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 July 4, 1997
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 July 4, 1997 (unaudited)
and January 3, 1997 (audited) ...................................... 3
Consolidated Statement of Income for the three and six months
ended July 4, 1997 (unaudited) and June 28, 1996 (unaudited)........ 5
Consolidated Statements of Changes in Minority Interest
and Stockholders' Equity for the period January 3, 1997
to July 4, 1997 (unaudited) ....................................... 6
Consolidated Statements of Cash Flows for the six months ended
July 4, 1997 (unaudited) and June 28, 1996 (unaudited).............. 7
Notes to Consolidated Financial Statements ......................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................. 10
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>
ASSETS
July 4, 1997 January 3, 1997
(Unaudited) (Audited)
CURRENT ASSETS
<S> <C> <C>
Cash and equivalents $25,496 $46,449
Marketable securities 5,109 2,355
Receivables -
Trade, less allowance for doubtful
accounts of $163 7,246 5,790
Construction reimbursements and
management fees 1,078 825
Inventories 1,054 1,019
Prepaid expenses and other 1,728 1,928
---------- ----------
Total current assets 41,711 58,366
---------- ----------
PROPERTY AND EQUIPMENT, at cost
Land and improvements 34,806 29,712
Buildings and improvements 506,533 433,059
Furniture, fixtures and equipment 189,930 160,198
Construction in progress 112,117 120,525
---------- ----------
843,386 743,494
Less-accumulated depreciation
and amortization (188,487) (174,899)
---------- -----------
654,899 568,595
---------- -----------
DEFERRED FINANCING COSTS,
FRANCHISE FEES AND OTHER, net 32,163 31,111
--------- ----------
$728,773 $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
July 4, 1997 January 3, 1997
(Unaudited) (Audited)
CURRENT LIABILITIES
<S> <C> <C>
Current maturities of long-term debt $ 9,326 $12,444
Accounts payable 20,758 29,977
Accrued expenses:
Payroll and related benefits 5,004 4,611
Sales and property taxes 8,749 7,069
Insurance 10,392 9,511
Interest 12,611 12,634
Utilities, franchise fees, and other 7,318 6,347
--------- ------------
Total current liabilities 74,158 82,593
LONG-TERM DEBT 586,870 518,699
OTHER OBLIGATIONS AND DEFERRED REVENUE 9,431 7,024
---------- ------------
Total liabilities 670,459 608,316
---------- ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST OF HOLDERS OF
LIMITED PARTNER UNITS 39,390 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 (77,512) (80,342)
----------- -----------
Total equity 18,924 16,094
----------- -----------
$728,773 $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 Six Months Ended
July 4,1997 June 28, 1996 July 4,1997 June 28, 1996
REVENUES : (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Rooms $50,582 $44,126 $95,979 $84,357
Food and beverage 20,841 19,435 41,238 39,196
Meeting room rental and other 4,796 4,782 9,544 9,410
---------- ---------- ---------- ------------
Total revenues 76,219 68,343 146,761 132,963
---------- ---------- ---------- ------------
OPERATING EXPENSES :
Direct operating costs and expenses
Rooms 12,573 10,826 23,842 21,120
Food and beverage 15,100 14,448 29,938 28,751
Other 829 734 1,579 1,450
General, administrative
and sales expenses 20,279 18,428 40,352 37,792
Repairs and maintenance 3,189 3,036 6,094 5,636
Depreciation and amortization 8,104 6,025 15,037 11,946
---------- ---------- ----------- ------------
Total operating expenses 60,074 53,497 116,842 106,695
---------- ---------- ----------- ------------
INCOME FROM OPERATIONS 16,145 14,846 29,919 26,268
OTHER INCOME (EXPENSE) :
Interest income 130 526 489 1,220
Interest expense and amortization
of deferred financing fees (10,168) (9,470) (19,886) (19,429)
---------- ---------- ------------ ------------
INCOME BEFORE MINORITY INTEREST AND PROVISION
FOR INCOME TAXES 6,107 5,902 10,522 8,059
Minority interest in earnings
of partnership (4,378) (4,231) (7,543) (5,777)
---------- ----------- ------------ -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,729 1,671 2,979 2,282
Provision for income taxes (86) (33) (149) (45)
---------- ----------- ---------- ----------
NET INCOME $1,643 $1,638 $2,830 $2,237
======= ======= ======== =======
UNAUDITED EARNINGS PER SHARE
Per share net income allocable
to the Company $0.26 $0.26 $0.45 $0.35
======= ====== ====== ======
</TABLE>
See Notes to Consolidated Financial Statements
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONSOLIDATED STATEMENT 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
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 (1,815) -- -- -- -- --
Net income allocable
to the Company -- -- -- -- 2,830 2,830
Minority interest
in earnings of
partnership 7,543 -- -- -- -- --
BALANCE, --------- ------- ----- ------- -------- -----------
July 4, 1997
(Unaudited) $39,390 $60 $3 $96,373 ($77,512) $18,924
========= ===== ===== ======= ======== =======
</TABLE>
See Notes to Consolidated Financial Statements
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
<TABLE>
<CAPTION>
Six Months Ended
July 4,1997 June 28, 1996
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 2,830 $ 2,237
Adjustments to reconcile net income to cash
provided by operating activities-
Depreciation, amortization, and
loan cost amortization 15,996 12,861
Minority interest in earnings of the partnership 7,543 5,777
Changes in certain assets and liabilities-
Receivables (1,709) 1,785
Inventories (35) 116
Prepaid expenses and other 200 600
Accounts payable (9,219) 2,406
Accrued expenses 3,902 1,111
Other obligations and deferred revenue 2,407 (308)
--------- ---------
Net cash provided by operating activities 21,915 26,585
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment, net (99,542) (50,659)
Franchise fees and other (3,810) (1,496)
Sale (purchase)of marketable securities, net (2,754) 5,535
--------- ----------
Net cash used in investing activities (106,106) (46,620)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing 66,831 19,000
Repayments of debt (1,778) (1,068)
Distributions (1,815) (1,675)
---------- ---------
Net cash provided by financing activities 63,238 16,257
---------- ---------
Increase (decrease) in cash and equivalents (20,953) (3,778)
CASH AND EQUIVALENTS, beginning of period 46,449 41,777
---------- --------
CASH AND EQUIVALENTS, end of period $25,496 $37,999
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR INTEREST, net of amounts capitalized $18,918 $18,567
======== =======
</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 January 3, 1997 which included 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 (SFAS128), 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.
In June of 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, REPORTING COMPREHENSIVE INCOME (SFAS
130), which requires comprehensive income and the associated
income tax expense or benefit be reported in a financial statement with
the same prominence as other financial statements with an aggregate
amount of comprehensive income reported in that same financial
statement. SFAS 130 permits the statement of changes in
shareholders equity to be used to meet this requirement. "Other
Comprehensive Income" refers to revenues, expenses, gains and
losses that under GAAP are included in comprehensive income but
bypass net income. The Company intends to adopt SFAS 130 in the
first quarter of fiscal 1998. The Company anticipates that adoption of
SFAS 130 will not be material.
Also in June of 1997, The FASB issued Statement of Financial
Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION (SFAS 131),
which requires disclosures for each segment in which the chief
operating decision maker organizes these segments within a company
for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography,
legal structure, management structure and any manner in which
management disaggregates a company. The Company intends to
adopt SFAS 131 in the first quarter of fiscal 1998. The Company
anticipates that adoption of SFAS 131 will not be material.
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 and six months ended July 4, 1997 and June 28, 1996.
THREE MONTHS
Total revenues increased to $76.2 million in the 1997 Three Months
from $68.3 million in the 1996 Three Months, an increase of $7.9
million or 11.5%. Of the total revenues reported in the 1997 Three
Months, 66.4% were revenues from rooms, 27.3% were revenues from
food and beverage, and 6.3% were revenues from meeting room
rental and other, compared with 64.6%, 28.4%, and 7.0%, respectively
during the 1996 Three Months.
Rooms revenues increased to $50.6 million in the 1997 Three Months
from $44.1 million in the 1996 Three Months, an increase of $6.5
million or 14.6% 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 $79.48 in the 1997 Three
Months from $76.24 in the 1996 Three Months, an increase of $3.24 or
4.2%. Occupancy of Mature Hotels decreased to 68.0% in the 1997
Three Months from 68.3% in the 1996 Three Months, a decrease of
0.3 percentage points. The lower occupancy was primarily due to the
increased number of limited service rooms opening in the immediate
market of some Company hotels.
Food and beverage revenues increased to $20.8 million in the 1997
Three Months from $19.4 million in the 1996 Three Months, an
increase of $1.4 million or 7.2%. 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 were $4.8 million in the 1997
and 1996 Three Months.
Rooms operating expenses increased to $12.6 million in the 1997
Three Months from $10.8 million in the 1996 Three Months, an
increase of $1.8 million or 16.1%. This expense represented 24.9% of
rooms revenues in the 1997 Three Month period and 24.5% in the
1996 Three Month period.
Food and beverage operating expenses increased to $15.1 million in
the 1997 Three Months from $14.4 million in the 1996 Three Months,
an increase of $0.7 million or 4.5%.
Other operating expenses increased to $0.8 million in the 1997 Three
Months from $0.7 million in the 1996 Three Months, an increase of
$0.1 million or 12.9%.
General, administrative and sales expenses increased to $20.3 million
in the 1997 Three Months from $18.4 million in the 1996 Three
Months, an increase of $1.9 million or 10.0%. The increased
expenses were a result of expenses incurred during the 1997 Three
Months associated with the opening of more rooms during 1996 and
1997.
Repairs and maintenance expenses increased to $3.2 million in the
1997 Three Months from $3.0 million in the 1996 Three Months, an
increase of $0.2 million or 5.0%. The increase was a result of the
Company's increased number of hotels open.
Depreciation and amortization expenses increased to $8.1 million in
the 1997 Three Months from $6.0 million in the 1996 Three Months, an
increase of $2.1 million or 34.5%. These expenses represented
10.6% of total revenues in the 1997 Three Months and 8.8% of total
revenues in the 1996 Three Months. The increase was a result of
additional capital expenditures related to new hotels and
improvements in existing properties.
Income from Operations increased to $16.1 million in the 1997 Three
Months from $14.8 million in the 1996 Three Months, an increase of
$1.3 million or 8.7%. The increase was due primarily to the higher
amount of total revenue offset in part by higher depreciation from new
hotels open during the 1997 quarter.
Interest income decreased to $0.1 million in the 1997 Three Months
from $0.5 million in the 1996 Three Months, a decrease of $0.4 million.
The decrease was attributable to lower balances in cash and
equivalents because of amounts spent for new construction.
Interest expense and amortization of deferred financing fees
increased to $10.2 million in the 1997 Three Months from $9.5 million
in the 1996 Three Months, an increase of $0.7 million or 7.4%. As a
percentage of total revenues, this expense decreased to 13.3% in the
1997 Three Months from 13.9% in the 1996 Three Months.
Income before minority interest and provision for income taxes
increased to $6.1 million in the 1997 Three Months from $5.9 million in
the 1996 Three Months, an increase of $0.2 million or 3.5%. As a
percentage of total revenues, income before minority interest and
provision for income taxes decreased to 8.0% in the 1997 Three
Months from 8.6% in the 1996 Three Months. The increase in income
before minority interest and provision for income taxes was due
primarily to growth in revenue from new hotels opened in 1996 and
1997 offset by the increase in depreciation and interest expense
associated with these openings.
SIX MONTHS
Total revenues increased to $146.8 million in the 1997 Six Months
from $133.0 million in the 1996 Six Months, an increase of $13.8
million or 10.4%. Of the total revenues reported in the 1997 Six
Months, 65.4% were revenues from rooms, 28.1% were revenues from
food and beverage, and 6.5% were revenues from meeting room
rental and other, compared with 63.4%, 29.5%, and 7.1% respectively
during the 1996 Six Months.
Rooms revenues increased to $96.0 million in the 1997 Six Months
from $84.4 million in the 1996 Six Months, an increase of $11.6 million
or 13.8% as a result of increases in average room rates and total
number of available rooms. Average room rates of Mature Hotels
increased to $78.90 in the 1997 Six Months from $75.74 in the 1996
Six Months, an increase of $3.16 or 4.2%. Occupancy of Mature
Hotels decreased to 65.6% in the 1997 Six Months from 65.7% in the
1996 Six Months, a decrease of 0.1 percentage points.
Food and beverage revenues increased to $41.2 million in the 1997
Six Months from $39.2 million in the 1996 Six Months, an increase of
$2.0 million or 5.2%. 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 $9.5 million in
the 1997 Six Months from $9.4 million in the 1996 Six Months, an
increase of $0.1 million or 1.4%.
Rooms operating expenses increased to $23.8 million in the 1997 Six
Months from $21.1 million in the 1996 Six Months, an increase of $2.7
million or 12.9%. This expense represented 24.8% of rooms revenues
in the 1997 Six Month period and 25.0% in the 1996 Six Month period.
Food and beverage operating expenses increased to $29.9 million in
the 1997 Six Months from $28.8 million in the 1996 Six Months, an
increase of $1.1 million or 4.1%.
Other operating expenses increased to $1.6 million in the 1997 Six
Months from $1.5 million in the 1996 Six Months, an increase of $0.1
million or 8.9%.
General, administrative and sales expenses increased to $40.4 million
in the 1997 Six Months from $37.8 million in the 1996 Six Months, an
increase of $2.6 million or 6.8%. The increased expenses were a
result of expenses incurred during the 1997 Six Months associated
with the opening of more rooms.
Repairs and maintenance expenses increased to $6.1 million in the
1997 Six Months from $5.6 million in the 1996 Six Months, an increase
of $0.5 million or 8.1%. The increase was a result of the Company's
increased number of hotels open.
Depreciation and amortization expenses increased to $15.0 million in
the 1997 Six Months from $11.9 million in the 1996 Six Months, an
increase of $3.1 million or 25.9%. These expenses represented
10.2% of total revenues in the 1997 first half and 9.0% of total
revenues in the first half of 1996.
Income from Operations increased to $29.9 million in the 1997 Six
Months from $26.3 million in the 1996 Six Months, an increase of $3.6
million or 13.9%. The increase was due primarily to the higher amount
of total revenue offset in part by higher depreciation from new hotels.
Interest income decreased to $0.5 million in the 1997 Six Months from
$1.2 million in the 1996 Six Months, a decrease of $0.7 million. 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 $19.9 million in the 1997 Six Months from $19.4 million in
the 1996 Six Months, an increase of $0.5 million or 2.4%. As a
percentage of total revenues, this expense decreased to 13.5% in the
1997 Six Months from 14.6% in the 1996 Six Months.
Income before minority interest and provision for income taxes
increased to $10.5 million in the 1997 Six Months from $8.1 million in
the 1996 Six Months, an increase of $2.4 million or 30.6%. As a
percentage of total revenues, income before minority interest and
provision for income taxes increased to 7.2% in the 1997 Six Months
from 6.1% in the 1996 Six Months. The increase was due primarily to
an increase in total revenue offset in part by depreciation and interest
expense associated with the opening of hotels in 1995 and 1996 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. In the
future the Company 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.
On July 4, 1997 the Company had $25.5 million of cash and
equivalents and also had $5.1 million of marketable securities. These
amounts are expected to be used for development of new hotels and
other working capital requirements of the Company.
Net cash provided by operating activities was $21.9 million for the
first six months of 1997 compared to $ 26.6 million for the first six
months of 1996, a decrease of $ 4.7 million. A majority of the
decrease was due to an increase in trade and construction related
receivables and decreases in construction payables at July 4, 1997.
The Company incurred net capital expenditures of $99.5 million during
the first six months of 1997 and $ 50.7 million during the first six
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 $106 million, representing
$13 million for capital improvements on existing hotels and $93 million
for continued new hotel development.
The Company currently has six hotels under construction. The
Company estimates the remaining building and pre-opening costs of
the six hotels will require funding of approximately $111 million.
Construction in progress at July 4, 1997 included $99 million expended
for these projects.
The Company has received loans and loan commitments for the
projects under construction in the amount of $144 million. Ninety-
nine million was available to draw as of July 4, 1997.
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.
The Company's development activity restricts its ability to grow
earnings per share in the short term. This is due to fixed charges such
as depreciation and interest that exceed new hotels operating cash
flow in the first one to two years of operations after opening. The
Company plans to continue with its development of full-service, and
all-suite hotels based on favorable market fundamentals and because
few hotels are being constructed in the upscale sector of the overall
hotel industry.
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 1997 capital requirements for the currently
planned projects and normally recurring capital improvement projects.
The Company accrued distributions of approximately $ 1.8 million
during the first six 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
As of July 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: August 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-3-1998 JAN-3-1998
<PERIOD-END> JUL-4-1997 JUL-4-1997
<CASH> 0 25496
<SECURITIES> 0 5109
<RECEIVABLES> 0 7246
<ALLOWANCES> 0 0
<INVENTORY> 0 1054
<CURRENT-ASSETS> 0 41711
<PP&E> 0 843386
<DEPRECIATION> 0 188487
<TOTAL-ASSETS> 0 728773
<CURRENT-LIABILITIES> 0 74158
<BONDS> 0 390000
0 0
0 0
<COMMON> 0 63
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 728773
<SALES> 76219 146761
<TOTAL-REVENUES> 76349 147250
<CGS> 28502 55359
<TOTAL-COSTS> 60074 116842
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 10168 19886
<INCOME-PRETAX> 1729 2979
<INCOME-TAX> 86 149
<INCOME-CONTINUING> 1643 2830
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1643 2830
<EPS-PRIMARY> .26 .45
<EPS-DILUTED> .26 .45
</TABLE>
