FelCor Lodging Trust Incorporated (NYSE: FCH) today reported
operating results for the third quarter ended September 30,
2009.
“We continue to accomplish the goals we set at the beginning of
the year: extend debt maturities; ensure adequate liquidity; and
operate our hotels as efficiently as possible. We refinanced our
senior corporate debt with new senior notes, thereby pushing the
maturity to 2014 and substantially removing the Company’s
refinancing risk,” said Richard A. Smith, FelCor’s President and
Chief Executive Officer. “I am pleased with our market share gains
and flow-through, despite lower than expected RevPAR. We continue
to lead other lodging companies in these three areas. Our
high-quality and well-located portfolio improved market share by
approximately two percent during the quarter and intense cost
containment limited the flow-through of reduced revenue to the
bottom line to only 51 percent, which was better than expected,”
continued Mr. Smith.
Summary:
- Completed the sale of $636
million of senior notes due 2014 that allowed us to refinance our
existing senior notes that mature in 2011.
- RevPAR decreased 17.8 percent
for the third quarter at our 85 consolidated hotels.
- Market share increased
approximately two percent for the third quarter at our 85
consolidated hotels.
- RevPAR increased 53 percent in
the third quarter at the San Francisco Marriott Union Square
(following the completion of the redevelopment in June).
- Hotel expenses declined 11.6
percent during the third quarter. Our strict expense controls
limited the effect of reduced revenue on flow-through to Hotel
EBITDA to 51 percent, compared to the prior year, which was better
than our expectations. Hotel EBITDA margin decreased 490 basis
points.
- Adjusted FFO per share was $0.14
for the third quarter. Adjusted EBITDA was $45.3 million for the
quarter. This met the low end of our expectations.
- Net loss for the third quarter
was $25.5 million.
Third Quarter Operating Results:
Revenue per available room (“RevPAR”) for our 85 consolidated
hotels decreased by 17.8 percent to $80.39, driven by
decreases in both average daily rate (“ADR”) (a 12.5 percent
decrease to $116.51) and occupancy (a 6.0 percent decrease to
69.0 percent), compared to the same period in 2008.
“Once the economy begins to improve, we expect the lodging
industry will lag behind the broader recovery. As such, there has
not yet been a widespread improvement in demand trends and the
shift of the customer mix continues to pressure rates. However,
some markets are showing signs of improvement. Approximately 40
percent of our hotels grew occupancy in September compared to prior
year, and that trend is accelerating each month,” added Mr.
Smith.
Adjusted Funds from Operations (“FFO”) for the third quarter of
2009 was $9.0 million, or $0.14 per share, compared to
$28.7 million, or $0.45 per share, for the same period in
2008.
Hotel EBITDA for the third quarter of 2009 decreased to
$50.9 million, compared to $75.0 million in the same
period in 2008. Hotel EBITDA margin was 22.2 percent, a 490 basis
point decrease compared to the same period in 2008. Hotel operating
expenses decreased 11.6 percent compared to prior year. The decline
in expenses reflects various factors including: decreased labor
costs, including permanent hotel staffing reductions; decreased
other room expenses, such as guest transportation and in-room
amenities; decreased incentive management fees; and improved food
and beverage efficiencies. Prior to accounting for taxes, insurance
and land leases, Hotel EBITDA margins declined only 397 basis
points. Hotel EBITDA represents EBITDA generated by our hotels
before corporate expenses and joint venture adjustments.
Adjusted EBITDA for the third quarter of 2009 was
$45.3 million, compared to $65.1 million for the same
period in 2008.
Net loss applicable to common stockholders for the third quarter
of 2009 was $34.8 million, or $0.55 per share, compared to a
net loss of $51.3 million, or $0.83 per share, for the same
period in 2008.
EBITDA, Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO
and Adjusted FFO are all non-GAAP financial measures. See our
discussion of “Non-GAAP Financial Measures” beginning on
page 13 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, 2009, we had $1.6 billion of
consolidated debt outstanding with a weighted average interest rate
of 5.5 percent, and our cash and cash equivalents totaled
$128 million.
In October, we completed the sale and issuance of
$636 million in aggregate principal amount of senior notes.
The new notes bear an annual interest rate of 10 percent and mature
in 2014. The net proceeds of the offering were approximately
$558 million after original issue discount and other fees and
expenses related to the offering. The proceeds were used to fund
our purchase of $427 million of our floating-rate notes and 8½
percent notes, both of which mature in 2011, with the remainder
available for general corporate purposes. There are
$87 million of 8½ percent notes that were not tendered and
remain outstanding. We have called for redemption of the remaining
$1 million of floating-rate notes that were not tendered.
We have received term sheets from the special servicer to extend
the maturity dates on two loans, totaling $14 million, secured
by the Embassy Suites - Boca Raton and Doubletree – Wilmington that
matured in June 2009. We are also in various stages of discussions
regarding all of our mortgage loans that mature during 2010.
Several of these loans have been transferred to the special
servicers so that we may begin negotiations to refinance and/or
extend their maturity.
“I am pleased with our progress to extend and refinance our
maturing debt and ensure we have adequate liquidity. Most
importantly, we refinanced our only corporate-level debt, the
senior notes that were to mature in 2011, with new senior notes
that mature in 2014. While the interest rate for the new notes is
higher than the existing notes, we have substantially eliminated
our debt maturity risk. We have also strengthened our liquidity
position, which provides us the capacity and flexibility to address
the additional interest expense on the new notes and the economic
conditions that continue to affect travel demand. We have made good
progress toward extending the mortgage debt that matures in 2010
and continue to work with lenders,” said Andrew J. Welch, FelCor’s
Executive Vice President and Chief Financial Officer.
Capital Expenditures and Development:
For the quarter and nine months ended September 30, 2009,
we spent $17.2 million and $65.4 million, respectively,
on capital expenditures at our hotels (including our pro rata share
of joint ventures). Included in the capital expenditures for the
nine months is $34 million to complete our renovation and
redevelopment projects.
In June, we completed the final phase of the comprehensive
redevelopment at the San Francisco Marriott Union Square. Third
quarter RevPAR increased 53 percent at this hotel (which operated
as Hotel 480 prior to April), compared to the prior year, and its
market share increased by 98 percent, exceeding expectations. The
market share index for this hotel was 107 percent in the quarter
compared to 80 percent for calendar year 2007 (before its
renovation and rebranding).
Outlook:
We are revising our 2009 outlook in light of the additional
interest expense associated with our recent notes offering. In
addition, we assume all of the untendered 8½ percent notes
($87 million) remain outstanding for the duration of the year,
and we hold significant excess cash on our balance sheet. We are
evaluating our options with regard to the future use of our excess
cash.
We also are revising our 2009 outlook to reflect updated revenue
expectations, which include actual RevPAR results for October.
Occupancy declined only 2.4 percent and RevPAR declined
approximately 12.6 percent for October at our 85 consolidated
hotels. The volatile economic conditions continue to hinder our
ability to predict demand patterns and its effect on RevPAR. We
continue to be aggressive in mixing the customer segments to
optimize revenue and work with our operators to achieve the most
efficient cost structure to correspond with demand trends. While
the occupancy decline in all segments has continued to moderate
throughout the year, the premium corporate and group segments
remain weak. As a result, we expect fewer room nights for the
premium corporate and group segments during the fourth quarter,
compared to our previous expectations. This shift in the customer
mix will result in lower ADR and food & beverage revenue.
However, due to strict expense controls, we still expect
flow-through to remain strong, relative to current market
conditions.
We will continue to benefit from our high-quality portfolio, the
renovations we completed in 2008 and the redevelopment of the San
Francisco Marriott Union Square. As a result, we expect our hotels
will continue to gain market share from their competitive sets and
RevPAR at our portfolio to outperform our peer group and the
upper-upscale segment.
Assuming full-year 2009 RevPAR for our 85 consolidated hotels
decreases between 18 and 18.5 percent, we anticipate:
- Adjusted EBITDA to be between
$174 million and $176 million;
- Adjusted FFO per share to be
between $0.31 and $0.34;
- Net loss to be between $113
million and $111 million; and
- Interest expense to be
approximately $110 million.
FelCor, a real estate investment trust, is the nation’s largest
owner of upper-upscale, all-suite hotels. FelCor owns interests in
87 hotels and resorts, located in 23 states and Canada. FelCor’s
portfolio consists primarily of upper-upscale hotels, which are
flagged under global brands - Embassy Suites Hotels®, Doubletree ®,
Hilton®, Marriott®, 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 4, 2009, at 10:00 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.
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, dispositions and debt refinancing, 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, 2009.
TABLE OF CONTENTS
PAGE
Consolidated Statements of Operations(a) 6 Consolidated Balance
Sheets(a) 7 Capital Expenditures 8 Supplemental Financial Data 8
Debt Summary 9 Hotel Portfolio Composition 10 Detailed Operating
Statistics by Brand 11 Detailed Operating Statistics for FelCor’s
Top Markets 12 Non-GAAP Financial Measures 13
(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 Ended Nine Months Ended
September 30, September 30, 2009
2008 2009 2008 Revenues: Hotel
operating revenue: Room $ 184,103 $ 223,968 $ 557,491 $ 693,789
Food and beverage 30,370 36,357 103,786 131,875 Other operating
departments 14,456 16,008 43,234 47,453 Other revenue 1,280
1,396 2,554 2,655 Total revenues
230,209 277,729 707,065 875,772 Expenses:
Hotel departmental expenses: Room 50,202 55,563 145,741 167,085
Food and beverage 26,728 30,747 84,133 102,289 Other operating
departments 6,765 7,192 19,257 21,391 Other property related costs
66,492 76,947 199,711 230,646 Management and franchise fees 11,361
13,573 34,278 45,448 Taxes, insurance and lease expense 25,355
29,718 75,411 87,884 Corporate expenses 4,471 5,388 15,829 17,079
Depreciation and amortization 37,982 36,069 112,024 104,909
Impairment loss 2,080 36,692 3,448 53,823 Hurricane loss - 1,669 -
1,669 Other expenses 1,031 1,046 3,528
2,879 Total operating expenses 232,467 294,604
693,360 835,102 Operating income (loss) (2,258 ) (16,875 )
13,705 40,670 Interest expense, net (24,427 ) (24,114 ) (68,501 )
(74,886 ) Charges related to debt extinguishment - -
(594 ) - Loss before equity in income (loss) from
unconsolidated entities
(26,685
)
(40,989
)
(55,390
)
(34,216
)
Equity in income (loss) from unconsolidated entities 488 (2,773 )
(3,197 ) (1,064 ) Gain on sale of assets 723 - 723 - Gain on
involuntary conversion - - - 3,095 Loss
from continuing operations (25,474 ) (43,762 ) (57,864 ) (32,185 )
Discontinued operations - 1,193 - 1,180
Net loss (25,474 ) (42,569 ) (57,864 ) (31,005 ) Net loss (income)
attributable to noncontrolling
interests in other
partnerships
174
(165
)
66
(1,126
)
Net loss attributable to redeemable noncontrolling
interests in FelCor LP
160
1,094
399
1,280
Net loss attributable to FelCor (25,140 ) (41,640 ) (57,399 )
(30,851 ) Preferred dividends (9,678 ) (9,678 )
(29,034 ) (29,034 ) Net loss attributable to FelCor
common stockholders $ (34,818 ) $ (51,318 ) $ (86,433 ) $ (59,885 )
Basic and diluted per common share data: Loss from continuing
operations $ (0.55 ) $ (0.85 ) $ (1.37 ) $ (1.00 ) Net loss $ (0.55
) $ (0.83 ) $ (1.37 ) $ (0.99 ) Basic and diluted weighted average
common shares outstanding
63,086
61,828
63,121
61,827
Cash dividends declared on common stock $ - $ 0.15 $ - $ 0.85
Consolidated Balance Sheets
(unaudited, in thousands)
September 30, December 31, 2009
2008
ASSETS
Investment in hotels, net of accumulated depreciation of $921,197
at September 30, 2009 and $816,271 at December 31, 2008 $ 2,228,839
$ 2,279,026 Investment in unconsolidated entities 86,690 94,506
Cash and cash equivalents 128,063 50,187 Restricted cash 19,774
13,213 Accounts receivable, net of allowance for doubtful accounts
of $274 at September 30, 2009 and $521 at December 31, 2008 30,894
35,240 Deferred expenses, net of accumulated amortization of
$12,676 at September 30, 2009 and $13,087 at December 31, 2008
9,957 5,556 Other assets 36,805 34,541
Total assets $ 2,541,022 $ 2,512,269
LIABILITIES AND EQUITY
Debt, net of discount of $1,140 at September 30, 2009 and $1,544 at
December 31, 2008
$ 1,632,910 $ 1,551,686 Preferred distributions payable 27,902
8,545 Accrued expenses and other liabilities 137,419
132,604 Total liabilities 1,798,231
1,692,835 Commitments and contingencies
Redeemable noncontrolling interests in FelCor LP at redemption
value, 296 units issued and outstanding at September 30, 2009 and
December 31, 2008 1,340 545
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, 2009 and December 31, 2008 309,362 309,362 Series C Cumulative
Redeemable Preferred Stock, 68 shares, liquidation value of
$169,950, issued and outstanding at September 30, 2009 and December
31, 2008 169,412 169,412 Common stock, $.01 par value, 200,000
shares authorized and 69,413 shares issued and outstanding,
including shares in treasury, at September 30, 2009 and December
31, 2008 694 694 Additional paid-in capital 2,037,084 2,045,482
Accumulated other comprehensive income 22,471 15,347 Accumulated
deficit (1,732,420 ) (1,645,947 ) Less: Common stock in treasury,
at cost, of 4,725 shares at September 30, 2009 and 5,189 shares at
December 31, 2008 (88,366 ) (99,245 ) Total
FelCor stockholders’ equity 718,237 795,105 Noncontrolling
interests in other partnerships 23,214 23,784
Total equity 741,451 818,889
Total liabilities and equity $ 2,541,022 $ 2,512,269
Capital Expenditures
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30, 2009
2008 2009 2008 Improvements and
additions to consolidated hotels $ 16,926 $ 35,274 $ 62,465 $
108,899
Consolidated joint venture
partners’ pro rata share
of additions to hotels (381 ) (787 ) (758 ) (3,005 )
Pro rata share of unconsolidated
additions to hotels
693 2,592 3,646
13,898 Total additions to hotels(a) $ 17,238 $ 37,079
$ 65,353 $ 119,792
(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
2009 2008 Common shares outstanding 64,687 64,224
Units outstanding 296 296 Combined
shares and units outstanding 64,983 64,520 Common stock price $
4.53 $ 1.84 Equity capitalization $ 294,373 $ 118,717
Series A preferred stock 309,362 309,362 Series C preferred stock
169,412 169,412 Consolidated debt 1,632,910 1,551,686
Noncontrolling interests of consolidated debt (3,999 ) (4,078 ) Pro
rata share of unconsolidated debt 108,103 112,220 Cash and cash
equivalents (128,063 ) (50,187 ) Total enterprise
value (TEV) $ 2,382,098 $ 2,207,132
Debt Summary
(dollars in thousands)
Interest Rate at Maturity Consolidated
Encumbered Hotels September 30, 2009 Date
Debt Senior term notes(a) none 9.00%(b) June 2011 $299,602
Senior term notes(a) none L +1.875 December 2011 215,000 Total
senior debt 6.29(c) 514,602 CMBS debt 12 hotels(d) L
+0.93(e) November 2011(f) 250,000 Mortgage debt 9 hotels(g) L
+3.50(h) August 2011(i) 200,800 Mortgage debt(j) Esmeralda-REN,
Vinoy-REN
L +1.55(k) May 2012(l) 176,483 CMBS debt(j) 8 hotels(m) 8.70 May
2010 159,205 Mortgage debt 7 hotels(n) 9.02 April 2014 118,415
Mortgage debt 6 hotels(o) 8.73 May 2010 113,628 CMBS debt(j) 5
hotels(p) 6.66 June-August 2014 71,331 CMBS debt(j) Boca Raton-ES,
Wilmington-DT
6.15 June 2009(q) 14,277 CMBS debt Indianapolis North-ES 5.81 July
2016 11,843 Capital lease and other St. Paul-ES and other 9.58
various 2,326 Total mortgage debt 53 hotels 5.20(c) 1,118,308 Total
5.54%(c)
$1,632,910
(a) In October 2009, we issued $636 million in aggregate
principal amount of our 10% senior notes due 2014. The new notes
are secured by mortgages and related security interests on up to 14
hotels. A portion of the net proceeds from the sale of these notes
was used to repurchase $214 million of our floating-rate notes
and $213 million of our 8½% notes.
(b) As a result of a rating down-grade in February 2009, the
interest rate on our 8½% notes due 2011 increased by 50 basis
points to 9.0%.
(c) Interest rates are calculated based on the weighted average
debt outstanding at September 30, 2009.
(d) The hotels that secure this debt are: 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.
(e) We have purchased an interest rate cap that caps LIBOR at
7.8% and expires in November 2010 for this notional
amount.
(f) The maturity date assumes that we will exercise the
remaining one-year extension option that is exercisable, at our
sole discretion, and would extend the current November 2010
maturity to 2011.
(g) The hotels that secure this debt are: 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-HI, and Santa
Monica-HI.
(h) LIBOR for this loan is subject to a 2% floor.
(i) This loan can be extended for as many as two years, subject
to satisfying certain conditions that we expect to satisfy.
(j) The hotels under this debt are subject to separate loan
agreements and are not cross collateralized.
(k) We have purchased interest rate caps that cap LIBOR at 6.5%
and expire in May 2010 for aggregate notional amounts of
$177 million.
(l) We have exercised the first of three successive one-year
extension options that permit, at our sole discretion, the original
May 2009 maturity to be extended to 2012.
(m) The hotels that secure this debt are: South San
Francisco-ES, Orlando South-ES, Atlanta Buckhead-ES, Chicago
Deerfield-ES, New Orleans-ES, Boston Marlboro-ES, Piscataway-ES,
and Corpus Christi-ES.
(n) The hotels that secure this debt are: Milpitas-ES, Napa
Valley-ES, Minneapolis Airport-ES, Birmingham-ES, Baton Rouge-ES,
Miami Airport-ES, and Ft. Lauderdale-ES.
(o) The hotels that secure this debt are: Phoenix Crescent-SH,
Ft. Lauderdale Cypress Creek-SS, Atlanta Galleria-SS, Chicago
O’Hare-SS, Philadelphia Society Hill-SH, and Burlington-SH.
(p) The hotels that secure this debt are: Atlanta Airport-ES,
Austin-DTGS, BWI Airport-ES, Orlando Airport-HI, and Phoenix
Biltmore-ES.
(q) We have received term sheets from the special servicer to
extend the maturity of these loans for two years, which we are
currently evaluating.
Debt Summary –
(continued)
Weighted average interest 5.54% Fixed interest rate
debt to total debt 48.4% Mortgage debt to total assets 44.0%
Hotel Portfolio
Composition
The following tables set forth, as of September 30, 2009,
for 85 Consolidated Hotels distribution by brand, top markets and
location type.
% of % of 2008
Brand
Hotels Rooms Total Rooms
Hotel EBITDA(a)
Embassy Suites Hotels 47 12,132 49 55 Holiday Inn 17 6,306 25 19
Sheraton and Westin 9 3,217 13 12 Doubletree 7 1,471 6 7
Renaissance and Marriott 3 1,321 5 5 Hilton 2 559 2 2
Top Markets
South Florida 5 1,439 6 7 San Francisco area 6 2,138 8 6 Atlanta 5
1,462 6 6 Los Angeles area 4 899 4 6 Orlando 5 1,690 7 5 Dallas 4
1,333 5 4 Philadelphia 2 729 3 4 Northern New Jersey 3 756 3 4
Minneapolis 3 736 3 4 San Diego 1 600 2 4 Phoenix 3 798 3 3 San
Antonio 3 874 4 3 Chicago 3 795 3 3 Boston 2 532 2 3 Washington,
D.C. 1 443 2 2
Location
Suburban 35 8,781 35 34 Urban 20 6,358 25 26 Airport 18 5,788 24 24
Resort 12 4,079 16 16
(a) Hotel EBITDA is more fully described on page 20.
Detailed Operating Statistics by Brand (85
consolidated hotels) Occupancy (%) Three
Months Ended Nine Months Ended
September 30, September 30, 2009
2008 %Variance 2009 2008
%Variance Embassy Suites Hotels 69.8 74.5 (6.4 ) 68.8 75.2
(8.5 ) Holiday Inn 70.4 76.3 (7.8 ) 67.4 74.8 (9.8 ) Sheraton and
Westin 63.6 68.1 (6.7 ) 61.0 68.1 (10.5 ) Doubletree 67.5 73.5 (8.2
) 66.2 76.3 (13.3 ) Renaissance and Marriott 66.9 62.2 7.5 61.7
67.0 (7.9 ) Hilton 77.1 71.5 7.8 65.1 64.8 0.5 Total hotels
69.0 73.4 (6.0 ) 66.9 73.6 (9.2 )
ADR ($) Three
Months Ended Nine Months Ended September 30,
September 30, 2009 2008 %Variance
2009 2008 %Variance Embassy Suites Hotels
123.51 142.26 (13.2 ) 129.79 145.69 (10.9 ) Holiday Inn 107.10
122.98 (12.9 ) 106.93 121.64 (12.1 ) Sheraton and Westin 100.86
117.54 (14.2 ) 109.39 125.19 (12.6 ) Doubletree 114.00 133.42 (14.5
) 125.87 144.39 (12.8 ) Renaissance and Marriott 130.99 131.20 (0.2
) 164.91 178.25 (7.5 ) Hilton 128.93 141.20 (8.7 ) 118.12 131.33
(10.1 ) Total hotels 116.51 133.21 (12.5 ) 122.65 138.14
(11.2 )
RevPAR ($) Three Months Ended Nine
Months Ended September 30, September 30,
2009 2008 %Variance 2009 2008
%Variance Embassy Suites Hotels 86.16 105.98 (18.7 ) 89.28
109.58 (18.5 ) Holiday Inn 75.36 93.86 (19.7 ) 72.11 90.94 (20.7 )
Sheraton and Westin 64.11 80.08 (19.9 ) 66.70 85.28 (21.8 )
Doubletree 76.95 98.12 (21.6 ) 83.32 110.21 (24.4 ) Renaissance and
Marriott 87.58 81.60 7.3 101.79 119.44 (14.8 ) Hilton 99.34 100.95
(1.6 ) 76.89 85.04 (9.6 ) Total hotels 80.39 97.80 (17.8 )
82.00 101.69 (19.4 )
Detailed Operating Statistics for
FelCor’s Top Markets
(85 consolidated
hotels)
Occupancy (%) Three Months Ended
Nine Months Ended September 30, September
30, 2009 2008 % Variance
2009 2008 %Variance South Florida 67.2
70.9 (5.3 ) 73.3 78.7 (6.9 ) San Francisco area 81.6 83.5 (2.3 )
69.5 78.1 (11.0 ) Atlanta 72.9 74.0 (1.6 ) 70.8 75.4 (6.1 ) Los
Angeles area 75.7 81.3 (6.8 ) 72.9 77.7 (6.2 ) Orlando 65.4 72.6
(10.0 ) 68.1 78.4 (13.2 ) Dallas 58.2 67.5 (13.7 ) 59.5 68.6 (13.4
) Philadelphia 72.5 79.6 (8.9 ) 65.6 74.7 (12.2 ) Northern New
Jersey 64.7 75.6 (14.4 ) 62.4 72.5 (14.0 ) Minneapolis 77.8 78.6
(0.9 ) 68.2 73.9 (7.7 ) San Diego 76.9 80.4 (4.3 ) 71.7 81.3 (11.8
) Phoenix 45.8 55.3 (17.1 ) 54.1 66.0 (18.0 ) San Antonio 74.7 85.9
(13.0 ) 72.8 82.1 (11.3 ) Chicago 72.7 76.4 (4.8 ) 65.0 74.4 (12.6
) Boston 84.4 85.0 (0.8 ) 78.4 79.8 (1.8 ) Washington, D.C. 67.5
62.1 8.6 59.1 58.9 0.4
ADR ($) Three Months
Ended Nine Months Ended September 30,
September 30, 2009 2008 % Variance
2009 2008 %Variance South Florida 100.94
112.91 (10.6 ) 132.67 152.82 (13.2 ) San Francisco area 132.57
153.86 (13.8 ) 127.32 144.74 (12.0 ) Atlanta 102.90 119.91 (14.2 )
106.24 122.57 (13.3 ) Los Angeles area 141.69 167.55 (15.4 ) 138.03
161.27 (14.4 ) Orlando 81.21 91.33 (11.1 ) 97.31 107.41 (9.4 )
Dallas 108.58 119.72 (9.3 ) 116.83 124.75 (6.4 ) Philadelphia
127.29 148.20 (14.1 ) 133.86 148.84 (10.1 ) Northern New Jersey
132.09 163.52 (19.2 ) 142.35 163.89 (13.1 ) Minneapolis 128.35
154.63 (17.0 ) 129.03 147.34 (12.4 ) San Diego 123.11 160.07 (23.1
) 127.37 160.83 (20.8 ) Phoenix 95.82 114.52 (16.3 ) 126.23 148.71
(15.1 ) San Antonio 102.64 112.59 (8.8 ) 104.75 114.04 (8.1 )
Chicago 107.30 129.37 (17.1 ) 108.66 127.88 (15.0 ) Boston 138.86
161.05 (13.8 ) 134.62 156.12 (13.8 ) Washington, D.C. 114.73 141.53
(18.9 ) 132.89 155.11 (14.3 )
RevPAR ($) Three
Months Ended Nine Months Ended September 30,
September 30, 2009 2008 % Variance
2009 2008 %Variance South Florida 67.82
80.07 (15.3 ) 97.21 120.33 (19.2 ) San Francisco area 108.24 128.52
(15.8 ) 88.52 113.02 (21.7 ) Atlanta 74.98 88.77 (15.5 ) 75.18
92.41 (18.6 ) Los Angeles area 107.26 136.15 (21.2 ) 100.57 125.24
(19.7 ) Orlando 53.12 66.34 (19.9 ) 66.25 84.25 (21.4 ) Dallas
63.25 80.79 (21.7 ) 69.48 85.64 (18.9 ) Philadelphia 92.26 117.90
(21.7 ) 87.76 111.19 (21.1 ) Northern New Jersey 85.48 123.62 (30.9
) 88.77 118.88 (25.3 ) Minneapolis 99.92 121.49 (17.8 ) 87.96
108.87 (19.2 ) San Diego 94.72 128.66 (26.4 ) 91.36 130.75 (30.1 )
Phoenix 43.93 63.31 (30.6 ) 68.31 98.09 (30.4 ) San Antonio 76.70
96.71 (20.7 ) 76.22 93.58 (18.6 ) Chicago 78.01 98.81 (21.1 ) 70.61
95.10 (25.7 ) Boston 117.14 136.92 (14.4 ) 105.51 124.59 (15.3 )
Washington, D.C. 77.41 87.95 (12.0 ) 78.60 91.34 (13.9 )
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 (in thousands,
except per share data) Three Months Ended September
30, 2009 2008 Dollars
Shares Per Share Amount Dollars
Shares Per Share Amount Net loss $
(25,474 ) $ (42,569 ) Noncontrolling interests 334 929 Preferred
dividends(a) (9,678 ) (9,678 )
Net loss
attributable to FelCor common stockholders (34,818 )
(51,318 ) Less: Dividends declared on unvested restricted stock
compensation - (98 ) Numerator for basic and
diluted loss attributable to common stockholders (34,818 ) 63,086 $
(0.55
)
(51,416 ) 61,828 $ (0.83 ) Depreciation and amortization 37,982 -
0.60 36,069 - 0.59 Depreciation, unconsolidated entities 3,610 -
0.06 3,998 - 0.06 Gain on sale of hotels - - - (1,193 ) - (0.02 )
Noncontrolling interests in FelCor LP (160 ) 296 (0.01 ) (1,094 )
1,346 (0.01 ) Conversion of options and unvested restricted stock
- 445 - 98 - -
FFO 6,614 63,827 0.10 (13,538 ) 63,174 (0.21 )
Impairment loss 2,080 - 0.04 36,692 - 0.58 Impairment loss,
unconsolidated subsidiaries - - - 3,750 - 0.06 Hurricane loss(b) -
- - 1,669 - 0.02 Hurricane loss, unconsolidated subsidiaries - - -
50 - - Conversion costs(c) 117 - - 118 - - Severance costs, net of
noncontrolling interests 41 - - - - - Lease termination costs 117 -
- - - -
Conversion of options and unvested
restricted stock
- - - - 121 -
Adjusted FFO $ 8,969 63,827 $ 0.14 $
28,741 63,295 $ 0.45
(a) We suspended our preferred dividends in March 2009 and
unpaid preferred dividends continue to accrue until paid.
(b) Represents hurricane-related expenses.
(c) Costs related to the conversion of our San Francisco Union
Square hotel to a Marriott.
Reconciliation of Net Loss to
FFO
(in thousands, except per share
data)
Nine Months Ended September 30, 2009
2008 Dollars Shares Per Share
Amount Dollars Shares Per Share
Amount Net loss $ (57,864 ) $ (31,005 ) Noncontrolling
interests 465 154 Preferred dividends(a) (29,034 )
(29,034 )
Net loss attributable to FelCor common
stockholders (86,433 ) (59,885 ) Less: Dividends declared on
unvested restricted stock compensation -
(1,041 ) Numerator for basic and diluted loss attributable to
common stockholders (86,433 ) 63,121 $ (1.37 ) (60,926 ) 61,827 $
(0.99 ) Depreciation and amortization 112,024 - 1.77 104,909 - 1.70
Depreciation, unconsolidated entities 10,898 - 0.17 11,128 - 0.18
Gain on involuntary conversion - - - (3,095 ) - (0.05 ) Gain on
sale of hotels - - - (1,193 ) - (0.02 ) Noncontrolling interests in
FelCor LP (399 ) 296 - (1,280 ) 1,351 (0.04 ) Conversion of options
and unvested restricted stock - 284 -
1,041 114 0.02
FFO 36,090 63,701
0.57 50,584 63,292 0.80 Impairment loss 3,448 - 0.05 53,823 - 0.85
Impairment loss, unconsolidated subsidiaries 2,068 - 0.03 3,750 -
0.06 Charges related to debt extinguishment 594 - 0.01 - - -
Hurricane loss(b) - - - 1,669 - 0.03 Hurricane loss, unconsolidated
subsidiaries - - - 50 - - Conversion costs(c) 447 - 0.01 481 - -
Severance costs, net of noncontrolling interests 550 - 0.01 - - -
Lease termination costs 469 - 0.01
- - -
Adjusted FFO $ 43,666
63,701 $ 0.69 $ 110,357 63,292 $ 1.74
(a) We suspended our preferred dividends in March 2009 and
unpaid preferred dividends continue to accrue until paid.
(b) Represents hurricane-related expenses.
(c) Costs related to the conversion of our San Francisco Union
Square hotel to a Marriott.
Reconciliation of Net Loss to
EBITDA
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30, 2009
2008 2009 2008 Net loss $
(25,474 ) $ (42,569 ) $ (57,864 ) $ (31,005 ) Depreciation and
amortization 37,982 36,069 112,024 104,909 Depreciation,
unconsolidated entities 3,610 3,998 10,898 11,128 Interest expense
24,656 24,368 69,074 76,112 Interest expense, unconsolidated
entities 837 1,282 2,807 4,205 Amortization of stock compensation
1,122 1,072 3,924 3,795 Noncontrolling interests in other
partnerships 174 (165 ) 66
(1,126 )
EBITDA 42,907 24,055 140,929 168,018 Gain on
sale of hotels - (1,193 ) - (1,193 ) Gain on involuntary conversion
- - - (3,095 ) Charges related to debt extinguishment - - 594 -
Impairment loss 2,080 36,692 3,448 53,823 Impairment loss on
unconsolidated hotels - 3,750 2,068 3,750 Hurricane loss(a) - 1,669
- 1,669 Hurricane loss, unconsolidated entities - 50 - 50
Conversion costs(b) 117 118 447 481 Severance costs, net of
noncontrolling interests 41 - 550 - Lease termination costs
117 - 469 -
Adjusted EBITDA $ 45,262 $ 65,141 $ 148,505
$ 223,503
(a) Represents hurricane-related expenses.
(b) 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 Ended Nine Months Ended
September 30, September 30, 2009
2008 2009 2008 Adjusted EBITDA $
45,262 $ 65,141 $ 148,505 $ 223,503 Other revenue (1,280 ) (1,396 )
(2,554 ) (2,655 ) Equity in income from unconsolidated subsidiaries
(excluding interest, depreciation and impairment expense) (5,558 )
(6,926 ) (14,519 ) (19,776 ) Noncontrolling interests in other
partnerships (excluding interest, depreciation and severance
expense) 454 784 1,899 2,834 Consolidated hotel lease expense
10,892 14,511 31,805 42,444 Unconsolidated taxes, insurance and
lease expense (2,023 ) (2,132 ) (6,041 ) (6,328 ) Interest income
(229 ) (254 ) (573 ) (1,227 ) Other expenses (excluding conversion
costs, severance costs and lease termination costs) 751 928 2,040
2,398 Corporate expenses (excluding amortization expense of stock
compensation) 3,349 4,316 11,905 13,284 Gain on sale of assets (723
) - (723 ) - Adjusted EBITDA from discontinued operations -
- - 13
Hotel
EBITDA $ 50,895 $ 74,972 $ 171,744 $
254,490
Reconciliation of Net Loss to Hotel
EBITDA
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30, 2009
2008 2009 2008 Net loss $
(25,474 ) $ (42,569 ) $ (57,864 ) $ (31,005 ) Discontinued
operations - (1,193 ) - (1,180 ) Equity in loss (income) from
unconsolidated entities (488 ) 2,773 3,197 1,064 Consolidated hotel
lease expense 10,892 14,511 31,805 42,444 Unconsolidated taxes,
insurance and lease expense (2,023 ) (2,132 ) (6,041 ) (6,328 )
Interest expense, net 24,427 24,114 68,501 74,886 Charges related
to debt extinguishment - - 594 - Corporate expenses 4,471 5,388
15,829 17,079 Depreciation and amortization 37,982 36,069 112,024
104,909 Impairment loss 2,080 36,692 3,448 53,823 Hurricane loss -
1,669 - 1,669 Gain on sale of assets (723 ) - (723 ) - Gain on
involuntary conversion - - - (3,095 ) Other expenses 1,031 1,046
3,528 2,879 Other revenue (1,280 ) (1,396 )
(2,554 ) (2,655 )
Hotel EBITDA $ 50,895 $
74,972 $ 171,744 $ 254,490
Hotel EBITDA and Hotel EBITDA
Margin
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30, 2009
2008 2009 2008 Total revenues $ 230,209
$ 277,729 $ 707,065 $ 875,772 Other revenue (1,280 )
(1,396 ) (2,554 ) (2,655 ) Hotel operating revenue
228,929 276,333 704,511 873,117 Hotel operating expenses
(178,034 ) (201,361 ) (532,767 ) (618,627 )
Hotel EBITDA $ 50,895 $ 74,972 $ 171,744 $
254,490 Hotel EBITDA margin(a) 22.2 % 27.1 % 24.4 % 29.1 %
(a) Hotel EBITDA as a percentage of hotel operating revenue.
Reconciliation of Total Operating Expenses to
Hotel Operating Expenses
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30, 2009
2008 2009 2008 Total operating expenses
$ 232,467 $ 294,604 $ 693,360 $ 835,102 Unconsolidated taxes,
insurance and lease expense
2,023
2,132
6,041
6,328
Consolidated hotel lease expense (10,892 ) (14,511 ) (31,805 )
(42,444 ) Corporate expenses (4,471 ) (5,388 ) (15,829 ) (17,079 )
Depreciation and amortization (37,982 ) (36,069 ) (112,024 )
(104,909 ) Impairment loss (2,080 ) (36,692 ) (3,448 ) (53,823 )
Hurricane loss - (1,669 ) - (1,669 ) Other expenses (1,031 )
(1,046 ) (3,528 ) (2,879 ) Hotel operating
expenses $ 178,034 $ 201,361 $ 532,767 $
618,627
Reconciliation of Ratio of
Operating Income (Loss) to Total Revenues to Hotel EBITDA
Margin
Three Months Ended Nine Months Ended
September 30, September 30, 2009
2008 2009 2008 Ratio of operating
income (loss) to total revenues (1.0 )% (6.1 )% 1.9 % 4.6 % Other
revenue (0.6 ) (0.5 ) (0.4 ) (0.3 ) Unconsolidated taxes, insurance
and lease expense (0.9 ) (0.7 ) (0.8 ) (0.7 ) Consolidated hotel
lease expense 4.8 5.2 4.5 4.9 Other expenses 0.4 0.4 0.5 0.3
Corporate expenses 2.0 2.0 2.3 2.0 Depreciation and amortization
16.6 13.0 15.9 12.0 Impairment loss 0.9 13.2 0.5 6.1 Hurricane loss
- 0.6 - 0.2 Hotel EBITDA margin 22.2 %
27.1 % 24.4 % 29.1 %
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 2009 Guidance Low Guidance
High Guidance Dollars Per Share Amount
Dollars Per Share Amount Net loss
attributable to FelCor $ (113 ) $ (111 ) Preferred dividends
(39 ) (39 )
Net loss applicable to FelCor common
stockholders (152 ) $ (2.42 ) (150 ) $ (2.39 ) Depreciation(b)
164 164 Noncontrolling interests in FelCor LP (1 ) (1 ) Severance
costs 1 1 Charges related to debt extinguishment 2 2 Impairment
loss(b) 6 6
Adjusted FFO $ 20
$
0.31(a)
$ 22 $
0.34(a)
Net loss attributable to FelCor $ (113 ) $ (111 )
Depreciation(b) 164 164 Interest expense(b) 110 110 Amortization
expense 5 5 Noncontrolling interests in FelCor LP (1 ) (1 )
Severance costs 1 1 Charges related to debt extinguishment 2 2
Impairment loss(b) 6 6
Adjusted
EBITDA $ 174 $ 176
(a) Weighted average shares and units are 63.6 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
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.
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
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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