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~~June 3130, 2005

¨	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 1-9320

WYNDHAM INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware		94-2878485
(State or other jurisdiction ofincorporation or organization)		(I.R.S. EmployerIdentification No.)
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1950 Stemmons Freeway, Suite 6001

Dallas, Texas 75207

(Address of principal executive offices) (Zip Code)

(214) 863-1000

(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. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

The number of shares outstanding of the registrant’s class A common stock, par value $.01 per share, as of the close of business on ~~May~~July 926, 2005, was 172,~~790~~794,~~424~~895.

WYNDHAM INTERNATIONAL, INC.

INDEX

		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Wyndham International, Inc.:
	Condensed Consolidated Balance Sheets as of March 31, 2005 andDecember 31, 2004 (unaudited)	1
	Condensed Consolidated Balance Sheets as of June 30, 2005 andDecember 31, 2004 (unaudited)	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004 (unaudited)	2
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2005 and 2004 (unaudited)	2
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004 (unaudited)	3
	Notes to Condensed Consolidated Financial Statements as of March 31, 2005 (unaudited)	4
	Notes to Condensed Consolidated Financial Statements as of June 30, 2005 (unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2125
Item 3.	Quantitative and Qualitative Disclosures about Market ~~Risks~~Risk	3239
Item 4.	Controls and Procedures	3340
~~PART II—OTHER INFORMATION~~	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	3441
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3644
Item 3.	Defaults Upon Senior Securities	3644
Item 4.	Submission of Matters to a Vote of Security Holders	3644
Item 5.	Other Information	3644
Item 6.	Exhibits	3645
Signatures		37
Signature		47

PART I: —FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

WYNDHAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(unaudited)

	March 31,2005			December 31,2004
	June 30, 2005			December 31,2004
ASSETS
Current assets:
Cash and cash equivalents	$	3239,~~074~~282		$	24,338
Restricted cash		75160,~~916~~620			77,812
Accounts receivable, net of allowance for doubtful accounts of $4,079 in 2005 and $4,115 in 2004		73,881			70,129
Accounts receivable, net of allowance for doubtful accounts of $1,925 in 2005 and $4,115 in 2004		67,292			70,129
Inventories		11,~~305~~034			12,818
Prepaid expenses and other assets		109,~~203~~222			10,389
Assets held for sale, net of accumulated depreciation of $20,540 in 2005 and $178,085 in 2004		26,791			361,504
Assets held for sale, net of accumulated depreciation of $10,856 in 2005 and $178,085 in 2004		15,835			361,504
Total current assets		~~230~~303,~~170~~285			556,990
Investment in real estate and related improvements, net of accumulated depreciation of $601,867 in 2005 and $576,686 in 2004		2,020,861			2,032,965
Investment in real estate and related improvements, net of accumulated depreciation of $628,539 in 2005 and $576,686 in 2004		2,015,389			2,032,965
Investment in unconsolidated subsidiaries		5251,~~136~~548			51,149
Notes and other receivables		1918,~~851~~105			23,686
Management contract costs, net of accumulated amortization $7,382 in 2005 and $7,128 in 2004		4,567			4,826
Derivative financial instruments		355			—
Leasehold costs, net of accumulated amortization of $290 in 2005 and $186 in 2004		6,402			6,537
Management contract costs, net of accumulated amortization $7,281 in 2005 and $7,128 in 2004		4,113			4,826
Trade names, net of accumulated amortization of $44,436 in 2005 and $42,739 in 2004		81,916			83,612
Leasehold costs, net of accumulated amortization of $45 in 2005 and $186 in 2004		88			6,537
Deferred costs		2,103			4,335
Trade names, net of accumulated amortization of $46,144 in 2005 and $42,739 in 2004		80,283			83,612
Deferred expenses, net of accumulated amortization of $64,801 in 2005 and $62,123 in 2004		18,012			21,803
Deferred acquisition costs		1,776			4,335
Other assets		4,250			4,586
Deferred expenses, net of accumulated amortization of $15,312 in 2005 and $62,123 in 2004		35,638			21,803
Total assets	$	2,440,268		$	2,790,489
Other assets		4,344			4,586
Total assets	$	2,514,924		$	2,790,489
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	178,~~077~~864		$	17,891
Accrued payroll costs		3835,~~015~~286			49,138
Dividends payable		~~109~~116,~~628~~933			102,322
Accrued insurance and property taxes		4147,~~298~~812			41,884
Other accrued expenses		9985,~~750~~118			94,494
Advance deposits		3227,~~110~~828			36,637
Borrowings associated with assets held for sale		—			114,251
Current portion of borrowings under credit facility, term loans, mortgage notes and capital lease obligations		~~562~~211,~~349~~761			685,145
Total current liabilities		~~900~~533,~~227~~602			1,141,762
Borrowings under credit facility, term loans, mortgage notes and capital lease obligations		1,~~277~~757,~~805~~787			1,398,090
Derivative financial instruments		~~342~~—			8,637
Income taxes payable		33,~~389~~996			33,107
Deferred income		910,~~979~~233			9,446
Minority interest in the Operating Partnerships		20,559			20,559
Minority interest in other consolidated subsidiaries		59,~~360~~514			63,001
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized: 150,000,000 shares; shares issued and outstanding: 16,181,122 in 2005 and 15,812,279 in 2004		162			158
Preferred stock, $0.01 par value; authorized: 150,000,000 shares; shares issued and outstanding: 16,558,638 in 2005 and 15,812,279 in 2004		166			158
Common stock, $0.01 par value; authorized: 750,000,000 shares; shares issued and outstanding: 172,060,224 in 2005 and 171,386,918 in 2004		1,721			1,714
Common stock, $0.01 par value; authorized: 750,000,000 shares; shares issued and outstanding: 172,794,895 in 2005 and 171,386,918 in 2004		1,728			1,714
Additional paid in capital		4,~~335~~375,~~691~~355			4,298,445
Receivables from shareholders		(6,855	)		(6,855	)
Accumulated other comprehensive income		(~~197~~859	)		(5,560	)
Accumulated deficit		(4,~~191~~270,~~915~~302	)		(4,172,015	)
Total shareholders’ equity		~~138~~99,~~607~~233			115,887
Total liabilities and shareholders’ equity	$	2,~~440~~514,~~268~~924		$	2,790,489

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

WYNDHAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

	Three Months EndedMarch 31,
	Three Months EndedJune 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenues:
Room revenues	$	~~147~~135,~~595~~467		$	~~139~~125,~~831~~736		$	281,783		$	265,567
Food and beverage revenues		83,~~773~~546			8478,~~693~~624			167,319			163,317
Other hotel revenues		4538,~~099~~359			4437,~~898~~517			83,400			82,415
Total hotel revenues		~~276~~257,~~467~~372			~~269~~241,~~422~~877			532,502			511,299
Management fee and service fee income		5,~~369~~567			4,~~717~~088			10,936			8,805
Interest and other income		~~785~~1,296			~~516~~528			2,081			1,044
Total revenues		~~282~~264,~~621~~235			~~274~~246,~~655~~493			545,519			521,148
Expenses:
Room expenses		3231,~~303~~571			30,~~986~~007			63,363			60,993
Food and beverage expenses		5251,~~701~~730			5351,~~358~~335			104,431			104,693
Other hotel expenses		~~101~~95,~~139~~439			9995,~~636~~986			195,973			195,622
Total hotel expenses		~~186~~178,~~143~~740			~~183~~177,~~980~~328			363,767			361,308
General and administrative		1527,~~461~~054			1416,~~243~~895			42,517			31,138
Interest expense		4643,~~244~~207			5048,~~114~~667			89,451			98,781
(Gain) loss on derivative financial instruments		(191	)		4,336
Loss (gain) on derivative financial instruments		181			(2,402	)		(10	)		1,934
Depreciation and amortization		27,530			31,661
Loss on extinguishment of debt		19,925			—			19,925			—
Total expenses		275,187			284,334
Depreciation and amortization		29,150			27,959			56,664			59,620
Operating income (loss) from continuing operations		7,434			(9,679	)
Total expenses		298,257			268,447			572,314			552,781
Equity in earnings of unconsolidated subsidiaries		373			791
Operating loss from continuing operations		(34,022	)		(21,954	)		(26,795	)		(31,633	)
Income (loss) from continuing operations before income taxes and minority interests		7,807			(8,888	)
Equity in earnings of unconsolidated subsidiaries		1,008			575			1,381			1,366
Income tax provision		(1,738	)		(5,617	)
Loss from continuing operations before income taxes and minority interests		(33,014	)		(21,379	)		(25,414	)		(30,267	)
Income (loss) from continuing operations before minority interests		6,069			(14,505	)
Income tax (provision) benefit		(1,366	)		3,783			(3,104	)		(1,834	)
Minority interest in consolidated subsidiaries		(6,117	)		(7,497	)
Loss from continuing operations before minority interests		(34,380	)		(17,596	)		(28,518	)		(32,101	)
Loss from continuing operations		(48	)		(22,002	)
Minority interest in consolidated subsidiaries		(3,306	)		(1,923	)		(9,423	)		(9,420	)
Discontinued operations:
Loss from continuing operations		(37,686	)		(19,519	)		(37,941	)		(41,521	)
Income (loss) from operations of discontinued hotels		2,050			(4,452	)
Discontinued operations:
Impairment loss		—			(1,963	)
Income (loss) from operations of discontinued hotels		1,560			4,382			3,817			(70	)
Gain (loss) on sale of assets		22,288			(1,018	)
Impairment loss		—			(340,258	)		—			(342,221	)
Income (loss) from discontinued operations before income taxes		24,338			(7,433	)
Gain on sale of assets		2,795			2,162			25,083			1,144
Income tax provision from discontinued operations		—			—
Income (loss) from discontinued operations before income taxes		4,355			(333,714	)		28,900			(341,147	)
Income (loss) from discontinued operations		24,338			(7,433	)
Income tax provision from discontinued operations		—			—			—			—
Net income (loss)	$	24,290		$	(29,435	)
Income (loss) from discontinued operations		4,355			(333,714	)		28,900			(341,147	)
Net income (loss) attributable to common shareholders:
Net loss	$	(33,331	)	$	(353,233	)	$	(9,041	)	$	(382,668	)
Net income (loss)	$	24,290		$	(29,435	)
Net loss attributable to common shareholders:
Preferred stock dividends		(44,190	)		(40,814	)
Net loss	$	(33,331	)	$	(353,233	)	$	(9,041	)	$	(382,668	)
Net loss attributable to common shareholders	$	(19,900	)	$	(70,249	)
Preferred stock dividends		(45,056	)		(41,622	)		(89,246	)		(82,435	)
Basic and diluted income (loss) per common share:
Net loss attributable to common shareholders	$	(78,387	)	$	(394,855	)	$	(98,287	)	$	(465,103	)
Loss from continuing operations, net of taxes	$	(0.26	)	$	(0.37	)
Basic and diluted income (loss) per common share:
Income (loss) from discontinued operations, net of taxes		0.14			(0.05	)
Loss from continuing operations, net of taxes	$	(0.48	)	$	(0.36	)	$	(0.74	)	$	(0.73	)
Net loss per common share	$	(0.12	)	$	(0.42	)
Income (loss) from discontinued operations, net of taxes		0.03			(1.97	)		0.17			(2.03	)
Net loss per common share	$	(0.45	)	$	(2.33	)	$	(0.57	)	$	(2.76	)

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

~~WYDHAM~~WYNDHAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months EndedMarch 31,
	Six Months Ended June 30,
	2005			2004
Cash flows from operating activities:
Net income (loss)	$	24,290		$	(29,435	)
Net loss	$	(9,041	)	$	(382,668	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		2756,~~530~~664			4894,~~222~~561
Amortization of unearned stock compensation		~~436~~891			~~774~~1,465
Amortization of deferred loan costs		48,~~656~~714			715,~~837~~779
Net (gain) loss on sale of assets		(22,288	)		1,018
Loss on extinguishment of debt		12,393			—
Gain on derivative financial instruments		(4,899	)		(8,032	)
Net gain on sale of assets		(25,083	)		(1,144	)
Impairment loss on assets		—			1,963
Gain on derivative financial instruments		(4,808	)		(23,000	)
Write-off of intangible assets		439			10
Impairment loss on assets		—			342,221
Write-off of deferred costs		3,529			1,050
Write-off of intangible assets		558			(202	)
Provision for bad debt expense		233			172
Write-off of deferred acquisition costs		3,836			1,276
Equity in earnings of unconsolidated subsidiaries		(373	)		(791	)
Provision for bad debt expense		281			(277	)
Minority interest in consolidated subsidiaries		6,223			7,608
Equity in earnings of unconsolidated subsidiaries		(1,381	)		(1,366	)
Deferred income taxes and reserve items		282			3,542
Minority interest in consolidated subsidiaries		9,530			9,528
Deferred income taxes and reserve items		889			(1,470	)
Changes in assets and liabilities:
Accounts receivable and other assets		(26,~~819~~823	)		(2010,~~604~~489	)
Inventory		1,~~513~~784			~~911~~1,016
Deferred income		36169			~~(152~~118	)
Accounts payable and other accrued expenses		(2046,~~461~~818	)		(1,~~361~~053	)
Net cash provided by operating activities		1815,~~327~~401			1244,~~732~~295
Cash flows from investing activities:
Improvements and additions to hotel properties		(2245,~~434~~578	)		(1028,~~729~~723	)
Proceeds from sale of assets		~~368~~394,~~647~~380			~~154~~161,~~322~~921
Changes in restricted cash accounts		1(82,~~897~~808	)		2633,~~419~~335
Collection on other notes receivable		5,~~921~~946			~~540~~604
Advances on other notes receivable		(36	)		(3338	)
Deferred costs		(950	)		(404	)
Deferred acquisition costs		(939	)		(118	)
Investment in unconsolidated subsidiaries		(934	)		—
Other		(75240	)		(8235	)
Net cash provided by investing activities		~~352~~269,~~069~~821			~~170~~166,~~107~~746
Cash flows from financing activities:
Borrowings under credit facility and mortgage notes		321,~~000~~519,245			1045,000
Repayments of borrowings under credit facility and mortgage notes		(~~389~~1,~~332~~747,184	)		(~~151~~234,~~590~~894	)
Payment of deferred loan costs		—(34,615	)		(701,794	)
Distributions made to minority interest in consolidated subsidiaries		(5,600	)		(6,172	)
Distributions made to minority interest in other consolidated subsidiaries		(7,930	)		(6,235	)
Other		611			9
Net cash used in financing activities		(~~362~~270,~~926~~473	)		(~~147~~197,~~823~~914	)
Effect of exchange rate changes on cash and cash equivalents		~~266~~195			~~277~~229
Net increase in cash and cash equivalents		714,~~736~~944			3513,~~293~~356
Cash and cash equivalents at beginning of period		24,338			62,441
Cash and cash equivalents at end of period	$	3239,~~074~~282		$	9775,~~734~~797

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

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(unaudited)

1.	Organization:

Wyndham International, Inc. (together with its consolidated subsidiaries, “we,” “us,” “Wyndham” or the “Company”) is a fully integrated hotel enterprise that operates primarily in the upper upscale and luxury segments. As of ~~March~~June 3130, 2005, we owned interests in 3130 hotels with approximately 1211,~~100~~800 guestrooms and leased 54 hotels from third parties with approximately ~~1,000~~800 guestrooms. In addition, we managed 3836 hotels for third party owners with approximately 109,~~500~~900 guestrooms, franchised 68 hotels with approximately 14,600 guestrooms and had a strategic alliance with a third party for eight hotels with approximately 2,400 guestrooms.

These financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement have been included. Operating results for the three and six months ended ~~March~~June 3130, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2004, as amended.

2. ~~Summary of Significant Accounting Policies~~Merger:

~~Principles~~On June 14, 2005, we entered into a definitive Merger Agreement to be acquired by an affiliate of ~~Consolidation—~~The ~~consolidated~~Blackstone ~~financial~~Group. ~~statements~~Under ~~include~~ the ~~accounts~~terms of ~~Wyndham~~the Merger Agreement, Blackstone will acquire all of our ~~wholly-owned~~outstanding ~~subsidiaries,~~shares ~~and~~of common stock for $1.15 per share in cash. Under the ~~partnerships,~~ ~~corporations,~~terms of the Merger Agreement the holders of shares of series A and ~~limited~~series B ~~liability~~Preferred ~~companies~~Stock will receive $72.17 per share in ~~which~~cash, wesubject ~~own~~to apotential ~~controlling~~adjustment ~~interest,~~to reflect additional shares issued as dividends after ~~the~~June 30, ~~elimination~~2005. Our board of ~~all~~directors ~~significant~~unanimously ~~intercompany~~approved ~~accounts~~the Merger Agreement and ~~transactions~~recommended approval by our stockholders.

~~Partnerships,~~The ~~Corporations~~completion ~~and~~of ~~Limited~~the ~~Liability~~Merger ~~Companies—In~~Agreement ~~December~~is ~~2003~~conditioned, ~~the~~among ~~Financial~~other ~~Accounting~~things, ~~Standards~~on ~~Board~~the ~~(“FASB”)~~approval ~~issued~~by ~~Interpretation~~our ~~No.~~stockholders ~~46(R),~~and ~~“Consolidation~~the oftermination ~~Variable~~or ~~Interest~~expiration ~~Entities”~~of ~~(“FIN~~the ~~46R”)~~waiting ~~which~~period ~~requires~~under athe ~~variable~~Hart-Scott-Rodino ~~interest~~Antitrust ~~entity~~Improvements ~~(“VIE”)~~Act toof be1976, ~~consolidated~~as byamended. aThe ~~company~~completion ifof ~~that~~the ~~company~~Merger Agreement is not subject to athe ~~majority~~receipt of ~~the~~financing ~~risk~~by Blackstone. ofThe ~~loss~~closing ~~from~~of the ~~VIE’s~~Merger ~~activities~~Agreement oris ~~entitled~~expected to ~~receive~~occur aas ~~majority~~soon ofas ~~the~~practicable ~~entity’s~~following ~~residual~~the ~~returns~~annual orstockholder ~~both.~~meeting Weto ~~adopted~~be ~~FIN~~held ~~46R~~on asAugust ~~of January 1~~11, ~~2004~~2005.

We previously entered into a definitive Recapitalization Agreement, dated as of April 14, 2005, with certain investors of our series B Preferred Stock in which all outstanding shares of series A and series B Preferred Stock would be converted into common stock. The transactions contemplated by the Recapitalization Agreement will occur only if the Merger Agreement is terminated prior to the completion of the merger with Blackstone.

3.	Summary of Significant Accounting Policies:

Principles of Consolidation

The consolidated financial statements include the accounts of Wyndham, our wholly-owned subsidiaries, and the partnerships, corporations, and limited liability companies in which we own a controlling interest, after the elimination of all significant intercompany accounts and transactions.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

Partnerships, Corporations and Limited Liability Companies

In December 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (“FIN 46R”) which requires a variable interest entity (“VIE”) to be consolidated by a company if that company is subject to a majority of the risk of loss from the VIE’s activities or entitled to receive a majority of the entity’s residual returns or both. We adopted FIN 46R as of January 1, 2004.

Stock Compensation

We account for our stock compensation arrangements under the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and we intend to continue to do so until we are required to expense stock-based employee compensation in compliance with the provisions of Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123R”). ~~Pursuant~~The ~~to a rule issued by the~~ Securities and Exchange Commission (the “SEC”) issued a rule on April 14, 2005 amending the ~~compliance~~effective ~~dates~~date for SFAS 123R. Under the rule, weSFAS 123R will become effective beginning January 1, 2006. Pursuant to the Merger Agreement with the Blackstone Group, all of our outstanding stock options will be ~~required~~exercised or cancelled upon closing of the merger, which is expected to ~~adopt~~close ~~SFAS~~as ~~123R~~soon ~~beginning~~as ~~January~~practicable 1following the annual stockholder meeting to be held on August 11, ~~2006~~2005. At ~~March~~June 3130, 2005, no stock-based employee compensation cost has been charged to earnings for options, as all options had an exercise price equal to the market value of the underlying ~~common~~ common stock on the date of grant. If the compensation cost for our stock option-based compensation plans had been determined based on the fair value at the grant dates for awards under the plans consistent with the method ~~pursuant~~required toby SFAS 123, “Accounting for Stock-Based Compensation”, our net loss and loss per common share would have increased to the pro forma amounts indicated below:

	Three Months EndedMarch 31,
	Three Months EndedJune 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net loss attributable to common shareholders, as reported	$	(1978,~~900~~387	)	$	(70394,~~249~~855	)	$	(98,287	)	$	(465,103	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(7876	)		(~~110~~312	)		(154	)		(469	)
Pro forma net loss attributable to common shareholders	$	(1978,~~978~~463	)	$	(70395,~~359~~167	)	$	(98,441	)	$	(465,572	)
Earnings per share:
Basic and diluted loss per common share—as reported	$	(0.1245	)	$	(02.4233	)	$	(0.57	)	$	(2.76	)
Basic and diluted loss per common share—pro forma	$	(0.1245	)	$	(02.4233	)	$	(0.57	)	$	(2.76	)

Intangibles

Our intangible assets are as follows:

	As of March 31, 2005					As of December 31, 2004
	GrossCarryingAmount		AccumulatedAmortization			GrossCarryingAmount		AccumulatedAmortization
Amortized intangible assets
Management contract costs	$	11,949	$	(7,382	)	$	11,954	$	(7,128	)
Leasehold costs		6,692		(290	)		6,723		(186	)
Trade name costs		121,852		(44,436	)		121,851		(42,739	)
Total amortized intangible assets	$	140,493	$	(52,108	)	$	140,528	$	(50,053	)
Unamortized intangible assets
Goodwill	$	391				$	391
Trademark		4,500					4,500
Total unamortized intangible assets	$	4,891				$	4,891

The aggregate amortization expense for the three-month periods ended March 31, 2005 and 2004 was $2,973 and $3,281, respectively.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

Intangibles

Our intangible assets are as follows:


	As of June 30, 2005					As of December 31, 2004
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
Management contract costs	$	11,394	$	(7,281	)	$	11,954	$	(7,128	)
Leasehold costs		133		(45	)		6,723		(186	)
Trade name costs		121,927		(46,144	)		121,851		(42,739	)

Total amortized intangible assets	$	133,454	$	(53,470	)	$	140,528	$	(50,053	)

Unamortized intangible assets
Goodwill	$	391				$	391
Trademark		4,500					4,500

Total unamortized intangible assets	$	4,891				$	4,891

The aggregate amortization expense for the six-month periods ended June 30, 2005 and 2004 was $5,901 and $6,161, respectively.

The estimated amortization expense for the next five years is as follows:

Remainder of 2005	$	64,~~731~~208
2006	$	8,~~884~~410
2007	$	87,~~252~~782
2008	$	87,~~184~~764
2009	$	7,~~981~~561

We review the carrying value of our intangible assets with finite lives including management contracts and leasehold costs whenever events or changes in circumstances arise that indicate the carrying amount of the asset may not be recoverable. If circumstances indicate that the carrying amount of an asset that we expect to hold and use may not be recoverable, we estimate the future cash flows expected to result from the use of the asset and its eventual disposition. Future cash flows are the future cash inflows expected to be generated by an asset less the future cash outflows expected to be necessary to obtain those inflows. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, we recognize an impairment loss as the amount by which the carrying amount of the asset exceeds its fair value. In addition, we periodically evaluate the remaining useful lives of our intangible assets to determine whether events or circumstances indicate that a revision of the remaining amortization period is warranted.

Recent Pronouncements

In May 2003, the FASB issued SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS 150 specifies that instruments within its scope embody obligations of the issuer and that, therefore, the issuer must classify them as liabilities. SFAS 150 was effective immediately for all financial instruments entered into or modified after May 31, 2003. For all other instruments, SFAS 150 went into effect at the beginning of the first interim period beginning after June 15, 2003, except for ~~mandatorily redeemable financial instruments of a non-public entity. For contracts that were created or modified before May 31, 2003 and still exist at the beginning of the first interim~~ period beginning after June 15, 2003, entities should record the transition to SFAS 150 by reporting the cumulative effect of a change in an accounting principle. SFAS 150 prohibits entities from restating financial statements for earlier years presented. On October 29, 2003, the FASB deferred the provisions of paragraphs 9 and 10 of SFAS 150 as they apply to mandatorily redeemable noncontrolling interests. Those provisions require that a mandatorily redeemable minority interest within the scope of SFAS 150 be classified as a liability on a parent company’s financial statement in certain situations, including when a finite-lived entity is consolidated. The deferral of those provisions is expected to remain in effect while certain issues are addressed in either Phase II of the FASB’s Liabilities and Equity project or Phase II of the FASB’s Business Combinations Project. However, the FASB did not defer the disclosure provisions relating to mandatorily redeemable noncontrolling interests. Therefore, in accordance with SFAS 150, if we liquidate the consolidated subsidiaries in which there exists a minority interest, we would be required to pay approximately $12,201 in cash. Such amount is lower than the carrying amount of the minority interest in consolidated subsidiaries by $5,255.

In December 2004, the FASB issued SFAS 123R. SFAS 123R is a revision of SFAS 123 and supersedes APB 25. Among other items, SFAS 123R eliminates the use of the intrinsic value method of accounting permitted under APB 25, and requires companies to expense the fair value of employee stock options and similar share-based payment awards. Under SFAS 123R, share-based payment awards are expensed based on the fair value of the awards on their grant dates and the estimated number of awards that are expected to vest. The fair values of the share-based payment awards are estimated using an option-pricing model that appropriately reflects a company’s specific circumstances and the economics of the company’s share-based payment transactions.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

~~Compensation~~mandatorily ~~expense~~redeemable ~~for~~financial ~~share~~instruments of a non-~~based~~public ~~payment~~entity. ~~awards~~For contracts that were created or modified before May 31, ~~along~~2003 ~~with~~and still exist at the beginning ~~related~~of ~~tax~~the ~~effects~~first interim period beginning after June 15, is2003, ~~recognized~~entities asshould record the ~~awards~~transition ~~vest.~~to SFAS ~~123R~~150 ~~also~~by ~~requires~~reporting the ~~tax benefit~~cumulative ~~associated~~effect ~~with~~of ~~these~~a ~~share-based~~change ~~payment~~in ~~awards~~an beaccounting ~~classified~~principle. asSFAS ~~financing~~150 ~~activities~~prohibits inentities from restating financial statements for earlier years presented. On October 29, 2003, the ~~statement~~FASB deferred the provisions of ~~cash~~paragraphs ~~flow~~9 ~~rather~~and ~~than~~10 ~~operating~~of ~~activities~~SFAS 150 as ~~currently~~they ~~permitted.~~apply ~~Pursuant~~ to amandatorily ~~rule~~redeemable ~~issued~~noncontrolling byinterests. ~~the~~Those ~~SEC~~provisions onrequire ~~April~~that ~~14,~~a ~~2005~~mandatorily ~~amending~~redeemable minority interest within the ~~compliance~~ ~~dates~~scope ~~for~~of SFAS ~~123R,~~150 webe ~~will~~classified beas ~~required~~a toliability ~~adopt~~on ~~SFAS~~a ~~123R~~parent ~~beginning~~company’s ~~January~~financial 1statement in certain situations, ~~2006~~including when a finite-lived entity is consolidated. The ~~provisions~~deferral of ~~SFAS~~those ~~123R~~provisions ~~apply~~is expected to remain ~~all~~in ~~outstanding~~effect ~~and~~while ~~unvested~~certain ~~share-based~~issues ~~payment~~are ~~awards~~addressed atin either Phase II of the ~~company~~FASB’s ~~adoption~~Liabilities ~~date.~~and ~~SFAS~~Equity ~~123R~~project ~~offers alternative~~or ~~transition~~Phase ~~methods~~II of ~~adopting~~the ~~this~~FASB’s ~~final~~Business ~~rule~~Combinations Project. AtHowever, the ~~present~~FASB ~~time~~did not defer the disclosure provisions relating to mandatorily redeemable noncontrolling interests. Therefore, in accordance with SFAS 150, if we ~~have~~liquidate ~~not~~the ~~determined~~consolidated subsidiaries in which ~~alternative~~there ~~method~~exists a minority interest, we ~~will~~would ~~use~~be required to pay approximately $11,142 in cash. Such amount is lower than the carrying amount of the minority interest in consolidated subsidiaries by $6,306.

~~Reclassification—Certain~~In ~~prior~~December ~~period~~2004, ~~balances~~the ~~have~~FASB ~~been~~issued ~~reclassified~~SFAS 123R. SFAS 123R is a revision of SFAS 123 and supersedes APB 25. Among other items, SFAS 123R eliminates the use of the intrinsic value method of accounting permitted under APB 25, and requires companies to ~~conform~~expense the fair value of employee stock options and similar share-based payment awards. Under SFAS 123R, share-based payment awards are expensed based on the fair value of the awards on their grant dates and the estimated number of awards that are expected to vest. The fair values of the ~~current~~share-based ~~period~~payment ~~presentation~~awards are estimated using an option-pricing model that appropriately reflects a company’s specific circumstances and the economics of the company’s share-based payment transactions. Compensation expense for share-based payment awards, along with nothe ~~effect~~related ontax effects, is recognized as the awards vest. SFAS 123R also requires the ~~previously~~tax ~~reported~~benefit ~~amounts~~associated with these share-based payment awards be classified as financing activities in the statement of ~~income~~cash orflow ~~accumulated~~rather ~~deficits~~than operating activities as currently permitted. The provisions of SFAS 123R apply to all outstanding and unvested share-based payment awards at the company’s adoption date. SFAS 123R offers alternative transition methods of adopting this final rule. The SEC issued a rule on April 14, 2005 amending the effective date for SFAS 123R. Under the rule, SFAS 123R will become effective beginning January 1, 2006.

3.Reclassification ~~Disposition of Assets~~

~~During~~Certain ~~the~~prior ~~three~~year ~~months~~balances have ~~ended~~been ~~March~~reclassified ~~31, 2005, we sold our investments in 23 hotels~~ to aconform private investment fund managed by Goldman Sachs and affiliates of Highgate Holdings and two additional hotel properties in separate transactions. We received net cash proceeds of approximately $229,664, after the repayment of mortgage debt of $138,983. We recorded a net gain of $21,979 as a result of these asset sales. Also, we used $209,972 of the net cash proceeds to ~~pay down a portion of~~ the current ~~portion~~year ofpresentation ~~our senior credit facility and term loans and we retained the rest of the net cash proceeds in accordance~~ with ~~the~~no ~~terms~~effect ofon ~~the~~previously ~~senior~~reported ~~credit facilities.~~amounts ~~We have three assets we expect to sell by the end~~ of ~~the~~income ~~third~~or ~~quarter~~accumulated ~~of 2005~~deficits.

4. ~~Investment~~Disposition inof ~~Wyndham Anatole~~Assets

During the six months ended June 30, 2005, we sold our investments in 23 hotels to a private investment fund managed by Goldman Sachs and affiliates of Highgate Holdings and three additional hotel properties in separate transactions. We also sold our leasehold interest in the Wyndham Manhattan and sold other land parcels during the six months ended June 30, 2005. We received net cash proceeds from these asset sales of approximately $255,397, after the repayment of mortgage debt of $138,983. We recorded a net gain of $25,083 as a result of these asset sales. Also, we used $221,091 of the net cash proceeds to pay down a portion of the senior credit facility and term loans and we retained the rest of the net cash proceeds in accordance with the terms of the senior credit facilities.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

5.	Investment in Wyndham Anatole

We adopted FIN 46R as of January 1, 2004. Pursuant to the adoption of FIN 46R, we evaluated our joint ventures, management and franchise contracts to determine whether any agreements qualify as VIEs and whether, as such, we meet the criteria of a primary beneficiary. We identified the Wyndham Anatole management contract as one of our VIE’s and Wyndham was identified as the primary beneficiary. Therefore, the Wyndham Anatole has been included in our consolidated financial statements. The Wyndham Anatole management contract has the following provisions:

•

Wyndham will secure a letter of credit in the amount of $21,000 which can be drawn by the owner if net operating income (“NOI”) generated by the hotel is insufficient to pay the primary debt service and first portion of the owner’s priority return. This letter of credit will be renewed annually, but if there are any amounts drawn against the letter of credit, only the remaining balance will be renewed.

•

NOI will be distributed as follows:

•

First, to the payment of debt service on the hotel’s first mortgage;

•

Second, to pay a preferred return to the owner (the amounts due under the debt service and owner return shall not exceed $28,000);

•

Third, to the payment of current and accrued interest on the Wyndham loans;

•

Fourth, to pay Wyndham a base management fee in an amount equal to 2% of gross revenues;

•

Fifth, to pay any owner accrued amount (as defined in the management agreement);

•

Sixth, to pay Wyndham an incentive management fee equal to 40% of NOI; and,

•

Seventh, any remaining NOI shall be distributed 50% to the owner and 50% to Wyndham.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except share amounts)

(unaudited)

•

If the hotel is sold during the 11^th to 20^th year of the contract, the sales proceeds (after the payment of closing costs and expenses) will be distributed as follows:

•

First, $330,000 would be paid to the hotel’s lender to satisfy the repayment of mortgage debt and as a priority return to the owner;

•

Second, to the payment of accrued and unpaid interest on, and the principal of, the Wyndham loans;

•

Third, to the payment of any unpaid owner accrued amount;

•

Fourth, to the payment to Wyndham of the unamortized portion of 50% of $67,000 (the amount paid to the owner at the inception of the agreement); and,

•

Fifth, 50% to the owner and 50% to Wyndham.

The Wyndham Anatole management contract met the FIN 46R criteria for consolidation into our financial statements due to the requirement that we reimburse the owner for any shortfall in the payment of mortgage debt and the owner’s preferred return prior to payment of management fees. This reimbursement is limited to $21,000 and is backed by a letter of credit. This $21,000 letter of credit triggers consolidation due to Wyndham being exposed to the majority of the risks of loss. As of ~~March~~June 3130, 2005, $4,667 had been drawn against this letter of credit. Even though our risk of loss is limited solely to the $21,000, our projections indicate that there is a remote possibility that the property will not be able to generate sufficient cash flow to cover debt service during the term of the management contract and, therefore, the owner has no risk of loss.

We consolidated the Wyndham Anatole as of March 31, 2005 and December 31, 2004 and for the three-month periods ended March 31, 2005 and March 31, 2004. This consolidation results in an increase of $307,164 and $310,172 in consolidated Wyndham assets at March 31, 2005 and December 31, 2004, respectively. Our balance sheet also reflects the Wyndham Anatole mortgage debt of $167,784 and $168,891 at March 31, 2005 and December 31, 2004, respectively, even though we are not a party to nor guarantor of this debt. Our net loss does not change as a result of the consolidation of the Wyndham Anatole as profit is 100% attributable to the owner and recorded as minority interest.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

We consolidated the Wyndham Anatole as of June 30, 2005 and December 31, 2004 and for the three and six-month periods ended June 30, 2005 and June 30, 2004. This consolidation results in an increase of $304,330 and $310,172 in consolidated Wyndham assets at June 30, 2005 and December 31, 2004, respectively. Our balance sheet also reflects the Wyndham Anatole mortgage debt and capital lease obligations of $166,923 and $168,891 at June 30, 2005 and December 31, 2004, respectively, even though we are not a party to nor guarantor of this debt. Our net loss does not change as a result of the consolidation of the Wyndham Anatole as profit is 100% attributable to the owner and recorded as minority interest.

Condensed financial information of the Wyndham Anatole is set forth below:

Condensed Balance Sheet:

	March 31,2005		December 31,2004
	June 30,2005		December 31,2004
ASSETS
Cash and cash equivalents	$	25,~~382~~156	$	1,141
Restricted cash		24,~~545~~708		4,785
Accounts receivable, net of allowance for doubtful accounts of $396 in 2005 and $368 in 2004		8,973		8,952
Accounts receivable, net of allowance for doubtful accounts of $366 in 2005 and $368 in 2004		5,334		8,952
Investment in real estate and related improvements, net of accumulated depreciation of $35,385 in 2005 and $32,354 in 2004		291,636		293,745
Investment in real estate and related improvements, net of accumulated depreciation of $40,162 in 2005 and $32,354 in 2004		287,498		293,745
Other assets		1,~~628~~634		1,549
Total assets	$	~~307~~304,~~164~~330	$	310,172
LIABILITIES AND SHAREHOLDERS’ EQUITY
Trade accounts payable	$	1,~~899~~292	$	2,198
Accrued payroll costs		2,~~471~~165		3,164
Accrued insurance and property taxes		~~800~~1,600		3,086
Other liabilities		2,~~707~~646		3,344
Advance deposits		1,~~856~~004		1,672
Intercompany items with Wyndham		8786,~~743~~634		88,852
Mortgage debt and capital lease obligations		~~167~~166,~~784~~923		168,891
Minority interest		4142,~~904~~066		38,965
Wyndham equity		—		—
Total liabilities and shareholders’ equity	$	~~307~~304,~~164~~330	$	310,172

Condensed Statement of Operations:

	Three Months EndedMarch 31,
	2005			2004
Revenues:
Room revenues	$	12,764		$	13,419
Food and beverage revenues		16,357			17,225
Other hotel revenues		1,618			1,679
Total revenues		30,739			32,323
Expenses:
Room expenses		2,976			3,079
Food and beverage expenses		8,345			8,756
Other hotel expenses		7,906			8,303
Total hotel expenses		19,227			20,138
Interest expense		3,150			3,195
Depreciation and amortization		3,031			2,223
Total expenses		25,408			25,556
Income before intercompany items and minority interest		5,331			6,767
Intercompany items with Wyndham		677			729
Minority interest		(6,008	)		(7,496	)
Net income attributable to Wyndham equity	$	—		$	—

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

5.Condensed ~~Line~~Statement of ~~Credit Facility, Term Loans, Mortgage and Other Notes and Capital Lease Obligations~~Operations:

On May 10, 2005, we completed the refinancing of our corporate credit facilities and the majority of our outstanding mortgage debt. We entered into a $1,650,000 refinancing, extending our corporate debt maturities to 2011. This represents approximately 90 percent of our outstanding debt. Additionally, the debt pre-funds $100,000 in capital to be invested into our owned and leased properties.


	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenues:
Room revenues	$	10,970		$	9,822		$	23,734		$	23,241
Food and beverage revenues		15,219			12,137			31,576			29,362
Other hotel revenues		2,166			1,999			3,784			3,678

Total revenues		28,355			23,958			59,094			56,281

Expenses:
Room expenses		2,763			2,197			5,739			5,276
Food and beverage expenses		7,566			7,189			15,911			15,945
Other hotel expenses		7,545			7,683			15,451			15,986

Total hotel expenses		17,874			17,069			37,101			37,207
Interest expense		3,136			3,208			6,286			6,403
Depreciation and amortization		4,777			2,490			7,808			4,713

Total expenses		25,787			22,767			51,195			48,323

Income before intercompany items and minority interest		2,568			1,191			7,899			7,958
Intercompany items with Wyndham		662			727			1,339			1,456
Minority interest		(3,230	)		(1,918	)		(9,238	)		(9,414	)

Net income attributable to Wyndham equity	$	—		$	—		$	—		$	—

As6. aLine ~~result~~ of ~~existing~~Credit ~~financing agreements~~Facility, ~~the~~Term ~~separate assets and liabilities of the special purpose entities which own directly or indirectly the Wyndham Baltimore~~Loans, ~~Wyndham~~Mortgage ~~Boston, Wyndham El San Juan Hotel~~ and ~~Casino,~~Other ~~Wyndham~~Notes ~~Bel Age, Wyndham San Diego, Wyndham Philadelphia, Wyndham Buttes Resort, Wyndham Burlington, Wyndham Northwest Chicago~~ and ~~Wyndham~~Capital ElLease Conquistador Resort and Country Club properties are not available to pay the debts of consolidated Wyndham and do not constitute obligations of consolidated Wyndham. However, amounts permitted to be distributed by such special purpose entities to consolidated Wyndham are available to consolidated Wyndham in accordance with such existing financing agreements. Obligations:

~~Outstanding~~On ~~borrowings~~May as10, 2005, we completed the refinancing of ~~March~~our ~~31,~~corporate ~~2005~~credit facilities and ~~December~~the ~~31,~~majority ~~2004~~of ~~under~~our ~~the~~outstanding ~~line~~mortgage debt. We entered into a refinancing of ~~credit~~approximately $1,650,000 ~~term~~of ~~loans~~our debt, ~~various~~extending ~~mortgage~~our ~~and~~corporate ~~other~~debt ~~notes~~maturities ~~and~~to ~~capital~~2011. ~~lease~~This ~~obligations~~represented ~~consisted~~approximately 90 percent of our outstanding debt at the ~~following:~~time of the closing. Additionally, the debt pre-funds up to $100,000 of capital to invest in our owned and leased properties.

Description	March 31,2005			December 31,2004			Amortization		Interest Rate(1)		Maturity
Revolving credit facility III	$	—		$	—		None		LIBOR + 4.75%		April 1, 2006(2)
Revolving credit facility IV		23,060			68,589		None		LIBOR + 5.75%		April 1, 2006(2)
Term loans I		744,119			870,794		(3	)	LIBOR + 5.75%(4)		June 30, 2006
Term loans II		243,248			284,196		(5	)	LIBOR + 5.75%		April 1, 2006
Lehman Brothers Holdings Inc. II		127,379			128,015		(6	)	LIBOR + 1.8%		August 10, 2005
Lehman Brothers Holdings Inc. III		—			10,735		(7	)	8.0%(7)		September 10, 2005
Lehman Brothers Holdings Inc. IV		168,644			266,094		(8	)	7.86%(8)		July 8, 2005
Lehman Brothers Holdings Inc. (Condado)		92,317			92,740		(9	)	LIBOR + 4.25%(9)		November 9, 2005
CSFB Pool		9,718			28,040		None		LIBOR + 1.2%		July 9, 2006(10)
Other mortgage notes payable(11)		223,934			238,926		Various		(12	)	(12)
Unsecured financing		1,510			1,510		None		10.5%		May 15, 2006
Capital lease obligations		38,441			38,956
Capital lease obligations (Wyndham Anatole)		567			621
Cigna Insurance (Wyndham Anatole)		167,217			168,270		(13	)	7.48%		August 1, 2011
	$	1,840,154		$	2,197,486
Less current portion:
Mortgage debt-assets held for sale		—			(114,251	)
Current portion of borrowings		(562,349	)		(685,145	)
Long term debt	$	1,277,805		$	1,398,090

During the three and six months ended June 30, 2005, we recorded a loss on the extinguishment of debt of $19,925 (including $7,532 of cash expenses related to replacement debt) resulting from the refinancing of our corporate credit facilities and the majority of our outstanding mortgage debt.

As a result of existing financing agreements, the separate assets and liabilities of the special purpose entities which own directly or indirectly the Wyndham Baltimore, Wyndham Boston, Wyndham El San Juan Hotel and ~~refinancing~~Casino, onWyndham ~~May~~Bel 10Age, ~~2005~~Wyndham San Diego, ~~$293~~Wyndham Philadelphia,~~201~~ ofWyndham ~~the~~Buttes ~~current~~Resort, ~~portion~~Wyndham Burlington, Wyndham Northwest Chicago, Wyndham El Conquistador Resort and Country Club, Wyndham Ft. Lauderdale Airport, Wyndham Casa Marina Resort, Wyndham Reach Resort, Wyndham Atlanta Downtown and Wyndham Condado Plaza properties are not available to pay the debts of ~~borrowings~~consolidated Wyndham and do not constitute obligations of ~~$562~~consolidated Wyndham. However,~~349~~ ~~has~~amounts ~~been~~permitted ~~extended~~to be distributed by such special purpose entities to ~~2011~~consolidated Wyndham are available to consolidated Wyndham in accordance with such existing financing agreements.

(1) The weighted average interest rate was 7.39% and 7.04% as of March 31, 2005 and December 31, 2004, respectively.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

~~(2)~~Outstanding Weborrowings ~~entered~~as ~~into~~of ~~amendments~~June ~~and~~30, ~~restatements~~2005 ofand ~~our~~December ~~senior~~31, ~~credit~~2004 ~~facilities.~~under ~~The~~the ~~consenting~~line ~~lenders’~~of ~~maturity~~credit, ~~dates~~term loans, ~~for~~various ~~the~~mortgage ~~revolving~~and ~~credit~~other ~~facility~~notes and ~~the~~capital ~~term~~lease ~~loans~~obligations IIconsisted ~~were~~of ~~extended~~the tofollowing: ~~April 1, 2006.~~

(3) A principal payment of $5,000 is to be paid each six months until the final payment of principal, which is due on June 30, 2006.


Description	June 30, 2005			December 31, 2004			Amortization	Interest Rate(1)	Maturity
Revolving credit facility IV	$	—		$	68,589		None	LIBOR + 5.75%	April 1, 2006(2)
Revolving credit facility		20,368			—		None	LIBOR + 3.25%	May 10, 2011(2)
Term loans I		—			870,794		(3)	LIBOR + 5.75%(4)	June 30, 2006(2)
Term loans II		—			284,196		(5)	LIBOR + 5.75%	April 1, 2006(2)
Term loans B		528,675			—		(6)	LIBOR + 3.25%	May 10, 2011(2)
Term loans C		139,650			—		(7)	LIBOR + 8.00%	December 10, 2011(2)
Lehman Brothers Holdings Inc. II		—			128,015		(8)	LIBOR + 1.8%	August 10, 2005(2)
Lehman Brothers Holdings Inc. III		—			10,735		(9)	LIBOR + 5.57%	September 10, 2005(9)
Lehman Brothers Holdings Inc. IV		167,736			266,094		(10)	8.33%(10)	July 8, 2006(11)
Lehman Brothers Holdings Inc. (Condado)		91,887			92,740		(12)	LIBOR + 4.25%(12)	November 9, 2005
Eight-property CMBS		675,000			—		None	LIBOR + 3.37%	June 9, 2007(13)
Six-property mezzanine loan		100,000			—		None	LIBOR + 5.75%	July 31, 2005(14)
CSFB Pool		—			28,040		None	LIBOR + 1.2%	July 9, 2006(2)
Nomura Securities (Buena Vista)		39,628			40,626		(15)	9.11%	March 11, 2016
Other mortgage notes payable		—			198,300		Various	(16)	(2)
Unsecured financing		1,510			1,510		None	10.50%	May 15, 2006
Capital lease obligations		38,171			38,956
Capital lease obligations (Wyndham Anatole)		514			621
Cigna Insurance (Wyndham Anatole)		166,409			168,270		(17)	7.48%	August 1, 2011

	$	1,969,548		$	2,197,486
Less current portion:
Mortgage debt-assets held for sale		—			(114,251	)
Current portion of borrowings		(211,761	)		(685,145	)

Long term debt	$	1,757,787		$	1,398,090

(41) 1%The ofweighted ~~the~~average interest rate ~~spread~~on isour ~~paid-in-kind~~debt was 7.46% and is7.04% ~~payable~~as atof ~~maturity~~June 30, 2005 and December 31, 2004, respectively.

(52) AOn ~~principal~~May ~~payment~~10, of2005, ~~0.5%~~we ofcompleted the ~~outstanding~~refinancing ~~principal~~of ~~balance~~our isrevolving tocredit befacility, ~~paid~~term ~~each~~loans ~~six~~and ~~months~~the ~~until~~majority ~~the~~of ~~final~~our ~~payment~~mortgage ofdebt. The maturity date for the ~~principal,~~new ~~which~~revolving credit facility and term loan B is ~~due~~May on10, ~~April~~2011. 1The maturity date for term loan C is December 10, ~~2006~~2011.

(63) ~~The~~A ~~loan~~principal ispayment ~~collateralized by three hotel properties with a net book value~~ of $~~186~~5,~~369~~000 aswas ofpaid ~~March~~each ~~31,~~six ~~2005~~months. We must make scheduled amortization payments as set forth in the loan agreement. The loan agreement provides that we can elect to extend the term of the loan for one additional twelve-month period, provided that there is not a default under the loan and other minor conditions are met which are within our control.

(74) ~~The~~1% ~~hotel~~of ~~properties were sold on March 24, 2005 and~~ the ~~mortgage~~interest ~~debt~~rate spread was paid -in ~~full~~-kind.

(85) ~~The~~A ~~loan~~principal ispayment ~~collateralized by six hotel properties with a net book value~~ of ~~$286,800 as of March 31, 2005~~0. We must make scheduled amortization payments as set forth in the loan agreement. The loan agreement provides that we can elect to extend the term of the loan for three additional twelve-month periods, provided that there is not a default under the loan and other minor conditions are met which are within our control. The interest rate is the sum of (x) the greater of (i) LIBOR or (ii) 2.5% ~~plus (y) the then effective spread as set forth in the loan agreement. As~~ of ~~March 31, 2005,~~ the ~~spread~~outstanding isprincipal ~~4.99%~~balance ~~and~~was ~~LIBOR~~paid iseach ~~2.87%,~~six ~~which results in a current interest rate of 7~~months.~~86%. The interest rate is adjustable as LIBOR and the spread changes over the life of the loan. Over the life of the loan, the average spread is 5%.~~

(96) ~~The~~A ~~loan~~principal ispayment ~~collateralized by one hotel property with a net book value~~ of $951,~~909~~325 as of March 31, 2005. The interest rate has a 2% LIBOR floor. The loan agreement provides that we can elect to extend the term of the loan for three additional twelve-month periods, provided that there is ~~not~~paid aeach ~~default under the loan and other minor conditions are met which are within our control~~quarter.

(107) ~~The~~A ~~loan~~principal ispayment ~~collateralized by one hotel property with a net book value~~ of $~~35,174~~350 ~~as of March 31, 2005. The loan agreement provides that we can elect to extend the term of the loan for three additional twelve-month periods, provided that there~~ is ~~not~~paid aeach ~~default under the loan and other minor conditions are met which are within our control~~quarter.

(11) The loans are collateralized by five hotel properties and a parcel of land with a net book value of $507,857 as of March 31, 2005.

(12) Interest rates range from fixed rates of 9.08% to 9.11% and variable rates of LIBOR plus 1.5% to LIBOR plus 4.5%. The mortgages have a weighted average interest rate as of March 31, 2005 of 6.27%. Maturity dates range from 2005 through 2016.

(13) The loan is collateralized by the Anatole hotel with a net book value of $291,636 as of March 31, 2005. We are not party to nor guarantor of this loan. (See note 4 to the Condensed Consolidated Financial Statements).

Under the terms of the related loan agreements and capital lease obligations, principal amortization and balloon payment requirements at March 31, 2005 are as follows:

Year	Amount
Remainder of 2005	$	560,186	(1)
2006		1,048,057	(2)
2007		8,615
2008		8,060
2009		6,965
2010 and thereafter		208,271
	$	1,840,154	(3)

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

(18) AsThe aloan ~~result~~was ofcollateralized ~~the~~by ~~refinancing~~three onhotel ~~May 10, 2005, $293,201 of the $560,186 that matures during the remainder of 2005 has been extended to 2011~~properties. InWe ~~addition,~~made wescheduled ~~can~~amortization ~~elect~~payments toas ~~extend~~set ~~$260,961~~forth ~~for~~in ~~three additional twelve-month periods provided there is not a default under~~ the ~~loans~~loan ~~and other minor conditions are met which are within our control~~agreement. ~~The remaining maturities represent $6,024 related to normal principal amortization.~~

(29) The ~~refinancing~~mortgaged onhotel ~~May~~properties ~~10,~~were ~~2005~~sold ~~also~~on ~~extended~~March $124,~~039,652~~ of2005 and the ~~$1,048,057 of~~ debt ~~maturing~~was paid in ~~2006 to 2011~~full.

(310) The ~~Wyndham~~loan ~~Anatole~~is ~~debt~~collateralized ~~and~~by ~~capital~~six ~~lease~~hotel ~~obligations~~properties with a net book value of $~~167~~284,~~784~~898 as of June 30, 2005. We must make scheduled amortization payments as set forth in the loan agreement. The interest rate is ~~included~~the sum of (x) the greater of (i) LIBOR or (ii) 2.5% plus (y) the then effective spread as set forth in the loan agreement. As of June 30, ~~however~~2005, wethe ~~are~~spread ~~not~~is 4.99% and LIBOR is 3.34%, which results in a ~~party~~current tointerest ~~nor~~rate ~~guarantor~~of 8.33%. The interest rate is adjustable as LIBOR and the spread changes over the life of ~~this~~the ~~debt~~loan. ~~(see~~Over ~~note~~the 4life toof the ~~Condensed~~loan, ~~Consolidated~~the ~~Financial~~average ~~Statements)~~spread is 5%.

6(11) The maturity date was July 8, 2005 as of June 30, 2005, but was subsequently extended to July 8, 2006. ~~Derivatives:~~The loan agreement provides that we can elect to extend the term of the loan for two additional twelve-month periods, provided that there is not a default under the loan and other statutory conditions are met which are within our control.

We(12) ~~manage~~The ~~our~~loan ~~debt~~is ~~portfolio~~collateralized by ~~using~~one ~~interest~~hotel ~~rate~~property ~~caps~~with ~~and~~a ~~swaps~~net tobook ~~achieve~~value anof ~~overall~~$98,351 ~~desired~~as ~~position~~ of ~~fixed~~June ~~and~~30, ~~floating rates~~2005. The ~~fair value of~~ interest rate ~~hedge~~has ~~contracts~~a is2% ~~estimated~~LIBOR ~~based~~floor. onThe ~~quotes~~loan ~~from~~agreement ~~the~~provides ~~market~~that ~~makers of these instruments and represents the estimated amounts~~ we ~~would~~can ~~expect~~elect to ~~receive~~extend ~~or pay to terminate~~ the ~~contracts.~~term ~~Credit~~of ~~and market risk exposures are limited to~~ the ~~net~~loan ~~interest~~for ~~differentials~~three ~~and~~additional ~~counterparty~~twelve-month ~~risk. At March 31~~periods, ~~2005,~~provided ~~the~~that ~~estimated~~there ~~fair~~is ~~value~~not ~~of the interest rate hedges represented~~ a ~~liability~~default ofunder ~~$342.~~the Weloan ~~have~~and noother ~~embedded~~statutory ~~derivatives~~conditions ~~under~~are ~~SFAS~~met ~~133,~~which asare ~~amended,~~within atour ~~March 31, 2005~~control.

(13) The ~~following~~loan ~~table~~is ~~represents~~collateralized ~~the~~by ~~derivatives~~eight inhotel ~~place~~properties with a net book value of $588,644 as of ~~March~~June 3130, 2005:. The loan agreement provides that we can elect to extend the term of the loan for three additional twelve-month periods, provided that there is not a default under the loan and other statutory conditions are met which are within our control.

	NotionalAmount		MaturityDate	Swap Rate		Cap Rate		Floor Rate	Trigger Level		Fair Value
Type of Hedge:
Interest Rate Cap (2)	$	268,344	7/9/05	n/a		4.25	%	n/a	n/a		$	—
Interest Rate Cap (2)		146,369	7/9/05	n/a		4.25	%	n/a	n/a			—
Interest Rate Cap (1)		104,760	7/1/05	n/a		9.75	%	n/a	n/a			—
Interest Rate Cap (1)		172,147	8/10/05	n/a		7.25	%	n/a	n/a			—
Interest Rate Cap (2)		19,304	9/10/05	n/a		7.00	%	n/a	n/a			—
Interest Rate Cap (2)		12,548	9/10/05	n/a		7.00	%	n/a	n/a			—
Interest Rate Cap (2)		6,756	9/10/05	n/a		7.00	%	n/a	n/a			—
Interest Rate Cap (1)		92,317	11/15/05	n/a		5.75	%	n/a	n/a			—
Interest Rate Cap (2)		13,300	9/2/06	n/a		7.00	%	n/a	n/a			—
Interest Rate Cap (2)		12,000	9/2/06	n/a		7.00	%	n/a	n/a			—
Interest Rate Cap (2)		5,800	9/2/06	n/a		7.00	%	n/a	n/a			—
Interest Rate Cap (2)		3,900	9/2/06	n/a		7.00	%	n/a	n/a			—
	$	857,545									$	—
Interest Rate Swap (2)	$	28,358	9/30/05	4.62	%	n/a		n/a	n/a		$	52
Interest Rate Swap (2)		27,885	12/30/05	7.00	%	n/a		n/a	5.61	%		(2	)
Interest Rate Swap (2)		42,563	8/1/05	4.36	%-5.25%	7.85	%	n/a	5.75	%		(392	)
	$	98,806									$	(342	)
Total Caps and Swaps	$	956,351									$	(342	)

(14)	The loan is collateralized by the six hotel properties that also collateralize the Lehman Brothers Holdings Inc. IV loan. The maturity date was July 31, 2005 as of June 30, 2005, but has been subsequently extended to August 31, 2005.

(15)	The loan is collateralized by one hotel property with a net book value of $130,820 as of June 30, 2005. We must make scheduled amortization payments over 20 years as set forth in the loan agreement.

(16)	Interest rates included a fixed rate of 9.08% and variable rates ranging from LIBOR plus 1.5% to LIBOR plus 4.5%. Maturity dates ranged from 2005 to 2007.

(17)	The loan is collateralized by the Anatole hotel with a net book value of $287,498 as of June 30, 2005. We are not party to nor guarantor of this loan. (See note 5 to the Condensed Consolidated Financial Statements).

Under the terms of the related loan agreements and capital lease obligations, principal amortization and balloon payment requirements at June 30, 2005 are as follows:


Year	Amount
Remainder of 2005	$	200,962	(1)
2006		182,682	(2)
2007		690,314
2008		14,760
2009		13,993
2010 and thereafter		866,837

	$	1,969,548	(3)

(1)	We can elect to extend $91,887 for three additional twelve-month periods provided there is not a default under the loan and other statutory conditions are met which are within our control. The remaining maturities include a

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

$100,000 six-property mezzanine loan, which was due July 31, 2005 as of June 30, 2005 but has been subsequently extended to August 31, 2005, and $9,075 million related to normal principal amortization.

(2)	We can elect to extend $166,069 for two additional twelve-month periods provided there is not a default under the loan and other statutory conditions are met which are within our control.

(3)	The Wyndham Anatole debt and capital lease obligations of $166,923 are included, however, we are not a party to nor guarantor of this debt (see note 5 to the condensed consolidated financial statements).

7.	Derivatives:

We manage our debt portfolio by using interest rate caps and swaps to achieve an overall desired position of fixed and floating rates. The fair value of interest rate hedge contracts is estimated based on quotes from the market makers of these instruments and represents the estimated amounts we would expect to receive or pay to terminate the contracts. Credit and market risk exposures are limited to the net interest differentials and counterparty risk. At June 30, 2005, the estimated fair value of the interest rate hedges represented an asset of $355. We have no embedded derivatives under SFAS 133, as amended, at June 30, 2005.

The following table represents the derivatives in place as of June 30, 2005:


	Notional Amount		Maturity Date	Swap Rate	Cap Rate		Floor Rate	Trigger Level		Fair Value
Type of Hedge:
Interest Rate Cap(2)	$	267,272	7/9/05	n/a	4.25	%	n/a	n/a		$	—
Interest Rate Cap(2)		145,785	7/9/05	n/a	4.25	%	n/a	n/a			—
Interest Rate Cap(2)		104,070	7/1/05	n/a	9.75	%	n/a	n/a			—
Interest Rate Cap(2)		171,497	8/10/05	n/a	7.25	%	n/a	n/a			—
Interest Rate Cap(2)		19,227	9/10/05	n/a	7.00	%	n/a	n/a			—
Interest Rate Cap(2)		12,497	9/10/05	n/a	7.00	%	n/a	n/a			—
Interest Rate Cap(2)		6,729	9/10/05	n/a	7.00	%	n/a	n/a			—
Interest Rate Cap(1)		91,887	11/15/05	n/a	5.75	%	n/a	n/a			—
Interest Rate Cap(2)		13,300	9/2/06	n/a	7.00	%	n/a	n/a			—
Interest Rate Cap(2)		12,000	9/2/06	n/a	7.00	%	n/a	n/a			—
Interest Rate Cap(2)		5,800	9/2/06	n/a	7.00	%	n/a	n/a			—
Interest Rate Cap(2)		3,900	9/2/06	n/a	7.00	%	n/a	n/a			—
Interest Rate Cap(2)		100,000	8/9/07	n/a	5.50	%	n/a	n/a			62
Interest Rate Cap(1)		475,000	6/9/07	n/a	5.50	%	n/a	n/a			200
Interest Rate Cap(1)		50,000	6/9/07	n/a	5.50	%	n/a	n/a			21
Interest Rate Cap(1)		50,000	6/9/07	n/a	5.50	%	n/a	n/a			21
Interest Rate Cap(1)		100,000	6/9/07	n/a	5.50	%	n/a	n/a			42

	$	1,628,964								$	346

Interest Rate Swap(2)	$	26,872	9/30/05	4.62%	n/a		n/a	n/a		$	9
Interest Rate Swap(2)		26,425	12/30/05	7.00%	n/a		n/a	5.61	%		—

	$	53,297								$	9

Total Caps and Swaps	$	1,682,261								$	355

(1)	Effective derivatives.

(2)	Ineffective derivatives.

1213

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

For the three months ended ~~March~~June 3130, 2005, we recorded a ~~gain~~loss of $~~8,207~~91 for the change in the ~~value~~fair market value of the ineffective interest rate hedge contracts through earnings, and a ~~credit~~charge of $76659 (net of taxes of $0) to other comprehensive income for the change in the fair market value of the effective interest rate hedge contracts. ~~Also,~~In addition, during the three months ended ~~March~~June 3130, 2005, we ~~recorded amortization of $594 (net of taxes of $0) to earnings as a reduction of the transitional adjustment that was recorded in other comprehensive income in 2001. Additionally, we~~ paid $~~4,708~~90 in settlement payments for the ineffective hedges ~~and recorded a charge to earnings of $2,714 to write-off expired derivative instruments during the three months ended March 31, 2005~~. The charge to earnings for the write-off of expired derivative instruments resulted from transition adjustments recorded upon adoption of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended, on January 1, 2001.

For the three months ended March 31, ~~2004~~2005, we recorded a gain of $98,~~516~~207 for the change in the ~~fair market~~ value of the ineffective interest rate hedge contracts through earnings, and a ~~charge~~credit of $~~149~~76 (net of taxes of $990) to other comprehensive income for the change in the fair market value of the effective interest rate hedge contracts. Also, during the three months ended March 31, ~~2004~~2005, we recorded amortization of $~~890~~594 (net of taxes of $~~594~~0) to earnings as a reduction of the transitional adjustment that was recorded in other comprehensive income in 2001. Additionally, we paid $124,~~368~~708 in settlement payments for the ineffective hedges and recorded a charge to earnings of $2,714 and a credit to other comprehensive income of $4,748 to write-off expired derivative instruments during the three months ended March 31, ~~2004~~2005. The charge to earnings and credit to other comprehensive income for the write-off of expired derivative instruments resulted from transition adjustments recorded upon adoption of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended, on January 1, 2001.

For the three months ended June 30, 2004, we recorded a gain of $16,453 for the change in the fair market value of the ineffective interest rate hedge contracts through earnings and a charge of $20 (net of taxes of $14) to other comprehensive income for the change in the fair market value of the effective interest rate hedge contracts. Also, during the three months ended June 30, 2004, we recorded amortization of $890 (net of taxes of $594) to earnings as a reduction of the transitional adjustment that was recorded in other comprehensive income in 2001. In addition, during the three months ended June 30, 2004, we paid $12,566 in settlement payments for the ineffective hedges.

For the three months ended March 31, 2004, we recorded a gain of $9,516 for the change in the fair market value of the ineffective interest rate hedge contracts through earnings and a charge of $149 (net of taxes of $99) to other comprehensive income for the change in the fair market value of the effective interest rate hedge contracts. Also, during the three months ended March 31, 2004, we recorded amortization of $890 (net of taxes of $594) to earnings as a reduction of the transitional adjustment that was recorded in other comprehensive income in 2001. In addition, during the three months ended March 31, 2004, we paid $12,368 in settlement payments for the ineffective hedges.

Accounting for Derivatives and Hedging Activities

On the date we enter into a derivative contract, we designate the derivative as a hedge of (a) a forecasted transaction or (b) the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a “cash flow hedge”). Currently, we have only entered into derivative contracts designated as cash flow hedges. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge, to the extent that the hedge is effective, are recorded in other comprehensive income until earnings are affected by the variability of cash flows of the hedged transaction (e.g., until periodic settlements of a variable-rate asset or liability are recorded in earnings). Any hedge ineffectiveness (which represents the amount by which the changes in the fair value of the derivative exceed the variability in the cash flows of the forecasted transaction) is recorded in current-period earnings. Changes in the fair value of non-hedging instruments are reported in current-period earnings.

We formally document all relationships between hedging instruments and hedged items, as well as ~~its~~the risk-management ~~objective~~objectives and ~~strategy~~strategies for undertaking various hedge transactions. This process includes linking ~~all derivatives that are designated as cash flow hedges to (1) specific assets and liabilities on the balance sheet or (2) specific firm commitments or forecasted transactions. We also~~ formally assess (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. When it is determined that a derivative is not (or has ceased to be) highly effective as a hedge, we discontinue hedge accounting prospectively.

We14 discontinue hedge accounting prospectively when (1) we determine that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated, or exercised; (3) it is no longer probable that the forecasted transaction will occur; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designating the derivative as a hedging instrument is no longer appropriate.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

all derivatives that are designated as cash flow hedges to (1) specific assets and liabilities on the balance sheet or (2) specific firm commitments or forecasted transactions. We also formally assess (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. When it is determined that a derivative is not (or has ceased to be) highly effective as a hedge, we discontinue hedge accounting prospectively.

We discontinue hedge accounting prospectively when (1) we determine that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated, or exercised; (3) it is no longer probable that the forecasted transaction will occur; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designating the derivative as a hedging instrument is no longer appropriate.

When we discontinue hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period, the gain or loss on the derivative remains in accumulated other comprehensive income and is reclassified into earnings when the forecasted transaction affects earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses that were accumulated in other comprehensive income will be recognized immediately in earnings. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, we will carry the derivative at its fair value on the balance sheet, recognizing changes in the fair value in current-period earnings.

78. Comprehensive Income:

SFAS 130, “Reporting Comprehensive Income” establishes standards for reporting and displaying comprehensive income and its components. Total comprehensive income for the three and six-month periods ended ~~March~~June 3130, 2005 and 2004 is calculated as follows:

	Three Months EndedMarch 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net income (loss)	$	24,290		$	(29,435	)
Net loss	$	(33,331	)	$	(353,233	)	$	(9,041	)	$	(382,668	)
Change in unrealized gain on securities held for sale		~~(129~~153	)		25(6	)		24			19
Change in unrealized foreign translation loss		74(156	)		~~267~~5			(82	)		272
Change in unrealized loss on derivative instruments		~~5,418~~(659	)		~~742~~911			4,759			1,653
Total comprehensive income	$	29(33,~~653~~993	)	$	(28352,~~401~~323	)	$	(4,340	)	$	(380,724	)

8.15 ~~Computation of Earnings Per Share:~~

Basic and diluted loss per share have been computed as follows:

	Three Months EndedMarch 31,
	2005(1)			2004(1)
Loss from continuing operations	$	(48	)	$	(22,002	)
Income (loss) from discontinued operations		24,338			(7,433	)
Preferred stock dividends		(44,190	)		(40,814	)
Net loss attributable to common shareholders	$	(19,900	)	$	(70,249	)
Weighted average number of shares outstanding		172,003			168,255
Income (loss) per common share:
Loss from continuing operations	$	(0.26	)	$	(0.37	)
Income (loss) from discontinued operations		0.14			(0.05	)
Net loss per common share	$	(0.12	)	$	(0.42	)

(1) For the three months ended March 31, 2005, the dilutive effect of unvested stock grants of 6,086, options to purchase 8,256 shares of common stock at prices ranging from $0.20 to $30.40 and 188,372 shares of preferred stock on an as converted basis were not included in the computation of diluted earnings per share because they are anti-dilutive. For the three months ended March 31, 2004, the dilutive effect of unvested stock grants of 12,976, options to purchase 10,460 shares of common stock at prices ranging from $0.20 to $30.40 and 171,806 shares of preferred stock on an as converted basis were not included in the computation of diluted earnings per share because they are anti-dilutive.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

9. ~~Commitments~~Computation ~~and~~of ~~Contingencies~~Earnings Per Share:

Basic and diluted income (loss) per share have been computed as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2005(1)			2004(1)			2005(1)			2004(1)
Loss from continuing operations	$	(37,686	)	$	(19,519	)	$	(37,941	)	$	(41,521	)
Income (loss) from discontinued operations		4,355			(333,714	)		28,900			(341,147	)
Preferred stock dividends		(45,056	)		(41,622	)		(89,246	)		(82,435	)

Net loss attributable to common shareholders	$	(78,387	)	$	(394,855	)	$	(98,287	)	$	(465,103	)

Weighted average number of shares outstanding		172,703			169,361			172,355			168,808

Income (loss) per common share:
Loss from continuing operations	$	(0.48	)	$	(0.36	)	$	(0.74	)	$	(0.73	)
Income (loss) from discontinued operations		0.03			(1.97	)		0.17			(2.03	)

Net loss per common share	$	(0.45	)	$	(2.33	)	$	(0.57	)	$	(2.76	)

(1)

For the three months ended June 30, 2005, the dilutive effect of unvested stock grants of 5,076, options to purchase 8,225 shares of common stock at prices ranging from $0.20 to $30.40 and 192,766 shares of preferred stock on an as-converted basis were not included in the computation of diluted earnings per share because they are anti-dilutive. For the three months ended June 30, 2004, the dilutive effect of unvested stock grants of 11,458, options to purchase 15,186 shares of common stock at prices ranging from $0.20 to $30.40 and 175,799 shares of preferred stock on an as-converted basis were not included in the computation of diluted earnings per share because they are anti-dilutive. For the six months ended June 30, 2005, the dilutive effect of unvested stock grants of 5,578, options to purchase 8,225 shares of common stock at prices ranging from $0.20 to $30.40 and 192,766 shares of preferred stock on an as-converted basis were not included in the computation of diluted earnings per share because they are anti-dilutive. For the six months ended June 30, 2004 the dilutive effect of unvested stock grants of 12,276, options to purchase 15,186 shares of common stock at prices ranging from $0.20 to $30.40 and 175,799 shares of preferred stock on an as-converted basis were not included in the computation of diluted earnings per share because they are anti-dilutive.

10.

Commitments and Contingencies:

Employee Separation Agreements

During 2004, we implemented organizational changes to better align our costs with our revenue structure upon the completion of our plan to sell our non-strategic assets. These organizational changes included a reduction in our workforce. We entered into separation agreements with certain employees which require them to render services until their termination date in order to receive termination benefits. The liability related to these termination benefits is being recognized ratably over the employees’ service periods in accordance with the provisions of SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities”. We estimate that approximately $42,~~000~~421 will be paid in the remainder of 2005 related to these separation agreements, of which $32,~~408~~223 is included in accrued payroll costs in the condensed consolidated balance sheet as of ~~March~~June 3130, 2005, with the remainder to be expensed ratably over the remaining 2005 service period.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

Contingencies

On May 7, 1999, Doris Johnson and Charles Dougherty filed a lawsuit in the Northern District of California against Patriot, Wyndham, their respective operating partnerships and PaineWebber Group, Inc. This action, Johnson v. Patriot American Hospitality, Inc., et al., No. C-99-2153, was commenced on behalf of all former holders of Bay Meadows stock during a class period from June 2, 1997 to the date of filing. The action asserts securities fraud claims and alleges that the purported class members were wrongfully induced to tender their shares as part of the Patriot/Bay Meadows merger based on a fraudulent prospectus. The action seeks unspecified damages and further alleges that defendants continued to defraud ~~shareholders~~stockholders about their intentions to acquire numerous hotels and saddle ~~the~~Wyndham ~~company~~ with massive debt during the class period. Three other actions against the same defendants subsequently were filed in the Northern District of California: (i) Ansell v. Patriot American Hospitality, Inc., et al., No. C-99-2239 (filed May 14, 1999), (ii) Sola v. PaineWebber Group, Inc., et al., No. C-99-2770 (filed June 11, 1999), and (iii) Gunderson v. Patriot American Hospitality, Inc., et al., No. C 99-3040 (filed June 23, 1999). Another action with substantially identical allegations, Susnow v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1354-T (filed June 15, 1999) also subsequently was filed in the Northern District of Texas. By order of the Judicial Panel on Multidistrict Litigation, these actions along with certain actions identified below have been consolidated in the Northern District of California for consolidated pretrial purposes. On or about October 13, 2000, the defendants moved to dismiss the actions. On or about August 15, 2001, the Court granted Defendants’ motions to dismiss the action, dismissing some of the claims with prejudice and granting leave to replead certain other claims in the Complaint. On or about October 15, 2001, plaintiff filed an amended complaint seeking substantially the same relief as in the original complaint. On or about December 20, 2001, the defendants moved to dismiss the amended complaint. On or about September 3, 2002, the Court granted in part and denied in part Defendants’ motion to dismiss. The Court did not dismiss certain of Plaintiffs’ claims under Section 11 of the Securities Act of 1933 and Section 12(b) of the Securities Exchange Act of 1934. An answer to the complaint has been filed and the parties have been exchanging discovery. The Court has not yet certified a class. On or about February 28, 2005, the parties entered into a stipulation of settlement. Pursuant to the stipulation of settlement, we shall issue 11~~,000~~ million shares of Wyndham common stock to the proposed settlement class. We also have agreed to contribute a maximum amount of $1,000 to the settlement class, only in the event that the trading price of Wyndham common stock falls below a certain threshold for a defined period of time. Furthermore, we have agreed to allow the settlement class to participate in a rights offering. The parties currently are negotiating the terms of the rights offering. The stipulation of settlement is subject to Court approval. As of March 31, 2005, we have recorded a reserve of $11,200 to cover the cost of the settlement.

15We have also agreed that in the event that the holders of the series B preferred stock convert the series B preferred stock into common stock of Wyndham at any time on or before December 31, 2005, the members of the settlement class shall have the right to participate in a rights offering. In the rights offering, each class member will have the right to purchase that number of shares of Wyndham common stock as is necessary to maintain such member’s ownership percentage of Wyndham common stock received as a result of the settlement of the foregoing actions. The purchase price in such rights offering will be equal to 90% of the lower of (i) the liquidation value of the series B preferred stock being converted into Wyndham common stock received by the series B preferred stockholder divided by the number of shares of Wyndham common stock to be received pursuant to the conversion or (ii) the stated conversion price in any agreement between the holders of the series B preferred stock and Wyndham. The recapitalization transaction, if consummated, will give rise to Wyndham’s obligation to conduct the rights offering in order to permit the class members to maintain their ownership interest in Wyndham (approximately 6.18% based on the number of shares anticipated to be outstanding immediately following consummation of the recapitalization). The price in such rights offering will be equal to 90% of the average liquidation preference of the series B preferred stock immediately prior to the effective time of the recapitalization merger divided by the exchange ratio. Based on the average liquidation preference of the series B preferred stock as of March 31, 2005, such price is equal to approximately $1.50 per share. On or about June 20,

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

~~On or about June 22, 1999, a lawsuit captioned Levitch v. Patriot American Hospitality, Inc., et al.,~~ ~~No. 3-99-CV1416-D~~2005, ~~was filed in~~ the ~~Northern~~parties ~~District~~entered ofinto ~~Texas~~an ~~against~~amended ~~Patriot,~~stipulation ~~Wyndham,~~of ~~James~~settlement D.that ~~Carreker~~would ~~and~~provide ~~Paul~~class A.members ~~Nussbaum.~~with ~~This~~cash ~~action~~consideration ~~asserts~~equal ~~securities~~to ~~fraud claims and alleges that, during~~ the ~~period~~consideration ~~from~~per common ~~January~~share 5,provided ~~1998~~ to ~~December~~holders ~~17, 1998,~~of ~~the~~Wyndham ~~defendants~~common ~~defrauded~~stock ~~shareholders~~in ~~by issuing false statements about~~ the ~~company.~~event ~~The~~of ~~complaint~~a ~~sought~~sale, ~~unspecified~~merger ~~damages~~or ~~and~~other ~~was~~business ~~filed~~combination ~~on behalf~~ of ~~all shareholders who purchased Patriot American and~~ Wyndham ~~stock~~prior ~~during~~to ~~that~~the ~~period. Three~~issuance ~~other~~of ~~actions,~~the ~~Gallagher v. Patriot American Hospitality~~11, ~~Inc.~~000,000 etshares ~~al.,~~to ~~No.~~the ~~3-99-CV1429-L, filed on June 23, 1999, David Lee Meisenburg, et al~~class. v.In ~~Patriot American Hospitality~~addition, ~~Inc.,~~the ~~Wyndham~~amended ~~International,~~stipulation ~~Inc.,~~of ~~James~~settlement ~~D. Carreker, and Paul A.~~provides ~~Nussbaum~~that ~~Case~~in ~~No. 3-99-CV1686-X, filed July 27, 1999 and Deborah Szekely v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1866-D, filed on or about August 27, 1999, allege substantially~~ the ~~same~~event ~~allegations.~~that By(i) ~~orders of~~ the ~~Judicial~~series ~~Panel on~~B ~~Multidistrict~~preferred ~~Litigation,~~shares ~~these actions~~ have been ~~consolidated~~converted ~~with~~into ~~certain~~common ~~other~~stock ~~shareholder~~prior ~~actions and transferred~~ to the ~~Northern~~consummation ~~District~~ of ~~California~~a ~~for~~sale ~~consolidated~~of ~~pretrial~~Wyndham ~~purposes.~~and On(ii) ~~or about October 20, 2000,~~ the ~~defendants~~per ~~moved~~share ~~to dismiss~~consideration ~~the~~provided ~~actions. On or about August 15, 2001, the Court granted Defendants’ motions~~ to ~~dismiss~~holders ~~the action, dismissing some~~ of ~~the~~Wyndham ~~claims~~common ~~with~~stock ~~prejudice and granting leave to replead certain other claims~~ in the ~~Complaint.~~sale Onwere ~~or about October~~greater ~~15,~~than ~~2001,~~90% ~~plaintiff~~of ~~filed an amended complaint seeking substantially~~ the ~~same~~conversion ~~relief~~price asof in the ~~original~~price ~~complaint.~~per Oncommon orshare ~~about~~at ~~December~~which ~~20, 2001,~~ the ~~defendants~~holders ~~moved~~of toseries ~~dismiss~~B ~~the~~preferred ~~amended~~stock ~~complaint.~~convert Onshares orinto ~~about~~Wyndham ~~September~~common 3stock, ~~2002,~~then ~~the~~instead ~~Court dismissed~~of ina ~~its~~rights ~~entirety~~offering ~~the~~each ~~complaint~~class ~~and~~member ~~granted~~would ~~plaintiffs~~receive ~~leave~~additional tocash ~~amend.~~consideration in ~~On or about December 2, 2002, plaintiffs filed~~ an ~~amended~~amount ~~complaint.~~equal ~~The~~to ~~Court~~the ~~has~~product ~~not~~of ~~yet certified~~ (a) ~~class.~~that Onnumber orof ~~about~~shares ~~September 30, 2004, the parties entered into a stipulation~~ of ~~settlement~~Wyndham ~~with~~common ~~class~~stock ~~counsel~~necessary to ~~settle~~maintain ~~the~~that ~~litigation.~~person’s ~~The~~ownership ~~stipulation~~percentage of ~~settlement~~Wyndham’s iscommon ~~subject~~stock toprior ~~Court approval. Pursuant~~ to the ~~stipulation~~conversion ofand ~~settlement,~~(b) wethe ~~shall~~difference ~~pay~~between ~~$2,500~~the inper ~~cash~~share consideration ~~when~~provided anto ~~order~~holders isof ~~entered~~Wyndham bycommon ~~the~~stock ~~Court preliminarily~~in ~~approving~~ the ~~proposed~~sale ~~settlement~~ and an90% ~~additional $2,500 on or before the second anniversary~~ of the ~~final~~conversion ~~Court approval~~price. As of ~~March~~June 3130, 2005, we have recorded ana ~~adequate~~ reserve of $11,200 to cover the cost of the settlement.

On ~~May~~or 29about June 22, ~~2002~~1999, a lawsuit captioned Levitch v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1416-D, was filed in the ~~State~~Northern District of ~~Florida~~Texas ~~Office~~against ofPatriot, Wyndham, James D. Carreker and Paul A. Nussbaum. This action asserts securities fraud claims and alleges that, during the ~~Attorney~~period ~~General~~from ~~Department~~January of5, ~~Legal~~1998 ~~Affairs~~to December 17, 1998, the defendants defrauded stockholders by issuing false statements about Wyndham. The complaint sought unspecified damages and was filed aon ~~lawsuit~~behalf inof ~~Leon~~all ~~County~~stockholders who purchased Patriot American and Wyndham stock during that period. Three other actions, ~~Florida~~Gallagher ~~(Case~~v. Patriot American Hospitality, Inc., et al., No. 023-CA99-~~1296)~~CV1429-L, ~~naming~~filed uson June 23, ~~Patriot~~1999, ~~and~~David ~~four~~Lee ~~current~~Meisenburg, oret ~~former~~al. v. Patriot American Hospitality, Inc., Wyndham ~~employees~~International, asInc., ~~defendants~~James D. InCarreker, ~~this~~and ~~case~~Paul A. Nussbaum Case No. 3-99-CV1686-X, ~~the~~filed ~~Attorney~~July ~~General~~27, ~~alleged~~1999 ~~that~~and ~~the~~Deborah ~~imposition~~Szekely ofv. ~~energy surcharges~~Patriot American Hospitality, ~~resort~~Inc., ~~fees~~et ~~and~~al., ~~automatic~~No. 3-99-CV1866-D, ~~service~~filed ~~fees~~on ~~violates~~or ~~the~~about ~~State’s~~August ~~Deceptive~~27, ~~and~~1999, ~~Unfair~~allege ~~Trade~~substantially ~~Practices~~the ~~Act~~same allegations. WeBy ~~filed~~orders aof ~~motion~~the toJudicial ~~dismiss~~Panel ~~this~~on ~~suit~~Multidistrict Litigation, ~~which~~these ~~was~~actions ~~granted~~have inbeen ~~part,~~consolidated with certain other stockholder actions and ~~two~~transferred ofto the ~~individual~~Northern ~~defendants~~District ~~have~~of ~~been~~California ~~dismissed~~for consolidated pretrial purposes. ~~The~~On or ~~Attorney~~about ~~General~~October ~~seeks~~20, ~~damages~~2000, ~~penalties~~the ~~and~~defendants ~~attorneys~~moved to dismiss the actions. On or about August 15, 2001, the Court granted Defendants’ ~~fees~~motions ~~from~~to dismiss the ~~remaining~~action, ~~defendants.~~dismissing Wesome ~~intend~~of the claims with prejudice and granting leave to ~~vigorously~~replead ~~defend~~certain other ~~this~~claims ~~lawsuit~~in the Complaint. ~~Discovery~~On isor ~~on-going.~~about ~~This~~October ~~suit~~15, ~~may~~2001, ~~not~~plaintiff befiled ~~resolved~~an ~~for~~amended acomplaint ~~number~~seeking ofsubstantially ~~years~~the ~~and~~same itrelief isas ~~not~~in ~~possible~~the ~~to predict~~original complaint. On or about December 20, 2001, the ~~ultimate~~defendants ~~cost~~moved to usdismiss the amended complaint. ~~However~~On or about September 3, 2002, the Court ~~has~~dismissed ~~stated~~in its ~~preliminary~~entirety ~~interpretation~~the ofcomplaint ~~the~~and ~~applicable~~granted ~~penalty~~plaintiffs ~~statute~~leave to amend. ~~The~~On ~~Attorney~~or ~~General~~about ~~has~~December ~~argued~~2, ~~that~~2002, ~~the~~plaintiffs ~~statute~~filed ~~should~~an beamended ~~construed~~complaint. ~~such~~The ~~that~~Court ~~the~~has ~~maximum~~not ~~penalty~~yet ~~would~~certified bea ~~$10~~class. ~~each~~On or ~~time~~about September 30, 2004, the parties entered into a ~~consumer~~stipulation ~~was~~of ~~allegedly~~settlement ~~deceived.~~with ~~Pursuant~~class counsel to settle the ~~Court’s~~litigation. ~~construction,~~The ifstipulation ~~the~~of ~~Attorney~~settlement ~~General’s~~is ~~Office~~subject ~~fully~~to ~~prevails~~Court onapproval. ~~its~~Pursuant ~~claims~~to ~~that~~the ~~Wyndham~~stipulation ~~willfully~~of ~~engaged~~settlement, we shall pay $2,500 in cash awhen ~~deceptive~~an ~~trade~~order ~~practice~~is entered by ~~charging~~the ~~energy~~Court ~~fees~~preliminarily approving the proposed settlement and an additional $2,500 on or before the ~~maximum penalty~~second ~~that~~anniversary ~~could~~of bethe ~~imposed~~final isCourt ~~$10~~approval. ~~(exclusive~~As of ~~actual~~June ~~damages~~30, or2005, ~~attorneys’~~we ~~fees)~~have recorded an adequate reserve to cover the cost of the settlement.

On ~~June~~May 2029, 2002, ~~plaintiffs in~~ the ~~case~~State ~~entitled~~of Florida ~~Roller-Edelstein,~~Office etof ~~al.~~the v.Attorney ~~Wyndham~~General ~~International,~~Department ~~Inc.,~~of etLegal ~~al.,~~Affairs filed ana ~~amended~~lawsuit ~~complaint~~ in ~~Dallas~~Leon County, ~~District~~Florida ~~Court~~ (~~case~~Case noNo. 02-~~04946~~CA-A1296) ~~alleging~~naming ~~that supplemental~~us, ~~fees~~Patriot, ~~charged~~and tofour ~~hotel~~current ~~guests~~or ~~constituted~~former ~~common~~Wyndham ~~law~~employees ~~fraud~~as defendants. In this case, ~~breach~~the Attorney General alleged that the imposition of ~~contract~~energy surcharges, resort fees and ~~violated~~automatic ~~Texas~~service fees violates the State’s Deceptive and Unfair Trade Practices Act. ~~The~~We ~~plaintiffs~~filed ~~claim~~a motion to ~~represent~~dismiss athis ~~nationwide~~suit, ~~class~~which ~~and~~was ~~have~~granted ~~estimated~~in ~~damages~~part, inand ~~excess~~two of ~~$10,000.~~the individual Wedefendants have ~~answered~~been ~~this~~dismissed. ~~complaint,~~The ~~but~~Attorney ~~little~~General ~~formal~~seeks ~~discovery~~damages, ~~has~~penalties ~~been taken~~ and ~~the~~attorneys’ ~~Court~~fees ~~has~~from ~~not~~the ~~yet~~remaining ~~certified a class~~defendants. We ~~have~~intend ~~tentatively agreed~~ to ~~settle~~vigorously defend this ~~case,~~lawsuit. ~~without~~Discovery ~~admitting~~is ~~liability~~on-going. ~~Under~~This ~~the~~suit ~~proposed~~may ~~settlement,~~not webe ~~would~~resolved ~~(i)~~for ~~provide~~ a ~~coupon~~number ~~for~~of years ~~discounts~~and atit ~~our~~is ~~properties~~not possible to ~~affected~~predict ~~class~~the ~~members~~ultimate cost to us. However, ~~(ii)~~the ~~make~~Court ahas stated its preliminary

1618

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

~~$50~~interpretation ~~charitable~~of ~~donation,~~the ~~(iii)~~applicable ~~pay~~penalty ~~attorneys’~~statute. ~~fees~~The inAttorney anGeneral ~~amount~~has upargued tothat ~~$240,~~the ~~and~~statute ~~(iv)~~should ~~agree~~be toconstrued ~~make~~such ~~changes~~that inthe ~~our~~maximum ~~disclosures~~penalty ~~regarding~~would ~~resort~~be $10 ~~fees~~each time a consumer was allegedly deceived. ~~The~~ Pursuant to the Court’s ~~has~~construction, ~~not~~if ~~yet~~the ~~held~~Attorney aGeneral’s ~~hearing~~Office fully prevails on ~~the~~its ~~joint~~claims ~~motion~~that toWyndham ~~preliminarily~~willfully ~~approve~~engaged in a deceptive trade practice by charging energy fees, the maximum ~~settlement~~penalty ~~and~~that ~~certify~~could abe ~~settlement~~imposed ~~class.~~is As$10 per Wyndham property (exclusive of ~~March~~actual ~~31,~~damages ~~2005,~~or weattorneys’ ~~have~~fees). ~~recorded~~In anthe ~~adequate~~event ~~reserve~~a tofinal ~~cover~~judgment ~~the~~is ~~cost~~entered in favor of Wyndham, the ~~settlement~~Attorney General will likely appeal.

On June 20, 2002, plaintiffs in the case entitled Roller-Edelstein, et al. v. Wyndham International, Inc., et al., filed an amended complaint in Dallas County District Court (case no. 02-04946-A) alleging that supplemental fees charged to hotel guests constituted common law fraud, breach of contract and violated Texas’ Deceptive Trade Practices Act. The plaintiffs claim to represent a nationwide class and have estimated damages in excess of $10,000. We have answered this complaint, but little formal discovery has been taken and the Court has not yet certified a class. We have tentatively agreed to settle this case, without admitting liability. Under the proposed settlement, we would (i) provide a coupon for discounts at our properties to affected class members, (ii) make a $50,000 charitable donation, (iii) pay attorneys’ fees in an amount up to $240, and (iv) agree to make changes in our disclosures regarding resort fees. The Court has not yet held a hearing on the joint motion to preliminarily approved the settlement and certify a settlement class. As of June 30, 2005, we have recorded an adequate reserve to cover the cost of the settlement.

On or about June 8, 2003, the Massachusetts Office of the Attorney General notified Wyndham that a complaint had been filed with its Fair Labor and Practices Division against Wyndham’s Westborough, Massachusetts location. According to the Office of the Attorney General, the complaint alleged that Wyndham-Westborough had violated certain provisions of Massachusetts’ wage payment laws (Massachusetts General Statutes c. 149, § 152A) by failing to remit to its employees all amounts owed by statute. On or about January 2, 2004, Wyndham received notice of a second Attorney General complaint also alleging a violation of c. 149, § 152A, this time with respect to all of Wyndham’s Massachusetts hotels. Although we intend to vigorously defend against these complaints, we have nevertheless fully cooperated with the Attorney General’s office by providing it with documents and other information in hopes of quickly resolving these matters. Because the Office of the Attorney General does not disclose the names of complainants, it is unclear who the complainants are, and how many are involved. The focus of the investigation has been distribution of “service charges” to service employees. Wyndham Westborough’s Massachusetts counsel and counsel for seven Wyndham Westborough employees have settled all charges involving “service charge” issues and we are in receipt of settlement agreements signed by all seven potential plaintiffs and their attorney. A number of Wyndham Westborough employees and ex-employees who are not represented by counsel have also sought payment of “service charges” collected by the hotel. In each instance in which the subject has been raised, Wyndham Westborough has made distributions to these individuals in return for their execution of a settlement agreement.

On June 14, 2005, there was filed in the Court of Chancery of the State of Delaware, New Castle County, a purported class action complaint captioned Shaev v. Kleisner et al (C.A. No. 1417-N) (the “Shaev Action”) against Wyndham and certain of its directors and officers. In the Shaev Action, plaintiff seeks to bring a purported class action on behalf of himself and a putative class comprising all stockholders of Wyndham (except for the directors of Wyndham and any persons related to or affiliated with Wyndham or any of its directors). The Shaev Action asserts that Wyndham’s directors owe a fiduciary duty to Wyndham’s stockholders, and that Wyndham’s directors breached such asserted duty in authorizing Wyndham’s entry into the Blackstone merger agreement, by, among other things, allegedly failing to conduct an auction or explore strategic alternatives to a merger, and/or allegedly failing to obtain sufficient value for stockholders. The alleged class representative seeks various remedies on behalf of himself and the putative class, including declaratory relief affirming the claims set

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

forth in the complaint, an injunction preliminarily and permanently enjoining the proposed merger transaction, an award of compensatory damages against all defendants and an award of attorney’s fees. We believe that each of the claims in this action is meritless and intend to contest those claims vigorously.

On June 16, 2005, there was filed in the Court of Chancery of the State of Delaware, New Castle County, a purported class action complaint captioned Hwang v. Kleisner et al (C.A. No. 1422-N) (the “Hwang Action”) against Wyndham and certain of its directors and officers. The parties, purported class, allegations and relief requested in the Hwang Action complaint are materially identical to those in the Shaev Action, save that the Hwang Action additionally asserts that the Wyndham directors violated fiduciary duties in: (1) allegedly failing to obtain a control premium; and (2) allegedly approving improper compensation arrangements with certain Wyndham officers, including Wyndham’s Chairman and CEO. We believe that each of the claims in this action is meritless and intend to contest those claims vigorously.

On June 17, 2005, there was filed in the Court of Chancery of the State of Delaware, New Castle County, a purported class action complaint captioned Zucker v. Kleisner et al (C.A. No. 1425-N) (the “Zucker Action”) against Wyndham and certain of its directors and officers. The parties, purported class, allegations and relief requested in the Zucker Action complaint are materially identical to those in the Hwang Action. We believe that each of the claims in this action is meritless and intend to contest those claims vigorously.

On June 30, 2005, a purported derivative and class action complaint, Alaska U.F.C.W. Pension Fund v. Kleisner et al (No. C-05CV1323-B) (the “A.U.F.C.W. Action”), was filed in the United States District Court for the Northern District of Texas, Dallas Division, naming Wyndham and certain of its directors as defendants. Plaintiff seeks to bring a purported class and/or derivative action on behalf of itself, Wyndham and/or a putative class comprising all holders of Wyndham common stock (except for the directors of Wyndham and any persons related to or affiliated with Wyndham or any of its directors). Plaintiff asserts that Wyndham’s directors owe fiduciary duties to Wyndham and its stockholders, and that Wyndham’s directors breached such asserted duties in authorizing Wyndham’s entry into the Blackstone merger agreement, by, among other things, allegedly failing to properly value Wyndham and allegedly failing to obtain an adequate price for holders of Wyndham common stock. The complaint also purports to make claims of abuse of control, gross mismanagement, corporate waste, failure to provide sufficient disclosures, and self-dealing in connection with the Blackstone merger. The alleged class representative seeks various remedies on behalf of itself, Wyndham and the putative class, including an injunction enjoining and/or rescinding the proposed merger transaction, damages and an award of attorney’s fees. We believe that each of the claims in this action is meritless and intend to contest them vigorously.

On June 30, 2005, a jury awarded approximately $5,917 in damages to AMMV Investments, LLC, which had commenced an action against Wyndham in Colorado state court (AMMV Investments, LLC v. Wyndham International, Inc., 01 CV 678) asserting breach of contract claims arising out of Wyndham’s alleged failure to provide marketing support to AMMV’s property located adjacent to Wyndham’s Peaks Hotel. Wyndham is considering certain post-trial motions and an appeal. As of June 30, 2005, we have recorded a reserve of $5,917 to cover the cost of the judgment.

We are a party to a number of other claims and lawsuits arising out of the normal course of business. However, we do not consider the ultimate liability with respect to these other claims and lawsuits to be material in relation to our consolidated financial condition or operations.

~~10.~~20 ~~Dividends~~

We do not anticipate paying a dividend to the common shareholders and we are prohibited under the terms of the senior credit facility and increasing rate loans facility from paying dividends on the class A common stock. Also, we are prohibited under the terms of the January 24, 2002 amendments to the senior credit facility and increasing rate loans facility from paying the cash portion of any dividends on the preferred stock. However, the holders of the preferred stock are entitled to receive on a quarterly basis a dividend equal to 9.75% per annum on a cumulative basis payable in cash and additional shares of preferred stock. In addition, according to the terms of the series A and series B preferred stock, if the cash dividends on the preferred stock are in arrears and unpaid for a period of 60 days or more, then an additional amount of dividends shall accrue at a rate per annum equal to 2.0% of the stated amount of each share of preferred stock then outstanding from the last payment date on which cash dividends were to be paid in full until such time as all cash dividends in arrears have been paid in full. Such additional dividends shall be cumulative and payable in additional shares of preferred stock.

During the three months ended March 31, 2005, we issued preferred stock dividends of approximately 289,550 shares of series A and series B preferred stock with a stated value of $28,955. We deferred payment of the cash portion of the dividends of approximately $7,306. In addition, we issued an additional stock dividend of 79,292 shares of series A and series B preferred stock with a stated value of $7,929 in payment of additional dividends at a rate of 2.0% per annum as cash dividends on the preferred stock were in arrears for at least 60 days as of March 31, 2005.

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

As of March 31, 2005, the deferred payments of the cash portion of the preferred stock dividend totaled approximately $109,628 and are included in dividends payable in the accompanying condensed consolidated balance sheet11. Dividends:

11We do not anticipate paying a dividend to the common shareholders and we are prohibited under the terms of our credit facilities from paying dividends on the class A common stock. ~~Discontinued~~Also, ~~Operations:~~we are prohibited under the terms of our credit facilities from paying the cash portion of any dividends on the preferred stock. However, the holders of the preferred stock are entitled to receive on a quarterly basis a dividend equal to 9.75% per annum on a cumulative basis payable in cash and additional shares of preferred stock. In addition, according to the terms of the series A and series B preferred stock, if the cash dividends on the preferred stock are in arrears and unpaid for a period of 60 days or more, then an additional amount of dividends shall accrue at a rate per annum equal to 2.0% of the stated amount of each share of preferred stock then outstanding from the last payment date on which cash dividends were to be paid in full until such time as all cash dividends in arrears have been paid in full. Such additional dividends shall be cumulative and payable in additional shares of preferred stock.

During the three months ended June 30, 2005, we issued stock dividends of approximately 296,612 shares of series A and series B preferred stock with a stated value of $29,661. For the three months ended June 30, 2005, we deferred payment of the cash portion of the dividends of approximately $7,305. Also, for the three months ended June 30, 2005, we issued additional stock dividends of 80,902 shares of series A and series B preferred stock with a value of $8,090 in payment of additional dividends at a rate of 2.0% per annum as cash dividends on the preferred stock were in arrears for at least 60 days as of June 30, 2005.

During the three months ended March 31, 2005, we issued stock dividends of approximately 289,550 shares of series A and series B preferred stock with a value of $28,955. For the three months ended March 31, 2005, we deferred payment of the cash portion of the dividends of approximately $7,306. Also, for the three months ended March 31, 2005, we issued additional stock dividends of 79,292 shares of series A and series B preferred stock with a value of $7,929 in payment of additional dividends at a rate of 2.0% per annum as cash dividends on the preferred stock were in arrears for at least 60 days as of March 31, 2005.

As of June 30, 2005, the deferred payments of the cash portion of the preferred stock dividend totaled approximately $116,933 and are included in dividends payable in the accompanying condensed consolidated balance sheet.

12.

Discontinued Operations:

The Company accounts for certain revenues and expenses as originating from discontinued operations pursuant to SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS 144 requires that sales of long-lived assets, or the identification of assets as held for sale, be treated as discontinued operations. Any gain or loss from the disposition, and any income or expenses associated with assets held for sale, are included in the accompanying condensed consolidated statements of operations as discontinued operations.

~~The~~21 financial results for the assets we classified as held for sale are reflected as discontinued operations in the accompanying condensed consolidated financial statements. The operating results of discontinued operations were as follows for the three months ended March 31, 2005 and 2004:

	Three Months EndedMarch 31,
	2005			2004
Hotel revenues	$	54,230		$	129,659
Hotel expenses		(48,510	)		(110,384	)
Interest expense		(3,748	)		(7,022	)
Depreciation and amortization(1)		—			(16,561	)
Gain (loss) on sale of assets		22,288			(1,018	)
Impairment loss		—			(1,963	)
Other income (expense)		78			(144	)
Income (loss) from discontinued operations	$	24,338		$	(7,433	)

(1) In accordance with SFAS 144, we cease depreciation on properties after they have been identified as held for sale. The depreciation expense reflected above for the three months ended March 31, 2004 was recorded before the assets were identified as held for sale.

12. Segment Reporting:

Our reportable segments are currently: (1) hotels and resorts and (2) other. On March 24, 2005, we completed the sale of 23 hotels. This sale constituted the disposition of all but three of our hotels in the non-proprietary branded segment. With this sale, all our hotels and resorts including the Golden Door Spa have been combined into one reportable segment. The 2004 segment data has been restated to reflect the change to the reportable segments.

The hotels and resorts segment is comprised primarily of Wyndham branded properties: Wyndham Hotels & Resorts®, Wyndham Luxury Resorts®, Wyndham Garden Hotels® and Summerfield Suites by Wyndham™. Wyndham Hotels & Resorts® are upper upscale, full-service hotel properties that contain an average of 300 hotel rooms, generally between 15,000 and 315,000 square feet of meeting space and a full range of guest services and amenities for business and leisure travelers, as well as conferences and conventions. The hotels are located primarily in the central business districts and dominant suburbs of major metropolitan markets and are targeted to business groups, meetings, and individual business and leisure travelers. These hotels offer elegantly appointed facilities and high levels of guest service. Wyndham Luxury Resorts® are five-star hotel properties that are

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

~~distinguished by their focus on incorporating the local environment into every aspect of the property, from decor to cuisine to recreation.~~ The ~~luxury collection~~financial ~~includes~~results ~~the~~for ~~Golden Door Spa, one of~~ the ~~world’s~~assets ~~preeminent~~we ~~spas.~~classified ~~Wyndham~~as ~~Garden~~held ~~Hotels®~~for ~~are~~sale ~~full-service properties, which serve individual business travelers and~~ are ~~located~~reflected ~~principally~~as ~~near major airports and suburban business districts. Amenities and services generally~~discontinued ~~include~~operations ain ~~three-meal~~the ~~restaurant,~~accompanying ~~signature~~condensed ~~Wyndham~~consolidated ~~Garden~~financial ~~Hotels® libraries, and laundry and room service~~statements. ~~Summerfield~~The ~~Suites~~operating byresults ~~Wyndham™~~of ~~offers~~discontinued ~~guests~~operations ~~the~~were ~~highest~~as ~~quality~~follows ~~lodging~~for in the ~~upper~~three ~~upscale all-suites segment. Each suite has a fully equipped kitchen, a spacious living room~~ and asix ~~private~~months ~~bedroom.~~ended ~~Many~~June ~~suites feature two-bedroom~~30, ~~two-bath~~2005 ~~units. The hotels also have a swimming pool, exercise room~~ and ~~other~~2004: ~~amenities to serve business and leisure travelers.~~

Other includes management fee and service fee income and interest and other income, general and administrative costs, interest expense and other charges. General and administrative costs and interest expense are not allocated to each reportable segment; therefore, they are reported in the aggregate within the other segment.


	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Hotel revenues	$	8,945		$	127,048		$	64,511		$	256,707
Hotel expenses		(7,931	)		(97,096	)		(57,556	)		(207,480	)
Interest expense		—			(6,407	)		(3,748	)		(13,429	)
Depreciation and amortization(1)		—			(18,379	)		—			(34,940	)
Gain on sale of assets		2,795			2,162			25,083			1,144
Impairment loss		—			(340,258	)		—			(342,221	)
Other income (expense)		546			(784	)		610			(928	)

Income (loss) from discontinued operations	$	4,355		$	(333,714	)	$	28,900		$	(341,147	)

(1) In accordance with SFAS 144, we cease depreciation on properties after they have been identified as held for sale. The ~~following~~depreciation ~~table~~expense ~~presents~~reflected above for the ~~financial~~three ~~information~~and ~~for~~six ~~our~~months ~~reportable~~ended ~~segments:~~June 30, 2004 was recorded before the assets were identified as held for sale.

	Three Months Ended March 31, 2005
	Hotels and Resorts		Other			Total
Revenues	$	276,467	$	6,154		$	282,621
Operating income (loss)		67,945		(60,511	)		7,434
	Three Months Ended March 31, 2004
	Hotels and Resorts		Other			Total
Revenues	$	269,422	$	5,233		$	274,655
Operating income (loss)		58,405		(68,084	)		(9,679	)

13.

Segment Reporting:

~~The~~Our ~~following~~reportable ~~table represents~~segments ~~revenue~~are ~~information~~currently: by(1) ~~geographic~~hotels ~~area~~and ~~for~~resorts ~~the~~and ~~three-month~~(2) ~~periods~~other. ~~ended~~On March 3124, 2005, ~~and~~we ~~2004~~completed the sale of 23 hotel properties. ~~Revenues~~This ~~are~~sale constituted ~~attributed~~the todisposition of all but three of our hotel properties in the ~~United~~non-proprietary ~~States~~branded ~~and~~segment. ~~its~~With ~~territories~~this sale, all our hotels and ~~International~~resorts ~~based~~including onthe Golden Door Spa have been combined into one reportable segment. The 2004 segment data presented below has been restated to reflect the ~~location~~change ofto ~~hotel~~the ~~properties~~reportable segments.

	Three Months Ended March 31, 2005
	United States		International		Total
Revenues	$	268,828	$	13,793	$	282,621
	Three Months Ended March 31, 2004
	United States		International		Total
Revenues	$	262,533	$	12,122	$	274,655

The hotels and resorts segment is comprised primarily of Wyndham branded properties: Wyndham Hotels & Resorts^®, Wyndham Luxury Resorts^®, Wyndham Garden Hotels^® and Summerfield Suites by Wyndham^™. Wyndham Hotels & Resorts^® are upper upscale, full-service hotel properties that contain an average of 300 hotel rooms, generally between 15,000 and 315,000 square feet of meeting space and a full range of guest services and amenities for business and leisure travelers, as well as conferences and conventions. The hotels are located primarily in the central business districts and dominant suburbs of major metropolitan markets and are targeted to business groups, meetings, and individual business and leisure travelers. These hotels offer elegantly appointed facilities and high levels of guest service. Wyndham Luxury Resorts^® are five-star hotel properties that are distinguished by their focus on incorporating the local environment into every aspect of the property, from decor to cuisine to recreation. The luxury collection includes the Golden Door Spa, one of the world’s preeminent spas. Wyndham Garden Hotels^® are full-service properties, which serve individual business travelers and are located principally near major airports and suburban business districts. Amenities and services generally include a three-meal restaurant, signature Wyndham Garden Hotels^® libraries, and laundry and room service. Summerfield Suites by Wyndham^™ offers guests the highest quality lodging in the upper upscale all-suites segment. Each suite has a fully equipped kitchen, a spacious living room and a private bedroom. Many suites feature two-bedroom, two-bath units. The hotels also have a swimming pool, exercise room and other amenities to serve business and leisure travelers.

~~13.~~22 ~~Supplemental Cash Flow Disclosure:~~

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

Other includes management fee and service fee income and interest and other income, general and administrative costs, interest expense and other charges. General and administrative costs and interest expenses are not allocated to each reportable segment; therefore, they are reported in the aggregate within the other segment.

The total revenue and operating income (loss) for each segment for the three and six months ended June 30, 2005 and 2004 are as follows:


	Three Months Ended June 30, 2005								Three Months Ended June 30, 2004
	Hotels and Resorts		Other			Total			Hotels and Resorts		Other			Total
Revenues	$	257,372	$	6,863		$	264,235		$	241,877	$	4,616		$	246,493
Operating income (loss)		56,264		(90,286	)		(34,022	)		41,067		(63,021	)		(21,954	)

	Six Months Ended June 30, 2005								Six Months Ended June 30, 2004
	Hotels and Resorts		Other			Total			Hotels and Resorts		Other			Total
Revenues	$	532,502	$	13,017		$	545,519		$	511,299	$	9,849		$	521,148
Operating income (loss)		126,988		(153,783	)		(26,795	)		99,472		(131,105	)		(31,633	)

The following table represents revenue information by geographic area for the three and six months ended June 30, 2005 and 2004. Revenues are attributed to the United States and its territories and International based on the location of hotel properties.


	Three Months Ended June 30, 2005						Three Months Ended June 30, 2004
	United States		International		Total		United States		International		Total
Revenues	$	251,673	$	12,562	$	264,235	$	235,311	$	11,182	$	246,493

	Six Months Ended June 30, 2005						Six Months Ended June 30, 2004
	United States		International		Total		United States		International		Total
Revenues	$	519,164	$	26,355	$	545,519	$	497,844	$	23,304	$	521,148

14.

Supplemental Cash Flow Disclosure:

During the three months ended June 30, 2005 and 2004, we issued stock dividends of 296,612 shares and 269,375 share of series A and series B preferred stock with a stated value of $29,661 and $26,938, respectively. We deferred payment of the cash portions of the dividend of approximately $7,305 in each of the three-month periods ended June 30, 2005 and 2004. We also issued additional stock dividends during the three months ended June 30, 2005 and 2004 of 80,902 shares and 73,791 shares of series A and series B preferred stock with a stated value of $8,090 and $7,379, respectively, in payment of additional dividends at a rate of 2.0% per annum as cash dividends on the preferred stock were in arrears for at least 60 days as of June 30, 2005 and 2004.

During the three months ended March 31, 2005 and 2004, we issued stock dividends of 289,550 shares and 262,958 share of series A and series B preferred stock with a stated value of $28,955 and $26,296, respectively. We deferred payment of the cash portion of the dividend of approximately $7,306 in each of the three-month periods ended March 31, 2005 and 2004. We also issued additional stock dividends during the three months ended March 31, 2005 and 2004 of 79,292 shares and 72,115 shares of series A and series B preferred stock with a stated value of $7,929 and $7,212, respectively, in payment of additional dividends at a rate of 2.0% per annum as cash dividends on the preferred stock were in arrears for at least 60 days as of March 31, 2005 and 2004.

1923

WYNDHAM INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share amounts)

(unaudited)

WeDuring the three months ended June 30, 2005 and 2004, we recorded areductions ~~decrease~~to ofthe ~~$76~~accruals ~~(net~~for derivative offinancial ~~taxes~~instruments of $0)697 and an$16,487, ~~increase~~respectively. ofWe ~~$149~~recognized (a net ofloss ~~taxes~~ of $~~99)~~91 ~~to other~~in ~~comprehensive income during~~ the three months ended ~~March~~June 3130, 2005 and ~~2004~~a net gain of $16,453 ~~respectively~~in the three months ended June 30, ~~for~~2004 as a result of the change in the ~~fair~~ value of the ~~effective~~ineffective derivatives. Also, in the three months ended ~~March~~June 3130, ~~2005 and~~ 2004, we recorded amortization of $~~594 (net of taxes of $0) and $~~890 (net of taxes of $594), ~~respectively,~~ to earnings as a reduction of the transitional adjustment that was recorded in other comprehensive income in 2001. ~~We recorded a charge to earnings of $2,715 to write off expired~~ derivatives the three months ended March 31, 2005. The charge to earnings for the write off of expired derivative instruments resulted from transition adjustments recorded upon adoption of SFAS 133, as amended, on January 1, 2001. In addition, we paid $4,708 and $12,368 in settlement payments for the ineffective hedges during the three months ended March 31, 2005 and 2004, respectively.

14During the three months ended March 31, 2005 and 2004, we recorded reductions to the accrual for derivative financial instruments of $8,295 and $9,357, respectively. ~~Subsequent~~We ~~Events:~~recognized net gains of $8,207 and $9,516 in the three months ended March 31, 2005 and 2004, respectively, as a result of the change in the value of the ineffective derivatives. Also, in the three months ended March 31, 2005 and 2004, we recorded amortization of $594 (net of taxes of $0) and $890 (net of taxes of $594), respectively, to earnings as a reduction of the transitional adjustment that was recorded in other comprehensive income in 2001. We recorded a charge to earnings of $2,714 to write off expired derivatives in the three months ended March 31, 2005. The charge to earnings for the write off of expired derivative instruments resulted from transition adjustments recorded upon adoption of SFAS 133, as amended, on January 1, 2001.

In24 May 2005, certain tax concession agreements related to the operation of two hotels in Puerto Rico, which previously expired on December 31, 2003 and January 1, 2004, were renewed and extended for a period of ten years retroactively from the date of expiration. These concession agreements provide for the reduction of certain taxes, including income, excise, property, and volume of business taxes by as much as 90%. A tax concession agreement related to a third property in Puerto Rico is set to expire on December 31, 2005. We intend to file for renewal and extension of this agreement.

On April 15, 2005, the Company entered into a definitive recapitalization agreement with certain investors in our series B preferred stock that is expected to greatly simplify our capital structure and governance. In the recapitalization, the existing classification of our common stock will be eliminated, all outstanding shares of our series A and series B preferred stock (including accrued but unpaid dividends) will be converted into common stock and the existing common stockholders will continue to hold shares of our common stock. At the closing of the transaction, the holders of our series A and series B preferred stock will own approximately 85 percent of the outstanding common stock of the Company and the existing common stockholders will own approximately 15 percent of the outstanding common stock of the Company.

The recapitalization, which is structured as a merger of a subsidiary of the Company into the Company, is subject to customary closing conditions, including regulatory approvals and the approval of the holders of a majority of the voting power held by our stockholders and the holders of at least two-thirds of our series B preferred stock. The investors that are party to the recapitalization agreement have agreed to vote all of their shares of our stock, representing approximately 49 percent of the outstanding voting power of the Company and approximately 90 percent of the outstanding shares of our series B preferred stock, in favor of the transaction. It is expected that the size of our Board of Directors will be reduced from its present size of 19 members; however, it is anticipated that a majority of the existing members of our Board of Directors, including certain independent directors, will remain on the Board. The recapitalization agreement contains covenants of the Company and the investors that provide certain protections for our minority shareholders for a period of time following the closing of the recapitalization. The transaction is anticipated to be completed during the summer of 2005.

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2004, as amended, and the unaudited Condensed Consolidated Financial Statements included in this Form 10-Q.

Certain statements in this Form 10-Q constitute “forward-looking statements” as that term is defined under §21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “thinks” and similar expressions, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. These factors include, among other things, those matters discussed under the caption “Risk Factors,” in our 2004 Annual Report on Form 10-K, as amended, as well as the following:

•

the impact of general economic conditions in the United States;

•

industry conditions, including competition;

•

business strategies and intended results;

•

our ability to effect sales of our assets on terms and conditions favorable to us;

•

our ability to integrate acquisitions into our operations and management;

•

our ability to integrate management and franchise relationships;

•

risks associated with the hotel industry and real estate markets in general;

•

the impact of terrorist activity or war, threats of terrorist activity or war and responses to terrorist activity on the economy in general and the travel and hotel industries in particular;

•

travelers’ fears of exposure to contagious diseases;

•

our ability to remediate the material weakness in internal controls related to our income tax accounts;

•

risks associated with the pending Blackstone merger;

•

capital expenditure requirements;

•

legislative or regulatory requirements; and

•

access to capital markets.

Although we believe that these statements are based upon reasonable assumptions, we can give no assurance that our goals will be achieved. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this Form 10-Q. We assume no obligation to update or revise them or provide reasons why actual results may differ.

Results of operations:

General

AsOn ofJune ~~March 31~~14, 2005, we ~~owned~~entered ~~and~~into ~~leased~~a 36definitive ~~hotels with approximately~~Merger ~~13,000~~Agreement ~~guestrooms~~to asbe ~~compared~~acquired toby 91an ~~owned~~affiliate ~~and~~of ~~leased~~The ~~hotels~~Blackstone ~~with~~Group. ~~approximately~~Under ~~26,300~~the ~~guestrooms~~terms atof ~~March~~the 31Merger Agreement, ~~2004.~~Blackstone ~~This~~will ~~decrease~~acquire ~~was~~all ~~a result~~ of ~~hotels~~our ~~sold~~outstanding ~~and~~shares ~~leases~~of ~~terminated~~common ~~during~~stock ~~that~~for ~~twelve-month period~~$1.15 Asper ofshare ~~March~~in ~~31,~~cash. ~~2005,~~Under wethe ~~managed~~terms ~~38 hotels~~of ~~and~~the ~~franchised~~Merger 68Agreement, the ~~hotels~~holders asof ~~compared~~shares toof 26series ~~managed~~A ~~hotels~~ and 53series ~~franchised~~B ~~hotels~~Preferred atStock ~~March~~will ~~31,~~receive ~~2004~~$72.17 ~~The~~per ~~increase~~share in ~~managed~~cash, ~~hotels~~subject ~~was primarily attributable~~ to ~~conversions~~potential ofadjustment ~~sold hotels~~ to ~~managed~~reflect ~~properties~~additional ~~under~~shares ~~new~~issued ~~agreements~~as ~~during the~~dividends ~~twelve~~after ~~months~~June ~~ended March 31~~30, 2005. ~~The~~Our ~~increase~~board ~~in franchised hotels was primarily the result~~ of ~~the~~directors ~~conversions~~unanimously ~~to franchises due to~~ approved the ~~termination~~Merger ofAgreement ~~leases on six Summerfield Suites by Wyndham™ properties in April 2004~~ and ~~the~~recommended ~~sale~~approval ~~of six Summerfield Suites~~ by ~~Wyndham™~~our ~~properties~~stockholders. in

2125

~~December~~The ~~2004.~~completion ~~Also,~~of the ~~sale~~Merger onAgreement ~~March~~is 24conditioned, ~~2005~~among ofother athings, ~~portfolio~~on ofthe 23approval ~~hotel~~by ~~properties~~our stockholders ~~resulted~~and in the ~~addition~~termination ofor ~~new~~expiration ~~franchises~~of ~~for~~ the 15waiting ~~Wyndham~~period ~~branded hotel~~under ~~properties~~the ~~included~~Hart-Scott-Rodino inAntitrust ~~the~~Improvements ~~transaction.~~Act Inof ~~addition~~1976, as amended. The completion of ~~March 31,~~the ~~2005,~~Merger weAgreement ~~had~~is anot ~~strategic~~subject ~~alliance~~to ~~with~~the areceipt ~~third~~of ~~party~~financing ~~for~~by ~~eight~~Blackstone. ~~hotels~~The closing ~~with~~of ~~approximately~~the ~~2,400~~Merger ~~guestrooms,~~Agreement ~~compared~~is ~~with~~expected ~~seven~~to ~~hotels~~occur ~~included~~as insoon as practicable following the ~~alliance~~annual ~~with approximately~~stockholder ~~2,300~~meeting ~~guestrooms~~to atbe ~~March~~held 31on August 11, ~~2004~~2005.

AtWe ~~March~~previously 31entered into a definitive Recapitalization Agreement, dated as of April 14, 2005, wewith ~~had~~certain ~~approximately~~investors ~~$26.8~~of ~~million~~our ofseries ~~assets~~B ~~classified~~Preferred asStock ~~held~~in which ~~for~~all ~~sale.~~outstanding Weshares ~~classify~~of ~~certain~~series ~~assets~~A asand ~~held~~series ~~for~~B ~~sale~~Preferred ~~based~~Stock onwould ~~our~~be ~~management~~converted ~~having~~into common stock. The transactions contemplated by the ~~authority~~Recapitalization ~~and~~Agreement ~~intent~~will ofoccur ~~entering~~only ~~into~~if ~~commitments~~the ~~for~~Merger ~~sale~~Agreement ~~transactions~~is ~~expected~~terminated prior to ~~close~~the completion inof the ~~next~~merger ~~twelve~~with ~~months~~Blackstone.

OnAs ~~May~~of 10June 30, 2005, we ~~completed the~~owned ~~refinancing~~and ofleased ~~our~~34 ~~corporate~~hotels ~~credit~~with ~~facilities~~approximately 12,600 guestrooms as compared to 84 owned and ~~the~~leased ~~majority~~hotels ofwith ~~our~~approximately ~~outstanding~~25,340 ~~mortgage~~guestrooms ~~debt~~at June 30, 2004. WeThis ~~entered~~decrease ~~into~~was a $1result of hotels sold and leases terminated or sold during that twelve-month period.65 ~~billion~~As ~~refinancing~~of June 30, ~~extending~~2005, ~~our~~we ~~corporate~~managed ~~debt~~36 ~~maturities~~hotels and franchised 68 hotels as compared to ~~2011~~27 managed hotels and 47 franchised hotels at June 30, 2004. ~~This~~The ~~represents~~increase ~~approximately~~in 90managed ~~percent~~hotels was primarily attributable to conversions of ~~our~~sold ~~outstanding~~hotels ~~debt.~~to ~~Additionally~~managed properties under long-term agreements during the twelve months ended June 30, 2005. The increase in franchised hotels was primarily the ~~debt~~result ~~pre-funds~~of ~~$100~~the ~~million~~sale of six Summerfield Suites by Wyndham™ properties in ~~capital~~December 2004. The six Summerfield Suites by Wyndham™ properties were converted to belong-term ~~invested~~franchises. Also, ~~into~~the ~~our~~sale ~~owned~~on ~~and~~March ~~leased~~24, 2005 of a portfolio of 23 hotel properties resulted in the addition of long-term franchises for the 15 Wyndham branded hotel properties included in the transaction. In addition, as of June 30, 2005, we had a strategic alliance with a third party for eight hotels with approximately 2,400 guestrooms, compared with six hotels included in the alliance with approximately 1,900 guestrooms at June 30, 2004.

AsAt aJune ~~result of the refinancing on May 10~~30, 2005, ~~$293.2~~we ~~million~~had ofapproximately ~~the~~ $~~560~~15.28 million ~~that matures during the remainder~~ of ~~2005~~assets ~~has~~classified ~~been~~as ~~extended~~held tofor ~~2011~~sale. In ~~addition,~~We weclassify ~~can~~certain ~~elect~~assets toas held ~~extend $261 million~~ for ~~three~~sale ~~additional~~based ~~twelve-month~~on ~~periods~~our ~~provided~~management ~~there~~having ~~is not a default under~~ the ~~loans~~authority and ~~other~~intent ~~minor~~of ~~conditions~~entering ~~are~~into ~~met~~commitments ~~which~~for ~~are~~sale ~~within~~transactions ~~our~~expected ~~control.~~to ~~The~~close ~~remaining~~in ~~maturities~~the ~~represent~~next $6twelve ~~million related to normal principal amortization~~months.

On May 10, 2005, we completed the refinancing of our corporate credit facilities and the majority of our outstanding mortgage debt. We entered into a refinancing of approximately $1.65 billion of our debt, extending our corporate debt maturities to 2011. This represented approximately 90 percent of our outstanding debt at the time of the closing. Additionally, the debt pre-funds $100 million in capital to be invested into our owned and leased properties.

As a result of the refinancing, during the last six months of 2005, we have scheduled principal payments and debt maturities of approximately $201 million. Of that amount, we can elect to extend $91.9 million for three additional twelve-month periods provided there is not a default under the loan and other minor conditions are met which are within our control. The remaining 2005 maturities include a $100 million six-property mezzanine loan, which was due July 31, 2005 but has been subsequently extended to August 31, 2005 and $9.1 million related to normal principal amortization.

There can be no assurance that we will be able to meet our debt service obligations and, to the extent that we cannot, we may lose some or all of our assets, including hotel properties. Adverse economic conditions could cause the terms on which we borrow to worsen. Those circumstances, if we are in need of funds to repay indebtedness, could force us to liquidate one or more investments in properties at times that may not permit realization of the maximum return on those investments. The foregoing risks associated with our debt obligations may inhibit our ability to raise capital in both the public and private markets and may have a negative impact on our credit rating.

We adopted Interpretation 46(R) (“FIN 46R”) as of January 1, 2004. Pursuant to the adoption of FIN 46R, we evaluated our joint ventures, management and franchise contracts to determine whether any agreements qualify as a variable interest entity (“VIE”) and whether, as such, we meet the criteria of a primary beneficiary. ~~We identified the~~ Wyndham Anatole management contract as a VIE where we were identified as the primary beneficiary. Therefore, the Wyndham Anatole has been included in our consolidated financial statements. The Wyndham Anatole management contract met the FIN 46R criteria for consolidation into our financial statements due to the requirement that we reimburse the owner for any shortfall in the payment of mortgage debt and the owner’s preferred return prior to payment of management fees. This reimbursement is limited to $21 million and is backed by a letter of credit. This $21 million letter of credit triggers consolidation due to us being exposed to the majority of the risks of loss. As of March 31, 2005, $4.7 million had been drawn against this letter of credit. Even though our risk of loss is limited solely to the $21 million, our projections indicate that it is a remote possibility that the property will not be able to generate sufficient cash flow to cover debt service during the term of the management contract and therefore the owner has no risk of loss. The consolidation results in an increase of $307.2 million and $310.2 million in our consolidated assets at March 31, 2005 and December 31, 2004, respectively. Our balance sheets at March 31, 2005 and December 31, 2004 also reflect the Wyndham Anatole mortgage debt and capital lease obligations of $167.8 million and $168.9 million, respectively, even though we are not a party to nor guarantor of this debt. Our net income does not change as a result of the consolidation of the Wyndham Anatole as profit is 100% attributable to the owner and recorded as minority interest.

On26 December 22, 2004, we formed a joint venture with Lehman Brothers Real Estate Partners (“LBREP”) to expand and develop Summerfield Suites by Wyndham™, Wyndham’s upscale, extended-stay brand. The transaction included the sale of six Summerfield Suites by Wyndham™ and the sale of an equity interest in the

~~entity~~We ~~that~~identified ~~owns~~the Wyndham Anatole management contract as a VIE where we were identified as the primary beneficiary. Therefore, the Wyndham Anatole has been included in our ~~Summerfield~~consolidated ~~brand~~financial statements. The Wyndham Anatole management contract met the FIN 46R criteria for consolidation into our financial statements due to ~~LBREP.~~the ~~Under~~requirement that we reimburse the ~~terms~~owner for any shortfall in the payment of mortgage debt and the ~~joint~~owner’s ~~venture~~preferred ~~agreement~~return ~~with~~prior ~~LBREP,~~to wepayment ~~initially~~of ~~hold~~management fees. This reimbursement is limited to $21 million and is backed by a 66letter of credit.~~67%~~ ~~ownership~~This ~~interest~~$21 inmillion letter of credit triggers consolidation due to us being exposed to the ~~joint~~majority ~~venture~~of the risks of loss. As of June 30, ~~however~~2005, we$4.7 ~~have~~million ~~50%~~had ~~voting~~been ~~rights~~drawn against this letter of credit. InEven ~~addition,~~though ~~LBREP~~our ~~has~~risk aof ~~priority~~loss ~~return.~~is ~~Therefore,~~limited insolely ~~accordance~~to ~~with~~the ~~FIN~~$21 ~~46R~~million, our ~~joint~~projections ~~venture~~indicate ~~with~~that ~~LBREP~~it is ~~consolidated~~a remote possibility that the property will not be able to generate sufficient cash flow to cover debt service during the term of the management contract and therefore the owner has no risk of loss. The consolidation results in an increase of $304.3 million and $310.2 million in our ~~financial~~consolidated ~~statements~~assets at ~~March~~June 30, 2005 and December 31, 2004, respectively. Our balance sheets at June 30, 2005 and December 31, 2004 also reflect the Wyndham Anatole mortgage debt and capital lease obligations of $166.9 million and $168.9 million, respectively, even though we are not a party to nor guarantor of this debt. Our net income does not change as a result of the consolidation of the Wyndham Anatole as profit is 100% attributable to the owner and recorded as minority interest.

~~Results~~On ofDecember ~~Operations:~~22, ~~Three~~2004, ~~months~~we ~~ended~~formed ~~March~~a 31joint venture with Lehman Brothers Real Estate Partners (“LBREP”) to expand and develop Summerfield Suites by Wyndham™, ~~2005~~Wyndham’s upscale, extended-stay brand. The transaction included the sale of six Summerfield Suites by Wyndham™ and the sale of an equity interest in the entity that owns our Summerfield brand to LBREP. Under the terms of the joint ~~compared~~venture agreement with LBREP, we initially hold a 66.67% ownership interest in the ~~three~~joint ~~months~~venture; ~~ended~~however, ~~March~~we have 50% voting rights. In addition, LBREP has a priority return. Therefore, in accordance with FIN 46R, our joint venture with LBREP is consolidated in our financial statements at June 30, 2005 and December 31, 2004.

~~Our room~~Results ~~revenues were $147.6 million and $139.8 million for the three months ended March 31, 2005 and 2004, respectively. The Wyndham Anatole portion~~ of ~~our~~operations: room revenues during the three months ended March 31, 2005 and 2004 was $12.8 million and $13.4 million, respectively. Excluding the Wyndham Anatole, our room revenues increased by approximately $8.4 million. Occupancy, average daily rate, or ADR, and revenue per available room, or RevPAR, increased by 0.7%, 5.9% and 6.8%, respectively, for the three months ended March 31, 2005 as compared to the same period in 2004. The increases in occupancy, ADR and RevPAR can be attributed to continued growth in the lodging industry resulting in increases in the leisure, corporate group and commercial retail segments of our business.

~~Our~~For ~~food and beverage revenues were $83.8 million and $84.7 million for~~ the three months ended ~~March~~June 3130, 2005 ~~and~~compared ~~2004,~~with ~~respectively. The Wyndham Anatole portion of our food and beverage revenues during~~ the three months ended ~~March~~June 3130, ~~2005 and~~ 2004 was approximately $16.4 million and $17.2 million, respectively. Excluding the Wyndham Anatole, our food and beverage revenues were flat for the three months ended March 31, 2005 as compared to the same period in 2004.

Our ~~other~~room ~~hotel~~ revenues were $45135.15 million and $44125.97 million for the three months ended ~~March~~June 3130, 2005 and 2004, respectively. The Wyndham Anatole portion of our ~~other~~room revenues during the three months ended ~~March~~June 3130, 2005 and 2004 was ~~approximately~~ $~~1.6~~11 million and $19.78 million, respectively. Excluding the Wyndham Anatole, our ~~other~~room revenues increased by approximately $~~300~~8.6 million. Occupancy,~~000~~ average daily rate, or ADR, and revenue per available room, or RevPAR, increased by 0.3%, 7.1% and 7.4%, respectively, for the three months ended ~~March~~June 3130, 2005 as compared to the same period in 2004. The ~~increase~~increases isin ~~primarily~~occupancy, ~~attributable~~ADR and RevPAR can be attributed to ana ~~increase~~continuation inof ~~other~~strong ~~minor~~hotel ~~operating~~demand ~~revenues~~among business, ~~partially~~group ~~offset~~and ~~by a~~leisure ~~decrease~~travelers, incombined ~~communication~~with ~~revenues~~limited full-service hotel supply.

Our ~~room~~food ~~expenses~~and beverage revenues were $3283.35 million and $3178.6 million for the three months ended ~~March~~June 3130, 2005 and 2004, respectively. The Wyndham Anatole portion of our ~~room~~food ~~expenses~~and beverage revenues during the three months ended ~~March~~June 3130, 2005 and 2004 was approximately $315.2 million and $312.1 million, respectively. Excluding the Wyndham Anatole, our ~~room~~food ~~expenses~~and ~~increased~~beverage ~~approximately~~revenues increased $1.48 million for the three months ended ~~March~~June 3130, 2005 as compared to the same period in 2004., ~~The~~primarily due ~~overall~~to ~~increase~~increases in our ~~room~~banquet ~~expenses is primarily attributable increases in labor costs~~ and ~~sales~~catering ~~commissions associated with the 0~~business.7% ~~increase in occupancy.~~

Our other ~~food~~hotel ~~and~~revenues ~~beverage expenses~~ were $5238.74 million and $5337.45 million for the three months ended ~~March~~June 3130, 2005 and 2004, respectively. The Wyndham Anatole portion of our ~~food~~other ~~and~~revenues ~~beverage expenses~~ during the three months ended ~~March~~June 3130, 2005 and 2004 was approximately $82.3 2 million and $~~8.8~~2 million, respectively. Excluding the Wyndham Anatole, our ~~food~~other ~~and~~hotel ~~beverage~~revenues ~~expenses~~increased ~~were~~approximately ~~flat~~$700,000 for the three months ended ~~March~~June 3130, 2005 as compared to the same period in 2004. The increase is primarily attributable to an increase in other minor operating revenues, partially offset by a decrease in communication revenues.

Our ~~other~~room ~~hotel~~ expenses were $~~101~~31.16 million and $~~99.6~~ 30 million for the three months ended ~~March~~June 3130, 2005 and 2004, respectively. The Wyndham Anatole portion of ~~other~~our room expenses during the three months ended ~~March~~June 3130, 2005 ~~and 2004 was approximately $7.9 million and $8.3 million, respectively. Excluding~~ the Wyndham Anatole, our other expenses increased approximately $1.9 million for the three months ended March 31, 2005 as compared to the same period in 2004. The increase is attributable to higher utility costs and increases in other minor operating expenses.

~~Our~~27 management fee and service fee income was $5.4 million and $4.7 million for the three months ended March 31, 2005 and 2004, respectively. The increase in our management fee and service fee income is a result of an increase in the number of managed hotels and higher hotel revenue upon which the fees are based.

~~Our interest~~ and ~~other~~2004 ~~income~~ was approximately $~~785,000~~2.8 million and $~~516,000~~2.2 ~~for the three months ended March 31~~million, ~~2005 and 2004,~~ respectively. ~~The~~Excluding ~~increase~~the isWyndham ~~primarily~~Anatole, ~~attributable~~our toroom expenses increased ~~interest~~approximately ~~income~~$1 ~~related~~million for tothe ~~higher~~three ~~interest~~months ~~rates~~ended onJune ~~notes~~30, ~~receivable.~~2005 ~~The~~as ~~one-month~~compared ~~LIBOR~~to ~~rate~~the ~~was~~same ~~2.87%~~period ~~and~~in ~~1.09%~~2004, asprimarily ofdue ~~March~~to ~~31,~~an ~~2005~~increase ~~and~~in ~~2004,~~labor ~~respectively~~costs.

Our ~~general~~food and ~~administrative~~beverage expenses were $1551.57 million and $1451.23 million for the three months ended ~~March~~June 3130, 2005 and 2004, respectively. The ~~increase~~Wyndham isAnatole portion ~~primarily~~of ~~attributable~~our tofood aand ~~$2.2~~beverage ~~million~~expenses ~~increase~~during inthe ~~severance~~three ~~expenses~~months ~~associated~~ended ~~with~~June ~~staff~~30, ~~reductions~~2005 atand ~~our~~2004 ~~corporate~~was ~~office~~approximately ~~and~~$7.6 amillion and $17.42 million, ~~increase~~respectively. inExcluding the Wyndham Anatole, our food and beverage expenses were flat for the three ~~write-offs~~months ofended ~~abandoned~~June ~~projects~~30, ~~partially~~2005 ~~offset~~as bycompared ato ~~reduction~~the same period in ~~general~~2004. ~~and~~Increases ~~administrative~~in ~~salaries~~labor costs were offset by decreases in food and ~~wages~~beverage ofproduct $1costs.4 ~~million.~~

Our ~~interest~~other ~~expense~~hotel ~~was~~expenses were $4695.24 million and $~~50.1~~96 million for the three months ended ~~March~~June 3130, 2005 and 2004, respectively. The Wyndham Anatole portion of ~~the~~of ~~interest~~other ~~expense~~expenses ~~remained~~during ~~constant at $3.2 million for~~ the three months ended ~~March~~June 3130, 2005 and 2004. ~~Excluding~~was ~~the Wyndham Anatole, our interest expense decreased~~ approximately $37.95 million ~~for~~and the three months ended March 31, 2005 as compared to the same period in 2004, due primarily to decreases in total debt, partially offset by increases in interest rates. Our total debt decreased from approximately $27.7 ~~billion (including $170.3~~ million ~~in Wyndham Anatole debt) at March 31~~, ~~2004 to approximately $1~~respectively.8 ~~billion~~Excluding ~~(including~~the ~~$167.8 million in~~ Wyndham Anatole ~~debt) at March 31~~, ~~2005.~~our ~~The~~other ~~one-month~~expenses ~~LIBOR~~were ~~rate~~flat ~~was~~for ~~2.87%~~the ~~and~~three ~~1.09%~~months asended ofJune ~~March 31~~30, 2005 ~~and 2004, respectively, and our weighted average interest rate, excluding hedges,~~ as of ~~March 31, 2005 was 7.39% as~~ compared to the ~~6.13%~~same asperiod ofin ~~March 31,~~ 2004.

Our ~~depreciation~~management fee and ~~amortization~~service ~~expense~~fee income was $~~27.~~5.6 million and $314.71 million for the three months ended ~~March~~June 3130, 2005 and 2004, respectively. The ~~Wyndham~~increase ~~Anatole~~in ~~portion~~our ofmanagement ~~the~~fee ~~depreciation~~ and ~~amortization~~service ~~expense~~fee ~~during~~income ~~the~~is ~~three~~primarily ~~months ended~~the ~~March~~result ~~31,~~of ~~2005~~an ~~and~~increase ~~2004~~in ~~was approximately $3 million and $2.2 million, respectively. Excluding~~ the ~~Wyndham~~number ~~Anatole,~~of ~~our~~managed ~~depreciation~~ and ~~amortization expense decreased approximately $5 million for the three months ended March 31, 2005 as~~franchised ~~compared to the same period in 2004~~hotels. ~~This decrease is primarily attributable to certain assets becoming fully depreciated or reclassified as held for sale subsequent to March 31, 2004.~~

~~The~~Our ~~income~~interest ~~tax~~and ~~provision~~other income was $1.73 million ~~for the three months ended March 31, 2005~~ and ~~is mainly caused by the taxability~~ ~~of profitable operations in foreign jurisdictions. This compares to an income tax provision of~~ $~~5.6~~528,000 ~~million~~ for the three months ended ~~March~~June 3130, ~~2004. The decrease in the tax provision is due to the recording of a reduced valuation allowance against our deferred tax assets in the three months ended March 31,~~ 2005 asand ~~compared to the same period in~~ 2004~~. As discussed in Note 12 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31~~, ~~2004, as amended, we have a valuation against the full amount of our net deferred tax asset~~respectively. WeThe ~~provide~~increase ~~a valuation allowance for deferred tax assets when it~~ is ~~more~~primarily ~~likely~~attributable ~~than~~to ~~not~~increases ~~that~~in ~~some~~termination ~~portion~~fee orand ~~all~~interest ~~of our deferred tax assets will not be realized~~income.

~~Minority~~Our ~~interests’~~general ~~share~~and ofadministrative ~~operations~~expenses ~~from~~were ~~consolidated subsidiaries was~~ $627.1 million and $716.59 million for the three months ended ~~March~~June 3130, 2005 and 2004, respectively. ~~This~~The ~~decrease~~increase is primarily ~~due~~attributable to a ~~decrease~~$6 million increase in ~~minority~~litigation ~~interest~~expense, ~~attributable~~resulting toprimarily from a $5.9 million judgment recorded in the ~~Wyndham~~three ~~Anatole~~months ended June 30, 2005, and $3.3 million of strategic reorganization costs incurred in the three months ended June 30, 2005.

~~For~~Our ~~the~~interest ~~three~~expense ~~months~~was ~~ended March 31, 2005, we recorded a gain of~~ $843.2 million ~~compared~~ toand ~~a gain of~~ $948.57 million for the three months ended ~~March~~June 3130, ~~2004~~2005 ~~for~~and ~~the~~2004, ~~change~~respectively. inThe ~~the~~Wyndham ~~value~~Anatole portion of the ~~ineffective~~ interest ~~rate~~expense ~~hedge contracts. Also,~~ during the three months ended ~~March~~June 3130, 2005 and 2004, wewas approximately ~~paid~~ $43.71 million and $123.4 2 million, respectively~~, in settlement payments for ineffective hedges~~. InExcluding ~~addition,~~the weWyndham ~~recorded amortization of $594~~Anatole,~~000~~ ~~(net~~our ofinterest ~~taxes~~expense ofdecreased ~~$0)~~approximately ~~and~~ $~~890,000~~5.4 ~~(net~~million ~~of taxes of $594,000)~~ for the three months ended ~~March~~June 3130, 2005 ~~and~~as compared to the same period in 2004, ~~respectively,~~due primarily to ~~earnings~~decreases asin atotal ~~reduction~~debt, ofpartially ~~the~~offset ~~transitional~~by ~~adjustment~~increases ~~that~~in ~~was~~interest ~~recorded~~rates. inOur ~~other~~total ~~comprehensive~~debt ~~income~~decreased infrom ~~2001~~approximately $2.7 ~~During~~billion ~~the~~(including ~~three~~$170.3 ~~months~~million ~~ended~~in ~~March~~Wyndham ~~31,~~Anatole ~~2005,~~debt) weat ~~recorded~~June a30, ~~charge~~2004 to ~~earnings~~approximately of $2.70 billion (including $166.9 million toin ~~write-off~~Wyndham ~~expired~~Anatole ~~derivative instruments~~debt) at June 30, 2005. The ~~charge~~one-month toLIBOR ~~earnings~~rate ~~for~~was ~~the~~3.34% ~~write-off~~and 1.37% as of ~~expired~~June ~~derivative~~30, ~~instruments~~2005 ~~resulted~~and ~~from~~2004, ~~transition~~respectively, ~~adjustments~~and ~~recorded~~our ~~upon~~weighted ~~adoption~~average interest rate was 7.46% as of ~~SFAS~~June ~~133~~30, ~~“Accounting~~2005 ~~for~~as ~~Derivative~~compared ~~Instruments~~to ~~and~~6.29% ~~Hedging~~as ~~Activities”,~~of asJune ~~amended~~30, on ~~January 1, 2001~~2004.

24Our loss (gain) on derivative financial instruments was a loss of $181,000 for the three months ended June 30, 2005 compared to a gain of $2.4 million for the three months ended June 30, 2004. For the three months ended June 30, 2005, we recorded a loss of $91,000 compared to a gain of $16.5 million for the three months ended June 30, 2004 for the change in the value of the ineffective interest rate hedge contracts. Also, during the three months ended June 30, 2005 and 2004, we paid $90,000 and $12.6 million, respectively, in settlement payments for ineffective hedges. In addition, we recorded amortization of $890,000 (net of taxes of $594,000) for the three months ended June 30, 2004 to earnings as a reduction of the transitional adjustment that was recorded in other comprehensive income in 2001.

During the three months ended June 30, 2005, we recorded a loss on the extinguishment of debt of $19.9 million (including $7.5 million of cash expenses related to replacement debt) resulting from the refinancing of our corporate credit facilities and the majority of our outstanding mortgage debt.

Our depreciation and amortization expense was $29.2 million and $28 million for the three months ended June 30, 2005 and 2004, respectively. The Wyndham Anatole portion of the depreciation and amortization

~~Income~~ expense ~~from~~during ~~discontinued operations was $24.3 million for~~ the three months ended ~~March~~June 3130, 2005 ~~compared to~~and a2004 ~~loss~~was ~~from~~approximately ~~discontinued operations of~~ $7.4.8 million ~~for~~and ~~the~~$2.5 ~~three months ended March 31~~million, ~~2004~~respectively. ~~The~~Excluding ~~increase in income is attributable to~~ the ~~decrease~~Wyndham inAnatole, our ~~the~~depreciation ~~loss~~and ~~from~~amortization ~~operations~~expense ofdecreased ~~discontinued~~approximately ~~hotels of~~ $61.51 million, for the ~~decrease~~three inmonths ~~impairment loss~~ended ofJune ~~$1.9~~30, ~~million~~2005 ~~and~~as ~~the~~compared ~~increase~~to in the ~~gain~~same onperiod ~~sale~~in of2004. ~~assets~~This ofdecrease ~~$23.3~~is ~~million~~primarily inattributable ~~the~~to ~~three~~certain ~~months~~assets ~~ended~~becoming ~~March~~fully ~~31,~~depreciated ~~2005~~or reclassified ~~compared~~as toheld ~~the~~for ~~three~~sale ~~months~~subsequent ~~ended~~to ~~March~~June 3130, 2004.

AsThe income atax ~~result~~provision ofwas $1.4 million for the ~~above~~three months ended June 30, ~~our~~2005 ~~net~~and ~~income~~is ~~was~~mainly ~~$24~~caused by the taxability of profitable operations in foreign jurisdictions. This compares to a tax benefit of $3.8 million for the three months ended ~~March~~June 30, 312004. The increase in the tax provision is due to the recording of a valuation allowance against our deferred tax assets in the three months ended June 30, 2005 as compared to asame ~~net~~period ~~loss of~~in ~~$29~~2004.4 ~~million~~As ~~for~~discussed in Note 12 to the ~~three~~consolidated financial ~~months~~statements in the Annual Report on Form 10-K for the year ended ~~March~~December 31, 2004, as amended, we have a valuation allowance against the full amount of our deferred tax asset. We provide a valuation allowance for deferred tax assets when it is more likely than not that some portion or all of our deferred tax assets will not be realized.

Minority interests’ share of operations from consolidated subsidiaries was $3.3 million and $1.9 million for the three months ended June 30, 2005 and 2004, respectively. This increase is primarily due to an increase in minority interest attributable to the Wyndham Anatole.

Income (loss) from discontinued operations was income of $4.4 million for the three months ended June 30, 2005 compared to a loss of $333.7 million for the three months ended June 30, 2004. The change is attributable to a decrease in the income from operations of discontinued hotels of $2.8 million, a decrease in impairment loss of $340.2 million and an increase in the gain on sale of assets of $633,000 in the three months ended June 30, 2005 compared to the three months ended June 30, 2004.

As a result of the above, our net loss was $33.3 million for the three months ended June 30, 2005 compared to $353.2 million for the three months ended June 30, 2004.

For the six months ended June 30, 2005 compared with the six months ended June 30, 2004

Our room revenues were $281.8 million and $265.6 million for the six months ended June 30, 2005 and 2004, respectively. The Wyndham Anatole portion of our room revenues during the six months ended June 30, 2005 and 2004 was $23.7 million and $23.2 million, respectively. Excluding the Wyndham Anatole, our room revenues increased by approximately $15.7 million. Occupancy, ADR and RevPAR, increased by 0.4%, 6.5% and 7.1%, respectively, for the six months ended June 30, 2005 as compared to the same period in 2004. The increases in occupancy, ADR and RevPAR can be attributed to continued growth in the lodging industry resulting in increases in the leisure, corporate group and commercial retail segments of our business. Increases in ADR and RevPAR were also impacted by rate increases resulting from strong demand in the hospitality industry with the return of business and group travelers combined with limited full-service hotel supply.

Our food and beverage revenues were $167.3 million and $163.3 million for the six months ended June 30, 2005 and 2004, respectively. The Wyndham Anatole portion of our food and beverage revenues during the six months ended June 30, 2005 and 2004 was approximately $31.6 million and $29.4 million, respectively. Excluding the Wyndham Anatole, our food and beverage revenues increased $1.8 million for the six months ended June 30, 2005 as compared to the same period in 2004. The increase is primarily attributable to the 0.4% increase in occupancy and increases in our banquet and catering business.

Our other hotel revenues were $83.4 million and $82.4 million for the six months ended June 30, 2005 and 2004, respectively. The Wyndham Anatole portion of our other revenues during the six months ended June 30, 2005 and 2004 was approximately $3.8 million and $3.7 million, respectively. Excluding the Wyndham Anatole, our other hotel revenues increased approximately $900,000 for the six months ended June 30, 2005 as compared to the same period in 2004. The increase is primarily attributable to increases in other minor operating revenues and rent and other revenues, partially offset by decreases in communications and casino revenues.

Our room expenses were $63.4 million and $61 million for the six months ended June 30, 2005 and 2004, respectively. The Wyndham Anatole portion of our room expenses during the six months ended June 30, 2005 and 2004 was approximately $5.7 million and $5.3 million, respectively. Excluding the Wyndham Anatole, our room expenses increased approximately $2 million for the six months ended June 30, 2005 as compared to the same period in 2004. The increase in our room expenses is primarily attributable to increases in labor costs associated with the 0.4% increase in occupancy.

Our food and beverage expenses were $104.4 million and $104.7 million for the six months ended June 30, 2005 and 2004, respectively. The Wyndham Anatole portion of our food and beverage expenses during the six months ended June 30, 2005 and 2004 remained constant at $15.9 million for the six months ended June 30, 2005 and 2004. Excluding the Wyndham Anatole, our food and beverage expenses were flat for the six-month period ended June 30, 2005 as compared to the same period in 2004.

Our other hotel expenses were $196 million and $195.6 million for the six months ended June 30, 2005 and 2004, respectively. The Wyndham Anatole portion of other expenses during the six months ended June 30, 2005 and 2004 was approximately $15.5 million and $16 million, respectively. Excluding the Wyndham Anatole, our other expenses increased approximately $900,000 for the six months ended June 30, 2005 as compared to the same period in 2004, primarily due to higher utility costs.

Our management fee and service fee income was $10.9 million and $8.8 million for the six months ended June 30, 2005 and 2004, respectively. The increase in our management fee and service fee income is primarily the result of an increase in the number of managed hotels.

Our interest and other income was $2.1 million and $1 million for the six months ended June 30, 2005 and 2004, respectively. The increase is primarily attributable to increases in termination fee income and interest income resulting from higher interest rates on notes receivable.

Our general and administrative expenses were $42.5 million and $31.1 million for the six months ended June 30, 2005 and 2004, respectively. The increase is primarily attributable to a $6 million increase in litigation expense, resulting primarily from a $5.9 million judgment recorded in the three months ended June 30, 2005, and $3.3 million of strategic reorganization costs incurred in the six months ended June 30, 2005 and a $2.5 million increase in severance expenses associated with staff reductions at our corporate office, partially offset by a reduction in general and administrative salaries and wages of $2.8 million.

Our interest expense was $89.5 million and $98.8 million for the six months ended June 30, 2005 and 2004, respectively. The Wyndham Anatole portion of our interest expense was $6.3 million and $6.4 million for the six months ended June 30, 2005 and 2004, respectively. Excluding the Wyndham Anatole, our interest expense decreased approximately $9.2 million for the six months ended June 30, 2005 as compared to the same period in 2004, due primarily to decreases in total debt, partially offset by increases in interest rates. Our total debt decreased from approximately $2.7 billion (including $170.3 million in Wyndham Anatole debt) at June 30, 2004 to approximately $2.0 billion (including $166.9 million in Wyndham Anatole debt) at June 30, 2005. The one-month LIBOR rate was 3.11% and 1.23% for the six months ended June 30, 2005 and 2004, respectively, and our weighted average interest rate was 7.43% for the six months ended June 30, 2005 as compared to 6.21% for the six months ended June 30, 2004.

Our loss (gain) on derivative financial instruments was a gain of $10,000 for the six months ended June 30, 2005 compared to a loss of $1.9 million for the six months ended June 30, 2004. For the six months ended June 30, 2005, we recorded a gain of $8.1 million compared to a gain of $26 million for the six months ended June 30, 2004 for the change in the value of the ineffective interest rate hedge contracts. Also, during the six months ended June 30, 2005 and 2004, we paid $4.8 million and $24.9 million, respectively, in settlement payments for ineffective hedges. In addition, we recorded amortization of $594,000 (net of taxes of $0) and $1.8 million (net of taxes of $1.2 million) for the six months ended June 30, 2005 and 2004, respectively, to earnings as a

reduction of the transitional adjustment that was recorded in other comprehensive income in 2001. During the six months ended June 30, 2005, we recorded a charge to earnings of $2.7 million to write-off expired derivative instruments. The charge to earnings for the write-off of expired derivative instruments resulted from transition adjustments recorded upon adoption of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended, on January 1, 2001.

During the six months ended June 30, 2005, we recorded a loss on the extinguishment of debt of $19.9 million (including $7.5 million of cash expenses related to replacement debt) resulting from the refinancing of our corporate credit facilities and the majority of our outstanding mortgage debt.

Our depreciation and amortization expense was $56.7 million and $59.6 million for the six months ended June 30, 2005 and 2004, respectively. The Wyndham Anatole portion of the depreciation and amortization expense during the six months ended June 30, 2005 and 2004 was approximately $7.8 million and $4.7 million, respectively. Excluding the Wyndham Anatole, our depreciation and amortization expense decreased approximately $6 million for the six months ended June 30, 2005 as compared to the same period in 2004. This decrease is primarily attributable to certain assets becoming fully depreciated or reclassified as held for sale subsequent to June 30, 2004.

The income tax provision was $3.1 million for the six months ended June 30, 2005 and is mainly caused by the taxability of profitable operations in foreign jurisdictions. This compares to a tax provision of $1.8 million for the six months ended June 30, 2004. The increase in the tax provision is due to the recording of a valuation allowance against our deferred tax assets in the six months ended June 30, 2005 as compared to same period in 2004. As discussed in Note 12 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2004, as amended, we have a valuation against the full amount of our net deferred tax asset. We provide a valuation allowance for deferred tax assets when it is more likely than not that some portion or all of our deferred tax assets will not be realized.

Minority interests’ share of operations from consolidated subsidiaries remained constant at $9.4 million for the six-month periods ended June 30, 2005 and 2004.

Income (loss) from discontinued operations was income of $28.9 million for the six months ended June 30, 2005 compared to a loss of $341.1 million for the six months ended June 30, 2004. The change is attributable to an increase in the income from operations of discontinued hotels of $3.9 million, a decrease in impairment loss of $342.2 million and an increase in the gain on sale of assets of $23.9 million in the six months ended June 30, 2005 compared to the six months ended June 30, 2004.

As a result of the above, our net loss was $9 million for the six months ended June 30, 2005 compared to $382.7 million for the six months ended June 30, 2004.

Results of reporting segments:

For the three months ended ~~March~~June 3130, 2005 compared with the three months ended ~~March~~June 3130, 2004

The hotels and resorts segment is comprised primarily of Wyndham branded properties: Wyndham Hotels & Resorts®, Wyndham Luxury Resorts®, Wyndham Garden Hotels® and Summerfield Suites by Wyndham™. This segment represented approximately 97.84% and 98.1% of our total revenues for the three months ended ~~March~~June 3130, 2005 and 2004, respectively. Total revenue for this segment was $~~276~~257.54 million compared to $~~269~~241.4 million for the three months ended March 31, 2005 and 2004, respectively. The Wyndham Anatole portion of our total revenues was $30.7 million and $32.3 million during the three months ended March 31, 2005 and 2004, respectively. Operating income for this segment was $67.9 million ~~compared to $58.4 million~~ for ~~the three months ended March 31, 2005 and 2004, respectively. The Wyndham Anatole portion of the operating income was~~ approximately $5.3 million and $6.8 million during the three months ended March 31, 2005 and 2004, respectively. Excluding the Wyndham Anatole, our revenue increased approximately $8.6 million and operating income increased approximately $11 million for the three months ended March 31, 2005 as compared to the same period in 2004. The increases in revenue and operating income for this segment can be primarily attributed to increases in occupancy, ADR and RevPAR of 0.7%, 5.9% and 6.8%, respectively, as demand increased in the leisure, corporate group and commercial retail segments of our business as a result of continued growth in the lodging industry. The increase in operating income was also due to a decrease in depreciation and amortization expense due primarily to certain assets becoming fully depreciated or reclassified as held for sale subsequent to March 31, 2004.

Other represents revenue from various operating businesses, including management and other service companies. Expenses in this segment are primarily interest, depreciation, amortization and corporate general and administrative expenses. Total revenue for the segment was $6.2 million and $5.2 million for the three months ended March 31, 2005 and 2004, respectively. The increase in this segment’s revenue was primarily the result of increases in management fees as a result of an increase in the number of managed hotels and higher hotel revenue upon which the fees are based. Operating losses for this segment were $60.5 million and $68.1 million for the three months ended March 31, 2005 and 2004, respectively. The decrease in operating loss was primarily due to reductions in losses on derivative financial instruments of $4.5 million and reductions in interest expense of $3.9 million, partially offset by increases in severance expenses associated with staff reductions at our corporate offices of $2.2 million.

Recent Events

In May 2005, certain tax concession agreements related to the operation of two hotels in Puerto Rico, which previously expired on December 31, 2003 and January 1, 2004, were renewed and extended for a period of ten years retroactively from the date of expiration. These concession agreements provide for the reduction of certain taxes, including income, excise, property, and volume of business taxes by as much as 90%. A tax concession agreement related to a third property in Puerto Rico is set to expire on December 31, 2005. We intend to file for renewal and extension of this agreement.

~~During~~ the three months ended ~~March~~June 3130, 2005 and 2004, werespectively. ~~sold~~The Wyndham Anatole portion of our ~~investments~~total inrevenues 23was ~~hotels~~$28.4 tomillion aand ~~private~~$24 million during the ~~investment~~three ~~fund~~months ~~managed~~ended byJune ~~Goldman~~30, ~~Sachs~~2005 and ~~affiliates~~2004, ofrespectively. ~~Highgate~~Operating ~~Holdings~~income ~~and~~for ~~two~~this ~~additional~~segment ~~hotel~~was ~~properties~~$56.3 inmillion ~~separate~~compared ~~transactions~~to $41.1 Wemillion ~~received~~for ~~net~~the ~~cash~~three ~~proceeds~~months ~~from~~ended ~~the~~June ~~sales~~30, 2005 and 2004, respectively. The Wyndham Anatole portion of the operating income was approximately $~~229~~5.7 million and $4.4 million during the three months ended June 30, ~~after~~2005 and 2004, respectively. Excluding the ~~repayment~~Wyndham ofAnatole, ~~mortgage debt~~our ofrevenue increased approximately $~~139~~11.1 million and operating income increased approximately $13.9 Wemillion ~~recorded~~for athe ~~net~~three ~~gain~~months ofended ~~$22~~June ~~million~~30, 2005 as acompared ~~result~~to ofthe ~~these~~same ~~asset~~period ~~sales~~in 2004. ~~Also,~~The weincreases ~~used~~in ~~$210~~revenue ~~million~~and ofoperating ~~the~~income ~~net~~for ~~cash~~this ~~proceeds~~segment can be primarily attributed to ~~pay~~increases ~~down~~in aoccupancy, ~~portion~~ADR ofand ~~the~~RevPAR ~~senior~~of ~~credit~~0.3%, ~~facility~~7.1% and 7.4%, ~~term~~respectively, ~~loans~~as demand increased in the leisure, corporate group and wecommercial ~~retained~~retail ~~the~~segments ~~rest~~of our business as a result of continued growth in the ~~net cash~~lodging ~~proceeds~~industry. The increase in ~~accordance~~operating ~~with~~income ~~the~~was ~~terms~~also ofdue ~~the~~to ~~senior~~a ~~credit~~decrease ~~facilities.~~in depreciation Weand ~~have~~amortization ~~three~~expense due primarily to certain assets webecoming ~~expect~~fully todepreciated ~~sell~~or byreclassified ~~the~~as ~~end~~held offor ~~the~~sale ~~third~~subsequent ~~quarter~~to ofJune ~~2005~~30, 2004.

OnOther ~~May~~represents 10revenue from various operating businesses, ~~2005~~including management and other service companies. Expenses in this segment are primarily interest, wedepreciation, ~~completed~~amortization and corporate general and administrative expenses. Total revenue for the ~~refinancing~~segment ofwas ~~our~~$6.9 ~~corporate~~million ~~credit~~and ~~facilities~~$4.6 million for the three months ended June 30, 2005 and 2004, respectively. The increase in this segment’s revenue was primarily the ~~majority~~result of ~~our~~increases ~~outstanding~~in ~~mortgage~~management ~~debt~~fees as a result of an increase in the number of managed hotels. WeOperating ~~entered~~losses ~~into~~for a this segment were $190.653 ~~billion~~million ~~refinancing,~~and ~~extending~~$63 ~~our~~million ~~corporate~~for ~~debt~~the ~~maturities~~three tomonths ~~2011~~ended June 30, 2005 and 2004, respectively. ~~This~~The ~~represents~~increase ~~approximately~~in 90operating ~~percent~~loss ofwas ~~our~~primarily ~~outstanding~~attributable ~~debt~~to a $19.9 ~~Additionally,~~million ~~the~~loss on extinguishment of debt, ~~pre-funds~~a $~~100~~6 million increase in ~~capital~~litigation toexpense, be$3.3 ~~invested~~million ~~into~~of ~~our~~strategic ~~owned~~reorganization costs and ~~leased~~a $2.6 million ~~properties~~decrease in the gain on derivative financial instruments, partially offset by a $5.5 million reduction in interest expense.

OnFor ~~April 15, 2005,~~ the ~~Company~~six ~~entered~~months ~~into~~ended ~~a definitive~~June ~~recapitalization agreement with certain investors in our series B preferred stock that is expected to greatly simplify Wyndham’s capital structure and governance. In the recapitalization~~30, ~~the~~2005 ~~existing~~compared ~~classification~~with ~~of our common stock will be eliminated, all outstanding shares of our series A and series B preferred stock (including accrued but unpaid dividends) will be converted into common stock and~~ the ~~existing~~six ~~common~~months ~~stockholders~~ended ~~will~~June ~~continue to hold shares of our common stock. At the closing of the transaction~~30, ~~the~~2004 holders of our series A and series B preferred stock will own approximately 85 percent of the outstanding common stock of the Company and the existing common stockholders will own approximately 15 percent of the outstanding common stock of the Company.

The hotels and resorts segment is comprised primarily of Wyndham branded ~~recapitalization~~properties: Wyndham Hotels & Resorts®, ~~which~~Wyndham Luxury isResorts®, ~~structured~~Wyndham asGarden aHotels® ~~merger~~and ofSummerfield aSuites ~~subsidiary~~by Wyndham™. This segment represented approximately 97.6% and 98.1% of ~~the~~our ~~Company~~total ~~into~~revenues for the ~~Company,~~six ismonths ~~subject~~ended toJune ~~customary~~30, ~~closing~~2005 ~~conditions~~and 2004, ~~including~~respectively. ~~regulatory~~Total ~~approvals~~revenue ~~and~~for ~~the~~this ~~approval~~segment ofwas ~~the~~$532.5 ~~holders~~million ofcompared ato ~~majority~~$511.3 ofmillion for the ~~voting~~six ~~power~~months ~~held~~ended ~~by our~~June ~~stockholders~~30, 2005 and ~~the~~2004, ~~holders~~respectively. ofThe atWyndham Anatole ~~least~~portion ~~two-thirds~~ of our ~~series~~total Brevenues ~~preferred~~was ~~stock~~$59.1 ~~The~~million ~~investors~~and ~~that~~$56.3 ~~are~~million ~~party~~during to the ~~recapitalization~~six ~~agreement~~months ~~have~~ended ~~agreed~~June 30, 2005 and 2004, respectively. Operating income for this segment was $127 million compared to ~~vote~~$99.5 ~~all~~million offor ~~their~~the ~~shares~~six ofmonths ~~our~~ended ~~stock~~June 30, ~~representing~~2005 ~~approximately~~and 492004, ~~percent~~respectively. ~~of the~~The ~~outstanding~~Wyndham ~~voting~~Anatole ~~power~~portion of the ~~Company~~operating ~~and~~income was approximately 90$14.2 ~~percent~~million ofand ~~the~~$14.4 ~~outstanding~~million ~~shares~~during ofthe ~~our~~six ~~series~~months Bended ~~preferred~~June ~~stock~~30, in2005 ~~favor~~and of2004, respectively. Excluding the ~~transaction~~Wyndham Anatole, our revenue increased approximately $18.4 Itmillion isand ~~expected~~operating ~~that~~income increased approximately $27.7 million for the ~~size~~six ofmonths ~~our~~ended ~~Board~~June of30, ~~Directors~~2005 ~~will~~as becompared ~~reduced~~to ~~from~~the ~~its~~same ~~present size~~period ofin 192004. ~~members;~~The ~~however,~~increases itin isrevenue ~~anticipated~~and ~~that~~operating aincome ~~majority~~for ofthis ~~the~~segment ~~existing~~can ~~members~~be primarily ofattributed ~~our~~to ~~Board~~increases in occupancy, ADR and RevPAR of ~~Directors~~0.4%, ~~including~~6.5% ~~certain~~and ~~independent~~7.1%, ~~directors~~respectively, ~~will~~as ~~remain~~demand onincreased in the ~~Board.~~leisure, ~~The~~corporate ~~recapitalization~~group ~~agreement~~and ~~contains~~commercial ~~covenants~~retail segments of ~~the~~our ~~Company~~business ~~and~~ as a result of continued growth in the ~~investors~~lodging industry. ~~that~~The ~~provide~~increase ~~certain~~in ~~protections~~operating ~~for~~income ~~our~~was ~~minority~~also ~~shareholders~~due ~~for~~to a ~~period~~decrease ofin ~~time~~depreciation ~~following~~and ~~the~~amortization ~~closing~~expense ofdue ~~the~~primarily ~~recapitalization.~~to ~~The~~certain ~~transaction~~assets isbecoming ~~anticipated~~fully todepreciated beor ~~completed~~reclassified ~~during~~as ~~the~~held ~~summer~~for ofsale ~~2005~~subsequent to June 30, 2004.

~~Statistical~~Other ~~Information~~represents revenue from various operating businesses, including management and other service companies. Expenses in this segment are primarily interest, depreciation, amortization and corporate general and administrative expenses. Total revenue for the segment was $13 million and $9.8 million for the six months ended June 30, 2005 and 2004, respectively. The increase in this segment’s revenue was primarily the result of increases in management fees as a result of an increase in the number of managed hotels. Operating losses for this segment were $153.8 million and $131.1 million for the six months ended June 30, 2005 and 2004, respectively. The increase in operating loss was primarily attributable to a $19.9 million loss on extinguishment of debt, a $6 million increase in litigation expense, $3.3 million of strategic reorganization costs and a $2.5

During the three months ended March 31, 2005, our portfolio of owned and leased hotels experienced an increase in occupancy, ADR and RevPAR as compared to the three months ended March 31, 2004. The following table sets forth certain statistical information for the three months ended March 31, 2005 and 2004 for the 32 hotels we will own and lease after the completion of the planned dispositions, excluding The Wyndham New York which we acquired in August 2004, as if these hotels were owned or leased for the entire periods presented.

	Three months ended March 31,
	Occupancy				ADR				RevPAR
	2005		2004		2005		2004		2005		2004
Wyndham Hotels & Resorts	78.3	%	77.6	%	$	162.67	$	153.45	$	127.43	$	119.12
Wyndham Luxury Resorts	75.8		76.2			296.91		291.03		225.09		221.78
Wyndham Garden Hotels	72.3		69.8			109.58		100.33		79.22		70.06
Non-Proprietary Branded Hotels	83.6		86.5			97.36		85.73		81.37		74.18
Weighted average	78.3	%	77.6	%	$	163.75	$	154.58	$	128.14	$	119.96

million increase in severance expenses associated with staff reductions at our corporate office, partially offset by reductions in interest expense of $9.2 million and a decrease in the loss on derivative financial instruments of $1.9 million.

Recent Events

On June 14, 2005, we entered into a definitive Merger Agreement to be acquired by an affiliate of The Blackstone Group. Under the terms of the Merger Agreement, Blackstone will acquire all of our outstanding shares of common stock for $1.15 per share in cash. Under the terms of the Merger Agreement the holders of shares of series A and series B Preferred Stock will receive $72.17 per share in cash, subject to potential adjustment to reflect additional shares issued as dividends after June 30, 2005. Our board of directors unanimously approved the Merger Agreement and recommended approval by our stockholders.

The completion of the Merger Agreement is conditioned, among other things, on the approval by our stockholders and the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The completion of the Merger Agreement is not subject to the receipt of financing by Blackstone. The closing of the Merger Agreement is expected to occur as soon as practicable following the annual stockholder meeting to be held on August 11, 2005.

Statistical Information

During the three and six months ended June 30, 2005, our portfolio of owned and leased hotels experienced an increase in occupancy, ADR and RevPAR as compared to the three and six months ended June 30, 2004. The following table sets forth certain statistical information for the three and six months ended June 30, 2005 and 2004 for the 31 hotels we will own and lease after the completion of the planned dispositions, as if these hotels were owned or leased for the entire periods presented.


	Three months ended June 30,												Six months ended June 30,
	Occupancy				ADR				RevPAR				Occupancy				ADR				RevPAR
	2005		2004		2005		2004		2005		2004		2005		2004		2005		2004		2005		2004
Wyndham Hotels & Resorts	82.5	%	82.5	%	$	143.05	$	133.66	$	118.02	$	110.32	80.4	%	80.0	%	$	152.59	$	143.29	$	122.72	$	114.74
Wyndham Luxury Resorts	76.3		77.1			251.99		236.47		192.14		182.18	76.0		76.6			274.26		263.60		208.53		201.99
Wyndham Garden Hotels	85.9		87.8			122.83		100.78		105.50		88.44	79.1		78.8			116.81		100.58		92.43		79.25
Non-Proprietary Branded Hotels	91.2		74.9			89.70		81.92		81.76		61.34	87.4		80.7			93.34		83.96		81.57		67.76

Weighted average	82.6	%	82.3	%	$	144.13	$	134.58	$	119.02	$	110.82	80.4	%	80.0	%	$	153.66	$	144.32	$	123.57	$	115.41

Liquidity and Capital Resources

Our cash and cash equivalents as of ~~March~~June 3130, 2005 were $3239.~~1 million, inclusive of $~~2.4 million ~~in Wyndham Anatole cash; and our restricted cash was $75.9 million~~, inclusive of $2.5 ~~million in Wyndham Anatole restricted cash~~.2 ~~Our cash and cash equivalents as of March 31, 2004 were $97.7~~ million, ~~inclusive of $1.8 million~~ in Wyndham Anatole cash; and our restricted cash was $~~115~~160.46 million, inclusive of $64.97 million in Wyndham ~~Anatole restricted cash. Restricted cash is comprised of furniture, fixture and equipment reserves, tax and insurance escrows, derivative collateral, deferred maintenance reserves and~~ ~~ground rent reserves.~~

Anatole restricted cash. Our cash and cash equivalents as of June 30, 2004 were $75.8 million, inclusive of $525,000 in Wyndham Anatole cash; and our restricted cash was $108.5 million, inclusive of $7.2 million in Wyndham Anatole restricted cash. Restricted cash is comprised of furniture, fixture and equipment reserves, tax and insurance escrows, derivative collateral, deferred maintenance reserves, ground rent reserves and other miscellaneous reserves.

Cash Flow Provided by Operating Activities

Our principal source of cash flow is from the operations of the hotels that we own, lease, manage and franchise. Cash flows from operating activities were $1815.34 million and $1244.73 million for the ~~three~~six months ended ~~March~~June 3130, 2005 and 2004, respectively. Operational cash flows ~~increased~~decreased for the ~~three~~ six months ended ~~March~~June 3130, 2005 compared to the ~~three~~six months ended ~~March~~June 3130, 2004 primarily due to ~~increased~~lower cash ~~flows~~generated from ~~the~~hotel operations ofas ~~our~~a ~~owned,~~result ~~leased~~of hotels sold and ~~managed~~an ~~hotels,~~increase ~~partially~~in ~~offset~~interest payments byof ~~higher~~approximately ~~interest~~$9.9 ~~payments~~million.

Cash Flows from Investing and Financing Activities

Cash flows provided by our investing activities were $~~352~~269.18 million for the ~~three~~ six months ended ~~March~~June 3130, 2005, resulting primarily from proceeds received from the sale of assets during the period, offset somewhat by additions to restricted cash accounts and expenditures for improvements and additions to hotel properties. Cash flows used in financing activities of $~~362~~270.95 million for the ~~three~~six months ended ~~March~~June 3130, 2005 were primarily related to the refinancing of our corporate credit facilities and the majority of our mortgage debt and principal repayments made on our debt as a result of asset sales.

Cash flows provided by our investing activities were $~~170~~166.17 million for the ~~three~~six months ended ~~March~~June 3130, 2004, resulting primarily from proceeds received from the sale of assets during the period ~~and changes to our restricted cash reserves during the period~~. This was ~~partially~~ offset by renovation expenditures at certain hotels. Cash flows used in financing activities of $~~147~~197.89 million for the ~~three~~six months ended ~~March~~June 3130, 2004 were primarily related to principal payments made on our debt.

Credit Facilities

As of ~~March~~June 3130, 2005, we had approximately $2320.14 million outstanding under our revolving credit facility, $~~744~~528.17 million outstanding on term loans IB and $~~243~~139.27 million outstanding on term loans IIC. Additionally, we had outstanding letters of credit totaling $5857.54 million. Also, as of ~~March~~June 3130, 2005, we had $~~789~~1.2 ~~million of~~billion of mortgage debt outstanding that encumbered 17 hotels and capital leases and other debt of $40.52 million, resulting in total indebtedness of approximately $~~1.84~~2 billion. Included in the total indebtedness is $~~167~~166.89 million in mortgage debt and ~~capital~~ capital lease obligations associated with the Wyndham Anatole of which we are not a party to nor guarantor of ~~this~~the ~~loan~~debt and capital lease obligation (see note 45 of the Condensed Consolidated Financial Statements). As of ~~March~~June 3130, 2005, we had approximately $~~201~~160.32 million in liquidity. Our liquidity is defined as revolver availability ($~~189~~147.73 million) plus cash in our overnight accounts ($1112.69 million).

We have considered our short-term liquidity needs and the adequacy of adjusted estimated cash flows and other expected liquidity sources to meet these needs. We believe that our principal short-term liquidity needs are to fund our normal recurring expenses and our debt service requirements. We anticipate that these needs will be fully funded from our cash flows provided by operating activities and, when necessary, from our revolving credit facility. In the past, we have generally met our long-term liquidity requirements for the funding of activities, such as development and scheduled debt maturities, major renovations, expansions and other non-recurring capital improvements, through long-term secured and unsecured indebtedness and the proceeds from the sale of our assets. In the future, we may seek to increase our capital resources through similar activities or, subject to limitations imposed by the terms of our credit agreements and preferred stock, through offerings of debt or equity securities, including convertible notes and preferred or common stock.

27As a result of existing financing agreements, the separate assets and liabilities of the special purpose entities which own directly or indirectly the Wyndham Baltimore, Wyndham Boston, Wyndham El San Juan Hotel and Casino, Wyndham Bel Age, Wyndham San Diego, Wyndham Philadelphia, Wyndham Buttes Resort, Wyndham

~~As a result of existing financing agreements, the separate assets and liabilities of the special purpose~~ ~~entities which own directly or indirectly the Wyndham Baltimore~~Burlington, Wyndham ~~Boston~~Northwest Chicago, Wyndham El ~~San~~Conquistador ~~Juan~~Resort ~~Hotel~~ and ~~Casino,~~Country ~~Wyndham Bel Age~~Club, Wyndham ~~San~~Ft. ~~Diego,~~Lauderdale ~~Wyndham Philadelphia~~Airport, Wyndham ~~Buttes~~Casa Marina Resort, Wyndham Reach ~~Burlington~~Resort, Wyndham ~~Northwest~~Atlanta ~~Chicago~~Downtown and Wyndham ElCondado ~~Conquistador~~Plaza ~~Resort and Country Club~~ properties are not available to pay the debts of consolidated Wyndham and do not constitute obligations of consolidated Wyndham. However, amounts permitted to be distributed by such special purpose entities to consolidated Wyndham are available to consolidated Wyndham in accordance with such existing financing agreements.

As of ~~March~~June 3130, 2005, under the terms of the applicable credit facility, loan agreement, and lease agreement, our principal amortization and balloon payment requirements and our future five-year minimum lease payments are summarized as follows:

Payments due by year

Total

~~Remainderof~~Remainder of 2005

2006

2007

2008

2009

2010 ~~andthereafter~~and thereafter

(in thousands)

Debt

1,~~801~~930,~~146~~862

(1)

~~558~~199,~~114~~567

(2)

1179,~~045,328~~953

(3)

6687,~~152~~852

613,~~663~~363

512,~~908~~608

~~178~~837,~~981~~519

Capital leases obligations

3938,~~008~~685

(1)

21,~~072~~395

2,729

2,~~463~~462

1,397

1,~~057~~385

29,~~290~~317

Office leases(4)

76,~~307~~600

21,~~040~~337

2,~~488~~487

2,~~014~~013

~~490~~489

~~275~~274

—

Hotel and ground leases(4)

~~151~~141,~~972~~196

64,~~349~~177

76,~~521~~471

8,~~444~~344

8,~~449~~349

8,~~407~~307

~~112~~105,~~802~~548

Total

12,~~999~~117,~~433~~343

~~568~~206,~~575~~476

1191,~~058,066~~640

19700,~~073~~671

1623,~~999~~598

1522,~~647~~574

~~321~~972,~~073~~384

(1) The Wyndham Anatole debt and capital lease obligations of $~~167~~166.89 million is included, however, we are not a party to nor guarantor of this debt and capital lease obligation (see note 45 to the Condensed Consolidated Financial Statements).

(2) AsWe ~~a result of the refinancing on May 10, 2005, $293.2 million of the $558.1 million that matures during the remainder of 2005 has been extended to 2011. In addition, we~~ can elect to extend $~~261~~91.9 million for three additional twelve-month periods provided there is not a default under the ~~loans~~loan and other minor conditions are met which are within our control. The remaining maturities ~~represent~~include a $3100 million six-property mezzanine loan, which was due on July 31, 2005 but has been subsequently extended to August 31, 2005 and $9.81 million related to normal principal amortization.

(3) ~~The~~We ~~refinancing~~can onelect ~~May~~to ~~10,~~extend ~~2005,~~$166.1 ~~also~~million ~~extended~~for ~~$1.040~~two ~~billion~~additional oftwelve-month periods provided there is not a default under the ~~$1.045~~loan ~~billion~~and ofother ~~debt~~minor ~~maturing~~conditions inare ~~2006~~met towhich ~~2011~~are within our control.

(4)	Office, hotel and ground leases are operating leases and are included in operating expenses.

Dividends

We do not anticipate paying a dividend to our common shareholders and we are prohibited under the terms of our senior ~~credit~~facilities ~~facility and increasing rate loans facility~~ from paying dividends on our class A common stock. For the six year period beginning September 30, 1999, dividends on our series A and series B preferred stock are payable partly in cash and partly in additional shares of our series A and series B preferred stock, with the cash portion aggregating $29.25 million per year, so long as there is no redemption or conversion of our series A and series B preferred stock. For the following four years, dividends are payable in cash or additional shares of our series A or series B preferred stock, as the case may be, as determined by our board of directors. After year ten, dividends are payable solely in cash.

We are prohibited under the terms of ~~the~~our ~~January 24, 2002 amendments to the senior~~ credit ~~facility~~facilities ~~and increasing rate loans facility~~ from paying cash dividends on the series A and series B preferred stock. As of ~~March~~June 3130, 2005, we have deferred payments of the cash portion of the preferred stock dividend totaling approximately $~~109~~116.69 million. In addition, according to the terms of our series A and series B preferred stock, if the cash dividends on the preferred stock are in arrears and unpaid for at least 60 days, then an additional amount of dividends will accrue at an annual rate of 2.0% of the stated amount of each share of preferred stock then outstanding from the last payment date on which cash dividends were to be paid in full until the cash dividends in arrears have been paid in full. These additional dividends are cumulative and payable in additional shares of preferred stock. As of June 30, 2005, we have issued additional stock dividends of 1,096,267 shares of series A and series B preferred stock with a stated value of $109.6 million.

2835

arrears have been paid in full. These additional dividends are cumulative and payable in additional shares of preferred stock. As of March 31, 2005, we have issued additional stock dividends of 1,015,365 shares of series A and series B preferred stock with a stated value of $101.5 million.

Renovations and Capital Improvements

During the first ~~three~~six months of 2005, we invested approximately $2245.46 million in capital improvements and renovations. These capital expenditures included (i) costs related to enhancing the revenue-producing capabilities of our hotels and (ii) costs related to recurring maintenance ~~capital expenditures~~. During 2005, we anticipate spending approximately $~~100~~75 million in capital expenditures primarily for recurring maintenance capital expenditures and technological initiatives. We are limited to capital expenditures of $125 million per year, plus $25 million per year for emergency capital expenditures under the terms of the January 24, 2002 amendments to the senior credit facility and increasing rate loans facility.

We attempt to schedule renovations and improvements during traditionally lower occupancy periods in an effort to minimize disruption to the hotel’s operations. Therefore, we do not believe such renovations and capital improvements will have a material effect on the results of operations of the hotels. Capital expenditures will be financed through capital expenditure reserves or with working capital.

Inflation

Operators of hotels in general possess the ability to adjust room rates quickly. However, competitive pressures may limit our ability to raise room rates in the face of inflation.

Seasonality

The hotel industry is seasonal in nature; however, the periods during which our hotel properties experience higher revenues vary from property to property and depend predominantly on the property’s location. Our revenues typically have been higher in the first and second quarters than in the third or fourth quarters.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to: impairment of assets; assets held for sale; bad debts; income taxes; insurance reserves; derivatives; and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

We periodically review the carrying value of our assets, including intangible assets, to determine if events and circumstances exist indicating that assets might be impaired. If facts and circumstances support this possibility of impairment, management will prepare undiscounted and discounted cash flow projections, which require judgments that are both subjective and complex.

We use judgment in projecting which assets we will sell within the next twelve months. These judgments are based on our knowledge of the current market and the status of current negotiations with third parties. If we expect assets to be sold within 12 months, they are reclassified as assets held for sale on the balance sheet.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered ongoing prudent and feasible tax planning strategies in assessing the ~~need for the valuation allowance, in the event we were to determine that we would be able to realize~~ ~~our deferred tax assets in the future in excess of their net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made.~~

need for the valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made.

We have reserves for taxes and associated interest that may become payable in future years as a result of audits by taxing authorities. Although we believe that the positions taken on previously filed tax returns are reasonable, we nevertheless have established tax and interest reserves in recognition that various taxing authorities may challenge the positions taken by us resulting in additional liabilities for taxes and interest. The tax reserves are reviewed as circumstances warrant and adjusted as events occur that affect our potential liability for additional taxes, such as lapsing of applicable statues of limitations, conclusion of tax audits, additional or reduced exposure based on current calculations, identification of new issues, release of administrative guidance or rendering of a court decision affecting a particular tax issue.

We maintain a paid loss deductible insurance plan for commercial general liability, automobile liability, and workers’ compensation loss exposures related to the hotel operations. The primary loss deductible retention limit is currently $1,000,000 per occurrence for general liability, $250,000 per occurrence for ~~automobile~~ automobile liability and $500,000 per occurrence for workers’ compensation loss, in most jurisdictions. The estimates of the ultimate liability for losses and associated expenses are based upon a third party actuarial analysis and projection of ~~actual~~ actual historical development trends of loss frequency, severity and incurred but not reported claims as well as traditional issues that affect loss cost such as medical and statutory benefit inflation. In addition, the actuarial analysis compares ~~our~~ our trends against general insurance industry development trends to develop an estimate of ultimate costs within the deductible retention. Large claims or incidents that could potentially involve material amounts are also monitored closely on a case-by-case basis. As of ~~March~~June 3130, 2005, our balance sheet included an estimated liability with respect to this self-insurance program of $3135.62 million.

Our objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. During the ~~three~~six months ended ~~March~~June 3130, 2005, such derivatives were used to hedge the variable cash flows associated with a portion of our variable-rate debt. As of ~~March~~June 3130, 2005, we did not have any derivatives designated as fair value hedges. Additionally, we do not use derivatives for trading or speculative purposes. We use a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date to determine the fair value of the derivative instruments. For the majority of financial instruments including most derivatives, standard market conventions and techniques such as discounted cash flow analyses, option pricing models, replacement cost and termination cost are used to determine fair value. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized. Future cash inflows or outflows from the derivative instruments depend upon future borrowing rates. If assumptions about future borrowing rates prove to be materially incorrect, the recorded value of these agreements could also prove to be materially incorrect. Because we use the derivative instruments to reduce our exposure to increases in variable interest rates, thus effectively fixing a portion of our variable interest rates, the impact of changes in future borrowing rates could result in interest expense being either higher or lower than might otherwise have been incurred on the variable-rate borrowings had the rates not been fixed. A reduction in interest rates could result in a competitive advantage for companies in a position to take advantage of a lower cost of capital.

We are defendants in lawsuits that arise out of, and are incidental to, the conduct of our business. Management uses judgment, with the aid of legal counsel, to record accruals for losses that we consider to be probable and that can be reasonably estimated, as a result of any pending actions against us.

Recently Issued Accounting Standards

In ~~May~~December ~~2003~~2004, the FASB issued SFAS ~~150~~123 (Revised 2004), “~~Accounting~~Shared-Based ~~for Certain Financial Instruments with Characteristics of Both Liabilities and Equity~~Payment.” SFAS ~~150~~123R ~~specifies~~is ~~that~~a ~~instruments~~revision ~~within its scope embody obligations~~ of ~~the issuer and that, therefore, the issuer must classify them as liabilities.~~ SFAS ~~150 was effective immediately for all financial instruments entered into or modified after May 31~~123, ~~2003.~~“Accounting ~~For all other instruments, SFAS 150 went into effect at the beginning of the first interim period beginning after June 15, 2003, except~~ for ~~mandatorily redeemable financial instruments of a non-public~~ ~~entity.~~Stock ~~For~~Based ~~contracts that were created or modified before May 31~~Compensation”, ~~2003~~ and ~~still~~supersedes ~~exist~~Accounting atPrinciples ~~the~~Board ~~beginning~~Opinion ofNo. ~~the~~25 ~~first~~(APB ~~interim period beginning after June 15~~25), ~~2003,~~“Accounting ~~entities should record the transition to SFAS 150 by reporting the cumulative effect of a change in an accounting principle. SFAS 150 prohibits entities from restating financial statements~~ for ~~earlier~~Stock ~~years~~Issued ~~presented. On October 29, 2003, the FASB deferred the provisions of paragraphs 9 and 10 of SFAS 150 as they apply~~ to ~~mandatorily~~ ~~redeemable noncontrolling interests~~Employees”. ~~Those~~Among ~~provisions~~other ~~require that a mandatorily redeemable minority interest within the scope of SFAS 150 be classified as a liability on a parent company’s financial statement in certain situations~~items, ~~including~~ when a finite-lived entity is consolidated. The deferral of those provisions is expected to remain in effect while certain issues are addressed in either Phase II of the FASB’s Liabilities and Equity project or Phase II of the FASB’s Business Combinations Project. However, the FASB did not defer the disclosure provisions relating to mandatorily redeemable noncontrolling interests. Therefore, in accordance with SFAS ~~150,~~123R ~~if we liquidate the consolidated subsidiaries~~ in which there exists a minority interest, we would be required to pay approximately $12.2 million in cash. Such amount is lower than the carrying amount of the minority interest in consolidated subsidiaries by $5.3 million.

In37 December 2004, the FASB issued SFAS 123 (Revised 2004), “Shared-Based Payment.” SFAS 123R is a revision of SFAS 123, “Accounting for Stock Based Compensation”, and supersedes Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees”. Among other items, SFAS 123R eliminates the use of the intrinsic value method of accounting permitted under APB 25, and requires companies to expense the fair value of employee stock options and similar share-based payment awards. Under SFAS 123R, share-based payment awards are expensed based on the fair value of the awards on their grant dates and the estimated number of awards that are expected to vest. The fair values of the share-based payment awards are estimated using an option-pricing model that appropriately reflects a company’s specific circumstances and the economics of the company’s share-based payment transactions. Compensation expense for share-based payment awards, along with the related tax effects, is recognized as the awards vest. SFAS 123R also requires the tax benefit associated with these share-based payment awards be classified as financing activities in the statement of cash flow rather than operating activities as currently permitted. Pursuant to a rule issued by the Securities and Exchange Commission (“SEC”) on April 14, 2005 amending the compliance dates for SFAS 123R, we will be required to adopt SFAS 123R beginning January 1, 2006. The provisions of SFAS 123R apply to all outstanding and unvested share-based payment awards at the company’s adoption date. SFAS 123R offers alternative transition methods of adopting this final rule. At the present time, we have not determined which alternative method we will use.

eliminates the use of the intrinsic value method of accounting permitted under APB 25, and requires companies to expense the fair value of employee stock options and similar share-based payment awards. Under SFAS 123R, share-based payment awards are expensed based on the fair value of the awards on their grant dates and the estimated number of awards that are expected to vest. The fair values of the share-based payment awards are estimated using an option-pricing model that appropriately reflects a company’s specific circumstances and the economics of the company’s share-based payment transactions. Compensation expense for share-based payment awards, along with the related tax effects, is recognized as the awards vest. SFAS 123R also requires the tax benefit associated with these share-based payment awards be classified as financing activities in the statement of cash flow rather than operating activities as currently permitted. Pursuant to a rule issued by the Securities and Exchange Commission (“SEC”) on April 14, 2005 amending the compliance dates for SFAS 123R, we will be required to adopt SFAS 123R beginning January 1, 2006. The provisions of SFAS 123R apply to all outstanding and unvested share-based payment awards at the company’s adoption date. SFAS 123R offers alternative transition methods of adopting this final rule. At the present time, we have not determined which alternative method we will use.

In May 2003, the FASB issued SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS 150 specifies that instruments within its scope embody obligations of the issuer and that, therefore, the issuer must classify them as liabilities. SFAS 150 was effective immediately for all financial instruments entered into or modified after May 31, 2003. For all other instruments, SFAS 150 went into effect at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of a non-public entity. For contracts that were created or modified before May 31, 2003 and still exist at the beginning of the first interim period beginning after June 15, 2003, entities should record the transition to SFAS 150 by reporting the cumulative effect of a change in an accounting principle. SFAS 150 prohibits entities from restating financial statements for earlier years presented. On October 29, 2003, the FASB deferred the provisions of paragraphs 9 and 10 of SFAS 150 as they apply to mandatorily redeemable noncontrolling interests. Those provisions require that a mandatorily redeemable minority interest within the scope of SFAS 150 be classified as a liability on a parent company’s financial statement in certain situations, including when a finite-lived entity is consolidated. The deferral of those provisions is expected to remain in effect while certain issues are addressed in either Phase II of the FASB’s Liabilities and Equity project or Phase II of the FASB’s Business Combinations Project. However, the FASB did not defer the disclosure provisions relating to mandatorily redeemable noncontrolling interests. Therefore, in accordance with SFAS 150, if we liquidate the consolidated subsidiaries in which there exists a minority interest, we would be required to pay approximately $11.1 million in cash. Such amount is lower than the carrying amount of the minority interest in consolidated subsidiaries by $6.3 million.

Item 3.

Quantitative and Qualitative Disclosures About Market Risks

Our primary market risk exposure is to future changes in interest rates related to our derivative financial instruments and other financial instruments, including debt obligations, interest rate swaps, interest rate caps, and future debt commitments.

We manage our debt portfolio by periodically entering into interest rate swaps and caps to achieve an overall desired position of fixed and floating rates or to limit our exposure to rising interest rates.

The following table provides information ~~as of March 31, 2005~~ about our derivative and other financial instruments that are sensitive to changes in interest rates.

• For fixed rate debt obligations, the table presents principal cash flows and related weighted-average interest rates by expected maturity date and contracted interest rates at ~~March~~June 3130, 2005. For variable rate debt obligations, the table presents principal cash flows by expected maturity date and contracted interest rates at ~~March~~June 3130, 2005.

• For interest rate swaps and caps, the table presents notional amounts and weighted-average interest rates or strike rates by expected (contractual) maturity dates. Notional amounts are used to calculate the contractual cash flows to be exchanged under the contract. Weighted average variable rates are based on implied forward rates in the yield curve at ~~March~~June 3130, 2005.

	Remainderof 2005			2006			2007			2008			2009			Thereafter			Face Value			FairValue	~~FairValue~~
	(dollars in thousands)
Debt
Long-term debt obligations including current portion Fixed Rate	$	194,~~523~~059	(1)	$	9,913	~~(2)~~	$	8,~~615~~614		$	8,060		$	67,~~965~~293		$	208,~~271~~294	(3)	$	~~261~~246,~~347~~233		$	$266,129	~~259,919~~
Average Interest Rate		8.8738	%		8.70	%		8.35	%		8.26	%		8.0610	%		7.92	%
Variable Rate	$	~~540~~196,~~663~~903	(1)	$	1172,~~038,144~~769	(2)	$	—681,700		$	—6,700		$	—6,700		$	—658,543		$	1,~~578~~723,~~807~~315	~~(3)~~	$	$1,723,315	~~1,578,807~~
Average Interest Rate		78.0479	%		98.4396	%		—7.45	%		—8.41	%		—8.55	%		—8.52	%
Interest Rate Derivative Financial Instruments Related to Debt
Interest Rate Swaps (based on British LIBOR)
Pay Fixed/Receive Variable	$	5653,~~243~~297		$	—		$	—		$	—		$	—		$	—		$	5653,~~243~~297		$	$9	50
Average Pay Rate		4.62	%		—			—			—			—			—
Average Receive Rate		54.0365	%		—			—			—			—			—
Interest Rate Swaps (based on U.S LIBOR)
Interest Rate Caps
Pay Fixed/Receive Variable	$	42,188		$	—		$	—		$	—		$	—		$	—		$	42,188			$	(392	)
Notional Amount	$	818,964		$	35,000		$	775,000		$	—		$	—		$	—		$	1,628,964		$	346
Average Pay Rate		5.25	%		—			—			—			—			—
Strike Rate		5.72	%		5.56	%		5.50	%		—			—			—
Average Receive Rate		3.45	%		—			—			—			—			—
Forward Rate		3.37	%		4.00	%		4.07	%		—			—			—
Interest Rate Caps
Notional Amount	$	818,055		$	35,000		$	—		$	—		$	—		$	—		$	853,055			$	—
Strike Rate		5.92	%		7.00	%		—			—			—			—
Forward Rate		3.45	%		4.46	%		—			—			—			—

(1) AsWe ~~a result of the refinancing on May 10, 2005, $293.2 million of the $560.2 million that matures during the remainder of 2005 has been extended to 2011. In addition, we~~ can elect to extend $~~261~~91.9 million for three additional twelve-month periods provided there is not a default under the loans and other minor conditions are met which are within our control. The remaining maturities ~~represent~~include a $6100 million six-property mezzanine loan, which was due on July 31, 2005 but has been subsequently extended to August 31, 2005, and $9.1 million related to normal principal amortization.

32(2) We can elect to extend $166.1 million for two additional twelve-month periods provided there is not a default under the loan and other minor conditions are met which are within our control.

(3)	Wyndham Anatole debt of $166.9 million is included, however, we are not a party to nor guarantor of this debt (see note 5 of the Condensed Consolidated Financial Statements).

(2) The refinancing on May 10, 2005, also extended $1.040 billion of the $1.048 billion of debt maturing in 2006 to 2011.

(3) Wyndham Anatole debt of $167.8 million is included, however, we are not a party to nor guarantor of this debt (see note 4 of the Condensed Consolidated Financial Statements).

Item 4.

Controls and Procedures

As of ~~March~~June 3130, 2005, management, under the supervision and with the participation of our Chairman, President and Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chairman, President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are not effective in ensuring that information required to be disclosed by us in the reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and include controls and procedures designed to insure the information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chairman, President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As discussed in “Management’s Report on Internal Control Over Financial Reporting”, in our Form 10-K as filed with the SEC on March 15, 2005 for the year ended December 31, 2004, as amended by Amendment No. 1 to the Form 10-K filed with the Commission on April 8, 2005, as amended by Amendment No. 2 to the Form 10-K filed with the Commission on April 29, 2005, and as amended by Amendment No. 3 to the Form 10-K filed with the Commission on May 16, 2005, the Company as of December 31, 2004, ~~the Company~~ did not maintain effective controls over the accounting and review of income taxes and the determination of deferred income taxes and the related valuation allowance. Specifically, the Company did not maintain effective controls over the reconciliation of its income tax assets and liabilities to the underlying differences between the tax basis and accounting basis of each component of the Company’s balance sheet. In addition, the related income tax asset valuation allowance was not reconciled to the underlying supporting detail. This control deficiency resulted in an audit adjustment to the fourth quarter 2004 consolidated financial statements. During the quarter ended March 31, 2005, as the Company was continuing to remediate internal controls over income tax accounting, the Company identified an additional $1.7 million income tax receivable write-off related to 2004, which resulted in the restatement of the 2004 financial statements. Additionally, this control deficiency could result in a misstatement of income taxes payable, deferred income tax assets and liabilities and the related income tax provision that could result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. Accordingly, management determined that this control deficiency constitutes a material weakness. Because of this material weakness, we have concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2004, based on criteria in Internal Control—Integrated Framework.

InWe ~~2005,~~are wecurrently ~~plan~~in tothe ~~implement~~process of implementing improved monitoring controls over the income tax account balance sheet review process and have engaged a third party consultant to assist our personnel in conducting a comprehensive and detailed review of our tax accounting and reporting processes and procedures for the quarter and six months ended ~~March~~June 3130, 2005. Once fully implemented, management believes that these new policies and procedures will be effective at remediating this material weakness.

Other than the matters discussed in the two preceding paragraphs, during the three month period ended ~~March~~June 3130, 2005, there were no changes in our internal control over financial reporting that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of such evaluation.

3340

PART II: —OTHER INFORMATION

Item 1.

Legal Proceedings

On May 7, 1999, Doris Johnson and Charles Dougherty filed a lawsuit in the Northern District of California against Patriot, Wyndham, their respective operating partnerships and PaineWebber Group, Inc. This action, Johnson v. Patriot American Hospitality, Inc., et al., No. C-99-2153, was commenced on behalf of all former holders of Bay Meadows stock during a class period from June 2, 1997 to the date of filing. The action asserts securities fraud claims and alleges that the purported class members were wrongfully induced to tender their shares as part of the Patriot/Bay Meadows merger based on a fraudulent prospectus. The action seeks unspecified damages and further alleges that defendants continued to defraud ~~shareholders~~stockholders about their intentions to acquire numerous hotels and saddle ~~the~~Wyndham ~~company~~ with massive debt during the class period. Three other actions against the same ~~defendants~~ defendants subsequently were filed in the Northern District of California: (i) Ansell v. Patriot American Hospitality, Inc., et al., No. C-99-2239 (filed May 14, 1999), (ii) Sola v. PaineWebber Group, Inc., et al., No. C-99-2770 (filed June 11, 1999), and (iii) Gunderson v. Patriot American Hospitality, Inc., et al., No. C 99-3040 (filed June 23, 1999). Another action with substantially identical allegations, Susnow v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1354-T (filed June 15, 1999) also subsequently was filed in the Northern District of Texas. By order of the Judicial Panel on Multidistrict Litigation, these actions along with certain actions identified below have been consolidated in the Northern District of ~~California~~ California for consolidated pretrial purposes. On or about October 13, 2000, the defendants moved to dismiss the actions. On or about August 15, 2001, the Court granted Defendants’ motions to dismiss the action, dismissing some of the claims ~~with~~ with prejudice and granting leave to replead certain other claims in the Complaint. On or about October 15, 2001, plaintiff filed an amended complaint seeking substantially the same relief as in the original complaint. On or about December 20, 2001, ~~the~~ the defendants moved to dismiss the amended complaint. On or about September 3, 2002, the Court granted in part and denied in part Defendants’ motion to dismiss. The Court did not dismiss certain of Plaintiffs’ claims under Section 11 of ~~the~~ the Securities Act of 1933 and Section 12(b) of the Securities Exchange Act of 1934. An answer to the complaint has been filed and the parties have been exchanging discovery. The Court has not yet certified a class. On or about February 28, 2005, ~~the~~ the parties entered into a stipulation of settlement. Pursuant to the stipulation of settlement, we shall issue 11 million shares of Wyndham common stock to the proposed settlement class. We also have agreed to contribute a maximum amount of $1 ~~million~~ million to the settlement class, only in the event that the trading price of Wyndham common stock falls below a certain threshold for a defined period of time. Furthermore, we have agreed to allow the settlement class to participate in a rights offering. The parties currently are negotiating the terms of the rights offering. The stipulation of settlement is subject to Court approval. As of March 31, 2005, we have recorded a reserve of $11.2 million to cover the cost of the settlement.

OnWe orhave ~~about~~also ~~June~~agreed ~~22,~~that ~~1999,~~in athe ~~lawsuit~~event ~~captioned~~that ~~Levitch~~the ~~v. Patriot~~holders ~~American~~of ~~Hospitality,~~the ~~Inc.,~~series etB ~~al.,~~preferred ~~No.~~stock ~~3-99-CV1416-D,~~convert ~~was~~the ~~filed~~series inB ~~the~~preferred ~~Northern~~stock ~~District~~into common stock of ~~Texas~~Wyndham at ~~against~~any ~~Patriot~~time on or before December 31, ~~Wyndham~~2005, ~~James~~the D.members ~~Carreker~~of ~~and~~the ~~Paul~~settlement A.class ~~Nussbaum.~~shall ~~This~~have ~~action~~the ~~asserts~~right ~~securities~~to ~~fraud~~participate ~~claims~~in ~~and~~a ~~alleges~~rights ~~that~~offering. In the rights offering, ~~during~~each class member will have the right to purchase that number of shares of Wyndham ~~period~~common ~~from~~stock ~~January~~as 5,is ~~1998~~necessary to ~~December~~maintain ~~17,~~such ~~1998,~~member’s ~~the~~ownership ~~defendants~~percentage ~~defrauded~~of ~~shareholders~~Wyndham bycommon ~~issuing~~stock ~~false~~received ~~statements~~as ~~about~~a result of the ~~company~~settlement of the foregoing actions. The ~~complaint~~purchase ~~sought~~price ~~unspecified~~in ~~damages~~such ~~and~~rights ~~was~~offering ~~filed~~will onbe ~~behalf~~equal ofto ~~all~~90% ~~shareholders~~of ~~who~~the ~~purchased~~lower ~~Patriot~~of ~~American~~(i) ~~and~~the ~~Wyndham~~liquidation ~~stock~~value ~~during~~of ~~that~~the ~~period.~~series ~~Three~~B ~~other~~preferred ~~actions,~~stock ~~Gallagher~~being v.converted ~~Patriot~~into ~~American~~Wyndham ~~Hospitality,~~common ~~Inc.,~~stock etreceived ~~al.,~~by ~~No.~~the ~~3-99-CV1429-L,~~series ~~filed~~B onpreferred ~~June~~stockholder ~~23,~~divided ~~1999,~~by ~~David~~the ~~Lee~~number ~~Meisenburg,~~of etshares ~~al.~~of v.Wyndham ~~Patriot~~common ~~American~~stock ~~Hospitality,~~to ~~Inc.,~~be ~~Wyndham International,~~received ~~Inc.,~~pursuant ~~James~~to D.the ~~Carreker,~~conversion ~~and~~or (ii) ~~Paul~~the A.stated ~~Nussbaum~~conversion ~~Case~~price ~~No.~~in ~~3-99-CV1686-X,~~any ~~filed~~agreement ~~July~~between ~~27,~~the ~~1999~~holders ~~and~~of ~~Deborah~~the ~~Szekely~~series v.B ~~Patriot~~preferred ~~American~~stock ~~Hospitality,~~and ~~Inc~~Wyndham., etThe ~~al.~~recapitalization transaction, ~~No.~~if ~~3-99-CV1866-D~~consummated, ~~filed~~will ongive orrise ~~about~~to ~~August~~Wyndham’s ~~27,~~obligation ~~1999,~~to ~~allege~~conduct ~~substantially~~ the ~~same~~rights ~~allegations.~~offering Byin ~~orders~~order to ofpermit the ~~Judicial~~class ~~Panel~~members onto ~~Multidistrict~~maintain ~~Litigation,~~their ~~these~~ownership ~~actions~~interest ~~have~~in ~~been~~Wyndham ~~consolidated~~(approximately ~~with~~6.18% ~~certain~~based ~~other~~on ~~shareholder~~the ~~actions~~number ~~and~~of ~~transferred~~shares anticipated to ~~the~~be ~~Northern~~outstanding ~~District~~immediately following consummation of ~~California~~the ~~for~~recapitalization). ~~consolidated~~The ~~pretrial~~price ~~purposes.~~in such rights Onoffering orwill ~~about~~be ~~October~~equal ~~20,~~to ~~2000,~~90% of the ~~defendants~~average ~~moved~~liquidation topreference ~~dismiss~~of the ~~actions.~~series OnB orpreferred ~~about~~stock ~~August~~immediately ~~15,~~prior ~~2001,~~to the ~~Court~~effective ~~granted~~time ~~Defendants’~~of ~~motions~~the torecapitalization ~~dismiss~~merger divided by the ~~action,~~exchange ~~dismissing~~ratio. ~~some~~Based ofon the ~~claims~~average ~~with~~liquidation ~~prejudice~~preference ~~and~~of the ~~granting~~series ~~leave~~B topreferred ~~replead certain~~stock ~~other~~as ~~claims~~of inMarch ~~the~~31, ~~Complaint~~2005, such price is equal to approximately $1.50 per share. On or about ~~October~~June 1520, ~~2001~~2005, ~~plaintiff~~the ~~filed~~parties entered into an amended ~~complaint~~stipulation ~~seeking~~of ~~substantially~~settlement ~~the~~that ~~same~~would ~~relief~~provide asclass inmembers ~~the~~with ~~original~~cash consideration ~~complaint.~~equal Onto orthe ~~about~~consideration ~~December~~per ~~20,~~common ~~2001,~~share ~~the~~provided ~~defendants~~to ~~moved~~holders toof ~~dismiss~~Wyndham ~~the~~common ~~amended complaint.~~stock Onin orthe ~~about~~event ~~September~~of 3,a ~~2002~~sale, ~~the~~merger ~~Court~~or ~~dismissed~~other inbusiness ~~its~~combination ~~entirety~~of Wyndham prior to the ~~complaint~~issuance ~~and~~of ~~granted~~the ~~plaintiffs~~11,000,000 ~~leave~~shares to ~~amend~~the class. OnIn oraddition, the ~~about~~amended ~~December~~stipulation 2,of ~~2002,~~settlement ~~plaintiffs~~provides ~~filed~~that anin the event that (i) the series B preferred shares have

3441

~~amended~~been ~~complaint.~~converted ~~The~~into ~~Court~~common ~~has~~stock ~~not~~prior ~~yet~~to ~~certified~~the aconsummation ~~class.~~of Ona orsale ~~about~~of ~~September~~Wyndham ~~30,~~and ~~2004,~~(ii) the ~~parties~~per ~~entered~~share ~~into~~consideration aprovided ~~stipulation~~to holders of ~~settlement~~Wyndham ~~with class~~common ~~counsel~~stock toin ~~settle~~ the ~~litigation.~~sale ~~The~~were ~~stipulation~~greater than 90% of ~~settlement~~the isconversion ~~subject~~price toof ~~Court~~the ~~approval.~~price ~~Pursuant~~per tocommon share at which the ~~stipulation~~holders of ~~settlement~~series B preferred stock convert shares into Wyndham common stock, wethen ~~shall~~instead ~~pay~~of ~~$2.5~~a ~~million~~rights inoffering each class member would receive additional cash ~~when~~consideration in an ~~order~~amount isequal ~~entered~~to by the ~~Court~~product ~~preliminarily~~of ~~approving~~(a) that number of shares of Wyndham common stock necessary to maintain that person’s ownership percentage of Wyndham’s common stock prior to the ~~proposed settlement~~conversion and an(b) the ~~additional~~difference ~~$2.5~~between ~~million~~the onper orshare ~~before~~consideration ~~the~~provided ~~second~~to ~~anniversary~~holders of Wyndham common stock in the ~~final~~sale ~~Court~~and ~~approval~~90% of the conversion price. As of ~~March~~June 3130, 2005, we have recorded ana ~~adequate~~ reserve of $11.2 million to cover the cost of the settlement.

On ~~May~~or 29about June 22, ~~2002~~1999, ~~the~~a ~~State~~lawsuit ofcaptioned ~~Florida~~Levitch ~~Office~~v. Patriot ofAmerican ~~the~~Hospitality, ~~Attorney~~Inc., ~~General Department~~et ofal., ~~Legal~~No. 3-99-CV1416-D, ~~Affairs~~was filed ain ~~lawsuit~~the inNorthern ~~Leon~~District ~~County~~of Texas against Patriot, ~~Florida~~Wyndham, ~~(Case~~James NoD. ~~02-CA-1296)~~Carreker ~~naming~~and ~~us,~~Paul ~~Patriot,~~A. Nussbaum. This action asserts securities fraud claims and ~~four~~alleges ~~current~~that, orduring the ~~former~~period ~~Wyndham~~from ~~employees~~January as5, ~~defendants.~~1998 Into ~~this~~December ~~case~~17, 1998, the ~~Attorney~~defendants ~~General~~defrauded ~~alleged~~stockholders ~~that~~by ~~the~~issuing ~~imposition~~false ofstatements ~~energy surcharges,~~about ~~resort~~Wyndham. ~~fees~~The complaint sought unspecified damages and ~~automatic~~was ~~service~~filed ~~fees~~on ~~violates~~behalf ~~the~~of ~~State’s~~all ~~Deceptive~~stockholders who purchased Patriot American and ~~Unfair~~Wyndham ~~Trade~~stock ~~Practices~~during ~~Act~~that period. WeThree ~~filed~~other aactions, ~~motion~~Gallagher tov. ~~dismiss~~Patriot ~~this~~American ~~suit~~Hospitality, ~~which~~Inc., ~~was~~et ~~granted~~al., inNo. ~~part~~3-99-CV1429-L, ~~and~~filed ~~two~~on ofJune ~~the~~23, ~~individual~~1999, ~~defendants~~David ~~have~~Lee ~~been~~Meisenburg, ~~dismissed~~et al. ~~The~~v. Patriot American Hospitality, Inc., Wyndham ~~Attorney~~International, ~~General~~Inc., ~~seeks~~James ~~damages~~D. Carreker, ~~penalties~~and Paul A. Nussbaum Case No. 3-99-CV1686-X, filed July 27, 1999 and ~~attorneys’~~Deborah ~~fees~~Szekely ~~from~~v. ~~the~~Patriot ~~remaining~~American ~~defendants~~Hospitality, Inc., Weet ~~intend~~al., toNo. 3-99-CV1866-D, ~~vigorously~~filed ~~defend~~on ~~this~~or ~~lawsuit~~about August 27, 1999, allege substantially the same allegations. ~~Discovery~~By isorders of the Judicial Panel on~~-going.~~ ~~This~~Multidistrict ~~suit~~Litigation, ~~may~~these ~~not~~actions behave ~~resolved~~been ~~for~~consolidated awith ~~number~~certain ofother ~~years~~stockholder actions and ittransferred isto ~~not~~the ~~possible~~Northern toDistrict of California for consolidated ~~predict~~pretrial purposes. On or about October 20, 2000, the ~~ultimate~~defendants ~~cost~~moved to usdismiss the actions. ~~However~~On or about August 15, 2001, the Court ~~has~~granted ~~stated~~Defendants’ ~~its~~motions ~~preliminary~~to ~~interpretation~~dismiss the action, dismissing some of the ~~applicable~~claims ~~penalty~~with ~~statute.~~prejudice ~~The~~and ~~Attorney~~granting leave ~~General~~to ~~has~~replead ~~argued~~certain ~~that~~other claims in the ~~statute~~Complaint. ~~should~~On beor ~~construed~~about ~~such~~October ~~that~~15, 2001, plaintiff filed an amended complaint seeking substantially the ~~maximum~~same ~~penalty~~relief ~~would~~as bein ~~$10~~the original complaint. On or about December 20,~~000~~ ~~each time~~2001, athe ~~consumer~~defendants ~~was~~moved ~~allegedly~~to dismiss ~~deceived~~the amended complaint. ~~Pursuant~~On toor about September 3, 2002, the Court’s ~~construction,~~dismissed ifin its entirety the ~~Attorney~~complaint ~~General’s~~and ~~Office~~granted ~~fully~~plaintiffs ~~prevails~~leave onto ~~its~~amend. ~~claims~~On ~~that~~or ~~Wyndham~~about ~~willfully~~December ~~engaged~~2, in2002, plaintiffs filed an amended complaint. The Court has not yet certified a ~~deceptive~~class. ~~trade~~On ~~practice~~or byabout ~~charging~~September ~~energy~~30, ~~fees~~2004, the ~~maximum penalty~~parties ~~that~~entered ~~could~~into bea ~~imposed~~stipulation isof ~~$10,000~~settlement ~~(exclusive~~with class counsel to settle the litigation. The stipulation of ~~actual~~settlement ~~damages~~is orsubject ~~attorneys’~~to ~~fees)~~Court approval. InPursuant to the ~~event~~stipulation aof settlement, ~~final~~we ~~judgment~~shall pay $2.5 million in cash when an order is entered inby ~~favor~~the Court preliminarily approving the proposed settlement and an additional $2.5 million on or before the second anniversary of ~~Wyndham~~the final Court approval. As of June 30, ~~the~~2005, we ~~Attorney~~have ~~General~~recorded ~~will~~an ~~likely~~adequate ~~appeal~~reserve to cover the cost of the settlement.

On ~~June~~May 2029, 2002, ~~plaintiffs~~the inState ~~the~~of ~~case~~Florida ~~entitled~~Office ~~Roller-Edelstein,~~of etthe ~~al.~~Attorney ~~v. Wyndham~~General ~~International,~~Department ~~Inc.,~~of etLegal ~~al.,~~Affairs filed ana ~~amended~~lawsuit ~~complaint~~ in ~~Dallas~~Leon County, ~~District~~Florida ~~Court~~ (~~case~~Case noNo. 02-~~04946~~CA-A1296) ~~alleging~~naming ~~that~~us, ~~supplemental~~Patriot, ~~fees~~and ~~charged~~four tocurrent ~~hotel~~or ~~guests~~former ~~constituted~~Wyndham employees ~~common~~as ~~law~~defendants. ~~fraud~~In this case, ~~breach~~the Attorney General alleged that the imposition of ~~contract~~energy surcharges, resort fees and ~~violated~~automatic ~~Texas~~service fees violates the State’ s Deceptive and Unfair Trade Practices Act. ~~The~~We ~~plaintiffs~~filed ~~claim~~a motion to ~~represent~~dismiss this asuit, ~~nationwide~~which ~~class~~was granted in part, and ~~have~~two ~~estimated~~of ~~damages~~the inindividual ~~excess~~defendants ofhave ~~$10~~been ~~million~~dismissed. WeThe ~~have~~Attorney ~~answered~~General ~~this~~seeks ~~complaint~~damages, ~~but~~penalties ~~little~~and ~~formal~~attorneys’ ~~discovery~~fees ~~has~~from ~~been~~the ~~taken~~remaining ~~and~~defendants. ~~the~~We ~~Court~~intend ~~has~~to ~~not~~vigorously ~~yet~~defend ~~certified~~this lawsuit. aDiscovery ~~class~~is on-going. WeThis ~~have~~suit ~~tentatively~~may ~~agreed~~not tobe ~~settle~~resolved ~~this~~for ~~case,~~a ~~without~~number ~~admitting~~of ~~liability.~~years ~~Under~~and it is not possible to predict the ~~proposed~~ultimate ~~settlement~~cost to us. However, wethe ~~would~~Court ~~(i)~~has ~~provide~~stated aits ~~coupon~~preliminary ~~for~~interpretation ~~discounts~~of atthe ~~our~~applicable ~~properties~~penalty tostatute. ~~affected~~The ~~class~~Attorney General ~~members,~~has ~~(ii)~~argued ~~make~~that athe ~~$50,000~~statute ~~charitable~~should ~~donation, (iii)~~be ~~pay~~construed ~~attorneys’~~such ~~fees~~that inthe anmaximum ~~amount~~penalty upwould tobe $~~240~~10,000, ~~and~~each ~~(iv)~~time ~~agree~~a consumer was allegedly deceived. Pursuant to ~~make~~the ~~changes~~Court’s inconstruction, ~~our~~if ~~disclosures~~the ~~regarding~~Attorney ~~resort~~General’s ~~fees.~~Office ~~The~~fully ~~Court~~prevails ~~has~~on its ~~not~~claims ~~yet~~that ~~held~~Wyndham willfully engaged in a ~~hearing~~deceptive ontrade practice by charging energy fees, the ~~joint~~maximum ~~motion~~penalty tothat ~~preliminarily~~could ~~approve~~be ~~the~~imposed ~~settlement~~is ~~and~~$10,000 ~~certify~~per ~~a settlement~~Wyndham ~~class.~~property As(exclusive of ~~March~~actual ~~31,~~damages ~~2005,~~or weattorneys’ ~~have~~fees). ~~recorded~~In anthe ~~adequate~~event ~~reserve~~a tofinal judgment ~~cover~~is ~~the~~entered ~~cost~~in favor of Wyndham, the ~~settlement~~Attorney General will likely appeal.

Trade Practices Act. The plaintiffs claim to represent a nationwide class and have estimated damages in excess of $10 million. We have answered this complaint, but little formal discovery has been taken and the Court has not yet certified a class. We have tentatively agreed to settle this case, without admitting liability. Under the proposed settlement, we would (i) provide a coupon for discounts at our properties to affected class members, (ii) make a $50,000 charitable donation, (iii) pay attorneys’ fees in an amount up to $240,000, and (iv) agree to make changes in our disclosures regarding resort fees. The Court has not yet held a hearing on the joint motion to preliminarily approved the settlement and certify a settlement class. As of June 30, 2005, we have recorded an adequate reserve to cover the cost of the settlement.

35On June 14, 2005, there was filed in the Court of Chancery of the State of Delaware, New Castle County, a purported class action complaint captioned Shaev v. Kleisner et al (C.A. No. 1417-N) (the “Shaev Action”) against Wyndham and certain of its directors and officers. In the Shaev Action, plaintiff seeks to bring a purported class action on behalf of himself and a putative class comprising all stockholders of Wyndham (except for the directors of Wyndham and any persons related to or affiliated with Wyndham or any of its directors). The Shaev Action asserts that Wyndham’s directors owe a fiduciary duty to Wyndham’s stockholders, and that Wyndham’s directors breached such asserted duty in authorizing Wyndham’s entry into the Blackstone merger agreement, by, among other things, allegedly failing to conduct an auction or explore strategic alternatives to a merger, and/or allegedly failing to obtain sufficient value for stockholders. The alleged class representative seeks various remedies on behalf of himself and the putative class, including declaratory relief affirming the claims set forth in the complaint, an injunction preliminarily and permanently enjoining the proposed merger transaction, an award of compensatory damages against all defendants and an award of attorney’s fees. We believe that each of the claims in this action is meritless and intend to contest those claims vigorously.

against Wyndham and certain of its directors and officers. The parties, purported class, allegations and relief requested in the Zucker Action complaint are materially identical to those in the Hwang Action. We believe that each of the claims in this action is meritless and intend to contest those claims vigorously.

On June 30, 2005, a jury awarded approximately $5.9 million in damages to AMMV Investments, LLC, which had commenced an action against Wyndham in Colorado state court (AMMV Investments, LLC v. Wyndham International, Inc., 01 CV 678) asserting breach of contract claims arising out of Wyndham’s alleged failure to provide marketing support to AMMV’s property located adjacent to Wyndham’s Peaks Hotel. Wyndham is considering certain post-trial motions and an appeal. As of June 30, 2005, we have recorded a reserve of $5.9 million to cover the cost of the judgment.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

We are prohibited under the terms of the January 24, 2002 amendments to the ~~senior~~ credit ~~facility~~facilities ~~and increasing rate loans facility~~ from paying cash dividends on the series A and series B preferred stock. As of ~~March~~June 3130, 2005, we have deferred payments of the cash portion of the preferred stock dividend totaling approximately $~~109~~116.69 million. In addition, according to the terms of our series A and series B preferred stock, if the cash dividends on the preferred stock are in arrears and unpaid for at least 60 days, then an additional amount of dividends will accrue at an annual rate of 2.0% of the stated amount of each share of preferred stock then outstanding from the last payment date on which cash dividends were to be paid in full until the cash dividends in arrears have been paid in full. These additional dividends are cumulative and payable in additional shares of preferred stock. As of ~~March~~June 3130, 2005, we have issued additional stock dividends of 1,~~015~~096,~~365~~267 shares of series A and series B preferred stock with a stated value of $~~101~~109.56 million.

Item 4.

Submission of Matters to a Vote of Security Holders

No matters were submitted during the ~~first~~second quarter of the calendar year covered by this Form 10-Q to a vote of our shareholders, through the solicitation of proxies or otherwise.

Item 5.

Other Information

None.

Item 6.

Exhibits

Item No.		Description
ExhibitNumber		Description
31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
3.1		Amended and Restated Certificate of Incorporation of Wyndham, incorporated by reference to Exhibit 3.1 to Wyndham’s Registration Statement on Form S-8 (SEC file no. 333-82325) filed July 2, 1999.
31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
3.2		Amended and Restated Bylaws of Wyndham, incorporated by reference to Exhibit 3.2 to Wyndham’s Registration Statement on Form S-8 (SEC file no. 333-82325) filed July 2, 1999.
32.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
3.3		Amendment No. 1 to Amended and Restated Bylaws of Wyndham, incorporated by reference to Exhibit 2.1 to Wyndham’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000.
32.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
4.1		Certificate of Designation of Series A Convertible Preferred Stock of Wyndham, incorporated by reference to Exhibit 99.5 to Wyndham’s and Patriot’s Current Report on Form 8-K (SEC file no. 001-09320) filed March 2, 1999.
4.2		Certificate of Designation of Series B Convertible Preferred Stock of Wyndham, incorporated by reference to Exhibit 4.2 to Wyndham’s Registration Statement on Form S-4/A (SEC file no. 333-79527) filed June 1, 1999.
4.3		Certificate of Designation of Series C Junior Participating Cumulative Preferred Stock of Wyndham, incorporated by reference to Exhibit 3.1 to Wyndham’s Current Report on Form 8-K (SEC file no. 001-09320) filed July 12, 1999.
4.4		Registration Rights Agreement, dated as of February 18, 1999, by and among Wyndham and the holders of Series B Convertible Preferred Stock of Wyndham party thereto, incorporated by reference to Exhibit 4.1 to Wyndham’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (SEC file no. 001-09320).
4.5		Registration Rights Agreement, dated as of June 30, 1999, by and among Wyndham and former Operating Partnership unitholders party thereto, incorporated by reference to Exhibit 10.1 to Wyndham’s Registration Statement on Form S-3 (SEC file no. 333-86189) filed August 30, 1999.
4.6		Shareholder Rights Agreement, dated as of June 29, 1999, between Wyndham and American Stock Transfer and Trust Company, as Rights Agent, incorporated by reference to Exhibit 4.1 to Wyndham’s Current Report on Form 8-K (SEC file no. 001-09320) filed July 12, 1999.
4.7		Amendment No. 1 to the Shareholder Rights Agreement, dated May 12, 2000, by and between Wyndham and American Stock Transfer and Trust Company, incorporated by reference to Exhibit 4.2 to Wyndham’s Registration Statement on Form 8-A filed May 30, 2000.
4.8		Amendment No. 2 to the Shareholder Rights Agreement, dated April 24, 2002, by and between Wyndham and American Stock Transfer and Trust Company, incorporated by reference to Exhibit 4.8 to Wyndham’s Annual Report on Form 10-K for the year ended December 31, 2002.
4.9		Amendment No. 3 to the Shareholder Rights Agreement, dated May 18, 2005, by and between Wyndham and American Stock Transfer and Trust Company, incorporated by reference to Exhibit 4.3 to Wyndham’s Registration Statement on Form 8-A/A filed May 20, 2005.
4.10		Amendment No. 4 to the Shareholder Rights Agreement, dated June 13, 2005, by and between Wyndham and American Stock Transfer and Trust Company, incorporated by reference to Exhibit 4.1 to Wyndham’s Current Report on Form 8-K filed June 15, 2005.
10.1*		First-Lien Credit Agreement Dated as of May 10, 2005 among Wyndham International, Inc., the Lenders Party Hereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and Bear Stearns Corporate Lending Inc., as Syndication Agent $755,000,000 J.P. Morgan Securities Inc., as Joint Lead Arranger and Joint Book Runner Bear, Stearns & Co., Inc., as Joint Lead Arranger and Joint Book Runner.


Exhibit Number		Description
10.2*		Second-Lien Credit Agreement dated as of May 10, 2005 among Wyndham International, Inc., the Lenders Party Hereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and Bear Stearns Corporate Lending Inc., as Syndication Agent $140,000,000 J.P. Morgan Securities Inc., as Joint Lead Arranger and Joint Book Runner Bear, Stearns & Co., Inc., as Joint Lead Arranger and Joint Book Runner.

10.3*		Loan Agreement dated as of May 10, 2005 among W-#2 Baltimore, LLC, W-Boston, LLC, Casa Marina Owner, LLC, Key West Reach Owner, LLC, El Conquistador Partnership L.P., S.E., Posadas De San Juan Associates, Atlanta American Owner, LLC, and Ft. Lauderdale Owner, LLC, collectively, as Borrower, Travis Real Estate Group Joint Venture, as Baltimore Owner and JPMorgan Chase Bank, N.A., and Bear Stearns Commercial Mortgage, Inc., collectively, as Lender.

10.4*		Mezzanine A Loan Agreement dated as of May 10, 2005 among W-Baltimore Majority Mezz Borrower, LLC, W-Baltimore Minority Mezz Borrower, LLC, PAH Batterymarch Realty Company Mezz Borrower, LLC, Casa Marina Mezz Borrower, LLC, Key West Mezz Borrower, LLC, Conquistador Mezzanine (SPE), Inc., El San Juan Mezz Borrower, Inc., Atlanta American Mezz Borrower, LLC and Wyndham Fort Lauderdale Airport Mezz Borrower, LLC, Collectively, as Borrower and JPMorgan Chase Bank, N.A., and Bear Stearns Commercial Mortgage, Inc., collectively, as Lender.

10.5*		Mezzanine B Loan Agreement dated as of May 10, 2005 among W-Baltimore Majority Mezz Borrower #2, LLC, W-Baltimore Minority Mezz Borrower #2, LLC, PAH Batterymarch Realty Company Mezz Borrower #2, LLC, Casa Marina Mezz Borrower #2, LLC, Key West Mezz Borrower #2, LLC, Conquistador Mezzanine #2 (SPE), Inc., El San Juan Mezz Borrower #2, Inc., Atlanta American Mezz Borrower #2, LLC and Wyndham Fort Lauderdale Airport Mezz Borrower #2, LLC, Collectively, as Borrower and JPMorgan Chase Bank, N.A., and Bear Stearns Commercial Mortgage, Inc., collectively, as Lender.

10.6*		Mezzanine C Loan Agreement dated as of May 10, 2005 among W-Baltimore Majority Mezz Borrower #3, LLC, W-Baltimore Minority Mezz Borrower #3, LLC, PAH Batterymarch Realty Company Mezz Borrower #3, LLC, Casa Marina Mezz Borrower #3, LLC, Key West Mezz Borrower #3, LLC, Conquistador Mezzanine #3 (SPE), Inc., El San Juan Mezz Borrower #3, Inc., Atlanta American Mezz Borrower #3, LLC and Wyndham Fort Lauderdale Airport Mezz Borrower #3, LLC, Collectively, as Borrower and JPMorgan Chase Bank, N.A., and Bear Stearns Commercial Mortgage, Inc., collectively, as Lender.

10.7*		Mezzanine Loan Agreement dated as of May 10, 2005 among Patriot Mezz Borrower #2, LLC and IHC Mezz Borrower #2, LLC, collectively, as Borrower and JPMorgan Chase Bank, N.A., and Bear Stearns Commercial Mortgage, Inc., collectively, as Lender.

31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Filed herewith

3646

~~SIGNATURES~~SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.


WYNDHAM INTERNATIONAL, INC.

By:		/s/ ELIZABETH SCHROEDER
		Elizabeth Schroeder
		Executive Vice President and Chief Financial Officer (Authorized Officer and Principal Financial Officer)

DATED: ~~May~~August 165, 2005

3747

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