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FelCor Reports Year End 2007 Net income of $50.3 million Up from $12.3 million in Prior Year;
Expecting its 85 Hotels to Grow RevPAR  from 6.5 - 8.5% for 2008


                                                                                        

 

 

FELCOR REPORTS 2007 OPERATING RESULTS

 

            IRVING, Texas…February 28, 2008 - FelCor Lodging Trust Incorporated (NYSE: FCH) today reported operating results for the fourth quarter and year ended December 31, 2007.

 

Fourth Quarter Summary:  

 

·

Exceeded operating expectations for our 49 hotels where renovations had been completed for at least a full quarter.  Hotel EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for these hotels exceeded budget by 1.8 percent.  This represents a return on capital greater than our 12 percent goal.

 

 

·

Increased Revenue per Available Room (“RevPAR”) by 13.9 percent at our 49 hotels where renovations had been completed for at least a full quarter.  RevPAR increased 6.2 percent for our 83 consolidated hotels owned the entire quarter.

 

 

·

Completed renovations at 12 hotels during the fourth quarter and an additional five hotels in the first two months of 2008.  We have now completed renovations at 66 hotels, which comprise 80 percent of the hotels in our portfolio.  We expect to complete renovations at 75 hotels by March 31, 2008 and at the remaining hotels by the end of 2008. 

 

 

·

During the fourth quarter, we had 27 hotels under renovation.  While performance continues to be affected by renovation, the amount of disruption during the fourth quarter was lower than any other quarter during 2007.

 

 

·

Acquired two upper-upscale destination resorts, the Renaissance Vinoy Resort & Golf Club in St. Petersburg, Florida and the Renaissance Esmeralda Resort & Spa in Indian Wells, California.  These hotels meet our objectives of acquiring upper-upscale hotels in markets with high barriers to entry that offer returns that exceed our weighted average cost of capital.

 

 

·

Increased our quarterly common dividend by $0.05 to $0.35 per share.

 

Fourth Quarter and Year Ended Operating Results:  

 

In the fourth quarter, RevPAR at our 83 consolidated hotels owned the entire quarter, increased 6.2 percent and Average Daily Rate (“ADR”) increased 6.4 percent, compared to the same period in 2006.  RevPAR at our 49 hotels where renovations had been completed for at least a full quarter, increased 13.9 percent and ADR increased 6.2 percent, compared to the prior year period.  At our 34 hotels where renovations were not complete at September 30, 2007, RevPAR decreased 3.7 percent.  This decrease in RevPAR resulted from a 10.0 percent decrease in occupancy and is attributed principally to renovation-related disruptions. 

 

For the full year 2007, RevPAR at our 83 consolidated hotels owned the entire period, increased 3.3 percent and ADR increased 6.5 percent, compared to the same period in 2006.


“We have nearly completed our renovation program and will soon be back to normal renovation schedules.  Overall, the renovation program has been a tremendous success.  Based on the performance of the renovated hotels, we are achieving our expected return on capital investment,” said Richard A. Smith, FelCor’s President and Chief Executive Officer.  “As a result of our renovation program, our RevPAR growth is expected to be significantly above the industry average in 2008.  We expect this trend to continue into 2009 from our hotels where we are completing renovations in late 2007 and 2008 and from our redevelopment projects, despite the anticipated softening in travel demand.  Given the uncertain economic environment, our focus will continue to be on the prudent allocation of capital.”

 

In the fourth quarter our loss from continuing operations was $2.7 million, an improvement of $12.3 million from the same period in 2006.  Net loss applicable to common stockholders was $13.0 million, or $0.21 per share, compared to net income applicable to common stockholders of $1.3 million, or $0.02 per share, for the same period in 2006. 

 

For the year, our income from continuing operations was $55.7 million, a $47.1 million increase from the same period in 2006.  Net income applicable to common stockholders was $50.3 million, or $0.81 per share, compared to $12.3 million, or $0.20 per share.

 

In the fourth quarter, Same-Store Funds from Operations (“FFO”) increased to $22.3 million, or $0.35 per share, compared to $15.2 million, or $0.24 per share, for the same period in 2006.  Our Adjusted FFO was $21.2 million, a $274,000 increase from the same period in 2006.  Adjusted FFO per share was $0.34, an increase of $0.01. 

 

For the year, Same-Store FFO increased to $112.2 million, or $1.77 per share, compared to $89.8 million, or $1.42 per share, for the same period in 2006.  Adjusted FFO was $137.2 million, a $12.4 million increase from 2006. Adjusted FFO per share increased to $2.17 for the year, compared to $1.98 in the prior year, an increase of 9.6 percent.

 

In the fourth quarter, Same-Store EBITDA increased to $59.2 million, compared to $53.1 million for the same period in 2006.  Our Adjusted EBITDA (including sold hotels) decreased to $58.8 million in the fourth quarter, compared to $59.0 million for the same period in 2006. 

 

For the year, Same-Store EBITDA increased by $4.4 million, to $259.4 million, or 1.7 percent.  Adjusted EBITDA (including sold hotels) decreased $6.1 million, to $285.1 million compared to the same period in 2006. 

 

In the fourth quarter, our Hotel EBITDA increased to $67.3 million, compared to $62.3 million in the same period in 2006.  Hotel EBITDA margin was 27.1 percent, representing a 39 basis point increase compared to the same period in 2006. 

 

For the year ended December 31, 2007, Hotel EBITDA increased to $293.7 million, compared to $292.4 million in the same period in 2006, an increase of $1.3 million.  Hotel EBITDA margin was 28.8 percent, representing a 68 basis point decrease.

 

Adjusted FFO, Adjusted EBITDA and net income were impacted by significant disruption related to the renovation of 68 hotels during the year.  Adjusted FFO, Adjusted EBITDA and net income (loss) include a gain from the sale of condominium units of $129,000 for the fourth quarter and $18.6 million for the year.  Net income includes gains from the sale of hotels of $28.0 million for the year.  Prior year net income for the quarter includes gains from the sale of hotels of $25.9 million and impairment losses of $1.3 million, and gains from sale of hotels of $41.2 million and impairment losses of $16.5 million for the full year.  

 

EBITDA, Adjusted EBITDA, Same-Store EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO, Same-Store FFO and Adjusted FFO are all non-GAAP financial measures. See our discussion of “Non-GAAP Financial Measures” beginning on page 11 for a reconciliation of each of these measures to our net income (loss) and for information regarding the use, limitations and importance of these non-GAAP financial measures.

 

Renovation Program Update:

 

            During the fourth quarter, 27 of our hotels were undergoing some form of renovation.  We completed major renovations at 12 of our hotels during the quarter, and through February 2008, we completed renovations at an additional five hotels.  Since we started our renovation program, we have completed renovations at 66 hotels, which comprise 80 percent of the hotels in our portfolio.  We expect to complete renovations at 75 hotels by March 31, 2008 and our remaining hotels by the end of 2008.  We had approximately 85,000 room nights out of service in the fourth quarter of 2007 and 450,000 for the full year, which impacted our 2007 EBITDA by approximately $18 million.

 

We spent $265.9 million on renovations and redevelopment projects at our hotels during 2007, including our pro rata share of joint venture expenditures.

 

Overall, our hotels where we have completed renovations are exceeding our targeted 12 percent return on the guest impact portion of total capital expenditures.  Similarly, during the fourth quarter, RevPAR, Hotel EBITDA and Hotel EBITDA margin exceeded budget for these hotels.  For our 49 hotels where renovations had been completed for at least a full quarter, RevPAR increased 13.9 percent for the fourth quarter, compared to the prior year period.  For these same hotels, Hotel EBITDA grew 31 percent compared to prior year, which was approximately two percent greater than budget, and Hotel EBTIDA margin grew approximately 400 basis points, compared to prior year, which was approximately 50 basis points greater than budget.

 

Development:  

 

We continue to progress with the redevelopment and rebranding of our San Francisco - Union Square hotel.  Marriott International, Inc. took over management of this hotel in December 2007, and the hotel is currently operating under the name Hotel 480.  Upon completion of the project, which we expect to occur by early 2009, the hotel will be rebranded as a Marriott®.  Additionally, the 35,000 square foot convention center adjacent to our Myrtle Beach Hilton® Resort opened in January 2008, hosting its first group on January 10, and the addition of a spa at our Embassy Suites Hotel® - Deerfield Beach Resort was completed this month.  Our other announced redevelopment project, adding meeting space at our Doubletree Guest Suites® in Dana Point, California, should be completed by April 2008.  We are currently in various planning and entitlement stages for our remaining projects.

 

Our asset management approach includes seeking additional value-added enhancements to our hotels, such as new restaurant concepts and maximizing the use of public area space, which will provide additional EBITDA growth.  Two of these recent projects include opening a Ruth’s Chris Steak House at our Atlanta-Buckhead property and converting unused space to meeting rooms at our Ft. Lauderdale hotel. 

 

In the fourth quarter, we recognized a gain of $129,000 on the sale of one unit at our Royale Palms condominium project in Myrtle Beach, South Carolina.  During the year 2007, we sold 179 units and recognized a gain on sale of $18.6 million.  We have five condominium units remaining to be sold, which we expect to sell on a selective basis to maximize prices. 

 

Capital Structure:  

 

At December 31, 2007, we had $1.5 billion of consolidated debt outstanding with a weighted average life of four years and a weighted average interest rate of 7.2 percent.  However, LIBOR has since decreased, resulting in reductions to our weighted average interest expense of nearly 75 basis points.  Our cash and cash equivalents totaled approximately $58 million at December 31, 2007.

 

We refinanced a CMBS loan secured by eight joint-venture hotels that matured in January 2008.  The loan amount of $140 million was used principally to repay the existing $87 million loan and a $12 million loan secured by one additional joint-venture hotel.  Our pro rata share of the remaining proceeds was used for general corporate purposes.  The new loan bears interest of LIBOR plus 175 basis points.  We also have a $250 million mortgage loan secured by 12 hotels scheduled to mature in November 2008, on which we have three one-year extension options that we currently expect to exercise. We have no other material debt maturities in 2008.

 

            We increased our quarterly common dividend from $0.30 to $0.35 per share, effective the fourth quarter of 2007. 

 

Acquisitions:  

 

In December 2007, we purchased two upper-upscale destination resorts, the Renaissance® Esmeralda Resort & Spa located in Indian Wells, California and the Renaissance Vinoy Resort & Golf Club located in St. Petersburg, Florida, for a combined purchase price of $225 million.  Marriott International, Inc. will continue to manage the properties under long-term management agreements.  The two hotels typify our strategy of acquiring upper-upscale hotels in high barrier to entry markets, and to further diversify our portfolio by customer, market and brand.  There are opportunities at both hotels to upgrade and enhance the existing facilities, including the spa and pool areas, as well as other redevelopment opportunities (such as maximizing the value of excess land) that would generate greater EBITDA growth.

 

“We are very pleased with the progress we made in completing our initiatives in 2007 including the renovation and disposition programs and the debt reduction plan.  We continue to strengthen our balance sheet capacity and flexibility in a very tough credit market, as evidenced by the amendment to our line of credit, which increased capacity and lowered the interest rate, and the recent successful refinancing of the maturing CMBS loan,” said Andrew J. Welch, FelCor’s Executive Vice President and Chief Financial Officer.  “Looking into 2008, we will continue to seek opportunities to improve our portfolio quality through further asset sales and improve our operating margins through our active asset management approach.  Our brand-operators are also prepared to implement contingency plans at our hotels, if necessary, to combat a softening in demand.”


2008 Guidance:

 

                Our 2008 guidance assumes that our portfolio will increase RevPAR at a significantly higher rate than the industry average.  RevPAR at our 85 consolidated hotels increased 7.4 percent in January 2008, compared to the same period in 2007.  The benefits of our renovation program, including achieving the expected returns from our capital investment, are driving the relatively high increase in RevPAR.  Due to slowing economic growth and its potential impact on the hotel industry, we are assuming demand growth will further moderate beyond current levels, resulting in low single-digit RevPAR growth for our markets.  This assumption also accounts for the potential impact on travel demand due to weaknesses in the financial and housing sectors as well as the general economy.  As we complete our remaining renovations, primarily occurring during the first part of the year, and the redevelopment of our Union Square hotel, we will have continued disruption in 2008.  As a result, we currently anticipate:

 

·

Portfolio RevPAR growth between 6.5 and 8.5 percent for the full year and 4.0 and 5.5 percent for the first quarter;

·

Adjusted EBITDA to be between $293 million and $301 million for the full year and between $69 million and $71 million for the first quarter;

·

Adjusted FFO per share to be between $2.29 and $2.42 for the full year and between $0.48 and $0.51 for the first quarter;

·

Net Income to be between $33 million and $41 million for the full year and between $2 million and $4 million for the first quarter;

·

Hotel EBITDA margins to increase between 50 and 100 basis points for the full year;

·

Capital expenditures including redevelopment projects of $150 million; and

·

Gain of $400,000 from the sale of three Royale Palms condominium units during the year.

 

Guidance for 2008 assumes the following:

 

·

RevPAR for our markets is expected to grow between 1.0 and 3.0 percent for the full year.  We expect our RevPAR to grow an additional 6.5 percent as we earn the targeted 12 percent return on renovated hotels and recapture displaced business from 2007.  This is offset by approximately 1.0 percent of RevPAR, or approximately $8 million of EBITDA, related to disruption in 2008, attributable equally to completing the renovations at 22 hotels and the redevelopment at our Union Square hotel.

 

 

·

2007 EBITDA for 85 hotels, of $273 million, is expected to grow 9 percent, or $24 million, based on the mid-point of guidance.  2007 EBITDA for 85 hotels includes $14 million for the acquired Renaissance hotels, and excludes the $19 million gain from the Royale Palms project and $8 million from hotels sold in 2007.  The mid-point of our 2008 Same-Store EBITDA guidance assumes the following:

  • Recapturing displaced business from 2007 and the expected returns to be recognized from renovations completed in 2007 of $36 million;
  • Two percent growth in market RevPAR, and a three percent increase in expenses, including above average inflationary increases in Property and State & Franchise Taxes, resulting in EBITDA that is slightly negative to prior year;
  • Disruption of $8 million from completing the remaining renovations; and
  • Decline of $2 million in interest income as a result of smaller cash balances. 

 

The following table reconciles 2007 Same-Store EBITDA to the mid-point of our anticipated 2008 EBITDA (in millions):

 

2007 Same-Store EBITDA.............................................................

$

259

 

2007 EBITDA for the acquired Renaissance hotels..........................

 

14

 

2007 EBITDA for 85 hotels............................................................

 

273

 

2007 renovation returns and disruption recapture..............................

 

36

 

Market change...............................................................................

 

(2

)

Interest income..............................................................................

 

(2

)

2008 Disruption..............................................................................

 

(8

)

2008 EBITDA...............................................................................

$

297

 

 

·

Hotel EBITDA margin in 2007 for 85 hotels was 27.7 percent.

·

Same-Store FFO for 85 hotels is expected to grow between 29 and 37 percent, compared to prior year.  This reflects the benefits of our renovation program and a lower weighted average interest rate from a reduction in LIBOR. 

 

The following table reconciles 2007 Same-Store FFO to the mid-point of our anticipated 2008 FFO (in millions):

 

2007 Same-Store FFO....................................................................

$

112

 

2007 FFO for the acquired Renaissance hotels.................................

 

2

 

2007 FFO for 85 hotels...................................................................

 

114

 

2007 renovation returns and disruption recapture..............................

 

36

 

Market change...............................................................................

 

(2

)

Interest income..............................................................................

 

(2

)

2008 Disruption..............................................................................

 

(8

)

Interest expense savings.................................................................

 

11

 

2008 FFO......................................................................................

$

149

 

2008 FFO per share.......................................................................

$

2.35

 

 

 


 

FelCor, a real estate investment trust, is the nation’s largest owner of upper-upscale, all-suite hotels.  FelCor’s portfolio is comprised of 85 consolidated hotels and resorts, located in 23 states and Canada.  FelCor’s portfolio consists mostly of upper upscale hotels, which are flagged under global brands such as Embassy Suites Hotels®, Doubletree®, Hilton®, Renaissance®, Sheraton®, Westin® and Holiday Inn®.  FelCor has a current enterprise value of approximately $2.8 billion.  Additional information can be found on the Company’s Web site at www.felcor.com.

 

We invite you to listen to our fourth quarter earnings Conference Call on Friday, February 29, 2008, 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 Friday, February 29, 2008, at 1:00 p.m. (Central Time), through Tuesday, March 4, at 1:00 p.m. (Central Time), by dialing 800-642-1687 (conference ID 35492875). 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 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

 

Year Ended

 

December 31,

 

December 31,

 

2007

 

2006

 

2007

 

2006

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Hotel operating revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Room...................................................................................

$

197,495

 

 

$

185,491

 

 

$

830,978

 

 

$

809,466

 

     Food and beverage...........................................................

 

37,647

 

 

 

34,928

 

 

 

136,793

 

 

 

129,200

 

     Other operating departments..........................................

 

12,887

 

 

 

12,473

 

 

 

51,024

 

 

 

52,293

 

   Other revenue......................................................................

 

477

 

 

 

10

 

 

 

3,089

 

 

 

79

 

Total revenues.......................................................

 

248,506

 

 

 

232,902

 

 

 

1,021,884

 

 

 

991,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Hotel departmental expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Room...................................................................................

 

50,032

 

 

 

47,690

 

 

 

204,426

 

 

 

199,283

 

     Food and beverage...........................................................

 

27,873

 

 

 

25,249

 

 

 

104,086

 

 

 

97,012

 

     Other operating departments..........................................

 

5,397

 

 

 

5,602

 

 

 

20,924

 

 

 

23,436

 

   Other property related costs.............................................

 

67,957

 

 

 

66,168

 

 

 

275,217

 

 

 

270,301

 

   Management and franchise fees......................................

 

12,790

 

 

 

11,775

 

 

 

53,508

 

 

 

51,237

 

   Taxes, insurance and lease expense................................

 

28,872

 

 

 

27,926

 

 

 

121,259

 

 

 

112,052

 

   Abandoned projects..........................................................

 

-   

 

 

 

33

 

 

 

22

 

 

 

33

 

   Corporate expenses............................................................

 

4,986

 

 

 

4,778

 

 

 

20,718

 

 

 

23,308

 

   Other expenses....................................................................

 

1,112

 

 

 

-   

 

 

 

2,803

 

 

 

-   

 

   Depreciation........................................................................

 

30,022

 

 

 

24,483

 

 

 

110,751

 

 

 

94,579

 

Total operating expenses.....................................

 

229,041

 

 

 

213,704

 

 

 

913,714

 

 

 

871,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income...................................................................

 

19,465

 

 

 

19,198

 

 

 

108,170

 

 

 

119,797

 

   Interest expense, net..........................................................

 

(23,755

)

 

 

(24,021

)

 

 

(92,489

)

 

 

(110,867

)

   Charge-off of deferred financing costs...........................

 

-   

 

 

 

(2,599

)

 

 

-   

 

 

 

(3,562

)

   Early extinguishment of debt, net.....................................

 

-   

 

 

 

(12,033

)

 

 

-   

 

 

 

(12,471

)

   Gain on swap termination..................................................

 

-   

 

 

 

1,715

 

 

 

-   

 

 

 

1,715

 

Income (loss) before equity in income from

   unconsolidated entities, minority interests and

   sale of assets.......................................................................

 

 

 

(4,290

 

 

)

 

 

 

 

(17,740

 

 

)

 

 

 

 

15,681

 

 

 

 

 

(5,388

 

 

)

   Equity in income from unconsolidated entities..............

 

846

 

 

 

1,829

 

 

 

20,357

 

 

 

11,537

 

   Minority interests...............................................................

 

570

 

 

 

867

 

 

 

1,033

 

 

 

2,508

 

   Loss on sale of other assets.............................................

 

-   

 

 

 

-   

 

 

 

-   

 

 

 

(92

)

   Gain on sale of condominiums..........................................

 

129

 

 

 

-   

 

 

 

18,622

 

 

 

-   

 

Income (loss) from continuing operations.........................

 

(2,745

)

 

 

(15,044

)

 

 

55,693

 

 

 

8,565

 

   Discontinued operations..................................................

 

(547

)

 

 

26,030

 

 

 

33,346

 

 

 

42,480

 

Net income (loss)...................................................................

 

(3,292

)

 

 

10,986

 

 

 

89,039

 

 

 

51,045

 

   Preferred dividends............................................................

 

(9,679

)

 

 

(9,691

)

 

 

(38,713

)

 

 

(38,713

)

Net income (loss) applicable to common stockholders..

$

(12,971

)

 

$

1,295

 

 

$

50,326

 

 

$

12,332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic per common share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Net income (loss) from continuing operations...............

$

(0.20

)

 

$

(0.40

)

 

$

0.28

 

 

$

(0.50

)

   Net income (loss)................................................................

$

(0.21

)

 

$

0.02

 

 

$

0.82

 

 

$

0.20

 

   Basic weighted average common shares outstanding..

 

61,649

 

 

 

61,268

 

 

 

61,600

 

 

 

60,734

 

Diluted per common share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Net income (loss)  from continuing operations..............

$

(0.20

)

 

$

(0.40

)

 

$

0.27

 

 

$

(0.50

)

   Net income (loss)................................................................

$

(0.21

)

 

$

0.02

 

 

$

0.81

 

 

$

0.20

 

   Diluted weighted average common shares

     outstanding.......................................................................

 

61,649

 

 

 

61,268

 

 

 

61,897

 

 

 

60,734

 

Cash dividends declared on common stock......................

$

0.35

 

 

$

0.25

 

 

$

1.20

 

 

$

0.80

 

 

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

 

Year Ended

 

December 31,

 

December 31,

 

2007

 

2006

 

2007

 

2006

   Operating revenue.................................................

$

-   

 

 

$

32,268

 

 

$

26,522

 

$

204,494

 

   Operating expenses...............................................

 

(59

)

 

 

(31,891

)

 

 

(18,430

)

 

(200,958

)

      Operating income (loss)......................................

 

(59

)

 

 

377

 

 

 

8,092

 

 

3,536

 

   Interest expense, net.............................................

 

-   

 

 

 

(259

)

 

 

(14

)

 

(1,206

)

   Gain (loss) on sale of hotels, net of income tax........

 

(500

)

 

 

25,902

 

 

 

27,988

 

 

41,222

 

   Gain on sale of land...............................................

 

-   

 

 

 

1,958

 

 

 

-   

 

 

1,958

 

   Debt extinguishment..............................................

 

-   

 

 

 

(1,071

)

 

 

(902

)

 

(1,311

)

   Minority interests..................................................

 

12

 

 

 

(877

)

 

 

(1,818

)

 

(1,719

)

Income (loss) from discontinued operations........

 

(547

)

 

 

26,030

 

 

 

33,346

 

 

42,480

 

   Depreciation and amortization, net of minority

      interests.............................................................

 

 

-   

 

 

 

 

2,548

 

 

 

 

14

 

 

 

15,451

 

   Minority interest in FelCor LP................................

 

(12

)

 

 

569

 

 

 

724

 

 

903

 

   Interest expense, net of minority interests...............

 

-   

 

 

 

241

 

 

 

27

 

 

1,168

 

EBITDA from discontinued operations................

 

(559

)

 

 

29,388

 

 

 

34,111

 

 

60,002

 

   Loss (gain) on sale of hotels, net of income tax and

      minority interests................................................

 

 

500

 

 

 

 

(25,902

 

)

 

 

 

(27,330

 

)

 

 

(40,650

 

)

   Impairment loss, net of minority interests................

 

-   

 

 

 

1,332

 

 

 

-   

 

 

15,547

 

   Charges related to early extinguishment of debt,

      net of minority interests......................................

 

 

-   

 

 

 

 

1,069

 

 

 

 

811

 

 

 

1,285

 

   Abandoned projects...............................................

 

-   

 

 

 

79

 

 

 

-   

 

 

79

 

Adjusted EBITDA from discontinued operations

$

(59

)

 

$

5,966

 

 

$

7,592

 

$

36,263

 

 

Selected Balance Sheet Data

(in thousands)

 

 

 

December 31,

 

December 31,

 

2007

 

2006

Investment in hotels...............................................................

$

3,094,521

 

 

$

2,656,571

 

Accumulated depreciation......................................................

 

(694,464

)

 

 

(612,286

)

Investments in hotels, net of accumulated depreciation ............

$

2,400,057

 

 

$

2,044,285

 

 

 

 

 

 

 

 

 

Total cash and cash equivalents.............................................

$

57,609

 

 

$

124,179

 

Total assets..........................................................................

$

2,683,835

 

 

$

2,583,249

 

Total debt.............................................................................

$

1,475,607

 

 

$

1,369,153

 

Total stockholders’ equity......................................................

$

1,006,914

 

 

$

1,010,931

 

 

            At December 31, 2007, we had an aggregate of 62,707,499 shares of FelCor common stock and 1,353,771 limited partnership units of FelCor Lodging Limited Partnership outstanding.


Debt Summary

(dollars in thousands)

 

 

Encumbered

Interest Rate at

Maturity

Consolidated

 

 

Hotels

 

 

December 31, 2007

 

 

Date

 

 

Debt

Line of credit(a)

none

 

L + 0.80

 

August 2011

$

-   

Senior term notes

none

 

8.50(b)

 

June 2011

 

299,163

Senior term notes

none

 

L + 1.875

 

December 2011

 

215,000

Other

none

 

L + 0.40

 

March 2008

 

8,350

   Total line of credit

     and senior debt(c)

 

 

 

7.65

 

 

 

 

522,513

 

 

 

 

 

 

 

 

Mortgage debt

 

12 hotels

 

 

L + 0.93(d)

 

November 2008(e)

 

250,000

Mortgage debt

 

7 hotels

 

 

6.57

 

June 2009-2014

 

89,087

Mortgage debt

 

7 hotels

 

 

7.32

 

March 2009

 

120,827

Mortgage debt

 

8 hotels

 

 

8.70

 

May 2010

 

165,981

Mortgage debt

 

6 hotels

 

 

8.73

 

May 2010

 

119,568

Mortgage debt

 

2 hotels

 

 

L + 1.55(f)

 

May 2009(g)

 

175,980

Mortgage debt

 

1 hotel

 

 

L + 2.85

 

August 2008

 

15,500

Mortgage debt

 

1 hotel

 

 

5.81

 

July 2016

 

12,509

Other

 

1 hotel   

 

 

9.17

 

August 2011

 

3,642

   Total mortgage debt(c)

 

45 hotels

 

 

6.99

 

 

 

953,094

     Total          

 

 

7.22

%

 

 

$

1,475,607

















 

(a)    We have a borrowing capacity of $250 million on our line of credit.  The interest on this line can range from 80 to 150 basis points over LIBOR, based on our leverage ratio as defined in our line of credit agreement.

(b)    The interest rate on these senior notes will increase to 9.0% if the credit rating on our senior debt is downgraded by Moody’s to B1 and Standard & Poor’s rating remains below BB-.

(c)    Interest rates are calculated based on the weighted average debt outstanding at December 31, 2007.

(d)    We have purchased an interest rate cap for this notional amount with a cap rate of 7.8% that expires in November 2008.

(e)    This loan has three one-year extension options that permit the maturity to be extended to 2011, at our option.

(f)     We have purchased interest rate caps for $177 million aggregate notional amounts with cap rates of 6.25% which expire in May 2009.

(g)    These loans have three one-year extension options that permit the maturity to be extended to 2012, at our option.

 

 

Debt Statistics at December 31, 2007

 

 

Weighted average interest

7.22%

Fixed interest rate debt to total debt

54.9%

Weighted average maturity of debt

4 years

Mortgage debt to total assets

35.5%

 

 

 

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, Same-Store FFO, 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 (Loss) to FFO, Adjusted FFO and Same-Store FFO

(in thousands, except per share and unit data)

 

 

Three Months Ended December 31,

 

2007

 

2006

 

Dollars

 

Shares

 

Per Share Amount

 

Dollars

 

Shares

 

Per Share Amount

Net income (loss)........................................

$

(3,292

)

 

 

 

 

 

 

 

$

10,986

 

 

 

 

 

 

 

Preferred dividends.......................................

 

(9,679

)

 

 

 

 

 

 

 

 

(9,691

)

 

 

 

 

 

 

Net income (loss) applicable to common stockholders.........................................

 

(12,971

)

 

61,649

 

$

(0.21

)

 

 

1,295

 

 

61,268

 

$

0.02

 

Depreciation, continuing operations...............

 

30,022

 

 

-   

 

 

0.49

 

 

 

24,483

 

 

-   

 

 

0.40

 

Depreciation, unconsolidated entities and discontinued operations............................

 

3,465

 

 

-   

 

 

0.06

 

 

 

5,533

 

 

-   

 

 

0.09

 

Loss (gain) on sale of hotels, net of income tax and minority interests...............................

 

 

500

 

 

-   

 

 

 

0.01

 

 

 

(25,902

)

 

-   

 

 

(0.43

)

Minority interest in FelCor LP......................

 

(281

)

 

1,354

 

 

(0.02

)

 

 

28

 

 

1,355

 

 

0.01

 

Conversion of options and unvested restricted stock......................................................

 

-   

 

 

341

 

 

-   

 

 

 

-   

 

 

371

 

 

-   

 

FFO..............................................................

 

20,735

 

 

63,344

 

 

0.33

 

 

 

5,437

 

 

62,994

 

 

0.09

 

Impairment loss, net of minority interests......

 

-   

 

 

-   

 

 

-   

 

 

 

1,332

 

 

-   

 

 

0.02

 

Abandoned projects.....................................

 

-   

 

 

-   

 

 

-   

 

 

 

112

 

 

-   

 

 

-   

 

Charges related to early extinguishment of debt, net of minority interests...........................

 

-   

 

 

-   

 

 

-   

 

 

 

15,786

 

 

 

-   

 

 

0.25

 

Gain on swap termination.............................

 

-   

 

 

-   

 

 

-   

 

 

 

(1,715

)

 

-   

 

 

(0.03

)

Conversion costs(a)......................................

 

491

 

 

-   

 

 

0.01

 

 

 

-   

 

 

-   

 

 

-   

 

Adjusted FFO..............................................

 

21,226

 

 

63,344

 

 

0.34

 

 

 

20,952

 

 

62,994

 

 

0.33

 

Adjusted FFO from discontinued operations and acquired hotels............................................

 

1,154

 

 

 

-   

 

 

 

0.01

 

 

 

(5,728

)

 

 

-   

 

 

 

(0.09

)

Gain on sale of condominiums..........................

 

(129

)

 

-   

 

 

-   

 

 

 

-   

 

 

-   

 

 

-   

 

Same-Store FFO..........................................

$

22,251

 

 

63,344

 

$

0.35

 

 

$

15,224

 

 

62,994

 

$

0.24

 

 

(a)  These costs relate to the conversion of our Hotel 480 Union Square in San Francisco to a Marriott.  The conversion is expected to be complete by early 2009.


 

Reconciliation of Net Income to FFO, Adjusted FFO and Same-Store FFO

(in thousands, except per share and unit data)

 

 

Year Ended December 31,

 

2007

 

2006

 

Dollars

 

Shares

 

Per Share Amount

 

Dollars

 

Shares

 

Per Share Amount

Net income..................................................

$

89,039

 

 

 

 

 

 

 

 

$

51,045

 

 

 

 

 

 

 

Preferred dividends.......................................

 

(38,713

)

 

 

 

 

 

 

 

 

(38,713

)

 

 

 

 

 

 

Net income applicable to common stockholders.........................................

 

50,326

 

 

61,897

 

$

0.81

 

 

 

12,332

 

 

60,734

 

$

0.20

 

Depreciation, continuing operations...............

 

110,751

 

 

-   

 

 

1.79

 

 

 

94,579

 

 

-   

 

 

1.56

 

Depreciation, unconsolidated entities and discontinued operations............................

 

12,071

 

 

-   

 

 

0.20

 

 

 

26,911

 

 

-   

 

 

0.44

 

Gain on sale of hotels, net of income tax and minority interests.....................................

 

 

(27,330

)

 

-   

 

 

(0.44

)

 

 

(40,650

)

 

-   

 

 

(0.67

)

Gain on sale of hotels in unconsolidated entities..............................................................

 

(10,993

)

 

-   

 

 

 

(0.18

)

 

 

-   

 

 

 

-   

 

 

-   

 

Minority interest in FelCor LP......................

 

1,094

 

 

1,354

 

 

(0.03

)

 

 

279

 

 

1,864

 

 

(0.04

)

Conversion of options and unvested restricted stock......................................................

 

-   

 

 

-   

 

 

-   

 

 

 

-   

 

 

327

 

 

-   

 

FFO..............................................................

 

135,919

 

 

63,251

 

 

2.15

 

 

 

93,451

 

 

62,925

 

 

1.49

 

Impairment loss, net of minority interests......

 

-   

 

 

-   

 

 

-   

 

 

 

15,547

 

 

-   

 

 

0.24

 

Abandoned projects.....................................

 

22  

 

 

-   

 

 

-   

 

 

 

112

 

 

-   

 

 

-   

 

Charges related to early extinguishment of debt, net of minority interests...........................

 

811 

 

 

-   

 

 

0.01

 

 

 

17,472

 

 

 

-   

 

 

0.28

 

Gain on swap termination.............................

 

-   

 

 

-   

 

 

-   

 

 

 

(1,715

)

 

-   

 

 

(0.03

)

Conversion costs(a)......................................

 

491

 

 

-   

 

 

0.01

 

 

 

-   

 

 

-   

 

 

-   

 

Adjusted FFO..............................................

 

137,243

 

 

63,251

 

 

2.17

 

 

 

124,867

 

 

62,925

 

 

1.98

 

Adjusted FFO from discontinued operations and acquired hotels..............................................

 

(6,470

)

 

-   

 

 

(0.11

)

 

 

(35,111

)

 

 

-   

 

 

 

(0.55

)

Gain on sale of condominiums..............................

 

(18,622

)

 

-   

 

 

(0.29

)

 

 

-   

 

 

-   

 

 

-   

 

Same-Store FFO.................................................

$

112,151

 

 

63,251

 

$

1.77

 

 

$

89,756

 

 

62,925

 

$

1.43

 

 

(a)  These costs relate to the conversion of our Hotel 480 Union Square in San Francisco to a Marriott.  The conversion is expected to be complete by early 2009.

 


Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and Same-Store EBITDA

 (in thousands)

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

2007

 

2006

 

2007

 

2006

Net income (loss).........................................................

$

(3,292

)

 

$

10,986

 

 

$

89,039

 

 

$

51,045

 

Depreciation, continuing operations................................

 

30,022

 

 

 

24,483

 

 

 

110,751

 

 

 

94,579

 

Depreciation, unconsolidated entities and discontinued operations...............................................................

 

3,465

 

 

 

5,533

 

 

 

12,071

 

 

 

26,911

 

Minority interest in FelCor Lodging LP..........................

 

(281

)

 

 

28

 

 

 

1,094

 

 

 

279

 

Interest expense...........................................................

 

25,318

 

 

 

25,538

 

 

 

98,929

 

 

 

114,909

 

Interest expense, unconsolidated entities
and discontinued operations......................................

 

1,417

 

 

 

2,104

 

 

 

5,987

 

 

 

7,657

 

Amortization expense...................................................

 

1,127

 

 

 

741

 

 

 

4,255

 

 

 

5,080

 

EBITDA.......................................................................

 

57,776

 

 

 

69,413

 

 

 

322,126

 

 

 

300,460

 

Loss (gain) on sale of hotels, net of income tax and minority interests...................................................

 

500

 

 

 

(25,902

)

 

 

(27,330

)

 

 

(40,650

)

Gain on sale of hotels in unconsolidated entities...............

 

-   

 

 

 

-   

 

 

 

(10,993

)

 

 

-   

 

Impairment loss, discontinued operations........................

 

-   

 

 

 

1,332

 

 

 

-   

 

 

 

15,547

 

Abandoned projects......................................................

 

-   

 

 

 

112

 

 

 

22

 

 

 

112

 

Charges related to debt extinguishment, net of minority interests.................................................................

 

-   

 

 

 

15,786

 

 

 

811

 

 

 

17,472

 

Gain on swap termination..............................................

 

-   

 

 

 

(1,715

)

 

 

-   

 

 

 

(1,715

)

Conversion costs(a)........................................................

 

491

 

 

 

-   

 

 

 

491

 

 

 

-   

 

Adjusted EBITDA........................................................

 

58,767

 

 

 

59,026

 

 

 

285,127

 

 

 

291,226

 

Adjusted EBITDA from discontinued operations and acquired hotels.......................................................

 

552

 

 

 

(5,966

)

 

 

(7,099

)

 

 

(36,263

)

Gain on sale of condominiums.......................................

 

(129

)

 

 

-   

 

 

 

(18,622

)

 

 

-   

 

Same-Store EBITDA....................................................

$

59,190

 

 

$

53,060

 

 

$

259,406

 

 

$

254,963

 

 

(a)  These costs relate to the conversion of our Hotel 480 Union Square in San Francisco to a Marriott.  The conversion is expected to be complete by early 2009.

 

 

Reconciliation of Adjusted EBITDA to Hotel EBITDA

(in thousands)

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

2007

 

2006

 

2007

 

2006

Adjusted EBITDA.......................................................

$

58,767

 

 

$

59,026

 

 

$

285,127

 

 

$

291,226

 

Other revenue..............................................................

 

(477

)

 

 

(10

)

 

 

(3,089

)

 

 

(79

)

Adjusted EBITDA from discontinued operations............

 

59

 

 

 

(5,966

)