10-Q 1 l03884ae10vq.txt JANUS HOTELS AND RESORTS, INC. U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 or [ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 0-22745 Janus Hotels and Resorts, Inc. (Exact name of registrant as specified in its charter) DELAWARE 13-2572712 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2300 Corporate Blvd., N.W., Suite 232 Boca Raton, Florida 33431-8596 (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (561) 997-2325 (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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No | | Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X] Number of shares of common stock outstanding as of November 11, 2003: 5,564,005 1 JANUS HOTELS AND RESORTS, INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

2 JANUS HOTELS AND RESORTS, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002

See notes to unaudited consolidated financial statements. 3 JANUS HOTELS AND RESORTS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

See notes to unaudited consolidated financial statements. 4 JANUS HOTELS AND RESORTS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

See notes to unaudited consolidated financial statements. 5 JANUS HOTELS AND RESORTS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

See notes to unaudited consolidated financial statements. 6 JANUS HOTELS AND RESORTS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 1 -- Unaudited interim financial statements: The consolidated financial statements included herein have been prepared by Janus Hotels and Resorts, Inc. (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted as permitted by such rules and regulations. The Company believes the disclosures included herein are adequate; however, these consolidated statements should be read in conjunction with the financial statements and the notes thereto for the year ended December 31, 2002 previously filed with the Securities and Exchange Commission on Form 10-K. In the opinion of management, these unaudited, consolidated financial statements contain all of the adjustments (normal and recurring in nature) necessary to present fairly the consolidated financial position of the Company at September 30, 2003 and the consolidated results of operations and cash flows for the three-month and nine-month periods ended September 30, 2003 and 2002. The results of operations for the periods presented may not be indicative of those which may be expected for the full year. Stock options: In accordance with the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, the Company will recognize compensation costs as a result of the issuance of stock options based on the excess, if any, of the fair value of the underlying stock at the date of grant or award (or at an appropriate subsequent measurement date) over the amount the employee must pay to acquire the stock. Therefore, the Company will not be required to recognize compensation expense because of any grants of stock options at an exercise price that is equivalent to or greater than fair value. There were no grants of stock options during the first nine months of 2003 or the year ended December 31, 2002. The weighted average fair value at date of grant for options granted during 2001 was $0.97. The fair value of options at the date of grant was estimated using the Black-Scholes model with the following assumptions: (i) expected life - 5 years; (ii) interest rate - 3.0%; (iii) volatility - 78%; and, (iv) dividend yield - 0%. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant date for the award in 2001 consistent with the provisions of SFAS No. 123, Accounting for Stock-Based Compensation, the Company's pro forma net income for the quarter and nine months ended September 30, 2003 would not have changed, and the pro forma net income for the quarter ended September 30, 2002 would have been $3,856,360, or $0.55 per common share and the pro forma net income for the nine months ended September 30, 2002 would have been $2,721,481, or $0.35 per common share. Accounting pronouncements: In January 2003 the FASB issued FASB Interpretation 46, "Consolidation of Variable Interest Entities" ("FIN 46"), an interpretation of Accounting Research Bulletin No. 51. FIN 46 clarifies the application for certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties or in which equity investors do not have the characteristics of a controlling financial interest ("variable interest entities"). It applies in the first fiscal year or interim period beginning after June 15, 2003. The Company does not expect FIN 46 to have a material impact on its consolidated financial statements. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity. SFAS No. 150 changes the classification in the statement of financial position of certain common financial instruments from either equity or mezzanine presentation to liabilities and requires an issuer of those financial statements to recognize changes in fair value or redemption amount, as applicable, in earnings. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and with one exception, is effective at the beginning of the first interim period beginning after June 15, 2003. The effect of adopting SFAS No. 150 will be recognized as a cumulative effect of an accounting change as of the beginning of the period of adoption. Restatement of prior periods is not permitted. SFAS No. 150 is not expected to have any impact on the Company's financial position or results of operations. 7 Note 2 -- Organization: As of September 30, 2003, the continuing operations of the Company were comprised primarily of the operation of twelve hotels and a hotel management company which manages hotels for unrelated parties. Note 3 - Business restructuring: Effective April 18, 2003, the Company restructured its business by transferring seven of its thirteen owned hotel properties to a newly formed corporation controlled by the Company, JAGI Subsidiary, Inc. ("JAGI"). The Company continues to own six hotel properties and maintains a hotel management business. JAGI is a consolidated subsidiary for accounting purposes. Accordingly, the Company does not anticipate that the transaction will have a material effect on the financial condition or financial statements of the Company, other than the creation of a minority interest when JAGI becomes profitable. The transferred properties were valued at $13,242,032, net of the aggregate indebtedness of $19,107,968 to which they were subject. In exchange for the transfer, the Company received voting preferred stock of JAGI representing 79% of the aggregate voting stock of JAGI, and having a liquidation preference of $13,242,032. The preferred stock has a cumulative annual dividend of 5% of the liquidation preference, payable to the extent of 25% of the positive change in cash and cash equivalents of JAGI for the applicable fiscal year. The preferred stock is redeemable by JAGI, at its option, after January 1, 2013. After January 1, 2008, the preferred stock is mandatorily redeemable by JAGI at the election of holders of two thirds of the shares of preferred stock. JAGI also entered into a management agreement with the Company under which the Company is paid its standard annual management fee of 3% of gross revenues. Under the management agreement the Company also is entitled to (i) an incentive fee equal to 50% of JAGI's positive change in cash and cash equivalents for the applicable fiscal year and (ii) 50% of the net sale proceeds from the disposition by JAGI of any properties transferred to it by the Company. The common stock, par value $0.01, of JAGI is owned by Louis S. Beck and Harry G. Yeaggy, Chairman and Vice Chairman of the Company, respectively, and owners of approximately 70% of the Company's common stock. The common stock will represent 21% of the aggregate voting stock of JAGI. No dividends will be payable on such common stock while the JAGI preferred stock remains outstanding. In consideration for the common stock, Messrs. Beck and Yeaggy delivered to JAGI cash in the amount of the par value of the shares and promissory notes in the aggregate principal amount of $3,519,996.80 (the "Common Stock Notes"), together representing 21% of the aggregate initial capitalization of JAGI. The Common Stock Notes bear interest of 7.5% per annum, payable quarterly, and are payable in full on December 31, 2011. A brief description of the seven transferred properties is as follows: Best Western Cambridge in Cambridge, Ohio (sold May 29, 2003), Best Western Kings Quarter, located at the Kings Dominion Amusement Park in Doswell, Virginia, Days Inn Cambridge in Cambridge, Ohio, Days Inn Cincinnati in Sharonville, Ohio, Days Inn Kings Island, located near the Kings Island Amusement Park in Mason, Ohio, Holiday Inn North Canton in North Canton, Ohio, and Red Roof Kings Island, located near the Kings Island Amusement Park in Mason, Ohio. The statement of operations does not show a minority interest as a result of this transaction since the minority stockholders have little net capital invested and have not guaranteed the losses of the properties transferred. Therefore, the Company has not recognized a minority interest in the net loss of approximately $16,000. Note 4 - Debt refinancing: On June 11, 2003, the Company closed permanent financing on the Holiday Inn - North Canton and the Holiday Inn - Independence properties. The secured notes, totaling $18,850,000, have a maturity date of July 1, 2010, and a fixed annual interest rate of 5.9%. Monthly payments were calculated on the basis of a twenty year amortization of principal and interest. 8 Effective June 11, 2003, the Company executed note extension agreements with the Provident Bank for the outstanding balances related to the Cleveland properties that were due August 1, 2003. These agreements extended the maturity dates to January 1, 2004. There were no modifications to any other terms of the notes. Note 5 - Disposition of property: On May 29, 2003, the Company sold the property known as Best Western - Cambridge for cash of $2,200,000. This transaction resulted in a loss of $1,407,256. Note 6 - Income taxes: For the quarter ended September 30, 2003, the Company's tax provision was calculated using an effective income tax rate of 42%. For the nine months ended September 30, 2003, the Company's tax credit was calculated after giving effect to the business restructuring described above. The principal reason for the larger than expected tax credit relates to deferred state taxes of approximately $1,600,000 that will not be payable as a result of the business restructuring. Note 7 - Merger agreement and goodwill impairment: As of July 28, 2003, the Company entered into an Agreement and Plan of Merger with Janus Acquisition, Inc., a Delaware corporation ("Acquisition"). The merger agreement contemplates that, subject to the approval of the Company's stockholders and other customary closing conditions, the Company will be merged with and into Acquisition, with Acquisition as the surviving corporation. In connection with the Merger Agreement, each holder of the Company's common stock, except for Acquisition, will be entitled to receive $0.65 per share. Such stockholders will then have no continuing interest in the operations of the Company. Acquisition was formed by Louis S. Beck and Harry G. Yeaggy, Chairman / Chief Executive Officer, and Vice Chairman, respectively, of the Company for the purpose of taking the Company private. At present, Messrs. Beck and Yeaggy control approximately 70.4% of the Company's issued and outstanding common stock, which assures the approval of the merger agreement when it is voted upon by the Company's stockholders. The acceptance of the merger agreement by the board of directors was a triggering event for the evaluation of the goodwill in the Company and indicated a new value for the entire Company. The acceptance of the offer indicated that the value of the goodwill was diminished. A charge for $7,133,384 was made in the quarter ended September 30, 2003 to reflect the impairment of the value of goodwill. There is no tax effect for this charge since the Company's goodwill is not deductible for tax purposes. The acceptance of the merger also represented a triggering event for the evaluation of impairment under SFAS No. 144 of the properties used in the business. A calculation was performed by management to assess the future undiscounted cash flow from the properties. The results of that calculation indicated that the undiscounted cash flow from the properties exceeded the carrying value of those properties, therefore no impairment is indicated. Note 8 - Litigation: The Company is a party to various legal proceedings. In the opinion of management, these actions are routine in nature and will not have a material adverse effect on the Company's consolidated financial statements in subsequent years. 9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIGNIFICANT ACCOUNTING POLICIES For a description of critical accounting policies, including those which involve varying degrees of judgement, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002. OVERVIEW The operations of the Company are comprised primarily of the operations of owned hotels and the Company's management of hotels owned by third parties. In the discussion that follows, "Comparable Hotels" means only those hotels owned and operated by the Company since January 1, 2002 and still owned and operated as of September 30, 2003. There were no new hotels added since January 1, 2002. THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2002 Room and related services revenue decreased 1.7% to $9,057,575 in 2003 from $9,215,941 in 2002. For Comparable Hotels: (i) the average daily room rate decreased to $65.58 for 2003 from $66.76 in 2002; (ii) occupancy increased in 2003 to 72.3% from 69.7% in 2002; and (iii) room and related services revenue increased 1.8% from $8,901,534 in 2002. The Company selectively lowered room rates in order to maintain or increase occupancy rates at or above 2002 levels. Food and beverage revenues are principally a function of the number of guests who stay at each owned hotel, local walk-in business and catering sales. These revenues increased 3.6% to $2,709,738 in 2003 from $2,616,488 in 2002. For Comparable Hotels, food and beverage revenues increased 5.6% from $2,567,236 in 2002. Management fee income, which is based on a percentage of revenue or a fixed fee, increased 18.4% to $875,589 in 2003 from $739,409 in 2002. This increase is primarily due to an increase in the number of properties under management and improved revenues at the managed properties. Total direct operating expenses increased 0.6% to $5,083,541 in 2003 from $5,052,959 in 2002 and increased as a percentage of room and related services and food and beverage revenues to 43.2% from 42.7%. Total direct operating expenses increased 3.0% for Comparable Hotels. Occupancy expenses decreased 10.0% to $1,479,366 from $1,644,423 in 2003. At Comparable Hotels, occupancy expenses decreased 7.8%. General and administrative expenses increased 1.8% to $3,181,663 in 2003 from $3,126,159 in 2002 and increased as a percentage of total revenues to 24.6% from 24.4%. This increase is primarily attributable to certain professional and legal fees related to the merger agreement. Excluding these costs, general and administrative expenses would have decreased 4.8%. For Comparable Hotels and excluding merger expenses, general and administrative expenses decreased 3.6%. Depreciation decreased by $71,413 in 2003 from $992,409 in 2002. For Comparable Hotels, depreciation decreased $22,974. The acceptance of the merger agreement by the board of directors was a triggering event for the evaluation of the goodwill in the Company and indicated a new value for the entire Company. The acceptance of the offer indicated that the value of the goodwill was diminished. A charge for $7,133,384 was made to reflect the impairment of the value of goodwill. There is no tax effect for this charge since the Company's goodwill is not deductible for tax purposes. Interest income increased to $125,018 in 2003 from $110,091 in 2002. This increase is due to interest on the notes from Messrs. Beck and Yeaggy for the JAGI Subsidiary, Inc. common stock acquired by them in connection with the restructuring of the Company effective April 18, 2003 offset by lower available funds for investment. 10 Interest expense decreased to $1,085,582 in 2003 from $1,378,377 in 2002. The decrease was attributable to the restructuring of debt for four properties near Cleveland, Ohio, the reduction of subordinated debt in December 2002, the pay-off of debt related to a property sold in the second quarter of 2003 and scheduled amortization. In 2002, the Company recorded a gain of $5,787,088 from the settlement of mortgage debt for four properties near Cleveland, Ohio. In the three months ended September 30, 2003 and 2002, the Company recorded gains, net of tax, from discontinued operations of $17,414 and $29,691, respectively. In April 1998, the Company sold its oil and gas services operations and reported the transaction as a discontinued operation. The consideration for the sale included a $500,000 note. As of December 31, 1999, management, based on representations from the debtor, concluded that the note was not collectible and the write-off was reported as a discontinued operation consistent with the reporting of the original transaction. Collections in respect of this note subsequent to the write-off have been reported as gains from discontinued operations. The Company used an effective tax rate of 42% for federal and state taxes to calculate its tax provision for the three months ended September 30, 2003. The Company had a net loss of $6,397,750 for the three months ended September 30, 2003 compared to net income of $3,866,185 for the three months ended September 30, 2002. This change is attributable primarily to the goodwill impairment in 2003 and the after tax effect of the gain from debt settlement. NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2002 Room and related services revenue decreased 2.2% to $21,924,600 in 2003 from $22,405,386 in 2002. For Comparable Hotels: (i) the average daily room rate decreased to $60.97 for 2003 from $63.78 in 2002; (ii) occupancy increased in 2003 to 62.6% from 59.8% in 2002; and (iii) room and related services revenue decreased 0.2% to $21,662,252 from $21,695,714 in 2002. Food and beverage revenues decreased 0.8% to $7,307,380 in 2003 from $7,364,141 in 2002. For Comparable Hotels, food and beverage revenues was flat compared to 2002. Management fee income, which is based on a percentage of revenue or a fixed fee, increased 0.2% to $2,158,420 in 2003 from $2,155,223 in 2002. Total direct operating expenses increased 1.6% to $13,394,245 in 2003 from $13,181,070 in 2002 and increased as a percentage of room and related services and food and beverage revenues to 45.8% from 44.3%. Total direct operating expenses increased 3.0% for Comparable Hotels. Occupancy expenses decreased 3.3% to $4,303,324 in 2003 from $4,450,822 in 2002. At Comparable Hotels, occupancy expenses decreased 2.0%. General and administrative expenses decreased 2.1% to $8,577,996 in 2003 from $8,765,167 in 2002 and decreased as a percentage of total revenues to 26.6% from 26.9%. Excluding certain professional and legal fees related to the merger agreement, general and administrative expenses decreased 5.1%. For Comparable Hotels and excluding merger expenses, general and administrative expenses increased 4.6%. Depreciation decreased by $49,193 in 2003 from $2,953,149 in 2002. For Comparable Hotels, depreciation increased $30,694. The acceptance of the merger agreement by the board of directors was a triggering event for the evaluation of the goodwill in the Company and indicated a new value for the entire Company. The acceptance of the offer indicated that the value of the goodwill was diminished. A charge for $7,133,384 was made to reflect the impairment of the value of goodwill. There is no tax effect for this charge since the Company's goodwill is not deductible for tax purposes. Interest income decreased to $150,160 in 2003 from $329,680 in 2002. This decrease is due to lower available funds for investment offset by interest on the notes from Messrs. Beck and Yeaggy for the JAGI Subsidiary, Inc. common stock acquired by them in connection with the restructuring of the Company effective April 18, 2003. 11 Interest expense decreased to $3,102,969 in 2003 from $4,670,505 in 2002. The decrease was attributable to the restructuring of debt for four properties near Cleveland, Ohio, the reduction of subordinated debt in December 2002, the pay-off of debt related to a property sold in the second quarter of 2003 and traditional amortization. In 2002, the Company recorded a gain of $5,787,088 from the settlement of mortgage debt for four properties near Cleveland, Ohio. In the nine months ended September 30, 2003 and 2002, the Company recorded gains, net of tax, from discontinued operations of $40,966 and $64,521, respectively. In April 1998, the Company sold its oil and gas services operations and reported the transaction as a discontinued operation. The consideration for the sale included a $500,000 note. As of December 31, 1999, management, based on representations from the debtor, concluded that the note was not collectible and the write-off was reported as a discontinued operation consistent with the reporting of the original transaction. Collections in respect of this note subsequent to the write-off have been reported as gains from discontinued operations. For the nine months ended September 30, 2003, the Company's tax credit was calculated after giving effect to the business restructuring described above. The principal reason for the larger than expected tax credit relates to deferred state taxes of approximately $1,600,000 that will not be payable as a result of the business restructuring. The Company had a net loss of $6,193,112 for the nine months ended September 30, 2003 compared to net income of $2,750,956 for the nine months ended September 30, 2002. This change is attributable primarily to the goodwill impairment in 2003 and the after tax effect of the gain from debt settlement in 2002. LIQUIDITY AND CAPITAL RESOURCES Total assets decreased to $88,940,972 at September 30, 2003 from $101,975,670 at December 31, 2002. Net cash provided by operating activities increased to $2,478,389 in the nine months ended September 30, 2003 from $1,839,456 in the nine months ended September 30, 2002. The increase is primarily the result of the lower operating loss, which excludes the goodwill impairment, the loss on the sale of property and deferred taxes in 2003 and the gain from restructured debt, the gain from the sale of property and deferred taxes in 2002, for the nine months ended September 30, 2003 offset by the net decrease in operating assets and liabilities. Excluding the previously mentioned items, the Company had operating income of $64,528 in 2003 compared to an operating loss of $1,482,959 in 2002. Net cash provided by investing activities was $572,657 in the nine months ended September 30, 2003 compared to cash provided by investing activities of $1,648,116 in the nine months ended September 30, 2002. This change is attributable to the higher capital expenditures in 2003, lower proceeds from the sale of properties in 2003 and the pay-off of the notes receivable in December 2002. The Company plans to spend an additional $163,000 on capital improvements during the remainder of 2003. Net cash used in financing activities was $4,975,589 in the nine months ended September 30, 2003 compared to $7,703,795 used in financing activities in the nine months ended September 30, 2002. This change resulted from the reduced cash used in net short and long term borrowings, no purchase of common stock in 2003 and the increase in restricted cash in 2003. The Company maintains a number of commercial banking relationships and maintains aggregate lines of credit totaling $6,500,000, which had $3,992,708 outstanding at September 30, 2003. The Company's contractual obligations at September 30, 2003, and the effect such obligations are expected to have on its liquidity and cash flow in future periods have not changed materially since December 31, 2002. The Company's principal sources of liquidity are cash on hand (including escrow deposits and replacement reserves), cash from operations, earnings on invested cash and, when required, principally in connection with acquisitions, borrowings (consisting primarily of loans secured by mortgages on real property owned or to be acquired by the Company). The Company's continuing operations are funded through cash generated from its hotel operations. Acquisitions of hotels are expected to be financed through a combination of cash on hand, internally generated cash, issuance of equity securities and borrowings, some of which is likely to be secured by assets of the Company. 12 Seasonality Demand at many of the Company's hotels is affected by seasonal patterns. Demand for hotel rooms in the industry generally tends to be lower during the first and fourth quarters and higher in the second and third quarters. Accordingly, the Company's revenues reflect similar seasonality. Forward Looking Statements When used in this and in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases and in oral statements made with the approval of an authorized executive officer of the Company, the words or phrases "will likely result," "expects," "plans," "will continue," "is anticipated," "estimated," "project" or "outlook" or similar expressions (including confirmations by an authorized executive officer of the Company of any such expressions made by a third party with respect to the Company) are intended to identify forward-looking statements. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, each of which speak only as of the date made. All such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements, including without limitation, the impacts of the terrorist attacks of September 11, 2001 on the travel and hospitality industries; the duration and severity of the recent downturn in the economy; the availability and cost of long-term financing for the Company's hotel properties; the seasonality of the hotel business; general real estate and economic conditions; the cost and availability of capital for scheduled maintenance, renovations and expansion; government and regulatory action affecting the hotel industry; the Company's ability to generate adequate working capital to sustain its operations, described under the heading "Liquidity and Capital Resources" above; and the other risks and uncertainties set forth in the annual, quarterly and current reports of the Company. The Company has no obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements. ITEM 4 - CONTROLS and PROCEDURES In accordance with the Securities Exchange Act Rules 13a-15 and 15d-15, the Company's management, under the supervision of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of the Company's disclosure controls and procedures were effective. There have been no significant changes in internal controls over financial reporting or in other factors that could significantly affect internal controls over financial reporting subsequent to the date of such evaluation. 13 PART II--OTHER INFORMATION Items 1 to 5 None Item 6 -- Exhibits and Reports on Form 8-K. A. Exhibits The following exhibits are filed as part of this report:

* Filed herewith. B. Reports on Form 8-K The reports on Form 8-K filed during the three months ended September 30, 2003 were as follows:

SIGNATURES Pursuant to the requirements 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. JANUS HOTELS AND RESORTS, INC. Dated: November 14, 2003 /s/ Richard A. Tonges ----------------- ------------------------------------------- Richard A. Tonges Treasurer and Vice President of Finance (Principal Financial and Accounting Officer) 14 CERTIFICATIONS I, Louis S. Beck, Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Janus Hotels and Resorts, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2003 /s/ Louis S. Beck ---------------------------------------------- Louis S. Beck Chief Executive Officer 15 I, Richard A. Tonges, Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Janus Hotels and Resorts, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2003 /s/ Richard A. Tonges ---------------------------------------------- Richard A. Tonges Chief Financial Officer 16

JANUS HOTELS & RESORTS INC 10-Q