FelCor Announces Third Quarter Results

FelCor Lodging Trust Incorporated , the nation`s second largest hotel real
estate investment trust (REIT), today reported operating results for the
third quarter and nine months ended September 30, 2003.
Third Quarter Results:

The third quarter results reflect a sluggish economy and soft corporate
transient demand, which continues to adversely affect the lodging industry.
FelCor`s third quarter hotel portfolio revenue per available room
(“RevPAR”) declined 2.4 percent, compared to third quarter 2002. For the
quarter, occupancy increased 0.3 percent, to 65.3 percent, and average
daily rate (“ADR”) decreased 2.7 percent, to $92.64, compared to the same
quarter of 2002.
The operating margin for FelCor`s hotels during the third quarter 2003 was
28.7 percent, which represents a 290 basis point decrease, compared to the
same period of 2002. The decrease in margins for the third quarter was
lower than the 390 basis point decrease in second quarter margins,
compared to the same period in 2002. The deterioration in third quarter
margins principally resulted from the 2.7 percent decline in ADR, coupled
with increases in employee wage and benefit, marketing, and energy costs
for the quarter, compared to the third quarter of 2002.
FelCor`s net loss for the third quarter, which included an impairment
charge of $113 million, or $1.92 per share, was $133 million, or a loss of
$2.26 per share, compared to a third quarter 2002 net loss of $14 million,
or a loss of $0.26 per share. Third quarter Funds From Operations (“FFO”)
and Earnings Before Interest, Taxes, Depreciation and Amortization
(“EBITDA”), in accordance with the Securities and Exchange Commission`s
(SEC) recently clarified guidance, have not been adjusted to add back the
$113 million impairment charge. Including the impairment charge for the
quarter, FFO was a loss of $101 million and EBITDA was a loss of $50
million. FFO and EBITDA for the third quarter of 2002, computed on a
consistent basis, were $25 million and $75 million, respectively. FFO per
share for the third quarter of 2003 was a loss of $1.63 per share
(including $1.81 in impairment charges), as compared to a positive $0.40
per share during the same period of 2002, computed on a consistent basis.
Excluding the impairment charge for the third quarter, operating results
met the low end of the Company`s previously provided guidance of $0.18 per
share for FFO and $63 million for EBITDA.
The impairment charge primarily related to the third quarter decision to
sell 11 IHG-managed hotels, following an amendment to the management
agreements on these hotels, and an additional impairment charge on certain
of the 19 remaining non-strategic hotels identified for sale in December
2002. The 30 non-strategic hotels are under-performing and generally in
markets that no longer meet FelCor`s long-term investment strategy.
Although the Company expects to sell these hotels over the next 36 months,
the impaired assets were written down to FelCor`s estimate of today`s fair
market value.
The 30 non-strategic hotels represent 16 percent of FelCor`s rooms, while
only comprising five percent of the Company`s hotel-level EBITDA. Of the
non- strategic hotels, there are six that are estimated to have a negative
EBITDA of $0.05 per share for 2003.
Year to Date Results:

For the nine months ended September 30, 2003, the Company`s RevPAR
declined 4.9 percent, compared to the same period in 2002. The decline in
RevPAR principally resulted from a 4.0 percent decline in FelCor`s ADR
during the period.
The operating margin for FelCor`s hotels during the nine months ended
September 30, 2003, was 29.9 percent, which reflects a 400 basis point
decrease, compared to the same period in 2002. The deterioration in margin
principally resulted from a 4.0 percent decline in ADR, coupled with
increases in employee wage and benefit, marketing, and energy costs,
compared to the same period in 2002.
FelCor`s net loss for the nine months, which included an impairment charge
of $121 million, or $2.06 per share, was $187 million, or a loss of $3.20
per share, compared to the nine month 2002 net loss of $20 million, or a
loss of $0.38 per share. FFO and EBITDA for the nine months, in accordance
with the SEC`s recently clarified guidance, have not been adjusted to add
back the $121 million impairment charge. Including the impairment charge
for the nine months, FFO was a loss of $80 million and EBITDA was $73
million. FFO and EBITDA for the nine months of 2002 were $94 million and
$247 million, respectively. FFO per share for the nine months of 2003 was
a loss of $1.28 per share, including $1.81 in third quarter impairment
charges, as compared to a positive $1.51 per share during the same period
of 2002. The following items are included in net loss for the 2003 nine
month period and have not been added to or deducted from net loss in the
computation of FFO or EBITDA: a $121 million impairment charge; a $2.8
million charge-off of deferred debt costs; and a $1.6 million gain on
early extinguishment of debt. For the nine months in 2002, a $1.6 million
charge for the third quarter abandoned projects was included in net loss
and not added back to net loss in the computation of FFO or EBITDA.
“We have achieved the three strategic objectives that we set out at the
beginning of this year. While we are disappointed with the operating
results of the second half of 2003 and anticipated fourth quarter results,
we are positioned for a recovery and believe we`re near the end of what
has been a difficult lodging cycle,” said Thomas J. Corcoran, Jr.,
FelCor`s President and CEO. “We have given a great deal of thought to our
investment strategy and the need to improve our return on investment (ROI)
over the long-term. The sale of non-strategic hotels, which is progressing
better than expected, is the first phase of our strategy to improve our
ROI and long-term shareholder value.”

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