##### 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 September 30, 2005
 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 Freeway, Suite 1300, Irving, Texas
(Address of principal executive offices)
    
    75062
(Zip Code)
 (972) 444-4900
 þ o
 o þ
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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 INDEX
 PagePART I.  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    3Consolidated Balance Sheets September 30, 2005 and December 31, 2004 (unaudited)
    
    3Consolidated Statements of Operations  For the Three and Nine Months Ended September 30, 2005 and 2004 (unaudited)
    
    4Consolidated Statements of Comprehensive Income (Loss)  For the Three and Nine Months Ended September 30, 2005 and 2004 (unaudited)
    
    5Consolidated Statements of Cash Flows  For the Nine Months Ended September 30, 2005 and 2004 (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
    
    25Non-GAAP Financial Measures
    
    28Hotel Portfolio Composition
    
    34Hotel Operating Statistics
    
    35Liquidity and Capital Resources
    
    37Inflation
    
    39Seasonality
    
    39Disclosure Regarding Forward-Looking Statements
    
    39Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    40Item 4. Controls and Procedures
    
    41PART II.  OTHER INFORMATIONItem 6. Exhibits
    
    42SIGNATURE
    
    43Certification of the CEO Pursuant to Section 302Certification of the CFO Pursuant to Section 302Certification of the CEO Pursuant to Section 302Certification of the 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)
 September 30,
    
    
    December 31,2005
    
    
    2004ASSETSInvestment in hotels, net of accumulated depreciation of $1,008,200 at
September 30, 2005 and $948,631 at December 31, 2004
    
    $
    2,862,103
    
    
    $
    2,955,766Investment in unconsolidated entities
    
    
    107,621
    
    
    
    110,843Hotels held for sale
    
    
    2,599
    
    
    
    255Cash and cash equivalents
    
    
    170,923
    
    
    
    119,310Restricted cash
    
    
    27,170
    
    
    
    34,736Accounts receivable, net of allowance for doubtful accounts of $2,294
at September 30, 2005 and $905 at December 31, 2004
    
    
    58,945
    
    
    
    51,845Deferred expenses, net of accumulated amortization of $12,049 at
September 30, 2005 and $14,935 at December 31, 2004
    
    
    15,483
    
    
    
    18,804Condominium development project
    
    
    9,326
    
    
    
    1,613Other assets
    
    
    23,810
    
    
    
    24,486Total assets
    
    $
    3,277,980
    
    
    $
    3,317,658LIABILITIES AND PARTNERS CAPITALDebt, net of discount of $3,657 at September 30, 2005 and $4,529 at
December 31, 2004
    
    $
    1,708,642
    
    
    $
    1,767,122Distributions payable
    
    
    8,592
    
    
    
    8,867Accrued expenses and other liabilities
    
    
    158,987
    
    
    
    124,922Minority interest in other partnerships
    
    
    48,605
    
    
    
    46,765Total liabilities and minority interest
    
    
    1,924,826
    
    
    
    1,947,676Commitments and contingenciesRedeemable units at redemption value, 2,763 and 2,788 units issued
and outstanding at September 30, 2005 and December 31, 2004,
respectively
    
    
    41,859
    
    
    
    40,846Preferred units, $.01 par value, 20,000 units authorized:Series A Cumulative Convertible Preferred Units, 12,880, issued
and outstanding at September 30, 2005 and December 31, 2004
    
    
    309,362
    
    
    
    309,362Series B Cumulative Redeemable Preferred Units, 68 units issued
and outstanding at December 31, 2004
    
    
    
    
    
    
    169,395Series C Cumulative Redeemable Preferred Units, 68 units issued
and outstanding at September 30, 2005
    
    
    169,412
    
    
    
    Common units, $.01 par value, 200,000 shares authorized and 60,210 and
59,817 units issued and outstanding at September 30, 2005 and
December 31, 2004, respectively
    
    
    813,076
    
    
    
    834,599Accumulated other comprehensive income
    
    
    19,445
    
    
    
    15,780Total partners capital
    
    
    1,311,295
    
    
    
    1,329,136Total liabilities, redeemable units and partners capital
    
    $
    3,277,980
    
    
    $
    3,317,658
  3




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three and Nine
Months Ended September 30, 2005 and 2004

(unaudited, in thousands, except for per unit data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Hotel operating revenue
    
    $
    313,018
    
    
    $
    287,154
    
    
    $
    922,959
    
    
    $
    857,493Retail space rental and other revenue
    
    
    1,632
    
    
    
    2,166
    
    
    
    1,908
    
    
    
    2,590Total revenues
    
    
    314,650
    
    
    
    289,320
    
    
    
    924,867
    
    
    
    860,083Expenses:Hotel departmental expenses
    
    
    108,405
    
    
    
    103,078
    
    
    
    317,692
    
    
    
    305,105Other property operating costs
    
    
    92,758
    
    
    
    83,026
    
    
    
    267,744
    
    
    
    246,430Management and franchise fees
    
    
    16,100
    
    
    
    15,355
    
    
    
    47,087
    
    
    
    44,712Taxes, insurance and lease expense
    
    
    31,792
    
    
    
    28,389
    
    
    
    94,359
    
    
    
    87,006Corporate expenses
    
    
    4,839
    
    
    
    3,787
    
    
    
    14,108
    
    
    
    11,529Depreciation
    
    
    30,390
    
    
    
    28,533
    
    
    
    89,534
    
    
    
    83,943Total operating expenses
    
    
    284,284
    
    
    
    262,168
    
    
    
    830,524
    
    
    
    778,725Operating income
    
    
    30,366
    
    
    
    27,152
    
    
    
    94,343
    
    
    
    81,358Interest expense, net
    
    
    (33,173
    )
    
    
    (34,303
    )
    
    
    (98,960
    )
    
    
    (113,090
    )Charge-off of deferred financing costs
    
    
    
    
    
    
    (1,920
    )
    
    
    
    
    
    
    (6,094
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (10,987
    )
    
    
    
    
    
    
    (39,233
    )Impairment loss
    
    
    (569
    )
    
    
    
    
    
    
    (569
    )
    
    
    Hurricane loss
    
    
    (2,309
    )
    
    
    (2,125
    )
    
    
    (2,309
    )
    
    
    (2,125
    )Gain on swap termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,005Loss before equity in income of unconsolidated
entities, minority interests and gain on sales
of assets
    
    
    (5,685
    )
    
    
    (22,183
    )
    
    
    (7,495
    )
    
    
    (78,179
    )Equity in income from unconsolidated entities
    
    
    3,260
    
    
    
    12,019
    
    
    
    8,229
    
    
    
    15,692Gain on sale of assets
    
    
    344
    
    
    
    1,094
    
    
    
    733
    
    
    
    1,094Minority interests
    
    
    400
    
    
    
    (644
    )
    
    
    415
    
    
    
    (960
    )Income (loss) from continuing operations
    
    
    (1,681
    )
    
    
    (9,714
    )
    
    
    1,882
    
    
    
    (62,353
    )Discontinued operations
    
    
    12,944
    
    
    
    (29,493
    )
    
    
    10,658
    
    
    
    (32,711
    )Net income (loss)
    
    
    11,263
    
    
    
    (39,207
    )
    
    
    12,540
    
    
    
    (95,064
    )Preferred distributions
    
    
    (9,829
    )
    
    
    (9,343
    )
    
    
    (29,729
    )
    
    
    (25,039
    )Issuance costs of redeemed preferred units
    
    
    (1,324
    )
    
    
    
    
    
    
    (6,522
    )
    
    
    Net income (loss) applicable to common
unitholders
    
    $
    110
    
    
    $
    (48,550
    )
    
    $
    (23,711
    )
    
    $
    (120,103
    )Basic and diluted loss per common unit data:Net loss from continuing operations
    
    $
    (0.21
    )
    
    $
    (0.31
    )
    
    $
    (0.55
    )
    
    $
    (1.41
    )Net income (loss)
    
    $
    0.00
    
    
    $
    (0.78
    )
    
    $
    (0.38
    )
    
    $
    (1.94
    )Weighted average common units outstanding
    
    
    62,205
    
    
    
    61,978
    
    
    
    62,181
    
    
    
    61,982
  4




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Three and Nine
Months Ended September 30, 2005 and 2004
(unaudited, in thousands)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss)
    
    $
    11,263
    
    
    $
    (39,207
    )
    
    $
    12,540
    
    
    $
    (95,064
    )Unrealized gain (loss) on swaps
    
    
    1,020
    
    
    
    
    
    
    
    1,767
    
    
    
    Foreign currency translation adjustment
    
    
    2,891
    
    
    
    4,489
    
    
    
    1,897
    
    
    
    3,519Comprehensive income (loss)
    
    $
    15,174
    
    
    $
    (34,718
    )
    
    $
    16,204
    
    
    $
    (91,545
    )
  5




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Nine Months
Ended September 30, 2005 and 2004
(unaudited, in thousands)
 Nine Months Ended September 30,2005
    
    
    2004Cash flows from operating activities:Net income (loss)
    
    $
    12,540
    
    
    $
    (95,064
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation
    
    
    91,795
    
    
    
    92,242Loss (gain) on sale of assets
    
    
    (10,022
    )
    
    
    (3,210
    )Amortization of deferred financing fees
    
    
    2,522
    
    
    
    3,230Accretion of debt, net of discount
    
    
    871
    
    
    
    200Amortization of unearned compensation
    
    
    2,171
    
    
    
    1,750Equity in income from unconsolidated entities
    
    
    (8,229
    )
    
    
    (15,692
    )Distributions of income from unconsolidated entities
    
    
    670
    
    
    
    11,339Impairment loss
    
    
    1,860
    
    
    
    33,027Bad debt reserve
    
    
    1,389
    
    
    
    4Charge-off of deferred financing costs
    
    
    
    
    
    
    6,094Gain (loss) on early extinguishment of debt
    
    
    (2,538
    )
    
    
    39,233Minority interests
    
    
    (415
    )
    
    
    (321
    )Changes in assets and liabilities:Accounts receivable
    
    
    (9,518
    )
    
    
    (12,340
    )Restricted cash  operations
    
    
    (7,784
    )
    
    
    (19,698
    )Other assets
    
    
    569
    
    
    
    4,912Accrued expenses and other liabilities
    
    
    41,295
    
    
    
    8,413Net cash flow provided by operating activities
    
    
    117,176
    
    
    
    54,119Cash flows (used in) provided by investing activities:Acquisition of hotel
    
    
    
    
    
    
    (27,759
    )Acquisition of interest in venture
    
    
    (1,197
    )
    
    
    Cash from consolidation of venture
    
    
    3,204
    
    
    
    Improvements and additions to hotels
    
    
    (76,632
    )
    
    
    (58,597
    )Additions to condominium project
    
    
    (7,778
    )
    
    
    Proceeds from sale of assets
    
    
    52,354
    
    
    
    66,866Increase in restricted cash  investing
    
    
    8,454
    
    
    
    2,058Capital contributions to unconsolidated entities
    
    
    (700
    )
    
    
    Distributions of capital from unconsolidated entities
    
    
    6,021
    
    
    
    4,602Net cash flow used in investing activities
    
    
    (16,274
    )
    
    
    (12,830
    )Cash flows (used in) provided by financing activities:Proceeds from borrowings
    
    
    6,002
    
    
    
    483,802Repayment of borrowings
    
    
    (25,951
    )
    
    
    (732,458
    )Payment of deferred financing fees
    
    
    
    
    
    
    (4,283
    )Increase in restricted cash  financing
    
    
    4,429
    
    
    
    Contributions from minority interest holders
    
    
    1,591
    
    
    
    2,436Net proceeds from sale of preferred units
    
    
    164,221
    
    
    
    156,094Redemption of preferred units
    
    
    (169,395
    )
    
    
    Distributions paid to minority interest holders
    
    
    
    
    
    
    (4,000
    )Distributions paid to preferred unitholders
    
    
    (30,231
    )
    
    
    (21,676
    )Net cash flow used in financing activities
    
    
    (49,334
    )
    
    
    (120,085
    )Effect of exchange rate changes on cash
    
    
    45
    
    
    
    1,020Net change in cash and cash equivalents
    
    
    51,613
    
    
    
    (77,776
    )Cash and cash equivalents at beginning of periods
    
    
    119,310
    
    
    
    231,885Cash and cash equivalents at end of periods
    
    $
    170,923
    
    
    $
    154,109Supplemental cash flow information 
Interest paid
    
    $
    85,626
    
    
    $
    118,427
  6




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    Organization
 ® ®
    Brand
    
    Hotels
    
    
    RoomsEmbassy Suites Hotels
    
    
    55
    
    
    
    13,922Doubletree® and Doubletree Guest Suites
    
    
    10
    
    
    
    2,206Holiday Inn®  branded
    
    
    34
    
    
    
    11,644Crowne Plaza® and Crowne Plaza Suites®
    
    
    12
    
    
    
    4,025Sheraton® and Sheraton Suites®
    
    
    10
    
    
    
    3,269Other brands
    
    
    7
    
    
    
    1,811Total hotels
    
    
    128
     7




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    Organization3⁄4(continued)
  2.
    
    Foreign Currency Translation
  3.
    
    Investment in Unconsolidated Entities
   September 30,
    
    
    December 31,2005
    
    
    2004Balance sheet information:Investment in hotels, net of accumulated depreciation
    
    $
    259,875
    
    
    $
    282,028Total assets
    
    $
    287,672
    
    
    $
    313,104Debt
    
    $
    205,783
    
    
    $
    218,292Total liabilities
    
    $
    208,825
    
    
    $
    237,597Equity
    
    $
    78,847
    
    
    $
    75,507
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Total revenues
    
    $
    20,384
    
    
    $
    17,212
    
    
    $
    57,652
    
    
    $
    49,623Net income
    
    $
    6,543
    
    
    $
    20,828
    (a)
    
    $
    16,962
    
    
    $
    29,610
    (a)
 
 (a)
    
    Includes $15.9 million from the gain on the sale of residential
condominium units development in Myrtle Beach, South Carolina, which was realized in
September 2004. Our share of the gain was approximately $7.9 million. We included
additional gains of approximately $1.9 million in our equity in income from
unconsolidated entities to reflect the differences between our historical basis in
the assets sold and the basis recorded by the condominium development joint venture. 8




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    Investment in Unconsolidated Entities  (continued)
  4.
    
    Debt
  Balance OutstandingEncumbered
    
    Interest Rate at
    
    
    Maturity
    
    September 30,
    
    
    December 31,Hotels
    
    September 30, 2005
    
    
    Date
    
    2005
    
    
    2004Promissory note
    
    none
    
    
    5.92
    (a)
    
    June 2016
    
    $
    650
    
    
    $
    650Senior unsecured term notes
    
    none
    
    
    7.63
    
    
    October 2007
    
    
    123,125
    
    
    
    122,426Senior unsecured term notes
    
    none
    
    
    9.00
    
    
    June 2011
    
    
    298,597
    
    
    
    298,409Senior unsecured term notes
    
    none
    
    
    7.79
    (b)
    
    June 2011
    
    
    290,000
    
    
    
    290,000Total unsecured debt
    
    
    
    
    8.27
    
    
    
    
    
    712,372
    
    
    
    711,485Mortgage debt
    
    9 hotels
    
    
    6.52
    
    
    July 2009 - 2014
    
    
    104,586
    
    
    
    105,951Mortgage debt
    
    6 hotels
    
    
    5.74
    (c)
    
    August 2007
    
    
    85,053
    
    
    
    86,412Mortgage debt
    
    10 hotels
    
    
    6.13
    (c)
    
    May 2006
    
    
    142,008
    
    
    
    144,669Mortgage debt
    
    15 hotels
    
    
    7.24
    
    
    Nov. 2007
    
    
    125,017
    
    
    
    127,316Mortgage debt
    
    7 hotels
    
    
    7.32
    
    
    April 2009
    
    
    128,218
    
    
    
    130,458Mortgage debt
    
    6 hotels
    
    
    7.55
    
    
    June 2009
    
    
    66,768
    
    
    
    67,959Mortgage debt
    
    8 hotels
    
    
    8.70
    
    
    May 2010
    
    
    173,363
    
    
    
    175,504Mortgage debt
    
    7 hotels
    
    
    8.73
    
    
    May 2010
    
    
    133,809
    
    
    
    135,690Mortgage debt
    
    1 hotel
    
    
    6.77
    (a)
    
    August 2008
    
    
    15,500
    
    
    
    15,500Mortgage debt
    
    1 hotel
    
    
    7.91
    
    
    December 2007
    
    
    10,523
    
    
    
    Mortgage debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,476Mortgage debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,521Other
    
    1 hotel
    
    
    9.17
    
    
    August 2011
    
    
    5,423
    
    
    
    6,181Construction loan
    
    
    
    5.76dc)
    
    October 2007
    
    
    6,002
    
    
    
    Total secured debt(e)
    
    71 hotels
    
    
    7.36
    
    
    
    
    
    996,270
    
    
    
    1,055,637Total(e)
    
    
    
    
    7.74
    %
    
    
    
    $
    1,708,642
    
    
    $
    1,767,122
 
 (a)
    
    Variable interest rate based on LIBOR. The six month LIBOR was 3.53% at September 30,
2005.(b)
    
    The stated interest rate on this debt is six month LIBOR plus 4.25%. We have swapped $100
million of this floating rate debt for a fixed rate of 7.80%. The resulting weighted average
rate on these notes was 7.79% at September 30, 2005.(c)
    
    Variable interest rate based on LIBOR. This debt has two, one-year extension options,
subject to certain contingencies.(d)
    
    This represents 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 currently based on LIBOR plus 225 basis points and is being capitalized as part
of the cost of the project. The interest rate may be reduced to LIBOR plus 200 basis points
when the project is 55% complete and upon satisfaction of certain other requirements.(e)
    
    Interest rates are calculated based on the weighted average outstanding debt at September
30, 2005.  9




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4.
    
    Debt3⁄4(continued)
   5.
    
    Derivatives
    10




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    Derivatives  (continued)
     6.
    
    Preferred Units
  11




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7.
    
    Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Room revenue
    
    $
    256,721
    
    
    $
    232,089
    
    
    $
    748,519
    
    
    $
    688,339Food and beverage revenue
    
    
    40,123
    
    
    
    39,960
    
    
    
    127,993
    
    
    
    124,176Other operating departments
    
    
    16,174
    
    
    
    15,105
    
    
    
    46,447
    
    
    
    44,978Total hotel operating revenue
    
    $
    313,018
    
    
    $
    287,154
    
    
    $
    922,959
    
    
    $
    857,493
   Three Months Ended September 30,2005
    
    
    2004% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueRoom
    
    $
    67,307
    
    
    
    21.5
    
    
    $
    63,166
    
    
    
    22.0Food and beverage
    
    
    32,890
    
    
    
    10.5
    
    
    
    32,461
    
    
    
    11.3Other operating departments
    
    
    8,208
    
    
    
    2.6
    
    
    
    7,451
    
    
    
    2.6Total hotel departmental expenses
    
    $
    108,405
    
    
    
    34.6
    
    
    $
    103,078
    
    
    
    35.9
 Nine Months Ended September 30,2005
    
    
    2004% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueRoom
    
    $
    193,581
    
    
    
    21.0
    
    
    $
    183,633
    
    
    
    21.4Food and beverage
    
    
    100,829
    
    
    
    10.9
    
    
    
    99,240
    
    
    
    11.6Other operating departments
    
    
    23,282
    
    
    
    2.5
    
    
    
    22,232
    
    
    
    2.6Total hotel departmental expenses
    
    $
    317,692
    
    
    
    34.4
    
    
    $
    305,105
    
    
    
    35.6
 12




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7.
    
    Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs 
(continued)
  Three Months Ended September 30,2005
    
    
    2004% of Total
    
    
    
    
    
    
    % of TotalDollars in
    
    
    Hotel
    
    
    Dollars in
    
    
    HotelThousands
    
    
    Operating Revenue
    
    
    Thousands
    
    
    Operating RevenueHotel general and administrative expense
    
    $
    31,249
    
    
    
    9.9
    
    
    $
    26,810
    
    
    
    9.3Marketing
    
    
    26,471
    
    
    
    8.5
    
    
    
    24,234
    
    
    
    8.4Repair and maintenance
    
    
    17,114
    
    
    
    5.5
    
    
    
    15,676
    
    
    
    5.5Energy
    
    
    17,924
    
    
    
    5.7
    
    
    
    16,306
    
    
    
    5.7Total other property operating costs
    
    $
    92,758
    
    
    
    29.6
    
    
    $
    83,026
    
    
    
    28.9
 Nine Months Ended September 30,2005
    
    
    2004% of Total
    
    
    
    
    
    
    % of TotalHotel
    
    
    
    
    
    
    HotelDollars in
    
    
    Operating
    
    
    Dollars in
    
    
    OperatingThousands
    
    
    Revenue
    
    
    Thousands
    
    
    RevenueHotel general and administrative expense
    
    $
    88,221
    
    
    
    9.6
    
    
    $
    80,459
    
    
    
    9.4Marketing
    
    
    79,584
    
    
    
    8.6
    
    
    
    74,191
    
    
    
    8.7Repair and maintenance
    
    
    51,010
    
    
    
    5.5
    
    
    
    47,461
    
    
    
    5.5Energy
    
    
    48,929
    
    
    
    5.3
    
    
    
    44,319
    
    
    
    5.1Total other property operating costs
    
    $
    267,744
    
    
    
    29.0
    
    
    $
    246,430
    
    
    
    28.7
  8.
    
    Taxes, Insurance and Lease Expense
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Operating lease expense (a)
    
    $
    17,239
    
    
    $
    15,132
    
    
    $
    49,892
    
    
    $
    45,726Real estate and other taxes
    
    
    11,289
    
    
    
    9,608
    
    
    
    34,266
    
    
    
    31,140Property insurance, general liability insurance and
other
    
    
    3,264
    
    
    
    3,649
    
    
    
    10,201
    
    
    
    10,140Total taxes, insurance and lease expense
    
    $
    31,792
    
    
    $
    28,389
    
    
    $
    94,359
    
    
    $
    87,006
 
 (a)
    
    Includes hotel lease expense of $14.7 million and $13.1 million associated with 14
hotels and 15 hotels owned by unconsolidated entities for the three months ended September
30, 2005 and 2004, respectively, and $42.8 million and $39.2 million for the nine months
ended September 30, 2005 and 2004, respectively. Included in lease expense are $8.7
million and $6.6 million in percentage rent based on operating results for the three months
ended September 30, 2005 and 2004, respectively, and $23.4 million and $18.8 million in
percentage rent for the nine months ended September 30, 2005 and 2004, respectively. 13




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9.
    
    Impairment
   10.
    
    Discontinued Operations
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Operating revenue
    
    $
    4,881
    
    
    $
    30,212
    
    
    $
    29,655
    
    
    $
    110,501Operating expenses
    
    
    3,924
    
    
    
    29,421
    
    
    
    28,516
    
    
    
    110,474Operating income
    
    
    957
    
    
    
    791
    
    
    
    1,139
    
    
    
    27Direct interest costs
    
    
    
    
    
    
    (1,037
    )
    
    
    (963
    )
    
    
    (3,108
    )Gain on early extinguishment of debt
    
    
    2,538
    
    
    
    
    
    
    
    2,538
    
    
    
    Impairment loss
    
    
    
    
    
    
    (33,027
    )
    
    
    (1,291
    )
    
    
    (33,027
    )Gain on sale of assets
    
    
    9,449
    
    
    
    3,058
    
    
    
    9,235
    
    
    
    2,116Minority interest
    
    
    
    
    
    
    722
    
    
    
    
    
    
    
    1,281Income (loss) from discontinued operations
    
    $
    12,944
    
    
    $
    (29,493
    )
    
    $
    10,658
    
    
    $
    (32,711
    )
      14




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    Earnings (Loss) Per Unit
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Numerator:Income (loss) from continuing operations
    
    $
    (1,681
    )
    
    $
    (9,714
    )
    
    $
    1,882
    
    
    $
    (62,353
    )Less: Preferred distributions
    
    
    (9,829
    )
    
    
    (9,343
    )
    
    
    (29,729
    )
    
    
    (25,039
    )Issuance costs of redeemed preferred units
    
    
    (1,324
    )
    
    
    
    
    
    
    (6,522
    )
    
    
    Loss from continuing operations applicable
to common unitholders
    
    
    (12,834
    )
    
    
    (19,057
    )
    
    
    (34,369
    )
    
    
    (87,392
    )Discontinued operations
    
    
    12,944
    
    
    
    (29,493
    )
    
    
    10,658
    
    
    
    (32,711
    )Net loss applicable to common unitholders
    
    $
    110
    
    
    $
    (48,550
    )
    
    $
    (23,711
    )
    
    $
    (120,103
    )Denominator:Denominator for basic earnings per unit
    
    
    62,215
    
    
    
    61,978
    
    
    
    62,181
    
    
    
    61,982Denominator for diluted earnings per unit
    
    
    62,215
    
    
    
    61,978
    
    
    
    62,181
    
    
    
    61,982Earnings (loss) per unit data:Basic:Loss from continuing operations
    
    $
    (0.21
    )
    
    $
    (0.31
    )
    
    $
    (0.55
    )
    
    $
    (1.41
    )Discontinued operations
    
    $
    0.21
    
    
    $
    (0.47
    )
    
    $
    0.17
    
    
    $
    (0.53
    )Net loss
    
    $
    0.00
    
    
    $
    (0.78
    )
    
    $
    (0.38
    )
    
    $
    (1.94
    )Diluted:Loss from continuing operations
    
    $
    (0.21
    )
    
    $
    (0.31
    )
    
    $
    (0.55
    )
    
    $
    (1.41
    )Discontinued operations
    
    $
    0.21
    
    
    $
    (0.47
    )
    
    $
    0.17
    
    
    $
    (0.53
    )Net loss
    
    $
    0.00
    
    
    $
    (0.78
    )
    
    $
    (0.38
    )
    
    $
    (1.94
    )
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004FelCor restricted shares granted but not vested
    
    
    620
    
    
    
    405
    
    
    
    543
    
    
    
    306Series 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
 12.
    
    FelCor Stock Based Compensation Plans
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Income (loss) from continuing operations, as reported
    
    $
    (1,681
    )
    
    $
    (9,714
    )
    
    $
    1,882
    
    
    $
    (62,353
    )Add stock based compensation included in the net income or
loss, as reported
    
    
    954
    
    
    
    484
    
    
    
    2,171
    
    
    
    1,615Less 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
    
    
    (957
    )
    
    
    (638
    )
    
    
    (2,180
    )
    
    
    (1,685
    )Income (loss) from continuing operations, pro forma
    
    $
    (1,684
    )
    
    $
    (9,868
    )
    
    $
    1,873
    
    
    $
    (62,423
    )Basic and diluted net loss from continuing operations per
common unit:As reported
    
    $
    (0.21
    )
    
    $
    (0.31
    )
    
    $
    (0.55
    )
    
    $
    (1.41
    )Pro forma
    
    $
    (0.21
    )
    
    $
    (0.31
    )
    
    $
    (0.55
    )
    
    $
    (1.41
    )
  13.
    
    Subsequent Events
    16




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information
  CONSOLIDATING BALANCE SHEET
September 30, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSNet investment in hotel properties
    
    $
    120,480
    
    
    $
    804,907
    
    
    $
    1,936,716
    
    
    $
    
    
    
    $
    2,862,103Equity investment in consolidated entities
    
    
    1,824,726
    
    
    
    
    
    
    
    
    
    
    
    (1,824,726
    )
    
    
    Investment in unconsolidated entities
    
    
    74,318
    
    
    
    33,303
    
    
    
    
    
    
    
    
    
    
    
    107,621Assets held for sale
    
    
    
    
    
    
    2,599
    
    
    
    
    
    
    
    
    
    
    
    2,599Cash and cash equivalents
    
    
    120,790
    
    
    
    40,690
    
    
    
    9,443
    
    
    
    
    
    
    
    170,923Restricted cash
    
    
    3,501
    
    
    
    2,161
    
    
    
    21,508
    
    
    
    
    
    
    
    27,170Accounts receivable
    
    
    5,178
    
    
    
    54,067
    
    
    
    (300
    )
    
    
    
    
    
    
    58,945Deferred assets
    
    
    6,866
    
    
    
    1,214
    
    
    
    7,403
    
    
    
    
    
    
    
    15,483Condominium development project
    
    
    9,326
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,326Other assets
    
    
    3,843
    
    
    
    19,619
    
    
    
    348
    
    
    
    
    
    
    
    23,810Total assets
    
    $
    2,169,028
    
    
    $
    958,560
    
    
    $
    1,975,118
    
    
    $
    (1,824,726
    )
    
    $
    3,277,980LIABILITIES AND PARTNERS CAPITALDebt
    
    $
    733,924
    
    
    $
    157,259
    
    
    $
    817,459
    
    
    $
    
    
    
    $
    1,708,642Distributions payable
    
    
    8,592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,592Accrued expenses and other liabilities
    
    
    34,923
    
    
    
    107,034
    
    
    
    17,030
    
    
    
    
    
    
    
    158,987Minority interest  other partnerships
    
    
    38,435
    
    
    
    (182
    )
    
    
    10,352
    
    
    
    
    
    
    
    48,605Total liabilities
    
    
    815,874
    
    
    
    264,111
    
    
    
    844,841
    
    
    
    
    
    
    
    1,924,826Redeemable units, at redemption value
    
    
    41,859
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,859Preferred units
    
    
    478,774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,774Common units
    
    
    830,606
    
    
    
    676,919
    
    
    
    1,130,277
    
    
    
    (1,824,726
    )
    
    
    813,076Accumulated other comprehensive income
    
    
    1,915
    
    
    
    17,530
    
    
    
    
    
    
    
    
    
    
    
    19,445Total partners capital
    
    
    1,311,295
    
    
    
    694,449
    
    
    
    1,130,277
    
    
    
    (1,824,726
    )
    
    
    1,311,295Total liabilities, redeemable
units and partners capital
    
    $
    2,169,028
    
    
    $
    958,560
    
    
    $
    1,975,118
    
    
    $
    (1,824,726
    )
    
    $
    3,277,980
 17




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2004
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSNet investment in hotel properties
    
    $
    193,695
    
    
    $
    1,015,155
    
    
    $
    1,746,916
    
    
    $
    
    
    
    $
    2,955,766Equity investment in consolidated entities
    
    
    1,769,874
    
    
    
    
    
    
    
    
    
    
    
    (1,769,874
    )
    
    
    Investment in unconsolidated entities
    
    
    76,190
    
    
    
    34,653
    
    
    
    
    
    
    
    
    
    
    
    110,843Assets held for sale
    
    
    
    
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    255Cash and cash equivalents
    
    
    84,829
    
    
    
    29,387
    
    
    
    5,094
    
    
    
    
    
    
    
    119,310Restricted cash
    
    
    9,287
    
    
    
    2,195
    
    
    
    23,254
    
    
    
    
    
    
    
    34,736Accounts receivable
    
    
    3,426
    
    
    
    48,411
    
    
    
    8
    
    
    
    
    
    
    
    51,845Deferred assets
    
    
    8,917
    
    
    
    1,218
    
    
    
    8,669
    
    
    
    
    
    
    
    18,804Condominium development project
    
    
    1,613
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,613Other assets
    
    
    8,239
    
    
    
    16,185
    
    
    
    62
    
    
    
    
    
    
    
    24,486Total assets
    
    $
    2,156,070
    
    
    $
    1,147,459
    
    
    $
    1,784,003
    
    
    $
    (1,769,874
    )
    
    $
    3,317,658LIABILITIES AND PARTNERS CAPITALDebt
    
    $
    776,790
    
    
    $
    160,337
    
    
    $
    829,995
    
    
    $
    
    
    
    $
    1,767,122Distributions payable
    
    
    8,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,867Accrued expenses and other liabilities
    
    
    (764
    )
    
    
    106,047
    
    
    
    19,639
    
    
    
    
    
    
    
    124,922Minority interest  other partnerships
    
    
    1,195
    
    
    
    (5,353
    )
    
    
    50,923
    
    
    
    
    
    
    
    46,765Total liabilities
    
    
    786,088
    
    
    
    261,031
    
    
    
    900,557
    
    
    
    
    
    
    
    1,947,676Redeemable units, at redemption value
    
    
    40,846
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,846Preferred units
    
    
    478,757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,757Common units
    
    
    850,379
    
    
    
    870,648
    
    
    
    883,446
    
    
    
    (1,769,874
    )
    
    
    834,599Accumulated other comprehensive income
    
    
    
    
    
    
    15,780
    
    
    
    
    
    
    
    
    
    
    
    15,780Total partners capital
    
    
    1,329,136
    
    
    
    886,428
    
    
    
    883,446
    
    
    
    (1,769,874
    )
    
    
    1,329,136Total liabilities, redeemable
units and partners capital
    
    $
    2,156,070
    
    
    $
    1,147,459
    
    
    $
    1,784,003
    
    
    $
    (1,769,874
    )
    
    $
    3,317,658
 18




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    313,018
    
    
    $
    
    
    
    $
    
    
    
    $
    313,018Percentage lease revenue
    
    
    8,215
    
    
    
    33,749
    
    
    
    59,611
    
    
    
    (101,575
    )
    
    
    Other revenue
    
    
    1,632
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,632Total revenue
    
    
    9,847
    
    
    
    346,767
    
    
    
    59,611
    
    
    
    (101,575
    )
    
    
    314,650Expenses:Hotel operating expense
    
    
    
    
    
    
    217,263
    
    
    
    
    
    
    
    
    
    
    
    217,263Taxes, insurance and lease expense
    
    
    1,168
    
    
    
    124,075
    
    
    
    8,124
    
    
    
    (101,575
    )
    
    
    31,792Corporate expenses
    
    
    280
    
    
    
    2,636
    
    
    
    1,923
    
    
    
    
    
    
    
    4,839Depreciation
    
    
    1,824
    
    
    
    10,208
    
    
    
    18,358
    
    
    
    
    
    
    
    30,390Total operating expenses
    
    
    3,272
    
    
    
    354,182
    
    
    
    28,405
    
    
    
    (101,575
    )
    
    
    284,284Operating income (loss)
    
    
    6,575
    
    
    
    (7,415
    )
    
    
    31,206
    
    
    
    
    
    
    
    30,366Interest expense, net
    
    
    (14,477
    )
    
    
    (2,616
    )
    
    
    (16,080
    )
    
    
    
    
    
    
    (33,173
    )Impairment loss
    
    
    
    
    
    
    (569
    )
    
    
    
    
    
    
    
    
    
    
    (569
    )Hurricane loss
    
    
    (1,890
    )
    
    
    (419
    )
    
    
    
    
    
    
    
    
    
    
    (2,309
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (9,792
    )
    
    
    (11,019
    )
    
    
    15,126
    
    
    
    
    
    
    
    (5,685
    )Equity in income from consolidated
entities
    
    
    7,841
    
    
    
    
    
    
    
    
    
    
    
    (7,841
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    2,285
    
    
    
    975
    
    
    
    
    
    
    
    
    
    
    
    3,260Gain (loss) on sale of assets
    
    
    8,391
    
    
    
    (8,109
    )
    
    
    62
    
    
    
    
    
    
    
    344Minority interests in other partnerships
    
    
    
    
    
    
    844
    
    
    
    (444
    )
    
    
    
    
    
    
    400Income (loss) from continuing operations
    
    
    8,725
    
    
    
    (17,309
    )
    
    
    14,744
    
    
    
    (7,841
    )
    
    
    (1,681
    )Discontinued operations from
consolidated entities
    
    
    2,538
    
    
    
    10,406
    
    
    
    
    
    
    
    
    
    
    
    12,944Net income (loss)
    
    
    11,263
    
    
    
    (6,903
    )
    
    
    14,744
    
    
    
    (7,841
    )
    
    
    11,263Preferred distributions
    
    
    (9,829
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,829
    )Issuance costs of redeemed preferred
units
    
    
    (1,324
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,324
    )Net income (loss) applicable to
unitholders
    
    $
    110
    
    
    $
    (6,903
    )
    
    $
    14,744
    
    
    $
    (7,841
    )
    
    $
    110
 19




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2004
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    287,154
    
    
    $
    
    
    
    $
    
    
    
    $
    287,154Percentage lease revenue
    
    
    6,558
    
    
    
    41,979
    
    
    
    50,196
    
    
    
    (98,733
    )
    
    
    Other revenue
    
    
    1,166
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    2,166Total revenue
    
    
    7,724
    
    
    
    330,133
    
    
    
    50,196
    
    
    
    (98,733
    )
    
    
    289,320Expenses:Hotel operating expense
    
    
    
    
    
    
    201,459
    
    
    
    
    
    
    
    
    
    
    
    201,459Taxes, insurance and lease expense
    
    
    (332
    )
    
    
    120,035
    
    
    
    7,419
    
    
    
    (98,733
    )
    
    
    28,389Corporate expenses
    
    
    193
    
    
    
    2,235
    
    
    
    1,359
    
    
    
    
    
    
    
    3,787Depreciation
    
    
    1,770
    
    
    
    10,524
    
    
    
    16,239
    
    
    
    
    
    
    
    28,533Total operating expenses
    
    
    1,631
    
    
    
    334,253
    
    
    
    25,017
    
    
    
    (98,733
    )
    
    
    262,168Operating income (loss)
    
    
    6,093
    
    
    
    (4,120
    )
    
    
    25,179
    
    
    
    
    
    
    
    27,152Interest expense, net
    
    
    (17,000
    )
    
    
    (2,540
    )
    
    
    (14,763
    )
    
    
    
    
    
    
    (34,303
    )Charge-off of deferred financing cost
    
    
    (1,920
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,920
    )Early extinguishment of debt
    
    
    (10,987
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,987
    )Hurricane loss
    
    
    (1,750
    )
    
    
    (375
    )
    
    
    
    
    
    
    
    
    
    
    (2,125
    )Income (loss) before equity in income from
unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (25,564
    )
    
    
    (7,035
    )
    
    
    10,416
    
    
    
    
    
    
    
    (22,183
    )Equity in income from consolidated entities
    
    
    8,885
    
    
    
    
    
    
    
    
    
    
    
    (8,885
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    551
    
    
    
    11,468
    
    
    
    
    
    
    
    
    
    
    
    12,019Gain (loss) on sale of assets
    
    
    
    
    
    
    (11
    )
    
    
    1,105
    
    
    
    
    
    
    
    1,094Minority interests in other partnerships
    
    
    
    
    
    
    528
    
    
    
    (1,172
    )
    
    
    
    
    
    
    (644
    )Income (loss) from continuing operations
    
    
    (16,128
    )
    
    
    4,950
    
    
    
    10,349
    
    
    
    (8,885
    )
    
    
    (9,714
    )Discontinued operations from consolidated
entities
    
    
    (23,079
    )
    
    
    (6,414
    )
    
    
    
    
    
    
    
    
    
    
    (29,493
    )Net income (loss)
    
    
    (39,207
    )
    
    
    (1,464
    )
    
    
    10,349
    
    
    
    (8,885
    )
    
    
    (39,207
    )Preferred distributions
    
    
    (9,343
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,343
    )Net income (loss) applicable to unitholders
    
    $
    (48,550
    )
    
    $
    (1,464
    )
    
    $
    10,349
    
    
    $
    (8,885
    )
    
    $
    (48,550
    )
 20




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    922,959
    
    
    $
    
    
    
    $
    
    
    
    $
    922,959Percentage lease revenue
    
    
    19,235
    
    
    
    110,801
    
    
    
    174,743
    
    
    
    (304,779
    )
    
    
    Other revenue
    
    
    2,245
    
    
    
    (337
    )
    
    
    
    
    
    
    
    
    
    
    1,908Total revenue
    
    
    21,480
    
    
    
    1,033,423
    
    
    
    174,743
    
    
    
    (304,779
    )
    
    
    924,867Expenses:Hotel operating expense
    
    
    
    
    
    
    632,523
    
    
    
    
    
    
    
    
    
    
    
    632,523Taxes, insurance and lease expense
    
    
    4,707
    
    
    
    373,002
    
    
    
    21,429
    
    
    
    (304,779
    )
    
    
    94,359Corporate expenses
    
    
    819
    
    
    
    7,475
    
    
    
    5,814
    
    
    
    
    
    
    
    14,108Depreciation
    
    
    5,151
    
    
    
    31,950
    
    
    
    52,433
    
    
    
    
    
    
    
    89,534Total operating expenses
    
    
    10,677
    
    
    
    1,044,950
    
    
    
    79,676
    
    
    
    (304,779
    )
    
    
    830,524Operating income (loss)
    
    
    10,803
    
    
    
    (11,527
    )
    
    
    95,067
    
    
    
    
    
    
    
    94,343Interest expense, net
    
    
    (42,920
    )
    
    
    (8,716
    )
    
    
    (47,324
    )
    
    
    
    
    
    
    (98,960
    )Impairment loss
    
    
    
    
    
    
    (569
    )
    
    
    
    
    
    
    
    
    
    
    (569
    )Hurricane loss
    
    
    (1,890
    )
    
    
    (419
    )
    
    
    
    
    
    
    
    
    
    
    (2,309
    )Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (34,007
    )
    
    
    (21,231
    )
    
    
    47,743
    
    
    
    
    
    
    
    (7,495
    )Equity in income from consolidated
entities
    
    
    27,381
    
    
    
    
    
    
    
    
    
    
    
    (27,381
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    7,086
    
    
    
    1,143
    
    
    
    
    
    
    
    
    
    
    
    8,229Gain on sale of assets
    
    
    388
    
    
    
    283
    
    
    
    62
    
    
    
    
    
    
    
    733Minority interests in other partnerships
    
    
    
    
    
    
    1,562
    
    
    
    (1,147
    )
    
    
    
    
    
    
    415Income (loss) from continuing operations
    
    
    848
    
    
    
    (18,243
    )
    
    
    46,658
    
    
    
    (27,381
    )
    
    
    1,882Discontinued operations from
consolidated entities
    
    
    11,692
    
    
    
    (1,034
    )
    
    
    
    
    
    
    
    
    
    
    10,658Net income (loss)
    
    
    12,540
    
    
    
    (19,277
    )
    
    
    46,658
    
    
    
    (27,381
    )
    
    
    12,540Preferred distributions
    
    
    (29,729
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,729
    )Issuance costs of redeemed preferred
units
    
    
    (6,522
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,522
    )Net income (loss) applicable to
unitholders
    
    $
    (23,711
    )
    
    $
    (19,277
    )
    
    $
    46,658
    
    
    $
    (27,381
    )
    
    $
    (23,711
    )
 21




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2004
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    
    
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Hotel operating revenue
    
    $
    
    
    
    $
    857,493
    
    
    $
    
    
    
    $
    
    
    
    $
    857,493Percentage lease revenue
    
    
    18,406
    
    
    
    126,676
    
    
    
    157,502
    
    
    
    (302,584
    )
    
    
    Other revenue
    
    
    1,590
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    2,590Total revenue
    
    
    19,996
    
    
    
    985,169
    
    
    
    157,502
    
    
    
    (302,584
    )
    
    
    860,083Expenses:Hotel operating expense
    
    
    
    
    
    
    596,247
    
    
    
    
    
    
    
    
    
    
    
    596,247Taxes, insurance and lease expense
    
    
    (38
    )
    
    
    367,624
    
    
    
    22,004
    
    
    
    (302,584
    )
    
    
    87,006Corporate expenses
    
    
    1,193
    
    
    
    6,109
    
    
    
    4,227
    
    
    
    
    
    
    
    11,529Depreciation
    
    
    5,627
    
    
    
    30,013
    
    
    
    48,303
    
    
    
    
    
    
    
    83,943Total operating expenses
    
    
    6,782
    
    
    
    999,993
    
    
    
    74,534
    
    
    
    (302,584
    )
    
    
    778,725Operating income
    
    
    13,214
    
    
    
    (14,824
    )
    
    
    82,968
    
    
    
    
    
    
    
    81,358Interest expense, net
    
    
    (64,917
    )
    
    
    (7,990
    )
    
    
    (40,183
    )
    
    
    
    
    
    
    (113,090
    )Charge-off of deferred financing cost
    
    
    (6,094
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,094
    )Early extinguishment of debt
    
    
    (39,233
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,233
    )Hurricane loss
    
    
    (1,750
    )
    
    
    (375
    )
    
    
    
    
    
    
    
    
    
    
    (2,125
    )Gain on swap termination
    
    
    1,005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,005Income (loss) before equity in income
from unconsolidated entities, minority
interests and gain on sale of assets
    
    
    (97,775
    )
    
    
    (23,189
    )
    
    
    42,785
    
    
    
    
    
    
    
    (78,179
    )Equity in income from consolidated
entities
    
    
    20,083
    
    
    
    
    
    
    
    
    
    
    
    (20,083
    )
    
    
    Equity in income from unconsolidated
entities
    
    
    4,647
    
    
    
    11,045
    
    
    
    
    
    
    
    
    
    
    
    15,692Gain (loss) on sale of assets
    
    
    
    
    
    
    (22
    )
    
    
    1,116
    
    
    
    
    
    
    
    1,094Minority interests in other partnerships
    
    
    
    
    
    
    528
    
    
    
    (1,488
    )
    
    
    
    
    
    
    (960
    )Income from continuing operations
    
    
    (73,045
    )
    
    
    (11,638
    )
    
    
    42,413
    
    
    
    (20,083
    )
    
    
    (62,353
    )Discontinued operations from
consolidated entities
    
    
    (22,019
    )
    
    
    (10,699
    )
    
    
    7
    
    
    
    
    
    
    
    (32,711
    )Net income (loss)
    
    
    (95,064
    )
    
    
    (22,337
    )
    
    
    42,420
    
    
    
    (20,083
    )
    
    
    (95,064
    )Preferred distributions
    
    
    (25,039
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,039
    )Net loss applicable to unitholders
    
    $
    (120,103
    )
    
    $
    (22,337
    )
    
    $
    42,420
    
    
    $
    (20,083
    )
    
    $
    (120,103
    )
 22




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##### Table of Contents



FELCOR LODGING LIMITED PARTNERSHIP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    Consolidating Financial Information3⁄4(continued)
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2005
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    ConsolidatedCash flows from (used in) operating activities
    
    $
    3,434
    
    
    $
    12,883
    
    
    $
    100,859
    
    
    $
    117,176Cash flows from (used in) investing activities
    
    
    18,095
    
    
    
    487
    
    
    
    (34,856
    )
    
    
    (16,274
    )Cash flows from (used in) financing activities
    
    
    14,432
    
    
    
    (2,112
    )
    
    
    (61,654
    )
    
    
    (49,334
    )Effect of exchange rates changes on cash
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    45Change in cash and cash equivalents
    
    
    35,961
    
    
    
    11,303
    
    
    
    4,349
    
    
    
    51,613Cash and cash equivalents at beginning of period
    
    
    84,829
    
    
    
    29,387
    
    
    
    5,094
    
    
    
    119,310Cash and equivalents at end of period
    
    $
    120,790
    
    
    $
    40,690
    
    
    $
    9,443
    
    
    $
    170,923
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2004
(in thousands)
 Subsidiary
    
    
    Non-Guarantor
    
    
    TotalFelCor L.P.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    ConsolidatedCash flows from (used in) operating activities
    
    $
    (42,886
    )
    
    $
    16,362
    
    
    $
    80,643
    
    
    $
    54,119Cash flows from (used in) investing activities
    
    
    448
    
    
    
    696
    
    
    
    (13,974
    )
    
    
    (12,830
    )Cash flows from (used in) financing activities
    
    
    (52,747
    )
    
    
    681
    
    
    
    (68,019
    )
    
    
    (120,085
    )Effect of exchange rates changes on cash
    
    
    
    
    
    
    1,020
    
    
    
    
    
    
    
    1,020Change in cash and cash equivalents
    
    
    (95,185
    )
    
    
    18,759
    
    
    
    (1,350
    )
    
    
    (77,776
    )Cash and cash equivalents at beginning of period
    
    
    170,057
    
    
    
    59,317
    
    
    
    2,511
    
    
    
    231,885Cash and equivalents at end of period
    
    $
    74,872
    
    
    $
    78,076
    
    
    $
    1,161
    
    
    $
    154,109
 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 operating margin)
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,% Change
    
    
    
    
    
    
    
    
    
    % Change2005
    
    2004
    
    2004-2005
    
    2005
    
    2004
    
    2004-2005RevPAR
    
    $
    76.43
    
    
    $
    68.98
    
    
    
    10.8
    
    
    $
    74.31
    
    
    $
    68.18
    
    
    
    9.0Hotel operating profit(1)
    
    
    63,963
    
    
    
    57,306
    
    
    
    11.6
    
    
    
    196,077
    
    
    
    174,240
    
    
    
    12.5Hotel operating margin(1)
    
    
    20.4
    %
    
    
    20.0
    %
    
    
    2.0
    
    
    
    21.2
    %
    
    
    20.3
    %
    
    
    4.4Income (loss) from continuing
operations(2)
    
    $
    (1,681
    )
    
    $
    (9,714
    )
    
    
    82.7
    
    
    $
    1,882
    
    
    $
    (62,353
    )
    
    
    103.0Funds From Operations
(FFO)(1) (3)
    
    
    23,705
    
    
    
    (18,610
    )
    
    
    227.4
    
    
    
    65,561
    
    
    
    (24,536
    )
    
    
    367.2Earnings Before Interest, Taxes,
Depreciation and Amortization
(EBITDA)(1)(4)
    
    
    81,166
    
    
    
    31,447
    
    
    
    158.1
    
    
    
    221,268
    
    
    
    126,202
    
    
    
    75.3
 
 (1)
    
    Included in the Financial Comparison are non-GAAP financial measures, including FFO,
EBITDA, hotel operating profit and hotel operating 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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Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Charge off of deferred debt costs
    
    $
    
    
    
    $
    1,920
    
    
    $
    
    
    
    $
    6,094Loss (gain) on early extinguishment of debt
    
    
    (2,538
    )
    
    
    10,987
    
    
    
    (2,538
    )
    
    
    39,233Hurricane loss
    
    
    2,309
    
    
    
    2,125
    
    
    
    2,309
    
    
    
    2,125Gain on swap termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,005
    )Impairment loss
    
    
    569
    
    
    
    
    
    
    
    569
    
    
    
    
 
 (3)
    
    In accordance with the guidance provided by the Securities and Exchange Commission, or
SEC, on non-GAAP financial measures, FFO has not been adjusted to add back the following
items included in net income (loss) (in thousands): Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Charge-off of deferred debt costs
    
    $
    
    
    
    $
    1,920
    
    
    $
    
    
    
    $
    6,094Loss (gain) on early extinguishment of debt
    
    
    (2,538
    )
    
    
    10,987
    
    
    
    (2,538
    )
    
    
    39,233Issuance costs of redeemed preferred units.
    
    
    1,324
    
    
    
    
    
    
    
    6,522
    
    
    
    Gain on swap termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,005
    )Impairment loss
    
    
    569
    
    
    
    33,027
    
    
    
    1,860
    
    
    
    33,027Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    4,900
 
 (4)
    
    Consistent with SEC guidance on non-GAAP financial measures, EBITDA has not been
adjusted for the following amounts included in net income (loss) (in thousands): Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Charge-off of deferred debt costs
    
    $
    
    
    
    $
    1,920
    
    
    $
    
    
    
    $
    6,094Loss (gain) on early extinguishment of debt
    
    
    (2,538
    )
    
    
    10,987
    
    
    
    (2,538
    )
    
    
    39,233Issuance costs of redeemed preferred units.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on swap termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,005
    )Impairment loss
    
    
    569
    
    
    
    33,027
    
    
    
    1,860
    
    
    
    33,027Gain on sale
of depreciable assets
    
    
    (9,449
    )
    
    
    (3,058
    )
    
    
    (9,624
    )
    
    
    (2,116
    )Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    4,900
 
 Results of Operations
 Comparison of the Three Months Ended September 30, 2005 and 2004
  ® ®
 25




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26




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##### Table of Contents



Comparison of the Nine Months Ended September 30, 2005 and 2004
        27




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Non-GAAP Financial Measures
   Reconciliation of Net Income (Loss) to FFO
(in thousands, except per unit data)
 Three Months Ended September 30,2005
    
    
    2004Per Unit
    
    
    
    
    
    
    
    
    
    
    Per UnitDollars
    
    
    Units
    
    
    Amount
    
    
    Dollars
    
    
    Units
    
    
    AmountNet income (loss)
    
    $
    11,263
    
    
    
    
    
    
    
    
    
    
    $
    (39,207
    )Preferred distributions
    
    
    (9,829
    )
    
    
    
    
    
    
    
    
    
    
    (9,343
    )Issuance costs of redeemed preferred units
    
    
    (1,324
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss) applicable to common
unitholders
    
    
    110
    
    
    
    62,215
    
    
    $
    
    
    
    
    (48,550
    )
    
    
    61,978
    
    
    $
    (0.78
    )Depreciation from continuing operations
    
    
    30,390
    
    
    
    
    
    
    
    0.49
    
    
    
    28,533
    
    
    
    
    
    
    
    0.46Depreciation from unconsolidated entities
and discontinued operations
    
    
    2,654
    
    
    
    
    
    
    
    0.04
    
    
    
    4,465
    
    
    
    
    
    
    
    0.07Gain on sale of depreciable assets
    
    
    (9,449
    )
    
    
    
    
    
    
    (0.15
    )
    
    
    (3,058
    )
    
    
    
    
    
    
    (0.05
    )Conversion of unvested restricted stock
    
    
    
    
    
    
    620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FFO
    
    $
    23,705
    
    
    
    62,835
    
    
    $
    0.38
    
    
    $
    (18,610
    )
    
    
    61,978
    
    
    $
    (0.30
    )
 28




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Reconciliation of Net Income (Loss) to FFO
(in thousands, except per unit data)
 Nine Months Ended September 30,2005
    
    
    2004Per Unit
    
    
    
    
    
    
    
    
    
    
    Per UnitDollars
    
    
    Units
    
    
    Amount
    
    
    Dollars
    
    
    Units
    
    
    AmountNet income (loss)
    
    $
    12,540
    
    
    
    
    
    
    
    
    
    
    $
    (95,064
    )Preferred distributions
    
    
    (29,729
    )
    
    
    
    
    
    
    
    
    
    
    (25,039
    )Issuance costs of redeemed preferred units
    
    
    (6,522
    )
    
    
    
    
    
    
    
    
    
    
    Net loss applicable to common unitholders
    
    
    (23,711
    )
    
    
    62,181
    
    
    $
    (0.38
    )
    
    
    (120,103
    )
    
    
    61,982
    
    
    $
    (1.94
    )Depreciation from continuing operations
    
    
    89,534
    
    
    
    
    
    
    
    1.44
    
    
    
    83,943
    
    
    
    
    
    
    
    1.35Depreciation from unconsolidated entities
and discontinued operations
    
    
    9,362
    
    
    
    
    
    
    
    0.15
    
    
    
    13,740
    
    
    
    
    
    
    
    0.22Gain on sale of depreciable assets
    
    
    (9,624
    )
    
    
    
    
    
    
    (0.16
    )
    
    
    (2,116
    )
    
    
    
    
    
    
    (0.03
    )Conversion of unvested restricted stock
    
    
    
    
    
    
    543
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FFO
    
    $
    65,561
    
    
    
    62,724
    
    
    $
    1.05
    
    
    $
    (24,536
    )
    
    
    61,982
    
    
    $
    (0.40
    )
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Charge-off of deferred financing costs
    
    $
    
    
    
    $
    1,920
    
    
    $
    
    
    
    $
    6,094Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    4,900Issuance costs of redeemed preferred units.
    
    
    1,324
    
    
    
    
    
    
    
    6,522
    
    
    
    Loss (gain) on early extinguishment of debt
    
    
    (2,538
    )
    
    
    10,987
    
    
    
    (2,538
    )
    
    
    39,233Impairment loss
    
    
    569
    
    
    
    33,027
    
    
    
    1,860
    
    
    
    33,027Gain on swap termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,005
    )
 29




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##### Table of Contents



Reconciliation of Net Income (Loss) to EBITDA
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss)
    
    $
    11,263
    
    
    $
    (39,207
    )
    
    $
    12,540
    
    
    $
    (95,064
    )Depreciation from continuing operations
    
    
    30,390
    
    
    
    28,533
    
    
    
    89,534
    
    
    
    83,943Depreciation from unconsolidated
entities and discontinued operations
    
    
    2,654
    
    
    
    4,465
    
    
    
    9,362
    
    
    
    13,740Interest expense
    
    
    34,216
    
    
    
    34,230
    
    
    
    101,187
    
    
    
    113,341Interest expense from unconsolidated
entities and discontinued operations
    
    
    1,823
    
    
    
    2,833
    
    
    
    6,474
    
    
    
    8,627Amortization expense
    
    
    820
    
    
    
    593
    
    
    
    2,171
    
    
    
    1,615EBITDA
    
    $
    81,166
    
    
    $
    31,447
    
    
    $
    221,268
    
    
    $
    126,202
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Charge-off of deferred
financing costs
    
    $
    
    
    
    $
    1,920
    
    
    $
    
    
    
    $
    6,094Asset disposition costs
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    4,900Gain on sale of depreciable assets
    
    
    (9,449
    )
    
    
    (3,058
    )
    
    
    (9,624
    )
    
    
    (2,116
    )Loss (gain) from early
extinguishment of debt
    
    
    (2,538
    )
    
    
    10,987
    
    
    
    (2,538
    )
    
    
    39,233Impairment loss
    
    
    569
    
    
    
    33,027
    
    
    
    1,860
    
    
    
    33,027Gain on swap termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,005
    )
  Hotel Operating Profit
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Total revenue
    
    $
    314,650
    
    
    $
    289,320
    
    
    $
    924,867
    
    
    $
    860,083Retail space rental and other revenue
    
    
    (1,632
    )
    
    
    (2,166
    )
    
    
    (1,908
    )
    
    
    (2,590
    )Hotel operating revenue
    
    
    313,018
    
    
    
    287,154
    
    
    
    922,959
    
    
    
    857,493Hotel operating expenses
    
    
    (249,055
    )
    
    
    (229,848
    )
    
    
    (726,882
    )
    
    
    (683,253
    )Hotel operating profit
    
    $
    63,963
    
    
    $
    57,306
    
    
    $
    196,077
    
    
    $
    174,240Hotel operating margin
    
    
    20.4
    %
    
    
    20.0
    %
    
    
    21.2
    %
    
    
    20.3
    %
 30




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##### Table of Contents



Hotel Operating Expense Composition
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Hotel departmental expenses:Room
    
    $
    67,307
    
    
    $
    63,166
    
    
    $
    193,581
    
    
    $
    183,633Food and beverage
    
    
    32,890
    
    
    
    32,461
    
    
    
    100,829
    
    
    
    99,240Other operating departments
    
    
    8,208
    
    
    
    7,451
    
    
    
    23,282
    
    
    
    22,232Other property related costs:Administrative and general
    
    
    31,249
    
    
    
    26,810
    
    
    
    88,221
    
    
    
    80,459Marketing and advertising
    
    
    26,471
    
    
    
    24,234
    
    
    
    79,584
    
    
    
    74,191Repairs and maintenance
    
    
    17,114
    
    
    
    15,676
    
    
    
    51,010
    
    
    
    47,461Energy
    
    
    17,924
    
    
    
    16,306
    
    
    
    48,929
    
    
    
    44,319Taxes, insurance and lease expense
    
    
    31,792
    
    
    
    28,389
    
    
    
    94,359
    
    
    
    87,006Total other property related costs
    
    
    124,550
    
    
    
    111,415
    
    
    
    362,103
    
    
    
    333,436Management and franchise fees
    
    
    16,100
    
    
    
    15,355
    
    
    
    47,087
    
    
    
    44,712Hotel operating expenses
    
    $
    249,055
    
    
    $
    229,848
    
    
    $
    726,882
    
    
    $
    683,253Reconciliation of total operating expense to hotel operating expense:Total operating expenses
    
    $
    284,284
    
    
    $
    262,168
    
    
    $
    830,524
    
    
    $
    778,725Corporate expenses
    
    
    (4,839
    )
    
    
    (3,787
    )
    
    
    (14,108
    )
    
    
    (11,529
    )Depreciation
    
    
    (30,390
    )
    
    
    (28,533
    )
    
    
    (89,534
    )
    
    
    (83,943
    )Hotel operating expenses
    
    $
    249,055
    
    
    $
    229,848
    
    
    $
    726,882
    
    
    $
    683,253
 31




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##### Table of Contents



Reconciliation of Net Income (Loss) to Hotel Operating Profit
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss)
    
    $
    11,263
    
    
    $
    (39,207
    )
    
    $
    12,540
    
    
    $
    (95,064
    )Discontinued operations
    
    
    (12,944
    )
    
    
    29,493
    
    
    
    (10,658
    )
    
    
    32,711Equity in income from unconsolidated
entities
    
    
    (3,260
    )
    
    
    (12,019
    )
    
    
    (8,229
    )
    
    
    (15,692
    )Minority interests
    
    
    (400
    )
    
    
    644
    
    
    
    (415
    )
    
    
    960Interest expense, net
    
    
    33,173
    
    
    
    34,303
    
    
    
    98,960
    
    
    
    113,090Charge-off of deferred financing costs
    
    
    
    
    
    
    1,920
    
    
    
    
    
    
    
    6,094Impairment loss
    
    
    569
    
    
    
    
    
    
    
    569
    
    
    
    Hurricane loss
    
    
    2,309
    
    
    
    2,125
    
    
    
    2,309
    
    
    
    2,125Loss on early extinguishment of debt
    
    
    
    
    
    
    10,987
    
    
    
    
    
    
    
    39,233Gain on swap termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,005
    )Corporate expenses
    
    
    4,839
    
    
    
    3,787
    
    
    
    14,108
    
    
    
    11,529Depreciation
    
    
    30,390
    
    
    
    28,533
    
    
    
    89,534
    
    
    
    83,943Retail space rental and other revenue.
    
    
    (1,632
    )
    
    
    (2,166
    )
    
    
    (1,908
    )
    
    
    (2,590
    )Gain on sale of assets
    
    
    (344
    )
    
    
    (1,094
    )
    
    
    (733
    )
    
    
    (1,094
    )Hotel operating profit
    
    $
    63,963
    
    
    $
    57,306
    
    
    $
    196,077
    
    
    $
    174,240
 Reconciliation of Ratio of Operating Income to Total Revenue to Hotel Operating Margin
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Ratio of operating income to total revenue
    
    
    9.7
    %
    
    
    9.4
    %
    
    
    10.2
    %
    
    
    9.5
    %Less:Retail space and rental and other revenue
    
    
    (0.5
    )
    
    
    (0.7
    )
    
    
    (0.2
    )
    
    
    (0.3
    )Plus:Corporate expenses
    
    
    1.5
    
    
    
    1.3
    
    
    
    1.5
    
    
    
    1.3Depreciation
    
    
    9.7
    
    
    
    10.0
    
    
    
    9.7
    
    
    
    9.8Hotel operating margin
    
    
    20.4
    %
    
    
    20.0
    %
    
    
    21.2
    %
    
    
    20.3
    %
  FFO and EBITDA
  32




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##### Table of Contents



Hotel Operating Profit and Operating Margin
  Use and Limitations of Non-GAAP Measures
    33




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##### Table of Contents



Hotel Portfolio Composition
  % of
    
    % of 2004 HotelBrand
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Operating ProfitEmbassy Suites Hotels
    
    
    54
    
    
    
    13,550
    
    
    
    38
    %
    
    
    53
    %Holiday Inn-branded
    
    
    32
    
    
    
    10,770
    
    
    
    31
    
    
    
    21Sheraton-branded
    
    
    10
    
    
    
    3,269
    
    
    
    9
    
    
    
    10Doubletree-branded
    
    
    10
    
    
    
    2,206
    
    
    
    6
    
    
    
    6Crowne Plaza
    
    
    12
    
    
    
    4,025
    
    
    
    11
    
    
    
    5Other
    
    
    7
    
    
    
    1,811
    
    
    
    5
    
    
    
    5
 % of
    
    % of 2004 HotelTop Markets
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Operating ProfitAtlanta
    
    
    10
    
    
    
    3,060
    
    
    
    9
    %
    
    
    9
    %Dallas
    
    
    12
    
    
    
    3,586
    
    
    
    10
    
    
    
    6Los Angeles Area
    
    
    6
    
    
    
    1,435
    
    
    
    4
    
    
    
    5Orlando
    
    
    6
    
    
    
    2,219
    
    
    
    6
    
    
    
    5Boca Raton/Ft.
Lauderdale
    
    
    4
    
    
    
    1,118
    
    
    
    3
    
    
    
    5Minneapolis
    
    
    4
    
    
    
    955
    
    
    
    3
    
    
    
    4Philadelphia
    
    
    3
    
    
    
    1,174
    
    
    
    3
    
    
    
    3San Diego
    
    
    1
    
    
    
    600
    
    
    
    2
    
    
    
    3Phoenix
    
    
    3
    
    
    
    798
    
    
    
    2
    
    
    
    3San Antonio
    
    
    4
    
    
    
    1,188
    
    
    
    3
    
    
    
    3Northern New Jersey
    
    
    3
    
    
    
    757
    
    
    
    2
    
    
    
    3Chicago
    
    
    4
    
    
    
    1,239
    
    
    
    3
    
    
    
    3San Francisco Bay Area
    
    
    8
    
    
    
    2,690
    
    
    
    8
    
    
    
    3Houston
    
    
    4
    
    
    
    1,403
    
    
    
    4
    
    
    
    3Washington, D.C.
    
    
    1
    
    
    
    437
    
    
    
    1
    
    
    
    3
 % of
    
    % of 2004 HotelTop Four States
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Operating ProfitCalifornia
    
    
    19
    
    
    
    5,536
    
    
    
    16
    %
    
    
    16
    %Texas
    
    
    25
    
    
    
    7,344
    
    
    
    21
    
    
    
    14Florida
    
    
    15
    
    
    
    4,937
    
    
    
    14
    
    
    
    12Georgia
    
    
    12
    
    
    
    3,414
    
    
    
    10
    
    
    
    10
 % of
    
    % of 2004 HotelLocation
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Operating ProfitSuburban
    
    
    57
    
    
    
    14,335
    
    
    
    40
    %
    
    
    40
    %Urban
    
    
    29
    
    
    
    9,322
    
    
    
    26
    
    
    
    24Airport
    
    
    26
    
    
    
    8,182
    
    
    
    23
    
    
    
    23Resort
    
    
    12
    
    
    
    3,544
    
    
    
    10
    
    
    
    13Interstate
    
    
    1
    
    
    
    248
    
    
    
    1
    
    
    
    0
 % of
    
    % of 2004 HotelSegment
    
    Hotels
    
    Rooms
    
    Total Rooms
    
    Operating ProfitUpscale all-suite
    
    
    67
    
    
    
    16,416
    
    
    
    46
    %
    
    
    60
    %Full service
    
    
    33
    
    
    
    10,934
    
    
    
    31
    
    
    
    21Upscale
    
    
    23
    
    
    
    7,843
    
    
    
    22
    
    
    
    17Limited service
    
    
    2
    
    
    
    438
    
    
    
    1
    
    
    
    1
 34




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##### Table of Contents



Hotel Operating Statistics
  Operating Statistics by Brand
 Occupancy (%)Three Months Ended September 30,
    
    Nine Months Ended September 30,2005
    
    2004
    
    %Variance
    
    2005
    
    2004
    
    % VarianceEmbassy Suites Hotels
    
    
    75.1
    
    
    
    71.7
    
    
    
    4.7
    
    
    
    74.1
    
    
    
    71.4
    
    
    
    3.9Holiday Inn-branded hotels
    
    
    71.7
    
    
    
    69.9
    
    
    
    2.5
    
    
    
    68.4
    
    
    
    67.5
    
    
    
    1.3Sheraton-branded hotels
    
    
    67.1
    
    
    
    64.2
    
    
    
    4.6
    
    
    
    65.4
    
    
    
    64.8
    
    
    
    1.0Doubletree-branded hotels
    
    
    71.6
    
    
    
    66.3
    
    
    
    8.0
    
    
    
    69.6
    
    
    
    68.3
    
    
    
    1.9Crowne Plaza hotels
    
    
    71.5
    
    
    
    66.6
    
    
    
    7.3
    
    
    
    68.4
    
    
    
    64.5
    
    
    
    6.0Other hotels
    
    
    65.0
    
    
    
    61.0
    
    
    
    6.7
    
    
    
    61.2
    
    
    
    59.5
    
    
    
    2.1Total hotels
    
    
    72.2
    
    
    
    69.0
    
    
    
    4.6
    
    
    
    70.0
    
    
    
    68.1
    
    
    
    2.9
 ADR ($)Three Months Ended September 30,
    
    Nine Months Ended September 30,2005
    
    2004
    
    % Variance
    
    2005
    
    2004
    
    % VarianceEmbassy Suites Hotels
    
    
    120.79
    
    
    
    115.59
    
    
    
    4.5
    
    
    
    122.02
    
    
    
    116.61
    
    
    
    4.6Holiday Inn-branded hotels
    
    
    88.73
    
    
    
    82.23
    
    
    
    7.9
    
    
    
    86.95
    
    
    
    81.84
    
    
    
    6.2Sheraton-branded hotels
    
    
    106.06
    
    
    
    97.70
    
    
    
    8.6
    
    
    
    108.30
    
    
    
    97.36
    
    
    
    11.2Doubletree-branded hotels
    
    
    105.57
    
    
    
    102.75
    
    
    
    2.7
    
    
    
    109.96
    
    
    
    103.90
    
    
    
    5.8Crowne Plaza hotels
    
    
    100.16
    
    
    
    94.02
    
    
    
    6.5
    
    
    
    98.26
    
    
    
    93.22
    
    
    
    5.4Other hotels
    
    
    103.29
    
    
    
    97.79
    
    
    
    5.6
    
    
    
    99.46
    
    
    
    93.61
    
    
    
    6.2Total hotels
    
    
    105.87
    
    
    
    99.94
    
    
    
    5.9
    
    
    
    106.12
    
    
    
    100.18
    
    
    
    5.9
 RevPAR ($)Three Months Ended September 30,
    
    Nine Months Ended September 30,2005
    
    2004
    
    % Variance
    
    2005
    
    2004
    
    % VarianceEmbassy Suites Hotels
    
    
    90.70
    
    
    
    82.93
    
    
    
    9.4
    
    
    
    90.47
    
    
    
    83.22
    
    
    
    8.7Holiday Inn-branded hotels
    
    
    63.60
    
    
    
    57.48
    
    
    
    10.7
    
    
    
    59.51
    
    
    
    55.28
    
    
    
    7.6Sheraton-branded hotels
    
    
    71.21
    
    
    
    62.70
    
    
    
    13.6
    
    
    
    70.82
    
    
    
    63.05
    
    
    
    12.3Doubletree-branded hotels
    
    
    75.58
    
    
    
    68.11
    
    
    
    11.0
    
    
    
    76.58
    
    
    
    70.98
    
    
    
    7.9Crowne Plaza hotels
    
    
    71.56
    
    
    
    62.58
    
    
    
    14.4
    
    
    
    67.16
    
    
    
    60.10
    
    
    
    11.8Other hotels
    
    
    67.19
    
    
    
    59.64
    
    
    
    12.7
    
    
    
    60.85
    
    
    
    56.11
    
    
    
    8.4Total hotels
    
    
    76.43
    
    
    
    68.98
    
    
    
    10.8
    
    
    
    74.31
    
    
    
    68.18
    
    
    
    9.0
 35




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##### Table of Contents



Operating Statistics for Our Top Markets
 Occupancy (%)Three Months Ended September 30,
    
    Nine Months Ended September 30,2005
    
    2004
    
    % Variance
    
    2005
    
    2004
    
    % VarianceAtlanta
    
    
    75.5
    
    
    
    74.7
    
    
    
    1.1
    
    
    
    72.4
    
    
    
    69.9
    
    
    
    3.6Dallas
    
    
    53.8
    
    
    
    49.0
    
    
    
    9.7
    
    
    
    52.8
    
    
    
    51.6
    
    
    
    2.3Los Angeles Area
    
    
    80.5
    
    
    
    74.0
    
    
    
    8.8
    
    
    
    75.8
    
    
    
    72.9
    
    
    
    3.9Orlando
    
    
    69.3
    
    
    
    78.5
    
    
    
    (11.6
    )
    
    
    74.9
    
    
    
    77.9
    
    
    
    (3.9
    )Boca Raton/Ft. Lauderdale
    
    
    74.6
    
    
    
    75.9
    
    
    
    (1.7
    )
    
    
    81.7
    
    
    
    79.9
    
    
    
    2.1Minneapolis
    
    
    79.7
    
    
    
    77.8
    
    
    
    2.5
    
    
    
    73.6
    
    
    
    70.0
    
    
    
    5.2Philadelphia
    
    
    74.7
    
    
    
    71.5
    
    
    
    4.4
    
    
    
    72.3
    
    
    
    66.9
    
    
    
    8.1San Diego
    
    
    88.2
    
    
    
    83.8
    
    
    
    5.3
    
    
    
    84.6
    
    
    
    84.5
    
    
    
    0.1Phoenix
    
    
    64.5
    
    
    
    61.9
    
    
    
    4.3
    
    
    
    73.6
    
    
    
    71.6
    
    
    
    2.8San Antonio
    
    
    80.0
    
    
    
    74.5
    
    
    
    7.4
    
    
    
    77.1
    
    
    
    72.2
    
    
    
    6.8Northern New Jersey
    
    
    69.8
    
    
    
    65.5
    
    
    
    6.6
    
    
    
    70.7
    
    
    
    67.2
    
    
    
    5.2Chicago
    
    
    79.3
    
    
    
    73.2
    
    
    
    8.4
    
    
    
    74.0
    
    
    
    70.6
    
    
    
    4.7San Francisco Bay Area
    
    
    80.6
    
    
    
    73.1
    
    
    
    10.2
    
    
    
    72.0
    
    
    
    67.5
    
    
    
    6.7Houston
    
    
    71.5
    
    
    
    62.8
    
    
    
    13.8
    
    
    
    71.3
    
    
    
    69.5
    
    
    
    2.6Washington, D.C.
    
    
    76.1
    
    
    
    76.3
    
    
    
    (0.2
    )
    
    
    75.5
    
    
    
    75.0
    
    
    
    0.6
 ADR ($)Three Months Ended September 30,
    
    Nine Months Ended September 30,2005
    
    2004
    
    % Variance
    
    2005
    
    2004
    
    % VarianceAtlanta
    
    
    90.88
    
    
    
    86.06
    
    
    
    5.6
    
    
    
    91.04
    
    
    
    87.00
    
    
    
    4.6Dallas
    
    
    91.94
    
    
    
    91.15
    
    
    
    0.9
    
    
    
    93.84
    
    
    
    90.87
    
    
    
    3.3Los Angeles Area
    
    
    122.59
    
    
    
    115.59
    
    
    
    6.0
    
    
    
    118.32
    
    
    
    111.43
    
    
    
    6.2Orlando
    
    
    77.63
    
    
    
    70.50
    
    
    
    10.1
    
    
    
    85.75
    
    
    
    76.39
    
    
    
    12.3Boca Raton/Ft. Lauderdale
    
    
    102.24
    
    
    
    93.98
    
    
    
    8.8
    
    
    
    129.19
    
    
    
    114.48
    
    
    
    12.9Minneapolis
    
    
    134.88
    
    
    
    129.79
    
    
    
    3.9
    
    
    
    127.53
    
    
    
    124.89
    
    
    
    2.1Philadelphia
    
    
    114.12
    
    
    
    108.22
    
    
    
    5.5
    
    
    
    114.65
    
    
    
    105.57
    
    
    
    8.6San Diego
    
    
    128.40
    
    
    
    119.73
    
    
    
    7.2
    
    
    
    129.92
    
    
    
    119.72
    
    
    
    8.5Phoenix
    
    
    98.04
    
    
    
    90.70
    
    
    
    8.1
    
    
    
    120.43
    
    
    
    111.89
    
    
    
    7.6San Antonio
    
    
    88.52
    
    
    
    82.28
    
    
    
    7.6
    
    
    
    88.73
    
    
    
    84.76
    
    
    
    4.7Northern New Jersey
    
    
    137.98
    
    
    
    133.94
    
    
    
    3.0
    
    
    
    137.31
    
    
    
    135.00
    
    
    
    1.7Chicago
    
    
    120.22
    
    
    
    109.05
    
    
    
    10.3
    
    
    
    113.81
    
    
    
    104.51
    
    
    
    8.9San Francisco Bay Area
    
    
    120.95
    
    
    
    115.70
    
    
    
    4.5
    
    
    
    115.93
    
    
    
    112.89
    
    
    
    2.7Houston
    
    
    74.38
    
    
    
    66.92
    
    
    
    11.1
    
    
    
    72.39
    
    
    
    69.84
    
    
    
    3.7Washington, D.C.
    
    
    141.80
    
    
    
    121.25
    
    
    
    16.9
    
    
    
    145.80
    
    
    
    124.92
    
    
    
    16.7
 RevPAR ($)Three Months Ended September 30,
    
    Nine Months Ended September 30,2005
    
    2004
    
    % Variance
    
    2005
    
    2004
    
    % VarianceAtlanta
    
    
    68.62
    
    
    
    64.30
    
    
    
    6.7
    
    
    
    65.93
    
    
    
    60.85
    
    
    
    8.4Dallas
    
    
    49.43
    
    
    
    44.68
    
    
    
    10.6
    
    
    
    49.56
    
    
    
    46.90
    
    
    
    5.7Los Angeles Area
    
    
    98.72
    
    
    
    85.55
    
    
    
    15.4
    
    
    
    89.67
    
    
    
    81.28
    
    
    
    10.3Orlando
    
    
    53.83
    
    
    
    55.33
    
    
    
    (2.7
    )
    
    
    64.19
    
    
    
    59.52
    
    
    
    7.8Boca Raton/Ft. Lauderdale
    
    
    76.32
    
    
    
    71.33
    
    
    
    7.0
    
    
    
    105.50
    
    
    
    91.52
    
    
    
    15.3Minneapolis
    
    
    107.51
    
    
    
    100.93
    
    
    
    6.5
    
    
    
    93.87
    
    
    
    87.38
    
    
    
    7.4Philadelphia
    
    
    85.20
    
    
    
    77.40
    
    
    
    10.1
    
    
    
    82.89
    
    
    
    70.57
    
    
    
    17.4San Diego
    
    
    113.30
    
    
    
    100.38
    
    
    
    12.9
    
    
    
    109.94
    
    
    
    101.18
    
    
    
    8.7Phoenix
    
    
    63.27
    
    
    
    56.11
    
    
    
    12.8
    
    
    
    88.59
    
    
    
    80.10
    
    
    
    10.6San Antonio
    
    
    70.86
    
    
    
    61.34
    
    
    
    15.5
    
    
    
    68.43
    
    
    
    61.20
    
    
    
    11.8Northern New Jersey
    
    
    96.37
    
    
    
    87.77
    
    
    
    9.8
    
    
    
    97.07
    
    
    
    90.71
    
    
    
    7.0Chicago
    
    
    95.39
    
    
    
    79.84
    
    
    
    19.5
    
    
    
    84.18
    
    
    
    73.82
    
    
    
    14.0San Francisco Bay Area
    
    
    97.43
    
    
    
    84.54
    
    
    
    15.2
    
    
    
    83.43
    
    
    
    76.15
    
    
    
    9.6Houston
    
    
    53.18
    
    
    
    42.06
    
    
    
    26.4
    
    
    
    51.60
    
    
    
    48.52
    
    
    
    6.4Washington, D.C.
    
    
    107.89
    
    
    
    92.47
    
    
    
    16.7
    
    
    
    110.02
    
    
    
    93.73
    
    
    
    17.4
 36




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Liquidity and Capital Resources
       37




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##### Table of Contents



.
   ® ®
   38




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##### Table of Contents



Inflation
  
 Seasonality
  
 Disclosure Regarding Forward-Looking Statements
  
    
    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.
  39




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Quantitative and Qualitative Disclosures About Market Risk
   Expected Maturity Date
at September 30, 2005
(dollars in thousands)
 Fair2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    Total
    
    
    ValueLiabilitiesFixed rate:Debt
    
    $
    3,539
    
    
    $
    17,284
    
    
    $
    270,833
    
    
    $
    15,757
    
    
    $
    201,008
    
    
    $
    664,665
    
    
    $
    1,173,086
    
    
    $
    1,197,061Average interest
rate
    
    
    7.82
    %
    
    
    7.80
    %
    
    
    7.48
    %
    
    
    7.96
    %
    
    
    7.40
    %
    
    
    8.57
    %
    
    
    8.09
    %Floating rate:Debt
    
    
    1,372
    
    
    
    143,018
    
    
    
    2,015
    
    
    
    23,620
    
    
    
    78,538
    
    
    
    290,650
    
    
    
    539,213
    
    
    
    539,213Average interest
rate
    
    
    6.00
    %
    
    
    6.12
    %
    
    
    5.74
    %
    
    
    6.42
    %
    
    
    5.74
    %
    
    
    7.78
    %
    
    
    6.97
    %Total debt
    
    $
    4,911
    
    
    $
    160,302
    
    
    $
    272,848
    
    
    $
    39,377
    
    
    $
    279,546
    
    
    $
    955,315
    
    
    $
    1,712,299Net discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,657
    )Total debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,708,642Interest rate swaps
Variable to fixed
    
    
    
    
    
    
    
    
    
    $
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    100,000
    
    
    $
    1,914,813Average pay rate
    
    
    
    
    
    
    
    
    
    
    7.80
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.80
    %Average receive
rate
    
    
    
    
    
    
    
    
    
    
    7.79
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.79
    %
  40




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##### Table of Contents



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 Exhibit10.35
    
    Term Credit Agreement, dated as of October 18, 2005, among
FelCor TRS Borrower 1, L.P., as Initial Borrower, FelCor
TRS Guarantor, L.P., FelCor Lodging Limited Partnership and
the other guarantors named therein as Guarantors, Citigroup
North America, Inc., as Initial Lender, as Administrative
Agent, and as Collateral Agent, and Citigroup Global
Markets, Inc., as Sole Lead Arranger and Sole Book Running
Manager, for a maximum principal loan amount of $175
million (filed as Exhibit 10.35 to FelCor Lodging Trust
Incorporateds September 2005 10-Q and incorporated herein
by reference).31.1
    
    Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Principal 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 (18 U.S.C.
1350).32.2
    
    Certification of the Principal Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350).
 42




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##### Table of Contents



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




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##### Table of Contents



INDEX
 Exhibit Number
    
    Description of Exhibit10.35
    
    Term Credit Agreement, dated as of October 18, 2005,
among FelCor TRS Borrower 1, L.P., as Initial
Borrower, FelCor TRS Guarantor, L.P., FelCor Lodging
Limited Partnership and the other guarantors named
therein as Guarantors, Citigroup North America,
Inc., as Initial Lender, as Administrative Agent,
and as Collateral Agent, and Citigroup Global
Markets, Inc., as Sole Lead Arranger and Sole Book
Running Manager, for a maximum principal loan amount
of $175 million (filed as Exhibit 10.35 to FelCor
Lodging Trust Incorporateds September 2005 10-Q and
incorporated herein by reference).31.1
    
    Certification of the Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of the Principal 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 (18 U.S.C. 1350).32.2
    
    Certification of the Principal Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350).
 44