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 June 28, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ______________ to_________________
Commission file number 033-73340-01
John Q. Hammons Hotels, Inc.
(Exact name of registrants as specified in their charters)
Delaware 43-1695093
(State or other jurisdiction of incorporation (IRS Employer
or organization) (Identification Nos.)
300 John Q. Hammons Parkway
Suite 900
Springfield, MO 65806
(Address of principal executive offices)
(417) 864-4300
(Registrants' telephone number, including area code)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrants were required to file such reports, and (2) have been
subject to such filing requirements for the past 90 days.
Registrants have been required to file reports since November 23, 1994.
Yes __X__ No ______
JOHN Q. HAMMONS HOTELS, INC.
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Consolidated Balance Sheets at June 28, 1996 (unaudited)
and December 29, 1995 (audited) ............................ 3
Consolidated Statements of Income for the three and six months
ended June 28, 1996 (unaudited) and June 30, 1995 (unaudited)... 5
Consolidated Statements of Changes in Minority Interest
and Stockholder Equity for the period December 29, 1995
to June 28, 1996 (unaudited) .................................... 6
Consolidated Statements of Cash Flows for the six months ended
June 28, 1996 (unaudited) and June 30, 1995 (unaudited)......... 7
Notes to Consolidated Financial Statements ..................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................... 9
PART II. OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings............................................ 16
Item 6. Reports on Form 8-K.......................................... 16
Signatures ............................................. 17
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONSOLIDATED BALANCE SHEETS
(000's omitted)
<TABLE>
<CAPTION>
June 28, 1996 December 29, 1995
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 37,999 $ 41,777
Marketable securities 21,039 26,574
Receivables -
Trade, less allowance for doubtful
accounts of $157 5,731 4,852
Construction reimbursements and
management fees 98 2,762
Inventories 994 1,110
Prepaid expenses and other 524 1,124
----------- ----------
Total current assets 66,385 78,199
----------- ----------
PROPERTY AND EQUIPMENT, at cost
Land and improvements 28,009 27,974
Buildings and improvements 403,211 399,746
Furniture, fixtures and equipment 157,044 149,535
Construction in progress 67,045 27,395
---------- ---------
655,309 604,650
Less-accumulated depreciation
and amortization (180,094) (169,811)
---------- ---------
475,215 434,839
---------- ---------
DEFERRED FINANCING COSTS,
FRANCHISE FEES AND OTHER, net 28,251 29,333
--------- ---------
$569,851 $542,371
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONSOLIDATED BALANCE SHEETS
(000's omitted)
LIABILITIES AND EQUITY
[CAPTION]
<TABLE>
June 28, 1996 December 29, 1995
(Unaudited) (Audited)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 10,371 $ 7,981
Accounts payable 10,788 8,382
Accrued expenses:
Payroll and related benefits 3,542 3,800
Sales and property taxes 7,030 7,012
Insurance 9,174 8,446
Interest 12,119 12,171
Utilities, franchise fees, and other 5,524 4,849
---------- -----------
Total current liabilities 58,548 52,641
LONG-TERM DEBT 465,655 450,113
DEFERRED REVENUE AND OTHER 5,271 5,579
DEFERRED INCOME TAXES 1 1
---------- ---------
Total liabilities 529,475 508,334
---------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST OF HOLDERS OF
LIMITED PARTNER UNITS 27,184 23,082
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
2,000,000 shares authorized,
none outstanding -- --
Class A common stock, $.01 par value,
40,000,000 shares authorized,
6,042,000 shares issued and outstanding 60 60
Class B common stock, $.01 par value,
1,000,000 shares authorized,
294,100 shares issued and outstanding 3 3
Paid-in capital 96,373 96,373
Retained deficit, net (83,244) (85,481)
---------- ---------
Total equity 13,192 10,955
---------- ---------
$569,851 $542,371
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(000's omitted)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 28,1996 June 30, 1995 June 28,1996 June 30, 1995
REVENUES : (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Rooms $44,126 $38,005 $84,357 $72,655
Food and beverage 19,435 16,648 39,196 32,953
Meeting room rental and other 4,782 3,646 9,410 7,334
--------- --------- --------- ---------
Total revenues 68,343 58,299 132,963 112,942
--------- --------- --------- ---------
OPERATING EXPENSES :
Direct operating costs and expenses
Rooms 10,826 9,521 21,120 18,302
Food and beverage 14,448 13,107 28,751 25,459
Other 734 593 1,450 1,155
General, administrative
and sales expenses 18,428 15,432 37,792 30,807
Repairs and maintenance 3,036 2,530 5,636 4,787
Depreciation and amortization 6,025 3,672 11,946 7,094
--------- --------- --------- ----------
Total operating expenses 53,497 44,855 106,695 87,604
--------- --------- --------- ----------
INCOME FROM OPERATIONS 14,846 13,444 26,268 25,338
OTHER INCOME (EXPENSE) :
Interest income 526 1,226 1,220 2,602
Interest expense and amortization
of deferred financing fees (9,470) (7,591) (19,429) (15,448)
--------- ---------- --------- --------
INCOME BEFORE MINORITY INTEREST AND PROVISION
FOR INCOME TAXES 5,902 7,079 8,059 12,492
Minority interest in earnings
of partnership (4,231) (5,075) (5,777) (8,956)
-------- ---------- ---------- ---------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,671 2,004 2,282 3,536
Provision for income taxes (33) (40) (45) (70)
-------- ---------- --------- ---------
NET INCOME $1,638 $1,964 $2,237 $3,466
======== ========= ======== ========
UNAUDITED EARNINGS PER SHARE
Per share net income allocable
to the Company $0.26 $0.31 $0.35 $0.55
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN MINORITY INTEREST
AND STOCKHOLDERS EQUITY
(000's omitted)
Stockholders' Equity
<TABLE>
<CAPTION>
-----------------------------------------------
Class A Class B
Minority Common Common Paid-In Company
Interest Stock Stock Capital Retained
Deficit Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, $23,082 $60 $3 $96,373 ($85,481) $10,955
December 29, 1995
(Audited)
Distribution for
income taxes (1,675) -- -- -- -- --
Net income allocable
to the Company -- -- -- -- 2,237 2,237
Minority interest
in earnings of
partnership 5,777 -- -- -- -- --
BALANCE ---------- ------ ------ -------- -------- ---------
June 28, 1996
(Unaudited) $27,184 $60 $3 $96,373 ($83,244) $13,192
========= ====== ===== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
JOHN Q. HAMMONS HOTELS, INC
AND COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(000's omitted)
<TABLE>
<CAPTION>
Six Months Ended
June 28,1996 June 30, 1995
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 2,237 $ 3,466
Adjustments to reconcile net income
to cash provided by operating
activities-
Depreciation, amortization, and
loan cost amortization 12,861 7,776
Minority interest in earnings of the
partnership 5,777 8,956
Changes in certain assets and liabilities-
Receivables 1,785 (313)
Inventories 116 79
Prepaid expenses and other 600 536
Accounts payable 2,406 (1,386)
Accrued expenses 1,111 956
Other obligations and
deferred revenue (308) (652)
---------- --------
Net cash provided by operating
activities 26,585 19,418
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment, net (50,659) (56,838)
Buyout of minority interest -- (1,200)
Franchise fees and other (1,496) 2,081
Sale of marketable securities, net 5,535 34,095
-------- --------
Net cash used in investing activities (46,620) (21,862)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 19,000 9,162
Payments of notes payable to affiliates -- (547)
Repayments of debt (1,068) (1,831)
Distributions (1,675) (3,157)
--------- --------
Net cash provided by financing
activities 16,257 3,627
--------- --------
Increase (decrease) in cash and equivalents (3,778) 1,183
CASH AND EQUIVALENTS, beginning of period 41,777 9,712
--------- --------
CASH AND EQUIVALENTS, end of period $37,999 $10,895
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR INTEREST,
net of amounts capitalized $18,567 $16,534
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
JOHN Q. HAMMONS HOTELS, INC. AND COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. ENTITY MATTERS
The accompanying consolidated financial statements include the
accounts of John Q. Hammons Hotels, Inc. and John Q. Hammons
Hotels, L.P. and subsidiaries. (Collectively the Company or, as the
context may require John Q. Hammons Hotels, Inc. only.)
The Company was formed in September 1994 and had no operations
or assets prior to its initial public offering of 6,042,000 shares of Class
A common stock at $16.50 per share consummated on November 23,
1994. Immediately prior to the initial public offering, Mr. John Q.
Hammons (JQH) contributed approximately $5 million in cash to the
Company in exchange for 294,100 shares of Class B common stock
(which represents approximately 72% of the voting control of the
Company). The Company contributed the approximate $96 million of
net proceeds from the Class A and Class B common stock offerings to
John Q. Hammons Hotels, L.P. (the "Partnership") in exchange for a
28.31% general partnership interest.
All significant balances and transactions between the entities and
properties have been eliminated.
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 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 Company's
Form 10-K for the year ended December 29, 1995 which included
financial statements for the years ended December 29, 1995 and
December 30, 1994.
The information contained herein reflects all normal and recurring
adjustments which, in the opinion of management, are necessary for a
fair presentation of the results of operations and financial position for
the interim periods.
The Company 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 government agency obligations which
mature or will be available for use in operations in 1996. These
securities are valued at current market value, which approximates cost.
The provision for income taxes was determined using an effective
income tax rate of 2%. The lower effective tax rate is due to special
allocations of tax depreciation to the Company in excess of its
proportionate share of the depreciation related to the book value of the
Partnership's net assets.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis addresses result of operations
for the three and six months ended June 28, 1996 and June 30, 1995.
Total revenues increased to $68.3 million in the 1996 Three Months
from $58.3 million in the 1995 Three Months, an increase of $10 million
or 17.2%. Of the total revenues reported in the 1996 Three Months,
64.6% were revenues from rooms, 28.4% were revenues from food and
beverage, and 7.0% were revenues from meeting room rental and
other, compared with 65.2%, 28.6%, and 6.2% respectively during the
1995 Three Months.
Rooms revenues increased to $44.1 million in the 1996 Three Months
from $38.0 million in the 1995 Three Months, an increase of $6.1
million or 16.1% because of increases in average room rates and total
number of available rooms. Average room rates of Mature Hotels
(open more than one year) increased to $74.65 in the 1996 Three
Months from $71.13 in the 1995 Three Months, an increase of $3.52 or
5.0%. Occupancy of Mature Hotels decreased to 69.5% in the 1996
Three Months from 72.8% in the 1995 Three Months, a decrease of 3.3
percentage points. The lower occupancy was primarily due to the
increased number of limited service rooms opening in the immediate
market of some Partnership hotels and the non-recurrence of certain
large group reservations in the second quarter compared to the prior
year second quarter.
Food and beverage revenues increased to $19.4 million in the 1996
Three Months from $16.6 million in the 1995 Three Months, an
increase of $2.8 million or 16.7%. The increase in revenues was
attributable to the opening of additional full service hotels, opening of
new restaurant concepts in the existing hotels, and menu pricing
adjustments.
Meeting room rental and other revenues increased to $4.8 million in the
1996 Three Months from $3.6 million in the 1995 Three Months, an
increase of $1.2 million or 31.2%.
Rooms operating expenses increased to $10.8 million in the 1996
Three Months from $9.5 million in the 1995 Three Months, an increase
of $1.3 million or 13.7%. This expense represented 24.5% of rooms
revenues in the 1996 Three Month period and 25.1% in the 1995 Three
Month period.
Food and beverage operating expenses increased to $14.4 million in
the 1996 Three Months from $13.1 million in the 1995 Three Months,
an increase of $1.3 million or 10.2%.
Other operating expenses increased to $0.7 million in the 1996 Three
Months from $0.6 million in the 1995 Three Months, an increase of $0.1
million or 23.8%.
General, administrative and sales expenses increased to $18.4 million
in the 1996 Three Months from $15.4 million in the 1995 Three Months,
an increase of $3.0 million or 19.4%. The increased expenses were a
result of expenses incurred during the 1996 Three Months associated
with the opening of 16% more rooms during the last half of 1995.
Repairs and maintenance expenses increased to $3.0 million in the
1996 Three Months from $2.5 million in the 1995 Three Months, an
increase of $0.5 million or 20.0%. The increase was a result of the
Company's increased number of hotels open.
Depreciation and amortization expenses increased to $6.0 million in the
1996 Three Months from $3.7 million in the 1995 Three Months, an
increase of $2.3 million or 64.1%. These expenses represented 8.8%
of total revenues in the 1996 Three Months and 6.3% of total revenues
in the 1995 Three Months.
Income from Operations increased to $14.8 million in the 1996 Three
Months from $13.4 million in the 1995 Three Months, an increase of
$1.4 million or 10.4%. The increase was due primarily to the higher
amount of total revenue offset in part by higher depreciation from new
hotels open during the 1996 quarter.
Interest income decreased to $0.5 million in the 1996 Three Months
from $1.2 million in the 1995 Three Months, a decrease of $0.7 million
or 57.1%. The decrease was attributable to lower balances in cash
and equivalents and in marketable securities because of amounts
spent for new construction.
Interest expense and amortization of deferred financing fees increased
to $9.5 million in the 1996 Three Months from $7.6 million in the 1995
Three Months, an increase of $1.9 million or 24.8%. As a percentage
of total revenues, this expense increased to 13.9% in the 1996 Three
Months from 13.0% in the 1995 Three Months.
Income before minority interest and provision for income taxes
decreased to $5.9 million in the 1996 Three Months from $7.1 million in
the 1995 Three Months, a decrease of $1.2 million or 16.6%. As a
percentage of total revenues, it decreased to 8.6% in the 1996 Three
Months from 12.1% in the 1995 Three Months. The decrease was due
primarily to an increase in depreciation and interest expense
associated with the opening of six hotels in 1995 that have not reached
normal occupancy levels.
Total revenues increased to $133.0 million in the 1996 Six Months from
$112.9 million in the 1995 Six Months, an increase of $20.1 million or
17.7%. Of the total revenues reported in the 1996 Six Months, 63.4%
were revenues from rooms, 29.5% were revenues from food and
beverage, and 7.1% were revenues from meeting room rental and
other, compared with 64.3%, 29.2%, and 6.5% respectively during the
1995 Three Months.
Rooms revenues increased to $84.4 million in the 1996 Six Months
from $72.7 million in the 1995 Six Months, an increase of $11.7 million
or 16.1% as a result of increases in average room rates and total
number of available rooms. Average room rates of Mature Hotels
increased to $74.45 in the 1996 Six Months from $70.99 in the 1995
Six Months, an increase of $3.46 or 4.9%. Occupancy of Mature Hotels
decreased to 67.3% in the 1996 Six Months from 69.8% in the 1995 Six
Months, a decrease of 2.5 percentage points. The lower occupancy
was primarily due to bad weather at some hotels during the first quarter
and the increased number of limited service hotels opening in the
immediate market area of some partnership hotels.
Food and beverage revenues increased to $39.2 million in the 1996 Six
Months from $33.0 million in the 1995 Six Months, an increase of $6.2
million or 18.9%. The increase in revenues was attributable to the
opening of additional full service hotels, opening of new restaurant
concepts in the existing hotels, and menu pricing adjustments.
Meeting room rental and other revenues increased to $9.4 million in the
1996 Six Months from $7.3 million in the 1995 Six Months, an increase
of $2.1 million or 28.3%.
Rooms operating expenses increased to $21.1 million in the 1996 Six
Months from $18.3 million in the 1995 Six Months, an increase of $2.8
million or 15.4%. This expense represented 25.0% of rooms revenues
in the 1996 Six Month period and 25.2% in the 1995 Six Month period.
Food and beverage operating expenses increased to $28.8 million in
the 1996 Six Months from $25.5 million in the 1995 Six Months, an
increase of $3.3 million or 12.9%.
Other operating expenses increased to $1.5 million in the 1996 Six
Months from $1.2 million in the 1995 Six Months, an increase of $0.3
million or 25.5%.
General, administrative and sales expenses increased to $37.8 million
in the 1996 Six Months from $30.8 million in the 1995 Six Months, an
increase of $7.0 million or 22.7%. The increased expenses were a
result of expenses incurred during the 1996 Six Months associated with
the opening of 16% more rooms during the last half of 1995.
Repairs and maintenance expenses increased to $5.6 million in the
1996 Six Months from $4.8 million in the 1995 Six Months, an increase
of $0.8 million or 17.7%. The increase was a result of the Company's
increased number of hotels open.
Depreciation and amortization expenses increased to $11.9 million in
the 1996 Six Months from $7.1 million in the 1995 Six Months, an
increase of $4.8 million or 68.4%. These expenses represented 9.0%
of total revenues in the 1996 first half and 6.3% of total revenues in the
first half of 1995.
Income from Operations increased to $26.3 million in the 1996 Six
Months from $25.3 million in the 1995 Six Months, an increase of $1.0
million or 3.7%. The increase was due primarily to the higher amount
of total revenue offset in part by higher depreciation from new hotels
open during the 1996 half.
Interest income decreased to $1.2 million in the 1996 Six Months from
$2.6 million in the 1995 Six Months, a decrease of $1.4 million or
53.1%. The decrease was attributable to lower balances in cash and
equivalents and in marketable securities as a result of amounts spent
for new construction.
Interest expense and amortization of deferred financing fees increased
to $19.4 million in the 1996 Six Months from $15.4 million in the 1995
Six Months, an increase of $4.0 million or 25.8%. As a percentage of
total revenues, this expense increased to 14.6% in the 1996 Six
Months from 13.7% in the 1995 Six Months.
Income before minority interest and provision for income taxes
decreased to $8.1 million in the 1996 Six Months from $12.5 million in
the 1995 Six Months, a decrease of $4.4 million or 35.5%. As a
percentage of total revenues, it decreased to 6.1% in the 1996 Six
Months from 11.1% in the 1995 Six Months. The decrease was due
primarily to an increase in depreciation and interest expense
associated with the opening of six hotels in 1995 that have not reached
normal occupancy levels.
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 revenue bonds. The
Company in the future may obtain mortgage financing secured by
unencumbered hotels and construction in progress to provide
additional liquidity, if necessary. The Company's principal uses of cash
are to pay operating expenses, to service debt, to fund capital
expenditures, to fund new hotel development and to make partnership
distributions.
At June 28, 1996 the Company had $38.0 million of cash and
equivalents and also had $21.0 million of marketable securities, which
represented investment of a portion of the proceeds of the Note
Offerings and Common Stock Offering. Such investment is expected to
be used for development of new hotels and other working capital
requirements of the Company.
Net cash provided from operating activities was $26.6 million for the
first six months of 1996 compared to $ 19.4 million at the end of the
first six months of 1995, an increase of $ 7.2 million. A majority of the
increase was due to fewer receivables due from construction
reimbursements and increases in construction payables at June 28,
1996.
The Company incurred net capital expenditures of $50.7 million during
the first six months of 1996 and $ 56.8 million during the first six
months of 1995. Capital expenditures include expenditures for
development of new hotels and capital improvements on existing hotel
properties. During the remainder of 1996 the Company expects capital
expenditures to total approximately $95 million, representing $10
million for capital improvements on existing hotels and $85 million for
continued new hotel development.
The Company currently has seven hotels under construction. The
Company estimates that building and pre-opening costs of the seven
hotels will require aggregate funding of approximately $167 million from
the Company (net of $50 million included in construction in progress at
June 28, 1996).
In addition to the capital expenditures for the hotels under construction,
the Company is at various stages in other new hotel development.
Capital requirements for the new hotels under development are
expected to be provided by (i) mortgage financing secured by the
Owned Hotels which are unencumbered: (ii) mortgage financing
secured by the Scheduled Hotels as described above; and (iii)
contributions from third parties.
On July 15, 1996 the Company received a commitment for a $33.0
million secured line of credit. Borrowings under the secured line of
credit will mature three years from the date of closing and
require quarterly principal payments commencing September 30, 1997
of $0.3 million. Borrowings bear interest at LIBOR plus an applicable
margin as defined in the credit agreement. The partnership pays a
commitment fee of 0.375% per annum on the daily unused portion of
the credit facility.
In addition to the secured line of credit the Company has received
various loan commitments for the projects planned and under
construction in the amount of $134 million.
The Company expects to develop new hotels through limited
partnerships in which the Company will be the general partner and an
affiliate of the general partner will be the limited partner. As permitted
by the Indentures relating to the 1994 Notes and the 1995 Notes (the
"1994 and 1995 Note Indentures"), each of these entities will be an
"Unrestricted Subsidiary" for purposes thereof, and accordingly, the
ability of the Company to fund these entities is subject to certain
limitations contained in the 1994 and 1995 Note Indentures. All of the
indebtedness of these entities will be non-recourse to the Company.
The Company believes that funding permitted under the 1994 and 1995
Note Indentures will be sufficient to meet its development plans.
Based upon current plans relating to the timing of new hotel
development, the Company anticipates that its capital resources will be
adequate to satisfy its 1996 capital requirements for the currently
planned projects and normal recurring capital improvement projects.
The Company accrued distributions of approximately $ 1.7 million
during the first six months of 1996 to its partners. Distributions by the
Company to its partners must be made in accordance with provisions of
the 1994 and 1995 Note Indentures.
Part II. OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings
A lawsuit has been filed in the U.S. District Court of Arizona, CV 96-356
TUC JMR, against John Q. Hammons Hotels Two, L.P., a Delaware limited
partnership, and John Q. and Juanita K. Hammons, husband and wife. The
Second Amended Complaint was filed on August 5, 1996, by the Marshall
Foundation, a not-for-profit Arizona corporation. The lawsuit arises out
of a Ground Lease by the Marshall Foundation to John Q. Hammons Hotels
Two, L.P., the performance of which is guaranteed by John Q. and Juanita
K. Hammons. The Ground Lease requires Hammons to construct a hotel on the
subject land and maintain and operate the hotel for a 99-year term.
The lawsuit alleges that the Hammons entities are guilty of bad faith and
misrepresentation, as well as fraud, and that the Marshall Foundation is
entitled to specific performance, declaratory relief on certain issues and
damages. The claim arises out of a dispute over the course of
construction of the hotel, with the Marshall Foundation claiming that it
has the right to approve all modifications to the original plans
developed for the hotel and the Hammons entities contending that they have
the right to build the hotel in a manner that is consistent with the
original plans and drawings but subject only to the Ground Lease
requirement that the hotel be first-class in quality and have a value of
more than $16,000,000.
Hammons has filed a counterclaim seeking declaratory relief with regard
to whether it is complying with the terms of the Ground Lease between
the parties and seeking monetary damages from the Marshall Foundation
for the Foundation's wrongful interference with the rights of Hammons
under the terms of the Ground Lease.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
John Q. Hammons Hotels, Inc.
By: /s/ John Q. Hammons
John Q. Hammons
Chairman, Founder,
and Chief Executive Officer
By: /s/ Mel J. Volmert
Mel J. Volmert
Executive Vice President
and Chief Financial Officer
Dated: August 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-3-1997 JAN-3-1997
<PERIOD-END> JUN-28-1996 JUN-28-1996
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