FelCor Reports 2002 Net Loss of $178.5 million; Plans to Sell 33 Smaller Hotels from Portfolio of 169, Expects to Defer Further Common Dividends / February 2003

Hotel Online Special Report

FelCor Reports 2002 Net Loss of $178.5 million; Plans
to Sell 33 Smaller Hotels from Portfolio of 169,
Expects to Defer Further Common Dividends

IRVING, Texas�February 4, 2002 - FelCor Lodging Trust Incorporated (NYSE: FCH), the nation�s second largest hotel real estate investment trust (REIT), today reported operating results for the fourth quarter and year ended December 31, 2002.

FelCor�s operating results for the fourth quarter and full year 2002, reflect weak lodging demand related to the continued softness in the nation�s economy and uncertain political environment.

Fourth Quarter Results:

Total revenues were $309.8 million or 2.3 percent over the fourth quarter in 2001. The increase was primarily related to a 3.1 percent improvement in the portfolio�s revenue per available room ("RevPAR"). RevPAR increased 5.2 percent in October, and 1.7 percent in November and December. For the quarter, occupancy increased 4.4 percent, to 57.8 percent, and average daily rate ("ADR") decreased 1.3 percent, to $95.61, compared to the same quarter of 2001.

The operating margin for FelCor�s hotels during the fourth quarter 2002 was 27.8 percent, which reflected a 210 basis point decrease, compared to the same period in 2001. The deterioration in margins principally resulted from increased occupancy with decreases in ADR, and increased employee related costs.

FelCor�s fourth quarter 2002 recurring Funds From Operations ("FFO") was $6.9 million, or $0.11 per share. FFO for the same period last year totaled $13.8 million, or $0.21 per share. FFO prior to convertible preferred (Series A) dividends was $0.15 per share and unit for the three months ended December 31, 2002. Fourth quarter 2002 recurring Earnings Before Interest, Taxes, Depreciation, Amortization, and other non-cash charges ("EBITDA") totaled $57.7 million, compared to $60.8 million for fourth quarter of 2001. For the quarter, FelCor reported a net loss of $185.1 million, or a loss of $3.17 per share, compared to a fourth quarter 2001 net loss of $35.4 million, or $0.67 per share.

Included in the 2002 net loss is an impairment charge of $157.5 million related to certain of FelCor�s hotels and investments in unconsolidated entities. The impairment charge resulted primarily from FelCor�s decision to dispose of 33 non-strategic hotels over the next 36 months. Non-strategic hotels include smaller properties in secondary and tertiary locations and certain hotels in Texas and specifically Dallas, areas where FelCor plans to reduce its concentration. The fourth quarter of 2001 included $7 million of impairment charges relating to hotels that were held for sale.

"Our plan is to dispose of our smaller hotels in low growth markets and reinvest most of the proceeds in newer, larger and higher quality assets, primarily in urban and resort locations that have higher growth rates and barriers to competition. Using this asset allocation strategy, we expect to improve the overall quality and growth potential of our hotel portfolio while preserving our strategic brand relationships," said Thomas J. Corcoran, Jr., FelCor�s President and CEO.

The 33 sale candidates represent 14 percent of the rooms in FelCor�s hotel portfolio, but less than seven percent of FelCor�s consolidated hotel EBITDA. The average number of rooms in the hotels identified for sale is 196, while the average number of rooms for the remainder of FelCor�s portfolio is 294.

Full Year 2002 Results:

Total revenues for 2002 were $1.3 billion, or 8.7 percent below 2001 pro forma revenues, principally related to weak lodging demand and the decrease in RevPAR for FelCor�s hotel portfolio. Pro forma 2001 operating results assume the 88 leases acquired on July 1, 2001, had been acquired on January 1, 2001. FelCor�s total hotel portfolio RevPAR decreased 8.1 percent for 2002, resulting from a decline of 2.8 percent in occupancy and a 5.5 percent drop in ADR. The operating margin for FelCor�s hotels was 32.2 percent, a decrease of 220 basis points, compared to pro forma 2001. The reduction in operating margins is attributed principally to the decrease in ADR between the periods.

For the full year 2002, recurring FFO totaled $102.4 million, or $1.65 per share, compared to 2001 FFO of $183.7 million, or $2.75 per share. FFO prior to convertible preferred (Series A) dividends was $1.71 per share and unit for the year ended December 31, 2002. EBITDA for 2002 totaled $306.6 million, compared to $369.6 million in 2001. For 2002, FelCor reported a net loss of $204.9 million, or a loss of $3.78 per share, compared to a 2001 net loss of $63.9 million, or $1.21 per share.

During 2002, the Company recorded a $157.5 million impairment charge, as previously described. During 2001, FelCor recorded $78 million of non-recurring expenses, consisting principally of lease termination charges of $37 million and $25 million of expenses associated with its proposed acquisition of MeriStar Hospitality, which was terminated following the events of September 11, 2001.

Capital Structure:

At December 31, 2002, FelCor had $1.9 billion of debt outstanding, and had no outstanding borrowings under its $300 million line of credit. The weighted average life of FelCor�s debt is six years. During 2003, debt maturities total $35 million, including $14 million of recurring principal payments. At December 31, 2002, FelCor had $66.5 million in cash and cash equivalents.

"FelCor continues to have access to diversified capital sources. These sources, together with the potential to refinance a portion of its 2003 maturities and to sell $50 to $75 million in non-strategic hotels that are unencumbered, will be used for additional working capital," said Richard J. O�Brien, FelCor�s Executive Vice President and Chief Financial Officer.

2003 Guidance:

For the first quarter of 2003, FelCor currently anticipates its portfolio RevPAR will be down three-to-five percent below the comparable period of the prior year. FFO per share is expected to be within the range of $0.14 to $0.18 per share for the first quarter of 2003, and EBITDA is expected to be within the range of $59 million to $62 million for the same period. FelCor�s RevPAR for the month of January was down approximately four percent, compared to January of 2002.

FelCor currently anticipates that full year 2003 hotel portfolio RevPAR will be approximately the same as 2002, plus or minus one percent.

FFO per share for 2003 is currently expected to be within the range of $1.20 to $1.40 per share and EBITDA is expected to be within the range of $277 to $289 million. FelCor is currently anticipating 2003 maintenance capital expenditures to be between $60 and $70 million.

"Today�s uncertain political environment and soft business climate, together with the risk of further margin deterioration should our portfolio�s ADR continue to decline, makes it difficult to forecast earnings with any degree of certainty," added O�Brien.

For 2002, FelCor declared common dividends of $0.60 per share. "We expect the Board of Directors to defer further common dividends until there is a two to four percent positive RevPAR environment," added Mr. Corcoran.

Results of Operations - Three Months Ended
(in thousands, except per share data)

		Three Months Ended December 31,
	2002		2001
Revenues:
Hotel operating revenue:
Room	$236,198		$229,339
Food and beverage	57,372		57,154
Other operating departments	16,076		15,882
Retail space rental and other revenue	195		535
Total revenue	309,841		302,910

Expenses:
Hotel operating expenses:
Room	63,916		58,621
Food and beverage	44,287		43,133
Other operating departments	7,929		7,519
Other property related costs	91,670		86,248
Management and franchise fees	16,036		16,823
Taxes, insurance and lease expense	30,696		32,886
Corporate expenses	3,463		3,369
Depreciation	38,225		38,906
Abandoned project costs	-		837
Total operating expenses	296,222		288,342

Operating income	13,619		14,568
Interest expense, net:
Recurring financing	40,749		40,005
Merger related financing	-		274
Impairment loss	157,505		7,000
Charge-off of capitalized costs on reduced line commitments	3,222		-
Swap termination expense	-		2,225

Loss before equity in income from unconsolidated entities and minority interests	(187,857)		(34,936)
Equity in income from unconsolidated entities	(523)		296
Minority interests	10,024		5,373
Net loss	(178,356)		(29,267)
Preferred dividends	(6,727)		(6,150)
Net loss applicable to common shareholders	$ (185,083)		$ (35,417)

Diluted per common share data:

Net loss applicable to common shareholders	$ (3.17)		$ (0.67)
Weighted average common shares outstanding	58,450		52,639

Results of Operations � Full Year
(in thousands, except per share data)

	Years Ended December 31,
	2002	Pro Forma 2001 ^(a)	2001
Revenues:
Hotel operating revenue:
Room	$1,036,547	$1,136,615	$866,101
Food and beverage	212,076	228,593	157,812
Other operating departments	67,690	74,776	58,931
Percentage lease revenue	-	-	115,137
Retail space rental and other revenue	1,646	2,990	2,990
Total revenue	1,317,959	1,442,974	1,200,971

Expenses:
Hotel operating expenses:
Room	264,480	276,670	212,857
Food and beverage	166,147	179,267	122,999
Other operating departments	31,666	33,296	26,789
Other property related costs	363,931	380,299	290,247
Management and franchise fees	66,897	77,678	57,739
Taxes, insurance and lease expense	132,138	141,712	140,784
Corporate expenses	13,756	13,696	12,678
Depreciation	152,817	157,708	157,692
Abandoned project costs	1,663	837	837
Lease termination costs	-	-	36,604
Merger termination costs	-	19,919	19,919
Total operating expenses	1,193,495	1,281,082	1,079,145

Operating income	124,464	161,892	121,826
Interest expense, net:
Recurring financing	164,294	158,343	158,343
Merger related financing	-	5,486	5,486
Impairment loss	157,505	7,000	7,000
Swap termination expense	-	7,049	7,049
Charge-off of capitalized costs on reduced line commitments on early extinguishment of debt	3,222	1,270	1,270

Loss before equity in income from unconsolidated entities, minority interests, and gain on sale of assets	(200,557)	(17,256)	(57,322)
Equity in income from unconsolidated entities	3,293	7,346	7,346
Minority interests	12,622	1,457	7,283
Gain on sale of assets	6,061	3,417	3,417
Net loss	(178,581)	(5,036)	(39,276)
Preferred dividends	(26,292)	(24,600)	(24,600)
Net loss applicable to common shareholders	$ (204,873)	$ (29,636)	$ (63,876)

Diluted per common share data:
Net loss applicable to common shareholders	$ (3.78)	$ (0.56)	$ (1.21)
Weighted average common shares outstanding	54,173	52,622	52,622

(a) Information for the pro forma year ended December 31, 2001, is presented assuming the 88 hotel leases acquired on July 1, 2001, were acquired on January 1, 2001, and $36.6 million of non-recurring lease termination costs have been eliminated. When these hotel 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 and unit data)

		Three Months Ended December 31,
	2002		2001
Funds From Operations (FFO)^{(a) (b)}
Net loss	$(178,356)		$ (29,267)
Depreciation	38,225		38,906
Depreciation from unconsolidated entities	3,377		3,104
Preferred dividends:
Series A preferred dividends	(2,915)		-
Series B preferred dividends	(3,812)		(3,234)
Minority interest in FelCor Lodging LP	(10,358)		(6,026)
Significant non-recurring items:
Impairment loss	157,505		7,000
Abandoned project costs	-		837
Charge-off of capitalized costs on reduced line commitments	3,222		-
Merger related financing costs	-		274
Swap termination costs	-		2,225
FFO	$ 6,888		$ 13,819
Diluted FFO per common share and unit	$ 0.11		$ 0.21
Weighted average common shares and units outstanding	62,056		66,641

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)^(a)
FFO	$ 6,888		$ 13,819
Interest expense		41,130		40,635
Interest expense from unconsolidated entities		2,380		2,413
Amortization expense		526		654
Preferred dividends:
Series A preferred dividends		2,915		-
Series B preferred dividends		3,812		3,234
EBITDA		$ 57,651		$ 60,755

a) FFO and EBITDA are adjusted for significant non-recurring items.
b) FFO prior to convertible preferred (Series A) dividends was $0.15 per share and unit
for the three months ended December 31, 2002.

Reconciliation of FFO and EBITDA
(in thousands, except per share and unit data)

			Years Ended December 31,
			2002			Pro Forma 2001^(a)				2001
Funds From Operations (FFO) ^{(b) (c)}
Net loss		$ (178,581)			$ (5,036)			$ (39,276)
Gains or losses from sales of property:
Gain on sale of hotel assets		(5,861)			-			-
Depreciation		152,817			157,692			157,692
Depreciation from unconsolidated entities		11,616			10,881			10,881
Preferred dividends:
Series A preferred dividends		(11,662)			-			-
Series B preferred dividends		(14,630)			(12,937)			(12,937)
Minority interest in FelCor Lodging LP		(13,717)			(5,041)			(10,868)
Significant non-recurring items:
Impairment loss		157,505			7,000			7,000
Abandoned project costs		1,663			837			837
Charge-off of capitalized costs on reduced line commitments		3,222			1,270			1,270
Merger termination costs		-			19,919			19,919
Merger related financing costs		-			5,486			5,486
Lease termination costs		-			-			36,604
Swap termination costs		-			7,049			7,049
FFO		$ 102,372			$187,120			$183,657
Diluted FFO per common share and unit		$ 1.65			$ 2.81			$ 2.75
Weighted average common shares and units outstanding		62,061			66,675			66,675

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
FFO	$102,372			$187,120			$183,657
Interest expense	166,427			161,226				161,226
Interest expense from unconsolidated entities		9,375			9,678				9,678
Amortization expense	2,087			2,093				2,093
Preferred dividends:
Series A preferred dividends		11,662			-				-
Series B preferred dividends		14,630			12,937				12,937
EBITDA	$306,553			$373,054				$369,591

^{a) Information for the pro forma year ended December 31, 2001,
is presented assuming the 88 hotel leases acquired}
^{on July 1, 2001, were acquired on January 1, 2001, and $36.6 million
of non-recurring lease termination costs have been eliminated.}
^{When these hotel leases were acquired, the Company began receiving
and recording hotel revenues and expenses,}
^{rather than percentage lease revenues.}
^{b) FFO and EBITDA are adjusted to exclude significant non-recurring
items.}
^{c) FFO prior to convertible preferred (Series A) dividends was
$1.71 per share and unit for the year}
^{ended December 31, 2002.}

FelCor has published its Fourth Quarter 2002 Supplemental Information, which provides additional corporate data, financial highlights and portfolio statistical data for the fourth quarter and year ended December 31, 2002. Investors are encouraged to access the Supplemental Information on the Company's website at www.felcor.com, on its Investor Relations page in the "Financial Reports" section. The Supplemental Information also will be furnished upon request. Requests may be made by e-mail to [email protected] or by writing to the Director of Investor Relations, FelCor Lodging Trust Incorporated, 545 E. John Carpenter Freeway, Suite 1300, Irving, Texas, 75062.

FelCor is the nation�s second largest lodging REIT and the largest owner of full service, all-suite hotels. FelCor�s consolidated portfolio is comprised of 169 hotels, located in 35 states and Canada. FelCor owns 77 upscale, all-suite hotels, and is the largest owner of Embassy Suites^® and Doubletree Guest Suites^®hotels. FelCor�s portfolio also includes hotels in the upscale and full service segments. FelCor has a current market capitalization of approximately $2.8 billion. Additional information can be found on the Company�s website 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.

###

Contact:
Thomas J. Corcoran, Jr.,
President and CEO
(972) 444-4901
[email protected]

Also See	FELCOR Finishes 2000 with FFO UP 12.6% to $4.29 / Feb 2001
	FelCor Reports Fourth-quarter Net Loss of $35.4 million, Reverses Profit of $35.1 million in the Year-earlier Period / Feb 2002

To search Hotel Online data base of News and Trends Go to Hotel.Online Search