##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from          to
 Commission file no. 1-14537
 Lodgian, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    52-2093696(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)3445 Peachtree Road, N.E., Suite 700,Atlanta, GA
    
    30326(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code
(404) 364-9400
 (Former name, former address and former fiscal year, if changed since last report): Not
applicable
 þ o
  o þ o
 o þ
 þ o
  Class
    
    Outstanding as of November 1, 2007Common
    
    24,033,677




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##### 



LODGIAN, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September
30, 2007 and September 30, 2006 (unaudited)
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the Nine Months Ended September
30, 2007 (unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007
and September 30, 2006 (unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 4. Controls and Procedures
    
    
    44PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    45Item 6. Exhibits
    
    
    45Signatures
    
    
    46EX-10.12 SEPARATION AGREEMENT AND GENERAL RELEASE BETWEEN LODIGAN AND MARK D. LINCHEX-31.1 SECTION 302 CERTIFICATION BY THE CEOEX-31.2 SECTION 302 CERTIFICATION BY THE CFOEX-32 SECTION 906 CERTIFICATIONS BY THE CEO AND CFO
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LODGIAN, INC. AND SUBSIDIARIES CONDENSED
 
 CONSOLIDATED BALANCE SHEETS
 September 30, 2007
    
    
    December 31, 2006(Unaudited in thousands, except share data)ASSETSCurrent assets:Cash and
cash equivalents
    
    $
    69,159
    
    
    $
    48,188Cash, restricted
    
    
    15,324
    
    
    
    13,791Accounts
receivable (net of allowances: 2007 - $322; 2006 - $277)
    
    
    13,386
    
    
    
    7,404Insurance receivable
    
    
    1,959
    
    
    
    2,347Inventories
    
    
    2,998
    
    
    
    2,893Prepaid expenses and other current assets
    
    
    24,723
    
    
    
    22,450Assets held for sale
    
    
    13,697
    
    
    
    89,437Total current assets
    
    
    141,246
    
    
    
    186,510Property and
equipment, net
    
    
    498,336
    
    
    
    487,022Deposits for capital
expenditures
    
    
    16,892
    
    
    
    19,802Other assets
    
    
    5,528
    
    
    
    5,824$
    662,002
    
    
    $
    699,158LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,520
    
    
    $
    7,742Other accrued
liabilities
    
    
    31,854
    
    
    
    27,724Advance deposits
    
    
    1,877
    
    
    
    1,384Insurance advances
    
    
    2,000
    
    
    
    2,063Current portion of long-term liabilities
    
    
    13,651
    
    
    
    46,557Liabilities related to assets held for sale
    
    
    7,316
    
    
    
    68,351Total
current
liabilities
    
    
    66,218
    
    
    
    153,821Long-term liabilities
    
    
    357,938
    
    
    
    292,301Total liabilities
    
    
    424,156
    
    
    
    446,122Minority interests
    
    
    
    
    
    
    10,922Commitments and
contingenciesStockholders equity:Common stock, $.01 par value, 60,000,000
shares authorized;
24,967,284 and 24,860,321 issued at September 30, 2007
and
December 31, 2006, respectively
    
    
    250
    
    
    
    249Additional paid-in
capital
    
    
    328,921
    
    
    
    327,634Accumulated deficit
    
    
    (85,189
    )
    
    
    (84,816
    )Accumulated other comprehensive income
    
    
    3,923
    
    
    
    2,088Treasury stock, at cost, 846,113 and 251,619
shares at
September 30, 2007 and December 31,
2006, respectively
    
    
    (10,059
    )
    
    
    (3,041
    )Total
stockholders
equity
    
    
    237,846
    
    
    
    242,114$
    662,002
    
    
    $
    699,158
  3




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited in thousands, except per share data)Revenues:Rooms
    
    $
    54,187
    
    
    $
    50,445
    
    
    $
    160,646
    
    
    $
    152,102Food and beverage
    
    
    14,381
    
    
    
    12,912
    
    
    
    45,004
    
    
    
    40,658Other
    
    
    2,417
    
    
    
    2,105
    
    
    
    6,931
    
    
    
    6,208Total revenues
    
    
    70,985
    
    
    
    65,462
    
    
    
    212,581
    
    
    
    198,968Direct operating expenses:Rooms
    
    
    14,157
    
    
    
    13,297
    
    
    
    40,592
    
    
    
    38,810Food and beverage
    
    
    10,651
    
    
    
    9,772
    
    
    
    31,656
    
    
    
    29,260Other
    
    
    1,683
    
    
    
    1,523
    
    
    
    4,837
    
    
    
    4,705Total direct operating expenses
    
    
    26,491
    
    
    
    24,592
    
    
    
    77,085
    
    
    
    72,77544,494
    
    
    
    40,870
    
    
    
    135,496
    
    
    
    126,193Other operating expenses:Other hotel operating costs
    
    
    20,924
    
    
    
    19,078
    
    
    
    61,415
    
    
    
    56,395Property and other taxes, insurance, and leases
    
    
    4,734
    
    
    
    5,862
    
    
    
    15,557
    
    
    
    14,980Corporate and other
    
    
    5,585
    
    
    
    5,592
    
    
    
    17,197
    
    
    
    15,801Casualty (gains) losses, net
    
    
    
    
    
    
    (3,085
    )
    
    
    (1,867
    )
    
    
    (2,888
    )Restructuring
    
    
    1,258
    
    
    
    
    
    
    
    1,258
    
    
    
    Depreciation and amortization
    
    
    8,086
    
    
    
    7,886
    
    
    
    23,848
    
    
    
    22,948Impairment of long-lived assets
    
    
    535
    
    
    
    323
    
    
    
    1,022
    
    
    
    533Total other operating expenses
    
    
    41,122
    
    
    
    35,656
    
    
    
    118,430
    
    
    
    107,769Operating income
    
    
    3,372
    
    
    
    5,214
    
    
    
    17,066
    
    
    
    18,424Other income (expenses):Business interruption proceeds
    
    
    299
    
    
    
    2,706
    
    
    
    571
    
    
    
    3,401Interest income and other
    
    
    1,330
    
    
    
    786
    
    
    
    3,077
    
    
    
    1,943Interest expense
    
    
    (6,642
    )
    
    
    (6,482
    )
    
    
    (19,607
    )
    
    
    (19,051
    )Loss on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    (3,411
    )
    
    
    (Loss) income before income taxes and minority interests
    
    
    (1,641
    )
    
    
    2,224
    
    
    
    (2,304
    )
    
    
    4,717Minority interests (net of taxes, nil)
    
    
    
    
    
    
    100
    
    
    
    (421
    )
    
    
    (40
    )Benefit (provision) for income taxes  continuing operations
    
    
    744
    
    
    
    (1,039
    )
    
    
    1,411
    
    
    
    (2,559
    )(Loss) income from continuing operations
    
    
    (897
    )
    
    
    1,285
    
    
    
    (1,314
    )
    
    
    2,118Discontinued operations:Income (loss) from discontinued operations before income taxes
    
    
    1,300
    
    
    
    (1,917
    )
    
    
    2,917
    
    
    
    4,748(Provision) benefit for income taxes  discontinued operations
    
    
    (356
    )
    
    
    794
    
    
    
    (1,976
    )
    
    
    (1,329
    )Income (loss) from discontinued operations
    
    
    944
    
    
    
    (1,123
    )
    
    
    941
    
    
    
    3,419Net income (loss) attributable to common stock
    
    $
    47
    
    
    $
    162
    
    
    $
    (373
    )
    
    $
    5,537Basic net (loss) income per share attributable to common stock
    
    $
    
    
    
    $
    0.01
    
    
    $
    (0.02
    )
    
    $
    0.22Diluted net (loss) income per share attributable to common stock
    
    $
    
    
    
    $
    0.01
    
    
    $
    (0.02
    )
    
    $
    0.22
  4




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AccumulatedAdditional
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    Paid-In
    
    Accumulated
    
    Comprehensive
    
    Treasury Stock
    
    StockholdersShares
    
    Amount
    
    Capital
    
    Deficit
    
    Income
    
    Shares
    
    Amount
    
    Equity(Unaudited in thousands, except share data)Balance, December 31, 2006
    
    
    24,860,321
    
    
    
    249
    
    
    
    327,634
    
    
    
    (84,816
    )
    
    
    2,088
    
    
    
    251,619
    
    
    
    (3,041
    )
    
    
    242,114Amortization of unearned stock compensation
    
    
    
    
    
    
    
    
    
    
    1,126
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,126Issuance and vesting of restricted and nonvested shares
    
    
    81,587
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    26,749
    
    
    
    
    
    
    
    257
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    257Repurchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    594,494
    
    
    
    (7,018
    )
    
    
    (7,018
    )Realization of pre-emergence deferred tax asset
    
    
    
    
    
    
    
    
    
    
    (149
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149
    )Other
    
    
    (1,373
    )
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (373
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (373
    )Currency translation adjustments (related taxes estimated at nil)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,835
    
    
    
    
    
    
    
    
    
    
    
    1,835Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,462Balance, September 30, 2007
    
    
    24,967,284
    
    
    
    250
    
    
    
    328,921
    
    
    
    (85,189
    )
    
    
    3,923
    
    
    
    846,113
    
    
    
    (10,059
    )
    
    
    237,846
   5




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006(Unaudited in thousands)Operating activities:Net (loss) income
    
    $
    (373
    )
    
    $
    5,537Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization
    
    
    23,848
    
    
    
    27,511Impairment of long-lived assets
    
    
    3,551
    
    
    
    10,596Stock compensation expense
    
    
    1,126
    
    
    
    1,222Casualty gain, net
    
    
    (4,525
    )
    
    
    (3,535
    )Deferred income taxes
    
    
    (149
    )
    
    
    3,453Minority interests
    
    
    421
    
    
    
    39Gain on asset dispositions
    
    
    (1,947
    )
    
    
    (1,483
    )Loss (gain) on extinguishment of debt
    
    
    4,735
    
    
    
    (10,869
    )Amortization of deferred financing costs
    
    
    1,048
    
    
    
    1,046Other
    
    
    
    
    
    
    (132
    )Changes in operating assets and liabilities:Accounts receivable, net of allowances
    
    
    (4,082
    )
    
    
    (3,001
    )Insurance receivable
    
    
    931
    
    
    
    (2,425
    )Inventories
    
    
    (63
    )
    
    
    (321
    )Prepaid expenses and other assets
    
    
    2,812
    
    
    
    (714
    )Accounts payable
    
    
    (2,213
    )
    
    
    (33
    )Other accrued liabilities
    
    
    1,162
    
    
    
    1,595Advance deposits
    
    
    505
    
    
    
    (980
    )Net cash provided by operating activities
    
    
    26,787
    
    
    
    27,506Investing activities:Capital improvements
    
    
    (31,009
    )
    
    
    (31,270
    )Proceeds from sale of assets, net of related selling costs
    
    
    72,289
    
    
    
    9,404Acquisition of minority partners interest
    
    
    (16,361
    )
    
    
    Withdrawals for capital expenditures
    
    
    3,948
    
    
    
    15,585Insurance receipts related to casualty claims, net
    
    
    658
    
    
    
    3,745Net (increase) decrease in restricted cash
    
    
    (1,533
    )
    
    
    1,422Other
    
    
    (33
    )
    
    
    (36
    )Net cash provided by (used in) investing activities
    
    
    27,959
    
    
    
    (1,150
    )Financing activities:Proceeds from issuance of long term debt
    
    
    130,000
    
    
    
    44,954Proceeds from exercise of stock options
    
    
    257
    
    
    
    822Principal payments on long-term debt
    
    
    (152,522
    )
    
    
    (35,886
    )Purchases of treasury stock
    
    
    (6,366
    )
    
    
    (2,212
    )Payments of deferred financing costs
    
    
    (1,666
    )
    
    
    (870
    )Payments of defeasance costs
    
    
    (3,820
    )
    
    
    Other
    
    
    53
    
    
    
    108Net cash (used in) provided by financing activities
    
    
    (34,064
    )
    
    
    6,916Effect of exchange rate changes on cash
    
    
    289
    
    
    
    51Net increase in cash and cash equivalents
    
    
    20,971
    
    
    
    33,323Cash and cash equivalents at beginning of period
    
    
    48,188
    
    
    
    19,097Cash and cash equivalents at end of period
    
    $
    69,159
    
    
    $
    52,420Supplemental cash flow information:Cash paid during the period for:Interest, net of the amounts capitalized shown below
    
    $
    20,337
    
    
    $
    25,477Interest capitalized
    
    
    187
    
    
    
    117Income taxes, net of refunds
    
    
    1,281
    
    
    
    840Supplemental disclosure of non-cash investing and financing activities:Net non-cash debt decrease
    
    
    
    
    
    
    10,195Treasury stock repurchases traded, but not settled
    
    
    652
    
    
    
    Purchases of property and equipment on account
    
    
    3,272
    
    
    
    3,031
  6




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. Business Summary
   
    
    47 hotels that were wholly owned and operated through subsidiaries; and
    
    one hotel that was operated in a joint venture in which the Company has a 50%
voting equity interest and exercises control.
   2. General
     
    
    the reported amounts of assets and liabilities;
    
    the reported amounts of revenues and expenses during the reporting period; and
 7




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##### Table of Contents




    
    the disclosures of contingent assets and liabilities at the date of the financial
statements.
  3. Stock-Based Compensation
   Available under the plan, less previously issued as of December 31, 2006
    
    
    2,568,029Nonvested stock issued January 26, 2007
    
    
    (63,000
    )Nonvested stock issued February 12, 2007
    
    
    (46,000
    )Nonvested stock issued March 30, 2007
    
    
    (18,800
    )Shares of nonvested stock withheld from awards to satisfy tax withholding obligations
    
    
    6,989Nonvested shares forfeited in 2007
    
    
    8,749Stock options forfeited in 2007
    
    
    59,155Available for issuance, September 30, 2007
    
    
    2,515,122
 Stock Options
   Weighted AverageStock Options
    
    
    Exercise PriceBalance, December 31, 2006
    
    
    356,313
    
    
    $
    10.60Exercised
    
    
    (26,749
    )
    
    
    9.61Forfeited
    
    
    (59,155
    )
    
    
    10.62Balance, September 30, 2007
    
    
    270,409
    
    
    $
    10.70
   8




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##### Table of Contents



Options outstanding
    
    
    Options exercisableWeighted average
    
    
    Weighted
    
    
    
    
    
    
    Weighted average
    
    
    Weightedremaining life
    
    
    average
    
    
    
    
    
    
    remaining life
    
    
    averageRange of prices
    
    Number
    
    
    (in years)
    
    
    exercise price
    
    
    Number
    
    
    (in years)
    
    
    exercise price$7.83 to $9.39
    
    
    117,830
    
    
    
    6.2
    
    
    $
    9.05
    
    
    
    79,501
    
    
    
    5.6
    
    
    $
    9.05$9.40 to $10.96
    
    
    104,591
    
    
    
    5.5
    
    
    $
    10.48
    
    
    
    102,091
    
    
    
    5.5
    
    
    $
    10.50$10.97 to $15.66
    
    
    47,988
    
    
    
    4.2
    
    
    $
    15.21
    
    
    
    47,988
    
    
    
    4.2
    
    
    $
    15.21270,409
    
    
    
    5.6
    
    
    $
    10.70
    
    
    
    229,580
    
    
    
    5.2
    
    
    $
    10.98Expected to vest
    
    
    259,504
    
    
    
    5.6
    
    
    $
    10.76
 ($ in thousands)Aggregate intrinsic value of stock options outstanding
    
    $
    298Aggregate intrinsic value of stock options expected to vest
    
    $
    269Aggregate intrinsic value of stock options exercisable
    
    $
    188
 Restricted Stock
  Weighted AverageRestricted Stock
    
    
    Exercise PriceBalance, December 31, 2006
    
    
    7,694
    
    
    $
    12.88Expiration of restrictions
    
    
    (7,694
    )
    
    
    12.88Balance, June 30, 2007
    
    
    
    
    
    $
    
 Nonvested Stock
      9




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##### Table of Contents



Weight AverageNonvested Stock
    
    
    Exercise PriceBalance, December 31, 2006
    
    
    82,607
    
    
    $
    11.63Granted
    
    
    127,800
    
    
    
    12.96Forfeited
    
    
    (8,749
    )
    
    
    13.32Vested
    
    
    (81,587
    )
    
    
    11.66Balance, September 30, 2007
    
    
    120,071
    
    
    $
    12.90
   Unrecognized
    
    
    Weighted-AverageCompensation
    
    
    AmortizationType of Award
    
    Expense ($000s)
    
    
    Period (in years)Stock Options
    
    $
    170
    
    
    
    0.64Nonvested Stock
    
    
    1,173
    
    
    
    2.20Total
    
    $
    1,343
    
    
    
    2.20
  Three Months Ended September 30, 2007
    
    
    Three Months Ended September 30, 2006Compensation
    
    
    Income Tax
    
    
    Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit
    
    
    Expense
    
    
    Benefit(Unaudited in thousands)Stock Options
    
    $
    102
    
    
    $
    40
    
    
    $
    279
    
    
    $
    108Nonvested Stock
    
    
    368
    
    
    
    143
    
    
    
    133
    
    
    
    52Total
    
    $
    470
    
    
    $
    183
    
    
    $
    412
    
    
    $
    160
  Nine Months Ended September 30, 2007
    
    
    Nine Months Ended September 30, 2006Compensation
    
    
    Income Tax
    
    
    Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit
    
    
    Expense
    
    
    Benefit(Unaudited in thousands)Stock Options
    
    $
    100
    
    
    $
    39
    
    
    $
    695
    
    
    $
    270Nonvested Stock
    
    
    1,026
    
    
    
    398
    
    
    
    365
    
    
    
    142Restricted Stock
    
    
    
    
    
    
    
    
    
    
    161
    
    
    
    62Total
    
    $
    1,126
    
    
    $
    437
    
    
    $
    1,221
    
    
    $
    474
  10




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##### Table of Contents



4. Treasury Stock
     5. Restructuring
  6. Dispositions and Discontinued Operations
 Dispositions
    
    
    Clarion Louisville, KY
    
    Crowne Plaza Cedar Rapids, IA
    
    Augusta West Inn Augusta, GA
    
    Holiday Inn Greentree, PA
    
    Holiday Inn Lancaster East, PA
    
    Holiday Inn Lansing, MI
    
    Holiday Inn Pensacola, FL
    
    Holiday Inn Winter Haven, FL
    
    Holiday Inn York, PA
    
    Holiday Inn Express Dothan, AL
    
    Holiday Inn Express Pensacola, FL
    
    Park Inn Brunswick, GA
    
    Quality Inn Dothan, AL
    
    Ramada Plaza Macon, GA
    
    Ramada Inn North Charleston, SC
 11




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##### Table of Contents



Assets Held for Sale and Discontinued Operations
  a)
    
    Management commits to a plan to sell the asset;b)
    
    The asset is available for immediate sale in its present condition;c)
    
    An active marketing plan to sell the asset at a reasonable price has been initiated;d)
    
    The sale of the asset is probable within one year; ande)
    
    It is unlikely that significant changes to the plan to sell the asset will be made.
      
    
    $1.3 million on the Holiday Inn Clarksburg, WV to reflect the estimated selling price;
    
    $0.6 million on the Holiday Inn Jamestown, NY to reflect the estimated selling price;
    
    $0.4 million on the Vermont Maple Inn Colchester, VT to reflect the current estimated
selling price;
    
    $0.1 million on the University Plaza Bloomington, IN to record the final disposition of
the hotel; and
    
    $0.1 million related to various other held-for-sale properties primarily to write-off
the remaining net book value of disposed fixed assets.
 12




---



##### Table of Contents




    
    $1.0 million on the Ramada Plaza Macon, GA hotel, which was classified as held for sale
during the third quarter, to reduce the carrying value to estimated selling price less cost
to sell; and
    
    $1.0 million on the Holiday Inn Sheffield, AL hotel to reflect the reduced estimated
selling price.
  
    
    $3.9 million on the Holiday Inn Manhattan, KS hotel to record the loss on disposal of
fixed assets;
    
    $2.2 million on the Holiday Inn Lawrence, KS hotel to record the loss on disposal of
fixed assets;
    
    $1.4 million on the Holiday Inn Sheffield, AL hotel to reflect the estimated selling
costs of the sale as this hotel was identified for sale during the first quarter of 2006
and the reduced estimated selling price in the third quarter;
    
    $0.3 million on the Holiday Inn McKnight, PA hotel to reflect the lowered estimated
selling price and to reflect the write-off of capital improvements spent on this hotel for
franchisor compliance that did not add incremental value or revenue generating capacity to
the property;
    
    $0.2 million on the Holiday Inn Valdosta, GA hotel to reflect the estimated selling
costs of the sale as this hotel was identified for sale during the first quarter of 2006;
    
    $0.1 million on the Azalea Inn Valdosta, GA hotel to reflect the estimated selling costs
of the sale as this hotel was identified for sale during the first quarter of 2006;
    
    $0.7 million on the University Plaza Bloomington, IN hotel, which was classified as held
for sale during the second quarter, to reduce the carrying value to estimated selling price
less costs to sell; and
    
    $1.0 million on the Ramada Plaza Macon, GA hotel, which was classified as held for sale
during the third quarter, to reduce the carrying value to estimated selling price less cost
to sell.
  
    
    Holiday Inn Frederick, MD
    
    Holiday Inn Jamestown, NY
    
    former Holiday Inn St. Paul, MN (now closed)
    
    Vermont Maple Inn Colchester, VT
  September 30, 2007
    
    
    December 31, 2006(Unaudited in thousands)Property and equipment, net
    
    $
    12,829
    
    
    $
    83,462Other assets
    
    
    868
    
    
    
    5,975Assets held for sale
    
    $
    13,697
    
    
    $
    89,437Other liabilities
    
    $
    3,287
    
    
    $
    10,630Long-term debt
    
    
    4,029
    
    
    
    57,721Liabilities related to assets held for sale
    
    $
    7,316
    
    
    $
    68,351
  13




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##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited in thousands)Total revenues
    
    $
    3,216
    
    
    $
    22,732
    
    
    $
    38,579
    
    
    $
    70,353Total expenses
    
    
    (2,975
    )
    
    
    (21,378
    )
    
    
    (34,815
    )
    
    
    (64,323
    )Impairment of long-lived assets
    
    
    (452
    )
    
    
    (2,039
    )
    
    
    (2,529
    )
    
    
    (10,063
    )Business interruption proceeds
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    724Interest income and other
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    10Interest expense
    
    
    (26
    )
    
    
    (1,499
    )
    
    
    (1,600
    )
    
    
    (4,543
    )Casualty gains, net
    
    
    
    
    
    
    
    
    
    
    2,658
    
    
    
    239Gain on asset disposition
    
    
    1,750
    
    
    
    
    
    
    
    1,947
    
    
    
    1,482(Loss) gain on extinguishment of debt
    
    
    (213
    )
    
    
    
    
    
    
    (1,324
    )
    
    
    10,869(Provision) benefit for income taxes
    
    
    (356
    )
    
    
    794
    
    
    
    (1,976
    )
    
    
    (1,329
    )Income (loss) from discontinued operations
    
    $
    944
    
    
    $
    (1,123
    )
    
    
    941
    
    
    
    3,419
   7. Income (Loss) Per Share
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited in thousands, except per share data)Numerator:(Loss) income from continuing operations
    
    $
    (897
    )
    
    $
    1,285
    
    
    $
    (1,314
    )
    
    $
    2,118Income (loss) from discontinued operations
    
    
    944
    
    
    
    (1,123
    )
    
    
    941
    
    
    
    3,419Net income (loss) attributable to common stock
    
    $
    47
    
    
    $
    162
    
    
    $
    (373
    )
    
    $
    5,537Denominator:Basic weighted average shares
    
    
    24,457
    
    
    
    24,588
    
    
    
    24,478
    
    
    
    24,619Diluted weighted average shares
    
    
    24,457
    
    
    
    24,683
    
    
    
    24,478
    
    
    
    24,702Basic (loss) income per common share:Loss from continuing operations
    
    $
    (0.04
    )
    
    $
    0.05
    
    
    $
    (0.05
    )
    
    $
    0.09Income from discontinued operations
    
    
    0.04
    
    
    
    (0.05
    )
    
    
    0.04
    
    
    
    0.14Net (loss) income attributable to common stock
    
    $
    
    
    
    $
    0.01
    
    
    $
    (0.02
    )
    
    $
    0.22Diluted (loss) income per common share:Loss from continuing operations
    
    $
    (0.04
    )
    
    $
    0.05
    
    
    $
    (0.05
    )
    
    $
    0.09Income from discontinued operations
    
    
    0.04
    
    
    
    (0.05
    )
    
    
    0.04
    
    
    
    0.14Net (loss) income attributable to common stock
    
    $
    
    
    
    $
    0.01
    
    
    $
    (0.02
    )
    
    $
    0.22
   14




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##### Table of Contents



8. Long-Term Liabilities
  September 30, 2007
    
    
    December 31, 2006Number
    
    
    Property, plant
    
    
    Long-term
    
    
    Long-termof Hotels
    
    
    and equipment, net
    
    
    obligations
    
    
    obligations
    
    
    Interest rates at September 30, 2007Mortgage DebtMerrill Lynch Mortgage Lending, Inc.  Floating
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    58,118Merrill Lynch Mortgage Lending, Inc.  Fixed
    
    
    21
    
    
    $
    239,874
    
    
    $
    160,149
    
    
    
    239,383
    
    
    
    6.58%Goldman Sachs
    
    
    10
    
    
    
    120,779
    
    
    
    130,000
    
    
    
    
    
    
    LIBOR plus 1.50%; capped at 8.50%Computer Share Trust Company of Canada
    
    
    1
    
    
    
    16,859
    
    
    
    8,600
    
    
    
    7,551
    
    
    
    7.88%Lehman Brothers Holdings, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,194Wachovia
    
    
    4
    
    
    
    37,198
    
    
    
    35,594
    
    
    
    36,081
    
    
    $9,712 at 6.03%; $3,069 at 5.78%; 22,813 at 6.04%$18,823 at LIBOR plus 2.90%, capped at 8.4%; $21,351 atIXIS
    
    
    4
    
    
    
    37,058
    
    
    
    40,174
    
    
    
    40,500
    
    
    LIBOR plus 2.95%, capped at 8.45%Total
    
    
    40
    
    
    
    451,768
    
    
    
    374,517
    
    
    
    396,828
    
    
    
    7.00% (1)Long-term liabilities  otherTax notes issued pursuant to our Joint Plan
of Reorganization
    
    
    
    
    
    
    
    
    
    
    781
    
    
    
    1,263Other
    
    
    
    
    
    
    
    
    
    
    403
    
    
    
    1,038
    
    
    
    
    
    
    
    1,184
    
    
    
    2,301Property, plant and equipment  Unencumbered
    
    
    8
    
    
    
    59,397
    
    
    
    
    
    
    
    48
    
    
    
    511,165
    
    
    
    375,701
    
    
    
    399,129Held for sale
    
    
    (4
    )
    
    
    (12,829
    )
    
    
    (4,112
    )
    
    
    (60,271
    )Total September 30, 2007 (2)
    
    
    44
    
    
    $
    498,336
    
    
    $
    371,589
    
    
    $
    338,858
 
 (1)
    
    Represents the Companys annual effective weighted average cost
of debt at September 30, 2007.(2)
    
    Includes the current portion.   
    
    $46.1 million of the loan proceeds, along with $9.7 million in funds held in reserve by
Merrill Lynch, were used to pay off the $55.8 million Merrill Lynch Floating Rate Loan,
which was secured by 14 hotels (2 hotels were classified as held for use, while 12 hotels
were classified as held for sale). The unamortized deferred loan costs of $0.3 million
were recorded as a Loss on Debt Extinguishment in the statement of operations. Of this
amount, approximately $0.1 million was recorded in continuing operations and approximately
$0.3 million was recorded in discontinued operations.
    
    $59.6 million of the loan proceeds, along with $11.7 million of the Companys cash, were
used to defease the Merrill Lynch Fixed Rate #2 Loan, as discussed below.
    
    $15.7 million was held in a restricted cash account, pending resolution or settlement of
the terms of a ground lease relating to one of the ten hotels securing the loan. In June
2007, the terms of the ground lease were settled and $15.4 million of the restricted cash
balance was transferred into an unrestricted cash account.
  15




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##### Table of Contents



9. Commitments and Contingencies
 Franchise Agreements and Capital Expenditures
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited in thousands)Continuing operations
    
    $
    5,178
    
    
    $
    4,768
    
    
    $
    15,191
    
    
    $
    14,173Discontinued operations
    
    
    205
    
    
    
    1,597
    
    
    
    2,779
    
    
    
    5,433$
    5,383
    
    
    $
    6,365
    
    
    $
    17,970
    
    
    $
    19,606
  16




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##### Table of Contents




    
    Two hotels are in non-compliance of the franchise agreements because of substandard
guest satisfaction scores. If the Company does not achieve scores above the required
thresholds by the designated dates, these hotels could be subject to termination of the
franchise agreements.
    
    One hotel is in default of the franchise agreement for failure to complete a Property
Improvement Plan. If the Company does not cure the default by December 31, 2007, the
hotels franchise agreement could be terminated by the franchisor. However, the Company
has met with the franchisor, is in the planning and diligence phase of renovation, and
anticipates that it will be given additional time to cure the default.
    
    The Company expects to earn clean slate letters for the remaining three hotels in
February 2009, August 2009, and February 2010, respectively.
   Letters of Credit
  Self-insurance
   17




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##### Table of Contents



Casualty gains (losses) and business interruption insurance
      Litigation
    10. Income Taxes
   18




---



##### Table of Contents



11. Recent Accounting Pronouncements
     
 19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the discussion below in conjunction with the unaudited condensed consolidated
financial statements and accompanying notes, set forth in Item I. Financial Statements included
in this Form 10-Q . Also, the discussion which follows contains forward-looking statements which
involve risks and uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including those discussed in
our Form 10-K for the year ended December 31, 2006.
 Executive Overview
    
 
    
    one hotel that was operated in a joint venture in which we have a 50% voting equity interest
and exercise control.
   Overview of Continuing Operations
  
    
    Third quarter revenues increased $5.5 million or 8.4%. Rooms revenues increased $3.7
million, or 7.4%, as occupancy and ADR rose 3.3% and 3.9%, respectively. Overall, we gained
market share during the third quarter as RevPAR index rose to 99.2%, a 1.4% increase over
the same period one year ago. Excluding hotels under renovation in the third quarters of
2007 and/or 2006, RevPAR index grew 3.1%. Food and beverage revenues increased $1.5
million, an increase of 11.4% compared with the same period last year, driven by the
successful implementation of our food and beverage sales and profitability initiatives.
    
    Third quarter operating income decreased $1.8 million as strong operating performance at
our hotels was more than offset by the following:
 o
    
    In the third quarter of 2006, we benefited from casualty gains of $3.1
million related to the settlement of property damage claims at two of our hotels.
Similar gains were not recorded in the third quarter of 2007.o
    
    In the third quarter of 2007, we implemented cost-reduction initiatives to
improve future operating performance. These initiatives resulted in position
eliminations in the Companys corporate and regional staff as well as reductions in
hotel staff at certain locations. As a result, we recorded restructuring costs
totaling $1.3 million, representing severance and related costs. The majority of the
terminations occurred in the third quarter. As of November 1, the remaining
terminations had been communicated to the affected employees. We expect corporate
and hotel payroll and related costs to decrease beginning in the fourth quarter of
2007.
 20




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##### Table of Contents



o
    
    In January 2007, we announced a review of strategic alternatives to enhance
shareholder value. During the third quarter, we incurred $0.6 million in related
costs.
 Overview of Discontinued Operations
   
    
    In January 2007, we sold the University Plaza Bloomington, IN for a gross sales price of
$2.4 million. An impairment charge of $0.1 million was recorded upon the disposition of
this hotel.
    
    Additionally, in March 2007, we sold the Holiday Inn Hamburg, NY for a gross sales price
of $3.4 million, realized a gain of $0.8 million, and used $2.0 million to pay down debt.
The remaining net proceeds, after paying settlement costs, were used for general corporate
purposes.
  
    
    In June 2007, we sold the Holiday Inn Sheffield, AL, which was previously written down
to its estimated net selling price, for a gross sales price of $4.1 million. The net
proceeds, after paying settlement costs, were used for general corporate purposes.
    
    In June 2007, we sold 15 hotels. These hotels, along with an additional hotel expected
to be sold later in the year, were negotiated in a single purchase-sale agreement to an
individual buyer. The agreement met the criteria for recognition as a group sale and the
aggregate transaction is expected to result in a gain. $60.8 million of the aggregate
purchase price was allocated to the 15 hotels and the net proceeds, after paying settlement
costs, were used for general corporate purposes. The gain, which will be deferred until
the remaining hotel is sold, is included in Liabilities Related to Assets Held for Sale in
our Balance Sheet.
  
    
    In July 2007, we sold the Holiday Inn Clarksburg, WV, which had previously been written
down to its estimated net selling price, for a gross sales price of $2.9 million. The net
proceeds, after paying settlement costs, were used for general corporate purposes.
    
    In July 2007, we sold the Holiday Inn Fort Wayne, IN for a gross sales price of $2.8
million and realized a gain of $1.7 million. The net proceeds, after paying settlement
costs, were used for general corporate purposes.
    
    Additionally, in August 2007, we sold the Holiday Inn Fairmont, WV for a gross sales
price of $2.6 million and realized a gain of $0.1 million. The net proceeds, after paying
settlement costs, were used for general corporate purposes.
     21




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##### Table of Contents



Critical Accounting Policies and Estimates
    Income Statement Overview
  Results of Operations  Continuing Operations
 The analysis below compares the results of operations for the three months ended September 30, 2007
and 2006.
 Revenues  Continuing Operations
 Three Months Ended September 30,2007
    
    
    2006
    
    
    Increase (decrease)(unaudited in thousands)Revenues:Rooms
    
    $
    54,187
    
    
    $
    50,445
    
    
    $
    3,742
    
    
    
    7.4
    %Food and beverage
    
    
    14,381
    
    
    
    12,912
    
    
    
    1,469
    
    
    
    11.4
    %Other
    
    
    2,417
    
    
    
    2,105
    
    
    
    312
    
    
    
    14.8
    %Total revenues
    
    $
    70,985
    
    
    $
    65,462
    
    
    $
    5,523
    
    
    
    8.4
    %Occupancy
    
    
    71.5
    %
    
    
    69.2
    %
    
    
    
    
    
    
    3.3
    %ADR
    
    $
    103.93
    
    
    $
    100.05
    
    
    $
    3.88
    
    
    
    3.9
    %RevPar
    
    $
    74.34
    
    
    $
    69.20
    
    
    $
    5.14
    
    
    
    7.4
    %
  22




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##### Table of Contents



23




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##### Table of Contents



Hotel
    
    Room
    
    
    
    Three Months Ended September 30,Count
    
    Count
    
    
    
    2007
    
    2006
    
    Increase (decrease)43
    
    
    7,923
    
    
    Continuing Operations less one hotel
closed in 2006 due to fireOccupancy
    
    
    71.5
    %
    
    
    69.2
    %
    
    
    
    
    
    
    3.3
    %ADR
    
    $
    103.93
    
    
    $
    100.05
    
    
    $
    3.88
    
    
    
    3.9
    %RevPAR
    
    $
    74.34
    
    
    $
    69.20
    
    
    $
    5.14
    
    
    
    7.4
    %RevPAR Index
    
    
    99.2
    %
    
    
    97.8
    %
    
    
    
    
    
    
    1.4
    %42
    
    
    7,679
    
    
    Continuing Operations less one hotel
closed in 2006 due to fire and Radisson
New Orleans Airport hotelOccupancy
    
    
    71.6
    %
    
    
    69.5
    %
    
    
    
    
    
    
    3.0
    %ADR
    
    $
    104.51
    
    
    $
    100.12
    
    
    $
    4.39
    
    
    
    4.4
    %RevPAR
    
    $
    74.85
    
    
    $
    69.58
    
    
    $
    5.27
    
    
    
    7.6
    %RevPAR Index
    
    
    99.2
    %
    
    
    97.9
    %
    
    
    
    
    
    
    1.3
    %40
    
    
    7,243
    
    
    Continuing Operations less one hotel
closed in 2006 due to fire and hotels
under renovation in the third quarters
of 2006 and/or 2007Occupancy
    
    
    73.6
    %
    
    
    69.2
    %
    
    
    
    
    
    
    6.4
    %ADR
    
    $
    104.57
    
    
    $
    101.93
    
    
    $
    2.64
    
    
    
    2.6
    %RevPAR
    
    $
    76.96
    
    
    $
    70.56
    
    
    $
    6.40
    
    
    
    9.1
    %RevPAR Index
    
    
    99.9
    %
    
    
    96.9
    %
    
    
    
    
    
    
    3.1
    %10
    
    
    2,259
    
    
    Hotels completing major renovations in
2005 and 2006Occupancy
    
    
    75.5
    %
    
    
    67.0
    %
    
    
    
    
    
    
    12.7
    %ADR
    
    $
    108.86
    
    
    $
    104.83
    
    
    $
    4.03
    
    
    
    3.8
    %RevPAR
    
    $
    82.21
    
    
    $
    70.19
    
    
    $
    12.02
    
    
    
    17.1
    %RevPAR Index
    
    
    102.5
    %
    
    
    96.1
    %
    
    
    
    
    
    
    6.7
    %12
    
    
    1,398
    
    
    Marriott HotelsOccupancy
    
    
    74.9
    %
    
    
    74.6
    %
    
    
    
    
    
    
    0.4
    %ADR
    
    $
    113.27
    
    
    $
    108.27
    
    
    $
    5.00
    
    
    
    4.6
    %RevPAR
    
    $
    84.83
    
    
    $
    80.74
    
    
    $
    4.09
    
    
    
    5.1
    %RevPAR Index
    
    
    111.3
    %
    
    
    112.2
    %
    
    
    
    
    
    
    (0.8
    )%4
    
    
    777
    
    
    Hilton HotelsOccupancy
    
    
    75.4
    %
    
    
    69.0
    %
    
    
    
    
    
    
    9.3
    %ADR
    
    $
    106.25
    
    
    $
    104.40
    
    
    $
    1.85
    
    
    
    1.8
    %RevPAR
    
    $
    80.12
    
    
    $
    72.08
    
    
    $
    8.04
    
    
    
    11.2
    %RevPAR Index
    
    
    96.9
    %
    
    
    89.4
    %
    
    
    
    
    
    
    8.4
    %23
    
    
    4,958
    
    
    IHG HotelsOccupancy
    
    
    72.5
    %
    
    
    68.4
    %
    
    
    
    
    
    
    6.0
    %ADR
    
    $
    103.88
    
    
    $
    100.57
    
    
    $
    3.31
    
    
    
    3.3
    %RevPAR
    
    $
    75.34
    
    
    $
    68.78
    
    
    $
    6.56
    
    
    
    9.5
    %RevPAR Index
    
    
    97.3
    %
    
    
    94.9
    %
    
    
    
    
    
    
    2.5
    %4
    
    
    790
    
    
    Other Brands and Independent HotelsOccupancy
    
    
    55.5
    %
    
    
    64.6
    %
    
    
    
    
    
    
    (14.1
    )%ADR
    
    $
    78.96
    
    
    $
    75.16
    
    
    $
    3.80
    
    
    
    (5.1
    )%RevPAR
    
    $
    43.84
    
    
    $
    48.53
    
    
    $
    (4.69
    )
    
    
    (9.7
    )%RevPAR Index
    
    
    84.4
    %
    
    
    98.3
    %
    
    
    
    
    
    
    (14.1
    )%
 24




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##### Table of Contents



Direct operating expenses  Continuing Operations
 % of total revenuesThree Months Ended September 30,
    
    
    
    
    
    
    
    
    
    
    Three Months Ended September 30,2007
    
    
    2006
    
    
    Increase (decrease)
    
    
    2007
    
    
    2006(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    14,157
    
    
    $
    13,297
    
    
    $
    860
    
    
    
    6.5
    %
    
    
    19.9
    %
    
    
    20.3
    %Food and beverage
    
    
    10,651
    
    
    
    9,772
    
    
    
    879
    
    
    
    9.0
    %
    
    
    15.0
    %
    
    
    14.9
    %Other
    
    
    1,683
    
    
    
    1,523
    
    
    
    160
    
    
    
    10.5
    %
    
    
    2.4
    %
    
    
    2.3
    %Total direct operating expenses
    
    $
    26,491
    
    
    $
    24,592
    
    
    $
    1,899
    
    
    
    7.7
    %
    
    
    37.3
    %
    
    
    37.6
    %Direct operating margin (by revenue source):Rooms
    
    $
    40,030
    
    
    $
    37,148
    
    
    $
    2,882
    
    
    
    7.8
    %Food and beverage
    
    
    3,730
    
    
    
    3,140
    
    
    
    590
    
    
    
    18.8
    %Other
    
    
    734
    
    
    
    582
    
    
    
    152
    
    
    
    26.1
    %Total direct operating margin
    
    $
    44,494
    
    
    $
    40,870
    
    
    $
    3,624
    
    
    
    8.9
    %Direct operating margin % (by revenue source):Rooms
    
    
    73.9
    %
    
    
    73.6
    %Food and beverage
    
    
    25.9
    %
    
    
    24.3
    %Other
    
    
    30.4
    %
    
    
    27.6
    %Total direct operating margin
    
    
    62.7
    %
    
    
    62.4
    %
    
    
    Fee-based expenses including reservations, travel agent and credit card commissions
increased $0.3 million, or 13.3%, driven largely by revenue growth.
    
    Payroll costs increased $0.3 million, or 3.9%.
   25




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##### Table of Contents



Other operating expenses and operating income  Continuing Operations
 % of total revenuesThree Months Ended September 30,
    
    
    
    
    
    
    
    
    
    
    Three Months Ended September 30,2007
    
    
    2006
    
    
    Increase (decrease)
    
    
    2007
    
    
    2006(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    4,256
    
    
    $
    3,855
    
    
    $
    401
    
    
    
    10.4
    %
    
    
    6.0
    %
    
    
    5.9
    %Advertising and promotion
    
    
    3,789
    
    
    
    3,079
    
    
    
    710
    
    
    
    23.1
    %
    
    
    5.3
    %
    
    
    4.7
    %Franchise fees
    
    
    5,178
    
    
    
    4,768
    
    
    
    410
    
    
    
    8.6
    %
    
    
    7.3
    %
    
    
    7.3
    %Repairs and maintenance
    
    
    3,352
    
    
    
    3,324
    
    
    
    28
    
    
    
    0.8
    %
    
    
    4.7
    %
    
    
    5.1
    %Utilities
    
    
    4,115
    
    
    
    4,042
    
    
    
    73
    
    
    
    1.8
    %
    
    
    5.8
    %
    
    
    6.2
    %Other expenses
    
    
    234
    
    
    
    10
    
    
    
    224
    
    
    
    n/m
    
    
    
    0.3
    %
    
    
    0.0
    %Other hotel operating costs
    
    
    20,924
    
    
    
    19,078
    
    
    $
    1,846
    
    
    
    9.7
    %
    
    
    29.5
    %
    
    
    29.1
    %Property and other taxes, insurance, and leases
    
    
    4,734
    
    
    
    5,862
    
    
    
    (1,128
    )
    
    
    (19.2
    %)
    
    
    6.7
    %
    
    
    9.0
    %Corporate and other
    
    
    5,585
    
    
    
    5,592
    
    
    
    (7
    )
    
    
    (0.1
    %)
    
    
    7.9
    %
    
    
    8.5
    %Casualty gains, net
    
    
    
    
    
    
    (3,085
    )
    
    
    3,085
    
    
    
    100.0
    %
    
    
    0.0
    %
    
    
    (4.7
    %)Restructuring
    
    
    1,258
    
    
    
    
    
    
    
    1,258
    
    
    
    n/m
    
    
    
    1.8
    %
    
    
    0.0
    %Depreciation and amortization
    
    
    8,086
    
    
    
    7,886
    
    
    
    200
    
    
    
    2.5
    %
    
    
    11.4
    %
    
    
    12.0
    %Impairment of long-lived assets
    
    
    535
    
    
    
    323
    
    
    
    212
    
    
    
    65.6
    %
    
    
    0.8
    %
    
    
    0.5
    %Total other operating expenses
    
    $
    41,122
    
    
    $
    35,656
    
    
    $
    5,466
    
    
    
    15.3
    %
    
    
    57.9
    %
    
    
    54.5
    %Total operating expenses
    
    $
    67,613
    
    
    $
    60,248
    
    
    $
    7,365
    
    
    
    12.2
    %
    
    
    95.2
    %
    
    
    92.0
    %Operating income
    
    $
    3,372
    
    
    $
    5,214
    
    
    $
    (1,842
    )
    
    
    (35.3
    %)
    
    
    4.8
    %
    
    
    8.0
    %
   
    
    Hotel general and administrative costs increased $0.4 million, or 10.4%, primarily as a
result of higher payroll and travel expenses. The increase in payroll costs of $0.4
million was due in large part to fewer vacant positions.
    
    Advertising and promotion costs increased $0.7 million, or 23.1%, due largely to higher
sales staffing levels, higher sales bonuses driven by revenue growth, and promotion
expenses.
    
    Franchise fees increased $0.4 million, or 8.6%, driven in large part by higher room
revenues. As a percentage of total revenues, franchise fees remained constant. As a
percentage of room revenues, franchise fees increased 10 basis points from 9.5% to 9.6%.
    
    Repairs and maintenance expenses remained relatively constant. As a percentage of
revenues, repairs and maintenance expenses decreased 40 basis points from 5.1% to 4.7%.
    
    Utilities increased 1.8%, primarily because of higher electricity rates. As a
percentage of total revenues, utilities decreased 40 basis points.
    
    Other expenses increased $0.2 million due primarily to costs associated with the
conversion of one of our hotels to another brand.
   26




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##### Table of Contents



Non-operating income (expenses)  Continuing Operations
 Three Months Ended September 30,2007
    
    2006
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Business interruption proceeds
    
    $
    299
    
    
    $
    2,706
    
    
    $
    (2,407
    )
    
    
    (89.0
    %)Interest income and other
    
    
    1,330
    
    
    
    786
    
    
    
    544
    
    
    
    69.2
    %Interest expense
    
    
    (6,642
    )
    
    
    (6,482
    )
    
    
    160
    
    
    
    2.5
    %
  The analysis below compares the results of operations for the nine months ended September 30, 2007
and September 30, 2006.
 Revenues  Continuing Operations
 Nine Months Ended September 30,2007
    
    
    2006
    
    
    Increase (decrease)(unaudited in thousands)Revenues:Rooms
    
    $
    160,646
    
    
    $
    152,102
    
    
    $
    8,544
    
    
    
    5.6
    %Food and beverage
    
    
    45,004
    
    
    
    40,658
    
    
    
    4,346
    
    
    
    10.7
    %Other
    
    
    6,931
    
    
    
    6,208
    
    
    
    723
    
    
    
    11.6
    %Total revenues
    
    $
    212,581
    
    
    $
    198,968
    
    
    $
    13,613
    
    
    
    6.8
    %Occupancy
    
    
    69.7
    %
    
    
    69.0
    %
    
    
    
    
    
    
    1.0
    %ADR
    
    $
    106.61
    
    
    $
    102.08
    
    
    $
    4.53
    
    
    
    4.4
    %RevPar
    
    $
    74.27
    
    
    $
    70.43
    
    
    $
    3.84
    
    
    
    5.5
    %
   27




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##### Table of Contents



28




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##### Table of Contents



Hotel
    
    Room
    
    
    
    Nine Months Ended September 30,Count
    
    Count
    
    
    
    2007
    
    2006
    
    Increase (decrease)43
    
    
    7,923
    
    
    Continuing Operations less one hotel closed in 2006
due to fireOccupancy
    
    
    69.7
    %
    
    
    69.0
    %
    
    
    
    
    
    
    1.0
    %ADR
    
    $
    106.61
    
    
    $
    102.17
    
    
    $
    4.44
    
    
    
    4.3
    %RevPAR
    
    $
    74.27
    
    
    $
    70.48
    
    
    $
    3.79
    
    
    
    5.4
    %RevPAR Index
    
    
    99.8
    %
    
    
    98.4
    %
    
    
    
    
    
    
    1.4
    %42
    
    
    7,679
    
    
    Continuing Operations less one hotel closed in 2006
due to fire and Radisson New Orleans Airport hotelOccupancy
    
    
    69.7
    %
    
    
    68.9
    %
    
    
    
    
    
    
    1.2
    %ADR
    
    $
    107.04
    
    
    $
    101.42
    
    
    $
    5.61
    
    
    
    5.5
    %RevPAR
    
    $
    74.63
    
    
    $
    69.91
    
    
    $
    4.72
    
    
    
    6.8
    %RevPAR Index
    
    
    100.1
    %
    
    
    98.1
    %
    
    
    
    
    
    
    2.0
    %38
    
    
    6,790
    
    
    Continuing Operations less one hotel closed in 2006
due to fire and hotels under renovation in the
third quarters of 2006 and/or 2007Occupancy
    
    
    71.0
    %
    
    
    68.5
    %
    
    
    
    
    
    
    3.6
    %ADR
    
    $
    105.53
    
    
    $
    103.01
    
    
    $
    2.52
    
    
    
    2.4
    %RevPAR
    
    $
    74.98
    
    
    $
    70.56
    
    
    $
    4.42
    
    
    
    6.3
    %RevPAR Index
    
    
    100.7
    %
    
    
    98.1
    %
    
    
    
    
    
    
    2.7
    %10
    
    
    2,259
    
    
    Hotels completing major renovations in 2005 and 2006Occupancy
    
    
    72.7
    %
    
    
    66.5
    %
    
    
    
    
    
    
    9.3
    %ADR
    
    $
    112.06
    
    
    $
    111.54
    
    
    $
    0.52
    
    
    
    0.5
    %RevPAR
    
    $
    81.47
    
    
    $
    74.13
    
    
    $
    7.34
    
    
    
    9.9
    %RevPAR Index
    
    
    98.9
    %
    
    
    93.6
    %
    
    
    
    
    
    
    5.7
    %12
    
    
    1,398
    
    
    Marriott HotelsOccupancy
    
    
    72.3
    %
    
    
    74.4
    %
    
    
    
    
    
    
    (2.8
    )%ADR
    
    $
    114.12
    
    
    $
    105.62
    
    
    $
    8.50
    
    
    
    8.0
    %RevPAR
    
    $
    82.52
    
    
    $
    78.54
    
    
    $
    3.98
    
    
    
    5.1
    %RevPAR Index
    
    
    112.2
    %
    
    
    112.2
    %
    
    
    
    
    
    
    0.0
    %4
    
    
    777
    
    
    Hilton HotelsOccupancy
    
    
    69.1
    %
    
    
    66.3
    %
    
    
    
    
    
    
    4.2
    %ADR
    
    $
    108.02
    
    
    $
    104.33
    
    
    $
    3.69
    
    
    
    3.5
    %RevPAR
    
    $
    74.66
    
    
    $
    69.14
    
    
    $
    5.52
    
    
    
    8.0
    %RevPAR Index
    
    
    95.2
    %
    
    
    90.6
    %
    
    
    
    
    
    
    5.1
    %23
    
    
    4,958
    
    
    IHG HotelsOccupancy
    
    
    70.5
    %
    
    
    67.7
    %
    
    
    
    
    
    
    4.1
    %ADR
    
    $
    106.60
    
    
    $
    102.57
    
    
    $
    4.03
    
    
    
    3.9
    %RevPAR
    
    $
    75.10
    
    
    $
    69.42
    
    
    $
    5.68
    
    
    
    8.2
    %RevPAR Index
    
    
    98.4
    %
    
    
    95.0
    %
    
    
    
    
    
    
    3.6
    %4
    
    
    790
    
    
    Other Brands and Independent HotelsOccupancy
    
    
    60.5
    %
    
    
    70.3
    %
    
    
    
    
    
    
    (13.9
    )%ADR
    
    $
    89.29
    
    
    $
    91.28
    
    
    ($
    1.99
    )
    
    
    (2.2
    )%RevPAR
    
    $
    54.06
    
    
    $
    64.13
    
    
    ($
    10.07
    )
    
    
    (15.7
    )%RevPAR Index
    
    
    88.0
    %
    
    
    102.5
    %
    
    
    
    
    
    
    (14.1
    )%
 29




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##### Table of Contents



Direct operating expenses  Continuing Operations
 % of total revenuesNine Months Ended September 30,
    
    
    
    
    
    
    
    
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    Increase (decrease)
    
    
    2007
    
    
    2006(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    40,592
    
    
    $
    38,810
    
    
    $
    1,782
    
    
    
    4.6
    %
    
    
    19.1
    %
    
    
    19.5
    %Food and beverage
    
    
    31,656
    
    
    
    29,260
    
    
    
    2,396
    
    
    
    8.2
    %
    
    
    14.9
    %
    
    
    14.7
    %Other
    
    
    4,837
    
    
    
    4,705
    
    
    
    132
    
    
    
    2.8
    %
    
    
    2.3
    %
    
    
    2.4
    %Total direct operating expenses
    
    $
    77,085
    
    
    $
    72,775
    
    
    $
    4,310
    
    
    
    5.9
    %
    
    
    36.3
    %
    
    
    36.6
    %Direct operating margin (by revenue source):Rooms
    
    $
    120,054
    
    
    $
    113,292
    
    
    $
    6,762
    
    
    
    6.0
    %Food and beverage
    
    
    13,348
    
    
    
    11,398
    
    
    
    1,950
    
    
    
    17.1
    %Other
    
    
    2,094
    
    
    
    1,503
    
    
    
    591
    
    
    
    39.3
    %Total direct operating margin
    
    $
    135,496
    
    
    $
    126,193
    
    
    $
    9,303
    
    
    
    7.4
    %Direct operating margin % (by revenue source):Rooms
    
    
    74.7
    %
    
    
    74.5
    %Food and beverage
    
    
    29.7
    %
    
    
    28.0
    %Other
    
    
    30.2
    %
    
    
    24.2
    %Total direct operating margin
    
    
    63.7
    %
    
    
    63.4
    %
   
    
    Higher fee-based expenses, including reservations, travel agent and credit card
commissions, driven by higher revenues.
    
    Higher payroll costs, up 1.4% on a POR basis.
    
    Increased costs in other operating areas including room promotion, cable television,
credit card and other commissions, and guest satisfaction.
   30




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##### Table of Contents



Other operating expenses and operating income  Continuing Operations
 % of total revenuesNine Months Ended September 30,
    
    
    
    
    
    
    
    
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    Increase (decrease)
    
    2007
    
    2006(unaudited in thousands)Other operating expenses:Other hotel operating costs
General and administrative
    
    $
    13,111
    
    
    $
    11,518
    
    
    $
    1,593
    
    
    
    13.8
    %
    
    
    6.2
    %
    
    
    5.8
    %Advertising and promotion
    
    
    11,328
    
    
    
    9,473
    
    
    
    1,855
    
    
    
    19.6
    %
    
    
    5.3
    %
    
    
    4.8
    %Franchise fees
    
    
    15,191
    
    
    
    14,173
    
    
    
    1,018
    
    
    
    7.2
    %
    
    
    7.1
    %
    
    
    7.1
    %Repairs and maintenance
    
    
    9,888
    
    
    
    9,946
    
    
    
    (58
    )
    
    
    (0.6
    %)
    
    
    4.7
    %
    
    
    5.0
    %Utilities
    
    
    11,444
    
    
    
    11,101
    
    
    
    343
    
    
    
    3.1
    %
    
    
    5.4
    %
    
    
    5.6
    %Other expenses
    
    
    453
    
    
    
    184
    
    
    
    269
    
    
    
    146.2
    %
    
    
    0.2
    %
    
    
    0.1
    %Other hotel operating costs
    
    
    61,415
    
    
    
    56,395
    
    
    $
    5,020
    
    
    
    8.9
    %
    
    
    28.9
    %
    
    
    28.3
    %Property and other taxes, insurance, and leases
    
    
    15,557
    
    
    
    14,980
    
    
    
    577
    
    
    
    3.9
    %
    
    
    7.3
    %
    
    
    7.5
    %Corporate and other
    
    
    17,197
    
    
    
    15,801
    
    
    
    1,396
    
    
    
    8.8
    %
    
    
    8.1
    %
    
    
    7.9
    %Casualty gains, net
    
    
    (1,867
    )
    
    
    (2,888
    )
    
    
    1,021
    
    
    
    35.4
    %
    
    
    (0.9
    %)
    
    
    (1.5
    %)Restructuring
    
    
    1,258
    
    
    
    
    
    
    
    1,258
    
    
    
    n/m
    
    
    
    0.6
    %
    
    
    0.0
    %Depreciation and amortization
    
    
    23,848
    
    
    
    22,948
    
    
    
    900
    
    
    
    3.9
    %
    
    
    11.2
    %
    
    
    11.5
    %Impairment of long-lived assets
    
    
    1,022
    
    
    
    533
    
    
    
    489
    
    
    
    91.7
    %
    
    
    0.5
    %
    
    
    0.3
    %Total other operating expenses
    
    $
    118,430
    
    
    $
    107,769
    
    
    $
    10,661
    
    
    
    9.9
    %
    
    
    55.7
    %
    
    
    54.2
    %Total operating expenses
    
    $
    195,515
    
    
    $
    180,544
    
    
    $
    14,971
    
    
    
    8.3
    %
    
    
    92.0
    %
    
    
    90.7
    %Operating income
    
    $
    17,066
    
    
    $
    18,424
    
    
    $
    (1,358
    )
    
    
    (7.4
    %)
    
    
    8.0
    %
    
    
    9.3
    %
   
    
    Hotel general and administrative costs increased $1.6 million, or 13.8%, driven largely
by higher payroll, legal, professional fees, moving costs, training and travel costs.
    
    Advertising and promotion costs increased $1.9 million, or 19.6%, due primarily to
increased sales staffing and travel expense.
    
    Franchise fees increased $1.0 million, or 7.2%, driven largely by higher room revenues.
As a percentage of room revenues, franchise fees increased 20 basis points from 9.3% to
9.5%.
    
    Repairs and maintenance expenses decreased $58,000, or 0.6%, resulting from improved
preventive maintenance programs and execution of our capital expenditures plan. Repairs
and maintenance expenses declined 30 basis points as a percentage of revenues.
    
    Utilities increased $0.3 million, or 3.1% (2.3% on a cost POR basis), primarily as a
result of higher electricity rates. As a percentage of total revenues, utilities
decreased 20 basis points.
    
    Other expenses increased $0.3 million due primarily to costs associated with the
conversion of one of our hotels to another brand.
   
    
    In January 2007, we announced a review of strategic alternatives to enhance shareholder
value. During the first nine months of 2007, we incurred $1.3 million in related costs.
 31




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##### Table of Contents




    
    Costs associated with our corporate operations team increased $0.6 million. In November
2006, we announced a major strategic initiative to reconfigure our hotel portfolio and
dispose of our non-core hotels. In conjunction with this initiative, we reorganized our
operations team to focus on the different needs of our core and non-core (held for sale)
hotels.
    
    $0.3 million was related to the amortization of non-vested stock awards granted to our
Board of Directors in February 2007. Two members of the Board did not stand for reelection
at the April 2007 annual meeting of stockholders and the Board elected to accelerate the
vesting of the awards for those individuals as of April 24, 2007. In addition, one Board
member resigned during August 2007 and the Board elected to accelerate the vesting of the
award as of August 8, 2007. The stock awarded to the remaining members of our Board of
Directors is being amortized over a three-year vesting period at an annualized rate of $0.1
million.
   Non-operating income (expenses)  Continuing Operations
 Nine Months Ended September 30,2007
    
    2006
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Business interruption proceeds
    
    $
    571
    
    
    $
    3,401
    
    
    $
    (2,830
    )
    
    
    (83.2
    %)Interest income and other
    
    
    3,077
    
    
    
    1,943
    
    
    
    1,134
    
    
    
    58.4
    %Interest expense
    
    
    (19,607
    )
    
    
    (19,051
    )
    
    
    556
    
    
    
    2.9
    %Loss on debt extinguishment
    
    
    (3,411
    )
    
    
    
    
    
    
    3,411
    
    
    
    n/m
  Results of Operations  Discontinued Operations
     
    
    $1.3 million on the Holiday Inn Clarksburg, WV to reflect the estimated selling price;
    
    $0.6 million on the Holiday Inn Jamestown, NY to reflect the estimated selling price;
 32




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##### Table of Contents




    
    $0.4 million on the Vermont Maple Inn Colchester, VT to reflect the current estimated
selling price;
    
    $0.1 million on the University Plaza Bloomington, IN to record the final disposition of
the hotel; and
    
    $0.1 million related to various other held-for-sale properties primarily to write-off
the remaining net book value of disposed fixed assets.
  
    
    $1.0 million on the Ramada Plaza Macon, GA hotel, which was classified as held for sale
during the third quarter, to reduce the carrying value to estimated selling price less cost
to sell; and
    
    $1.0 million on the Holiday Inn Sheffield, AL hotel to reflect the reduced estimated
selling price.
  
    
    $3.9 million on the Holiday Inn Manhattan, KS hotel to record the loss on disposal of
fixed assets;
    
    $2.2 million on the Holiday Inn Lawrence, KS hotel to record the loss on disposal of
fixed assets;
    
    $1.4 million on the Holiday Inn Sheffield, AL hotel to reflect the estimated selling
costs of the sale as this hotel was identified for sale during the first quarter of 2006
and the reduced estimated selling price in the third quarter;
    
    $0.3 million on the Holiday Inn McKnight, PA hotel to reflect the lowered estimated
selling price and to reflect the write-off of capital improvements spent on this hotel for
franchisor compliance that did not add incremental value or revenue generating capacity to
the property;
    
    $0.2 million on the Holiday Inn Valdosta, GA hotel to reflect the estimated selling
costs of the sale as this hotel was identified for sale during the first quarter of 2006;
    
    $0.1 million on the Azalea Inn Valdosta, GA hotel to reflect the estimated selling costs
of the sale as this hotel was identified for sale during the first quarter of 2006;
    
    $0.7 million on the University Plaza Bloomington, IN hotel, which was classified as held
for sale during the second quarter, to reduce the carrying value to estimated selling price
less costs to sell; and
    
    $1.0 million on the Ramada Plaza Macon, GA hotel, which was classified as held for sale
during the third quarter, to reduce the carrying value to estimated selling price less cost
to sell.
    Income Taxes
  33




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34




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##### Table of Contents



Additional Financial Information Regarding Quarterly Results of Our Continuing Operations
  2007
    
    
    2006
    
    
    2005Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(Unaudited in thousands)Revenues:Rooms
    
    
    54,187
    
    
    $
    56,216
    
    
    $
    50,243
    
    
    $
    45,617
    
    
    $
    50,445
    
    
    $
    53,788
    
    
    $
    47,869
    
    
    $
    40,957Food and beverage
    
    
    14,381
    
    
    
    16,779
    
    
    
    13,844
    
    
    
    15,134
    
    
    
    12,912
    
    
    
    15,636
    
    
    
    12,110
    
    
    
    11,973Other
    
    
    2,417
    
    
    
    2,453
    
    
    
    2,061
    
    
    
    2,066
    
    
    
    2,105
    
    
    
    2,154
    
    
    
    1,949
    
    
    
    1,84970,985
    
    
    
    75,448
    
    
    
    66,148
    
    
    
    62,817
    
    
    
    65,462
    
    
    
    71,578
    
    
    
    61,928
    
    
    
    54,779Direct operating expenses:Rooms
    
    
    14,157
    
    
    
    13,756
    
    
    
    12,679
    
    
    
    12,462
    
    
    
    13,297
    
    
    
    13,310
    
    
    
    12,203
    
    
    
    11,253Food and beverage
    
    
    10,651
    
    
    
    11,021
    
    
    
    9,984
    
    
    
    10,363
    
    
    
    9,772
    
    
    
    10,469
    
    
    
    9,019
    
    
    
    8,444Other
    
    
    1,683
    
    
    
    1,642
    
    
    
    1,512
    
    
    
    1,456
    
    
    
    1,523
    
    
    
    1,657
    
    
    
    1,525
    
    
    
    1,48426,491
    
    
    
    26,419
    
    
    
    24,175
    
    
    
    24,281
    
    
    
    24,592
    
    
    
    25,436
    
    
    
    22,747
    
    
    
    21,18144,494
    
    
    
    49,029
    
    
    
    41,973
    
    
    
    38,536
    
    
    
    40,870
    
    
    
    46,142
    
    
    
    39,181
    
    
    
    33,598Other operating expenses:Other hotel operating costs
    
    
    20,924
    
    
    
    20,478
    
    
    
    20,013
    
    
    
    18,304
    
    
    
    19,078
    
    
    
    18,755
    
    
    
    18,562
    
    
    
    17,265Property and other taxes, insurance and leases
    
    
    4,734
    
    
    
    5,212
    
    
    
    5,611
    
    
    
    5,813
    
    
    
    5,862
    
    
    
    4,717
    
    
    
    4,401
    
    
    
    3,937Corporate and other
    
    
    5,585
    
    
    
    5,930
    
    
    
    5,682
    
    
    
    4,959
    
    
    
    5,592
    
    
    
    5,292
    
    
    
    4,917
    
    
    
    4,314Casualty (gain) losses, net
    
    
    
    
    
    
    
    
    
    
    (1,867
    )
    
    
    
    
    
    
    (3,085
    )
    
    
    31
    
    
    
    166
    
    
    
    (28,754
    )Restructuring
    
    
    1,258Depreciation and amortization
    
    
    8,086
    
    
    
    7,960
    
    
    
    7,802
    
    
    
    7,770
    
    
    
    7,886
    
    
    
    7,704
    
    
    
    7,358
    
    
    
    7,002Impairment of long-lived assets
    
    
    535
    
    
    
    222
    
    
    
    265
    
    
    
    225
    
    
    
    323
    
    
    
    16
    
    
    
    194
    
    
    
    1,018Other operating expenses
    
    
    41,122
    
    
    
    39,802
    
    
    
    37,506
    
    
    
    37,071
    
    
    
    35,656
    
    
    
    36,515
    
    
    
    35,598
    
    
    
    4,7823,372
    
    
    
    9,227
    
    
    
    4,467
    
    
    
    1,465
    
    
    
    5,214
    
    
    
    9,627
    
    
    
    3,583
    
    
    
    28,816Other income (expenses):Business interruption insurance proceeds
    
    
    299
    
    
    
    272
    
    
    
    
    
    
    
    530
    
    
    
    2,706
    
    
    
    695
    
    
    
    
    
    
    
    1,772Interest income and other
    
    
    1,330
    
    
    
    822
    
    
    
    925
    
    
    
    664
    
    
    
    786
    
    
    
    848
    
    
    
    309
    
    
    
    271Other interest expense
    
    
    (6,642
    )
    
    
    (6,767
    )
    
    
    (6,198
    )
    
    
    (6,297
    )
    
    
    (6,482
    )
    
    
    (6,227
    )
    
    
    (6,342
    )
    
    
    (5,485
    )Loss on debt extinguishment
    
    
    
    
    
    
    (3,411
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Loss) income before income taxes and minority interests
    
    
    (1,641
    )
    
    
    143
    
    
    
    (806
    )
    
    
    (3,638
    )
    
    
    2,224
    
    
    
    4,943
    
    
    
    (2,450
    )
    
    
    25,374Minority interests (net of taxes, nil)
    
    
    
    
    
    
    (56
    )
    
    
    (365
    )
    
    
    335
    
    
    
    100
    
    
    
    (136
    )
    
    
    (4
    )
    
    
    (8,486
    )(Loss) income before income taxes  continuing operations
    
    
    (1,641
    )
    
    
    87
    
    
    
    (1,171
    )
    
    
    (3,303
    )
    
    
    2,324
    
    
    
    4,807
    
    
    
    (2,454
    )
    
    
    16,888Benefit (provision) for income taxes  continuing operations
    
    
    744
    
    
    
    (19
    )
    
    
    686
    
    
    
    (9,082
    )
    
    
    (1,039
    )
    
    
    (2,245
    )
    
    
    725
    
    
    
    (8,383
    )(Loss) income from continuing operations
    
    
    (897
    )
    
    
    68
    
    
    
    (485
    )
    
    
    (12,385
    )
    
    
    1,285
    
    
    
    2,562
    
    
    
    (1,729
    )
    
    
    8,505Discontinued operations:Income
(loss) from discontinued operations before income taxes
    
    
    1,300
    
    
    
    (565
    )
    
    
    2,182
    
    
    
    (12,765
    )
    
    
    (1,917
    )
    
    
    1,853
    
    
    
    4,812
    
    
    
    (1,014
    )(Provision) benefit for income taxes
    
    
    (356
    )
    
    
    234
    
    
    
    (1,854
    )
    
    
    4,437
    
    
    
    794
    
    
    
    (414
    )
    
    
    (1,709
    )
    
    
    313Income (loss) from discontinued operations
    
    
    944
    
    
    
    (331
    )
    
    
    328
    
    
    
    (8,328
    )
    
    
    (1,123
    )
    
    
    1,439
    
    
    
    3,103
    
    
    
    (701
    )Net income (loss) attributable to common stock
    
    $
    47
    
    
    $
    (263
    )
    
    $
    (157
    )
    
    $
    (20,713
    )
    
    $
    162
    
    
    $
    4,001
    
    
    $
    1,374
    
    
    $
    7,804
 Hotel data by market segment and region
 Hotel data by market segment
   
    
    Upper Upscale: Hilton and Marriott;
    
    Upscale: Courtyard by Marriott, Crowne Plaza, Radisson, Residence Inn by
Marriott, Springhill Suites by Marriott and Wyndham;
    
    Midscale with Food & Beverage: Doubletree Club, Holiday Inn, Holiday Inn Select; and
    
    Midscale without Food & Beverage: Fairfield Inn by Marriott and Holiday Inn Express.
 35




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##### Table of Contents



Combined Continuing and Discontinued Operations  46 hotels (excludes 2 hotels)
 Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Upper UpscaleNumber of properties
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4Number of rooms
    
    
    825
    
    
    
    825
    
    
    
    825
    
    
    
    825Occupancy
    
    
    78.6
    %
    
    
    71.8
    %
    
    
    73.4
    %
    
    
    69.2
    %Average daily rate
    
    $
    117.97
    
    
    $
    113.98
    
    
    $
    119.68
    
    
    $
    113.49RevPAR
    
    $
    92.72
    
    
    $
    81.86
    
    
    $
    87.85
    
    
    $
    78.52UpscaleNumber of properties
    
    
    21
    
    
    
    20
    
    
    
    21
    
    
    
    20Number of rooms
    
    
    3,859
    
    
    
    3,577
    
    
    
    3,859
    
    
    
    3,577Occupancy
    
    
    67.5
    %
    
    
    65.9
    %
    
    
    68.8
    %
    
    
    69.6
    %Average daily rate
    
    $
    102.60
    
    
    $
    101.46
    
    
    $
    109.12
    
    
    $
    106.74RevPAR
    
    $
    69.23
    
    
    $
    66.90
    
    
    $
    75.13
    
    
    $
    74.25Midscale with Food & BeverageNumber of properties
    
    
    17
    
    
    
    18
    
    
    
    17
    
    
    
    18Number of rooms
    
    
    3,193
    
    
    
    3,475
    
    
    
    3,193
    
    
    
    3,475Occupancy
    
    
    75.4
    %
    
    
    72.9
    %
    
    
    69.4
    %
    
    
    68.5
    %Average daily rate
    
    $
    102.60
    
    
    $
    96.40
    
    
    $
    100.36
    
    
    $
    94.90RevPAR
    
    $
    77.37
    
    
    $
    70.26
    
    
    $
    69.62
    
    
    $
    64.97Midscale without Food & BeverageNumber of properties
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Number of rooms
    
    
    245
    
    
    
    245
    
    
    
    245
    
    
    
    245Occupancy
    
    
    55.2
    %
    
    
    54.9
    %
    
    
    58.5
    %
    
    
    59.6
    %Average daily rate
    
    $
    75.20
    
    
    $
    77.69
    
    
    $
    90.83
    
    
    $
    87.43RevPAR
    
    $
    41.50
    
    
    $
    42.67
    
    
    $
    53.10
    
    
    $
    52.07Independent HotelsNumber of properties
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Number of rooms
    
    
    222
    
    
    
    222
    
    
    
    222
    
    
    
    222Occupancy
    
    
    55.8
    %
    
    
    63.7
    %
    
    
    46.9
    %
    
    
    54.5
    %Average daily rate
    
    $
    62.76
    
    
    $
    60.14
    
    
    $
    57.35
    
    
    $
    60.16RevPAR
    
    $
    35.03
    
    
    $
    38.31
    
    
    $
    26.90
    
    
    $
    32.81All HotelsNumber of properties
    
    
    46
    
    
    
    46
    
    
    
    46
    
    
    
    46Number of rooms
    
    
    8,344
    
    
    
    8,344
    
    
    
    8,344
    
    
    
    8,344Occupancy
    
    
    70.9
    %
    
    
    69.0
    %
    
    
    68.6
    %
    
    
    68.4
    %Average daily rate
    
    $
    102.82
    
    
    $
    98.95
    
    
    $
    105.45
    
    
    $
    100.98RevPAR
    
    $
    72.94
    
    
    $
    68.30
    
    
    $
    72.35
    
    
    $
    69.04
 36




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##### Table of Contents



Continuing Operations  43 hotels (excludes 1 hotel and held for sale hotels)
 Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Upper UpscaleNumber of properties
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4Number of rooms
    
    
    825
    
    
    
    825
    
    
    
    825
    
    
    
    825Occupancy
    
    
    78.6
    %
    
    
    71.8
    %
    
    
    73.4
    %
    
    
    69.2
    %Average daily rate
    
    $
    117.97
    
    
    $
    113.98
    
    
    $
    119.68
    
    
    $
    113.49RevPAR
    
    $
    92.72
    
    
    $
    81.86
    
    
    $
    87.85
    
    
    $
    78.52UpscaleNumber of properties
    
    
    21
    
    
    
    20
    
    
    
    21
    
    
    
    20Number of rooms
    
    
    3,861
    
    
    
    3,579
    
    
    
    3,861
    
    
    
    3,579Occupancy
    
    
    67.5
    %
    
    
    65.9
    %
    
    
    68.8
    %
    
    
    69.6
    %Average daily rate
    
    $
    102.60
    
    
    $
    101.46
    
    
    $
    109.12
    
    
    $
    106.74RevPAR
    
    $
    69.23
    
    
    $
    66.90
    
    
    $
    75.13
    
    
    $
    74.25Midscale with Food & BeverageNumber of properties
    
    
    15
    
    
    
    16
    
    
    
    15
    
    
    
    16Number of rooms
    
    
    2,889
    
    
    
    3,171
    
    
    
    2,889
    
    
    
    3,171Occupancy
    
    
    76.8
    %
    
    
    73.4
    %
    
    
    71.0
    %
    
    
    69.3
    %Average daily rate
    
    $
    104.74
    
    
    $
    97.90
    
    
    $
    102.39
    
    
    $
    96.51RevPAR
    
    $
    80.41
    
    
    $
    71.83
    
    
    $
    72.72
    
    
    $
    66.91Midscale without Food & BeverageNumber of properties
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Number of rooms
    
    
    245
    
    
    
    245
    
    
    
    245
    
    
    
    245Occupancy
    
    
    55.2
    %
    
    
    54.9
    %
    
    
    58.5
    %
    
    
    59.6
    %Average daily rate
    
    $
    75.20
    
    
    $
    77.69
    
    
    $
    90.83
    
    
    $
    87.43RevPAR
    
    $
    41.50
    
    
    $
    42.67
    
    
    $
    53.10
    
    
    $
    52.07Independent HotelsNumber of properties
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Number of rooms
    
    
    105
    
    
    
    105
    
    
    
    105
    
    
    
    105Occupancy
    
    
    58.9
    %
    
    
    64.6
    %
    
    
    58.9
    %
    
    
    59.2
    %Average daily rate
    
    $
    46.34
    
    
    $
    47.09
    
    
    $
    47.38
    
    
    $
    50.86RevPAR
    
    $
    27.28
    
    
    $
    30.42
    
    
    $
    27.89
    
    
    $
    30.13All HotelsNumber of properties
    
    
    43
    
    
    
    43
    
    
    
    43
    
    
    
    43Number of rooms
    
    
    7,925
    
    
    
    7,925
    
    
    
    7,925
    
    
    
    7,925Occupancy
    
    
    71.5
    %
    
    
    69.2
    %
    
    
    69.7
    %
    
    
    69.0
    %Average daily rate
    
    $
    103.93
    
    
    $
    100.05
    
    
    $
    106.61
    
    
    $
    102.17RevPAR
    
    $
    74.34
    
    
    $
    69.20
    
    
    $
    74.27
    
    
    $
    70.48
 37




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##### Table of Contents



Hotel data by region
   
    
    Northeast: Canada, Connecticut, Massachusetts, Maryland, New Hampshire, New York,
Ohio, Pennsylvania, Vermont;
    
    Southeast: Florida, Georgia, Kentucky, Louisiana, North Carolina, South Carolina,
Tennessee;
    
    Midwest: Arkansas, Indiana, Michigan, Oklahoma, Texas; and
    
    West: Arizona, California, Colorado, New Mexico.
 38




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##### Table of Contents



Combined Continuing and Discontinued Operations  46 hotels (excludes 2 hotels)
 Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Northeast RegionNumber of properties
    
    
    20
    
    
    
    20
    
    
    
    20
    
    
    
    20Number of rooms
    
    
    3,884
    
    
    
    3,884
    
    
    
    3,884
    
    
    
    3,884Occupancy
    
    
    73.1
    %
    
    
    71.0
    %
    
    
    67.3
    %
    
    
    67.6
    %Average daily rate
    
    $
    104.32
    
    
    $
    100.67
    
    
    $
    103.79
    
    
    $
    100.52RevPAR
    
    $
    76.29
    
    
    $
    71.44
    
    
    $
    69.83
    
    
    $
    67.97Southeast RegionNumber of properties
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    11Number of rooms
    
    
    1,729
    
    
    
    1,729
    
    
    
    1,729
    
    
    
    1,729Occupancy
    
    
    73.0
    %
    
    
    68.6
    %
    
    
    71.7
    %
    
    
    68.8
    %Average daily rate
    
    $
    108.84
    
    
    $
    108.81
    
    
    $
    112.32
    
    
    $
    113.24RevPAR
    
    $
    79.43
    
    
    $
    74.66
    
    
    $
    80.50
    
    
    $
    77.94Midwest RegionNumber of properties
    
    
    8
    
    
    
    8
    
    
    
    8
    
    
    
    8Number of rooms
    
    
    1,415
    
    
    
    1,415
    
    
    
    1,415
    
    
    
    1,415Occupancy
    
    
    63.1
    %
    
    
    68.6
    %
    
    
    63.2
    %
    
    
    69.4
    %Average daily rate
    
    $
    97.72
    
    
    $
    87.79
    
    
    $
    99.11
    
    
    $
    88.58RevPAR
    
    $
    61.69
    
    
    $
    60.22
    
    
    $
    62.64
    
    
    $
    61.50West RegionNumber of properties
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316Occupancy
    
    
    70.2
    %
    
    
    64.3
    %
    
    
    74.3
    %
    
    
    68.9
    %Average daily rate
    
    $
    94.95
    
    
    $
    92.33
    
    
    $
    106.98
    
    
    $
    99.85RevPAR
    
    $
    66.62
    
    
    $
    59.37
    
    
    $
    79.48
    
    
    $
    68.75All HotelsNumber of properties
    
    
    46
    
    
    
    46
    
    
    
    46
    
    
    
    46Number of rooms
    
    
    8,344
    
    
    
    8,344
    
    
    
    8,344
    
    
    
    8,344Occupancy
    
    
    70.9
    %
    
    
    69.0
    %
    
    
    68.6
    %
    
    
    68.4
    %Average daily rate
    
    $
    102.82
    
    
    $
    98.95
    
    
    $
    105.45
    
    
    $
    100.98RevPAR
    
    $
    72.94
    
    
    $
    68.30
    
    
    $
    72.35
    
    
    $
    69.04
 39




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##### Table of Contents



Continuing Operations  43 hotels (excludes 1 hotel and held for sale hotels)
 Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Northeast RegionNumber of properties
    
    
    17
    
    
    
    17
    
    
    
    17
    
    
    
    17Number of rooms
    
    
    3,463
    
    
    
    3,463
    
    
    
    3,463
    
    
    
    3,463Occupancy
    
    
    74.7
    %
    
    
    71.5
    %
    
    
    69.5
    %
    
    
    68.9
    %Average daily rate
    
    $
    106.89
    
    
    $
    103.28
    
    
    $
    106.32
    
    
    $
    103.19RevPAR
    
    $
    79.90
    
    
    $
    73.87
    
    
    $
    73.93
    
    
    $
    71.11Southeast RegionNumber of properties
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    11Number of rooms
    
    
    1,731
    
    
    
    1,731
    
    
    
    1,731
    
    
    
    1,731Occupancy
    
    
    73.0
    %
    
    
    68.6
    %
    
    
    71.7
    %
    
    
    68.8
    %Average daily rate
    
    $
    108.84
    
    
    $
    108.81
    
    
    $
    112.32
    
    
    $
    113.24RevPAR
    
    $
    79.43
    
    
    $
    74.66
    
    
    $
    80.50
    
    
    $
    77.94Midwest RegionNumber of properties
    
    
    8
    
    
    
    8
    
    
    
    8
    
    
    
    8Number of rooms
    
    
    1,415
    
    
    
    1,415
    
    
    
    1,415
    
    
    
    1,415Occupancy
    
    
    63.1
    %
    
    
    68.6
    %
    
    
    63.2
    %
    
    
    69.4
    %Average daily rate
    
    $
    97.72
    
    
    $
    87.79
    
    
    $
    99.11
    
    
    $
    88.58RevPAR
    
    $
    61.69
    
    
    $
    60.22
    
    
    $
    62.64
    
    
    $
    61.50West RegionNumber of properties
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316Occupancy
    
    
    70.2
    %
    
    
    64.3
    %
    
    
    74.3
    %
    
    
    68.9
    %Average daily rate
    
    $
    94.95
    
    
    $
    92.33
    
    
    $
    106.98
    
    
    $
    99.85RevPAR
    
    $
    66.62
    
    
    $
    59.37
    
    
    $
    79.48
    
    
    $
    68.75All HotelsNumber of properties
    
    
    43
    
    
    
    43
    
    
    
    43
    
    
    
    43Number of rooms
    
    
    7,925
    
    
    
    7,925
    
    
    
    7,925
    
    
    
    7,925Occupancy
    
    
    71.5
    %
    
    
    69.2
    %
    
    
    69.7
    %
    
    
    69.0
    %Average daily rate
    
    $
    103.93
    
    
    $
    100.05
    
    
    $
    106.61
    
    
    $
    102.17RevPAR
    
    $
    74.34
    
    
    $
    69.20
    
    
    $
    74.27
    
    
    $
    70.48
 40




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##### Table of Contents



Liquidity and Capital Resources
 Working Capital
         Cash Flow
  Operating activities
  41




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##### Table of Contents



Investing activities
   Financing activities
   Debt and Contractual Obligations
  Off Balance Sheet Arrangements
  Market Risk
    Forward-looking Statements
  42




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##### Table of Contents




    
    The effects of regional, national and international economic conditions;
    
    Competitive conditions in the lodging industry and increases in room supply;
    
    The effects of actual and threatened terrorist attacks and international
conflicts in the Middle East and elsewhere, and their impact on domestic and
international travel;
    
    The effectiveness of changes in management and our ability to retain qualified
individuals to serve in senior management positions;
    
    Requirements of franchise agreements, including the right of franchisors to
immediately terminate their respective agreements if we breach certain provisions;
    
    Our ability to complete planned hotel dispositions;
    
    Seasonality of the hotel business;
    
    The effects of unpredictable weather events such as hurricanes;
    
    The financial condition of the airline industry and its impact on air travel;
    
    The effect that Internet reservation channels may have on the rates that we are
able to charge for hotel rooms;
    
    Increases in the cost of debt and our continued compliance with the terms of our
loan agreements;
    
    The effect of the majority of our assets being encumbered on our borrowings and
future growth;
    
    Our ability to meet the continuing listing requirements of the American Stock
Exchange;
    
    The effect of self-insured claims in excess of our reserves, or our ability to
obtain adequate property and liability insurance to protect against losses, or to obtain
insurance at reasonable rates;
    
    Potential litigation and/or governmental inquiries and investigations;
    
    Laws and regulations applicable to our business, including federal, state or
local hotel, resort, restaurant or land use regulations, employment, labor or disability
laws and regulations;
    
    A downturn in the economy due to several factors, including but not limited to,
high energy costs, natural gas and gasoline prices; and
    
    The risks identified in our Form 10-K for the year ended December 31, 2006 under
Risks Related to Our Business and Risks Related to Our Common Stock.
  Inflation
  43




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   44




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits
  45




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##### Table of Contents



SIGNATURES
  LODGIAN, INC.By:
    
    /s/ EDWARD J. ROHLING

Edward J. RohlingPresident andDate: November 8, 2007
    
    
    
    Chief Executive OfficerBy:
    
    /s/ JAMES A. MACLENNAN

James A. MacLennanExecutive Vice President andDate: November 8, 2007
    
    
    
    Chief Financial Officer
 46




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1
    
    Disclosure Statement for Joint Plan of Reorganization of Lodgian, Inc., et al(other than the
CCA Debtors), Together with the Official Committee of Unsecured Creditors under Chapter 11 of
the Bankruptcy Code, dated September 26, 2002) (Incorporated by reference to Exhibit 10.6 to
the Companys Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed
on March 9, 2004).2.2
    
    First Amended Joint Plan of Reorganization of Lodgian, Inc., et al(Other than CCA Debtors),
Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy
Code, dated September 26, 2002) (Incorporated by reference to Exhibit 10.7 to the Companys
Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9,
2004).2.3
    
    Order Confirming First Amended Joint Plan of Reorganization of Lodgian, Inc., et alissued on
November 5, 2002 by the United States Bankruptcy Curt for the Southern District of New York
(Incorporated by reference to Exhibit 10.8 to the Companys Annual Report for the period ended
December 31, 2003 (File No. 1-14537), filed on March 9, 2004).2.4
    
    Disclosure Statement for Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac
Hotels III, L.L.C. Together with the Official Committee of Unsecured Creditors Under Chapter
11 of the Bankruptcy Code (Incorporated by reference to Exhibit 10.13.1 to the Companys
Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9,
2004).2.5
    
    Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. Together
with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code
(Incorporated by reference to Exhibit 10.13.2 to the Companys Annual Report for the period
ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).2.6
    
    Order Confirming Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac Hotels
III, L.L.C. Together with the Official Committee of Unsecured Creditors under Chapter 11 of
the Bankruptcy Code (Incorporated by reference to Exhibit 10.13.3 to the Companys Annual
Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).2.7
    
    Post Confirmation Order and Notice for Joint Plan of Reorganization of Impac Hotels III,
L.L.C. Together with the Official Committee of Unsecured Creditors under Chapter 11 of the
Bankruptcy Code (Incorporated by reference to Exhibit 10.13.4 to the Companys Annual Report
for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).3.1
    
    Certificate of Correction to the Second Amended and Restated Certificate of Incorporation and
Second Amended and Restated Certificate of Incorporation of Lodgian, Inc. (Incorporated by
reference to Exhibit 3.1 to Amendment No. 2 to the Companys Registration Statement on Form
S-1 (File No. 333-113410), filed on June 4, 2004).3.2
    
    Amended and Restated Bylaws of Lodgian, Inc. (Incorporated by reference to Exhibit 3.4 to the
Companys Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on
March 9, 2004).4.1
    
    Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to Amendment No.
2 to the Companys Registration Statement on Form S-1 (File No. 333-113410), filed on June 6,
2004).4.2
    
    Class A Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia
Bank, N.A. (Incorporated by reference to Exhibit 10.9 to the Companys Annual Report for the
period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).4.3
    
    Class B Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia
Bank, N.A. (Incorporated by reference to Exhibit 10.10 to the Companys Annual Report for the
period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).10.1
    
    Amended and Restated Executive Employment Agreement between Lodgian, Inc. and Daniel E.
Ellis, dated March 29, 2007 (Incorporated be reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K (File No. 1-12537), filed with the Commission on March 30, 2007).10.2
    
    Participation Form for Daniel E. Ellis under the Lodgian, Inc. Executive Incentive Plan
(Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K (File
No. 1-14537), filed with the Commission on February 6, 2006).
 47




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##### Table of Contents



ExhibitNumber
    
    Description10.3
    
    Amended and Restated Executive Employment Agreement between Edward J. Rohling and Lodgian,
Inc., dated April 23, 2007 (Incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K (File No. 1-14537). Filed with the Commission on April 26, 2007).10.4
    
    Restricted Stock Award Agreement between Edward J. Rohling and Lodgian, Inc., dated July 15,
2005 (Incorporated by reference to Exhibit 10.36 to the Companys Quarterly Report for the
period ended June 30, 2005 (File No. 1-14537), filed with the Commission on August 9, 2005).10.5
    
    Amended and Restated Executive Employment Agreement between Lodgian, Inc. and James A.
MacLennan dated March 29, 2007 (Incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K (File No.1-14537), filed with the Commission on March 30, 2007).10.6
    
    Restricted Stock Award Agreement between Lodgian, Inc. and James A. MacLennan dated March 1,
2006 (Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K
(File No. 1-14537), filed with the Commission on March 3, 2006).10.7
    
    Participation Form for James A. MacLennan under the Lodgian, Inc. Executive Incentive Plan
(Incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K (File
No. 1-14537), filed with the Commission on March 3, 2006).10.8
    
    Amended and Restated 2002 Stock Incentive Plan of Lodgian, Inc. (as amended through April 24,
2007 (Incorporated by reference to Exhibit 10.10 to the Companys Quarterly Report for the
period ended June 30, 2007 (File No. 1-14537), filed with the Commission on August 8, 2007).10.9
    
    Form of Stock Option Award Agreement (Incorporated by reference to Exhibit 10.37 to the
Companys Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with
the Commission on March 23, 2005).10.10
    
    Lodgian, Inc. 401(k) Plan, As Amended and Restated Effective as of January 1, 2006
(Incorporated by reference to Exhibit 10.13 to the Companys Quarterly Report for the period
ended June 30, 2007 (File No. 1-14537), filed with the Commission on August 8, 2007).10.11
    
    Amended and Restated Executive Employment Agreement between Mark D. Linch and Lodgian, Inc.
dated March 29, 2007 (Incorporated by reference to Exhibit 10.3 to the Companys Current
Report on Form 8-K (File No. 1-14537), filed with the Commission on March 30, 2007).10.12
    
    Separation Agreement and General Release between Mark D. Linch and Lodgian, Inc. dated
September 11, 2007. **10.13
    
    Executive Employment Agreement between Donna B. Cohen and Lodgian, Inc. dated March 29, 2007
(Incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K (File
No. 1-14537), filed with the Commission on March 30, 2007).10.14
    
    Lodgian, Inc. Executive Incentive Plan (Covering the calendar years 2006-2008).
(Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K (File
No. 1-14537), filed with the Commission on February 6, 2006).10.15
    
    Form of Restricted Stock Award Agreement for Employees (Incorporated by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K/A (File No. 1-14537), filed with the
Commission on March 6, 2007).10.16
    
    Form of Restricted Stock Award Agreement for Non-Employee Directors (Incorporated by
reference to Exhibit 10.2 to the Companys Current Report on Form 8-K/A (File No. 1-14537),
filed with the Commission on March 6, 2007).31.1
    
    Sarbanes-Oxley Section 302 Certification by the CEO.**31.2
    
    Sarbanes-Oxley Section 302 Certification by the CFO.**32
    
    Sarbanes-Oxley Section 906 Certification by the CEO and CFO.**
 
 **
    
    Filed herewith. 48