##### 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 March 31, 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
    
    52-2093696(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)3445 Peachtree Road, N.E., Suite 700,Atlanta, GA
    
    30326(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code
(404) 364-9400
 (Former name, former address and former fiscal year, if changed since last report): Not
applicable
  þ o
  o þ o
 o þ
 þ o
  Class
    
    Outstanding as of May 1, 2006Common
    
    24,754,112




---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of March 31, 2006 and December 31,
2005 (unaudited)
    
    
    2Condensed Consolidated Statements of Operations for the Three Months Ended
March 31, 2006 and March 31, 2005 (unaudited)
    
    
    3Condensed Consolidated Statement of Stockholders Equity for the Three Months
Ended March 31, 2006 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2006 and March 31, 2005 (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4.
    
    Controls and Procedures
    
    
    38PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    39Item 6.
    
    Exhibits
    
    
    39Signatures
    
    
    40EX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO
 1




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LODGIAN, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31, 2006
    
    
    December 31, 2005(Unaudited in thousands, except share data)ASSETSCurrent assets:Cash and cash
equivalents
    
    $
    37,866
    
    
    $
    19,097Cash, restricted
    
    
    14,416
    
    
    
    15,003Accounts receivable (net of
allowances: 2006 - $1,219; 2005
-$1,101)
    
    
    12,193
    
    
    
    8,054Insurance
receivable
    
    
    38
    
    
    
    11,725Inventories
    
    
    3,988
    
    
    
    3,955Prepaid expenses and other
current assets
    
    
    16,853
    
    
    
    20,101Assets held for
sale
    
    
    31,052
    
    
    
    14,866Total current assets
    
    
    116,406
    
    
    
    92,801Property and
equipment, net
    
    
    592,613
    
    
    
    606,862Deposits for capital
expenditures
    
    
    21,342
    
    
    
    19,431Other assets
    
    
    8,179
    
    
    
    7,591$
    738,540
    
    
    $
    726,685LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts
payable
    
    $
    14,989
    
    
    $
    14,709Other
accrued
liabilities
    
    
    31,568
    
    
    
    31,528Advance
deposits
    
    
    3,070
    
    
    
    1,914Insurance
advances
    
    
    1,200
    
    
    
    700Current portion of long-term
liabilities
    
    
    7,295
    
    
    
    18,531Liabilities related to
assets held for sale
    
    
    16,378
    
    
    
    4,610Total current
liabilities
    
    
    74,500
    
    
    
    71,992Long-term liabilities
    
    
    401,012
    
    
    
    394,432Total liabilities
    
    
    475,512
    
    
    
    466,424Minority interests
    
    
    11,221
    
    
    
    11,217Commitments and
contingenciesStockholders equity:Common stock, $.01 par value,
60,000,000 shares authorized;
24,666,899 and 24,648,405 issued at
March 31, 2006 and
December 31, 2005,
respectively
    
    
    247
    
    
    
    246Additional paid-in
capital
    
    
    317,878
    
    
    
    317,034Unearned stock
compensation
    
    
    
    
    
    
    (604
    )Accumulated deficit
    
    
    (68,266
    )
    
    
    (69,640
    )Accumulated other comprehensive
income
    
    
    2,235
    
    
    
    2,234Treasury stock, at cost, 26,352 and
21,633 shares at
March 31, 2006 and December
31, 2005, respectively
    
    
    (287
    )
    
    
    (226
    )Total stockholders equity
    
    
    251,807
    
    
    
    249,044$
    738,540
    
    
    $
    726,685
  2




---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months EndedMarch 31, 2006
    
    
    March 31, 2005(Unaudited in thousands, except per share data)Revenues:Rooms
    
    $
    59,791
    
    
    $
    50,471Food and beverage
    
    
    15,439
    
    
    
    13,725Other
    
    
    2,342
    
    
    
    2,39977,572
    
    
    
    66,595Operating expenses:Direct:Rooms
    
    
    16,070
    
    
    
    14,115Food and beverage
    
    
    11,751
    
    
    
    10,070Other
    
    
    1,871
    
    
    
    1,82329,692
    
    
    
    26,00847,880
    
    
    
    40,587Other operating expenses:Other hotel operating costs
    
    
    24,705
    
    
    
    21,983Property and other taxes, insurance, and leases
    
    
    5,539
    
    
    
    5,271Corporate and other
    
    
    4,894
    
    
    
    4,421Casualty (gains) losses, net
    
    
    188
    
    
    
    104Depreciation and amortization
    
    
    8,648
    
    
    
    6,119Impairment of long-lived assets
    
    
    204
    
    
    
    97Other operating expenses
    
    
    44,178
    
    
    
    37,9953,702
    
    
    
    2,592Other income (expenses):Interest income and other
    
    
    309
    
    
    
    171Interest expense
    
    
    (7,558
    )
    
    
    (6,501
    )Loss before income taxes and minority interests
    
    
    (3,547
    )
    
    
    (3,738
    )Benefit (provision) for income taxes  continuing operations
    
    
    1,477
    
    
    
    (67
    )Minority interests (net of taxes, nil)
    
    
    (4
    )
    
    
    145Loss from continuing operations
    
    
    (2,074
    )
    
    
    (3,660
    )Discontinued operations:Income (loss) from discontinued operations before income taxes
    
    
    5,909
    
    
    
    (3,425
    )Provision for income taxes  discontinued operations
    
    
    (2,461
    )
    
    
    Income (loss) from discontinued operations
    
    
    3,448
    
    
    
    (3,425
    )Net income (loss) attributable to common stock
    
    $
    1,374
    
    
    $
    (7,085
    )Net income (loss) per share attributable to common stock:Basic and diluted income per common share:Net income attributable to common stock
    
    $
    0.06
    
    
    $
    (0.29
    )
  3




---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT 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
    
    
    
    
    
    
    
    
    
    
    310
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    310Issuance of restricted stock awards
    
    
    12,413
    
    
    
    1
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161Exercise of stock options
    
    
    6,081
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61Repurchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,719
    
    
    
    (61
    )
    
    
    (61
    )Realization of pre-emergence deferred tax asset
    
    
    
    
    
    
    
    
    
    
    917
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    917Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,374
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,374Currency translation adjustments (related taxes estimated at nil)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,375Balance, March 31, 2006
    
    
    24,666,899
    
    
    $
    247
    
    
    $
    317,878
    
    
    $
    
    
    
    $
    (68,266
    )
    
    $
    2,235
    
    
    
    26,352
    
    
    $
    (287
    )
    
    $
    251,807
 
 The comprehensive loss for the three months ended March 31, 2005 was $7.0 million.Accumulated Other Comprehensive Income is comprised of currency translation adjustments.  4




---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 31, 2006
    
    
    March 31, 2005(Unaudited in thousands)Operating activities:Net income (loss)
    
    $
    1,374
    
    
    $
    (7,085
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    8,673
    
    
    
    6,770Impairment of long-lived assets
    
    
    7,400
    
    
    
    3,545Stock compensation expense
    
    
    471
    
    
    
    57Casualty (gains) losses, net
    
    
    
    
    
    
    104Deferred income taxes
    
    
    917
    
    
    
    Minority interests
    
    
    4
    
    
    
    (145
    )Gain on asset dispositions
    
    
    (1,489
    )
    
    
    (2,002
    )Gain on extinguishment of debt
    
    
    (10,869
    )
    
    
    Amortization of deferred financing costs
    
    
    344
    
    
    
    367Other
    
    
    (52
    )
    
    
    (389
    )Changes in operating assets and liabilities:Accounts receivable, net of allowances
    
    
    (4,607
    )
    
    
    (2,772
    )Insurance receivable
    
    
    7,495
    
    
    
    55Inventories
    
    
    (408
    )
    
    
    (147
    )Prepaid expenses and other assets
    
    
    2,348
    
    
    
    (1,990
    )Accounts payable
    
    
    683
    
    
    
    479Other accrued liabilities
    
    
    1,858
    
    
    
    3,891Advance deposits
    
    
    1,352
    
    
    
    1,429Net cash provided by operating activities
    
    
    15,494
    
    
    
    2,167Investing activities:Capital improvements
    
    
    (17,153
    )
    
    
    (19,683
    )Proceeds from sale of assets, net of related selling costs
    
    
    2,073
    
    
    
    9,024Withdrawals (deposits) for capital expenditures
    
    
    2,282
    
    
    
    (4,735
    )Insurance advances related to hurricanes
    
    
    500
    
    
    
    15,834Net increase in restricted cash
    
    
    587
    
    
    
    (2,475
    )Other
    
    
    26
    
    
    
    (11
    )Net cash used in investing activities
    
    
    (11,685
    )
    
    
    (2,046
    )Financing activities:Proceeds from issuance of long term debt
    
    
    44,954
    
    
    
    Proceeds from exercise of stock options and issuance of common stock
    
    
    61
    
    
    
    Principal payments on long-term debt
    
    
    (28,746
    )
    
    
    (14,698
    )Purchase of treasury stock
    
    
    (61
    )
    
    
    Payments of deferred financing costs
    
    
    (1,238
    )
    
    
    (111
    )Other
    
    
    (10
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    14,960
    
    
    
    (14,809
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    (9
    )Net increase
(decrease) in cash and cash equivalents
    
    
    18,769
    
    
    
    (14,697
    )Cash and cash equivalents at beginning of period
    
    
    19,097
    
    
    
    36,234Cash and cash equivalents at end of period
    
    $
    37,866
    
    
    $
    21,537Supplemental cash flow information:Cash paid during the period for:Interest, net of the amounts capitalized shown below
    
    $
    7,412
    
    
    $
    6,878Interest capitalized
    
    
    117
    
    
    
    481Income taxes, net of refunds
    
    
    206
    
    
    
    88Supplemental disclosure of non-cash investing and financing activities:Net non-cash debt increase (decrease)
    
    
    10,189
    
    
    
    (32
    )Purchases of
property and equipment on account
    
    
    
    
    
    
    1,609
  5




---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. Business Summary
  
    
    70 hotels that were wholly owned and operated through subsidiaries; and
    
    four hotels that were operated in joint ventures in which the Company has a 50%
or greater voting equity interest and exercises control.
  2. General
     6




---



##### 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








Loss from continuing operations:As reported
    
    $
    (3,660
    )Add: Stock-based compensation expense included in net income
    
    
    57Deduct: Total pro forma stock-based employee compensation expense
    
    
    (508
    )Pro forma
    
    
    (4,111
    )Loss from discontinued operations:As reported
    
    
    (3,425
    )Add: Stock-based compensation expense included in net income
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    Pro forma
    
    
    (3,425
    )Net Loss attributable to common stock:As reported
    
    
    (7,085
    )Add: Stock-based compensation expense included in net income
    
    
    57Deduct: Total pro forma stock-based employee compensation expense
    
    
    (508
    )Pro forma
    
    $
    (7,536
    )Basic and diluted loss per common shareLoss from continuing operations:As reported
    
    $
    (0.15
    )Add: Stock-based compensation expense included in net income
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    (0.02
    )Pro forma
    
    
    (0.17
    )Loss from discontinued operations:As reported
    
    
    (0.14
    )Add: Stock-based compensation expense included in net income
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    Pro forma
    
    
    (0.14
    )Net Loss attributable to common stock:As reported
    
    
    (0.29
    )Add: Stock-based compensation expense included in net income
    
    
    Deduct: Total pro forma stock-based employee compensation expense
    
    
    (0.02
    )Pro forma
    
    $
    (0.31
    )




7



---



##### 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
    
    
    2,493,955Shares withheld from awards to satisfy tax
withholding obligations
    
    
    (4,719
    )
    
    
    
    
    2,498,674Stock options forfeited January 1, 2006 -
March 31, 2006
    
    
    (16,418
    )
    
    
    
    
    2,515,092Total issued from January 1, 2006 - March
31, 2006
    
    
    30,160
      8




---



##### Table of Contents



Weighted AverageStock Options
    
    
    Exercise PriceBalance, December 31, 2005
    
    
    593,894
    
    
    $
    10.41Granted
    
    
    Exercised
    
    
    (6,081
    )
    
    
    10.52Forfeited
    
    
    (16,418
    )
    
    
    9.81Balance, March 31, 2006
    
    
    571,395
    
    
    $
    10.44
 Restricted Stock
    
    
    Nonvested StockBalance, December 31, 2005
    
    
    
    
    
    
    75,000Granted
    
    
    12,413
    
    
    
    38,884Withheld to satisfy tax obligations
    
    
    (4,719
    )
    
    
    Balance, March 31, 2006
    
    
    7,694
    
    
    
    113,884($ in thousands)Aggregate
intrinsic value of stock options exercised
    
    
    
    
    
    $
    20
   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
    
    
    258,750
    
    
    
    9.1
    
    
    $
    9.05
    
    
    
    
    
    
    $
    0.00$9.40 to $10.96
    
    
    241,167
    
    
    
    8.3
    
    
    $
    10.51
    
    
    
    75,808
    
    
    $
    10.52$10.97 to $15.66
    
    
    71,478
    
    
    
    7.3
    
    
    $
    15.21
    
    
    
    71,478
    
    
    $
    15.21571,395
    
    
    
    8.5
    
    
    $
    10.44
    
    
    
    147,286
    
    
    $
    12.80($ in thousands)Aggregate intrinsic value of
stock options outstanding
    
    
    
    
    
    
    
    
    


    
    
    
    
    
    
    
    
    $
    1,971
  Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit(Unaudited in thousands)Stock Options
    
    $
    206
    
    
    $
    80Restricted Stock
    
    
    161
    
    
    
    62Nonvested Stock
    
    
    104
    
    
    
    40Total
    
    $
    471
    
    
    $
    182
  9




---



##### Table of Contents



Unrecognized
    
    
    Weighted-AverageCompensation
    
    
    AmortizationType of Award
    

Expense
($000s)
    
    
    Period (in years)Stock Options
    
    $
    1,410
    
    
    
    1.63Nonvested Stock
    
    
    887
    
    
    
    2.03Total
    
    $
    2,297
    
    
    
    1.78
  Income from continuing operations
    
    $
    206Income before income taxes
    
    
    206Net income
    
    
    126Basic and Diluted earnings per share
    
    
    0.005
 4. 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 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 three months ended March 31, 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.
 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;
 10




---



##### Table of Contents



d)
    
    The sale of the asset is probable within one year; ande)
    
    It is unlikely that significant changes to the plan to sell the asset will
be made.
    a)
    
    $3.8 million on the Holiday Inn Manhattan, KS hotel to record the loss on
disposal of fixed assets;b)
    
    $2.3 million on the Holiday Inn Lawrence, KS hotel to record the loss on
disposal of fixed assets;c)
    
    $0.4 million on the Holiday Inn Sheffield, AL hotel to reflect the estimated
selling costs of the sale as this hotel was identified for sale during the first
quarter of 2006;d)
    
    $0.4 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; andf)
    
    $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.
  a)
    
    $1.6 million on the Holiday Inn Lawrence, KS hotel due to a reduced fair value appraisal;b)
    
    $1.0 million on the Holiday Inn Rolling Meadows, IL to reflect the lowered
estimated selling price of the hotel;c)
    
    $0.4 million on the Mt. Laurel, NJ land parcel to reflect the lowered estimated
selling of the land parcel;d)
    
    $0.3 million on the Holiday Inn Express Gadsden, AL to reflect the estimated
selling costs of this 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; ande)
    
    $0.3 million on the Holiday Inn Morgantown, WV to reflect the reduced selling
price and the additional charges to dispose of this hotel in February 2005.
 11




---



##### Table of Contents



March 31, 2006
    
    
    December 31, 2005(Unaudited in thousands)Property and equipment, net
    
    $
    28,826
    
    
    $
    13,796Other assets
    
    
    2,226
    
    
    
    1,070Assets held for sale
    
    $
    31,052
    
    
    $
    14,866Other liabilities
    
    $
    4,613
    
    
    $
    3,346Long-term debt
    
    
    11,765
    
    
    
    1,264Liabilities related to assets held for sale
    
    $
    16,378
    
    
    $
    4,610
  Three Months EndedMarch 31, 2006
    
    
    March 31, 2005(Unaudited in thousands)Total revenues
    
    $
    6,251
    
    
    $
    11,465Total expenses
    
    
    (5,192
    )
    
    
    (12,481
    )Impairment of long-lived assets
    
    
    (7,196
    )
    
    
    (3,448
    )Interest income and other
    
    
    10
    
    
    
    Interest expense and other financing costs
    
    
    (322
    )
    
    
    (963
    )Gain on asset disposition
    
    
    1,489
    
    
    
    2,002Gain on extinguishment of debt
    
    
    10,869
    
    
    
    Provision for income taxes
    
    
    (2,461
    )
    
    
    Income (loss) from discontinued operations
    
    $
    3,448
    
    
    $
    (3,425
    )
  5. Income (Loss) Per Share
  12




---



##### Table of Contents



March 31, 2006
    
    
    March 31, 2005(Unaudited in thousands,
except per share data)Basic and diluted earnings per share:Numerator:Loss from continuing operations
    
    $
    (2,074
    )
    
    $
    (3,660
    )Income (loss) from discontinued operations
    
    
    3,448
    
    
    
    (3,425
    )Net Income (loss) attributable to common stock
    
    $
    1,374
    
    
    $
    (7,085
    )Denominator:Basic and diluted weighted average shares
    
    
    24,635
    
    
    
    24,572Basic and diluted income (loss) per common share:Loss from continuing operations
    
    $
    (0.08
    )
    
    $
    (0.15
    )Income (loss) from discontinued operations
    
    
    0.14
    
    
    
    (0.14
    )Net Income (loss) attributable to common stock
    
    $
    0.06
    
    
    $
    (0.29
    )
    6. Long-Term Liabilities
  13




---



##### Table of Contents



March 31, 2006
    
    
    December 31, 2005Number
    
    
    Property, plant
    
    
    Long-term
    
    
    Long-termof Hotels
    
    
    and equipment, net
    
    
    obligations
    
    
    obligations
    
    
    Interest rates at March 31, 2006Refinancing DebtMerrill Lynch Mortgage Lending, Inc.  Floating
    
    
    18
    
    
    $
    92,518
    
    
    $
    65,750
    
    
    $
    67,546
    
    
    LIBOR plus 3.40%, capped
at 8.4%(3)Merrill Lynch Mortgage Lending, Inc.  Fixed
    
    
    34
    
    
    
    336,557
    
    
    
    251,268
    
    
    
    252,377
    
    
    6.58%Merrill Lynch Mortgage Lending, Inc.  Total
    
    
    52
    
    
    
    429,075
    
    
    
    317,018
    
    
    
    319,923Other FinancingsComputer Share Trust Company of Canada
    
    
    1
    
    
    
    16,066
    
    
    
    7,758
    
    
    
    7,838
    
    
    7.88%Column Financial, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,337Lehman Brothers Holdings, Inc.
    
    
    4
    
    
    
    46,017
    
    
    
    15,472
    
    
    
    22,398
    
    
    $8,892 at 9.40%; $6,580 at 8.90%JP Morgan Chase Bank
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,064Wachovia
    
    
    4
    
    
    
    37,264
    
    
    
    36,540
    
    
    
    13,173
    
    
    $9,970 at 6.03%; $3,158 at 5.78%;23,412 at 6.04%IXIS
    
    
    4
    
    
    
    37,746
    
    
    
    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
    
    
    
    137,093
    
    
    
    100,270
    
    
    
    90,956
    
    
    7.02%(1)65
    
    
    
    566,168
    
    
    
    417,288
    
    
    
    410,879Long-term liabilities  otherTax notes issued pursuant to our Joint Plan
of Reorganization
    
    
    
    
    
    
    
    
    
    
    1,864
    
    
    
    2,220Other
    
    
    
    
    
    
    
    
    
    
    1,082
    
    
    
    1,151
    
    
    
    
    
    
    
    2,946
    
    
    
    3,371Property, plant and equipment  unencumbered
    
    
    9
    
    
    
    55,271
    
    
    
    
    
    
    
    74
    
    
    
    621,439
    
    
    
    420,234
    
    
    
    414,250Held for sale
    
    
    (7
    )
    
    
    (28,826
    )
    
    
    (11,927
    )
    
    
    (1,287
    )Total March 31, 2006 (2)
    
    
    67
    
    
    $
    592,613
    
    
    $
    408,307
    
    
    $
    412,963
 
 (1)
    
    The 7.02% in the table above represents the annual weighted average cost of debt at March 31, 2006, based on LIBOR of 4.826% as of March 31, 2006.(2)
    
    Long term debt obligations at March 31, 2006 and December 31, 2005 include the current portion.(3)
    
    This interest rate cap expires on June 30, 2006.
Thereafter, the interest rate on this loan will be capped at 9.4%
until its maturity in January 2007. Wachovia Bank Refinance
  IXIS Real Estate Capital Refinance
   14




---



##### Table of Contents



7. Commitments and Contingencies
 Franchise Agreements and Capital Expenditures
   Three
months endedMarch 31, 2006
    
    
    March 31, 2005(Unaudited in thousands)Continuing operations
    
    $
    5,392
    
    
    $
    4,557Discontinued operations
    
    
    439
    
    
    
    800$
    5,831
    
    
    $
    5,357
   15




---



##### Table of Contents



a)
    
    Three hotels are held for sale. One of these hotels is in default of its franchise
agreement for failure to complete the Property Improvement Plan (PIP). Two additional
hotels are in default or non-compliance of the franchise agreement for not maintaining
required guest satisfaction scores. Each of these hotels is in
need of significant capital investment for which the Company does not anticipate an
acceptable return on investment. The Company has entered into voluntary termination
agreements with the franchisor regarding two of these hotels which will maintain the flag
until the earlier of June 30, 2006 or until the Company sells the hotels.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
guestroom 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.c)
    
    Four hotels are in default or non-compliance of the franchise agreement because of
substandard guest satisfaction or quality scores. The Company
anticipates two of these hotels
will earn clean slate letters in August 2006 and August 2007, respectively. The Company
anticipates that one of these hotels will be above the required threshold by the end of the
period, however, this hotel must remain above the threshold until February 2008 to receive
a clean slate letter. One of these hotels has entered into non-compliance due to a new
measurement process implemented in January 2006 by the franchisor. The corporate operations
team, as well as each propertys general manager and associates, have focused their efforts
to cure these failures through enhanced service, increased cleanliness, and product
improvements by the required cure date. If the Company does not achieve scores above
required thresholds by the designated date, the hotel will be subject to default of its
franchise agreement. Each hotel will receive another opportunity to improve its scores
before the hotel would be at risk of having its franchise agreement terminated.
   Letters of Credit
  16




---



##### Table of Contents



Self-insurance
    Casualty losses and business interruption insurance
     Litigation
  17




---



##### Table of Contents



8. 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 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
   
    
    70 hotels that we wholly owned and operated through subsidiaries; and
    
    four hotels that we operated in joint ventures in which we have a 50% or greater voting
equity interest and exercise control.
  18




---



##### Table of Contents



Overview of Continuing Operations
  
    
    Revenues increased $11 million, or 16.5% due to our continued strong growth in ADR and
occupancy.
    
    Direct operating expenses increased $3.7 million, or 14.2%, while other operating
expenses increased $6.2 million, or 16.3%, driven primarily by
strong revenue growth, costs associated with the reopening of the
Crowne Plaza hotels in West Palm Beach and Melbourne, FL and higher payroll
costs.
    
    Net income attributable to common stock was $1.4 million in the first quarter of 2006
compared to a net loss of $7.1 million for the first quarter of 2005.
 Overview of Discontinued Operations
  (Unaudited in thousands)Aggregate Sales Price
    
    $
    97,586Debt pay down (principal only)
    
    $
    73,253
    Critical Accounting Policies and Estimates
  19




---



##### Table of Contents



Income from continuing operations
    
    $
    206Income before income taxes
    
    
    206Net income
    
    
    126Basic and Diluted earnings per share
    
    
    0.005
 Income Statement Overview
  Results of Operations  Continuing Operations
  Revenues  Continuing Operations
 Three
months endedMarch 31, 2006
    
    
    March 31, 2005
    
    
    Increase (decrease)(Unaudited in thousands)Revenues:Rooms
    
    $
    59,791
    
    
    $
    50,471
    
    
    $
    9,320
    
    
    
    18.5
    %Food and beverage
    
    
    15,439
    
    
    
    13,725
    
    
    
    1,713
    
    
    
    12.5
    %Other
    
    
    2,342
    
    
    
    2,399
    
    
    
    (57
    )
    
    
    (2.4
    )%Total revenues
    
    $
    77,572
    
    
    $
    66,595
    
    
    $
    10,976
    
    
    
    16.5
    %Occupancy
    
    
    59.9
    %
    
    
    58.9
    %
    
    
    
    
    
    
    1.7
    %ADR
    
    $
    93.44
    
    
    $
    81.65
    
    
    $
    11.79
    
    
    
    14.4
    %RevPAR
    
    $
    56.01
    
    
    $
    48.12
    
    
    $
    7.89
    
    
    
    16.4
    %
  20




---



##### Table of Contents



21




---



##### Table of Contents



Hotel
    
    Room
    
    
    
    Three Months Ended
    
    Change/%Count
    
    Count
    
    
    
    March 31, 2006
    
    March 31, 2005
    
    Change67
    
    
    
    12,144
    
    
    All Continuing OperationsOccupancy
    
    
    59.9
    %
    
    
    58.9
    %
    
    
    
    
    
    
    1.7
    %ADR
    
    $
    93.44
    
    
    $
    81.65
    
    
    $
    11.79
    
    
    
    14.4
    %RevPAR
    
    $
    56.01
    
    
    $
    48.12
    
    
    $
    7.89
    
    
    
    16.4
    %64
    
    
    
    11,460
    
    
    Continuing Operations less two hotels
closed in 2005 due to hurricane damage
& one closed in 2006 due to fire damageOccupancy
    
    
    60.1
    %
    
    
    58.9
    %
    
    
    
    
    
    
    2.0
    %ADR
    
    $
    91.53
    
    
    $
    82.09
    
    
    $
    9.44
    
    
    
    11.5
    %RevPAR
    
    $
    55.00
    
    
    $
    48.36
    
    
    $
    6.64
    
    
    
    13.7
    %RevPAR Index
    
    
    100.1
    %
    
    
    97.9
    %
    
    
    
    
    
    
    2.2
    %63
    
    
    
    11,216
    
    
    Continuing Operations less Radisson
New Orleans Airport hotel & two hotels
closed in 2005 due to hurricane damage
& one closed in 2006 due to fire damageOccupancy
    
    
    59.3
    %
    
    
    59.5
    %
    
    
    
    
    
    
    (0.3
    %)ADR
    
    $
    89.92
    
    
    $
    82.41
    
    
    $
    7.51
    
    
    
    9.1
    %RevPAR
    
    $
    53.35
    
    
    $
    49.07
    
    
    $
    4.28
    
    
    
    8.7
    %RevPAR Index
    
    
    98.8
    %
    
    
    99.5
    %
    
    
    
    
    
    
    (0.7
    %)55
    
    
    
    9,544
    
    
    Continuing Operations less two hotels
closed in 2005 due to hurricane damage,
one closed in 2006 due to fire damage and hotels under
renovation in both the first quarter of 2005 and/or 2006Occupancy
    
    
    60.3
    %
    
    
    60.0
    %
    
    
    
    
    
    
    0.5
    %ADR
    
    $
    88.33
    
    
    $
    81.54
    
    
    $
    6.79
    
    
    
    8.3
    %RevPAR
    
    $
    53.27
    
    
    $
    48.91
    
    
    $
    4.36
    
    
    
    8.9
    %RevPAR Index
    
    
    101.3
    %
    
    
    102.6
    %
    
    
    
    
    
    
    (1.3
    %)25
    
    
    
    4,093
    
    
    Hotels completing major renovations in
2004 and 2005Occupancy
    
    
    66.7
    %
    
    
    64.0
    %
    
    
    
    
    
    
    4.2
    %ADR
    
    $
    99.41
    
    
    $
    83.34
    
    
    $
    16.07
    
    
    
    19.3
    %RevPAR
    
    $
    66.31
    
    
    $
    53.36
    
    
    $
    12.95
    
    
    
    24.3
    %RevPAR Index
    
    
    103.8
    %
    
    
    94.8
    %
    
    
    
    
    
    
    9.5
    %13
    
    
    
    1,515
    
    
    Marriott HotelsOccupancy
    
    
    70.7
    %
    
    
    69.5
    %
    
    
    
    
    
    
    1.7
    %ADR
    
    $
    99.73
    
    
    $
    91.52
    
    
    $
    8.21
    
    
    
    9.0
    %RevPAR
    
    $
    70.55
    
    
    $
    63.57
    
    
    $
    6.98
    
    
    
    11.0
    %RevPAR Index
    
    
    120.3
    %
    
    
    124.4
    %
    
    
    
    
    
    
    (3.3
    %)4
    
    
    
    777
    
    
    Hilton HotelsOccupancy
    
    
    61.0
    %
    
    
    61.0
    %
    
    
    
    
    
    
    ADR
    
    $
    104.42
    
    
    $
    94.45
    
    
    $
    9.97
    
    
    
    10.6
    %RevPAR
    
    $
    63.71
    
    
    $
    57.63
    
    
    $
    6.08
    
    
    
    10.6
    %RevPAR Index
    
    
    99.9
    %
    
    
    99.6
    %
    
    
    
    
    
    
    0.3
    %39
    
    
    
    7,656
    
    
    IHG Hotels less two hotels closed in
2005 due to hurricane damage and one closed in 2006 due to fire damageOccupancy
    
    
    59.4
    %
    
    
    60.0
    %
    
    
    
    
    
    
    (1.0
    %)ADR
    
    $
    88.22
    
    
    $
    80.79
    
    
    $
    7.43
    
    
    
    9.2
    %RevPAR
    
    $
    52.42
    
    
    $
    48.44
    
    
    $
    3.98
    
    
    
    8.2
    %RevPAR Index
    
    
    98.6
    %
    
    
    98.2
    %
    
    
    
    
    
    
    0.4
    %8
    
    
    
    1,512
    
    
    Other Brands and Independent HotelsOccupancy
    
    
    52.3
    %
    
    
    42.0
    %
    
    
    
    
    
    
    24.5
    %ADR
    
    $
    91.59
    
    
    $
    66.61
    
    
    $
    24.98
    
    
    
    37.5
    %RevPAR
    
    $
    47.87
    
    
    $
    27.95
    
    
    $
    19.92
    
    
    
    71.3
    %RevPAR Index
    
    
    88.4
    %
    
    
    65.1
    %
    
    
    
    
    
    
    35.8
    %
 22




---



##### Table of Contents



RevPAR in Markets in Which Lodgian Operates
 Markets inwhich Lodgian
    
    
    
    
    
    
    
    
    
    
    
    
    CompOperates
    Quarter
    
    Comp Sets
    
    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
    %(A)  63
    
    
    1st Qtr 06
    
    
    10.4
    %
    
    
    10.2
    %
    
    
    102.0
    %
 
 (A)
    
    The 63 hotels in the 1st quarter 2006 include the 67 hotels in our continuing
operations portfolio less the hotels in West Palm Beach, FL; Melbourne, FL; Windsor,
Ontario and Marietta, GA.  Direct operating expenses  Continuing Operations
 Three
months endedMarch 31, 2006
    
    
    March 31, 2005
    
    
    Increase (decrease)(Unaudited in thousands)Direct operating expenses:Rooms
    
    $
    16,070
    
    
    $
    14,115
    
    
    $
    1,955
    
    
    
    13.9
    %Food and beverage
    
    
    11,751
    
    
    
    10,070
    
    
    
    1,681
    
    
    
    16.7
    %Other
    
    
    1,871
    
    
    
    1,823
    
    
    
    48
    
    
    
    2.6
    %Total direct operating expenses
    
    $
    29,692
    
    
    $
    26,008
    
    
    $
    3,684
    
    
    
    14.2
    %% of total revenues
    
    
    38.3
    %
    
    
    39.1
    %
  23




---



##### Table of Contents




    
    the reopening and ramp up expenses of the Crowne Plaza West Palm Beach, FL, the Crowne
Plaza Melbourne, FL, and the Holiday Inn Clarksburg, WV, which reopened in late 2005 and
early 2006.
    
    annual wage increases and higher costs in room attendant and laundry services as a
result of the brand-mandated improvements in guest room linen packages.
   Other operating expenses  Continuing Operations
 Three months endedMarch 31, 2006
    
    
    March 31, 2005
    
    
    Increase (decrease)(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    5,186
    
    
    $
    5,196
    
    
    $
    (10
    )
    
    
    (0.2
    )%Advertising and promotion
    
    
    4,368
    
    
    
    3,710
    
    
    
    658
    
    
    
    17.7
    %Franchise fees
    
    
    5,392
    
    
    
    4,557
    
    
    
    835
    
    
    
    18.3
    %Repairs and maintenance
    
    
    4,394
    
    
    
    3,843
    
    
    
    551
    
    
    
    14.3
    %Utilities
    
    
    5,240
    
    
    
    4,583
    
    
    
    657
    
    
    
    14.3
    %Other expenses
    
    
    125
    
    
    
    94
    
    
    
    31
    
    
    
    33.0
    %Total other hotel operating expenses
    
    
    24,705
    
    
    
    21,983
    
    
    
    2,722
    
    
    
    12.4
    %Property and other taxes, insurance and leases
    
    
    5,539
    
    
    
    5,271
    
    
    
    268
    
    
    
    5.1
    %Corporate and other
    
    
    4,894
    
    
    
    4,421
    
    
    
    473
    
    
    
    10.7
    %Casualty (gains) losses, net
    
    
    188
    
    
    
    104
    
    
    
    84
    
    
    
    80.8
    %Depreciation and amortization
    
    
    8,648
    
    
    
    6,119
    
    
    
    2,529
    
    
    
    41.3
    %Impairment of long-lived assets
    
    
    204
    
    
    
    97
    
    
    
    107
    
    
    
    110.3
    %Total other operating expenses
    
    $
    44,178
    
    
    $
    37,995
    
    
    $
    6,183
    
    
    
    16.3
    %% of total revenues
    
    
    57.0
    %
    
    
    57.1
    %
  
    
    Advertising and promotion costs increased $0.7 million or 17.7%, primarily
due to the addition of sales personnel and sales programs to promote our newly
renovated and reopened properties. Reopening expenses at the Crowne Plaza Hotels in
West Palm Beach, FL and Melbourne, FL accounted for $0.2 million or 33% of this
increase.
    
    Franchise fees increased $0.8 million, or 18.3%, as a result of increased
revenues. As a percentage of room revenues, 2006 franchise fees remained virtually
unchanged year over year at approximately 9%.
    
    Repairs and Maintenance increased $0.6 million or 14.3%. The reopening of the
Crowne Plaza Hotels in West Palm Beach and Melbourne, FL accounts for 29.5% of this
increase. The remainder of the increase is due to increases in
payroll costs (up 4.1%,
or 21% of the increase), automotive expenses (up 26%, or 17% of the total increase) and
HVAC, Heating, Electrical and Equipment repairs (up 50%, or 42% of the total increase).
    
    Utilities increased $0.7 million, or 14.3%, primarily as a result of
significantly higher utility rates.
   24




---



##### Table of Contents



Non-operating income (expenses)  Continuing Operations
 Three
months endedMarch 31, 2006
    
    March 31, 2005
    
    Increase (decrease)(Unaudited in thousands)Non-operating income (expenses):Interest income and other
    
    $
    309
    
    
    $
    171
    
    
    $
    138
    
    
    
    80.7
    %Interest expense and other
financing costs:Other interest expense
    
    
    (7,558
    )
    
    
    (6,501
    )
    
    
    1,057
    
    
    
    16.3
    %
  Results of Operations  Discontinued Operations
     a)
    
    $3.8 million on the Holiday Inn Manhattan, KS hotel to record the loss on
disposal of fixed assets;b)
    
    $2.3 million on the Holiday Inn Lawrence, KS hotel to record the loss on
disposal of fixed assets;c)
    
    $0.4 million on the Holiday Inn Sheffield, AL hotel to reflect the estimated
selling costs of the sale as this hotel was identified for sale during the first
quarter of 2006;d)
    
    $0.4 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; andf)
    
    $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.
  a)
    
    $1.6 million on the Holiday Inn Lawrence, KS hotel due to a reduced fair value appraisal;b)
    
    $1.0 million on the Holiday Inn Rolling Meadows, IL hotel to reflect the
lowered estimated selling price of the hotel;
 25




---



##### Table of Contents



c)
    
    $0.4 million on the Mt. Laurel, NJ land parcel to reflect the lowered estimated
selling of the land parcel;d)
    
    $0.3 million on the Holiday Inn Express Gadsden, AL hotel to reflect the
estimated selling costs of this 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; ande)
    
    $0.3 million on the Holiday Inn Morgantown, WV hotel to reflect the reduced
selling price and the additional charges to dispose of this hotel in February 2005.
 Income Taxes
    EBITDA
   26




---



##### Table of Contents



Three months endedMarch 31, 2006
    
    
    March 31, 2005(Unaudited in thousands)Continuing operations:Loss from continuing operations
    
    $
    (2,074
    )
    
    $
    (3,660
    )Depreciation and amortization
    
    
    8,648
    
    
    
    6,119Interest income
    
    
    (309
    )
    
    
    (220
    )Interest expense
    
    
    7,558
    
    
    
    6,501Benefit (provision) for income taxes
- continuing operations
    
    
    (1,477
    )
    
    
    67EBITDA from continuing operations
    
    $
    12,346
    
    
    $
    8,807
  Three months endedMarch 31, 2006
    
    March 31, 2005(Unaudited in thousands)Post-emergence Chapter 11 expenses,
included in corporate and other on
our consolidated statements of operations
    
    $
    3
    
    
    $
    110Impairment loss
    
    
    204
    
    
    
    97Casualty losses  hurricane damage
    
    
    188
    
    
    
    104
 Additional Financial Information Regarding Quarterly Results of Our Continuing Operations
  27




---



##### Table of Contents



Three Months Ended3/31/06
    
    
    12/31/05
    
    
    9/30/05
    
    
    6/30/05
    
    
    3/31/05
    
    
    12/31/04
    
    
    9/30/04
    
    
    6/30/04(Unaudited in thousands)Revenues:Rooms
    
    $
    59,791
    
    
    $
    53,099
    
    
    $
    61,168
    
    
    $
    59,712
    
    
    $
    50,471
    
    
    $
    46,246
    
    
    $
    57,542
    
    
    $
    57,985Food and beverage
    
    
    15,439
    
    
    
    16,130
    
    
    
    15,443
    
    
    
    17,488
    
    
    
    13,725
    
    
    
    17,322
    
    
    
    15,245
    
    
    
    17,632Other
    
    
    2,342
    
    
    
    2,215
    
    
    
    2,452
    
    
    
    2,570
    
    
    
    2,399
    
    
    
    2,166
    
    
    
    2,568
    
    
    
    2,60477,572
    
    
    
    71,444
    
    
    
    79,063
    
    
    
    79,770
    
    
    
    66,595
    
    
    
    65,734
    
    
    
    75,355
    
    
    
    78,221Operating expenses:Direct:Rooms
    
    
    16,070
    
    
    
    15,214
    
    
    
    16,320
    
    
    
    16,040
    
    
    
    14,115
    
    
    
    14,165
    
    
    
    16,146
    
    
    
    14,841Food and beverage
    
    
    11,751
    
    
    
    11,568
    
    
    
    11,129
    
    
    
    12,045
    
    
    
    10,070
    
    
    
    12,570
    
    
    
    11,334
    
    
    
    11,451Other
    
    
    1,871
    
    
    
    1,828
    
    
    
    1,878
    
    
    
    1,988
    
    
    
    1,823
    
    
    
    1,712
    
    
    
    1,884
    
    
    
    1,90229,692
    
    
    
    28,610
    
    
    
    29,327
    
    
    
    30,073
    
    
    
    26,008
    
    
    
    28,447
    
    
    
    29,364
    
    
    
    28,19447,880
    
    
    
    42,834
    
    
    
    49,736
    
    
    
    49,697
    
    
    
    40,587
    
    
    
    37,287
    
    
    
    45,991
    
    
    
    50,027Other operating expenses:Other hotel operating costs
    
    
    24,705
    
    
    
    23,410
    
    
    
    24,509
    
    
    
    22,603
    
    
    
    21,982
    
    
    
    20,784
    
    
    
    22,428
    
    
    
    20,988Property and other taxes, insurance and leases
    
    
    5,539
    
    
    
    4,684
    
    
    
    5,504
    
    
    
    5,380
    
    
    
    5,271
    
    
    
    4,619
    
    
    
    5,052
    
    
    
    4,770Corporate and other
    
    
    4,894
    
    
    
    4,169
    
    
    
    5,562
    
    
    
    5,089
    
    
    
    4,421
    
    
    
    3,171
    
    
    
    4,118
    
    
    
    4,434Casualty gains and losses
    
    
    188
    
    
    
    (31,251
    )
    
    
    190
    
    
    
    28
    
    
    
    104
    
    
    
    294
    
    
    
    2,019
    
    
    
    Depreciation and amortization
    
    
    8,648
    
    
    
    8,736
    
    
    
    6,657
    
    
    
    6,362
    
    
    
    6,119
    
    
    
    6,002
    
    
    
    6,403
    
    
    
    6,267Impairment of long-lived assets
    
    
    204
    
    
    
    1,657
    
    
    
    613
    
    
    
    955
    
    
    
    97
    
    
    
    4,208
    
    
    
    
    
    
    
    Other operating expenses
    
    
    44,178
    
    
    
    11,405
    
    
    
    43,035
    
    
    
    40,417
    
    
    
    37,994
    
    
    
    39,078
    
    
    
    40,020
    
    
    
    36,4593,702
    
    
    
    31,429
    
    
    
    6,701
    
    
    
    9,280
    
    
    
    2,593
    
    
    
    (1,791
    )
    
    
    5,971
    
    
    
    13,568Other income (expenses):Business interruption insurance proceeds
    
    
    
    
    
    
    1,772
    
    
    
    6,094
    
    
    
    1,729
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest income and other
    
    
    309
    
    
    
    272
    
    
    
    341
    
    
    
    53
    
    
    
    171
    
    
    
    360
    
    
    
    212
    
    
    
    66Interest expense and other financing costs:Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (866
    )
    
    
    (4,233
    )Other interest expense
    
    
    (7,558
    )
    
    
    (6,688
    )
    
    
    (6,445
    )
    
    
    (6,480
    )
    
    
    (6,501
    )
    
    
    (6,917
    )
    
    
    (6,775
    )
    
    
    (18,218
    )Loss on preferred stock redemption
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,471
    )
    
    
    (1,592
    )Income (loss) before income taxes and minority interest
    
    
    (3,547
    )
    
    
    26,785
    
    
    
    6,691
    
    
    
    4,582
    
    
    
    (3,737
    )
    
    
    (8,348
    )
    
    
    (5,929
    )
    
    
    (10,409
    )Minority interests
    
    
    (4
    )
    
    
    (8,486
    )
    
    
    (1,127
    )
    
    
    (120
    )
    
    
    145
    
    
    
    406
    
    
    
    503
    
    
    
    (71
    )Income (loss) before income taxes  continuing operations
    
    
    (3,551
    )
    
    
    18,299
    
    
    
    5,564
    
    
    
    4,462
    
    
    
    (3,592
    )
    
    
    (7,942
    )
    
    
    (5,426
    )
    
    
    (10,480
    )(Provision) benefit for income taxes  continuing operations
    
    
    1,477
    
    
    
    (9,537
    )
    
    
    (13
    )
    
    
    (68
    )
    
    
    (68
    )
    
    
    259
    
    
    
    (337
    )
    
    
    (76
    )Income (loss) from continuing operations
    
    
    (2,074
    )
    
    
    8,762
    
    
    
    5,551
    
    
    
    4,394
    
    
    
    (3,660
    )
    
    
    (7,683
    )
    
    
    (5,763
    )
    
    
    (10,556
    )Discontinued operations:(Loss) income from discontinued operations before income
taxes
    
    
    5,909
    
    
    
    (2,427
    )
    
    
    4,158
    
    
    
    (2,520
    )
    
    
    (3,425
    )
    
    
    (6,081
    )
    
    
    2,026
    
    
    
    3,309Income tax benefit (provision)
    
    
    (2,461
    )
    
    
    1,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Loss) income from discontinued operations
    
    
    3,448
    
    
    
    (958
    )
    
    
    4,158
    
    
    
    (2,520
    )
    
    
    (3,425
    )
    
    
    (6,081
    )
    
    
    2,026
    
    
    
    3,309Net income (loss)
    
    
    1,374
    
    
    
    7,804
    
    
    
    9,709
    
    
    
    1,874
    
    
    
    (7,085
    )
    
    
    (13,764
    )
    
    
    (3,737
    )
    
    
    (7,247
    )Net income (loss) attributable to common stock
    
    $
    1,374
    
    
    $
    7,804
    
    
    $
    9,709
    
    
    $
    1,874
    
    
    $
    (7,085
    )
    
    $
    (13,764
    )
    
    $
    (3,737
    )
    
    $
    (7,247
    )
 EBITDA Reconciliation of Continuing Operations
  Three Months Ended3/31/06
    
    
    12/31/05
    
    
    9/30/05
    
    
    6/30/05
    
    
    3/31/05
    
    
    12/31/04
    
    
    9/30/04
    
    
    6/30/04(Unaudited in thousands)Continuing operations:Income (loss) from continuing operations
    
    $
    (2,074
    )
    
    $
    8,762
    
    
    $
    5,551
    
    
    $
    4,394
    
    
    $
    (3,660
    )
    
    $
    (7,683
    )
    
    $
    (5,763
    )
    
    $
    (10,556
    )Depreciation and amortization
    
    
    8,648
    
    
    
    8,736
    
    
    
    6,657
    
    
    
    6,362
    
    
    
    6,119
    
    
    
    6,002
    
    
    
    6,403
    
    
    
    6,267Interest income
    
    
    (309
    )
    
    
    (261
    )
    
    
    (340
    )
    
    
    (205
    )
    
    
    (220
    )
    
    
    (345
    )
    
    
    (175
    )
    
    
    (80
    )Interest expense
    
    
    7,558
    
    
    
    6,688
    
    
    
    6,445
    
    
    
    6,480
    
    
    
    6,501
    
    
    
    6,917
    
    
    
    6,775
    
    
    
    18,218Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    866
    
    
    
    4,233Loss on preferred stock redemption
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,471
    
    
    
    1,592Provision (benefit) for income taxes -
continuing operations
    
    
    (1,477
    )
    
    
    9,537
    
    
    
    13
    
    
    
    68
    
    
    
    67
    
    
    
    (259
    )
    
    
    337
    
    
    
    76EBITDA from continuing operations
    
    $
    12,346
    
    
    $
    33,462
    
    
    $
    18,326
    
    
    $
    17,099
    
    
    $
    8,807
    
    
    $
    4,632
    
    
    $
    12,914
    
    
    $
    19,750
  Three Months Ended3/31/06
    
    12/31/05
    
    9/30/05
    
    6/30/05
    
    3/31/05
    
    12/31/04
    
    9/30/04
    
    6/30/04(Unaudited in thousands)Post-emergence Chapter 11 expenses, included in corporate
and other on consolidated statement of operations
    
    $
    3
    
    
    $
    (2
    )
    
    $
    13
    
    
    $
    52
    
    
    $
    110
    
    
    $
    61
    
    
    $
    67
    
    
    $
    135Impairment loss
    
    
    204
    
    
    
    1,657
    
    
    
    613
    
    
    
    955
    
    
    
    97
    
    
    
    4,208
    
    
    
    
    
    
    
    Casualty losses - 2004 and 2005 hurricane damage
    
    
    188
    
    
    
    (31,251
    )
    
    
    190
    
    
    
    28
    
    
    
    104
    
    
    
    294
    
    
    
    2,019
    
    
    
    Adjustments to bankruptcy claims reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    Write-off (recovery) of receivable from non-consolidated
hotel
    
    
    
    
    
    
    1
    
    
    
    (200
    )
    
    
    946
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Write-off of investment in subsidiary for
non-consolidated hotel
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 28




---



##### Table of Contents



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 first quarter of 2005;
    
    The Crowne Plaza West Palm Beach, FL hotel since it was closed for hurricane
renovations in the first quarter of 2005; and
    
    The Holiday Inn Marietta, GA hotel since it was closed on January 15, 2006 due
to fire damage.
 29




---



##### Table of Contents



Combined Continuing and Discontinued Operations  71 hotels (excludes 3 hotels)
 Capital expendituresThree Months Ended
    

Three
Months EndedMarch 31, 2006
    
    March 31, 2006
    
    March 31, 2005(in thousands $)Upper UpscaleNumber of properties
    
    $
    225
    
    
    
    4
    
    
    
    4Number of rooms
    
    
    
    
    
    
    825
    
    
    
    825Occupancy
    
    
    
    
    
    
    67.4
    %
    
    
    67.0
    %Average daily rate
    
    
    
    
    
    $
    112.19
    
    
    $
    100.25RevPAR
    
    
    
    
    
    $
    75.59
    
    
    $
    67.17UpscaleNumber of properties
    
    
    2,540
    
    
    
    20
    
    
    
    18Number of rooms
    
    
    
    
    
    
    3,660
    
    
    
    3,185Occupancy
    
    
    
    
    
    
    69.8
    %
    
    
    66.5
    %Average daily rate
    
    
    
    
    
    $
    103.58
    
    
    $
    90.50RevPAR
    
    
    
    
    
    $
    72.32
    
    
    $
    60.17Midscale with Food & BeverageNumber of properties
    
    
    4,289
    
    
    
    37
    
    
    
    39Number of rooms
    
    
    
    
    
    
    6,956
    
    
    
    7,313Occupancy
    
    
    
    
    
    
    54.6
    %
    
    
    55.3
    %Average daily rate
    
    
    
    
    
    $
    80.55
    
    
    $
    74.31RevPAR
    
    
    
    
    
    $
    43.97
    
    
    $
    41.08Midscale without Food & BeverageNumber of properties
    
    
    27
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    
    
    
    
    821
    
    
    
    821Occupancy
    
    
    
    
    
    
    59.7
    %
    
    
    66.8
    %Average daily rate
    
    
    
    
    
    $
    78.45
    
    
    $
    66.44RevPAR
    
    
    
    
    
    $
    46.85
    
    
    $
    44.39EconomyNumber of properties
    
    
    
    
    
    
    1
    
    
    
    Number of rooms
    
    
    
    
    
    
    126
    
    
    
    Occupancy
    
    
    
    
    
    
    41.5
    %
    
    
    Average daily rate
    
    
    
    
    
    $
    58.46
    
    
    
    RevPAR
    
    
    
    
    
    $
    24.23
    
    
    
    Independent HotelsNumber of properties
    
    
    9
    
    
    
    2
    
    
    
    3Number of rooms
    
    
    
    
    
    
    291
    
    
    
    535Occupancy
    
    
    
    
    
    
    32.3
    %
    
    
    29.8
    %Average daily rate
    
    
    
    
    
    $
    58.35
    
    
    $
    59.09RevPAR
    
    
    
    
    
    $
    18.85
    
    
    $
    17.62All HotelsNumber of properties
    
    
    7,090
    
    
    
    71
    
    
    
    71Number of rooms
    
    
    
    
    
    
    12,679
    
    
    
    12,679Occupancy
    
    
    
    
    
    
    59.5
    %
    
    
    58.5
    %Average daily rate
    
    
    
    
    
    $
    90.15
    
    
    $
    79.96RevPAR
    
    
    
    
    
    $
    53.66
    
    
    $
    46.79
 30




---



##### Table of Contents



Continuing Operations  64 hotels (excludes 3 hotels and held for sale hotels)
 Capital expendituresThree Months Ended
    

Three
Months EndedMarch 31, 2006
    
    March 31, 2006
    
    March 31, 2005(in thousands $)Upper UpscaleNumber of properties
    
    $
    225
    
    
    
    4
    
    
    
    4Number of rooms
    
    
    
    
    
    
    825
    
    
    
    825Occupancy
    
    
    
    
    
    
    67.4
    %
    
    
    67.0
    %Average daily rate
    
    
    
    
    
    $
    112.19
    
    
    $
    100.25RevPAR
    
    
    
    
    
    $
    75.59
    
    
    $
    67.17UpscaleNumber of properties
    
    
    2,540
    
    
    
    19
    
    
    
    17Number of rooms
    
    
    
    
    
    
    3,385
    
    
    
    2,910Occupancy
    
    
    
    
    
    
    70.9
    %
    
    
    67.7
    %Average daily rate
    
    
    
    
    
    $
    105.33
    
    
    $
    92.09RevPAR
    
    
    
    
    
    $
    74.63
    
    
    $
    62.32Midscale with Food & BeverageNumber of properties
    
    
    3,208
    
    
    
    33
    
    
    
    35Number of rooms
    
    
    
    
    
    
    6,237
    
    
    
    6,594Occupancy
    
    
    
    
    
    
    54.4
    %
    
    
    55.3
    %Average daily rate
    
    
    
    
    
    $
    80.74
    
    
    $
    76.26RevPAR
    
    
    
    
    
    $
    43.89
    
    
    $
    42.21Midscale without Food & BeverageNumber of properties
    
    
    16
    
    
    
    5
    
    
    
    5Number of rooms
    
    
    
    
    
    
    596
    
    
    
    596Occupancy
    
    
    
    
    
    
    65.8
    %
    
    
    70.5
    %Average daily rate
    
    
    
    
    
    $
    82.65
    
    
    $
    70.70RevPAR
    
    
    
    
    
    $
    54.40
    
    
    $
    49.87EconomyNumber of properties
    
    
    
    
    
    
    1
    
    
    
    Number of rooms
    
    
    
    
    
    
    126
    
    
    
    Occupancy
    
    
    
    
    
    
    41.5
    %
    
    
    Average daily rate
    
    
    
    
    
    $
    58.46
    
    
    
    RevPAR
    
    
    
    
    
    $
    24.23
    
    
    
    Independent HotelsNumber of properties
    
    
    9
    
    
    
    2
    
    
    
    3Number of rooms
    
    
    
    
    
    
    291
    
    
    
    535Occupancy
    
    
    
    
    
    
    32.3
    %
    
    
    29.8
    %Average daily rate
    
    
    
    
    
    $
    58.35
    
    
    $
    59.09RevPAR
    
    
    
    
    
    $
    18.85
    
    
    $
    17.62All HotelsNumber of properties
    
    
    5,998
    
    
    
    64
    
    
    
    64Number of rooms
    
    
    
    
    
    
    11,460
    
    
    
    11,460Occupancy
    
    
    
    
    
    
    60.1
    %
    
    
    58.9
    %Average daily rate
    
    
    
    
    
    $
    91.53
    
    
    $
    82.09RevPAR
    
    
    
    
    
    $
    55.00
    
    
    $
    48.36
 31




---



##### Table of Contents




    
    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
 Hotel data by region
  
    
    The Crowne Plaza Melbourne, FL hotel since it was closed for hurricane
renovations in the first quarter of 2005;
    
    The Crowne Plaza West Palm Beach, FL hotel since it was closed for hurricane
renovations in the first quarter of 2005; and
    
    The Holiday Inn Marietta, GA hotel since it was closed on January 15, 2006 due
to fire damage.
 32




---



##### Table of Contents



Combined Continuing and Discontinued Operations  71 hotels (excludes 3 hotels)


Capital expendituresThree Months Ended
    

Three
Months EndedMarch 31, 2006
    
    March 31, 2006
    
    March 31, 2005(in thousands $)Northeast RegionNumber of
properties
    
    $
    3,126
    
    
    
    27
    
    
    
    27Number of rooms
    
    
    
    
    
    
    4,914
    
    
    
    4,914Occupancy
    
    
    
    
    
    
    55.8
    %
    
    
    57.2
    %Average daily rate
    
    
    
    
    
    $
    92.12
    
    
    $
    85.33RevPAR
    
    
    
    
    
    $
    51.41
    
    
    $
    48.81Southeast RegionNumber of
properties
    
    
    3,119
    
    
    
    24
    
    
    
    24Number of rooms
    
    
    
    
    
    
    3,965
    
    
    
    3,965Occupancy
    
    
    
    
    
    
    58.7
    %
    
    
    55.7
    %Average daily rate
    
    
    
    
    
    $
    84.31
    
    
    $
    68.48RevPAR
    
    
    
    
    
    $
    49.52
    
    
    $
    38.15Midwest RegionNumber of
properties
    
    
    359
    
    
    
    13
    
    
    
    13Number of rooms
    
    
    
    
    
    
    2,484
    
    
    
    2,484Occupancy
    
    
    
    
    
    
    59.1
    %
    
    
    55.8
    %Average daily rate
    
    
    
    
    
    $
    81.82
    
    
    $
    76.95RevPAR
    
    
    
    
    
    $
    48.36
    
    
    $
    42.95West RegionNumber of
properties
    
    
    487
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    
    
    
    
    1,316
    
    
    
    1,316Occupancy
    
    
    
    
    
    
    76.5
    %
    
    
    77.1
    %Average daily rate
    
    
    
    
    
    $
    110.51
    
    
    $
    94.15RevPAR
    
    
    
    
    
    $
    84.49
    
    
    $
    72.57All HotelsNumber of
properties
    
    
    7,090
    
    
    
    71
    
    
    
    71Number of rooms
    
    
    
    
    
    
    12,679
    
    
    
    12,679Occupancy
    
    
    
    
    
    
    59.5
    %
    
    
    58.5
    %Average daily rate
    
    
    
    
    
    $
    90.15
    
    
    $
    79.96RevPAR
    
    
    
    
    
    $
    53.66
    
    
    $
    46.79
 33




---



##### Table of Contents



Continuing Operations  64 hotels (excludes 3 hotels and held for sale hotels)


Capital expendituresThree Months Ended
    

Three
Months EndedMarch 31, 2006
    
    March 31, 2006
    
    March 31, 2005(in thousands $)Northeast RegionNumber of
properties
    
    $
    3,066
    
    
    
    25
    
    
    
    25Number of rooms
    
    
    
    
    
    
    4,651
    
    
    
    4,651Occupancy
    
    
    
    
    
    
    56.9
    %
    
    
    58.0
    %Average daily rate
    
    
    
    
    
    $
    92.94
    
    
    $
    86.34RevPAR
    
    
    
    
    
    $
    52.89
    
    
    $
    50.04Southeast RegionNumber of
properties
    
    
    2,088
    
    
    
    20
    
    
    
    20Number of rooms
    
    
    
    
    
    
    3,284
    
    
    
    3,284Occupancy
    
    
    
    
    
    
    58.5
    %
    
    
    54.9
    %Average daily rate
    
    
    
    
    
    $
    85.87
    
    
    $
    71.87RevPAR
    
    
    
    
    
    $
    50.21
    
    
    $
    39.45Midwest RegionNumber of
properties
    
    
    357
    
    
    
    12
    
    
    
    12Number of rooms
    
    
    
    
    
    
    2,209
    
    
    
    2,209Occupancy
    
    
    
    
    
    
    59.4
    %
    
    
    56.1
    %Average daily rate
    
    
    
    
    
    $
    82.41
    
    
    $
    77.85RevPAR
    
    
    
    
    
    $
    48.92
    
    
    $
    43.64West RegionNumber of
properties
    
    
    487
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    
    
    
    
    1,316
    
    
    
    1,316Occupancy
    
    
    
    
    
    
    76.5
    %
    
    
    77.1
    %Average daily rate
    
    
    
    
    
    $
    110.51
    
    
    $
    94.15RevPAR
    
    
    
    
    
    $
    84.49
    
    
    $
    72.57All HotelsNumber of
properties
    
    
    5,998
    
    
    
    64
    
    
    
    64Number of rooms
    
    
    
    
    
    
    11,460
    
    
    
    11,460Occupancy
    
    
    
    
    
    
    60.1
    %
    
    
    58.9
    %Average daily rate
    
    
    
    
    
    $
    91.53
    
    
    $
    82.09RevPAR
    
    
    
    
    
    $
    55.00
    
    
    $
    48.36
  
    
    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.
 34




---



##### Table of Contents



Liquidity and Capital Resources
 Working Capital
         35




---



##### Table of Contents



Cash Flow
  Operating activities
  Investing activities
   Financing activities
   Debt and Contractual Obligations
  Off Balance Sheet Arrangements
  36




---



##### Table of Contents



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;
    
    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 and land parcel 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 Securities and
Exchange Commission and the American Stock Exchange;
 37




---



##### Table of Contents




    
    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 below 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
    38




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits
  39




---



##### Table of Contents



SIGNATURES
  LODGIAN, INC.By:
    
    /s/ EDWARD J. ROHLINGDate:
May 9, 2006
    
    
    
    Edward J. RohlingPresident andChief Executive OfficerBy:
    
    /s/ JAMES A. MACLENNANDate:
May 9, 2006
    
    
    
    James A. MacLennanExecutive Vice President andChief Financial Officer
 40




---



##### 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).
 41




---



##### Table of Contents



ExhibitNumber
    
    Description4.4
    
    
    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).10.1
    
    
    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).
 42




---



##### Table of Contents



ExhibitNumber
    
    Description10.11
    
    
    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).10.17
    
    
    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.)
 43




---



##### Table of Contents



ExhibitNumber
    
    Description10.26
    
    
    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
    
    
    Amendment No. 1 to the Lodgian, Inc. 401(k) Plan (As Amended and Restated Effective
September 1, 2003) (Incorporated by reference to Exhibit 10.3 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).10.30
    
    
    Amendment No. 2 to the Lodgian, Inc. 401(K) Plan dated March 24, 2005 (As Amended and
Restated Effective as of September 1, 2003). (Incorporated by reference to Exhibit 10.38 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).10.31
    
    
    Amendment No. 3 to the Lodgian, Inc. 401(K) Plan dated April 28, 2005 (As Amended and
Restated Effective as of September 1, 2003). (Incorporated by reference to Exhibit 10.39 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).10.32
    
    
    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. 44