<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 3, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from __________________ to ___________________
Commission File number 033-73340 01
John Q. Hammons Hotels, L.P.
John Q. Hammons Hotels Finance Corporation
John Q. Hammons Hotels Finance Corporation II
(Exact name of registrants as specified in their charters)
<TABLE>
<S> <C>
Delaware 43-1523951
Missouri 43-1680322
Missouri 43-1720400
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
</TABLE>
300 John Q. Hammons Parkway
Suite 900
Springfield, MO 65806
(Address of principal executive offices)
(Zip Code)
(417) 864-4300
(Registrants' telephone number, including area code)
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
---- ----
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED BALANCE SHEETS
(000's omitted)
ASSETS
<TABLE>
<CAPTION>
October 3, 1997 January 3, 1997
--------------- ---------------
(Unaudited) (Audited)
CURRENT ASSETS
<S> <C> <C>
Cash and equivalents $ 47,137 $ 46,449
Marketable securities 6,234 2,355
Receivables
Trade, less allowance for doubtful accounts
of $163 8,298 5,790
Construction reimbursements and management fees 2,159 825
Inventories 1,141 1,019
Prepaid expenses and other 585 1,928
--------- ---------
Total current assets 65,554 58,366
--------- ---------
PROPERTY AND EQUIPMENT, at cost
Land and improvements 40,093 29,712
Buildings and improvements 551,956 433,059
Furniture, fixtures and equipment 199,192 160,198
Construction in progress 89,335 120,525
--------- ---------
880,576 743,494
Less-accumulated depreciation and amortization (189,109) (174,899)
--------- ---------
691,467 568,595
--------- ---------
DEFERRED FINANCING COSTS, FRANCHISE FEES 29,812 31,111
AND OTHER, net --------- ---------
$ 786,833 $ 658,072
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
2
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JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED BALANCE SHEETS
(000's omitted)
LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
October 3, 1997 January 3, 1997
--------------- ---------------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 30,433 $ 12,444
Accounts payable 23,297 29,977
Accrued expenses:
Payroll and related benefits 4,618 4,611
Sales and property taxes 9,920 7,059
Insurance 10,678 9,511
Interest 3,675 12,634
Utilities, franchise fees and other 6,563 6,242
-------- --------
Total current liabilities 89,184 82,488
LONG-TERM DEBT 632,187 518,699
OTHER OBLIGATIONS AND DEFERRED REVENUE 5,424 7,023
-------- --------
Total liabilities 726,795 608,210
-------- --------
COMMITMENTS AND CONTINGENCIES
EQUITY
Contributed Capital 96,436 96,436
Partners' and other deficits, net (36,398) (46,574)
-------- --------
Total equity 60,038 49,862
-------- --------
$786,833 $658,072
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
3
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JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(000's omitted)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Oct. 3, 1997 Sept. 27, 1996 Oct. 3, 1997 Sept. 27, 1996
--------------------------------- --------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Rooms $ 53,360 $45,563 $149,339 $129,920
Food and beverage 19,472 17,308 60,710 56,504
Meeting room rental and other 6,032 4,458 15,576 13,868
-------- ------- -------- --------
Total revenues 78,864 67,329 225,625 200,292
-------- ------- -------- --------
OPERATING EXPENSES:
Direct operating costs and expenses-
Rooms 13,250 10,953 37,092 32,073
Food and beverage 14,888 13,107 44,826 41,858
Other 878 704 2,457 2,154
General, administrative and sales expenses 23,406 18,463 63,758 56,255
Repairs and maintenance 3,227 2,890 9,321 8,526
Depreciation and amortization 9,422 6,310 24,459 18,256
-------- ------- -------- --------
Total operating expenses 65,071 52,427 181,913 159,122
-------- ------- -------- --------
INCOME FROM OPERATIONS 13,793 14,902 43,712 41,170
OTHER INCOME (EXPENSE)
Interest income 298 570 787 1,790
Interest expense and amortization of
deferred financing fees (12,022) (9,109) (31,908) (28,538)
-------- ------- -------- --------
NET INCOME $ 2,069 $ 6,363 $ 12,591 $ 14,422
======== ======= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
4
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JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(000's omitted)
<TABLE>
<CAPTION>
Contributed Partners and
Capital Other Equity (Deficit)
----------- ------------------------
General General Limited
Partner Partner Partner Total
----------- ------------ ---------- --------
<S> <C> <C> <C> <C>
BALANCE, January 3, 1997 (Audited) $96,436 ($80,236) $33,662 $49,862
Distributions -- -- (2,415) (2,415)
-- 3,565 9,026 12,591
Net Income
------- --------- ------- -------
BALANCE, October 3, 1997 (Unaudited) $96,436 $ (76,671) $40,273 $60,038
======= ========= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
5
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JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
(000's omitted)
<TABLE>
<CAPTION>
Nine Months Ended
October 3, 1997 September 27, 1996
--------------- ------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,591 $ 14,422
Adjustments to reconcile net income to cash provided by operating activities-
Depreciation, amortization, and loan cost amortization 25,931 19,596
Changes in certain assets and liabilities
Receivables (3,842) 689
Inventories (122) 127
Prepaid expenses and other 1,343 870
Accounts payable (6,680) 3,359
Accrued expenses (4,613) (1,153)
Other obligations and deferred revenue (1,599) (462)
-------- -------
Net cash provided by operating activities 23,009 37,448
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment, net (144,245) (92,742)
Franchise fees and other (3,259) (1,761)
Sale (purchase) of marketable securities, net (3,879) 14,936
-------- -------
Net cash used in investing activities (151,383) (79,567)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 152,159 32,133
Repayments of debt (20,682) (1,068)
Distributions to partners (2,415) (2,680)
-------- -------
Net cash provided by financing activities 129,062 28,385
-------- -------
Increase (decrease) in cash and equivalents 688 (13,734)
CASH AND EQUIVALENTS, beginning of period 46,449 41,777
-------- -------
CASH AND EQUIVALENTS, end of period $ 47,137 $ 28,043
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID FOR INTEREST, net of amounts capitalized $ 39,395 $ 31,671
======== =======
</TABLE>
See Notes to Consolidated Financial Statements
6
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JOHN Q. HAMMONS HOTELS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ENTITY MATTERS
The accompanying consolidated financial statements include the accounts of John
Q. Hammons Hotels, L.P. and its wholly-owned subsidiaries ("Partnership"),
consisting of John Q. Hammons Finance Corporation ("Finance Corp.") and John Q.
Hammons Hotels Finance Corporation II ("Finance Corp. II"), both corporations
with nominal assets and no operations, the catering corporations (which are
separate corporations for each hotel location chartered to own the respective
food and liquor licenses and operate the related food and beverage facilities),
and certain other wholly-owned subsidiaries conducting certain hotel operations.
In conjunction with a public offering of first mortgage notes in February 1994
(the "1994 Notes") and in November 1995 ("1995 Notes") by the Partnership and
Finance Corp. I and II, and a public offering of common stock in November 1994
("Common Stock Offering") by its general partner, John Q. Hammons Hotels, Inc.
("General Partner"), the Partnership, which owned and operated ten hotels
properties, obtained through transfers or contributions from Mr. John Q. Hammons
("Mr. Hammons") or enterprises that he controlled, 21 additional operating hotel
properties, equity interests in two hotels under construction, the stock of
catering corporations and management contracts relating to all of Mr. Hammons'
hotels.
The Partnership is directly or indirectly owned and controlled by Mr. Hammons,
as were all enterprises that transferred or contributed net assets to the
Partnership. Accordingly, the accompanying financial statements present, as a
combination of entities under common control as if using the pooling method of
accounting, the financial position and related results of operations of all
entities on a consolidated basis for all periods presented.
All significant balances and transactions between the entities and properties
have been eliminated.
Mr. Hammons and entities directly or indirectly owned or controlled by him are
the only limited partners of the Partnership. Mr. Hammons, through his voting
control of the General Partner, continues to be in control of the Partnership.
2. GENERAL
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-Q. Accordingly, certain information and footnotes
required by generally accepted accounting principles (GAAP) for complete
financial statements have been omitted. These interim statements should be read
in conjunction with the financial statements and notes
7
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thereto included in the Partnership's Form 10-K for the fiscal year ended
January 3, 1997, which included financial statements for the fiscal years ended
January 3, 1997, December 29, 1995 and December 30, 1994.
The information contained herein reflects all normal and recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
the results of operations and financial position for the interim periods.
The Partnership considers all operating cash accounts and money market
investments with an original maturity of three months or less to be cash
equivalents. Marketable securities consist of available-for-sale commercial
paper and governmental agency obligations which mature or will be available for
use in operations in 1997. These securities are valued at current market value,
which approximates cost.
3. ALLOCATIONS OF INCOME, LOSSES AND DISTRIBUTIONS
Income, losses and distributions of the Partnership will generally be allocated
between the General Partner and the limited partners based on their respective
ownership interests of 28.31% and 71.69%.
In the event the Partnership has taxable income, distributions are to be made to
the partners in an aggregate amount equal to the amount that the Partnership
would have paid for income taxes had it been a C Corporation during the
applicable period. Aggregate tax distributions will first be allocated to the
General Partner, if applicable, with the remainder allocated to the limited
partners.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
For purposes of this discussion, the Partnership classifies new hotels (New
Hotels) as those hotels opened during the current year and the prior year, and
defines all other hotels as mature hotels (Mature Hotels).
The Partnership has opened five New Hotels in the past nine months, and has an
additional five hotels under construction. The Partnership's development
activity restricts its ability to grow per share income in the short term. Fixed
charges for New Hotels (such as depreciation and amortization expense and
interest expense) exceed New Hotel operating cash flow in the first one to three
years of operations. As New Hotels mature, the Partnership expects, but there
can be no assurance, that the operating expenses for these hotels will decrease
as a percentage of revenues. This has been the Partnership's experience in the
past.
The Partnership plans to continue with its development of full-service, and all-
suite hotels based on favorable market fundamentals and because few hotels are
being constructed in the
8
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upscale sector of the hotel industry. While the Partnership believes its
development efforts represent the best long-term strategy, continued aggressive
New Hotel developments is likely to have a negative effect on short-term
earnings.
The Partnership continues to evaluate its properties and how best to allocate
capital resources. For example, the Partnership currently plans to sell six of
its lower-performing properties over the next several months. This sale would
eliminate significant capital replacement costs necessary to continue operation
of these hotels in their current franchises, and allow the Partnership to invest
its resources in newer assets.
The following discussion and analysis addresses results of operations for the
three and nine months ended October 3, 1997 and September 27, 1996.
THREE MONTHS
General. For the three months ended October 3, 1997 (1997 Three Months), the
Partnership's 37 Mature Hotels generated total revenues of $68.9 million, an
increase of $2.0 million, or 3.0%, compared to the three months ended September
27, 1996 (1996 Three Months). During the same period, the Mature Hotels' income
from operations increased to $13.7 million, an increase of $1.4 million, or
11.4%. Earnings before interest, taxes, depreciation and amortization (EBITDA)
related to the Mature Hotels increased to $20.5 million, an increase of $1.6
million, or 8.3%. As a percentage of total revenues, EBITDA related to the
Mature Hotels increased to 29.7% in the 1997 Three Months from 28.3% in the same
period of the prior year.
The Partnership's seven New Hotels generated total revenues of $8.9 million
during the 1997 Three Months compared to $0.2 million in the 1996 Three Months
when only one of the New Hotels was open. Loss from operations for the New
Hotels was $2.0 million, and the New Hotels' EBITDA for the current quarter was
$0.8 million compared to $0.1 million in the 1996 Six Months.
Total revenues increased $11.5 million, or 17.1%, compared to the 1996 Three
Months, primarily as a result of the continued growth of the New Hotels,
including the two hotels opened during the quarter, and, to a lesser extent,
revenue growth at the Mature Hotels.
Rooms revenues increased $7.8 million, or 17.1%, from the 1996 Three Months, but
remained stable as a percentage of total revenues, at 67.7%. The dollar increase
was primarily due to increased rooms revenues from the New Hotels. Also
contributing to the rooms revenue growth was a 5.8% increase in average room
rate for the Mature Hotels.
Food and beverage revenues increased $2.2 million, or 12.5%, compared to the
1996 Three Months, and decreased slightly as a percentage of total revenues, to
24.7%, from 25.7%. Sales at the New Hotels with full food and beverage services
accounted for the overall dollar increase in food and beverage revenues.
9
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Meeting room rental and other revenues increased $1.6 million, or 35.3%, from
the 1996 Three Months, and increased as a percentage of revenues, from 6.6% to
7.6%. The majority of the increase was a result of increased meeting and
convention business in the Mature Hotels as well as revenues from the New
Hotels.
In general, as discussed below, the Partnership's total operating expenses
increased as a percentage of revenues, primarily related to the New Hotels.
During the 1997 Three Months, the Mature Hotels decreased total operating
expenses for the Mature Hotels compared to the same period in the prior year.
Rooms operating expenses increased $2.3 million, or 21.0%, compared to the 1996
Three Months, and increased slightly as a percentage of rooms revenues, to 24.8%
compared to 24.0%. The increase related entirely to expenses for New Hotels. For
the Mature Hotels, rooms operating expenses decreased as a percentage of rooms
revenues, to 24.3% compared to 24.6% in the 1996 Three Months.
Food and beverage operating expenses increased $1.8 million, or 13.6%, compared
to the 1996 Three Months, and increased slightly as a percentage of food and
beverage revenues, to 76.5% from 75.7%. The increase was attributable entirely
to the New Hotels. Food and beverage operating expenses for the Mature Hotels
decreased as a percentage of food and beverage revenues, to 75.3% compared to
75.7% in the 1996 Three Months.
Other operating expenses increased $0.2 million, or 24.7%, compared to the 1996
Three Months, and decreased as a percentage of meeting room rental and other
revenues, to 14.6% from 15.8% in the same period of the prior year.
General, administrative and sales expenses increased $4.9 million, or 26.8%,
over the 1996 Three Months, and increased as a percentage of revenues to 29.7%
from 27.4%. The increase was primarily attributable to expenses associated with
the New Hotels, including management and sales payroll and marketing. General,
administrative and sales expenses for the Mature Hotels remained stable at 27.1%
of total revenues in both the 1997 and 1996 third quarters.
Repairs and maintenance expenses increased $0.3 million, or 11.7%, compared to
the 1996 Three Months, but decreased as a percentage of revenues, to 4.1% from
4.3%. This decrease as a percentage of revenues occurred since the New Hotels
require lower repairs and maintenance in the first two to three years after
opening.
Depreciation and amortization expenses increased $3.1 million, or 49.3%,
compared to the 1996 Three Months, and increased as a percentage of revenues to
11.9% from 9.4%. Depreciation and amortization increased as a percentage of
total revenues due to the New Hotels, as depreciation and amortization expenses
are higher in the initial years of a New Hotel's operation.
Income from operations decreased $1.1 million, or 7.4%, compared to the 1996
Three Months, and decreased as a percentage of revenues, from 22.1% to 17.5%.
Expenses
10
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related to operating the New Hotels, particularly general, administrative and
sales expenses and depreciation and amortization, increased more rapidly than
revenues.
Interest income decreased $0.3 million, or 47.7%, from the third quarter of
1996, and decreased to 0.4% of revenues, from 0.8%, as the Partnership spent
additional amounts for new construction and carried lower cash, cash equivalents
and marketable securities balances.
Interest expense and amortization of deferred financing fees increased $2.9
million, or 32.0%, from the 1996 Three Months, and increased as a percentage of
total revenues to 15.2% from 13.5%. These increased costs related to interest
expense on financing for the New Hotels.
Net income decreased $4.3 million, or 67.5%, from the three months ended
September 27, 1996, and decreased as a percentage of revenues to 2.6% from 9.5%.
The decrease was primarily attributable to higher depreciation and amortization
costs as well as interest expense associated with the Partnership's New Hotels.
NINE MONTHS
General. For the nine months ended October 3, 1997 (1997 Nine Months), the 37
Mature Hotels generated total revenues of $205.1 million, an increase of $5.5
million, or 2.8%, compared to the nine months ended September 27,1996 (1996 Nine
Months). During the same period the Mature Hotels' income from operations
increased to $40.2 million, an increase of $4.4 million, or 12.3%. EBITDA for
the 1997 Nine Months increased to $59.5 million, an increase of $4.3 million, or
7.8%. As a percentage of total revenues, EBITDA increased to 29.0% in the 1997
Nine Months from 27.7% in the 1996 Nine Months.
The seven New Hotels generated total revenues of $20.1 million during the 1997
Nine Months compared to $0.2 million in the 1996 Nine Months when only one of
the New Hotels was open. Loss from operations for the New Hotels was $2.9
million, and the New Hotels' EBITDA for the 1997 Nine Months was $3.4 million
compared to $0.1 million in the 1996 Nine Months.
Total revenues increased $25.3 million in the 1997 Nine Months, or 12.6%,
compared to the 1996 Nine Months, primarily due to revenues generated by the New
Hotels.
Rooms revenues increased $19.4 million, or 14.9%, compared to the 1996 Nine
Months, and increased as a percentage of total revenues to 66.2% from 64.9%. The
increase was primarily attributed to the New Hotels which achieved a 58.9%
occupancy and a $107.82 average room rate in the 1997 Nine Months. The New
Hotels had 229,365 rooms available in the 1997 Nine Months compared to 2,438 in
the 1996 Nine Months when only one of the seven New Hotels was open. Rooms
available is a function of the number of hotels open and the number of months
each hotel operates during the respective period.
11
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Food and beverage revenues increased $4.2 million, or 7.4%, compared to the 1996
Nine Months, as the result of the New Hotels. These revenues decreased as a
percentage of total revenues to 26.9% from 28.2%, however, since the New Hotels
include two Homewood Suites extended-stay hotels which do not offer food and
beverage services.
Meeting room rental and other revenues increased $1.7 million, or 12.3%,
compared to the 1996 Nine Months, and remained stable as a percentage of total
revenues, at 6.9%.
Rooms operating expenses increased $5.0 million, or 15.6%, and increased
slightly as a percentage of room revenues, to 24.8% from 24.7%. The overall
dollar increase related to growth in the total number of rooms occupied
generated by the New Hotels.
Food and beverage operating expenses increased $3.0 million, or 7.1%, compared
to the 1996 Nine Months, but decreased slightly as a percentage of food and
beverage revenues, to 73.8% from 74.1%, due to improved cost controls in the
Mature Hotels.
Other operating expenses increased $0.3 million, or 14.1%, compared to the 1996
Nine Months, and remained relatively stable as a percentage of meeting room
rental and other revenues at 15.8% in the 1997 Nine Months compared to 15.5% in
the same period of the prior year.
General, administrative and sales expenses increased $7.5 million, or 13.3%,
compared to the 1996 Nine Months, and increased only slightly as a percentage of
total revenues, to 28.3% from 28.1%. The slight increase in general,
administrative and sales expenses as a percentage was associated with the New
Hotels, which generally had a higher expense margin than did the Mature Hotels,
which is common in New Hotels.
Repairs and maintenance expenses increased $0.8 million, or 9.3%, compared to
the 1996 Nine Months, and decreased slightly as a percentage of total revenues
to 4.1% from 4.3%. As the total mix of the Partnership's hotel rooms shifted to
newer rooms, these expenditures declined as a percentage of revenues.
Depreciation and amortization expenses increased $6.2 million, or 34.0%,
compared to the 1996 Nine Months, and increased as a percentage of total
revenues to 10.8% from 9.1%. The Partnership recognized $6.3 million of
depreciation and amortization expenses related to the seven New Hotels open
during the 1997 Nine Months as compared to $0.1 million in the 1996 Nine Months,
when only one of the seven New Hotels was open. As noted above, depreciation and
amortization expenses are higher in the initial years of a New Hotel's
operation.
Income from operations increased $2.5 million, or 6.2%, compared to the 1996
Nine Months, but decreased as a percentage of revenues to 19.4% from 20.6%, as
the growth in depreciation and amortization expenses for the Partnership's New
Hotels increased more rapidly than related revenues.
12
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Interest income decreased $1.0 million, or 56.0%, compared to the 1996 Nine
Months, and decreased as a percentage of revenues to 0.3% from 0.9%, as the
Partnership spent additional amounts for new construction and carried lower
cash, cash equivalents and marketable securities balances.
Interest expense and amortization of deferred financing fees increased $3.4
million, or 11.8%, compared to the 1996 Nine Months, but remained relatively
stable as a percentage of revenues, at 14.1% compared to 14.2%.
Net income decreased $1.8 million, or 12.7%, compared to the 1996 Nine Months.
The decrease was attributable to increased depreciation and amortization expense
related to the New Hotels.
Liquidity and Capital Resources
In general, the Partnership has financed its operations through internal cash
flow, loans from financial institutions, the issuance of public debt and equity
and the issuance of industrial revenue bonds. Twenty of the Partnership's hotels
are pledged to secure the 1994 Notes (the "1994 Collateral Hotels"). Eight of
the Partnership's hotels are pledged to secure the 1995 Notes (the "1995
Collateral Hotels"). The Partnership in the future may obtain mortgage financing
secured by unencumbered hotels and construction in progress to provide
additional liquidity, if necessary. The Partnership's principal uses of cash are
to pay operating expenses, to service debt, and to fund capital expenditures,
new hotel development and partnership distributions.
At October 3, 1997, the Partnership had $47.1 million of cash and equivalents
and $6.2 million of marketable securities, compared to $46.4 million and $2.4
million, respectively, at the end of 1996. Total current assets at October 3,
1997, increased $7.2 million, primarily as the result of the increase in
marketable securities, and also as the result of a $2.5 million increase in
trade receivables related to the Partnership's higher cyclical revenues
generated during the third quarter.
Net cash provided by operating activities was $23.0 million for the 1997 Nine
Months compared to $37.4 million at the end of the same period in 1996. The
majority of the decrease was due to increases in trade receivables as described
above, decreases in construction accounts payable and a decrease in accrued
interest expense.
The Partnership's long-term debt increased $113.5 million during the 1997 Nine
Months to fund a significant portion of the activities described below. The
Partnership incurred net capital expenditures of $144.2 million during the 1997
Nine Months and $92.7 million during the 1996 Nine Months. Of the $144.2 million
incurred during the 1997 Nine Months, $14.6 million was for capital improvements
on existing hotel properties and $129.6 million was for the development of New
Hotels. During the remainder of 1997 the Partnership expects capital
expenditures to total approximately $21.3 million, including $5.0 million for
capital improvements on existing hotels and $16.3 million for continued New
Hotel development.
13
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The Partnership currently has five hotels under construction. The Partnership
estimates the remaining building and pre-opening costs of these hotels will
require additional capital expenditures of approximately $78.5 million,
including expenses scheduled in the remainder of 1997 and during 1998.
Construction in progress at October 3, 1997 included $80.5 million expended for
these projects. The Partnership has received loans and loan commitments for the
projects under construction in the amount of $76.0 million, with $42.8 million
available as of October 3, 1997.
In addition to capital expenditures for the hotels under construction, the
Partnership is at various stages in other new hotel development. Capital
requirements for the new hotels under development are expected to be provided by
(i) mortgage financing secured by the scheduled hotels as described above; (ii)
existing cash; and (iii) cash generated by hotel operations.
At the present time, the Partnership expects to continue to develop New Hotels
through limited partnerships in which the Partnership will be the general
partner and an affiliate of the general partner will be the limited partner. As
permitted by the indentures relating to the 1994 Notes and the 1995 Notes (the
"1994 and 1995 Note Indentures"), each of these entities will be an
"Unrestricted Subsidiary" for purposes thereof, and accordingly, the ability of
the Partnership to fund these entities is subject to certain limitations
contained in the 1994 and 1995 Note Indentures. All of the indebtedness of these
entities will be non-recourse to the Partnership. The Partnership believes that
funding permitted under the 1994 and 1995 Note Indentures will be sufficient to
meet its development plans.
Based upon current plans relating to the timing of New Hotel development, the
Partnership anticipates that its capital resources will be adequate to satisfy
its 1997 capital requirements for the currently planned projects and normal
recurring capital improvement.
The Partnership accrued distributions of approximately $2.4 million during the
1997 Nine Months to its partners. Distributions by the Partnership to its
partners must be made in accordance with provisions of the 1994 and 1995 Note
Indentures.
NOTE: Certain matters discussed within this report, including statements
regarding the Partnership's expectations or plans, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements involve risks and uncertainties and are
based on current expectations. Consequently, actual results could differ
materially from the expectations expressed in the forward-looking statements.
Among the various factors that could cause actual results to differ include a
downturn in the economy (either regionally or nationwide) affecting overall
hotel occupancy rates, revenues at New Hotels not reaching expected levels as
quickly as planned as the result of competitive factors or the Partnership's
inability to obtain permanent financing for New Hotels on terms similar to those
available in the past.
Supplemental Financial Information Relating to the 1994 and 1995 Collateral
Hotels
14
<PAGE>
The following tables set forth, as of October 3, 1997, unaudited selected
financial information with respect to the 1994 Collateral Hotels and the 1995
Collateral Hotels and the Partnership, excluding the Unrestricted Subsidiaries
(as defined in the indentures relating to the 1994 Notes and the 1995
Indentures) (the "Restricted Group"). Under the heading "Management Operations,"
information with respect to revenues and expenses generated by the Partnership
as manager of the 1994 Collateral Hotels, the 1995 Collateral Hotels, the other
Owned Hotels owned by John Q. Hammons Hotels Two, L.P. ("L.P. Two"), and the
Managed Hotels is provided.
<TABLE>
<CAPTION>
Trailing 12 Months Ended October 3, 1997
---------- ---------- ---------- ----------
1994 1995 Management Total
Collateral Collateral Operation Restricted
Hotels Hotels Group
---------- ---------- ---------- ----------
(Dollars in thousands, except operating data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Operating Revenues $154,689 $63,164 $ 4,286(a) $122,139
Operating Expenses:
Direct operating costs and expenses 58,618 24,637 -- 83,255
General, administrative, sales and
management expenses(b) 42,728 18,435 (2,147)(c) 59,016
Repairs and maintenance 6,145 2,837 -- 8,982
Depreciation and amortization 11,622 5,235 132 16,989
-------- ------ ------ -------
Total operating expenses 119,113 51,144 (2,015) 168,242
-------- ------ ------ -------
Income from Operations $ 35,576 $12,020 $ 6,301 $ 53,897
====== ====== ===== ======
Operating Data:
Occupancy 65.9% 65.9%
Average daily room rate $ 79.36 $ 74.36
RevPAR $ 52.31 $ 48.99
</TABLE>
<TABLE>
<CAPTION>
12 Months Ended January 3, 1997
---------- ---------- ---------- ----------
1994 1995 Management Total
Collateral Collateral Operation Restricted
Hotels Hotels Group
---------- ---------- ---------- ----------
(Dollars in thousands, except operating data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Operating Revenues $153,000 $61,375 $ 3,211(a) $217,586
Operating Expenses:
Direct operating costs and expenses 59,013 24,255 -- 83,268
General, administrative, sales and
management expenses(b) 42,196 18,193 (2,451)(c) 57,938
Repairs and maintenance 6,322 2,835 -- 9,157
Depreciation and amortization 10,235 4,714 120 15,069
------- ------ ------ -------
Total operating expenses 117,766 49,997 (2,331) 165,432
------- ------ ------ -------
Income from Operations $ 35,234 $11,378 $ 5,542 $ 52,154
====== ====== ===== ======
</TABLE>
15
<PAGE>
Operating Data:
Occupancy 66.5% 67.1%
Average daily room rate $ 77.06 $ 71.40
RevPAR $ 51.23 $ 47.92
- --------------------------------
(a) Represents management revenues derived from the Owned Hotels owned by Two
L.P. and the Managed Hotels
(b) General, administrative, sales and management expenses for the 1994 and 1995
Collateral Hotels includes management expenses allocated to the respective
hotels.
(c) General, administrative, sales and management expenses applicable to
management operations is net of management revenues allocated to the 1994 and
1995 Collateral Hotels.
PART II. OTHER INFORMATION AND SIGNATURES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
JOHN Q. HAMMONS HOTELS, L.P.
By: John Q. Hammons Hotels, Inc,
its General Partner
By: /s/ John Q. Hammons
------------------------------------------
John Q. Hammons, Chairman, Founder, and
Chief Executive Officer
By: /s/ Glenn R. Malone
------------------------------------------
Principal Financial or Chief Accounting
Officer
JOHN Q. HAMMONS HOTELS FINANCE
CORPORATION
By: /s/ John Q. Hammons
------------------------------------------
John Q. Hammons, Chairman, Founder, and
Chief Executive Officer
By: /s/ Glenn R. Malone
------------------------------------------
Principal Financial or Chief Accounting
Officer
JOHN Q. HAMMONS HOTELS FINANCE
CORPORATION II
By: /s/ John Q. Hammons
------------------------------------------
John Q. Hammons, Chairman, Founder, and
Chief Executive Officer
By: /s/ Glenn R. Malone
------------------------------------------
Principal Financial or Chief Accounting
Officer
Dated: November 14, 1997
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
financial statements for the quarter ended 10/3/97 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1998
<PERIOD-START> JUL-05-1997
<PERIOD-END> OCT-03-1997
<CASH> 47,137
<SECURITIES> 6,234
<RECEIVABLES> 10,620
<ALLOWANCES> 163
<INVENTORY> 1,141
<CURRENT-ASSETS> 65,554
<PP&E> 880,576
<DEPRECIATION> (189,109)
<TOTAL-ASSETS> 786,833
<CURRENT-LIABILITIES> 89,184
<BONDS> 390,000
0
0
<COMMON> 0
<OTHER-SE> 60,038
<TOTAL-LIABILITY-AND-EQUITY> 786,833
<SALES> 78,864
<TOTAL-REVENUES> 78,864
<CGS> 29,016
<TOTAL-COSTS> 65,071
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,022)
<INCOME-PRETAX> 2,069
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,069
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,069
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
