FelCor Lodging Trust Incorporated (NYSE: FCH) today reported
operating results for the fourth quarter and year ended December
31, 2010.
Summary:
- Same-store revenue per available room
(“RevPAR”) at 80 consolidated hotels increased 5.7% for the quarter
and 4.3% for the year.
- Adjusted EBITDA was $188.1 million
and Adjusted FFO per share was $(0.09) for the year, which was
$3.1 million and $0.04 above the high-end of our guidance,
respectively.
- Hotel EBITDA margin increased 240 basis
points for the quarter and 32 basis points for the year.
- Net loss was $225.8 million for the
year.
- We reinstated current quarterly
preferred dividend payments in January 2011.
- Our joint venture sold the Sheraton
Premiere Hotel at Tysons Corner for $84.5 million in
December.
- We repurchased $40 million of
senior notes, that mature in 2011, during the fourth quarter.
Fourth Quarter Operating Results:
Same-store RevPAR for 80 consolidated hotels was $79.77, a 5.7%
increase compared to the same period in 2009. This increase was
driven by a 4.2% occupancy increase to 66.2% and a 1.5% average
daily rate (“ADR”) increase to $120.47. RevPAR at the Fairmont
Copley Plaza (not included in same-store RevPAR) increased 9.3% (to
$172.43) and ADR increased 6.9% (to $249.18), compared to the same
period in 2009.
“We ended the year on a very strong note. RevPAR for our
portfolio grew more than 4% during the year, which was much better
than we expected at the outset of 2010. Industry fundamentals
continue to improve, and we don't see signs of those trends
diminishing in the near future. ADR is becoming a larger portion of
the RevPAR growth, and our flow-through from revenue to EBITDA
continues to accelerate,” said Richard A. Smith, FelCor's President
and Chief Executive Officer.
“Last year, we repaid more than $225 million of debt,
extended maturities and acquired an iconic hotel in Boston at a
substantial discount to replacement cost. FelCor's evolution
continues, and we anticipate another active year in 2011. Although
we have a strong portfolio today, we remain focused on continuing
to improve overall portfolio quality, future growth rates and
diversification through asset sales and selective acquisitions in
our two target markets (New York and Washington, D.C.),” added Mr.
Smith.
Hotel EBITDA was $48.4 million, compared to $41.1 million for
the same period in 2009, a 17.9% increase. Hotel EBITDA
represents EBITDA for 80 same-store consolidated hotels prior to
corporate expenses and joint venture adjustments. Hotel EBITDA
margin was 22.0%, a 240 basis point increase compared to the same
period in 2009.
Adjusted EBITDA (which includes our pro rata share of joint
ventures) was $45.0 million, compared to $30.4 million for the same
period in 2009, a 47.8% increase, which was $3 million ahead
of the high-end of our guidance. Same-store Adjusted EBITDA was
$39.2 million, a 28.5% increase, compared to the prior year period.
Same-store Adjusted EBITDA excludes EBITDA from hotels sold and
acquired during the year.
Adjusted funds from operations (“FFO”) was a loss of $3.6
million or $0.04 per share, compared to an $18.7 million loss, or
$0.29 per share, for the same period in 2009.
Net loss attributable to common stockholders was $103.1 million,
or $1.08 per share, compared to a $60.4 million loss, or $0.96
per share, for the same period in 2009. Our 2010 net loss includes
$86.8 million of impairment charges reflecting the reduced book
values on ten non-strategic hotels (three hotels comprise the
majority of the impairment), as well as a $7.0 million gain on
extinguishment of debt related to the disposition of one hotel, a
$1.6 million charge related to the repurchase of
$40 million of our senior notes maturing 2011 and a
$20.5 million gain related to the sale of our interest in a
joint venture. Our 2009 net loss included a $1.1 million loss from
debt extinguishment.
Full Year Operating Results:
Same-store RevPAR in 2010 was $85.58, a 4.3% increase compared
to 2009. This increase was driven by a 5.8% occupancy increase to
70.5% and a 1.5% ADR decrease to $121.47, compared to 2009.
Hotel EBITDA was $217.8 million, compared to $206.2 million in
2009, a 5.6% increase. Hotel EBITDA represents EBITDA for 80
same-store consolidated hotels prior to corporate expenses and
joint venture adjustments. Hotel EBITDA margin was 24.0%, a 32
basis point increase compared to 2009.
Adjusted EBITDA (which includes our pro rata share of joint
ventures) was $188.1 million, compared to $178.9 million in 2009, a
5.1% increase. Same-store Adjusted EBITDA was $179.6 million.
Same-store Adjusted EBITDA excludes EBITDA from hotels sold and
acquired during the year.
Adjusted FFO was a loss of $7.6 million or $0.09 per share,
compared to a positive $25.0 million, or $0.39 per share, in
2009.
Net loss attributable to common stockholders was $261.8 million,
or $3.25 per share, compared to a $146.8 million loss, or
$2.33 per share, in 2009. Our 2010 loss included
$173.7 million of impairment charges, $59.4 million of gains
from extinguishment of debt, and a $20.5 million gain related
to the sale of our interest in an unconsolidated joint venture. Our
2009 loss included a $3.4 million impairment charge, a $910,000
gain from disposition, and a $1.7 million loss from debt
extinguishment.
EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel
EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Adjusted FFO per
share are all non-GAAP financial measures. See our discussion of
“Non-GAAP Financial Measures” beginning on page 15 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 December 31, 2010, we had $1.5 billion of
consolidated debt and $201.0 million of cash and cash equivalents.
We reduced our consolidated debt balance by more than
$225 million during 2010.
During the fourth quarter, we repurchased $40 million of
our senior notes maturing in June 2011 in separate transactions
using excess cash on hand. The remaining $46 million of notes
will be repaid with cash on hand.
On December 29, the Embassy Suites in Deerfield, Illinois was
transferred to the lender in full satisfaction of the
$14 million loan securing that hotel. We recorded a
$7.0 million gain on debt extinguishment (which reflects the
principal amount of that loan in excess of the value of that hotel,
as reflected on our balance sheet). The hotel generated $357,000 of
EBITDA during the trailing-twelve-months ended November 2010 (the
debt satisfied represents 39 times EBITDA).
We reinstated the current quarterly payment on our preferred
stock. On January 31, 2011, we made current quarterly dividend
payments on our Series A Cumulative Convertible Preferred Stock and
our 8% Series C Cumulative Redeemable Preferred Stock. Seven
quarters of preferred dividends remain in arrears, which we plan to
pay with proceeds from future asset sales.
“We are very pleased with our accomplishments during the
quarter. We reinstated the preferred dividends, as our cash flows
have meaningfully improved since the depths of the downturn. We
also created shareholder value through the deed-in-lieu of two
hotels where the debt balance significantly exceeded the fair value
of the hotels. We continue to strengthen our balance sheet by
reducing debt and improving liquidity. Furthermore, we are in the
process of reestablishing a line of credit with a syndicate of
lenders. This line of credit will provide us with greater
flexibility to manage our balance sheet while negotiating and
completing strategic hotel acquisitions,” said Andrew J. Welch,
FelCor's Executive Vice President and Chief Financial Officer.
Portfolio Management:
For the quarter and year ended December 31, 2010, we
spent $11.6 million and $40.4 million, respectively, on capital
improvements at our hotels (including our pro rata share of joint
venture expenditures). As part of our long-term capital plan, we
anticipate renovating between six and eight core properties each
year. In 2011, we will start renovations at six hotels (Embassy
Suites - Mandalay Beach Hotel & Resort, Embassy Suites - Napa
Valley, Sheraton Society Hill - Philadelphia, Doubletree Guest
Suites - Austin, Doubletree Guest Suites - Charlotte-SouthPark and
the Renaissance Vinoy Resort & Golf Club), in addition to the
more than $20 million redevelopment project at the Fairmont
Copley Plaza that will refresh the property and implement various
value-enhancing initiatives.
During the fourth quarter, we commenced the second phase of
asset sales. This is part of our long-term strategic plan developed
in 2006 to further improve our portfolio quality, growth rates and
diversification and to reinvest sales proceeds into investments
that generate higher returns and increase shareholder value. In
October, we began marketing 14 hotels for sale, of which 11 are
suburban or airport locations, and seven are located in Texas,
Florida and Georgia. The 2010 RevPAR for these hotels was $70.86,
or 27% below the remaining portfolio's hotel RevPAR ($90.09). In
addition, we shortened the hold period on an additional 21
non-strategic hotels. We will continue to monitor the transaction
environment and will bring these hotels to market at the
appropriate time.
In December 2010, we sold the 443-room Sheraton Premiere Hotel
at Tysons Corner in Vienna, Virginia for $84.5 million in cash. The
property was owned in a joint venture between FelCor and Starwood
Hotels & Resorts Worldwide Inc. We received $42.3 million in
gross proceeds, and there was no debt associated with the hotel.
The sale price, approximately $191,000 per key, represented
approximately 23 times trailing-twelve-month hotel EBITDA.
Outlook:
Lodging demand growth continues to accelerate and new hotel
supply growth is moderating. This supply and demand imbalance is
resulting in both occupancy and average rate growth for FelCor and
the industry. Our hotels are taking advantage of the growth in
corporate and premium segments to remix the customer base and
replace the lower rated business with those premium customers.
Additionally, our hotels are opportunistically increasing rates
where appropriate. New hotel supply growth continues to moderate
and is below the historical, long-term average and also compares
favorably to prior cycles. Overall, hotel rooms under construction
in our markets represent only 1.0% of existing supply, which is
below the industry average. These factors are expected to drive
accelerating RevPAR and margin growth throughout 2011.
For 2011, we anticipate:
- Same-store RevPAR for 81 hotels
(including the Fairmont Copley Plaza's results for both years) to
increase between 6% and 8% (a 7.7% to 9.7% increase for 81 hotels
(including the Fairmont Copley Plaza) to the RevPAR reported on 80
hotels for 2010);
- Adjusted EBITDA to be between
$206 million and $217 million;
- Adjusted FFO per share to be between
$0.21 and $0.32;
- Net loss attributable to FelCor to be
between $96 million and $85 million;
- Interest expense to be approximately
$140 million; and
- Capital expenditures to be
approximately $85 million.
Our 2011 projections are based on 81 consolidated hotels and do
not include any future asset sales, acquisitions or other capital
transactions. Our 2011 guidance assumes Same-store Adjusted EBITDA
growth of between 12 - 18%, compared to 2010 (including Fairmont
Copley Plaza’s full year EBITDA for both periods).
FelCor, a real estate investment trust, is the nation's largest
owner of upper-upscale, all-suite hotels. FelCor owns interests in
82 properties located in major markets throughout 22 states.
FelCor's diversified portfolio of hotels and resorts are flagged
under global brands such as - Doubletree®, Embassy Suites Hotels®,
Hilton®, Fairmont®, 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 fourth quarter earnings
Conference Call on Thursday, February 24, 2011, at 11:00 a.m.
(Central Time). The conference call will be Webcast simultaneously
on FelCor's Web site at www.felcor.com. Interested investors and other
parties who wish to access the call can go to FelCor's Web site and
click on the conference call microphone icon on either the
“Investor Relations” or “News Releases” page. The conference call
replay also will be archived on the Company's Web site.
With the exception of historical information, the matters
discussed in this news release include “forward-looking statements”
within the meaning of the federal securities laws. These
forward-looking statements are identified by their use of terms and
phrases such as “anticipate,” “believe,” “could,” “estimate,”
“expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,”
“will,” “continue” and other similar terms and phrases, including
references to assumptions and forecasts of future results.
Forward-looking statements are not guarantees of future
performance. Numerous risks and uncertainties, and the occurrence
of future events, may cause actual results to differ materially
from those anticipated at the time the forward-looking statements
are made. Current economic circumstances or an economic slowdown
and the impact on the lodging industry, operating risks associated
with the hotel business, relationships with our property managers,
risks associated with our level of indebtedness and our ability to
meet debt covenants in our debt agreements, our ability to complete
acquisitions, dispositions and debt refinancing, the availability
of capital, the impact on the travel industry from security
precautions, our ability to continue to qualify as a Real Estate
Investment Trust for federal income tax purposes and numerous other
factors may affect future results, performance and achievements.
Certain of these risks and uncertainties are described in greater
detail in our filings with the Securities and Exchange Commission.
Although we believe our current expectations to be based upon
reasonable assumptions, we can give no assurance that our
expectations will be attained or that actual results will not
differ materially. We undertake no obligation to update any
forward-looking statement to conform the statement to actual
results or changes in our expectations.
SUPPLEMENTAL INFORMATION
INTRODUCTION
The following information is presented in order to help our
investors understand FelCor's financial position as of and for the
three months and year ended December 31, 2010.
TABLE OF CONTENTS
PAGE
Consolidated Statements of Operations(a)
7
Consolidated Balance Sheets(a)
8
Capital Expenditures
9
Supplemental Financial Data
9
Consolidated Debt Summary
10
Schedule of Encumbered Hotels
11
Hotel Portfolio Composition
12
Detailed Operating Statistics by Brand
13
Detailed Operating Statistics for FelCor's Top Markets
14
Non-GAAP Financial Measures
15
(a) Our consolidated statements of operations and balance sheets
have been prepared without audit. Certain information and footnote
disclosures normally included in financial statements presented in
accordance with GAAP have been omitted. The consolidated statements
of operations and balance sheets should be read in conjunction with
the consolidated financial statements and notes thereto included in
our most recent Annual Report on Form 10-K.
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009
2010 2009 Revenues: Hotel
operating revenue: Room 176,628 161,378 726,497 687,486 Food and
beverage 41,198 35,346 142,239 128,781 Other operating departments
13,968 13,380 56,401 55,285 Other revenue 381
289 3,174 2,843 Total revenues
232,175 210,393 928,311
874,395 Expenses: Hotel departmental expenses: Room
50,232 45,983 196,147 182,184 Food and beverage 32,275 27,914
112,185 103,844 Other operating departments 6,680 6,461 25,447
25,172 Other property related costs 68,897 62,519 264,968 248,980
Management and franchise fees 10,381 9,656 43,455 41,925 Taxes,
insurance and lease expense 19,879 22,268 91,432 90,333 Corporate
expenses 7,826 8,387 30,747 24,216 Depreciation and amortization
36,005 36,778 145,536 144,152 Impairment loss 86,804 — 152,654 —
Other expenses 587 601 3,280
4,069 Total operating expenses 319,566
220,567 1,065,851 864,875
Operating income (loss) (87,391 ) (10,174 ) (137,540 ) 9,520
Interest expense, net (34,839 ) (36,419 ) (141,513 ) (102,765 )
Extinguishment of debt (1,659 ) (1,127 )
44,224 (1,721 )
Income (loss) before equity in income
(loss) from unconsolidated entities
(123,889 ) (47,720 ) (234,829 ) (94,966 ) Equity in income (loss)
from unconsolidated entities 17,802 (1,617 ) 16,916 (4,814 ) Gain
on sale of assets — — —
723 Loss from continuing operations (106,087 )
(49,337 ) (217,913 ) (99,057 ) Discontinued operations
10,482 (1,890 ) (7,924 ) (10,034 ) Net
loss (95,605 ) (51,227 ) (225,837 ) (109,091 )
Net loss attributable to noncontrolling
interests in other partnerships
1,838 231 1,915 297
Net loss attributable to redeemable
noncontrolling interests in FelCor LP
310 273 881 672
Net loss attributable to FelCor (93,457 ) (50,723 ) (223,041
) (108,122 ) Preferred dividends (9,679 ) (9,679 )
(38,713 ) (38,713 ) Net loss attributable to FelCor
common stockholders $ (103,136 ) $ (60,402 ) $ (261,754 ) $
(146,835 ) Basic and diluted per common share data: Loss from
continuing operations $ (1.20 ) $ (0.93 ) $ (3.16 ) $
(2.17 ) Net loss $ (1.08 ) $ (0.96 ) $ (3.25 ) $ (2.33 )
Basic and diluted weighted average common
shares outstanding
95,490 63,087 80,611
63,114
Consolidated Balance
Sheets
(in thousands)
December 31, 2010
2009 Assets
Investment in hotels, net of accumulated
depreciation of $982,564 and$916,604 at December 31, 2010 and 2009,
respectively
$ 1,985,779 $ 2,180,394 Investment in unconsolidated entities
75,920 82,040 Cash and cash equivalents 200,972 263,531 Restricted
cash 16,702 18,708
Accounts receivable, net of allowance for
doubtful accounts of $696and $406 at December 31, 2010 and 2009,
respectively
27,851 28,678
Deferred expenses, net of accumulated
amortization of $17,892and $14,502 at December 31, 2010 and 2009,
respectively
19,940 19,977 Other assets 32,271 32,666
Total assets $ 2,359,435 $ 2,625,994
Liabilities and Equity
Debt, net of discount of $53,193 and
$64,267 at December 31, 2010and 2009, respectively
$ 1,548,309 $ 1,773,314 Distributions payable 76,293 37,580 Accrued
expenses and other liabilities 144,451 131,339
Total liabilities 1,769,053 1,942,233
Commitments and contingencies
Redeemable noncontrolling interests in
FelCor LP at redemption value, 285and 295 units issued and
outstanding at December 31, 2010 and 2009,respectively
2,004 1,062 Equity: Preferred stock,
$0.01 par value, 20,000 shares authorized:
Series A Cumulative Convertible Preferred
Stock, 12,880 shares,liquidation value of $322,011, issued and
outstanding at December 31,2010 and 2009
309,362 309,362
Series C Cumulative Redeemable Preferred
Stock, 68 shares,liquidation value of $169,950, issued and
outstanding at December 31,2010 and 2009
169,412 169,412
Common stock, $0.01 par value, 200,000
shares authorized and 101,038 and69,413 shares issued, including
shares in treasury, at December 31, 2010and 2009, respectively
1,010 694 Additional paid-in capital 2,190,308 2,021,837
Accumulated other comprehensive income 26,457 23,528 Accumulated
deficit (2,054,625 ) (1,792,822 )
Less: Common stock in treasury, at cost,
of 4,156 shares and 3,845 sharesat December 31, 2010 and 2009,
respectively
(73,341 ) (71,895 ) Total FelCor stockholders’ equity
568,583 660,116 Noncontrolling interests in other partnerships
19,795 22,583 Total equity
588,378 682,699 Total liabilities and equity $
2,359,435 $ 2,625,994
Capital
Expenditures
(in thousands)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 2010 2009
Improvements and additions to majority-owned hotels 11,095 13,484
38,936 75,949 Partners' pro rata share of additions to consolidated
joint venture hotels
(55 ) (52 ) (258 ) (805 ) Pro rata share of additions to
unconsolidated hotels 521 556 1,741 4,201
Total additions to hotels(a) $ 11,561 $ 13,988
$ 40,419 $ 79,345
(a) Includes capitalized interest, property taxes, ground leases
and certain employee costs.
Supplemental Financial Data
(in thousands, except per share
information)
December 31, Total Enterprise Value
2010
2009
Common shares outstanding 96,882 65,568 Units outstanding 285
295 Combined shares and units outstanding 97,167
65,863 Common stock price $ 7.04 $ 3.60 Market
capitalization $ 684,056 $ 237,107 Series A preferred stock 309,362
309,362 Series C preferred stock 169,412 169,412 Consolidated debt
1,548,309 1,773,314 Noncontrolling interests of consolidated debt
(3,754 ) (3,971 ) Pro rata share of unconsolidated debt 77,295
107,481 Cash and cash equivalents (200,972 ) (263,531 ) Total
enterprise value (TEV) $ 2,583,708 $ 2,329,174
Consolidated Debt Summary
(dollars in thousands)
Interest Rate (%) Maturity Date
December 31,2010
December 31,2009
Mortgage debt Mortgage debt
L + 0.93 (a)
November 2011 $ 250,000 $ 250,000 Mortgage debt
L + 5.10 (b)
April 2015 212,000 — Mortgage debt
L + 3.50 (c)
August 2011 (d) 198,300 200,425 Mortgage debt 9.02 April 2014
113,220 117,422 Mortgage debt(e) 6.66 June - August 2014 69,206
70,917 Mortgage debt L + 4.25
November 2011 (f)
29,000 — Mortgage debt 8.77 May 2013 27,770 27,829 Mortgage debt
5.81 July 2016 11,321 11,741 Mortgage debt 6.15 June 2011 7,800
9,228 Other 4.25 May 2011 524 354
Senior notes Senior
secured notes(g) 10.00 October 2014 582,821 572,500 Senior notes
9.00 June 2011 46,347 86,604
Retired debt — 426,294
Total $ 1,548,309 $ 1,773,314
(a) We purchased an interest rate cap that caps LIBOR at 7.8%
and expires November 2011 for a $250 million notional
amount.
(b) LIBOR for this loan is subject to a 3% floor. We purchased
an interest rate cap that caps LIBOR at 5.0% and expires May 2012
for a $212 million notional amount.
(c) LIBOR for this loan is subject to a 2% floor.
(d) This loan can be extended for as many as two years (to
2013), subject to satisfying certain conditions.
(e) The hotels under this debt are subject to separate loan
agreements and are not cross-collateralized.
(f) This loan can be extended for one year, subject to
satisfying certain conditions.
(g) These notes have $636 million in aggregate principal
outstanding and were sold at a discount that provides an effective
yield of 12.875% before transaction costs.
Schedule of Encumbered Hotels
(dollars in millions)
December 31, 2010 Consolidated
Debt Balance Encumbered Hotels CMBS debt $
250
Anaheim - ES, Bloomington - ES, Charleston
Mills House - HI, Dallas DFW South - ES, Deerfield Beach - ES,
Jacksonville - ES, Lexington - HS, Dallas Love Field - ES,
Raleigh/Durham - DTGS, San Antonio Airport - HI, Tampa Rocky Point
- DTGS and Phoenix Tempe - ES
Mortgage debt $ 212
Atlanta Buckhead - ES, Atlanta Galleria -
SS, Boston Marlboro - ES, Burlington - SH, Corpus Christi - ES, Ft.
Lauderdale Cypress Creek - SS, Orlando South - ES, Philadelphia
Society Hill - SH and South San Francisco - ES
Mortgage debt $ 198
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 at the
Pier - HI
Mortgage debt $ 113 Baton Rouge - ES, Birmingham - ES, Ft.
Lauderdale - ES, Miami Airport - ES, Milpitas - ES, Minneapolis
Airport - ES and Napa Valley - ES CMBS debt(a) $ 69 Atlanta Airport
- ES, Austin - DTGS, BWI Airport - ES, Orlando Airport - HI and
Phoenix Biltmore - ES Mortgage debt $ 29 Boca Raton - ES and Dana
Point - DTGS CMBS debt $ 28 New Orleans Convention Center - ES CMBS
debt $ 11 Indianapolis North - ES CMBS debt $ 8 Wilmington - DT
Senior secured notes $ 583
Atlanta Airport - SH, Boston Beacon Hill -
HI, Dallas Market Center - ES, Myrtle Beach Resort - ES, Nashville
Opryland - Airport - HI, New Orleans French Quarter - HI, Orlando
North - ES, Orlando Walt Disney World® - DTGS, San Diego on the Bay
- HI, San Francisco Burlingame - ES, San Francisco Fisherman's
Wharf - HI, San Francisco Union Square - MAR, Toronto Airport - HI
and Toronto Yorkdale - HI
(a) The hotels under this debt are subject to separate loan
agreements and are not cross-collateralized.
Hotel Portfolio Composition
The following table illustrates the distribution of 81
consolidated hotels by brand, market and location at
December 31, 2010.
Brand Hotels Rooms
% of TotalRooms
% of
2010HotelEBITDA(a)
Embassy Suites Hotels 45 11,674 50 58 Holiday Inn 15 5,154
22 18 Sheraton and Westin 8 2,774 12 9 Doubletree 7 1,471 6 7
Renaissance and Marriott 3 1,321 6 3 Hilton 2 559 2 3 Fairmont 1
383 2 2
(b)
Market South Florida Area 5 1,439 6 7 Los Angeles 4
899 4 6 San Francisco Area 6 2,138 9 6 Atlanta 5 1,462 6 6 Dallas 4
1,333 6 5 Boston 3 915 4 5 (b) Minneapolis 3 736 3 4 Philadelphia 2
729 3 4 Orlando 4 1,038 4 4 Central California Coast 2 408 2 4
Myrtle Beach 2 640 3 4 New Orleans 2 744 3 4 San Antonio 3 874 4 3
San Diego 1 600 3 3 Other 35 9,381 40 35
Location
Urban 21 6,741 29 32 (b) Suburban 32 7,880 34 29 Airport 18 5,788
25 23 Resort 10 2,927 12 16
(a) Hotel EBITDA is more fully described on page 21.
(b) We acquired the Fairmont Copley Plaza in August 2010, and
this table reflects only results of operations for the periods in
which we owned the hotel.
The following tables set forth occupancy, ADR and RevPAR for the
three months and year ended December 31, 2010 and 2009,
and the percentage changes thereto between the periods presented,
for 80 same-store consolidated hotels owned for both periods
(excludes the Fairmont Copley Plaza acquired in August 2010).
Detailed Operating Statistics by
Brand
Occupancy (%)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 %Variance 2010
2009 %Variance Embassy Suites Hotels 68.8 64.8
6.1 72.2 68.1 5.9 Holiday Inn 66.2 66.6 (0.7 ) 71.5 68.7 4.1
Sheraton and Westin 61.4 57.9 6.1 64.9 60.4 7.5 Doubletree 68.7
63.6 8.0 72.6 65.5 10.8 Renaissance and Marriott 60.7 60.7 — 63.9
61.4 4.0 Hilton 46.2 45.0 2.7 61.5 60.0 2.4 Total hotels
66.2 63.6 4.2 70.5 66.6 5.8
ADR ($)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 %Variance 2010 2009
%Variance Embassy Suites Hotels 121.58 122.37 (0.6 ) 124.81
128.33 (2.7 ) Holiday Inn 115.29 109.12 5.7 114.16 112.22 1.7
Sheraton and Westin 101.24 103.60 (2.3 ) 102.64 105.25 (2.5 )
Doubletree 116.52 112.46 3.6 116.37 122.59 (5.1 ) Renaissance and
Marriott 167.59 159.14 5.3 165.95 163.16 1.7 Hilton 118.36 104.01
13.8 123.55 115.46 7.0 Total hotels 120.47 118.74 1.5 121.47
123.26 (1.5 )
RevPAR ($)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 %Variance 2010 2009
%Variance Embassy Suites Hotels 83.61 79.33 5.4 90.10 87.44
3.0 Holiday Inn 76.31 72.71 5.0 81.65 77.11 5.9 Sheraton and Westin
62.19 59.97 3.7 66.64 63.58 4.8 Doubletree 80.04 71.56 11.9 84.52
80.35 5.2 Renaissance and Marriott 101.73 96.65 5.3 106.00 100.21
5.8 Hilton 54.72 46.84 16.8 75.96 69.32 9.6 Total hotels
79.77 75.48 5.7 85.58 82.07 4.3
Detailed Operating
Statistics for FelCor's Top Markets Occupancy (%)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 %Variance 2010
2009 %Variance South Florida 70.9 72.1 (1.7 )
76.0 73.0 4.1 Los Angeles area 67.7 67.8 (0.1 ) 73.8 71.6 3.2 San
Francisco area 70.9 67.7 4.7 74.5 69.1 7.9 Atlanta 69.0 66.6 3.5
73.4 69.7 5.3 Dallas 61.3 56.0 9.5 64.3 58.6 9.7 Minneapolis 71.7
61.8 16.1 74.6 66.6 12.1 Philadelphia 63.5 69.0 (7.9 ) 70.9 66.4
6.8 Orlando 74.9 75.2 (0.4 ) 74.0 74.0 0.1 Central California Coast
60.8 57.0 6.7 73.5 72.8 0.9 Myrtle Beach 43.5 40.0 8.6 61.0 59.6
2.4 New Orleans 69.4 60.6 14.5 68.5 58.9 16.3 Boston 77.9 76.1 2.4
81.2 77.8 4.4 San Antonio 64.9 61.7 5.1 73.6 70.0 5.1 San Diego
70.4 75.2 (6.4 )
75.8 72.6 4.4
ADR ($)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 %Variance 2010 2009
%Variance South Florida 119.50 118.65 0.7 125.88 129.18 (2.6
) Los Angeles area 132.23 127.95 3.3 137.01 135.63 1.0 San
Francisco area 140.26 136.41 2.8 134.83 129.66 4.0 Atlanta 103.34
99.90 3.4 104.02 104.71 (0.7 ) Dallas 104.65 108.92 (3.9 ) 108.92
114.92 (5.2 ) Minneapolis 119.67 122.63 (2.4 ) 124.74 127.53 (2.2 )
Philadelphia 127.71 139.07 (8.2 ) 125.56 135.22 (7.1 ) Orlando
109.93 102.12 7.6 107.20 110.75 (3.2 ) Central California Coast
138.09 140.15 (1.5 ) 158.07 156.45 1.0 Myrtle Beach 103.29 103.63
(0.3 ) 135.78 133.48 1.7 New Orleans 132.48 126.93 4.4 124.45
123.90 0.4 Boston 142.00 131.99 7.6 138.58 133.97 3.4 San Antonio
91.03 95.70 (4.9 ) 96.80 102.74 (5.8 ) San Diego 122.89
117.34 4.7 120.13
124.75 (3.7 )
RevPAR ($)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 %Variance 2010 2009
%Variance South Florida 84.73 85.58 (1.0 ) 95.62 94.28 1.4
Los Angeles area 89.48 86.69 3.2 101.17 97.07 4.2 San Francisco
area 99.50 92.41 7.7 100.50 89.54 12.2 Atlanta 71.30 66.58 7.1
76.40 73.01 4.6 Dallas 64.13 60.98 5.2 70.00 67.34 4.0 Minneapolis
85.85 75.75 13.3 93.04 84.88 9.6 Philadelphia 81.13 95.91 (15.4 )
89.03 89.81 (0.9 ) Orlando 82.30 76.79 7.2 79.36 81.93 (3.1 )
Central California Coast 83.99 79.90 5.1 116.19 113.95 2.0 Myrtle
Beach 44.90 41.50 8.2 82.81 79.49 4.2 New Orleans 91.95 76.96 19.5
85.28 73.00 16.8 Boston 110.60 100.39 10.2 112.55 104.22 8.0 San
Antonio 59.07 59.07 — 71.19 71.89 (1.0 ) San Diego 86.54
88.28 (2.0 ) 91.10
90.58 0.6
Non-GAAP Financial Measures
We refer in this release to certain “non-GAAP financial
measures.” These measures, including FFO, Adjusted FFO, EBITDA,
Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA and Hotel
EBITDA margin, are measures of our financial performance that are
not calculated and presented in accordance with generally accepted
accounting principles (“GAAP”). The following tables reconcile each
of these non-GAAP measures to the most comparable GAAP financial
measure. Immediately following the reconciliations, we include a
discussion of why we believe these measures are useful supplemental
measures of our performance and the limitations of such
measures.
Reconciliation of Net Loss to FFO and Adjusted
FFO
(in thousands, except per share data)
Three Months Ended December 31, 2010
2009 Dollars Shares
Per ShareAmount
Dollars Shares
Per ShareAmount
Net loss $ (95,605 ) $ (51,227 ) Noncontrolling interests
2,148 504 Preferred dividends (9,679 ) (9,679 )
Net loss attributable to FelCor common
stockholders
(103,136 ) 95,490 (1.08 ) (60,402 ) 63,087 $ (0.96 ) Depreciation
and amortization 36,005 — 0.38 36,778 — 0.58
Depreciation, discontinued operations and
unconsolidated entities
3,706 — 0.04 4,950 — 0.08 Gain on sale of hotels — — — (910 ) —
(0.01 )
Gain on sale of unconsolidated
subsidiary
(20,544 ) — (0.22 ) — — — Noncontrolling interests in FelCor LP
(310 ) 290 — (273 ) 295 —
FFO
(84,279 ) 95,780 (0.88 ) (19,857 ) 63,382 (0.31 ) Impairment loss
86,804 — 0.91 — — —
Impairment loss, discontinued operations
and unconsolidated entities
(738 ) — (0.01 ) — — — Acquisition costs 31 — — — — —
Extinguishment of debt (5,369 ) — (0.06 ) 1,127 — 0.02 Severance
costs — — — 61 — — Lease termination costs — — —
— — —
Adjusted FFO $ (3,551 )
95,780 $ (0.04 ) $ (18,669 ) 63,382 $ (0.29 )
Reconciliation of Net Loss to FFO and Adjusted FFO
(in thousands, except per share data)
Year Ended December 31, 2010
2009 Dollars Shares
Per ShareAmount
Dollars Shares
Per ShareAmount
Net loss $ (225,837 ) $ (109,091 ) Noncontrolling interests
2,796 969 Preferred dividends (38,713 ) (38,713 )
Net loss attributable to FelCor common
stockholders
(261,754 ) 80,611 $ (3.25 ) (146,835 ) 63,114 $ (2.33 )
Depreciation and amortization 145,536 — 1.81 144,152 — 2.28
Depreciation, discontinued operations and
unconsolidated entities
16,690 — 0.21 20,497 — 0.32 Gain on sale of hotels — — — (910 ) —
(0.01 ) Gain on sale of unconsolidated subsidiary (21,103 ) — (0.26
) — — — Noncontrolling interests in FelCor LP (881 ) 294 (0.01 )
(672 ) 296 (0.01 )
Conversion of options and unvested
restricted stock
— — — — 331 —
FFO (121,512 ) 80,905 (1.50 ) 16,232 63,741 0.25 Impairment
loss 152,654 — 1.89 — — —
Impairment loss, discontinued operations
and unconsolidated entities
20,322 — 0.25 5,516 — 0.08 Acquisition costs 449 — 0.01 — — —
Extinguishment of debt (59,465 ) — (0.74 ) 1,721 — 0.03 Conversion
costs — — — 447 — 0.01 Severance costs — — — 612 — 0.01 Lease
termination costs — — — 469 —
0.01
Adjusted FFO $ (7,552 ) 80,905 $ (0.09 )
$ 24,997 63,741 $ 0.39
Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and Hotel
EBITDA
(in thousands)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 2010 2009
Net loss $ (95,605 ) $ (51,227 ) $ (225,837 ) $ (109,091 )
Depreciation and amortization 36,005 36,778 145,536 144,152
Depreciation, discontinued operations
andunconsolidated entities
3,706 4,950 16,690 20,497 Interest expense 34,895 36,546 141,876
103,458
Interest expense, discontinued operations
andunconsolidated entities
1,410 1,633 7,633 6,603 Amortization of stock compensation 2,544
1,241 7,445 5,165 Noncontrolling interests in other partnerships
1,838 231 1,915 297
EBITDA
(15,207 ) 30,152 95,258 171,081 Impairment loss 86,804 — 152,654 —
Impairment loss, discontinued operations
andunconsolidated entities
(738 ) — 20,322 5,516 Extinguishment of debt (5,369 ) 1,127 (59,465
) 1,721 Acquisition costs 31 — 449 — Conversion costs — — — 447
Severance costs — 61 — 612 Lease termination costs — — — 469 Gain
on sale of hotels — (910 ) — (910 ) Gain on sale of unconsolidated
subsidiary (20,544 ) — (21,103 ) —
Adjusted
EBITDA 44,977 30,430 188,115 178,936
Adjusted EBITDA from disposed hotels
(3,914 ) 48 (5,075 ) (4,656 ) Gain on sale of asset — — — (723 )
Adjusted EBITDA from acquired hotels (1,896 ) — (3,416 ) —
Same-store Adjusted EBITDA 39,167 30,478 179,624
173,557 Other revenue (381 ) (289 ) (3,174 ) (2,843 ) Equity in
income from unconsolidated subsidiaries
(excluding interest, depreciation and
impairment expense)
(3,414 ) (2,837 ) (16,283 ) (14,829 ) Noncontrolling interests in
other partnerships
(excluding interest, depreciation and
severance expense)
399 406 2,150 2,305 Consolidated hotel lease expense 8,501 7,568
36,327 34,187 Unconsolidated taxes, insurance and lease expense
(1,615 ) (1,793 ) (6,630 ) (7,092 ) Interest income (56 ) (127 )
(363 ) (693 ) Other expenses (excluding conversion costs, severance
costs and lease termination costs)
557 526 2,831 2,566 Corporate expenses (excluding amortization
expense of
stock compensation)
5,282 7,146 23,302 19,051
Hotel
EBITDA $ 48,440 $ 41,078 $ 217,784 $
206,209
Hotel EBITDA and Hotel EBITDA
Margin
(dollars in thousands)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 2010 2009 Total
revenues $ 232,175 $ 210,393 $ 928,311 $ 874,395 Other revenue (381
) (289 ) (3,174 ) (2,843 ) Hotel operating revenue 231,794 210,104
925,137 871,552 Acquired hotel revenue(a) (11,166 ) —
(16,839 ) — Same-store hotel operating revenue 220,628
210,104 908,298 871,552 Same-store hotel operating expenses
(172,188 ) (169,026 ) (690,514 ) (665,343 ) Hotel EBITDA $ 48,440
$ 41,078 $ 217,784 $ 206,209 Hotel
EBITDA margin(b) 22.0 % 19.6 % 24.0 % 23.7 %
(a) We have excluded amounts from the Fairmont Copley Plaza
acquired in August 2010 for same-store comparison purposes.
(a) Hotel EBITDA as a percentage of same-store hotel operating
revenue.
Reconciliation of Total Operating Expenses to
Same-Store Hotel Operating Expenses
(dollars in thousands)
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 2010 2009 Total
operating expenses $ 319,566 $ 220,567 $ 1,065,851 $ 864,875
Unconsolidated taxes, insurance and lease expense 1,615 1,793 6,630
7,092 Consolidated hotel lease expense (8,501 ) (7,568 ) (36,327 )
(34,187 ) Corporate expenses (7,826 ) (8,387 ) (30,747 ) (24,216 )
Depreciation and amortization (36,005 ) (36,778 ) (145,536 )
(144,152 ) Impairment loss (86,804 ) — (152,654 ) — Other expenses
(587 ) (601 ) (3,280 ) (4,069 ) Acquired hotel expenses(a) (9,270 )
— (13,423 ) — Same-store hotel operating expenses $
172,188 $ 169,026 $ 690,514 $ 665,343
(a) We have excluded amounts from the Fairmont Copley Plaza
acquired in August 2010 for same-store comparison purposes.
Reconciliation of Ratio of Operating
Income (Loss) to Total Revenues to Hotel EBITDA Margin
Three Months EndedDecember
31,
Year EndedDecember 31,
2010 2009 2010 2009 Ratio
of operating income (loss) to total revenues (37.6
)%
(4.8 )% (14.8 )% 1.1 % Other revenue (0.2 ) (0.1 ) (0.3 ) (0.3 )
Acquired hotel revenue(a) (6.9 ) — (2.2 ) — Unconsolidated taxes,
insurance and lease expense (0.7 ) (0.9 ) (0.7 ) (0.8 )
Consolidated hotel lease expense 3.8 3.6 4.0 3.9 Other expenses 0.3
0.3 0.4 0.5 Corporate expenses 3.5 4.0 3.4 2.8 Depreciation and
amortization 16.3 17.5 16.0 16.5 Impairment loss 39.3 — 16.7 —
Acquired hotel expenses(a) 4.2 — 1.5 —
Hotel EBITDA margin 22.0 % 19.6 % 24.0 % 23.7 %
(a) We have excluded amounts from the Fairmont Copley Plaza
acquired in August 2010 for same-store comparison purposes.
Reconciliation of Forecasted Net Loss Attributable
to FelCor to Forecasted FFO and EBITDA
(in millions, except per share and unit
data)
Full Year 2011 Guidance Low Guidance
High Guidance Dollars
Per ShareAmount
Dollars
Per ShareAmount
Net loss attributable to FelCor $
(96
) $
(85
) Preferred dividends (39 ) (39 )
Net loss attributable to
FelCor common stockholders
(135
) $
(1.42
)
(124
) $
(1.30
) Depreciation(b) 155 155
FFO(a)
$
20
$
0.21
$
31
$
0.32
Net loss attributable to FelCor $
(96
) $
(85
) Depreciation(b) 155 155 Interest expense(b) 140 140 Amortization
expense 7 7
EBITDA $
206
$
217
(a) Weighted average shares and units are 96.4 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 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 items,
including but not limited to those described below, provides useful
supplemental information to investors regarding our ongoing
operating performance and that the presentation of Adjusted FFO,
and Adjusted EBITDA when combined with GAAP net income attributable
to FelCor, EBITDA and FFO, is beneficial to an investor's better
understanding of our operating performance.
- Gains and losses related to
extinguishment of debt and interest rate swaps - We exclude gains
and losses related to extinguishment of debt and interest rate
swaps from FFO and EBITDA because we believe that it is not
indicative of ongoing operating performance of our hotel assets.
This also represents an acceleration of interest expense or a
reduction of interest expense, and interest expense is excluded
from EBITDA.
- Impairment losses - We exclude the
effect of impairment losses and gains or losses on disposition of
assets in computing Adjusted FFO and Adjusted EBITDA because we
believe that including these is not consistent with reflecting the
ongoing performance of our remaining assets. Additionally, we
believe that impairment charges and gains or losses on disposition
of assets represent accelerated depreciation, or excess
depreciation, and depreciation is excluded from FFO by the NAREIT
definition and from EBITDA.
- Cumulative effect of a change in
accounting principle - Infrequently, the Financial Accounting
Standards Board promulgates new accounting standards that require
the consolidated statements of operations to reflect the cumulative
effect of a change in accounting principle. We exclude these
one-time adjustments in computing Adjusted FFO and Adjusted EBITDA
because they do not reflect our actual performance for that
period.
In addition, to derive Adjusted EBITDA we exclude gains or
losses on the sale of depreciable assets because we believe that
including them in EBITDA is not consistent with reflecting the
ongoing performance of our remaining assets. Additionally, the gain
or loss on sale of depreciable assets represents either accelerated
depreciation or excess depreciation in previous periods, and
depreciation is excluded from EBITDA.
Hotel EBITDA and Hotel EBITDA Margin
Hotel EBITDA and Hotel EBITDA margin are commonly used measures
of performance in the hotel industry and give investors a more
complete understanding of the operating results over which our
individual hotels and brand/managers have direct control. We
believe that Hotel EBITDA and Hotel EBITDA margin are useful to
investors by providing greater transparency with respect to two
significant measures that we use in our financial and operational
decision-making. Additionally, using these measures facilitates
comparisons with other hotel REITs and hotel owners. We present
Hotel EBITDA and Hotel EBITDA margin by eliminating all revenues
and expenses from continuing operations not directly associated
with hotel operations, including corporate-level expenses,
depreciation and amortization, 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 into the ongoing operational performance
of our hotels and the effectiveness of management on a
property-level basis. We eliminate depreciation and amortization
because, even though depreciation and amortization are
property-level expenses, 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 diminishes 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 Consolidated Hotels. Hotel
EBITDA and Hotel EBITDA margins are presented on a same-store basis
and exclude the historical results of operations from the Fairmont
Copley Plaza acquired in August 2010.
Use and 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 other lodging REITs, hotel owners who
are not REITs and other capital intensive companies. We use Hotel
EBITDA and Hotel EBITDA margin in evaluating hotel-level
performance and the operating efficiency of our hotel managers.
The use of these non-GAAP financial measures has certain
limitations. These non-GAAP financial measures as presented by us,
may not be comparable to non-GAAP financial measures as calculated
by other real estate companies. These measures do not reflect
certain expenses or expenditures that we incurred and will incur,
such as depreciation, interest and capital expenditures. 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 most comparable GAAP financial measures,
and our consolidated statements of operations and cash flows,
include interest expense, capital expenditures, and other excluded
items, all of which should be considered when evaluating our
performance, as well as the usefulness of our non-GAAP financial
measures.
These non-GAAP financial measures are used in addition to and in
conjunction with results presented in accordance with GAAP. They
should not be considered as alternatives to operating profit, cash
flow from operations, or any other operating performance measure
prescribed by GAAP. These non-GAAP financial measures reflect
additional ways of viewing our operations that we believe, when
viewed with our GAAP results and the reconciliations to the
corresponding GAAP financial measures, provide a more complete
understanding of factors and trends affecting our business than
could be obtained absent this disclosure. Management strongly
encourages investors to review our financial information in its
entirety and not to rely on a single financial measure.
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