##### 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 Period ended June 30, 2006
 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(State or other jurisdiction of
incorporation or organization)
    
    52-2093696(I.R.S. Employer
Identification No.)3445 Peachtree Road, N.E., Suite 700,
Atlanta, GA(Address of principal executive offices)
    
    30326(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
 R £
  £ R £
 £ R
 R £
  Class
    
    Outstanding as of August 1, 2006Common
    
    24,556,262




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##### 



LODGIAN, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2006 and June 30, 2005 (unaudited)
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the Six Months Ended June 30, 2006 (unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and June 30, 2005 (unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    45Item 4.
    
    Controls and Procedures
    
    
    45PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    47Item 6.
    
    Exhibits
    
    
    47Signatures
    
    
    48EX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32 SECTION 906 CERTIFICATION OF CEO/CFO
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LODGIAN, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 June 30, 2006
    
    
    December 31, 2005(Unaudited in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    46,435
    
    
    $
    19,097Cash, restricted
    
    
    14,086
    
    
    
    15,003Accounts
receivable (net of allowances: 2006 - $1,098; 2005 - $1,101)
    
    
    11,578
    
    
    
    8,054Insurance receivable
    
    
    1,127
    
    
    
    11,725Inventories
    
    
    3,987
    
    
    
    3,955Prepaid expenses and other current assets
    
    
    22,610
    
    
    
    20,101Assets held for sale
    
    
    26,309
    
    
    
    14,866Total current assets
    
    
    126,132
    
    
    
    92,801Property and equipment, net
    
    
    586,925
    
    
    
    606,862Deposits for capital expenditures
    
    
    19,163
    
    
    
    19,431Other assets
    
    
    7,699
    
    
    
    7,591$
    739,919
    
    
    $
    726,685LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    13,676
    
    
    $
    14,709Other accrued liabilities
    
    
    32,102
    
    
    
    31,528Advance deposits
    
    
    2,291
    
    
    
    1,914Insurance advances
    
    
    1,763
    
    
    
    700Current portion of long-term liabilities
    
    
    16,491
    
    
    
    18,531Liabilities related to assets held for sale
    
    
    13,806
    
    
    
    4,610Total current liabilities
    
    
    80,129
    
    
    
    71,992Long-term liabilities
    
    
    389,620
    
    
    
    394,432Total liabilities
    
    
    469,749
    
    
    
    466,424Minority interests
    
    
    11,357
    
    
    
    11,217Commitments
and contingenciesStockholders equity:Common stock, $.01 par value, 60,000,000 shares
authorized;
24,689,820 and 24,648,405 issued at June 30, 2006 and
December 31, 2005, respectively
    
    
    247
    
    
    
    246Additional paid-in capital
    
    
    320,938
    
    
    
    317,034Unearned stock compensation
    
    
    
    
    
    
    (604
    )Accumulated deficit
    
    
    (64,265
    )
    
    
    (69,640
    )Accumulated other comprehensive income
    
    
    2,756
    
    
    
    2,234Treasury stock, at cost, 75,258 and 21,633 shares at
June 30, 2006 and December 31, 2005, respectively
    
    
    (863
    )
    
    
    (226
    )Total stockholders equity
    
    
    258,813
    
    
    
    249,044$
    739,919
    
    
    $
    726,685
  3




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005(Unaudited in thousands, except per share data)Revenues:Rooms
    
    $
    68,926
    
    
    $
    59,236
    
    
    $
    128,499
    
    
    $
    109,458Food and beverage
    
    
    19,636
    
    
    
    17,435
    
    
    
    35,022
    
    
    
    31,104Other
    
    
    2,590
    
    
    
    2,561
    
    
    
    4,923
    
    
    
    4,950Total revenues
    
    
    91,152
    
    
    
    79,232
    
    
    
    168,444
    
    
    
    145,512Operating expenses:Direct:Rooms
    
    
    17,810
    
    
    
    15,940
    
    
    
    33,803
    
    
    
    29,971Food and beverage
    
    
    13,487
    
    
    
    12,011
    
    
    
    25,203
    
    
    
    22,042Other
    
    
    2,012
    
    
    
    1,977
    
    
    
    3,875
    
    
    
    3,789Total direct operating expenses
    
    
    33,309
    
    
    
    29,928
    
    
    
    62,881
    
    
    
    55,80257,843
    
    
    
    49,304
    
    
    
    105,563
    
    
    
    89,710Other operating expenses:Other hotel operating costs
    
    
    25,381
    
    
    
    22,460
    
    
    
    49,915
    
    
    
    44,279Property and other taxes, insurance, and leases
    
    
    5,876
    
    
    
    5,336
    
    
    
    11,379
    
    
    
    10,570Corporate and other
    
    
    5,524
    
    
    
    5,068
    
    
    
    10,407
    
    
    
    9,477Casualty (gains) losses, net
    
    
    (248
    )
    
    
    28
    
    
    
    (60
    )
    
    
    132Depreciation and amortization
    
    
    9,270
    
    
    
    6,339
    
    
    
    17,898
    
    
    
    12,434Impairment of long-lived assets
    
    
    74
    
    
    
    955
    
    
    
    278
    
    
    
    1,052Total other operating expenses
    
    
    45,877
    
    
    
    40,186
    
    
    
    89,817
    
    
    
    77,94411,966
    
    
    
    9,118
    
    
    
    15,746
    
    
    
    11,766Other income (expenses):Business interruption insurance proceeds
    
    
    1,152
    
    
    
    1,729
    
    
    
    1,152
    
    
    
    1,729Interest income and other
    
    
    848
    
    
    
    54
    
    
    
    1,157
    
    
    
    225Interest expense
    
    
    (7,493
    )
    
    
    (6,433
    )
    
    
    (15,051
    )
    
    
    (12,887
    )Income before income taxes and minority interests
    
    
    6,473
    
    
    
    4,468
    
    
    
    3,004
    
    
    
    833Minority interests (net of taxes, nil)
    
    
    (136
    )
    
    
    (120
    )
    
    
    (140
    )
    
    
    25Provision for income taxes  continuing operations
    
    
    (2,545
    )
    
    
    (67
    )
    
    
    (1,100
    )
    
    
    (135
    )Income from continuing operations
    
    
    3,792
    
    
    
    4,281
    
    
    
    1,764
    
    
    
    723Discontinued operations:Income (loss) from discontinued operations before
income taxes
    
    
    325
    
    
    
    (2,407
    )
    
    
    6,156
    
    
    
    (5,933
    )Provision for income taxes  discontinued operations
    
    
    (116
    )
    
    
    
    
    
    
    (2,545
    )
    
    
    Income (loss) from discontinued operations
    
    
    209
    
    
    
    (2,407
    )
    
    
    3,611
    
    
    
    (5,933
    )Net income (loss) attributable to common stock
    
    $
    4,001
    
    
    $
    1,874
    
    
    $
    5,375
    
    
    $
    (5,210
    )Net income (loss) per share attributable to common
stock:Basic
    
    $
    0.16
    
    
    $
    0.08
    
    
    $
    0.22
    
    
    $
    (0.21
    )Diluted
    
    $
    0.16
    
    
    $
    0.08
    
    
    $
    0.22
    
    
    $
    (0.21
    )
  4




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AccumulatedAdditional
    
    Unearned
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    Paid-In
    
    Stock
    
    Accumulated
    
    Comprehensive
    
    Treasury Stock
    
    StockholdersShares
    
    Amount
    
    Capital
    
    Compensation
    
    Deficit
    
    Income
    
    Shares
    
    Amount
    
    Equity(Unaudited in thousands, except share data)Balance, December 31, 2005
    
    
    24,648,405
    
    
    $
    246
    
    
    $
    317,034
    
    
    $
    (604
    )
    
    $
    (69,640
    )
    
    $
    2,234
    
    
    
    21,633
    
    
    $
    (226
    )
    
    $
    249,044Reclassification of unearned stock
compensation to additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    (604
    )
    
    
    604
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of unearned stock compensation
    
    
    
    
    
    
    
    
    
    
    684
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    684Issuance of restricted stock awards
    
    
    12,413
    
    
    
    1
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161Exercise of stock options
    
    
    29,002
    
    
    
    
    
    
    
    287
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287Repurchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,625
    
    
    
    (637
    )
    
    
    (637
    )Realization of pre-emergence deferred tax asset
    
    
    
    
    
    
    
    
    
    
    3,377
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,377Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,375Currency translation adjustments (related
taxes estimated at nil)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    522
    
    
    
    
    
    
    
    
    
    
    
    522Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,897Balance, June 30, 2006
    
    
    24,689,820
    
    
    
    247
    
    
    
    320,938
    
    
    
    
    
    
    
    (64,265
    )
    
    
    2,756
    
    
    
    75,258
    
    
    
    (863
    )
    
    
    258,813
   5




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30, 2006
    
    
    June 30, 2005($ in thousands)Operating activities:Net income (loss)
    
    $
    5,375
    
    
    $
    (5,210
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    17,963
    
    
    
    13,650Impairment of long-lived assets
    
    
    8,234
    
    
    
    6,327Stock compensation expense
    
    
    845
    
    
    
    107Deferred income taxes
    
    
    3,377
    
    
    
    Minority interests
    
    
    140
    
    
    
    (25
    )Gain on asset dispositions
    
    
    (1,483
    )
    
    
    (2,003
    )Gain on extinguishment of debt
    
    
    (10,869
    )
    
    
    Amortization of deferred financing costs
    
    
    676
    
    
    
    682Other
    
    
    202
    
    
    
    (667
    )Changes in operating assets and liabilities:Accounts receivable, net of allowances
    
    
    (3,838
    )
    
    
    (2,124
    )Insurance receivable
    
    
    5,945
    
    
    
    (53
    )Inventories
    
    
    (480
    )
    
    
    (199
    )Prepaid expenses and other assets
    
    
    (3,528
    )
    
    
    (2,285
    )Accounts payable
    
    
    1,674
    
    
    
    465Other accrued liabilities
    
    
    2,463
    
    
    
    4,492Advance deposits
    
    
    340
    
    
    
    811Net cash provided by operating activities
    
    
    27,036
    
    
    
    13,968Investing activities:Capital improvements
    
    
    (26,206
    )
    
    
    (42,184
    )Proceeds from sale of assets, net of related selling costs
    
    
    9,404
    
    
    
    12,908Withdrawals (deposits) for capital expenditures
    
    
    4,900
    
    
    
    8,728Insurance advances related to hurricanes
    
    
    1,852
    
    
    
    15,834Net increase
(decrease) in restricted cash
    
    
    671
    
    
    
    (3,757
    )Other
    
    
    (71
    )
    
    
    (106
    )Net cash used in investing activities
    
    
    (9,450
    )
    
    
    (8,577
    )Financing activities:Proceeds
from issuance of long-term debt
    
    
    44,954
    
    
    
    3,200Proceeds from exercise of stock options and issuance of common stock
    
    
    287
    
    
    
    Principal payments on long-term debt
    
    
    (34,134
    )
    
    
    (26,409
    )Purchase of treasury stock
    
    
    (543
    )
    
    
    Payments of deferred financing costs
    
    
    (870
    )
    
    
    (174
    )Other
    
    
    10
    
    
    
    Net cash provided by (used in) financing activities
    
    
    9,704
    
    
    
    (23,383
    )Effect of exchange rate changes on cash
    
    
    48
    
    
    
    (8
    )Net (decrease) increase in cash and cash equivalents
    
    
    27,338
    
    
    
    (18,000
    )Cash and cash equivalents at beginning of period
    
    
    19,097
    
    
    
    36,234Cash and cash equivalents at end of period
    
    $
    46,435
    
    
    $
    18,234Supplemental cash flow information:Cash paid during the period for:Interest, net of the amounts capitalized shown below
    
    $
    17,680
    
    
    $
    13,784Interest capitalized
    
    
    117
    
    
    
    1,047Income taxes, net of refunds
    
    
    590
    
    
    
    162Supplemental disclosure of non-cash investing and financing activities:Net non-cash debt increase (decrease)
    
    
    10,195
    
    
    
    (572
    )Release of surplus accrual on final settlement of bankruptcy claims
    
    
    
    
    
    
    (1,292
    )Treasury stock repurchases traded, but not settled
    
    
    94
    
    
    
    Purchases of
property and equipment on account
    
    
    5,197
    
    
    
    3,511
  6




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Business Summary
    
    
    69 hotels that were wholly owned and operated through subsidiaries; and
    
    three hotels that were operated in joint ventures in which the Company has a 50% or
greater voting equity interest and exercises control.
  2. General
    7




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##### Table of Contents




    
    the reported amounts of assets and liabilities;
    
    the reported amounts of revenues and expenses during the reporting period; and
    
    the disclosures of contingent assets and liabilities at the date of the financial statements.
  3. Stock-Based Compensation
    8




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005(Per-share amounts below are individually rounded)
    
    (Unaudited in thousands, except per share data)Income (loss) from continuing operations:As reported
    
    $
    4,281
    
    
    $
    723Add: Stock-based compensation expense included in net income
    
    
    50
    
    
    
    107Deduct: Total pro forma stock-based employee compensation expense
    
    
    (437
    )
    
    
    (1,022
    )Pro forma
    
    
    3,894
    
    
    
    (192
    )Loss from discontinued operations:As reported
    
    
    (2,407
    )
    
    
    (5,933
    )Add: Stock-based compensation expense included in net income
    
    
    
    
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    
    
    
    
    Pro forma
    
    
    (2,407
    )
    
    
    (5,933
    )Net Income (loss) attributable to common stock:As reported
    
    
    1,874
    
    
    
    (5,210
    )Add: Stock-based compensation expense included in net income
    
    
    50
    
    
    
    107Deduct: Total pro forma stock-based employee compensation expense
    
    
    (437
    )
    
    
    (1,022
    )Pro forma
    
    $
    1,487
    
    
    $
    (6,125
    )Basic earnings per common shareIncome (loss) from continuing operations:As reported
    
    $
    0.17
    
    
    $
    0.03Add: Stock-based compensation expense included in net income
    
    
    
    
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    (0.02
    )
    
    
    (0.04
    )Pro forma
    
    
    0.16
    
    
    
    (0.01
    )Loss from discontinued operations:As reported
    
    
    (0.10
    )
    
    
    (0.24
    )Add: Stock-based compensation expense included in net income
    
    
    
    
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    
    
    
    
    Pro forma
    
    
    (0.10
    )
    
    
    (0.24
    )Net Income (loss) attributable to common stock:As reported
    
    
    0.08
    
    
    
    (0.21
    )Add: Stock-based compensation expense included in net income
    
    
    
    
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    (0.02
    )
    
    
    (0.04
    )Pro forma
    
    $
    0.06
    
    
    $
    (0.25
    )Diluted earnings per common shareIncome (loss) from continuing operations:As reported
    
    $
    0.17
    
    
    $
    0.03Add: Stock-based compensation expense included in net income
    
    
    
    
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    (0.02
    )
    
    
    (0.04
    )Pro forma
    
    
    0.16
    
    
    
    (0.01
    )Loss from discontinued operations:As reported
    
    
    (0.10
    )
    
    
    (0.24
    )Add: Stock-based compensation expense included in net income
    
    
    
    
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    
    
    
    
    Pro forma
    
    
    (0.10
    )
    
    
    (0.24
    )Net Income (loss) attributable to common stock:As reported
    
    
    0.08
    
    
    
    (0.21
    )Add: Stock-based compensation expense included in net income
    
    
    
    
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    (0.02
    )
    
    
    (0.04
    )Pro forma
    
    $
    0.06
    
    
    $
    (0.25
    )
 9




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##### Table of Contents



Available for IssuanceIssued Under the Stock
    
    
    
    
    Under the StockIncentive Plan
    
    
    Type
    
    Incentive PlanAvailable under the plan, less previously
issued as of December 31, 2005
    
    
    
    
    
    
    
    
    2,545,252Issued January 31, 2006
    
    
    12,413
    
    
    restricted stock
    
    
    2,532,839Issued January 31, 2006
    
    
    3,884
    
    
    nonvested stock
    
    
    2,528,955Issued March 1, 2006
    
    
    35,000
    
    
    nonvested stock
    
    
    2,493,955Issued June 8, 2006
    
    
    7,000
    
    
    nonvested stock
    
    
    2,486,955Shares withheld from awards to satisfy tax
withholding obligations
    
    
    (4,719
    )
    
    
    
    
    2,491,674Options and nonvested shares forfeited
January 1, 2006 - June 30, 2006
    
    
    (29,496
    )
    
    
    
    
    2,521,170Issued from January 1, 2006 - June 30, 2006,
net
    
    
    24,082
 Stock Options
  Restricted Stock
  Nonvested Stock
    10




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##### Table of Contents



Performance-Based Stock
     Weighted AverageStock Options
    
    
    Exercise PriceBalance, December 31, 2005
    
    
    593,894
    
    
    $
    10.41Granted
    
    
    
    
    
    
    Exercised
    
    
    (29,002
    )
    
    
    9.99Forfeited
    
    
    (29,416
    )
    
    
    10.16Balance, June 30, 2006
    
    
    535,476
    
    
    $
    10.46
 Restricted Stock
    
    
    Nonvested StockBalance, December 31, 2005
    
    
    
    
    
    
    75,000Granted
    
    
    12,413
    
    
    
    45,884Forfeited
    
    
    
    
    
    
    (80
    )Withheld to satisfy tax obligations
    
    
    (4,719
    )
    
    
    Balance, June 30, 2006
    
    
    7,694
    
    
    
    120,804
 ($ in thousands)Aggregate intrinsic value of stock options exercised
    
    $
    124
   11




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##### Table of Contents



Options outstanding
    
    
    Options exercisableWeighted average
    
    
    Weighted
    
    
    
    
    
    
    Weightedremaining life
    
    
    average
    
    
    
    
    
    
    averageRange of prices
    
    Number
    
    
    (in years)
    
    
    exercise price
    
    
    Number
    
    
    exercise price$7.83 to $9.39
    
    
    243,829
    
    
    
    8.8
    
    
    $
    9.05
    
    
    
    75,371
    
    
    $
    9.05$9.40 to $10.96
    
    
    221,835
    
    
    
    8.0
    
    
    $
    10.50
    
    
    
    137,969
    
    
    $
    10.51$10.97 to $15.66
    
    
    69,812
    
    
    
    7.1
    
    
    $
    15.21
    
    
    
    69,812
    
    
    $
    15.21535,476
    
    
    
    8.3
    
    
    $
    10.46
    
    
    
    283,152
    
    
    $
    11.28
 ($ in thousands)Aggregate intrinsic value of stock options outstanding
    
    $
    2,029
  Three Months Ended June 30, 2006
    
    
    Six Months Ended June 30, 2006Compensation
    
    
    Income Tax
    
    
    Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit
    
    
    Expense
    
    
    Benefit(Unaudited in thousands)Stock Options
    
    $
    209
    
    
    $
    81
    
    
    $
    415
    
    
    $
    161Nonvested Stock
    
    
    131
    
    
    
    51
    
    
    
    235
    
    
    
    91Restricted Stock
    
    
    
    
    
    
    
    
    
    
    161
    
    
    
    62Performance-Based Stock
    
    
    37
    
    
    
    14
    
    
    
    37
    
    
    
    14Total
    
    $
    377
    
    
    $
    146
    
    
    $
    848
    
    
    $
    328
  Six Months Ended June 30, 2006Unrecognized
    
    
    Weighted-AverageCompensation
    
    
    AmortizationType of Award
    

Expense
($000s)
    
    
    Period (in years)Stock Options
    
    $
    1,150
    
    
    
    1.44Nonvested Stock
    
    
    833
    
    
    
    1.67Performance-Based Stock
    
    
    835
    
    
    
    3.74Total
    
    $
    2,818
    
    
    
    2.47
  Three Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2006Income from continuing operations
    
    $
    209
    
    
    $
    415Income before income taxes
    
    
    209
    
    
    
    415Net income
    
    
    128
    
    
    
    254Basic earnings per share
    
    
    0.005
    
    
    
    0.010Diluted earnings per share
    
    
    0.005
    
    
    
    0.010
 12




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##### Table of Contents



4. Treasury Stock
   5. Dispositions and Discontinued Operations
 Dispositions
  a)
    
    Holiday Inn Lawrence, KS and Holiday Inn Manhattan, KS  In January 2006, the Company
surrendered both hotels to a Trustee, pursuant to the settlement agreement entered into in
August 2005. The surrender of these two hotels resulted in an aggregate loss on disposal
of fixed assets of $6.1 million, which was recorded in the first quarter of 2006 as
impairment expense, and an aggregate gain on the extinguishment of debt of $10.9 million.b)
    
    Holiday Inn City Center Columbus, OH  In February 2006, the Companys minority-owned
hotel was deeded to the lender. The Company had a 30% non-controlling equity interest in
the partnership which owned the hotel, and as a result, the Companys partnership interest
was accounted for using the equity method of accounting. The hotel was not included in the
discontinued operations portfolio. The Companys investment in this subsidiary was written
off in 2005 and the deeding of the hotel to the lender resulted in a net loss.
Consequently, there was no impact on the consolidated financial results for the six months
ended June 30, 2006.c)
    
    Fairfield Inn Jackson, TN  In March 2006, the Company sold the hotel for a gross
sales price of $2.5 million and used $1.6 million of the net proceeds to pay down debt.
The gain on the sale of the asset was $1.5 million.d)
    
    Holiday Inn (McKnight) Pittsburgh, PA  In April 2006, the Company sold the hotel
for a gross sales price of $6.0 million which was used for general corporate purposes.
Prior to the disposition, the Company recorded impairment charges of $0.4 million.e)
    
    Land parcel at Mount Laurel, NJ  In April 2006, the Company sold the land parcel
for a gross sales price of $2.0 million which was used for general corporate purposes.
Prior to the disposition, the Company recorded impairment charges of $1.0 million. Upon
disposition, the Company recorded an additional impairment charge of $34,000.
 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; and
 13




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##### Table of Contents



e)
    
    It is unlikely that significant changes to the plan to sell the asset will be made.
     a)
    
    $0.7 million on the University Plaza Bloomington, IN hotel, which was classified as
held for sale during the quarter, to reduce the carrying value to estimated selling price
less costs to sell; andb)
    
    $36,000 related to various other held-for-sale properties primarily to reduce the
carrying value to estimated selling price less costs to sell and to record the final
disposition of certain properties.
  a)
    
    $3.9 million on the Holiday Inn Manhattan, KS hotel to record the loss on disposal of
fixed assets;b)
    
    $2.2 million on the Holiday Inn Lawrence, KS hotel to record the loss on disposal of
fixed assets;c)
    
    $0.5 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;d)
    
    $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;e)
    
    $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;f)
    
    $0.1 million on the Fairfield 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;g)
    
    $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; andh)
    
    $36,000 related to various other held-for-sale properties primarily to reduce the
carrying value to estimated selling price less costs to sell and to record the final
disposition of certain properties.
 14




---



##### Table of Contents



a)
    
    an additional $0.6 million on the Holiday Inn Rolling Meadows, IL hotel to reflect the
reduced selling price of the hotel; andb)
    
    an additional $1.3 million on the Holiday Inn St. Louis North, MO hotel to reflect the
reduced selling price of this hotel.
  a)
    
    $1.6 million on the Holiday Inn Rolling Meadows, IL hotel to reflect the reduced
selling price of the hotel;b)
    
    $1.3 million on the Holiday Inn St. Louis North, MO hotel to reflect the reduced
selling price of this hotel;c)
    
    $1.6 million on the Holiday Inn Lawrence, KS hotel due to a reduced fair value
appraisal;d)
    
    $0.3 million on the Holiday Inn Express Gadsden, AL hotel to reflect the estimated
selling costs of the sale as this hotel was identified for sale in January 2005 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;e)
    
    $0.4 million on the Mt. Laurel, NJ land parcel to reflect the lowered estimated selling
price of the land;f)
    
    $0.3 million on the Holiday Inn Morgantown, WV hotel to adjust for the further
reduction in the estimated selling price of this hotel; andg)
    
    $ (0.1) million recovery on the Holiday Inn Austin, TX hotel related to insurance
premium refunds.
  June 30, 2006
    
    
    December 31, 2005(Unaudited in thousands)Property and equipment, net
    
    $
    24,190
    
    
    $
    13,796Other assets
    
    
    2,119
    
    
    
    1,070Assets held for sale
    
    $
    26,309
    
    
    $
    14,866Other liabilities
    
    $
    5,018
    
    
    $
    3,346Long-term debt
    
    
    8,788
    
    
    
    1,264Liabilities related to assets held for sale
    
    $
    13,806
    
    
    $
    4,610
   15




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005(Unaudited in thousands)Total revenues
    
    $
    6,151
    
    
    $
    14,451
    
    
    $
    12,682
    
    
    $
    26,231Total expenses
    
    
    (4,819
    )
    
    
    (14,166
    )
    
    
    (10,369
    )
    
    
    (27,017
    )Impairment of long-lived assets
    
    
    (760
    )
    
    
    (1,826
    )
    
    
    (7,956
    )
    
    
    (5,274
    )Interest income and other
    
    
    
    
    
    
    1
    
    
    
    10
    
    
    
    1Interest expense and other financing costs
    
    
    (240
    )
    
    
    (868
    )
    
    
    (563
    )
    
    
    (1,877
    )Gain on asset disposition
    
    
    (7
    )
    
    
    1
    
    
    
    1,483
    
    
    
    2,003Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    10,869
    
    
    
    Provision for income taxes
    
    
    (116
    )
    
    
    
    
    
    
    (2,545
    )
    
    
    Income (loss) from discontinued operations
    
    $
    209
    
    
    $
    (2,407
    )
    
    $
    3,611
    
    
    $
    (5,933
    )
  6. Income (Loss) Per Share
  Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005(Per-share amounts below are individually rounded)
    
    (Unaudited in thousands, except per share data)Numerator:Income from continuing operations
    
    $
    3,792
    
    
    $
    4,281
    
    
    $
    1,764
    
    
    $
    723Income (loss) from discontinued operations
    
    
    209
    
    
    
    (2,407
    )
    
    
    3,611
    
    
    
    (5,933
    )Net Income (loss) attributable to common stock
    
    $
    4,001
    
    
    $
    1,874
    
    
    $
    5,375
    
    
    $
    (5,210
    )Denominator:Basic weighted average shares
    
    
    24,634
    
    
    
    24,573
    
    
    
    24,635
    
    
    
    24,573Diluted weighted average shares
    
    
    24,743
    
    
    
    24,610
    
    
    
    24,731
    
    
    
    24,611Basic income (loss) per common share:Income from continuing operations
    
    $
    0.15
    
    
    $
    0.17
    
    
    $
    0.07
    
    
    $
    0.03Income (loss) from discontinued operations
    
    
    0.01
    
    
    
    (0.10
    )
    
    
    0.15
    
    
    
    (0.24
    )Net Income (loss) attributable to common stock
    
    $
    0.16
    
    
    $
    0.08
    
    
    $
    0.22
    
    
    $
    (0.21
    )Diluted income (loss) per common share:Income from continuing operations
    
    $
    0.15
    
    
    $
    0.17
    
    
    $
    0.07
    
    
    $
    0.03Income (loss) from discontinued operations
    
    
    0.01
    
    
    
    (0.10
    )
    
    
    0.15
    
    
    
    (0.24
    )Net Income (loss) attributable to common stock
    
    $
    0.16
    
    
    $
    0.08
    
    
    $
    0.22
    
    
    $
    (0.21
    )
   7. Long-Term Liabilities
  16




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##### Table of Contents



June 30, 2006
    
    
    December 31, 2005Number
    
    
    Property, plant
    
    
    Long-term
    
    
    Long-termof Hotels
    
    
    and equipment, net
    
    
    obligations
    
    
    obligations
    
    
    Interest rates at June 30, 2006Refinancing DebtMerrill Lynch Mortgage Lending, Inc. -
Floating
    
    
    16
    
    
    $
    88,931
    
    
    $
    61,871
    
    
    $
    67,546
    
    
    LIBOR plus 3.40%, capped at 9.4% (3)Merrill Lynch Mortgage Lending, Inc. -
Fixed
    
    
    34
    
    
    
    334,532
    
    
    
    250,231
    
    
    
    252,377
    
    
    
    6.58%Merrill Lynch Mortgage Lending, Inc. -
Total
    
    
    50
    
    
    
    423,463
    
    
    
    312,102
    
    
    
    319,923Other FinancingsComputer Share Trust Company of Canada
    
    
    1
    
    
    
    16,699
    
    
    
    8,012
    
    
    
    7,838
    
    
    
    7.88%Column Financial, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,337Lehman Brothers Holdings, Inc.
    
    
    4
    
    
    
    46,337
    
    
    
    15,370
    
    
    
    22,398
    
    
    $8,831 at 9.40%; $6,539 at 8.90%JP Morgan Chase Bank
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,064Wachovia
    
    
    4
    
    
    
    36,993
    
    
    
    36,391
    
    
    
    13,173
    
    
    $9,929 at 6.03%; $3,144 at 5.78%;23,218 at 6.04%IXIS
    
    
    4
    
    
    
    37,430
    
    
    
    40,500
    
    
    
    19,000
    
    
    $19,000 at LIBOR plus 2.90%, capped at8.4%; $21,500 at LIBOR plus 2.95%,capped at 8.45%Column Financial, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,146Total  other financing
    
    
    13
    
    
    
    137,459
    
    
    
    100,273
    
    
    
    90,95663
    
    
    
    560,922
    
    
    
    412,375
    
    
    
    410,879
    
    
    
    7.14% (1)Long-term liabilities  otherTax notes issued pursuant to our Joint Plan
of Reorganization
    
    
    
    
    
    
    
    
    
    
    1,638
    
    
    
    2,220Other
    
    
    
    
    
    
    
    
    
    
    1,017
    
    
    
    1,151
    
    
    
    
    
    
    
    2,655
    
    
    
    3,371Property, plant and equipment -
unencumbered
    
    
    10
    
    
    
    50,193
    
    
    
    
    
    
    
    73
    
    
    
    611,115
    
    
    
    415,030
    
    
    
    414,250Held for sale
    
    
    (7
    )
    
    
    (24,190
    )
    
    
    (8,919
    )
    
    
    (1,287
    )Total June 30, 2006 (2)
    
    
    66
    
    
    $
    586,925
    
    
    $
    406,111
    
    
    $
    412,963
 
 (1)
    
    The 7.14% in the table above represents the weighted average annualized cost of debt at June
30, 2006, based on LIBOR of 5.346% as of June 30, 2006.(2)
    
    Long term debt obligations at June 30, 2006 and December 31, 2005 include the current
portion.(3)
    
    This interest rate cap expired on June 30, 2006. Thereafter, the interest rate on this loan
is capped at 9.4% until the loans maturity in January 2007. Merrill Lynch Floating Rate Debt
  Wachovia Bank Refinance
  17




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##### Table of Contents



IXIS Real Estate Capital Refinance
    18




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##### Table of Contents



8. Commitments and Contingencies
 Franchise Agreements and Capital Expenditures
   Three months ended
    
    
    Six months endedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005(Unaudited in thousands)Continuing operations
    
    $
    6,989
    
    
    $
    5,398
    
    
    $
    12,380
    
    
    $
    9,955Discontinued operations
    
    
    422
    
    
    
    987
    
    
    
    861
    
    
    
    1,786$
    7,411
    
    
    $
    6,385
    
    
    $
    13,241
    
    
    $
    11,741
    a)
    
    One hotel is held for sale. This hotel is in default of its franchise agreement for
failure to complete the Property Improvement Plan (PIP).b)
    
    One hotel has received an extension to its default termination date until August 15,
2006. The franchisor has agreed to the planned renovations of two floors of guestrooms and
guest room corridors. This work has been completed and the management team and operations
team are currently utilizing these improvements as well as operational enhancements to
improve the guest satisfaction levels necessary to cure this default. We are in
communication with the franchisor on further extensions to this default termination date.c)
    
    Two hotels are in default or non-compliance of their franchise agreement because of
substandard guest satisfaction scores. The Company anticipates that both of these hotels
will earn clean slate letters in August 2006 and August 2007, respectively.
 19




---



##### Table of Contents



d)
    
    Seven hotels are in default or non-compliance of their franchise agreement because of
substandard guest satisfaction scores. Five of these hotels will enter into non-compliance
status in August based on a new scoring methodology imposed by the franchisor. The Company
anticipates that the remaining two hotels will not be above the required threshold by the
termination date. If the Company does not achieve scores above required thresholds by the
designated date at these two hotels, the hotels could be subject to termination of the
franchise agreements; The Company is negotiating with the franchisors to receive additional
extensions to cure these defaults, and the franchisors have demonstrated a strong desire
and willingness to continue working with the Company to cure these issues. The corporate
operations team, as well as each propertys general manager and associates, have focused
their efforts to cure each of these default or non-compliance issues through enhanced
service, increased cleanliness, and product improvements by the required cure date.
   Letters of Credit
  Self-insurance
    Casualty losses and business interruption insurance
  20




---



##### Table of Contents




    
    received all of the property damage proceeds and all but $38,000 of the business
interruption proceeds that were accrued at December 31, 2005 for the Crowne Plaza West Palm
Beach and Melbourne, FL hotels. Of the proceeds received in 2006, $4.2 million was
forwarded to the lender for deposit into the Companys escrow account. The Company receives
reimbursements from the escrow account as operating and capital expenditures are incurred.
    
    recorded a $0.7 million receivable for signed proofs of loss associated with the 2005
business interruption claims at the Crowne Plaza West Palm Beach, FL.
    
    received insurance advances totaling $0.5 million associated with an environmental
insurance policy claim at the Crowne Plaza West Palm Beach, FL relating to the 2004
hurricane season, which has not yet been finalized. The advances were forwarded to the
lender for deposit into the Companys escrow account.
    
    received a $0.4 million settlement for a property damage claim at the Holiday Inn
Clarksburg, WV, where a water main ruptured in October 2005. The hotel was closed until
January 31, 2006. The property damage proceeds were forwarded to the lender for deposit
into the Companys escrow account. The Company also received business interruption
proceeds totaling $0.5 million for the October through December 2005 time period.
    
    received $0.6 million and $0.8 million of advances associated with the hurricane-related
property damage claims at the Radisson Kenner, LA and Quality Inn Metairie, LA,
respectively.
   Litigation
  9.
Income Taxes
    10. Recent Accounting Pronouncements
  11. Subsequent Events
  
 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
 21




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##### Table of Contents



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, 2005.
 Executive Overview
    
    
    69 hotels that are wholly owned and operated through subsidiaries; and
    
    three hotels that are operated in joint ventures in which we have a 50% or greater voting equity interest and exercise control.
   Overview of Continuing Operations
  
    
    Revenues increased $11.9 million, or 15.0%, due to our continued
strong growth in ADR and occupancy as well as the reopening of two
hotels which were closed in 2005 due to hurricane damage, and the
completion of various renovation projects which resulted in displaced
revenues in 2005. These increases were partially offset by the
closure of our Jekyll Island and Marietta, GA properties.
    
    Direct operating expenses increased $3.4 million, or 11.3%, while
other operating expenses increased $5.7 million, or 14.2%, driven
primarily by strong revenue growth, the reopening of our two
hurricane-damaged hotels, higher property insurance premiums, and $1.0
million of certain costs associated with the closure and pending sale
of our Jekyll Island property (see below).
    
    Net income attributable to common stock increased $2.1 million from
$1.9 million in the second quarter of 2005 to $4.0 million in the
second quarter of 2006.
  22




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##### Table of Contents




    
    $0.6 million of liquidated damages payable to the franchisor, of which 50% is expected
to be reimbursed by the buyer in accordance with the terms of the contract;
    
    $0.2 million of accelerated depreciation expense as a result of the pending demolition
of the building; and,
    
    $0.2 million of other costs related to the closure/sale including legal fees, write-off
of various prepaid and deferred asset balances, and the write-off of costs associated with
the disposal and/or removal of certain fixed assets and inventories.
  Overview of Discontinued Operations
  ($ in thousands)Aggregate Sales Price
    
    $
    105,586Debt pay down (principal only)
    
    
    73,253
    Critical Accounting Policies and Estimates
    23




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2006Income from continuing operations
    
    $
    209
    
    
    $
    415Income before income taxes
    
    
    209
    
    
    
    415Net income
    
    
    128
    
    
    
    254Basic earnings per share
    
    
    0.005
    
    
    
    0.010Diluted earnings per share
    
    
    0.005
    
    
    
    0.010
 Income Statement Overview
  Results of Operations  Continuing Operations
  Revenues  Continuing Operations
 Three months endedJune 30, 2006
    
    
    June 30, 2005
    
    
    Increase (decrease)(unaudited in thousands)Revenues:Rooms
    
    $
    68,926
    
    
    $
    59,236
    
    
    $
    9,690
    
    
    
    16.4
    %Food and beverage
    
    
    19,636
    
    
    
    17,435
    
    
    
    2,201
    
    
    
    12.6
    %Other
    
    
    2,590
    
    
    
    2,561
    
    
    
    29
    
    
    
    1.1
    %Total revenues
    
    $
    91,152
    
    
    $
    79,232
    
    
    $
    11,920
    
    
    
    15.0
    %Occupancy
    
    
    68.4
    %
    
    
    67.0
    %
    
    
    
    
    
    
    2.1
    %ADR
    
    $
    94.58
    
    
    $
    84.74
    
    
    $
    9.84
    
    
    
    11.6
    %RevPAR
    
    $
    64.74
    
    
    $
    56.76
    
    
    $
    7.98
    
    
    
    14.1
    %
   24




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##### Table of Contents



25




---



##### Table of Contents



Hotel
    
    Room
    
    
    
    Three Months EndedCount
    
    Count
    
    
    
    June 30, 2006
    
    June 30, 2005
    
    Change/% Change66
    
    
    
    11,958
    
    
    All Continuing OperationsOccupancy
    
    
    68.4
    %
    
    
    67.0
    %
    
    
    
    
    
    
    2.1
    %ADR
    
    $
    94.58
    
    
    $
    84.74
    
    
    $
    9.84
    
    
    
    11.6
    %RevPAR
    
    $
    64.74
    
    
    $
    56.76
    
    
    $
    7.98
    
    
    
    14.1
    %62
    
    
    
    11,076
    
    
    Continuing Operations less two hotels closed in
2005 due to hurricane damage, one hotel closed in
2006 due to fire damage and one closed in 2006 for
demolitionOccupancy
    
    
    68.7
    %
    
    
    67.4
    %
    
    
    
    
    
    
    1.9
    %ADR
    
    $
    93.34
    
    
    $
    85.12
    
    
    $
    8.22
    
    
    
    9.7
    %RevPAR
    
    $
    64.09
    
    
    $
    57.35
    
    
    $
    6.74
    
    
    
    11.8
    %RevPAR Index
    
    
    95.5
    %
    
    
    91.9
    %
    
    
    
    
    
    
    3.9
    %61
    
    
    
    10,832
    
    
    Continuing Operations less Radisson New Orleans
Airport hotel, two hotels closed in 2005 due to
hurricane damage, one hotel closed in 2006 due to
fire damage and one hotel closed in 2006 for demolitionOccupancy
    
    
    68.9
    %
    
    
    67.7
    %
    
    
    
    
    
    
    1.8
    %ADR
    
    $
    92.57
    
    
    $
    85.47
    
    
    $
    7.10
    
    
    
    8.3
    %RevPAR
    
    $
    63.78
    
    
    $
    57.88
    
    
    $
    5.90
    
    
    
    10.2
    %RevPAR Index
    
    
    95.5
    %
    
    
    92.6
    %
    
    
    
    
    
    
    3.1
    %51
    
    
    
    8,725
    
    
    Continuing Operations less two hotels closed in
2005 due to hurricane damage, one hotel closed in 2006
due to fire damage, one hotel closed in 2006 for
demolition and hotels under renovation in both the
first quarter 2005 and/or 2006Occupancy
    
    
    68.1
    %
    
    
    68.9
    %
    
    
    
    
    
    
    -1.2
    %ADR
    
    $
    90.76
    
    
    $
    84.56
    
    
    $
    6.20
    
    
    
    7.3
    %RevPAR
    
    $
    61.83
    
    
    $
    58.27
    
    
    $
    3.56
    
    
    
    6.1
    %RevPAR Index
    
    
    96.2
    %
    
    
    96.5
    %
    
    
    
    
    
    
    -0.3
    %25
    
    
    
    4,093
    
    
    Hotels completing major renovations in 2004 and 2005Occupancy
    
    
    72.6
    %
    
    
    68.8
    %
    
    
    
    
    
    
    5.5
    %ADR
    
    $
    100.98
    
    
    $
    86.81
    
    
    $
    14.17
    
    
    
    16.3
    %RevPAR
    
    $
    73.34
    
    
    $
    59.75
    
    
    $
    13.59
    
    
    
    22.7
    %RevPAR Index
    
    
    100.3
    %
    
    
    89.0
    %
    
    
    
    
    
    
    12.7
    %13
    
    
    
    1,515
    
    
    Marriott HotelsOccupancy
    
    
    77.3
    %
    
    
    77.2
    %
    
    
    
    
    
    
    0.1
    %ADR
    
    $
    104.02
    
    
    $
    93.95
    
    
    $
    10.07
    
    
    
    10.7
    %RevPAR
    
    $
    80.45
    
    
    $
    72.55
    
    
    $
    7.90
    
    
    
    10.9
    %RevPAR Index
    
    
    116.1
    %
    
    
    113.7
    %
    
    
    
    
    
    
    2.1
    %4
    
    
    
    777
    
    
    Hilton HotelsOccupancy
    
    
    68.7
    %
    
    
    71.3
    %
    
    
    
    
    
    
    -3.6
    %ADR
    
    $
    104.19
    
    
    $
    96.77
    
    
    $
    7.42
    
    
    
    7.7
    %RevPAR
    
    $
    71.54
    
    
    $
    68.99
    
    
    $
    2.55
    
    
    
    3.7
    %RevPAR Index
    
    
    96.1
    %
    
    
    94.4
    %
    
    
    
    
    
    
    1.8
    %38
    
    
    
    7,458
    
    
    IHG Hotels less two hotels closed in 2005 due to
hurricane damage, one hotel closed in 2006 due to fire
damage and one hotel closed in 2006 for demolitionOccupancy
    
    
    69.0
    %
    
    
    67.5
    %
    
    
    
    
    
    
    2.2
    %ADR
    
    $
    91.64
    
    
    $
    84.50
    
    
    $
    7.14
    
    
    
    8.4
    %RevPAR
    
    $
    63.21
    
    
    $
    57.06
    
    
    $
    6.15
    
    
    
    10.8
    %RevPAR Index
    
    
    92.8
    %
    
    
    88.9
    %
    
    
    
    
    
    
    4.4
    %7
    
    
    
    1,326
    
    
    Other Brands and Independent HotelsOccupancy
    
    
    57.0
    %
    
    
    53.0
    %
    
    
    
    
    
    
    7.5
    %ADR
    
    $
    80.71
    
    
    $
    65.69
    
    
    $
    15.02
    
    
    
    22.9
    %RevPAR
    
    $
    45.98
    
    
    $
    34.82
    
    
    $
    11.16
    
    
    
    32.1
    %RevPAR Index
    
    
    85.0
    %
    
    
    77.5
    %
    
    
    
    
    
    
    9.7
    %
 26




---



##### Table of Contents



RevPAR in Markets in Which Lodgian Operates
 Lodgian
    
    
    
    
    
    LodgianMarkets in which
    
    
    
    
    
    Competitive
    
    
    
    
    
    CompetitiveLodgian Operates
    
    Quarter
    
    Set
    
    Industry
    
    Set/Industry71
    
    
    1st Qtr 04
    
    
    4.5
    %
    
    
    7.7
    %
    
    
    58.4
    %71
    
    
    2nd Qtr 04
    
    
    5.6
    %
    
    
    8.6
    %
    
    
    65.1
    %71
    
    
    3rd Qtr 04
    
    
    5.2
    %
    
    
    6.4
    %
    
    
    81.3
    %71
    
    
    4th Qtr 04
    
    
    7.6
    %
    
    
    8.4
    %
    
    
    90.5
    %71
    
    
    1st Qtr 05
    
    
    6.3
    %
    
    
    7.2
    %
    
    
    87.5
    %71
    
    
    2nd Qtr 05
    
    
    8.1
    %
    
    
    8.3
    %
    
    
    97.6
    %71
    
    
    3rd Qtr 05
    
    
    8.4
    %
    
    
    8.3
    %
    
    
    101.2
    %69
    
    
    4th Qtr 05
    
    
    10.0
    %
    
    
    9.9
    %
    
    
    101.0
    %63
    
    
    1st Qtr 06
    
    
    10.4
    %
    
    
    10.2
    %
    
    
    102.0
    %(A)
    
    
    61
    
    
    2nd Qtr 06
    
    
    8.0
    %
    
    
    8.3
    %
    
    
    96.4
    %
 
   Direct operating expenses  Continuing Operations
 27




---



##### Table of Contents



Three months ended
    
    
    
    
    
    
    
    
    
    
    % of total revenuesJune 30, 2006
    
    
    June 30, 2005
    
    
    Increase (decrease)
    
    
    June 30, 2006
    
    
    June 30, 2005(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    17,810
    
    
    $
    15,940
    
    
    $
    1,870
    
    
    
    11.7
    %
    
    
    19.5
    %
    
    
    20.1
    %Food and beverage
    
    
    13,487
    
    
    
    12,011
    
    
    
    1,476
    
    
    
    12.3
    %
    
    
    14.8
    %
    
    
    15.2
    %Other
    
    
    2,012
    
    
    
    1,977
    
    
    
    35
    
    
    
    1.8
    %
    
    
    2.2
    %
    
    
    2.5
    %Total direct operating expenses
    
    $
    33,309
    
    
    $
    29,928
    
    
    $
    3,381
    
    
    
    11.3
    %
    
    
    36.5
    %
    
    
    37.8
    %Direct
operating margin (by revenue source):Rooms
    
    $
    51,116
    
    
    $
    43,296
    
    
    $
    7,820
    
    
    
    18.1
    %Food and beverage
    
    
    6,149
    
    
    
    5,424
    
    
    
    725
    
    
    
    13.4
    %Other
    
    
    578
    
    
    
    584
    
    
    
    (6
    )
    
    
    (1.0
    )%Total direct operating margin
    
    $
    57,843
    
    
    $
    49,304
    
    
    $
    8,539
    
    
    
    17.3
    %Direct
operating margin % (by revenue source):Rooms
    
    
    74.2
    %
    
    
    73.1
    %Food and beverage
    
    
    31.3
    %
    
    
    31.1
    %Other
    
    
    22.3
    %
    
    
    22.8
    %Total direct operating margin
    
    
    63.5
    %
    
    
    62.2
    %
   
    
    Higher fee-based expenses, including reservations, travel agent and credit card
commissions, due to the 11.6% growth in ADR.
    
    Higher payroll costs, up 3.2% on a POR basis.
    
    Increased linen costs associated with certain brand-mandated upgrades.
    Other operating expenses and operating income  Continuing Operations
 Three months ended
    
    
    
    
    
    
    
    
    
    
    % of total revenuesJune 30, 2006
    
    
    June 30, 2005
    
    
    Increase (decrease)
    
    
    June 30, 2006
    
    

June 30, 2005(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    5,079
    
    
    $
    4,880
    
    
    $
    199
    
    
    
    4.1
    %
    
    
    5.6
    %
    
    
    6.2
    %Advertising and promotion
    
    
    4,010
    
    
    
    3,788
    
    
    
    222
    
    
    
    5.9
    %
    
    
    4.4
    %
    
    
    4.8
    %Franchise fees
    
    
    6,989
    
    
    
    5,398
    
    
    
    1,591
    
    
    
    29.5
    %
    
    
    7.7
    %
    
    
    6.8
    %Repairs and maintenance
    
    
    4,702
    
    
    
    4,301
    
    
    
    401
    
    
    
    9.3
    %
    
    
    5.2
    %
    
    
    5.4
    %Utilities
    
    
    4,545
    
    
    
    4,007
    
    
    
    538
    
    
    
    13.4
    %
    
    
    5.0
    %
    
    
    5.1
    %Other expenses
    
    
    56
    
    
    
    86
    
    
    
    (30
    )
    
    
    (34.9
    )%
    
    
    0.1
    %
    
    
    0.1
    %Total other hotel operating expenses
    
    
    25,381
    
    
    
    22,460
    
    
    
    2,921
    
    
    
    13.0
    %
    
    
    27.8
    %
    
    
    28.3
    %Property and other taxes, insurance
and leases
    
    
    5,876
    
    
    
    5,336
    
    
    
    540
    
    
    
    10.1
    %
    
    
    6.4
    %
    
    
    6.7
    %Corporate and other
    
    
    5,524
    
    
    
    5,068
    
    
    
    456
    
    
    
    9.0
    %
    
    
    6.1
    %
    
    
    6.4
    %Casualty (gains) losses, net
    
    
    (248
    )
    
    
    28
    
    
    
    (276
    )
    
    
    (985.7
    )%
    
    
    (0.3
    )%
    
    
    n/mDepreciation and amortization
    
    
    9,270
    
    
    
    6,339
    
    
    
    2,931
    
    
    
    46.2
    %
    
    
    10.2
    %
    
    
    8.0
    %Impairment of long-lived assets
    
    
    74
    
    
    
    955
    
    
    
    (881
    )
    
    
    (92.3
    )%
    
    
    0.1
    %
    
    
    1.2
    %Total other operating expenses
    
    $
    45,877
    
    
    $
    40,186
    
    
    $
    5,691
    
    
    
    14.2
    %
    
    
    50.3
    %
    
    
    50.7
    %Total operating expenses
    
    $
    79,186
    
    
    $
    70,114
    
    
    $
    9,072
    
    
    
    12.9
    %
    
    
    86.9
    %
    
    
    88.5
    %Operating income
    
    $
    11,966
    
    
    $
    9,118
    
    
    $
    2,848
    
    
    
    31.2
    %
    
    
    13.1
    %
    
    
    11.5
    %
 28




---



##### Table of Contents




    
    Franchise fees increased $1.6 million, or 29.5%. As a percentage of revenues,
franchise fees increased 90 basis points from 6.8% to 7.7%. $0.6 million of the increase
was due to liquidated damages payable to the franchisor in conjunction with the closure
and pending sale of our Jekyll Island property. The remaining increase was driven by
higher revenues.
    
    Utilities increased $0.5 million, or 13.4% (8.9% on a cost POR basis), primarily as a
result of significantly higher utility rates and the reopening of our Crowne Plaza hotels
in West Palm Beach and Melbourne, FL. As a percentage of total revenues, utilities
decreased 10 basis points.
    
    Repairs and maintenance expenses increased $0.4 million or 9.3%, driven by higher
automobile fuel costs associated with our fleet of vans and several large repair projects. Repairs and maintenance expenses
decreased 20 basis points from 5.4% to 5.2% as a percentage of revenues.
    
    Advertising and promotion costs increased $0.2 million or 5.9%, due primarily to the
addition of sales personnel and sales programs to promote our newly renovated and reopened
properties. As a percentage of total revenues, advertising and promotion costs decreased
from 4.8% in 2005 to 4.4% in 2006, a decrease of 40 basis points.
    Non-operating income (expenses)  Continuing Operations
 Three months endedJune 30, 2006
    
    June 30, 2005
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Business interruption proceeds
    
    $
    1,152
    
    
    $
    1,729
    
    
    $
    (577
    )
    
    
    (33.4
    )%Interest income and other
    
    
    848
    
    
    
    54
    
    
    
    794
    
    
    
    n/mInterest expense
    
    
    (7,493
    )
    
    
    (6,433
    )
    
    
    1,060
    
    
    
    16.5
    %
  The analysis below compares the results of operations for the six months ended June 30, 2006 and
June 30, 2005.
 Revenues  Continuing Operations
 29




---



##### Table of Contents



Six months endedJune 30, 2006
    
    
    June 30, 2005
    
    
    Increase (decrease)(unaudited in thousands)Revenues:Rooms
    
    $
    128,499
    
    
    $
    109,458
    
    
    $
    19,041
    
    
    
    17.4
    %Food and beverage
    
    
    35,022
    
    
    
    31,104
    
    
    
    3,918
    
    
    
    12.6
    %Other
    
    
    4,923
    
    
    
    4,950
    
    
    
    (27
    )
    
    
    (0.5
    )%Total revenues
    
    $
    168,444
    
    
    $
    145,512
    
    
    $
    22,932
    
    
    
    15.8
    %Occupancy
    
    
    64.5
    %
    
    
    63.3
    %
    
    
    
    
    
    
    1.9
    %ADR
    
    $
    94.11
    
    
    $
    83.34
    
    
    $
    10.77
    
    
    
    12.9
    %RevPAR
    
    $
    60.75
    
    
    $
    52.73
    
    
    $
    8.02
    
    
    
    15.2
    %
    30




---



##### Table of Contents



Hotel
    
    Room
    
    
    
    Six Months EndedCount
    
    Count
    
    
    
    June 30, 2006
    
    June 30, 2005
    
    Change/% Change66
    
    
    
    11,958
    
    
    All Continuing OperationsOccupancy
    
    
    64.5
    %
    
    
    63.3
    %
    
    
    
    
    
    
    1.9
    %ADR
    
    $
    94.11
    
    
    $
    83.34
    
    
    $
    10.77
    
    
    
    12.9
    %RevPAR
    
    $
    60.75
    
    
    $
    52.73
    
    
    $
    8.02
    
    
    
    15.2
    %62
    
    
    
    11,076
    
    
    Continuing Operations less two hotels closed in 2005 due to
hurricane damage, one hotel closed in 2006 due to fire damage
and one hotel closed in 2006 for demolitionOccupancy
    
    
    64.9
    %
    
    
    63.6
    %
    
    
    
    
    
    
    2.0
    %ADR
    
    $
    92.67
    
    
    $
    83.83
    
    
    $
    8.84
    
    
    
    10.5
    %RevPAR
    
    $
    60.19
    
    
    $
    53.35
    
    
    $
    6.84
    
    
    
    12.8
    %RevPAR Index
    
    
    97.4
    %
    
    
    94.0
    %
    
    
    
    
    
    
    3.6
    %61
    
    
    
    10,832
    
    
    Continuing Operations less Radisson New Orleans Airport hotel,
two hotels closed in 2005 due to hurricane damage, one hotel
closed in 2006 due to fire damage and one hotel closed in 2006 for
demolitionOccupancy
    
    
    64.7
    %
    
    
    64.1
    %
    
    
    
    
    
    
    0.9
    %ADR
    
    $
    91.51
    
    
    $
    84.17
    
    
    $
    7.34
    
    
    
    8.7
    %RevPAR
    
    $
    59.20
    
    
    $
    53.99
    
    
    $
    5.21
    
    
    
    9.6
    %RevPAR Index
    
    
    96.7
    %
    
    
    95.1
    %
    
    
    
    
    
    
    1.7
    %51
    
    
    
    8,725
    
    
    Continuing Operations less two hotels closed in 2005 due to
hurricane damage, one hotel closed in 2006 due to fire damage, one
hotel closed in 2006 for demolition and hotels under renovation in
both the first quarter 2005 and/or 2006Occupancy
    
    
    65.0
    %
    
    
    65.2
    %
    
    
    
    
    
    
    -0.3
    %ADR
    
    $
    90.31
    
    
    $
    83.73
    
    
    $
    6.58
    
    
    
    7.9
    %RevPAR
    
    $
    58.71
    
    
    $
    54.62
    
    
    $
    4.09
    
    
    
    7.5
    %RevPAR Index
    
    
    98.6
    %
    
    
    99.0
    %
    
    
    
    
    
    
    -0.4
    %25
    
    
    
    4,093
    
    
    Hotels completing major renovations in 2004 and 2005Occupancy
    
    
    69.7
    %
    
    
    66.4
    %
    
    
    
    
    
    
    5.0
    %ADR
    
    $
    100.23
    
    
    $
    85.15
    
    
    $
    15.08
    
    
    
    17.7
    %RevPAR
    
    $
    69.84
    
    
    $
    56.57
    
    
    $
    13.27
    
    
    
    23.5
    %RevPAR Index
    
    
    101.6
    %
    
    
    91.1
    %
    
    
    
    
    
    
    11.5
    %13
    
    
    
    1,515
    
    
    Marriott HotelsOccupancy
    
    
    74.1
    %
    
    
    73.4
    %
    
    
    
    
    
    
    1.0
    %ADR
    
    $
    101.98
    
    
    $
    92.81
    
    
    $
    9.17
    
    
    
    9.9
    %RevPAR
    
    $
    75.53
    
    
    $
    68.09
    
    
    $
    7.44
    
    
    
    10.9
    %RevPAR Index
    
    
    116.8
    %
    
    
    116.7
    %
    
    
    
    
    
    
    0.1
    %4
    
    
    
    777
    
    
    Hilton HotelsOccupancy
    
    
    64.9
    %
    
    
    66.2
    %
    
    
    
    
    
    
    -2.0
    %ADR
    
    $
    104.30
    
    
    $
    95.71
    
    
    $
    8.59
    
    
    
    9.0
    %RevPAR
    
    $
    67.65
    
    
    $
    63.34
    
    
    $
    4.31
    
    
    
    6.8
    %RevPAR Index
    
    
    97.9
    %
    
    
    96.1
    %
    
    
    
    
    
    
    1.9
    %38
    
    
    
    7,458
    
    
    IHG Hotels less two hotels closed in 2005 due to hurricane
damage, one hotel closed in 2006 due to fire damage and one hotel closed in
2006 for demolitionOccupancy
    
    
    64.5
    %
    
    
    64.0
    %
    
    
    
    
    
    
    0.8
    %ADR
    
    $
    90.21
    
    
    $
    82.86
    
    
    $
    7.35
    
    
    
    8.9
    %RevPAR
    
    $
    58.21
    
    
    $
    53.05
    
    
    $
    5.16
    
    
    
    9.7
    %RevPAR Index
    
    
    94.7
    %
    
    
    92.2
    %
    
    
    
    
    
    
    2.7
    %7
    
    
    
    1,326
    
    
    Other Brands and Independent HotelsOccupancy
    
    
    56.9
    %
    
    
    48.8
    %
    
    
    
    
    
    
    16.6
    %ADR
    
    $
    86.68
    
    
    $
    66.16
    
    
    $
    20.52
    
    
    
    31.0
    %RevPAR
    
    $
    49.35
    
    
    $
    32.31
    
    
    $
    17.04
    
    
    
    52.7
    %RevPAR Index
    
    
    89.2
    %
    
    
    71.5
    %
    
    
    
    
    
    
    24.8
    %
 31




---



##### Table of Contents



Direct operating expenses  Continuing Operations
 Six months ended
    
    
    
    
    
    
    
    
    
    
    % of total revenuesJune 30, 2006
    
    
    June 30, 2005
    
    
    Increase (decrease)
    
    
    June 30, 2006
    
    
    June 30, 2005(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    33,803
    
    
    $
    29,971
    
    
    $
    3,832
    
    
    
    12.8
    %
    
    
    20.1
    %
    
    
    20.6
    %Food and beverage
    
    
    25,203
    
    
    
    22,042
    
    
    
    3,161
    
    
    
    14.3
    %
    
    
    15.0
    %
    
    
    15.1
    %Other
    
    
    3,875
    
    
    
    3,789
    
    
    
    86
    
    
    
    2.3
    %
    
    
    2.3
    %
    
    
    2.6
    %Total direct operating expenses
    
    $
    62,881
    
    
    $
    55,802
    
    
    $
    7,079
    
    
    
    12.7
    %
    
    
    37.3
    %
    
    
    38.3
    %Direct
operating margin (by revenue source):Rooms
    
    $
    94,696
    
    
    $
    79,487
    
    
    $
    15,209
    
    
    
    19.1
    %Food and beverage
    
    
    9,819
    
    
    
    9,062
    
    
    
    757
    
    
    
    8.4
    %Other
    
    
    1,048
    
    
    
    1,161
    
    
    
    (113
    )
    
    
    (9.7
    )%Total direct operating margin
    
    $
    105,563
    
    
    $
    89,710
    
    
    $
    15,853
    
    
    
    17.7
    %Direct
operating margin % (by revenue source):Rooms
    
    
    73.7
    %
    
    
    72.6
    %Food and beverage
    
    
    28.0
    %
    
    
    29.1
    %Other
    
    
    21.3
    %
    
    
    23.5
    %Total direct operating margin %
    
    
    62.7
    %
    
    
    61.7
    %
     Other operating expenses and operating income  Continuing Operations
 Six months ended
    
    
    
    
    
    
    
    
    
    
    % of total revenuesJune 30, 2006
    
    
    June 30, 2005
    
    
    Increase (decrease)
    
    
    June 30, 2006
    
    
    June 30, 2005(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    10,226
    
    
    $
    10,033
    
    
    $
    193
    
    
    
    1.9
    %
    
    
    6.1
    %
    
    
    6.9
    %Advertising and promotion
    
    
    8,359
    
    
    
    7,470
    
    
    
    889
    
    
    
    11.9
    %
    
    
    5.0
    %
    
    
    5.1
    %Franchise fees
    
    
    12,380
    
    
    
    9,955
    
    
    
    2,425
    
    
    
    24.4
    %
    
    
    7.3
    %
    
    
    6.8
    %Repairs and maintenance
    
    
    9,037
    
    
    
    8,104
    
    
    
    933
    
    
    
    11.5
    %
    
    
    5.4
    %
    
    
    5.6
    %Utilities
    
    
    9,733
    
    
    
    8,540
    
    
    
    1,193
    
    
    
    14.0
    %
    
    
    5.8
    %
    
    
    5.9
    %Other expenses
    
    
    180
    
    
    
    177
    
    
    
    3
    
    
    
    1.7
    %
    
    
    0.1
    %
    
    
    0.1
    %Total other hotel operating expenses
    
    
    49,915
    
    
    
    44,279
    
    
    
    5,636
    
    
    
    12.7
    %
    
    
    29.6
    %
    
    
    30.4
    %Property and other taxes, insurance
and leases
    
    
    11,379
    
    
    
    10,570
    
    
    
    809
    
    
    
    7.7
    %
    
    
    6.8
    %
    
    
    7.3
    %Corporate and other
    
    
    10,407
    
    
    
    9,477
    
    
    
    930
    
    
    
    9.8
    %
    
    
    6.2
    %
    
    
    6.5
    %Casualty (gains) losses, net
    
    
    (60
    )
    
    
    132
    
    
    
    (192
    )
    
    
    (145.5
    )%
    
    
    n/m
    
    
    
    0.1
    %Depreciation and amortization
    
    
    17,898
    
    
    
    12,434
    
    
    
    5,464
    
    
    
    43.9
    %
    
    
    10.6
    %
    
    
    8.5
    %Impairment of long-lived assets
    
    
    278
    
    
    
    1,052
    
    
    
    (774
    )
    
    
    (73.6
    )%
    
    
    0.2
    %
    
    
    0.7
    %Total other operating expenses
    
    $
    89,817
    
    
    $
    77,944
    
    
    $
    11,873
    
    
    
    15.2
    %
    
    
    53.3
    %
    
    
    53.6
    %Total operating expenses
    
    $
    152,698
    
    
    $
    133,746
    
    
    $
    18,952
    
    
    
    14.2
    %
    
    
    90.7
    %
    
    
    91.9
    %Operating income
    
    $
    15,746
    
    
    $
    11,766
    
    
    $
    3,980
    
    
    
    33.8
    %
    
    
    9.3
    %
    
    
    8.1
    %
 32




---



##### Table of Contents




    
    Franchise fees were up $2.4 million, or 24.4%, due to the increased room revenue, as
well as $0.6 million in liquidated damages payable to the franchisor as a result of the
closure and pending sale of our Jekyll Island, GA property. As a percentage of total
revenues, franchise fees increased 50 basis points from 6.8% in 2005 to 7.3% in 2006.
    
    Utilities increased $1.2 million, or 14.0%, primarily as a result of significantly
higher utility rates and the reopening of our Crowne Plaza Hotels in Melbourne and West
Palm Beach, FL. Utilities decreased 10 basis points as a percentage of total revenues
compared to 2005.
    
    Advertising and promotion costs increased $0.9 million, or 11.9%, due in large part to
the reopening of two of our two hotels in Florida. The remaining increase is a result of
additional sales personnel and sales programs to promote our other newly renovated
properties. Advertising and promotion costs decreased 10 basis points as a percentage of
total revenues from 5.1% in 2005 to 5.0% in 2006.
    
    Repairs and maintenance expenses increased $0.9 million, or 11.5%, primarily because of
several large repair projects, as well as higher automobile
fuel costs associated with our fleet of vans. As a
percentage of total revenues, repairs and maintenance costs decreased 20 basis points from
5.6% in 2005 to 5.4% in 2006.
    Non-operating income (expenses)  Continuing Operations
 Six months endedJune 30, 2006
    
    June 30, 2005
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Business interruption proceeds
    
    $
    1,152
    
    
    $
    1,729
    
    
    $
    (577
    )
    
    
    (33.4
    )%Interest income and other
    
    
    1,157
    
    
    
    225
    
    
    
    932
    
    
    
    n/mInterest expense
    
    
    (15,051
    )
    
    
    (12,887
    )
    
    
    2,164
    
    
    
    16.8
    %
   33




---



##### Table of Contents



Results of Operations  Discontinued Operations
    a)
    
    $0.7 million on the University Plaza Bloomington, IN hotel, which was classified as
held for sale during the quarter, to reduce the carrying value to estimated selling price
less costs to sell; andb)
    
    $36,000 related to several other held-for-sale properties primarily to reduce the
carrying value to estimated selling price less costs to sell and to record the final
disposition of certain properties.
  a)
    
    $3.9 million on the Holiday Inn Manhattan, KS hotel to record the loss on disposal of
fixed assets;b)
    
    $2.2 million on the Holiday Inn Lawrence, KS hotel to record the loss on disposal of
fixed assets;c)
    
    $0.5 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;d)
    
    $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;e)
    
    $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;f)
    
    $0.1 million on the Fairfield 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;g)
    
    $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; andh)
    
    $36,000 related to various other held-for-sale properties primarily to reduce the
carrying value to estimated selling price less costs to sell and to record the final
disposition of certain properties.
  a)
    
    an additional $0.6 million on the Holiday Inn Rolling Meadows, IL hotel to reflect the
lowered selling price of the hotel; andb)
    
    an additional $1.3 million on the Holiday Inn St. Louis North, MO hotel to reflect the
reduced selling price on this hotel.
  a)
    
    $1.6 million on the Holiday Inn Rolling Meadows, IL hotel to reflect the reduced
selling price of the hotel;b)
    
    $1.3 million on the Holiday Inn St. Louis North, MO hotel to reflect the reduced
selling price of this hotel;
 34




---



##### Table of Contents



c)
    
    $1.6 million on the Holiday Inn Lawrence, KS hotel due to a reduced fair value
appraisal;d)
    
    $0.3 million on the Holiday Inn Express Gadsden, AL hotel to reflect the estimated
selling costs of the sale as this hotel was identified for sale in January 2005 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;e)
    
    $0.4 million on the Mt. Laurel, NJ land parcel to reflect the lowered estimated selling
price of the land;f)
    
    $0.3 million on the Holiday Inn Morgantown, WV hotel to adjust for the further
reduction in the estimated selling price of this hotel; andg)
    
    $ (0.1) million recovery on the Holiday Inn Austin, TX hotel related to insurance
premium refunds.
 Income Taxes
    EBITDA
   Three months ended
    
    
    Six months endedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005(Unaudited in thousands)Continuing operations:Income from continuing operations
    
    $
    3,792
    
    
    $
    4,281
    
    
    $
    1,764
    
    
    $
    723Depreciation and amortization
    
    
    9,270
    
    
    
    6,339
    
    
    
    17,898
    
    
    
    12,434Interest income
    
    
    (848
    )
    
    
    (205
    )
    
    
    (1,157
    )
    
    
    (425
    )Interest expense
    
    
    7,493
    
    
    
    6,433
    
    
    
    15,051
    
    
    
    12,887Provision for income taxes  continuing operations
    
    
    2,545
    
    
    
    67
    
    
    
    1,100
    
    
    
    135EBITDA from continuing operations
    
    $
    22,252
    
    
    $
    16,915
    
    
    $
    34,656
    
    
    $
    25,754
 35




---



##### Table of Contents



Three months ended
    
    Six months endedJune 30, 2006
    
    June 30, 2005
    
    June 30, 2006
    
    June 30, 2005(Unaudited in thousands)Post-emergence Chapter 11 expenses, included in corporate
and other on consolidated statement of operations
    
    $
    
    
    
    $
    52
    
    
    $
    3
    
    
    $
    162Impairment of long-lived assets
    
    
    74
    
    
    
    955
    
    
    
    278
    
    
    
    1,052Casualty (gains) losses
    
    
    (248
    )
    
    
    28
    
    
    
    (60
    )
    
    
    132Write-off of receivable from non-consolidated hotel
    
    
    
    
    
    
    946
    
    
    
    
    
    
    
    946Write-off of investment in subsidiary for non-consolidated hotel
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    170
 36




---



##### Table of Contents



Additional Financial Information Regarding Quarterly Results of Our Continuing Operations
  Three Months Ended06/30/06
    
    
    3/31/06
    
    
    12/31/05
    
    
    9/30/05
    
    
    6/30/05
    
    
    3/31/05
    
    
    12/31/04
    
    
    9/30/04($ in thousands)Revenues:Rooms
    
    $
    68,926
    
    
    $
    59,573
    
    
    $
    52,785
    
    
    $
    60,775
    
    
    $
    59,236
    
    
    $
    50,222
    
    
    $
    45,875
    
    
    $
    57,000Food and beverage
    
    $
    19,636
    
    
    $
    15,386
    
    
    $
    16,077
    
    
    $
    15,409
    
    
    $
    17,435
    
    
    $
    13,669
    
    
    $
    17,255
    
    
    $
    15,099Other
    
    $
    2,590
    
    
    $
    2,333
    
    
    $
    2,207
    
    
    $
    2,443
    
    
    $
    2,561
    
    
    $
    2,389
    
    
    $
    2,156
    
    
    $
    2,556Total revenues
    
    
    91,152
    
    
    
    77,292
    
    
    
    71,069
    
    
    
    78,627
    
    
    
    79,232
    
    
    
    66,280
    
    
    
    65,286
    
    
    
    74,655Operating expenses:Direct:Rooms
    
    
    17,810
    
    
    
    15,993
    
    
    
    15,122
    
    
    
    16,197
    
    
    
    15,940
    
    
    
    14,031
    
    
    
    14,064
    
    
    
    15,994Food and beverage
    
    
    13,487
    
    
    
    11,716
    
    
    
    11,534
    
    
    
    11,092
    
    
    
    12,011
    
    
    
    10,031
    
    
    
    12,521
    
    
    
    11,228Other
    
    
    2,012
    
    
    
    1,863
    
    
    
    1,816
    
    
    
    1,868
    
    
    
    1,977
    
    
    
    1,812
    
    
    
    1,703
    
    
    
    1,870Total direct operating expenses
    
    
    33,309
    
    
    
    29,572
    
    
    
    28,472
    
    
    
    29,157
    
    
    
    29,928
    
    
    
    25,874
    
    
    
    28,288
    
    
    
    29,09257,843
    
    
    
    47,720
    
    
    
    42,597
    
    
    
    49,470
    
    
    
    49,304
    
    
    
    40,406
    
    
    
    36,998
    
    
    
    45,563Other operating expenses:Other hotel operating costs
    
    
    25,381
    
    
    
    24,534
    
    
    
    23,255
    
    
    
    24,352
    
    
    
    22,460
    
    
    
    21,819
    
    
    
    20,645
    
    
    
    22,256Property and other taxes, insurance and leases
    
    
    5,876
    
    
    
    5,503
    
    
    
    4,662
    
    
    
    5,457
    
    
    
    5,336
    
    
    
    5,234
    
    
    
    4,605
    
    
    
    5,015Corporate and other
    
    
    5,524
    
    
    
    4,883
    
    
    
    4,154
    
    
    
    5,545
    
    
    
    5,068
    
    
    
    4,409
    
    
    
    3,154
    
    
    
    4,090Casualty gains and losses
    
    
    (248
    )
    
    
    188
    
    
    
    (31,251
    )
    
    
    190
    
    
    
    28
    
    
    
    104
    
    
    
    295
    
    
    
    2,019Depreciation and amortization
    
    
    9,270
    
    
    
    8,628
    
    
    
    8,714
    
    
    
    6,634
    
    
    
    6,339
    
    
    
    6,095
    
    
    
    5,979
    
    
    
    6,380Impairment of long-lived assets
    
    
    74
    
    
    
    204
    
    
    
    1,657
    
    
    
    613
    
    
    
    955
    
    
    
    97
    
    
    
    4,208
    
    
    
    Total other operating expenses
    
    
    45,877
    
    
    
    43,940
    
    
    
    11,191
    
    
    
    42,791
    
    
    
    40,186
    
    
    
    37,758
    
    
    
    38,886
    
    
    
    39,76011,966
    
    
    
    3,780
    
    
    
    31,406
    
    
    
    6,679
    
    
    
    9,118
    
    
    
    2,648
    
    
    
    (1,888
    )
    
    
    5,803Other income (expenses):Business interruption insurance proceeds
    
    
    1,152
    
    
    
    
    
    
    
    1,772
    
    
    
    6,094
    
    
    
    1,729
    
    
    
    
    
    
    
    
    
    
    
    Interest income and other
    
    
    848
    
    
    
    309
    
    
    
    272
    
    
    
    341
    
    
    
    54
    
    
    
    171
    
    
    
    360
    
    
    
    212Interest expense and other financing costs:Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (866
    )Other interest expense
    
    
    (7,493
    )
    
    
    (7,558
    )
    
    
    (6,683
    )
    
    
    (6,422
    )
    
    
    (6,433
    )
    
    
    (6,454
    )
    
    
    (6,869
    )
    
    
    (6,727
    )Loss on preferred stock redemption
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,471
    )Income (loss) before income taxes and minority interest
    
    
    6,473
    
    
    
    (3,469
    )
    
    
    26,767
    
    
    
    6,692
    
    
    
    4,468
    
    
    
    (3,635
    )
    
    
    (8,397
    )
    
    
    (6,049
    )Minority interests
    
    
    (136
    )
    
    
    (4
    )
    
    
    (8,486
    )
    
    
    (1,127
    )
    
    
    (120
    )
    
    
    145
    
    
    
    406
    
    
    
    503(Provision) benefit for income taxes  continuing operations
    
    
    (2,545
    )
    
    
    1,445
    
    
    
    (9,527
    )
    
    
    (13
    )
    
    
    (67
    )
    
    
    (68
    )
    
    
    259
    
    
    
    (337
    )Income (loss) from continuing operations
    
    
    3,792
    
    
    
    (2,028
    )
    
    
    8,754
    
    
    
    5,552
    
    
    
    4,281
    
    
    
    (3,558
    )
    
    
    (7,732
    )
    
    
    (5,883
    )Discontinued operations:(Loss) income from discontinued operations before income
taxes
    
    
    325
    
    
    
    5,831
    
    
    
    (2,409
    )
    
    
    4,157
    
    
    
    (2,407
    )
    
    
    (3,526
    )
    
    
    (6,032
    )
    
    
    2,146Income tax benefit (provision)
    
    
    (116
    )
    
    
    (2,429
    )
    
    
    1,459
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Loss) income from discontinued operations
    
    
    209
    
    
    
    3,402
    
    
    
    (950
    )
    
    
    4,157
    
    
    
    (2,407
    )
    
    
    (3,526
    )
    
    
    (6,032
    )
    
    
    2,146Net income (loss) attributable to common stock
    
    $
    4,001
    
    
    $
    1,374
    
    
    $
    7,804
    
    
    $
    9,709
    
    
    $
    1,874
    
    
    $
    (7,084
    )
    
    $
    (13,764
    )
    
    $
    (3,737
    )
 EBITDA Reconciliation of Continuing Operations
  Three Months Ended06/30/06
    
    
    3/31/06
    
    
    12/31/05
    
    
    9/30/05
    
    
    6/30/05
    
    
    3/31/05
    
    
    12/31/04
    
    
    9/30/04($ in thousands)Continuing operations:Income (loss) from continuing operations
    
    $
    3,792
    
    
    $
    (2,028
    )
    
    $
    8,754
    
    
    $
    5,552
    
    
    $
    4,281
    
    
    $
    (3,558
    )
    
    $
    (7,732
    )
    
    $
    (5,883
    )Depreciation and amortization
    
    
    9,270
    
    
    
    8,628
    
    
    
    8,714
    
    
    
    6,634
    
    
    
    6,339
    
    
    
    6,095
    
    
    
    5,979
    
    
    
    6,380Interest income
    
    
    (848
    )
    
    
    (309
    )
    
    
    (261
    )
    
    
    (351
    )
    
    
    (205
    )
    
    
    (220
    )
    
    
    (346
    )
    
    
    (176
    )Interest expense
    
    
    7,493
    
    
    
    7,558
    
    
    
    6,683
    
    
    
    6,422
    
    
    
    6,433
    
    
    
    6,454
    
    
    
    6,869
    
    
    
    6,727Provision (benefit) for income taxes 
continuing operations
    
    
    2,545
    
    
    
    (1,445
    )
    
    
    9,527
    
    
    
    13
    
    
    
    67
    
    
    
    68
    
    
    
    (259
    )
    
    
    337Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    866Loss on preferred stock redemption
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,471EBITDA from continuing operations
    
    $
    22,252
    
    
    $
    12,404
    
    
    $
    33,417
    
    
    $
    18,270
    
    
    $
    16,915
    
    
    $
    8,839
    
    
    $
    4,511
    
    
    $
    12,722
  37




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##### Table of Contents



Three Months Ended06/30/06
    
    3/31/06
    
    12/31/05
    
    9/30/05
    
    6/30/05
    
    3/31/05
    
    12/31/04
    
    9/30/04($ in thousands)Post-emergence Chapter 11 expenses, included in corporate
and other on consolidated statement of operations
    
    
    
    
    
    
    3
    
    
    
    (2
    )
    
    
    13
    
    
    
    52
    
    
    
    110
    
    
    
    61
    
    
    
    67Impairment of long-lived assets
    
    
    74
    
    
    
    204
    
    
    
    1,657
    
    
    
    613
    
    
    
    955
    
    
    
    97
    
    
    
    4,208
    
    
    
    Casualty (gains) losses
    
    
    (248
    )
    
    
    188
    
    
    
    (31,251
    )
    
    
    190
    
    
    
    28
    
    
    
    104
    
    
    
    295
    
    
    
    2,019Write-off (recovery) of receivable from non-consolidated
hotel
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    (200
    )
    
    
    946
    
    
    
    
    
    
    
    
    
    
    
    Adjustment to backruptcy claims reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    Write-off of investment in subsidiary for
non-consolidated hotel
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    
 Hotel data by market segment and region
 Hotel data by market segment
  
    
    The Crowne Plaza Melbourne, FL hotel since it was closed for hurricane
renovations in the three and six months ended June 30, 2005.
    
    The Crowne Plaza West Palm Beach, FL hotel since it was closed for hurricane
renovations in the three and six months ended June 30, 2005.
    
    The Holiday Inn Marietta, GA hotel since it was closed on January 15, 2006 due to fire damage; and
    
    The Holiday Inn Jekyll Island, GA hotel since it closed on June 1, 2006 for demolition.
 38




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##### Table of Contents



Combined Continuing and Discontinued Operations  69 hotels (excludes 4 hotels)
 Three Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2005
    
    June 30, 2006
    
    June 30, 2005Upper UpscaleNumber of properties
    
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4Number of rooms
    
    
    
    825
    
    
    
    825
    
    
    
    825
    
    
    
    825Occupancy
    
    
    
    68.3
    %
    
    
    72.4
    %
    
    
    67.8
    %
    
    
    69.7
    %Average daily rate
    
    
    $
    114.24
    
    
    $
    100.82
    
    
    $
    113.23
    
    
    $
    100.55RevPAR
    
    
    $
    78.04
    
    
    $
    73.02
    
    
    $
    76.82
    
    
    $
    70.11UpscaleNumber of properties
    
    
    
    20
    
    
    
    18
    
    
    
    20
    
    
    
    18Number of rooms
    
    
    
    3,660
    
    
    
    3,185
    
    
    
    3,660
    
    
    
    3,185Occupancy
    
    
    
    71.7
    %
    
    
    71.5
    %
    
    
    70.8
    %
    
    
    69.0
    %Average daily rate
    
    
    $
    100.25
    
    
    $
    88.85
    
    
    $
    101.89
    
    
    $
    89.64RevPAR
    
    
    $
    71.90
    
    
    $
    63.49
    
    
    $
    72.11
    
    
    $
    61.84Midscale with Food & BeverageNumber of properties
    
    
    
    35
    
    
    
    36
    
    
    
    35
    
    
    
    36Number of rooms
    
    
    
    6,612
    
    
    
    6,843
    
    
    
    6,612
    
    
    
    6,843Occupancy
    
    
    
    66.9
    %
    
    
    64.7
    %
    
    
    61.2
    %
    
    
    60.3
    %Average daily rate
    
    
    $
    86.36
    
    
    $
    80.79
    
    
    $
    83.89
    
    
    $
    77.92RevPAR
    
    
    $
    57.76
    
    
    $
    52.24
    
    
    $
    51.36
    
    
    $
    46.96Midscale without Food & BeverageNumber of properties
    
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    
    821
    
    
    
    821
    
    
    
    821
    
    
    
    821Occupancy
    
    
    
    65.7
    %
    
    
    70.4
    %
    
    
    62.7
    %
    
    
    68.6
    %Average daily rate
    
    
    $
    79.53
    
    
    $
    68.72
    
    
    $
    79.02
    
    
    $
    67.62RevPAR
    
    
    $
    52.22
    
    
    $
    48.40
    
    
    $
    49.55
    
    
    $
    46.41EconomyNumber of properties
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Number of rooms
    
    
    
    126
    
    
    
    126
    
    
    
    126
    
    
    
    126Occupancy
    
    
    
    57.5
    %
    
    
    54.5
    %
    
    
    49.5
    %
    
    
    60.3
    %Average daily rate
    
    
    $
    59.67
    
    
    $
    61.33
    
    
    $
    59.17
    
    
    $
    66.37RevPAR
    
    
    $
    34.30
    
    
    $
    33.43
    
    
    $
    29.29
    
    
    $
    40.04Independent HotelsNumber of properties
    
    
    
    2
    
    
    
    3
    
    
    
    2
    
    
    
    3Number of rooms
    
    
    
    291
    
    
    
    535
    
    
    
    291
    
    
    
    535Occupancy
    
    
    
    37.3
    %
    
    
    46.3
    %
    
    
    34.8
    %
    
    
    38.1
    %Average daily rate
    
    
    $
    64.84
    
    
    $
    66.71
    
    
    $
    61.85
    
    
    $
    63.75RevPAR
    
    
    $
    24.20
    
    
    $
    30.89
    
    
    $
    21.54
    
    
    $
    24.29All HotelsNumber of properties
    
    
    
    69
    
    
    
    69
    
    
    
    69
    
    
    
    69Number of rooms
    
    
    
    12,335
    
    
    
    12,335
    
    
    
    12,335
    
    
    
    12,335Occupancy
    
    
    
    67.5
    %
    
    
    66.4
    %
    
    
    63.9
    %
    
    
    62.7
    %Average daily rate
    
    
    $
    91.67
    
    
    $
    83.05
    
    
    $
    91.11
    
    
    $
    81.69RevPAR
    
    
    $
    61.91
    
    
    $
    55.16
    
    
    $
    58.18
    
    
    $
    51.26
 39




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##### Table of Contents



Continuing Operations  62 hotels (excludes 4 hotels and held for sale hotels)
 Three Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2005
    
    June 30, 2006
    
    June 30, 2005Upper UpscaleNumber of properties
    
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4Number of rooms
    
    
    
    825
    
    
    
    825
    
    
    
    825
    
    
    
    825Occupancy
    
    
    
    68.3
    %
    
    
    72.4
    %
    
    
    67.8
    %
    
    
    69.7
    %Average daily rate
    
    
    $
    114.24
    
    
    $
    100.82
    
    
    $
    113.23
    
    
    $
    100.55RevPAR
    
    
    $
    78.04
    
    
    $
    73.02
    
    
    $
    76.82
    
    
    $
    70.11UpscaleNumber of properties
    
    
    
    19
    
    
    
    17
    
    
    
    17
    
    
    
    17Number of rooms
    
    
    
    3,385
    
    
    
    2,910
    
    
    
    2,910
    
    
    
    2,910Occupancy
    
    
    
    71.7
    %
    
    
    72.3
    %
    
    
    71.3
    %
    
    
    70.0
    %Average daily rate
    
    
    $
    102.33
    
    
    $
    90.05
    
    
    $
    103.81
    
    
    $
    91.03RevPAR
    
    
    $
    73.36
    
    
    $
    65.06
    
    
    $
    73.99
    
    
    $
    63.70Midscale with Food & BeverageNumber of properties
    
    
    
    32
    
    
    
    33
    
    
    
    33
    
    
    
    33Number of rooms
    
    
    
    6,039
    
    
    
    6,270
    
    
    
    6,270
    
    
    
    6,270Occupancy
    
    
    
    67.4
    %
    
    
    65.0
    %
    
    
    61.2
    %
    
    
    60.3
    %Average daily rate
    
    
    $
    87.26
    
    
    $
    83.14
    
    
    $
    84.48
    
    
    $
    80.13RevPAR
    
    
    $
    58.83
    
    
    $
    54.05
    
    
    $
    51.72
    
    
    $
    48.35Midscale without Food &
BeverageNumber of properties
    
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    5Number of rooms
    
    
    
    596
    
    
    
    596
    
    
    
    596
    
    
    
    596Occupancy
    
    
    
    68.8
    %
    
    
    73.9
    %
    
    
    67.3
    %
    
    
    72.2
    %Average daily rate
    
    
    $
    83.64
    
    
    $
    70.90
    
    
    $
    83.16
    
    
    $
    70.80RevPAR
    
    
    $
    57.54
    
    
    $
    52.36
    
    
    $
    55.98
    
    
    $
    51.12EconomyNumber of properties
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Number of rooms
    
    
    
    126
    
    
    
    126
    
    
    
    126
    
    
    
    126Occupancy
    
    
    
    57.5
    %
    
    
    54.5
    %
    
    
    56.5
    %
    
    
    60.3
    %Average daily rate
    
    
    $
    59.67
    
    
    $
    61.33
    
    
    $
    53.06
    
    
    $
    66.37RevPAR
    
    
    $
    34.30
    
    
    $
    33.43
    
    
    $
    29.98
    
    
    $
    40.04Independent HotelsNumber of properties
    
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    2Number of rooms
    
    
    
    105
    
    
    
    349
    
    
    
    349
    
    
    
    349Occupancy
    
    
    
    57.7
    %
    
    
    50.8
    %
    
    
    56.5
    %
    
    
    42.2
    %Average daily rate
    
    
    $
    53.43
    
    
    $
    63.73
    
    
    $
    53.06
    
    
    $
    61.06RevPAR
    
    
    $
    30.84
    
    
    $
    32.37
    
    
    $
    29.98
    
    
    $
    25.76All HotelsNumber of properties
    
    
    
    62
    
    
    
    62
    
    
    
    62
    
    
    
    62Number of rooms
    
    
    
    11,076
    
    
    
    11,076
    
    
    
    11,076
    
    
    
    11,076Occupancy
    
    
    
    68.7
    %
    
    
    67.4
    %
    
    
    64.9
    %
    
    
    63.6
    %Average daily rate
    
    
    $
    93.34
    
    
    $
    85.12
    
    
    $
    92.67
    
    
    $
    83.83RevPAR
    
    
    $
    64.09
    
    
    $
    57.35
    
    
    $
    60.19
    
    
    $
    53.35
  
    
    Upper Upscale: Hilton and Marriott;
    
    Upscale: Courtyard by Marriott, Crowne Plaza, Radisson, Residence Inn and SpringHill Suites by Marriott;
    
    Midscale with Food & Beverage: Clarion, DoubleTree, Holiday Inn, Holiday Inn Select, and Quality Inn;
    
    Midscale without Food & Beverage: Fairfield Inn by Marriott and Holiday Inn Express; and
    
    Economy: Park Inn
 40




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##### Table of Contents



Hotel data by region
  
    
    The Crowne Plaza Melbourne, FL hotel since it was closed for hurricane
renovations in the three and six months ended June 30, 2006
    
    The Crowne Plaza West Palm Beach, FL hotel since it was closed for hurricane
renovations in the first quarter three and six months ended June 30, 2006
    
    The Holiday Inn Marietta, GA hotel since it was closed on January 15, 2006 due to fire damage; and
    
    The Holiday Inn Jekyll Island, GA hotel since it closed on June 1, 2006 for demolition.
 Combined Continuing and Discontinued Operations  69 hotels (excludes 4 hotels)
 Three Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2005
    
    June 30, 2006
    
    June 30, 2005Northeast RegionNumber of properties
    
    
    
    26
    
    
    
    26
    
    
    
    26
    
    
    
    26Number of rooms
    
    
    
    4,768
    
    
    
    4,768
    
    
    
    4,768
    
    
    
    4,768Occupancy
    
    
    
    70.7
    %
    
    
    69.9
    %
    
    
    63.6
    %
    
    
    63.8
    %Average daily rate
    
    
    $
    98.16
    
    
    $
    91.06
    
    
    $
    95.66
    
    
    $
    88.61RevPAR
    
    
    $
    69.43
    
    
    $
    63.64
    
    
    $
    60.86
    
    
    $
    56.57Southeast RegionNumber of properties
    
    
    
    23
    
    
    
    23
    
    
    
    23
    
    
    
    23Number of rooms
    
    
    
    3,767
    
    
    
    3,767
    
    
    
    3,767
    
    
    
    3,767Occupancy
    
    
    
    65.1
    %
    
    
    63.4
    %
    
    
    62.5
    %
    
    
    60.0
    %Average daily rate
    
    
    $
    88.28
    
    
    $
    75.91
    
    
    $
    86.63
    
    
    $
    72.43RevPAR
    
    
    $
    57.50
    
    
    $
    48.16
    
    
    $
    54.14
    
    
    $
    43.46Midwest RegionNumber of properties
    
    
    
    13
    
    
    
    13
    
    
    
    13
    
    
    
    13Number of rooms
    
    
    
    2,484
    
    
    
    2,484
    
    
    
    2,484
    
    
    
    2,484Occupancy
    
    
    
    65.9
    %
    
    
    64.8
    %
    
    
    62.5
    %
    
    
    60.3
    %Average daily rate
    
    
    $
    81.59
    
    
    $
    76.85
    
    
    $
    81.70
    
    
    $
    76.89RevPAR
    
    
    $
    53.77
    
    
    $
    49.78
    
    
    $
    51.08
    
    
    $
    46.39West RegionNumber of properties
    
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316Occupancy
    
    
    
    65.9
    %
    
    
    65.4
    %
    
    
    71.2
    %
    
    
    71.2
    %Average daily rate
    
    
    $
    95.02
    
    
    $
    83.49
    
    
    $
    103.29
    
    
    $
    89.23RevPAR
    
    
    $
    62.67
    
    
    $
    54.61
    
    
    $
    73.52
    
    
    $
    63.54All HotelsNumber of properties
    
    
    
    69
    
    
    
    69
    
    
    
    69
    
    
    
    69Number of rooms
    
    
    
    12,335
    
    
    
    12,335
    
    
    
    12,335
    
    
    
    12,335Occupancy
    
    
    
    67.5
    %
    
    
    66.4
    %
    
    
    63.9
    %
    
    
    62.7
    %Average daily rate
    
    
    $
    91.67
    
    
    $
    83.05
    
    
    $
    91.11
    
    
    $
    81.69RevPAR
    
    
    $
    61.91
    
    
    $
    55.16
    
    
    $
    58.18
    
    
    $
    51.26
 41




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##### Table of Contents



Continuing Operations  62 hotels (excludes 4 hotels and held for sale hotels)
 Three Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2005
    
    June 30, 2006
    
    June 30, 2005Northeast RegionNumber of properties
    
    
    
    25
    
    
    
    25
    
    
    
    25
    
    
    
    25Number of rooms
    
    
    
    4,651
    
    
    
    4,651
    
    
    
    4,651
    
    
    
    4,651Occupancy
    
    
    
    71.2
    %
    
    
    70.1
    %
    
    
    64.1
    %
    
    
    64.1
    %Average daily rate
    
    
    $
    98.63
    
    
    $
    91.55
    
    
    $
    96.13
    
    
    $
    89.20RevPAR
    
    
    $
    70.20
    
    
    $
    64.22
    
    
    $
    61.64
    
    
    $
    57.17Southeast RegionNumber of properties
    
    
    
    19
    
    
    
    19
    
    
    
    19
    
    
    
    19Number of rooms
    
    
    
    3,086
    
    
    
    3,086
    
    
    
    3,086
    
    
    
    3,086Occupancy
    
    
    
    66.0
    %
    
    
    64.0
    %
    
    
    62.9
    %
    
    
    59.9
    %Average daily rate
    
    
    $
    91.33
    
    
    $
    80.60
    
    
    $
    89.07
    
    
    $
    76.63RevPAR
    
    
    $
    60.26
    
    
    $
    51.56
    
    
    $
    56.02
    
    
    $
    45.93Midwest RegionNumber of properties
    
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    11Number of rooms
    
    
    
    2,023
    
    
    
    2,023
    
    
    
    2,023
    
    
    
    2,023Occupancy
    
    
    
    68.7
    %
    
    
    67.5
    %
    
    
    65.9
    %
    
    
    63.3
    %Average daily rate
    
    
    $
    82.64
    
    
    $
    77.30
    
    
    $
    82.73
    
    
    $
    77.77RevPAR
    
    
    $
    56.81
    
    
    $
    52.17
    
    
    $
    54.52
    
    
    $
    49.24West RegionNumber of properties
    
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316Occupancy
    
    
    
    65.9
    %
    
    
    65.4
    %
    
    
    71.2
    %
    
    
    71.2
    %Average daily rate
    
    
    $
    95.02
    
    
    $
    83.49
    
    
    $
    103.29
    
    
    $
    89.23RevPAR
    
    
    $
    62.67
    
    
    $
    54.61
    
    
    $
    73.52
    
    
    $
    63.54All HotelsNumber of properties
    
    
    
    62
    
    
    
    62
    
    
    
    62
    
    
    
    62Number of rooms
    
    
    
    11,076
    
    
    
    11,076
    
    
    
    11,076
    
    
    
    11,076Occupancy
    
    
    
    68.7
    %
    
    
    67.4
    %
    
    
    64.9
    %
    
    
    63.6
    %Average daily rate
    
    
    $
    93.34
    
    
    $
    85.12
    
    
    $
    92.67
    
    
    $
    83.83RevPAR
    
    
    $
    64.09
    
    
    $
    57.35
    
    
    $
    60.19
    
    
    $
    53.35
  
    
    Northeast: Canada, Connecticut, Massachusetts, Maryland, New Hampshire, New York,
Ohio, Pennsylvania, Vermont, West Virginia;
    
    Southeast: Alabama, Florida, Georgia, Kentucky, Louisiana, North Carolina, South Carolina, Tennessee;
    
    Midwest: Arkansas, Iowa, Indiana, Michigan, Minnesota, Oklahoma, Texas; and
    
    West: Arizona, California, Colorado, New Mexico.
 Liquidity and Capital Resources
 Working Capital
  42




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Cash Flow
  Operating activities
  Investing activities
   43




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##### Table of Contents



Financing activities
   Debt and Contractual Obligations
  Off Balance Sheet Arrangements
  Market Risk
    Forward-looking Statements
  
    
    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 Iraq, the Middle East and elsewhere, and their impact on domestic and
international travel;
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
    
    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 high energy costs, natural gas and gasoline
prices; and
    
    The risks identified in our form 10-K for the year ended December 31, 2005 under
Risks Related to Our Business and Risks Relating to Our Common Stock.
  Inflation
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Internal Control 
Integrated Framework
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46




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits
  47




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SIGNATURES
  LODGIAN, INC.By:
    
    /s/ EDWARD J. ROHLINGEdward J. RohlingPresident andDate: August 9, 2006
    
    
    
    Chief Executive OfficerBy:
    
    /s/ JAMES A. MACLENNANJames A. MacLennanDate: August 9, 2006
    
    
    
    Executive Vice President andChief Financial Officer
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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
    
    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 6, 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).4.4
    
    Registration Rights Agreement, dated as of November 25, 2002, between Lodgian, Inc. and the
other signatories thereto (Incorporated by reference to Exhibit 10.11 to the Companys Annual
Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).4.5
    
    Preferred Share Exchange Agreement, dated June 22, 2004, by and among Lodgian, Inc. and the
record and/or beneficial stockholders as signatories thereto (Incorporated by reference to
Exhibit 10.9 to the Companys Quarterly Report for the period ended June 30, 2004 (File No.
1-14537), filed on August 16, 2004).4.6
    
    Registration Rights Agreement, dated June, dated June 22, 2004, by and among Lodgian, Inc.
and the signatories thereto (Incorporated by reference to Exhibit 10.10 to the Companys
Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16,
2004).
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ExhibitNumber
    
    Description10.1
    
    Loan and Security Agreement (Floating Rate), dated as of June 25, 2004, by and between the
Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated
by reference to Exhibit 10.1.1 to the Companys Quarterly Report for the period ended June 30,
2004 (File No. 1-14537), filed on August 16, 2004).10.2
    
    Loan Modification Agreement (Floating Rate) between Merrill Lynch Mortgage Lending, Inc. and
the Borrowers identified on the signature pages thereto dated April 29, 2005 (Incorporated by
reference to Exhibit 10.40 to the Companys Quarterly Report for the period ended March 31,
2005 (File No. 1-14537), filed with the Commission on May 10, 2005.10.3
    
    Promissory Note A in the original amount of $72,000,000.00, dated as of June 25, 2004, by the
Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending,
Inc. (Incorporated by reference to Exhibit 10.1.2 to the Companys Quarterly Report for the
period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).10.4
    
    Promissory Note B in the original amount of $38,000,000, dated as of June 25, 2004, by the
Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending,
Inc. (Incorporated by reference to Exhibit 10.1.3 to the Companys Quarterly Report for the
period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).10.5
    
    Loan and Security Agreement (Fixed Rate #1), dated as of June 25, 2004, 2004, by and between
the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
(Incorporated by reference to Exhibit 10.2.1 to the Companys Quarterly Report for the period
ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).10.6
    
    Promissory Note in the original amount of $63,801,000.00, dated as of June 25, 2004, by the
Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending,
Inc. (Incorporated by reference to Exhibit 10.2.2 to the Companys Quarterly Report for the
period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).10.7
    
    Loan and Security Agreement (Fixed Rate #2), dated as of June 25, 2004, by and between the
Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated
by reference to Exhibit 10.3.1 to the Companys Quarterly Report for the period ended June 30,
2004 (File No. 1-14537), filed on August 16, 2004).10.8
    
    Promissory Note in the original amount of $67,864,000.00, dated as of June 25, 2004, by the
Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending,
Inc. (Incorporated by reference to Exhibit 10.3.2 to the Companys Quarterly Report for the
period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).10.9
    
    Loan and Security Agreement (Fixed Rate #3), dated as of June 25, 2004, by and between the
Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated
by reference to Exhibit 10.4.1 to the Companys Quarterly Report for the period ended June 30,
2004 (File No. 1-14537), filed on August 16, 2004).10.10
    
    Promissory Note in the original amount of $66,818,500.00, dated as of June 25, 2004, by the
Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending,
Inc. (Incorporated by reference to Exhibit 10.4.2 to the Companys Quarterly Report for the
period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).10.11
    
    Loan and Security Agreement (Fixed Rate #4), dated as of June 25, 2004, by and between the
Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated
by reference to Exhibit 10.5.1 to the Companys Quarterly Report for the period ended June 30,
2004 (File No. 1-14537), filed on August 16, 2004).10.12
    
    Loan Modification Agreement (Fixed Rate #4) dated October 17, 2005, by and between Merrill
Lynch Mortgage Lending, Inc. and certain Lodgian, Inc. subsidiaries (Incorporated by
reference to Exhibit 99.1 to Companys Current Report on Form 8-K. (File No. 1-14537), filed
on October 21, 2005).10.13
    
    Promissory Note in the original amount of $61,516,500.00, dated as of June 25, 2004, 2004,
by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage
Lending, Inc. (Incorporated by reference to
Exhibit 10.5.2 to the Companys Quarterly Report
for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).10.14
    
    Employment Agreement between Lodgian, Inc. and Daniel E. Ellis, dated May 2, 2004
(Incorporated by reference to Exhibit 10.4 to the Companys Quarterly Report for the period
ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).10.15
    
    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).10.16
    
    Employment Agreement between Lodgian, Inc. and Samuel J. Davis, dated May 14, 2004
(Incorporated by reference to Exhibit 10.19 to Amendment No. 2 to the Companys Registration
Statement on Form S-1 (Registration Number 333-113410), filed with the Commission on June 4,
2004).
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ExhibitNumber
    
    Description10.17
    
    Agreement for Consulting Services between Lodgian, Inc. and Linda Borchert Philp dated
December 19, 2005 (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 December 22, 2005).10.18
    
    Release Agreement between Lodgian, Inc. and Linda Borchert Philp dated December 16, 2005
(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 December 22, 2005).10.19
    
    Executive Employment Agreement between Edward J. Rohling and Lodgian, Inc., dated July 12,
2005 (Incorporated by reference to Exhibit 10.35 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).10.20
    
    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).10.21
    
    Employment Agreement between Lodgian, Inc. and James A. MacLennan dated March 1, 2006
(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 3, 2006).10.22
    
    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).10.23
    
    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).10.24
    
    2002 Amended and Restated Stock Incentive Plan of Lodgian, Inc. (Incorporated by reference
to Exhibit 10.5 to Amendment No. 2 to the Companys Registration Statement on Form S-1 (File
No. 333-1113410), filed on June 6, 2004).10.25
    
    First Amendment to the Amended and Restated 2002 Stock Incentive Plan of Lodgian, Inc. dated
April 28, 2005 (Incorporated by reference to Exhibit 10.34 to the Companys Quarterly Report
for the period ended March 31, 2005 (File No. 1-14537), filed with the Commission on May 10,
2005.)10.26
    
    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).10.27
    
    Form of Restricted Stock Award Agreement (Incorporated by reference to Exhibit 10.40 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).10.28
    
    Lodgian, Inc. 401(k) Plan, As Amended and Restated Effective September 1, 2003 (Incorporated
by reference to Exhibit 20.1.1 to Amendment No. 2 to the Companys Registration Statement on
Form S-1 (File No. 333-113410), filed on June 6, 2004).10.29
    
    Executive Employment Agreement between Mark D. Linch and Lodgian, Inc., dated June 8, 2006
(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 June 14, 2006).10.30
    
    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).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. 51