<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 1, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to __________________
Commission File Number 1-13486
JOHN Q. HAMMONS HOTELS, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 43-16950593
(State of Organization) (I.R.S. employer identification no.)
300 John Q. Hammons Parkway, Ste. 900
Springfield, Missouri 65806
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (417) 864-4300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Class A Common Stock New York Stock Exchange
$.01 par value per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. YES x NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The aggregate market value of the 5,764,725 shares of Class A Common Stock
held by non-affiliates of the Registrant was approximately $26,301,558 based on
the closing price on the New York Stock Exchange for such stock on March 19,
1999.
Number of shares of the Registrant's Class A Common Stock outstanding as of
March 19, 1999: 6,042,000.
Documents Incorporated by Reference
Portions of the annual report to shareholders for the year ended January 1,
1999 are incorporated by reference into Part II. Portions of the proxy
statement for the annual shareholders meeting to be held on May 4, 1999 are
incorporated by reference into Part III.
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PART I
Item 1. Business.
As used herein, the term "Company" means (i) John Q. Hammons Hotels, Inc.,
a Delaware corporation, (ii) Hammons, Inc., a Missouri corporation, as
predecessor general partner, (iii) John Q. Hammons Hotels, L.P., a Delaware
limited partnership, and (iv) corporate and partnership subsidiaries of John Q.
Hammons Hotels, L.P., collectively, or, as the context may require, John Q.
Hammons Hotels, Inc. only. As used herein, the term "Partnership" means John Q.
Hammons Hotels, L.P., a Delaware limited partnership, and its corporate and
partnership subsidiaries, collectively, or, as the context may require, John Q.
Hammons Hotels, L.P. only. Unless otherwise stated, references to the Company's
business and properties refer to the business and properties of the Partnership.
Overview
The Company is a leading independent owner, manager and developer of
affordable upscale hotels in capital city, secondary and airport markets. The
Company owns 42 hotels located in 20 states, containing 10,293 guest rooms or
suites (the "Owned Hotels"), including four new hotels opened in 1998. The
Company also manages five additional hotels located in two states, containing
1,176 guest rooms (the "Managed Hotels"). On January 1, 1999, the Company also
owned six upscale hotels at various stages of development, which are scheduled
to open during 1999 and 2000 (the "Scheduled Hotels"). The Company's existing
Owned Hotels and Managed Hotels (together, the "JQH Hotels") operate primarily
under the Holiday Inn and Embassy Suites trade names. Most of the Company's
hotels are near a state capitol, university, airport or corporate headquarters,
plant or other major facility and generally serve markets with populations of up
to 300,000 people (or larger populations in the case of airport markets and many
of the markets in which the Company has developed new hotels over the past
several years).
The Company's strategy is to increase cash flow and thereby enhance
shareholder value primarily through (i) capitalizing on positive operating
fundamentals in the upscale full-service sector of its markets and improving the
operating results of its newer hotels, (ii) converting the franchises of its
existing hotels to franchise brands that are considered to be more upscale, and
(iii) selling certain mature assets and re-investing the net proceeds.
The JQH Hotels are designed to appeal to a broad range of hotel customers,
including frequent business travelers, groups and conventions, as well as
leisure travelers. Each of the JQH Hotels is individually designed by the
Company, and most contain an impressive multi-storied atrium, with water
features and lush plantings, expansive meeting space, large guest rooms or
suites and comfortable lounge areas. The Company believes that these design
features enhance guest comfort and safety and increase the value perceived by
the guest. The JQH Hotels' meeting facilities can be readily adapted to
accommodate both larger and smaller meetings, conventions and trade shows. The
18 Holiday Inn JQH Hotels are affordably priced hotels designed to attract the
business and leisure traveler desiring quality accommodations, including meeting
facilities, in-house restaurants, cocktail lounges and room service. The 13
Embassy Suites JQH Hotels are all-suite hotels which appeal to the traveler
needing or desiring greater space and specialized services. The JQH Hotels also
include six non-franchise hotels, two Radissons, one Hampton Inn & Suites, two
Marriotts, two Homewood Suites, one Crowne Plaza, one Sheraton and one Days Inn.
Four of the non-franchise hotels have the word "Plaza" in their names, and the
other two non-franchise hotels are resort hotels. The Company determines which
brand of hotel to develop depending upon the demographics of the market to be
served.
Management of the JQH Hotels is coordinated from the Company's headquarters
in Springfield, Missouri by its senior management team. Five Regional Vice
Presidents and two District Directors are responsible for supervising a group of
General Managers of JQH Hotels in day-to-day operations. Centralized management
services and functions include development, design, sales and marketing,
purchasing and financial controls. Through these centralized services,
significant cost savings are realized due to economies of scale.
The Company conducts all of its business operations through the Partnership
and its subsidiaries. Mr. Hammons beneficially owns all 294,100 shares of Class
B Common Stock of the Company, representing 70.88%
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of the combined voting power of both classes of the Company's Common Stock. The
Company is the sole general partner of the Partnership through its ownership of
all 6,336,100 general partner units (the "GP Units"), representing 28.31% of the
total equity in the Partnership. Mr. Hammons beneficially owns all 16,043,900
limited partnership units of the Partnership (the "LP Units"), representing
71.69% of the total equity in the Partnership. The Class A Common Stock of the
Company represents 27.00% of the total equity of the Partnership, and the Class
B Common Stock and LP Units beneficially owned by Mr. Hammons represent 73.00%
of the total equity in the Partnership. Mr. Hammons is also the beneficial owner
of 110,100 shares of Class A Common Stock.
The Company's executive offices are located at 300 John Q. Hammons Parkway,
Suite 900, Springfield, Missouri 65806 and its telephone number is (417) 864-
4300. The Company is a Delaware corporation that was formed on September 29,
1994.
Development
The Company announced on September 11, 1998 that it was ceasing new
development activity, except for the hotels currently under construction. The
following table sets forth information as to the Scheduled Hotels:
<TABLE>
<CAPTION>
Number of Stage of Development/
Location Franchise/Name Rooms/Suites Description Estimated Completion Date
-------- -------------- ------------ ----------- -------------------------
<S> <C> <C> <C> <C>
Mesquite, TX Hampton Inn & Suites 160 Convention Center Construction commenced;
2nd Quarter 1999
Coral Springs, FL Radisson Plaza 224 Atrium; Convention Construction commenced;
Center 2nd Quarter 1999
Dallas/Ft. Worth Airport, TX Embassy Suites 330 Atrium Construction commenced;
3rd Quarter 1999
Charlotte, NC Renaissance Suites 275 Atrium Construction commenced;
4th Quarter 1999
Oklahoma City, OK Renaissance 312 Atrium; Convention Construction commenced;
Center 1st Quarter 2000
Charleston, SC Embassy Suites 275 Atrium Construction commenced;
1st Quarter 2000
</TABLE>
Although the Company has in the past chosen to develop rather than acquire
existing hotels, the Company may in the future acquire hotels if suitable
opportunities arise. The Company continues to be approached from time to time
by third-party hotel owners seeking to sell or buy hotels. The Company will
continue to evaluate each offer and base its decision on the market location,
capital required, and return on investment alternatives.
On February 6, 1998, the Company completed the sale of six hotels to an
unrelated party for $39.4 million, resulting in a gain of approximately $0.2
million. The net book value of the hotels' property and equipment at the time
of the sale was approximately $38.6 million. On December 31, 1998, the Company
completed the sale of an additional hotel property to an unrelated party for
$16.1 million, resulting in a gain of approximately $8.0 million. The net book
value of the hotel's property and equipment at the time of the sale was
approximately $8.1 million.
The Company's development activity restricts its ability to grow per share
income in the short term. Fixed charges for new hotels (such as depreciation
and amortization expense and interest expense) exceed new hotel operating cash
flow in the first one to three years of operations. As new hotels mature, the
Company expects, based on past experience, that the operating expenses for these
hotels will decrease as a percentage of revenues, although there can be no
assurance that this will continue to occur.
Operations
Management of the JQH Hotels network is coordinated by the Company's senior
management team at the Company's headquarters in Springfield, Missouri. The
management team is responsible for managing the day-to-day financial needs of
the Company, including the Company's internal accounting audits. The Company's
management team administers insurance plans and business contract review,
oversees the financial budgeting and
<PAGE>
forecasting for the JQH Hotels, analyzes the financial feasibility of new hotel
developments, and identifies new systems and procedures to employ within the JQH
Hotels to improve efficiency and profitability. The management team also
coordinates each JQH Hotel's sales force, designing sales training programs,
tracking future business under contract, and identifying, employing and
monitoring marketing programs aimed at specific target markets. The management
team is indirectly responsible for interior design of all hotels and each
hotel's product quality, and directly oversees the detailed refurbishment of
existing operations. The overall management of the JQH Hotels is coordinated by
the central management team through five Regional Vice Presidents and two
District Directors responsible for guiding the General Managers of each JQH
Hotel in day-to-day operations.
Central management utilizes information systems that track each JQH Hotel's
daily occupancy, average room rate, and rooms and food and beverage revenues.
Contracted business is tracked for each hotel individually five years into the
future using the Company's sales projection and usage reporting system. By
having the latest information available at all times, management is better able
to respond to changes in each market by focusing sales and yield management
efforts on periods of demand extremes (low periods and high periods of demand)
and controlling variable expenses to maximize the profitability of each JQH
Hotel.
Creating operating, cost and guest service efficiencies in each hotel is a
top priority to the Company. With a total of 47 hotels under management, the
Company is able to realize significant cost savings due to economies of scale.
By leveraging the total hotels/rooms under its management, the Company is able
to secure volume pricing from its vendors that is not available to smaller hotel
companies. The Company employs a systems trainer who is responsible for
installing new computer systems and providing training to hotel employees to
maximize the effectiveness of these systems and to ensure that guest service is
enhanced.
Regional management constantly monitors each JQH Hotel to verify that the
Company's high level of operating standards are being met. The Company's
franchisors maintain rigorous inspection programs in which chain representatives
visit their respective JQH Hotels (typically 2 or 3 times per year ) to evaluate
product and service quality. Each chain also provides feedback to each hotel
through their guest satisfaction rating systems in which guests who visited the
hotel are asked to rate a variety of product and service issues.
Sales and Marketing
The Company's marketing strategy is to market the JQH Hotels both through
national and marketing programs. These are local sales managers and a director
of sales at each of the JQH Hotels. While the Company makes periodic
modifications to the concept in order to address differences and maintain a
sales organization structure based on market needs and local preferences, it
generally utilizes the same major campaign concept throughout the country. The
concepts are developed at its management headquarters while the modifications
are implemented by the JQH Hotels Regional Vice Presidents, District Directors
and local sales force, all of whom are experienced in hotel marketing. The
sales force reacts promptly to local changes and market trends in order to
customize marketing programs to meet each hotel's competitive needs. In
addition, the local sales force is responsible for developing and implementing
marketing programs targeted at specific customer segments within each market.
The Company requires that each of its sales managers complete an extensive sales
training program. Before finishing the program, the sales manager must
successfully complete certifications in three development phases.
The Company's core market consists of business travelers who visit a given
area several times per year, including salespersons covering a regional
territory, government and military personnel and technicians. The profile of
the primary target customer is a college educated business traveler, age 25 to
54, from a two-income household with a middle management white collar occupation
or upper level blue collar occupation. The Company believes that business
travelers are attracted to the JQH Hotels because of their convenient locations
in state capitals, their proximity to airports or corporate headquarters,
plants, convention centers or other major facilities, the availability of ample
meeting space and the high level of service relative to other hotel operators
serving the same markets. The Company's sales force markets to organizations
which consistently produce a high volume of room nights and which have a
significant number of individuals traveling in the Company's operating regions.
The Company also targets groups and conventions attracted by a JQH Hotel's
proximity to convention or trade centers (often adjacent). JQH Hotels' group
meetings logistics include flexible space readily adaptable to groups of varying
size, high-tech audio-visual equipment and on-site catering facilities. The
Company believes that suburban convention centers attract more convention
sponsors due to lower prices than larger, more
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cosmopolitan cities. In addition to the business market, the Company's targeted
customers also include leisure travelers looking for secure, comfortable lodging
at an affordable price as well as women travelers who find the security benefits
of the Company's atrium hotels appealing.
The Company advertises primarily through direct mail, magazine
publications, directories, and newspaper advertisements, all of which focus on
value delivered to and perceived by the guest. The Company has developed in-
house marketing materials including professional photographs and written
materials that can be mixed and matched to appeal to a specific target group
(business traveler, vacationer, religious group, reunions, etc.). The Company's
marketing efforts focus primarily on business travelers who account for
approximately 50% of the rooms rented in the JQH Hotels.
The Company's franchise hotels utilize the centralized reservation systems
of its franchisors, which the Company believes are among the more advanced
reservation systems in the hotel industry. The franchisors' reservation systems
receive reservation requests entered (i) on terminals located at all of their
respective franchises, (ii) at reservation centers utilizing 1-800 phone access
and (iii) through several major domestic airlines. Such reservation systems
immediately confirm reservations or indicate accommodations available at
alternate system hotels. Confirmations are transmitted automatically to the
hotel for which the reservations are made. The Company believes that these
systems are effective in directing customers to the Company's franchise hotels.
Franchise Agreements
The Company enters into non-exclusive franchise licensing agreements (the
"Franchise Agreements") with franchisors which it believes are the most
successful brands in the hotel industry. The term of the individual Franchise
Agreement for a hotel typically is 20 years. The Franchise Agreements allow the
Company to start with and then build upon the reputation of the brand names by
setting higher standards of excellence than the brands themselves require. The
non-exclusive nature of the Franchise Agreements allows the Company the
flexibility to continue to develop properties with the brands that have shown
success in the past and to operate hotels in conjunction with other brand names.
While the Company currently has a good relationship with its franchisors, there
can be no assurance that a desirable replacement would be available if any of
the Franchise Agreements were to be terminated.
Holiday Inn. The Franchise Agreement grants to the Company a
nonassignable, non-exclusive license to use the Holiday Inns service mark and
computerized reservation network. The franchisor maintains the right to improve
and change the reservation system to make it more efficient, economical and
competitive. Monthly fees paid by the Company are based on a percentage of
gross revenues attributable to room rentals, plus marketing and reservation
contributions which are also a percentage of gross revenues. The term of the
Franchise Agreement is 20 years with a renewal option in the 15th year.
Embassy Suites. The Franchise Agreement grants to the Company a
nonassignable, non-exclusive license to use the Embassy Suites service mark and
computerized reservation network. The franchisor maintains the exclusive right
to improve and change the reservation system for the purpose of making it more
efficient, economical and competitive. Monthly fees paid by the Company are
based on a percentage of gross revenues attributable to suite rentals, plus
marketing and reservation contributions which are also a percentage of gross
revenues. The term of the Franchise Agreement is 20 years with a renewal option
in the 18th year.
Other Franchisors. The franchise agreements with other franchisors not
listed above are similar in that they are nonassignable, non-exclusive licenses
to use the franchisor's service mark and computerized reservation network.
Payments and terms of agreement vary based on specific negotiations with the
franchisor.
Competition
Each of the JQH Hotels competes in its market area with numerous full
service lodging brands, especially in the upscale market, and with numerous
other hotels, motels and other lodging establishments. Chains such as Sheraton
Inns, Marriott Hotels, Ramada Inns, Radisson Inns, Comfort Inns, Hilton hotels
and Doubletree/Red Lion Inns are direct competitors of JQH Hotels in their
respective markets. There is, however, no single competitor or group of
competitors of the JQH Hotels that is consistently located nearby and competing
<PAGE>
with most of the JQH Hotels. Competitive factors in the lodging industry include
reasonableness of room rates, quality of accommodations, level of service and
convenience of locations.
Regulations and Insurance
General. A number of states regulate the licensing of hotels and
restaurants including liquor license grants by requiring registration,
disclosure statements and compliance with specific standards of conduct. In
addition, various federal and state regulations mandate certain disclosures and
practices with respect to the sales of license agreements and the
licensor/licensee relationship. The Company believes that each of the JQH
Hotels has the necessary permits and approvals to operate its respective
businesses, and that all necessary permits and approvals to operate the
Scheduled Hotels will be obtained in the ordinary course of business. To
supplement the Company's self insurance programs, umbrella, property, auto,
commercial liability and worker's compensation insurance is provided to the JQH
Hotels under a blanket policy. Insurance expenses for the JQH Hotels were
approximately $6.3 million, $6.2 million and $2.2 million in 1996, 1997 and
1998, respectively. During 1998, the Company realized continued favorable
trends in insurance expense as a result of claim experience and rate
improvements and a favorable buyout of several prior self-insured years. The
Company believes that the JQH Hotels are adequately covered by insurance.
Americans with Disabilities Act. The JQH Hotels and any newly developed or
acquired hotels must comply with Title III of the Americans with Disabilities
Act ("ADA") to the extent that such properties are "public accommodations" and/
or "commercial facilities" as defined by the ADA. Compliance with the ADA
requirements could require removal of structural barriers to handicapped areas
in certain public areas of the JQH Hotels where such removal is readily
achievable. Noncompliance could result in a judicial order requiring
compliance, an imposition of fines or an award of damages to private litigants.
The Company has taken into account an estimate of the expense required to make
any changes required by the ADA and believes that such expenses will not have a
material adverse effect on the Company's financial condition or results of
operations. If required changes involve a greater expenditure than the Company
currently anticipates, or if the changes must be made on a more accelerated
basis than the Company anticipates, the Company could be adversely affected.
The Company believes that its competitors face similar costs to comply with the
requirements of the ADA.
Asbestos Containing Materials. Certain federal, state and local laws,
regulations and ordinances govern the removal, encapsulation or disturbance of
Asbestos Containing Materials ("ACMs") when ACMs are in poor condition or in the
event of building, remodeling, renovation or demolition. These laws may impose
liability for the release of ACMs and may permit third parties to seek recovery
from owners or operators of real estate for personal injury associated with
ACMs. Based on prior environmental assessments, seven of the Owned Hotels
contain ACMs and four of the Owned Hotels may contain ACMs, generally in
sprayed-on ceiling treatments or in roofing materials. However, no removal of
asbestos from the Owned Hotels has been recommended, and the Company has no
plans to undertake any such removal, beyond the removal that has already
occurred. The Company believes that the presence of ACMs in the Owned Hotels
will not have a material adverse effect on the Company, but there can be no
assurance that this will be the case.
Environmental Regulations. The JQH Hotels are subject to environmental
regulations under federal, state and local laws. Certain of these laws may
require a current or previous owner or operator of real estate to clean up
designated hazardous or toxic substances or petroleum product releases affecting
the property. In addition, the owner or operator may be held liable to a
governmental entity or to third parties for damages or costs incurred by such
parties in connection with the contamination. The Company does not believe that
it is subject to any material environmental liability.
Employees
The Company employs approximately 8,000 full time employees, approximately
305 of whom are members of labor unions. The Company believes that labor
relations with employees are good.
Management
The following is a biographical summary of the experience of the executive
officers and other key officers of the Company.
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John Q. Hammons is the Chairman, Chief Executive Officer, a director and
founder of the Company. Mr. Hammons has been actively engaged in the
development, management and acquisition of hotel properties since 1959. From
1959 through 1969, Mr. Hammons and a business partner developed 34 Holiday Inn
franchises, 23 of which were sold in 1969 to Holiday Inns, Inc. Since 1969, Mr.
Hammons has developed 81 hotels on a nationwide basis, primarily under the
Holiday Inn and Embassy Suites trade names.
Kenneth J. Weber is the Chief Financial Officer of the Company. He joined
the Company in April 1998 and became a director of the Company in May 1998.
Prior to joining the Company, Mr. Weber was the Executive Vice President and
Chief Financial Officer of Chartwell Leisure, a New York based hotel company.
From 1992 to 1996, Mr. Weber was the Senior Vice President and Chief Financial
Officer of Omni Hotels, based in Hampton, New Hampshire. From 1986 to 1992, Mr.
Weber worked with Red Lion Hotels, based in Vancouver, Washington, holding the
positions of Senior Vice President, Chief Accounting Officer and Corporate
Controller. Mr. Weber began his career in the hotel industry with the Marriott
Corporation, holding positions in several of Marriott's divisions, including
President and Chief Executive Officer of Farrell's Ice Cream Parlour Restaurants
from 1983 to 1986.
Lonnie A. Funk is Senior Vice President of Operations. He began with the
Company in 1975 as the General Manager at the Holiday Inn in Billings, Montana.
In 1981, he was promoted to Regional Vice President of the Midwest Region. In
November 1998, he was promoted to his current position.
Debra M. Shantz is Corporate Counsel of the Company. She joined the
Company in May 1995. Prior thereto, Ms. Shantz was a partner of Farrington &
Curtis, P.C. (now Husch & Eppenberger, LLC), a law firm which serves as Mr.
Hammons' primary outside counsel, where she practiced primarily in the area of
real estate law. Ms. Shantz had been with that firm since 1988.
Pat A. Shivers is Senior Vice President, Administration and Control, of the
Company. He has been active in Mr. Hammons' hotel operations since 1985. Prior
thereto, he had served as Vice President of Product Management in Winegardner &
Hammons, Inc., a hotel management company.
Steven E. Minton is Senior Vice President, Architecture, of the Company.
He has been active in Mr. Hammons' hotel operations since 1985. Prior to that
time, Mr. Minton was a project manager with the firm of Pellham and Phillips
working on various John Q. Hammons projects.
Jacqueline A. Dowdy has been the Secretary and a director of the Company
since 1989. She has been active in Mr. Hammons' hotel operations since 1981.
She is an officer of several affiliates of the Company.
John D. Fulton is Vice President, Design and Construction of the Company.
He joined the Company in 1989 from Integra/Brock Hotel Corporation, Dallas,
Texas where he had been Director of Design and Purchasing for ten years.
Paul E. Muellner is Vice President, Corporate Controller of the Company.
Prior to joining the Company in June of 1998, Mr. Muellner was Vice President of
Finance for Carnival Hotels. He also served as Operations Controller at Omni
Hotels as well as positions with Red Lion Inns and Marriott Corporation.
Lawrence A. Welch has been Vice President, Food and Beverage, of the
Company since March 1994. Prior to joining the Company, Mr. Welch worked in the
Food and Beverage division with Davidson Hotel Company for ten years.
Forward-Looking Statements
In addition to historical information, this document contains certain
forward-looking statements within the meaning of the Private Securities
Litigation Act of 1995. These statements typically, but not exclusively, are
identified by the inclusion of phrases such as "the Company believes," "the
Company plans," "the Company intends," and other phrases of similar meaning.
These forward-looking statements involve risks and uncertainties and are based
on current expectations. Consequently, actual results could differ materially
from the expectations expressed in the forward-looking statements. Among the
various factors that could cause actual results to differ
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include a downturn in the economy (either regionally or nationwide) affecting
overall hotel occupancy rates, revenues at New Hotels not reaching expected
levels as quickly as planned as the result of competitive factors or the
Company's inability to obtain permanent financing for New Hotels on terms
similar to those available in the past.
Item 2. Properties.
The Company leases its headquarters in Springfield, Missouri from a
Missouri general partnership of which Mr. Hammons is a 50% partner. In 1998,
the Company made aggregate annual lease payments of approximately $231,000 to
such Missouri general partnership. The Company leases from John Q. Hammons the
real estate on which two of the Company's hotels are located. These leases are
more fully described in Item 13 "Certain Relationships and Related
Transactions." The Company owns the land on which 33 of the Owned Hotels are
located, while nine of the Owned Hotels are subject to long-term ground leases.
Description of Hotels - General
The JQH Hotels are located in 21 states and contain a total of 11,469
rooms. The JQH Hotels operate primarily under the Holiday Inn and Embassy
Suites trade names. Most of the JQH Hotels have assumed a leadership position
in their local market by providing a high quality product in a market unable to
economically support a second competitor of similar quality.
Each of the JQH Hotels is individually designed by the Company. Many of
the JQH Hotels contain an impressive multi-storied atrium, large indoor water
features, lush plantings, expansive meeting space, large guest rooms or suites
and comfortable lounge areas. In addition to the visual appeal, the Company
believes that an atrium design in which each of the hotel's room doors face into
the atrium, combined with glass elevators, achieves a greater level of security
for all guests. The Company believes this safety factor is particularly
relevant to women, who represent a growing portion of its business clientele.
The JQH Hotels also appeal to fitness conscious guests as all of the JQH Hotels
have at least one swimming pool and most have exercise facilities.
The Company believes that the presence of adjacent convention centers
provides incremental revenues for its hotel rooms, meeting facilities, and
catering services, and that hotels which are adjacent to convention centers
occupy a particularly successful niche within the hotel industry. These
convention or trade centers are available for rent by hotel guests. Each of the
JQH Hotels has a restaurant/catering service on its premises which provides an
essential amenity to the convention trade. The Company chooses not to lease out
the restaurant business to third-party caterers or vendors since it considers
the restaurant business an important component of securing convention business.
All of the restaurants in the JQH Hotels are owned and managed by the Company
specifically to maintain direct quality control over a vital aspect of the
convention and hotel business. The Company also derives significant revenue and
operating profit from food and beverage sales due to its ownership and
management of all of the restaurants in the JQH Hotels. The Company believes
that its food and beverage sales are more profitable than its competitors due to
the amount of catering business provided to convention and other meetings at the
Owned Hotels.
The Company retains responsibility for all aspects of the day-to-day
management of each of the JQH Hotels, including establishing and implementing
standards of operation at all levels; hiring, training and supervising staff;
creating and maintaining financial controls; regulating compliance with laws and
regulations relating to the hotel operations; and providing for the safekeeping,
repair and maintenance of the hotels owned by the Company. The Company
typically refurbishes individual hotels every four to six years, and has spent
an average per year of $20.9 million in the last four years on the Owned Hotels.
During 1999, the Company expects to spend approximately $15.5 million on
refurbishment of the Owned Hotels.
Owned Hotels
The Owned Hotels consist of 42 hotels, which are located in 20 states and
contain a total of 10,293 guest rooms or suites. The following table sets forth
certain information concerning location, franchise/name, number of rooms/suites,
description and opening date for each Owned Hotel:
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<TABLE>
<CAPTION>
Number of
Location Franchise/Name Rooms/Suites Description Opening Date
- -------- -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Montgomery, AL Embassy Suites 237 Atrium; 8/95
Meeting Space: 15,000 sq. ft. (c)
Tucson, AZ Holiday Inn 299 Atrium; 11/81
Meeting Space: 14,000 sq. ft.
Tucson, AZ Marriott 250 Atrium; 12/96
Meeting Space: 11,500 sq. ft.
Little Rock, AR Embassy Suites 251 Atrium; 8/97
Meeting Space: 14,000 sq. ft.
Springdale, AR Holiday Inn 206 Atrium; 7/89
Meeting Space: 18,000 sq. ft.
Convention Center; 29,280 sq. ft.
Springdale, AR Hampton Inn & Suites 102 Meeting Space: 400 sq. ft. 10/95
Bakersfield, CA Holiday Inn Select 259 Meeting Space: 9,735 sq. ft. (c) 6/95
Monterey, CA Embassy Suites 225 Meeting Space: 13,700 sq. ft. 11/95
Sacramento, CA Holiday Inn 364 Meeting Space: 9,000 sq. ft. 8/79
San Francisco, CA Holiday Inn 280 Meeting Space: 9,000 sq. ft. 6/72
Denver, CO(a) Holiday Inn (International 256 Atrium; 10/82
Airport) Trade Center: 66,000 sq. ft. (b)
Denver, CO Holiday Inn (Northglenn) 235 Meeting Space: 20,000 sq. ft. 12/80
Fort Collins, CO Holiday Inn 259 Atrium; 8/85
Meeting Space: 12,000 sq. ft.
St. Augustine, FL World Golf Village Resort 302 Atrium; 5/98
Convention Center; 40,000 sq. ft.
Tampa, FL Embassy Suites 247 Atrium; 1/98
Meeting Space; 18,000 sq. ft.
Joliet, IL Holiday Inn 200 Meeting Space: 5,500 sq. ft. 3/71
Cedar Rapids, IA Collins Plaza 221 Atrium; 9/88
Meeting Space: 11,250 sq. ft.
Davenport, IA Radisson 221 Meeting Space: 7,800 sq. ft. (c) 10/95
Des Moines, IA Embassy Suites 234 Atrium; 9/90
Meeting Space: 13,000 sq. ft.
Des Moines, IA Holiday Inn 288 Atrium; 1/87
Meeting Space: 15,000 sq. ft.
Topeka, KS Capitol Plaza 224 Atrium; 8/98
Convention Center; 26,000 sq. ft.
Bowling Green, KY University Plaza 218 Meeting Space: 4,000 sq. ft. (c) 8/95
Branson, MO Chateau on the Lake 302 Atrium; Meeting 5/97
Space: 40,000 sq. ft.
Jefferson City, MO Capitol Plaza 255 Atrium; 9/87
Meeting Space: 14,600 sq. ft.
Joplin, MO Holiday Inn 264 Atrium; 6/79
Meeting Space: 8,000 sq. ft.
Trade Center: 32,000 sq. ft. (b)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Kansas City, MO(a) Embassy Suites 236 Atrium; 4/89
Meeting Space: 12,000 sq. ft.
Kansas City, MO Homewood Suites 119 Extended Stay 5/97
Springfield, MO Holiday Inn 188 Atrium; 9/87
Meeting Space: 3,020 sq. ft.
Omaha, NE Embassy Suites 249 Atrium; 1/97
Meeting Space: 13,000 sq. ft.
Reno, NV Holiday Inn 286 Meeting Space: 8,700 sq. ft. 2/74
Albuquerque, NM Holiday Inn 311 Atrium; 12/86
Meeting Space: 12,300 sq. ft.
Greensboro, NC(a) Embassy Suites 221 Atrium; 1/89
Meeting Space: 10,250 sq. ft.
Greensboro, NC(a) Homewood Suites 104 Extended Stay 8/96
Raleigh-Durham, NC Embassy Suites 273 Atrium; 9/97
Meeting Space: 20,000 sq. ft.
Portland, OR(a) Holiday Inn 286 Atrium; 4/79
Trade Center: 37,000 sq. ft. (b)
Portland, OR(a) Embassy Suites 253 Atrium; 9/98
Meeting Space: 11,000 sq. ft.
Columbia, SC Embassy Suites 214 Atrium; 3/88
Meeting Space: 13,000 sq. ft.
Greenville, SC Embassy Suites 268 Atrium; 4/93
Meeting Space: 20,000 sq. ft.
Beaumont, TX Holiday Inn 253 Atrium; 3/84
Meeting Space: 12,000 sq. ft.
Houston, TX(a) Radisson 288 Atrium; 12/85
Meeting Space: 14,300 sq. ft.
Charleston, WV Embassy Suites 253 Atrium; 12/97
Meeting Space: 14,600 sq. ft.
Madison, WI Marriott 292 Atrium; 10/85
Meeting Space: 15,000 sq. ft. (b)
Convention Center: 50,000 sq. ft.
</TABLE>
________________________
(a) Airport location
(b) The trade or convention center is located adjacent to hotel and is owned by
Mr. Hammons, except the convention centers in Madison, Wisconsin and
Denver, Colorado, which are owned by the Company.
(c) Large civic center is located adjacent to hotel.
Managed Hotels
The Managed Hotels consist of five hotels (three Holiday Inns, one Sheraton
and one Days Inn) located in two states (Missouri and South Dakota), and contain
a total of 1,176 guest rooms. Mr. Hammons directly owns four of these five
hotels. The remaining hotel is owned by an entity controlled by Mr. Hammons in
which he has a 50% interest. Jacqueline Dowdy, a director and officer of the
Company, and Daniel L. Earley, a
<PAGE>
director of the Company, each own a 25% interest in this entity. There is a
convention and trade center adjacent to three of the Managed Hotels.
The Company provides management services to the Managed Hotels within the
guidelines contained in annual operating and capital plans submitted to the
hotel owner for review and approval during the final 30 days of the preceding
year. The Company is responsible for the day-to-day operations of the Managed
Hotels. While the Company is responsible for the implementation of major
refurbishment and repairs, the actual cost of such refurbishments and repairs is
borne by the hotel owner. The Company earns a fee based on the size of the
project. The Company earns an average annual management fee of 3% of the
hotel's gross revenues. Each of the Managed Hotels' management contracts is for
an initial term of 20 years, which automatically extends for four periods of
five years, unless otherwise canceled. The Company has received an option from
Mr. Hammons or entities controlled by him to purchase each of the Managed
Hotels.
Item 3. Legal Proceedings.
The Company is not presently involved in any litigation which if decided
adversely to the Company would have a material effect on the Company's financial
condition. To the Company's knowledge, there is no litigation threatened other
than routine litigation arising in the ordinary course of business which would
be covered by liability insurance.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
The Company's Class A common stock (the "Class A Common Stock") has been
listed on the New York Stock Exchange since November 23, 1994 under the symbol
"JQH."
<TABLE>
<CAPTION>
Stock Price Per Share
High Low
<S> <C> <C>
1997
First Quarter $ 9-3/4 $ 7-1/2
Second Quarter $ 9-3/8 $ 8
Third Quarter $ 9-5/8 $ 8-5/8
Fourth Quarter $10-13/16 $ 8-3/16
1998
First Quarter $ 8-15/16 $7-11/16
Second Quarter $ 8 $6-13/16
Third Quarter $ 7-3/16 $3-11/16
Fourth Quarter $ 4-1/2 $ 3-3/16
</TABLE>
On March 19, 1999, there were approximately 270 holders of record of the Class A
Common Stock then outstanding. Based on the number of annual reports requested
by brokers, the Company estimates that it has approximately 2,000 beneficial
owners of its Class A Common Stock. On March 19, 1999, the last reported sale
price of the Class A Common Stock on the NYSE was $4-9/16. No dividends have
been declared for the Company's stock during the past five years.
Item 6. Selected Financial Data.
The information required by this item is hereby incorporated by reference
to the material appearing in the 1998 Annual Report to Shareholders (the "Annual
Report to Shareholders"), filed as Exhibit 13.1 hereto, under the caption
"Selected Financial Data."
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The information required by this item is hereby incorporated by reference
to the material appearing in the Annual Report to Shareholders under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item is hereby incorporated by reference
to the material appearing in the Annual Report to Shareholders under the caption
of "Quantitative and Qualitative Disclosures About Market Risk."
Item 8. Financial Statements and Supplementary Data.
The Financial Statements of the Company are hereby incorporated by
reference to the Consolidated Financial Statements of the Company appearing in
the Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item with respect to directors is hereby
incorporated by reference to the material appearing in the Company's definitive
proxy statement for the annual meeting of shareholders to be held on May 4, 1999
(the "Proxy Statement") under the caption "Election of Directors." Information
required by this item with respect to executive officers is provided in Item 1
of this report. See "Management." The information included in the Proxy
Statement under the caption "16(a) Beneficial Ownership Reports" is hereby
incorporated by reference.
Item 11. Executive Compensation.
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the caption "Executive
Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the captions "Security
Ownership of Management" and "Security Ownership of Certain Beneficial Owners."
Item 13. Certain Relationships and Related Transactions.
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the captions "Certain
Transactions" and "Compensation Committee Interlocks and Insider Participation."
PART IV
Item 14. Exhibits, Financial Schedules, and Reports on Form 8-K.
14(a)(1) Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets at Fiscal 1998 Year-End and Fiscal 1997 Year-
End
<PAGE>
Consolidated Statements of Income for the 1998, 1997 and 1996 Fiscal Years
Consolidated Statements of Changes In Minority Interest and Stockholders
Equity (Deficit) for Fiscal 1998, 1997 and 1996
Consolidated Statements of Cash Flows for Fiscal 1998, 1997 and 1996
Notes to Consolidated Financial Statements
The Consolidated Financial Statements of the Company are hereby
incorporated by reference to the Consolidated Financial Statements of the
Company appearing in the Annual Report to Shareholders.
14(a)(2) Financial Statement Schedules
All schedules have been omitted because the required information in such
schedules is not present in amounts sufficient to require submission of the
schedule or because the required information is included in the consolidated
financial statements or is not required.
14(a)(3) Exhibits
Exhibits required to be filed by Item 601 of Regulation S-K are listed in
the Exhibit Index attached hereto, which is incorporated by reference.
Set forth below is a list of management contracts and compensatory plans
and arrangements required to be filed as exhibits by Item 14(c).
10.5 Form of Option Purchase Agreement
10.7 Employment Agreement between John Q. Hammons Hotels, Inc. and Debra
M. Shantz dated as of May 1,1995 as amended on October 31, 1997.
10.13 Employment Agreement between John Q. Hammons Hotels, Inc. and
Kenneth J. Weber dated as of April 27, 1998
10.18 1994 Employee Stock Option Plan
10.19 1999 Non-Employee Director Stock and Stock Option Plan
14(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended January 1, 1999.
14(c) Exhibits
Exhibits required to be filed by Item 601 of Regulation S-K are listed in
the Exhibit Index attached hereto, which is incorporated by reference.
14(d) Financial Statements
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Springfield, Missouri, on the 31st day of March, 1999
JOHN Q. HAMMONS HOTELS, INC.
By: /s/ John Q. Hammons
--------------------
John Q. Hammons
Chairman and Founder
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
in the capacities at John Q. Hammons Hotels, Inc. on March 31, 1999.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
/s/ John Q. Hammons Chairman and Founder of John Q. Hammons Hotels, Inc.
- -------------------- (Principal Executive Officer)
John Q. Hammons
/s/ Kenneth J. Weber Director, Chief Financial Officer of John Q. Hammons, Hotels, Inc.
- -------------------- (Principal Financial and Accounting Officer)
Kenneth J. Weber
/s/ Jacqueline A. Dowdy Director, Secretary of John Q. Hammons Hotels, Inc.
- ------------------------
Jacqueline A. Dowdy
/s/ William J. Hart Director of John Q. Hammons Hotels, Inc.
- --------------------
William J. Hart
/s/ Daniel L. Earley Director of John Q. Hammons Hotels, Inc.
- ---------------------
Daniel L. Earley
/s/ James F. Moore Director of John Q. Hammons Hotels, Inc.
- -------------------
James F. Moore
/s/ John E. Lopez-Ona Director of John Q. Hammons Hotels, Inc.
- ----------------------
John E. Lopez-Ona
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Title Page
--- ----- ----
<C> <S> <C>
*3.1 Restated Certificate of Incorporation of the Company
*3.2 Bylaws of the Company, as amended
*3.3 Second Amended and Restated Agreement of Limited Partnership of the Partnership
*3.4 Certificate of Limited Partnership of the Partnership, filed with the Secretary of State of
the State of Delaware
*3.5 Agreement of Limited Partnership of John Q. Hammons Hotels Two, L.P.
*3.6 Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of the
Partnership
**3.7 Amendment No. 2 to Second Amended and Restated Agreement of Limited Partnership of the
Partnership
*10.1 1994 Note Indenture
**10.2 1995 Note Indenture
*10.3 Holiday Inn License Agreement
*10.4 Embassy Suites License Agreement
*10.5 Form of Option Purchase Agreement
*10.6 Collective Bargaining Agreement between East Bay Hospitality Industry Association, Inc. and
Service Employee's International Union
***10.6a Collective Bargaining Agreement between Hotel Employee and Restaurant Employee Union Local
49 and Holiday Inn Sacramento--Capitol Plaza, for 06/01/95 to 5/31/98
10.7 Employment Agreement between John Q. Hammons Hotels, Inc. and Debra M. Shantz dated as of
May 1,1995 as amended on October 31, 1997.
*10.8 Letter Agreement re: Hotel Financial Services for Certain Hotels Owned and Operated by John
Q. Hammons or JQH Controlled Companies
***10.9a John Q. Hammons Building Lease Agreement - 9th Floor (6000 sq. ft.)
***10.9b John Q. Hammons Building Lease Agreement - 7th Floor (2775 sq. ft.)
***10.9c John Q. Hammons Building Lease Agreement - 7th Floor (2116 sq. ft.)
***10.9d John Q. Hammons Building Lease Agreement - 8th Floor (6000 sq. ft.)
*10.11 Triple Net Lease
*10.12 Lease Agreement between John Q. Hammons and John Q. Hammons Hotels, L.P.
10.13 Employment Agreement between John Q. Hammons Hotels, Inc. and Kenneth J. Weber dated as of
April 27, 1998
***10.15a Ground lease between John Q. Hammons and John Q. Hammons-Branson, L.P. - (Chateau on the
Lake, Branson, Missouri)
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
***10.15b Ground lease between John Q. Hammons and John Q. Hammons-Hotels Two, L.P. - (Little Rock,
Arkansas)
*10.17 Operating Agreement of Rivercenter Plaza Development Co., L.C., an Iowa limited liability
company
*10.18 1994 Stock Option Plan
10.19 1999 Non-Employee Director Stock and Stock Option Plan
12.1 Computations of Ratio of Earnings to Fixed Charges of the Company
13.1 1998 Annual Report to Shareholders
*21 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
27 Financial Data Schedule
</TABLE>
________________________
* Incorporated by reference to the same numbered exhibit in the Company's
Registration Statement on Form S-1, No. 33-84570.
** Incorporated by reference to the partnership's Registration Statement on
Form S-4, No. 33-99614.
*** Incorporated by reference to the same numbered exhibit in the Company's
Annual Report on Form 10-K for the Fiscal Year Ended January 3, 1997.
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT between John Q. Hammons Hotels, Inc., a Delaware
Corporation (the "Company"), and Debra M. Shantz (the "Executive"), dated as of
the 1st day of May, 1995.
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company.
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Executive
hereby agree as follows:
1. Offer and Acceptance of Employment. Commencing on May 10, 1995 (the
"Effective Date"), the Company agrees to and hereby does, employ the Executive
as its in-house legal counsel. The Executive hereby accepts such employment in
such capacity and agrees to discharge faithfully, diligently, and to the best of
her ability the responsibilities of that position.
2. Term. This Agreement shall commence on the Effective Date for an
initial period of three (3) years (the "Employment Term") and continuing
thereafter from year to year (a "Renewal Term") provided that either the Company
or the Executive may terminate such employment at the end of the Employment Term
or any Renewal Term by giving the other not less than six (6) months prior
written notice of such termination. The foregoing notwithstanding either the
Executive or the Company may terminate such employment ninety (90) days after
the Effective Date (the "Option Period") with two (2) weeks written notice to
the other of such termination.
3. Duties and Responsibilities.
(a) During the Employment Term, the Executive (i) shall be in charge
of overseeing on going litigation in which the Company is involved, (ii)
shall be in charge of
<PAGE>
coordinating the Company's legal matters with outside counsel, (iii) shall
report to the Chairman and President and (iv) shall assume and perform such
further reasonable responsibilities and duties assigned to her by the
President or Chairman of the Board of Directors. If elected or appointed,
the Executive shall serve as a director of the Company without any
additional compensation.
(b) Excluding periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote her working time and
energy to the business and affairs of the Company and to use her best
efforts to perform the responsibilities assigned to her hereunder
faithfully and efficiently. Executive will work thirty-five (35) hours per
week on the Company's affairs and the Company agrees to allow the Executive
flexibility in her work schedule, specifically to include permitting
Executive to depart at 3:00 p.m. each day.
3. Compensation. The following provisions apply during the time the
Executive is employed by the Company:
(a) Base Salary. During the Employment Term, the Executive shall
receive a base salary of Ninety Thousand Dollars ($90,000.00) (the "Base
Salary") payable in accordance with the Company's normal payroll practices
for salaried employees. The Base Salary shall be reviewed annually and may
be increased (but not decreased) in the course of each such review. Under
no circumstances shall any increase in the Base Salary (i) limit or reduce
any other obligation to the Executive under this Agreement or (ii) be later
reduced or eliminated, once effective.
(b) Annual Bonus. In addition to the Base Salary, the Executive
shall be entitled, for each year of the Employment Term or any Renewal
Term, to an annual bonus ("Annual Bonus") in an amount determined by the
Chairman of the Board and President of
<PAGE>
the Company. Each Annual Bonus shall be determined and accrued as of the
end of the fiscal year for which the Annual Bonus is awarded and paid no
later than April 1 of the following year, unless the Executive shall
otherwise timely elect to defer the receipt of the Annual Bonus under any
deferred compensation plan of the Company then in effect.
(c) Savings and Retirement Plans. In addition to the Base Salary and
Annual Bonus payable as hereinabove provided, the Executive shall be
entitled to participate, during the Employment Term and any Renewal Term,
in all savings and retirement plans or programs applicable to other key
executives of the Company.
(d) Welfare Benefit Plans. During the Employment Term and any
Renewal Term, the Executive, and the Executive's dependents as to medical
and dental benefits, shall be eligible to participate in and shall receive
all benefits under each welfare benefit plan of the Company, including,
without limitation, all medical, dental, disability (at least $250,000),
group life (at least $75,000), accidental death and travel accident (at
least $250,000) insurance plans and programs of the Company.
(e) Expenses. During the Employment Term and any Renewal Term, the
Executive shall be entitled, upon submission of proper substantiation, to
receive reimbursement for all reasonable business-related expenses actually
paid or incurred by the Executive in connection with the discharge of her
duties hereunder and in the promotion of the business of the Company.
(f) Fringe Benefits. During the Employment Term and any Renewal
Term, the Executive shall be entitled to fringe benefits in accordance with
the policies of the Company.
<PAGE>
(g) Vacation. The Executive shall be entitled to five (5) days of
paid vacation in 1995 and ten (10) days of paid vacation during 1996, and
fifteen (15) days of paid vacation per year thereafter, excluding weekends
or days which the Company is not open for business, which are the following
holidays: Christmas, New Year's Day, Thanksgiving and the day after,
Memorial Day, Labor Day and July 4th.
(h) Bar Dues. During the Employment Term and any Renewal Term, the
Company shall pay the Executive's Bar Association Dues to allow the
Executive to maintain her membership in the American, Missouri and
Springfield Metropolitan Bar Associations.
(i) Continuing Legal Education. During the Employment Term and any
Renewal Term, the Company shall pay for the Executive to attend the
requisite continuing legal education programs to maintain her license to
practice law.
(j) Malpractice Insurance Premium. During the Employment Term and
any Renewal Term, the Company shall pay for the Executive's Malpractice
Premium to provide the Executive with legal malpractice coverage for errors
and omissions.
(k) Stock Options. The Executive shall receive the option to
purchase shares of the Class A Common Stock of the Company as options are
awarded to the other executives of the Company.
(l) Executive's Assistant. The Company shall hire as the Executive's
Assistant, Micca L. Braden to be paid Twenty-Five Thousand Dollars
($25,000.00) per year. Ms. Braden shall be entitled to paid vacation of
five (5) days during 1995, and ten (10) days per year for each year
thereafter, and health and disability insurance fully paid for by the
Company.
<PAGE>
(m) Legal Resources. The Company shall provide the Executive with
legal publications and resources at the Executive's request, including
subscriptions to legal publications, purchase of software and books
necessary for the Executive to perform her job for the Company.
(n) Highland Springs Country Club Membership. Company shall provide
Executive, during the Employment Term and any Renewal Term, a Social
Membership to Highland Springs Country Club; however, Executive shall pay
all monthly dues and other costs associated with such membership.
5. Termination. The following provisions relate solely to termination of
the Executive's employment during the Employment Term or any Renewal Term:
(a) Death or Disability.
(i) Subject to Section 7 below, this Agreement shall terminate
automatically upon the Executive's death.
(ii) Subject to Section 7 below, the Company shall at all times
have the right to terminate the Executive's employment hereunder at
any time after the Employee shall be absent from her employment, for
whatever cause, including but not limited to mental or physical
incapacity, illness or disability, (collectively "Disability") for a
continuous period of more than twenty-six (26) weeks.
(b) Cause. The Company may terminate the Executive's employment for
"Cause" by a majority vote of the Company's Board of Directors at a meeting
where the Executive has had an opportunity to be present and express her
response. For purposes of this Agreement, "Cause" means (i) the conviction
of the Executive by a court of competent jurisdiction of crime involving
moral turpitude, (ii) the commission by the Executive of an
<PAGE>
act of fraud on the Company; (iii) the misappropriation or attempted
misappropriation by the Executive of any funds or property of the Company,
or (iv) the continuing failure of the Executive to perform her obligations
under Section 2 of this Agreement thirty (30) days after having received a
written notice specifying the manner in which she is failing to perform
those obligations.
6. Notice of Termination. Any termination by the Company for Cause shall be
communicated in writing to the Executive in accordance with Section 13(b) of
this Agreement and if the termination date is other than the date of receipt,
the notice shall specify the termination date.
7. Obligations of the Company Upon Termination. The following provisions
apply only in the event the Executive is terminated during the Employment Term
or any Renewal Term:
(a) Death. If the Executive's employment is terminated by reason of
the Executive's death, this Agreement shall terminate without further
obligation to the Executive's legal representatives under this Agreement
other than those salary, bonus and fringe benefit amounts accrued and
payable hereunder at the date of the Executive's death. Anything in this
Agreement to the contrary notwithstanding, the Executive's family shall be
entitled to receive benefits at least equal to those provided by the
Company generally to surviving families of key executives of the Company
under its plans, programs and policies relating to family death benefits,
if any.
(b) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability, the Executive shall be entitled to receive
the amount specified in Section 7(d)(i) and (ii) hereof and to receive
disability and other benefits at least equal to those provided by the
Company to disabled employees and/or their families in accordance with such
plans, programs, and policies relating to disability, if any.
<PAGE>
(c) Cause. If the Executive's employment shall be terminated for
Cause, the Company shall pay the Executive her Base Salary through the date
of termination at the rate in effect at the time notice of termination is
given and shall have no further obligation to the Executive under this
Agreement except as to vested employee benefits.
(d) Termination or Failure to Renew Without Cause. If the Company
shall terminate or fail to renew the Executive's employment with the
Company without cause:
(i) the Company shall pay to the Executive at the time of
termination, an amount equal to two (2) year's current Base Salary;
and, in the case of vested compensation previously deferred by the
Executive, all amounts of such compensation previously deferred and
not yet paid by the Company;
(ii) the Company shall, promptly upon submission by the Executive
of supporting documentation, pay or reimburse, or cause to be paid or
reimbursed, to the Executive any business related costs and expenses
paid or incurred by the Executive on or before the date of termination
which would have been payable under Section 3(e) if the Executive's
employment had not terminated; and
(iii) until the six-month anniversary of the Executive's
termination, the Company shall continue benefits (or equivalent
coverage) to the Executive and/or the Executive's family at least
equal to those which would have been provided to them in accordance
with the plans, programs and policies described in Sections 3(d) and
3(f) of this Agreement if the Executive's employment had not been
terminated.
8. Non-Competition. At all times during the Executive's employment with the
Company and for a period of two (2) years after the Executive is no longer
employed by the Company, the Executive shall not anywhere in the United States,
directly or indirectly, engage in
<PAGE>
any business, enterprise or employment whether as owner, operator, shareholder,
director, partner, financial backer, creditor, consultant, agent, executive or
any capacity whatsoever that is directly or indirectly competitive with the
business of the Company; provided, however, that the foregoing shall not be
deemed to prohibit the Executive from (i) acquiring, solely as an investment and
through market purchases, securities of any issuer that are registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and
that are listed or admitted for trading on any United States national securities
exchange or that are quoted on the NASDAQ National Market System or any similar
system of automated dissemination of quotations of securities prices in common
use, so long as the Executive is not a member of any control group (within the
meaning of the rules and regulations of the Securities and Exchange Commission)
of any such issuer, and (ii) practicing law at the location of her choice.
9. Non-Solicitation of Employees and Customers. The Executive shall not at
any time during her employment hereunder and for a period of two (2) years after
the date her employment is terminated for any reason, directly or indirectly,
for herself or for any other person, firm, corporation, partnership, association
or other entity, (i) attempt to employ, employ or enter into any contractual
arrangement with any employee or former employee of the Company, its affiliates,
or predecessors-in-interest, unless such employee or former employee has not
been employed by the Company, its affiliates, or predecessors-in-interest for a
period in excess of six (6) months; and/or (ii) call on or solicit any of the
actual or targeted prospective customers or suppliers of the Company with
respect to any matters, related to or competitive with the business of the
Company, nor shall the Executive make known the names or addresses of such
customers or suppliers or any information relating in any manner to the
Company's trade or business relationships with such customers or suppliers.
<PAGE>
10. Non-Disclosure. Except as expressly permitted by the Company, or in
connection with the performance of her duties hereunder, the Executive shall not
at any time during or subsequent to her employment by the Company, disclose,
directly or indirectly, to any person, firm, corporation, partnership,
association or other entity any proprietary or confidential information relating
to the Company or any information concerning the Company's financial condition
or prospects, the Company's customers or suppliers, the Company's sources of
leads and methods of obtaining new business, the design, development, or
construction of the Company's properties or the Company's methods of doing and
operating its business (collectively, "Confidential Information"). Confidential
Information shall not include information which, at the time of disclosure, is
known or available to the general public by publication or otherwise through no
act or failure to act on the part of the Executive. The Executive acknowledges
and agrees that the Confidential Information is a valuable, special and unique
asset of the Company's business.
11. Books and Records. All books, records and accounts relating in any
manner to the Company's customer, suppliers, or methods of conducting business
whether prepared by the Executive or otherwise coming into the Executive's
possession, and all copies thereof in the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of the Executive's employment hereunder or upon the
Company's request at any time.
12. Injunction. The Executive acknowledges that if she were to breach any
of the provisions of Sections 8, 9, 10, or 11 it would result in immediate and
irreparable injury to the Company which cannot be adequately or reasonably
compensated at law. Therefore, the Executive agrees that the Company shall be
entitled, if any such breach shall occur or be threatened or attempted, if it so
elects, to a temporary and permanent injunction, without being required to post
a
<PAGE>
bond, enjoining and restraining a breach by the Executive, her associates, her
partners or agents, either directly or indirectly, and that right to injunction
shall be cumulative to whatever remedies or actual damages the Company may
possess.
13. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company the benefits accrued and payable hereunder
shall not be assignable by the Executive otherwise than by will or the laws
of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors.
(c) In the event that another corporation or unincorporated entity
becomes a Successor (as such term is defined below) of the Company, then
the Successor shall, by an agreement in form and substance reasonably
satisfactory to the Executive, expressly assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform if there had been no Successor. As used herein, the
term "Successor" means another corporation or unincorporated entity or
group of corporations or unincorporated entities which (i) acquires all or
substantially all of the assets of the Company, or (ii) is the surviving
entity as a result of the merger of the Company into that entity.
14. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Missouri. The captions of this Agreement are
not part of the provisions
<PAGE>
hereof and shall have no force or effect. This Agreement may not be amended
or modified otherwise than by a written agreement executed by the parties
hereto or their respective successor and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Debra M. Shantz
------------------- 3760 E. Meadowmere Place
Springfield, Missouri 65809
If to the Company: John Q. Hammons Hotels, Inc.
----------------- 300 John Q. Hammons Parkway
Springfield, Missouri 65802
Attention: John Q. Hammons
with a copy to: William J. Hart
-------------- Farrington & Curtis, P.C.
750 No. Jefferson
Springfield, Missouri 65802
or to such other address as either party shall have furnished to the other
in writing on accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
(c) If any term or provision of the Agreement or the application
hereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of that
term or provision to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law. Moreover, if a court of competent
jurisdiction deems any
<PAGE>
provisions hereof to be too broad in time, scope or area, it is expressly
agreed that provision shall be enforced to a lesser degree which the court
of competent jurisdiction finds enforceable.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state and local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof.
(f) Any waiver of any breach of this Agreement shall not be construed
to be a continuing waiver of consent to any subsequent breach by either
party hereto.
(g) In the event that either party hereto brings suit for the
collection of any damages resulting from, or the injunction of any action
constituting, a breach of any of the terms or provisions of this Agreement,
then the party found to be at fault shall pay all reasonable court costs
and attorneys' fees of the other.
(h) The Executive shall not delegate the employment obligations
pursuant to this Agreement to any other person.
IN WITNESS WHEREOF, the Executive has hereunto set her hand, and the
Company has caused these presents to be executed in its name on its behalf, all
as of the day and year first above written.
JOHN Q. HAMMONS HOTELS, INC.
________________________________ By ______________________________________
Debra M. Shantz John Q. Hammons, Chairman of the Board
<PAGE>
EXHIBIT 10.7
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT is made and entered into as of the 31st day of October,
1997, by and between John Q. Hammons Hotels, Inc. (the "Company") and Debra
Mallonee Shantz (the "Executive").
WHEREAS, the Company and Executive previously entered into an
Employment Agreement dated as of May 1, 1995, (the "Agreement") and Company and
Executive now desire to amend the terms of the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
provisions set forth herein and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Company and
Executive hereby agree to amend the Agreement as follows:
1. Paragraph 2 - Term shall be amended in its entirety as follows:
"This Agreement shall continue for a renewal term of three
(3) years (the "Renewal Term"), commencing May 1, 1998, and
continuing thereafter from year to year, provided that either the
Company or the Executive may terminate such employment at the end
of the Renewal Term by giving the other not less than six months'
prior written notice of such termination."
2. Paragraph 3(a) - Compensation shall be amended in its entirety as
follows:
"Base salary. During the Renewal Term, the Executive shall
receive a base salary of One Hundred Thirty-five Thousand Dollars
(135,000.00) (the "Base Salary"), payable in accordance with the
Company's normal payroll practices for salaried employees. The
Base Salary shall be reviewed annually and may be increased (but
not decreased) in the course of each such review. Under no
circumstances shall any
<PAGE>
increase in the Base Salary (i) limit or reduce any other
obligation to the Executive under this Agreement or (ii) be later
reduced or eliminated once effective."
3. Continuing Validity. Except as expressly modified herein, all
remaining terms and conditions of the Agreement shall remain in
full force and effect.
COMPANY
John O. Hammons Hotels, Inc.
-------------------------------------
JOHN Q. HAMMONS
Chairman of the Board and
Chief Executive Officer
EXECUTIVE
-------------------------------------
Debra Mallonee Shantz
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement"), executed March 27, 1998, and
to be effective April 27, 1998, is by and between JOHN Q. HAMMONS HOTELS, INC.,
a Delaware Corporation (the "Company"), and KENNETH J. WEBER ("Employee").
RECITALS
--------
Employee will be employed as the Chief Financial Officer of the Company on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
AGREEMENT
---------
1. Employment. The Company hereby employs Employee as Executive Vice
President and Chief Financial Officer ("CFO") of the Company for the Term (as
defined below) of this Agreement, and Employee hereby accepts employment on the
terms and subject to the conditions set forth herein. Employee shall have and
exercise the authority and perform the duties normally incident to the office of
CFO, as well as such other duties as may be reasonably delegated to him by the
Company's Chief Executive Officer (the "CEO") and Board of Directors (the
"Board").
2. Term of Agreement. The term of this Agreement (the "Term") shall begin
on April 27, 1998, or such earlier date as mutually agreed upon by the parties
hereto (the "Commencement Date"), and shall continue until the date that is
three (3) years after the Commencement Date.
3. Compensation.
(a) Base Salary. The Company shall pay to Employee an annual salary of
Two Hundred Fifty Thousand Dollars ($250,000.00) (the annual salary, as it may
be increased from time to time by the Board on an annual basis, is referred to
herein as the "Base Salary") in equal bi-weekly installments.
(b) Discretionary Bonus. Each year during the Term, the Company shall
pay to Employee a bonus (the "Annual Bonus") of up to thirty-five percent (35%)
of his Base Salary for that year based on reasonable, performance-based
standards as established from time to time in the reasonable discretion of the
Board based on the following criteria: one-half (1/2) of the Annual Bonus shall
be based on the Compensation Committee's evaluation of Employee's overall job
performance; the other one-half (1/2) of the Annual Bonus shall be based on the
financial performance of the Company during that year, including the relative
financial performance of the Company as compared to the immediately preceding
year, and the extent to
-1-
<PAGE>
which the Company has met or exceeded the Company's annual budget projections as
adopted by the Board for that year.
All bonuses payable pursuant to this Section 3(b) shall be paid to
Employee in cash or other immediately available funds at the same time bonuses
are paid to the other officers of the Company.
(c) Stock Options. The Company shall grant to Employee options to
purchase one hundred thousand (100,000) shares ("Options") of the Company's
Class A Common Stock, par value One Dollar ($1.00) ("Common Stock"), for their
fair market value on the grant date of the option, pursuant to the Company's
1994 Stock Option Plan as in effect on the date hereof.
Except as otherwise provided herein, each of the Options granted
hereunder shall vest and become exercisable over a four (4) year period
following their Grant Date as follows: twenty-five percent (25%) of the granted
Options shall vest and become exercisable on each anniversary of the Grant Date
of the Options. Notwithstanding the foregoing, all Options granted to Employee
shall immediately vest and become exercisable upon the sale, merger,
reorganization or recapitalization of the Company pursuant to which the holders
of the Common Stock of the Company become entitled to receive stock, securities,
or other assets in exchange for their shares of Common Stock.
4. Benefits. Employee shall be entitled to receive the following benefits
from the Company:
(a) Insurance. The Company shall, at its sole expense, if Employee is
insurable at standard rates, purchase and maintain during the Term (i) a life
insurance policy on Employee's life, payable to one (1) or more beneficiaries
designated by Employee, in the aggregate amount of Five Hundred Thousand Dollars
($500,000.00); and (ii) such medical and disability insurance as is generally
available to other executive employees of the Company. If immediate coverage
under the Company's insurance plans is not available to Employee as of the
Commencement Date, the Company shall pay, or reimburse Employee for, the cost of
maintaining full coverage under Employee's existing life, health and disability
insurance policies until Employee is covered under the Company's plans.
(b) Retirement Plan. Employee shall be entitled to participate in any
retirement, savings or benefit plans that the Company makes available to any of
its executive employees.
(c) Club Memberships. The Company shall provide membership at (i)
Highland Springs Country Club, and (ii) the Tower Club (collectively, the
"Country Clubs"). Employee shall be responsible for all monthly dues and food
and other incidental charges incurred by Employee for personal use at the
Country Clubs.
(d) Vacation. Employee shall be entitled to two (2) weeks of paid
vacation during calendar 1998 and four (4) weeks of paid vacation per year
beginning in January, 1999.
-2-
<PAGE>
(e) Indemnity; D & O Insurance. To the extent permitted by law, the
Company shall indemnify Employee for any and all liability or damages incurred
by Employee in connection with his employment hereunder; and Employee shall be
covered by any Directors and Officers Liability Insurance which is maintained by
Company.
(f) Miscellaneous. The Company shall reimburse Employee for all costs
and expenses reasonably incurred by Employee in connection with the performance
of his duties hereunder.
5. Relocation.
(a) The Company shall reimburse Employee for two (2) trips to
Springfield for Employee and his spouse (including one (1) trip with his
children), to locate a residence in Springfield, and all costs and expenses
reasonably incurred in connection therewith, including meals, transportation,
and lodging at a hotel affiliated with the Company.
(b) If Employee begins work at the Company before his immediate family
moves to Springfield, the Company shall reimburse Employee for all reasonable
expenses incurred in connection with Employee's reasonable round-trip travel
between Springfield and New York, for up to three (3) months after the
Commencement Date.
(c) The Company shall pay the direct relocation costs for Employee and
his family to move from New York to Springfield, including without limitation
(i) packing and moving their personal effects, furniture and other property
(including the cost of shipping up to three (3) cars or, if one (1) or more of
the cars are driven to Springfield, the costs associated therewith including
mileage reimbursement), (ii) travel costs (including meals and lodging), (iii)
the costs of renting an apartment or other temporary living arrangements for up
to six (6) months, or until employee purchases a home in Springfield, whichever
is earlier, (iv) temporary storage costs for Employee's furniture and personal
effects for up to six (6) months, and (v) insurance costs related to the move.
To the extent that the amount of any reimbursement hereunder will be
included in Employee's taxable income (Federal or State), and is not deductible
for income tax purposes, the Company shall pay to Employee as reimbursement for
such moving expenses an aggregate amount that is sufficient to cover all of
Employee's out-of-pocket moving expenses on an after-tax basis. For example, and
without limiting the generality of the foregoing, if reimbursement of Seven
Hundred Fifty Dollars ($750.00) of Employee's actual moving expenses would be
included in Employee's taxable income (without an offsetting deduction), and if
Employee were taxed at a twenty-five percent (25%) effective rate (combined
Federal and State), then the Company would be obligated to pay Employee an
aggregate of One Thousand Dollars ($1,000.00) for such moving expenses (i.e.,
Seven Hundred Fifty Dollars ($750.00) on an after-tax basis).
6. Termination.
-3-
<PAGE>
(a) The Company may terminate this Agreement at any time with or
without "Cause." As used herein, the term "Cause" means gross negligence, fraud
or wilful misconduct.
(b) If Employee is terminated for Cause or if Employee voluntarily
terminates his employment with the Company prior to the end of the Term, (i)
Employee shall be entitled to receive his Base Salary through the date of such
termination; (ii) any Stock Options not vested at the time of such termination
shall be forfeited; and (iii) Employee will not be entitled to receive his
Annual Bonus, or any portion thereof, for the fiscal year in which such
termination occurs.
(c) This Agreement shall terminate upon the death of Employee or, at
the election of the Company, if Employee is unable to perform his duties
hereunder by reason of illness, injury or incapacity for one hundred eighty
(180) consecutive days ("Disability") (during which time Employee shall continue
to be compensated as provided herein).
(d) Either the Company or Employee may elect not to extend the Term by
giving written notice of such non-extension to the other party at least one
hundred and twenty (120) days prior to the end of the Term.
(e) If the Company materially changes the authority and duties of
Employee, such that he no longer serves as the CFO of the Company, and Employee
resigns as a result thereof, then the Company shall be deemed to have terminated
the Employee without Cause for purposes of this Agreement.
7. Severance. If this agreement is terminated (i) by the Company without
Cause, (ii) pursuant to an election by the Company not to extend the Term, (iii)
upon the death or Disability of Employee, or (iv) by either the Company or
Employee if there is a material change in Employee's authority and duties such
that he no longer serves as the CFO, then Employee shall be entitled to
severance pay equal to his Base Salary for the balance of the year in which the
termination occurs and an amount equal to one (1) year of his Base Salary and
prior years bonus, and all Options granted to Employee shall immediately vest
and be exercisable.
8. Covenant Not to Compete. Employee agrees that during the Term and for
one (1) year after the termination of this Agreement by Employee prior to the
end of the Term (except pursuant to Section 6(e) above), Employee will not,
without the prior written consent of the Chief Executive Officer of the Company,
which will not be unreasonably withheld, accept employment with, or serve as a
consultant to, or become an investor with, officer, director or shareholder of
any person, firm or corporation (including any new business started by Employee
alone or with others) that directly competes with the Company in any market
where Company has an existing hotel or has plans, as of the termination of
Employee's employment, for the construction of a hotel.
9. Miscellaneous.
(a) For purposes of this Agreement, all notices and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when personally delivered, two (2) days after deposit in the mail if
mailed by certified mail, return receipt
-4-
<PAGE>
requested, or when received if delivered by a nationally recognized overnight
courier service, or by facsimile. Notices to the Company shall be given to the
Company's secretary, addressed to the Company's corporate headquarters. Notices
to Employee shall be addressed to Employee's most recent address as set forth in
the personnel records of the Company. Either party shall be entitled to change
the address at which notice is to be given by providing notice to the other
party of such change in the manner provided herein.
(b) This Agreement sets forth the entire agreement of the parties with
respect to the subject matter hereof, and supersedes all prior agreements,
whether written or oral. This Agreement may be amended only by a writing signed
by the parties hereto. Each party represents and warrants that this Agreement
has been duly and validly authorized, executed and delivered by such party and
constitutes a valid and binding obligation of such party, enforceable against
such party in accordance with its terms.
(c) This Agreement shall be binding upon, and inure to the benefit of
the parties, their respective heirs, successors, personal representatives and
assigns.
(d) No waiver of any provision of this Agreement shall be valid unless
it is in writing and signed by the person or party against whom it is charged.
(e) This Agreement may be executed in one (1) or more counterparts,
any one (1) of which need not contain the signatures of more than one (1) party,
but all such counterparts taken together will constitute one (1) and the same
instrument. Signatures may be exchanged by telecopy, with original signatures to
follow. Each party to this Agreement agrees that it will be bound by its own
telecopied signature and that it accepts the telecopied signature of the other
party to this Agreement.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the state of Missouri.
IN WITNESS WHEREOF, Company and Employee have caused this Employment
Agreement to be executed as of the date first set forth above.
COMPANY:
JOHN Q. HAMMONS HOTELS, INC.
By:_________________________________
Name (Print):_______________________
Title:______________________________
EMPLOYEE:
-5-
<PAGE>
____________________________________
Kenneth J. Weber
-6-
<PAGE>
EXHIBIT 10.19
JOHN Q. HAMMONS HOTELS, INC.
1999 NON-EMPLOYEE DIRECTOR STOCK AND STOCK OPTION PLAN
This John Q. Hammons Hotels, Inc. 1999 Non-Employee Director Stock and Stock
Option Plan (the "Plan"), was duly adopted by t he Board of Directors for John
Q. Hammons Hotels, Inc., a Delaware corporation (the "Company") on February 23,
1999.
Article I: Purpose
The purpose of the Plan is to encourage qualified persons to become and remain
directors of the Company, and to provide directors of the Company with a direct
stake in its success.
Article II: Definitions
Unless otherwise defined herein, in this Plan the following terms shall have the
following respective meanings:
2.1 "Board of Directors" or the "Board" means the Board of Directors of the
Company.
2.2 "Cause" shall mean a finding by the Board that the Grantee has been engaged
in disloyalty to the Company, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the course
of his or her service, or has disclosed trade secrets or confidential
information of the Company to persons not entitled to receive such information.
2.3 "Chairman of the Board" means the Chairman of the Board of Directors.
2.4 "Committee" means a Committee of the Board, which consists of no fewer than
two members of such Board, all of whom meet the criteria of "Non-Employee
Directors" as defined in Rule 16b-3(b)(3)(i), promulgated pursuant to Section 16
of the Exchange Act.
2.5 "Common Stock" means the shares of Class A Common Stock, par value $.01 per
share, of the Company.
2.6 "Director" means a member of the Board.
2.7 "Eligible Director" means a Director who is not an employee of the Company
or any of its subsidiaries or other affiliates as of the date of the relevant
grant of an Option or shares of Common Stock.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as now in effect
or as hereafter amended.
2.9 "Fair Market Value" of a security means, as of any date, (i) the average of
the high and the low price of the security as reported on the consolidated tape
of the New York Stock Exchange,
<PAGE>
or if the New York Stock Exchange is closed on such date, the next preceding
date on which it was open, or (ii) if the security is not listed for trading on
the New York Stock Exchange, but is listed for trading on another national
securities exchange or the NASDAQ National Market, the closing price, of the
security as reported on the consolidated transaction reporting system applicable
to such security, or if no such reported sale of the security shall have
occurred on such date, on the next preceding date on which there was such a
reported sale, or (iii) if the security is not listed for trading on a national
securities exchange or the NASDAQ National Market, but is listed on the NASDAQ
SmallCap Market, the average of the closing bid and asked prices, regular way,
on the NASDAQ SmallCap Market or, if no such prices shall have been so reported
for such date, on the next preceding date for which such prices were so
reported. If the shares of Stock are not listed on any of these markets, Fair
Market Value shall be determined by the Board in good faith.
2.10 "Grantee" means the holder of an Option or any person entitled to exercise
an Option or any person granted Common Stock under the Plan.
2.11 "Option" means a right to purchase Common Stock granted under this Plan.
Article III: Administration
Subject to the provisions of the Plan, the Board or the Committee shall have the
power to construe and interpret the Plan, to determine all questions arising
thereunder, and to adopt and amend rules for the administration of the Plan;
provided, however, that no such interpretation or rule shall change the number
of Options or shares that may be granted under the Plan or the terms upon which,
or the times at which, or the periods within which, such Options may be
exercised. Any actions of the Board or the Committee shall otherwise maintain
the applicable exemption from short-swing profits liability under Section 16 of
the Exchange Act. Any decision of the Board in the administration of the Plan
shall be final.
Article IV: Amount of Common Stock
The aggregate number of shares of Common Stock in respect of which Options may
be exercised and shares of Common Stock which may be granted shall not exceed
500,000, subject to adjustment pursuant to Article VII. Such shares of Common
Stock shall be previously-issued shares reacquired by the Company. If any
Options terminate or expire without being exercised in whole or in part, new
Options may be granted covering the shares not purchased under such terminated
or expired Options.
<PAGE>
Article V: Grant of Options
5.1 Annual Grants of Options and Common Stock. Commencing with the 1999 annual
meeting of stockholders, each Eligible Director who is in office on the day
immediately after the election of directors at an annual meeting of the
stockholders of the Company:
(i) shall automatically be granted a number of shares of Common Stock with
a Fair Market Value equal to $10,000 on the date of grant, and
(ii) shall automatically be granted an option to purchase 10,000 shares of
Common Stock.
5.2 Term of Options. Each Option shall have a term ("Term") of 10 years
beginning on the date of grant, unless earlier terminat ed as provided herein.
5.3 Exercise Price. The purchase price per share of Common Stock subject to an
Option (the "Exercise Price") shall be the Fair Market Value of a share of
Common Stock on the date of grant, subject to adjustment pursuant to Article
VII.
5.4 Option Agreements. Each Option shall be evidenced by an agreement in such
form as the Board or Committee shall prescribe from time to time and shall be
consistent with the Plan.
Article VI: Exercise of Options
6.1 Vesting. Each Option granted under the Plan shall be exercisable in respect
of twenty five percent of the number of shares of Stock subject to the Option on
each of the first four anniversaries of the date on which the Option was
granted. The foregoing installments, to the extent not exercised, shall
accumulate and be exercisable prior to the termination of the Option.
6.2 Exercise. An Option shall be exercised, in whole or in part by delivery
during the Term to the Company of (i) written notice of the exercise specifying
the number of shares to be purchased and (ii) full payment in cash for the
shares of Common Stock being acquired thereunder. Such delivery may occur on any
business day, at the Company's principal office, addressed to the attention of
the Secretary.
6.3 Exercise After Termination of Directorship. If a person shall cease to be a
Director for any reason other than for Cause while holding an unexpired Option
that has not been fully exercised, such Option shall terminate three months
thereafter; provided that such person, or in the case of the Director's death or
adjudication of incompetency, the Director's executor, administrator,
distributees, guardian or legal representative, as the case may be, may exercise
the Option (to the extent that it was exercisable pursuant to Section 6.1 on the
date the person ceased to be a Director) at any time until the earlier to occur
of (i) one year after the date such person ceased to be a Director, or (ii) the
expiration of the Term of such Option. If a person ceases to be a
<PAGE>
member of the Board for "Cause," any option held by the Grantee shall terminate
as of the date the Grantee ceases to be a member of the Board.
Article VII: Changes in Capitalization
7.1 Adjustments. If the outstanding Common Stock is changed by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split, reverse stock split, stock dividend, rights offering, combination, spin-
off, exchange of shares, or the like, an appropriate adjustment shall be made by
the Board to (i) the aggregate number of shares then-remaining available under
the Plan, (ii) the number of shares of Common Stock in respect of which Options
and Common Stock are subsequently to be granted, and (iii) to the extent that
the following adjustments are necessary to preserve the economic value of
unexercised Options, the number or type of shares of capital stock subject to,
and the exercise price of, outstanding Options.
7.2 No Fractional Shares. If a fraction of a share would otherwise result from
any adjustment pursuant to Section 7.1, the adjusted share amount shall be
rounded to the nearest whole number.
Article VIII: Miscellaneous
8.1 Options Non-Transferable. An Option shall not be transferable by its
Grantee except by will or the laws of descent and distribution and shall be
exercisable during the Grantee's lifetime only by the Grantee or his or her
guardian or legal representative; provided, however, that a Grantee may in a
manner and to the extent permitted by the Board or Committee (a) designate in
writing a beneficiary to exercise an Option after his or her death or (b)
transfer an Option to a revocable, inter vivos trust as to which the Grantee is
the settler and trustee.
8.2 Expenses. The expenses of the Plan shall be borne by the Company. Any taxes
imposed on a Grantee upon exercise of an Option or receipt of a grant of Common
Stock shall be paid by such Grantee.
8.3 No Right to Re-Election. Neither the Plan nor any action taken hereunder
shall be construed as giving any Director any right to be retained or re-elected
as a Director.
8.4 Securities Registration. The Company shall not be obligated to deliver any
shares of Common Stock hereunder until there has been compliance with all
applicable state and federal securities laws; provided, however, that the
Company shall use all reasonable efforts to cause any such compliance.
8.5 Rule 16b-3. The intent of this Plan is to qualify for the exemption provided
by Rule 16b-3 under the Exchange Act. To the extent any provision of the Plan or
action by the Plan administrators does not comply with the requirements of Rule
16b-3, it shall be deemed inoperative, to the extent permitted by law and deemed
advisable by the Plan administrators, and shall not affect the validity of the
Plan. In the event Rule 16b-3 is revised or replaced, the Board may exercise
discretion to modify this Plan in any respect necessary to satisfy the
requirements of the revised exemption or its replacement.
<PAGE>
8.6 Taxes. The Company shall not be required to issue shares of Common Stock
upon the exercise of an Option unless the Grantee shall first pay to the Company
such amount, if any, as may be requested by the Company to satisfy any liability
to withhold federal, state, local or foreign income or other taxes relating to
such exercise.
8.7 Rights as Stockholder. A Grantee shall not by reason of any Option have
any right as a stockholder of the Company with respect to the shares of Common
Stock which may be deliverable upon exercise of such Option until such shares
have been delivered to him or her.
8.8 Severability. If all or any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of the Plan not declared to
be unlawful or invalid. Any Section or part of a Section so declared to be
unlawful or invalid shall, if possible, be construed in a manner which gives
effect to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.
8.9 Applicable Law. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of Delaware.
Article IX: Amendment
---------------------
The Plan may be amended from time to time by the Board as it shall deem
advisable, including amendments necessary to qualify for any exemption or to
comply with applicable law or regulations; provided, however, that no amendment
to the Plan may be made which changes (i) the criteria for Eligible Directors or
(ii) the vesting conditions, term of exercisability, grant timing, grant amount
or exercise price of Options in a manner that causes the plan to be other than a
"formula plan" as defined under applicable SEC regulations promulgated pursuant
to Section 16 of the Exchange Act. No amendment of the Plan shall adversely
affect the rights of any Grantee under an Option without the consent of such
Grantee.
Article X: Termination
----------------------
The Plan shall terminate on February 23, 2009, unless sooner terminated by the
Board. Any termination of the Plan shall not affect any Option then outstanding.
The Company may retain the right in an Option Agreement to cause a forfeiture of
the shares of Stock or gain realized by an Optionee on account of that Optionee
taking actions prohibited by the applicable Option Agreement.
<PAGE>
EXHIBIT 12.1
JOHN Q. HAMMONS HOTELS, INC.
HISTORICAL RATIO OF EARNINGS TO FIXED CHARGES
(000's omitted)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
HISTORICAL EARNINGS:
Net income before extraordinary item $15,386 $18,729 $18,524 $ 8,79 $ 338
Add:
Interest, amortization or deferred
financing fees and other fixed
charges (excluding interest
capitalized) 33,308 28,904 36,337 45,08 58,257
------- ------- ------- ------ -------
Historical earnings $48,694 $47,633 $54,861 $53,87 $58,595
======= ======= ======= ====== =======
FIXED CHARGES:
Interest expense and
amortization of deferred
financing fees $32,932 $28,447 $35,620 $44,32 $57,286
Interest capitalized 957 5,270 7,162 10,25 6,163
Interest element of rentals 376 457 717 76 971
------- ------- ------- ------ -------
Fixed charges $34,265 $34,174 $43,499 $55,34 $64,420
------- ------- ------- ------ -------
RATIO OF EARNINGS TO FIXED CHARGES (A) 1.42 1.39 1.26 0.97 0.91
======= ======= ======= ====== =======
</TABLE>
(A) In computing the ratio of earnings to fixed charges, earnings have been
based on income from operations before income taxes and fixed charges
(exclusive of interest capitalized) and fixed charges consist of interest
and amortization of deferred financing fees (including amounts capitalized)
and the estimated interest portion of rents (deemed to be one-third of
rental expense).
<PAGE>
[INSERT PHOTO]
John Q. Hammons
----------------
HOTELS & RESORTS
300 john q. hammons parkway . suite 900 . springfield, mo 65806 . (417) 864-4300
. www.jqhhotels.com
<PAGE>
[INSERT PHOTO]
John Q. Hammons
----------------
HOTELS & RESORTS
[INSERT PHOTO] 19
98
annual report 1998
---------------------------------------------------
THE BUILDING BLOCKS OF OUR SUCCESS
<PAGE>
financial highlights
- ---------------------------------------------------------------
(in thousands, except per share amounts, ratios and hotel data)
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
OPERATING RESULTS
Total Revenues $326,130 $302,274 $268,847
OTHER DATA
EBITDA $ 95,029 $ 87,897 $ 78,178
SHARE DATA
EBITDA per share/LP Unit $ 4.25 $ 3.93 $ 3.49
Operating Cash Flow per share $ 1.69 $ 1.95 $ 1.90
(EBITDA less interest expense)
SELECTED BALANCE SHEET DATA
Total Assets $876,486 $816,733 $658,072
Total Debt, including Current Portion $759,716 $695,791 $531,143
Minority Interest of Holders of
Limited Partner Units $ 27,392 $ 39,399 $ 33,662
Equity $ 17,847 $ 18,508 $ 16,094
OPERATING DATA
Number of Hotels 42 45 39
Number of Rooms 10,293 11,108 9,666
Average Occupancy 62.1% 62.9% 64.7%
Average Daily Room Rate (ADR) $ 91.38 $ 82.38 $ 76.16
Room Revenue per Available
Room (RevPAR) $ 56.79 $ 51.84 $ 49.25
</TABLE>
revenue
- ----------------------------------------
350,000 326,103
302,274
300,000
268,847
250,000
200,000
150,000
100,000
- ----------------------------------------
1996 1997 1998
occupancy
- ----------------------------------------
65.0%
64.7%
64.0%
63.0% 62.9%
62.1%
62.0%
61.0%
60.0%
59.0%
58.0%
57.0%
56.0%
- ----------------------------------------
1996 1997 1998
adr
- ----------------------------------------
95.00
91.38
90.00
85.00
82.38
80.00
76.16
75.00
70.00
65.00
60.00
- ----------------------------------------
1996 1997 1998
revpar
- ----------------------------------------
58.00 56.79
56.00
54.00
52.00
51.84
50.00
49.25
48.00
46.00
44.00
42.00
40.00
- ----------------------------------------
1996 1997 1998
<PAGE>
[ ]
we will build and maintain the finest
hotel PRODUCT in the country.
[ ]
we will build in LOCATIONS that are ripe for growth.
[ ]
we will form PARTNERSHIPS with brands
that share our vision.
[ ]
we will employ quality PEOPLE with
a commitment to excellence.
we will constantly seek new ways to maximize returns for shareholders.
these are the BUILDING BLOCKS on which our company stands.
on which our company will continue to grow.
and that together, form a strong foundation for our organization.
----------------------------------------------------------------------
<PAGE>
BOARD OF DIRECTORS
JOHN Q. HAMMONS
Founder, Chairman &
Chief Executive Officer
John Q. Hammons Hotels, Inc.
KENNETH J. WEBER
Executive Vice President
Chief Financial Officer
John Q. Hammons Hotels, Inc.
JACQUELINE A. DOWDY
Secretary
John Q. Hammons Hotels, Inc.
DANIEL L. EARLEY
President, Clermont Savings Bank
WILLIAM J. HART
Partner, Husch & Eppenberger, LLC
JOHN E. LOPEZ-ONA
President, Anvil Capital
JAMES F. MOORE
Chairman, Champion Products, Inc.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE
James F. Moore
John E. Lopez-Ona
COMPENSATION AND
STOCK OPTION COMMITTEE
Daniel L. Earley
James F. Moore
John E. Lopez-Ona
FINANCE COMMITTEE
John E. Lopez-Ona
Daniel L. Earley
William J. Hart
OFFICERS
JOHN Q. HAMMONS
Founder, Chairman &
Chief Executive Officer
KENNETH J. WEBER
Executive Vice President &
Chief Financial Officer
LONNIE A. FUNK
Senior Vice President
Operations
JACQUELINE A. DOWDY
Secretary
STEVEN E. MINTON, AIA
Senior Vice President
Architecture
PAT A. SHIVERS
Senior Vice President
Administration & Control
JOHN D. FULTON
Vice President
Design & Construction
PAUL MUELLNER
Vice President
Corporate Controller
JAMES MILLER
Vice President
Sales & Marketing
DEBRA MALLONEE SHANTZ
Corporate Counsel
LAWRENCE A. WELCH
Vice President
Food & Beverage
ROBERT FUGAZI
Regional Vice President
Southern Region
Houston, Texas
JOE MORRISSEY
Regional Vice President
Midwest Region
Kansas City, Missouri
WILLIAM MEAD
Regional Vice President
Eastern Region
Greensboro, North Carolina
ROBERT NIEHAUS
Regional Vice President
Western Region
Sacramento, California
BILL PARKER
Regional Vice President
Central Region
Springfield, Missouri
<PAGE>
[INSERT PICTURE]
the atrium at embassy suites downtown/old market, omaha
<PAGE>
[INSERT PICTURE]
MANAGEMENT TEAM OF
JOHN Q. HAMMONS HOTELS, INC.
Front row (left to right): Jacqueline Dowdy, Pat Shivers, John Q. Hammons,
Robert Fugazi, Kenneth Weber, Bill Parker, Steven Minton
Second row (left to right): Veanne Stocking, William Mead, John Fulton, Debra
Mallonee Shantz, James Miller, Mark Gundlach
Third row (left to right): Joe Morrissey, Lonnie Funk, Larry Welch, Paul
Muellner, Robert Niehaus
a letter to our shareholders
- --------------------------------------
1998 WAS A WATERSHED YEAR FOR JOHN Q. HAMMONS HOTELS, INC.
Not only because we own and manage the strongest portfolio of hotels in the
nation. But because our properties gain strength every day.
In recent years, we have been the predominant developer of upscale, full-
service hotels--adding 18 properties to our portfolio since 1994. Our
hotels have consistently outperformed the industry in average daily rate
(ADR) and revenue per available room (RevPAR). To help this success
continue, the company took a series of actions in 1998 to better enhance
shareholder value, increase earnings and maximize the performance of our
portfolio.
WE ENHANCED OUR STAFF OF QUALITY PEOPLE.
Kenneth J. Weber joined John Q. Hammons Hotels, Inc. in May as executive
vice president and chief financial officer, bringing more than 30 years of
experience in financial accounting and management with some of the world's
premier lodging companies. Ken has served as chief financial officer for
Chartwell Leisure and Omni Hotels, was senior vice president, chief
accounting officer and corporate controller for Red Lion Hotels and spent
several years with Marriott Corporation in various management positions.
Paul Muellner, CPA, joined the team in June as vice president and
controller, solidifying our financial planning team. A 20-year veteran of
the hospitality industry, Paul had previously held senior positions with
such companies as Carnival Hotels & Casinos, Chartwell Leisure, Omni
Hotels, Marriott Corporation and Red Lion Hotels.
Lonnie Funk, a 23-year veteran of John Q. Hammons Hotels, Inc. who has
personally been involved in the opening of more than half of our
properties, was named senior vice president, operations, in October.
Concurrent with Lonnie's appointment, John Q. Hammons Hotels, Inc. created
the position of district director, naming Veanne Stocking and Mark Gundlach
as the first two executives to hold this title. They will oversee smaller
groups of hotels, enabling more efficient operation of our properties
nationwide.
2
<PAGE>
WE IMPLEMENTED NEW PROGRAMS.
In July, John Q. Hammons Hotels, Inc. partnered with Food Insights, Inc. of
Cordova, Tennessee, to implement a system-wide food and beverage purchasing
program that will enable the company to consolidate and track all food
purchases, saving an estimated $1 million per year.
To ensure the program's success, John Q. Hammons Hotels, Inc. has
established five regional purchasing teams, comprised of an executive chef
and food and beverage director, responsible for establishing standards of
product quality and delivery performance. The regional purchasing team
structure allows for "bottom up" support and implementation in the field.
WE REINVESTED IN OUR OWN COMPANY.
This past year, we invested $20 million in refurbishment and capital
expenditure in our existing hotels. And last December, our board of
directors authorized the repurchase of up to $3 million in company stock.
We believe that the stock is currently undervalued and represents a solid
investment for the company.
WE SUSPENDED BUILDING.
In September, we announced that we would delay future development following
the completion of the six current projects, which will be finished by early
2000. By that time, we will own or manage 53 hotels in 22 states. Twenty-
four (or 45%) of those hotels will be five years old or newer. The
suspension of new development will enable these hotels to mature and
generate greater revenue for the company without the burden of additional
development debt and costs.
In 1998, our 10 new hotels (each two years old or newer) generated an
average daily room rate (ADR) of $115.55, with occupancy at 54.1 percent
and revenue per available room (RevPAR) of $62.54. We anticipate that
occupancy and revenue per available room (RevPAR) will both improve as
these properties mature. Overall, John Q. Hammons properties generated an
average occupancy of 62.1 percent, an average daily room rate (ADR) of
$91.38 and revenue per available room (RevPAR) of $56.79.
Company revenues and EBITDA improved for the fourth consecutive year, to
$326.1 million and $95 million, respectively, increasing 7.9 percent and
8.1 percent, respectively, over 1997.
WE NEVER STOPPED LOOKING TOWARD THE FUTURE.
John Q. Hammons properties outpace the competition and the industry for
four key reasons: superior product, superior location, superior
partnerships and superior people.
As we move toward the 21st century, John Q. Hammons Hotels, Inc. has
positioned itself to become stronger than ever. Our core company strategies
will not change. We will continue to own and manage the finest hotels in
the markets we serve, and continue to provide the highest level of
customer satisfaction. We invite you to share in our success.
[INSERT PHOTOS] [INSERT PHOTOS]
/s/ John Q. Hammons /s/ Kenneth J. Weber
John Q. Hammons Kenneth J. Weber
Founder Executive Vice President
Chairman and CEO Chief Financial Officer
3
<PAGE>
SIGNATURE MEETING
FACILITIES
[INSERT PHOTO]
superior product
- --------------------------------------
John Q. Hammons properties consistently rank among the top performers in
their respective markets and outperform the industry as a whole. Our
success is due in large part to our commitment to developing, building,
owning and managing signature hotels that provide the highest level of
customer service in the industry.
OUR HOTELS AND RESORTS OFFER EXCEPTIONAL VALUE TO OUR GUESTS.
We pride ourselves in providing room amenities and meeting space that is
superior to the competition in the markets we serve. Each of our properties
is designed to meet the demands of the market of today and tomorrow, rather
than the market of yesterday.
Our signature atrium is the symbol of our commitment to excellence. With
lush foilage and water features, we create comfortable and secure
environments for those who stay with us.
BEYOND THAT, WE CONTINUALLY STRIVE FOR NEW WAYS TO SERVE OUR GUESTS AND BRING
OUR PROPERTIES INTO THE 21ST CENTURY.
Our Personal Service Desks enable our guest services representatives to
meet one-on-one with customers to provide dedicated individual attention.
Our guest rooms are 15 to 20 percent larger than those in our competitors'
hotels and offer the latest business traveler amenities, such as desk
areas with swivel chairs and dual-line telephones with modem ports.
And all of our new hotels include a corporate business center with fax
machines, computers, secretarial services and work stations to help our
guests get work done while on the road.
It's a known fact that more than 200,000 new hotel rooms have been added by
the industry in the past few years. However, the majority of new hotels are
limited-service properties that offer rooms only. All of our hotels offer
significant, flexible meeting space for business meetings and conventions.
Additionally, many of our properties are attached or located adjacent to
convention centers and exhibition halls--a testament to our belief that
meeting space, coupled with our other innovative features, will distinguish
our hotel properties and sustain our edge in increasingly competitive
markets.
4
<PAGE>
the atrium at embassy suites portland airport
[PHOTO]
<PAGE>
superior location
- ---------------------------------------
John Q. Hammons Hotels, Inc. works closely with local businesses and state
and local officials to develop hotels that meet the needs of the community
and satisfy long-term demand for hotel rooms. In some cases, the company
benefits from incentives offered by local governments and other
organizations interested in ensuring the development of a quality hotel in
their community. In fact, many of our hotels are developed in partnership
with local governments to specifically serve meetings and convention
markets.
As a result, most John Q. Hammons hotels are located near a state capitol,
university, corporate headquarters or airport and serve rapidly growing
markets of 300,000 or more people.
AS OUR FOUNDER WOULD SAY, "WE BUILD WHERE THE PEOPLE ARE."
In 1998, we did just that. Opening four new hotels--adding 1,026 new rooms
and suites and 95,000 square feet of meeting space to our portfolio.
. January saw the completion of our first new property of the year,
the 247-suite Embassy Suites Tampa. Built to answer the needs of
today's successful business travelers, the hotel is ideally located
at the University of South Florida, at the entrance to Busch
Gardens.
. In May, the World Golf Village Resort Hotel opened near St.
Augustine, Florida, joining Branson's Chateau on the Lake as a
premier resort and convention destination.
The World Golf Village Resort Hotel anchors a 6,500-acre
development that will include three championship golf courses, an
IMAX(R) Theater, the International Golf Hall of Fame, The Shops of
World Golf Village, a luxury condominium development, a Mayo Clinic
and the headquarters of PGA TOUR Productions.
The luxury-class hotel is adjacent to the St. John's County
Convention Center, making it the largest combination hotel and
convention center between Atlanta and Orlando, offering more than
40,000 square feet of flexible meeting space for events of all
sizes.
. John Q. Hammons Hotels, Inc. opened the Topeka Capitol Plaza Hotel,
its first hotel in Kansas, in August. Located in the heart of the
Kansas state capital and adjacent to the Kansas Expocentre, the
Capitol Plaza Hotel offers meeting space for groups ranging from 10
to 10,000 people.
. The 253-suite Embassy Suites at Portland Airport opened in
September. Located in one of the West Coast's fastest-growing
markets, and including over 11,000 square feet of meeting space,
this Embassy Suites Hotel is well positioned to become one of the
region's leading business meeting properties.
In 1999 and 2000, John Q. Hammons Hotels, Inc. will open the Hampton Inn &
Suites at Rodeo Center in Mesquite, Texas; the Radisson Resort Coral Springs,
Florida; the Embassy Suites at Dallas/Fort Worth International Airport North at
Bass Pro Shops(R) Outdoor World; the Renaissance Suites Hotel in Charlotte,
North Carolina; the Renaissance Oklahoma City; and the Embassy Suites Charleston
Convention Center/Coliseum, South Carolina.
To enable our shareholders to benefit from the strengthening portfolio, John Q.
Hammons Hotels, Inc. has suspended development of new hotels after the
completion of these six properties.
WORLD GOLF VILLAGE
RESORT HOTEL
St. Augustine, Florida
[PHOTO]
6
<PAGE>
MESQUITE HAMPTON INN & SUITES AT RODEO CENTER
[PHOTO]
RADISSON RESORT CORAL SPRINGS
[PHOTO]
EMBASSY SUITES DALLAS/FORT WORTH INT'L AIRPORT NORTH
AT BASS PRO SHOPS(R) OUTDOOR WORLD
[PHOTO]
RENAISSANCE SUITES HOTEL CHARLOTTE
[PHOTO]
RENAISSANCE OKLAHOMA CITY
[PHOTO]
EMBASSY SUITES CHARLESTON CONVENTION CENTER/COLISEUM
[PHOTO]
<PAGE>
superior partnerships
- ----------------------------------------
John Q. Hammons Hotels, Inc. is affiliated with some of the industry's
best-known, best-performing brands.
OUR PROPERTIES ARE NOW FRANCHISED UNDER NINE DIFFERENT FLAGS,
AS WELL AS OUR OWN PLAZA HOTEL SIGNATURE BRAND.
Our association with this diverse product line, as well as two premier
resorts, has enabled us to identify promising growth markets and develop the
hotel franchise, providing the greatest competitive strength in each
marketplace.
. John Q. Hammons Hotels, Inc. is now the nation's leading developer
of Embassy Suites hotels, with 13 existing Embassy Suites properties
and two more scheduled to open.
Our Embassy Suites hotels are among the brand's top performers,
with four John Q. Hammons Embassy Suites among the franchiser's top
ten. Our Embassy Suites Greenville Resort and Convention Center in
South Carolina received the prestigious Rose Award from Promus Hotel
Corporation as the number one Embassy Suites hotel nationwide.
. Based on our reputation and the success of our Marriott hotels in
Madison, Wisconsin, and Tucson, Arizona, Marriott Corporation
selected John Q. Hammons Hotels, Inc. as the development company to
help take its newly acquired Renaissance brand to a higher level.
In 1999 and 2000, John Q. Hammons Hotels, Inc. will open the first
two newly constructed Marriott-franchised Renaissance hotels.
Both the Renaissance Suites Hotel in the Coliseum/Douglas
International Airport area of Charlotte, North Carolina and the
Renaissance Oklahoma City at Myriad Convention Center will be among
the finest hotels in their respective markets.
. Our third Radisson property, the Radisson Resort Coral Springs,
Florida, will open in April 1999 adjacent to the PGA TOUR Tournament
Players Club at Heron Bay, home of the Honda Classic. The 224-room
resort hotel offers 17,000 square feet of meeting space and will
enhance John Q. Hammons Hotels' position as one of the premier
developers of upscale golf-oriented resorts in the country.
. Our second Hampton Inn and Suites property will open adjacent to the
Rodeo Center in Mesquite, Texas, in March 1999. The Hampton Inn and
Suites at Rodeo Center will offer 160 rooms, including 53 suites and
21,000 square feet of meeting space, on the eastern edge of the
Dallas/Ft. Worth Metroplex. John Q. Hammons Hotels, Inc. will also
manage the adjoining 21,000-square-foot Mesquite Convention Center.
The property will become an important anchor for the annual
Mesquite Rodeo and an attractive destination for conventions and
business meetings.
. Our Holiday Inn hotels continue to be top performers. Five of our 18
Holiday Inns received either Torchbearer or Quality Excellence
Awards at the Bass Hotels and Resorts Worldwide Conference in 1998,
ranking among the top tier of the system's 1,800 hotels worldwide.
John Q. Hammons Hotels, Inc. also owns and manages hotels under the Homewood
Suites, Crowne Plaza and Sheraton flags.
EMBASSY SUITES TAMPA
University of South Florida at
the entrance to Busch Gardens
Tampa, Florida
[PHOTO]
8
<PAGE>
EMBASSY SUITES PORTLAND AIRPORT
Portland, Oregon
[PHOTO]
CHATEAU ON THE LAKE RESORT HOTEL
& CONVENTION CENTER
Branson, Missouri
[PHOTO]
<PAGE>
1998
COMMITMENT TO
EXCELLENCE
[INSERT PHOTO]
superior people
- --------------------------------------------
This past year, John Q. Hammons Hotels, Inc. gained a new level of
experience with the arrival of Executive Vice President/CFO Kenneth Weber
and the promotion of Lonnie Funk to senior vice president of operations.
Additionally, in an effort to foster more effective management of its
hotels, the company split two of its regional operating divisions into
smaller districts. By doing this, the company will not only benefit from
more hands-on management, but offer career advancement opportunities to its
best and brightest managers. The first two executives to hold the new title
of district director, Veanne Stocking and Mark Gundlach, have proven a
level of service, dedication and knowledge of the business that will enable
more effective operations of our hotels nationwide.
Along with Veanne and Mark, more than 8,000 employees across the country
take pride in their work and share in the values that helped build our
company over the past 40 years: hard work, attention to detail and a
commitment to excellence.
WE NEVER LOSE SIGHT OF THE FACT THAT OUR EMPLOYEES ARE VALUABLE ASSETS.
Through ongoing training, recognition programs and promoting from within,
we continually strive to let our people know how important they are to the
future of our company. As a result, John Q. Hammons Hotels, Inc. enjoys one
of the lowest employee turnover rates in the industry.
Superior product. Superior locations. Superior partnerships. And superior
people. Combined, they are the building blocks that result in properties
that consistently outperform the competition and provide superior return on
investment. With your support, we can achieve even more, and enjoy the
rewards of our growing organization. We look forward to a prosperous future
with you.
10
<PAGE>
[INSERT PHOTO]
the grand ballroom at chateau on the lake
<PAGE>
19
98
[INSERT LOGO]
John Q. Hammons
------------------
HOTELS & RESORTS
company profile
- ------------------------------------------------
John Q. Hammons Hotels, Inc. and its subsidiaries (collectively, the
"Company") is a leading independent owner, manager and developer of
affordable upscale hotels in market-driven locations. The Company owns 42
hotels located in 20 states containing 10,293 guest rooms and suites (the
"Owned Hotels"), and manages five additional hotels located in two states
containing 1,176 guest rooms (the "Managed Hotels"). On January 1, 1999,
the Company was at various stages of development on six upscale hotels,
which are scheduled to open during 1999 and 2000 (the "Scheduled Hotels").
The Company will suspend development after the completion of the Scheduled
Hotels. The Company's existing 47 Owned Hotels and Managed Hotels
(together, the "JQH Hotels") operate primarily under the Holiday Inn and
Embassy Suites trade names. Most of the Company's hotels are near a state
capitol, university, airport, corporate headquarters, plant or other major
facility.
The Company's strategy is to increase cash flow and thereby enhance
shareholder value primarily through (i) capitalizing on positive operating
fundamentals in the upscale full-service sector of our markets and
improving the operating results of our newer hotels, (ii) converting the
franchises of its existing hotels to franchise brands that are considered
to be more upscale, and (iii) selling certain mature assets and re-
investing the net proceeds. The Company has designed each new hotel to meet
the specific needs of the market and has engaged in selling efforts months
in advance of the hotel's opening. The Company's entire management team,
including senior management, architects, design specialists, hotel managers
and sales personnel, is involved in the development and continuing
operations of each hotel.
The JQH Hotels are designed to appeal to a broad range of hotel customers,
including frequent business travelers, groups and conventions, and leisure
travelers. Each of the JQH Hotels is individually designed by the Company
and most contain an impressive multi-storied atrium, expansive meeting
space, large guestrooms or suites and comfortable lounge areas. The JQH
Hotels meeting facilities can be readily adapted to accommodate both larger
and smaller meetings, conventions, and trade shows. The 13 Embassy Suites
JQH Hotels are all-suite hotels, which appeal to the traveler needing or
desiring greater space and specialized services. The 18 Holiday Inn JQH
Hotels (owned and managed) are affordably priced hotels designed to attract
the business and leisure traveler desiring quality accommodations.
Management of the JQH Hotels is coordinated from the Company's headquarters
in Springfield, Missouri, by its senior management team. Five regional vice
presidents and two district directors are each responsible for supervising
a group of general managers of JQH Hotels in day-to-day operations.
Centralized management services and functions include development, design,
sales and marketing, purchasing and financial controls. Through these
centralized services, significant cost savings are realized due to
economies of scale.
12
<PAGE>
stock price per share
UNAUDITED QUARTERLY STOCK INFORMATION
The Company's Class A Common Stock (the "Class A Common Stock") has been
listed on the New York Stock Exchange since November 23, 1994 under the symbol
"JQH." Prior to that date, the Company's Class A Common Stock was not publicly
traded.
The following sets forth the high and low closing sales prices of the Class A
Common Stock for the period indicated, as reported by the New York Stock
Exchange Composite Tape:
<TABLE>
<CAPTION>
1997 High Low
<S> <C> <C>
First Quarter $ 9 3/4 $ 7 1/2
Second Quarter $ 9 3/8 $ 8
Third Quarter $ 9 5/8 $ 8 5/8
Fourth Quarter $ 10 13/16 $ 8 3/16
1998 High Low
First Quarter $ 8 15/16 $ 7 11/16
Second Quarter $ 8 $ 6 13/16
Third Quarter $ 7 3/16 $ 3 11/16
Fourth Quarter $ 4 1/2 $ 3 3/16
</TABLE>
On March 10, 1999, the last reported sales price of the Class A Common Stock
on the NYSE was $ 4 5/8. On March 10, 1999, the Company had approximately
2,000 record holders of Class A Common Stock.
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
The selected consolidated financial information of the Company for the 1998,
1997, 1996, 1995 and 1994 Fiscal Years has been derived from, and should be
read in conjunction with, the audited consolidated financial statements of the
Company, which statements have been audited by Arthur Andersen LLP,
independent public accountants. The information presented below should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein. The Company's
fiscal year ends on the Friday nearest December 31. Consequently, the
Company's 1996 Fiscal Year included 53 weeks of operations, while the 1994,
1995, 1997 and 1998 Fiscal Years included 52 weeks of operations.
13
<PAGE>
selected consolidated financial information
<TABLE>
<CAPTION>
(in thousands, except per share amounts, ratios and hotel data)
- -----------------------------------------------------------------------------------------------------
FISCAL YEAR-ENDED 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
REVENUES
Rooms (a) $211,989 $195,296 $171,206 $148,432 $137,387
Food and beverage 91,982 86,183 79,580 70,840 65,308
Meeting room rental and other (b) 22,159 20,795 18,061 15,907 13,998
-------- -------- -------- -------- --------
Total revenues 326,130 302,274 268,847 235,179 216,693
-------- -------- -------- -------- --------
OPERATING EXPENSES
Direct operating costs and expenses (c)
Rooms 54,600 50,265 43,610 38,543 34,413
Food and beverage 64,174 62,383 57,956 54,228 49,721
Other 3,389 3,385 2,929 2,521 2,397
General, administrative, sales and
management service expenses (d,e) 95,500 85,766 74,646 64,234 57,981
Repairs and maintenance 13,438 12,578 11,528 10,131 9,888
Depreciation and amortization 45,580 34,781 24,034 18,346 13,975
-------- -------- -------- -------- --------
Total operating expenses 276,681 249,158 214,703 188,003 168,375
-------- -------- -------- -------- --------
INCOME FROM OPERATIONS 49,449 53,116 54,144 47,176 48,318
OTHER (INCOME) EXPENSES
Interest expense and amortization of deferred
financing fees, net 57,286 44,325 35,620 28,447 32,932
Gain on sales of property and equipment (f) (8,175) -- -- -- --
-------- -------- -------- -------- --------
INCOME BEFORE MINORITY INTEREST, PROVISION
FOR INCOME TAXES AND EXTRAORDINARY ITEM (g) 338 8,791 18,524 18,729 15,386
Minority interest in earnings of partnership (242) (6,302) (13,280) (13,427) (274)
-------- -------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES AND
EXTRAORDINARY ITEM 96 2,489 5,244 5,302 15,112
Provision for income taxes (h) (120) (75) (105) (107) (41)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (24) 2,414 5,139 5,195 15,071
Income before extraordinary item prior to
November 23, 1994 allocable to partners -- -- -- -- (15,004)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM
ALLOCABLE TO THE COMPANY $ (24) $ 2,414 $ 5,139 $ 5,195 $ 67
======== ======== ======== ======== ========
BASIC AND DILUTED EARNINGS PER SHARE OF
COMMON STOCK BEFORE EXTRAORDINARY ITEM (m) $ -- $ 0.38 $ 0.81 $ 0.82 $ 0.48
======== ======== ======== ======== ========
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Continued
<S> <C> <C> <C> <C> <C>
FISCAL YEAR-ENDED 1998 1997 1996 1995 1994
OTHER DATA
EBITDA (i) $ 95,029 $ 87,897 $ 78,178 $ 65,522 $ 62,293
Net Cash provided by operating activities 43,494 27,769 72,052 44,037 46,107
Net Cash used in investing activities (92,925) (193,271) (136,296) (78,085) (149,510)
Net Cash provided by financing activities 53,703 161,014 68,916 66,113 104,884
MARGIN AND RATIO DATA
EBITDA margin (% of total revenue) (i) 29.1% 29.1% 29.1% 27.9% 28.8%
Earnings to fixed charges ratio (j) 0.91x 0.97x 1.26x 1.39x 1.42x
OPERATING DATA
Owned Hotels:
Number of Hotels 42 45 39 37 31
Number of Rooms 10,293 11,108 9,666 9,312 8,054
Average Occupancy 62.1% 62.9% 64.7% 67.1% 68.5%
Average Daily Room Rate (ADR) $ 91.38 $ 82.38 $ 76.16 $ 71.68 $ 68.45
Room Revenue per Available Room (RevPAR)(k) $ 56.79 $ 51.84 $ 49.25 $ 48.09 $ 46.88
Increase in Yield (l) 9.5% 5.3% 2.4% 4.8% 3.9%
BALANCE SHEET DATA
Total Assets $876,486 $ 816,733 $ 658,072 $542,371 $ 443,044
Total Debt, including current portion 759,716 695,791 531,143 458,094 380,869
Minority interest of holders of the LP units 27,392 39,399 33,662 23,082 14,820
Equity 17,847 18,508 16,094 10,955 5,852
</TABLE>
(a) Includes revenues derived from rooms.
(b) Includes meeting room rental, management fees for providing management
services to the Managed Hotels and other.
(c) Includes expenses incurred in connection with rooms, food and beverage, and
telephones.
(d) Includes expenses incurred in connection with franchise fees,
administrative, marketing and advertising, utilities, insurance, property
taxes, rent and other.
(e) Includes expenses incurred providing management services to the
Managed Hotels.
(f) Gain on sales includes six hotels sold February 6, 1998 and one hotel sold
December 31, 1998.
(g) The 1994 and 1995 Fiscal Years do not include a $3.3 million and a $0.3
million, respectively, extraordinary charge related to prepayment fees on
early debt retirement in connection with the Note Offerings and Common
Stock Offering. The 1998 Fiscal Year includes a $2.2 million extraordinary
charge related to early extinguishment of debt.
(h) After the Common Stock Offering, the Company has been taxed as a
C Corporation on its portion of the Partnership's earnings. Prior to the
Common Stock Offering, net income does not include any provision
(benefit) for income taxes in view of the S Corporation tax status of the
general partner prior to the Common Stock Offering and of the
Partnership's status as a partnership for income tax purposes.
(i) EBITDA represents earnings before net interest expense, provision for
income taxes (if applicable) and depreciation and amortization. EBITDA
is used by the Company for the purpose of analyzing its operating
performance, leverage and liquidity. Such data are not a measure of
financial performance under generally accepted accounting principles and
should not be considered as an alternative to net earnings as an indicator
of the Company's operating performance or as an alternative to cash flows
as a measure of liquidity.
(j) Earnings used in computing the earnings to fixed charges ratios consist of
net income plus fixed charges. Fixed charges consist of interest expense
and that portion of rental expense representative of interest (deemed to be
one-third of rental expense).
(k) Total room revenue divided by number of available rooms. Available rooms
represent the number of rooms available for rent multiplied by the number
of days in the period presented.
(l) Increase in yield represents the period-over-period increases in yield.
Yield is defined as the room revenue per available room (RevPAR).
(m) The 1994 unaudited pro forma net income per share represents the
Company's allocable share of pre-tax income (28.31%) after giving effect to
(i) the issuance of the Notes and the repayment of the Partnership's then
existing mortgage indebtedness with approximately $240.0 million of the
$289.7 million total net proceeds from the Note Offering, (ii) the
application of approximately $36.1 million of the net proceeds from the
Common Stock Offering to the repayment of indebtedness, and (iii) an
estimated provision for income taxes that would have been reported had the
Company filed federal and state income tax returns as a C Corporation. The
estimated tax provision was based on an assumed effective tax rate of 38%.
The unaudited pro forma earnings per share information is based upon
6,336,100 shares of common stock outstanding after the Common Stock
Offering.
15
<PAGE>
management's discussions and analysis
of financial condition and results of operations
General
The following discussion and analysis primarily addresses results of operations
of the Company for the fiscal years ended January 1, 1999 ("1998"), January 2,
1998 ("1997") and January 3, 1997 ("1996"). The following discussion should be
read in conjunction with the selected consolidated financial information of the
Company and the consolidated financial statements of the Company included
elsewhere herein.
The Company's consolidated financial statements include revenues from the Owned
Hotels and management fee revenues for providing management services to the
Managed Hotels. References to the JQH Hotels include both the Owned Hotels and
the Managed Hotels. Revenues from the Owned Hotels are derived from rooms, food
and beverage, meeting rooms and other revenues. The Company's beverage revenues
include only revenues from the sale of alcoholic beverages, while revenues from
the sale of non-alcoholic beverages are shown as part of food revenues. Direct
operating costs and expenses include expenses incurred in connection with the
direct operation of rooms, food and beverage and telephones. General,
administrative, sales and management services expenses include expenses incurred
from franchise fees, administrative, sales and marketing, utilities, insurance,
property taxes, rent, management services and other expenses.
From 1994 through 1998, the Company's total revenues grew at an annual
compounded growth rate of 10.8%, from $216.7 million to $326.1 million.
Occupancy for the Owned Hotels during that period decreased 6.4 percentage
points from 68.5% to 62.1%. However, the Owned Hotels' average daily room rate
(ADR) increased by 33.5% from $68.45 to $91.38 during that period. Room revenue
per available room (RevPAR) increased by 21.1% from $46.88 to $56.79.
In general, hotels opened during the period from 1994 to 1998 decreased overall
occupancy but increased the overall average room rate. The Company tracks the
performance of the Owned Hotels in two groups. One group of hotels are those
opened by the Company during the current and prior fiscal years (New Hotels).
During 1998, the New Hotels included four hotels opened in 1998 and six hotels
opened in 1997. The remainder of the Owned Hotels, excluding the New Hotels, are
defined as Mature Hotels. In 1998, the Mature Hotels included 32 hotels opened
prior to 1997. New hotels typically generate positive cash flow from operations
before debt service in the first year, generate cash sufficient to service
mortgage debt in the second year and create positive cash flow after debt
service in the third year.
16
<PAGE>
results of operations of the company
- ---------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR-ENDED 1998 1997 1996 1995 1994
OWNED HOTELS
<S> <C> <C> <C> <C> <C>
Average Occupancy 62.1% 62.9% 64.7% 67.1% 68.5%
Average Daily Room Rate (ADR) $ 91.38 $ 82.38 $ 76.16 $ 71.68 $ 68.45
Room Revenue per Available Room (RevPAR) $ 56.79 $ 51.84 $ 49.25 $ 48.09 $ 46.88
Available Rooms (a) 3,733,166 3,767,387 3,476,279 3,087,700 2,930,893
Number of Hotels 42 45 39 37 31
MATURE HOTELS
Average Occupancy 64.1% 63.8% 64.8% 67.1% 68.5%
Average Daily Room Rate (ADR) $ 86.50 $ 79.80 $ 76.06 $ 71.68 $ 68.45
Room Revenue per Available Room (RevPAR) $ 55.41 $ 50.90 $ 49.29 $ 48.09 $ 46.88
Available Rooms (a) 3,012,845 3,388,896 3,454,899 3,087,700 2,930,893
Number of Hotels 32 37 37 37 31
NEW HOTELS
Average Occupancy 54.1% 55.3% 42.2% -- --
Average Daily Room Rate (ADR) $ 115.55 $ 108.97 $ 100.49 -- --
Room Revenue per Available Room (RevPAR) $ 62.54 $ 60.21 $ 42.42 -- --
Available Rooms (a) 720,321 378,491 21,380 -- --
Number of Hotels 10 8 2 -- --
PERCENTAGES OF TOTAL REVENUES
REVENUES
Rooms 65.0% 64.6% 63.7% 63.1% 63.4%
Food and beverage 28.2% 28.5% 29.6% 30.1% 30.1%
Meeting room rental and other 6.8% 6.9% 6.7% 6.8% 6.5%
----------- ----------- ----------- ----------- -----------
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES
Direct operating costs and expenses
Rooms 16.7% 16.6% 16.2% 16.4% 15.9%
Food and beverage 19.7% 20.6% 21.6% 23.0% 22.9%
Other 1.0% 1.1% 1.1% 1.1% 1.1%
General, administrative, sales and
management service expenses 29.3% 28.4% 27.8% 27.3% 26.8%
Repairs and maintenance 4.1% 4.2% 4.3% 4.3% 4.6%
Depreciation and amortization 14.0% 11.5% 8.9% 7.8% 6.4%
---------- ----------- ----------- ----------- -----------
Total operating expenses 84.8% 82.4% 79.9% 79.9% 77.7%
---------- ----------- ----------- ----------- -----------
Income from Operations 15.2% 17.6% 20.1% 20.1% 22.3%
========== =========== =========== =========== ===========
</TABLE>
(a) Available rooms represent the number of New Hotels, the rooms available for
rent multiplied by the number of days in the period reported or, in the
case of number of days the hotel was open during the period reported. The
Company's 1996 Fiscal Year contained 53 weeks, or 371 days, while its 1994,
1995, 1997 and 1998 Fiscal Years each contained 52 weeks, or 364 days.
17
<PAGE>
1998 FISCAL YEAR COMPARED TO 1997 FISCAL YEAR
Total revenues increased to $326.1 million in 1998 from $302.3 million in 1997,
an increase of $23.8 million, or 7.9%. Of the total revenues reported in 1998,
65.0% were revenues from rooms, 28.2% were revenues from food and beverage and
6.8% were revenues from meeting room rental and other, compared with 64.6%,
28.5% and 6.9%, respectively, during 1997.
Rooms revenues increased to $212.0 million in 1998 from $195.3 million in 1997,
an increase of $16.7 million, or 8.6%, as a result of the operation of two
hotels which opened in 1996 and six hotels opened in 1997, and the increase in
average daily room rate (ADR). Average daily room rates (ADR) of Mature Hotels
increased to $86.50 in 1998 from $79.80 in 1997. The occupancy in the mature
hotels was a 0.3 percentage point increase to 64.1% in 1998, compared to 63.8%
in 1997. The Mature Hotels' room revenue per available room (RevPAR) improved to
$55.41 in 1998 from $50.90 in 1997, an increase of $4.51 or 8.9%. In 1998, the
New Hotels included ten hotels, which generated a revenue per available room
(RevPAR) of $62.54, up 3.9% from the 1997 revenue per available room (RevPAR) of
$60.21, when eight New Hotels were open. In general, management believes the New
Hotels are more insulated from the effects of new hotel supply than are the
Mature Hotels, since the New Hotels utilize franchise brands that are considered
to be more upscale in nature, and the New Hotels have higher-quality guest rooms
and public spaces.
Food and beverage revenues increased to $92.0 million in 1998 from $86.2 million
in 1997, an increase of $5.8 million, or 6.7%. This increase was due to revenues
associated with newly opened hotels.
Meeting room rental and other revenues increased to $22.2 million in 1998 from
$20.8 million in 1997, an increase of $1.4 million, or 6.7%. This increase was
due to the addition of meeting space in the New Hotels.
Direct operating costs and expenses for rooms increased to $54.6 million in 1998
from $50.3 million in 1997, an increase of $4.3 million, or 8.5%. As a
percentage of rooms revenue, these expenses remained stable, at 25.8%.
Direct operating costs and expenses for food and beverage increased to $64.2
million in 1998 from $62.4 million in 1997, an increase of $1.8 million, or
2.9%, but decreased as a percentage of food and beverage revenues, to 69.8% from
72.4% in 1997. The dollar increase was due to costs associated with the higher
volume of sales.
Direct operating costs and expenses for other remained stable in 1998 at $3.4
million, but decreased as a percentage of meeting room rental and other revenues
to 15.3% from 16.3% in 1997.
General, administrative, sales and management service expenses increased to
$95.5 million in 1998 from $85.8 million in 1997, an increase of $9.7 million,
or 11.3%. Increases in these expenses are primarily attributable to expenses
associated with the opening of new hotels in 1997 and 1998. A large portion of
expenses associated with new hotel openings are fixed costs in nature. As a
result, these expenses rise faster than revenues in the first one to two years
of operation. As a percentage of total revenues, these expenses increased to
29.3% in 1998 from 28.4% in 1997.
Repairs and maintenance expenses increased to $13.4 million in 1998 from $12.6
million in 1997, by $0.8 million or 6.3%, but decreased slightly as a percentage
of total revenues, to 4.1% from 4.2% in 1997.
Depreciation and amortization increased to $45.6 million in 1998 from $34.8
million in 1997, by $10.8 million, or 31.0%. As a percentage of total revenues,
these expenses increased to 14.0% in 1998 from 11.5% in 1997. The increase was a
direct result of the increased level of capital expenditures for the newly
opened hotels.
Income from operations decreased to $49.4 million in 1998 from $53.1 million in
1997, a decrease of $3.7 million, or 7.0%. The decrease was due to higher costs,
including depreciation expense related to the building of new hotels. As a
percentage of total revenues, income from operations was 15.2% in 1998 and 17.6%
in 1997.
18
<PAGE>
Interest expense and amortization of deferred financing fees, net increased to
$57.3 million in 1998 from $44.3 million in 1997, an increase of $13.0 million,
or 29.3%. The increase was attributable to borrowing for new hotel construction.
Income before minority interest, provision for income taxes and extraordinary
item decreased to $0.3 million in 1998 from $8.8 million in 1997, a decrease of
$8.5 million, or 96.6%. The 1998 results include an $8.2 million gain on sales
of property and equipment in connection with the sale of six Holiday Inns in
February of 1998 and one Holiday Inn in December of 1998.
1997 FISCAL YEAR COMPARED TO 1996 FISCAL YEAR
Total revenues increased to $302.3 million in 1997 from $268.8 million in 1996,
an increase of $33.5 million, or 12.4%. Of total revenues recognized in 1997,
64.6% were revenues from rooms, compared to 63.7% in 1996, continuing the
gradual shift over the past several years, as the average daily room rate (ADR)
continues to increase. Revenues from food and beverage represented 28.5% of
total revenues recognized in 1997, compared to 29.6% in 1996, and revenues from
meeting room rental and other represented 6.9% of total revenues compared to
6.7% in 1996.
Rooms revenues increased to $195.3 million in 1997 from $171.2 million in 1996,
an increase of $24.1 million, or 14.1%, as a result of the addition of six
hotels opened in 1997, a full year of operation for the two hotels opened in
1996, and a 4.9% increase in the average daily room rate (ADR) of the Mature
Hotels.
Food and beverage revenues increased to $86.2 million in 1997 from $79.6 million
in 1996, an increase of $6.6 million, or 8.3%. This increase was primarily due
to revenues associated with the New Hotels.
Meeting room rental and other revenues increased to $20.8 million in 1997 from
$18.1 million in 1996, an increase of $2.7 million, or 15.1%. This increase was
primarily a result of the New Hotels.
Direct operating costs and expenses for rooms increased to $50.3 million in 1997
from $43.6 million in 1996, an increase of $6.7 million, or 15.3%. As a
percentage of rooms revenue, these expenses increased slightly to 25.7% in 1997
from 25.5% in 1996. The increased expense was associated with the New Hotels.
These costs generally represent a higher percentage of rooms revenue in newer
hotels until these hotels reach stabilized occupancy levels.
Direct operating costs and expenses for food and beverage increased to $62.4
million in 1997 from $58.0 million in 1996, an increase of $4.4 million, or
7.6%, but decreased slightly as a percentage of food and beverage revenues to
72.4%, from 72.8% in 1996. The dollar increase was due to costs associated with
the higher volume of sales associated with the New Hotels.
Other direct operating costs and expenses were $3.4 million in 1997 and $ 2.9
million in 1996, a 15.6% increase. As a percentage of meeting room rental and
other revenues, these expenses were 16.3% in 1997 and 16.2% in 1996.
General, administrative, sales and management service expenses increased to
$85.8 million in 1997 from $74.6 million in 1996, an increase of $11.2 million,
or 14.9%. Increases in these expenses were primarily attributable to expenses
associated with the New Hotels. As a percentage of total revenues, these
expenses increased to 28.4% in 1997, from 27.8% in 1996.
Repairs and maintenance expenses increased to $12.6 million in 1997 from $11.5
million in 1996, an increase of $1.1 million, or 9.1%, but decreased slightly as
a percentage of revenues to 4.2% from 4.3% in 1996.
Depreciation and amortization increased by $10.8 million, or 44.7%, to $34.8
million in 1997 from $24.0 million in 1996. As a percentage of total revenues,
these expenses increased to 11.5% in 1997 from 8.9% in 1996. The increase was a
direct result of the opening of the eight New Hotels during 1996 and 1997.
19
<PAGE>
Income from operations decreased to $53.1 million in 1997 from $54.1 million in
1996, a decrease of $1.0 million, or 1.9%. As a percentage of total revenues,
income from operations was 17.6% in 1997 compared to 20.1% in 1996, due
primarily to the non-cash expense of depreciation and amortization associated
with the New Hotels.
Interest expense and amortization of deferred financing fees, net increased to
$44.3 million in 1997 from $35.6 million in 1996, an increase of $8.7 million or
24.4%. The increase was attributable to debt associated with the financing of
the New Hotels.
Income before minority interest, provision for income taxes and extraordinary
item decreased to $8.8 million in 1997 from $18.5 million in 1996, a decrease of
$9.7 million, or 52.5%.
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's principal uses of cash
are to pay operating expenses, to service debt and to fund capital expenditures,
new hotel development and permitted distributions to fund some of the taxes
allocable to the partners.
At January 1, 1999, the Company had $46.2 million of cash and equivalents and
also had $6.5 million of marketable securities, compared to $42.0 million in
cash and cash equivalents and $12.7 million of marketable securities at the end
of 1997. Such amounts are available for development of new hotels and other
working capital requirements of the Company.
Net cash provided by operating activities increased significantly to $43.5
million at the end of 1998 from $27.8 million at the end of 1997, an increase of
$15.7 million, or 56.5%, primarily as the result of changes in interim financing
of construction through trade payables.
The Company incurred net capital expenditures of $131.2 million and $179.4
million, respectively, for 1998 and 1997. Capital expenditures typically include
capital improvements on existing hotel properties and expenditures for
development of new hotels. Capital expenditures in 1998 included $111.5 million
for new hotel development and $19.7 million for existing hotels. During 1997,
capital expenditures for existing hotels and new hotel development were $19.1
million and $160.3 million, respectively. During 1999, the Company expects
capital expenditures to approximate $120.8 million, representing approximately
$15.5 million for capital improvements on existing hotels and approximately
$105.3 million for continued new hotel development.
At the end of 1998, total debt was $759.7 million compared with $695.8 million
in 1997. The increase is attributable to the hotels opened during 1998 as well
as six Scheduled Hotels under construction at the end of 1998. The current
portion of long-term debt was $42.3 million at the end of 1998, compared with
$61.5 million at the end of 1997.
In February 1998, the Company completed the sale of six hotels for $39.4
million, resulting in a gain of approximately $0.2 million. Five of the six
hotels sold served as collateral for the 1994 and 1995 Mortgage Notes. Under the
terms of these Indentures, the Company provided replacement collateral.
On December 31, 1998, the Company completed the sale of an additional hotel
property for $16.1 million, resulting in a gain of approximately $8.0 million.
The net book value of the hotel's property and equipment at the time of the sale
was approximately $8.1 million. In addition to cash received upon closing, the
sales price included a note receivable for $11.9 million, with 8.0% interest,
due in 1999. The note receivable is secured by the hotel and the personal
guarantee of a shareholder of the buyer. This hotel served as collateral under
the 1995 Mortgage Notes. Under the terms of the Indenture, the Company must
provide replacement collateral of equivalent value or apply the net proceeds
from the sale to amounts outstanding. The Company intends to provide replacement
collateral in accordance with the Indenture provisions.
20
<PAGE>
The Company estimates that building, pre-opening and other costs of the six
Scheduled Hotels will require aggregate funding of approximately $198.0 million
from the Company (net of $61.0 million included in construction in progress and
other assets at year end). The Company has obtained loans and commitments of
approximately $143.0 million (approximately $22 million of which had been drawn
at year end) on the Scheduled Hotels and expects the remaining 1999 capital
requirements to be funded by cash, cash flow from operations and refinancing of
certain existing hotels.
Based upon current plans relating to the timing of new hotel development and
loan draw schedules, the Company anticipates that its capital resources will be
adequate to satisfy its 1999 capital requirements for the currently planned
projects and normal recurring capital improvement projects.
The Company distributed or accrued $10.6 million in 1998, and $0.6 million in
1997 to its partner for income taxes. Distributions by the Company must be made
in accordance with the provisions of the Indentures.
YEAR 2000
STATE OF READINESS
John Q. Hammons Hotels, Inc. (the "Company") is actively addressing the
impact of the Year 2000 as it relates to the processes of its information
technology environment. Potential problems with internal, external and
embedded systems are being addressed. Capital budget funds have been set
aside for software and hardware upgrades and/or replacements to address
Year 2000 issues. Virtually all such upgrades were anticipated by the
Company and would have been implemented within the next few years even
absent a Year 2000 issue.
The Company is requiring vendors and suppliers to certify Year 2000
compliance of supplied information technology systems and devices.
Compliance is defined as no failures or interruptions occurring due to the
processing of date information or data between the years through 1999 and
years beginning with the year 2000.
The Company has reviewed the effects of the upcoming Year 2000 on its
computer systems and operations, as well as on those of the hotels it
operates. The Company does not anticipate any material impact on its
corporate operation, given that the current systems used are believed to be
Year 2000 compliant.
CORPORATE SYSTEMS
HARDWARE--Computer systems were tested for Y2K compliance during the first
quarter of 1998. Ninety percent of those systems not compliant were
replaced by the end of the third quarter of 1998. The remaining systems
were replaced during the fourth quarter of 1998.
SOFTWARE--All software systems were tested during the first quarter of
1998. Word processing and spreadsheet software packages were deemed
materially compliant and will not be replaced. The accounting and payroll
system was not Y2K compliant and was replaced during January, 1998.
HOTEL SYSTEMS
HARDWARE--Testing of Company owned computer hardware was started during the
first quarter of 1998. Ninety percent of all systems have been tested and
those systems deemed not Y2K compliant have been identified and have either
been replaced at this time or are scheduled for replacement during the
first half of 1999.
SOFTWARE--Bass Hotels and Resorts use the Encore Property Management
System. This system is currently not Y2K compliant but is being upgraded at
no expense to the Company.
Promus Hotels, Inc. uses the HMS Property Management System. This system is
not Y2K compliant and is scheduled for replacement at all non-compliant
hotels during the first half of 1999.
Radisson Hotels and some Company hotels use the Fidelio Property Management
System. This software is Y2K compliant. The operating system on the file
servers will be compliant with the installation of software patches at no
expense to the Company. These systems are scheduled for upgrade in the year
2000 independent of the Y2K situation.
Other Company hotels use the Multi-Systems, Inc. Property Management
System, which is Y2K compliant.
21
<PAGE>
EMBEDDED SYSTEMS
NON-CRITICAL--Fax machines, copiers and similar equipment are generally
leased. The majority of these devices have been tested and deemed Y2K
compliant. Those failing the Y2K testing will be replaced by the lessor during
1999 under current leasing agreements as required in order to be Y2K
compliant.
CRITICAL--Systems in this category include elevators, fire control, security,
energy management, credit card processing and telecommunications. The Company
is currently testing and evaluating these systems. These evaluations are
approximately 75% complete with anticipated completion by the end of the first
quarter, 1999.
TIME KEEPING AND PAYROLL SYSTEMS
The Company currently uses Time Resource Management software for time keeping.
This software is not Y2K compliant and will be replaced during the second
quarter of 1999. Payroll processing is out-sourced and a Y2K compliance
certificate from the processor is on file.
VENDOR COMPLIANCE CERTIFICATIONS
STRATEGIC RELATIONSHIPS--Requests for Y2K compliance have been sent to those
vendors which have a strategic relationship with the Company specifically and
with the hotels in general. Those compliance letters will be on file in our
offices.
UTILITY SUPPLIERS--Requests for Y2K compliance have been sent to those
suppliers which have a strategic relationship with the Company specifically
and with the hotels in general. Those compliance letters will be on file in
our offices.
COMPLIANCE TESTING
INFORMATION TECHNOLOGY
VENDOR CERTIFICATION--The Company has received Y2K compliance
certifications from the majority of its property management system vendors.
All certifications are expected to be on file by the end of the second
quarter, 1999.
FIELD TESTING--The Company has received Y2K compliance testing software
from our property management system vendors. These tests were completed
during the fourth quarter, 1998.
EVALUATION--The Company will monitor all systems currently in place and
those Y2K upgrades that will be installed during the first half of 1999 to
insure Y2K integrity. This evaluation will continue throughout the year
2000.
EMBEDDED SYSTEMS
VENDOR CERTIFICATION--The Company has received Y2K compliance
certifications from the majority of its vendors. All certifications are
expected to be on file by the end of the first quarter, 1999.
FIELD TESTING--The Company or its authorized vendors began conducting Y2K
compliance field testing during the fourth quarter of 1998 and will
continue testing throughout 1999.
EVALUATION--The Company will monitor all systems currently in place and
those Y2K upgrades that will be installed during the first half of 1999, to
insure Y2K integrity. This evaluation will continue throughout the year
2000.
22
<PAGE>
COST OF IMPLEMENTATION
CORPORATE OFFICE
INFORMATION TECHNOLOGY--Expenses for hardware and software that were
directly attributed to Y2K compliance were less than $75,000.
EMBEDDED SYSTEMS--The Company has no current expenses directly
attributed to Y2K compliance for embedded systems.
HOTELS
INFORMATION TECHNOLOGY
BASS HOTELS & RESORTS--The Company has upgraded hardware and
software systems over the last two years that were required from
a technology standpoint. Y2K compliance was an ancillary benefit
of these upgrades.
PROMUS HOTELS, INC.--The Company has allocated less than $15,000
to date for upgrades necessary to meet Y2K compliance at these
hotels.
EMBEDDED SYSTEMS--The Company has not expended any funds directly
attributed to Y2K compliance for these systems. Those upgrades and
replacements of equipment that have occurred over the last two years
were required to replace equipment that had reached the end of the
normal life cycle and not specifically for Y2K compliance.
FUTURE COSTS
CORPORATE OFFICE
Additional software upgrades are anticipated to maintain current
technology levels but are not directly attributed to Y2K compliance.
HOTELS
INFORMATION TECHNOLOGY
BASS HOTELS & RESORTS--Hotels operating under this flag (eighteen
hotels) will incur minimal costs to replace some computer
systems. Average cost per hotel is estimated to be less than
$10,000. Hardware requirements will be offset with the transfer
of existing Y2K compliant hardware from other hotels that are
receiving technology-driven upgrades.
PROMUS HOTELs, INC.--Hotels operating under this flag (sixteen
hotels) will receive new hardware and software as part of a
technology and Y2K compliant upgrade. The estimated cost for this
upgrade is approximately $625,000.
The balance of the Company's hotels have budgeted approximately
$400,000 in capital funds for technology replacements and Y2K
compliancy issues.
EMBEDDED SYSTEMS--Final evaluation of these systems has not been
completed at this time. No major replacements are expected based upon
the results of early testing.
23
<PAGE>
RISK FACTORS
INFORMATION TECHNOLOGY--Based upon current testing results and evaluation
of those results, it is believed that all hardware and software systems in
the Company's corporate office and hotels will be Y2K compliant by the end
of the second quarter, 1999. Risk to the operation of the Company is
therefore considered to be low.
EMBEDDED SYSTEMS--Complete analysis of all embedded systems has not been
completed at this time. Final evaluation is scheduled for the end of the
first quarter, 1999, with testing to be completed by the end of the second
quarter, 1999. Based upon early reports, risk to the operation of the
Company is considered to be low.
VENDORS AND SUPPLIERS--The Company does not rely on the services of any one
single vendor or supplier that will materially impact its operations. To
date, no strategic vendor or supplier has reported that it will not be Y2K
compliant by the end of 1999. Based upon these reports, risk to the
operations of the Company is considered to be low.
CONTINGENCY PLANS
INFORMATION TECHNOLOGY
HARDWARE--A number of non-critical (time/date critical operations are
not dependent on these systems) hardware systems have failed Y2K
compliancy testing. These systems are scheduled for replacement during
the first half of 1999. Failure to replace these systems will not
materially impact the operation of the Company or its hotels.
SOFTWARE--Manual operation of guest services, reservations, credit
card processing and time keeping systems can be accomplished with
existing personnel and equipment. Since all known, non-compliant
software systems will be replaced during the first half of 1999, no
material impact to the operation of the Company is expected.
EMBEDDED SYSTEMS
Contingency plans will be finalized during the first quarter of 1999,
when evaluation of these systems is complete. All known embedded
systems can be manually over-ridden if necessary, in the event of a
failure due to a Y2K issue.
VENDORS AND SUPPLIERS
The Company will use alternative vendors and suppliers in the event
any one strategic vendor or supplier is incapable of operating as a
result of a Y2K compliance issue. The Company maintains a list of
alternative vendors and suppliers. These vendors and suppliers will be
certified as Y2K compliant in the event their services are required.
SEASONALITY
Demand is affected by normally recurring seasonal patterns. For most of the
JQH Hotels, demand is higher in the spring and summer months (March through
October) than during the remainder of the year. Accordingly, the Company's
operations are seasonal in nature, with lower revenue, operating profit and
cash flow in the first and fourth quarters due to decreased travel during
the winter months.
INFLATION
The rate of inflation as measured by changes in the average consumer price
index has not had a material effect on the revenues or operating results of
the Company during the three most recent fiscal years.
24
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to changes in interest rates primarily as a result
of its investing and financing activities. Investing activity includes
operating cash accounts and investments, with an original maturity of three
months or less, and certain balances of various money market and common
bank accounts. The financing activities of the Company are comprised of
long-term fixed and variable rate debt obligations utilized to fund
business operations and maintain liquidity. The following table presents
the principal cash repayments and related weighted average interest rates
by maturity date for the Company's long-term fixed and variable rate debt
obligations as of January 1, 1999:
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE (IN MILLIONS)
1999 2000 2001 2002 2003 Thereafter Total Fair Value (d)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Debt (a)
$300 Million 1st Mortgage Notes $ -- $ -- $ -- $ -- $ -- $300 $300 $313
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 $ 41 $ 6 $ 13 $ 30 $ 20 $213 $323 $323
Average interest rate (b) 8.8% 8.4% 8.2% 8.8% 8.7% 8.7% 8.7%
Other variable-rate debt obligations $ 1 $ 1 $ 7 $ 10 $ 3 $ 25 $ 47 $ 47
Average interest rate (c) 8.1% 8.1% 8.1% 8.1% 8.1% 8.1% 8.1%
</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 January 1, 1999, that is maturing in
the year reported. The weighted average interest rate excludes the
effect of the amortization of deferred financing costs.
(d) The fair values of long-term debt obligations approximate their
respective historical carrying amounts, except with respect to the
$300 million First Mortgage Notes and the $90 million First Mortgage
Notes. The fair value of the First Mortgage Notes issued is estimated
by obtaining quotes from brokers.
25
<PAGE>
report of independent public accountants
- ----------------------------------------
To the Shareholders of John Q. Hammons Hotels, Inc.:
We have audited the accompanying consolidated balance sheets of John Q.
Hammons Hotels, Inc. and Companies (Note 1) as of January 1, 1999 and
January 2, 1998 and the related consolidated statements of operations,
changes in minority interest and stockholders' equity and cash flows for
each of the three fiscal years ended January 1, 1999, January 2, 1998 and
January 3, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of John Q. Hammons Hotels, Inc. and Companies (Note 1) as of
January 1, 1999 and January 2, 1998 and the results of their operations and
their cash flows for each of the three fiscal years ended January 1, 1999,
January 2, 1998 and January 3, 1997 in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio
February 17, 1999
26
<PAGE>
EXHIBIT 23.1
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
of our report incorporated by reference in this Form 10-K, into the Company's
previously filed registration Statements No.'s 33-84570 and 333-1276.
Cincinnati, Ohio
March 31, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Annual Report on Form 10-K and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-1999
<PERIOD-START> JAN-03-1998
<PERIOD-END> JAN-01-1999
<CASH> 46,233
<SECURITIES> 6,533
<RECEIVABLES> 14,389
<ALLOWANCES> 206
<INVENTORY> 1,205
<CURRENT-ASSETS> 69,243
<PP&E> 956,294
<DEPRECIATION> 194,860
<TOTAL-ASSETS> 876,486
<CURRENT-LIABILITIES> 102,903
<BONDS> 717,460
0
0
<COMMON> 63
<OTHER-SE> 17,784
<TOTAL-LIABILITY-AND-EQUITY> 876,486
<SALES> 0
<TOTAL-REVENUES> 326,130
<CGS> 0
<TOTAL-COSTS> 122,163
<OTHER-EXPENSES> 154,518
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,286
<INCOME-PRETAX> 96
<INCOME-TAX> 120
<INCOME-CONTINUING> (24)
<DISCONTINUED> 0
<EXTRAORDINARY> (637)
<CHANGES> 0
<NET-INCOME> (661)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
