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%
|IRVING, Texas, Feb. 4, 2004 - 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, 2003.
Fourth Quarter Results:
FelCor's fourth quarter revenues from continuing operations were $292 million in both 2003 and 2002. The Company's fourth quarter hotel portfolio revenue per available room (RevPAR) from continuing operations declined 1.7 percent, compared to fourth quarter of 2002. For the quarter, occupancy increased 0.6 percent, to 58.6 percent, and hotel average daily rate (ADR) decreased 2.3 percent, to $94.02, compared to the same quarter in 2002. For the two most recent consecutive quarters, FelCor's hotel portfolio had occupancy improvement, compared to the same periods in the prior year.
The decline in RevPAR and its effects on revenues during 2003 was offset by the inclusion in revenues of $5 million from consolidating the Interstate Hotels & Resorts joint venture and the operating results of its eight hotels that were accounted for by the equity method until June 2003.
The operating margin from continuing operations of FelCor's hotels during the fourth quarter 2003 was 25.1 percent, which represents a 310 basis point decrease compared to the same period of 2002. The continued deterioration in operating margins principally resulted from the $2.22, or 2.3 percent, decline in ADR, partially offset by slightly higher occupancies. In addition, health and workers compensation insurance put additional pressure on FelCor's operating margins, compared to the same period in 2002.
FelCor's net loss applicable to common stockholders for the fourth quarter of 2003 was $150 million, or a net loss of $2.55 per share. This is compared to the prior year fourth quarter net loss of $185 million, or $3.17 per share. The fourth quarter 2003 loss included an impairment loss of $123 million, or $1.99 per share. The fourth quarter loss in 2002 included an impairment loss of $158 million and a $3 million charge-off of deferred debt costs, which had a combined $161 million, or $2.60 per share impact.
In accordance with the Securities and Exchange Commission's (SEC) guidance on non-GAAP financial measures, Funds From Operations (FFO) and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) have not been adjusted to add back the 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.
FFO for the fourth quarter of 2003 was a loss of $128 million, compared to the fourth quarter of 2002 loss of $154 million. FFO per share for the fourth quarter of 2003 was a loss of $2.06 (including a $1.99 per share impairment loss), compared to a FFO per share loss of $2.49 during the same period of 2002 (including $2.60 per share resulting from an impairment loss and the charge-off of deferred debt costs).
EBITDA for fourth quarter 2003 reflected a loss of $76 million (including a $123 million impairment loss), compared to a 2002 fourth quarter EBITDA loss of $103 million (including $161 million related to an impairment loss and the charge-off of deferred debt costs).
The fourth quarter 2003 operating results (before impairment losses) were consistent with the low end of the Company's previously provided guidance of an FFO loss of $0.07 per share and EBITDA of $47 million.
Consistent with FelCor's strategic objective to improve its portfolio quality, the Company identified seven additional hotels for sale during the fourth quarter of 2003. The fourth quarter 2003 impairment charge principally resulted from FelCor's decision to sell these non-strategic hotels and reflects the difference between book value and the estimated current fair market value of these hotels.
Of the Company's 161 consolidated hotels, 35 hotels (including two in discontinued operations) have been identified as non-strategic. FelCor expects to sell these non-strategic hotels over the next 24 months with sales proceeds expected to be approximately $250 million. During 2003, the Company disposed of 16 non-strategic hotels and has designated two hotels as held for sale. The operating results of these 18 hotels are included in discontinued operations for 2003 and 2002. Disposition proceeds from the 16 non-strategic hotels and two parking garages sold during 2003 totaled approximately $125 million.
"We continue to focus on our strategy to sell non-strategic hotels in our portfolio and on future acquisitions in low supply-growth markets," said Thomas J. Corcoran, Jr., FelCor's President and CEO. "We believe the worst is over following three tough years for our industry. We are optimistic that we are in the early stages of a recovery and that the positive signs will continue and pricing power will return. FelCor is well positioned for the recovery."
Full Year 2003 Results:
FelCor's revenues from continuing operations for the full year 2003 were $1.2 billion, which reflected a decline of 3.4 percent, compared to 2002. The decline in revenue principally resulted from a 4.4 percent decline in hotel portfolio RevPAR, compared to full year 2002. Occupancy decreased 0.6 percent, to 62.4 percent, and ADR decreased 3.8 percent, to $94.92, compared to 2002.
The revenue decrease related to the RevPAR decline during 2003 was partially offset by $13 million of increased revenues from consolidating the Interstate Hotels & Resorts joint venture and the operating results of its eight hotels in June 2003, that were accounted for by the equity method, and the added revenues of two hotels acquired in the third quarter of 2002.
The operating margin from continuing operations of FelCor's hotels during 2003 was 28.9 percent, this represents a 380 basis point decrease compared to 2002. The 2003 decrease in operating margin principally resulted from the $3.78, or 3.8 percent decline in ADR during the year. In addition, health and workers compensation insurance, and energy costs, put additional pressure on FelCor's operating margins, compared to 2002.
FelCor's net loss applicable to common stockholders for 2003 was $337 million, or a net loss of $5.75 per share. This is compared to the prior year net loss of $205 million, or $3.78 per share. The loss in 2003 included net charges of $245 million, or $3.95 per share, resulting from an impairment loss of $244 million, a charge-off of deferred debt costs of $3 million and a gain on early extinguishment of debt of $2 million. The loss in 2002 included net charges of $162 million, or $2.63 per share, resulting from an impairment loss of $158 million, a $3 million charge-off of deferred debt costs, and $2 million of abandoned project costs.
In accordance with the SEC's guidance on non-GAAP financial measures, FFO and EBITDA have not been adjusted to add back the impairment charges, the charge-off of deferred debt costs, abandoned project costs or the gain on early extinguishment of debt.
FFO for 2003 was a loss of $207 million, compared to the 2002 loss of $60 million. FFO per share for 2003 was a loss of $3.35 (including $3.95 per share resulting from impairment losses, charge-off of deferred debt costs and gain on early extinguishment of debt), compared to an FFO per share loss of $0.97 during the same period of 2002 (including $2.63 per share resulting from impairment losses, charge-off of deferred debt costs and abandoned project costs).
EBITDA for 2003 reflected a loss of $3 million (including net charges of $245 million resulting from impairment losses, charge-off of deferred debt costs and gain on early extinguishment of debt), compared to a 2002 EBITDA of $144 million (including net charges of $162 million resulting from impairment losses, charge-off of deferred debt costs and abandoned project costs).
The impairment losses in 2003 and 2002 principally resulted from the Company's decision to sell non-strategic hotels and reflect the difference between book value and the current estimated fair market value of these hotels. After the completion of a comprehensive review of FelCor's investment strategy and its portfolio, the Company refined its investment strategy and decided to sell smaller hotels in secondary and tertiary markets, emphasize the acquisition of hotels in the upper upscale segment in low supply growth markets, and better diversify its portfolio by geographic market and brand.
The 33 non-strategic hotels, included in continuing operations, represent 20 percent of the rooms in FelCor's hotel portfolio, but less than nine percent of FelCor's consolidated hotel operating profit. The 2003 operating margin for these 33 non-strategic hotels was 17.9 percent, compared to 30.6 percent for the core portfolio.
At December 31, 2003, FelCor had $246 million in cash and cash equivalents and $2.04 billion of debt outstanding. FelCor had no outstanding borrowings under its secured debt facility, under which it currently has $174 million of available borrowing capacity, or its $50 million unsecured line of credit. The weighted average life of FelCor's debt is five years. During 2004, debt maturities total $175 million, and there will be $17 million of additional recurring principal payments.
"Our liquidity position is strong, with excess cash and available capacity under our secured debt facility, which more than covers FelCor's October 2004 senior note maturity," said Richard J. O'Brien, FelCor's Executive Vice President and Chief Financial Officer. "In addition, the Company has four hotels under sale contracts, with hard money deposits, and we anticipate $30 million in sales proceeds over the next 90 days."
For the first quarter of 2004, FelCor currently anticipates its portfolio RevPAR will be 1.5 to 2.5 percent above the comparable period of the prior year. The Company expects to realize proceeds from the sale of approximately $30 million related to four non-strategic hotels with hard money deposits. FelCor's RevPAR for the month of January increased approximately 1.8 percent, compared to January of 2003. FelCor currently anticipates that for the full year 2004:
Hotel operating profit and operating margin are commonly used measures of performance in the 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 is useful to investors by providing greater transparency with respect to a significant measure used by management in its financial and operational decision-making.
FelCor has published its Supplemental Information for the Three Months and Year Ended December 31, 2003, which provides additional corporate data, financial highlights and portfolio statistical data. 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@example.com 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 161 hotels, located in 33 states and Canada. FelCor owns 71 upscale, all-suite hotels, and is the owner of the largest number of Embassy Suites Hotels® and Doubletree Guest Suites® hotels in the U.S. FelCor's portfolio also includes 77 hotels in the upscale and full service segments. FelCor has a current market capitalization of approximately $3.1 billion. Additional information can be found on the Company's Web site 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.
FelCor Lodging Trust Incorporated
|Also See:||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|