Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 4, 1997
OF
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 January 3, 1997 (audited) and
April 4, 1997 (unaudited) ..................................... 3
Consolidated Statements of Income for the three months ended
March 29, 1996 (unaudited) and April 4, 1997 (unaudited)........ 5
Consolidated Statements of Changes in Minority Interest and Stockholders'
Equity for the period January 3, 1997 to April 4, 1997 (unaudited). 6
Consolidated Statements of Cash Flows for the three months ended
March 29, 1996 (unaudited) and April 4, 1997 (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...................................... 10
Item 6. Reports on Form 8-K...................................... 11
Signatures ........................................ 12
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONSOLIDATED BALANCE SHEETS
(000's omitted)
<TABLE>
<CAPTION>
ASSETS
April 4, 1997 January 3, 1997
(Unaudited) (Audited)
<S> <C> <C>
CASH AND EQUIVALENTS $25,969 $46,449
MARKETABLE SECURITIES 1,646 2,355
RECEIVABLES
Trade, less allowance for
doubtful accounts of $163 7,144 5,790
Construction reimbursements and
management fees 740 825
INVENTORIES 1,024 1,019
PREPAID EXPENSES AND OTHER 1,556 1,928
Total current assets 38,079 58,366
PROPERTY AND EQUIPMENT, at cost
Land and improvements 31,847 29,712
Buildings and improvements 458,103 433,059
Furniture, fixtures and equipment 168,871 160,198
Construction in progress 130,233 120,525
789,054 743,494
Less-accumulated depreciation
and amortization (181,409) (174,899)
607,645 568,595
DEFERRED FINANCING COSTS,
FRANCHISE FEES
AND OTHER, net 29,893 31,111
$675,617 $658,072
</TABLE>
See Notes to Consolidated Financial Statements
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONSOLIDATED BALANCE SHEETS
(000's omitted)
<TABLE>
<CAPTION>
LIABILITIES AND EQUITY
April 4, 1997 January 3,1997
LIABILITIES: (Unaudited) (Audited)
<S> <C> <C>
Current portion of long-term debt $15,377 $12,444
Accounts payable 20,397 29,977
Accrued expenses
Payroll and related benefits 3,710 4,611
Sales and property taxes 6,760 7,069
Insurance 9,954 9,511
Interest 3,854 12,634
Utilities, franchise fees, and other 6,837 6,347
Total current liabilities 66,889 82,593
Long-term debt 547,541 518,699
Other obligations and deferred revenue 7,694 7,024
Total liabilities 622,124 608,316
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST OF HOLDERS OF LIMITED
PARTNER UNITS 36,212 33,662
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 (79,155) (80,342)
Total equity 17,281 16,094
$675,617 $658,072
</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
April 4, 1997 March 29, 1996
(Unaudited) (Unaudited)
REVENUES:
<S> <C> <C>
Rooms $45,397 $40,231
Food and beverage 20,397 19,761
Meeting room rental and other 4,748 4,628
Total revenues 70,542 64,620
OPERATING EXPENSES:
Direct operating costs and expenses-
Rooms 11,269 10,294
Food and beverage 14,838 14,303
Other 750 716
General, administrative and sales expense 20,073 19,364
Repairs and maintenance 2,905 2,600
Depreciation and amortization 6,933 5,921
Total operating expenses 56,768 53,198
INCOME FROM OPERATIONS 13,774 11,422
OTHER INCOME (EXPENSE)
Interest income 359 694
Interest expense and amortization of
deferred financing fees (9,718) (9,959)
INCOME BEFORE MINORITY INTEREST
AND PROVISION FOR INCOME TAXES 4,415 2,157
Minority interest in earnings of
partnership (3,165) (1,546)
INCOME BEFORE PROVISION FOR
INCOME TAXES 1,250 611
Provision for income taxes (63) (12)
NET INCOME $1,187 $ 599
UNAUDITED EARNINGS PER SHARE
Per share net income allocable to
the Company $0.19 $0.09
</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)
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
Minority Class A Class B Paid-In Company
Interest Common Stock Common Stock Capital Retained Total
Deficit
BALANCE,
January 3, 1997
<S> <C> <C> <C> <C> <C> <C>
(audited) $33,662 $60 $3 $96,373 ($80,342) $16,094
Distribution for
income taxes (615) -- -- -- -- --
Net income
allocable to the
Company -- -- -- -- 1,187 1,187
Minority interest
in earnings
of partnership 3,165 -- -- -- -- --
BALANCE, April 4, 1997
(unaudited) $36,212 $60 $3 $96,373 ($79,155) $17,281
</TABLE>
See Notes to Consolidated Financial Statements
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(000's omitted)
<TABLE>
<CAPTION>
Three Months Ended
April 4, 1997 March 29,1996
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited) (Unaudited)
<S> <C> <C>
Net income $1,187 $599
Adjustments to reconcile net income to cash provided by
(used in) operating activities
Depreciation, amortization, and loan cost amortization 7,391 6,379
Minority interest in earnings of the partnership 3,165 1,546
Changes in certain assets and liabilities
Receivables (1,269) 165
Inventories (5) 89
Prepaid expenses and other 372 (304)
Accounts payable (9,580) (80)
Accrued expenses (9,057) (2,687)
Other obligations and deferred revenue 670 (154)
Net cash provided by (used in ) operating activities (7,126) 5,553
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment, net (45,435) (21,486)
Franchise fees and other 212 (426)
Sale of marketable securities 709 13,060
Net cash used in investing activities (44,514) (8,852)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 32,929 --
Repayments of debt (1,154) (394)
Distributions (615) (670)
Net cash provided by (used in) financing activities 31,160 (1,064)
Increase (decrease) in cash and equivalents (20,480) (4,363)
CASH AND EQUIVALENTS, beginning of period 46,449 41,777
CASH AND EQUIVALENTS, end of period $25,969 $37,414
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
CASH PAID FOR INTEREST, net of amounts
capitalized $18,024 $13,989
</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 $5.0 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 consolidated 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 January 3, 1997 which included consolidated financial statements
for the years ended January 3, 1997 and December 29, 1995.
The information contained herein reflects all normal and recurring
adjustments which, in the opinion of management, are necessary for
a fair presentation of the results of operations and financial position
for the interim periods.
The 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 1997. 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% in 1996 and 5% in 1997. 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.
In 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128),
effective for fiscal years ending after December 15, 1997. The new standard
replaces primary earnings per share (EPS) with basic EPS, simplifies EPS
calculations and requires restatement of all prior period EPS data. The
Company intends to adopt the provisions of SFAS 128 during the fourth
quarter of 1997 and expects no material impact.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The following discussion and analysis addresses results of operations for
the three months ended April 4, 1997 and March 29, 1996.
Total revenues increased to $70.5 million in the 1997 Three Months from
$64.6 million in the 1996 Three Months, an increase of $5.9 million or 9.2%.
Of the total revenues reported in the 1997 Three Months, 64.4% were
revenues from rooms, 28.9% were revenues from food and beverage, and 6.7%
were revenues from meeting room rental and other, compared with 62.2%,
30.6%, and 7.2% respectively during the 1996 Three Months.
Rooms revenues increased to $45.4 million in the 1997 Three Months from
$40.2 million in the 1996 Three Months, an increase of $5.2 million or
12.8% as a result of increases in average room rates and occupancy and
total number of available rooms. Average room rates of all owned hotels
increased to $80.08 in the 1997 Three Months from $75.20 in the 1996
Three Months, an increase of $4.88 or 6.5%. Occupancy increased to
63.2% in the 1997 Three Months from 63.1% in the 1996 Three Months,
an increase of 0.1 percentage points.
Food and beverage revenues increased to $20.4 million in the 1997 Three
Months from $19.8 million in the 1996 Three Months, an increase of $0.6
million or 3.2%. 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 $4.7 million in the
1997 Three Months from $4.6 million in the 1996 Three Months, a increase
of $0.1 million or 2.6%.
Direct operating costs and expenses - rooms increased to $11.3 million
in the 1997 Three Months from $10.3 million in the 1996 Three Months,
an increase of $1.0 million or 9.5%. This expense represented 24.8% of
rooms revenues in the 1997 Three Month period and 25.6% in the 1996
Three Month period.
Direct operating costs and expenses - Food and beverage increased to
$14.8 million in the 1997 Three Months from $14.3 million in the 1996
Three Months, an increase of $0.5 million or 3.7%.
Direct operating costs and expenses - other were $0.7 million in the
1997 and 1996 Three Months.
General, administrative and sales expenses increased to $20.1 million
in the 1997 Three Months from $19.4 million in the 1996 Three Months,
an increase of $0.7 million or 3.7%. The increased expenses were a
result of a greater number of hotels open during the 1997 Three
Months.
Repairs and maintenance expenses increased to $2.9 million in the 1997
Three Months from $2.6 million in the 1996 Three Months, an increase of
$0.3 million or 11.7%. The increase was a result of the Company's
increased number of hotels open.
Depreciation and amortization expenses increased to $6.9 million in the
1997 Three Months from $5.9 million in the 1996 Three Months, an increase
of $1.0 million or 17.1%. These expenses represented 9.8% of total
revenues in the 1997 Three Month period and 9.2% of total revenues in
the 1996 Three Month period. The increase was attributable to the
greater number of open hotels during the period.
Income from operations increased to $13.8 million in the 1997 Three Months
from $11.4 million in the 1996 Three Months, an increase of $2.4 million
or 20.6%. The increase was primarily due to the higher amount of total
revenue.
Interest income decreased to $0.4 million in the 1997 Three Months from
$0.7 million in the 1996 Three Months, a decrease of $0.3 million or
48.3%. 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 decreased
to $9.7 million in the 1997 Three Months from $10.0 million in the 1996
Three Months, a decrease of $0.3 million or 2.4%. As a percentage of
total revenues, this expense decreased to 13.8% in the 1997 Three
Months from 15.4% in the 1996 Three Months as a result of additional
capitalized interest associated with projects under construction.
Income before minority interest and provision for income tax increased
to $4.4 million in the 1997 Three Months from $2.2 million in the 1996
Three Months, an increase of $2.2 million or 104.7%. As a percentage of
total revenues, it increased to 6.3% in the 1997 Three Months from
3.3% in the 1996 Three Months. The increase was primarily due to an
increase in income from operations associated with the six hotels
opened in 1995 that are continuing to mature towards 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 April 4, 1997 the Company had $26.0 million of cash and equivalents and
also had $1.6 million of marketable securities. Such investment is
expected to be used for development of new hotels and other working capital
requirements of the Company.
Net cash used by operating activities was $7.1 million for the first three
months of 1997 compared to cash provided by operating activities of $ 5.6
million at the end of the first three months of 1996, a decrease of $ 12.7
million. A majority of the decrease was due to the decrease in construction
payables and accrued expenses.
The Company incurred net capital expenditures of $45.4 million during the
first three months of 1997 and $21.5 million during the first three months
of 1996. Capital expenditures include expenditures for development of new
hotels and capital improvements on existing hotel properties. During the
remainder of 1997 the Company expects capital expenditures to total
approximately $179 million, representing $18 million for capital
improvements on existing hotels and $161 million for continued new hotel
development.
The Company currently has eight hotels under construction. The Company
estimates that building and pre-opening costs of these eight hotels will
require aggregate funding of approximately $150 million from the Company
(net of $124 million included in construction in progress at April 4, 1997).
The Company has obtained loans on these eight hotels of $131
million ($31.0 million which had been drawn at April 40, 1997) and expects
the remaining 1997 capital requirements to be funded by cash, operating
income, and additional loans on four unencumbered hotels.
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 eight hotels as described
above; and (iii) contributions from third parties.
The Company expects to fund development of 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 1997 capital requirements for the currently planned projects
and normal recurring capital improvement projects.
The Company made distributions of approximately $ 0.6 million during the
first three months of 1997 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
At April 4, 1997 there were no material pending legal proceedings.
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: May 16, 1997
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