- Same-store Adjusted EBITDA increased
22%
- Raising 2014 Operating
Outlook
FelCor Lodging Trust Incorporated (NYSE: FCH) reported operating
results for the third quarter ended September 30, 2014.
Highlights
- Same-store RevPAR increased 12.3%;
RevPAR for comparable core hotels increased 9.8%.
- Adjusted FFO per share improved to
$0.21, a 50% increase from 2013.
- Adjusted EBITDA increased $6.3 million
to $61.1 million, and Same-store Adjusted EBITDA increased
$10.8 million, or 21.9%, to $60.0 million.
- Net income per share was $0.50, a $0.55
improvement from a loss of $0.05 in 2013.
- Sold three non-strategic hotels since
the second quarter for aggregate gross proceeds of
$37 million. Agreed to sell three other hotels (and have
received a non-refundable deposit for one of these hotels) for
aggregate gross proceeds of $102 million.
- Redeemed remaining $234 million of
our 10% senior secured notes in August using proceeds from a new
$140 million term loan, cash on hand and borrowings under our line
of credit.
“I am very pleased with our performance in the third quarter.
Same-store Adjusted EBITDA and RevPAR exceeded our expectations,
increasing 21.9% and 12.3%, respectively. This strong growth
reflects the successful execution of our strategic plan and
transformation of our portfolio,” said Richard A. Smith, President
and Chief Executive Officer of FelCor. “We have positioned FelCor
to deliver sustainable growth by assembling a high-quality and
diverse portfolio and will continue to leverage our strengths to
create additional shareholder value.”
Mr. Smith added, “We continue to make very good progress on our
portfolio repositioning and balance sheet restructuring programs,
which are nearing completion. We only have nine remaining
non-strategic hotels to sell. Of these, we have agreed to sell
three, and we expect to complete our asset sale program by early
next year. We will continue to apply asset sale proceeds to debt
repayment, thereby completing the final phase of our balance sheet
restructuring.”
Hotel Results
Third Quarter 2014 2013
Change Comparable hotels (39) RevPAR $
135.63 $ 124.28 9.1 % Total hotel revenue, in millions $ 185.6 $
170.2 9.0 % Hotel EBITDA, in millions $ 51.3 $ 43.0 19.3 % Hotel
EBITDA margin 27.7 % 25.3 % 238 bps
Wyndham Hotels
(8) RevPAR $ 126.31 $ 96.31 31.1 % Total hotel revenue, in
millions $ 34.7 $ 26.4 31.4 % Hotel EBITDA, in millions $ 12.3 $
10.0 23.4 % Hotel EBITDA margin 35.6 % 37.8 % (224) bps
Same-store hotels (47) RevPAR $ 133.98 $ 119.32 12.3 % Total
hotel revenue, in millions $ 220.3 $ 196.6 12.1 % Hotel EBITDA, in
millions $ 63.6 $ 53.0 20.1 % Hotel EBITDA margin 28.9 % 27.0 % 195
bps
RevPAR for our 39 comparable hotels (31 comparable core hotels
plus eight non-strategic hotels) was $135.63, a 9.1% increase
compared to the same period in 2013. The increase reflects a
7.1% increase in ADR to $171.86 and a 1.9% increase in
occupancy to 78.9%. Hotel EBITDA for our 39 comparable hotels was
$51.3 million, a 19.3% increase, and Hotel EBITDA margin was 27.7%
during the quarter, a 238 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 9.8% compared to the same period in 2013, while
RevPAR for our eight non-strategic hotels increased 4.7%.
RevPAR and Hotel EBITDA for our six acquired and recently
redeveloped hotels increased 9.1% and 49.6%, respectively, compared
to the same period in 2013, which exceeded our expectations.
RevPAR for the eight hotels converted to Wyndham in 2013
increased 31.1% for the third quarter, compared to the same period
in 2013. We expect our Wyndham hotels’ revenues and EBITDA will
continue to grow meaningfully for the remainder of 2014 and going
forward, 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. The amount
recorded on the guaranty for the three months ended
September 30, 2013 was $2.4 million, compared to only
$93,000 for the three months ended September 30, 2014 (which
affects margin comparisons for the eight hotels). We do not expect
that any amount paid by Wyndham under the guaranty with respect to
2014 will be significant.
RevPAR for our 47 Same-store hotels (39 comparable hotels plus
our Wyndham hotels) was $133.98, a 12.3% increase compared to the
same period in 2013. The increase reflects an 8.0% increase in ADR
to $169.79 and a 4.0% increase in occupancy to 78.9%.
See page 15 for hotel portfolio composition and pages 16-18 and
22-23 for more detailed hotel portfolio operating data.
Third Quarter Operating Results
Third Quarter $ in millions, except for per share
information
2014 2013
Change Same-store Adjusted EBITDA $ 60.0 $ 49.2 21.9 %
Adjusted EBITDA $ 61.1 $ 54.8 11.5 % Adjusted FFO per share $ 0.21
$ 0.14 $ 0.07 Net income (loss) per share $
0.50
$ (0.05 ) $
0.55
Same-store Adjusted EBITDA was $60.0 million, a 21.9% increase
from $49.2 million for the same period in 2013. Adjusted EBITDA
(which includes Adjusted EBITDA earned for sold hotels prior to
sale) was $61.1 million compared to $54.8 million for the
same period in 2013.
Adjusted FFO was $26.7 million ($0.21 per share),
compared to $17.1 million ($0.14 per share) in 2013. Net
income attributable to common stockholders was $62.7 million
($0.50 per share) in 2014, compared to a net loss of
$6.4 million ($0.05 per share) in 2013. Net income in 2014
included a $29.6 million net gain on consolidated hotel sales,
a $30.2 million gain on the sale of our interest in
unconsolidated hotels, and a $20.7 million gain on the fair
value remeasurement of previously unconsolidated hotels. Net loss
in 2013 included an $11.8 million gain.
Year-to-Date Operating Results
RevPAR for 39 comparable hotels was $130.76, an 8.6% increase
compared to the same period in 2013. The increase reflects a 6.4%
increase in ADR to $169.26 and a 2.0% increase in occupancy to
77.3%. Total revenue for the 39 comparable hotels increased 8.2%
from the same period in 2013. RevPAR for our 31 comparable core
hotels increased 9.2%, while RevPAR for our eight non-strategic
hotels increased 4.9%.
Same-store Adjusted EBITDA was $165.2 million, a 19.3%
increase compared to the same period in 2013. Adjusted EBITDA
(which includes Adjusted EBITDA earned for sold hotels prior to
sale) was $171.4 million compared to $157.1 million for
the same period in 2013.
Adjusted FFO was $63.7 million ($0.51 per share) compared
to $42.3 million ($0.34 per share) in 2013. Net income
attributable to common stockholders was $52.8 million
($0.42 per share) in 2014, compared to a net loss of
$70.7 million ($0.57 per share) in 2013. Net income in 2014
included a $51.0 million net gain on consolidated hotel sales,
a $30.2 million gain on the sale of our interest in unconsolidated
hotels, and a $20.7 million gain on the fair value remeasurement of
previously unconsolidated entities. Net loss in 2013 included a
$27.7 million impairment loss, partially offset by a
$19.1 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 18 for a
reconciliation of each of these measures to the most comparable
GAAP financial measure and for information regarding the use,
limitations and importance of these non-GAAP financial
measures.
Portfolio Repositioning
During 2014, we sold seven hotels, including two in the third
quarter (the 446-room Holiday Inn-Toronto Airport and the 221-room
Embassy Suites Hotel-Indianapolis North) and one hotel in October
(the 395-room Sheraton-Atlanta Airport). We received total gross
proceeds of $130.7 million from selling these seven hotels.
Since December 2010, we have sold 31 non-strategic hotels for total
gross proceeds of $663 million as part of our portfolio
repositioning program.
In addition, in July, we unwound joint ventures that owned 10
non-strategic hotels. We retained five of those hotels (comprising
1,224 rooms) outright, and our joint venture partner owns the other
five (comprising 1,215 rooms). We began the sale process for our
five retained hotels in September. As part of the unwinding of the
joint ventures, we now wholly-own our DoubleTree Suites hotel
located in downtown Austin.
We currently have nine non-strategic hotels to be sold. We have
agreed to sell the 208-room DoubleTree Charlotte-SouthPark for
$37 million and expect the sale to close today. We have
excluded the hotel from our Same-store metrics. We are negotiating
contracts to sell two more hotels for total gross proceeds of
approximately $65 million. Of the remaining six, we expect
five to be sold or under contract by the end of this year (of which
we are considering multiple offers on four). We expect to begin
marketing the last hotel in early 2015.
Capital Expenditures
During the quarter, we invested $18.0 million in capital
expenditures at our hotels (excluding the Knickerbocker), including
approximately $2.5 million for redevelopment projects and
repositioning 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 hotels. Please see page 13 of this
release for more detail on renovations.
Knickerbocker
We have invested $118.5 million (excluding initial
acquisition costs and capitalized interest) through
September 30, 2014 to redevelop the 4+ star Knickerbocker
Hotel. Our expected net project cost remains $240 million.
Balance Sheet
As of September 30, 2014, we had $1.6 billion of
consolidated debt bearing a 5.3% weighted-average interest rate and
a six-year weighted-average maturity. We had $60.1 million of
cash and cash equivalents and $34.3 million of restricted
cash, of which $20.3 million secured our Knickerbocker
construction loan.
During July, we obtained a $140 million term loan secured
by three hotels. The loan bears interest at LIBOR (no floor) plus
2.5%. The loan, which matures in 2017 and may be extended for up to
two years, subject to satisfaction of certain conditions, is freely
pre-payable. In August, we used proceeds from the loan, cash on
hand and borrowings under our line of credit to redeem the
remaining $234 million 10% senior secured notes due this
year.
During the quarter, we also repaid a $9.6 million mortgage
loan (secured by a hotel sold in September) that would have
otherwise matured in 2016.
In connection with unwinding some of our joint ventures in July,
an unconsolidated loan to these joint ventures (which was secured
by mortgages on eight of the 10 hotels) was bifurcated. We are
liable for our $64 million share of that non-recourse loan
which is now secured by mortgages on four former joint venture
hotels. The loan bears interest at LIBOR plus 3% and matures in
2017.
We will use proceeds from pending and future asset sales to
repay debt, including the $140 million term loan, our
$64 million loan assumed from our unconsolidated joint venture
and our line of credit.
Common Dividend
During the third quarter, we declared a $0.02 per share common
stock dividend, which will be paid tomorrow. Future quarterly
common stock 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
reflecting better than expected third quarter results. Our improved
2014 outlook reflects continuing strong lodging industry
fundamentals. Our expected RevPAR growth exceeds overall RevPAR
growth projections for the industry because of our high-quality
diverse portfolio and continuing strong growth at our six acquired
and recently redeveloped hotels.
Our outlook reflects selling eight of the nine remaining
non-strategic hotels during 2014 (one currently under contract to
close today and seven to close at the end of the year). Our outlook
assumes EBITDA for the Wyndham hotels at the level guaranteed by
Wyndham.
During 2014, we expect:
- RevPAR for same-store hotels will
increase 9.25 - 9.5%, and RevPAR for comparable hotels (which
excludes our Wyndham hotels) will increase 8.0 - 8.25%;
- Adjusted EBITDA will be
$217.5 million - $219.5 million;
- Adjusted FFO per share will be $0.60 -
$0.62;
- Net income attributable to FelCor will
be $74.5 million - $76.5 million; and
- Interest expense, including our pro
rata share from joint ventures, will be $95.5 million.
The following table reconciles our 2014 Adjusted EBITDA to core
Adjusted EBITDA outlook (in millions):
Low High Previous
Adjusted EBITDA $ 211.5 $ 217.5
Operations 2.5 2.0 Updated timing of asset sales 3.5
—
Current Adjusted EBITDA $
217.5 $ 219.5 Hotel dispositions(a)
(28.5 ) (28.5 )
Core Adjusted EBITDA (39 hotels)
$ 189.0 $ 191.0
(a) EBITDA that is forecasted to be generated by the 20
hotels that we assume will be sold from January 1, 2014 through the
actual or assumed dates of sale and the one hotel that we will
begin marketing in early 2015.
About FelCor
FelCor, a real estate investment trust, owns a diversified
portfolio of primarily upper-upscale and luxury hotels that are
located in major and resort markets. FelCor partners with leading
hotel companies to operate its hotels, which are flagged under
globally renowned brands and premier independent hotels. Additional
information can be found on the Company’s website at www.felcor.com.
We invite you to listen to our third quarter earnings Conference
Call on Thursday, October 30, 2014 at 11:00 a.m. (Central
Time). The conference call will be webcast simultaneously on
FelCor’s website at www.felcor.com.
Interested investors and other parties who wish to access the call
can go to FelCor’s website and click on the conference call
microphone icon on the “Investor Relations” page. The conference
call replay will also be archived on the Company’s website.
With the exception of historical information, the matters
discussed in this news release include “forward-looking statements”
within the meaning of the federal securities laws. These
forward-looking statements are identified by their use of terms and
phrases such as “anticipate,” “believe,” “could,” “estimate,”
“expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,”
“will,” “continue” and other similar terms and phrases, including
references to assumptions and forecasts of future results.
Forward-looking statements are not guarantees of future
performance. Numerous risks and uncertainties, and the occurrence
of future events, may cause actual results to differ materially
from those anticipated at the time the forward-looking statements
are made. Current economic circumstances or an economic slowdown
and the impact on the lodging industry, operating risks associated
with the hotel business, relationships with our property managers,
risks associated with our level of indebtedness and our ability to
meet debt covenants in our debt agreements, our ability to complete
acquisitions, dispositions and debt refinancing, the availability
of capital, the impact on the travel industry from security
precautions, our ability to continue to qualify as a Real Estate
Investment Trust for federal income tax purposes and numerous other
factors may affect future results, performance and achievements.
Certain of these risks and uncertainties are described in greater
detail in our filings with the Securities and Exchange Commission.
Although we believe our current expectations to be based upon
reasonable assumptions, we can give no assurance that our
expectations will be attained or that actual results will not
differ materially. We undertake no obligation to update any
forward-looking statement to conform the statement to actual
results or changes in our expectations.
SUPPLEMENTAL INFORMATION
INTRODUCTION
The following information is presented in order to help our
investors understand FelCor’s financial position as of and for the
three and nine months ended September 30, 2014.
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
Hotel Portfolio Composition 15 Hotel Operating Statistics by Brand
16 Hotel Operating Statistics by Market 17 Historical Quarterly
Operating Statistics 18 Non-GAAP Financial Measures 18 (a)
Our consolidated statements of operations and balance sheets have
been prepared without audit. Certain information and footnote
disclosures normally included in financial statements presented in
accordance with GAAP have been omitted. The consolidated statements
of operations and balance sheets should be read in conjunction with
the consolidated financial statements and notes thereto included in
our most recent Annual Report on Form 10-K.
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30, 2014
2013 2014 2013 Revenues: Hotel
operating revenue: Room $ 185,969 $ 183,657 $ 556,036 $ 528,491
Food and beverage 34,287 33,118 119,543 112,222 Other operating
departments 12,193 12,070 36,171 35,475 Other revenue 1,607
1,584 3,170 3,034
Total revenues 234,056 230,429
714,920 679,222 Expenses: Hotel departmental
expenses: Room 48,348 47,914 145,666 140,106 Food and beverage
28,667 28,251 92,920 90,244 Other operating departments 5,716 5,585
17,296 16,776 Other property-related costs 59,441 60,497 183,931
179,955 Management and franchise fees 9,632 9,171 28,805 27,248
Taxes, insurance and lease expense 19,131 25,836 69,756 72,853
Corporate expenses 6,442 5,817 21,914 20,343 Depreciation and
amortization 28,523 29,820 87,206 89,473 Impairment loss — — —
24,441 Conversion expenses — (81 ) — 1,134 Other expenses
9,746
2,102
13,874
6,838 Total operating expenses
215,646
214,912
661,368
669,411 Operating income
18,410
15,517
53,552
9,811 Interest expense, net (21,922 ) (25,796 ) (71,644 ) (78,457 )
Debt extinguishment (4,730 ) — (4,763 ) — Gain on sale of
investment in unconsolidated entities, net 30,184 — 30,184 —
Gain from remeasurement of unconsolidated
entities
20,733 — 20,733 — Other gains, net — 21
100 21 Income (loss) before equity in
income from unconsolidated entities
42,675
(10,258 )
28,162
(68,625 ) Equity in income from unconsolidated entities
1,347 2,100 4,756 4,095
Income (loss) from continuing operations
44,022
(8,158 )
32,918
(64,530 ) Income (loss) from discontinued operations (8 )
11,947 132 18,919 Income
(loss) before gain on sale of property
44,014
3,789
33,050
(45,611 ) Gain on sale of property, net 29,556
— 50,639 — Net income (loss)
73,570
3,789
83,689
(45,611 ) Net loss (income) attributable to noncontrolling
interests in other partnerships (646 ) (591 ) (830 ) 3,621 Net loss
(income) attributable to redeemable noncontrolling interests in
FelCor LP
(185
) 32
(135
) 352 Preferred distributions - consolidated joint venture
(348 ) — (870 ) — Net income
(loss) attributable to FelCor
72,391
3,230
81,854
(41,638 ) Preferred dividends (9,678 ) (9,678 )
(29,034 ) (29,034 ) Net income (loss) attributable to
FelCor common stockholders $
62,713
$ (6,448 ) $
52,820
$ (70,672 )
Basic per common share data:
Income (loss) from continuing operations $
0.50
$ (0.14 ) $
0.42
$ (0.72 ) Net income (loss) $
0.50
$ (0.05 ) $
0.43
$ (0.57 ) Basic weighted average common shares outstanding
124,168 123,817 124,159
123,815
Diluted per common share data:
Income (loss) from continuing
operations
$
0.50
$
(0.14
)
$
0.42
$
(0.72
)
Net income (loss)
$
0.50
$
(0.05
)
$
0.42
$
(0.57
)
Diluted weighted average common shares outstanding 125,526
123,817 125,289 123,815
Consolidated Balance
Sheets
(in thousands)
September 30, December 31, 2014
2013 Assets Investment in hotels, net of accumulated
depreciation of $871,685 and $929,801 at September 30, 2014 and
December 31, 2013, respectively $ 1,657,551 $ 1,653,267 Hotel
development 278,619 216,747 Investment in unconsolidated entities
17,741 46,943 Hotels held for sale 26,690 16,319 Cash and cash
equivalents 60,110 45,645 Restricted cash 34,263 77,227 Accounts
receivable, net of allowance for doubtful accounts of $226 and $262
at September 30, 2014 and December 31, 2013, respectively 34,696
35,747 Deferred expenses, net of accumulated amortization of
$15,415 and $20,362 at September 30, 2014 and December 31, 2013,
respectively 27,353 29,325 Other assets 22,924
23,060 Total assets $ 2,159,947 $ 2,144,280
Liabilities and Equity Debt, net of discount of $4,714 at
December 31, 2013 $ 1,621,644 $ 1,663,226 Distributions payable
11,263 11,047 Accrued expenses and other liabilities
151,915
150,738 Total liabilities
1,784,822
1,825,011 Commitments and contingencies
Redeemable noncontrolling interests in
FelCor LP, 611 and 618 units issued and outstanding at September
30, 2014 and December 31, 2013, respectively
5,723 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 September 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 September 30, 2014 and
December 31, 2013 169,412 169,412 Common stock, $0.01 par value,
200,000 shares authorized; 124,289 and 124,051 shares issued and
outstanding at September 30, 2014 and December 31, 2013,
respectively 1,243 1,240 Additional paid-in capital
2,353,304
2,354,328 Accumulated other comprehensive income — 24,937
Accumulated deficit
(2,524,017
) (2,568,350 ) Total FelCor stockholders’ equity
309,296
290,929 Noncontrolling interests in other partnerships 18,663
23,301 Preferred equity in consolidated joint venture, liquidation
value of $42,067 41,443 — Total equity
369,402
314,230 Total liabilities and equity $
2,159,947 $ 2,144,280
Consolidated
Debt Summary
(dollars in thousands)
EncumberedHotels
InterestRate (%)
MaturityDate
September 30, 2014 December 31, 2013
Line of credit 8 LIBOR + 3.375 June 2016(a) $ 146,500 $ 88,000 Term
loan 3 LIBOR + 2.50 July 2017 140,000 — Mortgage debt 4 LIBOR +
3.00 March 2017 64,000 — Mortgage debt(b) 4 4.95 October 2022
124,930 126,220 Mortgage debt 1 4.94 October 2022 31,353 31,714
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:(c) Construction tranche — LIBOR + 4.00 May 2016 44,577 — Cash
collateralized tranche — LIBOR + 1.25 May 2016 20,284 64,861
Retired debt — — — — 302,431
Total 35 $
1,621,644 $ 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) 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 $44.6 million of
the cash collateral to fund construction costs, leaving $20.3
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 September 30, 2014 Debt
Balance Encumbered Hotels Line of credit $ 147
Charleston Mills House - WYN, Houston
Medical Center - WYN, Mandalay Beach - ES, Miami International
Airport - ES, Myrtle Beach Resort - ES, Philadelphia Historic
District - WYN, Pittsburgh University Center - WYN, and Santa
Monica at the Pier - WYN
Term loan $ 140 New Orleans French Quarter - WYN, Phoenix Biltmore
- ES, and San Francisco Union Square - MAR Mortgage debt $ 64
Austin Airport - ES, Chicago Lombard - ES, Raleigh - ES, and San
Antonio NW - ES Mortgage debt $ 28 Napa Valley - ES Mortgage debt $
35 Ft. Lauderdale - ES Mortgage debt $ 24 Birmingham - ES Mortgage
debt $ 38 Minneapolis Airport - ES Mortgage debt $ 31 Deerfield
Beach - ES
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
Capital Expenditures
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30, 2014
2013 2014 2013 Improvements and
additions to majority-owned hotels $ 17,515 $ 27,433 $ 65,547 $
74,456 Partners’ pro rata share of additions to consolidated joint
venture hotels (21 ) (126 ) (280 ) (434 ) Pro rata share of
additions to unconsolidated hotels 480 299
1,884 1,101 Total additions to
hotels(a) $ 17,974 $ 27,606 $ 67,151 $ 75,123
(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 Aug-2014 Dec-2014 Ft. Lauderdale - ES(d) guestrooms
July-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)
September 30, December 31,
Total Enterprise
Value
2014 2013 Common shares outstanding 124,289 124,051
Units outstanding 611 618 Combined
shares and units outstanding 124,900 124,669 Common stock price $
9.36 $ 8.16
Market capitalization $ 1,169,064
$ 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) 39,371 — Consolidated debt(b) 1,621,644
1,663,226 Noncontrolling interests of consolidated debt (2,229 )
(2,719 ) Pro rata share of unconsolidated debt 17,236 73,179 Hotel
development (278,619 ) (216,747 ) Cash, cash equivalents and
restricted cash(c) (94,373 ) (122,872 )
Total
enterprise value (TEV) $ 2,950,860 $ 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 $20.3 million of cash fully securing $20.3 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 $ 255,746 $ 81,008 Wyndham and
Wyndham Grand(b) 8 2,528 103,932 35,028 Renaissance and Marriott 3
1,321 119,839 21,328 DoubleTree by Hilton and Hilton 3 802 41,106
12,613 Sheraton and Westin 2 673 37,996 10,167 Fairmont 1 383
49,104 7,839 Holiday Inn 2 968 46,403 6,402 Morgans and Royalton 2
285 34,341 3,512
Core hotels 39
11,942 688,467 177,897 Non-strategic hotels(c)
8 2,322 81,804 22,310
Same-store hotels
47 14,264 $ 770,271 $
200,207
Market
San Francisco area 5 1,903 $ 124,826 $ 31,567 Boston 3 916 76,510
17,783 South Florida 3 923 50,011 14,296 Los Angeles area 2 481
23,760 10,444 Myrtle Beach 2 640 37,956 10,113 Philadelphia 2 728
34,271 7,563 Tampa 1 361 46,423 7,430 New York area 3 546 48,046
6,756 Austin 1 188 13,126 5,677 Atlanta 1 316 14,016 5,487 Other
markets 16 4,940 219,522 60,781
Core hotels
39 11,942 688,467 177,897 Non-strategic
hotels(c) 8 2,322 81,804 22,310
Same-store
hotels 47 14,264 $ 770,271 $
200,207
Location
Urban 17 5,310 $ 323,306 $ 81,303 Resort 9 2,733 185,266 41,267
Airport 8 2,621 122,735 37,339 Suburban 5 1,278 57,160
17,988
Core hotels 39 11,942
688,467 177,897 Non-strategic hotels(c) 8 2,322
81,804 22,310
Same-store hotels 47
14,264 $ 770,271 $ 200,207
(a) Hotel EBITDA is more fully described on page 26. (b)
These hotels were converted to Wyndham on March 1, 2013. (c)
Excludes two hotels held for sale as of September 30, 2014 (one
sold in early October and one is expected to sell today).
The following tables set forth occupancy, ADR and RevPAR for the
three and nine months ended September 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
Nine Months Ended September 30, September
30, 2014 2013 %Variance 2014
2013 %Variance Embassy Suites Hotels 81.5 80.7
1.0 80.0 77.9 2.8 Renaissance and Marriott 70.0 66.9 4.7 74.0 71.6
3.2 DoubleTree by Hilton and Hilton 81.9 76.2 7.5 76.4 71.3 7.2
Sheraton and Westin 79.1 75.2 5.1 70.4 69.7 1.1 Fairmont 85.0 85.5
(0.6 ) 75.9 75.5 0.6 Holiday Inn 86.5 85.3 1.3 78.8 80.7 (2.4 )
Morgans and Royalton 89.8 88.8 1.1 86.8 86.4 0.4
Comparable core
hotels (31) 80.6 78.9 2.2 78.1
76.3 2.3 Non-strategic hotels (8)(a) 72.0 71.7 0.4
73.9 73.4 0.7
Comparable hotels (39) 78.9 77.5
1.9 77.3 75.7 2.0 Wyndham and Wyndham
Grand(b) 78.9 68.7 14.8 73.1 67.8 7.8
Same-store hotels (47)
78.9 75.9 4.0 76.5 74.3
3.0 ADR ($) Three Months Ended Nine Months
Ended September 30, September 30, 2014
2013 %Variance 2014 2013
%Variance Embassy Suites Hotels 167.65 154.63 8.4 165.46
154.09 7.4 Renaissance and Marriott 207.35 191.81 8.1 224.11 209.87
6.8 DoubleTree by Hilton and Hilton 155.89 148.69 4.8 157.57 151.80
3.8 Sheraton and Westin 153.46 146.73 4.6 146.57 145.40 0.8
Fairmont 319.97 290.21 10.3 303.03 280.17 8.2 Holiday Inn 192.61
176.59 9.1 164.50 144.64 13.7 Morgans and Royalton 294.02 299.78
(1.9 ) 296.60 300.11 (1.2 )
Comparable core hotels (31)
184.02 171.37 7.4 181.13 169.76
6.7 Non-strategic hotels (8)(a) 116.62 111.79 4.3 118.44
113.75 4.1
Comparable hotels (39) 171.86
160.45 7.1 169.26 159.03 6.4
Wyndham and Wyndham Grand(b) 160.19 140.19 14.3 157.44 142.94 10.1
Same-store hotels (47) 169.79 157.20
8.0 167.26 156.42 6.9 RevPAR ($)
Three Months Ended Nine Months Ended September
30, September 30, 2014 2013
%Variance 2014 2013 %Variance Embassy
Suites Hotels 136.57 124.74 9.5 132.36 119.97 10.3 Renaissance and
Marriott 145.21 128.29 13.2 165.75 150.36 10.2 DoubleTree by Hilton
and Hilton 127.71 113.28 12.7 120.46 108.29 11.2 Sheraton and
Westin 121.31 110.33 10.0 103.23 101.30 1.9 Fairmont 271.87 248.05
9.6 230.03 211.43 8.8 Holiday Inn 166.52 150.64 10.5 129.55 116.76
11.0 Morgans and Royalton 264.03 266.15 (0.8 ) 257.33 259.43 (0.8 )
Comparable core hotels (31) 148.38 135.17
9.8 141.42 129.51 9.2 Non-strategic
hotels (8)(a) 83.95 80.15 4.7 87.57 83.49 4.9
Comparable hotels
(39) 135.63 124.28 9.1 130.76
120.42 8.6 Wyndham and Wyndham Grand(b) 126.31 96.31
31.1 115.10 96.95 18.7
Same-store hotels (47) 133.98
119.32 12.3 127.99 116.25 10.1
(a) Excludes two hotels held for sale as of September 30,
2014 (one sold in early October and one is expected to sell today).
(b) These hotels were converted to Wyndham on March 1, 2013.
Hotel Operating Statistics by
Market
Occupancy (%) Three Months Ended
Nine Months Ended September 30, September
30, 2014 2013 %Variance 2014
2013 %Variance San Francisco area 90.4 89.3
1.2 82.6 83.4 (1.0 ) Boston 82.3 82.1 0.3 75.5 75.1 0.6 South
Florida 76.4 77.1 (0.9 ) 84.1 82.4 2.1 Los Angeles area 84.9 88.1
(3.7 ) 84.2 84.1 0.1 Myrtle Beach 87.9 88.6 (0.8 ) 70.8 67.3 5.2
Philadelphia 79.0 70.4 12.3 72.5 67.5 7.3 Tampa 74.2 77.6 (4.4 )
81.7 81.0 0.8 New York area 86.9 85.7 1.3 82.2 82.3 (0.1 ) Austin
80.8 75.2 7.5 80.5 80.8 (0.5 ) Atlanta 82.1 81.5 0.6 78.2 76.1 2.7
Other markets 73.5 69.6 5.7 74.4 70.7 5.1
Comparable core hotels
(31) 80.6 78.9
2.2 78.1 76.3
2.3 ADR ($) Three Months Ended Nine
Months Ended September 30, September 30,
2014 2013 %Variance 2014 2013
%Variance San Francisco area 235.29 211.50 11.2 210.81
185.99 13.3 Boston 265.29 241.44 9.9 249.56 231.03 8.0 South
Florida 123.87 114.98 7.7 161.23 148.76 8.4 Los Angeles area 154.92
141.13 9.8 146.24 138.56 5.5 Myrtle Beach 185.24 174.58 6.1 163.72
158.18 3.5 Philadelphia 160.08 155.73 2.8 161.55 165.08 (2.1 )
Tampa 167.93 155.99 7.7 197.24 185.51 6.3 New York area 243.04
241.38 0.7 246.95 241.34 2.3 Austin 194.77 175.49 11.0 212.08
196.85 7.7 Atlanta 141.70 139.99 1.2 143.17 142.27 0.6 Other
markets 147.52 138.87 6.2 152.20 144.77 5.1
Comparable core
hotels (31) 184.02 171.37
7.4 181.13 169.76
6.7 RevPAR ($) Three Months
Ended Nine Months Ended September 30,
September 30, 2014 2013 %Variance
2014 2013 %Variance San Francisco area 212.62
188.94 12.5 174.03 155.04 12.3 Boston 218.33 198.14 10.2 188.38
173.39 8.6 South Florida 94.67 88.66 6.8 135.60 122.53 10.7 Los
Angeles area 131.52 124.38 5.7 123.10 116.50 5.7 Myrtle Beach
162.89 154.70 5.3 115.85 106.39 8.9 Philadelphia 126.54 109.65 15.4
117.05 111.48 5.0 Tampa 124.61 121.02 3.0 161.08 150.35 7.1 New
York area 211.13 206.90 2.0 203.05 198.69 2.2 Austin 157.41 131.96
19.3 170.64 159.14 7.2 Atlanta 116.29 114.16 1.9 111.95 108.27 3.4
Other markets 108.48 96.59 12.3 113.16 102.40 10.5
Comparable core hotels (31)
148.38 135.17 9.8
141.42 129.51 9.2
Historical Quarterly Operating
Statistics
Occupancy (%) Q4 2013 Q1 2014
Q2 2014 Q3 2014 Comparable core hotels
(31) 70.4 72.2 81.3 80.6 Non-strategic hotels (8)(a) 68.3 72.9 77.0
72.0
Comparable hotels (39) 70.0 72.3
80.4 78.9 Wyndham and Wyndham Grand (8)(b) 59.1 62.9
77.4 78.9
Same-store hotels (47) 68.1 70.7
79.9 78.9 ADR ($) Q4 2013 Q1
2014 Q2 2014 Q3 2014 Comparable core hotels (31)
170.40 176.24 182.53 184.02 Non-strategic hotels (8)(a) 111.95
120.44 118.30 116.62
Comparable hotels (39) 159.11
165.12 170.37 171.86 Wyndham and Wyndham Grand
(8)(b) 149.34 144.62 164.91 160.19
Same-store hotels (47)
157.62 161.89 169.43 169.79
RevPAR ($) Q4 2013 Q1 2014 Q2 2014
Q3 2014 Comparable core hotels (31) 120.03 127.25 148.39
148.38 Non-strategic hotels (8)(a) 76.51 87.75 91.04 83.95
Comparable hotels (39) 111.42 119.44
137.04 135.63 Wyndham and Wyndham Grand (8)(b) 88.30
90.99 127.59 126.31
Same-store hotels (47) 107.37
114.40 135.37 133.98 (a) Excludes two
hotels held for sale as of September 30, 2014 (one sold in early
October and one is expected to sell today). (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 September 30, 2014
2013 Dollars Shares
Per ShareAmount
Dollars Shares
Per ShareAmount
Net income $
73,570
$ 3,789 Noncontrolling interests
(831
) (559 ) Preferred dividends (9,678 ) (9,678 ) Preferred
distributions - consolidated joint venture (348 ) —
Net income (loss) attributable to FelCor common
stockholders
62,713
(6,448 ) Less: Dividends declared on unvested restricted stock (2 )
— Less: Undistributed earnings allocated to unvested restricted
stock
(48
) —
Basic earnings per share data
62,663
124,168 $
0.50
(6,448 ) 123,817 $ (0.05 ) Restricted stock units —
1,358
— — — —
Diluted
earnings per share data
62,663
125,526
0.50
(6,448 ) 123,817 (0.05 ) Depreciation and amortization 28,523
—
0.23 29,820 — 0.24 Depreciation, discontinued operations and
unconsolidated entities 1,021 — 0.01 3,765 — 0.03 Gain on sale of
hotels, net of noncontrolling interests in other partnerships
(28,410 ) — (0.23 ) (10,958 ) — (0.09 ) Gain on sale of investment
in unconsolidated entities, net (30,184 ) — (0.24 ) — — —
Gain from remeasurement of unconsolidated
entities
(20,733 ) — (0.17 ) — — — Other gains, net — — — (21 ) — — Other
gains, discontinued operations — — — (57 ) — — Noncontrolling
interests in FelCor LP
185
613 — (32 ) 618 — Dividends declared on unvested restricted stock 2
— — — — — Undistributed earnings allocated to unvested restricted
stock
48
— — — — — Conversion of unvested restricted stock and units
— 26 — — 983 —
FFO
13,115
126,165
0.10
16,069 125,418 0.13 Debt extinguishment 4,566 — 0.04 — — — Debt
extinguishment, unconsolidated entities 155 — — — — —
Contract dispute contingency
5,850
—
0.05
—
—
—
Severance costs 426 — — 106 — — Conversion expenses — — — (81 ) — —
Variable stock compensation 201 — — 151 — — Pre-opening costs, net
of noncontrolling interests 2,346 — 0.02
814 — 0.01
Adjusted FFO $
26,659
126,165
$ 0.21 $ 17,059 125,418 $ 0.14
Reconciliation of Net Income (Loss) to FFO and Adjusted
FFO
(in thousands, except per share data)
Nine Months Ended September 30, 2014
2013 Dollars Shares
Per ShareAmount
Dollars Shares
Per ShareAmount
Net income (loss) $
83,689
$ (45,611 ) Noncontrolling interests
(965
) 3,973 Preferred distributions - consolidated joint venture (870 )
— Preferred dividends (29,034 ) (29,034 )
Net income (loss) attributable to
FelCor common stockholders
52,820
(70,672 ) Less: Dividends declared on unvested restricted stock (5
) —
Less: Undistributed earnings allocated to
unvested restricted stock
(18
) —
Basic earnings per share data
52,797
124,159 $
0.43
(70,672 ) 123,815 $ (0.57 ) Restricted stock units —
1,130
(0.01
)
— — —
Diluted earnings per share
data
52,797
125,289
0.42
(70,672 ) 123,815 (0.57 ) Depreciation and amortization 87,206
—
0.70
89,473
— 0.73 Depreciation, discontinued operations and unconsolidated
entities 6,395 — 0.05 12,734 — 0.10 Gain on sale of investment in
unconsolidated entities, net (30,184 ) —
(0.24
)
— — —
Gain from remeasurement of unconsolidated
entities
(20,733 ) — (0.17 ) — — — Other gains, net (100 ) — — (21 ) — —
Other gains, discontinued operations — — — (57 ) — — Impairment
loss, net of noncontrolling 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 (49,771 ) — (0.40 ) (18,217 ) — (0.15 )
Noncontrolling interests in FelCor LP
135
615 — (352 ) 620 (0.01 ) Dividends declared on unvested restricted
stock 5 — — — — — Conversion of unvested restricted stock and units
18
12 — — 672 —
FFO
45,768
125,916
0.36
36,535 125,107 0.29 Acquisition costs — — — 23 — — Debt
extinguishment, including discontinued operations 4,843 — 0.04 — —
— Debt extinguishment, unconsolidated entities 155 — — — — —
Contract dispute contingency
5,850
—
0.05
—
—
—
Severance costs 829 — 0.01 2,896 — 0.02 Conversion expenses — — —
1,134 — 0.01 Variable stock compensation 1,620 — 0.01 374 — —
Pre-opening costs, net of noncontrolling interests 4,605
— 0.04 1,376 — 0.02
Adjusted FFO $ 63,670
125,916
$ 0.51 $ 42,338 125,107 $ 0.34
Reconciliation of Net Income (Loss) to
EBITDA, Adjusted EBITDA and Same-Store Adjusted EBITDA
(in thousands)
Three Months Ended
Nine Months Ended
September 30, September 30, 2014
2013 2014 2013 Net income (loss)
$
73,570
$ 3,789 $
83,689
$ (45,611 ) Depreciation and amortization 28,523 29,820 87,206
89,473 Depreciation, discontinued operations and unconsolidated
entities 1,021 3,765 6,395 12,734 Interest expense 21,935 25,811
71,685 78,517 Interest expense, discontinued operations and
unconsolidated entities 290 881 1,681 2,628 Noncontrolling
interests in other partnerships (646 ) (591 )
(830 ) 3,621
EBITDA
124,693
63,475
249,826
141,362 Impairment loss, net of noncontrolling interests in other
partnerships — — — 20,382 Impairment loss, discontinued operations
— — — 3,265 Debt extinguishment, including discontinued operations
4,566 — 4,843 — Debt extinguishment, unconsolidated entities 155 —
155 — Acquisition costs — — — 23 Gain on sale of hotels, net of
noncontrolling interests in other partnerships (28,410 ) (10,958 )
(49,771 ) (18,217 ) Gain on sale of investment in unconsolidated
entities, net (30,184 ) — (30,184 ) —
Gain from remeasurement of unconsolidated
entities
(20,733 ) — (20,733 ) — Other gains, net — (21 ) (100 ) (21 ) Other
gains, discontinued operations — (57 )
—
(57 )
Contract dispute contingency
5,850
—
5,850
—
Amortization of fixed stock and directors’ compensation 2,198 1,397
4,490 4,547 Severance costs 426 106 829 2,896 Conversion expenses —
(81 ) — 1,134 Variable stock compensation 201 151 1,620 374
Pre-opening costs, net of noncontrolling interests 2,346
814 4,605 1,376
Adjusted EBITDA 61,108 54,826 171,430 157,064 Adjusted
EBITDA from hotels, sold and held for sale (1,090 ) (4,891 ) (6,445
) (18,230 ) Adjusted EBITDA from joint venture exchange (43
) (741 ) 212 (330 )
Same-store
Adjusted EBITDA $ 59,975 $ 49,194 $ 165,197
$ 138,504
Hotel EBITDA
and Hotel EBITDA Margin
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30, 2014
2013 2014 2013 Same-store operating
revenue: Room $175,823 $ 156,479 $ 498,380 $ 453,306 Food and
beverage 32,543 29,047 109,118 98,946 Other operating departments
11,858 11,072 34,160
32,603
Same-store operating revenue 220,224 196,598
641,658 584,855
Same-store operating expense: Room 45,251
40,765 129,527 119,794 Food and beverage 27,093 24,967 84,560
80,072 Other operating departments 5,527 5,112 16,267 15,388 Other
property related costs 55,403 50,976 162,315 152,606 Management and
franchise fees 9,122 7,646 25,651 23,006 Taxes, insurance and lease
expense 14,182 14,142 41,639
39,927
Same-store operating expense 156,578
143,608 459,959 430,793
Hotel EBITDA $63,646 $ 52,990 $ 181,699
$ 154,062
Hotel EBITDA Margin
28.9
%
27.0 % 28.3 % 26.3 %
Three Months Ended
Nine Months Ended September 30, September 30,
2014 2013 2014 2013 Hotel EBITDA -
Comparable core (31) $ 45,936 $ 37,825 $ 130,530 $ 110,365 Hotel
EBITDA - Non-strategic (8)(a) 5,376 5,168
18,898 17,416
Hotel EBITDA -
Comparable (39) 51,312 42,993 149,428
127,781
Hotel EBITDA - Wyndham (8)
12,334 9,997 32,271
26,281
Hotel EBITDA - Same-store (47)
$ 63,646 $ 52,990
$ 181,699 $ 154,062
Hotel EBITDA Margin - Comparable core (31) 27.9 % 25.2 %
27.1 % 24.9 % Hotel EBITDA Margin - Non-strategic (8)(a) 25.9 %
25.6 % 28.7 % 27.8 %
Hotel EBITDA Margin - Comparable (39)
27.7 % 25.3 % 27.3 %
25.3 % Hotel EBITDA Margin - Wyndham (8) 35.6 % 37.8
% 34.1 % 33.1 %
Hotel EBITDA Margin - Same-store
(47)
28.9 % 27.0 % 28.3 %
26.3 % (a) Excludes two hotels held for sale
as of September 30, 2014 (one sold in early October and one is
expected to sell today).
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 Nine Months Ended
September 30, September 30, 2014
2013 2014 2013 Same-store operating
revenue $ 220,224 $ 196,598 $ 641,658 $ 584,855 Other revenue 1,607
1,584 3,170 3,034 Revenue from hotels, disposed and held for
sale(a) 12,225 32,247 70,092
91,333
Total revenue 234,056 230,429
714,920 679,222 Same-store operating expense 156,578 143,608
459,959 430,793 Consolidated hotel lease expense(b) 5,537 11,849
29,224 33,572 Unconsolidated taxes, insurance and lease expense
(916 ) (1,800 ) (4,867 ) (5,737 ) Corporate expenses 6,442 5,817
21,914 20,343 Depreciation and amortization 28,523 29,820 87,206
89,473 Impairment loss — — — 24,441 Conversion expenses — (81 ) —
1,134 Expenses from hotels, disposed and held for sale(a) 9,736
23,597 54,058 68,554 Other expenses
9,746
2,102
13,874
6,838
Total operating expense
215,646
214,912
661,368
669,411
Operating income $
18,410
$ 15,517 $
53,552
$ 9,811 (a) During the nine months ended
September 30, 2014, we disposed of ten hotels, which were not held
for sale at December 31, 2013. Subsequent to September 30, 2014, we
sold one hotel for $7.8 million, and we have agreed to sell one
hotel for $37.0 million which is expected to close today. These
hotels are considered held for sale on our September 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 nine months ended September 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
ShareAmount(a)
Dollars
Per
ShareAmount(a)
Net income attributable to FelCor(b) $
74.5
$
76.5
Preferred dividends (39.0 ) (39.0 )
Net income
attributable to FelCor common stockholders
35.5
$
0.29
37.5
$
0.31
Gains on hotel transactions (100.0 ) (100.0 ) Depreciation(c)
122.5 122.5
FFO $
58.0
$
0.46
$
60.0
$
0.48
Contract dispute contingency
6.0
6.0
Pre-opening costs 4.6 4.6 Variable stock compensation 1.6 1.6
Severance costs 0.8 0.8 Early extinguishment of debt 5.0
5.0
Adjusted FFO $ 76.0 $ 0.60 $
78.0 $ 0.62
Net income attributable to
FelCor(b) $
74.5
$
76.5
Depreciation(c) 122.5 122.5 Interest expense(c) 95.5 95.5
Amortization expense 1.0 1.0
EBITDA $
293.5
$
295.5
Gains on hotel transactions (100.0 ) (100.0 )
Contract dispute contingency
6.0
6.0
Early extinguishment of debt 5.0 5.0 Amortization of stock
compensation 6.0 6.0 Pre-opening costs 4.6 4.6 Variable stock
compensation 1.6 1.6 Severance costs 0.8 0.8
Adjusted EBITDA $ 217.5 $ 219.5
(a) Weighted average shares are 125.8 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, which is included in corporate expenses and is not
separately stated on our statements of operations. Excluding
amortization of our fixed stock and directors’ compensation
maintains consistency 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
We 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. As we present them, these non-GAAP financial measures
may not be comparable to similar non-GAAP financial measures as
presented 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. We
compensate 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. We strongly encourage
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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