JAMS Jameson Inns

Jameson Inns, Inc. Reports First Quarter 2005 Results - RevPAR Increases 5.3% systemwide ATLANTA, May 12 /PRNewswire-FirstCall/ -- Jameson Inns, Inc. (NASDAQ:JAMS), owner and operator of Jameson Inn and Signature Inn hotels, today announced financial results for the quarter ended March 31, 2005. Operating Results - Despite having 2.8% fewer available room nights, lodging revenue fell less than 1.6%, from $18.8 million to $18.5 million. There were fewer available room nights because first quarter 2004 was one day longer due to leap year; and in 2004 the company sold four hotels to franchisees. - The combination of a robust increase in ADR (up 6.8%) and relatively flat occupancy (down 1/2 point) drove a dramatic boost in RevPAR of $1.50, or 5.3%. "Our overall RevPAR improvement is an accurate reflection of our recent initiatives to execute an across-the-board price increase while not impacting occupancy," said Thomas W. Kitchin, Chairman and Chief Executive Officer of Jameson Inns, Inc. "A view inside the numbers reflects an even healthier improvement. For instance, there was a significant occupancy decline when we closed our lobby during renovations at three Signature Inns. If you remove the results from just those three hotels, our systemwide RevPAR increased by over $2.00 or 7.4%. That is a very dramatic improvement." - The Jameson Inn occupancy rate increased to 53.0% in first quarter 2005 from 52.5% in 2004. ADR for the Jameson Inn brand increased 8.3% in first quarter 2005 as compared to first quarter 2004. This combination drove a RevPAR increase of 9.2% for the brand. - The Signature Inn occupancy rate decreased to 29.9% in first quarter 2005 from 33.6% in first quarter 2004. ADR for the Signature Inn brand increased slightly to $64.57 in first quarter 2005 from $64.23 in first quarter 2004. RevPAR at Signature Inns decreased by 10.6%. "We remain very confident in our strategy to sell eight Signature Inns and convert the remaining to Jameson Inns," said Kitchin. "While it's too early to gauge the impact each renovation will have on operation results, the falling occupancies suggest that guests will take their business elsewhere if we don't improve the physical property." - The company's commitment to guest satisfaction continues to be validated by Market Metrix, LLC, the leading provider of market research services for the hospitality industry. After winning the #1 ranking in both 2003 and 2004, Jameson Inn was named the leading economy sector hotel in the just released Q1 2005 survey results. "It's important to note that, while we lead the economy sector, our guest satisfaction scores are actually ahead of all our major competitors, whether they're ranked in the economy or mid-scale sector. This provides further proof that our "Perfect Stay" guarantee continues to resonate with our customer base," said Thomas Kitchin. Operating Statistics Room Nights Average Daily Available Occupancy Rate Rate Brand 2005 2004 2005 2004 2005 2004 Jameson Inns (1) 461,700 477,778 53.0% 52.5% $62.80 $58.00 Signature Inns 152,100 153,699 29.9% 33.6% 64.57 64.23 Combined Brands (1) 613,800 631,477 47.2% 47.9% $63.08 $59.06 Inns under renovation (1) (2) 32,580 32,942 31.2% 43.8% $67.02 $68.21 Signature Inns (less Inns under renovation) (1) 119,520 120,757 29.5% 30.8% $63.92 $62.67 Combined Brands (less Inns under renovation) (1) 581,220 598,535 48.1% 48.2% $62.94 $58.60 Discontinued Operations 83,880 93,821 30.5% 30.1% $53.94 $54.10 RevPAR RevPAR Brand 2005 2004 Growth Jameson Inns (1) $33.26 $30.47 +9.2% Signature Inns 19.29 21.57 -10.6% Combined Brands (1) $29.80 $28.30 +5.3% Inns under renovation (1) (2) $20.89 $29.91 -30.2% Signature Inns (less Inns under renovation) (1) $18.86 $19.30 -2.3% Combined Brands (less Inns under renovation) (1) $30.30 $28.22 +7.4% Discontinued Operations $16.45 $16.26 -1.2% (1) Brand statistics reflect only hotels in continuing operations. At March 31, 2005 there are eight Signature Inns being held for sale and classified as discontinued operations. (2) The Signature Inn in Knoxville, Tennessee and the two Signature Inns in Louisville, Kentucky were under renovation during the first quarter of 2005. The properties began operating as Jameson Inns on April 1. Financial Results The Company reported a net loss attributable to common stockholders of $1.8 million in first quarter 2005, compared to a net loss of $8.1 million in first quarter 2004. The decrease in the loss was primarily due to a one time lease termination expense in 2004 of approximately $9.0 million as a result of the acquisition of Kitchin Hospitality, LLC, partially offset by income tax benefit of approximately $1.4 million to establish initial deferred tax asset as a result of the change in taxable status in 2004, and by the elimination of the preferred dividends of approximately $1.7 million paid in first quarter 2004 due to the redemption of the preferred stock in August 2004. Reconciliation of Net Loss to EBITDA The Company considers EBITDA to be an indicator of operating performance because it can be used to measure its ability to service debt, fund capital expenditures and expand its business. EBITDA is defined as income before interest expense, income tax expense, preferred stock dividends, depreciation and amortization and certain non-recurring items. The lease termination costs incurred in 2004 are considered "non-recurring" under relevant SEC guidelines. This information should not be considered as an alternative to any measure of performance as promulgated under U.S. generally accepted accounting principles (GAAP), nor should it be considered as an indicator of the Company's overall financial performance. The Company's calculation of EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited. Three Months Ended March 31, Three Months Ended March 31, 2005 2004 (dollars in thousands) (dollars in thousands) Continu- Discon- Continu- Discon- As ing tinued As ing tinued Reported Opera- Opera- Reported Opera- Opera- tions tions tions tions Net loss attributable to common stockholders $(1,825) $(1,512) $(313) $(8,079) $(7,784) $(295) Depreciation 3,109 3,109 - 3,763 3,478 285 Lease termination costs - - - 8,954 8,954 - Interest expense 3,086 2,792 294 2,994 2,664 330 Income tax benefit - - - (3,605) (3,560) (45) Preferred dividends - - - 1,667 1,667 - EBITDA $4,370 $4,389 $(19) $5,694 $5,419 $275 The items listed below have not been included as adjustments in the above calculation of EBITDA: Gain on sale of property and equipment $- $- $- $(310) $(57) $(253) Early extinguishment of mortgage notes - - - 9 9 - Stock based compensation expense 215 215 - 91 91 - $215 $215 $- $(210) $43 $(253) The Company uses EBITDA to measure the financial performance of its operations because it excludes interest, preferred dividends, income taxes, and depreciation, which bear little or no relationship to operating performance. EBITDA from continuing operations also excludes those items which relate to net loss from discontinued operations. By excluding interest expense and preferred dividends, EBITDA measures financial performance irrespective of the Company's capital structure or how it finances its hotel properties and operations. By excluding income taxes, the Company believes EBITDA provides a basis for measuring the financial performance of its operations excluding factors that its hotels cannot control. By excluding depreciation expense, which can vary from hotel to hotel based on historical cost and other factors unrelated to the hotels' financial performance, EBITDA measures the financial performance of its operations without regard to their historical cost. For all of these reasons, the Company believes that EBITDA and EBITDA from continuing operations provide information that is relevant and useful in evaluating its business. However, because EBITDA excludes depreciation, it does not measure the capital required to maintain or preserve its fixed assets. In addition, because EBITDA does not reflect interest expense and preferred dividends, it does not take into account the total amount of interest paid on outstanding debt and preferred dividends nor does it show trends in interest costs due to changes in borrowings or changes in interest rates. EBITDA, as defined by the Company, may not be comparable to EBITDA as reported by other companies that do not define EBITDA exactly as the Company defines the term. Because the Company uses EBITDA to evaluate its financial performance, the Company reconciles it to net loss (and in the case of EBITDA from continuing operations, to net loss from continuing operations), which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net loss determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity. Signature Refurbishment and Conversion Update During the fourth quarter of 2004, the Company began the project of refurbishment and converting certain Signature Inns to Jameson Inns, beginning with the three properties in the Southeast with the closest proximity to Jameson Inns. The conversion in Knoxville, Tennessee and the two in Louisville, Kentucky are complete and began operating as Jameson Inns on April 1, 2005. The Company has begun the next two renovations and conversion projects in Elkhart and South Bend, Indiana. These projects should be completed in the early fall of 2005. "These recently converted Jameson Inns are, without a doubt, the three nicest properties we own. The improvement in these assets, along with the comments we have received from employees and customers gives us a high degree of confidence that the investment we have made in these properties will pay off," stated Thomas Kitchin. Private Trust Preferred Securities Offering On March 15, 2005, the Company completed a private offering of approximately $26.3 million trust preferred securities through Jameson Inns Financing Trust I, a Delaware statutory business trust sponsored by the Company. The Notes have a fixed rate equal to 8.5% per annum through the interest payment date on March 30, 2010, and thereafter for the balance of the thirty year term a variable rate equal to LIBOR plus 4.2 percentage points per annum, with interest payable quarterly beginning June 30, 2005. The proceeds from the private offering, net of transition costs were approximately $25.5 million. The Company used the proceeds from the Junior Subordinated Notes to retire existing debt and for general corporate purposes. "The trust preferred offering is an important financing for us. Most of the proceeds were used to pay down other mortgage indebtedness. The rest will be available for general corporate purposes, mainly in providing us more leverage in negotiation the refinancing terms of maturing loans," stated Craig Kitchin, President and Chief Financial Officer of Jameson Inns, Inc. Inns At March 31, 2005, the Company owned and operated 113 Inns, of which 90 are Jameson Inns, located predominantly in the southeastern United States and 23 are Signature Inns, located predominantly in the mid-western United States. The Company licenses the use of the Jameson Inn brand to the owners of 12 other Jameson Inns. The Company's 113 owned and 12 franchised Inns are located in the following fourteen states: Combined Jameson Inns Signature Inns Percentage of Total State Hotels Rooms Hotels Rooms Hotels Rooms Rooms Georgia 31 1,598 -- -- 31 1,598 19.4 % Indiana -- -- 14 1,520 14 1,520 18.5 % Alabama 18 960 -- -- 18 960 11.7 % Tennessee 11 658 1 124 12 782 9.5 % N. Carolina 14 677 -- -- 14 677 8.2 % S. Carolina 10 575 -- -- 10 575 7.0 % Florida 6 390 -- -- 6 390 4.7 % Illinois -- -- 3 371 3 371 4.5 % Mississippi 6 349 -- -- 6 349 4.2 % Kentucky 1 67 2 238 3 305 3.7 % Ohio -- -- 2 250 2 250 3.1 % Louisiana 3 213 -- -- 3 213 2.6 % Virginia 2 122 -- -- 2 122 1.5 % Iowa -- -- 1 119 1 119 1.4 % Total 102 5,609 23 2,622 125 8,231 100.0 % April Update Occupancy for all our continuing operations hotels in April 2005 was 57.3% versus 54.4% in April 2004. The ADR for these hotels was $64.44 for the month compared to $60.95 in the same period last year. Consequently, RevPAR was $36.91, up 11.3% over RevPAR of $33.17 in the same period last year. The three converted hotels began operating as Jameson Inns on April 1 of this year. Collectively, their occupancy in April 2005 was up 5.3 points at 49.1% versus 43.8%. ADR for these three hotels was down 10% at $65.72 versus $72.98. Consequently, RevPAR was only up less than 1% at $32.24 versus $31.99. ADR for these hotels was higher in April 2004 due to the higher room rates associated with the Kentucky Derby. This year the Kentucky Derby had a bigger impact on May's RevPAR. From April 1 through May 11, 2005 RevPAR for the three converted hotels is up 10.2%. These three hotels were classified as Inns under renovation in the first quarter of this year. Earnings Conference Call As previously announced, the Company's first quarter earnings conference call is scheduled for 11:00 am EDT, May 13, 2005. A simultaneous webcast of the conference call is available by accessing the Investor Relations section of the Company's website at http://www.jamesoninns.com/ . To listen to the call, dial 877-462-0700 (domestic) or 706-679-3971 (international) and ask for the Jameson Inns, Inc. first quarter earnings conference call hosted by Mr. Tom Kitchin. A replay of the conference call will be available for thirty days following the call on http://www.jamesoninns.com/ and by telephone until May 20, 2005 by calling 800-642-1687 (domestic) or 706-645-9291 (international) and requesting conference ID 6110939. For reservations or more information about Jameson Inns, Inc., visit the Company's website at http://www.jamesoninns.com/ . Forward-Looking Statements Certain matters discussed in this press release may constitute "forward- looking statements" within the meaning of federal securities regulations. All forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking statements. General economic conditions, competition, and governmental actions will affect future transactions, results, performance, and achievements. These risks are presented in detail in the Company's filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the Company's expectations will be attained or that any deviations will not be material. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. Condensed Consolidated Balance Sheets March 31, 2005 December 31, (unaudited) 2004 Assets Current Assets: Cash and cash equivalents $8,652,930 $1,626,322 Restricted cash 7,401,876 1,745,171 Trade accounts receivable, net of allowance of $71,344 and $124,504 at March 2005 and December 2004, respectively. 1,930,268 1,442,912 Other receivables 180,214 206,706 Prepaid expenses 835,619 554,105 Inventory 1,345,261 1,345,261 Total current assets 20,346,168 6,920,477 Operating property and equipment 352,474,495 350,763,365 Property and equipment held for sale 16,789,350 16,754,836 Less accumulated depreciation (94,312,817) (91,160,887) 274,951,028 276,357,314 Deferred finance costs, net 2,521,967 1,881,995 Other assets 974,152 976,554 Investment in Jameson Inns Financing Trust I 812,000 - Total assets $299,605,315 $286,136,340 Liabilities and Stockholders' Equity Current Liabilities: Current maturities of mortgage notes payable $44,366,084 $49,991,739 Line of credit borrowings 2,000 110,216 Accounts payable and accrued expenses 3,982,822 4,582,803 Accrued interest payable 966,781 830,368 Accrued property and other taxes 2,421,955 2,165,734 Accrued payroll 1,015,919 1,150,571 Total current liabilities 52,755,561 58,831,431 Mortgage notes payable, less current portion 141,830,126 147,737,940 Notes due Jameson Inns Financing Trust I 27,062,000 - Total liabilities 221,647,687 206,569,371 Stockholders' Equity Common stock, $0.10 par value, 100,000,000 shares authorized, 57,116,390 shares and 57,052,630 shares issued and outstanding at March 2005 and December 2004, respectively 5,711,639 5,705,263 Contributed capital 110,484,993 110,375,931 Unamortized deferred compensation (1,719,400) (1,819,158) Accumulated deficit (36,519,604) (34,695,067) Total stockholders' equity 77,957,628 79,566,969 Total liabilities and equity $299,605,315 $286,136,340 Condensed Consolidated Statements of Operations (unaudited) Three Months Ended March 31, (unaudited) 2005 2004 Lodging revenues $18,521,931 $18,798,349 Other revenues 120,066 94,562 Total revenues 18,641,997 18,892,911 Direct lodging expenses 10,499,599 10,562,110 Property and other taxes and insurance 1,412,112 1,293,439 Depreciation 3,108,770 3,478,380 Corporate general and administrative 2,341,769 1,665,597 Total expenses 17,362,250 16,999,526 Income from operations 1,279,747 1,893,385 Interest expense 2,791,572 2,664,425 Early extinguishment of mortgage notes - 9,419 Lease termination costs - 8,954,361 Gain on sale of property and equipment - (57,532) Loss before income taxes and discontinued operations (1,511,825) (9,677,288) Deferred tax benefit due to change in taxable status - (1,397,672) Income tax benefit - (2,162,271) Net loss from continuing operations (1,511,825) (6,117,345) Loss from discontinued operations (312,712) (592,492) Gain on sale of discontinued operations - 252,547 Income tax benefit - (45,318) Net loss from discontinued operations (312,712) (294,627) Net loss (1,824,537) (6,411,972) Preferred stock dividends - 1,667,190 Net loss attributable to common stockholders $(1,824,537) $(8,079,162) Per common share (basic and diluted): Loss from continuing operations attributable to common stockholders $(0.03) $(0.58) Loss from discontinued operations - (0.02) Net loss attributable to common stockholders $(0.03) $(0.60) Weighted average shares - basic and diluted 56,544,656 13,496,313 Consolidated Statements of Cash Flows Three Months Ended March 31, (unaudited) 2005 2004 Operating activities Loss from continuing operations $(1,511,825) $(6,117,345) Adjustments to reconcile loss from continuing operations to net cash provided by operating activities: Depreciation 3,108,770 3,478,380 Amortization of deferred finance costs 163,364 203,213 Stock-based compensation expense 214,706 91,472 Early extinguishment of mortgage notes - 9,419 Lease termination costs - non cash - 9,215,220 Gain on sale of property and equipment - (57,532) Deferred income tax benefit - (3,648,091) Changes in assets and liabilities increasing (decreasing) cash: Trade accounts receivable, net (487,356) (369,228) Other receivables 26,492 (17,169) Prepaid expenses and other assets (279,112) (724,688) Inventory - 36,834 Accounts payable and accrued expenses (599,981) (523,389) Accrued interest payable 180,113 (48,489) Accrued property and other taxes 256,221 134,848 Accrued payroll (134,652) 427,644 Net cash provided by operating activities 936,740 2,091,099 Investing activities Reductions from restricted cash FF&E reserves 369,042 479,704 Proceeds from sale of land, property and equipment - 4,621,471 Additions to property and equipment (1,667,970) (596,866) Net cash (used in) provided by investing activities (1,298,928) 4,504,309 Financing activities Preferred stock dividends paid - (1,667,183) Proceeds from issuance of common stock 490 3,530 Proceeds from trust preferred securities offering, net of deferred finance costs 25,465,500 - Deposits to pay off mortgage notes (6,025,747) - (Payments of) proceeds from lines of credit, net (108,216) 1,500,000 Payments of deferred finance costs (73,036) (27,159) Payoffs of mortgage notes payable (9,161,045) (4,499,592) Payments on mortgage notes payable (2,416,124) (2,555,595) Net cash provided by (used in) financing activities 7,681,822 (7,245,999) Net cash provided by (used in) continuing operations 7,319,634 (650,591) Net cash used in discontinued operations (293,026) (209,383) Net change in cash 7,026,608 (859,974) Cash at beginning of period 1,626,322 3,549,083 Cash at end of period $8,652,930 $2,689,109 DATASOURCE: Jameson Inns, Inc. CONTACT: Investor Relations, Todd Atenhan, , or Valerie Kimball, , both of EPOCH Financial, +1-888-917-5109 Web site: http://www.jamesoninns.com/

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