|
|
Item 1.
|
Financial Statements.
|
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par values)
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
Assets
|
|
|
|
Investment in hotels, net of accumulated depreciation of $932,184 and $932,886 at June 30, 2017 and December 31, 2016, respectively
|
$
|
1,448,346
|
|
|
$
|
1,566,823
|
|
Investment in unconsolidated entities
|
7,657
|
|
|
8,312
|
|
Hotels held for sale
|
77,937
|
|
|
—
|
|
Cash and cash equivalents
|
58,135
|
|
|
47,317
|
|
Restricted cash
|
24,199
|
|
|
19,491
|
|
Accounts receivable, net of allowance for doubtful accounts of $184 and $177 at June 30, 2017 and December 31, 2016, respectively
|
43,923
|
|
|
42,080
|
|
Deferred expenses, net of accumulated amortization of $3,895 and $2,959 at June 30, 2017 and December 31, 2016, respectively
|
3,591
|
|
|
4,527
|
|
Other assets
|
20,240
|
|
|
18,542
|
|
Total assets
|
$
|
1,684,028
|
|
|
$
|
1,707,092
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
Debt, net of unamortized debt issuance costs of $14,803 and $15,967 at June 30, 2017 and December 31, 2016, respectively
|
$
|
1,360,071
|
|
|
$
|
1,338,326
|
|
Distributions payable
|
14,887
|
|
|
14,858
|
|
Accrued expenses and other liabilities
|
135,792
|
|
|
116,437
|
|
Total liabilities
|
1,510,750
|
|
|
1,469,621
|
|
Commitments and contingencies
|
|
|
|
|
|
Redeemable noncontrolling interests in FelCor LP, 610 units issued and outstanding at June 30, 2017 and December 31, 2016
|
4,400
|
|
|
4,888
|
|
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 June 30, 2017 and December 31, 2016
|
309,337
|
|
|
309,337
|
|
Common stock, $0.01 par value, 200,000 shares authorized; 138,412 and 137,990 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
|
1,384
|
|
|
1,380
|
|
Additional paid-in capital
|
2,580,539
|
|
|
2,576,988
|
|
Accumulated deficit
|
(2,774,178
|
)
|
|
(2,706,408
|
)
|
Total FelCor stockholders’ equity
|
117,082
|
|
|
181,297
|
|
Noncontrolling interests in other partnerships
|
7,365
|
|
|
7,503
|
|
Preferred equity in consolidated joint venture, liquidation value of $45,373 and $44,667 at June 30, 2017 and December 31, 2016, respectively
|
44,431
|
|
|
43,783
|
|
Total equity
|
168,878
|
|
|
232,583
|
|
Total liabilities and equity
|
$
|
1,684,028
|
|
|
$
|
1,707,092
|
|
The accompanying notes are an integral part of these consolidated financial statements.
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the
Three
and
Six
Months Ended
June 30, 2017
and
2016
(unaudited, in thousands, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
|
|
|
|
Hotel operating revenue
|
$
|
219,116
|
|
|
$
|
236,761
|
|
|
$
|
406,812
|
|
|
$
|
446,218
|
|
Other revenue
|
1,324
|
|
|
1,145
|
|
|
1,732
|
|
|
1,832
|
|
Total revenues
|
220,440
|
|
|
237,906
|
|
|
408,544
|
|
|
448,050
|
|
Expenses:
|
|
|
|
|
|
|
|
Hotel departmental expenses
|
75,711
|
|
|
81,379
|
|
|
146,144
|
|
|
158,817
|
|
Other property-related costs
|
52,220
|
|
|
56,007
|
|
|
103,075
|
|
|
111,573
|
|
Management and franchise fees
|
7,726
|
|
|
8,501
|
|
|
15,276
|
|
|
17,726
|
|
Taxes, insurance and lease expense
|
15,454
|
|
|
14,864
|
|
|
29,356
|
|
|
28,446
|
|
Corporate expenses
|
6,281
|
|
|
6,047
|
|
|
13,221
|
|
|
14,447
|
|
Depreciation and amortization
|
27,528
|
|
|
29,177
|
|
|
55,366
|
|
|
58,360
|
|
Impairment
|
10,271
|
|
|
6,333
|
|
|
35,109
|
|
|
6,333
|
|
Other expenses
|
7,331
|
|
|
2,142
|
|
|
8,591
|
|
|
2,970
|
|
Total operating expenses
|
202,522
|
|
|
204,450
|
|
|
406,138
|
|
|
398,672
|
|
Operating income
|
17,918
|
|
|
33,456
|
|
|
2,406
|
|
|
49,378
|
|
Interest expense, net
|
(19,416
|
)
|
|
(19,907
|
)
|
|
(38,702
|
)
|
|
(39,627
|
)
|
Other gains, net
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
Income (loss) before equity in income from unconsolidated entities
|
(1,398
|
)
|
|
13,649
|
|
|
(36,196
|
)
|
|
9,851
|
|
Equity in income from unconsolidated entities
|
648
|
|
|
726
|
|
|
518
|
|
|
572
|
|
Income (loss) from continuing operations before income tax
|
(750
|
)
|
|
14,375
|
|
|
(35,678
|
)
|
|
10,423
|
|
Income tax
|
(503
|
)
|
|
25
|
|
|
(1,050
|
)
|
|
(390
|
)
|
Income (loss) from continuing operations before loss on sale of hotels
|
(1,253
|
)
|
|
14,400
|
|
|
(36,728
|
)
|
|
10,033
|
|
Loss on sale of hotels
|
(207
|
)
|
|
(630
|
)
|
|
(873
|
)
|
|
(1,344
|
)
|
Net income (loss) and comprehensive income (loss)
|
(1,460
|
)
|
|
13,770
|
|
|
(37,601
|
)
|
|
8,689
|
|
Net loss attributable to noncontrolling interests in other partnerships
|
33
|
|
|
16
|
|
|
437
|
|
|
487
|
|
Net loss (income) attributable to redeemable noncontrolling interests in FelCor LP
|
35
|
|
|
(31
|
)
|
|
221
|
|
|
17
|
|
Preferred distributions - consolidated joint venture
|
(367
|
)
|
|
(364
|
)
|
|
(727
|
)
|
|
(724
|
)
|
Net income (loss) and comprehensive income (loss) attributable to FelCor
|
(1,759
|
)
|
|
13,391
|
|
|
(37,670
|
)
|
|
8,469
|
|
Preferred dividends
|
(6,279
|
)
|
|
(6,279
|
)
|
|
(12,558
|
)
|
|
(12,558
|
)
|
Net income (loss) attributable to FelCor common stockholders
|
$
|
(8,038
|
)
|
|
$
|
7,112
|
|
|
$
|
(50,228
|
)
|
|
$
|
(4,089
|
)
|
Basic and diluted per common share data:
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
(0.06
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.36
|
)
|
|
$
|
(0.03
|
)
|
Basic weighted average common shares outstanding
|
137,866
|
|
|
138,182
|
|
|
137,820
|
|
|
138,930
|
|
Diluted weighted average common shares outstanding
|
137,866
|
|
|
138,678
|
|
|
137,820
|
|
|
138,930
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
The accompanying notes are an integral part of these consolidated financial statements.
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the
Six
Months Ended
June 30, 2017
and
2016
(unaudited, in thousands, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Accumulated Deficit
|
|
Noncontrolling Interests in Other Partnerships
|
|
Preferred Equity in Consolidated Joint Venture
|
|
Total Equity
|
|
Number of Shares
|
|
Amount
|
|
Number of Shares
|
|
Amount
|
|
|
|
|
|
Balance at December 31, 2015
|
12,879
|
|
|
$
|
309,337
|
|
|
141,808
|
|
|
$
|
1,418
|
|
|
$
|
2,567,515
|
|
|
$
|
(2,618,117
|
)
|
|
$
|
7,806
|
|
|
$
|
43,186
|
|
|
$
|
311,145
|
|
Repurchase of common stock
|
—
|
|
|
—
|
|
|
(4,133
|
)
|
|
(41
|
)
|
|
—
|
|
|
(27,386
|
)
|
|
—
|
|
|
—
|
|
|
(27,427
|
)
|
Issuance of stock awards
|
—
|
|
|
—
|
|
|
648
|
|
|
6
|
|
|
728
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
734
|
|
Cumulative effect of change in accounting for stock compensation forfeitures
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
185
|
|
|
(185
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock awards - amortization
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,677
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,677
|
|
Stock compensation shares withheld
|
—
|
|
|
—
|
|
|
(98
|
)
|
|
(1
|
)
|
|
—
|
|
|
(591
|
)
|
|
—
|
|
|
—
|
|
|
(592
|
)
|
Allocation to redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
563
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
563
|
|
Contribution from noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
530
|
|
|
—
|
|
|
530
|
|
Distribution to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Dividends declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.12 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,666
|
)
|
|
—
|
|
|
—
|
|
|
(16,666
|
)
|
$0.975 per Series A preferred share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,558
|
)
|
|
—
|
|
|
—
|
|
|
(12,558
|
)
|
Preferred distributions - consolidated joint venture
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(724
|
)
|
|
(724
|
)
|
Issuance of preferred equity - consolidated joint venture
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
597
|
|
|
597
|
|
Net income (loss) and comprehensive income (loss) (attributable to FelCor and noncontrolling interests in other partnerships)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,469
|
|
|
(487
|
)
|
|
724
|
|
|
8,706
|
|
Balance at June 30, 2016
|
12,879
|
|
|
$
|
309,337
|
|
|
138,225
|
|
|
$
|
1,382
|
|
|
$
|
2,572,668
|
|
|
$
|
(2,667,034
|
)
|
|
$
|
7,848
|
|
|
$
|
43,783
|
|
|
$
|
267,984
|
|
Balance at December 31, 2016
|
12,879
|
|
|
$
|
309,337
|
|
|
137,990
|
|
|
$
|
1,380
|
|
|
$
|
2,576,988
|
|
|
$
|
(2,706,408
|
)
|
|
$
|
7,503
|
|
|
$
|
43,783
|
|
|
$
|
232,583
|
|
Issuance of stock awards
|
—
|
|
|
—
|
|
|
541
|
|
|
5
|
|
|
180
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
185
|
|
Stock awards - amortization
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,178
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,178
|
|
Stock compensation shares withheld
|
—
|
|
|
—
|
|
|
(119
|
)
|
|
(1
|
)
|
|
—
|
|
|
(880
|
)
|
|
—
|
|
|
—
|
|
|
(881
|
)
|
Allocation to redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
193
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
193
|
|
Contribution from noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
299
|
|
|
—
|
|
|
299
|
|
Dividends declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.12 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,662
|
)
|
|
—
|
|
|
—
|
|
|
(16,662
|
)
|
$0.975 per Series A preferred share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,558
|
)
|
|
—
|
|
|
—
|
|
|
(12,558
|
)
|
Preferred distributions - consolidated joint venture
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(727
|
)
|
|
(727
|
)
|
Issuance of preferred equity - consolidated joint venture
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
648
|
|
|
648
|
|
Net income (loss) and comprehensive income (loss) (attributable to FelCor and noncontrolling interests in other partnerships)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37,670
|
)
|
|
(437
|
)
|
|
727
|
|
|
(37,380
|
)
|
Balance at June 30, 2017
|
12,879
|
|
|
$
|
309,337
|
|
|
138,412
|
|
|
$
|
1,384
|
|
|
$
|
2,580,539
|
|
|
$
|
(2,774,178
|
)
|
|
$
|
7,365
|
|
|
$
|
44,431
|
|
|
$
|
168,878
|
|
The accompanying notes are an integral part of these consolidated financial statements.
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the
Six
Months Ended
June 30, 2017
and
2016
(unaudited, in thousands)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
Cash flows from operating activities:
|
|
|
|
Net income (loss)
|
$
|
(37,601
|
)
|
|
$
|
8,689
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
Depreciation and amortization
|
55,366
|
|
|
58,360
|
|
Loss on sale of hotels and other assets, net
|
773
|
|
|
1,244
|
|
Amortization of deferred financing fees
|
2,100
|
|
|
1,897
|
|
Amortization of fixed stock and directors’ compensation
|
2,988
|
|
|
3,627
|
|
Equity in income from unconsolidated entities
|
(518
|
)
|
|
(572
|
)
|
Distributions of income from unconsolidated entities
|
333
|
|
|
339
|
|
Impairment
|
35,109
|
|
|
6,333
|
|
Changes in assets and liabilities:
|
|
|
|
Accounts receivable
|
(6,781
|
)
|
|
(10,599
|
)
|
Other assets
|
(1,873
|
)
|
|
(5,255
|
)
|
Accrued expenses and other liabilities
|
17,353
|
|
|
7,502
|
|
Net cash flow provided by operating activities
|
67,249
|
|
|
71,565
|
|
Cash flows from investing activities:
|
|
|
|
Improvements and additions to hotels
|
(41,921
|
)
|
|
(31,909
|
)
|
Net payments related to asset sales
|
(1,296
|
)
|
|
(1,461
|
)
|
Change in restricted cash
|
(4,709
|
)
|
|
(6,004
|
)
|
Insurance proceeds
|
—
|
|
|
94
|
|
Distributions from unconsolidated entities in excess of earnings
|
840
|
|
|
386
|
|
Net cash flow used in investing activities
|
(47,086
|
)
|
|
(38,894
|
)
|
Cash flows from financing activities:
|
|
|
|
Proceeds from borrowings
|
51,000
|
|
|
50,000
|
|
Repayment of borrowings
|
(30,419
|
)
|
|
(27,145
|
)
|
Payment of deferred financing fees
|
—
|
|
|
(12
|
)
|
Distributions paid to noncontrolling interests
|
—
|
|
|
(1
|
)
|
Contributions from noncontrolling interests
|
299
|
|
|
530
|
|
Distributions paid to FelCor LP limited partners
|
(74
|
)
|
|
(75
|
)
|
Distributions paid to preferred stockholders
|
(12,558
|
)
|
|
(12,558
|
)
|
Repurchase of common stock
|
—
|
|
|
(27,427
|
)
|
Stock compensation withholding
|
(881
|
)
|
|
(592
|
)
|
Preferred distributions - consolidated joint venture
|
(729
|
)
|
|
(729
|
)
|
Distributions paid to common stockholders
|
(16,631
|
)
|
|
(16,848
|
)
|
Net proceeds from issuance of preferred equity - consolidated joint venture
|
648
|
|
|
597
|
|
Net cash flow used in financing activities
|
(9,345
|
)
|
|
(34,260
|
)
|
Effect of exchange rate changes on cash
|
—
|
|
|
(9
|
)
|
Net change in cash and cash equivalents
|
10,818
|
|
|
(1,598
|
)
|
Cash and cash equivalents at beginning of periods
|
47,317
|
|
|
59,786
|
|
Cash and cash equivalents at end of periods
|
$
|
58,135
|
|
|
$
|
58,188
|
|
Supplemental cash flow information – interest paid, net of capitalized interest
|
$
|
36,984
|
|
|
$
|
37,581
|
|
Supplemental cash flow information – income taxes paid
|
$
|
1,105
|
|
|
$
|
105
|
|
The accompanying notes are an integral part of these consolidated financial statements.
FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2017
|
|
2016
|
Assets
|
|
|
|
Investment in hotels, net of accumulated depreciation of $932,184 and $932,886 at June 30, 2017 and December 31, 2016, respectively
|
$
|
1,448,346
|
|
|
$
|
1,566,823
|
|
Investment in unconsolidated entities
|
7,657
|
|
|
8,312
|
|
Hotels held for sale
|
77,937
|
|
|
—
|
|
Cash and cash equivalents
|
58,135
|
|
|
47,317
|
|
Restricted cash
|
24,199
|
|
|
19,491
|
|
Accounts receivable, net of allowance for doubtful accounts of $184 and $177 at June 30, 2017 and December 31, 2016, respectively
|
43,923
|
|
|
42,080
|
|
Deferred expenses, net of accumulated amortization of $3,895 and $2,959 at June 30, 2017 and December 31, 2016, respectively
|
3,591
|
|
|
4,527
|
|
Other assets
|
20,240
|
|
|
18,542
|
|
Total assets
|
$
|
1,684,028
|
|
|
$
|
1,707,092
|
|
|
|
|
|
Liabilities and Partners’ Capital
|
|
|
|
Debt, net of unamortized debt issuance costs of $14,803 and $15,967 at June 30, 2017 and December 31, 2016, respectively
|
$
|
1,360,071
|
|
|
$
|
1,338,326
|
|
Distributions payable
|
14,887
|
|
|
14,858
|
|
Accrued expenses and other liabilities
|
135,792
|
|
|
116,437
|
|
Total liabilities
|
1,510,750
|
|
|
1,469,621
|
|
Commitments and contingencies
|
|
|
|
|
|
Redeemable units, 610 units issued and outstanding at June 30, 2017 and December 31, 2016
|
4,400
|
|
|
4,888
|
|
Capital:
|
|
|
|
Preferred units:
|
|
|
|
Series A Cumulative Convertible Preferred Units, 12,879 units issued and outstanding at June 30, 2017 and December 31, 2016
|
309,337
|
|
|
309,337
|
|
Common units, 138,412 and 137,990 units issued and outstanding at June 30, 2017 and December 31, 2016, respectively
|
(192,255
|
)
|
|
(128,040
|
)
|
Total FelCor LP partners’ capital
|
117,082
|
|
|
181,297
|
|
Noncontrolling interests
|
7,365
|
|
|
7,503
|
|
Preferred capital in consolidated joint venture
|
44,431
|
|
|
43,783
|
|
Total partners’ capital
|
168,878
|
|
|
232,583
|
|
Total liabilities and partners’ capital
|
$
|
1,684,028
|
|
|
$
|
1,707,092
|
|
The accompanying notes are an integral part of these consolidated financial statements.
FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the
Three
and
Six
Months Ended
June 30, 2017
and
2016
(unaudited, in thousands, except for per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
|
|
|
|
Hotel operating revenue
|
$
|
219,116
|
|
|
$
|
236,761
|
|
|
$
|
406,812
|
|
|
$
|
446,218
|
|
Other revenue
|
1,324
|
|
|
1,145
|
|
|
1,732
|
|
|
1,832
|
|
Total revenues
|
220,440
|
|
|
237,906
|
|
|
408,544
|
|
|
448,050
|
|
Expenses:
|
|
|
|
|
|
|
|
Hotel departmental expenses
|
75,711
|
|
|
81,379
|
|
|
146,144
|
|
|
158,817
|
|
Other property-related costs
|
52,220
|
|
|
56,007
|
|
|
103,075
|
|
|
111,573
|
|
Management and franchise fees
|
7,726
|
|
|
8,501
|
|
|
15,276
|
|
|
17,726
|
|
Taxes, insurance and lease expense
|
15,454
|
|
|
14,864
|
|
|
29,356
|
|
|
28,446
|
|
Corporate expenses
|
6,281
|
|
|
6,047
|
|
|
13,221
|
|
|
14,447
|
|
Depreciation and amortization
|
27,528
|
|
|
29,177
|
|
|
55,366
|
|
|
58,360
|
|
Impairment
|
10,271
|
|
|
6,333
|
|
|
35,109
|
|
|
6,333
|
|
Other expenses
|
7,331
|
|
|
2,142
|
|
|
8,591
|
|
|
2,970
|
|
Total operating expenses
|
202,522
|
|
|
204,450
|
|
|
406,138
|
|
|
398,672
|
|
Operating income
|
17,918
|
|
|
33,456
|
|
|
2,406
|
|
|
49,378
|
|
Interest expense, net
|
(19,416
|
)
|
|
(19,907
|
)
|
|
(38,702
|
)
|
|
(39,627
|
)
|
Other gains, net
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
Income (loss) before equity in income from unconsolidated entities
|
(1,398
|
)
|
|
13,649
|
|
|
(36,196
|
)
|
|
9,851
|
|
Equity in income from unconsolidated entities
|
648
|
|
|
726
|
|
|
518
|
|
|
572
|
|
Income (loss) from continuing operations before income tax
|
(750
|
)
|
|
14,375
|
|
|
(35,678
|
)
|
|
10,423
|
|
Income tax
|
(503
|
)
|
|
25
|
|
|
(1,050
|
)
|
|
(390
|
)
|
Income (loss) from continuing operations before loss on sale of hotels
|
(1,253
|
)
|
|
14,400
|
|
|
(36,728
|
)
|
|
10,033
|
|
Loss on sale of hotels
|
(207
|
)
|
|
(630
|
)
|
|
(873
|
)
|
|
(1,344
|
)
|
Net income (loss) and comprehensive income (loss)
|
(1,460
|
)
|
|
13,770
|
|
|
(37,601
|
)
|
|
8,689
|
|
Net loss attributable to noncontrolling interests
|
33
|
|
|
16
|
|
|
437
|
|
|
487
|
|
Preferred distributions - consolidated joint venture
|
(367
|
)
|
|
(364
|
)
|
|
(727
|
)
|
|
(724
|
)
|
Net income (loss) and comprehensive income (loss) attributable to FelCor LP
|
(1,794
|
)
|
|
13,422
|
|
|
(37,891
|
)
|
|
8,452
|
|
Preferred distributions
|
(6,279
|
)
|
|
(6,279
|
)
|
|
(12,558
|
)
|
|
(12,558
|
)
|
Net income (loss) attributable to FelCor LP common unitholders
|
$
|
(8,073
|
)
|
|
$
|
7,143
|
|
|
$
|
(50,449
|
)
|
|
$
|
(4,106
|
)
|
Basic and diluted per common unit data:
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
(0.06
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.36
|
)
|
|
$
|
(0.03
|
)
|
Basic weighted average common units outstanding
|
138,476
|
|
|
138,793
|
|
|
138,430
|
|
|
139,541
|
|
Diluted weighted average common units outstanding
|
138,476
|
|
|
139,289
|
|
|
138,430
|
|
|
139,541
|
|
|
|
|
|
|
|
|
|
Distributions per common unit
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
The accompanying notes are an integral part of these consolidated financial statements.
FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the
Six
Months Ended
June 30, 2017
and
2016
(unaudited, in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Units
|
|
Common Units
|
|
Noncontrolling Interests
|
|
Preferred Capital in Consolidated Joint Venture
|
|
Total Partners’ Capital
|
Balance at December 31, 2015
|
$
|
309,337
|
|
|
$
|
(49,184
|
)
|
|
$
|
7,806
|
|
|
$
|
43,186
|
|
|
$
|
311,145
|
|
Repurchase of common units
|
—
|
|
|
(27,427
|
)
|
|
—
|
|
|
—
|
|
|
(27,427
|
)
|
FelCor restricted stock compensation
|
—
|
|
|
3,819
|
|
|
—
|
|
|
—
|
|
|
3,819
|
|
Contributions
|
—
|
|
|
—
|
|
|
530
|
|
|
—
|
|
|
530
|
|
Distributions
|
—
|
|
|
(29,299
|
)
|
|
(1
|
)
|
|
(724
|
)
|
|
(30,024
|
)
|
Allocation to redeemable units
|
—
|
|
|
655
|
|
|
—
|
|
|
—
|
|
|
655
|
|
Issuance of preferred capital - consolidated joint venture
|
—
|
|
|
—
|
|
|
—
|
|
|
597
|
|
|
597
|
|
Net income (loss) and comprehensive income (loss)
|
—
|
|
|
8,452
|
|
|
(487
|
)
|
|
724
|
|
|
8,689
|
|
Balance at June 30, 2016
|
$
|
309,337
|
|
|
$
|
(92,984
|
)
|
|
$
|
7,848
|
|
|
$
|
43,783
|
|
|
$
|
267,984
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
$
|
309,337
|
|
|
$
|
(128,040
|
)
|
|
$
|
7,503
|
|
|
$
|
43,783
|
|
|
$
|
232,583
|
|
FelCor restricted stock compensation
|
—
|
|
|
2,482
|
|
|
—
|
|
|
—
|
|
|
2,482
|
|
Contributions
|
—
|
|
|
—
|
|
|
299
|
|
|
—
|
|
|
299
|
|
Distributions
|
—
|
|
|
(29,294
|
)
|
|
—
|
|
|
(727
|
)
|
|
(30,021
|
)
|
Allocation to redeemable units
|
—
|
|
|
488
|
|
|
—
|
|
|
—
|
|
|
488
|
|
Issuance of preferred capital - consolidated joint venture
|
—
|
|
|
—
|
|
|
—
|
|
|
648
|
|
|
648
|
|
Net income (loss) and comprehensive income (loss)
|
—
|
|
|
(37,891
|
)
|
|
(437
|
)
|
|
727
|
|
|
(37,601
|
)
|
Balance at June 30, 2017
|
$
|
309,337
|
|
|
$
|
(192,255
|
)
|
|
$
|
7,365
|
|
|
$
|
44,431
|
|
|
$
|
168,878
|
|
The accompanying notes are an integral part of these consolidated financial statements.
FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the
Six
Months Ended
June 30, 2017
and
2016
(unaudited, in thousands)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
Cash flows from operating activities:
|
|
|
|
Net income (loss)
|
$
|
(37,601
|
)
|
|
$
|
8,689
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
Depreciation and amortization
|
55,366
|
|
|
58,360
|
|
Loss on sale of hotels and other assets, net
|
773
|
|
|
1,244
|
|
Amortization of deferred financing fees
|
2,100
|
|
|
1,897
|
|
Amortization of fixed stock and directors’ compensation
|
2,988
|
|
|
3,627
|
|
Equity in income from unconsolidated entities
|
(518
|
)
|
|
(572
|
)
|
Distributions of income from unconsolidated entities
|
333
|
|
|
339
|
|
Impairment
|
35,109
|
|
|
6,333
|
|
Changes in assets and liabilities:
|
|
|
|
Accounts receivable
|
(6,781
|
)
|
|
(10,599
|
)
|
Other assets
|
(1,873
|
)
|
|
(5,255
|
)
|
Accrued expenses and other liabilities
|
17,353
|
|
|
7,502
|
|
Net cash flow provided by operating activities
|
67,249
|
|
|
71,565
|
|
Cash flows from investing activities:
|
|
|
|
Improvements and additions to hotels
|
(41,921
|
)
|
|
(31,909
|
)
|
Net payments related to asset sales
|
(1,296
|
)
|
|
(1,461
|
)
|
Change in restricted cash
|
(4,709
|
)
|
|
(6,004
|
)
|
Insurance proceeds
|
—
|
|
|
94
|
|
Distributions from unconsolidated entities in excess of earnings
|
840
|
|
|
386
|
|
Net cash flow used in investing activities
|
(47,086
|
)
|
|
(38,894
|
)
|
Cash flows from financing activities:
|
|
|
|
Proceeds from borrowings
|
51,000
|
|
|
50,000
|
|
Repayment of borrowings
|
(30,419
|
)
|
|
(27,145
|
)
|
Payment of deferred financing fees
|
—
|
|
|
(12
|
)
|
Distributions paid to noncontrolling interests
|
—
|
|
|
(1
|
)
|
Contributions from noncontrolling interests
|
299
|
|
|
530
|
|
Distributions paid to FelCor LP limited partners
|
(74
|
)
|
|
(75
|
)
|
Distributions paid to preferred unitholders
|
(12,558
|
)
|
|
(12,558
|
)
|
Repurchase of common units
|
—
|
|
|
(27,427
|
)
|
FelCor stock compensation withholding
|
(881
|
)
|
|
(592
|
)
|
Preferred distributions - consolidated joint venture
|
(729
|
)
|
|
(729
|
)
|
Distributions paid to common unitholders
|
(16,631
|
)
|
|
(16,848
|
)
|
Net proceeds from issuance of preferred capital - consolidated joint venture
|
648
|
|
|
597
|
|
Net cash flow used in financing activities
|
(9,345
|
)
|
|
(34,260
|
)
|
Effect of exchange rate changes on cash
|
—
|
|
|
(9
|
)
|
Net change in cash and cash equivalents
|
10,818
|
|
|
(1,598
|
)
|
Cash and cash equivalents at beginning of periods
|
47,317
|
|
|
59,786
|
|
Cash and cash equivalents at end of periods
|
$
|
58,135
|
|
|
$
|
58,188
|
|
Supplemental cash flow information – interest paid, net of capitalized interest
|
$
|
36,984
|
|
|
$
|
37,581
|
|
Supplemental cash flow information – income taxes paid
|
$
|
1,105
|
|
|
$
|
105
|
|
The accompanying notes are an integral part of these consolidated financial statements.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FelCor Lodging Trust Incorporated (NYSE:FCH), or FelCor, is a Maryland corporation operating as a real estate investment trust, or REIT. FelCor is the sole general partner of, and the owner of a greater than
99.5%
partnership interest in, FelCor Lodging Limited Partnership, or FelCor LP, through which we held ownership interests in
39
hotels as of
June 30, 2017
,
two
of which were held for sale. At
June 30, 2017
, we had an aggregate of
139,021,939
shares and units outstanding, consisting of
138,411,756
shares of FelCor common stock and
610,183
FelCor LP units not owned by FelCor. Felcor LP is a variable interest entity of FelCor.
Of our
37
hotels as of
June 30, 2017
(excluding the
two
hotels held for sale), we owned
100%
interests in
34
hotels, a
95%
interest in
one
hotel (The Knickerbocker) and
50%
interests in entities owning
two
hotels. We consolidate our real estate interests in the
35
hotels in which we hold majority interests, and we record the real estate interests of the
two
hotels in which we hold indirect
50%
interests using the equity method. We lease
36
of the
37
hotels to our taxable REIT subsidiaries, of which we own a controlling interest. We operate
one
50%
owned hotel without a lease. Because we own controlling interests in our operating lessees, we consolidate our interests in all
36
leased hotels (which we refer to as our Consolidated Hotels) and reflect their operating revenues and expenses in our statements of operations and comprehensive income (loss). We own
50%
of the real estate interest in
one
Consolidated Hotel (we account for our real estate interest in this hotel by the equity method) and majority real estate interests in our remaining
35
Consolidated Hotels (we consolidate our real estate interests in these hotels).
The following table reflects the distribution by brand of our
36
Consolidated Hotels at
June 30, 2017
:
|
|
|
|
|
|
|
|
|
Brand
|
|
Hotels
|
|
Rooms
|
Embassy Suites by Hilton
®
|
|
18
|
|
|
|
4,982
|
|
Wyndham
®
and Wyndham Grand
®
|
|
8
|
|
|
|
2,528
|
|
Marriott
®
and Renaissance
®
|
|
2
|
|
|
|
761
|
|
Holiday Inn
®
|
|
1
|
|
|
|
585
|
|
DoubleTree
by Hilton
®
and Hilton
®
|
|
3
|
|
|
|
802
|
|
Sheraton
®
|
|
2
|
|
|
|
673
|
|
Fairmont
®
|
|
1
|
|
|
|
383
|
|
The Knickerbocker
®
|
|
1
|
|
|
|
330
|
|
Total
|
|
36
|
|
|
|
11,044
|
|
At
June 30, 2017
, our Consolidated Hotels were located in
14
states, with concentrations in California (
10
hotels), Florida (
six
hotels) and Massachusetts (
three
hotels). We generated approximately
61%
of our revenue from hotels in these
three
states during the first
six
months of
2017
.
At
June 30, 2017
, of our Consolidated Hotels: (i) subsidiaries of Hilton Worldwide managed
20
hotels; (ii) subsidiaries of Wyndham Worldwide managed
eight
hotels; (iii) subsidiaries of Marriott International managed
four
hotels; (iv) subsidiaries of InterContinental Hotels Group managed
one
hotel; (v) Fairmont, a subsidiary of AccorHotels Group, managed
one
hotel; (vi) a subsidiary of Highgate Hotels managed
one
hotel; and (vii) Aimbridge Hospitality managed
one
hotel.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization — (continued)
The information in our consolidated financial statements for the
three
and
six
months ended
June 30, 2017
and
2016
is unaudited. Preparing financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The accompanying financial statements for the
three
and
six
months ended
June 30, 2017
and
2016
, include adjustments based on management’s estimates (consisting of normal and recurring accruals), which we consider necessary for a fair statement of the results for the periods. The financial information should be read in conjunction with the consolidated financial statements for the year ended
December 31, 2016
, included in our Annual Report on Form 10-K. Operating results for the
three
and
six
months ended
June 30, 2017
are not necessarily indicative of actual operating results for the entire year.
|
|
2.
|
Investment in Unconsolidated Entities
|
At
June 30, 2017
and
December 31, 2016
, we owned
50%
interests in joint ventures that owned
two
hotels. We also own
50%
interests in entities that own real estate in Myrtle Beach, South Carolina and provide condominium management services at these locations. We account for our investments in these unconsolidated entities under the equity method. We consolidate all of our majority-owned subsidiaries in our financial statements. We make adjustments to our equity in income from unconsolidated entities related to the difference between our basis in investment in unconsolidated entities compared to the historical basis of the assets recorded by the joint ventures.
The following table summarizes combined balance sheet information for our unconsolidated entities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2017
|
|
2016
|
Investment in hotels and other properties, net of accumulated depreciation
|
$
|
19,817
|
|
|
|
$
|
20,898
|
|
|
Total assets
|
$
|
26,777
|
|
|
|
$
|
27,052
|
|
|
Debt, net of unamortized debt issuance costs
|
$
|
21,801
|
|
|
|
$
|
22,065
|
|
|
Total liabilities
|
$
|
24,960
|
|
|
|
$
|
24,311
|
|
|
Equity
|
$
|
1,817
|
|
|
|
$
|
2,741
|
|
|
Our unconsolidated entities’ debt at
June 30, 2017
and
December 31, 2016
consisted entirely of non-recourse mortgage debt.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
2.
|
Investment in Unconsolidated Entities — (continued)
|
The following table sets forth summarized combined statement of operations information for our unconsolidated entities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Total revenues
|
$
|
10,461
|
|
|
$
|
10,175
|
|
|
$
|
15,687
|
|
|
$
|
15,678
|
|
Net income
|
$
|
1,489
|
|
|
$
|
1,644
|
|
|
$
|
1,422
|
|
|
$
|
1,530
|
|
Net income attributable to FelCor
|
$
|
744
|
|
|
$
|
822
|
|
|
$
|
711
|
|
|
$
|
765
|
|
Depreciation of cost in excess of book value
|
(96
|
)
|
|
(96
|
)
|
|
(193
|
)
|
|
(193
|
)
|
Equity in income from unconsolidated entities
|
$
|
648
|
|
|
$
|
726
|
|
|
$
|
518
|
|
|
$
|
572
|
|
The following table summarizes the components of our investments in unconsolidated entities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2017
|
|
2016
|
Equity basis of hotel joint venture investments
|
$
|
(4,497
|
)
|
|
|
$
|
(4,533
|
)
|
|
Cost of hotel investments in excess of joint venture book value
|
6,749
|
|
|
|
6,942
|
|
|
Equity basis of land and condominium joint venture investments
|
5,405
|
|
|
|
5,903
|
|
|
Investment in unconsolidated entities
|
$
|
7,657
|
|
|
|
$
|
8,312
|
|
|
The following table summarizes the components of our equity in income from unconsolidated entities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Hotel investments
|
$
|
575
|
|
|
$
|
653
|
|
|
$
|
1,016
|
|
|
$
|
1,028
|
|
Other investments
|
73
|
|
|
73
|
|
|
(498
|
)
|
|
(456
|
)
|
Equity in income from unconsolidated entities
|
$
|
648
|
|
|
$
|
726
|
|
|
$
|
518
|
|
|
$
|
572
|
|
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated debt consisted of the following (dollars in thousands) at the dates shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Encumbered
|
|
Interest
|
|
Maturity
|
|
June 30,
|
|
December 31,
|
|
Hotels
|
|
Rate (%)
|
|
Date
|
|
2017
|
|
2016
|
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
|
|
118,971
|
|
|
120,109
|
|
Mortgage debt
|
1
|
|
|
|
4.94
|
|
|
October 2022
|
|
29,903
|
|
|
30,184
|
|
Line of credit
(b)
|
7
|
|
|
|
LIBOR + 2.75
|
|
June 2019
|
|
141,000
|
|
|
119,000
|
|
Mortgage debt
(c)
|
1
|
|
|
|
LIBOR + 3.00
|
|
November 2017
|
|
85,000
|
|
|
85,000
|
|
Total
|
22
|
|
|
|
|
|
|
|
|
$
|
1,374,874
|
|
|
$
|
1,354,293
|
|
Unamortized debt issuance costs
|
|
|
|
|
|
|
|
|
(14,803
|
)
|
|
(15,967
|
)
|
Debt, net of unamortized debt issuance costs
|
|
|
|
|
|
|
|
|
$
|
1,360,071
|
|
|
$
|
1,338,326
|
|
|
|
(a)
|
This debt is comprised of separate non-cross-collateralized loans, each secured by a mortgage encumbering a separate hotel.
|
|
|
(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.
|
We reported
$19.4 million
and
$19.9 million
of interest expense for the
three
months ended
June 30, 2017
and
2016
, respectively, which is net of: (i) interest income of
$47,000
and
$16,000
and (ii) capitalized interest of
$429,000
and
$205,000
, respectively. We reported
$38.7 million
and
$39.6 million
of interest expense for the
six
months ended
June 30, 2017
and
2016
, respectively, which is net of: (i) interest income of
$80,000
and
$28,000
and (ii) capitalized interest of
$791,000
and
$347,000
, respectively.
|
|
4.
|
FelCor Capital Stock/FelCor LP Partners’ Capital
|
During the first
six
months of 2016, FelCor repurchased
4.1 million
shares of common stock for
$27.4 million
(including commissions) at an average price of
$6.61
per share. Since FelCor’s Board of Directors authorized the
$100 million
repurchase program, which expires October 2017, FelCor has repurchased
6.6 million
shares of common stock for
$44.8 million
(including commissions) at an average price of
$6.78
per share. All repurchased shares have been retired and have been re-designated as authorized but unissued.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
5.
|
Hotel Operating Revenue, Departmental Expenses, and Other Property-Related Costs
|
Hotel operating revenue was comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Room revenue
|
$
|
168,772
|
|
|
$
|
181,318
|
|
|
$
|
313,705
|
|
|
$
|
340,394
|
|
Food and beverage revenue
|
37,921
|
|
|
43,697
|
|
|
69,995
|
|
|
83,229
|
|
Other operating departments
|
12,423
|
|
|
11,746
|
|
|
23,112
|
|
|
22,595
|
|
Total hotel operating revenue
|
$
|
219,116
|
|
|
$
|
236,761
|
|
|
$
|
406,812
|
|
|
$
|
446,218
|
|
Nearly all of our revenue is comprised of hotel operating revenues. These revenues are recorded net of any sales or occupancy taxes collected from our guests. We record all rebates or discounts, when allowed, as a reduction in revenue, and there are no material contingent obligations with respect to rebates or discounts offered by us. All revenues are recorded on an accrual basis, as earned. We make appropriate allowances for doubtful accounts, which we record as bad debt expense. The remainder of our revenue is from condominium management fee income and other sources.
Hotel departmental expenses were comprised of the following (in thousands, except for percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
2017
|
|
2016
|
|
Amount
|
|
% of Total Hotel Operating Revenue
|
|
Amount
|
|
% of Total Hotel Operating Revenue
|
Room
|
$
|
43,483
|
|
|
19.8
|
%
|
|
|
$
|
44,748
|
|
|
18.9
|
%
|
|
Food and beverage
|
28,281
|
|
|
12.9
|
|
|
|
32,592
|
|
|
13.8
|
|
|
Other operating departments
|
3,947
|
|
|
1.9
|
|
|
|
4,039
|
|
|
1.7
|
|
|
Total hotel departmental expenses
|
$
|
75,711
|
|
|
34.6
|
%
|
|
|
$
|
81,379
|
|
|
34.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
Amount
|
|
% of Total Hotel Operating Revenue
|
|
Amount
|
|
% of Total Hotel Operating Revenue
|
Room
|
$
|
84,161
|
|
|
20.7
|
%
|
|
|
$
|
87,447
|
|
|
19.6
|
%
|
|
Food and beverage
|
54,503
|
|
|
13.4
|
|
|
|
63,548
|
|
|
14.2
|
|
|
Other operating departments
|
7,480
|
|
|
1.8
|
|
|
|
7,822
|
|
|
1.8
|
|
|
Total hotel departmental expenses
|
$
|
146,144
|
|
|
35.9
|
%
|
|
|
$
|
158,817
|
|
|
35.6
|
%
|
|
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
5.
|
Hotel Operating Revenue, Departmental Expenses, and Other Property-Related Costs — (continued)
|
Other property-related costs were comprised of the following amounts (in thousands, except for percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
2017
|
|
2016
|
|
Amount
|
|
% of Total Hotel Operating Revenue
|
|
Amount
|
|
% of Total Hotel Operating Revenue
|
Hotel general and administrative expense
|
$
|
18,919
|
|
|
8.6
|
%
|
|
|
$
|
21,042
|
|
|
8.9
|
%
|
|
Marketing
|
18,407
|
|
|
8.4
|
|
|
|
19,157
|
|
|
8.1
|
|
|
Repair and maintenance
|
8,665
|
|
|
4.0
|
|
|
|
9,391
|
|
|
4.0
|
|
|
Utilities
|
6,229
|
|
|
2.8
|
|
|
|
6,417
|
|
|
2.7
|
|
|
Total other property-related costs
|
$
|
52,220
|
|
|
23.8
|
%
|
|
|
$
|
56,007
|
|
|
23.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
Amount
|
|
% of Total Hotel Operating Revenue
|
|
Amount
|
|
% of Total Hotel Operating Revenue
|
Hotel general and administrative expense
|
$
|
37,482
|
|
|
9.2
|
%
|
|
|
$
|
41,500
|
|
|
9.3
|
%
|
|
Marketing
|
35,779
|
|
|
8.8
|
|
|
|
38,030
|
|
|
8.5
|
|
|
Repair and maintenance
|
17,494
|
|
|
4.3
|
|
|
|
19,096
|
|
|
4.3
|
|
|
Utilities
|
12,320
|
|
|
3.0
|
|
|
|
12,947
|
|
|
2.9
|
|
|
Total other property-related costs
|
$
|
103,075
|
|
|
25.3
|
%
|
|
|
$
|
111,573
|
|
|
25.0
|
%
|
|
Wyndham guarantees minimum levels of annual net operating income at each of the hotels it manages for us. W
e recorded
$2.4 million
and
$1.5 million
with respect to the pro rata portions of the projected aggregate full-year guaranties for the
six
months ended
June 30, 2017
and
2016
, respectively (of which
$1.4 million
and
$1.5 million
is attributable to the three months ended June 30, 2017 and 2016, respectively). We record these amounts as a reduction of Wyndham's contractual management and other fees.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
6.
|
Taxes, Insurance and Lease Expense
|
Taxes, insurance and lease expense were comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Hotel lease expense
(a)
|
$
|
1,430
|
|
|
$
|
1,359
|
|
|
$
|
2,245
|
|
|
$
|
2,161
|
|
Land lease expense
(b)
|
3,685
|
|
|
3,757
|
|
|
7,089
|
|
|
7,019
|
|
Real estate and other taxes
|
8,532
|
|
|
7,784
|
|
|
16,447
|
|
|
15,359
|
|
Property insurance, general liability insurance and other
|
1,807
|
|
|
1,964
|
|
|
3,575
|
|
|
3,907
|
|
Total taxes, insurance and lease expense
|
$
|
15,454
|
|
|
$
|
14,864
|
|
|
$
|
29,356
|
|
|
$
|
28,446
|
|
|
|
(a)
|
We record hotel lease expense for the consolidated operating lessees of hotels owned by unconsolidated entities and partially offset this expense through noncontrolling interests in other partnerships (generally
49%
). We record our
50%
share of the corresponding lease income through equity in income (loss) from unconsolidated entities. We include in hotel lease expense percentage rent of
$615,000
and
$557,000
for the three and six months ended
June 30, 2017
and
2016
, respectively
.
|
|
|
(b)
|
We include in land lease expense percentage rent of
$1.6 million
and
$1.5 million
for the three months ended
June 30, 2017
and
2016
, respectively, and
$2.9 million
and
$2.6 million
for the
six months ended June 30, 2017
and
2016
, respectively.
|
Our hotels are comprised of operations and cash flows that can clearly be distinguished, operationally, and for financial reporting purposes, from the remainder of our operations. Accordingly, we consider our hotels to be components for purposes of determining impairment charges.
We test for impairment on our hotels to be held and used whenever changes in circumstances indicate a hotel’s carrying value may not be recoverable. We conduct the test using undiscounted cash flows for the shorter of the hotel’s estimated hold period or its remaining useful life. When testing for recoverability of hotels held for investment, we use projected cash flows over its expected hold period. Those hotels held for investment that fail the impairment test are written down to their then current estimated fair value, before any selling costs, and we continue to depreciate the hotels over their remaining useful lives. Hotels classified as held for sale are measured at the lower of carrying amount or estimated fair value, less estimated selling costs.
In March 2017, we recorded a
$24.8 million
impairment charge for a hotel. The impairment charge was based on both third-party offers to purchase the hotel and observable market data on a price per room basis from transactions involving hotels in similar locations (a Level 2 input under authoritative guidance for fair value measurements).
In June 2017,
two
hotels, including the hotel impaired during the first quarter of 2017, were classified as held for sale. The basis for these hotels had previously been written down to reflect the respective fair market value of the properties based on both third-party offers to purchase the hotels and observable market data on a price per room basis from transactions involving hotels in similar locations (a Level 2 input under authoritative guidance for fair value measurements). During the current period, we recorded additional impairment charges of
$10.3 million
for these hotels to reflect the current contract prices less estimated costs of sales.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
7.
|
Impairment Charges — (continued)
|
In June 2016, we recorded a
$6.3 million
impairment charge, based on an accepted third-party offer to purchase a hotel (a Level 2 input under authoritative guidance for fair value measurements) at a price below our previously estimated fair market value for the property. The hotel was subsequently sold in the third quarter of 2016.
We may record additional impairment charges if operating results of individual hotels are materially different from our forecasts, the economy and lodging industry weakens, or we shorten our contemplated holding period for additional hotels.
At
June 30, 2017
, we had
two
hotels held for sale, both of which were subsequently sold in the third quarter of 2017. In 2016, we sold
two
hotels. We included operations for the held for sale and sold hotels in income (loss) from continuing operations as shown in the statements of operations and comprehensive income (loss) for the three and
six
months ended
June 30, 2017
and
2016
, as disposition of these hotels does not represent a strategic shift in our business. Additionally, we included selling costs, which we expense as they are incurred, in the gain (loss) on the sale of hotels.
We designate a hotel as held for sale when the sale is probable within the next twelve months. Generally, we consider a sale to be probable when a buyer completes its due diligence review, we have an executed contract for sale and we have received a substantial non-refundable deposit.
The following table includes condensed financial information primarily related to the
two
hotels held for sale at
June 30, 2017
and the hotels sold in 2016 included in continuing operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
2016
|
Hotel operating revenue
|
$
|
7,197
|
|
|
|
$
|
24,026
|
|
|
|
$
|
12,773
|
|
|
$
|
48,859
|
|
Operating expenses
|
(18,687
|
)
|
|
|
(28,569
|
)
|
|
|
(51,935
|
)
|
|
(51,633
|
)
|
Operating loss from continuing operations
|
(11,490
|
)
|
|
|
(4,543
|
)
|
|
|
(39,162
|
)
|
|
(2,774
|
)
|
Loss on sale of hotels
|
(207
|
)
|
|
|
(630
|
)
|
|
|
(873
|
)
|
|
(1,344
|
)
|
Net loss
|
(11,697
|
)
|
|
|
(5,173
|
)
|
|
|
(40,035
|
)
|
|
(4,118
|
)
|
Net loss attributable to redeemable noncontrolling interests in FelCor LP
|
50
|
|
|
|
22
|
|
|
|
172
|
|
|
18
|
|
Net loss attributable to FelCor
|
$
|
(11,647
|
)
|
|
|
$
|
(5,151
|
)
|
|
|
$
|
(39,863
|
)
|
|
$
|
(4,100
|
)
|
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
9.
|
Income (Loss) Per Share/Unit
|
The following tables set forth the computation of basic and diluted income (loss) per share/unit (in thousands, except per share/unit data):
FelCor Income (Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Numerator:
|
|
|
|
|
|
|
|
Net income (loss) attributable to FelCor
|
$
|
(1,759
|
)
|
|
$
|
13,391
|
|
|
$
|
(37,670
|
)
|
|
$
|
8,469
|
|
Less: Preferred dividends
|
(6,279
|
)
|
|
(6,279
|
)
|
|
(12,558
|
)
|
|
(12,558
|
)
|
Less: Dividends declared on unvested restricted stock
|
(36
|
)
|
|
(35
|
)
|
|
(73
|
)
|
|
(73
|
)
|
Numerator for basic and diluted income (loss) attributable to FelCor common stockholders
|
$
|
(8,074
|
)
|
|
$
|
7,077
|
|
|
$
|
(50,301
|
)
|
|
$
|
(4,162
|
)
|
Denominator:
|
|
|
|
|
|
|
|
Denominator for basic income (loss) per share
|
137,866
|
|
|
138,182
|
|
|
137,820
|
|
|
138,930
|
|
FelCor restricted stock units, less shares assumed purchased at market
|
—
|
|
|
496
|
|
|
—
|
|
|
—
|
|
Denominator for diluted income (loss) per share
|
137,866
|
|
|
138,678
|
|
|
137,820
|
|
|
138,930
|
|
Basic and diluted income (loss) per share data:
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
(0.06
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.36
|
)
|
|
$
|
(0.03
|
)
|
FelCor LP Income (Loss) Per Unit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Numerator:
|
|
|
|
|
|
|
|
Net income (loss) attributable to FelCor LP
|
$
|
(1,794
|
)
|
|
$
|
13,422
|
|
|
$
|
(37,891
|
)
|
|
$
|
8,452
|
|
Less: Preferred distributions
|
(6,279
|
)
|
|
(6,279
|
)
|
|
(12,558
|
)
|
|
(12,558
|
)
|
Less: Distributions declared on FelCor unvested restricted stock
|
(36
|
)
|
|
(35
|
)
|
|
(73
|
)
|
|
(73
|
)
|
Numerator for basic and diluted income (loss) attributable to FelCor common unitholders
|
$
|
(8,109
|
)
|
|
$
|
7,108
|
|
|
$
|
(50,522
|
)
|
|
$
|
(4,179
|
)
|
Denominator:
|
|
|
|
|
|
|
|
Denominator for basic income (loss) per unit
|
138,476
|
|
|
138,793
|
|
|
138,430
|
|
|
139,541
|
|
FelCor restricted stock units, less shares assumed purchased at market
|
—
|
|
|
496
|
|
|
—
|
|
|
—
|
|
Denominator for diluted income (loss) per unit
|
138,476
|
|
|
139,289
|
|
|
138,430
|
|
|
139,541
|
|
Basic and diluted income (loss) per unit data:
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
(0.06
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.36
|
)
|
|
$
|
(0.03
|
)
|
The income (loss) attributable to FelCor/FelCor LP share/unit in the above calculations includes the net loss on sale of hotels attributable to FelCor/FelCor LP.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
9.
|
Income (Loss) Per Share/Unit
— (continued)
|
Securities that could potentially dilute earnings (loss) per share/unit in the future that were not included in the computation of diluted income (loss) per share/unit, because they would have been antidilutive for the periods presented, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Series A convertible preferred shares/units
|
9,984
|
|
9,984
|
|
9,984
|
|
|
|
9,984
|
|
FelCor restricted stock units, less shares assumed purchased at market
|
287
|
|
—
|
|
239
|
|
|
|
451
|
|
Series A preferred dividends (distributions) that would be excluded from net income (loss) attributable to FelCor common stockholders (or FelCor LP common unitholders), if these preferred shares/units were dilutive, were
$6.3 million
for the three months ended
June 30, 2017
and
2016
, and
$12.6 million
for the
six months ended June 30, 2017
and
2016
.
We grant our executive officers restricted stock units each year, which provides them with the potential to earn shares of our common stock. We amortize the fixed cost of these grants over the vesting period. We calculate the potential dilutive impact of these awards on our earnings per share using the treasury stock method.
|
|
10.
|
Fair Value of Financial Instruments
|
We base disclosures about fair value of our financial instruments on pertinent information available to management as of
June 30, 2017
and
December 31, 2016
. We exercise considerable judgment when interpreting market data and developing estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize on disposition of the financial instruments. Different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.
We base our estimates of the fair value of: (i) cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses on their carrying values due to their relatively short maturity; (ii) our debt for which trading prices are publicly available on observable market data (a Level 2 input) (that debt had an estimated fair value of
$1.1 billion
and
$1.0 billion
at
June 30, 2017
and
December 31, 2016
, respectively); and (iii) our debt for which trading prices are not publicly available on a discounted cash flow model using effective borrowing rates for debt with similar terms, loan to estimated fair value of collateral and remaining maturities (a Level 3 input) (that debt had an estimated fair value of
$384.6 million
and
$364.6 million
at
June 30, 2017
and
December 31, 2016
, respectively). The estimated fair value of all our debt was
$1.4 billion
at
June 30, 2017
and
December 31, 2016
. The carrying value of our debt was
$1.4 billion
and
$1.3 billion
at
June 30, 2017
and
December 31, 2016
, respectively.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
11.
|
Redeemable Noncontrolling Interests in FelCor LP/Redeemable Units
|
We record redeemable noncontrolling interests in FelCor LP, in the case of FelCor, and redeemable units, in the case of FelCor LP, in the mezzanine section (between liabilities and equity or partners’ capital) of our consolidated balance sheets because of the redemption feature of these units. Additionally, FelCor’s consolidated statements of operations and comprehensive income (loss) separately present earnings attributable to redeemable noncontrolling interests. We adjust redeemable noncontrolling interests in FelCor LP (or redeemable units) each period to reflect the greater of its carrying value based on the accumulation of historical cost or its redemption value. We base the historical cost on the proportionate relationship between the carrying value of equity associated with FelCor’s common stockholders relative to that of FelCor LP’s unitholders. We base redemption value on the closing price of FelCor’s common stock at period end. FelCor allocates net income (loss) to FelCor LP’s noncontrolling partners based on their weighted average ownership percentage during the period.
At
June 30, 2017
and December 31, 2016, we carried
610,183
outstanding limited partnership units at
$4.4 million
and
$4.9 million
, respectively. We base the value of these outstanding units on the closing price of FelCor’s common stock at
June 30, 2017
(
$7.21
per share) and December 31, 2016 (
$8.01
per share).
Changes in redeemable noncontrolling interests (or redeemable units) for the
six
months ended
June 30, 2017
and
2016
are shown below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
June 30,
|
|
2017
|
|
2016
|
Balance at beginning of period
|
$
|
4,888
|
|
|
|
$
|
4,464
|
|
|
Redemption value allocation
|
(193
|
)
|
|
|
(563
|
)
|
|
Distributions paid to unitholders
|
(74
|
)
|
|
|
(75
|
)
|
|
Net loss
|
(221
|
)
|
|
|
(17
|
)
|
|
Balance at end of period
|
$
|
4,400
|
|
|
|
$
|
3,809
|
|
|
12. Consolidated Joint Venture Preferred Equity/Capital
Our joint venture that redeveloped The Knickerbocker raised
$45.0 million
through the sale of redeemable preferred equity under the EB-5 Immigrant Investor Program. The purchasers receive a
3.25%
current annual return (which increases to
8%
if we do not redeem this equity interest before the fifth anniversary of its issuance), plus a
0.25%
non-compounding annual return payable at redemption. Through June 30, 2017, the venture received
$45.0 million
in gross proceeds (
$44.4 million
net of issuance costs), including
$650,000
in gross proceeds received in the first six months of 2017 and
$600,000
in gross proceeds received in the first
six
months of 2016.
13. Contingency
In April 2016, an affiliate of InterContinental Hotels Group PLC, or IHG, which had formerly operated
three
hotels on our behalf (
two
of which we sold in 2006, and
one
of which we converted to Wyndham operation and brand in 2013), notified us that the pension fund in which the employees at those hotels had participated has assessed
$8.3 million
in withdrawal liability in connection with the termination of IHG’s operation of those hotels. Under our hotel management agreements with IHG, we
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Contingency — (continued)
may be obligated to indemnify and hold IHG harmless for some or all of any amount ultimately contributed to the pension fund with respect to these hotels.
Because of the rules and regulations governing the pension trust, we have paid
$1.7 million
through
June 30, 2017
(of which
$570,000
was paid in the
six months ended June 30, 2017
) and expect to continue making such payments, on a quarterly basis, while the dispute is ongoing, subject to an overall contribution limit corresponding to the amount sought by the pension trust. While we aggressively oppose the pension trust’s position, we believe that resolution of this matter may not occur until mid-2018. Accordingly, in the third quarter of 2016, we accrued approximately
$2.3 million
for payments to be made through that time. The accrual recorded in the third quarter of 2016, in addition to payments made prior to that time, was recorded as a loss on the sale of hotels included in discontinued operations (because it primarily relates to hotels sold prior to 2013).
Despite these payments and accruals, we believe that (i) the pension trust was in error in assessing the withdrawal liability in this situation and (ii) even if the pension trust was not in error, we are not responsible for a significant portion (or perhaps any) of the withdrawal liability assessed by the pension trust for other reasons and that we are likely to recover a significant portion (if not all) of what we have paid, and may pay in the future, to the pension trust with respect to its claim. Consequently, we are vigorously disputing the underlying claims and, if appropriate, IHG’s demand for indemnification. The matter involves significant legal, actuarial and factual analysis with respect to each hotel, and we have not determined whether any loss to us is probable or that any such loss is estimable (other than the payments and accrual noted in the previous paragraph, for which we intend to seek recovery).
14. Recently Issued Accounting Standards
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may u
se either a full retrospective or a modified retrospective approach.
Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2017, and early adoption is permitted but not before the original effective date (for annual reporting periods beginning after December 15, 2016). The Company will adopt this guidance on January 1, 2018, on a modified retrospective basis. Based on the company’s assessment of this standard, it is not expected to have a material effect on the amount of revenue, or the timing of recognizing revenue, from our hotel operations.
In February 2016, the FASB issued ASU 2016-02 - Leases (ASC 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Recently Issued Accounting Standards — (continued)
account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The ASU is expected to impact our consolidated financial statements as we have certain operating lease arrangements. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The standard is effective on January 1, 2019, with early adoption permitted. While we are still in the process of evaluating the impact of this new guidance, we do expect that the application of this standard will result in the recording of a right-of-use asset and a related lease liability on our ground leases.
In August 2016, the FASB issued ASU 2016-18, Restricted Cash, which addresses classification issues related to the statement of cash flows which may impact our classification of cash activity related to restricted cash. The standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We are in the process of evaluating the impact of this new guidance.
15. Proposed Merger
On April 23, 2017, FelCor, FelCor LP, RLJ Lodging Trust (“RLJ”), RLJ Lodging Trust, L.P. (the “Operating Partnership”) and certain subsidiaries thereof entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”).
The Merger Agreement provides for the merger of an indirect wholly-owned subsidiary of the Operating Partnership with and into FelCor LP, with FelCor LP surviving as a wholly-owned subsidiary of the Operating Partnership (the “Partnership Merger”), and immediately thereafter, the merger of FelCor with and into another wholly-owned subsidiary of the Operating Partnership, with such subsidiary surviving as a wholly-owned subsidiary of the Operating Partnership (the “REIT Merger” and, together with the Partnership Merger, the “Mergers”). The Mergers are expected to close on or about August 31, 2017.
At the effective time of the REIT Merger, each outstanding share of FelCor common stock will be converted into the right to receive
0.362
(the “Common Exchange Ratio”) common shares of RLJ, and each share of FelCor Series A preferred stock will be converted into the right to receive
one
share of newly created Series A cumulative convertible preferred shares of RLJ with equivalent terms and conditions as the existing FelCor Series A preferred stock. Each external limited partner of FelCor LP will be entitled to redeem or exchange its outstanding common limited partnership units in FelCor LP for shares of FelCor common stock, which will in turn be converted into the right to receive RLJ common shares. Each outstanding FelCor LP common unit of any holder who does not make the foregoing election will be converted into the right to receive a number of common limited partnership units in the Operating Partnership based on the Common Exchange Ratio.
In connection with the Mergers, each outstanding share of FelCor restricted stock and each outstanding restricted stock unit of FelCor will vest in accordance with the applicable award agreement, and the holders of such vested shares will receive common shares of RLJ in exchange therefor based on the Common Exchange Ratio.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Proposed Merger — (continued)
The parties to the Merger Agreement have made certain customary representations and warranties in the Merger Agreement and have agreed to customary covenants, including a “no-shop” provision. The completion of the Mergers is subject to customary closing conditions, including the approval of the REIT Merger by FelCor’s stockholders and approval of the issuance of RLJ common shares by RLJ’s shareholders. The Merger Agreement may be terminated under certain circumstances, including by either party if the Mergers have not been consummated on or before December 28, 2017. In connection with the termination of the Merger Agreement under specified circumstances, RLJ may be required to pay to FelCor a termination fee of
$95 million
or reimburse FelCor’s transaction expenses in an amount equal to
$20 million
, or FelCor may be required to pay to RLJ a termination fee of
$39 million
or reimburse RLJ’s transaction expenses in an amount equal to
$20 million
. If either party pays the expense reimbursement amount and subsequently becomes obligated to pay the termination fee, the termination fee is reduced by the expense reimbursement amount previously paid.
Through the
six months ended June 30, 2017
, we have incurred
$6.3 million
in transaction costs primarily related to the proposed merger, including
$5.8 million
incurred during the
three months ended June 30, 2017
(of which
$5.6 million
was accrued at June 30, 2017). The costs are included in other expenses in our statement of operations.
Four
putative class actions have been filed by purported stockholders of FelCor challenging the Mergers. The first suit, styled as
George Assad v. FelCor Lodging Trust Inc., et al.
, No. 1:17-cv-01744-ELH, was filed in the United States District Court for the District of Maryland on June 26, 2017 and is against FelCor, its directors (including Steven R. Goldman, who is also an officer), FelCor LP, RLJ, the Operating Partnership, the REIT Merger Sub, and the Partnership Merger Sub (the “Assad Lawsuit”). The second suit, styled as
Martin Johnson v. FelCor Lodging Trust Inc., et al.
, No. 1:17-cv-01786-ELH, was filed in the United States District Court for the District of Maryland on June 28, 2017, and is against FelCor and its directors (including Steven R. Goldman, who is also an officer) (the “Johnson Lawsuit”). The third suit, styled as
Sachs Investment Group v. FelCor Lodging Trust Inc., et al.
, No. 1:17-cv-01933-ELH, was filed in the United States District Court for the District of Maryland on July 11, 2017, and is against FelCor and its directors (including Steven R. Goldman, who is also an officer) (the “Sachs Lawsuit”). The fourth suit, styled as
Judy G. Bagheri v. FelCor Lodging Trust Inc., et al.
, No. 3:17-cv-01892-C, was filed in the United States District Court for the Northern District of Texas on July 17, 2017 and is against FelCor, its directors (including Steven R. Goldman, who is also an officer), FelCor LP, RLJ, the Operating Partnership, the REIT Merger Sub, and the Partnership Merger Sub (the “Bagheri Lawsuit,” and with the Assad, Johnson, and Sachs Lawsuits, the “Lawsuits”).
The Lawsuits allege that FelCor and its directors violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by disseminating a false and misleading Form S-4 containing a joint proxy statement/prospectus. The Lawsuits further allege that FelCor's directors violated Section 20(a) of the Exchange Act by failing to exercise proper control over the person(s) who violated Section 14(a) of the Exchange Act. The Assad and Bagheri Lawsuits further allege that RLJ violated Section 20(a) of the Exchange Act.
The Lawsuits seek, among other things, injunctive relief preventing the parties from consummating the Mergers, rescission of the transactions contemplated by the Merger Agreement should they be consummated, and litigation costs, including attorneys’ fees. The Johnson Lawsuit and Sachs Lawsuit also seek damages to be awarded to the plaintiff and any class in the event the transactions contemplated by the Merger Agreement are consummated. The Assad Lawsuit also seeks injunctive relief directing the defendants to disseminate a true and complete joint proxy statement/prospectus and
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Proposed Merger — (continued)
declaratory relief that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder.
We dispute the allegations raised in the Lawsuits and will vigorously defend ourselves and related defendants. Because these matters are in the early stages, the timing and resolution of them is uncertain.
In connection with the proposed Mergers, RLJ has filed with the SEC a registration statement on Form S-4 (File No. 333-218439), and RLJ and FelCor have filed with the SEC a definitive joint proxy statement/prospectus, which was first mailed to security holders of RLJ and FelCor on July 18, 2017. RLJ and FelCor also filed a supplement to the joint proxy statement/prospectus on August 7, 2017 and plan to file other relevant documents with the SEC regarding the proposed transaction. See “Important Information for Investors and Stockholders” and “Participants in the Solicitation” included elsewhere in this Quarterly Report on Form 10-Q. The Mergers are subject to certain risks and uncertainties, and we cannot assure you that we will be able to complete the Mergers on the expected timeline or at all. See “Item 1A. Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
16.
|
FelCor LP’s Consolidating Financial Information
|
Certain of FelCor LP’s
100%
owned subsidiaries (FCH/PSH, L.P.; FelCor/CMB Buckhead Hotel, L.L.C.; FelCor/CMB Marlborough Hotel, L.L.C.; FelCor/CMB Orsouth Holdings, L.P.; FelCor/CMB SSF Holdings, L.P.; FelCor/CSS Holdings, L.P.; FelCor Dallas Love Field Owner, L.L.C.; FelCor Milpitas Owner, L.L.C.; FelCor TRS Borrower 4, L.L.C.; FelCor TRS Holdings, L.L.C.; FelCor Hotel Asset Company, L.L.C.; FelCor St. Pete (SPE), L.L.C.; FelCor Esmeralda (SPE), L.L.C.; FelCor S-4 Hotels (SPE), L.L.C.; Madison 237 Hotel, L.L.C.; Myrtle Beach Owner, L.L.C.; and Royalton 44 Hotel, L.L.C., collectively, “Subsidiary Guarantors”), together with FelCor, guaranty, fully and unconditionally, except where subject to customary release provisions as described below, and jointly and severally, our senior debt.
The guaranties by the Subsidiary Guarantors may be automatically and unconditionally released upon (i) the sale or other disposition of all of the capital stock of the Subsidiary Guarantor or the sale or disposition of all or substantially all of the assets of the Subsidiary Guarantor, if, in each case, as a result of such sale or disposition, such Subsidiary Guarantor ceases to be a subsidiary of FelCor LP, (ii) the consolidation or merger of any such Subsidiary Guarantor with any person other than FelCor LP, or a subsidiary of FelCor LP, if, as a result of such consolidation or merger, such Subsidiary Guarantor ceases to be a subsidiary of FelCor LP, (iii) a legal defeasance or covenant defeasance of the indenture, (iv) the unconditional and complete release of such Subsidiary Guarantor in accordance with the modification and waiver provisions of the indenture, or (v) the designation of a restricted subsidiary that is a Subsidiary Guarantor as an unrestricted subsidiary under and in compliance with the indenture.
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
16.
|
FelCor LP’s Consolidating Financial Information — (continued)
|
The following tables present consolidating information for the Subsidiary Guarantors.
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor LP
|
|
Subsidiary Guarantors
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total Consolidated
|
Net investment in hotels
|
$
|
—
|
|
|
$
|
366,763
|
|
|
$
|
1,081,583
|
|
|
$
|
—
|
|
|
$
|
1,448,346
|
|
Equity investment in consolidated entities
|
1,129,658
|
|
|
—
|
|
|
—
|
|
|
(1,129,658
|
)
|
|
—
|
|
Investment in unconsolidated entities
|
2,252
|
|
|
4,209
|
|
|
1,196
|
|
|
—
|
|
|
7,657
|
|
Hotels held for sale
|
—
|
|
|
77,937
|
|
|
—
|
|
|
—
|
|
|
77,937
|
|
Cash and cash equivalents
|
14,681
|
|
|
41,341
|
|
|
2,113
|
|
|
—
|
|
|
58,135
|
|
Restricted cash
|
—
|
|
|
18,503
|
|
|
5,696
|
|
|
—
|
|
|
24,199
|
|
Accounts receivable, net
|
2,887
|
|
|
39,442
|
|
|
1,594
|
|
|
—
|
|
|
43,923
|
|
Deferred expenses, net
|
—
|
|
|
—
|
|
|
3,591
|
|
|
—
|
|
|
3,591
|
|
Other assets
|
6,591
|
|
|
9,920
|
|
|
3,729
|
|
|
—
|
|
|
20,240
|
|
Total assets
|
$
|
1,156,069
|
|
|
$
|
558,115
|
|
|
$
|
1,099,502
|
|
|
$
|
(1,129,658
|
)
|
|
$
|
1,684,028
|
|
|
|
|
|
|
|
|
|
|
|
Debt, net
|
$
|
986,573
|
|
|
$
|
—
|
|
|
$
|
408,991
|
|
|
$
|
(35,493
|
)
|
|
$
|
1,360,071
|
|
Distributions payable
|
14,765
|
|
|
—
|
|
|
122
|
|
|
—
|
|
|
14,887
|
|
Accrued expenses and other liabilities
|
33,249
|
|
|
92,683
|
|
|
9,860
|
|
|
—
|
|
|
135,792
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
1,034,587
|
|
|
92,683
|
|
|
418,973
|
|
|
(35,493
|
)
|
|
1,510,750
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable units, at redemption value
|
4,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,400
|
|
|
|
|
|
|
|
|
|
|
|
Preferred units
|
309,337
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
309,337
|
|
Common units
|
(192,255
|
)
|
|
466,348
|
|
|
627,817
|
|
|
(1,094,165
|
)
|
|
(192,255
|
)
|
Total FelCor LP partners’ capital
|
117,082
|
|
|
466,348
|
|
|
627,817
|
|
|
(1,094,165
|
)
|
|
117,082
|
|
Noncontrolling interests
|
—
|
|
|
(916
|
)
|
|
8,281
|
|
|
—
|
|
|
7,365
|
|
Preferred capital in consolidated joint venture
|
—
|
|
|
—
|
|
|
44,431
|
|
|
—
|
|
|
44,431
|
|
Total partners’ capital
|
117,082
|
|
|
465,432
|
|
|
680,529
|
|
|
(1,094,165
|
)
|
|
168,878
|
|
Total liabilities and partners’ capital
|
$
|
1,156,069
|
|
|
$
|
558,115
|
|
|
$
|
1,099,502
|
|
|
$
|
(1,129,658
|
)
|
|
$
|
1,684,028
|
|
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. FelCor LP’s Consolidating Financial Information — (continued)
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor LP
|
|
Subsidiary Guarantors
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total Consolidated
|
Net investment in hotels
|
$
|
—
|
|
|
$
|
488,528
|
|
|
$
|
1,078,295
|
|
|
$
|
—
|
|
|
$
|
1,566,823
|
|
Equity investment in consolidated entities
|
1,190,737
|
|
|
—
|
|
|
—
|
|
|
(1,190,737
|
)
|
|
—
|
|
Investment in unconsolidated entities
|
2,410
|
|
|
4,800
|
|
|
1,102
|
|
|
—
|
|
|
8,312
|
|
Cash and cash equivalents
|
13,532
|
|
|
29,141
|
|
|
4,644
|
|
|
—
|
|
|
47,317
|
|
Restricted cash
|
—
|
|
|
16,433
|
|
|
3,058
|
|
|
—
|
|
|
19,491
|
|
Accounts receivable, net
|
2,804
|
|
|
33,338
|
|
|
5,938
|
|
|
—
|
|
|
42,080
|
|
Deferred expenses, net
|
—
|
|
|
—
|
|
|
4,527
|
|
|
—
|
|
|
4,527
|
|
Other assets
|
5,634
|
|
|
10,009
|
|
|
2,899
|
|
|
—
|
|
|
18,542
|
|
Total assets
|
$
|
1,215,117
|
|
|
$
|
582,249
|
|
|
$
|
1,100,463
|
|
|
$
|
(1,190,737
|
)
|
|
$
|
1,707,092
|
|
|
|
|
|
|
|
|
|
|
|
Debt, net
|
$
|
985,767
|
|
|
$
|
—
|
|
|
$
|
391,995
|
|
|
$
|
(39,436
|
)
|
|
$
|
1,338,326
|
|
Distributions payable
|
14,734
|
|
|
—
|
|
|
124
|
|
|
—
|
|
|
14,858
|
|
Accrued expenses and other liabilities
|
28,431
|
|
|
79,439
|
|
|
8,567
|
|
|
—
|
|
|
116,437
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
1,028,932
|
|
|
79,439
|
|
|
400,686
|
|
|
(39,436
|
)
|
|
1,469,621
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable units, at redemption value
|
4,888
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,888
|
|
|
|
|
|
|
|
|
|
|
|
Preferred units
|
309,337
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
309,337
|
|
Common units
|
(128,040
|
)
|
|
503,765
|
|
|
647,536
|
|
|
(1,151,301
|
)
|
|
(128,040
|
)
|
Total FelCor LP partners’ capital
|
181,297
|
|
|
503,765
|
|
|
647,536
|
|
|
(1,151,301
|
)
|
|
181,297
|
|
Noncontrolling interests
|
—
|
|
|
(955
|
)
|
|
8,458
|
|
|
—
|
|
|
7,503
|
|
Preferred capital in consolidated joint venture
|
—
|
|
|
—
|
|
|
43,783
|
|
|
—
|
|
|
43,783
|
|
Total partners’ capital
|
181,297
|
|
|
502,810
|
|
|
699,777
|
|
|
(1,151,301
|
)
|
|
232,583
|
|
Total liabilities and partners’ capital
|
$
|
1,215,117
|
|
|
$
|
582,249
|
|
|
$
|
1,100,463
|
|
|
$
|
(1,190,737
|
)
|
|
$
|
1,707,092
|
|
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. FelCor LP’s Consolidating Financial Information — (continued)
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
For the
Three
Months Ended
June 30, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor LP
|
|
Subsidiary Guarantors
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Hotel operating revenue
|
$
|
—
|
|
|
$
|
219,116
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
219,116
|
|
Percentage lease revenue
|
—
|
|
|
—
|
|
|
46,486
|
|
|
(46,486
|
)
|
|
—
|
|
Other revenue
|
36
|
|
|
1,146
|
|
|
142
|
|
|
—
|
|
|
1,324
|
|
Total revenues
|
36
|
|
|
220,262
|
|
|
46,628
|
|
|
(46,486
|
)
|
|
220,440
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Hotel operating expenses
|
—
|
|
|
135,657
|
|
|
—
|
|
|
—
|
|
|
135,657
|
|
Taxes, insurance and lease expense
|
66
|
|
|
55,630
|
|
|
6,244
|
|
|
(46,486
|
)
|
|
15,454
|
|
Corporate expenses
|
—
|
|
|
3,396
|
|
|
2,885
|
|
|
—
|
|
|
6,281
|
|
Depreciation and amortization
|
116
|
|
|
10,712
|
|
|
16,700
|
|
|
—
|
|
|
27,528
|
|
Impairment
|
—
|
|
|
10,271
|
|
|
—
|
|
|
—
|
|
|
10,271
|
|
Other expenses
|
5,844
|
|
|
1,412
|
|
|
75
|
|
|
—
|
|
|
7,331
|
|
Total operating expenses
|
6,026
|
|
|
217,078
|
|
|
25,904
|
|
|
(46,486
|
)
|
|
202,522
|
|
Operating income
|
(5,990
|
)
|
|
3,184
|
|
|
20,724
|
|
|
—
|
|
|
17,918
|
|
Interest expense, net
|
(14,405
|
)
|
|
23
|
|
|
(5,034
|
)
|
|
—
|
|
|
(19,416
|
)
|
Other gains, net
|
—
|
|
|
—
|
|
|
100
|
|
|
—
|
|
|
100
|
|
Loss before equity in income from unconsolidated entities
|
(20,395
|
)
|
|
3,207
|
|
|
15,790
|
|
|
—
|
|
|
(1,398
|
)
|
Equity in income from consolidated entities
|
18,056
|
|
|
—
|
|
|
—
|
|
|
(18,056
|
)
|
|
—
|
|
Equity in income from unconsolidated entities
|
575
|
|
|
84
|
|
|
(11
|
)
|
|
—
|
|
|
648
|
|
Loss from continuing operations before income tax
|
(1,764
|
)
|
|
3,291
|
|
|
15,779
|
|
|
(18,056
|
)
|
|
(750
|
)
|
Income tax
|
(30
|
)
|
|
(473
|
)
|
|
—
|
|
|
—
|
|
|
(503
|
)
|
Loss from continuing operations before loss on sale of hotels
|
(1,794
|
)
|
|
2,818
|
|
|
15,779
|
|
|
(18,056
|
)
|
|
(1,253
|
)
|
Loss on sale of hotels
|
—
|
|
|
(126
|
)
|
|
(81
|
)
|
|
—
|
|
|
(207
|
)
|
Net loss and comprehensive loss
|
(1,794
|
)
|
|
2,692
|
|
|
15,698
|
|
|
(18,056
|
)
|
|
(1,460
|
)
|
Loss attributable to noncontrolling interests
|
—
|
|
|
(6
|
)
|
|
39
|
|
|
—
|
|
|
33
|
|
Preferred distributions - consolidated joint venture
|
—
|
|
|
—
|
|
|
(367
|
)
|
|
—
|
|
|
(367
|
)
|
Net loss and comprehensive loss attributable to FelCor LP
|
(1,794
|
)
|
|
2,686
|
|
|
15,370
|
|
|
(18,056
|
)
|
|
(1,794
|
)
|
Preferred distributions
|
(6,279
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,279
|
)
|
Net loss attributable to FelCor LP common unitholders
|
$
|
(8,073
|
)
|
|
$
|
2,686
|
|
|
$
|
15,370
|
|
|
$
|
(18,056
|
)
|
|
$
|
(8,073
|
)
|
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the
Three
Months Ended
June 30, 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor LP
|
|
Subsidiary Guarantors
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Hotel operating revenue
|
$
|
—
|
|
|
$
|
236,761
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
236,761
|
|
Percentage lease revenue
|
—
|
|
|
—
|
|
|
46,953
|
|
|
(46,953
|
)
|
|
—
|
|
Other revenue
|
1
|
|
|
1,022
|
|
|
122
|
|
|
—
|
|
|
1,145
|
|
Total revenues
|
1
|
|
|
237,783
|
|
|
47,075
|
|
|
(46,953
|
)
|
|
237,906
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Hotel operating expenses
|
—
|
|
|
145,887
|
|
|
—
|
|
|
—
|
|
|
145,887
|
|
Taxes, insurance and lease expense
|
26
|
|
|
56,112
|
|
|
5,679
|
|
|
(46,953
|
)
|
|
14,864
|
|
Corporate expenses
|
—
|
|
|
3,360
|
|
|
2,687
|
|
|
—
|
|
|
6,047
|
|
Depreciation and amortization
|
93
|
|
|
12,030
|
|
|
17,054
|
|
|
—
|
|
|
29,177
|
|
Impairment
|
—
|
|
|
6,333
|
|
|
—
|
|
|
—
|
|
|
6,333
|
|
Other expenses
|
187
|
|
|
1,661
|
|
|
294
|
|
|
—
|
|
|
2,142
|
|
Total operating expenses
|
306
|
|
|
225,383
|
|
|
25,714
|
|
|
(46,953
|
)
|
|
204,450
|
|
Operating income
|
(305
|
)
|
|
12,400
|
|
|
21,361
|
|
|
—
|
|
|
33,456
|
|
Interest expense, net
|
(14,601
|
)
|
|
9
|
|
|
(5,315
|
)
|
|
—
|
|
|
(19,907
|
)
|
Other gains, net
|
—
|
|
|
—
|
|
|
100
|
|
|
—
|
|
|
100
|
|
Income before equity in income from unconsolidated entities
|
(14,906
|
)
|
|
12,409
|
|
|
16,146
|
|
|
—
|
|
|
13,649
|
|
Equity in income from consolidated entities
|
27,974
|
|
|
—
|
|
|
—
|
|
|
(27,974
|
)
|
|
—
|
|
Equity in income from unconsolidated entities
|
652
|
|
|
85
|
|
|
(11
|
)
|
|
—
|
|
|
726
|
|
Income from continuing operations before income tax
|
13,720
|
|
|
12,494
|
|
|
16,135
|
|
|
(27,974
|
)
|
|
14,375
|
|
Income tax
|
(48
|
)
|
|
73
|
|
|
—
|
|
|
—
|
|
|
25
|
|
Income from continuing operations before loss on sale of hotels
|
13,672
|
|
|
12,567
|
|
|
16,135
|
|
|
(27,974
|
)
|
|
14,400
|
|
Loss on sale of hotels
|
(250
|
)
|
|
(300
|
)
|
|
(80
|
)
|
|
—
|
|
|
(630
|
)
|
Net income and comprehensive income
|
13,422
|
|
|
12,267
|
|
|
16,055
|
|
|
(27,974
|
)
|
|
13,770
|
|
Loss attributable to noncontrolling interests
|
—
|
|
|
(57
|
)
|
|
73
|
|
|
—
|
|
|
16
|
|
Preferred distributions - consolidated joint venture
|
—
|
|
|
—
|
|
|
(364
|
)
|
|
—
|
|
|
(364
|
)
|
Net income and comprehensive income attributable to FelCor LP
|
13,422
|
|
|
12,210
|
|
|
15,764
|
|
|
(27,974
|
)
|
|
13,422
|
|
Preferred distributions
|
(6,279
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,279
|
)
|
Net income attributable to FelCor LP common unitholders
|
$
|
7,143
|
|
|
$
|
12,210
|
|
|
$
|
15,764
|
|
|
$
|
(27,974
|
)
|
|
$
|
7,143
|
|
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
For the
Six
Months Ended
June 30, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor LP
|
|
Subsidiary Guarantors
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Hotel operating revenue
|
$
|
—
|
|
|
$
|
406,812
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
406,812
|
|
Percentage lease revenue
|
—
|
|
|
—
|
|
|
84,530
|
|
|
(84,530
|
)
|
|
—
|
|
Other revenue
|
39
|
|
|
1,490
|
|
|
203
|
|
|
—
|
|
|
1,732
|
|
Total revenues
|
39
|
|
|
408,302
|
|
|
84,733
|
|
|
(84,530
|
)
|
|
408,544
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Hotel operating expenses
|
—
|
|
|
264,495
|
|
|
—
|
|
|
—
|
|
|
264,495
|
|
Taxes, insurance and lease expense
|
106
|
|
|
101,582
|
|
|
12,198
|
|
|
(84,530
|
)
|
|
29,356
|
|
Corporate expenses
|
—
|
|
|
7,025
|
|
|
6,196
|
|
|
—
|
|
|
13,221
|
|
Depreciation and amortization
|
231
|
|
|
21,570
|
|
|
33,565
|
|
|
—
|
|
|
55,366
|
|
Impairment
|
—
|
|
|
35,109
|
|
|
—
|
|
|
—
|
|
|
35,109
|
|
Other expenses
|
6,317
|
|
|
2,152
|
|
|
122
|
|
|
—
|
|
|
8,591
|
|
Total operating expenses
|
6,654
|
|
|
431,933
|
|
|
52,081
|
|
|
(84,530
|
)
|
|
406,138
|
|
Operating income
|
(6,615
|
)
|
|
(23,631
|
)
|
|
32,652
|
|
|
—
|
|
|
2,406
|
|
Interest expense, net
|
(28,857
|
)
|
|
37
|
|
|
(9,882
|
)
|
|
—
|
|
|
(38,702
|
)
|
Other gains, net
|
—
|
|
|
—
|
|
|
100
|
|
|
—
|
|
|
100
|
|
Loss before equity in income from unconsolidated entities
|
(35,472
|
)
|
|
(23,594
|
)
|
|
22,870
|
|
|
—
|
|
|
(36,196
|
)
|
Equity in loss from consolidated entities
|
(3,379
|
)
|
|
—
|
|
|
—
|
|
|
3,379
|
|
|
—
|
|
Equity in income from unconsolidated entities
|
1,016
|
|
|
(475
|
)
|
|
(23
|
)
|
|
—
|
|
|
518
|
|
Loss from continuing operations before income tax
|
(37,835
|
)
|
|
(24,069
|
)
|
|
22,847
|
|
|
3,379
|
|
|
(35,678
|
)
|
Income tax
|
(56
|
)
|
|
(994
|
)
|
|
—
|
|
|
—
|
|
|
(1,050
|
)
|
Loss from continuing operations before loss on sale of hotels
|
(37,891
|
)
|
|
(25,063
|
)
|
|
22,847
|
|
|
3,379
|
|
|
(36,728
|
)
|
Loss on sale of hotels
|
—
|
|
|
(652
|
)
|
|
(221
|
)
|
|
—
|
|
|
(873
|
)
|
Net loss and comprehensive loss
|
(37,891
|
)
|
|
(25,715
|
)
|
|
22,626
|
|
|
3,379
|
|
|
(37,601
|
)
|
Loss attributable to noncontrolling interests
|
—
|
|
|
260
|
|
|
177
|
|
|
—
|
|
|
437
|
|
Preferred distributions - consolidated joint venture
|
—
|
|
|
—
|
|
|
(727
|
)
|
|
—
|
|
|
(727
|
)
|
Net loss and comprehensive loss attributable to FelCor LP
|
(37,891
|
)
|
|
(25,455
|
)
|
|
22,076
|
|
|
3,379
|
|
|
(37,891
|
)
|
Preferred distributions
|
(12,558
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,558
|
)
|
Net loss attributable to FelCor LP common unitholders
|
$
|
(50,449
|
)
|
|
$
|
(25,455
|
)
|
|
$
|
22,076
|
|
|
$
|
3,379
|
|
|
$
|
(50,449
|
)
|
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. FelCor LP’s Consolidating Financial Information — (continued)
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the
Six
Months Ended
June 30, 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor LP
|
|
Subsidiary Guarantors
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Hotel operating revenue
|
$
|
—
|
|
|
$
|
446,218
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
446,218
|
|
Percentage lease revenue
|
—
|
|
|
—
|
|
|
90,498
|
|
|
(90,498
|
)
|
|
—
|
|
Other revenue
|
187
|
|
|
1,454
|
|
|
191
|
|
|
—
|
|
|
1,832
|
|
Total revenues
|
187
|
|
|
447,672
|
|
|
90,689
|
|
|
(90,498
|
)
|
|
448,050
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Hotel operating expenses
|
—
|
|
|
288,116
|
|
|
—
|
|
|
—
|
|
|
288,116
|
|
Taxes, insurance and lease expense
|
53
|
|
|
107,595
|
|
|
11,296
|
|
|
(90,498
|
)
|
|
28,446
|
|
Corporate expenses
|
—
|
|
|
7,695
|
|
|
6,752
|
|
|
—
|
|
|
14,447
|
|
Depreciation and amortization
|
144
|
|
|
24,027
|
|
|
34,189
|
|
|
—
|
|
|
58,360
|
|
Impairment
|
—
|
|
|
6,333
|
|
|
—
|
|
|
—
|
|
|
6,333
|
|
Other expenses
|
419
|
|
|
2,213
|
|
|
338
|
|
|
—
|
|
|
2,970
|
|
Total operating expenses
|
616
|
|
|
435,979
|
|
|
52,575
|
|
|
(90,498
|
)
|
|
398,672
|
|
Operating income
|
(429
|
)
|
|
11,693
|
|
|
38,114
|
|
|
—
|
|
|
49,378
|
|
Interest expense, net
|
(29,262
|
)
|
|
18
|
|
|
(10,383
|
)
|
|
—
|
|
|
(39,627
|
)
|
Other gains, net
|
—
|
|
|
—
|
|
|
100
|
|
|
—
|
|
|
100
|
|
Income before equity in income from unconsolidated entities
|
(29,691
|
)
|
|
11,711
|
|
|
27,831
|
|
|
—
|
|
|
9,851
|
|
Equity in income from consolidated entities
|
37,841
|
|
|
—
|
|
|
—
|
|
|
(37,841
|
)
|
|
—
|
|
Equity in income from unconsolidated entities
|
716
|
|
|
(121
|
)
|
|
(23
|
)
|
|
—
|
|
|
572
|
|
Income from continuing operations before income tax
|
8,866
|
|
|
11,590
|
|
|
27,808
|
|
|
(37,841
|
)
|
|
10,423
|
|
Income tax
|
(164
|
)
|
|
(226
|
)
|
|
—
|
|
|
—
|
|
|
(390
|
)
|
Income from continuing operations before loss on sale of hotels
|
8,702
|
|
|
11,364
|
|
|
27,808
|
|
|
(37,841
|
)
|
|
10,033
|
|
Loss on sale of hotels
|
(250
|
)
|
|
(757
|
)
|
|
(337
|
)
|
|
—
|
|
|
(1,344
|
)
|
Net income and comprehensive income
|
8,452
|
|
|
10,607
|
|
|
27,471
|
|
|
(37,841
|
)
|
|
8,689
|
|
Loss attributable to noncontrolling interests
|
—
|
|
|
313
|
|
|
174
|
|
|
—
|
|
|
487
|
|
Preferred distributions - consolidated joint venture
|
—
|
|
|
—
|
|
|
(724
|
)
|
|
—
|
|
|
(724
|
)
|
Net income and comprehensive income attributable to FelCor LP
|
8,452
|
|
|
10,920
|
|
|
26,921
|
|
|
(37,841
|
)
|
|
8,452
|
|
Preferred distributions
|
(12,558
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,558
|
)
|
Net loss attributable to FelCor LP common unitholders
|
$
|
(4,106
|
)
|
|
$
|
10,920
|
|
|
$
|
26,921
|
|
|
$
|
(37,841
|
)
|
|
$
|
(4,106
|
)
|
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. FelCor LP’s Consolidating Financial Information — (continued)
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the
Six
Months Ended
June 30, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor LP
|
|
Subsidiary Guarantors
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total Consolidated
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
$
|
(33,170
|
)
|
|
$
|
41,039
|
|
|
$
|
59,380
|
|
|
$
|
—
|
|
|
$
|
67,249
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
Improvements and additions to hotels
|
5
|
|
|
(12,604
|
)
|
|
(29,322
|
)
|
|
—
|
|
|
(41,921
|
)
|
Net payments related to asset sales
|
(623
|
)
|
|
(524
|
)
|
|
(149
|
)
|
|
—
|
|
|
(1,296
|
)
|
Change in restricted cash - investing
|
—
|
|
|
(2,070
|
)
|
|
(2,639
|
)
|
|
—
|
|
|
(4,709
|
)
|
Distributions from unconsolidated entities
|
840
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
840
|
|
Intercompany financing
|
64,241
|
|
|
—
|
|
|
—
|
|
|
(64,241
|
)
|
|
—
|
|
Cash flows from investing activities
|
64,463
|
|
|
(15,198
|
)
|
|
(32,110
|
)
|
|
(64,241
|
)
|
|
(47,086
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
—
|
|
|
—
|
|
|
51,000
|
|
|
—
|
|
|
51,000
|
|
Repayment of borrowings
|
—
|
|
|
—
|
|
|
(30,419
|
)
|
|
—
|
|
|
(30,419
|
)
|
Contributions from noncontrolling interests
|
—
|
|
|
299
|
|
|
—
|
|
|
—
|
|
|
299
|
|
Distributions paid to preferred unitholders
|
(12,558
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,558
|
)
|
Distributions paid to common unitholders
|
(16,631
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,631
|
)
|
Net proceeds from issuance of preferred capital - consolidated joint venture
|
—
|
|
|
—
|
|
|
648
|
|
|
—
|
|
|
648
|
|
Intercompany financing
|
—
|
|
|
(13,940
|
)
|
|
(50,301
|
)
|
|
64,241
|
|
|
—
|
|
Other
|
(955
|
)
|
|
—
|
|
|
(729
|
)
|
|
—
|
|
|
(1,684
|
)
|
Cash flows from financing activities
|
(30,144
|
)
|
|
(13,641
|
)
|
|
(29,801
|
)
|
|
64,241
|
|
|
(9,345
|
)
|
Change in cash and cash equivalents
|
1,149
|
|
|
12,200
|
|
|
(2,531
|
)
|
|
—
|
|
|
10,818
|
|
Cash and cash equivalents at beginning of period
|
13,532
|
|
|
29,141
|
|
|
4,644
|
|
|
—
|
|
|
47,317
|
|
Cash and cash equivalents at end of period
|
$
|
14,681
|
|
|
$
|
41,341
|
|
|
$
|
2,113
|
|
|
$
|
—
|
|
|
$
|
58,135
|
|
FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. FelCor LP’s Consolidating Financial Information — (continued)
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the
Six
Months Ended
June 30, 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FelCor LP
|
|
Subsidiary Guarantors
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total Consolidated
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
$
|
(34,655
|
)
|
|
$
|
41,661
|
|
|
$
|
64,559
|
|
|
$
|
—
|
|
|
$
|
71,565
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
Improvements and additions to hotels
|
(7
|
)
|
|
(15,093
|
)
|
|
(16,809
|
)
|
|
—
|
|
|
(31,909
|
)
|
Net payments related to asset sales
|
(723
|
)
|
|
(533
|
)
|
|
(205
|
)
|
|
—
|
|
|
(1,461
|
)
|
Insurance proceeds
|
—
|
|
|
—
|
|
|
94
|
|
|
—
|
|
|
94
|
|
Change in restricted cash - investing
|
—
|
|
|
(3,540
|
)
|
|
(2,464
|
)
|
|
—
|
|
|
(6,004
|
)
|
Distributions from unconsolidated entities
|
386
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
386
|
|
Intercompany financing
|
87,950
|
|
|
—
|
|
|
—
|
|
|
(87,950
|
)
|
|
—
|
|
Cash flows from investing activities
|
87,606
|
|
|
(19,166
|
)
|
|
(19,384
|
)
|
|
(87,950
|
)
|
|
(38,894
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
—
|
|
|
—
|
|
|
50,000
|
|
|
—
|
|
|
50,000
|
|
Repayment of borrowings
|
—
|
|
|
—
|
|
|
(27,145
|
)
|
|
—
|
|
|
(27,145
|
)
|
Payment of deferred financing fees
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
(12
|
)
|
Distributions paid to preferred unitholders
|
(12,558
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,558
|
)
|
Distributions paid to common unitholders
|
(16,848
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,848
|
)
|
Repurchase of common units
|
(27,427
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,427
|
)
|
Distributions paid to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Contributions from noncontrolling interests
|
—
|
|
|
313
|
|
|
217
|
|
|
—
|
|
|
530
|
|
Net proceeds from issuance of preferred capital- consolidated joint venture
|
—
|
|
|
—
|
|
|
597
|
|
|
—
|
|
|
597
|
|
Intercompany financing
|
—
|
|
|
(17,208
|
)
|
|
(70,742
|
)
|
|
87,950
|
|
|
—
|
|
Other
|
(667
|
)
|
|
—
|
|
|
(729
|
)
|
|
—
|
|
|
(1,396
|
)
|
Cash flows from financing activities
|
(57,500
|
)
|
|
(16,895
|
)
|
|
(47,815
|
)
|
|
87,950
|
|
|
(34,260
|
)
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
(9
|
)
|
Change in cash and cash equivalents
|
(4,549
|
)
|
|
5,600
|
|
|
(2,649
|
)
|
|
—
|
|
|
(1,598
|
)
|
Cash and cash equivalents at beginning of period
|
21,219
|
|
|
33,873
|
|
|
4,694
|
|
|
—
|
|
|
59,786
|
|
Cash and cash equivalents at end of period
|
$
|
16,670
|
|
|
$
|
39,473
|
|
|
$
|
2,045
|
|
|
$
|
—
|
|
|
$
|
58,188
|
|
Reconciliation of Net Income (Loss) to FFO and Adjusted FFO
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
2017
|
2016
|
|
Dollars
|
|
Shares
|
|
Per Share Amount
|
|
Dollars
|
|
Shares
|
|
Per Share Amount
|
Net income (loss)
|
$
|
(1,460
|
)
|
|
|
|
|
|
$
|
13,770
|
|
|
|
|
|
Noncontrolling interests
|
68
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
Preferred dividends
|
(6,279
|
)
|
|
|
|
|
|
(6,279
|
)
|
|
|
|
|
Preferred distributions - consolidated joint venture
|
(367
|
)
|
|
|
|
|
|
(364
|
)
|
|
|
|
|
Net income (loss) attributable to FelCor common stockholders
|
(8,038
|
)
|
|
|
|
|
|
7,112
|
|
|
|
|
|
Less: Dividends declared on unvested restricted stock
|
(36
|
)
|
|
|
|
|
|
(35
|
)
|
|
|
|
|
Basic and diluted earnings per share data
|
(8,074
|
)
|
|
137,866
|
|
|
(0.06
|
)
|
|
7,077
|
|
|
138,182
|
|
|
0.05
|
|
Restricted stock units
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
496
|
|
|
—
|
|
Diluted earnings per share data
|
(8,074
|
)
|
|
137,866
|
|
|
(0.06
|
)
|
|
7,077
|
|
|
138,678
|
|
|
0.05
|
|
Depreciation and amortization
|
27,528
|
|
|
—
|
|
|
0.20
|
|
|
29,177
|
|
|
—
|
|
|
0.21
|
|
Depreciation, unconsolidated entities and other partnerships
|
464
|
|
|
—
|
|
|
—
|
|
|
469
|
|
|
—
|
|
|
—
|
|
Impairment
|
10,271
|
|
|
—
|
|
|
0.07
|
|
|
6,333
|
|
|
—
|
|
|
0.05
|
|
Loss on sale of hotels
|
207
|
|
|
—
|
|
|
0.01
|
|
|
630
|
|
|
—
|
|
|
—
|
|
Other gains
|
(100
|
)
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
—
|
|
|
—
|
|
Noncontrolling interests in FelCor LP
|
(35
|
)
|
|
610
|
|
|
—
|
|
|
31
|
|
|
611
|
|
|
—
|
|
Dividends declared on unvested restricted stock
|
36
|
|
|
65
|
|
|
—
|
|
|
35
|
|
|
66
|
|
|
—
|
|
Conversion of unvested restricted stock units
|
—
|
|
|
287
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
FFO*
|
30,297
|
|
|
138,828
|
|
|
0.22
|
|
|
43,652
|
|
|
139,355
|
|
|
0.31
|
|
Severance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
—
|
|
Variable stock compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
(789
|
)
|
|
—
|
|
|
(0.01
|
)
|
Transaction costs
|
5,844
|
|
|
—
|
|
|
0.04
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Abandoned projects
|
—
|
|
|
—
|
|
|
—
|
|
|
383
|
|
|
—
|
|
|
0.01
|
|
Litigation settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
650
|
|
|
—
|
|
|
0.01
|
|
Pre-opening costs
|
532
|
|
|
—
|
|
|
—
|
|
|
191
|
|
|
—
|
|
|
—
|
|
Adjusted FFO*
|
$
|
36,673
|
|
|
138,828
|
|
|
$
|
0.26
|
|
|
$
|
44,114
|
|
|
139,355
|
|
|
$
|
0.32
|
|
* FFO and Adjusted FFO are attributable to FelCor common stockholders and FelCor LP common unitholders other than FelCor.
Reconciliation of Net Income (Loss) to FFO and Adjusted FFO
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2017
|
2016
|
|
Dollars
|
|
Shares
|
|
Per Share Amount
|
|
Dollars
|
|
Shares
|
|
Per Share Amount
|
Net income (loss)
|
$
|
(37,601
|
)
|
|
|
|
|
|
$
|
8,689
|
|
|
|
|
|
Noncontrolling interests
|
658
|
|
|
|
|
|
|
504
|
|
|
|
|
|
Preferred dividends
|
(12,558
|
)
|
|
|
|
|
|
(12,558
|
)
|
|
|
|
|
Preferred distributions - consolidated joint venture
|
(727
|
)
|
|
|
|
|
|
(724
|
)
|
|
|
|
|
Net loss attributable to FelCor common stockholders
|
(50,228
|
)
|
|
|
|
|
|
(4,089
|
)
|
|
|
|
|
Less: Dividends declared on unvested restricted stock
|
(73
|
)
|
|
|
|
|
|
(73
|
)
|
|
|
|
|
Basic and diluted earnings per share data
|
(50,301
|
)
|
|
137,820
|
|
|
$
|
(0.36
|
)
|
|
(4,162
|
)
|
|
138,930
|
|
|
$
|
(0.03
|
)
|
Depreciation and amortization
|
55,366
|
|
|
—
|
|
|
0.39
|
|
|
58,360
|
|
|
—
|
|
|
0.42
|
|
Depreciation, unconsolidated entities and other partnerships
|
918
|
|
|
—
|
|
|
0.01
|
|
|
936
|
|
|
—
|
|
|
0.01
|
|
Impairment
|
35,109
|
|
|
—
|
|
|
0.25
|
|
|
6,333
|
|
|
—
|
|
|
0.05
|
|
Loss on sale of hotels
|
873
|
|
|
—
|
|
|
0.01
|
|
|
1,344
|
|
|
—
|
|
|
—
|
|
Other gains
|
(100
|
)
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
—
|
|
|
—
|
|
Noncontrolling interests in FelCor LP
|
(221
|
)
|
|
610
|
|
|
—
|
|
|
(17
|
)
|
|
611
|
|
|
—
|
|
Dividends declared on unvested restricted stock
|
73
|
|
|
47
|
|
|
—
|
|
|
73
|
|
|
22
|
|
|
—
|
|
Conversion of unvested restricted stock units
|
—
|
|
|
239
|
|
|
—
|
|
|
—
|
|
|
451
|
|
|
—
|
|
FFO*
|
41,717
|
|
|
138,716
|
|
|
0.30
|
|
|
62,767
|
|
|
140,014
|
|
|
0.45
|
|
Hurricane loss
|
17
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Hurricane loss, unconsolidated entities
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Severance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
—
|
|
Variable stock compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
(27
|
)
|
|
—
|
|
|
—
|
|
Litigation settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
650
|
|
|
—
|
|
|
0.01
|
|
Transaction costs
|
6,317
|
|
|
—
|
|
|
0.05
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Abandoned projects
|
—
|
|
|
—
|
|
|
—
|
|
|
615
|
|
|
—
|
|
|
—
|
|
Pre-opening costs
|
665
|
|
|
—
|
|
|
—
|
|
|
245
|
|
|
—
|
|
|
—
|
|
Adjusted FFO*
|
$
|
48,720
|
|
|
138,716
|
|
|
$
|
0.35
|
|
|
$
|
64,277
|
|
|
140,014
|
|
|
$
|
0.46
|
|
* 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
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income (loss)
|
$
|
(1,460
|
)
|
|
$
|
13,770
|
|
|
$
|
(37,601
|
)
|
|
$
|
8,689
|
|
Depreciation and amortization
|
27,528
|
|
|
29,177
|
|
|
55,366
|
|
|
58,360
|
|
Depreciation, unconsolidated entities and other partnerships
|
464
|
|
|
469
|
|
|
918
|
|
|
936
|
|
Interest expense
|
19,462
|
|
|
19,923
|
|
|
38,782
|
|
|
39,655
|
|
Interest expense, unconsolidated entities and other partnerships
|
81
|
|
|
90
|
|
|
165
|
|
|
190
|
|
Income tax
|
503
|
|
|
(25
|
)
|
|
1,050
|
|
|
390
|
|
Noncontrolling interests in preferred distributions, consolidated joint venture
|
(18
|
)
|
|
(18
|
)
|
|
(36
|
)
|
|
(36
|
)
|
Noncontrolling interests in other partnerships
|
33
|
|
|
16
|
|
|
437
|
|
|
487
|
|
EBITDA*
|
46,593
|
|
|
63,402
|
|
|
59,081
|
|
|
108,671
|
|
Impairment
|
10,271
|
|
|
6,333
|
|
|
35,109
|
|
|
6,333
|
|
Hurricane loss
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
Hurricane loss, unconsolidated entities
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
Loss on sale of hotels
|
207
|
|
|
630
|
|
|
873
|
|
|
1,344
|
|
Other gains
|
(100
|
)
|
|
(100
|
)
|
|
(100
|
)
|
|
(100
|
)
|
Amortization of fixed stock and directors’ compensation
|
1,394
|
|
|
1,693
|
|
|
2,988
|
|
|
3,627
|
|
Severance costs
|
—
|
|
|
27
|
|
|
—
|
|
|
27
|
|
Transaction costs
|
5,844
|
|
|
—
|
|
|
6,317
|
|
|
—
|
|
Abandoned projects
|
—
|
|
|
383
|
|
|
—
|
|
|
615
|
|
Variable stock compensation
|
—
|
|
|
(789
|
)
|
|
—
|
|
|
(27
|
)
|
Litigation settlement
|
—
|
|
|
650
|
|
|
—
|
|
|
650
|
|
Pre-opening costs
|
532
|
|
|
191
|
|
|
665
|
|
|
245
|
|
Adjusted EBITDA*
|
64,741
|
|
|
72,420
|
|
|
104,954
|
|
|
121,385
|
|
Adjusted EBITDA from held for sale and sold hotels
|
293
|
|
|
(4,516
|
)
|
|
2,014
|
|
|
(9,011
|
)
|
Same-store Adjusted EBITDA*
|
$
|
65,034
|
|
|
$
|
67,904
|
|
|
$
|
106,968
|
|
|
$
|
112,374
|
|
* 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
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Same-store operating revenue:
|
|
|
|
|
|
|
|
Room
|
$
|
162,792
|
|
|
$
|
164,439
|
|
|
$
|
303,817
|
|
|
$
|
308,439
|
|
Food and beverage
|
36,977
|
|
|
37,501
|
|
|
67,912
|
|
|
68,195
|
|
Other operating departments
|
12,150
|
|
|
10,795
|
|
|
22,310
|
|
|
20,725
|
|
Same-store operating revenue
(a)
|
211,919
|
|
|
212,735
|
|
|
394,039
|
|
|
397,359
|
|
Same-store operating expense:
|
|
|
|
|
|
|
|
Room
|
40,467
|
|
|
39,585
|
|
|
78,298
|
|
|
77,135
|
|
Food and beverage
|
26,948
|
|
|
27,395
|
|
|
51,790
|
|
|
52,372
|
|
Other operating departments
|
3,834
|
|
|
3,613
|
|
|
7,250
|
|
|
7,025
|
|
Other property-related costs
|
50,058
|
|
|
49,074
|
|
|
98,894
|
|
|
97,894
|
|
Management and franchise fees
|
7,727
|
|
|
7,786
|
|
|
15,151
|
|
|
16,245
|
|
Taxes, insurance and lease expense
|
13,693
|
|
|
12,946
|
|
|
26,409
|
|
|
24,851
|
|
Same-store operating expense
(a)
|
142,727
|
|
|
140,399
|
|
|
277,792
|
|
|
275,522
|
|
Hotel EBITDA
|
$
|
69,192
|
|
|
$
|
72,336
|
|
|
$
|
116,247
|
|
|
$
|
121,837
|
|
Hotel EBITDA Margin
|
32.7
|
%
|
|
34.0
|
%
|
|
29.5
|
%
|
|
30.7
|
%
|
(a) Excludes two hotels held for sale at June 30, 2017.
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
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Same-store operating revenue
|
$
|
211,919
|
|
|
$
|
212,735
|
|
|
$
|
394,039
|
|
|
$
|
397,359
|
|
Other revenue
|
1,324
|
|
|
1,145
|
|
|
1,732
|
|
|
1,832
|
|
Revenue from held for sale and sold hotels
(a)
|
7,197
|
|
|
24,026
|
|
|
12,773
|
|
|
48,859
|
|
Total revenue
|
220,440
|
|
|
237,906
|
|
|
408,544
|
|
|
448,050
|
|
Same-store operating expense
|
142,727
|
|
|
140,399
|
|
|
277,792
|
|
|
275,522
|
|
Consolidated hotel lease expense
(b)
|
1,430
|
|
|
1,359
|
|
|
2,245
|
|
|
2,161
|
|
Unconsolidated taxes, insurance and lease expense
|
(536
|
)
|
|
(517
|
)
|
|
(973
|
)
|
|
(969
|
)
|
Corporate expenses
|
6,281
|
|
|
6,047
|
|
|
13,221
|
|
|
14,447
|
|
Depreciation and amortization
|
27,528
|
|
|
29,177
|
|
|
55,366
|
|
|
58,360
|
|
Impairment
|
10,271
|
|
|
6,333
|
|
|
35,109
|
|
|
6,333
|
|
Expenses from held for sale and sold hotels
(a)
|
7,490
|
|
|
19,510
|
|
|
14,787
|
|
|
39,848
|
|
Other expenses
|
7,331
|
|
|
2,142
|
|
|
8,591
|
|
|
2,970
|
|
Total operating expense
|
202,522
|
|
|
204,450
|
|
|
406,138
|
|
|
398,672
|
|
Operating income
|
$
|
17,918
|
|
|
$
|
33,456
|
|
|
$
|
2,406
|
|
|
$
|
49,378
|
|
|
|
(a)
|
Under GAAP, we include the operating performance for held for sale and sold hotels in continuing operations in our 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 lease expense of our 51% owned operating lessees. The offsetting lease revenue is included in equity in income from 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, or “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, 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.
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 (loss) 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.
Pro Rata Share of Rooms Owned
The following table sets forth, at
June 30, 2017
, our
pro rata
share of hotel rooms (excluding two hotels held for sale) after giving consideration to the portion of rooms attributed to our partners in our consolidated and unconsolidated joint ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Room Count at
|
|
Hotels
|
|
June 30, 2017
|
Consolidated Hotels
|
36
|
|
|
|
11,044
|
|
|
Unconsolidated hotel operations
|
1
|
|
|
|
171
|
|
|
Total hotels
|
37
|
|
|
|
11,215
|
|
|
|
|
|
|
|
|
50% joint ventures
|
2
|
|
|
|
(216
|
)
|
|
95% joint venture
|
1
|
|
|
|
(17
|
)
|
|
Pro rata rooms attributed to joint venture partners
|
|
|
|
(233
|
)
|
|
Pro rata share of rooms owned
|
|
|
|
10,982
|
|
|
Hotel Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy (%)
|
|
ADR ($)
|
|
RevPAR ($)
|
|
|
Three Months Ended June 30,
|
|
Three Months Ended June 30,
|
|
Three Months Ended June 30,
|
Same-store Hotels
|
2017
|
|
2016
|
|
%Change
|
|
2017
|
|
2016
|
|
%Change
|
|
2017
|
|
2016
|
|
%Change
|
Embassy Suites Atlanta-Buckhead
|
71.7
|
|
80.7
|
|
(11.2
|
)
|
|
144.71
|
|
|
154.42
|
|
|
(6.3
|
)
|
|
103.77
|
|
|
124.66
|
|
|
(16.8
|
)
|
DoubleTree Suites by Hilton Austin
|
87.1
|
|
88.6
|
|
(1.7
|
)
|
|
224.51
|
|
|
217.74
|
|
|
3.1
|
|
|
195.64
|
|
|
193.01
|
|
|
1.4
|
|
Embassy Suites Birmingham
|
80.6
|
|
80.3
|
|
0.4
|
|
|
142.04
|
|
|
143.14
|
|
|
(0.8
|
)
|
|
114.46
|
|
|
114.88
|
|
|
(0.4
|
)
|
The Fairmont Copley Plaza, Boston
|
87.7
|
|
83.2
|
|
5.4
|
|
|
359.69
|
|
|
366.02
|
|
|
(1.7
|
)
|
|
315.32
|
|
|
304.57
|
|
|
3.5
|
|
Wyndham Boston Beacon Hill
|
89.5
|
|
86.9
|
|
3.0
|
|
|
264.45
|
|
|
258.35
|
|
|
2.4
|
|
|
236.77
|
|
|
224.62
|
|
|
5.4
|
|
Embassy Suites Boston-Marlborough
|
77.1
|
|
77.2
|
|
(0.1
|
)
|
|
164.34
|
|
|
175.60
|
|
|
(6.4
|
)
|
|
126.66
|
|
|
135.52
|
|
|
(6.5
|
)
|
Sheraton Burlington Hotel & Conference Center
|
73.0
|
|
72.0
|
|
1.3
|
|
|
125.14
|
|
|
123.44
|
|
|
1.4
|
|
|
91.29
|
|
|
88.86
|
|
|
2.7
|
|
The Mills House Wyndham Grand Hotel, Charleston
|
88.2
|
|
91.7
|
|
(3.8
|
)
|
|
273.10
|
|
|
262.48
|
|
|
4.0
|
|
|
240.95
|
|
|
240.67
|
|
|
0.1
|
|
Embassy Suites Dallas-Love Field
(1)
|
81.3
|
|
78.5
|
|
3.5
|
|
|
147.42
|
|
|
141.99
|
|
|
3.8
|
|
|
119.89
|
|
|
111.52
|
|
|
7.5
|
|
Embassy Suites Deerfield Beach-Resort & Spa
|
83.1
|
|
81.3
|
|
2.2
|
|
|
172.33
|
|
|
174.71
|
|
|
(1.4
|
)
|
|
143.14
|
|
|
142.02
|
|
|
0.8
|
|
Embassy Suites Fort Lauderdale 17
th
Street
|
82.0
|
|
79.9
|
|
2.7
|
|
|
152.60
|
|
|
157.06
|
|
|
(2.8
|
)
|
|
125.20
|
|
|
125.52
|
|
|
(0.3
|
)
|
Wyndham Houston-Medical Center Hotel & Suites
|
74.0
|
|
80.3
|
|
(7.9
|
)
|
|
140.49
|
|
|
152.72
|
|
|
(8.0
|
)
|
|
103.98
|
|
|
122.70
|
|
|
(15.3
|
)
|
The Knickerbocker- New York
|
84.9
|
|
89.9
|
|
(5.5
|
)
|
|
352.19
|
|
|
336.79
|
|
|
4.6
|
|
|
299.11
|
|
|
302.77
|
|
|
(1.2
|
)
|
Embassy Suites Los Angeles-International Airport/South
|
91.5
|
|
85.5
|
|
7.0
|
|
|
171.29
|
|
|
173.74
|
|
|
(1.4
|
)
|
|
156.76
|
|
|
148.63
|
|
|
5.5
|
|
Embassy Suites Mandalay Beach-Hotel & Resort
|
87.9
|
|
86.4
|
|
1.8
|
|
|
219.95
|
|
|
233.46
|
|
|
(5.8
|
)
|
|
193.44
|
|
|
201.60
|
|
|
(4.0
|
)
|
Embassy Suites Miami-International Airport
|
80.4
|
|
84.5
|
|
(4.9
|
)
|
|
125.45
|
|
|
130.21
|
|
|
(3.6
|
)
|
|
100.88
|
|
|
110.04
|
|
|
(8.3
|
)
|
Embassy Suites Milpitas-Silicon Valley
|
82.8
|
|
84.8
|
|
(2.3
|
)
|
|
209.86
|
|
|
203.16
|
|
|
3.3
|
|
|
173.81
|
|
|
172.20
|
|
|
0.9
|
|
Embassy Suites Minneapolis-Airport
|
79.3
|
|
78.6
|
|
0.8
|
|
|
144.48
|
|
|
157.60
|
|
|
(8.3
|
)
|
|
114.55
|
|
|
123.91
|
|
|
(7.6
|
)
|
Embassy Suites Myrtle Beach-Oceanfront Resort
|
91.5
|
|
85.5
|
|
7.0
|
|
|
171.29
|
|
|
173.74
|
|
|
(1.4
|
)
|
|
156.76
|
|
|
148.63
|
|
|
5.5
|
|
Hilton Myrtle Beach Resort
|
74.5
|
|
74.3
|
|
0.2
|
|
|
169.01
|
|
|
158.89
|
|
|
6.4
|
|
|
125.91
|
|
|
118.12
|
|
|
6.6
|
|
Embassy Suites Napa Valley
|
83.2
|
|
83.6
|
|
(0.4
|
)
|
|
264.84
|
|
|
257.77
|
|
|
2.7
|
|
|
220.48
|
|
|
215.39
|
|
|
2.4
|
|
Wyndham New Orleans-French Quarter
|
81.6
|
|
81.2
|
|
0.4
|
|
|
137.06
|
|
|
151.61
|
|
|
(9.6
|
)
|
|
111.82
|
|
|
123.14
|
|
|
(9.2
|
)
|
Embassy Suites Orlando-International Drive South/Convention Center
|
83.7
|
|
73.3
|
|
14.2
|
|
|
164.86
|
|
|
138.31
|
|
|
19.2
|
|
|
137.94
|
|
|
101.34
|
|
|
36.1
|
|
DoubleTree Suites by Hilton Orlando-Lake Buena Vista
|
87.4
|
|
91.7
|
|
(4.6
|
)
|
|
149.69
|
|
|
138.99
|
|
|
7.7
|
|
|
130.84
|
|
|
127.39
|
|
|
2.7
|
|
Wyndham Philadelphia Historic District
|
84.0
|
|
85.3
|
|
(1.5
|
)
|
|
171.11
|
|
|
163.19
|
|
|
4.9
|
|
|
143.78
|
|
|
139.25
|
|
|
3.3
|
|
Sheraton Philadelphia Society Hill Hotel
|
77.9
|
|
81.4
|
|
(4.3
|
)
|
|
192.03
|
|
|
193.05
|
|
|
(0.5
|
)
|
|
149.65
|
|
|
157.15
|
|
|
(4.8
|
)
|
Embassy Suites Phoenix-Biltmore
|
74.7
|
|
70.5
|
|
6.0
|
|
|
160.29
|
|
|
159.69
|
|
|
0.4
|
|
|
119.75
|
|
|
112.58
|
|
|
6.4
|
|
Wyndham Pittsburgh University Center
|
79.8
|
|
77.7
|
|
2.7
|
|
|
146.85
|
|
|
153.69
|
|
|
(4.5
|
)
|
|
117.20
|
|
|
119.43
|
|
|
(1.9
|
)
|
Wyndham San Diego Bayside
|
80.1
|
|
77.9
|
|
2.7
|
|
|
162.83
|
|
|
161.97
|
|
|
0.5
|
|
|
130.39
|
|
|
126.25
|
|
|
3.3
|
|
Embassy Suites San Francisco Airport-South San Francisco
|
91.8
|
|
89.4
|
|
2.8
|
|
|
190.76
|
|
|
208.42
|
|
|
(8.5
|
)
|
|
175.21
|
|
|
186.23
|
|
|
(5.9
|
)
|
Embassy Suites San Francisco Airport-Waterfront
|
91.7
|
|
92.0
|
|
(0.3
|
)
|
|
206.58
|
|
|
207.43
|
|
|
(0.4
|
)
|
|
189.41
|
|
|
190.75
|
|
|
(0.7
|
)
|
Holiday Inn San Francisco-Fisherman’s Wharf
|
92.3
|
|
89.8
|
|
2.7
|
|
|
186.00
|
|
|
207.18
|
|
|
(10.2
|
)
|
|
171.63
|
|
|
186.12
|
|
|
(7.8
|
)
|
San Francisco Marriott Union Square
|
87.2
|
|
90.8
|
|
(3.9
|
)
|
|
266.56
|
|
|
291.00
|
|
|
(8.4
|
)
|
|
232.40
|
|
|
264.08
|
|
|
(12.0
|
)
|
Wyndham Santa Monica At the Pier
|
90.2
|
|
87.1
|
|
3.5
|
|
|
265.81
|
|
|
273.84
|
|
|
(2.9
|
)
|
|
239.63
|
|
|
238.44
|
|
|
0.5
|
|
Embassy Suites Secaucus-Meadowlands
|
82.2
|
|
79.5
|
|
3.5
|
|
|
183.10
|
|
|
188.41
|
|
|
(2.8
|
)
|
|
150.56
|
|
|
149.73
|
|
|
0.5
|
|
The Vinoy Renaissance St. Petersburg Resort & Golf Club
|
83.3
|
|
83.9
|
|
(0.8
|
)
|
|
218.24
|
|
|
220.88
|
|
|
(1.2
|
)
|
|
181.79
|
|
|
185.39
|
|
|
(1.9
|
)
|
Same-store Hotels
|
83.2
|
|
82.8
|
|
0.4
|
|
|
194.81
|
|
|
197.55
|
|
|
(1.4
|
)
|
|
161.98
|
|
|
163.62
|
|
|
(1.0
|
)
|
Hotel Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy (%)
|
|
ADR ($)
|
|
RevPAR ($)
|
|
|
Six Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
Six Months Ended June 30,
|
Same-store Hotels
|
|
2017
|
|
2016
|
|
%Change
|
|
2017
|
|
2016
|
|
%Change
|
|
2017
|
|
2016
|
|
%Change
|
Embassy Suites Atlanta-Buckhead
|
72.5
|
|
80.8
|
|
(10.3
|
)
|
|
155.37
|
|
|
156.78
|
|
|
(0.9
|
)
|
|
112.68
|
|
|
126.72
|
|
|
(11.1
|
)
|
DoubleTree Suites by Hilton Austin
|
86.2
|
|
85.7
|
|
0.6
|
|
|
237.86
|
|
|
228.52
|
|
|
4.1
|
|
|
205.14
|
|
|
195.94
|
|
|
4.7
|
|
Embassy Suites Birmingham
|
80.0
|
|
80.5
|
|
(0.6
|
)
|
|
138.03
|
|
|
138.46
|
|
|
(0.3
|
)
|
|
110.37
|
|
|
111.40
|
|
|
(0.9
|
)
|
The Fairmont Copley Plaza, Boston
|
75.1
|
|
73.6
|
|
2.0
|
|
|
312.43
|
|
|
316.53
|
|
|
(1.3
|
)
|
|
234.51
|
|
|
232.97
|
|
|
0.7
|
|
Wyndham Boston Beacon Hill
|
81.4
|
|
75.4
|
|
8.0
|
|
|
212.86
|
|
|
218.60
|
|
|
(2.6
|
)
|
|
173.23
|
|
|
164.74
|
|
|
5.2
|
|
Embassy Suites Boston-Marlborough
|
67.1
|
|
71.0
|
|
(5.5
|
)
|
|
162.69
|
|
|
171.95
|
|
|
(5.4
|
)
|
|
109.17
|
|
|
122.04
|
|
|
(10.5
|
)
|
Sheraton Burlington Hotel & Conference Center
|
68.3
|
|
70.3
|
|
(2.8
|
)
|
|
109.71
|
|
|
108.67
|
|
|
0.9
|
|
|
74.95
|
|
|
76.36
|
|
|
(1.8
|
)
|
The Mills House Wyndham Grand Hotel, Charleston
|
82.7
|
|
84.9
|
|
(2.6
|
)
|
|
248.11
|
|
|
236.39
|
|
|
5.0
|
|
|
205.07
|
|
|
200.65
|
|
|
2.2
|
|
Embassy Suites Dallas-Love Field
|
80.1
|
|
81.9
|
|
(2.2
|
)
|
|
150.50
|
|
|
142.78
|
|
|
5.4
|
|
|
120.62
|
|
|
116.94
|
|
|
3.1
|
|
Embassy Suites Deerfield Beach-Resort & Spa
|
83.3
|
|
84.8
|
|
(1.8
|
)
|
|
212.82
|
|
|
224.15
|
|
|
(5.1
|
)
|
|
177.22
|
|
|
189.99
|
|
|
(6.7
|
)
|
Embassy Suites Fort Lauderdale 17
th
Street
|
84.7
|
|
86.6
|
|
(2.3
|
)
|
|
195.54
|
|
|
197.07
|
|
|
(0.8
|
)
|
|
165.59
|
|
|
170.75
|
|
|
(3.0
|
)
|
Wyndham Houston-Medical Center Hotel & Suites
|
75.8
|
|
83.2
|
|
(8.8
|
)
|
|
152.40
|
|
|
156.30
|
|
|
(2.5
|
)
|
|
115.58
|
|
|
130.01
|
|
|
(11.1
|
)
|
The Knickerbocker- New York
|
77.3
|
|
74.2
|
|
4.1
|
|
|
315.56
|
|
|
308.22
|
|
|
2.4
|
|
|
243.85
|
|
|
228.75
|
|
|
6.6
|
|
Embassy Suites Los Angeles-International Airport/South
|
90.7
|
|
87.8
|
|
3.3
|
|
|
171.21
|
|
|
168.08
|
|
|
1.9
|
|
|
155.26
|
|
|
147.52
|
|
|
5.2
|
|
Embassy Suites Mandalay Beach-Hotel & Resort
|
81.2
|
|
81.5
|
|
(0.4
|
)
|
|
204.75
|
|
|
221.16
|
|
|
(7.4
|
)
|
|
166.29
|
|
|
180.29
|
|
|
(7.8
|
)
|
Embassy Suites Miami-International Airport
|
83.1
|
|
88.0
|
|
(5.6
|
)
|
|
154.89
|
|
|
165.04
|
|
|
(6.1
|
)
|
|
128.65
|
|
|
145.23
|
|
|
(11.4
|
)
|
Embassy Suites Milpitas-Silicon Valley
|
81.3
|
|
82.8
|
|
(1.7
|
)
|
|
205.14
|
|
|
207.29
|
|
|
(1.0
|
)
|
|
166.83
|
|
|
171.56
|
|
|
(2.8
|
)
|
Embassy Suites Minneapolis-Airport
|
72.9
|
|
73.7
|
|
(1.1
|
)
|
|
140.61
|
|
|
151.13
|
|
|
(7.0
|
)
|
|
102.48
|
|
|
111.36
|
|
|
(8.0
|
)
|
Embassy Suites Myrtle Beach-Oceanfront Resort
|
90.7
|
|
87.8
|
|
3.3
|
|
|
171.21
|
|
|
168.08
|
|
|
1.9
|
|
|
155.26
|
|
|
147.52
|
|
|
5.2
|
|
Hilton Myrtle Beach Resort
|
60.1
|
|
61.2
|
|
(1.9
|
)
|
|
145.95
|
|
|
138.46
|
|
|
5.4
|
|
|
87.72
|
|
|
84.79
|
|
|
3.5
|
|
Embassy Suites Napa Valley
|
78.3
|
|
81.8
|
|
(4.3
|
)
|
|
230.71
|
|
|
220.76
|
|
|
4.5
|
|
|
180.54
|
|
|
180.47
|
|
|
—
|
|
Wyndham New Orleans-French Quarter
|
79.9
|
|
77.5
|
|
3.1
|
|
|
148.36
|
|
|
153.40
|
|
|
(3.3
|
)
|
|
118.49
|
|
|
118.84
|
|
|
(0.3
|
)
|
Embassy Suites Orlando-International Drive South/Convention Center
|
82.4
|
|
80.7
|
|
2.1
|
|
|
175.29
|
|
|
159.03
|
|
|
10.2
|
|
|
144.48
|
|
|
128.35
|
|
|
12.6
|
|
DoubleTree Suites by Hilton Orlando-Lake Buena Vista
|
88.6
|
|
92.0
|
|
(3.6
|
)
|
|
156.28
|
|
|
152.24
|
|
|
2.7
|
|
|
138.54
|
|
|
140.00
|
|
|
(1.0
|
)
|
Wyndham Philadelphia Historic District
|
72.0
|
|
70.2
|
|
2.6
|
|
|
151.78
|
|
|
148.58
|
|
|
2.1
|
|
|
109.23
|
|
|
104.26
|
|
|
4.8
|
|
Sheraton Philadelphia Society Hill Hotel
|
67.2
|
|
68.2
|
|
(1.5
|
)
|
|
174.96
|
|
|
176.18
|
|
|
(0.7
|
)
|
|
117.59
|
|
|
120.20
|
|
|
(2.2
|
)
|
Embassy Suites Phoenix-Biltmore
|
75.9
|
|
74.3
|
|
2.1
|
|
|
195.33
|
|
|
203.61
|
|
|
(4.1
|
)
|
|
148.16
|
|
|
151.23
|
|
|
(2.0
|
)
|
Wyndham Pittsburgh University Center
|
70.4
|
|
66.6
|
|
5.7
|
|
|
140.27
|
|
|
144.69
|
|
|
(3.1
|
)
|
|
98.73
|
|
|
96.32
|
|
|
2.5
|
|
Wyndham San Diego Bayside
|
79.6
|
|
77.7
|
|
2.5
|
|
|
160.36
|
|
|
149.61
|
|
|
7.2
|
|
|
127.71
|
|
|
116.28
|
|
|
9.8
|
|
Embassy Suites San Francisco Airport-South San Francisco
|
88.7
|
|
87.4
|
|
1.5
|
|
|
195.28
|
|
|
202.90
|
|
|
(3.8
|
)
|
|
173.19
|
|
|
177.31
|
|
|
(2.3
|
)
|
Embassy Suites San Francisco Airport-Waterfront
|
88.2
|
|
88.6
|
|
(0.5
|
)
|
|
210.24
|
|
|
205.97
|
|
|
2.1
|
|
|
185.40
|
|
|
182.50
|
|
|
1.6
|
|
Holiday Inn San Francisco-Fisherman’s Wharf
|
88.6
|
|
85.9
|
|
3.2
|
|
|
185.73
|
|
|
201.21
|
|
|
(7.7
|
)
|
|
164.62
|
|
|
172.85
|
|
|
(4.8
|
)
|
San Francisco Marriott Union Square
|
85.2
|
|
89.7
|
|
(5.0
|
)
|
|
293.18
|
|
|
305.12
|
|
|
(3.9
|
)
|
|
249.90
|
|
|
273.65
|
|
|
(8.7
|
)
|
Wyndham Santa Monica at the Pier
|
87.1
|
|
87.4
|
|
(0.3
|
)
|
|
261.00
|
|
|
266.11
|
|
|
(1.9
|
)
|
|
227.41
|
|
|
232.64
|
|
|
(2.2
|
)
|
Embassy Suites Secaucus-Meadowlands
|
71.3
|
|
67.0
|
|
6.3
|
|
|
176.34
|
|
|
181.51
|
|
|
(2.8
|
)
|
|
125.66
|
|
|
121.68
|
|
|
3.3
|
|
The Vinoy Renaissance St. Petersburg Resort & Golf Club
|
84.7
|
|
86.0
|
|
(1.5
|
)
|
|
241.55
|
|
|
239.00
|
|
|
1.1
|
|
|
204.70
|
|
|
205.65
|
|
|
(0.5
|
)
|
Same-store Hotels
|
79.1
|
|
79.4
|
|
(0.4
|
)
|
|
192.20
|
|
|
193.36
|
|
|
(0.6
|
)
|
|
151.99
|
|
|
153.45
|
|
|
(1.0
|
)
|
Hotel Portfolio
The following table provides room counts for the hotels in which we held an ownership interest at
June 30, 2017
.
|
|
|
|
|
|
Consolidated Hotels
|
|
|
Rooms
|
Embassy Suites Atlanta-Buckhead
|
|
316
|
|
DoubleTree Suites by Hilton Austin
|
|
188
|
|
Embassy Suites Birmingham
|
|
242
|
|
The Fairmont Copley Plaza, Boston
|
|
383
|
|
Wyndham Boston Beacon Hill
|
|
304
|
|
Embassy Suites Boston-Marlborough
|
|
229
|
|
Sheraton Burlington Hotel & Conference Center
|
|
309
|
|
The Mills House Wyndham Grand Hotel, Charleston
|
|
216
|
|
Embassy Suites Dallas-Love Field
|
|
248
|
|
Embassy Suites Deerfield Beach-Resort & Spa
|
|
244
|
|
Embassy Suites Fort Lauderdale 17
th
Street
|
|
361
|
|
Wyndham Houston-Medical Center Hotel & Suites
|
|
287
|
|
Embassy Suites Los Angeles-International Airport/South
|
|
349
|
|
Embassy Suites Mandalay Beach-Hotel & Resort
|
|
250
|
|
Embassy Suites Miami-International Airport
|
|
318
|
|
Embassy Suites Milpitas-Silicon Valley
|
|
266
|
|
Embassy Suites Minneapolis-Airport
|
|
310
|
|
Embassy Suites Myrtle Beach-Oceanfront Resort
|
|
255
|
|
Hilton Myrtle Beach Resort
|
|
385
|
|
Embassy Suites Napa Valley
|
|
205
|
|
Wyndham New Orleans-French Quarter
|
|
374
|
|
The Knickerbocker New York
(a)
|
|
330
|
|
Embassy Suites Orlando-International Drive South/Convention Center
|
|
244
|
|
DoubleTree Suites by Hilton Orlando-Lake Buena Vista
|
|
229
|
|
Wyndham Philadelphia Historic District
|
|
364
|
|
Sheraton Philadelphia Society Hill Hotel
|
|
364
|
|
Embassy Suites Phoenix-Biltmore
|
|
232
|
|
Wyndham Pittsburgh University Center
|
|
251
|
|
Wyndham San Diego Bayside
|
|
600
|
|
Embassy Suites San Francisco Airport-South San Francisco
|
|
312
|
|
Embassy Suites San Francisco Airport-Waterfront
|
|
340
|
|
Holiday Inn San Francisco-Fisherman’s Wharf
|
|
585
|
|
San Francisco Marriott Union Square
|
|
400
|
|
Wyndham Santa Monica At the Pier
|
|
132
|
|
Embassy Suites Secaucus-Meadowlands
(b)
|
|
261
|
|
The Vinoy Renaissance St. Petersburg Resort & Golf Club
|
|
361
|
|
|
|
11,044
|
|
Unconsolidated Hotel
|
|
|
Chateau LeMoyne-French Quarter, New Orleans
(b)
|
|
171
|
|
|
|
|
Hotels Held for Sale
|
|
|
Morgans New York
|
|
117
|
|
Royalton New York
|
|
168
|
|
|
|
(a)
|
We own a 95% interest in this property.
|
|
|
(b)
|
We own a 50% interest in this property.
|
Liquidity and Capital Resources
Operating Activities
For the
six months ended June 30, 2017
, RevPAR at our same-store hotels decreased
1.0%
, as compared to the same period in 2016, driven by a
0.4%
decrease in occupancy and a
0.6%
decrease in ADR.
At
June 30, 2017
, we had
$58.1 million
of cash and cash equivalents, including
$41.3 million
held by third-party management companies. During the first
six
months of
2017
, our operations (primarily hotel operations) provided
$67.2 million
in cash compared to
$71.6 million
for the same period last year. The decline in cash received compared to the prior period is primarily attributable to a decline in our hotel operations (primarily reflecting selling two hotels in the third quarter of 2016), partially offset by a $3.9 million increase in cash received from Wyndham in the current year under Wyndham’s annual adjusted net operating income guaranty, in addition to an increase in operating cash flow reflecting a change in the timing of property taxes made for certain properties.
As discussed herein, on April 23, 2017, we agreed to merge with RLJ, pending stockholder approval. Through the
six months ended June 30, 2017
, we have incurred
$6.3 million
in transaction costs, primarily related to the merger, including
$5.8 million
incurred during the
second
quarter of 2017 (of which
$5.6 million
was accrued at June 30, 2017). We expect to incur additional significant costs in connection with completing the mergers.
Investing Activities
During the
six months ended June 30, 2017
, cash used in investing activities was
$47.1 million
compared to
$38.9 million
during the same period last year. Through
June 30, 2017
, we spent
$10.0 million
more on renovation and redevelopment projects at our hotels compared to the same period last year, primarily at our Embassy Suites Myrtle Beach-Oceanfront Resort and The Vinoy Renaissance St. Petersburg Resort & Golf Club.
Any future renovations and redevelopments will be funded using operating cash flow, cash on hand and borrowings under our line of credit.
We received gross proceeds of $92 million from the sale of two hotels in the third quarter of 2017, and we incurred approximately $14.0 million in aggregate selling costs.
Financing Activities
During the
six months ended June 30, 2017
, cash used in financing activities was
$9.3 million
,
$24.9 million
less than cash used for the same period last year.
In 2015, our Board approved
a stock repurchase program
, under which we may spend up to $100 million repurchasing shares of our common stock through October 2017, in accordance with applicable securities laws and other restrictions.
During the first
six
months of 2016, we repurchased
4.1 million
shares of common stock for
$27.4 million
(including commissions) at an average price of
$6.61
per share. We did not repurchase any shares during the first
six
months of 2017. Since the program was authorized, FelCor has repurchased
6.6 million
shares for a total of
$44.8 million
(including commissions) at an average share price of
$6.78
per share.
In the current period, we repaid $3.3 million more in debt and drew $1.0 million more under our line of credit compared to the same period last year.
In 2017, we expect to make approximately $3 million of scheduled principal payments and pay $25 million of preferred dividends and $33 million in common dividends (assuming no change to our current quarterly dividend), all of which we expect to fund with operating cash flow and cash on hand.
FelCor LP, our operating partnership, distributes funds to FelCor to pay common and preferred
dividends. Our Board determines the amount of common and preferred dividends for each quarter, if any, based upon various factors including operating results, economic conditions, other operating trends, our financial condition and capital requirements, as well as the minimum REIT distribution requirements.
Except for our 5.625% senior secured notes due 2023 and our line of credit, our secured debt is generally recourse solely to the specific hotels securing the debt, except in case of fraud, misapplication of funds and certain other customary limited recourse carve-out provisions that could extend recourse to us. Much of our secured debt allows us to substitute collateral under certain conditions and is freely prepayable, subject in some instances to various prepayment, yield maintenance or defeasance obligations.
Most of our secured debt (other than our 5.625% senior secured notes) is subject to lock-box arrangements under certain circumstances. We are permitted to spend an amount required to cover our hotel operating expenses, taxes, debt service, insurance and capital expenditure reserves, even if revenues are flowing through a lock-box triggered by a specified debt service coverage ratio not being met. All of our consolidated loans subject to lock-box provisions currently exceed the applicable minimum debt service coverage ratios.
Senior Notes.
Our senior notes, which are guaranteed by FelCor, require that we satisfy total leverage, secured leverage and interest coverage tests in order to: (i) incur additional indebtedness, except to refinance maturing debt with replacement debt, as defined under our indentures; (ii) pay dividends in excess of the minimum distributions required to qualify as a REIT; (iii) repurchase capital stock; or (iv) merge. We currently exceed all minimum thresholds. In addition, our 5.625% senior secured notes are secured by a combination of first lien mortgages and related security interests on nine hotels, as well as pledges of equity interests in certain subsidiaries of FelCor LP, and our 6.0% senior unsecured notes require us to maintain a minimum amount of unencumbered assets.
Interest Rate Caps.
To fulfill requirements under one of our loans, we entered into an interest rate cap agreement with an aggregate notional amount of $140 million at
June 30, 2016
. We did not designate the interest rate cap as a hedge, and it had an insignificant fair value at
June 30, 2016
, resulting in no significant impact on earnings. We had no outstanding interest rate caps at
June 30, 2017
or
December 31, 2016
.
Inflation and Competition
Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, require us to reduce room rates in the near term and may limit our ability to raise room rates in the future. We are also subject to the risk that inflation will cause increases in hotel operating expenses that are disproportionate to increases in revenues. If competition requires us to reduce room rates or limits our ability to raise room rates in the future, we may not be able to adjust our room rates to reflect the effects of inflation in full, in which case our operating results and liquidity could be adversely affected.
Seasonality
The lodging business is seasonal in nature. Generally, hotel revenues are greater in the second and third calendar quarters than in the first and fourth calendar quarters, although this may not be true for hotels in major tourist destinations. Revenues for hotels in tourist areas generally are substantially greater during tourist season than other times of the year. Seasonal variations in revenue at our hotels can be expected to cause quarterly fluctuations in our revenues. Quarterly earnings also may be adversely affected by events beyond our control, such as extreme weather conditions, economic factors and other considerations affecting travel. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenues, we may utilize cash on hand or borrowings to satisfy our obligations.
Disclosure Regarding Forward-Looking Statements
The information presented herein may contain forward-looking statements. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which FelCor and RLJ operate and beliefs of and assumptions made by FelCor management and RLJ management, involve significant risks and uncertainties, which are difficult to predict and are not guarantees of future performances, that could significantly affect the financial results of FelCor or RLJ or the combined company. Words such as “projects,” “will,” “could,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “forecast,” “guidance,” “outlook,” “may,” and “might” and variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. Such forward-looking statements may include, but are not limited to, statements about the anticipated benefits of the proposed merger between FelCor and RLJ, including future financial and operating results, the attractiveness of the value to be received by FelCor stockholders, the attractiveness of the value to be received by RLJ, the combined company’s plans, objectives, expectations and intentions, the timing of future events, anticipated administrative and operating synergies, the anticipated impact of the merger on net debt ratios, cost of capital, future dividend payment rates, forecasts of FFO accretion, projected capital improvements, expected sources of financing, and descriptions relating to these expectations. All statements that address operating performance, events or developments that FelCor expects or anticipates will occur in the future - including statements relating to expected synergies, improved liquidity and balance sheet strength - are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. FelCor’s ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although FelCor believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, FelCor can give no assurance that our expectations will be attained and therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may materially and adversely affect FelCor’s or the combined company’s business, financial condition, liquidity, results of operations and prospects, as well as the ability to make distributions to shareholders, include, but are not limited to: (i) national, regional and local economic climates, (ii) changes in the real estate industry, financial markets and interest rates, or to the business or financial condition of either company or business, (iii) increased or unanticipated competition for the companies’ properties, (iv) risks associated with acquisitions, including the integration of the combined companies’ businesses, (v) the potential liability for the failure to meet regulatory requirements, including the maintenance of REIT status, (vi) availability of financing and capital, (vii) risks associated with achieving expected revenue synergies or cost savings, (viii) risks associated with the companies’ ability to consummate the merger and the timing of the closing of the merger, (ix) the outcome of any claims and litigation involving or affecting either company, (x) applicable regulatory changes, and (xi) those additional risks and factors discussed in reports filed with the SEC by FelCor and RLJ from time to time, including those discussed under the heading “Risk Factors” in this Quarterly Report on Form 10-Q and our and RLJ’s other filings with the SEC. Neither FelCor nor RLJ, except as required by law, undertakes any duty to update any forward-looking statements appearing in this document or any other document, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
Important Information for Investors and Stockholders
In connection with the proposed Mergers described elsewhere in this Quarterly Report on Form 10-Q, RLJ has filed with the SEC a registration statement on Form S-4 (File No. 333-218439), and RLJ and FelCor have filed with the SEC a definitive joint proxy statement/prospectus, which was first mailed to security holders of RLJ and FelCor on July 18, 2017. RLJ and FelCor filed a supplement to the joint proxy statement/prospectus on August 7, 2017 and plan to file other relevant documents with the SEC regarding the proposed transaction.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND ALL RELATED SUPPLEMENTS AND AMENDMENTS THERETO AND ALL OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
. You may obtain a free copy of the joint proxy statement/prospectus and all related supplements and amendments and all other relevant documents (if and when they become available) filed by RLJ and FelCor with the SEC at the SEC’s website at
www.sec.gov
. Copies of the documents filed by RLJ with the SEC will be available free of charge on RLJ’s website at
www.rljlodgingtrust.com
or by contacting RLJ Investor Relations at
ir@rljlodgingtrust.com
or at 301-280-7774. Copies of the documents filed by FelCor with the SEC will be available free of charge on FelCor’s website at
www.felcor.com
or by contacting FelCor Investor Relations at
asalami@felcor.com
or at 972-444-4967.
This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.
Participants in the Solicitation
RLJ and FelCor and their respective trustees, directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed merger. You can find information about RLJ’s executive officers and trustees in RLJ’s definitive proxy statement filed with the SEC on March 28, 2017 in connection with its 2017 annual meeting of shareholders and in Form 4s of RLJ’s trustees and executive officers filed with the SEC. You can find information about FelCor’s executive officers and directors in Amendment No. 1 to FelCor’s Annual Report on Form 10-K for the year ended December 31, 2016 on Form 10-K/A filed with the SEC on April 28, 2017 and in Form 4s of FelCor’s directors and executive officers filed with the SEC. Additional information regarding the interests of such potential participants is included in the joint proxy statement/prospectus and other relevant documents filed with the SEC in connection with the proposed merger. You may obtain free copies of these documents from RLJ or FelCor using the sources indicated above.