FelCor Reports First Quarter Results
FelCor Reports First Quarter Results
• Core RevPAR increased 6.7% and core hotel EBITDA increased 13%
• Asset sale program progressing as planned
- RevPAR for 45 core hotels increased 6.7%.
- Total revenue increased 6.1%, driven by a 5.5% increase in RevPAR at 65 same-store hotels.
- Same-store Adjusted EBITDA was $37.7 million, a 13.3% increase.
- Adjusted FFO per share improved to a loss of $0.01 and net loss per share was $0.29.
- Currently under negotiations or have agreed to sell six non-strategic hotels.
Commenting on operating results, Richard A. Smith, President and Chief Executive Officer of FelCor, said, "I am very pleased with our performance during the quarter. Our high quality, diverse portfolio continues to produce strong results. Industry fundamentals remain very favorable, as demand growth remains robust and supply growth remains historically low. We expect these trends to continue for the foreseeable future, which will provide favorable conditions for sustained RevPAR growth."
Added Mr. Smith, "We continue to make substantial progress toward completing the transformation and repositioning of FelCor, building a first-class REIT and driving stockholder value. We have sold 19 of 39 non-strategic hotels, with six more either under contract or in negotiations. Our portfolio has improved significantly, as more than 90% of our EBITDA is now generated by upper upscale and luxury hotels strategically located around the country in gateway and resort markets with high barriers-to-entry and dynamic demand generators. We have also strengthened our balance sheet significantly. As asset sales continue and EBITDA increases, we are building greater financial flexibility and leverage will continue to decline."
Summary of First Quarter Operating Results:
|$ in millions, except for per share information||2013||2012||Change|
|Same-store Adjusted EBITDA||$||37.7||$||33.3||13.3||%|
|Adjusted FFO per share||$||(0.01||)||$||(0.02||)||$||0.01|
|Net loss per share||$||(0.29||)||$||(0.31||)||$||0.02|
Revenue per available room ("RevPAR") for 65 same-store hotels was $100.17, a 5.5% increase compared to the same period in 2012. The increase reflects a 5.0% increase in average daily rate ("ADR") to $143.90 and a 30 basis point increase in occupancy to 69.6%. RevPAR for our 45 core hotels increased 6.7%, while RevPAR for our 20 non-strategic hotels increased 1.2%. RevPAR at the six newly-acquired and recently-redeveloped hotels increased 17.8% during the quarter. Total revenue increased 6.1% from the same period in 2012.
Hotel EBITDA was $48.0 million, 8.3% higher than the same period in 2012. Hotel EBITDA margin was 21.8% during the quarter, a 44 basis point increase from the same period in 2012. Adjusted EBITDA (which includes Adjusted EBITDA for sold hotels prior to sale) was $37.7 million compared to $41.4 million for the same period in 2012.
Adjusted funds from operations ("Adjusted FFO") was a loss of $773,000, or $0.01 per share, compared to a loss of $0.02 per share in 2012. Net loss attributable to common stockholders was $35.9 million, or $0.29 per share for the quarter ended March 31, 2013, compared to a net loss of $38.1 million, or $0.31 per share, for the same period in 2012.
Summary of Core Hotel Results:
|Hotel EBITDA, in millions||$||37.0||$||32.8||12.6||%|
|Hotel EBITDA margin||21.0||%||20.1||%||91|
Total revenue for our 45 core hotels increased 7.7% compared to the same period in 2012, driven by a 6.7% increase in RevPAR to $106.16. The increase in RevPAR reflects a 6.0% increase in ADR to $154.23 and a 40 basis point increase in occupancy to 68.8%. Hotel EBITDA at our core hotels increased 12.6% to $37.0 million. Hotel EBITDA margin at our core hotels was 21.0% during the quarter, a 91 basis point increase compared to the same period in 2012.
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 18 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.
To date, we have sold 19 of 39 non-strategic hotels as part of our portfolio repositioning plan. We are currently marketing 11 non-strategic hotels and are evaluating offers or have agreed to sell six of those, including one under contract. We will use the proceeds from dispositions to repay debt and reduce leverage. The other nine non-strategic hotels are owned by joint ventures, and we are progressing on discussions with our partners to facilitate marketing those properties.
In March, we successfully re-branded and transitioned management at eight Holiday Inn hotels to Wyndham brands. Wyndham Worldwide Corporation is providing a $100 million guaranty over the 10-year term of the agreement, with an annual guaranty of up to $21.5 million, that ensures a minimum annual NOI for the eight hotels. In addition, the management fee structure is more consistent with prevailing industry practices, and we expect to save approximately $50 million in management fees over the initial term. The guaranty protects approximately 20% of our core hotel-level EBITDA from future lodging cycle fluctuations, in addition to ensuring a return on investment that is superior to the hotels' historical performance.
Capital expenditures at our operating hotels (including our pro rata share of joint ventures), were $23.5 million during the quarter (including approximately $6.4 million for redevelopment projects and repositioning the eight Wyndham hotels).
During 2013, we anticipate investing approximately $65 million on capital improvements and renovations, concentrated mostly at seven hotels, as part of our 20-year capital plan. In addition, we anticipate investing approximately $40 million on redevelopment projects (excluding Knickerbocker) and repositioning the Wyndham hotels. Please see page 12 of this release for more detail on renovations.
Through March 31, 2013, we have spent $35 million to redevelop the 4+ star Knickerbocker Hotel, in midtown Manhattan. The project remains on budget and is scheduled to open in early 2014.
At March 31, 2013, we had $1.7 billion of consolidated debt bearing a weighted-average interest rate of 6.3% (approximately 120 basis points below last year). Our debt has a weighted-average maturity of seven years, and none of our debt matures before June 2014. We had $61.8 million of cash and cash equivalents at March 31, 2013. In addition, at March 31, 2013 we had $77.1 million of restricted cash, of which $64.9 million secures our Knickerbocker construction loan.
Andrew J. Welch, FelCor's Executive Vice President and Chief Financial Officer, said, "Our balance sheet is stronger today because of our low borrowing costs, extended weighted-average debt maturity and ample liquidity. We are committed to making our balance sheet even stronger, as we repay higher-cost debt with net sale proceeds, further improve our maturity profile and continue to reduce our overall leverage."
Our 2013 outlook assumes continued strength in lodging fundamentals and has been updated to reflect first quarter results and timing of asset sales. Our outlook reflects selling all 11 hotels during 2013. The low-end of our outlook assumes all sales occur in June, and the high-end of our outlook assumes all sales close at the beginning of the fourth quarter.
During 2013, we anticipate:
- Same-store RevPAR to increase between 5-6%;
- Adjusted EBITDA to be between $190.5 million and $205.0 million;
- Adjusted FFO per share to be between $0.33 and $0.43;
- Net loss attributable to FelCor to be between $59 million and $51 million; and
- Interest expense, including pro rata share of joint ventures, to be between $104 million and $106 million.
The following table reconciles our 2013 Adjusted EBITDA to Same-store Adjusted EBITDA outlook (in millions):
|Previous Adjusted EBITDA Outlook (65 hotels)||$||203.5||$||208.5|
|Adjusted EBITDA Outlook (65 hotels)||$||204.0||$||208.5|
|EBITDA of sold hotels from closing to December 31(a)||(13.5||)||(3.5||)|
|Adjusted EBITDA Outlook (54 hotels)||$||190.5||$||205.0|
|Same-store Adjusted EBITDA (54 hotels)||$||178.0||$||182.5|
|EBITDA of 11 hotels assumed to be sold during 2013 that would have been recognized from the dates of sale through December 31, 2013.|
|(b)||EBITDA of 11 hotels assumed to be sold during 2013 that is forecasted to be generated from January 1, 2013 through the dates of sale.|
FelCor, a real estate investment trust, owns a diversified portfolio of primarily upper-upscale and luxury hotels that are located in major and resort markets. FelCor partners with leading hotel companies to operate its 66 hotels, which are flagged under globally renowned brands and premier independent hotels. Additional information can be found on the Company's website at www.felcor.com.
We invite you to listen to our first quarter earnings Conference Call on Tuesday, April 30, 2013 at 10:30 a.m. (Central Time). The conference call will be webcast simultaneously on FelCor's 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 conference call microphone icon on the "Investor Relations" page. The conference call replay also will 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.
The following information is presented in order to help our investors understand FelCor's financial position as of and for the three months ended March 31, 2013.
TABLE OF CONTENTS
|Consolidated Statements of Operations(a)||7|
|Consolidated Balance Sheets(a)||8|
|Consolidated Debt Summary||9|
|Schedule of Encumbered Hotels||10|
|Hotels Under Renovation or Redevelopment During 2013||11|
|Supplemental Financial Data||12|
|Hotel Portfolio Composition||14|
|Hotel Operating Statistics by Brand||15|
|Hotel Operating Statistics by Market||16|
|Historical Quarterly Operating Statistics||17|
|Non-GAAP Financial Measures||18|
|(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 Annual Report on Form 10-K.|
|Consolidated Statements of Operations|
(in thousands, except per share data)
|Three Months Ended|
|Hotel operating revenue:|
|Food and beverage||38,464||34,821|
|Other operating departments||11,448||11,090|
|Hotel departmental expenses:|
|Food and beverage||31,462||28,345|
|Other operating departments||5,480||5,445|
|Other property-related costs||63,108||60,482|
|Management and franchise fees||9,654||9,778|
|Taxes, insurance and lease expense||22,667||21,710|
|Depreciation and amortization||31,570||30,068|
|Total operating expenses||220,815||209,974|
|Interest expense, net||(26,483||)||(30,814||)|
|Loss before equity in income (loss) from unconsolidated entities||(26,608||)||(32,830||)|
|Equity in income (loss) from unconsolidated entities||89||(224||)|
|Loss from continuing operations||(26,519||)||(33,054||)|
|Income (loss) from discontinued operations||(86||)||4,193|
|Net loss attributable to noncontrolling interests in other partnerships||240||202|
|Net loss attributable to redeemable noncontrolling interests in FelCor LP||180||196|
|Net loss attributable to FelCor||(26,185||)||(28,463||)|
|Net loss attributable to FelCor common stockholders||$||(35,863||)||$||(38,141||)|
|Basic and diluted per common share data:|
|Loss from continuing operations||$||(0.29||)||$||(0.34||)|
|Basic and diluted weighted average common shares outstanding||123,814||123,665|
|Consolidated Balance Sheets|
|March 31,||December 31,|
|Investment in hotels, net of accumulated depreciation of $948,095 and $929,298 at March 31, 2013 and December 31, 2012, respectively||$||1,787,016||$||1,794,564|
|Investment in unconsolidated entities||52,867||55,082|
|Cash and cash equivalents||61,796||45,745|
|Accounts receivable, net of allowance for doubtful accounts of $243 and $469 at March 31, 2013 and December 31, 2012, respectively||34,293||25,383|
|Deferred expenses, net of accumulated amortization of $15,438 and $13,820 at March 31, 2013 and December 31, 2012, respectively||34,035||34,262|
|Liabilities and Equity|
|Debt, net of discount of $8,985 and $10,318 at March 31, 2013 and December 31, 2012, respectively||$||1,683,756||$||1,630,525|
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