EX-99.1 2 form8kq12011exh991.htm 1Q 2011 EARNING RELEASE FOR FELCOR LODGING TRUST WebFilings | EDGAR view
Exhibit 99.1  
 
545 E. JOHN CARPENTER FREEWAY, SUITE 1300
 IRVING, TX 75062
PH: 972-444-4900
F: 972-444-4949
WWW.FELCOR.COM
NYSE: FCH
For Immediate Release:
 
FELCOR REPORTS FIRST QUARTER RESULTS
• Exceeds Expectations
• Asset Sale Program Progresses
• Purchasing Two Manhattan Hotels
 
IRVING, Texas…April 25, 2011 - FelCor Lodging Trust Incorporated (NYSE: FCH) today reported operating results for the first quarter ended March 31, 2011.
 
Summary:
 
•
Same-store revenue per available room ("RevPAR") at 80 consolidated hotels increased 6.3% for the quarter.
•
Adjusted FFO per share was $(0.02) and Adjusted EBITDA was $44.2 million for the quarter, which was at the high-end of our expectations.
•
Hotel EBITDA margin increased 198 basis points for the quarter.
•
Net loss was $31.7 million for the quarter.
•
Agreed to purchase two midtown Manhattan hotels, the Royalton and Morgans, for $140 million.
•
Currently have executed contracts to sell six hotels for total gross proceeds of approximately $114 million.
 
First Quarter Operating Results:
 
Same-store RevPAR for our 80 consolidated hotels was $88.97 for the quarter, a 6.3% increase compared to the same period in 2010, an improvement over our fourth quarter 2010 RevPAR growth of 5.7%. The RevPAR increase for the quarter was driven by a 4.0% increase in average daily rate ("ADR") to $127.88 and a 2.3% increase in occupancy to 69.6%.
 
“Our portfolio RevPAR growth continues to accelerate as lodging industry fundamentals improve. We are very pleased with our first quarter results given the severe travel disruptions due to record setting storms in January and February. Our RevPAR grew 7.6% in March, which was ahead of our expectations. Economic data points that correlate to demand growth indicate a strong and lasting recovery, while limited supply growth further improves our ability to drive average rate and occupancy,” said Richard A. Smith, FelCor's President and Chief Executive Officer.
 
“We continue to execute our portfolio repositioning plan successfully. Our asset sale program is progressing as planned, with six hotels under contract. We have also agreed to purchase the Royalton and Morgans in midtown Manhattan at an attractive price per key, which will further improve our portfolio quality and future growth rates. We are excited to acquire these terrific hotels and expect they will generate

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 2

    
above market growth. Our most recent acquisition, the Fairmont Copley Plaza, continues to perform very well and is exceeding our underwriting. RevPAR at this hotel grew 18% during the quarter, driven by a 15% increase in ADR. This performance reflects that hotel’s superior location and the impact of our unique asset management approach,” added Mr. Smith.     
 
First quarter Hotel EBITDA was $55.2 million, compared to $47.8 million for the same period in 2010, a 15.3% increase. Hotel EBITDA represents EBITDA for 80 Same-store consolidated hotels prior to corporate expenses and joint venture adjustments. Hotel EBITDA margin was 23.5%, a 198 basis point increase compared to the same period in 2010.
 
Adjusted EBITDA (which includes our pro rata share of joint ventures) was $44.2 million for the quarter, compared to $38.5 million for the same period in 2010, a 14.7% increase, and met the high-end of our expectations. Same-store Adjusted EBITDA, which excludes EBITDA from discontinued operations, was $43.3 million for the quarter, a 20.1% increase, compared to the same period in 2010.
 
First quarter adjusted funds from operations (“FFO”) reflected a $2.3 million loss, or $0.02 per share, compared to a $10.6 million loss, or $0.17 per share, for the same period in 2010, a $0.15 improvement.
 
Net loss attributable to common stockholders was $41.3 million, or $0.43 per share for the quarter, compared to $72.1 million, or $1.14 per share, for the same period in 2010. Net loss in 2010 included a $21.1 million impairment charge.
 
RevPAR, Hotel EBITDA and other Same-store metrics reflect 80 consolidated hotels owned at the end of the quarter, including the Fairmont Copley Plaza, and excluding the Embassy Suites – Phoenix-Tempe, which is classified as held for sale.
 
EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Adjusted FFO per share 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 March 31, 2011, we had $1.5 billion of consolidated debt (including $145 million drawn on our $225 million line of credit) and $91.0 million of cash and cash equivalents.
 
In March, we closed a $225 million secured, revolving line of credit with a group of seven banks. At closing, we repaid two secured loans, totaling $198.3 million and $28.8 million, with a combination of $52.1 million of cash on hand and funds drawn under the new line of credit. The repaid loans would have matured in 2013 and 2012 (including extensions), respectively, and were secured by mortgages on 11 hotels. Those same hotels now secure repayment of amounts outstanding under the line of credit. The credit facility bears interest equal to LIBOR, plus 4.5%, with no LIBOR floor.
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 3

 
In April, we sold 27.6 million shares of common stock at $6.00 per share. We received net proceeds of approximately $159.0 million from the offering, after underwriting discounts and commissions.
“We continue to improve the flexibility of our balance sheet, extend maturity dates and lower our overall cost of debt. The line of credit, combined with other recent financing activities, provides critical financial flexibility and capacity to acquire properties at attractive prices – including the Royalton and Morgans – in a competitive hotel transactions setting. We continue to look for ways to restructure our balance sheet to refinance or repay existing debt. In addition, we expect our leverage to decline significantly from improved operations and from asset sales,” stated Andrew J. Welch, FelCor's Executive Vice President and Chief Financial Officer.
 
Portfolio Management:
 
For the quarter, we spent $16.0 million on capital improvements at our hotels (including our pro rata share of joint venture expenditures).
 
We agreed to acquire two midtown Manhattan hotels, the Royalton and Morgans, for $140.0 million from Morgans Hotel Group Co. (“MHGC”). MHGC will continue to manage the properties, which have a total of 282 guest rooms. The hotels will require limited initial capital, as both hotels are in excellent condition and have been recently renovated. The purchase price of $496,000 per key is approximately 60% of replacement cost and is approximately ten times peak Hotel EBITDA. We expect to close this transaction in the second quarter. FelCor has identified opportunities to enhance the hotels’ value, including adding guest rooms, and improving the fitness center and guest lounge at the Morgans, as well as food and beverage offerings.
 
As part of our long-term strategic plan to improve our portfolio quality, growth rates and diversification, we began marketing 14 hotels for sale during the fourth quarter of 2010. We expect to sell a majority of those 14 hotels during 2011. We currently have agreements to sell six of the 14 hotels for total gross proceeds of approximately $114 million. We have also identified an additional 21 non-strategic hotels. We will continue to monitor the transaction environment and will bring these additional hotels to market at the appropriate time.
 
Outlook:
 
Lodging demand growth, particularly from corporate customers, continues to accelerate, and new hotel supply growth is moderating. Our hotels are taking advantage of this demand and supply imbalance to remix the customer base and opportunistically increase rates where appropriate. As a result, our RevPAR growth continues to accelerate, and we expect this trend to continue through 2011. We have updated our 2011 projections for first quarter actual results, the pending sale of the Embassy Suites – Phoenix-Tempe and the pending acquisition of the Royalton and Morgans, which should all occur during the second quarter. We assumed no additional acquisitions or dispositions in our 2011 outlook.

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 4

 
For 2011, we anticipate:
 
•
RevPAR for our 80 Same-store consolidated hotels to increase between 6% and 8%;
•
Adjusted EBITDA to be between $213 million and $222 million;
•
Adjusted FFO per share to be between $0.26 and $0.34;
•
Net loss to be between $78 million and $69 million;
•
Interest expense to be approximately $136 million;
•
Capital expenditures to be approximately $85 million; and
•
Weighted average shares and units to be 117.1 million.
 
FelCor, a real estate investment trust, is the nation's largest owner of upper-upscale, all-suite hotels. FelCor owns interests in 82 properties located in major markets throughout 22 states. FelCor's diversified portfolio of hotels and resorts are flagged under global brands such as - Doubletree ®, Embassy Suites Hotels®, Hilton®, Fairmont®, 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 first quarter earnings Conference Call on Monday, April 25, 2011, at 10:00 a.m. (Central Time). The conference call will be Webcast simultaneously on FelCor's Web site at www.felcor.com. Interested investors and other parties who wish to access the call can 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 also 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 an 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 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.
Contact:
Stephen A. Schafer, Vice President Strategic Planning & Investor Relations,
(972) 444-4912     sschafer@felcor.com
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 5

SUPPLEMENTAL INFORMATION
 
 
 
 
FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 5

 
 
 
INTRODUCTION
 
The following information is presented in order to help our investors understand FelCor's financial position as of and for the three month period ended March 31, 2011.
 
 
 
TABLE OF CONTENTS
 
 
 
Page
Consolidated Statements of Operations(a)
 
Consolidated Balance Sheets(a)
 
Capital Expenditures
 
Supplemental Financial Data
 
Consolidated Debt Summary
 
Schedule of Encumbered Hotels
 
Hotel Portfolio Composition
 
Detailed Operating Statistics by Brand
 
Detailed Operating Statistics for FelCor's Top Markets
 
Non-GAAP Financial Measures
 
 
 
(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.
 
 
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 6

 
Consolidated Statements of Operations
(in thousands, except per share data)
 
 
Three Months Ended March 31,
 
2011
 
2010
Revenues:
 
 
 
Hotel operating revenue:
 
 
 
Room
$
184,366
 
 
$
170,287
 
Food and beverage
38,039
 
 
33,555
 
Other operating departments
12,700
 
 
12,916
 
Other revenue
225
 
 
365
 
Total revenues
235,330
 
 
217,123
 
Expenses:
 
 
 
Hotel departmental expenses:
 
 
 
Room
49,528
 
 
45,480
 
Food and beverage
29,859
 
 
26,254
 
Other operating departments
6,035
 
 
5,938
 
Other property related costs
69,457
 
 
62,702
 
Management and franchise fees
10,942
 
 
10,145
 
Taxes, insurance and lease expense
20,723
 
 
22,379
 
Corporate expenses
9,537
 
 
9,847
 
Depreciation and amortization
35,317
 
 
36,284
 
Other expenses
631
 
 
561
 
Total operating expenses
232,029
 
 
219,590
 
Operating income (loss)
3,301
 
 
(2,467
)
Interest expense, net
(33,765
)
 
(35,403
)
Extinguishment of debt
(245
)
 
—
 
Loss before equity in loss from unconsolidated entities
(30,709
)
 
(37,870
)
Equity in loss from unconsolidated entities
(1,583
)
 
(1,474
)
Gain on involuntary conversion
150
 
 
—
 
Loss from continuing operations
(32,142
)
 
(39,344
)
Discontinued operations
416
 
 
(23,598
)
Net loss
(31,726
)
 
(62,942
)
Net loss (income) attributable to noncontrolling interests in other partnerships
(58
)
 
229
 
Net loss attributable to redeemable noncontrolling interests in FelCor LP
120
 
 
325
 
Net loss attributable to FelCor
(31,664
)
 
(62,388
)
Preferred dividends
(9,678
)
 
(9,678
)
Net loss attributable to FelCor common stockholders
$
(41,342
)
 
$
(72,066
)
Basic and diluted per common share data:
 
 
 
Loss from continuing operations
$
(0.44
)
 
$
(0.77
)
Net loss
$
(0.43
)
 
$
(1.14
)
Basic and diluted weighted average common shares outstanding
95,350
 
 
63,475
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 7

Consolidated Balance Sheets
(in thousands)
 
 
March 31,
 
December 31,
 
2011
 
2010
Assets
 
 
 
Investment in hotels, net of accumulated depreciation of $998,506 and
$982,564 at March 31, 2011 and December 31, 2010, respectively
$
1,960,848
 
 
$
1,985,779
 
Investment in unconsolidated entities
73,972
 
 
75,920
 
Hotel held for sale
18,533
 
 
—
 
Cash and cash equivalents
91,040
 
 
200,972
 
Restricted cash
19,254
 
 
16,702
 
Accounts receivable, net of allowance for doubtful accounts of $683
and $696 at March 31, 2011 and December 31, 2010, respectively
36,878
 
 
27,851
 
Deferred expenses, net of accumulated amortization of $14,863 and
$17,892 at March 31, 2011 and December 31, 2010, respectively
22,245
 
 
19,940
 
Other assets
25,438
 
 
32,271
 
Total assets
$
2,248,208
 
 
$
2,359,435
 
Liabilities and Equity
 
 
 
Debt, net of discount of $50,432 and $53,193 at March 31, 2011
and December 31, 2010, respectively
$
1,466,798
 
 
$
1,548,309
 
Distributions payable
76,293
 
 
76,293
 
Accrued expenses and other liabilities
154,478
 
 
144,451
 
Total liabilities
1,697,569
 
 
1,769,053
 
Commitments and contingencies
 
 
 
Redeemable noncontrolling interests in FelCor LP at redemption value, 285
units issued and outstanding at March 31, 2011 and December 31, 2010
1,745
 
 
2,004
 
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
      March 31, 2011 and December 31, 2010
309,362
 
 
309,362
 
    Series C Cumulative Redeemable Preferred Stock, 68 shares,
liquidation value of $169,950, issued and outstanding at
      March 31, 2011 and December 31, 2010
169,412
 
 
169,412
 
Common stock, $0.01 par value, 200,000 shares authorized and
96,872 shares issued at March 31, 2011, and 101,038 shares
issued, including shares in treasury, at December 31, 2010
969
 
 
1,010
 
Additional paid-in capital
2,191,278
 
 
2,190,308
 
Accumulated other comprehensive income
27,745
 
 
26,457
 
Accumulated deficit
(2,169,344
)
 
(2,054,625
)
Less: Common stock in treasury, at cost, of 4,156 shares at December 31, 2010
—
 
 
(73,341
)
Total FelCor stockholders’ equity
529,422
 
 
568,583
 
Noncontrolling interests in other partnerships
19,472
 
 
19,795
 
Total equity
548,894
 
 
588,378
 
Total liabilities and equity
$
2,248,208
 
 
$
2,359,435
 
 
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 8

Capital Expenditures
(in thousands)
 
 
 
Three Months Ended March 31,
 
2011
 
2010
Improvements and additions to majority-owned hotels
$
15,038
 
 
$
8,200
 
Partners' pro rata share of additions to consolidated joint venture hotels
(189
)
 
(36
)
Pro rata share of additions to unconsolidated hotels
1,133
 
 
426
 
   Total additions to hotels(a)
$
15,982
 
 
$
8,590
 
 
(a)    Includes capitalized interest, property taxes, ground leases and certain employee costs.
 
Supplemental Financial Data
(in thousands, except per share information)
 
 
March 31,
 
December 31,
Total Enterprise Value
2011
 
2010
Common shares outstanding
96,872
 
 
96,882
 
Units outstanding
285
 
 
285
 
Combined shares and units outstanding
97,157
 
 
97,167
 
Common stock price
$
6.13
 
 
$
7.04
 
Market capitalization
$
595,572
 
 
$
684,056
 
Series A preferred stock
309,362
 
 
309,362
 
Series C preferred stock
169,412
 
 
169,412
 
Consolidated debt
1,466,798
 
 
1,548,309
 
Noncontrolling interests of consolidated debt
(3,701
)
 
(3,754
)
Pro rata share of unconsolidated debt
76,811
 
 
77,295
 
Cash and cash equivalents
(91,040
)
 
(200,972
)
 Total enterprise value (TEV)
$
2,523,214
 
 
$
2,583,708
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 9

Consolidated Debt Summary
(dollars in thousands)
 
 
 
Interest Rate (%)
 
 
Maturity Date
 
March 31, 2011
 
December 31, 2010
Secured line of credit(a)
L + 4.50
 
 
 
August 2014(b)
 
$
145,000
 
 
$
—
 
Mortgage debt
 
 
 
 
 
 
 
 
Mortgage debt
L + 0.93
 
(c) 
 
 November 2011
 
250,000
 
 
250,000
 
Mortgage debt
L + 5.10
 
(d) 
 
 April 2015
 
212,000
 
 
212,000
 
Mortgage debt
9.02
 
 
 
 April 2014
 
112,109
 
 
113,220
 
Mortgage debt(e)
6.66
 
 
 
 June - August 2014
 
68,744
 
 
69,206
 
Mortgage debt
8.77
 
 
 
May 2013
 
27,770
 
 
27,770
 
Mortgage debt
5.81
 
 
 
 July 2016
 
11,210
 
 
11,321
 
Mortgage debt
6.15
 
 
 
June 2011
 
7,473
 
 
7,800
 
Other
4.25
 
 
 
May 2011
 
563
 
 
524
 
Senior notes
 
 
 
 
 
 
 
 
Senior secured notes(f)
10.00
 
 
 
 October 2014
 
585,573
 
 
582,821
 
Senior notes
8.50
 
(g) 
 
 June 2011
 
46,356
 
 
46,347
 
Retired debt
—
 
 
 
—
 
—
 
 
227,300
 
Total
 
 
 
 
 
$
1,466,798
 
 
$
1,548,309
 
 
(a)
The outstanding balance on the line of credit was paid subsequent to March 31, 2011. We currently have full availability under our $225 million line of credit.
(b)
This loan can be extended for one year (to 2015), subject to satisfying certain conditions.
(c)
We purchased an interest rate cap that caps LIBOR at 7.8% and expires November 2011 for a $250 million notional amount.
(d)
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.
(e)
The hotels securing this debt are subject to separate loan agreements and are not cross-collateralized.
(f)
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.
(g)
As a result of a rating down-grade in February 2009, the interest rate on the 8½% senior notes increased to 9%.

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 10

Schedule of Encumbered Hotels
(dollars in millions)
 
 
 
March 31, 2011
 
 
Consolidated Debt
 
Balance
 
Encumbered Hotels
Secured line of credit
 
 
$
145
 
 
 
Boca Raton - ES, Charlotte SouthPark - DT, Dana Point - DTGS, 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
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
Mortgage debt
 
 
$
112
 
 
 
Baton Rouge - ES, Birmingham - ES, Ft. Lauderdale - ES, Miami Airport - ES, Milpitas - ES, Minneapolis Airport - ES and Napa Valley - ES
CMBS debt(a)
 
 
$
69
 
 
 
Atlanta Airport - ES, Austin - DTGS, BWI Airport - ES, Orlando Airport - HI and Phoenix Biltmore - ES
CMBS debt
 
 
$
28
 
 
 
New Orleans Convention Center - ES
CMBS debt
 
 
$
11
 
 
 
Indianapolis North - ES
CMBS debt
 
 
$
7
 
 
 
Wilmington - DT
Senior secured notes
 
 
$
586
 
 
 
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
 
(a)
The hotels under this debt are subject to separate loan agreements and are not cross-collateralized.
 
 
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 11

Hotel Portfolio Composition
 
The following table illustrates the distribution of 80 same-store consolidated hotels by brand, market and location at March 31, 2011.
 
Brand
 
 
Hotels
 
Rooms
 
% of Total Rooms
 
% of 2010 Hotel EBITDA(a)
Embassy Suites Hotels
 
44
 
 
11,450
 
 
50
 
 
 
58
 
 
Holiday Inn
 
15
 
 
5,154
 
 
22
 
 
 
18
 
 
Sheraton and Westin
 
8
 
 
2,774
 
 
12
 
 
 
9
 
 
Doubletree
 
7
 
 
1,471
 
 
6
 
 
 
7
 
 
Renaissance and Marriott
 
3
 
 
1,321
 
 
6
 
 
 
3
 
 
Hilton
 
2
 
 
559
 
 
2
 
 
 
3
 
 
Fairmont
 
1
 
 
383
 
 
2
 
 
 
2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Market
 
 
 
 
 
 
 
 
 
 
 
South Florida
 
5
 
 
1,439
 
 
6
 
 
 
7
 
 
Los Angeles area
 
4
 
 
899
 
 
4
 
 
 
6
 
 
San Francisco area
 
6
 
 
2,138
 
 
9
 
 
 
6
 
 
Atlanta
 
5
 
 
1,462
 
 
6
 
 
 
6
 
 
Dallas
 
4
 
 
1,333
 
 
6
 
 
 
5
 
 
Boston
 
3
 
 
915
 
 
4
 
 
 
5
 
 
Minneapolis
 
3
 
 
736
 
 
3
 
 
 
4
 
 
Philadelphia
 
2
 
 
729
 
 
3
 
 
 
4
 
 
Orlando
 
4
 
 
1,038
 
 
5
 
 
 
4
 
 
Central California Coast
 
2
 
 
408
 
 
2
 
 
 
4
 
 
Myrtle Beach
 
2
 
 
640
 
 
3
 
 
 
4
 
 
New Orleans
 
2
 
 
744
 
 
3
 
 
 
4
 
 
San Antonio
 
3
 
 
874
 
 
4
 
 
 
3
 
 
San Diego
 
1
 
 
600
 
 
3
 
 
 
3
 
 
Other
 
34
 
 
9,157
 
 
39
 
 
 
35
 
 
 
 
 
 
 
 
 
 
 
 
 
Location 
 
 
 
 
 
 
 
 
 
 
 
Urban
 
21
 
 
6,741
 
 
29
 
 
 
32
 
 
Suburban
 
31
 
 
7,656
 
 
33
 
 
 
29
 
 
Airport
 
18
 
 
5,788
 
 
25
 
 
 
23
 
 
Resort
 
10
 
 
2,927
 
 
13
 
 
 
16
 
 
 
(a)    Hotel EBITDA is more fully described on page 19.
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 12

 
The following tables set forth occupancy, ADR and RevPAR for the three months ended March 31, 2011 and 2010, and the percentage changes thereto between the periods presented, for 80 same-store consolidated hotels.
 
Detailed Operating Statistics by Brand
 
 
Occupancy (%)
 
Three Months Ended March 31,
 
 
 
 
2011
 
2010
 
%Variance
Embassy Suites Hotels
72.5
 
 
 
70.8
 
 
 
2.3
 
 
Holiday Inn
68.0
 
 
 
67.6
 
 
 
0.6
 
 
Sheraton and Westin
66.7
 
 
 
64.0
 
 
 
4.3
 
 
Doubletree
71.4
 
 
 
70.0
 
 
 
1.9
 
 
Renaissance and Marriott
71.0
 
 
 
65.3
 
 
 
8.6
 
 
Hilton
42.5
 
 
 
46.2
 
 
 
(8.0
)
 
Fairmont
53.0
 
 
 
51.7
 
 
 
2.6
 
 
 
 
 
 
 
 
 
 
 
Total hotels
69.6
 
 
 
68.0
 
 
 
2.3
 
 
 
 
 
 
 
 
 
 
 
 
ADR ($)
 
Three Months Ended March 31,
 
 
 
 
2011
 
2010
 
%Variance
Embassy Suites Hotels
130.49
 
 
 
129.42
 
 
 
0.8
 
 
Holiday Inn
110.89
 
 
 
104.30
 
 
 
6.3
 
 
Sheraton and Westin
109.51
 
 
 
103.71
 
 
 
5.6
 
 
Doubletree
131.94
 
 
 
118.75
 
 
 
11.1
 
 
Renaissance and Marriott
196.66
 
 
 
183.84
 
 
 
7.0
 
 
Hilton
98.10
 
 
 
95.75
 
 
 
2.4
 
 
Fairmont
199.71
 
 
 
174.05
 
 
 
14.7
 
 
 
 
 
 
 
 
 
 
 
Total hotels
127.88
 
 
 
123.02
 
 
 
4.0
 
 
 
 
 
 
 
 
 
 
 
 
RevPAR ($)
 
Three Months Ended March 31,
 
 
 
 
2011
 
2010
 
%Variance
Embassy Suites Hotels
94.57
 
 
 
91.66
 
 
 
3.2
 
 
Holiday Inn
75.41
 
 
 
70.52
 
 
 
6.9
 
 
Sheraton and Westin
73.07
 
 
 
66.37
 
 
 
10.1
 
 
Doubletree
94.15
 
 
 
83.12
 
 
 
13.3
 
 
Renaissance and Marriott
139.54
 
 
 
120.08
 
 
 
16.2
 
 
Hilton
41.65
 
 
 
44.21
 
 
 
(5.8
)
 
Fairmont
105.82
 
 
 
89.91
 
 
 
17.7
 
 
 
 
 
 
 
 
 
 
 
Total hotels
88.97
 
 
 
83.67
 
 
 
6.3
 
 
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 13

Detailed Operating Statistics for FelCor's Top Markets
 
Occupancy (%)
 
Three Months Ended March 31,
 
 
 
 
2011
 
2010
 
%Variance
South Florida
83.2
 
 
 
85.1
 
 
 
(2.3
)
 
Los Angeles area
73.8
 
 
 
70.5
 
 
 
4.7
 
 
San Francisco area
68.3
 
 
 
65.3
 
 
 
4.6
 
 
Atlanta
73.9
 
 
 
75.2
 
 
 
(1.8
)
 
Dallas
72.9
 
 
 
65.4
 
 
 
11.4
 
 
Minneapolis
72.7
 
 
 
67.0
 
 
 
8.4
 
 
Philadelphia
57.8
 
 
 
60.4
 
 
 
(4.3
)
 
Orlando
82.9
 
 
 
80.9
 
 
 
2.4
 
 
Central California Coast
68.6
 
 
 
69.7
 
 
 
(1.6
)
 
Myrtle Beach
40.8
 
 
 
44.1
 
 
 
(7.5
)
 
New Orleans
70.0
 
 
 
68.7
 
 
 
1.8
 
 
Boston
68.6
 
 
 
66.5
 
 
 
3.2
 
 
San Antonio
73.9
 
 
 
74.7
 
 
 
(1.0
)
 
San Diego
73.8
 
 
 
71.5
 
 
 
3.2
 
 
 
ADR ($)
 
Three Months Ended March 31,
 
 
 
 
2011
 
2010
 
%Variance
South Florida
158.05
 
 
 
163.64
 
 
 
(3.4
)
 
Los Angeles area
138.26
 
 
 
132.32
 
 
 
4.5
 
 
San Francisco area
134.09
 
 
 
122.73
 
 
 
9.3
 
 
Atlanta
106.06
 
 
 
105.48
 
 
 
0.6
 
 
Dallas
123.63
 
 
 
112.99
 
 
 
9.4
 
 
Minneapolis
122.52
 
 
 
125.73
 
 
 
(2.6
)
 
Philadelphia
124.14
 
 
 
111.42
 
 
 
11.4
 
 
Orlando
118.54
 
 
 
114.47
 
 
 
3.6
 
 
Central California Coast
133.87
 
 
 
138.16
 
 
 
(3.1
)
 
Myrtle Beach
98.75
 
 
 
96.37
 
 
 
2.5
 
 
New Orleans
143.29
 
 
 
132.43
 
 
 
8.2
 
 
Boston
146.90
 
 
 
137.72
 
 
 
6.7
 
 
San Antonio
95.21
 
 
 
98.33
 
 
 
(3.2
)
 
San Diego
122.03
 
 
 
115.09
 
 
 
6.0
 
 
 
RevPAR ($)
 
Three Months Ended March 31,
 
 
 
 
2011
 
2010
 
%Variance
South Florida
131.51
 
 
 
139.33
 
 
 
(5.6
)
 
Los Angeles area
101.99
 
 
 
93.23
 
 
 
9.4
 
 
San Francisco area
91.53
 
 
 
80.11
 
 
 
14.3
 
 
Atlanta
78.40
 
 
 
79.36
 
 
 
(1.2
)
 
Dallas
90.09
 
 
 
73.89
 
 
 
21.9
 
 
Minneapolis
89.01
 
 
 
84.26
 
 
 
5.6
 
 
Philadelphia
71.77
 
 
 
67.34
 
 
 
6.6
 
 
Orlando
98.27
 
 
 
92.65
 
 
 
6.1
 
 
Central California Coast
91.81
 
 
 
96.33
 
 
 
(4.7
)
 
Myrtle Beach
40.31
 
 
 
42.53
 
 
 
(5.2
)
 
New Orleans
100.32
 
 
 
91.04
 
 
 
10.2
 
 
Boston
100.72
 
 
 
91.52
 
 
 
10.1
 
 
San Antonio
70.39
 
 
 
73.46
 
 
 
(4.2
)
 
San Diego
90.08
 
 
 
82.33
 
 
 
9.4
 
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 14

 
Non-GAAP Financial Measures
 
We refer in this release to certain “non-GAAP financial measures.” These measures, including FFO, 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 Loss to FFO and Adjusted FFO
(in thousands, except per share data)
 
 
Three Months Ended March 31,
 
2011
 
2010
 
Dollars
 
Shares
 
Per Share Amount
 
Dollars
Shares
 
Per Share Amount
Net loss
$
(31,726
)
 
 
 
 
 
$
(62,942
)
 
 
 
 
Noncontrolling interests
62
 
 
 
 
 
 
554
 
 
 
 
 
Preferred dividends
(9,678
)
 
 
 
 
 
(9,678
)
 
 
 
 
Net loss attributable to FelCor
common stockholders
(41,342
)
 
95,350
 
 
$
(0.43
)
 
(72,066
)
 
63,475
 
 
$
(1.14
)
Depreciation and amortization
35,317
 
 
—
 
 
0.37
 
 
36,284
 
 
—
 
 
0.57
 
Depreciation, discontinued operations
and unconsolidated entities
3,581
 
 
—
 
 
0.04
 
 
4,977
 
 
—
 
 
0.08
 
Gain on sale of unconsolidated entities
—
 
 
—
 
 
—
 
 
(559
)
 
—
 
 
(0.01
)
Noncontrolling interests in FelCor LP
(120
)
 
285
 
 
(0.01
)
 
(325
)
 
295
 
 
—
 
Gain on involuntary conversion
(150
)
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
FFO
(2,714
)
 
95,635
 
 
(0.03
)
 
(31,689
)
 
63,770
 
 
(0.50
)
Impairment loss, discontinued operations
and unconsolidated entities
—
 
 
—
 
 
—
 
 
21,060
 
 
—
 
 
0.33
 
Acquisition costs
119
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Extinguishment of debt, including
   discontinued operations
252
 
 
—
 
 
0.01
 
 
—
 
 
—
 
 
—
 
Adjusted FFO
$
(2,343
)
 
95,635
 
 
$
(0.02
)
 
$
(10,629
)
 
63,770
 
 
$
(0.17
)
 
 
 
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 15

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
(in thousands)
 
 
Three Months Ended March 31,
 
2011
 
2010
Net loss
$
(31,726
)
 
$
(62,942
)
Depreciation and amortization
35,317
 
 
36,284
 
Depreciation, discontinued operations and unconsolidated entities
3,581
 
 
4,977
 
Interest expense
33,806
 
 
35,508
 
Interest expense, discontinued operations and unconsolidated entities
1,209
 
 
2,337
 
Amortization of stock compensation
1,803
 
 
1,616
 
Noncontrolling interests in other partnerships
(58
)
 
229
 
EBITDA
43,932
 
 
18,009
 
Impairment loss, discontinued operations and unconsolidated entities
—
 
 
21,060
 
Extinguishment of debt, including discontinued operations
252
 
 
—
 
Acquisition costs
119
 
 
—
 
Gain on involuntary conversion
(150
)
 
—
 
Gain on sale of unconsolidated subsidiary
—
 
 
(559
)
Adjusted EBITDA
44,153
 
 
38,510
 
Adjusted EBITDA from discontinued operations
(857
)
 
(380
)
Adjusted EBITDA from acquired hotels
—
 
 
(2,078
)
Same-store Adjusted EBITDA
43,296
 
 
36,052
 
Other revenue
(225
)
 
(365
)
Equity in income from unconsolidated entities (excluding interest,
   depreciation and impairment expense)
(3,341
)
 
(2,984
)
Noncontrolling interests in other partnerships (excluding interest and
   depreciation expense)
626
 
 
392
 
Consolidated hotel lease expense
8,304
 
 
7,758
 
Unconsolidated taxes, insurance and lease expense
(1,684
)
 
(1,692
)
Interest income
(41
)
 
(105
)
Other expenses (excluding acquisition costs)
512
 
 
561
 
Corporate expenses (excluding amortization expense of stock compensation)
7,734
 
 
8,231
 
Hotel EBITDA
$
55,181
 
 
$
47,848
 
 
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 16

Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands)
 
Three Months Ended March 31,
 
2011
 
2010
Total revenues
$
235,330
 
 
$
217,123
 
Other revenue
(225
)
 
(365
)
Hotel operating revenue
235,105
 
 
216,758
 
Acquired hotel revenue
—
 
 
5,855
 
Same-store hotel operating revenue
235,105
 
 
222,613
 
Same-store hotel operating expenses
(179,924
)
 
(174,765
)
Hotel EBITDA
$
55,181
 
 
$
47,848
 
Hotel EBITDA margin(a) 
23.5
%
 
21.5
%
 
(a)    Hotel EBITDA as a percentage of same-store hotel operating revenue.
 
Reconciliation of Total Operating Expenses to Same-store Hotel Operating Expenses
(in thousands)
 
Three Months Ended March 31,
 
2011
 
2010
Total operating expenses
$
232,029
 
 
$
219,590
 
Unconsolidated taxes, insurance and lease expense
1,684
 
 
1,692
 
Consolidated hotel lease expense
(8,304
)
 
(7,758
)
Corporate expenses
(9,537
)
 
(9,847
)
Depreciation and amortization
(35,317
)
 
(36,284
)
Other expenses
(631
)
 
(561
)
Acquired hotel expenses
—
 
 
7,933
 
Same-store hotel operating expenses
$
179,924
 
 
$
174,765
 
 
 
Reconciliation of Ratio of Operating Income (Loss) to Total Revenues to Hotel EBITDA Margin
 
 
Three Months Ended March 31,
 
2011
 
2010
Ratio of operating income (loss) to total revenues
1.4
 %
 
(1.1
)%
Other revenue
(0.1
)
 
(0.2
)
Acquired hotel revenue
—
 
 
2.7
 
Unconsolidated taxes, insurance and lease expense
(0.7
)
 
(0.8
)
Consolidated hotel lease expense
3.5
 
 
3.5
 
Other expenses
0.3
 
 
0.3
 
Corporate expenses
4.1
 
 
4.4
 
Depreciation and amortization
15.0
 
 
16.3
 
Acquired hotel expenses
—
 
 
(3.6
)
Hotel EBITDA margin
23.5
 %
 
21.5
 %

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 17

 
Reconciliation of Forecasted Net Loss to Forecasted Adjusted FFO and
Adjusted EBITDA
(in millions, except per share and unit data)
 
 
Full Year 2011 Guidance
 
Low Guidance
 
High Guidance
 
Dollars
 
Per Share Amount(a)
 
Dollars
 
Per Share Amount(a)
Net loss
$
(78
)
 
 
 
$
(69
)
 
 
Preferred dividends
(39
)
 
 
 
(39
)
 
 
Net loss attributable to FelCor common stockholders
(117
)
 
$
(0.99
)
 
(108
)
 
$
(0.92
)
Depreciation(b)
156
 
 
 
 
156
 
 
 
FFO
39
 
 
$
0.33
 
 
48
 
 
$
0.41
 
Extinguishment of debt
(8
)
 
 
 
(8
)
 
 
Adjusted FFO
$
31
 
 
$
0.26
 
 
$
40
 
 
$
0.34
 
 
 
 
 
 
 
 
 
Net loss
$
(78
)
 
 
 
$
(69
)
 
 
Depreciation(b)
156
 
 
 
 
156
 
 
 
Interest expense(b)
136
 
 
 
 
136
 
 
 
Amortization expense
7
 
 
 
 
7
 
 
 
EBITDA
221
 
 
 
 
230
 
 
 
Extinguishment of debt
(8
)
 
 
 
(8
)
 
 
Adjusted EBITDA
$
213
 
 
 
 
$
222
 
 
 
 
(a)    Weighted average shares and units are 117.1 million.
(b)    Includes pro rata portion of unconsolidated entities.
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 18

 
Substantially all of our non-current assets consist of real estate. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to be helpful in evaluating a real estate company's operations. These supplemental measures are not measures of operating performance under GAAP. However, we consider these non-GAAP measures to be supplemental measures of a hotel REIT's performance and should be considered along with, but not as an alternative to, net income (loss) attributable to FelCor as a measure of our operating performance.
FFO and EBITDA
The White Paper on Funds From Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), defines FFO as net income or loss attributable to parent (computed in accordance with GAAP), excluding gains or losses from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. We compute FFO in accordance with standards established by NAREIT. This may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.
 
EBITDA is a commonly used measure of performance in many industries. We define EBITDA as net income or loss attributable to parent (computed in accordance with GAAP) plus interest expenses, income taxes, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA on the same basis.
 
Adjustments to FFO and EBITDA
 
We adjust FFO and EBITDA when evaluating our performance because management believes that the exclusion of certain additional items, including but not limited to those described below, provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted FFO, and Adjusted EBITDA when combined with GAAP net income attributable to FelCor, EBITDA and FFO, is beneficial to an investor's better understanding of our operating performance.
 
•    Gains and losses related to extinguishment of debt and interest rate swaps - We exclude gains and losses related to extinguishment of debt and interest rate swaps from FFO and EBITDA because we believe that it is not indicative of ongoing operating performance of our hotel assets. This also represents an acceleration of interest expense or a reduction of interest expense, and interest expense is excluded from EBITDA.

-more-
 
FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 19

 
•    Impairment losses - We exclude the effect of impairment losses and gains or losses on disposition of assets in computing Adjusted FFO and Adjusted EBITDA because we believe that including these is not consistent with reflecting the ongoing performance of our remaining assets. Additionally, we believe that impairment charges and gains or losses on disposition of assets represent accelerated depreciation, or excess depreciation, and depreciation is excluded from FFO by the NAREIT definition and from EBITDA.
 
•    Cumulative effect of a change in accounting principle - Infrequently, the Financial Accounting Standards Board promulgates new accounting standards that require the consolidated statements of operations to reflect the cumulative effect of a change in accounting principle. We exclude these one-time adjustments in computing Adjusted FFO and Adjusted EBITDA because they do not reflect our actual performance for that period.
 
In addition, to derive Adjusted EBITDA we exclude gains or losses on the sale of depreciable assets because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets. Additionally, the gain or loss on sale of depreciable assets represents either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.
 
Hotel EBITDA and Hotel EBITDA Margin
 
Hotel EBITDA and Hotel EBITDA margin are commonly used measures of performance in the hotel industry and give investors a more complete understanding of the operating results over which our individual hotels and brand/managers have direct control.  We believe that Hotel EBITDA and Hotel EBITDA margin are useful to investors by providing greater transparency with respect to two significant measures that we use in our financial and operational decision-making.  Additionally, using these measures facilitates comparisons with other hotel REITs and hotel owners.  We present Hotel EBITDA and Hotel EBITDA margin by eliminating all revenues and expenses from continuing operations not directly associated with hotel operations, including corporate-level expenses, depreciation and amortization, and expenses related to our capital structure.  We eliminate corporate-level costs and expenses because we believe property-level results provide investors with supplemental information into the ongoing operational performance of our hotels and the effectiveness of management on a property-level basis.  We eliminate depreciation and amortization because, even though depreciation and amortization are property-level expenses, we do not believe that these non-cash expenses, which are based on historical cost accounting for real estate assets, and implicitly assume that the value of real estate assets diminishes predictably over time, accurately reflect an adjustment in the value of our assets.  We also eliminate consolidated percentage rent paid to unconsolidated entities, which is effectively eliminated by noncontrolling interests and equity in income from unconsolidated subsidiaries, and include the cost of unconsolidated taxes, insurance and lease expense, to reflect the entire operating costs applicable to our Consolidated Hotels.  Hotel EBITDA and Hotel EBITDA margins are presented on a same-store basis.
 
 
 

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FelCor Lodging Trust Incorporated First Quarter 2011 Operating Results
April 25, 2011
Page 20

 
Use and Limitations of Non-GAAP Measures
 
Our management and Board of Directors use FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies.  We use Hotel EBITDA and Hotel EBITDA margin in evaluating hotel-level performance and the operating efficiency of our hotel managers.
 
The use of these non-GAAP financial measures has certain limitations.  These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies.  These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures.  Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance.  Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.
 
These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP.  They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP.  These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure.  Management strongly encourages investors to review our financial information in its entirety and not to rely on a single financial measure.
 
 

###