##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





---




FORM 10-Q





(Mark One)





|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGEACT OF 1934
|- |  | ---------------------------------------------------------------------------------------




For the quarterly period ended June 30, 2002





OR





| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934 [NO FEE REQUIRED]
|- |  | ---------------------------------------------------------------------------------------------------------




For the transition period from
 to





---




Commission File Number 1-9320





WYNDHAM INTERNATIONAL, INC.


(Exact name of registrant as specified in its charter)





Delaware

94-2878485(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)





1950 Stemmons Freeway, Suite 6001


Dallas, Texas 75207


(Address of principal executive offices) (Zip Code)





(214) 863-1000


(Registrants telephone number, including area code)





N/A


(Former name, former address and former fiscal year, if changed since last report)





---




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x         No  ̈





The number of shares outstanding of the registrants class of common stock, par value $.01 per share, as of the close of business on
August 6, 2002, was 167,950,617.





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##### Table of Contents

WYNDHAM INTERNATIONAL, INC.





INDEX





PART IFINANCIAL INFORMATION





PageItem 1.

Financial Statements

3Wyndham International, Inc.:Condensed Consolidated Balance Sheets as of June 30, 2002 (unaudited) and December 31, 2001

3Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2002 and 2001 (unaudited)

4Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001 (unaudited)

5Notes to Condensed Consolidated Financial Statements as of June 30, 2002 (unaudited)

6Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

23Item 3.

Qualitative and Quantitative Disclosures about Market Risks

37PART IIOTHER INFORMATIONItem 1.

Legal Proceedings

38Item 2.

Changes in Securities and Use of Proceeds

39Item 3.

Defaults Upon Senior Securities

39Item 4.

Submission of Matters to Vote of Security Holders

40Item 5.

Other Information

41Item 6.

Exhibits and Reports on Form 8-K:

41Exhibits

41Reports on Form 8-K

41Signature

42







2




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##### Table of Contents

PART I: FINANCIAL INFORMATION





ITEM 1.    FINANCIAL STATEMENTS





WYNDHAM INTERNATIONAL, INC.





CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except share amounts)


(unaudited)





June 30, 2002


December 31, 2001ASSETSCurrent assets:Cash and cash equivalents

$
77,994


$
165,702Restricted cash


104,778



85,932Accounts receivable


124,291



120,283Inventories


16,743



17,742Prepaid expenses and other assets


4,529



5,716Assets held for sale, net of accumulated depreciation of $23,978 in 2002 and $25,685 in 2001


93,809



96,783Total current assets


422,144



492,158Investment in real estate and related improvements, net of accumulated depreciation of $978,489 in 2002 and $856,732 in
2001


4,244,480



4,399,256Investment in unconsolidated subsidiaries


73,001



77,619Notes and other receivables


47,598



50,385Management contract costs, net of accumulated amortization $22,160 in 2002 and $18,714 in 2001


92,537



95,227Leasehold costs, net of accumulated amortization of $34,501 in 2002 and $29,889 in 2001


106,512



111,125Trade names and franchise costs, net of accumulated amortization of $27,144 in 2002 and $24,041 in 2001


96,594



97,779Deferred acquisition costs


4,360



4,662Goodwill, net of accumulated amortization of $54 in 2002 and $49,015 in 2001


391



326,843Deferred expenses, net of accumulated amortization of $68,058 in 2002 and $54,416 in 2001


67,364



71,214Other assets


42,291



41,803Total assets

$
5,197,272


$
5,768,071LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses

$
219,002


$
213,596Deposits


29,214



36,079Borrowings associated with assets held for sale


30,441



30,441Current portion of borrowings under credit facility, term loans, mortgage notes and capital lease
obligations


79,029



117,484Total current liabilities


357,686



397,600Borrowings under credit facility, term loans, mortgage notes and capital lease obligations


3,208,786



3,298,070Derivative financial instruments


73,600



73,490Deferred income taxes


249,251



290,259Deferred income


9,078



7,358Minority interest in the Operating Partnerships


21,368



21,416Minority interest in other consolidated subsidiaries


70,399



91,657Commitments and contingenciesShareholders equity:Preferred stock, $0.01 par value; authorized: 150,000,000 shares; shares issued and outstanding:12,580,514 in 2002 and 11,905,060 in 2001


126



119Common stock, $0.01 par value; authorized: 750,000,000 shares; shares issued and outstanding:167,950,382 in 2002 and 167,847,940 in 2001


1,678



1,678Additional paid in capital


3,980,183



3,912,656Receivables from shareholders and affiliates


(18,608
)


(18,121
)Accumulated other comprehensive income


(22,537
)


(29,007
)Accumulated deficit


(2,733,738
)


(2,279,104
)Total shareholders equity


1,207,104



1,588,221Total liabilities and shareholders equity

$
5,197,272


$
5,768,071





The accompanying notes are an integral part of these consolidated financial
statements.







3




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##### Table of Contents

WYNDHAM INTERNATIONAL, INC.





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(in thousands, except per share amounts)


(unaudited)





Three Months Ended June
30,


Six Months Ended June
30,2002


2001


2002


2001Revenue:Hotel revenue

$
502,259



581,080


$
995,241


$
1,185,837Management fee and service fee income


4,574



4,663



9,043



10,382Interest and other income


1,870



1,782



3,975



5,461Total revenue


508,703



587,525



1,008,259



1,201,680Expenses:Hotel expenses


382,075



419,680



752,687



845,286General and administrative


17,593



29,417



36,582



40,517Bond offering cancellation costs


4,504







4,504



Interest expense


61,045



79,942



125,462



166,199Depreciation and amortization


73,338



62,230



145,772



117,072Loss on sale of assets


1,097



13,259



5,867



12,923Impairment loss on assets held for sale










162



(Gain) loss on derivative instruments


34,378



(3,273
)


33,044



(13,188
)Total expenses


574,030



601,255



1,104,080



1,168,809Operating (loss) income


(65,327
)


(13,730
)


(95,821
)


32,871Equity in earnings of unconsolidated subsidiaries


54



1,216



898



1,597(Loss) income before income taxes, minority interest, accounting change and extraordinary item


(65,273
)


(12,514
)


(94,923
)


34,468Income tax benefit (provision)


24,147



3,035



35,419



(16,221
)(Loss) income before minority interest, accounting change and extraordinary item


(41,126
)


(9,479
)


(59,504
)


18,247Minority interest in consolidated subsidiaries


(239
)


(2,106
)


(939
)


(6,952
)(Loss) income before accounting change and extraordinary item


(41,365
)


(11,585
)


(60,443
)


11,295Cumulative effect of change in accounting principle, net of taxes










(324,102
)


(10,364
)Extraordinary item from early extinguishment of debt, net of taxes






(719
)






(719
)Net (loss) income

$
(41,365
)

$
(12,304
)

$
(384,545
)

$
212Preferred stock dividends


(35,500
)


(27,506
)


(70,580
)


(54,531
)Net loss attributable to common shareholders

$
(76,865
)

$
(39,810
)

$
(455,125
)

$
(54,319
)Basic and diluted loss per common share:Net loss before accounting change and extraordinary item

$
(0.46
)

$
(0.24
)

$
(0.78
)

$
(0.26
)Cumulative effect of change in accounting principle, net of taxes










(1.93
)


(0.06
)Extraordinary item

$



$



$



$
Net loss per common share

$
(0.46
)

$
(0.24
)

$
(2.71
)

$
(0.32
)





The accompanying notes are an integral part of these consolidated financial
statements.




4




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##### Table of Contents

WYNDHAM INTERNATIONAL, INC.





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)


(unaudited)





Six Months Ended June
30,2002


2001Cash flows from operating activities:Net (loss) income

$
(384,545
)

$
212Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization


145,772



117,072Amortization of unearned stock compensation


1,801



776Amortization of deferred loan costs


13,009



10,856Net loss on sale of assets


5,867



12,923Loss (gain) on derivative financial instruments


12,729



(15,676
)Impairment loss on assets


162



Write-off intangible assets


992



Write-off of deferred acquisition costs


1,022



1,445Provision for bad debt expense


1,449



Equity in earnings of unconsolidated subsidiaries


(898
)


(1,597
)Minority interest in consolidated subsidiaries


939



6,952Deferred income taxes


(46,095
)


8,415Cumulative effect of change in accounting principle


324,102



10,364Extraordinary items






719Changes in assets and liabilities:Accounts receivable and other assets


(2,230
)


5,822Inventory


999



1,796Deferred income


912



(517
)Accounts payable and other accrued expenses


(10,690
)


(28,376
)Net cash provided by operating activities


65,297



131,186Cash flows from investing activities:Improvements and additions to hotel properties


(22,167
)


(100,692
)Proceeds from sale of assets


11,561



106,097Changes in restricted cash accounts


(18,846
)


(10,386
)Collection on notes receivable


2,741



6,064Advances on other notes receivable


(165
)


(1,720
)Deferred acquisition costs


(949
)


(3,266
)Management contract costs


(257
)


(1,038
)Investment in unconsolidated subsidiaries


(327
)


(1,600
)Distributions from unconsolidated subsidiaries


968



2,980Net cash used in investing activities


(27,441
)


(3,561
)Cash flows from financing activities:Borrowings under line of credit facility and mortgage notes


10,000



255,000Repayments of borrowings under credit facility and other debt


(122,738
)


(355,085
)Payment of deferred loan costs


(12,303
)


(750
)Contribution received from minority interest in consolidated subsidiaries


1,075



Distribution made to minority interest in other partnerships


(2,277
)


(5,534
)Dividends and distributions paid






(14,624
)Other


(59
)


Net cash used in financing activities


(126,302
)


(120,993
)Foreign currency translation adjustment


738



582Net (decrease) increase in cash and cash equivalents


(87,708
)


7,214Cash and cash equivalents at beginning of period


165,702



52,460Cash and cash equivalents at end of period

$
77,994


$
59,674





The accompanying notes are an integral part of these consolidated financial
statements.




5




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##### Table of Contents

WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(in thousands, except share amounts)


(unaudited)





1.    Organization:





Wyndham International, Inc. (together with its consolidated subsidiaries, Wyndham or the Company) is a fully integrated and multi-branded hotel
enterprise that operates primarily in the upper upscale and luxury segments. Through a series of acquisitions, Wyndham has since 1995 grown from 20 hotels to become one of the largest U.S. based hotel owner/operators. As of June 30, 2002, Wyndham
owned interests in 127 hotels with over 36,900 guestrooms and leased 37 hotels from third parties with over 5,700 guestrooms. In addition, Wyndham managed 30 hotels for third party owners with over 9,300 guestrooms and franchised 24 hotels with over
4,300 guestrooms.





Principles of ConsolidationThe consolidated financial statements include the
accounts of Wyndham, its wholly-owned subsidiaries, and the partnerships, corporations, and limited liability companies in which Wyndham owns a controlling interest, after the elimination of all significant intercompany accounts and transactions.





PartnershipsThe condition for control is the ownership of a majority voting interest and the
ownership of the general partnership interest.





Corporations and Limited Liability CompaniesThe
condition for control is the ownership of a majority voting interest.





Critical Accounting Policies and
EstimatesThe preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to impairment of assets; assets held for sale; bad debts; income taxes; and contingencies and litigation. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.





The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. The Company periodically reviews the carrying value
of its assets, including intangible assets, to determine if events and circumstances exist indicating that assets might be impaired. If facts and circumstances support this possibility of impairment, management will prepare undiscounted and
discounted cash flow projections which require judgments that are both subjective and complex.





The Companys
management uses its judgment in projecting which assets will be sold by the Company within the next twelve months. These judgments are based on managements knowledge of the current market and the status of current negotiations with third
parties. If assets are expected to be sold within 12 months, they are reclassified as assets held for sale on the balance sheet.





The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Companys customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional allowances may be required.





The Company
records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)




feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would be able to realize its deferred tax assets in the
future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its net
deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.





The Company is a defendant in lawsuits that arise out of, and are incidental to, the conduct of its business. Management uses its judgment, with the aid of legal counsel, to determine if accruals are
necessary as a result of any pending actions against the Company.





These financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three
and six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2001.





Recent
PronouncementsIn June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, and SFAS 142, Goodwill and Other Intangible
Assets, collectively referred to as the Standards. SFAS 141 supersedes Accounting Principles Board Opinion (APB) No. 16, Business Combinations. The provisions of SFAS 141 (1) require that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001, (2) provide specific criteria for the initial recognition and measurement of intangible assets apart from goodwill, and (3) require that unamortized negative goodwill be written off
immediately as an extraordinary gain instead of being deferred and amortized. SFAS 141 also requires that, upon adoption of SFAS 142, the Company reclassify carrying amounts of certain intangible assets into or out of goodwill based on certain
criteria. SFAS 142 supersedes APB 17, Intangible Assets, and is effective for fiscal years beginning after December 15, 2001. SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their initial recognition. The
provisions of SFAS 142 (1) prohibit the amortization of goodwill and indefinite-lived intangible assets, (2) require that goodwill and indefinite-lived intangible assets be tested annually for impairment (and in interim periods if certain events
occur indicating that the carrying value of goodwill and/or indefinite-lived assets may be impaired), (3) require that reporting units be identified for the purpose of assessing potential future impairments of goodwill, and (4) remove the forty-year
limitation on the amortization period of intangible assets that have finite lives.





The provisions of the
Standards also apply to equity-method investments made both before and after June 30, 2001. SFAS 141 requires that the unamortized deferred credit related to an excess over cost arising from an investment that was accounted for using the equity
method (equity-method negative goodwill) and that was acquired before July 1, 2001, must be written-off immediately and recognized as the cumulative effect of a change in accounting principle. Equity-method negative goodwill arising from
equity investments made after June 30, 2001 must be written-off immediately and recorded as an extraordinary gain, instead of being deferred and amortized. SFAS 142 prohibits amortization of the excess of cost over the underlying equity in the net
assets of an equity-method investee that is recognized as goodwill.




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)







On January 1, 2002, the Company completed the two step process
prescribed by SFAS 142 for (1) testing for impairment and (2) determining the amount of impairment loss related to goodwill associated with the reporting unit. Accordingly, in January 2002, the Company recorded an impairment charge of $324,102 as a
cumulative effect of a change in accounting principle. In connection with the adoption of SFAS 142, the Company did not record $6,068 of amortization in the first six months of 2002, and will not record $12,136 of amortization annually.





The impact of the adoption of SFAS 142 on the net (loss) income, and basic and diluted loss per share is
presented in the following tables:





Three Months Ended June
30, 2002


Three Months Ended June
30, 2001


Six Months Ended June 30, 2002


Six Months Ended June 30, 2001Reported net (loss) income

$
(41,365
)

$
(12,304
)

$
(384,545
)

$
212Add back: Goodwill amortization






3,065







5,657Adjusted net (loss) income

$
(41,365
)

$
(9,239
)

$
(384,545
)

$
5,869Reported basic and diluted loss per share

$
(0.46
)

$
(0.24
)

$
(2.71
)

$
(0.32
)Goodwill amortization






0.02







0.03Adjusted basic and diluted loss per share

$
(0.46
)

$
(0.22
)

$
(2.71
)

$
(0.29
)





The changes in the carrying amount of goodwill for the six months
ended June 30, 2002 were as follows:





Other Segment (1)Balance (net of amortization) as of January 1, 2002

$
326,843Reclassification to franchise costs


(2,350
)Impairment losses


(324,102
)Balance as of June 30, 2002

$
391


---

|(1) |  | The fair value of the reporting unit was estimated using the expected present value of future cash flows. The hotel management subsidiaries, which is where
goodwill is recorded, are included in the Other Segment as described on page 30 under Results of Reporting Segments. The Other Segment includes management fee and service fee income, interest and other income,
general and administrative costs, interest expense, depreciation and amortization and other charges.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




In October 2001, the FASB issued SFAS 144 Accounting for the Impairment and Disposal of Long-Lived Assets. SFAS 144 supercedes SFAS 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. SFAS 144 primarily addresses significant issues relating to the implementation of SFAS 121 and develops a single accounting model for long-lived assets to be disposed of, whether previously held and used or newly acquired. The
provisions of SFAS 144 are effective for fiscal years beginning after December 15, 2001. In the first quarter of 2002, the Company adopted SFAS 144. The adoption of SFAS 144 did not have a financial statement impact. The assets held for sale as of
December 31, 2001 continue to be accounted for in accordance with SFAS 121.




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)







In April 2002, the FASB issued SFAS 145, Recission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. The statement, which is effective for financial statements issued for fiscal years beginning after May 15, 2002 and interim periods within those
fiscal years, updates, clarifies and simplifies existing accounting pronouncements. SFAS 145 rescinds SFAS 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net
of the related income tax effect. As a result of this recission, the criteria in APB 30 will now be used to classify those gains and losses, which could result in the gains and losses being reported in income before extraordinary items. Also, SFAS
145 amends SFAS 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. The Company is currently evaluating the impact this
statement will have on its financial position or results of operations.





In July 2002, the FASB issued SFAS 146,
Accounting for Exit or Disposal Activities. SFAS 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities
that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force (EITF) has set forth in EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring). The scope of SFAS 146 also includes (1) costs related to terminating a contract that is not a capital lease and (2) termination benefits that employees who are involuntarily
terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS 146 will be effective for exit or disposal activities initiated after December 31,
2002. The Company is currently evaluating the impact this statement will have on its financial position or results of operations.





ReclassificationCertain prior year balances have been reclassified to conform to the current year presentation with no effect on previously reported amounts of income or accumulated deficits.





2.    Disposition of Assets





During the first six months of 2002, the Company sold two hotel properties and an investment in a restaurant venture. The Company received net cash proceeds of approximately $4,860, after the repayment
of mortgage debt of $6,911. The Company recorded a net loss of $2,859 as a result of these asset sales.




9




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)







3.    Line of Credit Facility, Term Loans, Mortgage and Other Notes
and Capital Lease Obligations:





Outstanding borrowings as of June 30, 2002 and December 31, 2001 under the
line of credit, term loans, various mortgage and other notes and capital lease obligations consisted of the following:





Description

June 30, 2002


December 31, 2001


Amortization


Interest Rate

MaturityRevolving Credit Facility

$
213,500


$
303,500


None


Libor + 3.75%(1)

June 30, 2004Term Loans


1,284,150



1,284,150


(2
)

Libor + 4.75%(3)

June 30, 2006Increasing Rate Loans


482,139



482,139


None


Libor + 4.75%(3)

June 30, 2004Bear, Stearns Funding, Inc.(4)


307,825



307,825


None


Libor + 0.82% to 4.5%

July 1, 2004Lehman Brothers Holdings Inc.(5)


200,178



202,186


None


Libor + 3.5%

July 1, 2003Lehman Brothers Holdings Inc.(6)


178,397



179,374


(6
)

Libor + 1.9%

August 10, 2003Metropolitan Life Insurance(7)


95,608



96,271


(8
)

8.08%

October 1, 2007Other Mortgage Notes Payable(9)


515,398



545,842


Various


(10)

(10)Unsecured financing


1,509



1,509


None


10.5%

May 15, 2006Capital lease obligations


39,552



43,199$
3,318,256


$
3,445,995Less current portion:Mortgage debt-assets held for sale


(30,441
)


(30,441
)Current portion of borrowings(11)


(79,029
)


(117,484
)Long term debt

$
3,208,786


$
3,298,070


---

|(1) |  | The one-month LIBOR rate at June 30, 2002 was 1.839%. The rate was increased to LIBOR plus 3.75% on January 24, 2002.
|--- |  | ---------------------------------------------------------------------------------------------------------------------

|(2) |  | On July 1, 2002, $5,000 was repaid and $5,000 each six months thereafter, with the final payment of principal due on June 30, 2006.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------

|(3) |  | The rate increased to LIBOR plus 4.75% on January 24, 2002.
|--- |  | -----------------------------------------------------------

|(4) |  | During 2001, three properties were included in an exchange of assets, resulting in a repayment of $33,135. As of June 30, 2002, the net book value of the
remaining 21 properties is $543,354, net of impairment.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | During 2001, two properties collateralizing the debt were sold and debt was repaid in the amount of $30,347. The net book value of the remaining eight
properties is $255,139, net of impairment, as of June 30, 2002. In December 2001, the Company elected to extend the term of the loan for an additional twelve month period. The Company paid an extension fee of $2,021. The loan agreement specifies an
interest rate floor of 8%.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | The loan is collaterized by four hotel properties with a net book value of $241,767 at June 30, 2002. The Company must make scheduled amortization payments as
set forth in the loan agreement. The loan agreement provides that the Company can elect to extend the term of the loan for three additional twelve month periods.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | The loan is collateralized by six Doubletree hotels with a net book value of $174,946 at June 30, 2002.
|--- |  | -------------------------------------------------------------------------------------------------------



10




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)




|(8) |  | The loan requires monthly payments of principal and interest in the amount of $755 until the October 1, 2007 maturity date.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|(9) |  | The loans are collateralized by 18 hotel properties and a parcel of land with a net book value of $836,318 at June 30, 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------

|(10) |  | Interest rates range from fixed rates of 6.50% to 11.99% and variable rates of LIBOR plus 1.5% to prime plus 2.5%. The mortgages have a weighted average
interest rate at June 30, 2002 of 6.12%. Maturity dates range from 2002 through 2023.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) |  | Subsequent to June 30, 2002, the balances of the term loans, increasing rate loans and revolver were paid down by a total of $20,065 due to the sale of an
asset.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------




On January 24, 2002, the Company reached an agreement with its lenders to permanently
amend the senior credit facility and increasing rate loans facility. As of June 30, 2002, these facilities included approximately $1.3 billion in term loans maturing in June 2006 and $482.1 million in increasing rate loans and a revolver with
capacity of $500 million both maturing in June 2004. Among other things, these amendments provide for mortgage collateral for 59 properties that were previously unencumbered; an increase in interest rates; a restriction on capital and development
spending; a prohibition on paying the cash dividends on the series A and B preferred stock; restrictions on the use of asset sale proceeds and mortgage debt refinancing; and an interest coverage ratio of 1.05 to 1.00 until December 31, 2003 at which
time it will increase to 1.25 to 1.00. The applicable interest rate margins are as follows: LIBOR plus 3.75% for the revolving term loans and LIBOR plus 4.75% for the term loans and increasing rate loans. The fees paid in connection with the
amendment were approximately $9,586 and will be amortized over the lives of these facilities.





On May 3, 2002, the
Company entered into the third amendment and restatement of its senior credit facility and increasing rate loans facility. The third amendment and restatement permits the issuance of certain debt securities and, in the event that the Company issues
such debt securities, the maturity of the outstanding revolving loans held by the bank lenders who have consented to the third amendment and restatement will be extended from June 30, 2004 to June 30, 2006.





This amendment and restatement directs the net cash proceeds received from any such offering of debt securities to be applied as follows:





| |  |  | first, to repay all of the outstanding increasing rate loans and cancel the increasing rate loans facility; and
| | - |  | ---------------------------------------------------------------------------------------------------------------




| |  |  | second, to repay the outstanding revolving loans the maturity of which has been extended to June 30, 2006 and the term loans prorata, based on their outstanding
principal amounts, with the revolving commitment of these repaid revolving loans reduced by the amount of the principal repayment thereof.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The proceeds from any such offering of debt securities will not be used to repay any of the revolving loans whose maturity remains June 30, 2004.





The third amendment and restatement also specifically permits the Company to refinance two or more of its existing mortgages in a single transaction. In such a
transaction, the refinancing of the mortgaged properties may be secured by the properties that secured the mortgage being refinanced and/or certain specified unencumbered properties.





In the event that the Company issues certain debt securities, the third amendment and restatement will also change the application of proceeds from asset dispositions,
exchanges and certain incurrences of indebtedness




11




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)




among the various loan facilities. In addition, the third amendment and restatement allows the Company to sell certain non-core assets for consideration consisting of marketable securities,
assumed indebtedness and cash.





In connection with the credit agreement, the Company also entered into an
increasing rate note purchase and loan agreement, originally dated June 30, 1999 and modified by the first amendment and restatement dated September 25, 2000 and the second amendment and restatement effective as of January 24, 2002, with Bear
Stearns Corporate Lending Inc, as co-arranger and syndication agent, Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as syndication agent, and J.P. Morgan Securities Inc. (formerly known as Chase Securities Inc.), as
lead arranger and book manager. This facility has no scheduled amortization. As of June 30, 2002, the Company had a $482 million increasing rate term loan facility.





Upon receipt of the proceeds from any offering of debt securities and repayment of the term loans and the revolving loans whose maturity has been extended in the third
amendment to June 30, 2006, the outstanding amounts of the revolving loans held by the lenders who consent to the third amendment and restatement will be converted to term loans and will constitute a new class of loans under the senior credit
facility having the same interest rate and term as the existing senior credit facility. The new term loans will be amortized semi-annually by 0.5% with balance paid on the maturity date. The extended revolving loans and the revolving loans which
maintain a maturity of June 30, 2004 will have the same interest rate, but will be treated differently for purposes of prepayments due to asset sales and incurrence of debt.





On June 7, 2002, the Company withdrew the proposed offering of the debt securities due to unfavorable market conditions.





Effective May 1, 2002, the Company amended a mortgage note with a balance of $14,092 with MassMutual. The amendment extended the maturity
from May 1, 2002 to September 1, 2002. The note bears interest at 11.99%. On June 26, 2002, the Company amended a mortgage note with a balance of $3,999 with TIB/Bank of the Keys. The amendment extended the maturity from June 26, 2002 to December
26, 2002. The note bears interest at prime plus 2.50%.





Effective March 1, 2002, the Company amended a mortgage
note with a balance of $25,657 with GMAC Commercial Mortgage. The amendment extended the maturity from August 1, 2002 to May 1, 2004. The note bears interest at LIBOR plus 3.75%. On March 13, 2002, the Company amended a mortgage note with a balance
of $14,615 with Credit Lyonnais. The amendment extended the maturity from March 30, 2002 to March 30, 2005. The note bears interest at LIBOR plus 2.5%. On March 14, 2002, the Company refinanced a mortgage note with a balance of $15,000 with Lincoln
National Bank. The refinancing extended the maturity from May 1, 2002 to March 1, 2007. The note bears interest at prime not to exceed 7.50% with an initial rate of 4.75%.





In connection with the refinancing of the $15,000 mortgage note with Lincoln National Bank, the joint venture partnership agreement between the Company and Maryville Hotel
Associates I, L.L.C. was amended on March 1, 2002. Pursuant to the amendment, Maryville Hotel Associates I, L.L.C. became the managing general partner of the partnership effective April 1, 2002. As a result, the Company now accounts for its 50%
interest in the partnership using the equity method of accounting.




12




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)







4.    Derivatives:





The Company manages its debt portfolio by using interest rate caps and swaps to achieve an overall desired position of fixed and floating
rates. The fair value of interest rate hedge contracts is estimated based on quotes from the market makers of these instruments and represents the estimated amounts the Company would expect to receive or pay to terminate the contracts. Credit and
market risk exposures are limited to the net interest differentials. At June 30, 2002, the estimated fair value of the interest rate hedges represented a liability of $73,600.





The Company has no embedded derivatives under SFAS 133, as amended, at June 30, 2002.





The following table represents the derivatives in place as of June 30, 2002:





Notional Amount

Maturity Date

Swap Rate

Cap Rate


Floor Rate


Trigger Level

Fair Market Value at 06/30/02Type of Hedge:Interest Rate Cap

$
178,397

08/10/2003

n/a

7.25
%

n/a


n/a

$
4Interest Rate Corridor


550,000

12/07/2002

n/a

5.25
%

n/a


7.25%


Interest Rate Cap3 year Knockout


100,000

03/06/2003

n/a

4.75
%

n/a


7.50%


1Interest Rate Cap3 year Knockout


75,000

03/06/2003

n/a

4.75
%

n/a


7.50%


1Interest Rate Cap3 year Knockout


75,000

03/06/2003

n/a

4.75
%

n/a


7.50%


1Interest Rate Cap


18,990

07/03/2004

n/a

6.50
%

n/a


n/a


23Interest Rate Cap


27,680

07/03/2004

n/a

7.10
%

n/a


n/a


21Interest Rate Cap


42,760

07/03/2004

n/a

8.10
%

n/a


n/a


16Interest Rate Cap


42,760

07/03/2004

n/a

9.70
%

n/a


n/a


5Interest Rate Cap


26,675

08/02/2004

n/a

8.50
%

n/a


n/a


9Structured Collar


180,000

11/04/2004

n/a

6.60
%(1)

5.65
%(2)

n/a


(10,805
)Interest Rate Cap


5,740

07/01/2005

n/a

9.75
%

n/a


n/a


1Interest Rate Cap


106,000

07/01/2005

n/a

9.75
%

n/a


n/a


73$
1,429,002













$
(10,650
)Interest Rate Swap

$
14,616

04/01/2005

3.92%-4.73%

6.50
%

n/a


5.50%

$
(431
)Interest Rate Swap


44,625

08/01/2005

4.36%-5.25%

7.85
%

n/a


5.75%


(1,934
)Interest Rate Swap5 year Knockout


150,000

03/06/2005

6.10%-6.75%

n/a


n/a


7.00%-8.50%


(12,881
)Interest Rate Swap5 year Knockout


550,000

03/07/2005

6.10%-6.75%

n/a


n/a


7.00%-8.50%


(47,702
)$
759,241













$
(62,948
)


---

|(1) |  | If on a reset date LIBOR is greater than or equal to 8% but less than 9.5%, cap shall be of no force. If on a reset date, LIBOR is equal to or greater than
9.5%, then the cap rate shall be 9.5%
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | If on a reset date, LIBOR is equal to or less than 5.1%, then the floor rate is 5.65%
|--- |  | -------------------------------------------------------------------------------------




In the second quarter of 2002, the Company recorded a loss of $18,533 for the change in the fair market value of the interest rate hedge contracts through earnings,
and an increase of $103 (net of taxes of $69) to other comprehensive income. Also, in the second quarter of 2002, the Company recorded amortization of $3,084 (net of taxes of $2,056) to earnings as a reduction of the transitional adjustment that was
recorded in other comprehensive income in 2001. Additionally, the Company paid $10,705 in settlement payments for the ineffective hedges during the second quarter of 2002.




13




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)







In the first quarter of 2002, the Company recorded a gain of $16,084
for the change in the fair market value of the interest rate hedge contracts through earnings, and a charge of $1,508 (net of taxes of $1,005) through other comprehensive income. Also, in the first quarter of 2002, the Company recorded amortization
of $3,084 (net of taxes of $2,056) to earnings as a reduction of the transitional adjustment that was recorded in other comprehensive income in 2001. Additionally, the Company paid $9,610 in settlement payments for the ineffective hedges during the
first quarter of 2002.





Accounting for Derivatives and Hedging Activities





On the date the Company enters into a derivative contract, it designates the derivative as a hedge of (a) a forecasted transaction or (b)
the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a cash flow hedge). Currently, the Company has only entered into derivative contracts designated as cash flow hedges.
Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge, to the extent that the hedge is effective, are recorded in other comprehensive income until earnings are affected by the
variability of cash flows of the hedged transaction (e.g., until periodic settlements of a variable-rate asset or liability are recorded in earnings). Any hedge ineffectiveness (which represents the amount by which the changes in the fair value of
the derivative exceed the variability in the cash flows of the forecasted transaction) is recorded in current-period earnings. Changes in the fair value non-hedging instruments are reported in current-period earnings.





The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective
and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to (1) specific assets and liabilities on the balance sheet or (2) specific firm commitments or forecasted
transactions. The Company also formally assesses (both at the hedges inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the cash flows of hedged
items and whether those derivatives may be expected to remain highly effective in future periods. When it is determined that a derivative is not (or has ceased to be) highly effective as a hedge, the Company discontinues hedge accounting
prospectively.





The Company discontinues hedge accounting prospectively when (1) it determines that the derivative
is no longer effective in offsetting changes in the cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated, or exercised; (3) it is no longer
probable that the forecasted transaction will occur; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designating the derivative as a hedging instrument is no longer appropriate.





When the Company discontinues hedge accounting because it is no longer probable that the forecasted transaction
will occur in the originally expected period, the gain or loss on the derivative remains in accumulated other comprehensive income and is reclassified into earnings when the forecasted transaction affects earnings. However, if it is probable that a
forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses that were accumulated in other comprehensive income will be recognized
immediately in earnings. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company will carry the derivative at its fair value on the balance sheet, recognizing changes in the fair value in
current-period earnings.




14




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)







5.    Comprehensive Income:





SFAS No. 130, Reporting Comprehensive Income establishes standards for reporting and displaying comprehensive income and its
components. Total comprehensive income for the relevant periods is calculated as follows:





Three Months Ended June 30,


Six Months Ended June 30,2002


2001


2002


2001Net (loss) income

$
(41,365
)

$
(12,304
)

$
(384,545
)

$
212Unrealized (loss) gain on securities held for sale


(172
)


474



61



492Unrealized foreign exchange (loss) gain


(1,071
)


37



(1,163
)


523Unrealized gain (loss) on derivative instruments


2,981



(1,240
)


7,572



(41,121
)Total comprehensive income

$
(39,627
)

$
(13,033
)

$
(378,075
)

$
(39,894
)





6.    Computation of Earnings Per Share:





Basic and diluted loss per share have been computed as follows:





Three Months Ended June 30, 2002


Three Months Ended June 30, 2001Basic


Diluted (1), (2)


Basic


Diluted (1), (2)Loss before extraordinary item

$
(41,365
)

$
(41,365
)

$
(11,585
)

$
(11,585
)Preferred stock dividends


(35,500
)


(35,500
)


(27,506
)


(27,506
)Loss attributable to common shareholders before extraordinary item


(76,865
)


(76,865
)


(39,091
)


(39,091
)Extraordinary item










(719
)


(719
)Net loss attributable to common shareholders

$
(76,865
)

$
(76,865
)

$
(39,810
)

$
(39,810
)Weighted average number of shares outstanding


167,942



167,942



167,698



167,698Loss per share:Loss before extraordinary item

$
(0.46
)

$
(0.46
)

$
(0.24
)

$
(0.24
)Extraordinary item














Net loss per common share

$
(0.46
)

$
(0.46
)

$
(0.24
)

$
(0.24
)


---

|(1) |  | For the three months ended June 30, 2002, the dilutive effect of unvested stock grants of 13,581 and 146,455 shares of preferred stock were not included in the
computation of diluted earnings per share because they are anti-dilutive. No option to purchase shares of common stock was issued for the three months ended June 30, 2002. For the three months ended June 30, 2001, the dilutive effect of unvested
stock grants of 5,267, the option to purchase 915 shares of common stock and 133,717 shares of preferred stock were not included in the computation of diluted earnings per share because they are anti-dilutive.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



15




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)




|(2) |  | For the three months ended June 30, 2002, options to purchase 13,235 shares of common stock at prices ranging from $0.61 to $30.40 were outstanding but not
included in the computation because the effect would be anti-dilutive. For the three months ended June 30, 2001, options to purchase 11,802 shares of common stock at prices ranging from $2.6875 to $30.40 were outstanding but not included in the
computation because the effect would be anti-dilutive.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Six Months Ended June 30, 2002


Six Months Ended June 30, 2001Basic


Diluted (1), (2)


Basic


Diluted (1), (2)(Loss) income before extraordinary item and cumulative effect of accounting change

$
(60,443
)

$
(60,443
)

$
11,295


$
11,295Preferred stock dividends


(70,580
)


(70,580
)


(54,531
)


(54,531
)Loss attributable to common shareholders before extraordinary item and cumulative effect of accounting
change


(131,023
)


(131,023
)


(43,236
)


(43,236
)Extraordinary item










(719
)


(719
)Cumulative effect of accounting change


(324,102
)


(324,102
)


(10,364
)


(10,364
)Net loss attributable to common shareholders

$
(455,125
)

$
(455,125
)

$
(54,319
)

$
(54,319
)Weighted average number of shares outstanding


167,898



167,898



167,559



167,559Loss per share:Loss before extraordinary item and cumulative effect of accounting change

$
(0.78
)

$
(0.78
)

$
(0.26
)

$
(0.26
)Extraordinary item














Accounting change


(1.93
)


(1.93
)


(0.06
)


(0.06
)Net loss per common share

$
(2.71
)

$
(2.71
)

$
(0.32
)

$
(0.32
)


---

|(1) |  | For the six months ended June 30, 2002, the dilutive effect of unvested stock grants of 13,544 and 146,455 shares of preferred stock were not included in the
computation of diluted earnings per share because they are anti-dilutive. No option to purchase shares of common stock was issued for the six months ended June 30, 2002. For the six months ended June 30, 2001, the dilutive effect of unvested stock
grants of 2,982, the option to purchase 649 shares of common stock and 133,717 shares of preferred stock were not included in the computation of diluted earnings per share because they are anti-dilutive.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | For the six months ended June 30, 2002, options to purchase 13,235 shares of common stock at prices ranging from $0.61 to $30.40 were outstanding but not
included in the computation because the effect would be anti-dilutive. For the six months ended June 30, 2001, options to purchase 12,757 shares of common stock at prices ranging from $2.15 to $30.40 were outstanding but not included in the
computation because the effect would be anti-dilutive.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




7.    Commitments and Contingencies:





Contingencies





On May 7, 1999, Doris Johnson and Charles Dougherty filed a lawsuit in the Northern District of California against the Company, Patriot American Hospitality, Inc., which is a wholly-owned subsidiary of
the Company,




16




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)




the Companys operating partnerships (Wyndham International Operating Partnership, L.P. and Patriot American Hospitality Partnership, L.P.) and Paine Webber Group, Inc. This action,
captioned Johnson v. Patriot American Hospitality, Inc., et al., No. C-99-2153, was commenced on behalf of all former stockholders of Bay Meadows Operating Company during a class period from June 2, 1997 to the date the lawsuit was filed. The action
asserts securities fraud claims and alleges that the purported class members were wrongfully induced to tender their shares as part of the merger of Patriot and California Jockey Club based on a fraudulent prospectus. The action further alleges that
defendants continued to defraud shareholders about their intentions to acquire numerous hotels and incur massive debt during the class period. Three other actions against the same defendants subsequently were filed in the Northern District of
California: (i) Ansell v. Patriot American Hospitality, Inc., et al., No. C-99-2239 (filed May 14, 1999), (ii) Sola v. Paine Webber Group, Inc., et al., No. C-99-2770 (filed June 11, 1999), and (iii) Gunderson v. Patriot American Hospitality,
Inc., et al., No. C-99-3040 (filed June 23, 1999). Another action with substantially identical allegations, Susnow v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1354-T (filed June 15, 1999), also subsequently was filed in the Northern
District of Texas. By order of the Judicial Panel on Multidistrict Litigation, these actions along with certain actions identified in the following paragraph have been consolidated in the Northern District of California for consolidated pretrial
purposes. On or about August 15, 2001, the court granted the defendants motions to dismiss the action, dismissing some of the claims with prejudice and granting leave to replead certain other claims in the complaint. On or about October 15,
2001, the plaintiffs filed an amended complaint seeking monetary damages but did not specify the amount of damages being sought. On December 20, 2001, the defendants moved to dismiss the amended complaint. The defendants motion has been fully
submitted and is pending before the Court. The Company intends to defend the suits vigorously.





On or about June
22, 1999, a lawsuit captioned Levitch v. Patriot American Hospitality, Inc., et al., No. 3-99-V1416-D, was filed in the Northern District of Texas against the Company, Patriot, James D. Carreker and Paul A. Nussbaum. This action asserts
securities fraud claims and alleges that, during the period from January 5, 1998 to December 17, 1998, the defendants defrauded shareholders by issuing false statements about Wyndham and Patriot. The complaint was filed on behalf of all shareholders
who purchased shares of the Companys capital stock and Patriots capital stock during that period. Three other actions, Gallagher v. Patriot American Hospitality, Inc., et al., No. 3-99-CV-1429-L, filed on June 23, 1999, David Lee
Meisenburg, et al., v. Patriot American Hospitality, Inc., Wyndham International, Inc., James D. Carreker, and Paul A. Nussbaum Case No. 3-99-CV1686-X, filed July 27, 1999 and Deborah Szekely v. Patriot American Hospitality, Inc., et al.,
No. 3-99-CV1866-D, filed on or about August 27, 1999, allege substantially the same allegations. By orders of the Judicial Panel on Multidistrict Litigation, these actions have been consolidated with certain other shareholder actions discussed
in the above paragraph and transferred to the Northern District of California for consolidated pre-trial purposes. On or about August 15, 2001, the court granted the defendants motions to dismiss the action, dismissing some of the claims with
prejudice and granting leave to replead certain other claims in the complaint. On or about October 15, 2001, the plaintiffs filed an amended complaint seeking monetary damages but did not specify the amount of damages being sought. On December 20,
2001, the defendants moved to dismiss the amended complaint. The defendants motion has been fully submitted and is pending before the Court. The Company intends to defend the suits vigorously.





On or about May 8, 2001, a demand for arbitration was filed on behalf of John W. Cullen, IV, William F. Burruss, Heritage Hotel Management
& Investment Ltd. and GH-Resco, L.L.C. naming one of the Companys operating partnerships as a respondent. A similar arbitration was originally filed on or about October 26, 2000 against the Company. The Supreme Court of the State of New
York, however, ruled that the Company did not agree to arbitrate any claims with the claimants and stayed the arbitration with respect to the Company. The




17




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##### Table of Contents



WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)




claimants then recommended an identical arbitration, dropped the Company and named the operating partnership as a respondent. The demand for arbitration claims that the claimants and the
operating partnership are parties to a contribution agreement dated February 28, 1997 and that the operating partnership is in breach of that agreement. The claimants assert that the operating partnership breached its agreement to pay respondents
additional consideration under the contribution agreement by, among other things, allegedly denying the claimants compensation due to them in connection with various transactions initiated by the claimants and provided to the operating partnership,
which allegedly provided the operating partnership with growth and added revenue. In addition, the claimants assert that the operating partnership failed to provide the claimants with various other amounts due under the contribution agreement,
failed to indemnify the claimants for certain expenses and intentionally and negligently mismanaged the operating partnerships business. The claimants do not specify the amount of damages sought. The Company intends to defend the claims
vigorously.





The Company was named as a defendant in four lawsuits stemming from hotels charging energy surcharges
in addition to room rates. The lawsuits were filed in California (Bryant v. Wyndham International, Inc. and Judd v. Wyndham International, Inc.), Illinois (Nicolloff v. Wyndham International, Inc.) and Florida (Soper v. Wyndham International, Inc.).
All of these cases are class actions, with two being on behalf of purported nationwide classes. The basis for each of the cases is that an energy surcharge was not disclosed at the time the room rate was quoted, and the cases allege various causes
of action for breach of contract and unfair business practices under state law. Additionally, the attorneys general of Florida, Texas, New Jersey and California investigated the issue of energy surcharges. The Company has received subpoenas in
Florida, Texas and New Jersey. Finally, the Office of Consumer Affairs of Suffolk County, New York received a complaint related to an energy surcharge, and has asked for a response. The Court has approved a settlement of the two California cases
(Bryant and Judd) and plaintiffs counsel have agreed to dismiss the Illinois and Florida cases. The settlements and dismissals will resolve all of the pending class action lawsuits. The basic terms of the settlement are that each person who
paid an energy surcharge will be entitled to a coupon for $15 (not in thousands) off a future nights stay. If the redemption rate of these coupons is less than 6%, the Company will make up the difference by donating room nights, conference
rooms, ballrooms or the equivalent to charitable or governmental entities. However, in no event will this amount exceed $1.5 million. Additionally, the Company has agreed to pay plaintiffs attorneys fees of up to $410. The Company has
entered into an assurance of voluntary compliance with the Texas Attorney General, resolving that States investigation. The Florida Attorney General filed a lawsuit claiming that the imposition of energy fees violated the States
Deceptive and Unlawful Trade Practices Act and False Claim Act. The Company filed a motion to dismiss this suit and intends to present a vigorous defense to it.





The Company is a party to a number of other claims and lawsuits arising out of the normal course of business. However, the Company does not consider the ultimate liability with respect to these other
claims and lawsuits to be material in relation to the consolidated financial condition or operations of the Company.





8.    Dividends





The Company does not anticipate paying a dividend to
the common shareholders and is prohibited under the terms of the senior credit facility and increasing rate loans facility from paying dividends on the class A common stock. Also, the Company is prohibited under the terms of the January 24, 2002
amendments to the senior credit facility and increasing rate loans facility from paying the cash portion of any dividends on the preferred stock. However, the holders of the preferred stock are entitled to receive on a quarterly basis a dividend
equal to 9.75% per annum on a cumulative basis payable in cash and additional shares of preferred stock.




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WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)







On June 30, 2002, the Company issued approximately 1,204 shares of
series A preferred stock and 221,152 shares of series B preferred stock. As of June 30, 2002, the Company has deferred payments of the cash portion of the preferred stock dividend totaling $29,248. The amount has been included in accounts payable
and accrued expenses in the accompanying condensed consolidated balance sheet. In addition, according to the terms of the series A and B preferred stock, if the cash dividends on the preferred stock are in arrears and unpaid for at least 60 days,
then an additional amount of dividends will accrue at an annual rate of 2.0% of the stated amount of each share of preferred stock then outstanding from the last payment date on which cash dividends were to be paid in full until the cash dividends
in arrears have been paid in full. These additional dividends are cumulative and payable in additional shares of preferred stock. During the three months ended June 30, 2002, the Company issued approximately 1,278 shares of series A preferred stock
and 234,755 shares of series B preferred stock in payment of all the previously accrued additional dividends through June 30, 2002.





On March 31, 2002, the Company issued approximately 1,176 shares of series A preferred stock and 215,889 shares of series B preferred stock.





9.    Segment Reporting:





The Company
classifies its business into proprietary owned brands and non-proprietary branded hotel divisions, under which it manages the business.





Wyndham is the brand umbrella under which all of its proprietary products are marketed. It includes three four-star, upscale hotel brands that offer full-service accommodations to business and leisure travelers, as well as
the five-star luxury resort brand.





Description of reportable segments





The Company has seven reportable segments: Wyndham Hotels & Resorts ® , Wyndham Luxury Resorts, Summerfield Suites by Wyndham    , Wyndham Gardens ® , other proprietary branded hotel properties, non-proprietary branded hotel properties and other.





| |  |  | Wyndham Hotels & Resorts®are upscale, full-service hotel properties that contain an average of 300 hotel rooms, generally between 15,000 and 250,000 square feet of meeting space and a full range of guest services and amenities for business and
leisure travelers, as well as conferences and conventions. The hotels are located primarily in the central business districts and dominant suburbs of major metropolitan markets and are targeted to business groups, meetings, and individual business
and leisure travelers. These hotels offer elegantly appointed facilities and high levels of guest service.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Wyndham Luxury Resorts are five-star hotel properties that are distinguished by their focus on incorporating the local environment into every aspect of the
property, from decor to cuisine to recreation. The luxury collection includes the Golden Door Spa, one of the worlds preeminent spas.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Wyndham Gardens®are full-service properties that serve individual business travelers and are located principally near major airports and suburban business districts. Amenities and services generally include a three-meal restaurant,
signature Wyndham Gardens®libraries and laundry and room service.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Summerfield Suites by Wyndhamoffer guests the highest quality lodging in the upscale all suites segment. Each suite has a fully equipped kitchen, a spacious living room and a private bedroom. Many suites feature two bedroom, two bath units. The
hotels also have a swimming pool, exercise room and other amenities to serve business and leisure travelers.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)







| |  |  | In January 2002, the Company sold Manoir de Gressy, the only hotel remaining in the other proprietary branded segment.
| | - |  | ----------------------------------------------------------------------------------------------------------------------




| |  |  | Non-proprietary branded properties include all properties which are not Wyndham branded hotel properties or other proprietary branded properties. The properties
consist of non-Wyndham branded assets, such as Crowne Plaza®, Embassy Suites®, Marriott®, Courtyard by Marriott®,
Sheraton®and independents.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Other includes management fee and service fee income, interest and other income, general and administrative costs, interest expense, depreciation and
amortization and other charges. General and administrative costs, interest expense and depreciation and amortization are not allocated to each reportable segment; therefore, they are reported in the aggregate within this segment.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Factors management used to identify the reportable segments





The Companys reportable segments are determined by brand affiliation and type of property. The reportable segments are each managed
separately due to the specified characteristics of each segment.





Measurement of segment profit or loss





The Company evaluates performance based on the operating income or loss from each business segment. The
accounting policies of the reportable segments are the same as those described in Note 1. The total revenue and operating income (loss) for each segment for the three and six months ended June 30, 2002 and 2001 are as follows:





Three Months Ended June 30,
2002

Wyndham Hotels & Resorts®

Wyndham Luxury Resorts

Wyndham Gardens®

Summerfield Suites by Wyndham

Other Proprietary Branded

Non Proprietary Branded

Other


TotalTotal revenue

$
269,697

$
23,883

$
16,780

$
28,503

$


$
163,394

$
6,446


$
508,703Operating income (loss)


71,870


5,811


2,179


3,123





37,202


(185,512
)


(65,327
)





Three Months Ended June 30,
2001

Wyndham Hotels & Resorts®

Wyndham Luxury Resorts

Wyndham Gardens®

Summerfield Suites by Wyndham

Other Proprietary Branded

Non Proprietary Branded

Other


TotalTotal revenue

$
283,489

$
23,934

$
17,830

$
35,081

$
1,275

$
219,471

$
6,445


$
587,525Operating income (loss)


74,002


6,110


3,732


7,410


63


58,995


(164,042
)


(13,730
)





Six Months Ended June 30,
2002

Wyndham Hotels & Resorts®

Wyndham Luxury Resorts

Wyndham Gardens®

Summerfield Suites by Wyndham

Other Proprietary Branded

Non Proprietary Branded

Other


TotalTotal revenue

$
540,206

$
51,275

$
32,655

$
54,399

$
288

$
316,417

$
13,019


$
1,008,259Operating income (loss)


145,712


15,311


3,986


9,024





68,521


(338,375
)


(95,821
)




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WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)







Six Months Ended June 30,
2001

Wyndham Hotels & Resorts®

Wyndham Luxury Resorts

Wyndham Gardens®

Summerfield Suites by Wyndham

Other Proprietary Branded

Non Proprietary Branded

Other


TotalTotal revenue

$
591,447

$
52,366

$
35,540

$
69,035

$
2,433

$
435,016

$
15,843


$
1,201,680Operating income (loss)


168,472


14,594


6,128


12,480


224


113,308


(282,335
)


32,871





The following table represents revenue information by geographic
area for the three and six months ended June 30, 2002 and 2001, respectively. Revenues are attributed to the United States and its territories or International based on the location of hotel properties.





Three Months ended June 30, 2002United States

International

TotalRevenues

$
502,522

$
6,181

$
508,703Three Months ended June 30, 2001United States

International

TotalRevenues

$
578,322

$
9,203

$
587,525Six Months ended June 30, 2002United States

International

TotalRevenues

$
994,462

$
13,797

$
1,008,259Six Months ended June 30, 2001United States

International

TotalRevenues

$
1,182,676

$
19,004

$
1,201,680





10.    Supplemental Cash Flow Disclosure:





During the three months ended June 30, 2002, the Company issued a stock dividend of 222,356 shares of series A and series B
preferred stock with a value of $22,236. The Company deferred payment of the cash portion of the dividend of approximately $7,312. The amount has been included in accounts payable and accrued expenses in the accompanying condensed consolidated
balance sheet. In addition, the Company issued an additional stock dividend of 236,033 shares of series A and series B preferred stock with a value of $23,603 in payment of previously accrued additional dividends at a rate of 2.0% per annum as cash
dividends on the preferred stock were in arrears for at least 60 days as of June 30, 2002.





During the three
months ended March 31, 2002, the Company issued a stock dividend of 217,065 shares of series A and series B preferred stock with a value of $21,706. The Company deferred payment of the cash portion of the dividend of approximately $7,312. The amount
has been included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet.





During the three months ended June 30, 2002, the Company recorded an accrual of $18,706 as a result of the change in the fair market value of the derivatives with the offset recognized as a loss of $18,533 and an




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WYNDHAM INTERNATIONAL, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(in thousands, except share
amounts)


(unaudited)




increase to other comprehensive income of $103 (net of taxes of $69). Also, in the second quarter of 2002, the Company recorded amortization of $3,084 (net of taxes of $2,056) to earnings as a
reduction of the transitional adjustment that was recorded in other comprehensive income in 2001. Additionally, the Company paid $10,705 in settlement payments for the ineffective hedges.





During the three months ended March 31, 2002, the Company recorded an accrual of $18,596 as a result of the change in the fair market value of the derivatives with the
offset recognized as a gain of $16,084 and a charge through other comprehensive income of $1,508 (net of taxes of $1,005). Also, in the first quarter of 2002, the Company recorded amortization of $3,084 (net of taxes of $2,056) to earnings as a
reduction of the transitional adjustment that was recorded in other comprehensive income in 2001. Additionally, the Company paid $9,610 in settlement payments for the ineffective hedges.





The Company adopted the provisions of SFAS 142 in the first quarter of 2002 and recorded an impairment charge of $324,102 as a cumulative effect of a change in accounting
principle.





11.    Subsequent Event:





On July 19, 2002, the Company sold the 385-room Wyndham Myrtle Beach Resort and Arcadian Shores Golf Club, a leasehold interest in a golf course and adjacent land. The
Company received net cash proceeds of approximately $30.6 million. The hotel had no mortgage debt. The Company recorded a net loss of $8,220 as a result of the asset sale. Under a short-term transitional agreement, Wyndham Myrtle Beach Resort will
retain the Wyndham flag until the Spring of 2003. In connection with the sale of the assets, the Company paid down the balance of its term loans, increasing rate loans and revolver by a total of $20,065. As part of the sale of Wyndham Myrtle Beach,
the Company will re-flag the Company-owned and managed Fort Lauderdale Airport property to the Wyndham flag.




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##### Table of Contents




ITEM 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations





The following discussion and analysis should be read in conjunction with the Managements Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on
Form 10-K for the year ended December 31, 2001.





Certain statements in this Form 10-Q constitute
forward-looking statements as that term is defined under §21E of the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our
current expectations and projections about future events. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates,
intends, plans, believes, estimates, thinks, and similar expressions, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. These factors include, among other things, those matters discussed under the
caption Risk Factors in our 2001 Annual Report on Form 10-K as well as the following:





| |  |  | the impact of general economic conditions in the United States;
| | - |  | ---------------------------------------------------------------




| |  |  | industry conditions, including competition;
| | - |  | -------------------------------------------




| |  |  | our ability to effect sales of our assets on terms and conditions favorable to us;
| | - |  | ----------------------------------------------------------------------------------




| |  |  | our ability to integrate acquisitions into our operations and management;
| | - |  | -------------------------------------------------------------------------




| |  |  | risks associated with the hotel industry and real estate markets in general;
| | - |  | ----------------------------------------------------------------------------




| |  |  | the impact of terrorist activity, threats of terrorist activity and responses to terrorist activity on the economy in general and the travel and hotel
industries in particular;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | capital expenditure requirements;
| | - |  | ---------------------------------




| |  |  | legislative or regulatory requirements; and
| | - |  | -------------------------------------------




| |  |  | access to capital markets.
| | - |  | --------------------------




Although we believe that these statements are based upon reasonable assumptions, we can give no assurance that our goals will be achieved. Given these uncertainties, prospective investors are cautioned not to place undue
reliance on these forward-looking statements. These forward-looking statements are made as of the date of this Form 10-Q. We assume no obligation to update or revise them or provide reasons why actual results may differ.





Results of operations:





General





As of June 30, 2002, we had 164 owned and leased hotels with approximately 42,600
guestrooms as compared to 167 owned and leased hotels with approximately 42,800 guestrooms at June 30, 2001. This decrease was a result of hotels sold during that twelve month period. As of June 30, 2002, we managed 30 hotels and franchised 24
hotels as compared to 34 managed hotels and 30 franchised hotels at June 30, 2001.





The residual effects of the
terrorist attacks of September 11, 2001, a sluggish economy, investor lack of confidence in the stock market and other national and world events have created a significant amount of uncertainty about future prospects and national and world
economies. The overall long-term effect on us and the lodging industry is also uncertain. In the face of uncertainty, we have developed and implemented a contingency plan focused particularly on cost management. At the present time, however, it is
not possible to predict either the severity or duration of such declines, but weaker hotel performance will, in turn, have an adverse impact on our business, financial condition, and results of operations.




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In an agreement dated as of January 24, 2002, we amended and restated our senior
credit facility and increasing rate loans facility. Under the terms of the amendment and restatement, all financial covenants, other than the interest coverage ratio test, have been eliminated. The minimum interest coverage ratio has been reduced
from 1.75:1.00 to 1.05:1.00 until December 31, 2003, and to 1.25:1.00 thereafter. Pursuant to the amendment and restatement, we provided additional collateral to the lenders, agreed to an increase in the interest rates payable under the senior
credit facility, and agreed to limit our capital expenditures to $125 million per year, plus $25 million per year for emergency capital expenditures. We also agreed that we would use 100% of the net cash proceeds from sales of the lenders
collateral, 75% of the proceeds from other asset sales and proceeds from mortgage refinancings and 100% of the proceeds from new debt issuances to reduce debt outstanding under the credit facilities. We also agreed not to pay the cash portion of the
regular quarterly dividend on our series A and series B convertible preferred stock.





On May 3, 2002, we entered
into the third amendment and restatement of our credit facilities. The third amendment and restatement permits the issuance of certain debt securities and, in the event that we issue such debt securities, the maturity of the outstanding revolving
loans held by the lenders who have consented to the third amendment and restatement will be extended from June 30, 2004 to June 30, 2006.





This amendment and restatement directs the net cash proceeds we receive from any such offering of debt securities to be applied as follows:





| |  |  | first, to repay all of the outstanding increasing rate loans and cancel the increasing rate loans facility; and
| | - |  | ---------------------------------------------------------------------------------------------------------------




| |  |  | second, to repay the outstanding revolving loans the maturity of which has been extended to June 30, 2006 and the term loans equally, based on their outstanding
principal amounts, with the revolving commitment of these repaid revolving loans reduced by the amount of the principal repayment thereof.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The proceeds from any such offering of debt securities will not be used to repay any of the revolving loans whose maturity remains June 30, 2004.





The third amendment and restatement also specifically permits us to refinance two or more of our existing mortgages in a single transaction. In such a transaction, the
refinancing of the mortgaged properties may be secured by the properties that secured the mortgage being refinanced and/or certain specified unencumbered properties.





In the event that we issue certain debt securities, the third amendment and restatement will also change the application of proceeds from asset dispositions, exchanges and
certain incurrences of indebtedness among the various loan facilities. In addition, the third amendment and restatement allows us to sell certain non-core assets for consideration consisting of marketable securities, assumed indebtedness and cash.





In connection with the credit agreement, we also entered into an increasing rate note purchase and loan
agreement, originally dated June 30, 1999 and modified by the first amendment and restatement dated September 25, 2000 and the second amendment and restatement effective as of January 24, 2002, with Bear Stearns Corporate Lending Inc, as
co-arranger and syndication agent, Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as syndication agent, and J.P. Morgan Securities Inc. (formerly known as Chase Securities Inc.), as lead arranger and book manager.
This facility has no scheduled amortization. As of June 30, 2002, we had a $482 million increasing rate term loan facility.





Upon our receipt of the proceeds from any offering of debt securities and repayment of the term loans and the revolving loans whose maturity has been extended in the third amendment and restatement to June 30, 2006, the outstanding
amounts of the revolving loans held by the lenders who consent to the third amendment and restatement will be converted to term loans and will constitute a new class of loans under the senior credit facility having the same interest rate and term as
the existing senior credit facility. The new term loans will be amortized semi-annually by 0.5% with balance paid on the maturity date. The extended revolving loans and the revolving




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loans which maintain a maturity of June 30, 2004 will have the same interest rate, but will be treated differently for purposes of prepayments due to asset sales and incurrence of debt.





On June 7, 2002, we withdrew the offering of the proposed debt securities due to unfavorable market conditions.





Results of Operations: Three months ended June 30, 2002 compared with the three months ended
June 30, 2001





Our hotel revenues were $502,259,000 and $581,080,000 for the three months ended June
30, 2002 and 2001, respectively. Approximately $29,505,000 of the decrease in our hotel revenues is attributable to those hotels that were sold in 2001. The remaining decrease is attributable to declining revenues throughout our owned and leased
hotel portfolio. Revenue per available room, or RevPAR, decreased 10.7% for the quarter ended June 30, 2002 as compared to the same period in 2001.





Our hotel expenses were $382,075,000 and $419,680,000 for the three months ended June 30, 2002 and 2001, respectively. Approximately $25,440,000 of the decrease in our hotel expenses is attributable to
those hotels that were sold in 2001. The remaining decrease is attributable to staffing reductions at hotels and other cost saving initiatives we implemented as our hotel revenues declined.





Our management fee and service fee income was $4,574,000 and $4,663,000 for the three months ended June 30, 2002 and 2001, respectively. The decrease is primarily a result
of reductions in hotel revenue upon which the fees are based and the termination of certain contracts since June 30, 2001.





Our general and administrative expenses were $17,593,000 and $29,417,000 for the three months ended June 30, 2002 and 2001, respectively. The decrease in our general and administrative expenses for the quarter ended June 30, 2002 is
primarily related to the decrease in conversion costs of $7,171,000 resulting from the implementation of brand standards in our portfolio of hotels during the quarter ended June 30, 2001. The decrease is also due to severance costs paid in 2001 of
$5,347,000. This decrease was offset in 2002 in part by an increase in debt restructuring costs of $1,119,000, amortization of retention bonuses of $1,595,000 and an incentive bonus accrual of $1,999,000.





During the three months ended June 30, 2002, our bond offering cancellation costs were $4,504,000. We withdrew the offering of the
proposed debt securities due to unfavorable market conditions.





Our interest expense was $61,045,000 and
$79,942,000 for the three months ended June 30, 2002 and 2001, respectively. The decrease in interest expense is primarily a result of a reduction of interest rates. The average one-month LIBOR rate for the three months ended June 30, 2002 was
1.845% as compared to 4.274% for the three months ended June 30, 2001. The weighted average interest rate as of June 30, 2002 was 6.00% as compared to 7.72% as of June 30, 2001.





For the three months ended June 30, 2002, we recorded a loss of $18,533,000 as compared to a gain of $6,074,000 for the three months ended June 30, 2001 for the change in
the fair market value of interest rate hedge contracts. In addition, $103,000 (net of taxes of $69,000) and $1,240,000 (net of taxes of $827,000) were charged through other comprehensive income for the three months ended June 30, 2002 and 2001,
respectively, for such change. Also, during the second quarter of 2002, we paid $10,704,846 in settlement payments for the ineffective hedges and recorded amortization of $3,084,000 (net of taxes of $2,056,000) to earnings as a reduction of the
transitional adjustment that was recorded in other comprehensive income in 2001.





Our depreciation and
amortization expense was $73,338,000 and $62,230,000 for the three months ended June 30, 2002 and 2001, respectively. During the fourth quarter of 2001, we transferred back to held for use certain assets that were previously held for sale thus
increasing depreciation expense in the second quarter of




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##### Table of Contents

2002 by $12,494,671. The remainder of the increase is due to asset additions subsequent to the second quarter of 2001. This increase was offset by our adopting SFAS 142 during the first quarter
of 2002 which impaired our goodwill by $324,102,000 thus reducing amortization expense by $3,034,000 for the three months ended June 30, 2002.





The benefit for income taxes was $24,147,000 and $3,035,000 for the three months ended June 30, 2002 and 2001, respectively. The tax benefit was in part due to operating losses and in part due to
depreciation of certain assets that were previously held for sale in the second quarter of 2001, resulting in differences in GAAP and tax depreciation.





Minority interests share of income in consolidated subsidiaries was $239,000 and $2,106,000 for the three months ended June 30, 2002 and 2001, respectively. The decrease in the allocation of
income used in the computation of minority interest was due to depreciation expense now being recorded for assets previously held for sale in 2001. Also, approximately $282,000 of the decrease in minority interest is attributable to those hotels
that were sold in 2001.





During the three months ended June 30, 2001, we recorded a charge of $719,000, net of
taxes, as an extraordinary item resulting from the write-off of unamortized deferred financing costs for debt that was repaid.





Our resulting net loss for the three months ended June 30, 2002 was $41,365,000 as compared to net loss of $12,304,000 for the three months ended June 30, 2001.





Results of Operations: Six months ended June 30, 2002 compared with the six months ended June 30, 2001





Our hotel revenues were $995,241,000 and $1,185,837,000 for the six months ended June 30, 2002 and 2001, respectively. Approximately $61,834,000 of the decrease in our
hotel revenues is attributable to those hotels that were sold in 2001. The remaining decrease is attributable to declining revenues throughout our owned and leased hotel portfolio. RevPAR decreased 14.2% for the six months ended June 30, 2002 as
compared to the same period in 2001.





Our hotel expenses were $752,687,000 and $845,286,000 for the six months
ended June 30, 2002 and 2001, respectively. Approximately $52,232,000 of the decrease in our hotel expenses is attributable to those hotels that were sold in 2001. The remaining decrease is attributable to staffing reductions at hotels and other
cost saving initiatives we implemented as our hotel revenues declined.





Our management fee and service fee income
was $9,043,000 and $10,382,000 for the six months ended June 30, 2002 and 2001, respectively. The decrease is primarily a result of reductions in hotel revenue upon which the fees are based and the termination of certain contracts since June
30, 2001.





Our general and administrative expenses were $36,582,000 and $40,517,000 for the six months ended
June 30, 2002 and 2001, respectively. The decrease in our general and administrative expenses for the six months ended June 30, 2002 is primarily related to the decrease in conversion costs of $7,079,000 resulting from the implementation of
brand standards in our portfolio of hotels during the six months ended June 30, 2001. The decrease is also due to severance costs paid of $6,335,000 in 2001. This decrease was offset in 2002 in part by an increase in debt restructuring costs of
$1,506,000, amortization of retention bonuses of $3,162,000 and an incentive bonus accrual of $3,999,000.





During
the six months ended June 30, 2002, our bond offering cancellation costs were $4,504,000. We withdrew the offering of the proposed debt securities due to unfavorable market conditions.





Our interest expense was $125,462,000 and $166,199,000 for the six months ended June 30, 2002 and 2001, respectively. The decrease in interest expense is primarily a result
of a reduction of interest rates. The average




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one-month LIBOR rate for the six months ended June 30, 2002 was 1.846% as compared to 4.906% for the six months ended June 30, 2001. The weighted average interest rate as of June 30, 2002 was
6.00% as compared to 7.72% as of June 30, 2001.





For the six months ended June 30, 2002, we recorded a loss of
$2,451,000 as compared to a gain of $15,676,000 for the six months ended June 30, 2001 for the change in the fair market value of interest rate hedge contracts. In addition, $1,405,000 (net of taxes of $936,000) and $19,430,000 (net of taxes of
$12,954,000) were charged through other comprehensive income as of June 30, 2002 and 2001, respectively, for such change. Also, during the six months ended June 30, 2002, we paid $20,315,000 in settlement payments for the ineffective hedges and
recorded amortization of $6,167,000 (net of taxes of $4,111,000) to earnings during the six months ended June 30, 2002 as a reduction of the transitional adjustment that was recorded in other comprehensive income in 2001.





Our depreciation and amortization expense was $145,772,000 and $117,072,000 for the six months ended June 30, 2002 and 2001, respectively.
During the fourth quarter of 2001, we transferred back to held for use certain assets that were previously held for sale thus increasing depreciation expense for the six months ended June 30, 2002 by $24,493,000. The remainder of the increase is due
to asset additions subsequent to the second quarter of 2001. This increase was offset by our adopting SFAS 142 during the first quarter of 2002 which impaired our goodwill by $324,102,000 thus reducing amortization expense by $6,068,000 for the six
months ended June 30, 2002.





The benefit for income taxes was $35,419,000 for the six months ended June 30, 2002.
The provision for income taxes was $16,221,000 for the six months ended June 30, 2001. The tax benefit was in part due to operating losses and in part due to depreciation of certain assets that were previously held for sale during the six months
ended June 30, 2001, resulting in differences in GAAP and tax depreciation.





Minority interests share of
income in consolidated subsidiaries was $939,000 and $6,952,000 for the six months ended June 30, 2002 and 2001, respectively. The decrease in the allocation of income used in the computation of minority interest was due to depreciation expense now
being recorded for assets previously held for sale in 2001. Also, approximately $3,304,000 of the decrease in minority interest is attributable to those hotels that were sold in 2001.





Our adoption of SFAS No. 142 during the six months ended June 30, 2002 resulted in the cumulative effect of an accounting change of $324,102,000 being recognized in our
condensed consolidated statement of operations as compared to $10,364,000 (net of taxes of $6,911,000) for the adoption of SFAS No. 133 for the six months ended June 30, 2001.





During the six months ended June 30, 2001, we recorded a charge of $719,000, net of taxes, as an extraordinary item resulting from the write-off of unamortized deferred
financing costs for debt that was repaid.





Our resulting net loss for the six months ended June 30, 2002 was
$384,545,000 as compared to net income of $212,000 for the six months ended June 30, 2001.





Results of reporting segments:





Our results of operations are classified into seven reportable segments. Those segments include
(1) Wyndham Hotel & Resorts ® , (2) Wyndham Luxury Resorts, (3) Wyndham Gardens ® , (4) Summerfield Suites by Wyndham  , (5) other proprietary branded hotel properties, (6) non-proprietary branded properties and (7) other.





Three months ended June 30, 2002 compared with the three months ended June 30, 2001





Wyndham Hotels & Resorts ® represented approximately 53.0% and 48.1% of our total revenue for the three months ended June 30, 2002 and 2001, respectively. Total revenue for this segment was $269,697,000 compared




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to $283,489,000 for the three months ended June 30, 2002 and 2001, respectively. Operating income for this segment was $71,870,000 compared to $74,002,000 for the three months ended June 30, 2002
and 2001, respectively. Decreases in revenue and operating income for this segment can be primarily attributed to decreases in average daily rate, or ADR, of 9.0% due to the sluggish economy and the residual effects of September 11, 2001 while
occupancy remained flat.





Wyndham Luxury Resorts represented approximately 4.7% and 4.1% of our total revenue for
the three months ended June 30, 2002 and 2001, respectively. Total revenue for this segment was $23,883,000 compared to $23,934,000 for the three months ended June 30, 2002 and 2001, respectively. Operating income for this segment was $5,811,000
compared to $6,110,000 for the same periods, respectively. The decreases in both revenue and operating income for this segment can be primarily attributed to decreases in ADR of 17.1% in 2002 due to the sluggish economy and the residual effects of
September 11, 2001. The decrease in ADR was partially offset by an increase in occupancy of 8.8%.





Wyndham
Gardens ® represented approximately 3.3% and 3.0% of our total revenue for the three months ended June
30, 2002 and 2001, respectively. Total revenue for this segment was $16,780,000 compared to $17,830,000 for the three months ended June 30, 2002 and 2001, respectively. Operating income for this segment was $2,179,000 compared to $3,732,000 for the
same periods, respectively. The decreases in both revenue and operating income for this segment resulted primarily from a decline in ADR of 15.3% in 2002 due to the sluggish economy and the residual effects of September 11, 2001 while occupancy
remained flat.





Summerfield Suites by Wyndham  represented approximately 5.6% and 6.0% of our total revenue for the three months ended June 30, 2002 and 2001, respectively. Total revenue for
this segment was $28,503,000 compared to $35,081,000 for the three months ended June 30, 2002 and 2001, respectively. Operating income for this segment was $3,123,000 compared to $7,410,000 for the same periods, respectively. The decreases in both
revenue and operating income were primarily due to declines in ADR of 14.9% due to the sluggish economy and the residual effects of September 11, 2001.





The decrease in other proprietary branded properties was a result of our sale of Manoir de Gressy in January 2002. No hotel remains in this segment.





Non-proprietary branded properties, including Doubletree ® , Hilton ® , Holiday Inn ® , Marriott ® , Ramada ® , Radisson ® , and other major hotel franchises, represented approximately
32.1% and 37.3% of our total revenue for the three months ended June 30, 2002 and 2001, respectively. Total revenue for this segment was $163,394,000 compared to $219,471,000 for the three months ended June 30, 2002 and 2001, respectively. Operating
income for this segment was $37,202,000 and $58,995,000 for the quarters ended June 30, 2002 and 2001, respectively. The decreases in both revenue and operating income were due to the sale of non-proprietary branded assets in 2001. Also, operating
results were impacted by declines in ADR and occupancy of 6.90% and 2.8%, respectively, in 2002 due to the sluggish economy and the residual effects of September 11, 2001.





We have identified 51 of these non-proprietary branded hotels as non-strategic assets which we intend to sell. However, these non-strategic assets will be held until such
time as the sales price meets or exceeds managements assessment of fair value. These 51 assets represented approximately 28% of our revenue and 30% of our adjusted EBITDA for the three months ended June 30, 2002 and 27% of our revenue and 28%
of our adjusted EBITDA for the three months ended June 30, 2001. EBITDA is earnings before interest, taxes, depreciation and amortization. EBITDA is presented because it provides useful information regarding our ability to service debt. EBITDA
should not be considered as an alternative measure of operating results or cash flow from operations, as determined by generally accepted accounting principles. EBITDA as presented by us may not be comparable to other similarly titled measures used
by other companies. Adjusted EBITDA is EBITDA adjusted for certain non-recurring items.





Other represents revenue
from various operating businesses, including management and other service companies. Expenses in this segment are primarily interest, depreciation, amortization and corporate general and




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administrative expenses. Total revenue for this segment was $6,446,000 and $6,445,000 for the three months ended June 30, 2002 and 2001, respectively. Operating losses for the segment were
$185,512,000 and $164,042,000 for the three months ended June 30, 2002 and 2001, respectively. The increase in operating loss of $21,470,000 is primarily attributable to increases in certain expenses such as loss on derivative financial instruments
of $37,651,000, bond offering cancellation costs of $4,504,000 and depreciation expense of $12,495,000. The increase in the loss on derivative instruments of $37,651,000 was primarily a result of changes in the fair market value of the interest rate
hedge contracts. The bond offering cancellation costs of $4,504,000 were the costs associated with the proposed issuance of debt securities which was later withdrawn due to unfavorable market conditions. The increase in depreciation expense of
$12,495,000 was primarily a result of the depreciation of assets previously held for sale. This increase was offset in part by the decreases in interest expense of $18,898,000 and general and administrative expense such as conversion costs of
$7,171,000 and severance costs of $5,347,000 during the quarter ended June 30, 2002 as compared to the quarter ended June 30, 2001.





Six months ended June 30, 2002 compared with the six months ended June 30, 2001





Wyndham Hotels & Resorts ® represented approximately 53.6% and 49.1% of our total
revenue for the six months ended June 30, 2002 and 2001, respectively. Total revenue for this segment was $540,206,000 compared to $591,447,000 for the six months ended June 30, 2002 and 2001, respectively. Operating income for this segment was
$145,712,000 compared to $168,472,000 for the six months ended June 30, 2002 and 2001, respectively. Decreases in revenue and operating income for this segment can be primarily attributed to declines in ADR and occupancy of 10.4% and 2.5%,
respectively, in 2002 due to the sluggish economy and the residual effects of September 11, 2001.





Wyndham Luxury
Resorts represented approximately 5.1% and 4.3% of our total revenue for the six months ended June 30, 2002 and 2001, respectively. Total revenue for this segment was $51,275,000 compared to $52,366,000 for the six months ended June 30, 2002 and
2001, respectively. Operating income for this segment was $15,311,000 compared to $14,594,000 for the same periods, respectively. The decrease in revenue for this segment can be primarily attributed to decreases in ADR of 17.6% in 2002 due to the
sluggish economy and the residual effects of September 11, 2001. The decrease in ADR was partially offset by an increase in occupancy of 6.0%. The increase in operating income is due to a reduction of staff and other cost saving measures implemented
after the second quarter of 2001.





Wyndham Gardens ® represented approximately 3.2% and 2.9% of our total revenue for the six months ended June 30, 2002 and 2001, respectively. Total revenue for
this segment was $32,655,000 compared to $35,540,000 for the six months ended June 30, 2002 and 2001, respectively. Operating income for this segment was $3,986,000 compared to $6,128,000 for the same periods, respectively. The decreases in both
revenue and operating income for this segment resulted primarily from declines in ADR and occupancy of 15.4% and 2.5%, respectively, in 2002 due to the sluggish economy and the residual effects of September 11, 2001.





Summerfield Suites by Wyndham  represented approximately 5.4% and 5.7% of our total revenue for the six months ended June 30, 2002 and 2001, respectively. Total revenue for this segment was $54,399,000 compared to
$69,035,000 for the six months ended June 30, 2002 and 2001, respectively. Operating income for this segment was $9,024,000 compared to $12,480,000 for the same periods, respectively. The decrease in both revenue and operating income for this
segment resulted primarily from declines in ADR and occupancy of 16.4% and 2.3%, respectively, due to the sluggish economy and the residual effects of September 11, 2001.





The decrease in other proprietary branded properties was a result of our sale of Manoir de Gressy in January 2002. No hotel remains in this segment.





Non-proprietary branded properties, including Doubletree ® , Hilton ® , Holiday Inn ® , Marriott ® , Ramada ® , Radisson ® , and other major hotel franchises, represented approximately
31.4% and 36.1% of our total revenue




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for the six months ended June 30, 2002 and 2001, respectively. Total revenue for this segment was $316,417,000 compared to $435,016,000 for the six months ended June 30, 2002 and 2001,
respectively. Operating income for this segment was $68,521,000 and $113,308,000 for the six months ended June 30, 2002 and 2001, respectively. The decrease in both revenue and operating income was due primarily to the sale of non-proprietary
branded assets in 2001. Also, operating results were impacted by declines in ADR and occupancy of 7.4% and 4.9%, respectively, in 2002 due to the sluggish economy and the residual effects of September 11, 2001.





We have identified 51 of these non-proprietary branded hotels as non-strategic assets which we intend to sell. However, these
non-strategic assets will be held until such time as the sales price meets or exceeds managements assessment of fair value. These 51 assets represented approximately 27% of our revenue and 26% of our adjusted EBITDA for the six months ended
June 30, 2002 and 26% of our revenue and 24% of our adjusted EBITDA in 2001.





Other represents revenue from
various operating businesses, including management and other service companies. Expenses in this segment are primarily interest, depreciation, amortization and corporate general and administrative expenses. Total revenue for this segment was
$13,019,000 and $15,843,000 for the six months ended June 30, 2002 and 2001, respectively. The $2,824,000 decrease was primarily the result of lost management fees from contracts lost and the decline in hotel revenue. Operating losses for the
segment were $338,375,000 and $282,335,000 for the six months ended June 30, 2002 and 2001, respectively. The increase in operating loss of $56,040,000 was primarily attributable to increases in certain expenses such as loss on derivative
instruments of $46,232,000, bond offering cancellation costs of $4,504,000 and depreciation expense of $24,493,000. The increase in the loss on derivative instruments of $46,232,000 was primarily a result of changes in the fair market value of the
interest rate hedge contracts. The bond offering cancellation costs of $4,504,000 were the costs associated with the proposed issuance of debt securities which was later withdrawn due to unfavorable market conditions. The increase in depreciation
expense of $24,493,000 was primarily a result of the depreciation of assets previously held for sale. This increase was offset in part by the decreases in interest expense of $40,737,000 and general and administrative expense, such as conversion
costs of $7,079,000 and severance costs of $6,335,000 during the six months ended June 30, 2002 as compared to the six months ended June 30, 2001.





Statistical Information





During 2002, our portfolio of 164 owned and leased hotels
experienced a decline in ADR, occupancy and REVPAR for the three and six months ended June 30, 2002 as compared to the three and six months ended June 30, 2001. The following table sets forth certain statistical information for the 164 owned
and leased hotels for 2002 and 2001 as if the hotels were owned or leased for the entire periods presented.





Three months ended June 30,

Six months ended June 30,Occupancy


ADR

REVPAR

Occupancy


ADR

REVPAR2002


2001


2002

2001

2002

2001

2002


2001


2002

2001

2002

2001Wyndham Hotels & Resorts

73.8
%

74.4
%

$
116.78

$
128.37

$
86.21

$
95.48

70.1
%

72.6
%

$
124.37

$
138.80

$
87.18

$
100.83Wyndham Luxury Resorts

79.1


70.3



229.26


276.59


181.24


194.39

77.0


70.9



261.39


317.07


201.20


224.95Wyndham Garden Hotels

63.8


63.5



77.65


91.69


49.55


58.23

60.1


62.6



79.29


93.73


47.63


58.65Summerfield Suites by Wyndham

81.8


82.6



104.59


122.95


85.51


101.50

78.0


80.4



105.03


125.62


81.95


100.95Non-Proprietary Branded Hotels

66.4


69.2



103.17


110.84


68.53


76.73

63.0


67.9



104.99


113.4


66.15


76.96Weighted average

71.1
%

72.4
%

$
109.73

$
120.67

$
78.01

$
87.34

67.5
%

70.8
%

$
114.56

$
127.31

$
77.33

$
90.15




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Liquidity and Capital Resources





Our cash and cash equivalents as of June 30, 2002 were $77.9 million and our restricted cash was $104.8 million. Our cash and cash equivalents as of June 30, 2001 were
$59.7 million and our restricted cash was $108.5 million.





Cash Flow Provided by Operating Activities





Our principal source of cash flow is from the operations of the hotels that we own, lease and manage. Cash
flows from operating activities were $65.3 million and $131.2 million for the six months ended June 30, 2002 and 2001, respectively. Operational cash flows were negatively impacted by those hotels that were sold in 2001, the sluggish economy and the
residual effects of the terrorist attacks of September 11, 2001.





Cash Flows from Investing and Financing
Activities





Cash flows used in investing activities were $27.4 million for the six months ended June 30, 2002,
resulting primarily from renovation expenditures at certain hotels and changes in our restricted cash reserves. This was offset by proceeds received from the sale of assets during the period. Cash flows used in financing activities of $126.3 million
for the six months ended June 30, 2002 were primarily related to principal repayments made on our debt and distributions made to limited partners.





Cash flows used in investing activities were $3.6 million for the six months ended June 30, 2001, resulting primarily from renovation expenditures at certain hotels. This was offset by proceeds
received from asset sales during the period. Cash flows used in financing activities of $121.0 million for the six months ended June 30, 2001 were primarily related to principal payments made on our debt, distributions made to limited partners and
dividend payments made on our preferred stock.





Credit Facilities





As of June 30, 2002, we had approximately $213.5 million outstanding under our revolving credit facility, $1.28 billion outstanding on
term loans, and $482 million outstanding under increasing rate loans facility. Additionally, we had outstanding letters of credit totaling $53.9 million. Also as of June 30, 2002, we had over $1.3 billion of mortgage debt outstanding that encumbered
116 hotels and capital leases and other debt of $41.1 million, resulting in total indebtedness of approximately $3.32 billion. Included in the total indebtedness is approximately $30 million of debt associated with assets held for sale. As of June
30, 2002, we had $232.6 million of additional availability under the revolving credit facility.





On January 24,
2002, we successfully reached an agreement with the lenders under our senior credit facility and our increasing rate loans facility to permanently amend these facilities. The key terms of the amendments are as follows:





| |  |  | The total leverage ratio and the senior secured leverage ratio requirements have been eliminated from the facilities;
| | - |  | ---------------------------------------------------------------------------------------------------------------------




| |  |  | The interest coverage ratio decreased from 1.75 to 1.00 to 1.05 to 1.00 until December 31, 2003, at which time it will increase to 1.25 to 1.00;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | We granted mortgages on 59 of our properties that were not previously encumbered;
| | - |  | ---------------------------------------------------------------------------------




| |  |  | The interest rate on our term loans increased to LIBOR plus 4.75% per annum;
| | - |  | ----------------------------------------------------------------------------




| |  |  | The interest rate on our revolving credit facility increased to LIBOR plus 3.75% per annum;
| | - |  | -------------------------------------------------------------------------------------------




| |  |  | 100% of the net cash proceeds from sales of the lenders collateral, and 75% of the net cash proceeds we receive from other asset sales and any excess
proceeds we receive from any mortgage debt refinancing must be used to reduce the amounts outstanding under the senior credit facility and the increasing rate loans facility;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 100% of the net cash proceeds we receive from any new debt issuance must be used to reduce the amounts outstanding under the senior credit facility and the
increasing rate loans facility;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Our capital and development spending cannot exceed $125 million per annum, with $25 million available for use in certain emergencies; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------




| |  |  | We cannot pay the cash portion of the regular quarterly dividends on our series A and series B preferred stock.
| | - |  | ---------------------------------------------------------------------------------------------------------------




On May 3, 2002, we entered into the third amendment and restatement of our senior credit facility and our increasing rate loans facility.
The third amendment and restatement permits the issuance of certain debt securities and, in the event that we issue such debt securities, the maturity of the outstanding revolving loans held by the lenders who have consented to the third amendment
and restatement will be extended from June 30, 2004 to June 30, 2006, as of the date of the issuance of the debt securities.





This amendment and restatement directs the net cash proceeds we receive from any such offering of debt securities to be applied as follows:





| |  |  | first, to repay all of the outstanding increasing rate loans and cancel the increasing rate loans facility; and
| | - |  | ---------------------------------------------------------------------------------------------------------------




| |  |  | second, to repay the outstanding revolving loans the maturity of which has been extended to June 30, 2006 and the term loans equally, based on their outstanding
principal amounts, with the revolving commitment of these repaid revolving loans reduced by the amount of the principal repayment thereof.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The proceeds from any such offering of debt securities will not be used to repay any of the revolving loans whose maturity remains June 30, 2004.





The third amendment and restatement also specifically permits us to refinance two or more of our existing mortgages in a single transaction. In such a transaction, the
refinancing of the mortgaged properties may be secured by the properties that secured the mortgage being refinanced and/or certain specified unencumbered properties.





In the event that we issue certain debt securities, the third amendment and restatement will also change the application of proceeds from asset dispositions, exchanges and
certain incurrences of indebtedness among the various loan facilities. In addition, the third amendment and restatement allows us to sell certain non-core assets for consideration consisting of marketable securities, assumed indebtedness and cash.





In connection with the credit agreement, we also entered into an increasing rate note purchase and loan
agreement, originally dated June 30, 1999 and modified by the first amendment and restatement dated September 25, 2000 and the second amendment and restatement effective as of January 24, 2002, with Bear Stearns Corporate Lending Inc, as
co-arranger and syndication agent, Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as syndication agent, and J.P. Morgan Securities Inc. (formerly known as Chase Securities Inc.), as lead arranger and book manager.
This facility has no scheduled amortization. As of June 30, 2002, we had a $482 million increasing rate term loan facility.





Upon our receipt of the proceeds from any offering of debt securities and repayment of the term loans and the revolving loans whose maturity has been extended in the third amendment and restatement to June 30, 2006, the outstanding
amounts of the revolving loans held by the lenders who consent to the third amendment and restatement will be converted to term loans and will constitute a new class of loans under the senior credit facility having the same interest rate and term as
the existing senior credit facility. The new term loans will be amortized semi-annually by 0.5% with balance paid on the maturity date. The extended revolving loans and the revolving loans which maintain a maturity of June 30, 2004 will have the
same interest rate, but will be treated differently for purposes of prepayments due to asset sales and incurrence of debt.




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On June 7, 2002, we withdrew the proposed offering of the debt securities due to
unfavorable market conditions.





We have considered our short-term liquidity needs and the adequacy of adjusted
estimated cash flows and other expected liquidity sources to meet these needs. We believe that our principal short-term liquidity needs are to fund our normal recurring expenses and our debt service requirements. We anticipate that these needs will
be fully funded from our cash flows provided by operating activities and, when necessary, from our revolving credit facility. In the past, we have generally met our long-term liquidity requirements for the funding of activities, such as development
and scheduled debt maturities, major renovations, expansions and other non-recurring capital improvements, through long-term secured and unsecured indebtedness and the proceeds from the sale of our assets.





Under the terms of the applicable credit facility, loan agreement, and lease agreement, as of June 30, 2002, our principal amortization
and balloon payment requirements and our future five year minimum lease payments are summarized as follows:





Payments due by yearTotal

Remainder of 2002


2003

2004

2005

2006

2007 and thereafter(in thousands)Long term debt and capital lease obligations

$
3,318,256

$
61,033
(B)

$
407,566

$
1,142,737

$
225,218

$
1,244,317

$
237,385Office leases(A)


10,259


1,073



2,097


2,062


1,838


1,838


1,351Hotel and ground leases(A)


893,143


31,162



62,420


61,841


61,633


61,633


614,454Total

$
4,221,658

$
93,268


$
472,083

$
1,206,640

$
288,689

$
1,307,788

$
853,190


---

|(A) |  | Office, hotel and ground leases are operating leases and are included in operating expenses.
|--- |  | --------------------------------------------------------------------------------------------

|(B) |  | Subsequent to June 30, 2002, we paid down the balances of our term loans, increasing rate loans and revolver by a total of $20,065 due to the sale of an asset.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------




For the remainder of 2002, we have scheduled principal payments and debt maturities of
approximately $61 million of which, subsequent to June 30, 2002, $20,065 was paid down due to the sale of an asset. We are seeking to refinance the remaining mortgages prior to their maturities in 2002; however, there can be no assurance that we
will be able to do so. During 2003, we have scheduled principal payments and debt maturities of approximately $408 million. Of that amount, we can elect to extend $178.4 million for three additional twelve month periods. Although occupancies have
improved from very depressed levels following the events of September 11, 2001, at present, it is not possible to predict the duration of declines in the medium or long term on operations, liquidity, and capital resources (see our December 31, 2001
Form 10-K Risks Related to Our Indebtedness on page 15).





Dividends





We do not anticipate paying a dividend to our common shareholders and we are prohibited under the terms of the senior credit facility and
increasing rate loans facility from paying dividends on our class A common stock. For the six year period beginning September 30, 1999, dividends on our series A and series B preferred stock are payable partly in cash and partly in additional shares
of our series A and series B preferred stock, with the cash portion aggregating $29.2 million per year, so long as there is no redemption or conversion of our series A and series B preferred stock. For the following four years, dividends are payable
in cash or additional shares of our series A or series B preferred stock, as the case may be, as determined by our board of directors. After year ten, dividends are payable solely in cash.




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We are prohibited under the terms of the January 24, 2002 amendments to the
senior credit facility and increasing rate loans facility from paying cash dividends on the preferred stock. As of June 30, 2002, we have deferred payments of the cash portion of the preferred stock dividend totaling approximately $29.2 million.
This amount has been included in accounts payable and accrued expenses as of June 30, 2002. In addition, according to the terms of our series A and B preferred stock, if the cash dividends on the preferred stock are in arrears and unpaid for at
least 60 days, then an additional amount of dividends will accrue at an annual rate of 2.0% of the stated amount of each share of preferred stock then outstanding from the last payment date on which cash dividends were to be paid in full until the
cash dividends in arrears have been paid in full. These additional dividends are cumulative and payable in additional shares of preferred stock. In the quarter ended June 30, 2002, we issued an additional stock dividend of 236,033 shares of series A
and series B preferred stock with a value of $23,603 in payment of all previously accrued additional dividends through June 30, 2002.





Renovations and Capital Improvements





During the first six months of 2002, we invested
approximately $22.2 million in capital improvements and renovations. These capital expenditures included (i) costs related to enhancing the revenue-producing capabilities of our hotels and (ii) costs related to recurring maintenance. During 2002, we
anticipate spending approximately $120 million in capital expenditures primarily for recurring maintenance capital expenditures and technological initiatives. We are limited to capital expenditures of $125 million per year, plus $25 million per year
for emergency capital expenditures under the terms of the January 24, 2002 amendments to the senior credit facility and increasing rate loans facility.





We attempt to schedule renovations and improvements during traditionally lower occupancy periods in an effort to minimize disruption to the hotels operations. Therefore, we do not believe such
renovations and capital improvements will have a material effect on the results of operations of the hotels. Capital expenditures will be financed through capital expenditure reserves or with working capital.





Inflation





Operators of hotels in general possess the ability to adjust room rates quickly. However, competitive pressures may limit our ability to raise room rates in the face of inflation.





Seasonality





The hotel industry is seasonal in
nature; however, the periods during which our hotel properties experience higher revenues vary from property to property and depend predominantly on the propertys location. Our revenues typically have been higher in the first and second
quarters than in the third or fourth quarters.





Critical Accounting Policies and Estimates





The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to impairment of assets; assets held for sale; bad debts; income taxes;
and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.





We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
We periodically review the carrying value of our assets, including intangible assets, to determine if events and circumstances exist indicating that assets might be




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impaired. If facts and circumstances support this possibility of impairment, our management will prepare undiscounted and discounted cash flow projections which require judgments that are both
subjective and complex.





Our management uses judgment in projecting which assets will be sold by us within this
next twelve months. These judgments are based on our managements knowledge of the current market and the status of current negotiations with third parties. If assets are expected to be sold within 12 months, they are reclassified as assets
held for sale on the balance sheet.





We maintain allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.





We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.
While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, should we determine that we would be able to realize our deferred tax assets in the future in
excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset
in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.





We are a defendant in lawsuits that arise out of, and are incidental to, the conduct of our business. Our management uses its judgment, with the aid of legal counsel, to determine if accruals are necessary as a result of any pending
actions against us.





Newly Issued Accounting Standards





In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards 141, Business Combinations, and Statement of
Financial Accounting Standards 142, Goodwill and Other Intangible Assets, collectively referred to as the Standards. Statement 141 supersedes APB 16, Business Combination. The provisions of Statement 141 (1)
require that we use the purchase method of accounting for all business combinations initiated after June 30, 2001, (2) provide specific criteria for the initial recognition and measurement of intangible assets apart from goodwill, and (3) require
that unamortized negative goodwill be written off immediately as an extraordinary gain instead of being deferred and amortized. Statement 141 also requires that, upon adoption of Statement 142, we reclassify carrying amounts of certain intangible
assets into or out of goodwill, based on certain criteria. Statement 142 supersedes APB 17, Intangible Assets, and is effective for fiscal years beginning after December 15, 2001. Statement 142 primarily addresses the accounting for
goodwill and intangible assets subsequent to their initial recognition. The provisions of Statement 142 (1) prohibit the amortization of goodwill and indefinite-lived intangible assets, (2) require that goodwill and indefinite-lived intangibles
assets be tested annually for impairment (and in interim periods if certain events occur indicating that the carrying value of goodwill and/or indefinite-lived assets may be impaired), (3) require that reporting units be identified for the purpose
of assessing potential future impairments of goodwill, and (4) remove the forty-year limitation on the amortization period of intangible assets that have finite lives.





We adopted the provisions of SFAS 142 in the first quarter of 2002 and recorded an impairment charge of $324,102,000 as a cumulative effect of a change in accounting
principle. In connection with the adoption of SFAS 142, we did not record $6,068,000 of amortization in the first six months of 2002 and will not record $12,136,000 annually.




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##### Table of Contents




The impact of the adoption of SFAS 142 on our net (loss) income, and basic and
diluted loss per share is presented in the following tables:





Three Months Ended June 30, 2002


Three Months Ended June 30, 2001


Six Months Ended June 30, 2002


Six Months Ended June 30, 2001Reported net (loss) income

$
(41,365
)

$
(12,304
)

$
(384,545
)

$
212Add back: Goodwill amortization






3,065







5,657Adjusted net (loss) income

$
(41,365
)

$
(9,239
)

$
(384,545
)

$
5,869Reported basic and diluted loss per share

$
(0.46
)

$
(0.24
)

$
(2.71
)

$
(0.32
)Goodwill amortization






0.02







0.03Adjusted basic and diluted loss per share

$
(0.46
)

$
(0.22
)

$
(2.71
)

$
(0.29
)





The changes in the carrying amount of goodwill for the quarter
ended June 30, 2002 were as follows:





Other Segment
(1)Balance (net of amortization) as of January 1, 2002

$
326,843Reclassification to franchise costs


(2,350
)Impairment losses


(324,102
)Balance as of June 30, 2002

$
391


---

|(1) |  | The fair value of the reporting unit was estimated using the expected present value of future cash flows. The hotel management subsidiaries, which is where
goodwill is recorded, are included in the Other Segment as described on page 30 under Results of Reporting Segments. The Other Segment includes management fee and service fee income, interest and other income,
general and administrative costs, interest expense, depreciation and amortization and other charges.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




In October 2001, the FASB issued SFAS 144 Accounting for the Impairment and Disposal of Long-Lived Assets. SFAS 144 supersedes SFAS 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. SFAS 144 primarily addresses significant issues relating to the implementation of SFAS 121 and develops a single accounting model for long-lived assets to be disposed of, whether previously held and used or newly acquired. The
provisions of SFAS 144 will be effective for fiscal years beginning after December 15, 2001. In the first quarter of 2002, the Company adopted SFAS 144. The adoption of SFAS 144 did not have a financial statement impact. The assets held for sale as
of December 31, 2001 continue to be accounted for in accordance with SFAS 121.





In April 2002, the FASB issued
SFAS 145, Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. The statement, which is effective for financial statements issued for fiscal years beginning after May 15, 2002 and
interim periods within those fiscal years, updates, clarifies and simplifies existing accounting pronouncements. SFAS 145 rescinds SFAS 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified
as an extraordinary item, net of the related income tax effect. As a result of this recission, the criteria in APB 30 will now be used to classify those gains and losses, which could result in the gains and losses being reported in income before
extraordinary items. Also, SFAS 145 amends SFAS 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. We are currently
evaluating the impact this statement will have on our financial position or results of operations.




36




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##### Table of Contents




In July 2002, the FASB issued SFAS 146, Accounting for Exit or Disposal
Activities. SFAS 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for
pursuant to the guidance that the Emerging Issues Task Force (EITF) has set forth in EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in
a Restructuring). The scope of SFAS 146 also includes (1) costs related to terminating a contract that is not a capital lease and (2) termination benefits that employees who are involuntarily terminated receive under the terms of a one-time
benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS 146 will be effective for exit or disposal activities initiated after December 31, 2002. We are currently evaluating the impact this
statement will have on our financial position or results of operations.





Item 3.    Qualitative and Quantitative Disclosures About Market Risks





Our primary market risk exposure is to future changes in interest rates related to our derivative financial instruments and other financial instruments, including debt obligations, interest rate swaps, interest rate caps, and future
debt commitments.





We manage our debt portfolio by periodically entering into interest rate swaps and caps to
achieve an overall desired position of fixed and floating rates or to limit our exposure to rising interest rates.





The following table provides information about our derivative and other financial instruments that are sensitive to changes in interest rates.





| |  |  | For fixed rate debt obligations, the table presents principal cash flows and related weighted-average interest rates by expected maturity date and contracted
interest rates at June 30, 2002. For variable rate debt obligations, the table presents principal cash flows by expected maturity date and contracted interest rates at June 30, 2002.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | For interest rate swaps and caps, the table presents notional amounts and weighted-average interest rates or strike rates by expected (contractual) maturity
dates. Notional amounts are used to calculate the contractual cash flows to be exchanged under the contract. Weighted average variable rates are based on implied forward rates in the yield curve at June 30, 2002.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Remainder of 2002


2003(1)


2004


2005


2006


Thereafter


Face Value

Fair Value(dollars in thousands)DebtLong-term debt obligations including current portionFixed Rate

$
27,270


$
8,291


$
63,703


$
53,242


$
8,688


$
227,710


$
388,904

$
428,996Average Interest Rate


10.09
%


8.11
%


6.97
%


7.71
%


9.03
%


8.44
%Variable Rate

$
33,763


$
399,275


$
1,079,034


$
171,976


$
1,235,629


$
9,675


$
2,929,352

$
2,929,352Average Interest Rate


6.47
%


6.84
%


9.01
%


8.42
%


11.14
%


1.80
%Interest Rate Derivative Financial Instruments Related to DebtInterest Rate SwapsPay Fixed/Receive Variable

$



$



$



$
759,241


$







$
759,241

$
(62,948
)Average Pay Rate


6.14
%


6.51
%


6.67
%


6.68
%






Average Receive Rate


1.91
%


2.84
%


4.26
%


5.02
%






Interest Rate CapsNotional Amount

$
550,000


$
428,397


$
338,865


$
111,740


$







$
1,429,002

$
(10,650
)Strike Rate


6.26
%


6.89
%


7.93
%


9.75
%






Forward Rate


1.91
%


2.84
%


4.26
%


5.02
%









---

|(1) |  | We can elect to extend $179.4 million for three additional twelve month periods
|--- |  | -------------------------------------------------------------------------------



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##### Table of Contents

PART II:    OTHER INFORMATION





Item 1.    Legal Proceedings





On May 7, 1999, Doris Johnson and
Charles Dougherty filed a lawsuit in the Northern District of California against us, Patriot, our operating partnerships and Paine Webber Group, Inc. This action, captioned Johnson v. Patriot American Hospitality, Inc., et al., No. C-99-2153, was
commenced on behalf of all former stockholders of Bay Meadows stock during a class period from June 2, 1997 to the date the lawsuit was filed. The action asserts securities fraud claims and alleges that the purported class members were wrongfully
induced to tender their shares as part of the Cal Jockey merger based on a fraudulent prospectus. The action further alleges that defendants continued to defraud shareholders about their intentions to acquire numerous hotels and incur massive debt
during the class period. Three other actions against the same defendants subsequently were filed in the Northern District of California: (i) Ansell v. Patriot American Hospitality, Inc., et al., No. C-99-2239 (filed May 14, 1999), (ii) Sola v. Paine
Webber Group, Inc., et al., No. C-99-2770 (filed June 11, 1999), and (iii) Gunderson v. Patriot American Hospitality, Inc., et al., No. C-99-3040 (filed June 23, 1999). Another action with substantially identical allegations, Susnow v. Patriot
American Hospitality, Inc., et al., No. 3-99-CV1354-T (filed June 15, 1999), also subsequently was filed in the Northern District of Texas. By order of the Judicial Panel on Multidistrict Litigation, these actions along with certain actions
identified in the following paragraph have been consolidated in the Northern District of California for consolidated pretrial purposes. On or about August 15, 2001, the court granted the defendants motions to dismiss the action, dismissing
some of the claims with prejudice and granting leave to replead certain other claims in the complaint. On or about October 15, 2001, the plaintiffs filed an amended complaint seeking monetary damages but did not specify the amount of damages being
sought. On December 20, 2001, the defendants moved to dismiss the amended complaint. The defendants motion has been fully submitted and is pending before the Court. We intend to defend the suits vigorously.





On or about June 22, 1999, a lawsuit captioned Levitch v. Patriot American Hospitality, Inc., et al., No. 3-99-V1416-D, was filed in
the Northern District of Texas against us, Patriot, James D. Carreker and Paul A. Nussbaum. This action asserts securities fraud claims and alleges that, during the period from January 5, 1998 to December 17, 1998, the defendants defrauded
shareholders by issuing false statements about us and Patriot. The complaint was filed on behalf of all shareholders who purchased shares of our capital stock and Patriots capital stock during that period. Three other actions, Gallagher v.
Patriot American Hospitality, Inc., et al., No. 3-99-CV-1429-L, filed on June 23, 1999, David Lee Meisenburg, et al., v. Patriot American Hospitality, Inc., Wyndham International, Inc., James D. Carreker, and Paul A. Nussbaum Case No. 3-99-CV1686-X,
filed July 27, 1999 and Deborah Szekely v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1866-D, filed on or about August 27, 1999, allege substantially the same allegations. By orders of the Judicial Panel on Multidistrict Litigation,
these actions have been consolidated with certain other shareholder actions discussed in the above paragraph and transferred to the Northern District of California for consolidated pre-trial purposes. On or about August 15, 2001, the court granted
the defendants motions to dismiss the action, dismissing some of the claims with prejudice and granting leave to replead certain other claims in the complaint. On or about October 15, 2001, the plaintiffs filed an amended complaint seeking
monetary damages but did not specify the amount of damages being sought. On December 20, 2001, the defendants moved to dismiss the amended complaint. The defendants motion has been fully submitted and is pending before the court. We intend to
defend the suits vigorously.





On or about May 8, 2001, a demand for arbitration was filed on behalf of John W.
Cullen, IV, William F. Burruss, Heritage Hotel Management & Investment Ltd. and GH-Resco, L.L.C. naming one of our operating partnerships as a respondent. A similar arbitration was originally filed on or about October 26, 2000 against us. The
Supreme Court of the State of New York, however, ruled that we did not agree to arbitrate any claims with the claimants and stayed the arbitration with respect to us. The claimants then recommended an identical arbitration, dropped us and named our
operating partnership as a respondent. The demand for arbitration claims that the claimants and our operating partnership are parties to a contribution agreement dated February 28, 1997 and that our operating partnership is in breach of that
agreement. The claimants assert that our operating partnership breached its agreement to pay respondents additional consideration under the contribution agreement




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##### Table of Contents

by, among other things, allegedly denying the claimants compensation due to them in connection with various transactions initiated by the claimants and provided to our operating partnership,
which allegedly provided our operating partnership with growth and added revenue. In addition, the claimants assert that our operating partnership failed to provide the claimants with various other amounts due under the contribution agreement,
failed to indemnify the claimants for certain expenses and intentionally and negligently mismanaged our operating partnerships business. The claimants do not specify the amount of damages sought. We intend to defend the claims vigorously.





We were named as a defendant in four lawsuits stemming from hotels charging energy surcharges in addition to room
rates. The lawsuits were filed in California (Bryant v. Wyndham International, Inc. and Judd v. Wyndham International, Inc.), Illinois (Nicolloff v. Wyndham International, Inc.) and Florida (Soper v. Wyndham International, Inc.). All of these cases
are class actions, with two being on behalf of purported nationwide classes. The basis for each of the cases is that an energy surcharge was not disclosed at the time the room rate was quoted, and the cases allege various causes of action for breach
of contract and unfair business practices under state law. Additionally, the attorneys general of Florida, Texas, New Jersey and California investigated the issue of energy surcharges. We have received subpoenas in Florida, Texas and New Jersey.
Finally, the Office of Consumer Affairs of Suffolk County, New York received a complaint related to an energy surcharge, and has asked for our response. The Court has approved a settlement of the two California cases (Bryant and Judd) and
plaintiffs counsel have agreed to dismiss the Illinois and Florida cases. The settlements and dismissals will resolve all of the pending class action lawsuits. The basic terms of the settlement are that each person who paid an energy surcharge
will be entitled to a coupon for $15 off a future nights stay. If the redemption rate of these coupons is less than 6%, we will make up the difference by donating room nights, conference rooms, ballrooms or the equivalent to charitable or
governmental entities. However, in no event will this amount exceed $1.5 million. Additionally, we have agreed to pay plaintiffs attorneys fees of up to $410,000. We entered into an assurance of voluntary compliance with the Texas
Attorney General, resolving that States investigation. The Florida Attorney General filed a lawsuit claiming that the imposition of energy fees violated the States Deceptive and Unlawful Trade Practices Act and False Claim Act. We filed
a motion to dismiss this suit and intend to present a vigorous defense to it.





Item 2.    Changes in Securities and Use of Proceeds





None.





Item 3.    Defaults Upon Senior Securities





We are prohibited under
the terms of the January 24, 2002 amendments to our senior credit facility and increasing rate loans facility from paying cash dividends on our preferred stock. As of June 30, 2002, we had aggregate deferred payments of the cash portion of the
preferred stock dividend totaling approximately $29.2 million. This amount has been included in accounts payable and accrued expenses as of June 30, 2002. In addition, according to the terms of our series A and B preferred stock, if the cash
dividends on the preferred stock are in arrears and unpaid for at least 60 days, then an additional amount of dividends will accrue at an annual rate of 2.0% of the stated amount of each share of preferred stock then outstanding from the last
payment date on which cash dividends were to be paid in full until the cash dividends in arrears have been paid in full. These additional dividends are cumulative and payable in additional shares of preferred stock. In the quarter ended
June 30, 2002, we issued an additional stock dividend of 236,033 shares of series A and series B preferred stock with a value of $23,603 in payment of all previously accrued additional dividends.




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##### Table of Contents




Item 4.    Submission of Matters to a Vote of Security Holders





We
held our annual meeting of stockholders on June 11, 2002. During this meeting, our stockholders were asked to consider and vote upon three proposals: to approve the proposed amendments to our restated certificate of incorporation to enable us to
effect a reverse stock split of our outstanding class A common stock by a ratio of between one-for-two and one-for-ten, to ratify the appointment of our independent auditors for the 2002 calendar year, and to elect certain individuals to our board
of directors. On the date of the annual meeting, a total of 167,847,940 shares of class A common stock (aggregated to 167,847,940 votes) and 12,056,490.720 shares of series B preferred stock (equivalent to 140,354,431 votes) were outstanding and
entitled to vote. The holders of class A common stock and series B preferred stock were entitled to vote together on all matters presented at the meeting, except that only holders of class A common stock were entitled to vote for the election of
class A directors and only holders of series B preferred stock were entitled to vote for the election of class B directors. In addition, the holders of class A common stock were entitled to vote as a separate class on the proposed amendments to our
restated certificate of incorporation. For each proposal, the results of the shareholder voting were as follows:





Votes FOR

Votes AGAINST

Abstaining

Broker Non-Votes1.

To consider and approve the proposed amendments to our restated certificate of incorporation to enable us to effect a reverse stock split of our outstanding
class A common stock by a ratio of between one-for-two and one-for-ten. Our board of directors would retain discretion to elect to implement one of the proposed amendments, or elect not to implement any of them:class A common and series B preferred stock voting together

262,521,742

4,107,008

271,963

class A common stock voting as a separate class

131,233,467

4,107,008

271,9632.

To ratify the appointment of PricewaterhouseCoopers LLP as our independent auditors for the 2002 calendar year;

266,075,557

508,622

316,533

3.

To elect to our board of directors seven directors, consisting of three class A directors, three class B directors and one class C director, to serve until
2003 annual meeting of stockholders or until their respective successors are duly elected and qualified, as follows:Class A DirectorsKarim Alibhai

134,143,546

1,468,893



Milton Fine

134,233,884

1,378,555



Susan T. Groenteman

134,112,299

1,500,140



Class B DirectorsThomas H. Lee

131,288,275





Alan M. Leventhal

131,288,275





William L. Mack

131,288,275





Class C DirectorStephen T. Clark

265,521,899

1,377,825









The following directors shall continue in office after the
Companys annual meeting of stockholders held on June 11, 2002:





Class A DirectorsLeonard Boxer, Fred J. Kleisner, Rolf E.
Ruhfus, Lynn Swann and Sherwood Weiser.





Class B DirectorsLeon D. Black, Lee S. Neibart, Marc J. Rowan, Scott A. Schoen and Scott
M. Sperling.





Class C DirectorsNorman Brownstein and Paul Fribourg.




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##### Table of Contents




Item 5.    Other Information





None.





Item 6.    Exhibits and Reports on Form 8-K





(a) Exhibits:





Item No.

Description99.1*

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.2*

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


---

|* |  | Filed herewith
|- |  | --------------




(b) Reports on Form 8-K for the quarter ended June 30, 2002:





We filed a Current Report on
Form 8-K on May 17, 2002 to report our plan to offer $750 million in principal amount of senior secured notes due 2008. On June 7, 2002, we withdrew the proposed offering of the debt securities due to unfavorable market conditions.




41




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##### Table of Contents

SIGNATURE





Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.





WYNDHAM INTERNATIONAL, INCBy

/s/ RICHARD A. SMITHRichard A. Smith Executive Vice President and Chief Financial Officer (Authorized Officer and Principal Accounting
and Financial Officer)





DATED: August 13, 2002




42