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 FelCor Reports Net Loss for the 1st Qtr of 2004 of $27.4 million Compared to Prior Year 1st Qtr Net Loss of $27.8 million; Occupancy Up  5.2%, to 64.4%

 
4.4 Percent Increase in RevPAR for First Quarter

IRVING, Texas, April 28, 2004 - FelCor Lodging Trust Incorporated (NYSE: FCH), the nation's second largest hotel real estate investment trust (REIT), today reported operating results for the first quarter ended March 31, 2004.

First Quarter Results:

FelCor's first quarter revenue from continuing operations was $311 million, which reflected an increase of $24 million, or 8.5 percent, compared to the first quarter in 2003.  The increase in revenue was related to a 4.4 percent increase in the hotel portfolio's revenue per available room ("RevPAR") and the inclusion of $7 million of revenue from the consolidation of FelCor's joint venture with Interstate Hotels & Resorts, which was accounted for under the equity method until June 2003.  For the quarter, occupancy increased 5.2 percent, to 64.4 percent, and average daily rate ("ADR") decreased 0.7 percent, to $97.16, compared to the same quarter of 2003.  The first quarter RevPAR increases by month, compared to the same periods in 2003, were 2.2 percent for January, 0.9 percent for February and 9.0 percent for March.

The operating margin from continuing operations of FelCor's hotels during the first quarter 2004 was 28.6 percent, which reflected a 100 basis point decrease, compared to the same period in 2003.  The deterioration in operating margin was principally the result of increased occupancy during the quarter and the decrease in ADR.

FelCor's net loss applicable to common stockholders for the first quarter of 2004 was $27 million, or a net loss of $0.47 per share.  This is compared to the prior year first quarter net loss of $28 million, or $0.48 per share.  The first quarter 2004 loss included a non-recurring $4.9 million expense, representing $0.08 per share, associated with an anticipated settlement that is expected to include an early termination of the lease on one hotel and a release of claims relating to that hotel.  The early termination of this lease is expected to result in an improvement of $0.01 per share in second half 2004 earnings.  Also included in the prior year loss was a gain of $1 million, or $0.02 per share, from the early extinguishment of debt.

FelCor's first quarter 2004 Funds From Operations ("FFO") was $9 million, or $0.14 per share.  FFO for the same period last year was $10 million, or $0.15 per share.  First quarter 2004 Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") totaled $59 million, compared to $60 million for first quarter of 2003.  Included in prior year FFO and EBITDA was a gain of $1 million, or $0.02 per share, from early extinguishment of debt. Accompanying this press release is a discussion of the non-GAAP financial measures, FFO and EBITDA, and a reconciliation of these measures to the Company's net loss.

"FelCor has had four consecutive months of RevPAR improvement.  Business is finally getting better, with increases in corporate transient business and strong leisure demand.  We believe these trends indicate that 2004 will be a turnaround year for the lodging industry," said Thomas J. Corcoran, Jr., FelCor's President and CEO.

Capital Structure:

At March 31, 2004, FelCor had $232 million in cash and cash equivalents and $2.03 billion of debt outstanding.  As of today, FelCor has approximately $325 million of cash and cash equivalents.  FelCor has no outstanding borrowings under its secured debt facility, under which it currently has $172 million of available borrowing capacity.  The weighted average life of FelCor's debt is five years.  The Company's next significant debt maturity is its $175 million of senior notes that will mature in October 2004.  FelCor expects to meet this obligation from excess cash on hand, future cash flow from operations, its additional secured debt capacity, and from the proceeds of non-strategic hotel sales.

In March 2004, FelCor elected to terminate its unsecured line of credit arrangement, which will result in estimated 2004 cost savings of approximately $0.4 million.

On April 5, 2004, FelCor closed on the sale of 4.6 million shares of its $1.95 Series A Cumulative Convertible Preferred Stock.  The shares were sold at a price of $23.79 per share (at a yield of 8.375%), which included dividends of $0.51 per share (or $2.3 million) accrued through April 5, 2004, resulting in gross proceeds of approximately $107 million.

During April 2004, FelCor purchased in the open market an aggregate of $23.5 million in principal amount of its 10% Senior Notes due 2008.

"Our balance sheet continues to improve and will provide FelCor with increased financial flexibility," said Andrew J. Welch, FelCor's Senior Vice President and Treasurer.  "Through debt reduction and earnings improvement, we are on target to reduce the Company's financial leverage this year.  We are also pleased that we are on target in repositioning our portfolio."

Other Highlights:

FelCor declared first quarter dividends on its $1.95 Series A Cumulative Convertible Preferred Stock and its 9% Series B Cumulative Redeemable Preferred Stock.

In March 2004, FelCor closed on the sale of four previously identified non-strategic hotels, realizing aggregate proceeds of $30 million.  The hotels sold include: a Holiday Inn(R) hotel in Plano, Texas; a Crowne Plaza(R) hotel in Jackson, Miss.; a Crowne Plaza hotel in Houston, Texas; and a Hampton Inn(R) hotel in Omaha, Neb.

In March 2004, FelCor acquired the 132-room Holiday Inn - Santa Monica Beach at the Pier for $27 million.  This is FelCor's first acquisition since the summer of 2002.  The hotel is ideally located on Ocean Drive, across the street from the Santa Monica Pier and Santa Monica's beaches.  In 2004, FelCor plans to invest approximately $2.5 million in the property with enhancements to the hotel's guest rooms, exterior and public areas.  The hotel will continue to be branded as a Holiday Inn and will be managed by InterContinental Hotels Group.

In April 2004, the Company closed on the sale of three previously identified non-strategic hotels, receiving $13 million in aggregate proceeds.  The hotels include the 316-room Holiday Inn in St. Louis, Mo., and two hotels in Odessa, Texas -- the 245-room Holiday Inn and the 186-room Holiday Inn Express(R).

FelCor's RevPAR for the first 25 days of April 2004, increased 7.3 percent compared to the same period in 2003.

2004 Guidance:
    Current estimates of operating results for the second quarter and full year 2004 are as follows:
                             Second Quarter           Full Year 2004
    FFO per share            $0.31 to $0.34           $0.89 to $0.98
    EBITDA                  $71 to $73 million     $257 to $263 million
    Net loss per share     $(0.20) to $(0.17)       $(1.27) to $(1.17)
    RevPAR                      5% to 6%                 4% to 5%
 
 

Results of Operations - 
Three Months Ended (in thousands, except per share data)
                                                        Three Months
                                                       Ended March 31,
                                                     2004          2003 
Revenues:
       Hotel operating revenue:
         Room                                      $247,395      $227,659
         Food and beverage                           47,220        43,628
         Other operating departments                 16,470        15,284
       Retail space rental and other revenue            245           382
           Total revenues                           311,330       286,953

    Expenses:
       Hotel departmental expenses:
         Room                                        66,594        59,030
         Food and beverage                           38,205        35,144
         Other operating departments                  8,481         7,055
       Other property related costs                  92,907        85,295
       Management and franchise fees                 15,857        15,306
       Taxes, insurance and lease expense            32,118        31,107
       Lease termination expense                      4,900           ---
       Corporate expenses                             3,386         3,423
       Depreciation                                  30,714        34,064
           Total operating expenses                 293,162       270,424

    Operating income                                 18,168        16,529
       Interest expense, net                        (41,120)      (39,805)
       Charge-off of deferred financing costs          (230)          ---

    Loss before equity in income from
     unconsolidated entities, minority
     interests and gain on sale of assets           (23,182)      (23,276)
       Equity in income (loss) from
        unconsolidated entities                         982          (148)
       Minority interests                             1,344         1,191
    Loss from continuing operations                 (20,856)      (22,233)
       Discontinued operations                          157         1,142
    Net loss                                        (20,699)      (21,091)
       Preferred dividends                           (6,726)       (6,726)
    Net loss applicable to common stockholders    $ (27,425)    $ (27,817)

    Basic and diluted per common share data:
       Net loss from continuing operations           $(0.47)       $(0.50)
       Net loss applicable to common stockholders    $(0.47)       $(0.48)
       Weighted average common shares outstanding    58,937        58,532
 

                             Discontinued Operations
                                  (in thousands)
     Condensed financial information for the hotels included in discontinued operations is as follows:
                                                      Three Months Ended
                                                          March 31,
                                                      2004         2003

    Hotel operating revenue                          $4,285       $20,393
    Hotel operating expenses                          4,392        19,692
       Operating income (loss)                         (107)          701
    Direct interest costs, net                          ---          (448)
    Gain on the early extinguishment of debt            ---           953
    Gain on disposition                                 272           ---
    Minority interest                                    (8)          (64)
       Income from discontinued operations             $157        $1,142
 

                           Selected Balance Sheet Data
                                  (in thousands)
                                                  March 31,    December 31,
                                                    2004          2003

    Investment in hotels                         $4,005,392    $3,989,964
    Accumulated depreciation                       (908,655)     (886,168)
    Investments in hotels, net of accumulated
     depreciation                                $3,096,737    $3,103,796

    Total cash and cash equivalents                $231,586      $246,036
    Total assets                                  3,561,857     3,590,893
    Total debt                                    2,033,362     2,037,355
    Total stockholders' equity                   $1,268,923    $1,296,272
 

                         Reconciliation of FFO and EBITDA (in thousands, except per share and unit data)
                                        Three Months Ended March 31,
                                     2004                       2003
                                           Per Share                 Per Share
                          Dollars   Shares  Amount   Dollars   Shares  Amount

    Net loss             $(20,699)                  $(21,091)
      Preferred dividends  (6,726)                    (6,726)
Net loss applicable to common stockholders (27,425) 58,937 $(0.47) (27,817)  58,532  $(0.48)
      Depreciation from
       continuing
       operations          30,714             0.52    34,064             0.58
      Depreciation from
       unconsolidated
       entities and
       discontinued
       operations           1,954             0.03     4,902             0.08
      Gain on sale of
       assets                (272)           (0.01)      ---              ---
      Lease termination
       costs                4,900             0.08       ---              ---
      Minority interest
       in FelCor LP        (1,407)   3,033   (0.01)   (1,557)   3,289   (0.03)
      Conversion of options
       and unvested
       restricted stock       ---      201     ---       ---      309     ---
    FFO                    $8,464   62,171   $0.14    $9,592   62,130   $0.15
 

     Consistent with SEC guidance, FFO has not been adjusted for the following amounts included in net loss (in thousands):
                                                  Three Months Ended
                                                       March 31,
                                                    2004      2003
    Charge off of deferred debt costs               $230      $---
    Gain on early extinguishment of debt             ---      (953)
                                                    $230     $(953)

    Per share amounts                              $0.00    $(0.02)
 

                       Reconciliation of Net Loss to EBITDA
                                  (in thousands)
                                                  Three Months Ended
                                                        March 31,
                                                   2004           2003
    Net loss                                    $(20,699)      $(21,091)
       Depreciation from continuing operations    30,714         34,064
       Depreciation from unconsolidated entities
        and discontinued operations                1,954          4,902
       Gain on sale of assets                       (272)           ---
       Minority interest in FelCor Lodging LP     (1,407)        (1,557)
       Lease termination costs                     4,900            ---
       Interest expense                           41,844         40,628
       Interest expense from unconsolidated
        entities and discontinued operations       1,320          2,339
       Amortization expense                          503            516
    EBITDA                                       $58,857        $59,801
 

     Consistent with SEC guidance, EBITDA has not been adjusted for the following amounts included in net loss (in thousands):
                                                    Three Months Ended
                                                         March 31,
                                                    2004           2003
       Charge off of deferred debt costs            $230           $---
       Gain on early extinguishment of debt          ---           (953)
                                                    $230          $(953)
 

    Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminish predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measurements of performance to be helpful in evaluating a real estate company's operations.  We consider Funds From Operations, or FFO, and Earnings Before Interest, Taxes, Depreciation, and Amortization, or EBITDA, to be supplemental measures of a REIT's performance and should be considered along with, but not as an alternative to, net income as a measure of our operating performance.
    The White Paper on Funds From Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income or loss (computed in accordance with generally accepted accounting principles), excluding gains or losses from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis.  We believe that FFO and EBITDA are helpful to investors as a supplemental measure of the performance of an equity REIT.  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.
    FFO and EBITDA should not be considered as alternatives to net income, operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP.  Neither should FFO, FFO per share and EBITDA be considered as measures of our liquidity or indicative of funds available for our cash needs, including our ability to make cash distributions.  FFO per share does not measure, and should not be used as a measure of amounts that accrue directly to the benefit of stockholders.

         Reconciliation of Estimated Net Loss to Estimated FFO and EBITDA
                  (in millions, except per share and unit data)
                                          Second Quarter 2004 Guidance
                                      Low Guidance           High Guidance
                                             Per Share              Per Share
                                   Dollars    Amount(A)   Dollars    Amount(A)
    Net loss                        $(3)                   $(1)
       Preferred Dividends           (9)                    (9)
    Net loss applicable to
     common stockholders            (12)      $(0.20)      (10)      $(0.17)
       Depreciation                  32                     32
       Minority interest in
        FelCor LP                    (1)                    (1)
    FFO                             $19        $0.31       $21        $0.34

    Net loss                        $(3)                   $(1)
       Depreciation                  32                     32
       Minority interest in
        FelCor LP                    (1)                    (1)
       Interest expense              42                     42
       Amortization expense           1                      1
    EBITDA                          $71                    $73
 

                                             Full Year 2004 Guidance
                                       Low Guidance         High Guidance
                                            Per Share              Per Share
                                   Dollars   Amount(A)   Dollars    Amount(A)
    Net loss                       $(48)                  $(42)
       Preferred Dividends          (27)                   (27)
    Net loss applicable to
     common stockholders            (75)      $(1.27)      (69)      $(1.17)
       Lease termination costs        5                      5
       Depreciation                 129                    129
       Minority interest in
        FelCor LP                    (4)                    (4)
    FFO                             $55        $0.89       $61        $0.98

    Net loss                       $(48)                  $(42)
       Lease termination costs        5                      5
       Depreciation                 129                    129
       Minority interest in
        FelCor LP                    (4)                    (4)
       Interest expense             173                    173
       Amortization expense           2                      2
    EBITDA                         $257                   $263
 

     (A)  Weighted average shares are 58.9 million.  Adding minority interest
          and unvested restricted stock of 3.4 million shares to weighted average shares, provides the weighted average shares and units of 62.3 million used to compute FFO per share.

                            Hotel Operating Profit
                            (dollars in thousands)

                                                         Three Months
                                                        Ended March 31,
                                                      2004          2003
    Total revenue                                   $311,330      $286,953
    Retail space rental and other revenue               (245)         (382)
    Hotel revenue                                    311,085       286,571
    Hotel operating expenses                        (222,044)     (201,830)
    Hotel operating profit                           $89,041       $84,741
    Operating margin                                   28.6%         29.6%

    Corporate expenses                                 3,386         3,423
    Corporate expenses as a percentage
     of total revenues                                  1.1%          1.2%

                       Hotel Operating Expense Composition
                              (dollars in thousands)
                                           Three Months Ended March 31,
                                            2004                 2003

                                               % of Hotel           % of Hotel
    Hotel departmental expenses:                 Revenue              Revenue
       Room                           $66,594     21.4%     $59,030    20.6%
       Food and beverage               38,205     12.3       35,144    12.2
       Other operating departments      8,481      2.7        7,055     2.5
        Total hotel departmental
         expenses                     113,280     36.4      101,229    35.3
    Other property related costs:
       Administrative and general      30,430      9.8       29,109    10.2
       Marketing and advertising       27,607      8.9       25,122     8.8
       Repairs and maintenance         18,277      5.9       16,443     5.7
       Energy                          16,593      5.3       14,621     5.1
        Total other property
         related costs                 92,907     29.9       85,295    29.8
    Management and franchise fees      15,857      5.1       15,306     5.3
    Hotel operating expenses         $222,044     71.4%    $201,830    70.4%
 

                                                      Three Months
                                                     Ended March 31,
                                                    2004          2003
    Supplemental information:
    Compensation and benefits expense
     (included in hotel
     operating expenses)                           $105,336      $96,777

    Reconciliation of total operating expenses
     to hotel operating expenses:
    Total operating expenses                       $293,162     $270,424
       Taxes, insurance and lease expense           (32,118)     (31,107)
       Lease termination expense                     (4,900)         ---
       Corporate expenses                            (3,386)      (3,423)
       Depreciation                                 (30,714)     (34,064)
    Hotel operating expenses                       $222,044     $201,830
 

    Hotel operating profit and operating margin are commonly used measures of performance in our industry and give investors a more complete understanding of the operating results over which FelCor's individual hotels and operating managers have direct control.  The Company believes that hotel operating profit and operating margin are useful to investors, providing greater transparency related to a significant measure used by management in its financial and operational decision-making.

FelCor has published its First Quarter 2004 Supplemental Information, which provides additional corporate data, financial highlights and portfolio statistical data for the quarter ended March 31, 2004.  Investors are encouraged to access the Supplemental Information on the Company's Web site at http://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 information@felcor.com or by writing to the Vice President 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 nation's largest owner of full service, all-suite hotels.  FelCor's portfolio is comprised of 155 consolidated hotels, located in 33 states and Canada.  FelCor owns 71 upscale, all-suite hotels, and is the largest owner of Embassy Suites Hotels(R) and Doubletree Guest Suites(R) hotels.  FelCor's portfolio also includes 73 hotels in the upscale and full service segments.  FelCor has a current market capitalization of approximately $3.1 billion.  
    
With the exception of historical information, the matters discussed in this release include "forward looking statements" within the meaning of the federal securities laws.  


 
Contact:
FelCor Lodging Trust Incorporated
http://www.felcor.com

 
Also See: FelCor Reports a 1st Quarter Net Loss of $21.1 million Compared to Loss of $6.1 million a Year-ago; 5.3% Drop RevPAR / May 2003
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


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