EX-99.1 2 form8k3q2010exh991.htm THIRD QUARTER 2010 EARNINGS RELEASE 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 THIRD QUARTER RESULTS
• RevPAR Growth Accelerating
• Portfolio Repositioning Continues
 
IRVING, Texas…November 3, 2010 - FelCor Lodging Trust Incorporated (NYSE: FCH) today reported operating results for the third quarter ended September 30, 2010.
 
Summary:
 
•    
Same-store revenue per available room ("RevPAR") at 82 consolidated hotels increased 6.3% for the quarter and 7.9% for September.
 
•    
Adjusted EBITDA was $48.2 million and Adjusted FFO per share was $0.00 for the quarter, which was at the high-end of our expectations.
 
•    
Hotel EBITDA margin increased 67 basis points for the quarter, driven by a 2.1% increase in average daily rate, or ADR.
 
•    
Net loss was $89.3 million for the quarter.
 
•    
Acquired the 383-room Fairmont Copley Plaza for $98.5 million, an iconic hotel located in the heart of Boston's Back Bay.
 
•    
Began marketing the first group of hotels for disposition.
 
Third Quarter Operating Results:
 
Same-store RevPAR for 82 consolidated hotels was $87.83 for the quarter, a 6.3% increase compared to the same period in 2009 (excluding 14 hotels we are marketing for sale, RevPAR for our portfolio increased 6.7% during the quarter compared to the same period in 2009). RevPAR at these 82 hotels increased 7.9% during September from a 5.1% occupancy increase and a 2.7% ADR increase, compared to the same period in 2009. The RevPAR increase for the quarter was driven by a 4.2% occupancy increase to 72.7% and a 2.1% ADR increase to $120.85, compared to the same period in 2009. RevPAR increased at 61 of our hotels and in every major market, except for Orlando.
 
“The lodging industry fundamentals continue to strengthen, and we are pleased with our operating results for the quarter. While the booking window remains relatively short, group booking pace continues to improve each month, occupancy is improving and RevPAR growth is accelerating. We are taking advantage of the positive imbalance between demand and supply to remix our customer base and drive daily rates. During the quarter, ADR for our portfolio increased 2.1%, driven by a 14% increase of premium transient room nights," said Richard A. Smith, FelCor's President and Chief Executive Officer.     

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 2

"We are focused on continuing to improve our overall portfolio quality, future growth rates and barriers-to-entry protection in order to increase shareholder value and return on invested capital. During the quarter, we acquired the Fairmont Copley Plaza. We have been very pleased with the performance of the hotel: RevPAR increased 14% for the hotel in September. In addition, we launched the second phase of asset sales bringing the first group of 14 hotels to market,” added Mr. Smith.
 
Third quarter Hotel EBITDA was $55.5 million, compared to $50.7 million for the same period in 2009, a 9.4% increase. Hotel EBITDA represents EBITDA generated by 82 same-store consolidated hotels prior to corporate expenses and joint venture adjustments. Hotel EBITDA margin was 23.5%, a 67 basis point increase compared to the same period in 2009. Hotel EBITDA margins were better than expectations and benefited from a 2.1% increase in ADR, but were impacted by hotel-level expenses that did not occur last year, such as salary and bonus increases. Excluding the 14 hotels that we are marketing for sale, Hotel EBITDA margin increased 102 basis points compared to 2009.
 
Adjusted EBITDA was $48.2 million, compared to $45.3 million for the same period in 2009, a 6.4% increase, and was at the high-end of our expectations.
 
Adjusted funds from operations (“FFO”) was a loss of $39,000 or $0.00 per share, compared to $9.0 million, or $0.14 per share, for the same period in 2009.
 
Net loss attributable to common stockholders was $98.5 million, or $1.04 per share, compared to $34.8 million, or $0.55 per share, for the same period in 2009. Net loss includes a $65.8 million non-cash impairment charge reflecting the reduced book values of eight of the 14 non-strategic hotels (three hotels comprise the majority of the impairment), as well as an $8.3 million gain on extinguishment of debt related to the disposition of one hotel. Prior year net loss included a $2.1 million impairment charge related to the sale of two hotels.
 
EBITDA, 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 September 30, 2010, we had $1.6 billion of consolidated debt outstanding, with a weighted average interest rate of 7.8%, and $192.5 million of cash and cash equivalents.
 
In July, we repaid two secured loans, totaling $5.6 million bearing an average interest rate of 8.3%, that were scheduled to mature next year.
 
On September 30, the Embassy Suites Hotel in Piscataway, New Jersey was transferred to the lender in full satisfaction of the $18 million loan secured by that hotel. We recorded an $8.2 million gain on the extinguishment of that debt (which reflects the principal amount of that loan in excess of the value of that hotel as reflected on our balance sheet). The hotel generated $750,000 of EBITDA during the trailing twelve months ended September 2010. We also continue to work with the special servicer to transfer the Embassy Suites Chicago - North Shore/Deerfield to the lender in full satisfaction of the $14 million loan secured by that hotel, which matured in May 2010.

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 3

“We successfully refinanced all of our near-term debt and eliminated all of our maturity issues. We also have reduced our leverage this year and now have 10 unencumbered hotels. As a result of the recent equity offering, debt repayments and improving EBITDA, we now expect to be cash flow positive for the year after capital expenditures. Furthermore, we expect cash flow growth to accelerate significantly with the recovery and expect to reduce our leverage significantly through improved operations and using proceeds from future asset sales to repay debt. We will continue to look for additional opportunities to reduce our average interest rate, increase our flexibility and ensure adequate long-term liquidity on an economically sound basis,” said Andrew J. Welch, FelCor's Executive Vice President and Chief Financial Officer.
 
Portfolio Management:
 
For the quarter and nine months ended September 30, 2010, we spent $10 million and
$29 million, respectively, on capital improvements at our hotels (including our pro rata share of joint venture expenditures).
 
On August 17, we acquired the Fairmont Copley Plaza in Boston for $98.5 million from an affiliate of Fairmont Hotels & Resorts ("Fairmont"). This world-class icon 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. For the quarter, RevPAR for this hotel increased 8.6% and hotel EBITDA increased 33%, compared to the same period in 2009.
 
As part of our long-term strategic plan, we have begun a second phase of asset sales. During the third quarter, we began marketing the first 14 hotels, of which 11 are suburban or airport locations, and seven are located in Texas, Florida and Georgia. Additional hotels will be brought to market based on various factors and we will sell hotels only when we receive adequate pricing.
 
Outlook:
 
The lodging industry recovery is taking hold and RevPAR growth is accelerating, reflecting improved corporate transient and group demand and moderating supply growth. We expect this trend to continue, and also for our portfolio to maintain its superior market share as a result of our high-quality, diversified and renovated portfolio. Additionally, our hotels are affected less by new supply growth because the average number of rooms under construction in our markets is lower than the industry as a whole.
 
For 2010, we anticipate:
 
•
RevPAR to increase between 3.75% and 4.5%;
 
•
Adjusted EBITDA to be between $182 million and $185 million;
 
•
Adjusted FFO per share to be between $(0.17) and $(0.13);
 
•
Net loss attributable to FelCor to be between $163 million and $160 million; and
 
•
Interest expense to be approximately $144 million.
 
•
Capital expenditures to be approximately $42 million.
 
•
Weighted average shares and units to be 80.9 million.

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 4

 
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 diversified, high-quality portfolio is flagged under leading brands such as - Hilton®, Doubletree ®, Embassy Suites Hotels®, Marriott®, Renaissance®, Sheraton®, Westin®, Fairmont® 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 third quarter earnings Conference Call on Wednesday, November 3, 2010, at 11:00 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 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 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 Third Quarter 2010 Operating Results
November 3, 2010
Page 5

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 nine month periods ended September 30, 2010.
 
 
 
TABLE OF CONTENTS
 
PAGE
Consolidated Statements of Operations(a)
 
6
 
Consolidated Balance Sheets(a)
 
7
 
Capital Expenditures
 
8
 
Supplemental Financial Data
 
8
 
Consolidated 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.
 
 
 

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 6

Consolidated Statements of Operations
(in thousands, except per share data)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2010
 
2009
 
2010
 
2009
Revenues:
 
 
 
 
 
 
 
Hotel operating revenue:
 
 
 
 
 
 
 
Room
$
193,641
 
 
$
178,795
 
 
$
564,086
 
 
$
539,949
 
Food and beverage
33,076
 
 
29,207
 
 
106,796
 
 
99,583
 
Other operating departments
15,227
 
 
14,258
 
 
43,055
 
 
42,484
 
Other revenue
1,421
 
 
1,280
 
 
2,793
 
 
2,554
 
Total revenues
243,365
 
 
223,540
 
 
716,730
 
 
684,570
 
Expenses:
 
 
 
 
 
 
 
Hotel departmental expenses:
 
 
 
 
 
 
 
Room
52,636
 
 
48,473
 
 
150,793
 
 
140,671
 
Food and beverage
27,830
 
 
25,657
 
 
84,623
 
 
80,647
 
Other operating departments
6,535
 
 
6,661
 
 
19,053
 
 
18,957
 
Other property related costs
69,894
 
 
63,778
 
 
201,701
 
 
191,961
 
Management and franchise fees
11,545
 
 
10,975
 
 
33,796
 
 
32,990
 
Taxes, insurance and lease expense
26,511
 
 
24,872
 
 
77,913
 
 
74,199
 
Corporate expenses
6,564
 
 
4,471
 
 
22,921
 
 
15,829
 
Depreciation and amortization
36,564
 
 
36,866
 
 
110,454
 
 
108,668
 
Impairment loss
65,849
 
 
—
 
 
79,245
 
 
—
 
Other expenses
1,331
 
 
1,031
 
 
2,693
 
 
3,486
 
Total operating expenses
305,259
 
 
222,784
 
 
783,192
 
 
667,408
 
Operating income (loss)
(61,894
)
 
756
 
 
(66,462
)
 
17,162
 
Interest expense, net
(35,147
)
 
(24,015
)
 
(107,678
)
 
(67,301
)
Extinguishment of debt
(225
)
 
—
 
 
45,853
 
 
(594
)
Loss before equity in income (loss) from
unconsolidated entities
(97,266
)
 
(23,259
)
 
(128,287
)
 
(50,733
)
Equity in income (loss) from unconsolidated entities
302
 
 
488
 
 
(886
)
 
(3,197
)
Gain on sale of assets
—
 
 
723
 
 
—
 
 
723
 
Loss from continuing operations
(96,964
)
 
(22,048
)
 
(129,173
)
 
(53,207
)
Discontinued operations
7,684
 
 
(3,426
)
 
(1,059
)
 
(4,657
)
Net loss
(89,280
)
 
(25,474
)
 
(130,232
)
 
(57,864
)
Net loss attributable to noncontrolling interests in other
partnerships
173
 
 
174
 
 
77
 
 
66
 
Net loss attributable to redeemable noncontrolling
interests in FelCor LP
297
 
 
160
 
 
571
 
 
399
 
Net loss attributable to FelCor
(88,810
)
 
(25,140
)
 
(129,584
)
 
(57,399
)
Preferred dividends
(9,678
)
 
(9,678
)
 
(29,034
)
 
(29,034
)
Net loss attributable to FelCor common stockholders
$
(98,488
)
 
$
(34,818
)
 
$
(158,618
)
 
$
(86,433
)
Basic and diluted per common share data:
 
 
 
 
 
 
 
Loss from continuing operations
$
(1.12
)
 
$
(0.50
)
 
$
(2.10
)
 
$
(1.30
)
Net loss
$
(1.04
)
 
$
(0.55
)
 
$
(2.11
)
 
$
(1.37
)
Basic and diluted weighted average common shares
    outstanding
95,034
 
 
63,086
 
 
75,135
 
 
63,121
 
 

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 7

Consolidated Balance Sheets
(in thousands)
 
 
September 30, 2010
 
December 31, 2009
Assets
 
 
 
Investment in hotels, net of accumulated depreciation of $970,730 at
September 30, 2010 and $916,604 at December 31, 2009
$
2,101,244
 
 
$
2,180,394
 
Investment in unconsolidated entities
102,957
 
 
82,040
 
Cash and cash equivalents
192,478
 
 
263,531
 
Restricted cash
20,586
 
 
18,708
 
Accounts receivable, net of allowance for doubtful accounts of $326 at
September 30, 2010 and $406 at December 31, 2009
36,628
 
 
28,678
 
Deferred expenses, net of accumulated amortization of $15,811 at
September 30, 2010 and $14,502 at December 31, 2009
21,701
 
 
19,977
 
Other assets
37,599
 
 
32,666
 
Total assets
$
2,513,193
 
 
$
2,625,994
 
Liabilities and Equity
 
 
 
Debt, net of discount of $55,972 at September 30, 2010 and $64,267 at
December 31, 2009
$
1,573,402
 
 
$
1,773,314
 
Distributions payable
66,615
 
 
37,580
 
Accrued expenses and other liabilities
180,560
 
 
131,339
 
Total liabilities
1,820,577
 
 
1,942,233
 
Commitments and contingencies
 
 
 
Redeemable noncontrolling interests in FelCor LP at redemption value, 295
units issued and outstanding at September 30, 2010 and December 31,
2009
1,357
 
 
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
    September 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
    September 30, 2010 and December 31, 2009
169,412
 
 
169,412
 
Common stock, $0.01 par value, 200,000 shares authorized and 101,038 and
69,413 shares issued, including shares in treasury, at September 30, 2010
and December 31, 2009, respectively
1,010
 
 
694
 
Additional paid-in capital
2,189,418
 
 
2,021,837
 
Accumulated other comprehensive income
24,800
 
 
23,528
 
Accumulated deficit
(1,951,451
)
 
(1,792,822
)
Less: Common stock in treasury, at cost, of 3,988 shares at September 30,
2010 and 3,845 shares at December 31, 2009
(72,245
)
 
(71,895
)
Total FelCor stockholders’ equity
670,306
 
 
660,116
 
Noncontrolling interests in other partnerships
20,953
 
 
22,583
 
Total equity
691,259
 
 
682,699
 
Total liabilities and equity
$
2,513,193
 
 
$
2,625,994
 
 
 

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 8

Capital Expenditures
(in thousands)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2010
 
2009
 
2010
 
2009
Improvements and additions to majority-owned hotels
$
9,448
 
 
16,926
 
 
27,841
 
 
62,465
 
Partners' pro rata share of additions to consolidated
    joint venture hotels
(81
)
 
(381
)
 
(203
)
 
(758
)
Pro rata share of additions to unconsolidated hotels
250
 
 
693
 
 
1,220
 
 
3,646
 
   Total additions to hotels(a)
$
9,617
 
 
$
17,238
 
 
$
28,858
 
 
$
65,353
 
 
(a)    Includes capitalized interest, property taxes, ground leases and certain employee costs.
 
Supplemental Financial Data
(in thousands, except per share information)
 
Total Enterprise Value
September 30, 2010
 
December 31, 2009
Common shares outstanding
97,050
 
 
65,568
 
Units outstanding
295
 
 
295
 
Combined shares and units outstanding
97,345
 
 
65,863
 
Common stock price
$
4.60
 
 
$
3.60
 
Market capitalization
$
447,787
 
 
$
237,107
 
Series A preferred stock
309,362
 
 
309,362
 
Series C preferred stock
169,412
 
 
169,412
 
Consolidated debt
1,573,402
 
 
1,773,314
 
Noncontrolling interests of consolidated debt
(3,809
)
 
(3,971
)
Pro rata share of unconsolidated debt
78,199
 
 
107,481
 
Cash and cash equivalents
(192,478
)
 
(263,531
)
 Total enterprise value (TEV)
$
2,381,875
 
 
$
2,329,174
 

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 9

Consolidated Debt Summary
(dollars in thousands)
 
 
 
Interest Rate (%)
 
 
Maturity Date
 
September 30, 2010
 
December 31, 2009
Mortgage debt
 
 
 
 
 
 
 
Mortgage debt
L + 0.93
(a) 
 November 2011
 
$
250,000
 
 
$
250,000
 
Mortgage debt
L + 5.10
(b) 
 April 2015
 
212,000
 
 
—
 
Mortgage debt
L + 3.50
(c) 
 August 2011(d)
 
198,800
 
 
200,425
 
Mortgage debt
9.02
 
 
 April 2014
 
114,306
 
 
117,422
 
Mortgage debt(e)
6.66
 
 
 June - August 2014
 
69,606
 
 
70,917
 
Mortgage debt
8.77
 
 
 May 2013
 
27,770
 
 
27,829
 
Mortgage debt(f)
8.62
 
 
May 2010
 
14,103
 
 
14,103
 
Mortgage debt
5.81
 
 
 July 2016
 
11,429
 
 
11,741
 
Mortgage debt
6.15
 
 
June 2011
 
8,157
 
 
9,228
 
Other
4.25
 
 
May 2011
 
502
 
 
354
 
Senior notes
 
 
 
 
 
 
 
Senior secured notes(g)
10.00
 
 
 October 2014
 
580,070
 
 
572,500
 
Senior notes
8.50
 
(h) 
 June 2011
 
86,659
 
 
86,604
 
Retired debt
—
 
 
—
 
—
 
 
412,191
 
Total
 
 
 
 
$
1,573,402
 
 
$
1,773,314
 
 
(a)    
We purchased an interest rate cap that caps LIBOR at 7.8% and expires November 2011 for a $250 million notional amount.
(b)    
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.
(c)    
LIBOR for this loan is subject to a 2% floor.
(d)    
This loan can be extended for as many as two years (to 2013), subject to satisfying certain conditions.
(e)    
The hotels securing this debt are subject to separate loan agreements and are not cross-collateralized.
(f)    
We are in the process of transferring this hotel to the lender in full satisfaction of the debt.
(g)    
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.
(h)    
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 Third Quarter 2010 Operating Results
November 3, 2010
Page 10

Schedule of Encumbered Hotels
(dollars in millions)
 
 
 
September 30, 2010
 
 
Consolidated Debt
 
Balance
 
Encumbered Hotels
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
 
 
$
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
Mortgage debt
 
 
$
114
 
 
 
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
CMBS debt
 
 
$
28
 
 
 
New Orleans Convention Center - ES
CMBS debt
 
 
$
14
 
 
 
Chicago Deerfield - ES
CMBS debt
 
 
$
11
 
 
 
Indianapolis North - ES
CMBS debt
 
 
$
8
 
 
 
Wilmington - DT
Senior secured notes
 
 
$
580
 
 
 
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 Third Quarter 2010 Operating Results
November 3, 2010
Page 11

Hotel Portfolio Composition
 
The following table illustrates the distribution of 82 same-store consolidated hotels (excluding the Fairmont Copley Plaza acquired in August 2010) by brand, market and location at September 30, 2010.
 
Brand
 
 
Hotels
 
Rooms
 
% of Total Rooms
 
% of 2009 Hotel EBITDA(a)
Embassy Suites Hotels
 
46
 
 
11,911
 
 
50
 
 
60
 
Holiday Inn
 
15
 
 
5,154
 
 
22
 
 
18
 
Sheraton and Westin
 
9
 
 
3,217
 
 
14
 
 
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
 
Other
 
39
 
 
10,805
 
 
45
 
 
44
 
 
 
 
 
 
 
 
 
 
Location 
 
 
 
 
 
 
 
 
 
Suburban
 
34
 
 
8,560
 
 
36
 
 
32
 
Urban
 
20
 
 
6,358
 
 
27
 
 
27
 
Airport
 
18
 
 
5,788
 
 
25
 
 
24
 
Resort
 
10
 
 
2,927
 
 
12
 
 
17
 
 
(a)    Hotel EBITDA is more fully described on page 22.
 

-more-
FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 12

 
The following tables set forth occupancy, ADR and RevPAR for the three and nine months ended September 30, 2010 and 2009, and the percentage changes thereto between the periods presented, for 82 same-store consolidated hotels owned for both periods (excludes the Fairmont Copley Plaza acquired in August 2010).
 
Detailed Operating Statistics by Brand
 
 
Occupancy (%)
 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
 
2010
2009
 
%Variance
 
2010
 
2009
 
%Variance
Embassy Suites Hotels
73.6
 
70.0
 
 
5.2
 
 
73.2
 
 
69.1
 
 
5.9
 
Holiday Inn
75.3
 
73.8
 
 
2.1
 
 
73.3
 
 
69.4
 
 
5.6
 
Sheraton and Westin
66.3
 
63.6
 
 
4.4
 
 
66.3
 
 
61.0
 
 
8.7
 
Doubletree
74.8
 
67.5
 
 
10.8
 
 
74.0
 
 
66.2
 
 
11.7
 
Renaissance and Marriott
62.7
 
66.9
 
 
(6.2
)
 
65.3
 
 
61.7
 
 
5.8
 
Hilton
80.3
 
77.1
 
 
4.2
 
 
66.6
 
 
65.1
 
 
2.3
 
 
 
 
 
 
 
 
 
 
 
 
Total hotels
72.7
 
69.8
 
 
4.2
 
 
71.7
 
 
67.4
 
 
6.5
 
 
 
 
 
 
 
 
 
 
 
 
 
ADR ($)
 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
 
2010
2009
 
%Variance
 
2010
 
2009
 
%Variance
Embassy Suites Hotels
123.56
 
123.60
 
 
—
 
 
125.40
 
 
129.86
 
 
(3.4
)
Holiday Inn
119.41
 
113.79
 
 
4.9
 
 
113.82
 
 
113.22
 
 
0.5
 
Sheraton and Westin
104.07
 
100.86
 
 
3.2
 
 
105.69
 
 
109.39
 
 
(3.4
)
Doubletree
113.11
 
114.00
 
 
(0.8
)
 
116.33
 
 
125.87
 
 
(7.6
)
Renaissance and Marriott
142.59
 
130.99
 
 
8.9
 
 
165.27
 
 
164.91
 
 
0.2
 
Hilton
142.27
 
128.93
 
 
10.4
 
 
124.76
 
 
118.12
 
 
5.6
 
 
 
 
 
 
 
 
 
 
 
 
Total hotels
120.85
 
118.42
 
 
2.1
 
 
121.60
 
 
124.72
 
 
(2.5
)
 
 
 
 
 
 
 
 
 
 
 
 
RevPAR ($)
 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
 
2010
2009
 
%Variance
 
2010
 
2009
 
%Variance
Embassy Suites Hotels
90.98
 
86.49
 
 
5.2
 
 
91.77
 
 
89.71
 
 
2.3
 
Holiday Inn
89.98
 
83.95
 
 
7.2
 
 
83.45
 
 
78.60
 
 
6.2
 
Sheraton and Westin
69.05
 
64.11
 
 
7.7
 
 
70.04
 
 
66.70
 
 
5.0
 
Doubletree
84.60
 
76.95
 
 
9.9
 
 
86.02
 
 
83.32
 
 
3.2
 
Renaissance and Marriott
89.47
 
87.58
 
 
2.2
 
 
107.90
 
 
101.79
 
 
6.0
 
Hilton
114.20
 
99.34
 
 
15.0
 
 
83.12
 
 
76.89
 
 
8.1
 
 
 
 
 
 
 
 
 
 
 
 
Total hotels
87.83
 
82.64
 
 
6.3
 
 
87.25
 
 
84.05
 
 
3.8
 
 

-more-
FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 13

Detailed Operating Statistics for FelCor's Top Markets
 
Occupancy (%)
 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
 
2010
 
2009
 
%Variance
 
2010
 
2009
 
%Variance
South Florida
72.4
 
 
67.2
 
 
7.8
 
 
77.7
 
 
73.3
 
 
6.0
 
Los Angeles area
79.5
 
 
75.7
 
 
5.1
 
 
75.9
 
 
72.9
 
 
4.2
 
Atlanta
74.7
 
 
72.9
 
 
2.5
 
 
75.0
 
 
70.8
 
 
5.9
 
Orlando
66.5
 
 
69.8
 
 
(4.7
)
 
73.7
 
 
73.6
 
 
0.2
 
Philadelphia
79.2
 
 
72.5
 
 
9.2
 
 
73.4
 
 
65.6
 
 
11.9
 
Minneapolis
82.9
 
 
77.8
 
 
6.4
 
 
75.5
 
 
68.2
 
 
10.8
 
San Francisco area
83.2
 
 
81.6
 
 
1.9
 
 
75.8
 
 
69.5
 
 
9.1
 
Dallas
64.2
 
 
58.2
 
 
10.2
 
 
65.3
 
 
59.5
 
 
9.8
 
Central California Coast
83.1
 
 
81.0
 
 
2.6
 
 
77.8
 
 
78.2
 
 
(0.5
)
San Antonio
77.9
 
 
74.7
 
 
4.3
 
 
76.5
 
 
72.8
 
 
5.1
 
Myrtle Beach
82.7
 
 
80.0
 
 
3.4
 
 
66.9
 
 
66.1
 
 
1.2
 
Boston
84.6
 
 
84.4
 
 
0.3
 
 
82.3
 
 
78.4
 
 
5.0
 
San Diego
82.6
 
 
76.9
 
 
7.3
 
 
77.7
 
 
71.7
 
 
8.3
 
 
ADR ($)
 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
 
2010
 
2009
 
%Variance
 
2010
 
2009
 
%Variance
South Florida
100.25
 
 
100.94
 
 
(0.7
)
 
127.84
 
 
132.67
 
 
(3.6
)
Los Angeles area
146.10
 
 
141.69
 
 
3.1
 
 
138.45
 
 
138.03
 
 
0.3
 
Atlanta
104.34
 
 
102.90
 
 
1.4
 
 
104.23
 
 
106.24
 
 
(1.9
)
Orlando
95.50
 
 
94.42
 
 
1.1
 
 
106.27
 
 
113.72
 
 
(6.6
)
Philadelphia
128.12
 
 
127.29
 
 
0.7
 
 
124.93
 
 
133.86
 
 
(6.7
)
Minneapolis
126.95
 
 
128.35
 
 
(1.1
)
 
126.36
 
 
129.03
 
 
(2.1
)
San Francisco area
144.56
 
 
132.57
 
 
9.0
 
 
133.03
 
 
127.32
 
 
4.5
 
Dallas
106.94
 
 
108.58
 
 
(1.5
)
 
110.27
 
 
116.83
 
 
(5.6
)
Central California Coast
189.59
 
 
188.12
 
 
0.8
 
 
163.34
 
 
160.45
 
 
1.8
 
San Antonio
98.46
 
 
102.64
 
 
(4.1
)
 
98.45
 
 
104.75
 
 
(6.0
)
Myrtle Beach
166.08
 
 
159.11
 
 
4.4
 
 
142.90
 
 
139.57
 
 
2.4
 
Boston
148.27
 
 
138.86
 
 
6.8
 
 
137.49
 
 
134.62
 
 
2.1
 
San Diego
123.95
 
 
123.11
 
 
0.7
 
 
119.28
 
 
127.37
 
 
(6.4
)
 
RevPAR ($)
 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
 
2010
 
2009
 
%Variance
 
2010
 
2009
 
%Variance
South Florida
72.61
 
 
67.82
 
 
7.1
 
 
99.29
 
 
97.21
 
 
2.1
 
Los Angeles area
116.19
 
 
107.26
 
 
8.3
 
 
105.10
 
 
100.57
 
 
4.5
 
Atlanta
77.89
 
 
74.98
 
 
3.9
 
 
78.12
 
 
75.18
 
 
3.9
 
Orlando
63.50
 
 
65.87
 
 
(3.6
)
 
78.37
 
 
83.67
 
 
(6.3
)
Philadelphia
101.42
 
 
92.26
 
 
9.9
 
 
91.69
 
 
87.76
 
 
4.5
 
Minneapolis
105.20
 
 
99.92
 
 
5.3
 
 
95.46
 
 
87.96
 
 
8.5
 
San Francisco area
120.31
 
 
108.24
 
 
11.2
 
 
100.86
 
 
88.52
 
 
13.9
 
Dallas
68.67
 
 
63.25
 
 
8.6
 
 
71.98
 
 
69.48
 
 
3.6
 
Central California Coast
157.51
 
 
152.39
 
 
3.4
 
 
127.04
 
 
125.43
 
 
1.3
 
San Antonio
76.72
 
 
76.70
 
 
—
 
 
75.28
 
 
76.22
 
 
(1.2
)
Myrtle Beach
137.31
 
 
127.24
 
 
7.9
 
 
95.58
 
 
92.29
 
 
3.6
 
Boston
125.51
 
 
117.14
 
 
7.1
 
 
113.20
 
 
105.51
 
 
7.3
 
San Diego
102.33
 
 
94.72
 
 
8.0
 
 
92.64
 
 
91.36
 
 
1.4
 

-more-
FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
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, 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 September 30,
 
2010
2009
 
Dollars
 
Shares
 
Per Share Amount
 
Dollars
 
Shares
 
Per Share Amount
Net loss
$
(89,280
)
 
 
 
 
 
$
(25,474
)
 
 
 
 
Noncontrolling interests
470
 
 
 
 
 
 
334
 
 
 
 
 
Preferred dividends
(9,678
)
 
 
 
 
 
(9,678
)
 
 
 
 
Net loss attributable to FelCor
    common stockholders
(98,488
)
 
95,034
 
 
(1.04
)
 
(34,818
)
 
63,086
 
 
(0.55
)
Depreciation and amortization
36,564
 
 
—
 
 
0.38
 
 
36,866
 
 
—
 
 
0.58
 
Depreciation, discontinued operations
and unconsolidated entities
3,966
 
 
—
 
 
0.04
 
 
4,726
 
 
—
 
 
0.07
 
Noncontrolling interests in FelCor LP
(297
)
 
295
 
 
0.01
 
 
(160
)
 
296
 
 
—
 
Conversion of options and unvested
restricted stock
—
 
 
—
 
 
—
 
 
—
 
 
445
 
 
—
 
FFO
(58,255
)
 
95,329
 
 
(0.61
)
 
6,614
 
 
63,827
 
 
0.10
 
Impairment loss
65,849
 
 
—
 
 
0.69
 
 
—
 
 
—
 
 
—
 
Impairment loss, discontinued operations
    and unconsolidated entities
—
 
 
—
 
 
—
 
 
2,080
 
 
—
 
 
0.04
 
Acquisition costs
403
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Extinguishment of debt
(8,036
)
 
—
 
 
(0.08
)
 
—
 
 
—
 
 
—
 
Conversion costs(a)
—
 
 
—
 
 
—
 
 
117
 
 
—
 
 
—
 
Severance costs
—
 
 
—
 
 
—
 
 
41
 
 
—
 
 
—
 
Lease termination costs
—
 
 
—
 
 
—
 
 
117
 
 
—
 
 
—
 
Adjusted FFO
$
(39
)
 
95,329
 
 
—
 
 
$
8,969
 
 
63,827
 
 
$
0.14
 
 
(a)    Costs related to the conversion of our San Francisco Union Square hotel to a Marriott.

-more-
FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 15

Reconciliation of Net Loss to FFO and Adjusted FFO
(in thousands, except per share data)
 
 
Nine Months Ended September 30,
 
2010
 
2009
 
Dollars
 
Shares
 
Per Share Amount
 
Dollars
Shares
 
Per Share Amount
Net loss
$
(130,232
)
 
 
 
 
 
$
(57,864
)
 
 
 
 
Noncontrolling interests
648
 
 
 
 
 
 
465
 
 
 
 
 
Preferred dividends
(29,034
)
 
 
 
 
 
(29,034
)
 
 
 
 
Net loss attributable to FelCor
common stockholders
(158,618
)
 
75,135
 
 
$
(2.11
)
 
(86,433
)
 
63,121
 
 
$
(1.37
)
Depreciation and amortization
110,454
 
 
—
 
 
1.47
 
 
108,668
 
 
—
 
 
1.72
 
Depreciation, discontinued operations
and unconsolidated entities
12,060
 
 
—
 
 
0.16
 
 
14,254
 
 
—
 
 
0.23
 
Gain on sale of unconsolidated subsidiary
(559
)
 
—
 
 
(0.01
)
 
—
 
 
—
 
 
—
 
Noncontrolling interests in FelCor LP
(571
)
 
295
 
 
—
 
 
(399
)
 
296
 
 
(0.01
)
Conversion of options and unvested
restricted stock
—
 
 
—
 
 
—
 
 
—
 
 
284
 
 
—
 
FFO
(37,234
)
 
75,430
 
 
(0.49
)
 
36,090
 
 
63,701
 
 
0.57
 
Impairment loss
79,245
 
 
—
 
 
1.05
 
 
—
 
 
—
 
 
—
 
Impairment loss, discontinued operations
and unconsolidated entities
7,664
 
 
—
 
 
0.10
 
 
5,516
 
 
—
 
 
0.08
 
Acquisition costs
419
 
 
—
 
 
0.01
 
 
—
 
 
—
 
 
—
 
Extinguishment of debt
(54,096
)
 
—
 
 
(0.72
)
 
594
 
 
—
 
 
0.01
 
Conversion costs(a)
—
 
 
—
 
 
—
 
 
447
 
 
—
 
 
0.01
 
Severance costs
—
 
 
—
 
 
—
 
 
550
 
 
—
 
 
0.01
 
Lease termination costs
—
 
 
—
 
 
—
 
 
469
 
 
—
 
 
0.01
 
Adjusted FFO
$
(4,002
)
 
75,430
 
 
$
(0.05
)
 
$
43,666
 
 
63,701
 
 
$
0.69
 
 
(a)    Costs related to the conversion of our San Francisco Union Square hotel to a Marriott.
 
 

-more-
FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 16

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
(in thousands)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2010
 
2009
 
2010
 
2009
Net loss
$
(89,280
)
 
$
(25,474
)
 
$
(130,232
)
 
$
(57,864
)
Depreciation and amortization
36,564
 
 
36,866
 
 
110,454
 
 
108,668
 
Depreciation, discontinued operations and
unconsolidated entities
3,966
 
 
4,726
 
 
12,060
 
 
14,254
 
Interest expense
35,251
 
 
24,244
 
 
107,985
 
 
67,874
 
Interest expense, discontinued operations and
      unconsolidated entities
1,627
 
 
1,249
 
 
5,219
 
 
4,007
 
Amortization of stock compensation
1,644
 
 
1,122
 
 
4,901
 
 
3,924
 
Noncontrolling interests in other partnerships
173
 
 
174
 
 
77
 
 
66
 
EBITDA
(10,055
)
 
42,907
 
 
110,464
 
 
140,929
 
Impairment loss
65,849
 
 
—
 
 
79,245
 
 
—
 
Impairment loss, discontinued operations and
unconsolidated entities
—
 
 
2,080
 
 
7,664
 
 
5,516
 
Extinguishment of debt
(8,036
)
 
—
 
 
(54,096
)
 
594
 
Acquisition costs
403
 
 
—
 
 
419
 
 
—
 
Conversion costs(a)
—
 
 
117
 
 
—
 
 
447
 
Severance costs
—
 
 
41
 
 
—
 
 
550
 
Lease termination costs
—
 
 
117
 
 
—
 
 
469
 
Gain on sale of unconsolidated subsidiary
—
 
 
—
 
 
(559
)
 
—
 
Adjusted EBITDA
$
48,161
 
 
$
45,262
 
 
$
143,137
 
 
$
148,505
 
 
(a)    Costs related to the conversion of our San Francisco Union Square hotel to a Marriott.
 

-more-
FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 17

Reconciliation of Adjusted EBITDA to Hotel EBITDA
(in thousands)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2010
 
2009
 
2010
 
2009
Adjusted EBITDA
$
48,161
 
 
$
45,262
 
 
$
143,137
 
 
$
148,505
 
Other revenue
(1,421
)
 
(1,280
)
 
(2,793
)
 
(2,554
)
Adjusted EBITDA from acquired hotels
(1,520
)
 
—
 
 
(1,520
)
 
—
 
Equity in income from unconsolidated subsidiaries
   (excluding interest, depreciation and impairment expense)
(5,816
)
 
(5,558
)
 
(15,425
)
 
(14,519
)
Noncontrolling interests in other partnerships (excluding
interest, depreciation and severance expense)
424
 
 
454
 
 
1,751
 
 
1,899
 
Consolidated hotel lease expense
11,827
 
 
10,893
 
 
33,090
 
 
31,805
 
Unconsolidated taxes, insurance and lease expense
(1,801
)
 
(2,024
)
 
(5,555
)
 
(6,041
)
Interest income
(104
)
 
(229
)
 
(307
)
 
(573
)
Other expenses (excluding conversion costs, severance
    costs and lease termination costs)
928
 
 
751
 
 
2,274
 
 
2,040
 
Corporate expenses (excluding amortization expense of
   stock compensation)
4,920
 
 
3,349
 
 
18,020
 
 
11,905
 
Gain on sale of asset
—
 
 
(723
)
 
—
 
 
(723
)
Adjusted EBITDA from discontinued operations
(99
)
 
(182
)
 
(599
)
 
(3,389
)
Hotel EBITDA
$
55,499
 
 
$
50,713
 
 
$
172,073
 
 
$
168,355
 
 
 
Reconciliation of Net Loss to Hotel EBITDA
(in thousands)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2010
 
2009
 
2010
 
2009
Net loss
$
(89,280
)
 
$
(25,474
)
 
$
(130,232
)
 
$
(57,864
)
Discontinued operations
(7,684
)
 
3,426
 
 
1,059
 
 
4,657
 
Adjusted EBITDA from acquired hotels
(1,520
)
 
—
 
 
(1,520
)
 
—
 
Equity in loss (income) from unconsolidated entities
(302
)
 
(488
)
 
886
 
 
3,197
 
Consolidated hotel lease expense
11,827
 
 
10,893
 
 
33,090
 
 
31,805
 
Unconsolidated taxes, insurance and lease expense
(1,801
)
 
(2,024
)
 
(5,555
)
 
(6,041
)
Interest expense, net
35,147
 
 
24,015
 
 
107,678
 
 
67,301
 
Extinguishment of debt
225
 
 
—
 
 
(45,853
)
 
594
 
Corporate expenses
6,564
 
 
4,471
 
 
22,921
 
 
15,829
 
Depreciation and amortization
36,564
 
 
36,866
 
 
110,454
 
 
108,668
 
Impairment loss
65,849
 
 
—
 
 
79,245
 
 
—
 
Gain on sale of assets
—
 
 
(723
)
 
—
 
 
(723
)
Other expenses
1,331
 
 
1,031
 
 
2,693
 
 
3,486
 
Other revenue
(1,421
)
 
(1,280
)
 
(2,793
)
 
(2,554
)
Hotel EBITDA
$
55,499
 
 
$
50,713
 
 
$
172,073
 
 
$
168,355
 
 
 

-more-
FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 18

Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2010
 
2009
 
2010
 
2009
Total revenues
$
243,365
 
 
$
223,540
 
 
$
716,730
 
 
$
684,570
 
Other revenue
(1,421
)
 
(1,280
)
 
(2,793
)
 
(2,554
)
Hotel operating revenue
241,944
 
 
222,260
 
 
713,937
 
 
682,016
 
Less: revenue from acquired hotels
(5,673
)
 
—
 
 
(5,673
)
 
—
 
Same-store hotel operating revenue
236,271
 
 
222,260
 
 
708,264
 
 
682,016
 
Same-store hotel operating expenses
(180,772
)
 
(171,547
)
 
(536,191
)
 
(513,661
)
Hotel EBITDA
$
55,499
 
 
$
50,713
 
 
$
172,073
 
 
$
168,355
 
Hotel EBITDA margin(a) 
23.5
%
 
22.8
%
 
24.3
%
 
24.7
%
 
(a)    Hotel EBITDA as a percentage of same-store hotel operating revenue.
 
Reconciliation of Total Operating Expenses to Same-Store Hotel Operating Expenses
(dollars in thousands)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2010
 
2009
 
2010
 
2009
Total operating expenses
$
305,259
 
 
$
222,784
 
 
$
783,192
 
 
$
667,408
 
Unconsolidated taxes, insurance and lease expense
1,801
 
 
2,024
 
 
5,555
 
 
6,041
 
Consolidated hotel lease expense
(11,827
)
 
(10,893
)
 
(33,090
)
 
(31,805
)
Corporate expenses
(6,564
)
 
(4,471
)
 
(22,921
)
 
(15,829
)
Depreciation and amortization
(36,564
)
 
(36,866
)
 
(110,454
)
 
(108,668
)
Impairment loss
(65,849
)
 
—
 
 
(79,245
)
 
—
 
Acquired hotel expenses
(4,153
)
 
—
 
 
(4,153
)
 
—
 
Other expenses
(1,331
)
 
(1,031
)
 
(2,693
)
 
(3,486
)
Same-store hotel operating expenses
$
180,772
 
 
$
171,547
 
 
$
536,191
 
 
$
513,661
 
 
 

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 19

Reconciliation of Ratio of Operating Income (Loss) to Total Revenues to Hotel EBITDA Margin
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2010
 
2009
 
2010
 
2009
Ratio of operating income (loss) to total revenues
(25.4
)%
 
0.3
 %
 
(9.3
)%
 
2.5
 %
Other revenue
(0.6
)
 
(0.6
)
 
(0.4
)
 
(0.4
)
Revenue from acquired hotels
(2.9
)
 
—
 
 
(0.7
)
 
—
 
Unconsolidated taxes, insurance and lease expense
(0.8
)
 
(0.9
)
 
(0.8
)
 
(0.9
)
Consolidated hotel lease expense
5.0
 
 
4.9
 
 
4.7
 
 
4.6
 
Other expenses
0.6
 
 
0.6
 
 
0.4
 
 
0.7
 
Corporate expenses
2.8
 
 
2.0
 
 
3.2
 
 
2.3
 
Depreciation and amortization
15.4
 
 
16.5
 
 
15.5
 
 
15.9
 
Impairment loss
27.7
 
 
—
 
 
11.1
 
 
—
 
Expenses from acquired hotels
1.7
 
 
—
 
 
0.6
 
 
—
 
Hotel EBITDA margin
23.5
 %
 
22.8
 %
 
24.3
 %
 
24.7
 %
 
 

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 20

 
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
 
Per Share Amount(a)
Net loss attributable to FelCor
$
(163
)
 
 
 
$
(160
)
 
 
Preferred dividends
(39
)
 
 
 
(39
)
 
 
Net loss attributable to FelCor common stockholders
(202
)
 
$
(2.53
)
 
(199
)
 
$
(2.49
)
Depreciation(b)
163
 
 
 
 
163
 
 
 
Gain on sale of assets
(1
)
 
 
 
(1
)
 
 
Noncontrolling interests in FelCor LP
(1
)
 
 
 
(1
)
 
 
FFO
(41
)
 
$
(0.51
)
 
(38
)
 
$
(0.47
)
Impairment
87
 
 
 
 
87
 
 
 
Extinguishment of debt
(60
)
 
 
 
(60
)
 
 
Adjusted FFO
$
(14
)
 
$
(0.17
)
 
$
(11
)
 
$
(0.13
)
 
 
 
 
 
 
 
 
Net loss attributable to FelCor
$
(163
)
 
 
 
$
(160
)
 
 
Depreciation(b)
163
 
 
 
 
163
 
 
 
Interest expense(b)
150
 
 
 
 
150
 
 
 
Amortization expense
7
 
 
 
 
7
 
 
 
Noncontrolling interests in FelCor LP
(1
)
 
 
 
(1
)
 
 
EBITDA
156
 
 
 
 
159
 
 
 
Impairment
87
 
 
 
 
87
 
 
 
Extinguishment of debt
(60
)
 
 
 
(60
)
 
 
Gain on sale of assets
(1
)
 
 
 
(1
)
 
 
Adjusted EBITDA
$
182
 
 
 
 
$
185
 
 
 
 
(a)    Weighted average shares and units are 80.9 million.
(b)    Includes pro rata portion of unconsolidated entities.
 

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 21

    
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.
 
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 recurring and non-recurring items, including but not limited to these 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.
 
•    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.

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 22

•    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 operating 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 used by us 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 from continuing operations all revenues and expenses not directly associated with hotel operations including but not limited to corporate-level expenses; impairment losses; gains or losses on disposition of assets; and gains and losses related to extinguishment of debt. 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 exclude the effect of impairment losses, gains or losses on disposition of assets, and gains or losses related to extinguishment of debt because we believe that including these is not consistent with reflecting the ongoing performance of our remaining 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 hotels. Hotel EBITDA and Hotel EBITDA margins are presented on a same-store basis.
 
Limitations of Non-GAAP Measures
 
Our management and Board of Directors use FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin to evaluate the performance of our hotels and to facilitate comparisons between us and 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. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin, as presented by us, may not be comparable to the same measures as calculated by other real estate companies. These measures do not reflect certain expenses that we incurred and will incur, such as depreciation and interest or 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 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.
 

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FelCor Lodging Trust Incorporated Third Quarter 2010 Operating Results
November 3, 2010
Page 23

 
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. Neither should FFO, Adjusted FFO, Adjusted FFO per share, EBITDA or Adjusted EBITDA be considered as measures of our liquidity or indicative of funds available for our cash needs, including our ability to make cash distributions. Adjusted FFO per share should not be used as a measure of amounts that accrue directly to the benefit of stockholders. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin 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 any single financial measure.
    

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