##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 333-3959-01
 FelCor Lodging Limited Partnership
  Delaware
(State or other jurisdiction of
incorporation or organization)
    
    75-2544994
(I.R.S. Employer
Identification No.)
 545 E. John Carpenter Frwy., Suite 1300, Irving, Texas
(Address of principal executive offices)
    
    75062
(Zip Code)
 (972) 444-4900
 þ o
  o o þ
 o þ




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##### 



FELCOR LODGING LIMITED PARTNERSHIP
 INDEX
 PagePART I.  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Consolidated Balance Sheets June 30, 2006 and December 31, 2005 (unaudited)
    
    
    3Consolidated Statements of Operations  For the Three and Six Months Ended June 30, and 2006 and 2005 (unaudited)
    
    
    4Consolidated Statements of Comprehensive Income  For the Three and Six Months Ended June 30, 2006 and 2005 (unaudited)
    
    
    5Consolidated Statements of Cash Flows  For the Six Months Ended June 30, 2006 and 2005 (unaudited)
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24General
    
    
    24Financial Comparison
    
    
    24Results of Operations
    
    
    26Non-GAAP Financial Measures
    
    
    29Hotel Portfolio Composition
    
    
    34Hotel Operating Statistics
    
    
    35Liquidity and Capital Resources
    
    
    37Inflation
    
    
    39Seasonality
    
    
    39Disclosure Regarding Forward-Looking Statements
    
    
    40Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    41PART II.  OTHER INFORMATIONItem 6. Exhibits
    
    
    42SIGNATURE
    
    
    43Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 June 30,
    
    
    December 31,2006
    
    
    2005ASSETSInvestment in hotels, net of accumulated depreciation of $717,253 at
June 30, 2006 and $754,502 at December 31, 2005
    
    $
    2,327,789
    
    
    $
    2,587,379Investment in unconsolidated entities
    
    
    107,913
    
    
    
    109,262Hotels held for sale
    
    
    26,209
    
    
    
    Cash and cash equivalents
    
    
    67,490
    
    
    
    94,564Restricted cash
    
    
    27,174
    
    
    
    18,298Accounts receivable, net of allowance for doubtful accounts of $704 at June 30, 2006
and $2,203 at December 31, 2005
    
    
    51,109
    
    
    
    54,815Deferred expenses, net of accumulated amortization of $13,289 at June 30, 2006
and $12,150 at December 31, 2005
    
    
    10,890
    
    
    
    12,423Condominium development project
    
    
    39,965
    
    
    
    13,051Other assets
    
    
    28,217
    
    
    
    29,301Total assets
    
    $
    2,686,756
    
    
    $
    2,919,093LIABILITIES AND PARTNERS CAPITALDebt, net of discount of $2,391 at June 30, 2006 and $2,982 at December 31, 2005
    
    $
    1,442,073
    
    
    $
    1,675,280Distributions payable
    
    
    20,941
    
    
    
    8,596Accrued expenses and other liabilities
    
    
    144,367
    
    
    
    138,017Total liabilities
    
    
    1,607,381
    
    
    
    1,821,893Commitments and contingenciesRedeemable units at redemption value, 1,355 and 2,763 units issued and
outstanding at June 30, 2006 and December 31, 2005, respectively
    
    
    29,458
    
    
    
    47,543Minority interest in other partnerships
    
    
    38,790
    
    
    
    40,014Partners Capital:Preferred units, $.01 par value, 20,000 units authorized:Series A Cumulative Convertible Preferred Units, 12,880 units, issued and
outstanding at June 30, 2006 and December 31, 2005
    
    
    309,362
    
    
    
    309,362Series C Cumulative Redeemable Preferred Units, 68 units, issued and
outstanding at June 30, 2006 and December 31, 2005
    
    
    169,412
    
    
    
    169,412Common units, $.01 par value, 61,955 and 60,210 units issued and outstanding, at
June 30, 2006 and December 31, 2005, respectively
    
    
    510,883
    
    
    
    511,267Accumulated other comprehensive income
    
    
    21,470
    
    
    
    19,602Total partners capital
    
    
    1,011,127
    
    
    
    1,009,643Total liabilities, redeemable units and partners capital
    
    $
    2,686,756
    
    
    $
    2,919,093
  3




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2006 and 2005
(unaudited, in thousands, except for per unit data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Hotel operating revenue
    
    $
    308,493
    
    
    $
    285,775
    
    
    $
    604,780
    
    
    $
    541,265Retail space rental and other revenue
    
    
    157
    
    
    
    120
    
    
    
    291
    
    
    
    276Total revenues
    
    
    308,650
    
    
    
    285,895
    
    
    
    605,071
    
    
    
    541,541Expenses:Hotel departmental expenses
    
    
    101,330
    
    
    
    95,385
    
    
    
    197,370
    
    
    
    181,833Other property operating costs
    
    
    81,257
    
    
    
    78,349
    
    
    
    164,794
    
    
    
    153,253Management and franchise fees
    
    
    16,854
    
    
    
    14,802
    
    
    
    32,649
    
    
    
    27,461Taxes, insurance and lease expense
    
    
    32,044
    
    
    
    30,336
    
    
    
    61,733
    
    
    
    58,698Corporate expenses
    
    
    5,562
    
    
    
    4,728
    
    
    
    11,366
    
    
    
    9,269Depreciation
    
    
    27,604
    
    
    
    26,579
    
    
    
    53,802
    
    
    
    52,256Impairment loss
    
    
    9,268
    
    
    
    
    
    
    
    9,268
    
    
    
    Total operating expenses
    
    
    273,919
    
    
    
    250,179
    
    
    
    530,982
    
    
    
    482,770Operating income
    
    
    34,731
    
    
    
    35,716
    
    
    
    74,089
    
    
    
    58,771Interest expense, net
    
    
    (28,561
    )
    
    
    (32,901
    )
    
    
    (59,325
    )
    
    
    (64,779
    )Charge-off of deferred financing costs
    
    
    (295
    )
    
    
    
    
    
    
    (962
    )
    
    
    Early extinguishment of debt
    
    
    (438
    )
    
    
    
    
    
    
    (438
    )
    
    
    Income (loss) before equity in income of
unconsolidated entities, minority interests and
gain on sales of assets
    
    
    5,437
    
    
    
    2,815
    
    
    
    13,364
    
    
    
    (6,008
    )Equity in income from unconsolidated entities
    
    
    3,812
    
    
    
    3,837
    
    
    
    5,760
    
    
    
    4,968Minority interests
    
    
    1,612
    
    
    
    (50
    )
    
    
    1,903
    
    
    
    145Gain on sale of assets
    
    
    
    
    
    
    389
    
    
    
    
    
    
    
    389Income (loss) from continuing operations
    
    
    10,861
    
    
    
    6,991
    
    
    
    21,027
    
    
    
    (506
    )Discontinued operations
    
    
    (700
    )
    
    
    3,144
    
    
    
    (1,006
    )
    
    
    1,784Net income
    
    
    10,161
    
    
    
    10,135
    
    
    
    20,021
    
    
    
    1,278Preferred distributions
    
    
    (9,678
    )
    
    
    (9,809
    )
    
    
    (19,356
    )
    
    
    (19,900
    )Issuance costs of redeemed preferred units
    
    
    
    
    
    
    (5,198
    )
    
    
    
    
    
    
    (5,198
    )Net income (loss) applicable to common unitholders
    
    $
    483
    
    
    $
    (4,872
    )
    
    $
    665
    
    
    $
    (23,820
    )Basic and diluted earnings (loss) per common unit data:Net earnings (loss) from continuing operations
    
    $
    0.02
    
    
    $
    (0.13
    )
    
    $
    0.03
    
    
    $
    (0.41
    )Net earnings (loss)
    
    $
    0.01
    
    
    $
    (0.08
    )
    
    $
    0.01
    
    
    $
    (0.38
    )Basic weighted average common units outstanding
    
    
    62,457
    
    
    
    62,192
    
    
    
    62,447
    
    
    
    62,151Diluted weighted average common units
outstanding
    
    
    62,728
    
    
    
    62,192
    
    
    
    62,707
    
    
    
    62,151Cash distributions declared on common units
    
    $
    0.20
    
    
    $
    
    
    
    $
    0.35
    
    
    $
    
  4




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2006 and 2005
(unaudited, in thousands)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    10,161
    
    
    $
    10,135
    
    
    $
    20,021
    
    
    $
    1,278Unrealized holding gain (loss) from interest rate swaps
    
    
    75
    
    
    
    (880
    )
    
    
    435
    
    
    
    747Foreign currency translation adjustment
    
    
    2,085
    
    
    
    (749
    )
    
    
    1,433
    
    
    
    (993
    )Comprehensive income
    
    $
    12,321
    
    
    $
    8,506
    
    
    $
    21,889
    
    
    $
    1,032
  5




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2006 and 2005
(unaudited, in thousands)
 Six Months Ended June 30,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    20,021
    
    
    $
    1,278Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    55,452
    
    
    
    61,282Loss (gain) on sale of assets
    
    
    2,862
    
    
    
    (175
    )Amortization of deferred financing fees
    
    
    1,628
    
    
    
    1,670Accretion of debt, net of discount
    
    
    591
    
    
    
    579Amortization of unearned compensation
    
    
    1,897
    
    
    
    1,363Equity in income from unconsolidated entities
    
    
    (5,760
    )
    
    
    (4,968
    )Distributions of income from unconsolidated entities
    
    
    2,866
    
    
    
    240Impairment loss
    
    
    9,268
    
    
    
    1,291Bad debt reserve
    
    
    
    
    
    
    266Charge-off of deferred financing costs
    
    
    962
    
    
    
    Loss on early extinguishment of debt
    
    
    438
    
    
    
    Minority interests
    
    
    (1,715
    )
    
    
    (16
    )Changes in assets and liabilities:Accounts receivable
    
    
    (1,540
    )
    
    
    (7,887
    )Restricted cash  operations
    
    
    (3,975
    )
    
    
    (997
    )Other assets
    
    
    424
    
    
    
    (4,122
    )Accrued expenses and other liabilities
    
    
    9,406
    
    
    
    22,771Net cash flow provided by operating activities
    
    
    92,825
    
    
    
    72,575Cash flows (used in) provided by investing activities:Acquisition of interest in venture
    
    
    
    
    
    
    (1,197
    )Cash from consolidation of venture
    
    
    
    
    
    
    3,204Improvements and additions to hotels
    
    
    (69,900
    )
    
    
    (49,949
    )Additions to condominium project
    
    
    (26,908
    )
    
    
    (3,588
    )Proceeds from sale of assets
    
    
    80,588
    
    
    
    8,926Proceeds received from property damage insurance
    
    
    5,973
    
    
    
    Decrease (increase) in restricted cash  investing
    
    
    (1,897
    )
    
    
    5,524Distributions of capital from unconsolidated entities
    
    
    4,243
    
    
    
    4,431Capital contributions to unconsolidated entities
    
    
    
    
    
    
    (700
    )Net cash flow used in investing activities
    
    
    (7,901
    )
    
    
    (33,349
    )Cash flows (used in) provided by financing activities:Proceeds from borrowings
    
    
    98,764
    
    
    
    Repayment of borrowings
    
    
    (185,167
    )
    
    
    (10,649
    )Payment of deferred financing fees
    
    
    (990
    )
    
    
    Decrease in restricted cash  financing
    
    
    2,825
    
    
    
    Net proceeds from sale of preferred units
    
    
    
    
    
    
    130,468Redemption of preferred units
    
    
    
    
    
    
    (135,000
    )Exercise of stock options
    
    
    626
    
    
    
    Contributions from minority interest holders
    
    
    1,417
    
    
    
    1,028Distributions paid to other partnerships minority interests
    
    
    (800
    )
    
    
    Distributions paid to preferred unitholders
    
    
    (19,357
    )
    
    
    (19,405
    )Distributions paid to common unitholders
    
    
    (9,517
    )
    
    
    Net cash flow used in financing activities
    
    
    (112,199
    )
    
    
    (33,558
    )Effect of exchange rate changes on cash
    
    
    201
    
    
    
    (33
    )Net change in cash and cash equivalents
    
    
    (27,074
    )
    
    
    5,635Cash and cash equivalents at beginning of periods
    
    
    94,564
    
    
    
    119,310Cash and cash equivalents at end of periods
    
    $
    67,490
    
    
    $
    124,945Supplemental cash flow information Interest paid
    
    $
    61,453
    
    
    $
    64,756
  6




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization
 ® ®
    Brand
    
    Hotels
    
    RoomsEmbassy Suites Hotels
    
    
    54
    
    
    
    13,653Doubletree® and Doubletree Guest Suites
    
    
    7
    
    
    
    1,471Holiday Inn®  branded
    
    
    29
    
    
    
    9,846Sheraton® and Sheraton Suites®
    
    
    10
    
    
    
    3,274Other brands
    
    
    10
    
    
    
    3,234Total hotels
    
    
    110
    
    
    
    31,478
    7




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2. Foreign Currency Translation
  3. Investment in Unconsolidated Entities
   June 30,
    
    December 31,2006
    
    2005Balance sheet information:Investment in hotels, net of accumulated depreciation
    
    $
    261,490
    
    
    $
    259,645Total assets
    
    $
    298,259
    
    
    $
    295,065Debt
    
    $
    205,183
    
    
    $
    203,880Total liabilities
    
    $
    214,275
    
    
    $
    211,174Equity
    
    $
    83,984
    
    
    $
    83,891
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Total revenues
    
    $
    23,395
    
    
    $
    21,039
    
    
    $
    41,509
    
    
    $
    37,268Net income
    
    
    8,785
    
    
    
    7,531
    
    
    
    13,601
    
    
    
    10,419Net income attributable to FelCor
    
    $
    4,231
    
    
    $
    4,125
    
    
    $
    6,598
    
    
    $
    5,569Preferred return
    
    
    
    
    
    
    129
    
    
    
    
    
    
    
    256Depreciation of cost in excess of book value
    
    
    (419
    )
    
    
    (417
    )
    
    
    (838
    )
    
    
    (857
    )Equity in income from unconsolidated entities
    
    $
    3,812
    
    
    $
    3,837
    
    
    $
    5,760
    
    
    $
    4,968
  June 30,
    
    
    December 31,2006
    
    
    2005Hotel investments
    
    $
    43,556
    
    
    $
    43,117Cost in excess of book value of hotel investments
    
    
    62,260
    
    
    
    63,098Land and condominium investments
    
    
    3,589
    
    
    
    4,270Hotel lessee investments
    
    
    (1,492
    )
    
    
    (1,223
    )$
    107,913
    
    
    $
    109,262
 8




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3. Investment in Unconsolidated Entities 3⁄4 (continued)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Hotel investments
    
    $
    3,956
    
    
    $
    3,878
    
    
    $
    6,029
    
    
    $
    5,118Hotel lessee operations
    
    
    (144
    )
    
    
    (41
    )
    
    
    (269
    )
    
    
    (150
    )$
    3,812
    
    
    $
    3,837
    
    
    $
    5,760
    
    
    $
    4,968
 4. Debt
  Balance OutstandingEncumbered
    
    Interest Rate at
    
    Maturity
    
    June 30,
    
    
    December 31,Hotels
    
    June 30, 2006(a)
    
    Date
    
    2006
    
    
    2005Promissory note
    
    none
    
    LIBOR (L) + 2.00
    
    June 2016
    
    $
    650
    
    
    $
    650Line of credit(b)
    
    none
    
    L + 2.00
    
    January 2009
    
    
    
    
    
    
    Senior unsecured term notes
    
    none
    
    7.63
    
    October 2007
    
    
    123,823
    
    
    
    123,358Senior unsecured term notes
    
    none
    
    8.50
    
    June 2011
    
    
    298,786
    
    
    
    298,660Term loan
    
    
    
    
    
    
    
    
    
    
    
    
    225,000Senior unsecured term notes
    
    none
    
    L + 4.25
    
    June 2011
    
    
    190,000
    
    
    
    190,000Senior unsecured term notes(c)
    
    none
    
    7.80
    
    June 2011
    
    
    100,000
    
    
    
    100,000Total unsecured debt
    
    
    
    
    
    
    
    
    713,259
    
    
    
    937,668Mortgage debt
    
    9 hotels
    
    6.53
    
    July 2009  2014
    
    
    103,144
    
    
    
    104,282Mortgage debt(d)
    
    8 hotels
    
    L + 1.25
    
    May 2007
    
    
    88,984
    
    
    
    117,913Mortgage debt
    
    7 hotels
    
    7.32
    
    March 2009
    
    
    125,888
    
    
    
    127,455Mortgage debt
    
    4 hotels
    
    7.55
    
    June 2009
    
    
    40,955
    
    
    
    41,912Mortgage debt
    
    8 hotels
    
    8.70
    
    May 2010
    
    
    171,035
    
    
    
    172,604Mortgage debt
    
    7 hotels
    
    8.73
    
    May 2010
    
    
    131,801
    
    
    
    133,374Mortgage debt
    
    1 hotel
    
    L + 2.85
    
    August 2008
    
    
    15,500
    
    
    
    15,500Mortgage debt
    
    1 hotel
    
    5.81
    
    July 2016
    
    
    13,000
    
    
    
    10,457Other
    
    1 hotel
    
    9.17
    
    August 2011
    
    
    4,832
    
    
    
    5,204Construction loan(e)
    
    
    
    L + 2.25
    
    August 2007
    
    
    33,675
    
    
    
    8,911Total secured debt
    
    46 hotels
    
    
    
    
    
    
    728,814
    
    
    
    737,612$
    1,442,073
    
    
    $
    1,675,280
 
 (a)
    
    Our weighted average interest rate as of June 30, 2006 was 8.16%.(b)
    
    We have a borrowing capacity of $125 million on our line of credit. The interest on this
line can range from L + 175 to L + 225 basis points, based on our leverage ratio (as defined
in our line of credit agreement).(c)
    
    We have swapped $100 million of floating rate debt, at L + 4.25 percent, for a fixed rate
of 7.80 percent. This interest rate swap expires in December 2007.(d)
    
    This debt has a one-year extension option, subject to certain contingencies.(e)
    
    We have a $69.8 million recourse construction loan facility for the development of a
184-unit condominium project in Myrtle Beach, South Carolina. The interest on this facility
is being capitalized as part of the cost of the project. Effective July 1, 2006, the
interest rate on this loan facility was reduced to L + 200 basis points.  9




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4. Debt 3⁄4 (continued)
    5. Derivatives
     10




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5. Derivatives  (continued)
   6. Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Room revenue
    
    $
    251,114
    
    
    $
    231,936
    
    
    $
    495,839
    
    
    $
    439,995Food and beverage revenue
    
    
    42,200
    
    
    
    39,605
    
    
    
    79,284
    
    
    
    74,189Other operating departments
    
    
    15,179
    
    
    
    14,234
    
    
    
    29,657
    
    
    
    27,081Total hotel operating revenue
    
    $
    308,493
    
    
    $
    285,775
    
    
    $
    604,780
    
    
    $
    541,265
   Three Months Ended June 30,2006
    
    
    2005% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueRoom
    
    $
    62,490
    
    
    
    20.2
    %
    
    $
    58,301
    
    
    
    20.4
    %Food and beverage
    
    
    31,740
    
    
    
    10.3
    %
    
    
    30,076
    
    
    
    10.5
    %Other operating departments
    
    
    7,100
    
    
    
    2.3
    %
    
    
    7,008
    
    
    
    2.5
    %Total hotel departmental expenses
    
    $
    101,330
    
    
    
    32.8
    %
    
    $
    95,385
    
    
    
    33.4
    %
 11




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6.
    
    Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs 
(continued)
 Six Months Ended June 30,2006
    
    
    2005% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueRoom
    
    $
    122,063
    
    
    
    20.2
    %
    
    $
    111,235
    
    
    
    20.6
    %Food and beverage
    
    
    61,217
    
    
    
    10.1
    %
    
    
    57,450
    
    
    
    10.6
    %Other operating departments
    
    
    14,090
    
    
    
    2.3
    %
    
    
    13,148
    
    
    
    2.4
    %Total hotel departmental expenses
    
    $
    197,370
    
    
    
    32.6
    %
    
    $
    181,833
    
    
    
    33.6
    %
  Three Months Ended June 30,2006
    
    
    2005% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueHotel general and administrative expense
    
    $
    26,211
    
    
    
    8.5
    %
    
    $
    26,112
    
    
    
    9.1
    %Marketing
    
    
    24,886
    
    
    
    8.1
    %
    
    
    23,903
    
    
    
    8.4
    %Repair and maintenance
    
    
    16,033
    
    
    
    5.2
    %
    
    
    15,280
    
    
    
    5.3
    %Energy
    
    
    14,127
    
    
    
    4.5
    %
    
    
    13,054
    
    
    
    4.6
    %Total other property operating costs
    
    $
    81,257
    
    
    
    26.3
    %
    
    $
    78,349
    
    
    
    27.4
    %
 Six Months Ended June 30,2006
    
    
    2005% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueHotel general and administrative expense
    
    $
    53,131
    
    
    
    8.8
    %
    
    $
    50,134
    
    
    
    9.3
    %Marketing
    
    
    49,712
    
    
    
    8.2
    %
    
    
    46,474
    
    
    
    8.6
    %Repair and maintenance
    
    
    31,946
    
    
    
    5.3
    %
    
    
    29,937
    
    
    
    5.5
    %Energy
    
    
    30,005
    
    
    
    4.9
    %
    
    
    26,708
    
    
    
    4.9
    %Total other property operating costs
    
    $
    164,794
    
    
    
    27.2
    %
    
    $
    153,253
    
    
    
    28.3
    %
  12




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7. Taxes, Insurance and Lease Expense
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Operating lease expense(a)
    
    $
    19,337
    
    
    $
    17,510
    
    
    $
    35,576
    
    
    $
    31,957Real estate and other taxes
    
    
    10,177
    
    
    
    9,540
    
    
    
    20,920
    
    
    
    20,604Property insurance, general liability insurance and
other
    
    
    2,530
    
    
    
    3,286
    
    
    
    5,237
    
    
    
    6,137Total taxes, insurance and lease expense
    
    $
    32,044
    
    
    $
    30,336
    
    
    $
    61,733
    
    
    $
    58,698
 
 (a)
    
    Operating lease expense includes hotel lease expense of $17.0 million and $15.4 million
associated with 14 hotels leased by us from unconsolidated subsidiaries for the three
months ended June 30, 2006 and 2005, respectively, and $31.4 million and $28.0 million
associated with 14 hotels leased by us from unconsolidated subsidiaries for the six months
ended June 30, 2006 and 2005, respectively. $10.8 million and $9.1 million in percentage
rent based on operating results for the three months ended June 30, 2006 and 2005,
respectively and $18.5 million and $14.4 million in percentage rent based on operating
results for the six months ended June 30, 2006 and 2005, respectively, are included in
operating lease expense. 8. Impairment Charge
     13




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9. Discontinued Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Operating revenue
    
    $
    8,704
    
    
    $
    45,944
    
    
    $
    27,691
    
    
    $
    93,457Operating expenses(a)
    
    
    (7,460
    )
    
    
    (41,893
    )
    
    
    (25,513
    )
    
    
    (89,358
    )Operating income
    
    
    1,244
    
    
    
    4,051
    
    
    
    2,178
    
    
    
    4,099Direct interest costs, net
    
    
    (64
    )
    
    
    (610
    )
    
    
    (134
    )
    
    
    (1,972
    )Gain (loss) on sale of assets
    
    
    (1,785
    )
    
    
    (234
    )
    
    
    (2,862
    )
    
    
    (214
    )Minority interests
    
    
    (95
    )
    
    
    (63
    )
    
    
    (188
    )
    
    
    (129
    )Income (loss) from discontinued operations
    
    $
    (700
    )
    
    $
    3,144
    
    
    $
    (1,006
    )
    
    $
    1,784
 
 (a)
    
    $0.7 million and $1.3 million of impairment losses for the three and six months ended
June 30, 2005, respectively, are included in operating expenses.    14




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10. Earnings (Loss) Per Unit
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Numerator:Income (loss) from continuing operations
    
    $
    10,861
    
    
    $
    6,991
    
    
    $
    21,027
    
    
    $
    (506
    )Less: Preferred distributions
    
    
    (9,678
    )
    
    
    (9,809
    )
    
    
    (19,356
    )
    
    
    (19,900
    )Issuance costs of redeemed preferred units
    
    
    
    
    
    
    (5,198
    )
    
    
    
    
    
    
    (5,198
    )Income (loss) from continuing operations applicable
to common unitholders
    
    
    1,183
    
    
    
    (8,016
    )
    
    
    1,671
    
    
    
    (25,604
    )Discontinued operations
    
    
    (700
    )
    
    
    3,144
    
    
    
    (1,006
    )
    
    
    1,784Net income (loss) applicable to common unitholders
    
    $
    483
    
    
    $
    (4,872
    )
    
    $
    665
    
    
    $
    (23,820
    )Denominator:Denominator for basic earnings per unit
    
    
    62,457
    
    
    
    62,192
    
    
    
    62,447
    
    
    
    62,151Denominator for diluted earnings per unit
    
    
    62,728
    
    
    
    62,192
    
    
    
    62,707
    
    
    
    62,151Earnings (loss) per unit data:Basic:Earnings (loss) from continuing operations
    
    $
    0.02
    
    
    $
    (0.13
    )
    
    $
    0.03
    
    
    $
    (0.41
    )Discontinued operations
    
    $
    (0.01
    )
    
    $
    0.05
    
    
    $
    (0.02
    )
    
    $
    0.03Net earnings (loss)
    
    $
    0.01
    
    
    $
    (0.08
    )
    
    $
    0.01
    
    
    $
    (0.38
    )Diluted:Earnings (loss) from continuing operations
    
    $
    0.02
    
    
    $
    (0.13
    )
    
    $
    0.03
    
    
    $
    (0.41
    )Discontinued operations
    
    $
    (0.01
    )
    
    $
    0.05
    
    
    $
    (0.02
    )
    
    $
    0.03Net earnings (loss)
    
    $
    0.01
    
    
    $
    (0.08
    )
    
    $
    0.01
    
    
    $
    (0.38
    )
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005FelCors restricted shares granted but not vested
    
    
    
    
    
    
    673
    
    
    
    
    
    
    
    593Series A convertible preferred units
    
    
    9,985
    
    
    
    9,985
    
    
    
    9,985
    
    
    
    9,985
  15




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. FelCors Stock Based Compensation Plans
   Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2005
    
    
    June 30, 2005Income (loss) from continuing operations, as reported
    
    $
    6,991
    
    
    $
    (506
    )Add stock based compensation included in the net income or
loss, as reported
    
    
    746
    
    
    
    1,352Less stock based compensation expense that would have been
included in the determination of net income or loss if the
fair value method had been applied to all awards
    
    
    (749
    )
    
    
    (1,357
    )Income from continuing operations, pro forma
    
    $
    6,988
    
    
    $
    (511
    )Basic and diluted net loss per common unit:As reported
    
    $
    (0.13
    )
    
    $
    (0.41
    )Pro forma
    
    $
    (0.13
    )
    
    $
    (0.41
    )
 12. FelCor LP Units
  13. Application of New Accounting Standards
 Accounting for Uncertainty in
Income Taxes, an Interpretation of FASB Statement No. 109 Accounting for Income Taxes Accounting for Contingencies
 16




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. Consolidating Financial Information
  CONDENSED
CONSOLIDATING BALANCE SHEET
June 30, 2006
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSNet investment in hotel properties
    
    $
    110,418
    
    
    $
    1,171,418
    
    
    $
    1,045,953
    
    
    $
    
    
    
    $
    2,327,789Equity investment in consolidated entities
    
    
    1,616,076
    
    
    
    
    
    
    
    
    
    
    
    (1,616,076
    )
    
    
    Investment in unconsolidated entities
    
    
    76,272
    
    
    
    29,880
    
    
    
    1,761
    
    
    
    
    
    
    
    107,913Hotels held for sale
    
    
    
    
    
    
    3,222
    
    
    
    22,987
    
    
    
    
    
    
    
    26,209Cash and cash equivalents
    
    
    14,526
    
    
    
    46,890
    
    
    
    6,074
    
    
    
    
    
    
    
    67,490Restricted cash
    
    
    604
    
    
    
    1,292
    
    
    
    25,278
    
    
    
    
    
    
    
    27,174Accounts receivable
    
    
    2,606
    
    
    
    48,503
    
    
    
    
    
    
    
    
    
    
    
    51,109Deferred assets
    
    
    6,185
    
    
    
    788
    
    
    
    3,917
    
    
    
    
    
    
    
    10,890Condominium development project
    
    
    
    
    
    
    
    
    
    
    39,965
    
    
    
    
    
    
    
    39,965Other assets
    
    
    8,430
    
    
    
    19,499
    
    
    
    288
    
    
    
    
    
    
    
    28,217Total assets
    
    $
    1,835,117
    
    
    $
    1,321,492
    
    
    $
    1,146,223
    
    
    $
    (1,616,076
    )
    
    $
    2,686,756LIABILITIES AND PARTNERS CAPITALDebt
    
    
    728,759
    
    
    
    125,888
    
    
    
    587,426
    
    
    
    
    
    
    
    1,442,073Distributions payable
    
    
    20,941
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,941Accrued expenses and other liabilities
    
    
    23,545
    
    
    
    110,523
    
    
    
    10,299
    
    
    
    
    
    
    
    144,367Total liabilities
    
    
    773,245
    
    
    
    236,411
    
    
    
    597,725
    
    
    
    
    
    
    
    1,607,381Minority interest  other partnerships
    
    
    21,287
    
    
    
    (29
    )
    
    
    17,532
    
    
    
    
    
    
    
    38,790Redeemable units, at redemption value
    
    
    29,458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,458Preferred units
    
    
    478,774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,774Common units
    
    
    529,696
    
    
    
    1,066,297
    
    
    
    530,966
    
    
    
    (1,616,076
    )
    
    
    510,883Accumulated other comprehensive income
    
    
    2,657
    
    
    
    18,813
    
    
    
    
    
    
    
    
    
    
    
    21,470Total partners capital
    
    
    1,011,127
    
    
    
    1,085,110
    
    
    
    530,966
    
    
    
    (1,616,076
    )
    
    
    1,011,127Total liabilities, redeemable units
and partners capital
    
    $
    1,835,117
    
    
    $
    1,321,492
    
    
    $
    1,146,223
    
    
    $
    (1,616,076
    )
    
    $
    2,686,756
 17




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSNet investment in hotel properties
    
    $
    115,615
    
    
    $
    666,137
    
    
    $
    1,805,627
    
    
    $
    
    
    
    $
    2,587,379Equity investment in consolidated entities
    
    
    1,582,280
    
    
    
    
    
    
    
    
    
    
    
    (1,582,280
    )
    
    
    Investment in unconsolidated entities
    
    
    76,991
    
    
    
    32,271
    
    
    
    
    
    
    
    
    
    
    
    109,262Cash and cash equivalents
    
    
    48,393
    
    
    
    36,189
    
    
    
    9,982
    
    
    
    
    
    
    
    94,564Restricted cash
    
    
    3,637
    
    
    
    2,189
    
    
    
    12,472
    
    
    
    
    
    
    
    18,298Accounts receivable
    
    
    4,361
    
    
    
    50,149
    
    
    
    305
    
    
    
    
    
    
    
    54,815Deferred assets
    
    
    6,262
    
    
    
    1,139
    
    
    
    5,022
    
    
    
    
    
    
    
    12,423Condominium development project
    
    
    
    
    
    
    13,051
    
    
    
    
    
    
    
    
    
    
    
    13,051Other assets
    
    
    11,294
    
    
    
    17,599
    
    
    
    408
    
    
    
    
    
    
    
    29,301Total assets
    
    $
    1,848,833
    
    
    $
    818,724
    
    
    $
    1,833,816
    
    
    $
    (1,582,280
    )
    
    $
    2,919,093LIABILITIES AND PARTNERS CAPITALDebt
    
    $
    737,087
    
    
    $
    152,302
    
    
    $
    785,891
    
    
    $
    
    
    
    $
    1,675,280Distributions payable
    
    
    8,596
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,596Accrued expenses and other liabilities
    
    
    20,522
    
    
    
    97,747
    
    
    
    19,748
    
    
    
    
    
    
    
    138,017Total liabilities
    
    
    766,205
    
    
    
    250,049
    
    
    
    805,639
    
    
    
    
    
    
    
    1,821,893Minority interest  other partnerships
    
    
    25,442
    
    
    
    (345
    )
    
    
    14,917
    
    
    
    
    
    
    
    40,014Redeemable units, at redemption value
    
    
    47,543
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,543Preferred units
    
    
    478,774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,774Common units
    
    
    528,647
    
    
    
    551,640
    
    
    
    1,013,260
    
    
    
    (1,582,280
    )
    
    
    511,267Accumulated other comprehensive income
    
    
    2,222
    
    
    
    17,380
    
    
    
    
    
    
    
    
    
    
    
    19,602Total partners capital
    
    
    1,009,643
    
    
    
    569,020
    
    
    
    1,013,260
    
    
    
    (1,582,280
    )
    
    
    1,009,643Total liabilities and
partners capital
    
    $
    1,848,833
    
    
    $
    818,724
    
    
    $
    1,833,816
    
    
    $
    (1,582,280
    )
    
    $
    2,919,093
 18




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2006
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    308,493
    
    
    $
    
    
    
    $
    
    
    
    $
    308,493Percentage lease revenue
    
    
    6,924
    
    
    
    
    
    
    
    42,231
    
    
    
    (49,155
    )
    
    
    Other revenue
    
    
    157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157Total revenue
    
    
    7,081
    
    
    
    308,493
    
    
    
    42,231
    
    
    
    (49,155
    )
    
    
    308,650Expenses:Hotel operating expense
    
    
    
    
    
    
    199,441
    
    
    
    
    
    
    
    
    
    
    
    199,441Taxes, insurance and lease expense
    
    
    1,806
    
    
    
    72,762
    
    
    
    6,631
    
    
    
    (49,155
    )
    
    
    32,044Corporate expenses
    
    
    257
    
    
    
    3,740
    
    
    
    1,565
    
    
    
    
    
    
    
    5,562Depreciation
    
    
    2,146
    
    
    
    14,443
    
    
    
    11,015
    
    
    
    
    
    
    
    27,604Impairment loss
    
    
    
    
    
    
    
    
    
    
    9,268
    
    
    
    
    
    
    
    9,268Total operating expenses
    
    
    4,209
    
    
    
    290,386
    
    
    
    28,479
    
    
    
    (49,155
    )
    
    
    273,919Operating income
    
    
    2,872
    
    
    
    18,107
    
    
    
    13,752
    
    
    
    
    
    
    
    34,731Interest expense, net
    
    
    (14,624
    )
    
    
    (2,825
    )
    
    
    (11,112
    )
    
    
    
    
    
    
    (28,561
    )Charge-off of deferred financing cost
    
    
    
    
    
    
    (66
    )
    
    
    (229
    )
    
    
    
    
    
    
    (295
    )Early extinguishment of debt
    
    
    
    
    
    
    (146
    )
    
    
    (292
    )
    
    
    
    
    
    
    (438
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (11,752
    )
    
    
    15,070
    
    
    
    2,119
    
    
    
    
    
    
    
    5,437Equity in income from consolidated
entities
    
    
    18,564
    
    
    
    
    
    
    
    
    
    
    
    (18,564
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    3,365
    
    
    
    460
    
    
    
    (13
    )
    
    
    
    
    
    
    3,812Minority interests in other partnerships
    
    
    (16
    )
    
    
    379
    
    
    
    1,249
    
    
    
    
    
    
    
    1,612Income from continuing operations
    
    
    10,161
    
    
    
    15,909
    
    
    
    3,355
    
    
    
    (18,564
    )
    
    
    10,861Discontinued operations from
consolidated entities
    
    
    
    
    
    
    (1,560
    )
    
    
    860
    
    
    
    
    
    
    
    (700
    )Net income
    
    
    10,161
    
    
    
    14,349
    
    
    
    4,215
    
    
    
    (18,564
    )
    
    
    10,161Preferred distributions
    
    
    (9,678
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,678
    )Net income (loss) applicable to
unitholders
    
    $
    483
    
    
    $
    14,349
    
    
    $
    4,215
    
    
    $
    (18,564
    )
    
    $
    483
 19




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    285,775
    
    
    $
    
    
    
    $
    
    
    
    $
    285,775Percentage lease revenue
    
    
    7,461
    
    
    
    
    
    
    
    57,793
    
    
    
    (65,254
    )
    
    
    Other revenue
    
    
    457
    
    
    
    (337
    )
    
    
    
    
    
    
    
    
    
    
    120Total revenue
    
    
    7,918
    
    
    
    285,438
    
    
    
    57,793
    
    
    
    (65,254
    )
    
    
    285,895Expenses:Hotel operating expense
    
    
    
    
    
    
    188,536
    
    
    
    
    
    
    
    
    
    
    
    188,536Taxes, insurance and lease expense
    
    
    1,564
    
    
    
    83,466
    
    
    
    10,560
    
    
    
    (65,254
    )
    
    
    30,336Corporate expenses
    
    
    279
    
    
    
    2,513
    
    
    
    1,936
    
    
    
    
    
    
    
    4,728Depreciation
    
    
    1,496
    
    
    
    8,895
    
    
    
    16,188
    
    
    
    
    
    
    
    26,579Total operating expenses
    
    
    3,339
    
    
    
    283,410
    
    
    
    28,684
    
    
    
    (65,254
    )
    
    
    250,179Operating income
    
    
    4,579
    
    
    
    2,028
    
    
    
    29,109
    
    
    
    
    
    
    
    35,716Interest expense, net
    
    
    (14,647
    )
    
    
    (2,712
    )
    
    
    (15,542
    )
    
    
    
    
    
    
    (32,901
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (10,068
    )
    
    
    (684
    )
    
    
    13,567
    
    
    
    
    
    
    
    2,815Gain on sale of assets
    
    
    389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389Equity in income from consolidated
entities
    
    
    16,724
    
    
    
    
    
    
    
    
    
    
    
    (16,724
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    3,277
    
    
    
    560
    
    
    
    
    
    
    
    
    
    
    
    3,837Minority interests in other partnerships
    
    
    
    
    
    
    410
    
    
    
    (460
    )
    
    
    
    
    
    
    (50
    )Income from continuing operations
    
    
    10,322
    
    
    
    286
    
    
    
    13,107
    
    
    
    (16,724
    )
    
    
    6,991Discontinued operations from
consolidated entities
    
    
    (187
    )
    
    
    1,658
    
    
    
    1,673
    
    
    
    
    
    
    
    3,144Net income
    
    
    10,135
    
    
    
    1,944
    
    
    
    14,780
    
    
    
    (16,724
    )
    
    
    10,135Preferred distributions
    
    
    (9,809
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,809
    )Issuance costs of redeemed preferred
units
    
    
    (5,198
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,198
    )Net income (loss) applicable to
unitholders
    
    $
    (4,872
    )
    
    $
    1,944
    
    
    $
    14,780
    
    
    $
    (16,724
    )
    
    $
    (4,872
    )
 20




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2006
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    604,780
    
    
    $
    
    
    
    $
    
    
    
    $
    604,780Percentage lease revenue
    
    
    12,534
    
    
    
    
    
    
    
    87,359
    
    
    
    (99,893
    )
    
    
    Other revenue
    
    
    291
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    291Total revenue
    
    
    12,825
    
    
    
    604,780
    
    
    
    87,359
    
    
    
    (99,893
    )
    
    
    605,071Expenses:Hotel operating expense
    
    
    
    
    
    
    394,813
    
    
    
    
    
    
    
    
    
    
    
    394,813Taxes, insurance and lease expense
    
    
    2,489
    
    
    
    146,242
    
    
    
    12,895
    
    
    
    (99,893
    )
    
    
    61,733Corporate expenses
    
    
    494
    
    
    
    7,432
    
    
    
    3,440
    
    
    
    
    
    
    
    11,366Depreciation
    
    
    4,028
    
    
    
    28,566
    
    
    
    21,208
    
    
    
    
    
    
    
    53,802Impairment loss
    
    
    
    
    
    
    
    
    
    
    9,268
    
    
    
    
    
    
    
    9,268Total operating expenses
    
    
    7,011
    
    
    
    577,053
    
    
    
    46,811
    
    
    
    (99,893
    )
    
    
    530,982Operating income
    
    
    5,814
    
    
    
    27,727
    
    
    
    40,548
    
    
    
    
    
    
    
    74,089Interest expense, net
    
    
    (30,712
    )
    
    
    (6,206
    )
    
    
    (22,407
    )
    
    
    
    
    
    
    (59,325
    )Charge-off of deferred financing cost
    
    
    
    
    
    
    (733
    )
    
    
    (229
    )
    
    
    
    
    
    
    (962
    )Early extinguishment of debt
    
    
    
    
    
    
    (146
    )
    
    
    (292
    )
    
    
    
    
    
    
    (438
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (24,898
    )
    
    
    20,642
    
    
    
    17,620
    
    
    
    
    
    
    
    13,364Equity in income from consolidated
entities
    
    
    39,267
    
    
    
    
    
    
    
    
    
    
    
    (39,267
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    5,675
    
    
    
    111
    
    
    
    (26
    )
    
    
    
    
    
    
    5,760Minority interests in other partnerships
    
    
    (23
    )
    
    
    1,150
    
    
    
    776
    
    
    
    
    
    
    
    1,903Income from continuing operations
    
    
    20,021
    
    
    
    21,903
    
    
    
    18,370
    
    
    
    (39,267
    )
    
    
    21,027Discontinued operations from
consolidated entities
    
    
    
    
    
    
    (2,713
    )
    
    
    1,707
    
    
    
    
    
    
    
    (1,006
    )Net income
    
    
    20,021
    
    
    
    19,190
    
    
    
    20,077
    
    
    
    (39,267
    )
    
    
    20,021Preferred distributions
    
    
    (19,356
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,356
    )Net income applicable to unitholders
    
    $
    665
    
    
    $
    19,190
    
    
    $
    20,077
    
    
    $
    (39,267
    )
    
    $
    665
 21




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    541,265
    
    
    $
    
    
    
    $
    
    
    
    $
    541,265Percentage lease revenue
    
    
    12,917
    
    
    
    
    
    
    
    115,132
    
    
    
    (128,049
    )
    
    
    Other revenue
    
    
    613
    
    
    
    (337
    )
    
    
    
    
    
    
    
    
    
    
    276Total revenue
    
    
    13,530
    
    
    
    540,928
    
    
    
    115,132
    
    
    
    (128,049
    )
    
    
    541,541Expenses:Hotel operating expense
    
    
    
    
    
    
    362,547
    
    
    
    
    
    
    
    
    
    
    
    362,547Taxes, insurance and lease expense
    
    
    3,841
    
    
    
    161,697
    
    
    
    21,209
    
    
    
    (128,049
    )
    
    
    58,698Corporate expenses
    
    
    531
    
    
    
    4,992
    
    
    
    3,746
    
    
    
    
    
    
    
    9,269Depreciation
    
    
    3,558
    
    
    
    17,239
    
    
    
    31,459
    
    
    
    
    
    
    
    52,256Total operating expenses
    
    
    7,930
    
    
    
    546,475
    
    
    
    56,414
    
    
    
    (128,049
    )
    
    
    482,770Operating income
    
    
    5,600
    
    
    
    (5,547
    )
    
    
    58,718
    
    
    
    
    
    
    
    58,771Interest expense, net
    
    
    (28,171
    )
    
    
    (6,230
    )
    
    
    (30,378
    )
    
    
    
    
    
    
    (64,779
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (22,571
    )
    
    
    (11,777
    )
    
    
    28,340
    
    
    
    
    
    
    
    (6,008
    )Gain on sale of assets
    
    
    389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389Equity in income from consolidated
entities
    
    
    19,533
    
    
    
    
    
    
    
    
    
    
    
    (19,533
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    4,801
    
    
    
    167
    
    
    
    
    
    
    
    
    
    
    
    4,968Minority interests in other partnerships
    
    
    
    
    
    
    718
    
    
    
    (573
    )
    
    
    
    
    
    
    145Income (loss) from continuing operations
    
    
    2,152
    
    
    
    (10,892
    )
    
    
    27,767
    
    
    
    (19,533
    )
    
    
    (506
    )Discontinued operations from
consolidated entities
    
    
    (874
    )
    
    
    (634
    )
    
    
    3,292
    
    
    
    
    
    
    
    1,784Net income (loss)
    
    
    1,278
    
    
    
    (11,526
    )
    
    
    31,059
    
    
    
    (19,533
    )
    
    
    1,278Preferred distributions
    
    
    (19,900
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,900
    )Issuance costs of redeemed preferred
units
    
    
    (5,198
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,198
    )Net income (loss) applicable to
unitholders
    
    $
    (23,820
    )
    
    $
    (11,526
    )
    
    $
    31,059
    
    
    $
    (19,533
    )
    
    $
    (23,820
    )
 22




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. Consolidating Financial Information 3⁄4 (continued)
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2006
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    ConsolidatedCash flows from (used in) operating activities
    
    $
    (15,549
    )
    
    $
    55,373
    
    
    $
    53,001
    
    
    $
    92,825Cash flows from (used in) investing activities
    
    
    (1,418
    )
    
    
    52,550
    
    
    
    (59,033
    )
    
    
    (7,901
    )Cash flows from (used in) financing activities
    
    
    (16,900
    )
    
    
    (97,423
    )
    
    
    2,124
    
    
    
    (112,199
    )Effect of exchange rates changes on cash
    
    
    
    
    
    
    201
    
    
    
    
    
    
    
    201Change in cash and cash equivalents
    
    
    (33,867
    )
    
    
    10,701
    
    
    
    (3,908
    )
    
    
    (27,074
    )Cash and cash equivalents at beginning of period
    
    
    48,393
    
    
    
    36,189
    
    
    
    9,982
    
    
    
    94,564Cash and equivalents at end of period
    
    $
    14,526
    
    
    $
    46,890
    
    
    $
    6,074
    
    
    $
    67,490
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    ConsolidatedCash flows from (used in) operating activities
    
    $
    (5,209
    )
    
    $
    11,773
    
    
    $
    66,011
    
    
    $
    72,575Cash flows from (used in) investing activities
    
    
    (3,460
    )
    
    
    (6,072
    )
    
    
    (23,817
    )
    
    
    (33,349
    )Cash flows from (used in) financing activities
    
    
    (3,832
    )
    
    
    8,937
    
    
    
    (38,663
    )
    
    
    (33,558
    )Effect of exchange rates changes on cash
    
    
    
    
    
    
    (33
    )
    
    
    
    
    
    
    (33
    )Change in cash and cash equivalents
    
    
    (12,501
    )
    
    
    14,605
    
    
    
    3,531
    
    
    
    5,635Cash and cash equivalents at beginning of period
    
    
    84,829
    
    
    
    29,387
    
    
    
    5,094
    
    
    
    119,310Cash and equivalents at end of period
    
    $
    72,328
    
    
    $
    43,992
    
    
    $
    8,625
    
    
    $
    124,945
 23




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##### Table of Contents



Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
 
 General
      
 Financial Comparison (in thousands of dollars, except RevPAR and Hotel EBITDA margin)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,% Change
    
    
    
    
    
    
    
    
    
    % Change2006
    
    2005
    
    2005-2006
    
    2006
    
    2005
    
    2005-2006RevPAR
    
    $
    87.77
    
    
    $
    80.97
    
    
    
    8.4
    %
    
    $
    86.08
    
    
    $
    77.22
    
    
    
    11.5
    %Total revenues from continuing
operations
    
    
    308,650
    
    
    
    285,895
    
    
    
    8.0
    %
    
    
    605,071
    
    
    
    541,541
    
    
    
    11.7
    %Hotel EBITDA(1)
    
    
    92,592
    
    
    
    80,692
    
    
    
    14.7
    %
    
    
    176,597
    
    
    
    145,018
    
    
    
    21.8
    %Hotel EBITDA margin(1)
    
    
    30.0
    %
    
    
    28.2
    %
    
    
    6.4
    %
    
    
    29.2
    %
    
    
    26.8
    %
    
    
    9.0
    %Income (loss) from continuing
operations
    
    
    10,861
    
    
    
    6,991
    
    
    
    55.4
    %
    
    
    21,027
    
    
    
    (506
    )
    
    
    4,255.5
    %Funds From Operations
(FFO)(1) (2)
    
    
    32,974
    
    
    
    28,062
    
    
    
    17.5
    %
    
    
    64,307
    
    
    
    41,856
    
    
    
    53.6
    %Earnings Before Interest, Taxes,
Depreciation and Amortization
(EBITDA)(1)(3)
    
    $
    72,858
    
    
    $
    79,939
    
    
    
    (8.9
    )%
    
    $
    147,006
    
    
    $
    140,102
    
    
    
    4.9
    %
 
 (1)
    
    Included in the Financial Comparison are non-GAAP financial measures, including FFO,
EBITDA, Hotel EBITDA and Hotel EBITDA margin. Further discussions of the use, limitations
and importance, and detailed reconciliations to the most comparable GAAP measure, of these
non-GAAP financial measures are found elsewhere in this Managements Discussion and
Analysis of Financial Condition and Results of Operations. 24




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##### Table of Contents



(2)
    
    In accordance with the guidance provided by the United States Securities and Exchange
Commission, or SEC, with respect to non-GAAP financial measures, FFO has not been adjusted
to add back the following items included in net income (loss) applicable to common
unitholders (in thousands): Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Charge-off of deferred debt costs
    
    $
    295
    
    
    $
    
    
    
    $
    962
    
    
    $
    Charge-off of deferred debt costs,
unconsolidated entities
    
    
    20
    
    
    
    
    
    
    
    20
    
    
    
    Loss on early extinguishment of debt
    
    
    438
    
    
    
    
    
    
    
    438
    
    
    
    Loss on early extinguishment of debt,
unconsolidated entities
    
    
    165
    
    
    
    
    
    
    
    165
    
    
    
    Minority interest share of charge-off of debt
costs and early extinguishment of debt
    
    
    (115
    )
    
    
    
    
    
    
    (115
    )
    
    
    Impairment loss, continuing operations
    
    
    9,268
    
    
    
    
    
    
    
    9,268
    
    
    
    Impairment loss, discontinued operations
    
    
    
    
    
    
    732
    
    
    
    
    
    
    
    1,291Minority interest share of impairment loss
    
    
    (927
    )
    
    
    
    
    
    
    (927
    )
    
    
    Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,300Issuance costs of redeemed preferred units
    
    
    
    
    
    
    5,198
    
    
    
    
    
    
    
    5,198
 
 (3)
    
    Consistent with SEC guidance on non-GAAP financial measures, EBITDA has not been
adjusted for the following amounts included in net income (in thousands): Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Charge-off of deferred debt costs
    
    $
    295
    
    
    $
    
    
    
    $
    962
    
    
    $
    Charge-off of deferred debt costs,
unconsolidated entities
    
    
    20
    
    
    
    
    
    
    
    20
    
    
    
    Loss on early extinguishment of debt
    
    
    438
    
    
    
    
    
    
    
    438
    
    
    
    Loss on early extinguishment of debt,
unconsolidated entities
    
    
    165
    
    
    
    
    
    
    
    165
    
    
    
    Minority interest share of charge-off of debt
costs and early extinguishment of debt
    
    
    (115
    )
    
    
    
    
    
    
    (115
    )
    
    
    Loss (gain) on sale of depreciable assets
    
    
    1,785
    
    
    
    (155
    )
    
    
    2,862
    
    
    
    (175
    )Impairment loss, continuing operations
    
    
    9,268
    
    
    
    
    
    
    
    9,268
    
    
    
    Impairment loss, discontinued operations
    
    
    
    
    
    
    732
    
    
    
    
    
    
    
    1,291Minority interest share of impairment loss
    
    
    (927
    )
    
    
    
    
    
    
    (927
    )
    
    
    Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,300
 25




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##### Table of Contents



Results of Operations
 Comparison of the Three Months Ended June 30, 2006 and 2005
           26




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##### Table of Contents



Comparison of the Six Months Ended June 30, 2006 and 2005
     27




---



##### Table of Contents



28




---



##### Table of Contents



Non-GAAP Financial Measures
   Reconciliation of Net Income to FFO
 Three Months Ended June 30,2006
    
    
    2005Per Unit
    
    
    
    
    
    
    
    
    
    
    Per UnitDollars
    
    
    Units
    
    
    Amount
    
    
    Dollars
    
    
    Units
    
    
    AmountNet income
    
    $
    10,161
    
    
    
    
    
    
    
    
    
    
    $
    10,135Preferred distributions
    
    
    (9,678
    )
    
    
    
    
    
    
    
    
    
    
    (9,809
    )Issuance costs of redeemed preferred units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,198
    )Net income (loss) applicable to common
unitholders
    
    
    483
    
    
    
    62,728
    
    
    $
    0.01
    
    
    
    (4,872
    )
    
    
    62,192
    
    
    $
    (0.08
    )Depreciation, continuing operations
    
    
    27,604
    
    
    
    
    
    
    
    0.44
    
    
    
    26,579
    
    
    
    
    
    
    
    0.43Depreciation, unconsolidated
entities and discontinued operations
    
    
    3,102
    
    
    
    
    
    
    
    0.05
    
    
    
    6,510
    
    
    
    
    
    
    
    0.10Loss (gain) on sale of depreciable assets
    
    
    1,785
    
    
    
    
    
    
    
    0.03
    
    
    
    (155
    )
    
    
    
    
    
    
    Conversion of options and unvested
restricted units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339
    
    
    
    FFO
    
    $
    32,974
    
    
    
    62,728
    
    
    $
    0.53
    
    
    $
    28,062
    
    
    
    62,531
    
    
    $
    0.45
 Reconciliation of Net Income to FFO and Adjusted FFO
 Six Months Ended June 30,2006
    
    
    2005Per Unit
    
    
    
    
    
    
    
    
    
    
    Per UnitDollars
    
    
    Units
    
    
    Amount
    
    
    Dollars
    
    
    Units
    
    
    AmountNet income
    
    $
    20,021
    
    
    
    
    
    
    
    
    
    
    $
    1,278Preferred distributions
    
    
    (19,356
    )
    
    
    
    
    
    
    
    
    
    
    (19,900
    )Issuance costs of redeemed preferred units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,198
    )Net income (loss) applicable to common
unitholders
    
    
    665
    
    
    
    62,707
    
    
    $
    0.01
    
    
    
    (23,820
    )
    
    
    62,151
    
    
    $
    (0.38
    )Depreciation, continuing operations
    
    
    53,802
    
    
    
    
    
    
    
    0.86
    
    
    
    52,256
    
    
    
    
    
    
    
    0.83Depreciation, unconsolidated
entities and discontinued operations
    
    
    6,978
    
    
    
    
    
    
    
    0.11
    
    
    
    13,595
    
    
    
    
    
    
    
    0.22Loss (gain) on sale of depreciable assets
    
    
    2,862
    
    
    
    
    
    
    
    0.05
    
    
    
    (175
    )
    
    
    
    
    
    
    Conversion of options and unvested
restricted units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319
    
    
    
    FFO
    
    $
    64,307
    
    
    
    62,707
    
    
    $
    1.03
    
    
    $
    41,856
    
    
    
    62,470
    
    
    $
    0.67
 29




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Charge-off of deferred debt costs
    
    $
    295
    
    
    
    
    
    
    $
    962
    
    
    
    Charge-off of deferred debt costs, unconsolidated entities
    
    
    20
    
    
    
    
    
    
    
    20
    
    
    
    Loss on early extinguishment of debt
    
    
    438
    
    
    
    
    
    
    
    438
    
    
    
    Loss on early extinguishment of debt, unconsolidated
entities
    
    
    165
    
    
    
    
    
    
    
    165
    
    
    
    Minority interest share of charge-off of debt costs and
early extinguishment of debt
    
    
    (115
    )
    
    
    
    
    
    
    (115
    )
    
    
    Impairment loss, continuing operations
    
    
    9,268
    
    
    
    
    
    
    
    9,268
    
    
    
    Impairment loss, discontinued operations
    
    
    
    
    
    
    732
    
    
    
    
    
    
    
    1,291Minority interest share of impairment loss
    
    
    (927
    )
    
    
    
    
    
    
    (927
    )
    
    
    Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,300Issuance costs of redeemed preferred units
    
    
    
    
    
    
    5,198
    
    
    
    
    
    
    
    5,198
 Reconciliation of Net Income to EBITDA
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    10,161
    
    
    $
    10,135
    
    
    $
    20,021
    
    
    $
    1,278Depreciation, continuing operations
    
    
    27,604
    
    
    
    26,579
    
    
    
    53,802
    
    
    
    52,256Depreciation, unconsolidated entities
and discontinued operations
    
    
    3,102
    
    
    
    6,510
    
    
    
    6,978
    
    
    
    13,595Interest expense
    
    
    29,416
    
    
    
    33,702
    
    
    
    60,973
    
    
    
    66,219Interest expense from unconsolidated entities
and discontinued operations
    
    
    1,667
    
    
    
    2,258
    
    
    
    3,335
    
    
    
    5,400Amortization expense
    
    
    908
    
    
    
    755
    
    
    
    1,897
    
    
    
    1,354EBITDA
    
    $
    72,858
    
    
    $
    79,939
    
    
    $
    147,006
    
    
    $
    140,102
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Charge-off of deferred debt costs
    
    $
    295
    
    
    
    
    
    
    $
    962
    
    
    
    Charge-off of deferred debt costs, unconsolidated entities
    
    
    20
    
    
    
    
    
    
    
    20
    
    
    
    Loss on early extinguishment of debt
    
    
    438
    
    
    
    
    
    
    
    438
    
    
    
    Loss on early extinguishment of debt, unconsolidated
entities
    
    
    165
    
    
    
    
    
    
    
    165
    
    
    
    Minority interest share of charge-off of debt costs and
early extinguishment of debt
    
    
    (115
    )
    
    
    
    
    
    
    (115
    )
    
    
    Loss (gain) on sale of depreciable assets
    
    
    1,785
    
    
    
    (155
    )
    
    
    2,862
    
    
    
    (175
    )Impairment loss, continuing operations
    
    
    9,268
    
    
    
    
    
    
    
    9,268
    
    
    
    Impairment loss, discontinued operations
    
    
    
    
    
    
    732
    
    
    
    
    
    
    
    1,291Minority interest share of impairment loss
    
    
    (927
    )
    
    
    
    
    
    
    (927
    )
    
    
    Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,300
 30




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##### Table of Contents



Hotel EBITDA and Hotel EBITDA Margin
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Total revenue
    
    $
    308,650
    
    
    $
    285,895
    
    
    $
    605,071
    
    
    $
    541,541Retail space rental and other revenue
    
    
    (157
    )
    
    
    (120
    )
    
    
    (291
    )
    
    
    (276
    )Hotel operating revenue
    
    
    308,493
    
    
    
    285,775
    
    
    
    604,780
    
    
    
    541,265Hotel operating expenses
    
    
    (215,901
    )
    
    
    (205,083
    )
    
    
    (428,183
    )
    
    
    (396,247
    )Hotel EBITDA
    
    $
    92,592
    
    
    $
    80,692
    
    
    $
    176,597
    
    
    $
    145,018Hotel EBITDA margin(1)
    
    
    30.0
    %
    
    
    28.2
    %
    
    
    29.2
    %
    
    
    26.8
    %
 
 (1)
    
    Hotel EBITDA as a percentage of hotel revenue. Hotel Operating Expense Composition
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,Continuing Operations
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Hotel departmental expenses:Room
    
    $
    62,490
    
    
    $
    58,301
    
    
    $
    122,063
    
    
    $
    111,235Food and beverage
    
    
    31,740
    
    
    
    30,076
    
    
    
    61,217
    
    
    
    57,450Other operating departments
    
    
    7,100
    
    
    
    7,008
    
    
    
    14,090
    
    
    
    13,148Other property related costs:Administrative and general
    
    
    26,211
    
    
    
    26,112
    
    
    
    53,131
    
    
    
    50,134Marketing and advertising
    
    
    24,886
    
    
    
    23,903
    
    
    
    49,712
    
    
    
    46,474Repairs and maintenance
    
    
    16,033
    
    
    
    15,280
    
    
    
    31,946
    
    
    
    29,937Energy
    
    
    14,127
    
    
    
    13,054
    
    
    
    30,005
    
    
    
    26,708Total other property related costs
    
    
    81,257
    
    
    
    78,349
    
    
    
    164,794
    
    
    
    153,253Management and franchise fees
    
    
    16,854
    
    
    
    14,802
    
    
    
    32,649
    
    
    
    27,461Taxes, insurance and lease expense
    
    
    16,460
    
    
    
    16,547
    
    
    
    33,370
    
    
    
    33,700Hotel operating expenses
    
    $
    215,901
    
    
    $
    205,083
    
    
    $
    428,183
    
    
    $
    396,247Reconciliation of total operating expense to hotel operating expense:Total operating expenses
    
    $
    273,919
    
    
    $
    250,179
    
    
    $
    530,982
    
    
    $
    482,770Consolidated hotel lease expense
    
    
    (17,056
    )
    
    
    (15,387
    )
    
    
    (31,388
    )
    
    
    (28,051
    )Unconsolidated taxes, insurance and lease expense
    
    
    1,472
    
    
    
    1,598
    
    
    
    3,025
    
    
    
    3,053Corporate expenses
    
    
    (5,562
    )
    
    
    (4,728
    )
    
    
    (11,366
    )
    
    
    (9,269
    )Depreciation
    
    
    (27,604
    )
    
    
    (26,579
    )
    
    
    (53,802
    )
    
    
    (52,256
    )Impairment loss
    
    
    (9,268
    )
    
    
    
    
    
    
    (9,268
    )
    
    
    Hotel operating expenses
    
    $
    215,901
    
    
    $
    205,083
    
    
    $
    428,183
    
    
    $
    396,247Supplemental information:Compensation and benefits expense (included in hotel operating expenses)
    
    $
    90,370
    
    
    $
    86,074
    
    
    $
    177,246
    
    
    $
    167,353
 31




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##### Table of Contents



Reconciliation of Net Income to Hotel EBITDA
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    10,161
    
    
    $
    10,135
    
    
    $
    20,021
    
    
    $
    1,278Discontinued operations
    
    
    700
    
    
    
    (3,144
    )
    
    
    1,006
    
    
    
    (1,784
    )Equity in income from unconsolidated entities
    
    
    (3,812
    )
    
    
    (3,837
    )
    
    
    (5,760
    )
    
    
    (4,968
    )Minority interests
    
    
    (1,612
    )
    
    
    50
    
    
    
    (1,903
    )
    
    
    (145
    )Consolidated hotel lease expense
    
    
    17,056
    
    
    
    15,387
    
    
    
    31,388
    
    
    
    28,051Unconsolidated taxes, insurance and lease expense
    
    
    (1,472
    )
    
    
    (1,598
    )
    
    
    (3,025
    )
    
    
    (3,053
    )Interest expense, net
    
    
    28,561
    
    
    
    32,901
    
    
    
    59,325
    
    
    
    64,779Charge-off of deferred financing costs
    
    
    295
    
    
    
    
    
    
    
    962
    
    
    
    Impairment loss
    
    
    9,268
    
    
    
    
    
    
    
    9,268
    
    
    
    Early extinguishment of debt
    
    
    438
    
    
    
    
    
    
    
    438
    
    
    
    Corporate expenses
    
    
    5,562
    
    
    
    4,728
    
    
    
    11,366
    
    
    
    9,269Depreciation
    
    
    27,604
    
    
    
    26,579
    
    
    
    53,802
    
    
    
    52,256Gain on sale of assets
    
    
    
    
    
    
    (389
    )
    
    
    
    
    
    
    (389
    )Retail space rental and other revenue
    
    
    (157
    )
    
    
    (120
    )
    
    
    (291
    )
    
    
    (276
    )Hotel EBITDA
    
    $
    92,592
    
    
    $
    80,692
    
    
    $
    176,597
    
    
    $
    145,018
 Reconciliation of Ratio of Operating Income to Total Revenue to Hotel EBITDA Margin
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Ratio of operating income to total revenue
    
    
    11.3
    %
    
    
    12.4
    %
    
    
    12.2
    %
    
    
    10.9
    %Less:Retail space and rental and other revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unconsolidated taxes, insurance and lease
expense
    
    
    (0.5
    )%
    
    
    (0.6
    )%
    
    
    (0.5
    )%
    
    
    (0.6
    )%Plus:Consolidated lease expense
    
    
    5.5
    %
    
    
    5.4
    %
    
    
    5.2
    %
    
    
    5.2
    %Corporate expenses
    
    
    1.8
    %
    
    
    1.7
    %
    
    
    1.9
    %
    
    
    1.7
    %Depreciation
    
    
    8.9
    %
    
    
    9.3
    %
    
    
    8.9
    %
    
    
    9.6
    %Impairment loss
    
    
    3.0
    %
    
    
    
    
    
    
    1.5
    %
    
    
    Hotel EBITDA margin
    
    
    30.0
    %
    
    
    28.2
    %
    
    
    29.2
    %
    
    
    26.8
    %
  FFO and EBITDA
  32




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##### Table of Contents



Hotel EBITDA and Hotel EBITDA Margin
  Limitations of Non-GAAP Measures
   33




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##### Table of Contents



Hotel Portfolio Composition
  % of
    
    % of 2005Brand
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Hotel EBITDAEmbassy Suites Hotels
    
    
    54
    
    
    
    13,653
    
    
    
    44
    
    
    
    54Holiday Inn-branded
    
    
    29
    
    
    
    9,846
    
    
    
    31
    
    
    
    22Sheraton-branded
    
    
    10
    
    
    
    3,274
    
    
    
    10
    
    
    
    12Doubletree-branded
    
    
    7
    
    
    
    1,471
    
    
    
    5
    
    
    
    6Other
    
    
    10
    
    
    
    3,234
    
    
    
    10
    
    
    
    6Top MarketsAtlanta
    
    
    8
    
    
    
    2,385
    
    
    
    8
    
    
    
    7South Florida area
    
    
    5
    
    
    
    1,434
    
    
    
    5
    
    
    
    6Los Angeles area
    
    
    5
    
    
    
    1,100
    
    
    
    3
    
    
    
    5Orlando
    
    
    5
    
    
    
    1,690
    
    
    
    5
    
    
    
    5Dallas
    
    
    9
    
    
    
    2,876
    
    
    
    9
    
    
    
    4Minneapolis
    
    
    4
    
    
    
    955
    
    
    
    3
    
    
    
    4New Orleans
    
    
    2
    
    
    
    746
    
    
    
    2
    
    
    
    4Phoenix
    
    
    3
    
    
    
    798
    
    
    
    3
    
    
    
    4Chicago
    
    
    4
    
    
    
    1,238
    
    
    
    4
    
    
    
    4San Francisco Bay area
    
    
    7
    
    
    
    2,385
    
    
    
    8
    
    
    
    4Washington, D.C.
    
    
    1
    
    
    
    443
    
    
    
    1
    
    
    
    3San Diego
    
    
    1
    
    
    
    600
    
    
    
    2
    
    
    
    3San Antonio
    
    
    4
    
    
    
    1,187
    
    
    
    4
    
    
    
    3Northern New Jersey
    
    
    3
    
    
    
    757
    
    
    
    2
    
    
    
    3Philadelphia
    
    
    2
    
    
    
    729
    
    
    
    2
    
    
    
    3Top Four StatesCalifornia
    
    
    17
    
    
    
    4,896
    
    
    
    16
    
    
    
    17Florida
    
    
    13
    
    
    
    4,104
    
    
    
    13
    
    
    
    13Texas
    
    
    20
    
    
    
    6,036
    
    
    
    19
    
    
    
    12Georgia
    
    
    10
    
    
    
    2,739
    
    
    
    9
    
    
    
    8LocationSuburban
    
    
    46
    
    
    
    11,412
    
    
    
    36
    
    
    
    37Urban
    
    
    28
    
    
    
    9,053
    
    
    
    29
    
    
    
    27Airport
    
    
    24
    
    
    
    7,498
    
    
    
    24
    
    
    
    22Resort
    
    
    12
    
    
    
    3,515
    
    
    
    11
    
    
    
    14SegmentUpper-upscale all-suite
    
    
    65
    
    
    
    16,036
    
    
    
    51
    
    
    
    63Full service
    
    
    30
    
    
    
    10,009
    
    
    
    32
    
    
    
    22Upscale
    
    
    14
    
    
    
    5,124
    
    
    
    16
    
    
    
    14Limited service
    
    
    1
    
    
    
    309
    
    
    
    1
    
    
    
    1Core Hotels
    
    
    83
    
    
    
    24,084
    
    
    
    77
    
    
    
    89Non-Strategic Hotels
    
    
    27
    
    
    
    7,394
    
    
    
    23
    
    
    
    11
 34




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##### Table of Contents



Hotel Operating Statistics
  Operating Statistics by Brand
 Occupancy (%)Three Months Ended June 30,
    
    Six Months Ended June 30,2006
    
    2005
    
    %Variance
    
    2006
    
    2005
    
    % VarianceEmbassy Suites Hotels
    
    
    76.4
    
    
    
    76.8
    
    
    
    (0.4
    )
    
    
    76.0
    
    
    
    74.1
    
    
    
    2.6Holiday Inn-branded hotels
    
    
    73.0
    
    
    
    72.5
    
    
    
    0.7
    
    
    
    71.1
    
    
    
    68.3
    
    
    
    4.0Sheraton-branded hotels
    
    
    63.5
    
    
    
    67.3
    
    
    
    (5.7
    )
    
    
    62.5
    
    
    
    64.5
    
    
    
    (3.1
    )Doubletree-branded hotels
    
    
    78.7
    
    
    
    76.7
    
    
    
    2.6
    
    
    
    76.6
    
    
    
    72.5
    
    
    
    5.6Other hotels
    
    
    68.9
    
    
    
    64.8
    
    
    
    6.4
    
    
    
    65.2
    
    
    
    61.2
    
    
    
    6.6Total hotels
    
    
    73.3
    
    
    
    73.2
    
    
    
    0.2
    
    
    
    72.0
    
    
    
    69.9
    
    
    
    3.0
 ADR ($)Three Months Ended June 30,
    
    Six Months Ended June 30,2006
    
    2005
    
    % Variance
    
    2006
    
    2005
    
    % VarianceEmbassy Suites Hotels
    
    
    131.71
    
    
    
    121.38
    
    
    
    8.5
    
    
    
    133.58
    
    
    
    123.82
    
    
    
    7.9Holiday Inn-branded hotels
    
    
    98.96
    
    
    
    93.59
    
    
    
    5.7
    
    
    
    97.52
    
    
    
    91.36
    
    
    
    6.7Sheraton-branded hotels
    
    
    125.82
    
    
    
    111.02
    
    
    
    13.3
    
    
    
    124.90
    
    
    
    109.48
    
    
    
    14.1Doubletree-branded hotels
    
    
    130.87
    
    
    
    117.39
    
    
    
    11.5
    
    
    
    132.23
    
    
    
    120.49
    
    
    
    9.7Other hotels
    
    
    118.65
    
    
    
    110.48
    
    
    
    7.4
    
    
    
    112.50
    
    
    
    103.28
    
    
    
    8.9Total hotels
    
    
    119.68
    
    
    
    110.60
    
    
    
    8.2
    
    
    
    119.62
    
    
    
    110.51
    
    
    
    8.2
 RevPAR ($)Three Months Ended June 30,
    
    Six Months Ended June 30,2006
    
    2005
    
    % Variance
    
    2006
    
    2005
    
    % VarianceEmbassy Suites Hotels
    
    
    100.65
    
    
    
    93.16
    
    
    
    8.0
    
    
    
    101.48
    
    
    
    91.72
    
    
    
    10.6Holiday Inn-branded hotels
    
    
    72.23
    
    
    
    67.86
    
    
    
    6.4
    
    
    
    69.29
    
    
    
    62.40
    
    
    
    11.1Sheraton-branded hotels
    
    
    79.86
    
    
    
    74.70
    
    
    
    6.9
    
    
    
    78.10
    
    
    
    70.62
    
    
    
    10.6Doubletree-branded hotels
    
    
    102.93
    
    
    
    90.04
    
    
    
    14.3
    
    
    
    101.23
    
    
    
    87.36
    
    
    
    15.9Other hotels
    
    
    81.79
    
    
    
    71.58
    
    
    
    14.3
    
    
    
    73.36
    
    
    
    63.20
    
    
    
    16.1Total hotels
    
    
    87.77
    
    
    
    80.97
    
    
    
    8.4
    
    
    
    86.08
    
    
    
    77.22
    
    
    
    11.5
 35




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##### Table of Contents



Operating Statistics for Our Top Markets
 Occupancy (%)Three Months Ended June 30,
    
    Six Months Ended June 30,2006
    
    2005
    
    % Variance
    
    2006
    
    2005
    
    % VarianceAtlanta
    
    
    69.4
    
    
    
    71.0
    
    
    
    (2.3
    )
    
    
    71.8
    
    
    
    70.5
    
    
    
    1.9South Florida area
    
    
    78.5
    
    
    
    81.3
    
    
    
    (3.4
    )
    
    
    83.5
    
    
    
    86.0
    
    
    
    (2.9
    )Los Angeles area
    
    
    73.9
    
    
    
    77.5
    
    
    
    (4.7
    )
    
    
    76.0
    
    
    
    74.8
    
    
    
    1.7Orlando
    
    
    84.5
    
    
    
    79.9
    
    
    
    5.7
    
    
    
    82.1
    
    
    
    81.7
    
    
    
    0.5Dallas
    
    
    58.2
    
    
    
    50.1
    
    
    
    16.2
    
    
    
    59.1
    
    
    
    51.0
    
    
    
    15.8Minneapolis
    
    
    71.4
    
    
    
    75.5
    
    
    
    (5.4
    )
    
    
    67.9
    
    
    
    70.5
    
    
    
    (3.7
    )New Orleans
    
    
    61.4
    
    
    
    73.5
    
    
    
    (16.5
    )
    
    
    76.2
    
    
    
    73.7
    
    
    
    3.4Phoenix
    
    
    74.1
    
    
    
    74.9
    
    
    
    (1.1
    )
    
    
    78.6
    
    
    
    78.1
    
    
    
    0.6Chicago
    
    
    80.4
    
    
    
    80.9
    
    
    
    (0.6
    )
    
    
    71.8
    
    
    
    71.2
    
    
    
    0.8San Francisco Bay area
    
    
    75.8
    
    
    
    74.3
    
    
    
    2.0
    
    
    
    73.4
    
    
    
    68.8
    
    
    
    6.6Washington, D.C.
    
    
    70.9
    
    
    
    83.0
    
    
    
    (14.6
    )
    
    
    66.4
    
    
    
    75.1
    
    
    
    (11.6
    )San Diego
    
    
    80.4
    
    
    
    84.0
    
    
    
    (4.3
    )
    
    
    81.3
    
    
    
    82.8
    
    
    
    (1.8
    )San Antonio
    
    
    83.6
    
    
    
    81.7
    
    
    
    2.3
    
    
    
    80.1
    
    
    
    75.6
    
    
    
    5.9Northern New Jersey
    
    
    74.5
    
    
    
    77.1
    
    
    
    (3.3
    )
    
    
    70.2
    
    
    
    71.1
    
    
    
    (1.3
    )Philadelphia
    
    
    82.5
    
    
    
    84.5
    
    
    
    (2.4
    )
    
    
    71.2
    
    
    
    73.8
    
    
    
    (3.5
    )
 ADR ($)Three Months Ended June 30,
    
    Six Months Ended June 30,2006
    
    2005
    
    % Variance
    
    2006
    
    2005
    
    % VarianceAtlanta
    
    
    105.40
    
    
    
    92.52
    
    
    
    13.9
    
    
    
    105.19
    
    
    
    92.97
    
    
    
    13.1South Florida area
    
    
    131.30
    
    
    
    117.54
    
    
    
    11.7
    
    
    
    157.77
    
    
    
    136.19
    
    
    
    15.8Los Angeles area
    
    
    139.61
    
    
    
    123.88
    
    
    
    12.7
    
    
    
    134.39
    
    
    
    122.24
    
    
    
    9.9Orlando
    
    
    98.39
    
    
    
    91.61
    
    
    
    7.4
    
    
    
    105.27
    
    
    
    98.81
    
    
    
    6.5Dallas
    
    
    101.99
    
    
    
    95.34
    
    
    
    7.0
    
    
    
    103.92
    
    
    
    96.44
    
    
    
    7.8Minneapolis
    
    
    135.74
    
    
    
    123.75
    
    
    
    9.7
    
    
    
    132.75
    
    
    
    123.30
    
    
    
    7.7New Orleans
    
    
    123.37
    
    
    
    135.87
    
    
    
    (9.2
    )
    
    
    140.36
    
    
    
    141.58
    
    
    
    (0.9
    )Phoenix
    
    
    122.69
    
    
    
    111.95
    
    
    
    9.6
    
    
    
    142.68
    
    
    
    129.83
    
    
    
    9.9Chicago
    
    
    137.53
    
    
    
    120.46
    
    
    
    14.2
    
    
    
    127.31
    
    
    
    110.18
    
    
    
    15.5San Francisco Bay area
    
    
    127.49
    
    
    
    115.72
    
    
    
    10.2
    
    
    
    123.48
    
    
    
    113.32
    
    
    
    9.0Washington, D.C.
    
    
    166.46
    
    
    
    147.80
    
    
    
    12.6
    
    
    
    165.76
    
    
    
    147.86
    
    
    
    12.1San Diego
    
    
    138.75
    
    
    
    138.43
    
    
    
    0.2
    
    
    
    137.30
    
    
    
    130.74
    
    
    
    5.0San Antonio
    
    
    99.67
    
    
    
    91.24
    
    
    
    9.2
    
    
    
    96.77
    
    
    
    88.85
    
    
    
    8.9Northern New Jersey
    
    
    148.57
    
    
    
    139.54
    
    
    
    6.5
    
    
    
    147.48
    
    
    
    136.97
    
    
    
    7.7Philadelphia
    
    
    135.14
    
    
    
    124.60
    
    
    
    8.5
    
    
    
    126.83
    
    
    
    115.21
    
    
    
    10.1
 RevPAR ($)Three Months Ended June 30,
    
    Six Months Ended June 30,2006
    
    2005
    
    % Variance
    
    2006
    
    2005
    
    % VarianceAtlanta
    
    
    73.10
    
    
    
    65.71
    
    
    
    11.2
    
    
    
    75.50
    
    
    
    65.50
    
    
    
    15.3South Florida area
    
    
    103.08
    
    
    
    95.55
    
    
    
    7.9
    
    
    
    131.76
    
    
    
    117.17
    
    
    
    12.5Los Angeles area
    
    
    103.19
    
    
    
    96.03
    
    
    
    7.5
    
    
    
    102.16
    
    
    
    91.38
    
    
    
    11.8Orlando
    
    
    83.10
    
    
    
    73.20
    
    
    
    13.5
    
    
    
    86.41
    
    
    
    80.71
    
    
    
    7.1Dallas
    
    
    59.39
    
    
    
    47.77
    
    
    
    24.3
    
    
    
    61.39
    
    
    
    49.18
    
    
    
    24.8Minneapolis
    
    
    96.95
    
    
    
    93.43
    
    
    
    3.8
    
    
    
    90.14
    
    
    
    86.93
    
    
    
    3.7New Orleans
    
    
    75.69
    
    
    
    99.82
    
    
    
    (24.2
    )
    
    
    107.02
    
    
    
    104.36
    
    
    
    2.6Phoenix
    
    
    90.87
    
    
    
    83.87
    
    
    
    8.3
    
    
    
    112.20
    
    
    
    101.46
    
    
    
    10.6Chicago
    
    
    110.57
    
    
    
    97.45
    
    
    
    13.5
    
    
    
    91.43
    
    
    
    78.48
    
    
    
    16.5San Francisco Bay area
    
    
    96.63
    
    
    
    85.98
    
    
    
    12.4
    
    
    
    90.63
    
    
    
    78.00
    
    
    
    16.2Washington, D.C.
    
    
    118.07
    
    
    
    122.75
    
    
    
    (3.8
    )
    
    
    110.05
    
    
    
    111.10
    
    
    
    (0.9
    )San Diego
    
    
    111.55
    
    
    
    116.35
    
    
    
    (4.1
    )
    
    
    111.56
    
    
    
    108.23
    
    
    
    3.1San Antonio
    
    
    83.32
    
    
    
    74.58
    
    
    
    11.7
    
    
    
    77.54
    
    
    
    67.20
    
    
    
    15.4Northern New Jersey
    
    
    110.70
    
    
    
    107.52
    
    
    
    3.0
    
    
    
    103.53
    
    
    
    97.42
    
    
    
    6.3Philadelphia
    
    
    111.47
    
    
    
    105.26
    
    
    
    5.9
    
    
    
    90.30
    
    
    
    85.02
    
    
    
    6.2
 36




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##### Table of Contents



Liquidity and Capital Resources
        37




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##### Table of Contents



Debt
   Line of Credit
    Construction Loan
  Mortgage Debt
  38




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##### Table of Contents



Senior Notes
   
 Inflation
  
 Seasonality
  39




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##### Table of Contents



Disclosure Regarding Forward-Looking Statements
  
    
    our general economic and lodging industry conditions, including the
anticipated continuation of the current recovery in the economy, the realization of
anticipated job growth, the impact of the United States military involvement in the Middle
East and elsewhere, future acts of terrorism, the threat or outbreak of a pandemic disease
affecting the travel industry, the impact on the travel industry of high fuel costs and
increased security precautions, and the impact that the bankruptcy of additional major air
carriers may have on our revenues and receivables;
    
    our overall debt levels and our ability to obtain new financing and service debt;
    
    our inability to retain earnings;
    
    our liquidity and capital expenditures;
    
    our growth strategy and acquisition activities;
    
    our inability to sell the hotels being marketed for sale at anticipated prices; and
    
    competitive conditions in the lodging industry.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Quantitative and Qualitative Disclosures About Market Risk
  40




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##### Table of Contents



Expected Maturity Date
at June 30, 2006
(dollars in thousands)
 Fair2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    Total
    
    
    ValueLiabilitiesFixed rate:Debt
    
    $
    6,979
    
    
    $
    139,897
    
    
    $
    16,342
    
    
    $
    183,531
    
    
    $
    282,245
    
    
    $
    386,661
    
    
    $
    1,015,655
    
    
    $
    1,082,874Average interest
rate
    
    
    7.90
    %
    
    
    7.66
    %
    
    
    7.88
    %
    
    
    7.29
    %
    
    
    8.70
    %
    
    
    8.06
    %
    
    
    8.04
    %Floating rate:Debt
    
    
    1,447
    
    
    
    121,212
    
    
    
    15,500
    
    
    
    
    
    
    
    
    
    
    
    190,650
    
    
    
    328,809
    
    
    
    328,809Average interest
rate
    
    
    6.81
    %
    
    
    7.02
    %
    
    
    8.32
    %
    
    
    
    
    
    
    
    
    
    
    9.87
    %
    
    
    8.73
    %Interest rate swaps (floating to fixed)Notional amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    100,000
    
    
    
    102,800Pay rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.80
    %
    
    
    7.80
    %Total debt
    
    $
    8,426
    
    
    $
    261,109
    
    
    $
    31,842
    
    
    $
    183,531
    
    
    $
    282,245
    
    
    $
    677,311
    
    
    $
    1,444,464Average interest
rate
    
    
    7.71
    %
    
    
    7.36
    %
    
    
    8.09
    %
    
    
    7.29
    %
    
    
    8.70
    %
    
    
    8.53
    %
    
    
    8.18
    %Net discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,391
    )Total debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,442,073
  
 Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures.
  Changes in internal control over financial reporting.
  41




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##### Table of Contents



PART II.  OTHER INFORMATION
 
 Item 6. Exhibits.
  Exhibit Number
    
    Description of Exhibit31.1
    
    Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 42




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##### Table of Contents



SIGNATURE
   FELCOR LODGING LIMITED PARTNERSHIP
a Delaware Limited PartnershipBy:
    
    FelCor Lodging Trust Incorporated
Its General PartnerBy:
    
    /s/ Lester C. JohnsonLester C. JohnsonSenior Vice President and
Principal Accounting Officer
 43




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit Number
    
    Description of Exhibit31.1
    
    Certification of FelCors Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of FelCors Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of FelCors Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350).32.2
    
    Certification of FelCors Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350).