<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Period ended March 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Period _______________ to _______________.
Commission file number 0-23256
JAMESON INNS, INC.
(Exact name of registrant as specified in its Articles)
----------------------
Georgia 58-2079583
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
8 Perimeter Center East, Suite 8050
Atlanta, Georgia 30346-1604
(Address of principal executive offices including zip codes)
(770) 901-9020
(Registrant's telephone number, including area code)
----------------------
(Former name, former address and former
fiscal year, if changed since last report)
----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes _____ No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date - Common Stock, $.10 Par Value -
11,429,093 shares outstanding as of April 28, 2000.
<PAGE> 2
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Condensed Consolidated Balance Sheets as of March 31, 2000
(unaudited) and December 31, 1999............................................3
Condensed Consolidated Statements of Operations for the Three
Month Periods Ended March 31, 2000 and 1999 (unaudited)......................4
Condensed Consolidated Statements of Stockholders' Equity for the Three
Month Period Ended March 31, 2000 (unaudited) and the Year Ended
December 31, 1999 ...........................................................5
Condensed Consolidated Statements of Cash Flows for the Three Month
Periods Ended March 31, 2000 and 1999 (unaudited)............................6
Notes to Condensed Consolidated Financial Statements (unaudited).............7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................17
SIGNATURES.......................................................................18
EXHIBITS
</TABLE>
2
<PAGE> 3
JAMESON INNS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
------------- -------------
<S> <C> <C>
ASSETS
Operating property and equipment $ 330,083,103 $ 318,601,921
Property and equipment held for sale 850,000 2,532,131
Less: accumulated depreciation (27,722,023) (24,551,080)
------------- -------------
303,211,080 296,582,972
Cash 1,332,851 2,531,009
Restricted cash 602,875 12,616,482
Lease revenue receivable 12,864,887 6,941,315
Deferred finance costs, net 3,337,179 2,942,324
Other assets 1,092,683 1,237,642
------------- -------------
$ 322,441,555 $ 322,851,745
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $ 173,353,409 $ 173,957,998
Accounts payable and accrued expenses 785,441 1,269,334
Accounts payable to affiliates 10,022,020 6,475,510
Accrued interest payable 1,100,452 972,544
Accrued property taxes 2,224,294 2,178,719
Preferred stock dividends payable 1,694,595 1,694,595
------------- -------------
189,180,211 186,548,700
Stockholders' equity:
Preferred stock, $1 par value,
1,272,727 shares of 9.25%
Series A Cumulative Preferred Stock
issued and outstanding 1,272,727 1,272,727
Preferred stock, $1 par value,
2,256,000 shares of $1.70
Series S Cumulative Convertible Preferred
Stock issued and outstanding 2,256,000 2,256,000
Common stock, $.10 par value, 40,000,000
shares authorized, 11,422,593 shares
(11,083,952 shares in 1999) issued and
outstanding 1,142,059 1,108,395
Additional paid-in capital 129,617,549 132,692,914
Retained deficit (1,026,991) (1,026,991)
------------- -------------
Total stockholders' equity 133,261,344 136,303,045
------------- -------------
$ 322,441,555 $ 322,851,745
============= =============
</TABLE>
See accompanying notes.
3
<PAGE> 4
JAMESON INNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------------
2000 1999
----------- ----------
<S> <C> <C>
Lease revenue $ 9,109,277 $4,875,038
Expenses:
Property tax expense 780,350 302,559
Insurance expense 203,682 82,588
Depreciation 3,357,896 1,701,323
General and administrative expenses 379,201 128,050
Loss on disposal of furniture and equipment -- 120,708
Loss on disposal of real estate 32,852 --
----------- ----------
Total expenses 4,753,981 2,335,228
----------- ----------
Income from operations 4,355,296 2,539,810
Interest expense, net of capitalized amounts 3,013,672 912,004
Other income 2,592 --
----------- ----------
Income before extraordinary loss 1,344,216 1,627,806
Extraordinary loss - early extinguishment of debt 31,847 --
----------- ----------
Net income 1,312,369 1,627,806
Less preferred stock dividends 1,694,595 693,750
----------- ----------
Net income (loss) attributable to
common stockholders $ (382,226) $ 934,056
=========== ==========
Per common share:
Income (loss) before extraordinary loss:
Basic $ (0.03) $ 0.10
Diluted $ (0.03) $ 0.09
Net income (loss):
Basic $ (0.03) $ 0.10
Diluted $ (0.03) $ 0.09
Dividends paid on common stock $ 0.245 $ 0.24
</TABLE>
See accompanying notes.
4
<PAGE> 5
JAMESON INNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED PREFERRED
STOCK STOCK COMMON CONTRIBUTED RETAINED STOCKHOLDERS'
SERIES A SERIES S STOCK CAPITAL DEFICIT EQUITY
------------ ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998 $1,200,000 $ -- $ 989,581 $ 97,705,947 $ (1,026,991) $ 98,868,537
Issuance of preferred and common
stock, net of offering expense 72,727 2,256,000 117,341 39,585,070 -- 42,031,138
Exercise of stock options -- -- 1,501 100,302 -- 101,803
Vesting of restricted stock grant -- -- (28) 67,653 -- 67,625
Common stock dividends -- -- -- (4,072,307) (6,077,070) (10,149,377)
Preferred stock dividends - Series S -- -- -- -- (2,486,112) (2,486,112)
Preferred stock dividends -Series A -- -- -- (693,751) (2,207,385) (2,901,136)
Net income -- -- -- -- 10,770,567 10,770,567
---------- ---------- ----------- ------------- ------------ -------------
BALANCE AT DECEMBER 31, 1999 1,272,727 2,256,000 1,108,395 132,692,914 (1,026,991) 136,303,045
Issuance of common stock -- -- 2,064 56,232 -- 58,296
Vesting of restricted stock grant -- -- 31,600 44,117 -- 75,717
Common stock dividends -- -- -- (3,175,714) 382,226 (2,793,488)
Preferred stock dividends - Series S -- -- -- -- (958,800) (958,800)
Preferred stock dividends -Series A -- -- -- -- (735,795) (735,795)
Net income -- -- -- -- 1,312,369 1,312,369
---------- ---------- ----------- ------------- ------------ -------------
BALANCE AT MARCH 31, 2000 $1,272,727 $2,256,000 $ 1,142,059 $ 129,617,549 $ (1,026,991) $ 133,261,344
========== ========== =========== ============= ============ =============
</TABLE>
See accompanying notes.
5
<PAGE> 6
JAMESON INNS, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,312,369 $ 1,627,806
Adjustments to reconcile net income to cash
provided by operating activities:
Extraordinary loss 31,847 --
Depreciation and amortization 3,483,786 1,747,210
Loss on disposal of furniture and equipment -- 120,708
Stock-based compensation expense 75,717 --
Loss on disposal of real estate 32,852 --
Changes in assets and liabilities increasing (decreasing) cash
Lease revenue receivable (5,923,572) 266,752
Restricted cash 12,013,607 --
Other assets 144,959 (736,281)
Accounts payable and accrued expenses (484,829) 331,449
Accounts payable to affiliates 3,546,510 (1,988,975)
Accrued interest payable 127,908 (53,006)
Accrued property taxes and other accrued liabilities 26,611 (133,072)
------------ ------------
Net cash provided by operating activities 14,387,765 1,182,591
INVESTING ACTIVITIES
Proceeds from disposition of property and equipment 1,490,000 --
Additions to property and equipment (11,481,735) (6,678,957)
------------ ------------
Net cash used in investing activities (9,991,735) (6,678,957)
FINANCING ACTIVITIES
Common stock dividends paid (2,793,488) (2,375,207)
Preferred stock dividends paid (1,694,595) (693,750)
Proceeds from issuance of common stock, net of offering expense 58,296 140,273
Proceeds from mortgage notes payable 19,887,081 25,664,393
Payment of deferred finance costs (559,812) (569,250)
Payments on mortgage notes payable (20,491,670) (17,170,470)
------------ ------------
Net cash provided by (used in) financing activities (5,594,188) 4,995,989
Net change in cash (1,198,158) (500,377)
Cash at beginning of year 2,531,009 500,377
------------ ------------
Cash at end of period $ 1,332,851 $ --
============ ============
</TABLE>
See accompanying notes.
6
<PAGE> 7
JAMESON INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF FINANCIAL STATEMENTS
Jameson Inns, Inc. is a self-administered real estate investment trust ("REIT")
headquartered in Atlanta which develops and owns limited service hotel
properties ("Inns") operating in the southeastern United States under the
trademark "The Jameson Inn (R)." We also own Inns in the Midwest operating under
the name "Signature Inn (R)" as a result of the acquisition of Signature Inns,
Inc. in May 1999.
At March 31, 2000, we had a total of 111 Jameson Inns either in operation or
under development, including 91 operating Jameson Inns (4,457 available rooms),
18 Inns under development and contracts to acquire 2 parcels of land on which
additional Inns are expected to be constructed. In addition, we own 26 operating
Signature Inns (3,051 available rooms.)
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The condensed consolidated balance sheet at December 31, 1999,
has been derived from the audited consolidated financial statements at that
date. Operating results for the three month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000, or any other interim period. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
annual report on Form 10-K for the year ended December 31, 1999.
2. MERGER WITH SIGNATURE INNS, INC.
On May 7, 1999, we completed our merger with Signature. In the merger, we
acquired 25 Signature Inns and a 40% interest in a partnership which owned one
Signature Inn. In December 1999 we acquired the remaining partnership interest
in this partnership and took direct ownership of the hotel.
Immediately prior to the merger, the Signature operating assets were sold to,
and the liabilities pertaining to the operations of the Signature Inns were
assumed by Jameson Hospitality, LLC. During 1999, we entered into a new master
lease with Jameson Hospitality covering the Signature Inns, with terms similar
to the terms of the master leases covering the Jameson Inns.
We accounted for the merger of Signature as a purchase. Accordingly, our
historical results include the effects of the merger beginning May 8, 1999.
7
<PAGE> 8
The following presents the unaudited pro forma results of operations as if the
Signature purchase and all related transactions were consummated on January 1,
1999 for the period presented. Such information reflects the allocation of the
purchase price.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
1999
-------------------
<S> <C>
PRO FORMA:
Lease revenues $ 8,395,034
Net income 1,707,410
Preferred stock dividend 1,652,550
-------------------
Net income attributable to common stock $ 54,860
===================
Pro forma net income per common share:
Basic $ .01
===================
Diluted $ .01
===================
</TABLE>
8
<PAGE> 9
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------------------
2000 1999
------------ -----------
<S> <C> <C>
NUMERATOR:
Income before extraordinary loss $ 1,344,216 $ 1,627,806
Extraordinary loss (31,847) --
------------ -----------
Net income 1,312,369 1,627,806
Preferred stock dividends (1,694,595) (693,750)
------------ -----------
Numerator for basic earnings per share - income
Available to common stockholders $ (382,226) $ 934,056
============ ===========
DENOMINATOR
Weighted average shares outstanding
11,399,536 9,902,809
Less: Unvested restricted shares (390,336) (84,472)
------------ -----------
Denominator for basic earnings per share 11,009,200 9,818,337
Plus: Effect of dilutive securities
Employee and director stock options 5,413 41,369
Unvested restricted shares of common stock 384,358 77,371
------------ -----------
Total dilutive potential common shares 389,771 118,740
============ ===========
Denominator for diluted earnings per share - adjusted
weighted average shares and assumed conversions 11,398,971 9,937,077
============ ===========
BASIC EARNINGS PER COMMON SHARE
Income before extraordinary loss $ (.03) $ .10
Extraordinary loss -- --
------------ -----------
Net income $ (.03) $ .10
============ ===========
DILUTED EARNINGS PER COMMON SHARE
Income before extraordinary loss $ (.03) $ .10
Extraordinary loss -- --
------------ -----------
Net income $ (.03) $ .10
============ ===========
</TABLE>
Options to purchase 704,904 and 578,333 shares of common stock for the three
months ended March 31, 2000 and 1999 were outstanding but were not included in
the computation of diluted earnings per share because the effect would be
antidilutive. Additionally, the potential conversion of the Series S Preferred
Stock was not included in the computation of diluted earnings per share as the
effect of conversion would be antidilutive.
4. SALE OF HOTEL PROPERTY
On February 29, 2000 we sold the Inn located in Clinton, Tennessee resulting in
a loss of approximately $33,000.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Jameson Inns,
Inc. condensed consolidated financial statements and notes thereto appearing
elsewhere in this quarterly report.
Our primary source of revenue is rent payments by Jameson Hospitality, LLC
("Jameson Hospitality") under master leases ("the Leases") covering all of the
Jameson Inns and Signature Inns in operation. Our expenses consist of property
taxes, insurance, corporate overhead, interest on mortgage debt and depreciation
of the Inns.
The Leases provide for the payment of base rent and percentage rent. For the
quarter ended March 31, 2000, we earned base rent and percentage rent in the
aggregate amount of $9.1 million. The principal determinant of percentage rent
is Jameson Hospitality's Room Revenues from the Inns, as defined by the Leases.
Therefore, management believes that a review of the historical performance of
the operations of the operating Inns, particularly with respect to occupancy,
average daily rate ("ADR") and revenue per available room ("REVPAR") is
appropriate for understanding revenue from the Leases.
The following table shows certain historical financial and other information for
the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------------
2000 1999
-------- -------
<S> <C> <C>
Occupancy rate 53.2% 56.8%
ADR $ 57.27 $ 52.18
REVPAR $ 30.44 $ 29.63
Guest Room Revenues (000s) $ 20,256 $ 10,354
Other Inn Revenues (000s) $ 703 $ 250
Room nights available 665,367 349,432
Room nights occupied 353,673 198,428
Operating Inns (at period end) 117 85
Rooms available (at period end) 7,508 4,078
</TABLE>
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 2000 to the Three Months Ended
March 31, 1999.
Our revenue from the Leases for the three-month period ended March 31, 2000,
increased 86.9% to $9.1 million as compared to $4.9 million for the same period
in 1999. The increase was due to the increase in Jameson Hospitality's Room
Revenues which was primarily a result of the following three factors:
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<PAGE> 11
- - The number of room nights available increased 315,935 or 90.4% due
primarily to our acquisition of Signature in May 1999, which accounted
for 277,649 of the additional room nights available, and from April 1,
1999 through March 31, 2000 due to the opening of eight new Jameson
Inns (496 total additional rooms), two expansions of existing Jameson
Inns (40 total additional rooms), offset partially by sales of the
Milledgeville, Georgia Jameson Inn (100 rooms) in July 1999 and the
Clinton, Tennessee Jameson Inn (40 rooms) in February 2000.
- - The occupancy rate for all Inns decreased from 56.8% during the first
quarter of 1999 to 53.2% during the first quarter of 2000 due primarily
to additional competition in certain markets in which our hotels are
located.
- - ADR increased 9.8% from the first quarter of 1999 to the same period in
2000 due primarily to the addition of the Signature Inns which
experienced an ADR of $62.75 for the first quarter of 2000.
As a result of the above three factors, Jameson Hospitality's first quarter
guest room revenues rose 96% from $10.4 million for the first quarter of 1999 to
$20.3 million in the first quarter of 2000. Same Inn Room Revenues in the first
quarter of 2000 versus the first quarter of 1999 grew to $10.2 million from
$10.0 million, or 1.75%. The same Inn growth is due to an increase in ADR from
$52.29 to $53.27 and an increase in room nights available (due to expansions of
certain of these Inns) from 333,150 to 340,704, partially offset by a decrease
in the occupancy rate of these Inns from 57.6% to 56.2% for the first quarter of
2000 compared to the same period in 1999.
General and administrative expense includes overhead charges for management,
accounting and legal services provided by the corporate home office. Effective
with the April 2, 1999, acquisition of billboards, ground leases for sites on
which billboards are erected and other related assets from Jameson Hospitality,
we incurred expenses related to our ownership of these billboards and related
assets. General and administrative expense for the three months ended March 31,
2000, was $379,000 compared to $128,000 for the three months ended March 31,
1999 due to more time spent in 2000 by shared employees on our business matters
as compared to Jameson Hospitality's and other entities', and our acquisition of
the billboard assets.
Property taxes and insurance expenses totaled $984,000 for the three month
period ended March 31, 2000, compared with $385,000 for the same period in 1999.
The increase is attributable to the increase in number of Inns as a result of
the Signature acquisition and to the construction and expansion of Jameson Inns.
Interest expense increased from $912,000 for the three-month period ended March
31, 1999, to $3,014,000 for the same period ended March 31, 2000, due to the
increase in average outstanding debt balances in the first quarter of 2000
compared to the same period in 1999. This was the result primarily of our
assumption of $67.1 million of indebtedness in connection with the Signature
acquisition and increased indebtedness related to development of new Jameson
Inns.
Depreciation expense increased from $1,701,000 to $3,357,000 for the three month
period ended March 31, 2000, as compared to the same period in 1999 due
primarily to the Signature
11
<PAGE> 12
acquisition and to an increase in the number of operating Jameson Inns and the
expansion of existing Jameson Inns.
FUNDS FROM OPERATIONS
The following table illustrates the calculation of funds from operations ("FFO")
on a historical basis. In March 1995, NAREIT published a new interpretation of
funds from operations which we retroactively adopted at that time.
In October 1999, NAREIT issued additional clarification effective as of January
1, 2000 stipulating that FFO should include both recurring and non-recurring
operating results. Consistent with this clarification, non-recurring items that
are not defined as "extraordinary" under GAAP will be reflected in the
calculation of FFO. Gains and losses from the sale of operating property will
continue to be excluded from the calculation of FFO.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Net income (loss) attributable to common
Stockholders $ (382,226) $ 934,056
Loss on disposal of real estate 32,852 --
Depreciation expense 3,357,896 1,701,323
Extraordinary loss 31,847 --
Loss on disposal of furniture and equipment -- 120,708
----------- -----------
Funds from operations $ 3,040,369 $ 2,756,087
=========== ===========
FFO per common share $ .28 $ .28
=========== ===========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
We expect to continue to develop additional Jameson Inns and Signature Inns and
to expand Jameson Inns, as suitable opportunities arise. We will not undertake
such investments, however, unless adequate sources of financing are available.
Since our election to be taxed as a REIT, we have financed construction of new
Jameson Inns and currently intend to continue financing the construction of new
Jameson Inns and Signature Inns entirely with bank borrowings. We believe we can
continue to finance new Inns and expansions with construction and long-term
mortgage loans. At March 31, 2000, we had approximately $173 million in
outstanding debt. At that date, we had two operating Jameson Inns and one
Signature Inn which were debt free and could be used as collateral if we need
additional borrowing capacity.
We have $29.8 million available for borrowing under lines of credit (the
"Line"), with some convertible to term notes beginning in 2000. At March 31,
2000, $13.7 million had been drawn down under the Line, with $16.1 million
remaining available credit. Loans made under the Line bear interest at rates
initially ranging from 8.5% to 9.0%, which are adjustable annually to a spread
over the prime rate plus .25 to .5 percentage points. The minimum annual
interest rate payable is 7% and the maximum is 13%. The annual interest rates at
March 31, 2000, ranged from 8.0% to 8.5%. Loans made under the Line are secured
by mortgages on 24 of the Jameson
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<PAGE> 13
Inns. Payments of interest are due monthly, and monthly payments of principal
and interest commence at various dates. Principal for each term loan under the
Line is amortized using a 15- or 20-year period and is payable in full at
various dates through 2007. We use the Line to purchase land and supplement the
financing of construction costs, and for certain other operating needs,
including the payment of dividends and other operating expenses.
In January 1999, we entered into an agreement with a bank to provide $17.2
million in new financing, which is secured by 14 operating Jameson Inns. This
bank note bears interest at the weekly average yield on United States Treasury
securities adjusted to the constant maturity of one year plus 3.75% per annum
and is adjusted annually. Monthly installments of principal and interest are due
through maturity in 2019. The proceeds of this financing were used to repay
amounts outstanding under the Line.
In December 1999, we obtained a ten-year term loan in the principal amount of
$3.7 million to refinance the Signature Inn-Carmel and to provide funds for the
purchase of the remaining interest in the partnership which had owned the
property . The interest rate on the loan is the prime rate plus .5% and adjusts
annually. Payments of principal and interest are due monthly and repayment of
the loan is secured by the Inn.
In December 1999 and January 2000, we refinanced indebtedness secured by four
Signature Inns by issuance of adjustable rate economic development revenue
refunding bonds in the aggregate principal amount of $12,115,000. The bonds
mature on December 1, 2016, subject to prior optional and mandatory redemption,
and are subject to mandatory purchase under certain conditions. The interest
rates on the bonds adjust weekly.
Historically, we have utilized construction and long-term mortgage financing to
fund the balance of construction costs of Inns not funded under the Line. For
each new Jameson Inn to be built, We generally obtain a construction loan for
approximately $1.1 to $2.8 million depending on the size and location of the
Inn. After an 18-month interest-only period, each construction loan
automatically converts to a long-term mortgage financing upon completion of the
Inn with a 15- or 20-year amortization period is and payable in full seven years
from its inception. The interest rate on each of the loans adjusts annually to
rates ranging from the prevailing prime rate plus .125% to prime plus .375%. As
of March 31, 2000, the construction loans are secured by mortgages on 19 of the
Jameson Inns under construction.
As of March 31, 2000, we had a total of 18 new Jameson Inns and one expansion of
an existing Jameson Inn under construction, with total remaining construction
costs, excluding land, expected to total $50 million when the projects are
complete. For 17 of these properties, we had obtained construction loans
totaling $42.7 million, with remaining availability of $30.4 million at March
31, 2000. To fund the completion of the properties under construction we will
use the remaining availability under the construction loans, availability on the
Line of $16.1 million, proceeds from the financing of the two unencumbered Inns
and proceeds from the refinancing of Inns with increased borrowing capacity.
Since we presently intend to rely primarily on borrowings for construction and
permanent financing of new Jameson Inns and Signature Inns and for the expansion
of existing Jameson Inns, the lack of sufficient financing on favorable terms
and conditions could prevent or significantly deter us from constructing new
Inns or expanding existing Inns. The availability of such financing depends on a
number of factors over which we have no control, including general
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<PAGE> 14
economic conditions, the economic and competitive environments of the
communities in which the Inns are located and the level and stability of
long-term interest rates. We are also considering possible additional long-term
debt or equity financing that would be available to fund our ongoing development
activities.
As with most real estate investments, our investments in the Inns are relatively
illiquid and such illiquidity is further increased by the location of many
Jameson Inns in small communities. As a result, our ability to sell or otherwise
dispose of any Inn to provide liquidity will be very limited.
We have four stock incentive plans in place. As of March 31, 2000, 593,000
shares of our common stock were reserved for future stock option and restricted
stock grants. Previously issued options to purchase 1,380,241 shares of our
common stock were outstanding (including 461,971 which were exercisable). As of
March 31, 2000, 402,270 shares of our common stock issued to certain key
employees of Jameson and Jameson Hospitality are restricted as to sale until
fully vested beginning in 2006 through 2010.
FORWARD-LOOKING STATEMENTS
There are a number of statements in this report which address activities, events
or developments which we expect or anticipate will or may occur in the future,
including such things as our expansion plans, including construction of new Inns
and expansion of existing Inns, availability of debt financing and capital,
payment of quarterly dividends, and other matters. These statements are based on
certain assumptions and analyses we have made in the light of our experience and
its perception of historical trends, current conditions and expected future
developments, as well as other factors it believes are appropriate under the
circumstances. However, whether actual results and developments will conform to
our expectations and predictions is subject to a number of risks and
uncertainties, including (1) our ability to (a) secure construction and
permanent financing to finance such development on terms and conditions
favorable to us, (b) assess accurately the market demand for new Inns and
expansions of existing Inns, (c) identify and purchase new sites which meet its
various criteria, including reasonable land prices, (d) contract for the
construction of new Inns and expansions of existing Inns in a manner which
produces Inns consistent with its present quality and standards at a reasonable
cost and without significant delays, (e) provide ongoing renovation and
refurbishment of the Inns sufficient to maintain consistent quality among the
Inns, and (f) manage our business in a cost-effective manner given the increase
in the number of Inns; (2) Jameson Hospitality's willingness and ability to
manage the Inns profitably; (3) general economic, market and business
conditions, particularly those in the lodging industry generally and in the
geographic markets where the Inns are located; (4) the business opportunities
(or lack thereof) that may be presented to and pursued by us; (5) the
availability of qualified managers and employees necessary for our planned
growth; (6) changes in laws or regulations and (7) other factors, most of which
are beyond our control . Consequently, all of the forward-looking statements
made in this report are qualified by these cautionary statements and there can
be no assurance that the actual results of developments which we anticipate will
be realized, or even if substantially realized, that they will have the expected
consequences to or effects on us or our business or operations.
THE LESSEE - JAMESON HOSPITALITY, LLC
We seek to enhance Lease revenue by working in a collaborative manner with
Jameson Hospitality, lessee of the Jameson and Signature Inns. Jameson
Hospitality is wholly owned by Thomas W. Kitchin, our Chairman and chief
executive officer, and other family members.
14
<PAGE> 15
Presently, Jameson Hospitality also has an exclusive relationship with us in
that Jameson Hospitality does not manage any hotel properties other than the
Inns. We believe this exclusive relationship ensures that our and Jameson
Hospitality's interests are well-aligned. While we do not control the operations
of Jameson Hospitality or the day-to-day operation of the Inns, the two
companies work together to enhance both occupancy and ADR. The Leases' rent
formula allows us to benefit from increases in Room Revenues, regardless of the
mix between occupancy and ADR.
The following table summarizes the unaudited financial results of Jameson
Hospitality, including the operating results of the Signature Inns beginning May
8, 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Room revenues $ 20,959,206 $ 10,604,828
Construction revenues 10,361,622 5,667,676
Other income 386,129 21,611
------------ ------------
Total revenues 31,706,957 16,294,115
Inn operating expenses 11,779,867 5,476,124
Lease expense 9,067,458 4,875,038
Construction and other expenses 9,168,061 4,715,792
General and administrative 1,789,379 1,071,131
Depreciation and amortization 78.749 56.933
------------ ------------
Total expenses 31,883,514 16,195,018
------------ ------------
Net income (loss) $ (176,557) $ 99,097
============ ============
</TABLE>
The following presents the unaudited pro forma results of operations of Jameson
Hospitality as if the Signature purchase and all related transactions were
consummated on January 1, 1999 for the period presented:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31
------------
1999
------------
<S> <C>
PRO FORMA:
Room revenues $19,394,367
Construction revenues 5,667,676
Other income 21,611
-----------
Total revenues 25,083,654
Inn operating expenses 9,789,994
Lease expense 8,395,034
Construction and other expenses 4,715,792
General and administrative 2,402,618
-----------
Depreciation and amortization 87,106
-----------
Total expenses 25,390,544
-----------
Net income (loss) $ (306,890)
===========
</TABLE>
15
<PAGE> 16
DISTRIBUTIONS TO STOCKHOLDERS
The table below sets forth, for the periods indicated, the cash distributions
declared per share since January 1, 1999.
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock
Common Stock Series A Series S
--------------------------------------------------------------------------
<S> <C> <C> <C>
First Quarter, 1999 $0.240 $0.5781 --
Second Quarter, 1999 $0.245 $0.5781 $0.252
Third Quarter, 1999 $0.245 $0.5781 $0.425
Fourth Quarter, 1999 $0.245 $0.5781 $0.425
First Quarter, 2000 $0.245(1) $0.5781(2) $0.425(2)
</TABLE>
(1) On April 26, 2000 we declared this dividend, which is payable on May
20, 2000 to stockholders of record on May 4, 2000.
(2) On March 15, 2000 we declared this dividend, which was paid on April
20, 2000 to stockholders of record on March 31, 2000.
16
<PAGE> 17
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
We filed no Form 8-K filings during the three months ended
March 31, 2000.
EXHIBITS
27.1 Financial Data Schedule (for SEC use only)
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Jameson Inns, Inc.
<TABLE>
<S> <C>
Dated: May 12, 2000 By: /s/ Craig R. Kitchin
-----------------------------------------------------
Craig R. Kitchin
President and Chief Financial Officer
(Principal Financial Officer)
By: /s/ Martin D. Brew
-----------------------------------------------------
Martin D. Brew
Treasurer and Corporate Controller
(Principal Accounting Officer)
</TABLE>
18
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Page
- ------ ----
<S> <C> <C>
27.1 - Financial Data Schedule (For SEC use only)...........................................
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF JAMESON INNS, INC. FOR THE PERIOD
ENDING MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,935,726
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,800,613
<PP&E> 330,933,103
<DEPRECIATION> 27,722,023
<TOTAL-ASSETS> 322,441,555
<CURRENT-LIABILITIES> 15,826,802
<BONDS> 173,353,409
2,256,000
1,272,727
<COMMON> 1,142,059
<OTHER-SE> 128,590,558
<TOTAL-LIABILITY-AND-EQUITY> 322,441,555
<SALES> 0
<TOTAL-REVENUES> 9,109,277
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,753,981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,013,672
<INCOME-PRETAX> 1,344,216
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,344,216
<DISCONTINUED> 0
<EXTRAORDINARY> 31,847
<CHANGES> 0
<NET-INCOME> 1,312,369
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
