<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 April 3, 1998
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 033-7334001
John Q. Hammons Hotels, L.P.
John Q. Hammons Hotels Finance Corporation
John Q. Hammons Hotels Finance Corporation II
(Exact name of registrant as specified in its charter)
Delaware 43-1523951
Missouri 43-1680322
Missouri 43-1720400
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
300 John Q. Hammons Parkway
Suite 900
Springfield, MO 65806
(Address of principal executive offices)
(Zip Code)
(417) 864-4300
(Registrant's telephone number, including area code)
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) have been subject to such filing
requirements for the past 90 days.
Yes X No _______
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED BALANCE SHEETS
(000's omitted)
ASSETS
<TABLE>
<CAPTION>
April 3, 1998 January 2, 1998
------------- ---------------
(Unaudited) (Audited)
CURRENT ASSETS
<S> <C> <C>
Cash and equivalents $ 33,170 $ 41,961
Marketable securities 10,149 12,742
Receivables
Trade, less allowance for doubtful accounts of $188 8,713 7,652
Construction reimbursements and management fees 4,368 3,739
Management fees 61 50
Inventories 1,055 1,206
Prepaid expenses and other 1,018 1,386
--------- ---------
Total current assets 58,534 68,736
PROPERTY AND EQUIPMENT, at cost
Land and improvements 40,519 40,511
Buildings and improvements 549,225 527,856
Furniture, fixtures and equipment 204,868 197,177
Construction in progress 77,682 78,946
--------- ---------
872,294 844,490
Less-accumulated depreciation and amortization (175,467) (166,125)
--------- ---------
696,827 678,365
Property and equipment available for sale -- 38,791
---------- ---------
696,827 717,156
Restricted cash from property disposition 26,980 --
DEFERRED FINANCING COSTS, FRANCHISE FEES AND OTHER, net 31,907 30,841
--------- ---------
$ 814,158 $ 816,733
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED BALANCE SHEETS
(000's omitted)
LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
April 3, 1998 January 2, 1998
------------- ---------------
(Unaudited) (Audited)
CURRENT LIABILITIES
<S> <C> <C>
Current portion of long-term debt $ 60,194 $ 61,517
Accounts payable 7,865 11,232
Accrued expenses
Payroll and related benefits 3,976 5,529
Sales and property taxes 8,686 8,676
Insurance 11,928 11,242
Interest 3,712 12,603
Utilities, franchise fees and other 5,442 5,822
-------- --------
Total current liabilities 101,803 116,621
Long-term debt 648,987 634,274
Other obligations and deferred revenue 8,776 7,900
-------- --------
Total liabilities 759,566 758,795
-------- --------
COMMITMENTS AND CONTINGENCIES
EQUITY:
Contributed capital 96,436 96,436
Partners' and other deficits, net (41,844) (38,498)
-------- --------
Total equity 54,592 57,938
-------- --------
$814,158 $816,733
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(000's omitted)
<TABLE>
<CAPTION>
Three Months Ended
April 3, 1998 April 4, 1997
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(Unaudited)
<S> <C> <C>
REVENUES:
Rooms $ 51,278 $45,397
Food and beverage 21,938 20,397
Meeting room rental and other 5,736 4,748
-------- -------
Total revenues 78,952 70,542
OPERATING EXPENSES:
Direct operating costs and expenses
Rooms 13,195 11,269
Food and beverage 15,451 14,838
Other 876 750
General, administrative and sales expenses 23,984 20,073
Repairs and maintenance 3,237 2,905
Depreciation and amortization 11,077 6,933
-------- -------
Total operating costs 67,820 56,768
-------- -------
INCOME FROM OPERATIONS 11,132 13,774
OTHER INCOME (EXPENSE)
Interest income 888 359
Interest expense and amortization of deferred financing fees (14,457) (9,718)
Gain on property disposition 238 --
-------- -------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (2,199) 4,415
EXTRAORDINARY ITEM:
Loss on extinguishment of debt (1,117) --
-------- -------
NET INCOME (LOSS) $ (3,316) $ 4,415
======== =======
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(000's omitted)
<TABLE>
<CAPTION>
CONTRIBUTED CAPITAL PARTNERS' AND OTHER EQUITY (DEFICIT)
------------------- --------------------------------------------
General Partner General Partner Limited Partner Total
-------------- --------------- --------------- -------
<S> <C> <C> <C> <C>
BALANCE, January 2, 1998 (audited) $96,436 $(77,897) $39,399 $57,938
Distributions -- (30) -- (30)
Net Loss -- (939) (2,377) (3,316)
------- -------- ------- -------
BALANCE, April 3, 1998 (unaudited) $96,436 $(78,866) $37,022 $54,592
======= ======== ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
(000's omitted)
<TABLE>
<CAPTION>
Three Months Ended
CASH FLOWS FROM OPERATING ACTIVITIES: April 3, 1998 April 4, 1997
------------- -------------
(Unaudited)
<S> <C> <C>
Net income (loss) $ (3,316) $ 1,187
Adjustments to reconcile net income (loss) to cash used in operating activities-
Depreciation, amortization, and loan cost amortization 11,604 7,391
Extraordinary item 1,117 --
Gain on property disposition (238) --
Changes in certain assets and liabilities
Receivables (1,701) (1,269)
Inventories 38 (5)
Prepaid expenses and other 368 372
Accounts payable (3,367) (9,580)
Accrued expenses (10,128) (9,057)
Other obligations and deferred revenue 876 670
-------- --------
Net cash used in operating activities (4,747) (7,126)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment, net (27,587) (45,435)
Proceeds from disposition of property 39,387 --
Restricted cash remaining from property disposition (26,890) --
Franchise fees and other (4,907) 212
Sale of marketable securities, net 2,593 709
-------- --------
Net cash provided by (used in) investing activities (17,404) (44,514)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 96,961 32,929
Repayments of debt (83,571) (1,154)
Distributions (30) (615)
-------- --------
Net cash provided by financing activities 13,360 31,160
-------- --------
Increase (decrease) in cash and equivalents (8,791) (20,480)
CASH AND EQUIVALENTS, beginning of period 41,961 46,449
-------- --------
CASH AND EQUIVALENTS, end of period $ 33,170 $ 25,969
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID FOR INTEREST, net of amounts capitalized $ 22,821 $ 18,024
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
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 hotel
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 thereto included in the
Partnership's Form 10-K for the fiscal year ended January 2, 1998, which
included financial statements for the fiscal years ended January 2, 1998,
January 3, 1997 and December 29, 1995.
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
<PAGE>
available-for-sale commercial paper and governmental agency obligations which
mature or will be available for use in operations in 1998. 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.
4. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS No. 130), which requires comprehensive income and the associated income
tax expense or benefit be reported in a financial statement that is displayed
with the same prominence as other financial statements with an aggregate amount
of comprehensive income reported in that same financial statement. "Other
Comprehensive Income" refers to revenues, expenses, gains and losses that under
generally accepted accounting principles are included in comprehensive income
but not in net income. The Partnership adopted this statement in the first
quarter of fiscal 1998 with no impact on the Partnership's reported consolidated
financial position, results of operations, cash flows or related disclosures.
Also in June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
(SFAS 131), which requires disclosure for each segment in which the chief
operating decision maker organizes these segments within a company for making
operating decisions and assessing performance. Reportable segments are based on
products and services, geography, legal structure, management structure and any
manner in which management disaggregates a company. The Partnership intends to
adopt SFAS 131 during fiscal 1998. This statement, which requires expansion or
modification to existing disclosures, will have no impact on the Partnership's
reported financial position, results of operation or cash flows.
In April 1998, the American Institute of Certified Public Accountants released
Statement of Position (SOP) 98-5 "Reporting on the Costs of Start-Up
Activities." The SOP requires costs of start-up activities, including
preopening expenses, to be expenses as incurred. The Partnership's current
practice is to defer these expenses until a hotel has commenced operations, at
which time the costs, other than advertising costs that are expensed upon
opening, are amortized over a one-year period. The Partnership is required to
adopt the provisions of this statement no later than the first quarter of fiscal
1999 and, consistent with the guidance of the SOP, then existing cumulative
unamortized preopening costs will be charged to expense.
5. PROPERTY DISPOSITION
Effective February 6, 1998, the Partnership completed the sale of six hotels
to an unrelated party for $40 million, resulting in a gain of approximately $0.2
million. Certain of these hotels served as collateral under the 1994 and 1995
first mortgage notes. Under the terms of these indentures the Partnership must
provide replacement collateral of equivalent value or apply the net proceeds
from the sale to amounts outstanding. The Partnership has provided, or is in
the process of
<PAGE>
providing, replacement collateral in accordance with the indenture provisions.
As of April 3, 1998, $26.9 million of cash was restricted for this purpose and
classified as non-current restricted cash in the accompanying balance sheet.
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 one New Hotel in the past three months, and has an
additional seven hotels under construction. The Partnership's development
activity limits its ability to grow per share income. 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.
Given the current positive trends in the upscale, full-service sector of the
hotel industry, the Partnership continues to develop new hotels, including World
Golf Resort Hotel and Convention Center, St. Augustine, Florida; Plaza Hotel,
Topeka, Kansas; Embassy Suites Hotel, Portland Oregon; Hampton Inn and Suites
Hotel adjacent to the Mesquite Championship Rodeo Arena, Mesquite, Texas;
Radisson Plaza Hotel, Coral Springs, Florida; Marriott Renaissance Hotel at the
Charlotte, North Carolina airport; and Embassy Suites Hotel, Grapevine, Texas,
adjacent to the Bass Pro Shop's Outdoor World, near the Dallas-Fort Worth
airport. While the Partnership believes its development efforts represent the
best long-term strategy, the continued aggressive New Hotel development
initiatives will continue to have a negative effect on earnings.
On January 12, 1998 the Partnership opened an Embassy Suites hotel in Tampa,
Florida. The opening marked the fifteenth hotel the Partnership had developed
in less than three years. The Partnership expects to open three additional
hotels during the remainder of 1998: World Golf Report Hotel and Convention
Center - St. Augustine, Florida; Capitol Plaza Hotel - Topeka, Kansas; and
Embassy Suites hotel - Portland, Oregon.
The following discussion and analysis addresses results of operations for the
three month periods ended April 3, 1998 (the "1998 Quarter") and April 4, 1997
(the "1997 Quarter").
For the 1998 Quarter, the Partnership's total earnings before interest
expense, taxes, depreciation and amortization (EBITDA)were $22.2 million, a 7.2%
increase over the 1997 Quarter, EBITDA of $20.7 million. The Mature Hotels'
EBITDA was $18.3 million in the 1998 Quarter, down 2.8% from $18.9 million in
the 1997 Quarter, due to the sale of six hotels on February 6, 1998. Excluding
the six hotels sold, the Mature Hotels' EBITDA in the 1998 Quarter was $18.5
million, up 2.1% from $18.1 million in the 1997 Quarter. As a percentage of
total revenues, EBITDA related to the Mature Hotels, excluding the six hotels
sold, increased to 29.1% in the 1998 Quarter from 29.0% in the 1997 Quarter.
The New Hotels' EBITDA for the 1998 Quarter was $2.5 million compared to $0.2
million in the 1997 Quarter.
The Partnership sold six Holiday Inn hotels on February 6, 1998, and
recognized a book gain of $0.2 million on the sale. Excluding the six hotels
sold, total EBITDA for the Partnership was $22.3 million in the 1998 Quarter, up
13.5% from $19.7 million in the 1997 Quarter.
<PAGE>
Total revenues for the 1998 Quarter were $79.0 million, an increase of $8.4
million, or 11.9%, compared to the 1997 Quarter, primarily as a result of the
continued growth of the New Hotels, including the hotel opened during the 1998
Quarter, and, to a lesser extent, revenue growth at the Mature Hotels. The
Partnership's Mature Hotels generated total revenues of $65.4 million in the
1998 Quarter, a decrease of $3.3 million, or 4.8%, compared to the 1997 Quarter,
due to the sale of six hotels in the 1998 Quarter. Excluding the six hotels
sold, the Mature Hotels generated total revenues of $63.5 million, an increase
of $1.1 million or 1.8%, compared to the 1997 Quarter. The Partnership's New
Hotels generated total revenues of $13.2 million during the 1998 Quarter
compared to $1.6 million in the 1997 Quarter.
Rooms revenues increased $5.9 million, or 13.0%, from the 1997 Quarter, and
increased only slightly, as a percentage of total revenues, to 64.9% from 64.4%.
The increase was primarily due to increased rooms revenues from the New Hotels,
and the resulting increase in the Partnership's average room rate to $90.20, a
12.6% increase compared to the 1997 Quarter average room rate of $80.08. In
comparison, the average room rate for the hotel industry was $79.44 in the 1998
Quarter, up 5.3% from the 1997 Quarter. The increased average room rate was
partially offset by a 1.8% decrease in Partnership's occupancy for the 1998
Quarter to 64.4%. Occupancy for the hotel industry was 59.9%, down 0.3% from
the 1997 Quarter. The Partnership's Revenue Per Available Room (RevPAR) was
$55.37 in the 1998 Quarter, up 7.6% from $50.64 in the 1997 Quarter. RevPAR for
the hotel industry was $47.59, up 4.7% from the 1997 Quarter.
Food and beverage revenues increased $1.5 million, or 7.6%, compared to the
1997 Quarter, and decreased slightly as a percentage of total revenues, to
27.8%, from 28.9%. Sales at the New Hotels with full food and beverage services
accounted for the overall dollar increase in food and beverage revenues.
Meeting room rental and other revenues increased $1.0 million, or 20.8%, from
the 1997 Quarter, and increased slightly as a percentage of revenues, to 7.3%
from 6.7%. 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.
Rooms operating expenses increased $1.9 million, or 17.1%, compared to the
1997 Quarter, and increased as a percentage of rooms revenues, to 25.7% compared
to 24.8%. The increase related primarily to expenses for New Hotels. For the
Mature Hotels, rooms operating expenses as a percentage of rooms revenues were
24.3% in the 1998 Quarter compared to 23.6% in the 1997 Quarter.
Food and beverage operating expenses increased $0.6 million, or 4.1%, compared
to the 1997 Quarter, but decreased as a percentage of food and beverage
revenues, to 70.4% from 72.7%. The dollar increase was attributable to expenses
associated with food and beverage revenues from the New Hotels.
Other operating expenses increased $0.1 million, or 16.8%, compared to the
1997 Quarter, and decreased slightly as a percentage of meeting room rental and
other revenues, to 15.3% from 15.8% in the same period of the prior year.
General, administrative and sales expenses increased $3.9 million, or 19.5%,
over the 1997 Quarter, and increased as a percentage of revenues to 30.4% from
28.5%. The increase was primarily attributable to expenses associated with the
New Hotels. The Partnership had seven New Hotels in the 1998 Quarter compared
to one New Hotel in the 1997 Quarter.
Repairs and maintenance expenses increased $0.3 million, or 11.4%, compared to
the 1997
<PAGE>
Quarter and remained stable as a percentage of revenues, at 4.1%.
Depreciation and amortization expenses increased $4.1 million, or 59.8%,
compared to the 1997 Quarter, and increased significantly as a percentage of
revenues to 14.0% from 9.8%. The Depreciation and amortization increase relates
entirely 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 $2.7 million, or 19.2%, compared to the 1997
Quarter. Expenses related to operating the New Hotels, particularly depreciation
and amortization increased more rapidly than revenues.
Interest income increased $0.5 million, or 147.4%, from the 1997 Quarter, as
the Partnership held cash from the sale of hotels described above.
Interest expense and amortization of deferred financing fees increased $4.7
million, or 48.8%, from the 1997 Quarter, and increased significantly as a
percentage of total revenues to 18.3% from 13.8%. These increased costs related
to interest expense for the New Hotels, and can be expected to continue to rise
in connection with the Partnership's new hotel development.
Net Income (loss) for the 1998 Quarter was a $3.3 loss, including an
extraordinary charge of $1.1 million, compared to $4.4 million in net income in
the 1997 Quarter. The loss was driven by fixed charges associated with the
Partnership's seven new hotels opened in 1997 and in the 1998 Quarter. The
Partnership incurred the extraordinary charge for a $0.1 million pre-payment
penalty and the write-off of $1.0 million of deferred financing costs associated
with the refinancing of certain debt on four of the Partnership's 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. In addition, in the future the
Partnership will obtain mortgage financing secured by construction in progress
to provide funding for hotels it develops. Any funds from sales of hotels that
are not restricted under the terms of the Partnership's debt documents also
would be available for these purposes. The Partnership's principal uses of cash
are to pay operating expenses, to service debt, to fund new hotel development,
to fund capital improvements on existing hotels and to make partnership
distributions to fund some of the taxes associated with income allocable to the
partners.
At April 3, 1998, the Partnership had $33.2 million of cash and equivalents
and $10.1 million of marketable securities, compared to $42.0 million and $12.7
million, respectively, at the end of 1997. Total current assets at April 3,
1998, decreased $10.2 million, as the result of the decrease in cash and cash
equivalents and marketable securities. In February 1998, the Partnership
completed the sale of six hotels for approximately $40 million, consisting of
assumption of debt and other obligations of approximately $5.1 million and cash
of approximately $34.9 million. Five of the six hotels sold served as collateral
for the 1994 and 1995 Mortgage Notes. The Partnership intends to provide
replacement collateral for these mortgage notes. As of April 3, 1998, the
Partnership had provided replacement collateral for one of the five hotels, and
currently holds $26.9 million of restricted cash available for the remaining
replacement collateral.
Net cash used in operating activities was $4.8 million for the 1998 Quarter
compared to $7.1 million for the 1997 Quarter. The Partnership used less cash
in the 1998 Quarter as it had fewer hotels under construction than in the 1997
Quarter.
<PAGE>
The Partnership's long term debt increased $13.4 million during the 1998
Quarter to fund new hotel development and refurbishment expenditures. The
Partnership incurred net capital expenditures of approximately $27.6 million
during the 1998 Quarter and $45.4 million during the 1997 Quarter. Of the $27.6
million incurred during the 1998 Quarter, approximately $4.2 million was for
capital improvements on existing hotel properties and approximately $23.4
million was for development of new hotels. During the remainder of 1998 the
Partnership expects capital expenditures to total approximately $165.0 million,
including approximately $16.6 million for capital improvements on existing
hotels and approximately $148.4 million for continued new hotel development.
The Partnership currently has seven hotels under construction. The
Partnership estimates the remaining building and pre-opening costs of these
hotels will require additional capital expenditures of approximately $144.0
million, including expenses scheduled during 1998. Construction in progress at
April 3, 1998 included $77.7 million expended for these projects. The
Partnership has received loans and loan commitments for six projects under
construction in the amount of $120.3 million, with $85.5 million available, and
expects the remaining 1998 capital requirements to be funded by cash, operating
income and additional loans on unencumbered developments.
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) construction loans; (ii) refinancing of certain existing hotels; (iii)
contributions from third parties; and (iv) cash flow from operations.
The Partnership expects to continue to fund development of 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 current hotel
development plans.
Based upon current plans relating to the timing of new hotel development and
loan draw schedules, the Partnership anticipates that its capital resources will
be adequate to satisfy its 1998 capital requirements for the currently planned
projects and normal recurring capital improvement.
The Partnership accrued $30 thousand of distributions to the partners during
the 1998 Quarter. Any 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
<PAGE>
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
The following tables set forth, as of April 3, 1998, unaudited selected
financial information with respect to the 20 hotels collateralizing the 1994
Notes (the "1994 Collateral Hotels") and the eight hotels collateralizing the
1995 notes (the "1995 Collateral Hotels") and the Partnership, excluding
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 Company 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 April 3, 1998
----------------------------------------------------
1994 1995 Management Total
Collateral Collateral Operations Restricted
Hotels Hotels Group Group
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(Dollars in thousands, except operating data)
Statement of Operations Data:
Operating Revenues $148,052 $61,239 $ 5,473(a) $214,764
Operating Expenses:
Direct operating costs and 79,799
expenses 56,091 23,708 --
General, administrative, sales
and management expenses(b) 41,521 18,627 (1,758)(c) 58,390
Repairs and maintenance 5,955 2,739 -- 8,694
Depreciation and amortization 12,378 5,438 95 17,911
-------- ------- ------- --------
Total operating expenses 115,945 50,512 (1,663) 164,794
-------- ------- ------- --------
$ 32,107 $10,727 $ 7,136 $ 49,970
======== ======= ======= ========
Income from operations:
Operating Data:
Occupancy 64.8% 64.0%
Average daily room rate $81.75 $76.43
RevPAR $52.95 $48.92
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Trailing 12 Months Ended January 2, 1998
----------------------------------------------------
1994 1995 Management Total
Collateral Collateral Operations Restricted
Hotels Hotels Group Group
---------- ---------- ---------- ----------
(Dollars in thousands, except operating data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Operating Revenues $151,797 $62,209 $ 4,828(a) $218,834
Operating Expenses:
Direct operating costs and
expenses 57,511 24,030 -- 81,541
General, administrative, sales and
management expenses(b) 41,960 18,303 (1,524)(c) 58,739
Repairs and maintenance 6,089 2,771 -- 8,860
Depreciation and amortization 12,072 5,391 76 17,539
-------- ------- ------- --------
Total operating expenses 117,632 50,496 (1,448) 166,679
-------- ------- ------- --------
Income from operations: $ 34,165 $11,713 $ 6,276 $ 52,154
======== ======= ======= ========
Operating Data:
Occupancy 65.2% 65.2%
Average daily room rate $80.32 $75.30
RevPAR $52.33 $49.06
</TABLE>
(a) Represents management revenues derived from the Owned Hotels owned by L.P.
Two 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.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Not Applicable
PART II. OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
<PAGE>
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Securities Holders.
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index incorporated by reference
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrants have duly caused this report to be signed on their 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/ Kenneth J. Weber
--------------------------------
Kenneth J. Weber, Chief Financial
Officer and Executive Vice President
(Principal Financial Officer)
JOHN Q. HAMMONS HOTELS FINANCE CORPORATION
By: /s/ John Q. Hammons
-------------------------------------
John Q. Hammons, Chairman,
Founder, and Chief Executive Officer
By: /s/ Kenneth J. Weber
-------------------------------------
Kenneth J. Weber, Chief Financial Officer
and Executive Vice President (Principal
Financial Officer)
JOHN Q. HAMMONS HOTELS FINANCE CORPORATION II
By: /s/ John Q. Hammons
-------------------------------------
John Q. Hammons, Chairman,
Founder, and Chief Executive Officer
By: /s/ Kenneth J. Weber
-------------------------------------
Kenneth J. Weber, Chief Financial Officer
and Executive Vice President (Principal
Financial Officer)
Dated: May 15, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's quarterly report on Form 10-Q 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-01-1999
<PERIOD-START> JAN-03-1998
<PERIOD-END> APR-03-1998
<CASH> 33,170
<SECURITIES> 10,149
<RECEIVABLES> 13,330
<ALLOWANCES> 188
<INVENTORY> 1,055
<CURRENT-ASSETS> 58,534
<PP&E> 872,294
<DEPRECIATION> 175,467
<TOTAL-ASSETS> 814,158
<CURRENT-LIABILITIES> 101,803
<BONDS> 648,987
0
0
<COMMON> 0
<OTHER-SE> 54,592
<TOTAL-LIABILITY-AND-EQUITY> 814,158
<SALES> 0
<TOTAL-REVENUES> 78,952
<CGS> 0
<TOTAL-COSTS> 29,522
<OTHER-EXPENSES> 38,298
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,569
<INCOME-PRETAX> (2,199)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,199)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,117)
<CHANGES> 0
<NET-INCOME> (3,316)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
