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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q (Mark One) x
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended September 30, 2004 OR  o
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934  For the transition period from  to Commission file number 001-11975 Boykin Lodging Company  Ohio
    
    34-1824586(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)Guildhall Building, Suite 1500, 45 W. ProspectAvenue,Cleveland, Ohio
    
    
    44115(Address of Principal Executive Office)
    
    (Zip Code)
 (216) 430-1200 
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x       No o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes x       No o The number of common shares, without par value, outstanding as of October
29, 2004 was 17,450,314.




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PART I ITEM 1. FINANCIAL STATEMENTS BOYKIN LODGING COMPANY
INDEX TO FINANCIAL STATEMENTS Consolidated Balance Sheets as of September 30, 2004 (unaudited) and December 31, 2003
    
    
    3Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2004 and 2003 (unaudited)
    
    
    4Consolidated Statement of Shareholders Equity for the Nine Months Ended September 30, 2004 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
2004 and 2003 (unaudited)
    
    
    6Notes to Consolidated Financial Statements September 30, 2004 (unaudited)
    
    
    7EX-31.1 Certification Pursuant to Rule 13A-14(A)EX-31.2 Certification Pursuant to Rule 13A-14(A)EX-32.1 Certification Pursuant to 18 U.S.C. Section 1350EX-32.2 Certification Pursuant to 18 U.S.C. Section 1350




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BOYKIN LODGING COMPANY 
 CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
 (dollar amounts in thousands)
 (Unaudited)September 30,
    
    December 31,2004
    
    2003ASSETSInvestment in hotel properties
    
    $
    552,588
    
    
    $
    552,155Accumulated depreciation
    
    
    (127,852
    )
    
    
    (128,340
    )Investment in hotel properties, net
    
    
    424,736
    
    
    
    423,815Cash and cash equivalents
    
    
    13,265
    
    
    
    14,013Restricted cash
    
    
    13,551
    
    
    
    15,365Accounts receivable, net of allowance for doubtful accounts of $180
and $145 as of September 30, 2004 and December 31, 2003
    
    
    11,283
    
    
    
    40,016Rent receivable from lessee
    
    
    165
    
    
    
    254Inventories
    
    
    1,740
    
    
    
    1,616Deferred financing costs and other, net
    
    
    2,291
    
    
    
    2,948Investment in unconsolidated joint ventures
    
    
    14,622
    
    
    
    16,158Other assets
    
    
    10,588
    
    
    
    8,340Assets related to discontinued operations, net
    
    
    
    
    
    
    68,767$
    492,241
    
    
    $
    591,292LIABILITIES AND SHAREHOLDERS EQUITYBorrowings against credit facility
    
    $
    11,446
    
    
    $
    71,945Term notes payable
    
    
    194,474
    
    
    
    210,074Accounts payable and accrued expenses
    
    
    39,369
    
    
    
    43,568Accounts payable to related party
    
    
    1,378
    
    
    
    898Dividends/distributions payable
    
    
    1,188
    
    
    
    1,188Due to lessees
    
    
    
    
    
    
    164Deferred lease revenue
    
    
    439
    
    
    
    Minority interest in joint ventures
    
    
    934
    
    
    
    1,177Minority interest in operating partnership
    
    
    11,042
    
    
    
    11,495Liabilities related to discontinued operations
    
    
    
    
    
    
    19,242SHAREHOLDERS EQUITY:Preferred shares, without par value; 10,000,000 shares authorized;
181,000 shares issued and outstanding as of September 30, 2004
and
December 31, 2003 (liquidation preference of $45,250)
    
    
    
    
    
    
    Common shares, without par value; 40,000,000 shares authorized;
17,450,314 and 17,344,380 shares outstanding as of September
30, 2004 and December 31, 2003, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    358,688
    
    
    
    357,290Distributions and losses in excess of income
    
    
    (124,477
    )
    
    
    (124,321
    )Unearned compensation  restricted shares
    
    
    (2,240
    )
    
    
    (1,428
    )Total shareholders equity
    
    
    231,971
    
    
    
    231,541$
    492,241
    
    
    $
    591,292
 See notes to consolidated financial statements. 3




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BOYKIN LODGING COMPANY 
 CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
 (unaudited, amounts in thousands except for per share data)
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Revenues:Hotel revenuesRooms
    
    $
    36,129
    
    
    $
    32,705
    
    
    $
    105,883
    
    
    $
    96,714Food and beverage
    
    
    14,784
    
    
    
    13,461
    
    
    
    46,214
    
    
    
    42,645Other
    
    
    4,870
    
    
    
    3,297
    
    
    
    10,874
    
    
    
    8,885Total hotel revenues
    
    
    55,783
    
    
    
    49,463
    
    
    
    162,971
    
    
    
    148,244Lease revenue
    
    
    571
    
    
    
    501
    
    
    
    1,257
    
    
    
    1,175Other operating revenue
    
    
    100
    
    
    
    79
    
    
    
    296
    
    
    
    231Revenues from condominium development and unit sales
    
    
    3,267
    
    
    
    12,436
    
    
    
    7,541
    
    
    
    29,532Total revenues
    
    
    59,721
    
    
    
    62,479
    
    
    
    172,065
    
    
    
    179,182Expenses:Hotel operating expensesRooms
    
    
    9,071
    
    
    
    8,211
    
    
    
    26,189
    
    
    
    24,020Food and beverage
    
    
    10,651
    
    
    
    9,430
    
    
    
    32,669
    
    
    
    30,705Other direct
    
    
    2,275
    
    
    
    2,031
    
    
    
    6,331
    
    
    
    5,536Indirect
    
    
    17,818
    
    
    
    16,951
    
    
    
    52,236
    
    
    
    47,085Management fees to related party
    
    
    1,468
    
    
    
    1,169
    
    
    
    4,394
    
    
    
    3,187Management fees  other
    
    
    13
    
    
    
    80
    
    
    
    49
    
    
    
    924Total hotel operating expenses
    
    
    41,296
    
    
    
    37,872
    
    
    
    121,868
    
    
    
    111,457Property taxes, insurance and other
    
    
    3,877
    
    
    
    3,615
    
    
    
    11,652
    
    
    
    10,562Cost of condominium development and unit sales
    
    
    2,028
    
    
    
    8,135
    
    
    
    5,509
    
    
    
    19,820Real estate related depreciation and amortization
    
    
    6,275
    
    
    
    6,823
    
    
    
    18,374
    
    
    
    20,350Corporate general and administrative
    
    
    2,721
    
    
    
    1,877
    
    
    
    6,733
    
    
    
    5,815Impairment of real estate
    
    
    
    
    
    
    
    
    
    
    4,300
    
    
    
    Total operating expenses
    
    
    56,197
    
    
    
    58,322
    
    
    
    168,436
    
    
    
    168,004Operating income
    
    
    3,524
    
    
    
    4,157
    
    
    
    3,629
    
    
    
    11,178Interest income
    
    
    (29
    )
    
    
    117
    
    
    
    140
    
    
    
    364Other income
    
    
    
    
    
    
    4
    
    
    
    8
    
    
    
    21Interest expense
    
    
    (3,337
    )
    
    
    (3,282
    )
    
    
    (10,512
    )
    
    
    (11,388
    )Amortization of deferred financing costs
    
    
    (335
    )
    
    
    (290
    )
    
    
    (1,003
    )
    
    
    (1,689
    )Minority interest in earnings of joint ventures
    
    
    (41
    )
    
    
    (34
    )
    
    
    (80
    )
    
    
    (74
    )Minority interest in loss of operating partnership
    
    
    199
    
    
    
    219
    
    
    
    1,649
    
    
    
    1,378Equity in earnings (loss) of unconsolidated joint ventures
    
    
    14
    
    
    
    (109
    )
    
    
    (574
    )
    
    
    (818
    )Income
(loss) before gain (loss) on sale/disposal of assets and discontinued operations
    
    
    (5
    )
    
    
    782
    
    
    
    (6,743
    )
    
    
    (1,028
    )Gain (loss) on sale/disposal of assets
    
    
    861
    
    
    
    (28
    )
    
    
    3,368
    
    
    
    348Income (loss) before discontinued operations
    
    
    856
    
    
    
    754
    
    
    
    (3,375
    )
    
    
    (680
    )Discontinued operations:Operating income (loss) from discontinued operations, net of minority interest
income (expense) of $315 and $(72) for the three months ended September 30, 2004
and 2003, respectively, and $249 and $167 for the nine months ended September 30,
2004 and 2003, respectively
    
    
    (1,783
    )
    
    
    405
    
    
    
    (1,412
    )
    
    
    (944
    )Gain (loss) on sale of assets, net of minority interest income (expense) of
$(1,206) and $26 for the three months ended September 30, 2004 and 2003,
respectively, and $(1,445) and $(116) for the nine months ended September 30,
2004 and 2003, respectively
    
    
    6,835
    
    
    
    (148
    )
    
    
    8,194
    
    
    
    654Net income (loss)
    
    $
    5,908
    
    
    $
    1,011
    
    
    $
    3,407
    
    
    $
    (970
    )Preferred dividends
    
    
    (1,188
    )
    
    
    (1,188
    )
    
    
    (3,563
    )
    
    
    (3,563
    )Net income (loss) attributable to common shareholders
    
    $
    4,720
    
    
    $
    (177
    )
    
    $
    (156
    )
    
    $
    (4,533
    )Net loss attributable to common shareholders before discontinued operations per shareBasic
    
    $
    (0.02
    )
    
    $
    (0.03
    )
    
    $
    (0.40
    )
    
    $
    (0.24
    )Diluted
    
    $
    (0.02
    )
    
    $
    (0.03
    )
    
    $
    (0.40
    )
    
    $
    (0.24
    )Discontinued operations per shareBasic
    
    $
    0.29
    
    
    $
    0.01
    
    
    $
    0.39
    
    
    $
    (0.02
    )Diluted
    
    $
    0.29
    
    
    $
    0.01
    
    
    $
    0.39
    
    
    $
    (0.02
    )Net income (loss) attributable to common shareholders per share (a)Basic
    
    $
    0.27
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.26
    )Diluted
    
    $
    0.27
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.26
    )Weighted average number of common shares outstandingBasic
    
    
    17,447
    
    
    
    17,344
    
    
    
    17,418
    
    
    
    17,334Diluted
    
    
    17,529
    
    
    
    17,445
    
    
    
    17,515
    
    
    
    17,438
 (a) Per share amounts may not add due to rounding See notes to consolidated financial statements. 4




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BOYKIN LODGING COMPANY 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
 (unaudited, dollar amounts in thousands except for per share data)
 DistributionsAdditional
    
    and LossesPreferred
    
    Common
    
    Paid-In
    
    In Excess of
    
    UnearnedShares
    
    Shares
    
    Capital
    
    Income
    
    Compensation
    
    TotalBalance at December 31, 2003
    
    
    181,000
    
    
    
    17,344,380
    
    
    $
    357,290
    
    
    $
    (124,321
    )
    
    $
    (1,428
    )
    
    $
    231,541Issuance of common shares
    
    
    
    
    
    
    128,745
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted common share
grants
    
    
    
    
    
    
    
    
    
    
    1,589
    
    
    
    
    
    
    
    (1,589
    )
    
    
    Common share purchases for
treasury
    
    
    
    
    
    
    (22,811
    )
    
    
    (191
    )
    
    
    
    
    
    
    
    
    
    
    (191
    )Dividends declared $19.6875 per Class A
preferred share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,563
    )
    
    
    
    
    
    
    (3,563
    )Amortization of unearned
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    777
    
    
    
    777Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,407
    
    
    
    
    
    
    
    3,407Balance at September 30, 2004
    
    
    181,000
    
    
    
    17,450,314
    
    
    $
    358,688
    
    
    $
    (124,477
    )
    
    $
    (2,240
    )
    
    $
    231,971
 See notes to consolidated financial statements. 5




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BOYKIN LODGING COMPANY 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
 (unaudited, amounts in thousands)
 2004
    
    2003Cash flows from operating activities:Net income (loss)

    
    $
    3,407
    
    
    $
    (970
    )Adjustments to reconcile net income (loss) to net cash
flow provided
by operating activities -Gain on sale/disposal of assets
    
    
    (13,007
    )
    
    
    (1,118
    )Impairment of real estate
    
    
    4,300
    
    
    
    Depreciation and amortization
    
    
    21,493
    
    
    
    26,027Amortization of unearned compensation
    
    
    777
    
    
    
    583Equity in loss of unconsolidated joint ventures
    
    
    574
    
    
    
    818Deferred lease revenue
    
    
    439
    
    
    
    427Minority interests
    
    
    1,746
    
    
    
    (1,355
    )Changes in assets and liabilities -Accounts receivable and inventories
    
    
    31,002
    
    
    
    (23,956
    )Restricted cash
    
    
    1,814
    
    
    
    (6,228
    )Accounts payable and accrued expenses
    
    
    (6,066
    )
    
    
    4,750Amounts due to/from lessees
    
    
    (75
    )
    
    
    (422
    )Other
    
    
    (1,749
    )
    
    
    3,745Net cash flow provided by operating activities
    
    
    44,655
    
    
    
    2,301Cash flows from investing activities:Investment in unconsolidated joint ventures
    
    
    (438
    )
    
    
    (481
    )Distributions received from unconsolidated joint ventures
    
    
    1,373
    
    
    
    267Improvements and additions to hotel properties, net
    
    
    (25,009
    )
    
    
    (46,289
    )Net proceeds from sale of assets
    
    
    78,145
    
    
    
    29,314Net cash flow provided by (used in) investing activities
    
    
    54,071
    
    
    
    (17,189
    )Cash flows from financing activities:Payments of dividends and distributions
    
    
    (3,563
    )
    
    
    (10,786
    )Net (repayments) borrowings against credit facility
    
    
    (60,500
    )
    
    
    27,500Term note borrowings
    
    
    14,133
    
    
    
    7,206Repayment of term notes
    
    
    (46,602
    )
    
    
    (18,552
    )Payment of deferred financing costs
    
    
    (309
    )
    
    
    (681
    )Net proceeds from issuance of common shares
    
    
    
    
    
    
    154Cash payment for common share purchases
    
    
    (191
    )
    
    
    (81
    )Distributions to joint venture minority interest partners
    
    
    (2,442
    )
    
    
    (55
    )Net cash flow provided by (used in) financing activities
    
    
    (99,474
    )
    
    
    4,705Net change in cash and cash equivalents
    
    $
    (748
    )
    
    $
    (10,183
    )Cash and cash equivalents, beginning of period
    
    
    14,013
    
    
    
    25,453Cash and cash equivalents, end of period
    
    $
    13,265
    
    
    $
    15,270
 See notes to consolidated financial statements. 6




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##### Table of Contents



BOYKIN LODGING COMPANY 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
 (unaudited, dollar amounts in thousands except per share data)
 1. BACKGROUND: Boykin Lodging Company, an Ohio corporation (together with its
subsidiaries Boykin), is a real estate investment trust (REIT) that owns
hotels throughout the United States of America. As of September 30, 2004,
Boykin owned interests in 25 hotels containing a total of 7,417 guest rooms
located in 16 states. Formation and Significant Events Boykin was formed and completed an initial public offering (IPO) in 1996
to continue and expand the nearly 40-year history of hotel ownership,
acquisition, redevelopment and repositioning activities of its predecessors,
Boykin Management Company and its affiliates. Boykin Hotel Properties, L.P.,
an Ohio limited partnership (the Partnership), is the operating partnership
that transacts business and holds the direct and indirect ownership interests
in Boykins hotels. As of September 30, 2004, Boykin had an 85.3% ownership
interest in and was the sole general partner of the Partnership. Since the IPO, Boykin has expanded its hotel portfolio by using capital
raised through a combination of common share issuances, debt financings,
capital from strategic joint venture partners and cash flow generated from
operations. Consolidated Joint Venture Boykin has a 91% ownership interest in Boykin San Diego, LLC, a joint
venture formed with Outrigger Lodging Services (Outrigger), a
California-based, privately-held hotel management company. In November 1997,
the joint venture purchased the Hampton Inn San Diego Airport/Sea World.
Outrigger is the operator of the hotel. Unconsolidated Joint Ventures Boykin has a 25% ownership interest in a joint venture with AEW Partners
III, L.P. (AEW), an investment partnership managed by AEW Capital Management,
L.P., a Boston-based real estate investment firm. The Boykin/AEW venture has a
75% ownership interest in Boykin Chicago, L.L.C., which owns Hotel 71, located
in downtown Chicago. Boykin directly owns the remaining 25% ownership interest
in Boykin Chicago, L.L.C. thereby resulting in Boykins total ownership
percentage in the hotel of 43.75%. Boykin has a 50% ownership interest in BoyCon, L.L.C. (BoyCon), a joint
venture with an affiliate of Concord Hospitality Enterprises (Concord), a
privately owned hotel investment and management company based in Raleigh, North
Carolina. BoyCon owns a 227-room Courtyard by Marriott® in Lyndhurst, New
Jersey, which is managed by Concord. Because of the non-controlling nature of Boykins ownership interests in
these joint ventures, Boykin accounts for these investments using the equity
method. Boykins carrying value of its investment in the joint ventures differs
from its share of the partnership equity reported in the balance sheets of the
unconsolidated joint ventures due to Boykins cost of its investment in excess
of the historical net book values related to the direct investment in Boykin
Chicago, L.L.C. Boykins additional basis is allocated to depreciable assets
and depreciation is recognized on a straight-line basis over 30 years. 7




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The following table sets forth the total assets, liabilities, equity and
components of net income (loss), including Boykins share, related to the
unconsolidated joint ventures discussed above as of September 30, 2004 and
December 31, 2003 and for the three and nine month periods ended September 30,
2004 and 2003: Boykin/AEW
    
    Boykin/ConcordSeptember 30,
    
    December 31,
    
    September 30,
    
    December 31,2004
    
    2003
    
    2004
    
    2003Total assets
    
    $
    68,067
    
    
    $
    68,601
    
    
    $
    21,762
    
    
    $
    22,272Accrued expenses
    
    
    3,737
    
    
    
    2,884
    
    
    
    510
    
    
    
    469Outstanding debt
    
    
    36,448
    
    
    
    37,236
    
    
    
    18,476
    
    
    
    16,728Total liabilities
    
    
    40,185
    
    
    
    40,120
    
    
    
    18,986
    
    
    
    17,197Minority interest
    
    
    6,934
    
    
    
    7,081
    
    
    
    
    
    
    
    Equity
    
    
    20,948
    
    
    
    21,400
    
    
    
    2,776
    
    
    
    5,075Boykins share of equity and minority interest
    
    
    12,268
    
    
    
    12,627
    
    
    
    1,388
    
    
    
    2,537Boykins additional basis in Boykin Chicago, L.L.C.
    
    
    966
    
    
    
    994
    
    
    
    
    
    
    
    Investment in unconsolidated joint venture
    
    $
    13,234
    
    
    $
    13,621
    
    
    $
    1,388
    
    
    $
    2,537
 Boykin/AEW
    
    Boykin/ConcordThree Months
    
    Nine Months
    
    Three Months
    
    Nine MonthsEnded
    
    Ended
    
    Ended
    
    EndedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003Revenues
    
    $
    4,984
    
    
    $
    4,096
    
    
    $
    12,204
    
    
    $
    10,731
    
    
    $
    1,868
    
    
    $
    1,727
    
    
    $
    5,426
    
    
    $
    4,894Hotel operating expenses
    
    
    (3,137
    )
    
    
    (2,844
    )
    
    
    (8,470
    )
    
    
    (7,596
    )
    
    
    (1,052
    )
    
    
    (986
    )
    
    
    (3,107
    )
    
    
    (2,779
    )Real estate related depreciation
    
    
    (777
    )
    
    
    (793
    )
    
    
    (2,328
    )
    
    
    (2,343
    )
    
    
    (279
    )
    
    
    (276
    )
    
    
    (834
    )
    
    
    (862
    )Property taxes, insurance and other
    
    
    (592
    )
    
    
    (275
    )
    
    
    (1,286
    )
    
    
    (841
    )
    
    
    (142
    )
    
    
    (128
    )
    
    
    (410
    )
    
    
    (404
    )Operating income (loss)
    
    
    478
    
    
    
    184
    
    
    
    120
    
    
    
    (49
    )
    
    
    395
    
    
    
    337
    
    
    
    1,075
    
    
    
    849Interest and other income
    
    
    5
    
    
    
    2
    
    
    
    7
    
    
    
    3
    
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    3Amortization
    
    
    (38
    )
    
    
    (69
    )
    
    
    (153
    )
    
    
    (208
    )
    
    
    (96
    )
    
    
    (23
    )
    
    
    (140
    )
    
    
    (66
    )Interest expense
    
    
    (454
    )
    
    
    (424
    )
    
    
    (1,272
    )
    
    
    (1,301
    )
    
    
    (265
    )
    
    
    (193
    )
    
    
    (644
    )
    
    
    (600
    )Other
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    (6
    )
    
    
    
    
    
    
    (75
    )
    
    
    (109
    )
    
    
    (470
    )Net income (loss) before minority interest
    
    
    (10
    )
    
    
    (307
    )
    
    
    (1,299
    )
    
    
    (1,561
    )
    
    
    35
    
    
    
    47
    
    
    
    184
    
    
    
    (284
    )Boykins share of net income (loss)
    
    
    (3
    )
    
    
    (132
    )
    
    
    (666
    )
    
    
    (676
    )
    
    
    17
    
    
    
    23
    
    
    
    92
    
    
    
    (142
    )
 Taxable REIT Subsidiaries Bellboy, Inc. (Bellboy) is a wholly-owned taxable REIT subsidiary
(TRS) of Boykin which, through its subsidiaries, leased 22 of Boykins
properties as of September 30, 2004. Boykin Chicago, L.L.C. and the
Boykin/Concord joint venture each also have TRS entities, 71 E. Wacker Leasing,
Inc. and BoyCon Leasing, Inc., respectively, that leased their properties. As of September 30, 2004, all hotels Boykin had an ownership interest in,
other than the Hampton Inn San Diego Airport/Sea World, were operated under the
TRS structure. The consolidated financial statements include the operating results of the
consolidated hotels under the TRS structure. For the one consolidated hotel
not operated under the TRS structure, lease revenues are recorded within the
consolidated financial statements. 8




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##### Table of Contents



Hilton Modification Agreement In connection with the terms of an agreement which Boykin entered into
with Hilton Hotels Corporation (Hilton) during 2003, Hilton ceased management
of Boykins hotel in Yakima, Washington, in February 2004. Simultaneously, the
hotel changed from a Doubletree to a Clarion. At that time, Boykin entered into
an agreement with a regional management company, Chambers Group, to take over
operations of the hotel. The new management agreement has an indefinite life
but is cancelable by Boykin without penalty upon providing 30 days notice. Doubletree Portland Downtown Hotel On March 2, 2004, the City of Portland, through the Portland Development
Commission (PDC), acquired Boykins Doubletree Portland Downtown Hotel in
Portland, Oregon, through its power of eminent domain. The PDC acquired the
property for $19,700. Approximately $16,870 of the proceeds were applied to the
outstanding balance of Boykins $130,000 term loan, for which the property
served as collateral. The remainder of the net proceeds was available for
general corporate purposes. Additionally, Boykin sold the related furniture,
fixtures and equipment contained within the property to Portland State
University for $2,272. The proceeds from the sale of the related furniture,
fixtures and equipment were deposited into the furniture, fixtures and
equipment reserve fund of the $130,000 term loan. Marriotts Hunt Valley Inn In July 2004, Shawan Road Hotel L.P., a previously existing consolidated
joint venture between Boykin and Davidson Hotel Company, closed on the sale of
the Marriotts Hunt Valley Inn in Hunt Valley, Maryland for a price of $31,000.
Net proceeds from the sale were distributed to the joint venture partners in
accordance with the joint venture agreement, with certain funds being retained
to fund potential future expenses of the partnership. Boykins share of the
net proceeds of the sale of the property distributed from the joint venture
approximated $29,200, and were applied to reduce the outstanding balance of
Boykins credit facility, for which the property served as collateral. In
connection with this sale, the commitment amount of the credit facility was
reduced to $60,000. Holiday Inn Minneapolis West In August 2004, BoyStar Ventures, L.P., a previously existing consolidated
joint venture between Boykin and Interstate Hotels and Resorts, closed on the
sale of the Holiday Inn Minneapolis West in Minneapolis, Minnesota for a price
of $9,325. As a result of the terms of the joint venture agreement, Boykin
received net proceeds from the sale of approximately $9,000. The net proceeds
were applied to reduce the outstanding balance of Boykins credit facility, for
which the property served as collateral. Radisson Hotel Mount Laurel In September 2004, Boykin closed on the sale of the
Radisson Hotel Mount Laurel in Mount Laurel, New Jersey for a price of $14,250.
Boykin received net proceeds from the sale of approximately $13,800. A portion
of the proceeds was applied to reduce the outstanding balance of the credit
facility, for which the property served as collateral. The remainder of the
proceeds was used for general corporate purposes. Impact of Hurricanes In August and September, the state of Florida and Boykins hotels along
the east and west coasts of the state endured the impact of several hurricanes.
Boykins three hotels on the west coast, the Pink Shell Beach Resort and Spa
(the Pink Shell), the Best Western Fort Myers Island Gateway Hotel (the Best
Western) and the Radisson Suite Beach Resort  Marco Island (the Radisson)
were impacted by Hurricane Charley. All three hotels were evacuated during the
storm. The Best Western and the Radisson sustained only minor damage. Pink
Shell had more extensive damage. The 43 units of the Captiva and Useppa
buildings at the Pink Shell have been closed since the hurricane. Boykins Melbourne Hilton Oceanfront and Melbourne Quality Suites were
damaged by Hurricane Frances, which struck the east coast of Florida in early
September. Prior to the storm, both hotels were evacuated, and due to the
damage to the guestrooms and common areas as a result of the storm, both hotels
remain closed as of September 30, 2004. Due to shortages of materials and
labor in Florida caused by the severity of the hurricanes, Boykin is unable to
estimate when the hotels will resume normal operations, but Boykin expects the
closure will be a minimum of six months. Boykin expects the majority of costs
to repair the properties will be covered under its insurance policies. Boykin
also maintains business interruption insurance to offset the effects of the
closure on its operating results. 9




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##### Table of Contents



Hotel Managers As of September 30, 2004, Boykin Management Company Limited Liability
Company (BMC) and certain of its subsidiaries managed 22 of the 25 hotels in
which Boykin had ownership interests. BMC is owned by Robert W. Boykin,
Chairman and Chief Executive Officer of Boykin (53.8%), and his brother, John
E. Boykin (46.2%). Chambers Group, Concord, and Outrigger each managed one
property as of such date. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Presentation The separate financial statements of Boykin, the Partnership, Bellboy and
Boykin San Diego LLC discussed above are consolidated because Boykin exercises
unilateral control over these entities. All significant intercompany
transactions and balances have been eliminated. Boykin believes that the
results of operations contained within the financial statements reflect all
costs of Boykin doing business. These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Boykin
believes that all adjustments, consisting of normal recurring adjustments and
accruals, considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 2004
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2004. The operations of the hotels have historically been
seasonal. The five hotels located in Florida have historically experienced
their highest occupancy in the first quarter, while the remaining hotels have
historically maintained higher occupancy rates during the second and third
quarters. For further information, refer to the consolidated financial
statements and footnotes thereto included in Boykins annual report on Form
10-K for the year ended December 31, 2003. Certain prior period amounts have
been reclassified to conform to the current period presentation. Condominium Units Condominium project revenue and expenses for units under construction are
recognized on the percentage of completion method upon satisfaction of the
following criteria: (a) construction is determined to be beyond a preliminary
stage, (b) the buyer is not entitled to a refund except for nondelivery of the
unit, (c) sufficient units are under binding contract to assure the entire
property will not revert to rental property, (d) sales prices have been
determined to be collectible, and (e) aggregate sales proceeds and costs can be
reasonably estimated. Beginning in 2003, revenue was recognized under
percentage of completion accounting for the White Sand Villas project at the
Pink Shell as the project had satisfied the criteria outlined above.
Percentage of completion accounting involves the use of estimates for the
relation of revenues on sold units to total revenues of the project and for
total cost of the project. The profit margin realized could change if
estimated costs change due to a change in scope or scheduling of the project or
other factors. Boykin reported revenues of $7,541 and $24,823 and costs of
$5,509 and $16,804 under the percentage of completion method of accounting for
the nine month periods ended September 30, 2004 and 2003, respectively. As of September 30, 2004, the sales of all of the 91 available units had
closed, the proceeds had been collected and the contractors had completed their
obligations; therefore, all project revenues and related costs had been
recognized. The amount of costs in excess of the revenue recognized on the White Sand
Villas project was $518 as of December 31, 2003, and is reflected in other
assets within the consolidated balance sheet. The outstanding accounts
receivable related to the recognition of revenue for the White Sand Villas
units totaled $32,173 as of December 31, 2003. Investment in Hotel Properties Boykin reviews the hotel properties for impairment whenever events or
changes in circumstances indicate the carrying value of the hotel properties
may not be recoverable. Events or circumstances that may cause a review
include, but are not limited to, adverse changes in the demand for lodging at
the properties due to declining national or local economic conditions, new
hotel construction in markets where the hotels are located or changes in the
expected holding period of the property. When such conditions exist,
management performs an analysis to determine if the estimated undiscounted
future cash flows from operations and the proceeds from the ultimate
disposition of a hotel property exceed its carrying value. If the estimated
undiscounted future cash flows are less than the carrying amount of the asset,
an adjustment to reduce the carrying amount to the related hotel propertys
estimated fair market value is recorded and an impairment loss recognized. In the first quarter of 2004, Boykin identified changes in circumstances,
namely the intended holding period of the property, which indicated that the
carrying value of one of its non-core west coast properties was impaired and
accordingly recorded an impairment charge of $4,300. Boykin does not believe
that there are any factors or circumstances indicating impairment of any other
investments in hotel properties at this time. 10




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##### Table of Contents



Fair market values of hotel properties are estimated through a combination
of comparable property sales, replacement cost and a discounted cash flow
analysis taking into account each propertys expected cash flow generated from
operations, holding period and ultimate proceeds from disposition. In
projecting the expected cash flows from operations of the asset, the estimates
are based on future projected earnings before interest expense, income taxes,
depreciation and amortization, or EBITDA, and deduct expected capital
expenditure requirements. Growth assumptions are applied to project these
amounts over the expected holding period of the asset. The growth assumptions
are based on estimated inflationary increases in room rates and expenses and
the demand for lodging at the properties, as impacted by local and national
economic conditions and estimated or known future new hotel supply. The
estimated proceeds from disposition are judgmentally determined based on a
combination of anticipated cash flow in the year of disposition, capitalization
rate, ratio of selling price to gross hotel revenues and selling price per
room. If actual conditions differ from the assumptions, the actual results of
each assets future operations and fair market value could be significantly
different from the estimated results and value used in the analysis. There were no properties held for sale as of September 30, 2004 as defined
within the provisions of Statement of Financial Accounting Standards (SFAS)
No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets.
Boykin considers assets to be held for sale when they are under contract,
significant non-refundable deposits have been made by the potential buyer and
the assets are immediately available to be sold. Insurance Recoveries In 2003, Boykin disposed of certain assets due to water infiltration
remediation activities. Property insurance proceeds received in 2004 totaled
$3,383 and are recorded as gain on sale/disposal of assets within the
consolidated financial statements. In the third quarter of 2004, Boykin
recognized a $750 advance on its business interruption insurance claim related
to the period when the remediation activities occurred. These proceeds are
recorded as other hotel revenues within the consolidated financial statements. Since September 2004, Boykins two hotels located in Melbourne, Florida
have been closed due to damage sustained from Hurricane Frances. Boykin has
recorded estimated business interruption insurance recoveries in the amount of
the operating loss sustained by the hotels since the storm. These estimates,
totaling $577, are recorded as other hotel revenues within the consolidated
financial statements. Estimated property insurance recoveries totaling $1,251
have been recorded as gain on sale/disposal of assets within the consolidated
financial statements to the extent Boykin experienced a loss on the writeoff of
the damaged or destroyed assets. As other property insurance claims are filed for repair work done at the
properties, Boykin records estimated recoveries to offset the costs incurred,
less appropriate deductibles. Stock-based Compensation At September 30, 2004, Boykin had a Long-Term Incentive Plan (LTIP).
Boykin has adopted the disclosure only provisions of SFAS No. 123, Accounting
for Stock-Based Compensation, and applies Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for its employee share option
plan. If Boykin had elected to recognize compensation costs for the LTIP based
on the fair value at the grant dates for option awards consistent with the
method prescribed by SFAS No. 123, reported amounts of net
income (loss) and net income (loss)
per share would have been changed to the pro forma amounts indicated below. Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Pro Forma
    
    Pro Forma
    
    Pro Forma
    
    Pro FormaNet income (loss) attributable to common shareholders
    
    $
    4,720
    
    
    $
    (177
    )
    
    $
    (156
    )
    
    $
    (4,533
    )Stock-based employee compensation expense
    
    
    (32
    )
    
    
    (32
    )
    
    
    (95
    )
    
    
    (95
    )Pro forma net income (loss) attributable to common
shareholders
    
    
    4,688
    
    
    
    (209
    )
    
    
    (251
    )
    
    
    (4,628
    )Pro forma net income (loss) attributable to common
shareholders per share:Basic
    
    $
    0.27
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.27
    )Diluted
    
    $
    0.27
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.27
    )
 11




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##### Table of Contents



3. EARNINGS PER SHARE: Basic earnings per share is based on the weighted average number of common
shares outstanding during the period whereas diluted earnings per share adjusts
the weighted average shares outstanding for the effect of all dilutive
securities. For the three and nine months ended September 30, 2004 and 2003,
the weighted average basic and diluted common shares outstanding were as
follows: Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Basic
    
    
    17,446,739
    
    
    
    17,344,380
    
    
    
    17,418,448
    
    
    
    17,333,521Effective of dilutive securities:Common stock options
    
    
    19,098
    
    
    
    12,531
    
    
    
    26,616
    
    
    
    14,068Restricted share grants
    
    
    63,287
    
    
    
    87,673
    
    
    
    70,338
    
    
    
    89,921Diluted
    
    
    17,529,124
    
    
    
    17,444,584
    
    
    
    17,515,402
    
    
    
    17,437,510
 4. PARTNERSHIP UNITS/MINORITY INTERESTS: A total of 2,718,256 limited partnership units of the Partnership were
issued and outstanding at September 30, 2004 and 2003. The weighted average
number of limited partnership units outstanding for each of the three and nine
month periods ended September 30, 2004 and 2003 was 2,718,256. The minority interest liability is affected by the limited partnership

units outstanding as well as the existence of preferred partnership units which
are owned by Boykin. The preferred partnership units mirror the terms of the
preferred depositary shares outstanding. 5. DISCONTINUED OPERATIONS: The provisions of SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, require that hotels sold or held for sale be treated as
discontinued operations. As discussed in Note 1, on March 2, 2004, Boykins Doubletree Portland
Downtown Hotel in Portland, Oregon, was acquired by the City of Portland
through its power of eminent domain. Additionally in 2004, Boykin sold
Marriotts Hunt Valley Inn, the Holiday Inn Minneapolis West and the Radisson
Hotel Mount Laurel. During 2003, Boykin sold the Knoxville Hilton, the Hampton
Inn Lake Norman, the Holiday Inn Lake Norman, a hotel in Springfield, Oregon
and the Doubletree Spokane Valley. The assets and liabilities of the four hotels disposed of in 2004 as of
December 31, 2003, and the results of operations of the properties through the
2004 disposal/sale dates and for the three and nine months ended September 30,
2003, have been reclassified as discontinued operations in the accompanying
financial statements. The operating results of the five properties sold during
2003 have also been reclassified as discontinued operations in the accompanying
financial statements for the three and nine months ending September 30, 2003.
Interest expense and deferred loan costs have been attributed to the
properties, as applicable, based upon the term loan amounts that were repaid
with the proceeds of the dispositions. 12




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##### Table of Contents



The results of operations and the financial position of the applicable
properties were as follows: Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Revenues
    
    $
    2,968
    
    
    $
    10,221
    
    
    $
    18,011
    
    
    $
    32,815Hotel operating expenses
    
    
    (2,386
    )
    
    
    (7,605
    )
    
    
    (13,891
    )
    
    
    (25,692
    )Management fees to related party
    
    
    (51
    )
    
    
    (153
    )
    
    
    (214
    )
    
    
    (324
    )Management fees  other
    
    
    (22
    )
    
    
    (83
    )
    
    
    (192
    )
    
    
    (493
    )Property taxes, insurance and other
    
    
    (147
    )
    
    
    (520
    )
    
    
    (895
    )
    
    
    (2,367
    )Other expenses
    
    
    (21
    )
    
    
    (22
    )
    
    
    (62
    )
    
    
    (49
    )Interest income
    
    
    7
    
    
    
    5
    
    
    
    14
    
    
    
    12Interest expense
    
    
    
    
    
    
    (297
    )
    
    
    (197
    )
    
    
    (1,024
    )Real estate related depreciation and amortization
    
    
    (327
    )
    
    
    (1,064
    )
    
    
    (2,029
    )
    
    
    (3,795
    )Amortization of deferred financing costs
    
    
    
    
    
    
    (5
    )
    
    
    (87
    )
    
    
    (194
    )Minority interest in earnings of joint ventures
    
    
    (2,119
    )
    
    
    
    
    
    
    (2,119
    )
    
    
    Income (loss) from discontinued operations
    
    $
    (2,098
    )
    
    $
    477
    
    
    $
    (1,661
    )
    
    $
    (1,111
    )
 December 31,2003Accounts receivable, net
    
    $
    851Inventories
    
    
    204Other assets
    
    
    644Deferred financing costs and other, net
    
    
    158Investment in hotel properties, net
    
    
    66,910Total assets
    
    $
    68,767Accounts payable and accrued expenses
    
    $
    2,279Accounts payable to related party
    
    
    93Term notes payable
    
    
    16,870Total liabilities
    
    $
    19,242
 6. CREDIT FACILITY: As of September 30, 2004, Boykin had a secured, revolving credit facility
with a financial institution which enabled Boykin to borrow up to $60,000,
subject to borrowing base and loan-to-value limitations. The credit facility
was reduced from $78,000 to $60,000 in the third quarter of 2004. Boykin had
borrowed $11,446 and $71,945 under this facility at September 30, 2004 and
December 31, 2003, respectively. The facility expires in October 2006 and
currently bears interest at a floating rate of LIBOR plus 3.75% (5.625% at
September 30, 2004). Boykin is required to pay a fee of 0.375% on the unused
portion of the credit facility. The facility was secured by five hotel
properties with a net carrying value of $58,428 at September 30, 2004 and seven
hotels with a net carrying value of $90,518 at December 31, 2003. The credit facility requires Boykin, among other things, to maintain a
minimum net worth, a coverage ratio of EBITDA to debt service, a coverage of
EBITDA to debt service and fixed charges and a maximum leverage ratio. Further,
Boykin is required to maintain the franchise agreement at each hotel and to
maintain its REIT status. The terms of the agreement provide certain
restrictions on common share dividends; however, Boykin is entitled to
distribute sufficient dividends to maintain its REIT status. Boykin was in
compliance with its covenants at September 30, 2004. 13




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##### Table of Contents



7. TERM NOTES PAYABLE: Red Lion Inns Operating L.P. (OLP), a wholly-owned subsidiary of the
Partnership, has a term loan agreement in the original amount of $130,000 that
expires in June 2023 and may be prepaid without penalty after May 21, 2008.
The outstanding balance as of September 30, 2004 and December 31, 2003 was
$103,349 and $122,597, respectively. The loan bears interest at a fixed rate
of 6.9% until May 2008, and at a new fixed rate to be determined thereafter.
The loan requires principal repayment based on a 25-year amortization schedule.
As of September 30, 2004, the loan was secured by six Doubletree hotels with a
net carrying value of $189,906 and, as of December 31, 2003, was secured by
seven Doubletree hotels with a net carrying value of $209,123. Under covenants
in the loan agreement, assets of OLP are not available to pay the creditors of
any other Boykin entity, except to the extent of permitted cash distributions
from OLP to Boykin. Likewise, the assets of other Boykin entities are not
available to pay the creditors of OLP. The loan agreement also requires OLP to
hold funds in escrow for the payment of capital expenditures, insurance,
interest and real estate taxes and requires OLP to maintain certain financial
reporting requirements. OLP was in compliance with these requirements at
September 30, 2004 and December 31, 2003. Boykin Holding, LLC (BHC), a wholly-owned subsidiary of the Partnership,
has a term loan agreement. The outstanding balance as of September 30, 2004 and
December 31, 2003 was $91,125. During the second quarter, Boykin exercised an
option to extend the maturity of this loan for one year, to July 2005. The
loan was secured by six hotel properties with a net carrying value of $63,998
and $61,273 at September 30, 2004 and December 31, 2003, respectively. The
term loan bears interest at a rate that fluctuates at LIBOR plus 2.35% (4.0% at
September 30, 2004). Under covenants in the loan agreement, assets of BHC are
not available to pay the creditors of any other Boykin entity, except to the
extent of permitted cash distributions from BHC to Boykin. Likewise, the
assets of other Boykin entities are not available to pay the creditors of BHC.
The loan agreement also requires BHC to hold funds in escrow for the payment of
capital expenditures, insurance and real estate taxes and requires BHC to
maintain certain financial reporting requirements. BHC was in compliance with
these requirements at September 30, 2004 and December 31, 2003. Subject to the
terms of the loan agreement, BHC has purchased interest rate protection on the
entire outstanding balance of $91,125, to cap the interest rate at no more than
10.25% through July 2005. The cap had no value at September 30, 2004. In 2003, White Sand Villas Development LLC, a wholly-owned subsidiary of
Bellboy, closed on a $23,300 construction loan with a bank. The loan, which
had an outstanding balance of $13,222 at December 31, 2003, required principal
payments based upon the closing of White Sand Villas unit sales and was repaid
during the first quarter of 2004. The loan bore interest at a rate that
fluctuated at LIBOR plus 2.50%. As a part of normal business activities, Boykin has issued letters of
credit through major banking institutions as required by certain debt and
insurance agreements. As of September 30, 2004, there were no outstanding
letters of credit. As of September 30, 2004, Boykin had not entered into any
other significant off-balance sheet financing arrangements. Maturities of long-term debt at September 30, 2004 were as follows: 2004
    
    $
    9342005
    
    
    95,0102006
    
    
    4,1662007
    
    
    4,4482008
    
    
    4,7882009 and thereafter
    
    
    85,128$
    194,474
 8. RELATED PARTY TRANSACTIONS: Management and other fees earned by BMC for the continuing operations of
the consolidated hotels related to provisions within the hotel management
contracts totaled $1,468 and $4,394 for the three and nine months ended
September 30, 2004 and $1,169 and $3,187 for the three and nine months ended
September 30, 2003, respectively. Management fees earned by BMC related to
discontinued operations totaled $51 and $214 for the three and nine
months ended September 30, 2004 and $153 and $324 for the three
and nine months ended September 30, 2003, respectively. An additional $25 was paid
during 2004 for other services provided pursuant to the management agreements.
The management agreements between Boykin and BMC were approved by the
independent members of the Board of Directors. With respect to the
consolidated hotels, Boykin had related party payables to BMC of $1,378 and
$991 as of September 30, 2004 and December 31, 2003, primarily related to
management fees and reimbursements of expenses on behalf of the hotel
properties. 14




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##### Table of Contents



Boykin Chicago L.L.C. has entered into a management agreement with a
wholly-owned subsidiary of BMC to manage Hotel 71. Management and other fees
earned by the subsidiary for the three and nine months ended September 30, 2004
totaled $149 and $365, respectively. An additional $1 was paid for other
services provided pursuant to the management agreement for the nine months
ended September 30, 2004. For the nine months ended September 30, 2004, fees
of $1 were paid to a wholly-owned subsidiary of BMC for design services related
to capital improvements at the hotel. For the three and nine months ended September 30, 2004, Boykin paid a
wholly-owned subsidiary of BMC $71 and $252, respectively, for design services
related to capital improvements at its consolidated hotels. During 2001, a
subsidiary of BMC sold a portion of its business to an unrelated third party.
A portion of the sales price is contingent upon the revenues the business
receives from Boykin. For the three and nine months ended September 30, 2004,
an additional $19 and $52, respectively, of sales proceeds was provided to BMC
as a result of purchases made by Boykin. Fees paid to BMC and its subsidiaries for services which are not subject
to management agreements are at market prices as determined by the independent
members of the Board of Directors. The Boards market price determinations are
based on market checks performed by management and outside consultants from
time to time, comparative information provided by BMC, and industry
publications. Boykin believes that the methodologies used for determining the amounts to
be paid to BMC and its subsidiaries for management and other services are
reasonable. 9. STATEMENT OF CASH FLOWS, SUPPLEMENTAL DISCLOSURES: As of September 30, 2004 and December 31, 2003, there were $1,188 of
preferred share dividends which were declared but not paid. Interest paid during the nine month periods ended September 30, 2004 and
2003 was $11,002 and $12,799, respectively. In the first nine months of 2004, Boykin granted 174,789 restricted common
shares, valued at $1,589, under its Long  Term Incentive Plan. 10. INCOME TAXES: Boykin qualifies as a REIT under Sections 856-860 of the Internal Revenue
Code. As a REIT, Boykin generally will not be subject to federal corporate
income tax on that portion of its net income that does not relate to its TRS
subsidiaries. Accordingly, no provision for income taxes has been reflected in
the accompanying consolidated financial statements for the corporate level
entities. Upon the effective date of the establishment of Boykins TRSs, the
subsidiaries became subject to federal and state income taxes. Boykins TRSs
account for income taxes in accordance with the provisions of SFAS No. 109,
Accounting for Income Taxes. As of September 30, 2004, Boykin has a deferred
tax asset of approximately $8,195, prior to any valuation allowance, related to
the assumption of the retained deficit of certain leases upon the formation of
the TRSs as well as the cumulative operating losses of the TRSs and their
subsidiaries since their formation. Boykin has recorded a 100% valuation
allowance against this asset due to the uncertainty of realization and
therefore, no provision or benefit from income taxes is reflected in the
accompanying consolidated statements of operations. As of September 30, 2004,
the net operating loss carry-forwards have remaining lives of approximately 18
to 19 years. 11. SUBSEQUENT EVENT: In November 2004, Boykin closed on the sale of its Ramada Inn Bellevue
Center in Bellevue, Washington, for a price of $9,800. The net proceeds of the
sale totaled approximately $9,400 and were used to reduce the outstanding
balance on the credit facility and for general corporate purposes. 15




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OVERVIEW Boykin Lodging Company, an Ohio corporation, (Boykin) is a real estate
investment trust (REIT) that currently owns interests in 24 hotels throughout
the United States. Boykin was formed and completed an initial public offering
in 1996 to continue and expand the nearly 40-year history of hotel ownership,
acquisition, redevelopment and repositioning activities of its predecessors,
Boykin Management Company and its affiliates. Boykin Hotel Properties, L.P.,
an Ohio limited partnership (the Partnership), is the operating partnership
entity that transacts business and holds the direct and indirect ownership
interests in our hotels. As of September 30, 2004, Boykin had an 85.3%
ownership interest in, is the sole general partner of and does all its business
through the Partnership. Our primary business objectives are to maximize current returns to our
shareholders by increasing cash flow available for distribution and long-term
total returns to shareholders through appreciation in value of our common
shares. THIRD QUARTER HIGHLIGHTS AND OUTLOOK FOR THE REMAINDER OF 2004 Refer to the Results of Operations section below for discussion of our
third quarter and year to date 2004 results compared to 2003 results. During the third quarter of 2004, we sold three properties for a total of
$54.6 million. Net proceeds from these sales to the Company totaled
approximately $52.1 million, after reduction for costs of sale and
distributions to the partner for the one asset held in a consolidated joint
venture, and were used to reduce the outstanding balance of our credit facility
and for general corporate purposes. Five of our hotels were impacted by hurricanes in Florida in the quarter.
Two hotels, the Best Western Fort Myers Island Gateway Hotel and the Radisson
Suite Beach Resort- Marco Island were evacuated for several days, suffered
minimal damage and were reopened. The Pink Shell Beach Resort and Spa (the
Pink Shell) was evacuated for approximately one week. The hurricane damaged
the 43 units in the Useppa and Captiva buildings, which remain closed, while
the remainder of the resort was reopened. At the beginning of September,
Hurricane Frances hit the east coast of Florida, where the Melbourne Hilton
Oceanfront and the Melbourne Quality Suites are located. Both hotels were
evacuated prior to the storm and both hotels remain closed due to the damage
from the storm. The hotels in Melbourne are not expected to resume normal
operations for at least another six to nine months. We expect that the
majority of costs to repair the properties will be covered under our insurance
policies. Additionally, we also maintain business interruption insurance to
offset the effects of the closure on the hotels operating results. We are continuing the marketing efforts and pre-sales of the final
component to the Pink Shell redevelopment project, Captiva Villas. The project
would entail demolition of the Useppa and Captiva buildings and the
construction of a new 43-unit building. Similar to White Sand Villas, the
units in the new building will be sold as condominiums, with the anticipation
that the owners will put their unused room nights back to the resort by
contract. Zoning for the new building, which will contain a full-service fine
dining restaurant with a view of the Gulf of Mexico, has been approved. We
expect to commence demolition of the existing buildings and construction of the
new building within the next twelve months. Earlier in 2004, the Indiana Gaming Commission (the Commission)
solicited proposals from interested parties to develop and operate a casino in
Orange County, Indiana, where our French Lick Springs Resort and Spa is
located. In July, the Commission selected Trump Hotels & Casino Resorts to
develop and operate the casino. The site and plans selected by the Commission
include the casino being located adjacent to and connected with the French Lick
Springs Resort and Spa. We anticipate that the casino opening will increase
tourism in the county, leading to greater demand for rooms at our French Lick
Springs Resort and Spa. The opening of a casino remains subject to many items,
including the operators ability to raise financing to fund construction of a
casino. Based upon our year to date results and our current booking trends, we are
anticipating that the fourth quarter RevPAR, meaning room revenue per available
room, for our entire portfolio will be 2.0% to 4.0% above the same period last
year with the full year 2004 RevPAR up 2.5% to 3.5% from 2003. Net loss
attributable to common shareholders per share is expected to range between
$0.29 and $0.25 for the fourth quarter and between $0.30 and $0.26 for the full
year. With that assumption, we expect that our funds from operations
attributable to common shareholders (FFO) could range between $0.02 and $0.06
per fully-diluted share for the fourth quarter and $0.74 and $0.78 per share
for the full year. For a definition of FFO, a reconciliation of net income
(loss) to FFO and why we believe FFO is an important measure to investors of a
REITs financial performance, see Results of Operations section below. 16




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During the quarter our Board of Directors declared a dividend on our
preferred shares of $6.5625 per preferred share. The dividends were payable to
shareholders of record as of September 30, 2004 and were paid on October 15,
2004. The Board did not declare a common share dividend for the third quarter.
We will continue to evaluate the status of a common share dividend; management
will recommend to the Board of Directors resumption of the dividend when and at
a level that we believe our cash flow can support. We intend to make
distributions necessary, if any, to meet REIT requirements. CRITICAL ACCOUNTING POLICIES Investment in Hotel Properties We review our hotel properties for impairment whenever events or changes
in circumstances indicate the carrying value of the hotel properties may not be
recoverable. Events or circumstances that may cause a review include, but are
not limited to, adverse changes in the demand for lodging at the properties due
to declining national or local economic conditions, new hotel construction in
markets where the hotels are located or changes in the expected holding period
of the property. When such conditions exist, management performs an analysis
to determine if the estimated undiscounted future cash flows from operations
and the proceeds from the ultimate disposition of a hotel property are equal to
or exceed its carrying value. If the estimated undiscounted future cash flows
are less than the carrying amount of the asset, an adjustment to reduce the
carrying amount to the related hotel propertys estimated fair market value is
recorded and an impairment loss recognized. We did not believe that there were
any factors or circumstances indicating impairment in the third quarter of
2004. If actual conditions differ from those in our assumptions, the actual
results of each assets future operations and fair market value could be
significantly different from the estimated results and value used in our
analysis. Our operating results are also subject to the risks discussed within
this Quarterly Report on Form 10-Q. Revenue recognition - Percentage of Completion In 2003, we began recognizing revenue related to the White Sand Villas
project under the percentage of completion method. Condominium project revenue
and expenses are recognized on the percentage of completion method upon
satisfaction of the following criteria: (a) construction is determined to be
beyond a preliminary stage, (b) the buyer is not entitled to a refund except
for nondelivery of the unit, (c) sufficient units are under binding contract to
assure the entire property will not revert to rental property, (d) sales prices
have been determined to be collectible, and (e) aggregate sales proceeds and
costs can be reasonably estimated. Starting in 2003 and during 2004, revenue
was recognized under percentage of completion accounting as the project had
satisfied the criteria outlined above. Percentage of completion accounting
involves the use of estimates for the relation of revenues on sold units to
total revenues of the project and for total cost of the project. FINANCIAL CONDITION September 30, 2004 Compared to December 31, 2003 In accordance with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, the assets and liabilities of the Doubletree Portland
Downtown Hotel, Marriotts Hunt Valley Inn, the Holiday Inn Minneapolis West
and the Radisson Hotel Mount Laurel as of December 31, 2003 have been
classified as discontinued operations in the accompanying financial statements.
As such, the only material changes in our financial condition as a result of
the disposal of the hotels in 2004 has been the removal of these segregated
assets and liabilities and the receipt of the cash in excess of the paydown of
the related debt instruments, of which a portion was used to fund restricted
cash balances. As a result of the progress made towards completion of the White Sand
Villas and the closing of the sale of the 91 available units during 2004,
outstanding accounts receivable related to the recognition of revenue for the
units based upon the percentage of completion method decreased in excess of
$32.1 million. Release of restricted cash related to deposits made on the
pre-sales (approximately $4.7 million at December 31, 2003) and the remaining
proceeds from the closing of the sale of the 91 units were used to repay the
construction loan related to the project ($13.2 million outstanding as of
December 31, 2003) as well as to provide cash for general corporate purposes.
Additionally, approximately $7.8 million of payables related to deposits
received for pre-sales (whether or not used to fund construction) were released
upon closing of the units. 17




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##### Table of Contents



RESULTS OF OPERATIONS Quarter Ended September 30, 2004 Compared to Quarter Ended September 30, 2003 Total revenues from continuing operations decreased 4.4% to $59.7 million
for the third quarter 2004 versus $62.5 million for the same period in 2003.
The overall decrease is primarily due to the $9.2 million decrease in revenues
from condominium development and unit sales as a result of the completion of
the White Sand Villas development project in 2004 and the completion of sales
of Sanibel View Villas units during 2003. Hotel revenues for the three months
ended September 30, 2004 were $55.8 million, a 12.8% increase from $49.5
million in hotel revenues for the same period in 2003. Contributing to this
increase is an additional $2.1 million of revenues related to our Marco Island
property in the third quarter of 2004, as it was purchased during the third
quarter of 2003. Additionally, included in third quarter hotel revenues is a
$0.8 million advance related to a business interruption insurance claim for a
property which had rooms out of service as a result of a remediation project
during 2003 and the first half of 2004. For further information, see the table
below which illustrates the key operating statistics of the hotels within our
portfolio, including RevPAR. Hotel operating profit margins of the consolidated hotels operated under
the TRS structure for the third quarter were 26.0%, an increase from the 23.4%
hotel operating profit margin for third quarter of 2003. One reason for the
increased margin is the recognition of the insurance recoveries during the
third quarter of 2004 within hotel revenues. In addition, the overall hotel
operating margins increased as the increase in revenues was primarily due to
higher occupancies at the hotels. When occupancy drives the increase in
revenues, the result is a higher revenue to fixed cost ratio, leading to higher
margins. Property taxes, insurance and other increased approximately $0.3 million
to $3.9 million for the third quarter of 2004 versus the third quarter of 2003.
The primary reason for this change is increased contractual payments to owners
of the condominiums at the Pink Shell for use of their units as hotel rooms as
a result of the sellout of the Sanibel View Villas during 2003 and the
completion and sales of the White Sand Villas tower in 2004. All unit owners
in each building have contractually put their units back to the resort for use
as hotel rooms. The acquisition of the Marco Island property also resulted in
increased property taxes and insurance expense. Cost of condominium development and unit sales decreased from $8.1 million
for the third quarter of 2003 to $2.0 million for the third quarter of 2004 as
a result of the completion of the White Sand Villas project as well as the
completion of the sales of the Sanibel View Villas units at our Pink Shell in
2003. Real estate related depreciation and amortization decreased $0.5 million
from the third quarter of 2003 primarily because during 2003 we recorded a $1.7
million acceleration of depreciation related to the pending demolition and
removal of two existing buildings at the Pink Shell to make way for the planned
Captiva Villas building. There was no similar activity during the third
quarter of 2004. The remaining net change is due to the depreciation relating
to the Marco Island property and other recent capital expenditures. Corporate general and administrative expenses increased $0.8 million from
the third quarter of 2003 primarily as a result of additional staffing and
third party services in maintaining compliance with new federal laws and
regulations addressing corporate governance issues and with the new listing
requirements of the New York Stock Exchange. Gain (loss) on sale/disposals of assets during the third quarter of 2004
totaled $0.9 million primarily as a result of the receipt and recording of
insurance proceeds related to disposals of certain assets in 2003 due to water
infiltration remediation activities. As a result of the above, the third quarter 2004 resulted in net income
before discontinued operations of $0.9 million compared to the same period last
year when we experienced net income of $0.8 million. In accordance with SFAS No. 144, the results of operations of the
Doubletree Portland Downtown Hotel, Marriotts Hunt Valley Inn, the Holiday Inn
Minneapolis West and the Radisson Hotel Mount Laurel through their respective
disposal dates and for the three months ended September 30, 2003, have been
classified as discontinued operations in the accompanying financial statements.
Additionally, the third quarter 2003 results of operations of the properties
sold during the third quarter of 2003 or later have also been reclassified as
discontinued operations in the accompanying financial statements. Please refer
to note 5 of our Notes to Consolidated Financial Statements included within
this Quarterly Report on Form 10-Q for a summary of such operations. Nine Months Ended September 30, 2004 Compared to Nine Months Ended September
30, 2003 Total revenues from continuing operations decreased 4.0% to $172.1 million
for the first nine months of 2004 versus $179.2 million for the same period in
2003. The overall decrease is primarily due to the $22.0 million decrease in
revenues from condominium development and unit sales as a result of the
completion of the White Sand Villas development project in 2004 and the
completion of sales of Sanibel View Villas units during 2003. Hotel revenues
for the nine months ended September 30, 2004 were $163.0 million, a 9.9%
increase from $148.2 million in hotel revenues for the same period in 2003.
Contributing to this increase is an additional $10.4 million of revenues
related to our Marco Island property, which was purchased in the third quarter
of 2003. Additionally, included in 2004 hotel revenues is a $0.8 million 18




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##### Table of Contents



advance related to a business interruption insurance claim for a property which
had rooms out of service as a result of a remediation project during 2003 and
the first half of 2004. For further information, see the table below which
illustrates the key operating statistics of the hotels within our portfolio,
including RevPAR. Hotel operating profit margins of the consolidated hotels operating under
the TRS structure for the first nine months of 2004 were 25.2%, an increase
from the 24.8% hotel operating profit margin for the first nine months of 2003.
The primary reason for the increased margin is the recognition of the
insurance recoveries in 2004. Property taxes, insurance and other increased approximately $1.1 million
to $11.7 million for the first nine months of 2004 versus the first nine months
of 2003. The increase is primarily due to increased contractual payments to
owners of the condominiums at the Pink Shell for use of their units as hotel
rooms as a result of the sellout of Sanibel View Villas in 2003 and the
completion and sales of the White Sand Villas tower in 2004. All unit owners
in each building contractually put their units back to the resort for use as
hotel rooms. The addition of the Marco Island property also resulted in
increases in property tax and insurance expenses. Cost of condominium development and unit sales decreased from $19.8
million for the first nine months of 2003 to $5.5 million for the first nine
months of 2004 as a result of the completion of the White Sand Villas project
as well as the completion of the sales of the Sanibel View Villas units at our
Pink Shell in 2003. Real estate related depreciation and amortization decreased nearly $2.0
million from the first nine months of 2003 primarily due to the recording of
$3.4 million of acceleration of depreciation related to the pending demolition
and removal of two existing buildings at the Pink Shell to make way for the
planned Captiva Villas building in 2003. There was no similar activity which
occurred during 2004. The remaining net change is due to the depreciation on
Marco Island and other recent capital expenditures. Corporate general and administrative expenses increased $0.9 million from
the first nine months of 2003 primarily as a result of additional staffing and
third party services in maintaining compliance with new federal laws and
regulations addressing corporate governance issues and with the new listing
requirements of the New York Stock Exchange. In 2004, Boykin recorded an impairment charge of $4.3 million on one of
its non-core west coast properties due to a change in the intended holding
period. Interest expense from continuing operations decreased from $11.4 million
to $10.5 million from the first nine months of 2003 to 2004 as our weighted
average interest rate during 2004 was significantly lower than the rate
throughout the first nine months of 2003. The decline in rate was primarily
due to the expiration of our previously existing swap which fixed $83.0 million
of our debt at 7.32% during the first six months of 2003. Partially offsetting
this decrease is an increase in our weighted average outstanding debt during
2004 of approximately 3%. The first nine months of 2004 experienced a $0.7 million decrease in
amortization of deferred financing costs over the same period in the prior year
as a result of the replacement of the previously existing credit facility and
$45.0 million term loan with a new credit facility in October 2003 which has
approximately $2 million less of deferred costs to be amortized. In the second half of 2003, we disposed of certain assets due to water
infiltration remediation activities. Insurance proceeds received in 2004
totaled $3.4 million and are recorded as gain on sale/disposal of assets within
the consolidated financial statements. In the first nine months of 2003, gain
(loss) on sale/disposal of assets related primarily to eminent domain action
taken by the local county related to our hotel in Bellevue, Washington, whereby
a portion of the hotels land was surrendered for funds of approximately $0.3
million. As a result of the above, the first nine months 2004 resulted in net loss
before discontinued operations of $3.4 million compared to the same period last
year when we experienced net loss of $0.7 million. In accordance with SFAS No. 144, the results of operations of the
Doubletree Portland Downtown Hotel, Marriotts Hunt Valley Inn, the Holiday Inn
Minneapolis West and the Radisson Hotel Mount Laurel through their respective
disposal dates and for the nine months ended September 30, 2003, have been
reclassified as discontinued operations in the accompanying financial
statements. Additionally, the first nine months of 2003 results of operations
of the five properties sold during 2003 have also been reclassified as
discontinued operations in the accompanying financial statements. Please refer
to Note 5 of our Notes to Consolidated Financial Statements included within
this Quarterly Report on Form 10-Q for a summary of such operations. 19




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FFO The White Paper on Funds From Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
(NAREIT) in April 2002 defines FFO as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from sales of properties and
extraordinary items, plus real estate related depreciation and amortization,
and after comparable adjustments for our portion of these items related to
unconsolidated entities and joint ventures. We believe that FFO is helpful as
a measure of the performance of an equity REIT because it provides investors
and management with another indication of the Companys performance prior to
deduction of real estate related depreciation and amortization. We compute FFO in accordance with our interpretation of standards
established by NAREIT which may not be comparable to FFO reported by other
REITs that do not define the term in accordance with the current NAREIT
definition or that interpret the NAREIT definition differently than us. FFO
does not represent cash generated from operating activities as determined by
GAAP and should not be considered as an alternative to GAAP net income as an
indication of our financial performance or to cash flow from operating
activities as determined by GAAP as a measure of our liquidity, nor is it
indicative of funds available to fund our cash needs, including our ability to
make cash distributions. FFO may include funds that may not be available for
the Companys discretionary use due to functional requirements to conserve
funds for capital expenditures and property acquisitions, and other commitments
and uncertainties. The following is a reconciliation between net income (loss) and FFO for
the three and nine months ended September 30, 2004 and 2003, respectively (in
thousands): Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Net income (loss)
    
    $
    5,908
    
    
    $
    1,011
    
    
    $
    3,407
    
    
    $
    (970
    )Minority interest
    
    
    2,852
    
    
    
    (139
    )
    
    
    1,746
    
    
    
    (1,355
    )(Gain) loss on sale/disposal of assets
    
    
    (8,902
    )
    
    
    202
    
    
    
    (13,007
    )
    
    
    (1,118
    )Real estate related depreciation and amortization
    
    
    6,275
    
    
    
    6,823
    
    
    
    18,374
    
    
    
    20,350Real estate related depreciation and amortization
included in discontinued operations
    
    
    327
    
    
    
    1,064
    
    
    
    2,029
    
    
    
    3,795Equity in (income) loss of unconsolidated joint ventures
    
    
    (14
    )
    
    
    109
    
    
    
    574
    
    
    
    818FFO adjustment related to joint ventures
    
    
    441
    
    
    
    331
    
    
    
    847
    
    
    
    730Preferred dividends declared
    
    
    (1,188
    )
    
    
    (1,188
    )
    
    
    (3,563
    )
    
    
    (3,563
    )Funds from operations after preferred dividends
    
    $
    5,699
    
    
    $
    8,213
    
    
    $
    10,407
    
    
    $
    18,687Less: Funds from operations related to minority interest
    
    
    768
    
    
    
    1,113
    
    
    
    1,405
    
    
    
    2,533Funds from operations attributable to common shareholders
    
    $
    4,931
    
    
    $
    7,100
    
    
    $
    9,002
    
    
    $
    16,154
 FFO was negatively impacted by the $4.3 million impairment charge recorded
during the nine months ended September 30, 2004. 20




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EBITDA We believe that EBITDA is helpful to investors and management as a measure
of the performance of the Company because it provides an indication of the
operating performance of the properties within the portfolio and is not
impacted by the capital structure of the REIT. EBITDA does not represent cash
generated from operating activities as determined by GAAP and should not be
considered as an alternative to GAAP net income as an indication of our
financial performance or to cash flow from operating activities as determined
by GAAP as a measure of our liquidity, nor is it indicative of funds available
to fund our cash needs, including our ability to make cash distributions.
EBITDA may include funds that may not be available for the Companys
discretionary use due to functional requirements to conserve funds for capital
expenditures and property acquisitions, and other commitments and
uncertainties. The following is a reconciliation between operating income and EBITDA for
the three and nine months ended September 30, 2004 and 2003, respectively (in
thousands): Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Operating income
    
    $
    3,524
    
    
    $
    4,157
    
    
    $
    3,629
    
    
    $
    11,178Interest income
    
    
    (29
    )
    
    
    117
    
    
    
    140
    
    
    
    364Other income
    
    
    
    
    
    
    4
    
    
    
    8
    
    
    
    21Real estate related depreciation and amortization
    
    
    6,275
    
    
    
    6,823
    
    
    
    18,374
    
    
    
    20,350EBITDA attributable to discontinued operations
    
    
    348
    
    
    
    1,843
    
    
    
    2,771
    
    
    
    3,902Companys share of EBITDA of unconsolidated joint
ventures
    
    
    890
    
    
    
    736
    
    
    
    2,031
    
    
    
    1,863EBITDA applicable to joint venture minority interest
    
    
    (52
    )
    
    
    (45
    )
    
    
    (113
    )
    
    
    (106
    )EBITDA
    
    $
    10,956
    
    
    $
    13,635
    
    
    $
    26,840
    
    
    $
    37,572
 EBITDA was negatively impacted by the $4.3 million impairment charge
recorded during the nine months ended September 30, 2004. Key Hotel Operating Statistics The following table illustrates key operating statistics of our portfolio
for the three and nine months ended September 30, 2004 and 2003: Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003All Hotels (25 hotels) (a) (b)Hotel revenues (in thousands)
    
    $
    64,091
    
    
    $
    58,467
    
    
    $
    184,490
    
    
    $
    177,311RevPAR
    
    $
    64.60
    
    
    $
    59.70
    
    
    $
    61.77
    
    
    $
    60.24Occupancy
    
    
    67.1
    %
    
    
    63.0
    %
    
    
    62.5
    %
    
    
    61.5
    %Average daily rate
    
    $
    96.25
    
    
    $
    94.71
    
    
    $
    98.89
    
    
    $
    97.91Comparable Hotels (21 hotels) (c)Hotel revenues (in thousands)
    
    $
    53,253
    
    
    $
    49,016
    
    
    $
    152,116
    
    
    $
    147,815RevPAR
    
    $
    60.24
    
    
    $
    56.83
    
    
    $
    57.18
    
    
    $
    56.94Occupancy
    
    
    66.2
    %
    
    
    62.6
    %
    
    
    61.6
    %
    
    
    61.4
    %Average daily rate
    
    $
    91.06
    
    
    $
    90.83
    
    
    $
    92.81
    
    
    $
    92.77
  (a)
    
    Includes all hotels owned or partially owned by Boykin as of September
30, 2004. Rooms out of service at the two Melbourne hotels and the
Captiva and Useppa buildings at the Pink Shell as a result of hurricanes
have been excluded from the available room count since the date that the
related hurricane closed each facility.(b)
    
    Results calculated including 35 lock-out rooms at the Radisson Suite
Beach Resort on Marco Island.(c)
    
    Includes all consolidated hotels operated under the TRS structure for all
periods presented and owned or partially owned by Boykin as of September
30, 2004. Rooms out of service at the two Melbourne hotels and the
Captiva and Useppa buildings at the Pink Shell as a result of hurricanes
have been excluded from the available room count since the date that the
related hurricane closed each facility. 21




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LIQUIDITY AND CAPITAL RESOURCES: Our principal source of cash to meet our cash requirements, including
dividends to shareholders, is our share of the Partnerships cash flow from the
operations of the hotels and condominium sales. Cash flow from hotel
operations is subject to all operating risks common to the hotel industry,
including, but not limited to:  
    
    Competition for guests from other hotels;
    
    Adverse effects of general and local economic conditions;
    
    Dependence on demand from business and leisure travelers, which may
be seasonal and which may be adversely impacted by health and
safety-related concerns;
    
    Increases in energy costs, airline fares, and other expenses related to travel, which may deter traveling;
    
    Impact of the financial difficulties of the airline industry;
    
    Increases in operating costs related to inflation and other factors, including wages, benefits, insurance and energy;
    
    Overbuilding in the hotel industry, especially in particular markets; and
    
    Actual or threatened acts of terrorism and actions taken against terrorists that cause public concern about travel safety. The cash flow from condominium development is subject to risk factors common to real estate sales and development,
including, but not limited to:  
    
    Competition from other condominium projects;
    
    Construction delays;
    
    Reliance on contractors and subcontractors;
    
    Construction cost overruns; and
    
    The ability of the condominium purchasers to secure financing. As of September 30, 2004, we had $13.3 million of unrestricted cash and
cash equivalents and $13.6 million of restricted cash for the payment of
capital expenditures, real estate taxes, interest and insurance. There were
outstanding borrowings at quarter end totaling $11.4 million against our credit
facility and $194.5 million against our two term notes payable. We have a $60.0 million credit facility to fund acquisitions of additional
hotels, renovations and capital expenditures, and for our working capital
needs, subject to limitations contained in the credit agreement. During the
first quarter of 2004, we added a previously uncollateralized property with a
net carrying value of $13.0 million as security for the facility. The addition
of the collateral increased the availability under the facility. During the
third quarter, three properties which previously secured the facility were
sold, reducing availability under the facility. For information relating to the terms of our credit facility and our term
notes please see Notes 6 and 7, respectively, of the Notes to Consolidated
Financial Statements of Boykin Lodging Company included in this Quarterly
Report on Form 10-Q. Our $130.0 million and $108.0 million term notes payable are
property-specific mortgages and have only financial reporting covenants. The
credit facility contains covenants regarding overall leverage and debt service
coverage. As of September 30, 2004, we were in compliance with such covenants.
No assurance can be made that we will continue to comply with such covenants. We may seek to negotiate additional credit facilities, replacement credit
facilities, or we may issue debt instruments. Any debt incurred or issued by us
may be secured or unsecured, long-term, medium-term or short-term, bear
interest at a fixed or variable rate, and be subject to such other terms as the
Board of Directors considers prudent. The availability of borrowings under the
credit facility is restrained by borrowing base and loan-to-value limits, as
well as other financial performance covenants contained in the agreement.
There can be no assurance that funds will be available in anticipated amounts
from the credit facility. Due to the continued uncertainty of the hotel industry and its impact on
the results of our operations, the Board of Directors did not declare a
dividend with respect to our common shares for the third quarter of 2004.
Pursuant to the terms of our credit facility, we are limited to distributing
not more than 75% of FFO attributable to common shareholders. The credit
facility does not limit distributions to preferred shareholders or
distributions required for us to maintain our REIT status. Currently, we
expect to continue to pay a regular quarterly dividend on our preferred shares
and anticipate that such dividends will be sufficient for us to maintain our
REIT status. The resumption of a common dividend will depend upon continuance
of the improving performance of our hotels and other factors that our Board of
Directors considers relevant. 22




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We have considered our short-term (defined as one-year or less) liquidity
needs and the adequacy of our estimated cash flow from operations and other
expected liquidity sources to meet these needs. We expect our principal
short-term liquidity needs will be to fund normal recurring expenses, debt
service requirements, scheduled debt maturities, distributions on the preferred
shares and any minimum distribution required to maintain our REIT status. We
anticipate that these needs will be met with cash flows provided by operating
activities, using availability under the credit facility, proceeds from
dispositions of non-core assets and proceeds from additional financings. We
also consider capital improvements, construction, and property acquisitions as
short-term needs that can be funded either with cash flows provided by
operating activities, by utilizing availability under our credit facility, or
from proceeds from additional financings. We expect to meet long-term (defined as greater than one year) liquidity
requirements such as property acquisitions, scheduled debt maturities, major
renovations, development projects and other nonrecurring capital improvements
utilizing cash flow from operations, proceeds from dispositions of non-core
assets, additional debt financings and preferred or common equity offerings.
We expect to acquire or develop additional hotel properties only as suitable
opportunities arise, and we will not undertake acquisition or development of
properties unless stringent criteria have been met. Capital Projects For the nine months ended September 30, 2004, we spent approximately $25.0
million for capital improvements at our hotels and for technology improvements.
This amount included planned refurbishments and replacements at selected
existing hotels, commencement of reconstruction of properties damaged as a
result of hurricanes, as well as revenue generating projects, such as the
development of an ancillary conference center within our Doubletree Portland
Lloyd Center hotel. We anticipate spending an additional $7 to $9 million
related to capital expenditures for the remainder of 2004, excluding the
reconstruction of the hurricane-damaged hotels. We expect to use cash
available from operations and restricted capital expenditure reserves, as well
as borrowings under our line of credit, to fund these costs. With regard to the planned Captiva Villas project, as with our recent
Sanibel View Villas and White Sand Villas projects, the units in the tower will
be sold as condominiums, with the anticipation that the owners will put their
unused room nights back to the resort by contract, which will provide us with
continuing income. Subject to achieving a sufficient level of pre-sales, the
project is currently expected to commence in early 2005. We are currently
talking to various lenders regarding our financing options for the construction
of Captiva Villas. Off Balance Sheet Arrangements We believe that neither Boykin nor its unconsolidated entities have
entered into any off balance sheet arrangements which would have a current or
future impact on our financial condition, changes in financial condition,
results of operations, liquidity or capital resources in ways which would be
considered material to our investors. INFLATION Operators of hotels in general can change room rates quickly, but
competitive pressures may limit the operators ability to raise rates to keep
pace with inflation. Our general and administrative costs as well as real estate and personal
property taxes, property and casualty insurance and ground rent are subject to
inflation. SEASONALITY Our hotels operations historically have been seasonal. The five hotels
located in Florida experience their highest occupancy in the first quarter,
while the remaining hotels maintain high occupancy rates during the second and
third quarters. This seasonality pattern can be expected to cause fluctuations
in our quarterly operating results and cash flow received from hotel
operations. COMPETITION AND OTHER ECONOMIC FACTORS Our hotels are located in developed areas that contain other hotel
properties. The future occupancy, average daily rate and RevPAR of any hotel
could be materially and adversely affected by an increase in the number of or
quality of the competitive hotel properties in its market area. Competition
could also affect the quality and quantity of future investment opportunities,
and our ability to sell existing properties. As a portion of the lodging industrys sales are based upon business,
commercial and leisure travel, changes in general economic conditions,
demographics, or local business economics could affect business, commercial and
leisure travel. As a portion of the lodging industrys sales are based upon
travel, a change in travel may affect demand for rooms, which would affect
hotel revenues. 23




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Our primary market risk exposure consists of changes in interest rates on
borrowings under our debt instruments that bear interest at variable rates that
fluctuate with market interest rates. These debt instruments include the
secured credit facility, the $108.0 million secured term loan and our share of
floating rate debt under our unconsolidated joint ventures of $25.2 million at
September 30, 2004. We have entered into both variable and fixed rate debt arrangements to
allow us to optimize the balance of using variable rate debt versus fixed rate
debt. Our variable rate debt allows us to maximize financial flexibility when
selling properties and minimize potential prepayment penalties typical of fixed
rate loans. Our $130.0 million, 6.9% fixed rate term note allows us to
minimize our interest rate risk exposure. Approximately 50% of our outstanding
debt at September 30, 2004, was fixed-rate in nature, compared with 41% at
December 31, 2003. The weighted average interest rate of our variable rate debt
and total debt as of September 30, 2004 was 4.2% and 5.5%, respectively. We review interest rate exposure continuously in an effort to minimize the
risk of interest rate fluctuations. It is our policy to manage our exposure to
fluctuations in market interest rates on our borrowings through the use of
fixed rate debt instruments, to the extent that reasonably favorable rates are
obtainable with such arrangements, and after considering the need for financial
flexibility related to our debt arrangements. We may enter into forward
interest rate agreements, or similar agreements, to hedge our variable rate
debt instruments where we believe the risk of adverse changes in market rates
is significant. Under a forward interest rate agreement, if the referenced
interest rate increases, we would be entitled to a receipt in settlement of the
agreement that economically would offset the higher financing cost of the debt
issued. If the referenced interest rate decreases, we would make payments in
settlement of the agreement, creating an expense that economically would offset
the reduced financing cost of the debt issued. As of September 30, 2004, we do
not have any material market-sensitive financial instruments. We do not believe that changes in market interest rates will have a
material impact on the performance or fair value of our hotel portfolio because
the value of our hotel portfolio is based primarily on the operating cash flow
of the hotels, before interest expense charges. However, a change of 1/4% in
the index rate to which our variable rate debt is tied would change our annual
interest incurred by $0.3 million, based upon the balances outstanding on our
variable rate instruments at September 30, 2004. Using sensitivity analysis to measure the potential change in fair value
of financial instruments based on changes in interest rates, we have determined
that a hypothetical increase of 1% in the interest rates for instruments with
similar maturities would decrease the fair market value of our fixed rate debt
by $3.2 million as compared with the fair market value at September 30, 2004,
which was approximately $3.5 million higher than the carrying value. ITEM 4. CONTROLS AND PROCEDURES As of September 30, 2004, an evaluation was performed under the
supervision and with the participation of the principal executive and financial
officers with regard to the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e)). Based upon the
evaluation, they concluded that our disclosure controls and procedures were
effective in ensuring that material information required to be disclosed in
this Quarterly Report was recorded, processed, summarized and reported on a
timely basis. There were no changes in our internal control over financial reporting
during the quarter ended September 30, 2004 that materially affected or are
reasonably likely to materially affect our internal control over financial
reporting. 24




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PART II ITEM 1. LEGAL PROCEEDINGS We are subject to various legal proceedings and claims that arise in the
ordinary course of business. In our opinion, the amount of any ultimate
liability with respect to these actions will not materially affect our
financial position, results of operations or liquidity. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS ISSUER PURCHASES OF EQUITY SECURITIES Total Number of
    
    Maximum Number (orShares (or Units)
    
    Approximate Dollar Value) ofTotal Number of
    
    Average
    
    Purchased as Part of
    
    Shares (or Units) that MayShares (or Units)
    
    Price Paid
    
    Publicly Announced
    
    Yet Be Purchased UnderPeriod
    
    Purchased
    
    per Share (or Unit)
    
    Plans or Programs
    
    the Plans or ProgramsJuly 1,
2004  July 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    August 1, 2004  August 31, 2004
    
    
    4,071
    
    
    $
    8.43
    
    
    
    
    
    
    
    September 1,
2004  September 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    4,071
    
    
    $
    8.43
    
    
    
    
    
    
    
    
 Commencing June 1, 2001, participants in Boykins Long-Term Incentive Plan
have the option to exchange shares of Boykin that have not been subject to
restriction, vesting or forfeiture in the previous six months to satisfy
minimum tax withholding requirements for shares that are currently vesting.
The price at which Boykin purchases the shares from the participant is based
upon the average of the high and low trading price of the shares on the
previous trading day. Such election is effective unless and until the earlier of termination by
the participant or the Long-Term Incentive Plan Committee of Boykins Board of
Directors. The activity for those who have elected such option is shown above. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. 25




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ITEM 6. EXHIBITS 3.1
    
    (a)
    
    Amended and Restated Articles of Incorporation, as amended3.2
    
    (b)
    
    Code of Regulations3.3
    
    (c)
    
    Amendment to the Companys Articles of Incorporation for the
10-1/2% Class A Cumulative Preferred shares, Series 2002-A4.1
    
    (b)
    
    Specimen Share Certificate4.2
    
    (a)
    
    Dividend Reinvestment and Optional Share Purchase Plan4.3
    
    (d)
    
    Shareholder Rights Agreement, dated as of May 25, 1999, between Boykin Lodging Company and National City Bank, as
rights agent4.3a
    
    (e)
    
    Amendment to Shareholder Rights Agreement dated as of December 31, 2001, between Boykin Lodging Company and
National City Bank4.4
    
    (c)
    
    Form of Preferred Share Certificate4.5
    
    (c)
    
    Form of Depositary Receipt31.1
    
    
    
    Certification Pursuant to Rule 13a-14(a)31.2
    
    
    
    Certification Pursuant to Rule 13a-14(a)32.1
    
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002(a)
    
    Incorporated by reference from Boykins Form 10-Q for the
quarter ended June 30, 1999.(b)
    
    Incorporated by reference from Amendment
No. 3 to Boykins Registration Statement on Form S-11
(Registration No. 333-6341) (the Form S-11) filed on
October 24, 1996. Each of the above exhibits has the same
exhibit number in the Form S-11.(c)
    
    Incorporated by reference from Boykins
Registration Statement on Form 8-A filed on October 3, 2002(d)
    
    Incorporated by reference as Exhibit 1 from
Boykins Registration Statement on Form 8-A filed on June
10, 1999.(e)
    
    Incorporated by reference from Boykins Form 8-K filed on
January 14, 2002.
 26




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FORWARD LOOKING STATEMENTS This Form 10-Q contains statements that constitute forward-looking
statements. Those statements appear in a number of places in this Form 10-Q
and the documents incorporated by reference herein and include statements
regarding our intent, belief or current expectations or those of our directors
or officers with respect to:  
    
    Leasing, management or performance of the hotels;
    
    Our plans for expansion, conversion or renovation of the hotels;
    
    Adequacy of reserves for renovation and refurbishment;
    
    Our financing plans;
    
    Our continued qualification as a REIT under applicable tax laws;
    
    Our policies and activities regarding investments,
acquisitions, dispositions, financings, conflicts of interest and
other matters;
    
    National and international economic, political or market conditions; and
    
    Trends affecting us or any hotels financial condition or results of operations. You can identify the forward-looking statements by their use of
forward-looking words, such as believes, expects, may, will, should,
seeks, intends, plans, estimates, or anticipates, or the negative of
those words or similar words. You are cautioned that any such forward-looking
statement is not a guarantee of future performance and involves risks and
uncertainties, and that actual results may differ materially from those in the
forward-looking statement as a result of various factors. The factors that
could cause actual results to differ materially from those expressed in a
forward-looking statement include, among other factors, financial performance,
real estate conditions, execution of hotel acquisition or disposition programs,
changes in local or national economic conditions and their impact on the
occupancy of our hotels, military action, terrorism, hurricanes, changes in
interest rates, changes in local or national supply and construction of new
hotels, changes in profitability and margins and the financial condition of our
operators and lessee and other similar variables. The information contained in this Form 10-Q and in the documents
incorporated by reference herein and in Boykins periodic filings with the
Securities and Exchange Commission also identifies important factors that could
cause such differences. With respect to any such forward-looking statement that includes a
statement of its underlying assumptions or bases, we caution that, while we
believe such assumptions or bases to be reasonable and have formed them in good
faith, assumed facts or bases almost always vary from actual results, and the
differences between assumed facts or bases and actual results can be material
depending on the circumstances. When, in any forward-looking statement, we or
our management express an expectation or belief as to future results, that
expectation or belief is expressed in good faith and is believed to have a
reasonable basis, but there can be no assurance that the stated expectation or
belief will result or be achieved or accomplished. 
 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. November 5, 2004
    
    /s/ Robert W. BoykinRobert W. BoykinChairman of the Board and Chief Executive Officer(Principal Executive Officer)November 5, 2004
    
    /s/ Shereen P. JonesShereen P. JonesExecutive Vice President, Chief Financial and Investment Officer(Principal Accounting Officer)




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EXHIBIT INDEX 3.1
    
    (a)
    
    Amended and Restated Articles of Incorporation, as amended3.2
    
    (b)
    
    Code of Regulations3.3
    
    (c)
    
    Amendment to the Companys Articles of Incorporation for the
10-1/2% Class A Cumulative Preferred shares, Series 2002-A4.1
    
    (b)
    
    Specimen Share Certificate4.2
    
    (a)
    
    Dividend Reinvestment and Optional Share Purchase Plan4.3
    
    (d)
    
    Shareholder Rights Agreement, dated as of May 25,
1999, between Boykin Lodging Company and National City Bank, as
rights agent4.3a
    
    (e)
    
    Amendment to Shareholder Rights Agreement dated
as of December 31, 2001, between Boykin Lodging Company and
National City Bank4.4
    
    (c)
    
    Form of Preferred Share Certificate4.5
    
    (c)
    
    Form of Depositary Receipt31.1
    
    
    
    Certification Pursuant to Rule 13a-14(a)31.2
    
    
    
    Certification Pursuant to Rule 13a-14(a)32.1
    
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
200232.2
    
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002(a)
    
    Incorporated by reference from Boykins Form 10-Q for the
quarter ended June 30, 1999.(b)
    
    Incorporated by reference from Amendment
No. 3 to Boykins Registration Statement on Form S-11
(Registration No. 333-6341) (the Form S-11) filed on
October 24, 1996. Each of the above exhibits has the same
exhibit number in the Form S-11.(c)
    
    Incorporated by reference from Boykins
Registration Statement on Form 8-A filed on October 3,
2002.(d)
    
    Incorporated by reference as Exhibit 1 from
Boykins Registration Statement on Form 8-A filed on June
10, 1999.(e)
    
    Incorporated by reference from Boykins Form 8-K filed on
January 14, 2002.