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with a Loss of $14 million a Year Ago; RevPAR Down 2.4% |
IRVING, Texas, Oct. 29, 2003 - FelCor Lodging Trust Incorporated (NYSE:
FCH - News), the nation's second largest hotel real estate investment trust
(REIT), today reported operating results for the third quarter and nine
months ended September 30, 2003.
Third Quarter Results: The third quarter results reflect a sluggish economy and soft corporate transient demand, which continues to adversely affect the lodging industry. FelCor's third quarter hotel portfolio revenue per available room ("RevPAR") declined 2.4 percent, compared to third quarter 2002. For the quarter, occupancy increased 0.3 percent, to 65.3 percent, and average daily rate ("ADR") decreased 2.7 percent, to $92.64, compared to the same quarter of 2002. The operating margin for FelCor's hotels during the third quarter 2003 was 28.7 percent, which represents a 290 basis point decrease, compared to the same period of 2002. The decrease in margins for the third quarter was lower than the 390 basis point decrease in second quarter margins, compared to the same period in 2002. The deterioration in third quarter margins principally resulted from the 2.7 percent decline in ADR, coupled with increases in employee wage and benefit, marketing, and energy costs for the quarter, compared to the third quarter of 2002. FelCor's net loss for the third quarter, which included an impairment charge of $113 million, or $1.92 per share, was $133 million, or a loss of $2.26 per share, compared to a third quarter 2002 net loss of $14 million, or a loss of $0.26 per share. Third quarter Funds From Operations ("FFO") and Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), in accordance with the Securities and Exchange Commission's (SEC) recently clarified guidance, have not been adjusted to add back the $113 million impairment charge. Including the impairment charge for the quarter, FFO was a loss of $101 million and EBITDA was a loss of $50 million. FFO and EBITDA for the third quarter of 2002, computed on a consistent basis, were $25 million and $75 million, respectively. FFO per share for the third quarter of 2003 was a loss of $1.63 per share (including $1.81 in impairment charges), as compared to a positive $0.40 per share during the same period of 2002, computed on a consistent basis. Excluding the impairment charge for the third quarter, operating results met the low end of the Company's previously provided guidance of $0.18 per share for FFO and $63 million for EBITDA. The impairment charge primarily related to the third quarter decision to sell 11 IHG-managed hotels, following an amendment to the management agreements on these hotels, and an additional impairment charge on certain of the 19 remaining non-strategic hotels identified for sale in December 2002. The 30 non-strategic hotels are under-performing and generally in markets that no longer meet FelCor's long-term investment strategy. Although the Company expects to sell these hotels over the next 36 months, the impaired assets were written down to FelCor's estimate of today's fair market value. The 30 non-strategic hotels represent 16 percent of FelCor's rooms, while only comprising five percent of the Company's hotel-level EBITDA. Of the non- strategic hotels, there are six that are estimated to have a negative EBITDA of $0.05 per share for 2003. Year to Date Results: For the nine months ended September 30, 2003, the Company's RevPAR declined 4.9 percent, compared to the same period in 2002. The decline in RevPAR principally resulted from a 4.0 percent decline in FelCor's ADR during the period. The operating margin for FelCor's hotels during the nine months ended September 30, 2003, was 29.9 percent, which reflects a 400 basis point decrease, compared to the same period in 2002. The deterioration in margin principally resulted from a 4.0 percent decline in ADR, coupled with increases in employee wage and benefit, marketing, and energy costs, compared to the same period in 2002. FelCor's net loss for the nine months, which included an impairment charge of $121 million, or $2.06 per share, was $187 million, or a loss of $3.20 per share, compared to the nine month 2002 net loss of $20 million, or a loss of $0.38 per share. FFO and EBITDA for the nine months, in accordance with the SEC's recently clarified guidance, have not been adjusted to add back the $121 million impairment charge. Including the impairment charge for the nine months, FFO was a loss of $80 million and EBITDA was $73 million. FFO and EBITDA for the nine months of 2002 were $94 million and $247 million, respectively. FFO per share for the nine months of 2003 was a loss of $1.28 per share, including $1.81 in third quarter impairment charges, as compared to a positive $1.51 per share during the same period of 2002. The following items are included in net loss for the 2003 nine month period and have not been added to or deducted from net loss in the computation of FFO or EBITDA: a $121 million impairment charge; a $2.8 million charge-off of deferred debt costs; and a $1.6 million gain on early extinguishment of debt. For the nine months in 2002, a $1.6 million charge for the third quarter abandoned projects was included in net loss and not added back to net loss in the computation of FFO or EBITDA. "We have achieved the three strategic objectives that we set out at the beginning of this year. While we are disappointed with the operating results of the second half of 2003 and anticipated fourth quarter results, we are positioned for a recovery and believe we're near the end of what has been a difficult lodging cycle," said Thomas J. Corcoran, Jr., FelCor's President and CEO. "We have given a great deal of thought to our investment strategy and the need to improve our return on investment (ROI) over the long-term. The sale of non-strategic hotels, which is progressing better than expected, is the first phase of our strategy to improve our ROI and long-term shareholder value." Capital Structure: At September 30, 2003, FelCor had $2.0 billion of debt outstanding, with a weighted average life of five years, and $176 million in cash and cash equivalents. The Company's next significant debt maturity is its $175 million in senior notes that will mature in October 2004. FelCor expects to meet this obligation from excess cash on hand and the $176 million currently available under its recently closed $200 million secured debt facility. "We have achieved our strategic objective to improve the Company's liquidity. FelCor is carrying excess cash, has covered its 2004 maturity through its secured debt facility, has amended the IHG management agreements to allow for greater flexibility to sell non-strategic assets, and has exceeded its asset sales targets. We're very pleased with the completion of these steps in strengthening our balance sheet," said Richard J. O'Brien, FelCor's Executive Vice President and Chief Financial Officer. Non-strategic asset sales were previously targeted to be between $50 and $75 million. Taking into consideration $89 million of October closings, FelCor now anticipates 2003 asset sales to be in the range of $125 to $140 million. The Company has cash and cash equivalents of approximately $260 million, following the closing of the October property sales. Other Highlights: In early October, the Company closed on the sale of nine non-strategic hotels. FelCor sold four Holiday Inn®-branded hotels in Ontario, Canada, for $32 million (U.S. dollars). The Company intends to reinvest the proceeds to achieve a tax-free exchange. In addition, FelCor closed on the sale of five non-strategic hotels for $50 million. This portfolio had 894 rooms and included three Embassy Suites Hotels® and two Doubletree Guest Suites® hotels. A parking facility also was sold for $7 million in October. FelCor has 19 hotels remaining of the previously announced 33 non-strategic hotels identified for sale in December 2002. A listing of the non-strategic hotels actively being marketed for sale can be found on the Company's Web site at www.felcor.com on the "Hotels" page. FelCor has declared and will pay regular third quarter dividends on its $1.95 Series A Cumulative Convertible Preferred Stock and its 9% Series B Cumulative Redeemable Preferred Stock. 2003 Guidance: Current estimates of operating results for the fourth quarter and full year 2003 are as follows:
Fourth
Full Year
Consistent with recently clarified SEC guidance, full year 2003 FFO and EBITDA estimates have not been adjusted for the following non-cash charges included in the estimated net loss (in thousands):
Amount Per Share
The Company's estimate for the fourth quarter was lowered to reflect a lower RevPAR forecast and the accelerated sale of hotels compared to FelCor's previous target ($0.04 per share impact). For the first 28 days of October, total portfolio RevPAR declined 2.7 percent, occupancy increased 1.1 percent and ADR declined 3.7 percent, compared to the same period in 2002. "We believe that 2004 will be a stronger year, with improving rates and increasing revenue, both for the industry and FelCor. We are confident that the initiatives taken over the last three years with our strategic brand managers will provide the framework for opportunistically recapturing rate and improving EBITDA as the economy regains its momentum," added Mr. Corcoran. The Company currently anticipates its 2003 total capital expenditures
to be approximately $70 million.
FelCor is the nation's second largest lodging REIT and the owner of the largest number of full service, all-suite hotels in the nation. FelCor's consolidated portfolio is comprised of 163 hotels, located in 34 states and Canada. FelCor owns 71 full service, all-suite hotels, and is the owner of the greatest number of Embassy Suites Hotels and Doubletree Guest Suites hotels. FelCor's portfolio also includes 79 hotels in the upscale and full service segments. FelCor has a current market capitalization of approximately $3.0 billion. 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:
www.felcor.com |