10-Q 1 a2013q110q.htm 10-Q 2013 Q1 10Q


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, 2013
 

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


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
FelCor Lodging Trust Incorporated:
 
 
 Large accelerated filer  o
 
 Accelerated filer þ
 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 29, 2013, FelCor Lodging Trust Incorporated had issued and outstanding 124,121,786 shares of common stock.




EXPLANATORY NOTE

This quarterly report on Form 10-Q for the quarter ended March 31, 2013, 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 on 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, 2013 and December 31, 2012 (unaudited)
 
 
Consolidated Statements of Operations – For the Three Months Ended March 31, 2013 and 2012 (unaudited)
 
 
Consolidated Statements of Comprehensive Loss – For the Three Months Ended March 31, 2013 and 2012 (unaudited)
 
 
Consolidated Statements of Changes in Equity – For the Three Months Ended March 31, 2013 and 2012 (unaudited)
 
 
Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2013 and 2012 (unaudited)
 
FelCor Lodging Limited Partnership:
 
 
 
Consolidated Balance Sheets - March 31, 2013 and December 31, 2012 (unaudited)
 
 
Consolidated Statements of Operations – For the Three Months Ended March 31, 2013 and 2012 (unaudited)
 
 
Consolidated Statements of Comprehensive Loss – For the Three Months Ended March 31, 2013 and 2012 (unaudited)
 
 
Consolidated Statements of Partners’ Capital – For the Three Months Ended March 31, 2013 and 2012 (unaudited)
 
 
Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2013 and 2012 (unaudited)
 
 Notes to Consolidated Financial Statements
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
General
 
 
Results of Operations
 
 
Non-GAAP Financial Measures
 
 
Pro Rata Share of Rooms Owned
 
 
Hotel Portfolio Composition
 
 
Hotel Operating Statistics
 
 
Hotel Portfolio
 
 
Liquidity and Capital Resources
 
 
Inflation
 
 
Seasonality
 
 
Disclosure Regarding Forward-Looking Statements
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
Item 4.
Controls and Procedures
 
 
 
 
 
 
  PART II − OTHER INFORMATION
 
 
 
 
 
Item 6.
Exhibits
 
 
 
 
SIGNATURES
 

ii


PART I -- FINANCIAL INFORMATION

Item 1.
Financial Statements.

FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
March 31,
2013
 
December 31,
2012
Assets
 
 
 
Investment in hotels, net of accumulated depreciation of $948,095 and $929,298 at March 31, 2013 and December 31, 2012, respectively
$
1,787,016

 
$
1,794,564

Hotel development
156,081

 
146,079

Investment in unconsolidated entities
52,867

 
55,082

Cash and cash equivalents
61,796

 
45,745

Restricted cash
77,102

 
77,927

Accounts receivable, net of allowance for doubtful accounts of $243 and $469 at March 31, 2013 and December 31, 2012, respectively
34,293

 
25,383

Deferred expenses, net of accumulated amortization of $15,438 and $13,820 at March 31, 2013 and December 31, 2012, respectively
34,035

 
34,262

Other assets
26,096

 
23,391

Total assets
$
2,229,286

 
$
2,202,433

Liabilities and Equity
 
 
 
Debt, net of discount of $8,985 and $10,318 at March 31, 2013 and December 31, 2012, respectively
$
1,683,756

 
$
1,630,525

Distributions payable
8,545

 
8,545

Accrued expenses and other liabilities
147,715

 
138,442

Total liabilities
1,840,016

 
1,777,512

Commitments and contingencies


 


Redeemable noncontrolling interests in FelCor LP, 621 units issued and outstanding at March 31, 2013 and December 31, 2012
3,697

 
2,902

Equity:
 
 
 
 Preferred stock, $0.01 par value, 20,000 shares authorized:
 
 
 
Series A Cumulative Convertible Preferred Stock, 12,880 shares, liquidation value of $322,011, issued and outstanding at March 31, 2013 and December 31, 2012
309,362

 
309,362

Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at March 31, 2013 and December 31, 2012
169,412

 
169,412

Common stock, $0.01 par value, 200,000 shares authorized; 124,122 and 124,117 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively
1,241

 
1,241

Additional paid-in capital
2,353,275

 
2,353,581

Accumulated other comprehensive income
25,684

 
26,039

Accumulated deficit
(2,500,831
)
 
(2,464,968
)
Total FelCor stockholders’ equity
358,143

 
394,667

Noncontrolling interests in other partnerships
27,430

 
27,352

Total equity
385,573

 
422,019

Total liabilities and equity
$
2,229,286

 
$
2,202,433

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, 2013 and 2012
(unaudited, in thousands, except for per share data)
 
 
Three Months Ended March 31,
 
 
2013
 
2012
Revenues:
 
 
 
 
Hotel operating revenue
 
$
220,291

 
$
207,690

Other revenue
 
399

 
275

Total revenues
 
220,690

 
207,965

Expenses:
 
 
 
 
Hotel departmental expenses
 
84,535

 
78,761

Other property-related costs
 
63,108

 
60,482

Management and franchise fees
 
9,654

 
9,778

Taxes, insurance and lease expense
 
22,667

 
21,710

Corporate expenses
 
7,832

 
8,212

Depreciation and amortization
 
31,570

 
30,068

Conversion expenses
 
628

 

Other expenses
 
821

 
963

Total operating expenses
 
220,815

 
209,974

Operating loss
 
(125
)
 
(2,009
)
Interest expense, net
 
(26,483
)
 
(30,814
)
Debt extinguishment
 

 
(7
)
Loss before equity in income (loss) from unconsolidated entities
 
(26,608
)
 
(32,830
)
Equity in income (loss) from unconsolidated entities
 
89

 
(224
)
Loss from continuing operations
 
(26,519
)
 
(33,054
)
Income (loss) from discontinued operations
 
(86
)
 
4,193

Net loss
 
(26,605
)
 
(28,861
)
Net loss attributable to noncontrolling interests in other partnerships
 
240

 
202

Net loss attributable to redeemable noncontrolling interests in FelCor LP
 
180

 
196

Net loss attributable to FelCor
 
(26,185
)
 
(28,463
)
Preferred dividends
 
(9,678
)
 
(9,678
)
Net loss attributable to FelCor common stockholders
 
$
(35,863
)
 
$
(38,141
)
Basic and diluted per common share data:
 
 
 
 
Loss from continuing operations
 
$
(0.29
)
 
$
(0.34
)
Net loss
 
$
(0.29
)
 
$
(0.31
)
Basic and diluted weighted average common shares outstanding
 
123,814

 
123,665


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

2



FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Three Months Ended March 31, 2013 and 2012
(unaudited, in thousands)
 
Three Months Ended
 
March 31,
 
2013
 
2012
Net loss
$
(26,605
)
 
$
(28,861
)
Foreign currency translation adjustment
(357
)
 
308

Comprehensive loss
(26,962
)
 
(28,553
)
Comprehensive loss attributable to noncontrolling interests in other partnerships
240

 
202

Comprehensive loss attributable to redeemable noncontrolling interests in FelCor LP
182

 
194

Comprehensive loss attributable to FelCor
$
(26,540
)
 
$
(28,157
)































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, 2013 and 2012
(unaudited, in thousands)
 
Preferred Stock
 
Common Stock
 
Additional Paid-in Capital 
 
Accumulated Other Comprehensive Income
 
 
 
Noncontrolling Interests in Other Partnerships
 
 
 
 
 
Number of Shares
 
Amount
 
Number of Shares
 
Amount
 
 
 
Accumulated Deficit
 
 
Comprehensive Loss
 
Total Equity
Balance at December 31, 2011
12,948

 
$
478,774

 
124,281

 
$
1,243

 
$
2,353,251

 
$
25,738

 
$
(2,297,468
)
 
$
25,357

 
 

 
$
586,895

Amortization of stock awards

 

 

 

 
232

 

 

 

 
 

 
232

Forfeiture of stock awards

 

 
(63
)
 
(1
)
 
193

 

 
(199
)
 

 
 

 
(7
)
Conversion of operating partnership units into common shares

 

 

 

 
1

 

 

 

 
 
 
1

Allocation to redeemable noncontrolling interests

 

 

 

 
(230
)
 

 

 

 
 

 
(230
)
Contribution from noncontrolling interests

 

 

 

 

 

 

 
291

 
 

 
291

Distribution to noncontrolling interests

 

 

 

 

 

 

 
(455
)
 
 

 
(455
)
Other

 

 

 

 

 

 
(4
)
 

 
 

 
(4
)
Preferred dividends:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

$0.4875 per Series A preferred share

 

 

 

 

 

 
(6,279
)
 

 
 

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

 

 

 

 

 

 
(3,399
)
 

 
 

 
(3,399
)
Comprehensive loss:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Foreign exchange translation

 

 

 

 

 
306

 

 

 
$
306

 
 

Net loss

 

 

 

 

 

 
(28,463
)
 
(202
)
 
(28,665
)
 
 

Comprehensive loss
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
$
(28,359
)
 
(28,359
)
Balance at March 31, 2012
12,948

 
$
478,774

 
124,218

 
$
1,242

 
$
2,353,447

 
$
26,044

 
$
(2,335,812
)
 
$
24,991

 
 

 
$
548,686

Balance at December 31, 2012
12,948

 
$
478,774

 
124,117

 
$
1,241

 
$
2,353,581

 
$
26,039

 
$
(2,464,968
)
 
$
27,352

 
 

 
$
422,019

Issuance of stock awards

 

 
5

 

 

 

 

 

 
 

 

Amortization of stock awards

 

 

 

 
671

 

 

 

 
 

 
671

Allocation to redeemable noncontrolling interests

 

 

 

 
(977
)
 

 

 

 
 

 
(977
)
Contribution from noncontrolling interests

 

 

 

 

 

 

 
602

 
 

 
602

Distribution to noncontrolling interests

 

 

 

 

 

 

 
(284
)
 
 

 
(284
)
Preferred dividends:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

$0.4875 per Series A preferred share

 

 

 

 

 

 
(6,279
)
 

 
 

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

 

 

 

 

 

 
(3,399
)
 

 
 

 
(3,399
)
Comprehensive loss:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Foreign exchange translation

 

 

 

 

 
(355
)
 

 

 
$
(355
)
 
 

Net loss

 

 

 

 

 

 
(26,185
)
 
(240
)
 
(26,425
)
 
 

Comprehensive loss
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

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

 
$
478,774


124,122

 
$
1,241

 
$
2,353,275

 
$
25,684

 
$
(2,500,831
)
 
$
27,430

 
 
 
$
385,573



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, 2013 and 2012
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net loss
$
(26,605
)
 
$
(28,861
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
31,570

 
32,992

Amortization of deferred financing fees and debt discount
2,694

 
4,487

Amortization of fixed stock and directors’ compensation
1,578

 
1,296

Equity in loss (income) from unconsolidated entities
(89
)
 
224

Distributions of income from unconsolidated entities
619

 
475

Debt extinguishment, net

 
7

Changes in assets and liabilities:
 
 
 
Accounts receivable
(8,903
)
 
(9,572
)
Other assets
(3,162
)
 
960

Accrued expenses and other liabilities
7,177

 
31,638

Net cash flow provided by operating activities
4,879

 
33,646

Cash flows from investing activities:
 
 
 
Improvements and additions to hotels
(23,342
)
 
(41,385
)
Hotel development
(8,260
)
 
(4,560
)
Payment of selling costs
(232
)
 
(413
)
Change in restricted cash – investing
825

 
885

Distributions from unconsolidated entities
1,685

 
403

Net cash used in investing activities
(29,324
)
 
(45,070
)
Cash flows from financing activities:
 
 
 
Proceeds from borrowings
84,245

 
36,000

Repayment of borrowings
(32,346
)
 
(9,372
)
Payment of deferred financing fees
(2,022
)
 
(996
)
Distributions paid to noncontrolling interests
(284
)
 
(455
)
Contributions from noncontrolling interests
602

 
291

Distributions paid to preferred stockholders
(9,678
)
 
(9,678
)
Net cash flow provided by financing activities
40,517

 
15,790

Effect of exchange rate changes on cash
(21
)
 
51

Net change in cash and cash equivalents
16,051

 
4,417

Cash and cash equivalents at beginning of periods
45,745

 
93,758

Cash and cash equivalents at end of periods
$
61,796

 
$
98,175

 
 
 
 
Supplemental cash flow information – interest paid, net of capitalized interest
$
7,013

 
$
5,665







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,
 
2013
 
2012
Assets
 
 
 
Investment in hotels, net of accumulated depreciation of $948,095 and $929,298 at March 31, 2013 and December 31, 2012, respectively
$
1,787,016

 
$
1,794,564

Hotel development
156,081

 
146,079

Investment in unconsolidated entities
52,867

 
55,082

Cash and cash equivalents
61,796

 
45,745

Restricted cash
77,102

 
77,927

Accounts receivable, net of allowance for doubtful accounts of $243 and $469 at March 31, 2013 and December 31, 2012, respectively
34,293

 
25,383

Deferred expenses, net of accumulated amortization of $15,438 and $13,820 at March 31, 2013 and December 31, 2012, respectively
34,035

 
34,262

Other assets
26,096

 
23,391

Total assets
$
2,229,286

 
$
2,202,433

Liabilities and Partners’ Capital
 
 
 
Debt, net of discount of $8,985 and $10,318 at March 31, 2013 and December 31, 2012, respectively
$
1,683,756

 
$
1,630,525

Distributions payable
8,545

 
8,545

Accrued expenses and other liabilities
147,715

 
138,442

Total liabilities
1,840,016

 
1,777,512

Commitments and contingencies


 


Redeemable units, 621 units issued and outstanding at March 31, 2013 and December 31, 2012
3,697

 
2,902

Capital:
 
 
 
Preferred units:
 
 
 
Series A Cumulative Convertible Preferred Units, 12,880 units issued and outstanding at March 31, 2013 and December 31, 2012
309,362

 
309,362

Series C Cumulative Redeemable Preferred Units, 68 units issued and outstanding at March 31, 2013 and December 31, 2012
169,412

 
169,412

Common units, 124,122 and 124,117 units issued and outstanding at March 31, 2013 and December 31, 2012, respectively
(146,425
)
 
(110,258
)
Accumulated other comprehensive income
25,794

 
26,151

Total FelCor LP partners’ capital
358,143

 
394,667

Noncontrolling interests
27,430

 
27,352

Total partners’ capital
385,573

 
422,019

Total liabilities and partners’ capital
$
2,229,286

 
$
2,202,433





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, 2013 and 2012
(unaudited, in thousands, except for per unit data)
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Revenues:
 
 
 
 
Hotel operating revenue
 
$
220,291

 
$
207,690

Other revenue
 
399

 
275

Total revenues
 
220,690

 
207,965

Expenses:
 
 
 
 
Hotel departmental expenses
 
84,535

 
78,761

Other property-related costs
 
63,108

 
60,482

Management and franchise fees
 
9,654

 
9,778

Taxes, insurance and lease expense
 
22,667

 
21,710

Corporate expenses
 
7,832

 
8,212

Depreciation and amortization
 
31,570

 
30,068

Conversion expenses
 
628

 

Other expenses
 
821

 
963

Total operating expenses
 
220,815

 
209,974

Operating loss
 
(125
)
 
(2,009
)
Interest expense, net
 
(26,483
)
 
(30,814
)
Debt extinguishment
 

 
(7
)
Loss before equity in income (loss) from unconsolidated entities
 
(26,608
)
 
(32,830
)
Equity in income (loss) from unconsolidated entities
 
89

 
(224
)
Loss from continuing operations
 
(26,519
)
 
(33,054
)
Income (loss) from discontinued operations
 
(86
)
 
4,193

Net loss
 
(26,605
)
 
(28,861
)
Net loss attributable to noncontrolling interests
 
240

 
202

Net loss attributable to FelCor LP
 
(26,365
)
 
(28,659
)
Preferred distributions
 
(9,678
)
 
(9,678
)
Net loss attributable to FelCor LP common unitholders
 
$
(36,043
)
 
$
(38,337
)
Basic and diluted per common unit data:
 
 
 
 
Loss from continuing operations
 
$
(0.29
)
 
$
(0.34
)
Net loss
 
$
(0.29
)
 
$
(0.31
)
Basic and diluted weighted average common units outstanding
 
124,435

 
124,301




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

7



FELCOR LODGING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Three Months Ended March 31, 2013 and 2012
(unaudited, in thousands)
 
Three Months Ended
 
March 31,
 
2013
 
2012
Net loss
$
(26,605
)
 
$
(28,861
)
Foreign currency translation adjustment
(357
)
 
308

Comprehensive loss
(26,962
)
 
(28,553
)
Comprehensive loss attributable to noncontrolling interests
240

 
202

Comprehensive loss attributable to FelCor LP
$
(26,722
)
 
$
(28,351
)































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, 2013 and 2012
(unaudited, in thousands)
 
Preferred Units
 
Common Units
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interests
 
Comprehensive Loss
 
Total Partners’ Capital
Balance at December 31, 2011
$
478,774

 
$
56,916

 
$
25,848

 
$
25,357

 
 
 
$
586,895

FelCor restricted stock compensation

 
225

 

 

 
 
 
225

Contributions

 

 

 
291

 
 
 
291

Distributions

 
(9,678
)
 

 
(455
)
 
 
 
(10,133
)
Allocation to redeemable units

 
(35
)
 

 

 
 
 
(35
)
Other

 
(4
)
 

 

 
 
 
(4
)
Comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange translation


 


 
308

 


 
$
308

 
 
Net loss


 
(28,659
)
 


 
(202
)
 
(28,861
)
 
 
Comprehensive loss


 


 


 


 
$
(28,553
)
 
(28,553
)
Balance at March 31, 2012
$
478,774

 
$
18,765

 
$
26,156

 
$
24,991

 
 
 
$
548,686

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2012
$
478,774

 
$
(110,258
)
 
$
26,151

 
$
27,352

 
 
 
$
422,019

FelCor restricted stock compensation

 
671

 

 

 
 
 
671

Contributions

 

 

 
602

 
 
 
602

Distributions

 
(9,678
)
 

 
(284
)
 
 
 
(9,962
)
Allocation to redeemable units

 
(795
)
 

 

 
 
 
(795
)
Comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange translation


 


 
(357
)
 


 
$
(357
)
 
 
Net loss


 
(26,365
)
 


 
(240
)
 
(26,605
)
 
 
Comprehensive loss


 


 


 


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

 
$
(146,425
)
 
$
25,794

 
$
27,430

 
 
 
$
385,573





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, 2013 and 2012
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net loss
$
(26,605
)
 
$
(28,861
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
31,570

 
32,992

Amortization of deferred financing fees and debt discount
2,694

 
4,487

Amortization of fixed stock and directors’ compensation
1,578

 
1,296

Equity in loss (income) from unconsolidated entities
(89
)
 
224

Distributions of income from unconsolidated entities
619

 
475

Debt extinguishment, net

 
7

Changes in assets and liabilities:
 
 
 
Accounts receivable
(8,903
)
 
(9,572
)
Other assets
(3,162
)
 
960

Accrued expenses and other liabilities
7,177

 
31,638

Net cash flow provided by operating activities
4,879

 
33,646

 Cash flows from investing activities:
 
 
 
Improvements and additions to hotels
(23,342
)
 
(41,385
)
Hotel development
(8,260
)
 
(4,560
)
Payment of selling costs
(232
)
 
(413
)
Change in restricted cash – investing
825

 
885

Distributions from unconsolidated entities
1,685

 
403

Net cash used in investing activities
(29,324
)
 
(45,070
)
 Cash flows from financing activities:
 
 
 
Proceeds from borrowings
84,245

 
36,000

Repayment of borrowings
(32,346
)
 
(9,372
)
Payment of deferred financing fees
(2,022
)
 
(996
)
Distributions paid to noncontrolling interests
(284
)
 
(455
)
Contributions from noncontrolling interests
602

 
291

Distributions paid to preferred unitholders
(9,678
)
 
(9,678
)
Net cash flow provided by financing activities
40,517

 
15,790

 Effect of exchange rate changes on cash
(21
)
 
51

 Net change in cash and cash equivalents
16,051

 
4,417

 Cash and cash equivalents at beginning of periods
45,745

 
93,758

 Cash and cash equivalents at end of periods
$
61,796

 
$
98,175

 
 
 
 
 Supplemental cash flow information – interest paid, net of capitalized interest
$
7,013

 
$
5,665




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 66 hotels in continuing operations with 18,993 rooms at March 31, 2013. At March 31, 2013, we had an aggregate of 124,743,167 shares and units outstanding, consisting of 124,121,786 shares of FelCor common stock and 621,381 FelCor LP units not owned by FelCor.
Of the 66 hotels included in continuing operations, we owned a 100% interest in 48 hotels, a 90% interest in entities owning three hotels, an 82% interest in an entity owning one hotel, a 60% interest in an entity owning one hotel and a 50% interest in entities owning 13 hotels. We consolidate our real estate interests in the 53 hotels in which we held majority interests, and we record the real estate interests of the 13 hotels in which we held 50% interests using the equity method. We leased 65 of the 66 hotels in continuing operations to our taxable REIT subsidiaries, of which we own a controlling interest. One 50% owned hotel was operated without a lease. Because we owned controlling interests in these lessees, we consolidated our interests in these 65 hotels (which we refer to as our Consolidated Hotels) and reflect those hotels’ operating revenues and expenses in our statements of operations.  Of our Consolidated Hotels, we owned 50% of the real estate interests in each of 12 hotels (we accounted for the ownership in our real estate interests of these hotels by the equity method) and majority real estate interests in each of the remaining 53 hotels (we consolidate our real estate interest in these hotels).
The following table illustrates the distribution of our 65 Consolidated Hotels at March 31, 2013:
Brand
 
Hotels
 
Rooms
 Embassy Suites Hotels® 
 
35

 
 
9,116

 
 Wyndham® and Wyndham Grand®
 
8

 
 
2,526

 
 Holiday Inn® 
 
5

 
 
1,862

 
 Sheraton® and Westin® 
 
5

 
 
1,882

 
 DoubleTree by Hilton® and Hilton® 
 
6

 
 
1,450

 
 Marriott® and Renaissance® 
 
3

 
 
1,321

 
 Fairmont® 
 
1

 
 
383

 
 Independent (Morgans and Royalton)
 
2

 
 
282

 
 Total
 
65

 
 
18,822

 
At March 31, 2013, our Consolidated Hotels were located in the United States (64 hotels in 22 states) and Canada (one hotel in Ontario), with concentrations in California (14 hotels), Florida (8 hotels) and Texas (7 hotels). Approximately 55% of our revenue was generated from hotels in these three states during the first three months of 2013.
At March 31, 2013, of our 65 Consolidated Hotels: (i) subsidiaries of Hilton Hotels Corporation, or Hilton, managed 40 hotels, (ii) subsidiaries of Wyndham Hotel Group, or Wyndham, managed eight hotels, (iii) subsidiaries of InterContinental Hotels Group, or IHG, managed five hotels, (iv) subsidiaries of Starwood Hotels & Resorts Worldwide Inc., or Starwood, managed five hotels, (v) subsidiaries of Marriott International Inc., or Marriott, managed three hotels, (vi) a subsidiary of Fairmont Hotels and Resorts, or Fairmont, managed one hotel, (vii) a subsidiary of Morgans Hotel Group Corporation managed two hotels, and (viii) an independent management company managed one hotel.

11




FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    Organization — (continued)
In addition to the above hotels, we own (through a 95% interest in a consolidated joint venture) the Knickerbocker, a former hotel and office building, that is being redeveloped as a 4+ star hotel in midtown Manhattan and is expected to open in early 2014.
Effective January 1, 2013, our hotels managed by Marriott are accounted for on a 12 month calendar year basis as compared to a fiscal year comprised of 52 or 53 weeks ending on the Friday closest to December 31, as done in 2012 and prior years. Our three-month period ending March 31, 2013 is reported on a three-month calendar basis for our Marriott-managed hotels, which is consistent with the reporting periods for our other managed hotels. However, our three-month period ending March 31, 2012 includes the results of operations for the Marriott-managed hotels for the 12 week period ending March 23, 2012. Prior year results have not been restated to reflect the reporting period transition as we do not believe the change in periods would result in a material difference for comparison of results year over year.
The information in our consolidated financial statements for the three months ended March 31, 2013 and 2012 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, 2013 and 2012, include adjustments based on management’s estimates (consisting of normal and recurring accruals), which we consider necessary for a fair presentation of the results for the periods. The financial information should be read in conjunction with the consolidated financial statements for the year ended December 31, 2012, included in our Annual Report on Form 10-K. Operating results for the three months ended March 31, 2013 are not necessarily indicative of actual operating results for the entire year.
2.
Investment in Unconsolidated Entities
We owned 50% interests in joint ventures that owned 13 hotels at March 31, 2013 and December 31, 2012.  We also own 50% interests in entities that own real estate in Myrtle Beach, South Carolina and provide condominium management services.  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,
 
2013
 
2012
Investment in hotels, net of accumulated depreciation
$
151,132

 
 
$
155,888

 
Total assets
$
164,478

 
 
$
170,477

 
Debt
$
147,886

 
 
$
148,395

 
Total liabilities
$
151,640

 
 
$
154,139

 
Equity
$
12,838

 
 
$
16,338

 
Our unconsolidated entities’ debt at March 31, 2013 and December 31, 2012 consisted entirely of non-recourse mortgage debt. In January 2012, one of our unconsolidated joint ventures refinanced $130 million of debt and extended the maturity until 2014.

12




FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.
Investment in Unconsolidated Entities — (continued)
The following table sets forth summarized combined statement of operations information for our unconsolidated entities (in thousands):
 
Three Months Ended March 31,
 
2013
 
2012
Total revenues
$
13,608

 
$
10,989

Net income
$
1,108

 
$
481

 
 
 
 
Net income attributable to FelCor
$
554

 
$
241

Depreciation of cost in excess of book value
(465
)
 
(465
)
Equity in income (loss) from unconsolidated entities
$
89

 
$
(224
)
The following table summarizes the components of our investment in unconsolidated entities (in thousands):
 
March 31,
 
December 31,
 
2013
 
2012
Hotel-related investments
$
(886
)
 
$
246

Cost in excess of book value of hotel investments
46,448

 
46,913

Land and condominium investments
7,305

 
7,923

 
$
52,867

 
$
55,082

The following table summarizes the components of our equity in income (loss) from unconsolidated entities (in thousands):
 
Three Months Ended
 
March 31,
 
2013
 
2012
Hotel investments
$
708

 
$
405

Other investments
(619
)
 
(629
)
Equity in income (loss) from unconsolidated entities
$
89

 
$
(224
)

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
 
2013
 
2012
Line of credit
9

 
 
L + 3.375
 
 
June 2016(a)
 
$
109,000

 
$
56,000

Hotel mortgage debt
 
 
 
 
 
 
 
 
 
 
 
Mortgage debt(b)
5

 
 
6.66
 
 
June - August 2014
 
64,906

 
65,431

Mortgage debt
1

 
 
5.81
 
 
July 2016
 
10,280

 
10,405

Mortgage debt(b)
4

 
 
4.95
 
 
October 2022
 
127,733

 
128,066

Mortgage debt
1

 
 
4.94
 
 
October 2022
 
32,057

 
32,176

Senior notes
 
 
 
 
 
 
 
 
 
 
 
Senior secured notes
6

 
 
6.75
 
 
June 2019
 
525,000

 
525,000

Senior secured notes
10

 
 
5.625
 
 
March 2023
 
525,000

 
525,000

Senior secured notes(c)
11

 
 
10.00
 
 
October 2014
 
224,919

 
223,586

Other(d)

 
 
L + 1.25
 
 
May 2016
 
64,861

 
64,861

Total
47

 
 
 
 
 
 
 
$
1,683,756

 
$
1,630,525

(a)
Our $225 million line of credit can be extended for one year (to 2017), subject to satisfying certain conditions.
(b)
This debt is comprised of separate non-cross-collateralized loans each secured by a mortgage of a different hotel.
(c)
We originally issued $636 million (face amount) of these notes. After redemptions in 2011 and 2012, $234 million (face amount) of these notes were outstanding at March 31, 2013. These notes were initially sold at a discount that provided an effective yield of 12.875% before transaction costs.
(d)
This loan is related to our Knickerbocker development project and is fully secured by restricted cash and a mortgage. Because we were able to assume an existing loan when we purchased this hotel, we were not required to pay any local mortgage recording tax. This loan, which allows us to borrow up to $85 million, can be extended for one year subject to satisfying certain conditions.

We reported $26.5 million and $30.8 million of interest expense for the three months ended March 31, 2013 and 2012, respectively, which is net of: (i) interest income of $22,000 and $48,000 and (ii) capitalized interest of $2.8 million and $3.3 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,
 
2013
 
2012
Room revenue
$
170,379

 
$
161,779

Food and beverage revenue
38,464

 
34,821

Other operating departments
11,448

 
11,090

Total hotel operating revenue
$
220,291

 
$
207,690

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.  The remainder of our revenue was derived from other sources.
Hotel departmental expenses from continuing operations were comprised of the following (in thousands):
 
 
Three Months Ended March 31,
 
2013
 
2012
 
Amount
 
% of Total Hotel Operating Revenue
 
Amount
 
% of Total Hotel Operating Revenue
Room
$
47,593

 
21.6
%
 
 
$
44,971

 
21.7
%
 
Food and beverage
31,462

 
14.3

 
 
28,345

 
13.6

 
Other operating departments
5,480

 
2.5

 
 
5,445

 
2.6

 
Total hotel departmental expenses
$
84,535

 
38.4
%
 
 
$
78,761

 
37.9
%
 

15




FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.
Hotel Operating Revenue, Departmental Expenses, and Other Property-Related Costs — (continued)
Other property-related costs from continuing operations were comprised of the following amounts (in thousands):
 
 
Three Months Ended March 31,
 
2013
 
2012
 
Amount
 
% of Total Hotel Operating Revenue
 
Amount
 
% of Total Hotel Operating Revenue
Hotel general and administrative expense
$
21,162

 
9.6
%
 
 
$
20,107

 
9.7
%
 
Marketing
20,274

 
9.2

 
 
19,258

 
9.3

 
Repair and maintenance
12,238

 
5.6

 
 
11,738

 
5.7

 
Utilities
9,434

 
4.2

 
 
9,379

 
4.4

 
Total other property-related costs
$
63,108

 
28.6
%
 
 
$
60,482

 
29.1
%
 
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,
 
2013
 
2012
Hotel lease expense(a) 
$
9,558

 
$
9,193

Land lease expense(b) 
2,394

 
2,387

Real estate and other taxes
7,938

 
7,871

Property insurance, general liability insurance and other
2,777

 
2,259

  Total taxes, insurance and lease expense
$
22,667

 
$
21,710


(a)
Hotel lease expense is recorded by the consolidated operating lessees of 12 hotels owned by unconsolidated entities and is partially (generally 49%) offset through noncontrolling interests in other partnerships.  Our 50% share of the corresponding lease income is recorded through equity in income from unconsolidated entities.  Hotel lease expense includes percentage rent of $4.1 million and $3.8 million for the three months ended March 31, 2013 and 2012, respectively.

(b)
Land lease expense includes percentage rent of $968,000 and $915,000 for the three months ended March 31, 2013 and 2012, respectively.


16




FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.
Impairment

Our hotels are comprised of operations and cash flows that can clearly be distinguished, operationally and for financial reporting purposes, from the remainder of our operations.  Accordingly, we consider our hotels to be components for purposes of determining impairment charges and reporting discontinued operations.

We may record impairment charges if operating results of individual hotels are materially different from our forecasts, if the economy and/or lodging industry weakens, or if we shorten our contemplated holding period for additional hotels. We had no impairments during the three months ended March 31, 2013 and 2012.

7.
Discontinued Operations

Discontinued operations include results of operations for ten hotels sold in 2012. The following table summarizes the condensed financial information for those hotels (in thousands):

 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Hotel operating revenue
 
$

 
 
$
27,840

 
Operating expenses
 
(86
)
 
 
(22,699
)

Operating income (loss) from discontinued operations
 
(86
)
 
 
5,141

 
Interest expense, net
 

 
 
(948
)
 
Income (loss) from discontinued operations
 
$
(86
)
 
 
$
4,193

 



17




FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.
Loss Per Share/Unit

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

FelCor Loss Per Share

 
Three Months Ended
 
March 31,
 
2013
 
2012
Numerator:
 
 
 
Net loss attributable to FelCor
$
(26,185
)
 
$
(28,463
)
Discontinued operations attributable to FelCor
86

 
(4,172
)
Loss from continuing operations attributable to FelCor
(26,099
)
 
(32,635
)
Less: Preferred dividends
(9,678
)
 
(9,678
)
Numerator for continuing operations attributable to FelCor common stockholders
(35,777
)
 
(42,313
)
Discontinued operations attributable to FelCor
(86
)
 
4,172

Numerator for basic and diluted loss attributable to FelCor common stockholders
$
(35,863
)
 
$
(38,141
)
Denominator:
 
 
 
Denominator for basic and diluted loss per share
123,814

 
123,665

Basic and diluted loss per share data:
 
 
 
Loss from continuing operations
$
(0.29
)
 
$
(0.34
)
Discontinued operations
$

 
$
0.03

Net loss
$
(0.29
)
 
$
(0.31
)


18




FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.
Loss Per Share/Unit — (continued)

FelCor LP Loss Per Unit
 
Three Months Ended
 
March 31,
 
2013
 
2012
Numerator:
 
 
 
Net loss attributable to FelCor LP
$
(26,365
)
 
$
(28,659
)
Discontinued operations attributable to FelCor LP
86

 
(4,193
)
Loss from continuing operations attributable to FelCor LP
(26,279
)
 
(32,852
)
 Less: Preferred distributions
(9,678
)
 
(9,678
)
Numerator for continuing operations attributable to FelCor LP common unitholders
(35,957
)
 
(42,530
)
Discontinued operations attributable to FelCor LP
(86
)
 
4,193

Numerator for basic and diluted loss attributable to FelCor common unitholders
$
(36,043
)
 
$
(38,337
)
Denominator:
 
 
 
Denominator for basic and diluted loss per unit
124,435

 
124,301

Basic and diluted loss per unit data:
 
 
 
Loss from continuing operations
$
(0.29
)
 
$
(0.34
)
Discontinued operations
$

 
$
0.03

Net loss
$
(0.29
)
 
$
(0.31
)

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,
 
2013
 
2012
Series A convertible preferred shares/units
9,985

 
 
9,985

 
FelCor restricted stock units
167

 
 

 

Series A preferred dividends (distributions) that would be excluded from net loss attributable to FelCor common stockholders (or FelCor LP common unitholders), if these Series A preferred shares/units were dilutive, were $6.3 million for the three months ended March 31, 2013 and 2012.

In February 2013, our executive officers were granted restricted stock units providing them with the potential to earn up to 1,250,000 common shares vesting in three increments over four years based on total stockholder return, relative to a group of 10 lodging REIT peers. The fixed cost of these grants are being amortized over the vesting period, and the potential impact of these restricted stock units on our earnings per share, had they been dilutive, was calculated using the treasury stock method.


19




FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.
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, 2013.  Considerable judgment is necessary to interpret market data and develop estimated fair value.  Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize on disposition of the financial instruments.  The use of 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 $1.4 billion at March 31, 2013 and $1.3 billion at December 31, 2012; 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 $423.3 million and $369.6 million at March 31, 2013 and December 31, 2012, respectively. The estimated fair value of all our debt was $1.8 billion and $1.7 billion at March 31, 2013 and December 31, 2012, respectively. The carrying value of our debt was $1.7 billion and $1.6 billion at March 31, 2013 and December 31, 2012, respectively.

10.
Redeemable Noncontrolling Interests in FelCor LP / Redeemable Units

We record redeemable noncontrolling interests in FelCor LP, in the case of FelCor, and redeemable units, in the case of FelCor LP, in the mezzanine section (between liabilities and equity or partners’ capital) of our consolidated balance sheets because of the redemption feature of these units. Additionally, FelCor’s consolidated statements of operations separately present earnings attributable to redeemable noncontrolling interests.  We adjust redeemable noncontrolling interests in FelCor LP (or redeemable units) each period to reflect the greater of its carrying value based on the accumulation of historical cost or its redemption value.  The historical cost is based on the proportionate relationship between the carrying value of equity associated with FelCor’s common stockholders relative to that of FelCor LP’s unitholders.  Redemption value is based on the closing price of FelCor’s common stock at period end. FelCor allocates net income (loss) to FelCor LP’s noncontrolling partners based on their weighted average ownership percentage during the period.  

At March 31, 2013, we had 621,381 limited partnership units outstanding. We carried 367,647 outstanding limited partner units (which were issued in May 2011) at $2.2 million, and the remaining 253,734 outstanding units of limited partner interest were carried at $1.5 million. The current value of the outstanding units is based on the closing price of FelCor’s common stock at March 31, 2013 ($5.95 per share).


20




FELCOR LODGING TRUST INCORPORATED AND FELCOR LODGING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.
Redeemable Noncontrolling Interests in FelCor LP / Redeemable Units - (continued)

Changes in redeemable noncontrolling interests (or redeemable units) for the three months ended March 31, 2013 and 2012 are shown below (in thousands):
 
Three Months Ended
 
March 31,
 
2013
 
2012
Balance at beginning of period
$
2,902

 
 
$