JAMS Jameson Inns

- Jameson Inn Brand RevPAR Up 11.4% Resulting from Record Occupancy Growth ATLANTA, Nov. 8 /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 September 30, 2005. Third Quarter Results For the quarter ended September 30, 2005, total revenue was $24.8 million, net income totaled $1.7 million or $0.03 per common share, and EBITDA was $8.7 million. - Lodging revenues grew by approximately $1.6 million or 7.1% to $24.6 million in third quarter 2005 from $22.9 million in the same period in 2004. Combined brands RevPAR increased 8.8%. Along with an increase in ADR of $2.11 or 3.4%, occupancy rose by a full three percentage points, to 60.2%. - The Jameson Inn brand occupancy rate increased to 64.1% in third quarter 2005 from 59.7% in the same period in 2004, while ADR increased 3.8% in third quarter 2005 as compared to the same period in 2004. This combination drove RevPAR to $40.80, $4.16 or 11.4% higher than the same period in 2004. "Last quarter our Jameson Inn brand occupancy rate grew by 3.0 percentage points, our largest quarterly gain ever. This quarter occupancy grew 4.4 percentage points. Clearly our business continues to get stronger," said Thomas W. Kitchin, Chairman and Chief Executive Officer of Jameson Inns, Inc. "This was our fifth quarter in a row of better than 7.0% RevPAR growth for our Jameson Inn brand." - ADR for the Signature Inn brand increased to $69.20 in third quarter 2005 from $66.13 in the same period in 2004, while the occupancy rate fell to 44.1% from 49.5%, which resulted in a RevPAR decrease of 6.8%. "The Signature Inn brand performance in the third quarter 2005 was adversely impacted by the South Bend and Elkhart, Indiana renovation and conversion projects," said Kitchin. "RevPAR for these two properties was down 29.5% for the quarter. Excluding these two Inns, the remaining Signature Inns to be converted had RevPAR growth of 3.2% for the quarter." Nine-Month Results Net income attributable to common stockholders was approximately $2.3 million, or $0.04 per share in the nine months ended September 30, 2005, compared to a net loss of approximately $26.4 million, or $(1.10) per share in the same period of 2004. The net change 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 an 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, by the elimination of the preferred dividends of approximately $4.4 million and a loss on redemption of the preferred stock of approximately $16.0 million. - Despite having approximately 1.6% fewer rooms available to rent, lodging revenues rose 4.1% to $66.5 million during the first nine months of 2005, compared to $63.9 million in the same period in 2004. - During the first nine months of 2005, the occupancy rate for the Jameson Inn brand increased to 59.9% from 57.2%. ADR for the Jameson Inn brand increased 6.0% for the nine months ended September 30, 2005 as compared to the same period of 2004. This combination resulted in a RevPAR increase of 11.1% for the Jameson Inn brand. - During the first nine months of 2005, ADR for the Signature Inn brand increased 2.0%, while occupancy decreased to 38.3% from 42.4%. This combination resulted in a RevPAR decrease of 7.9% for the Signature Inn brand. Fourth Quarter Update - Combined Brands For the first 38 days of the 4th quarter 2005, occupancy for continuing operations hotels was 59.9% versus 53.2% in the same period in 2004. The ADR for these hotels was $66.50 compared to $64.70 in the same period in 2004. Consequently, RevPAR was $39.80, up 15.8% over RevPAR of $34.40 in the same period in 2004. For the Jameson Inn brand, RevPAR was up 18.1% during this period. RevPAR for the five hotels converted to Jameson Inns was up 14.6% during this period. For the South Bend and Elkhart, Indiana properties, which were officially converted on October 1, 2005, RevPAR for the first 38 days after the conversion was up 18.4%. During the 3rd quarter 2005, when these two hotels were still under renovation and conversion, RevPAR was down 29.5%. Hotels under Renovation and Conversion The Company continues to execute a strategy of selling certain Signature Inn hotels and converting the remaining Signature Inns to our more recognizable and better performing Jameson Inn brand. The conversions are accompanied by a significant renovation and upgrade to the physical property. "The operating results at our converted hotels are very positive," said Kitchin. "Both the occupancy gain and improved lodging revenues make us very optimistic about our conversion strategy." In the nine months ended September 30, 2005, the Company completed the renovation and conversion of three Signature Inns to the Jameson Inn brand, and substantially completed the renovation and conversion of two others. Additionally, work has already begun to convert four additional Signature Inns to the Jameson Inn brand. These projects should be completed in the early spring of 2006. The Company invested approximately $6.3 million in the third quarter of 2005 and approximately $11.1 million in the nine months ended of 2005 for its capital refurbishment, renovation and conversion projects. The total expected capital expenditures for 2005 are $19.0 million. Discontinued Operations During the third quarter of 2005, the Company sold one Signature Inn located in Indianapolis, Indiana for approximately $2.3 million resulting in a net gain of approximately $48,000. In October 2005, the Company decided to remove the Signature Inns in Evansville, Indiana and Springfield, Illinois from the held for sale category, and plans to convert them to the Jameson Inn brand. The local markets in which these two Inns are located are performing well relative to the prior years. During the nine months ended 2005, RevPAR increased 22.9% and 14.5% for the Evansville, Indiana and Springfield, Illinois Inns, respectively. Effective October 1, 2005, these two Inns are no longer included in discontinued operations for financial reporting purposes. Convertible Notes On September 30, 2005, the Company issued an aggregate of $35.0 million of 7.0% Convertible Senior Subordinated Notes due 2010 (the "Convertible Notes") in a private placement. The Convertible Notes have a maturity date of September 30, 2010. Interest is payable semi-annually on June 30 and December 31, commencing December 31, 2005. The Convertible Notes are convertible at the option of the holder at any time prior to maturity into shares of the Company's common stock, initially at the conversion price of $2.77 per share. The Company used the proceeds from the sale of the Convertible Notes to repay floating rate mortgage notes totaling approximately $32.1 million that were maturing over the next twelve months. As a result, the current maturities of mortgage notes payable as of September 30, 2005 totaled approximately $4.9 million, which represents the principal amortization of long term debt over the next twelve months. "This was an important financing for us as we continue to improve our balance sheet and meet our goals of fixing interest rate exposure and extending debt maturities," said Craig R. Kitchin, President and Chief Financial Officer of Jameson Inns, Inc. "Today we have no loans maturing in the next twelve months compared to approximately $54.2 million of current maturities at the end of last quarter. Furthermore, over half of our total outstanding debt has been fixed, compared to nearly all of our debt being subject to variable interest rates a year ago. We also improved our free cash flow by significantly reducing required principal amortization payments to approximately $4.9 million from $11.3 million a year ago, allowing for an effective redeployment of capital." Inns At September 30, 2005, the Company owned and operated 109 Inns, of which 93 are Jameson Inns, located predominantly in the southeastern United States, and 16 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 109 owned and 12 franchised Inns are located in the following thirteen states: Combined Brands Percentage Jameson Inns Signature Inns of Total State Hotels Rooms Hotels Rooms Hotels Rooms Rooms Georgia 31 1,598 -- -- 31 1,598 20.5 % Indiana -- -- 12 1,342 12 1,342 17.2 % Alabama 18 960 -- -- 18 960 12.3 % Tennessee 12 781 -- -- 12 781 10.0 % N. Carolina 14 677 -- -- 14 677 8.7 % S. Carolina 10 577 -- -- 10 577 7.4 % Florida 6 390 -- -- 6 390 5.0 % Illinois -- -- 3 371 3 371 4.7 % Mississippi 6 349 -- -- 6 349 4.5 % Kentucky 3 305 -- -- 3 305 3.9 % Louisiana 3 213 -- -- 3 213 2.7 % Ohio -- -- 1 125 1 125 1.6 % Virginia 2 122 -- -- 2 122 1.5 % Total 105 5,972 16 1,838 121 7,810 100.0 % Earnings Conference Call As previously announced, the Company's third quarter earnings conference call is scheduled for 11:00 am EST, November 9, 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. third 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 for thirty days by calling 800-642-1687 (domestic) or 706-645-9291 (international) and requesting conference ID 2031223. For more information about Jameson Inns, Inc., visit the Company's website at http://www.jamesoninns.com/. Operating Statistics Three Months Ended September 30, Room Nights Available Occupancy Rate 2005 2004 2005 2004 Jameson Inns (1) 505,356 477,243 64.1 % 59.7 % Signature Inns (1) 122,054 155,388 44.1 % 49.5 % Combined Brands (1) 627,410 632,631 60.2 % 57.2 % Discontinued Operations 51,245 89,172 47.5 % 43.8 % Three Months Ended September 30, Average Daily Rate RevPAR RevPAR 2005 2004 2005 2004 Change Jameson Inns (1) $63.69 $61.34 $40.80 $36.64 11.4 % Signature Inns (1) $69.20 $66.13 $30.49 $32.72 (6.8)% Combined Brands (1) $64.47 $62.36 $38.80 $35.67 8.8 % Discontinued Operations $57.17 $56.83 $27.14 $24.89 9.0 % Nine Months Ended September 30, Room Nights Available Occupancy Rate 2005 2004 2005 2004 Jameson Inns (1) 1,466,889 1,428,585 59.9 % 57.2 % Signature Inns (1) 395,002 462,786 38.3 % 42.4 % Combined Brands (1) 1,861,891 1,891,371 55.3 % 53.6 % Discontinued Operations 212,044 271,354 40.1 % 37.7 % Nine Months Ended September 30, Average Daily Rate RevPAR RevPAR 2005 2004 2005 2004 Change Jameson Inns (1) $63.26 $59.69 $37.91 $34.11 11.1 % Signature Inns (1) $67.39 $66.06 $25.81 $28.03 (7.9)% Combined Brands (1) $63.86 $60.93 $35.34 $32.62 8.3 % Discontinued Operations $56.06 $56.26 $22.50 $21.19 6.2 % Three Months Ended September 30, Room Nights Occupancy Available Rate 2005 2004 2005 2004 Converted Inns (2) 33,212 33,304 59.7 % 55.0 % Inns under renovation and conversion (3) 22,694 22,816 35.0 % 52.4 % Three Months Ended September 30, Average Daily Rate RevPAR RevPAR 2005 2004 2005 2004 Change Converted Inns (2) $65.70 $65.95 $39.22 $36.28 8.1 % Inns under renovation and conversion (3) $75.22 $71.21 $26.33 $37.32 (29.5)% (1) Brand statistics reflect only owned hotels included in continuing operations. At September 30, 2005 there are four 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 converted and began operating as Jameson Inns on April 1, 2005. (3) The operating performance of the Signature Inns in South Bend and Elkhart, Indiana was negatively impacted by the ongoing renovation activity during the third quarter of 2005. These Inns began operating as Jameson Inns on October 1, 2005. Condensed Consolidated Balance Sheets September 30, 2005 December 31, (unaudited) 2004 Assets Current Assets: Cash and cash equivalents $5,382,655 $1,626,322 Restricted cash 600,999 1,745,171 Trade accounts receivable, net of allowance of $110,909 and $124,504 at September 30, 2005 and December 31, 2004, respectively 2,771,256 1,442,912 Other receivables 635,007 206,706 Prepaid expenses 783,360 554,105 Inventory 1,258,636 1,345,261 Total current assets 11,431,913 6,920,477 Operating property and equipment 353,945,948 350,763,365 Property and equipment held for sale 9,152,484 16,754,836 Less accumulated depreciation (93,142,333) (91,160,887) 269,956,099 276,357,314 Deferred finance costs, net 5,130,111 1,881,995 Other assets 664,756 976,554 Investment in Jameson Inns Financing Trust I 812,000 - Total assets $287,994,879 $286,136,340 Liabilities and Stockholders' Equity Current Liabilities: Current maturities of mortgage notes payable $4,880,620 $49,991,739 Line of credit borrowings 1,921 110,216 Accounts payable and accrued expenses 5,928,939 4,582,803 Accrued interest payable 735,391 830,368 Accrued property and other taxes 3,015,645 2,165,734 Accrued payroll 912,119 1,150,571 Total current liabilities 15,474,635 58,831,431 Mortgage notes payable, less current portion 128,314,330 147,737,940 Trust preferred notes 27,062,000 - Convertible notes 35,000,000 - Total liabilities 205,850,965 206,569,371 Stockholders' Equity Common stock, $0.10 par value, 100,000,000 shares authorized, 57,436,350 shares and 57,052,630 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively 5,743,635 5,705,263 Contributed capital 110,555,560 110,375,931 Unamortized deferred compensation (1,764,221) (1,819,158) Accumulated deficit (32,391,060) (34,695,067) Total stockholders' equity 82,143,914 79,566,969 Total liabilities and stockholders' equity $287,994,879 $286,136,340 Condensed Consolidated Statements of Operations (unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Lodging revenues $24,560,566 $22,941,787 $66,514,423 $63,876,382 Other revenues 198,251 130,765 490,690 333,469 Total revenues 24,758,817 23,072,552 67,005,113 64,209,851 Direct lodging expenses 12,791,045 11,800,074 34,968,523 33,698,697 Property and other taxes and insurance 1,108,535 1,291,951 3,966,194 3,901,696 Depreciation 3,630,687 3,082,866 9,944,228 9,946,929 Corporate general and administrative 2,438,480 1,640,985 6,798,889 5,080,878 Interest expense 3,330,629 2,556,695 9,280,156 7,817,035 Early extinguishment of mortgage notes 163,899 22,596 383,543 32,015 Lease termination costs - - - 8,954,361 Loss on impairment of real estate - 50,000 - 50,000 Gain on sale of property and equipment - (663,050) (4,374) (732,290) Total expenses 23,463,275 19,782,117 65,337,159 68,749,321 Income (loss) before income taxes and discontinued operations 1,295,542 3,290,435 1,667,954 (4,539,470) Deferred tax benefit due to change in taxable status - - - (1,397,672) Income tax expense (benefit) - 1,279,902 - (7,931) Net income (loss) from continuing operations 1,295,542 2,010,533 1,667,954 (3,133,867) Income (loss) from discontinued operations 330,944 81,815 298,886 (497,711) Loss on impairment related to discontinued operations - (4,343,729) - (4,343,729) Gain (loss) on sale of discontinued operations 47,762 (217,909) 337,167 34,638 Income tax (benefit) - (1,742,659) - (1,914,631) Net income (loss) from discontinued operations 378,706 (2,737,164) 636,053 (2,892,171) Net income (loss) 1,674,248 (726,631) 2,304,007 (6,026,038) Preferred stock dividends - 1,037,357 - 4,371,716 Loss on redemption of preferred stock - 15,954,925 - 15,954,925 Net income (loss) attributable to common stockholders $1,674,248 $(17,718,913) $2,304,007 $(26,352,679) Per common share (basic and diluted): Income (loss) from continuing operations attributable to common stockholders $0.02 $(0.34) $0.03 $(0.98) Income (loss) from discontinued operations 0.01 (0.06) 0.01 (0.12) Net income (loss) attributable to common stockholders $0.03 $(0.40) $0.04 $(1.10) Weighted average shares - basic and diluted 56,595,115 44,359,100 56,605,363 23,860,432 Consolidated Statements of Cash Flows Nine Months Ended September 30, (unaudited) 2005 2004 Operating activities Net income (loss) from continuing operations $1,667,954 $(3,133,867) Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities: Depreciation 9,944,228 9,946,929 Loss on impairment of real estate - 50,000 Amortization of deferred finance costs 398,075 568,476 Stock-based compensation expense 274,554 297,474 Early extinguishment of mortgage notes 383,543 32,015 Lease termination costs- non cash - 9,215,220 Gain on sale of property and equipment (4,374) (732,290) Deferred income tax benefit - (1,399,019) Changes in assets and liabilities increasing (decreasing) cash: Trade accounts receivable, net (1,328,344) (724,511) Other receivables (428,301) (235,681) Prepaid expenses and other assets (226,890) (803,373) Inventory 86,625 58,068 Accounts payable and accrued expenses 797,572 (50,874) Accrued interest payable (51,277) (79,604) Accrued property and other taxes 849,911 1,054,652 Accrued payroll (238,452) (441,158) Net cash provided by operating activities 12,124,824 13,622,457 Investing activities Reductions from restricted cash for furniture, fixture & equipment reserves 1,144,172 72,830 Proceeds from sale of land, property and equipment 313,807 4,236,149 Additions to property and equipment (10,695,948) (2,827,556) Net cash (used in) provided by investing activities (9,237,969) 1,481,423 Financing activities Preferred stock dividends paid - (6,039,318) Payments on redemption of preferred stock, net - (75,662,976) Proceeds from issuance of common stock 516 76,957,098 Proceeds from trust preferred securities offering, net of deferred finance cost of $785,000 25,465,500 - Proceeds from convertible notes issuance 35,000,000 - Payments from lines of credit, net (108,295) (5,001) Payments of deferred finance costs (3,311,755) (274,426) Payoffs of mortgage notes payable (48,441,204) (4,131,780) Payments on mortgage notes payable (6,732,708) (7,664,744) Net cash provided by (used in) financing activities 1,872,054 (16,821,147) Net cash provided by (used in) continuing operations 4,758,909 (1,717,267) Net cash (used in) provided by discontinued operations (1,002,576) 1,391,550 Net change in cash and cash equivalents 3,756,333 (325,717) Cash and cash equivalents at beginning of period 1,626,322 3,549,083 Cash and cash equivalents at end of period $5,382,655 $3,223,366 Reconciliation of Net Income (Loss) to EBITDA Three Months Ended Three Months Ended September 30, 2005 September 30, 2004 As Continuing Discontinued As Continuing Discontinued Reported Operations Operations Reported Operations Operations (dollars in thousands) (dollars in thousands) Net income (loss) attributable to common stock- holders $1,674 $1,295 $379 $(17,719) $(14,982) $(2,737) Depreciation 3,631 3,631 - 3,327 3,083 244 Interest expense 3,436 3,331 105 2,867 2,557 310 Income tax expense (benefit) - - - (463) 1,280 (1,743) EBITDA 8,741 8,257 484 (11,988) (8,062) (3,926) The items listed below have not been included as adjustments in the above calculation of EBITDA: Gain on sale of property and equipment (48) - (48) (445) (663) 218 Early extinguishment of mortgage notes 164 164 - 22 22 - Impairment losses - - - 4,394 50 4,344 Stock based compensation expense 152 152 - 102 102 - Straight line rent adjustment - - - 102 102 - Preferred - - - 1,037 1,037 - dividends Loss on redemption of preferred stock - - - 15,955 15,955 - $268 $316 $(48) $21,167 $16,605 $4,562 Nine Months Ended Nine Months Ended September 30, 2005 September 30, 2004 As Continuing Discontinued As Continuing Discontinued Reported Operations Operations Reported Operations Operations (dollars in thousands) (dollars in thousands) Net income (loss) attributable to common stock- holders $2,304 $1,668 $636 $(26,353) $(23,461) $(2,892) Depreciation 9,944 9,944 - 10,752 9,947 805 Interest expense 9,910 9,280 630 8,769 7,817 952 Income tax (benefit) - - - (3,320) (1,405) (1,915) EBITDA $22,158 $20,892 $1,266 $(10,152) $(7,102) $(3,050) The items listed below have not been included as adjustments in the above calculation of EBITDA: Gain on sale of property and equipment $(341) $(4) $(337) $(767) $(732) $(35) Early extinguishment of mortgage notes 383 383 - 32 32 - Impairment losses - - - 4,394 50 4,344 Stock based compensation expense 275 275 - 297 297 - Straight line rent adjustment - - - 102 102 - Lease termination costs - - - 8,954 8,954 - Preferred dividends - - - 4,372 4,372 - Loss on redemption of preferred stock - - - 15,955 15,955 - $317 $654 $(337) $33,339 $29,030 $4,309 EBITDA is defined as income before interest expense, income tax expense, depreciation and amortization. The Company uses EBITDA to measure the financial performance of its operations because it excludes interest, 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 income (loss) from discontinued operations. By excluding interest expense, 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, it does not take into account the total amount of interest paid on outstanding debt 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 income (loss) (and in the case of EBITDA from continuing operations, to net income (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 income (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. 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. DATASOURCE: Jameson Inns, Inc. CONTACT: Investor Relations, Todd Atenhan, , or James Kautz, , both of EPOCH Financial, +1-888-654-5318 Web site: http://www.jamesoninns.com/

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