- Same-store Adjusted EBITDA Increased
24%
- Common Stock Dividend
Doubled
- The Knickerbocker Opened this
Month
FelCor Lodging Trust Incorporated (NYSE: FCH) reported operating
results for the fourth quarter and year ended December 31,
2014.
Fourth Quarter Highlights
- Same-store RevPAR increased 11.2%;
comparable core RevPAR increased 9.3%.
- Adjusted FFO per share improved to
$0.15, a 200% increase from the same quarter in 2013.
- Adjusted EBITDA increased $6.2 million
to $49.4 million; same-store Adjusted EBITDA increased $9.3
million, or 23.8%, to $48.4 million.
- Net income per share increased $0.24
from the same quarter in 2013.
- Quarterly common dividend was doubled
to $0.04 per share.
- Two non-strategic hotels were sold for
gross proceeds of $46.4 million in the quarter and two
additional non-strategic hotels were sold in February for total
gross proceeds of $63.6 million; four other non-strategic hotels
are currently under contract or in negotiations to be sold (one
with a non-refundable deposit).
“I am very pleased with our performance in the fourth quarter.
Same-store Adjusted EBITDA and RevPAR increased significantly and
exceeded our expectations. This performance reflects our progress
toward building a superior portfolio and enhancing returns on our
investments, which continues to drive our ability to outperform the
industry,” said Richard A. Smith, President and Chief Executive
Officer of FelCor.
Mr. Smith added, “We have only six remaining non-strategic
hotels, which we will sell shortly, thus completing our portfolio
repositioning plan. We expect our high-quality and well-positioned
portfolio to continue outperforming the industry. That
outperformance, combined with the ongoing ramp-up of the Wyndham
portfolio, the opening and ramp-up of the Knickerbocker and the
significant reduction in interest expense, will drive incremental
shareholder value well into the future. In addition, we are
positioned to pursue future opportunities that build upon our
substantial accomplishments.”
Hotel Results
Fourth Quarter 2014 2013
Change Comparable hotels (37) RevPAR $ 124.98 $
114.68 9.0 % Total hotel revenue, in millions $ 168.0 $ 154.9 8.4 %
Hotel EBITDA, in millions $ 43.1 $ 36.1 19.2 % Hotel EBITDA margin
25.7 % 23.3 % 232 bps
Wyndham Hotels (8) RevPAR $
109.29 $ 88.30 23.8 % Total hotel revenue, in millions $ 30.8 $
24.5 25.4 % Hotel EBITDA, in millions $ 10.9 $ 8.8 24.0 % Hotel
EBITDA margin 35.3 % 35.7 % (37) bps
Same-store hotels
(45) RevPAR $ 122.04 $ 109.79 11.2 % Total hotel revenue, in
millions $ 198.8 $ 179.4 10.8 % Hotel EBITDA, in millions $ 54.0 $
44.9 20.2 % Hotel EBITDA margin 27.1 % 25.0 % 212 bps
RevPAR for our 31 comparable core hotels (our 39 core hotels
excluding the eight Wyndham hotels that were converted from Holiday
Inn on March 1, 2013) increased 9.3% compared to the same
period in 2013.
RevPAR for our 37 comparable hotels (31 comparable core hotels
plus six non-strategic hotels) was $124.98, a 9.0% increase
compared to the same period in 2013. The change reflects a
5.2% increase in ADR to $170.73 and a 3.6% increase in
occupancy to 73.2%. Hotel EBITDA for our 37 comparable hotels was
$43.1 million, a 19.2% increase, and Hotel EBITDA margin was 25.7%
during the quarter, a 232 basis point increase.
RevPAR for the eight Wyndham hotels increased 23.8%, compared to
the same period in 2013. We expect our Wyndham hotels’ revenues and
EBITDA will continue to grow meaningfully during 2015, as
transitional disruption subsides. Wyndham Worldwide Corporation has
guaranteed minimum annual NOI for these hotels over the ten-year
term of the management agreements. We recorded $3 million of
the guaranty for the three months ended December 31, 2013, compared
to $748,000 for the three months ended December 31, 2014 (which
affected margin comparisons for the eight hotels). For the year
ended December 31, 2014, Wyndham paid $1.3 million under the
guaranty compared to $8 million for 2013, as the hotels’ operating
performance improved significantly.
RevPAR for our 45 same-store hotels (37 comparable hotels plus
our Wyndham hotels) was $122.04, an 11.2% increase compared to the
same period in 2013. The change reflects a 5.6% increase in ADR to
$169.07 and a 5.3% increase in occupancy to 72.2%.
See page 15 for hotel portfolio composition and pages 16-18 and
22-23 for more detailed hotel portfolio operating data.
Fourth Quarter Operating
Results
Fourth Quarter $ in millions, except for per share
information
2014 2013 Change
Same-store Adjusted EBITDA $ 48.4 $ 39.1 23.8 % Adjusted EBITDA $
49.4 $ 43.2 14.3 % Adjusted FFO per share $ 0.15 $ 0.05 $ 0.10 Net
income (loss) per share $ 0.00 $ (0.24 ) $ 0.24
Same-store Adjusted EBITDA was $48.4 million, a 23.8% increase
from the same period in 2013. Adjusted EBITDA (which includes
Adjusted EBITDA from sold hotels) was $49.4 million, a 14.3%
increase for the same period in 2013.
Adjusted FFO was $18.5 million ($0.15 per share),
compared to $6.3 million ($0.05 per share) for the same
period in 2013. Net income attributable to common stockholders was
$567,000 ($0.00 per share) in 2014, compared to a net loss of
$29.5 million ($0.24 per share) for the same period in 2013.
Net income in 2014 included a $15.6 million net gain on the
sale of our consolidated hotels. Net loss in 2013 included a
$1.1 million impairment charge offset by a $373,000 net gain
on the sale of our consolidated hotels.
Full Year Operating Results
RevPAR for 45 same-store hotels increased 10.5% in 2014 to
$128.82 compared to 2013. RevPAR for 37 comparable hotels
(excluding our eight Wyndham hotels) increased 8.9% in 2014 to
$132.32, compared to 2013. The change reflects a 6.3% increase in
ADR to $172.17 and a 2.5% increase in occupancy to 76.9%. Total
revenue for the 37 comparable hotels increased 8.4% to
$693.5 million from 2013. RevPAR for our 31 comparable core
hotels (excluding our eight Wyndham and six remaining non-strategic
hotels) increased 9.2%, while RevPAR for our six non-strategic
hotels increased 5.8%.
Adjusted EBITDA (which includes Adjusted EBITDA from sold
hotels) increased 10.3% in 2014 to $220.9 million. Same-store
Adjusted EBITDA increased 20.6% in 2014 to $209.6 million from
2013.
Adjusted FFO was $82.2 million ($0.65 per share) compared
to $48.7 million ($0.39 per share) in 2013. Net income
attributable to common stockholders was $53.4 million
($0.43 per share) in 2014, compared to a net loss of
$100.2 million ($0.81 per share) in 2013. Net income in 2014
included a $66.7 million net gain on the sale of our
consolidated hotels, 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 $28.8 million impairment loss,
partially offset by a $19.4 million net gain on the sale of
our consolidated hotels.
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
Since December 2010, we have sold 34 non-strategic hotels for
total gross proceeds of $698 million (includes our pro rata
share) as part of our portfolio repositioning program. We expect to
complete this program in the next few months.
During 2014, we moved closer to completing the program by
selling eight hotels, including two in the fourth quarter (the
395-room Sheraton-Atlanta Airport and the 208-room DoubleTree
Suites-Charlotte SouthPark), for total gross proceeds of
$169.0 million.
Earlier this month, we sold two hotels (the 225-room Embassy
Suites-Raleigh and the 536-room Westin-Dallas Park Central) for
total gross proceeds of $63.6 million.
We have six non-strategic hotels remaining to be sold, of which
we have agreed to sell three (the 261-room Embassy Suites-San
Antonio Airport, the 216-room Embassy Suites-San Antonio Northwest,
and the 288-room Holiday Inn-Orlando Airport) for total gross
proceeds of $62 million (we hold a non-refundable deposit for
one of these hotels). We are negotiating a contract to sell one
more hotel. We began marketing the final two hotels last month.
Capital Expenditures
During the quarter, we invested $18.6 million in capital
improvements at our hotels (excluding the Knickerbocker). During
2015, we plan to invest approximately $45 million in capital
improvements and renovations, concentrated at five hotels, as part
of our long-term capital plan. Please see page 13 of this release
for more detail on renovations.
Knickerbocker
The Knickerbocker Hotel (www.TheKnickerbocker.com), located in
the heart of Times Square on the corner of 42nd Street and Broadway
in New York City, opened on February 12, 2015.
The newly redeveloped hotel boasts 330 spacious guest rooms,
including 31 suites, a state-of-the-art fitness center, a
2,200-square-foot event space, upscale food and dining options, and
a spectacular 7,500-square-foot rooftop bar and terrace with
unrivaled views of New York City’s skyline. The 4+ star luxury
property is a member of The Leading Hotels of the World.
As of December 31, 2014, we have invested
$138.0 million (excluding initial acquisition costs and
capitalized interest) to redevelop the property.
We expect the Knickerbocker will generate approximately $10
million of EBITDA during 2015.
Balance Sheet
At December 31, 2014, we had $1.6 billion of
consolidated debt bearing a 5.4% weighted-average interest rate and
a seven-year weighted-average maturity. We had $47.1 million
of cash and cash equivalents and $20.5 million of restricted
cash, of which $6.3 million secured our Knickerbocker
construction loan.
We will use proceeds from selling the remaining non-strategic
hotels at December 31, 2014 (six current, plus two sold this
month) to repay $69 million of non-cross-collateralized debt
encumbering five of these hotels, with the remaining proceeds
applied to our $140 million term loan and borrowings under our line
of credit.
Common Dividend
During the fourth quarter, we doubled our quarterly dividend to
$0.04 per share. Future quarterly common stock dividends will be
determined by our Board of Directors based on funds available for
distribution, reinvestment opportunities within our portfolio and
taxable income, among other things.
Outlook
Our 2015 outlook reflects continuing strong lodging industry
fundamentals. We expect continued robust demand growth reflecting
strength in both the leisure and corporate segments. We expect
occupancy will increase, as demand growth broadly outpaces new
supply. Average occupancy for the U.S. is expected to reach a new
record in early 2015, allowing for strong ADR growth. Our projected
RevPAR growth exceeds projected overall industry RevPAR growth
because of our high-quality and diverse portfolio, overweighted to
higher growth markets with favorable fundamentals.
Our outlook assumes we sell eight remaining non-strategic hotels
during 2015 (including two already sold in February). The low end
of our guidance assumes that all of the remaining six non-strategic
hotels are sold in the first quarter. The high end of our guidance
assumes that one of the remaining six is sold in the first quarter,
three are sold in the second quarter and two are sold in the third
quarter. Our outlook assumes EBITDA for the Wyndham hotels equals
the amount guaranteed by Wyndham.
During 2015, we expect:
- RevPAR for same-store hotels will
increase 8.0 - 9.0%;
- Adjusted EBITDA will be $234.5 million
- $246.5 million;
- Adjusted FFO per share will be $0.80 -
$0.88;
- Net income attributable to FelCor will
be $19.2 million - $28.6 million; and
- Interest expense, including our pro
rata share from joint ventures, will be $86.0 million -
$87.8 million.
The following table reconciles our Adjusted EBITDA outlook (in
millions):
Low Middle High
2014 Same-store Adjusted EBITDA (45 hotels) $ 209.6 $
209.6 $ 209.6 EBITDA from remaining asset sales (6 hotels)
(16.1 ) (16.1 ) (16.1 )
2014
Core Adjusted EBITDA (39 hotels) $ 193.5 $ 193.5 $ 193.5 2015
Growth (including Knickerbocker) 36.0
39.5 43.0
2015 Core Adjusted EBITDA
(40 hotels) $ 229.5 $ 233.0 $ 236.5 2015 EBITDA of
non-strategic hotels(a) 5.0 7.0
10.0
2015 Adjusted EBITDA $ 234.5
$ 240.0 $ 246.5
(a)
Forecasted EBITDA for the eight non-strategic hotels from
January 1, 2015 through the actual or assumed sale dates.
About FelCor
FelCor, a real estate investment trust, owns a diversified
portfolio of primarily upper-upscale and luxury hotels that are
located in major and resort markets. FelCor partners with leading
hotel companies to operate its hotels, which are flagged under
globally renowned brands and premier independent hotels. Additional
information can be found on the Company’s website at www.felcor.com.
We invite you to listen to our fourth quarter earnings
Conference Call on Thursday, February 26, 2015 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 months and year ended December 31, 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 - 2015 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 Year Ended December
31, December 31, 2014 2013
2014 2013 Revenues: Hotel operating revenue:
Room $ 157,177 $ 163,525 $ 713,213 $ 692,016 Food and beverage
38,064 39,011 157,607 151,233 Other operating departments 10,990
11,282 47,161 46,757 Other revenue 436 396
3,606 3,430 Total revenues
206,667 214,214 921,587
893,436 Expenses: Hotel departmental expenses: Room
42,799 44,734 188,465 184,840 Food and beverage 28,281 30,043
121,201 120,287 Other operating departments 4,914 5,179 22,210
21,954 Other property-related costs 54,239 58,159 238,170 238,115
Management and franchise fees 7,262 8,487 36,067 35,735 Taxes,
insurance and lease expense 15,170 23,340 84,926 96,194 Corporate
expenses 7,671 6,653 29,585 26,996 Depreciation and amortization
28,613 30,149 115,819 119,624 Impairment loss — — — 24,441
Conversion expenses — — — 1,134 Other expenses 4,078
1,913 17,952 8,749 Total
operating expenses 193,027 208,657
854,395 878,069 Operating income 13,640
5,557 67,192 15,367 Interest expense, net (19,051 ) (25,330 )
(90,695 ) (103,787 ) Debt extinguishment (7 ) — (4,770 ) — Gain on
sale of investment in unconsolidated entities, net (8 ) — 30,176 —
Gain from remeasurement of unconsolidated entities 4 — 20,737 —
Other gains, net — 20 100
41 Income (loss) before equity in income from
unconsolidated entities (5,422 ) (19,753 ) 22,740 (88,379 ) Equity
in income from unconsolidated entities 254 491
5,010 4,586 Income (loss) from
continuing operations (5,168 ) (19,262 ) 27,750 (83,793 ) Income
(loss) from discontinued operations (492 ) (910 )
(360 ) 18,010 Income (loss) before gain on
sale of property (5,660 ) (20,172 ) 27,390 (65,783 ) Gain on sale
of property, net 16,123 — 66,762
— Net income (loss) 10,463 (20,172 ) 94,152
(65,783 ) Net loss (income) attributable to noncontrolling
interests in other partnerships 133 161 (697 ) 3,782 Net loss
(income) attributable to redeemable noncontrolling interests in
FelCor LP (2 ) 145 (137 ) 497 Preferred distributions -
consolidated joint venture (349 ) —
(1,219 ) — Net income (loss) attributable to FelCor
10,245 (19,866 ) 92,099 (61,504 ) Preferred dividends (9,678
) (9,679 ) (38,712 ) (38,713 ) Net income
(loss) attributable to FelCor common stockholders $ 567 $
(29,545 ) $ 53,387 $ (100,217 ) Basic and diluted per common
share data: Income (loss) from continuing operations $ 0.01
$ (0.23 ) $ 0.43 $ (0.95 ) Net income (loss) $ — $
(0.24 ) $ 0.43 $ (0.81 ) Basic weighted average common
shares outstanding 124,188 123,827
124,158 123,818 Diluted weighted
average common shares outstanding 125,146
123,827 124,892 123,818
Consolidated Balance Sheets
(in thousands)
December 31, December 31, 2014
2013 Assets Investment in hotels, net of accumulated
depreciation of $850,687 and $929,801 at December 31, 2014 and
2013, respectively $ 1,599,791 $ 1,653,267 Hotel development
297,466 216,747 Investment in unconsolidated entities 15,095 46,943
Hotels held for sale 47,145 16,319 Cash and cash equivalents 47,147
45,645 Restricted cash 20,496 77,227 Accounts receivable, net of
allowance for doubtful accounts of $241 and $262 at December 31,
2014 and 2013, respectively 27,805 35,747 Deferred expenses, net of
accumulated amortization of $17,111 and $20,362 at December 31,
2014 and 2013, respectively 25,827 29,325 Other assets
23,886 23,060 Total assets $ 2,104,658
$ 2,144,280
Liabilities and Equity Debt, net of
discount of $4,714 at December 31, 2013 $ 1,585,867 $ 1,663,226
Distributions payable 13,827 11,047 Accrued expenses and other
liabilities 135,481 150,738 Total
liabilities 1,735,175 1,825,011
Commitments and contingencies Redeemable noncontrolling interests
in FelCor LP, 611 and 618 units issued and outstanding at December
31, 2014 and 2013, respectively 6,616 5,039
Equity: Preferred stock, $0.01 par value, 20,000 shares
authorized: Series A Cumulative Convertible Preferred Stock, 12,879
and 12,880 shares, liquidation value of $321,987 and $322,011,
issued and outstanding at December 31, 2014 and 2013, respectively
309,337 309,362 Series C Cumulative Redeemable Preferred Stock, 68
shares, liquidation value of $169,950, issued and outstanding at
December 31, 2014 and 2013 169,412 169,412 Common stock, $0.01 par
value, 200,000 shares authorized; 124,605 and 124,051 shares issued
and outstanding at December 31, 2014 and 2013, respectively 1,246
1,240 Additional paid-in capital 2,353,666 2,354,328 Accumulated
other comprehensive income — 24,937 Accumulated deficit
(2,530,671 ) (2,568,350 ) Total FelCor stockholders’ equity
302,990 290,929 Noncontrolling interests in other partnerships
18,435 23,301 Preferred equity in consolidated joint venture,
liquidation value of $42,094 41,442 —
Total equity 362,867 314,230 Total
liabilities and equity $ 2,104,658 $ 2,144,280
Consolidated Debt
Summary
(dollars in thousands)
Encumbered Interest December 31,
December 31, Hotels Rate (%) Maturity
Date 2014 2013 Line of credit 8
LIBOR + 3.375 June 2016(a) $ 111,500 $ 88,000 Term loan 3 LIBOR +
2.50 July 2017(b) 140,000 — Mortgage debt 4 LIBOR + 3.00 March 2017
64,000 — Mortgage debt(c) 4 4.95 October 2022 124,278 126,220
Mortgage debt 1 4.94 October 2022 31,228 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:(d) Construction
tranche — LIBOR + 4.00 May 2016 58,562 — Cash collateralized
tranche — LIBOR + 1.25 May 2016 6,299 64,861 Retired debt — — —
— 302,431
Total 35 $ 1,585,867 $ 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 can be extended up to two years, subject to satisfying certain
conditions. (c) This debt is comprised of separate
non-cross-collateralized loans each secured by a mortgage of a
single hotel. (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 $58.6 million of the cash
collateral to fund construction costs, leaving $6.3 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 December 31, 2014 Debt
Balance Encumbered Hotels Line of credit $ 112
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 Year Ended December
31, December 31, 2014 2013
2014 2013 Improvements and additions to
majority-owned hotels $ 18,117 $ 26,901 $ 83,664 $ 101,357
Partners’ pro rata share of additions to consolidated joint venture
hotels (27 ) (88 ) (308 ) (521 ) Pro rata share of additions to
unconsolidated hotels 528 369
2,412 1,470 Total additions to hotels(a) $
18,618 $ 27,182 $ 85,768 $ 102,306
(a) Includes capitalized interest, property taxes, property
insurance, ground leases and certain employee costs.
Hotels Under Renovation During 2014 –
2015
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
New Orleans - WYN(a)
guestrooms, public areas May-2014 Oct-2014 Dallas Love Field - ES
guestrooms, F&B Jun-2014 Sep-2014
Ft. Lauderdale - ES(c)
guestrooms July-2014 Oct-2014 Myrtle Beach - HLT meeting space, new
F&B Dec-2014 Feb-2015
LAX - ES(d)
public areas, F&B, meeting space Feb-2014 May-2015 Nashville -
HI public areas, F&B, rooms Aug-2014 June-2015 New Orleans -
French Quarter Chateau Lemoyne - HI guestrooms, public areas,
exterior May-2015 Dec-2015 Vinoy Resort & Golf Club - REN
meeting space, F&B, golf shop Nov-2015 Jan-2016 (a)
Repositioning from Holiday Inn to Wyndham. (b) Public areas
renovation completed in May 2013. (c) Public areas renovation
completed in November 2013. (d) Guestrooms renovation completed in
February 2013. Public areas and F&B completed in May 2014.
Supplemental Financial Data
(in thousands, except per share data)
December 31, December 31,
Total Enterprise
Value
2014 2013 Common shares outstanding 124,605 124,051
Units outstanding 611 618 Combined
shares and units outstanding 125,216 124,669 Common stock price $
10.82 $ 8.16
Market capitalization $ 1,354,837
$ 1,017,299 Series A preferred stock(a) 309,337 309,362 Series C
preferred stock(a) 169,412 169,412 Preferred equity - Knickerbocker
joint venture, net(b) 39,370 — Consolidated debt(b) 1,585,867
1,663,226 Noncontrolling interests of consolidated debt (2,928 )
(2,719 ) Pro rata share of unconsolidated debt 17,096 73,179 Hotel
development (297,466 ) (216,747 ) Cash, cash equivalents and
restricted cash(c) (67,643 ) (122,872 )
Total
enterprise value (TEV) $ 3,107,882 $ 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 $6.3 million of cash fully securing $6.3 million of
outstanding debt assumed when we purchased the Knickerbocker Hotel.
Hotel Portfolio Composition
The following table illustrates the
distribution of same-store hotels.
2014 Hotel
2014 Hotel
Operating Revenue
EBITDA
Brand
Hotels Rooms (in thousands)
(in thousands)(a)
Embassy Suites Hotels 18 4,982 $ 282,866 $ 95,000 Wyndham and
Wyndham Grand(b) 8 2,528 125,354 43,126 Renaissance and Marriott 3
1,321 128,770 26,089 DoubleTree by Hilton and Hilton 3 802 45,383
15,484 Sheraton 2 673 39,639 10,623 Fairmont 1 383 53,451 10,011
Holiday Inn 2 968 51,511 8,967 Morgans and Royalton 2 285
33,895 3,314
Core hotels 39 11,942 760,869 212,614
Non-strategic hotels(c) 6 1,561 58,028 17,837
Same-store hotels 45 13,503 $ 818,897 $ 230,451
Market
San Francisco area 5 1,903 $ 139,692 $ 39,470 Boston 3 916 85,670
21,834 South Florida 3 923 55,561 17,009 Los Angeles area 2 481
28,696 12,406 Myrtle Beach 2 640 41,149 12,219 Philadelphia 2 728
38,680 9,631 Tampa 1 361 49,358 9,302 New York area 3 546 48,456
7,259 Austin 1 188 13,935 6,177 Atlanta 1 316 13,899 5,701 Other
markets 16 4,940 245,773 71,606
Core hotels 39
11,942 760,869 212,614 Non-strategic hotels(c) 6 1,561
58,028 17,837
Same-store hotels 45 13,503 $ 818,897 $
230,451
Location
Urban 17 5,310 $ 360,177 $ 97,594 Resort 9 2,733 203,370 51,684
Airport 8 2,621 136,144 43,208 Suburban 5 1,278 61,178
20,128
Core hotels 39 11,942 760,869 212,614
Non-strategic hotels(c) 6 1,561 58,028 17,837
Same-store hotels 45 13,503 $ 818,897 $ 230,451 (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 December 31, 2014, both of which were sold in
February 2015.
The following tables set forth occupancy, ADR and RevPAR for the
three months and year ended December 31, 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
Year Ended December 31, December 31,
2014 2013 %Variance 2014
2013 %Variance Embassy Suites Hotels 76.2 73.4 3.8
79.0 76.7 3.0 Renaissance and Marriott 66.2 65.8 0.5 72.0 70.2 2.6
DoubleTree by Hilton and Hilton 65.0 59.1 9.9 73.6 68.3 7.7
Sheraton 66.2 63.1 4.9 69.4 68.0 2.0 Fairmont 70.1 70.3 (0.3 ) 74.4
74.2 0.4 Holiday Inn 74.1 69.8 6.2 77.6 78.0 (0.5 ) Morgans and
Royalton 91.2 90.9 0.3 87.9 87.6 0.4
Comparable core hotels
(31) 73.1 70.4 3.8 76.8 74.8 2.7 Non-strategic hotels (6)(a)
73.7 72.2 2.1 77.0 76.2 1.1
Comparable hotels (37) 73.2 70.7
3.6 76.9 75.0 2.5 Wyndham and Wyndham Grand(b) 67.8 59.1 14.6 71.8
65.7 9.3
Same-store hotels (45) 72.2 68.5 5.3 75.9 73.3 3.6
ADR ($) Three Months Ended Year Ended
December 31, December 31, 2014 2013
%Variance 2014 2013 %Variance Embassy
Suites Hotels 159.92 150.27 6.4 164.11 153.17 7.1 Renaissance and
Marriott 221.53 208.65 6.2 223.51 209.58 6.6 DoubleTree by Hilton
and Hilton 146.71 138.95 5.6 155.15 148.99 4.1 Sheraton 147.31
146.73 0.4 146.75 145.71 0.7 Fairmont 322.99 300.62 7.4 307.77
285.06 8.0 Holiday Inn 163.29 143.08 14.1 164.21 144.29 13.8
Morgans and Royalton 340.38 358.54 (5.1 ) 308.05 315.50 (2.4 )
Comparable core hotels (31) 179.45 170.40 5.3 180.73 169.91
6.4 Non-strategic hotels (6)(a) 118.56 114.11 3.9 120.68 115.29 4.7
Comparable hotels (37) 170.73 162.22 5.2 172.17 162.03 6.3
Wyndham and Wyndham Grand(b) 161.26 149.34 8.0 158.35 144.37 9.7
Same-store hotels (45) 169.07 160.16 5.6 169.72 159.07 6.7
RevPAR ($) Three Months Ended Year Ended
December 31, December 31, 2014 2013
%Variance 2014 2013 %Variance Embassy
Suites Hotels 121.87 110.36 10.4 129.71 117.55 10.4 Renaissance and
Marriott 146.60 137.37 6.7 160.92 147.11 9.4 DoubleTree by Hilton
and Hilton 95.32 82.16 16.0 114.12 101.71 12.2 Sheraton 97.49 92.54
5.4 101.78 99.09 2.7 Fairmont 226.48 211.36 7.2 229.14 211.41 8.4
Holiday Inn 121.07 99.94 21.1 127.41 112.52 13.2 Morgans and
Royalton 310.34 325.78 (4.7 ) 270.69 276.27 (2.0 )
Comparable
core hotels (31) 131.21 120.03 9.3 138.84 127.13 9.2
Non-strategic hotels (6)(a) 87.41 82.38 6.1 92.95 87.83 5.8
Comparable hotels (37) 124.98 114.68 9.0 132.32 121.54 8.9
Wyndham and Wyndham Grand(b) 109.29 88.30 23.8 113.63 94.79 19.9
Same-store hotels (45) 122.04 109.79 11.2 128.82 116.54 10.5
(a) Excludes two hotels held for sale as of December 31,
2014, both of which were sold in February 2015. (b) These hotels
were converted to Wyndham on March 1, 2013.
Hotel Operating Statistics by
Market
Occupancy (%) Three Months Ended
Year Ended December 31, December 31,
2014 2013 %Variance 2014
2013 %Variance San Francisco area 81.1 75.5 7.5 82.2
81.4 1.0 Boston 67.9 68.9 (1.4 ) 73.6 73.5 0.1 South Florida 81.3
78.4 3.7 83.4 81.4 2.5 Los Angeles area 67.9 76.7 (11.5 ) 80.1 82.2
(2.6 ) Myrtle Beach 53.9 47.4 13.6 66.5 62.3 6.8 Philadelphia 61.6
62.5 (1.4 ) 69.7 66.3 5.2 Tampa 80.0 78.7 1.5 81.2 80.5 0.9 New
York area 86.6 85.7 1.0 83.3 83.2 0.2 Austin 78.2 73.3 6.7 79.9
78.9 1.2 Atlanta 74.1 73.3 1.0 77.2 75.4 2.3 Other markets 69.3
66.3 4.5 73.1 69.6 5.0
Comparable core hotels (31)
73.1 70.4 3.8 76.8 74.8
2.7
ADR ($) Three Months Ended Year
Ended December 31, December 31, 2014
2013 %Variance 2014 2013
%Variance San Francisco area 209.59 194.25 7.9 210.51 187.91
12.0 Boston 266.80 247.73 7.7 253.57 234.97 7.9 South Florida
157.24 143.52 9.6 160.25 147.49 8.7 Los Angeles area 143.85 131.43
9.4 145.73 136.89 6.5 Myrtle Beach 109.47 101.86 7.5 152.64 147.36
3.6 Philadelphia 174.98 171.14 2.2 164.54 166.52 (1.2 ) Tampa
192.17 177.50 8.3 195.98 183.55 6.8 New York area 269.66 277.31
(2.8 ) 252.90 250.72 0.9 Austin 220.76 214.15 3.1 214.22 200.90 6.6
Atlanta 137.71 134.69 2.2 141.85 140.41 1.0 Other markets 145.66
139.35 4.5 150.64 143.47 5.0
Comparable core hotels (31)
179.45 170.40 5.3 180.73
169.91 6.4
RevPAR ($) Three Months
Ended Year Ended December 31, December 31,
2014 2013 %Variance 2014 2013
%Variance San Francisco area 170.02 146.58 16.0 173.02
152.91 13.2 Boston 181.20 170.57 6.2 186.57 172.68 8.0 South
Florida 127.80 112.51 13.6 133.64 120.00 11.4 Los Angeles area
97.63 100.79 (3.1 ) 116.68 112.54 3.7 Myrtle Beach 58.98 48.31 22.1
101.51 91.75 10.6 Philadelphia 107.71 106.88 0.8 114.69 110.32 4.0
Tampa 153.64 139.78 9.9 159.21 147.71 7.8 New York area 233.50
237.73 (1.8 ) 210.72 208.57 1.0 Austin 172.72 156.96 10.0 171.17
158.59 7.9 Atlanta 102.02 98.75 3.3 109.44 105.87 3.4 Other markets
100.92 92.42 9.2 110.08 99.88 10.2
Comparable core hotels
(31) 131.21 120.03 9.3
138.84 127.13 9.2
Historical Quarterly Operating
Statistics
Occupancy (%) Q1 2014 Q2 2014
Q3 2014 Q4 2014 Comparable core hotels
(31) 72.2 81.3 80.6 73.1 Non-strategic hotels (6)(a) 76.9 81.1 76.4
73.7
Comparable hotels (37) 72.9 81.3 80.0 73.2 Wyndham and
Wyndham Grand (8)(b) 62.9 77.4 78.9 67.8
Same-store hotels
(45) 71.0 80.5 79.8 72.2
ADR ($) Q1 2014
Q2 2014 Q3 2014 Q4 2014 Comparable core hotels
(31) 176.24 182.53 184.02 179.45 Non-strategic hotels (6)(a) 123.14
120.70 120.29 118.56
Comparable hotels (37) 168.27 173.76
175.37 170.73 Wyndham and Wyndham Grand (8)(b) 144.62 164.91 160.19
161.26
Same-store hotels (45) 164.35 172.17 172.56 169.07
RevPAR ($) Q1 2014 Q2 2014 Q3
2014 Q4 2014 Comparable core hotels (31) 127.25 148.39
148.38 131.21 Non-strategic hotels (6)(a) 94.72 97.86 91.91 87.41
Comparable hotels (37) 122.62 141.20 140.35 124.98 Wyndham
and Wyndham Grand (8)(b) 90.99 127.59 126.31 109.29
Same-store
hotels (45) 116.70 138.65 137.72 122.04 (a) Excludes two
hotels held for sale as of December 31, 2014, both of which were
sold in February 2015. (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 December 31, 2014
2013 Per Share Per
Share Dollars Shares Amount Dollars
Shares Amount Net income (loss) $ 10,463 $
(20,172 ) Noncontrolling interests 131 306 Preferred dividends
(9,678 ) (9,679 ) Preferred distributions - consolidated joint
venture (349 ) —
Net income (loss)
attributable to FelCor common stockholders 567 (29,545 ) Less:
Dividends declared on unvested restricted stock (3 )
—
Basic earnings per share data 564 124,188 $ —
(29,545 ) 123,827 $ (0.24 ) Restricted stock units —
958 — — — —
Diluted
earnings per share data 564 125,146 — (29,545 ) 123,827 (0.24 )
Depreciation and amortization 28,613 — 0.23 30,149 — 0.24
Depreciation, discontinued operations and unconsolidated entities
496 — — 3,263 — 0.03 Gain on sale of hotels, net of noncontrolling
interests in other partnerships (15,682 ) — (0.13 ) (373 ) — — Gain
on sale of investment in unconsolidated entities, net 8 — — — — —
Gain from remeasurement of unconsolidated entities (4 ) — — — — —
Other gains, net — — — (18 ) — — Impairment loss, discontinued
operations — — — 1,089 — 0.01 Noncontrolling interests in FelCor LP
2 611 0.01 (145 ) 617 — Dividends declared on unvested restricted
stock 3 — — — — — Conversion of unvested restricted stock and units
— 7 — — 866 —
FFO 14,000 125,764 0.11 4,420 125,310 0.04 Hurricane
and earthquake loss 348 — — — — — Debt extinguishment 7 — — — — —
Debt extinguishment, unconsolidated entities 13 — — — — — Severance
costs 99 — — 372 — — Variable stock compensation 1,103 — 0.01 590 —
— Pre-opening costs, net of noncontrolling interests 2,925
— 0.03 939 — 0.01
Adjusted FFO $ 18,495 125,764 $ 0.15 $ 6,321
125,310 $ 0.05
Reconciliation
of Net Income (Loss) to FFO and Adjusted FFO
(in thousands, except per share data)
Year Ended December 31, 2014
2013 Per Share Per
Share Dollars Shares Amount Dollars
Shares Amount Net income (loss) $ 94,152 $
(65,783 ) Noncontrolling interests (834 ) 4,279 Preferred
distributions - consolidated joint venture (1,219 ) — Preferred
dividends (38,712 ) (38,713 )
Net income (loss)
attributable to FelCor common stockholders 53,387 (100,217 )
Less: Dividends declared on unvested restricted stock (8 ) — Less:
Undistributed earnings allocated to unvested restricted stock
(20 ) —
Basic earnings per share data
53,359 124,158 $ 0.43 (100,217 ) 123,818 $ (0.81 ) Restricted stock
units — 734 — — —
—
Diluted earnings per share data 53,359 124,892 0.43
(100,217 ) 123,818 (0.81 ) Depreciation and amortization 115,819 —
0.93 119,624 — 0.97 Depreciation, discontinued operations and
unconsolidated entities 6,891 — 0.06 15,996 — 0.13 Gain on sale of
investment in unconsolidated entities, net (30,176 ) — (0.24 ) — —
— Gain from remeasurement of unconsolidated entities (20,737 ) —
(0.17 ) — — — Other gains, net (100 ) — — (37 ) — — Other gains,
discontinued operations — — — (59 ) — — Impairment loss, net of
noncontrolling interests in other partnerships — — — 20,382 — 0.16
Impairment loss, discontinued operations — — — 4,354 — 0.04 Gain on
sale of hotels, net of noncontrolling interests in other
partnerships (65,453 ) — (0.52 ) (18,590 ) — (0.15 ) Noncontrolling
interests in FelCor LP 137 614 (0.01 ) (497 ) 619 (0.01 ) Dividends
declared on unvested restricted stock 8 — — — — — Conversion of
unvested restricted stock and units 20 5 —
— 547 —
FFO 59,768
125,511 0.48 40,956 124,984 0.33 Acquisition costs — — — 23 — —
Hurricane and earthquake loss 348 — — — — — Debt extinguishment,
including discontinued operations, net of noncontrolling interests
4,850 — 0.03 — — — Debt extinguishment, unconsolidated entities 168
— — — — — Contract dispute contingency 5,850 — 0.05 — — — Severance
costs 928 — 0.01 3,268 — 0.02 Conversion expenses — — — 1,134 —
0.01 Variable stock compensation 2,723 — 0.02 963 — 0.01
Pre-opening costs, net of noncontrolling interests 7,530
— 0.06 2,314 — 0.02
Adjusted FFO $ 82,165 125,511 $ 0.65 $
48,658 124,984 $ 0.39
Reconciliation of Net Income (Loss) to
EBITDA, Adjusted EBITDA and Same-store
Adjusted EBITDA
(in thousands)
Three Months Ended Year Ended December
31, December 31, 2014 2013
2014 2013 Net income (loss) $ 10,463 $
(20,172 ) $ 94,152 $ (65,783 ) Depreciation and amortization 28,613
30,149 115,819 119,624 Depreciation, discontinued operations and
unconsolidated entities 496 3,263 6,891 15,996 Interest expense
19,058 25,349 90,743 103,865 Interest expense, discontinued
operations and unconsolidated entities 216 868 1,896 3,496
Noncontrolling interests in other partnerships 133
161 (697 ) 3,782
EBITDA
58,979 39,618 308,804 180,980 Impairment loss, net of
noncontrolling interests in other partnerships — — — 20,382
Impairment loss, discontinued operations — 1,089 — 4,354 Hurricane
and earthquake loss 348 — 348 — Debt extinguishment, including
discontinued operations 7 — 4,850 — Debt extinguishment,
unconsolidated entities 13 — 168 — Acquisition costs — — — 23 Gain
on sale of hotels, net of noncontrolling interests in other
partnerships (15,682 ) (373 ) (65,453 ) (18,590 ) Gain on sale of
investment in unconsolidated entities, net 8 — (30,176 ) — Gain
from remeasurement of unconsolidated entities (4 ) — (20,737 ) —
Other gains, net — (18 ) (100 ) (37 ) Other gains, discontinued
operations — — — (59 ) Contract dispute contingency — — 5,850 —
Amortization of fixed stock and directors’ compensation 1,631 1,023
6,122 5,570 Severance costs 99 372 928 3,268 Abandoned projects — —
— — Conversion expenses — — — 1,134 Variable stock compensation
1,103 590 2,723 963 Pre-opening costs, net of noncontrolling
interests 2,925 939 7,530
2,314
Adjusted EBITDA 49,427 43,240 220,857
200,302 Adjusted EBITDA from hotels, sold and held for sale (1,090
) (3,781 ) (11,464 ) (25,842 ) Adjusted EBITDA from joint venture
exchange 25 (379 ) 237
(656 )
Same-store Adjusted EBITDA $ 48,362 $ 39,080
$ 209,630 $ 173,804
Hotel EBITDA and Hotel EBITDA
Margin
(dollars in thousands)
Three Months Ended Year
Ended December 31, December 31, 2014
2013 2014 2013 Same-store
operating revenue: Room $ 151,613 $ 136,055 $ 634,892 $ 574,647
Food and beverage 36,434 33,226 140,156 127,234 Other operating
departments 10,705 10,104 43,849
41,606
Same-store operating revenue
198,752 179,385 818,897 743,487
Same-store operating
expense: Room 41,213 36,891 166,534 152,724 Food and beverage
27,182 25,749 108,206 102,398 Other operating departments 4,733
4,573 20,401 19,320 Other property related costs 51,631 47,300
207,481 193,569 Management and franchise fees 7,018 7,005 32,043
29,396 Taxes, insurance and lease expense 13,018
12,968 53,781 52,032
Same-store operating expense 144,795
134,486 588,446 549,439
Hotel
EBITDA $ 53,957 $ 44,899 $ 230,451 $
194,048
Hotel EBITDA Margin 27.1 % 25.0 % 28.1 % 26.1
%
Three Months Ended Year Ended
December 31, December 31, 2014 2013
2014 2013 Hotel EBITDA - Comparable core (31) $
38,979 $ 32,574 $ 169,488 $ 142,983 Hotel EBITDA - Non-strategic
(6)(a) 4,115 3,565 17,837
16,015
Hotel EBITDA - Comparable (37)
43,094 36,139 187,325 158,998 Hotel
EBITDA - Wyndham (8) 10,863 8,760
43,126 35,050
Hotel EBITDA
Same-store (45) $ 53,957 $
44,899 $ 230,451 $
194,048 Hotel EBITDA Margin - Comparable core
(31) 25.3 % 23.0 % 26.7 % 24.5 % Hotel EBITDA Margin -
Non-strategic (6)(a) 30.0 % 27.4 % 30.7 % 29.1 %
Hotel EBITDA
Margin - Comparable (37) 25.7 % 23.3
% 27.0 % 24.9 % Hotel EBITDA
Margin - Wyndham (8) 35.3 % 35.7 % 34.4 % 33.7 %
Hotel EBITDA
Margin Same-store (45) 27.1 % 25.0
% 28.1 % 26.1 % (a)
Excludes two hotels held for sale as of December 31, 2014, both of
which were sold in February 2015.
Reconciliation of Same-store Operating Revenue and Same-store
Operating Expense to Total Revenue, Total Operating Expense
and Operating Income
(in thousands)
Three Months Ended Year Ended December
31, December 31, 2014 2013
2014 2013 Same-store operating revenue $
198,752 $ 179,385 $ 818,897 $ 743,487 Other revenue 436 396 3,606
3,430 Revenue from hotels disposed and held for sale(a)
7,479 34,433 99,084
146,519
Total revenue 206,667 214,214 921,587 893,436
Same-store operating expense 144,795 134,486 588,446 549,439
Consolidated hotel lease expense(b) 2,412 10,515 31,635 44,087
Unconsolidated taxes, insurance and lease expense (637 ) (1,720 )
(5,503 ) (7,456 ) Corporate expenses 7,671 6,653 29,585 26,996
Depreciation and amortization 28,613 30,149 115,819 119,624
Impairment loss — — — 24,441 Conversion expenses — — — 1,134
Expenses from hotels disposed and held for sale(a) 6,095 26,661
76,461 111,055 Other expenses 4,078 1,913
17,952 8,749
Total operating
expense 193,027 208,657
854,395 878,069
Operating income $
13,640 $ 5,557 $ 67,192 $ 15,367
(a)
During the year ended December 31, 2014,
we disposed of 12 hotels that were not held for sale at December
31, 2013. We sold two held for sale hotels for $63.6 million
subsequent to December 31, 2014. These hotels are considered held
for sale on our December 31, 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 months and
years ended December 31, 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 Adjusted
FFO and Adjusted EBITDA
(in millions, except per share data)
Full Year 2015 Guidance Low High
Per Share Per Share Dollars
Amount(a)
Dollars
Amount(a)
Net income attributable to FelCor(b) $ 19.2 $ 28.6
Preferred dividends (39.0 ) (39.0 )
Net income
attributable to FelCor common stockholders (19.8 ) $ (0.16 )
(10.4 ) $ (0.08 ) Depreciation(c) 120.3 121.1
FFO and Adjusted FFO $ 100.5 $ 0.80 $ 110.7 $ 0.88
Net income attributable to FelCor(b) $ 19.2 $
28.6 Depreciation(c) 120.3 121.1 Interest expense(c) 86.0 87.8
Amortization expense 1.5 1.5
EBITDA $ 227.0 $ 239.0 Amortization of stock compensation
7.5 7.5
Adjusted EBITDA $ 234.5
$ 246.5 (a) Weighted average shares are 126.3
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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