UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 10-Q

(Mark One)
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 
 
THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended March 31, 2014
 

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: 001-14236
 
(FelCor Lodging Trust Incorporated)
 
Commission file number:  333-39595-01
 
(FelCor Lodging Limited Partnership)
FelCor Lodging Trust Incorporated
FelCor Lodging Limited Partnership
(Exact Name of Registrant as Specified in Its Charter)

 
Maryland
(FelCor Lodging Trust Incorporated)
 
75-2541756
 
 
Delaware
(FelCor Lodging Limited Partnership)
 
75-2544994
 
 
(State or Other Jurisdiction of Incorporation or Organization)
 
 
(I.R.S. Employer
Identification No.)
 
 
 
 
545 E. John Carpenter Freeway, Suite 1300, Irving, Texas
 
75062
 
 
(Address of Principal Executive Offices)
 
(Zip Code)
 
(972) 444-4900
(Registrant’s Telephone Number, Including Area Code)

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




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
FelCor Lodging Trust Incorporated
 
þ
Yes
¨
No
 
FelCor Lodging Limited Partnership
 
þ
Yes
¨
No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
FelCor Lodging Trust Incorporated:
 
 
 Large accelerated filer  þ
 
 Accelerated filer o
 Non-accelerated filer      o  (Do not check if a smaller reporting company)
 
 Smaller reporting company o
FelCor Lodging Limited Partnership:
 
 
 Large accelerated filer  o
 
 Accelerated filer ¨
 Non-accelerated filer      þ  (Do not check if a smaller reporting company)
 
 Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
 
FelCor Lodging Trust Incorporated
 
¨
Yes
þ
No
 
FelCor Lodging Limited Partnership
 
¨
Yes
þ
No

At April 28, 2014 , FelCor Lodging Trust Incorporated had issued and outstanding 124,186,686 shares of common stock.


EXPLANATORY NOTE

This quarterly report on Form 10-Q for the quarter ended March 31, 2014, combines the filings for FelCor Lodging Trust Incorporated, or FelCor, and FelCor Lodging Limited Partnership, or FelCor LP. Where it is important to distinguish between the two, we either refer specifically to FelCor or FelCor LP. Otherwise we use the terms “we” or “our” to refer to FelCor and FelCor LP, collectively (including their consolidated subsidiaries), unless the context indicates otherwise.

FelCor is a Maryland corporation operating as a real estate investment trust, or REIT, and is the sole general partner of, and the owner of a greater than 99% partnership interest in, FelCor LP. Through FelCor LP, FelCor owns hotels and conducts business. As the sole general partner of FelCor LP, FelCor has exclusive and complete control of FelCor LP’s day-to-day management.

We believe combining periodic reports for FelCor and FelCor LP into single combined reports results in the following benefits:

•
presents our business as a whole (the same way management views and operates the business);
•
eliminates duplicative disclosure and provides a more streamlined presentation (a substantial portion of our disclosure applies to both FelCor and FelCor LP); and
•
saves time and cost by preparing combined reports instead of separate reports.

We operate the company as one enterprise. The employees of FelCor direct the management and operation of FelCor LP. With sole control of FelCor LP, FelCor consolidates FelCor LP for financial reporting purposes. FelCor has no assets other than its investment in FelCor LP and no liabilities separate from FelCor LP. Therefore, the reported assets and liabilities for FelCor and FelCor LP are substantially identical.

The substantive difference between FelCor and FelCor LP filings is that FelCor is a REIT with publicly-traded equity, while FelCor LP is a partnership with no publicly-traded equity. This difference is reflected in the financial statements in the equity (or partners’ capital) section of the consolidated balance sheets and in the consolidated statements of equity (or partners’ capital). Apart from the different equity treatment, the consolidated financial statements for FelCor and FelCor LP are nearly identical, except the net income (loss) attributable to redeemable noncontrolling interests in FelCor LP is deducted from FelCor’s net income (loss) in order to arrive at net income (loss) attributable to FelCor common stockholders. The noncontrolling interest is included in net income (loss) attributable to FelCor LP common unitholders. The holders of noncontrolling interests in FelCor LP are unaffiliated with FelCor, and in aggregate, hold less than 1% of the operating partnership units.

We present the sections in this report combined unless separate disclosure is required for clarity.



i

FELCOR LODGING TRUST INCORPORATED and
FELCOR LODGING LIMITED PARTNERSHIP

INDEX
 
 
 
Page
 
 
  PART I − FINANCIAL INFORMATION
 
 
 
 
 
Item 1.
Financial Statements
 
FelCor Lodging Trust Incorporated:
 
 
 
Consolidated Balance Sheets - March 31, 2014 and December 31, 2013 (unaudited)
 
 
Consolidated Statements of Operations – For the Three Months Ended March 31, 2014 and 2013 (unaudited)
 
 
Consolidated Statements of Comprehensive Income (Loss) – For the Three Months Ended March 31, 2014 and 2013 (unaudited)
 
 
Consolidated Statements of Changes in Equity – For the Three Months Ended March 31, 2014 and 2013 (unaudited)
 
 
Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2014 and 2013 (unaudited)
 
FelCor Lodging Limited Partnership:
 
 
 
Consolidated Balance Sheets - March 31, 2014 and December 31, 2013 (unaudited)
 
 
Consolidated Statements of Operations – For the Three Months Ended March 31, 2014 and 2013 (unaudited)
 
 
Consolidated Statements of Comprehensive Income (Loss) – For the Three Months Ended March 31, 2014 and 2013 (unaudited)
 
 
Consolidated Statements of Partners’ Capital – For the Three Months Ended March 31, 2014 and 2013 (unaudited)
 
 
Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2014 and 2013 (unaudited)
 
 Notes to Consolidated Financial Statements
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
General
 
 
Results of Operations
 
 
Non-GAAP Financial Measures
 
 
Pro Rata Share of Rooms Owned
 
 
Hotel Portfolio Composition
 
 
Hotel Operating Statistics
 
 
Hotel Portfolio
 
 
Liquidity and Capital Resources
 
 
Inflation
 
 
Seasonality
 
 
Disclosure Regarding Forward-Looking Statements
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
Item 4.
Controls and Procedures
 
 
 
 
 
 
PART II − OTHER INFORMATION
 
 
 
 
 
 
 
 
 
Item 6.
Exhibits
 
 
 
 
SIGNATURES
 

ii

PART I -- FINANCIAL INFORMATION

Item 1.
Financial Statements.

FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
March 31,
2014
 
December 31,
2013
Assets
 
 
 
Investment in hotels, net of accumulated depreciation of $915,561 and $929,801 at March 31, 2014 and December 31, 2013, respectively
$
1,611,247

 
$
1,653,267

Hotel development
236,729

 
216,747

Investment in unconsolidated entities
44,634

 
46,943

Hotel held for sale
19,137

 
16,319

Cash and cash equivalents
73,526

 
45,645

Restricted cash
67,047

 
77,227

Accounts receivable, net of allowance for doubtful accounts of $179 and $262 at March 31, 2014 and December 31, 2013, respectively
34,486

 
35,747

Deferred expenses, net of accumulated amortization of $21,360 and $20,362 at March 31, 2014 and December 31, 2013, respectively
27,635

 
29,325

Other assets
22,828

 
23,060

Total assets
$
2,137,269

 
$
2,144,280

Liabilities and Equity
 
 
 
Debt, net of discount of $3,190 and $4,714 at March 31, 2014 and December 31, 2013, respectively
$
1,640,628

 
$
1,663,226

Distributions payable
11,195

 
11,047

Accrued expenses and other liabilities
152,103

 
150,738

Total liabilities
1,803,926

 
1,825,011

Commitments and contingencies


 


Redeemable noncontrolling interests in FelCor LP, 618 units issued and outstanding at March 31, 2014 and December 31, 2013
5,583

 
5,039

Equity:
 
 
 
 Preferred stock, $0.01 par value, 20,000 shares authorized:
 
 
 
Series A Cumulative Convertible Preferred Stock, 12,880 shares, liquidation value of $322,004 and $322,011, issued and outstanding at March 31, 2014 and December 31, 2013, respectively
309,354

 
309,362

Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at March 31, 2014 and December 31, 2013
169,412

 
169,412

Common stock, $0.01 par value, 200,000 shares authorized; 124,186 and 124,051 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively
1,242

 
1,240

Additional paid-in capital
2,354,613

 
2,354,328

Accumulated other comprehensive income
24,320

 
24,937

Accumulated deficit
(2,596,294
)
 
(2,568,350
)
Total FelCor stockholders’ equity
262,647

 
290,929

Noncontrolling interests in other partnerships
24,204

 
23,301

Preferred equity in consolidated joint venture, liquidation value of $41,464
40,909

 
—

Total equity
327,760

 
314,230

Total liabilities and equity
$
2,137,269

 
$
2,144,280


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

1

FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2014 and 2013
(unaudited, in thousands, except for per share data)
 
Three Months Ended March 31,
 
2014
 
2013
Revenues:
 
 
 
Hotel operating revenue
$
221,022

 
$
208,538

Other revenue
327

 
399

Total revenues
221,349

 
208,937

Expenses:
 
 
 
Hotel departmental expenses
83,523

 
80,405

Other property-related costs
61,578

 
59,428

Management and franchise fees
9,013

 
9,163

Taxes, insurance and lease expense
23,633

 
22,164

Corporate expenses
7,825

 
7,832

Depreciation and amortization
29,601

 
29,755

Conversion expenses
—

 
628

Other expenses
2,014

 
821

Total operating expenses
217,187

 
210,196

Operating income (loss)
4,162

 
(1,259
)
Interest expense, net
(25,227
)
 
(26,285
)
Debt extinguishment
(6
)
 
—

Loss before equity in income from unconsolidated entities
(21,071
)
 
(27,544
)
Equity in income from unconsolidated entities
643

 
89

Loss from continuing operations
(20,428
)
 
(27,455
)
Income from discontinued operations
135

 
850

Loss before gain on sale of property
(20,293
)
 
(26,605
)
Gain on sale of property, net
5,457

 
—

Net loss
(14,836
)
 
(26,605
)
Net loss attributable to noncontrolling interests in other partnerships
78

 
240

Net loss attributable to redeemable noncontrolling interests in FelCor LP
121

 
180

Preferred distributions - consolidated joint venture
(181
)
 
—

Net loss attributable to FelCor
(14,818
)
 
(26,185
)
Preferred dividends
(9,678
)
 
(9,678
)
Net loss attributable to FelCor common stockholders
$
(24,496
)
 
$
(35,863
)
Basic and diluted per common share data:
 
 
 
Loss from continuing operations
$
(0.20
)
 
$
(0.30
)
Net loss
$
(0.20
)
 
$
(0.29
)
Basic and diluted weighted average common shares outstanding
124,146

 
123,814



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

2


FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Three Months Ended March 31, 2014 and 2013
(unaudited, in thousands)
 
Three Months Ended
 
March 31,
 
2014
 
2013
Net loss
$
(14,836
)
 
$
(26,605
)
Foreign currency translation adjustment
(620
)
 
(357
)
Comprehensive loss
(15,456
)
 
(26,962
)
Comprehensive loss attributable to noncontrolling interests in other partnerships
78

 
240

Comprehensive loss attributable to redeemable noncontrolling interests in FelCor LP
124

 
182

Comprehensive loss attributable to FelCor
$
(15,254
)
 
$
(26,540
)





























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

3


FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2014 and 2013
(unaudited, in thousands)
 
Preferred Stock
 
Common Stock
 
Additional Paid-in Capital 
 
Accumulated Other Comprehensive Income
 
 
 
Noncontrolling Interests in Other Partnerships
 
Preferred Equity in Consolidated Joint Venture
 
 
 
 
 
Number of Shares
 
Amount
 
Number of Shares
 
Amount
 
 
 
Accumulated Deficit
 
 
 
Comprehensive Loss
 
Total Equity
Balance at December 31, 2012
12,948

 
$
478,774

 
124,117

 
$
1,241

 
$
2,353,581

 
$
26,039

 
$
(2,464,968
)
 
$
27,352

 
$
—

 
 

 
$
422,019

Issuance of stock awards
—

 
—

 
5

 
—

 
—

 
—

 
—

 
—

 
—

 
 

 
—

Stock awards - amortization
—

 
—

 
—

 
—

 
671

 
—

 
—

 
—

 
—

 
 

 
671

Allocation to redeemable noncontrolling interests
—

 
—

 
—

 
—

 
(977
)
 
—

 
—

 
—

 
—

 
 

 
(977
)
Contribution from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
602

 
—

 
 

 
602

Distribution to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(284
)
 
—

 
 

 
(284
)
Preferred dividends:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

$0.4875 per Series A preferred share
—

 
—

 
—

 
—

 
—

 
—

 
(6,279
)
 
—

 
—

 
 

 
(6,279
)
$0.50 per Series C depositary preferred share
—

 
—

 
—

 
—

 
—

 
—

 
(3,399
)
 
—

 
—

 
 

 
(3,399
)
Comprehensive loss (attributable to FelCor and noncontrolling interests in other partnerships):
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

Foreign exchange translation
—

 
—

 
—

 
—

 
—

 
(355
)
 
—

 
—

 
—

 
$
(355
)
 
 

Net loss
—

 
—

 
—

 
—

 
—

 
—

 
(26,185
)
 
(240
)
 
—

 
(26,425
)
 
 

Comprehensive loss
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
$
(26,780
)
 
(26,780
)
Balance at March 31, 2013
12,948

 
$
478,774

 
124,122

 
$
1,241

 
$
2,353,275

 
$
25,684

 
$
(2,500,831
)
 
$
27,430

 
$
—

 
 

 
$
385,573

Balance at December 31, 2013
12,948

 
$
478,774

 
124,051

 
$
1,240

 
$
2,354,328

 
$
24,937

 
$
(2,568,350
)
 
$
23,301

 
—

 
 

 
$
314,230

Conversion of preferred stock into common stock
—

 
(8
)
 
—

 
—

 
8

 
—

 
—

 
—

 
—

 
 

 
—

Issuance of stock awards
—

 
—

 
250

 
3

 
(3
)
 
—

 
—

 
—

 
—

 
 

 
—

Stock awards - amortization
—

 
—

 
—

 
—

 
959

 
—

 
—

 
—

 
—

 
 

 
959

Forfeiture of stock awards
—

 
—

 
(115
)
 
(1
)
 
—

 
—

 
(931
)
 
—

 
—

 
 

 
(932
)
Allocation to redeemable noncontrolling interests
—

 
—

 
—

 
—

 
(679
)
 
—

 
—

 
—

 
—

 
 

 
(679
)
Contribution from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,568

 
—

 
 

 
1,568

Distribution to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(587
)
 
—

 
 

 
(587
)
Dividends declared:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

$0.02 per common share
—

 
—

 
—

 
—

 
—

 
—

 
(2,517
)
 
—

 
—

 
 
 
(2,517
)
$0.4875 per Series A preferred share
—

 
—

 
—

 
—

 
—

 
—

 
(6,279
)
 
—

 
—

 
 

 
(6,279
)
$0.50 per Series C depositary preferred share
—

 
—

 
—

 
—

 
—

 
—

 
(3,399
)
 
—

 
—

 
 

 
(3,399
)
Preferred distributions - consolidated joint venture
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(181
)
 
 
 
(181
)
Issuance of preferred equity - consolidated joint venture
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
40,909

 
 
 
40,909

Comprehensive loss (attributable to FelCor and noncontrolling interests in other partnerships):
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

Foreign exchange translation
—

 
—

 
—

 
—

 
—

 
(617
)
 
—

 
—

 
—

 
$
(617
)
 
 

Net loss
—

 
—

 
—

 
—

 
—

 
—

 
(14,818
)
 
(78
)
 
181

 
(14,715
)
 
 

Comprehensive loss
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
$
(15,332
)
 
(15,332
)
Balance at March 31, 2014
12,948

 
$
478,766


124,186

 
$
1,242

 
$
2,354,613

 
$
24,320

 
$
(2,596,294
)
 
$
24,204

 
$
40,909

 
 
 
$
327,760

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

4


FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2014 and 2013
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net loss
$
(14,836
)
 
$
(26,605
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
29,601

 
31,570

Gain on sale of properties, net
(5,848
)
 
—

Amortization of deferred financing fees and debt discount
2,929

 
2,694

Amortization of fixed stock and directors’ compensation
1,446

 
1,578

Equity in income from unconsolidated entities
(643
)
 
(89
)
Distributions of income from unconsolidated entities
824

 
619

Debt extinguishment
251

 
—

Changes in assets and liabilities:
 
 
 
Accounts receivable
152

 
(8,903
)
Other assets
(2,572
)
 
(3,162
)
Accrued expenses and other liabilities
11,098

 
7,177

Net cash flow provided by operating activities
22,402

 
4,879

Cash flows from investing activities:
 
 
 
Improvements and additions to hotels
(28,617
)
 
(23,342
)
Hotel development
(23,622
)
 
(8,260
)
Net proceeds from asset dispositions
39,896

 
(232
)
Change in restricted cash – investing
10,180

 
825

Insurance proceeds
255

 
—

Distributions from unconsolidated entities
2,128

 
1,685

Net cash flow provided by (used in) investing activities
220

 
(29,324
)
Cash flows from financing activities:
 
 
 
Proceeds from borrowings
81,000

 
84,245

Repayment of borrowings
(105,353
)
 
(32,346
)
Payment of deferred financing fees
(5
)
 
(2,022
)
Distributions paid to noncontrolling interests
(587
)
 
(284
)
Contributions from noncontrolling interests
1,568

 
602

Distributions paid to FelCor LP limited partners
(7
)
 
—

Distributions paid to preferred stockholders
(9,678
)
 
(9,678
)
Preferred distributions - consolidated joint venture
(65
)
 
—

Distributions paid to common stockholders
(2,484
)
 
—

Net proceeds from issuance of preferred equity - consolidated joint venture
40,909

 
—

Net cash flow provided by financing activities
5,298

 
40,517

Effect of exchange rate changes on cash
(39
)
 
(21
)
Net change in cash and cash equivalents
27,881

 
16,051

Cash and cash equivalents at beginning of periods
45,645

 
45,745

Cash and cash equivalents at end of periods
$
73,526

 
$
61,796

 
 
 
 
Supplemental cash flow information – interest paid, net of capitalized interest
$
14,511

 
$
7,013

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

5

FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
March 31,
 
December 31,
 
2014
 
2013
Assets
 
 
 
Investment in hotels, net of accumulated depreciation of $915,561 and $929,801 at March 31, 2014 and December 31, 2013, respectively
$
1,611,247

 
$
1,653,267

Hotel development
236,729

 
216,747

Investment in unconsolidated entities
44,634

 
46,943

Hotel held for sale
19,137

 
16,319

Cash and cash equivalents
73,526

 
45,645

Restricted cash
67,047

 
77,227

Accounts receivable, net of allowance for doubtful accounts of $179 and $262 at March 31, 2014 and December 31, 2013, respectively
34,486

 
35,747

Deferred expenses, net of accumulated amortization of $21,360 and $20,362 at March 31, 2014 and December 31, 2013, respectively
27,635

 
29,325

Other assets
22,828

 
23,060

Total assets
$
2,137,269

 
$
2,144,280

Liabilities and Partners’ Capital
 
 
 
Debt, net of discount of $3,190 and $4,714 at March 31, 2014 and December 31, 2013, respectively
$
1,640,628

 
$
1,663,226

Distributions payable
11,195

 
11,047

Accrued expenses and other liabilities
152,103

 
150,738

Total liabilities
1,803,926

 
1,825,011

Commitments and contingencies


 


Redeemable units, 618 units issued and outstanding at March 31, 2014 and December 31, 2013
5,583

 
5,039

Capital:
 
 
 
Preferred units:
 
 
 
Series A Cumulative Convertible Preferred Units, 12,880 units issued and outstanding at March 31, 2014 and December 31, 2013
309,354

 
309,362

Series C Cumulative Redeemable Preferred Units, 68 units issued and outstanding at March 31, 2014 and December 31, 2013
169,412

 
169,412

Common units, 124,186 and 124,051 units issued and outstanding at March 31, 2014 and December 31, 2013, respectively
(240,542
)
 
(212,888
)
Accumulated other comprehensive income
24,423

 
25,043

Total FelCor LP partners’ capital
262,647

 
290,929

Noncontrolling interests
24,204

 
23,301

Preferred capital in consolidated joint venture
40,909

 
—

Total partners’ capital
327,760

 
314,230

Total liabilities and partners’ capital
$
2,137,269

 
$
2,144,280

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

6

FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2014 and 2013
(unaudited, in thousands, except for per unit data)
 
 
Three Months Ended
 
 
March 31,
 
 
2014
 
2013
Revenues:
 
 
 
 
Hotel operating revenue
 
$
221,022

 
$
208,538

Other revenue
 
327

 
399

Total revenues
 
221,349

 
208,937

Expenses:
 
 
 
 
Hotel departmental expenses
 
83,523

 
80,405

Other property-related costs
 
61,578

 
59,428

Management and franchise fees
 
9,013

 
9,163

Taxes, insurance and lease expense
 
23,633

 
22,164

Corporate expenses
 
7,825

 
7,832

Depreciation and amortization
 
29,601

 
29,755

Conversion expenses
 
—

 
628

Other expenses
 
2,014

 
821

Total operating expenses
 
217,187

 
210,196

Operating income (loss)
 
4,162

 
(1,259
)
Interest expense, net
 
(25,227
)
 
(26,285
)
Debt extinguishment
 
(6
)
 
—

Loss before equity in income from unconsolidated entities
 
(21,071
)
 
(27,544
)
Equity in income from unconsolidated entities
 
643

 
89

Loss from continuing operations
 
(20,428
)
 
(27,455
)
Income from discontinued operations
 
135

 
850

Loss before gain on sale of property
 
(20,293
)
 
(26,605
)
Gain on sale of property, net
 
5,457

 
—

Net loss
 
(14,836
)
 
(26,605
)
Net loss attributable to noncontrolling interests
 
78

 
240

Preferred distributions - consolidated joint venture
 
(181
)
 
—

Net loss attributable to FelCor LP
 
(14,939
)
 
(26,365
)
Preferred distributions
 
(9,678
)
 
(9,678
)
Net loss attributable to FelCor LP common unitholders
 
$
(24,617
)
 
$
(36,043
)
Basic and diluted per common unit data:
 
 
 
 
Loss from continuing operations
 
$
(0.20
)
 
$
(0.30
)
Net loss
 
$
(0.20
)
 
$
(0.29
)
Basic and diluted weighted average common units outstanding
 
124,764

 
124,435



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

7


FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Three Months Ended March 31, 2014 and 2013
(unaudited, in thousands)
 
 
Three Months Ended
 
 
March 31,
 
 
2014
 
2013
Net loss
 
$
(14,836
)
 
$
(26,605
)
Foreign currency translation adjustment
 
(620
)
 
(357
)
Comprehensive loss
 
(15,456
)
 
(26,962
)
Comprehensive loss attributable to noncontrolling interests
 
78

 
240

Comprehensive loss attributable to FelCor LP
 
$
(15,378
)
 
$
(26,722
)































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


8

FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the Three Months Ended March 31, 2014 and 2013
(unaudited, in thousands)
 
Preferred Units
 
Common Units
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interests
 
Preferred Capital in Consolidated Joint Venture
 
Comprehensive Loss
 
Total Partners’ Capital
Balance at December 31, 2012
$
478,774

 
$
(110,258
)
 
$
26,151

 
$
27,352

 
$
—

 
 
 
$
422,019

FelCor restricted stock compensation
—

 
671

 
—

 
—

 
—

 
 
 
671

Contributions
—

 
—

 
—

 
602

 
—

 
 
 
602

Distributions
—

 
(9,678
)
 
—

 
(284
)
 
—

 
 
 
(9,962
)
Allocation to redeemable units
—

 
(795
)
 
—

 
—

 
—

 
 
 
(795
)
Comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange translation


 


 
(357
)
 


 
—

 
$
(357
)
 
 
Net loss


 
(26,365
)
 


 
(240
)
 
—

 
(26,605
)
 
 
Comprehensive loss


 


 


 


 
 
 
$
(26,962
)
 
(26,962
)
Balance at March 31, 2013
$
478,774

 
$
(146,425
)
 
$
25,794

 
$
27,430

 
$
—

 
 
 
$
385,573

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
$
478,774

 
$
(212,888
)
 
$
25,043

 
$
23,301

 
—

 
 
 
$
314,230

Conversion of preferred units into common units
(8
)
 
8

 
—

 
—

 
—

 
 
 
—

FelCor restricted stock compensation
—

 
27

 
—

 
—

 
—

 
 
 
27

Contributions
—

 
—

 
—

 
1,568

 
—

 
 
 
1,568

Distributions
—

 
(12,195
)
 
—

 
(587
)
 
(181
)
 
 
 
(12,963
)
Allocation to redeemable units
—

 
(555
)
 
—

 
—

 
—

 
 
 
(555
)
Issuance of preferred capital - consolidated joint venture
—

 
—

 
—

 
—

 
40,909

 
 
 
40,909

Comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange translation


 


 
(620
)
 


 
—

 
$
(620
)
 
 
Net loss


 
(14,939
)
 


 
(78
)
 
181

 
(14,836
)
 
 
Comprehensive loss


 


 


 


 
 
 
$
(15,456
)
 
(15,456
)
Balance at March 31, 2014
$
478,766

 
$
(240,542
)
 
$
24,423

 
$
24,204

 
$
40,909

 
 
 
$
327,760

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

9


FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2014 and 2013
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net loss
$
(14,836
)
 
$
(26,605
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
29,601

 
31,570

Gain on sale of properties, net
(5,848
)
 
—

Amortization of deferred financing fees and debt discount
2,929

 
2,694

Amortization of fixed stock and directors’ compensation
1,446

 
1,578

Equity in income from unconsolidated entities
(643
)
 
(89
)
Distributions of income from unconsolidated entities
824

 
619

Debt extinguishment
251

 
—

Changes in assets and liabilities:
 
 
 
Accounts receivable
152

 
(8,903
)
Other assets
(2,572
)
 
(3,162
)
Accrued expenses and other liabilities
11,098

 
7,177

Net cash flow provided by operating activities
22,402

 
4,879

 Cash flows from investing activities:
 
 
 
Improvements and additions to hotels
(28,617
)
 
(23,342
)
Hotel development
(23,622
)
 
(8,260
)
Net proceeds from asset dispositions
39,896

 
(232
)
Change in restricted cash – investing
10,180

 
825

Insurance proceeds
255

 
—

Distributions from unconsolidated entities
2,128

 
1,685

Net cash flow provided by (used in) investing activities
220

 
(29,324
)
 Cash flows from financing activities:
 
 
 
Proceeds from borrowings
81,000

 
84,245

Repayment of borrowings
(105,353
)
 
(32,346
)
Payment of deferred financing fees
(5
)
 
(2,022
)
Distributions paid to noncontrolling interests
(587
)
 
(284
)
Contributions from noncontrolling interests
1,568

 
602

Distributions paid to FelCor LP limited partners
(7
)
 
—

Distributions paid to preferred unitholders
(9,678
)
 
(9,678
)
Preferred distributions - consolidated joint venture
(65
)
 
—

Distributions paid to common unitholders
(2,484
)
 
—

Net proceeds from issuance of preferred capital - consolidated joint venture
40,909

 
—

Net cash flow provided by financing activities
5,298

 
40,517

 Effect of exchange rate changes on cash
(39
)
 
(21
)
 Net change in cash and cash equivalents
27,881

 
16,051

 Cash and cash equivalents at beginning of periods
45,645

 
45,745

 Cash and cash equivalents at end of periods
$
73,526

 
$
61,796

 
 
 
 
 Supplemental cash flow information – interest paid, net of capitalized interest
$
14,511

 
$
7,013

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

10


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.
Organization
FelCor Lodging Trust Incorporated (NYSE:FCH), or FelCor, is a Maryland corporation, operating as a real estate investment trust, or REIT. FelCor is the sole general partner of, and the owner of a greater than 99.5% partnership interest in, FelCor Lodging Limited Partnership, or FelCor LP, through which we held ownership interests in 59 hotels as of March 31, 2014 , one of which was held for sale. At March 31, 2014 , we had an aggregate of 124,803,232 shares and units outstanding, consisting of 124,185,690 shares of FelCor common stock and 617,542 FelCor LP units not owned by FelCor.
Of the 58 hotels not held for sale as of March 31, 2014, we owned a 100% interest in 41 hotels, a 90% interest in entities owning two hotels, an 82% interest in an entity owning one hotel, a 60% interest in an entity owning one hotel and a 50% interest in entities owning 13 hotels. We consolidate our real estate interests in the 45 hotels in which we held majority interests, and we record the real estate interests of the 13  hotels in which we held 50% interests using the equity method. We leased 57 of the 58 hotels in continuing operations to our taxable REIT subsidiaries, of which we own a controlling interest. One 50% owned hotel was operated without a lease. Because we owned controlling interests in these lessees, we consolidated our interests in these 57 hotels (which we refer to as our Consolidated Hotels) and reflect those hotels’ operating revenues and expenses in our statements of operations.  Of our Consolidated Hotels, we owned 50% of the real estate interests in each of 12 hotels (we accounted for the ownership in our real estate interests of these hotels by the equity method) and majority real estate interests in each of the remaining 45 hotels (we consolidate our real estate interest in these hotels).
The following table illustrates the distribution of our 57  Consolidated Hotels at March 31, 2014 :
Brand
 
Hotels
 
Rooms
 Embassy Suites Hotels ® 
 
31

 
 
8,167

 Wyndham ®   and Wyndham Grand ®
 
8

 
 
2,528

 Holiday Inn ® 
 
4

 
 
1,702

 Sheraton ® and Westin ® 
 
4

 
 
1,604

 Marriott ® and Renaissance ® 
 
3

 
 
1,321

 DoubleTree   by Hilton ®  and Hilton ® 
 
4

 
 
998

 Fairmont ® 
 
1

 
 
383

 Morgans and Royalton
 
2

 
 
285

  Total
 
57

 
 
16,988

At March 31, 2014 , our Consolidated Hotels were located in the United States ( 56 hotels in 21 states) and Canada ( one  hotel in Ontario), with concentrations in California ( 13  hotels), Florida ( 7  hotels) and Texas ( 7  hotels). Approximately 58% of our revenue was generated from hotels in these three states during the first three months of 2014 .
At March 31, 2014 , of our 57  Consolidated Hotels: (i) subsidiaries of Hilton Hotels Corporation, or Hilton, managed 34 hotels, (ii) subsidiaries of Wyndham Hotel Group, or Wyndham, managed eight hotels, (iii) subsidiaries of InterContinental Hotels Group, or IHG, managed four hotels, (iv) subsidiaries of Starwood Hotels & Resorts Worldwide Inc., or Starwood, managed four hotels, (v) subsidiaries of Marriott International Inc., or Marriott, managed three hotels, (vi) a subsidiary of Fairmont Hotels and Resorts, or Fairmont, managed one hotel, (vii) a subsidiary of Morgans Hotel Group Corporation managed two hotels, and (viii) an independent management company managed one hotel.

11


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    Organization — (continued)
In addition to the above hotels, we own a 95% interest in a consolidated joint venture that owns the Knickerbocker Hotel, a former hotel and office building that is being redeveloped as a 4+ star hotel in midtown Manhattan and is expected to open in early fall 2014.
The information in our consolidated financial statements for the three months ended March 31, 2014 and 2013 is unaudited. Preparing financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The accompanying financial statements for the three months ended March 31, 2014 and 2013 , include adjustments based on management’s estimates (consisting of normal and recurring accruals), which we consider necessary for a fair presentation of the results for the periods. The financial information should be read in conjunction with the consolidated financial statements for the year ended December 31, 2013 , included in our Annual Report on Form 10-K. Operating results for the three months ended March 31, 2014 are not necessarily indicative of actual operating results for the entire year.
2.
Investment in Unconsolidated Entities
At March 31, 2014 and December 31, 2013 , we owned 50%  interests in joint ventures that owned 13 hotels. We also own 50% interests in entities that own real estate in Myrtle Beach, South Carolina and provide condominium management services there. We account for our investments in these unconsolidated entities under the equity method. We do not have any majority-owned subsidiaries that are not consolidated in our financial statements. We make adjustments to our equity in income from unconsolidated entities related to the difference between our basis in investment in unconsolidated entities compared to the historical basis of the assets recorded by the joint ventures.
The following table summarizes combined balance sheet information for our unconsolidated entities (in thousands):
 
March 31,
 
December 31,
 
2014
 
2013
Investment in hotels and other properties, net of accumulated depreciation
$
136,484

 
 
$
140,145

 
Total assets
$
150,837

 
 
$
155,848

 
Debt
$
146,921

 
 
$
146,358

 
Total liabilities
$
150,745

 
 
$
152,068

 
Equity
$
92

 
 
$
3,780

 
Our unconsolidated entities’ debt at March 31, 2014 and December 31, 2013 consisted entirely of non-recourse mortgage debt.  In March 2014, one of our unconsolidated joint ventures refinanced $128 million of debt and extended the maturity until 2017.


12


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.
Investment in Unconsolidated Entities — (continued)
The following table sets forth summarized combined statement of operations information for our unconsolidated entities (in thousands):
 
Three Months Ended March 31,
 
2014
 
2013
Total revenues
$
14,617

 
$
13,608

Net income
$
2,216

 
$
1,108

 
 
 
 
Net income attributable to FelCor
$
1,108

 
$
554

Depreciation of cost in excess of book value
(465
)
 
(465
)
Equity in income from unconsolidated entities
$
643

 
$
89

The following table summarizes the components of our investment in unconsolidated entities (in thousands):
 
March 31,
 
December 31,
 
2014
 
2013
Hotel-related investments
$
(7,564
)
 
 
$
(6,349
)
 
Cost in excess of book value of hotel investments
44,588

 
 
45,053

 
Land and condominium investments
7,610

 
 
8,239

 
Investment in unconsolidated entities
$
44,634

 
 
$
46,943

 
The following table summarizes the components of our equity in income from unconsolidated entities (in thousands):
 
Three Months Ended
 
March 31,
 
2014
 
2013
Hotel investments
$
1,272

 
$
708

Other investments
(629
)
 
(619
)
Equity in income from unconsolidated entities
$
643

 
$
89


13


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.
Debt
Consolidated debt consisted of the following (dollars in thousands):
 
Encumbered
 
Interest
 
Maturity
 
March 31,
 
December 31,
 
Hotels
 
Rate (%)
 
Date
 
2014
 
2013
Line of credit
9

 
 
LIBOR + 3.375
 
June 2016 (a)
 
$
93,000

 
$
88,000

Hotel mortgage debt
 
 
 
 
 
 
 
 
 
 
 
Mortgage debt (b)
3

 
 
6.58

 
 
July - August 2014
 
34,821

 
35,133

Mortgage debt
1

 
 
5.81

 
 
July 2016
 
9,772

 
9,904

Mortgage debt (b)
4

 
 
4.95

 
 
October 2022
 
125,871

 
126,220

Mortgage debt
1

 
 
4.94

 
 
October 2022
 
31,589

 
31,714

Senior notes
 
 
 
 
 
 
 
 
 
 
 
Senior secured notes
11

 
 
10.00

 
 
October 2014
 
230,714

 
229,190

Senior secured notes
6

 
 
6.75

 
 
June 2019
 
525,000

 
525,000

Senior secured notes
9

 
 
5.625

 
 
March 2023
 
525,000

 
525,000

Knickerbocker loan (c)
 
 
 
 
 
 
 
 
 
 
 
Construction tranche
—

 
 
LIBOR + 4.00
 
May 2016
 
12,994

 
—

Cash collateralized tranche
—

 
 
LIBOR + 1.25
 
May 2016
 
51,867

 
64,861

Retired debt
—

 
 
—

 
 
—
 
—

 
28,204

Total
44

 
 
 
 
 
 
 
$
1,640,628

 
$
1,663,226

(a)
Our $225 million line of credit can be extended for one year (to 2017), subject to satisfying certain conditions.
(b)
This debt is comprised of separate non-cross-collateralized loans each secured by a mortgage of a different hotel.
(c)
In November 2012, we obtained an $85.0 million construction loan to finance the redevelopment of the Knickerbocker Hotel. This loan can be extended for one year subject to satisfying certain conditions. In January 2014, we drew $13.0 million of the cash collateral to fund construction costs, leaving $51.9 million of cash collateral to be drawn before drawing on the remaining $20.1 million available under the construction loan.

In January 2014, we repaid $10.9 million of secured loan debt, scheduled to mature in July 2014, when we sold a hotel. In March 2014, we repaid an additional $17.1 million of debt, secured by a hotel, scheduled to mature in June 2014. We incurred $251,000 of debt extinguishment costs with these repayments.

We reported $25.2 million and $26.3 million of interest expense for the three months ended March 31, 2014 and 2013 , respectively, which is net of: (i) interest income of $15,000 and $22,000 and (ii) capitalized interest of $4.0 million and $2.8 million , respectively.


14


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.
Hotel Operating Revenue, Departmental Expenses, and Other Property-Related Costs
Hotel operating revenue from continuing operations was comprised of the following (in thousands):
 
Three Months Ended
 
March 31,
 
2014
 
2013
Room revenue
$
169,829

 
$
160,507

Food and beverage revenue
39,785

 
36,943

Other operating departments
11,408

 
11,088

Total hotel operating revenue
$
221,022

 
$
208,538

Nearly all of our revenue is comprised of hotel operating revenue. These revenues are recorded net of any sales or occupancy taxes collected from our guests. All rebates or discounts are recorded, when allowed, as a reduction in revenue, and there are no material contingent obligations with respect to rebates or discounts offered by us. All revenues are recorded on an accrual basis, as earned. Appropriate allowances are made for doubtful accounts, which are recorded as a bad debt expense.
Hotel departmental expenses from continuing operations were comprised of the following (in thousands):
 
 
Three Months Ended March 31,
 
2014
 
2013
 
Amount
 
% of Total Hotel Operating Revenue
 
Amount
 
% of Total Hotel Operating Revenue
Room
$
46,733

 
21.1
%
 
 
$
44,870

 
21.5
%
 
Food and beverage
31,187

 
14.1

 
 
30,246

 
14.5

 
Other operating departments
5,603

 
2.6

 
 
5,289

 
2.6

 
Total hotel departmental expenses
$
83,523

 
37.8
%
 
 
$
80,405

 
38.6
%
 

Other property-related costs from continuing operations were comprised of the following amounts (in thousands):
 
 
Three Months Ended March 31,
 
2014
 
2013
 
Amount
 
% of Total Hotel Operating Revenue
 
Amount
 
% of Total Hotel Operating Revenue
Hotel general and administrative expense
$
19,834

 
9.0
%
 
 
$
20,047

 
9.6
%
 
Marketing
20,071

 
9.1

 
 
19,010

 
9.1

 
Repair and maintenance
11,687

 
5.3

 
 
11,561

 
5.5

 
Utilities
9,986

 
4.5

 
 
8,810

 
4.3

 
Total other property-related costs
$
61,578

 
27.9
%
 
 
$
59,428

 
28.5
%
 

15


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.
Hotel Operating Revenue, Departmental Expenses, and Other Property-Related Costs — (continued)
In March 2013, we rebranded and transitioned management at eight core hotels located in strategic markets to Wyndham brands. Wyndham's parent guaranteed a minimum level of net operating income for each year of the initial ten -year term, subject to an aggregate $100 million limit over the term and an annual $21.5 million limit. Amounts recorded under the guaranty will be accounted for, to the extent available, as a reduction in contractual management and other fees paid and payable to Wyndham. Any amounts in excess of those fees will be recorded as revenue when earned. For the three months ended March 31, 2014 and 2013, we have recorded a $136,000 and $464,000 , respectively, pro rata portion of the projected full-year guaranty as a reduction of Wyndham's contractual management and other fees.
5.
Taxes, Insurance and Lease Expense

Taxes, insurance and lease expense from continuing operations were comprised of the following (in thousands):
 
Three Months Ended
 
March 31,
 
2014
 
2013
Hotel lease expense (a) 
$
10,391

 
$
9,558

Land lease expense (b) 
2,462

 
2,394

Real estate and other taxes
8,109

 
7,594

Property insurance, general liability insurance and other
2,671

 
2,618

  Total taxes, insurance and lease expense
$
23,633

 
$
22,164


(a)
Hotel lease expense is recorded by the consolidated operating lessees of 12 hotels owned by unconsolidated entities and is partially (generally 49% ) offset through noncontrolling interests in other partnerships. Our 50% share of the corresponding lease income is recorded through equity in income from unconsolidated entities.  Hotel lease expense includes percentage rent of $4.9 million and $4.1 million for the three months ended March 31, 2014 and 2013 , respectively.

(b)
Land lease expense includes percentage rent of $1.0 million and $968,000 for the three months ended March 31, 2014 and 2013 , respectively.


16


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.
Hotel Dispositions

Effective January 1, 2014, we have adopted the provisions of Accounting Standards Update No. 2014-08 (the Update), under which the disposal of components of an entity are reported as discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. These new provisions are applied prospectively only and, as such, hotels that were considered discontinued operations for the year ended December 31, 2013 and prior continue to be reported as discontinued operations in all periods presented.

During the first quarter, we sold two hotels, one of which was not previously held for sale. Additionally, as of March 31, 2014 , we had one hotel held for sale. We designate a hotel as held for sale when the sale is probable within the next twelve months. We consider a sale to be probable when a buyer completes its due diligence review, we have an executed contract for sale, and we have received a substantial non-refundable deposit. Operations for these two hotels (the hotel sold not previously held for sale and the hotel held for sale as of March 31, 2014 ) are included in loss from continuing operations as shown in the Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013 as disposition of these hotels does not represent a strategic shift in our business. The operations from these two components included income of $396,000 (of which $394,000 was attributable to FelCor) and a loss of $2,900 for the three months ended March 31, 2014 and 2013 , respectively. The gain on the sale of the hotel not previously held for sale is reported in the accompanying statement of operations on a separate line item and is not included in continuing operations.

Discontinued operations include the results of operations for five hotels sold in 2013 and one hotel sold in 2014 (which was held for sale as of December 31, 2013). The following table summarizes the condensed financial information for those hotels (in thousands):

 
Three Months Ended
 
March 31,
 
2014
 
2013
Hotel operating revenue
$
729

 
 
$
11,754

 
Operating expenses
(674
)
 
 
(10,706
)
 
Operating income from discontinued operations
55

 
 
1,048

 
Interest expense, net
(66
)
 
 
(198
)
 
Debt extinguishment
(245
)
 
 
—

 
Gain on sale of hotels, net
391

 
 
—

 
Income from discontinued operations
$
135

 
 
$
850

 



17


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.
Loss Per Share/Unit

The following tables set forth the computation of basic and diluted loss per share/unit (in thousands, except per share/unit data):

FelCor Loss Per Share

 
Three Months Ended
 
March 31,
 
2014
 
2013
Numerator:
 
 
 
Net loss attributable to FelCor
$
(14,818
)
 
$
(26,185
)
Discontinued operations attributable to FelCor
(134
)
 
(830
)
Loss from continuing operations attributable to FelCor
(14,952
)
 
(27,015
)
Less: Preferred dividends
(9,678
)
 
(9,678
)
Numerator for continuing operations attributable to FelCor common stockholders
(24,630
)
 
(36,693
)
Discontinued operations attributable to FelCor
134

 
830

Numerator for basic and diluted loss attributable to FelCor common stockholders
$
(24,496
)
 
$
(35,863
)
Denominator:
 
 
 
Denominator for basic and diluted loss per share
124,146

 
123,814

Basic and diluted loss per share data:
 
 
 
Loss from continuing operations
$
(0.20
)
 
$
(0.30
)
Discontinued operations
$
—

 
$
0.01

Net loss
$
(0.20
)
 
$
(0.29
)


18


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.
Loss Per Share/Unit — (continued)

FelCor LP Loss Per Unit

 
Three Months Ended
 
March 31,
 
2014
 
2013
Numerator:
 
 
 
Net loss attributable to FelCor LP
$
(14,939
)
 
$
(26,365
)
Discontinued operations attributable to FelCor LP
(135
)
 
(834
)
Loss from continuing operations attributable to FelCor LP
(15,074
)
 
(27,199
)
Less: Preferred distributions
(9,678
)
 
(9,678
)
Numerator for continuing operations attributable to FelCor LP common unitholders
(24,752
)
 
(36,877
)
Discontinued operations attributable to FelCor LP
135

 
834

Numerator for basic and diluted loss attributable to FelCor common unitholders
$
(24,617
)
 
$
(36,043
)
Denominator:
 
 
 
Denominator for basic and diluted loss per unit
124,764

 
124,435

Basic and diluted loss per unit data:
 
 
 
Loss from continuing operations
$
(0.20
)
 
$
(0.30
)
Discontinued operations
$
—

 
$
0.01

Net loss
$
(0.20
)
 
$
(0.29
)

The loss from continuing operations attributable to FelCor/FelCor LP share/unit calculations includes the gain on the sale of property attributable to FelCor/FelCor LP.

Securities that could potentially dilute earnings per share/unit in the future that were not included in the computation of diluted loss per share/unit, because they would have been antidilutive for the periods presented, are as follows (in thousands):
 
Three Months Ended
 
March 31,
 
2014
 
2013
Series A convertible preferred shares/units
9,985

 
 
9,985

FelCor restricted stock units
850

 
 
167


Series A preferred dividends (distributions) that would be excluded from net loss attributable to FelCor common stockholders (or FelCor LP common unitholders), if these preferred shares/units were dilutive, were $6.3 million for the three months ended March 31, 2014 and 2013 .

We grant our executive officers restricted stock units each year, which provides them with the potential to earn shares of our common stock in three increments over four years . The actual number of shares that vest is determined based on total stockholder return relative to a group of 10 lodging REIT peers. We amortize the fixed cost of these grants over the vesting period. We calculate the potential dilutive impact of these awards on our earnings per share using the treasury stock method.


19


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.
Fair Value of Financial Instruments
Disclosures about fair value of our financial instruments are based on pertinent information available to management as of March 31, 2014 and December 31, 2013 . Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize on disposition of the financial instruments. Different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.
Our estimates of the fair value of (i) cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses approximate carrying value due to the relatively short maturity of these instruments; (ii) our publicly-traded debt is based on observable market data (a Level 2 input) and has an estimated fair value of $1.3 billion at March 31, 2014 and December 31, 2013 ; and (iii) our debt that is not publicly-traded is based on a discounted cash flow model using effective borrowing rates for debt with similar terms, loan to estimated fair value of collateral and remaining maturities (a Level 3 input) and has an estimated fair value of $364.3 million and $390.1 million at March 31, 2014 and December 31, 2013 , respectively. The estimated fair value of all our debt was $1.7 billion at March 31, 2014 and December 31, 2013 . The carrying value of our debt was $1.6 billion and $1.7 billion at March 31, 2014 and December 31, 2013 , respectively.
9.
Redeemable Noncontrolling Interests in FelCor LP / Redeemable Units
We record redeemable noncontrolling interests in FelCor LP, in the case of FelCor, and redeemable units, in the case of FelCor LP, in the mezzanine section (between liabilities and equity or partners’ capital) of our consolidated balance sheets because of the redemption feature of these units. Additionally, FelCor’s consolidated statements of operations separately present earnings attributable to redeemable noncontrolling interests. We adjust redeemable noncontrolling interests in FelCor LP (or redeemable units) each period to reflect the greater of its carrying value based on the accumulation of historical cost or its redemption value. The historical cost is based on the proportionate relationship between the carrying value of equity associated with FelCor’s common stockholders relative to that of FelCor LP’s unitholders. Redemption value is based on the closing price of FelCor’s common stock at period end. FelCor allocates net income (loss) to FelCor LP’s noncontrolling partners based on their weighted average ownership percentage during the period.
At March 31, 2014 , we had 617,542 limited partnership units outstanding carried at $5.6 million . The value of these outstanding units is based on the closing price of FelCor’s common stock at March 31, 2014 ( $9.04 per share).
Changes in redeemable noncontrolling interests (or redeemable units) for the three months ended March 31, 2014 and 2013 are shown below (in thousands):
 
Three Months Ended
 
March 31,
 
2014
 
2013
Balance at beginning of period
$
5,039

 
 
$
2,902

 
Redemption value allocation
679

 
 
977

 
Distributions paid to unitholders
(11
)
 
 
—

 
Comprehensive loss:
 
 
 
 
 
Foreign exchange translation
(3
)
 
 
(2
)
 
Net loss
(121
)
 
 
(180
)
 
Balance at end of period
$
5,583

 
 
$
3,697

 


20


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.    Consolidated Joint Venture Preferred Equity/Capital
Our joint venture that is redeveloping the Knickerbocker Hotel raised $45 million through the sale of 3.5% preferred equity/capital under the EB-5 immigrant investor program. The investors in this preferred equity receive a 3.25% current annual return, with a 0.25% non-compounding annual return paid at redemption. If the preferred equity is not redeemed within five years , the current return increases to 8.00% . The venture received $41.5 million in gross proceeds ( $40.9 million net of issuance costs) in the first quarter of 2014, and the remaining $3.5 million will be received as investors’ visas are approved by the government. We used our 95% share of the proceeds to repay borrowings under our line of credit.

11.
FelCor LP’s Consolidating Financial Information
Certain of FelCor LP’s 100% owned subsidiaries (FCH/PSH, L.P.; FelCor Baton Rouge Owner, L.L.C.; FelCor/CMB Buckhead Hotel, L.L.C.; FelCor/CMB Marlborough Hotel, L.L.C.; FelCor/CMB Orsouth Holdings, L.P.; FelCor/CMB SSF Holdings, L.P.; FelCor/CSS Holdings, L.P.; FelCor Dallas Love Field Owner, L.L.C.; FelCor Lodging Holding Company, L.L.C.; FelCor Milpitas Owner, L.L.C.; FelCor TRS Borrower 4, L.L.C.; FelCor TRS Holdings, L.L.C.; FelCor Canada Co.; FelCor Hotel Asset Company, L.L.C.; FelCor Copley Plaza, L.L.C.; FelCor St. Pete (SPE), L.L.C.; FelCor Esmeralda (SPE), L.L.C.; FelCor S-4 Hotels (SPE), L.L.C.; Los Angeles International Airport Hotel Associates, a Texas L.P.; Madison 237 Hotel, L.L.C.; Myrtle Beach Owner, L.L.C.; and Royalton 44 Hotel, L.L.C., collectively, “Subsidiary Guarantors”), together with FelCor, guaranty, fully and unconditionally, except where subject to customary release provisions as described below, and jointly and severally, our senior debt.
The guaranties by the Subsidiary Guarantors may be automatically and unconditionally released upon (1) the sale or other disposition of all of the capital stock of the Subsidiary Guarantor or the sale or disposition of all or substantially all of the assets of the Subsidiary Guarantor, (2) the consolidation or merger of any such Subsidiary Guarantor with any person other than FelCor LP, or a subsidiary of FelCor LP, if, as a result of such consolidation or merger, such Subsidiary Guarantor ceases to be a subsidiary of FelCor LP, (3) a legal defeasance or covenant defeasance of the indenture, (4) the unconditional and complete release of such Subsidiary Guarantor in accordance with the modification and waiver provisions of the indenture, or (5) the designation of a restricted subsidiary that is a Subsidiary Guarantor as an unrestricted subsidiary under and in compliance with the indenture.

21


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.
FelCor LP’s Consolidating Financial Information – (continued)
The following tables present consolidating information for the Subsidiary Guarantors.
FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING BALANCE SHEET
March 31, 2014
(in thousands)

 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Net investment in hotels
$
43,777

 
$
1,056,263

 
$
511,207

 
$
—

 
$
1,611,247

Hotel development
—

 
—

 
236,729

 
—

 
236,729

Equity investment in consolidated entities
1,476,856

 
—

 
—

 
(1,476,856
)
 
—

Investment in unconsolidated entities
32,312

 
10,977

 
1,345

 
—

 
44,634

Hotel held for sale
—

 
—

 
19,137

 
—

 
19,137

Cash and cash equivalents
17,625

 
44,711

 
11,190

 
—

 
73,526

Restricted cash
—

 
10,019

 
57,028

 
—

 
67,047

Accounts receivable, net
251

 
33,587

 
648

 
—

 
34,486

Deferred expenses, net
19,660

 
—

 
7,975

 
—

 
27,635

Other assets
5,380

 
11,935

 
18,013

 
(12,500
)
 
22,828

 
 
 
 
 
 
 
 
 
 
Total assets
$
1,595,861

 
$
1,167,492

 
$
863,272

 
$
(1,489,356
)
 
$
2,137,269

 
 
 
 
 
 
 
 
 
 
Debt, net
$
1,280,714

 
$
12,500

 
$
401,117

 
$
(53,703
)
 
$
1,640,628

Distributions payable
11,079

 
—

 
116

 
—

 
11,195

Accrued expenses and other liabilities
35,838

 
103,725

 
12,540

 
—

 
152,103

 
 
 
 
 
 
 
 
 
 
Total liabilities
1,327,631

 
116,225

 
413,773

 
(53,703
)
 
1,803,926

 
 
 
 
 
 
 
 
 
 
Redeemable units
5,583

 
—

 
—

 
—

 
5,583

 
 
 
 
 
 
 
 
 
 
Preferred units
478,766

 
—

 
—

 
—

 
478,766

Common units
(240,542
)
 
1,047,284

 
363,946

 
(1,411,230
)
 
(240,542
)
Accumulated other comprehensive income
24,423

 
4,486

 
19,937

 
(24,423
)
 
24,423

Total FelCor LP partners’ capital
262,647

 
1,051,770

 
383,883

 
(1,435,653
)
 
262,647

Noncontrolling interests
—

 
(503
)
 
24,707

 
—

 
24,204

Preferred capital in consolidated joint venture
—

 
—

 
40,909

 
—

 
40,909

Total partners’ capital
262,647

 
1,051,267

 
449,499

 
(1,435,653
)
 
327,760

Total liabilities and partners’ capital
$
1,595,861

 
$
1,167,492

 
$
863,272

 
$
(1,489,356
)
 
$
2,137,269


22


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.    FelCor LP’s Consolidating Financial Information – (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2013
(in thousands)

 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Net investment in hotels
$
48,971

 
$
1,053,724

 
$
550,572

 
$
—

 
$
1,653,267

Hotel development
—

 
—

 
216,747

 
—

 
216,747

Equity investment in consolidated entities
1,508,593

 
—

 
—

 
(1,508,593
)
 
—

Investment in unconsolidated entities
34,090

 
11,497

 
1,356

 
—

 
46,943

Hotel held for sale
—

 
—

 
16,319

 
—

 
16,319

Cash and cash equivalents
5,227

 
33,283

 
7,135

 
—

 
45,645

Restricted cash
—

 
9,051

 
68,176

 
—

 
77,227

Accounts receivable, net
516

 
34,366

 
865

 
—

 
35,747

Deferred expenses, net
20,540

 
—

 
8,785

 
—

 
29,325

Other assets
6,248

 
10,767

 
17,998

 
(11,953
)
 
23,060

Total assets
$
1,624,185

 
$
1,152,688

 
$
887,953

 
$
(1,520,546
)
 
$
2,144,280

 
 
 
 
 
 
 
 
 
 
Debt, net
$
1,279,190

 
$
11,953

 
$
464,036

 
$
(91,953
)
 
$
1,663,226

Distributions payable
11,047

 
—

 
—

 
—

 
11,047

Accrued expenses and other liabilities
37,980

 
96,494

 
16,264

 
—

 
150,738

 
 
 
 
 
 
 
 
 
 
Total liabilities
1,328,217

 
108,447

 
480,300

 
(91,953
)
 
1,825,011

 
 
 
 
 
 
 
 
 
 
Redeemable units
5,039

 
—

 
—

 
—

 
5,039

 
 
 
 
 
 
 
 
 
 
Preferred units
478,774

 
—

 
—

 
—

 
478,774

Common units
(212,888
)
 
1,039,903

 
363,647

 
(1,403,550
)
 
(212,888
)
Accumulated other comprehensive income
25,043

 
4,569

 
20,474

 
(25,043
)
 
25,043

Total FelCor LP partners’ capital
290,929

 
1,044,472

 
384,121

 
(1,428,593
)
 
290,929

Noncontrolling interests
—

 
(231
)
 
23,532

 
—

 
23,301

Total partners’ capital
290,929

 
1,044,241

 
407,653

 
(1,428,593
)
 
314,230

Total liabilities and partners’ capital
$
1,624,185

 
$
1,152,688

 
$
887,953

 
$
(1,520,546
)
 
$
2,144,280



23


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.    FelCor LP’s Consolidating Financial Information – (continued)
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2014
(in thousands)
 
 
 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
Hotel operating revenue
$
—

 
$
221,022

 
$
—

 
$
—

 
$
221,022

Percentage lease revenue
1,399

 
—

 
25,609

 
(27,008
)
 
—

Other revenue
1

 
266

 
60

 
—

 
327

Total revenues
1,400

 
221,288

 
25,669

 
(27,008
)
 
221,349

 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
Hotel operating expenses
—

 
154,114

 
—

 
—

 
154,114

Taxes, insurance and lease expense
419

 
46,829

 
3,393

 
(27,008
)
 
23,633

Corporate expenses
123

 
5,069

 
2,633

 
—

 
7,825

Depreciation and amortization
991

 
17,767

 
10,843

 
—

 
29,601

Other expenses
35

 
840

 
1,139

 
—

 
2,014

Total operating expenses
1,568

 
224,619

 
18,008

 
(27,008
)
 
217,187

Operating income
(168
)
 
(3,331
)
 
7,661

 
—

 
4,162

Interest expense, net
(20,484
)
 
(328
)
 
(4,415
)
 
—

 
(25,227
)
Debt extinguishment
—

 
—

 
(6
)
 
—

 
(6
)
Loss before equity in income from unconsolidated entities
(20,652
)
 
(3,659
)
 
3,240

 
—

 
(21,071
)
Equity in income from consolidated entities
5,323

 
—

 
—

 
(5,323
)
 
—

Equity in income from unconsolidated entities
799

 
(145
)
 
(11
)
 
—

 
643

Loss from continuing operations
(14,530
)
 
(3,804
)
 
3,229

 
(5,323
)
 
(20,428
)
Income from discontinued operations
—

 
29

 
106

 
—

 
135

Loss before gain on sale of property
(14,530
)
 
(3,775
)
 
3,335

 
(5,323
)
 
(20,293
)
Gain on sale of property, net
(228
)
 
(14
)
 
5,699

 
—

 
5,457

Net loss
(14,758
)
 
(3,789
)
 
9,034

 
(5,323
)
 
(14,836
)
Loss attributable to noncontrolling interests
—

 
134

 
(56
)
 
—

 
78

Preferred distributions - consolidated joint venture
—

 
—

 
(181
)
 
—

 
(181
)
Net loss attributable to FelCor LP
(14,758
)
 
(3,655
)
 
8,797

 
(5,323
)
 
(14,939
)
Preferred distributions
(9,678
)
 
—

 
—

 
—

 
(9,678
)
Net loss attributable to FelCor LP common unitholders
$
(24,436
)
 
$
(3,655
)
 
$
8,797

 
$
(5,323
)
 
$
(24,617
)

24


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.    FelCor LP’s Consolidating Financial Information – (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2013
(in thousands)
 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
Hotel operating revenue
$
—

 
$
208,538

 
$
—

 
$
—

 
$
208,538

Percentage lease revenue
1,262

 
—

 
23,144

 
(24,406
)
 
—

Other revenue
3

 
333

 
63

 
—

 
399

Total revenues
1,265

 
208,871

 
23,207

 
(24,406
)
 
208,937

 
 
 
 
 
 
 
 
 

Expenses:
 
 
 
 
 
 
 
 

Hotel operating expenses
—

 
148,996

 
—

 
—

 
148,996

Taxes, insurance and lease expense
304

 
42,993

 
3,273

 
(24,406
)
 
22,164

Corporate expenses
109

 
5,543

 
2,180

 
—

 
7,832

Depreciation and amortization
1,250

 
17,596

 
10,909

 
—

 
29,755

Conversion expenses
20

 
391

 
217

 
—

 
628

Other expenses
23

 
517

 
281

 
—

 
821

Total operating expenses
1,706

 
216,036

 
16,860

 
(24,406
)
 
210,196

Operating loss
(441
)
 
(7,165
)
 
6,347

 
—

 
(1,259
)
Interest expense, net
(21,604
)
 
(303
)
 
(4,378
)
 
—

 
(26,285
)
Loss before equity in income from unconsolidated entities
(22,045
)
 
(7,468
)
 
1,969

 
—

 
(27,544
)
Equity in loss from consolidated entities
(4,625
)
 
—

 
—

 
4,625

 
—

Equity in income from unconsolidated entities
305

 
(205
)
 
(11
)
 
—

 
89

Loss from continuing operations
(26,365
)
 
(7,673
)
 
1,958

 
4,625

 
(27,455
)
Income from discontinued operations
—

 
(415
)
 
1,265

 
—

 
850

Net loss
(26,365
)
 
(8,088
)
 
3,223

 
4,625

 
(26,605
)
Loss attributable to noncontrolling interests
—

 
256

 
(16
)
 
—

 
240

Net loss attributable to FelCor LP
(26,365
)
 
(7,832
)
 
3,207

 
4,625

 
(26,365
)
Preferred distributions
(9,678
)
 
—

 
—

 
—

 
(9,678
)
Net loss attributable to FelCor LP common unitholders
$
(36,043
)
 
$
(7,832
)
 
$
3,207

 
$
4,625

 
$
(36,043
)

25


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.    FelCor LP’s Consolidating Financial Information – (continued)

FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS
For the Three Months Ended March 31, 2014
(in thousands)

 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Net loss
$
(14,758
)
 
$
(3,789
)
 
$
9,034

 
$
(5,323
)
 
$
(14,836
)
Foreign currency translation adjustment
(620
)
 
(83
)
 
(537
)
 
620

 
(620
)
Comprehensive loss
(15,378
)
 
(3,872
)
 
8,497

 
(4,703
)
 
(15,456
)
Comprehensive loss attributable to noncontrolling interests
—

 
134

 
(56
)
 
—

 
78

Comprehensive loss attributable to FelCor LP
$
(15,378
)
 
$
(3,738
)
 
$
8,441

 
$
(4,703
)
 
$
(15,378
)


FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS
For the Three Months Ended March 31, 2013
(in thousands)

 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Net loss
$
(26,365
)
 
$
(8,088
)
 
$
3,223

 
$
4,625

 
$
(26,605
)
Foreign currency translation adjustment
(357
)
 
(95
)
 
(262
)
 
357

 
(357
)
Comprehensive loss
(26,722
)
 
(8,183
)
 
2,961

 
4,982

 
(26,962
)
Comprehensive loss attributable to noncontrolling interests
—

 
256

 
(16
)
 
—

 
240

Comprehensive loss attributable to FelCor LP
$
(26,722
)
 
$
(7,927
)
 
$
2,945

 
$
4,982

 
$
(26,722
)


26


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.    FelCor LP’s Consolidating Financial Information – (continued)
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2014
(in thousands)

 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
$
(14,116
)
 
$
21,575

 
$
14,943

 
$
—

 
$
22,402

Investing activities:
 
 
 
 
 
 
 
 
 
Improvements and additions to hotels
(730
)
 
(20,888
)
 
(6,999
)
 
—

 
(28,617
)
Hotel development
—

 
—

 
(23,622
)
 
—

 
(23,622
)
Net proceeds from asset dispositions
(167
)
 
(42
)
 
40,105

 
—

 
39,896

Insurance proceeds
—

 
255

 
—

 
—

 
255

Change in restricted cash - investing
—

 
(501
)
 
10,681

 
—

 
10,180

Distributions from unconsolidated entities
1,753

 
375

 
—

 
—

 
2,128

Intercompany financing
37,827

 
—

 
—

 
(37,827
)
 
—

Cash flows from investing activities
38,683

 
(20,801
)
 
20,165

 
(37,827
)
 
220

Financing activities:
 
 
 
 
 
 
 
 
 
Proceeds from borrowings
—

 
—

 
81,000

 
—

 
81,000

Repayment of borrowings
—

 
—

 
(105,353
)
 
—

 
(105,353
)
Distributions paid to preferred unitholders
(9,678
)
 
—

 
—

 
—

 
(9,678
)
Net proceeds from issuance of preferred capital - consolidated joint venture
—

 
—

 
40,909

 
—

 
40,909

Intercompany financing
—

 
10,832

 
(48,659
)
 
37,827

 
—

Other
(2,491
)
 
(139
)
 
1,050

 
—

 
(1,580
)
Cash flows from financing activities
(12,169
)
 
10,693

 
(31,053
)
 
37,827

 
5,298

Effect of exchange rate changes on cash
—

 
(39
)
 
—

 
—

 
(39
)
Change in cash and cash equivalents
12,398

 
11,428

 
4,055

 
—

 
27,881

Cash and cash equivalents at beginning of period
5,227

 
33,283

 
7,135

 
—

 
45,645

Cash and cash equivalents at end of period
$
17,625

 
$
44,711

 
$
11,190

 
$
—

 
$
73,526


27


FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.    FelCor LP’s Consolidating Financial Information – (continued)

FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2013
(in thousands)

 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
$
(3,904
)
 
$
6,447

 
$
2,336

 
$
—

 
$
4,879

Investing activities:
 
 
 
 
 
 
 
 
 
Improvements and additions to hotels
(142
)
 
(14,312
)
 
(8,888
)
 
—

 
(23,342
)
Hotel development
—

 
—

 
(8,260
)
 
—

 
(8,260
)
Payment of selling costs
—

 
(17
)
 
(215
)
 
—

 
(232
)
Distributions from unconsolidated entities
1,435

 
250

 
—

 
—

 
1,685

Intercompany financing
19,554

 
—

 
—

 
(19,554
)
 
—

Other
—

 
1,746

 
(921
)
 
—

 
825

Cash flows from investing activities
20,847

 
(12,333
)
 
(18,284
)
 
(19,554
)
 
(29,324
)
Financing activities:
 
 
 
 
 
 
 
 
 
Proceeds from borrowings
—

 
—

 
84,245

 
—

 
84,245

Repayment of borrowings
—

 
—

 
(32,346
)
 
—

 
(32,346
)
Distributions paid to preferred unitholders
(9,678
)
 
—

 
—

 
—

 
(9,678
)
Intercompany financing
—

 
16,792

 
(36,346
)
 
19,554

 
—

Other
(1,819
)
 
25

 
90

 
—

 
(1,704
)
Cash flows from financing activities
(11,497
)
 
16,817

 
15,643

 
19,554

 
40,517

Effect of exchange rate changes on cash
—

 
(21
)
 
—

 
—

 
(21
)
Change in cash and cash equivalents
5,446

 
10,910

 
(305
)
 
—

 
16,051

Cash and cash equivalents at beginning of period
8,312

 
30,425

 
7,008

 
—

 
45,745

Cash and cash equivalents at end of period
$
13,758

 
$
41,335

 
$
6,703

 
$
—

 
$
61,796



28

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

General
Revenue per available room, or RevPAR, for our 49 comparable hotels (our Consolidated Hotels excluding the Wyndham portfolio) increased 7.0% in the first quarter of 2014 compared to the same period last year. Overall, for all of our Consolidated Hotels RevPAR grew 6.4% in the first quarter of 2014 compared to the same period last year, driven primarily by a 4.8% increase in average daily rate, or ADR, and a 1.6% increase in occupancy.
RevPAR for the Wyndham portfolio, which were converted from Holiday Inn on March 1, 2013, increased 2.7% for the first quarter compared to the same period last year. We expect revenues at these hotels to improve meaningfully as transitional disruption subsides. In addition, as previously disclosed, Wyndham’s parent has guaranteed a minimum level of net operating income for each year of the ten-year term. Wyndham’s aggregate payments under this guaranty are limited to $100 million over the term and $21.5 million annually. For the three months ended March 31, 2014 and 2013, we have recorded a $136,000 and $464,000, respectively, pro rata portion of the projected full-year guaranty as a reduction of Wyndham's contractual management and other fees.
To date, we have sold 26 hotels as part of our portfolio repositioning plan. We are currently marketing eight non-strategic hotels (of which we have agreed to sell five) and expect to bring another to market later this year. We indirectly own 50% interests in the other 10 non-strategic hotels, which are owned by a joint venture with one of our brand-managers. We have made substantial progress with our partner to unwind that joint venture, as a consequence of which we would own five of those hotels outright (our joint venture partner would own the other five). When the joint venture is unwound (which we are targeting to occur in the second quarter), we intend to begin marketing those hotels immediately.
We have spent $85.6 million (excluding the initial acquisition costs and capitalized interest) through March 31, 2014 to redevelop the 4+ star Knickerbocker Hotel, located in the heart of Times Square in Manhattan. We expect the project will cost $240 million, in the aggregate, net of historic tax credits. We expect the hotel will open in early fall.
Our joint venture that is redeveloping the Knickerbocker Hotel raised $45 million through the sale of 3.5% preferred equity through the EB-5 immigrant investor program. The venture received $41.5 million in proceeds during the first quarter of 2014, and the remaining $3.5 million will be received as investors’ visas are approved by the government. We used our 95% share of the proceeds to repay borrowings under our line of credit.
Results of Operations
Comparison of the Three Months ended March 31, 2014 and 2013
For the three months ended March 31, 2014 , we recorded a $14.8 million net loss compared to a $26.6 million net loss for the same period last year. Our 2014 net loss included a $5.8 million net gain on sale primarily related to two hotels (including $391,000 in discontinued operations).
For the three months ended March 31, 2014 :
•
Total revenue was $221.3 million , 5.9% more than last year. The increase was driven by a 6.4% increase in same-store RevPAR, reflecting a 4.8% increase in ADR and a 100 basis point increase in occupancy.

•
Hotel departmental expenses increased $3.1 million . As a percentage of total revenue, hotel departmental expenses decreased from 38.5% last year to 37.7% in the current period. In the

29

current period, we experienced a favorable shift in banquet and catering operations, which typically have higher margins than other food and beverage operations. Hotel departmental operations also recognized a slight improvement in profitability margins for the rooms department, which was driven by a favorable increase in ADR.
•
Other property-related costs increased $2.2 million . As a percentage of total revenue, other property-related costs decreased from 28.4% last year to 27.8% in the current period, primarily attributable to growth in ADR and a change in employee benefit plans implemented by one of the management companies during the current period.
•
Management and franchise fees decreased $150,000 . As a percentage of total revenue, these costs decreased from 4.4% last year to 4.1% in the current period. In March 2013, we converted eight hotels to Wyndham brands and management. Wyndham’s base management fee is lower than the previous management company, resulting in an improved cost structure.
•
Taxes, insurance and lease expense increased $1.5 million and increased slightly as a percentage of total revenue from 10.6% last year to 10.7% in the current period. The increase reflects higher percentage lease expense (computed as a percentage of hotel revenues in excess of base rent; as revenue increases, percentage rent increases at a faster rate than other expenses) and higher property and other taxes.
•
Conversion expenses . We converted eight hotels to Wyndham brands and management in March 2013. We classified those expenses as conversion expense in our 2013 statements of operations.
•
Other expenses increased $1.2 million compared to the same period in 2013, primarily related to severance costs for certain hotel employees and pre-opening costs for the Knickerbocker Hotel.
•
Net interest expense decreased $1.1 million , primarily reflecting increased capitalized interest attributable to renovation and redevelopment projects.
•
Discontinued operations include the results of operations for one hotel sold in January 2014 and five hotels sold in 2013. Discontinued operations in 2014 included a $391,000 net gain on sale primarily related to one hotel, offset by debt extinguishment charges of $245,000 (related to $10.9 million in repayment of debt for the hotel sold in the current period).
Non-GAAP Financial Measures
We refer in this report to certain “non-GAAP financial measures.” These measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA, and Hotel EBITDA margin, are measures of our financial performance that are not calculated and presented in accordance with GAAP. The following tables reconcile these non-GAAP measures to the most comparable GAAP financial measure. Immediately following the reconciliations, we include a discussion of why we believe these measures are useful supplemental measures of our performance and the limitations of such measures.

30

 
Reconciliation of Net Loss to FFO and Adjusted FFO
(in thousands, except per share data)

 
Three Months Ended March 31,
 
2014
2013
 
Dollars
 
Shares
 
Per Share Amount
 
Dollars
 
Shares
 
Per Share Amount
Net loss
$
(14,836
)
 
 
 
 
 
$
(26,605
)
 
 
 
 
Noncontrolling interests
199

 
 
 
 
 
420

 
 
 
 
Preferred distributions - consolidated joint venture
(181
)
 
 
 
 
 
—

 
 
 
 
Preferred dividends
(9,678
)
 
 
 
 
 
(9,678
)
 
 
 
 
Net loss attributable to FelCor common stockholders
(24,496
)
 
124,146

 
$
(0.20
)
 
(35,863
)
 
123,814

 
$
(0.29
)
Depreciation and amortization
29,601

 
—

 
0.24

 
29,755

 
—

 
0.24

Depreciation, discontinued operations and unconsolidated entities
2,675

 
—

 
0.02

 
4,521

 
—

 
0.04

Gain on sale of hotels, net of noncontrolling interests in other partnerships
(5,851
)
 
—

 
(0.05
)
 
—

 
—

 
—

Loss on sale, unconsolidated entities
33

 
—

 
—

 
—

 
—

 
—

Noncontrolling interests in FelCor LP
(121
)
 
618

 
—

 
(180
)
 
621

 
—

Conversion of unvested restricted stock
—

 
858

 
—

 
—

 
—

 
—

FFO
1,841

 
125,622

 
0.01

 
(1,767
)
 
124,435

 
(0.01
)
Acquisition costs
—

 
—

 
—

 
23

 
—

 
—

Debt extinguishment, including discontinued operations
251

 
—

 
—

 
—

 
—

 
—

Severance costs
400

 
—

 
—

 
—

 
—

 
—

Conversion expenses
—

 
—

 
—

 
628

 
—

 
—

Variable stock compensation
564

 
—

 
0.01

 
102

 
—

 
—

Pre-opening costs, net of noncontrolling interests
1,053

 
—

 
0.01

 
241

 
—

 
—

Adjusted FFO
$
4,109

 
125,622


$
0.03


$
(773
)

124,435


$
(0.01
)

31


Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and Same-store Adjusted EBITDA
(in thousands)
 
Three Months Ended
 
March 31,
 
2014
 
2013
Net loss
$
(14,836
)
 
$
(26,605
)
Depreciation and amortization
29,601

 
29,755

Depreciation, discontinued operations and unconsolidated entities
2,675

 
4,521

Interest expense
25,242

 
26,307

Interest expense, discontinued operations and unconsolidated entities
744

 
870

Noncontrolling interests in other partnerships
78

 
240

EBITDA
43,504

 
35,088

Debt extinguishment, including discontinued operations
251

 
—

Acquisition costs
—

 
23

Gain on sale of hotels, net of noncontrolling interests in other partnerships
(5,851
)
 
—

Loss on sale, unconsolidated entities
33

 
—

Amortization of fixed stock and directors’ compensation
1,122

 
1,578

Severance costs
400

 
—

Conversion expenses
—

 
628

Variable stock compensation
564

 
102

Pre-opening costs, net of noncontrolling interests
1,053

 
241

Adjusted EBITDA
41,076

 
37,660

Adjusted EBITDA from hotels, disposed and held for sale
(1,179
)
 
(3,852
)
Same-store Adjusted EBITDA
$
39,897

 
$
33,808



32


Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands)
 
Three Months Ended
 
March 31,
 
2014
 
2013
Same-store operating revenue:
 
 
 
Room
$
166,486

 
$
157,069

Food and beverage
39,430

 
36,616

Other operating departments
11,293

 
10,959

Same-store operating revenue
217,209

 
204,644

Same-store operating expense:
 
 
 
Room
45,926

 
44,043

Food and beverage
30,896

 
29,953

Other operating departments
5,566

 
5,247

Other property related costs
60,408

 
58,168

Management and franchise fees
8,865

 
9,004

Taxes, insurance and lease expense
14,974

 
14,233

Same-store operating expense
166,635

 
160,648

Hotel EBITDA
$
50,574

 
$
43,996

Hotel EBITDA Margin
23.3
%
 
21.5
%

Hotel EBITDA and Hotel EBITDA Margin (continued)
(dollars in thousands)
 
Three Months Ended
 
March 31,
 
2014
 
2013
Hotel EBITDA - Comparable core (31)
$
33,413

 
$
28,581

Hotel EBITDA - Non-strategic (18)
11,111

 
10,323

Hotel EBITDA - Comparable (49)
44,524

 
38,904

Hotel EBITDA - Wyndham (8)
6,050

 
5,092

Hotel EBITDA (57)
$
50,574

 
$
43,996

 
 
 
 
Hotel EBITDA Margin - Comparable core (31)
22.9
%
 
21.0
%
Hotel EBITDA Margin - Non-strategic (18)
23.8
%
 
23.1
%
Hotel EBITDA Margin - Comparable (49)
23.1
%
 
21.5
%
Hotel EBITDA Margin - Wyndham (8)
24.6
%
 
21.2
%
Hotel EBITDA Margin (57)
23.3
%
 
21.5
%


33

Reconciliation of Same-store Operating Revenue and Same-store Operating Expense to Total Revenue, Total Operating Expense and Operating Income (Loss)
(in thousands)
 
Three Months Ended
 
March 31,
 
2014
 
2013
Same-store operating revenue
$
217,209

 
$
204,644

Other revenue
327

 
399

Revenue from hotels, disposed and held for sale (a)
3,813

 
3,894

Total revenue
221,349

 
208,937

Same-store operating expense
166,635

 
160,648

Consolidated hotel lease expense (b)
10,391

 
9,558

Unconsolidated taxes, insurance and lease expense
(1,965
)
 
(1,898
)
Corporate expenses
7,825

 
7,832

Depreciation and amortization
29,601

 
29,755

Conversion expenses
—

 
628

Expenses from hotels, disposed and held for sale (a)
2,686

 
2,852

Other expenses
2,014

 
821

Total operating expense
217,187

 
210,196

Operating income (loss)
$
4,162

 
$
(1,259
)
(a)
In March 2014, we sold a 218-room Embassy Suites hotel in Bloomington, Minnesota, for $24 million. In addition, we have agreed to sell the 208-room DoubleTree Suites in Charlotte, North Carolina, for $37 million. The hotel is held for sale on our March 31, 2014 balance sheet, as the purchaser of the Charlotte hotel paid a non-refundable deposit toward the purchase price. The closing is scheduled for May. Under recently issued GAAP accounting guidance, we included the operating performance for these hotels in continuing operations in our Consolidated Statements of Operations for the first quarter 2014 and 2013. However, for purposes of our Non-GAAP reporting metrics, we have excluded the results of these hotels to provide a meaningful same-store comparison.
(b)
Consolidated hotel lease expense represents the percentage lease expense of our 51% owned operating lessees. The offsetting percentage lease revenue is included in equity in income from unconsolidated entities.
Substantially all of our non-current assets consist of real estate. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to be helpful in evaluating a real estate company’s operations. These supplemental measures are not measures of operating performance under GAAP. However, we consider these non-GAAP measures to be supplemental measures of a hotel REIT’s performance and should be considered along with, but not as an alternative to, net income (loss) attributable to FelCor as a measure of our operating performance.


34


FFO and EBITDA

The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income or loss attributable to parent (computed in accordance with GAAP), excluding gains or losses from sales of property, plus depreciation, amortization and impairment losses. FFO for unconsolidated partnerships and joint ventures are calculated on the same basis. We compute FFO in accordance with standards established by NAREIT. This may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.

EBITDA is a commonly used measure of performance in many industries. We define EBITDA as net income or loss attributable to parent (computed in accordance with GAAP) plus interest expenses, income taxes, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA on the same basis.

Adjustments to FFO and EBITDA
We adjust FFO and EBITDA when evaluating our performance because management believes that the exclusion of certain additional items provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted FFO, and Adjusted EBITDA when combined with GAAP net income attributable to FelCor, EBITDA and FFO, is beneficial to an investor’s better understanding of our operating performance.
•
Gains and losses related to extinguishment of debt and interest rate swaps - We exclude gains and losses related to extinguishment of debt and interest rate swaps from FFO and EBITDA because we believe that it is not indicative of ongoing operating performance of our hotel assets. This also represents an acceleration of interest expense or a reduction of interest expense, and interest expense is excluded from EBITDA.
•
Cumulative effect of a change in accounting principle - Infrequently, the Financial Accounting Standards Board promulgates new accounting standards that require the consolidated statements of operations to reflect the cumulative effect of a change in accounting principle. We exclude these one-time adjustments in computing Adjusted FFO and Adjusted EBITDA because they do not reflect our actual performance for that period.
•
Other transaction costs - From time to time, we periodically incur costs that are not indicative of ongoing operating performance. Such costs include, but are not limited to, conversions costs, acquisition costs, pre-opening costs and severance costs. We exclude these costs from the calculation of Adjusted FFO and Adjusted EBITDA.

•
Variable stock compensation - We exclude the cost associated with our variable stock compensation. This cost is subject to volatility related to the price and dividends of our common stock that does not necessarily correspond to our operating performance.
In addition, to derive Adjusted EBITDA, we exclude gains or losses on the sale of depreciable assets and impairment losses because including them in EBITDA is inconsistent with reporting the ongoing performance of our remaining assets. Additionally, the gain or loss on sale of depreciable assets and impairment losses represents either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA. We also exclude the amortization of our fixed stock compensation. While this amortization is included in corporate expenses and is not separately stated on our statements of operations, excluding this amortization is consistent with the EBITDA definition.

35

Hotel EBITDA and Hotel EBITDA Margin
Hotel EBITDA and Hotel EBITDA margin are commonly used measures of performance in the hotel industry and give investors a more complete understanding of the operating results over which our individual hotels and brand/managers have direct control. We believe that Hotel EBITDA and Hotel EBITDA margin are useful to investors by providing greater transparency with respect to two significant measures that we use in our financial and operational decision-making. Additionally, using these measures facilitates comparisons with other hotel REITs and hotel owners. We present Hotel EBITDA and Hotel EBITDA margin in a manner consistent with Adjusted EBITDA, however, we also eliminate all revenues and expenses from continuing operations not directly associated with hotel operations, including other income and corporate-level and other expenses. We eliminate these additional items because we believe property-level results provide investors with supplemental information into the ongoing operational performance of our hotels and the effectiveness of management on a property-level basis. We also eliminate consolidated percentage rent paid to unconsolidated entities, which is effectively eliminated by noncontrolling interests and equity in income from unconsolidated subsidiaries, and include the cost of unconsolidated taxes, insurance and lease expense, to reflect the entire operating costs applicable to our Consolidated Hotels. Hotel EBITDA and Hotel EBITDA margins are presented on a same-store basis.
Use and Limitations of Non-GAAP Measures
Our management and Board of Directors use FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. We use Hotel EBITDA and Hotel EBITDA margin in evaluating hotel-level performance and the operating efficiency of our hotel managers.
The use of these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.
These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. Management strongly encourages investors to review our financial information in its entirety and not to rely on a single financial measure.


36

Pro Rata Share of Rooms Owned

The following table sets forth, at March 31, 2014 , our pro rata share of hotel rooms, included in continuing operations, after giving consideration to the portion of rooms attributed to our partners in our consolidated and unconsolidated joint ventures:
 
Hotels
 
Room Count at March 31, 2014
Consolidated Hotels (a)
57

 
 
16,988

 
Unconsolidated hotel operations
1

 
 
171

 
Total hotels
58

 
 
17,159

 
 
 
 
 
 
 
    50% joint ventures
13

 
 
(1,573
)
 
    60% joint venture
1

 
 
(214
)
 
    82% joint venture
1

 
 
(40
)
 
    90% joint ventures
2

 
 
(44
)
 
Pro rata rooms attributed to joint venture partners
 
 
 
(1,871
)
 
Pro rata share of rooms owned
 
 
 
15,288

 

(a)    Excludes hotel held for sale as of March 31, 2014.


37

Hotel Portfolio Composition
The following table illustrates the distribution of Same-store hotels.
 
 
 
 
 
 
 
 
Year Ended December 31, 2013
Brand
 
Hotels
 
Rooms
 
Hotel Operating Revenue
(in thousands)
 
Hotel EBITDA
(in thousands) (a)
Embassy Suites Hotels
18

 
 
4,982

 
 
$
255,744

 
 
$
81,062

 
Wyndham and Wyndham Grand (b)
8

 
 
2,528

 
 
103,931

 
 
35,046

 
Renaissance and Marriott
3

 
 
1,321

 
 
119,838

 
 
21,341

 
DoubleTree by Hilton and Hilton
3

 
 
802

 
 
41,106

 
 
12,621

 
Sheraton and Westin
2

 
 
673

 
 
37,996

 
 
10,174

 
Fairmont
1

 
 
383

 
 
49,104

 
 
7,845

 
Holiday Inn
2

 
 
968

 
 
46,403

 
 
6,406

 
Morgans and Royalton
2

 
 
285

 
 
34,340

 
 
3,514

 
Core hotels
39

 
 
11,942

 
 
688,462

 
 
178,009

 
Non-strategic hotels (c)
18

 
 
5,046

 
 
184,125

 
 
45,611

 
Same-store hotels
57

 
 
16,988

 
 
$
872,587

 
 
$
223,620

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Market
 
 
 
 
 
 
 
 
 
 
 
 
San Francisco area
5

 
 
1,903

 
 
$
124,825

 
 
$
31,587

 
Boston
3

 
 
916

 
 
76,510

 
 
17,794

 
South Florida
3

 
 
923

 
 
50,011

 
 
14,305

 
Los Angeles area
2

 
 
481

 
 
23,760

 
 
10,451

 
Myrtle Beach
2

 
 
640

 
 
37,955

 
 
10,120

 
New York area
3

 
 
546

 
 
48,045

 
 
6,761

 
Atlanta
1

 
 
316

 
 
14,016

 
 
5,491

 
Philadelphia
2

 
 
728

 
 
34,271

 
 
7,567

 
Tampa
1

 
 
361

 
 
46,423

 
 
7,435

 
Austin
1

 
 
188

 
 
13,126

 
 
5,680

 
Other markets
16

 
 
4,940

 
 
219,520

 
 
60,818

 
Core hotels
39

 
 
11,942

 
 
688,462

 
 
178,009

 
Non-strategic hotels (c)
18

 
 
5,046

 
 
184,125

 
 
45,611

 
Same-store hotels
57

 
 
16,988

 
 
$
872,587

 
 
$
223,620

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Location
 
 
 
 
 
 
 
 
 
 
 
 
Urban
17

 
 
5,310

 
 
$
323,304

 
 
$
81,351

 
Resort
9

 
 
2,733

 
 
185,264

 
 
41,294

 
Airport
8

 
 
2,621

 
 
122,734

 
 
37,364

 
Suburban
5

 
 
1,278

 
 
57,160

 
 
18,000

 
Core hotels
39

 
 
11,942

 
 
688,462

 
 
178,009

 
Non-strategic hotels (c)
18

 
 
5,046

 
 
184,125

 
 
45,611

 
Same-store hotels
57

 
 
16,988

 
 
$
872,587

 
 
$
223,620

 
(a)
Hotel EBITDA is a non-GAAP financial measure. A detailed reconciliation and further discussion of Hotel EBITDA is contained in the “Non-GAAP Financial Measures” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of this Quarterly Report on Form 10-Q. We consider Hotel Operating Revenue and Hotel EBITDA to be same store metrics for this presentation and hotels disposed or held for sale are excluded.
(b)
These hotels converted to Wyndham on March 1, 2013.
(c)
Excludes hotel held for sale as of March 31, 2014.

38

Hotel Operating Statistics
The following tables set forth occupancy, ADR and RevPAR for the three months ended March 31, 2014 and 2013 , and the percentage changes therein for the periods presented, for our Same-store Consolidated Hotels.
Operating Statistics by Brand
 
Occupancy (%)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2014
 
2013
 
%Variance
Embassy Suites Hotels
76.8

 
74.1

 
3.7

 
Renaissance and Marriott
75.6

 
74.8

 
1.1

 
DoubleTree by Hilton and Hilton
64.4

 
59.8

 
7.8

 
Sheraton and Westin
56.4

 
58.2

 
(3.0
)
 
Fairmont
58.6

 
60.3

 
(2.9
)
 
Holiday Inn
64.5

 
68.4

 
(5.7
)
 
Morgans and Royalton
79.4

 
81.0

 
(2.0
)
 
Comparable core hotels (31)
72.2

 
70.9

 
1.8

 
Non-strategic hotels (18) (a)
71.3

 
69.7

 
2.3

 
Comparable hotels (49)
71.9

 
70.5

 
2.0

 
Wyndham and Wyndham Grand (b)
62.9

 
63.6

 
(1.0
)
 
Same-store hotels (57)
70.5

 
69.5

 
1.6

 
 
ADR ($)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2014
 
2013
 
%Variance
Embassy Suites Hotels
166.71

 
157.30

 
6.0

 
Renaissance and Marriott
236.72

 
221.01

 
7.1

 
DoubleTree by Hilton and Hilton
156.22

 
155.48

 
0.5

 
Sheraton and Westin
127.91

 
125.38

 
2.0

 
Fairmont
238.07

 
221.26

 
7.6

 
Holiday Inn
131.81

 
112.44

 
17.2

 
Morgans and Royalton
258.62

 
260.05

 
(0.5
)
 
Comparable core hotels (31)
176.24

 
166.29

 
6.0

 
Non-strategic hotels (18) (a)
117.30

 
114.77

 
2.2

 
Comparable hotels (49)
155.85

 
148.56

 
4.9

 
Wyndham and Wyndham Grand (b)
144.62

 
139.38

 
3.8

 
Same-store hotels (57)
154.36

 
147.30

 
4.8

 
 
RevPAR ($)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2014
 
2013
 
%Variance
Embassy Suites Hotels
128.06

 
116.56

 
9.9

 
Renaissance and Marriott
178.95

 
165.32

 
8.2

 
DoubleTree by Hilton and Hilton
100.65

 
92.96

 
8.3

 
Sheraton and Westin
72.20

 
72.93

 
(1.0
)
 
Fairmont
139.46

 
133.52

 
4.4

 
Holiday Inn
85.01

 
76.89

 
10.6

 
Morgans and Royalton
205.34

 
210.76

 
(2.6
)
 
Comparable core hotels (31)
127.25

 
117.93

 
7.9

 
Non-strategic hotels (18) (a)
83.62

 
80.00

 
4.5

 
Comparable hotels (49)
112.02

 
104.73

 
7.0

 
Wyndham and Wyndham Grand (b)
90.99

 
88.60

 
2.7

 
Same-store hotels (57)
108.90

 
102.31

 
6.4

 
(a)    Excludes hotel held for sale as of March 31, 2014.
(b)    These hotels converted to Wyndham on March 1, 2013.

39

Hotel Operating Statistics by Market
 
Occupancy (%)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2014
 
2013
 
%Variance
San Francisco area
72.0

 
 
74.3

 
 
(3.2
)
 
Los Angeles area
82.7

 
 
76.9

 
 
7.5

 
South Florida
91.2

 
 
90.8

 
 
0.4

 
Boston
60.8

 
 
63.0

 
 
(3.4
)
 
New York area
71.7

 
 
73.3

 
 
(2.2
)
 
Myrtle Beach
45.5

 
 
37.0

 
 
22.9

 
Atlanta
75.5

 
 
72.3

 
 
4.5

 
Philadelphia
59.7

 
 
53.0

 
 
12.7

 
Tampa
86.1

 
 
83.7

 
 
2.9

 
Austin
78.4

 
 
80.3

 
 
(2.4
)
 
Other markets
72.5

 
 
70.2

 
 
3.2

 
Comparable core hotels (31)
72.2

 
 
70.9

 
 
1.8

 
 
ADR ($)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2014
 
 
2013
 
%Variance
San Francisco area
188.07

 
 
162.38

 
 
15.8

 
Los Angeles area
137.23

 
 
136.12

 
 
0.8

 
South Florida
205.26

 
 
190.78

 
 
7.6

 
Boston
203.68

 
 
190.57

 
 
6.9

 
New York area
229.08

 
 
218.23

 
 
5.0

 
Myrtle Beach
108.73

 
 
108.94

 
 
(0.2
)
 
Atlanta
146.50

 
 
142.77

 
 
2.6

 
Philadelphia
148.79

 
 
152.21

 
 
(2.2
)
 
Tampa
226.08

 
 
215.29

 
 
5.0

 
Austin
232.97

 
 
221.78

 
 
5.0

 
Other markets
154.15

 
 
149.13

 
 
3.4

 
Comparable core hotels (31)
176.24

 
 
166.29

 
 
6.0

 
 
RevPAR ($)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2014
 
 
2013
 
%Variance
San Francisco area
135.42

 
 
120.73

 
 
12.2

 
Los Angeles area
113.46

 
 
104.71

 
 
8.4

 
South Florida
187.18

 
 
173.22

 
 
8.1

 
Boston
123.91

 
 
120.00

 
 
3.3

 
New York area
164.18

 
 
159.99

 
 
2.6

 
Myrtle Beach
49.43

 
 
40.30

 
 
22.6

 
Atlanta
110.64

 
 
103.18

 
 
7.2

 
Philadelphia
88.84

 
 
80.65

 
 
10.2

 
Tampa
194.74

 
 
180.26

 
 
8.0

 
Austin
182.67

 
 
178.15

 
 
2.5

 
Other markets
111.72

 
 
104.74

 
 
6.7

 
Comparable core hotels (31)
127.25

 
 
117.93

 
 
7.9

 

40


Hotel Portfolio

The following table sets forth certain descriptive information regarding the hotels in which we held ownership interest at March 31, 2014 .

Core Hotels
 
 Brand
 State
Rooms
 % Owned

(a)  
Birmingham
 Embassy Suites Hotel
 AL
242
 
 
Phoenix – Biltmore
 Embassy Suites Hotel
 AZ
232
 
 
Indian Wells – Esmeralda Resort & Spa
 Renaissance
 CA
560
 
 
Los Angeles – International Airport/South
 Embassy Suites Hotel
 CA
349
 
 
Napa Valley
 Embassy Suites Hotel
 CA
205
 
 
Mandalay Beach – Hotel & Resort
 Embassy Suites Hotel
 CA
250
 
 
Milpitas – Silicon Valley
 Embassy Suites Hotel
 CA
266
 
 
San Diego – Bayside
 Wyndham
 CA
600
 
 
San Francisco – Airport/Waterfront
 Embassy Suites Hotel
 CA
340
 
 
San Francisco – Airport/South San Francisco
 Embassy Suites Hotel
 CA
312
 
 
San Francisco – Fisherman’s Wharf
 Holiday Inn
 CA
585
 
 
San Francisco – Union Square
 Marriott
 CA
400
 
 
Santa Monica – at the Pier
 Wyndham
 CA
132
 
 
Deerfield Beach – Resort & Spa
 Embassy Suites Hotel
 FL
244
 
 
Ft. Lauderdale – 17th Street
 Embassy Suites Hotel
 FL
361
 
 
Miami – International Airport
 Embassy Suites Hotel
 FL
318
 
 
Orlando – International Drive South/Convention
 Embassy Suites Hotel
 FL
244
 
 
Orlando – Walt Disney World Resort
 DoubleTree Suites by Hilton
 FL
229
 
 
St. Petersburg – Vinoy Resort & Golf Club
 Renaissance
 FL
361
 
 
Atlanta – Buckhead
 Embassy Suites Hotel
 GA
316
 
 
New Orleans – French Quarter
 Wyndham
 LA
374
 
 
Boston – Beacon Hill
 Wyndham
 MA
304
 
 
Boston – Copley Plaza
 Fairmont
 MA
383
 
 
Boston – Marlborough
 Embassy Suites Hotel
 MA
229
 
 
Minneapolis – Airport
 Embassy Suites Hotel
 MN
310
 
 
Secaucus – Meadowlands
 Embassy Suites Hotel
 NJ
261
50
%
 
New York – Morgans
 Independent
 NY
117
 
 
New York – Royalton
 Independent
 NY
168
 
 
Philadelphia – Historic District
 Wyndham
 PA
364
 
 
Philadelphia – Society Hill
 Sheraton
 PA
364
 
 
Pittsburgh – at University Center (Oakland)
 Wyndham
 PA
251
 
 
Charleston – The Mills House
 Wyndham Grand
 SC
216
 
 
Myrtle Beach – Oceanfront Resort
 Embassy Suites Hotel
 SC
255
 
 
Myrtle Beach Resort
 Hilton
 SC
385
 
 
Nashville – Opryland – Airport (Briley
   Parkway)
 Holiday Inn
 TN
383
 
 

41

Hotel Portfolio (continued)

Core Hotels
 
 Brand
 
 State
 
Rooms
 
 % Owned

(a)  
Austin
 DoubleTree Suites by Hilton
 
 TX
 
188
 
90
%
 
Dallas – Love Field
 Embassy Suites Hotel
 
 TX
 
248
 
 
 
Houston – Medical Center
 Wyndham
 
 TX
 
287
 
 
 
Burlington Hotel & Conference Center
 Sheraton
 
 VT
 
309
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Hotel
 
 
 
 
 
 
 
 
New Orleans – French Quarter – Chateau
   LeMoyne
 Holiday Inn
 
 LA
 
171
 
50
%
 
 
 
 
 
 
 
 
 
 
 
Hotel under Development
 
 
 
 
 
 
 
 
New York – Knickerbocker
 Independent
 
 NY
 
330
 
95
%
 
 
 
 
 
 
 
 
 
 
Non-strategic Hotels
 
 
 
 
 
 
 
 
Dana Point – Doheny Beach
 DoubleTree Suites by Hilton
 
 CA
 
196
 
 
 
San Rafael – Marin County
 Embassy Suites Hotel
 
 CA
 
235
 
50
%
 
Orlando – International Airport
 Holiday Inn
 
 FL
 
288
 
 
 
Atlanta – Gateway – Atlanta Airport
 Sheraton
 
 GA
 
395
 
 
 
Atlanta – Perimeter Center
 Embassy Suites Hotel
 
 GA
 
241
 
50
%
 
Chicago – Lombard/Oak Brook
 Embassy Suites Hotel
 
 IL
 
262
 
50
%
 
Indianapolis – North
 Embassy Suites Hotel
 
 IN
 
221
 
82
%
 
Kansas City – Overland Park
 Embassy Suites Hotel
 
 KS
 
199
 
50
%
 
Baltimore – at BWI Airport
 Embassy Suites Hotel
 
 MD
 
251
 
90
%
 
Kansas City – Plaza
 Embassy Suites Hotel
 
 MO
 
266
 
50
%
 
Charlotte
 Embassy Suites Hotel
 
 NC
 
274
 
50
%
 
Raleigh – Crabtree
 Embassy Suites Hotel
 
 NC
 
225
 
50
%
 
Parsippany
 Embassy Suites Hotel
 
 NJ
 
274
 
50
%
 
Toronto – International Airport
 Holiday Inn
 
Ontario
 
446
 
 
 
Austin – Central
 Embassy Suites Hotel
 
 TX
 
260
 
50
%
 
Dallas – Park Central
 Westin
 
 TX
 
536
 
60
%
 
San Antonio – International Airport
 Embassy Suites Hotel
 
 TX
 
261
 
50
%
 
San Antonio – NW I-10
 Embassy Suites Hotel
 
 TX
 
216
 
50
%
 
 
 
 
 
 
 
 
 
 
Non-strategic Hotel Held for Sale
 
 
 
 
 
Charlotte – SouthPark
DoubleTree Suites by Hilton
 
NC
 
208
 
 
 

(a)
We own 100% of each hotel except where otherwise noted.

42

Liquidity and Capital Resources
Operating Activities
During the first three months of 2014, our operations (primarily hotel operations) provided $22.4 million in cash, $17.5 million more than the same period last year. This increase is primarily attributable to the 2014 receipt of Wyndham’s $8 million net operating income guaranty (which we accrued for in 2013), as well as improved operations compared to last year. Our consolidated statements of cash flows combines cash flow from continuing and discontinued operations. Hotels in discontinuing operations did not generate operating cash flow for the three months ended March 31, 2014 and generated $2.7 million of operating cash flow for the three months ended March 31, 2013 . The hotels reported in discontinued operations will not provide acceptable future returns of operating cash flow on our investment, and we do not expect the absence of their operating cash flow to have a material impact on our business.
At March 31, 2014 , we had $73.5 million of cash and cash equivalents, including $44.4 million held by third-party management companies.
RevPAR growth for the lodging industry remains strong. RevPAR at our comparable hotels for the first three months increased 7.0% , driven by a 4.9% increase in ADR and a 2.0% increase in occupancy. We expect RevPAR at our comparable hotels to increase 6.5-7.5% during 2014, primarily from ADR growth, which is a premium to the industry due to portfolio condition and quality. We expect to generate $112.9 - $118.8 million of operating cash flow in 2014.
Investing Activities
During the first three months of 2014, we had $220,000 of cash provided by investing activities compared to $29.3 million of cash used during the same period last year. So far in 2014, compared to the same period last year, we spent $5.3 million more on improvements and additions to hotels and $15.4 million more on hotel development. These increases in capitalized investments were more than offset by $39.9 million in net proceeds from hotel sales and a $10.2 million reduction of restricted cash (which was primarily used to fund our hotel development).
For renovations and redevelopment in 2014, we expect to spend approximately $85 million which will be funded from operating cash flow, cash on hand and borrowings under our line of credit. In addition, for the Knickerbocker Hotel we expect to invest approximately $81 million in 2014, which will be funded primarily by draws on the Knickerbocker construction loan and additional capital that is currently being raised through the EB-5 immigrant investment program.
To date, we have sold 26 hotels as part of our portfolio repositioning plan. We are currently marketing eight non-strategic hotels (of which we have agreed to sell five) and expect to bring another to market later this year. We indirectly own 50% interests in the other 10 non-strategic hotels, which are owned by a joint venture with one of our brand-managers. We have made substantial progress with our partner to unwind that joint venture, as a consequence of which we would own five of those hotels outright (our joint venture partner would own the other five). When the joint venture is unwound (which we are targeting to occur in the second quarter), we intend to begin marketing those hotels immediately.
Financing Activities
During the first three months of 2014, cash provided by financing activities decreased by $35.2 million compared to the same period last year. We repaid $73.0 million more of debt in the current year as compared to the same period last year, which was partially offset by $40.9 million in net proceeds

43

from issuing preferred equity by our Knickerbocker Hotel consolidated joint venture. In 2014, we expect to pay approximately $3 million of normally occurring principal payments, $39 million of preferred dividends and $10 million in common dividends (assuming the current quarterly dividend per share), all of which will be funded from operating cash flow and cash on hand. We are using proceeds from hotel sales to make additional non-recurring principal payments. To the extent debt matures prior to receiving sufficient proceeds from asset sales, we expect to bridge the shortfall with a low-cost and freely pre-payable loan that would be repaid with subsequent asset sale proceeds.
FelCor’s Board of Directors reinstated a quarterly common dividend in October 2013, in recognition of our ongoing and successful portfolio repositioning and balance sheet restructuring. FelCor’s Board of Directors declared a $0.02 per share first quarter common stock dividend, which was paid in April 2014. FelCor LP, which is our operating partnership, distributes funds to FelCor to pay common or preferred dividends. FelCor's Board of Directors will determine the amount of future common and preferred dividends for each quarter, if any, based upon various factors including operating results, economic conditions, other operating trends, our financial condition and capital requirements, as well as the minimum REIT distribution requirements.
Except for our senior notes and line of credit, our mortgage debt is generally recourse solely to the specific hotels securing the debt, except in case of fraud, misapplication of funds and certain other customary limited recourse carve-out provisions that could extend recourse to us. Much of our secured debt allows us to substitute collateral under certain conditions and is prepayable, subject (in some instances) to various prepayment, yield maintenance or defeasance obligations.
Most of our secured debt (other than our senior notes and line of credit) includes lock-box arrangements under certain circumstances. We are permitted to spend an amount required to cover our budgeted hotel operating expenses, taxes, debt service, insurance and capital expenditure reserves, even if revenues are flowing through a lock-box because a specified debt service coverage ratio is not met. With the exception of a loan secured by one property, all of our consolidated loans subject to lock-box provisions currently exceed the applicable minimum debt service coverage ratios.

Senior Notes. Our senior notes require that we satisfy total leverage, secured leverage and interest coverage tests in order to: (i) incur additional indebtedness, except to refinance maturing debt with replacement debt, as defined under our indentures; (ii) pay dividends in excess of the minimum distributions required to qualify as a REIT; (iii) repurchase capital stock; or (iv) merge. We currently exceed all minimum thresholds. These notes are guaranteed by us, and payment of our 10% notes is secured by a pledge of the limited partner interests in FelCor LP owned by FelCor. In addition, our senior notes are secured by a combination of first lien mortgages and related security interests and/or negative pledges on 26 hotels (11 hotels for our 10% senior notes, six hotels for our 6.75% senior notes and nine hotels for our 5.625% senior notes), as well as pledges of equity interests in certain subsidiaries of FelCor LP.

Inflation
Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, require us to reduce room rates in the near term and may limit our ability to raise room rates in the future. We are also subject to the risk that inflation will cause increases in hotel operating expenses disproportionately to revenues. If competition requires us to reduce room rates or limits our ability to raise room rates in the future, we may not be able to adjust our room rates to reflect the effects of inflation in full, in which case our operating results and liquidity could be adversely affected.


44


Seasonality

The lodging business is seasonal in nature. Generally, hotel revenues are greater in the second and third calendar quarters than in the first and fourth calendar quarters, although this may not be true for hotels in major tourist destinations. Revenues for hotels in tourist areas generally are substantially greater during tourist season than other times of the year. Seasonal variations in revenue at our hotels can be expected to cause quarterly fluctuations in our revenues. Quarterly earnings also may be adversely affected by events beyond our control, such as extreme weather conditions, economic factors and other considerations affecting travel. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenues, we may utilize cash on hand or borrowings to satisfy our obligations.

Disclosure Regarding Forward-Looking Statements

This report and the documents incorporated by reference in this report include forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” or other variations of these terms (including their use in the negative), or by discussions of strategies, plans or intentions. A number of factors could cause actual results to differ materially from those anticipated by these forward-looking statements. Certain of these risks and uncertainties are described in greater detail under “Risk Factors” in our Annual Report on Form 10-K or in our other filings with the Securities and Exchange Commission, or the SEC.

These forward-looking statements are necessarily dependent upon assumptions and estimates that may prove to be incorrect. Accordingly, while we believe that the plans, intentions and expectations reflected in these forward-looking statements are reasonable, we cannot assure you that deviations from these plans, intentions or expectations will not be material. The forward-looking statements included in this report, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, are expressly qualified in their entirety by the risk factors and cautionary statements discussed in our filings to the SEC. We undertake no obligation to publicly update any forward-looking statements to reflect future circumstances or changes in our expectations.


45

Item 3.
Quantitative and Qualitative Disclosures about Market Risk.
At March 31, 2014 , approximately 90% of our consolidated debt bears fixed-rate interest.
The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents scheduled maturities and weighted average interest rates, by maturity dates. The fair value of our fixed-rate debt indicates the estimated principal amount of debt having the same debt service requirements that could have been borrowed at the date presented, at then current market interest rates.
Expected Maturity Date
at March 31, 2014
(dollars in thousands)
 
Expected Maturity Date
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
 
Fair Value
Liabilities
 
Fixed-rate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt
$
270,924

 
$
3,107

 
$
11,461

 
$
2,810

 
$
2,954

 
$
1,194,701

 
$
1,485,957

 
$
1,546,449

Average
  interest rate
9.52
%
 
5.11
%
 
5.61
%
 
4.95
%
 
4.95
%
 
6.04
%
 
6.66
%
 
 

Floating-rate:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Debt
—

 
—

 
157,861

 
—

 
—

 
—

 
157,861

 
$
158,351

Average
  interest rate (a)
—

 
—

 
3.91
%
 
—

 
—

 
—

 
3.91
%
 
 

Total debt
$
270,924

 
$
3,107

 
$
169,322

 
$
2,810

 
$
2,954

 
$
1,194,701

 
$
1,643,818

 
 

Average
   interest rate
9.52
%
 
5.11
%
 
4.03
%
 
4.95
%
 
4.95
%
 
6.04
%
 
6.40
%
 
 

Net discount
 

 
 
 
 
 
 
 
 
 
 

 
(3,190
)
 
 

  Total debt
 

 
 
 
 
 
 
 
 
 
 

 
$
1,640,628

 
 

(a)
The average floating interest rate considers the implied forward rates in the yield curve at March 31, 2014 .

Item 4.
Controls and Procedures.
(a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934) as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded, as of the Evaluation Date, that our disclosure controls and procedures were effective, such that the information relating to us required to be disclosed in our reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.
(b) Changes in internal control over financial reporting.
There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15 (f) promulgated under the Securities Exchange Act of 1934) during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

46

PART II – OTHER INFORMATION





Item 6.
Exhibits.

The following exhibits are furnished in accordance with the provisions of Item 601 of Regulation S-K:

Exhibit Number
 
Description of Exhibit
 
 
 
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor.
 
 
 
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor.
 
 
 
31.3
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor LP.
 
 
 
31.4
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor LP.
32.1
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for FelCor.
 
 
 
32.2
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for FelCor LP.
 
 
 
101.INS
 
XBRL Instance Document. Submitted electronically with this report.
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document. Submitted electronically with this report.
 
 
 
101.CAL
 
XBRL Taxonomy Calculation Linkbase Document. Submitted electronically with this report.
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document. Submitted electronically with this report.
 
 
 
101.LAB
 
XBRL Taxonomy Label Linkbase Document. Submitted electronically with this report.
 
 
 
101.PRE
 
XBRL Taxonomy Presentation Linkbase Document. Submitted electronically with this report.

* Previously filed.

Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) FelCor’s Consolidated Balance Sheets at March 31, 2014 and December 31, 2013 ; (ii) FelCor’s Consolidated Statements of Operations for the three months ended

47

March 31, 2014 and 2013 ; (iii) FelCor’s Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2014 and 2013 ; (iv) FelCor’s Consolidated Statements of Changes in Equity for the three months ended March 31, 2014 and 2013 ; (v) FelCor’s Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 ; (vi) FelCor LP’s Consolidated Balance Sheets at March 31, 2014 and December 31, 2013 ; (vii) FelCor LP’s Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013 ; (viii) FelCor LP’s Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2014 and 2013 ; (ix) FelCor LP’s Consolidated Statements of Partners’ Capital for the three months ended March 31, 2014 and 2013 ; (x) FelCor LP’s Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 ; and (xi) the Notes to Consolidated Financial Statements. Users of this data are advised pursuant to Rule 406T of Regulation S‑T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
  FELCOR LODGING TRUST INCORPORATED
 
 
 
 
 
 
 
 
 
 
 
 
Date:  May 2, 2014
 By:
/s/ Jeffrey D. Symes
 
 
Name:
Jeffrey D. Symes
 
 
Title:
Senior Vice President, Chief Accounting Officer
and Controller


 
FELCOR LODGING LIMITED PARTNERSHIP
 
a Delaware limited partnership
 
 
 
 
By:
FelCor Lodging Trust Incorporated
 
 
Its General Partner
 
 
 
 
 
 
Date:  May 2, 2014
By:
/s/ Jeffrey D. Symes
 
 
Name:
Jeffrey D. Symes
 
 
Title:
Senior Vice President, Chief Accounting Officer
and Controller


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