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  FelCor Reports 2nd Qtr 2010 Net Income of $22.0 million Due to a $46.1 million
 Gain on Extinguishment of Debt; RevPAR for the 83 Hotel Portfolio Increased
 5.6% for the Quarter Compared to Prior Year
Hotel Operating Statistics

 


  • Exceeds Expectations and Raises Guidance
  • Balance Sheet and Portfolio Improvement Continues

IRVING, Texas--August 3, 2010 --FelCor Lodging Trust Incorporated (NYSE: FCH) today reported operating results for the second quarter and six months ended June 30, 2010.

Summary:

  • RevPAR at our 83 consolidated hotels increased 5.6% for the quarter and 6.5% for June.
  • Adjusted EBITDA was $56.5 million for the quarter. Adjusted FFO per share was $0.10 for the quarter, which was above analyst’s original expectations and $0.04 above the high-end of our internal expectations.
  • Positive flow-through on the improvement to budgeted revenue was 62%, even though the revenue improvement was driven largely by increased occupancy. Hotel EBITDA margin decreased 27 basis points for the quarter, which was nearly 100 basis points better than internal expectations.
  • Net income for the quarter was $22.0 million.
  • Completed a public common stock offering, raising net proceeds of $167 million, after underwriting discounts and commissions.
  • Repaid loans totaling approximately $177 million for $130 million, a discount of nearly $50 million, and unencumbered two hotels.
  • Agreed to purchase the 383-room Fairmont Copley Plaza in Boston for $98.5 million, which is expected to close in the third quarter.

Second Quarter Operating Results:

Revenue per available room (“RevPAR”) for our 83 consolidated hotels was $90.62, a 5.6% increase compared to the same period in 2009. Our RevPAR increase was driven by a 7.6% increase in occupancy to 74.4%, which was partially offset by a 1.9% decline in average daily rate (“ADR”), to $121.86, compared to the same period in 2009. Occupancy increased during the quarter at 69 of our hotels and in nearly all of our markets. RevPAR for our 83 consolidated hotels increased 6.5% during June, compared to prior year, as occupancy increased 6.2% and ADR increased 0.2%, compared to the same period in 2009.

“We are pleased with our performance this quarter, achieving better than expected operating results and significant improvement on our balance sheet. Lodging fundamentals continue to improve, and occupancy is recovering faster than we anticipated. As the lodging recovery takes hold and corporate demand improves, we are taking advantage of stronger occupancies to remix our customer base and drive ADR. ADR for our portfolio increased during June for the first time in nearly two years, driven by an increase in transient ADR. We are in the early stages of a recovery and expect the robust growth in demand to continue and supply growth to remain moderate. This dynamic is building pricing power and leading to earlier and stronger EBITDA growth than previously anticipated,” said Richard A. Smith, FelCor’s President and Chief Executive Officer.

“We remain committed to improving long-term shareholder value by improving the overall quality and future growth rate of our portfolio through accretive transactions. Due to the rapid improvement in lodging fundamentals and increased transaction volume, we could launch the second phase of asset sales as soon as the beginning of 2011. However, we will sell hotels only when we receive adequate pricing. As part of our long-term strategic plan, we will look to acquire hotels that fit our strategic and value criteria. Acquiring the Fairmont Copley Plaza fits our strategy to improve and diversify our portfolio with expected returns in excess of our weighted average cost of capital. We are excited to acquire this very special and irreplaceable asset, which we expect to have significantly stronger RevPAR and EBITDA growth than the industry. At the same time, this transaction represents a rare opportunity to gain entry into this submarket at a significant discount to replacement cost,” added Mr. Smith.

Hotel EBITDA was $66.0 million, compared to $62.9 million for the same period in 2009, a 5% increase. Hotel EBITDA margin was 26.5%, a 27 basis point decrease compared to 2009. Positive flow-through on the improvement to budgeted revenue was 62%, even though the improvement was largely driven by increased occupancy. Hotel EBITDA represents EBITDA generated by our 83 consolidated hotels prior to corporate expenses and joint venture adjustments.

Adjusted EBITDA was $56.5 million, compared to $55.9 million for the same period in 2009, a 1% increase. Adjusted EBITDA in the prior year period includes $1.2 million of EBITDA from hotels sold in 2009.

Adjusted funds from operations (“FFO”) was $6.7 million, or $0.10 per share, compared to $20.9 million, or $0.33 per share, for the same period in 2009. The change in Adjusted FFO largely reflects a $14.4 million increase in interest expense compared to the same period in 2009.

Net income attributable to common stockholders was $11.9 million, or $0.17 per share, compared to a net loss of $20.9 million, or $0.33 per share, for the same period in 2009. Net income in the current year includes a $46.1 million gain on extinguishment of debt.

EBITDA, Adjusted EBITDA, Same Store Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Same-Store Adjusted FFO are all non-GAAP financial measures. See our discussion of “Non-GAAP Financial Measures” beginning on page 14 for a reconciliation of each of these measures to the most comparable GAAP financial measure and for information regarding the use, limitations and importance of these non-GAAP financial measures.

Balance Sheet:

At June 30, 2010, we had $1.6 billion of consolidated debt outstanding, with a weighted average interest rate of 7.8%, and $281 million of cash and cash equivalents.

In June, we completed a public offering of 31,625,000 shares of our common stock at $5.50 per share. The net proceeds from the offering, after underwriting discounts and commissions, were approximately $167 million.

In June, we repaid $177 million of secured debt for $130 million, a 27% discount to the principal balance, funded with cash on hand. The two hotels that secured the loans, and are now unencumbered, have a combined 921 guest rooms and more than 100,000 square feet of meeting space. The payment, approximately $141,000 per room, reflects a substantial discount to replacement cost. We now own 11 unencumbered properties.

We continue to work with the special servicers of two loans totaling $32 million that matured in May 2010. The cash flows for the hotels that secure those loans do not cover debt service, and we stopped funding the shortfalls in December 2009. We have been unable to negotiate an acceptable debt modification or reduction that made sense for our stockholders with regard to these loans. Therefore, we are in the process of transferring these two hotels to the lenders in full satisfaction of the debt.

“We remain committed to looking for opportunities that will strengthen our balance sheet and improve shareholder value. We have been extremely diligent and unwavering in our efforts during the past two years. During that time, we have successfully repositioned our balance sheet, including refinancing or repaying more than $1.5 billion of debt. As a result, we pushed out maturities, unencumbered assets and resolved all our maturity and liquidity issues. As cash flows recover and capital markets strengthen, we will look to capitalize on additional opportunities to strengthen our balance sheet,” said Andrew J. Welch, FelCor’s Executive Vice President and Chief Financial Officer.

Portfolio Management:

For the quarter and six months ended June 30, 2010, we spent $10.7 million and $19.2 million, respectively, on capital expenditures (including our pro rata share of joint venture expenditures) at our hotels.

We have agreed to acquire the Fairmont Copley Plaza in Boston for $98.5 million from an affiliate of Fairmont Hotels & Resorts (“Fairmont”). This world-class historic hotel is located on Copley Square in the heart of Boston’s Back Bay neighborhood. The property has 383 guest rooms and suites and 23,000 square feet of meeting space. Fairmont will continue to manage the property under a long-term management agreement. The purchase is expected to be completed in the third quarter, funded with cash on hand.

Outlook:

The pace of the recovery in the lodging industry continues to accelerate, reflecting improved corporate transient and group demand and moderating supply growth. We expect our portfolio RevPAR to continue to outperform the industry as a result of our high-quality, renovated portfolio. Additionally, our hotels are relatively less affected by new supply growth because the average number of rooms under construction in our markets is lower than the industry.

Our updated guidance reflects better than expected second quarter results, an improved second half outlook, our recently completed equity offering, repayment of $177 million in secured loans for $130 million and operating results from the Fairmont Boston for the period owned.

For 2010, we anticipate:

  • RevPAR to increase between 2.5% and 4.5%;
  • Adjusted EBITDA to be between $177 million and $185 million;
  • Adjusted FFO per share to be between $(0.23) and $(0.13);
  • Net loss to be between $116 million and $108 million; and
  • Interest expense to be approximately $150 million.
  • Capital expenditures to be approximately $42 million.

FelCor, a real estate investment trust, is the nation’s largest owner of upper-upscale, all-suite hotels. FelCor owns interests in 84 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 Wednesday, August 4, 2010, 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 “News Releases” page. 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 FelCor’s financial position as of and for the three and six month periods ended June 30, 2010.

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
Schedule of Encumbered Hotels


10
Hotel Portfolio Composition


11
Detailed Operating Statistics by Brand


12
Detailed Operating Statistics for FelCor’s Top Markets


13
Non-GAAP Financial Measures


14

(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

June 30,


Six Months Ended

June 30,



  2010       2009  
  2010       2009  
Revenues:







Hotel operating revenue:







Room
$ 195,876

$ 185,567

$ 373,136

$ 363,746
Food and beverage

38,792


35,063


74,288


70,914
Other operating departments

14,661


14,639


27,944


28,342
Other revenue
  1,007  
  988  
  1,372  
  1,274  
Total revenues
  250,336  
  236,257  
  476,740  
  464,276  








 
Expenses:







Hotel departmental expenses:







Room

51,115


47,685


98,902


92,907
Food and beverage

29,373


27,589


57,282


55,476
Other operating departments

6,486




6,213


12,572


12,349
Other property related costs

67,466


63,956


133,070


129,310
Management and franchise fees

11,884


11,043


22,419


22,184
Taxes, insurance and lease expense

26,921


24,656


51,601


49,318
Corporate expenses

6,510


5,236


16,357


11,358
Depreciation and amortization

36,969


35,935


74,567


72,586
Impairment loss

-


-


21,060


-
Other expenses
  801  
  1,761  
  1,362  
  2,457  
Total operating expenses
  237,525  
  224,074  
  489,192  
  447,945  








 

Operating income (loss)



12,811


12,183


(12,452 )

16,331
Interest expense, net

(37,174 )

(22,782 )

(73,414 )

(44,074 )
Extinguishment of debt
  46,060  
  (594 )
  46,060  
  (594 )
Income (loss) before equity in income (loss) from unconsolidated entities

21,697


(11,193

)



(39,806

)



(28,337

)

Equity in income (loss) from unconsolidated entities
  286  
  (261 )
 

(1,188

)


  (3,685 )
Income (loss) from continuing operations

21,983


(11,454 )

(40,994 )

(32,022 )
Discontinued operations
  7  
  486  
  42  
  (368 )
Net income (loss)

21,990


(10,968 )

(40,952 )

(32,390 )
Net income attributable to noncontrolling interests in other partnerships

(325

)



(324

)



(96

)



(108

)

Net loss (income) attributable to redeemable noncontrolling interests in FelCor LP
  (51 )
 

97

 
  274  
  239  
Net income (loss) attributable to FelCor

21,614


(11,195 )

(40,774 )

(32,259 )
Preferred dividends
  (9,678 )
  (9,678 )
  (19,356 )
  (19,356 )
Net income (loss) applicable to FelCor common stockholders
$ 11,936  
$ (20,873 )
$ (60,130 )
$ (51,615 )








 
Basic and diluted per common share data:







Income (loss) from continuing operations
$ 0.17  
$ (0.34 )
$ (0.93 )
$ (0.81 )
Net income (loss)
$ 0.17  
$ (0.33 )
$ (0.92 )
$ (0.82 )
Basic and diluted weighted average common shares outstanding
  66,531  
 

63,101

 
  65,014  
  63,132  

 
 

Consolidated Balance Sheets

(in thousands)





 


June 30,

2010


December 31, 2009
Assets



Investment in hotels, net of accumulated depreciation of $958,462 at June 30, 2010 and $916,604 at December 31, 2009


$ 2,102,908

$ 2,180,394
Investment in unconsolidated entities

104,372


82,040
Cash and cash equivalents

281,474


263,531
Restricted cash

17,288


18,708
Accounts receivable, net of allowance for doubtful accounts of $315 at June 30, 2010 and $406 at December 31, 2009

33,618


28,678
Deferred expenses, net of accumulated amortization of $13,993 at June 30, 2010 and $14,502 at December 31, 2009

22,828


19,977
Other assets
  37,387  
  32,666  
Total assets
$ 2,599,875  
$ 2,625,994  




 
Liabilities and Equity



Debt, net of discount of $58,567 at June 30, 2010 and $64,267 at December 31, 2009
$ 1,596,635

$ 1,773,314
Distributions payable

56,936


37,580
Accrued expenses and other liabilities
  156,808  
  131,339  




 
Total liabilities
  1,810,379  
  1,942,233  




 
Commitments and contingencies







 
Redeemable noncontrolling interests in FelCor LP at redemption value, 295 units issued and outstanding at June 30, 2010 and December 31, 2009
  1,472  
  1,062  




 
Equity:



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



Series A Cumulative Convertible Preferred Stock, 12,880 shares, liquidation value of $322,011, issued and outstanding at June 30, 2010 and December 31, 2009

309,362


309,362
Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at June 30, 2010 and December 31, 2009

169,412


169,412
Common stock, $.01 par value, 200,000 shares authorized and 101,038 and 69,413 shares issued, including shares in treasury, at June 30, 2010 and December 31, 2009, respectively

1,010


694
Additional paid-in capital

2,188,730


2,021,837
Accumulated other comprehensive income

22,879


23,528
Accumulated deficit

(1,852,962 )

(1,792,822 )
Less: Common stock in treasury, at cost, of 3,986 shares at June 30, 2010 and 3,845 shares at December 31, 2009
  (72,237 )
  (71,895 )




 
Total FelCor stockholders’ equity

766,194


660,116
Noncontrolling interests in other partnerships
  21,830  
  22,583  
Total equity
  788,024  
  682,699  




 
Total liabilities and equity
$ 2,599,875  
$ 2,625,994  

 
 

Capital Expenditures

(in thousands)





 


Three Months Ended
Six Months Ended


June 30,
June 30,


  2010       2009  
  2010       2009  
Improvements and additions to majority-owned hotels
$ 10,194

$ 20,265

$ 18,393

$ 45,539
Consolidated joint venture partners’ pro rata share of additions to hotels

(87 )

(122 )

(122 )

(376 )
Pro rata share of unconsolidated additions to hotels
  543  
  1,491  
  970  
  2,953  
Total additions to hotels(a)
$ 10,650  
$ 21,634  
$ 19,241  
$ 48,116  

(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
  2010  
  2009  
Common shares outstanding

97,052


65,568
Units outstanding
  295  
  295  
Combined shares and units outstanding

97,347


65,863
Common stock price
$ 4.99  
$ 3.60  
Market capitalization
$ 485,762

$ 237,107
Series A preferred stock

309,362


309,362
Series C preferred stock

169,412


169,412
Consolidated debt

1,596,635


1,773,314
Noncontrolling interests of consolidated debt

(3,872 )

(3,971 )
Pro rata share of unconsolidated debt

80,131


107,481
Cash and cash equivalents
  (281,474 )
  (263,531 )
Total enterprise value (TEV)
$ 2,355,956  
$ 2,329,174  

 
 
 
 

Consolidated Debt Summary

(dollars in thousands)









 






June 30,
December 31,


Interest Rate
Maturity Date
2010
2009
Mortgage debt(a)

8.73 %
May 2010
$ -
$ 112,703
Mortgage debt(b)

8.70

May 2010

-

98,639
Mortgage debt(c)

8.62

May 2010

31,740

31,740
Other

4.25

May 2011

477

354
Senior notes

8.50 (d)
June 2011

86,640

86,604
Mortgage debt(e)

6.15

June 2011

4,402

4,922
Mortgage debt

6.15

June 2011

8,607

9,228
Capital lease(e)

10.50

August 2011

1,236

1,735
Mortgage debt
L + 3.50 (f)
August 2011(g)

199,300

200,425
Mortgage debt
L + 0.93 (h)
November 2011(i)

250,000

250,000
Mortgage debt(j)
L + 1.55

May 2012

-

176,555
Mortgage debt

8.77

May 2013

27,770

27,829
Mortgage debt

9.02

April 2014

115,368

117,422
Mortgage debt

6.66

June - August 2014

70,069

70,917
Senior secured notes(k)

10.00

October 2014

577,493

572,500
Mortgage debt

L +

5.10 (l)
April 2015

212,000

-
Mortgage debt

5.81

July 2016
  11,533
  11,741
Total






$ 1,596,635
$ 1,773,314
(a)   This loan was refinanced in May 2010, as a consequence of which two hotels were unencumbered.
(b)
These loans were refinanced in May 2010.
(c)
We are in the process of transferring the two hotels securing this debt to the lenders in full satisfaction of the debt.
(d)
As a result of a rating down-grade in February 2009, the interest rate on our 8½% senior notes increased to 9%.
(e)
Since the end of the second quarter 2010, we have repaid this debt.
(f)
LIBOR for this loan is subject to a 2% floor.
(g)
This loan can be extended for as many as two years (to 2013), subject to satisfying certain conditions.
(h)
We purchased an interest rate cap that caps LIBOR at 7.8% and expires November 2010 for a $250 million notional amount.
(i)
The maturity date assumes that we will exercise the remaining one-year extension option that is exercisable, at our sole discretion, and would extend the current November 2010 maturity to 2011.
(j)
This loan was repaid in June 2010 for a payment of $130 million plus accrued interest.
(k)
These notes have $636 million in aggregate principal outstanding and were sold at a discount that provides an effective yield of 12.875% before transaction costs.
(l)
LIBOR for this loan is subject to a 3% floor. We purchased an interest rate cap that caps LIBOR at 5.0% and expires May 2012 for a $212 million notional amount.

 
 

Schedule of Encumbered Hotels

(dollars in millions)





 

Consolidated Debt


June 30, 2010 Balance

Encumbered Hotels

CMBS debt(a)
$ 32

Chicago Deerfield – ES and Piscataway – ES






 
CMBS debt(b)
$ 4

Boca Raton – ES






 
CMBS debt
$ 9

Wilmington – DT






 
Capital lease(b)
$ 1

St. Paul – ES






 
Mortgage debt
$ 199

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, Goleta – HI and Santa Monica at the Pier – HI







 
CMBS debt
$ 250

Anaheim – ES, Bloomington – ES, Charleston Mills House – HI, Dallas DFW South – ES, Deerfield Beach – ES, Jacksonville – ES, Lexington – HS, Dallas Love Field – ES, Raleigh/Durham – DTGS, San Antonio Airport – HI, Tampa Rocky Point – DTGS and Phoenix Tempe – ES







 
CMBS debt
$ 28

New Orleans Convention Center – ES






 
Mortgage debt
$ 115

Baton Rouge – ES, Birmingham – ES, Ft. Lauderdale – ES, Miami Airport – ES, Milpitas – ES, Minneapolis Airport – ES and Napa Valley – ES







 
CMBS debt(a)
$ 70

Atlanta Airport – ES, Austin – DTGS, BWI Airport – ES, Orlando Airport – HI and Phoenix Biltmore – ES







 
Senior secured notes
$ 577

Atlanta Airport – SH, Boston Beacon Hill – HI, Dallas Market Center – ES, Myrtle Beach Resort – ES, Nashville Opryland – Airport – HI, New Orleans French Quarter – HI, Orlando North – ES, Orlando Walt Disney World® - DTGS, San Diego on the Bay – HI, San Francisco Burlingame – ES, San Francisco Fisherman’s Wharf – HI, San Francisco Union Square – MAR, Toronto Airport – HI and Toronto Yorkdale – HI







 
Mortgage debt
$ 212

Atlanta Buckhead – ES, Atlanta Galleria – SS, Boston Marlboro – ES, Burlington – SH, Corpus Christi – ES, Ft. Lauderdale Cypress Creek – SS, Orlando South – ES, Philadelphia Society Hill – SH and South San Francisco – ES







 
CMBS debt
$ 12

Indianapolis North – ES

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

(b) Since the end of the second quarter 2010, we have repaid this debt.

Hotel Portfolio Composition

The following table illustrates the distribution of our 83 Consolidated Hotels by brand, market and location at June 30, 2010.

Brand


 

Hotels

 

Rooms

  % of

Total Rooms

  % of 2009

Hotel EBITDA(a)

Embassy Suites Hotels
47

12,132

51

60
Holiday Inn
15

5,154

22

18
Sheraton and Westin
9

3,217

13

9
Doubletree
7

1,471

6

7
Renaissance and Marriott
3

1,321

6

3
Hilton
2

559

2

3












 

Market














South Florida
5

1,439

6

8
Los Angeles area
4

899

4

6
Atlanta
5

1,462

6

6
Orlando
4

1,038

4

4
Philadelphia
2

729

3

4
Minneapolis
3

736

3

4
San Francisco area
6

2,138

9

4
Dallas
4

1,333

6

4
Central California Coast
2

408

2

4
San Antonio
3

874

4

3
Myrtle Beach
2

640

3

3
Boston
2

532

2

3
San Diego
1

600

3

3
Northern New Jersey
3

756

3

3
Other
37

10,270

42

41












 

Location














Suburban
35

8,781

37

32
Urban
20

6,358

27

27
Airport
18

5,788

24

24
Resort
10

2,927

12

17

(a) Hotel EBITDA is more fully described on page 21.


 

Detailed Operating Statistics by Brand
(83 consolidated hotels)



 


Occupancy (%)


Three Months Ended
June 30,

 
 

Six Months Ended
June 30,

 

 


2010   2009
%Variance
2010   2009
%Variance
Embassy Suites Hotels
75.1
70.1
7.2

72.7
68.3
6.4
Holiday Inn
76.9
71.8
7.0

72.3
67.2
7.6
Sheraton and Westin
69.0
64.2
7.5

66.2
59.6
11.0
Doubletree
77.0
67.5
14.1

73.5
65.5
12.2
Renaissance and Marriott
67.8
62.0
9.3

66.6
59.2
12.5
Hilton
73.0
70.6
3.4

59.7
59.0
1.1












 
Total hotels
74.4
69.1
7.6

71.1
66.0
7.8












 












 


ADR ($)


Three Months Ended
June 30,




Six Months Ended
June 30,





2010
2009
%Variance
2010
2009
%Variance
Embassy Suites Hotels
123.82
127.79
(3.1 )
126.21
133.05
(5.1 )
Holiday Inn
116.56
115.01
1.4

110.86
112.90
(1.8 )
Sheraton and Westin
108.02
110.54
(2.3 )
106.52
114.01
(6.6 )
Doubletree
117.30
125.47
(6.5 )
117.99
132.08
(10.7 )
Renaissance and Marriott
168.37
168.11
0.2

175.96
184.08
(4.4 )
Hilton
123.45
119.80
3.0

112.80
110.95
1.7












 
Total hotels
121.86
124.26
(1.9 )
121.96
128.10
(4.8 )












 












 


RevPAR ($)


Three Months Ended
June 30,




Six Months Ended
June 30,





2010
2009
%Variance
2010
2009
%Variance
Embassy Suites Hotels
93.00
89.52
3.9

91.72
90.86
0.9
Holiday Inn
89.64
82.63
8.5

80.13
75.88
5.6
Sheraton and Westin
74.53
70.98
5.0

70.54
68.01
3.7
Doubletree
90.33
84.66
6.7

86.75
86.55
0.2
Renaissance and Marriott
114.15
104.23
9.5

117.12
108.89
7.6
Hilton
90.17
84.62
6.6

67.32
65.48
2.8












 
Total hotels
90.62
85.85
5.6

86.77
84.58
2.6

 

Detailed Operating Statistics for FelCor’s Top Markets

(83 consolidated hotels)


 

Occupancy (%)

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

2010   2009
% Variance
2010   2009
%Variance
South Florida 75.6
73.5
2.9

80.3
76.4
5.2
Los Angeles area 77.7
74.2
4.7

74.1
71.4
3.7
Atlanta 75.0
73.7
1.7

75.1
69.7
7.8
Orlando 74.0
75.9
(2.5 )
77.4
75.5
2.6
Philadelphia 80.4
74.5
7.9

70.5
62.0
13.6
Minneapolis 76.6
65.6
16.7

71.8
63.2
13.6
San Francisco area 78.8
70.8
11.3

72.1
63.4
13.7
Dallas 66.2
60.8
9.0

65.8
60.1
9.5
Central California Coast 80.4
76.9
4.5

75.1
76.7
(2.2 )
San Antonio 76.7
73.9
3.8

75.7
71.8
5.5
Myrtle Beach 73.4
69.8
5.2

58.9
59.1
(0.4 )
Boston 85.2
80.0
6.4

81.2
75.3
7.7
San Diego 78.8
74.1
6.4

75.2
69.1
8.8
Northern New Jersey 76.1
62.7
21.4

68.1
61.2
11.3

 

ADR ($)

Three Months Ended June 30,


Six Months Ended June 30,


2010
2009
% Variance
2010   2009
%Variance
South Florida 114.69
121.55
(5.6 )
140.49
146.86
(4.3 )
Los Angeles area 136.03
133.85
1.6

134.27
136.06
(1.3 )
Atlanta 102.89
105.19
(2.2 )
104.18
108.01
(3.6 )
Orlando 107.18
114.20
(6.1 )
110.97
122.78
(9.6 )
Philadelphia 131.80
143.10
(7.9 )
123.10
137.76
(10.6 )
Minneapolis 126.25
127.91
(1.3 )
126.01
129.45
(2.7 )
San Francisco area 129.18
126.45
2.2

126.28
123.90
1.9
Dallas 110.87
115.04
(3.6 )
111.92
120.89
(7.4 )
Central California Coast 157.51
154.55
1.9

148.58
145.60
2.0
San Antonio 98.55
106.08
(7.1 )
98.44
105.87
(7.0 )
Myrtle Beach 144.16
145.05
(0.6 )
126.35
126.13
0.2
Boston 142.16
137.63
3.3

131.78
132.21
(0.3 )
San Diego 118.10
127.62
(7.5 )
116.68
129.78
(10.1 )
Northern New Jersey 132.81
144.27
(7.9 )
132.57
147.86
(10.3 )

 

RevPAR ($)

Three Months Ended June 30,


Six Months Ended June 30,


2010
2009
% Variance
2010
2009
%Variance
South Florida 86.68
89.30
(2.9 )
112.86
112.15
0.6
Los Angeles area 105.64
99.26
6.4

99.47
97.16
2.4
Atlanta 77.13
77.55
(0.5 )
78.24
75.28
3.9
Orlando 79.29
86.65
(8.5 )
85.93
92.71
(7.3 )
Philadelphia 105.94
106.65
(0.7 )
86.74
85.47
1.5
Minneapolis 96.68
83.93
15.2

90.51
81.88
10.5
San Francisco area 101.79
89.51
13.7

91.00
78.52
15.9
Dallas 73.43
69.89
5.1

73.66
72.65
1.4
Central California Coast 126.61
118.84
6.5

111.55
111.72
(0.2 )
San Antonio 75.62
78.43
(3.6 )
74.55
75.97
(1.9 )
Myrtle Beach 105.87
101.28
4.5

74.38
74.53
(0.2 )
Boston 121.06
110.15
9.9

106.95
99.61
7.4
San Diego 93.04
94.51
(1.6 )
87.71
89.65
(2.2 )
Northern New Jersey 101.13
90.50
11.7

90.24
90.43
(0.2 )

Non-GAAP Financial Measures

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


 

Reconciliation of Net Income (Loss) to FFO

(in thousands, except per share data)



 


Three Months Ended June 30,


2010     2009  


Dollars   Shares   Per Share Amount
Dollars   Shares   Per Share Amount
Net income (loss)
$ 21,990





$ (10,968 )



Noncontrolling interests

(376 )





(227 )



Preferred dividends(a)
  (9,678 )




  (9,678 )



Net income (loss) attributable to FelCor common stockholders



11,936






(20,873 )



Less: Undistributed earnings allocated to unvested restricted stock


  (352 )




  -  



Numerator for basic and diluted income (loss) attributable to common stockholders



11,584

66,531
$ 0.17


(20,873 )
63,101
$ (0.33 )
Depreciation and amortization

36,969

-

0.56


35,935

-

0.57
Depreciation, discontinued operations and unconsolidated entities

3,755

-

0.06


4,323

-

0.07
Noncontrolling interests in FelCor LP

51

295

(0.02 )

(97 )
296

(0.01 )
Undistributed earnings allocated to unvested restricted stock

352

-

0.01


-

-

-

Conversion of options and unvested restricted stock


  -  
828
  -  
  -     342
  -  
FFO

52,711

67,654

0.78


19,288

63,739

0.30
Extinguishment of debt

(46,060 )
-

(0.68 )

594

-

0.01
Conversion costs(b)

-

-

-


292

-

-
Severance costs

-

-

-


374

-

0.01
Lease termination costs
  -  
-
  -  
  352  
-
  0.01  
Adjusted FFO

6,651

67,654

0.10


20,900

63,739

0.33
Adjusted FFO from discontinued operations
  (7 )
-
  -  
  (1,248 )
-
  (0.02 )
Same-Store Adjusted FFO
$ 6,644  
67,654
$ 0.10  
$ 19,652  
63,739
$ 0.31  

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

(b) Costs related to the conversion of our San Francisco Union Square hotel to a Marriott.


 

Reconciliation of Net Loss to FFO

(in thousands, except per share data)



 


Six Months Ended June 30,


2010     2009  


Dollars   Shares   Per Share Amount
Dollars   Shares   Per Share Amount
Net loss
$ (40,952 )





$ (32,390 )




Noncontrolling interests

178







131





Preferred dividends(a)
  (19,356 )





  (19,356 )




Net loss attributable to FelCor common stockholders



(60,130 )
65,014

$ (0.92 )

(51,615 )
63,132
$ (0.82 )
Depreciation and amortization

74,567

-


1.15


72,586

-

1.15
Depreciation, discontinued operations and unconsolidated entities

7,418

-


0.11


8,744

-

0.14
Gain on sale of unconsolidated subsidiary

(559 )
-


(0.01 )

-

-

-
Noncontrolling interests in FelCor LP

(274 )
295


(0.01 )

(239 )
296

(0.01 )

Conversion of options and unvested restricted stock


  -  
651  
  -  
  -  
202
  -  
FFO

21,022

65,960


0.32


29,476

63,630

0.46
Impairment loss

21,060

-


0.32


-

-

-
Impairment loss, discontinued operations and unconsolidated entities

-

-


-


3,436

-

0.05
Extinguishment of debt

(46,060 )
-


(0.70 )

594

-

0.01
Conversion costs(b)

-

-


-


330

-

0.01
Severance costs

-

-


-


509

-

0.01
Lease termination costs

-

-


-


352

-

0.01
Conversion of options and unvested restricted stock
  -  
(651 )
  -  
  -  
-
  -  
Adjusted FFO

(3,978 )
65,309


(0.06 )

34,697

63,630

0.55
Adjusted FFO from discontinued operations
  (42 )
-  
  -  
  (2,496 )
-
  (0.04 )
Same-Store Adjusted FFO
$ (4,020 )
65,309  
$ (0.06 )
$ 32,201  
63,630
$ 0.51  

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

(b) Costs related to the conversion of our San Francisco Union Square hotel to a Marriott.


 
 

Reconciliation of Net Income (Loss) to EBITDA

(in thousands)





 


Three Months Ended
June 30,


Six Months Ended 
June 30,


  2010       2009  
  2010       2009  
Net income (loss)
$ 21,990

$ (10,968 )
$ (40,952 )
$ (32,390 )
Depreciation and amortization

36,969


35,935


74,567


72,586
Depreciation, discontinued operations and unconsolidated entities

3,755


4,323


7,418




8,744


Interest expense

37,271


22,949


73,616


44,418
Interest expense, unconsolidated entities

1,210


951


2,709


1,970
Amortization of stock compensation

1,642


1,404


3,257


2,802
Noncontrolling interests in other partnerships
  (325 )
  (324 )
  (96 )
  (108 )
EBITDA

102,512


54,270


120,519


98,022
Impairment loss

-


-


21,060


-
Impairment loss, discontinued operations and unconsolidated entities

-


-


-




3,436


Extinguishment of debt

(46,060 )

594


(46,060 )

594
Conversion costs(a)

-


292


-


330
Severance costs

-


374


-


509
Lease termination costs

-


352


-


352
Gain on sale of unconsolidated subsidiary
  -  
  -  
  (559 )
  -  
Adjusted EBITDA

56,452


55,882


94,960


103,243
Adjusted EBITDA from discontinued operations
  (7 )
  (1,248 )
  (42 )
  (2,496 )
Same-Store Adjusted EBITDA
$ 56,445  
$ 54,634  
$ 94,918  
$ 100,747  

(a) Costs related to the conversion of our San Francisco Union Square hotel to a Marriott.


 
 

Reconciliation of Adjusted EBITDA to Hotel EBITDA

(in thousands)





 


Three Months Ended
June 30,

Six Months Ended
June 30,


  2010       2009  
  2010       2009  
Adjusted EBITDA
$ 56,452

$ 55,882

$ 94,960

$ 103,243
Other revenue

(1,007 )

(988 )

(1,372 )

(1,274 )
Equity in income from unconsolidated subsidiaries
(excluding interest, depreciation and impairment expense)


(5,861 )

(4,963 )

(9,611 )

(8,961 )
Noncontrolling interests in other partnerships
(excluding interest, depreciation and severance expense)


935


1,002


1,327


1,445
Consolidated hotel lease expense

11,769


10,853


21,263


20,913
Unconsolidated taxes, insurance and lease expense

(1,866 )

(2,084 )

(3,754 )

(4,018 )
Interest income

(97 )

(167 )

(202 )

(344 )
Other expenses (excluding conversion costs, severance costs and lease termination costs)

801


777


1,362


1,289
Corporate expenses (excluding amortization expense
of stock compensation)


4,868


3,832


13,100


8,556
Adjusted EBITDA from discontinued operations
  (7 )
  (1,248 )
  (42 )
  (2,496 )
Hotel EBITDA
$ 65,987  
$ 62,896  
$ 117,031  
$ 118,353  

 
 

Reconciliation of Net Income (Loss) to Hotel EBITDA

(in thousands)





 


Three Months Ended
June 30,

Six Months Ended
June 30,


  2010       2009  
  2010       2009  
Net income (loss)
$ 21,990

$ (10,968 )
$ (40,952 )
$ (32,390 )
Discontinued operations

(7 )

(486 )

(42 )

368
Equity in loss (income) from unconsolidated entities

(286 )

261


1,188


3,685
Consolidated hotel lease expense

11,769


10,853


21,263


20,913
Unconsolidated taxes, insurance and lease expense

(1,866 )

(2,084 )

(3,754 )

(4,018 )
Interest expense, net

37,174


22,782


73,414


44,074
Extinguishment of debt

(46,060 )

594


(46,060 )

594
Corporate expenses

6,510


5,236


16,357


11,358
Depreciation and amortization

36,969


35,935


74,567


72,586
Impairment loss

-


-


21,060


-
Other expenses

801


1,761


1,362


2,457
Other revenue
  (1,007 )
  (988 )
  (1,372 )
  (1,274 )
Hotel EBITDA
$ 65,987  
$ 62,896  
$ 117,031  
$ 118,353  

 
 

Hotel EBITDA and Hotel EBITDA Margin

(dollars in thousands)





 


Three Months Ended
June 30,

Six Months Ended
June 30,


  2010       2009  
  2010       2009  
Total revenues
$ 250,336

$ 236,257

$ 476,740

$ 464,276

Other revenue


  (1,007 )
  (988 )
  (1,372 )
  (1,274 )
Hotel operating revenue

249,329


235,269


475,368


463,002
Hotel operating expenses
  (183,342 )
  (172,373 )
  (358,337 )
  (344,649 )
Hotel EBITDA
$ 65,987  
$ 62,896  
$ 117,031  
$ 118,353  
Hotel EBITDA margin(a)

26.5 %

26.7 %

24.6 %

25.6 %

(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,



  2010       2009  
  2010       2009  
Total operating expenses
$ 237,525

$ 224,074

$ 489,192

$ 447,945
Unconsolidated taxes, insurance and lease expense

1,866


2,084


3,754


4,018
Consolidated hotel lease expense

(11,769 )

(10,853 )

(21,263 )

(20,913 )
Corporate expenses

(6,510 )

(5,236 )

(16,357 )

(11,358 )
Depreciation and amortization

(36,969 )

(35,935 )

(74,567 )

(72,586 )
Impairment loss

-


-


(21,060 )

-
Other expenses
  (801 )
  (1,761 )
  (1,362 )
  (2,457 )
Hotel operating expenses
$ 183,342  
$ 172,373  
$ 358,337  
$ 344,649  

 
 

Reconciliation of Ratio of Operating Income (Loss) to Total Revenues to Hotel EBITDA Margin





 


Three Months Ended
June 30,


Six Months Ended
June 30,



2010   2009
2010   2009
Ratio of operating income (loss) to total revenues
5.1 %
5.2 %
(2.6 )%
3.5 %
Other revenue
(0.4 )
(0.4 )
(0.3 )
(0.3 )
Unconsolidated taxes, insurance and lease expense
(0.7 )
(0.9 )
(0.8 )
(0.9 )
Consolidated hotel lease expense
4.7

4.6

4.5

4.5
Other expenses
0.4

0.7

0.3

0.6
Corporate expenses
2.6

2.2

3.4

2.5
Depreciation and amortization
14.8

15.3

15.7

15.7
Impairment loss
-  
-  
4.4  
-  
Hotel EBITDA margin
26.5 %
26.7 %
24.6 %
25.6 %

 

Reconciliation of Forecasted Net Loss Attributable to FelCor to Forecasted Adjusted FFO and Adjusted EBITDA

(in millions, except per share and unit data)



 


Full Year 2010 Guidance


Low Guidance   High Guidance


Dollars   Per Share Amount(a)
Dollars