##### 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 June 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(State or other jurisdiction of 
incorporation or organization)
    
    52-2093696(I.R.S. Employer
Identification No.)
 3445 Peachtree Road, N.E., Suite 700,Atlanta, GA
    
    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
 o o
 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
  Class
    
    Outstanding as of  August 1, 2009Common
    
    21,686,574




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##### 



LODGIAN, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six months ended June
30, 2009 and June 30, 2008 (unaudited)
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the Six months ended June 30,
2009 (unaudited)
    
    
    5Condensed Consolidated Statements of Comprehensive Income for the Three and Six months
ended June 30, 2009 and June 30, 2008 (unaudited)
    
    
    6Condensed Consolidated Statements of Cash Flows for the Six months ended June 30, 2009 and
June 30, 2008 (unaudited)
    
    
    7Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    45Item 4. Controls and Procedures
    
    
    45PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    45Item 1A. Risk Factors
    
    
    45Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 4. Submission of Matters to a Vote of Security Holders
    
    
    46Item 6. Exhibits
    
    
    46Signatures
    
    
    47EX-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
 June 30, 2009
    
    
    December 31, 2008(Unaudited in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    23,752
    
    
    $
    20,454Cash, restricted
    
    
    10,327
    
    
    
    8,179Accounts receivable (net of allowances: 2009
- $328; 2008 - $263)
    
    
    8,184
    
    
    
    7,115Inventories
    
    
    3,116
    
    
    
    2,983Prepaid expenses and other current assets
    
    
    14,166
    
    
    
    21,257Assets held for sale
    
    
    5,622
    
    
    
    33,021Total
current
assets
    
    
    65,167
    
    
    
    93,009Property and
equipment, net
    
    
    450,560
    
    
    
    447,366Deposits for capital
expenditures
    
    
    7,588
    
    
    
    11,408Other assets
    
    
    5,110
    
    
    
    3,631$
    528,425
    
    
    $
    555,414LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    5,647
    
    
    $
    7,897Other accrued
liabilities
    
    
    22,929
    
    
    
    22,897Advance deposits
    
    
    1,953
    
    
    
    1,293Current portion of long-term liabilities
    
    
    66,720
    
    
    
    124,955Liabilities related to assets held for sale
    
    
    803
    
    
    
    16,167Total
current
liabilities
    
    
    98,052
    
    
    
    173,209Long-term liabilities
    
    
    258,104
    
    
    
    194,800Total liabilities
    
    
    356,156
    
    
    
    368,009Commitments and contingencies (Note 8)Stockholders equity:Common stock, $.01 par value, 60,000,000
shares authorized; 25,144,364 and 25,075,837
issued at June 30, 2009 and December 31,
2008, respectively
    
    
    252
    
    
    
    251Additional paid-in
capital
    
    
    331,319
    
    
    
    330,785Accumulated deficit
    
    
    (119,143
    )
    
    
    (105,246
    )Accumulated other comprehensive income
    
    
    33
    
    
    
    1,262Treasury stock, at cost, 3,826,157 and
3,806,000 shares at June 30, 2009 and December 31, 2008,
respectively
    
    
    (39,690
    )
    
    
    (39,647
    )Total stockholders equity
attributable to common stock
    
    
    172,771
    
    
    
    187,405Noncontrolling
interest
    
    
    (502
    )
    
    
    Total
stockholders
equity
    
    
    172,269
    
    
    
    187,405$
    528,425
    
    
    $
    555,414
  3




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited in thousands, except per share data)Revenues:Rooms
    
    $
    40,238
    
    
    $
    50,185
    
    
    $
    77,807
    
    
    $
    95,296Food and beverage
    
    
    12,655
    
    
    
    15,564
    
    
    
    23,658
    
    
    
    27,820Other
    
    
    1,970
    
    
    
    2,153
    
    
    
    3,689
    
    
    
    4,234Total revenues
    
    
    54,863
    
    
    
    67,902
    
    
    
    105,154
    
    
    
    127,350Direct operating expenses:Rooms
    
    
    10,951
    
    
    
    12,391
    
    
    
    21,264
    
    
    
    23,825Food and beverage
    
    
    8,380
    
    
    
    9,996
    
    
    
    16,132
    
    
    
    18,969Other
    
    
    1,335
    
    
    
    1,556
    
    
    
    2,651
    
    
    
    2,967Total direct operating expenses
    
    
    20,666
    
    
    
    23,943
    
    
    
    40,047
    
    
    
    45,76134,197
    
    
    
    43,959
    
    
    
    65,107
    
    
    
    81,589Other operating expenses:Other hotel operating costs
    
    
    15,211
    
    
    
    18,107
    
    
    
    31,138
    
    
    
    36,388Property and other taxes, insurance, and leases
    
    
    4,562
    
    
    
    3,851
    
    
    
    8,854
    
    
    
    8,294Corporate and other
    
    
    3,573
    
    
    
    3,471
    
    
    
    7,181
    
    
    
    9,668Casualty losses, net
    
    
    15
    
    
    
    
    
    
    
    96
    
    
    
    Depreciation and amortization
    
    
    8,800
    
    
    
    7,989
    
    
    
    17,293
    
    
    
    15,455Impairment of long-lived assets
    
    
    3,816
    
    
    
    5,580
    
    
    
    4,325
    
    
    
    7,721Total other operating expenses
    
    
    35,977
    
    
    
    38,998
    
    
    
    68,887
    
    
    
    77,526Operating (loss) income
    
    
    (1,780
    )
    
    
    4,961
    
    
    
    (3,780
    )
    
    
    4,063Other income (expenses):Interest income and other
    
    
    37
    
    
    
    276
    
    
    
    82
    
    
    
    666Interest expense
    
    
    (3,658
    )
    
    
    (4,920
    )
    
    
    (7,579
    )
    
    
    (10,238
    )(Loss) income before income taxes and noncontrolling interest
    
    
    (5,401
    )
    
    
    317
    
    
    
    (11,277
    )
    
    
    (5,509
    )Benefit (provision) for income taxes  continuing operations
    
    
    53
    
    
    
    (33
    )
    
    
    (18
    )
    
    
    (85
    )(Loss) income from continuing operations
    
    
    (5,348
    )
    
    
    284
    
    
    
    (11,295
    )
    
    
    (5,594
    )Discontinued operations:(Loss) income from discontinued operations before income taxes
    
    
    (2,031
    )
    
    
    5,977
    
    
    
    (3,141
    )
    
    
    4,520Benefit (provision) for income taxes  discontinued operations
    
    
    62
    
    
    
    106
    
    
    
    37
    
    
    
    (77
    )(Loss) income from discontinued operations
    
    
    (1,969
    )
    
    
    6,083
    
    
    
    (3,104
    )
    
    
    4,443Net (loss) income
    
    
    (7,317
    )
    
    
    6,367
    
    
    
    (14,399
    )
    
    
    (1,151
    )Less: Net loss attributable to noncontrolling interest
    
    
    342
    
    
    
    
    
    
    
    502
    
    
    
    Net (loss) income attributable to common stock
    
    $
    (6,975
    )
    
    $
    6,367
    
    
    $
    (13,897
    )
    
    $
    (1,151
    )Basic and diluted net (loss) income per share attributable to common stock
    
    $
    (0.33
    )
    
    $
    0.29
    
    
    $
    (0.65
    )
    
    $
    (0.05
    )
  4




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LODGIAN, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS 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
    
    
    
    
    
    
    
    
    
    
    535
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    535
    
    
    
    
    
    
    
    535Issuance and vesting of nonvested shares
    
    
    68,527
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,157
    
    
    
    (43
    )
    
    
    (43
    )
    
    
    
    
    
    
    (43
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,897
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,897
    )
    
    
    (502
    )
    
    
    (14,399
    )Currency translation adjustments (related taxes estimated at nil)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,229
    )
    
    
    
    
    
    
    
    
    
    
    (1,229
    )
    
    
    
    
    
    
    (1,229
    )Balance, June 30, 2009
    
    
    25,144,364
    
    
    $
    252
    
    
    $
    331,319
    
    
    $
    (119,143
    )
    
    $
    33
    
    
    
    3,826,157
    
    
    $
    (39,690
    )
    
    $
    172,771
    
    
    $
    (502
    )
    
    $
    172,269
  5




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LODGIAN, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 For the three months ended June 30,
    
    
    For the six months ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(unaudited in thousands)Net (loss) income attributable to common stock
    
    $
    (6,975
    )
    
    $
    6,367
    
    
    $
    (13,897
    )
    
    $
    (1,151
    )Currency translation adjustments (estimated taxes nil)
    
    
    (1,018
    )
    
    
    207
    
    
    
    (1,229
    )
    
    
    (475
    )Less: reclassification adjustment for losses
included in net income (estimated taxes nil)
    
    
    1,156
    
    
    
    
    
    
    
    1,156
    
    
    
    Comprehensive (loss) income
    
    $
    (6,837
    )
    
    $
    6,574
    
    
    $
    (13,970
    )
    
    $
    (1,626
    )
   6




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30, 2009
    
    
    June 30, 2008(unaudited in thousands)Operating activities:Net loss
    
    $
    (14,399
    )
    
    $
    (1,151
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    17,293
    
    
    
    15,478Impairment of long-lived assets
    
    
    8,735
    
    
    
    9,218Stock compensation expense
    
    
    535
    
    
    
    549Casualty loss (gain), net
    
    
    96
    
    
    
    (5,583
    )Gain on asset dispositions
    
    
    (1,824
    )
    
    
    (Gain) loss on extinguishment of debt
    
    
    (174
    )
    
    
    28Amortization of deferred financing costs
    
    
    642
    
    
    
    709Changes in operating assets and liabilities:Accounts receivable, net of allowances
    
    
    (1,049
    )
    
    
    (2,865
    )Inventories
    
    
    (82
    )
    
    
    (398
    )Prepaid expenses and other assets
    
    
    3,287
    
    
    
    (177
    )Accounts payable
    
    
    1,570
    
    
    
    (540
    )Other accrued liabilities
    
    
    215
    
    
    
    (1,251
    )Advance deposits
    
    
    641
    
    
    
    575Net cash provided by operating activities
    
    
    15,486
    
    
    
    14,592Investing activities:Capital improvements
    
    
    (17,413
    )
    
    
    (25,495
    )Proceeds from sale of assets, net of related selling costs and note receivable from buyer
    
    
    12,641
    
    
    
    7,723Withdrawals for capital expenditures
    
    
    3,820
    
    
    
    5,121Insurance proceeds related to casualty claims, net
    
    
    
    
    
    
    5,187Payments related to casualty damage, net
    
    
    (96
    )
    
    
    Net increase in restricted cash
    
    
    (2,148
    )
    
    
    (353
    )Other
    
    
    41
    
    
    
    30Net cash used in investing activities
    
    
    (3,155
    )
    
    
    (7,787
    )Financing activities:Proceeds from exercise of stock options
    
    
    
    
    
    
    23Principal payments on long-term debt
    
    
    (9,188
    )
    
    
    (8,048
    )Purchases of treasury stock
    
    
    (43
    )
    
    
    (16,774
    )Payments of deferred financing costs
    
    
    (61
    )
    
    
    Defeasance proceeds, net
    
    
    224
    
    
    
    Net cash used in financing activities
    
    
    (9,068
    )
    
    
    (24,799
    )Effect of exchange rate changes on cash
    
    
    35
    
    
    
    (28
    )Net increase in cash and cash equivalents
    
    
    3,298
    
    
    
    (18,022
    )Cash and cash equivalents at beginning of year
    
    
    20,454
    
    
    
    54,389Cash and cash equivalents at end of year
    
    $
    23,752
    
    
    $
    36,367Supplemental cash flow information:Cash paid during the year for:Interest, net of the amounts capitalized shown below
    
    $
    7,101
    
    
    $
    10,596Interest capitalized
    
    
    224
    
    
    
    217Income taxes, net of refunds
    
    
    (74
    )
    
    
    148Supplemental disclosure of non-cash investing and financing activities:Treasury stock repurchases traded, but not settled
    
    
    
    
    
    
    145Purchases of property and equipment on account
    
    
    1,566
    
    
    
    3,224Note 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
   Available 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
    
    
    20,157Nonvested shares forfeited in 2009
    
    
    18,083Stock options forfeited in 2009
    
    
    Available for issuance, June 30, 2009
    
    
    2,216,658
 Stock Options
   Options Outstanding and ExercisableWeighted Average
    
    
    WeightedRemaining Life
    
    
    AverageRange of prices
    
    Number
    
    
    (In Years)
    
    
    Exercise Price$7.83 to $9.39
    
    
    73,663
    
    
    
    5.9
    
    
    $
    9.05$9.40 to $10.96
    
    
    72,587
    
    
    
    5.1
    
    
    $
    10.51$10.97 to $15.66
    
    
    28,661
    
    
    
    4.2
    
    
    $
    15.21174,911
    
    
    
    5.3
    
    
    $
    10.66
  9




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##### Table of Contents



Nonvested Stock
     WeightedAverageNonvested
    
    
    Grant DateStock
    
    
    Fair ValueBalance, December 31, 2008
    
    
    133,474
    
    
    $
    10.41Granted
    
    
    321,503
    
    
    
    2.59Forfeited
    
    
    (18,083
    )
    
    
    3.83Vested
    
    
    (68,527
    )
    
    
    10.71Balance, June 30, 2009
    
    
    368,367
    
    
    $
    3.86
    Unrecognized
    
    
    Weighted-AverageCompensation
    
    
    AmortizationType of Award
    
    Expense ($000s)
    
    
    Period (in years)(unaudited in thousands)Nonvested Stock
    
    $
    749
    
    
    
    1.46Revised Plan Nonvested Stock Awards
    
    $
    305
    
    
    
    2.71Total
    
    $
    1,054
    
    
    
    1.82
  10




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##### Table of Contents



Three Months Ended June 30, 2009
    
    
    Three Months Ended June 30, 2008Compensation
    
    
    Income Tax
    
    
    Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit
    
    
    Expense
    
    
    Benefit(unaudited in thousands)Stock Options
    
    $
    
    
    
    $
    
    
    
    $
    (125
    )
    
    $
    (49
    )Nonvested Stock
    
    
    216
    
    
    
    84
    
    
    
    285
    
    
    
    111Revised Plan Nonvested Stock Awards
    
    
    26
    
    
    
    10
    
    
    
    47
    
    
    
    18Total
    
    $
    242
    
    
    $
    94
    
    
    $
    207
    
    
    $
    80
  Six Months Ended June 30, 2009
    
    
    Six Months Ended June 30, 2008Compensation
    
    
    Income Tax
    
    
    Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit
    
    
    Expense
    
    
    Benefit(unaudited in thousands)Stock Options
    
    $
    
    
    
    $
    
    
    
    $
    (51
    )
    
    $
    (20
    )Nonvested Stock
    
    
    503
    
    
    
    195
    
    
    
    553
    
    
    
    215Revised Plan Nonvested Stock Awards
    
    
    32
    
    
    
    12
    
    
    
    47
    
    
    
    18Total
    
    $
    535
    
    
    $
    207
    
    
    $
    549
    
    
    $
    213
 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;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.
 11




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
    
    $3.3 million on the Ramada Plaza Northfield, MI to reflect the current estimated selling
price, net of selling costs;
    
    $0.3 million on the French Quarter Suites Memphis, TN (closed) to reflect the current
estimated selling price, net of selling costs; and
    
    $0.1 million on the Holiday Inn in Windsor, Ontario, Canada to reflect the final selling
price, net of selling costs.
  
    
    $3.3 million on the Ramada Plaza Northfield, MI to reflect the current estimated selling
price, net of selling costs;
    
    $0.8 million on the Holiday Inn in Windsor, Ontario, Canada to reflect the final selling
price, net of selling costs; and
    
    $0.3 million on the French Quarter Suites Memphis, TN (closed) to reflect the current
estimated selling price, net of selling costs.
  
    
    $0.6 million on the Ramada Plaza Northfield, MI to reflect the then current estimated
selling price, net of selling costs;
    
    $0.4 million on the Holiday Inn East Hartford, CT 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.
  
    
    $0.9 million on the Ramada Plaza Northfield, MI to reflect the then current estimated
selling price, net of selling costs;
    
    $0.4 million on the Holiday Inn East Hartford, CT to reflect the then current estimated
selling price, net of selling costs;
 12




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##### Table of Contents




    
    $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
  June 30, 2009
    
    
    December 31, 2008(Unaudited in thousands)Property and equipment, net
    
    $
    4,905
    
    
    $
    31,351Other assets
    
    
    717
    
    
    
    1,670Assets held for sale
    
    $
    5,622
    
    
    $
    33,021Other liabilities
    
    $
    803
    
    
    $
    6,886Long-term debt
    
    
    
    
    
    
    9,281Liabilities related to assets held for sale
    
    $
    803
    
    
    $
    16,167
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited in thousands)Total revenues
    
    
    1,426
    
    
    
    7,506
    
    
    
    4,539
    
    
    
    15,617Total expenses
    
    
    (1,730
    )
    
    
    (6,272
    )
    
    
    (5,165
    )
    
    
    (15,199
    )Impairment of long-lived assets
    
    
    (3,699
    )
    
    
    (1,174
    )
    
    
    (4,410
    )
    
    
    (1,496
    )Business interruption proceeds
    
    
    
    
    
    
    672
    
    
    
    
    
    
    
    672Interest income and other
    
    
    
    
    
    
    7
    
    
    
    1
    
    
    
    16Interest expense
    
    
    (26
    )
    
    
    (317
    )
    
    
    (104
    )
    
    
    (645
    )Casualty gains, net
    
    
    
    
    
    
    5,583
    
    
    
    
    
    
    
    5,583Gain on asset disposition
    
    
    1,824
    
    
    
    
    
    
    
    1,824
    
    
    
    Gain on extinguishment of debt
    
    
    174
    
    
    
    (28
    )
    
    
    174
    
    
    
    (28
    )Provision for income taxes
    
    
    62
    
    
    
    106
    
    
    
    37
    
    
    
    (77
    )Loss from discontinued operations
    
    $
    (1,969
    )
    
    $
    6,083
    
    
    $
    (3,104
    )
    
    $
    4,443
   13




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6. Income (Loss) Per Share
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited in thousands, except per share data)Numerator:(Loss) income from continuing operations
    
    $
    (5,348
    )
    
    $
    284
    
    
    $
    (11,295
    )
    
    $
    (5,594
    )Less: Net loss attributable to noncontrolling interest
    
    
    342
    
    
    
    
    
    
    
    502
    
    
    
    (Loss) income from continuing operations attributable to common stock
    
    
    (5,006
    )
    
    
    284
    
    
    
    (10,793
    )
    
    
    (5,594
    )(Loss) income from discontinued operations
    
    
    (1,969
    )
    
    
    6,083
    
    
    
    (3,104
    )
    
    
    4,443Net (loss) income attributable to common stock
    
    $
    (6,975
    )
    
    $
    6,367
    
    
    $
    (13,897
    )
    
    $
    (1,151
    )Denominator:Basic weighted average shares
    
    
    21,318
    
    
    
    21,781
    
    
    
    21,310
    
    
    
    22,213Diluted weighted average shares
    
    
    21,318
    
    
    
    21,826
    
    
    
    21,310
    
    
    
    22,213Basic (loss) income per common share:(Loss) income from continuing operations attributable to common stock
    
    $
    (0.23
    )
    
    $
    0.01
    
    
    $
    (0.51
    )
    
    $
    (0.25
    )(Loss) income from discontinued operations
    
    
    (0.09
    )
    
    
    0.28
    
    
    
    (0.15
    )
    
    
    0.20Net (loss) income attributable to common stock
    
    $
    (0.33
    )
    
    $
    0.29
    
    
    $
    (0.65
    )
    
    $
    (0.05
    )Diluted (loss) income per common share:(Loss) income from continuing operations attributable to common stock
    
    $
    (0.23
    )
    
    $
    0.01
    
    
    $
    (0.51
    )
    
    $
    (0.25
    )(Loss) income from discontinued operations
    
    
    (0.09
    )
    
    
    0.28
    
    
    
    (0.15
    )
    
    
    0.20Net (loss) income attributable to common stock
    
    $
    (0.33
    )
    
    $
    0.29
    
    
    $
    (0.65
    )
    
    $
    (0.05
    )
    7. Long-Term Liabilities
   14




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June 30, 2009
    
    
    December 31, 2008Number
    
    
    Property, plant
    
    
    Long-term
    
    
    Long-termof Hotels
    
    
    and equipment, net
    
    
    obligations
    
    
    obligations
    
    
    Interest rates at June 30, 2009($ unaudited in thousands)Mortgage DebtGoldman Sachs
    
    
    10
    
    
    $
    123,738
    
    
    $
    130,000
    
    
    $
    130,000
    
    
    LIBOR plus 1.50%; capped at 6.50%Merrill Lynch Fixed Rate Pool 1
    
    
    4
    
    
    
    65,962
    
    
    
    38,669
    
    
    
    39,372
    
    
    6.58%Merrill Lynch Fixed Rate Pool 3
    
    
    6
    
    
    
    76,657
    
    
    
    45,739
    
    
    
    53,031
    
    
    6.58%Merrill Lynch Fixed Rate Pool 4
    
    
    6
    
    
    
    81,794
    
    
    
    35,576
    
    
    
    35,984
    
    
    6.58%IXIS
    
    
    3
    
    
    
    18,503
    
    
    
    20,828
    
    
    
    20,977
    
    
    LIBOR plus 2.95%; capped at 7.45%IXIS
    
    
    1
    
    
    
    16,370
    
    
    
    18,412
    
    
    
    18,530
    
    
    LIBOR plus 2.90%; capped at 7.90%Wachovia
    
    
    1
    
    
    
    14,344
    
    
    
    16,328
    
    
    
    16,501
    
    
    6.04%Wachovia
    
    
    1
    
    
    
    4,942
    
    
    
    9,411
    
    
    
    9,478
    
    
    6.03%Wachovia
    
    
    1
    
    
    
    5,515
    
    
    
    5,706
    
    
    
    5,767
    
    
    6.04%Wachovia
    
    
    1
    
    
    
    5,780
    
    
    
    2,954
    
    
    
    2,988
    
    
    5.78%Total
    
    
    34
    
    
    
    413,605
    
    
    
    323,623
    
    
    
    332,628
    
    
    4.20% (1)Long-term liabilities  otherTax notes issued pursuant to our Joint Plan
of Reorganization
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    42Other
    
    
    
    
    
    
    
    
    
    
    1,199
    
    
    
    1,342
    
    
    
    
    
    
    
    1,201
    
    
    
    1,384Property, plant and equipment  Unencumbered
    
    
    4
    
    
    
    41,860
    
    
    
    
    
    
    
    38
    
    
    
    455,465
    
    
    
    324,824
    
    
    
    334,012Held for sale
    
    
    (2
    )
    
    
    (4,905
    )
    
    
    
    
    
    
    (14,257
    )Held for use (2)
    
    
    36
    
    
    $
    450,560
    
    
    $
    324,824
    
    
    $
    319,755
 
 (1)
    
    The rate represents the annual effective weighted average cost of debt at June 30, 2009.(2)
    
    Long-term debt obligations at June 30, 2009 and December 31, 2008 include the current portion
of $66.7 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
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited in thousands)Continuing operations
    
    $
    4,071
    
    
    $
    4,782
    
    
    $
    7,846
    
    
    $
    8,983Discontinued operations
    
    
    99
    
    
    
    567
    
    
    
    343
    
    
    
    1,199$
    4,170
    
    
    $
    5,349
    
    
    $
    8,189
    
    
    $
    10,182
   17




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##### Table of Contents




    
    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 September 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.
    
    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 September 2009, 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. Since the Company
did not achieve scores above the required thresholds by June 2009, the hotels franchise
agreement could be subject to termination by the franchisor. However, since the hotel
recently completed a renovation, the Company anticipates that it will be given additional
time to cure the defaults.
    
    The Company is anticipating cure letters for two hotels to be delivered no later than
February 2010.
     Letters of Credit
  Self-insurance
  18




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Casualty gains (losses) and business interruption insurance
  Litigation
   9. Income Taxes
    19




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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.
   Fair Value Measurements at Reporting Date Using(unaudited in thousands)SignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Total GainsDescription
    
    June 30, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Losses)Real Estate Assets  Held for Use Hotels
    
    $
    5,000
    
    
    $
    
    
    
    $
    
    
    
    $
    5,000
    
    
    $
    (3,076
    )Real Estate Assets  Held for Sale Hotels
    
    
    5,207
    
    
    
    
    
    
    
    5,207
    
    
    
    
    
    
    
    (3,581
    )$
    10,207
    
    
    $
    
    
    
    $
    5,207
    
    
    $
    5,000
    
    
    $
    (6,657
    )
  .
 20




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008(Unaudited in thousands, except per share data)Income (loss) from continuing operations
    
    $
    284
    
    
    $
    (5,594
    )Less: Net loss attributable to noncontrolling interest
    
    
    269
    
    
    
    44Income (loss) from continuing operations attributable to common stock
    
    
    553
    
    
    
    (5,550
    )Income from discontinued operations
    
    
    6,083
    
    
    
    4,443Net income (loss) attributable to common stock
    
    $
    6,636
    
    
    $
    (1,107
    )DenominatorBasic weighted average shares
    
    
    21,781
    
    
    
    22,213Diluted weighted average shares
    
    
    21,826
    
    
    
    22,213Basic income (loss) per common share:Income (loss) from continuing operations attributable to common stock
    
    $
    0.03
    
    
    $
    (0.25
    )Income from discontinued operations
    
    
    0.28
    
    
    
    0.20Net income (loss) attributable to common stock
    
    $
    0.30
    
    
    $
    (0.05
    )Diluted income (loss) per common share:Income (loss) from continuing operations attributable to common stock
    
    $
    0.03
    
    
    $
    (0.25
    )Income from discontinued operations
    
    
    0.28
    
    
    
    0.20Net income (loss) attributable to common stock
    
    $
    0.30
    
    
    $
    (0.05
    )
  21




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.
      22




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Recently Issued Pronouncements
    11. Subsequent Events
  23




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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
    Overview of Continuing Operations
  
    
    Second quarter revenues decreased $13.0 million or 19.2%. Rooms revenues decreased $9.9
million, or 19.8%, as occupancy and average daily rate decreased 12.4% and 8.4%,
respectively. Food and beverage revenues declined $2.9 million, driven largely by fewer
banquets and lower occupancy.
    
    Operating income decreased $6.7 million to a loss of $1.8 million. We realized the
benefits of several cost containment initiatives as total operating expenses decreased $6.3
million, or 10.0%. However, these initiatives did not fully offset the $13.0 million
decline in revenues since many of our operating costs are fixed in nature.
 Overview of Discontinued Operations
    24




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Critical Accounting Policies and Estimates
     25




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008(Unaudited in thousands, except per share data)Income (loss) from continuing operations
    
    $
    284
    
    
    $
    (5,594
    )Less: Net loss attributable to noncontrolling interest
    
    
    269
    
    
    
    44Income (loss) from continuing operations attributable to common stock
    
    
    553
    
    
    
    (5,550
    )Income from discontinued operations
    
    
    6,083
    
    
    
    4,443Net income (loss) attributable to common stock
    
    $
    6,636
    
    
    $
    (1,107
    )DenominatorBasic weighted average shares
    
    
    21,781
    
    
    
    22,213Diluted weighted average shares
    
    
    21,826
    
    
    
    22,213Basic income (loss) per common share:Income (loss) from continuing operations attributable to common stock
    
    $
    0.03
    
    
    $
    (0.25
    )Income from discontinued operations
    
    
    0.28
    
    
    
    0.20Net income (loss) attributable to common stock
    
    $
    0.30
    
    
    $
    (0.05
    )Diluted income (loss) per common share:Income (loss) from continuing operations attributable to common stock
    
    $
    0.03
    
    
    $
    (0.25
    )Income from discontinued operations
    
    
    0.28
    
    
    
    0.20Net income (loss) attributable to common stock
    
    $
    0.30
    
    
    $
    (0.05
    )
 Income Statement Overview
  Results of Operations  Continuing Operations
 The analysis below compares the results of operations for the three months ended June 30, 2009 and
2008.
 Revenues  Continuing Operations
 Three Months Ended June 30,2009
    
    
    2008
    
    
    Increase (decrease)(unaudited in thousands)Revenues:Rooms
    
    $
    40,238
    
    
    $
    50,185
    
    
    $
    (9,947
    )
    
    
    (19.8
    %)Food and beverage
    
    
    12,655
    
    
    
    15,564
    
    
    
    (2,909
    )
    
    
    (18.7
    %)Other
    
    
    1,970
    
    
    
    2,153
    
    
    
    (183
    )
    
    
    (8.5
    %)Total revenues
    
    $
    54,863
    
    
    $
    67,902
    
    
    $
    (13,039
    )
    
    
    (19.2
    %)Occupancy
    
    
    66.0
    %
    
    
    75.3
    %
    
    
    
    
    
    
    (12.4
    %)ADR
    
    $
    98.66
    
    
    $
    107.69
    
    
    $
    (9.03
    )
    
    
    (8.4
    %)RevPar
    
    $
    65.12
    
    
    $
    81.08
    
    
    $
    (15.96
    )
    
    
    (19.7
    %)
   26




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27




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Direct operating expenses  Continuing Operations
 % of total revenuesThree Months Ended June 30,
    
    
    
    
    
    
    
    
    
    
    Three Months Ended June 30,2009
    
    
    2008
    
    
    Increase (decrease)
    
    
    2009
    
    
    2008(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    10,951
    
    
    $
    12,391
    
    
    $
    (1,440
    )
    
    
    (11.6
    %)
    
    
    20.0
    %
    
    
    18.2
    %Food and beverage
    
    
    8,380
    
    
    
    9,996
    
    
    
    (1,616
    )
    
    
    (16.2
    %)
    
    
    15.3
    %
    
    
    14.7
    %Other
    
    
    1,335
    
    
    
    1,556
    
    
    
    (221
    )
    
    
    (14.2
    %)
    
    
    2.4
    %
    
    
    2.3
    %Total direct operating expenses
    
    $
    20,666
    
    
    $
    23,943
    
    
    $
    (3,277
    )
    
    
    (13.7
    %)
    
    
    37.7
    %
    
    
    35.3
    %Direct operating contribution (by revenue source):Rooms
    
    $
    29,287
    
    
    $
    37,794
    
    
    $
    (8,507
    )
    
    
    (22.5
    %)Food and beverage
    
    
    4,275
    
    
    
    5,568
    
    
    
    (1,293
    )
    
    
    (23.2
    %)Other
    
    
    635
    
    
    
    597
    
    
    
    38
    
    
    
    6.4
    %Total direct operating contribution
    
    $
    34,197
    
    
    $
    43,959
    
    
    $
    (9,762
    )
    
    
    (22.2
    %)Direct operating contribution % (by revenue source):Rooms
    
    
    72.8
    %
    
    
    75.3
    %Food and beverage
    
    
    33.8
    %
    
    
    35.8
    %Other
    
    
    32.2
    %
    
    
    27.7
    %Total direct operating contribution
    
    
    62.3
    %
    
    
    64.7
    %
     28




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Other operating expenses and operating income  Continuing Operations
 % of total revenuesThree Months Ended June 30,
    
    
    
    
    
    
    
    
    
    
    Three Months Ended June 30,2009
    
    
    2008
    
    
    Increase (decrease)
    
    
    2009
    
    
    2008(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    3,292
    
    
    $
    3,886
    
    
    $
    (594
    )
    
    
    (15.3
    %)
    
    
    6.0
    %
    
    
    5.7
    %Advertising and promotion
    
    
    2,358
    
    
    
    3,139
    
    
    
    (781
    )
    
    
    (24.9
    %)
    
    
    4.3
    %
    
    
    4.6
    %Franchise fees
    
    
    4,071
    
    
    
    4,782
    
    
    
    (711
    )
    
    
    (14.9
    %)
    
    
    7.4
    %
    
    
    7.0
    %Repairs and maintenance
    
    
    2,652
    
    
    
    3,066
    
    
    
    (414
    )
    
    
    (13.5
    %)
    
    
    4.8
    %
    
    
    4.5
    %Utilities
    
    
    2,795
    
    
    
    3,179
    
    
    
    (384
    )
    
    
    (12.1
    %)
    
    
    5.1
    %
    
    
    4.7
    %Other expenses
    
    
    43
    
    
    
    55
    
    
    
    (12
    )
    
    
    (21.8
    %)
    
    
    0.1
    %
    
    
    0.1
    %Other hotel operating costs
    
    $
    15,211
    
    
    $
    18,107
    
    
    $
    (2,896
    )
    
    
    (16.0
    %)
    
    
    27.7
    %
    
    
    26.7
    %Property and other taxes, insurance, and leases
    
    
    4,562
    
    
    
    3,851
    
    
    
    711
    
    
    
    18.5
    %
    
    
    8.3
    %
    
    
    5.7
    %Corporate and other
    
    
    3,573
    
    
    
    3,471
    
    
    
    102
    
    
    
    2.9
    %
    
    
    6.5
    %
    
    
    5.1
    %Casualty losses, net
    
    
    15
    
    
    
    
    
    
    
    15
    
    
    

    n/m

    
    
    0.0
    %
    
    
    0.0
    %Depreciation and amortization
    
    
    8,800
    
    
    
    7,989
    
    
    
    811
    
    
    
    10.2
    %
    
    
    16.0
    %
    
    
    11.8
    %Impairment of long-lived assets
    
    
    3,816
    
    
    
    5,580
    
    
    
    (1,764
    )
    
    
    (31.6
    %)
    
    
    7.0
    %
    
    
    8.2
    %Total other operating expenses
    
    $
    35,977
    
    
    $
    38,998
    
    
    $
    (3,021
    )
    
    
    (7.7
    %)
    
    
    65.6
    %
    
    
    57.4
    %Total operating expenses
    
    $
    56,643
    
    
    $
    62,941
    
    
    $
    (6,298
    )
    
    
    (10.0
    %)
    
    
    103.2
    %
    
    
    92.7
    %Operating (loss) income
    
    $
    (1,780
    )
    
    $
    4,961
    
    
    $
    (6,741
    )
    
    
    (135.9
    %)
    
    
    (3.2
    %)
    
    
    7.3
    %
   
    
    Hotel general and administrative costs decreased $0.6 million, or 15.3%. The decrease
was primarily the result of lower labor costs of $0.2 million driven by initiatives to
reduce our cost structure and a $0.1 million decline in medical and workers compensation
insurance costs. Also contributing to the decline was a $0.2 reduction in travel and
entertainment costs.
    
    Advertising and promotion costs decreased $0.8 million, or 24.9%, because of lower
payroll costs of $0.5 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
decrease was largely the result of cost containment initiatives.
    
    Franchise fees decreased $0.7 million, or 14.9%, 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 $0.4 million, or 13.5%, compared to the prior year
primarily due to lower labor costs of $0.1 million and lower fuel costs of $0.1 million as
well as lower overall maintenance costs.
    
    Utilities decreased $0.4 million, or 12.1%, driven largely by reduced consumption.
    
    Other expenses remained flat compared to the prior year.
   29




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##### Table of Contents



Non-operating income (expenses)  Continuing Operations
 Three Months Ended June 30,2009
    
    2008
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Interest income and other
    
    $
    37
    
    
    $
    276
    
    
    $
    (239
    )
    
    
    (86.6
    %)Interest expense
    
    
    (3,658
    )
    
    
    (4,920
    )
    
    
    (1,262
    )
    
    
    (25.7
    %)
  The analysis below compares the results of operations for the six months ended June 30, 2009 and
2008.
 Revenues  Continuing Operations
 Six Months Ended June 30,2009
    
    
    2008
    
    
    Increase (decrease)(unaudited in thousands)Revenues:Rooms
    
    $
    77,807
    
    
    $
    95,296
    
    
    $
    (17,489
    )
    
    
    (18.4
    %)Food and beverage
    
    
    23,658
    
    
    
    27,820
    
    
    
    (4,162
    )
    
    
    (15.0
    %)Other
    
    
    3,689
    
    
    
    4,234
    
    
    
    (545
    )
    
    
    (12.9
    %)Total revenues
    
    $
    105,154
    
    
    $
    127,350
    
    
    $
    (22,196
    )
    
    
    (17.4
    %)Occupancy
    
    
    63.7
    %
    
    
    71.0
    %
    
    
    
    
    
    
    (10.3
    %)ADR
    
    $
    99.36
    
    
    $
    108.44
    
    
    $
    (9.08
    )
    
    
    (8.4
    %)RevPar
    
    $
    63.27
    
    
    $
    76.98
    
    
    $
    (13.71
    )
    
    
    (17.8
    %)
   30




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##### Table of Contents



Direct operating expenses  Continuing Operations
 % of total revenuesSix Months Ended June 30,
    
    
    
    
    
    
    
    
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    Increase (decrease)
    
    
    2009
    
    
    2008(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    21,264
    
    
    $
    23,825
    
    
    $
    (2,561
    )
    
    
    (10.7
    %)
    
    
    20.2
    %
    
    
    18.7
    %Food and beverage
    
    
    16,132
    
    
    
    18,969
    
    
    
    (2,837
    )
    
    
    (15.0
    %)
    
    
    15.3
    %
    
    
    14.9
    %Other
    
    
    2,651
    
    
    
    2,967
    
    
    
    (316
    )
    
    
    (10.7
    %)
    
    
    2.5
    %
    
    
    2.3
    %Total direct operating expenses
    
    $
    40,047
    
    
    $
    45,761
    
    
    $
    (5,714
    )
    
    
    (12.5
    %)
    
    
    38.1
    %
    
    
    35.9
    %Direct operating contribution (by revenue source):Rooms
    
    $
    56,543
    
    
    $
    71,471
    
    
    $
    (14,928
    )
    
    
    (20.9
    %)Food and beverage
    
    
    7,526
    
    
    
    8,851
    
    
    
    (1,325
    )
    
    
    (15.0
    %)Other
    
    
    1,038
    
    
    
    1,267
    
    
    
    (229
    )
    
    
    (18.1
    %)Total direct operating contribution
    
    $
    65,107
    
    
    $
    81,589
    
    
    $
    (16,482
    )
    
    
    (20.2
    %)Direct operating contribution % (by revenue source):Rooms
    
    
    72.7
    %
    
    
    75.0
    %Food and beverage
    
    
    31.8
    %
    
    
    31.8
    %Other
    
    
    28.1
    %
    
    
    29.9
    %Total direct operating contribution
    
    
    61.9
    %
    
    
    64.1
    %
     31




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##### Table of Contents



Other operating expenses and operating income  Continuing Operations
 % of total revenuesSix Months Ended June 30,
    
    
    
    
    
    
    
    
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    Increase (decrease)
    
    
    2009
    
    
    2008(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    6,846
    
    
    $
    8,007
    
    
    $
    (1,161
    )
    
    
    (14.5
    %)
    
    
    6.5
    %
    
    
    6.3
    %Advertising and promotion
    
    
    5,020
    
    
    
    6,653
    
    
    
    (1,633
    )
    
    
    (24.5
    %)
    
    
    4.8
    %
    
    
    5.2
    %Franchise fees
    
    
    7,846
    
    
    
    8,983
    
    
    
    (1,137
    )
    
    
    (12.7
    %)
    
    
    7.5
    %
    
    
    7.1
    %Repairs and maintenance
    
    
    5,332
    
    
    
    5,985
    
    
    
    (653
    )
    
    
    (10.9
    %)
    
    
    5.1
    %
    
    
    4.7
    %Utilities
    
    
    6,032
    
    
    
    6,531
    
    
    
    (499
    )
    
    
    (7.6
    %)
    
    
    5.7
    %
    
    
    5.1
    %Other expenses
    
    
    62
    
    
    
    229
    
    
    
    (167
    )
    
    
    (72.9
    %)
    
    
    0.1
    %
    
    
    0.2
    %Other hotel operating costs
    
    $
    31,138
    
    
    $
    36,388
    
    
    $
    (5,250
    )
    
    
    (14.4
    %)
    
    
    29.6
    %
    
    
    28.6
    %Property and other taxes, insurance, and leases
    
    
    8,854
    
    
    
    8,294
    
    
    
    560
    
    
    
    6.8
    %
    
    
    8.4
    %
    
    
    6.5
    %Corporate and other
    
    
    7,181
    
    
    
    9,668
    
    
    
    (2,487
    )
    
    
    (25.7
    %)
    
    
    6.8
    %
    
    
    7.6
    %Casualty losses, net
    
    
    96
    
    
    
    
    
    
    
    96
    
    
    

    n/m

    
    
    0.1
    %
    
    
    0.0
    %Depreciation and amortization
    
    
    17,293
    
    
    
    15,455
    
    
    
    1,838
    
    
    
    11.9
    %
    
    
    16.4
    %
    
    
    12.1
    %Impairment of long-lived assets
    
    
    4,325
    
    
    
    7,721
    
    
    
    (3,396
    )
    
    
    (44.0
    %)
    
    
    4.1
    %
    
    
    6.1
    %Total other operating expenses
    
    $
    68,887
    
    
    $
    77,526
    
    
    $
    (8,639
    )
    
    
    (11.1
    %)
    
    
    65.5
    %
    
    
    60.9
    %Total operating expenses
    
    $
    108,934
    
    
    $
    123,287
    
    
    $
    (14,353
    )
    
    
    (11.6
    %)
    
    
    103.6
    %
    
    
    96.8
    %Operating (loss) income
    
    $
    (3,780
    )
    
    $
    4,063
    
    
    $
    (7,843
    )
    
    
    (193.0
    %)
    
    
    (3.6
    %)
    
    
    3.2
    %
   
    
    Hotel general and administrative costs decreased $1.2 million, or 14.5%. The decrease
was primarily the result of lower labor costs of $0.5 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 $0.4 million
and employee recruiting costs by $0.1 million.
    
    Advertising and promotion costs decreased $1.6 million, or 24.5%, as we reduced payroll
costs by $1.0 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 $0.4 million
decrease for the six months ended June 30, 2009 compared to the same period in 2008. The
remaining decrease was largely the result of other cost containment initiatives.
    
    Franchise fees decreased $1.1 million, or 12.7%, 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 $0.7 million, or 10.9%, compared to the prior year
primarily due to lower labor costs of $0.3 million and lower fuel costs of $0.2 million.
    
    Utilities decreased $0.5 million, or 7.6%, due in large part to reduced consumption.
    
    Other expenses decreased $0.2 million, or 72.9%. In 2008, we incurred costs associated
with a hotel brand conversion. Such costs were not incurred in first six months of 2009.
   32




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##### Table of Contents



Non-operating income (expenses)  Continuing Operations
 Six Months Ended June 30,2009
    
    2008
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Interest income and other
    
    $
    82
    
    
    $
    666
    
    
    $
    (584
    )
    
    
    (87.7
    %)Interest expense
    
    
    (7,579
    )
    
    
    (10,238
    )
    
    
    (2,659
    )
    
    
    (26.0
    %)
  Results of Operations  Discontinued Operations
   
    
    $3.3 million on the Ramada Plaza Northfield, MI to reflect the current estimated selling
price, net of selling costs;
    
    $0.3 million on the French Quarter Suites Memphis, TN (closed) to reflect the current
estimated selling price, net of selling costs; and
    
    $0.1 million on the Holiday Inn in Windsor, Ontario, Canada to reflect the final selling
price, net of selling costs.
  
    
    $3.3 million on the Ramada Plaza Northfield, MI to reflect the current estimated selling
price, net of selling costs;
    
    $0.8 million on the Holiday Inn in Windsor, Ontario, Canada to reflect the final selling
price, net of selling costs; and
    
    $0.3 million on the French Quarter Suites Memphis, TN (closed) to reflect the current
estimated selling price, net of selling costs.
  
    
    $0.6 million on the Ramada Plaza Northfield, MI to reflect the then current estimated
selling price, net of selling costs;
    
    $0.4 million on the Holiday Inn East Hartford, CT 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
 33




---



##### Table of Contents




    
    $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.
  
    
    $0.9 million on the Ramada Plaza Northfield, MI to reflect the then current estimated
selling price, net of selling costs;
 
    
    $0.4 million on the Holiday Inn East Hartford, CT 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
    Additional Financial Information Regarding Quarterly Results of Our Continuing Operations
  34




---



##### Table of Contents



2009
    
    2008
    
    2007Second
    
    First
    
    Fourth
    
    Third
    
    Second
    
    First
    
    Fourth
    
    ThirdQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter(unaudited in thousands)Revenues:Rooms
    
    $
    40,238
    
    
    $
    37,569
    
    
    $
    39,434
    
    
    $
    47,251
    
    
    $
    50,185
    
    
    $
    45,111
    
    
    $
    41,859
    
    
    $
    47,745Food and beverage
    
    
    12,655
    
    
    
    11,003
    
    
    
    13,700
    
    
    
    12,656
    
    
    
    15,564
    
    
    
    12,256
    
    
    
    14,600
    
    
    
    13,042Other
    
    
    1,970
    
    
    
    1,719
    
    
    
    1,902
    
    
    
    2,189
    
    
    
    2,153
    
    
    
    2,081
    
    
    
    1,834
    
    
    
    2,16254,863
    
    
    
    50,291
    
    
    
    55,036
    
    
    
    62,096
    
    
    
    67,902
    
    
    
    59,448
    
    
    
    58,293
    
    
    
    62,949Direct operating expenses:Rooms
    
    
    10,951
    
    
    
    10,313
    
    
    
    11,216
    
    
    
    12,385
    
    
    
    12,391
    
    
    
    11,434
    
    
    
    10,742
    
    
    
    12,188Food and beverage
    
    
    8,380
    
    
    
    7,752
    
    
    
    9,132
    
    
    
    9,169
    
    
    
    9,996
    
    
    
    8,973
    
    
    
    9,186
    
    
    
    9,592Other
    
    
    1,335
    
    
    
    1,316
    
    
    
    1,353
    
    
    
    1,566
    
    
    
    1,556
    
    
    
    1,411
    
    
    
    1,310
    
    
    
    1,53420,666
    
    
    
    19,381
    
    
    
    21,701
    
    
    
    23,120
    
    
    
    23,943
    
    
    
    21,818
    
    
    
    21,238
    
    
    
    23,31434,197
    
    
    
    30,910
    
    
    
    33,335
    
    
    
    38,976
    
    
    
    43,959
    
    
    
    37,630
    
    
    
    37,055
    
    
    
    39,635Other operating expenses:Other hotel operating costs
    
    
    15,211
    
    
    
    15,927
    
    
    
    16,423
    
    
    
    18,633
    
    
    
    18,107
    
    
    
    18,281
    
    
    
    16,697
    
    
    
    18,239Property and other taxes, insurance and leases
    
    
    4,562
    
    
    
    4,292
    
    
    
    4,296
    
    
    
    4,314
    
    
    
    3,851
    
    
    
    4,443
    
    
    
    4,421
    
    
    
    4,147Corporate and other
    
    
    3,573
    
    
    
    3,608
    
    
    
    3,067
    
    
    
    4,373
    
    
    
    3,471
    
    
    
    6,197
    
    
    
    4,248
    
    
    
    5,575Casualty losses (gain), net
    
    
    15
    
    
    
    81
    
    
    
    1,153
    
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )
    
    
    1,258Depreciation and amortization
    
    
    8,800
    
    
    
    8,493
    
    
    
    8,352
    
    
    
    8,123
    
    
    
    7,989
    
    
    
    7,466
    
    
    
    7,571
    
    
    
    7,332Impairment of long-lived assets
    
    
    3,816
    
    
    
    509
    
    
    
    354
    
    
    
    1,393
    
    
    
    5,580
    
    
    
    2,141
    
    
    
    796
    
    
    
    512Other operating expenses
    
    
    35,977
    
    
    
    32,910
    
    
    
    33,645
    
    
    
    36,780
    
    
    
    38,998
    
    
    
    38,528
    
    
    
    33,708
    
    
    
    37,063Operating (loss) income
    
    
    (1,780
    )
    
    
    (2,000
    )
    
    
    (310
    )
    
    
    2,196
    
    
    
    4,961
    
    
    
    (898
    )
    
    
    3,347
    
    
    
    2,572Other income (expenses):Interest income and other
    
    
    37
    
    
    
    45
    
    
    
    146
    
    
    
    242
    
    
    
    276
    
    
    
    390
    
    
    
    912
    
    
    
    1,312Other interest expense
    
    
    (3,658
    )
    
    
    (3,921
    )
    
    
    (4,720
    )
    
    
    (4,967
    )
    
    
    (4,920
    )
    
    
    (5,318
    )
    
    
    (5,946
    )
    
    
    (6,114
    )(Loss) income before income taxes
    
    
    (5,401
    )
    
    
    (5,876
    )
    
    
    (4,884
    )
    
    
    (2,529
    )
    
    
    317
    
    
    
    (5,826
    )
    
    
    (1,687
    )
    
    
    (2,230
    )(Provision) benefit for income taxes  continuing operations
    
    
    53
    
    
    
    (71
    )
    
    
    (71
    )
    
    
    79
    
    
    
    (33
    )
    
    
    (52
    )
    
    
    (1,678
    )
    
    
    1,062(Loss) income from continuing operations
    
    
    (5,348
    )
    
    
    (5,947
    )
    
    
    (4,955
    )
    
    
    (2,450
    )
    
    
    284
    
    
    
    (5,878
    )
    
    
    (3,365
    )
    
    
    (1,168
    )Discontinued operations:(Loss) income from discontinued operations before income
taxes
    
    
    (2,031
    )
    
    
    (1,110
    )
    
    
    210
    
    
    
    (3,681
    )
    
    
    5,977
    
    
    
    (1,457
    )
    
    
    (5,978
    )
    
    
    1,889(Provision) benefit for income taxes
    
    
    62
    
    
    
    (25
    )
    
    
    95
    
    
    
    (52
    )
    
    
    106
    
    
    
    (183
    )
    
    
    1,270
    
    
    
    (674
    )(Loss) income from discontinued operations
    
    
    (1,969
    )
    
    
    (1,135
    )
    
    
    305
    
    
    
    (3,733
    )
    
    
    6,083
    
    
    
    (1,640
    )
    
    
    (4,708
    )
    
    
    1,215Net (loss) income
    
    $
    (7,317
    )
    
    $
    (7,082
    )
    
    $
    (4,650
    )
    
    $
    (6,183
    )
    
    $
    6,367
    
    
    $
    (7,518
    )
    
    $
    (8,073
    )
    
    $
    47Less: Net loss (income) attributable to noncontrolling interest
    
    
    342
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income attributable to common stock
    
    
    (6,975
    )
    
    
    (6,922
    )
    
    
    (4,650
    )
    
    
    (6,183
    )
    
    
    6,367
    
    
    
    (7,518
    )
    
    
    (8,073
    )
    
    
    47
 35




---



##### 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  37 hotels (excludes the Memphis hotel)
 Three months ended
    
    Six months endedJune 30, 2009
    
    June 30, 2008
    
    June 30, 2009
    
    June 30, 2008Upper UpscaleNumber of properties
    
    
    3
    
    
    
    4
    
    
    
    3
    
    
    
    4Number of rooms
    
    
    634
    
    
    
    819
    
    
    
    634
    
    
    
    819Occupancy
    
    
    69.4
    %
    
    
    74.9
    %
    
    
    67.7
    %
    
    
    69.7
    %Average daily rate
    
    $
    117.46
    
    
    $
    121.46
    
    
    $
    116.93
    
    
    $
    120.33RevPAR
    
    $
    81.51
    
    
    $
    91.03
    
    
    $
    79.16
    
    
    $
    83.85UpscaleNumber of properties
    
    
    22
    
    
    
    22
    
    
    
    22
    
    
    
    22Number of rooms
    
    
    4,049
    
    
    
    4,049
    
    
    
    4,049
    
    
    
    4,049Occupancy
    
    
    65.5
    %
    
    
    75.7
    %
    
    
    66.0
    %
    
    
    72.5
    %Average daily rate
    
    $
    95.97
    
    
    $
    107.42
    
    
    $
    98.55
    
    
    $
    111.01RevPAR
    
    $
    62.83
    
    
    $
    81.35
    
    
    $
    65.03
    
    
    $
    80.47Midscale with Food & BeverageNumber of properties
    
    
    10
    
    
    
    9
    
    
    
    10
    
    
    
    9Number of rooms
    
    
    2,047
    
    
    
    1,862
    
    
    
    2,047
    
    
    
    1,862Occupancy
    
    
    64.1
    %
    
    
    77.3
    %
    
    
    57.0
    %
    
    
    71.6
    %Average daily rate
    
    $
    99.00
    
    
    $
    103.03
    
    
    $
    95.39
    
    
    $
    105.53RevPAR
    
    $
    63.47
    
    
    $
    79.68
    
    
    $
    54.36
    
    
    $
    75.60Midscale without Food & BeverageNumber of properties
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Number of rooms
    
    
    244
    
    
    
    244
    
    
    
    244
    
    
    
    244Occupancy
    
    
    48.6
    %
    
    
    54.4
    %
    
    
    46.5
    %
    
    
    55.0
    %Average daily rate
    
    $
    81.36
    
    
    $
    91.24
    
    
    $
    87.55
    
    
    $
    103.94RevPAR
    
    $
    39.54
    
    
    $
    49.68
    
    
    $
    40.72
    
    
    $
    57.18All HotelsNumber of properties
    
    
    37
    
    
    
    37
    
    
    
    37
    
    
    
    37Number of rooms
    
    
    6,974
    
    
    
    6,974
    
    
    
    6,974
    
    
    
    6,974Occupancy
    
    
    64.8
    %
    
    
    75.3
    %
    
    
    62.8
    %
    
    
    71.0
    %Average daily rate
    
    $
    98.55
    
    
    $
    107.45
    
    
    $
    99.22
    
    
    $
    108.15RevPAR
    
    $
    63.90
    
    
    $
    80.94
    
    
    $
    62.32
    
    
    $
    76.84
 36




---



##### Table of Contents



Continuing Operations  36 hotels (excludes held for sale hotels)
 Three months ended
    
    Six months endedJune 30, 2009
    
    June 30, 2009
    
    June 30, 2009
    
    June 30, 2009Upper UpscaleNumber of properties
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3Number of rooms
    
    
    634
    
    
    
    634
    
    
    
    634
    
    
    
    634Occupancy
    
    
    69.4
    %
    
    
    74.4
    %
    
    
    67.7
    %
    
    
    68.6
    %Average daily rate
    
    $
    117.46
    
    
    $
    128.32
    
    
    $
    116.93
    
    
    $
    127.48RevPAR
    
    $
    81.51
    
    
    $
    95.54
    
    
    $
    79.16
    
    
    $
    87.49UpscaleNumber of properties
    
    
    22
    
    
    
    22
    
    
    
    22
    
    
    
    22Number of rooms
    
    
    4,049
    
    
    
    4,049
    
    
    
    4,049
    
    
    
    4,049Occupancy
    
    
    65.5
    %
    
    
    75.7
    %
    
    
    66.0
    %
    
    
    72.5
    %Average daily rate
    
    $
    95.97
    
    
    $
    107.42
    
    
    $
    98.55
    
    
    $
    111.01RevPAR
    
    $
    62.83
    
    
    $
    81.35
    
    
    $
    65.03
    
    
    $
    80.47Midscale with Food & BeverageNumber of properties
    
    
    9
    
    
    
    9
    
    
    
    9
    
    
    
    9Number of rooms
    
    
    1,862
    
    
    
    1,862
    
    
    
    1,862
    
    
    
    1,862Occupancy
    
    
    68.3
    %
    
    
    77.3
    %
    
    
    59.5
    %
    
    
    70.6
    %Average daily rate
    
    $
    99.39
    
    
    $
    103.03
    
    
    $
    95.72
    
    
    $
    96.91RevPAR
    
    $
    67.85
    
    
    $
    79.68
    
    
    $
    56.98
    
    
    $
    68.43Midscale without Food & BeverageNumber of properties
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Number of rooms
    
    
    244
    
    
    
    244
    
    
    
    244
    
    
    
    244Occupancy
    
    
    48.6
    %
    
    
    54.4
    %
    
    
    46.5
    %
    
    
    55.0
    %Average daily rate
    
    $
    81.36
    
    
    $
    91.24
    
    
    $
    87.55
    
    
    $
    103.94RevPAR
    
    $
    39.54
    
    
    $
    49.68
    
    
    $
    40.72
    
    
    $
    57.18All HotelsNumber of properties
    
    
    36
    
    
    
    36
    
    
    
    36
    
    
    
    36Number of rooms
    
    
    6,789
    
    
    
    6,789
    
    
    
    6,789
    
    
    
    6,789Occupancy
    
    
    66.0
    %
    
    
    75.3
    %
    
    
    63.7
    %
    
    
    71.0
    %Average daily rate
    
    $
    98.66
    
    
    $
    107.69
    
    
    $
    99.36
    
    
    $
    108.44RevPAR
    
    $
    65.12
    
    
    $
    81.08
    
    
    $
    63.27
    
    
    $
    76.98
 37




---



##### 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  37 hotels (excludes the Memphis hotel)
 Three months ended
    
    Six months endedJune 30, 2009
    
    June 30, 2008
    
    June 30, 2009
    
    June 30, 2008Northeast RegionNumber of properties
    
    
    13
    
    
    
    13
    
    
    
    13
    
    
    
    13Number of rooms
    
    
    2,842
    
    
    
    2,842
    
    
    
    2,842
    
    
    
    2,842Occupancy
    
    
    65.5
    %
    
    
    74.4
    %
    
    
    59.6
    %
    
    
    67.2
    %Average daily rate
    
    $
    103.21
    
    
    $
    109.94
    
    
    $
    102.97
    
    
    $
    107.59RevPAR
    
    $
    67.61
    
    
    $
    81.78
    
    
    $
    61.38
    
    
    $
    72.29Southeast RegionNumber of properties
    
    
    10
    
    
    
    10
    
    
    
    10
    
    
    
    10Number of rooms
    
    
    1,624
    
    
    
    1,624
    
    
    
    1,624
    
    
    
    1,624Occupancy
    
    
    71.6
    %
    
    
    78.5
    %
    
    
    68.5
    %
    
    
    73.5
    %Average daily rate
    
    $
    100.62
    
    
    $
    113.08
    
    
    $
    99.28
    
    
    $
    113.77RevPAR
    
    $
    72.06
    
    
    $
    88.75
    
    
    $
    68.02
    
    
    $
    83.59Midwest RegionNumber of properties
    
    
    8
    
    
    
    8
    
    
    
    8
    
    
    
    8Number of rooms
    
    
    1,413
    
    
    
    1,413
    
    
    
    1,413
    
    
    
    1,413Occupancy
    
    
    54.6
    %
    
    
    73.2
    %
    
    
    56.6
    %
    
    
    70.0
    %Average daily rate
    
    $
    90.51
    
    
    $
    99.62
    
    
    $
    91.23
    
    
    $
    98.85RevPAR
    
    $
    49.45
    
    
    $
    72.88
    
    
    $
    51.62
    
    
    $
    69.15West RegionNumber of properties
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6Number of rooms
    
    
    1,095
    
    
    
    1,095
    
    
    
    1,095
    
    
    
    1,095Occupancy
    
    
    66.2
    %
    
    
    75.9
    %
    
    
    70.8
    %
    
    
    78.9
    %Average daily rate
    
    $
    91.86
    
    
    $
    102.28
    
    
    $
    99.18
    
    
    $
    112.28RevPAR
    
    $
    60.82
    
    
    $
    77.63
    
    
    $
    70.18
    
    
    $
    88.57All HotelsNumber of properties
    
    
    37
    
    
    
    37
    
    
    
    37
    
    
    
    37Number of rooms
    
    
    6,974
    
    
    
    6,974
    
    
    
    6,974
    
    
    
    6,974Occupancy
    
    
    64.8
    %
    
    
    75.3
    %
    
    
    62.8
    %
    
    
    71.0
    %Average daily rate
    
    $
    98.55
    
    
    $
    107.45
    
    
    $
    99.22
    
    
    $
    108.15RevPAR
    
    $
    63.90
    
    
    $
    80.94
    
    
    $
    62.32
    
    
    $
    76.84
 38




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##### Table of Contents



Continuing Operations  36 hotels (excludes held for sale hotels)
 Three months ended
    
    Six months endedJune 30, 2009
    
    June 30, 2009
    
    June 30, 2009
    
    June 30, 2009Northeast RegionNumber of properties
    
    
    13
    
    
    
    13
    
    
    
    13
    
    
    
    13Number of rooms
    
    
    2,842
    
    
    
    2,842
    
    
    
    2,842
    
    
    
    2,842Occupancy
    
    
    65.5
    %
    
    
    74.4
    %
    
    
    59.6
    %
    
    
    67.2
    %Average daily rate
    
    $
    103.21
    
    
    $
    109.94
    
    
    $
    102.97
    
    
    $
    107.59RevPAR
    
    $
    67.61
    
    
    $
    81.78
    
    
    $
    61.38
    
    
    $
    72.29Southeast RegionNumber of properties
    
    
    10
    
    
    
    10
    
    
    
    10
    
    
    
    10Number of rooms
    
    
    1,624
    
    
    
    1,624
    
    
    
    1,624
    
    
    
    1,624Occupancy
    
    
    71.6
    %
    
    
    78.5
    %
    
    
    68.5
    %
    
    
    73.5
    %Average daily rate
    
    $
    100.62
    
    
    $
    113.08
    
    
    $
    99.28
    
    
    $
    113.77RevPAR
    
    $
    72.06
    
    
    $
    88.75
    
    
    $
    68.02
    
    
    $
    83.59Midwest RegionNumber of properties
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    1,228
    
    
    
    1,228
    
    
    
    1,228
    
    
    
    1,228Occupancy
    
    
    59.5
    %
    
    
    72.6
    %
    
    
    60.4
    %
    
    
    69.5
    %Average daily rate
    
    $
    90.72
    
    
    $
    99.67
    
    
    $
    91.39
    
    
    $
    98.97RevPAR
    
    $
    53.99
    
    
    $
    72.38
    
    
    $
    55.19
    
    
    $
    68.75West RegionNumber of properties
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6Number of rooms
    
    
    1,095
    
    
    
    1,095
    
    
    
    1,095
    
    
    
    1,095Occupancy
    
    
    66.2
    %
    
    
    75.9
    %
    
    
    70.8
    %
    
    
    78.9
    %Average daily rate
    
    $
    91.86
    
    
    $
    102.28
    
    
    $
    99.18
    
    
    $
    112.28RevPAR
    
    $
    60.82
    
    
    $
    77.63
    
    
    $
    70.18
    
    
    $
    88.57All HotelsNumber of properties
    
    
    36
    
    
    
    36
    
    
    
    36
    
    
    
    36Number of rooms
    
    
    6,789
    
    
    
    6,789
    
    
    
    6,789
    
    
    
    6,789Occupancy
    
    
    66.0
    %
    
    
    75.3
    %
    
    
    63.7
    %
    
    
    71.0
    %Average daily rate
    
    $
    98.66
    
    
    $
    107.69
    
    
    $
    99.36
    
    
    $
    108.44RevPAR
    
    $
    65.12
    
    
    $
    81.08
    
    
    $
    63.27
    
    
    $
    76.98
 39




---



##### Table of Contents



Liquidity and Capital Resources
 Working Capital
         40




---



##### Table of Contents



Covenant Compliance
    Mortgage Debt
   41




---



##### Table of Contents



42




---



##### Table of Contents



Interest Rate Cap Agreements
   Cash Flow
  Operating activities
  Investing activities
   Financing activities
   Debt and Contractual Obligations
  Off Balance Sheet Arrangements
  Market Risk
  43




---



##### Table of Contents



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;
    
    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;
 44




---



##### Table of Contents




    
    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 Report on Form
10-Q filed with the SEC on May 7, 2009.
  Inflation
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Provisions for liquidated damages in our franchise agreements could require us to pay material
amounts to our franchisors if we are forced to turn over properties to our lenders.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 45




---



##### Table of Contents



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
    
    
    ProgramsApril 2009
    
    
    740
    
    
    $
    2.52
    
    
    
    
    
    
    $
    5,599,458May 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    5,599,458June 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    5,599,458740
    
    
    $
    2.52
    
    
    
    
 
 (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 4. Submission of Matters to a Vote of Security Holders.
   Nominee
    
    Votes For
    
    Votes WithheldStewart J. Brown
    
    
    16,353,273
    
    
    
    2,330,759Alex R. Lieblong
    
    
    16,353,273
    
    
    
    2,330,759Paul J. Garity
    
    
    16,349,322
    
    
    
    2,334,710Peter T. Cyrus
    
    
    16,365,794
    
    
    
    2,318,238Michael J. Grondahl
    
    
    16,352,440
    
    
    
    2,331,592W. Blair Allen
    
    
    16,344,875
    
    
    
    2,339,157Mark S. Oei
    
    
    16,334,040
    
    
    
    2,349,992John W. Allison
    
    
    16,321,895
    
    
    
    2,362,137
 1 2 1 2 1 2 1 2 1 2
  
 Item 6. Exhibits
  46




---



##### Table of Contents



SIGNATURES
  LODGIAN, INC.By:
    /s/ DANIEL E. ELLISDaniel E. EllisDate: August 6, 2009
    
    President and
Chief Executive OfficerBy:
    /s/ JAMES A. MACLENNANJames A. MacLennanDate: August 6, 2009
    
    Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer) 47




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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. 48