##### 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 March 31, 2008
 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
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
 þ o
  Class
    
    Outstanding as of May 1, 2008Common
    
    21,975,877




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##### 



LODGIAN, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2008
and March 31, 2007 (unaudited)
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the Three Months Ended March
31, 2008 (unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008
and March 31, 2007 (unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4.
    
    Controls and Procedures
    
    
    34PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    35Item 1a.
    
    Risk Factors
    
    
    35Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 6.
    
    Exhibits
    
    
    35Signatures
    
    
    36EX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32 SECTION 906 CERTIFICATIONS OF THE CEO AND CFO
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31, 2008
    
    
    December 31, 2007(Unaudited in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    29,844
    
    
    $
    54,389Cash, restricted
    
    
    8,590
    
    
    
    8,363Accounts receivable (net of allowances: 2008  $333; 2007  $323)
    
    
    10,465
    
    
    
    8,794Insurance receivable
    
    
    2,387
    
    
    
    2,254Inventories
    
    
    2,673
    
    
    
    3,097Prepaid expenses and other current assets
    
    
    16,531
    
    
    
    18,186Assets held for sale
    
    
    80,246
    
    
    
    8,009Total current assets
    
    
    150,736
    
    
    
    103,092Property and equipment, net
    
    
    435,524
    
    
    
    499,986Deposits for capital expenditures
    
    
    15,889
    
    
    
    16,565Other assets
    
    
    4,128
    
    
    
    5,087$
    606,277
    
    
    $
    624,730LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,022
    
    
    $
    9,692Other accrued liabilities
    
    
    27,330
    
    
    
    28,336Advance deposits
    
    
    2,091
    
    
    
    1,683Insurance advances
    
    
    2,650
    
    
    
    2,650Current portion of long-term liabilities
    
    
    4,159
    
    
    
    5,092Liabilities related to assets held for sale
    
    
    50,236
    
    
    
    961Total current liabilities
    
    
    95,488
    
    
    
    48,414Long-term liabilities
    
    
    311,578
    
    
    
    355,728Total liabilities
    
    
    407,066
    
    
    
    404,142Commitments and contingencies (Note 8)Stockholders equity:Common stock, $.01 par value, 60,000,000 shares authorized;
25,062,835 and 25,008,621 issued at March 31, 2008 and
December 31, 2007, respectively
    
    
    251
    
    
    
    250Additional paid-in capital
    
    
    330,051
    
    
    
    329,694Accumulated deficit
    
    
    (100,780
    )
    
    
    (93,262
    )Accumulated other comprehensive income
    
    
    3,433
    
    
    
    4,115Treasury stock, at cost, 3,119,056 and 1,709,878 shares at
March 31, 2008 and December 31, 2007, respectively
    
    
    (33,744
    )
    
    
    (20,209
    )Total stockholders equity
    
    
    199,211
    
    
    
    220,588$
    606,277
    
    
    $
    624,730
  3




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended March 31,2008
    
    
    2007(Unaudited in thousands,except per share data)Revenues:Rooms
    
    $
    42,789
    
    
    $
    41,540Food and beverage
    
    
    11,265
    
    
    
    11,650Other
    
    
    1,952
    
    
    
    1,600Total revenues
    
    
    56,006
    
    
    
    54,790Direct operating expenses:Rooms
    
    
    10,860
    
    
    
    10,263Food and beverage
    
    
    8,254
    
    
    
    8,259Other
    
    
    1,324
    
    
    
    1,212Total direct operating expenses
    
    
    20,438
    
    
    
    19,73435,568
    
    
    
    35,056Other operating expenses:Other hotel operating costs
    
    
    17,226
    
    
    
    16,131Property and other taxes, insurance, and leases
    
    
    4,218
    
    
    
    4,698Corporate and other
    
    
    5,371
    
    
    
    5,664Casualty gains, net
    
    
    
    
    
    
    (1,867
    )Depreciation and amortization
    
    
    7,481
    
    
    
    6,831Impairment of long-lived assets
    
    
    2,141
    
    
    
    153Total other operating expenses
    
    
    36,437
    
    
    
    31,610Operating (loss) income
    
    
    (869
    )
    
    
    3,446Other income (expenses):Interest income and other
    
    
    390
    
    
    
    912Interest expense
    
    
    (4,958
    )
    
    
    (5,154
    )Loss before income taxes and minority interests
    
    
    (5,437
    )
    
    
    (796
    )Minority interests (net of taxes, nil)
    
    
    
    
    
    
    (365
    )(Provision) benefit for income taxes  continuing operations
    
    
    
    
    
    
    677Loss from continuing operations
    
    
    (5,437
    )
    
    
    (484
    )Discontinued operations:(Loss) income from discontinued operations before income taxes
    
    
    (1,846
    )
    
    
    2,172Provision for income taxes  discontinued operations
    
    
    (235
    )
    
    
    (1,845
    )(Loss) income from discontinued operations
    
    
    (2,081
    )
    
    
    327Net loss attributable to common stock
    
    $
    (7,518
    )
    
    $
    (157
    )Basic and diluted net loss per share attributable to common stock
    
    $
    (0.33
    )
    
    $
    (0.01
    )
  4




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LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Treasury Stock
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    Shares
    
    
    Amount
    
    
    Equity(Unaudited in thousands, except share data)Balance, December 31, 2007
    
    
    25,008,621
    
    
    
    250
    
    
    
    329,694
    
    
    
    (93,262
    )
    
    
    4,115
    
    
    
    1,709,878
    
    
    
    (20,209
    )
    
    
    220,588Amortization of unearned stock compensation
    
    
    
    
    
    
    
    
    
    
    342
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    342Issuance and vesting of restricted and nonvested shares
    
    
    52,547
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    1,667
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Repurchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,409,178
    
    
    
    (13,535
    )
    
    
    (13,535
    )Realization of pre-emergence deferred tax asset
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Comprehensive loss:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,518
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,518
    )Currency translation adjustments (related taxes estimated at nil)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (682
    )
    
    
    
    
    
    
    
    
    
    
    (682
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,200
    )Balance, March 31, 2008
    
    
    25,062,835
    
    
    
    251
    
    
    
    330,051
    
    
    
    (100,780
    )
    
    
    3,433
    
    
    
    3,119,056
    
    
    
    (33,744
    )
    
    
    199,211
   5




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LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 31, 2008
    
    
    March 31, 2007(unaudited in thousands)Operating activities:Net loss
    
    $
    (7,518
    )
    
    $
    (157
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    7,481
    
    
    
    7,802Impairment of long-lived assets
    
    
    2,464
    
    
    
    1,730Stock compensation expense
    
    
    342
    
    
    
    492Casualty gain, net
    
    
    
    
    
    
    (4,525
    )Deferred income taxes
    
    
    
    
    
    
    727Minority interests
    
    
    
    
    
    
    365Gain on asset dispositions
    
    
    
    
    
    
    (807
    )Amortization of deferred financing costs
    
    
    353
    
    
    
    316Other
    
    
    
    
    
    
    (17
    )Changes in operating assets and liabilities:Accounts receivable, net of allowances
    
    
    (3,027
    )
    
    
    (4,844
    )Insurance receivable
    
    
    
    
    
    
    1,230Inventories
    
    
    (107
    )
    
    
    (67
    )Prepaid expenses and other assets
    
    
    202
    
    
    
    (490
    )Accounts payable
    
    
    3,919
    
    
    
    35Other accrued liabilities
    
    
    105
    
    
    
    1,912Advance deposits
    
    
    837
    
    
    
    1,065Net cash provided by operating activities
    
    
    5,051
    
    
    
    4,767Investing activities:Capital improvements
    
    
    (15,587
    )
    
    
    (8,364
    )Proceeds from sale of assets, net of related selling costs
    
    
    
    
    
    
    5,480Acquisition of minority partners interest
    
    
    
    
    
    
    (2,862
    )Withdrawals (deposits) for capital expenditures
    
    
    676
    
    
    
    (1,728
    )Insurance (payments) receipts related to casualty claims, net
    
    
    (133
    )
    
    
    1,097Net (increase) decrease in restricted cash
    
    
    (227
    )
    
    
    1,216Other
    
    
    
    
    
    
    53Net cash used in investing activities
    
    
    (15,271
    )
    
    
    (5,108
    )Financing activities:Proceeds from exercise of stock options
    
    
    17
    
    
    
    2Principal payments on long-term debt
    
    
    (1,262
    )
    
    
    (3,958
    )Purchases of treasury stock
    
    
    (13,043
    )
    
    
    (1,937
    )Payments of deferred financing costs
    
    
    
    
    
    
    (252
    )Other
    
    
    (2
    )
    
    
    (109
    )Net cash used in financing activities
    
    
    (14,290
    )
    
    
    (6,254
    )Effect of exchange rate changes on cash
    
    
    (35
    )
    
    
    11Net decrease in cash and cash equivalents
    
    
    (24,545
    )
    
    
    (6,584
    )Cash and cash equivalents at beginning of year
    
    
    54,389
    
    
    
    48,188Cash and cash equivalents at end of year
    
    $
    29,844
    
    
    $
    41,604Supplemental cash flow information:Cash paid during the year for:Interest, net of the amounts capitalized shown below
    
    $
    5,612
    
    
    $
    7,113Interest capitalized
    
    
    136
    
    
    
    Income taxes, net of refunds
    
    
    51
    
    
    
    705Supplemental disclosure of non-cash investing and financing activities:Treasury stock repurchases traded, but not settled
    
    
    879
    
    
    
    Purchases of property and equipment on account
    
    
    3,657
    
    
    
    3,141
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LODGIAN, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Business Summary
   
    
    45 hotels that were wholly owned and operated through subsidiaries; and
    
    one hotel that is operated in a joint venture in the form of a limited partnership, in
which a Lodgian subsidiary serves as the general partner, has a 51% voting interest and
exercises significant control.
  2. General
     
    
    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.
 7




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3. Stock-Based Compensation
   Issued Under the StockIncentive PlanAvailable under the plan, less previously issued as of December 31, 2007
    
    
    2,536,666Nonvested stock issued January 22, 2008
    
    
    (76,500
    )Nonvested stock issued February 12, 2008
    
    
    (24,000
    )Shares of nonvested stock withheld from awards to satisfy tax withholding obligations
    
    
    9,184Nonvested shares forfeited in 2008
    
    
    3,000Stock options forfeited in 2008
    
    
    12,831Available for issuance, March 31, 2008
    
    
    2,461,181
 Stock Options
   Weighted AverageStock Options
    
    
    Exercise PriceBalance, December 31, 2007
    
    
    212,408
    
    
    $
    10.60Exercised
    
    
    (1,667
    )
    
    
    9.93Forfeited
    
    
    (12,831
    )
    
    
    9.98Balance, March 31, 2008
    
    
    197,910
    
    
    $
    10.64
   8




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Options outstanding
    
    
    Options exercisableWeighted average
    
    
    Weighted
    
    
    
    
    
    
    Weighted average
    
    
    Weightedremaining life
    
    
    average
    
    
    
    
    
    
    remaining life
    
    
    averageRange of prices
    
    Number
    
    
    (in years)
    
    
    exercise price
    
    
    Number
    
    
    (in years)
    
    
    exercise price$7.83 to $9.39
    
    
    84,663
    
    
    
    7.1
    
    
    $
    9.05
    
    
    
    51,000
    
    
    
    7.1
    
    
    $
    9.05$9.40 to $10.96
    
    
    80,754
    
    
    
    6.3
    
    
    $
    10.47
    
    
    
    78,254
    
    
    
    6.3
    
    
    $
    10.49$10.97 to $15.66
    
    
    32,493
    
    
    
    5.4
    
    
    $
    15.21
    
    
    
    32,493
    
    
    
    5.4
    
    
    $
    15.21197,910
    
    
    
    6.5
    
    
    $
    10.64
    
    
    
    161,747
    
    
    
    6.4
    
    
    $
    10.98Expected to vest
    
    
    188,251
    
    
    
    6.5
    
    
    $
    10.72
 ($ in thousands)Aggregate intrinsic value of stock options outstanding
    
    $
    101Aggregate intrinsic value of stock options expected to vest
    
    $
    81Aggregate intrinsic value of stock options exercisable
    
    $
    27
 Nonvested Stock
     Weighted AverageGrant DateNonvested Stock
    
    
    Fair ValueBalance, December 31, 2007
    
    
    115,191
    
    
    $
    12.89Granted
    
    
    100,500
    
    
    
    8.85Forfeited
    
    
    (3,000
    )
    
    
    10.39Vested
    
    
    (52,547
    )
    
    
    12.87Balance, March 31, 2008
    
    
    160,144
    
    
    $
    10.41
   Unrecognized
    
    
    Weighted-AverageCompensation
    
    
    AmortizationType of Award
    
    Expense ($000s)
    
    
    Period (in years)Stock Options
    
    $
    41
    
    
    
    0.24Nonvested Stock
    
    
    1,517
    
    
    
    1.89Total
    
    $
    1,558
    
    
    
    1.84
  9




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##### Table of Contents



Three Months Ended March 31, 2008
    
    
    Three Months Ended March 31, 2007Compensation
    
    
    Income Tax
    
    
    Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit
    
    
    Expense
    
    
    Benefit(Unaudited in thousands)Stock Options
    
    $
    74
    
    
    $
    29
    
    
    $
    206
    
    
    $
    80Nonvested Stock
    
    
    268
    
    
    
    104
    
    
    
    286
    
    
    
    111Total
    
    $
    342
    
    
    $
    133
    
    
    $
    492
    
    
    $
    191
 4. Treasury Stock
    5. Dispositions and Discontinued Operations
 Assets Held for Sale and Discontinued Operations
  a)
    
    Management commits to a plan to sell the asset;b)
    
    The asset is available for immediate sale in its present condition;c)
    
    An active marketing plan to sell the asset at a reasonable price has been initiated;d)
    
    The sale of the asset is probable within one year; ande)
    
    It is unlikely that significant changes to the plan to sell the asset will be made.
     10




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
    
    $1.3 million on the Holiday Inn Clarksburg, WV to reflected the lowered estimated
selling price;
    
    $0.1 million on the University Plaza Bloomington, IN to record the final disposition of
the hotel; and
    
    $0.1 million to record the disposal of replaced assets at various hotels.
  
    
    Crowne Plaza Worcester, MA
    
    French Quarter Suites Memphis, TN
    
    Hilton Northfield, MI
    
    former Holiday Inn St. Paul, MN (now closed)
    
    Holiday Inn Cromwell Bridge, MD
    
    Holiday Inn East Hartford, CT
    
    Holiday Inn Frederick, MD
    
    Holiday Inn Frisco, CO
    
    Holiday Inn Glen Burnie, MD
    
    Holiday Inn Phoenix, AZ
    
    Holiday Inn Select Windsor, Ontario, Canada
  March 31, 2008
    
    
    December 31, 2007(Unaudited in thousands)Property and equipment, net
    
    $
    76,451
    
    
    $
    7,781Other assets
    
    
    3,795
    
    
    
    228Assets held for sale
    
    $
    80,246
    
    
    $
    8,009Other liabilities
    
    $
    7,300
    
    
    $
    961Long-term debt
    
    
    42,936
    
    
    
    Liabilities related to assets held for sale
    
    $
    50,236
    
    
    $
    961
  Three Months Ended March 31,2008
    
    
    2007(Unaudited in thousands)Total revenues
    
    
    11,553
    
    
    
    29,391Total expenses
    
    
    (12,396
    )
    
    
    (26,865
    )Impairment of long-lived assets
    
    
    (323
    )
    
    
    (1,577
    )Interest income and other
    
    
    9
    
    
    
    14Interest expense
    
    
    (689
    )
    
    
    (2,256
    )Casualty gains, net
    
    
    
    
    
    
    2,658Gain on asset disposition
    
    
    
    
    
    
    807Provision for income taxes
    
    
    (235
    )
    
    
    (1,845
    )(Loss) income from discontinued operations
    
    $
    (2,081
    )
    
    $
    327
 11




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##### Table of Contents



6. Income (Loss) Per Share
  Three Months Ended March 31,2008
    
    
    2007(Unaudited in thousands,except per share data)Numerator:Loss from continuing operations
    
    $
    (5,437
    )
    
    $
    (484
    )(Loss) income from discontinued operations
    
    
    (2,081
    )
    
    
    327Net loss attributable to common stock
    
    $
    (7,518
    )
    
    $
    (157
    )Denominator:Basic and diluted weighted average shares
    
    
    22,644
    
    
    
    24,497Basic and diluted (loss) income per common share:Loss from continuing operations
    
    $
    (0.24
    )
    
    $
    (0.02
    )(Loss) income from discontinued operations
    
    
    (0.09
    )
    
    
    0.01Net loss attributable to common stock
    
    $
    (0.33
    )
    
    $
    (0.01
    )
   7. Long-Term Liabilities
  12




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##### Table of Contents



March 31, 2008
    
    
    December 31, 2007Number
    
    
    Property, plant
    
    
    Long-term
    
    
    Long-termof Hotels
    
    
    and equipment, net
    
    
    obligations
    
    
    obligations
    
    
    Interest rates at March 31, 2008Mortgage DebtMerrill Lynch Mortgage Lending, Inc.  Fixed
    
    
    20
    
    
    $
    246,214
    
    
    $
    153,171
    
    
    $
    153,940
    
    
    
    6.58%Goldman Sachs
    
    
    10
    
    
    
    119,113
    
    
    
    130,000
    
    
    
    130,000
    
    
    LIBOR plus 1.50%; capped at 8.50%Wachovia
    
    
    4
    
    
    
    36,440
    
    
    
    35,254
    
    
    
    35,425
    
    
    $9,620 at 6.03%; $3,037 at 5.78%; $22,597 at 6.04%$18,706 at LIBOR plus 2.90%, capped at 8.4%;IXIS
    
    
    4
    
    
    
    36,333
    
    
    
    39,907
    
    
    
    40,041
    
    
    $21,201 at LIBOR plus 2.95%, capped at 8.45%Total
    
    
    38
    
    
    
    438,100
    
    
    
    358,332
    
    
    
    359,406
    
    
    
    5.63%(1)Long-term liabilities  otherTax notes issued pursuant to our Joint Plan
of Reorganization
    
    
    
    
    
    
    
    
    
    
    475
    
    
    
    633Other
    
    
    
    
    
    
    
    
    
    
    750
    
    
    
    781
    
    
    
    
    
    
    
    1,225
    
    
    
    1,414Property, plant and equipment  unencumbered
    
    
    8
    
    
    
    73,875
    
    
    
    
    
    
    
    46
    
    
    
    511,975
    
    
    
    359,557
    
    
    
    360,820Held for sale
    
    
    (11
    )
    
    
    (76,451
    )
    
    
    (43,820
    )
    
    
    Total (2)
    
    
    35
    
    
    $
    435,524
    
    
    $
    315,737
    
    
    $
    360,820
 
 (1)
    
    The rate represents the annual effective weighted average cost of debt at March 31, 2008.(2)
    
    Long-term debt obligations at March 31, 2008 and December 31, 2007 include the current
portion. 8. Commitments and Contingencies
 Franchise Agreements and Capital Expenditures
   Three Months EndedMarch 31,2008
    
    
    2007(Unaudited in thousands)Continuing operations
    
    $
    3,982
    
    
    $
    3,829Discontinued operations
    
    
    852
    
    
    
    2,071$
    4,834
    
    
    $
    5,900
   13




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##### Table of Contents




    
    Five hotels are in non-compliance of the franchise agreement based on substandard guest
satisfaction scores. If the Company does not achieve scores above the required thresholds
by the designated cure dates, these hotels could be subject to default and termination
based on the terms of the franchise agreements. Two of these hotels are held for sale.
    
    Two hotels are in default of the franchise agreements because of substandard guest
satisfaction scores. If the Company does not achieve scores above the required thresholds
by the designated cure dates, these hotels could be subject to termination of the franchise
agreements. The franchisor granted a six-month extension with regard to one of these
hotels, following the completion of major guest room renovations.
    
    One hotel is in default of the franchise agreement for failure to complete a Property
Improvement Plan. If the Company does not cure the default by June 30, 2008, the hotels
franchise agreement could be terminated by the franchisor. However, the Company has met
with the franchisor and is planning some additional capital improvements to improve guest
satisfaction for which the franchisor is expected to extend the default cure period. This
hotel is held for sale.
   Letters of Credit
  Self-insurance
    Casualty gains (losses) and business interruption insurance
 14




---



##### Table of Contents



Litigation
    9. Income Taxes
     15




---



##### Table of Contents



10. Recent Accounting Pronouncements
   . .
   11. Subsequent Events
  16




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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, 2007.
 Executive Overview
    
    
    45 hotels that were wholly owned and operated through subsidiaries; and
    
    one hotel that we operate in a joint venture in the form of a limited partnership, in which a
Lodgian subsidiary serves as the general partner, has a 51% voting interest and exercises
significant control.
  Overview of Continuing Operations
  
    
    First quarter revenues increased $1.2 million or 2.2%. Rooms revenues increased $1.2
million, or 3.0%, as occupancy rose 2.6%. Our RevPAR index grew 2.3% to 97.9%, excluding
the hotel that closed in 2006 due to a fire. Our RevPAR index for
 17




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##### Table of Contents



the first quarter of 2008
was 99.1% for the 29 hotels that were open and not under renovation in both periods, a
growth rate of 3.7%.
    
    Direct operating contribution increased $0.5 million, or 1.5%, as higher revenue was
partly offset by an increase in costs associated with our self-insured medical and dental
insurance programs and higher food costs.
    
    First quarter operating income decreased $4.3 million as the growth in direct operating
contribution was more than offset by the following:
 
    
    In the first quarter of 2007, we benefited from casualty gains of $1.9
million related to the settlement of a property damage claim. We had no casualty
claims in the first quarter of 2008.
    
    In the first quarter of 2008, we incurred impairment charges of $2.1
million related to the write-off of replaced assets driven largely by certain
renovation projects. Impairment charges in the first quarter of 2007 totaled $0.2
million.
 Overview of Discontinued Operations
     Critical Accounting Policies and Estimates
  Income Statement Overview
  Results of Operations  Continuing Operations
 The analysis below compares the results of operations for the three months ended March 31, 2008 and
2007.
 es  Continuing Operations
 18




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##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007
    
    
    Increase (decrease)(unaudited in thousands)Revenues:Rooms
    
    $
    42,789
    
    
    $
    41,540
    
    
    $
    1,249
    
    
    
    3.0
    %Food and beverage
    
    
    11,265
    
    
    
    11,650
    
    
    
    (385
    )
    
    
    (3.3
    %)Other
    
    
    1,952
    
    
    
    1,600
    
    
    
    352
    
    
    
    22.0
    %Total revenues
    
    $
    56,006
    
    
    $
    54,790
    
    
    $
    1,216
    
    
    
    2.2
    %Occupancy
    
    
    67.0
    %
    
    
    65.3
    %
    
    
    
    
    
    
    2.6
    %ADR
    
    $
    109.33
    
    
    $
    110.21
    
    
    $
    (0.88
    )
    
    
    (0.8
    %)RevPar
    
    $
    73.30
    
    
    $
    71.96
    
    
    $
    1.34
    
    
    
    1.9
    %
    19




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##### Table of Contents



For the three months ended March 31, 2008 and 2007  Supplemental Operating Information
 Hotel
    
    Room
    
    
    
    Three Months Ended March 31,Count
    
    Count
    
    
    
    2008
    
    2007
    
    Increase (Decrease)34
    
    
    
    6,415
    
    
    All Continuing Operations less one hotel closed in 2006 due
to fireOccupancy
    
    
    67.0
    %
    
    
    65.3
    %
    
    
    
    
    
    
    2.6
    %ADR
    
    $
    109.33
    
    
    $
    110.21
    
    
    
    ($0.88
    )
    
    
    (0.8
    )%RevPAR
    
    $
    73.30
    
    
    $
    71.96
    
    
    $
    1.34
    
    
    
    1.9
    %RevPAR Index
    
    
    97.9
    %
    
    
    95.7
    %
    
    
    
    
    
    
    2.3
    %29
    
    
    
    5,149
    
    
    Continuing Operations less one hotel closed in 2006 due to
fire and hotels under renovation in the first quarter 2007
and 2008Occupancy
    
    
    68.4
    %
    
    
    65.3
    %
    
    
    
    
    
    
    4.7
    %ADR
    
    $
    108.00
    
    
    $
    108.51
    
    
    
    ($0.51
    )
    
    
    (0.5
    )%RevPAR
    
    $
    73.91
    
    
    $
    70.81
    
    
    $
    3.10
    
    
    
    4.4
    %RevPAR Index
    
    
    99.1
    %
    
    
    95.6
    %
    
    
    
    
    
    
    3.7
    %12
    
    
    
    1,397
    
    
    Marriott HotelsOccupancy
    
    
    66.2
    %
    
    
    65.9
    %
    
    
    
    
    
    
    0.5
    %ADR
    
    $
    114.57
    
    
    $
    114.66
    
    
    
    ($0.09
    )
    
    
    (0.1
    )%RevPAR
    
    $
    75.81
    
    
    $
    75.60
    
    
    $
    0.21
    
    
    
    0.3
    %RevPAR Index
    
    
    110.2
    %
    
    
    113.5
    %
    
    
    
    
    
    
    (2.9
    )%2
    
    
    
    396
    
    
    Hilton HotelsOccupancy
    
    
    58.9
    %
    
    
    56.5
    %
    
    
    
    
    
    
    4.2
    %ADR
    
    $
    110.00
    
    
    $
    111.55
    
    
    
    ($1.55
    )
    
    
    (1.4
    )%RevPAR
    
    $
    64.82
    
    
    $
    63.08
    
    
    $
    1.74
    
    
    
    2.8
    %RevPAR Index
    
    
    94.8
    %
    
    
    89.8
    %
    
    
    
    
    
    
    5.6
    %16
    
    
    
    3,747
    
    
    IHG Hotels less one hotel closed in 2006 due to fireOccupancy
    
    
    68.2
    %
    
    
    66.6
    %
    
    
    
    
    
    
    2.4
    %ADR
    
    $
    108.94
    
    
    $
    108.70
    
    
    $
    0.24
    
    
    
    0.2
    %RevPAR
    
    $
    74.30
    
    
    $
    72.40
    
    
    $
    1.90
    
    
    
    2.6
    %RevPAR Index
    
    
    98.8
    %
    
    
    94.5
    %
    
    
    
    
    
    
    4.6
    %4
    
    
    
    875
    
    
    Other BrandsOccupancy
    
    
    67.1
    %
    
    
    62.6
    %
    
    
    
    
    
    
    7.2
    %ADR
    
    $
    102.52
    
    
    $
    109.03
    
    
    
    ($6.51
    )
    
    
    (6.0
    )%RevPAR
    
    $
    68.84
    
    
    $
    68.30
    
    
    $
    0.54
    
    
    
    0.8
    %RevPAR Index
    
    
    78.5
    %
    
    
    78.3
    %
    
    
    
    
    
    
    0.3
    %
 20




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##### Table of Contents



Direct operating expenses  Continuing Operations
 % of total revenuesThree Months Ended March 31,
    
    
    
    
    
    
    
    
    
    
    Three Months Ended March 31,2008
    
    
    2007
    
    
    Increase (decrease)
    
    
    2008
    
    
    2007(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    10,860
    
    
    $
    10,263
    
    
    $
    597
    
    
    
    5.8
    %
    
    
    19.4
    %
    
    
    18.7
    %Food and beverage
    
    
    8,254
    
    
    
    8,259
    
    
    
    (5
    )
    
    
    (0.1
    %)
    
    
    14.7
    %
    
    
    15.1
    %Other
    
    
    1,324
    
    
    
    1,212
    
    
    
    112
    
    
    
    9.2
    %
    
    
    2.4
    %
    
    
    2.2
    %Total direct operating expenses
    
    $
    20,438
    
    
    $
    19,734
    
    
    $
    704
    
    
    
    3.6
    %
    
    
    36.5
    %
    
    
    36.0
    %Direct operating contribution (by revenue source):Rooms
    
    $
    31,929
    
    
    $
    31,277
    
    
    $
    652
    
    
    
    2.1
    %Food and beverage
    
    
    3,011
    
    
    
    3,391
    
    
    
    (380
    )
    
    
    (11.2
    %)Other
    
    
    628
    
    
    
    388
    
    
    
    240
    
    
    
    61.9
    %Total direct operating contribution
    
    $
    35,568
    
    
    $
    35,056
    
    
    $
    512
    
    
    
    1.5
    %Direct operating contribution % (by revenue source):Rooms
    
    
    74.6
    %
    
    
    75.3
    %Food and beverage
    
    
    26.7
    %
    
    
    29.1
    %Other
    
    
    32.2
    %
    
    
    24.3
    %Total direct operating contribution
    
    
    63.5
    %
    
    
    64.0
    %
     21




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Other operating expenses and operating income  Continuing Operations
 % of total revenuesThree Months Ended March 31,
    
    
    
    
    
    
    
    
    
    
    Three Months Ended March 31,2008
    
    
    2007
    
    
    Increase (decrease)
    
    
    2008
    
    
    2007(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    3,881
    
    
    $
    3,547
    
    
    $
    334
    
    
    
    9.4
    %
    
    
    6.9
    %
    
    
    6.5
    %Advertising and promotion
    
    
    3,311
    
    
    
    3,072
    
    
    
    239
    
    
    
    7.8
    %
    
    
    5.9
    %
    
    
    5.6
    %Franchise fees
    
    
    3,982
    
    
    
    3,829
    
    
    
    153
    
    
    
    4.0
    %
    
    
    7.1
    %
    
    
    7.0
    %Repairs and maintenance
    
    
    2,766
    
    
    
    2,655
    
    
    
    111
    
    
    
    4.2
    %
    
    
    4.9
    %
    
    
    4.8
    %Utilities
    
    
    3,112
    
    
    
    3,027
    
    
    
    85
    
    
    
    2.8
    %
    
    
    5.6
    %
    
    
    5.5
    %Other expenses
    
    
    174
    
    
    
    1
    
    
    
    173
    
    
    
    n/m
    
    
    
    0.3
    %
    
    
    0.0
    %Other hotel operating costs
    
    
    17,226
    
    
    
    16,131
    
    
    $
    1,095
    
    
    
    6.8
    %
    
    
    30.8
    %
    
    
    29.4
    %Property and other taxes, insurance, and leases
    
    
    4,218
    
    
    
    4,698
    
    
    
    (480
    )
    
    
    (10.2
    %)
    
    
    7.5
    %
    
    
    8.6
    %Corporate and other
    
    
    5,371
    
    
    
    5,664
    
    
    
    (293
    )
    
    
    (5.2
    %)
    
    
    9.6
    %
    
    
    10.3
    %Casualty gains, net
    
    
    
    
    
    
    (1,867
    )
    
    
    1,867
    
    
    
    100.0
    %
    
    
    0.0
    %
    
    
    (3.4
    %)Depreciation and amortization
    
    
    7,481
    
    
    
    6,831
    
    
    
    650
    
    
    
    9.5
    %
    
    
    13.4
    %
    
    
    12.5
    %Impairment of long-lived assets
    
    
    2,141
    
    
    
    153
    
    
    
    1,988
    
    
    
    n/m
    
    
    
    3.8
    %
    
    
    0.3
    %Total other operating expenses
    
    $
    36,437
    
    
    $
    31,610
    
    
    $
    4,827
    
    
    
    15.3
    %
    
    
    65.1
    %
    
    
    57.7
    %Total operating expenses
    
    $
    56,875
    
    
    $
    51,344
    
    
    $
    5,531
    
    
    
    10.8
    %
    
    
    101.6
    %
    
    
    93.7
    %Operating income
    
    $
    (869
    )
    
    $
    3,446
    
    
    $
    (4,315
    )
    
    
    (125.2
    %)
    
    
    (1.6
    %)
    
    
    6.3
    %
   
    
    Hotel general and administrative costs increased $0.3 million, or 9.4%. Of this amount
$0.2 million related to an increase in bad debt expense, as we benefited from a bad debt
recovery in the first quarter of 2007. We also benefited from sales tax credits totaling
$0.1 million in 2007.
    
    Advertising and promotion costs increased $0.2 million, or 7.8%, due largely to
increased staffing and bonuses related to marketing and sales programs designed to drive
higher revenues.
    
    Franchise fees increased $0.2 million, or 4.0%, driven in large part by higher room
revenues. As a percentage of total revenues, franchise fees increased 10 basis points. As
a percentage of room revenues, franchise fees increased 10 basis points from 9.2% to 9.3%.
    
    Repairs and maintenance increased $0.1 million compared to the prior year primarily due
to higher automotive maintenance costs, including higher fuel costs.
    
    Utilities increased $0.1 million, an increase of 10 basis points as a percentage of
total revenue in 2008 due to higher fuel costs.
    
    Other expenses increased $0.2 million driven primarily by costs associated with the
hotel brand conversions and other brand-mandated costs.
  22




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##### Table of Contents



Non-operating income (expenses)  Continuing Operations
 Three Months Ended March 31,2008
    
    2007
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Interest income and other
    
    $
    390
    
    
    $
    912
    
    
    $
    (522
    )
    
    
    (57.2
    %)Interest expense
    
    
    (4,958
    )
    
    
    (5,154
    )
    
    
    (196
    )
    
    
    (3.8
    %)
  Results of Operations  Discontinued Operations
    
    
    $1.3 million on the Holiday Inn Clarksburg, WV to reflect the lowered estimated selling
price;
    
    $0.1 million on the University Plaza Bloomington, IN to record the final disposition of
the hotel; and
    
    $0.1 million to record the disposal of replaced assets.
  Income Taxes
  23




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##### Table of Contents



24




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##### Table of Contents



Additional Financial Information Regarding Quarterly Results of Our Continuing Operations
  2008
    
    
    2007
    
    
    2006First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    SecondQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(Unaudited in thousands)Revenues:Rooms
    
    $
    42,789
    
    
    $
    39,468
    
    
    $
    45,549
    
    
    $
    47,809
    
    
    $
    41,540
    
    
    $
    38,202
    
    
    $
    42,219
    
    
    $
    45,441Food and beverage
    
    
    11,265
    
    
    
    13,319
    
    
    
    12,033
    
    
    
    14,231
    
    
    
    11,650
    
    
    
    12,726
    
    
    
    10,792
    
    
    
    13,007Other
    
    
    1,952
    
    
    
    1,694
    
    
    
    1,994
    
    
    
    2,038
    
    
    
    1,600
    
    
    
    1,700
    
    
    
    1,736
    
    
    
    1,80756,006
    
    
    
    54,481
    
    
    
    59,576
    
    
    
    64,078
    
    
    
    54,790
    
    
    
    52,628
    
    
    
    54,747
    
    
    
    60,255Direct operating expenses:Rooms
    
    
    10,860
    
    
    
    10,129
    
    
    
    11,605
    
    
    
    11,363
    
    
    
    10,263
    
    
    
    10,117
    
    
    
    10,907
    
    
    
    11,025Food and beverage
    
    
    8,254
    
    
    
    8,380
    
    
    
    8,878
    
    
    
    9,245
    
    
    
    8,259
    
    
    
    8,537
    
    
    
    8,116
    
    
    
    8,655Other
    
    
    1,324
    
    
    
    1,210
    
    
    
    1,436
    
    
    
    1,406
    
    
    
    1,212
    
    
    
    1,234
    
    
    
    1,320
    
    
    
    1,45120,438
    
    
    
    19,719
    
    
    
    21,919
    
    
    
    22,014
    
    
    
    19,734
    
    
    
    19,888
    
    
    
    20,343
    
    
    
    21,13135,568
    
    
    
    34,762
    
    
    
    37,657
    
    
    
    42,064
    
    
    
    35,056
    
    
    
    32,740
    
    
    
    34,404
    
    
    
    39,124Other operating expenses:Other hotel operating costs
    
    
    17,226
    
    
    
    15,624
    
    
    
    17,171
    
    
    
    16,906
    
    
    
    16,131
    
    
    
    14,809
    
    
    
    15,564
    
    
    
    15,452Property and other taxes, insurance and leases
    
    
    4,218
    
    
    
    4,210
    
    
    
    3,967
    
    
    
    4,291
    
    
    
    4,698
    
    
    
    4,950
    
    
    
    4,902
    
    
    
    3,961Corporate and other
    
    
    5,371
    
    
    
    4,250
    
    
    
    5,577
    
    
    
    5,905
    
    
    
    5,664
    
    
    
    4,942
    
    
    
    5,587
    
    
    
    5,259Casualty (gain) losses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,867
    )
    
    
    
    
    
    
    (3,085
    )
    
    
    34Restructuring
    
    
    
    
    
    
    (26
    )
    
    
    1,258
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    7,481
    
    
    
    7,329
    
    
    
    7,077
    
    
    
    6,955
    
    
    
    6,831
    
    
    
    6,780
    
    
    
    6,939
    
    
    
    6,762Impairment of long-lived assets
    
    
    2,141
    
    
    
    470
    
    
    
    395
    
    
    
    141
    
    
    
    153
    
    
    
    147
    
    
    
    281
    
    
    
    13Other operating expenses
    
    
    36,437
    
    
    
    31,857
    
    
    
    35,445
    
    
    
    34,198
    
    
    
    31,610
    
    
    
    31,628
    
    
    
    30,188
    
    
    
    31,481Operating (loss) income
    
    
    (869
    )
    
    
    2,905
    
    
    
    2,212
    
    
    
    7,866
    
    
    
    3,446
    
    
    
    1,112
    
    
    
    4,216
    
    
    
    7,643Other income (expenses):Business interruption insurance proceeds
    
    
    
    
    
    
    
    
    
    
    299
    
    
    
    272
    
    
    
    
    
    
    
    530
    
    
    
    2,706
    
    
    
    695Interest income and other
    
    
    390
    
    
    
    913
    
    
    
    1,312
    
    
    
    807
    
    
    
    912
    
    
    
    652
    
    
    
    770
    
    
    
    835Other interest expense
    
    
    (4,958
    )
    
    
    (5,567
    )
    
    
    (5,730
    )
    
    
    (5,816
    )
    
    
    (5,154
    )
    
    
    (5,225
    )
    
    
    (5,403
    )
    
    
    (5,153
    )Loss on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,329
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Loss) income before income taxes and minority interests
    
    
    (5,437
    )
    
    
    (1,749
    )
    
    
    (1,907
    )
    
    
    (200
    )
    
    
    (796
    )
    
    
    (2,931
    )
    
    
    2,289
    
    
    
    4,020Minority interests (net of taxes, nil)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    (365
    )
    
    
    335
    
    
    
    100
    
    
    
    (136
    )(Loss) income before income taxes  continuing operations
    
    
    (5,437
    )
    
    
    (1,749
    )
    
    
    (1,907
    )
    
    
    (256
    )
    
    
    (1,161
    )
    
    
    (2,596
    )
    
    
    2,389
    
    
    
    3,884(Provision) benefit for income taxes  continuing operations
    
    
    
    
    
    
    (2,114
    )
    
    
    907
    
    
    
    392
    
    
    
    677
    
    
    
    (2,121
    )
    
    
    (1,315
    )
    
    
    (2,004
    )(Loss) income from continuing operations
    
    
    (5,437
    )
    
    
    (3,863
    )
    
    
    (1,000
    )
    
    
    136
    
    
    
    (484
    )
    
    
    (4,717
    )
    
    
    1,074
    
    
    
    1,880Discontinued operations:(Loss) income from discontinued operations before income taxes
    
    
    (1,846
    )
    
    
    (5,916
    )
    
    
    1,566
    
    
    
    (222
    )
    
    
    2,172
    
    
    
    (13,472
    )
    
    
    (1,982
    )
    
    
    2,776Benefit (provision) for income taxes
    
    
    (235
    )
    
    
    1,706
    
    
    
    (519
    )
    
    
    (177
    )
    
    
    (1,845
    )
    
    
    (2,524
    )
    
    
    1,070
    
    
    
    (655
    )Income (loss) from discontinued operations
    
    
    (2,081
    )
    
    
    (4,210
    )
    
    
    1,047
    
    
    
    (399
    )
    
    
    327
    
    
    
    (15,996
    )
    
    
    (912
    )
    
    
    2,121Net (loss) income attributable to common stock
    
    $
    (7,518
    )
    
    $
    (8,073
    )
    
    $
    47
    
    
    $
    (263
    )
    
    $
    (157
    )
    
    $
    (20,713
    )
    
    $
    162
    
    
    $
    4,001
 Hotel data by market segment and region
 Hotel data by market segment
   
    
    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, Holiday Inn Select; and
    
    Midscale without Food & Beverage: Fairfield Inn by Marriott and Holiday Inn Express.
 25




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##### Table of Contents



Combined Continuing and Discontinued Operations  44 hotels (excludes 2 hotels)
 Three Months Ended March 31,2008
    
    2007Upper UpscaleNumber of properties
    
    
    4
    
    
    
    4Number of rooms
    
    
    825
    
    
    
    825Occupancy
    
    
    64.4
    %
    
    
    66.6
    %Average daily rate
    
    $
    119.02
    
    
    $
    119.30RevPAR
    
    $
    76.68
    
    
    $
    79.51UpscaleNumber of properties
    
    
    22
    
    
    
    20Number of rooms
    
    
    4,052
    
    
    
    3,580Occupancy
    
    
    69.3
    %
    
    
    68.1
    %Average daily rate
    
    $
    114.93
    
    
    $
    118.45RevPAR
    
    $
    79.59
    
    
    $
    80.68Midscale with Food & BeverageNumber of properties
    
    
    15
    
    
    
    17Number of rooms
    
    
    2,857
    
    
    
    3,329Occupancy
    
    
    61.8
    %
    
    
    61.8
    %Average daily rate
    
    $
    93.52
    
    
    $
    93.45RevPAR
    
    $
    57.78
    
    
    $
    57.75Midscale without Food & BeverageNumber of properties
    
    
    2
    
    
    
    2Number of rooms
    
    
    244
    
    
    
    244Occupancy
    
    
    55.6
    %
    
    
    58.0
    %Average daily rate
    
    $
    116.38
    
    
    $
    107.32RevPAR
    
    $
    64.67
    
    
    $
    62.27Independent HotelsNumber of properties
    
    
    1
    
    
    
    1Number of rooms
    
    
    105
    
    
    
    105Occupancy
    
    
    35.1
    %
    
    
    56.3
    %Average daily rate
    
    $
    55.45
    
    
    $
    47.70RevPAR
    
    $
    19.49
    
    
    $
    26.88All HotelsNumber of properties
    
    
    44
    
    
    
    44Number of rooms
    
    
    8,083
    
    
    
    8,083Occupancy
    
    
    65.3
    %
    
    
    64.9
    %Average daily rate
    
    $
    107.80
    
    
    $
    107.63RevPAR
    
    $
    70.35
    
    
    $
    69.86
 26




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##### Table of Contents



Continuing Operations  34 hotels (excludes 1 hotel and 11 held for sale hotels)
 Three Months Ended March 31,2008
    
    2007Upper UpscaleNumber of properties
    
    
    3
    
    
    
    3Number of rooms
    
    
    634
    
    
    
    634Occupancy
    
    
    62.8
    %
    
    
    67.6
    %Average daily rate
    
    $
    126.48
    
    
    $
    125.06RevPAR
    
    $
    79.44
    
    
    $
    84.54UpscaleNumber of properties
    
    
    21
    
    
    
    19Number of rooms
    
    
    3,809
    
    
    
    3,337Occupancy
    
    
    70.7
    %
    
    
    68.8
    %Average daily rate
    
    $
    115.43
    
    
    $
    119.56RevPAR
    
    $
    81.62
    
    
    $
    82.29Midscale with Food & BeverageNumber of properties
    
    
    8
    
    
    
    10Number of rooms
    
    
    1,728
    
    
    
    2,200Occupancy
    
    
    62.1
    %
    
    
    60.1
    %Average daily rate
    
    $
    86.78
    
    
    $
    89.47RevPAR
    
    $
    53.92
    
    
    $
    53.76Midscale without Food & BeverageNumber of properties
    
    
    2
    
    
    
    2Number of rooms
    
    
    244
    
    
    
    244Occupancy
    
    
    55.6
    %
    
    
    58.0
    %Average daily rate
    
    $
    116.38
    
    
    $
    107.32RevPAR
    
    $
    64.67
    
    
    $
    62.27All HotelsNumber of properties
    
    
    34
    
    
    
    34Number of rooms
    
    
    6,415
    
    
    
    6,415Occupancy
    
    
    67.0
    %
    
    
    65.3
    %Average daily rate
    
    $
    109.33
    
    
    $
    110.21RevPAR
    
    $
    73.30
    
    
    $
    71.96
 27




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##### Table of Contents



Hotel data by region
   
    
    Northeast: Canada, Connecticut, Massachusetts, Maryland, New Hampshire, New York,
Ohio, Pennsylvania;
    
    Southeast: Florida, Georgia, Kentucky, Louisiana, North Carolina, South Carolina,
Tennessee;
    
    Midwest: Arkansas, Indiana, Michigan, Oklahoma, Texas; and
    
    West: Arizona, California, Colorado, New Mexico.
 28




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##### Table of Contents



Combined Continuing and Discontinued Operations  44 hotels (excludes 2 hotels)
 Three Months Ended March 31,2008
    
    2007Northeast RegionNumber of properties
    
    
    18
    
    
    
    18Number of rooms
    
    
    3,620
    
    
    
    3,620Occupancy
    
    
    59.0
    %
    
    
    61.0
    %Average daily rate
    
    $
    102.63
    
    
    $
    100.51RevPAR
    
    $
    60.54
    
    
    $
    61.34Southeast RegionNumber of properties
    
    
    11
    
    
    
    11Number of rooms
    
    
    1,729
    
    
    
    1,729Occupancy
    
    
    66.4
    %
    
    
    64.9
    %Average daily rate
    
    $
    112.66
    
    
    $
    115.44RevPAR
    
    $
    74.85
    
    
    $
    74.91Midwest RegionNumber of properties
    
    
    8
    
    
    
    8Number of rooms
    
    
    1,418
    
    
    
    1,418Occupancy
    
    
    66.8
    %
    
    
    59.4
    %Average daily rate
    
    $
    98.00
    
    
    $
    99.46RevPAR
    
    $
    65.43
    
    
    $
    59.04West RegionNumber of properties
    
    
    7
    
    
    
    7Number of rooms
    
    
    1,316
    
    
    
    1,316Occupancy
    
    
    79.4
    %
    
    
    81.5
    %Average daily rate
    
    $
    121.90
    
    
    $
    120.54RevPAR
    
    $
    96.75
    
    
    $
    98.30All HotelsNumber of properties
    
    
    44
    
    
    
    44Number of rooms
    
    
    8,083
    
    
    
    8,083Occupancy
    
    
    65.3
    %
    
    
    64.9
    %Average daily rate
    
    $
    107.80
    
    
    $
    107.63RevPAR
    
    $
    70.35
    
    
    $
    69.86
 29




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##### Table of Contents



Continuing Operations  34 hotels (excludes 1 hotel and 11 held for sale hotels)
 Three Months Ended March 31,2008
    
    2007Northeast RegionNumber of properties
    
    
    12
    
    
    
    12Number of rooms
    
    
    2,609
    
    
    
    2,609Occupancy
    
    
    61.3
    %
    
    
    61.6
    %Average daily rate
    
    $
    104.80
    
    
    $
    104.64RevPAR
    
    $
    64.19
    
    
    $
    64.45Southeast RegionNumber of properties
    
    
    10
    
    
    
    10Number of rooms
    
    
    1,624
    
    
    
    1,624Occupancy
    
    
    68.5
    %
    
    
    65.4
    %Average daily rate
    
    $
    114.56
    
    
    $
    119.21RevPAR
    
    $
    78.43
    
    
    $
    78.02Midwest RegionNumber of properties
    
    
    7
    
    
    
    7Number of rooms
    
    
    1,227
    
    
    
    1,227Occupancy
    
    
    66.3
    %
    
    
    58.7
    %Average daily rate
    
    $
    98.21
    
    
    $
    99.55RevPAR
    
    $
    65.11
    
    
    $
    58.45West RegionNumber of properties
    
    
    5
    
    
    
    5Number of rooms
    
    
    955
    
    
    
    955Occupancy
    
    
    81.4
    %
    
    
    83.6
    %Average daily rate
    
    $
    122.82
    
    
    $
    119.03RevPAR
    
    $
    99.97
    
    
    $
    99.52All HotelsNumber of properties
    
    
    34
    
    
    
    34Number of rooms
    
    
    6,415
    
    
    
    6,415Occupancy
    
    
    67.0
    %
    
    
    65.3
    %Average daily rate
    
    $
    109.33
    
    
    $
    110.21RevPAR
    
    $
    73.30
    
    
    $
    71.96
 30




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##### Table of Contents



Liquidity and Capital Resources
 Working Capital
         Cash Flow
  Operating activities
  31




---



##### Table of Contents



Investing activities
   Financing activities
   Debt and Contractual Obligations
  Off Balance Sheet Arrangements
  Market Risk
    Forward-looking Statements
  
    
    The effects of regional, national and international economic conditions;
    
    Competitive conditions in the lodging industry and increases in room supply;
 32




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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 the majority of our assets being encumbered on our borrowings and
future growth;
    
    Our ability to meet the continuing listing requirements of the American Stock
Exchange;
    
    The effect of self-insured claims in excess of our reserves, or our ability to
obtain adequate property and liability insurance to protect against losses, or to obtain
insurance at reasonable rates;
    
    Potential litigation and/or governmental inquiries and investigations;
    
    Laws and regulations applicable to our business, including federal, state or
local hotel, resort, restaurant or land use regulations, employment, labor or disability
laws and regulations;
    
    A downturn in the economy due to several factors, including but not limited to,
high energy costs, natural gas and gasoline prices; and
    
    The risks identified in our Form 10-K for the year ended December 31, 2007 under
Risks Related to Our Business and Risks Related to Our Common Stock.
  Inflation
  33




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   34




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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
    
    
    Average Price
    
    
    Part of Publicly
    
    
    Purchased Under theShares
    
    
    Paid Per Share
    
    
    Announced Plans or
    
    
    Publicly Announced Plans orPeriod
    
    Purchased (1)
    
    
    (2)
    
    
    Programs
    
    
    ProgramsJanuary 2008
    
    
    403,866
    
    
    $
    9.67
    
    
    
    403,866
    
    
    $
    10,934,291February 2008
    
    
    554,302
    
    
    $
    8.96
    
    
    
    548,904
    
    
    $
    6,012,925March 2008
    
    
    451,010
    
    
    $
    10.24
    
    
    
    447,224
    
    
    $
    1,428,2871,409,178
    
    
    $
    9.58
    
    
    
    1,399,994
 
 (1)
    
    The total number of shares purchased includes:(a)
    
    shares purchased pursuant to the August 2007 share repurchase program, which granted a
maximum of $30 million of repurchase authority expiring in August 2009, and(b)
    
    shares surrendered to the Company to satisfy tax withholding obligations in connection
with the Stock Incentive Plan, of which there were none in January, 5,398 in February, and
3,786 in March 2008.(2)
    
    The average price paid per share excludes commissions. 
 Item 6. Exhibits
  35




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##### Table of Contents



SIGNATURES
  LODGIAN, INC.By:
    /s/ PETER T. CYRUSPeter T. CyrusDate: May 8, 2008
    
    Interim President and

Chief Executive OfficerBy:
    /s/ JAMES A. MACLENNANJames A. MacLennanDate: May 8, 2008
    
    Executive Vice President and
Chief Financial Officer 36




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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
    
    Separation and Release Agreement between Edward J. Rohling and Lodgian, Inc. dated January
29, 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 4, 2008).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. 37