FelCor Lodging Trust Reports 2nd Qtr Net Loss
of $41 million Compared with a Loss of $27 million
a Year Earlier; Revenues Up 9.1%
|IRVING, Texas, July 28, 2004 - FelCor Lodging Trust Incorporated (NYSE:
FCH - News), the nation's second largest hotel real estate investment trust
(REIT), today reported operating results for the second quarter and six
months ended June 30, 2004.
Second Quarter Results:
FelCor's second quarter results reflect improving hotel industry fundamentals. FelCor had seven consecutive months of hotel portfolio revenue per available room ("RevPAR") increases and had its first quarterly increase in average daily rate ("ADR") since the first quarter of 2001.
FelCor's second quarter revenues were $330 million, which reflect an increase of $28 million, or 9.1 percent, compared to the second quarter in 2003. The increase was primarily related to a 7.3 percent increase in its hotel portfolio RevPAR. For the quarter, occupancy increased 5.5 percent, to 68.6 percent, and ADR increased 1.7 percent, to $97.78, compared to the same quarter of 2003.
The operating margin for FelCor's hotels during the second quarter 2004 was 30.7 percent, which represents a 170 basis point decrease, compared to the same period in 2003. The deterioration in margins largely resulted from the 5.5 percent increase in occupancy with only a 1.7 percent increase in ADR, coupled with increases in labor related costs, compared to the second quarter of 2003.
FelCor's net loss applicable to common stockholders for the second quarter of 2004 was $41 million, or a net loss of $0.69 per share. This is compared to the prior year second quarter net loss of $27 million, or $0.46 per share. Second quarter 2004 Funds From Operations ("FFO") was a loss of $9 million, or $0.15 per share. FFO for the same period last year was $12 million, or $0.19 per share. Second quarter 2004 Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") totaled $42 million, compared to $63 million in the second quarter of 2003.
Results of operations for the second quarter of 2004 include a net $31 million ($0.50 per share) of costs associated with the early retirement of $500 million of senior notes. Results of operations for the second quarter of 2003 included $10 million ($0.17 per share) of expenses related to impairment losses, the charge off of deferred financing costs, net of gain on early extinguishment of debt. Second quarter of 2003 also included $3 million of EBITDA related to hotels that were sold in 2003.
In accordance with the Securities and Exchange Commission's (SEC) guidance on non-GAAP financial measures, FFO and EBITDA have not been adjusted to add back the costs associated with the early retirement of senior notes, impairment charges and the charge off of deferred debt costs. 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.
The second quarter 2004 operating results (before the expenses related to the early retirement of senior notes) were consistent with the high end of FelCor's previously provided EBITDA guidance of $73 million, and exceeded the high end of its FFO guidance of $0.34 per share by $0.01.
Consistent with FelCor's objectives to reduce its outstanding debt, reduce its interest expense and extend the maturities of its debt, FelCor completed the following capital transactions since March 31, 2004:
For the six months ended June 30, 2004, FelCor's revenues were $636 million, which reflected an increase of 8.8 percent, compared to the same period in 2003. The increase in revenue principally resulted from a 5.8 percent increase in RevPAR.
The operating margin for FelCor's hotels during the six months ended June 30, 2004, was 29.9 percent, which reflects a 130 basis point decrease, compared to the same period in 2003. The deterioration in margins principally resulted from the 5.3 percent increase in occupancy with only a 0.5% increase in ADR, coupled with increases in labor related costs, compared to the same period in 2003.
FelCor's net loss applicable to common stockholders for the six months ended June 30, 2004, was $68 million, or a net loss per share of $1.15. This is compared to the prior year net loss of $55 million, or $0.93 per share. FFO for the six months ended June 30, 2004, was a loss of $1 million, or $0.02 per share. FFO for the same period last year was $21 million, or $0.34 per share. EBITDA for the six months ended June 30, 2004, totaled $101 million, compared to $123 million in the same period of 2003.
FelCor's results of operations for the six months ended June 30, 2004, include $31 million ($0.51 per share) of costs primarily related to the early retirement of $500 million of its senior notes. Results of operations for the six months ended June 30, 2003, included $9 million ($0.15 per share) of expenses related to impairment losses, the charge off of deferred financing costs, net of gain on early extinguishment of debt. During the first six months of 2003, operating results included $5 million of EBITDA related to hotels that were sold in 2003.
In accordance with the SEC's guidance on non-GAAP financial measures, FFO and EBITDA have not been adjusted to add back the costs associated with the early retirement of senior notes, impairment charges, the charge off of deferred debt costs or income from the early retirement of debt.
"The economy continues to improve and ADR is on the upswing," said Thomas J. Corcoran, Jr., FelCor's President and CEO. "With the occupancy gains for the last four quarters, our hotels are gaining confidence in their ability to drive ADR. We experienced growth in second quarter ADR, the first quarterly ADR growth in three years. With the increase in ADR in the second quarter, in June we saw improvement in operating margins over the prior year period -- the first time since December of 2002. The lodging industry is well into a recovery and we expect the second half of the year will continue to reflect these overall improving trends."
At June 30, 2004, FelCor had $1.9 billion of debt outstanding, with a weighted average life of five years. As of July 28, FelCor had approximately $160 million in cash and cash equivalents. FelCor has no significant remaining debt maturities (other than those that may be extended at FelCor's option) until 2007, when $125 million of its senior notes mature. The capital transactions completed through July 2004 have reduced FelCor's debt by $131 million, reduced its average cost of debt from 7.82% to 7.35%, and extended the average maturity of its debt by approximately one year.
"We have continued to strengthen FelCor's financial position by reducing the amount and cost of our debt, as well as extending the length of our maturities," said Andrew J. Welch, FelCor's Senior Vice President and Treasurer. "We will continue to reduce debt with proceeds from asset sales and opportunistically access the capital markets to further lower our cost of capital and increase our financial flexibility."
FelCor has declared the second quarter dividend on each of its $1.95 Series A Cumulative Convertible Preferred Stock and its 9% Series B Cumulative Redeemable Preferred Stock.
FelCor currently has 26 remaining non-strategic hotels identified for sale, with expected proceeds of approximately $200 million over the next 18 months. During 2004, through July 28, FelCor has sold eight hotels for proceeds of $46 million, including three hotels for $13 million during the second quarter and one hotel for $3 million during July. For the remainder of 2004, proceeds from the sale of non-strategic hotels are currently estimated to be approximately $80 million.
Current estimates for the third quarter and full year 2004 operating results, exclusive of future capital transactions, are as follows:
Included in third quarter and full year guidance is an expected $8 million gain related to FelCor's 50% joint venture share of the Margate residential condominium project in Myrtle Beach, South Carolina.
Included in Net Loss, FFO and EBITDA guidance are the following (in millions, except per share data):
Third Quarter 2004 Full Year 2004
During the first 27 days of July, total portfolio RevPAR increased 4.9 percent, occupancy increased 2.6 percent and ADR increased 2.2 percent, compared to the same period in 2003.
FelCor currently anticipates its 2004 total capital expenditures to
be in the range of $75 to $100 million with $34 million having been spent
through June 30, 2004.
FelCor has published its Second Quarter 2004 Supplemental Information, which provides additional corporate data, financial highlights and portfolio statistical data for the quarter and six months ended June 30, 2004. Investors are encouraged to access the Supplemental Information on FelCor'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 email@example.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 consolidated portfolio of continuing operations is comprised of 152 hotels, located in 33 states and Canada. FelCor owns 71 upscale, all-suite hotels, and is the largest owner of Embassy Suites Hotels® and Doubletree Guest Suites® hotels. FelCor's portfolio also includes 71 hotels in the upscale and full service segments. FelCor has a current market capitalization of approximately $3.0 billion. Additional information can be found on FelCor's Web site at http://www.felcor.com .
With the exception of historical information, the matters discussed in this release include "forward looking statements" within the meaning of the federal securities laws.
FelCor Lodging Trust Incorporated
|Also See:||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% / April 2004|
|FelCor Reports 2003 Net Loss of $337 million Compared to the Prior Year Net Loss of $205 million; Hotel Portfolio RevPAR for the Full Year 2003 Declines 4.4% Compared to 2002, Occupancy Decreased to 62.4% / February 2004|