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"We continue to accomplish the goals we set at the beginning of the year: extend debt maturities; ensure adequate liquidity; and operate our hotels as efficiently as possible. We refinanced our senior corporate debt with new senior notes, thereby pushing the maturity to 2014 and substantially removing the Company's refinancing risk," said Richard A. Smith, FelCor's President and Chief Executive Officer. "I am pleased with our market share gains and flow-through, despite lower than expected RevPAR. We continue to lead other lodging companies in these three areas. Our high-quality and well-located portfolio improved market share by approximately two percent during the quarter and intense cost containment limited the flow-through of reduced revenue to the bottom line to only 51 percent, which was better than expected," continued Mr. Smith.
Summary:
-- Completed the sale of $636 million of senior notes due 2014 that allowed us to refinance our existing senior notes that mature in 2011.
-- RevPAR decreased 17.8 percent for the third quarter at our 85 consolidated hotels.
-- Market share increased approximately two percent for the third quarter at our 85 consolidated hotels.
-- RevPAR increased 53 percent in the third quarter at the San Francisco Marriott Union Square (following the completion of the redevelopment in June).
-- Hotel expenses declined 11.6 percent during the third quarter. Our strict expense controls limited the effect of reduced revenue on flow-through to Hotel EBITDA to 51 percent, compared to the prior year, which was better than our expectations. Hotel EBITDA margin decreased 490 basis points.
-- Adjusted FFO per share was $0.14 for the third quarter. Adjusted EBITDA was $45.3 million for the quarter. This met the low end of our expectations.
-- Net loss for the third quarter was $25.5 million.
Third Quarter Operating Results:
Revenue per available room ("RevPAR") for our 85 consolidated hotels decreased by 17.8 percent to $80.39, driven by decreases in both average daily rate ("ADR") (a 12.5 percent decrease to $116.51) and occupancy (a 6.0 percent decrease to 69.0 percent), compared to the same period in 2008.
"Once the economy begins to improve, we expect the lodging industry will lag behind the broader recovery. As such, there has not yet been a widespread improvement in demand trends and the shift of the customer mix continues to pressure rates. However, some markets are showing signs of improvement. Approximately 40 percent of our hotels grew occupancy in September compared to prior year, and that trend is accelerating each month," added Mr. Smith.
Adjusted Funds from Operations ("FFO") for the third quarter of 2009 was $9.0 million, or $0.14 per share, compared to $28.7 million, or $0.45 per share, for the same period in 2008.
Hotel EBITDA for the third quarter of 2009 decreased to $50.9 million, compared to $75.0 million in the same period in 2008. Hotel EBITDA margin was 22.2 percent, a 490 basis point decrease compared to the same period in 2008. Hotel operating expenses decreased 11.6 percent compared to prior year. The decline in expenses 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 food and beverage efficiencies. Prior to accounting for taxes, insurance and land leases, Hotel EBITDA margins declined only 397 basis points. Hotel EBITDA represents EBITDA generated by our hotels before corporate expenses and joint venture adjustments.
Adjusted EBITDA for the third quarter of 2009 was $45.3 million, compared to $65.1 million for the same period in 2008.
Net loss applicable to common stockholders for the third quarter of 2009 was $34.8 million, or $0.55 per share, compared to a net loss of $51.3 million, or $0.83 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:
At September 30, 2009, we had $1.6 billion of consolidated debt outstanding with a weighted average interest rate of 5.5 percent, and our cash and cash equivalents totaled $128 million.
In October, we completed the sale and issuance of $636 million in aggregate principal amount of senior notes. The new notes bear an annual interest rate of 10 percent and mature in 2014. The net proceeds of the offering were approximately $558 million after original issue discount and other fees and expenses related to the offering. The proceeds were used to fund our purchase of $427 million of our floating-rate notes and 81/2 percent notes, both of which mature in 2011, with the remainder available for general corporate purposes. There are $87 million of 81/2 percent notes that were not tendered and remain outstanding. We have called for redemption of the remaining $1 million of floating-rate notes that were not tendered.
We have received term sheets from the special servicer to extend the maturity dates on two loans, totaling $14 million, secured by the Embassy Suites - Boca Raton and Doubletree -- Wilmington that matured in June 2009. We are also in various stages of discussions regarding all of our mortgage loans that mature during 2010. Several of these loans have been transferred to the special servicers so that we may begin negotiations to refinance and/or extend their maturity.
"I am pleased with our progress to extend and refinance our maturing debt and ensure we have adequate liquidity. Most importantly, we refinanced our only corporate-level debt, the senior notes that were to mature in 2011, with new senior notes that mature in 2014. While the interest rate for the new notes is higher than the existing notes, we have substantially eliminated our debt maturity risk. We have also strengthened our liquidity position, which provides us the capacity and flexibility to address the additional interest expense on the new notes and the economic conditions that continue to affect travel demand. We have made good progress toward extending the mortgage debt that matures in 2010 and continue to work with lenders," said Andrew J. Welch, FelCor's Executive Vice President and Chief Financial Officer.
Capital Expenditures and Development:
For the quarter and nine months ended September 30, 2009, we spent $17.2 million and $65.4 million, respectively, on capital expenditures at our hotels (including our pro rata share of joint ventures). Included in the capital expenditures for the nine months is $34 million to complete our renovation and redevelopment projects.
In June, we completed the final phase of the comprehensive redevelopment at the San Francisco Marriott Union Square. Third quarter RevPAR increased 53 percent at this hotel (which operated as Hotel 480 prior to April), compared to the prior year, and its market share increased by 98 percent, exceeding expectations. The market share index for this hotel was 107 percent in the quarter compared to 80 percent for calendar year 2007 (before its renovation and rebranding).
Outlook:
We are revising our 2009 outlook in light of the additional interest expense associated with our recent notes offering. In addition, we assume all of the untendered 81/2 percent notes ($87 million) remain outstanding for the duration of the year, and we hold significant excess cash on our balance sheet. We are evaluating our options with regard to the future use of our excess cash.
We also are revising our 2009 outlook to reflect updated revenue expectations, which include actual RevPAR results for October. Occupancy declined only 2.4 percent and RevPAR declined approximately 12.6 percent for October at our 85 consolidated hotels. The volatile economic conditions continue to hinder our ability to predict demand patterns and its effect on RevPAR. We continue to be aggressive in mixing the customer segments to optimize revenue and work with our operators to achieve the most efficient cost structure to correspond with demand trends. While the occupancy decline in all segments has continued to moderate throughout the year, the premium corporate and group segments remain weak. As a result, we expect fewer room nights for the premium corporate and group segments during the fourth quarter, compared to our previous expectations. This shift in the customer mix will result in lower ADR and food & beverage revenue. However, due to strict expense controls, we still expect flow-through to remain strong, relative to current market conditions.
We will continue to benefit from our high-quality portfolio, the renovations we completed in 2008 and the redevelopment of the San Francisco Marriott Union Square. As a result, we expect our hotels will continue to gain market share from their competitive sets and RevPAR at our portfolio to outperform our peer group and the upper-upscale segment.
Assuming full-year 2009 RevPAR for our 85 consolidated hotels decreases between 18 and 18.5 percent, we anticipate:
-- Adjusted EBITDA to be between $174 million and $176 million;
-- Adjusted FFO per share to be between $0.31 and $0.34;
-- Net loss to be between $113 million and $111 million; and
-- Interest expense to be approximately $110 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(R), Doubletree (R), Hilton(R), Marriott(R), Renaissance(R), Sheraton(R), Westin(R) and Holiday Inn(R). Additional information can be found on the Company's Web site at www.felcor.com.
We invite you to listen to our third quarter earnings Conference Call on Wednesday, November 4, 2009, 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" 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 nine month periods ended September 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 Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenues:
Hotel operating revenue:
Room $ 184,103 $ 223,968 $ 557,491 $ 693,789
Food and beverage 30,370 36,357 103,786 131,875
Other operating departments 14,456 16,008 43,234 47,453
Other revenue 1,280 1,396 2,554 2,655
Total revenues 230,209 277,729 707,065 875,772
Expenses:
Hotel departmental expenses:
Room 50,202 55,563 145,741 167,085
Food and beverage 26,728 30,747 84,133 102,289
Other operating departments 6,765 7,192 19,257 21,391
Other property related costs 66,492 76,947 199,711 230,646
Management and franchise fees 11,361 13,573 34,278 45,448
Taxes, insurance and lease expense 25,355 29,718 75,411 87,884
Corporate expenses 4,471 5,388 15,829 17,079
Depreciation and amortization 37,982 36,069 112,024 104,909
Impairment loss 2,080 36,692 3,448 53,823
Hurricane loss - 1,669 - 1,669
Other expenses 1,031 1,046 3,528 2,879
Total operating expenses 232,467 294,604 693,360 835,102
Operating income (loss) (2,258 ) (16,875 ) 13,705 40,670
Interest expense, net (24,427 ) (24,114 ) (68,501 ) (74,886 )
Charges related to debt extinguishment - - (594 ) -
Loss before equity in income (loss) from unconsolidated entities (26,685 ) (40,989 ) (55,390 ) (34,216 )
Equity in income (loss) from unconsolidated entities 488 (2,773 ) (3,197 ) (1,064 )
Gain on sale of assets 723 - 723 -
Gain on involuntary conversion - - - 3,095
Loss from continuing operations (25,474 ) (43,762 ) (57,864 ) (32,185 )
Discontinued operations - 1,193 - 1,180
Net loss (25,474 ) (42,569 ) (57,864 ) (31,005 )
Net loss (income) attributable to noncontrolling 174 (165 ) 66 (1,126 )
interests in other partnerships
Net loss attributable to redeemable noncontrolling 160 1,094 399 1,280
interests in FelCor LP
Net loss attributable to FelCor (25,140 ) (41,640 ) (57,399 ) (30,851 )
Preferred dividends (9,678 ) (9,678 ) (29,034 ) (29,034 )
Net loss attributable to FelCor common stockholders $ (34,818 ) $ (51,318 ) $ (86,433 ) $ (59,885 )
Basic and diluted per common share data:
Loss from continuing operations $ (0.55 ) $ (0.85 ) $ (1.37 ) $ (1.00 )
Net loss $ (0.55 ) $ (0.83 ) $ (1.37 ) $ (0.99 )
Basic and diluted weighted average common shares outstanding 63,086 61,828 63,121 61,827
Cash dividends declared on common stock $ - $ 0.15 $ - $ 0.85
Consolidated Balance Sheets
(unaudited, in thousands)
September 30, December 31,
2009 2008
ASSETS
Investment in hotels, net of accumulated depreciation of $921,197 at
September 30, 2009 and $816,271 at December 31, 2008 $ 2,228,839 $ 2,279,026
Investment in unconsolidated entities 86,690 94,506
Cash and cash equivalents 128,063 50,187
Restricted cash 19,774 13,213
Accounts receivable, net of allowance for doubtful accounts of $274
at
September 30, 2009 and $521 at December 31, 2008 30,894 35,240
Deferred expenses, net of accumulated amortization of $12,676 at
September 30, 2009 and $13,087 at December 31, 2008 9,957 5,556
Other assets 36,805 34,541
Total assets $ 2,541,022 $ 2,512,269
LIABILITIES AND EQUITY
Debt, net of discount of $1,140 at September 30, 2009 and $1,544 at
December 31, 2008 $ 1,632,910 $ 1,551,686
Preferred distributions payable 27,902 8,545
Accrued expenses and other liabilities 137,419 132,604
Total liabilities 1,798,231 1,692,835
Commitments and contingencies
Redeemable noncontrolling interests in FelCor LP at redemption
value, 296
units issued and outstanding at September 30, 2009 and December 31, 1,340 545
2008
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 September 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 September 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
September 30, 2009 and December 31, 2008 694 694
Additional paid-in capital 2,037,084 2,045,482
Accumulated other comprehensive income 22,471 15,347
Accumulated deficit (1,732,420 ) (1,645,947 )
Less: Common stock in treasury, at cost, of 4,725 shares at
September 30, 2009 and 5,189 shares at December 31, 2008 (88,366 ) (99,245 )
Total FelCor stockholders' equity 718,237 795,105
Noncontrolling interests in other partnerships 23,214 23,784
Total equity 741,451 818,889
Total liabilities and equity $ 2,541,022 $ 2,512,269
Capital Expenditures
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Improvements and additions to consolidated
hotels $ 16,926 $ 35,274 $ 62,465 $ 108,899
Consolidated joint venture partners' pro rata share
of additions to hotels (381 ) (787 ) (758 ) (3,005 )
Pro rata share of unconsolidated additions to hotels 693 2,592 3,646 13,898
Total additions to hotels(a) $ 17,238 $ 37,079 $ 65,353 $ 119,792
(a) Includes capitalized interest, property taxes, ground leases and certain employee costs.
Supplemental Financial Data
(in thousands, except per share information)
September 30, December 31,
Total Enterprise Value 2009 2008
Common shares outstanding 64,687 64,224
Units outstanding 296 296
Combined shares and units outstanding 64,983 64,520
Common stock price $ 4.53 $ 1.84
Equity capitalization $ 294,373 $ 118,717
Series A preferred stock 309,362 309,362
Series C preferred stock 169,412 169,412
Consolidated debt 1,632,910 1,551,686
Noncontrolling interests of consolidated debt (3,999 ) (4,078 )
Pro rata share of unconsolidated debt 108,103 112,220
Cash and cash equivalents (128,063 ) (50,187 )
Total enterprise value (TEV) $ 2,382,098 $ 2,207,132
Debt Summary
(dollars in thousands)
Interest Rate at Maturity Consolidated
Encumbered Hotels September 30, 2009 Date Debt
Senior term notes(a) none 9.00%(b) June 2011 $299,602
Senior term notes(a) none L +1.875 December 2011 215,000
Total senior debt 6.29(c) 514,602
CMBS debt 12 hotels(d) L +0.93(e) November 2011(f) 250,000
Mortgage debt 9 hotels(g) L +3.50(h) August 2011(i) 200,800
Mortgage debt(j) Esmeralda-REN, L +1.55(k) May 2012(l) 176,483
Vinoy-REN
CMBS debt(j) 8 hotels(m) 8.70 May 2010 159,205
Mortgage debt 7 hotels(n) 9.02 April 2014 118,415
Mortgage debt 6 hotels(o) 8.73 May 2010 113,628
CMBS debt(j) 5 hotels(p) 6.66 June-August 2014 71,331
CMBS debt(j) Boca Raton-ES, 6.15 June 2009(q) 14,277
Wilmington-DT
CMBS debt Indianapolis North-ES 5.81 July 2016 11,843
Capital lease and other St. Paul-ES and other 9.58 various 2,326
Total mortgage debt 53 hotels 5.20(c) 1,118,308
Total 5.54%(c) $1,632,910
(a) In October 2009, we issued $636 million in aggregate principal amount of our 10% senior notes due 2014. The new notes are secured by mortgages and related security interests on up to 14 hotels. A portion of the net proceeds from the sale of these notes was used to repurchase $214 million of our floating-rate notes and $213 million of our 81/2% notes.
(b) As a result of a rating down-grade in February 2009, the interest rate on our 81/2% notes due 2011 increased by 50 basis points to 9.0%.
(c) Interest rates are calculated based on the weighted average debt outstanding at September 30, 2009.
(d) 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.
(e) We have purchased an interest rate cap that caps LIBOR at 7.8% and expires in November 2010 for this notional amount.
(f) 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.
(g) 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.
(h) LIBOR for this loan is subject to a 2% floor.
(i) This loan can be extended for as many as two years, subject to satisfying certain conditions that we expect to satisfy.
(j) The hotels under this debt are subject to separate loan agreements and are not cross collateralized.
(k) We have purchased interest rate caps that cap LIBOR at 6.5% and expire in May 2010 for aggregate notional amounts of $177 million.
(l) 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.
(m) 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.
(n) 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.
(o) 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.
(p) The hotels that secure this debt are: Atlanta Airport-ES, Austin-DTGS, BWI Airport-ES, Orlando Airport-HI, and Phoenix Biltmore-ES.
(q) We have received term sheets from the special servicer to extend the maturity of these loans for two years, which we are currently evaluating.
Debt Summary - (continued) Weighted average interest 5.54% Fixed interest rate debt to total debt 48.4% Mortgage debt to total assets 44.0%
Hotel Portfolio Composition
The following tables set forth, as of September 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 Nine Months Ended
September 30, September 30,
2009 2008 %Variance 2009 2008 %Variance
Embassy Suites Hotels 69.8 74.5 (6.4 ) 68.8 75.2 (8.5 )
Holiday Inn 70.4 76.3 (7.8 ) 67.4 74.8 (9.8 )
Sheraton and Westin 63.6 68.1 (6.7 ) 61.0 68.1 (10.5 )
Doubletree 67.5 73.5 (8.2 ) 66.2 76.3 (13.3 )
Renaissance and Marriott 66.9 62.2 7.5 61.7 67.0 (7.9 )
Hilton 77.1 71.5 7.8 65.1 64.8 0.5
Total hotels 69.0 73.4 (6.0 ) 66.9 73.6 (9.2 )
ADR ($)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 %Variance 2009 2008 %Variance
Embassy Suites Hotels 123.51 142.26 (13.2 ) 129.79 145.69 (10.9 )
Holiday Inn 107.10 122.98 (12.9 ) 106.93 121.64 (12.1 )
Sheraton and Westin 100.86 117.54 (14.2 ) 109.39 125.19 (12.6 )
Doubletree 114.00 133.42 (14.5 ) 125.87 144.39 (12.8 )
Renaissance and Marriott 130.99 131.20 (0.2 ) 164.91 178.25 (7.5 )
Hilton 128.93 141.20 (8.7 ) 118.12 131.33 (10.1 )
Total hotels 116.51 133.21 (12.5 ) 122.65 138.14 (11.2 )
RevPAR ($)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 %Variance 2009 2008 %Variance
Embassy Suites Hotels 86.16 105.98 (18.7 ) 89.28 109.58 (18.5 )
Holiday Inn 75.36 93.86 (19.7 ) 72.11 90.94 (20.7 )
Sheraton and Westin 64.11 80.08 (19.9 ) 66.70 85.28 (21.8 )
Doubletree 76.95 98.12 (21.6 ) 83.32 110.21 (24.4 )
Renaissance and Marriott 87.58 81.60 7.3 101.79 119.44 (14.8 )
Hilton 99.34 100.95 (1.6 ) 76.89 85.04 (9.6 )
Total hotels 80.39 97.80 (17.8 ) 82.00 101.69 (19.4 )
Detailed Operating Statistics for FelCor's Top Markets
(85 consolidated hotels)
Occupancy (%)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 % Variance 2009 2008 %Variance
South Florida 67.2 70.9 (5.3 ) 73.3 78.7 (6.9 )
San Francisco area 81.6 83.5 (2.3 ) 69.5 78.1 (11.0 )
Atlanta 72.9 74.0 (1.6 ) 70.8 75.4 (6.1 )
Los Angeles area 75.7 81.3 (6.8 ) 72.9 77.7 (6.2 )
Orlando 65.4 72.6 (10.0 ) 68.1 78.4 (13.2 )
Dallas 58.2 67.5 (13.7 ) 59.5 68.6 (13.4 )
Philadelphia 72.5 79.6 (8.9 ) 65.6 74.7 (12.2 )
Northern New Jersey 64.7 75.6 (14.4 ) 62.4 72.5 (14.0 )
Minneapolis 77.8 78.6 (0.9 ) 68.2 73.9 (7.7 )
San Diego 76.9 80.4 (4.3 ) 71.7 81.3 (11.8 )
Phoenix 45.8 55.3 (17.1 ) 54.1 66.0 (18.0 )
San Antonio 74.7 85.9 (13.0 ) 72.8 82.1 (11.3 )
Chicago 72.7 76.4 (4.8 ) 65.0 74.4 (12.6 )
Boston 84.4 85.0 (0.8 ) 78.4 79.8 (1.8 )
Washington, D.C. 67.5 62.1 8.6 59.1 58.9 0.4
ADR ($)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 % Variance 2009 2008 %Variance
South Florida 100.94 112.91 (10.6 ) 132.67 152.82 (13.2 )
San Francisco area 132.57 153.86 (13.8 ) 127.32 144.74 (12.0 )
Atlanta 102.90 119.91 (14.2 ) 106.24 122.57 (13.3 )
Los Angeles area 141.69 167.55 (15.4 ) 138.03 161.27 (14.4 )
Orlando 81.21 91.33 (11.1 ) 97.31 107.41 (9.4 )
Dallas 108.58 119.72 (9.3 ) 116.83 124.75 (6.4 )
Philadelphia 127.29 148.20 (14.1 ) 133.86 148.84 (10.1 )
Northern New Jersey 132.09 163.52 (19.2 ) 142.35 163.89 (13.1 )
Minneapolis 128.35 154.63 (17.0 ) 129.03 147.34 (12.4 )
San Diego 123.11 160.07 (23.1 ) 127.37 160.83 (20.8 )
Phoenix 95.82 114.52 (16.3 ) 126.23 148.71 (15.1 )
San Antonio 102.64 112.59 (8.8 ) 104.75 114.04 (8.1 )
Chicago 107.30 129.37 (17.1 ) 108.66 127.88 (15.0 )
Boston 138.86 161.05 (13.8 ) 134.62 156.12 (13.8 )
Washington, D.C. 114.73 141.53 (18.9 ) 132.89 155.11 (14.3 )
RevPAR ($)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 % Variance 2009 2008 %Variance
South Florida 67.82 80.07 (15.3 ) 97.21 120.33 (19.2 )
San Francisco area 108.24 128.52 (15.8 ) 88.52 113.02 (21.7 )
Atlanta 74.98 88.77 (15.5 ) 75.18 92.41 (18.6 )
Los Angeles area 107.26 136.15 (21.2 ) 100.57 125.24 (19.7 )
Orlando 53.12 66.34 (19.9 ) 66.25 84.25 (21.4 )
Dallas 63.25 80.79 (21.7 ) 69.48 85.64 (18.9 )
Philadelphia 92.26 117.90 (21.7 ) 87.76 111.19 (21.1 )
Northern New Jersey 85.48 123.62 (30.9 ) 88.77 118.88 (25.3 )
Minneapolis 99.92 121.49 (17.8 ) 87.96 108.87 (19.2 )
San Diego 94.72 128.66 (26.4 ) 91.36 130.75 (30.1 )
Phoenix 43.93 63.31 (30.6 ) 68.31 98.09 (30.4 )
San Antonio 76.70 96.71 (20.7 ) 76.22 93.58 (18.6 )
Chicago 78.01 98.81 (21.1 ) 70.61 95.10 (25.7 )
Boston 117.14 136.92 (14.4 ) 105.51 124.59 (15.3 )
Washington, D.C. 77.41 87.95 (12.0 ) 78.60 91.34 (13.9 )
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 Loss to FFO
(in thousands, except per share data)
Three Months Ended September 30,
2009 2008
Dollars Shares Per Share Amount Dollars Shares Per Share Amount
Net loss $ (25,474 ) $ (42,569 )
Noncontrolling interests 334 929
Preferred dividends(a) (9,678 ) (9,678 )
Net loss attributable to FelCor
common stockholders (34,818 ) (51,318 )
Less: Dividends declared on unvested
restricted stock compensation - (98 )
Numerator for basic and diluted loss
attributable to common stockholders (34,818 ) 63,086 $ (0.55 ) (51,416 ) 61,828 $ (0.83 )
Depreciation and amortization 37,982 - 0.60 36,069 - 0.59
Depreciation, unconsolidated entities 3,610 - 0.06 3,998 - 0.06
Gain on sale of hotels - - - (1,193 ) - (0.02 )
Noncontrolling interests in FelCor LP (160 ) 296 (0.01 ) (1,094 ) 1,346 (0.01 )
Conversion of options and unvested
restricted stock - 445 - 98 - -
FFO 6,614 63,827 0.10 (13,538 ) 63,174 (0.21 )
Impairment loss 2,080 - 0.04 36,692 - 0.58
Impairment loss, unconsolidated subsidiaries - - - 3,750 - 0.06
Hurricane loss(b) - - - 1,669 - 0.02
Hurricane loss, unconsolidated subsidiaries - - - 50 - -
Conversion costs(c) 117 - - 118 - -
Severance costs, net of noncontrolling
interests 41 - - - - -
Lease termination costs 117 - - - - -
Conversion of options and unvested restricted stock - - - - 121 -
Adjusted FFO $ 8,969 63,827 $ 0.14 $ 28,741 63,295 $ 0.45
(a) We suspended our preferred dividends in March 2009 and unpaid preferred dividends continue to accrue until paid.
(b) Represents hurricane-related expenses.
(c) 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)
Nine Months Ended September 30,
2009 2008
Dollars Shares Per Share Amount Dollars Shares Per Share Amount
Net loss $ (57,864 ) $ (31,005 )
Noncontrolling interests 465 154
Preferred dividends(a) (29,034 ) (29,034 )
Net loss attributable to FelCor
common stockholders (86,433 ) (59,885 )
Less: Dividends declared on unvested
restricted stock compensation - (1,041 )
Numerator for basic and diluted loss
attributable to common stockholders (86,433 ) 63,121 $ (1.37 ) (60,926 ) 61,827 $ (0.99 )
Depreciation and amortization 112,024 - 1.77 104,909 - 1.70
Depreciation, unconsolidated entities 10,898 - 0.17 11,128 - 0.18
Gain on involuntary conversion - - - (3,095 ) - (0.05 )
Gain on sale of hotels - - - (1,193 ) - (0.02 )
Noncontrolling interests in FelCor LP (399 ) 296 - (1,280 ) 1,351 (0.04 )
Conversion of options and unvested
restricted stock - 284 - 1,041 114 0.02
FFO 36,090 63,701 0.57 50,584 63,292 0.80
Impairment loss 3,448 - 0.05 53,823 - 0.85
Impairment loss, unconsolidated subsidiaries 2,068 - 0.03 3,750 - 0.06
Charges related to debt extinguishment 594 - 0.01 - - -
Hurricane loss(b) - - - 1,669 - 0.03
Hurricane loss, unconsolidated subsidiaries - - - 50 - -
Conversion costs(c) 447 - 0.01 481 - -
Severance costs, net of noncontrolling
interests 550 - 0.01 - - -
Lease termination costs 469 - 0.01 - - -
Adjusted FFO $ 43,666 63,701 $ 0.69 $ 110,357 63,292 $ 1.74
(a) We suspended our preferred dividends in March 2009 and unpaid preferred dividends continue to accrue until paid.
(b) Represents hurricane-related expenses.
(c) Costs related to the conversion of our San Francisco Union Square hotel to a Marriott.
Reconciliation of Net Loss to EBITDA
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Net loss $ (25,474 ) $ (42,569 ) $ (57,864 ) $ (31,005 )
Depreciation and amortization 37,982 36,069 112,024 104,909
Depreciation, unconsolidated entities 3,610 3,998 10,898 11,128
Interest expense 24,656 24,368 69,074 76,112
Interest expense, unconsolidated entities 837 1,282 2,807 4,205
Amortization of stock compensation 1,122 1,072 3,924 3,795
Noncontrolling interests in other partnerships 174 (165 ) 66 (1,126 )
EBITDA 42,907 24,055 140,929 168,018
Gain on sale of hotels - (1,193 ) - (1,193 )
Gain on involuntary conversion - - - (3,095 )
Charges related to debt extinguishment - - 594 -
Impairment loss 2,080 36,692 3,448 53,823
Impairment loss on unconsolidated hotels - 3,750 2,068 3,750
Hurricane loss(a) - 1,669 - 1,669
Hurricane loss, unconsolidated entities - 50 - 50
Conversion costs(b) 117 118 447 481
Severance costs, net of noncontrolling interests 41 - 550 -
Lease termination costs 117 - 469 -
Adjusted EBITDA $ 45,262 $ 65,141 $ 148,505 $ 223,503
(a) Represents hurricane-related expenses.
(b) 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 Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Adjusted EBITDA $ 45,262 $ 65,141 $ 148,505 $ 223,503
Other revenue (1,280 ) (1,396 ) (2,554 ) (2,655 )
Equity in income from unconsolidated subsidiaries
(excluding interest, depreciation and impairment
expense) (5,558 ) (6,926 ) (14,519 ) (19,776 )
Noncontrolling interests in other partnerships
(excluding interest, depreciation and severance
expense) 454 784 1,899 2,834
Consolidated hotel lease expense 10,892 14,511 31,805 42,444
Unconsolidated taxes, insurance and lease expense (2,023 ) (2,132 ) (6,041 ) (6,328 )
Interest income (229 ) (254 ) (573 ) (1,227 )
Other expenses (excluding conversion costs, severance
costs and lease termination costs) 751 928 2,040 2,398
Corporate expenses (excluding amortization expense
of stock compensation) 3,349 4,316 11,905 13,284
Gain on sale of assets (723 ) - (723 ) -
Adjusted EBITDA from discontinued operations - - - 13
Hotel EBITDA $ 50,895 $ 74,972 $ 171,744 $ 254,490
Reconciliation of Net Loss to Hotel EBITDA
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Net loss $ (25,474 ) $ (42,569 ) $ (57,864 ) $ (31,005 )
Discontinued operations - (1,193 ) - (1,180 )
Equity in loss (income) from unconsolidated entities (488 ) 2,773 3,197 1,064
Consolidated hotel lease expense 10,892 14,511 31,805 42,444
Unconsolidated taxes, insurance and lease expense (2,023 ) (2,132 ) (6,041 ) (6,328 )
Interest expense, net 24,427 24,114 68,501 74,886
Charges related to debt extinguishment - - 594 -
Corporate expenses 4,471 5,388 15,829 17,079
Depreciation and amortization 37,982 36,069 112,024 104,909
Impairment loss 2,080 36,692 3,448 53,823
Hurricane loss - 1,669 - 1,669
Gain on sale of assets (723 ) - (723 ) -
Gain on involuntary conversion - - - (3,095 )
Other expenses 1,031 1,046 3,528 2,879
Other revenue (1,280 ) (1,396 ) (2,554 ) (2,655 )
Hotel EBITDA $ 50,895 $ 74,972 $ 171,744 $ 254,490
Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Total revenues $ 230,209 $ 277,729 $ 707,065 $ 875,772
Other revenue (1,280 ) (1,396 ) (2,554 ) (2,655 )
Hotel operating revenue 228,929 276,333 704,511 873,117
Hotel operating expenses (178,034 ) (201,361 ) (532,767 ) (618,627 )
Hotel EBITDA $ 50,895 $ 74,972 $ 171,744 $ 254,490
Hotel EBITDA margin(a) 22.2 % 27.1 % 24.4 % 29.1 %
(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 Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Total operating expenses $ 232,467 $ 294,604 $ 693,360 $ 835,102
Unconsolidated taxes, insurance and lease expense 2,023 2,132 6,041 6,328
Consolidated hotel lease expense (10,892 ) (14,511 ) (31,805 ) (42,444 )
Corporate expenses (4,471 ) (5,388 ) (15,829 ) (17,079 )
Depreciation and amortization (37,982 ) (36,069 ) (112,024 ) (104,909 )
Impairment loss (2,080 ) (36,692 ) (3,448 ) (53,823 )
Hurricane loss - (1,669 ) - (1,669 )
Other expenses (1,031 ) (1,046 ) (3,528 ) (2,879 )
Hotel operating expenses $ 178,034 $ 201,361 $ 532,767 $ 618,627
Reconciliation of Ratio of Operating Income (Loss) to Total
Revenues to Hotel EBITDA Margin
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Ratio of operating income (loss) to total revenues (1.0 )% (6.1 )% 1.9 % 4.6 %
Other revenue (0.6 ) (0.5 ) (0.4 ) (0.3 )
Unconsolidated taxes, insurance and lease expense (0.9 ) (0.7 ) (0.8 ) (0.7 )
Consolidated hotel lease expense 4.8 5.2 4.5 4.9
Other expenses 0.4 0.4 0.5 0.3
Corporate expenses 2.0 2.0 2.3 2.0
Depreciation and amortization 16.6 13.0 15.9 12.0
Impairment loss 0.9 13.2 0.5 6.1
Hurricane loss - 0.6 - 0.2
Hotel EBITDA margin 22.2 % 27.1 % 24.4 % 29.1 %
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 2009 Guidance
Low Guidance High Guidance
Dollars Per Share Amount Dollars Per Share Amount
Net loss attributable to FelCor $ (113 ) $ (111 )
Preferred dividends (39 ) (39 )
Net loss applicable to FelCor common stockholders (152 ) $ (2.42 ) (150 ) $ (2.39 )
Depreciation(b) 164 164
Noncontrolling interests in FelCor LP (1 ) (1 )
Severance costs 1 1
Charges related to debt extinguishment 2 2
Impairment loss(b) 6 6
Adjusted FFO $ 20 $ 0.31(a) $ 22 $ 0.34(a)
Net loss attributable to FelCor $ (113 ) $ (111 )
Depreciation(b) 164 164
Interest expense(b) 110 110
Amortization expense 5 5
Noncontrolling interests in FelCor LP (1 ) (1 )
Severance costs 1 1
Charges related to debt extinguishment 2 2
Impairment loss(b) 6 6
Adjusted EBITDA $ 174 $ 176
(a) Weighted average shares and units are 63.6 million.
(b) Includes pro rata portion of unconsolidated entities.
Substantially all of our non-current assets consist of real estate. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to be helpful in evaluating a real estate company's operations. These supplemental measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin, are not measures of operating performance under GAAP. However, we consider these non-GAAP measures to be supplemental measures of a hotel REIT's performance and should be considered along with, but not as an alternative to, net income (loss) attributable to FelCor as a measure of our operating performance.
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