##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 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 o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ
  Class
    
    Outstanding as of November 1, 2009Common
    
    21,685,094




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##### 



LODGIAN, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three and Nine months ended September 30, 2009 and September 30, 2008 (unaudited)
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the Nine months ended September 30, 2009 (unaudited)
    
    
    5Condensed Consolidated Statements of Comprehensive Income for the Three and Nine months ended September 30, 2009 and September 30, 2008 (unaudited)
    
    
    6Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2009 and September 30, 2008 (unaudited)
    
    
    7Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    46Item 4.
    
    Controls and Procedures
    
    
    46PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    47Item 1A.
    
    Risk Factors
    
    
    47Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47Item 6.
    
    Exhibits
    
    
    47Signatures
    
    
    
    
    48EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30, 2009
    
    
    December 31, 2008(Unaudited in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    24,647
    
    
    $
    20,454Cash, restricted
    
    
    9,419
    
    
    
    8,179Accounts receivable (net of allowances: 2009 - $257; 2008 - $263)
    
    
    7,035
    
    
    
    7,115Inventories
    
    
    3,100
    
    
    
    2,983Prepaid expenses and other current assets
    
    
    15,342
    
    
    
    21,257Assets held for sale
    
    
    4,554
    
    
    
    33,021Total current assets
    
    
    64,097
    
    
    
    93,009Property and equipment, net
    
    
    403,815
    
    
    
    447,366Deposits for capital expenditures
    
    
    5,586
    
    
    
    11,408Other assets
    
    
    4,893
    
    
    
    3,631$
    478,391
    
    
    $
    555,414LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    5,152
    
    
    $
    7,897Other accrued liabilities
    
    
    23,674
    
    
    
    22,897Advance deposits
    
    
    1,619
    
    
    
    1,293Current portion of long-term liabilities
    
    
    102,614
    
    
    
    124,955Liabilities related to assets held for sale
    
    
    607
    
    
    
    16,167Total current liabilities
    
    
    133, 666
    
    
    
    173,209Long-term liabilities
    
    
    208,935
    
    
    
    194,800Total liabilities
    
    
    342,601
    
    
    
    368,009Commitments and contingencies (Note 8)Stockholders equity:Common stock, $.01 par value, 60,000,000 shares authorized;
25,148,819 and 25,075,837 issued at September 30, 2009 and
December 31, 2008, respectively
    
    
    252
    
    
    
    251Additional paid-in capital
    
    
    331,601
    
    
    
    330,785Accumulated deficit
    
    
    (155,344
    )
    
    
    (105,246
    )Accumulated other comprehensive income
    
    
    64
    
    
    
    1,262Treasury stock, at cost, 3,827,603 and 3,806,000 shares at
September 30, 2009 and December 31, 2008, respectively
    
    
    (39,692
    )
    
    
    (39,647
    )Total stockholders equity attributable to common stock
    
    
    136,881
    
    
    
    187,405Noncontrolling interest
    
    
    (1,091
    )
    
    
    Total stockholders equity
    
    
    135,790
    
    
    
    187,405$
    478,391
    
    
    $
    555,414
  3




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited in thousands, except per share data)Revenues:Rooms
    
    $
    38,095
    
    
    $
    46,679
    
    
    $
    114,415
    
    
    $
    139,891Food and beverage
    
    
    10,469
    
    
    
    12,545
    
    
    
    33,852
    
    
    
    40,011Other
    
    
    2,028
    
    
    
    2,176
    
    
    
    5,689
    
    
    
    6,376Total revenues
    
    
    50,592
    
    
    
    61,400
    
    
    
    153,956
    
    
    
    186,278Direct operating expenses:Rooms
    
    
    10,952
    
    
    
    12,200
    
    
    
    31,818
    
    
    
    35,562Food and beverage
    
    
    7,784
    
    
    
    9,070
    
    
    
    23,706
    
    
    
    27,740Other
    
    
    1,264
    
    
    
    1,548
    
    
    
    3,881
    
    
    
    4,473Total direct operating expenses
    
    
    20,000
    
    
    
    22,818
    
    
    
    59,405
    
    
    
    67,77530,592
    
    
    
    38,582
    
    
    
    94,551
    
    
    
    118,503Other operating expenses:Other hotel operating costs
    
    
    15,670
    
    
    
    18,287
    
    
    
    46,229
    
    
    
    53,885Property and other taxes, insurance, and leases
    
    
    4,147
    
    
    
    4,226
    
    
    
    12,829
    
    
    
    12,338Corporate and other
    
    
    4,289
    
    
    
    4,373
    
    
    
    11,458
    
    
    
    13,742Casualty losses (gains), net
    
    
    38
    
    
    
    (57
    )
    
    
    133
    
    
    
    (57
    )Depreciation and amortization
    
    
    8,774
    
    
    
    8,120
    
    
    
    26,067
    
    
    
    23,578Impairment of long-lived assets
    
    
    34,165
    
    
    
    1,393
    
    
    
    35,349
    
    
    
    9,114Total other operating expenses
    
    
    67,083
    
    
    
    36,342
    
    
    
    132,065
    
    
    
    112,600Operating (loss) income
    
    
    (36,491
    )
    
    
    2,240
    
    
    
    (37,514
    )
    
    
    5,903Other income (expenses):Interest income and other
    
    
    16
    
    
    
    241
    
    
    
    98
    
    
    
    907Interest expense
    
    
    (3,304
    )
    
    
    (4,821
    )
    
    
    (10,598
    )
    
    
    (14,768
    )Loss before income taxes and noncontrolling interest
    
    
    (39,779
    )
    
    
    (2,340
    )
    
    
    (48,014
    )
    
    
    (7,958
    )(Provision) benefit for income taxes  continuing operations
    
    
    (10
    )
    
    
    81
    
    
    
    (29
    )
    
    
    (6
    )Loss from continuing operations
    
    
    (39,789
    )
    
    
    (2,259
    )
    
    
    (48,043
    )
    
    
    (7,964
    )Discontinued operations:Income (loss) from discontinued operations before income taxes
    
    
    2,841
    
    
    
    (3,870
    )
    
    
    (3,342
    )
    
    
    759Benefit (provision) for income taxes  discontinued operations
    
    
    158
    
    
    
    (54
    )
    
    
    196
    
    
    
    (129
    )Income (loss) from discontinued operations
    
    
    2,999
    
    
    
    (3,924
    )
    
    
    (3,146
    )
    
    
    630Net loss
    
    
    (36,790
    )
    
    
    (6,183
    )
    
    
    (51,189
    )
    
    
    (7,334
    )Less: Net loss attributable to noncontrolling interest
    
    
    589
    
    
    
    
    
    
    
    1,091
    
    
    
    Net loss attributable to common stock
    
    $
    (36,201
    )
    
    $
    (6,183
    )
    
    $
    (50,098
    )
    
    $
    (7,334
    )Basic and diluted net loss per share attributable to common stock
    
    $
    (1.70
    )
    
    $
    (0.29
    )
    
    $
    (2.35
    )
    
    $
    (0.33
    )
  4




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LODGIAN,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Attributable to Common StockAccumulated
    
    
    
    
    
    
    
    
    
    
    TotalAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Attributable
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Treasury Stock
    
    
    to Common
    
    
    Noncontrolling
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    Interest
    
    
    Equity(Unaudited in thousands, except share data)Balance, December 31, 2008
    
    
    25,075,837
    
    
    $
    251
    
    
    $
    330,785
    
    
    $
    (105,246
    )
    
    $
    1,262
    
    
    
    3,806,000
    
    
    $
    (39,647
    )
    
    $
    187,405
    
    
    $
    
    
    
    $
    187,405Amortization of unearned stock compensation
    
    
    
    
    
    
    
    
    
    
    817
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    817
    
    
    
    
    
    
    
    817Issuance and vesting of nonvested shares
    
    
    72,982
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,603
    
    
    
    (45
    )
    
    
    (45
    )
    
    
    
    
    
    
    (45
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,098
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,098
    )
    
    
    (1,091
    )
    
    
    (51,189
    )Currency translation adjustments (related taxes estimated at nil)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,198
    )
    
    
    
    
    
    
    
    
    
    
    (1,198
    )
    
    
    
    
    
    
    (1,198
    )Balance, September 30, 2009
    
    
    25,148,819
    
    
    $
    252
    
    
    $
    331,601
    
    
    $
    (155,344
    )
    
    $
    64
    
    
    
    3,827,603
    
    
    $
    (39,692
    )
    
    $
    136,881
    
    
    $
    (1,091
    )
    
    $
    135,790
  5




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LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 For the three months 
ended September 30,
    
    
    For the nine months
 ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(unaudited in thousands)Net loss attributable to common stock
    
    $
    (36,201
    )
    
    $
    (6,183
    )
    
    $
    (50,098
    )
    
    $
    (7,334
    )Currency translation adjustments (estimated taxes nil)
    
    
    31
    
    
    
    (557
    )
    
    
    (1,198
    )
    
    
    (1,032
    )Less: reclassification adjustment for losses
included in net income (estimated taxes nil)
    
    
    
    
    
    
    
    
    
    
    1,156
    
    
    
    Comprehensive loss
    
    $
    (36,170
    )
    
    $
    (6,740
    )
    
    $
    (50,140
    )
    
    $
    (8,366
    )
   6




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedSeptember 30, 2009
    
    
    September 30, 2008(unaudited in thousands)Operating activities:Net loss
    
    $
    (51,189
    )
    
    $
    (7,334
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    26,099
    
    
    
    23,598Impairment of long-lived assets
    
    
    44,119
    
    
    
    16,917Stock compensation expense
    
    
    817
    
    
    
    845Casualty loss (gain), net
    
    
    134
    
    
    
    (5,640
    )Gain on asset dispositions
    
    
    (1,824
    )
    
    
    (2,303
    )(Gain) loss on extinguishment of debt
    
    
    (174
    )
    
    
    537Gain on deconsolidation
    
    
    (4,236
    )
    
    
    Amortization of deferred financing costs
    
    
    845
    
    
    
    1,120Changes in operating assets and liabilities:Accounts receivable, net of allowances
    
    
    44
    
    
    
    (2,232
    )Inventories
    
    
    (130
    )
    
    
    (566
    )Prepaid expenses and other assets
    
    
    1,664
    
    
    
    (1,910
    )Accounts payable
    
    
    1,941
    
    
    
    (1,585
    )Other accrued liabilities
    
    
    1,216
    
    
    
    (373
    )Advance deposits
    
    
    291
    
    
    
    179Net cash provided by operating activities
    
    
    19,617
    
    
    
    21,253Investing activities:Capital improvements
    
    
    (19,528
    )
    
    
    (35,758
    )Proceeds from sale of assets, net of related selling costs and note receivable from buyer
    
    
    12,641
    
    
    
    10,873Withdrawals for capital expenditures
    
    
    5,747
    
    
    
    4,195Insurance proceeds related to casualty claims, net
    
    
    
    
    
    
    5,244Payments related to casualty damage, net
    
    
    (134
    )
    
    
    Net increase in restricted cash
    
    
    (1,240
    )
    
    
    (1,133
    )Other
    
    
    (20
    )
    
    
    (25
    )Net cash used in investing activities
    
    
    (2,534
    )
    
    
    (16,604
    )Financing activities:Proceeds from exercise of stock options
    
    
    
    
    
    
    23Principal payments on long-term debt
    
    
    (13,052
    )
    
    
    (18,004
    )Purchases of treasury stock
    
    
    (45
    )
    
    
    (19,834
    )Payments of deferred financing costs
    
    
    (61
    )
    
    
    Defeasance proceeds (payments), net
    
    
    224
    
    
    
    (487
    )Net cash used in financing activities
    
    
    (12,934
    )
    
    
    (38,302
    )Effect of exchange rate changes on cash
    
    
    44
    
    
    
    (184
    )Net increase (decrease) in cash and cash equivalents
    
    
    4,193
    
    
    
    (33,837
    )Cash and cash equivalents at beginning of year
    
    
    20,454
    
    
    
    54,389Cash and cash equivalents at end of year
    
    $
    24,647
    
    
    $
    20,552Supplemental cash flow information:Cash paid (received) during the year for:Interest, net of the amounts capitalized shown below
    
    $
    10,248
    
    
    $
    15,463Interest capitalized
    
    
    291
    
    
    
    251Income tax (refunds) payments, net
    
    
    (201
    )
    
    
    157Supplemental disclosure of non-cash investing and financing activities:Treasury stock repurchases traded, but not settled
    
    
    
    
    
    
    73Purchases of property and equipment on account
    
    
    702
    
    
    
    2,622Note receivable from buyer of sold hotel
    
    
    1,850
    
    
    
    
  7




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LODGIAN, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
($ amounts in thousands unless otherwise noted, except per share data)
 1. Business Summary
    2. General
      8




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
    
    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
   Issued Under the StockIncentive PlanAvailable under the plan, less previously issued as of December 31, 2008
    
    
    2,499,921Nonvested stock issued February 4, 2009
    
    
    (286,503
    )Nonvested stock issued February 12, 2009
    
    
    (20,000
    )Nonvested stock issued June 11, 2009
    
    
    (15,000
    )Shares of nonvested stock withheld from awards to satisfy tax withholding obligations
    
    
    21,603Nonvested shares forfeited in 2009
    
    
    18,117Stock options forfeited in 2009
    
    
    6,666Available for issuance, September 30, 2009
    
    
    2,224,804
 Stock Options
  9




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Options Outstanding and ExercisableWeighted Average
    
    
    WeightedRemaining Life
    
    
    AverageRange of prices
    
    Number
    
    
    (In Years)
    
    
    Exercise Price$7.83 to $9.39
    
    
    71,080
    
    
    
    5.6
    
    
    $
    9.05$9.40 to $10.96
    
    
    70,003
    
    
    
    4.8
    
    
    $
    10.51$10.97 to $15.66
    
    
    27,162
    
    
    
    3.9
    
    
    $
    15.21168,245
    
    
    
    5.0
    
    
    $
    10.65
  Nonvested Stock
     WeightedAverageNonvested
    
    
    Grant DateStock
    
    
    Fair ValueBalance, December 31, 2008
    
    
    133,474
    
    
    $
    10.41Granted
    
    
    321,503
    
    
    
    2.59Forfeited
    
    
    (18,117
    )
    
    
    3.84Vested
    
    
    (72,982
    )
    
    
    10.28Balance, September 30, 2009
    
    
    363,878
    
    
    $
    3.86
   10




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##### Table of Contents



Unrecognized
    
    
    Weighted-AverageCompensation
    
    
    AmortizationType of Award
    
    Expense ($000s)
    
    
    Period (in years)Nonvested Stock
    
    $
    647
    
    
    
    1.08Revised Plan Nonvested Stock Awards
    
    $
    397
    
    
    
    2.46Total
    
    $
    1,044
    
    
    
    1.61
   Three Months Ended September 30, 2009
    
    
    Three Months Ended September 30, 2008Compensation
    
    
    Income Tax
    
    
    Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit
    
    
    Expense
    
    
    BenefitNonvested Stock
    
    $
    229
    
    
    $
    89
    
    
    $
    224
    
    
    $
    87Revised Plan Nonvested Stock Awards
    
    
    53
    
    
    
    21
    
    
    
    72
    
    
    
    28Total
    
    $
    282
    
    
    $
    110
    
    
    $
    296
    
    
    $
    115
  Nine Months Ended September 30, 2009
    
    
    Nine Months Ended September 30, 2008Compensation
    
    
    Income Tax
    
    
    Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit
    
    
    Expense
    
    
    BenefitStock Options
    
    $
    
    
    
    $
    
    
    
    $
    (51
    )
    
    $
    (20
    )Nonvested Stock
    
    
    732
    
    
    
    284
    
    
    
    777
    
    
    
    302Revised Plan Nonvested Stock Awards
    
    
    85
    
    
    
    33
    
    
    
    119
    
    
    
    46Total
    
    $
    817
    
    
    $
    317
    
    
    $
    845
    
    
    $
    328
 4. Treasury Stock
   5. Dispositions and Discontinued Operations
 Dispositions
  Assets Held for Sale and Discontinued Operations
  a)
    
    Management commits to a plan to sell the asset;b)
    
    The asset is available for immediate sale in its present condition;
 11




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c)
    
    An active marketing plan to sell the asset at a reasonable price has been initiated;d)
    
    The sale of the asset is probable within one year; ande)
    
    It is unlikely that significant changes to the plan to sell the asset will be made.
     
    
    $1.0 million on the Ramada Plaza Northfield, MI to reflect the current estimated selling
price, net of selling costs; and
    
    $0.2 million on the French Quarter Suites Memphis, TN (a closed hotel) to reflect the
current estimated selling price, net of selling costs.
  
    
    $4.3 million on the Ramada Plaza Northfield, MI to reflect the current estimated selling
price, net of selling costs;
    
    $3.1 million on the Holiday Inn Phoenix, AZ to reflect the propertys estimated fair
value;
    
    $0.8 million on the Holiday Inn in Windsor, Ontario, Canada to reflect the final selling
price, net of selling costs;
    
    $0.5 million on the French Quarter Suites Memphis, TN (a closed hotel) to reflect the
current estimated selling price, net of selling costs; and
    
    $0.1 million to record the disposal of replaced assets at various hotels.
  
    
    $3.9 million on the Holiday Inn Select in Windsor, Ontario, Canada to reflect the then
current estimated selling price, net of selling costs;
    
    $1.2 million on the Holiday Inn East Hartford, CT to reflect the then current estimated
selling price, net of selling costs;
    
    $1.0 million on the Ramada Plaza Northfield, MI to reflect the then current estimated
selling price, net of selling costs; and
 12




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##### Table of Contents




    
    $0.2 million on the French Quarter Suites Memphis, TN (a closed hotel) to reflect the
then current estimated selling price, net of selling costs.
  
    
    $3.9 million on the Holiday Inn Select in Windsor, Ontario, Canada to reflect the then
current estimated selling price, net of selling costs;
    
    $1.9 million on the Ramada Plaza Northfield, MI to reflect the then current estimated
selling price, net of selling costs;
    
    $1.6 million on the Holiday Inn East Hartford, CT to reflect the then current estimated
selling price, net of selling costs;
    
    $0.2 million on the French Quarter Suites Memphis, TN (a closed hotel) to reflect the
then current estimated selling price, net of selling costs;
    
    $0.1 million on the former Holiday Inn St. Paul, MN to record the final disposition of
the hotel; and
    
    $0.1 million to record the final disposition of the Holiday Inn Frederick, MD as well as
the disposal of replaced assets at various hotels.
  
    
    French Quarter Suites Memphis, TN
    
    Ramada Plaza Northfield, MI
  September 30, 2009
    
    
    December 31, 2008Property and equipment, net
    
    $
    3,723
    
    
    $
    31,351Other assets
    
    
    831
    
    
    
    1,670Assets held for sale
    
    $
    4,554
    
    
    $
    33,021Other liabilities
    
    $
    607
    
    
    $
    6,886Long-term debt
    
    
    
    
    
    
    9,281Liabilities related to assets held for sale
    
    $
    607
    
    
    $
    16,167
  13




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Total revenues
    
    
    774
    
    
    
    7,703
    
    
    
    7,101
    
    
    
    25,792Total expenses
    
    
    (970
    )
    
    
    (6,670
    )
    
    
    (7,537
    )
    
    
    (23,937
    )Impairment of long-lived assets
    
    
    (1,218
    )
    
    
    (6,306
    )
    
    
    (8,770
    )
    
    
    (7,803
    )Business interruption proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    672Interest income and other
    
    
    75
    
    
    
    9
    
    
    
    76
    
    
    
    25Interest expense
    
    
    (56
    )
    
    
    (401
    )
    
    
    (445
    )
    
    
    (1,339
    )Casualty (losses) gains, net
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    5,583Gain on asset disposition
    
    
    
    
    
    
    2,303
    
    
    
    1,824
    
    
    
    2,303Gain on deconsolidation
    
    
    4,236
    
    
    
    
    
    
    
    4,236
    
    
    
    (Loss) gain on extinguishment of debt
    
    
    
    
    
    
    (508
    )
    
    
    174
    
    
    
    (537
    )Benefit (provision) for income taxes
    
    
    158
    
    
    
    (54
    )
    
    
    196
    
    
    
    (129
    )Income (loss) from discontinued operations
    
    $
    2,999
    
    
    $
    (3,924
    )
    
    $
    (3,146
    )
    
    $
    630
   6. Income (Loss) Per Share
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Loss from continuing operations
    
    $
    (39,789
    )
    
    $
    (2,259
    )
    
    $
    (48,043
    )
    
    $
    (7,964
    )Less: Net loss attributable to noncontrolling interest
    
    
    589
    
    
    
    
    
    
    
    1,091
    
    
    
    Loss from continuing operations attributable to common stock
    
    
    (39,200
    )
    
    
    (2,259
    )
    
    
    (46,952
    )
    
    
    (7,964
    )Income (loss) from discontinued operations
    
    
    2,999
    
    
    
    (3,924
    )
    
    
    (3,146
    )
    
    
    630Net loss attributable to common stock
    
    $
    (36,201
    )
    
    $
    (6,183
    )
    
    $
    (50,098
    )
    
    $
    (7,334
    )Denominator:Basic and diluted weighted average shares
    
    
    21,321
    
    
    
    21,412
    
    
    
    21,313
    
    
    
    21,944Basic and diluted (loss) income per common share:Loss from continuing operations attributable to common stock
    
    $
    (1.84
    )
    
    $
    (0.11
    )
    
    $
    (2.20
    )
    
    $
    (0.36
    )Income (loss) from discontinued operations
    
    
    0.14
    
    
    
    (0.18
    )
    
    
    (0.15
    )
    
    
    0.03Net loss attributable to common stock
    
    $
    (1.70
    )
    
    $
    (0.29
    )
    
    $
    (2.35
    )
    
    $
    (0.33
    )
   7. Long-Term Liabilities
  14




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September 30, 2009
    
    
    December 31, 2008Property,plant andNumber of
    
    
    equipment,
    
    
    Long-term
    
    
    Long-termHotels
    
    
    net
    
    
    obligations
    
    
    obligations
    
    
    Interest rates at September 30, 2009Mortgage DebtGoldman Sachs (1)
    
    
    10
    
    
    $
    121,661
    
    
    $
    130,000
    
    
    $
    130,000
    
    
    LIBOR plus 1.50%; capped at 6.50%Merrill Lynch Fixed Rate Pool 1 (2)
    
    
    4
    
    
    
    64,689
    
    
    
    36,125
    
    
    
    39,372
    
    
    6.58%Merrill Lynch Fixed Rate Pool 3 (3)
    
    
    6
    
    
    
    46,408
    
    
    
    45,500
    
    
    
    53,031
    
    
    6.58%Merrill Lynch Fixed Rate Pool 4 (4)
    
    
    6
    
    
    
    80,154
    
    
    
    34,868
    
    
    
    35,984
    
    
    6.58%IXIS (5)
    
    
    3
    
    
    
    17,966
    
    
    
    20,753
    
    
    
    20,977
    
    
    LIBOR plus 2.95%; capped at 7.45%IXIS  Holiday Inn Hilton Head, SC
    
    
    1
    
    
    
    16,202
    
    
    
    18,353
    
    
    
    18,530
    
    
    LIBOR plus 2.90%; capped at 7.90%Wachovia  Crowne Plaza Worcester, MA
    
    
    1
    
    
    
    9,627
    
    
    
    16,270
    
    
    
    16,501
    
    
    6.04%Wachovia  Holiday Inn Phoenix, AZ (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,478
    
    
    n/aWachovia  Holiday Inn Express Palm Desert, CA
    
    
    1
    
    
    
    5,404
    
    
    
    5,676
    
    
    
    5,767
    
    
    6.04%Wachovia  SpringHill Suites by Marriott Pinehurst, NC
    
    
    1
    
    
    
    5,701
    
    
    
    2,937
    
    
    
    2,988
    
    
    5.78%Total
    
    
    33
    
    
    
    367,812
    
    
    
    310,482
    
    
    
    332,628
    
    
    4.08%(7)Long-term liabilities  otherTax notes issued pursuant to our Joint Plan of
Reorganization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42Other
    
    
    
    
    
    
    
    
    
    
    1,067
    
    
    
    1,342
    
    
    
    
    
    
    
    1,067
    
    
    
    1,384Property, plant and equipment  Unencumbered
    
    
    4
    
    
    
    39,726
    
    
    
    
    
    
    
    37
    
    
    
    407,538
    
    
    
    311,549
    
    
    
    334,012Held for sale
    
    
    (2
    )
    
    
    (3,723
    )
    
    
    
    
    
    
    (14,257
    )Held for use (8)
    
    
    35
    
    
    $
    403,815
    
    
    $
    311,549
    
    
    $
    319,755
 
 (1)
    
    The hotels that secure this debt are: Crowne Plaza Albany, NY; Holiday Inn BWI Baltimore, MD; Residence Inn Dedham, MA; Hi lton Ft. Wayne, IN; Radisson Kenner, LA;
Courtyard by Marriott Lafayette, LA; Holiday Inn Meadow Lands Pittsburgh, PA; Holiday Inn Santa Fe, NM; Crowne Plaza Silver Spr ing, MD; and Courtyard by Marriott Tulsa, OK.(2)
    
    The hotels that secure this debt are: Courtyard by Marriott Atlanta-Buckhead, GA; Marriott Denver, CO; Four Points by Sheraton Philadelphia, PA; and Holiday Inn Strongsville,
OH.(3)
    
    The hotels that secure this debt are: Courtyard by Marriott Abilene, TX; Courtyard by Marriott Bentonville, AR; Courtyard by Marriott Florence, KY; Holiday Inn Inner Harbor
Baltimore, MD; Crowne Plaza Houston, TX; and Fairfield Inn by Marriott Merrimack, NH.(4)
    
    The hotels that secure this debt are: Hilton Columbia, MD; Wyndham DFW Dallas, TX; Residence Inn by Marriott Little Rock, AR; Holiday Inn Myrtle Beach, SC; Courtyard by
Marriott Paducah, KY; and Crowne Plaza West Palm Beach, FL.(5)
    
    The hotels that secure this debt are: Crowne Plaza Phoenix, AZ; Radisson Phoenix, AZ; and Crowne Plaza Pittsburgh, PA.(6)
    
    The Company surrendered control of the Holiday Inn Phoenix, AZ in July 2009. All assets and liabilities, including the related debt, were deconsolidated from the Companys
balance sheet upon surrender of control.(7)
    
    The rate represents the annual effective weighted average cost of debt at September 30, 2009.(8)
    
    Long-term debt obligations at September 30, 2009 and December 31, 2008 include the current portion of $102.6 million and $125.0 million, respectively.  15




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16




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Interest Rate Cap Agreements
   8. Commitments and Contingencies
 Franchise Agreements and Capital Expenditures
  17




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Continuing operations
    
    $
    4,000
    
    
    $
    4,459
    
    
    $
    11,686
    
    
    $
    13,235Discontinued operations
    
    
    32
    
    
    
    609
    
    
    
    535
    
    
    
    2,015$
    4,032
    
    
    $
    5,068
    
    
    $
    12,221
    
    
    $
    15,250
    
    
    One hotel is in default of the franchise agreement for substandard guest satisfaction
scores because the Company did not achieve scores above the required thresholds by July
2009. The hotel could be subject to termination of the franchise agreement if it does not
achieve the required thresholds by the November 2009 cure date. However, since the Company
recently completed some renovations at the hotel and is following an action plan for
improvement, the Company anticipates that it will cure the default by the required date.
This hotel is one of six hotels that serve as collateral for Pool 3. The Company expects
to convey the six hotels to the lender in full satisfaction of Pool 3.
    
    One hotel is in default of the franchise agreement for failure to complete a Property
Improvement Plan (PIP). The Company did not cure the default by September 2009 and the
hotels franchise agreement could be terminated by the franchisor. This hotel is also in
default of the franchise agreement because of substandard guest satisfaction scores. A
December 2009 cure date was established and the hotel could be subject to termination of
the franchise agreement if it does not achieve the required thresholds by that date. The
Company intends to convey this hotel to the lender in full satisfaction of the Crowne Plaza
Worcester, MA loan. As a result, the franchisor has decided to forego extending the cure
date regarding the failure to complete the PIP in anticipation of this transaction.
    
    The Company is anticipating cure letters for two hotels to be delivered no later than
February 2010.
  18




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Letters of Credit
  Self-insurance
    Casualty gains (losses) and business interruption insurance
  Litigation
   9. Income Taxes
  19




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##### Table of Contents



10. Recent Accounting Pronouncements
 Recently Adopted Pronouncements
    Level 1
    
    Quoted prices for identicalinstruments in active markets at the measurement date.Level 2
    
    Quoted prices for similarinstruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations in which all significant inputs and significant
value drivers are observable in active markets at the measurement date and for the anticipated term of the
instrument.Level 3
    
    Valuations derived from valuation techniques in which one or more significant inputs or significant value
drivers are unobservableinputs that reflect the reporting entitys own assumptions about the assumptions
market participants would use in pricing the asset or liability developed based on the best information
available in the circumstances.
 20




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##### Table of Contents



Fair Value Measurements at Reporting Date UsingSignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Total GainsDescription
    
    September 30, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Losses)Real Estate Assets  Held for Use Hotels
    
    $
    56,475
    
    
    $
    
    
    
    $
    
    
    
    $
    56,475
    
    
    $
    (32,314
    )Real Estate Assets  Held for Sale Hotels
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    
    
    
    
    (1,186
    )$
    60,475
    
    
    $
    
    
    
    $
    4,000
    
    
    $
    56,475
    
    
    $
    (33,500
    )
  
    
    $17.1 million on the Holiday Inn Inner Harbor, MD;
    
    $5.2 million on the Crowne Plaza Houston, TX;
    
    $4.5 million on the Crowne Plaza Worcester, MD;
    
    $2.5 million on the Fairfield Inn Merrimack, NH;
    
    $1.6 million on the Courtyard by Marriott Bentonville, AR;
    
    $1.2 million on the Courtyard by Marriott Florence, KY; and
    
    $0.1 million on the Courtyard by Marriott Abilene, TX.
    21




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008Loss from continuing operations
    
    $
    (2,259
    )
    
    $
    (7,964
    )Less: Net loss attributable to noncontrolling interest
    
    
    384
    
    
    
    428Loss from continuing operations attributable to common stock
    
    
    (1,875
    )
    
    
    (7,536
    )(Loss) income from discontinued operations
    
    
    (3,924
    )
    
    
    630Net loss attributable to common stock
    
    $
    (5,799
    )
    
    $
    (6,906
    )DenominatorBasic and diluted weighted average shares
    
    
    21,412
    
    
    
    21,944Basic and diluted (loss) income per common share:Loss from continuing operations attributable to common stock
    
    $
    (0.09
    )
    
    $
    (0.34
    )(Loss) income from discontinued operations
    
    
    (0.18
    )
    
    
    0.03Net loss attributable to common stock
    
    $
    (0.27
    )
    
    $
    (0.31
    )
  .
   22




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Recently Issued Pronouncements
    23




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##### Table of Contents



11. Subsequent Events
    24




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the discussion below in conjunction with the unaudited condensed consolidated
financial statements and accompanying notes, set forth in Item I. Financial Statements included
in this Form 10-Q. Also, the discussion which follows contains forward-looking statements which
involve risks and uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including those discussed in
our Form 10-K for the year ended December 31, 2008. The terms Company, we, us and our mean
Lodgian and its wholly owned subsidiaries.
 Executive Overview
        25




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##### Table of Contents



Overview of Continuing Operations
  
    
    Third quarter revenues decreased $10.8 million or 17.6%. Rooms revenues decreased $8.6
million, or 18.4%, as occupancy and average daily rate decreased 9.3% and 9.9%,
respectively. Food and beverage revenues declined $2.1 million. Lower occupancy and fewer
events held by our corporate customers contributed to the decrease.
    
    As previously discussed, we are conducting a portfolio analysis to strengthen our balance
sheet. At this time, we expect to convey seven hotels that secure two loans to the
respective lenders in full satisfaction of the debt because the cash flows generated by
these hotels are not sufficient to fund the debt service requirements. Because we expect to
surrender the hotels, we were required to perform a fair value assessment of the seven
hotels during the third quarter of 2009. We concluded that the book value of the seven
hotels exceeded fair value and recorded impairment charges totaling $32.3 million.
    
    Excluding impairment, operating income decreased $6.0 million to a loss of $2.3 million.
We realized the benefits of several cost containment initiatives as total operating expenses
excluding impairment decreased $4.8 million, or 8.4%. However, these initiatives did not
fully offset the $10.8 million decline in revenues, since many of our operating costs are
fixed in nature.
 Overview of Discontinued Operations
      Critical Accounting Policies and Estimates
  26




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27




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008(unaudited in thousands, except per share data)Loss from continuing operations
    
    $
    (2,259
    )
    
    $
    (7,964
    )Less: Net loss attributable to noncontrolling interest
    
    
    384
    
    
    
    428Loss from continuing operations attributable to common stock
    
    
    (1,875
    )
    
    
    (7,536
    )(Loss) income from discontinued operations
    
    
    (3,924
    )
    
    
    630Net loss attributable to common stock
    
    $
    (5,799
    )
    
    $
    (6,906
    )DenominatorBasic and diluted weighted average shares
    
    
    21,412
    
    
    
    21,944Basic and diluted (loss) income per common share:Loss from continuing operations attributable to common stock
    
    $
    (0.09
    )
    
    $
    (0.34
    )(Loss) income from discontinued operations
    
    
    (0.18
    )
    
    
    0.03Net loss attributable to common stock
    
    $
    (0.27
    )
    
    $
    (0.31
    )
 Income Statement Overview
  Results of Operations  Continuing Operations
 The analysis below compares the results of operations for the three months ended September 30, 2009
and 2008.
 Revenues  Continuing Operations
 Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)(unaudited in thousands, except ADR and RevPAR)Revenues:Rooms
    
    $
    38,095
    
    
    $
    46,679
    
    
    $
    (8,584
    )
    
    
    (18.4
    %)Food and beverage
    
    
    10,469
    
    
    
    12,545
    
    
    
    (2,076
    )
    
    
    (16.5
    %)Other
    
    
    2,028
    
    
    
    2,176
    
    
    
    (148
    )
    
    
    (6.8
    %)Total revenues
    
    $
    50,592
    
    
    $
    61,400
    
    
    $
    (10,808
    )
    
    
    (17.6
    %)Occupancy
    
    
    65.0
    %
    
    
    71.7
    %
    
    
    
    
    
    
    (9.3
    %)ADR
    
    $
    95.89
    
    
    $
    106.37
    
    
    $
    (10.48
    )
    
    
    (9.9
    %)RevPar
    
    $
    62.32
    
    
    $
    76.24
    
    
    $
    (13.92
    )
    
    
    (18.3
    %)
   28




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##### Table of Contents



Direct operating expenses  Continuing Operations
 % of total revenuesThree Months Ended September 30,
    
    
    
    
    
    
    
    
    
    
    Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)
    
    
    2009
    
    
    2008(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    10,952
    
    
    $
    12,200
    
    
    $
    (1,248
    )
    
    
    (10.2
    %)
    
    
    21.6
    %
    
    
    19.9
    %Food and beverage
    
    
    7,784
    
    
    
    9,070
    
    
    
    (1,286
    )
    
    
    (14.2
    %)
    
    
    15.4
    %
    
    
    14.8
    %Other
    
    
    1,264
    
    
    
    1,548
    
    
    
    (284
    )
    
    
    (18.3
    %)
    
    
    2.5
    %
    
    
    2.5
    %Total direct operating expenses
    
    $
    20,000
    
    
    $
    22,818
    
    
    $
    (2,818
    )
    
    
    (12.3
    %)
    
    
    39.5
    %
    
    
    37.2
    %Direct operating contribution (by revenue source):Rooms
    
    $
    27,143
    
    
    $
    34,479
    
    
    $
    (7,336
    )
    
    
    (21.3
    %)Food and beverage
    
    
    2,685
    
    
    
    3,475
    
    
    
    (790
    )
    
    
    (22.7
    %)Other
    
    
    764
    
    
    
    628
    
    
    
    136
    
    
    
    21.7
    %Total direct operating contribution
    
    $
    30,592
    
    
    $
    38,582
    
    
    $
    (7,990
    )
    
    
    (20.7
    %)Direct operating contribution % (by revenue source):Rooms
    
    
    71.3
    %
    
    
    73.9
    %Food and beverage
    
    
    25.6
    %
    
    
    27.7
    %Other
    
    
    37.7
    %
    
    
    28.9
    %Total direct operating contribution
    
    
    60.5
    %
    
    
    62.8
    %
      29




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Other operating expenses and operating income  Continuing Operations
 % of total revenuesThree Months Ended September 30,
    
    
    
    
    
    
    
    
    
    
    Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)
    
    
    2009
    
    
    2008(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    3,258
    
    
    $
    3,771
    
    
    $
    (513
    )
    
    
    (13.6
    %)
    
    
    6.4
    %
    
    
    6.1
    %Advertising and promotion
    
    
    2,494
    
    
    
    3,165
    
    
    
    (671
    )
    
    
    (21.2
    %)
    
    
    4.9
    %
    
    
    5.2
    %Franchise fees
    
    
    4,000
    
    
    
    4,459
    
    
    
    (459
    )
    
    
    (10.3
    %)
    
    
    7.9
    %
    
    
    7.3
    %Repairs and maintenance
    
    
    2,683
    
    
    
    2,985
    
    
    
    (302
    )
    
    
    (10.1
    %)
    
    
    5.3
    %
    
    
    4.9
    %Utilities
    
    
    3,235
    
    
    
    3,826
    
    
    
    (591
    )
    
    
    (15.4
    %)
    
    
    6.4
    %
    
    
    6.2
    %Other expenses
    
    
    
    
    
    
    81
    
    
    
    (81
    )
    
    
    (100.0
    %)
    
    
    0.0
    %
    
    
    0.1
    %Other hotel operating costs
    
    $
    15,670
    
    
    $
    18,287
    
    
    $
    (2,617
    )
    
    
    (14.3
    %)
    
    
    31.0
    %
    
    
    29.8
    %Property and other taxes, insurance, and leases
    
    
    4,147
    
    
    
    4,226
    
    
    
    (79
    )
    
    
    (1.9
    %)
    
    
    8.2
    %
    
    
    6.9
    %Corporate and other
    
    
    4,289
    
    
    
    4,373
    
    
    
    (84
    )
    
    
    (1.9
    %)
    
    
    8.5
    %
    
    
    7.1
    %Casualty losses, net
    
    
    38
    
    
    
    (57
    )
    
    
    95
    
    
    
    166.7
    %
    
    
    0.1
    %
    
    
    (0.1
    %)Depreciation and amortization
    
    
    8,774
    
    
    
    8,120
    
    
    
    654
    
    
    
    8.1
    %
    
    
    17.3
    %
    
    
    13.2
    %Impairment of long-lived assets
    
    
    34,165
    
    
    
    1,393
    
    
    
    32,772
    
    
    
    2352.6
    %
    
    
    67.5
    %
    
    
    2.3
    %Total other operating expenses
    
    $
    67,083
    
    
    $
    36,342
    
    
    $
    30,741
    
    
    
    84.6
    %
    
    
    132.6
    %
    
    
    59.2
    %Total operating expenses
    
    $
    87,083
    
    
    $
    59,160
    
    
    $
    27,923
    
    
    
    47.2
    %
    
    
    172.1
    %
    
    
    96.4
    %Operating (loss) income
    
    $
    (36,491
    )
    
    $
    2,240
    
    
    $
    (38,731
    )
    
    
    (1729.1
    %)
    
    
    (72.1
    %)
    
    
    3.6
    %
    
    
    Hotel general and administrative costs decreased $0.5 million, or 13.6%. The decrease
was primarily attributable to a reduction in labor costs of $0.2 million, a $0.1 reduction
in travel and entertainment costs and lower bad debt expense of $0.1 million.
    
    Advertising and promotion costs decreased $0.7 million, or 21.2%, driven by a reduction
in labor costs of $0.3 million. In addition, we eliminated our in-house reservation office
in the fourth quarter of 2008 and outsourced that function to our franchisors. This action
resulted in a $0.2 million decrease in expenses compared to last year. The remaining $0.2
million decrease was primarily the result of other cost containment initiatives.
    
    Franchise fees decreased $0.5 million, or 10.3%, largely as a result of lower revenues,
but increased as a percentage of revenue due to the outsourcing of the reservation function
to our franchisors in the fourth quarter of 2008.
    
    Repairs and maintenance decreased $0.3 million, or 10.1%, compared to the prior year
primarily due to lower automotive and fuel costs.
    
    Utilities decreased $0.6 million, or 15.4%, driven largely by reduced consumption.
    
    Other expenses decreased $0.1 million. In 2008, we incurred costs associated with a
hotel brand conversion. Such costs were not incurred in the third quarter of 2009.
   30




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##### Table of Contents



Non-operating income (expenses)  Continuing Operations
 Three Months Ended September 30,2009
    
    2008
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Interest income and other
    
    $
    16
    
    
    $
    241
    
    
    $
    (225
    )
    
    
    (93.4
    %)Interest expense
    
    
    (3,304
    )
    
    
    (4,821
    )
    
    
    (1,517
    )
    
    
    (31.5
    %)
  The analysis below compares the results of operations for the nine months ended September 30, 2009
and 2008.
 Revenues  Continuing Operations
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)(unaudited in thousands, except ADR and RevPAR)Revenues:Rooms
    
    $
    114,415
    
    
    $
    139,891
    
    
    $
    (25,476
    )
    
    
    (18.2
    %)Food and beverage
    
    
    33,852
    
    
    
    40,011
    
    
    
    (6,159
    )
    
    
    (15.4
    %)Other
    
    
    5,689
    
    
    
    6,376
    
    
    
    (687
    )
    
    
    (10.8
    %)Total revenues
    
    $
    153,956
    
    
    $
    186,278
    
    
    $
    (32,322
    )
    
    
    (17.4
    %)Occupancy
    
    
    64.1
    %
    
    
    71.1
    %
    
    
    
    
    
    
    (9.8
    %)ADR
    
    $
    98.30
    
    
    $
    107.81
    
    
    $
    (9.51
    )
    
    
    (8.8
    %)RevPar
    
    $
    63.04
    
    
    $
    76.69
    
    
    $
    (13.65
    )
    
    
    (17.8
    %)
   31




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##### Table of Contents



Direct operating expenses  Continuing Operations
 % of total revenuesNine Months Ended September 30,
    
    
    
    
    
    
    
    
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)
    
    
    2009
    
    
    2008(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    31,818
    
    
    $
    35,562
    
    
    $
    (3,744
    )
    
    
    (10.5
    %)
    
    
    20.7
    %
    
    
    19.1
    %Food and beverage
    
    
    23,706
    
    
    
    27,740
    
    
    
    (4,034
    )
    
    
    (14.5
    %)
    
    
    15.4
    %
    
    
    14.9
    %Other
    
    
    3,881
    
    
    
    4,473
    
    
    
    (592
    )
    
    
    (13.2
    %)
    
    
    2.5
    %
    
    
    2.4
    %Total direct operating expenses
    
    $
    59,405
    
    
    $
    67,775
    
    
    $
    (8,370
    )
    
    
    (12.3
    %)
    
    
    38.6
    %
    
    
    36.4
    %Direct operating contribution (by revenue source):Rooms
    
    $
    82,597
    
    
    $
    104,329
    
    
    $
    (21,732
    )
    
    
    (20.8
    %)Food and beverage
    
    
    10,146
    
    
    
    12,271
    
    
    
    (2,125
    )
    
    
    (17.3
    %)Other
    
    
    1,808
    
    
    
    1,903
    
    
    
    (95
    )
    
    
    (5.0
    %)Total direct operating contribution
    
    $
    94,551
    
    
    $
    118,503
    
    
    $
    (23,952
    )
    
    
    (20.2
    %)Direct operating contribution % (by revenue source):Rooms
    
    
    72.2
    %
    
    
    74.6
    %Food and beverage
    
    
    30.0
    %
    
    
    30.7
    %Other
    
    
    31.8
    %
    
    
    29.8
    %Total direct operating contribution
    
    
    61.4
    %
    
    
    63.6
    %
     32




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##### Table of Contents



Other operating expenses and operating income  Continuing Operations
 % of total revenuesNine Months Ended September 30,
    
    
    
    
    
    
    
    
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)
    
    
    2009
    
    
    2008(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    9,964
    
    
    $
    11,531
    
    
    $
    (1,567
    )
    
    
    (13.6
    %)
    
    
    6.5
    %
    
    
    6.2
    %Advertising and promotion
    
    
    7,424
    
    
    
    9,701
    
    
    
    (2,277
    )
    
    
    (23.5
    %)
    
    
    4.8
    %
    
    
    5.2
    %Franchise fees
    
    
    11,686
    
    
    
    13,235
    
    
    
    (1,549
    )
    
    
    (11.7
    %)
    
    
    7.6
    %
    
    
    7.1
    %Repairs and maintenance
    
    
    7,926
    
    
    
    8,857
    
    
    
    (931
    )
    
    
    (10.5
    %)
    
    
    5.1
    %
    
    
    4.8
    %Utilities
    
    
    9,167
    
    
    
    10,251
    
    
    
    (1,084
    )
    
    
    (10.6
    %)
    
    
    6.0
    %
    
    
    5.5
    %Other expenses
    
    
    62
    
    
    
    310
    
    
    
    (248
    )
    
    
    (80.0
    %)
    
    
    0.0
    %
    
    
    0.2
    %Other hotel operating costs
    
    $
    46,229
    
    
    $
    53,885
    
    
    $
    (7,656
    )
    
    
    (14.2
    %)
    
    
    30.0
    %
    
    
    28.9
    %Property and other taxes, insurance, and leases
    
    
    12,829
    
    
    
    12,338
    
    
    
    491
    
    
    
    4.0
    %
    
    
    8.3
    %
    
    
    6.6
    %Corporate and other
    
    
    11,458
    
    
    
    13,742
    
    
    
    (2,284
    )
    
    
    (16.6
    %)
    
    
    7.4
    %
    
    
    7.4
    %Casualty losses, net
    
    
    133
    
    
    
    (57
    )
    
    
    190
    
    
    
    333.3
    %
    
    
    0.1
    %
    
    
    (0.0
    %)Depreciation and amortization
    
    
    26,067
    
    
    
    23,578
    
    
    
    2,489
    
    
    
    10.6
    %
    
    
    16.9
    %
    
    
    12.7
    %Impairment of long-lived assets
    
    
    35,349
    
    
    
    9,114
    
    
    
    26,235
    
    
    
    287.9
    %
    
    
    23.0
    %
    
    
    4.9
    %Total other operating expenses
    
    $
    132,065
    
    
    $
    112,600
    
    
    $
    19,465
    
    
    
    17.3
    %
    
    
    85.8
    %
    
    
    60.4
    %Total operating expenses
    
    $
    191,470
    
    
    $
    180,375
    
    
    $
    11,095
    
    
    
    6.2
    %
    
    
    124.4
    %
    
    
    96.8
    %Operating (loss) income
    
    $
    (37,514
    )
    
    $
    5,903
    
    
    $
    (43,417
    )
    
    
    (735.5
    %)
    
    
    (24.4
    %)
    
    
    3.2
    %
    
    
    Hotel general and administrative costs decreased $1.6 million, or 13.6%. The decrease
was primarily the result of lower labor costs of $0.7 million driven by initiatives to
reduce our cost structure and a $0.2 million decline in medical and workers compensation
insurance costs. In addition, we reduced travel and entertainment costs by $0.5 million.
    
    Advertising and promotion costs decreased $2.3 million, or 23.5%, as we reduced labor
costs by $1.4 million including a $0.1 million decline in medical and workers compensation
insurance costs. Also, we eliminated our in-house reservation office in the fourth quarter
of 2008 and outsourced that function to our franchisors. This resulted in a $0.6 million
decrease for the nine months ended September 30, 2009 compared to the same period in 2008.
In addition, we reduced travel and entertainment costs by $0.1 million. The remaining
decrease was largely the result of other cost containment initiatives.
    
    Franchise fees decreased $1.5 million, or 11.7%, primarily as a result of lower
revenues, but increased as a percentage of revenue due to the outsourcing of the
reservation function to our franchisors in the fourth quarter of 2008.
    
    Repairs and maintenance decreased $0.9 million, or 10.5%, compared to the prior year
primarily due to lower labor costs of $0.3 million, lower automotive maintenance and fuel
costs of $0.3 million, lower building maintenance and repair project costs of $0.2 million.
    
    Utilities decreased $1.1 million, or 10.6%, due in large part to reduced consumption.
    
    Other expenses decreased $0.2 million, or 80.0%. In 2008, we incurred costs associated
with a hotel brand conversion. Such costs were not incurred in first nine months of 2009.
 33




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##### Table of Contents



Non-operating income (expenses)  Continuing Operations
 Nine Months Ended September 30,2009
    
    2008
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Interest income and other
    
    $
    98
    
    
    $
    907
    
    
    $
    (809
    )
    
    
    (89.2
    %)Interest expense
    
    
    (10,598
    )
    
    
    (14,768
    )
    
    
    (4,170
    )
    
    
    (28.2
    %)
  Results of Operations  Discontinued Operations
   
    
    $1.0 million on the Ramada Plaza Northfield, MI to reflect the current estimated selling
price, net of selling costs; and
    
    $0.2 million on the French Quarter Suites Memphis, TN (a closed hotel) to reflect the
current estimated selling price, net of selling costs;
  
    
    $4.3 million on the Ramada Plaza Northfield, MI to reflect the current estimated selling
price, net of selling costs;
    
    $3.1 million on the Holiday Inn Phoenix, AZ to reflect the propertys estimated fair
value;
    
    $0.8 million on the Holiday Inn in Windsor, Ontario, Canada to reflect the final selling
price, net of selling costs;
    
    $0.5 million on the French Quarter Suites Memphis, TN (a closed hotel) to reflect the
current estimated selling price, net of selling costs; and
    
    $0.1 million to record the disposal of replaced assets at various hotels.
 34




---



##### Table of Contents




    
    $3.9 million on the Holiday Inn Select in Windsor, Ontario, Canada to reflect the then
current estimated selling price, net of selling costs;
    
    $1.2 million on the Holiday Inn East Hartford, CT to reflect the then current estimated
selling price, net of selling costs;
    
    $1.0 million on the Ramada Plaza Northfield, MI to reflect the then current estimated
selling price, net of selling costs; and
    
    $0.2 million on the French Quarter Suites Memphis, TN (a closed hotel) to reflect the
then current estimated selling price, net of selling costs.
  
    
    $3.9 million on the Holiday Inn Select in Windsor, Ontario, Canada to reflect the then
current estimated selling price, net of selling costs;
    
    $1.9 million on the Ramada Plaza Northfield, MI to reflect the then current estimated
selling price, net of selling costs;
    
    $1.6 million on the Holiday Inn East Hartford, CT to reflect the then current estimated
selling price, net of selling costs;
    
    $0.2 million on the French Quarter Suites Memphis, TN (a closed hotel) to reflect the
then current estimated selling price, net of selling costs;
    
    $0.1 million on the former Holiday Inn St. Paul, MN to record the final disposition of
the hotel; and
    
    $0.1 million to record the final disposition of the Holiday Inn Frederick, MD as well as
the disposal of replaced assets at various hotels.
 Income Taxes
    35




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##### Table of Contents



Additional Financial Information Regarding Quarterly Results of Our Continuing Operations
  2009
    
    2008
    
    2007Third
    
    Second
    
    First
    
    Fourth
    
    Third
    
    Second
    
    First
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter(unaudited in thousands)Revenues:Rooms
    
    $
    38,095
    
    
    $
    39,685
    
    
    $
    36,635
    
    
    $
    38,732
    
    
    $
    46,679
    
    
    $
    49,364
    
    
    $
    43,848
    
    
    $
    40,730Food and beverage
    
    
    10,469
    
    
    
    12,545
    
    
    
    10,838
    
    
    
    13,532
    
    
    
    12,545
    
    
    
    15,404
    
    
    
    12,062
    
    
    
    14,429Other
    
    
    2,028
    
    
    
    1,958
    
    
    
    1,703
    
    
    
    1,886
    
    
    
    2,176
    
    
    
    2,138
    
    
    
    2,062
    
    
    
    1,81950,592
    
    
    
    54,188
    
    
    
    49,176
    
    
    
    54,150
    
    
    
    61,400
    
    
    
    66,906
    
    
    
    57,972
    
    
    
    56,978Direct operating expenses:Rooms
    
    
    10,952
    
    
    
    10,784
    
    
    
    10,082
    
    
    
    11,026
    
    
    
    12,200
    
    
    
    12,179
    
    
    
    11,183
    
    
    
    10,497Food and beverage
    
    
    7,784
    
    
    
    8,284
    
    
    
    7,638
    
    
    
    9,015
    
    
    
    9,070
    
    
    
    9,851
    
    
    
    8,819
    
    
    
    9,054Other
    
    
    1,264
    
    
    
    1,319
    
    
    
    1,298
    
    
    
    1,333
    
    
    
    1,548
    
    
    
    1,537
    
    
    
    1,388
    
    
    
    1,28820,000
    
    
    
    20,387
    
    
    
    19,018
    
    
    
    21,374
    
    
    
    22,818
    
    
    
    23,567
    
    
    
    21,390
    
    
    
    20,83930,592
    
    
    
    33,801
    
    
    
    30,158
    
    
    
    32,776
    
    
    
    38,582
    
    
    
    43,339
    
    
    
    36,582
    
    
    
    36,139Other operating expenses:Other hotel operating costs
    
    
    15,670
    
    
    
    14,931
    
    
    
    15,628
    
    
    
    16,075
    
    
    
    18,287
    
    
    
    17,719
    
    
    
    17,879
    
    
    
    16,285Property and other taxes, insurance and leases
    
    
    4,147
    
    
    
    4,471
    
    
    
    4,211
    
    
    
    4,223
    
    
    
    4,226
    
    
    
    3,760
    
    
    
    4,352
    
    
    
    4,334Corporate and other
    
    
    4,289
    
    
    
    3,564
    
    
    
    3,605
    
    
    
    3,063
    
    
    
    4,373
    
    
    
    3,484
    
    
    
    5,885
    
    
    
    4,248Casualty losses (gain), net
    
    
    38
    
    
    
    14
    
    
    
    81
    
    
    
    1,152
    
    
    
    (57
    )
    
    
    
    
    
    
    
    
    
    
    Restructuring
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )Depreciation and amortization
    
    
    8,774
    
    
    
    8,800
    
    
    
    8,493
    
    
    
    8,352
    
    
    
    8,120
    
    
    
    7,989
    
    
    
    7,469
    
    
    
    7,464Impairment of long-lived assets
    
    
    34,165
    
    
    
    719
    
    
    
    465
    
    
    
    354
    
    
    
    1,393
    
    
    
    5,580
    
    
    
    2,141
    
    
    
    796Other operating expenses
    
    
    67,083
    
    
    
    32,499
    
    
    
    32,483
    
    
    
    33,219
    
    
    
    36,342
    
    
    
    38,532
    
    
    
    37,726
    
    
    
    33,102Operating (loss) income
    
    
    (36,491
    )
    
    
    1,302
    
    
    
    (2,325
    )
    
    
    (443
    )
    
    
    2,240
    
    
    
    4,807
    
    
    
    (1,144
    )
    
    
    3,037Other income (expenses):Interest income and other
    
    
    16
    
    
    
    37
    
    
    
    45
    
    
    
    147
    
    
    
    241
    
    
    
    276
    
    
    
    390
    
    
    
    912Other interest expense
    
    
    (3,304
    )
    
    
    (3,515
    )
    
    
    (3,779
    )
    
    
    (4,577
    )
    
    
    (4,821
    )
    
    
    (4,775
    )
    
    
    (5,172
    )
    
    
    (5,790
    )(Loss) income before income taxes
    
    
    (39,779
    )
    
    
    (2,176
    )
    
    
    (6,059
    )
    
    
    (4,873
    )
    
    
    (2,340
    )
    
    
    308
    
    
    
    (5,926
    )
    
    
    (1,841
    )(Provision) benefit for income taxes  continuing operations
    
    
    (10
    )
    
    
    53
    
    
    
    (72
    )
    
    
    (74
    )
    
    
    81
    
    
    
    (24
    )
    
    
    (63
    )
    
    
    (2,262
    )(Loss) income from continuing operations
    
    
    (39,789
    )
    
    
    (2,123
    )
    
    
    (6,131
    )
    
    
    (4,947
    )
    
    
    (2,259
    )
    
    
    284
    
    
    
    (5,989
    )
    
    
    (4,103
    )Discontinued operations:(Loss) income from discontinued operations before income taxes
    
    
    2,841
    
    
    
    (5,256
    )
    
    
    (927
    )
    
    
    199
    
    
    
    (3,870
    )
    
    
    5,986
    
    
    
    (1,357
    )
    
    
    (5,824
    )(Provision) benefit for income taxes
    
    
    158
    
    
    
    62
    
    
    
    (24
    )
    
    
    98
    
    
    
    (54
    )
    
    
    97
    
    
    
    (172
    )
    
    
    1,854(Loss) income from discontinued operations
    
    
    2,999
    
    
    
    (5,194
    )
    
    
    (951
    )
    
    
    297
    
    
    
    (3,924
    )
    
    
    6,083
    
    
    
    (1,529
    )
    
    
    (3,970
    )Net (loss) income
    
    $
    (36,790
    )
    
    $
    (7,317
    )
    
    $
    (7,082
    )
    
    $
    (4,650
    )
    
    $
    (6,183
    )
    
    $
    6,367
    
    
    $
    (7,518
    )
    
    $
    (8,073
    )Less: Net loss (income) attributable to noncontrolling interest
    
    
    589
    
    
    
    342
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income attributable to common stock
    
    
    (36,201
    )
    
    
    (6,975
    )
    
    
    (6,922
    )
    
    
    (4,650
    )
    
    
    (6,183
    )
    
    
    6,367
    
    
    
    (7,518
    )
    
    
    (8,073
    )
 36




---



##### Table of Contents



Hotel data by market segment and region
   
    
    Upper Upscale: Hilton and Marriott;
    
    Upscale: Courtyard by Marriott, Crowne Plaza, Four Points by Sheraton, Radisson,
Residence Inn by Marriott, SpringHill Suites by Marriott and Wyndham;
    
    Midscale with Food & Beverage: Holiday Inn and Ramada Plaza; and
    
    Midscale without Food & Beverage: Fairfield Inn by Marriott and Holiday Inn
Express.
 Combined Continuing and Discontinued Operations  36 hotels (excludes the Memphis hotel)
 Three months ended
    
    Nine months endedSeptember 30, 2009
    
    September 30, 2008
    
    September 30, 2009
    
    September 30, 2008Upper UpscaleNumber of properties
    
    
    3
    
    
    
    4
    
    
    
    3
    
    
    
    4Number of rooms
    
    
    634
    
    
    
    819
    
    
    
    634
    
    
    
    819Occupancy
    
    
    64.9
    %
    
    
    75.6
    %
    
    
    66.8
    %
    
    
    71.7
    %Average daily rate
    
    $
    113.00
    
    
    $
    123.09
    
    
    $
    115.64
    
    
    $
    121.31RevPAR
    
    $
    73.37
    
    
    $
    93.05
    
    
    $
    77.21
    
    
    $
    86.94UpscaleNumber of properties
    
    
    22
    
    
    
    22
    
    
    
    22
    
    
    
    22Number of rooms
    
    
    4,049
    
    
    
    4,049
    
    
    
    4,049
    
    
    
    4,049Occupancy
    
    
    63.2
    %
    
    
    69.9
    %
    
    
    65.0
    %
    
    
    71.6
    %Average daily rate
    
    $
    90.94
    
    
    $
    102.47
    
    
    $
    96.06
    
    
    $
    108.21RevPAR
    
    $
    57.48
    
    
    $
    71.59
    
    
    $
    62.49
    
    
    $
    77.49Midscale with Food & BeverageNumber of properties
    
    
    9
    
    
    
    8
    
    
    
    9
    
    
    
    8Number of rooms
    
    
    1,902
    
    
    
    1,717
    
    
    
    1,902
    
    
    
    1,717Occupancy
    
    
    67.8
    %
    
    
    77.4
    %
    
    
    60.3
    %
    
    
    71.6
    %Average daily rate
    
    $
    101.73
    
    
    $
    109.32
    
    
    $
    98.04
    
    
    $
    104.64RevPAR
    
    $
    68.99
    
    
    $
    84.58
    
    
    $
    59.14
    
    
    $
    74.96Midscale without Food & BeverageNumber of properties
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Number of rooms
    
    
    244
    
    
    
    244
    
    
    
    244
    
    
    
    244Occupancy
    
    
    44.3
    %
    
    
    50.8
    %
    
    
    45.8
    %
    
    
    53.6
    %Average daily rate
    
    $
    63.95
    
    
    $
    72.67
    
    
    $
    79.85
    
    
    $
    93.98RevPAR
    
    $
    28.32
    
    
    $
    36.95
    
    
    $
    36.54
    
    
    $
    50.38All HotelsNumber of properties
    
    
    36
    
    
    
    36
    
    
    
    36
    
    
    
    36Number of rooms
    
    
    6,829
    
    
    
    6,829
    
    
    
    6,829
    
    
    
    6,829Occupancy
    
    
    64.0
    %
    
    
    71.8
    %
    
    
    63.2
    %
    
    
    71.2
    %Average daily rate
    
    $
    95.54
    
    
    $
    106.20
    
    
    $
    98.09
    
    
    $
    107.56RevPAR
    
    $
    61.12
    
    
    $
    76.22
    
    
    $
    61.99
    
    
    $
    76.59
 37




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##### Table of Contents



Continuing Operations  35 hotels (excludes held for sale hotels)
 Three months ended
    
    Nine months endedSeptember 30, 2009
    
    September 30, 2008
    
    September 30, 2009
    
    September 30, 2008Upper UpscaleNumber of properties
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3Number of rooms
    
    
    634
    
    
    
    634
    
    
    
    634
    
    
    
    634Occupancy
    
    
    64.9
    %
    
    
    75.7
    %
    
    
    66.8
    %
    
    
    71.0
    %Average daily rate
    
    $
    113.00
    
    
    $
    129.81
    
    
    $
    115.64
    
    
    $
    128.32RevPAR
    
    $
    73.37
    
    
    $
    98.32
    
    
    $
    77.21
    
    
    $
    91.13UpscaleNumber of properties
    
    
    22
    
    
    
    22
    
    
    
    22
    
    
    
    22Number of rooms
    
    
    4,049
    
    
    
    4,049
    
    
    
    4,049
    
    
    
    4,049Occupancy
    
    
    63.2
    %
    
    
    69.9
    %
    
    
    65.0
    %
    
    
    71.6
    %Average daily rate
    
    $
    90.94
    
    
    $
    102.47
    
    
    $
    96.06
    
    
    $
    108.21RevPAR
    
    $
    57.48
    
    
    $
    71.59
    
    
    $
    62.49
    
    
    $
    77.49Midscale with Food & BeverageNumber of properties
    
    
    8
    
    
    
    8
    
    
    
    8
    
    
    
    8Number of rooms
    
    
    1,717
    
    
    
    1,717
    
    
    
    1,717
    
    
    
    1,717Occupancy
    
    
    72.2
    %
    
    
    77.4
    %
    
    
    63.6
    %
    
    
    72.5
    %Average daily rate
    
    $
    103.22
    
    
    $
    109.32
    
    
    $
    98.87
    
    
    $
    100.96RevPAR
    
    $
    74.48
    
    
    $
    84.58
    
    
    $
    62.86
    
    
    $
    73.24Midscale without Food & BeverageNumber of properties
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Number of rooms
    
    
    244
    
    
    
    244
    
    
    
    244
    
    
    
    244Occupancy
    
    
    44.3
    %
    
    
    50.8
    %
    
    
    45.8
    %
    
    
    53.6
    %Average daily rate
    
    $
    63.95
    
    
    $
    72.67
    
    
    $
    79.85
    
    
    $
    93.98RevPAR
    
    $
    28.32
    
    
    $
    36.95
    
    
    $
    36.54
    
    
    $
    50.38All HotelsNumber of properties
    
    
    35
    
    
    
    35
    
    
    
    35
    
    
    
    35Number of rooms
    
    
    6,644
    
    
    
    6,644
    
    
    
    6,644
    
    
    
    6,644Occupancy
    
    
    65.0
    %
    
    
    71.7
    %
    
    
    64.1
    %
    
    
    71.1
    %Average daily rate
    
    $
    95.89
    
    
    $
    106.37
    
    
    $
    98.30
    
    
    $
    107.81RevPAR
    
    $
    62.32
    
    
    $
    76.24
    
    
    $
    63.04
    
    
    $
    76.69
 38




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##### Table of Contents




    
    Northeast: Massachusetts, Maryland, New Hampshire, New York, Ohio, Pennsylvania;
    
    Southeast: Florida, Georgia, Kentucky, Louisiana, North Carolina, South Carolina;
    
    Midwest: Arkansas, Indiana, Michigan, Oklahoma, Texas; and
    
    West: Arizona, California, Colorado, New Mexico.
 Combined Continuing and Discontinued Operations  36 hotels (excludes the Memphis hotel)
 Three months ended
    
    Nine months endedSeptember 30, 2009
    
    September 30, 2008
    
    September 30, 2009
    
    September 30, 2008Northeast RegionNumber of properties
    
    
    13
    
    
    
    13
    
    
    
    13
    
    
    
    13Number of rooms
    
    
    2,841
    
    
    
    2,841
    
    
    
    2,841
    
    
    
    2,841Occupancy
    
    
    66.7
    %
    
    
    71.8
    %
    
    
    62.0
    %
    
    
    68.7
    %Average daily rate
    
    $
    99.89
    
    
    $
    108.52
    
    
    $
    101.86
    
    
    $
    107.91RevPAR
    
    $
    66.63
    
    
    $
    77.88
    
    
    $
    63.14
    
    
    $
    74.17Southeast RegionNumber of properties
    
    
    10
    
    
    
    10
    
    
    
    10
    
    
    
    10Number of rooms
    
    
    1,624
    
    
    
    1,624
    
    
    
    1,624
    
    
    
    1,624Occupancy
    
    
    70.1
    %
    
    
    73.4
    %
    
    
    69.0
    %
    
    
    73.4
    %Average daily rate
    
    $
    99.16
    
    
    $
    110.61
    
    
    $
    99.24
    
    
    $
    112.71RevPAR
    
    $
    69.48
    
    
    $
    81.17
    
    
    $
    68.51
    
    
    $
    82.78Midwest RegionNumber of properties
    
    
    8
    
    
    
    8
    
    
    
    8
    
    
    
    8Number of rooms
    
    
    1,413
    
    
    
    1,413
    
    
    
    1,413
    
    
    
    1,413Occupancy
    
    
    52.5
    %
    
    
    68.9
    %
    
    
    55.2
    %
    
    
    69.6
    %Average daily rate
    
    $
    85.85
    
    
    $
    100.10
    
    
    $
    89.50
    
    
    $
    99.26RevPAR
    
    $
    45.10
    
    
    $
    68.97
    
    
    $
    49.43
    
    
    $
    69.09West RegionNumber of properties
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    5Number of rooms
    
    
    951
    
    
    
    951
    
    
    
    951
    
    
    
    951Occupancy
    
    
    62.4
    %
    
    
    73.3
    %
    
    
    68.7
    %
    
    
    77.2
    %Average daily rate
    
    $
    86.82
    
    
    $
    100.41
    
    
    $
    96.20
    
    
    $
    109.36RevPAR
    
    $
    54.21
    
    
    $
    73.58
    
    
    $
    66.11
    
    
    $
    84.45All HotelsNumber of properties
    
    
    36
    
    
    
    36
    
    
    
    36
    
    
    
    36Number of rooms
    
    
    6,829
    
    
    
    6,829
    
    
    
    6,829
    
    
    
    6,829Occupancy
    
    
    64.0
    %
    
    
    71.8
    %
    
    
    63.2
    %
    
    
    71.2
    %Average daily rate
    
    $
    95.54
    
    
    $
    106.20
    
    
    $
    98.09
    
    
    $
    107.56RevPAR
    
    $
    61.12
    
    
    $
    76.22
    
    
    $
    61.99
    
    
    $
    76.59
 39




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##### Table of Contents



Continuing Operations  35 hotels (excludes held for sale hotels)
 Three months ended
    
    Nine months endedSeptember 30, 2009
    
    September 30, 2008
    
    September 30, 2009
    
    September 30, 2008Northeast RegionNumber of properties
    
    
    13
    
    
    
    13
    
    
    
    13
    
    
    
    13Number of rooms
    
    
    2,841
    
    
    
    2,841
    
    
    
    2,841
    
    
    
    2,841Occupancy
    
    
    66.7
    %
    
    
    71.8
    %
    
    
    62.0
    %
    
    
    68.7
    %Average daily rate
    
    $
    99.89
    
    
    $
    108.52
    
    
    $
    101.86
    
    
    $
    107.91RevPAR
    
    $
    66.63
    
    
    $
    77.88
    
    
    $
    63.14
    
    
    $
    74.17Southeast RegionNumber of properties
    
    
    10
    
    
    
    10
    
    
    
    10
    
    
    
    10Number of rooms
    
    
    1,624
    
    
    
    1,624
    
    
    
    1,624
    
    
    
    1,624Occupancy
    
    
    70.1
    %
    
    
    73.4
    %
    
    
    69.0
    %
    
    
    73.4
    %Average daily rate
    
    $
    99.16
    
    
    $
    110.61
    
    
    $
    99.24
    
    
    $
    112.71RevPAR
    
    $
    69.48
    
    
    $
    81.17
    
    
    $
    68.51
    
    
    $
    82.78Midwest RegionNumber of properties
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    1,228
    
    
    
    1,228
    
    
    
    1,228
    
    
    
    1,228Occupancy
    
    
    56.3
    %
    
    
    67.9
    %
    
    
    59.0
    %
    
    
    68.9
    %Average daily rate
    
    $
    87.35
    
    
    $
    100.02
    
    
    $
    90.09
    
    
    $
    99.32RevPAR
    
    $
    49.19
    
    
    $
    67.95
    
    
    $
    53.17
    
    
    $
    68.48West RegionNumber of properties
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    5Number of rooms
    
    
    951
    
    
    
    951
    
    
    
    951
    
    
    
    951Occupancy
    
    
    62.4
    %
    
    
    73.3
    %
    
    
    68.7
    %
    
    
    77.2
    %Average daily rate
    
    $
    86.82
    
    
    $
    100.41
    
    
    $
    96.20
    
    
    $
    109.36RevPAR
    
    $
    54.21
    
    
    $
    73.58
    
    
    $
    66.11
    
    
    $
    84.45All HotelsNumber of properties
    
    
    35
    
    
    
    35
    
    
    
    35
    
    
    
    35Number of rooms
    
    
    6,644
    
    
    
    6,644
    
    
    
    6,644
    
    
    
    6,644Occupancy
    
    
    65.0
    %
    
    
    71.7
    %
    
    
    64.1
    %
    
    
    71.1
    %Average daily rate
    
    $
    95.89
    
    
    $
    106.37
    
    
    $
    98.30
    
    
    $
    107.81RevPAR
    
    $
    62.32
    
    
    $
    76.24
    
    
    $
    63.04
    
    
    $
    76.69
 40




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##### Table of Contents



Liquidity and Capital Resources
 Working Capital
       
    
    Pool 1, with a balance of $36.1 million, matures in July 2010 and we are seeking to
refinance this loan in anticipation of the maturity date.
    
    Pool 3, with a balance of $45.5 million, matured on October 1, 2009. We were unable to
reach an agreement with the special servicer to modify the loan. We expect to convey the
six hotels securing Pool 3 to the lender in full satisfaction of the loan. We believe
that the anticipated cash flow from the hotels securing Pool 3 will not be sufficient to
meet the related debt service obligations in the near-term. Because of the anticipated
cash flow shortfall, we do not believe that surrendering the hotels to the lender will have
an adverse effect on our cash flows.
    
    A single-asset mortgage loan secured by the Crowne Plaza Worcester, MA, with a balance
of $16.3 million, is in default because we ceased making debt service payments in September
2009. The cash flow generated by the hotel was not sufficient to fund the debt service
requirements and we intend to convey the hotel to the lender in full satisfaction of the
loan.
   41




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##### Table of Contents



Covenant Compliance
   Mortgage Debt
  42




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43




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##### Table of Contents



Interest Rate Cap Agreements
   Cash Flow
  Operating activities
  Investing activities
  44




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##### Table of Contents



Financing activities
   Debt and Contractual Obligations
  Off Balance Sheet Arrangements
  Market Risk
    Forward-looking Statements
  
    
    Our ability to refinance or extend our mortgage indebtedness as it becomes due;
    
    The effects of regional, national and international economic conditions;
    
    Competitive conditions in the lodging industry and increases in room supply;
 45




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##### Table of Contents




    
    The effects of actual and threatened terrorist attacks and international conflicts
in the Middle East and elsewhere, and their impact on domestic and international
travel;
    
    The effectiveness of changes in management and our ability to retain qualified
individuals to serve in senior management positions;
    
    Requirements of franchise agreements, including the right of franchisors to
immediately terminate their respective agreements if we breach certain provisions;
    
    Our ability to complete planned hotel dispositions;
    
    Seasonality of the hotel business;
    
    The effects of unpredictable weather events such as hurricanes;
    
    The financial condition of the airline industry and its impact on air travel;
    
    The effect that Internet reservation channels may have on the rates that we are
able to charge for hotel rooms;
    
    Increases in the cost of debt and our continued compliance with the terms of our
loan agreements;
    
    The effect of self-insured claims in excess of our reserves, or our ability to
obtain adequate property and liability insurance to protect against losses, or to
obtain insurance at reasonable rates;
    
    Potential litigation and/or governmental inquiries and investigations;
    
    Laws and regulations applicable to our business, including federal, state or local
hotel, resort, restaurant or land use regulations, employment, labor or disability
laws and regulations;
    
    A downturn in the economy due to several factors, including but not limited to,
high energy costs, natural gas and gasoline prices;
    
    The impact of continued disruptions in the stock and credit markets and potential
failures of financial institutions on our ability to access capital; and
    
    The risks identified in our Form 10-K under Risks Related to Our Business and
Risks Related to Our Common Stock and the risks in our Quarterly Reports on Form
10-Q filed with the SEC on May 7, 2009 and August 6, 2009.
  Inflation
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
  46




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number of
    
    
    Maximum Dollar Amount ofShares Purchased as
    
    
    Shares That May Yet BeTotal Number of
    
    
    
    
    
    
    Part of Publicly
    
    
    Purchased Under theShares
    
    
    Average Price
    
    
    Announced Plans or
    
    
    Publicly Announced Plans orPeriod
    
    Purchased (1)
    
    
    Paid Per Share
    
    
    Programs
    
    
    ProgramsJuly 2009
    
    
    1,446
    
    
    $
    1.21
    
    
    
    
    
    
    $
    5,599,458August 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    5,599,458September 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    5,599,4581,446
    
    
    $
    1.21
    
    
    
    
 
 (1)
    
    The total number of shares purchased represents shares of employee nonvested stock awards
withheld by the Company to satisfy employee tax obligations and repurchased by the Company at an
aggregate cost of $2,000. 
 Item 6. Exhibits
  47




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##### Table of Contents



SIGNATURES
  LODGIAN, INC.Date: November 5, 2009
    By:
    /s/ DANIEL E. ELLISDaniel E. EllisPresident and
Chief Executive OfficerDate: November 5, 2009
    By:
    /s/ JAMES A. MACLENNANJames A. MacLennanExecutive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer) 48




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    Certificate of Correction to the Second Amended and Restated Certificate of Incorporation and
Second Amended and Restated Certificate of Incorporation of Lodgian, Inc. (Incorporated by
reference to Exhibit 3.1 to Amendment No. 2 to the Companys Registration Statement on Form
S-1 (File No. 333-113410), filed on June 4, 2004).3.2
    
    Amended and Restated Bylaws of Lodgian, Inc. (Incorporated by reference to Exhibit 3.4 to the
Companys Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on
March 9, 2004).4.1
    
    Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to Amendment No.
2 to the Companys Registration Statement on Form S-1 (File No. 333-113410), filed on June 6,
2004).4.2
    
    Class B Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia
Bank, N.A. (Incorporated by reference to Exhibit 10.10 to the Companys Annual Report for the
period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).10.1
    
    Amended and Restated Executive Employment Agreement between Lodgian, Inc. and Daniel E.
Ellis, dated July 20, 2009 (Incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K (File No. 1-14537), filed on July 23, 2009).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. 49