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FelCor Reports Third Quarter 2016 Earnings

Completes Two Hotel Sales

IRVING, Texas--(BUSINESS WIRE)--Nov. 1, 2016-- FelCor Lodging Trust Incorporated (NYSE: FCH) today reported results for the third quarter ended September 30, 2016.

Third Quarter Highlights

  • Same-store RevPAR decreased 0.7% compared to the same period in 2015.
  • Net loss was $4.9 million ($0.08 per share) versus a net loss of $8.1 million ($0.10 per share) for the same period in 2015.
  • Adjusted FFO per share increased 12% to $0.28 from the same period in 2015.
  • Adjusted EBITDA increased $2.0 million to $67.1 million from the same period in 2015.
  • Sold two hotels (Renaissance Esmeralda Indian Wells Resort and Holiday Inn Nashville Airport) for aggregate gross proceeds of approximately $108 million.

“Our room revenue was impacted negatively this quarter by a combination of softer demand, tropical storms, and aggressive discounting programs offered by some of our brands. However, increases in non-room revenue, our various cost containment initiatives implemented earlier this year and our Wyndham guarantee enabled us to meet our Adjusted EBITDA and Adjusted FFO per share expectations,” said Troy A. Pentecost, FelCor’s President, Interim Senior Executive Officer and Chief Operating Officer.

“During the quarter, we also made progress with our planned hotel sales, selling both the Renaissance Esmeralda and the Holiday Inn Nashville and continuing the marketing process with Jones Lange LaSalle for our three New York hotels. While our primary focus remains on the asset sales, we also are moving forward with our planned redevelopment projects,” added Mr. Pentecost.

“Our Board of Directors and management team remain confident in our strategy to drive long-term stockholder value. We are dedicated to continued strengthening of our balance sheet and creating capacity for accretive investments,” concluded Mr. Pentecost.

 

Third Quarter Hotel Results

     
Third Quarter
2016     2015     Change
Same-store hotels (37)
RevPAR $ 159.78 $ 160.95 (0.7 )%
Total hotel revenue, in millions $ 204.8 $ 203.1 0.8 %
Hotel EBITDA, in millions $ 66.9 $ 67.4 (0.7 )%
Hotel EBITDA margin 32.7 % 33.2 % (50) bps
 

RevPAR for our 37 same-store hotels decreased 0.7% (to $159.78) from the same period in 2015. The change reflects a 0.6% increase in average daily rate, or ADR, (to $195.33) and a 1.3% decline in occupancy (to 81.8%). Several of our markets, accounting for 42% of total room nights, experienced softer transient and group demand, and many of our hotels in the Southeast were negatively impacted by weather. Additionally, some brands implemented programs designed to drive more direct bookings and decrease online travel agent dependence, which resulted in more rate discounting across our portfolio than anticipated. While these programs did, and may continue to negatively impact our RevPAR, we expect the offsetting reduction in online travel agent commissions will result in greater profitability. In the meantime, we are working closely with the brands to optimize their discounting and maximize profitability at our hotels.

Wyndham Worldwide Corporation has guaranteed a minimum annual NOI on eight of our hotels over the ten-year terms of their management agreements. Hotel EBITDA for the three months ended September 30, 2016 includes $1.8 million in fee reductions related to the Wyndham guarantee compared to $0.3 million during the same period last year.

See pages 12-13 and 18-22 for more detailed operating data.

     

Third Quarter Operating Results

 
Third Quarter
$ in millions, except for per share information 2016     2015     Change
Net loss $ (4.9 ) $ (8.1 ) 39.8 %
Net loss per share $ (0.08 ) $ (0.10 ) $ 0.02
Same-store Adjusted EBITDA $ 64.2 $ 64.0 0.3 %
Adjusted EBITDA $ 67.1 $ 65.1 3.1 %
Adjusted FFO per share $ 0.28 $ 0.25 $ 0.03
 

Net loss attributable to common stockholders was $11.4 million ($0.08 per share) in 2016, compared to a net loss of $14.5 million ($0.10 per share) for the same period in 2015. Net loss in 2016 includes a $20.1 million impairment charge for one hotel and severance costs of $6.1 million, partially offset by a $4.9 million net gain on hotel sales (including a $3.1 million loss in discontinued operations). Net loss in 2015 included a $20.9 million impairment charge for a hotel subsequently sold in 2016 and a $3.6 million charge for severance costs, partially offset by a $3.6 million net gain on hotel sales (including $491,000 in discontinued operations).

Year-to-Date Operating Results

Net loss attributable to common stockholders was $15.5 million ($0.11 per share) in 2016, compared to a net loss of $34.7 million ($0.26 per share) for the same period in 2015. Net loss in 2016 includes impairment charges of $26.5 million attributable to two hotels (one of which was sold in 2016) and a $6.1 million charge for severance costs. These charges are partially offset by a $3.5 million net gain on hotel sales (including a $3.1 million loss in discontinued operations). Net loss in 2015 included $30.9 million in debt extinguishment charges, a $20.9 million impairment charge for a property subsequently sold in 2016 and a $3.6 million charge for severance costs, partially offset by a $19.9 million net gain on the sale of consolidated hotels (including $407,000 in discontinued operations) and a $7.1 million gain on the sale of an unconsolidated joint venture.

RevPAR for our 37 same-store hotels increased 1.7% (to $155.17) from the same period in 2015. The change reflects a 2.0% increase in ADR (to $193.19) and a 0.2% decline in occupancy (to 80.3%). Hotel EBITDA for our 37 same-store hotels increased by 1.7% to $186.6 million, and Hotel EBITDA margin was 31.2%, a 16 basis point decrease.

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

Balance Sheet

As of September 30, 2016, we had $1.3 billion of gross consolidated debt with a 5.4% weighted-average interest rate and a seven-year weighted-average maturity. We had $50.4 million of cash and cash equivalents on hand and $22.1 million of restricted cash.

Capital Allocation

We continually strive to increase long-term stockholder value through prudent capital allocation. As part of this ongoing effort, we regularly evaluate opportunities to redeploy capital to achieve higher returns and strengthen our balance sheet.

Asset Sales

We sold two hotels during the third quarter. The 560-room Renaissance Esmeralda Indian Wells Resort sold for $76 million, and the 383-room Holiday Inn Nashville Airport sold for $32 million. We used the net proceeds to repay funds drawn under our line of credit. We continue to market our three New York hotels.

Stock Repurchase Program

In 2015, our Board approved a $100 million stock repurchase program, which we began implementing in December 2015. To date, we have purchased 6.6 million shares for $44.8 million (at an average price of $6.78 per share), including 477,000 shares during the third quarter.

Common Dividend

During the third quarter, we declared a $0.06 per share common stock dividend, which was paid at the end of October. Our Board of Directors will determine future quarterly common stock dividends based on funds available for distribution, reinvestment opportunities within our portfolio and taxable income, among other things.

Capital Expenditures

During the first nine months of 2016, we invested $51.6 million in renovations and redevelopment projects at our hotels. During 2016, we plan to invest approximately $60 million in renovations as part of our long-term capital plan. In addition, we expect to invest approximately $15 million in redevelopment projects this year, primarily at the Embassy Suites Myrtle Beach Oceanfront Resort and The Vinoy Renaissance St. Petersburg Resort and Golf Club. These projects are underway and remain on schedule and within budget. We are also progressing with obtaining entitlements and planning for several other high-ROI redevelopment projects. These projects will contribute to future EBITDA growth. We target unlevered internal rates of return of at least 15% for these projects.

Outlook

We are updating our 2016 guidance to reflect third quarter results and ongoing softness in transient and group demand for the remainder of the year. Our outlook assumes Hotel EBITDA for the Wyndham hotels equals the amount guaranteed by Wyndham for 2016 (corresponding to approximately $59 million of Hotel EBITDA).

For full year 2016, we now expect:

  • Net income attributable to FelCor will be $0.6 - $4.6 million;
  • RevPAR for same-store hotels will increase 1.25 - 1.5%;
  • Adjusted EBITDA will be $236.0 - $240.0 million;
  • Adjusted FFO per share will be $0.88 - $0.90; and
  • Interest expense, including our pro rata share from joint ventures, will be $80.1 million.

About FelCor

FelCor Lodging Trust Incorporated, a real estate investment trust, owns a diversified portfolio of primarily upper-upscale and luxury hotels that are located in major urban and resort markets throughout the U.S. FelCor partners with top hotel companies that operate its properties under globally renowned names and as premier independent hotels. Additional information can be found on the Company’s website at www.felcor.com.

We invite you to listen to our third quarter earnings conference call on Tuesday, November 1, 2016 at 10:00 a.m. (Central Time). We will simultaneously webcast the conference call on our website at www.felcor.com. Interested investors and other parties who wish to access the call can go to FelCor’s website and click on the webcast link on the “Investors” page. The conference call replay will also be archived on the Company’s website.

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.

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 months ended September 30, 2016.

     

TABLE OF CONTENTS

Page
Consolidated Statements of Operations(a)

7

Consolidated Balance Sheets(a)

8

Consolidated Debt Summary

9

Schedule of Encumbered Hotels

10

Capital Expenditures

10

Total Enterprise Value

11

Hotel Operating Statistics

12

Historical Quarterly Operating Statistics

14

Non-GAAP Financial Measures

14

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

(in thousands, except per share data)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Revenues:
Hotel operating revenue:
Room $ 174,169 $ 177,378 $ 514,563 $ 521,750
Food and beverage 34,260 34,370 117,489 116,365
Other operating departments 12,743 11,726 35,338 34,693
Other revenue   1,809     1,678     3,641     7,142  
Total revenues   222,981     225,152     671,031     679,950  
Expenses:
Hotel departmental expenses:
Room 44,032 44,485 131,479 131,419
Food and beverage 28,227 29,457 91,775 91,431
Other operating departments 3,820 4,572 11,642 13,352
Other property-related costs 52,875 55,893 164,448 170,579
Management and franchise fees 8,047 9,138 25,773 27,425
Taxes, insurance and lease expense 15,142 12,716 43,588 43,933
Corporate expenses 6,244 4,672 20,691 19,775
Depreciation and amortization 28,280 28,988 86,640 85,510
Impairment 20,126 20,861 26,459 20,861
Other expenses   7,581     5,807     10,551     11,446  
Total operating expenses   214,374     216,589     613,046     615,731  
Operating income 8,607 8,563 57,985 64,219
Interest expense, net (19,428 ) (19,602 ) (59,055 ) (59,361 )
Debt extinguishment (13 ) (30,909 )
Other gains, net           100     166  
Loss before equity in income from unconsolidated entities (10,821 ) (11,052 ) (970 ) (25,885 )
Equity in income from unconsolidated entities   814     321     1,386     7,983  
Income (loss) from continuing operations before income tax (10,007 ) (10,731 ) 416 (17,902 )
Income tax   246     (1,054 )   (144 )   (1,392 )
Income (loss) from continuing operations (9,761 ) (11,785 ) 272 (19,294 )
Income (loss) from discontinued operations   (3,131 )   498     (3,131 )   419  
Loss before gain on sale of hotels (12,892 ) (11,287 ) (2,859 ) (18,875 )
Gain on sale of hotels, net   7,998     3,154     6,654       19,491  
Net income (loss) (4,894 ) (8,133 ) 3,795 616
Net loss (income) attributable to noncontrolling interests in other partnerships 114 227 601 (4,405 )
Net loss attributable to redeemable noncontrolling interests in FelCor LP 50 61 67 150
Preferred distributions - consolidated joint venture   (369 )   (363 )   (1,093 )   (1,070 )
Net income (loss) attributable to FelCor (5,099 ) (8,208 ) 3,370 (4,709 )
Preferred dividends (6,279 ) (6,279 ) (18,837 ) (23,860 )
Redemption of preferred stock               (6,096 )
Net loss attributable to FelCor common stockholders $ (11,378 ) $ (14,487 ) $ (15,467 ) $ (34,665 )
Basic and diluted per common share data:
Loss from continuing operations $ (0.06 ) $ (0.10 ) $ (0.09 ) $ (0.26 )
Net loss $ (0.08 ) $ (0.10 ) $ (0.11 ) $ (0.26 )
Basic and diluted weighted average common shares outstanding   137,464     142,982     138,437     136,009  
 
         
Consolidated Balance Sheets

(in thousands, except par values)

 
September 30, December 31,
2016 2015
Assets
Investment in hotels, net of accumulated depreciation of $912,561 and $899,575 at September 30, 2016 and December 31, 2015, respectively $ 1,572,082 $ 1,729,531
Investment in unconsolidated entities 9,405 9,575
Cash and cash equivalents 50,350 59,786
Restricted cash 22,130 17,702
Accounts receivable, net of allowance for doubtful accounts of $182 and $204 at September 30, 2016 and December 31, 2015, respectively 46,745 28,136
Deferred expenses, net of accumulated amortization of $2,490 and $1,086 at September 30, 2016 and December 31, 2015, respectively 4,996 6,390
Other assets   17,003     14,792  
Total assets $ 1,722,711   $ 1,865,912  
Liabilities and Equity
Debt, net of unamortized debt issuance costs of $16,540 and $18,065 at September 30, 2016 and December 31, 2015, respectively $ 1,324,425 $ 1,409,889
Distributions payable 14,969 15,140
Accrued expenses and other liabilities   130,013     125,274  
Total liabilities   1,469,407     1,550,303  
Commitments and contingencies
Redeemable noncontrolling interests in FelCor LP, 610 and 611 units issued and outstanding at September 30, 2016 and December 31, 2015, respectively   3,923     4,464  
Equity:
Preferred stock, $0.01 par value, 20,000 shares authorized:
Series A Cumulative Convertible Preferred Stock, 12,879 shares, liquidation value of $321,987, issued and outstanding at September 30, 2016 and December 31, 2015 309,337 309,337
Common stock, $0.01 par value, 200,000 shares authorized; 137,774 and 141,808 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively 1,378 1,418
Additional paid-in capital 2,576,895 2,567,515
Accumulated deficit   (2,689,753 )   (2,618,117 )
Total FelCor stockholders’ equity 197,857 260,153
Noncontrolling interests in other partnerships 7,741 7,806
Preferred equity in consolidated joint venture, liquidation value of $44,638 and $43,954 at September 30, 2016 and December 31, 2015, respectively   43,783     43,186  
Total equity   249,381     311,145  
Total liabilities and equity $ 1,722,711   $ 1,865,912  
 
                     
Consolidated Debt Summary

(dollars in thousands)

 

Encumbered
Hotels

Interest
Rate (%)

Maturity Date

September 30,
2016

December 31,
2015

Senior unsecured notes 6.00 June 2025 $ 475,000 $ 475,000
Senior secured notes 9 5.625 March 2023 525,000 525,000
Mortgage debt(a) 4 4.95

October 2022

120,643 122,237
Mortgage debt 1 4.94 October 2022 30,322 30,717
Line of credit(b) 7 LIBOR + 2.75 June 2019 105,000 190,000
Mortgage debt(c) 1 LIBOR + 3.00 November 2017   85,000     85,000  
Total 22   $ 1,340,965 $ 1,427,954
Unamortized debt issuance costs   (16,540 )   (18,065 )
Debt, net of unamortized debt issuance costs $ 1,324,425   $ 1,409,889  
 
(a)   This debt is comprised of separate non-cross-collateralized loans, each secured by a mortgage encumbering different hotels.
(b) Our line of credit can be extended for one year, subject to satisfying certain conditions. We may borrow up to $400 million under our line of credit.
(c) This loan can be extended for one year, subject to satisfying certain conditions.
 
       
Schedule of Encumbered Hotels

(dollars in millions)

 
Consolidated September 30, 2016
Debt Balance Encumbered Hotels
Senior secured notes (5.625%)   $ 525 Atlanta Buckhead - ES, Boston Marlboro - ES, Burlington - SH, Dallas Love Field - ES, Milpitas - ES, Myrtle Beach Resort - HIL, Orlando South - ES, Philadelphia Society Hill - SH and SF South San Francisco - ES
Mortgage debt $ 27 Napa Valley - ES
Mortgage debt $ 34 Ft. Lauderdale - ES
Mortgage debt $ 23 Birmingham - ES
Mortgage debt $ 37 Minneapolis Airport - ES
Mortgage debt $ 30 Deerfield Beach - ES
Line of credit $ 105 Austin - DTG, Boston Copley - FM, Charleston Mills House - WYN, LA LAX S - ES, Santa Monica at the Pier - WYN, SF Union Square - MAR and St. Petersburg Vinoy - REN
Mortgage debt $ 85 The Knickerbocker
 
         
Capital Expenditures

(dollars in thousands)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Improvements and additions to majority-owned hotels $ 19,418 $ 10,222 $ 51,328 $ 35,979
Partners’ pro rata share of additions to consolidated joint venture hotels (108 ) (5 ) (333 ) (30 )
Pro rata share of additions to unconsolidated hotels   193     1,288     610     2,561  
Total additions to hotels(a) $ 19,503   $ 11,505   $ 51,605   $ 38,510  
 
(a)   Includes capitalized interest, property taxes, property insurance, ground leases and certain employee costs.
 
         
Total Enterprise Value

(in thousands, except per share data)

 
September 30, December 31
  2016 2015
Common shares outstanding 137,774 141,808
Units outstanding   610     611  
Combined shares and units outstanding 138,384 142,419
Common stock price $ 6.43   $ 7.30  
Market capitalization $ 889,809 $ 1,039,659
Series A preferred stock(a) 321,987 321,987
Preferred equity - Knickerbocker joint venture, net 41,594 41,027
Consolidated debt (b) 1,340,965 1,427,954
Noncontrolling interests of consolidated debt (4,250 ) (4,250 )
Pro rata share of unconsolidated debt 11,234 11,433
Cash, cash equivalents and restricted cash   (72,480 )   (77,488 )
Total enterprise value (TEV) $ 2,528,859   $ 2,760,322  
 
(a)   Based on liquidation value.
(b) Excludes unamortized debt issuance costs.
 
             

Hotel Operating Statistics

 
     
Occupancy (%) ADR ($) RevPAR ($)
Three Months Ended September 30, Three Months Ended September 30, Three Months Ended September 30,

Same-store Hotels

2016     2015     %Change  

2016

    2015     %Change   2016     2015     %Change  
Embassy Suites Atlanta-Buckhead 77.3 79.9 (3.3 ) 157.93 149.95 5.3 122.02 119.77 1.9
DoubleTree Suites by Hilton Austin 78.0 86.6 (10.0 ) 196.91 191.69 2.7 153.55 166.04 (7.5 )
Embassy Suites Birmingham 76.4 82.1 (6.9 ) 135.07 128.34 5.2 103.19 105.36 (2.1 )
The Fairmont Copley Plaza, Boston 86.5 86.7 (0.3 ) 336.67 337.92 (0.4 ) 291.26 293.13 (0.6 )
Wyndham Boston Beacon Hill 86.8 91.6 (5.2 ) 257.67 265.91 (3.1 ) 223.66 243.54 (8.2 )
Embassy Suites Boston-Marlborough 73.6 78.8 (6.7 ) 175.01 176.47 (0.8 ) 128.76 139.11 (7.4 )
Sheraton Burlington Hotel & Conference Center 83.3 82.6 0.8 144.65 129.75 11.5 120.49 107.18 12.4
The Mills House Wyndham Grand Hotel, Charleston 84.9 80.7 5.2 214.95 212.46 1.2 182.45 171.38 6.5
Embassy Suites Dallas-Love Field(1) 66.7 89.4 (25.4 ) 140.10 129.57 8.1 93.41 115.88 (19.4 )
Embassy Suites Deerfield Beach-Resort & Spa 69.7 68.8 1.3 152.95 160.32 (4.6 ) 106.60 110.29 (3.3 )
Embassy Suites Fort Lauderdale 17th Street 79.4 80.4 (1.3 ) 129.31 125.27 3.2 102.63 100.69 1.9
Wyndham Houston-Medical Center Hotel & Suites 72.1 85.2 (15.4 ) 129.25 142.32 (9.2 ) 93.15 121.20 (23.1 )
Embassy Suites Los Angeles-International Airport/South 88.0 84.1 4.7 183.81 178.79 2.8 161.84 150.35 7.6
Embassy Suites Mandalay Beach-Hotel & Resort 84.6 83.6 1.2 270.37 265.30 1.9 228.75 221.70 3.2
Embassy Suites Miami-International Airport 84.4 86.2 (2.1 ) 117.02 118.33 (1.1 ) 98.72 102.00 (3.2 )
Embassy Suites Milpitas-Silicon Valley 84.0 85.2 (1.5 ) 198.65 197.57 0.5 166.78 168.38 (1.0 )
Embassy Suites Minneapolis-Airport 83.9 84.5 (0.7 ) 170.49 162.14 5.1 143.04 137.04 4.4
Embassy Suites Myrtle Beach-Oceanfront Resort 91.1 89.2 2.1 230.26 222.64 3.4 209.67 198.53 5.6
Hilton Myrtle Beach Resort 84.1 86.9 (3.2 ) 177.60 170.92 3.9 149.36 148.47 0.6
Embassy Suites Napa Valley 85.3 88.4 (3.5 ) 279.76 280.07 (0.1 ) 238.66 247.66 (3.6 )
Wyndham New Orleans-French Quarter 62.8 61.2 2.6 129.55 123.69 4.7 81.37 75.75 7.4
Morgans New York 87.9 90.6 (3.0 ) 265.77 277.94 (4.4 ) 233.64 251.88 (7.2 )
Royalton New York 84.8 88.7 (4.4 ) 286.41 299.78 (4.5 ) 242.75 265.85 (8.7 )
Embassy Suites Orlando-International Drive South/Convention Center(1) 57.8 80.5 (28.2 ) 119.46 127.38 (6.2 ) 69.11 102.58 (32.6 )
DoubleTree Suites by Hilton Orlando-Lake Buena Vista 84.2 80.6 4.5 113.85 120.06 (5.2 ) 95.91 96.74 (0.9 )
Wyndham Philadelphia Historic District 84.3 74.0 13.9 170.85 159.84 6.9 143.97 118.21 21.8
Sheraton Philadelphia Society Hill Hotel 79.2 72.5 9.3 196.49 173.30 13.4 155.65 125.61 23.9
Embassy Suites Phoenix-Biltmore 62.5 64.4 (2.9 ) 134.26 128.93 4.1 83.86 82.97 1.1
Wyndham Pittsburgh University Center 78.8 83.8 (6.0 ) 148.42 149.07 (0.4 ) 116.91 124.86 (6.4 )
Wyndham San Diego Bayside 85.9 80.2 7.1 155.35 159.56 (2.6 ) 133.40 127.97 4.2
Embassy Suites San Francisco Airport-South San Francisco 90.7 90.4 0.4 216.84 232.00 (6.5 ) 196.75 209.63 (6.1 )
Embassy Suites San Francisco Airport-Waterfront 92.3 89.6 3.0 222.35 224.85 (1.1 ) 205.24 201.53 1.8
Holiday Inn San Francisco-Fisherman’s Wharf 92.7 92.7 0.1 243.12 253.91 (4.2 ) 225.47 235.30 (4.2 )
San Francisco Marriott Union Square 93.0 92.5 0.5 288.54 308.87 (6.6 ) 268.32 285.69 (6.1 )
Wyndham Santa Monica At the Pier 91.5 90.8 0.8 314.90 295.60 6.5 288.03 268.29 7.4
Embassy Suites Secaucus-Meadowlands 81.5 81.0 0.6 180.94 184.79 (2.1 ) 147.39 149.60 (1.5 )
The Vinoy Renaissance St. Petersburg Resort & Golf Club 76.2 77.3 (1.5 ) 183.78 173.53 5.9   140.05 134.20 4.4  
Same-store Hotels 81.8 82.9 (1.3 ) 195.33 194.22 0.6   159.78 160.95 (0.7 )
 
(1)   Hotel under renovation in 2016.
 
             

Hotel Operating Statistics

 
     
Occupancy (%) ADR ($)

RevPAR ($)

Nine Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30,

Same-store Hotels

2016     2015     %Change   2016     2015     %Change   2016     2015     %Change  
Embassy Suites Atlanta-Buckhead 79.6 80.1 (0.5 ) 157.15 149.55 5.1 125.14 119.74 4.5
DoubleTree Suites by Hilton Austin 83.1 83.3 (0.2 ) 218.56 220.31 (0.8 ) 181.71 183.60 (1.0 )
Embassy Suites Birmingham 79.1 79.4 (0.4 ) 137.36 134.08 2.4 108.64 106.50 2.0
The Fairmont Copley Plaza, Boston 77.9 77.6 0.4 324.04 323.51 0.2 252.54 251.11 0.6
Wyndham Boston Beacon Hill 79.2 81.8 (3.2 ) 232.98 237.02 (1.7 ) 184.52 193.91 (4.8 )
Embassy Suites Boston-Marlborough 71.8 76.7 (6.4 ) 173.00 170.70 1.3 124.30 130.97 (5.1 )
Sheraton Burlington Hotel & Conference Center 74.6 73.9 1.0 122.15 119.38 2.3 91.18 88.23 3.3
The Mills House Wyndham Grand Hotel, Charleston 84.9 83.3 1.9 229.19 224.94 1.9 194.54 187.45 3.8
Embassy Suites Dallas-Love Field(1) 76.8 90.7 (15.4 ) 142.00 131.42 8.0 109.04 119.23 (8.5 )
Embassy Suites Deerfield Beach-Resort & Spa 79.7 81.1 (1.7 ) 203.24 205.36 (1.0 ) 161.99 166.46 (2.7 )
Embassy Suites Fort Lauderdale 17th Street 84.2 85.1 (1.0 ) 175.62 166.26 5.6 147.88 141.42 4.6
Wyndham Houston-Medical Center Hotel & Suites 79.4 81.7 (2.7 ) 148.06 152.13 (2.7 ) 117.63 124.23 (5.3 )
Embassy Suites Los Angeles-International Airport/South 87.9 82.6 6.4 173.37 162.85 6.5 152.33 134.45 13.3
Embassy Suites Mandalay Beach-Hotel & Resort 82.6 80.4 2.7 238.09 220.77 7.8 196.56 177.43 10.8
Embassy Suites Miami-International Airport 86.8 89.2 (2.7 ) 149.36 151.76 (1.6 ) 129.61 135.36 (4.2 )
Embassy Suites Milpitas-Silicon Valley 83.2 83.6 (0.5 ) 204.36 196.20 4.2 169.96 163.96 3.7
Embassy Suites Minneapolis-Airport 77.1 78.0 (1.1 ) 158.20 152.98 3.4 121.99 119.30 2.3
Embassy Suites Myrtle Beach-Oceanfront Resort 79.6 77.1 3.2 190.36 188.35 1.1 151.53 145.29 4.3
Hilton Myrtle Beach Resort 68.9 70.7 (2.5 ) 154.49 149.12 3.6 106.47 105.44 1.0
Embassy Suites Napa Valley 82.9 83.5 (0.7 ) 241.13 235.96 2.2 200.01 197.01 1.5
Wyndham New Orleans-French Quarter 72.5 67.1 8.1 146.47 151.79 (3.5 ) 106.26 101.89 4.3
Morgans New York 83.3 81.1 2.8 256.36 269.72 (5.0 ) 213.66 218.69 (2.3 )
Royalton New York 82.8 85.7 (3.3 ) 279.79 289.25 (3.3 ) 231.73 247.79 (6.5 )
Embassy Suites Orlando-International Drive South/Convention Center(1) 73.0 84.6 (13.7 ) 148.50 148.24 0.2 108.46 125.41 (13.5 )
DoubleTree Suites by Hilton Orlando-Lake Buena Vista 89.4 89.0 0.4 140.09 137.19 2.1 125.19 122.14 2.5
Wyndham Philadelphia Historic District 74.9 64.7 15.7 157.00 159.89 (1.8 ) 117.59 103.49 13.6
Sheraton Philadelphia Society Hill Hotel 71.9 68.9 4.4 183.69 173.67 5.8 132.10 119.64 10.4
Embassy Suites Phoenix-Biltmore 70.3 72.8 (3.4 ) 182.93 175.70 4.1 128.61 127.86 0.6
Wyndham Pittsburgh University Center 70.7 73.9 (4.4 ) 146.09 145.99 0.1 103.23 107.95 (4.4 )
Wyndham San Diego Bayside 80.5 80.8 (0.4 ) 151.67 149.51 1.4 122.03 120.76 1.0
Embassy Suites San Francisco Airport-South San Francisco 88.5 89.2 (0.8 ) 207.70 203.06 2.3 183.84 181.21 1.5
Embassy Suites San Francisco Airport-Waterfront 89.8 86.8 3.5 211.62 211.38 0.1 190.14 183.43 3.7
Holiday Inn San Francisco-Fisherman’s Wharf 88.2 87.6 0.7 216.01 214.53 0.7 190.52 187.98 1.3
San Francisco Marriott Union Square 90.8 88.1 3.1 299.42 290.28 3.1 271.86 255.72 6.3
Wyndham Santa Monica At the Pier 88.8 86.9 2.2 282.99 260.64 8.6 251.24 226.46 10.9
Embassy Suites Secaucus-Meadowlands 71.9 76.3 (5.8 ) 181.29 185.30 (2.2 ) 130.31 141.43 (7.9 )
The Vinoy Renaissance St. Petersburg Resort & Golf Club 82.7 83.4 (0.8 ) 221.93 213.32 4.0   183.63 177.95 3.2  

Same-store Hotels

80.3 80.5 (0.2 ) 193.19 189.49 2.0   155.17 152.50 1.7  
 
(1)   Hotel under renovation in 2016.
 
     

Historical Quarterly Operating Statistics

 
Occupancy (%)
Q3 2015     Q4 2015     Q1 2016     Q2 2016     Q3 2016
Same-store hotels(a) 82.9 75.7 76.4 82.8 81.8
 
ADR ($)
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Same-store hotels(a) 194.22 182.20 188.04 195.79 195.33
 
RevPAR ($)
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Same-store hotels(a) 160.95 137.86 143.65 162.03 159.78
 
(a)   Includes 37 consolidated hotels and excludes The Knickerbocker, which opened in February 2015.
 

Non-GAAP Financial Measures

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

     
Reconciliation of Net Loss to FFO and Adjusted FFO

(in thousands, except per share data)

 
Three Months Ended September 30,
2016     2015
Dollars     Shares    

Per
Share
Amount

Dollars     Shares    

Per
Share
Amount

Net loss $ (4,894 ) $ (8,133 )
Noncontrolling interests 164 288
Preferred dividends (6,279 ) (6,279 )
Preferred distributions - consolidated joint venture   (369 )   (363 )
Net loss attributable to FelCor common stockholders (11,378 ) (14,487 )
Less: Dividends declared on unvested restricted stock   (36 )   (13 )
Basic and diluted earnings per share data (11,414 ) 137,464 $ (0.08 ) (14,500 ) 142,982 $ (0.10 )
Depreciation and amortization 28,280 0.21 28,988 0.21
Depreciation, unconsolidated entities and other partnerships 456 471
Gain on sale of hotels, net of noncontrolling interests in other partnerships (4,867 ) (0.04 ) (3,682 ) (0.03 )
Impairment 20,126 0.15 20,861 0.15
Noncontrolling interests in FelCor LP (50 ) 611 (0.01 ) (61 ) 611 (0.01 )
Dividends declared on unvested restricted stock 36 85 13 32
Conversion of unvested restricted stock units     504         1,173    
FFO* 32,567 138,664 0.23 32,090 144,798 0.22
Hurricane loss 52
Debt extinguishment 14
Severance costs 6,124 0.05 3,624 0.03
Abandoned projects 5
Variable stock compensation 394 (1,086 ) (0.01 )
Litigation settlement 203
Pre-opening costs, net of noncontrolling interests   125         1,079     0.01  
Adjusted FFO* $ 39,470   138,664 $ 0.28   $ 35,721   144,798 $ 0.25  
 
*   FFO and Adjusted FFO are attributable to FelCor common stockholders and FelCor LP common unitholders other than FelCor.
 
     
Reconciliation of Net Income to FFO and Adjusted FFO

(in thousands, except per share data)

 
Nine Months Ended September 30,
2016     2015
Dollars     Shares    

Per
Share
Amount

Dollars     Shares    

Per
Share
Amount

Net income $ 3,795 $ 616
Noncontrolling interests 668 (4,255 )
Preferred distributions - consolidated joint venture (1,093 ) (1,070 )
Redemption of preferred stock (6,096 )
Preferred dividends   (18,837 )   (23,860 )
Net loss attributable to FelCor common stockholders (15,467 ) (34,665 )
Less: Dividends declared on unvested restricted stock   (109 )   (40 )
Basic and diluted earnings per share data (15,576 ) 138,437 $ (0.11 ) (34,705 ) 136,009 $ (0.26 )
Depreciation and amortization 86,640 0.63 85,510 0.63
Depreciation, unconsolidated entities and other partnerships 1,392 0.01 1,730 0.01
Other gains (100 ) (100 )
Impairment 26,459 0.19 20,861 0.15
Gain on sale of hotel in unconsolidated entity (7,113 ) (0.05 )
Gain on sale of hotels, net of noncontrolling interests in other partnerships (3,523 ) (0.04 ) (14,931 ) (0.11 )
Noncontrolling interests in FelCor LP (67 ) 611 (150 ) 611
Dividends declared on unvested restricted stock 109 35 40 37
Conversion of unvested restricted stock units     436         1,136  
FFO* 95,334 139,519 0.68 51,142 137,793 0.37
Hurricane loss 52
Debt extinguishment 30,909 0.22
Debt extinguishment, unconsolidated entities 330
Severance costs 6,151 0.05 3,624 0.03
Abandoned projects 620
Variable stock compensation 366 (161 )
Redemption of preferred stock 6,096 0.04
Contract dispute recovery (3,717 ) (0.03 )
Litigation settlement 853 0.01
Pre-opening costs, net of noncontrolling interests   371         5,125   0.05  
Adjusted FFO* $ 103,747   139,519 $ 0.74   $ 93,348   137,793 $ 0.68  
 
*   FFO and Adjusted FFO are attributable to FelCor common stockholders and FelCor LP common unitholders other than FelCor.
 
         

Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and Same-store Adjusted EBITDA

(in thousands)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Net income (loss) $ (4,894 ) $ (8,133 ) $ 3,795 $ 616
Depreciation and amortization 28,280 28,988 86,640 85,510
Depreciation, unconsolidated entities and other partnerships 456 471 1,392 1,730
Interest expense 19,446 19,608 59,101 59,379
Interest expense, unconsolidated entities and other partnerships 90 96 280 439
Income taxes (246 ) 1,392 144 1,392
Noncontrolling interests in preferred distributions, consolidated joint venture (18 ) (55 )
Noncontrolling interests in other partnerships   114     227     601     (4,405 )
EBITDA* 43,228 42,649 151,898 144,661
Impairment 20,126 20,861 26,459 20,861
Hurricane loss 52 52
Debt extinguishment 14 30,909
Debt extinguishment, unconsolidated entities 330
Gain on sale of hotel in unconsolidated entity (7,113 )
Gain on sale of hotels, net of noncontrolling interests in other partnerships (4,867 ) (3,682 ) (3,523 ) (14,931 )
Other gains (100 ) (100 )
Amortization of fixed stock and directors’ compensation 1,711 1,652 5,338 5,214
Severance costs 6,124 3,624 6,151 3,624
Abandoned projects 5 620
Variable stock compensation 394 (1,086 ) 366 (161 )
Contract dispute recovery (3,717 )
Litigation settlement 203 853
Pre-opening costs, net of noncontrolling interests   125     1,079     371     5,125  
Adjusted EBITDA* 67,101 65,111 188,485 184,702
Adjusted EBITDA from hotels disposed and recently opened   (2,936 )   (1,153 )   (14,088 )   (14,482 )
Same-store Adjusted EBITDA* $ 64,165   $ 63,958   $ 174,397   $ 170,220  
 
*   EBITDA, Adjusted EBITDA and Same-store Adjusted EBITDA are attributable to FelCor common stockholders and FelCor LP unitholders other than FelCor.
 
         
Hotel EBITDA and Hotel EBITDA Margin

(dollars in thousands)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Same-store operating revenue:
Room $ 161,682 $ 162,871 $ 467,631 $ 457,925
Food and beverage 30,727 29,257 97,526 95,997
Other operating departments   12,413     11,014     33,272     31,643  
Same-store operating revenue 204,822 203,142 598,429 585,565
 
Same-store operating expense:
Room 40,191 39,975 117,910 113,902
Food and beverage 24,441 23,776 74,882 73,547
Other operating departments 3,678 4,139 10,853 11,766
Other property related costs 48,113 49,035 145,333 143,409
Management and franchise fees 7,748 8,344 23,608 23,681
Taxes, insurance and lease expense   13,730     10,483     39,287     35,796  
Same-store operating expense   137,901     135,752     411,873     402,101  
Hotel EBITDA $ 66,921   $ 67,390   $ 186,556   $ 183,464  
Hotel EBITDA Margin 32.7 % 33.2 % 31.2 % 31.3 %
 

The following tables set forth the components of our Hotel EBITDA for our same-store hotels (dollars in thousands):

       

Three months ended September 30, 2016

Same-store Hotels

Hotel Operating
Revenue

   

Net Income
(Loss)

   

Other
Adjustments

    Depreciation    

Interest
Expense

   

Hotel
EBITDA

   

Hotel EBITDA
Margin

Embassy Suites Atlanta-Buckhead $ 3,914 $ 1,077 $   $ 536 $ $ 1,613 41.2 %
DoubleTree Suites by Hilton Austin 3,260 635 485 156 1,276 39.1 %
Embassy Suites Birmingham 2,444 115 394 299 808 33.1 %
The Fairmont Copley Plaza, Boston 15,680 1,246 2,217 399 3,862 24.6 %
Wyndham Boston Beacon Hill 6,813 2,241 993 3,234 47.5 %
Embassy Suites Boston-Marlborough 3,036 712 294 1,006 33.1 %
Sheraton Burlington Hotel & Conference Center 4,479 1,091 616 1,707 38.1 %
The Mills House Wyndham Grand Hotel, Charleston 4,838 1,179 626 205 2,010 41.5 %
Embassy Suites Dallas-Love Field 2,432 274 371 645 26.5 %
Embassy Suites Deerfield Beach-Resort & Spa 3,196 (233 ) 471 399 637 19.9 %
Embassy Suites Fort Lauderdale 17th Street 4,358 (317 ) 692 450 825 18.9 %
Wyndham Houston-Medical Center Hotel & Suites 2,855 623

(19)

 

531 1,135 39.8 %
Embassy Suites Los Angeles-International Airport/South 6,154 1,810 630 234 2,674 43.5 %
Embassy Suites Mandalay Beach-Hotel & Resort 6,831 2,285 774 3,059 44.8 %
Embassy Suites Miami-International Airport 3,577 (40 ) 463 423 11.8 %
Embassy Suites Milpitas-Silicon Valley 4,704 1,569 301 1,870 39.8 %
Embassy Suites Minneapolis-Airport 4,241 939 423 475 1,837 43.3 %
Embassy Suites Myrtle Beach-Oceanfront Resort 8,198 2,527 5 653 3,185 38.9 %
Hilton Myrtle Beach Resort 8,870 3,458 895 4,353 49.1 %
Embassy Suites Napa Valley 5,059 1,540 509 347 2,396 47.4 %
Wyndham New Orleans-French Quarter 3,216 451 726 1,177 36.6 %
Morgans New York 2,730 (20,751 )

20,226

(1)

646 121 4.4 %
Royalton New York 4,650 (1,029 ) 144 591 (294 ) (6.3 )%
Embassy Suites Orlando-International Drive South/Convention Center 1,742 22 275 297 17.0 %
DoubleTree Suites by Hilton Orlando-Lake Buena Vista 2,541 (295 ) 776 481 18.9 %
Wyndham Philadelphia Historic District 5,873 1,907 727 2,634 44.8 %
Sheraton Philadelphia Society Hill Hotel 8,180 2,004 974 2,978 36.4 %
Embassy Suites Phoenix-Biltmore 1,901 (130 ) 431 301 15.8 %
Wyndham Pittsburgh University Center 3,305 826 506 1,332 40.3 %
Wyndham San Diego Bayside 8,921 1,357 1,556 2,913 32.7 %
Embassy Suites San Francisco Airport-South San Francisco 6,563 2,242 417 2,659 40.5 %
Embassy Suites San Francisco Airport-Waterfront 7,360 1,754 203 764 2,721 37.0 %
Holiday Inn San Francisco-Fisherman’s Wharf 13,506 2,900 543 3,443 25.5 %
San Francisco Marriott Union Square 10,868 1,509

(1)

 

1,293 480 3,281 30.2 %
Wyndham Santa Monica At the Pier 3,842 1,841 270 162 2,273 59.2 %
Embassy Suites Secaucus-Meadowlands 3,686 727 101 828 22.5 %
The Vinoy Renaissance St. Petersburg Resort & Golf Club   10,999   (725 )   181       1,424   341   1,221   11.1 %
$ 204,822 $ 17,341   $ 20,739     $ 24,894 $ 3,947 $ 66,921   32.7 %
 
           

Three months ended September 30, 2015

Same-store Hotels

Hotel Operating
Revenue

   

Net Income
(Loss)

   

Other
Adjustments

    Depreciation    

Interest
Expense

   

Hotel
EBITDA

Hotel EBITDA
Margin

Embassy Suites Atlanta-Buckhead $ 3,809 $ 936 $ $ 637 $ $ 1,573 41.3 %
DoubleTree Suites by Hilton Austin 3,366 580 492 188 1,260 37.4 %
Embassy Suites Birmingham 2,505 166 396 304 866 34.6 %
The Fairmont Copley Plaza, Boston 15,366 1,280 2,173 482 3,935 25.6 %
Wyndham Boston Beacon Hill 7,449 2,314 1,036 3,350 45.0 %
Embassy Suites Boston-Marlborough 3,195 829 289 1,118 35.0 %
Sheraton Burlington Hotel & Conference Center 3,908 765 615 1,380 35.3 %
The Mills House Wyndham Grand Hotel, Charleston 4,496 756 635 248 1,639 36.5 %
Embassy Suites Dallas-Love Field 3,020 598 341 939 31.1 %
Embassy Suites Deerfield Beach-Resort & Spa 3,259 (329 ) 499 406 576 17.7 %
Embassy Suites Fort Lauderdale 17th Street 4,071 (544 ) 741 457 654 16.1 %
Wyndham Houston-Medical Center Hotel & Suites 3,607 830 (20 ) 537 1,347 37.3 %
Embassy Suites Los Angeles-International Airport/South 5,652 1,609 658 283 2,550 45.1 %
Embassy Suites Mandalay Beach-Hotel & Resort 6,414 2,199 776 2,975 46.4 %
Embassy Suites Miami-International Airport 3,752 (49 ) 479 430 11.5 %
Embassy Suites Milpitas-Silicon Valley 4,705 1,578 301 1,879 39.9 %
Embassy Suites Minneapolis-Airport 4,062 799 459 483 1,741 42.9 %
Embassy Suites Myrtle Beach-Oceanfront Resort 7,845 2,374 698 3,072 39.2 %
Hilton Myrtle Beach Resort 8,525 3,345 843 4,188 49.1 %
Embassy Suites Napa Valley 5,146 1,661 (31 ) 518 353 2,501 48.6 %
Wyndham New Orleans-French Quarter 3,048 181 717 898 29.5 %
Morgans New York 2,775 (464 ) 623 159 5.7 %
Royalton New York 5,007 (604 ) 570 (34 ) (0.7 )%
Embassy Suites Orlando-International Drive South/Convention Center 2,379 250 272 522 21.9 %
DoubleTree Suites by Hilton Orlando-Lake Buena Vista 2,460 (501 ) 790 289 11.7 %
Wyndham Philadelphia Historic District 4,955 977 759 1,736 35.0 %
Sheraton Philadelphia Society Hill Hotel 6,186 849 985 1,834 29.6 %
Embassy Suites Phoenix-Biltmore 1,899 (194 ) 455 261 13.7 %
Wyndham Pittsburgh University Center 3,541 758 524 1,282 36.2 %
Wyndham San Diego Bayside 8,740 976 1,581 2,557 29.3 %
Embassy Suites San Francisco Airport-South San Francisco 6,991 2,612 407 3,019 43.2 %
Embassy Suites San Francisco Airport-Waterfront 7,130 1,984 743 2,727 38.2 %
Holiday Inn San Francisco-Fisherman’s Wharf 14,023 3,605 425 4,030 28.7 %
San Francisco Marriott Union Square 11,731 4,484 (1 ) 1,411 580 6,474 55.2 %
Wyndham Santa Monica At the Pier 3,565 1,548 290 196 2,034 57.1 %
Embassy Suites Secaucus-Meadowlands 3,731 874 110 984 26.4 %
The Vinoy Renaissance St. Petersburg Resort & Golf Club   10,829   (1,230 )   4     1,459   412 645   6.0 %
$ 203,142 $ 37,802   $ (48 ) $ 25,244 $ 4,392 $ 67,390   33.2 %
 

The following tables set forth the components of our Hotel EBITDA for our same-store hotels (dollars in thousands):

       

Nine months ended September 30, 2016

Same-store Hotels

Hotel Operating
Revenue

   

Net Income
(Loss)

   

Other
Adjustments

    Depreciation    

Interest
Expense

   

Hotel
EBITDA

   

Hotel EBITDA
Margin

Embassy Suites Atlanta-Buckhead $ 11,886 $ 3,114 $   $ 1,774 $ $ 4,888 41.1 %
DoubleTree Suites by Hilton Austin 11,150 2,793 1,459 528 4,780 42.9 %
Embassy Suites Birmingham 7,673 709 1 1,178 894 2,782 36.3 %
The Fairmont Copley Plaza, Boston 43,494 489

(91)

 

6,594 1,349 8,341 19.2 %
Wyndham Boston Beacon Hill 17,292 4,224 2,965 7,189 41.6 %
Embassy Suites Boston-Marlborough 8,807 1,935 888 2,823 32.1 %
Sheraton Burlington Hotel & Conference Center 11,162 1,270 1,859 3,129 28.0 %
The Mills House Wyndham Grand Hotel, Charleston 15,967 4,357 1,895 694 6,946 43.5 %
Embassy Suites Dallas-Love Field 8,416 1,450 1,057 2,507 29.8 %
Embassy Suites Deerfield Beach-Resort & Spa 13,638 2,297 1,423 1,195 4,915 36.0 %
Embassy Suites Fort Lauderdale 17th Street 17,422 2,397 1 2,115 1,345 5,858 33.6 %
Wyndham Houston-Medical Center Hotel & Suites 10,507 3,183

(57)

 

1,635 4,761 45.3 %
Embassy Suites Los Angeles-International Airport/South 17,374 4,368 1,906 792 7,066 40.7 %
Embassy Suites Mandalay Beach-Hotel & Resort 17,331 4,833 2,316 7,149 41.2 %
Embassy Suites Miami-International Airport 13,634 2,135 1,390 3,525 25.9 %
Embassy Suites Milpitas-Silicon Valley 14,182 4,639 904 5,543 39.1 %
Embassy Suites Minneapolis-Airport 10,792 1,286 1 1,300 1,420 4,007 37.1 %
Embassy Suites Myrtle Beach-Oceanfront Resort 19,237 3,871 232 1,986 6,089 31.7 %
Hilton Myrtle Beach Resort 18,568 4,388 2,618 7,006 37.7 %
Embassy Suites Napa Valley 13,126 2,786 1 1,544 1,038 5,369 40.9 %
Wyndham New Orleans-French Quarter 12,156 3,152 2,163 5,315 43.7 %
Morgans New York 7,278 (22,797 )

20,517

(1)

1,912 (368 ) (5.1 )%
Royalton New York 14,038 (2,951 ) 437 1,753 (761 ) (5.4 )%
Embassy Suites Orlando-International Drive South/Convention Center 7,627 1,427 815 2,242 29.4 %
DoubleTree Suites by Hilton Orlando-Lake Buena Vista 9,702 293 2,316 2,609 26.9 %
Wyndham Philadelphia Historic District 14,720 3,214 10 2,211 5,435 36.9 %
Sheraton Philadelphia Society Hill Hotel 20,560 3,273 2,927 6,200 30.2 %
Embassy Suites Phoenix-Biltmore 8,701 1,909 1,300 3,209 36.9 %
Wyndham Pittsburgh University Center 8,916 1,310 3 1,541 2,854 32.0 %
Wyndham San Diego Bayside 24,163 2,687 4,687 7,374 30.5 %
Embassy Suites San Francisco Airport-South San Francisco 18,586 5,625 1,245 6,870 37.0 %
Embassy Suites San Francisco Airport-Waterfront 20,893 4,267 853 2,276 7,396 35.4 %
Holiday Inn San Francisco-Fisherman’s Wharf 33,887 4,642 1,519 6,161 18.2 %
San Francisco Marriott Union Square 33,612 5,254

(105)

 

4,005 1,623 10,777 32.1 %
Wyndham Santa Monica At the Pier 9,919 4,148 1 831 548 5,528 55.7 %
Embassy Suites Secaucus-Meadowlands 9,824 1,270 1 344 1,615 16.4 %
The Vinoy Renaissance St. Petersburg Resort & Golf Club   42,189   3,567     413       4,294   1,153   9,427   22.3 %
$ 598,429 $ 76,814   $ 22,218     $ 74,945 $ 12,579 $ 186,556   31.2 %
 
           

Nine months ended September 30, 2015

Same-store Hotels

Hotel Operating
Revenue

   

Net Income
(Loss)

   

Other
Adjustments

    Depreciation    

Interest
Expense

   

Hotel
EBITDA

Hotel EBITDA
Margin

Embassy Suites Atlanta-Buckhead $ 11,371 $ 2,793 $ $ 1,924 $ $ 4,717 41.5 %
DoubleTree Suites by Hilton Austin 11,223 3,073 1,469 258 4,800 42.8 %
Embassy Suites Birmingham 7,535 692 1 1,179 906 2,778 36.9 %
The Fairmont Copley Plaza, Boston 42,709 1,726 6,505 661 8,892 20.8 %
Wyndham Boston Beacon Hill 18,154 4,345 3,038 7,383 40.7 %
Embassy Suites Boston-Marlborough 9,190 2,229 872 3,101 33.7 %
Sheraton Burlington Hotel & Conference Center 10,554 1,011 1,801 2,812 26.6 %
The Mills House Wyndham Grand Hotel, Charleston 14,953 3,489 22 1,861 676 6,048 40.4 %
Embassy Suites Dallas-Love Field 9,205 1,989 1,018 3,007 32.7 %
Embassy Suites Deerfield Beach-Resort & Spa 13,981 2,413 1,575 1,210 5,198 37.2 %
Embassy Suites Fort Lauderdale 17th Street 16,607 1,823 1 2,222 1,362 5,408 32.6 %
Wyndham Houston-Medical Center Hotel & Suites 10,943 3,063 (50 ) 1,619 210 4,842 44.2 %
Embassy Suites Los Angeles-International Airport/South 15,335 4,076 1,965 388 6,429 41.9 %
Embassy Suites Mandalay Beach-Hotel & Resort 15,731 3,458 24 2,402 372 6,256 39.8 %
Embassy Suites Miami-International Airport 14,135 2,070 20 1,468 308 3,866 27.4 %
Embassy Suites Milpitas-Silicon Valley 13,768 4,435 928 5,363 39.0 %
Embassy Suites Minneapolis-Airport 10,566 1,140 1 1,385 1,439 3,965 37.5 %
Embassy Suites Myrtle Beach-Oceanfront Resort 18,256 3,144 24 2,176 368 5,712 31.3 %
Hilton Myrtle Beach Resort 18,272 4,455 2,528 6,983 38.2 %
Embassy Suites Napa Valley 12,840 2,749 (26 ) 1,558 1,052 5,333 41.5 %
Wyndham New Orleans-French Quarter 11,737 1,848 537 2,132 529 5,046 43.0 %
Morgans New York 7,237 (2,134 ) 1,858 (276 ) (3.8 )%
Royalton New York 14,638 (1,853 ) 1,695 (158 ) (1.1 )%
Embassy Suites Orlando-International Drive South/Convention Center 8,524 1,830 828 2,658 31.2 %
DoubleTree Suites by Hilton Orlando-Lake Buena Vista 9,280 (30 ) 2,395 2,365 25.5 %
Wyndham Philadelphia Historic District 12,996 1,434 19 2,336 287 4,076 31.4 %
Sheraton Philadelphia Society Hill Hotel 18,564 2,010 2,998 5,008 27.0 %
Embassy Suites Phoenix-Biltmore 8,499 1,045 276 1,385 279 2,985 35.1 %
Wyndham Pittsburgh University Center 9,230 1,029 16 1,601 251 2,897 31.4 %
Wyndham San Diego Bayside 24,523 2,118 4,825 6,943 28.3 %
Embassy Suites San Francisco Airport-South San Francisco 18,552 5,888 1,227 7,115 38.4 %
Embassy Suites San Francisco Airport-Waterfront 20,167 8,669

(3,717

)

(2)

2,231 7,183 35.6 %
Holiday Inn San Francisco-Fisherman’s Wharf 33,640 5,440 1,248 6,688 19.9 %
San Francisco Marriott Union Square 32,232 4,979

1,062

(3)

4,245 1,963 12,249 38.0 %
Wyndham Santa Monica At the Pier 8,915 3,365 24 846 633 4,868 54.6 %
Embassy Suites Secaucus-Meadowlands 10,657 2,100 5 405 2,510 23.6 %
The Vinoy Renaissance St. Petersburg Resort & Golf Club   40,846   3,517           4,332   565   8,414   20.6 %
$ 585,565 $ 95,428   $ (1,761 )   $ 76,080 $ 13,717 $ 183,464   31.3 %
 

The following are footnotes to the Hotel EBITDA tables on pages 19 - 22:

(1)   Amount primarily represents an impairment.
(2) Amount represents net revenue attributable to a favorable settlement of a commercial dispute.
(3) Amount primarily represents debt extinguishment charges.
 
         

Reconciliation of Same-store Operating Revenue and Same-store Operating Expense to Total Revenue, Total Operating Expense and Operating Income

(in thousands)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Same-store operating revenue $ 204,822

$

203,142

$ 598,429 $ 585,565
Other revenue 1,809 1,678 3,641 7,142
Revenue from hotels disposed and recently opened(a)   16,350     20,332     68,961     87,243  
Total revenue 222,981 225,152 671,031 679,950
Same-store operating expense 137,901 135,752 411,873 402,101
Consolidated hotel lease expense(b) 1,488 1,524 3,648 5,762
Unconsolidated taxes, insurance and lease expense (517 ) (168 ) (1,486 ) (1,681 )
Corporate expenses 6,244 4,672 20,691 19,775
Depreciation and amortization 28,280 28,988 86,640 85,510
Impairment 20,126 20,861 26,459 20,861
Expenses from hotels disposed and recently opened(a) 13,271 19,153 54,670 71,957
Other expenses   7,581     5,807     10,551     11,446  
Total operating expense   214,374     216,589     613,046     615,731  
Operating income $ 8,607   $ 8,563   $ 57,985   $ 64,219  
 
(a)   We include the operating performance for hotels in continuing operations in our Consolidated Statements of Operations. However, for purposes of our non-GAAP reporting metrics, we have excluded the results of these hotels to provide a meaningful same-store comparison.
(b) Consolidated hotel lease expense represents the percentage lease expense of our 51%-owned operating lessees. The offsetting percentage lease revenue is included in equity in income from unconsolidated entities.
 
     

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

(in millions, except per share data)

 
Full Year 2016 Guidance
Low     High
Dollars    

Per Share
Amount(a)

Dollars    

Per Share
Amount(a)

Net income attributable to FelCor(b) $ 0.6 $ 4.6
Preferred dividends   (25.1 )   (25.1 )
Net loss attributable to FelCor common stockholders (24.5 ) $ (0.18 ) (20.5 ) $ (0.15 )
Depreciation(c) 115.3 115.3
Gain on sale of assets (3.6 ) (3.6 )
Impairment 26.5 26.5
Noncontrolling interests in FelCor LP   (0.1 )   (0.1 )
FFO $ 113.6   $ 0.81 $ 117.6   $ 0.84
Abandoned project costs 0.6 0.6
Pre-opening costs 0.4 0.4
Litigation settlement 0.9 0.9
Hurricane loss 0.1 0.1
Variable stock compensation 0.4 0.4
Severance costs   6.2     6.2  
Adjusted FFO $ 122.2   $ 0.88 $ 126.2   $ 0.90
 
Net income attributable to FelCor(b) $ 0.6 $ 4.6
Depreciation(c) 115.3 115.3
Noncontrolling interests in FelCor LP (0.1 ) (0.1 )
Interest expense(c) 80.1 80.1
Income taxes 0.4 0.4
Preferred distributions - consolidated joint venture   1.4     1.4  
EBITDA $ 197.7 $ 201.7
Gain on sale of assets (3.6 ) (3.6 )
Abandoned project costs 0.6 0.6
Impairment 26.5 26.5
Litigation settlement 0.9 0.9
Hurricane loss 0.1 0.1
Pre-opening costs 0.4 0.4
Amortization of fixed stock and directors’ compensation 6.8 6.8
Variable stock compensation 0.4 0.4
Severance costs   6.2     6.2  
Adjusted EBITDA $ 236.0   $ 240.0  
 
(a)   Weighted average shares are 139.5 million.
(b) Excludes any gains or losses on future asset or capital transactions.
(c) 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 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 National Association of Real Estate Investment Trusts (“NAREIT”) defines Funds From Operations (“FFO”) as net income or loss attributable to parent (computed in accordance with GAAP), excluding gains or losses from sales of property, plus depreciation, amortization and impairment losses. FFO for unconsolidated partnerships and joint ventures are calculated 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.

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) is a commonly used measure of performance in many industries. We define EBITDA as net income or loss attributable to parent (computed in accordance with GAAP) plus interest expenses, income taxes, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA on the same basis.

Adjustments to FFO and EBITDA

We adjust FFO and EBITDA when evaluating our performance because management believes that the exclusion of certain additional items 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 Adjusted FFO and Adjusted 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.

  • 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.
  • Other expenses and costs - From time to time, we periodically incur expenses or transaction costs that are not indicative of ongoing operating performance. Such costs include, but are not limited to, conversion costs, acquisition costs, pre-opening costs, severance costs and certain non-cash adjustments. We exclude these costs from the calculation of Adjusted FFO and Adjusted EBITDA.
  • Variable stock compensation - We exclude the cost associated with our variable stock compensation. This cost is subject to volatility related to the price and dividends of our common stock that does not necessarily correspond to our operating performance.

In addition, to derive Adjusted EBITDA, we exclude gains or losses on the sale of depreciable assets and impairment losses because including them in EBITDA is inconsistent with reporting the ongoing performance of our remaining assets. Additionally, the gain or loss on sale of depreciable assets and impairment losses represents either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA. We also exclude the amortization of our fixed stock and directors’ compensation, which is included in corporate expenses and is not separately stated on our statements of operations. Excluding amortization of our fixed stock and directors’ compensation maintains consistency with the EBITDA definition.

Hotel EBITDA and Hotel EBITDA Margin

Hotel EBITDA and Hotel EBITDA margin are commonly used measures of performance in the hotel industry and give investors a more complete understanding of the operating results over which our individual hotels and brand/managers have direct control. We believe that Hotel EBITDA and Hotel EBITDA margin are useful to investors by providing greater transparency with respect to two significant measures that we use in our financial and operational decision-making. Additionally, using these measures facilitates comparisons with other hotel REITs and hotel owners. We present Hotel EBITDA and Hotel EBITDA margin in a manner consistent with Adjusted EBITDA, however, we also eliminate all revenues and expenses from continuing operations not directly associated with hotel operations, including other income and corporate-level expenses. We eliminate these additional items because we believe property-level results provide investors with supplemental information regarding the ongoing operational performance of our hotels and the effectiveness of management on a property-level basis. We also eliminate consolidated percentage rent paid to unconsolidated entities, which is effectively eliminated by noncontrolling interests and equity in income from unconsolidated subsidiaries, and include the cost of unconsolidated taxes, insurance and lease expense, to reflect the entire operating costs applicable to our consolidated hotels. Hotel EBITDA and Hotel EBITDA margins are presented on a same-store basis.

Use and Limitations of Non-GAAP Measures

We use FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin to evaluate the performance of our hotels and to facilitate comparisons between us and other hotel 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. As we present them, these non-GAAP financial measures may not be comparable to similar non-GAAP financial measures as presented by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. We compensate for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

Source: FelCor Lodging Trust Incorporated

FelCor Lodging Trust Incorporated
Abi Salami, 972-444-4967
Manager, Investor Relations
asalami@felcor.com