FelCor Lodging Trust Incorporated (NYSE: FCH) today reported
operating results for the third quarter ended
September 30, 2010.
Summary:
- Same-store revenue per available room
("RevPAR") at 82 consolidated hotels increased 6.3% for the quarter
and 7.9% for September.
- Adjusted EBITDA was $48.2 million and
Adjusted FFO per share was $0.00 for the quarter, which was at the
high-end of our expectations.
- Hotel EBITDA margin increased 67 basis
points for the quarter, driven by a 2.1% increase in average daily
rate, or ADR.
- Net loss was $89.3 million for the
quarter.
- Acquired the 383-room Fairmont Copley
Plaza for $98.5 million, an iconic hotel located in the heart
of Boston's Back Bay.
- Began marketing the first group of
hotels for disposition.
Third Quarter Operating Results:
Same-store RevPAR for 82 consolidated hotels was $87.83 for the
quarter, a 6.3% increase compared to the same period in 2009
(excluding 14 hotels we are marketing for sale, RevPAR for our
portfolio increased 6.7% during the quarter compared to the same
period in 2009). RevPAR at these 82 hotels increased 7.9% during
September from a 5.1% occupancy increase and a 2.7% ADR increase,
compared to the same period in 2009. The RevPAR increase for the
quarter was driven by a 4.2% occupancy increase to 72.7% and a 2.1%
ADR increase to $120.85, compared to the same period in 2009.
RevPAR increased at 61 of our hotels and in every major market,
except for Orlando.
“The lodging industry fundamentals continue to strengthen, and
we are pleased with our operating results for the quarter. While
the booking window remains relatively short, group booking pace
continues to improve each month, occupancy is improving and RevPAR
growth is accelerating. We are taking advantage of the positive
imbalance between demand and supply to remix our customer base and
drive daily rates. During the quarter, ADR for our portfolio
increased 2.1%, driven by a 14% increase of premium transient room
nights," said Richard A. Smith, FelCor's President and Chief
Executive Officer.
"We are focused on continuing to improve our overall portfolio
quality, future growth rates and barriers-to-entry protection in
order to increase shareholder value and return on invested capital.
During the quarter, we acquired the Fairmont Copley Plaza. We have
been very pleased with the performance of the hotel: RevPAR
increased 14% for the hotel in September. In addition, we launched
the second phase of asset sales bringing the first group of 14
hotels to market,” added Mr. Smith.
Third quarter Hotel EBITDA was $55.5 million, compared to $50.7
million for the same period in 2009, a 9.4% increase. Hotel
EBITDA represents EBITDA generated by 82 same-store consolidated
hotels prior to corporate expenses and joint venture adjustments.
Hotel EBITDA margin was 23.5%, a 67 basis point increase compared
to the same period in 2009. Hotel EBITDA margins were better than
expectations and benefited from a 2.1% increase in ADR, but were
impacted by hotel-level expenses that did not occur last year, such
as salary and bonus increases. Excluding the 14 hotels that we are
marketing for sale, Hotel EBITDA margin increased 102 basis points
compared to 2009.
Adjusted EBITDA was $48.2 million, compared to $45.3 million for
the same period in 2009, a 6.4% increase, and was at the high-end
of our expectations.
Adjusted funds from operations (“FFO”) was a loss of $39,000 or
$0.00 per share, compared to $9.0 million, or $0.14 per share, for
the same period in 2009.
Net loss attributable to common stockholders was $98.5 million,
or $1.04 per share, compared to $34.8 million, or $0.55 per share,
for the same period in 2009. Net loss includes a $65.8 million
non-cash impairment charge reflecting the reduced book values of
eight of the 14 non-strategic hotels (three hotels comprise the
majority of the impairment), as well as an $8.3 million gain
on extinguishment of debt related to the disposition of one hotel.
Prior year net loss included a $2.1 million impairment charge
related to the sale of two hotels.
EBITDA, 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 14 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.
Balance Sheet:
At September 30, 2010, we had $1.6 billion of
consolidated debt outstanding, with a weighted average interest
rate of 7.8%, and $192.5 million of cash and cash equivalents.
In July, we repaid two secured loans, totaling $5.6 million
bearing an average interest rate of 8.3%, that were scheduled to
mature next year.
On September 30, the Embassy Suites Hotel in Piscataway, New
Jersey was transferred to the lender in full satisfaction of the
$18 million loan secured by that hotel. We recorded an
$8.2 million gain on the extinguishment of that debt (which
reflects the principal amount of that loan in excess of the value
of that hotel as reflected on our balance sheet). The hotel
generated $750,000 of EBITDA during the trailing twelve months
ended September 2010. We also continue to work with the special
servicer to transfer the Embassy Suites Chicago - North
Shore/Deerfield to the lender in full satisfaction of the
$14 million loan secured by that hotel, which matured in May
2010.
“We successfully refinanced all of our near-term debt and
eliminated all of our maturity issues. We also have reduced our
leverage this year and now have 10 unencumbered hotels. As a result
of the recent equity offering, debt repayments and improving
EBITDA, we now expect to be cash flow positive for the year after
capital expenditures. Furthermore, we expect cash flow growth to
accelerate significantly with the recovery and expect to reduce our
leverage significantly through improved operations and using
proceeds from future asset sales to repay debt. We will continue to
look for additional opportunities to reduce our average interest
rate, increase our flexibility and ensure adequate long-term
liquidity on an economically sound basis,” said Andrew J. Welch,
FelCor's Executive Vice President and Chief Financial Officer.
Portfolio Management:
For the quarter and nine months ended
September 30, 2010, we spent $10 million and $29
million, respectively, on capital improvements at our hotels
(including our pro rata share of joint venture expenditures).
On August 17, we acquired the Fairmont Copley Plaza in Boston
for $98.5 million from an affiliate of Fairmont Hotels &
Resorts ("Fairmont"). This world-class icon is located on Copley
Square in the heart of Boston's Back Bay neighborhood. The property
has 383 guest rooms and suites and 23,000 square feet of meeting
space. For the quarter, RevPAR for this hotel increased 8.6% and
hotel EBITDA increased 33%, compared to the same period in
2009.
As part of our long-term strategic plan, we have begun a second
phase of asset sales. During the third quarter, we began marketing
the first 14 hotels, of which 11 are suburban or airport locations,
and seven are located in Texas, Florida and Georgia. Additional
hotels will be brought to market based on various factors and we
will sell hotels only when we receive adequate pricing.
Outlook:
The lodging industry recovery is taking hold and RevPAR growth
is accelerating, reflecting improved corporate transient and group
demand and moderating supply growth. We expect this trend to
continue, and also for our portfolio to maintain its superior
market share as a result of our high-quality, diversified and
renovated portfolio. Additionally, our hotels are affected less by
new supply growth because the average number of rooms under
construction in our markets is lower than the industry as a
whole.
For 2010, we anticipate:
• RevPAR to increase between 3.75% and 4.5%; • Adjusted
EBITDA to be between $182 million and $185 million; • Adjusted FFO
per share to be between $(0.17) and $(0.13); • Net loss
attributable to FelCor to be between $163 million and $160 million;
and • Interest expense to be approximately $144 million. • Capital
expenditures to be approximately $42 million. • Weighted average
shares and units to be 80.9 million.
FelCor, a real estate investment trust, is the nation's largest
owner of upper-upscale, all-suite hotels. FelCor owns interests in
84 hotels and resorts, located in 23 states and Canada. FelCor's
diversified, high-quality portfolio is flagged under leading brands
such as - Hilton®, Doubletree ®, Embassy Suites Hotels®, Marriott®,
Renaissance®, Sheraton®, Westin®, Fairmont® and Holiday Inn®.
Additional information can be found on the Company's Web site at
www.felcor.com.
We invite you to listen to our third quarter earnings Conference
Call on Wednesday, November 3, 2010, at 11:00 a.m.
(Central Time). The conference call will be Webcast simultaneously
on FelCor's Web site at www.felcor.com. Interested investors and other
parties who wish to access the call should go to FelCor's Web site
and click on the conference call microphone icon on either the
“Investor Relations” or “News Releases” page. The conference call
replay will be archived on the Company's Web site.
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 month periods ended
September 30, 2010.
TABLE OF CONTENTS
PAGE
Consolidated Statements of Operations(a) 6 Consolidated Balance
Sheets(a) 7 Capital Expenditures 8 Supplemental Financial Data 8
Consolidated Debt Summary 9 Schedule of Encumbered Hotels 10 Hotel
Portfolio Composition 11 Detailed Operating Statistics by Brand 12
Detailed Operating Statistics for FelCor's Top Markets 13 Non-GAAP
Financial Measures
14
(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 Quarterly Report on Form 10-Q.
Consolidated Statements of
Operations
(in thousands, except per share data)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009 2010 2009
Revenues: Hotel operating revenue: Room $ 193,641 $ 178,795 $
564,086 $ 539,949 Food and beverage 33,076 29,207 106,796 99,583
Other operating departments 15,227 14,258 43,055 42,484 Other
revenue 1,421 1,280 2,793 2,554 Total
revenues 243,365 223,540 716,730 684,570
Expenses: Hotel departmental expenses: Room 52,636 48,473
150,793 140,671 Food and beverage 27,830 25,657 84,623 80,647 Other
operating departments 6,535 6,661 19,053 18,957 Other property
related costs 69,894 63,778 201,701 191,961 Management and
franchise fees 11,545 10,975 33,796 32,990 Taxes, insurance and
lease expense 26,511 24,872 77,913 74,199 Corporate expenses 6,564
4,471 22,921 15,829 Depreciation and amortization 36,564 36,866
110,454 108,668 Impairment loss 65,849 — 79,245 — Other expenses
1,331 1,031 2,693 3,486 Total operating
expenses 305,259 222,784 783,192 667,408
Operating income (loss) (61,894 ) 756 (66,462 ) 17,162
Interest expense, net (35,147 ) (24,015 ) (107,678 ) (67,301 )
Extinguishment of debt (225 ) — 45,853 (594 ) Loss
before equity in income (loss) fromunconsolidated entities (97,266
) (23,259 ) (128,287 ) (50,733 ) Equity in income (loss) from
unconsolidated entities 302 488 (886 ) (3,197 ) Gain on sale of
assets — 723 — 723 Loss from continuing
operations (96,964 ) (22,048 ) (129,173 ) (53,207 ) Discontinued
operations 7,684 (3,426 ) (1,059 ) (4,657 ) Net loss (89,280
) (25,474 ) (130,232 ) (57,864 )
Net loss attributable to noncontrolling
interests in other partnerships
173 174 77 66 Net loss attributable to redeemable
noncontrollinginterests in FelCor LP 297 160 571
399 Net loss attributable to FelCor (88,810 ) (25,140
) (129,584 ) (57,399 ) Preferred dividends (9,678 ) (9,678 )
(29,034 ) (29,034 ) Net loss attributable to FelCor common
stockholders $ (98,488 ) $ (34,818 ) $ (158,618 ) $ (86,433 ) Basic
and diluted per common share data: Loss from continuing operations
$ (1.12 ) $ (0.50 ) $ (2.10 ) $ (1.30 ) Net loss $ (1.04 ) $ (0.55
) $ (2.11 ) $ (1.37 ) Basic and diluted weighted average common
shares
outstanding
95,034 63,086 75,135 63,121
Consolidated Balance Sheets
(in thousands)
September 30,2010
December 31,2009
Assets Investment in hotels, net of accumulated depreciation
of $970,730 atSeptember 30, 2010 and $916,604 at December 31, 2009
$ 2,101,244 $ 2,180,394 Investment in unconsolidated entities
102,957 82,040 Cash and cash equivalents 192,478 263,531 Restricted
cash 20,586 18,708 Accounts receivable, net of allowance for
doubtful accounts of $326 atSeptember 30, 2010 and $406 at December
31, 2009 36,628 28,678 Deferred expenses, net of accumulated
amortization of $15,811 atSeptember 30, 2010 and $14,502 at
December 31, 2009 21,701 19,977 Other assets 37,599
32,666 Total assets $ 2,513,193 $ 2,625,994
Liabilities and Equity Debt, net of discount of
$55,972 at September 30, 2010 and $64,267 atDecember 31, 2009 $
1,573,402 $ 1,773,314 Distributions payable 66,615 37,580 Accrued
expenses and other liabilities 180,560 131,339
Total liabilities 1,820,577 1,942,233
Commitments and contingencies Redeemable noncontrolling
interests in FelCor LP at redemption value, 295units issued and
outstanding at September 30, 2010 and December 31,2009 1,357
1,062 Equity: Preferred stock, $0.01 par
value, 20,000 shares authorized: Series A Cumulative Convertible
Preferred Stock, 12,880 shares,liquidation value of $322,011,
issued and outstanding at
September 30, 2010 and December 31,
2009
309,362 309,362 Series C Cumulative Redeemable Preferred Stock, 68
shares,liquidation value of $169,950, issued and outstanding at
September 30, 2010 and December 31,
2009
169,412 169,412
Common stock, $0.01 par value, 200,000
shares authorized and 101,038 and69,413 shares issued, including
shares in treasury, at September 30, 2010and December 31, 2009,
respectively
1,010 694 Additional paid-in capital 2,189,418 2,021,837
Accumulated other comprehensive income 24,800 23,528 Accumulated
deficit (1,951,451 ) (1,792,822 ) Less: Common stock in treasury,
at cost, of 3,988 shares at September 30,2010 and 3,845 shares at
December 31, 2009 (72,245 ) (71,895 ) Total FelCor
stockholders’ equity 670,306 660,116 Noncontrolling interests in
other partnerships 20,953 22,583 Total
equity 691,259 682,699 Total
liabilities and equity $ 2,513,193 $ 2,625,994
Capital Expenditures
(in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009
2010 2009 Improvements
and additions to majority-owned hotels $ 9,448 16,926 27,841 62,465
Partners' pro rata share of additions to consolidated
joint venture hotels
(81 ) (381 ) (203 ) (758 ) Pro rata share of additions to
unconsolidated hotels 250 693
1,220 3,646 Total additions to hotels(a) $
9,617 $ 17,238 $ 28,858 $ 65,353
(a) Includes capitalized interest, property taxes, ground leases
and certain employee costs.
Supplemental Financial Data
(in thousands, except per share
information)
Total Enterprise Value
September 30,2010
December 31,2009
Common shares outstanding 97,050 65,568 Units outstanding 295 295
Combined shares and units outstanding 97,345 65,863 Common stock
price $4.60 $3.60 Market capitalization $447,787 $237,107 Series A
preferred stock 309,362 309,362 Series C preferred stock 169,412
169,412 Consolidated debt 1,573,402 1,773,314 Noncontrolling
interests of consolidated debt (3,809) (3,971) Pro rata share of
unconsolidated debt 78,199 107,481 Cash and cash equivalents
(192,478) (263,531) Total enterprise value (TEV) $2,381,875
$2,329,174
Consolidated Debt Summary
(dollars in thousands)
Interest Rate (%) Maturity Date
September 30,2010
December 31,2009
Mortgage debt Mortgage debt L + 0.93 (a) November 2011 $
250,000 $ 250,000 Mortgage debt L + 5.10 (b) April 2015 212,000 —
Mortgage debt L + 3.50 (c) August 2011(d) 198,800 200,425 Mortgage
debt 9.02 April 2014 114,306 117,422 Mortgage debt(e) 6.66 June -
August 2014 69,606 70,917 Mortgage debt 8.77 May 2013 27,770 27,829
Mortgage debt(f) 8.62 May 2010 14,103 14,103 Mortgage debt 5.81
July 2016 11,429 11,741 Mortgage debt 6.15 June 2011 8,157 9,228
Other 4.25 May 2011 502 354
Senior notes Senior secured
notes(g) 10.00 October 2014 580,070 572,500 Senior notes 8.50 (h)
June 2011 86,659 86,604
Retired debt — — —
412,191 Total $ 1,573,402 $ 1,773,314
(a) We purchased an interest rate cap that caps LIBOR at 7.8%
and expires November 2011 for a $250 million notional
amount.
(b) LIBOR for this loan is subject to a 3% floor. We purchased
an interest rate cap that caps LIBOR at 5.0% and expires May 2012
for a $212 million notional amount.
(c) LIBOR for this loan is subject to a 2% floor.
(d) This loan can be extended for as many as two years (to
2013), subject to satisfying certain conditions.
(e) The hotels securing this debt are subject to separate loan
agreements and are not cross-collateralized.
(f) We are in the process of transferring this hotel to the
lender in full satisfaction of the debt.
(g) These notes have $636 million in aggregate principal
outstanding and were sold at a discount that provides an effective
yield of 12.875% before transaction costs.
(h) As a result of a rating down-grade in February 2009, the
interest rate on the 8½% senior notes increased to 9%.
Schedule of Encumbered Hotels
(dollars in millions)
September 30,
2010Balance
Consolidated Debt Encumbered Hotels CMBS debt
$ 250
Anaheim - ES, Bloomington - ES, Charleston
Mills
House - HI, Dallas DFW South - ES,
Deerfield Beach - ES, Jacksonville - ES, Lexington - HS, Dallas
Love Field - ES, Raleigh/Durham - DTGS, San Antonio Airport - HI,
Tampa Rocky Point - DTGS and Phoenix Tempe - ES
Mortgage debt $ 212 Atlanta Buckhead - ES, Atlanta Galleria - SS,
Boston
Marlboro - ES, Burlington - SH, Corpus
Christi - ES,
Ft. Lauderdale Cypress Creek - SS, Orlando
South - ES, Philadelphia Society Hill - SH and South San Francisco
- ES
Mortgage debt $ 199 Charlotte SouthPark - DT, Houston Medical
Center - HI, Myrtle Beach - HLT, Mandalay Beach - ES, Nashville
Airport - ES, Philadelphia Independence Mall - HI, Pittsburgh
University Center - HI, Santa Barbara, Goleta -HI and Santa Monica
at the Pier - HI Mortgage debt $ 114 Baton Rouge - ES, Birmingham -
ES, Ft. Lauderdale - ES, Miami Airport - ES, Milpitas - ES,
Minneapolis Airport - ES and Napa Valley - ES CMBS debt(a) $ 70
Atlanta Airport - ES, Austin - DTGS, BWI Airport - ES, Orlando
Airport - HI and Phoenix Biltmore - ES CMBS debt $ 28 New Orleans
Convention Center - ES CMBS debt $ 14 Chicago Deerfield - ES CMBS
debt $ 11 Indianapolis North - ES CMBS debt $ 8 Wilmington - DT
Senior secured notes $ 580 Atlanta Airport - SH, Boston Beacon Hill
- HI, Dallas Market Center - ES, Myrtle Beach Resort - ES,
Nashville Opryland - Airport - HI, New Orleans French Quarter - HI,
Orlando North - ES, Orlando Walt Disney World® - DTGS, San Diego on
the Bay - HI, San Francisco Burlingame - ES, San Francisco
Fisherman's Wharf - HI, San Francisco Union Square - MAR, Toronto
Airport - HI and Toronto
Yorkdale - HI
(a) The hotels under this debt are subject to separate loan
agreements and are not cross-collateralized.
Hotel Portfolio Composition
The following table illustrates the distribution of 82
same-store consolidated hotels (excluding the Fairmont Copley Plaza
acquired in August 2010) by brand, market and location at
September 30, 2010.
Brand
Hotels Rooms
% of TotalRooms
% of
2009HotelEBITDA(a)
Embassy Suites Hotels 46 11,911 50 60 Holiday Inn 15 5,154 22 18
Sheraton and Westin 9 3,217 14 9 Doubletree 7 1,471 6 7 Renaissance
and Marriott 3 1,321 6 3 Hilton 2 559 2 3
Market
South Florida 5 1,439 6 8 Los Angeles area 4 899 4 6 Atlanta 5
1,462 6 6 Orlando 4 1,038 4 4 Philadelphia 2 729 3 4 Minneapolis 3
736 3 4 San Francisco area 6 2,138 9 4 Dallas 4 1,333 6 4 Central
California Coast 2 408 2 4 San Antonio 3 874 4 3 Myrtle Beach 2 640
3 3 Boston 2 532 2 3 San Diego 1 600 3 3 Other
39
10,805
45
44
Location
Suburban 34 8,560 36 32 Urban 20 6,358 27 27 Airport 18 5,788 25 24
Resort 10 2,927 12 17
(a) Hotel EBITDA is more fully described on page 22.
The following tables set forth occupancy, ADR and RevPAR for the
three and nine months ended September 30, 2010 and 2009,
and the percentage changes thereto between the periods presented,
for 82 same-store consolidated hotels owned for both periods
(excludes the Fairmont Copley Plaza acquired in August 2010).
Detailed Operating Statistics by
Brand
Occupancy (%)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009 %Variance 2010
2009 %Variance Embassy Suites Hotels 73.6 70.0
5.2 73.2 69.1 5.9 Holiday Inn 75.3 73.8 2.1 73.3 69.4 5.6 Sheraton
and Westin 66.3 63.6 4.4 66.3 61.0 8.7 Doubletree 74.8 67.5 10.8
74.0 66.2 11.7 Renaissance and Marriott 62.7 66.9 (6.2 ) 65.3 61.7
5.8 Hilton 80.3 77.1 4.2 66.6 65.1 2.3 Total hotels 72.7
69.8 4.2 71.7 67.4 6.5
ADR ($)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009 %Variance 2010 2009
%Variance Embassy Suites Hotels 123.56 123.60 — 125.40
129.86 (3.4 ) Holiday Inn 119.41 113.79 4.9 113.82 113.22 0.5
Sheraton and Westin 104.07 100.86 3.2 105.69 109.39 (3.4 )
Doubletree 113.11 114.00 (0.8 ) 116.33 125.87 (7.6 ) Renaissance
and Marriott 142.59 130.99 8.9 165.27 164.91 0.2 Hilton 142.27
128.93 10.4 124.76 118.12 5.6 Total hotels 120.85 118.42 2.1
121.60 124.72 (2.5 )
RevPAR ($)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009 %Variance 2010 2009
%Variance Embassy Suites Hotels 90.98 86.49 5.2 91.77 89.71
2.3 Holiday Inn 89.98 83.95 7.2 83.45 78.60 6.2 Sheraton and Westin
69.05 64.11 7.7 70.04 66.70 5.0 Doubletree 84.60 76.95 9.9 86.02
83.32 3.2 Renaissance and Marriott 89.47 87.58 2.2 107.90 101.79
6.0 Hilton 114.20 99.34 15.0 83.12 76.89 8.1 Total hotels
87.83 82.64 6.3 87.25 84.05 3.8
Detailed Operating Statistics for
FelCor's Top Markets
Occupancy (%)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009 %Variance 2010
2009 %Variance South Florida 72.4 67.2 7.8
77.7 73.3 6.0 Los Angeles area 79.5 75.7 5.1 75.9 72.9 4.2 Atlanta
74.7 72.9 2.5 75.0 70.8 5.9 Orlando 66.5 69.8 (4.7 ) 73.7 73.6 0.2
Philadelphia 79.2 72.5 9.2 73.4 65.6 11.9 Minneapolis 82.9 77.8 6.4
75.5 68.2 10.8 San Francisco area 83.2 81.6 1.9 75.8 69.5 9.1
Dallas 64.2 58.2 10.2 65.3 59.5 9.8 Central California Coast 83.1
81.0 2.6 77.8 78.2 (0.5 ) San Antonio 77.9 74.7 4.3 76.5 72.8 5.1
Myrtle Beach 82.7 80.0 3.4 66.9 66.1 1.2 Boston 84.6 84.4 0.3 82.3
78.4 5.0 San Diego 82.6 76.9 7.3
77.7 71.7 8.3
ADR ($)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009 %Variance 2010 2009
%Variance South Florida 100.25 100.94 (0.7 ) 127.84 132.67
(3.6 ) Los Angeles area 146.10 141.69 3.1 138.45 138.03 0.3 Atlanta
104.34 102.90 1.4 104.23 106.24 (1.9 ) Orlando 95.50 94.42 1.1
106.27 113.72 (6.6 ) Philadelphia 128.12 127.29 0.7 124.93 133.86
(6.7 ) Minneapolis 126.95 128.35 (1.1 ) 126.36 129.03 (2.1 ) San
Francisco area 144.56 132.57 9.0 133.03 127.32 4.5 Dallas 106.94
108.58 (1.5 ) 110.27 116.83 (5.6 ) Central California Coast 189.59
188.12 0.8 163.34 160.45 1.8 San Antonio 98.46 102.64 (4.1 ) 98.45
104.75 (6.0 ) Myrtle Beach 166.08 159.11 4.4 142.90 139.57 2.4
Boston 148.27 138.86 6.8 137.49 134.62 2.1 San Diego 123.95
123.11 0.7 119.28 127.37
(6.4 )
RevPAR ($)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009 %Variance 2010 2009
%Variance South Florida 72.61 67.82 7.1 99.29 97.21 2.1 Los
Angeles area 116.19 107.26 8.3 105.10 100.57 4.5 Atlanta 77.89
74.98 3.9 78.12 75.18 3.9 Orlando 63.50 65.87 (3.6 ) 78.37 83.67
(6.3 ) Philadelphia 101.42 92.26 9.9 91.69 87.76 4.5 Minneapolis
105.20 99.92 5.3 95.46 87.96 8.5 San Francisco area 120.31 108.24
11.2 100.86 88.52 13.9 Dallas 68.67 63.25 8.6 71.98 69.48 3.6
Central California Coast 157.51 152.39 3.4 127.04 125.43 1.3 San
Antonio 76.72 76.70 — 75.28 76.22 (1.2 ) Myrtle Beach 137.31 127.24
7.9 95.58 92.29 3.6 Boston 125.51 117.14 7.1 113.20 105.51 7.3 San
Diego 102.33 94.72 8.0 92.64
91.36 1.4
Non-GAAP Financial Measures
We refer in this release to certain “non-GAAP financial
measures.” These measures, including FFO, Adjusted FFO, EBITDA,
Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin, are measures
of our financial performance that are not calculated and presented
in accordance with generally accepted accounting principles
(“GAAP”). The following tables reconcile each of these non-GAAP
measures to the most comparable GAAP financial measure. Immediately
following the reconciliations, we include a discussion of why we
believe these measures are useful supplemental measures of our
performance and the limitations of such measures.
Reconciliation of Net Loss to FFO and
Adjusted FFO
(in thousands, except per share data)
Three Months Ended September 30, 2010
2009 Dollars Shares
Per Share Amount Dollars Shares
Per Share Amount Net loss $ (89,280 ) $ (25,474 )
Noncontrolling interests 470 334 Preferred dividends (9,678
) (9,678 )
Net loss attributable to FelCor
common stockholders
(98,488 ) 95,034 (1.04 ) (34,818 ) 63,086 (0.55 ) Depreciation and
amortization 36,564 — 0.38 36,866 — 0.58 Depreciation, discontinued
operationsand unconsolidated entities 3,966 — 0.04 4,726 — 0.07
Noncontrolling interests in FelCor LP (297 ) 295 0.01 (160 ) 296 —
Conversion of options and unvested
restricted stock
— — — — 445 —
FFO
(58,255 ) 95,329 (0.61 ) 6,614 63,827 0.10 Impairment loss 65,849 —
0.69 — — — Impairment loss, discontinued operations
and unconsolidated entities
— — — 2,080 — 0.04 Acquisition costs 403 — — — — — Extinguishment
of debt (8,036 ) — (0.08 ) — — — Conversion costs(a) — — — 117 — —
Severance costs — — — 41 — — Lease termination costs —
— — 117 — —
Adjusted FFO $ (39 )
95,329 — $ 8,969 63,827 $ 0.14
(a) Costs related to the conversion of our San Francisco Union
Square hotel to a Marriott.
Reconciliation of Net Loss to FFO and
Adjusted FFO
(in thousands, except per share data)
Nine Months Ended September 30, 2010
2009 Dollars Shares
Per ShareAmount
Dollars Shares
Per ShareAmount
Net loss $ (130,232 ) $ (57,864 ) Noncontrolling interests
648 465 Preferred dividends (29,034 ) (29,034 )
Net loss
attributable to FelCor common stockholders (158,618 )
75,135 $ (2.11 ) (86,433 ) 63,121 $ (1.37 ) Depreciation and
amortization 110,454 — 1.47 108,668 — 1.72 Depreciation,
discontinued operationsand unconsolidated entities 12,060 — 0.16
14,254 — 0.23 Gain on sale of unconsolidated subsidiary (559 ) —
(0.01 ) — — — Noncontrolling interests in FelCor LP (571 ) 295 —
(399 ) 296 (0.01 ) Conversion of options and unvestedrestricted
stock — — — — 284 —
FFO (37,234 ) 75,430 (0.49 ) 36,090 63,701 0.57 Impairment
loss 79,245 — 1.05 — — — Impairment loss, discontinued
operationsand unconsolidated entities 7,664 — 0.10 5,516 — 0.08
Acquisition costs 419 — 0.01 — — — Extinguishment of debt (54,096 )
— (0.72 ) 594 — 0.01 Conversion costs(a) — — — 447 — 0.01 Severance
costs — — — 550 — 0.01 Lease termination costs — — —
469 — 0.01
Adjusted FFO $ (4,002 )
75,430 $ (0.05 ) $ 43,666 63,701 $ 0.69
(a) Costs related to the conversion of our San Francisco Union
Square hotel to a Marriott.
Reconciliation of Net Loss to EBITDA
and Adjusted EBITDA
(in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009
2010 2009 Net loss
$ (89,280 ) $ (25,474 ) $ (130,232 ) $ (57,864 ) Depreciation and
amortization 36,564 36,866 110,454 108,668
Depreciation, discontinued operations and
unconsolidated entities
3,966 4,726 12,060 14,254 Interest expense 35,251 24,244 107,985
67,874
Interest expense, discontinued operations
and unconsolidated entities
1,627 1,249
5,219
4,007 Amortization of stock compensation 1,644 1,122 4,901 3,924
Noncontrolling interests in other partnerships 173
174 77 66
EBITDA
(10,055 ) 42,907 110,464 140,929 Impairment loss 65,849 — 79,245 —
Impairment loss, discontinued operations
and unconsolidated entities
— 2,080 7,664 5,516 Extinguishment of debt (8,036 ) — (54,096 ) 594
Acquisition costs 403 — 419 — Conversion costs(a) — 117 — 447
Severance costs — 41 — 550 Lease termination costs — 117 — 469 Gain
on sale of unconsolidated subsidiary — —
(559 ) —
Adjusted EBITDA $
48,161 $ 45,262 $ 143,137 $ 148,505
(a) Costs related to the conversion of our San Francisco Union
Square hotel to a Marriott.
Reconciliation of Adjusted EBITDA to
Hotel EBITDA
(in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009
2010 2009 Adjusted
EBITDA $ 48,161 $ 45,262 $ 143,137 $ 148,505 Other revenue
(1,421 ) (1,280 ) (2,793 ) (2,554 ) Adjusted EBITDA from acquired
hotels (1,520 ) — (1,520 ) — Equity in income from unconsolidated
subsidiaries
(excluding interest, depreciation and
impairment expense)
(5,816 ) (5,558 ) (15,425 ) (14,519 )
Noncontrolling interests in other
partnerships (excluding interest, depreciation and severance
expense)
424 454 1,751 1,899 Consolidated hotel lease expense 11,827 10,893
33,090 31,805 Unconsolidated taxes, insurance and lease
expense (1,801 ) (2,024 ) (5,555 ) (6,041 ) Interest income (104 )
(229 ) (307 ) (573 )
Other expenses (excluding conversion
costs, severance costs and lease termination costs)
928 751 2,274 2,040
Corporate expenses (excluding amortization
expense of stock compensation)
4,920 3,349 18,020 11,905 Gain on sale of asset — (723 ) — (723 )
Adjusted EBITDA from discontinued operations (99 )
(182 ) (599 ) (3,389 )
Hotel EBITDA
$ 55,499 $ 50,713 $ 172,073 $ 168,355
Reconciliation of Net Loss to Hotel
EBITDA
(in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009
2010 2009 Net loss
$ (89,280 ) $ (25,474 ) $ (130,232 ) $ (57,864 ) Discontinued
operations (7,684 ) 3,426 1,059 4,657 Adjusted EBITDA from acquired
hotels (1,520 ) — (1,520 ) — Equity in loss (income) from
unconsolidated entities (302 ) (488 ) 886 3,197 Consolidated hotel
lease expense 11,827 10,893 33,090 31,805 Unconsolidated taxes,
insurance and lease expense (1,801 ) (2,024 ) (5,555 ) (6,041 )
Interest expense, net 35,147 24,015 107,678 67,301 Extinguishment
of debt 225 — (45,853 ) 594 Corporate expenses 6,564 4,471 22,921
15,829 Depreciation and amortization 36,564 36,866 110,454 108,668
Impairment loss 65,849 — 79,245 — Gain on sale of assets — (723 ) —
(723 ) Other expenses 1,331 1,031 2,693 3,486 Other revenue
(1,421 ) (1,280 ) (2,793 ) (2,554 )
Hotel
EBITDA $ 55,499 $ 50,713 $ 172,073 $
168,355
Hotel EBITDA and Hotel EBITDA
Margin
(dollars in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009
2010 2009 Total revenues
$ 243,365 $ 223,540 $ 716,730 $ 684,570 Other revenue (1,421
) (1,280 ) (2,793 ) (2,554 ) Hotel operating
revenue 241,944 222,260 713,937 682,016 Less: revenue from acquired
hotels (5,673 ) — (5,673 ) —
Same-store hotel operating revenue 236,271 222,260 708,264
682,016 Same-store hotel operating expenses (180,772 )
(171,547 ) (536,191 ) (513,661 )
Hotel EBITDA
$ 55,499 $ 50,713 $ 172,073 $ 168,355
Hotel EBITDA margin(a) 23.5 % 22.8 % 24.3 % 24.7 %
(a) Hotel EBITDA as a percentage of same-store hotel operating
revenue.
Reconciliation of Total Operating
Expenses to Same-Store Hotel Operating Expenses
(dollars in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009
2010 2009 Total operating
expenses $ 305,259 $ 222,784 $ 783,192 $ 667,408 Unconsolidated
taxes, insurance and lease expense 1,801 2,024 5,555 6,041
Consolidated hotel lease expense (11,827 ) (10,893 ) (33,090 )
(31,805 ) Corporate expenses (6,564 ) (4,471 ) (22,921 ) (15,829 )
Depreciation and amortization (36,564 ) (36,866 ) (110,454 )
(108,668 ) Impairment loss (65,849 ) — (79,245 ) — Acquired hotel
expenses (4,153 ) — (4,153 ) — Other expenses (1,331 )
(1,031 ) (2,693 ) (3,486 ) Same-store hotel
operating expenses $ 180,772 $ 171,547 $ 536,191
$ 513,661
Reconciliation of Ratio of Operating
Income (Loss) to Total Revenues to Hotel EBITDA Margin
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2010 2009 2010
2009 Ratio of operating income (loss) to total
revenues (25.4 )% 0.3 % (9.3 )% 2.5 % Other revenue (0.6 ) (0.6 )
(0.4 ) (0.4 ) Revenue from acquired hotels (2.9 ) — (0.7 ) —
Unconsolidated taxes, insurance and lease expense (0.8 ) (0.9 )
(0.8 ) (0.9 ) Consolidated hotel lease expense 5.0 4.9 4.7 4.6
Other expenses 0.6 0.6 0.4 0.7 Corporate expenses 2.8 2.0 3.2 2.3
Depreciation and amortization 15.4 16.5 15.5 15.9 Impairment loss
27.7 — 11.1 — Expenses from acquired hotels 1.7 — 0.6
— Hotel EBITDA margin 23.5 % 22.8 % 24.3 % 24.7 %
Reconciliation of Forecasted Net Loss
Attributable to FelCor to Forecasted Adjusted FFO and
Adjusted EBITDA
(in millions, except per share and unit
data)
Full Year 2010 Guidance Low Guidance
High Guidance Dollars
Per
ShareAmount(a)
Dollars
Per
ShareAmount(a)
Net loss attributable to FelCor $ (163 ) $ (160 ) Preferred
dividends (39 ) (39 )
Net loss attributable to
FelCor common stockholders (202 ) $ (2.53 ) (199 ) $ (2.49 )
Depreciation(b) 163 163 Gain on sale of assets (1 ) (1 )
Noncontrolling interests in FelCor LP (1 ) (1 )
FFO (41 ) $ (0.51 ) (38 ) $ (0.47 ) Impairment 87 87
Extinguishment of debt (60 ) (60 )
Adjusted
FFO $ (14 ) $ (0.17 ) $ (11 ) $ (0.13 )
Net loss
attributable to FelCor $ (163 ) $ (160 ) Depreciation(b) 163
163 Interest expense(b) 150 150 Amortization expense 7 7
Noncontrolling interests in FelCor LP (1 ) (1 )
EBITDA 156 159 Impairment 87 87 Extinguishment of debt (60 )
(60 ) Gain on sale of assets (1 ) (1 )
Adjusted
EBITDA $ 182 $ 185
(a) Weighted average shares and units are 80.9 million.
(b) 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, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA,
Hotel EBITDA and Hotel EBITDA margin, 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 White Paper on Funds From Operations approved by the Board
of Governors of 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 and amortization,
and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint
ventures are calculated to reflect FFO 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
recurring and non-recurring items, including but not limited to
these described below, 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.
- Impairment losses - We exclude the
effect of impairment losses and gains or losses on disposition of
assets in computing Adjusted FFO and Adjusted EBITDA because we
believe that including these is not consistent with reflecting the
ongoing performance of our remaining assets. Additionally, we
believe that impairment charges and gains or losses on disposition
of assets represent accelerated depreciation, or excess
depreciation, and depreciation is excluded from FFO by the NAREIT
definition and 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.
In addition, to derive Adjusted EBITDA we exclude gains or
losses on the sale of depreciable assets because we believe that
including them in EBITDA is not consistent with reflecting the
ongoing performance of our remaining assets. Additionally, the gain
or loss on sale of depreciable assets represents either accelerated
depreciation or excess depreciation in previous periods, and
depreciation is excluded from EBITDA.
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 operating 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 used by us 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 by eliminating from continuing
operations all revenues and expenses not directly associated with
hotel operations including but not limited to corporate-level
expenses; impairment losses; gains or losses on disposition of
assets; and gains and losses related to extinguishment of debt. We
eliminate corporate-level costs and expenses 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
exclude the effect of impairment losses, gains or losses on
disposition of assets, and gains or losses related to
extinguishment of debt because we believe that including these is
not consistent with reflecting the ongoing performance of our
remaining assets. 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 hotels. Hotel EBITDA and Hotel EBITDA margins are
presented on a same-store basis.
Limitations of Non-GAAP Measures
Our management and Board of Directors use FFO, Adjusted FFO,
EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin to
evaluate the performance of our hotels and to facilitate
comparisons between us and 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. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel
EBITDA and Hotel EBITDA margin, as presented by us, may not be
comparable to the same measures as calculated by other real estate
companies. These measures do not reflect certain expenses that we
incurred and will incur, such as depreciation and interest or
capital expenditures. Management compensates for these limitations
by separately considering the impact of these excluded items to the
extent they are material to operating decisions or assessments of
our operating performance. Our reconciliations to the 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. Neither should FFO, Adjusted FFO, Adjusted FFO
per share, EBITDA or Adjusted EBITDA be considered as measures of
our liquidity or indicative of funds available for our cash needs,
including our ability to make cash distributions. Adjusted FFO per
share should not be used as a measure of amounts that accrue
directly to the benefit of stockholders. FFO, Adjusted FFO, EBITDA,
Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin reflect
additional ways of viewing our operations that we believe when
viewed with our GAAP results and the reconciliations to the
corresponding GAAP financial measures provide a more complete
understanding of factors and trends affecting our business than
could be obtained absent this disclosure. Management strongly
encourages investors to review our financial information in its
entirety and not to rely on any single financial measure.
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