FelCor Lodging Trust Incorporated (NYSE: FCH) today reported
operating results for the third quarter and nine months ended
September�30, 2008. Third Quarter Highlights: Adjusted FFO per
share of $0.45 and Adjusted EBITDA of $65.1 million met our third
quarter guidance. RevPAR increased by 5.4 percent at our 70 hotels
where renovations were completed during 2007 and 2008. RevPAR
increased 2.6 percent for our 85 consolidated hotels, compared to
the United States average decline of 1.1 percent. Hotel EBITDA
margin increased 45 basis points compared to prior year. Market
share increased more than six percent for our 70 hotels where
renovations were completed during 2007 and 2008, which is
consistent with our expectations. Market share increased almost
four percent for our 85 consolidated hotels. Net loss applicable to
common stockholders was $51.3 million and included impairment
charges of $40.4 million and hurricane losses of $1.7 million.
Third Quarter Operating Results: Revenue per available room
(�RevPAR�) for our 85 consolidated hotels increased 2.6�percent to
$97.80, which was driven by increases in both average daily rate
(�ADR�) of 0.3�percent and occupancy of 2.3�percent, compared to
the same period in 2007. At our 70 hotels where we completed
renovations during 2007 and 2008, RevPAR increased 5.4�percent.
�The US economy is experiencing an accelerated downturn, leading to
weaker consumer spending and tightened restrictions on corporate
travel, which has affected lodging demand. A major priority is to
reduce spending to mitigate the current trends by limiting capital
and development spending, and restructuring hotel-level costs and
general and administrative expenses. This, coupled with the fact
that our newly renovated portfolio continues to gain market share,
puts us in the best position to manage the downturn,� said Richard
A. Smith, FelCor�s President and Chief Executive Officer. �Despite
the weakening economic trends, we are pleased that third quarter
earnings met our expectations.� Our Adjusted Funds from Operations
(�FFO�) was $28.7�million, or $0.45 per share, compared to
Same-Store Adjusted FFO of $25.9 million, or $0.41 per share, and
Adjusted FFO (including sold hotels) of $29.9�million, or $0.47 per
share, for the same period in 2007. Our Adjusted FFO for the
quarter was consistent with our expectations. Our Hotel EBITDA
increased to $75.0�million, compared to $72.4�million in the same
period in 2007, a 3.6 percent increase. Hotel EBITDA margin was
27.1 percent, a 45 basis point increase compared to the same period
in 2007, which exceeded our expectations. Our Adjusted EBITDA was
$65.1�million compared to Same-Store Adjusted EBITDA of
$65.6�million, and Adjusted EBITDA (including sold hotels) of
$66.5�million, for the same period in 2007. Net loss applicable to
common stockholders was $51.3�million, or $0.83 per share, compared
to a net loss applicable to common stockholders of $1.7�million, or
$0.03 per share, for the same period in 2007. Net loss applicable
to common stockholders in the third quarter of 2008 included
impairment charges of $40.4�million, hurricane losses of
$1.7�million and conversion costs of $0.1�million. Net loss in the
third quarter of 2007 included $0.4�million gain on sale of
condominiums. EBITDA, Adjusted EBITDA, Same-Store Adjusted EBITDA,
Hotel EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Same-Store
Adjusted FFO are all non-GAAP financial measures. See our
discussion of �Non-GAAP Financial Measures� beginning on page�15
for a reconciliation of each of these measures to our net income
and for information regarding the use, limitations and importance
of these non-GAAP financial measures. Renovations and Development:
Overall, our renovated hotels continue to perform consistent with
our expectations. For the 70 hotels where we completed renovations
during 2007 and 2008, market share increased more than six percent
relative to their competitive sets. RevPAR at these hotels
increased more than five�percent and Hotel EBITDA increased
approximately eight�percent for the third quarter of 2008, compared
to the same period in prior year. We spent $37.1�million on
renovations and redevelopment projects at our hotels, including our
pro rata share of joint venture expenditures, during the three
months ended September�30, 2008. The redevelopment of our hotel in
San Francisco�s Union Square as a Marriott remains on schedule to
be completed in early 2009. Portfolio Recycling: As part of our
long-term strategic plan, we are focused on growing shareholder
value by actively managing our portfolio of hotels. We continually
examine each hotel in our portfolio to address issues of market
supply, demand patterns, ongoing capital needs and concentration of
risk. We have identified the following eight hotels as candidates
for sale: Embassy Suites Dallas (DFW International Airport South),
Texas Embassy Suites Jacksonville (Baymeadows), Florida Doubletree
Guest Suites Raleigh/Durham, North Carolina Holiday Inn Orlando
(International Drive), Florida Holiday Inn Cocoa Beach
(Oceanfront), Florida Three unconsolidated Holiday Inn hotels in
Kansas The two Holiday Inn hotels in Florida were originally
designated for redevelopment with condominiums. Market conditions
in Florida no longer make condominium projects feasible. As a
result, we recorded a $40.4�million impairment charge, primarily
related to those two hotels, in the third quarter 2008. Balance
Sheet/Debt Maturities: At September 30, 2008, we had $1.5�billion
of consolidated debt outstanding with a weighted average interest
rate of 6.8 percent and our cash and cash equivalents totaled
$59.1�million. At September�30, 2008, we had $172�million available
under our $250�million line of credit. We have no scheduled debt
maturities for the remainder of 2008. We have only one significant
debt maturity in 2009 � a $118�million non-recourse mortgage loan,
secured by seven hotels. We are in discussions with multiple
lenders and expect to complete the refinancing prior to the
maturity date of April 2009. We currently anticipate that proceeds
from the new loan will be higher than the current balance (the
current loan is approximately 35% loan-to-value), which will
provide the company with additional liquidity. Operating Focus: As
a result of the continued deterioration of travel demand, which is
expected to continue through 2009, we are very focused on the
following to ensure that we mitigate declining revenue until
lodging fundamentals stabilize: Continue to gain market share as a
result of achieving the returns from our renovation program and
recapture displacement; Work closely with the hotels to retool
hotel-level cost structures (including staffing models) to ensure
that expenses are being managed as effectively as possible; Limit
capital expenditures to critical items and postpone new
construction of any further redevelopment projects; and Reduce
corporate general and administrative expenses. �We have been
proactive in taking steps to strengthen our liquidity and balance
sheet capacity, including reducing expenses, limiting capital
expenditures beyond our current renovation program and reducing our
common dividend,� said Andrew J. Welch, FelCor�s Executive Vice
President and Chief Financial Officer. �In addition, we are
comfortable with refinancing our only near-term debt maturity. We
also continue to create shareholder value by recycling our
portfolio and expect to use asset sale proceeds to reduce our debt
and further enhance our liquidity.� Outlook: RevPAR at our 85
consolidated hotels is expected to increase approximately two
percent in 2008 and to decline between 3.5 and 5.0 percent in the
fourth quarter, compared to the prior year. We continue to expect
that RevPAR for our portfolio will increase significantly more than
our markets and the industry. Our successful renovation program,
which has achieved our expected returns from the capital
investments, is driving our comparatively high increase in RevPAR.
Our guidance assumes no asset sales. For full year 2008 we
currently anticipate: Adjusted EBITDA to be between $273 million
and $275 million; Adjusted FFO per share to be between $1.93 and
$1.96; Net Loss to be between $45 million and $47 million; Hotel
EBITDA margins to increase approximately 20 basis points; and
Capital expenditures, including redevelopment projects, of
approximately $150 million. FelCor, a real estate investment trust,
is the nation�s largest owner of upper-upscale, all-suite hotels.
FelCor�s portfolio is comprised of 85 consolidated hotels and
resorts, located in 23 states and Canada. FelCor�s portfolio
consists primarily of upper-upscale hotels, which are flagged under
global brands such as Embassy Suites Hotels�, Doubletree �,
Hilton�, Renaissance�, Sheraton�, Westin� 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�5, 2008, at
11:00�a.m. (Central Time). The conference call will be Web cast
simultaneously via the Internet 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� pages. The conference call replay will be archived on the
Company�s Web site. A telephonic replay will be available from 1:00
p.m. (Central Time), Wednesday, November 5, 2008 through 5:00 p.m.
(Central Time), Friday, November�7, 2008, by dialing (800) 642-1687
(conference ID #70128101). 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 a further
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 and dispositions, the availability
of capital, the impact on the travel industry from increased fuel
prices and 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 the financial position of the
Company as of and for the three and nine month periods ended
September 30, 2008. � � TABLE OF CONTENTS � Consolidated Statements
of Operations(a) Consolidated Balance Sheets(a) Discontinued
Operations Capital Expenditures Supplemental Financial Data Debt
Summary Hotel Portfolio Composition Detailed Operating Statistics
by Brand Detailed Operating Statistics for FelCor�s Top Markets
Non-GAAP Financial Measures (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 and Annual Report on Form 10-K.
Consolidated Statements of Operations (in thousands, except per
share data) � Three Months Ended Nine Months Ended September 30,
September 30, 2008 � 2007 2008 � 2007 Revenues: Hotel operating
revenue: Room $ 223,968 $ 212,347 $ 693,789 $ 633,483 Food and
beverage 36,357 32,161 131,875 99,146 Other operating departments
16,008 12,188 47,453 38,137 Other revenue � 1,396 � 1,766 � 2,655 �
2,612 Total revenues � 277,729 � 258,462 � 875,772 � 773,378 �
Expenses: Hotel departmental expenses: Room 55,563 52,553 167,085
154,394 Food and beverage 30,747 25,023 102,289 76,213 Other
operating departments 7,192 4,745 21,391 15,527 Other property
related costs 76,947 70,119 230,646 207,260 Management and
franchise fees 13,573 13,652 45,448 40,718 Taxes, insurance and
lease expense 29,718 31,736 87,884 92,387 Corporate expenses 5,388
3,690 17,079 15,732 Depreciation and amortization 36,069 28,523
104,909 80,729 Impairment loss 36,692 - 53,823 - Hurricane loss
1,669 - 1,669 - Other expenses � 1,046 � 1,298 � 2,879 � 1,713
Total operating expenses � 294,604 � 231,339 � 835,102 � 684,673
Operating income (loss) (16,875 ) 27,123 40,670 88,705 Interest
expense, net � (24,114 ) � (22,655 ) � (74,886 ) � (68,734 ) Income
(loss) before equity in income from unconsolidated entities,
minority interests and gain on sale of assets � (40,989 � ) � 4,468
� (34,216 � ) � 19,971 Equity in income (loss) from unconsolidated
entities (2,773 ) 3,030 (1,064 ) 19,511 Minority interests 955 347
180 463 Gain on involuntary conversion - - 3,095 - Gain on sale of
condominiums � - � 354 � - � 18,493 Income (loss) from continuing
operations (42,807 ) 8,199 (32,005 ) 58,438 Discontinued operations
� 1,167 � (206 ) � 1,154 � 33,893 Net income (loss) (41,640 ) 7,993
(30,851 ) 92,331 Preferred dividends � (9,678 ) � (9,678 ) �
(29,034 ) � (29,034 ) Net income (loss) applicable to common
stockholders $ (51,318 ) $ (1,685 ) $ (59,885 ) $ 63,297 � Basic
per common share data: Net income (loss) from continuing operations
$ (0.85 ) $ (0.02 ) $ (0.99 ) $ 0.48 Net income (loss) $ (0.83 ) $
(0.03 ) $ (0.97 ) $ 1.03 Basic weighted average common shares
outstanding � 61,828 � 61,652 � 61,827 � 61,582 � Diluted per
common share data: Net income (loss) from continuing operations $
(0.85 ) � (0.02 ) $ (0.99 ) $ 0.47 Net income (loss) $ (0.83 ) �
(0.03 ) $ (0.97 ) $ 1.02 Diluted weighted average common shares
outstanding � 61,828 � 61,652 � 61,827 � 61,908 Cash dividends
declared on common stock $ 0.15 $ 0.30 $ 0.85 $ 0.85 Consolidated
Balance Sheets (unaudited, in thousands) � � September 30, 2008
December 31, 2007 Assets Investment in hotels, net of accumulated
depreciation of $786,171 at September 30, 2008 and $694,464 at
December 31, 2007 $ 2,341,471 $ 2,400,057 Investment in
unconsolidated entities 108,052 127,273 Cash and cash equivalents
59,053 57,609 Restricted cash 15,112 14,846 Accounts receivable,
net of allowance for doubtful accounts of $665 at September 30,
2008 and $307 at December 31, 2007 42,215 37,871 Deferred expenses,
net of accumulated amortization of $12,488 at September 30, 2008
and $10,820 at December 31, 2007 6,154 8,149 Other assets � 37,623
� 38,030 Total assets $ 2,609,680 $ 2,683,835 � Liabilities and
Stockholders� Equity Debt, net of discount of $1,678 at September
30, 2008 and $2,082 at December 31, 2007 $ 1,520,068 $ 1,475,607
Distributions payable 18,040 30,493 Accrued expenses and other
liabilities � 145,776 � 134,159 � Total liabilities � 1,683,884 �
1,640,259 � Commitments and contingencies � Minority interest in
FelCor LP, 1,224 and 1,354 units issued and outstanding at
September 30, 2008 and December 31, 2007, respectively � � 8,035 �
� 11,398 Minority interest in other partnerships � 24,096 � 25,264
� Stockholders� 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, 2008 and December 31, 2007 � 309,362 �
309,362 Series C Cumulative Redeemable Preferred Stock, 68 shares,
liquidation value of $169,950, issued and outstanding at September
30, 2008 and December 31, 2007 � 169,412 � 169,412 Common stock,
$.01 par value, 200,000 shares authorized and 69,413 shares issued,
including shares in treasury, at September 30, 2008 and December
31, 2007 � 694 � 694 Additional paid-in capital 2,055,774 2,062,893
Accumulated other comprehensive income 23,281 27,450 Accumulated
deficit (1,547,856 ) (1,434,393 ) Less: Common stock in treasury,
at cost, of 6,117 and 6,705 shares at September 30, 2008 and
December 31, 2007, respectively � (117,002 ) � (128,504 ) � Total
stockholders� equity � 893,665 � 1,006,914 � Total liabilities and
stockholders� equity $ 2,609,680 $ 2,683,835 Discontinued
Operations (in thousands) Discontinued operations include the
results of operations of 11 hotels sold in 2007. Condensed
financial information for the hotels included in discontinued
operations is as follows: � � Three Months Ended Nine Months Ended
September 30, September 30, 2008 � 2007 2008 2007 Operating revenue
$ - $ 74 $ - $ 26,522 Operating expenses � - � (276 ) � (13 ) �
(18,371 ) Operating income (loss) - (202 ) (13 ) 8,151 Interest
income (expense), net - 4 - (15 ) Gain on sale of hotels, net of
income tax 1,193 - 1,193 28,488 Loss on early extinguishment of
debt - - - (901 ) Minority interests � (26 ) � (8 ) � (26 ) �
(1,830 ) Income (loss) from discontinued operations 1,167 (206 )
1,154 33,893 Depreciation and amortization, net of minority
interests - - - 14 Minority interest in FelCor LP 26 (4 ) 26 736
Interest expense, net of minority interests � - � - � - � 29 EBITDA
from discontinued operations 1,193 (210 ) 1,180 34,672 Gain on sale
of hotels, net of income tax and minority interests in other
partnerships (1,193 ) - (1,193 ) (27,830) Charges related to early
extinguishment of debt, net of minority interests � - � - � - � 811
Adjusted EBITDA from discontinued operations $ - $ (210 ) $ (13 ) $
7,653 Capital Expenditures (in thousands) � � Three Months Ended
September 30, Nine Months Ended September 30, 2008 � 2007 2008 �
2007 Improvements and additions to consolidated hotels $ 35,274 $
50,665 $ 108,899 $ 187,794 Consolidated joint venture partners�
prorata share of additions to hotels (787 ) (477 ) (3,005 ) (2,558
) Prorata share of unconsolidated additions to hotels � 2,592 �
9,568 � 13,898 � 19,076 Total additions to hotels(a) $ 37,079 $
59,756 $ 119,792 $ 204,312 (a) Includes capitalized interest,
property taxes, ground leases and certain employee costs.
Supplemental Financial Data (in thousands, except per share
information) � � September 30, December 31, Total Enterprise Value
2008 2007 Common shares outstanding 63,296 62,707 Units outstanding
� 1,224 � 1,354 Combined shares and units outstanding 64,520 64,061
Common stock price at end of period $ 7.16 $ 15.59 Equity
capitalization $ 461,963 $ 998,711 Series A preferred stock 309,362
309,362 Series C preferred stock 169,412 169,412 Consolidated debt
1,520,068 1,475,607 Minority interest of consolidated debt (4,104 )
(7,305 ) Pro rata share of unconsolidated debt 112,804 94,181 Cash
and cash equivalents � (59,053 ) � (57,609 ) Total enterprise value
(TEV) $ 2,510,452 $ 2,982,359 � Dividends Per Share Dividends
declared (year-to-date): Common stock $ 0.85 $ 1.20 Series A
preferred stock $ 1.4625 $ 1.95 Series C preferred stock
(depositary shares) $ 1.50 $ 2.00 Debt Summary (dollars in
thousands) � � � � Encumbered Hotels Interest Rate at September 30,
2008 Maturity Date Consolidated Debt Senior term notes none 8.50
%(a) June 2011 $ 299,351 Senior term notes none L + 1.875 December
2011 215,000 Line of credit(b) none L + 0.80 August 2011 � 78,000
Total line of credit and senior debt(c) 7.05 � 592,351 � Mortgage
debt 12 hotels L + 0.93 (d) November 2011(e) 250,000 Mortgage debt
2 hotels L + 1.55 (f) May 2012(g) 176,196 Mortgage debt 8 hotels
8.70 May 2010 163,233 Mortgage debt 7 hotels 7.32 April 2009
118,080 Mortgage debt 6 hotels 8.73 May 2010 117,133 Mortgage debt
5 hotels 6.66 June-August 2014 72,904 Mortgage debt 2 hotels 6.15
June 2009 14,759 Mortgage debt 1 hotel 5.81 July 2016 12,233 Other
1 hotel various various � 3,179 Total mortgage debt(c) 44 hotels
6.65 � 927,717 Total 6.80 % $ 1,520,068 (a) If the credit rating on
our senior debt is downgraded by Moody�s from Ba3 to B1 and
Standard & Poor�s from BB- to B+, the interest rate on these
senior notes will increase to 9.0%. (b) We have a $250�million line
of credit, of which $78�million is drawn. The interest rate can
range from 80 to 150 basis points over LIBOR, based on our leverage
ratio as defined in our line of credit agreement. (c) Interest
rates are calculated based on the weighted average debt outstanding
at September�30, 2008. (d) We have purchased an interest rate cap
that expires in November�2009 at 7.8% for this notional amount. (e)
The maturity date assumes that we will exercise three successive
one-year extension options that permit, at our sole discretion, the
original November 2008 maturity to be extended to 2011. In July
2008, we exercised our first one-year option to extend the maturity
to November 2009, and we expect to exercise the remaining options
when timely. (f) We have purchased interest rate caps that expire
in May 2009 of 6.25% for $177�million aggregate notional amounts.
(g) The maturity date assumes that we will exercise three
successive one-year extension options that permit, at our sole
discretion, the original May 2009 maturity to be extended to 2012,
and we expect to exercise the options when timely. Weighted average
interest � 6.80 % Fixed interest rate debt to total debt 52.7 %
Mortgage debt to total assets 35.5 % Hotel Portfolio Composition
The following tables set forth, as of September 30, 2008, for 85
Consolidated Hotels distribution by brand, top markets and location
type. � � � � Brand Hotels Rooms % of Total Rooms % of 2007 Hotel
EBITDA(a) Embassy Suites Hotels 47 12,129 49 58 Holiday Inn 17
6,306 25 19 Sheraton and Westin 9 3,217 13 14 Doubletree 7 1,472 6
7 Renaissance and Hotel 480 3 1,324 5 - (b) Hilton 2 559 2 2 � Top
Markets South Florida 5 1,436 6 7 Atlanta 5 1,462 6 7 Los Angeles
area 4 899 4 6 San Francisco area 6 2,141 8 6 Orlando 5 1,690 7 5
Dallas 4 1,333 5 4 Minneapolis 3 736 3 4 Phoenix 3 798 3 4 Northern
New Jersey 3 756 3 4 San Diego 1 600 2 3 Washington, D.C. 1 443 2 3
Chicago 3 795 3 3 San Antonio 3 874 4 3 Philadelphia 2 729 3 3
Boston 2 532 2 2 � Location Suburban 35 8,781 35 38 Urban 20 6,362
25 25 Airport 18 5,785 24 24 Resort 12 4,079 16 13 (a) Hotel EBITDA
is more fully described on page 22. (b) We acquired the Renaissance
Esmeralda Resort & Spa and the Renaissance Vinoy Resort &
Golf Club in December 2007. They did not make a significant
contribution to our 2007 Hotel EBITDA. Detailed Operating
Statistics by Brand (85 consolidated hotels) � Occupancy (%) Three
Months Ended September 30, � Nine Months Ended September 30, 2008 �
2007 � %Variance 2008 � 2007 � %Variance Embassy Suites Hotels 74.5
70.9 5.1 75.2 72.9 3.2 Holiday Inn 76.3 73.9 3.3 74.8 70.3 6.3
Sheraton and Westin 68.1 68.9 (1.1 ) 68.1 69.8 (2.3 ) Doubletree
73.5 75.5 (2.6 ) 76.3 72.8 4.8 Renaissance and Hotel 480(a) 62.2
70.2 (11.4 ) 67.0 73.9 (9.3 ) Hilton 71.5 77.5 (7.8 ) 64.8 63.6 1.8
� Total hotels 73.4 71.8 2.3 73.6 71.7 2.7 � ADR ($) Three Months
Ended September 30, Nine Months Ended September 30, 2008 2007
%Variance 2008 2007 %Variance Embassy Suites Hotels 142.26 141.35
0.6 145.69 143.55 1.5 Holiday Inn 122.98 120.11 2.4 121.64 116.87
4.1 Sheraton and Westin 117.54 120.30 (2.3 ) 125.19 126.51 (1.0 )
Doubletree 133.42 137.62 (3.1 ) 144.39 144.29 0.1 Renaissance and
Hotel 480(a) 131.20 137.99 (4.9 ) 178.25 178.31 - Hilton 141.20
139.95 0.9 131.33 132.82 (1.1 ) � Total hotels 133.21 132.78 0.3
138.14 136.42 1.3 � RevPAR ($) Three Months Ended September 30,
Nine Months Ended September 30, 2008 2007 %Variance 2008 2007
%Variance Embassy Suites Hotels 105.98 100.17 5.8 109.58 104.61 4.8
Holiday Inn 93.86 88.75 5.8 90.94 82.20 10.6 Sheraton and Westin
80.08 82.89 (3.4 ) 85.28 88.25 (3.4 ) Doubletree 98.12 103.90 (5.6
) 110.21 105.06 4.9 Renaissance and Hotel 480(a) 81.60 96.87 (15.8
) 119.44 131.80 (9.4 ) Hilton 100.95 108.52 (7.0 ) 85.04 84.50 0.6
� Total hotels 97.80 95.29 2.6 101.69 97.77 4.0 (a) Decreases in
occupancy, ADR and RevPAR are principally related to
renovation-related disruption at Hotel 480 Union Square. We have
included historical room statistics for two hotels acquired in
December 2007 for periods, prior to our ownership of these hotels,
for comparison purposes. Detailed Operating Statistics for FelCor�s
Top Markets (85 consolidated hotels) � Occupancy (%) Three Months
Ended September 30, � Nine Months Ended September 30, 2008 � 2007 �
%Variance 2008 � 2007 � %Variance South Florida 70.9 61.5 15.3 78.7
73.5 7.2 Atlanta 74.0 74.3 (0.4 ) 75.4 75.6 (0.3 ) Los Angeles area
81.3 79.7 2.0 77.7 78.8 (1.4 ) San Francisco area 83.5 85.6 (2.5 )
78.1 77.2 1.2 Orlando 72.6 73.2 (0.8 ) 78.4 77.6 1.1 Dallas 67.5
59.0 14.3 68.6 65.1 5.5 Minneapolis 78.6 84.0 (6.4 ) 73.9 77.3 (4.4
) Phoenix 55.3 56.1 (1.5 ) 66.0 68.6 (3.8 ) Northern New Jersey
75.6 77.8 (2.8 ) 72.5 71.5 1.5 San Diego 80.4 76.3 5.3 81.3 76.2
6.7 Washington, D.C. 62.1 66.6 (6.8 ) 58.9 67.7 (13.0 ) Chicago
76.4 82.1 (6.9 ) 74.4 72.0 3.3 San Antonio 85.9 78.7 9.2 82.1 78.0
5.2 Philadelphia 79.6 77.6 2.5 74.7 68.7 8.7 Boston 85.0 79.6 6.8
79.8 67.3 18.5 ADR ($) Three Months Ended September 30, Nine Months
Ended September 30, 2008 2007 %Variance 2008 2007 %Variance South
Florida 112.91 111.43 1.3 152.82 153.29 (0.3 ) Atlanta 119.91
119.91 - 122.57 122.05 0.4 Los Angeles area 167.55 170.50 (1.7 )
161.27 159.98 0.8 San Francisco area 153.86 149.81 2.7 144.74
140.64 2.9 Orlando 91.33 90.58 0.8 107.41 105.83 1.5 Dallas 119.72
119.49 0.2 124.75 124.41 0.3 Minneapolis 154.63 147.92 4.5 147.34
143.61 2.6 Phoenix 114.52 109.45 4.6 148.71 146.23 1.7 Northern New
Jersey 163.52 157.09 4.1 163.89 155.90 5.1 San Diego 160.07 157.76
1.5 160.83 155.45 3.5 Washington, D.C. 141.53 156.22 (9.4 ) 155.11
166.00 (6.6 ) Chicago 129.37 133.57 (3.1 ) 127.88 131.51 (2.8 ) San
Antonio 112.59 110.80 1.6 114.04 110.49 3.2 Philadelphia 148.20
137.41 7.9 148.84 136.45 9.1 Boston 161.05 164.62 (2.2 ) 156.12
156.12 - RevPAR ($) Three Months Ended September 30, Nine Months
Ended September 30, 2008 2007 %Variance 2008 2007 %Variance South
Florida 80.07 68.52 16.9 120.33 112.61 6.9 Atlanta 88.77 89.14 (0.4
) 92.41 92.31 0.1 Los Angeles area 136.15 135.86 0.2 125.24 126.03
(0.6 ) San Francisco area 128.52 128.30 0.2 113.02 108.53 4.1
Orlando 66.34 66.29 0.1 84.25 82.15 2.6 Dallas 80.79 70.55 14.5
85.64 80.95 5.8 Minneapolis 121.49 124.22 (2.2 ) 108.87 110.95 (1.9
) Phoenix 63.31 61.45 3.0 98.09 100.30 (2.2 ) Northern New Jersey
123.62 122.14 1.2 118.88 111.43 6.7 San Diego 128.66 120.38 6.9
130.75 118.50 10.3 Washington, D.C. 87.95 104.12 (15.5 ) 91.34
112.39 (18.7 ) Chicago 98.81 109.60 (9.8 ) 95.10 94.69 0.4 San
Antonio 96.71 87.16 11.0 93.58 86.16 8.6 Philadelphia 117.90 106.62
10.6 111.19 93.74 18.6 Boston 136.92 131.01 4.5 124.59 105.10 18.5
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 Income (Loss) to FFO, Adjusted FFO and
Same-Store Adjusted FFO (in thousands, except per share and unit
data) � Three Months Ended September 30, � 2008 � 2007 Dollars �
Shares � Per Share Amount Dollars � Shares � Per Share Amount Net
income (loss) $ (41,640 ) $ 7,993 Preferred dividends � (9,678 ) �
(9,678 ) Net income (loss) applicable to common stockholders
(51,318 ) 61,828 $ (0.83 ) (1,685 ) 61,652 $ (0.03 ) Depreciation
and amortization 36,069 - 0.59 28,523 - 0.46 Depreciation,
unconsolidated entities and discontinued operations 3,998 - 0.06
2,895 - 0.05 Gain on sale of hotels (1,193 ) - (0.02 ) - - - Loss
on sale of hotels in unconsolidated entities - - - 189 - - Minority
interest in FelCor LP (1,094 ) 1,346 (0.01 ) (36 ) 1,354 (0.01 )
Conversion of options and unvested restricted stock � - - � - � -
346 � - FFO (13,538 ) 63,174 (0.21 ) 29,886 63,352 0.47 Impairment
loss 36,692 - 0.59 - - - Impairment loss, unconsolidated
subsidiaries 3,750 - 0.06 - - - Hurricane loss(a) 1,669 - 0.03 - -
- Hurricane loss, unconsolidated subsidiaries 50 - - - - -
Conversion costs(b) 118 - - - - - Conversion of options and
unvested restricted stock � - 121 � - � - - � - Adjusted FFO 28,741
63,295 0.45 29,886 63,352 0.47 FFO from discontinued operations - -
- 210 - - FFO from acquired hotels(c) - - - (3,804 ) - (0.06 ) Gain
on sale of condominiums � - - � - � (354 ) - � - Same-Store
Adjusted FFO $ 28,741 63,295 $ 0.45 $ 25,938 63,352 $ 0.41 (a) This
represents clean up costs and insurance deductible. (b) These costs
relate to the conversion of our Hotel 480 Union Square in San
Francisco to a Marriott. The conversion is expected to be completed
by early 2009. (c) We have included amounts for two hotels acquired
in December 2007, prior to our ownership of these hotels, for
comparison purposes. Reconciliation of Net Income (Loss) to FFO,
Adjusted FFO and Same-Store Adjusted FFO (in thousands, except per
share and unit data) � Nine Months Ended September 30, 2008 � 2007
Dollars � Shares � Per Share Amount Dollars � Shares � Per Share
Amount Net income (loss) $ (30,851 ) $ 92,331 Preferred dividends �
(29,034 ) � (29,034 ) Net income (loss) applicable to common
stockholders (59,885 ) 61,827 $ (0.97 ) 63,297 61,908 $ 1.02
Depreciation and amortization 104,909 - 1.70 80,729 - 1.30
Depreciation, unconsolidated entities and discontinued operations
11,128 - 0.18 8,606 - 0.14 Gain on involuntary conversion (3,095 )
- (0.05 ) - - - Gain on sale of hotels (1,193 ) - (0.02 ) (27,830 )
- (0.45 ) Gain on sale of hotels in unconsolidated entities - - -
(10,993 ) - (0.18 ) Minority interest in FelCor LP (1,280 ) 1,351
(0.04 ) 1,375 1,354 (0.01 ) Conversion of options and unvested
restricted stock � - 114 � - � - - � - FFO 50,584 63,292 0.80
115,184 63,262 1.82 Abandoned projects - - - 22 - - Charges related
to early extinguishment of debt, net of minority interests - - -
811 - 0.01 Impairment loss 53,823 - 0.85 - - - Impairment loss,
unconsolidated subsidiaries 3,750 - 0.06 - - - Hurricane loss(a)
1,669 - 0.03 - - - Hurricane loss, unconsolidated subsidiaries 50 -
- - - - Conversion costs(b) � 481 - � - � - - � - Adjusted FFO
110,357 63,292 1.74 116,017 63,262 1.83 FFO from discontinued
operations 13 - - (7,625 ) - (0.12 ) FFO from acquired hotels(c) -
- - 1,826 - 0.03 Gain on sale of condominiums � - - � - � (18,493 )
- � (0.29 ) Same-Store Adjusted FFO $ 110,370 63,292 $ 1.74 $
91,725 63,262 $ 1.45 (a) This represents clean up costs and
insurance deductible. (b) These costs relate to the conversion of
our Hotel 480 Union Square in San Francisco to a Marriott. The
conversion is expected to be completed by early 2009. (c) We have
included amounts for two hotels acquired in December 2007, prior to
our ownership of these hotels, for comparison purposes.
Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and
Same-Store Adjusted EBITDA (in thousands) � � Three Months Ended
Nine Months Ended September 30, September 30, 2008 � 2007 2008 �
2007 Net income (loss) $ (41,640 ) $ 7,993 $ (30,851 ) $ 92,331
Depreciation and amortization 36,069 28,523 104,909 80,729
Depreciation, unconsolidated entities and discontinued operations
3,998 2,895 11,128 8,606 Interest expense 24,368 24,865 76,112
73,611 Interest expense, unconsolidated entities and discontinued
operations 1,282 1,508 4,205 4,570 Amortization of stock
compensation 1,072 516 3,795 3,130 Minority interest in FelCor
Lodging LP � (1,094 ) � (36 ) � (1,280 ) � 1,375 EBITDA 24,055
66,264 168,018 264,352 Gain on sale of hotels (1,193 ) - (1,193 )
(27,830 ) Gain on sale of hotels in unconsolidated entities - 189 -
(10,993 ) Gain on involuntary conversion - - (3,095 ) - Abandoned
projects - - - 22 Charges related to early extinguishment of debt,
net of minority interests - - - 811 Impairment loss 36,692 - 53,823
- Impairment loss, unconsolidated entities 3,750 - 3,750 -
Hurricane loss(a) 1,669 - 1,669 - Hurricane loss, unconsolidated
entities 50 - 50 - Conversion costs (b) � 118 � - � 481 � -
Adjusted EBITDA 65,141 66,453 223,503 226,362 Adjusted EBITDA from
discontinued operations - 210 13 (7,653 ) EBITDA from acquired
hotels(c) - (683 ) - 11,187 Gain on sale of condominiums � - � (354
) � - � (18,493 ) Same-Store Adjusted EBITDA $ 65,141 $ 65,626 $
223,516 $ 211,403 (a) This represents clean up costs and insurance
deductible. (b) These costs relate to the conversion of our Hotel
480 Union Square in San Francisco to a Marriott. The conversion is
expected to be completed by early 2009. (c) We have included
amounts for two hotels acquired in December 2007, prior to our
ownership of these hotels, for comparison purposes. Reconciliation
of Same-Store Adjusted EBITDA to Hotel EBITDA (in thousands) � �
Three Months Ended September 30, Nine Months Ended September 30,
2008 � 2007 2008 � 2007 Same-Store Adjusted EBITDA $ 65,141 $
65,626 $ 223,516 $ 211,403 Other revenue (1,396 ) (1,766 ) (2,655 )
(2,612 ) Equity in income from unconsolidated subsidiaries
(excluding interest, depreciation, impairment and hurricane
expense) (6,926 ) (8,018 ) (19,776 ) (22,860 ) Minority interest in
other partnerships (excluding interest and depreciation expense)
784 80 2,834 108 Consolidated hotel lease expense 14,511 16,204
42,444 47,729 Unconsolidated taxes, insurance and lease expense
(2,132 ) (1,990 ) (6,328 ) (5,588 ) Interest income (254 ) (2,210 )
(1,227 ) (4,878 ) Other expenses (excluding abandoned projects and
conversion costs) 928 1,298 2,398 1,691 Corporate expenses
(excluding amortization expense of stock compensation) � 4,316 �
3,175 � 13,284 � 12,602 Hotel EBITDA $ 74,972 $ 72,399 $ 254,490 $
237,595 Reconciliation of Net Income (Loss) to Hotel EBITDA (in
thousands) � � Three Months Ended September 30, Nine Months Ended
September 30, 2008 � 2007 2008 � 2007 Net income (loss) $ (41,640 )
$ 7,993 $ (30,851 ) $ 92,331 Discontinued operations (1,167 ) 206
(1,154 ) (33,893 ) EBITDA from acquired hotels(a) - (683 ) - 11,187
Equity in loss (income) from unconsolidated entities 2,773 (3,030 )
1,064 (19,511 ) Minority interests (955 ) (347 ) (180 ) (463 )
Consolidated hotel lease expense 14,511 16,204 42,444 47,729
Unconsolidated taxes, insurance and lease expense (2,132 ) (1,990 )
(6,328 ) (5,588 ) Interest expense, net 24,114 22,655 74,886 68,734
Corporate expenses 5,388 3,690 17,079 15,732 Depreciation and
amortization 36,069 28,523 104,909 80,729 Impairment loss 36,692 -
53,823 - Hurricane loss(b) 1,669 - 1,669 - Other expenses 1,046
1,298 2,879 1,713 Gain on involuntary conversion - - (3,095 ) -
Gain on sale of condominiums - (354 ) - (18,493 ) Other revenue �
(1,396 ) � (1,766 ) � (2,655 ) � (2,612 ) Hotel EBITDA $ 74,972 $
72,399 $ 254,490 $ 237,595 (a) We have included amounts for two
hotels acquired in December 2007, prior to our ownership of these
hotels, for comparison purposes. (b) This represents clean up costs
and insurance deductible. Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands) � � Three Months Ended Nine Months Ended
September 30, September 30, 2008 � 2007 2008 � 2007 Total revenues
$ 277,729 $ 258,462 $ 875,772 $ 773,378 Other revenue (1,396 )
(1,766 ) (2,655 ) (2,612 ) Revenue from acquired hotels(a) � - �
14,640 � - � 68,811 Same-Store hotel operating revenue 276,333
271,336 873,117 839,577 Same-Store hotel operating expenses(a) �
(201,361 ) � (198,937 ) � (618,627 ) � (601,982 ) Hotel EBITDA $
74,972 $ 72,399 $ 254,490 $ 237,595 Hotel EBITDA margin(b) 27.1%
26.7% 29.1% 28.3% (a) We have included amounts for two hotels
acquired in December 2007, prior to our ownership of these hotels,
for comparison purposes. (b) Hotel EBITDA as a percentage of hotel
operating revenue. Reconciliation of Total Operating Expenses to
Same-Store Hotel Operating Expenses (dollars in thousands) � �
Three Months Ended Nine Months Ended September 30, September 30,
2008 � 2007 2008 � 2007 Total operating expenses $ 294,604 $
231,339 $ 835,102 $ 684,673 Unconsolidated taxes, insurance and
lease expense 2,132 1,990 6,328 5,588 Consolidated hotel lease
expense (14,511 ) (16,204 ) (42,444 ) (47,729 ) Corporate expenses
(5,388 ) (3,690 ) (17,079 ) (15,732 ) Depreciation and amortization
(36,069 ) (28,523 ) (104,909 ) (80,729 ) Impairment loss (36,692 )
- (53,823 ) - Hurricane loss(a) (1,669 ) - (1,669 ) - Other
expenses (1,046 ) (1,298 ) (2,879 ) (1,713 ) Expenses from acquired
hotels(b) � - � 15,323 � - � 57,624 Same-Store Hotel operating
expenses $ 201,361 $ 198,937 $ 618,627 $ 601,982 (a) This
represents clean up costs and insurance deductible. (b) We have
included amounts for two hotels acquired in December 2007, prior to
our ownership of these hotels, for comparison purposes.
Reconciliation of Ratio of Operating Income (Loss) to Total
Revenues to Hotel EBITDA Margin � � Three Months Ended September
30, Nine Months Ended September 30, 2008 � 2007 2008 � 2007 Ratio
of operating income (loss) to total revenues (6.1 )% 10.0 % 4.6 %
10.5 % Other revenue (0.5 ) (0.7 ) (0.3 ) (0.3 ) Revenue from
acquired hotels(a) - 5.4 - 8.2 Unconsolidated taxes, insurance and
lease expense (0.7 ) (0.7 ) (0.7 ) (0.7 ) Consolidated hotel lease
expense 5.2 5.9 4.9 5.7 Other expenses 0.4 0.5 0.3 0.2 Corporate
expenses 2.0 1.4 2.0 1.9 Depreciation and amortization 13.0 10.5
12.0 9.6 Impairment loss 13.2 - 6.1 - Hurricane loss(b) 0.6 - 0.2 -
Expenses from acquired hotels(a) - � (5.6 ) - � (6.8 ) Hotel EBITDA
margin 27.1 % 26.7 % 29.1 % 28.3 % (a) We have included amounts for
two hotels acquired in December 2007, prior to our ownership of
these hotels, for comparison purposes. (b) This represents clean up
costs and insurance deductible. Reconciliation of Forecasted Net
Loss to Forecasted FFO, Adjusted FFO, EBITDA and Adjusted EBITDA
(in millions, except per share and unit data) � Full Year 2008
Guidance Low Guidance � High Guidance Dollars � Per Share Amount
Dollars � Per Share Amount Net loss $ (47 ) $ (45 ) Preferred
dividends � (39 ) � (39 ) Net loss applicable to common
stockholders (86 ) $ (1.39 ) (84 ) $ (1.36 ) Depreciation 154 154
Impairment charge 58 58 Gain from asset dispositions (4 ) (4 )
Hurricane loss 2 2 Minority interest in FelCor LP � (2 ) � (2 )
Adjusted FFO $ 122 $ 1.93 (a) $ 124 $ 1.96 (a) Net loss $ (47 ) $
(45 ) Depreciation 154 154 Impairment charge 58 58 Gain from asset
dispositions (4 ) (4 ) Hurricane loss 2 2 Interest expense 106 106
Amortization expense 6 6 Minority interest in FelCor LP � (2 ) � (2
) Adjusted EBITDA $ 273 $ 275 (a) Weighted average shares and units
are 63.3�million. 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 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 (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 (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, EBITDA and FFO, is
beneficial to an investor�s better understanding of our operating
performance. -- Gains and losses related to early extinguishment of
debt and interest rate swaps � We exclude gains and losses related
to early 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 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. To derive same-store
comparisons, we have adjusted Adjusted FFO and Adjusted EBITDA to
remove discontinued operations and gains on sales of condominium
units; and have added the historical results of operations from the
two hotels acquired in December 2007. Hotel EBITDA and Hotel EBITDA
Margin Hotel EBITDA and Hotel EBITDA margin are commonly used
measures of performance in the 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, these measures facilitate
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 corporate-level expenses, depreciation
and expenses related to our capital structure. We eliminate
corporate-level costs and expenses because we believe
property-level results provide investors with supplemental
information with respect to the ongoing operating performance of
our hotels and the effectiveness of management on a property-level
basis. We eliminate depreciation and amortization, even though they
are property-level expenses, because we do not believe that these
non-cash expenses, which are based on historical cost accounting
for real estate assets and implicitly assume that the value of real
estate assets diminish predictably over time, accurately reflect an
adjustment in the value of our assets. We also eliminate
consolidated percentage rent paid to unconsolidated entities, which
is effectively eliminated by minority interest expense 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 including
the historical results of operations from the two hotels acquired
in December�2007. Limitations of Non-GAAP Measures Our management
and Board of Directors use FFO, 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 FFO,
Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel
EBITDA margin 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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