|
4.4 Percent Increase in RevPAR for First
Quarter
IRVING, Texas, April 28, 2004 - FelCor Lodging Trust Incorporated (NYSE:
FCH), the nation's second largest hotel real estate investment trust (REIT),
today reported operating results for the first quarter ended March 31,
2004.
First Quarter Results:
FelCor's first quarter revenue from continuing operations was $311 million,
which reflected an increase of $24 million, or 8.5 percent, compared to
the first quarter in 2003. The increase in revenue was related to
a 4.4 percent increase in the hotel portfolio's revenue per available room
("RevPAR") and the inclusion of $7 million of revenue from the consolidation
of FelCor's joint venture with Interstate Hotels & Resorts, which was
accounted for under the equity method until June 2003. For the quarter,
occupancy increased 5.2 percent, to 64.4 percent, and average daily rate
("ADR") decreased 0.7 percent, to $97.16, compared to the same quarter
of 2003. The first quarter RevPAR increases by month, compared to
the same periods in 2003, were 2.2 percent for January, 0.9 percent for
February and 9.0 percent for March.
The operating margin from continuing operations of FelCor's hotels during
the first quarter 2004 was 28.6 percent, which reflected a 100 basis point
decrease, compared to the same period in 2003. The deterioration
in operating margin was principally the result of increased occupancy during
the quarter and the decrease in ADR.
FelCor's net loss applicable to common stockholders for the first quarter
of 2004 was $27 million, or a net loss of $0.47 per share. This is
compared to the prior year first quarter net loss of $28 million, or $0.48
per share. The first quarter 2004 loss included a non-recurring $4.9
million expense, representing $0.08 per share, associated with an anticipated
settlement that is expected to include an early termination of the lease
on one hotel and a release of claims relating to that hotel. The
early termination of this lease is expected to result in an improvement
of $0.01 per share in second half 2004 earnings. Also included in
the prior year loss was a gain of $1 million, or $0.02 per share, from
the early extinguishment of debt.
FelCor's first quarter 2004 Funds From Operations ("FFO") was $9 million,
or $0.14 per share. FFO for the same period last year was $10 million,
or $0.15 per share. First quarter 2004 Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") totaled $59 million, compared
to $60 million for first quarter of 2003. Included in prior year
FFO and EBITDA was a gain of $1 million, or $0.02 per share, from early
extinguishment of debt. Accompanying this press release is a discussion
of the non-GAAP financial measures, FFO and EBITDA, and a reconciliation
of these measures to the Company's net loss.
"FelCor has had four consecutive months of RevPAR improvement.
Business is finally getting better, with increases in corporate transient
business and strong leisure demand. We believe these trends indicate
that 2004 will be a turnaround year for the lodging industry," said Thomas
J. Corcoran, Jr., FelCor's President and CEO.
Capital Structure:
At March 31, 2004, FelCor had $232 million in cash and cash equivalents
and $2.03 billion of debt outstanding. As of today, FelCor has approximately
$325 million of cash and cash equivalents. FelCor has no outstanding
borrowings under its secured debt facility, under which it currently has
$172 million of available borrowing capacity. The weighted average
life of FelCor's debt is five years. The Company's next significant
debt maturity is its $175 million of senior notes that will mature in October
2004. FelCor expects to meet this obligation from excess cash on
hand, future cash flow from operations, its additional secured debt capacity,
and from the proceeds of non-strategic hotel sales.
In March 2004, FelCor elected to terminate its unsecured line of credit
arrangement, which will result in estimated 2004 cost savings of approximately
$0.4 million.
On April 5, 2004, FelCor closed on the sale of 4.6 million shares of
its $1.95 Series A Cumulative Convertible Preferred Stock. The shares
were sold at a price of $23.79 per share (at a yield of 8.375%), which
included dividends of $0.51 per share (or $2.3 million) accrued through
April 5, 2004, resulting in gross proceeds of approximately $107 million.
During April 2004, FelCor purchased in the open market an aggregate
of $23.5 million in principal amount of its 10% Senior Notes due 2008.
"Our balance sheet continues to improve and will provide FelCor with
increased financial flexibility," said Andrew J. Welch, FelCor's Senior
Vice President and Treasurer. "Through debt reduction and earnings
improvement, we are on target to reduce the Company's financial leverage
this year. We are also pleased that we are on target in repositioning
our portfolio."
Other Highlights:
FelCor declared first quarter dividends on its $1.95 Series A Cumulative
Convertible Preferred Stock and its 9% Series B Cumulative Redeemable Preferred
Stock.
In March 2004, FelCor closed on the sale of four previously identified
non-strategic hotels, realizing aggregate proceeds of $30 million.
The hotels sold include: a Holiday Inn(R) hotel in Plano, Texas; a Crowne
Plaza(R) hotel in Jackson, Miss.; a Crowne Plaza hotel in Houston, Texas;
and a Hampton Inn(R) hotel in Omaha, Neb.
In March 2004, FelCor acquired the 132-room Holiday Inn - Santa Monica
Beach at the Pier for $27 million. This is FelCor's first acquisition
since the summer of 2002. The hotel is ideally located on Ocean Drive,
across the street from the Santa Monica Pier and Santa Monica's beaches.
In 2004, FelCor plans to invest approximately $2.5 million in the property
with enhancements to the hotel's guest rooms, exterior and public areas.
The hotel will continue to be branded as a Holiday Inn and will be managed
by InterContinental Hotels Group.
In April 2004, the Company closed on the sale of three previously identified
non-strategic hotels, receiving $13 million in aggregate proceeds.
The hotels include the 316-room Holiday Inn in St. Louis, Mo., and two
hotels in Odessa, Texas -- the 245-room Holiday Inn and the 186-room Holiday
Inn Express(R).
FelCor's RevPAR for the first 25 days of April 2004, increased 7.3 percent
compared to the same period in 2003.
2004 Guidance:
Current estimates of operating results for the second
quarter and full year 2004 are as follows:
Second Quarter
Full Year 2004
FFO per share
$0.31 to $0.34
$0.89 to $0.98
EBITDA
$71 to $73 million $257 to $263 million
Net loss per share $(0.20)
to $(0.17) $(1.27) to $(1.17)
RevPAR
5% to 6%
4% to 5%
Results of Operations -
Three Months Ended (in thousands, except per share data)
Three Months
Ended March 31,
2004 2003
Revenues:
Hotel operating
revenue:
Room
$247,395 $227,659
Food
and beverage
47,220 43,628
Other
operating departments
16,470 15,284
Retail space rental
and other revenue
245 382
Total revenues
311,330 286,953
Expenses:
Hotel departmental
expenses:
Room
66,594 59,030
Food
and beverage
38,205 35,144
Other
operating departments
8,481 7,055
Other property related
costs
92,907 85,295
Management and franchise
fees
15,857 15,306
Taxes, insurance
and lease expense
32,118 31,107
Lease termination
expense
4,900 ---
Corporate expenses
3,386 3,423
Depreciation
30,714 34,064
Total operating expenses
293,162 270,424
Operating income
18,168 16,529
Interest expense,
net
(41,120) (39,805)
Charge-off of deferred
financing costs (230)
---
Loss before equity in income from
unconsolidated entities, minority
interests and gain on sale of
assets (23,182)
(23,276)
Equity in income
(loss) from
unconsolidated
entities
982 (148)
Minority interests
1,344 1,191
Loss from continuing operations
(20,856) (22,233)
Discontinued operations
157 1,142
Net loss
(20,699) (21,091)
Preferred dividends
(6,726) (6,726)
Net loss applicable to common stockholders
$ (27,425) $ (27,817)
Basic and diluted per common share
data:
Net loss from continuing
operations
$(0.47) $(0.50)
Net loss applicable
to common stockholders $(0.47)
$(0.48)
Weighted average
common shares outstanding 58,937
58,532
Discontinued Operations
(in thousands)
Condensed financial information
for the hotels included in discontinued operations is as follows:
Three Months Ended
March 31,
2004 2003
Hotel operating revenue
$4,285 $20,393
Hotel operating expenses
4,392 19,692
Operating income
(loss)
(107) 701
Direct interest costs, net
--- (448)
Gain on the early extinguishment of
debt
--- 953
Gain on disposition
272 ---
Minority interest
(8) (64)
Income from discontinued
operations
$157 $1,142
Selected Balance Sheet Data
(in thousands)
March 31, December 31,
2004 2003
Investment in hotels
$4,005,392 $3,989,964
Accumulated depreciation
(908,655) (886,168)
Investments in hotels, net of accumulated
depreciation
$3,096,737 $3,103,796
Total cash and cash equivalents
$231,586 $246,036
Total assets
3,561,857 3,590,893
Total debt
2,033,362 2,037,355
Total stockholders' equity
$1,268,923 $1,296,272
Reconciliation of FFO and EBITDA (in thousands, except per share and unit
data)
Three Months Ended March 31,
2004
2003
Per Share
Per Share
Dollars Shares Amount Dollars
Shares Amount
Net loss
$(20,699)
$(21,091)
Preferred dividends
(6,726)
(6,726)
Net loss applicable to common stockholders (27,425) 58,937
$(0.47) (27,817) 58,532 $(0.48)
Depreciation from
continuing
operations
30,714
0.52 34,064
0.58
Depreciation from
unconsolidated
entities and
discontinued
operations
1,954
0.03 4,902
0.08
Gain on sale of
assets
(272) (0.01)
---
---
Lease termination
costs
4,900
0.08 ---
---
Minority interest
in FelCor LP
(1,407) 3,033 (0.01) (1,557)
3,289 (0.03)
Conversion of options
and unvested
restricted stock
--- 201 ---
--- 309 ---
FFO
$8,464 62,171 $0.14 $9,592
62,130 $0.15
Consistent with SEC guidance,
FFO has not been adjusted for the following amounts included in net loss
(in thousands):
Three Months Ended
March 31,
2004 2003
Charge off of deferred debt costs
$230 $---
Gain on early extinguishment of debt
--- (953)
$230 $(953)
Per share amounts
$0.00 $(0.02)
Reconciliation of Net Loss to EBITDA
(in thousands)
Three Months Ended
March 31,
2004 2003
Net loss
$(20,699) $(21,091)
Depreciation from
continuing operations 30,714
34,064
Depreciation from
unconsolidated entities
and discontinued
operations
1,954 4,902
Gain on sale of
assets
(272) ---
Minority interest
in FelCor Lodging LP (1,407)
(1,557)
Lease termination
costs
4,900
---
Interest expense
41,844 40,628
Interest expense
from unconsolidated
entities and
discontinued operations 1,320
2,339
Amortization expense
503 516
EBITDA
$58,857 $59,801
Consistent with SEC guidance,
EBITDA has not been adjusted for the following amounts included in net
loss (in thousands):
Three Months Ended
March 31,
2004 2003
Charge off of deferred
debt costs
$230 $---
Gain on early extinguishment
of debt ---
(953)
$230 $(953)
Historical cost accounting for real
estate assets implicitly assumes that the value of real estate assets diminish
predictably over time. Since real estate values instead have historically
risen or fallen with market conditions, most industry investors consider
supplemental measurements of performance to be helpful in evaluating a
real estate company's operations. We consider Funds From Operations,
or FFO, and Earnings Before Interest, Taxes, Depreciation, and Amortization,
or EBITDA, to be supplemental measures of a REIT's performance and should
be considered along with, but not as an alternative to, net income as a
measure of our operating performance.
The White Paper on Funds From Operations
approved by the Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT") defines FFO as net income or loss (computed
in accordance with generally accepted accounting principles), excluding
gains or losses from sales of property, plus depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures are calculated
to reflect funds from operations on the same basis. We believe that
FFO and EBITDA are helpful to investors as a supplemental measure of the
performance of an equity REIT. We compute FFO in accordance with
standards established by NAREIT. This may not be comparable to FFO
reported by other REITs that do not define the term in accordance with
the current NAREIT definition, or that interpret the current NAREIT definition
differently than we do.
FFO and EBITDA should not be considered
as alternatives to net income, operating profit, cash flow from operations,
or any other operating performance measure prescribed by GAAP. Neither
should FFO, FFO per share and EBITDA be considered as measures of our liquidity
or indicative of funds available for our cash needs, including our ability
to make cash distributions. FFO per share does not measure, and should
not be used as a measure of amounts that accrue directly to the benefit
of stockholders.
Reconciliation
of Estimated Net Loss to Estimated FFO and EBITDA
(in millions, except per share and unit data)
Second Quarter 2004 Guidance
Low Guidance
High Guidance
Per Share
Per Share
Dollars Amount(A) Dollars
Amount(A)
Net loss
$(3)
$(1)
Preferred Dividends
(9)
(9)
Net loss applicable to
common stockholders
(12) $(0.20)
(10) $(0.17)
Depreciation
32
32
Minority interest
in
FelCor LP
(1)
(1)
FFO
$19 $0.31
$21 $0.34
Net loss
$(3)
$(1)
Depreciation
32
32
Minority interest
in
FelCor LP
(1)
(1)
Interest expense
42
42
Amortization expense
1
1
EBITDA
$71
$73
Full Year 2004 Guidance
Low Guidance High Guidance
Per Share
Per Share
Dollars Amount(A) Dollars Amount(A)
Net loss
$(48)
$(42)
Preferred Dividends
(27)
(27)
Net loss applicable to
common stockholders
(75) $(1.27)
(69) $(1.17)
Lease termination
costs 5
5
Depreciation
129
129
Minority interest
in
FelCor LP
(4)
(4)
FFO
$55 $0.89
$61 $0.98
Net loss
$(48)
$(42)
Lease termination
costs 5
5
Depreciation
129
129
Minority interest
in
FelCor LP
(4)
(4)
Interest expense
173
173
Amortization expense
2
2
EBITDA
$257
$263
(A) Weighted average shares
are 58.9 million. Adding minority interest
and unvested restricted stock of 3.4 million shares to weighted average
shares, provides the weighted average shares and units of 62.3 million
used to compute FFO per share.
Hotel Operating Profit
(dollars in thousands)
Three Months
Ended March 31,
2004 2003
Total revenue
$311,330 $286,953
Retail space rental and other revenue
(245) (382)
Hotel revenue
311,085 286,571
Hotel operating expenses
(222,044) (201,830)
Hotel operating profit
$89,041 $84,741
Operating margin
28.6% 29.6%
Corporate expenses
3,386 3,423
Corporate expenses as a percentage
of total revenues
1.1% 1.2%
Hotel Operating Expense Composition
(dollars in thousands)
Three Months Ended March 31,
2004
2003
% of Hotel
% of Hotel
Hotel departmental expenses:
Revenue
Revenue
Room
$66,594 21.4% $59,030
20.6%
Food and beverage
38,205 12.3
35,144 12.2
Other operating
departments 8,481
2.7 7,055
2.5
Total hotel
departmental
expenses
113,280 36.4 101,229
35.3
Other property related costs:
Administrative and
general 30,430
9.8 29,109 10.2
Marketing and advertising
27,607 8.9
25,122 8.8
Repairs and maintenance
18,277 5.9
16,443 5.7
Energy
16,593 5.3
14,621 5.1
Total other
property
related
costs
92,907 29.9
85,295 29.8
Management and franchise fees
15,857 5.1
15,306 5.3
Hotel operating expenses
$222,044 71.4% $201,830
70.4%
Three Months
Ended March 31,
2004 2003
Supplemental information:
Compensation and benefits expense
(included in hotel
operating expenses)
$105,336 $96,777
Reconciliation of total operating expenses
to hotel operating expenses:
Total operating expenses
$293,162 $270,424
Taxes, insurance
and lease expense
(32,118) (31,107)
Lease termination
expense
(4,900) ---
Corporate expenses
(3,386) (3,423)
Depreciation
(30,714) (34,064)
Hotel operating expenses
$222,044 $201,830
Hotel operating profit and operating
margin are commonly used measures of performance in our industry and give
investors a more complete understanding of the operating results over which
FelCor's individual hotels and operating managers have direct control.
The Company believes that hotel operating profit and operating margin are
useful to investors, providing greater transparency related to a significant
measure used by management in its financial and operational decision-making. |
FelCor has published its First Quarter 2004 Supplemental Information,
which provides additional corporate data, financial highlights and portfolio
statistical data for the quarter ended March 31, 2004. Investors
are encouraged to access the Supplemental Information on the Company's
Web site at http://www.felcor.com , on its Investor Relations page in the
"Financial Reports" section. The Supplemental Information also will
be furnished upon request. Requests may be made by e-mail to [email protected]
or by writing to the Vice President of Investor Relations, FelCor Lodging
Trust Incorporated, 545 E. John Carpenter Freeway, Suite 1300, Irving,
Texas, 75062.
FelCor is the nation's second largest lodging REIT and the nation's
largest owner of full service, all-suite hotels. FelCor's portfolio
is comprised of 155 consolidated hotels, located in 33 states and Canada.
FelCor owns 71 upscale, all-suite hotels, and is the largest owner of Embassy
Suites Hotels(R) and Doubletree Guest Suites(R) hotels. FelCor's
portfolio also includes 73 hotels in the upscale and full service segments.
FelCor has a current market capitalization of approximately $3.1 billion.
With the exception of historical information, the matters discussed
in this release include "forward looking statements" within the meaning
of the federal securities laws.
|
