<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2000
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 or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
300 John Q. Hammons Parkway
Suite 900
Springfield, MO 65806
(Address of principal executive offices)
(Zip Code)
(417) 864-4300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days.
Yes X No _______
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED BALANCE SHEETS
(000's omitted)
ASSETS
<TABLE>
<CAPTION>
September 29, 2000 December 31, 1999
------------------ -----------------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 34,311 $ 49,727
Marketable securities 12,691 4,982
Receivables:
Trade, less allowance for doubtful accounts of $226 13,679 11,677
Construction reimbursements and other 1,607 2,370
Management fees 149 63
Inventories 1,392 1,349
Prepaid expenses and other 500 1,699
---------- ---------
Total current assets 64,329 71,867
PROPERTY AND EQUIPMENT, at cost:
Land and improvements 57,077 55,818
Buildings and improvements 736,387 683,462
Furniture, fixture and equipment 287,353 270,146
Construction in progress 9,999 53,462
---------- ---------
1,090,816 1,062,888
Less-accumulated depreciation and amortization (259,674) (227,411)
---------- ---------
831,142 835,477
DEFERRED FINANCING COSTS, FRANCHISE FEES AND OTHER, net 26,099 26,968
---------- ---------
TOTAL ASSETS $ 921,570 $ 934,312
========== =========
</TABLE>
See Notes to Consolidated Financial Statements
2
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JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED BALANCE SHEETS
(000's omitted, except share data)
LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
September 29, 2000 December 31, 1999
------------------ -----------------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES:
Current portion of long-term debt $ 14,167 $ 16,569
Accounts payable 5,315 11,877
Accrued expenses:
Payroll and related benefits 7,400 7,720
Sales and property taxes 16,706 10,368
Insurance 4,288 7,576
Interest 3,503 12,873
Utilities, franchise fees and other 7,819 6,546
-------- --------
Total current liabilities 59,198 73,529
Long-term debt 824,222 812,274
Other obligations and deferred revenue 1,975 9,402
-------- --------
Total liabilities 885,395 895,205
EQUITY:
Contributed capital 96,436 96,436
Partners' and other deficits, net (60,261) (57,329)
-------- --------
Total equity 36,175 39,107
-------- --------
TOTAL LIABILITIES AND EQUITY $921,570 $934,312
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
3
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JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 29, 2000 Oct. 1, 1999 Sept. 29, 2000 Oct. 1, 1999
-------------- ------------ -------------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Rooms $ 70,421 $ 61,132 $ 204,851 $ 174,599
Food and beverage 26,568 21,802 85,812 70,001
Meeting room rental and other 7,359 6,272 22,688 18,654
--------- --------- --------- ---------
Total revenues 104,348 89,206 313,351 263,254
OPERATING EXPENSES:
Direct operating costs and expenses
Rooms 17,914 15,829 51,278 44,386
Food and Beverage 18,567 16,321 57,546 49,428
Other 1,002 907 2,862 2,764
General, administrative and sales expenses 32,146 27,638 94,785 79,532
Repairs and maintenance 4,183 3,784 12,600 11,115
Depreciation and amortization 13,620 11,913 39,826 33,751
--------- --------- --------- ---------
Total operating costs 87,432 76,392 258,897 220,976
--------- --------- --------- ---------
INCOME FROM OPERATIONS 16,916 12,814 54,454 42,278
OTHER INCOME (EXPENSE):
Gain on property disposition - - - 2,365
Interest income 723 1,083 1,914 2,476
Interest expense and amortization of deferred
financing fees (19,338) (17,489) (57,437) (48,404)
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (1,699) (3,592) (1,069) (1,285)
Extraordinary item: Cost of extinguishment of debt - - - (19)
--------- --------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (1,699) (3,592) (1,069) (1,304)
Cumulative effect of change in accounting principle - - - (1,819)
--------- --------- --------- ---------
NET LOSS $ (1,699) $ (3,592) $ (1,069) $ (3,123)
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
4
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JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(000's omitted)
<TABLE>
<CAPTION>
CONTRIBUTED PARTNERS' AND OTHER
CAPITAL EQUITY (DEFICIT)
------------ ---------------------
General General Limited
Partner Partner Partner Total
------------ --------- ---------- ---------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1999 (audited) $ 96,436 $ (82,580) $ 25,251 $ 39,107
Distributions - (120) - (120)
Distributions to Partner to purchase treasury stock - (1,743) - (1,743)
Net Loss - (303) (766) (1,069)
-------- --------- -------- --------
BALANCE, September 29, 2000 (unaudited) $ 96,436 $ (84,746) $ 24,485 $ 36,175
======== ========= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
JOHN Q. HAMMONS HOTELS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
Nine months ended
<TABLE>
<CAPTION>
September 29, 2000 October 1, 1999
------------------ ---------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (1,069) $ (3,123)
Adjustment to reconcile net income to cash provided
by operating activities
Depreciation, amortization and loan cost amortization 41,656 34,886
Extraordinary item - 19
Cumulative effect of change in accounting principle - 1,819
Gain on sale of property and equipment - (2,365)
Changes in certain assets and liabilities
Receivables (465) 2,027
Inventories (43) 51
Prepaid expenses and other 339 760
Accounts payable (6,562) (4,869)
Accrued expenses (5,367) (1,665)
Other obligations and deferred revenue (7,427) (1,208)
-------- ---------
Net cash provided by operating activities 21,062 26,332
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment, net (35,321) (96,104)
Proceeds form disposition of hotels - 6,500
Restricted cash and receivable remaining from property
dispositions - (7,425)
Franchise fees and other (1,131) (3,028)
(Purchase) sale of marketable securities, net (7,709) (6,378)
-------- ---------
Net cash used in investing activities (44,161) (106,435)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 24,441 83,191
Repayments of debt (14,895) (17,709)
Distributions (120) (3,056)
Purchase of treasury stock (1,743) (1,713)
-------- ---------
Net cash provided by financing activities 7,683 60,713
-------- ---------
Decrease in cash and equivalents (15,416) (19,390)
CASH AND EQUIVALENTS, beginning of period 49,727 46,233
-------- ---------
CASH AND EQUIVALENTS, end of period $ 34,311 $ 26,843
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR INTEREST, net of amounts capitalized $ 64,602 $ 51,727
======== =========
</TABLE>
See Notes to consolidated Financial Statements.
<PAGE>
JOHN Q. HAMMONS HOTELS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ENTITY MATTERS
The accompanying consolidated financial statements include the accounts of John
Q. Hammons Hotels, L.P. and its wholly owned subsidiaries ("Partnership"),
consisting of John Q. Hammons Finance Corporation ("Finance Corp.") and John Q.
Hammons Hotels Finance Corporation II ("Finance Corp. II"), both corporations
with nominal assets and no operations, the catering corporations (which are
separate corporations for each hotel location chartered to own the respective
food and liquor licenses and operate the related food and beverage facilities),
and certain other wholly-owned subsidiaries conducting certain hotel operations.
In conjunction with a public offering of first mortgage notes in February 1994
(the "1994 Notes") and in November 1995 ("1995 Notes") by the Partnership and
Finance Corp. I and II, and a public offering of common stock in November 1994
("Common Stock Offering") by its general partner, John Q. Hammons Hotels, Inc.
("General Partner"), the Partnership, which owned and operated ten hotel
properties, obtained through transfers or contributions from Mr. John Q. Hammons
("Mr. Hammons") or enterprises that he controlled, 21 additional operating hotel
properties, equity interests in two hotels under construction, the stock of
catering corporations and management contracts relating to all of Mr. Hammons'
hotels.
The Partnership is directly or indirectly owned and controlled by Mr. Hammons,
as were all enterprises that transferred or contributed net assets to the
Partnership. Accordingly, the accompanying financial statements present, as a
combination of entities under common control as if using the pooling method of
accounting, the financial position and related results of operations of all
entities on a consolidated basis for all periods presented.
All significant balances and transactions between the entities and properties
have been eliminated.
Mr. Hammons and entities directly or indirectly owned or controlled by him are
the only limited partners of the Partnership. Mr. Hammons, through his voting
control of the General Partner, continues to be in control of the Partnership.
2. GENERAL
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-Q. Accordingly, certain information and footnotes
required by generally accepted accounting principles (GAAP) for complete
financial statements have been omitted. These interim statements should be read
in Conjunction with the financial statements and notes thereto included in the
Partnership's Form 10-K for the fiscal year ended December 31, 1999, which
included financial statements for the fiscal years ended December 31, 1999,
January 1, 1999, and January 2, 1998.
The information contained herein reflects all normal and recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
the results of operations and financial position for the interim periods.
The Partnership considers all operating cash accounts and money market
investments with an original maturity of three months or less to be cash
equivalents. Marketable securities consist of available-for-sale commercial
paper and governmental agency obligations which mature or will be available for
use in operations in 2000. These securities are valued at current market value,
which approximates cost.
7
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3. ALLOCATIONS OF INCOME, LOSSES AND DISTRIBUTIONS
Income, losses and distributions of the Partnership will generally be allocated
between the General Partner and the limited partners based on their respective
ownership interests of 28.31% and 71.69%.
In the event the Partnership has taxable income, distributions are to be made to
the partners in an aggregate amount equal to the amount that the Partnership
would have paid for income taxes had it been a C corporation during the
applicable period. Aggregate tax distributions will first be allocated to the
General Partner, if applicable, with the remainder allocated to the limited
partners. During the first nine months of 2000, the Partnership provided
approximately $1.7 million in distributions to John Q. Hammons Hotels, Inc., for
the purchase of treasury stock.
4. NEW ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants released
Statement of Position (SOP) 98-5 "Reporting on the Costs of Start-Up
Activities." The SOP requires costs of start-up activities, including preopening
expenses, to be expensed as incurred. The Partnership's past practice was to
defer these expenses until a hotel commenced operations, at which time the
costs, other than advertising costs that are 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 $1.8 million were charged to expense.
In June 1998, the Financial Accounting Standards Board 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. In
June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133"
("SFAS 137"). SFAS 137 amends SFAS 133's effective date. SFAS 137 states the
statement is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. Upon adoption of this statement, the Company anticipates no
impact on its reported consolidated financial position, results of operations,
cash flows or related disclosures.
5. PROPERTY DISPOSITION
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. The Partnership provided replacement collateral of equivalent
value in accordance with the indenture provisions.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General. For purposes of this discussion, the Partnership classifies new hotels
(New Hotels) as those hotels opened during the current year and the prior year,
and defines all other hotels as mature hotels (Mature Hotels).
8
<PAGE>
The Partnership announced on September 11, 1998, that it was ceasing new
development activity except for the hotels under construction. The Partnership
opened the last two hotels under construction in the first quarter of 2000, and
currently has no hotels under constructions.
The Partnership's past development activity limits its ability to grow net
income. Fixed charges for New Hotels (such as depreciation and amortization
expense and interest expense) exceed New Hotel operating cash flow in the first
one to three years of operations. As New Hotels mature, the Partnership
believes, 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 occur.
Results of Operations - Three-Month Period
The following discussion and analysis addresses results of operations for the
three-month periods ended September 29, 2000 (the "2000 Quarter") and October 1,
1999 (the "1999 Quarter").
For the 2000 Quarter, the Partnership's total earnings before interest expense,
taxes, depreciation and amortization (EBITDA) were $30.5 million, an increase of
23.5% compared to the 1999 Quarter EBITDA of $24.7 million. The Mature Hotels'
EBITDA was $24.2 million in the 2000 Quarter, up 7.1% from $22.6 million in the
1999 Quarter primarily due to four hotels moving to the Mature Hotels category
from the New Hotels category. Those four hotels, Portland Embassy Suites, St.
Augustine World Golf Village, Tampa Embassy Suites, and Topeka Capitol Plaza,
provided $1.2 million of EBITDA in the 2000 Quarter. As a percentage of total
revenues, EBITDA related to the Mature Hotels (excluding the hotels sold)
decreased to 27.2% in the 2000 Quarter from 29.1% in the 1999 Quarter due
primarily to the operating results of World Golf Village. The New Hotels' EBITDA
for the 2000 Quarter was $3.0 million compared to $(0.7) million in the 1999
Quarter. This increase was due primarily to the strong performance of the New
Hotels, especially the Embassy Suites at Dallas-Fort Worth Airport.
Total revenues for the 2000 Quarter were $104.3 million, an increase of $15.1
million, or 17.0%, compared to the 1999 Quarter, primarily as a result of the
continued growth of the New Hotels, including the hotels opened late in 1999 and
early 2000. The Partnership's Mature Hotels generated total revenues of $89.2
million in the 2000 Quarter, an increase of $11.7 million, or 15.1% compared to
the 1999 Quarter. The Partnership's New Hotels generated total revenues of $14.4
million during the 2000 Quarter compared to $10.9 million in the 1999 Quarter.
There are six New Hotels in the 2000 Quarter, compared to seven New Hotels in
the 1999 Quarter.
Rooms revenues increased $9.3 million, or 15.2%, from the 1999 Quarter, but
decreased slightly as a percentage of total revenues, to 67.5% from 68.5%. The
dollar increase was primarily due to increased rooms revenues from the New
Hotels, and an accompanying increase in the Partnership's average room rate to
$98.30, a 3.9% increase compared to the 1999 Quarter average room rate of
$94.64. In comparison, the average room rate for the hotel industry was $85.40
in the 2000 Quarter, up 5.4% from the 1999 Quarter. The increased average room
rate was supplemented by a 1.3 percentage point increase in the Partnership's
occupancy for the 2000 Quarter to 67.7%. Occupancy for the hotel industry was
69.7%, up 0.3 percentage points from the 1999 Quarter. The Partnership's Revenue
Per Available Room (RevPAR) was $66.52 in the 2000 Quarter, up 5.8% from $62.86
in the 1999 Quarter. RevPAR for the hotel industry was $59.53, up 5.7% from the
1999 Quarter.
Food and beverage revenues increased $4.8 million, or 21.9%, compared to the
1999
9
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Quarter. Sales at the New Hotels with full food and beverage services along with
menu pricing adjustments accounted for substantially all of the increase in food
and beverage revenues.
Meeting room rental and other revenues increased $1.1 million, or 17.3%, from
the 1999 Quarter, and increased slightly as a percentage of revenues, to 7.1%
from 7.0%. The majority of the dollar increase was a result of revenues from the
New Hotels as well as increased meeting and convention business in some of the
Mature Hotels.
Rooms operating expenses increased $2.1 million, or 13.2%, compared to the 1999
Quarter, but decreased slightly as a percentage of rooms revenues to 25.4% from
25.9%. The dollar increase related primarily to expenses for New Hotels. For the
Mature Hotels, excluding the one hotel sold in 1999, rooms operating expenses as
a percentage of rooms revenues were 25.1% in the 2000 Quarter, compared to 23.9%
in the 1999 Quarter.
Food and beverage operating expenses increased $2.2 million, or 13.8%, compared
to the 1999 Quarter, but decreased as a percentage of food and beverage
revenues, to 69.9% from 74.9%. The dollar increase was attributable to expenses
associated with food and beverage revenues at the New Hotels. Profit margins
improved due to reductions in both food costs and labor costs, as a percentage
of food and beverage revenues.
Other operating expenses increased by 10.5%, compared to the 1999 Quarter, but
decreased as a percentage of meeting room rental and other revenues, to 13.6%
from 14.5%.
General, administrative and sales expenses increased $4.5 million, or 16.3%,
over the 1999 Quarter, but decreased slightly as a percentage of revenues to
30.8% from 31.0%. The dollar increase was primarily attributable to the greater
number of hotels in the 2000 Quarter.
Repairs and maintenance expenses increased $0.4 million, or 10.5%, compared to
the 1999 Quarter, but decreased slightly as a percentage of revenues, to 4.0%
from 4.2% in the 1999 Quarter. The dollar increase related to the net increase
in number of hotels and rooms in 2000 compared to 1999.
Depreciation and amortization expenses increased $1.7 million, or 14.3%,
compared to the 1999 Quarter, but decreased slightly as a percentage of revenues
to 13.1% from 13.4%. The dollar increase related to the hotels opened in late
1999 and early 2000.
Income from operations increased $4.1 million, or 32.0%, compared to the 1999
Quarter. Expenses, particularly direct operating expenses, increased less
rapidly than revenues, and the Partnership began to realize increased benefits
from the maturing hotels.
Other expense, net increased $2.2 million, or 13.5%, from the 1999 Quarter, as
the result of increased net interest expense related to the New Hotels.
Loss before extraordinary item and cumulative effect of change in accounting
principle was $1.7 million in the 2000 Quarter, compared to $3.6 million in the
1999 Quarter.
10
<PAGE>
Results of Operations - Nine-Month Period
The following discussion addresses results of operations for the nine-month
periods ended September 29, 2000 (the "2000 Nine Months") and October 1, 1999
(the "1999 Nine Months").
For the 2000 Nine Months, the Partnership's total EBITDA was $94.3 million, a
24.0% increase compared to the 1999 Nine Months EBITDA of $76.0 million. The
Mature Hotels' EBITDA was $76.0 million in the 2000 Nine Months, up $8.9 million
from the 1999 Nine Months, primarily due to four hotels moving to the Mature
Hotels category from the New Hotels category. These four hotels that were
included in New Hotels in 1999 and in Mature Hotels in 2000 provided $5.4
million of EBITDA in the 2000 Nine Months.
Total revenues increased to $313.4 million in the 2000 Nine Months from $263.3
million in the 1999 Nine Months, an increase of $50.1 million or 19.0%. The
increase is primarily attributed to the continued growth of both New Hotels and
Mature Hotels.
Rooms revenues increased to $204.9 million in the 2000 Nine Months from $174.6
million in the 1999 Nine Months, an increase of $30.3 million or 17.3% as a
result of increases in average room rates and total number of available rooms.
Rooms revenues as a percentage of total revenues decreased slightly, to 65.4%,
compared to 66.3% in the 1999 Nine Months. The Partnership's average room rate
increased to $98.36 in the 2000 Nine Months from $94.93 in the 1999 Nine Months,
an increase of $3.43 or 3.6%. Occupancy increased to 66.0% in the 2000 Nine
Months from 64.1% in the 1999 Nine Months, an increase of 1.9 percentage points.
Food and beverage revenues increased to $85.8 million in the 2000 Nine Months
from $70.0 million in the 1999 Nine Months, an increase of $15.8 million or
22.6%, and increased as a percentage of total revenues to 27.4% from 26.6% in
the 1999 Nine Months. The increase was attributable primarily to sales at the
New Hotels and menu pricing adjustments.
Meeting room rental and other revenues increased to $22.7 million in the 2000
Nine Months from $18.7 million in the 1999 Nine Months, an increase of $4.0
million or 21.6%. Meeting room rental and other revenues also increased slightly
as a percentage of total revenues to 7.2% from 7.1% in the 1999 Nine Months. The
majority of the increase was the result of revenues from the New Hotels.
Rooms operating expenses increased to $51.3 million in the 2000 Nine Months from
$44.4 million in the 1999 Nine Months, an increase of $6.9 million or 15.5%, but
decreased slightly as a percentage of rooms revenue to 25.0% from 25.4% in the
1999 Nine Months. The dollar increase related to the additional hotels opened in
late 1999 and early 2000.
Food and beverage operating expenses increased to $57.5 million in the 2000 Nine
Months from $49.4 million in the 1999 Nine Months, an increase of $8.1 million
or 16.4%. These expenses decreased as a percentage of food and beverage revenues
in the 2000 Nine Months to 67.1%, from 70.6% in the 1999 Nine Months. Profit
margins improved due to reductions in both food costs and labor costs, as a
percentage of food and beverage revenues.
Other operating expenses increased to $2.9 million in the 2000 Nine Months, a
3.5% increase, but declined as a percentage of meeting room rental and other
income, to 12.6% in the 2000 Nine Months from 14.8% in the 1999 Nine Months.
11
<PAGE>
General, administrative and sales expenses increased to $94.8 million in the
2000 Nine Months from $79.5 million in the 1999 Nine Months, an increase of
$15.3 million or 19.2%, and remained stable as a percentage of total revenues at
30.2%. The dollar increase in these expenses was primarily the result of a
greater number of hotels in the 2000 Nine Month period.
Repairs and maintenance expenses increased to $12.6 million in the 2000 Nine
Months from $11.1 million in the 1999 Nine Months, an increase of $1.5 million
or 13.4%, but decreased as a percentage of total revenues, to 4.0% from 4.2%.
The increase was a result of the increase in the total number of hotels open and
rooms available.
Depreciation and amortization expenses increased to $39.8 million in the 2000
Nine Months from $33.8 million in the 1999 Nine Months, an increase of $6.0
million or 18.0%, but decreased slightly as a percentage of total revenues to
12.7% from 12.8% in the 1999 Nine Months. The dollar increase related to the
hotels opened in late 1999 and early 2000.
Income from operations was $54.5 million in the 2000 Nine Months compared to
$42.3 million in the 1999 Nine Months, an increase of $12.2 million or 28.8%. As
a percentage of revenue, income from operations increased to 17.4% in the 2000
Nine Months compared to 16.1% in the 1999 Nine Months. The increase was due to
increased revenues coupled with controls of operating expenses.
Other expense, net increased to $55.5 million in the 2000 Nine Months from $43.6
million in the 1999 Nine Months, an increase of $11.9 million or 27.5%. As a
percentage of total revenues, other expense, net, increased to 17.7% from 16.6%
in the 1999 Nine Months. The increase reflected a $2.4 million gain on property
disposition in the 1999 Nine Months, and increased net interest expense in the
2000 Nine Months related to the New Hotels.
Loss before extraordinary item and cumulative effect of change in accounting
principle was $1.1 million in the 2000 Nine Months, compared to $1.3 million in
the 1999 Nine Months. The 1999 results included a $2.4 million gain on the sale
of a hotel in June 1999.
Liquidity and Capital Resources
In general, the Partnership has financed its operations through internal cash
flow, loans from financial institutions, the issuance of public debt and equity,
and the issuance of industrial revenue bonds. The Partnership's principal uses
of cash are to pay operating expenses, to service debt, to fund capital
expenditures, and to make Partnership distributions to fund some of the taxes
allocable to the partners.
At September 29, 2000, the Partnership had $34.3 million of cash and equivalents
and $12.7 million of marketable securities, compared to $49.7 million and $5.0
million, respectively, at the end of 1999. These amounts are available for
working capital requirements of the Partnership.
Net cash provided by operating activities was $20.9 million for the 2000 Nine
Months compared to $26.5 million for the 1999 Nine Months. The decrease is
primarily attributable to the reduction of other obligations, predominantly
construction-related payables and the buy-out of several years of self-insurance
reserves.
12
<PAGE>
At September 29, 2000, total debt was $838.4 million compared with $828.8
million at the end of 1999. The increase is attributable to newly-opened
hotels. The current portion of long-term debt was $14.2 million, compared to
$16.6 million at the end of 1999. The Partnership incurred net capital
expenditures of approximately $35.3 million during the 2000 Nine Months and
$96.4 million during the 1999 Nine Months. Of the $35.3 million incurred during
the 2000 Nine Months, approximately $17.0 million was for capital improvements
on existing hotel properties, and approximately $18.3 million was for
development of new hotels. During the remainder of 2000, the Partnership
expects capital expenditures to total approximately $3.0 million.
As of September 29, 2000, the Partnership had no hotels under construction,
while at October 1, 1999, the Partnership had three hotels under construction.
Based upon current plans relating to capital expenditures, the Partnership
anticipates that its capital resources will be adequate to satisfy its 2000
capital requirements for the currently planned projects and normal recurring
capital improvement.
Forward-Looking Statements
NOTE: In addition to historical information, this document contains certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements typically, but not exclusively,
are identified by the inclusion of phrases such as "the Partnership believes,"
"the Partnership plans," "the Partnership 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, or revenues at New Hotels not reaching expected levels as
quickly as planned as the result of competitive factors.
Supplemental Financial Information Relating to the 1994 and 1995 Collateral
Hotels
The following tables set forth, as of September 29, 2000, and 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
Partnership, excluding Unrestricted Subsidiaries (as defined in the indentures
relating to the 1994 Notes and the 1995 Notes) (the "Restricted Group"). Under
the heading "Management Operations," information with respect to revenues and
expenses generated by the Partnership as manager of the 1994 Collateral Hotels,
the 1995 Collateral Hotels, the other Owned Hotels owned by John Q. Hammons
Hotels Two, L.P. ("L.P. Two"), and the Managed Hotels is provided.
<TABLE>
<CAPTION>
Trailing 12 Months Ended September 29, 2000
1994 1995 Management Total
Collateral Collateral Operations Restricted
Hotels Hotels Group Group
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(Dollars in thousands, except operating data)
Statement of Operations Data:
Operating Revenues $150,534 $54,086 $10,221(a) $214,841
Operating Expenses:
Direct operating costs and expenses 53,127 19,818 -- 72,945
General, administrative, sales
and management expenses(b) 42,698 17,788 (291)(c) 60,195
Repairs and maintenance 6,006 2,586 -- 8,592
Depreciation and amortization 13,435 5,550 384 19,369
-------- ------- ------- --------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Total operating expenses 115,266 45,742 93 161,101
-------- ------- ------- --------
Income from operations: $ 35,268 $ 8,344 $10,128 $ 53,740
======== ======= ======= ========
Operating Data:
Occupancy 68.0% 62.9%
Average daily room rate $ 92.04 $ 79.13
RevPAR $ 62.59 $ 49.77
</TABLE>
<TABLE>
<CAPTION>
Trailing 12 Months Ended December 31, 1999
1994 1995 Management Total
Collateral Collateral Operations Restricted
Hotels Hotels Group Group
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(Dollars in thousands, except operating data)
Statement of Operations Data:
Operating Revenues $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
Management 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 expenses 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 $ 80.31
RevPAR $ 61.74 $ 49.03
</TABLE>
(a) Represents management revenues derived from the Owned Hotels owned by L.P.
Two and the Managed Hotels.
(b) General administrative, sales and management expenses for the 1994 and 1995
Collateral Hotels includes management expenses allocated to the respective
hotels.
(c) General, administrative, sales and management expenses applicable to
management operations is net of management revenues allocated to the 1994
and 1995 Collateral Hotels.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Partnership 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 Partnership are comprised of long-term fixed
and variable rate debt obligations utilized to fund business operations and
maintain liquidity. The following table presents the principal cash repayments
and related weighted average interest rates by maturity date for the
Partnership's long-term fixed and variable rate debt obligations as of September
29, 2000:
<TABLE>
<CAPTION>
Expected Maturity Date
(in millions)
Fair
There- Value
2000(d) 2001 2002 2003 2004 After Total (e)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Debt (a)
$300 Million 1st Mortgage
Notes $ - $ - $ - $ - $ 300 $ - $ 300 $ 313
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average interest rate (b) 8.9% 8.9% 8.9% 8.9% 8.9% 8.9% 8.9%
$90 Million 1st 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 $ 13 $ 7 $ 32 $ 38 $ 6 $ 219 $ 315 $ 315
Average interest rate (b) 8.2% 8.4% 8.7% 8.1% 8.4% 8.6% 8.5%
Other variable-rate debt
obligations $ 1 $ 48 $ 1 $ 17 $ 29 $ 37 $ 133 $ 133
Average interest rate (c) 9.3% 9.3% 9.3% 9.3% 9.3% 9.3% 9.3%
</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 September 29, 2000, that is maturing in
the year reported. The weighted average interest rate excludes the effect
of the amortization of deferred financing costs.
(d) The 2000 balances include actual and projected principal repayments and
weighted average interest rates for the year.
(e) The fair values of long-term debt obligations approximate their respective
historical carrying amounts except with respect to the $300 million 1st
Mortgage Notes and the $90 million 1st Mortgage Notes. The fair value of
the first mortgage note issues is estimated by obtaining quotes from
brokers.
PART II. OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Securities Holders.
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
15
<PAGE>
(a) Exhibits
See Exhibit Index incorporated by reference
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by the
undersigned thereto duly authorized.
JOHN Q. HAMMONS HOTELS, L.P.
By: John Q. Hammons Hotels, Inc.
its General Partner
By: /s/ John Q. Hammons
-------------------
John Q. Hammons, Chairman,
Founder, and Chief Executive Officer
By: /s/ Paul E. Muellner
--------------------
Paul E. Muellner, Vice President,
Corporate Controller (Principal
Financial Officer)
JOHN Q. HAMMONS HOTELS FINANCE CORPORATION
By: /s/ John Q. Hammons
-------------------
John Q. Hammons, Chairman,
Founder, and Chief Executive Officer
By: /s/ Paul E. Muellner
--------------------
Paul E. Muellner, Vice President, Corporate
Controller (Principal Financial Officer)
JOHN Q. HAMMONS HOTELS FINANCE CORPORATION II
By: /s/ John Q. Hammons
-------------------
John Q. Hammons, Chairman,
Founder, and Chief Executive Officer
By: /s/ Paul E. Muellner
--------------------
Paul E. Muellner, Vice President, Corporate
Controller (Principal Financial Officer)
Dated: November 10, 2000
17
<PAGE>
Exhibit Index
-------------
27 Financial Data Schedule
