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to Sell 33 Smaller Hotels from Portfolio of 169, Expects to Defer Further Common Dividends |
IRVING, Texas�February 4, 2002 - FelCor
Lodging Trust Incorporated (NYSE: FCH), the nation�s second largest hotel
real estate investment trust (REIT), today reported operating results for
the fourth quarter and year ended December 31, 2002.
FelCor�s operating results for the fourth quarter and full year 2002, reflect weak lodging demand related to the continued softness in the nation�s economy and uncertain political environment. Fourth Quarter Results: Total revenues were $309.8 million or 2.3 percent over the fourth quarter in 2001. The increase was primarily related to a 3.1 percent improvement in the portfolio�s revenue per available room ("RevPAR"). RevPAR increased 5.2 percent in October, and 1.7 percent in November and December. For the quarter, occupancy increased 4.4 percent, to 57.8 percent, and average daily rate ("ADR") decreased 1.3 percent, to $95.61, compared to the same quarter of 2001. The operating margin for FelCor�s hotels during the fourth quarter 2002 was 27.8 percent, which reflected a 210 basis point decrease, compared to the same period in 2001. The deterioration in margins principally resulted from increased occupancy with decreases in ADR, and increased employee related costs. FelCor�s fourth quarter 2002 recurring Funds From Operations ("FFO") was $6.9 million, or $0.11 per share. FFO for the same period last year totaled $13.8 million, or $0.21 per share. FFO prior to convertible preferred (Series A) dividends was $0.15 per share and unit for the three months ended December 31, 2002. Fourth quarter 2002 recurring Earnings Before Interest, Taxes, Depreciation, Amortization, and other non-cash charges ("EBITDA") totaled $57.7 million, compared to $60.8 million for fourth quarter of 2001. For the quarter, FelCor reported a net loss of $185.1 million, or a loss of $3.17 per share, compared to a fourth quarter 2001 net loss of $35.4 million, or $0.67 per share. Included in the 2002 net loss is an impairment charge of $157.5 million related to certain of FelCor�s hotels and investments in unconsolidated entities. The impairment charge resulted primarily from FelCor�s decision to dispose of 33 non-strategic hotels over the next 36 months. Non-strategic hotels include smaller properties in secondary and tertiary locations and certain hotels in Texas and specifically Dallas, areas where FelCor plans to reduce its concentration. The fourth quarter of 2001 included $7 million of impairment charges relating to hotels that were held for sale. "Our plan is to dispose of our smaller hotels in low growth markets and reinvest most of the proceeds in newer, larger and higher quality assets, primarily in urban and resort locations that have higher growth rates and barriers to competition. Using this asset allocation strategy, we expect to improve the overall quality and growth potential of our hotel portfolio while preserving our strategic brand relationships," said Thomas J. Corcoran, Jr., FelCor�s President and CEO. The 33 sale candidates represent 14 percent of the rooms in FelCor�s hotel portfolio, but less than seven percent of FelCor�s consolidated hotel EBITDA. The average number of rooms in the hotels identified for sale is 196, while the average number of rooms for the remainder of FelCor�s portfolio is 294. Full Year 2002 Results: Total revenues for 2002 were $1.3 billion, or 8.7 percent below 2001 pro forma revenues, principally related to weak lodging demand and the decrease in RevPAR for FelCor�s hotel portfolio. Pro forma 2001 operating results assume the 88 leases acquired on July 1, 2001, had been acquired on January 1, 2001. FelCor�s total hotel portfolio RevPAR decreased 8.1 percent for 2002, resulting from a decline of 2.8 percent in occupancy and a 5.5 percent drop in ADR. The operating margin for FelCor�s hotels was 32.2 percent, a decrease of 220 basis points, compared to pro forma 2001. The reduction in operating margins is attributed principally to the decrease in ADR between the periods. For the full year 2002, recurring FFO totaled $102.4 million, or $1.65 per share, compared to 2001 FFO of $183.7 million, or $2.75 per share. FFO prior to convertible preferred (Series A) dividends was $1.71 per share and unit for the year ended December 31, 2002. EBITDA for 2002 totaled $306.6 million, compared to $369.6 million in 2001. For 2002, FelCor reported a net loss of $204.9 million, or a loss of $3.78 per share, compared to a 2001 net loss of $63.9 million, or $1.21 per share. During 2002, the Company recorded a $157.5 million impairment charge, as previously described. During 2001, FelCor recorded $78 million of non-recurring expenses, consisting principally of lease termination charges of $37 million and $25 million of expenses associated with its proposed acquisition of MeriStar Hospitality, which was terminated following the events of September 11, 2001. Capital Structure: At December 31, 2002, FelCor had $1.9 billion of debt outstanding, and had no outstanding borrowings under its $300 million line of credit. The weighted average life of FelCor�s debt is six years. During 2003, debt maturities total $35 million, including $14 million of recurring principal payments. At December 31, 2002, FelCor had $66.5 million in cash and cash equivalents. "FelCor continues to have access to diversified capital sources. These sources, together with the potential to refinance a portion of its 2003 maturities and to sell $50 to $75 million in non-strategic hotels that are unencumbered, will be used for additional working capital," said Richard J. O�Brien, FelCor�s Executive Vice President and Chief Financial Officer. 2003 Guidance: For the first quarter of 2003, FelCor currently anticipates its portfolio RevPAR will be down three-to-five percent below the comparable period of the prior year. FFO per share is expected to be within the range of $0.14 to $0.18 per share for the first quarter of 2003, and EBITDA is expected to be within the range of $59 million to $62 million for the same period. FelCor�s RevPAR for the month of January was down approximately four percent, compared to January of 2002. FelCor currently anticipates that full year 2003 hotel portfolio RevPAR will be approximately the same as 2002, plus or minus one percent. FFO per share for 2003 is currently expected to be within the range of $1.20 to $1.40 per share and EBITDA is expected to be within the range of $277 to $289 million. FelCor is currently anticipating 2003 maintenance capital expenditures to be between $60 and $70 million. "Today�s uncertain political environment and soft business climate, together with the risk of further margin deterioration should our portfolio�s ADR continue to decline, makes it difficult to forecast earnings with any degree of certainty," added O�Brien. For 2002, FelCor declared common dividends of $0.60 per share. "We expect the Board of Directors to defer further common dividends until there is a two to four percent positive RevPAR environment," added Mr. Corcoran. |
December 31, |
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Revenues: | ||||
Hotel operating revenue: | ||||
Room | $236,198 | $229,339 | ||
Food and beverage | 57,372 | 57,154 | ||
Other operating departments | 16,076 | 15,882 | ||
Retail space rental and other revenue | 195 | 535 | ||
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309,841 | 302,910 | ||
Expenses: | ||||
Hotel operating expenses: | ||||
Room | 63,916 | 58,621 | ||
Food and beverage | 44,287 | 43,133 | ||
Other operating departments | 7,929 | 7,519 | ||
Other property related costs | 91,670 | 86,248 | ||
Management and franchise fees | 16,036 | 16,823 | ||
Taxes, insurance and lease expense | 30,696 | 32,886 | ||
Corporate expenses | 3,463 | 3,369 | ||
Depreciation | 38,225 | 38,906 | ||
Abandoned project costs | - | 837 | ||
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296,222 | 288,342 | ||
Operating income | 13,619 | 14,568 | ||
Interest expense, net: | ||||
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40,749 | 40,005 | ||
Merger related financing | - | 274 | ||
Impairment loss | 157,505 | 7,000 | ||
Charge-off of capitalized costs on reduced line commitments | 3,222 | - | ||
Swap termination expense | - | 2,225 | ||
Loss before equity
in income from unconsolidated entities and
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(187,857) | (34,936) | ||
Equity in income from unconsolidated entities | (523) | 296 | ||
Minority interests | 10,024 | 5,373 | ||
Net loss | (178,356) | (29,267) | ||
Preferred dividends | (6,727) | (6,150) | ||
Net loss applicable to common shareholders | $ (185,083) | $ (35,417) | ||
Diluted per common share data: | ||||
Net loss applicable to common shareholders | $ (3.17) | $ (0.67) | ||
Weighted average common shares outstanding | 58,450 | 52,639 |
Results of Operations � Full Year
(in thousands, except per share data)
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2001 (a) |
2001 |
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Revenues: | |||||
Hotel operating revenue: | |||||
Room | $1,036,547 | $1,136,615 | $866,101 | ||
Food and beverage | 212,076 | 228,593 | 157,812 | ||
Other operating departments | 67,690 | 74,776 | 58,931 | ||
Percentage lease revenue | - | - | 115,137 | ||
Retail space rental and other revenue | 1,646 | 2,990 | 2,990 | ||
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1,317,959 | 1,442,974 | 1,200,971 | ||
Expenses: | |||||
Hotel operating expenses: | |||||
Room | 264,480 | 276,670 | 212,857 | ||
Food and beverage | 166,147 | 179,267 | 122,999 | ||
Other operating departments | 31,666 | 33,296 | 26,789 | ||
Other property related costs | 363,931 | 380,299 | 290,247 | ||
Management and franchise fees | 66,897 | 77,678 | 57,739 | ||
Taxes, insurance and lease expense | 132,138 | 141,712 | 140,784 | ||
Corporate expenses | 13,756 | 13,696 | 12,678 | ||
Depreciation | 152,817 | 157,708 | 157,692 | ||
Abandoned project costs | 1,663 | 837 | 837 | ||
Lease termination costs | - | - | 36,604 | ||
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- | 19,919 | 19,919 | ||
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1,193,495 | 1,281,082 | 1,079,145 | ||
Operating income | 124,464 | 161,892 | 121,826 | ||
Interest expense, net: | |||||
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164,294 | 158,343 | 158,343 | ||
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- | 5,486 | 5,486 | ||
Impairment loss | 157,505 | 7,000 | 7,000 | ||
Swap termination expense | - | 7,049 | 7,049 | ||
Charge-off of capitalized costs on reduced line commitments on early extinguishment of debt | 3,222 | 1,270 | 1,270 | ||
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(200,557) | (17,256) | (57,322) | ||
Equity in income from unconsolidated entities | 3,293 | 7,346 | 7,346 | ||
Minority interests | 12,622 | 1,457 | 7,283 | ||
Gain on sale of assets | 6,061 | 3,417 | 3,417 | ||
Net loss | (178,581) | (5,036) | (39,276) | ||
Preferred dividends | (26,292) | (24,600) | (24,600) | ||
Net loss applicable to common shareholders | $ (204,873) | $ (29,636) | $ (63,876) | ||
Diluted per common share data: | |||||
Net loss applicable to common shareholders | $ (3.78) | $ (0.56) | $ (1.21) | ||
Weighted average common shares outstanding | 54,173 | 52,622 | 52,622 |
December 31, |
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Funds From Operations (FFO) (a) (b) | ||||||
Net loss | $(178,356) | $ (29,267) | ||||
Depreciation | 38,225 | 38,906 | ||||
Depreciation from unconsolidated entities | 3,377 | 3,104 | ||||
Preferred dividends: | ||||||
Series A preferred dividends | (2,915) | - | ||||
Series B preferred dividends | (3,812) | (3,234) | ||||
Minority interest in FelCor Lodging LP | (10,358) | (6,026) | ||||
Significant non-recurring items: | ||||||
Impairment loss | 157,505 | 7,000 | ||||
Abandoned project costs | - | 837 | ||||
Charge-off of capitalized costs on reduced line commitments | 3,222 | - | ||||
Merger related financing costs | - | 274 | ||||
Swap termination costs | - | 2,225 | ||||
FFO | $ 6,888 | $ 13,819 | ||||
Diluted FFO per common share and unit | $ 0.11 | $ 0.21 | ||||
Weighted average common shares and units outstanding | 62,056 | 66,641 | ||||
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (a) | ||||||
FFO | $ 6,888 | $ 13,819 | ||||
Interest expense | 41,130 | 40,635 | ||||
Interest expense from unconsolidated entities | 2,380 | 2,413 | ||||
Amortization expense | 526 | 654 | ||||
Preferred dividends: | ||||||
Series A preferred dividends | 2,915 | - | ||||
Series B preferred dividends | 3,812 | 3,234 | ||||
EBITDA | $ 57,651 | $ 60,755 |
Reconciliation of FFO and EBITDA
(in thousands, except per share and unit data)
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2001(a) |
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Funds From Operations (FFO) (b) (c) | ||||||||||||||||||
Net loss | $ (178,581) | $ (5,036) | $ (39,276) | |||||||||||||||
Gains or losses from sales of property: | ||||||||||||||||||
Gain on sale of hotel assets | (5,861) | - | - | |||||||||||||||
Depreciation | 152,817 | 157,692 | 157,692 | |||||||||||||||
Depreciation from unconsolidated entities | 11,616 | 10,881 | 10,881 | |||||||||||||||
Preferred dividends: | ||||||||||||||||||
Series A preferred dividends | (11,662) | - | - | |||||||||||||||
Series B preferred dividends | (14,630) | (12,937) | (12,937) | |||||||||||||||
Minority interest in FelCor Lodging LP | (13,717) | (5,041) | (10,868) | |||||||||||||||
Significant non-recurring items: | ||||||||||||||||||
Impairment loss | 157,505 | 7,000 | 7,000 | |||||||||||||||
Abandoned project costs | 1,663 | 837 | 837 | |||||||||||||||
Charge-off of capitalized costs on reduced line commitments | 3,222 | 1,270 | 1,270 | |||||||||||||||
Merger termination costs | - | 19,919 | 19,919 | |||||||||||||||
Merger related financing costs | - | 5,486 | 5,486 | |||||||||||||||
Lease termination costs | - | - | 36,604 | |||||||||||||||
Swap termination costs | - | 7,049 | 7,049 | |||||||||||||||
FFO | $ 102,372 | $187,120 | $183,657 | |||||||||||||||
Diluted FFO per common share and unit | $ 1.65 | $ 2.81 | $ 2.75 | |||||||||||||||
Weighted average common shares and units outstanding | 62,061 | 66,675 | 66,675 | |||||||||||||||
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) | ||||||||||||||||||
FFO | $102,372 | $187,120 | $183,657 | |||||||||||||||
Interest expense | 166,427 | 161,226 | 161,226 | |||||||||||||||
Interest expense from unconsolidated entities | 9,375 | 9,678 | 9,678 | |||||||||||||||
Amortization expense | 2,087 | 2,093 | 2,093 | |||||||||||||||
Preferred dividends: | ||||||||||||||||||
Series A preferred dividends | 11,662 | - | - | |||||||||||||||
Series B preferred dividends | 14,630 | 12,937 | 12,937 | |||||||||||||||
EBITDA | $306,553 | $373,054 | $369,591 |
a) Information for the pro forma year ended December 31, 2001,
is presented assuming the 88 hotel leases acquired
on July 1, 2001, were acquired on January 1, 2001, and $36.6 million
of non-recurring lease termination costs have been eliminated.
When these hotel leases were acquired, the Company began receiving
and recording hotel revenues and expenses,
rather than percentage lease revenues.
b) FFO and EBITDA are adjusted to exclude significant non-recurring
items.
c) FFO prior to convertible preferred (Series A) dividends was
$1.71 per share and unit for the year
ended December 31, 2002.
FelCor has published its Fourth Quarter 2002 Supplemental Information,
which provides additional corporate data, financial highlights and portfolio
statistical data for the fourth quarter and year ended December 31, 2002.
Investors are encouraged to access the Supplemental Information on the
Company's website at www.felcor.com, on its Investor Relations page
in the "Financial Reports" section. The Supplemental Information also will
be furnished upon request. Requests may be made by e-mail to [email protected]
or by writing to the Director of Investor Relations, FelCor Lodging Trust
Incorporated, 545 E. John Carpenter Freeway, Suite 1300, Irving, Texas,
75062.
FelCor is the nation�s second largest lodging REIT and the largest owner of full service, all-suite hotels. FelCor�s consolidated portfolio is comprised of 169 hotels, located in 35 states and Canada. FelCor owns 77 upscale, all-suite hotels, and is the largest owner of Embassy Suites® and Doubletree Guest Suites® hotels. FelCor�s portfolio also includes hotels in the upscale and full service segments. FelCor has a current market capitalization of approximately $2.8 billion. Additional information can be found on the Company�s website at www.felcor.com. With the exception of historical information, the matters discussed in this news release include "forward looking statements" within the meaning of the federal securities laws. |
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Thomas J. Corcoran, Jr., President and CEO (972) 444-4901 [email protected] |
Also See | FELCOR Finishes 2000 with FFO UP 12.6% to $4.29 / Feb 2001 |
FelCor Reports Fourth-quarter Net Loss of $35.4 million, Reverses Profit of $35.1 million in the Year-earlier Period / Feb 2002 |