IRVING, Texas - July 31, 2007 - FelCor Lodging Trust Incorporated (NYSE:FCH)
today reported operating results for the second quarter and six months
ended June 30, 2007.
Second Quarter Summary:
� Exceeded operating expectations for our 25 hotels where renovations
were completed by the end of the first quarter 2007. Hotel EBITDA (Hotel
Earnings Before Interest, Taxes, Depreciation and Amortization) for these
hotels exceeded our second quarter budget by $0.4 million, or 1.4 percent.
This is greater than our goal of a 12 percent return on capital.
� Completed renovations at 12 hotels during the second quarter and
an additional five hotels in July. Through the date of this release, we
have completed renovations at 42 hotels, or 51 percent of our portfolio.
We expect to complete renovations at an additional 28 hotels in the second
half of 2007, or 70 hotels by the end of 2007.
� Increased Revenue Per Available Room (�RevPAR�) by 9.9 percent at
our hotels not under renovation or in New Orleans (47 hotels). RevPAR increased
2.6 percent for our 83 consolidated hotels.
� Our operating results were impacted by major renovation projects.
During the second quarter, 34 hotels were undergoing renovation. Renovation
delays at six hotels and weakness in the New Orleans market negatively
affected our EBITDA by $3.5 million more than expected during the second
quarter. For the remainder of the year we expect our EBITDA to be negatively
affected by an additional $4.1 million driven primarily by these renovation
hotels and New Orleans.
� Completed our disposition plan to sell 45 hotels with gross proceeds
of $720 million. In 2007, we sold 11 hotels for gross proceeds of $191
million.
� Agreed with Marriott International, Inc. to rebrand our San Francisco
Union Square hotel to a Marriott by the end of 2008, following a redevelopment
and repositioning of the hotel expected to cost approximately $30 million.
� Closed on the sale of 177 of the 184 units at our Royal Palms condominium
project, through June 30, 2007. We recognized a second quarter gain of
$14.9 million and a year-to-date gain of $18.1 million on these sales,
which exceeded our original expectations.
� Increased our quarterly common dividend by $0.05 to $0.30 per share.
Second Quarter Operating Results:
RevPAR for our 83 consolidated hotels increased 2.6 percent and Average
Daily Rate (�ADR�) increased 5.8 percent for the quarter compared to the
same period in 2006. RevPAR for our 34 hotels undergoing renovation during
the second quarter decreased 5.8 percent. Renovation-related displacement
at these 34 hotels resulted in a decline in occupancy of 11.3 percent.
For our 47 hotels not under renovation and excluding New Orleans, RevPAR
increased 9.9 percent. Business continues to be strong in most of our major
markets.
The additional renovation disruption during the second quarter was
related principally to product delivery delays and changes in project scope
at six hotels. The hotels experiencing delays are located in Boston, Indianapolis,
Philadelphia, Raleigh, Santa Barbara, and Wilmington (Delaware). Our two
hotels in New Orleans have increased their market share, but continue to
be negatively impacted by the effects of hurricane Katrina, resulting in
a RevPAR decline of 19.5 percent for the quarter. We expect EBITDA for
the year to be negatively impacted by a total of $7.6 million, due largely
to the renovation process, which represents approximately $4.5 million
and New Orleans, which represents approximately $2.1 million.
Net income was $55.2 million for second quarter 2007, a $45.0 million
increase over the same period in 2006. Net income applicable to common
stockholders was $45.5 million, or $0.73 per share, compared to net income
applicable to common stockholders of $467,000, or $0.01 per share, for
the same period in 2006. Net income was $84.3 million for the six months,
a $64.3 million increase over the same period in 2006. Net income applicable
to common stockholders for the six months was $65.0 million, or $1.05 per
share, compared to net income applicable to common stockholders of $641,000,
or $0.01 per share, for the same period in 2006.
Adjusted Funds From Operations (�FFO�) was $54.7 million for the second
quarter, a $12.6 million increase from the same period in 2006. Adjusted
FFO per share increased to $0.83, for the second quarter compared to $0.67
for the same period in 2006, an increase of 24 percent. For the six months,
Adjusted FFO was $86.1 million, a $12.0 million increase from the same
period in 2006. Adjusted FFO per share increased to $1.35 for the six months,
compared to $1.18 in the prior year, an increase of 14 percent.
FFO per share for the second quarter and six months ended June 30, 2007
assumes the conversion of our Series A Preferred Stock because it is more
dilutive when our Adjusted FFO per share exceeds $0.63 for the quarter
and $1.26 for the six months. The assumed conversion of our Series A Preferred
Stock increases fully diluted shares outstanding to approximately 73 million.
Adjusted EBITDA (including sold hotels) increased to $91.7 million in
the second quarter, compared to $83.8 million for the same period in 2006.
Same-Store EBITDA increased to $72.3 million for the second quarter, compared
to $71.5 million for the same period in 2006. For the six month period,
Adjusted EBITDA (including sold hotels) increased $228,000, to $159.9 million
compared to the same period in 2006. Same-Store EBITDA decreased by $4.2
million for the six months, to $133.9 million, or three percent to prior
year.
Hotel EBITDA increased to $81.4 million for the second quarter, compared
to $81.0 million in the same period in 2006. Hotel EBITDA margin was 30.7
percent for the second quarter, representing a 60 basis point decrease
compared to the same period in 2006. For the six months, Hotel EBITDA decreased
to $153.3 million, compared to $156.8 million in the same period in 2006,
a decrease of two percent. Hotel EBITDA margin was 29.8 percent for the
six months, representing an 88 basis point decrease to the same period
in 2006.
Current quarter Adjusted FFO, Adjusted EBITDA and net income include
a $14.9 million gain from the sale of condominium units of $14.9 million
for the quarter and $18.1 million for the year. Current year net income
includes gains from the sale of hotels of $22.5 million for the quarter
and $28.5 million for the six months. Prior year net income includes losses
from the sale of hotels and impairment losses aggregating $11.1 million
for the quarter and $12.1 million for the six-month period.
EBITDA, Adjusted EBITDA, Same-Store 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 nine for
a reconciliation of each of these measures to our net income and for information
regarding the use, limitations and importance of these non-GAAP financial
measures.
Renovation Program Update:
We completed major renovations at 12 hotels during the second quarter,
and an additional five hotels in July. Through the date of this release,
we have completed major renovations at 42 hotels, representing 51 percent
of our portfolio, since we started our renovation program last year. We
expect to complete an additional 28 hotels during the second half of 2007,
or 70 hotels by the end of 2007.
Improvements and additions to our hotels for the first six months of
2007 totaled $145.9 million, including our pro rata share of joint ventures.
The renovations at our 37 hotels that were completed through the end of
the second quarter were completed within one percent of budget.
Our hotels with completed renovations are exceeding our expected returns
of 12 percent on the guest impact portion of the renovations. During the
second quarter, RevPAR growth, Hotel EBITDA and Hotel EBITDA margins exceeded
budget for these hotels. For our eight hotels where renovations were completed
in 2006 and our 17 hotels completed in the first quarter 2007, RevPAR growth
was 24.1 percent and 9.7 percent, respectively.
We conducted pre-budget meetings with our brand managers to review our
return on capital model and 2008 targets for each hotel, to ensure that
we remain on track to earn our expected return on the guest impact capital.
�I am pleased to see the hotels that have completed renovations are
performing even better than expected. Despite the delays in a few hotels,
we remain on track to complete renovations at 70 hotels in 2007 and to
meet our 2008 targets,� said Richard A. Smith, FelCor�s President and Chief
Executive Officer. �We remain confident in our strategic plan and look
forward to superior growth in 2008 and beyond from the renovation and redevelopment
programs.�
Development:
We have agreed with Marriott International, Inc. to rebrand our San
Francisco Union Square hotel to a Marriott by the end of 2008, following
a redevelopment and repositioning of the hotel expected to cost approximately
$30 million. This is the fourth redevelopment project that we have announced.
We are currently in the planning and permitting stages for ten additional
major redevelopment projects, which should continue to provide our portfolio
with ongoing above-market growth beyond 2008.
For the six months, we recognized a gain of $18.1 million on the sale
of 177 condominium units at our Royale Palms project in Myrtle Beach, South
Carolina. The remaining seven units will be sold on a selective basis to
maximize the selling price, and we anticipate recognizing additional profit
of approximately $1 million on these sales. The total anticipated gain
of $19.1 million is greater than previously expected. To date, 65 percent
of the condominium units have entered our rental program, which will result
in additional continuing income.
Disposition Program:
In the second quarter we sold eight hotels for gross proceeds of $126
million. This concludes our disposition program in which we have sold 45
hotels for aggregate gross proceeds of $720 million since announcing the
program at the beginning of 2006. The total gross proceeds from these dispositions
are approximately $75 million higher than we originally expected.
Capital Structure:
At June 30, 2007, we had $1.3 billion of consolidated debt outstanding
with a weighted average life of five years. Our cash and cash equivalents
totaled approximately $188.6 million at June 30, 2007.
�We have successfully executed the first phases of our strategic plan,
including the disposition program, and are focused on completing the renovation
and redevelopment phases of our plan,� said Andrew J. Welch, FelCor�s Executive
Vice President and Chief Financial Officer. �We recently conducted pre-budget
meetings with our brand operators to review our 2008 targets and the meetings
were very productive. We look forward to a very strong 2008, as substantially
all the hotels will be renovated.�
2007 Guidance:
We are updating our full-year guidance as a result of second quarter
results, additional anticipated displacement in the third quarter and continued
weakness in the New Orleans market.
For 2007, we currently anticipate:
� RevPAR to increase between 4.0 and 5.0 percent for the full
year and between 3.5 and 5.0 percent for the third quarter;
� Adjusted EBITDA to be between $290 and $294 million for the full
year and between $67 and $69 million for the third quarter;
� Adjusted FFO per share to be between $2.23 and $2.29 for the full
year and between $0.47 and $0.51 for the third quarter;
� Net Income to be between $103 and $107 million for the full year
and between $11 and $13 million for the third quarter;
� Hotel EBITDA margins to be flat for the full year; and
� Capital expenditures of approximately $225 million.
Third quarter and full-year guidance for FFO per share does not exceed
the annual conversion threshold; therefore, fully diluted shares outstanding
for the full year are assumed to be 63.2 million (i.e. our series A preferred
stock is not deemed converted) for purposes of computing full-year FFO
per share.
FelCor, a real estate investment trust, is the nation�s largest owner
of upper-upscale, all-suite hotels. FelCor�s portfolio is comprised of
83 consolidated hotels, located in 23 states and Canada. FelCor�s portfolio
includes 65 upper-upscale hotels, and FelCor is the largest owner of Embassy
Suites Hotels® and Doubletree Guest Suites® hotels. FelCor�s hotels
are flagged under global brands such as Embassy Suites Hotels, Doubletree®,
Hilton®, Sheraton®, Westin® and Holiday Inn®. (The foregoing
registered trademarks are the exclusive property of their respective owners.
None of the owners of these trademarks has any responsibility or liability
for any information contained in this press release.) FelCor has a current
enterprise value of approximately $3.2 billion. Additional information
can be found on the Company�s Web site at www.felcor.com.
We invite you to listen to our second quarter earnings Conference Call
on Wednesday, August 1, 2007, 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 �FelCor News� pages.
A telephonic replay will be available from Wednesday, August 1, 2007, at
12:00 p.m. (Central Time), through Friday, August 3, at 11:00 p.m. (Central
Time), by dialing 800-642-1687 (conference ID#11239031). A recording of
the call will also be archived and available at www.felcor.com.
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,� �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. General economic conditions, operating risks associated with
the hotel business, the impact of U.S. military involvement in the Middle
East and elsewhere, future acts of terrorism, the impact on the travel
industry of increased fuel prices and security precautions, the impact
that the bankruptcy of additional major air carriers may have on our revenues
and receivables, the availability of capital, the ability to execute our
renovation program on budget in a timely manner, the cyclical nature of
the real estate markets, 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.
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30,
June 30,
------------------- -------------------
2007 2006 2007
2006
--------- --------- --------- ---------
Revenues:
Hotel operating revenue:
Room
$216,813 $210,980 $421,135 $418,966
Food and beverage
35,212 34,689 66,985
65,103
Other operating
departments
13,504 13,568 25,948
26,549
Other revenue
322 27
452 56
-------- -------- -------- --------
Total revenues
265,851 259,264 514,520 510,674
-------- -------- -------- --------
Expenses:
Hotel departmental
expenses:
Room
53,058 51,562 101,841 100,977
Food and beverage
26,655 25,541 51,190
49,201
Other operating
departments
5,835 6,010 10,782
11,954
Other property related
costs
68,584 66,846 137,142 135,704
Management and franchise
fees
13,943 14,214 27,066
27,437
Taxes, insurance and lease
expense
31,422 28,868 60,651
55,400
Abandoned projects
- -
22 -
Corporate expenses
5,255 5,562 12,041
11,366
Depreciation
27,155 23,742 52,205
46,179
-------- -------- -------- --------
Total operating
expenses
231,907 222,345 452,940 438,218
-------- -------- -------- --------
Operating income
33,944 36,919 61,580
72,456
Interest expense, net
(23,207) (28,308) (46,079) (58,816)
Charge-off of deferred
financing costs
- (295)
- (962)
Early extinguishment of
debt, net
- (438)
- (438)
-------- -------- -------- --------
Income before equity in income
from
unconsolidated entities,
minority interests
and gain on sale of assets
10,737 7,878 15,501
12,240
Equity in income from
unconsolidated entities
3,710 3,812 16,480
5,760
Minority interests
79 844
116 1,285
Gain on sale of
condominiums
14,858 -
18,139 -
-------- -------- -------- --------
Income from continuing
operations
29,384 12,534 50,236
19,285
Discontinued operations
25,792 (2,389) 34,099
712
-------- -------- -------- --------
Net income
55,176 10,145 84,335
19,997
Preferred dividends
(9,678) (9,678) (19,356) (19,356)
-------- -------- -------- --------
Net income applicable to
common stockholders
$ 45,498 $ 467 $ 64,979 $
641
======== ======== ======== ========
Basic per common share data:
Net income from continuing
operations
$ 0.32 $ 0.05 $ 0.50
$ -
======== ======== ======== ========
Net income
$ 0.74 $ 0.01 $ 1.06
$ 0.01
======== ======== ======== ========
Basic weighted average
common shares outstanding
61,587 60,355 61,511
60,066
======== ======== ======== ========
Diluted per common share data:
Net income from continuing
operations
$ 0.32 $ 0.05 $ 0.50
$ -
======== ======== ======== ========
Net income
$ 0.73 $ 0.01 $ 1.05
$ 0.01
======== ======== ======== ========
Diluted weighted average
common shares outstanding
62,032 60,626 61,899
60,066
======== ======== ======== ========
Cash dividends declared on
common stock
$ 0.30 $ 0.20 $ 0.55
$ 0.35
======== ======== ======== ========
Discontinued Operations
(in thousands)
Discontinued operations include the results of operations
of 11 hotels
sold in 2007 and 31 hotels sold in 2006. Condensed
financial
information for the hotels included in discontinued
operations is as
follows:
Three Months Ended Six Months Ended
June 30,
June 30,
------------------- -------------------
2007 2006 2007
2006
--------- --------- --------- ---------
Operating revenue
$ 10,949 $ 58,088 $ 26,447 $ 122,089
Operating expenses
(6,215) (59,032) (18,094) (118,278)
-------- -------- -------- ---------
Operating income (loss)
4,734 (944) 8,353
3,811
Interest income (expense),
net
6 (317) (19)
(643)
Gain (loss) on sale of
hotels, net of income tax
22,457 (1,785) 28,488 (2,862)
Debt extinguishment
- -
(901) -
Minority interests
(1,405) 657 (1,822)
406
-------- -------- -------- ---------
Income (loss) from
discontinued operations
25,792 (2,389) 34,099
712
Depreciation and
amortization, net of
minority interest
14 4,280
14 9,118
Minority interest in FelCor
LP
559 (23)
740 (63)
Interest expense, net of
minority interests
- 314
27 629
-------- -------- -------- ---------
EBITDA from discontinued
operations
26,365 2,182 34,880
10,396
Loss (gain) on sale of
hotels, net of income tax
and minority interests
(21,799) 1,785 (27,830)
2,862
Impairment loss, net of
minority interests
- 8,341
- 8,341
Charges related to early
extinguishment of debt,
net of minority interests
- -
811 -
-------- -------- -------- ---------
Adjusted EBITDA from
discontinued operations
$ 4,566 $ 12,308 $ 7,861 $ 21,599
======== ======== ======== =========
Selected Balance Sheet Data
(in thousands)
June 30, December 31,
2007 2006
----------- ------------
Investment in hotels
$2,793,929 $2,656,571
Accumulated depreciation
(654,557) (612,286)
---------- -----------
Investments in hotels, net of accumulated
depreciation
$2,139,372 $2,044,285
========== ===========
Total cash and cash equivalents
$ 188,626 $ 124,179
========== ===========
Total assets
$2,556,234 $2,583,249
========== ===========
Total debt
$1,297,699 $1,369,153
========== ===========
Total stockholders' equity
$1,056,124 $1,010,931
========== ===========
At June 30, 2007, we had an aggregate of 62,471,098 shares
of FelCor common stock and 1,353,771 limited partnership units of FelCor
Lodging Limited Partnership outstanding.
Debt Summary
(dollars in thousands)
Interest
Rate at
Encumbered June 30, Maturity
Consolidated
Hotels 2007
Date
Debt
========== ========= ------------------ ------------
Line of credit(a) none
L + 1.75 January 2009 $
-
Senior term notes none
8.50 June 2011
299,037
Senior term notes none
L + 1.875 December 2011
215,000
---------
------------
Total line of
credit and
senior debt(b)
7.98
514,037
---------
------------
Mortgage debt(c) 12 hotels L + 0.93
November 2008 250,000
Mortgage debt 7 hotels
6.57 July 2009 - 2014 90,010
Mortgage debt 7 hotels
7.32 March 2009
122,576
Mortgage debt 8 hotels
8.70 May 2010
167,727
Mortgage debt 6 hotels
8.73 May 2010
121,106
Mortgage debt 1 hotel
L + 2.85 August 2008
15,500
Mortgage debt 1 hotel
5.81 July 2016
12,687
Other
1 hotel 9.17
August 2011
4,056
---------- ---------
------------
Total mortgage
debt(b)
43 hotels 7.41
783,662
========== =========
------------
$1,297,699
============
(a) We have a borrowing capacity of $125 million on our
line of credit. The interest on this line can range from 175 to 225 basis
points over LIBOR based on our leverage ratio as defined in our line of
credit agreement.
(b) Interest rates are calculated based on the average
outstanding debt at June 30, 2007.
(c) This debt has three one-year extension options.
Weighted average interest at June 30, 2007
7.64%
Fixed interest rate debt to total debt at June 30, 2007
63.0%
Weighted average maturity of debt at June 30, 2007
5 years
Mortgage debt to total assets at June 30, 2007
30.7%
Non-GAAP Financial Measures
We refer in this release to certain "non-GAAP financial
measures." These measures, including FFO, Adjusted FFO, Adjusted FFO per
share, EBITDA, Adjusted EBITDA, Same-Store EBITDA, Hotel EBITDA and Hotel
EBITDA margin, are measures of our financial performance that are not calculated
and presented in accordance with generally accepted accounting principles
("GAAP"). The following tables reconcile each of these non-GAAP measures
to the most comparable GAAP financial measure. Immediately following the
reconciliations, we include a discussion of why we believe these measures
are useful supplemental measures of our performance and the limitations
of such measures.
Reconciliation
of Net Income to FFO and Adjusted FFO
(in thousands, except per share and unit data)
Three Months Ended June 30,
------------------------------------------------
2007
2006
------------------------ -----------------------
Per
Per
Share
Share
Dollars Shares Amount Dollars Shares Amount
--------- ------ ------- -------- ------ -------
Net income
$ 55,176
$10,145
Preferred dividends (9,678)
(9,678)
--------
-------
Net income applicable
to common
stockholders
45,498 62,032 $ 0.73 467 60,626
$ 0.01
Depreciation,
continuing
operations
27,155 - 0.44
23,742 - 0.39
Depreciation,
unconsolidated
entities and
discontinued
operations
2,848 - 0.05
6,964 - 0.11
Loss (gain) on sale
of hotels, net of
income tax, and
minority interests (21,799)
- (0.35) 1,785 -
0.03
Minority interest in
FelCor LP
985 1,355 (0.01) 16
2,102 (0.01)
--------
-------
FFO
54,687
32,974
Impairment loss, net
of minority
interests
- - -
8,341 - 0.13
Charges related to
early extinguishment
of debt, net of
minority interests
- - -
803 - 0.01
--------
-------
Adjusted FFO
54,687
42,118
Preferred dividends
on Series A
Preferred Stock
6,279 9,985 (0.03) 6,279 9,985
-
-------- ------ ------ ------- ------ ------
Adjusted FFO for per
share calculation
assuming Series A
Preferred Stock
conversion(a)
$ 60,966 73,372 $ 0.83 $48,397 72,713 $ 0.67
======== ====== ====== ======= ====== ======
(a) For calculation of Adjusted FFO per share it is more
dilutive to assume the conversion of our Series A Preferred Stock into
common stock when our quarterly adjusted FFO per share calculation exceeds
63 cents per share.
Reconciliation
of Net Income to FFO and Adjusted FFO
(in thousands, except per share and unit data)
Six Months Ended June 30,
-------------------------------------------------
2007
2006
------------------------ ------------------------
Per
Per
Share
Share
Dollars Shares Amount Dollars Shares Amount
--------- ------ ------- --------- ------ -------
Net income
$ 84,335
$ 19,997
Preferred dividends (19,356)
(19,356)
--------
--------
Net income applicable
to common
stockholders
64,979 61,899 $ 1.05 641
60,066 $ 0.01
Depreciation,
continuing
operations
52,205 - 0.84
46,179 - 0.77
Depreciation,
unconsolidated
entities and
discontinued
operations
5,711 - 0.09
14,601 - 0.24
Loss (gain) on sale
of hotels, net of
income tax and
minority interests (27,830)
- (0.45) 2,862
- 0.05
Gain on sale of
hotels in
unconsolidated
entities
(11,182) - (0.18)
- - -
Minority interest
in FelCor LP
1,412 1,355 (0.01)
24 2,381 (0.04)
Conversion of
options and
unvested
restricted stock
- - -
- 260 -
--------
--------
FFO
85,295
64,307
Impairment loss, net
of minority
interest
- - -
8,341 - 0.13
Abandoned projects
22 -
- -
- -
Charges related to
debt
extinguishment,
net of minority
interest
811 - 0.01
1,470 - 0.02
--------
-------- ------ ------
Adjusted FFO
86,128
$ 74,118 62,707 $ 1.18
======== ====== ======
Preferred
dividends on
Series A
Preferred Stock
12,558 9,985 -
-------- ------ ------
Adjusted FFO for per
share calculation
assuming Series A
Preferred Stock
conversion(a)
$ 98,686 73,239 $ 1.35
======== ====== ======
(a) For calculation of Adjusted FFO per share it is more
dilutive to assume the conversion of our Series A Preferred Stock into
common stock when our adjusted FFO per share for six months exceeds $1.26
per share.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA
and Same-Store
EBITDA
(in thousands)
Three Months Ended Six Months Ended
June 30,
June 30,
------------------- -------------------
2007 2006 2007
2006
--------- --------- --------- ---------
Net income
$ 55,176 $ 10,145 $ 84,335 $ 19,997
Depreciation, continuing
operations
27,155 23,742 52,205
46,179
Depreciation, unconsolidated
entities and discontinued
operations
2,848 6,964 5,711
14,601
Minority interest in FelCor
Lodging LP
985 16
1,412 24
Interest expense
24,627 29,155 48,746
60,452
Interest expense,
unconsolidated entities and
discontinued operations
1,489 1,928 3,063
3,856
Amortization expense
1,207 908 2,614
1,897
-------- -------- -------- --------
EBITDA
113,487 72,858 198,086 147,006
Gain on sale of hotels, net of
income tax and minority
interests
(21,799) 1,785 (27,830)
2,862
Gain on sale of hotels in
unconsolidated entities
- - (11,182)
-
Impairment loss, discontinued
operations
- 8,341
- 8,341
Abandoned projects
- -
22 -
Charges related to debt
extinguishment, net of
minority interests
- 803
811 1,470
-------- -------- -------- --------
Adjusted EBITDA
91,688 83,787 159,907 159,679
Adjusted EBITDA from
discontinued operations
(4,566) (12,308) (7,861) (21,599)
Gain on sale of condominiums (14,858)
- (18,139) -
-------- -------- -------- --------
Same-Store EBITDA
$ 72,264 $ 71,479 $133,907 $138,080
======== ======== ======== ========
Reconciliation of Adjusted EBITDA to Hotel EBITDA
(in thousands)
Three Months Ended Six Months Ended
June 30,
June 30,
------------------- -------------------
2007 2006 2007
2006
--------- --------- --------- ---------
Adjusted EBITDA
$ 91,688 $ 83,787 $159,907 $159,679
Other revenue
(322) (27) (452)
(56)
Adjusted EBITDA from
discontinued operations
(4,566) (12,308) (7,861) (21,599)
Equity in income from
unconsolidated subsidiaries
(excluding interest and
depreciation expense)
(8,439) (8,667) (14,847) (15,365)
Minority interest in other
partnerships
(excluding interest and
depreciation expense)
(98) (396)
28 (547)
Consolidated hotel lease
expense
17,267 16,404 31,525
30,003
Unconsolidated taxes,
insurance and lease expense
(1,896) (1,567) (3,599) (3,149)
Interest income
(1,421) (847) (2,667) (1,636)
Corporate expenses (excluding
amortization expense)
4,048 4,654 9,427
9,469
Gain on sale of other
condominiums
(14,858) - (18,139)
-
-------- -------- -------- --------
Hotel EBITDA
$ 81,403 $ 81,033 $153,322 $156,799
======== ======== ======== ========
Reconciliation of Net Income to Hotel EBITDA
(in thousands)
Three Months Ended Six Months Ended
June 30, June
30,
------------------ -------------------
2007 2006 2007
2006
--------- -------- --------- ---------
Net income
$ 55,176 $10,145 $ 84,335 $ 19,997
Discontinued operations
(25,792) 2,389 (34,099)
(712)
Equity in income from
unconsolidated entities
(3,710) (3,812) (16,480) (5,760)
Minority interests
(79) (844) (116)
(1,285)
Consolidated hotel lease
expense
17,267 16,404 31,525 30,003
Unconsolidated taxes,
insurance and lease expense
(1,896) (1,567) (3,599) (3,149)
Interest expense, net
23,207 28,308 46,079 58,816
Charge-off of deferred
financing costs
- 295
- 962
Early extinguishment of debt
- 438
- 438
Corporate expenses
5,255 5,562 12,041
11,366
Depreciation
27,155 23,742 52,205 46,179
Abandoned projects
- -
22 -
Gain on sale of condominiums (14,858)
- (18,139) -
Other revenue
(322) (27) (452)
(56)
-------- ------- -------- --------
Hotel EBITDA
$ 81,403 $81,033 $153,322 $156,799
======== ======= ======== ========
Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands)
Three Months Ended Six Months Ended
June 30,
June 30,
-------------------- ----------------------
2007 2006
2007 2006
---------- ---------- ---------- ----------
Total revenue
$ 265,851 $ 259,264 $ 514,520 $ 510,674
Other revenue
(322) (27)
(452) (56)
--------- --------- --------- ---------
Hotel operating revenue
265,529 259,237 514,068
510,618
Hotel operating expenses (184,126)
(178,204) (360,746) (353,819)
--------- --------- ---------- ---------
Hotel EBITDA
$ 81,403 $ 81,033 $ 153,322 $ 156,799
========= ========= ========== =========
Hotel EBITDA margin
30.7% 31.3%
29.8% 30.7%
Reconciliation of Ratio of Operating Income to Total Revenue
to Hotel
EBITDA Margin
Three Months Six Months
Ended Ended
June 30, June 30,
-------------- --------------
2007 2006 2007 2006
------ ------- ------ -------
Ratio of operating income to total
revenue
12.8% 14.2% 12.0% 14.2%
Other revenue
(0.1) - (0.1)
-
Unconsolidated taxes, insurance and
lease expense
(0.7) (0.5) (0.7) (0.6)
Consolidated hotel lease expense
6.5 6.3 6.1
5.9
Corporate expenses
2.0 2.1 2.3
2.2
Depreciation
10.2 9.2 10.2
9.0
------ ------- ------ -------
Hotel EBITDA margin
30.7% 31.3% 29.8% 30.7%
====== ======= ====== =======
Reconciliation of Total Operating Expense to Hotel
Operating Expense
(dollars in thousands)
Three Months Ended Six Months Ended
June 30,
June 30,
------------------- -------------------
2007 2006 2007
2006
--------- --------- --------- ---------
Total operating expenses
$231,907 $222,345 $452,940 $438,218
Unconsolidated taxes,
insurance and lease
expense
1,896 1,567 3,599
3,149
Consolidated hotel lease
expense
(17,267) (16,404) (31,525) (30,003)
Corporate expenses
(5,255) (5,562) (12,041) (11,366)
Abandoned projects
- -
(22) -
Depreciation
(27,155) (23,742) (52,205) (46,179)
-------- -------- -------- --------
Hotel operating expenses
$184,126 $178,204 $360,746 $353,819
======== ======== ======== ========
Reconciliation of Forecasted Net Income to Forecasted
FFO, Adjusted
FFO, EBITDA and Adjusted EBITDA
(in millions, except per share and unit data)
Third Quarter 2007 Guidance
-------------------------------------
Low Guidance High Guidance
------------------ ------------------
Per Share Per Share
Dollars Amount(a) Dollars Amount(a)
------- ---------- ------- ----------
Net income
$ 11
$ 13
Preferred dividends
(10)
(10)
------
------
Net income applicable to common
stockholders
1 $0.02
3 $0.06
Depreciation
29
29
------
------
FFO and Adjusted FFO
$ 30 $0.47 $ 32
$0.51
======
======
Net income
$ 11
$ 13
Depreciation
29
29
Interest expense
26
26
Amortization expense
1
1
------
------
EBITDA and Adjusted EBITDA
$ 67
$ 69
======
======
Full Year 2007 Guidance
-------------------------------------
Low Guidance High Guidance
------------------ ------------------
Per Share Per Share
Dollars Amount(a) Dollars Amount(a)
------- ---------- ------- ----------
Net income
$103
$107
Preferred dividends
(39)
(39)
------
------
Net income applicable to common
stockholders
64 $1.03 68
$1.09
Gain on sale of assets
(39)
(39)
Depreciation
114
114
Minority interest in FelCor LP
1
1
------
------
FFO
140 $2.22 144
$2.28
Early extinguishment of debt
1
1
------
------
Adjusted FFO
$141 $2.23 $145
$2.29
======
======
Net income
$103
$107
Depreciation
114
114
Interest expense
105
105
Minority interest in FelCor LP
1
1
Amortization expense
5
5
------
------
EBITDA
328
332
Gain on sale of assets
(39)
(39)
Early extinguishment of debt
1
1
------
------
Adjusted EBITDA
$290
$294
======
======
(a) Weighted average shares and units are 63.2 million. |
(a) Weighted average shares and units are 63.2 million.
Substantially all of our non-current assets consist of
real estate. Historical cost accounting for real estate assets implicitly
assumes that the value of real estate assets diminishes predictably over
time. Since real estate values instead have historically risen or fallen
with market conditions, most industry investors consider supplemental measures
of performance, which are not measures of operating performance under GAAP,
to be helpful in evaluating a real estate company�s operations. These supplemental
measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store
EBITDA, Hotel EBITDA and Hotel EBITDA margin, are not measures of operating
performance under GAAP. However, we consider these non-GAAP measures to
be supplemental measures of a hotel REIT�s performance and should be considered
along with, but not as an alternative to, net income as a measure of our
operating performance.
FFO and EBITDA
The White Paper on Funds From Operations approved by
the Board of Governors of the National Association of Real Estate Investment
Trusts (�NAREIT�), defines FFO as net income or loss (computed in accordance
with GAAP), excluding gains or losses from sales of property, plus depreciation
and amortization, and after adjustments for unconsolidated partnerships
and joint ventures. Adjustments for unconsolidated partnerships and joint
ventures are calculated to reflect FFO on the same basis. We compute FFO
in accordance with standards established by NAREIT. This may not be comparable
to FFO reported by other REITs that do not define the term in accordance
with the current NAREIT definition or that interpret the current NAREIT
definition differently than we do.
EBITDA is a commonly used measure of performance in many
industries. We define EBITDA as net income or loss (computed in accordance
with GAAP) plus interest expenses, income taxes, depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures are calculated
to reflect EBITDA on the same basis.
Adjustments to FFO and EBITDA
We adjust FFO and EBITDA when evaluating our performance
because management believes that the exclusion of certain additional recurring
and non-recurring items described below provides useful supplemental information
to investors regarding our ongoing operating performance and that the presentation
of Adjusted FFO, Adjusted EBITDA and Same-Store EBITDA, when combined with
GAAP net income, EBITDA and FFO, is beneficial to an investor�s better
understanding of our operating performance.
� Gains and losses related to early extinguishment
of debt and interest rate swaps � We exclude gains and losses related to
early extinguishment of debt and interest rate swaps from FFO and EBITDA
because we believe that it is not indicative of ongoing operating performance
of our hotel assets. This also represents an acceleration of interest expense
or a reduction of interest expense, and interest expense is excluded from
EBITDA.
� Impairment losses � We exclude the effect of impairment
losses and gains or losses on disposition of assets in computing Adjusted
FFO and Adjusted EBITDA because we believe that including these is not
consistent with reflecting the ongoing performance of our remaining assets.
Additionally, we believe that impairment charges and gains or losses on
disposition of assets represent accelerated depreciation, or excess depreciation,
and depreciation is excluded from FFO by the NAREIT definition and from
EBITDA.
� Cumulative effect of a change in accounting principle
� Infrequently, the Financial Accounting Standards Board promulgates new
accounting standards that require the consolidated statements of operations
to reflect the cumulative effect of a change in accounting principle. We
exclude these one-time adjustments in computing Adjusted FFO and Adjusted
EBITDA because they do not reflect our actual performance for that period.
In addition, to derive Adjusted EBITDA, we exclude gains
or losses on the sale of assets because we believe that including them
in EBITDA is not consistent with reflecting the ongoing performance of
our remaining assets. Additionally, the gain or loss on sale of depreciable
assets represents either accelerated depreciation or excess depreciation
in previous periods, and depreciation is excluded from EBITDA.
To derive Same-Store EBITDA, we make the same adjustments
to EBITDA as for Adjusted EBITDA and, additionally, exclude EBITDA from
discontinued operations and gains and losses from the disposition of non-hotel
related assets.
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 corporate-level expenses, depreciation and
expenses related to our capital structure. We eliminate corporate-level
costs and expenses because we believe property-level results provide investors
with supplemental information with respect to the ongoing operating performance
of our hotels and the effectiveness of management on a property-level basis.
We eliminate depreciation and amortization, even though they are property-level
expenses, because we do not believe that these non-cash expenses, which
are based on historical cost accounting for real estate assets and implicitly
assume that the value of real estate assets diminish predictably over time,
accurately reflect an adjustment in the value of our assets. We also eliminate
consolidated percentage rent paid to unconsolidated entities, which is
effectively eliminated by minority interest expense and equity in income
from unconsolidated subsidiaries, and include the cost of unconsolidated
taxes, insurance and lease expense, to reflect the entire operating costs
applicable to our hotels.
Limitations of Non-GAAP Measures
The use of these non-GAAP financial measures has certain
limitations. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA,
Hotel EBITDA and Hotel EBITDA margin, as presented by us, may not be comparable
to FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, Hotel
EBITDA and Hotel EBITDA margin as calculated by other real estate companies.
These measures do not reflect certain expenses that we incurred and will
incur, such as depreciation and interest or capital expenditures. Management
compensates for these limitations by separately considering the impact
of these excluded items to the extent they are material to operating decisions
or assessments of our operating performance. Our reconciliations to the
GAAP financial measures, and our consolidated statements of operations
and cash flows, include interest expense, capital expenditures, and other
excluded items, all of which should be considered when evaluating our performance,
as well as the usefulness of our non-GAAP financial measures.
These non-GAAP financial measures are used in addition
to and in conjunction with results presented in accordance with GAAP. They
should not be considered as alternatives to operating profit, cash flow
from operations, or any other operating performance measure prescribed
by GAAP. Neither should FFO, Adjusted FFO, Adjusted FFO per share, EBITDA,
Adjusted EBITDA or Same-Store 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 does not measure, and
should not be used as a measure of, amounts that accrue directly to the
benefit of stockholders. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store
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. |