Hotel Online  Special Report
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 FelCor, Owner of 117 Hotels, Takes a 4th Qtr Charge of $263.1 million
for Hotel Portfolio Repositioning and Amendments of it's Agreement
with InterContinental Hotels Group; 
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Net Loss For Fiscal Year 2005 $297.5 million Compared to 2004 Net Loss of $135.3 million
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IRVING, Texas, Feb. 7, 2006 - FelCor Lodging Trust Incorporated (NYSE: FCH), one of the nation's largest hotel real estate investment trusts (REITs), today reported operating results for the fourth quarter and year ended December 31, 2005.

Fourth Quarter Results:

  • Revenue Per Available Room ("RevPAR") increased 16.2 percent, compared to the same period in 2004.  Average Daily Rate ("ADR") increased 7.1 percent.
  • Hotel Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") increased to $72.2 million, compared to $60.1 million in the prior year quarter, an increase of 20.2 percent.  Hotel EBITDA margin was 24.1 percent, representing a 166 basis point improvement to the prior year Hotel EBITDA margin of 22.4 percent.
  • Adjusted Funds From Operations ("FFO") were $13.3 million, an $8.3 million increase from the prior year period.  Adjusted FFO per share increased to $0.21, compared to $0.08 in the prior year, an increase of 163 percent.
  • Same-Store EBITDA increased by $6.7 million to $58.5 million, or 13.0 percent to prior year.  Adjusted EBITDA increased $6.2 million to $58.7 million, or 11.7 percent to prior year.
  • Included in Adjusted EBITDA and Adjusted FFO is a $4.2 million, or $0.07 per share, negative impact stemming from hurricane losses related to insurance deductibles as a result of Hurricane Wilma.
  • Net loss applicable to common stockholders was $274.9 million, or $4.62 per share, compared to a net loss of $20.9 million, or $0.35 per share, in the fourth quarter of 2004.
  • Included in the net loss applicable to common stockholders was a fourth quarter impairment charge of $263.1 million associated with the repositioning of our portfolio and the identification of additional non-strategic hotels following an amendment of the InterContinental Hotels Group ("IHG") agreements.
Full Year Results:
  • RevPAR for the year increased 10.8 percent, compared to 2004.  ADR increased 6.2 percent.
  • Hotel EBITDA increased to $305.4 million, compared to $268.1 million in the prior year, an increase of 13.9 percent.  Hotel EBITDA margin was 25.2 percent, an increase of 115 basis points over the 24.1 percent prior year margin.
  • Adjusted FFO was $86.0 million, a $23.3 million improvement from the prior year period. Adjusted FFO per share was $1.37, an increase of $0.36 per share, or 35.6 percent over the prior year.
  • Same-Store EBITDA increased $31.7 million, to $264.8 million, or 13.6 percent to prior year.  Adjusted EBITDA grew by $12.1 million, to $271.0 million, a 4.7 percent increase to prior year.
  • Included in Adjusted EBITDA and Adjusted FFO is a $6.5 million negative impact stemming from hurricane losses related to insurance deductibles in 2005 and $2.1 million in 2004.
  • Net loss applicable to common stockholders was $297.5 million, or $5.01 per share, compared to a net loss of $135.3 million, or $2.29 per share, in 2004.
  • Included in the net loss applicable to common stockholders was a fourth quarter impairment charge of $263.1 million associated with the repositioning of our portfolio and the identification of additional non-strategic hotels following an amendment of the IHG agreements.
Fourth Quarter Events:

Included in the fourth quarter Adjusted EBITDA, Adjusted FFO and net loss applicable to common stockholders are hurricane losses aggregating $4.2 million, representing our best estimate of uninsured losses at five of our hotels in southern Florida (including our insurance deductible) from Hurricane Wilma.

In the fourth quarter, we recorded an impairment charge in continuing operations associated with the repositioning of our portfolio following an agreement with IHG amending our management agreements. This resulted in the identification of 38 non-strategic hotels owned on December 1, 2005, 31 of which were IHG-managed hotels. These non-strategic hotels are located primarily in secondary and tertiary markets, including Texas and Atlanta, Georgia, where we have an excess concentration of hotels. Although these hotels represent 31 percent of our hotel rooms, they represent only 15 percent of our Hotel EBITDA. These hotels have significantly lower RevPAR and Hotel EBITDA margins than our remaining 90 core hotels.

During the fourth quarter, we refinanced or retired indebtedness totaling $259 million which was secured by 25 of our hotels using a $225 million unsecured term loan facility and excess cash. In conjunction with the refinancing and the debt retirement, we incurred $14.5 million of costs associated with the early extinguishment of debt.

Better than expected increases in the number of room nights sold and in ADR, in both the transient and group segments, resulted in double digit RevPAR increases in most of our key markets, including Atlanta, Los Angeles, Dallas, Phoenix, New Orleans, Washington D.C., San Francisco Bay area, Philadelphia and Chicago.

RevPAR was especially strong in Atlanta and Texas, following Hurricane Katrina, as RevPAR increased 29 percent in Atlanta and 31 percent in Texas during the fourth quarter, primarily from gains in average occupancy. This was partially offset by the softness in Florida, as the hotels there were recovering from the effects of Hurricane Wilma. We had rooms out of service in the fourth quarter at our three New Orleans hotels and certain Florida hotels as a result of damage sustained from hurricanes Katrina and Wilma.

Notwithstanding the unusually high increases in utility and property and liability insurance expense, the strong RevPAR performance provided a 166 basis point improvement in our Hotel EBITDA margin for the quarter.

"This is an exciting time for FelCor. We are pleased with our continued strong performance in RevPAR and ADR in 2005, as well as far exceeding our expectations. Our repositioning plan has set the stage for further growth," said Thomas J. Corcoran, Jr., FelCor's Chairman of the Board. "FelCor has entered a new era and the future is very bright for our Company."

Capital Structure:

At December 31, 2005, we had $1.7 billion of debt outstanding with a weighted average life of five years, compared to $1.8 billion at December 31, 2004. Our cash and cash equivalents totaled approximately $95 million at the end of 2005.

During 2005, we issued 6.8 million depositary shares representing our 8% Series C Preferred Stock, with gross proceeds of $169.4 million. The proceeds were used to redeem all of the shares outstanding of our 9% Series B Preferred Stock. As a result of this redemption, we recorded a reduction in net income applicable to common stockholders of $6.5 million for the original issuance cost of the Series B preferred stock which was redeemed.

In January, we retired our $225 million unsecured term loan facility and established a new $125 million unsecured line of credit.

The New FelCor:

On January 25, 2006, we announced the completion of an agreement modifying the current management agreements covering all our owned hotels managed by IHG. This agreement enables us to complete our repositioning program and creates the "New FelCor."

The completion of the agreement with IHG enables us to sell our non- strategic hotels and use the proceeds to reduce debt and invest in high return-on-investment capital projects at our remaining core hotels. The New FelCor will be a lower-leveraged company with a much stronger and fully renovated portfolio. Our repositioned portfolio will provide a solid platform for future growth in today's strong RevPAR environment.

Following the sale of the non-strategic hotels, New FelCor will have significantly lower exposure to markets with low barriers to entry, such as Atlanta, Dallas, Houston and Omaha and will be more geographically diverse with no market contributing more than six percent of EBITDA.

"Our asset disposition program continues to be a success. As we complete our repositioning program and focus on improving the existing portfolio through renovations and repositionings, our portfolio will be positioned to have above average growth," said Richard A. Smith, FelCor's President and CEO.

Hotel Dispositions:

In 2005, we disposed of 19 hotels for gross proceeds and forgiveness of debt aggregating $128 million. During January 2006, we sold eight hotels for gross proceeds of $163 million.

We currently have 27 hotels that we are actively marketing for sale. Gross proceeds from the disposition of these hotels are expected to be approximately $325 and $375 million.

Other Highlights:

In 2005, we started construction on the Royale Palms condominium development in Myrtle Beach, South Carolina. This project is more than 90 percent pre-sold and is expected to be completed in the summer of 2007.

Our consolidated capital expenditures for the fourth quarter and full year totaled $38 million and $124 million, respectively.

In the fourth quarter of 2005 we resumed paying a common dividend, with a $0.15 per share dividend paid on December 1, 2005, and declared and paid fourth quarter dividends on our Series A and Series C preferred stock. We will evaluate the level of the common dividend each quarter.

2006 Guidance:

We anticipate that during 2006, RevPAR will increase 7 to 9 percent for the consolidated hotels, with the majority of the increase attributable to gains in ADR. RevPAR during the first quarter is expected to increase between 10 and 12 percent to prior year. Based on those expectations, we currently anticipate:

  • Adjusted EBITDA to be between $282 and $289 million for the full year and between $70 and $72 million for the first quarter;
  • Adjusted FFO per share to be between $1.79 and $1.90 for the full year, and to be between $0.42 and $0.45 for the first quarter;
  • Hotel EBITDA margin will increase at least 100 basis points for the year; and
  • Capital expenditures to be between $175 and $200 million for the full year.
Our January RevPAR increased approximately 18 percent to prior year.

Our first quarter estimates include the receipt of $5 million in business interruption proceeds as a result of hurricane losses from 2005.

There are no future asset sales assumed in our guidance. We will adjust our quarterly guidance as asset sales occur. Consequently, we are assuming no further debt reduction, beyond what has occurred to date.

EBITDA, Adjusted EBITDA, Same-Store EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO and Adjusted FFO are all non-GAAP financial measures. See our discussion of "Non-GAAP Financial Measures" for a reconciliation of each of these measures to our net income and for information regarding the use, limitations and importance of these non-GAAP financial measures.

We have published our Year End 2005 Supplemental Information, which provides additional corporate data, financial highlights and portfolio statistical data for the quarter and year ended December 31, 2005. Investors are encouraged to access the Supplemental Information on our Web site at http://www.felcor.com , on the 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 one of the nation's largest hotel REITs and the nation's largest owner of full service, all-suite hotels. FelCor's portfolio is comprised of 117 consolidated hotels, located in 28 states and Canada. FelCor's portfolio includes 64 upper upscale, all-suite hotels, and FelCor is the largest owner of Embassy Suites Hotels® and Doubletree Guest Suites® hotels. FelCor's hotels are flagged under global brands such as Embassy Suites Hotels, Doubletree®, Hilton®, Sheraton®, Westin®, and Holiday Inn®. FelCor has a current market capitalization of approximately $3.2 billion. Additional information can be found on the Company's Web site at http://www.felcor.com .

We invite you to listen to our 2005 Conference Call on Wednesday, February 8, 2006, at 9:00 a.m. (Central Standard Time). The conference call will be Web cast simultaneously via FelCor's Web site at http://www.felcor.com . Interested investors and other parties who wish to access the call should go to FelCor's Web site and click on the conference call microphone icon on either the "Investor Relations" or "FelCor News" pages. A phone replay will be available from Wednesday, February 8, 2006, at 12:00 p.m. (Central Standard Time), through Friday, March 3, 2006, at 7:00 p.m. (Central Standard Time), by dialing 877-461-2816 (access code is 1180#). A recording of the call also will be archived and available at http://www.felcor.com .
 

Consolidated Statements of Operations
(in thousands, except per share data)

                                 Three Months Ended           Year Ended
                                     December 31,            December 31,
                                   2005        2004        2005        2004
    Revenues:
       Hotel operating revenue:
         Room                    $237,041    $208,121    $975,128    $886,478
         Food and beverage         48,200      45,919     174,537     168,391
         Other operating
          departments              14,479      13,796      60,465      58,284
       Retail space rental
        and other revenue             141         129       2,049       2,721
           Total revenues         299,861     267,965   1,212,179   1,115,874

    Expenses:
       Hotel departmental expenses:
         Room                      63,183      58,235     253,563     238,807
         Food and beverage         36,546      34,967     135,558     132,561
         Other operating
          departments               7,492       7,220      30,356      29,028
       Other property related
        costs                      89,556      81,342     353,070     323,587
       Management and franchise
        fees                       14,854      13,161      61,348      57,305
       Taxes, insurance and
        lease expense              29,181      23,513     122,186     109,310
       Abandoned projects             265         ---         265         ---
       Corporate expenses           4,917       5,506      19,025      17,035
       Depreciation                30,528      28,668     119,323     111,836
           Total operating
            expenses              276,522     252,612   1,094,694   1,019,469

    Operating income               23,339      15,353     117,485      96,405
       Interest expense, net      (31,948)    (32,552)   (130,954)   (145,666)
       Impairment loss           (263,091)     (3,494)   (263,091)     (3,494)
       Hurricane loss              (4,172)        ---      (6,481)     (2,125)
       Loss on early extinguishment
        of debt                   (11,921)     (4,983)    (11,921)    (44,216)
       Charge-off of deferred
        financing costs            (2,659)       (866)     (2,659)     (6,960)
       Gain on swap termination       ---         ---         ---       1,005
    Loss before equity in income
     from unconsolidated entities,
     minority interests and gain
     on sale of assets           (290,452)    (26,542)   (297,621)   (105,051)
       Equity in income from
        unconsolidated entities     1,941       1,428      10,169      17,121
       Minority interests          21,891       1,923      23,813       5,229
       Gain on sale of assets         ---          73         733       1,167
    Loss from continuing
     operations                  (266,620)    (23,118)   (262,906)    (81,534)
       Discontinued operations      1,410      12,348      11,291     (18,593)
    Net loss                     (265,210)    (10,770)   (251,615)   (100,127)
       Preferred dividends         (9,679)    (10,091)    (39,408)    (35,130)
       Issuance costs of redeemed
        preferred stock               ---         ---      (6,522)        ---
    Net loss applicable to
     common stockholders        $(274,889)   $(20,861)  $(297,545)  $(135,257)

    Basic and diluted per
     common share data:
       Net loss from continuing
        operations                 $(4.65)     $(0.56)     $(5.20)     $(1.98)
       Net loss                    $(4.62)     $(0.35)     $(5.01)     $(2.29)
       Weighted average common
        shares outstanding         59,453      59,192      59,436      59,045
 
 

                           Discontinued Operations
                                (in thousands)

    Included in discontinued operations are the results of operations of the
18 hotels disposed of in 2004, and 19 hotels disposed of in 2005.  Condensed
financial information for the hotels included in discontinued operations is as
follows:

                                 Three Months Ended          Year Ended
                                     December 31,            December 31,
                                   2005        2004        2005        2004

       Operating revenue          $3,813     $22,333     $45,970     $145,007
       Operating expenses         (3,781)    (24,087)    (43,299)    (141,530)
          Operating income (loss)     32      (1,754)      2,671        3,477
       Direct interest costs, net    ---        (861)       (918)      (3,943)
       Impairment loss            (1,800)     (1,768)     (3,660)     (34,795)
       Asset disposition costs       ---         ---      (1,300)      (4,900)
       Gain on early extinguishment
        of debt                      742         ---       3,280          ---
       Gain on sale of depreciable
        assets                     2,501      17,306      11,736       19,422
       Minority interests            (65)       (575)       (518)       2,146
    Income (loss) from
     discontinued operations       1,410      12,348      11,291      (18,593)
       Depreciation                  212       1,742       3,212        9,680
       Minority interest in
        FelCor LP                     65         575         518         (865)
       Interest expense              ---         864         922        2,465
    EBITDA from discontinued
     operations                    1,687      15,529      15,943       (7,313)
       Gain on sale of assets     (2,501)    (17,306)    (11,736)     (19,422)
       Impairment loss             1,800       1,768       3,660       34,795
       Gain on early
        extinguishment of debt      (742)        ---      (3,280)         ---
       Asset disposition costs       ---         ---       1,300        4,900
    Adjusted EBITDA from
     discontinued operations        $244         $(9)     $5,887      $12,960
 
 

                           Selected Balance Sheet Data
                                  (in thousands)

                                                  December 31,  December 31,
                                                     2005           2004
    Investment in hotels                          $3,606,502     $3,904,397
    Accumulated depreciation                      (1,019,123)      (948,631)
    Investments in hotels, net of
     accumulated depreciation                     $2,587,379     $2,955,766

    Total cash and cash equivalents               $   94,564     $  119,310
    Total assets                                  $2,919,094     $3,317,658
    Total debt                                    $1,675,280     $1,767,122
    Total stockholders' equity                    $1,031,793     $1,330,323
 

    At December 31, 2005, we had an aggregate of 60,209,499 shares of FelCor
common stock and 2,762,540 units of FelCor LP limited partnership interest
outstanding.
 
 

                                 Debt Summary
                            (dollars in thousands)

                                           Interest
                                            Rate at
                              Encumbered  December 31,  Maturity  Consolidated
                                Hotels       2005         Date        Debt
    Promissory note              none        6.31      June 2016       $650
    Senior unsecured term notes  none        7.63     October 2007  123,358
    Senior unsecured term notes  none        9.00      June 2011    298,660
    Term loan (A)                none        5.81     October 2006  225,000
    Senior unsecured term notes  none        8.48 (B)  June 2011    290,000
       Total unsecured debt                  7.89                   937,668

    Mortgage debt             9 hotels       6.52      July 2014    104,282
    Mortgage debt             8 hotels       6.63      May 2006 © 117,913
    Mortgage debt             7 hotels       7.32      April 2009   127,455
    Mortgage debt             4 hotels       7.55      June 2009     41,912
    Mortgage debt             8 hotels       8.70       May 2010    172,604
    Mortgage debt             7 hotels       8.73       May 2010    133,374
    Mortgage debt             1 hotel        6.77      August 2008   15,500
    Mortgage debt             1 hotel        7.91     December 2007  10,457
    Other                     1 hotel        9.17      August 2011    5,204
    Construction loan (D)         ---        6.47     October 2007    8,911
       Total secured debt    46 hotels       7.69                   737,612

         Total                               7.80%               $1,675,280
 

     (A)  This note was paid off in January 2006.
     (B)  The stated interest rate on this debt is six month LIBOR (4.58% at
          December 31, 2005) plus 4.25%.  We have swapped $100 million of this
          floating rate debt for a fixed rate of 7.80%.  The resulting
          weighted average rate on these notes was 8.48% at December 31, 2005.
     ©  This debt has two, one-year extension options, subject to certain
          contingencies.
     (D)  The Company has a $69.8 million recourse construction loan facility
          for the development of a 184-unit condominium project in Myrtle
          Beach, South Carolina.  The interest on this facility is currently
          based on LIBOR plus 225 basis points and is being capitalized as
          part of the cost of the project.  The interest rate may be reduced
          to LIBOR plus 200 basis points when the project is 55% complete and
          upon satisfaction of certain other requirements.

     Fixed interest rate debt to total debt                 67.2%
     Weighted average maturity of debt                     5 years
     Secured debt to total assets                           25.3%
 
 

                               Preferred Stock
                            (dollars in thousands)

                                                          Liquidation Value at
                                                            December 31, 2005
     Series A Cumulative Convertible Preferred Stock             $322,012
     Series C Cumulative Redeemable Preferred Stock              $169,950
 
 

                         Non-GAAP Financial Measures

We refer in this supplement to certain "non-GAAP financial measures." These measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same- Store EBITDA, Hotel EBITDA and Hotel EBITDA margin, are measures of our financial performance that are not calculated and presented in accordance with generally accepted accounting principles ("GAAP"). The following tables reconcile each of these non-GAAP measures to the most comparable GAAP financial measure. Immediately following the reconciliations, we include a discussion of why we believe these measures are useful supplemental measures of our performance and of the limitations upon such measures.
 

                Reconciliation of Net Loss to FFO and Adjusted FFO
                  (in thousands, except per share and unit data)

                                     Three Months Ended December 31,
                                     2005                       2004
                                           Per Share                 Per Share
                          Dollars   Shares   Amount  Dollars   Shares  Amount
    Net loss            $(265,210)                  $(10,770)
      Preferred dividends  (9,679)                   (10,091)

Net loss applicable

to common

stockholders (274,889) 59,453 $(4.62) (20,861) 59,192 $(0.35)

       Depreciation from
        continuing
        operations         30,528             0.51    28,668             0.48
       Depreciation from
        unconsolidated
        entities and
        discontinued
        operations          2,784             0.05     4,401             0.07
       Gain on sale of
        depreciable assets (2,501)            0.04   (17,306)           (0.29)
       Minority interest in
        FelCor LP         (12,623)   2,763   (0.11)     (974)   2,789   (0.01)
    FFO                  (256,701)  62,216   (4.13)   (6,072)  61,981   (0.10)
       Charge-off of
        deferred financing
        costs               2,659             0.04       866             0.01
       Loss on early
        extinguishment of
        debt               11,180             0.18     4,983             0.08
       Abandoned projects     265              ---       ---              ---
       Impairment loss    263,091             4.23     3,494             0.05
       Impairment loss on
        discontinued
        operations          1,800             0.03     1,768             0.03
       Minority interest
        share of impairment
        loss               (8,976)           (0.14)      ---              ---
       Unvested restricted
        stock                 ---      787     ---       ---      438    0.01
    Adjusted FFO          $13,318   63,003   $0.21    $5,039   62,419   $0.08
 
 

              Reconciliation of Net Loss to FFO and Adjusted FFO
                (in thousands, except per share and unit data)

                                          Year Ended December 31,
                                     2005                       2004
                                           Per Share                 Per Share
                          Dollars   Shares   Amount  Dollars   Shares  Amount
    Net loss            $(251,615)                 $(100,127)
      Preferred dividends (39,408)                   (35,130)

Issuance costs of

redeemed preferred

       stock               (6,522)                       ---
    Net loss applicable
     to common
     stockholders        (297,545)  59,436  $(5.01) (135,257)  59,045  $(2.29)
      Depreciation from
       continuing
       operations         119,323             2.01   111,836             1.89
      Depreciation from
       unconsolidated
       entities and
       discontinued
       operations          12,884             0.22    18,916             0.32
      Gain on sale of
       depreciable assets (12,124)           (0.20)  (19,422)           (0.33)

Minority interest

in FelCor LP (13,677) 2,778 (0.09) (6,681) 2,939 (0.08)

    FFO                  (191,139)  62,214  $(3.07)  (30,608)  61,984   (0.49)
      Charge-off of
       deferred financing
       costs                2,659             0.04     6,960             0.11
      Loss on early
       extinguishment of
       debt                 8,641             0.14    44,216             0.71
      Abandoned projects      265              ---       ---              ---
      Impairment loss     263,091             4.23     3,494             0.06
      Impairment loss on
       discontinued
       operations           3,660             0.06    34,795             0.56
      Minority interest
       share of impairment (8,976)           (0.14)      ---              ---
      Asset disposition
       costs                1,300             0.02     4,900             0.08
      Issuance costs of
       redeemed preferred
       stock                6,522             0.10       ---              ---
      Gain on swap
       termination            ---              ---    (1,005)           (0.02)
      Unvested restricted
       stock                  ---      647   (0.01)      ---      359     ---
    Adjusted FFO          $86,023   62,861   $1.37   $62,752   62,343   $1.01
 
 

       Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and Same-Store
                                      EBITDA
                                  (in thousands)

                             Three Months Ended            Year Ended
                                December 31,               December 31,
                             2005          2004         2005          2004
    Net loss              $(265,210)    $(10,770)    $(251,615)    $(100,127)
      Depreciation from
       continuing operations 30,528       28,668       119,323       111,836
      Depreciation from
       unconsolidated entities
       and discontinued
       operations             2,783        4,401        12,884        18,916
      Minority interest in
       FelCor Lodging LP    (12,623)        (974)      (13,677)       (6,681)
      Interest expense       33,414       33,459       135,054       148,430
      Interest expense from
       unconsolidated
       entities and
       discontinued
       operations             1,580        2,636         7,602         9,631
      Amortization expense      733        1,330         2,904         2,945
    EBITDA                $(208,795)     $58,750       $12,475      $184,950
      Charge-off of deferred
       financing costs        2,659          866         2,659         6,960
      Loss on early
       extinguishment of
       debt                  11,180        4,983         8,641        44,216
      Abandoned projects        265          ---           265           ---
      Impairment loss       263,091        3,494       263,091         3,494
      Impairment loss on
       discontinued
       operations             1,800        1,768         3,660        34,795
      Minority interest
       share of impairment   (8,976)         ---        (8,976)          ---
      Asset disposition costs   ---          ---         1,300         4,900
      Gain on swap termination  ---          ---           ---        (1,005)
      Gain on sale of
       depreciable assets    (2,501)     (17,306)      (12,124)      (19,422)

Adjusted EBITDA $58,723 $52,555 $270,991 $258,888

      Adjusted EBITDA from
       discontinued operations (244)           9        (5,887)      (12,960)
      Gain on development and
       sale of Margate condos   ---         (808)          ---       (11,664)
      Gain on sale of land      ---          ---          (344)       (1,167)
    Same-Store EBITDA       $58,479      $51,756      $264,760      $233,097
 
 

                Reconciliation of Adjusted EBITDA to Hotel EBITDA
                                  (in thousands)

                              Three Months Ended           Year Ended
                                 December 31,              December 31,
                              2005         2004         2005          2004
    Adjusted EBITDA         $58,723      $52,555      $270,991      $258,888
      Retail space rental
       and other revenue       (141)        (129)       (2,049)       (2,721)
      Adjusted EBITDA from
       discontinued operations (244)           9        (5,887)      (12,960)
      Equity in income from
       unconsolidated entities
       (excluding interest
       and depreciation
       expense)              (6,635)      (6,476)      (28,859)      (35,764)
      Minority interest in
       other partnerships
       (excluding interest
       and depreciation
       expense)                 315          243         1,694         2,828
      Consolidated hotel
       lease expense         14,243       12,256        57,004        51,261
      Unconsolidated taxes,
       insurance and
       lease expense           (964)      (1,577)       (5,673)       (5,737)
      Interest income        (1,466)        (907)       (4,100)       (2,764)
      Hurricane loss          4,172          ---         6,481         2,125
      Corporate expenses
       (excluding amortization
       expense)               4,184        4,176        16,121        14,090
      Gain on sale of land      ---          (73)         (344)       (1,167)
    Hotel EBITDA            $72,187      $60,077      $305,379      $268,079
 
 

                  Reconciliation of Net Loss to Hotel EBITDA
                                (in thousands)

                                 Three Months Ended           Year Ended
                                     December 31,             December 31,
                                 2005          2004         2005       2004
    Net loss                 $(265,210)     $(10,770)   $(251,615) $(100,127)
      Discontinued
       operations               (1,410)      (12,348)     (11,291)    18,593
      Equity in income
       from unconsolidated
       entities                 (1,941)       (1,428)     (10,169)   (17,121)
      Minority interest        (21,891)       (1,923)     (23,813)    (5,229)
      Consolidated hotel
       lease expense            14,243        12,256       57,004     51,261
      Unconsolidated taxes,
       insurance and lease
       expense                    (964)       (1,577)      (5,673)    (5,737)
      Interest expense, net     31,948        32,552      130,954    145,666
      Impairment loss          263,091         3,494      263,091      3,494
      Hurricane loss             4,172           ---        6,481      2,125
      Loss on early
       extinguishment of debt   11,921         4,983       11,921     44,216
      Charge-off of deferred
       financing costs           2,659           866        2,659      6,960
      Gain on swap termination     ---           ---          ---     (1,005)
      Corporate expenses         4,917         5,506       19,025     17,035
      Depreciation              30,528        28,668      119,323    111,836
      Retail space rental
       and other revenue          (141)         (129)      (2,049)    (2,721)
      Abandoned projects           265           ---          265        ---
      Gain on sale of assets       ---           (73)        (733)    (1,167)

    Hotel EBITDA               $72,187       $60,077     $305,380   $268,079
 
 

                     Hotel EBITDA and Hotel EBITDA Margin
                            (dollars in thousands)

                                 Three Months Ended            Year Ended
                                     December 31,              December 31,
                                2005           2004         2005        2004
    Total revenue            $299,861       $267,965   $1,212,179  $1,115,874
    Retail space rental
     and other revenue           (141)          (129)      (2,049)     (2,721)

Hotel operating revenue 299,720 267,836 1,210,130 1,113,153

Hotel operating expenses 227,533 207,759 904,750 845,074

    Hotel EBITDA              $72,187         60,077     $305,380     268,079
    Hotel EBITDA margin          24.1%          22.4%        25.2%       24.1%
 
 

Reconciliation of Ratio of Operating Income to Total Revenue to Hotel EBITDA

                                    Margin

                                  Three Months Ended           Year Ended
                                      December 31,             December 31,
                                 2005           2004        2005        2004
      Ratio of operating income
       to total revenue           7.8%           5.7%        9.7%        8.6%
        Retail space rental
         and other revenue        0.0            0.0        (0.2)       (0.2)
        Unconsolidated taxes,
         insurance and lease
         expense                 (0.3)          (0.7)       (0.4)       (0.5)
        Consolidated hotel
         lease expense            4.7            4.6         4.7         4.6
        Corporate expenses        1.6            2.1         1.6         1.5
        Depreciation             10.2           10.7         9.8        10.1
        Abandoned projects        0.1            ---         0.0         ---
      Hotel EBITDA margin        24.1%          22.4%       25.2%       24.1%
 
 

                     Hotel Operating Expense Composition
                            (dollars in thousands)

                                    Three Months Ended         Year Ended
                                       December 31,           December 31,
                                     2005      2004         2005        2004

    Reconciliation of total
     operating expense
     to hotel operating expense:
    Total operating expenses      $276,522  $252,612   $1,094,694  $1,019,469
      Unconsolidated taxes,
       insurance and lease expense     964     1,577        5,673       5,737
      Consolidated hotel
       lease expense               (14,243)  (12,256)     (57,004)    (51,261)
      Corporate expenses            (4,917)   (5,506)     (19,025)    (17,035)
      Depreciation                 (30,528)  (28,668)    (119,323)   (111,836)
      Abandoned projects              (265)      ---         (265)        ---
    Hotel operating expenses      $227,533  $207,759   $  904,750  $  845,074

    Supplemental information:
    Compensation and benefits
     expense
     (included in hotel
      operating expenses)         $ 96,188  $ 89,122   $  383,632  $  364,299
 
 

      Reconciliation of Estimated Net Income to Estimated FFO and EBITDA
                (in millions, except per share and unit data)

                    First Quarter 2006 Guidance    Full Year 2006 Guidance
                   Low Guidance   High Guidance   Low Guidance   High Guidance
                         Per Share      Per Share      Per Share     Per Share
                           Amount         Amount         Amount         Amount
                   Dollars   (A)  Dollars   (A)  Dollars   (A)  Dollars   (A)
 

    Net income (B) $   6          $   8           $ 23           $ 30
     Preferred
      dividends      (10)           (10)           (39)           (39)
    Net loss
     applicable to
     common
     stockholders (B) (4)  $(0.07)   (2)  $(0.04)  (16)  $(0.27)   (9) $(0.15)
     Depreciation     31             31            130            130
     Minority
      interest in
      FelCor LP      ---            ---             (1)            (1)
    FFO            $  27   $ 0.42  $ 29   $ 0.45  $113   $ 1.79  $120  $ 1.90

    Net income (B) $   6           $  8           $ 23           $ 30
     Depreciation     31             31            130            130
     Minority
      interest
      in FelCor LP   ---            ---             (1)            (1)
     Interest expense 32             32            126            126
     Amortization
      expense          1              1              4              4
    EBITDA          $ 70           $ 72           $282           $289

     (A)  Weighted average shares are 59.7 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
          63.1 million used to compute FFO per share.
     (B)  Excludes gains or losses from asset sales and debt extinguishment.
 

Substantially all of our non-current assets consist of real estate. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to be helpful in evaluating a real estate company's operations. These supplemental measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, Hotel EBITDA and Hotel EBITDA margin, are not measures of operating performance under GAAP. However, we consider these non-GAAP measures to be supplemental measures of a hotel REIT's performance and should be considered along with, but not as an alternative to, net income as a measure of our operating performance.

FFO and EBITDA

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 GAAP), 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 FFO on the same basis. 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.

EBITDA is a commonly used measure of performance in many industries. We define EBITDA as net income or loss (computed in accordance with GAAP) plus interest expenses, income taxes, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA on the same basis.

Adjustments to FFO and EBITDA

We adjust FFO and EBITDA when evaluating our performance because management believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted FFO, Adjusted EBITDA and Same-Store EBITDA, when combined with GAAP net income, EBITDA and FFO, is beneficial to an investor's better understanding of our operating performance.

     *  Gains and losses related to early extinguishment of debt and interest
        rate swaps -- We exclude gains and losses related to early
        extinguishment of debt and interest rate swaps from FFO and EBITDA
        because we believe that it is not indicative of ongoing operating
        performance of our hotel assets.  This also represents an acceleration
        of interest expense or a reduction of interest expense, and interest
        expense is excluded from EBITDA.
     *  Impairment losses -- We exclude the effect of impairment losses and
        gains or losses on disposition of assets in computing Adjusted FFO and
        Adjusted EBITDA because we believe that including these is not
        consistent with reflecting the ongoing performance of our remaining
        assets.  Additionally, we believe that impairment charges and gains or
        losses on disposition of assets represent accelerated depreciation, or
        excess depreciation, and depreciation is excluded from FFO by the
        NAREIT definition and from EBITDA.
     *  Cumulative effect of a change in accounting principle -- Infrequently,
        the Financial Accounting Standards Board promulgates new accounting
        standards that require the consolidated statements of operations to
        reflect the cumulative effect of a change in accounting principle.  We
        exclude these one-time adjustments in computing Adjusted FFO and
        Adjusted EBITDA because they do not reflect our actual performance for
        that period.

In addition, to derive Adjusted EBITDA, we exclude gains or losses on the sale of assets because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets. Additionally, the gain or loss on sale of depreciable assets represents either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.

To derive Same-Store EBITDA, we make the same adjustments to EBITDA as for Adjusted EBITDA and, additionally, exclude EBITDA from discontinued operations and gains and losses from the disposition of non-hotel related assets.

Hotel EBITDA and Hotel EBITDA Margin

Hotel EBITDA and Hotel EBITDA margin are commonly used measures of performance in the industry and give investors a more complete understanding of the operating results over which our individual hotels and operating managers have direct control. We believe that Hotel EBITDA and Hotel EBITDA margin is useful to investors by providing greater transparency with respect to two significant measures used by us in our financial and operational decision-making. Additionally, these measures facilitate comparisons with other hotel REITs and hotel owners. We present Hotel EBITDA and Hotel EBITDA margin by eliminating corporate-level expenses, depreciation and expenses related to our capital structure. We eliminate corporate-level costs and expenses because we believe property-level results provide investors with supplemental information with respect to the ongoing operating performance of our hotels and the effectiveness of management in running our business on a property-level basis. We eliminate depreciation and amortization, even though they are property-level expenses, because we do not believe that these non- cash expenses, which are based on historical cost accounting for real estate assets and implicitly assume that the value of real estate assets diminish predictably over time, accurately reflect an adjustment in the value of our assets. To enhance the comparability of our hotel-level operating results with other hotel REITs and hotel owners, we are now disclosing Hotel EBITDA and Hotel EBITDA margin rather than hotel operating profit and hotel operating margin, previously disclosed. The purpose of the change is to remove any distortion created by unconsolidated entities and to reflect hotel-level operations as if they were fully consolidated. To reflect this, we eliminate consolidated percentage rent paid to unconsolidated entities, which is effectively eliminated by minority interest expense and equity in income from unconsolidated subsidiaries, and include the cost of unconsolidated taxes, insurance and lease expense, to reflect the entire operating costs applicable to our hotels.

Use and Limitations of Non-GAAP Measures

Our management and Board of Directors use FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. Same-Store EBITDA is used to provide investors with supplemental information as to the ongoing operating performance of our hotels without regard to those hotels sold or held for sale at the date of presentation.

The use of these non-GAAP financial measures has certain limitations. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, Hotel EBITDA and Hotel EBITDA margin, as presented by us, may not be comparable to FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, Hotel EBITDA and Hotel EBITDA margin as calculated by other real estate companies. These measures do not reflect certain expenses that we incurred and will incur, such as depreciation and interest or capital expenditures. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. Neither should FFO, FFO per share, Adjusted FFO, Adjusted FFO per share, EBITDA, Adjusted EBITDA or Same-Store 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. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, Hotel EBITDA and Hotel EBITDA margin reflect additional ways of viewing our operations that we believe when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. Management strongly encourages investors to review our financial information in its entirety and not to rely on any single financial measure.

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 anticipated continuation of the current economic recovery, the impact of U.S. military involvement in the Middle East and elsewhere, future acts of terrorism, the impact on the travel industry of increased fuel prices and security precautions, the impact that the bankruptcy of additional major air carriers may have on our revenues and receivables, the availability of capital, the ability to effect sales of non-strategic hotels at anticipated prices, and numerous other factors may affect future results, performance and achievements. Certain of 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.

.
Contact:

FelCor Lodging Trust Incorporated

.
Also See: FelCor Reports 2004 4th Qtr Net loss of $21 million Compared with a Loss of $150 million a Year Earlier; Sold Five Hotels Resulting in Proceeds of $86 million During the Quarter / February 2005
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
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
FelCor Reports Fourth-quarter Net Loss of $35.4 million, Reverses Profit of $35.1 million in the Year-earlier Period / Feb 2002
FELCOR Finishes 2000 with FFO UP 12.6% to $4.29 / Feb 2001


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