Press Release: FelCor Lodging Trust Incorporated
May 3, 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 first quarter ended March 31, 2002.
FelCor's first quarter results reflect Revenue Per Available Room ("RevPAR") below prior year, but consistent
with previous expectations of a gradual increase in hotel occupancy. The portfolio's occupancy reflects that leisure
travel is recovering faster than business travel. Operating margins were better than anticipated, as FelCor continued
to work with its brand managers to maintain effective cost controls.
FelCor's first quarter 2002 recurring Funds From Operations ("FFO") of $29.3 million, or $0.44 per share,
equals consensus analyst estimates. FFO for the same period last year totaled $71.4 million, or $1.07 per share.
On a pro forma basis, assuming that the acquisition of the 88 leases from Six Continents Hotels completed on July
1, 2001 had been acquired on January 1, 2001, FFO for the first quarter 2001 was $68.9 million, or $1.03 per share.
First quarter 2002 recurring Earnings Before Interest, Taxes, Depreciation, Amortization, and other non-cash charges
("EBITDA"), totaled $77.2 million, compared to $117.3 million for first quarter 2001 and $114.8 million
on a pro forma basis for the first quarter 2001. The Company reported a net loss of $6.1 million, or a loss per
share of $0.23, compared to the first quarter 2001 net loss of $6.8 million, or loss per share of $0.25. On a pro
forma basis, the Company reported first quarter earnings of $26.5 million. The loss reported for the first quarter
of 2001 resulted from $36.2 million of non- recurring expense related to the acquisition of DJONT on January 1,
2001.
FelCor's total hotel portfolio RevPAR for the first quarter was 18.1 percent below that for the same period of
2001. Compared to the same months in 2001, RevPAR for January decreased 21.5 percent, February decreased 15.6 percent
and March decreased 17.4 percent. The deviation in March from the improving RevPAR trend is attributed primarily
to the negative impact related to the timing difference between the Easter and Passover holidays in 2002, as compared
to 2001. For the quarter, occupancy was down 770 basis points, to 60.6 percent, and average daily rate ("ADR")
was down 7.6 percent, to $100.36, compared to the same quarter of 2001. Occupancy increased from 55.2 percent for
the fourth quarter of 2001 to 60.6 percent for the first quarter of 2002.
"Our portfolio has experienced an increase in occupancy as the economy has started to turn around. There also
has been an increase in demand, principally from the leisure traveler, as we move further from the events of September
11," said Thomas J. Corcoran, Jr., FelCor's President and CEO. "Although group business is coming back,
we have not yet seen a substantial improvement in transient business travel."
The operating margin for FelCor's hotel portfolio during the first quarter 2002 was 33.6 percent, and declined
by 260 basis points, as compared to the operating margin for the same period in 2001. "Although down from
last year, our operating margins were actually better than expected due to the effective cost containment measures
that were implemented with our brand managers," added Mr. Corcoran.
During the first quarter of 2002, interest expense, net of interest income, was $41.2 million, compared to $39.4
million for the first quarter of prior year, relating primarily to FelCor's excess cash carried during 2002.
Capital Structure:
At March 31, 2002, FelCor had $1.9 billion of debt outstanding, which included $39.3 million drawn under its $615
million line of credit and the weighted average life of the Company's debt was seven years. At March 31, 2002,
FelCor had $112.0 million in cash and cash equivalents.
In April, FelCor closed on the sale of its 183-room Doubletree Guest Suites hotel in Boca Raton, Florida with net
sales proceeds of $6.5 million. In addition, the Company has entered into contracts for the sale of one of its
hotels in Kansas, for approximately $2.0 million, and for the sale of certain retail space at its Allerton Crowne
Plaza hotel in Chicago, for approximately $17 million. Both the Boca Raton and the Kansas hotels had been previously
identified as non-strategic assets and classified as held for sale.
Second Quarter and 2002 Guidance:
For the second quarter of 2002, FelCor currently anticipates its portfolio RevPAR will be four to seven percent
below the comparable period of the prior year. FFO per share is expected to be within the range of $0.78 to $0.86
per share and EBITDA is expected to be within the range of $101 million to $106 million for the same period.
The Company's RevPAR for April 2002 was approximately 8.7 percent below the same period of 2001, which includes
improved leisure demand along with the timing difference of the Easter and Passover holidays between 2002 and 2001.
The Company's occupancy for April was approximately 67 percent as compared to prior year of 69 percent.
FelCor has re-affirmed its previous guidance that full year 2002 hotel portfolio RevPAR, compared to 2001, will
be flat to negative three percent. RevPAR increases (decreases) by quarter for the remainder of 2002, compared
to 2001, are currently expected to fall within the following ranges:
Second quarter (4)% to (7)%
Third quarter 6% to 9%
Fourth quarter 13% to 16%
FFO per share for the full year 2002 is anticipated to be within the range of $2.25 to $2.60 per share and EBITDA
to be within the range of $345 to $360 million. The Company is currently anticipating 2002 maintenance capital
expenditures to be from $40 to $50 million.
"We are pleased that FelCor's first quarter 2002 earnings were at the high end of the earnings guidance previously
provided. Based on our first quarter results, and improving economic and operating trends, we remain comfortable
with our 2002 guidance," said Richard J. O'Brien, FelCor's Executive Vice President and Chief Financial Officer.
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 operating trends. FelCor currently anticipates distributing
an aggregate of $1.00 in dividends per common share during 2002, based on the low end of the Company's current
FFO guidance. For the first quarter, FelCor paid a $0.15 common dividend per share based on the first quarter results.
FelCor has published a First Quarter 2002 Supplemental Financial Report, which provides additional corporate data,
financial highlights and portfolio statistical data for the three months ended March 31, 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 182 hotels
with approximately 50,000 rooms and has a current market capitalization of approximately $3.7 billion. Additional
information can be found on the Company's website at www.felcor.com .
FelCor invites you to listen to a phone replay of Company's first quarter 2002 conference call, available from
Thursday, May 2, 2002 at 1:00 p.m. (Central Daylight Time) through Friday, May 31, 2002, at 7:00 p.m. (Central
Daylight Time) by dialing 877-296-3928 (access code is 6473). 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.
Results of Operations - Three Months Ended
(in thousands, except per share data)
Three Months Ended March 31,
Pro Forma Actual
2002 2001(A) 2001
Revenues:
Hotel operating revenue:
Room $257,230 $322,807 $192,225
Food and beverage 50,691 62,556 27,664
Other operating departments 16,219 20,623 12,899
Percentage lease revenue --- --- 51,531
Retail space rental and other revenue 670 1,334 1,334
Total revenues 324,810 407,320 285,653
Expenses:
Hotel operating expenses:
Room 63,233 75,236 43,620
Food and beverage 39,991 47,555 20,117
Other operating departments 7,316 9,052 5,727
Other property related costs 89,160 104,965 58,502
Management and franchise fees 15,648 22,277 12,671
Taxes, insurance and lease expense 34,570 38,853 38,364
Corporate expenses 3,746 3,141 3,141
Depreciation 38,618 39,808 39,808
Lease termination costs --- --- 36,226
Total operating expenses 292,282 340,887 258,176
Operating income 32,528 66,433 27,477
Interest expense, net 41,196 39,356 39,356
Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets (8,668) 27,077 (11,879)
Equity in income from unconsolidated
entities 1,221 2,150 2,150
Minority interests 1,301 (5,218) 450
Gain on sale of assets --- 2,473 2,473
Net income (loss) (6,146) 26,482 (6,806)
Preferred dividends (6,150) (6,150) (6,150)
Net income (loss) applicable to
common stockholders $ (12,296) $ 20,332 $ (12,956)
Diluted per common share data:
Net income (loss) applicable to
common stockholders $ (0.23) $ 0.38 $ (0.25)
Weighted average common shares
outstanding 52,717 53,063 52,595
(A) Information for the pro forma three months ended March 31, 2001 is
presented assuming that the 88 hotel leases acquired on July 1, 2001
from Six Continents Hotels, were acquired on January 1, 2001 and the
elimination of non-recurring lease termination costs.
Reconciliation of FFO and EBITDA
(in thousands, except per share data)
Three Months Ended March 31,
Pro Forma Actual
2002 2001(A) 2001
Funds From Operations (FFO)
Net income (loss) $ (6,146) $ 26,482 $ (6,806)
Deferred rent --- --- 5,254
Lease termination costs --- --- 36,226
Series B preferred dividends (3,234) (3,234) (3,234)
Depreciation 38,618 39,808 39,808
Depreciation from unconsolidated entities 2,178 2,381 2,381
Minority interest in FelCor Lodging LP (2,087) 3,462 (2,206)
FFO $ 29,329 $ 68,899 $ 71,423
Diluted FFO per common share and unit $ 0.44 $ 1.03 $ 1.07
Weighted average common shares and
units outstanding 66,715 66,767 66,767
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
FFO $ 29,329 $ 68,899 $ 71,423
Interest expense 41,775 40,093 40,093
Interest expense from unconsolidated
entities 2,359 2,111 2,111
Amortization expense 509 476 476
Series B preferred dividends 3,234 3,234 3,234
EBITDA $ 77,206 $114,813 $117,337
(A) Information for the pro forma three months ended March 31, 2001 is
presented assuming that the 88 hotel leases acquired on July 1, 2001
from Six Continents Hotels, were acquired on January 1, 2001 and the
elimination of non-recurring lease termination costs.
Selected Balance Sheet Data
(in thousands, except book value per share)
March 31, December 31,
2002 2001
Investment in hotels at cost $4,526,338 $4,525,501
Book value of real estate assets,
net of depreciation 3,631,804 3,664,712
Book value per share 25.84 26.23
Total cash and cash equivalents 112,031 128,742
Total assets 4,053,401 4,088,929
Total debt 1,924,952 1,938,408
Total stockholders' equity 1,664,258 1,683,194
SOURCE: FelCor Lodging Trust Incorporated