FelCor Reports Second Quarter Results
FelCor Reports Second Quarter Results
Negotiating or Under Contract to Sell Five Hotels for $120 million
- Adjusted FFO per share improved to $0.21.
- Total revenue for comparable hotels (same-store hotels excluding eight recently rebranded Wyndham hotels) increased 6.3%.
- RevPAR for comparable hotels increased 5.7%.
- Adjusted EBITDA was $64.6 million.
- Net loss per share was $0.23.
- Sold two hotels since the first quarter.
- Entered into contracts to sell three hotels (one with a non-refundable deposit) and are negotiating to sell two others.
Commenting on operating results, Richard A. Smith, President and Chief Executive Officer of FelCor, said, "Our high quality, diverse portfolio produced strong results during the second quarter, building on our momentum for the year. As the U.S. economy continues to improve, and demand for hotel rooms outpaces new supply, our industry should experience solid growth. Our portfolio is well-positioned to take advantage of this trend and outperformed the industry in the second quarter, as RevPAR at our comparable hotels increased 5.7%. Furthermore, FelCor is the only hotel REIT which has outperformed the upper-upscale segment over the past five years."
Mr. Smith added, "We continue to make substantial progress transforming FelCor and repositioning the company, to provide sustainable and growing stockholder value. We have sold 21 hotels and are currently marketing nine, three of which are under contract and two of which have contracts under negotiations. We continue to strengthen our balance sheet through asset sales and EBITDA growth. As a result, we have created greater financial flexibility, which will continue to improve as our leverage decreases."
Summary of Second Quarter Hotel Results:
|Comparable hotels (55)|
|Total hotel revenue, in millions||$||219.1||$||206.1||6.3||%|
|Hotel EBITDA, in millions||$||61.7||$||57.0||8.3||%|
|Hotel EBITDA margin||28.2||%||27.6||%||52 bps|
|Wyndham Hotels (8)|
|Total hotel revenue, in millions||$||28.9||$||34.0||(14.9||)%|
|Hotel EBITDA, in millions||$||11.2||$||12.8||(12.2||)%|
|Hotel EBITDA margin||38.7||%||37.5||%||128 bps|
|Same-store hotels (63)|
|Total hotel revenue, in millions||$||248.0||$||240.1||3.3||%|
|Hotel EBITDA, in millions||$||72.9||$||69.7||4.5||%|
|Hotel EBITDA margin||29.4||%||29.0||%||35 bps|
RevPAR for our 37 comparable core hotels (45 core hotels excluding the eight Wyndham hotels) increased 5.7% compared to the same period in 2012, while RevPAR for our 18 non-strategic hotels increased 5.2% compared to the same period in 2012.
RevPAR for our 55 comparable hotels (37 comparable core hotels plus 18 non-strategic hotels) was $116.12, a 5.7% increase compared to the same period in 2012. The increase reflects a 3.7% increase in ADR to $149.38 and a 1.9% increase in occupancy to 77.7%.
We believe comparable hotels (which excludes the eight Wyndham hotels) is the most appropriate measure on which to assess the operating performance of our portfolio. The eight Wyndham hotels were rebranded from Holiday Inn to Wyndham and transitioned management on March 1, 2013. RevPAR for the eight hotels declined 17.0% for the second quarter compared to the same period in 2012. This decline reflects the impact of changing brands and management companies, including related renovations. Furthermore, Wyndham Worldwide Corporation is providing a guarantee which ensures minimum annual NOI for the eight hotels. We have recorded a $2.7 million pro rata portion of the projected 2013 guarantee through June 30, 2013 as a reduction of Wyndham's contractual management and other fees. This is reflected in Hotel EBITDA and Hotel EBITDA margin. In addition, our outlook assumes the minimum EBITDA amount for the Wyndham hotels based on the annual guarantee. However, we expect the performance of our Wyndham portfolio to improve meaningfully throughout the year, as the transitional disruption subsides.
For the 55 comparable hotels, total revenue increased 6.3% compared to the same period in 2012; Hotel EBITDA was $61.7 million, 8.3% higher than the same period in 2012; and Hotel EBITDA margin was 28.2% during the quarter, a 52 basis point increase from the same period in 2012.
RevPAR for our 63 same-store hotels (55 comparable hotels plus the eight Wyndham hotels) was $114.72, a 2.1% increase compared to the same period in 2012. The increase reflects a 2.5% increase in ADR to $149.31 offset by a 30 basis point decrease in occupancy to 76.8%.
See page 15 for hotel portfolio composition and pages 16 and 22 for more detail on hotel portfolio operating data.
Summary of Second Quarter Operating Results:
|$ in millions, except for per share information||2013||2012||Change|
|Same-store Adjusted EBITDA||$||63.2||$||60.5||4.5||%|
|Adjusted FFO per share||$||0.21||$||0.18||$||0.03|
|Net income (loss) per share||$||(0.23||)||$||0.02||$||(0.25||)|
Same-store Adjusted EBITDA was $63.2 million compared to $60.5 million for the same period in 2012. Adjusted EBITDA (which includes Adjusted EBITDA for sold hotels prior to sale) was $64.6 million compared to $66.2 million for the same period in 2012.
Adjusted FFO was $26.1 million, or $0.21 per share, compared to $0.18 per share in 2012. Net loss attributable to common stockholders was $28.4 million, or $0.23 per share, for the quarter, compared to net income of $2.2 million, or $0.02 per share, for the same period in 2012. Net loss for the second quarter of 2013 included a $7.3 million net gain on asset sales and a $27.7 million impairment charge. Net income in the second quarter of 2012 included a $16.7 million net gain on asset sales and a $1.3 million impairment charge.
Year-to-Date Operating Results:
RevPAR for 55 comparable hotels was $109.41, a 6.6% increase compared to the same period in 2012. The increase reflects a 4.3% increase in ADR to $147.61 and a 2.2% increase in occupancy to 74.1%. Total revenue for the 55 comparable hotels increased 7.1% from the same period in 2012. RevPAR for our 37 comparable core hotels increased 7.6%, while RevPAR for our 18 non-strategic hotels increased 3.2%.
Same-store Adjusted EBITDA was $100.1 million compared to $92.9 million, for the same period in 2012. Hotel EBITDA margin was 25.8%, a 36 basis point increase from the same period in 2012. Adjusted EBITDA was $102.2 million compared to $107.6 million for the same period in 2012.
Adjusted FFO was $25.3 million, or $0.20 per share, for the six months ended June 30, 2013, compared to $0.16 per share for the same period in 2012. Net loss attributable to common stockholders was $64.2 million, or $0.52 per share, for the six months ended June 30, 2013, compared to a net loss of $36.0 million, or $0.29 per share, for the same period in 2012. Net loss for the six months ended June 30, 2013 included a $7.3 million net gain on asset sales and a $27.7 million impairment charge for the current period. Net loss for the same period in 2012 included a $16.7 million net gain on asset sales and a $1.3 million impairment charge.
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.
During the second quarter, we sold the 160-room Holiday Inn - Santa Barbara/Goleta for $24.0 million. On July 18, we sold the 278-room Sheraton Suites Galleria - Atlanta for $21.0 million. The hotels' operating performance is included in discontinued operations for the second quarter and year-to-date.
On July 30, we received a non-refundable deposit pursuant to an agreement to sell the 244-room DoubleTree Hotel in Wilmington for $27.7 million. We expect to close the sale in August.
To date, we have sold 21 of 39 non-strategic hotels as part of our portfolio repositioning plan. We are currently marketing nine non-strategic hotels, of which we have agreed to sell three, including the DoubleTree in Wilmington, and are negotiating to sell two others. We will use the sale proceeds to repay debt and reduce leverage. The other nine non-strategic hotels are owned by joint ventures, and we continue to advance toward agreements with our partners to facilitate marketing those properties.
Capital expenditures at our operating hotels (including our pro rata share of joint ventures) were $24.0 million during the quarter (including approximately $10.3 million for redevelopment projects and repositioning our 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 the Knickerbocker) and repositioning our Wyndham hotels. Please see page 12 of this release for more detail on renovations.
Through June 30, 2013, we have spent $49.4 million, in addition to the initial acquisition cost, to redevelop the 4+ star Knickerbocker Hotel. The project remains on budget and is scheduled to open in early 2014.
At June 30, 2013, we had $1.7 billion of consolidated debt bearing a 6.3% weighted-average interest rate (approximately 150 basis points below last year) and a seven-year weighted-average maturity. We had $66.2 million of cash and cash equivalents at June 30, 2013. In addition, we had $77.9 million of restricted cash, of which $64.9 million secures our Knickerbocker construction loan.
We updated our 2013 outlook to reflect second quarter results and revised timing of asset sales. Our 2013 outlook reflects selling the remaining nine hotels currently on the market. We assume the sale of three hotels, currently under contract, in August. The low-end of our outlook assumes that we sell the remaining hotels at the end of the third quarter, and the high-end of our outlook assumes that we sell the remaining hotels at the end of 2013. Our outlook also assumes the minimum EBITDA amount for the Wyndham hotels based on the annual NOI guarantee.
During 2013, we anticipate:
- Comparable RevPAR will increase between 6.0%-6.75%;
- Adjusted EBITDA will be between $197.0 million and $203.5 million;
- Adjusted FFO per share will be between $0.36 and $0.41;
- Net loss attributable to FelCor will be between $76.5 million and $72.5 million; and
- Interest expense, including pro rata share from joint ventures, will be between $106.5 million and $107.0 million.
The following table reconciles our 2013 Adjusted EBITDA to Same-store Adjusted EBITDA outlook (in millions):
|Previous Adjusted EBITDA Outlook (65 hotels)||$||204.0||$||208.5|
|EBITDA of two sold hotels from closing to December 31||(2.5||)||(2.5||)|
|Change in operations||0.5||(0.5||)|
|Adjusted EBITDA Outlook (63 hotels)||$||202.0||$||205.5|
|EBITDA of nine non-strategic hotels from closing to December 31(a)||(5.0||)||(2.0||)|
|Adjusted EBITDA Outlook (54 hotels)||$||197.0||$||203.5|
|Same-store Adjusted EBITDA (54 hotels)||$||178.0||$||181.5|
(a) EBITDA that would have been recognized with respect to nine hotels assumed to be sold during 2013 from the dates of sale through December 31, 2013.
(b) EBITDA from two hotels sold in 2013 from January 1, 2013 through the dates of sale and EBITDA that is forecasted to be generated by nine additional hotels assumed to be sold during 2013 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 64 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 second quarter earnings Conference Call on Thursday, August 1, 2013 at 11:00 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 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.
The following information is presented in order to help our investors understand FelCor's financial position as of and for the three and six months ended June 30, 2013.
TABLE OF CONTENTS
|Consolidated Statements of Operations(a)||8|
|Consolidated Balance Sheets(a)||9|
|Consolidated Debt Summary||10|
|Schedule of Encumbered Hotels||11|
|Hotels Under Renovation or Redevelopment During 2013||12|
|Supplemental Financial Data||13|
|Hotel Portfolio Composition||15|
|Hotel Operating Statistics by Brand||16|
|Hotel Operating Statistics by Market||17|
|Historical Quarterly Operating Statistics||18|
|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||Six Months Ended|
|June 30,||June 30,|
|Hotel operating revenue:|
|Food and beverage||43,397||38,632||81,367||72,974|
|Other operating departments||12,598||14,595||23,982||25,591|
|Hotel departmental expenses:|
|Food and beverage||32,610||29,799||63,655||57,732|
|Other operating departments||6,038||5,843||11,470||11,240|
|Other property-related costs||62,650||60,699||124,648||120,059|
|Management and franchise fees||9,315||11,254||18,845||20,898|
|Taxes, insurance and lease expense||25,245||24,423||47,754||45,990|
|Depreciation and amortization||31,132||29,773||62,146||59,310|
|Total operating expenses||255,256||216,452||472,793||423,224|
|Operating income (loss)||(6,229||)||24,637||(6,702||)||22,228|
|Interest expense, net||(26,574||)||(30,933||)||(53,057||)||(61,328||)|
|Loss before equity in income from unconsolidated entities||(32,803||)||(6,433||)||(59,759||)||(39,244||)|
|Equity in income from unconsolidated entities||1,905||1,362||
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