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EX-32.2 - 2015 Q1 EXHIBIT 32.2 - FelCor Lodging Trust Inca2015q110qexh322.htm
EX-31.3 - 2015 Q1 EXHIBIT 31.3 - FelCor Lodging Trust Inca2015q110qexh313.htm
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EX-32.1 - 2015 Q1 EXHIBIT 32.1 - FelCor Lodging Trust Inca2015q110qexh321.htm
EX-31.2 - 2015 Q1 EXHIBIT 31.2 - FelCor Lodging Trust Inca2015q110qexh312.htm
EX-31.4 - 2015 Q1 EXHIBIT 31.4 - FelCor Lodging Trust Inca2015q110qexh314.htm




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, 2015
 

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
 
o
Yes
þ
No

Note: As a voluntary filer not subject to the filing requirements of Section 13 or 15(d) of the Exchange Act, the registrant has filed all reports pursuant to Section 13 or 15(d) as if the registrant were subject to such filing requirements.



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 24, 2015, FelCor Lodging Trust Incorporated had issued and outstanding 143,276,171 shares of common stock.




EXPLANATORY NOTE

This quarterly report on Form 10-Q for the quarter ended March 31, 2015, 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, 2015 and December 31, 2014 (unaudited)
 
 
Consolidated Statements of Operations – For the Three Months Ended March 31, 2015 and 2014 (unaudited)
 
 
Consolidated Statements of Comprehensive Income (Loss) – For the Three Months Ended March 31, 2015 and 2014 (unaudited)
 
 
Consolidated Statements of Changes in Equity – For the Three Months Ended March 31, 2015 and 2014 (unaudited)
 
 
Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2015 and 2014 (unaudited)
 
FelCor Lodging Limited Partnership:
 
 
 
Consolidated Balance Sheets - March 31, 2015 and December 31, 2014 (unaudited)
 
 
Consolidated Statements of Operations – For the Three Months Ended March 31, 2015 and 2014 (unaudited)
 
 
Consolidated Statements of Comprehensive Income (Loss) – For the Three Months Ended March 31, 2015 and 2014 (unaudited)
 
 
Consolidated Statements of Partners’ Capital – For the Three Months Ended March 31, 2015 and 2014 (unaudited)
 
 
Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2015 and 2014 (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 and Competition
 
 
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,
2015
 
December 31,
2014
Assets
 
 
 
Investment in hotels, net of accumulated depreciation of $861,796 and $850,687 at March 31, 2015 and December 31, 2014, respectively
$
1,714,000

 
$
1,599,791

Hotel development
143,779

 
297,466

Investment in unconsolidated entities
14,633

 
15,095

Hotels held for sale
16,618

 
47,145

Cash and cash equivalents
58,930

 
47,147

Restricted cash
22,172

 
20,496

Accounts receivable, net of allowance for doubtful accounts of $185 and $241 at March 31, 2015 and December 31, 2014, respectively
33,794

 
27,805

Deferred expenses, net of accumulated amortization of $18,802 and $17,111 at March 31, 2015 and December 31, 2014, respectively
24,119

 
25,827

Other assets
21,505

 
23,886

Total assets
$
2,049,550

 
$
2,104,658

Liabilities and Equity
 
 
 
Debt
$
1,543,439

 
$
1,585,867

Distributions payable
13,867

 
13,827

Accrued expenses and other liabilities
138,095

 
135,481

Total liabilities
1,695,401

 
1,735,175

Commitments and contingencies


 


Redeemable noncontrolling interests in FelCor LP, 611 units issued and outstanding at March 31, 2015 and December 31, 2014
7,026

 
6,616

Equity:
 
 
 
 Preferred stock, $0.01 par value, 20,000 shares authorized:
 
 
 
Series A Cumulative Convertible Preferred Stock, 12,879 shares, liquidation value of $321,987, issued and outstanding at March 31, 2015 and December 31, 2014
309,337

 
309,337

Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at March 31, 2015 and December 31, 2014
169,412

 
169,412

Common stock, $0.01 par value, 200,000 shares authorized; 124,872 and 124,605 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively
1,249

 
1,246

Additional paid-in capital
2,354,800

 
2,353,666

Accumulated deficit
(2,538,643
)
 
(2,530,671
)
Total FelCor stockholders’ equity
296,155

 
302,990

Noncontrolling interests in other partnerships
8,278

 
18,435

Preferred equity in consolidated joint venture, liquidation value of $43,371 and $42,094 at March 31, 2015 and December 31, 2014, respectively
42,690

 
41,442

Total equity
347,123

 
362,867

Total liabilities and equity
$
2,049,550

 
$
2,104,658

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, 2015 and 2014
(unaudited, in thousands, except for per share data)
 
Three Months Ended March 31,
 
2015
 
2014
Revenues:
 
 
 
Hotel operating revenue
$
213,285

 
$
221,022

Other revenue
410

 
327

Total revenues
213,695

 
221,349

Expenses:
 
 
 
Hotel departmental expenses
77,656

 
83,523

Other property-related costs
56,895

 
61,578

Management and franchise fees
9,085

 
9,013

Taxes, insurance and lease expense
14,976

 
23,633

Corporate expenses
8,573

 
7,825

Depreciation and amortization
27,772

 
29,601

Other expenses
4,228

 
2,014

Total operating expenses
199,185

 
217,187

Operating income
14,510

 
4,162

Interest expense, net
(19,481
)
 
(25,227
)
Debt extinguishment
(73
)
 
(6
)
Loss before equity in income from unconsolidated entities
(5,044
)
 
(21,071
)
Equity in income from unconsolidated entities
149

 
643

Loss from continuing operations
(4,895
)
 
(20,428
)
Income from discontinued operations
4

 
135

Loss before gain on sale of hotels
(4,891
)
 
(20,293
)
Gain on sale of hotels, net
16,887

 
5,457

Net income (loss)
11,996

 
(14,836
)
Net loss (income) attributable to noncontrolling interests in other partnerships
(4,879
)
 
78

Net loss attributable to redeemable noncontrolling interests in FelCor LP
14

 
121

Preferred distributions - consolidated joint venture
(348
)

(181
)
Net income (loss) attributable to FelCor
6,783

 
(14,818
)
Preferred dividends
(9,678
)
 
(9,678
)
Net loss attributable to FelCor common stockholders
$
(2,895
)
 
$
(24,496
)
Basic and diluted per common share data:
 
 
 
Loss from continuing operations
$
(0.02
)
 
$
(0.20
)
Net loss
$
(0.02
)
 
$
(0.20
)
Basic and diluted weighted average common shares outstanding
124,519

 
124,146













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

2



FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31, 2015 and 2014
(unaudited, in thousands)
 
Three Months Ended
 
March 31,
 
2015
 
2014
Net income (loss)
$
11,996

 
$
(14,836
)
Foreign currency translation adjustment

 
(620
)
Comprehensive income (loss)
11,996

 
(15,456
)
Comprehensive loss (income) attributable to noncontrolling interests in other partnerships
(4,879
)
 
78

Comprehensive loss attributable to redeemable noncontrolling interests in FelCor LP
14

 
124

Preferred distributions - consolidated joint venture
(348
)
 

Comprehensive income (loss) attributable to FelCor
$
6,783

 
$
(15,254
)



























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, 2015 and 2014
(unaudited, in thousands)
 
Preferred Stock
 
Common Stock
 
Additional Paid-in Capital 
 
Accumulated Other Comprehensive Income
 
Accumulated Deficit 
 
Noncontrolling Interests in Other Partnerships
 
Preferred Equity in Consolidated Joint Venture
 
Comprehensive Income (Loss) 
 
Total Equity
 
Number of Shares
 
Amount
 
Number of Shares
 
Amount
 
 
 
 
 
 
 
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

Balance at December 31, 2014
12,947

 
$
478,749

 
124,605

 
$
1,246

 
$
2,353,666

 
$

 
$
(2,530,671
)
 
$
18,435

 
$
41,442

 
 

 
$
362,867

Issuance of stock awards

 

 
267

 
3

 
(3
)
 

 

 

 

 
 

 

Stock awards - amortization

 

 

 

 
1,584

 

 

 

 

 
 

 
1,584

Forfeiture of stock awards

 

 

 

 

 

 
(8
)
 

 

 
 

 
(8
)
Allocation to redeemable noncontrolling interests

 

 

 

 
(447
)
 

 

 

 

 
 

 
(447
)
Contribution from noncontrolling interests

 

 

 

 

 

 

 
790

 

 
 

 
790

Distribution to noncontrolling interests

 

 

 

 

 

 

 
(15,826
)
 

 
 

 
(15,826
)
Dividends declared:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

$0.04 per common share

 

 

 

 

 

 
(5,069
)
 

 

 
 
 
(5,069
)
$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

 

 

 

 

 

 

 

 
(348
)
 
 
 
(348
)
Issuance of preferred equity - consolidated joint venture

 

 

 

 

 

 

 

 
1,248

 
 
 
1,248

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

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

Net income

 

 

 

 

 

 
6,783

 
4,879

 
348

 
12,010

 
 

Comprehensive income
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
$
12,010

 
12,010

Balance at March 31, 2015
12,947

 
$
478,749


124,872

 
$
1,249

 
$
2,354,800

 
$

 
$
(2,538,643
)
 
$
8,278

 
$
42,690

 
 
 
$
347,123

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, 2015 and 2014
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income (loss)
$
11,996

 
$
(14,836
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
27,772

 
29,601

Gain on sale of hotels, net
(16,887
)
 
(5,848
)
Amortization of deferred financing fees and debt discount
1,477

 
2,929

Amortization of fixed stock and directors’ compensation
1,862

 
1,446

Equity in income from unconsolidated entities
(149
)
 
(643
)
Distributions of income from unconsolidated entities
580

 
824

Debt extinguishment
73

 
251

Changes in assets and liabilities:
 
 
 
Accounts receivable
(6,216
)
 
152

Other assets
(225
)
 
(2,572
)
Accrued expenses and other liabilities
(3,438
)
 
11,098

Net cash flow provided by operating activities
16,845

 
22,402

Cash flows from investing activities:
 
 
 
Improvements and additions to hotels
(13,483
)
 
(28,617
)
Hotel development
(10,108
)
 
(23,622
)
Net proceeds from asset sales
91,328

 
39,896

Change in restricted cash – investing
(1,676
)
 
10,180

Insurance proceeds
274

 
255

Distributions from unconsolidated entities
31

 
2,128

Net cash flow provided by investing activities
66,366

 
220

Cash flows from financing activities:
 
 
 
Proceeds from borrowings
36,000

 
81,000

Repayment of borrowings
(78,428
)
 
(105,353
)
Payment of deferred financing fees
(81
)
 
(5
)
Distributions paid to noncontrolling interests
(15,826
)
 
(587
)
Contributions from noncontrolling interests
790

 
1,568

Distributions paid to FelCor LP limited partners
(23
)
 
(7
)
Distributions paid to preferred stockholders
(9,678
)
 
(9,678
)
Preferred distributions - consolidated joint venture
(345
)
 
(65
)
Distributions paid to common stockholders
(5,034
)
 
(2,484
)
Net proceeds from issuance of preferred equity - consolidated joint venture
1,248

 
40,909

Net cash flow provided by (used in) financing activities
(71,377
)
 
5,298

Effect of exchange rate changes on cash
(51
)
 
(39
)
Net change in cash and cash equivalents
11,783

 
27,881

Cash and cash equivalents at beginning of periods
47,147

 
45,645

Cash and cash equivalents at end of periods
$
58,930

 
$
73,526

Supplemental cash flow information – interest paid, net of capitalized interest
$
16,244

 
$
14,511








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,
 
2015
 
2014
Assets
 
 
 
Investment in hotels, net of accumulated depreciation of $861,796 and $850,687 at March 31, 2015 and December 31, 2014, respectively
$
1,714,000

 
$
1,599,791

Hotel development
143,779

 
297,466

Investment in unconsolidated entities
14,633

 
15,095

Hotels held for sale
16,618

 
47,145

Cash and cash equivalents
58,930

 
47,147

Restricted cash
22,172

 
20,496

Accounts receivable, net of allowance for doubtful accounts of $185 and $241 at March 31, 2015 and December 31, 2014, respectively
33,794

 
27,805

Deferred expenses, net of accumulated amortization of $18,802 and $17,111 at March 31, 2015 and December 31, 2014, respectively
24,119

 
25,827

Other assets
21,505

 
23,886

Total assets
$
2,049,550

 
$
2,104,658

Liabilities and Partners’ Capital
 
 
 
Debt
$
1,543,439

 
$
1,585,867

Distributions payable
13,867

 
13,827

Accrued expenses and other liabilities
138,095

 
135,481

Total liabilities
1,695,401

 
1,735,175

Commitments and contingencies


 


Redeemable units, 611 units issued and outstanding at March 31, 2015 and December 31, 2014, respectively
7,026

 
6,616

Capital:
 
 
 
Preferred units:
 
 
 
Series A Cumulative Convertible Preferred Units, 12,879 units issued and outstanding at March 31, 2015 and December 31, 2014
309,337

 
309,337

Series C Cumulative Redeemable Preferred Units, 68 units issued and outstanding at March 31, 2015 and December 31, 2014
169,412

 
169,412

Common units, 124,872 and 124,605 units issued and outstanding at March 31, 2015 and December 31, 2014, respectively
(182,594
)
 
(175,759
)
Total FelCor LP partners’ capital
296,155

 
302,990

Noncontrolling interests
8,278

 
18,435

Preferred capital in consolidated joint venture
42,690

 
41,442

Total partners’ capital
347,123

 
362,867

Total liabilities and partners’ capital
$
2,049,550

 
$
2,104,658



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, 2015 and 2014
(unaudited, in thousands, except for per unit data)

 
Three Months Ended
 
March 31,
 
2015
 
2014
Revenues:
 
 
 
Hotel operating revenue
$
213,285

 
$
221,022

Other revenue
410

 
327

Total revenues
213,695

 
221,349

Expenses:
 
 
 
Hotel departmental expenses
77,656

 
83,523

Other property-related costs
56,895

 
61,578

Management and franchise fees
9,085

 
9,013

Taxes, insurance and lease expense
14,976

 
23,633

Corporate expenses
8,573

 
7,825

Depreciation and amortization
27,772

 
29,601

Other expenses
4,228

 
2,014

Total operating expenses
199,185

 
217,187

Operating income
14,510

 
4,162

Interest expense, net
(19,481
)
 
(25,227
)
Debt extinguishment
(73
)
 
(6
)
Loss before equity in income from unconsolidated entities
(5,044
)
 
(21,071
)
Equity in income from unconsolidated entities
149

 
643

Loss from continuing operations
(4,895
)
 
(20,428
)
Income from discontinued operations
4

 
135

Loss before gain on sale of hotels
(4,891
)
 
(20,293
)
Gain on sale of hotels, net
16,887

 
5,457

Net income (loss)
11,996

 
(14,836
)
Net loss (income) attributable to noncontrolling interests
(4,879
)
 
78

Preferred distributions - consolidated joint venture
(348
)
 
(181
)
Net income (loss) attributable to FelCor LP
6,769

 
(14,939
)
Preferred distributions
(9,678
)
 
(9,678
)
Net loss attributable to FelCor LP common unitholders
$
(2,909
)
 
$
(24,617
)
Basic and diluted per common unit data:
 
 
 
Loss from continuing operations
$
(0.02
)
 
$
(0.20
)
Net loss
$
(0.02
)
 
$
(0.20
)
Basic and diluted weighted average common units outstanding
125,130

 
124,764











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

7



FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31, 2015 and 2014
(unaudited, in thousands)
 
Three Months Ended
 
March 31,
 
2015
 
2014
Net income (loss)
$
11,996

 
$
(14,836
)
Foreign currency translation adjustment

 
(620
)
Comprehensive income (loss)
11,996

 
(15,456
)
Comprehensive loss (income) attributable to noncontrolling interests
(4,879
)
 
78

Preferred distributions - consolidated joint venture
(348
)
 

Comprehensive income (loss) attributable to FelCor LP
$
6,769

 
$
(15,378
)




























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, 2015 and 2014
(unaudited, in thousands)
 
Preferred Units
 
Common Units
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interests
 
Preferred Capital in Consolidated Joint Venture
 
Comprehensive Income (Loss)
 
Total Partners’ Capital
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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
$
478,749

 
$
(175,759
)
 
$

 
$
18,435

 
$
41,442

 
 
 
$
362,867

FelCor restricted stock compensation

 
1,576

 

 

 

 
 
 
1,576

Contributions

 

 

 
790

 

 
 
 
790

Distributions

 
(14,770
)
 

 
(15,826
)
 
(348
)
 
 
 
(30,944
)
Allocation to redeemable units

 
(410
)
 

 

 

 
 
 
(410
)
Issuance of preferred capital - consolidated joint venture

 

 

 

 
1,248

 
 
 
1,248

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income


 
6,769

 


 
4,879

 
348

 
11,996

 
 
Comprehensive income


 


 


 


 
 
 
$
11,996

 
11,996

Balance at March 31, 2015
$
478,749

 
$
(182,594
)
 
$

 
$
8,278

 
$
42,690

 
 
 
$
347,123






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, 2015 and 2014
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income (loss)
$
11,996

 
$
(14,836
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
27,772

 
29,601

Gain on sale of hotels, net
(16,887
)
 
(5,848
)
Amortization of deferred financing fees and debt discount
1,477

 
2,929

Amortization of fixed stock and directors’ compensation
1,862

 
1,446

Equity in income from unconsolidated entities
(149
)
 
(643
)
Distributions of income from unconsolidated entities
580

 
824

Debt extinguishment
73

 
251

Changes in assets and liabilities:
 
 
 
Accounts receivable
(6,216
)
 
152

Other assets
(225
)
 
(2,572
)
Accrued expenses and other liabilities
(3,438
)
 
11,098

Net cash flow provided by operating activities
16,845

 
22,402

 Cash flows from investing activities:
 
 
 
Improvements and additions to hotels
(13,483
)
 
(28,617
)
Hotel development
(10,108
)
 
(23,622
)
Net proceeds from asset sales
91,328

 
39,896

Change in restricted cash – investing
(1,676
)
 
10,180

Insurance proceeds
274

 
255

Distributions from unconsolidated entities
31

 
2,128

Net cash flow provided by investing activities
66,366

 
220

 Cash flows from financing activities:
 
 
 
Proceeds from borrowings
36,000

 
81,000

Repayment of borrowings
(78,428
)
 
(105,353
)
Payment of deferred financing fees
(81
)
 
(5
)
Distributions paid to noncontrolling interests
(15,826
)
 
(587
)
Contributions from noncontrolling interests
790

 
1,568

Distributions paid to FelCor LP limited partners
(23
)
 
(7
)
Distributions paid to preferred unitholders
(9,678
)
 
(9,678
)
Preferred distributions - consolidated joint venture
(345
)
 
(65
)
Distributions paid to common unitholders
(5,034
)
 
(2,484
)
Net proceeds from issuance of preferred capital - consolidated joint venture
1,248

 
40,909

Net cash flow provided by (used in) financing activities
(71,377
)
 
5,298

 Effect of exchange rate changes on cash
(51
)
 
(39
)
 Net change in cash and cash equivalents
11,783

 
27,881

 Cash and cash equivalents at beginning of periods
47,147

 
45,645

 Cash and cash equivalents at end of periods
$
58,930

 
$
73,526

 Supplemental cash flow information – interest paid, net of capitalized interest
$
16,244

 
$
14,511







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 46 hotels as of March 31, 2015, one of which was held for sale. At March 31, 2015, we had an aggregate of 125,483,273 shares and units outstanding, consisting of 124,871,811 shares of FelCor common stock and 611,462 FelCor LP units not owned by FelCor.
Of the 45 hotels not held for sale as of March 31, 2015, we owned a 100% interest in 41 hotels, a 95% interest in one hotel (The Knickerbocker) and 50% interests in entities owning three hotels. The Knickerbocker opened in February 2015 and, based on its partial completion as of March 31, 2015, $172 million of this development was reclassified to investment in hotels. We consolidate our real estate interests in the 42 hotels in which we held majority interests, and we record the real estate interests of the three hotels in which we held 50% interests using the equity method. We lease 44 of the 45 hotels to our taxable REIT subsidiaries, of which we own a controlling interest. We operate one 50% owned hotel without a lease. Because we own controlling interests in these lessees, we consolidate our interests in these 44 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 own 50% of the real estate interests in each of two hotels (we account for the ownership in our real estate interests of these hotels by the equity method) and majority real estate interests in the remaining 42 hotels (we consolidate our real estate interest in these hotels).
The following table illustrates the distribution of our 44 Consolidated Hotels at March 31, 2015:
Brand
 
Hotels
 
Rooms
 Embassy Suites Hotels® 
 
21

 
 
5,778

 Wyndham® and Wyndham Grand®
 
8

 
 
2,528

 Marriott® and Renaissance® 
 
3

 
 
1,321

 Holiday Inn® 
 
3

 
 
1,256

 DoubleTree by Hilton® and Hilton® 
 
3

 
 
802

 Sheraton®
 
2

 
 
673

 Fairmont® 
 
1

 
 
383

 The Knickerbocker
 
1

 
 
330

 Morgans and Royalton
 
2

 
 
285

  Total
 
44

 
 
13,356

At March 31, 2015, our Consolidated Hotels were located in 17 states, with concentrations in California (11 hotels), Florida (seven hotels) and Texas (four hotels). Approximately 65% of our revenue was generated from hotels in these three states during the first three months of 2015.
At March 31, 2015, of our 44 Consolidated Hotels: (i) subsidiaries of Hilton Hotels Corporation, or Hilton, managed 23 hotels, (ii) subsidiaries of Wyndham Hotel Group, or Wyndham, managed eight hotels, (iii) subsidiaries of Marriott International Inc., or Marriott, managed three hotels, (iv) subsidiaries of InterContinental Hotels Group, or IHG, managed three hotels, (v) subsidiaries of Starwood Hotels & Resorts Worldwide Inc., or Starwood, managed two hotels, (vi) a subsidiary of Fairmont Hotels and Resorts, or Fairmont, managed one hotel, (vii) a subsidiary of Highgate Hotels, or Highgate, managed one hotel, (viii) a subsidiary of Morgans Hotel Group Corporation managed two hotels, and (ix) 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)
The information in our consolidated financial statements for the three months ended March 31, 2015 and 2014 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, 2015 and 2014, include adjustments based on management’s estimates (consisting of normal and recurring accruals), which we consider necessary for a fair statement 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, 2014, included in our Annual Report on Form 10-K. Operating results for the three months ended March 31, 2015 are not necessarily indicative of actual operating results for the entire year.

2.
Investment in Unconsolidated Entities
At March 31, 2015 and December 31, 2014, we owned 50% interests in joint ventures that owned three 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,
 
2015
 
2014
Investment in hotels and other properties, net of accumulated depreciation
$
29,489

 
 
$
30,288

 
Total assets
$
43,440

 
 
$
45,374

 
Debt
$
33,902

 
 
$
34,192

 
Total liabilities
$
35,710

 
 
$
36,974

 
Equity
$
7,730

 
 
$
8,400

 
Our unconsolidated entities’ debt at March 31, 2015 and December 31, 2014 consisted entirely of non-recourse mortgage debt.

12



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.    Investment in Unconsolidated Entities -- (continued)

The following table (which reflects decreases attributable to the unwinding of our 10-hotel unconsolidated joint ventures in July 2014) sets forth summarized combined statement of operations information for our unconsolidated entities (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
Total revenues
$
6,569

 
$
14,617

Net income
$
551

 
$
2,216

 
 
 
 
Net income attributable to FelCor
$
276

 
$
1,108

Depreciation of cost in excess of book value
(127
)
 
(465
)
Equity in income from unconsolidated entities
$
149

 
$
643


The following table summarizes the components of our investment in unconsolidated entities (in thousands):
 
March 31,
 
December 31,
 
2015
 
2014
Hotel-related investments
$
(3,000
)
 
 
$
(3,265
)
 
Cost in excess of book value of hotel investments
10,768

 
 
10,895

 
Land and condominium investments
6,865

 
 
7,465

 
Investment in unconsolidated entities
$
14,633

 
 
$
15,095

 
The following table summarizes the components of our equity in income from unconsolidated entities (in thousands):
 
Three Months Ended
 
March 31,
 
2015
 
2014
Hotel investments
$
748

 
$
1,272

Other investments
(599
)
 
(629
)
Equity in income from unconsolidated entities
$
149

 
$
643



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
 
2015
 
2014
Line of credit
8

 
 
LIBOR + 3.375
 
June 2016(a)
 
$
84,500

 
$
111,500

Term loan
3

 
 
LIBOR + 2.50
 
July 2017(b)
 
140,000

 
140,000

Mortgage debt
3

 
 
LIBOR + 3.00
 
March 2017
 
49,067

 
51,008

Mortgage debt(c)
4

 
 
4.95

 
 
October 2022
 
123,914

 
124,278

Mortgage debt
1

 
 
4.94

 
 
October 2022
 
31,097

 
31,228

Senior secured notes
6

 
 
6.75

 
 
June 2019
 
525,000

 
525,000

Senior secured notes
9

 
 
5.625

 
 
March 2023
 
525,000

 
525,000

The Knickerbocker loan(d)
 
 
 
 
 
 
 
 
 
 
 
Construction tranche
1

 
 
LIBOR + 4.00
 
May 2016
 
58,562

 
58,562

Cash collateralized tranche

 
 
LIBOR + 1.25
 
May 2016
 
6,299

 
6,299

Retired debt

 
 

 
 
 

 
12,992

Total
35

 
 
 
 
 
 
 
$
1,543,439

 
$
1,585,867

(a)
Our $225 million line of credit can be extended for one year (to 2017), subject to satisfying certain conditions.
(b)
This debt can be extended up to two years, subject to satisfying certain conditions.
(c)
This debt is comprised of separate non-cross-collateralized loans each secured by a mortgage of a different hotel.
(d)
This construction loan (total capacity of $85.0 million) was obtained to finance the redevelopment of The Knickerbocker and can be extended for one year, subject to satisfying certain conditions.
In February 2015, we repaid $13.0 million of secured loan debt, scheduled to mature in March 2017, when we sold a hotel.

We reported $19.5 million and $25.2 million of interest expense for the three months ended March 31, 2015 and 2014, respectively, which is net of: (i) interest income of $5,000 and $15,000 and (ii) capitalized interest of $3.5 million and $4.0 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,
 
2015
 
2014
Room revenue
$
162,306

 
$
169,829

Food and beverage revenue
39,844

 
39,785

Other operating departments
11,135

 
11,408

Total hotel operating revenue
$
213,285

 
$
221,022

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,
 
2015
 
2014
 
Amount
 
% of Total Hotel Operating Revenue
 
Amount
 
% of Total Hotel Operating Revenue
Room
$
42,511

 
19.9
%
 
 
$
46,733

 
21.1
%
 
Food and beverage
30,696

 
14.4

 
 
31,187

 
14.1

 
Other operating departments
4,449

 
2.1

 
 
5,603

 
2.6

 
Total hotel departmental expenses
$
77,656

 
36.4
%
 
 
$
83,523

 
37.8
%
 
Other property-related costs from continuing operations were comprised of the following amounts (in thousands):
 
 
Three Months Ended March 31,
 
2015
 
2014
 
Amount
 
% of Total Hotel Operating Revenue
 
Amount
 
% of Total Hotel Operating Revenue
Hotel general and administrative expense
$
19,363

 
9.1
%
 
 
$
19,834

 
9.0
%
 
Marketing
19,303

 
9.1

 
 
20,071

 
9.1

 
Repair and maintenance
10,350

 
4.9

 
 
11,687

 
5.3

 
Utilities
7,879

 
3.6

 
 
9,986

 
4.5

 
Total other property-related costs
$
56,895

 
26.7
%
 
 
$
61,578

 
27.9
%
 

15



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In connection with Wyndham’s guaranty of achieving a minimum level of annual net operating income, we have recorded $411,000 and $136,000 for the pro rata portion of the projected full-year guaranty for the three months ended March 31, 2015 and 2014, respectively. These amounts are recorded, to the extent available, as a reduction of Wyndham's contractual management and other fees. Any amounts in excess of those fees will be recorded as revenue when earned.

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,
 
2015
 
2014
Hotel lease expense(a) 
$
2,104

 
$
10,391

Land lease expense(b) 
3,059

 
2,462

Real estate and other taxes
7,860

 
8,109

Property insurance, general liability insurance and other
1,953

 
2,671

  Total taxes, insurance and lease expense
$
14,976

 
$
23,633


(a)
Hotel lease expense is recorded by the consolidated operating lessees of 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 $936,000 and $4.9 million for the three months ended March 31, 2015 and 2014, respectively, and reflects a decrease attributable to the unwinding of our 10-hotel unconsolidated joint ventures in July 2014.

(b)
Land lease expense includes percentage rent of $1.5 million and $1.0 million for the three months ended March 31, 2015 and 2014, respectively.


16



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.
Hotel Dispositions
Effective January 1, 2014, we 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 2015, we sold three hotels and had one hotel held for sale at March 31, 2015. In 2014, we sold one hotel not previously held for sale during the three months ended March 31, 2014 and had one hotel held for sale at March 31, 2014. 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. We included operations for the sold hotels, and those hotels designated as held for sale, in income (loss) from continuing operations as shown in the statements of operations for the three months ended March 31, 2015 and 2014, as disposition of these hotels does not represent a strategic shift in our business.

The following table includes condensed financial information primarily related to 12 of 13 hotels sold in 2014, three hotels sold during the three months ended March 31, 2015, and one hotel held for sale at March 31, 2015 (in thousands):
 
Three Months Ended
 
March 31,
 
2015
 
2014
Hotel operating revenue
$
7,205

 
 
$
40,277

Operating expenses
(5,594
)
 
 
(39,817
)
Operating income
1,611

 
 
460

Interest expense, net
(160
)
 
 
(665
)
Debt extinguishment
(73
)
 
 

Equity in income (loss) from unconsolidated entities
(15
)
 
 
490

Income from continuing operations
1,363

 
 
285

Gain on sale of hotels, net
16,887

 
 
5,457

Net income
18,250

 
 
5,742

Net income attributable to noncontrolling interests in other partnerships
(5,253
)
 
 
(129
)
Net income attributable to redeemable noncontrolling interests in FelCor LP
(62
)
 
 
(28
)
Net income attributable to FelCor
$
12,935

 
 
$
5,585




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,
 
2015
 
2014
Numerator:
 
 
 
Net income (loss) attributable to FelCor
$
6,783

 
$
(14,818
)
Discontinued operations attributable to FelCor
(4
)
 
(134
)
Income (loss) from continuing operations attributable to FelCor
6,779

 
(14,952
)
Less: Preferred dividends
(9,678
)
 
(9,678
)
Less: Dividends declared on unvested restricted stock
(13
)
 

Numerator for continuing operations attributable to FelCor common stockholders
(2,912
)
 
(24,630
)
Discontinued operations attributable to FelCor
4

 
134

Numerator for basic and diluted loss attributable to FelCor common stockholders
$
(2,908
)
 
$
(24,496
)
Denominator:
 
 
 
Denominator for basic and diluted loss per share
124,519

 
124,146

Basic and diluted loss per share data:
 
 
 
Loss from continuing operations
$
(0.02
)
 
$
(0.20
)
Discontinued operations
$

 
$

Net loss
$
(0.02
)
 
$
(0.20
)


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,
 
2015
 
2014
Numerator:
 
 
 
Net income (loss) attributable to FelCor LP
$
6,769

 
$
(14,939
)
Discontinued operations attributable to FelCor LP
(4
)
 
(135
)
Income (loss) from continuing operations attributable to FelCor LP
6,765

 
(15,074
)
Less: Preferred distributions
(9,678
)
 
(9,678
)
Less: Distributions declared on FelCor unvested restricted stock
(13
)
 

Numerator for continuing operations attributable to FelCor LP common unitholders
(2,926
)
 
(24,752
)
Discontinued operations attributable to FelCor LP
4

 
135

Numerator for basic and diluted loss attributable to FelCor common unitholders
$
(2,922
)
 
$
(24,617
)
Denominator:
 
 
 
Denominator for basic and diluted loss per unit
125,130

 
124,764

Basic and diluted loss per unit data:
 
 
 
Loss from continuing operations
$
(0.02
)
 
$
(0.20
)
Discontinued operations
$

 
$

Net loss
$
(0.02
)
 
$
(0.20
)
The income (loss) from continuing operations attributable to FelCor/FelCor LP share/unit calculations includes the gain on sale of hotels 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,
 
2015
 
2014
Series A convertible preferred shares/units
9,984

 
 
9,985

FelCor restricted stock units
1,194

 
 
850


19



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.
Loss Per Share/Unit — (continued)

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, 2015 and 2014.

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.

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, 2015 and December 31, 2014. 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 $1.1 billion at March 31, 2015 and December 31, 2014; 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 $505.0 million and $548.2 million at March 31, 2015 and December 31, 2014, respectively. The estimated fair value of all our debt was $1.6 billion at March 31, 2015 and December 31, 2014. The carrying value of our debt was $1.5 billion and $1.6 billion at March 31, 2015 and December 31, 2014, 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.



20



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.
Redeemable Noncontrolling Interests in FelCor LP / Redeemable Units — (continued)
At March 31, 2015, we had 611,462 limited partnership units outstanding carried at $7.0 million. The value of these outstanding units is based on the closing price of FelCor’s common stock at March 31, 2015 ($11.49 per share).

Changes in redeemable noncontrolling interests (or redeemable units) for the three months ended March 31, 2015 and 2014 are shown below (in thousands):
 
Three Months Ended
 
March 31,
 
2015
 
2014
Balance at beginning of period
$
6,616

 
 
$
5,039

 
Redemption value allocation
447

 
 
679

 
Distributions paid to unitholders
(23
)
 
 
(11
)
 
Comprehensive loss:
 
 
 
 
 
Foreign exchange translation

 
 
(3
)
 
Net loss
(14
)
 
 
(121
)
 
Balance at end of period
$
7,026

 
 
$
5,583

 
10.    Consolidated Joint Venture Preferred Equity/Capital
Our joint venture that is redeveloping The Knickerbocker raised $45 million through the sale of 3.5% preferred equity/capital under the EB-5 immigrant investor program. The purchasers receive a 3.25% current annual return, plus a 0.25% non-compounding annual return paid at redemption. Our joint venture may, at its option, redeem this equity interest. If it is not redeemed within five years, the current annual return increases to 8%. The venture received $42.0 million in gross proceeds ($41.4 million net of issuance costs) during the year ended 2014 and $1.3 million during the three months ended March 31, 2015. The remaining $1.7 million will be received as investors’ visas are approved. We used our 95% share of the proceeds to repay borrowings under our line of credit.
11.    Contingency

One of our consolidated subsidiaries is currently engaged in a commercial dispute with a third party. Under generally accepted accounting principles, we recorded $5.9 million in other expenses during the third quarter of 2014 to establish a provision for our current estimate of our maximum exposure for this contingency. While we paid the contingent fees to the third party in January 2015, we will continue asserting our rights under the contract. We believe these negotiations, when complete, will result in a substantial recovery of this amount, which will be recorded when realized. Because negotiations are ongoing, the outcome of those negotiations and the net amount for which our subsidiary will ultimately be liable are uncertain.

12.    Subsequent Events
    
In April 2015, FelCor sold 18.4 million shares of its common stock at $11.25 per share in a public
offering. The net proceeds from the offering were $199 million and were contributed to FelCor LP in exchange for a like number of common units. Net proceeds from this offering are being used to redeem $170 million of our 8% Series C Cumulative Redeemable preferred stock (units) in May 2015.


21



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.    Recently Issued Accounting Standards

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2017, and early adoption is not permitted. We are in the process of evaluating the impact the adoption of ASU 2014-09 will have on the our financial position or results of operations.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. Under ASU 2015-03, debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. ASU 2015-03 is effective for the first interim period within annual reporting periods beginning after December 15, 2015, and early adoption is permitted. We are in the process of evaluating what impact the adoption of ASU 2015-03 will have on our financial position or results of operations.



14.
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 (i) 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, if, in each case, as a result of such sale or disposition, such Subsidiary Guarantor ceases to be a subsidiary of FelCor LP, (ii) 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, (iii) a legal defeasance or covenant defeasance of the indenture, (iv) the unconditional and complete release of such Subsidiary Guarantor in accordance with the modification and waiver provisions of the indenture, or (v) the designation of a restricted subsidiary that is a Subsidiary Guarantor as an unrestricted subsidiary under and in compliance with the indenture.

22



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14.
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, 2015
(in thousands)

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

 
$
900,920

 
$
813,080

 
$

 
$
1,714,000

Hotel development

 

 
143,779

 

 
143,779

Equity investment in consolidated entities
1,345,992

 

 

 
(1,345,992
)
 

Investment in unconsolidated entities
7,007

 
6,327

 
1,299

 

 
14,633

Hotel held for sale

 

 
16,618

 

 
16,618

Cash and cash equivalents
19,810

 
37,608

 
1,512

 

 
58,930

Restricted cash

 
12,678

 
9,494

 

 
22,172

Accounts receivable, net
446

 
32,969

 
379

 

 
33,794

Deferred expenses, net
16,575

 

 
7,544

 

 
24,119

Other assets
3,510

 
12,041

 
5,954

 

 
21,505

 
 
 
 
 
 
 
 
 
 
Total assets
$
1,393,340

 
$
1,002,543

 
$
999,659

 
$
(1,345,992
)
 
$
2,049,550

 
 
 
 
 
 
 
 
 
 
Debt
$
1,050,000

 
$

 
$
534,226

 
$
(40,787
)
 
$
1,543,439

Distributions payable
13,746

 

 
121

 

 
13,867

Accrued expenses and other liabilities
26,413

 
93,329

 
18,353

 

 
138,095

 
 
 
 
 
 
 
 
 
 
Total liabilities
1,090,159

 
93,329

 
552,700

 
(40,787
)
 
1,695,401

 
 
 
 
 
 
 
 
 
 
Redeemable units, at redemption value
7,026

 

 

 

 
7,026

 
 
 
 
 
 
 
 
 
 
Preferred units
478,749

 

 

 

 
478,749

Common units
(182,594
)
 
909,696

 
395,509

 
(1,305,205
)
 
(182,594
)
Total FelCor LP partners’ capital
296,155

 
909,696

 
395,509

 
(1,305,205
)
 
296,155

Noncontrolling interests

 
(482
)
 
8,760

 

 
8,278

Preferred capital in consolidated joint venture

 

 
42,690

 

 
42,690

Total partners’ capital
296,155

 
909,214

 
446,959

 
(1,305,205
)
 
347,123

Total liabilities and partners’ capital
$
1,393,340

 
$
1,002,543

 
$
999,659

 
$
(1,345,992
)
 
$
2,049,550


23



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

FELCOR LODGING LIMITED PARTNERSHIP

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

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

 
$
908,796

 
$
690,995

 
$

 
$
1,599,791

Hotel development

 

 
297,466

 

 
297,466

Equity investment in consolidated entities
1,364,470

 

 

 
(1,364,470
)
 

Investment in unconsolidated entities
7,270

 
6,514

 
1,311

 

 
15,095

Hotels held for sale

 

 
47,145

 

 
47,145

Cash and cash equivalents
5,717

 
32,923

 
8,507

 

 
47,147

Restricted cash

 
12,199

 
8,297

 

 
20,496

Accounts receivable, net
963

 
26,343

 
499

 

 
27,805

Deferred expenses, net
17,203

 

 
8,624

 

 
25,827

Other assets
4,866

 
11,558

 
7,462

 

 
23,886

Total assets
$
1,400,489

 
$
998,333

 
$
1,070,306

 
$
(1,364,470
)
 
$
2,104,658

 
 
 
 
 
 
 
 
 
 
Debt
$
1,050,000

 
$

 
$
576,654

 
$
(40,787
)
 
$
1,585,867

Distributions payable
13,709

 

 
118

 

 
13,827

Accrued expenses and other liabilities
27,174

 
94,190

 
14,117

 

 
135,481

 
 
 
 
 
 
 
 
 
 
Total liabilities
1,090,883

 
94,190

 
590,889

 
(40,787
)
 
1,735,175

 
 
 
 
 
 
 
 
 
 
Redeemable units, at redemption value
6,616

 

 

 

 
6,616

 
 
 
 
 
 
 
 
 
 
Preferred units
478,749

 

 

 

 
478,749

Common units
(175,759
)
 
904,296

 
419,387

 
(1,323,683
)
 
(175,759
)
Total FelCor LP partners’ capital
302,990

 
904,296

 
419,387

 
(1,323,683
)
 
302,990

Noncontrolling interests

 
(153
)
 
18,588

 

 
18,435

Preferred capital in consolidated joint venture

 

 
41,442

 

 
41,442

Total partners’ capital
302,990

 
904,143

 
479,417

 
(1,323,683
)
 
362,867

Total liabilities and partners’ capital
$
1,400,489

 
$
998,333

 
$
1,070,306

 
$
(1,364,470
)
 
$
2,104,658



24



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.    FelCor LP’s Consolidating Financial Information – (continued)
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2015
(in thousands)
 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
Hotel operating revenue
$

 
$
213,285

 
$

 
$

 
$
213,285

Percentage lease revenue

 

 
35,615

 
(35,615
)
 

Other revenue
1

 
348

 
61

 

 
410

Total revenues
1

 
213,633

 
35,676

 
(35,615
)
 
213,695

 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
Hotel operating expenses

 
143,636

 

 

 
143,636

Taxes, insurance and lease expense
(153
)
 
46,421

 
4,323

 
(35,615
)
 
14,976

Corporate expenses
138

 
4,901

 
3,534

 

 
8,573

Depreciation and amortization
41

 
15,985

 
11,746

 

 
27,772

Other expenses

 
4,045

 
183

 

 
4,228

Total operating expenses
26

 
214,988

 
19,786

 
(35,615
)
 
199,185

Operating income
(25
)
 
(1,355
)
 
15,890

 

 
14,510

Interest expense, net
(13,740
)
 
3

 
(5,744
)
 

 
(19,481
)
Debt extinguishment

 

 
(73
)
 

 
(73
)
Loss before equity in income from unconsolidated entities
(13,765
)
 
(1,352
)
 
10,073

 

 
(5,044
)
Equity in income from consolidated entities
20,359

 

 

 
(20,359
)
 

Equity in income from unconsolidated entities
346

 
(186
)
 
(11
)
 

 
149

Loss from continuing operations
6,940

 
(1,538
)
 
10,062

 
(20,359
)
 
(4,895
)
Income from discontinued operations

 
4

 

 

 
4

Loss before gain on sale of hotels
6,940

 
(1,534
)
 
10,062

 
(20,359
)
 
(4,891
)
Gain on sale of hotels, net
(171
)
 
(10
)
 
17,068

 

 
16,887

Net income
6,769

 
(1,544
)
 
27,130

 
(20,359
)
 
11,996

Income attributable to noncontrolling interests

 
258

 
(5,137
)
 

 
(4,879
)
Preferred distributions - consolidated joint venture

 

 
(348
)
 

 
(348
)
Net income attributable to FelCor LP
6,769

 
(1,286
)
 
21,645

 
(20,359
)
 
6,769

Preferred distributions
(9,678
)
 

 

 

 
(9,678
)
Net loss attributable to FelCor LP common unitholders
$
(2,909
)
 
$
(1,286
)
 
$
21,645

 
$
(20,359
)
 
$
(2,909
)

 
 

25



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14.    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 hotels
(14,530
)
 
(3,775
)
 
3,335

 
(5,323
)
 
(20,293
)
Gain on sale of hotels, 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
)

26



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14.    FelCor LP’s Consolidating Financial Information – (continued)
 
 
FELCOR LODGING LIMITED PARTNERSHIP

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2015
(in thousands)
 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Net income
$
6,769

 
$
(1,544
)
 
$
27,130

 
$
(20,359
)
 
$
11,996

Foreign currency translation adjustment

 

 

 

 

Comprehensive income
6,769

 
(1,544
)
 
27,130

 
(20,359
)
 
11,996

Comprehensive income attributable to noncontrolling interests

 
258

 
(5,137
)
 

 
(4,879
)
Preferred distributions - consolidated joint venture

 

 
(348
)
 

 
(348
)
Comprehensive income attributable to FelCor LP
$
6,769

 
$
(1,286
)
 
$
21,645

 
$
(20,359
)
 
$
6,769



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
)


27



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.    FelCor LP’s Consolidating Financial Information – (continued)
FELCOR LODGING LIMITED PARTNERSHIP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2015
(in thousands)
 
FelCor LP
 
Subsidiary Guarantors
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
$
(13,298
)
 
$
8,211

 
$
21,932

 
$

 
$
16,845

Investing activities:
 
 
 
 
 
 
 
 
 
Improvements and additions to hotels
(473
)
 
(8,314
)
 
(4,696
)
 

 
(13,483
)
Hotel development

 

 
(10,108
)
 

 
(10,108
)
Net proceeds from asset sales
(98
)
 
10

 
91,416

 

 
91,328

Insurance proceeds
274

 

 

 

 
274

Change in restricted cash - investing

 
(479
)
 
(1,197
)
 

 
(1,676
)
Distributions from unconsolidated entities
31

 

 

 

 
31

Intercompany financing
42,392

 

 

 
(42,392
)
 

Cash flows from investing activities
42,126

 
(8,783
)
 
75,415

 
(42,392
)
 
66,366

Financing activities:
 
 
 
 
 
 
 
 
 
Proceeds from borrowings

 

 
36,000

 

 
36,000

Repayment of borrowings

 

 
(78,428
)
 

 
(78,428
)
Payment of deferred financing fees

 

 
(81
)
 

 
(81
)
Distributions paid to noncontrolling interests

 
(81
)
 
(15,745
)
 

 
(15,826
)
Contributions from noncontrolling interests

 
10

 
780

 

 
790

Distributions paid to preferred unitholders
(9,678
)
 

 

 

 
(9,678
)
Distributions paid to common unitholders
(5,034
)
 

 

 

 
(5,034
)
Net proceeds from issuance of preferred capital - consolidated joint venture

 

 
1,248

 

 
1,248

Intercompany financing

 
5,379

 
(47,771
)
 
42,392

 

Other
(23
)
 

 
(345
)
 

 
(368
)
Cash flows from financing activities
(14,735
)
 
5,308

 
(104,342
)
 
42,392

 
(71,377
)
Effect of exchange rate changes on cash

 
(51
)
 

 

 
(51
)
Change in cash and cash equivalents
14,093

 
4,685

 
(6,995
)
 

 
11,783

Cash and cash equivalents at beginning of period
5,717

 
32,923

 
8,507

 

 
47,147

Cash and cash equivalents at end of period
$
19,810

 
$
37,608

 
$
1,512

 
$

 
$
58,930


28



FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14.    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 sales
(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



29


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

General
Revenue per available room, or RevPAR, for our 39 core hotels (same-store hotels, which excludes The Knickerbocker, without four non-strategic hotels) increased 13.5% in the first quarter of 2015 compared to the same period last year. Same-store hotels’ (39 hotels plus four non-strategic hotels) RevPAR grew 13.1% in the first quarter of 2015 compared to the same period last year, driven by a 6.5% increase in average daily rate, or ADR, and a 6.2% increase in occupancy.
The Knickerbocker, located in the heart of Times Square on the corner of 42nd Street and Broadway in New York City, opened on February 12, 2015. The newly redeveloped hotel boasts 330 spacious guest rooms, including 31 suites, a state-of-the-art fitness center, a 2,200 square-foot event space, upscale food and dining options, and a spectacular 7,500 square-foot rooftop bar and terrace with unrivaled views of New York City’s skyline. The 4+ star luxury property is a member of The Leading Hotels of the World.

During the first quarter, we sold three non-strategic hotels. We have five non-strategic hotels remaining to be sold, of which we have agreed to sell four for total gross proceeds of $104 million (we hold a non-refundable deposit for two of these hotels, one of which was received prior to March 31, 2015). We are currently marketing the remaining hotel.

On April 14, 2015, we sold 18.4 million shares of our common stock for net proceeds (after deducting underwriting discounts and commissions and expenses) of approximately $199 million.

On April 14, 2015, we called for redemption of all of our outstanding shares of 8% Series C Cumulative Redeemable Preferred Stock and all depositary shares representing the Series C Preferred Stock. The shares of Series C Preferred Stock and the depositary shares will be redeemed on May 14, 2015, with proceeds from the equity offering. Including accrued dividends, the total redemption price will be $170.4 million. The remaining net proceeds from the offering, along with cash on hand and proceeds from future asset sales, will be used to fund future redevelopment projects and other growth opportunities.

Results of Operations
Comparison of the Three Months ended March 31, 2015 and 2014
For the three months ended March 31, 2015, we recorded net income of $12.0 million compared to a net loss of $14.8 million for the same period last year. Our 2015 net income includes a net gain on hotel sales of $16.9 million. Our 2014 net loss included a $5.8 million net gain on hotel sales (including $391,000 in discontinued operations).
For the three months ended March 31, 2015:
Total revenue decreased $7.7 million, net of a $32.5 million net reduction in revenue for hotels that have been disposed of, classified as held for sale or recently opened. Excluding these hotels, revenue increased 13.7% from last year. The increase was driven by a 13.1% increase in same-store RevPAR, reflecting a 6.5% increase in ADR and a 6.2% increase in occupancy. RevPAR for our Wyndham portfolio increased 19.8%, driven by a 9.3% increase in ADR and a 9.6% increase in occupancy. The increased revenue for the Wyndham portfolio compared to the same period in 2014 primarily reflects these properties continuing to benefit from our repositioning them to upper-upscale hotels.

30



Hotel departmental expenses decreased $5.9 million, net of an $11.0 million net reduction in expense for hotels that have been disposed of, are classified as held for sale or recently opened. Excluding these hotels, hotel departmental expenses decreased as a percentage of total revenue to 36.0% in the current period from 38.1% last year. This reduction is primarily attributable to improved profitability margins for the rooms department, driven by increased ADR. Additionally, we continued experiencing an increase in banquet and catering operations, which typically have higher margins than other food and beverage operations.
Other property-related costs decreased $4.7 million, net of a $9.3 million net reduction in expense for hotels that have been disposed of, are classified as held for sale or recently opened. Excluding these hotels, other property-related costs decreased as a percentage of total revenue to 26.1% in the current period from 27.1% last year, primarily driven by ADR growth.
Management and franchise fees increased $72,000, net of a $1.4 million net reduction in expense for hotels that have been disposed of, are classified as held for sale or recently opened. Excluding these hotels, these costs as a percentage of total revenue increased slightly to 4.2% in the current period from 4.0% last year. Base management fees are computed as a percentage of hotel revenues; however, incentive fees generally increase at a higher rate than other hotel expenses as hotel financial performance improves.
Taxes, insurance and lease expense decreased $8.7 million and decreased as a percentage of total revenue to 7.0% in the current period from 10.7% last year. The decrease primarily reflects a $8.4 million reduction in hotel lease expense resulting from unwinding our 10-hotel unconsolidated joint ventures. Historically, hotel lease expense was recorded by 12 consolidated operating lessees of our hotels that were owned by unconsolidated entities. We recorded the corresponding lease income through equity in income from unconsolidated entities, and the hotel lease expense was not eliminated in consolidation. We unwound the joint ventures in July 2014, as a consequence of which we recorded lower percentage lease expense for the current period.
Corporate expenses increased $748,000 and increased as a percentage of total revenue from 3.5% to 4.0%. This increase primarily reflects the stock compensation expense associated with our variable stock awards (which increase in value as our stock price increases) and an increase in our corporate bonus expense from the prior year resulting from improved performance.
Depreciation and amortization expense decreased $1.8 million primarily attributable to selling hotels offset by depreciation resulting from $83.7 million in hotel capital expenditures in 2014.
Other expenses increased $2.2 million, primarily related to increased pre-opening costs incurred in the current period for The Knickerbocker.
Net interest expense decreased $5.7 million, primarily reflecting lower average outstanding debt and a lower blended interest rate for the period offset by decreased capitalized interest (attributable to the partial completion of certain renovation and redevelopment projects, including The Knickerbocker).
Equity in income from unconsolidated entities decreased $494,000. This reduction in income is primarily due to the unwinding of our 10-hotel unconsolidated joint ventures in July 2014 offset slightly by an increase in income for our remaining joint ventures.



31


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.

Reconciliation of Net Income (Loss) to FFO and Adjusted FFO
(in thousands, except per share data)
 
Three Months Ended March 31,
 
2015
2014
 
Dollars
 
Shares
 
Per Share Amount
 
Dollars
 
Shares
 
Per Share Amount
Net income (loss)
$
11,996

 
 
 
 
 
$
(14,836
)
 
 
 
 
Noncontrolling interests
(4,865
)
 
 
 
 
 
199

 
 
 
 
Preferred dividends
(9,678
)
 
 
 
 
 
(9,678
)
 
 
 
 
Preferred distributions - consolidated joint venture
(348
)





(181
)




Net loss attributable to FelCor common stockholders
(2,895
)
 
 
 
 
 
(24,496
)
 
 
 
 
Less: Dividends declared on unvested restricted stock
(13
)
 
 
 
 
 

 
 
 
 
Basic and diluted earnings per share data
(2,908
)
 
124,519

 
$
(0.02
)
 
(24,496
)
 
124,146

 
$
(0.20
)
Depreciation and amortization
27,772

 

 
0.22

 
29,601

 

 
0.24

Depreciation, unconsolidated entities and other partnerships
712

 

 
0.01

 
2,675

 

 
0.02

Loss on sale, unconsolidated entities

 

 

 
33

 

 

Gain on sale of hotels, net of noncontrolling interests in other partnerships
(11,881
)
 

 
(0.10
)
 
(5,851
)
 

 
(0.05
)
Noncontrolling interests in FelCor LP
(14
)
 
611

 

 
(121
)
 
618

 

Dividends declared on unvested restricted stock
13

 

 

 

 

 

Conversion of unvested restricted stock and units

 
1,213

 

 

 
858

 

FFO
13,694

 
126,343

 
0.11

 
1,841

 
125,622

 
0.01

Debt extinguishment, including discontinued operations
73

 

 

 
251

 

 

Severance costs

 

 

 
400

 

 

Variable stock compensation
997

 

 

 
564

 

 
0.01

Pre-opening costs, net of noncontrolling interests
3,524

 

 
0.03

 
1,053

 

 
0.01

Adjusted FFO
$
18,288

 
126,343


$
0.14


$
4,109


125,622


$
0.03

 

32


Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and Same-store Adjusted EBITDA
(in thousands)
 
Three Months Ended
 
March 31,
 
2015
 
2014
Net income (loss)
$
11,996

 
$
(14,836
)
Depreciation and amortization
27,772

 
29,601

Depreciation, unconsolidated entities and other partnerships
712

 
2,675

Interest expense
19,486

 
25,242

Interest expense, discontinued operations and unconsolidated entities
202

 
744

Noncontrolling interests in other partnerships
(4,879
)
 
78

EBITDA
55,289

 
43,504

Debt extinguishment, including discontinued operations
73

 
251

Gain on sale of hotels, net of noncontrolling interests in other partnerships
(11,881
)
 
(5,851
)
Loss on sale, unconsolidated entities

 
33

Amortization of fixed stock and directors’ compensation
1,862

 
1,122

Severance costs

 
400

Variable stock compensation
997

 
564

Pre-opening costs, net of noncontrolling interests
3,524

 
1,053

Adjusted EBITDA
49,864

 
41,076

Adjusted EBITDA from hotels disposed, held for sale and recently opened
(137
)
 
(4,956
)
Same-store Adjusted EBITDA
$
49,727

 
$
36,120



33



Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands)
 
Three Months Ended
 
March 31,
 
2015
 
2014
Same-store operating revenue:
 
 
 
Room
$
155,759

 
$
137,696

Food and beverage
38,847

 
33,005

Other operating departments
10,894

 
10,044

Same-store operating revenue
205,500

 
180,745

Same-store operating expense:
 
 
 
Room
40,347

 
37,782

Food and beverage
29,407

 
26,263

Other operating departments
4,326

 
4,896

Other property related costs
53,817

 
49,150

Management and franchise fees
8,749

 
7,278

Taxes, insurance and lease expense
12,946

 
12,730

Same-store operating expense
149,592

 
138,099

Hotel EBITDA
$
55,908

 
$
42,646

Hotel EBITDA Margin
27.2
%
 
23.6
%

 
Three Months Ended
 
March 31,
 
2015
 
2014
Hotel EBITDA - Core (39)
$
52,380

 
$
39,464

Hotel EBITDA - Non-strategic (4)(a)
3,528

 
3,182

Hotel EBITDA - Same-store (43)
$
55,908

 
$
42,646

 
 
 
 
Hotel EBITDA Margin - Core (39)
26.9
%
 
23.1
%
Hotel EBITDA Margin - Non-strategic (4)(a)
32.6
%
 
31.2
%
Hotel EBITDA Margin Same-store (43)
27.2
%
 
23.6
%

(a)
Excludes one hotel held for sale as of March 31, 2015.

34


Reconciliation of Same-store Operating Revenue and Same-store Operating Expense to Total Revenue, Total Operating Expense and Operating Income
(in thousands)
 
Three Months Ended
 
March 31,
 
2015
 
2014
Same-store operating revenue
$
205,500

 
$
180,745

Other revenue
410

 
327

Revenue from hotels disposed, held for sale and recently opened(a)
7,785

 
40,277

Total revenue
213,695

 
221,349

Same-store operating expense
149,592

 
138,099

Consolidated hotel lease expense(b)
2,104

 
10,391

Unconsolidated taxes, insurance and lease expense
(572
)
 
(1,965
)
Corporate expenses
8,573

 
7,825

Depreciation and amortization
27,772

 
29,601

Expenses from hotels disposed, held for sale and recently opened(a)
7,488

 
31,222

Other expenses
4,228

 
2,014

Total operating expense
199,185

 
217,187

Operating income
$
14,510

 
$
4,162

(a)
Under GAAP, we include the operating performance for disposed, held for sale and recently opened hotels in continuing operations in our Consolidated Statements of Operations. 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.


35



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, conversion 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 and directors’ compensation, which is included in corporate expenses and is not separately stated on our statements of operations. Excluding amortization of our fixed stock and directors’ compensation maintains consistency with the EBITDA definition.

36


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 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
We 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. As we present them, these non-GAAP financial measures may not be comparable to similar non-GAAP financial measures as presented 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. We compensate 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. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.


37


Pro Rata Share of Rooms Owned

The following table sets forth, at March 31, 2015, 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, 2015
Consolidated Hotels(a)
44

 
 
13,356

 
Unconsolidated hotel operations
1

 
 
171

 
Total hotels
45

 
 
13,527

 
 
 
 
 
 
 
    50% joint ventures
3

 
 
(353
)
 
    95% joint venture
1

 
 
(17
)
 
Pro rata rooms attributed to joint venture partners
 
 
 
(370
)
 
Pro rata share of rooms owned
 
 
 
13,157

 

(a)
Excludes one hotel held for sale as of March 31, 2015.


38


Hotel Portfolio Composition
The following table illustrates the distribution of same-store hotels.
 
 
 
 
 
 
 
 
Year Ended December 31, 2014
Brand
 
Hotels
 
Rooms
 
Hotel Operating Revenue
(in thousands)
 
Hotel EBITDA
(in thousands)(a)
Embassy Suites Hotels
18

 
 
4,982

 
 
$
282,866

 
 
$
94,990

 
Wyndham and Wyndham Grand
8

 
 
2,528

 
 
125,354

 
 
43,122

 
Renaissance and Marriott
3

 
 
1,321

 
 
128,770

 
 
26,086

 
DoubleTree by Hilton and Hilton
3

 
 
802

 
 
45,383

 
 
15,483

 
Sheraton
2

 
 
673

 
 
39,639

 
 
10,622

 
Fairmont
1

 
 
383

 
 
53,451

 
 
10,010

 
Holiday Inn
2

 
 
968

 
 
51,511

 
 
8,966

 
Morgans and Royalton
2

 
 
285

 
 
33,895

 
 
3,314

 
Core hotels(b)
39

 
 
11,942

 
 
760,869

 
 
212,593

 
Non-strategic hotels(c)
4

 
 
1,084

 
 
40,148

 
 
12,428

 
Same-store hotels
43

 
 
13,026

 
 
$
801,017

 
 
$
225,021

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Market
 
 
 
 
 
 
 
 
 
 
 
 
San Francisco area
5

 
 
1,903

 
 
$
139,692

 
 
$
39,466

 
Boston
3

 
 
916

 
 
85,670

 
 
21,832

 
South Florida
3

 
 
923

 
 
55,561

 
 
17,007

 
Los Angeles area
2

 
 
481

 
 
28,696

 
 
12,404

 
Myrtle Beach
2

 
 
640

 
 
41,149

 
 
12,218

 
Philadelphia
2

 
 
728

 
 
38,680

 
 
9,630

 
Tampa
1

 
 
361

 
 
49,358

 
 
9,301

 
New York area
3

 
 
546

 
 
48,456

 
 
7,259

 
Other markets
18

 
 
5,444

 
 
273,607

 
 
83,476

 
Core hotels(b)
39

 
 
11,942

 
 
760,869

 
 
212,593

 
Non-strategic hotels(c)
4

 
 
1,084

 
 
40,148

 
 
12,428

 
Same-store hotels
43

 
 
13,026

 
 
$
801,017

 
 
$
225,021

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Location
 
 
 
 
 
 
 
 
 
 
 
 
Urban
17

 
 
5,310

 
 
$
360,177

 
 
$
97,584

 
Resort
9

 
 
2,733

 
 
203,370

 
 
51,679

 
Airport
8

 
 
2,621

 
 
136,144

 
 
43,204

 
Suburban
5

 
 
1,278

 
 
61,178

 
 
20,126

 
Core hotels(b)
39

 
 
11,942

 
 
760,869

 
 
212,593

 
Non-strategic hotels(c)
4

 
 
1,084

 
 
40,148

 
 
12,428

 
Same-store hotels
43

 
 
13,026

 
 
$
801,017

 
 
$
225,021

 
(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 this Management’s Discussion and Analysis of Financial Condition and Results of Operations. 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)
Excludes The Knickerbocker which opened in February 2015.
(c)
Excludes one hotel held for sale as of March 31, 2015.

39


Hotel Operating Statistics
The following tables set forth occupancy, ADR and RevPAR for the three months ended March 31, 2015 and 2014, and the percentage changes therein for the periods presented, for our same-store hotels.
Operating Statistics by Brand
 
Occupancy (%)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2015
 
2014
 
%Variance
Embassy Suites Hotels
81.1

 
76.8

 
5.6

 
Wyndham and Wyndham Grand
69.0

 
62.9

 
9.6

 
Renaissance and Marriott
80.8

 
75.6

 
6.9

 
DoubleTree by Hilton and Hilton
69.1

 
64.4

 
7.2

 
Sheraton
58.8

 
56.4

 
4.1

 
Fairmont
61.6

 
58.6

 
5.1

 
Holiday Inn
70.1

 
64.5

 
8.6

 
Morgans and Royalton
73.8

 
79.4

 
(7.1
)
 
Core hotels (39)(a)
74.7

 
70.2

 
6.4

 
Non-strategic hotels (4)(b)
78.7

 
76.0

 
3.5

 
Same-store hotels (43)
75.1

 
70.7

 
6.2

 
 
ADR ($)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2015
 
2014
 
%Variance
Embassy Suites Hotels
179.02

 
166.71

 
7.4

 
Wyndham and Wyndham Grand
158.09

 
144.62

 
9.3

 
Renaissance and Marriott
251.96

 
236.72

 
6.4

 
DoubleTree by Hilton and Hilton
162.48

 
156.22

 
4.0

 
Sheraton
125.69

 
127.91

 
(1.7
)
 
Fairmont
250.51

 
238.07

 
5.2

 
Holiday Inn
155.09

 
131.81

 
17.7

 
Morgans and Royalton
234.84

 
258.62

 
(9.2
)
 
Core hotels (39)(a)
181.65

 
170.25

 
6.7

 
Non-strategic hotels (4)(b)
128.02

 
123.81

 
3.4

 
Same-store hotels (43)
176.97

 
166.09

 
6.5

 
 
RevPAR ($)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2015
 
2014
 
%Variance
Embassy Suites Hotels
145.25

 
128.06

 
13.4

 
Wyndham and Wyndham Grand
109.03

 
90.99

 
19.8

 
Renaissance and Marriott
203.52

 
178.95

 
13.7

 
DoubleTree by Hilton and Hilton
112.26

 
100.65

 
11.5

 
Sheraton
73.88

 
72.20

 
2.3

 
Fairmont
154.20

 
139.46

 
10.6

 
Holiday Inn
108.67

 
85.01

 
27.8

 
Morgans and Royalton
173.22

 
205.34

 
(15.6
)
 
Core hotels (39)(a)
135.78

 
119.58

 
13.5

 
Non-strategic hotels (4)(b)
100.72

 
94.12

 
7.0

 
Same-store hotels (43)
132.86

 
117.46

 
13.1

 


(a)
Excludes The Knickerbocker which opened in February 2015.
(b)
Excludes one hotel held for sale as of March 31, 2015.

40


Hotel Operating Statistics by Market
 
Occupancy (%)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2015
 
2014
 
%Variance
San Francisco area
82.5

 
 
72.0

 
 
14.6

 
Boston
66.5

 
 
61.3

 
 
8.4

 
South Florida
93.3

 
 
91.2

 
 
2.3

 
Los Angeles area
81.6

 
 
82.9

 
 
(1.6
)
 
Myrtle Beach
53.9

 
 
45.5

 
 
18.7

 
Philadelphia
49.2

 
 
54.5

 
 
(9.7
)
 
Tampa
88.8

 
 
86.1

 
 
3.1

 
New York area
70.2

 
 
71.7

 
 
(2.0
)
 
Other markets
75.1

 
 
70.3

 
 
6.8

 
Core hotels (39)(a)
74.7

 
 
70.2

 
 
6.4

 
 
ADR ($)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2015
 
 
2014
 
%Variance
San Francisco area
206.63

 
 
188.07

 
 
9.9

 
Boston
197.64

 
 
184.06

 
 
7.4

 
South Florida
221.32

 
 
205.26

 
 
7.8

 
Los Angeles area
170.33

 
 
159.17

 
 
7.0

 
Myrtle Beach
112.76

 
 
108.73

 
 
3.7

 
Philadelphia
139.82

 
 
130.99

 
 
6.7

 
Tampa
251.81

 
 
226.08

 
 
11.4

 
New York area
208.91

 
 
229.08

 
 
(8.8
)
 
Other markets
163.82

 
 
153.47

 
 
6.7

 
Core hotels (39)(a)
181.65

 
 
170.25

 
 
6.7

 
 
RevPAR ($)
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2015
 
 
2014
 
%Variance
San Francisco area
170.52

 
 
135.42

 
 
25.9

 
Boston
131.40

 
 
112.85

 
 
16.4

 
South Florida
206.40

 
 
187.18

 
 
10.3

 
Los Angeles area
138.98

 
 
131.96

 
 
5.3

 
Myrtle Beach
60.83

 
 
49.43

 
 
23.1

 
Philadelphia
68.77

 
 
71.38

 
 
(3.7
)
 
Tampa
223.53

 
 
194.74

 
 
14.8

 
New York area
146.76

 
 
164.18

 
 
(10.6
)
 
Other markets
122.97

 
 
107.85

 
 
14.0

 
Core hotels (39)(a)
135.78

 
 
119.58

 
 
13.5

 
(a)
Excludes The Knickerbocker which opened in February 2015.

41



Hotel Portfolio

The following table sets forth certain descriptive information regarding the hotels in which we held ownership interest at March 31, 2015.

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 – The Knickerbocker
 Independent
 NY
330
95
%
 
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
 
 

42


Hotel Portfolio (continued)

Core Hotels
 
 Brand
 
 State
 
Rooms
 
 % Owned(a)

 
Austin
 DoubleTree Suites by Hilton
 
 TX
 
188
 
 
 
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
%
 
 
 
 
 
 
 
 
 
 
 
Non-strategic Hotels
 
 
 
 
 
 
 
 
Orlando – International Airport
 Holiday Inn
 
 FL
 
288
 
 
 
Chicago – Lombard/Oak Brook
 Embassy Suites Hotel
 
 IL
 
262
 

 
Charlotte
 Embassy Suites Hotel
 
 NC
 
274
 
50
%
 
Austin – Central
 Embassy Suites Hotel
 
 TX
 
260
 

 
 
 
 
 
 
 
 
 
 
Non-strategic Hotel Held for Sale
 
 
 
 
 
San Antonio – NW I-10
 Embassy Suites Hotel
 
 TX
 
216
 

 

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


43


Liquidity and Capital Resources
Operating Activities
During the first three months of 2015, our operations (primarily hotel operations) provided $16.8 million in cash, $5.6 million less than the same period last year. This decrease is primarily attributable to Wyndham paying $8 million in 2014 (for 2013) compared to $1 million this year (for 2014) under its annual net operating income guaranty, as well as, an approximately $6.0 million payment we made this year in connection with an ongoing commercial dispute and increased interest paid over the same period last year, all of which is offset by improved operations this year. Our consolidated statements of cash flows combines cash flow from continuing and discontinued operations. Hotels in discontinued operations did not generate significant operating cash flow for the three months ended March 31, 2015 and 2014. The hotels reported in discontinued operations would not have provided acceptable future operating cash flow on our investment, and the absence of their operating cash flow has not had a material impact on our business.
At March 31, 2015, we had $58.9 million of cash and cash equivalents, including $37.0 million held by third-party management companies.
RevPAR growth for the lodging industry remains strong. At our core hotels for the first three months, RevPAR increased 13.5%, driven by a 6.7% increase in ADR and a 6.4% increase in occupancy. At our same-store hotels, we expect RevPAR will increase 8.5-9.5% during 2015, primarily from higher ADR, and our operations will generate $144.1 million to $152.7 million of cash flow this year.
Investing Activities
During the first three months of 2015, we had $66.4 million of cash provided by investing activities compared to $220,000 provided during the same period last year. During the first three months of 2015, we sold hotels for $91.3 million in net proceeds, which is $51.4 million more asset sale proceeds compared to this same period last year. Our restricted cash increased $1.7 million during the first three months of 2015 compared to a $10.2 million reduction of restricted cash during the same period last year (the prior year reduction was used primarily to fund our hotel development project). So far this year, compared to the same period last year, we spent $15.1 million less on improvements and additions to hotels and $13.5 million less on hotel development.
Through March 31, 2015, we have spent $143.2 million (excluding initial acquisition costs and capitalized interest) to redevelop The Knickerbocker, a 4+ star hotel which opened in February 2015.
For renovations and redevelopment this year, we expect to spend approximately $45 million, funded from operating cash flow, cash on hand and borrowings under our line of credit. In addition, at The Knickerbocker, we expect to invest approximately $33 million this year, funded primarily by proceeds from the construction loan and additional proceeds from selling preferred joint venture equity through the EB-5 immigrant investment program.
Since December 2010, we have sold 35 non-strategic hotels for total gross proceeds of $728 million (reflects our pro rata share) and have disposed of our 50% interests in five non-strategic hotels by unwinding certain joint ventures. We have five remaining non-strategic hotels, of which four additional non-strategic hotels (two with a non-refundable deposit, one of which was received prior to March 31, 2015) are expected to close in the second quarter.

44


Financing Activities
During the first three months of 2015, cash used in financing activities increased by $76.7 million compared to the same period last year. We repaid $26.9 million less in debt and our borrowings were $45.0 million lower this year compared to the same period last year. Our distributions to noncontrolling interests increased because we sold a joint venture property during the first three months of 2015. In the current year, we received $1.2 million in net proceeds from preferred equity issued by The Knickerbocker consolidated joint venture as compared to $40.9 million last year. This year, we expect to pay approximately $2 million of normally occurring principal payments, $32 million of preferred dividends and $22 million in common dividends (assuming no change to our current quarterly dividend rate), all of which will be funded from operating cash flow and cash on hand. We use proceeds from hotel sales to make additional non-recurring principal payments.
FelCor’s Board of Directors declared, and we paid, a $0.04 per share quarterly common stock dividend. FelCor LP, which is our operating partnership, distributes funds to FelCor to pay common or preferred dividends. FelCor's Board of Directors determines the amount of 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.
Common Stock Offering. On April 14, 2015, we sold 18.4 million shares of our common stock for net proceeds (after deducting underwriting discounts and commissions and expenses) of approximately $199 million.
On April 14, 2015, we called for redemption of all of our outstanding shares of 8% Series C Cumulative Redeemable Preferred Stock and all depositary shares representing the Series C Preferred Stock. The shares of Series C Preferred Stock and the depositary shares will be redeemed on May 14, 2015, with proceeds from the equity offering. Including accrued dividends, the total redemption price will be $170.4 million. The remaining net proceeds from the offering, along with cash on hand and proceeds from future asset sales, will be used to fund future redevelopment projects and other growth opportunities.
Secured Debt. Except for our senior notes, line of credit and 2014 term loan, 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 hotel operating expenses, taxes, debt service, insurance and capital expenditure reserves, even if revenues are flowing through a lock-box triggered by a specified debt service coverage ratio not being met. All of our consolidated loans subject to lock-box provisions currently exceed the applicable minimum debt service coverage ratios.
Senior Notes. Our senior notes, which are guaranteed by FelCor, 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. In addition, our senior notes are secured by a combination of first lien mortgages and related security interests on 15 hotels (six hotels for our 6.75%

45


senior notes and nine hotels for our 5.625% senior notes), as well as pledges of equity interests in certain subsidiaries of FelCor LP.

Interest Rate Caps. To fulfill requirements under one of our loans, we entered into an interest rate cap agreement with an aggregate notional amount of $140 million at March 31, 2015 and December 31, 2014. This interest rate cap was not designated as a hedge and had an insignificant fair value at March 31, 2015 and December 31, 2014, resulting in no significant impact on earnings.

Inflation and Competition
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.

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.


46


Item 3.
Quantitative and Qualitative Disclosures about Market Risk.
At March 31, 2015, approximately 78% 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, 2015
(dollars in thousands)
 
Expected Maturity Date
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
 
Fair Value
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt
$
1,893

 
$
2,652

 
$
2,810

 
$
2,954

 
$
528,106

 
$
666,596

 
$
1,205,011

 
$
1,259,243

Average
  interest rate
4.95
%
 
4.95
%
 
4.95
%
 
4.95
%
 
6.74
%
 
5.48
%
 
6.03
%
 
 

Floating-rate:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Debt

 
149,361

 
189,067

 

 

 

 
338,428

 
340,060

Average
  interest rate (a)

 
4.49
%
 
4.26
%
 

 

 

 
4.36
%
 
 

Total debt
$
1,893

 
$
152,013

 
$
191,877

 
$
2,954

 
$
528,106

 
$
666,596

 
$
1,543,439

 
 

Average
   interest rate
4.95
%
 
4.50
%
 
4.27
%
 
4.95
%
 
6.74
%
 
5.48
%
 
5.66
%
 
 

Net discount
 

 
 
 
 
 
 
 
 
 
 

 

 
 

  Total debt
 

 
 
 
 
 
 
 
 
 
 

 
$
1,543,439

 
 

(a)
The average floating interest rate considers the implied forward rates in the yield curve at March 31, 2015.

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.

47


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.


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, 2015 and December 31, 2014; (ii) FelCor’s Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014; (iii) FelCor’s Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2015 and 2014; (iv) FelCor’s Consolidated Statements of Changes in Equity for the three months ended March 31, 2015 and 2014; (v) FelCor’s Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014; (vi) FelCor LP’s Consolidated Balance Sheets at March 31, 2015 and December 31, 2014; (vii) FelCor LP’s Consolidated Statements of

48


Operations for the three months ended March 31, 2015 and 2014; (viii) FelCor LP’s Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2015 and 2014; (ix) FelCor LP’s Consolidated Statements of Partners’ Capital for the three months ended March 31, 2015 and 2014; (x) FelCor LP’s Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014; 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 1, 2015
 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 1, 2015
By:
/s/ Jeffrey D. Symes
 
 
Name:
Jeffrey D. Symes
 
 
Title:
Senior Vice President, Chief Accounting Officer
and Controller


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