EXHIBIT 99.1
(FELCOR LODGING TRUST LETTERHEAD)
FOR IMMEDIATE RELEASE:
FELCOR'S SECOND QUARTER RESULTS,
IN-LINE WITH PREVIOUS GUIDANCE
IRVING, TEXAS...JULY 30, 2003 - FelCor Lodging Trust Incorporated
(NYSE: FCH), the nation's second largest hotel real estate investment trust
(REIT), today reported operating results for the second quarter and six months
ended June 30, 2003.
SECOND QUARTER RESULTS:
The second quarter results reflect a difficult operating environment
due to the effects of the war in Iraq and the weak economic climate, which
continue to impact the travel industry.
FelCor's second quarter revenues were $327 million, which reflected a
decline of $23 million, or 6.4 percent, compared to the second quarter in 2002.
The decrease was primarily related to a 7.6 percent decline in its hotel
portfolio revenue per available room ("RevPAR"), partially offset by the current
year revenues of two hotels that were acquired in the third quarter of 2002. For
the quarter, occupancy decreased 3.0 percent, to 64.0 percent, and average daily
rate ("ADR") decreased 4.8 percent, to $94.34, compared to the same quarter of
2002.
The operating margin for FelCor's hotels during the second quarter 2003
was 31.6 percent, which represents a 390 basis point decrease, compared to the
same period in 2002. The deterioration in margins principally resulted from the
4.8 percent decline in ADR, coupled with increases in employee wages and
benefits, marketing, and energy costs for the quarter, compared to the second
quarter of 2002. FelCor's second quarter 2003 Funds From Operations ("FFO") was
$20 million, or $0.32 per share. Included in the computation of FFO was
approximately $0.04 per share in charge-offs of capitalized loan costs, net of a
gain on early extinguishment of debt. FFO for the same period last year was $43
million, or $0.69 per share. Second quarter 2003 Earnings Before Interest,
Taxes, Depreciation, Amortization ("EBITDA") totaled $73 million, compared to
$95 million in the second quarter of 2002. For the quarter, FelCor reported a
net loss of $27 million, or a loss of $0.46 per share, compared to second
quarter 2002 net income of $6 million, or $0.12 per share.
The Company's operating results for the second quarter of 2003 included
debt related costs of $2.5 million, an impairment loss of $7.8 million and
realized losses on the sale of assets of $0.3 million. The debt related costs
consisted of a $2.8 million charge-off of capitalized costs associated with a
reduction in its line of credit commitments, net of a $0.3 million gain on the
early extinguishment of debt. The $7.8 million impairment charge is related to
two hotels that the Company expects to dispose of during the third quarter of
2003. The Company expects a $1.7 million annual cash flow improvement as a
result of the disposition of these hotels. The realized loss on the sale of
assets consisted of a $0.5 million loss on the sale of two hotels, net of a $0.2
million gain on the sale of a parking garage.
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FelCor Lodging Trust Second Quarter 2003 Operating Results
July 30, 2003
Page 2
SIX MONTHS RESULTS:
For the six months ended June 30, 2003, the Company's revenues were
$633 million, which reflected a decline of 5.9 percent, compared to the same
period in 2002. The decline in revenue principally resulted from a 6.4 percent
RevPAR decline, and is partially offset by the revenues of two hotels acquired
in the third quarter of 2002.
The operating margin for FelCor's hotels during the six months ended
June 30, 2003, was 30.4 percent, which reflects a 420 basis point decrease,
compared to the same period in 2002. The deterioration in margin principally
resulted from the 4.4 percent decline in ADR, coupled with increases in employee
wages and benefits, marketing, and energy costs, compared to the same period in
2002.
FelCor's FFO for the six months ended June 30, 2003, was $29 million,
or $0.47 per share. FFO for the same period last year was $69 million, or $1.11
per share. Included in FFO for the most recent six months, was approximately
$0.03 per share in charge-offs of debt related costs, net of gains on the early
extinguishment of debt. For the six months, EBITDA totaled $132 million,
compared to $172 million for the same period in 2002. For the six months, FelCor
reported a net loss of $55 million, or a loss of $0.93 per share, compared to a
net loss of $6 million, or a loss of $0.11 per share, for the same period in
2002.
The Company's operating results for the six months ended June 30, 2003,
included debt related charges of $1.6 million, an impairment loss of $7.8
million and realized losses on the sale of assets of $0.3 million. The debt
related charges consisted of a $2.8 million charge-off of capitalized costs
associated with a reduction in its line of credit commitments, net of a $1.3
million gain on the early extinguishment of debt. The $7.8 million impairment
charge is related to two hotels that the Company expects to dispose of during
the third quarter of 2003. The realized losses on the sale of assets consisted
of a $0.5 million loss on the sale of two hotels, net of a $0.2 million gain on
the sale of a parking garage.
"We are seeing signs that the economy has stabilized and that
occupancies are improving," said Thomas J. Corcoran, Jr., FelCor's President and
CEO. "We are cautiously optimistic that the lodging industry will continue to
recover in the second half of the year. For July, we expect a two percent
improvement in portfolio occupancy, compared to the same period in the prior
year. The increase in occupancy confirms the overall improving trend."
CAPITAL STRUCTURE:
At June 30, 2003, FelCor had $2.1 billion of debt outstanding, with a
weighted average life of six years, and $183 million in cash and cash
equivalents. FelCor has no remaining debt maturing during 2003, other than $9
million in normal recurring principal payments. 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 and the
capacity from a recently closed secured debt facility.
In June, FelCor announced that it had entered into a non-recourse,
secured debt facility for up to $200 million with JPMorgan Chase Bank. At the
same time, FelCor announced the reduction of its unsecured line of credit
commitments to $50 million.
"We have strengthened the Company's financial position through our new
secured debt facility," said Richard J. O'Brien, FelCor's Executive Vice
President and Chief Financial Officer. "We have strong liquidity, our $183
million in cash on hand and our new secured debt facility more
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FelCor Lodging Trust Second Quarter 2003 Operating Results
July 30, 2003
Page 3
than cover the October 2004 maturing senior notes. We are committed to continue
to strengthen our balance sheet by reducing debt as we sell non-strategic
hotels, positioning us for a recovery."
OTHER HIGHLIGHTS:
FelCor declared and paid second quarter dividends on its $1.95 Series A
Cumulative Convertible Preferred Stock and its 9% Series B Cumulative Redeemable
Preferred Stock.
In February, FelCor announced plans to dispose of 33 non-strategic
hotels over 36 months. The Company previously announced the sale of three
non-strategic assets (two hotels and a parking garage) in June, with aggregate
net sales proceeds of $12 million. Yesterday, FelCor closed on the sale of the
Doubletree Guest Suites(R) hotel in Nashville, Tenn., with net proceeds of $3.0
million.
"We are actively marketing for sale our non-strategic hotels, and
transaction activity is stronger than anticipated. There is an active capital
market for secured debt and opportunistic private equity for hotels," said Mr.
Corcoran. "We have received offers that are under negotiation or signed
contracts on 15 properties with estimated proceeds of approximately $110
million. We previously targeted $50 to $75 million in 2003 sales, which we
expect to exceed."
FelCor's non-strategic hotels are generally smaller properties in
secondary and tertiary locations. A listing of those hotels actively being
marketed can be found on the Company's Web site at www.felcor.com on the
"Hotels" page.
In the second quarter of 2003, FelCor made a $0.2 million capital
contribution, which increased its ownership interest in its joint venture with
Interstate Hotels to more than 50 percent. As a result, FelCor began
consolidating eight hotels with an investment balance of $73 million that are
owned by this venture, effective June 1, 2003.
In April, FelCor completed the conversion of the 385-room Hilton Myrtle
Beach Resort, following a $15 million renovation of the former
Wyndham(R)-affiliated property. The resort is located on the ocean at the north
end of Myrtle Beach and is adjacent to FelCor's Kingston Plantation complex, one
of the largest and most comprehensive resort destination properties on the East
Coast.
2003 GUIDANCE:
Current estimates for the third quarter and full year 2003 for
recurring operating results, are as follows:
<Table>
<Caption>
THIRD FULL YEAR
QUARTER 2003
----------------------- -----------------------
FFO per share $0.18 to $0.23 $0.72 to $0.82
EBITDA $63 to $66 million $252 to $258 million
Net loss per share $0.47 to $0.42 $1.96 to $1.86
RevPAR (3)% to (1)% (4)% to (3)%
Operating margin decrease 2.00% to 2.50% decrease 2.50% to 2.75%
</Table>
Included in 2003 full year guidance is $0.03 per share in charge-offs
of capitalized loan costs, net of a gain on early extinguishment of debt, which
was recorded in the six month period ended June 30.
For the first 29 days of July, total portfolio RevPAR declined 0.8
percent, occupancy increased 2.3 percent and ADR declined 3.0 percent, compared
to the same period in 2002.
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FelCor Lodging Trust Second Quarter 2003 Operating Results
July 30, 2003
Page 4
The Company currently anticipates its 2003 total capital expenditures
to be in the range of $65 to $70 million.
FelCor has published its Second Quarter 2003 Supplemental Information,
which provides additional corporate data, financial highlights and portfolio
statistical data for the quarter and six months ended June 30, 2003. Investors
are encouraged to access the Supplemental Information on the Company's Web site
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 information@felcor.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 nation's
largest owner of full service, all-suite hotels. FelCor's consolidated portfolio
is comprised of 174 hotels, located in 35 states and Canada. FelCor owns 76
upscale, all-suite hotels, and is the largest owner of Embassy Suites(R) 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 $2.9 billion. Additional information can be found on the Company's
Web site at www.felcor.com.
FelCor invites you to listen to its second quarter 2003 conference call
on Thursday, July 31, 2003, at 9:00 a.m. (Central Daylight Time). The conference
call will be webcast simultaneously via FelCor's Web site at 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 Thursday, July 31, 2003, at 12:00 p.m. (Central Daylight Time), through
Friday, August 29, 2003, at 7:00 p.m. (Central Daylight Time), by dialing
416-695-6247 (access code is 3558). A recording of the call also will be
archived and available 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. 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 timing and magnitude of
any recovery from the current soft economy, 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 security precautions, 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.
<Table>
Contact:
Thomas J. Corcoran, Jr., President and CEO (972) 444-4901 tcorcoran@felcor.com
Richard J. O'Brien, Executive Vice President and CFO (972) 444-4932 robrien@felcor.com
Monica L. Hildebrand, Vice President of Communications (972) 444-4917 mhildebrand@felcor.com
Stephen A. Schafer, Director of Investor Relations (972) 444-4912 sschafer@felcor.com
</Table>
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FelCor Lodging Trust Second Quarter 2003 Operating Results
July 30, 2003
Page 5
RESULTS OF OPERATIONS - THREE AND SIX MONTHS ENDED
(in thousands, except per share data)
<Table>
<Caption>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------- -------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
REVENUES:
Hotel operating revenue:
Room ............................................... $ 257,397 $ 275,768 $ 499,124 $ 531,707
Food and beverage .................................. 52,758 56,278 100,561 106,844
Other operating departments ........................ 17,096 17,517 33,126 33,705
Retail space rental and other revenue ................ 236 428 637 1,098
--------- --------- --------- ---------
Total revenues ................................. 327,487 349,991 633,448 673,354
--------- --------- --------- ---------
EXPENSES:
Hotel departmental expenses:
Room ............................................... 66,554 67,658 129,596 130,468
Food and beverage .................................. 41,041 42,018 79,847 81,875
Other operating departments ........................ 7,949 7,881 15,428 15,165
Other property related costs ......................... 91,801 89,960 182,979 178,501
Management and franchise fees ........................ 16,646 18,017 32,893 33,605
Taxes, insurance and lease expense ................... 33,554 33,697 65,979 68,172
Corporate expenses ................................... 3,737 3,970 7,160 7,716
Depreciation ......................................... 36,658 38,204 72,656 76,822
--------- --------- --------- ---------
Total operating expenses ....................... 297,940 301,405 586,538 592,324
--------- --------- --------- ---------
OPERATING INCOME ........................................ 29,547 48,586 46,910 81,030
Interest expense, net ................................ (41,251) (41,555) (81,504) (82,751)
Charge off of debt related costs ..................... (2,527) -- (1,574) --
Impairment loss ...................................... (7,824) -- (7,824) --
--------- --------- --------- ---------
INCOME (LOSS) BEFORE EQUITY IN INCOME FROM
UNCONSOLIDATED ENTITIES, MINORITY INTERESTS AND
GAIN ON SALE OF ASSETS ............................ (22,055) 7,031 (43,992) (1,721)
Equity in income from unconsolidated entities ........ 726 1,365 578 2,586
Gain on sale of assets ............................... 153 6,061 153 6,061
Minority interests ................................... 1,785 (1,827) 2,912 (526)
--------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS ................ (19,391) 12,630 (40,349) 6,400
Discontinued operations .............................. (812) 372 (945) 456
--------- --------- --------- ---------
NET INCOME (LOSS) ....................................... (20,203) 13,002 (41,294) 6,856
Preferred dividends .................................. (6,728) (6,688) (13,454) (12,838)
--------- --------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON
STOCKHOLDERS ......................................... $ (26,931) $ 6,314 $ (54,748) $ (5,982)
========= ========= ========= =========
Basic per common share data:
Net income (loss) from continuing operations ......... $ (0.45) $ 0.11 $ (0.92) $ (0.12)
========= ========= ========= =========
Net income (loss) .................................... $ (0.46) $ 0.12 $ (0.93) $ (0.11)
========= ========= ========= =========
Weighted average common shares outstanding ........... 58,591 52,728 58,562 52,721
Diluted per common share data:
Net income (loss) from continuing operations ......... $ (0.45) $ 0.11 $ (0.92) $ (0.12)
========= ========= ========= =========
Net income (loss) .................................... $ (0.46) $ 0.12 $ (0.93) $ (0.11)
========= ========= ========= =========
Weighted average common shares outstanding ........... 58,591 53,093 58,562 52,721
========= ========= ========= =========
</Table>
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FelCor Lodging Trust Second Quarter 2003 Operating Results
July 30, 2003
Page 6
RECONCILIATION OF NET INCOME (LOSS) TO FFO
(in thousands, except per share and unit data)
<Table>
<Caption>
THREE MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------
2003 2002
----------------------------------- ------------------------------------
PER SHARE PER SHARE
DOLLARS SHARES AMOUNT DOLLARS SHARES AMOUNT
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) ................................ $ (20,203) 58,591 $ (0.34) $ 13,002 52,728 $ 0.25
Depreciation from continuing operations ....... 36,658 -- 0.63 38,204 -- 0.72
Depreciation from unconsolidated entities
and discontinued operations ............... 3,268 -- 0.06 3,078 -- 0.06
Loss (gain) on sale of assets ................. 330 -- 0.01 (5,861) -- (0.11)
Impairment loss ............................... 7,824 -- 0.13 -- -- --
Preferred dividends ........................... (6,728) -- (0.11) (6,688) (0.13)
Minority interest in FelCor LP. ............... (1,493) 3,254 (0.06) 1,072 9,004 (0.10)
Conversion of options and unvested
restricted stock .......................... -- 309 -- -- 365 --
---------- ---------- ---------- ---------- ---------- ----------
FFO(a) ........................................... $ 19,656 62,154 $ 0.32 $ 42,807 62,097 $ 0.69
========== ========== ========== ========== ========== ==========
</Table>
<Table>
<Caption>
SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------
2003 2002
----------------------------------- ------------------------------------
PER SHARE PER SHARE
DOLLARS SHARES AMOUNT DOLLARS SHARES AMOUNT
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) ................................ $ (41,294) 58,562 $ (0.71) $ 6,856 52,721 $ 0.13
Depreciation from continuing operations ....... 72,656 -- 1.24 76,822 -- 1.46
Depreciation from unconsolidated entities
and discounted operations .................. 6,236 -- 0.11 5,256 -- 0.10
Loss (gain) on sale of assets ................. 330 -- 0.01 (5,861) -- (0.11)
Impairment loss ............................... 7,824 -- 0.13 -- -- --
Preferred dividends ........................... (13,454) -- (0.23) (12,838) -- (0.24)
Minority interest in FelCor LP. ............... (3,050) 3,271 (0.08) (1,015) 9,005 (0.23)
Conversion of options and unvested
restricted stock ........................... -- 309 -- -- 362 --
---------- ---------- ---------- ---------- ---------- ----------
FFO(a) ........................................... $ 29,248 62,142 $ 0.47 $ 69,220 62,088 $ 1.11
========== ========== ========== ========== ========== ==========
</Table>
(a) Included in FFO are charge-offs of debt related costs of $2.5 million
for the quarter and $1.6 million for the six months, net of gains on
extinguishment of debt.
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FelCor Lodging Trust Second Quarter 2003 Operating Results
July 30, 2003
Page 7
RECONCILIATION OF FFO TO EBITDA
(in thousands)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
FFO ................................................ $ 19,656 $ 42,807 $ 69,220 $ 29,248
Interest expense ................................ 41,821 42,184 83,959 82,449
Interest expense from unconsolidated entities ... 2,036 2,373 4,732 4,375
Charge-off of line of credit costs .............. 2,834 -- -- 2,834
Gain on early extinguishment of debt ............ (307) -- -- (1,260)
Amortization expense ............................ 564 526 1,035 1,080
Preferred dividends ............................. 6,728 6,688 12,838 13,454
---------- ---------- ---------- ----------
EBITDA ............................................. $ 73,332 $ 94,578 $ 132,180 $ 171,784
========== ========== ========== ==========
</Table>
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 FFO and
EBITDA to be key measures of a REIT's performance and should be considered along
with, but not as an alternative to, net income and cash flow 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
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.
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FelCor Lodging Trust Second Quarter 2003 Operating Results
July 30, 2003
Page 8
SELECTED BALANCE SHEET DATA
(in thousands)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
------------ ------------
Investment in hotels ....................................... $ 4,376,794 $ 4,255,618
Accumulated depreciation ................................... (870,363) (782,166)
------------ ------------
Investments in hotels, net of accumulated depreciation ..... $ 3,506,431 $ 3,473,452
============ ============
Total cash and cash equivalents ............................ $ 182,669 $ 66,542
Total assets ............................................... 3,919,423 3,780,363
Total debt ................................................. 2,058,467 1,877,134
Total stockholders' equity ................................. $ 1,574,749 $ 1,616,817
</Table>
RECONCILIATION OF ESTIMATED NET INCOME (LOSS) TO
FFO AND EBITDA (in millions, except per
share and unit data)
<Table>
<Caption>
THIRD QUARTER 2003 GUIDANCE
------------------------------------------------------
LOW GUIDANCE HIGH GUIDANCE
------------------------- -------------------------
PER SHARE PER SHARE
DOLLARS AMOUNT(a) DOLLARS AMOUNT(a)
---------- ---------- ---------- ----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS ... $ (28) $ (0.47) $ (25) $ (0.42)
Depreciation .............................. 40 40
Minority interest in FelCor LP. ........... (1) (1)
---------- ----------
FFO .......................................... 11 $ 0.18 14 $ 0.23
Interest expense .......................... 44 44
Amortization expense ...................... 1 1
Preferred dividends ....................... 7 7
---------- ----------
EBITDA ....................................... $ 63 $ 66
========== ==========
</Table>
<Table>
<Caption>
FULL YEAR 2003 GUIDANCE
------------------------------------------------------
LOW GUIDANCE HIGH GUIDANCE
------------------------- -------------------------
PER SHARE PER SHARE
DOLLARS AMOUNT(a) DOLLARS AMOUNT(a)
---------- ---------- ---------- ----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS ... $ (115) $ (1.96) $ (109) $ (1.86)
Depreciation .............................. 157 157
Loss on depreciable assets (b) ............ 8 8
Minority interest in FelCor LP. ........... (5) (5)
---------- ----------
FFO (c) ...................................... 45 $ 0.72 51 $ 0.82
Interest expense .......................... 176 176
Amortization expense ...................... 2 2
Charge-off of debt related costs (c) ...... 2 2
Preferred dividends ....................... 27 27
---------- ----------
EBITDA ....................................... $ 252 $ 258
========== ==========
</Table>
(a) Weighted average shares are 58.6 million, adding minority interest and
unvested restricted stock of 3.6 million, provide weighted average
shares and units of 62.2 million, used to compute FFO per share.
(b) Represents the impairment loss of $7.8 million and realized losses on
the sale of assets of $0.3 million, which was recorded in the second
quarter.
(c) Included in full year FFO are $0.03 per share in charge-offs of
capitalized loan costs, net of a gain on early extinguishment of debt,
which was recorded in the six month period ended June 30.
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