.2%. Total revenue for the 46 comparable hotels increased 7.7%
from the same period in 2013. RevPAR for our 31 comparable core
hotels increased 8.9%, while RevPAR for our 15 non-strategic hotels
increased 6.5%.
Same-store Adjusted EBITDA was
$106.1 million, compared to $90.0 million for the
same period in 2013, a 17.9% increase. Adjusted EBITDA (which
includes Adjusted EBITDA for sold hotels prior to sale) was
$110.3 million compared to $102.2 million for the same
period in 2013.
Adjusted FFO was $37.0 million, or $0.29 per share,
compared to $25.3 million, or $0.20 per share, in 2013. Net
loss attributable to common stockholders was $9.9 million, or
$0.08 per share, in 2014, compared to a net loss of
$64.2 million, or $0.52 per share, in 2013. Net loss in 2014
included a $21.5 million net gain on asset sales, and net loss
in 2013 included a $24.4 million impairment loss partially
offset by a $7.3 million gain.
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 17 for a
reconciliation of each of these measures to the most comparable
GAAP financial measure and for information regarding the use,
limitations and importance of these non-GAAP financial
measures.
Portfolio Repositioning
During the first six months of 2014, we sold four hotels for
total gross proceeds of $95.2 million. At June 30, 2014,
we had 17 non-strategic hotels to be sold (two of which had
contracts with non-refundable deposits and were excluded from our
same-store metrics).
In July, we unwound joint ventures that owned 10 non-strategic
hotels. Through an exchange of interests, we now own five of those
hotels outright (comprising 1,224 rooms), and our joint venture
partner owns the other five (comprising 1,215 rooms). The five
retained hotels will be marketed for sale in early September. In
addition, we received our joint ventures partner’s 10% interest in
the DoubleTree Suites hotel located in downtown Austin and now
wholly-own that property.
Following the exchange of interests in our joint venture hotels,
we now have 12 non-strategic hotels remaining to sell. Of the
twelve, we have agreed to sell five hotels for total gross proceeds
of approximately $115 million. Of the five, we have contracts,
with non-refundable deposits, to sell four - the DoubleTree
Suites-Charlotte, the Embassy Suites-Indianapolis, the Holiday
Inn-Toronto Airport and the Sheraton-Atlanta Gateway.
Since December 2010, we have sold 28 non-strategic hotels, for
total gross proceeds of $627 million, and exchanged interests
in 10 non-strategic hotels with our joint venture partner.
Capital Expenditures
During the quarter, we invested $20.0 million in capital
expenditures at our hotels (excluding the Knickerbocker), including
approximately $7.8 million for redevelopment projects and
repositioning for our Wyndham hotels.
During 2014, we plan to invest approximately $60 million in
capital improvements and renovations, concentrated at seven core
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 12 of this
release for more detail on renovations.
We have invested $105.5 million (excluding initial
acquisition costs and capitalized interest) through June 30,
2014 to redevelop the 4+ star Knickerbocker Hotel. Our net expected
project cost remains $240 million, and we expect the hotel to
open in early fall.
Balance Sheet
As of June 30, 2014, we had $1.6 billion of
consolidated debt bearing a 6.3% weighted-average interest rate and
a six-year weighted-average maturity. We had $61.3 million of
cash and cash equivalents and $66.0 million of restricted
cash, of which $51.9 million secured our Knickerbocker
construction loan.
During the quarter, we repaid three loans that would have
matured between July and August 2014, totaling $35 million.
Those loans, each secured by a different hotel, bore interest at a
weighted average rate of 6.6%.
During July, we obtained a $140 million term loan secured
by three hotels. Borrowings under the facility bear interest at
LIBOR (no floor) plus 2.5%. The loan matures in 2017 (may be
extended for up to two years, subject to satisfaction of certain
conditions) and is freely pre-payable. On August 15, 2014, we
expect to use borrowings from the term loan, cash on hand and
borrowings under our line of credit to redeem the remaining
$234 million of our 10% senior secured notes. We will use
proceeds from pending and future asset sales to repay the term loan
and our line of credit. After redeeming the 10% notes, we will have
no significant debt maturities, other than our line of credit,
until 2019 and will have lowered our weighted average borrowing
rate to below 6.0%.
Common Dividend
During the second quarter, we declared a $0.02 per share common
stock dividend, which was paid in July. Future quarterly dividends
will be based on funds available for distribution, reinvestment
opportunities within our portfolio and taxable income, among other
things.
Outlook
We have increased our RevPAR and EBITDA outlook primarily to
reflect better than expected second quarter results. Our 2014
outlook reflects continued strong lodging industry fundamentals.
Our expected RevPAR growth reflects a premium to the industry
because of our high-quality diverse portfolio and continued strong
growth at our acquired and recently redeveloped hotels.
Our outlook reflects selling all 12 remaining non-strategic
hotels. The low end of our outlook assumes that five hotels are
sold during the third quarter and seven are sold in the fourth
quarter. The high end of our outlook assumes four hotels are sold
in the third quarter and eight hotels are sold during the fourth
quarter. Our outlook assumes EBITDA for the Wyndham hotels equates
to the amount of Wyndham’s annual NOI guaranty.
During 2014, we expect:
- RevPAR for same-store hotels will
increase 8.75% - 9.25%; and RevPAR for comparable hotels (excludes
Wyndham) will increase 7.5% - 8.0%;
- Adjusted EBITDA will be
$211.5 million to $217.5 million;
- Adjusted FFO per share will be $0.56 to
$0.60;
- Net income attributable to FelCor will
be $1.0 million to $5.0 million; and
- Interest expense, including our pro
rata share from joint ventures, will be $96.0 million to
$96.5 million.
The following table reconciles our 2014 Adjusted EBITDA to core
Adjusted EBITDA outlook (in millions):
Low High Previous Adjusted
EBITDA $ 206.0 $ 217.0 Operations
2.5 1.0 Updated timing of asset sales 3.0 (0.5
)
Current Adjusted EBITDA $ 211.5 $
217.5 Hotel dispositions(a) (25.0 ) (28.5 )
Core Adjusted EBITDA (40 hotels)(b) $
186.5 $ 189.0
(a) EBITDA that is forecasted to be generated by 21 hotels that
we assume will be sold from January 1, 2014 through the dates
of sale.
(b) Includes the Knickerbocker, which is scheduled to open in
early fall.
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 second quarter earnings
Conference Call on Thursday, July 31, 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 and six months ended June 30, 2014.
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 During 2014
12
Supplemental Financial Data
13
Hotel Portfolio Composition
14
Hotel Operating Statistics by Brand
15
Hotel Operating Statistics by Market
16
Historical Quarterly Operating Statistics
17
Non-GAAP Financial Measures
17
(a) Our consolidated statements of operations and balance sheets
have been prepared without audit. Certain information and footnote
disclosures normally included in financial statements presented in
accordance with GAAP have been omitted. The consolidated statements
of operations and balance sheets should be read in conjunction with
the consolidated financial statements and notes thereto included in
our most recent Annual Report on Form 10-K.
Consolidated Statements of Operations (in
thousands, except per share data) Three Months
Ended Six Months Ended June 30, June 30,
2014 2013
2014 2013 Revenues: Hotel
operating revenue: Room $ 200,238 $ 184,327 $ 370,067 $ 344,834
Food and beverage 45,471 42,162 85,256 79,105 Other operating
departments 12,570 12,317 23,978 23,405 Other revenue 1,236
1,050 1,563 1,449
Total revenues 259,515 239,856
480,864 448,793 Expenses: Hotel departmental
expenses: Room 50,585 47,322 97,318 92,192 Food and beverage 33,066
31,747 64,253 61,993 Other operating departments 5,977 5,902 11,580
11,191 Other property-related costs 62,912 60,030 124,490 119,458
Management and franchise fees 10,160 8,914 19,173 18,077 Taxes,
insurance and lease expense 26,992 24,853 50,625 47,017 Corporate
expenses 7,647 6,694 15,472 14,526 Depreciation and amortization
29,082 29,898 58,683 59,653 Impairment loss — 24,441 — 24,441
Conversion expenses — 587 — 1,215 Other expenses 2,114
3,915 4,128 4,736
Total operating expenses 228,535 244,303
445,722 454,499 Operating income
(loss) 30,980 (4,447 ) 35,142 (5,706 ) Interest expense, net
(24,495 ) (26,376 ) (49,722 ) (52,661 ) Debt extinguishment (27 ) —
(33 ) — Gain on sale of other assets, net 100
— 100 — Income (loss) before
equity in income from unconsolidated entities 6,558 (30,823 )
(14,513 ) (58,367 ) Equity in income from unconsolidated entities
2,766 1,905 3,409
1,994 Income (loss) from continuing operations 9,324 (28,918
) (11,104 ) (56,373 ) Income from discontinued operations 5
6,123 140 6,973
Income (loss) before gain on sale of property 9,329 (22,795 )
(10,964 ) (49,400 ) Gain on sale of property, net 15,626
— 21,083 — Net
income (loss) 24,955 (22,795 ) 10,119 (49,400 ) Net loss (income)
attributable to noncontrolling interests in other partnerships (262
) 3,972 (184 ) 4,212 Net loss (income) attributable to redeemable
noncontrolling interests in FelCor LP (71 ) 140 50 320 Preferred
distributions - consolidated joint venture (341 ) —
(522 ) — Net income (loss) attributable
to FelCor 24,281 (18,683 ) 9,463 (44,868 ) Preferred dividends
(9,678 ) (9,678 ) (19,356 ) (19,356 )
Net income (loss) attributable to FelCor common stockholders $
14,603 $ (28,361 ) $ (9,893 ) $ (64,224 ) Basic and diluted
per common share data: Income (loss) from continuing operations $
0.12 $ (0.28 ) $ (0.08 ) $ (0.57 ) Net income (loss) $ 0.12
$ (0.23 ) $ (0.08 ) $ (0.52 ) Basic weighted average common
shares outstanding 124,169 123,814
124,158 123,814 Diluted weighted
average common shares outstanding 125,386
123,814 124,158 123,814
Consolidated Balance Sheets (in thousands)
June 30, December 31, 2014
2013 Assets Investment in
hotels, net of accumulated depreciation of $882,585 and $929,801 at
June 30, 2014 and December 31, 2013, respectively $ 1,552,172 $
1,653,267 Hotel development 261,181 216,747 Investment in
unconsolidated entities 44,126 46,943 Hotels held for sale 33,148
16,319 Cash and cash equivalents 61,344 45,645 Restricted cash
66,046 77,227 Accounts receivable, net of allowance for doubtful
accounts of $231 and $262 at June 30, 2014 and December 31, 2013,
respectively 35,889 35,747 Deferred expenses, net of accumulated
amortization of $22,095 and $20,362 at June 30, 2014 and December
31, 2013, respectively 25,962 29,325 Other assets 26,796
23,060 Total assets $ 2,106,664 $
2,144,280
Liabilities and Equity Debt, net of
discount of $1,615 and $4,714 at June 30, 2014 and December 31,
2013, respectively $ 1,601,166 $ 1,663,226 Distributions payable
11,228 11,047 Accrued expenses and other liabilities 149,799
150,738 Total liabilities 1,762,193
1,825,011 Commitments and contingencies
Redeemable noncontrolling interests in FelCor LP, 613 and 618 units
issued and outstanding at June 30, 2014 and December 31, 2013,
respectively 6,440 5,039 Equity:
Preferred stock, $0.01 par value, 20,000 shares authorized: Series
A Cumulative Convertible Preferred Stock, 12,880 shares,
liquidation value of $322,004 and $322,011, issued and outstanding
at June 30, 2014 and December 31, 2013, respectively 309,354
309,362 Series C Cumulative Redeemable Preferred Stock, 68 shares,
liquidation value of $169,950, issued and outstanding at June 30,
2014 and December 31, 2013 169,412 169,412 Common stock, $0.01 par
value, 200,000 shares authorized; 124,290 and 124,051 shares issued
and outstanding at June 30, 2014 and December 31, 2013,
respectively 1,243 1,240 Additional paid-in capital 2,354,847
2,354,328 Accumulated other comprehensive income 24,892 24,937
Accumulated deficit (2,584,211 ) (2,568,350 ) Total
FelCor stockholders’ equity 275,537 290,929 Noncontrolling
interests in other partnerships 21,500 23,301 Preferred equity in
consolidated joint venture, liquidation value of $41,590
40,994 — Total equity 338,031
314,230 Total liabilities and equity $ 2,106,664
$ 2,144,280
Consolidated Debt Summary (dollars in thousands)
Encumbered Hotels Interest
Rate (%)
Maturity Date
June 30, 2014 December 31, 2013 Line
of credit 8 LIBOR + 3.375 June 2016(a) $ 87,500 $ 88,000
Hotel mortgage debt Mortgage debt 1 5.81 July 2016 9,641
9,904 Mortgage debt(b) 4 4.95 October 2022 125,404 126,220 Mortgage
debt 1 4.94 October 2022 31,471 31,714
Senior notes
Senior secured notes(c)
11 10.00 October 2014 232,289 229,190 Senior secured notes 6 6.75
June 2019 525,000 525,000 Senior secured notes 9 5.625 March 2023
525,000 525,000
Knickerbocker loan(d)
Construction tranche — LIBOR + 4.00 May 2016 12,994 — Cash
collateralized tranche — LIBOR + 1.25 May 2016 51,867 64,861
Retired debt — — — — 63,337
Total 40 $
1,601,166 $ 1,663,226
(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) We originally issued $636 million (face amount) of these
notes. After redemptions in 2011 and 2012, $234 million (face
amount) of these notes were outstanding at June 30, 2014 and
December 31, 2013.
(d) In November 2012, we obtained an $85.0 million
construction loan to finance the redevelopment of the Knickerbocker
Hotel. This loan can be extended for one year subject to satisfying
certain conditions. In 2014, we drew $13.0 million of the cash
collateral to fund construction costs, leaving $51.9 million
of cash collateral to be drawn before drawing on the remaining
$20.1 million available under the construction loan.
Schedule of Encumbered Hotels (dollars in
millions) Consolidated June 30, 2014
Debt Balance Encumbered Hotels Line of credit
$ 88 Charleston Mills House - WYN, Charlotte SouthPark - 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 $ 10 Indianapolis North - ES CMBS debt(a) $ 125
Birmingham - ES, Ft. Lauderdale - ES, Minneapolis Airport - ES and
Napa Valley - ES CMBS debt $ 31 Deerfield Beach - ES Senior secured
notes (10.00%) $ 232 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 Six Months Ended June
30, June 30, 2014
2013 2014
2013 Improvements and additions to majority-owned
hotels $ 19,415 $ 23,681 $ 48,032 $ 47,023 Partners’ pro rata share
of additions to consolidated joint venture hotels (166 ) (151 )
(260 ) (308 ) Pro rata share of additions to unconsolidated hotels
781 465 1,404 802
Total additions to hotels(a) $ 20,030 $ 23,995
$ 49,176 $ 47,517
(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 May-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 Jul-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 Jun-2014
Sep-2014 Nashville - HI public areas, F&B Jul-2014 Oct-2014 Ft.
Lauderdale - ES(d) guestrooms Aug-2014
Oct-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) June 30, December
31,
Total Enterprise
Value
2014 2013 Common shares
outstanding 124,290 124,051 Units outstanding 613
618 Combined shares and units outstanding 124,903
124,669 Common stock price $ 10.51 $ 8.16
Market
capitalization $ 1,312,731 $ 1,017,299 Series A preferred
stock(a) 309,354 309,362 Series C preferred stock(a) 169,412
169,412 Preferred equity - Knickerbocker joint venture, net(b)
38,944 — Consolidated debt(b) 1,601,166 1,663,226 Noncontrolling
interests of consolidated debt — (2,719 ) Pro rata share of
unconsolidated debt 73,361 73,179 Hotel development (261,181 )
(216,747 ) Cash, cash equivalents and restricted cash(c)
(127,390 ) (122,872 )
Total enterprise value (TEV) $
3,116,397 $ 2,890,140
(a) Book value based on issue price.
(b) Book value based on issue price, net of noncontrolling
interest.
(c) Restricted cash includes $51.9 million of cash fully
securing $51.9 million of outstanding debt assumed when we
purchased the Knickerbocker Hotel.
Hotel Portfolio Composition
The following table illustrates the distribution of
same-store hotels.
Brand
Hotels Rooms
2013 HotelOperating
Revenue(in thousands)
2013 HotelEBITDA(in
thousands)(a)
Embassy Suites Hotels 18 4,982 $ 255,744 $ 81,051 Wyndham and
Wyndham Grand(b) 8 2,528 103,932 35,042 Renaissance and Marriott 3
1,321 119,839 21,338 DoubleTree by Hilton and Hilton 3 802 41,106
12,619 Sheraton and Westin 2 673 37,996 10,173 Fairmont 1 383
49,104 7,844 Holiday Inn 2 968 46,403 6,405 Morgans and Royalton 2
285 34,340 3,513
Core hotels 39
11,942 688,464 177,985 Non-strategic hotels(c)
15 4,153 152,039 40,348
Same-store hotels
54 16,095 $ 840,503 $
218,333
Market
San Francisco area 5 1,903 $ 124,825 $ 31,583 Boston 3 916 76,510
17,791 South Florida 3 923 50,011 14,303 Los Angeles area 2 481
23,760 10,450 Myrtle Beach 2 640 37,956 10,118 Philadelphia 2 728
34,271 7,567 Tampa 1 361 46,423 7,434 New York area 3 546 48,045
6,760 Austin 1 188 13,126 5,679 Atlanta 1 316 14,016 5,490 Other
markets 16 4,940 219,521 60,810
Core hotels
39 11,942 688,464 177,985 Non-strategic
hotels(c) 15 4,153 152,039 40,348
Same-store
hotels 54 16,095 $ 840,503 $
218,333
Location
Urban 17 5,310 $ 323,305 $ 81,341 Resort 9 2,733 185,264 41,288
Airport 8 2,621 122,735 37,359 Suburban 5 1,278 57,160
17,997
Core hotels 39 11,942
688,464 177,985 Non-strategic hotels(c) 15 4,153
152,039 40,348
Same-store hotels 54
16,095 $ 840,503 $ 218,333
(a) Hotel EBITDA is more fully described on page 25.
(b) These hotels were converted to Wyndham on March 1, 2013.
(c) Excludes two hotels held for sale as of June 30,
2014.
The following tables set forth occupancy, ADR and RevPAR for the
three and six months ended June 30, 2014 and 2013, and the
percentage changes therein for the periods presented, for our
same-store hotels.
Hotel Operating Statistics by
Brand
Occupancy (%) Three Months Ended Six
Months Ended June 30, June 30,
2014
2013
%Variance
2014 2013 %Variance Embassy Suites
Hotels 81.7 78.7 3.7 79.3 76.4 3.7 Renaissance and Marriott 76.3
73.2 4.2 76.0 74.0 2.6 DoubleTree by Hilton and Hilton 82.8 77.9
6.3 73.7 68.9 7.0 Sheraton and Westin 75.5 75.5 0.1 66.0 66.9 (1.2
) Fairmont 83.9 80.3 4.5 71.3 70.4 1.3 Holiday Inn 85.1 88.3 (3.7 )
74.8 78.4 (4.5 ) Morgans and Royalton 91.0 89.4 1.7 85.2 85.3 —
Comparable core hotels (31) 81.3 79.0
2.9 76.8 75.0 2.4 Non-strategic hotels
(15)(a) 77.7 76.1 2.2 75.0 73.4 2.2
Comparable hotels (46)
80.2 78.1 2.7 76.2 74.5
2.3 Wyndham and Wyndham Grand(b) 77.4 71.2 8.7 70.2 67.4 4.2
Same-store hotels (54) 79.8 77.0 3.5
75.3 73.4 2.6 ADR ($) Three Months
Ended Six Months Ended June 30, June
30, 2014
2013
%Variance
2014 2013 %Variance Embassy Suites Hotels
162.07 150.55 7.7 164.31 153.80 6.8 Renaissance and Marriott 227.30
214.91 5.8 231.96 218.02 6.4 DoubleTree by Hilton and Hilton 160.29
152.07 5.4 158.52 153.54 3.2 Sheraton and Westin 153.06 159.32 (3.9
) 142.37 144.64 (1.6 ) Fairmont 330.56 313.17 5.6 292.78 273.98 6.9
Holiday Inn 160.13 138.09 16.0 147.99 126.97 16.6 Morgans and
Royalton 331.94 336.33 (1.3 ) 297.97 300.28 (0.8 )
Comparable
core hotels (31) 182.53 171.23 6.6
179.59 168.90 6.3 Non-strategic hotels (15)(a)
122.74 166.70 5.2 121.57 116.58 4.3
Comparable hotels (46)
164.79 154.98 6.3 162.12 153.15
5.9 Wyndham and Wyndham Grand(b) 164.91 148.81 10.8 155.86
144.36 8.0
Same-store hotels (54) 164.81
154.08 7.0 161.21 151.88 6.1
RevPAR ($) Three Months Ended Six Months Ended
June 30, June 30, 2014
2013
%Variance
2014 2013 %Variance Embassy Suites Hotels
132.35 118.53 11.7 130.22 117.55 10.8 Renaissance and Marriott
173.47 157.39 10.2 176.20 161.40 9.2 DoubleTree by Hilton and
Hilton 132.72 118.41 12.1 116.77 105.76 10.4 Sheraton and Westin
115.62 120.21 (3.8 ) 94.03 96.70 (2.8 ) Fairmont 227.30 251.44 10.3
208.76 192.81 8.3 Holiday Inn 136.21 121.92 11.7 110.75 99.53 11.3
Morgans and Royalton 301.98 300.74 0.4 253.93 256.00 (0.8 )
Comparable core hotels (31) 148.39 135.30
9.7 137.88 126.64 8.9 Non-strategic
hotels (15)(a) 95.40 88.76 7.5 91.12 85.53 6.5
Comparable hotels
(46) 132.17 121.06 9.2 123.57
114.08 8.3 Wyndham and Wyndham Grand(b) 127.59 105.95
20.4 109.40 97.27 12.5
Same-store hotels (54) 131.45
118.69 10.8 121.34 111.43 8.9
(a) Excludes two hotels held for sale as of June 30,
2014.
(b) These hotels were converted to Wyndham on March 1,
2013.
Hotel Operating Statistics by
Market
Occupancy (%) Three Months Ended
Six Months Ended June 30, June 30,
2014 2013 %Variance 2014
2013 %Variance San Francisco area 85.1 86.3 (1.4 )
78.6 80.3 (2.2 ) Boston 83.1 79.9 4.0 72.0 71.5 0.8 South Florida
84.9 79.3 6.9 88.0 85.0 3.5 Los Angeles area 84.9 87.0 (2.4 ) 83.8
82.0 2.2 Myrtle Beach 78.4 75.7 3.6 62.0 56.5 9.7 Philadelphia 78.4
79.0 (0.8 ) 69.1 66.1 4.6 Tampa 84.8 81.8 3.6 85.5 82.8 3.2 New
York area 88.0 87.8 0.2 79.9 80.6 (0.9 ) Austin 82.1 87.1 (5.7 )
80.3 83.7 (4.1 ) Atlanta 76.9 74.4 3.4 76.2 73.3 3.9 Other markets
77.0 72.4 6.4 74.8 71.3 4.8
Comparable core hotels (31)
81.3 79.0 2.9 76.8 75.0
2.4 ADR ($) Three Months Ended Six
Months Ended June 30, June 30, 2014
2013 %Variance 2014 2013
%Variance San Francisco area 203.56 179.54 13.4 196.51
171.62 14.5 Boston 267.04 251.75 6.1 240.43 224.95 6.9 South
Florida 148.46 134.39 10.5 177.73 164.33 8.2 Los Angeles area
146.14 138.07 5.8 141.77 137.16 3.4 Myrtle Beach 170.84 162.69 5.0
148.21 145.28 2.0 Philadelphia 172.66 182.05 (5.2 ) 162.40 170.15
(4.6 ) Tampa 194.20 182.67 6.3 210.17 199.34 5.4 New York area
265.24 260.37 1.9 249.10 241.31 3.2 Austin 209.58 192.74 8.7 220.94
206.60 6.9 Atlanta 141.54 144.32 (1.9 ) 143.98 143.56 0.3 Other
markets 154.90 146.29 5.9 154.54 147.69 4.6
Comparable core
hotels (31) 182.53 171.23 6.6
179.59 168.90 6.3 RevPAR ($)
Three Months Ended Six Months Ended June 30,
June 30, 2014 2013 %Variance
2014 2013 %Variance San Francisco area 173.22
154.94 11.8 154.42 137.87 12.0 Boston 221.88 201.17 10.3 173.16
160.81 7.7 South Florida 125.98 106.63 18.1 156.41 139.74 11.9 Los
Angeles area 124.13 120.18 3.3 118.82 112.49 5.6 Myrtle Beach
133.98 123.19 8.8 91.94 82.16 11.9 Philadelphia 135.35 143.82 (5.9
) 112.22 112.41 (0.2 ) Tampa 164.67 149.46 10.2 179.62 165.02 8.8
New York area 233.33 228.66 2.0 198.94 194.52 2.3 Austin 172.12
167.82 2.6 177.37 172.96 2.6 Atlanta 108.84 107.37 1.4 109.73
105.28 4.2 Other markets 119.32 105.93 12.6 115.54 105.34 9.7
Comparable core hotels (31) 148.39 135.30
9.7 137.88 126.64 8.9
Historical Quarterly Operating
Statistics
Occupancy (%) Q3 2013 Q4 2013
Q1 2014 Q2 2014 Comparable core hotels
(31) 78.9 70.4 72.2 81.3 Non-strategic hotels (15)(a) 74.2 68.7
72.2 77.7
Comparable hotels (46) 77.4 69.9
72.2 80.2 Wyndham and Wyndham Grand (8)(b) 68.7 59.1
62.9 77.4
Same-store hotels (54) 76.1 68.2
70.7 79.8 ADR ($) Q3 2013 Q4
2013 Q1 2014 Q2 2014 Comparable core hotels (31)
171.37 170.40 176.24 182.53 Non-strategic hotels (15)(a) 117.84
115.80 120.30 122.74
Comparable hotels (46) 155.66
153.98 159.13 164.79 Wyndham and Wyndham Grand
(8)(b) 140.19 149.34 144.62 164.91
Same-store hotels (54)
153.47 153.35 157.10 164.81
RevPAR ($) Q3 2013 Q4 2013 Q1 2014
Q2 2014 Comparable core hotels (31) 135.17 120.03 127.25
148.39 Non-strategic hotels (15)(a) 87.43 79.54 86.80 95.40
Comparable hotels (46) 120.55 107.64
114.87 132.17 Wyndham and Wyndham Grand (8)(b) 96.31
88.30 90.99 127.59
Same-store hotels (54) 116.74
104.63 111.12 131.45
(a) Excludes two hotels held for sale as of June 30,
2014.
(b) These hotels were converted to Wyndham on March 1,
2013.
Non-GAAP Financial Measures
We refer in this release to certain “non-GAAP financial
measures.” These measures, including FFO, Adjusted FFO, EBITDA,
Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA and Hotel
EBITDA margin, are measures of our financial performance that are
not calculated and presented in accordance with generally accepted
accounting principles (“GAAP”). The following tables reconcile each
of these non-GAAP measures to the most comparable GAAP financial
measure. Immediately following the reconciliations, we include a
discussion of why we believe these measures are useful supplemental
measures of our performance and the limitations of such
measures.
Reconciliation of Net Income (Loss) to FFO and Adjusted
FFO (in thousands, except per share data)
Three Months Ended June 30, 2014
2013 Dollars Shares
Per Share Amount Dollars Shares
Per Share Amount Net income (loss) $ 24,955 $ (22,795
) Noncontrolling interests (333 ) 4,112 Preferred dividends (9,678
) (9,678 ) Preferred distributions - consolidated joint venture
(341 ) —
Net income (loss) attributable to
FelCor common stockholders 14,603 (28,361 ) Less: Dividends
declared on unvested restricted stock (2 ) — Less: Undistributed
earnings allocated to unvested restricted stock (6 )
—
Basic earnings per share data 14,595 124,169 $ 0.12
(28,361 ) 123,814 $ (0.23 ) Restricted stock units —
1,217 — — — —
Diluted
earnings per share data 14,595 125,386 0.12 (28,361 ) 123,814
(0.23 ) Depreciation and amortization 29,082 — 0.23 29,898 — 0.24
Depreciation, discontinued operations and unconsolidated entities
2,700 — 0.02 4,448 — 0.04 Gain on sale of other assets (100 ) — — —
— — Impairment loss, net of non-controlling interests in other
partnerships — — — 20,382 — 0.16 Impairment loss, discontinued
operations — — — 3,265 — 0.03 Gain on sale of hotels, net of
noncontrolling interests in other partnerships (15,541 ) — (0.12 )
(7,259 ) — (0.06 ) Noncontrolling interests in FelCor LP 71 614
(0.01 ) (140 ) 621 — Dividends declared on unvested restricted
stock 2 — — — — — Undistributed earnings allocated to unvested
restricted stock 6 — — — — — Conversion of unvested restricted
stock and units — 11 — —
792 —
FFO 30,815 126,011 0.24 22,233 125,227 0.18
Debt extinguishment 25 — — — — — Severance costs 3 — — 2,791 — 0.02
Conversion expenses — — — 587 — 0.01 Variable stock compensation
854 — 0.01 121 — — Pre-opening costs, net of noncontrolling
interests 1,206 — 0.01 322
— —
Adjusted FFO $ 32,903 126,011 $
0.26 $ 26,054 125,227 $ 0.21
Reconciliation of Net Income (Loss) to FFO and Adjusted FFO
(in thousands, except per share data) Six Months
Ended June 30, 2014 2013
Dollars Shares Per Share Amount
Dollars Shares Per Share Amount
Net income (loss) $ 10,119 $ (49,400 ) Noncontrolling
interests (134 ) 4,532 Preferred distributions - consolidated joint
venture (522 ) — Preferred dividends (19,356 )
(19,356 )
Net loss attributable to FelCor common
stockholders (9,893 ) (64,224 )
Less: Dividends declared on unvested
restricted stock
(3 ) —
Basic and diluted earnings per share
data (9,896 ) 124,158 $ (0.08 ) (64,224 ) 123,814 $ (0.52 )
Depreciation and amortization 58,683 — 0.47 59,653 — 0.48
Depreciation, discontinued operations and unconsolidated entities
5,374 — 0.04 8,971 — 0.07 Gain on sale of other assets (100 ) — — —
— — Impairment loss, net of non-controlling interests in other
partnerships — — — 20,382 — 0.16 Impairment loss, discontinued
operations — — — 3,265 — 0.03 Gain on sale of hotels, net of
noncontrolling interests in other partnerships (21,361 ) — (0.17 )
(7,259 ) — (0.06 ) Noncontrolling interests in FelCor LP (50 ) 616
— (320 ) 621 — Dividends declared on unvested restricted stock 3 —
— — — — Conversion of unvested restricted stock and units —
1,029 — — 565 —
FFO 32,653 125,803 0.26 20,468 125,000 0.16 Acquisition
costs — — — 23 — — Debt extinguishment, including discontinued
operations 276 — — — — — Severance costs 403 — — 2,791 — 0.02
Conversion expenses — — — 1,215 — 0.01 Variable stock compensation
1,419 — 0.01 223 — — Pre-opening costs, net of noncontrolling
interests 2,259 — 0.02 563
— 0.01
Adjusted FFO $ 37,010
125,803 $ 0.29 $ 25,283 125,000 $ 0.20
Reconciliation of Net Income (Loss) to EBITDA, Adjusted
EBITDA and Same-Store Adjusted EBITDA (in
thousands) Three Months Ended Six Months
Ended June 30, June 30, 2014
2013 2014
2013 Net income (loss) $ 24,955 $
(22,795 ) $ 10,119 $ (49,400 ) Depreciation and amortization 29,082
29,898 58,683 59,653 Depreciation, discontinued operations and
unconsolidated entities 2,700 4,448 5,374 8,971 Interest expense
24,509 26,398 49,751 52,705 Interest expense, discontinued
operations and unconsolidated entities 647 879 1,390 1,749
Noncontrolling interests in other partnerships (262 )
3,972 (184 ) 4,212
EBITDA 81,631
42,800 125,133 77,890 Impairment loss, net of noncontrolling
interests in other partnerships — 20,382 — 20,382 Impairment loss,
discontinued operations — 3,265 — 3,265 Debt extinguishment,
including discontinued operations 25 — 276 — Acquisition costs — —
— 23 Gain on sale of hotels, net of noncontrolling interests in
other partnerships (15,541 ) (7,259 ) (21,361 ) (7,259 ) Gain on
sale of other assets (100 ) — (100 ) — Amortization of fixed stock
and directors’ compensation 1,171 1,572 2,292 3,150 Severance costs
3 2,791 403 2,791 Conversion expenses — 587 — 1,215 Variable stock
compensation 854 121 1,419 223 Pre-opening costs, net of
noncontrolling interests 1,206 322
2,259 563
Adjusted EBITDA 69,249
64,581 110,321 102,243 Adjusted EBITDA from hotels, disposed and
held for sale (2,293 ) (7,507 ) (4,210 )
(12,224 )
Same-store Adjusted EBITDA $ 66,956
$ 57,074 $ 106,111 $ 90,019
Hotel EBITDA and Hotel EBITDA Margin (dollars in
thousands) Three Months Ended Six Months
Ended June 30, June 30, 2014
2013 2014
2013 Same-store operating revenue: Room
$ 192,523 $ 173,831 $ 353,480 $ 325,313 Food and beverage 43,389
39,823 81,196 74,700 Other operating departments 12,222
11,891 23,239 22,575
Same-store operating revenue 248,134 225,545 457,915
422,588
Same-store operating expense: Room 48,335 44,465
92,368 86,578 Food and beverage 31,473 30,044 61,074 58,697 Other
operating departments 5,823 5,690 11,246 10,772 Other property
related costs 60,108 56,259 118,095 112,078 Management and
franchise fees 9,732 8,305 18,234 16,939 Taxes, insurance and lease
expense 15,120 14,251 29,584
27,924
Same-store operating expense
170,591 159,014 330,601
312,988
Hotel EBITDA $ 77,543 $ 66,531
$ 127,314 $ 109,600
Hotel EBITDA Margin
31.3 % 29.5 % 27.8 % 25.9 %
Three Months Ended Six
Months Ended June 30, June 30, 2014
2013 2014
2013 Hotel EBITDA - Comparable core (31) $ 51,241 $
43,979 $ 84,650 $ 72,552 Hotel EBITDA - Non-strategic (15)(a)
12,382 11,351 22,706
20,762
Hotel EBITDA - Comparable (46)
63,623 55,330 107,356 93,314 Hotel
EBITDA - Wyndham (8) 13,920 11,201
19,958 16,286
Hotel EBITDA (54)
$ 77,543 $ 66,531
$ 127,314 $ 109,600
Hotel EBITDA Margin - Comparable core (31) 30.1 % 28.0 %
26.8 % 24.8 % Hotel EBITDA Margin - Non-strategic (15)(a) 29.3 %
28.6 % 27.8 % 27.0 %
Hotel EBITDA Margin - Comparable (46)
29.9 % 28.1 % 27.0 %
25.2 % Hotel EBITDA Margin - Wyndham (8) 39.5 % 38.7
% 33.3 % 30.8 %
Hotel EBITDA Margin (54) 31.3
% 29.5 % 27.8 % 25.9
%
(a) Excludes two hotels held for sale as of June 30,
2014.
Reconciliation of Same-store Operating Revenue and
Same-store Operating Expense to Total Revenue, Total
Operating Expense and Operating Income (Loss) (in
thousands) Three Months Ended Six Months
Ended June 30, June 30, 2014
2013 2014
2013 Same-store operating revenue $ 248,134 $
225,545 $ 457,915 $ 422,588 Other revenue 1,236 1,050 1,563 1,449
Revenue from hotels, disposed and held for sale(a) 10,145
13,261 21,386 24,756
Total revenue 259,515 239,856 480,864 448,793
Same-store operating expense 170,591 159,014 330,601 312,988
Consolidated hotel lease expense(b) 13,296 12,166 23,687 21,723
Unconsolidated taxes, insurance and lease expense (1,985 ) (2,040 )
(3,951 ) (3,938 ) Corporate expenses 7,647 6,694 15,472 14,526
Depreciation and amortization 29,082 29,898 58,683 59,653
Impairment loss — 24,441 — 24,441 Conversion expenses — 587 — 1,215
Expenses from hotels, disposed and held for sale(a) 7,790 9,628
17,102 19,155 Other expenses 2,114 3,915
4,128 4,736
Total operating
expense 228,535 244,303
445,722 454,499
Operating income (loss)
$ 30,980 $ (4,447 ) $ 35,142 $ (5,706 )
(a) During the six months ended June 30, 2014, we sold three
hotels, which were not held for sale at December 31, 2013, for
$78.1 million. In addition, we have agreed to sell two hotels for
$52 million. These hotels are considered held for sale on our
June 30, 2014 balance sheet, as the purchasers each paid a
non-refundable deposit toward the purchase price. Under recently
issued GAAP accounting guidance, we included the operating
performance for these hotels in continuing operations in our
Consolidated Statements of Operations for the three and six months
ended June 30, 2014 and 2013. However, for purposes of our Non-GAAP
reporting metrics, we have excluded the results of these hotels to
provide a meaningful same-store comparison.
(b) Consolidated hotel lease expense represents the percentage
lease expense of our 51% owned operating lessees. The offsetting
percentage lease revenue is included in equity in income from
unconsolidated entities.
Reconciliation of Forecasted Net Income attributable to
FelCor to Forecasted FFO and EBITDA (in millions,
except per share data) Full Year 2014 Guidance
Low High Dollars Per Share
Amount(a) Dollars Per Share
Amount(a) Net income attributable to
FelCor(b) $ 1.0 $ 5.0 Preferred dividends (39.0 )
(39.0 )
Net loss attributable to FelCor common
stockholders (38.0 ) $ (0.31 ) (34.0 ) $ (0.28 ) Gain on sale
of hotels, net (21.0 ) (21.0 ) Depreciation(c) 125.0
126.5
FFO $ 66.0 $ 0.53 $ 71.5 $ 0.57
Pre-opening costs 2.0 2.0 Variable stock compensation 1.5 1.5
Severance costs 0.5 0.5
Adjusted
FFO $ 70.0 $ 0.56 $ 75.5 $ 0.60
Net
income attributable to FelCor(b) $ 1.0 $ 5.0
Depreciation(c) 125.0 126.5 Interest expense(c) 96.0 96.5
Amortization expense 1.0 1.0
EBITDA $ 223.0 $ 229.0 Gain on sale of hotels, net (21.0 )
(21.0 ) Amortization of stock compensation 5.5 5.5 Pre-opening
costs 2.0 2.0 Variable stock compensation 1.5 1.5 Severance costs
0.5 0.5
Adjusted EBITDA $ 211.5
$ 217.5
(a) Weighted average shares are 125.7 million.
(b) Excludes any 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
Felcor Lodging (NYSE:FCH)
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