FelCor ’02 Results In; To Axe Non-Strategic Hotels

IRVING, TX— FelCor Lodging Trust Inc. reported operating results for the fourth quarter and full year 2002. In addition, the company announced plans to dispose of non-strategic hotels throughout 2003. Total revenues were $309.8 million or 2.3% over the fourth quarter in 2001. The increase was primarily related to a 3.1% improvement in the portfolios revenue per available room (RevPAR). RevPAR increased 5.2% in October, and 1.7% in November and December. For the quarter, occupancy increased 4.4%, to 57.8%, and average daily rate (ADR) decreased 1.3%, to $95.61, compared to the same quarter of 2001. The operating margin for FelCors hotels during the fourth quarter 2002 was 27.8%, 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. FelCors 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 that ended Dec. 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 hotels and investments in unconsolidated entities. The impairment charge resulted primarily from FelCors 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,” said Thomas J. Corcoran, Jr., FelCors president and CEO. “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.” The 33 sale candidates represent 14% of the rooms in FelCors hotel portfolio, but less than 7% of FelCors 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 FelCors portfolio is 294.