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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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 1-13486
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)
Delaware 43-1523951
Missouri 43-1680322
Missouri 43-1720400
(State of Organization) (I.R.S. employer identification no.)
300 John Q. Hammons Parkway, Ste. 900
Springfield, Missouri 65806
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (417) 864-4300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has been subject to such filing
requirements for the past 90 days. YES X NO ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
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PART I
Item 1. Business.
As used herein, the term "Company" means John Q. Hammons Hotels, L.P., a
Delaware limited partnership, and its corporate and partnership subsidiaries
collectively, or, as the context may require, John Q. Hammons Hotels, L.P. only.
As used herein, the term "General Partner" means John Q. Hammons Hotels, Inc., a
Delaware corporation, or Hammons, Inc., a Missouri corporation, and the
predecessor general partner of the Company. As used herein, the term "Finance
Corp." means John Q. Hammons Hotels Finance Corporation, a wholly owned
subsidiary of the Company which has nominal assets and does not conduct any
operations, and Finance Corp. II means John Q. Hammons Hotels Finance
Corporation II, each of which is co-obligor for the 1994 Notes and the 1995
Notes (as defined herein). As used herein, the term "Registrants" means John Q.
Hammons Hotels, L.P., Finance Corp. and Finance Corp. II.
Overview
The Company is a leading independent owner, manager and developer of
affordable upscale hotels in capital city, secondary and airport markets. The
Company owns 45 hotels located in 19 states, containing 11,067 guest rooms or
suites (the "Owned Hotels"), including four new hotels opened in 1999. The
Company also manages five additional hotels located in two states, containing
1,136 guest rooms (the "Managed Hotels"). One of the Managed Hotels, a Days
Inn, closed in December, 1999. On December 31, 1999, the Company also owned two
upscale hotels at various stages of development, which opened early in 2000.
The Company's existing Owned Hotels and Managed Hotels (together, the "JQH
Hotels") operate primarily under the Holiday Inn and Embassy Suites trade names.
Most of the Company's hotels are near a state capitol, university, airport or
corporate headquarters, plant or other major facility and generally serve
markets with populations of up to 300,000 people (or larger populations in the
case of airport markets and many of the markets in which the Company has
developed new hotels over the past several years).
The Company's strategy is to increase cash flow and thereby enhance
investor value primarily through (i) capitalizing on positive operating
fundamentals in the upscale full-service sector of its markets and improving the
operating results of its newer hotels, (ii) converting the franchises of its
existing hotels to franchise brands that are considered to be more upscale, and
(iii) selling certain mature assets and re-investing the net proceeds.
The JQH Hotels are designed to appeal to a broad range of hotel customers,
including frequent business travelers, groups and conventions, as well as
leisure travelers. Each of the JQH Hotels is individually designed by the
Company, and most contain an impressive multi-storied atrium, with water
features and lush plantings, expansive meeting space, large guest rooms or
suites and comfortable lounge areas. The Company believes that these design
features enhance guest comfort and safety and increase the value perceived by
the guest. The JQH Hotels' meeting facilities can be readily adapted to
accommodate both larger and smaller meetings, conventions and trade shows. The
17 Holiday Inn JQH Hotels are affordably priced hotels designed to attract the
business and leisure traveler desiring quality accommodations, including meeting
facilities, in-house restaurants, cocktail lounges and room service. The 14
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Embassy Suites JQH Hotels are all-suite hotels which appeal to the traveler
needing or desiring greater space and specialized services. The JQH Hotels also
include five non-franchise hotels, three Radissons, two Hampton Inn & Suites,
two Marriotts, two Homewood Suites, one Crowne Plaza, one Sheraton, and two
Renaissance hotels. Four of the non-franchise hotels have the word "Plaza" in
their names and the other non-franchise hotel is a resort hotel. The Company
determines which brand of hotel to develop depending upon the demographics of
the market to be served.
Management of the JQH Hotels is coordinated from the Company's headquarters
in Springfield, Missouri by its senior management team. Six Regional Vice
Presidents and one District Director are responsible for supervising a group of
General Managers of JQH Hotels in day-to-day operations. Centralized management
services and functions include development, design, sales and marketing,
purchasing and financial controls. Through these centralized services,
significant cost savings are realized due to economies of scale.
The Company conducts all of its business operations through the Partnership
and its subsidiaries. Mr. Hammons beneficially owns all 294,100 shares of Class
B Common Stock of the Company, representing 73.5% of the combined voting power
of both classes of the Company's Common Stock. The Company is the sole general
partner of the Partnership through its ownership of all 6,336,100 general
partner units (the "GP Units"), representing 28.31% of the total equity in the
Partnership. Mr. Hammons beneficially owns all 16,043,900 limited partnership
units of the Partnership (the "LP Units"), representing 71.69% of the total
equity in the Partnership. The Class A Common Stock of the Company represents
24.5% of the total equity of the Partnership, and the Class B Common Stock and
LP Units beneficially owned by Mr. Hammons represent 75.5% of the total equity
in the Partnership. Mr. Hammons is also the beneficial owner of 244,300 shares
of Class A Common Stock.
The Company's executive offices are located at 300 John Q. Hammons Parkway,
Suite 900, Springfield, Missouri 65806 and its telephone number is (417) 864-
4300. The Company is a Delaware corporation that was formed on September 29,
1994.
Development
The Company announced on September 11, 1998 that it was ceasing new
development activity, except for the hotels then under construction. The
Company currently has no hotels under construction. The following table sets
forth information as to the hotels opened after December 31, 1999:
<TABLE>
<CAPTION>
Number of
---------
Location Franchise/Name Rooms/Suites Description Completion Date
- -------- -------------- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
Oklahoma City, OK Renaissance 311 Atrium; Convention Opened January 29, 2000
Center
Charleston, SC Embassy Suites 255 Atrium; Convention Opened February 18, 2000
Center
</TABLE>
Although the Company has in the past chosen to develop rather than acquire
existing hotels, the Company may in the future acquire hotels if suitable
opportunities arise. The Company continues to be approached from time to time
by third-party hotel owners seeking to
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sell or buy hotels. The Company will continue to evaluate each offer and base
its decision on the market location, capital required, and return on investment
alternatives.
On June 16, 1999, the Holiday Inn Express Hotel and Conference Center in
Joliet, Illinois was sold to an unrelated party for $6.5 million, resulting in a
gain of approximately $2.4 million. This hotel served as collateral under the
1994 first mortgage notes. Under the terms of this indenture, the Company must
provide replacement collateral of equivalent value or apply the proceeds from
the sale to amounts outstanding. The Company provided replacement collateral in
accordance with the indenture provisions.
The Company's development activity restricts its ability to grow net 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
Company expects, based on past experience, that the operating expenses for these
hotels will decrease as a percentage of revenues, although there can be no
assurance that this will continue to occur.
Operations
Management of the JQH Hotels network is coordinated by the Company's senior
management team at the Company's headquarters in Springfield, Missouri. The
management team is responsible for managing the day-to-day financial needs of
the Company, including the Company's internal accounting audits. The Company's
management team administers insurance plans and business contract review,
oversees the financial budgeting and forecasting for the JQH Hotels, analyzes
the financial feasibility of new hotel developments, and identifies new systems
and procedures to employ within the JQH Hotels to improve efficiency and
profitability. The management team also coordinates each JQH Hotel's sales
force, designing sales training programs, tracking future business under
contract, and identifying, employing and monitoring marketing programs aimed at
specific target markets. The management team is indirectly responsible for
interior design of all hotels and each hotel's product quality, and directly
oversees the detailed refurbishment of existing operations. The overall
management of the JQH Hotels is coordinated by the central management team
through six Regional Vice Presidents and one District Director responsible for
guiding the General Managers of each JQH Hotel in day-to-day operations.
Central management utilizes information systems that track each JQH Hotel's
daily occupancy, average room rate, and rooms and food and beverage revenues.
Contracted business is tracked for each hotel individually five years into the
future using the Company's sales projection and usage reporting system. By
having the latest information available at all times, management is better able
to respond to changes in each market by focusing sales and yield management
efforts on periods of demand extremes (low periods and high periods of demand)
and controlling variable expenses to maximize the profitability of each JQH
Hotel.
Creating operating, cost and guest service efficiencies in each hotel is a
top priority to the Company. With a total of 50 hotels under management, the
Company is able to realize significant cost savings due to economies of scale.
By leveraging the total hotels/rooms under its management, the Company is able
to secure volume pricing from its vendors that is not available
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to smaller hotel companies. The Company employs a systems trainer who is
responsible for installing new computer systems and providing training to hotel
employees to maximize the effectiveness of these systems and to ensure that
guest service is enhanced.
Regional management constantly monitors each JQH Hotel to verify that the
Company's high level of operating standards are being met. The Company's
franchisors maintain rigorous inspection programs in which chain representatives
visit their respective JQH Hotels (typically 2 or 3 times per year ) to evaluate
product and service quality. Each chain also provides feedback to each hotel
through their guest satisfaction rating systems in which guests who visited the
hotel are asked to rate a variety of product and service issues.
Sales and Marketing
The Company's marketing strategy is to market the JQH Hotels both through
national marketing programs and local sales managers and a director of sales at
each of the JQH Hotels. While the Company makes periodic modifications to the
concept in order to address differences and maintain a sales organization
structure based on market needs and local preferences, it generally utilizes the
same major campaign concept throughout the country. The concepts are developed
at its management headquarters while the modifications are implemented by the
JQH Hotels Regional Vice Presidents, District Director and local sales force,
all of whom are experienced in hotel marketing. The sales force reacts promptly
to local changes and market trends in order to customize marketing programs to
meet each hotel's competitive needs. In addition, the local sales force is
responsible for developing and implementing marketing programs targeted at
specific customer segments within each market. The Company requires that each
of its sales managers complete an extensive sales training program. Before
finishing the program, the sales manager must successfully complete
certifications in three development phases.
The Company's core market consists of business travelers who visit a given
area several times per year, including salespersons covering a regional
territory, government and military personnel and technicians. The profile of
the primary target customer is a college educated business traveler, age 25 to
54, from a two-income household with a middle management white collar occupation
or upper level blue collar occupation. The Company believes that business
travelers are attracted to the JQH Hotels because of their convenient locations
in state capitals, their proximity to airports or corporate headquarters,
plants, convention centers or other major facilities, the availability of ample
meeting space and the high level of service relative to other hotel operators
serving the same markets. The Company's sales force markets to organizations
which consistently produce a high volume of room nights and which have a
significant number of individuals traveling in the Company's operating regions.
The Company also targets groups and conventions attracted by a JQH Hotel's
proximity to convention or trade centers (often adjacent). JQH Hotels' group
meetings logistics include flexible space readily adaptable to groups of varying
size, high-tech audio-visual equipment and on-site catering facilities. The
Company believes that suburban convention centers attract more convention
sponsors due to lower prices than larger, more cosmopolitan cities. In addition
to the business market, the Company's targeted customers also include leisure
travelers looking for secure, comfortable lodging at an affordable price as well
as women travelers who find the security benefits of the Company's atrium hotels
appealing.
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The Company advertises primarily through direct mail, magazine
publications, directories, and newspaper advertisements, all of which focus on
value delivered to and perceived by the guest. The Company has developed in-
house marketing materials including professional photographs and written
materials that can be mixed and matched to appeal to a specific target group
(business traveler, vacationer, religious group, reunions, etc.). The Company's
marketing efforts focus primarily on business travelers who account for
approximately 50% of the rooms rented in the JQH Hotels.
The Company's franchise hotels utilize the centralized reservation systems
of its franchisors, which the Company believes are among the more advanced
reservation systems in the hotel industry. The franchisors' reservation systems
receive reservation requests entered (i) on terminals located at all of their
respective franchises, (ii) at reservation centers utilizing 1-800 phone access
and (iii) through several major domestic airlines. Such reservation systems
immediately confirm reservations or indicate accommodations available at
alternate system hotels. Confirmations are transmitted automatically to the
hotel for which the reservations are made. The Company believes that these
systems are effective in directing customers to the Company's franchise hotels.
Franchise Agreements
The Company enters into non-exclusive franchise licensing agreements (the
"Franchise Agreements") with franchisors which it believes are the most
successful brands in the hotel industry. The term of the individual Franchise
Agreement for a hotel typically is 20 years. The Franchise Agreements allow the
Company to start with and then build upon the reputation of the brand names by
setting higher standards of excellence than the brands themselves require. The
non-exclusive nature of the Franchise Agreements allows the Company the
flexibility to continue to develop properties with the brands that have shown
success in the past or to operate hotels in conjunction with other brand names.
While the Company currently has a good relationship with its franchisors, there
can be no assurance that a desirable replacement would be available if any of
the Franchise Agreements were to be terminated.
Holiday Inn. The Franchise Agreement grants to the Company a
nonassignable, non-exclusive license to use the Holiday Inns service mark and
computerized reservation network. The franchisor maintains the right to improve
and change the reservation system to make it more efficient, economical and
competitive. Monthly fees paid by the Company are based on a percentage of
gross revenues attributable to room rentals, plus marketing and reservation
contributions which are also a percentage of gross revenues. The term of the
Franchise Agreement is 20 years with a renewal option in the 15th year.
Embassy Suites. The Franchise Agreement grants to the Company a
nonassignable, non-exclusive license to use the Embassy Suites service mark and
computerized reservation network. The franchisor maintains the exclusive right
to improve and change the reservation system for the purpose of making it more
efficient, economical and competitive. Monthly fees paid by the Company are
based on a percentage of gross revenues attributable to suite rentals, plus
marketing and reservation contributions which are also a percentage of gross
revenues. The term of the Franchise Agreement is 20 years with a renewal option
in the 18th year.
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Other Franchisors. The franchise agreements with other franchisors not
listed above are similar in that they are nonassignable, non-exclusive licenses
to use the franchisor's service mark and computerized reservation network.
Payments and terms of agreement vary based on specific negotiations with the
franchisor.
Competition
Each of the JQH Hotels competes in its market area with numerous full
service lodging brands, especially in the upscale market, and with numerous
other hotels, motels and other lodging establishments. Chains such as Sheraton
Inns, Marriott Hotels, Ramada Inns, Radisson Inns, Comfort Inns, Hilton hotels
and Doubletree/Red Lion Inns are direct competitors of JQH Hotels in their
respective markets. There is, however, no single competitor or group of
competitors of the JQH Hotels that is consistently located nearby and competing
with most of the JQH Hotels. Competitive factors in the lodging industry
include reasonableness of room rates, quality of accommodations, level of
service and convenience of locations.
Regulations and Insurance
General. A number of states regulate the licensing of hotels and
restaurants including liquor license grants by requiring registration,
disclosure statements and compliance with specific standards of conduct. In
addition, various federal and state regulations mandate certain disclosures and
practices with respect to the sales of license agreements and the
licensor/licensee relationship. The Company believes that each of the JQH
Hotels has the necessary permits and approvals to operate its respective
businesses. To supplement the Company's self insurance programs, umbrella,
property, auto, commercial liability and worker's compensation insurance is
provided to the JQH Hotels under a blanket policy. Insurance expenses for the
JQH Hotels were approximately $6.2 million, $2.2 million and $1.1 million in
1997, 1998 and 1999, respectively. During 1999, the Company realized continued
favorable trends in insurance expense as a result of claim experience and rate
improvements and a favorable buyout of several prior self-insured years. The
Company believes that the JQH Hotels are adequately covered by insurance.
Americans with Disabilities Act. The JQH Hotels and any newly developed or
acquired hotels must comply with Title III of the Americans with Disabilities
Act ("ADA") to the extent that such properties are "public accommodations" and
/or "commercial facilities" as defined by the ADA. Compliance with the ADA
requirements could require removal of structural barriers to handicapped areas
in certain public areas of the JQH Hotels where such removal is readily
achievable. Noncompliance could result in a judicial order requiring
compliance, an imposition of fines or an award of damages to private litigants.
The Company has taken into account an estimate of the expense required to make
any changes required by the ADA and believes that such expenses will not have a
material adverse effect on the Company's financial condition or results of
operations. If required changes involve a greater expenditure than the Company
currently anticipates, or if the changes must be made on a more accelerated
basis than the Company anticipates, the Company could be adversely affected.
The Company believes that its competitors face similar costs to comply with the
requirements of the ADA.
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Asbestos Containing Materials. Certain, federal, state and local laws,
regulations and ordinances govern the removal, encapsulation or disturbance of
Asbestos Containing Materials ("ACMs") when ACMs are in poor condition or in the
event of building, remodeling, renovation or demolition. These laws may impose
liability for the release of ACMs and may permit third parties to seek recovery
from owners or operators of real estate for personal injury associated with
ACMs. Based on prior environmental assessments, seven of the Owned Hotels
contain ACMs and four of the Owned Hotels may contain ACMs, generally in
sprayed-on ceiling treatments or in roofing materials. However, no removal of
asbestos from the Owned Hotels has been recommended, and the Company has no
plans to undertake any such removal, beyond the removal that has already
occurred. The Company believes that the presence of ACMs in the Owned Hotels
will not have a material adverse effect on the Company, but there can be no
assurance that this will be the case.
Environmental Regulations. The JQH Hotels are subject to environmental
regulations under federal, state and local laws. Certain of these laws may
require a current or previous owner or operator of real estate to clean up
designated hazardous or toxic substances or petroleum product releases affecting
the property. In addition, the owner or operator may be held liable to a
governmental entity or to third parties for damages or costs incurred by such
parties in connection with the contamination. The Company does not believe that
it is subject to any material environmental liability.
Employees
The Company employs approximately 8,000 full time employees, approximately
300 of whom are members of labor unions. The Company believes that labor
relations with employees are good.
Management
The following is a biographical summary of the experience of the executive
officers and other key officers of the General Partner.
John Q. Hammons is the Chairman, Chief Executive Officer, a director and
founder of the General Partner, and a founder of the Company. Mr. Hammons has
been actively engaged in the development, management and acquisition of hotel
properties since 1959. From 1959 through 1969, Mr. Hammons and a business
partner developed 34 Holiday Inn franchises, 23 of which were sold in 1969 to
Holiday Inns, Inc. Since 1969, Mr. Hammons has developed 85 hotels on a
nationwide basis, primarily under the Holiday Inn and Embassy Suites trade
names.
Kenneth J. Weber is the Chief Financial Officer of the General Partner. He
joined the General Partner in April 1998 and became a director of the General
Partner in May 1998. Prior to joining the General Partner, Mr. Weber was the
Executive Vice President and Chief Financial Officer of Chartwell Leisure, a New
York based hotel company. From 1992 to 1996, Mr. Weber was the Senior Vice
President and Chief Financial Officer of Omni Hotels, based in Hampton, New
Hampshire. From 1986 to 1992, Mr. Weber worked with Red Lion Hotels, based in
Vancouver, Washington, holding the positions of Senior Vice President, Chief
Accounting Officer and Corporate Controller. Mr. Weber began his career in the
hotel industry with the
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Marriott Corporation, holding positions in several of Marriott's divisions,
including President and Chief Executive Officer of Farrell's Ice Cream Parlour
Restaurants from 1983 to 1986.
Lonnie A. Funk is Senior Vice President of Operations of the General
Partner. He began with the General Partner in 1975 as the General Manager at the
Holiday Inn in Billings, Montana. In 1981, he was promoted to Regional Vice
President of the Midwest Region. In November 1998, he was promoted to his
current position.
Debra M. Shantz is Corporate Counsel of the General Partner. She joined
the General Partner in May 1995. Prior thereto, Ms. Shantz was a partner of
Farrington & Curtis, P.C. (now Husch & Eppenberger, LLC), a law firm which
serves as Mr. Hammons' primary outside counsel, where she practiced primarily in
the area of real estate law. Ms. Shantz had been with that firm since 1988.
Pat A. Shivers is Senior Vice President, Administration and Control, of the
General Partner. He has been active in Mr. Hammons' hotel operations since
1985. Prior thereto, he had served as Vice President of Product Management in
Winegardner & Hammons, Inc., a hotel management company.
Steven E. Minton is Senior Vice President, Architecture, of the General
Partner. He has been active in Mr. Hammons' hotel operations since 1985. Prior
to that time, Mr. Minton was a project manager with the firm of Pellham and
Phillips working on various John Q. Hammons projects.
Jacqueline A. Dowdy has been the Secretary and a director of the General
Partner since 1989. She has been active in Mr. Hammons' hotel operations since
1981. She is an officer of several affiliates of the General Partner.
John D. Fulton is Vice President, Design and Construction of the General
Partner. He joined the General Partner in 1989 from Integra/Brock Hotel
Corporation, Dallas, Texas where he had been Director of Design and Purchasing
for ten years.
Paul E. Muellner is Vice President, Corporate Controller of the General
Partner. Prior to joining the General Partner in June of 1998, Mr. Muellner was
Vice President of Finance for Carnival Hotels. He also served as Operations
Controller at Omni Hotels as well as positions with Red Lion Inns and Marriott
Corporation.
Kent Foster joined the General Partner as Vice President of Human Resources
in August of 1999. Prior to that time, he served as Director and Manager, Human
Resources of Dayco Products, Inc. in Michigan. Prior thereto, Mr. Foster served
as Assistant Vice President and Director, Human Resources, for Great Southern
Savings & Loan Association, Springfield, Missouri.
William T. George, Jr., is Vice President, Capital Planning and Asset
Protection of the Company. He joined the Company in 1994 from Promus Hotel
Corporation, where he had been director of capital refurbishment.
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Forward-Looking Statements
In addition to historical information, this document contains certain
forward-looking statements within the meaning of the Private Securities
Litigation Act of 1995. These statements typically, but not exclusively, are
identified by the inclusion of phrases such as "the Company believes," "the
Company plans," "the Company intends," and other phrases of similar meaning.
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 Company's inability to obtain
permanent financing for New Hotels on terms similar to those available in the
past.
Item 2. Properties.
The Company leases its headquarters in Springfield, Missouri from a
Missouri general partnership of which Mr. Hammons is a 50% partner. In 1999,
the Company made aggregate annual lease payments of approximately $234,000 to
such Missouri general partnership. The Company leases from John Q. Hammons the
real estate on which two of the Company's hotels are located. These leases are
more fully described in Item 13 "Certain Relationships and Related
Transactions." The Company owns the land on which 33 of the Owned Hotels are
located, while ten of the Owned Hotels are subject to long-term ground leases.
Description of Hotels - General
The JQH Hotels are located in 20 states and contain a total of 12,203
rooms. The JQH Hotels operate primarily under the Holiday Inn and Embassy
Suites trade names. Most of the JQH Hotels have assumed a leadership position
in their local market by providing a high quality product in a market unable to
economically support a second competitor of similar quality.
Each of the JQH Hotels is individually designed by the Company. Many of
the JQH Hotels contain an impressive multi-storied atrium, large indoor water
features, lush plantings, expansive meeting space, large guest rooms or suites
and comfortable lounge areas. In addition to the visual appeal, the Company
believes that an atrium design in which each of the hotel's room doors face into
the atrium, combined with glass elevators, achieves a greater level of security
for all guests. The Company believes this safety factor is particularly
relevant to women, who represent a growing portion of its business clientele.
The JQH Hotels also appeal to fitness conscious guests as all of the JQH Hotels
have at least one swimming pool and most have exercise facilities.
The Company believes that the presence of adjacent convention centers
provides incremental revenues for its hotel rooms, meeting facilities, and
catering services, and that hotels which are adjacent to convention centers
occupy a particularly successful niche within the hotel industry. These
convention or trade centers are available for rent by hotel guests. Each of the
JQH Hotels has a restaurant/catering service on its premises which provides an
essential amenity to the convention trade. The Company chooses not to lease out
the restaurant business to third-
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party caterers or vendors since it considers the restaurant business an
important component of securing convention business. All of the restaurants in
the JQH Hotels are owned and managed by the Company specifically to maintain
direct quality control over a vital aspect of the convention and hotel business.
The Company also derives significant revenue and operating profit from food and
beverage sales due to its ownership and management of all of the restaurants in
the JQH Hotels. The Company believes that its food and beverage sales are more
profitable than its competitors due to the amount of catering business provided
to convention and other meetings at the Owned Hotels.
The Company retains responsibility for all aspects of the day-to-day
management of each of the JQH Hotels, including establishing and implementing
standards of operation at all levels; hiring, training and supervising staff;
creating and maintaining financial controls; regulating compliance with laws and
regulations relating to the hotel operations; and providing for the safekeeping,
repair and maintenance of the hotels owned by the Company. The Company
typically refurbishes individual hotels every four to six years, and has spent
an average per year of $20.3 million in the last four years on the Owned Hotels.
During 2000, the Company expects to spend approximately $19.1 million on
refurbishment of the Owned Hotels.
Owned Hotels
The Owned Hotels consist of 45 hotels, which are located in 19 states and
contain a total of 11,067 guest rooms or suites. The following table sets forth
certain information concerning location, franchise/name, number of rooms/suites,
description and opening date for each Owned Hotel:
<TABLE>
<CAPTION>
Number of
---------
Location Franchise/Name Rooms/Suites Description Opening Date
- -------- -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Montgomery, AL Embassy Suites 237 Atrium; 8/95
Meeting Space: 15,000 sq. ft. (c)
Tucson, AZ Holiday Inn 299 Atrium; 11/81
Meeting Space: 14,000 sq. ft.
Tucson, AZ Marriott 250 Atrium; 12/96
Meeting Space: 11,500 sq. ft.
Little Rock, AR Embassy Suites 251 Atrium; 8/97
Meeting Space 14,000 sq. ft.
Springdale, AR Holiday Inn 206 Atrium; 7/89
Meeting Space: 18,000 sq. ft.
Convention Center: 29,280 sq. ft.
Springdale, AR Hampton Inn & Suites 102 Meeting Space: 400 sq. ft. 10/95
Bakersfield, CA Holiday Inn Select 259 Meeting Space: 9,735 sq. ft. (c) 6/95
Monterey, CA Embassy Suites 225 Meeting Space: 13,700 sq. ft. 11/95
Sacramento, CA Holiday Inn 364 Meeting Space: 9,000 sq. ft. 8/79
San Francisco, CA Holiday Inn 279 Meeting Space: 9,000 sq. ft. 6/72
</TABLE>
11
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Denver, CO(a) Holiday Inn (International 256 Atrium; 10/82
Airport) Trade Center: 66,000 sq. ft. (b)
Denver, CO Holiday Inn (Northglenn) 236 Meeting Space: 20,000 sq. ft. 12/80
Fort Collins, CO Holiday Inn 259 Atrium; 8/85
Meeting Space: 12,000 sq. ft.
Coral Springs, FL Radisson Plaza 224 Atrium 5,326 sq. ft. 5/99
Convention Center: 12,800 sq. ft. 5/98
St. Augustine, FL World Golf Village Resort 300 Atrium;
Convention Center: 40,000 sq. ft.
Tampa, FL Embassy Suites 247 Atrium; 1/98
Meeting Space: 18,000 sq. ft.
Cedar Rapids, IA Collins Plaza 221 Atrium; 9/88
Meeting Space: 11,250 sq. ft.
Davenport, IA Radisson 221 Meeting Space: 7,800 sq. ft. (c) 10/95
Des Moines, IA Embassy Suites 234 Atrium; 9/90
Meeting Space: 13,000 sq. ft.
Des Moines, IA Holiday Inn 288 Atrium; 1/87
Meeting Space: 15,000 sq. ft.
Topeka, KS Capitol Plaza 224 Atrium; 8/98
Convention Center: 26,000 sq. ft.
Bowling Green, KY University Plaza 218 Meeting Space: 4,000 sq. ft. (c) 8/95
Branson, MO Chateau on the Lake 301 Atrium; Meeting 5/97
Space: 40,000 sq. ft.
Jefferson City, MO Capitol Plaza 255 Atrium; 9/87
Meeting Space: 14,600 sq. ft.
Joplin, MO Holiday Inn 262 Atrium; 6/79
Meeting Space: 8,000 sq. ft.
Trade Center: 32,000 sq. ft. (b)
Kansas City, MO(a) Embassy Suites 236 Atrium; 4/89
Meeting Space: 12,000 sq. ft.
Kansas City, MO Homewood Suites 117 Extended Stay 5/97
Springfield, MO Holiday Inn 188 Atrium; 9/87
Meeting Space: 3,020 sq. ft.
Omaha, NE Embassy Suites 249 Atrium; 1/97
Meeting Space: 13,000 sq. ft.
Reno, NV Holiday Inn 283 Meeting Space: 8,700 sq. ft. 2/74
Albuquerque, NM Holiday Inn 311 Atrium; 12/86
Meeting Space: 12,300 sq. ft.
Charlotte, NC Renaissance Suites 275 Atrium;
Meeting Space: 17,400 sq. ft. 12/99
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Greensboro, NC(a) Embassy Suites 219 Atrium; 1/89
Meeting Space: 10,250 sq. ft.
Greensboro, NC(a) Homewood Suites 104 Extended Stay 8/96
Raleigh-Durham, NC Embassy Suites 273 Atrium; 9/97
Meeting Space: 20,000 sq. ft.
Portland, OR(a) Holiday Inn 286 Atrium; 4/79
Trade Center: 37,000 sq. ft. (b)
Portland, OR(a) Embassy Suites 251 Atrium; 9/98
Meeting Space: 11,000 sq. ft.
Columbia, SC Embassy Suites 214 Atrium; 3/88
Meeting Space: 13,000 sq. ft.
Greenville, SC Embassy Suites 268 Atrium; 4/93
Meeting Space: 20,000 sq. ft.
Beaumont, TX Holiday Inn 253 Atrium; 3/84
Meeting Space: 12,000 sq. ft.
Dallas/Ft. Worth Airport, Embassy Suites 329 Atrium;
TX (a) Meeting Space: 18,900 sq. ft. 8/99
Houston, TX(a) Radisson 288 Atrium; 12/85
Meeting Space: 14,300 sq. ft.
Mesquite, TX Hampton Inn Suites 160 Meeting Space: 21,200 sq. ft. 4/99
Convention Center: 35,100 sq. ft. (c)
Charleston, WV Embassy Suites 253 Atrium; 12/97
Meeting Space: 14,600 sq. ft.
Madison, WI Marriott 292 Atrium; 10/85
Meeting Space: 15,000 sq. ft. (b)
Convention Center: 50,000 sq. ft.
</TABLE>
________________________
(a) Airport location
(b) The trade or convention center is located adjacent to hotel and is owned by
Mr. Hammons, except the convention centers in Madison, Wisconsin and
Denver, Colorado, which are owned by the Company.
(c) Large civic center is located adjacent to hotel.
Managed Hotels
The Managed Hotels consist of five hotels (three Holiday Inns, one
Sheraton, and one Days Inn, which closed in December, 1999) located in two
states (Missouri and South Dakota), and contain a total of 1,136 guest rooms.
Mr. Hammons directly owns four of these five hotels. The remaining hotel is
owned by an entity controlled by Mr. Hammons in which he has a 50% interest.
Jacqueline Dowdy, a director and officer of the General Partner, and Lonnie A.
Funk, an employee of the General Partner, each own a 25% interest in this
entity. Mr. Funk acquired his interest in April, 1999 from Daniel L. Earley.
There is a convention and trade center adjacent to three of the Managed Hotels.
13
<PAGE>
The Company provides management services to the Managed Hotels within the
guidelines contained in annual operating and capital plans submitted to the
hotel owner for review and approval during the final 30 days of the preceding
year. The Company is responsible for the day-to-day operations of the Managed
Hotels. While the Company is responsible for the implementation of major
refurbishment and repairs, the actual cost of such refurbishments and repairs is
borne by the hotel owner. The Company earns a fee based on the size of the
project. The Company earns annual management fees of 3-5% of the hotel's gross
revenues. Each of the Managed Hotels' management contracts is for an initial
term of 20 years, which automatically extends for four periods of five years,
unless otherwise canceled. The Company has received an option from Mr. Hammons
or entities controlled by him to purchase each of the Managed Hotels.
Item 3. Legal Proceedings.
The Company is not presently involved in any litigation which if decided
adversely to the Company would have a material effect on the Company's financial
condition. To the Company's knowledge, there is no litigation threatened other
than routine litigation arising in the ordinary course of business which would
be covered by liability insurance.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
Not Applicable
Item 6. Selected Financial Data.
The selected consolidated financial information of the Company for the
1999, 1998, 1997, 1996, and 1995 Fiscal Years has been derived from and should
be read in conjunction with the audited consolidated financial statements of the
Company, which statements have been audited by Arthur Andersen LLP, independent
public accountants. The information presented below also should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included under Item 7. The Company's fiscal year
ends on the Friday nearest December 31. Consequently, the Company's 1996 Fiscal
Year included 53 weeks of operations while the 1995, 1997, 1998 and 1999 Fiscal
Years included 52 weeks of operations.
14
<PAGE>
Selected Consolidated Financial Information
- -------------------------------------------
(in thousands, except per share amounts, ratios and hotel data)
<TABLE>
<CAPTION>
FISCAL YEAR-ENDED
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
REVENUES
Rooms (a) $229,807 $211,989 $195,296 $171,206 $148,432
Food and beverage 101,231 91,982 86,183 79,580 70,840
Meeting room rental and other (b) 25,410 22,159 20,795 18,061 15,907
-------- -------- -------- -------- --------
Total revenues 356,448 326,130 302,274 268,847 235,179
-------- -------- -------- -------- --------
OPERATING EXPENSES
Direct operating costs and expenses (c)
Rooms 59,507 54,600 50,265 43,610 38,543
Food and beverage 68,799 64,174 62,383 57,956 54,228
Other 3,667 3,389 3,385 2,929 2,521
General, administrative, sales and management
service expenses (d,e) 104,876 95,500 85,766 74,646 64,234
Repairs and maintenance 15,059 13,438 12,578 11,528 10,131
Depreciation and amortization 45,669 45,580 34,781 24,034 18,346
-------- -------- -------- -------- --------
Total operating expenses 297,577 276,681 249,158 214,703 188,003
-------- -------- -------- -------- --------
INCOME FROM OPERATIONS 58,871 49,449 53,116 54,144 47,176
OTHER (INCOME) EXPENSES
Interest expense and amortization of deferred
Financing fees, net 62,209 57,286 44,325 35,620 28,447
Gain on sales of property and equipment (f) (2,365) (8,175) -- -- --
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF CHANGE IN $ (973) $ 338 $ 8,791 $ 18,524 $18,729
ACCOUNTING PRINCIPLE (g)(h) ======== ======== ======== ======== ========
BALANCE SHEET DATA
Total Assets $934,312 $876,486 $816,733 $658,072 $542,371
Total Debt, including current portion 828,843 759,716 695,791 531,143 458,094
</TABLE>
(a) Includes revenues derived from rooms.
(b) Includes meeting room rental, management fees for providing management
services to the Managed Hotels and other.
(c) Includes expenses incurred in connection with rooms, food and beverage, and
telephones.
(d) Includes expenses incurred in connection with franchise fees,
administrative, marketing and advertising, utilities, insurance, property
taxes, rent and other.
(e) Includes expenses incurred providing management services to the Managed
Hotels.
(f) Gain on sales includes six hotels sold February 6, 1998 and one hotel sold
December 31, 1998 and one hotel sold on June 16, 1999.
(g) The 1995 Fiscal Year does not include a $0.3 million extraordinary charge
related to prepayment fees on Stock Offering. The 1998 and 1999 Fiscal
Years do not include a $2.2 million and a $0.2 million, respectively,
extraordinary charge related to early extinguishment of debt.
(h) The Company adopted a new accounting pronouncement in 1999 which requires
cost of start up activities, including pre-opening expenses, to be expensed
as incurred. The 1999 Fiscal Year does not include a $1.8 million charge
related to the change in accounting.
15
<PAGE>
Supplemental Financial Information Relating to the 1994 and 1995 Collateral
Hotels
The following tables set forth, as of December 31, 1999, unaudited selected
financial information with respect to the 17 hotels collateralizing the 1994
Notes (the "1994 Collateral Hotels") and the eight hotels collateralizing the
1995 notes (the "1995 Collateral Hotels") and the Company, 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 December 31, 1999
1994 1995 Management
Collateral Collateral Operations Total
Hotels Hotels Group Restricted
---------- -------- --------- ----------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Operating Revenues $146,148 $50,368 $8,208(a) $204,724
Operating Expenses:
Direct operating costs and expenses 52,440 18,846 -- 71,286
General Administrative, Sales
and Mgmt expenses (b) 39,570 16,286 (473)(c) 55,383
Repairs and Maintenance 5,779 2,382 -- 8,161
Depreciation and Amortization 12,902 5,173 395 18,470
-------- ------- ------ --------
Total Operating Expense 110,691 42,687 (78) 153,300
-------- ------- ------ --------
Income from Operations $ 35,457 $ 7,681 $8,286 $ 51,424
======== ======= ====== ========
Operating Data:
Occupancy 68.0% 60.9%
Average Daily Room Rate $ 90.79 $ 80.51
RevPAR $ 61.74 $ 49.03
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
12 Months Ended January 1, 1999
1994 1995 Management
Collateral Collateral Operations Total
Hotels Hotels Group Restricted
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Operating Revenues $139,721 $57,528 $6,783 (a) $204,032
Operating Expenses:
Direct operating costs and expenses 51,997 21,611 -- 73,608
General Administrative, Sales
and Mgmt expenses (b) 39,292 18,617 (917)(c) 56,992
Repairs and Maintenance 5,448 1,549 -- 6,998
Depreciation and Amortization 11,922 5,402 412 17,736
-------- ------- ------ --------
Total Operating Expense 108,659 47,179 (505) 155,334
-------- ------- ------ --------
Income from Operations $ 31,062 $10,349 $7,287 $ 48,698
======== ======= ====== ========
Operating Data:
Occupancy 66.0% 61.6%
Average Daily Room Rate $ 87.51 $ 80.16
RevPAR $ 56.70 $ 49.34
</TABLE>
(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 for the 1994 and 1995
Collateral Hotels includes management revenues allocated to the 1994 and 1995
Collateral Hotels.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The following discussion and analysis primarily addresses results of
operations of the Company for the fiscal years ended December 31, 1999 ("1999"),
January 1, 1999 ("1998") and January 2, 1998 ("1997"). The following discussion
should be read in conjunction with the selected consolidated financial
information of the Company and the consolidated financial statements of the
Company included elsewhere herein.
17
<PAGE>
The Company's consolidated financial statements include revenues from the
Owned Hotels and management fee revenues for providing management services to
the Managed Hotels. References to the JQH Hotels include both the Owned Hotels
and the Managed Hotels. Revenues from the Owned Hotels are derived from rooms,
food and beverage, meeting rooms and other revenues. The Company's beverage
revenues include only revenues from the sale of alcoholic beverages, while
revenues from the sale of non-alcoholic beverages are shown as part of food
revenues. Direct operating costs and expenses include expenses incurred in
connection with the direct operation of rooms, food and beverage and telephones.
General, administrative, sales and management services expenses include expenses
incurred from franchise fees, administrative, sales and marketing, utilities,
insurance, property taxes, rent, management services and other expenses.
From 1995 through 1999, the Company's total revenues grew at an annual
compounded growth rate of 10.9%, from $235.2 million to $356.4 million.
Occupancy for the Owned Hotels during that period decreased 4.2 percentage
points from 67.1% to 62.9%. However, the Owned Hotels' average daily room rate
(ADR) increased by 32.4% from $71.68 to $94.87 during that period. Room revenue
per available room (RevPAR) increased by 24.0% from $48.09 to $59.64.
In general, hotels opened during the period from 1995 to 1999 decreased
overall occupancy but increased the overall average room rate. The Company
tracks the performance of the Owned Hotels in two groups. One group of hotels
are those opened by the Company during the current and prior fiscal years (New
Hotels). During 1999, the New Hotels included four hotels opened in 1999 and
four hotels opened in 1998. The remainder of the Owned Hotels, excluding the New
Hotels, are defined as Mature Hotels. In 1999, the Mature Hotels included 37
hotels opened prior to 1998. New hotels typically generate positive cash flow
from operations before debt service in the first year, generate cash sufficient
to service mortgage debt in the second year and create positive cash flow after
debt service in the third year.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR-ENDED
- -----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OWNED HOTELS
- -----------------------------------------------------------------------------------------------------------------------------
Average Occupancy 62.9% 62.1% 62.9% 64.7% 67.1%
- -----------------------------------------------------------------------------------------------------------------------------
Average Daily Room Rate (ADR) $ 94.87 $ 91.38 $ 82.38 $ 76.16 $ 71.68
- -----------------------------------------------------------------------------------------------------------------------------
Room Revenue per Available Room
(RevPAR) $ 59.64 $ 56.79 $ 51.84 $ 49.24 $ 48.09
- -----------------------------------------------------------------------------------------------------------------------------
Available Rooms (a) 3,853,403 3,733,166 3,767,387 3,476,279 3,087,700
- -----------------------------------------------------------------------------------------------------------------------------
Number of Hotels 45 42 45 39 37
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
MATURE HOTELS
- -----------------------------------------------------------------------------------------------------------------------------
Average Occupancy 64.7% 64.1% 63.8% 64.8% 67.1%
- -----------------------------------------------------------------------------------------------------------------------------
Average Daily Room Rate (ADR) $ 93.60 $ 86.50 $ 79.80 $ 76.06 $ 71.68
- -----------------------------------------------------------------------------------------------------------------------------
Room Revenue per Available Room
(RevPAR) $ 60.57 $ 55.41 $ 50.90 $ 49.24 $ 48.09
- -----------------------------------------------------------------------------------------------------------------------------
Available Rooms (a) 3,332,718 3,012,845 3,388,896 3,454,899 3,087,700
- -----------------------------------------------------------------------------------------------------------------------------
Number of Hotels 37 32 37 37 37
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
NEW HOTELS
- --------------------------------------------------------------------------------------------------------------------------------
Average Occupancy 51.0% 54.1% 55.3% 42.2% --
- --------------------------------------------------------------------------------------------------------------------------------
Average Daily Room Rate (ADR) $ 105.25 $ 115.55 $ 108.97 $ 100.49 --
- --------------------------------------------------------------------------------------------------------------------------------
Room Revenue per Available Room
(RevPAR) $ 53.70 $ 62.54 $ 60.21 $ 42.42 --
- --------------------------------------------------------------------------------------------------------------------------------
Available Rooms (a) 520,685 720,321 378,491 21,380 --
- --------------------------------------------------------------------------------------------------------------------------------
Number of Hotels 8 10 8 2 --
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
PERCENTAGES OF TOTAL REVENUES
- --------------------------------------------------------------------------------------------------------------------------------
REVENUES
- --------------------------------------------------------------------------------------------------------------------------------
Rooms 64.5% 65.0% 64.6% 63.7% 63.1%
- --------------------------------------------------------------------------------------------------------------------------------
Food and beverage 28.4% 28.2% 28.5% 29.6% 30.1%
- --------------------------------------------------------------------------------------------------------------------------------
Meeting room rental and other 7.1% 6.8% 6.9% 6.7% 6.8%
---------- ---------- ---------- ---------- ----------
- --------------------------------------------------------------------------------------------------------------------------------
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0%
---------- ---------- ---------- ---------- ----------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
- --------------------------------------------------------------------------------------------------------------------------------
Direct operating costs and expenses
- --------------------------------------------------------------------------------------------------------------------------------
Rooms 16.7% 16.7% 16.6% 16.2% 16.4%
- --------------------------------------------------------------------------------------------------------------------------------
Food and beverage 19.3% 19.7% 20.6% 21.6% 23.0%
- --------------------------------------------------------------------------------------------------------------------------------
Other 1.0% 1.0% 1.1% 1.1% 1.1%
- --------------------------------------------------------------------------------------------------------------------------------
General, administrative, sales and
- --------------------------------------------------------------------------------------------------------------------------------
Management service expenses 29.4% 29.3% 28.4% 27.8% 27.3%
- --------------------------------------------------------------------------------------------------------------------------------
Repairs and maintenance 4.2% 4.1% 4.2% 4.3% 4.3%
- --------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 12.8% 14.0% 11.5% 8.9% 7.8%
---------- ---------- ---------- ---------- ----------
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 83.4% 84.8% 82.4% 79.9% 79.9%
---------- ---------- ---------- ---------- ----------
- --------------------------------------------------------------------------------------------------------------------------------
Income from Operations 16.6% 15.2% 17.6% 20.1% 20.1%
========== ========== ========== ========== ==========
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Available rooms represent the number of rooms available for rent multiplied
by the number of days in the prior reported or, in the case of New Hotels, the
number of days the hotel was opened during the period reported. The Company's
1996 Fiscal Year contained 53 weeks or 371 days, while its 1995, 1997 1998 and
1999 Fiscal Years each contained 52 weeks, or 364 days.
1999 FISCAL YEAR COMPARED TO 1998 FISCAL YEAR
Total revenues increased to $356.4 million in 1999 from $326.1 million in 1998,
an increase of $30.3 million, or 9.3%. Of total revenues recognized in 1999,
64.5% were revenues from rooms, compared to 65.0% in 1998. Revenues from food
and beverage represented 28.4% of total revenues recognized in 1999, compared to
28.2% in 1998, and revenues from meeting room rental and other represented 7.1%
of total revenues compared to 6.8% in 1998.
Rooms revenues increased to $229.8 million in 1999 from $212.0 million in 1998,
an increase of $17.8 million, or 8.4%, as a result of the addition of four
hotels opened in 1999, a full year of operation for the four hotels opened in
1998, and an increase in the average daily room rate (ADR) of the Mature Hotels.
Average daily room rates (ADR) of Mature Hotels increased to $93.60 in 1999 from
$86.50 in 1998. The occupancy in the Mature Hotels was a 0.6 percentage point
increase to 64.7% in 1999, compared to 64.1% in 1998. The Mature Hotels' room
revenue
19
<PAGE>
per available room (RevPAR) improved to $60.57 in 1999 from $55.41 in 1998, an
increase of $5.16 or 9.3%. In 1999, the New Hotels included eight hotels, which
generated a revenue per available room (RevPAR) of $53.70, down 14.1% from the
1998 revenue per available room (RevPAR) of $62.54, when ten New Hotels were
open. In general, management believes the New Hotels are more insulated from the
effects of new hotel supply than are the Mature Hotels, since the New Hotels
utilize franchise brands that are considered to be more upscale in nature, and
the New Hotels have higher-quality guest rooms and public spaces.
Food and beverage revenues increased to $101.2 million in 1999 from $92.0
million in 1998, an increase of $9.2 million, or 10.0%. This increase was
primarily due to revenues associated with the New Hotels.
Meeting room rental and other revenues increased to $25.4 million in 1999 from
$22.2 million in 1998, an increase of $3.2 million, or 14.4%. This increase was
primarily due to the additional meeting space in the New Hotels.
Direct operating costs and expenses for rooms increased to $59.5 million in 1999
from $54.6 million in 1998, an increase of $4.9 million, or 9.0%. As a
percentage of rooms revenue, these expenses increased slightly to 25.9% in 1999
from 25.8% in 1998. The increased expense was associated with the New Hotels.
These costs generally represent a higher percentage of rooms revenue in newer
hotels until these hotels reach stabilized occupancy levels.
Direct operating costs and expenses for food and beverage increased to $68.8
million in 1999 from $64.2 million in 1998, an increase of $4.6 million, or
7.2%, but decreased slightly as a percentage of food and beverage revenues to
68.0%, from 69.8% in 1998. The dollar increase was due to costs associated with
the higher volume of sales associated with the New Hotels.
Direct operating costs and expenses for other were $3.7 million in 1999 and $3.4
million in 1998, an 8.8% increase. As a percentage of meeting room rental and
other revenues, these expenses were 14.4% in 1999 and 15.3% in 1998.
General, administrative, sales and management service expenses increased to
$104.9 million in 1999 from $95.5 million in 1998, an increase of $9.4 million,
or 9.8%. Increases in these expenses were primarily attributable to the
Company's adoption of a new accounting pronouncement in 1999 which requires cost
of start up activities, including pre-opening expenses, to be expensed as
incurred. Pre-opening expenses approximated $4.2 million in 1999. In addition,
a large portion of expenses associated with New Hotel openings are fixed costs
in nature. As a result, these expenses rise faster than revenues in the first
one to two years of operation. As a percentage of total revenues, these
expenses increased slightly to 29.4% in 1999, from 29.3% in 1998.
Repairs and maintenance expenses increased to $15.1 million in 1999 from $13.4
million in 1998, an increase of $1.7 million, or 12.7%, and increased slightly
as a percentage of revenues to 4.2% from 4.1% in 1998.
Depreciation and amortization increased slightly by $0.1 million, or 0.2%, to
$45.7 million in 1999 from $45.6 million in 1998. As a percentage of total
revenues, these expenses decreased to
20
<PAGE>
12.8% in 1999 from 14.0% in 1998. The dollar increase was a direct result of the
increased level of capital expenditures for the newer hotels.
Income from operations increased to $58.9 million in 1999 from $49.4 million in
1998, an increase of $9.5 million, or 19.2%. As a percentage of total revenues,
income from operations was 16.6% in 1999 compared to 15.2% in 1998, due
primarily to the higher proportion of the non-cash expense of depreciation and
amortization in 1998.
Interest expense and amortization of deferred financing fees, net increased to
$65.4 million in 1999 from $57.3 million in 1998, an increase of $8.1 million or
14.1%. The increase was attributable to debt associated with the financing of
the New Hotels.
Income (loss) before extraordinary item and cumulative effect of change in
accounting principle was a $1.0 million loss in 1999 compared to $0.3 million of
income in 1998. The 1999 results include a $2.4 million gain on the sale of one
Holiday Inn in June of 1999, and a $0.2 million extraordinary item (cost of
early extinguishment of debt). The 1998 results include an $8.2 gain on the
sale of property and equipment in connection with the sale of six Holiday Inns
in February of 1998 and one Holiday Inn in December of 1998 and a $2.2 million
extraordinary item.
1998 FISCAL YEAR COMPARED TO 1997 FISCAL YEAR
Total revenues increased to $326.1 million in 1998 from 302.3 million in 1997,
an increase of $23.8 million, or 7.9%. Of the total revenues reported in 1998,
65.0% were revenues from rooms, 28.2% were revenues from food and beverage and
6.8% were revenues from meeting room rental and other, compared with 64.6%,
28.5% and 6.9%, respectively, during 1997.
Rooms revenues increased to $212.0 million in 1998 from $195.3 million in 1997,
an increase of $16.7 million, or 8.6%, as a result of the operation of two
hotels which opened in 1996 and six hotels opened in 1997, and the increase in
average daily room rate (ADR). Average daily room rates (ADR) of Mature Hotels
increased to $86.50 in 1998 from $79.80 in 1997. The occupancy in the mature
hotels was a 0.3 percentage point increase to 64.1% in 1998, compared to 63.8%
in 1997. The Mature Hotels' room revenue per available room (RevPAR) improved to
$55.41 in 1998 from $50.90 in 1997, an increase of $4.51 or 8.9%. In 1998, the
New Hotels included ten hotels, which generated a revenue per available room
(RevPAR) of $62.54, up 3.9% from the 1997 revenue per available room (RevPAR) of
$60.21, when eight New Hotels were open. In general, management believes the New
Hotels are more insulated from the effects of new hotel supply than are the
Mature Hotels, since the New Hotels utilize franchise brands that are considered
to be more upscale in nature, and the New Hotels have higher-quality guest rooms
and public spaces.
Food and beverage revenues increased to $92.0 million in 1998 from $86.2 million
in 1997, an increase of $5.8 million, or 6.7%. This increase was due to
revenues associated with newly opened hotels.
Meeting room rental and other revenues increased to $22.2 million in 1998 from
$20.8 million in 1997, an increase of $1.4 million, or 6.7%. This increase was
due to the addition of meeting space in the New Hotels.
21
<PAGE>
Direct operating costs and expenses for rooms increased to $54.6 million in 1998
from $50.3 million in 1997, an increase of $4.3 million, or 8.5%. As a
percentage of rooms revenue, these expenses remained stable, at 25.8%.
Direct operating costs and expenses for food and beverage increased to $64.2
million in 1998 from $62.4 million in 1997, an increase of $1.8 million, or
2.9%, but decreased as a percentage of food and beverage revenues, to 69.8% from
72.4% in 1997. The dollar increase was due to costs associated with the higher
volume of sales.
Direct operating costs and expenses for other remained stable in 1998 at $3.4
million, but decreased as a percentage of meeting room rental and other revenues
to 15.3% from 16.3% in 1997.
General administrative, sales and management service expenses increased to $95.5
million in 1998 from $85.8 million in 1997, an increase of $9.7 million, or
11.3%. Increases in these expenses are primarily attributable to expenses
associated with the opening of new hotels in 1997 and 1998. As a percentage of
total revenues, these expenses increased to 29.3 % in 1998 from 28.4% in 1997.
Repairs and maintenance expenses increased to $13.4 million in 1998 from $12.6
million in 1997, by $0.8 million or 6.3%, but decreased slightly as a percentage
of total revenues, to 4.1% from 4.2% in 1997.
Depreciation and amortization increased to $45.6 million in 1998 from $34.8
million in 1997, by $10.8 million, or 31.0%. As a percentage of total revenues,
these expenses increased to 14.0% in 1998 from 11.5% in 1997. The increase was
a direct result of the increased level of capital expenditures for the newly
opened hotels.
Income from operations decreased to $49.4 million 1998 from $53.1 million in
1997, a decrease of $3.7 million, or 7.0%. The decrease was due to higher
costs, including depreciation expense related to the building of new hotels. As
a percentage of total revenues, income from operations was 15.2% in 1998 and
17.6% in 1997.
Interest expense and amortization of deferred financing fees, net increased to
$57.3 million in 1998 from $44.3 million in 1997, an increase of $13.0 million,
or 29.3%. The increase was attributable to borrowing for new hotel
construction.
Income before extraordinary item decreased to $0.3 million in 1998 from $8.8
million in 1997, a decrease of $8.5 million, or 96.6%. The 1998 results include
an $8.2 million gain on sales of property and equipment in connection with the
sale of six Holiday Inns in February of 1998 and one Holiday Inn in December of
1998.
LIQUIDITY AND CAPITAL RESOURCES
In general, the Company has financed its operations through internal cash
flow, loans from financial institutions, the issuance of public debt and equity
and the issuance of industrial
22
<PAGE>
revenue bonds. The Company's principal uses of cash are to pay operating
expenses, to service debt and to fund capital expenditures, new hotel
development and permitted distributions to fund some of the taxes allocable to
the partners.
At December 31, 1999, the Company had $49.7 million of cash and equivalents
and also had $5.0 million of marketable securities, compared to $46.2 million in
cash and cash equivalents and $6.5 million of marketable securities at the end
of 1998. Such amounts are available for completion of new hotels and other
working capital requirements of the Company.
Net cash provided by operating activities decreased to $41.3 million at the
end of 1999 from $43.5 million at the end of 1998, a decrease of $2.2 million,
or 5.1%, primarily as the Company decreased its trade payables.
The Company incurred net capital expenditures of $123.6 million and $131.2
million, respectively, for 1999 and 1998. Capital expenditures typically include
capital improvements on existing hotel properties and expenditures for
development of new hotels. Capital expenditures in 1999 included $107.5 million
for new hotel development and $16.1 million for existing hotels. During 1998,
capital expenditures for existing hotels and new hotel development were $19.7
million and $111.5 million, respectively. During 2000, the Company expects
capital expenditures to approximate $48.7 million, representing approximately
$19.1 million for capital improvements on existing hotels and approximately
$29.6 million for continued new hotel development.
At the end of 1999, total debt was $828.8 million compared with $759.7
million in 1998. The increase is attributable to the hotels opened during 1999
as well as two Scheduled Hotels under construction at the end of 1999. The
current portion of long-term debt was $16.6 million at the end of 1999, compared
with $42.3 million at the end of 1998.
On June 16, 1999, the Holiday Inn Express Hotel and Conference Center in
Joliet, Illinois was sold to an unrelated party for $6.5 million, resulting in a
gain of approximately $2.4 million. This hotel served as collateral under the
1994 first mortgage notes. Under the terms of the indenture, the Company must
provide replacement collateral of equivalent value or apply the proceeds from
the sale to amounts outstanding. The Company provided replacement collateral in
accordance with the indenture provisions.
The Company estimates that building, pre-opening and other costs of the two
Scheduled Hotels will require aggregate funding of approximately $24.4 million
from the Company (net of $52.9 million included in construction in progress and
other assets at year end). The Company has obtained loans and commitments of
approximately $51.0 million (approximately $30.0 million of which had been drawn
at year end) on the Scheduled Hotels and expects the remaining 2000 capital
requirements to be funded by cash, cash flow from operations and refinancing of
certain existing hotels.
Based upon current plans relating to the timing of new hotel development
and loan draw schedules, the Company anticipates that its capital resources will
be adequate to satisfy its 2000 capital requirements for the currently planned
projects and normal recurring capital improvement projects.
23
<PAGE>
Consistent with the authorization by the partner's Board of Directors, the
Company advanced $3 million to the General Partner to purchase 744,200 shares of
its outstanding Class A Common Stock during 1999, at an approximate average
price of $4.03 per share. The Board of Directors of the General Partner has
authorized the purchase of an additional $3 million of shares of Class A Common
Stock during 2000.
The Company did not distribute or accrue any amounts in 1999 to its
partners for income taxes, but distributed or accrued $10.6 million in 1998 to
partners for income taxes. Distributions by the Company must be made in
accordance with the provisions of the Indentures.
Year 2000
The Company implemented a program over the past several years to define and
minimize the risks related to transitioning to the year 2000 and beyond. The
program developed appropriate action steps, while instituting a series of
management processes to coordinate and manage the process. The process included
corporate oversight and provided for consistent attention to progress made
against planned activities with periodic assessments made by independent parties
and reports to the Board of Directors. The Company's approach was to subdivide
the program into five distinct areas: 1) Corporate Systems; 2) Hotel Systems; 3)
Embedded Systems; 4) Time Keeping and Payroll Systems and 5) Vendor Compliance.
Each of these categories was broken into several subcategories (hardware and
software systems, critical and non-critical systems and compliance testing) The
Company analyzed and monitored progress in each subcategory of each category.
To date the program has been successful and the Company has transitioned
all of its systems to the new millennium. No significant problems were
identified in any of the five areas, and the Company believes the risk related
to future exposure for Year 2000 issues is minimal. The cost associated with the
Year 2000 initiative in 1999 was approximately $0.6 million, including the cost
for scheduled hardware and software upgrades.
Seasonality
Demand is affected by normally recurring seasonal patterns. For most of the
JQH Hotels, demand is higher in the spring and summer months (March through
October) than during the remainder of the year. Accordingly, the Company's
operations are seasonal in nature, with lower revenue, operating profit and cash
flow in the first and fourth quarters due to decreased travel during the winter
months.
Inflation
The rate of inflation as measured by changes in the average consumer price
index has not had a material effect on the revenues or operating results of the
Company during the three most recent fiscal years.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
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<PAGE>
The Company is exposed to changes in interest rates primarily as a result of its
investing and financing activities. Investing activity includes operating cash
accounts and investments, with an original maturity of three months or less, and
certain balances of various money market and common bank accounts. The
financing activities of the Company are comprised of long-term fixed and
variable rate debt obligations utilized to fund business operations and maintain
liquidity. The following table presents the principle cash repayments and
related weighted average interest rates by maturity date for the Company's long-
term fixed and variable rate debt obligations as of December 31, 1999:
Expected Maturity Date
(in millions)
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total Fair Value (d)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Debt(a)
$300 Million 1/st/ Mortgage Notes $ - $ - $ - $ - $ 300 $ -- $300 $313
Average interest rate (b) 8.9% 8.9% 8.9% 8.9% 8.9% -- 8.9%
$90 Million 1/st/ Mortgage Notes $ - $ - $ - $ - $ - $ 90 $ 90 $ 94
Average interest rate(b) 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8%
Other fixed-rate debt
obligations $ 6 $ 14 $ 31 $ 38 $ 6 $ 224 $319 $319
Average interest rate(b) 8.4% 8.2% 8.7% 8.8% 8.5% 8.6% 8.6%
Other variable-rate debt
obligations $ 10 $ 33 $ 1 $ 16 $ 29 $ 31 $120 $120
Average interest rate(c) 8.8% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8%
</TABLE>
(a) Includes amounts reflected as long-term debt due within one year
(b) For the long-term fixed rate debt obligations, the weighted average
interest rate is based on the stated rate of the debt that is maturing in the
year reported. The weighted average interest rate excludes the effect of the
amortization of deferred financing costs.
(c) For the long-term variable rate debt obligations, the weighted average
interest rate assumes no changes in interest rates and is based on the variable
rate of the debt, as of December 31, 1999, that is maturing in the year
reported. The weighted average interest rate excludes the effect of the
amortization of deferred financing costs.
(d) The fair values of long-term debt obligations approximate their
respective historical carrying amounts except with respect to the $300 million
1/st/ Mortgage Notes and the $90 million 1/st/ Mortgage Notes. The fair value of
the first mortgage note issues is estimated by obtaining quotes from brokers.
Item 8. Financial Statements and Supplementary Data.
Reference is made to the Index to Consolidated Financial Statements and the
Financial Statements following such index in Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
25
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Company does not have any directors or officers. The General Partner
in its capacity as general partner, manages and controls the activities of the
Company. The following sets forth certain information concerning the directors
and director nominees of the General Partner who are not also officers of the
General Partner. Information required by this item with respect to officers of
the General Partner is provided in Item 1 of this report. See "Management."
Finance Corp. and Finance Corp. II each have the same directors and officers as
the General Partner, except that Messrs. Dempsey, Earley, Hart, Lopez-Ona, Moore
and Sullivan are not directors of Finance Corp. or Finance Corp. II.
Donald H. Dempsey, age 55, became a director of the Company in August 1999.
Mr. Dempsey currently serves as Executive Vice President and Chief Financial
Officer of Equity Inns, Inc., where he also serves on its board of directors.
Equity Inns, Inc. is a large lodging real estate investment trust headquartered
in Germantown, Tennessee, which owns 100 hotels in 36 states. Mr. Dempsey has
more than 30 years' experience in corporate and financial management within the
hotel industry. Prior to joining Equity Inns in July 1998, Mr. Dempsey served
as Executive Vice President and Chief Financial Officer of Choice Hotel
Corporation, a publicly traded hotel franchiser, manager and owner of hotels
whose brands include Hampton Inn, Homewood Suites and Embassy Suites. Mr.
Dempsey was named Senior Vice President and Chief Financial Officer in 1995 of
The Promus Companies Incorporated ("PCI"); from 1993 to 1995, he served as
Senior Vice President of Finance and Administration of the Hotel Division.
From1983 to 1993, he was Vice President of Franchising and Development for the
Hampton Inn Division of PCI. Mr. Dempsey also held various corporate and
financial management and administrative positions with Holiday Inns from 1969 to
1983.
Daniel L. Earley, age 57, has been a director of the General Partner since
February 1994. Since 1985, Mr. Earley has been President, Chief Executive
Officer and a director of Clermont Savings Bank, FSB, a community bank located
Milford, Ohio, which is owned by Mr. Hammons.
William J. Hart, age 59, has been a director of the General Partner since
December 1993. He is a partner in the law firm of Husch & Eppenberger, LLC
formerly Farrington & Curtis, P.C., a position he has held since 1970. Mr.
Hart's firm performs legal services on a regular basis for the Company and
personally for Mr. Hammons. Mr. Hart has also been a director since 1981 of
Johnston Industries, Inc., a commercial textiles company listed on the New York
Stock Exchange.
John E. Lopez-Ona, age 42, became a director of the General Partner in May
1996. Mr. Lopez-Ona was a Managing director of Kidder Peabody & Company, Inc.
an investment banking firm, from March 1990 through March 1995. Since June 1995
Mr. Lopez-Ona has been the President of Anvil Capital, Inc., a firm owned by
him, which specializes in principal investments.
James F. Moore, age 58, became a director of the General Partner in May
1995. Since 1987, Mr. Moore has been Chairman, Chief Executive Office and a
Director of Champion Products, Incorporated, a privately owned manufacturing
company serving the telecommunications industry located in Strafford, Missouri.
Prior to 1987, Mr. Moore had served
26
<PAGE>
as President of the Manufacturing Division of Service Corporation International,
a company listed on the New York Stock Exchange.
David C. Sullivan, age 60, became a director of the Company in May, 1999.
Mr. Sullivan has been Chairman, Chief Executive Officer and a Director of Resort
Quest International, a company listed on the New York Stock Exchange that
provides vacation rental and property management services, since May 1998. From
April 1995 to December 1997, Mr. Sullivan was Executive Vice President and Chief
Operating Officer of Promus Hotel Corporation, a publicly traded hotel
franchiser, manager and owner of hotels whose brands include Hampton Inn,
Homewood Suites and Embassy Suites. From 1993 to 1995, Mr. Sullivan was the
Executive Vice President and Chief Officer of the Hotel Division of The Promus
Companies Incorporated ("PCI"), He was the Senior Vice President of Development
and Operations of the Hampton Inn/Homewood Suites Division of PCI from 1991 to
1993. From 1990 to 1991, Mr. Sullivan was the Vice President of Development of
the Hampton Inn Hotel Division of PCI.
Compensation of Directors. Each non-employee director was entitled to
receive the following payments for service on the Board during the fiscal year
ended December 31, 1999: (1) $1,000 for each regular Board meeting attended and
(2) $500 for each regular committee meeting attended ($750 per meeting for the
committee chair). In addition, each non-employee director was entitled to
receive on the day following the 1999 annual shareholder meeting: (1) a cash
payment of $10,000, (2) 2,580 shares of the Company's Class A Common Stock with
a fair market value equal to $10,000 on the date of payment and (3) an option to
purchase 10,000 shares of the Company's Class A Common Stock. The stock and
options were issued pursuant to the 1999 Non-Employee Director Stock and Stock
Option Plan. Employee directors are not compensated for their services as
directors or committee members.
Item 11. Executive Compensation.
Cash Compensation
The following table sets forth the salary, cash bonus and certain other
forms of compensation paid by the General Partner and its subsidiaries for
services rendered in all capacities during the 1999, 1998 and 1997 fiscal years
to the Chief Executive Officer of the General Partner and the four most highly
compensated executive officers of the General Partner other than the Chief
Executive Officer serving at the end of the 1999 fiscal year (the "named
executive officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
Fiscal ------------------- All Other ------
Name and Principal Positions Year Salary ($) Bonus ($) Compensation ($) Securities Underlying Options (#)
- ---------------------------- ------ ---------- --------- ------------------ ---------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
John Q. Hammons 1999 $250,000 $90,000 $ -- --
Chairman of the Board and 1998 200,000 50,000 -- 200,000 (b)
Chief Executive Officer 1997 150,000 -- -- --
Kenneth J. Weber (a) 1999 260,000 72,000 1,300(c) --
Executive Vice President and 1998 169,840 57,500 -- 100,000 (b)
Chief Financial Officer 1997 -- -- -- --
Lonnie A. Funk 1999 145,000 50,000 1,675(c) --
Senior Vice President 1998 125,000 22,500 1,449(c) 40,000 (b)
Operations 1997 112,500 20,000 1,453(c) --
Debra M. Shantz 1999 140,000 50,000 2,709(c) --
Corporate Counsel 1998 135,000 47,500 1,544(c) 70,000 (b)
1997 97,500 40,000 1,139(c) --
Steven E. Minton 1999 135,000 50,000 1,787(c) --
Senior Vice President, 1998 130,000 45,000 1,563(c) 40,000 (b)
Architecture 1997 118,000 40,000 1,275(c) --
</TABLE>
_________________
(a) Mr. Weber joined the Company in April of 1998.
(b) Comprised of options with an exercise price of $7.375 per share.
(c) Matching contributions to Company's 401(k) Plan.
<TABLE>
<CAPTION>
Option Holdings
Fiscal Year-End Option Values
Number of Unexercised Value of Unexercised
Options In-the-Money Options
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John Q. Hammons 50,000 150,000 -- --
Kenneth J. Weber 25,000 75,000 -- --
Lonnie Funk 10,000 30,000 -- --
Debra M. Shantz 17,500 52,500 -- --
Steven A. Minton 10,000 30,000 -- --
</TABLE>
The $7.375 exercise price per share of the stock options granted on June 5,
1998 (which comprise all of the options held by the Named Executive Officers) is
greater than the $3.875 closing price of the Company's Class A Common Stock as
reported on the New York Stock Exchange on December 31, 1999, thus no options
are "In the Money." The remaining options vest in three equal annual
installments on June 5, 2000, 2001 and 2002.
401(k) Plan
Effective January 1, 1996, the General Partner adopted a contributory
retirement plan (the "401(k) Plan") for its employees age 21 and over with at
least one year of service to the General Partner. The 401(k) Plan is designed
to provide tax-deferred income to the General Partner's employees in accordance
with the provisions of Section 401(k) of the Internal Revenue Code of
28
<PAGE>
1986. The 401(k) Plan provides that the General Partner will make a matching
contribution to each participant's account equal to 50% of such participant's
eligible contributions up to a maximum of 3% of such participant's annual
compensation.
Employment Agreements
The General Partner entered into an employment agreement with Kenneth J.
Weber, effective April 27, 1998. Under that agreement, Mr. Weber's annual base
salary is $260,000, plus a discretionary bonus of up to 35% of his base salary,
with such annual increases in compensation as may be determined by the
Compensation Committee of the General Partner. The agreement contains
significant non-competition provisions extending for a period of one year
following termination of the agreement. The initial term of the agreement is for
three years.
The General Partner entered into an employment agreement with Debra M.
Shantz, dated as of May 1, 1995 as amended on October 31, 1997. Under the
agreement, Ms. Shantz's annual base salary is $135,000, plus a discretionary
bonus, with such annual increases in compensation as may be determined by the
Compensation Committee of the General Partner. The agreement terminates October
31, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Mr. Hammons is the beneficial owner of all 16,043,900 limited partnership
units of the Company, representing 71.69% of the total equity in the Company.
The General Partner owns all 6,336,100 general partner units of the Company,
representing 28.31% of the total equity of the Company.
Item 13. Certain Relationships and Related Transactions.
Mr. Hammons and Anvil Capital, an investment and consulting firm owned by
Mr. Lopez-Ona, a director of the General Partner, formed a limited liability
company to provide personal financial advisory services, through which they have
invested in securities of one or more companies in industries unrelated to the
Company's business.
Mr. Hart is a non-employee director of the General Partner, and is a
partner in the law firm of Husch & Eppenberger, LLC, which performs legal
services on a regular basis for the Company and personally for Mr. Hammons. The
Company paid such firm approximately $276,000 in legal fees during the fiscal
year ended December 31, 1999.
The Company is controlled by Mr. Hammons through his control of the General
Partner, the sole general partner of the Company. His equity interest in the
Company (based on his beneficial ownership of 244,300 shares of Class A Common
Stock of the General Partner, all 294,100 shares of Class B Common Stock of the
General Partner and all 16,043,900 limited partnership units of the Company (the
"LP Units") is 76.8%. There are significant potential conflicts of interests
between Mr. Hammons as a limited partner of the Company, and the holders of
Class A Common Stock of the General Partner, which conflicts may be resolved in
favor of Mr. Hammons.
29
<PAGE>
Holders of LP Units have the right to require the redemption of their LP
Units. This redemption right will be satisfied, at the sole option of the
General Partner, by the payment of the then cash equivalent thereof or by the
issuance of shares of Class A Common Stock on a one-for-one basis. Mr. Hammons
beneficially owns all 16,043,900 LP Units. If Mr. Hammons, as a holder of LP
Units, requires the Company to redeem LP Units, the non-employee directors of
the General Partner would decide, consistent with their fiduciary duties as to
the best interests of the Company, whether to redeem the LP Units for cash or
for shares of Class A Common Stock. Mr. Hammons would not vote or otherwise
participate in the decision of the non-employee directors. Mr. Hammons has
informed the Company that he has no current plan to require the Company to
redeem his LP Units.
During 1999, the Company provided management services to five hotels not
owned by the Company (the "Managed Hotels") pursuant to management contracts
(the "Management Contracts"). Four of the Managed Hotels are owned by Mr.
Hammons and one is owned 50% by Mr. Hammons; 25% by Jacqueline A. Dowdy, the
Secretary and a director of the General Partner; and 25% by Lonnie A. Funk, an
employee of the General Partner. Mr. Funk acquired his interest in April, 1999
from Daniel L. Earley. Management fees of 3% to 5% of gross revenues were paid
to the Company by the Managed Hotels in the aggregate amount of $845,000 in the
fiscal year ended December 31, 1999. Each of the Management Contracts is for an
initial term of 20 years, which automatically extends for four periods of five
years, unless otherwise canceled. In addition to the management fees paid by the
Managed Hotels to the Company in that year, the Managed Hotels reimbursed the
Company for a portion of the salaries paid by the Company to its five regional
vice presidents, whose duties include management services related to the Managed
Hotels, and for certain marketing and other expenses allocated to the Managed
Hotels. Such reimbursed services and expenses aggregated $132,000 in the fiscal
year ended December 31, 1999.
The Company has an option granted by Mr. Hammons or persons or entities
controlled by him to purchase the Managed Hotels. The options are effective
until February 2009. If an option is exercised, the purchase price is based on
a percentage of the fair market value of the Managed Hotel as determined by an
appraisal firm of national standing. One hotel owned by the Company and two
Managed Hotels are located in Springfield, Missouri. These hotels are
potentially competing with one another for customers. The Company, however,
believes that these hotels do not significantly compete with one another due to
their respective locations and attributes.
Mr. Hammons has a 45% ownership interest in Winegardner & Hammons, Inc.
("WHI"). All of the hotels owned by the Company (the "Owned Hotels") have
contracted with WHI to provide accounting and other administrative services.
The accounting and administrative charges expensed by the Owned Hotels were
approximately $1,440,000 in the fiscal year ended December 31, 1999. The fee
may increase if the number of hotels for which accounting and administrative
services are performed drops below 35 hotels. The accounting services contract
expired in June of 2002.
The Company leases space in the John Q. Hammons Building for its
headquarters from a Missouri general partnership, of which Mr. Hammons is a 50%
partner and the remaining 50% is collectively held by other employees, including
Jacqueline A. Dowdy, the Secretary and a director of the General Partner, who is
a 9.5% partner. Pursuant to four lease agreements,
30
<PAGE>
expiring December 31, 2001, the Company paid monthly rental payments of
approximately $19,500 in 1999. The Company made aggregate annual lease payments
to the Missouri general partnership of approximately $234,000 in 1999.
Mr. Hammons also owns trade centers adjacent to three of the Owned Hotels
(the "JQH Trade Centers"). The Company leases the convention space in the JQH
Trade Center located in Portland, Oregon from Mr. Hammons pursuant to a long-
term lease expiring in 2004, requiring annual payments of approximately
$300,000. With respect to the other two JQH Trade Centers, the Company makes
nominal annual lease payments to Mr. Hammons. The Company has assumed
responsibility for all operating expenses of the JQH Trade Centers.
The Company leases the real estate for the Company's Chateau on the Lake
Resort, opened in mid-1997, in Branson, Missouri, from Mr. Hammons. Annual rent
was $150,000 in 1999, an amount based on adjusted gross revenues from room sales
on the property. The lease term is 50 years, with an option to renew for an
additional 10 years. The Company also has an option to purchase the land after
March 1, 2118 at a proposed transfer price of the greater of $3,000,000 or the
current appraised value.
The Company also leases the real estate for the Company's Embassy Suites
hotel in Little Rock, Arkansas which opened in the fall of 1997, from Mr.
Hammons. Annual rent is $120,000 per year until the end of 2001. Rent thereafter
is adjusted based on movement in the Consumer Price Index. The lease term is 40
years. The Company has an option to purchase the land at any time during the
first 10 years of the lease term, for the greater of $1,900,000 or the current
appraised value.
The Company also leases the real estate for the Company's Renaissance
Suites Hotel in Charlotte, NC, which opened in December of 1999 from Tulsa Hills
Investments, Inc., an Ohio corporation, of which Mr. Hammons is a 99% owner and
Jacqueline A. Dowdy is a 1% owner. The lease term is 99 years. Commencing
October 15, 1997, annual rent is $80,000 in years one and two, $120,000 in years
three through five, $124,800 in years six through ten with cost of living
adjustments for each year thereafter.
Mr. Hammons owns parcels of undeveloped land throughout the United States.
Although there are no current plans to do so, the Company may purchase or lease
one or more of these parcels in the future in order to develop hotels. Since
Mr. Hammons controls the Company, such transactions would not be arms-length
transactions but will be subject to restrictions contained in the indentures
relating to the Company's outstanding mortgage notes due in 2004 and 2005.
The General Partner receives no management fee or similar compensation in
connection with its management of the Company. The General Partner receives the
following remuneration from the Company: (i) distributions, if any, in respect
of its equity interest in the Company; and (ii) reimbursement for all direct and
indirect costs and expenses incurred by the General Partner for or on behalf of
the Company and all other expenses necessary or appropriate to the conduct of
the business of, and allocable to, the Company.
31
<PAGE>
The Company is unaware of any other transactions to which the Company is a
party in which any director or executive officer of the Company has or will have
a direct or indirect material interest.
PART IV
Item 14. Exhibits, Financial Schedules, and Reports on Form 8-K.
14(a)(1) Financial Statements
Reference is made to the Index to Consolidated Financial Statements and the
Consolidated Financial Statements following such index.
14(a)(2) Financial Statement Schedules
All schedules have been omitted because the required information in such
schedules is not present in amounts sufficient to require submission of the
schedule or because the required information is included in the consolidated
financial statements or is not required.
14(a)(3) Exhibits
Exhibits required to be filed by Item 601 of Regulation S-K are listed in
the Exhibit Index attached hereto, which is incorporated by reference. Set forth
below is a list of management contracts and compensatory plans and arrangements
required to be filed as exhibits by Item 14(c).
10.5 Form of Option Purchase Agreement
10.8 Employment Agreement between the General Partner and Debra M. Shantz
dated as of May 1, 1995 as amended on October 31, 1997.
10.13 Employment Agreement between the General Partner and Kenneth J.
Weber dated as of April 27, 1998
10.18 1994 Stock Option Plan of the General Partner
10.19 1999 Non-Employer Director Stock and Stock Option Plan of the
General Partner
14(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1999.
14(c) Exhibits
Reference is made to the exhibit index which has been filed with the
exhibits.
14(d) Financial Statements
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized, in the City of
Springfield, Missouri, on the 29th day of March, 2000.
JOHN Q. HAMMONS HOTELS, L.P.
By: John Q. Hammons Hotels, Inc.,
its general partner
By: /s/ John Q. Hammons
------------------------
John Q. Hammons
Chairman and Founder
JOHN Q. HAMMONS HOTELS FINANCE
CORPORATION
By: /s/ John Q. Hammons
-----------------------
John Q. Hammons
Chairman and Founder
JOHN Q. HAMMONS HOTELS FINANCE
CORPORATION II
By: /s/ John Q. Hammons
-----------------------
John Q. Hammons
Chairman and Founder
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
in their capacities at John Q. Hammons Hotels, Inc. as general partner of John
Q. Hammons Hotels, L.P., and in the capacities indicated for John Q. Hammons
Hotels Finance Corporation, and John Q Hammons Hotels Finance Corporation II, on
March 29, 2000.
33
<PAGE>
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
/s/ John Q. Hammons Chairman and Founder of John Q. Hammons Hotels, Inc., John Q.
- -------------------------- Hammons Hotels Finance Corporation and John Q. Hammons Finance
John Q. Hammons Corporation II (Principal Executive Officer)
/s/ Kenneth J. Weber Director, Chief Financial Officer of John Q. Hammons Hotels, Inc.
- -------------------------- [John Q. Hammons Hotels Financial Corporation and John Q. Hammons Finance
Kenneth J. Weber Corporation II] (Principal Financial and Accounting Officer)
/s/ Jacqueline A. Dowdy Director, Secretary of John Q. Hammons Hotels, Inc., John Q. Hammons
- -------------------------- Hotels Finance Corporation and John Q. Hammons Finance Corporation II
Jacqueline A. Dowdy
/s/ William J. Hart Director of John Q. Hammons Hotels, Inc.
- --------------------------
William J. Hart
/s/ Daniel L. Earley Director of John Q. Hammons Hotels, Inc.
- --------------------------
Daniel L. Earley
/s/ James F. Moore Director of John Q. Hammons Hotels, Inc.
- --------------------------
James F. Moore
/s/ John E. Lopez-Ona Director of John Q. Hammons Hotels, Inc.
- --------------------------
John E. Lopez-Ona
/s/ Donald H. Dempsey Director of John Q. Hammons Hotels, Inc.
- --------------------------
Donald H. Dempsey
</TABLE>
34
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Title Page
- ---- ----- ---
<S> <C> <C>
*3.1 Second Amended and Restated Agreement of Limited Partnership of the Company (the "Partnership
Agreement")
3.2 Amendment No. 1 to Partnership Agreement (incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended December 30, 1994)
**3.3 Amendment No. 2 to Partnership Agreement
****3.4 Certificate of Limited Partnership of the Company filed with the Secretary of State of the State
of Delaware
*3.5 Restated Certificate of Incorporation of the General Partner
***3.6 Certificate of Incorporation of John Q. Hammons Hotels Finance Corporation II
**10.1 1994 Note Indenture
**10.2 1995 Note Indenture
**10.3 Embassy Suites License Agreement
**10.4 Form of Option Purchase Agreement
*10.5 Collective Bargaining Agreement between East Bay Hospitality Industry Association, Inc. and
Service Employee's International Union
10.6 Collective Bargaining Agreement between Hotel Employee and Restaurant Employee Union Local 49 and
Holiday Inn Sacramento--Capitol Plaza, for 06/01/98 to 5/31/01
*10.7 Letter Agreement re: Hotel Financial Services for Certain Hotels Owned and Operated by John Q.
Hammons or JQH Controlled Companies
10.8 Employment Agreement between John Q. Hammons Hotels, Inc. and Debra M. Shantz dated as of May
1,1995 as amended on October 31, 1997 (incorporated by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended January 1, 1999)
***10.9a John Q. Hammons Building Lease Agreement - 9th Floor (6000 sq. ft.)
***10.9b John Q. Hammons Building Lease Agreement - 7th Floor (2775 sq. ft.)
***10.9c John Q. Hammons Building Lease Agreement - 7th Floor (2116 sq. ft.)
***10.9d John Q. Hammons Building Lease Agreement - 8th Floor (6000 sq. ft.)
*10.10 Triple Net Lease
*10.11 Lease Agreement between John Q. Hammons and John Q. Hammons Hotels, L.P.
10.13 Employment Agreement between John Q. Hammons Hotels, Inc. and Kenneth J. Weber dated as of April
27, 1998 (incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal
year ended January 1, 1999)
***10.14 Ground lease between John Q. Hammons and John Q. Hammons-Branson, L.P. - (Chateau on the Lake,
Branson, Missouri)
***10.15 Ground lease between John Q. Hammons and John Q. Hammons-Hotels Two, L.P. - (Little Rock,
Arkansas)
*10.16 Operating Agreement of Rivercenter Plaza Development Co., L.C., an Iowa limited liability company
*10.17 Agreement of Limited Partnership of John Q. Hammons Hotels, L.P. Two
*10.18 1994 Stock Option Plan
****10.19 Agreement of Limited Partnership of John Q. Hammons Hotels--Montgomery L.P.
10.20 1999 Non-Employee Director Stock and Stock Option Plan of the General Partner (incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1999)
12.1 Computations of Ratio of Earnings to Fixed Charges of the Company
27 Financial Data Schedule
</TABLE>
________________________
* Incorporated by reference to the General Partner's Registration
Statement on Form S-1, No. 33-84570.
** Incorporated by reference to the Company's Registration Statement on
Form S-4, No. 33-73340.
35
<PAGE>
*** Incorporated by reference to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended January 3, 1997.
**** Incorporated herein by reference to the Company's Registration
Statement (Registration No. 33-99614) previously filed with the
Commission.
36
<PAGE>
EXHIBIT 12.1
JOHN Q. HAMMONS HOTELS, L.P
HISTORICAL RATIO OF EARNINGS TO FIXED CHARGES
(000's omitted)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
HISTORICAL EARNINGS:
Net income (loss) before minority interest,
provision for income taxes, extraordinary
item and cumulative effect of change in
accounting principle $18,729 $18,524 $ 8,791 $ 338 $ (973)
Add:
Interest, amortization or deferred
financing fees and other fixed charges
(excluding interest capitalized) 28,904 36,337 45,086 58,257 63,456
------- ------- ------- ------- -------
Historical earnings $47,633 $54,861 $53,877 $58,595 $62,483
======= ======= ======= ======= =======
FIXED CHARGES:
Interest expense and
amortization of deferred
financing fees $28,447 $35,620 $44,325 $57,286 $62,209
Interest capitalized 5,270 7,162 10,259 6,163 6,770
Interest element of rentals 457 717 761 971 1,247
------- ------- ------- ------- -------
Fixed charges $34,174 $43,499 $55,345 $64,420 $70,226
------- ------- ------- ------- -------
RATIO OF EARNINGS TO FIXED CHARGES
(A) 1.39 1.26 0.97 0.91 0.89
======= ======= ======= ======= =======
</TABLE>
(A) In computing the ratio of earnings to fixed charges, earnings have been
based on income from operations before income taxes and fixed charges
(exclusive of interest capitalized) and fixed charges consist of interest
and amortization of deferred financing fees (including amounts capitalized)
and the estimated interest portion of rents (deemed to be one-third of
rental expense).
37
<PAGE>
John Q. Hammons Hotels, L.P.
Consolidated Financial Statements
As of December 31, 1999 and January 1, 1999
Together with Auditors' Report
<PAGE>
Report of Independent Public Accountants
- ----------------------------------------
To the Partners of
John Q. Hammons Hotels, L.P.:
We have audited the accompanying consolidated balance sheets of John Q. Hammons
Hotels, L.P. (Note 1) as of December 31, 1999 and January 1, 1999 and the
related consolidated statements of operations, changes in equity and cash flows
for each of the three fiscal years ended December 31, 1999, January 1, 1999 and
January 2, 1998. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of John Q.
Hammons Hotels, L.P. (Note 1) as of December 31, 1999 and January 1, 1999 and
the results of their operations and their cash flows for each of the three
fiscal years ended December 31, 1999, January 1, 1999 and January 2, 1998 in
conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, effective in
the first quarter of fiscal 1999, the Partnership changed its method of
accounting for costs of start-up activities, including preopening expenses.
Cincinnati, Ohio, Arthur Andersen LLP
February 10, 2000
<PAGE>
John Q. Hammons Hotels, L.P. (Note 1)
Consolidated Balance Sheets
(000's omitted)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Fiscal
1999 1998
Yearend Yearend
---------- ---------
<S> <C> <C>
ASSETS
- ------
CASH AND EQUIVALENTS (Restricted cash of $1,323 and $860 in 1999 and
1998, respectively) (Note 2) $ 49,727 $ 46,233
MARKETABLE SECURITIES (Note 2) 4,982 6,533
RECEIVABLES:
Trade, less allowance for doubtful accounts of $226 and $206 in 1999
and 1998, respectively 11,677 8,852
Management fees (Note 3) 63 62
Construction reimbursements and other 2,370 5,269
INVENTORIES 1,349 1,205
PREPAID EXPENSES AND OTHER 1,699 1,089
---------- ---------
Total current assets 71,867 69,243
---------- ---------
PROPERTY AND EQUIPMENT, at cost (Notes 2, 5 and 6):
Land and improvements 55,818 47,982
Buildings and improvements 683,462 605,586
Furniture, fixtures and equipment 270,146 239,648
Construction in progress 53,462 63,078
---------- ---------
1,062,888 956,294
Less- Accumulated depreciation and amortization (227,411) (194,860)
---------- ---------
835,477 761,434
DEFERRED FINANCING COSTS, FRANCHISE FEES
AND OTHER, net (Notes 2, 4 and 5) 26,968 45,809
---------- ---------
$ 934,312 $ 876,486
========== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
<PAGE>
John Q. Hammons Hotels, L.P. (Note 1)
Consolidated Balance Sheets
(000's omitted)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Fiscal
1999 1998
Yearend Yearend
-------- --------
<S> <C> <C>
LIABILITIES AND EQUITY
- ----------------------
LIABILITIES:
Current portion of long-term debt (Note 5) $ 16,569 $ 42,256
Accounts payable, including construction payables of approximately
$350 and $2,203, respectively 11,877 13,141
Accrued expenses-
Payroll and related benefits 7,720 6,843
Sales and property taxes 10,368 9,558
Insurance (Notes 2 and 3) 7,576 10,061
Interest 12,873 12,540
Utilities, franchise fees and other 6,546 5,568
Accrued dividends - 2,936
-------- --------
Total current liabilities 73,529 102,903
Long-term debt (Note 5) 812,274 717,460
Other obligations and deferred revenue 9,402 10,883
-------- --------
Total liabilities 895,205 831,246
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 6)
EQUITY (Note 1):
Contributed capital 96,436 96,436
Partners' and other deficits, net (57,329) (51,196)
-------- --------
Total equity 39,107 45,240
-------- --------
$934,312 $876,486
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
<PAGE>
John Q. Hammons Hotels, L.P. (Note 1)
Consolidated Statements of Operations
(000's omitted)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES (Note 8):
Rooms $229,807 $211,989 $195,296
Food and beverage 101,231 91,982 86,183
Meeting room rental and other 25,410 22,159 20,795
-------- -------- --------
Total revenues 356,448 326,130 302,274
-------- -------- --------
OPERATING EXPENSES (Notes 3, 4 and 6):
Direct operating costs and expenses-
Rooms 59,507 54,600 50,265
Food and beverage 68,799 64,174 62,383
Other 3,667 3,389 3,385
General, administrative, sales and management service expenses 104,876 95,500 85,766
Repairs and maintenance 15,059 13,438 12,578
Depreciation and amortization (Note 8) 45,669 45,580 34,781
-------- -------- --------
Total operating expenses 297,577 276,681 249,158
-------- -------- --------
INCOME FROM OPERATIONS (Note 8) 58,871 49,449 53,116
OTHER (INCOME) EXPENSE:
Interest expense and amortization of deferred financing fees,
net of $3,161, $3,794 and $1,279 of interest income in 1999,
1998 and 1997, respectively (Note 2(e)) 62,209 57,286 44,325
Gain on sales of property and equipment (Note 8) (2,365) (8,175) -
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (973) 338 8,791
Extraordinary item; cost of early extinguishment of debt
(Note 5) (194) (2,249) -
-------- -------- --------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (1,167) (1,911) 8,791
Cumulative effect of change in accounting principle (Note 2) (1,819) - -
-------- -------- --------
NET INCOME (LOSS) (Note 2(j)) $ (2,986) $ (1,911) $ 8,791
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
<PAGE>
John Q. Hammons Hotels, L.P. (Note 1)
Consolidated Statements of Changes in Equity (1)
(000's omitted)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Partners and
Contributed Capital Other Equity (Deficit)
------------------------- --------------------------
General Limited General Limited
Partner Partner Partner Partner Total
-------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, Yearend 1996 $ 96,436 $ - $ (80,236) $ 33,662 $ 49,862
Distributions (Note 1(b)) - - (150) (565) (715)
Net income - - 2,489 6,302 8,791
-------- ------- --------- -------- --------
Balance, Yearend 1997 96,436 - (77,897) 39,399 57,938
Distributions (Note 1(b)) - - (150) (10,637) (10,787)
Net loss - - (541) (1,370) (1,911)
-------- ------- --------- -------- --------
Balance, Yearend 1998 96,436 - (78,588) 27,392 45,240
Distributions (Note 1(b)) - - (150) - (150)
Advances to General Partner to
purchase treasury stock (Note
1(b)) - - (2,997) - (2,997)
Net loss - - (845) (2,141) (2,986)
-------- ------- --------- -------- --------
Balance, Yearend 1999 $ 96,436 $ - $ (82,580) $ 25,251 $ 39,107
======== ======= ========= ======== ========
</TABLE>
(1) For periods presented, there are no elements of other comprehensive income
as defined by the Financial Accounting Standards, No. 130 Reporting
---------
Comprehensive Income.
--------------------
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
<PAGE>
John Q. Hammons Hotels, L.P. (Note 1)
Consolidated Statements of Cash Flows
(000's omitted)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,986) $ (1,911) $ 8,791
Adjustments to reconcile net income (loss) to cash
provided by operating activities-
Depreciation, amortization and loan cost amortization 47,655 48,448 37,662
Extraordinary item (Note 5) 194 2,249 -
Cumulative effect of change in accounting principle
(Note 2) 1,819 - -
Gain on sales of property and equipment (Note 8) (2,365) (8,175) -
Changes in certain assets and liabilities-
Receivables 73 (2,742) (4,826)
Inventories (144) (112) (187)
Prepaid expenses and other (610) 297 542
Accounts payable (1,264) 1,909 (18,745)
Accrued expenses 513 698 3,805
Other obligations and deferred revenue (1,481) 2,983 877
--------- --------- ---------
Net cash provided by operating activities 41,404 43,644 27,919
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (123,620) (131,183) (179,385)
Proceeds from sales of property and equipment (Note 8) 6,500 43,577 -
Franchise fees and other 15,353 (11,528) (3,499)
(Purchase) sale of marketable securities, net 1,551 6,209 (10,387)
--------- --------- ---------
Net cash used in investing activities (100,216) (92,925) (193,271)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan financing fees (738) (2,521) (3,069)
Proceeds from borrowings 104,477 260,771 186,684
Repayments of debt (35,350) (196,846) (22,036)
Distributions to partners (3,086) (7,851) (715)
Advances to general partner to purchase treasury stock (2,997) - -
--------- --------- ---------
Net cash provided by financing activities 62,306 53,553 160,864
--------- --------- ---------
Increase (decrease) in cash and equivalents 3,494 4,272 (4,488)
CASH AND EQUIVALENTS, beginning of period 46,233 41,961 46,449
--------- --------- ---------
CASH AND EQUIVALENTS, end of period $ 49,727 $ 46,233 $ 41,961
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
cash paid for interest, net of amounts capitalized $ 63,312 $ 58,733 $ 43,399
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITES:
Note receivable from sale of property and equipment (Note 8) $ - $ 11,900 $ -
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted)
- --------------------------------------------------------------------------------
(1) Basis of Presentation-
---------------------
(a) Entity Matters--The accompanying consolidated financial statements
--------------
include the accounts of John Q. Hammons Hotels, L.P. and its wholly-
owned subsidiaries (the Partnership), John Q. Hammons Hotels Finance
Corporation, a corporation with nominal assets and no operations, the
catering corporations, which consist of separate corporations for each
hotel location chartered to own the respective food and liquor licenses
as well as operate the related food and beverage facilities and certain
wholly-owned subsidiaries which consist of certain hotel operations. As
of fiscal yearend 1999, 1998 and 1997, the Partnership had 45, 42 and
45, respectively, hotels in operation of which 29 in 1999, 28 in 1998
and 35 in 1997 operate under the Holiday Inn and Embassy Suites trade
names. The Partnership's hotels are located in 19 states throughout the
United States.
In conjunction with a public offering of debt securities in February,
1994 and a public offering of equity securities in November, 1994 by
John Q. Hammons Hotels, Inc., J.Q.H. Hotels, L.P., which owned and
operated ten hotel properties, obtained through transfers or
contributions from Mr. John Q. Hammons (Mr. Hammons) or enterprises
which he controlled, twenty-one additional operating hotel properties,
equity interests in two hotels under construction, the stock of the
catering corporations and management contracts relating to all of Mr.
Hammons' hotels. Upon consummation of these transactions J.Q.H. Hotels,
L.P. changed its name to John Q. Hammons Hotels, L.P. and the
allocation of income or loss was modified from 1% to its general
partner and 99% to its limited partner to 10% and 90%, respectively,
upon completion of the public debt offering and to 28.31% to its
general partner and 71.69% to its limited partner upon completion of
the public equity offering.
The Partnership is directly or indirectly owned and controlled by Mr.
Hammons, as were all enterprises which 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.
(b) Partnership Matters--A summary of selected provisions of the
-------------------
Partnership agreement and other matters are as follows:
General and Limited Partner: John Q. Hammons Hotels, Inc. was formed in
----------------------------
September 1994 and had no operations or assets prior to its initial
public offering of 6,042,000 Class A common shares at $16.50 per share
on November 23, 1994. Immediately prior to the initial public offering,
Mr. Hammons contributed approximately $5 million in cash in exchange
for 294,100 shares of Class B common stock (which represents
approximately 72% of the voting control of the company). John Q.
Hammons Hotels, Inc. contributed the approximate $96 million of the net
proceeds from the Class A and Class B common stock offerings to the
Partnership in exchange for an approximate 28% general partnership
interest.
As a result of the public equity offering, John Q. Hammons Hotels, Inc.
became the sole general partner and John Q. Hammons Revocable Living
Trust and Hammons, Inc., entities beneficially owned and controlled by
Mr. Hammons, became its limited partners.
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 2
- --------------------------------------------------------------------------------
Allocation 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 approximately 28% and 72%.
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. There were no distributions to the
limited partner for taxes for the fiscal year ended 1999. Distributions
to the limited partner for taxes approximated $10,637 and $565 for the
fiscal years ended 1998 and 1997, respectively.
In 1998 and 1999, the Board of Directors of John Q. Hammons Hotels, Inc.
authorized the purchase of up to $3.0 million of its stock during fiscal
1999 and 2000. As of December 31, 1999, $2,997 of stock had been
purchased. For financial reporting purposes, the advances by the
partnership to its general partner to purchase stock have been reflected
as a reduction of equity in the accompanying consolidated balance sheet
and statement of changes in equity.
Additional Capital Contributions: In the event proceeds from the sale of
--------------------------------
the original twenty hotel properties (or applicable replacement
collateral) which secure the $300 million first mortgage notes (1994
notes) (Note 5) are insufficient to satisfy amounts due on the 1994
notes, Mr. Hammons and Hammons, Inc. (as general partners at the time the
1994 notes were secured) are severally obligated to contribute up to $135
million and $15 million, respectively, to satisfy amounts due, if any.
In the event proceeds from the sale of the original eight hotel
properties (or applicable replacement collateral) which secure the $90
million first mortgage notes (1995 notes) (Note 5) are insufficient to
satisfy amounts due on the 1995 notes, Mr. Hammons is obligated to
contribute up to $45 million to satisfy amounts due, if any. In
addition, with respect to the original eleven hotel properties
contributed by Mr. Hammons concurrent with the public equity offering,
Mr. Hammons is obligated to contribute up to $50 million in the event
proceeds from the sale of these hotel properties (or applicable
replacement collateral) are insufficient to satisfy amounts due on the
then outstanding mortgage indebtedness related to these properties.
Redemption of Limited Partner Interests: Subject to certain limitations,
---------------------------------------
the limited partners have the right to require redemption of their
limited partner interests at any time subsequent to November 1995. Upon
redemption, the limited partners receive, at the sole discretion of the
general partner, one share of John Q. Hammons Hotels, Inc.'s Class A
common stock for each limited partner unit tendered or the then cash
equivalent thereof.
Additional General Partner Interests: Upon the issuance by the general
------------------------------------
partner of additional shares of its common stock, including shares issued
upon the exercise of its stock options, the general partner will be
required to contribute to the Partnership the net proceeds received and
the Partnership will be required to issue additional general partner
units to the general partner in an equivalent number to the additional
shares of common stock issued.
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 3
- --------------------------------------------------------------------------------
(2) Summary of Major Accounting Policies-
------------------------------------
(a) Cash and Equivalents--Cash and equivalents include operating cash
--------------------
accounts and investments, with an original maturity of three months or
less, and certain balances of various money market and common bank
accounts.
Restricted cash consists of certain funds maintained in escrow for
property taxes and certain other obligations.
(b) Marketable Securities--Marketable securities consist of available-for-
---------------------
sale commercial paper and government agency obligations which mature or
will be available for use in operations in 2000. These securities are
valued at current market value, which approximates cost. Realized gains
and losses in 1999 and 1998, determined using the specific
identification method, were nominal.
(c) Inventories--Inventories consist of food and beverage items. These items
-----------
are stated at the lower of cost, as determined by the first-in, first-
out valuation method, or market.
(d) Deferred Financing Costs, Franchise Fees and Other--Franchise fees paid
--------------------------------------------------
to the respective franchisors of the hotel properties are amortized on a
straight-line basis over 10 to 20 years which approximates the terms of
the respective agreements. Costs of obtaining financing are capitalized
and amortized over the respective terms of the debt.
The components of deferred financing costs, franchise fees and other are
summarized as follows:
<TABLE>
<CAPTION>
Fiscal Yearend
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred financing costs $ 23,647 $ 23,534
Franchise fees 5,142 5,254
Less- Accumulated amortization (12,874) (10,851)
-------- --------
15,915 17,937
Note receivable, related to sale of hotel and a component of
replacement collateral for 1994 first mortgage notes (Note 8) - 11,900
Restricted cash deposits, interest bearing, related to sales of
hotels and a component of replacement collateral for 1994 and
1995 first mortgage notes (Note 8) 102 6,266
Deposits 10,738 7,017
Preopening expenses (Note 2(p)) - 1,819
Other, net 213 870
-------- --------
$ 26,968 $ 45,809
======== ========
</TABLE>
In October 1997, the Partnership entered into an irrevocable stand-by
letter of credit agreement with a bank for approximately $5.6 million.
The letter of credit replaced the restricted cash deposit which was
required by and maintained with an insurance carrier. In November 1999,
the letter of credit amount was amended to approximately $1.9 million.
The letter of credit expires in October 2000.
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 4
- --------------------------------------------------------------------------------
(e) Property and Equipment--Property and equipment are stated at cost
----------------------
(including interest, real estate taxes and certain other costs incurred
during development and construction) less accumulated depreciation and
amortization. Buildings and improvements are depreciated using the
straight-line method while all other property is depreciated using both
straight-line and accelerated methods. The estimated useful lives of the
assets are summarized as follows:
Lives In Years
--------------
Land improvements 5-25
New buildings and improvements 5-40
Purchased buildings 25
Furniture, fixtures and equipment 3-10
Construction in progress includes development and construction costs of
certain hotel developments. Costs associated with hotel development
construction in progress approximated $53 million in 1999 and $59 million
in 1998, with the remainder representing refurbishments of operating
hotels.
The Partnership periodically reviews the carrying value of these assets
and other long-lived assets and impairments are recognized when the
expected undiscounted future cash flows are less than the carrying amount
of the asset. Based on its most recent analysis, the Partnership
believes no impairment exists at December 31, 1999.
Interest costs, construction overhead and certain other carrying costs
are capitalized during the period hotel properties are under
construction. Interest costs capitalized were $6,770, $6,163 and $10,259
for the fiscal years ended 1999, 1998 and 1997, respectively.
Construction in progress is recorded at the lower of cost or market.
Costs incurred for prospective hotel projects ultimately abandoned are
charged to operations in the period such plans are finalized. Costs of
significant improvements are capitalized, while costs of normal recurring
repairs and maintenance are charged to expense as incurred.
The accompanying 1999 consolidated financial statements include the land
costs for 33 of the operating hotel properties. Land for 10 of the
remaining 12 operating hotel properties is leased by the Partnership from
unrelated parties over long-term leases. Land for the remaining two
operating hotel properties is leased by the Partnership from a related
party over long-term leases. Rent expense for all land leases was
$1,109, $1,008 and $464 for the fiscal years ended 1999, 1998 and 1997,
respectively.
(f) Par Operating Equipment--A hotel's initial expenditures for the purchase
-----------------------
of china, glassware, silverware, linens and uniforms are capitalized into
furniture, fixtures and equipment and amortized on a straight-line basis
over a three to five year life. Costs for replacement of these items are
charged to operations in the period the items are placed in service.
(g) Advertising--The Partnership expenses the cost of advertising associated
-----------
with operating hotels as incurred. Advertising expense for 1999, 1998
and 1997 was approximately $26,834, $23,571 and $21,405, respectively.
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 5
- --------------------------------------------------------------------------------
(h) Pensions and Other Benefits--The Partnership contractually provides
---------------------------
retirement benefits for certain union employees at two of its hotel
properties under a union-sponsored defined benefit plan and a defined
contribution plan. Contributions to these plans, based upon the
provisions of the respective union contracts, approximated $77, $70 and
$66, for the fiscal years ended 1999, 1998 and 1997, respectively.
Effective January 1996, the Partnership implemented an employee savings
plan (a 401(k) plan). The Partnership matches a percentage of an
employee's contribution. The Partnership's matching contributions are
funded currently. The cost of the matching program and administrative
costs charged to income were approximately $258, $591 and $381 in 1999,
1998 and 1997, respectively. The Partnership does not offer any other
post-employment or post-retirement benefits to its employees.
(i) Self-Insurance--The Partnership became fully-insured for liability and
--------------
workers' compensation effective November 1999 and October 1998,
respectively. The Partnership became self-insured for medical coverage
effective January 1999. Estimated costs of these self-insurance programs
are accrued based on known claims and projected settlements of unasserted
claims. Subsequent changes in, among others, assumed claims, claim
costs, claim frequency, as well as changes in actual experience, could
cause these estimates to change.
(j) Income Taxes--Prior to 1994, the entities and properties included in the
------------
accompanying consolidated financial statements consisted of a
Partnership, S Corporations and a sole proprietorship. Accordingly, the
Partnership generally is not responsible for payment of income taxes.
Rather, the respective partner, stockholder or sole proprietor, as
applicable, is taxed on the Partnership's taxable income at the
respective individual federal and state income tax rates. Therefore, no
income taxes have been provided in the accompanying consolidated
financial statements.
As described in Note 1, the Partnership and its general partner, as
applicable, completed public offerings of first mortgage notes and equity
securities. Prior to the consummation of these offerings, the S
Corporation status of the catering companies was terminated, and,
accordingly, the Partnership is subject to federal and state income taxes
on taxable income, if any, earned by the catering companies after the
effective date of the securities registrations. There were nominal, if
any, earnings attributable to the catering companies after the applicable
public offerings and there were no undistributed earnings of the S
Corporations at the time of termination.
(k) Revenue Recognition--The Partnership recognizes revenues from its rooms,
-------------------
catering and restaurant facilities as earned on the close of business
each day.
(l) Use of Estimates--The preparation of financial statements in conformity
----------------
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 6
- --------------------------------------------------------------------------------
(m) Fiscal Year--The Partnership's fiscal year ends on the Friday nearest
-----------
December 31 which includes 52 weeks in 1999, 1998 and 1997.
The periods ended in the accompanying consolidated financial statements
are summarized as follows:
Year Fiscal Yearend
---- -----------------
1999 December 31, 1999
1998 January 1, 1999
1997 January 2, 1998
(n) Segments--The Partnership operates in one reportable segment,
--------
hospitality services.
(o) Reclassifications--Certain reclassifications have been reflected in
-----------------
1997 to conform with the current period presentation.
(p) Accounting Pronouncements-- In April 1998, the American Institute of
-------------------------
Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" (SOP 98-5), which
requires costs of start-up activities, including preopening expenses,
to be expensed as incurred. Prior to January 1, 1999, the Partnership's
practice was to defer these expenses until a hotel had commenced
operations, at which time the costs, other than advertising costs which
were expensed upon opening, were amortized over a one-year period. The
Partnership adopted the provisions of this statement in the first
quarter of fiscal 1999 and, as a result, cumulative unamortized
preopening costs of approximately $1.8 million were charged to expense.
Preopening expenses in 1999 approximated $4,161 and are included in
general, administrative, sales and management service expenses in the
accompanying consolidated statement of operations.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either
an asset or liability measured at its fair value. This statement
requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are
met. In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities --Deferral of the Effective Date of SFAS 133" (SFAS 137).
SFAS 137 amends SFAS 133's effective date. SFAS 137 is effective for
fiscal years beginning after June 15, 2000. Upon adoption of this
statement, the Partnership anticipates no impact on its reported
consolidated financial position, results of operations, cash flows or
related disclosures.
(3) Related Party Transactions-
--------------------------
(a) Hotel Management Fees--In addition to managing the hotel properties
---------------------
included in the accompanying consolidated financial statements, the
Partnership provides similar services for other hotel properties
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 7
- --------------------------------------------------------------------------------
owned or controlled by Mr. Hammons which included five properties at
December 31, 1999. A management fee of approximately 3% to 5% of gross
revenues (as defined) is paid to the Partnership by these hotels which
aggregated approximately $844, $715 and $643 for the fiscal years ended
1999, 1998 and 1997, respectively.
(b) Accounting and Administrative Services--The hotels have contracted for
--------------------------------------
accounting and other administrative services with Winegardner &
Hammons, Inc. (WHI), a company related by common ownership. The
accounting and administrative charges expensed by the hotel properties,
included in administrative expenses, were approximately $1,440, $1,388
and $1,411 for the fiscal years ended 1999, 1998 and 1997,
respectively.
In 1999, the Partnership negotiated a new contract with WHI to continue
to provide accounting and administrative services through June 2002.
Charges for these services provided by WHI will approximate $35 per
year for each hotel property for the duration of the agreement.
(c) Insurance Coverage--To supplement the Partnership's self-insurance
------------------
programs, umbrella, property, auto, commercial liability, workers'
compensation and, commencing in 1999, medical insurance is provided to
the hotel properties under a blanket commercial policy purchased by
John Q. Hammons Hotels, Inc. or WHI, covering hotel properties owned by
the Partnership, Mr. Hammons, or managed by WHI. Generally, premiums
allocated to each hotel property are based upon factors similar to
those used by the insurance provider to compute the aggregate group
policy premium. Insurance expense for the properties included in
operating expenses was approximately $1,088, $2,158 and $6,196 for the
fiscal years ended 1999, 1998 and 1997, respectively. During fiscal
1999 and 1998, the Partnership realized continued favorable trends in
insurance expense as a result of claim's experience and rate
improvements and favorable buyouts of several prior self-insured years.
(d) Allocation of Common Costs--The Partnership incurs certain hotel
--------------------------
management expenses incidental to the operations of all hotels
beneficially owned or controlled by Mr. Hammons. These costs
principally include the compensation and related benefits of certain
senior hotel executives. Commencing in May of 1993, these costs were
allocated by the Partnership to hotels not included in the accompanying
statements, based on the respective number of rooms of all hotels owned
or controlled by Mr. Hammons. These costs approximated $132, $145 and
$131 for the fiscal years ended 1999, 1998 and 1997, respectively.
Management considers these allocations to be reasonable.
(e) Transactions with Partners and Directors--Advances to Mr. Hammons as of
----------------------------------------
December 31, 1999 approximated $366. No amounts were due from Mr.
Hammons as of January 1, 1999.
In fiscal 1998, Mr. Hammons assumed approximately $0.3 million in costs
incurred associated with new developments. No such costs were assumed
by JQH in fiscal 1999.
During 1996, the Partnership entered into an agreement with a director
relating to certain financial advisory services. The Partnership
recognized approximately $17 and $180 in expense for the fiscal years
ended 1998 and 1997 under this agreement. No such services were
rendered in fiscal 1999.
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 8
- --------------------------------------------------------------------------------
(f) Summary of Related Party Expenses--The following summarizes expenses
---------------------------------
reported as a result of activities with related parties:
<TABLE>
<CAPTION>
Fiscal Yearend
---------------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Expenses included within general, administrative, sales
and management service expenses:
Accounting and administrative $ 1,440 $ 1,388 $ 1,411
Rental expenses (Note 6) 787 800 465
Financial advisory services from a director - 17 180
------- ------- -------
$ 2,227 $ 2,205 $ 2,056
======= ======= =======
Allocated insurance expense from the pooled coverage
included within various operating categories:
Insurance other than medical $ 1,088 $ 2,158 $ 6,196
======= ======= =======
Medical, self-insured commencing in 1999 $ 5,368 $ - $ -
======= ======= =======
</TABLE>
(4) Franchise Agreements-
--------------------
As of yearend 1999 and 1998, 40 of the 45 and 36 of the 42, respectively,
operating hotel properties included in the accompanying consolidated
balance sheets have franchise agreements with national hotel chains which
require each hotel to remit to the franchisor monthly fees equal to
approximately 3% to 5% percent of gross room revenues, as defined.
Franchise fees expensed under these contracts were $8,478, $8,110 and
$7,165 for the fiscal years ended 1999, 1998 and 1997, respectively.
As part of the franchise agreement, each hotel also pays additional
advertising, reservation and maintenance fees to the franchisor which range
from 1% to 3.5% of gross room revenues, as defined. The amount of expense
related to these fees included in the consolidated statements of operations
as a component of sales expenses was approximately $7,720, $7,083 and
$6,497 for the fiscal years ended 1999, 1998 and 1997, respectively.
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 9
- --------------------------------------------------------------------------------
(5) Long-Term Debt-
---------------
The components of long-term debt are summarized as follows:
<TABLE>
<CAPTION>
Fiscal Yearend
--------------------------
1999 1998
-------- --------
<S> <C> <C>
1994 first mortgage notes, interest at 8.875%, interest only payable
February 15 and August 15, principal due February 15, 2004, secured by
a first mortgage lien on the original 20 hotel properties (or
applicable replacement collateral) and additional capital
contributions of up to $150 million by Mr. Hammons and an entity under
his control. (Note 1(b)) $ 300,000 $ 300,000
1995 first mortgage notes, interest at 9.75%, interest only payable
April 1 and October 1, principal due October 1, 2005, secured by a
first mortgage lien on the original six hotel properties (or
applicable replacement collateral), a second mortgage lien on the
original two hotel properties and additional capital contributions of
up to $45 million by Mr. Hammons. (Note 1(b)) 90,000 90,000
Development bonds, variable interest rate approximates 85% of the bond
equivalent yield of 13 week U.S. Treasury bills (not to exceed 12%),
fixed interest rates at 7.125%, payable in scheduled installments
through August 2015, certain of the obligations subject to optional
prepayments by the bondholders, secured by certain hotel facilities,
fixtures and an assignment of rents. 13,959 14,443
Mortgage notes payable to banks, insurance companies and a state
retirement plan, variable interest rates at prime to LIBOR plus 3.25%
with certain instruments subject to a ceiling rate and a floor rate,
fixed rates ranging from 7.57% to 9.5%, payable in scheduled
installments through April 2027, secured by certain hotel facilities,
fixtures, an assignment of rents, and certain other real property
controlled by Mr. Hammons, with certain instruments subject to
cross-collateralization provisions and, with respect to approximately
$394,007 of mortgage notes, a personal guarantee of Mr. Hammons. 416,130 344,369
Other notes payable, variable interest rate at prime plus 1% and fixed
rates ranging from 6.8% to 8.1%, payable in scheduled installments
through March 2003, secured by certain hotel improvements, furniture,
fixtures and related equipment and, with respect to approximately $750
of notes, a personal guarantee of Mr. Hammons. 8,754 10,904
--------- ---------
828,843 759,716
Less- current portion (16,569) (42,256)
--------- ---------
$ 812,274 $ 717,460
========= =========
</TABLE>
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 10
- --------------------------------------------------------------------------------
The indenture agreements relating to the 1994 and 1995 first mortgage notes
include certain covenants which, among others, limit the ability of the
Partnership and its restricted subsidiaries (as defined) to make
distributions, incur debt and issue preferred equity interests, engage in
certain transactions with its partners, stockholders or affiliates, incur
certain liens, engage in mergers or consolidations and achieve certain
interest coverage ratios, as defined. In addition, certain of the other
credit agreements include subjective acceleration clauses and limit, among
others, the incurrence of certain liens and additional indebtedness. The
1994 and 1995 first mortgage notes and certain other obligations include
scheduled prepayment penalties in the event the obligations are paid prior
to their scheduled maturity.
The Partnership paid off or refinanced approximately $28,000 and $133,000
million of long-term debt in 1999 and 1998, respectively. In connection
with these transactions, the Partnership incurred approximately $200 and
$2,200, respectively, in charges related to the early extingushment of
debt. These debt extinguishment charges have been reflected in the
accompanying 1999 and 1998 consolidated statements of operations as an
extraordinary item.
Scheduled maturities of long-term debt are summarized as follows:
Yearend
Year Ending 1999
----------- ---------
2000 $ 16,569
2001 46,878
2002 31,559
2003 53,810
2004 335,032
Thereafter 344,995
---------
$ 828,843
=========
(6) Commitments and Contingencies-
-----------------------------
(a) Operating Leases--The hotel properties lease certain equipment and land
----------------
from unrelated parties under various lease arrangements. In addition,
the Partnership leases certain parking spaces at one hotel for the use
of its patrons and is billed by the lessor based on actual usage. Rent
expense for these leases was approximately $3,508, $2,715 and $1,819
for the fiscal years ended 1999, 1998 and 1997, respectively, which has
been included in general, administrative, sales and management service
expenses.
Included in the accompanying consolidated financial statements are the
operating results of trade centers located in Joplin, Missouri and
Portland, Oregon. Both of the trade centers are owned by Mr. Hammons.
The lease agreement for the Joplin trade center stipulates nominal
rentals for each of the fiscal years ended 1999, 1998 and 1997 and for
each ensuing year through 2014. The lease agreement for the Portland
facility extends through 2004 and requires minimum annual rents of $300
to Mr. Hammons. In addition, the Partnership leases office space in
Springfield, Missouri from a partnership (of which Mr. Hammons is a
partner) for annual payments of approximately $234 through December
2001. The Partnership has also entered into land leases with Mr.
Hammons for
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 11
- --------------------------------------------------------------------------------
two operating hotel properties. Subject to the Partnership exercising
purchase options provided under these agreements, these leases extend
through 2036 and 2045, respectively, and require aggregate minimum
annual payments of approximately $270. Rent expense for these related
party leases was approximately $787, $800 and $465 for the fiscal years
ended 1999, 1998 and 1997, respectively.
The minimum annual rental commitments for these noncancellable
operating leases at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Fiscal Year
Ending Mr. Hammons Other Total
----------- ----------- -------- --------
<S> <C> <C> <C>
2000 $ 570 $ 1,837 $ 2,407
2001 570 1,387 1,957
2002 570 882 1,452
2003 570 820 1,390
2004 570 803 1,373
Thereafter 10,235 52,070 62,305
-------- -------- --------
$ 13,085 $ 57,799 $ 70,884
======== ======== ========
</TABLE>
(b) Hotel Development--In 2000, the Partnership plans to complete
-----------------
construction and open 2 new hotels. The total estimated aggregate
development and construction costs for these hotels are expected to
exceed $70 million.
(c) Legal Matters--The Partnership is party to various legal proceedings
-------------
arising from its consolidated operations. Management of the Partnership
believes that the outcome of these proceedings, individually and in the
aggregate, will have no material adverse effect on the Partnership's
consolidated financial position, results of operations or cash flows.
(7) Fair Value of Financial Instruments-
-----------------------------------
The fair values of marketable securities and long-term debt approximate
their historical carrying amounts except with respect to the 1994 and 1995
first mortgage notes for which fair market value was approximately $408
million at 1999 and 1998. The fair value of the first mortgage notes issued
is estimated by obtaining quotes from brokers.
(8) Sales of Property and Equipment-
-------------------------------
On February 6, 1998, the Partnership completed the sale of six hotels to an
unrelated party for $39.4 million, resulting in a gain of approximately
$0.2 million. The net book value of the hotels' property and equipment at
the time of the sale was approximately $38.6 million. Certain of these
hotels served as collateral under the 1994 and 1995 first mortgage notes
(Note 5). Under the terms of these indentures, the Partnership provided
replacement collateral in accordance with the indenture provisions.
<PAGE>
John Q. Hammons Hotels, L.P.
Notes To Consolidated Financial Statements
(000's omitted) 12
- --------------------------------------------------------------------------------
On December 31, 1998, the Partnership completed the sale of a hotel
property to an unrelated party for $16.1 million, resulting in a gain of
approximately $8.0 million. The net book value of the hotel's property and
equipment at the time of the sale was approximately $8.0 million. In
addition to the cash received upon closing, the sales price included a note
receivable for $11.9 million. Proceeds for the balance of the note
receivable were received during fiscal 1999. This hotel served as
collateral under the 1995 first mortgage notes (Note 5). Under the terms of
this indenture, the Partnership provided replacement collateral in
accordance with the indenture provisions.
On June 16, 1999, the Partnership completed the sale of a hotel to an
unrelated party for $6.5 million, resulting in a gain of approximately $2.4
million. The net book value of the hotel's property and equipment at the
time of the sale was approximately $3.6 million. The hotel served as
collateral under the 1994 first mortgage notes (Note 5). Under the terms of
this indenture, the Partnership provided replacement collateral in
accordance with the indenture provisions.
Summary unaudited operating results for the eight hotels sold for each of
the three years ended 1999, 1998 and 1997, as applicable, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
Revenues $ 1,003 $ 12,122 $ 38,064
======= ======== ========
Income (loss) from operations, including depreciation
and amortization of $210, $1,315 and $3,578, respectively $ (22) $ 439 $ 2,264
======= ======== ========
</TABLE>
<PAGE>
EXHIBIT 10.6
Capitol Plaza Holiday Inn H.E.R.E. Local 49
300 J Street 1824 Tribute Road, Suite D
Sacramento, CA 95814 Sacramento
446-0100 564-4949 or 1-800-HOTEL-49
Medical & Dental: 921-3388
or 1-800-562-9383
June 1, 1998 through May 31, 2001
Section 1. Recognition
Section 2. Union Representative's Activities/Shop Stewards
Section 3. Types of Employees
Section 4. Reporting Pay
Section 5. Work Schedules
Section 6. Discrimination and Equal Pay
Section 7. Meals and Rest Periods
Section 8. Work Day, Week, and Overtime
Section 9. Vacations and Leaves of Absence
Section 10. Holidays and Well Days
Section 11. Funeral & Jury Duty Leave
Section 12. Medical and Dental Plans
Section 13. Pension
Section 14. Contributions and Collections
Section 15. Superior Workers and Premium Pay
Section 16. Combination Jobs
Section 17. Disciplinary Actions
Section 18. No Strike and No Lockout
Section 19. House Cards and Union Buttons
Section 20. Union Security
Section 21. Employer's Operation
Section 22. Grievance Procedures
Section 23. Arbitration
Section 24. Dues and Fees Check-off
Section 25. Worker's Compensation
Section 26. Management Rights Reserved
Section 27. Seniority
Section 28. Terms, Terminations, and Amendments
Section 29. Craft Rules, Regulations, and Working Conditions
Section 30. Wage Scales
Section 31. Signatures
Note: Wherever a masculine pronoun occurs in this document, it shall be
understood to include the feminine pronoun.
<PAGE>
COLLECTIVE BARGAINING AGREEMENT 6-1-98 to 5-31-01
THIS AGREEMENT, hereinafter called the contract, entered into this day
of 1999, at Sacramento, California, by and between the Hotel Employees and
Restaurant Employees Union Local 49, AFL-CIO, hereinafter known as the Union,
and Holiday Inn - Capitol Plaza Sacramento, hereinafter designated as Employer.
In the event any portion of this contract is invalidated by the passage of
legislation or by the rendition of a decision by a court of last resort, such
invalidation shall apply only to those portions thus invalidated; and the
remaining portions of this contract shall remain in full force and effect. If
this occurs both parties shall meet within fifteen (15) calendar days for the
purpose of renegotiating different provisions relative to the subject matter
invalidated.
Section 1. RECOGNITION:
The Union shall be recognized as the sole bargaining agent for the purpose
of collective bargaining for all employees coming under the jurisdiction of the
Union, except employees excluded under any applicable Federal law.
Section 2. UNION REPRESENTATIVE'S ACTIVTIES/SHOP STEWARDS:
(a) Properly authorized representatives of the Union shall be permitted to
investigate the standing of all employees and to investigate conditions to see
that the contract is being enforced, provided that no interview shall be held
during the rush hours, or unreasonably interrupt the duties of any employee.
Authorized Union representatives shall inform the Employer or department head of
their presence at the Hotel before interviewing employees.
(b) Shop Stewards
(1) The maximum number of Shop Stewards shall be three (3) Shop Stewards.
It is understood that no more than one(l) Shop Steward shall be involved in the
handling of any one particular grievance.
If any problem arises with the implementation of a Shop Steward system at
the hotel, the parties agree to meet upon request of either party and work out
mutually agreeable solutions to the problem.
(2) The Employer agrees to recognize Shop Stewards. Shop Stewards shall
assist in the handling and/or investigation of grievances and may participate in
all steps of the grievance procedure.
It is understood that during work time, if an employee requests the
presence of a Shop Steward at a meeting where discipline may occur, the Shop
Steward shall be allowed to leave his assigned job to attend such meeting. Shop
Stewards may discharge their responsibilities at other times during their
working hours only if prior approval is obtained from their immediate supervisor
and there is no disruption in work. The Employer reserves the right to schedule
grievance meetings during non-working hours of the Shop Steward. It is
understood that Shop Stewards may cross departmental lines.
Capitol Plaza Holiday Inn 2 6/l/98 - 5/31/01
<PAGE>
(3) Shop Stewards shall receive training from the Union concerning their
duties and responsibilities. In order to recognize Shop Stewards, the Union
shall notify the Employer of the names of the trained and certified Shop
Stewards.
(4) The Union may appoint or elect Shop Stewards. The election may be held
on Employer's premises. It is understood that balloting will be conducted on
the employee's own time and shall not cause disruption of the Hotel operations.
Section 3. TYPES OF EMPLOYEES:
(a) Full-time Employee: Any combination of shifts totaling thirty (30)
hours or more in a five (5) day period (work week).
(b) Steady Part-time Employee: Any combination of shifts totaling less than
thirty (30) hours in a five (5) day period (work week).
(c) Tipped Employee: Food and beverage servers, bus persons, bellpersons,
bartenders, and valet parking attendants.
(d) Non-tipped Employee: All others not mentioned in Sub-Section (c) above.
Section 4. REPORTING PAY:
(a) When an Employer or his representative orders an employee to report for
work or fails to notify an employee not to report for work for any reason and
said employee is not allowed to work, the Employer shall pay the employee for
one-half (1/2) of the shift called for but not less than four (4) hours minimum.
This shall not apply to an employee under the influence of liquor or drugs.
Employees scheduled to attend mandatory training/educational sessions shall be
compensated at a two (2) hour minimum pay, or actual time spent, whichever is
greater.
(b) Employees who are to be terminated must be notified at the end of their
shift. If this is not done and they report for work the next regular work day
and are not placed at work, they shall receive one-half (1/2) of their scheduled
shift or four (4) hours minimum pay for so reporting.
Section 5. WORK SCHEDULES:
(a) The Employer shall post in a conspicuous place in each department, a
work schedule specifying names and classifications, days off and starting and
finishing time, which must be corrected weekly if need be. The weekly schedule
should be posted by 12:00 noon on Thursday, to be effective 4:00 a.m. on
Saturday.
(b) Except for Housekeeping Department Employees, regularly scheduled
employees shall have a fixed starting time, which time shall not be changed by
the Employer without giving a thirty-six (36) hour notice to the affected
employee, except in case of need or emergency and by mutual consent.
It is further understood that:
1. All employee requests for a variance in a posted schedule will be
at the sole discretion of management.
2. All employee requests for a variance in scheduling must be
submitted before the schedule is posted and must be in writing.
Schedule variance requests will not be considered granted unless
signed as approved by the Department Head.
Capitol Plaza Holiday Inn 3 6/1/98 - 5/31/01
<PAGE>
The employee shall be responsible for keeping this written approval
in case of a dispute.
3. Seniority shall determine who has preference for a schedule
variance request if a conflict between employees arises before the
schedule is posted.
4. After posting of the work schedule, schedule variance requests, if
granted at all, will be to the first person to request the variance in
writing.
5. The scheduling procedures for the Housekeeping Department are
attached hereto as Addendum "B".
(c) Except as provided for in Section 4 (a), the minimum shift for all
classifications will be for four (4) hours, except the Banquet Department which
has a three (3) hour minimum shift.
(d) Split Shifts: Six (6) to eight (8) hours work within a spread of twelve
(12) consecutive hours with only one (1) split shall constitute a split shift.
Split shifts will be paid one (1) hour at the current minimum wage in addition
to wages earned, in accordance with current I.W.C. regulations.
Section 6. DISCRIMINATION AND EQUAL PAY:
(a) There shall be no discrimination against any employee in accordance
with all applicable State and Federal laws.
(b) The Union and the Employer agree the Employer shall be permitted to
take all actions necessary to comply with the Americans With Disabilities Act.
However, the Employer agrees that any accommodation made for an employee which
conflicts with any term or provision of this contract shall first be discussed
with the Union prior to its implementation. In any event, the only issue under
this provision that may be subject to the grievance procedure is pursuant to the
security provisions of this Contract.
Section 7. MEALS AND REST PERIODS:
(a) All meals furnished under this contract will be above and beyond the
wage scales set forth in this contract and at no cost to the employee, except
for any applicable State or Federal tax liability.
(b) Any employee working four (4) hours or more per day shall receive one
(1) hot or one (1) cold meal of comparable quality to that served to the
customer, excluding gourmet items.
(c) Any employee working a full shift shall be given an opportunity to eat
a meal within not less than two (2) or more than five (5) hours from the
commencement of the shift. This may be waived by mutual consent, but in no case
will an employee be allowed to work more than five (5) hours without a meal
break.
(d) In the event that employees are not permitted to eat in the dining
room, they shall be provided with clean and sanitary facilities therefor, and be
responsible for removing their own dishes, silverware, glassware, etc., to a
proper station.
(e) Where one (1) hot or cold meal is required to be furnished, pursuant
to this Section, and the employer fails to furnish such meal, he shall pay the
employee one dollar and fifty cents ($1.50) for each meal not furnished.
Employees who voluntarily do not eat the meal furnished by the Employer shall
have no claim on the Employer for cash in lieu of that meal.
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(f) All employees shall be entitled to a ten (10) minute rest period for
every four (4) hours worked or major portion thereof.
Section 8. WORK DAY, WEEK, AND OVERTIME:
(a) Seven and one-half (7 1/2) hours within eight (8) shall constitute an
eight (8) hour shift and a day's work, except for bartenders, security, night
auditors and graveyard housekeeping personnel. All of these employees shall be
paid for all eight (8) hours of their eight (8) hour shift (includes their
thirty (30) minute meal break).
(b) Any work performed in excess of an eight (8) hour shift shall be
compensated at time and one-half (1 1/2) of the regular rate of pay for each
major portion of each quarter (1/4) hour worked.
(c) Five (5) days in seven (7) consecutive days shall constitute a work
week. Any work performed on the sixth (6th) or seventh (7) day of any seven (7)
consecutive days shall be at time and one-half (1 1/2) of the regular rate of
pay.
(d) A ten (10) hour, four (4) day, work week may be implemented by mutual
agreement of the Union and the Employer, in a given classification.
(e) Except for Banquet Department employees, no employee shall be allowed
to work more than one (1) shift in any one (1) calendar day. This shall not
prohibit the performance of overtime work consecutive with the shift completed.
(f) Except for Banquet Department employees, eight (8) hours must elapse
between any two (2) regular scheduled shifts. Should a period of eight (8) hours
not elapse between the end of any one (1) regular scheduled shift and the
beginning of the next regular scheduled shift, then overtime wages of one and
one-half (1 1/2) of the regular rate of pay shall prevail. This shall not apply
in case of emergency and with the mutual consent of both parties. This shall not
apply to split shifts as defined under Section 5.
Section 9. VACATIONS AND LEAVES OF ABSENCE:
(a) Vacations with pay are hereby established for all employees. The
period of service for the purpose of earning a vacation shall begin with the
date of employment with this Employer and be calculated as follows:
After twelve (12) consecutive months he shall be entitled to one (1)
week's vacation with pay.
After twenty-four (24) consecutive months he shall be entitled to two
(2) weeks vacation with pay.
Effective January 1, 1999, after eight (8) consecutive years and
thereafter, he shall be entitled to three (3) weeks vacation with pay.
Effective January 1, 1999, after fifteen (15) consecutive years and
thereafter, he shall be entitled to four (4) weeks vacation with pay.
Vacations shall not be cumulative: i.e., they may not be accumulated from
one twelve (12) month period (commencing with the anniversary date) to the next.
Pay for unused vacation time shall be paid out on the employee's anniversary.
(b) Vacation pay shall be computed by the formula which follows. The
earnings upon which the computation is made shall be the total sum earned during
this period with the exception
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of banquet service charges and employee's declared tips, meals, premium holiday
pay and bonuses.
Vacation Pay Computation
1st year - 2% of wages earned.
2nd through 7th year - 4% of wages earned.
8th through 14th year - 6% of wages earned.
15th completed year and thereafter - 8% of wages earned.
(c) For the purpose of pro-rating vacations for all employees, who quit or
are terminated and who have served more than six (6) months shall on termination
of employment be compensated in lieu of vacation as follows:
Vacation Pay Upon Termination
6 months and up to 12 months - 2% of wages earned.
13 months through 7th year - 4% of wages earned.
8th year through 14th year - 6% of wages earned.
15th completed year and thereafter - 8% of wages earned.
(d) Temporary layoffs or leaves of absence for non-medical reasons, not
exceeding the following schedule, shall not interrupt continuity of employment
for the purpose of vacation eligibility:
1. During the first year of employment - 30 days.
2. During the second and subsequent years of employment - 45 days.
3. Those employees with three or more years of seniority shall be
entitled to a leave of absence of up to six (6) months.
4. These time periods shall not be cumulative.
5. The Employer shall grant eligible employees family care leaves as
required by the Federal Family and Medical Leave Act and California
Family Care Act. The Union and the Employer agree that this contract
shall be interpreted to be consistent with these State and Federal
Laws.
(e) During each November, sign up sheets will be posted for vacation
selection. During that month, employees will have the option of choosing a
vacation period in the following calendar year. If two (2) or more employees
request the same time period for vacation, and all cannot be granted that
period, hotel seniority shall determine who will get that time period. If at the
end of November, an employee fails to schedule a vacation time period, the
Employer shall have the right to schedule that employee for vacation time off.
Unless there is a serious verifiable emergency, any employee who has been given
or selected a given vacation period may not request a change in said vacation
period unless at least fourteen (14) calendar days advance written notice is
given. In all cases granting of variances is at the sole discretion of the
Employer. Black-out
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periods, where no vacation will be granted, are at the sole discretion of the
Employer. However, if business allows, the Employer has the option of releasing
any of that time for vacations.
(f) Employees shall be entitled to one (1) additional week without pay to
follow consecutively after their paid vacation. The employee must request this
additional time off at the same time as they request their vacation pay; 45
calendar days in advance of the start of their vacation.
(g) The employee will be paid their vacation pay within thirty (30)
calendar days prior to the start of their vacation by means of the regular
payroll period. However, employees must fill out a vacation pay request
forty-five (45) calendar days prior to the start of their vacation for this to
be guaranteed. If after so doing this, the Employer fails to have the vacation
pay included in the regular pay period check, a separate check will be issued
for that vacation pay prior to the start of the vacation.
(h) The Employer will pay Medical, Dental and Pension payments for said
vacation time on the same hours as if the employee actually worked. This will
not apply to terminated employees.
Section 10. HOLIDAYS AND WELL DAYS:
(a) The following days shall be observed as holidays:
New Year's Day (January 1)
President's Day (3rd Monday in February)
Memorial Day (last Monday in May)
Independence Day (July 4th)
Labor Day (1st Monday in September)
Thanksgiving Day (4th Thursday in November)
Christmas Day (December 25th)
Any work performed on such days shall be paid for at time and one-half (1 1/2)
the regular rate of pay. If an employee does not work on a holiday, said
employee is not entitled to holiday pay.
(b) Any non-tipped employee working on a holiday which is also their sixth
(6th) or seventh (7th) consecutive day of work will be compensated at two (2)
times the regular rate of pay.
(c) After one (1) year of continuous employment (including approved
medical leave of absence and vacation time) any employee who has also qualified
for medical, dental, and pension benefits will be entitled to paid well days in
accordance with the following schedule:
Effective: 1-1-99
------
Employment # of Days
---------- ---------
1 Year 1
2 Years 2
3 Years 5
4 Years 6
5 Years or more 7
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(d) Well days may be used to cover a day off for illness or injury, and
the Employer cannot demand a doctor's report unless that day is a holiday, or
immediately prior to or after a holiday, the vacation period, or regularly
scheduled days off. Other than this type of medical emergency, one week's notice
must be given to the Employer to schedule a well day off. The Employer has the
option to waive this advance notice. Well days may be taken off consecutively
where applicable. Unused well days may accumulate to a maximum of eighteen (18)
days. If currently over eighteen (18) days, the Hotel will pay off excess days.
Section 11. FUNERAL & JURY DUTY LEAVE:
(a) In the event of a death in the immediate family of an employee who has
one (1) or more years of employment with this Employer, that employee shall be
granted a leave of absence with pay not to exceed three (3) days. This provision
does not apply if the funeral occurs during the employee's vacation, leave of
absence, days off, lay off or sick leave. A day's pay shall be based upon an
employee's normal work schedule.
(b) The immediate family shall mean only a (step) father, (step) mother,
(step) brother, (step) sister, spouse, (step) child, (step) mother-in-law,
(step) father-in-law, or (step) grandparent.
(c) Funeral leave applies only when the employee must make arrangements
for the funeral and/or to attend the funeral. It is not applicable for other
purposes, such as settling the estate, etc.
(d) The Employer may demand verification of the death and the
relationship. The employee must notify his immediate shift supervisor as soon as
possible of the death and his necessary absence from work.
(e) Funeral leave hours shall count toward Medical, Dental and Pension
benefits calculations.
(f) Employees serving on jury duty shall retain their seniority, and the
Employer will continue to make contributions for them to continue their Medical,
Dental and Pension benefits on the same basis as their scheduled hours before
that jury duty. In no event shall the Employer continue Medical, Dental and
Pension benefits for more than thirty (30) calendar days per calendar year.
Section 12. MEDICAL AND DENTAL PLANS:
(a) The Sacramento Independent Hotel, Restaurant and Tavern Employees
Welfare Plan is hereby established. The details of the Trust Fund and the
Declaration of Trust dated the 1st day of April 1954 and the 1st day of August
1954, as executed by the parties hereto is hereby made a part of this contract.
The Fund shall be administered by the Employers and the Union through a Board of
Trustees. The Union recognizes the Sacramento HERE Employers' Association as the
representative body to appoint and/or remove Management Trustees on said Board,
provided said Association is legally constituted and approved by Employers
representing a majority of employees who are participants in the Fund.
(b) Eligibility Requirements: In all cases, for an employee to be eligible
for coverage he must work a minimum number of hours per calendar month
commencing with the calendar month immediately following the calendar month of
the date of hire as follows:
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All Employees........60 hours or more per calendar month.
For all purposes under this contract, the above are known as the "minimum
required number of hours per calendar month." They must be worked for a single
contributing Employer under this contract.
(c) Contributions: For each eligible employee the Employer shall contribute
during the term of this contract the following sums per calendar month; January
1999 contributions are based upon December 1998 hours:
1. MEDICAL - Low Plan (Low Indemnity):
1-1-99 $84.00 This rate is for all new hires, for their
1-1-00 $88.00 first twelve (12) calendar months of
1-1-01 $92.00 employment including anyone hired during
the month of the 1999 ratification vote.
2. MEDICAL - High Plan (fully paid Kaiser or High Indemnity):
1-1-99 $119.00 This rate is for all employees who have
1-1-00 $129.00 completed twelve (12) calendar months
1-1-01 $139.00 of employment, or have been hired prior
to the month of the 1999 ratification vote.
3. During the term of this contract, PacifiCare HMO, or another equal value
HMO will be offered as an alternative plan. Any employee may choose either Plan
by completing the necessary paperwork within 30 days of hire or during the
annual open enrollment. Those employees must then co-pay the difference between
the PacifiCare premium, or its alternative, and the Employer's contribution each
month through payroll deduction.
4. DENTAL: 4-1-99 1-1-00 1-1-01
------ ------ ------
All Employees, 60 hours or more.....$13.00......$14.00......$15.00
It is the desire and intent of the contracting parties to seek to preserve
a sound financial reserve in the Trust Fund to adequately meet the needs of the
participants of the Fund. Should depletions of the reserves occur in excess of
what can be recovered, then the Trustees will modify benefits temporarily until
such time as financially corrective measures can be taken.
(d) Contributions to the Fund for work performed shall be paid not later
than the tenth (10th) day of the month following that in which such work is
performed. Contributions to be made to the Administrator of the Fund on forms
furnished to the Employer by the Fund showing name of the employee, social
security account number of new employees, number of hours worked, the amount of
contributions due, and such other information as required by the Trustees.
(e) It is hereby agreed that the Employer shall permit a confidential
audit of payroll records by an authorized representative of the Medical Trust
Fund to verify hours worked only.
(f) The Trustees of the Sacramento Independent Hotel, Restaurant and
Tavern Employees Welfare Plan shall not be obligated to, and are not authorized
to accept any
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<PAGE>
contributions from an Employer under this Section of the contract unless the
said Employer is currently a party to or bound by a current contract with the
Hotel Employees and Restaurant Employees Union Local 49.
(g) The Employer agrees to pay up to two (2) months contributions per
calendar year for Medical and Dental benefits for any qualified employee who is
off work because of medical reasons. A qualified employee shall be deemed an
employee who has been qualified under this section for twelve (12) months
continuous service for this Employer.
(h) The schedule of benefits to be provided for each eligible employee and
each covered dependent shall be determined by a majority of the Board of
Trustees of said Fund.
(i) The Employer agrees to participate in an employee co-payment program
for dependent coverage. The co-payment schedule is set by the Trust Fund, and
the benefits provided shall be determined by the Trust Fund. The co-payments
must be transmitted to the Trust Fund concurrent with the payments for the
employee's coverage in order to maintain coverage. All of the conditions and
penalties apply to co-payment coverage that apply to employee coverage as stated
in this Section and the Contributions and Collections Section, as well as the
decision of the Trustees of that Trust Fund.
(j) There will be an open enrollment period during the month of October.
Employees shall pay by payroll deduction, and the Employer shall remit to the
Fund each month its monthly contributions, the difference between the amount of
monthly contributions paid by the Employer, as shown above, and the actual costs
of providing the benefits of the Plans, as determined by the Trustees. For this
purpose, the Employer shall provide for automatic and continuing payroll
deduction. All employees participating in the Plan shall by this Contract be
deemed to have granted the Employer authorization to withhold from their wages
the amounts necessary to maintain coverage.
These deductions will continue for one (1) full year for those originally
eligible. The deductions will be made only in months that the employee has 60
hours of work or pay and for which the Employer makes a contribution to the
Welfare Fund. In case of marriage, births, adoptions, etc., new dependents may
be added within 30 days.
New employees will begin to have the dependent contributions deducted, if
they chose such coverage, in the last month of Employer contributions which
will make the family eligible for benefits in the succeeding month.
Those employees who do not sign up their dependents when originally
eligible will have to provide evidence of insurability, at their own expense,
if they wish to enroll the dependent(s) at a subsequent annual open enrollment
period.
The Employer will supply to the Trust Fund Administrative office a copy of
each payroll deduction form signed by an employee.
Section 13. PENSION:
(a) Sacramento Independent Hotel, Restaurant and Tavern Employees Pension Plan
is hereby established. The parties to this Contract shall enter into a Trust
Agreement complying with the provisions of Section 302(c), of the Labor
Management Relations Act, 1947, as amended, under which the Pension Plan shall
be administered and under which a Board of Trustees upon which Union and
Employer have equal representation shall be created. The Union recognizes the
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<PAGE>
Sacramento HERE Employer's Association as the representative body to appoint
and/or remove Management Trustees on said Board, provided said Association is
legally constituted and approved by Employer's representing a majority of
employees who are participants in the "Fund."
(b) Eligibility Requirements: In all cases, for an employee to be eligible
for coverage he must work a minimum number of hours per calendar month
commencing with the calendar month immediately following the calendar month of
the date of hire as follows:
All Employees.......60 hours or more per calendar month.
For all purposes under this contract, the above is known as the "minimum
required number of hours per calendar month." They must be worked for a single
contributing Employer under this contract.
(c) Contributions: For each eligible employee the Employer shall contribute
during the term of this contract the following sums per calendar month:
PENSION: 1-1-99 1-1-00 1-1-01
------ ------ ------
All Employees, 60 hours or more............$23.00......$28.00......$33.00
(d) Contributions to the Fund for work performed shall be paid not later
than the tenth (10th) day of the month following that in which such work is
performed. Contributions to be made to the Administrator of the Fund on forms
furnished to the Employer by the Fund showing name of the employee, social
security account number of new employees, date of birth, number of hours worked,
the amount of contributions due and such other information as required by the
Trustees.
(e) It is hereby agreed that the Employer shall permit a confidential
audit of payroll records by an authorized representative of the Pension Plan
Trust Fund to verify hours worked only.
(f) The Trustees of the Sacramento Independent Hotel, Restaurant and Tavern
Employees Pension Plan shall not be obligated to, and are not authorized to
accept any contributions from an Employer under this Section of the contract
unless the said Employer is currently a party to or bound by a current contract
with the Union.
(g) The schedule of benefits to be provided for each eligible employee
shall be determined by a majority of the Board of Trustees of said Fund.
Section 14. CONTRIBUTIONS AND COLLECTIONS:
(a) Failure to pay contributions required under Sections 12 and 13 of this
contract when due may result in impairment of or loss of benefits to the
employees and result in additional costs in the administration of the Trust
Funds. It is impractical and extremely difficult to fix the actual damage
resulting from failure to pay the contributions in the manner and at the times
provided in Sections 12 and 13. The contributions are due on the tenth (10th) of
the month. Consequently, if the Employer fails to make such contributions by the
twentieth (20th) of the month in which such contributions are due, the Employer
shall pay an additional sum equal to ten
Capitol Plaza Holiday Inn 11 6/1/98 - 5/31/01
<PAGE>
percent (10%) of the contributions due and payable in such month, or fifty
dollars ($50.00), whichever is greater, as liquidated damage for each such late
payment. In addition the Employer shall pay interest in the amount of one and
one-half percent (1 1/2%) per month (eighteen percent (18%) annual interest) on
the unpaid balance.
(b) In the event the Employer willfully fails to report and pay the
contributions as required by Sections 12 and 13, or in the event the Employer so
negligently keeps and maintains his books and records that the amount of the
contributions reported and paid are ten percent (10%) less than the total
contributions found to be due under Sections 12 and 13, he shall pay the cost of
the audit, but in no event more than one thousand dollars ($1,000).
(c) In the event the Trustees are required to file suit to collect
contributions due under Sections 12 and 13, the Employer agrees to pay such sums
as the court shall fix as attorneys' fees and court costs.
(d) The parties hereto hereby authorize the Trustees of the Sacramento
Independent Hotel, Restaurant and Tavern Employees Welfare Plan Trust, and the
Trustees of the Sacramento Independent Hotel, Restaurant and Tavern Employees
Pension Trust, to waive or compromise the liquidated damages, cost of audit,
and/or attorneys' fees provided above when in their judgment such waived or
compromise is deemed just and proper.
(e) The parties hereto agree to abide by any and all action taken by the
Trustees of the Health and Welfare Plan and the Pension Plan or a successor
Trust designated by the Union between January 1, 1999, and May 31, 2001.
Section 15. SUPERIOR WORKERS AND PREMIUM PAY:
(a) The scale of wages in this contract are minimum scales and do not
prohibit a superior worker from receiving a higher wage scale.
(b) Employees receiving premium pay above the contract wage scale shall be
red circled and shall be given the same increase that the contract rate
receives.
(c) No employee shall as a result of the signing of this contract suffer a
reduction in his wages or fringe benefits.
(d) If the State or Federal Minimum Wage is established at an amount in
excess of the wage scales in this contract, then those minimum wages established
shall take effect immediately in this contract in lieu of wages herein
established.
Section 16. COMBINATION JOBS:
When an employee occupies a position combining two (2) or more
classifications in any day, said employee shall be paid for the time worked in
each classification at the contract rate of pay for that classification. This
shall not apply to relief for meal periods or rest periods nor to employees for
whom combination scales are fixed in this contract.
Section 17. DISCIPLINARY ACTIONS:
(a) The Employer may only discipline, suspend or terminate for reasons of
just cause. The Employer shall have the right to establish reasonable rules,
policies and regulations to maintain a safe and efficient operation.
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<PAGE>
(b) Written disciplinary notices (written warnings, suspensions and
terminations) issued to employees must specify the events or actions for which
the notice is issued. Written disciplinary notices shall be issued to employees
within five (5) calendar days excluding Saturdays, Sundays, vacations, leaves of
absence, and holidays, after the Employer first became aware of the event or
action for which the disciplinary notice has been issued. Employees shall be
provided with a copy of the notice and a copy shall be mailed to the Union.
(c) The Union shall have the right to challenge the propriety of any
discipline and/or termination pursuant to the requirements of the Grievance
Procedures Section of this Contract.
(d) It is understood that except in cases which are considered serious
enough for immediate termination, discipline shall be progressive and corrective
in nature. Warning notices, including suspensions, shall be considered null and
void after a period of twelve (12) months.
(e) Probationary Period. An employee may be terminated or disciplined for
any reason during the first ninety (90) calendar days of employment (the
probationary period) and such termination or discipline shall not be subject to
the grievance or arbitration procedures of this contract.
(f) An employee may not be terminated while:
1. On vacation.
2. On written leave of absence.
3. On medical leave not exceeding four (4) months if employee
furnishes Employer with monthly progress reports of doctor and
full release from doctor upon returning to work.
Section 18. NO STRIKE AND NO LOCKOUT:
Both the Union and the Employer recognize the service nature of the hotel
business and the duty of the Employer to render continued and hospitable service
to the public by supplying food, lodging, and other hotel accommodations.
Therefore, neither the Union or any of the employees will call, engage in,
participate in, or sanction any strike, sympathy strike, slow-down, stoppage of
work, picketing, or boycott during the life of this Contract. The Employer shall
not engage in a lock out during the life of this Contract.
Section 19. HOUSE CARDS AND UNION BUTTONS:
(a) This establishment may display the International House Card, and it
shall at all times remain the property of the Union, and may be removed from
this establishment for failing to comply with this contract.
(b) Employees may wear one (1) standard Local 49 Union Button while on
duty.
Section 20. UNION SECURITY:
(a) The Employer shall notify the Union of all job openings within the
bargaining unit covered by this Contract. The Union may refer qualified
applicants for those openings. The Employer shall be the judge of the
qualifications of his employees and applicants.
(b) All present employees who are not members of the Union on the effective
date of this Contract shall, as a condition of employment, on or after the
thirtieth (30th) calendar day following the effective date of this Contract
become and remain members of the Union.
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All new employees hired on or after the effective date of this Contract
shall, as a condition of employment, on or after the thirtieth (30th) calendar
day following the beginning of such employment, become and remain members in
good standing of the Union.
As a condition of continued employment, all employees must be members of
the Union. For purposes of this Section, the terms "members of the Union" and
"members in good standing" shall be defined as one who timely tenders any
Initiation fee and/or monthly dues as set forth in the Bylaws and Constitution
of the Union and in accordance with applicable law.
(c) Upon written notice from the Union of failure on the part of any
individual employee to complete or maintain membership in the Union as above
required, the Employer shall within seven (7) calendar days of such notice,
terminate such employee. The Union agrees to and will hold the Employer harmless
from and will indemnify the Employer from any and all claims, including
attorneys' fees and costs, that may be asserted as a result of any such Union
request for termination of an employee.
(d) No employee shall be allowed to enter into any individual contract or
agreement with his Employer concerning conditions of employment or wages which
are less than the conditions of employment or wages contained herein for hours
worked.
(e) If a salaried supervisorial employee works at the trade he must become
or maintain his membership in the Union in good standing; providing, however,
this Section shall not be applicable to work at the trade in emergencies, fill-
in work during vacation periods, and under other circumstances mutually agreed
to by the Employer and the Union.
(f) When an employee is hired, the Employer will notify the employee of
this contract. Within seven (7) calendar days following the date of hire, the
Employer shall notify the Union in writing of the name, date of hire,
classification, rate of pay, address and social security number.
Section 21. EMPLOYER'S OPERATION:
All provisions of this contract shall be equally effective under any sub-
contract or concession covering work performed in or outside of the
establishment of the Employer within the classification of work as set forth in
the terms of this contract. (The status of the gift shop is governed by Addendum
A of this contract.)
In the event business conditions necessitate the subcontracting of any one
or all services performed in any bargaining unit classification, the Employer
agrees to give the Union sixty (60) days notice of its intention to subcontract
and will agree to meet and discuss the issue with the Union should there be any
adverse impact upon any bargaining unit member. The Employer further agrees to
inform the subcontractor of the existence of the contract, and in good faith
make their best effort to ensure the subcontractor retains the current
employees.
Section 22. GRIEVANCE PROCEDURES:
For purposes of this contract, a grievance shall be defined as a dispute,
or difference of opinion, between the Union and the Employer involving the
meaning, interpretation, or application of this contract, or the alleged
violation of any provision of this contract.
Both parties having mutually agreed to the benefits of speedy resolutions
of grievances, especially disciplinary action for alleged violations of house
rules, procedures or terms and
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<PAGE>
conditions of this contract. All such disputes shall be processed in the
following time and manner. Time limits at any step in the procedure may be
waived by mutual agreement of the parties.
Step 1. The employee may discuss the matter with his supervisor on an
informal basis to settle the matter promptly. The employee may have a Union Shop
Steward or Union representative assist him in Step 1. if he so desires.
Step 2.
(a) If the grievance is not resolved at Step 1., the Union
Representative shall meet with the Employer, or his authorized representative,
for the purpose of attempting to resolve the dispute.
(b) The employee or the Union Representative must submit all
disciplinary grievances in writing to the Employer within ten (10) calendar days
after the disputed discipline occurred, or it will be deemed waived by the
grieving party, as well as both the Union and the Employer.
(c) All non-disciplinary grievances must be submitted in writing to
the other party within twenty (20) calendar days of first knowledge of said
grievance or it will be deemed waived by the parties.
(d) If a settlement of the grievance is not reached during Step 2.,
then the Union may file for a Board of Adjustment (Step 3.). In any event, the
Union must file for a Board of Adjustment within ten (10) calendar days of the
date that the grievance was filed in writing with the Union. Failure to request
an Adjustment Board in the prescribed time frame shall disallow any further
action on the grievance unless the time period is waived by the Union and the
Employer.
Step 3.
The Adjustment Board shall meet within seven (7) calendar days of a
request for a hearing. The Adjustment Board shall consist of two (2)
representatives from each contracting party. The Adjustment Board shall be
empowered to hear and resolve, by simple majority, all grievances properly
brought before them. Any decisions of the Adjustment Board shall be final and
binding. If the Adjustment Board cannot agree on any matter before it, the
grieving party may request arbitration. Said request must be done within seven
(7) calendar days of the deadlocked decision of that Adjustment Board, or that
grievance shall be deemed waived by both parties.
Section 23. ARBITRATION:
(a) If arbitration is resorted to, the decision of the arbitrator shall be
final and binding upon both of the parties. The time limits contained herein may
be waived by mutual agreement of the parties.
(b) Within ten (10) calendar days of the request to arbitrate, the parties
shall choose an arbitrator from a list of seven (7) arbitrators provided by the
Federal Mediation & Conciliation Service.
(c) Expedited arbitrations shall commence within twenty-eight (28)
calendar days of the request for arbitration in all disciplinary grievances.
(d) All non-disciplinary grievances shall proceed at the earliest possible
date, and the arbitrator chosen must be instructed by the parties to render his
written decision within thirty (30)
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calendar days of the arbitration, unless a bench decision has been mutually
requested by the parties.
(e) Arbitration hearings shall be conducted in accordance with the
following procedures:
1. Continuances may be granted by the Arbitrator, but any cost shall be
paid by the requesting party.
2. There shall be no formal rules of evidence.
3. Hearings shall normally be completed within one (1) day.
4. The Arbitrator shall have sole authority to rule on all motions and to
decide the case.
5. Bench decisions shall be the rule in all disciplinary cases, unless
otherwise agreed to beforehand by the parties.
(f) Each party shall bear their own cost of the arbitration excluding the
Arbitrator's fee and his related costs which shall be equally divided between
the parties.
(g) The Arbitrator shall not have the power to add to, or to modify any of
the terms, conditions, sections or subsections of this contract. The
arbitrator's decision shall not go beyond what is necessary for the
interpretation and application of this contract in the case of the specific
grievance at issue.
(h) No grievances that arose between June 1, 1998, and January 22, 1999,
are subject to the provisions of Section 23.
Section 24. DUES AND FEES CHECK-OFF:
(a) The Employer will deduct from their wages and turn over to the duly
designated officer of the Union the membership dues, initiation fees, and
reinstatement fees of such members of the Union as individually and voluntarily
certify in writing on and after the date of this contract that they authorized
such deductions. Such written authorizations shall be irrevocable for a period
of one (1) year or until the termination or renewal of this contract, whichever
occurs sooner, and such written authorizations shall be automatically renewed
and shall be irrevocable for successive periods of one (1) year or until the
termination or renewal of this contract, whichever occurs sooner, and such
written authorizations shall be automatically renewed and shall be irrevocable
for successive periods of one (1) year each, or for the period of such
succeeding contracts between the Employer and the Union, whichever shall be
shorter, unless written notice of revocation is given to the Employer and a copy
sent to the Union not more than fifteen (15) calendar days before the expiration
of each period of one (1) year, or each succeeding contract between the Employer
and the Union, whichever occurs sooner. All dues and fees deducted from an
employee's paycheck are then the property of the Union and are being held in
trust for the Union until delivered to the Union.
(b) The form of such written authorization shall be on a form supplied by
the Union and approved by the Employer, which form shall be attached hereto and
made a part of this contract and marked Addendum "C."
(c) Deductions for Union membership dues and fees pursuant to this Section
shall be made from the second (2nd) paycheck of the employee after receipt of
the authorization and monthly thereafter on the first (1st) payday of each month
for such time as the authorization remains in effect.
Capitol Plaza Holiday Inn 16 6/1/98 - 5/31/01
<PAGE>
(d) The provisions of this Section are intended solely as an accommodation
to the Union. It is expressly agreed and clearly understood by the parties that
no agency, bailment, or any other relationship is created, intended, or shall be
implied between the Employer and the Union, or between the Employer and any
employee or group of employees. Further, the Union specifically agrees to hold
the Employer harmless from any and all losses, damages, or injury of every
nature whatever, including but not limited to the expenditure of all attorneys'
fees and all court cost incurred by the Employer by reason of the provisions of
this Section.
Section 25. WORKER'S COMPENSATION:
(a) The Employer has secured worker's compensation insurance coverage and
will make every reasonable effort to see that injured employees receive prompt,
adequate medical attention. Any employee sustaining a work related injury must
immediately report said injury to his supervisor and if necessary request
medical attention from that supervisor. When an employee has an on the job
injury that requires off site medical attention he shall be required to take a
drug test.
(b) Prior to hiring or within thirty (30) calendar days of hiring an
employee or prior to returning to work from an injury, the Employer may require
that the employee take a physical examination at no cost to the employee. The
intention here is to avoid having employees on jobs which might jeopardize their
health or the safety and health of others. Should the medical examination
disclose such conditions, the Employer will make every effort to assign the
employee to work within his capability. When such other work is not available,
the employee may be removed from the payroll and the case taken up with a
representative of the Union.
(c) All employees will observe all safety rules set up by the Employer.
(d) The Employer agrees to add two (2) bargaining unit employees to the
Health & Safety Committee.
Section 26. MANAGEMENT RIGHTS RESERVED:
The Employer shall have the right to determine the extent of its
operations and to determine when any operation shall function, or shall be
halted, and when services shall be increased and decreased. The authority to
hire employees, to direct, retire, promote, transfer, train, layoff, or dismiss
any employee for just cause, to maintain discipline, to make reasonable rules,
to determine work schedules, and the number of hours an employee may work per
day or per week, shall be vested in the Employer, subject to the provisions of
this contract.
Section 27. SENIORITY:
The Employer and the Union agree that the purpose of seniority is to
accord consideration to senior employees in recognition of their length of
service to their Employer. Seniority is further intended to provide maximum work
opportunity to senior employees.
(a) Definition:
1. Hotel seniority is an employee's length of continuous service in years,
months and days from his most recent date of hire into the bargaining unit.
2. Classification seniority is an employee's length of continuous service
in years, months and days from his most recent date of hire, promotion or
transfer into his present classification. If
Capitol Plaza Holiday Inn 17 6/1/98 - 5/31/01
<PAGE>
two or more employees are employed within the same classification on the same
day, their seniority shall be determined by whoever is born on the earliest day
of the year.
(b) Layoff and Recall:
When it is necessary to lay off employees, those with the least amount of
seniority in the job classification shall be laid off first. When the workforce
is increased within the classification, employees on layoff shall be recalled in
order of their job classification seniority. All employees on layoff shall be
recalled before the hiring of any new employees.
(c) Scheduling:
1. Preference for sbifts and days off shall be based on classification
seniority.
2. Preference for vacation schedules shall be based on hotel seniority.
3. Employees with the greatest classification seniority shall have the
preference of work schedules including days off. A work schedule is defined as a
series of days of work, starting/quitting times and days off.
(d) Probationary Period:
A newly hired employee shall be considered a probationary period employee
until he has completed ninety (90) calendar days of employment. Once the
probation period has been completed his seniority shall date back to his date of
hire. A probationary employee may be laid off or terminated without recourse to
the grievance procedure.
(e) Promotions and Transfers:
1. In filling job vacancies which may exist within the bargaining unit, the
Hotel subscribes to the philosophy of promotion from within. Among employees who
are quafified for said job vacancy, in the judgment of the Employer, house
seniority shall be the final determining factor in making such selection.
In the event of a dispute as to the qualifications of an employee for a
promotion, the Union may file a grievance that the Employer has made its
determination arbitrarily or capriciously.
Nothing herein shall preclude the Employer from hiring an applicant from
outside the Hotel or bargaining unit once all internal candidates have been
considered.
2. In the event that an employee who, within sixty (60) calendar days of
his promotion or transfer, desires to return to his former position or is deemed
not qualified to hold the new position, he shall be returned to his former
classification without loss of seniority. This provision shall apply to
promotions or transfers to positions both inside the bargaining unit and outside
the bargaining unit. It is further understood that while an employee is training
for an upgraded position, he shall retain all seniority rights in his base
classification.
3. Employees who have been promoted into a new classification and as a
result of that promotion are not able to achieve the same amount of hours as
they were previously working pursuant to their seniority, shall retain the right
to work in their previous classification to supplement their hours under the
following terms and conditions:
(a) The new classification shall be the primary job and therefore shifts
must be satisfied there first, prior to working in the previous
classification;
(b) No overtime will be incurred unless agreed to by the Employer;
Capitol Plaza Holiday Inn 18 6/1/98 - 5/31/01
<PAGE>
(c) At the time of promotion, on a form to be provided by the Employer,
the employee shall choose whether or not he wants additional hours in his
previous position in the event he loses hours in his new position due to
his promotion.
(d) Such protections shall be valid for six (6) months beginning the first
date of employment in the new position.
In completing and filling out his weekly schedules with work from the
previous classification, the promoted employee shall exercise his seniority in
that classification in a manner which minimizes the disruption of the schedules
in that classification, i.e., bumping the least senior person in the
classification which will allow him to make up hours equivalent to his previous
schedule.
(f) Termination of Seniority:
An employee's seniority shall be terminated by:
1. Termination for cause
2. Voluntary quit
3. Failure to return to work at the end of a leave of absence
4. Absence from work for three (3) consecutive days without notifying and
providing a satisfactory excuse to the Employer.
5. Failure to report for work after layoff within three (3) calendar days
after having been recalled by a notice sent to the employee's last known
address by certified mail.
6. A layoff of three continuous months except where the property has been
temporarily closed, in whole or in part, for purposes of remodeling or
reconstruction. In such a case, the "closed time" shall not be counted
toward the three (3) month period of layoff.
(g) Seniority Lists:
Upon request the Employer shall furnish the Union with a current seniority
list every six months. The Employer shall also post an updated seniority list
within 10 calendar days of the signing of this contract. Employees shall have
ten (10) calendar days from the date of posting to notify the Employer or the
Union of any errors in the list.
(h) It shall be the responsibility of the employee to keep the Employer and
the Union informed of his current address and telephone number at all times.
Section 28. TERMS, TERMINATIONS, AND AMENDMENTS:
This contract shall be in effect from June 1, 1998, to and including May
31, 2001, and shall remain in full force and effect from year to year thereafter
unless either party shall serve written notice upon the other of a desire to
amend said contract no later than February 1, 2001, or any subsequent February
1st thereafter.
Section 29. CRAFT RULES, REGULATIONS, AND WORKING CONDITIONS:
(a) LINEN, LAUNDRY AND UNIFORM: The Employer shall furnish linen and
uniforms and launder same without expense to the employee. The Employer reserves
the right to select the style or type of special uniform required in his
establishment. Any special uniform that is considered wash and wear will be
laundered by the employee at no expense to the Employer.
Capitol Plaza Holiday Inn 19 6/1/98 - 5/31/01
<PAGE>
The ordinary black or white food servers garment which may be worn in other
establishments shall not be considered as a special uniform.
A cook's uniform shall consist of pants, cap, apron, and jacket, shirt, or
dress. When the Employer does not furnish and launder cooks uniforms, he shall
pay one dollar ($1) per day in lieu thereof. This shall not apply when an
employee refuses to wear the uniform furnished by the Employer, provided such
uniforms are wearable and are those customarily worn in the Employer's
establishment.
Any Employer electing to pay wages in excess of those called for in
Section 30 shall not be relieved of this provision. Any Employer electing to
reimburse the employee in lieu of uniforms and laundry shall designate such
reimbursement on the payroll check stub.
(b) BREAKAGE, CASH SHORTAGE, CONTRIBUTIONS AND DEDUCTIONS:
No employee shall be required to contribute to a captain, head food server,
bartender, or anyone in charge.
Unavoidable or accidental breakage or spillage of merchandise or equipment
shall not be charged against an employee.
No Employer shall make any deductions from the wage or require any refund
from an employee for any cash shortage, breakage, or loss of equipment unless it
can be proved that the shortage, breakage, or loss is caused by a dishonest or
willful act, or by the gross negligence of the employee.
No employee shall be held responsible for walkouts or when guests refuse to
pay checks. No employee shall be held to pay the house any part of an
undercharge.
Cash Shortages: No employee shall be held liable for any cash shortages if
more than one (1) employee has access to the employee's cash drawer. In the
event of an excessive cash shortage, the employee must notify the Employer or
his authorized representative for verification, or be held liable for such
shortage.
(c) CLEANING:
1. No food or beverage server shall be required to wash or wipe glasses,
silverware, creamers, tea or coffee pots, or other utensils as part of their
regular duties. This Section will not be applied to bartenders.
2. Food and beverage servers shall not be required or permitted to do any
work designated as "porter" work, including sweeping, scrubbing floors or walls,
defrosting or cleaning the inside of ice cream cabinets or refrigerators and
similar work; except the cleaning of back bars and counter may be required as
part of food server's work.
3. It is the responsibility of all employees to clean up spills whether
or not they caused the spill. This provision shall not result in amending
existing job descriptions.
(d) PAYMENT OF GRATUITIES:
1. Any house accepting charge accounts or credit cards on which a
gratuity or service charge is specified for any employee shall pay the same to
said employee upon the completion of the shift. An Employer may require a refund
of any gratuities or service charges made on a credit
Capitol Plaza Holiday Inn 20 6/1/98 - 5/31/01
<PAGE>
card which the employee has received and for which payment is later disallowed
or refused. This does not apply to house charge accounts.
2. All banquet and catering gratuities and service charges will be
distributed in the following manner:
a. Eighty percent (80%) of the customary 15% gratuity and/or service
charge shall be distributed to the employees working the affair;
and
b. Twenty percent (20%) may be distributed to the banquet manager,
catering manager and others.
c. Where more than the customary 15% gratuity and/or service charge is
charged for the affair, the distribution of the excess portion
shall be at the discretion of the Employer.
The Employer shall be responsible for and guarantee the distribution of said
gratuities or service charges and all banquet and catering gratuities received
in accordance with this rule. Said service charge or gratuity will be in
addition to the wages set forth in this contract.
The distribution formula may be deviated from where the success of the
affair is substantially due to the particular skills and/or labor of employees
other than regular banquet personnel, in which case the gratuity or service
charge will be distributed in a fair and equitable manner to all employees
concerned.
3. Representatives of the Union shall have the right to inspect all
records in connection with any gratuities or service charges and disposition of
same on behalf of employees working a particular function on request.
(e) BANQUET RULES:
1. All banquets served on Sunday after 11:00 a.m. shall receive the dinner
scale. If banquet servers, after completing their parties, are transferred to
ala carte service, they shall, after three (3) hours be paid the appropriate ala
carte rate per hour. No banquet server will work ala carte without the
employee's consent.
2. Dinner dances where food servers collect all checks, shall be paid the
ala carte scale. Non-collecting dinner dances shall be paid at the banquet rate
per hour with a minimum of three (3) hours.
3. Steady help are not allowed to work on banquets unless extra help is
not available; provided this shall not apply where the use of extra banquet
servers will result in closing stations. Steady help working on banquets of
twenty-five (25) or more shall receive banquet scale regardless of number of
guests served. Steady help may be employed on parties of twenty-four (24) or
less at regular rate for steady employment. The scale for breakfast applies only
to employees called at 5:00 a.m. or later.
4. No food server shall be required to wait on more than thirty (30)
guests. It is mutually understood that the Employer will estimate one (1) food
server to every thirty (30) guests. In case of overflow or any other emergency
and the food server waits on more than the allowed thirty (30) guests, they will
be paid forty cents ($.40) for each additional person.
5. Buffets: No employee shall be required to serve more than fifty (50)
guests on a service buffet; on semi-service buffets, they may serve sixty (60)
guests; on hors d'oeuvres and receptions one (1) food server for every eighty-
five (85) guests.
Capitol Plaza Holiday Inn 21 6/1/98 - 5/31/01
<PAGE>
6. All banquet scales will be for a three (3) hour minimum. Setting up and
overtime will be at the same hourly rate as the actual banquet. Where travel is
involved employees will be paid the same hourly rate for time of travel.
Employees who are requested to use their own car to transport other employees to
and from the job shall receive an additional twenty cents ($.20) per mile for
their car expense. This only applies to catered parties and banquets held over
ten (10) miles from place of employment.
7. All banquet workers shall be called through the union except house
steady banquet employees. All banquet gratuities and/or service charges are to
be paid on the next payroll after the party has been paid for. Head banquet
servers shall not receive less than fifty cents ($.50) per hour over the banquet
scale.
8. All extra banquet employees will be paid on the next regular payroll of
the Employer.
9. All banquet shifts will be individual shifts and paid for by the
individual banquet scale for same; however, where two (2) or more banquets are
worked in one (1) day in any one (1) house, the total pay cannot be below the
State Minimum Wage including overtime and split shifts.
(f) GUEST ROOM ATTENDANTS AND HOUSE PERSON'S DUTIES:
1. A guest room attendant will be required to change all linen daily,
clean the bath, vacuum, dust, clean the windows and fixtures, replace light
bulbs in lamps and anything else that is required to maintain the everyday
cleanliness of a room.
2. A house person shall assist the guest room attendant by picking up
trash and soiled linen from the attendant's cart, stock and maintain the linen
closets, move furniture, vacuum and maintain halls or sidewalks, shampoo rugs
and repair or replace items in a room, i.e., lamp shades, drapes, overhead light
bulbs, stopped up drains, etc.
3. A guest room attendant shall not be required to do more than fifteen
(15) rooms in one (1) day. If suites or apartments consist of more than one (1)
room, each room in the suite or apartment shall be considered as a room for the
total number of rooms for a day. Any additional rooms in excess of those called
for in the above schedule, the employee shall be compensated at the rate of two
dollars ($2.00) per room. If any dispute arises on the subject, the Employer
agrees to discuss the matter with the Union in an effort to effect an amicable
disposition of the complaint.
4. If a room contains two (2) or more rollaway cots, one (1) room will be
reduced from the daily quota.
(g) MAINTENANCE EMPLOYEES:
Maintenance Worker I (Assistant Chief)
In addition to performing all duties described under the other
classifications of this department, the Maintenance Worker I may, under the
supervision of the Chief of Maintenance, supervise a crew, assign them to their
duties, devise shift schedules, be responsible for a preventative maintenance
program and a M.S.D.S. program. The Maintenance Worker I must also possess a
Class 2 - EPA certification.
Capitol Plaza Holiday Inn 22 6/1/98 - 5/31/01
<PAGE>
He may, subject to advance approval, order and purchase parts and supplies,
call in contractors when necessary and keep management advised of his
department's activities. He also coordinates maintenance work with other
departments.
Maintenance Worker II:
Generally, under the direction of either Chief Engineer or the Maintenance
Worker I, the Maintenance Worker II performs the duties itemized below, but is
not limited to those duties. This outline is only a summary of the job
responsibilities and is not considered a restrictive job description.
Electrical: Repairs, replaces and maintains motors, controls, switches, and
relay wiring. Changes ceiling light bulbs. Locates problems and diagnoses
malfunction.
Refrigeration/Air Conditioning: Repairs, replaces and recharges
refrigeration/air condition systems, cleans oils, flushes liquid condensers,
adjusts temperature and pressure controls, replaces and cleans filters, replaces
certain components as may be required - usually short of major overhaul.
Plumbing: Repairs, replaces and maintains all plumbing fixtures including
faucets, flushometers, drains, toilets, sinks, showers, minor pipe failures,
evaporative coolers, sprinklers, valves and pumps.
Carpentry: Builds shelves, racks, partitions, platform, including
remodeling. Constructs various items as required by Employer.
Locks: Changes and repairs locks, make keys, install new locks.
Roofing: Locates leaks or damage and repairs. Maintains all roofing mounted
equipment.
Floors: Repairs and replaces tiles, linoleum and/or carpet. Repairs or
resurfaces floors.
Walls: Patch and plaster, paint or vinyl, or otherwise repair walls and
partitions including wall tile. Mount such items as mirrors, pictures, lamps,
headboards and shelves.
Heating: Maintains boiler components, gas and electrical, water heater,
piping, valves and control systems.
Furniture: Repairs any and all guest room and public area furnishings.
Emergency Life Safety Systems: Bi-monthly testing and preventative
maintenance, including repairs of fire sprinkler pumps and emergency lighting
generator. Tests and replaces emergency lighting batteries.
Maintenance Worker III (Helper/Utility Worker)
Under the supervision of either the Chief Engineer or the Maintenance
Worker I or II, the Utility worker performs the duties itemized below, but is
not limited to those duties. This outline is only a summary of the job
responsibilities and is not considered a restrictive job description.
Electrical: Repairs, replaces switches, lamp cords and sockets, light
fixtures, changes light bulbs.
Air Conditioning/Heating: Cleans and replaces filters, cleans coils,
adjust temperature controls, replaces faulty room units.
Plumbing: Repairs, replaces and maintains all plumbing fixtures including
flushometers, drains, toilets, sinks, showers, minor pipe failures. Maintains
and back flushes swimming pools.
Capitol Plaza Holiday Inn 23 6/1/98 - 5/31/01
<PAGE>
Carpentry: Assists with building of shelves and racks. Constructs various
items as required by the Employer.
Roofing: Assists with roof leak repairs.
Floors: Repair or replacement of tiles, linoleum and/or carpet.
Walls: Patching, plastering, painting or vinyling of walls, including other
repairs. Mount such items as mirrors, pictures, headboards and shelves.
Furniture: Repair of any and all guest room and public area furnishings.
(h) COMBINATION LAUNDRY WORKER/UNIFORM ROOM ATTENDANT:
Duties: 1. Maintains employee uniforms
2. Makes minor alterations of uniforms and linen
3. Laundry work.
Section 30. WAGE SCALES:
SENIORITY INCENTIVE:
Amount Beginning on hire date
------ ----------------------
10 cents per hour 1st Anniversary
20 cents per hour 3rd Anniversary
30 cents per hour 5th Anniversary
40 cents per hour 10th Anniversary
The above amounts will continue to be paid over the contract wage scale
according to the individual's job classification and are not cumulative.
* * * Effective on the date of contract ratification, January 22, 1999, all
employees receiving a seniority incentive under the above provisions will
continue to receive that same amount of incentive. However, that amount received
is frozen for this contract term. Employees not yet eligible, and all new
employees, will not become eligible for the seniority incentive during this
contract term.
WAGE SCALES - THE FIRST EFFECTIVE RAISE FOR ALL EMPLOYEES IS THE CONTRACT
RATIFICATION DATE (January 22, 1999)
TIPPED EMPLOYEES
----------------
BARTENDERS 1-22-99 6-1-99 6-1-2000
- ---------- ------- ------ --------
Service and/or Combination.......$7.32......$7.52........$7.72
Regular.......................... 7.13...... 7.33........ 7.53
Banquet:
6 hour guarantee............... 8.95...... 9.15........ 9.35
3 hour guarantee............... 9.45...... 9.65........ 9.85
Capitol Plaza Holiday Inn 24 6/1/98 - 5/31/01
<PAGE>
FOOD SERVERS AND BUSPERSONS 1-22-99 6-1-99 6-1-2000
- --------------------------- ------- ------ --------
Food and Beverage Servers............$5.85..........$5.95..........$6.05
Bus Persons.......................... 5.85.......... 5.95.......... 6.05
Head Food Server..................... 6.05.......... 6.15.......... 6.25
Banquet Captain...................... 6.15.......... 6.25.......... 6.35
Dinners and Banquets (Food and Beverage Servers and Bus Persons)
Breakfast, Lunch or Tea.............. 5.85.......... 5.95.......... 6.05
Dinner............................... 5.90.......... 6.00.......... 6.10
Dinners, commencing after 9:00 a.m... 6.05.......... 6.15.......... 6.25
BELLPERSONS/VALET PARKING ATTENDANTS
- ------------------------------------
Bell Captain......................... 5.90.......... 6.00.......... 6.10
Bell Person.......................... 5.85.......... 5.95.......... 6.05
Valet Parking Attendants * *......... 5.85.......... 5.95.......... 6.05
* * A shift differential of $.25 per hour will be added to all hours worked
on the graveyard shift.
NON-TIPPED EMPLOYEES
--------------------
DINING ROOM/BANQUETS
- --------------------
Host Person, Cashier ................$6.55......... $6.90......... $7.25
Banquet Setup (after 5 p.m.).........$6.50.......... 6.85.......... 7.20
KITCHEN
- -------
Lead Cook ...........................$9.25..........$9.60..........$9.95
Dinner, Second or Broiler Cook ...... 8.04.......... 8.39.......... 8.74
Fry Cook............................. 7.84.......... 8.19.......... 8.54
Pantry............................... 7.22.......... 7.57.......... 7.92
Kitchen Worker, Porter, Dishwasher... 6.52.......... 6.87.......... 7.22
FRONT DESK AND CLERICAL
- -----------------------
Front Desk Shift Lead................$9.70..........$9.95.........$10.20
Front Desk (In Hire)................. 7.50.......... 7.75......... 8.00
Front Desk (After 6 months).......... 7.75.......... 8.00......... 8.25
Concierge (In Hire).................. 7.50.......... 7.75......... 8.00
Concierge (After 6 months)........... 7.75.......... 8.00......... 8.25
Reservations (In Hire)............... 7.50.......... 7.75......... 8.00
Reservations (After 6 months) ....... 7.75.......... 8.00......... 8.25
Capitol Plaza Holiday Inn 25 6/1/98 - 5/31/01
<PAGE>
FRONT DESK AND CLERICAL 1-22-99 6-1-99 6-1-2000
- ----------------------- ------- ------ --------
Lead Night Auditor..................$ 9.85.........$10.10.........$10.35
Night Auditor....................... 9.25......... 9.50......... 9.75
PBX................................. 7.25......... 7.50......... 7.75
Store Room Clerk.................... 6.76......... 7.11......... 7.46
MAINTENANCE
- -----------
Maintenance I (Assistant Chief)..... 16.30......... 16.65......... 17.00
Maintenance II (In hire)............ 12.30......... 12.65......... 13.00
Maintenance II (After One Year)..... 12.65......... 13.00......... 13.35
Maintenance III..................... 10.00......... 10.35......... 10.70
SECURITY
- --------
Security Guards..................... 7.40......... 7.75......... 8.10
Night Security (11 p.m. to 7 a.m.).. 9.10......... 9.45......... 9.80
(Includes M.O.D. Responsibilities)
HOUSEKEEPING
- ------------
Guest Room Attendant................$ 6.57.........$ 6.97.........$ 7.42
Room Inspector...................... 6.67......... 7.07......... 7.52
Laundry Worker...................... 6.83......... 7.23......... 7.68
Laundry Worker/Guest Room Attendant. 6.83......... 7.23......... 7.68
Head Houseperson.................... 9.23......... 9.63......... 10.08
Houseperson/Lobby................... 6.67......... 7.07......... 7.52
Houseperson/Shampooer............... 9.03......... 9.43......... 9.88
Linen Room Attendant................ 6.57......... 6.97......... 7.42
Laundry Worker/Uniform/Seamstress... 6.83......... 7.23......... 7.68
Capitol Plaza Holiday Inn 26 6/1/98 - 5/31/01
<PAGE>
Section 31. SIGNATURES:
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
this day of , 1999.
FOR THE UNION: FOR THE EMPLOYER:
Hotel Employees and Holiday Inn -
Restaurant Employees Capitol Plaza Sacramento
Union Local 49
by: /s/ Joseph A. McLaughlin by:
Joseph A. McLaughlin Robert Niehaus
President-Business Manager Regional Vice President
by: /s/ Rebecca Garcia by:
Rebecca Garcia Jerry Temple
Secretary-Treasurer General Manager
Capitol Plaza Holiday Inn 27 6/1/98 - 5/31/01
<PAGE>
ADDENDUM "A"
------------
It is hereby agreed between the Capitol Plaza Holiday Inn and Hotel
Employees and Restaurant Employees Union Local 49 that the Gift Shop be
suspended from the Collective Bargaining Agreement until such time as the Gift
Shop returns under the business operation of the Capitol Plaza Holiday Inn, or
there is a change in management from that which is in the contract at the time
this contract is signed.
ADDENDUM "B"
------------
SCHEDULES
- ---------
1. After your scheduled day off you must call in to check your schedule
(6:30 am - 4 pm the day before you are due back).
2. On-call personnel must phone in each day that you are placed on call
between the hours of 6:30 am and 7:30 am. (The day of on-call status.)
3. Housekeeping personnel must not report to work without checking their
schedule prior to coming in.
4. Employees switching days off must get 5 days prior written approval.
5. Request for days off must be given 5 days in advance. You must receive
prior approval from the Housekeeping Manager.
ADDENDUM "C"
------------
Reference Section 24(b) - Dues Deduction.
FOR THE UNION: FOR THE EMPLOYER:
Hotel Employees and Restaurant CAPITOL PLAZA
Employees Union Local 49 HOLIDAY INN
by: /s/ Joseph A. McLaughlin by:
Joseph A. McLaughlin Robert Niehaus
President-Business Manager Regional Vice President
by: /s/ Rebecca Garcia by:
Rebecca Garcia Jerry Temple
Secretary-Treasurer General Manager
Capitol Plaza Holiday Inn 28 6/1/98 - 5/31/01
<PAGE>
ADDENDUM "C"
------------
Hotel Employees and Restaurant Employees International Union, AFL-CIO
- ---------------------------------------------------
(Print name of Employee)
- --------------------------------------------------- -------------------------
(Print name of Employer) (Date)
I hereby request and accept membership in the Hotel Employees and Restaurant
Employees International Union, Local _______, AFL-CIO, and designate and
authorize it and any subordinate body of the International Union with which it
is affiliated, to represent me in collective bargaining in all matters relating
to my wages, hours and conditions of employment, and to negotiate and execute
agreements covering same. In making this request and in accepting membership, I
hereby agree to be bound by the Constitution, laws, rules, policies and/or
regulations of the above International Union, the local union, and Joint Board
with which the local union is affiliated, if any, and any other affiliated local
union and/or Joint Board to which I may hereafter transfer or become a member
of. You may refrain from becoming a member by still paying union dues and
initiation fees, or an amount in lieu of dues and initiation fees which
represent the Union's cost germane to representing employees. For more
information, write Department B, HEREIU, 1219 28th Street, NW, Washington, DC
20007.
* * * * * *
I hereby authorize and direct my above-mentioned employer to deduct from my
wages, each and every month, dues, initiation fees, or reinstatement fees (not
exceeding initiation fees) which I am required to pay as a condition of
maintaining membership in good standing of said union, which I assign to said
union, and I direct that same be forwarded each month to said union. This
authorization and direction shall be irrevocable for a period of one (1) year or
until the termination of the collective bargaining agreement between my employer
and said union, whichever occurs sooner, and I agree and direct that this
authorization and direction shall be automatically renewed, and shall be
irrevocable for the successive periods of one (1) year each or for the period
of each succeeding applicable collective bargaining agreement between my
employer and said union whichever shall be shorter, unless written notice is
given by me to the employer and said local not more than twenty (20) days and
not less than ten (10) days prior to the expiration of each period of one (1)
year, or the expiration of each applicable agreement between my employer and
said union, whichever occurs sooner.
If you do not wish the above to apply, but prefer to pay your dues and
initiation fees and other voluntary charges, if any, referred to above to the
office of the local union every month, initial here.
--------
*SEE IMPORTANT INFORMATION ----------------------------------------------
ON REVERSE SIDE (Signature of Employee)
- ---------------------------------- -----------------------------------------
(Telephone Number) (Address)
- ---------------------------------- -----------------------------------------
(Type of Work) (Social Security No.)
<PAGE>
EXHIBIT 12.1
JOHN Q. HAMMONS HOTELS, L.P
HISTORICAL RATIO OF EARNINGS TO FIXED CHARGES
(000's omitted)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
HISTORICAL EARNINGS:
Net income (loss) before minority interest,
provision for income taxes, extraordinary
item and cumulative effect of change in
accounting principle $18,729 $18,524 $ 8,791 $ 338 $ (973)
Add:
Interest, amortization or deferred
financing fees and other fixed charges
(excluding interest capitalized) 28,904 36,337 45,086 58,257 63,456
------- ------- ------- ------- -------
Historical earnings $47,633 $54,861 $53,877 $58,595 $62,483
======= ======= ======= ======= =======
FIXED CHARGES:
Interest expense and
amortization of deferred
financing fees $28,447 $35,620 $44,325 $57,286 $62,209
Interest capitalized 5,270 7,162 10,259 6,163 6,770
Interest element of rentals 457 717 761 971 1,247
------- ------- ------- ------- -------
Fixed charges $34,174 $43,499 $55,345 $64,420 $70,226
------- ------- ------- ------- -------
RATIO OF EARNINGS TO FIXED CHARGES
(A) 1.39 1.26 0.97 0.91 0.89
======= ======= ======= ======= =======
</TABLE>
(A) In computing the ratio of earnings to fixed charges, earnings have been
based on income from operations before income taxes and fixed charges
(exclusive of interest capitalized) and fixed charges consist of interest
and amortization of deferred financing fees (including amounts capitalized)
and the estimated interest portion of rents (deemed to be one-third of
rental expense).
37
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>This schedule contains summary financial information extracted from the
Annual Report on Form 10-K and is qualified in its entirety by reference to such
financial statements.</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 49,727
<SECURITIES> 4,982
<RECEIVABLES> 14,110
<ALLOWANCES> 226
<INVENTORY> 1,349
<CURRENT-ASSETS> 71,867
<PP&E> 1,062,888
<DEPRECIATION> 227,411
<TOTAL-ASSETS> 934,312
<CURRENT-LIABILITIES> 73,529
<BONDS> 812,274
0
0
<COMMON> 0
<OTHER-SE> 39,107
<TOTAL-LIABILITY-AND-EQUITY> 934,312
<SALES> 0
<TOTAL-REVENUES> 356,448
<CGS> 0
<TOTAL-COSTS> 131,973
<OTHER-EXPENSES> 165,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,209
<INCOME-PRETAX> (973)
<INCOME-TAX> 0
<INCOME-CONTINUING> (973)
<DISCONTINUED> 0
<EXTRAORDINARY> (194)
<CHANGES> (1,819)
<NET-INCOME> (2,986)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
