EX-99.1 2 g03963exv99w1.htm EX-99.1 PRESS RELEASE DATED, NOVEMBER 2, 2006 EX-99.1 PRESS RELEASE DATED, NOVEMBER 2, 2006
 

Exhibit 99.1
(LODGIAN LOGO)
     
For Immediate Release
   
Contact:
   
Debi Ethridge
  Jerry Daly or Carol McCune
Vice President, Finance & Investor Relations
  Daly Gray Public Relations (Media)
dethridge@lodgian.com
  jerry@dalygray.com
(404) 365-2719
  (703) 435-6293
Lodgian Implements Strategic Initiatives and Reports Third Quarter 2006 Results
     ATLANTA, Ga., November 2, 2006—Lodgian, Inc. (AMEX: LGN), one of the nation’s largest independent owners and operators of full-service hotels, today reported results for the third quarter ended September 30, 2006, and provided details of a major strategic initiative to reconfigure the company’s hotel portfolio.
     The company will host a 10 a.m. ET conference call today to discuss results.
Overview of Strategic Initiative
     As a result of a detailed review, Lodgian has redefined its core portfolio, which will contain 43 hotels with 7,924 rooms, compared with its current portfolio of 71 hotels with 12,943 rooms. For the nine months ended September 30, 2006, net operating income for these 43 hotels was $19.0 million and Adjusted EBITDA was $42.4 million. The company spent approximately $120 million in capital expenditures on these properties since 2004.
     The core portfolio is comprised of 32 full service hotels, averaging 213 rooms and more than 10,500 square feet of meeting space, and 11 select service hotels, of which 10 are Marriott
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Lodgian Third Quarter Results
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branded properties. Approximately 9 percent of the properties are in the Upper Upscale segment as defined by Smith Travel Research, 47 percent in Upscale, and 37 percent in Midscale with food & beverage. Of the 7,710 rooms located in the United States, approximately 59 percent of rooms are located in the top 25 Metropolitan Statistical Areas (MSAs); those not in the top 25 MSAs include three Atlantic Coast beach hotels, one in a popular Colorado ski area, one in Pinehurst, N.C., and five Courtyards by Marriott, each in a strong tertiary market.
     As a result of the strategic reconfiguration of its portfolio, the company will sell a total of 27 hotels (including 14 hotels currently held for sale), transferring an additional 13 hotels to discontinued operations after September 30, 2006.
         
Hotels in Continuing Operations as of June 30, 2006
     66  
Less: Hotels classified as Discontinued Operations in the 2006 third quarter
     (6 )
Less: Hotels classified as Discontinued Operation in October 2006
     (3 )
Less: Hotels to be classified as Discontinued Operations in the remainder of the 2006 fourth quarter
     (13 )
Less: Marietta, GA hotel currently closed and unclassified
     (1 )
Core hotel portfolio as of December 31, 2006
     43  
     The 27 hotels to be sold are expected to generate aggregate sales proceeds of $115 million to $122 million, based upon sales contracts, letters of intent, broker opinions of value or management estimates. Realization of these estimated proceeds would result in net positive cash flow of $60 million to $70 million after selling expenses, settlement of debt (including defeasance expenses) and the successful refinancing of the company’s current floating rate credit facility in the first quarter of 2007 (which refinance is discussed further in “Balance Sheet Update” below). The company will incur impairment charges in the fourth quarter of 2006 of

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$13 to $19 million. Assuming the company realizes aggregates sales proceeds in the amounts stated above, book profit on the sale of the portfolio is expected to be between $20 and $24 million. The company expects to incur costs related to the early extinguishment of debt of approximately $2 million.
     Concurrent with the reconfiguration of the portfolio, Lodgian restructured its operating team to focus on the different needs of the core and held-for-sale hotels. Management of the core hotels will concentrate on the creation of long-term results and value. The held-for-sale management team will have incentives to maximize hotel performance until the properties are sold.
Third Quarter 2006 Operating Results
  •   Revenue per available room (RevPAR) growth for the company’s 60 continuing operations hotels improved 5.6 percent in the 2006 third quarter and 12.0 percent for the first nine months.
 
  •   Net income attributable to common stock decreased from $9.7 million to $162,000, or $0.39 to $0.01 per common diluted share in the 2006 third quarter.
 
  •   Adjusted EBITDA from 56 continuing operations hotels declined to $12.5 million from $13.1 million and Adjusted EBITDA margins decreased 130 basis points to 17.0 percent.
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Lodgian Third Quarter Results
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    3Q   3Q   %
    2006*   2005*   Change
Rooms revenue — Continuing operations
   $ 60,540     $ 56,776       6.6 %
RevPAR — Continuing operations
   $ 62.70     $ 59.36       5.6 %
Total revenue — Continuing operations
   $ 77,967     $ 73,367       6.3 %
Income from continuing operations
   $ 1,358     $ 4,822       -71.8 %
Income (loss) from discontinued operations
   $ (1,196 )   $ 4,887       -124.5 %
Net income attributable to common stock
   $ 162     $ 9,709       -98.3 %
Net income per diluted share
   $ 0.01     $ 0.39       -97.4 %
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations (a non-GAAP measure)
   $ 18,209     $ 16,956       7.4 %
Adjusted EBITDA from 56 continuing operations hotels (refer below)
   $ 12,526     $ 13,088       -4.3 %
Adjusted EBITDA margin for 56 continuing operations hotels
     17.0 %     18.3 %     -1.3 %
 
*   Dollars in thousands except for RevPAR and per share data
Continuing operations data in the table above includes the financial effects of the closure of two hotels in Florida, the Crowne Plaza West Palm Beach and the Crowne Plaza Melbourne-Oceanfront, which closed during the 2004 fourth quarter and reopened in December 2005 and January 2006, respectively. Continuing operations data also includes the impact of a hotel which closed in January 2006 due to fire damage and a hotel closed for demolition.
The increase in “Rooms revenue — Continuing operations”, presented above, exceeds the increase in “RevPAR — Continuing operations” due to differing numbers of rooms being available in 2006 vs. 2005 third quarter (965,540 in 2006 vs. 956,402 in 2005 third quarter).
In this press release, Lodgian uses the term “Adjusted EBITDA” to mean earnings before interest, taxes, depreciation and amortization (“EBITDA”), but excluding the effects of the following charges: post-emergence Chapter 11 expenses; impairment losses; casualty (gains)/losses, net, for properties damaged by hurricane, fire or flood; and charges related to the surrender of two hotels to a bond trustee and one hotel, in which we owned a non-controlling equity interest and whose results were accounted for under the equity method of accounting, to a lender.
Adjusted EBITDA for the third quarters of 2006 and 2005, as shown above, also excludes the results of the two Florida hotels, discussed above, that were closed during the 2004 fourth quarter and essentially all of 2005, thus eliminating the adverse effect of their closure in the third quarter of 2005. Also excluded are the results in both periods for a hotel damaged by fire in January 2006, which remains closed, and a hotel under contract to be sold which was closed as of June 1, 2006. A reconciliation of net income to EBITDA and Adjusted EBITDA is included with this release.
     Total revenues in the 2006 third quarter, at $78.0 million, improved 6.3 percent compared to the same period a year earlier. Net income attributable to common shares was $162,000, or $0.01 income per diluted share, in the 2006 third quarter, compared to $9.7 million, or $0.39 per
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diluted share, in the 2005 third quarter. The net income decline in the 2006 third quarter was primarily due to the following items:
  •   a 7.4% increase in hotel labor costs per occupied room,
 
  •   a $1.2 million increase in the company’s property insurance premiums,
 
  •   a $0.5 million increase in property taxes,
 
  •   a $0.5 million increase in energy expenses,
 
  •   a $1.3 million loss from discontinued operations, compared with $4.9 million in net income in the prior year’s third quarter due to the timing and value of asset sales,
 
  •   a $2.9 million increase in depreciation expense, and
 
  •   $1.4 million in higher interest costs.
     EBITDA from continuing operations was $18.2 million, a 7.4 percent improvement from $17.0 million in the prior year’s third quarter. Adjusted EBITDA for the 56 continuing operations hotels open during both periods’ third quarter declined to $12.5 million, compared to $13.1 million in the 2005 third quarter, due to the items mentioned above. Adjusted EBITDA margins for the 56 continuing operations hotels open in both periods’ third quarters declined 130 basis points to 17.0 percent.
     The company recorded $3.0 million in business interruption proceeds in the 2006 third quarter which related primarily to the 2006 first quarter, compared to $6.1 million in the prior year’s third quarter. The company has begun filing casualty and business interruption claims, subject to a $100,000 deductible, for the 193-room Holiday Inn hotel in Marietta, Georgia that has been closed since mid-January 2006 due to a fire.
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Lodgian Third Quarter Results
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     “We experienced a number of expense increases during the quarter, led by a significant increase in property insurance premiums, energy and interest expense,” said Ed Rohling, Lodgian president and chief executive officer. “We have taken steps to respond to these changes by emphasizing even more strongly our focus on those costs that we can control. Our insurance and energy costs rose substantially during the quarter, increasing 230 basis points as a percentage of revenue in the 2006 third quarter over the same period a year ago.
     “Candidly, we failed to adequately manage property-level payroll during the quarter. Total payroll costs, as a percentage of revenues, increased 38 basis points. This increase was partially mitigated by a decline in workers’ compensation costs of 24 basis points. Payroll represents roughly 30 percent of our total revenues and is the single largest expense we have to manage. We have since taken important steps to improve our controllable costs and have initiated an enhanced labor management program which is more proactive than our previous practice.”
     RevPAR at the company’s 25 renovated hotels that completed substantial renovations in 2004 and 2005, excluding the two newly-renovated Florida hotels that were not open in the 2005 third quarter, improved by an average of 7.3 percent in the 2006 third quarter, compared to an industry average of 6.0 percent, according to Smith Travel Research. RevPAR at the six hotels that completed renovations in 2005 increased by 46.2 percent.
Strategic Re-Positioning
     As part of the company’s portfolio improvement program, discussed above, Lodgian placed six hotels into discontinued operations in the 2006 third quarter (bringing the total to 11),
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an additional three since September 30, 2006, and plans to reclassify an additional 13 hotels into discontinued operations by year-end. Excluding the Jekyll Island property discussed below, each of those hotels is expected to be listed for sale by year-end, pending preparation of documentation and listing with brokers. Thus, the company will be actively marketing 26 hotels for sale, leaving a total of 43 hotels in the company’s continuing operations portfolio.
     “We conducted a thorough analysis of our entire portfolio to determine the most strategic allocation of our capital,” Rohling said. “The review was performed using stringent criteria that we believe will translate into the greatest long-term growth potential and that match up with our unique strengths as an owner/operator, including brand, location, market, renovation requirements, safety issues, and upgrade and repositioning potential. We have nearly completed our disposition analysis, and have identified the hotels that will become the core portfolio. Going forward, we will be more focused to ensure that future investments in upgrades and other capital items will generate returns consistent with our internal objectives.
     “The sale of these non-strategic properties will allow us to concentrate operationally on those hotels that will generate the highest returns and produce long-term growth for the company,” he added. “The proceeds we receive from these sales will give us increasingly greater flexibility to respond to current and expected industry trends.”
     The company estimates the aggregate sales price of the 27 hotels identified to be held for sale by year-end will be $115 million to $122 million, based upon sales contracts, letters of intent, broker opinions of value or management estimates. Eight of these hotels currently are part of the collateral for fixed rate credit facilities, which the company will partially defease in
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conjunction with those sales. Thirteen of the hotels to be sold currently are part of the collateral for a floating rate credit facility that the company intends to pay off early in the 2007 first quarter, simultaneously with a refinancing of two hotels.
     The sale of the 27 properties is expected to result in net positive cash flow of $60 million to $70 million after debt reduction, the refinancing referred to above, selling expenses, applicable liquidated damages payable to franchisors, and defeasance costs. As required by GAAP, the company recorded a $2.0 million impairment charge in the 2006 third quarter, associated with its reclassification of six hotels during the quarter, and expects to incur a $13 million to $19 million impairment charge in the 2006 fourth quarter associated with the planned reclassification and subsequent sale of the portfolio of hotels.
     “In the near term, we intend to use the proceeds to build our cash reserves to fund future capital projects or renovations at our core hotels, and/or acquire additional shares of stock under our previously announced stock repurchase program. Longer term, we will consider acquiring additional hotels once prices return to more reasonable levels,” Rohling said.
     Following the close of the third quarter, Lodgian sold two hotels. Located in Valdosta, Ga., the 167-room Holiday Inn and the 108-room Azalea Inn were sold for gross proceeds of $6.5 million. Below is a reconciliation of GAAP net loss from operations with Adjusted EBITDA (a non-GAAP financial measure) for the two properties for the trailing 12 months ended September 30, 2006:
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Lodgian Third Quarter Results
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(in thousands)   Holiday Inn     Azalea Inn  
Net (loss)/income from operations
     ($15 )     ($1,239 )
Depreciation and amortization
     47       60  
Interest expense
     206       98  
Provision for income taxes
     (131 )     (764 )
 
            
 
Adjusted EBITDA
   $ 107       ($1,845 )
 
            
     The company has nearly finished the demolition of the 198-room Holiday Inn Jekyll Island hotel, with demolition expected to be completed during the 2006 fourth quarter, and will then reclassify the hotel into discontinued operations as part of the 13 hotels. In the 2006 second quarter, the company signed a contract to sell the property contingent upon, among other things, Lodgian’s demolition of the hotel and the approval by the Jekyll Island Authority of the buyer’s development plans. The hotel was closed June 1, 2006 for demolition.
New Core Structure
     On a pro forma basis, during the nine months ended September 30, 2006, the 43 hotels in what the company considers its core portfolio generated $198.8 million of total revenue, net income of $2.4 million, Adjusted EBITDA of $42.4 million and an Adjusted EBITDA to revenue margin of 21.3 percent. Conversely, the non-core portfolio of 29 hotels (including the 2 hotels sold in the 2006 fourth quarter) generated $70.4 million of total revenue, net income of $3.4 million (including a $12.4 million gain on sale of assets), Adjusted EBITDA of $11.3 million, and an Adjusted EBITDA margin of 16.1 percent during the same time period.
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Lodgian Third Quarter Results
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            Non-Core Hotel
    Core Hotel Portfolio*   Portfolio*
Rooms revenue
   $ 152,015     $ 55,293  
RevPAR
   $ 70.48     $ 39.49  
Total revenue
   $ 198,813     $ 70,352  
Operating income/(loss)
   $ 18,954       ($3,788 )
Net income
   $ 2,354     $ 3,424  
Earnings before interest, taxes, depreciation and amortization (EBITDA) (a non-GAAP measure)
   $ 44,822     $ 13,850  
Adjusted EBITDA
   $ 42,430     $ 11,322  
Adjusted EBITDA margin
     21.3 %     16.1 %
Adjusted EBITDA per room
   $ 5,569     $ 2,346  
 
*   Dollars in thousands except for RevPAR and per room data
The Marietta, GA Holiday Inn is excluded from both sets of data presented above.
Balance Sheet Update
     During the 2006 third quarter, Lodgian acquired approximately 130,000 shares of common stock at an average price of $12.07 per share, for a total of approximately $1.6 million, as part of its previously announced plan to repurchase up to $15 million of its common shares over a period ending no later than May 26, 2007. Through September 30, 2006, the company had acquired a cumulative total of 179,000 shares for approximately $2.2 million.
     “We have begun efforts to refinance two hotels, one of which is currently part of the collateral for a floating rate credit facility,” said James MacLennan, executive vice president and chief financial officer. “The second hotel to be financed is currently unencumbered.”
     The proceeds from this fixed rate financing will be used to pay off a substantial majority of the outstanding balance of the existing floating rate facility secured by 15 hotels. The
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remaining balance will be retired by company funds. This refinancing will unencumber 13 of the 27 assets in the company’s non-core portfolio.
     “Concurrently, we are in the early stages of exploring a line of credit facility to give us greater flexibility and speed in executing growth initiatives, adding to our potential resources. We have just under $66 million in cash and restricted cash on the balance sheet as of September 30, 2006, an increase of more than $31 million year to date.”
Conference Call
     Lodgian will hold a conference call to discuss its third quarter results today, November 2, at 10 a.m. Eastern time. To hear the webcast, interested parties may visit the company’s Web site at www.lodgian.com and click on Investor Relations and then Webcast, Q2 Earnings Conference Call. A recording of the call will be available by telephone until midnight on Thursday, November 9, by dialing (800) 405-2236, reference number 11073559. A replay of the conference call will be posted on Lodgian’s Web site.
Non-GAAP Financial Measures
     The historical non-GAAP financial measures included in this press release are reconciled to the comparable GAAP measures in the schedules attached to this press release.
EBITDA and Adjusted EBITDA
     EBITDA and Adjusted EBITDA are non-GAAP measures and should not be used as a substitute for measures such as net income (loss), cash flows from operating activities, or other measures computed in accordance with GAAP. The company uses EBITDA and Adjusted EBITDA to measure its performance and to assist in the assessment of hotel property values.
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EBITDA is also a widely used industry measure which Lodgian believes provides pertinent information to investors and is an additional indicator of the company’s operating performance.
     The company defines Adjusted EBITDA as EBITDA excluding the effects of certain charges such as post-emergence Chapter 11 expenses included in corporate and other on the company’s consolidated statement of operations, impairment losses, casualty losses or gains related to damage to and insurance recoveries for properties damaged by hurricane, fire or flood, and charges related to the surrender of two wholly-owned hotels to the bond trustee and the disposition or surrender of one minority interest hotel to the lender. Adjusted EBITDA also excludes the results of two storm-damaged Florida hotels that were closed for repairs during the 2004 fourth quarter and essentially all of 2005, thus eliminating both the adverse effect of their closure and the positive effect of the settlement of their property damage and business interruption insurance claims in the fourth quarter and full year 2005. Also excluded are the results in both periods for a hotel damaged by fire in January 2006, which remains closed.
About Lodgian
     Lodgian is one of the largest independent owners and operators of full-service hotels in the United States. The company currently manages a portfolio of 71 hotels with 12,943 rooms located in 28 states and Canada, including the closed property on Jekyll Island. Of the company’s 71-hotel portfolio, 43 are InterContinental Hotels Group brands (Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn Express), 13 are Marriott brands (Courtyard by Marriott, Fairfield Inn, SpringHill Suites and Residence Inn), and 12 are affiliated with four other nationally recognized hospitality franchisors such as Hilton and Carlson (Radisson and
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Park Inn). Three hotels are independent, unbranded properties. Three hotels are owned by partnerships, in each of which Lodgian has at least a 50 percent equity interest, and is the operating partner for each. For more information about Lodgian, visit the company’s Web site: www.lodgian.com.
Forward-Looking Statements
     This press release includes forward-looking statements related to Lodgian’s operations that are based on management’s current expectations, estimates and projections. These statements are not guarantees of future performance and actual results could differ materially. The words “guidance,” “may,” “should,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “plan,” and similar expressions are intended to identify forward-looking statements. Certain factors are not within the company’s control and readers are cautioned not to put undue reliance on forward-looking statements. These statements involve risks and uncertainties including, but not limited to, the company’s ability to generate sufficient working capital from operations and other risks detailed from time to time in the company’s SEC reports. The company undertakes no obligations to update events to reflect changed assumptions, the occurrence of unanticipated events or changes to future results over time.

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LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                 
    September 30, 2006     December 31, 2005  
    (Unaudited in thousands)  
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 52,420     $ 19,097  
Cash, restricted
     13,334       15,003  
Accounts receivable (net of allowances: 2006 — $1,135; 2005 — $1,101)
     10,312       8,054  
Insurance receivable
     2,612       11,725  
Inventories
     3,546       3,955  
Prepaid expenses and other current assets
     19,722       20,101  
Assets held for sale
     42,678       14,866  
 
            
Total current assets
     144,624       92,801  
 
                
Property and equipment, net
     564,094       606,862  
Deposits for capital expenditures
     17,304       19,431  
Other assets
     6,786       7,591  
 
            
 
   $ 732,808     $ 726,685  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Accounts payable
   $ 10,587     $ 14,709  
Other accrued liabilities
     29,096       31,528  
Advance deposits
     2,144       1,914  
Insurance advances
     2,063       700  
Current portion of long-term liabilities
     21,186       18,531  
Liabilities related to assets held for sale
     28,615       4,610  
 
            
Total current liabilities
     93,691       71,992  
 
                
Long-term liabilities
     369,526       394,432  
 
            
Total liabilities
     463,217       466,424  
 
                
Minority interests
     11,256       11,217  
Commitments and contingencies
                
Stockholders’ equity:
                
Common stock, $.01 par value, 60,000,000 shares authorized; 24,743,253 and 24,648,405 issued at September 30, 2006 and December 31, 2005, respectively
     247       246  
Additional paid-in capital
     321,926       317,034  
Unearned stock compensation
     —       (604 )
Accumulated deficit
     (64,106 )     (69,640 )
Accumulated other comprehensive income
     2,706       2,234  
Treasury stock, at cost, 205,819 and 21,633 shares at September 30, 2006 and December 31, 2005, respectively
     (2,438 )     (226 )
 
            
Total stockholders’ equity
     258,335       249,044  
 
            
 
   $ 732,808     $ 726,685  
 
            

 

 

LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
                                 
    Three Months Ended     Nine Months Ended  
    September 30, 2006     September 30, 2005     September 30, 2006     September 30, 2005  
    (Unaudited in thousands, except per share data)  
Revenues:
                                
Rooms
   $ 60,540     $ 56,776     $ 181,681     $ 159,497  
Food and beverage
     15,040       14,243       47,937       43,095  
Other
     2,387       2,348       7,144       7,081  
 
                        
Total revenues
     77,967       73,367       236,762       209,673  
 
                        
Operating expenses:
                                
Direct:
                                
Rooms
     16,247       14,909       47,409       42,571  
Food and beverage
     11,553       10,300       35,089       30,712  
Other
     1,747       1,775       5,455       5,365  
 
                        
Total direct operating expenses
     29,547       26,984       87,953       78,648  
 
                        
 
     48,420       46,383       148,809       131,025  
 
                                
Other operating expenses:
                                
Other hotel operating costs
     23,430       22,562       69,932       63,633  
Property and other taxes, insurance, and leases
     6,939       5,202       17,759       15,220  
Corporate and other
     5,635       5,845       15,961       15,863  
Casualty (gains) losses, net
     (3,086 )     190       (3,145 )     322  
Depreciation and amortization
     9,234       6,340       26,565       18,176  
Impairment of long-lived assets
     367       603       645       1,656  
 
                        
Total other operating expenses
     42,519       40,742       127,717       114,870  
 
                        
Operating income
     5,901       5,641       21,092       16,155  
Other income (expenses):
                                
Business interruption insurance proceeds
     2,973       6,094       4,125       7,823  
Interest income and other
     786       348       1,943       573  
Interest expense
     (7,514 )     (6,121 )     (22,041 )     (18,340 )
 
                        
Income before income taxes and minority interests
     2,146       5,962       5,119       6,211  
Minority interests (net of taxes, nil)
     101       (1,127 )     (39 )     (1,006 )
Provision for income taxes — continuing operations
     (889 )     (13 )     (2,105 )     (148 )
 
                        
Income from continuing operations
     1,358       4,822       2,975       5,057  
 
                        
Discontinued operations:
                                
Income (loss) from discontinued operations before income taxes
     (1,839 )     4,887       4,346       (462 )
Minority interests — discontinued operations
     —       —       —       (96 )
Benefit (provision) for income taxes — discontinued operations
     643       —       (1,787 )     —  
 
                        
Income (loss) from discontinued operations
     (1,196 )     4,887       2,559       (558 )
 
                        
 
                                
 
                        
Net income attributable to common stock
   $ 162     $ 9,709     $ 5,534     $ 4,499  
 
                        
 
                                
Net income (loss) per share attributable to common stock:
                                
Basic
   $ 0.01     $ 0.40     $ 0.22     $ 0.18  
 
                        
Diluted
   $ 0.01     $ 0.39     $ 0.22     $ 0.18  
 
                        

 

 

LODGIAN, INC. AND SUBSIDIARIES
Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP measures) with
Net Income/(Loss) from Continuing Operations (a GAAP measure)
                                 
($ in thousands)   Three Months Ended     Nine Months Ended  
    Sept. 30, 2006     Sept. 30, 2005     Sept. 30, 2006     Sept. 30, 2005  
Continuing operations:
                                
Income (loss) from continuing operations
   $ 1,358     $ 4,822     $ 2,975     $ 5,057  
Depreciation and amortization
     9,234       6,340       26,565       18,176  
Interest income
     (786 )     (340 )     (1,943 )     (765 )
Interest expense
     7,514       6,121       22,041       18,340  
Provision (benefit for income taxes — continuing operations)
     889       13       2,105       148  
 
                        
EBITDA
   $ 18,209     $ 16,956     $ 51,743     $ 40,956  
 
                        
Adjustments to EBITDA:
                                
Post-emergence Chapter 11 expenses, included in corporate and other on consolidated statement of operations
   $ —     $ 13     $ 3     $ 175  
Write-off of investment in subsidiary for non-consolidated hotel
     —       —       —       170  
Write-off of receivable for non-consolidated hotel
     —       (200 )     —       746  
Impairment loss
     367       603       645       1,656  
Casualty (gains) losses, net
     (3,086 )     190       (3,145 )     322  
 
                        
Adjusted EBITDA
   $ 15,490     $ 17,562     $ 49,246     $ 44,025  
 
                        
 
                                
West Palm Beach, Melbourne, Jekyll Island and Marietta:
                                
Income (loss)
   $ 2,449     $ 4,177     $ 1,408     $ 3,929  
Depreciation and amortization
     1,658       231       4,446       662  
Interest income
     (4 )     (2 )     (11 )     (5 )
Interest expense
     363       55       975       352  
Provision (benefit for income taxes — continuing operations)
     1,528       —       751       —  
 
                        
EBITDA
   $ 5,993     $ 4,462     $ 7,569     $ 4,938  
 
                        
Adjustments to EBITDA:
                                
Post-emergence Chapter 11 expenses, included in corporate and other on consolidated statement of operations
   $ —     $ —     $ —     $ —  
Write-off of investment in subsidiary for non-consolidated hotel
     —       —       —       —  
Write-off of receivable for non-consolidated hotel
     —       —       —       —  
Impairment loss
     26       12       140       22  
Casualty (gains) losses, net
     (3,056 )     —       (2,894 )     108  
 
                        
Adjusted EBITDA
   $ 2,964     $ 4,474     $ 4,814     $ 5,069  
 
                        
 
                                
Continuing operations excluding West Palm Beach, Melbourne, Jekyll Island and Marietta:
                                
Income (loss) from continuing operations
   $ (1,091 )   $ 645     $ 1,567     $ 1,128  
Depreciation and amortization
     7,576       6,109       22,119       17,514  
Interest income
     (782 )     (338 )     (1,932 )     (760 )
Interest expense
     7,151       6,066       21,066       17,988  
Provision (benefit for income taxes — continuing operations)
     (639 )     13       1,354       148  
 
                        
EBITDA
   $ 12,216     $ 12,494     $ 44,174     $ 36,018  
 
                        
Adjustments to EBITDA:
                                
Post-emergence Chapter 11 expenses, included in corporate and other on consolidated statement of operations
   $ —     $ 13     $ 3     $ 175  
Write-off of investment in subsidiary for non-consolidated hotel
     —       —       —       170  
Write-off of receivable for non-consolidated hotel
     —       (200 )     —       746  
Impairment loss
     341       591       505       1,634  
Casualty (gains) losses, net
     (30 )     190       (251 )     214  
 
                        
Adjusted EBITDA
   $ 12,526     $ 13,088     $ 44,432     $ 38,956  
 
                        

 

 

CORE HOTEL PORTFOLIO (43 HOTELS)
PRO FORMA INCOME STATEMENT
                                 
    Three Months Ended     Nine Months Ended  
    September 30, 2006     September 30, 2005     September 30, 2006     September 30, 2005  
            (Unaudited in thousands, except per share data)          
 
                                
Revenues:
                                
Rooms
   $ 50,445     $ 43,882     $ 152,015     $ 125,163  
Food and beverage
     12,912       11,390       40,615       34,440  
Other
     2,099       1,986       6,183       5,942  
 
                        
Total revenues
     65,456       57,258       198,813       165,545  
 
                        
Operating expenses:
                                
Direct:
                                
Rooms
     13,291       11,523       38,732       33,114  
Food and beverage
     9,771       8,150       29,227       24,338  
Other
     1,519       1,495       4,690       4,486  
 
                        
Total direct operating expenses
     24,581       21,168       72,649       61,938  
 
                        
Direct operating margin
     40,875       36,090       126,164       103,607  
 
                                
Other operating expenses:
                                
Other hotel operating costs
     19,043       17,458       56,214       49,019  
Property and other taxes, insurance, and leases
     5,800       4,317       14,825       12,710  
Corporate and other
     5,590       5,814       15,801       15,791  
Casualty (gains) losses, net
     (3,086 )     190       (2,988 )     290  
Depreciation and amortization
     7,846       5,214       22,825       14,930  
Impairment of long-lived assets
     323       83       533       226  
 
                        
Total other operating expenses
     35,516       33,076       107,210       92,966  
 
                        
Operating income
     5,359       3,014       18,954       10,641  
 
                                
Other income (expenses):
                                
Business interruption insurance proceeds
     2,447       6,094       3,142       7,823  
Interest income and other
     786       340       1,943       562  
Interest expense
     (6,436 )     (5,238 )     (18,914 )     (15,730 )
 
                        
Income before income taxes and minority interests
     2,156       4,210       5,125       3,296  
Minority interests (net of taxes, nil)
     101       (1,127 )     (39 )     (1,006 )
Provision for income taxes
     (1,019 )     (13 )     (2,732 )     (148 )
 
                        
Net income/(loss)
   $ 1,238     $ 3,070     $ 2,354     $ 2,142  
 
                        
Note: The Holiday Inn Marietta, GA is not included in either the core or non-core hotel portfolio

 

 

NON-CORE HOTEL PORTFOLIO (29 HOTELS)
PRO FORMA INCOME STATEMENT
                                 
    Three Months Ended     Nine Months Ended  
    September 30, 2006     September 30, 2005     September 30, 2006     September 30, 2005  
    (Unaudited in thousands, except per share data)  
Revenues:
                                
Rooms
   $ 18,207     $ 24,203     $ 55,293     $ 71,577  
Food and beverage
     3,996       5,732       13,425       18,777  
Other
     529       647       1,633       2,223  
 
                        
Total revenues
     22,732       30,582       70,351       92,577  
 
                        
Operating expenses:
                                
Direct:
                                
Rooms
     5,695       7,310       17,115       22,558  
Food and beverage
     3,363       4,380       10,849       14,513  
Other
     447       573       1,416       1,927  
 
                        
Total direct operating expenses
     9,505       12,263       29,380       38,998  
 
                        
Direct operating margin
     13,227       18,319       40,971       53,579  
 
Other operating expenses:
                                
Other hotel operating costs
     8,210       10,492       25,074       32,834  
Property and other taxes, insurance, and leases
     1,938       1,543       4,967       5,807  
Corporate and other
     65       213       332       736  
Casualty (gains) losses, net
     —       142       (240 )     174  
Depreciation and amortization
     1,661       2,069       4,563       5,932  
Impairment of long-lived assets
     2,039       751       10,063       6,935  
 
                        
Total other operating expenses
     13,913       15,210       44,759       52,418  
 
                        
Operating income
     (686 )     3,109       (3,788 )     1,161  
 
Other income (expenses):
                                
Business interruption insurance proceeds
     267       —       724       —  
Interest income and other
     —       294       11       297  
Interest expense
     (1,499 )     (1,680 )     (4,543 )     (5,860 )
Gain on sale
     —       4,846       12,351       6,849  
 
                        
Income before income taxes and minority interests
     (1,918 )     6,569       4,755       2,447  
Minority interests (net of taxes, nil)
     —       —       —       (96 )
(Provision) benefit for income taxes
     794       —       (1,331 )     —  
 
                        
Net income/(loss)
   $ (1,124 )   $ 6,569     $ 3,424     $ 2,351  
 
                        
Note:     The Holiday Inn Marietta, GA is not included in either the core or non-core hotel portfolio. Included above are the results for the 2 hotels sold in the 2006 fourth quarter.

 

 

LODGIAN, INC. AND SUBSIDIARIES
Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP measures) with
Net Income/(Loss) from Continuing Operations (a GAAP measure)
                                 
    Three Months Ended     Nine Months Ended  
($ in thousands)   Sept. 30, 2006     Sept. 30, 2005     Sept. 30, 2006     Sept. 30, 2005  
Core Hotel Portfolio (43 hotels):
                                
Income (loss)
   $ 1,238     $ 3,070     $ 2,354     $ 2,142  
Depreciation and amortization
     7,846       5,214       22,825       14,930  
Interest income
     (786 )     (340 )     (1,943 )     (764 )
Interest expense
     6,436       5,238       18,914       15,730  
Provision (benefit) for income taxes
     1,019       13       2,732       148  
 
                        
EBITDA
   $ 15,753     $ 13,195     $ 44,882     $ 32,186  
 
                        
Adjustments to EBITDA:
                                
Post-emergence Chapter 11 expenses, included in corporate and other on consolidated statement of operations
           $ 13     $ 3     $ 175  
Write-off of investment in subsidiary for non-consolidated hotel
                             170  
Write-off of receivable for non-consolidated hotel
             (200 )             746  
Impairment loss
     323       83       533       226  
Casualty (gains) losses, net
     (3,086 )     190       (2,988 )     290  
 
                        
Adjusted EBITDA
   $ 12,990     $ 13,281     $ 42,430     $ 33,793  
 
                        
 
Non-Core Hotel Portfolio (29 hotels):
                                
Income (loss)
   $ (1,124 )   $ 6,569     $ 3,424     $ 2,351  
Depreciation and amortization
     1,661       2,069       4,563       5,932  
Interest income
     —       (7 )     (11 )     (7 )
Interest expense
     1,499       1,680       4,543       5,860  
Provision (benefit) for income taxes
     (794 )     —       1,331       —  
 
                        
EBITDA
   $ 1,242     $ 10,311     $ 13,850     $ 14,136  
 
                        
Adjustments to EBITDA:
                                
Guaranty payments on Kansas properties
                             500  
(Gain) on sale
             (4,846 )     (12,351 )     (6,849 )
Impairment loss
     2,039       751       10,063       6,935  
Casualty (gains) losses, net
             142       (240 )     174  
 
                        
Adjusted EBITDA
   $ 3,281     $ 6,358     $ 11,322     $ 14,896  
 
                        
Note:   The Holiday Inn Marietta, GA is not included in either the core or non-core hotel portfolio. Included in the Non-core results above are the results for the 2 hotels sold in the 2006 fourth quarter.

 

 

Lodgian, Inc.
2006 Supplemental Operating Information
                                             
Hotel   Room       Three Months Ended        
Count   Count       September 30, 2006   September 30, 2005   Change   % Change
60
     10,886     All Continuing Operations                                
 
           Occupancy     66.9 %     67.4 %             -0.7 %
 
           ADR   $ 93.70     $ 88.02     $ 5.68       6.5 %
 
           RevPAR   $ 62.70     $ 59.36     $ 3.34       5.6 %
56
     10,004     Continuing Operations less two hotels closed in                                
 
           2005 due to hurricane damage & one closed in 2006                                
 
           due to fire damage and one closed for demolition                                
 
           Occupancy     67.3 %     67.7 %             -0.6 %
 
           ADR   $ 92.81     $ 88.63     $ 4.18       4.7 %
 
           RevPAR   $ 62.51     $ 60.01     $ 2.50       4.2 %
 
           RevPAR Index     95.6 %     94.5 %             1.2 %
55
     9,760     Continuing Operations less two hotels closed in                                
 
           2005 due to hurricane damage & one closed in 2006                                
 
           due to fire damage, one closed for demolition and                                
 
           the Radisson Kenner                                
 
           Occupancy     67.6 %     67.9 %             -0.4 %
 
           ADR   $ 92.72     $ 88.47     $ 4.25       4.8 %
 
           RevPAR   $ 62.64     $ 60.08     $ 2.56       4.3 %
 
           RevPAR Index     95.8 %     94.4 %             1.5 %
46
     7,950     Continuing Operations less two hotels closed in                                
 
           2005 due to hurricane damage, one closed due to                                
 
           fire damage, one closed for demolition and hotels                                
 
           under renovation in the first, second & third                                
 
           quarter 2005 and 2006                                
 
           Occupancy     67.0 %     69.9 %             -4.1 %
 
           ADR   $ 91.48     $ 86.84     $ 4.64       5.3 %
 
           RevPAR   $ 61.29     $ 60.73     $ 0.56       0.9 %
 
           RevPAR Index     96.5 %     98.9 %             -2.4 %
25
     4,093     Hotels completing major renovations in 2004 and 2005                                
 
           Occupancy     67.0 %     66.2 %             1.2 %
 
           ADR   $ 97.55     $ 91.97     $ 5.58       6.1 %
 
           RevPAR   $ 65.35     $ 60.90     $ 4.45       7.3 %
 
           RevPAR Index     96.6 %     91.0 %             6.2 %
13
     1,515     Marriott Hotels                                
 
           Occupancy     74.5 %     74.7 %             -0.3 %
 
           ADR   $ 104.86     $ 94.03     $ 10.83       11.5 %
 
           RevPAR   $ 78.08     $ 70.28     $ 7.80       11.1 %
 
           RevPAR Index     114.1 %     111.7 %             2.1 %
4
     777     Hilton Hotels                                
 
           Occupancy     69.0 %     73.0 %             -5.5 %
 
           ADR   $ 104.40     $ 97.28     $ 7.12       7.3 %
 
           RevPAR   $ 72.08     $ 71.03     $ 1.05       1.5 %
 
           RevPAR Index     93.7 %     95.2 %             -1.6 %
34
     6,685     IHG Hotels less two hotels closed in 2005 due to                                
 
           hurricane damage, one closed in 2006 due to fire                                
 
           damage and one closed in 2006 for demolition                                
 
           Occupancy     68.6 %     68.1 %             0.7 %
 
           ADR   $ 90.77     $ 88.25     $ 2.52       2.9 %
 
           RevPAR   $ 62.23     $ 60.11     $ 2.12       3.5 %
 
           RevPAR Index     94.5 %     92.3 %             2.4 %
5
     1,027     Other Brands and Independent Hotels                                
 
           Occupancy     47.7 %     50.6 %             -5.7 %
 
           ADR   $ 71.44     $ 70.80     $ 0.64       0.9 %
 
           RevPAR   $ 34.07     $ 35.84       ($1.77 )     -4.9 %
 
           RevPAR Index     71.4 %     78.5 %             -9.0 %

 

 

Lodgian, Inc.
2006 Supplemental Operating Information
                                             
Hotel   Room       Nine Months Ended        
Count   Count       September 30, 2006   September 30, 2005   Change   % Change
60
     10,886     All Continuing Operations                                
 
           Occupancy     65.8 %     65.3 %             0.8 %
 
           ADR   $ 95.67     $ 86.07     $ 9.60       11.2 %
 
           RevPAR   $ 62.93     $ 56.20     $ 6.73       12.0 %
56
     10,004     Continuing Operations less two hotels closed in                                
 
           2005 due to hurricane damage & one closed in 2006                                
 
           due to fire damage and one closed for demolition                                
 
           Occupancy     66.3 %     65.7 %             0.9 %
 
           ADR   $ 94.42     $ 86.66     $ 7.76       9.0 %
 
           RevPAR   $ 62.55     $ 56.91     $ 5.64       9.9 %
 
           RevPAR Index     97.3 %     94.8 %             2.6 %
55
     9,760     Continuing Operations less two hotels closed in                                
 
           2005 due to hurricane damage & one closed in 2006                                
 
           due to fire damage, one closed for demolition and                                
 
           the Radisson, Kenner.                                
 
           Occupancy     66.1 %     66.1 %             0.0 %
 
           ADR   $ 93.60     $ 86.86     $ 6.74       7.8 %
 
           RevPAR   $ 61.91     $ 57.44     $ 4.47       7.8 %
 
           RevPAR Index     96.9 %     95.6 %             1.4 %
46
     7,950     Continuing Operations less two hotels closed in                                
 
           2005 due to hurricane damage, one closed due to                                
 
           fire damage, one closed for demolition and hotels                                
 
           under renovation in the first, second & third                                
 
           quarter 2005 and 2006                                
 
           Occupancy     66.0 %     67.5 %             -2.2 %
 
           ADR   $ 92.43     $ 86.01     $ 6.42       7.5 %
 
           RevPAR   $ 61.02     $ 58.06     $ 2.96       5.1 %
 
           RevPAR Index     98.7 %     99.9 %             -1.2 %
25
     4,093     Hotels completing major renovations in 2004 and 2005                                
 
           Occupancy     68.8 %     66.4 %             3.6 %
 
           ADR   $ 99.35     $ 87.44     $ 11.91       13.6 %
 
           RevPAR   $ 68.33     $ 58.03     $ 10.30       17.7 %
 
           RevPAR Index     99.0 %     90.6 %             9.3 %
13
     1,515     Marriott Hotels                                
 
           Occupancy     74.2 %     73.8 %             0.5 %
 
           ADR   $ 102.96     $ 93.22     $ 9.74       10.4 %
 
           RevPAR   $ 76.39     $ 68.82     $ 7.57       11.0 %
 
           RevPAR Index     115.7 %     114.8 %             0.8 %
4
     777     Hilton Hotels                                
 
           Occupancy     66.3 %     68.5 %             -3.2 %
 
           ADR   $ 104.33     $ 96.27     $ 8.06       8.4 %
 
           RevPAR   $ 69.14     $ 65.93     $ 3.21       4.9 %
 
           RevPAR Index     96.4 %     96.1 %             0.3 %
34
     6,685     IHG Hotels less two hotels closed in 2005 due to                                
 
           hurricane damage, one closed in 2006 due to fire                                
 
           damage and one closed in 2006 for demolition                                
 
           Occupancy     66.6 %     66.2 %             0.6 %
 
           ADR   $ 91.67     $ 85.63     $ 6.04       7.1 %
 
           RevPAR   $ 61.02     $ 56.70     $ 4.32       7.6 %
 
           RevPAR Index     95.1 %     93.0 %             2.3 %
5
     1,027     Other Brands and Independent Hotels                                
 
           Occupancy     52.5 %     48.0 %             9.4 %
 
           ADR   $ 89.76     $ 70.71     $ 19.05       26.9 %
 
           RevPAR   $ 47.12     $ 33.93     $ 13.19       38.9 %
 
           RevPAR Index     84.5 %     71.3 %             18.5 %

 

 

Lodgian, Inc.
Assets Held for Sale
             
Location   Brand   Rooms
 
            
Held for sale as of November 1, 2006
Dothan, AL
  Quality Inn     102  
Dothan, AL
  Holiday Inn Express     112  
Sheffield, AL
  Holiday Inn     202  
Augusta, GA
  Fairfield Inn by Marriott     117  
Macon, GA
  Ramada Plaza     297  
Cedar Rapids, IA
  Crowne Plaza     275  
Bloomington, IN
  Independent     186  
Ft. Wayne, IN
  Holiday Inn     208  
Metairie, LA
  Quality Hotel     205  
St. Paul/Arden Hills, MN
  Holiday Inn     156  
Charleston, SC
  Ramada     197  
Burlington, VT
  Independent     117  
Bridgeport, WV
  Holiday Inn     159  
Fairmont, WV
  Holiday Inn     106  
 
            
To be added to held for sale during remaining 2006 fourth quarter:
Pensacola, FL
  Holiday Inn     152  
Pensacola, FL
  Holiday Inn Express     122  
Winter Haven, FL
  Holiday Inn     228  
Brunswick, GA
  Park Inn     126  
Jekyll Island, GA
  former Holiday Inn        
Louisville, KY
  Clarion     393  
Frederick, MD
  Holiday Inn     158  
Lansing, MI
  Holiday Inn     244  
Hamburg, NY
  Holiday Inn     130  
Jamestown, NY
  Holiday Inn     146  
Lancaster, PA
  Holiday Inn     189  
Pittsburgh (Greentree), PA
  Holiday Inn     201  
York, PA
  Holiday Inn     100  

 

 

Lodgian, Inc.
Core Portfolio
             
Location   Brand   Rooms
 
Bentonville, AR
  Courtyard by Marriott     90  
Little Rock, AR
  Residence Inn by Marriott     96  
Phoenix, AZ
  Crowne Plaza     299  
Phoenix, AZ
  Radisson     159  
Phoenix, AZ
  Holiday Inn     144  
Palm Desert, CA
  Holiday Inn Express     129  
Denver, CO
  Marriott     238  
Frisco, CO
  Holiday Inn     217  
East Hartford, CT
  Holiday Inn     130  
Santa Fe, NM
  Holiday Inn     130  
Melbourne, FL
  Crowne Plaza     272  
West Palm Beach, FL
  Crowne Plaza     219  
Atlanta, GA
  Courtyard by Marriott     181  
Ft. Wayne, IN
  Hilton     244  
Florence, KY
  Courtyard by Marriott     78  
Paducah, KY
  Courtyard by Marriott     100  
Kenner, LA
  Radisson     244  
Lafayette, LA
  Courtyard by Marriott     90  
Dedham, MA
  Residence Inn by Marriot     81  
Worcester, MA
  Crowne Plaza     243  
Baltimore — Towson, MD
  Holiday Inn     139  
Baltimore (BWI Airport), MD
  Holiday Inn     260  
Baltimore (Inner Harbor), MD
  Holiday Inn     375  
Columbia, MD
  Hilton     152  
Glen Burnie, MD
  Holiday Inn     127  
Silver Spring, MD
  Crowne Plaza     231  
Northfield MI
  Hilton     191  
Pinehurst, NC
  Springhill Suites by Marriott     107  
Merrimack, NH
  Fairfield Inn by Marriott     116  
Albany, NY
  Crowne Plaza     384  
Strongsville, OH
  Holiday Inn Select     302  
Tulsa, OK
  Courtyard by Marriott     122  
Monroeville, PA
  Holiday Inn     187  
Philadelphia, PA
  Doubletree Club     190  
Pittsburgh — Washington, PA
  Holiday Inn     138  
Pittsburgh, PA
  Crowne Plaza     193  
Hilton Head, SC
  Holiday Inn     202  
Myrtle Beach, SC
  Holiday Inn     133  
Memphis, TN
  Independent     105  
Abilene, TX
  Courtyard by Marriott     99  
Dallas (DFW Airport), TX
  Holiday Inn Select     282  
Houston, TX
  Crowne Plaza     291  
Windsor, Ontario, Canada
  Holiday Inn Select     214