##### 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, 2007
 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 
incorporation or organization)
    
    (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
 þ o
 
 o þ o
 o þ
 þ o
  Class
    
    Outstanding as of August 1, 2007Common
    
    24,685,375




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##### 



LODGIAN, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006 (unaudited)
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2007 and June 30, 2006 (unaudited)
    
    4Condensed Consolidated Statement of Stockholders Equity for the Six Months Ended June 30, 2007 (unaudited)
    
    5Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and June 30, 2006 (unaudited)
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    19Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    42Item 4.
    
    Controls and Procedures
    
    43PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    44Item 6.
    
    Exhibits
    
    44Signatures
    
    
    
    45EX-10.10 AMENDED AND RESTATED 2002 STOCK INCENTIVE PLANEX-10.13 LODGIAN, INC. 401(K) PLAN AS AMENDEDEX-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
 June 30, 2007
    
    
    December 31, 2006(Unaudited in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    97,581
    
    
    $
    48,188Cash, restricted
    
    
    10,096
    
    
    
    13,791Accounts
receivable (net of allowances: 2007  $417; 2006  $277)
    
    
    11,915
    
    
    
    7,404Insurance receivable
    
    
    2,566
    
    
    
    2,347Inventories
    
    
    2,950
    
    
    
    2,893Prepaid expenses and other current assets
    
    
    26,658
    
    
    
    22,450Assets held for sale
    
    
    21,868
    
    
    
    89,437Total current assets
    
    
    173,634
    
    
    
    186,510Property and equipment, net
    
    
    488,654
    
    
    
    487,022Deposits for capital expenditures
    
    
    17,908
    
    
    
    19,802Other assets
    
    
    5,961
    
    
    
    5,824$
    686,157
    
    
    $
    699,158LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    8,704
    
    
    $
    7,742Other accrued liabilities
    
    
    29,856
    
    
    
    27,724Advance deposits
    
    
    2,252
    
    
    
    1,384Insurance advances
    
    
    2,000
    
    
    
    2,063Current portion of long-term liabilities
    
    
    17,909
    
    
    
    46,557Liabilities related to assets held for sale
    
    
    13,269
    
    
    
    68,351Total current liabilities
    
    
    73,990
    
    
    
    153,821Long-term liabilities
    
    
    359,914
    
    
    
    292,301Total liabilities
    
    
    433,904
    
    
    
    446,122Minority interests
    
    
    10,264
    
    
    
    10,922Commitments and contingenciesStockholders equity:Common stock, $.01 par value, 60,000,000 shares authorized;
24,903,783 and 24,860,321 issued at June 30, 2007 and
December 31, 2006, respectively
    
    
    249
    
    
    
    249Additional paid-in capital
    
    
    328,829
    
    
    
    327,634Accumulated deficit
    
    
    (85,236
    )
    
    
    (84,816
    )Accumulated other comprehensive income
    
    
    3,125
    
    
    
    2,088Treasury stock, at cost, 402,470 and 251,619 shares at
June 30, 2007 and December 31, 2006, respectively
    
    
    (4,978
    )
    
    
    (3,041
    )Total stockholders equity
    
    
    241,989
    
    
    
    242,114$
    686,157
    
    
    $
    699,158
  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 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited in thousands, except per share data)Revenues:Rooms
    
    $
    56,216
    
    
    $
    53,788
    
    
    $
    106,459
    
    
    $
    101,657Food and beverage
    
    
    16,779
    
    
    
    15,636
    
    
    
    30,623
    
    
    
    27,746Other
    
    
    2,453
    
    
    
    2,154
    
    
    
    4,514
    
    
    
    4,103Total revenues
    
    
    75,448
    
    
    
    71,578
    
    
    
    141,596
    
    
    
    133,506Direct operating expenses:Rooms
    
    
    13,756
    
    
    
    13,310
    
    
    
    26,435
    
    
    
    25,513Food and beverage
    
    
    11,021
    
    
    
    10,469
    
    
    
    21,005
    
    
    
    19,488Other
    
    
    1,642
    
    
    
    1,657
    
    
    
    3,154
    
    
    
    3,182Total direct operating expenses
    
    
    26,419
    
    
    
    25,436
    
    
    
    50,594
    
    
    
    48,18349,029
    
    
    
    46,142
    
    
    
    91,002
    
    
    
    85,323Other operating expenses:Other hotel operating costs
    
    
    20,478
    
    
    
    18,755
    
    
    
    40,491
    
    
    
    37,317Property and other taxes, insurance, and leases
    
    
    5,212
    
    
    
    4,717
    
    
    
    10,823
    
    
    
    9,118Corporate and other
    
    
    5,930
    
    
    
    5,292
    
    
    
    11,612
    
    
    
    10,209Casualty (gains) losses, net
    
    
    
    
    
    
    31
    
    
    
    (1,867
    )
    
    
    197Depreciation and amortization
    
    
    7,960
    
    
    
    7,704
    
    
    
    15,762
    
    
    
    15,062Impairment of long-lived assets
    
    
    222
    
    
    
    16
    
    
    
    487
    
    
    
    210Total other operating expenses
    
    
    39,802
    
    
    
    36,515
    
    
    
    77,308
    
    
    
    72,113Operating income
    
    
    9,227
    
    
    
    9,627
    
    
    
    13,694
    
    
    
    13,210Other income (expenses):Business interruption proceeds
    
    
    272
    
    
    
    695
    
    
    
    272
    
    
    
    695Interest income and other
    
    
    822
    
    
    
    848
    
    
    
    1,747
    
    
    
    1,157Interest expense
    
    
    (6,767
    )
    
    
    (6,227
    )
    
    
    (12,965
    )
    
    
    (12,569
    )Loss on debt extinguishment
    
    
    (3,411
    )
    
    
    
    
    
    
    (3,411
    )
    
    
    Income (loss) before income taxes and minority interests
    
    
    143
    
    
    
    4,943
    
    
    
    (663
    )
    
    
    2,493Minority interests (net of taxes, nil)
    
    
    (56
    )
    
    
    (136
    )
    
    
    (421
    )
    
    
    (140
    )(Provision) benefit for income taxes  continuing operations
    
    
    (19
    )
    
    
    (2,245
    )
    
    
    667
    
    
    
    (1,520
    )Income (loss) from continuing operations
    
    
    68
    
    
    
    2,562
    
    
    
    (417
    )
    
    
    833Discontinued operations:(Loss) income from discontinued operations before income taxes
    
    
    (565
    )
    
    
    1,853
    
    
    
    1,617
    
    
    
    6,665Benefit (provision) for income taxes  discontinued operations
    
    
    234
    
    
    
    (414
    )
    
    
    (1,620
    )
    
    
    (2,123
    )(Loss) income from discontinued operations
    
    
    (331
    )
    
    
    1,439
    
    
    
    (3
    )
    
    
    4,542Net (loss) income attributable to common stock
    
    $
    (263
    )
    
    $
    4,001
    
    
    $
    (420
    )
    
    $
    5,375Basic net (loss) income per share attributable to common stock
    
    $
    (0.01
    )
    
    $
    0.16
    
    
    $
    (0.02
    )
    
    $
    0.22Diluted net (loss) income per share attributable to common stock
    
    $
    (0.01
    )
    
    $
    0.16
    
    
    $
    (0.02
    )
    
    $
    0.22
  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, 2006
    
    
    24,860,321
    
    
    
    249
    
    
    
    327,634
    
    
    
    (84,816
    )
    
    
    2,088
    
    
    
    251,619
    
    
    
    (3,041
    )
    
    
    242,114Amortization of unearned stock compensation
    
    
    
    
    
    
    
    
    
    
    656
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    656Issuance and vesting of restricted and nonvested shares
    
    
    25,420
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    19,415
    
    
    
    
    
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    186Repurchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,851
    
    
    
    (1,937
    )
    
    
    (1,937
    )Realization of pre-emergence deferred tax asset
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300Other
    
    
    (1,373
    )
    
    
    (1
    )
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (420
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (420
    )Currency translation adjustments (related taxes estimated at nil)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,037
    
    
    
    
    
    
    
    
    
    
    
    1,037Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    617Balance, June 30, 2007
    
    
    24,903,783
    
    
    
    249
    
    
    
    328,829
    
    
    
    (85,236
    )
    
    
    3,125
    
    
    
    402,470
    
    
    
    (4,978
    )
    
    
    241,989
   5




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LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30, 2007
    
    
    June 30, 2006(Unaudited in thousands)Operating activities:Net (loss) income
    
    $
    (420
    )
    
    $
    5,375Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization
    
    
    15,762
    
    
    
    17,963Impairment of long-lived assets
    
    
    2,564
    
    
    
    8,234Stock compensation expense
    
    
    656
    
    
    
    845Casualty gain, net
    
    
    (4,525
    )
    
    
    Deferred income taxes
    
    
    300
    
    
    
    3,377Minority interests
    
    
    421
    
    
    
    140Gain on asset dispositions
    
    
    (197
    )
    
    
    (1,483
    )Loss (gain) on extinguishment of debt
    
    
    4,522
    
    
    
    (10,869
    )Amortization of deferred financing costs
    
    
    656
    
    
    
    676Other
    
    
    
    
    
    
    202Changes in operating assets and liabilities:Accounts receivable, net of allowances
    
    
    (4,514
    )
    
    
    (3,838
    )Insurance receivable
    
    
    958
    
    
    
    5,945Inventories
    
    
    (29
    )
    
    
    (480
    )Prepaid expenses and other assets
    
    
    345
    
    
    
    (3,528
    )Accounts payable
    
    
    (562
    )
    
    
    1,674Other accrued liabilities
    
    
    1,836
    
    
    
    2,463Advance deposits
    
    
    957
    
    
    
    340Net cash provided by operating activities
    
    
    18,730
    
    
    
    27,036Investing activities:Capital improvements
    
    
    (19,000
    )
    
    
    (26,206
    )Proceeds from sale of assets, net of related selling costs
    
    
    64,800
    
    
    
    9,404Acquisition of minority partners interest
    
    
    (2,862
    )
    
    
    Withdrawals for capital expenditures
    
    
    1,909
    
    
    
    4,900Insurance receipts related to casualty claims, net
    
    
    1,023
    
    
    
    1,852Net decrease in restricted cash
    
    
    3,695
    
    
    
    671Other
    
    
    8
    
    
    
    (71
    )Net cash provided by (used in) investing activities
    
    
    49,573
    
    
    
    (9,450
    )Financing activities:Proceeds from issuance of long term debt
    
    
    130,000
    
    
    
    44,954Proceeds from exercise of stock options and issuance of common stock
    
    
    186
    
    
    
    287Principal payments on long-term debt
    
    
    (141,733
    )
    
    
    (34,134
    )Purchase of treasury stock
    
    
    (1,937
    )
    
    
    (543
    )Payments of deferred financing costs
    
    
    (1,659
    )
    
    
    (870
    )Payments of defeasance costs
    
    
    (3,895
    )
    
    
    Other
    
    
    (15
    )
    
    
    10Net cash (used in) provided by financing activities
    
    
    (19,053
    )
    
    
    9,704Effect of exchange rate changes on cash
    
    
    143
    
    
    
    48Net increase in cash and cash equivalents
    
    
    49,393
    
    
    
    27,338Cash and cash equivalents at beginning of period
    
    
    48,188
    
    
    
    19,097Cash and cash equivalents at end of period
    
    $
    97,581
    
    
    $
    46,435Supplemental cash flow information:Cash paid during the period for:Interest, net of the amounts capitalized shown below
    
    $
    14,663
    
    
    $
    17,680Interest capitalized
    
    
    21
    
    
    
    117Income taxes, net of refunds
    
    
    876
    
    
    
    590Supplemental disclosure of non-cash investing and financing activities:Net non-cash debt decrease
    
    
    
    
    
    
    10,195Treasury stock repurchases traded, but not settled
    
    
    
    
    
    
    94Purchases of property and equipment on account
    
    
    2,544
    
    
    
    5,197
  6




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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Business Summary
   
    
    49 hotels that were wholly owned and operated through subsidiaries; and
    
    two hotels that were operated in joint ventures in which the Company has a 50%
voting equity interest and exercises control.
   2. General
     
    
    the reported amounts of assets and liabilities;
    
    the reported amounts of revenues and expenses during the reporting period; and
 7




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
    
    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, 2006
    
    
    2,568,029Nonvested stock issued January 26, 2007
    
    
    (63,000
    )Nonvested stock issued February 12, 2007
    
    
    (46,000
    )Nonvested stock issued March 30, 2007
    
    
    (18,800
    )Shares of nonvested stock withheld from awards to satisfy tax withholding obligations
    
    
    4,226Nonvested shares forfeited in 2007
    
    
    1,259Stock options forfeited in 2007
    
    
    26,833Available for issuance, June 30, 2007
    
    
    2,472,547
 Stock Options
   Weighted AverageStock Options
    
    
    Exercise PriceBalance, December 31, 2006
    
    
    356,313
    
    
    $
    10.60Exercised
    
    
    (19,415
    )
    
    
    9.61Forfeited
    
    
    (26,833
    )
    
    
    10.78Balance, June 30, 2007
    
    
    310,065
    
    
    $
    10.65
   8




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##### Table of Contents



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
    
    
    141,825
    
    
    
    7.7
    
    
    $
    9.05
    
    
    
    83,000
    
    
    
    7.5
    
    
    $
    9.05$9.40 to $10.96
    
    
    114,424
    
    
    
    6.9
    
    
    $
    10.49
    
    
    
    108,592
    
    
    
    6.9
    
    
    $
    10.50$10.97 to $15.66
    
    
    53,816
    
    
    
    5.7
    
    
    $
    15.21
    
    
    
    53,816
    
    
    
    5.7
    
    
    $
    15.21310,065
    
    
    
    7.1
    
    
    $
    10.65
    
    
    
    245,408
    
    
    
    6.8
    
    
    $
    11.04Expected to vest
    
    
    300,366
    
    
    
    7.0
    
    
    $
    10.70
 ($ in thousands)Aggregate intrinsic value of stock options outstanding
    
    $
    1,358Aggregate intrinsic value of stock options expected to vest
    
    $
    1,301Aggregate intrinsic value of stock options exercisable
    
    $
    979
 Restricted Stock
  Weighted AverageRestricted Stock
    
    
    Exercise PriceBalance, December 31, 2006
    
    
    7,694
    
    
    $
    12.88Expiration of restrictions
    
    
    (7,694
    )
    
    
    12.88Balance, June 30, 2007
    
    
    
    
    
    $
    
 Nonvested Stock
     9




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##### Table of Contents



Weight AverageNonvested Stock
    
    
    Exercise PriceBalance, December 31, 2006
    
    
    82,607
    
    
    $
    11.63Granted
    
    
    127,800
    
    
    
    12.96Forfeited
    
    
    (1,259
    )
    
    
    13.26Vested
    
    
    (25,420
    )
    
    
    12.76Balance, June 30, 2007
    
    
    183,728
    
    
    $
    12.39
   Unrecognized
    
    
    Weighted-AverageCompensation
    
    
    AmortizationType of Award
    
    Expense ($000s)
    
    
    Period (in years)Stock Options
    
    $
    291
    
    
    
    0.89Nonvested Stock
    
    
    1,539
    
    
    
    2.41Total
    
    $
    1,830
    
    
    
    2.36
  Three Months Ended June 30, 2007
    
    
    Three Months Ended June 30, 2006Compensation
    
    
    Income Tax
    
    
    Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit
    
    
    Expense
    
    
    Benefit(Unaudited in thousands)Stock Options
    
    $
    (208
    )
    
    $
    (81
    )
    
    $
    209
    
    
    $
    81Nonvested Stock
    
    
    372
    
    
    
    144
    
    
    
    131
    
    
    
    51Other
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    14Total
    
    $
    164
    
    
    $
    63
    
    
    $
    377
    
    
    $
    146
  Six Months Ended June 30, 2007
    
    
    Six Months Ended June 30, 2006Compensation
    
    
    Income Tax
    
    
    Compensation
    
    
    Income TaxType of Award
    
    Expense
    
    
    Benefit
    
    
    Expense
    
    
    Benefit(Unaudited in thousands)Stock Options
    
    $
    (2
    )
    
    $
    (1
    )
    
    $
    415
    
    
    $
    161Nonvested Stock
    
    
    658
    
    
    
    255
    
    
    
    235
    
    
    
    91Restricted Stock
    
    
    
    
    
    
    
    
    
    
    161
    
    
    
    62Other
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    14Total
    
    $
    656
    
    
    $
    254
    
    
    $
    848
    
    
    $
    328
  10




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##### Table of Contents



4. Treasury Stock
   5. Dispositions and Discontinued Operations
 Dispositions
    
    
    Clarion Louisville, KY
    
    Crowne Plaza Cedar Rapids, IA
    
    Augusta West Inn Augusta, GA
    
    Holiday Inn Greentree, PA
    
    Holiday Inn Lancaster East, PA
    
    Holiday Inn Lansing, MI
    
    Holiday Inn Pensacola, FL
    
    Holiday Inn Winter Haven, FL
    
    Holiday Inn York, PA
    
    Holiday Inn Express Dothan, AL
    
    Holiday Inn Express Pensacola, FL
    
    Park Inn Brunswick, GA
    
    Quality Inn Dothan, AL
    
    Ramada Plaza Macon, GA
    
    Ramada Inn North Charleston, SC
  Assets Held for Sale and Discontinued Operations
  a)
    
    Management commits to a plan to sell the asset;b)
    
    The asset is available for immediate sale in its present condition;
 11




---



##### Table of Contents



c)
    
    An active marketing plan to sell the asset at a reasonable price has been initiated;d)
    
    The sale of the asset is probable within one year; ande)
    
    It is unlikely that significant changes to the plan to sell the asset will be made.
      
    
    $1.3 million on the Holiday Inn Clarksburg, WV to reflect the estimated selling price;
    
    $0.6 million on the Holiday Inn Jamestown, NY to reflect the estimated selling price;
    
    $0.1 million on the University Plaza Bloomington, IN to record the final disposition of the hotel; and
    
    $0.1 million related to various other held-for-sale properties primarily to write-off
the remaining net book value of disposed fixed assets.
  
    
    $0.7 million on the University Plaza Bloomington, IN hotel which was classified as held
for sale during the second quarter, to reduce the carrying value to the estimated selling
price less costs to sell; and
    
    $36,000 related to various other held-for-sale properties primarily to reduce the
carrying values to estimated selling prices less costs to sell, and to record the final
disposition of certain properties.
  
    
    $3.9 million on the Holiday Inn Manhattan, KS to record the final disposition of the hotel;
    
    $2.2 million on the Holiday Inn Lawrence, KS to record the final disposition of the hotel;
    
    $0.5 million on the Holiday Inn Sheffield, AL to reflect the estimated selling costs as
the hotel was identified for sale during the first quarter of 2006;
    
    $0.3 million on the Holiday Inn McKnight, PA to reflect the lowered estimated selling
price and to reflect the write-off of capital improvements that did not add incremental
value or revenue generating capacity;
    
    $0.2 million on the Holiday Inn Valdosta, GA to reflect the estimated selling costs as
the hotel was identified for sale during the first quarter of 2006; and
    
    $0.1 million on the Azalea Inn Valdosta, GA to reflect the estimated selling costs as
the hotel was identified for sale during the first quarter 2006
 12




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##### Table of Contents




    
    $0.7 million on the University Plaza Bloomington, IN hotel which was classified as held
for sale during the second quarter, to reduce the carrying value to the estimated selling
price less costs to sell; and
    
    $36,000 related to various other held-for-sale properties primarily to reduce the
carrying value to estimated selling price less costs to sell and to record the final
disposition of certain properties.
  
    
    Holiday Inn Clarksburg, WV
    
    Holiday Inn Fairmont, WV
    
    Holiday Inn Frederick, MD
    
    Holiday Inn Fort Wayne, IN
    
    Holiday Inn Jamestown, NY
    
    Holiday Inn St. Paul, MN
    
    Vermont Maple Inn Colchester, VT
  June 30, 2007
    
    
    December 31, 2006(Unaudited in thousands)Property and equipment, net
    
    $
    18,903
    
    
    $
    83,462Other assets
    
    
    2,965
    
    
    
    5,975Assets held for sale
    
    $
    21,868
    
    
    $
    89,437Other liabilities
    
    $
    6,900
    
    
    $
    10,630Long-term debt
    
    
    6,369
    
    
    
    57,721Liabilities related to assets held for sale
    
    $
    13,269
    
    
    $
    68,351
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited in thousands)Total revenues
    
    $
    17,330
    
    
    $
    25,726
    
    
    $
    35,363
    
    
    $
    47,621Total expenses
    
    
    (15,200
    )
    
    
    (22,273
    )
    
    
    (31,840
    )
    
    
    (42,945
    )Impairment of long-lived assets
    
    
    (612
    )
    
    
    (818
    )
    
    
    (2,077
    )
    
    
    (8,024
    )Business interruption proceeds
    
    
    
    
    
    
    457
    
    
    
    
    
    
    
    457Interest income and other
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    10Interest expense
    
    
    (362
    )
    
    
    (1,506
    )
    
    
    (1,574
    )
    
    
    (3,044
    )Casualty gains, net
    
    
    
    
    
    
    274
    
    
    
    2,658
    
    
    
    239(Loss) gain on asset disposition
    
    
    (610
    )
    
    
    (7
    )
    
    
    197
    
    
    
    1,482(Loss) gain on extinguishment of debt
    
    
    (1,111
    )
    
    
    
    
    
    
    (1,111
    )
    
    
    10,869Benefit (provision) for income taxes
    
    
    234
    
    
    
    (414
    )
    
    
    (1,620
    )
    
    
    (2,123
    )(Loss) income from discontinued operations
    
    $
    (331
    )
    
    $
    1,439
    
    
    
    (3
    )
    
    
    4,542
 13




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##### Table of Contents



6. Income (Loss) Per Share
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited in thousands, except per share data)Numerator:Income (loss) from continuing operations
    
    $
    68
    
    
    $
    2,562
    
    
    $
    (417
    )
    
    $
    833(Loss) income from discontinued operations
    
    
    (331
    )
    
    
    1,439
    
    
    
    (3
    )
    
    
    4,542Net (loss) income attributable to common stock
    
    $
    (263
    )
    
    $
    4,001
    
    
    $
    (420
    )
    
    $
    5,375Denominator:Basic weighted average shares
    
    
    24,483
    
    
    
    24,634
    
    
    
    24,490
    
    
    
    24,635Diluted weighted average shares
    
    
    24,483
    
    
    
    24,743
    
    
    
    24,490
    
    
    
    24,731Basic (loss) income per common share:Loss from continuing operations
    
    $
    
    
    
    $
    0.10
    
    
    $
    (0.02
    )
    
    $
    0.03Income from discontinued operations
    
    
    (0.01
    )
    
    
    0.06
    
    
    
    
    
    
    
    0.18Net (loss) income attributable to common stock
    
    $
    (0.01
    )
    
    $
    0.16
    
    
    $
    (0.02
    )
    
    $
    0.22Diluted (loss) income per common share:Loss from continuing operations
    
    $
    
    
    
    $
    0.10
    
    
    $
    (0.02
    )
    
    $
    0.03Income from discontinued operations
    
    
    (0.01
    )
    
    
    0.06
    
    
    
    
    
    
    
    0.18Net (loss) income attributable to common stock
    
    $
    (0.01
    )
    
    $
    0.16
    
    
    $
    (0.02
    )
    
    $
    0.22
   7. Long-Term Liabilities
  14




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##### Table of Contents



June 30, 2007
    
    
    December 31, 2006Number
    
    
    Property, plant
    
    
    Long-term
    
    
    Long-termof Hotels
    
    
    and equipment, net
    
    
    obligations
    
    
    obligations
    
    
    Interest rates at June 30, 2007Mortgage DebtMerrill Lynch Mortgage Lending, Inc.  Floating
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    58,118Merrill Lynch Mortgage Lending, Inc.  Fixed
    
    
    22
    
    
    
    237,217
    
    
    
    163,969
    
    
    
    239,383
    
    
    6.58%Goldman Sachs Commercial Mortgage Capital, L.P.
    
    
    10
    
    
    
    120,262
    
    
    
    130,000
    
    
    
    
    
    
    LIBOR plus 1.50%; capped at 8.5%Computer Share Trust Company of Canada
    
    
    1
    
    
    
    16,987
    
    
    
    8,142
    
    
    
    7,551
    
    
    7.88%Lehman Brothers Holdings, Inc.
    
    
    2
    
    
    
    29,921
    
    
    
    6,380
    
    
    
    15,194
    
    
    8.90%Wachovia
    
    
    4
    
    
    
    37,005
    
    
    
    35,755
    
    
    
    36,081
    
    
    $9,756 at 6.03%; $3,084 at 5.78%; 22,915 at 6.04%IXIS
    
    
    4
    
    
    
    36,398
    
    
    
    40,308
    
    
    
    40,500
    
    
    $18,883 at LIBOR plus 2.90%, capped at 8.4%; $21,425 atLIBOR plus 2.95%, capped at 8.45%Total
    
    
    43
    
    
    
    477,790
    
    
    
    384,554
    
    
    
    396,828
    
    
    6.85%(1)Long-term liabilities  otherTax notes issued pursuant to our Joint Plan
of Reorganization
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    1,263Other
    
    
    
    
    
    
    
    
    
    
    447
    
    
    
    1,038
    
    
    
    
    
    
    
    1,385
    
    
    
    2,301Property, plant and equipment  Unencumbered
    
    
    8
    
    
    
    29,767
    
    
    
    
    
    
    
    51
    
    
    
    507,557
    
    
    
    385,939
    
    
    
    399,129Held for sale
    
    
    (7
    )
    
    
    (18,903
    )
    
    
    (8,116
    )
    
    
    (60,271
    )Total June 30, 2007 (2)
    
    
    44
    
    
    $
    488,654
    
    
    $
    377,823
    
    
    $
    338,858
 
 (1)
    
    Represents the Companys annual weighted average cost of debt at June 30, 2007.(2)
    
    Includes the current portion.   
    
    $46.1 million of the loan proceeds, along with $9.7 million in funds held in reserve by
Merrill Lynch, were used to pay off the $55.8 million Merrill Lynch Floating Rate Loan,
which was secured by 14 hotels (2 hotels were classified as held for use, while 12 hotels
were classified as held for sale). The unamortized deferred loan costs of $0.3 million
were recorded as a Loss on Debt Extinguishment in the statement of operations. Of this
amount, approximately $0.1 million was recorded in continuing operations and approximately $0.3 million was recorded in
discontinued operations.
    
    $59.6 million of the loan proceeds, along with $11.7 million of the Companys cash, were
used to defease the Merrill Lynch Fixed Rate #2 Loan, as discussed below.
    
    $15.7 million was held in a restricted cash account, pending resolution or settlement of
the terms of a ground lease relating to one of the ten hotels securing the loan. In June
2007, the terms of the ground lease were settled and $15.4 million of the restricted cash
balance was transferred into an unrestricted cash account.
    15




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##### Table of Contents



8. Commitments and Contingencies
 Franchise Agreements and Capital Expenditures
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited in thousands)Continuing operations
    
    $
    5,342
    
    
    $
    5,068
    
    
    $
    10,013
    
    
    $
    9,405Discontinued operations
    
    
    1,346
    
    
    
    2,574
    
    
    
    2,574
    
    
    
    4,068$
    6,688
    
    
    $
    7,642
    
    
    $
    12,587
    
    
    $
    13,473
    
    
    Two hotels are in default of the franchise agreements.
 
    
    One hotel is held for sale. The Company is currently negotiating a license
extension with the franchisor in an effort to maintain the license until the
hotel is sold.
    
    One hotel is in default of the franchise agreement for failure to complete a
Property Improvement Plan. The Company has met with the franchisor and is in the
planning and diligence phase of renovation.
 16




---



##### Table of Contents




    
    The Company expects to earn clean slate letters for the remaining three hotels in
February 2009, August 2009, and February 2010, respectively.
    Letters of Credit
  Self-insurance
    Casualty gains (losses) and business interruption insurance
    17




---



##### Table of Contents



Litigation
    9. Income Taxes
      18




---



##### Table of Contents



10. Recent Accounting Pronouncements
     11. Subsequent Events
  
    
    repaid two loans totaling $6.4 million, each of which was secured by one hotel. Both
loans had reached their scheduled maturity dates.
    
    sold the Holiday Inn Clarksburg, WV for a gross sales price of $2.9 million and the
Holiday Inn Ft. Wayne, IN for a gross sales price of $2.8 million. The net proceeds, after
paying settlement costs, were used for general corporate purposes. As of August 1, the
held for sale portfolio consisted of 5 hotels.
    
    defeased $3.1 million of the $65.3 million balance of one of the Companys mortgage
loans, which was secured by nine hotels. The Company purchased $3.2 million of Treasury
Securities to cover the monthly debt service payments under the terms of the loan
agreement. The Treasury Securities were then substituted for the one hotel that originally
served as collateral for the undefeased portion of the loan. The hotel was classified as
held for sale. The Treasury Securities and the debt were assigned to an unaffiliated
entity, which became liable for all obligations under the partially defeased portion of the
original debt. The transaction was deemed a partial defeasance because the Company
continues to be liable for the remaining (undefeased) portion of the debt. Accordingly,
the defeased portion of the debt will not be reflected in the Companys consolidated
balance sheet in the future. As a result of the defeasance, the Company will record a Loss
on Debt Extinguishment of approximately $0.2 million. The entire amount will be recorded
in discontinued operations in the Companys statement of operations.
    
    acquired its joint venture partners 50% interest in the Crowne Plaza Melbourne, FL for
$13.5 million.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 19




---



##### Table of Contents



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, 2006.
 Executive Overview
    
    
    49 hotels that are wholly owned and operated through subsidiaries; and
    
    two hotels that are operated in joint ventures in which we have a 50% voting equity interest and exercise control.
   Overview of Continuing Operations
  
    
    Revenues increased $3.9 million, or 5.4%, driven by increases in ADR and occupancy of 3.8%
and 0.7%, respectively. RevPAR grew 4.5%. 29 of our hotels generated an aggregate RevPAR
growth of 12.0%, driven primarily by segmentation mix and market
penetration. 14 of our
hotels experienced an aggregate 9.9% decline in RevPAR. These declines were driven by hotels that experienced a decline in Hurricane Katrina related business, hotels under renovation, locations where market supply had increased
yet is quickly being absorbed, and hotels whose markets were impacted by changes in the convention calendar and market events.
While in general, we expect these hotels to show improved performance in the 3rd and 4th quarters of 2007, the hotels that experienced the prior year Katrina lift and which were under renovation will continue to show declines in RevPAR year over year. Overall, we outperformed the market with a RevPAR
index of 103.7%, an increase of 1.7% compared with the same period one year ago.
    
    Operating income decreased $0.4 million. As a percentage of total revenues, total
operating expenses increased from 86.6% in the first quarter of 2006 to 87.8% in the first
quarter of 2007. The following costs, which increased as a percentage of revenues,
contributed to the decline in operating income: advertising and promotion costs, hotel
general and administrative costs, corporate overhead costs, and property taxes and insurance.
 Overview of Discontinued Operations
   20




---



##### Table of Contents




    
    In January 2007, we sold the University Plaza Bloomington, IN for a gross sales price of
$2.4 million. An impairment charge of $0.1 million was recorded upon the disposition of
this hotel.
    
    Additionally, in March 2007, we sold the Holiday Inn Hamburg, NY for a gross sales price
of $3.4 million, realized a gain of $0.8 million, and used $2.0 million to pay down debt.
The remaining net proceeds, after paying settlement costs, were used for general corporate
purposes.
  
    
    In June 2007, we sold the Holiday Inn Sheffield, AL, which was previously written down
to its estimated net selling price, for a gross sales price of $4.1 million. The net
proceeds, after paying settlement costs, were used for general corporate purposes.
    
    In June 2007, we sold 15 hotels. These hotels, along with an additional hotel expected
to be sold later in the year, were negotiated in a single purchase-sale agreement to an
individual buyer. The agreement met the criteria for recognition as a group sale and the
aggregate transaction is expected to result in a gain. $60.8 million of the aggregate purchase price was
allocated to the 15 hotels and the net proceeds, after paying settlement costs, were used
for general corporate purposes. The gain, which will be deferred until the remaining hotel is sold, is included in
Liabilities Related to Assets Held for Sale in our Balance Sheet.
     Critical Accounting Policies and Estimates
    21




---



##### Table of Contents



Income Statement Overview
  Results of Operations  Continuing Operations
 The analysis below compares the results of operations for the three months ended June 30, 2007 and
2006.
 Revenues  Continuing Operations
 Three Months Ended June 30,2007
    
    
    2006
    
    
    Increase (decrease)(unaudited in thousands)Revenues:Rooms
    
    $
    56,216
    
    
    $
    53,788
    
    
    $
    2,428
    
    
    
    4.5
    %Food and beverage
    
    
    16,779
    
    
    
    15,636
    
    
    
    1,143
    
    
    
    7.3
    %Other
    
    
    2,453
    
    
    
    2,154
    
    
    
    299
    
    
    
    13.9
    %Total revenues
    
    $
    75,448
    
    
    $
    71,578
    
    
    $
    3,870
    
    
    
    5.4
    %Occupancy
    
    
    72.3
    %
    
    
    71.8
    %
    
    
    
    
    
    
    0.7
    %ADR
    
    $
    107.85
    
    
    $
    103.87
    
    
    $
    3.98
    
    
    
    3.8
    %RevPar
    
    $
    77.97
    
    
    $
    74.59
    
    
    $
    3.38
    
    
    
    4.5
    %
    22




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##### Table of Contents



Hotel
    
    Room
    
    
    
    Three Months Ended June 30,Count
    
    Count
    
    
    
    2007
    
    2006
    
    Increase (decrease)Continuing Operations less one hotel43
    
    
    7,923
    
    
    closed in 2006 due to fireOccupancy
    
    
    72.3
    %
    
    
    71.8
    %
    
    
    
    
    
    
    0.7
    %ADR
    
    $
    107.85
    
    
    $
    103.87
    
    
    $
    3.98
    
    
    
    3.8
    %RevPAR
    
    $
    77.97
    
    
    $
    74.59
    
    
    $
    3.38
    
    
    
    4.5
    %RevPAR Index
    
    
    103.7
    %
    
    
    102.0
    %
    
    
    
    
    
    
    1.7
    %Continuing Operations less one hotelclosed in 2006 due to fire and Radisson42
    
    
    7,679
    
    
    New Orleans Airport hotelOccupancy
    
    
    72.4
    %
    
    
    72.2
    %
    
    
    
    
    
    
    0.3
    %ADR
    
    $
    108.47
    
    
    $
    103.10
    
    
    $
    5.37
    
    
    
    5.2
    %RevPAR
    
    $
    78.49
    
    
    $
    74.48
    
    
    $
    4.01
    
    
    
    5.4
    %RevPAR Index
    
    
    103.7
    %
    
    
    102.5
    %
    
    
    
    
    
    
    1.2
    %Continuing Operations less one hotelclosed in 2006 due to fire and hotelsunder renovation in the first and second38
    
    
    6,790
    
    
    quarters of 2006 and/or 2007Occupancy
    
    
    73.5
    %
    
    
    70.6
    %
    
    
    
    
    
    
    4.1
    %ADR
    
    $
    106.35
    
    
    $
    104.16
    
    
    $
    2.19
    
    
    
    2.1
    %RevPAR
    
    $
    78.13
    
    
    $
    73.49
    
    
    $
    4.64
    
    
    
    6.3
    %RevPAR Index
    
    
    105.3
    %
    
    
    100.8
    %
    
    
    
    
    
    
    4.5
    %12
    
    
    1,398
    
    
    Marriott HotelsOccupancy
    
    
    76.0
    %
    
    
    77.5
    %
    
    
    
    
    
    
    (1.9
    %)ADR
    
    $
    114.51
    
    
    $
    105.67
    
    
    $
    8.84
    
    
    
    8.4
    %RevPAR
    
    $
    87.02
    
    
    $
    81.88
    
    
    $
    5.14
    
    
    
    6.3
    %RevPAR Index
    
    
    104.1
    %
    
    
    105.4
    %
    
    
    
    
    
    
    (1.2
    %)4
    
    
    777
    
    
    Hilton HotelsOccupancy
    
    
    73.0
    %
    
    
    68.7
    %
    
    
    
    
    
    
    6.3
    %ADR
    
    $
    110.03
    
    
    $
    104.19
    
    
    $
    5.84
    
    
    
    5.6
    %RevPAR
    
    $
    80.36
    
    
    $
    71.54
    
    
    $
    8.82
    
    
    
    12.3
    %RevPAR Index
    
    
    103.7
    %
    
    
    97.6
    %
    
    
    
    
    
    
    6.2
    %24
    
    
    5,240
    
    
    IHG HotelsOccupancy
    
    
    71.6
    %
    
    
    71.8
    %
    
    
    
    
    
    
    (0.3
    %)ADR
    
    $
    107.62
    
    
    $
    103.14
    
    
    $
    4.48
    
    
    
    4.3
    %RevPAR
    
    $
    77.05
    
    
    $
    74.02
    
    
    $
    3.03
    
    
    
    4.1
    %RevPAR Index
    
    
    104.3
    %
    
    
    103.2
    %
    
    
    
    
    
    
    1.1
    %3
    
    
    508
    
    
    Other Brands and Independent HotelsOccupancy
    
    
    68.2
    %
    
    
    61.6
    %
    
    
    
    
    
    
    10.7
    %ADR
    
    $
    86.36
    
    
    $
    105.78
    
    
    
    ($19.42
    )
    
    
    (18.4
    %)RevPAR
    
    $
    58.86
    
    
    $
    65.15
    
    
    
    ($6.29
    )
    
    
    (9.7
    %)RevPAR Index
    
    
    99.5
    %
    
    
    88.6
    %
    
    
    
    
    
    
    12.3
    %
 23




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##### Table of Contents



Direct operating expenses  Continuing Operations
 % of total revenuesThree Months Ended June 30,
    
    
    
    
    
    
    
    
    
    
    Three Months Ended June 30,2007
    
    
    2006
    
    
    Increase (decrease)
    
    
    2007
    
    
    2006(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    13,756
    
    
    $
    13,310
    
    
    $
    446
    
    
    
    3.4
    %
    
    
    18.2
    %
    
    
    18.6
    %Food and beverage
    
    
    11,021
    
    
    
    10,469
    
    
    
    552
    
    
    
    5.3
    %
    
    
    14.6
    %
    
    
    14.6
    %Other
    
    
    1,642
    
    
    
    1,657
    
    
    
    (15
    )
    
    
    (0.9
    %)
    
    
    2.2
    %
    
    
    2.3
    %Total direct operating expenses
    
    $
    26,419
    
    
    $
    25,436
    
    
    $
    983
    
    
    
    3.9
    %
    
    
    35.0
    %
    
    
    35.5
    %Direct operating margin (by revenue source):Rooms
    
    $
    42,460
    
    
    $
    40,478
    
    
    $
    1,982
    
    
    
    4.9
    %Food and beverage
    
    
    5,758
    
    
    
    5,167
    
    
    
    591
    
    
    
    11.4
    %Other
    
    
    811
    
    
    
    497
    
    
    
    314
    
    
    
    63.2
    %Total direct operating margin
    
    $
    49,029
    
    
    $
    46,142
    
    
    $
    2,887
    
    
    
    6.3
    %Direct operating margin % (by revenue source):Rooms
    
    
    75.5
    %
    
    
    75.3
    %Food and beverage
    
    
    34.3
    %
    
    
    33.0
    %Other
    
    
    33.1
    %
    
    
    23.1
    %Total direct operating margin
    
    
    65.0
    %
    
    
    64.5
    %
    
    
    Higher payroll costs, up 2.5% on a POR basis. Payroll benefits were up $0.50 POR or 3.2%
due to higher workers compensation expenses. The increase in workers compensation costs
were partially offset by lower payroll wages, down $0.13 POR or 1.0%.
    
    Increased costs in other operating areas including cable television, walked guest
expense, other commissions and costs related to our rooms cleaning program.
    24




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##### Table of Contents



Other operating expenses and operating income  Continuing Operations
 % of total revenuesThree Months Ended June 30,
    
    
    
    
    
    
    
    
    
    
    Three Months Ended June 30,2007
    
    
    2006
    
    
    Increase (decrease)
    
    
    2007
    
    
    2006(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    4,439
    
    
    $
    3,836
    
    
    $
    603
    
    
    
    15.7
    %
    
    
    5.9
    %
    
    
    5.4
    %Advertising and promotion
    
    
    3,826
    
    
    
    3,019
    
    
    
    807
    
    
    
    26.7
    %
    
    
    5.1
    %
    
    
    4.2
    %Franchise fees
    
    
    5,342
    
    
    
    5,068
    
    
    
    274
    
    
    
    5.4
    %
    
    
    7.1
    %
    
    
    7.1
    %Repairs and maintenance
    
    
    3,222
    
    
    
    3,460
    
    
    
    (238
    )
    
    
    (6.9
    %)
    
    
    4.3
    %
    
    
    4.8
    %Utilities
    
    
    3,431
    
    
    
    3,322
    
    
    
    109
    
    
    
    3.3
    %
    
    
    4.5
    %
    
    
    4.6
    %Other expenses
    
    
    218
    
    
    
    50
    
    
    
    168
    
    
    
    336.0
    %
    
    
    0.3
    %
    
    
    0.1
    %Other hotel operating costs
    
    
    20,478
    
    
    
    18,755
    
    
    $
    1,723
    
    
    
    9.2
    %
    
    
    27.1
    %
    
    
    26.2
    %Property and other taxes, insurance, and leases
    
    
    5,212
    
    
    
    4,717
    
    
    
    495
    
    
    
    10.5
    %
    
    
    6.9
    %
    
    
    6.6
    %Corporate and other
    
    
    5,930
    
    
    
    5,292
    
    
    
    638
    
    
    
    12.1
    %
    
    
    7.9
    %
    
    
    7.4
    %Casualty (gains) losses, net
    
    
    
    
    
    
    31
    
    
    
    (31
    )
    
    
    (100.0
    %)
    
    
    0.0
    %
    
    
    0.0
    %Depreciation and amortization
    
    
    7,960
    
    
    
    7,704
    
    
    
    256
    
    
    
    3.3
    %
    
    
    10.6
    %
    
    
    10.8
    %Impairment of long-lived assets
    
    
    222
    
    
    
    16
    
    
    
    206
    
    
    
    1287.5
    %
    
    
    0.3
    %
    
    
    0.0
    %Total other operating expenses
    
    $
    39,802
    
    
    $
    36,515
    
    
    $
    3,287
    
    
    
    9.0
    %
    
    
    52.8
    %
    
    
    51.0
    %Total operating expenses
    
    $
    66,221
    
    
    $
    61,951
    
    
    $
    4,270
    
    
    
    6.9
    %
    
    
    87.8
    %
    
    
    86.6
    %Operating income
    
    $
    9,227
    
    
    $
    9,627
    
    
    $
    (400
    )
    
    
    (4.2
    %)
    
    
    12.2
    %
    
    
    13.4
    %
  
    
    General and administrative costs increased $0.6 million, or 15.7%, primarily as a result
of higher payroll, legal and professional fees, and training and travel expenses. The
increase in payroll costs of $0.4 million was primarily due to fewer vacant positions. The increase in
legal and professional fees of $0.1 million was largely driven by the current cycle of union contract
negotiations.
    
    Advertising and promotion costs increased $0.8 million, or 26.7%, due largely to higher
sales staffing levels, higher bonuses driven by revenue growth, and promotion expenses.
    
    Franchise fees increased $0.3 million, or 5.4%, driven in large part by higher room
revenues. As a percentage of total revenues, franchise fees remained flat. As a percentage
of room revenues, franchise fees increased 10 basis points from 9.4% to 9.5%.
    
    Repairs and maintenance expenses decreased $0.2 million, or 6.9%, as a result of improved
preventive maintenance programs and execution of our capital expenditures plan. As a
percentage of revenues, repairs and maintenance expenses decreased 50 basis points from 4.8%
to 4.3%.
    
    Utilities increased $0.1 million, or 3.3% (2.7% on a cost POR basis), primarily because
of higher electricity rates. As a percentage of total revenues, utilities decreased 10
basis points.
    
    Other expenses increased $0.2 million due primarily to costs associated with the planned
conversion of one of our hotels to another brand.
   
    
    In January 2007, we announced a review of strategic alternatives to enhance shareholder
value. During the second quarter, we incurred $0.3 million in consulting and other related
costs.
 25




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##### Table of Contents




    
    Costs associated with our corporate operations team increased $0.3 million. In November 2006,
we announced a major strategic initiative to reconfigure our hotel portfolio and dispose of
our non-core hotels. In conjunction with this initiative, we restructured our operations team
to focus on the different needs of our core and non-core (held for sale) hotels. We expect
these costs to decline following the sale of all of our non-core hotels.
  Non-operating income (expenses)  Continuing Operations
 Three Months Ended June 30,2007
    
    2006
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Business interruption proceeds
    
    $
    272
    
    
    $
    695
    
    
    $
    (423
    )
    
    
    (60.9
    %)Interest income and other
    
    
    822
    
    
    
    848
    
    
    
    (26
    )
    
    
    (3.1
    %)Interest expense
    
    
    (6,767
    )
    
    
    (6,227
    )
    
    
    540
    
    
    
    8.7
    %Loss on debt extinguishment
    
    
    (3,411
    )
    
    
    
    
    
    
    3,411
    
    
    
    n/m
  The analysis below compares the results of operations for the six months ended June 30, 2007 and
June 30, 2006.
 Revenues  Continuing Operations
 Six Months Ended June 30,2007
    
    
    2006
    
    
    Increase (decrease)(unaudited in thousands)Revenues:Rooms
    
    $
    106,459
    
    
    $
    101,657
    
    
    $
    4,802
    
    
    
    4.7
    %Food and beverage
    
    
    30,623
    
    
    
    27,746
    
    
    
    2,877
    
    
    
    10.4
    %Other
    
    
    4,514
    
    
    
    4,103
    
    
    
    411
    
    
    
    10.0
    %Total revenues
    
    $
    141,596
    
    
    $
    133,506
    
    
    $
    8,090
    
    
    
    6.1
    %Occupancy
    
    
    68.7
    %
    
    
    68.9
    %
    
    
    
    
    
    
    (0.3
    %)ADR
    
    $
    108.03
    
    
    $
    103.12
    
    
    $
    4.91
    
    
    
    4.8
    %RevPar
    
    $
    74.23
    
    
    $
    71.05
    
    
    $
    3.18
    
    
    
    4.5
    %
   26




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27




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##### Table of Contents



Hotel
    
    Room
    
    
    
    Six Months Ended June 30,Count
    
    Count
    
    
    
    2007
    
    2006
    
    Increase (decrease)43
    
    
    
    7,923
    
    
    Continuing
Operations less one hotel closed in 2006 due to fireOccupancy
    
    
    68.7
    %
    
    
    68.9
    %
    
    
    
    
    
    
    (0.3
    %)ADR
    
    $
    108.03
    
    
    $
    103.25
    
    
    $
    4.78
    
    
    
    4.6
    %RevPAR
    
    $
    74.23
    
    
    $
    71.13
    
    
    $
    3.10
    
    
    
    4.4
    %RevPAR Index
    
    
    103.3
    %
    
    
    102.1
    %
    
    
    
    
    
    
    1.2
    %42
    
    
    
    7,679
    
    
    Continuing Operations less one hotel
closed in 2006 due to fire and Radisson New Orleans Airport hotelOccupancy
    
    
    68.8
    %
    
    
    68.6
    %
    
    
    
    
    
    
    0.3
    %ADR
    
    $
    108.37
    
    
    $
    102.09
    
    
    $
    6.28
    
    
    
    6.2
    %RevPAR
    
    $
    74.52
    
    
    $
    70.08
    
    
    $
    4.44
    
    
    
    6.3
    %RevPAR Index
    
    
    103.5
    %
    
    
    102.1
    %
    
    
    
    
    
    
    1.4
    %38
    
    
    
    6,790
    
    
    Continuing Operations less one hotel
closed in 2006 due to fire and hotels
under renovation in the first and second
quarters of 2006 and/or 2007Occupancy
    
    
    69.8
    %
    
    
    68.4
    %
    
    
    
    
    
    
    2.0
    %ADR
    
    $
    107.52
    
    
    $
    104.28
    
    
    $
    3.24
    
    
    
    3.1
    %RevPAR
    
    $
    75.08
    
    
    $
    71.33
    
    
    $
    3.75
    
    
    
    5.3
    %RevPAR Index
    
    
    104.4
    %
    
    
    101.1
    %
    
    
    
    
    
    
    3.3
    %12
    
    
    
    1,398
    
    
    Marriott HotelsOccupancy
    
    
    71.0
    %
    
    
    74.3
    %
    
    
    
    
    
    
    (4.4
    %)ADR
    
    $
    114.58
    
    
    $
    104.26
    
    
    $
    10.32
    
    
    
    9.9
    %RevPAR
    
    $
    81.34
    
    
    $
    77.42
    
    
    $
    3.92
    
    
    
    5.1
    %RevPAR Index
    
    
    102.6
    %
    
    
    104.8
    %
    
    
    
    
    
    
    (2.1
    %)4
    
    
    
    777
    
    
    Hilton HotelsOccupancy
    
    
    65.9
    %
    
    
    64.9
    %
    
    
    
    
    
    
    1.5
    %ADR
    
    $
    109.04
    
    
    $
    104.30
    
    
    $
    4.74
    
    
    
    4.5
    %RevPAR
    
    $
    71.89
    
    
    $
    67.65
    
    
    $
    4.24
    
    
    
    6.3
    %RevPAR Index
    
    
    99.7
    %
    
    
    98.0
    %
    
    
    
    
    
    
    1.7
    %24
    
    
    
    5,240
    
    
    IHG HotelsOccupancy
    
    
    68.5
    %
    
    
    67.8
    %
    
    
    
    
    
    
    1.0
    %ADR
    
    $
    107.00
    
    
    $
    101.63
    
    
    $
    5.37
    
    
    
    5.3
    %RevPAR
    
    $
    73.35
    
    
    $
    68.88
    
    
    $
    4.47
    
    
    
    6.5
    %RevPAR Index
    
    
    105.0
    %
    
    
    102.9
    %
    
    
    
    
    
    
    2.0
    %3
    
    
    
    508
    
    
    Other Brands and Independent HotelsOccupancy
    
    
    68.4
    %
    
    
    71.6
    %
    
    
    
    
    
    
    (4.5
    %)ADR
    
    $
    98.54
    
    
    $
    114.68
    
    
    
    ($16.14
    )
    
    
    (14.1
    %)RevPAR
    
    $
    67.41
    
    
    $
    82.14
    
    
    
    ($14.73
    )
    
    
    (17.9
    %)RevPAR Index
    
    
    97.2
    %
    
    
    97.0
    %
    
    
    
    
    
    
    0.2
    %
 28




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Direct operating expenses  Continuing Operations
 % of total revenuesSix Months Ended June 30,
    
    
    
    
    
    
    
    
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Increase (decrease)
    
    
    2007
    
    
    2006(unaudited in thousands)Direct operating expenses:Rooms
    
    $
    26,435
    
    
    $
    25,513
    
    
    $
    922
    
    
    
    3.6
    %
    
    
    18.7
    %
    
    
    19.1
    %Food and beverage
    
    
    21,005
    
    
    
    19,488
    
    
    
    1,517
    
    
    
    7.8
    %
    
    
    14.8
    %
    
    
    14.6
    %Other
    
    
    3,154
    
    
    
    3,182
    
    
    
    (28
    )
    
    
    (0.9
    %)
    
    
    2.2
    %
    
    
    2.4
    %Total direct operating expenses
    
    $
    50,594
    
    
    $
    48,183
    
    
    $
    2,411
    
    
    
    5.0
    %
    
    
    35.7
    %
    
    
    36.1
    %Direct operating margin (by revenue source):Rooms
    
    $
    80,024
    
    
    $
    76,144
    
    
    $
    3,880
    
    
    
    5.1
    %Food and beverage
    
    
    9,618
    
    
    
    8,258
    
    
    
    1,360
    
    
    
    16.5
    %Other
    
    
    1,360
    
    
    
    921
    
    
    
    439
    
    
    
    47.7
    %Total direct operating margin
    
    $
    91,002
    
    
    $
    85,323
    
    
    $
    5,679
    
    
    
    6.7
    %Direct operating margin % (by revenue source):Rooms
    
    
    75.2
    %
    
    
    74.9
    %Food and beverage
    
    
    31.4
    %
    
    
    29.8
    %Other
    
    
    30.1
    %
    
    
    22.4
    %Total direct operating margin
    
    
    64.3
    %
    
    
    63.9
    %
   
    
    Higher fee-based expenses, including reservations, travel agent and credit card
commissions, driven by a 4.8% increase in ADR.
    
    Higher payroll costs, up 3.1% on a POR basis.
    
    Increased costs in other operating areas including room promotion, cable television,
other commissions, walked guest expense and costs associated with our rooms cleaning
program.
    29




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Other operating expenses and operating income  Continuing Operations
 % of total revenuesSix Months Ended June 30,
    
    
    
    
    
    
    
    
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Increase (decrease)
    
    
    2007
    
    
    2006(unaudited in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative
    
    $
    8,855
    
    
    $
    7,663
    
    
    $
    1,192
    
    
    
    15.6
    %
    
    
    6.3
    %
    
    
    5.7
    %Advertising and promotion
    
    
    7,538
    
    
    
    6,394
    
    
    
    1,144
    
    
    
    17.9
    %
    
    
    5.3
    %
    
    
    4.8
    %Franchise fees
    
    
    10,013
    
    
    
    9,405
    
    
    
    608
    
    
    
    6.5
    %
    
    
    7.1
    %
    
    
    7.0
    %Repairs and maintenance
    
    
    6,536
    
    
    
    6,621
    
    
    
    (85
    )
    
    
    (1.3
    %)
    
    
    4.6
    %
    
    
    5.0
    %Utilities
    
    
    7,329
    
    
    
    7,060
    
    
    
    269
    
    
    
    3.8
    %
    
    
    5.2
    %
    
    
    5.3
    %Other expenses
    
    
    220
    
    
    
    174
    
    
    
    46
    
    
    
    26.4
    %
    
    
    0.2
    %
    
    
    0.1
    %Other hotel operating costs
    
    
    40,491
    
    
    
    37,317
    
    
    $
    3,174
    
    
    
    8.5
    %
    
    
    28.6
    %
    
    
    28.0
    %Property and other taxes, insurance, and leases
    
    
    10,823
    
    
    
    9,118
    
    
    
    1,705
    
    
    
    18.7
    %
    
    
    7.6
    %
    
    
    6.8
    %Corporate and other
    
    
    11,612
    
    
    
    10,209
    
    
    
    1,403
    
    
    
    13.7
    %
    
    
    8.2
    %
    
    
    7.6
    %Casualty (gains) losses, net
    
    
    (1,867
    )
    
    
    197
    
    
    
    (2,064
    )
    
    
    (1047.7
    %)
    
    
    (1.3
    %)
    
    
    0.1
    %Depreciation and amortization
    
    
    15,762
    
    
    
    15,062
    
    
    
    700
    
    
    
    4.6
    %
    
    
    11.1
    %
    
    
    11.3
    %Impairment of long-lived assets
    
    
    487
    
    
    
    210
    
    
    
    277
    
    
    
    131.9
    %
    
    
    0.3
    %
    
    
    0.2
    %Total other operating expenses
    
    $
    77,308
    
    
    $
    72,113
    
    
    $
    5,195
    
    
    
    7.2
    %
    
    
    54.6
    %
    
    
    54.0
    %Total operating expenses
    
    $
    127,902
    
    
    $
    120,296
    
    
    $
    7,606
    
    
    
    6.3
    %
    
    
    90.3
    %
    
    
    90.1
    %Operating income
    
    $
    13,694
    
    
    $
    13,210
    
    
    $
    484
    
    
    
    3.7
    %
    
    
    9.7
    %
    
    
    9.9
    %
  
    
    General and administrative costs increased $1.2 million, or 15.6%, driven largely by
higher payroll, legal, professional fees and training and travel costs.
    
    Advertising and promotion costs increased $1.1 million, or 17.9%, due primarily to
increased sales staffing.
    
    Franchise fees increased $0.6 million, or 6.5%, driven largely by higher room revenues.
As a percentage of room revenues, franchise fees increased 10 basis points from 9.3% to
9.4%.
    
    Repairs and maintenance expenses decreased $0.1 million, or 1.3%, resulting from
improved preventive maintenance programs and execution of our capital expenditures plan.
Repairs and maintenance expenses declined 40 basis points as a percentage of revenues.
    
    Utilities increased $0.3 million, or 3.8% (3.9% on a cost POR basis), primarily as a
result of higher electricity rates. As a percentage of total revenues, utilities
decreased 10 basis points.
   
    
    In January 2007, we announced a review of strategic alternatives to enhance shareholder
value. During the first six months of 2007, we incurred $0.6 million in consulting and
other related costs.
    
    Costs associated with our corporate operations team increased $0.6 million. In November
2006, we announced a major strategic initiative to reconfigure our hotel portfolio and
dispose of our non-core hotels. In conjunction with this initiative, we restructured our
operations team to focus on the different needs of our core and non-core (held for sale)
hotels. We expect these costs to decline following the sale of all of our non-core
hotels.
 30




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##### Table of Contents




    
    $0.2 million was related to the amortization of non-vested stock awards granted to our
Board of Directors in February 2007. Two members of the Board did not stand for reelection
at the April 2007 annual meeting of stockholders and the Board elected to accelerate the vesting of the awards for those individuals as of April 24, 2007.
The stock awarded to the remaining members of our Board of Directors is being amortized over
a three-year vesting period.
   Non-operating income (expenses)  Continuing Operations
 Six Months Ended June 30,2007
    
    2006
    
    Increase (decrease)(unaudited in thousands)Non-operating income (expenses):Business interruption proceeds
    
    $
    272
    
    
    $
    695
    
    
    $
    (423
    )
    
    
    (60.9
    %)Interest income and other
    
    
    1,747
    
    
    
    1,157
    
    
    
    590
    
    
    
    51.0
    %Interest expense
    
    
    (12,965
    )
    
    
    (12,569
    )
    
    
    396
    
    
    
    3.2
    %Loss on debt extinguishment
    
    
    (3,411
    )
    
    
    
    
    
    
    3,411
    
    
    
    n/m
  Results of Operations  Discontinued Operations
     
    
    $1.3 million on the Holiday Inn Clarksburg, WV to reflect the estimated selling price;
    
    $0.6 million on the Holiday Inn Jamestown, NY to reflect the estimated selling price;
    
    $0.1 million on the University Plaza Bloomington, IN to record the final disposition of the hotel; and
    
    $0.1 million related to various other held-for-sale properties primarily to write-off
the remaining net book value of disposed fixed assets.
  
    
    $0.7 million on the University Plaza Bloomington, IN hotel which was classified as held
for sale during the second quarter, to reduce the carrying value to the estimated selling
price less costs to sell; and
 31




---



##### Table of Contents




    
    $36,000 related to various other held-for-sale properties primarily to reduce the
carrying values to estimated selling prices less costs to sell, and to record the final
disposition of certain properties.
  
    
    $3.9 million on the Holiday Inn Manhattan, KS to record the final disposition of the hotel;
    
    $2.2 million on the Holiday Inn Lawrence, KS to record the final disposition of the hotel;
    
    $0.5 million on the Holiday Inn Sheffield, AL to reflect the estimated selling costs as
the hotel was identified for sale during the first quarter of 2006;
    
    $0.3 million on the Holiday Inn McKnight, PA to reflect the lowered estimated selling
price and to reflect the write-off of capital improvements that did not add incremental
value or revenue generating capacity;
    
    $0.2 million on the Holiday Inn Valdosta, GA to reflect the estimated selling costs as
the hotel was identified for sale during the first quarter of 2006; and
    
    $0.1 million on the Azalea Inn Valdosta, GA to reflect the estimated selling costs as
the hotel was identified for sale during the first quarter 2006
    
    $0.7 million on the University Plaza Bloomington, IN hotel which was classified as held
for sale during the second quarter, to reduce the carrying value to the estimated selling
price less costs to sell; and
    
    $36,000 related to various other held-for-sale properties primarily to reduce the
carrying value to estimated selling price less costs to sell and to record the final
disposition of certain properties.
    Income Taxes
   32




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##### Table of Contents



33




---



##### Table of Contents



Additional Financial Information Regarding Quarterly Results of Our Continuing Operations
  2007
    
    
    2006
    
    
    2005Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    ThirdQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(Unaudited in thousands)Revenues:Rooms
    
    $
    56,216
    
    
    $
    50,243
    
    
    $
    45,617
    
    
    $
    50,445
    
    
    $
    53,788
    
    
    $
    47,869
    
    
    $
    40,957
    
    
    $
    44,652Food and beverage
    
    
    16,779
    
    
    
    13,844
    
    
    
    15,134
    
    
    
    12,912
    
    
    
    15,636
    
    
    
    12,110
    
    
    
    11,973
    
    
    
    11,570Other
    
    
    2,453
    
    
    
    2,061
    
    
    
    2,066
    
    
    
    2,105
    
    
    
    2,154
    
    
    
    1,949
    
    
    
    1,849
    
    
    
    2,01475,448
    
    
    
    66,148
    
    
    
    62,817
    
    
    
    65,462
    
    
    
    71,578
    
    
    
    61,928
    
    
    
    54,779
    
    
    
    58,236Direct operating expenses:Rooms
    
    
    13,756
    
    
    
    12,679
    
    
    
    12,462
    
    
    
    13,297
    
    
    
    13,310
    
    
    
    12,203
    
    
    
    11,253
    
    
    
    11,766Food and beverage
    
    
    11,021
    
    
    
    9,984
    
    
    
    10,363
    
    
    
    9,772
    
    
    
    10,469
    
    
    
    9,019
    
    
    
    8,444
    
    
    
    8,277Other
    
    
    1,642
    
    
    
    1,512
    
    
    
    1,456
    
    
    
    1,523
    
    
    
    1,657
    
    
    
    1,525
    
    
    
    1,484
    
    
    
    1,51726,419
    
    
    
    24,175
    
    
    
    24,281
    
    
    
    24,592
    
    
    
    25,436
    
    
    
    22,747
    
    
    
    21,181
    
    
    
    21,56049,029
    
    
    
    41,973
    
    
    
    38,536
    
    
    
    40,870
    
    
    
    46,142
    
    
    
    39,181
    
    
    
    33,598
    
    
    
    36,676Other operating expenses:Other hotel operating costs
    
    
    20,478
    
    
    
    20,013
    
    
    
    18,304
    
    
    
    19,078
    
    
    
    18,755
    
    
    
    18,562
    
    
    
    17,265
    
    
    
    17,813Property and other taxes, insurance and leases
    
    
    5,212
    
    
    
    5,611
    
    
    
    5,813
    
    
    
    5,862
    
    
    
    4,717
    
    
    
    4,401
    
    
    
    3,937
    
    
    
    4,357Corporate and other
    
    
    5,930
    
    
    
    5,682
    
    
    
    4,959
    
    
    
    5,592
    
    
    
    5,292
    
    
    
    4,917
    
    
    
    4,314
    
    
    
    5,771Casualty (gain) losses, net
    
    
    
    
    
    
    (1,867
    )
    
    
    
    
    
    
    (3,085
    )
    
    
    31
    
    
    
    166
    
    
    
    (28,754
    )
    
    
    190Depreciation and amortization
    
    
    7,960
    
    
    
    7,802
    
    
    
    7,770
    
    
    
    7,886
    
    
    
    7,704
    
    
    
    7,358
    
    
    
    7,002
    
    
    
    5,250Impairment of long-lived assets
    
    
    222
    
    
    
    265
    
    
    
    225
    
    
    
    323
    
    
    
    16
    
    
    
    194
    
    
    
    1,018
    
    
    
    83Other operating expenses
    
    
    39,802
    
    
    
    37,506
    
    
    
    37,071
    
    
    
    35,656
    
    
    
    36,515
    
    
    
    35,598
    
    
    
    4,782
    
    
    
    33,4649,227
    
    
    
    4,467
    
    
    
    1,465
    
    
    
    5,214
    
    
    
    9,627
    
    
    
    3,583
    
    
    
    28,816
    
    
    
    3,212Other income (expenses):Business interruption insurance proceeds
    
    
    272
    
    
    
    
    
    
    
    530
    
    
    
    2,706
    
    
    
    695
    
    
    
    
    
    
    
    1,772
    
    
    
    6,094Interest income and other
    
    
    822
    
    
    
    925
    
    
    
    664
    
    
    
    786
    
    
    
    848
    
    
    
    309
    
    
    
    271
    
    
    
    340Other interest expense
    
    
    (6,767
    )
    
    
    (6,198
    )
    
    
    (6,297
    )
    
    
    (6,482
    )
    
    
    (6,227
    )
    
    
    (6,342
    )
    
    
    (5,485
    )
    
    
    (5,285
    )Loss on debt extinguishment
    
    
    (3,411
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) before income taxes and minority interests
    
    
    143
    
    
    
    (806
    )
    
    
    (3,638
    )
    
    
    2,224
    
    
    
    4,943
    
    
    
    (2,450
    )
    
    
    25,374
    
    
    
    4,361Minority interests (net of taxes, nil)
    
    
    (56
    )
    
    
    (365
    )
    
    
    335
    
    
    
    100
    
    
    
    (136
    )
    
    
    (4
    )
    
    
    (8,486
    )
    
    
    (1,127
    )Income (loss) before income taxes  continuing operations
    
    
    87
    
    
    
    (1,171
    )
    
    
    (3,303
    )
    
    
    2,324
    
    
    
    4,807
    
    
    
    (2,454
    )
    
    
    16,888
    
    
    
    3,234(Provision) benefit for income taxes  continuing operations
    
    
    (19
    )
    
    
    686
    
    
    
    (9,082
    )
    
    
    (1,039
    )
    
    
    (2,245
    )
    
    
    725
    
    
    
    (8,383
    )
    
    
    (12
    )Income (loss) from continuing operations
    
    
    68
    
    
    
    (485
    )
    
    
    (12,385
    )
    
    
    1,285
    
    
    
    2,562
    
    
    
    (1,729
    )
    
    
    8,505
    
    
    
    3,222Discontinued operations:(Loss) income from discontinued operations before
income taxes
    
    
    (565
    )
    
    
    2,182
    
    
    
    (12,765
    )
    
    
    (1,917
    )
    
    
    1,853
    
    
    
    4,812
    
    
    
    (1,014
    )
    
    
    6,487(Provision) benefit for income taxes
    
    
    234
    
    
    
    (1,854
    )
    
    
    4,437
    
    
    
    794
    
    
    
    (414
    )
    
    
    (1,709
    )
    
    
    313
    
    
    
    (Loss) income from discontinued operations
    
    
    (331
    )
    
    
    328
    
    
    
    (8,328
    )
    
    
    (1,123
    )
    
    
    1,439
    
    
    
    3,103
    
    
    
    (701
    )
    
    
    6,487Net (loss) income attributable to common stock
    
    $
    (263
    )
    
    $
    (157
    )
    
    $
    (20,713
    )
    
    $
    162
    
    
    $
    4,001
    
    
    $
    1,374
    
    
    $
    7,804
    
    
    $
    9,709
 Hotel data by market segment and region
 Hotel data by market segment
   
    
    Upper Upscale: Hilton and Marriott;
    
    Upscale: Courtyard by Marriott, Crowne Plaza, Radisson, Residence Inn by
Marriott, and Springhill Suites by Marriott;
    
    Midscale with Food & Beverage: Doubletree Club, Holiday Inn, Holiday Inn Select; and
    
    Midscale without Food & Beverage: Fairfield Inn by Marriott and Holiday Inn Express.
 34




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##### Table of Contents



Combined Continuing and Discontinued Operations  50 hotels (excludes 1 hotel)
 Three Months Ended June 30,
    
    Six Months Ended June 30,2007
    
    2006
    
    2007
    
    2006Upper UpscaleNumber of properties
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4Number of rooms
    
    
    825
    
    
    
    825
    
    
    
    825
    
    
    
    825Occupancy
    
    
    74.8
    %
    
    
    68.3
    %
    
    
    70.8
    %
    
    
    67.8
    %Average daily rate
    
    $
    121.83
    
    
    $
    114.24
    
    
    $
    120.65
    
    
    $
    113.23RevPAR
    
    $
    91.19
    
    
    $
    78.04
    
    
    $
    85.38
    
    
    $
    76.82UpscaleNumber of properties
    
    
    20
    
    
    
    20
    
    
    
    20
    
    
    
    20Number of rooms
    
    
    3,577
    
    
    
    3,577
    
    
    
    3,577
    
    
    
    3,577Occupancy
    
    
    73.5
    %
    
    
    72.0
    %
    
    
    70.8
    %
    
    
    71.4
    %Average daily rate
    
    $
    110.06
    
    
    $
    107.20
    
    
    $
    114.07
    
    
    $
    109.24RevPAR
    
    $
    80.86
    
    
    $
    77.18
    
    
    $
    80.77
    
    
    $
    78.02Midscale with Food & BeverageNumber of properties
    
    
    22
    
    
    
    22
    
    
    
    22
    
    
    
    22Number of rooms
    
    
    4,104
    
    
    
    4,104
    
    
    
    4,104
    
    
    
    4,104Occupancy
    
    
    69.4
    %
    
    
    71.4
    %
    
    
    64.4
    %
    
    
    64.7
    %Average daily rate
    
    $
    96.97
    
    
    $
    93.91
    
    
    $
    93.27
    
    
    $
    90.35RevPAR
    
    $
    67.31
    
    
    $
    67.09
    
    
    $
    60.07
    
    
    $
    58.45Midscale without Food & BeverageNumber of properties
    
    
    2
    
    
    
    3
    
    
    
    2
    
    
    
    3Number of rooms
    
    
    245
    
    
    
    362
    
    
    
    245
    
    
    
    362Occupancy
    
    
    62.2
    %
    
    
    60.0
    %
    
    
    60.1
    %
    
    
    56.1
    %Average daily rate
    
    $
    89.64
    
    
    $
    81.46
    
    
    $
    98.12
    
    
    $
    85.90RevPAR
    
    $
    55.75
    
    
    $
    48.84
    
    
    $
    58.99
    
    
    $
    48.18Independent HotelsNumber of properties
    
    
    2
    
    
    
    1
    
    
    
    2
    
    
    
    1Number of rooms
    
    
    222
    
    
    
    105
    
    
    
    222
    
    
    
    105Occupancy
    
    
    47.1
    %
    
    
    57.7
    %
    
    
    42.4
    %
    
    
    56.5
    %Average daily rate
    
    $
    56.28
    
    
    $
    53.43
    
    
    $
    53.73
    
    
    $
    53.06RevPAR
    
    $
    26.52
    
    
    $
    30.84
    
    
    $
    22.77
    
    
    $
    29.98All HotelsNumber of properties
    
    
    50
    
    
    
    50
    
    
    
    50
    
    
    
    50Number of rooms
    
    
    8,973
    
    
    
    8,973
    
    
    
    8,973
    
    
    
    8,973Occupancy
    
    
    70.8
    %
    
    
    70.8
    %
    
    
    66.9
    %
    
    
    67.2
    %Average daily rate
    
    $
    103.96
    
    
    $
    100.30
    
    
    $
    104.21
    
    
    $
    99.95RevPAR
    
    $
    73.58
    
    
    $
    70.96
    
    
    $
    69.70
    
    
    $
    67.18
 35




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##### Table of Contents



Continuing Operations  43 hotels (excludes 1 hotel and held for sale hotels)
 Three Months Ended June 30,
    
    Six Months Ended June 30,2007
    
    2006
    
    2007
    
    2006Upper UpscaleNumber of properties
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4Number of rooms
    
    
    825
    
    
    
    825
    
    
    
    825
    
    
    
    825Occupancy
    
    
    74.8
    %
    
    
    68.3
    %
    
    
    70.8
    %
    
    
    67.8
    %Average daily rate
    
    $
    121.83
    
    
    $
    114.24
    
    
    $
    120.65
    
    
    $
    113.23RevPAR
    
    $
    91.19
    
    
    $
    78.04
    
    
    $
    85.38
    
    
    $
    76.82UpscaleNumber of properties
    
    
    20
    
    
    
    19
    
    
    
    19
    
    
    
    19Number of rooms
    
    
    3,579
    
    
    
    3,335
    
    
    
    3,335
    
    
    
    3,335Occupancy
    
    
    73.5
    %
    
    
    73.0
    %
    
    
    70.8
    %
    
    
    71.0
    %Average daily rate
    
    $
    110.06
    
    
    $
    105.65
    
    
    $
    114.07
    
    
    $
    107.11RevPAR
    
    $
    80.86
    
    
    $
    77.12
    
    
    $
    80.77
    
    
    $
    76.10Midscale with Food & BeverageNumber of properties
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    16Number of rooms
    
    
    3,171
    
    
    
    3,171
    
    
    
    3,171
    
    
    
    3,171Occupancy
    
    
    71.4
    %
    
    
    73.7
    %
    
    
    66.8
    %
    
    
    67.3
    %Average daily rate
    
    $
    104.41
    
    
    $
    100.26
    
    
    $
    99.78
    
    
    $
    95.74RevPAR
    
    $
    74.59
    
    
    $
    73.84
    
    
    $
    66.66
    
    
    $
    64.41Midscale without Food & BeverageNumber of properties
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Number of rooms
    
    
    245
    
    
    
    245
    
    
    
    245
    
    
    
    245Occupancy
    
    
    62.2
    %
    
    
    63.3
    %
    
    
    60.1
    %
    
    
    61.9
    %Average daily rate
    
    $
    89.64
    
    
    $
    84.84
    
    
    $
    98.12
    
    
    $
    91.83RevPAR
    
    $
    55.75
    
    
    $
    53.66
    
    
    $
    58.99
    
    
    $
    56.85Independent HotelsNumber of properties
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    2Number of rooms
    
    
    105
    
    
    
    349
    
    
    
    349
    
    
    
    349Occupancy
    
    
    61.4
    %
    
    
    58.2
    %
    
    
    58.9
    %
    
    
    70.5
    %Average daily rate
    
    $
    48.09
    
    
    $
    109.67
    
    
    $
    47.91
    
    
    $
    115.95RevPAR
    
    $
    29.51
    
    
    $
    63.83
    
    
    $
    28.20
    
    
    $
    81.69All HotelsNumber of properties
    
    
    43
    
    
    
    43
    
    
    
    43
    
    
    
    43Number of rooms
    
    
    7,925
    
    
    
    7,925
    
    
    
    7,925
    
    
    
    7,925Occupancy
    
    
    72.3
    %
    
    
    71.8
    %
    
    
    68.7
    %
    
    
    68.9
    %Average daily rate
    
    $
    107.85
    
    
    $
    103.87
    
    
    $
    108.03
    
    
    $
    103.25RevPAR
    
    $
    77.97
    
    
    $
    74.59
    
    
    $
    74.23
    
    
    $
    71.13
 36




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##### Table of Contents



Hotel data by region
   
    
    Northeast: Canada, Connecticut, Massachusetts, Maryland, New Hampshire, New York,
Ohio, Pennsylvania, Vermont, West Virginia;
    
    Southeast: Florida, Georgia, Kentucky, Louisiana, North Carolina, South Carolina, Tennessee;
    
    Midwest: Arkansas, Indiana, Michigan, Minnesota, Oklahoma, Texas; and
    
    West: Arizona, California, Colorado, New Mexico.
 37




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##### Table of Contents



Combined Continuing and Discontinued Operations  50 hotels (excludes 1 hotel)
 Three Months Ended June 30,
    
    Six Months Ended June 30,2007
    
    2006
    
    2007
    
    2006Northeast RegionNumber of properties
    
    
    22
    
    
    
    22
    
    
    
    22
    
    
    
    22Number of rooms
    
    
    4,149
    
    
    
    4,149
    
    
    
    4,149
    
    
    
    4,149Occupancy
    
    
    70.2
    %
    
    
    72.0
    %
    
    
    64.3
    %
    
    
    65.6
    %Average daily rate
    
    $
    103.95
    
    
    $
    101.32
    
    
    $
    101.00
    
    
    $
    98.45RevPAR
    
    $
    72.94
    
    
    $
    72.97
    
    
    $
    64.96
    
    
    $
    64.55Southeast RegionNumber of properties
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    11Number of rooms
    
    
    1,729
    
    
    
    1,729
    
    
    
    1,729
    
    
    
    1,729Occupancy
    
    
    77.0
    %
    
    
    72.6
    %
    
    
    71.0
    %
    
    
    68.9
    %Average daily rate
    
    $
    113.05
    
    
    $
    116.34
    
    
    $
    114.14
    
    
    $
    115.52RevPAR
    
    $
    87.10
    
    
    $
    84.49
    
    
    $
    81.04
    
    
    $
    79.64Midwest RegionNumber of properties
    
    
    10
    
    
    
    10
    
    
    
    10
    
    
    
    10Number of rooms
    
    
    1,779
    
    
    
    1,779
    
    
    
    1,779
    
    
    
    1,779Occupancy
    
    
    65.7
    %
    
    
    69.5
    %
    
    
    61.8
    %
    
    
    66.4
    %Average daily rate
    
    $
    93.89
    
    
    $
    85.22
    
    
    $
    93.27
    
    
    $
    85.32RevPAR
    
    $
    61.72
    
    
    $
    59.26
    
    
    $
    57.64
    
    
    $
    56.70West RegionNumber of properties
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316Occupancy
    
    
    71.3
    %
    
    
    65.9
    %
    
    
    76.4
    %
    
    
    71.2
    %Average daily rate
    
    $
    103.60
    
    
    $
    95.02
    
    
    $
    112.59
    
    
    $
    103.29RevPAR
    
    $
    73.88
    
    
    $
    62.67
    
    
    $
    86.02
    
    
    $
    73.52All HotelsNumber of properties
    
    
    50
    
    
    
    50
    
    
    
    50
    
    
    
    50Number of rooms
    
    
    8,973
    
    
    
    8,973
    
    
    
    8,973
    
    
    
    8,973Occupancy
    
    
    70.8
    %
    
    
    70.8
    %
    
    
    66.9
    %
    
    
    67.2
    %Average daily rate
    
    $
    103.96
    
    
    $
    100.30
    
    
    $
    104.21
    
    
    $
    99.95RevPAR
    
    $
    73.58
    
    
    $
    70.96
    
    
    $
    69.70
    
    
    $
    67.18
 38




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##### Table of Contents



Continuing Operations  43 hotels (excludes 1 hotel and held for sale hotels)
 Three Months Ended June 30,
    
    Six Months Ended June 30,2007
    
    2006
    
    2007
    
    2006Northeast RegionNumber of properties
    
    
    17
    
    
    
    17
    
    
    
    17
    
    
    
    17Number of rooms
    
    
    3,463
    
    
    
    3,463
    
    
    
    3,463
    
    
    
    3,463Occupancy
    
    
    72.4
    %
    
    
    73.6
    %
    
    
    66.9
    %
    
    
    67.6
    %Average daily rate
    
    $
    109.60
    
    
    $
    106.67
    
    
    $
    105.99
    
    
    $
    103.14RevPAR
    
    $
    79.38
    
    
    $
    78.50
    
    
    $
    70.89
    
    
    $
    69.71Southeast RegionNumber of properties
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    11Number of rooms
    
    
    1,731
    
    
    
    1,731
    
    
    
    1,731
    
    
    
    1,731Occupancy
    
    
    77.0
    %
    
    
    72.6
    %
    
    
    71.0
    %
    
    
    68.9
    %Average daily rate
    
    $
    113.05
    
    
    $
    116.34
    
    
    $
    114.14
    
    
    $
    115.52RevPAR
    
    $
    87.10
    
    
    $
    84.49
    
    
    $
    81.04
    
    
    $
    79.64Midwest RegionNumber of properties
    
    
    8
    
    
    
    8
    
    
    
    8
    
    
    
    8Number of rooms
    
    
    1,415
    
    
    
    1,415
    
    
    
    1,415
    
    
    
    1,415Occupancy
    
    
    67.1
    %
    
    
    71.9
    %
    
    
    63.2
    %
    
    
    69.9
    %Average daily rate
    
    $
    100.14
    
    
    $
    88.99
    
    
    $
    99.82
    
    
    $
    88.97RevPAR
    
    $
    67.17
    
    
    $
    64.02
    
    
    $
    63.13
    
    
    $
    62.16West RegionNumber of properties
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Number of rooms
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316
    
    
    
    1,316Occupancy
    
    
    71.3
    %
    
    
    65.9
    %
    
    
    76.4
    %
    
    
    71.2
    %Average daily rate
    
    $
    103.60
    
    
    $
    95.02
    
    
    $
    112.59
    
    
    $
    103.29RevPAR
    
    $
    73.88
    
    
    $
    62.67
    
    
    $
    86.02
    
    
    $
    73.52All HotelsNumber of properties
    
    
    43
    
    
    
    43
    
    
    
    43
    
    
    
    43Number of rooms
    
    
    7,925
    
    
    
    7,925
    
    
    
    7,925
    
    
    
    7,925Occupancy
    
    
    72.3
    %
    
    
    71.8
    %
    
    
    68.7
    %
    
    
    68.9
    %Average daily rate
    
    $
    107.85
    
    
    $
    103.87
    
    
    $
    108.03
    
    
    $
    103.25RevPAR
    
    $
    77.97
    
    
    $
    74.59
    
    
    $
    74.23
    
    
    $
    71.13
 39




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##### Table of Contents



Liquidity and Capital Resources
 Working Capital
         Cash Flow
  Operating activities
  40




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##### Table of Contents



Investing activities
   Financing activities
   Debt and Contractual Obligations
  Off Balance Sheet Arrangements
  Market Risk
    Forward-looking Statements
  41




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##### Table of Contents




    
    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 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, 2006 under
Risks Related to Our Business and Risks Related to Our Common Stock.
  Inflation
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  42




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##### Table of Contents



Item 4. Controls and Procedures
   43




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits
  44




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##### Table of Contents



SIGNATURES
  LODGIAN, INC.By:
    /s/ EDWARD J. ROHLINGEdward J. RohlingDate: August 8, 2007
    
    President and
Chief Executive OfficerBy:
    /s/ JAMES A. MACLENNANJames A. MacLennanDate: August 8, 2007
    
    Executive Vice President and
Chief Financial Officer 45




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EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1
    
    Disclosure Statement for Joint Plan of Reorganization of Lodgian, Inc., et al(other than the
CCA Debtors), Together with the Official Committee of Unsecured Creditors under Chapter 11 of
the Bankruptcy Code, dated September 26, 2002) (Incorporated by reference to Exhibit 10.6 to
the Companys Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed
on March 9, 2004).2.2
    
    First Amended Joint Plan of Reorganization of Lodgian, Inc., et al(Other than CCA Debtors),
Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy
Code, dated September 26, 2002) (Incorporated by reference to Exhibit 10.7 to the Companys
Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9,
2004).2.3
    
    Order Confirming First Amended Joint Plan of Reorganization of Lodgian, Inc., et alissued on
November 5, 2002 by the United States Bankruptcy Curt for the Southern District of New York
(Incorporated by reference to Exhibit 10.8 to the Companys Annual Report for the period ended
December 31, 2003 (File No. 1-14537), filed on March 9, 2004).2.4
    
    Disclosure Statement for Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac
Hotels III, L.L.C. Together with the Official Committee of Unsecured Creditors Under Chapter
11 of the Bankruptcy Code (Incorporated by reference to Exhibit 10.13.1 to the Companys
Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9,
2004).2.5
    
    Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. Together
with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code
(Incorporated by reference to Exhibit 10.13.2 to the Companys Annual Report for the period
ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).2.6
    
    Order Confirming Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac Hotels
III, L.L.C. Together with the Official Committee of Unsecured Creditors under Chapter 11 of
the Bankruptcy Code (Incorporated by reference to Exhibit 10.13.3 to the Companys Annual
Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).2.7
    
    Post Confirmation Order and Notice for Joint Plan of Reorganization of Impac Hotels III,
L.L.C. Together with the Official Committee of Unsecured Creditors under Chapter 11 of the
Bankruptcy Code (Incorporated by reference to Exhibit 10.13.4 to the Companys Annual Report
for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).3.1
    
    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 A Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia
Bank, N.A. (Incorporated by reference to Exhibit 10.9 to the Companys Annual Report for the
period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).4.3
    
    Class B Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia
Bank, N.A. (Incorporated by reference to Exhibit 10.10 to the Companys Annual Report for the
period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).




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##### Table of Contents



ExhibitNumber
    
    Description10.1
    
    Amended and Restated Executive Employment Agreement between Lodgian, Inc. and Daniel E.
Ellis, dated March 29, 2007 (Incorporated be reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K (File No. 1-12537), filed with the Commission on March 30, 2007).10.2
    
    Participation Form for Daniel E. Ellis under the Lodgian, Inc. Executive Incentive Plan
(Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K (File
No. 1-14537), filed with the Commission on February 6, 2006).10.3
    
    Agreement for Consulting Services between Lodgian, Inc. and Linda Borchert Philp dated
December 19, 2005 (Incorporated by reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K (File No. 1-14537), filed with the Commission on December 22, 2005).10.4
    
    Release Agreement between Lodgian, Inc. and Linda Borchert Philp dated December 16, 2005
(Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K (File
No. 1-14537), filed with the Commission on December 22, 2005).10.5
    
    Amended and Restated Executive Employment Agreement between Edward J. Rohling and Lodgian,
Inc., dated April 23, 2007 (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 April 26, 2007).10.6
    
    Restricted Stock Award Agreement between Edward J. Rohling and Lodgian, Inc., dated July 15,
2005 (Incorporated by reference to Exhibit 10.36 to the Companys Quarterly Report for the
period ended June 30, 2005 (File No. 1-14537), filed with the Commission on August 9, 2005).10.7
    
    Amended and Restated Executive Employment Agreement between Lodgian, Inc. and James A.
MacLennan dated March 29, 2007 (Incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K (File No.1-14537), filed with the Commission on March 30, 2007).10.8
    
    Restricted Stock Award Agreement between Lodgian, Inc. and James A. MacLennan dated March 1,
2006 (Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K
(File No. 1-14537), filed with the Commission on March 3, 2006).10.9
    
    Participation Form for James A. MacLennan under the Lodgian, Inc. Executive Incentive Plan
(Incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K (File
No. 1-14537), filed with the Commission on March 3, 2006).10.10
    
    Amended and Restated 2002 Stock Incentive Plan of Lodgian, Inc. (as amended through April
24, 2007. **10.11
    
    Form of Stock Option Award Agreement (Incorporated by reference to Exhibit 10.37 to the
Companys Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with
the Commission on March 23, 2005).10.12
    
    Form of Restricted Stock Award Agreement (Incorporated by reference to Exhibit 10.40 to the
Companys Quarterly Report for the period ended June 30, 2005 (File No. 1-14537), filed with
the Commission on August 9, 2005).10.13
    
    Lodgian, Inc. 401(k) Plan, As Amended and Restated Effective as of January 1, 2006. **10.14
    
    Amended and Restated Executive Employment Agreement between Mark D. Linch and Lodgian, Inc.
dated March 29, 2007 (Incorporated by reference to Exhibit 10.3 to the Companys Current
Report on Form 8-K (File No. 1-14537), filed with the Commission on March 30, 2007).10.15
    
    Executive Employment Agreement between Donna B. Cohen and Lodgian, Inc. dated March 29, 2007
(Incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K (File
No. 1-14537), filed with the Commission on March 30, 2007).10.16
    
    Lodgian, Inc. Executive Incentive Plan (Covering the calendar years 2006-2008).
(Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K (File
No. 1-14537), filed with the Commission on February 6, 2006).10.17
    
    Form of Restricted Stock Award Agreement for Employees (Incorporated by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K/A (File No. 1-14537), filed with the
Commission on March 6, 2007).




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##### Table of Contents



ExhibitNumber
    
    Description10.18
    
    Form of Restricted Stock Award Agreement for Non-Employee Directors (Incorporated by
reference to Exhibit 10.2 to the Companys Current Report on Form 8-K/A (File No. 1-14537),
filed with the Commission on March 6, 2007).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.