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FelCor Completes Dispositions – Renovated Hotels Exceeding Targets
.
Plans to Spend $30 million to Renovate and Reposition the Crowne Plaza
Union Square San Francisco to a Marriott Brand

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. 

.
Contact:

FelCor Lodging Trust Incorporated, Irving
Stephen A. Schafer, 972-444-4912
Vice President Strategic Planning & Investor Relations
sschafer@felcor.com
 

 

.
.
Also See: FelCor Identifies 38 Hotels for Sale, Expects Proceeds of Between $500 million and $550 million; The New FelCor Will Own 90 Hotels / January 2006
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