Lodgian Reports 3Q Results and Updates Outlook for 2001

ATLANTA, Nov. 14 /PRNewswire/ — Lodgian, Inc., (NYSE: LOD) today reported results for its third quarter and nine months ended September 30, 2001.

RESULTS FOR THE THIRD QUARTER 2001 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 2001
Attached are the Company's consolidated balance sheets as of September 30, 2001, (unaudited) and December 31, 2000, unaudited consolidated statements of operations for the three and nine months ended September 30, 2001 and unaudited consolidated statements of cash flows for the nine months ended September 30, 2001. The Company's Form 10-Q for this period has been filed with the Securities and Exchange Commission and is available on the Company's web site.

SUMMARY OF THIRD QUARTER 2001 RESULTS
Total revenues for the third quarter 2001 were $111.4 million compared to $155.2 million for the third quarter of 2000. Of this $43.8 million decrease (a 28.2% decrease), $24.9 million is due to the disposition of 9 hotels in the owned portfolio. Revenues for hotels owned as of September 30, 2001, on a same unit basis, were $111.4 million for the third quarter 2001 and $130.3 million for the third quarter 2000 (a decline of 14.5%). RevPAR for the third quarter 2001, for hotels owned as of September 30, 2001, on a same unit basis, decreased 14.1% as compared to the third quarter 2000. This primarily was as a result of a decline in occupancy of 11.3%, as well as a 3.2% decrease in average daily rates. After adjusting for $2.0 million of unusual overhead and other costs, primarily related to nonrecurring professional and legal fees, severance, one-time bonus charges, account write-offs and provisions, third quarter 2001 EBITDA was $22.3 million, a 33.5% decrease compared to third quarter 2000 EBITDA on a same unit basis. This decrease was primarily due to a general decline in the industry, particularly in certain of the Company's markets which factors were exacerbated by the events of September 11, 2001. Also contributing to the reduction in same unit EBITDA were higher utility, property insurance and property tax costs, which assuming a constant percentage of revenues, negatively impacted same unit EBITDA by an aggregate $3.3 million. The Company incurred a loss of $18.3 million ($0.64 loss per
share) for the third quarter 2001 compared to net income of $0.5 million ($0.02 per share) for the third quarter 2000.

SUMMARY RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(THE 2001 PERIOD)
Total revenues for the 2001 period were $352.0 million compared to $454.6 million for the 2000 period. Of this $102.6 million decrease (a 22.6% decrease), $82.9 million is due to the disposition of 9 hotels in the owned portfolio. Revenues for hotels owned as of September 30, 2001, on a same unit basis were $346.7 million for the 2001 period and $371.7 million for the 2000 period (a decline of 6.7%). RevPAR for the 2001 period, for hotels owned as of September 30, 2001, on a same unit basis, decreased 6.2% as compared to the 2000 period. This primarily was as a result of a decline in occupancy of 7.0%, partially offset by a 0.8% increase in average daily rates. After adjusting for $7.6 million of unusual overhead and other costs, primarily related to nonrecurring professional and legal fees, severance, one-time bonus charges, account write-offs and provisions, EBITDA for the 2001 period was $72.5 million, a 22.8% decrease compared to EBITDA of $93.9 million for the 2000 period, on a same unit basis. This decrease was primarily due to a general decline in the industry, particularly in certain of the Company's markets which factors were exacerbated by the events of September 11, 2001. Also contributing to the reduction in same unit EBITDA were higher utility, franchise fees, property insurance and property tax costs, which, assuming a constant percentage of revenues, negatively impacted same unit EBITDA by an aggregate $9.1 million.
The Company realized a gain on asset dispositions for the nine months ended September 30, 2001, of $24.2 million. The Company incurred a loss of $32.0 million ($1.12 loss per share) for the nine months ended September 30, 2001, compared to a loss of $56.5 million ($2.01 loss per share) for the nine months ended September 30, 2000.

SIGNIFICANT EVENTS SUBSEQUENT TO SEPTEMBER 30, 2001
The Company has been notified by the New York Stock Exchange (the
Exchange) that it is not in compliance with the Exchange's continuing listing requirements because the Company's total market capitalization has fallen below $15 million over a consecutive thirty trading day period. Pursuant to Exchange requirements relating to this listing standard, the Company is required to promptly demonstrate to the Exchange that the Company has a plan to come into compliance with the minimum market capitalization requirement. In this regard, the Company has scheduled a meeting with the Exchange to present its business plan going forward. However, in particular, because the Company's share price has been less than $1.00, there can be no assurance that the Company's plans will be acceptable to the Exchange.

FORBEARANCE, DEBT AMENDMENTS AND COVENANTS
Based on its third quarter 2001 results, the Company is not in compliance with the financial covenants related to its Senior Secured Loan Credit Facility (the senior facility), on which, as of November 14, 2001, the Company has outstanding borrowings of $196.2 million. However on November 13, 2001, the Company reached an agreement in principle with the lenders of this facility (the senior lenders) with respect to the financial covenant violations, pursuant to which the senior lenders agreed to forbear from the exercise of their default-related remedies against the Company until December 31, 2001 (unless an additional event of default occurs earlier). The Company expects to formally execute the forbearance agreement within the next few days. The forbearance agreement also reduced the commitment on the working capital revolver from $25.0 million to $13.4 million leaving the Company with $3.0 million of unused availability on the working capital revolver portion of the senior facility. The forbearance agreement also requires that the remaining $3.0 million be used only to pay the interest in respect of the senior facility due on November 15, 2001, and that the Company make semimonthly interest payments on the senior facility. The Company also anticipates that it will not be able to make the remaining $36.0 million of required special amortization payments to its senior lenders due December 31, 2001, and is working with its senior lenders to seek an acceptable resolution of these problems. There can be no assurance that the Company will be successful in such negotiations and there is no certainty as to what actions the senior lenders may take if the Company is unable to negotiate a resolution.
The Company anticipates that because of limited liquidity it will not be making the $12.3 million interest payment due January 15, 2002, to the holders of the Company's Senior Subordinated Notes. In addition, as a result of the events of noncompliance with respect to its Senior Secured Loan Facility, the Company's Senior Subordinated Notes and the CRESTS are also in noncompliance due to cross-default provisions in those agreements. The Company intends to attempt to negotiate a debt restructuring with both the holders of the Senior Subordinated Notes and the holders of the CRESTS. There can be no assurances that the Company will be successful in such negotiations and there is no certainty as to what actions the lenders may take if the Company is unable to negotiate a resolution.

2001 OUTLOOK UPDATE
Since the start of 2001, the Company has sold six hotel properties for gross proceeds of $76.4 million and used $65.5 million of these proceeds to reduce debt. Between January 1, 2000 and November 14, 2001, the Company sold 29 properties for gross proceeds of $285.2 million and used $216.6 million of these proceeds to reduce debt. Currently the Company is exploring the possibility of restructuring its outstanding debt. However, there can be no assurances that the Company can complete a restructuring nor can there be any assurances that, if completed, the restructuring will be on more favorable terms.
Amidst the challenges of the current economic environment and the specific challenges peculiar to the Company, particularly those adversely impacting the hospitality industry and the Company since the events of September 11, 2001, management considers the restructuring of its debt obligations to be critical if the Company is to have sufficient liquidity to fund its operating, capital expenditure and debt service obligations beyond December 31, 2001. If the Company is unsuccessful in obtaining waivers or amendments to cure existing or probable future events of noncompliance with its debt covenants and is unsuccessful in achieving a restructuring of its current debt obligations on terms sufficient to provide the Company with the liquidity necessary to fund its operating capital expenditure and debt service obligations, the auditors' report on financial statements for the year ending December 31, 2001, will likely contain a modification as to the Company's ability to continue as a going concern. As a result of the Company's noncompliance with the financial covenants related to its Senior Secured Loan Credit Facility, the Company's uncertainty regarding its future operating results and liquidity and the probable associated implications for its debt obligations, the Company has classified all of its outstanding debt and the CRESTS as current liabilities.

MANAGEMENT CHANGES
On October 12, 2001, Thomas Gryboski, the Company's Vice President of Legal Affairs and Secretary resigned to pursue other opportunities. The resignation takes effect on November 15, 2001.
On November 13, 2001, Richard Cartoon was appointed Executive Vice President and Chief Financial Officer, Michael Amaral was appointed Senior Vice President of Operations and Daniel Ellis was appointed Vice President of Legal Affairs and Secretary.

ABOUT LODGIAN
Lodgian, Inc. owns or manages a portfolio of 106 hotels with approximately 19,893 rooms in 32 states and Canada. The hotels are primarily full service, providing food and beverage service, as well as meeting facilities. Substantially all of Lodgian's hotels are affiliated with nationally recognized hospitality brands such as Marriott, Holiday Inn, Crowne Plaza, Radisson and Hilton. Lodgian's common shares are listed on the New York Stock Exchange under the symbol LOD.

FORWARD-LOOKING STATEMENTS
Note: Statements in this press release that are not strictly historical are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward- looking statements involve known and unknown risks, which may cause the Company's actual results in the future to differ materially from expected results. These risks include, among others; the effect of competition and the economy on the Company's ability to maintain margins on existing operations and to generate sufficient cash flows from operations; the impact of threatened or pending litigation and/or governmental regulation; the Company's ability to reduce overall Company debt and meet its principal amortization requirements; the Company's ability to restructure certain existing debt obligations; the Company's ability to obtain additional capital, if needed, and the possible additional or continuing default under credit facilities if cash flows are lower than expected or capital expenditures are greater than expected; the potential for additional impairment charges against earnings related to long-lived assets; the impact of increased expenses due to layoffs of employees; and the effectiveness of changes in management and the ability of the Company to retain qualified individuals to serve in senior management positions, as described in the Company's filings with the Securities and Exchange Commission.

FOR MORE INFORMATION ON LODGIAN
VISIT LODGIAN AT WWW.LODGIAN.COM

Financial Tables to Follow

LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, DECEMBER 31,
2001 2000
(UNAUDITED)
(IN THOUSANDS,
EXCEPT SHARE DATA)
ASSETS
Current assets:
Cash and cash equivalents $5,625 $21,002
Cash, restricted 2,996 2,237
Accounts receivable, net of allowances 17,598 20,624
Inventories 7,268 7,805
Prepaid expenses and other
current assets 9,123 9,261
42,610 60,929
Property and equipment, net 992,231 1,059,048
14,422 14,005
Other assets, net 23,969 29,965
$1,073,232 $1,163,947

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $18,658 $25,088
Accrued interest 8,782 16,795
Other accrued liabilities 34,456 37,203
Advance deposits 2,062 1,854
Current portion of long-term
obligations 701,358 79,843
Minority interests – preferred
redeemable securities
(including related accrued interest) 194,198 —
Total current liabilities 959,514 160,783
Long-term obligations, less current portion — 674,038
Deferred income taxes 3,603 3,603
Minority interests:
Preferred redeemable securities
(including related accrued
interest) — 184,349
Other 5,547 4,294
Total liabilities 968,664 1,027,067
Commitments and contingencies — —
Stockholders' equity:
Common stock, $.01 par value,
75,000,000 shares authorized;
28,479,837 and 28,139,481 issued
at September 30, 2001 and
December 31, 2000, respectively;
28,479,837 and 28,290,424 shares
outstanding at September 30,
2001 and December 31, 2000,
respectively 284 282
Additional paid-in capital 263,687 263,320
Accumulated deficit (157,533) (125,542)
Accumulated other comprehensive loss (1,870) (1,180)
Total stockholders' equity 104,568 136,880
$1,073,232 $1,163,947

LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Revenues:
Rooms $85,161 $117,425 $261,116 $334,643
Food and beverage 21,777 30,772 74,778 98,721
Other 4,436 7,007 16,150 21,262
111,374 155,204 352,044 454,626

Operating expenses:
Direct:
Rooms 23,227 32,827 71,604 93,326
Food and beverage 16,886 23,719 55,041 72,402
Other 2,932 4,225 9,281 13,142
General, administrative and other 47,554 56,178 148,716 168,037
Depreciation and amortization 14,471 16,908 44,619 49,348
Impairment of long-lived assets 2,270 (10,712) 6,835 55,450
Severance and restructuring
expenses 624 — 2,091 1,502
Total operating expenses 107,964 123,145 338,187 453,207
3,410 32,059 13,857 1,419

Other income (expenses):
Interest income and other 158 467 638 1,200
Interest expense (18,464) (24,596) (57,833) (74,426)
Interest hedge break fee — (4,294) — (4,294)
Gain (loss) on asset
dispositions 97 (21) 24,206 (24)
Minority interests:
Preferred redeemable securities (3,340) (3,063) (9,849) (9,190)
Other (65) 250 (181) (293)
(Loss) income before income taxes (18,204) 802 (29,162) (85,608)
(Provision) benefit for income
taxes (129) (275) (2,829) 29,105
Net (loss) income $(18,333) $527 $(31,991) $(56,503)

(Loss) earnings per common share –
basic and diluted $(0.64) $0.02 $(1.12) $(2.01)

LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED
SEPTEMBER 30,
2001 2000
(IN THOUSANDS)
(UNAUDITED)
Operating activities:
Net loss $(31,991) $(56,503)
Adjustments to reconcile net loss
to net cash
(used in) provided by operating
activities:
Depreciation and amortization 44,619 49,348
(Gain) loss on sale of assets (24,206) 24
Deferred income tax benefit — (29,105)
Minority interests 10,030 9,483
Impairment of long-lived assets 6,835 55,450
401 (k) plan contributions 369 376
Amortization of deferred loan fees 4,620 3,460
Other (171) (3,404)
Changes in operating assets and
liabilities:
Accounts receivable 3,026 (1,307)
Inventories 537 1,035
Prepaid expenses and other assets (621) (1,502)
Accounts payable (7,283) (3,834)
Accrued liabilities (10,760) (4,635)
Advance deposits 208 (278)
Net cash (used in) provided by
operating activities (4,788) 18,608
Investing activities:
Capital improvements, net (21,528) (72,044)
Proceeds from sale of assets, net 64,590 164,455
Net deposits for capital expenditures (417) (2,970)
Net cash provided by investing activities 42,645 89,441
Financing activities:
Proceeds from borrowings on working
capital revolver 16,000 30,000
Proceeds from issuance of long-term
obligations — 2,326
Principal payments on long-term
obligations (53,669) (131,520)
Principal payments on working
capital revolver (15,000) (5,000)
Payments of deferred loan costs (565) (3,300)
Distributions to minority interests — (683)
Net cash used in financing activities (53,234) (108,177)
Net decrease in cash and cash equivalents (15,377) (128)
Cash and cash equivalents at
beginning of period 21,002 14,644
Cash and cash equivalents at end of period $5,625 $14,516

Supplemental cash flow information:
Cash paid during the period for:
Interest, net of amount capitalized $61,226 $71,767
Income taxes, net of refunds $103 $584