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FelCor Reports a Net loss Applicable to Common Stockholders of $20.9 million for
 2009 2nd Qtr Compared  to Net Income of $13.6 million in the Year-ago Quarter

RevPAR Decreased 20.6% on Portfolio of 85 Hotels


Hotel Operating Statistics by Brand 


FelCor Reports Second Quarter Results

IRVING, Texas --August 5, 2009 - FelCor Lodging Trust Incorporated (NYSE: FCH) today reported operating results for the second quarter and six months ended June 30, 2009.

“We continue to make progress on our goals this year: reduce operating expenses; improve market share; develop new sources of revenues within our hotels; and ensure that we have adequate liquidity. These measures are reflected in our second quarter results – portfolio market share increased two percent, operating margins were better than expected, Adjusted FFO met the low-end of our expectations, and we successfully closed a $200 million secured term loan,” said Richard A. Smith, FelCor’s President and Chief Executive Officer.

Summary:

  • Closed a $200 million secured term loan.
  • Repaid and terminated our line of credit facility, eliminating restrictive corporate financial covenants.
  • Adjusted FFO per share was $0.33 for the second quarter, which met our low-end of expectations. Adjusted EBITDA was $55.9 million.
  • Increased market share two percent for the second quarter at our 85 consolidated hotels.
  • RevPAR decreased 20.6 percent for the second quarter at our 85 consolidated hotels and 20.1 percent year-to-date through June.
  • Hotel expenses declined 14.6 percent during the second quarter. Due to strict expense controls at our hotels, we were able to limit the effect of reduced revenue on flow-through to Hotel EBITDA to 53 percent compared to the prior year, and only 27 percent compared to budget. Hotel EBITDA margin decreased 534 basis points, which was better than expected.
  • Completed the redevelopment at our San Francisco Marriott Union Square hotel in June. RevPAR and market share have been exceeding expectations.
  • Net loss applicable to common stockholders for the second quarter was $20.9 million.

Second Quarter Operating Results:

Revenue per available room (“RevPAR”) for our 85 consolidated hotels decreased by 20.6 percent to $84.01, driven by decreases in both average daily rate (“ADR”) (an 11.6 percent decrease to $122.14) and occupancy (a 10.1 percent decrease to 68.8 percent), compared to the same period in 2008.

“We expected year-over-year RevPAR comparisons to ease somewhat beginning in May 2009, but that did not occur until July. As a result, Adjusted EBITDA was lower than anticipated during the second quarter. However, our portfolio continued to gain market share and our margins were better than expected. We are encouraged by the recent improvement in the economic indicators, including consumer confidence, unemployment claims, home prices and industrial manufacturing, which should lead to higher demand. Furthermore, supply growth for the industry has peaked. As a result, our RevPAR in July decreased only 15 percent to prior year, compared to 20 percent in June and 22 percent in May. However, we remain cautious, as the timing of the recovery is difficult to predict, and visibility into future demand trends remains low. We will continue to focus on our goals to improve market share, which include maintaining rate integrity and working with our operators to achieve the most efficient cost structure in the face of deteriorating lodging demand,” continued Mr. Smith.

Adjusted Funds from Operations (“FFO”) was $20.9 million, or $0.33 per share, compared to Adjusted FFO of $49.5 million, or $0.76 per share, for the same period in 2008.

Hotel EBITDA decreased to $64.1 million, compared to $97.4 million in the same period in 2008. Hotel EBITDA margin was 26.6 percent, a 534 basis point decrease compared to the same period in 2008. Hotel operating expenses decreased 14.6 percent compared to prior year. This decline reflects various factors, including: decreased labor costs, including permanent hotel staffing reductions; decreased other room expenses, such as guest transportation and in-room amenities; decreased incentive management fees; and improved efficiencies in the food and beverage outlets. Prior to accounting for taxes, insurance and land leases, Hotel EBITDA margins declined only 359 basis points. Hotel EBITDA represents EBITDA generated by our hotels before corporate expenses and joint venture adjustments.

Adjusted EBITDA was $55.9 million, compared to $87.2 million for the same period in 2008.

Net loss applicable to common stockholders was $20.9 million, or $0.33 per share, compared to net income of $13.6 million, or $0.21 per share, for the same period in 2008.

EBITDA, Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO and Adjusted FFO are all non-GAAP financial measures. See our discussion of “Non-GAAP Financial Measures” beginning on page 13 for a reconciliation of each of these measures to the most comparable GAAP financial measure and for information regarding the use, limitations and importance of these non-GAAP financial measures.

Balance Sheet/Liquidity:

At June 30, 2009, we had $1.6 billion of consolidated debt outstanding with a weighted average interest rate of 5.6 percent, and our cash and cash equivalents totaled $118.5 million.

In June, we closed a $200 million secured term loan. Proceeds of the new loan will be used for general corporate purposes. The new loan is non-recourse and secured by nine hotels. The loan bears interest at LIBOR plus 350 basis points, has a 65 percent loan to appraised value ratio and matures in 2013, including two one-year extension options. We also repaid all of our outstanding obligations (totaling $128 million) under our line of credit, which we then terminated.

“We are pleased to have closed this loan in a very challenging environment. This new loan extends our maturity profile and provides additional cash on hand. We also were able to eliminate restrictive covenants by terminating our line of credit. Our attention now turns to the debt that matures in 2010 and 2011. We have engaged in discussions with various lenders and bankers to modify and/or extend, or refinance this debt,” said Andrew J. Welch, FelCor’s Executive Vice President and Chief Financial Officer.

Capital Expenditures and Development:

For the quarter and six months ended June 30, 2009, we spent $22 million and $48 million, respectively, on capital expenditures at our hotels (including our pro rata share of joint ventures). Included in the capital expenditures are $11 million and $25 million, respectively, to complete our renovation and redevelopment projects.

In June, we completed the final phase of the comprehensive redevelopment at our San Francisco Marriott Union Square hotel. Second quarter RevPAR (under the Marriott flag) increased 21 percent at this hotel, compared to the prior year, and its market share increased by 82 percent, exceeding expectations. The market share index at this hotel was 109 percent in the second quarter compared to 79 percent in 2006 (prior to its renovation).

Outlook:

As a result of the continued deterioration of lodging demand, we now expect our RevPAR to decline more than our previous guidance. However, our revised FFO outlook reflects the positive impact of our strict expense controls and lower interest expense, which offsets the decline in RevPAR. While we expect RevPAR to decline sharply in 2009, our portfolio will benefit from the renovations we completed in 2008 and the redevelopment of our San Francisco Marriott Union Square hotel.

Assuming full-year 2009 RevPAR for our 85 consolidated hotels decreases between 17 and 15 percent, we anticipate:

  • Adjusted EBITDA to be between $188 million and $196 million;
  • Adjusted FFO per share to be between $0.74 and $0.86;
  • Net loss to be between $82 million and $74 million; and
  • Interest expense to be approximately $97 million.

FelCor, a real estate investment trust, is the nation’s largest owner of upper-upscale, all-suite hotels. FelCor owns interests in 87 hotels and resorts, located in 23 states and Canada. FelCor’s portfolio consists primarily of upper-upscale hotels, which are flagged under global brands - Embassy Suites Hotels®, Doubletree®, Hilton®, Marriott®, Renaissance®, Sheraton®, Westin® and Holiday Inn®. Additional information can be found on the Company’s Web site at www.felcor.com.

We invite you to listen to our second quarter earnings Conference Call on Thursday, August 6, 2009, at 11:00 a.m. (Central Time). The conference call will be Web cast simultaneously via the Internet on FelCor’s Web site at www.felcor.com. Interested investors and other parties who wish to access the call should go to FelCor’s Web site and click on the conference call microphone icon on either the “Investor Relations” or “News” pages. The conference call replay will be archived on the Company’s Web site.

With the exception of historical information, the matters discussed in this news release include “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “continue” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties, and the occurrence of future events, may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. Current economic circumstances or a further economic slowdown and the impact on the lodging industry, operating risks associated with the hotel business, relationships with our property managers, risks associated with our level of indebtedness and our ability to meet debt covenants in our debt agreements, our ability to complete acquisitions, dispositions and debt refinancing, the availability of capital, the impact on the travel industry from increased fuel prices and security precautions, our ability to continue to qualify as a Real Estate Investment Trust for federal income tax purposes and numerous other factors may affect future results, performance and achievements. Certain of these risks and uncertainties are described in greater detail in our filings with the Securities and Exchange Commission. Although we believe our current expectations to be based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that actual results will not differ materially. We undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in our expectations.

SUPPLEMENTAL INFORMATION

INTRODUCTION

The following information is presented in order to help our investors understand the financial position of the Company as of and for the three and six month periods ended June 30, 2009.

TABLE OF CONTENTS


 

PAGE

Consolidated Statements of Operations(a)
6
Consolidated Balance Sheets(a)
7
Capital Expenditures
8
Supplemental Financial Data
8
Debt Summary
9
Hotel Portfolio Composition
10
Detailed Operating Statistics by Brand
11
Detailed Operating Statistics for FelCor’s Top Markets
12
Non-GAAP Financial Measures
13


 

(a) Our consolidated statements of operations and balance sheets have been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The consolidated statements of operations and balance sheets should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent Quarterly Report on Form 10-Q.

Consolidated Statements of Operations

(in thousands, except per share data)


 
   


Three Months Ended

Six Months Ended


June 30,

June 30,


2009   2008

2009   2008
Revenues:
















Hotel operating revenue:
















Room
$ 190,388

$ 239,689


$ 373,388

$ 469,821
Food and beverage

36,303


49,010



73,416


95,518
Other operating departments

14,889


16,538



28,778


31,445
Other revenue
  988

  931


  1,274

  1,259
Total revenues
  242,568

  306,168


  476,856

  598,043
Expenses:
















Hotel departmental expenses:
















Room

49,039


56,871



95,539


111,522
Food and beverage

28,534


36,096



57,405


71,542
Other operating departments

6,285


7,170



12,492


14,199
Other property related costs

65,912


76,574



133,219


153,699
Management and franchise fees

11,410


15,973



22,917


31,875
Taxes, insurance and lease expense

25,025


28,862



50,056


58,166
Corporate expenses

5,236


4,864



11,358


11,691
Depreciation and amortization

36,657


35,072



74,042


68,840
Impairment loss

-


-



1,368


17,131
Other expenses
  1,801

  900


  2,497

  1,833
Total operating expenses
  229,899

  262,382


  460,893

  540,498
Operating income

12,669


43,786



15,963


57,545
Interest expense, net

(22,782 )

(24,769 )


(44,074 )

(50,772 )
Charges related to debt extinguishment
  (594 )
  -


  (594 )
  -
Income (loss) before equity in income (loss) from unconsolidated entities

(10,707

)



19,017





(28,705

)



6,773


Equity in income (loss) from unconsolidated entities

(261 )

2,331



(3,685 )

1,709
Gain on involuntary conversion
  -

  3,095


  -

  3,095
Income (loss) from continuing operations

(10,968 )

24,443



(32,390 )

11,577
Discontinued operations
  -

  -


  -

  (13 )
Net income (loss)

(10,968 )

24,443



(32,390 )

11,564
Net loss (income) attributable to noncontrolling

interests in other partnerships



(324

)



(890

)




(108

)



(961

)

Net loss (income) attributable to redeemable

noncontrolling interests in FelCor LP


 

97



 

(291

)



 

239



 

186


Net income (loss) attributable to FelCor

(11,195 )

23,262



(32,259 )

10,789
Preferred dividends
  (9,678 )
  (9,678 )

  (19,356 )
  (19,356 )
Net income (loss) applicable to FelCor common stockholders
$ (20,873 )
$ 13,584


$ (51,615 )
$ (8,567 )
Basic and diluted per common share data:
















Net income (loss) from continuing operations attributable to FelCor common stockholders

$

(0.33

)


$

0.21




$

(0.82

)


$

(0.15

)

Net income (loss) attributable to FelCor common stockholders

$

(0.33

)


$

0.21




$

(0.82

)


$

(0.15 )
Basic and diluted weighted average common shares outstanding
 

63,101



 

61,822




  63,132

  61,819
Cash dividends declared on common stock
$ -

$ 0.35


$ -

$ 0.70

















 
Consolidated Balance Sheets

(unaudited, in thousands)


 
   


June 30,

December 31,


2009

2008
ASSETS








Investment in hotels, net of accumulated depreciation of $885,794 at June 30, 2009 and $816,271 at December 31, 2008


$

2,249,297


$

2,279,026


Investment in unconsolidated entities

87,536



94,506
Cash and cash equivalents

118,508



50,187
Restricted cash

17,610



13,213

Accounts receivable, net of allowance for doubtful accounts of $296 at June 30, 2009 and $521 at December 31, 2008



33,022



35,240


Deferred expenses, net of accumulated amortization of $11,443 at June 30, 2009 and $13,087 at December 31, 2008



11,006



5,556


Other assets
  40,356


  34,541
Total assets
$ 2,557,335


$ 2,512,269
LIABILITIES AND EQUITY








Debt, net of discount of $1,274 at June 30, 2009 and $1,544 at

December 31, 2008


$

1,636,561


$

1,551,686


Preferred distributions payable

18,223



8,545
Accrued expenses and other liabilities
  130,220


  132,604
Total liabilities
  1,785,004


  1,692,835
Commitments and contingencies








Redeemable noncontrolling interests in FelCor LP at redemption value, 296 units issued and outstanding at June 30, 2009 and December 31, 2008


  728


  545
Equity:








Preferred stock, $0.01 par value, 20,000 shares authorized:








Series A Cumulative Convertible Preferred Stock, 12,880 shares, liquidation value of $322,011, issued and outstanding at June 30, 2009 and December 31, 2008



 

309,362





 

309,362


Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at June 30, 2009 and December 31, 2008



 

169,412





 

169,412


Common stock, $.01 par value, 200,000 shares authorized and 69,413 shares issued and outstanding, including shares in treasury, at June 30, 2009 and December 31, 2008



 

694





 

694


Additional paid-in capital

2,036,615



2,045,482
Accumulated other comprehensive income

17,786



15,347
Accumulated deficit

(1,697,602 )


(1,645,947 )

Less: Common stock in treasury, at cost, of 4,723 shares at June 30, 2009 and 5,189 shares at December 31, 2008


  (88,361

)



 

(99,245

)

Total FelCor stockholders’ equity

747,906



795,105
Noncontrolling interests in other partnerships
  23,697


  23,784
Total equity
  771,603


  818,889
Total liabilities and equity
$ 2,557,335


$ 2,512,269









 
Capital Expenditures

(in thousands)


 
   


Three Months Ended

Six Months Ended


June 30,

June 30,


2009   2008

2009   2008

Improvements and additions to consolidated hotels


$

20,265



$

31,251




$

45,539



$ 73,625

Consolidated joint venture partners’ pro rata share of additions to hotels



(122

)



(962

)




(376 )

(2,218 )
Pro rata share of unconsolidated additions to hotels
  1,491

  4,335


  2,953

  11,306
Total additions to hotels(a)
$ 21,634

$ 34,624


$ 48,116

$ 82,713

















 

(a) Includes capitalized interest, property taxes, ground leases and certain employee costs.

Supplemental Financial Data

(in thousands, except per share information)


 
   


June 30,

December 31,
Total Enterprise Value
2009

2008
Common shares outstanding

64,689



64,224
Units outstanding
  296


  296
Combined shares and units outstanding

64,985



64,520
Common stock price
$ 2.46


$ 1.84
Equity capitalization
$ 159,863


$ 118,717
Series A preferred stock

309,362



309,362
Series C preferred stock

169,412



169,412
Consolidated debt

1,636,561



1,551,686
Noncontrolling interests of consolidated debt

(4,025 )


(4,078 )
Pro rata share of unconsolidated debt

108,704



112,220
Cash and cash equivalents
  (118,508 )

  (50,187 )
Total enterprise value (TEV)
$ 2,261,369


$ 2,207,132









 
Dividends Per Share








Dividends declared:








Common stock
$ -


$ 0.85
Series A preferred stock
$ -


$ 1.95
Series C preferred stock (depositary shares)
$ -


$ 2.00









 
Debt Summary

(dollars in thousands)


 
   
   
   





Interest Rate at

Maturity

Consolidated


Encumbered Hotels

June 30, 2009

Date

Debt
Senior term notes
none

9.00 %(a)

June 2011

$ 299,539
Senior term notes
none

L + 1.875


December 2011

  215,000
Total senior debt



6.50 (b)




  514,539













 
CMBS debt
12 hotels(c)

L + 0.93 (d)

November 2011(e)


250,000
Mortgage debt
9 hotels(f)

L + 3.50 (g)

August 2011(h)


200,800
Mortgage debt(i)
Esmeralda-REN,

Vinoy-REN



L + 1.55 (j)

May 2012(k)


176,411
CMBS debt(i)
8 hotels(l)

8.70


May 2010


160,217
Mortgage debt
7 hotels(m)

9.02


April 2014


119,374
Mortgage debt
6 hotels(n)

8.73


May 2010


114,533
CMBS debt(i)
5 hotels(o)

6.66


June-August 2014


71,724
CMBS debt(i)
Boca Raton-ES,

Wilmington-DT



6.15


June 2009(p)


14,399
CMBS debt
Indianapolis North-ES

5.81


July 2016


11,941
Capital lease and other
St. Paul-ES and other

9.70


various

  2,623
Total mortgage debt
53 hotels

5.23 (b)




  1,122,022
Total



5.63 %(b)




$ 1,636,561













 

(a) When either Moody’s Investor Service or Standard & Poor’s Rating Services increases our senior note ratings to Ba3 or BB-, respectively, this interest rate will decrease to 8.5%.

(b) Interest rates are calculated based on the weighted average debt outstanding at June 30, 2009.

(c) The hotels that secure this debt are: Anaheim-ES, Bloomington-ES, Charleston Mills House-HI, Dallas DFW South-ES, Deerfield Beach-ES, Jacksonville-ES, Lexington-HS, Dallas Love Field-ES, Raleigh/Durham-DTGS, San Antonio Airport-HI, Tampa Rocky Point-DTGS, and Phoenix Tempe-ES.

(d) We have purchased an interest rate cap that caps LIBOR at 7.8% and expires in November 2009 for this notional amount.

(e) The maturity date assumes that we will exercise the remaining two one-year extension options that permit, at our sole discretion, the current November 2009 maturity to be extended to 2011.

(f) The hotels that secure this debt are: Charlotte SouthPark-DT, Houston Medical Center-HI, Myrtle Beach-HLT, Mandalay Beach-ES, Nashville Airport-ES, Philadelphia Independence Mall-HI, Pittsburgh University Center-HI, Santa Barbara-HI, and Santa Monica-HI.

(g) LIBOR for this loan is subject to a 2% floor.

(h) This loan can be extended for as many as two years, subject to satisfying certain conditions that we expect to satisfy.

(i) The hotels under this debt are subject to separate loan agreements and are not cross collateralized.

(j) We have purchased interest rate caps that cap LIBOR at 6.5% and expire in May 2010 for aggregate notional amounts of $177 million.

(k) We have exercised the first of three successive one-year extension options that permit, at our sole discretion, the original May 2009 maturity to be extended to 2012.

(l) The hotels that secure this debt are: South San Francisco-ES, Orlando South-ES, Atlanta Buckhead-ES, Chicago Deerfield-ES, New Orleans-ES, Boston Marlboro-ES, Piscataway-ES, and Corpus Christi-ES.

(m) The hotels that secure this debt are: Milpitas-ES, Napa Valley-ES, Minneapolis Airport-ES, Birmingham-ES, Baton Rouge-ES, Miami Airport-ES, and Ft. Lauderdale-ES.

(n) The hotels that secure this debt are: Phoenix Crescent-SH, Ft. Lauderdale Cypress Creek-SS, Atlanta Galleria-SS, Chicago O’Hare-SS, Philadelphia Society Hill-SH, and Burlington-SH.

(o) The hotels that secure this debt are: Atlanta Airport-ES, Austin-DTGS, BWI Airport-ES, Orlando Airport-HI, and Phoenix Biltmore-ES.

(p) These loans matured in June 2009 but remain unpaid and are in default. We withheld payment in order to cause the special servicer to engage in discussions regarding modifications, including potentially extending the maturity date.

Debt Summary – (continued)


 
Weighted average interest
5.63 %
Fixed interest rate debt to total debt
48.5 %
Mortgage debt to total assets
43.9 %



 

Hotel Portfolio Composition


 
   
   
   

The following tables set forth, as of June 30, 2009, for 85 Consolidated Hotels distribution by brand, top markets and location type.












 








% of

% of 2008
Brand
Hotels

Rooms

Total Rooms

Hotel EBITDA(a)

Embassy Suites Hotels
47

12,132

49

55
Holiday Inn
17

6,306

25

19
Sheraton and Westin
9

3,217

13

12
Doubletree
7

1,471

6

7
Renaissance and Marriott
3

1,321

5

5
Hilton
2

559

2

2











 

Top Markets












South Florida
5

1,439

6

7
San Francisco area
6

2,138

8

6
Atlanta
5

1,462

6

6
Los Angeles area
4

899

4

6
Orlando
5

1,690

7

5
Dallas
4

1,333

5

4
Philadelphia
2

729

3

4
Northern New Jersey
3

756

3

4
Minneapolis
3

736

3

4
San Diego
1

600

2

4
Phoenix
3

798

3

3
San Antonio
3

874

4

3
Chicago
3

795

3

3
Boston
2

532

2

3
Washington, D.C.
1

443

2

2











 

Location












Suburban
35

8,781

35

34
Urban
20

6,358

25

26
Airport
18

5,788

24

24
Resort
12

4,079

16

16











 

(a) Hotel EBITDA is more fully described on page 20.

Detailed Operating Statistics by Brand

(85 consolidated hotels)


 


Occupancy (%)


Three Months Ended
June 30,

 
   

Six Months Ended
June 30,

 



2009   2008
%Variance

2009   2008
%Variance
Embassy Suites Hotels
70.1
78.2
(10.4 )

68.3
75.6
(9.6 )
Holiday Inn
70.1
78.0
(10.1 )

66.0
74.0
(10.8 )
Sheraton and Westin
64.2
70.1
(8.4 )

59.6
68.1
(12.4 )
Doubletree
67.5
79.9
(15.5 )

65.5
77.7
(15.7 )
Renaissance and Marriott
62.0
68.2
(9.0 )

59.2
69.4
(14.8 )
Hilton
70.6
70.4
0.3


59.0
61.3
(3.8 )















 
Total hotels
68.8
76.5
(10.1 )

65.8
73.7
(10.8 )















 















 















 


ADR ($)


Three Months Ended
June 30,





Six Months Ended
June 30,






2009
2008
%Variance

2009
2008
%Variance
Embassy Suites Hotels
127.79
142.90
(10.6 )

133.05
147.40
(9.7 )
Holiday Inn
108.31
123.67
(12.4 )

106.84
120.94
(11.7 )
Sheraton and Westin
110.54
128.04
(13.7 )

114.01
129.06
(11.7 )
Doubletree
125.47
145.53
(13.8 )

132.08
149.64
(11.7 )
Renaissance and Marriott
168.11
187.30
(10.2 )

184.08
199.33
(7.6 )
Hilton
119.80
139.77
(14.3 )

110.95
125.53
(11.6 )















 
Total hotels
122.14
138.22
(11.6 )

125.92
140.62
(10.4 )















 















 















 


RevPAR ($)


Three Months Ended
June 30,





Six Months Ended
June 30,






2009
2008
%Variance

2009
2008
%Variance
Embassy Suites Hotels
89.52
111.71
(19.9 )

90.86
111.40
(18.4 )
Holiday Inn
75.93
96.44
(21.3 )

70.46
89.47
(21.2 )
Sheraton and Westin
70.98
89.76
(20.9 )

68.01
87.91
(22.6 )
Doubletree
84.66
116.21
(27.2 )

86.55
116.32
(25.6 )
Renaissance and Marriott
104.23
127.67
(18.4 )

108.89
138.36
(21.3 )
Hilton
84.62
98.38
(14.0 )

65.48
77.00
(15.0 )















 
Total hotels
84.01
105.76
(20.6 )

82.81
103.66
(20.1 )















 
Detailed Operating Statistics for FelCor’s Top Markets
(85 consolidated hotels)

 


Occupancy (%)


Three Months Ended June 30,  
    Six Months Ended June 30,  


2009   2008

%Variance



2009   2008
%Variance
South Florida
73.5
78.3
(6.2 )

76.4
82.7
(7.7 )
San Francisco area
70.8
79.7
(11.2 )

63.4
75.3
(15.9 )
Atlanta
73.7
75.9
(2.9 )

69.7
76.1
(8.4 )
Los Angeles area
74.2
78.1
(5.1 )

71.4
75.8
(5.8 )
Orlando
70.7
80.8
(12.5 )

69.4
81.4
(14.7 )
Dallas
60.8
68.6
(11.4 )

60.1
69.2
(13.2 )
Philadelphia
74.5
82.0
(9.2 )

62.0
72.3
(14.1 )
Northern New Jersey
62.7
75.6
(17.1 )

61.2
71.0
(13.8 )
Minneapolis
65.6
76.1
(13.7 )

63.2
71.5
(11.6 )
San Diego
74.1
83.0
(10.8 )

69.1
81.8
(15.5 )
Phoenix
52.6
66.8
(21.3 )

58.3
71.4
(18.3 )
San Antonio
73.9
83.1
(11.0 )

71.8
80.1
(10.4 )
Chicago
69.6
81.7
(14.8 )

61.1
73.3
(16.8 )
Boston
80.0
85.3
(6.2 )

75.3
77.2
(2.4 )
Washington, D.C.
64.6
70.6
(8.4 )

54.9
57.2
(4.1 )


 


 


ADR ($)


Three Months Ended June 30,



Six Months Ended June 30,



2009
2008

%Variance



2009   2008
%Variance
South Florida
121.55
137.88
(11.8 )

146.86
170.13
(13.7 )
San Francisco area
126.45
142.68
(11.4 )

123.90
139.64
(11.3 )
Atlanta
105.19
120.70
(12.8 )

108.01
123.89
(12.8 )
Los Angeles area
133.85
158.73
(15.7 )

136.06
157.87
(13.8 )
Orlando
97.52
104.66
(6.8 )

105.02
114.67
(8.4 )
Dallas
115.04
124.23
(7.4 )

120.89
127.23
(5.0 )
Philadelphia
143.10
158.99
(10.0 )

137.76
149.20
(7.7 )
Northern New Jersey
144.27
165.94
(13.1 )

147.86
164.09
(9.9 )
Minneapolis
127.91
141.76
(9.8 )

129.45
143.28
(9.7 )
San Diego
127.62
169.35
(24.6 )

129.78
161.20
(19.5 )
Phoenix
115.53
134.74
(14.3 )

138.37
162.11
(14.6 )
San Antonio
106.08
115.80
(8.4 )

105.87
114.83
(7.8 )
Chicago
107.42
132.15
(18.7 )

109.49
127.09
(13.9 )
Boston
137.63
167.10
(17.6 )

132.21
153.37
(13.8 )
Washington, D.C.
136.98
162.52
(15.7 )

144.22
162.57
(11.3 )


 


 


RevPAR ($)


Three Months Ended June 30,



Six Months Ended June 30,



2009
2008

%Variance



2009
2008
%Variance
South Florida
89.30
107.99
(17.3 )

112.15
140.68
(20.3 )
San Francisco area
89.51
113.71
(21.3 )

78.52
105.19
(25.4 )
Atlanta
77.55
91.61
(15.3 )

75.28
94.25
(20.1 )
Los Angeles area
99.26
123.99
(19.9 )

97.16
119.72
(18.8 )
Orlando
68.92
84.56
(18.5 )

72.93
93.31
(21.8 )
Dallas
69.89
85.22
(18.0 )

72.65
88.09
(17.5 )
Philadelphia
106.65
130.44
(18.2 )

85.47
107.80
(20.7 )
Northern New Jersey
90.50
125.50
(27.9 )

90.43
116.49
(22.4 )
Minneapolis
83.93
107.82
(22.2 )

81.88
102.48
(20.1 )
San Diego
94.51
140.60
(32.8 )

89.65
131.81
(32.0 )
Phoenix
60.73
90.01
(32.5 )

80.70
115.68
(30.2 )
San Antonio
78.43
96.25
(18.5 )

75.97
92.00
(17.4 )
Chicago
74.72
107.90
(30.8 )

66.85
93.22
(28.3 )
Boston
110.15
142.60
(22.8 )

99.61
118.35
(15.8 )
Washington, D.C.
88.51
114.67
(22.8 )

79.21
93.06
(14.9 )















 

Non-GAAP Financial Measures

We refer in this release to certain “non-GAAP financial measures.” These measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin, are measures of our financial performance that are not calculated and presented in accordance with generally accepted accounting principles (“GAAP”). The following tables reconcile each of these non-GAAP measures to the most comparable GAAP financial measure. Immediately following the reconciliations, we include a discussion of why we believe these measures are useful supplemental measures of our performance and the limitations of such measures.

Reconciliation of Net Income (Loss) Attributable to FelCor to FFO

(in thousands, except per share and unit data)


 


Three Months Ended June 30,


2009   2008


Dollars   Shares  

Per Share
Amount


Dollars   Shares  

Per Share
Amount

Net income (loss) attributable to FelCor
$ (11,195 )






$ 23,262






Preferred dividends(a)
  (9,678 )






  (9,678 )





Net income (loss) attributable to FelCor common stockholders



(20,873 )
63,101
$ (0.33 )

13,584

61,822
$ 0.22
Depreciation and amortization

36,657

-

0.58


35,072

-

0.57
Depreciation, unconsolidated entities

3,601

-

0.06


3,583

-

0.06
Gain on involuntary conversion

-

-

-


(3,095 )
-

(0.05 )
Noncontrolling interests in FelCor LP

(97 )
296

(0.01 )

291

1,354

(0.02 )

Conversion of options and unvested restricted stock


  -

342
  -

  -
  146
  -
FFO

19,288

63,739

0.30


49,435

63,322

0.78
Charges related to debt extinguishment

594

-

0.01


-

-

-
Conversion costs(b)

292

-

-


103

-

-
Severance costs, net of noncontrolling interests

374

-

0.01


-

-

-
Lease termination costs
  352

-
  0.01

  -
  -
  -
Adjusted FFO
$ 20,900

63,739
$ 0.33


49,538

63,322

0.78
Preferred dividends on Series A Preferred Stock










  6,279

9,985
  (0.02 )
Adjusted FFO assuming conversion of Series A Preferred Stock for per share computation(c)










$ 55,817

73,307
$ 0.76




















 

(a) We suspended our preferred dividends in March 2009 and unpaid preferred dividends continue to accrue until paid.

(b) These costs relate to the conversion of our Hotel 480 Union Square in San Francisco to a Marriott.

(c) For calculation of Adjusted FFO per share it is more dilutive to assume the conversion of our Series A Convertible Preferred Stock into common stock when our quarterly Adjusted FFO per share calculation exceeds $0.63.

Reconciliation of Net Income (Loss) Attributable to FelCor to FFO


 


Six Months Ended June 30,


2009     2008


Dollars   Shares  

Per Share
Amount



Dollars   Shares  

Per Share
Amount

Net income (loss) attributable to FelCor
$ (32,259 )







$ 10,789






Preferred dividends(a)
  (19,356 )







  (19,356 )





Net loss attributable to FelCor common stockholders



(51,615 )
63,132
$ (0.82 )


(8,567 )
61,819
$ (0.14 )
Depreciation and amortization

74,042

-

1.17



68,840

-

1.11
Depreciation, unconsolidated entities

7,288

-

0.12



7,133

-

0.12
Gain on involuntary conversion

-

-

-



(3,095 )
-

(0.05 )
Noncontrolling interests in FelCor LP

(239 )
296

(0.01 )


(186 )
1,354

(0.03 )

Conversion of options and unvested restricted stock


  -

202
  -


  -

120
  -
FFO

29,476

63,630

0.46



64,125

63,293

1.01
Impairment loss

1,368

-

0.02



17,131

-

0.27
Impairment loss, unconsolidated subsidiaries

2,068

-

0.03



-

-

-
Charges related to debt extinguishment

594

-

0.01



-

-

-
Conversion costs(b)

330

-

0.01



362

-

0.01
Severance costs, net of noncontrolling interests

509

-

0.01



-

-

-
Lease termination costs
  352

-
  0.01


  -

-
  -
Adjusted FFO
$ 34,697

63,630
$ 0.55



81,618

63,293

1.29
Preferred dividends on Series A Preferred Stock











  12,558

9,985
  -
Adjusted FFO assuming conversion of Series A Preferred Stock for per share computation(c)











$ 94,176

73,278
$ 1.29





















 

(a) We suspended our preferred dividends in March 2009 and unpaid preferred dividends continue to accrue until paid.

(b) These costs relate to the conversion of our Hotel 480 Union Square in San Francisco to a Marriott.

(c) For calculation of Adjusted FFO per share it is more dilutive to assume the conversion of our Series A Convertible Preferred Stock into common stock when our Adjusted FFO per share calculation for the six months exceeds $1.26.

Reconciliation of Net Income (Loss) Attributable to FelCor to EBITDA

(in thousands)


 
   


Three Months Ended

Six Months Ended


June 30,

June 30,


2009   2008

2009   2008
Net income (loss) attributable to FelCor
$ (11,195 )
$ 23,262


$ (32,259 )
$ 10,789
Depreciation and amortization

36,657


35,072



74,042


68,840
Depreciation, unconsolidated entities

3,601


3,583



7,288


7,133
Interest expense

22,949


25,196



44,418


51,745
Interest expense, unconsolidated entities

951


1,327



1,970


2,923
Amortization of stock compensation

1,404


1,457



2,802


2,722
Noncontrolling interests in FelCor LP
  (97 )
  291


  (239 )
  (186 )
EBITDA

54,270


90,188



98,022


143,966
Impairment loss

-


-



1,368


17,131
Impairment loss on unconsolidated hotels

-


-



2,068


-
Charges related to debt extinguishment

594


-



594


-
Gain on involuntary conversion

-


(3,095 )


-


(3,095 )
Conversion costs(a)

292


103



330


362
Severance costs, net of noncontrolling interests

374


-



509


-
Lease termination costs
  352

  -


  352

  -
Adjusted EBITDA
$ 55,882

$ 87,196


$ 103,243

$ 158,364

















 

(a) These costs relate to the conversion of our Hotel 480 Union Square in San Francisco to a Marriott.

Reconciliation of Adjusted EBITDA to Hotel EBITDA

(in thousands)


 
   


Three Months Ended
June 30,


Six Months Ended
June 30,


2009   2008

2009   2008
Adjusted EBITDA
$ 55,882

$ 87,196


$ 103,243

$ 158,364
Other revenue

(988 )

(931 )


(1,274 )

(1,259 )

Equity in income from unconsolidated subsidiaries (excluding interest, depreciation and impairment expense)



(4,963 )

(7,831 )


(8,961 )

(12,854 )

Noncontrolling interests in other partnerships (excluding interest, depreciation and severance expense)



1,002


1,481



1,445


2,050
Consolidated hotel lease expense

10,853


15,737



20,913


27,933
Unconsolidated taxes, insurance and lease expense

(2,084 )

(2,075 )


(4,018 )

(4,197 )
Interest income

(167 )

(428 )


(344 )

(973 )
Other expenses (excluding conversion costs, severance costs and lease termination costs)

777


797



1,289


1,471

Corporate expenses (excluding amortization expense of stock compensation)



3,832


3,407



8,556


8,969
Adjusted EBITDA from discontinued operations
  -

  -


  -

  13
Hotel EBITDA
$ 64,144

$ 97,353


$ 120,849

$ 179,517

















 
Reconciliation of Net Income (Loss) Attributable to FelCor to Hotel EBITDA

(in thousands)


 
   


Three Months Ended
June 30,


Six Months Ended
June 30,


2009   2008

2009   2008
Net income (loss) attributable to FelCor
$ (11,195 )
$ 23,262


$ (32,259 )
$ 10,789
Discontinued operations

-


-



-


13
Equity in loss (income) from unconsolidated entities

261


(2,331 )


3,685


(1,709 )

Net income (loss) attributable to noncontrolling interests in other partnerships



324




890





108


961
Net income (loss) attributable to redeemable noncontrolling interests in FelCor LP

(97

)



291





(239 )

(186 )
Consolidated hotel lease expense

10,853


15,737



20,913


27,933
Unconsolidated taxes, insurance and lease expense

(2,084 )

(2,075 )


(4,018 )

(4,197 )
Interest expense, net

22,782


24,769



44,074


50,772
Charges related to debt extinguishment

594


-



594


-
Corporate expenses

5,236


4,864



11,358


11,691
Depreciation and amortization

36,657


35,072



74,042


68,840
Impairment loss

-


-



1,368


17,131
Gain on involuntary conversion

-


(3,095 )


-


(3,095 )
Other expenses

1,801


900



2,497


1,833
Other revenue
  (988 )
  (931 )

  (1,274 )
  (1,259 )
Hotel EBITDA
$ 64,144

$ 97,353


$ 120,849

$ 179,517

















 
Hotel EBITDA and Hotel EBITDA Margin

(dollars in thousands)


 
   


Three Months Ended
June 30,


Six Months Ended
June 30,


2009   2008

2009   2008
Total revenues
$ 242,568

$ 306,168


$ 476,856

$ 598,043
Other revenue
  (988 )
  (931 )

  (1,274 )
  (1,259 )
Hotel operating revenue

241,580


305,237



475,582


596,784
Hotel operating expenses
  177,436

  207,884


  354,733

  417,267
Hotel EBITDA
$ 64,144

$ 97,353


$ 120,849

$ 179,517
Hotel EBITDA margin(a)

26.6%


31.9%



25.4%


30.1%

















 

(a) Hotel EBITDA as a percentage of hotel operating revenue.

Reconciliation of Total Operating Expenses to Hotel Operating Expenses

(dollars in thousands)


 
   


Three Months Ended
June 30,



Six Months Ended
June 30,



2009   2008

2009   2008
Total operating expenses
$ 229,899

$ 262,382


$ 460,893

$ 540,498
Unconsolidated taxes, insurance and lease expense

2,084


2,075



4,018


4,197
Consolidated hotel lease expense

(10,853 )

(15,737 )


(20,913 )

(27,933 )
Corporate expenses

(5,236 )

(4,864 )


(11,358 )

(11,691 )
Depreciation and amortization

(36,657 )

(35,072 )


(74,042 )

(68,840 )
Impairment loss

-


-



(1,368 )

(17,131 )
Other expenses
  (1,801 )
  (900 )

  (2,497 )
  (1,833 )
Hotel operating expenses
$ 177,436

$ 207,884