Press Release: FelCor Lodging Trust Incorporated
August 2, 2002
IRVING, TX -- FelCor Lodging Trust Incorporated (NYSE: FCH), one of the nation's largest hotel real estate investment
trusts (REITs), yesterday reported operating results for the second quarter ended June 30, 2002.
FelCor's second quarter 2002 recurring Funds From Operations ("FFO") was $45.7 million, or $0.69 per
share, which exceeded consensus analyst estimates of $0.68. FFO for the same period last year totaled $65.3 million,
or $0.98 per share. Assuming the 88 leases acquired on July 1, 2001, had been acquired on January 1, 2001, pro
forma FFO would have been $72.4 million, or $1.08 per share for the second quarter 2001. Second quarter 2002 recurring
Earnings Before Interest, Taxes, Depreciation, Amortization, and other non-cash charges ("EBITDA"), totaled
$94.6 million, compared to $111.4 million in the second quarter of 2001 and $118.5 million for the pro forma second
quarter of 2001. The Company reported net income of $13.0 million, or income per share of $0.12, compared to the
second quarter 2001 net income of $22.6 million, or income per share of $0.31 and pro forma second quarter 2001
earnings of $24.1 million. Second quarter 2002 net income includes a $5.9 million gain from the previously announced
sale of the Allerton retail space in Chicago, Illinois, and the sale of the Doubletree Guest Suites® hotel
in Boca Raton, Florida.
For the six months ended June 30, 2002, FFO was $75.1 million, or $1.12 per share, compared to the same period
last year of $136.8 million or $2.05 per share and on a pro forma basis was $141.3 million. EBITDA for the six
months was $171.8 million, compared to $228.8 million for the same period last year and $233.3 million for the
same period on a pro forma basis. Net income for the six months was $6.9 million, compared to prior year of $15.8
million and pro forma prior year of $50.5 million. The prior year six months net income reflected $36.2 million
of lease termination expense recorded in the first quarter of 2001.
FelCor's total hotel portfolio RevPAR for the second quarter was 11.1 percent below that of the same period in
2001, with 56 percent of the decline related to average daily rate ("ADR"). Compared to the same months
in 2001, RevPAR for April decreased 8.9 percent, May decreased 13.1 percent, and June decreased 11.3 percent. For
the quarter, occupancy was down 3.7 percentage points, to 65.7 percent, and ADR was down 6.0 percent, to $98.33,
compared to the same quarter in 2001. For the six month period, RevPAR decreased 14.6 percent. The RevPAR decline
for the month of July is estimated to be in the range of 5.0 to 6.0 percent, compared to prior year.
"The industry's recovery has not kept pace with previously anticipated levels, which is the result of the
continued softness in corporate transient business," said Thomas J. Corcoran, Jr., FelCor's President and
CEO. "Despite this challenging economic environment, our total portfolio occupancy levels remain relatively
strong at 66 percent, compared to the industry average of 63 percent. The economic recovery is taking longer than
expected, but we remain optimistic that RevPAR, as compared to prior year, will continue to improve on a steady
and gradual basis."
The operating margin for FelCor's portfolio was 35.5 percent during the second quarter of 2002, and represented
a decline of 240 basis points, compared to the same period last year. However, FelCor's operating margin for the
second quarter increased from the 33.6 percent reported for the first quarter of 2002.
During the second quarter of 2002, interest expense, net of interest income, was $41.6 million, compared to $40.3
million for the second quarter of the prior year, and for the six months was $82.8 million compared to $79.6 million
in the same period last year. The increase during the second quarter is primarily related to excess cash carried
during 2002 and the related increase in average debt outstanding, compared to the same period of 2001.
Capital Structure:
At June 30, 2002, FelCor had $151.7 million in cash and cash equivalents, and had no borrowings outstanding under
its $615 million unsecured line of credit. At quarter end, FelCor had $1.9 billion of debt outstanding with a weighted
average life of seven years and a weighted average interest cost of 8.3 percent. The Company's debt maturities
for the remainder of 2002 are $6 million and 2003 maturities are $35 million. Since December 31, 2001, FelCor has
reduced its outstanding debt by $56 million.
In the second quarter of 2002, the Company sold non-strategic assets for net proceeds of $23 million. FelCor sold
retail space at its Allerton Crowne Plaza® hotel in Chicago, Illinois, with net sales proceeds of $16.7 million
and sold its 183-room Doubletree Guest Suites hotel in Boca Raton, Florida, with net sales proceeds of $6.5 million.
The Boca Raton hotel had been previously identified as held for sale. The Holiday Inn® in Colby, Kansas, is
under contract for sale with an anticipated August closing and net sales proceeds of $1.7 million.
FelCor issued $25 million of perpetual preferred equity in April, and amended its unsecured line of credit in June
2002.
"The sale of assets, issuance of perpetual preferred, and the amendment of the line of credit were steps taken
to maintain our financial flexibility and to position FelCor for growth," said Richard J. O'Brien, FelCor's
Executive Vice President and Chief Financial Officer.
In July 2002, FelCor acquired the 208-suite SouthPark Suite Hotel in Charlotte, North Carolina for $14.5 million,
and the 385-room Wyndham® Myrtle Beach Resort and Arcadian Shores Golf Club in Myrtle Beach, South Carolina,
for $35.3 million. FelCor will convert the SouthPark Suite Hotel to a Doubletree Guest Suites hotel, and the Wyndham
Myrtle Beach to a Hilton® hotel. Both hotel acquisitions were funded from excess cash held on FelCor's balance
sheet.
2002 Estimates:
FelCor's FFO for the full year 2002 is currently anticipated to be within the range of $2.00 to $2.25 per share
and EBITDA to be within the range of $327 to $344 million. Anticipated operating results by quarter are as follows:
FFO per share EBITDA (in millions)
First quarter actual $0.44 $77.2
Second quarter actual $0.69 $94.6
Third quarter estimate $0.50 to $0.60 $81 to $88
Fourth quarter estimate $0.37 to $0.52 $74 to $84
Full year estimate $2.00 to $2.25 $327 to $344 million
FelCor estimates its RevPAR for the full year 2002 will be between 3.5 percent to 5.5 percent below that for 2001.
RevPAR increases, by quarter for the remainder of 2002, as compared to 2001, are currently expected to fall within
the following ranges:
Third quarter 1% to 5%
Fourth quarter 10% to 16%
The Company is currently expecting 2002 capital expenditures to range from $55 to $65 million. For the six months
ended June 30, 2002, capital expenditures totaled $20 million.
FelCor's decision to pay a common dividend will continue to be determined each quarter, based upon the operating
results of that quarter, economic conditions, and other factors. In February, FelCor indicated that it expected
to be able to distribute an aggregate of $1.00 in dividends per common share during 2002, based on its prior $2.25
FFO per share guidance. The $1.00 common dividend was based upon the low end of FelCor's then expected FFO range,
while FelCor currently anticipates that it will need to be at the high end of its revised range of FFO to achieve
this goal. FelCor paid a $0.15 common dividend per share for both the first and second quarters of 2002.
FelCor has published a Second Quarter 2002 Supplemental Financial Report, which provides additional corporate data,
financial highlights and portfolio statistical data for the three and six months ended June 30, 2002. Investors
are encouraged to access the Supplemental Financial Report on the Company's website at www.felcor.com , on its
Investor Relations page in the "Financial Reports" section. The Supplemental Financial Report will be
furnished upon request. Requests may be made by e-mail to information@felcor.com or by writing to Director of Investor
Relations, FelCor Lodging Trust Incorporated, 545 E. John Carpenter Freeway, Suite 1300, Irving, Texas 75062.
FelCor is the only lodging REIT that owns a diversified portfolio of nationally-branded, upscale and full-service
hotels managed by strategic brand managers such as Hilton Hotels, Six Continents Hotels, and Starwood Hotels &
Resorts. FelCor is competitively positioned to deliver superior shareholder returns through its strong management
team, strategic brand manager alliances, diversified upscale and full-service hotels, value creation expertise,
and financial strength. FelCor is the owner of the largest number of Embassy Suites®, Crowne Plaza, Holiday
Inn and independently owned Doubletree- branded hotels. FelCor's portfolio is comprised of 184 hotels with approximately
50,000 rooms and it has a current market capitalization of approximately $3.2 billion. Additional information can
be found on the Company's website at www.felcor.com .
FelCor invites you to listen to the Company's second quarter 2002 conference call on August 1, 2002, at 9:00 a.m.
(Central Daylight Time). A phone replay will be available from Thursday, August 1, 2002, at 12:00 p.m. (Central
Daylight Time), through Friday, August 30, 2002, at 7:00 p.m. (Central Daylight Time), by dialing 888-442-3295
(access code is 3841). A recording of the call also will be archived and available at www.felcor.com
.
With the exception of historical information, the matters discussed in this news release include "forward
looking statements" within the meaning of the federal securities laws. Forward looking statements are not
guarantees of future performance. Numerous risks and uncertainties, and the occurrence of future events, may cause
actual results to differ materially from those currently anticipated. General economic conditions, including the
timing and magnitude of any recovery from the current soft economy, future acts of terrorism, the availability
of capital, and numerous other factors may affect future results, performance and achievements. These risks and
uncertainties are described in greater detail in our filings with the Securities and Exchange Commission. Although
we believe our current expectations to be based upon reasonable assumptions, we can give no assurance that our
expectations will be attained or that actual results will not differ materially.
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended June 30,
Pro Forma Actual
2002 2001(A) 2001
Revenues:
Hotel operating revenue:
Room $277,361 $313,050 $173,118
Food and beverage 56,389 61,374 25,486
Other operating departments 17,548 20,011 11,891
Percentage lease revenue --- --- 63,606
Retail space rental and other revenue 428 549 548
Total revenues 351,726 394,984 274,649
Expenses:
Hotel operating expenses:
Room 68,114 71,979 39,784
Food and beverage 42,138 47,854 19,024
Other operating departments 7,916 8,377 5,195
Other property operating costs 90,548 96,095 52,508
Management and franchise fees 18,088 20,904 10,573
Taxes, insurance and lease expense 33,790 38,529 38,096
Corporate expenses 3,970 3,231 3,231
Depreciation 38,204 39,720 39,705
Total operating expenses 302,768 326,689 208,116
Operating income 48,958 68,295 66,533
Interest expense, net
Recurring financing (41,555) (39,179) (39,179)
Merger related financing --- (1,086) (1,086)
Swap termination expense --- (4,824) (4,824)
Loss on early extinguishment of debt --- (225) (225)
Income before equity in income from
unconsolidated entities, minority
interests and gain on sale of assets 7,403 22,981 21,219
Equity in income from unconsolidated
entities 1,365 4,178 4,178
Minority interests (1,827) (3,576) (3,320)
Gain on sale of assets 6,061 482 482
Net income 13,002 24,065 22,559
Preferred dividends (6,688) (6,150) (6,150)
Net income applicable to common
stockholders $ 6,314 $17,915 $16,409
Diluted per common share data:
Net income applicable to common
stockholders $ 0.12 $ 0.34 $ 0.31
Weighted average common shares
outstanding 53,093 53,046 53,046
(A) Information for the pro forma three months ended June 30, 2001 is
presented assuming the 88 hotel leases acquired on July 1, 2001, were
acquired on January 1, 2001. When the leases were acquired, the
Company began receiving and recording hotel revenues and expenses,
rather than percentage lease revenues.
Consolidated Statements of Operations
(in thousands, except per share data)
Six Months Ended June 30,
Pro Forma Actual
2002 2001(A) 2001
Revenues:
Hotel operating revenue:
Room $534,591 $635,857 $365,343
Food and beverage 107,080 123,930 53,150
Other operating departments 33,767 40,635 24,790
Percentage lease revenue --- --- 115,137
Retail space rental and other revenue 1,098 1,882 1,882
Total revenues 676,536 802,304 560,302
Expenses:
Hotel operating expenses:
Room 131,347 147,214 83,404
Food and beverage 82,129 95,409 39,141
Other operating departments 15,232 17,428 10,922
Other property operating costs 179,708 201,061 111,009
Management and franchise fees 33,736 43,181 23,245
Taxes, insurance and lease expense 68,360 77,382 76,460
Corporate expenses 7,716 6,372 6,372
Depreciation 76,822 79,529 79,513
Lease termination costs --- --- 36,226
Total operating expenses 595,050 667,576 466,292
Operating income 81,486 134,728 94,010
Interest expense, net
Recurring financing (82,751) (78,535) (78,535)
Merger related financing --- (1,086) (1,086)
Swap termination expense --- (4,824) (4,824)
Loss on early extinguishment of debt --- (225) (225)
Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets (1,265) 50,058 9,340
Equity in income from unconsolidated
entities 2,586 6,328 6,328
Minority interests (526) (8,794) (2,870)
Gain on sale of assets 6,061 2,955 2,955
Net income 6,856 50,547 15,753
Preferred dividends (12,838) (12,300) (12,300)
Net income (loss) applicable to
common stockholders $(5,982) $38,247 $ 3,453
Diluted per common share data:
Net income (loss) applicable to
common stockholders $ (0.11) $ 0.72 $ 0.07
Weighted average common shares
outstanding 52,721 53,055 53,055
(A) Information for the pro forma six months ended June 30, 2001 is
presented assuming the 88 hotel leases acquired on July 1, 2001, were
acquired on January 1, 2001. In addition, $36.2 million of
non-recurring lease termination costs were eliminated. When the
leases were acquired, the Company began receiving and recording hotel
revenues and expenses, rather than percentage lease revenues.
Reconciliation of FFO and EBITDA
(in thousands, except per share data)
Three Months Ended June 30,
Pro Forma Actual
2002 2001(A) 2001
Funds From Operations (FFO)
Net income $ 13,002 $ 24,065 $ 22,559
Deferred rent --- --- (5,254)
Gain on sale of hotel and related assets (5,861) --- ---
Merger related interest, net --- 1,086 1,086
Loss on early extinguishment of debt --- 225 225
Swap termination expense --- 4,824 4,824
Series B preferred dividends (3,773) (3,234) (3,234)
Depreciation 38,204 39,720 39,705
Depreciation from unconsolidated entities 3,078 2,641 2,641
Minority interest in FelCor LP 1,072 3,050 2,794
FFO $ 45,722 $ 72,377 $ 65,346
Diluted FFO per common share and unit $ 0.69 $ 1.08 $ 0.98
Weighted average common shares and
units outstanding 66,733 66,750 66,750
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
FFO $ 45,722 $ 72,377 $ 65,346
Interest expense 42,184 39,803 39,803
Interest expense from unconsolidated
entities 2,373 2,631 2,631
Amortization expense 526 408 408
Series B preferred dividends 3,773 3,234 3,234
EBITDA $ 94,578 $118,453 $111,422
(A) Information for the pro forma three months ended June 30, 2001 is
presented assuming the 88 hotel leases acquired on July 1, 2001, were
acquired on January 1, 2001. When the leases were acquired, the
Company began receiving and recording hotel revenues and expenses,
rather than percentage lease revenues.
Reconciliation of FFO and EBITDA
(in thousands, except per share data)
Six Months Ended June 30,
Pro Forma Actual
2002 2001(A) 2001
Funds From Operations (FFO)
Net income $ 6,856 $ 50,547 $ 15,753
Gain on sale of hotel and related assets (5,861) --- ---
Lease termination costs --- --- 36,226
Merger related interest, net --- 1,086 1,086
Loss on early extinguishment of debt --- 225 225
Swap termination expense --- 4,824 4,824
Series B preferred dividends (7,007) (6,468) (6,468)
Depreciation 76,822 79,529 79,513
Depreciation from unconsolidated entities 5,256 5,022 5,022
Minority interest in FelCor LP (1,015) 6,512 588
FFO $75,051 $141,277 $136,769
Diluted FFO per common share and unit $ 1.12 $ 2.12 $ 2.05
Weighted average common shares and
units outstanding 66,724 66,759 66,759
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
FFO $75,051 $141,277 $136,769
Interest expense 83,959 79,896 79,896
Interest expense from unconsolidated
entities 4,732 4,742 4,742
Amortization expense 1,035 884 884
Series B preferred dividends 7,007 6,468 6,468
EBITDA $171,784 $233,267 $228,759
(A) Information for the pro forma six months ended June 30, 2001 is
presented assuming the 88 hotel leases acquired on July 1, 2001, were
acquired on January 1, 2001. In addition, $36.2 million of
non-recurring lease termination costs were eliminated. When the
leases were acquired, the Company began receiving and recording hotel
revenues and expenses, rather than percentage lease revenues.
Selected Balance Sheet Data
(in thousands, except book value per share)
June 30, 2002 December 31, 2001
Investment in hotels at cost $4,517,882 $4,523,469
Total cash and cash equivalents 151,704 128,742
Total assets 4,048,359 4,088,929
Total debt 1,882,675 1,938,408
Total stockholders' equity 1,688,855 1,683,194
SOURCE: FelCor Lodging Trust Incorporated