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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 December 31, 1999
OR
[X] 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 or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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 American 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 approximately 3,798,913 shares of Class A
Common Stock held by non-affiliates of the Registrant was $15,195,652 based on
the closing price on the American Stock Exchange for such stock on March 13,
2000.
Number of shares of the Registrant's Class A Common Stock outstanding as of
March 13, 2000: 5,189,320.
Documents Incorporated by Reference
Portions of the annual report to shareholders for the year ended December
31, 1999 are incorporated by reference into Part II. Portions of the proxy
statement for the annual shareholders meeting to be held on May 2, 2000 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 45 hotels located in 19 states, containing 11,067 guest rooms or
suites (the "Owned Hotels"), including four new hotels opened in 1999. The
Company also manages five additional hotels located in two states, containing
1,136 guest rooms (the "Managed Hotels"). One of the Managed Hotels, a Days Inn
Hotel, was closed in December, 1999. On December 31, 1999, the Company also
owned two upscale hotels at various stages of development, which opened during
2000. 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
17 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 14
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 five non-franchise hotels, three Radissons, two Hampton Inn & Suites,
two Marriotts, two Homewood Suites, one Crowne Plaza, one Sheraton and two
Renaissance Hotels. Four of the non-franchise hotels have the word "Plaza" in
their names, and the other non-franchise hotel is a resort hotel. 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. Six Regional Vice
Presidents and one District Director 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
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73.5% 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 24.5% of the total equity of the Partnership,
and the Class B Common Stock and LP Units beneficially owned by Mr. Hammons
represent 75.5% of the total equity in the Partnership. Mr. Hammons is also the
beneficial owner of 244,300 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 then under construction. The Company
currently has no hotels under construction. The following table sets forth
information as to the hotels opened after December 31, 1999:
<TABLE>
<CAPTION>
Number of
------------
Location Franchise/Name Rooms/Suites Description Completion Date
- -------- -------------- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
Oklahoma City, OK Renaissance 311 Atrium; Convention Opened January 29, 2000
Center
Charleston, SC Embassy Suites 255 Atrium; Convention Opened February 18, 2000
Center
</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 June 16, 1999, the Holiday Inn Express Hotel and Conference Center in
Joliet, Illinois was sold to an unrelated party for $6.5 million, resulting in a
gain of approximately $2.4 million. This hotel served as collateral under the
1994 first mortgage notes. Under the terms of this indenture, the Company must
provide replacement collateral of equivalent value or apply the proceeds from
the sale to amounts outstanding. The Company provided replacement collateral in
accordance with the indenture provisions.
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 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
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of the JQH Hotels is coordinated by the central management team through six
Regional Vice Presidents and one District Director 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 50 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 marketing programs and 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 Director 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 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
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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
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
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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. 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 $6.2 million, $2.2 million and $1.1 million in 1997, 1998 and
1999, respectively. During 1999, 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
300 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.
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 85 hotels on a nationwide basis, primarily under the
Holiday Inn and Embassy Suites trade names.
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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.
Kent S. Foster is Vice President, Human Resources of the Company. He joined
the Company in 1999 from Dayco Products, Inc. in Michigan where he served as
Director and Manager, Human Resources. Prior thereto, Mr. Foster served as
Assistant Vice President and Director, Human Resources, for Great Southern
Savings & Loan Association, Springfield, Missouri.
William T. George, Jr., is Vice President, Capital Planning and Asset
Protection of the Company. He joined the Company in 1994 from Promus Hotel
Corporation, where he had been director of capital refurbishment.
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 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
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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 1999, the
Company made aggregate annual lease payments of approximately $234,000 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 ten of
the Owned Hotels are subject to long-term ground leases.
Description of Hotels - General
The JQH Hotels are located in 20 states and contain a total of 12,203
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 $20.3 million in the last four years on the Owned Hotels. During
2000, the Company expects to spend approximately $19.1 million on refurbishment
of the Owned Hotels.
Owned Hotels
The Owned Hotels consist of 45 hotels, which are located in 19 states and
contain a total of 11,067 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> <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 14,000 sq. ft.
Space
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 400 sq. ft. 10/95
Space:
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 279 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) 236 Meeting Space: 20,000 sq. ft. 12/80
Fort Collins, CO Holiday Inn 259 Atrium; 8/85
Meeting Space: 12,000 sq. ft.
Coral Springs, FL Radisson Plaza 224 Atrium; 5,326 sq. ft. 5/99
Convention Center: 12,800 sq. ft.
St. Augustine, FL World Golf Village Resort 300 Atrium; 5/98
Convention Center: 40,000 sq. ft.
Tampa, FL Embassy Suites 247 Atrium; 1/98
Meeting Space: 18,000 sq. ft.
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 301 Atrium; 5/97
Meeting Space: 40,000 sq. ft.
Jefferson City, MO Capitol Plaza 255 Atrium; 9/87
Meeting Space: 14,600 sq. ft.
Joplin, MO Holiday Inn 262 Atrium; 6/79
Meeting Space: 8,000 sq. ft.
Trade Center: 32,000 sq. ft. (b)
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <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 117 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 283 Meeting Space: 8,700 sq. ft. 2/74
Albuquerque, NM Holiday Inn 311 Atrium; 12/86
Meeting Space: 12,300 sq. ft.
Charlotte, NC Renaissance Suites 275 Atrium; 12/99
Meeting Space: 17,400 sq. ft.
Greensboro, NC(a) Embassy Suites 219 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 251 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.
Dallas/Ft. Worth Airport, Embassy Suites 329 Atrium; 8/99
TX (a) Meeting Space: 18,900 sq. ft.
Houston, TX(a) Radisson 288 Atrium; 12/85
Meeting Space: 14,300 sq. ft.
Mesquite, TX Hampton Inn Suites 160 Meeting Space: 21,200 sq. ft. 4/99
Convention Center: 35,100 sq. ft. (c)
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.
10
<PAGE>
(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, which closed in December 1999) located in two states (Missouri
and South Dakota), and contain a total of 1,136 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 Lonnie A. Funk, an employee of
the Company, each own a 25% interest in this entity. Mr. Funk acquired his
interest from Daniel L. Earley in April, 1999. 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 annual management fee of 3% to 5% 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 from November 23, 1994 until February 28,
2000 under the symbol "JQH." Effective February 28, 2000, the Class A Common
Stock began trading on the American Stock Exchange under the symbol "JQH".
<TABLE>
<CAPTION>
Stock Price Per Share
High Low
<S> <C> <C>
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
1999
First Quarter $5-1/2 $3-9/16
Second Quarter $4-7/16 $3-1/2
Third Quarter $4-1/2 $3-3/4
Fourth Quarter $4-3/16 $3-5/16
</TABLE>
On March 13, 2000, there were approximately 300 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
11
<PAGE>
approximately 2,500 beneficial owners of its Class A Common Stock. On March 13,
2000, the last reported sale price of the Class A Common Stock on the AMEX was
$4.00.
Item 6. Selected Financial Data.
The information required by this item is hereby incorporated by reference
to the material appearing in the 1999 Annual Report to Shareholders (the "Annual
Report to Shareholders"), filed as Exhibit 13.1 hereto, under the caption
"Selected Financial Data."
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 2, 2000
(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."
12
<PAGE>
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 1999 Year-End and Fiscal 1998
Year-End
Consolidated Statements of Operations for the 1999, 1998, and 1997
Fiscal Years
Consolidated Statements of Changes In Minority Interest and
Stockholders Equity (Deficit) for Fiscal 1999, 1998, and 1997.
Consolidated Statements of Cash Flows for Fiscal 1999, 1998, and
1997.
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 December 31,
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.
13
<PAGE>
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 29th day of March, 2000.
JOHN Q. HAMMONS HOTELS, INC.
By: /s/ John Q. Hammons
--------------------
John Q. Hammons
Chairman and Founder
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 29, 2000.
<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
/s/ David C. Sullivan Director of John Q. Hammons Hotels, Inc.
- ------------------------------
David C. Sullivan
/s/ Donald H. Dempsey Director of John Q. Hammons Hotels, Inc.
- ------------------------------
Donald H. Dempsey
</TABLE>
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Title Page
--- ----- ----
<S> <C> <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 06/01/98 to 5/31/01
****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)
***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 1999 Annual Report to Shareholders
*21.1 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.
**** Incorporated by reference to the same numbered exhibit in the Company's
Annual Report on Form 10-K for the Fiscal Year Ended January 1, 1999.
15
<PAGE>
EXHIBIT 10.6
Capitol Plaza Holiday Inn H.E.R.E. Local 49
300 J Street 1824 Tribute Road, Suite D
Sacramento, CA 95814 Sacramento
446-0100 564-4949 or 1-800-HOTEL-49
Medical & Dental: 921-3388
or 1-800-562-9383
June 1, 1998 through May 31, 2001
Section 1. Recognition
Section 2. Union Representative's Activities/Shop Stewards
Section 3. Types of Employees
Section 4. Reporting Pay
Section 5. Work Schedules
Section 6. Discrimination and Equal Pay
Section 7. Meals and Rest Periods
Section 8. Work Day, Week, and Overtime
Section 9. Vacations and Leaves of Absence
Section 10. Holidays and Well Days
Section 11. Funeral & Jury Duty Leave
Section 12. Medical and Dental Plans
Section 13. Pension
Section 14. Contributions and Collections
Section 15. Superior Workers and Premium Pay
Section 16. Combination Jobs
Section 17. Disciplinary Actions
Section 18. No Strike and No Lockout
Section 19. House Cards and Union Buttons
Section 20. Union Security
Section 21. Employer's Operation
Section 22. Grievance Procedures
Section 23. Arbitration
Section 24. Dues and Fees Check-off
Section 25. Worker's Compensation
Section 26. Management Rights Reserved
Section 27. Seniority
Section 28. Terms, Terminations, and Amendments
Section 29. Craft Rules, Regulations, and Working Conditions
Section 30. Wage Scales
Section 31. Signatures
Note: Wherever a masculine pronoun occurs in this document, it shall be
understood to include the feminine pronoun.
<PAGE>
COLLECTIVE BARGAINING AGREEMENT 6-1-98 to 5-31-01
THIS AGREEMENT, hereinafter called the contract, entered into this day
of 1999, at Sacramento, California, by and between the Hotel Employees and
Restaurant Employees Union Local 49, AFL-CIO, hereinafter known as the Union,
and Holiday Inn - Capitol Plaza Sacramento, hereinafter designated as Employer.
In the event any portion of this contract is invalidated by the passage of
legislation or by the rendition of a decision by a court of last resort, such
invalidation shall apply only to those portions thus invalidated; and the
remaining portions of this contract shall remain in full force and effect. If
this occurs both parties shall meet within fifteen (15) calendar days for the
purpose of renegotiating different provisions relative to the subject matter
invalidated.
Section 1. RECOGNITION:
The Union shall be recognized as the sole bargaining agent for the purpose
of collective bargaining for all employees coming under the jurisdiction of the
Union, except employees excluded under any applicable Federal law.
Section 2. UNION REPRESENTATIVE'S ACTIVTIES/SHOP STEWARDS:
(a) Properly authorized representatives of the Union shall be permitted to
investigate the standing of all employees and to investigate conditions to see
that the contract is being enforced, provided that no interview shall be held
during the rush hours, or unreasonably interrupt the duties of any employee.
Authorized Union representatives shall inform the Employer or department head of
their presence at the Hotel before interviewing employees.
(b) Shop Stewards
(1) The maximum number of Shop Stewards shall be three (3) Shop Stewards.
It is understood that no more than one(l) Shop Steward shall be involved in the
handling of any one particular grievance.
If any problem arises with the implementation of a Shop Steward system at
the hotel, the parties agree to meet upon request of either party and work out
mutually agreeable solutions to the problem.
(2) The Employer agrees to recognize Shop Stewards. Shop Stewards shall
assist in the handling and/or investigation of grievances and may participate in
all steps of the grievance procedure.
It is understood that during work time, if an employee requests the
presence of a Shop Steward at a meeting where discipline may occur, the Shop
Steward shall be allowed to leave his assigned job to attend such meeting. Shop
Stewards may discharge their responsibilities at other times during their
working hours only if prior approval is obtained from their immediate supervisor
and there is no disruption in work. The Employer reserves the right to schedule
grievance meetings during non-working hours of the Shop Steward. It is
understood that Shop Stewards may cross departmental lines.
Capitol Plaza Holiday Inn 2 6/l/98 - 5/31/01
<PAGE>
(3) Shop Stewards shall receive training from the Union concerning their
duties and responsibilities. In order to recognize Shop Stewards, the Union
shall notify the Employer of the names of the trained and certified Shop
Stewards.
(4) The Union may appoint or elect Shop Stewards. The election may be held
on Employer's premises. It is understood that balloting will be conducted on
the employee's own time and shall not cause disruption of the Hotel operations.
Section 3. TYPES OF EMPLOYEES:
(a) Full-time Employee: Any combination of shifts totaling thirty (30)
hours or more in a five (5) day period (work week).
(b) Steady Part-time Employee: Any combination of shifts totaling less than
thirty (30) hours in a five (5) day period (work week).
(c) Tipped Employee: Food and beverage servers, bus persons, bellpersons,
bartenders, and valet parking attendants.
(d) Non-tipped Employee: All others not mentioned in Sub-Section (c) above.
Section 4. REPORTING PAY:
(a) When an Employer or his representative orders an employee to report for
work or fails to notify an employee not to report for work for any reason and
said employee is not allowed to work, the Employer shall pay the employee for
one-half (1/2) of the shift called for but not less than four (4) hours minimum.
This shall not apply to an employee under the influence of liquor or drugs.
Employees scheduled to attend mandatory training/educational sessions shall be
compensated at a two (2) hour minimum pay, or actual time spent, whichever is
greater.
(b) Employees who are to be terminated must be notified at the end of their
shift. If this is not done and they report for work the next regular work day
and are not placed at work, they shall receive one-half (1/2) of their scheduled
shift or four (4) hours minimum pay for so reporting.
Section 5. WORK SCHEDULES:
(a) The Employer shall post in a conspicuous place in each department, a
work schedule specifying names and classifications, days off and starting and
finishing time, which must be corrected weekly if need be. The weekly schedule
should be posted by 12:00 noon on Thursday, to be effective 4:00 a.m. on
Saturday.
(b) Except for Housekeeping Department Employees, regularly scheduled
employees shall have a fixed starting time, which time shall not be changed by
the Employer without giving a thirty-six (36) hour notice to the affected
employee, except in case of need or emergency and by mutual consent.
It is further understood that:
1. All employee requests for a variance in a posted schedule will be
at the sole discretion of management.
2. All employee requests for a variance in scheduling must be
submitted before the schedule is posted and must be in writing.
Schedule variance requests will not be considered granted unless
signed as approved by the Department Head.
Capitol Plaza Holiday Inn 3 6/1/98 - 5/31/01
<PAGE>
The employee shall be responsible for keeping this written approval
in case of a dispute.
3. Seniority shall determine who has preference for a schedule
variance request if a conflict between employees arises before the
schedule is posted.
4. After posting of the work schedule, schedule variance requests, if
granted at all, will be to the first person to request the variance in
writing.
5. The scheduling procedures for the Housekeeping Department are
attached hereto as Addendum "B".
(c) Except as provided for in Section 4 (a), the minimum shift for all
classifications will be for four (4) hours, except the Banquet Department which
has a three (3) hour minimum shift.
(d) Split Shifts: Six (6) to eight (8) hours work within a spread of twelve
(12) consecutive hours with only one (1) split shall constitute a split shift.
Split shifts will be paid one (1) hour at the current minimum wage in addition
to wages earned, in accordance with current I.W.C. regulations.
Section 6. DISCRIMINATION AND EQUAL PAY:
(a) There shall be no discrimination against any employee in accordance
with all applicable State and Federal laws.
(b) The Union and the Employer agree the Employer shall be permitted to
take all actions necessary to comply with the Americans With Disabilities Act.
However, the Employer agrees that any accommodation made for an employee which
conflicts with any term or provision of this contract shall first be discussed
with the Union prior to its implementation. In any event, the only issue under
this provision that may be subject to the grievance procedure is pursuant to the
security provisions of this Contract.
Section 7. MEALS AND REST PERIODS:
(a) All meals furnished under this contract will be above and beyond the
wage scales set forth in this contract and at no cost to the employee, except
for any applicable State or Federal tax liability.
(b) Any employee working four (4) hours or more per day shall receive one
(1) hot or one (1) cold meal of comparable quality to that served to the
customer, excluding gourmet items.
(c) Any employee working a full shift shall be given an opportunity to eat
a meal within not less than two (2) or more than five (5) hours from the
commencement of the shift. This may be waived by mutual consent, but in no case
will an employee be allowed to work more than five (5) hours without a meal
break.
(d) In the event that employees are not permitted to eat in the dining
room, they shall be provided with clean and sanitary facilities therefor, and be
responsible for removing their own dishes, silverware, glassware, etc., to a
proper station.
(e) Where one (1) hot or cold meal is required to be furnished, pursuant
to this Section, and the employer fails to furnish such meal, he shall pay the
employee one dollar and fifty cents ($1.50) for each meal not furnished.
Employees who voluntarily do not eat the meal furnished by the Employer shall
have no claim on the Employer for cash in lieu of that meal.
Capitol Plaza Holiday Inn 4 6/1/98 - 5/31/01
<PAGE>
(f) All employees shall be entitled to a ten (10) minute rest period for
every four (4) hours worked or major portion thereof.
Section 8. WORK DAY, WEEK, AND OVERTIME:
(a) Seven and one-half (7 1/2) hours within eight (8) shall constitute an
eight (8) hour shift and a day's work, except for bartenders, security, night
auditors and graveyard housekeeping personnel. All of these employees shall be
paid for all eight (8) hours of their eight (8) hour shift (includes their
thirty (30) minute meal break).
(b) Any work performed in excess of an eight (8) hour shift shall be
compensated at time and one-half (1 1/2) of the regular rate of pay for each
major portion of each quarter (1/4) hour worked.
(c) Five (5) days in seven (7) consecutive days shall constitute a work
week. Any work performed on the sixth (6th) or seventh (7) day of any seven (7)
consecutive days shall be at time and one-half (1 1/2) of the regular rate of
pay.
(d) A ten (10) hour, four (4) day, work week may be implemented by mutual
agreement of the Union and the Employer, in a given classification.
(e) Except for Banquet Department employees, no employee shall be allowed
to work more than one (1) shift in any one (1) calendar day. This shall not
prohibit the performance of overtime work consecutive with the shift completed.
(f) Except for Banquet Department employees, eight (8) hours must elapse
between any two (2) regular scheduled shifts. Should a period of eight (8) hours
not elapse between the end of any one (1) regular scheduled shift and the
beginning of the next regular scheduled shift, then overtime wages of one and
one-half (1 1/2) of the regular rate of pay shall prevail. This shall not apply
in case of emergency and with the mutual consent of both parties. This shall not
apply to split shifts as defined under Section 5.
Section 9. VACATIONS AND LEAVES OF ABSENCE:
(a) Vacations with pay are hereby established for all employees. The
period of service for the purpose of earning a vacation shall begin with the
date of employment with this Employer and be calculated as follows:
After twelve (12) consecutive months he shall be entitled to one (1)
week's vacation with pay.
After twenty-four (24) consecutive months he shall be entitled to two
(2) weeks vacation with pay.
Effective January 1, 1999, after eight (8) consecutive years and
thereafter, he shall be entitled to three (3) weeks vacation with pay.
Effective January 1, 1999, after fifteen (15) consecutive years and
thereafter, he shall be entitled to four (4) weeks vacation with pay.
Vacations shall not be cumulative: i.e., they may not be accumulated from
one twelve (12) month period (commencing with the anniversary date) to the next.
Pay for unused vacation time shall be paid out on the employee's anniversary.
(b) Vacation pay shall be computed by the formula which follows. The
earnings upon which the computation is made shall be the total sum earned during
this period with the exception
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of banquet service charges and employee's declared tips, meals, premium holiday
pay and bonuses.
Vacation Pay Computation
1st year - 2% of wages earned.
2nd through 7th year - 4% of wages earned.
8th through 14th year - 6% of wages earned.
15th completed year and thereafter - 8% of wages earned.
(c) For the purpose of pro-rating vacations for all employees, who quit or
are terminated and who have served more than six (6) months shall on termination
of employment be compensated in lieu of vacation as follows:
Vacation Pay Upon Termination
6 months and up to 12 months - 2% of wages earned.
13 months through 7th year - 4% of wages earned.
8th year through 14th year - 6% of wages earned.
15th completed year and thereafter - 8% of wages earned.
(d) Temporary layoffs or leaves of absence for non-medical reasons, not
exceeding the following schedule, shall not interrupt continuity of employment
for the purpose of vacation eligibility:
1. During the first year of employment - 30 days.
2. During the second and subsequent years of employment - 45 days.
3. Those employees with three or more years of seniority shall be
entitled to a leave of absence of up to six (6) months.
4. These time periods shall not be cumulative.
5. The Employer shall grant eligible employees family care leaves as
required by the Federal Family and Medical Leave Act and California
Family Care Act. The Union and the Employer agree that this contract
shall be interpreted to be consistent with these State and Federal
Laws.
(e) During each November, sign up sheets will be posted for vacation
selection. During that month, employees will have the option of choosing a
vacation period in the following calendar year. If two (2) or more employees
request the same time period for vacation, and all cannot be granted that
period, hotel seniority shall determine who will get that time period. If at the
end of November, an employee fails to schedule a vacation time period, the
Employer shall have the right to schedule that employee for vacation time off.
Unless there is a serious verifiable emergency, any employee who has been given
or selected a given vacation period may not request a change in said vacation
period unless at least fourteen (14) calendar days advance written notice is
given. In all cases granting of variances is at the sole discretion of the
Employer. Black-out
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periods, where no vacation will be granted, are at the sole discretion of the
Employer. However, if business allows, the Employer has the option of releasing
any of that time for vacations.
(f) Employees shall be entitled to one (1) additional week without pay to
follow consecutively after their paid vacation. The employee must request this
additional time off at the same time as they request their vacation pay; 45
calendar days in advance of the start of their vacation.
(g) The employee will be paid their vacation pay within thirty (30)
calendar days prior to the start of their vacation by means of the regular
payroll period. However, employees must fill out a vacation pay request
forty-five (45) calendar days prior to the start of their vacation for this to
be guaranteed. If after so doing this, the Employer fails to have the vacation
pay included in the regular pay period check, a separate check will be issued
for that vacation pay prior to the start of the vacation.
(h) The Employer will pay Medical, Dental and Pension payments for said
vacation time on the same hours as if the employee actually worked. This will
not apply to terminated employees.
Section 10. HOLIDAYS AND WELL DAYS:
(a) The following days shall be observed as holidays:
New Year's Day (January 1)
President's Day (3rd Monday in February)
Memorial Day (last Monday in May)
Independence Day (July 4th)
Labor Day (1st Monday in September)
Thanksgiving Day (4th Thursday in November)
Christmas Day (December 25th)
Any work performed on such days shall be paid for at time and one-half (1 1/2)
the regular rate of pay. If an employee does not work on a holiday, said
employee is not entitled to holiday pay.
(b) Any non-tipped employee working on a holiday which is also their sixth
(6th) or seventh (7th) consecutive day of work will be compensated at two (2)
times the regular rate of pay.
(c) After one (1) year of continuous employment (including approved
medical leave of absence and vacation time) any employee who has also qualified
for medical, dental, and pension benefits will be entitled to paid well days in
accordance with the following schedule:
Effective: 1-1-99
------
Employment # of Days
---------- ---------
1 Year 1
2 Years 2
3 Years 5
4 Years 6
5 Years or more 7
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(d) Well days may be used to cover a day off for illness or injury, and
the Employer cannot demand a doctor's report unless that day is a holiday, or
immediately prior to or after a holiday, the vacation period, or regularly
scheduled days off. Other than this type of medical emergency, one week's notice
must be given to the Employer to schedule a well day off. The Employer has the
option to waive this advance notice. Well days may be taken off consecutively
where applicable. Unused well days may accumulate to a maximum of eighteen (18)
days. If currently over eighteen (18) days, the Hotel will pay off excess days.
Section 11. FUNERAL & JURY DUTY LEAVE:
(a) In the event of a death in the immediate family of an employee who has
one (1) or more years of employment with this Employer, that employee shall be
granted a leave of absence with pay not to exceed three (3) days. This provision
does not apply if the funeral occurs during the employee's vacation, leave of
absence, days off, lay off or sick leave. A day's pay shall be based upon an
employee's normal work schedule.
(b) The immediate family shall mean only a (step) father, (step) mother,
(step) brother, (step) sister, spouse, (step) child, (step) mother-in-law,
(step) father-in-law, or (step) grandparent.
(c) Funeral leave applies only when the employee must make arrangements
for the funeral and/or to attend the funeral. It is not applicable for other
purposes, such as settling the estate, etc.
(d) The Employer may demand verification of the death and the
relationship. The employee must notify his immediate shift supervisor as soon as
possible of the death and his necessary absence from work.
(e) Funeral leave hours shall count toward Medical, Dental and Pension
benefits calculations.
(f) Employees serving on jury duty shall retain their seniority, and the
Employer will continue to make contributions for them to continue their Medical,
Dental and Pension benefits on the same basis as their scheduled hours before
that jury duty. In no event shall the Employer continue Medical, Dental and
Pension benefits for more than thirty (30) calendar days per calendar year.
Section 12. MEDICAL AND DENTAL PLANS:
(a) The Sacramento Independent Hotel, Restaurant and Tavern Employees
Welfare Plan is hereby established. The details of the Trust Fund and the
Declaration of Trust dated the 1st day of April 1954 and the 1st day of August
1954, as executed by the parties hereto is hereby made a part of this contract.
The Fund shall be administered by the Employers and the Union through a Board of
Trustees. The Union recognizes the Sacramento HERE Employers' Association as the
representative body to appoint and/or remove Management Trustees on said Board,
provided said Association is legally constituted and approved by Employers
representing a majority of employees who are participants in the Fund.
(b) Eligibility Requirements: In all cases, for an employee to be eligible
for coverage he must work a minimum number of hours per calendar month
commencing with the calendar month immediately following the calendar month of
the date of hire as follows:
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All Employees........60 hours or more per calendar month.
For all purposes under this contract, the above are known as the "minimum
required number of hours per calendar month." They must be worked for a single
contributing Employer under this contract.
(c) Contributions: For each eligible employee the Employer shall contribute
during the term of this contract the following sums per calendar month; January
1999 contributions are based upon December 1998 hours:
1. MEDICAL - Low Plan (Low Indemnity):
1-1-99 $84.00 This rate is for all new hires, for their
1-1-00 $88.00 first twelve (12) calendar months of
1-1-01 $92.00 employment including anyone hired during
the month of the 1999 ratification vote.
2. MEDICAL - High Plan (fully paid Kaiser or High Indemnity):
1-1-99 $119.00 This rate is for all employees who have
1-1-00 $129.00 completed twelve (12) calendar months
1-1-01 $139.00 of employment, or have been hired prior
to the month of the 1999 ratification vote.
3. During the term of this contract, PacifiCare HMO, or another equal value
HMO will be offered as an alternative plan. Any employee may choose either Plan
by completing the necessary paperwork within 30 days of hire or during the
annual open enrollment. Those employees must then co-pay the difference between
the PacifiCare premium, or its alternative, and the Employer's contribution each
month through payroll deduction.
4. DENTAL: 4-1-99 1-1-00 1-1-01
------ ------ ------
All Employees, 60 hours or more.....$13.00......$14.00......$15.00
It is the desire and intent of the contracting parties to seek to preserve
a sound financial reserve in the Trust Fund to adequately meet the needs of the
participants of the Fund. Should depletions of the reserves occur in excess of
what can be recovered, then the Trustees will modify benefits temporarily until
such time as financially corrective measures can be taken.
(d) Contributions to the Fund for work performed shall be paid not later
than the tenth (10th) day of the month following that in which such work is
performed. Contributions to be made to the Administrator of the Fund on forms
furnished to the Employer by the Fund showing name of the employee, social
security account number of new employees, number of hours worked, the amount of
contributions due, and such other information as required by the Trustees.
(e) It is hereby agreed that the Employer shall permit a confidential
audit of payroll records by an authorized representative of the Medical Trust
Fund to verify hours worked only.
(f) The Trustees of the Sacramento Independent Hotel, Restaurant and
Tavern Employees Welfare Plan shall not be obligated to, and are not authorized
to accept any
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contributions from an Employer under this Section of the contract unless the
said Employer is currently a party to or bound by a current contract with the
Hotel Employees and Restaurant Employees Union Local 49.
(g) The Employer agrees to pay up to two (2) months contributions per
calendar year for Medical and Dental benefits for any qualified employee who is
off work because of medical reasons. A qualified employee shall be deemed an
employee who has been qualified under this section for twelve (12) months
continuous service for this Employer.
(h) The schedule of benefits to be provided for each eligible employee and
each covered dependent shall be determined by a majority of the Board of
Trustees of said Fund.
(i) The Employer agrees to participate in an employee co-payment program
for dependent coverage. The co-payment schedule is set by the Trust Fund, and
the benefits provided shall be determined by the Trust Fund. The co-payments
must be transmitted to the Trust Fund concurrent with the payments for the
employee's coverage in order to maintain coverage. All of the conditions and
penalties apply to co-payment coverage that apply to employee coverage as stated
in this Section and the Contributions and Collections Section, as well as the
decision of the Trustees of that Trust Fund.
(j) There will be an open enrollment period during the month of October.
Employees shall pay by payroll deduction, and the Employer shall remit to the
Fund each month its monthly contributions, the difference between the amount of
monthly contributions paid by the Employer, as shown above, and the actual costs
of providing the benefits of the Plans, as determined by the Trustees. For this
purpose, the Employer shall provide for automatic and continuing payroll
deduction. All employees participating in the Plan shall by this Contract be
deemed to have granted the Employer authorization to withhold from their wages
the amounts necessary to maintain coverage.
These deductions will continue for one (1) full year for those originally
eligible. The deductions will be made only in months that the employee has 60
hours of work or pay and for which the Employer makes a contribution to the
Welfare Fund. In case of marriage, births, adoptions, etc., new dependents may
be added within 30 days.
New employees will begin to have the dependent contributions deducted, if
they chose such coverage, in the last month of Employer contributions which
will make the family eligible for benefits in the succeeding month.
Those employees who do not sign up their dependents when originally
eligible will have to provide evidence of insurability, at their own expense,
if they wish to enroll the dependent(s) at a subsequent annual open enrollment
period.
The Employer will supply to the Trust Fund Administrative office a copy of
each payroll deduction form signed by an employee.
Section 13. PENSION:
(a) Sacramento Independent Hotel, Restaurant and Tavern Employees Pension Plan
is hereby established. The parties to this Contract shall enter into a Trust
Agreement complying with the provisions of Section 302(c), of the Labor
Management Relations Act, 1947, as amended, under which the Pension Plan shall
be administered and under which a Board of Trustees upon which Union and
Employer have equal representation shall be created. The Union recognizes the
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<PAGE>
Sacramento HERE Employer's Association as the representative body to appoint
and/or remove Management Trustees on said Board, provided said Association is
legally constituted and approved by Employer's representing a majority of
employees who are participants in the "Fund."
(b) Eligibility Requirements: In all cases, for an employee to be eligible
for coverage he must work a minimum number of hours per calendar month
commencing with the calendar month immediately following the calendar month of
the date of hire as follows:
All Employees.......60 hours or more per calendar month.
For all purposes under this contract, the above is known as the "minimum
required number of hours per calendar month." They must be worked for a single
contributing Employer under this contract.
(c) Contributions: For each eligible employee the Employer shall contribute
during the term of this contract the following sums per calendar month:
PENSION: 1-1-99 1-1-00 1-1-01
------ ------ ------
All Employees, 60 hours or more............$23.00......$28.00......$33.00
(d) Contributions to the Fund for work performed shall be paid not later
than the tenth (10th) day of the month following that in which such work is
performed. Contributions to be made to the Administrator of the Fund on forms
furnished to the Employer by the Fund showing name of the employee, social
security account number of new employees, date of birth, number of hours worked,
the amount of contributions due and such other information as required by the
Trustees.
(e) It is hereby agreed that the Employer shall permit a confidential
audit of payroll records by an authorized representative of the Pension Plan
Trust Fund to verify hours worked only.
(f) The Trustees of the Sacramento Independent Hotel, Restaurant and Tavern
Employees Pension Plan shall not be obligated to, and are not authorized to
accept any contributions from an Employer under this Section of the contract
unless the said Employer is currently a party to or bound by a current contract
with the Union.
(g) The schedule of benefits to be provided for each eligible employee
shall be determined by a majority of the Board of Trustees of said Fund.
Section 14. CONTRIBUTIONS AND COLLECTIONS:
(a) Failure to pay contributions required under Sections 12 and 13 of this
contract when due may result in impairment of or loss of benefits to the
employees and result in additional costs in the administration of the Trust
Funds. It is impractical and extremely difficult to fix the actual damage
resulting from failure to pay the contributions in the manner and at the times
provided in Sections 12 and 13. The contributions are due on the tenth (10th) of
the month. Consequently, if the Employer fails to make such contributions by the
twentieth (20th) of the month in which such contributions are due, the Employer
shall pay an additional sum equal to ten
Capitol Plaza Holiday Inn 11 6/1/98 - 5/31/01
<PAGE>
percent (10%) of the contributions due and payable in such month, or fifty
dollars ($50.00), whichever is greater, as liquidated damage for each such late
payment. In addition the Employer shall pay interest in the amount of one and
one-half percent (1 1/2%) per month (eighteen percent (18%) annual interest) on
the unpaid balance.
(b) In the event the Employer willfully fails to report and pay the
contributions as required by Sections 12 and 13, or in the event the Employer so
negligently keeps and maintains his books and records that the amount of the
contributions reported and paid are ten percent (10%) less than the total
contributions found to be due under Sections 12 and 13, he shall pay the cost of
the audit, but in no event more than one thousand dollars ($1,000).
(c) In the event the Trustees are required to file suit to collect
contributions due under Sections 12 and 13, the Employer agrees to pay such sums
as the court shall fix as attorneys' fees and court costs.
(d) The parties hereto hereby authorize the Trustees of the Sacramento
Independent Hotel, Restaurant and Tavern Employees Welfare Plan Trust, and the
Trustees of the Sacramento Independent Hotel, Restaurant and Tavern Employees
Pension Trust, to waive or compromise the liquidated damages, cost of audit,
and/or attorneys' fees provided above when in their judgment such waived or
compromise is deemed just and proper.
(e) The parties hereto agree to abide by any and all action taken by the
Trustees of the Health and Welfare Plan and the Pension Plan or a successor
Trust designated by the Union between January 1, 1999, and May 31, 2001.
Section 15. SUPERIOR WORKERS AND PREMIUM PAY:
(a) The scale of wages in this contract are minimum scales and do not
prohibit a superior worker from receiving a higher wage scale.
(b) Employees receiving premium pay above the contract wage scale shall be
red circled and shall be given the same increase that the contract rate
receives.
(c) No employee shall as a result of the signing of this contract suffer a
reduction in his wages or fringe benefits.
(d) If the State or Federal Minimum Wage is established at an amount in
excess of the wage scales in this contract, then those minimum wages established
shall take effect immediately in this contract in lieu of wages herein
established.
Section 16. COMBINATION JOBS:
When an employee occupies a position combining two (2) or more
classifications in any day, said employee shall be paid for the time worked in
each classification at the contract rate of pay for that classification. This
shall not apply to relief for meal periods or rest periods nor to employees for
whom combination scales are fixed in this contract.
Section 17. DISCIPLINARY ACTIONS:
(a) The Employer may only discipline, suspend or terminate for reasons of
just cause. The Employer shall have the right to establish reasonable rules,
policies and regulations to maintain a safe and efficient operation.
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(b) Written disciplinary notices (written warnings, suspensions and
terminations) issued to employees must specify the events or actions for which
the notice is issued. Written disciplinary notices shall be issued to employees
within five (5) calendar days excluding Saturdays, Sundays, vacations, leaves of
absence, and holidays, after the Employer first became aware of the event or
action for which the disciplinary notice has been issued. Employees shall be
provided with a copy of the notice and a copy shall be mailed to the Union.
(c) The Union shall have the right to challenge the propriety of any
discipline and/or termination pursuant to the requirements of the Grievance
Procedures Section of this Contract.
(d) It is understood that except in cases which are considered serious
enough for immediate termination, discipline shall be progressive and corrective
in nature. Warning notices, including suspensions, shall be considered null and
void after a period of twelve (12) months.
(e) Probationary Period. An employee may be terminated or disciplined for
any reason during the first ninety (90) calendar days of employment (the
probationary period) and such termination or discipline shall not be subject to
the grievance or arbitration procedures of this contract.
(f) An employee may not be terminated while:
1. On vacation.
2. On written leave of absence.
3. On medical leave not exceeding four (4) months if employee
furnishes Employer with monthly progress reports of doctor and
full release from doctor upon returning to work.
Section 18. NO STRIKE AND NO LOCKOUT:
Both the Union and the Employer recognize the service nature of the hotel
business and the duty of the Employer to render continued and hospitable service
to the public by supplying food, lodging, and other hotel accommodations.
Therefore, neither the Union or any of the employees will call, engage in,
participate in, or sanction any strike, sympathy strike, slow-down, stoppage of
work, picketing, or boycott during the life of this Contract. The Employer shall
not engage in a lock out during the life of this Contract.
Section 19. HOUSE CARDS AND UNION BUTTONS:
(a) This establishment may display the International House Card, and it
shall at all times remain the property of the Union, and may be removed from
this establishment for failing to comply with this contract.
(b) Employees may wear one (1) standard Local 49 Union Button while on
duty.
Section 20. UNION SECURITY:
(a) The Employer shall notify the Union of all job openings within the
bargaining unit covered by this Contract. The Union may refer qualified
applicants for those openings. The Employer shall be the judge of the
qualifications of his employees and applicants.
(b) All present employees who are not members of the Union on the effective
date of this Contract shall, as a condition of employment, on or after the
thirtieth (30th) calendar day following the effective date of this Contract
become and remain members of the Union.
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All new employees hired on or after the effective date of this Contract
shall, as a condition of employment, on or after the thirtieth (30th) calendar
day following the beginning of such employment, become and remain members in
good standing of the Union.
As a condition of continued employment, all employees must be members of
the Union. For purposes of this Section, the terms "members of the Union" and
"members in good standing" shall be defined as one who timely tenders any
Initiation fee and/or monthly dues as set forth in the Bylaws and Constitution
of the Union and in accordance with applicable law.
(c) Upon written notice from the Union of failure on the part of any
individual employee to complete or maintain membership in the Union as above
required, the Employer shall within seven (7) calendar days of such notice,
terminate such employee. The Union agrees to and will hold the Employer harmless
from and will indemnify the Employer from any and all claims, including
attorneys' fees and costs, that may be asserted as a result of any such Union
request for termination of an employee.
(d) No employee shall be allowed to enter into any individual contract or
agreement with his Employer concerning conditions of employment or wages which
are less than the conditions of employment or wages contained herein for hours
worked.
(e) If a salaried supervisorial employee works at the trade he must become
or maintain his membership in the Union in good standing; providing, however,
this Section shall not be applicable to work at the trade in emergencies, fill-
in work during vacation periods, and under other circumstances mutually agreed
to by the Employer and the Union.
(f) When an employee is hired, the Employer will notify the employee of
this contract. Within seven (7) calendar days following the date of hire, the
Employer shall notify the Union in writing of the name, date of hire,
classification, rate of pay, address and social security number.
Section 21. EMPLOYER'S OPERATION:
All provisions of this contract shall be equally effective under any sub-
contract or concession covering work performed in or outside of the
establishment of the Employer within the classification of work as set forth in
the terms of this contract. (The status of the gift shop is governed by Addendum
A of this contract.)
In the event business conditions necessitate the subcontracting of any one
or all services performed in any bargaining unit classification, the Employer
agrees to give the Union sixty (60) days notice of its intention to subcontract
and will agree to meet and discuss the issue with the Union should there be any
adverse impact upon any bargaining unit member. The Employer further agrees to
inform the subcontractor of the existence of the contract, and in good faith
make their best effort to ensure the subcontractor retains the current
employees.
Section 22. GRIEVANCE PROCEDURES:
For purposes of this contract, a grievance shall be defined as a dispute,
or difference of opinion, between the Union and the Employer involving the
meaning, interpretation, or application of this contract, or the alleged
violation of any provision of this contract.
Both parties having mutually agreed to the benefits of speedy resolutions
of grievances, especially disciplinary action for alleged violations of house
rules, procedures or terms and
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<PAGE>
conditions of this contract. All such disputes shall be processed in the
following time and manner. Time limits at any step in the procedure may be
waived by mutual agreement of the parties.
Step 1. The employee may discuss the matter with his supervisor on an
informal basis to settle the matter promptly. The employee may have a Union Shop
Steward or Union representative assist him in Step 1. if he so desires.
Step 2.
(a) If the grievance is not resolved at Step 1., the Union
Representative shall meet with the Employer, or his authorized representative,
for the purpose of attempting to resolve the dispute.
(b) The employee or the Union Representative must submit all
disciplinary grievances in writing to the Employer within ten (10) calendar days
after the disputed discipline occurred, or it will be deemed waived by the
grieving party, as well as both the Union and the Employer.
(c) All non-disciplinary grievances must be submitted in writing to
the other party within twenty (20) calendar days of first knowledge of said
grievance or it will be deemed waived by the parties.
(d) If a settlement of the grievance is not reached during Step 2.,
then the Union may file for a Board of Adjustment (Step 3.). In any event, the
Union must file for a Board of Adjustment within ten (10) calendar days of the
date that the grievance was filed in writing with the Union. Failure to request
an Adjustment Board in the prescribed time frame shall disallow any further
action on the grievance unless the time period is waived by the Union and the
Employer.
Step 3.
The Adjustment Board shall meet within seven (7) calendar days of a
request for a hearing. The Adjustment Board shall consist of two (2)
representatives from each contracting party. The Adjustment Board shall be
empowered to hear and resolve, by simple majority, all grievances properly
brought before them. Any decisions of the Adjustment Board shall be final and
binding. If the Adjustment Board cannot agree on any matter before it, the
grieving party may request arbitration. Said request must be done within seven
(7) calendar days of the deadlocked decision of that Adjustment Board, or that
grievance shall be deemed waived by both parties.
Section 23. ARBITRATION:
(a) If arbitration is resorted to, the decision of the arbitrator shall be
final and binding upon both of the parties. The time limits contained herein may
be waived by mutual agreement of the parties.
(b) Within ten (10) calendar days of the request to arbitrate, the parties
shall choose an arbitrator from a list of seven (7) arbitrators provided by the
Federal Mediation & Conciliation Service.
(c) Expedited arbitrations shall commence within twenty-eight (28)
calendar days of the request for arbitration in all disciplinary grievances.
(d) All non-disciplinary grievances shall proceed at the earliest possible
date, and the arbitrator chosen must be instructed by the parties to render his
written decision within thirty (30)
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<PAGE>
calendar days of the arbitration, unless a bench decision has been mutually
requested by the parties.
(e) Arbitration hearings shall be conducted in accordance with the
following procedures:
1. Continuances may be granted by the Arbitrator, but any cost shall be
paid by the requesting party.
2. There shall be no formal rules of evidence.
3. Hearings shall normally be completed within one (1) day.
4. The Arbitrator shall have sole authority to rule on all motions and to
decide the case.
5. Bench decisions shall be the rule in all disciplinary cases, unless
otherwise agreed to beforehand by the parties.
(f) Each party shall bear their own cost of the arbitration excluding the
Arbitrator's fee and his related costs which shall be equally divided between
the parties.
(g) The Arbitrator shall not have the power to add to, or to modify any of
the terms, conditions, sections or subsections of this contract. The
arbitrator's decision shall not go beyond what is necessary for the
interpretation and application of this contract in the case of the specific
grievance at issue.
(h) No grievances that arose between June 1, 1998, and January 22, 1999,
are subject to the provisions of Section 23.
Section 24. DUES AND FEES CHECK-OFF:
(a) The Employer will deduct from their wages and turn over to the duly
designated officer of the Union the membership dues, initiation fees, and
reinstatement fees of such members of the Union as individually and voluntarily
certify in writing on and after the date of this contract that they authorized
such deductions. Such written authorizations shall be irrevocable for a period
of one (1) year or until the termination or renewal of this contract, whichever
occurs sooner, and such written authorizations shall be automatically renewed
and shall be irrevocable for successive periods of one (1) year or until the
termination or renewal of this contract, whichever occurs sooner, and such
written authorizations shall be automatically renewed and shall be irrevocable
for successive periods of one (1) year each, or for the period of such
succeeding contracts between the Employer and the Union, whichever shall be
shorter, unless written notice of revocation is given to the Employer and a copy
sent to the Union not more than fifteen (15) calendar days before the expiration
of each period of one (1) year, or each succeeding contract between the Employer
and the Union, whichever occurs sooner. All dues and fees deducted from an
employee's paycheck are then the property of the Union and are being held in
trust for the Union until delivered to the Union.
(b) The form of such written authorization shall be on a form supplied by
the Union and approved by the Employer, which form shall be attached hereto and
made a part of this contract and marked Addendum "C."
(c) Deductions for Union membership dues and fees pursuant to this Section
shall be made from the second (2nd) paycheck of the employee after receipt of
the authorization and monthly thereafter on the first (1st) payday of each month
for such time as the authorization remains in effect.
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(d) The provisions of this Section are intended solely as an accommodation
to the Union. It is expressly agreed and clearly understood by the parties that
no agency, bailment, or any other relationship is created, intended, or shall be
implied between the Employer and the Union, or between the Employer and any
employee or group of employees. Further, the Union specifically agrees to hold
the Employer harmless from any and all losses, damages, or injury of every
nature whatever, including but not limited to the expenditure of all attorneys'
fees and all court cost incurred by the Employer by reason of the provisions of
this Section.
Section 25. WORKER'S COMPENSATION:
(a) The Employer has secured worker's compensation insurance coverage and
will make every reasonable effort to see that injured employees receive prompt,
adequate medical attention. Any employee sustaining a work related injury must
immediately report said injury to his supervisor and if necessary request
medical attention from that supervisor. When an employee has an on the job
injury that requires off site medical attention he shall be required to take a
drug test.
(b) Prior to hiring or within thirty (30) calendar days of hiring an
employee or prior to returning to work from an injury, the Employer may require
that the employee take a physical examination at no cost to the employee. The
intention here is to avoid having employees on jobs which might jeopardize their
health or the safety and health of others. Should the medical examination
disclose such conditions, the Employer will make every effort to assign the
employee to work within his capability. When such other work is not available,
the employee may be removed from the payroll and the case taken up with a
representative of the Union.
(c) All employees will observe all safety rules set up by the Employer.
(d) The Employer agrees to add two (2) bargaining unit employees to the
Health & Safety Committee.
Section 26. MANAGEMENT RIGHTS RESERVED:
The Employer shall have the right to determine the extent of its
operations and to determine when any operation shall function, or shall be
halted, and when services shall be increased and decreased. The authority to
hire employees, to direct, retire, promote, transfer, train, layoff, or dismiss
any employee for just cause, to maintain discipline, to make reasonable rules,
to determine work schedules, and the number of hours an employee may work per
day or per week, shall be vested in the Employer, subject to the provisions of
this contract.
Section 27. SENIORITY:
The Employer and the Union agree that the purpose of seniority is to
accord consideration to senior employees in recognition of their length of
service to their Employer. Seniority is further intended to provide maximum work
opportunity to senior employees.
(a) Definition:
1. Hotel seniority is an employee's length of continuous service in years,
months and days from his most recent date of hire into the bargaining unit.
2. Classification seniority is an employee's length of continuous service
in years, months and days from his most recent date of hire, promotion or
transfer into his present classification. If
Capitol Plaza Holiday Inn 17 6/1/98 - 5/31/01
<PAGE>
two or more employees are employed within the same classification on the same
day, their seniority shall be determined by whoever is born on the earliest day
of the year.
(b) Layoff and Recall:
When it is necessary to lay off employees, those with the least amount of
seniority in the job classification shall be laid off first. When the workforce
is increased within the classification, employees on layoff shall be recalled in
order of their job classification seniority. All employees on layoff shall be
recalled before the hiring of any new employees.
(c) Scheduling:
1. Preference for sbifts and days off shall be based on classification
seniority.
2. Preference for vacation schedules shall be based on hotel seniority.
3. Employees with the greatest classification seniority shall have the
preference of work schedules including days off. A work schedule is defined as a
series of days of work, starting/quitting times and days off.
(d) Probationary Period:
A newly hired employee shall be considered a probationary period employee
until he has completed ninety (90) calendar days of employment. Once the
probation period has been completed his seniority shall date back to his date of
hire. A probationary employee may be laid off or terminated without recourse to
the grievance procedure.
(e) Promotions and Transfers:
1. In filling job vacancies which may exist within the bargaining unit, the
Hotel subscribes to the philosophy of promotion from within. Among employees who
are quafified for said job vacancy, in the judgment of the Employer, house
seniority shall be the final determining factor in making such selection.
In the event of a dispute as to the qualifications of an employee for a
promotion, the Union may file a grievance that the Employer has made its
determination arbitrarily or capriciously.
Nothing herein shall preclude the Employer from hiring an applicant from
outside the Hotel or bargaining unit once all internal candidates have been
considered.
2. In the event that an employee who, within sixty (60) calendar days of
his promotion or transfer, desires to return to his former position or is deemed
not qualified to hold the new position, he shall be returned to his former
classification without loss of seniority. This provision shall apply to
promotions or transfers to positions both inside the bargaining unit and outside
the bargaining unit. It is further understood that while an employee is training
for an upgraded position, he shall retain all seniority rights in his base
classification.
3. Employees who have been promoted into a new classification and as a
result of that promotion are not able to achieve the same amount of hours as
they were previously working pursuant to their seniority, shall retain the right
to work in their previous classification to supplement their hours under the
following terms and conditions:
(a) The new classification shall be the primary job and therefore shifts
must be satisfied there first, prior to working in the previous
classification;
(b) No overtime will be incurred unless agreed to by the Employer;
Capitol Plaza Holiday Inn 18 6/1/98 - 5/31/01
<PAGE>
(c) At the time of promotion, on a form to be provided by the Employer,
the employee shall choose whether or not he wants additional hours in his
previous position in the event he loses hours in his new position due to
his promotion.
(d) Such protections shall be valid for six (6) months beginning the first
date of employment in the new position.
In completing and filling out his weekly schedules with work from the
previous classification, the promoted employee shall exercise his seniority in
that classification in a manner which minimizes the disruption of the schedules
in that classification, i.e., bumping the least senior person in the
classification which will allow him to make up hours equivalent to his previous
schedule.
(f) Termination of Seniority:
An employee's seniority shall be terminated by:
1. Termination for cause
2. Voluntary quit
3. Failure to return to work at the end of a leave of absence
4. Absence from work for three (3) consecutive days without notifying and
providing a satisfactory excuse to the Employer.
5. Failure to report for work after layoff within three (3) calendar days
after having been recalled by a notice sent to the employee's last known
address by certified mail.
6. A layoff of three continuous months except where the property has been
temporarily closed, in whole or in part, for purposes of remodeling or
reconstruction. In such a case, the "closed time" shall not be counted
toward the three (3) month period of layoff.
(g) Seniority Lists:
Upon request the Employer shall furnish the Union with a current seniority
list every six months. The Employer shall also post an updated seniority list
within 10 calendar days of the signing of this contract. Employees shall have
ten (10) calendar days from the date of posting to notify the Employer or the
Union of any errors in the list.
(h) It shall be the responsibility of the employee to keep the Employer and
the Union informed of his current address and telephone number at all times.
Section 28. TERMS, TERMINATIONS, AND AMENDMENTS:
This contract shall be in effect from June 1, 1998, to and including May
31, 2001, and shall remain in full force and effect from year to year thereafter
unless either party shall serve written notice upon the other of a desire to
amend said contract no later than February 1, 2001, or any subsequent February
1st thereafter.
Section 29. CRAFT RULES, REGULATIONS, AND WORKING CONDITIONS:
(a) LINEN, LAUNDRY AND UNIFORM: The Employer shall furnish linen and
uniforms and launder same without expense to the employee. The Employer reserves
the right to select the style or type of special uniform required in his
establishment. Any special uniform that is considered wash and wear will be
laundered by the employee at no expense to the Employer.
Capitol Plaza Holiday Inn 19 6/1/98 - 5/31/01
<PAGE>
The ordinary black or white food servers garment which may be worn in other
establishments shall not be considered as a special uniform.
A cook's uniform shall consist of pants, cap, apron, and jacket, shirt, or
dress. When the Employer does not furnish and launder cooks uniforms, he shall
pay one dollar ($1) per day in lieu thereof. This shall not apply when an
employee refuses to wear the uniform furnished by the Employer, provided such
uniforms are wearable and are those customarily worn in the Employer's
establishment.
Any Employer electing to pay wages in excess of those called for in
Section 30 shall not be relieved of this provision. Any Employer electing to
reimburse the employee in lieu of uniforms and laundry shall designate such
reimbursement on the payroll check stub.
(b) BREAKAGE, CASH SHORTAGE, CONTRIBUTIONS AND DEDUCTIONS:
No employee shall be required to contribute to a captain, head food server,
bartender, or anyone in charge.
Unavoidable or accidental breakage or spillage of merchandise or equipment
shall not be charged against an employee.
No Employer shall make any deductions from the wage or require any refund
from an employee for any cash shortage, breakage, or loss of equipment unless it
can be proved that the shortage, breakage, or loss is caused by a dishonest or
willful act, or by the gross negligence of the employee.
No employee shall be held responsible for walkouts or when guests refuse to
pay checks. No employee shall be held to pay the house any part of an
undercharge.
Cash Shortages: No employee shall be held liable for any cash shortages if
more than one (1) employee has access to the employee's cash drawer. In the
event of an excessive cash shortage, the employee must notify the Employer or
his authorized representative for verification, or be held liable for such
shortage.
(c) CLEANING:
1. No food or beverage server shall be required to wash or wipe glasses,
silverware, creamers, tea or coffee pots, or other utensils as part of their
regular duties. This Section will not be applied to bartenders.
2. Food and beverage servers shall not be required or permitted to do any
work designated as "porter" work, including sweeping, scrubbing floors or walls,
defrosting or cleaning the inside of ice cream cabinets or refrigerators and
similar work; except the cleaning of back bars and counter may be required as
part of food server's work.
3. It is the responsibility of all employees to clean up spills whether
or not they caused the spill. This provision shall not result in amending
existing job descriptions.
(d) PAYMENT OF GRATUITIES:
1. Any house accepting charge accounts or credit cards on which a
gratuity or service charge is specified for any employee shall pay the same to
said employee upon the completion of the shift. An Employer may require a refund
of any gratuities or service charges made on a credit
Capitol Plaza Holiday Inn 20 6/1/98 - 5/31/01
<PAGE>
card which the employee has received and for which payment is later disallowed
or refused. This does not apply to house charge accounts.
2. All banquet and catering gratuities and service charges will be
distributed in the following manner:
a. Eighty percent (80%) of the customary 15% gratuity and/or service
charge shall be distributed to the employees working the affair;
and
b. Twenty percent (20%) may be distributed to the banquet manager,
catering manager and others.
c. Where more than the customary 15% gratuity and/or service charge is
charged for the affair, the distribution of the excess portion
shall be at the discretion of the Employer.
The Employer shall be responsible for and guarantee the distribution of said
gratuities or service charges and all banquet and catering gratuities received
in accordance with this rule. Said service charge or gratuity will be in
addition to the wages set forth in this contract.
The distribution formula may be deviated from where the success of the
affair is substantially due to the particular skills and/or labor of employees
other than regular banquet personnel, in which case the gratuity or service
charge will be distributed in a fair and equitable manner to all employees
concerned.
3. Representatives of the Union shall have the right to inspect all
records in connection with any gratuities or service charges and disposition of
same on behalf of employees working a particular function on request.
(e) BANQUET RULES:
1. All banquets served on Sunday after 11:00 a.m. shall receive the dinner
scale. If banquet servers, after completing their parties, are transferred to
ala carte service, they shall, after three (3) hours be paid the appropriate ala
carte rate per hour. No banquet server will work ala carte without the
employee's consent.
2. Dinner dances where food servers collect all checks, shall be paid the
ala carte scale. Non-collecting dinner dances shall be paid at the banquet rate
per hour with a minimum of three (3) hours.
3. Steady help are not allowed to work on banquets unless extra help is
not available; provided this shall not apply where the use of extra banquet
servers will result in closing stations. Steady help working on banquets of
twenty-five (25) or more shall receive banquet scale regardless of number of
guests served. Steady help may be employed on parties of twenty-four (24) or
less at regular rate for steady employment. The scale for breakfast applies only
to employees called at 5:00 a.m. or later.
4. No food server shall be required to wait on more than thirty (30)
guests. It is mutually understood that the Employer will estimate one (1) food
server to every thirty (30) guests. In case of overflow or any other emergency
and the food server waits on more than the allowed thirty (30) guests, they will
be paid forty cents ($.40) for each additional person.
5. Buffets: No employee shall be required to serve more than fifty (50)
guests on a service buffet; on semi-service buffets, they may serve sixty (60)
guests; on hors d'oeuvres and receptions one (1) food server for every eighty-
five (85) guests.
Capitol Plaza Holiday Inn 21 6/1/98 - 5/31/01
<PAGE>
6. All banquet scales will be for a three (3) hour minimum. Setting up and
overtime will be at the same hourly rate as the actual banquet. Where travel is
involved employees will be paid the same hourly rate for time of travel.
Employees who are requested to use their own car to transport other employees to
and from the job shall receive an additional twenty cents ($.20) per mile for
their car expense. This only applies to catered parties and banquets held over
ten (10) miles from place of employment.
7. All banquet workers shall be called through the union except house
steady banquet employees. All banquet gratuities and/or service charges are to
be paid on the next payroll after the party has been paid for. Head banquet
servers shall not receive less than fifty cents ($.50) per hour over the banquet
scale.
8. All extra banquet employees will be paid on the next regular payroll of
the Employer.
9. All banquet shifts will be individual shifts and paid for by the
individual banquet scale for same; however, where two (2) or more banquets are
worked in one (1) day in any one (1) house, the total pay cannot be below the
State Minimum Wage including overtime and split shifts.
(f) GUEST ROOM ATTENDANTS AND HOUSE PERSON'S DUTIES:
1. A guest room attendant will be required to change all linen daily,
clean the bath, vacuum, dust, clean the windows and fixtures, replace light
bulbs in lamps and anything else that is required to maintain the everyday
cleanliness of a room.
2. A house person shall assist the guest room attendant by picking up
trash and soiled linen from the attendant's cart, stock and maintain the linen
closets, move furniture, vacuum and maintain halls or sidewalks, shampoo rugs
and repair or replace items in a room, i.e., lamp shades, drapes, overhead light
bulbs, stopped up drains, etc.
3. A guest room attendant shall not be required to do more than fifteen
(15) rooms in one (1) day. If suites or apartments consist of more than one (1)
room, each room in the suite or apartment shall be considered as a room for the
total number of rooms for a day. Any additional rooms in excess of those called
for in the above schedule, the employee shall be compensated at the rate of two
dollars ($2.00) per room. If any dispute arises on the subject, the Employer
agrees to discuss the matter with the Union in an effort to effect an amicable
disposition of the complaint.
4. If a room contains two (2) or more rollaway cots, one (1) room will be
reduced from the daily quota.
(g) MAINTENANCE EMPLOYEES:
Maintenance Worker I (Assistant Chief)
In addition to performing all duties described under the other
classifications of this department, the Maintenance Worker I may, under the
supervision of the Chief of Maintenance, supervise a crew, assign them to their
duties, devise shift schedules, be responsible for a preventative maintenance
program and a M.S.D.S. program. The Maintenance Worker I must also possess a
Class 2 - EPA certification.
Capitol Plaza Holiday Inn 22 6/1/98 - 5/31/01
<PAGE>
He may, subject to advance approval, order and purchase parts and supplies,
call in contractors when necessary and keep management advised of his
department's activities. He also coordinates maintenance work with other
departments.
Maintenance Worker II:
Generally, under the direction of either Chief Engineer or the Maintenance
Worker I, the Maintenance Worker II performs the duties itemized below, but is
not limited to those duties. This outline is only a summary of the job
responsibilities and is not considered a restrictive job description.
Electrical: Repairs, replaces and maintains motors, controls, switches, and
relay wiring. Changes ceiling light bulbs. Locates problems and diagnoses
malfunction.
Refrigeration/Air Conditioning: Repairs, replaces and recharges
refrigeration/air condition systems, cleans oils, flushes liquid condensers,
adjusts temperature and pressure controls, replaces and cleans filters, replaces
certain components as may be required - usually short of major overhaul.
Plumbing: Repairs, replaces and maintains all plumbing fixtures including
faucets, flushometers, drains, toilets, sinks, showers, minor pipe failures,
evaporative coolers, sprinklers, valves and pumps.
Carpentry: Builds shelves, racks, partitions, platform, including
remodeling. Constructs various items as required by Employer.
Locks: Changes and repairs locks, make keys, install new locks.
Roofing: Locates leaks or damage and repairs. Maintains all roofing mounted
equipment.
Floors: Repairs and replaces tiles, linoleum and/or carpet. Repairs or
resurfaces floors.
Walls: Patch and plaster, paint or vinyl, or otherwise repair walls and
partitions including wall tile. Mount such items as mirrors, pictures, lamps,
headboards and shelves.
Heating: Maintains boiler components, gas and electrical, water heater,
piping, valves and control systems.
Furniture: Repairs any and all guest room and public area furnishings.
Emergency Life Safety Systems: Bi-monthly testing and preventative
maintenance, including repairs of fire sprinkler pumps and emergency lighting
generator. Tests and replaces emergency lighting batteries.
Maintenance Worker III (Helper/Utility Worker)
Under the supervision of either the Chief Engineer or the Maintenance
Worker I or II, the Utility worker performs the duties itemized below, but is
not limited to those duties. This outline is only a summary of the job
responsibilities and is not considered a restrictive job description.
Electrical: Repairs, replaces switches, lamp cords and sockets, light
fixtures, changes light bulbs.
Air Conditioning/Heating: Cleans and replaces filters, cleans coils,
adjust temperature controls, replaces faulty room units.
Plumbing: Repairs, replaces and maintains all plumbing fixtures including
flushometers, drains, toilets, sinks, showers, minor pipe failures. Maintains
and back flushes swimming pools.
Capitol Plaza Holiday Inn 23 6/1/98 - 5/31/01
<PAGE>
Carpentry: Assists with building of shelves and racks. Constructs various
items as required by the Employer.
Roofing: Assists with roof leak repairs.
Floors: Repair or replacement of tiles, linoleum and/or carpet.
Walls: Patching, plastering, painting or vinyling of walls, including other
repairs. Mount such items as mirrors, pictures, headboards and shelves.
Furniture: Repair of any and all guest room and public area furnishings.
(h) COMBINATION LAUNDRY WORKER/UNIFORM ROOM ATTENDANT:
Duties: 1. Maintains employee uniforms
2. Makes minor alterations of uniforms and linen
3. Laundry work.
Section 30. WAGE SCALES:
SENIORITY INCENTIVE:
Amount Beginning on hire date
------ ----------------------
10 cents per hour 1st Anniversary
20 cents per hour 3rd Anniversary
30 cents per hour 5th Anniversary
40 cents per hour 10th Anniversary
The above amounts will continue to be paid over the contract wage scale
according to the individual's job classification and are not cumulative.
* * * Effective on the date of contract ratification, January 22, 1999, all
employees receiving a seniority incentive under the above provisions will
continue to receive that same amount of incentive. However, that amount received
is frozen for this contract term. Employees not yet eligible, and all new
employees, will not become eligible for the seniority incentive during this
contract term.
WAGE SCALES - THE FIRST EFFECTIVE RAISE FOR ALL EMPLOYEES IS THE CONTRACT
RATIFICATION DATE (January 22, 1999)
TIPPED EMPLOYEES
----------------
BARTENDERS 1-22-99 6-1-99 6-1-2000
- ---------- ------- ------ --------
Service and/or Combination.......$7.32......$7.52........$7.72
Regular.......................... 7.13...... 7.33........ 7.53
Banquet:
6 hour guarantee............... 8.95...... 9.15........ 9.35
3 hour guarantee............... 9.45...... 9.65........ 9.85
Capitol Plaza Holiday Inn 24 6/1/98 - 5/31/01
<PAGE>
FOOD SERVERS AND BUSPERSONS 1-22-99 6-1-99 6-1-2000
- --------------------------- ------- ------ --------
Food and Beverage Servers............$5.85..........$5.95..........$6.05
Bus Persons.......................... 5.85.......... 5.95.......... 6.05
Head Food Server..................... 6.05.......... 6.15.......... 6.25
Banquet Captain...................... 6.15.......... 6.25.......... 6.35
Dinners and Banquets (Food and Beverage Servers and Bus Persons)
Breakfast, Lunch or Tea.............. 5.85.......... 5.95.......... 6.05
Dinner............................... 5.90.......... 6.00.......... 6.10
Dinners, commencing after 9:00 a.m... 6.05.......... 6.15.......... 6.25
BELLPERSONS/VALET PARKING ATTENDANTS
- ------------------------------------
Bell Captain......................... 5.90.......... 6.00.......... 6.10
Bell Person.......................... 5.85.......... 5.95.......... 6.05
Valet Parking Attendants * *......... 5.85.......... 5.95.......... 6.05
* * A shift differential of $.25 per hour will be added to all hours worked
on the graveyard shift.
NON-TIPPED EMPLOYEES
--------------------
DINING ROOM/BANQUETS
- --------------------
Host Person, Cashier ................$6.55......... $6.90......... $7.25
Banquet Setup (after 5 p.m.).........$6.50.......... 6.85.......... 7.20
KITCHEN
- -------
Lead Cook ...........................$9.25..........$9.60..........$9.95
Dinner, Second or Broiler Cook ...... 8.04.......... 8.39.......... 8.74
Fry Cook............................. 7.84.......... 8.19.......... 8.54
Pantry............................... 7.22.......... 7.57.......... 7.92
Kitchen Worker, Porter, Dishwasher... 6.52.......... 6.87.......... 7.22
FRONT DESK AND CLERICAL
- -----------------------
Front Desk Shift Lead................$9.70..........$9.95.........$10.20
Front Desk (In Hire)................. 7.50.......... 7.75......... 8.00
Front Desk (After 6 months).......... 7.75.......... 8.00......... 8.25
Concierge (In Hire).................. 7.50.......... 7.75......... 8.00
Concierge (After 6 months)........... 7.75.......... 8.00......... 8.25
Reservations (In Hire)............... 7.50.......... 7.75......... 8.00
Reservations (After 6 months) ....... 7.75.......... 8.00......... 8.25
Capitol Plaza Holiday Inn 25 6/1/98 - 5/31/01
<PAGE>
FRONT DESK AND CLERICAL 1-22-99 6-1-99 6-1-2000
- ----------------------- ------- ------ --------
Lead Night Auditor..................$ 9.85.........$10.10.........$10.35
Night Auditor....................... 9.25......... 9.50......... 9.75
PBX................................. 7.25......... 7.50......... 7.75
Store Room Clerk.................... 6.76......... 7.11......... 7.46
MAINTENANCE
- -----------
Maintenance I (Assistant Chief)..... 16.30......... 16.65......... 17.00
Maintenance II (In hire)............ 12.30......... 12.65......... 13.00
Maintenance II (After One Year)..... 12.65......... 13.00......... 13.35
Maintenance III..................... 10.00......... 10.35......... 10.70
SECURITY
- --------
Security Guards..................... 7.40......... 7.75......... 8.10
Night Security (11 p.m. to 7 a.m.).. 9.10......... 9.45......... 9.80
(Includes M.O.D. Responsibilities)
HOUSEKEEPING
- ------------
Guest Room Attendant................$ 6.57.........$ 6.97.........$ 7.42
Room Inspector...................... 6.67......... 7.07......... 7.52
Laundry Worker...................... 6.83......... 7.23......... 7.68
Laundry Worker/Guest Room Attendant. 6.83......... 7.23......... 7.68
Head Houseperson.................... 9.23......... 9.63......... 10.08
Houseperson/Lobby................... 6.67......... 7.07......... 7.52
Houseperson/Shampooer............... 9.03......... 9.43......... 9.88
Linen Room Attendant................ 6.57......... 6.97......... 7.42
Laundry Worker/Uniform/Seamstress... 6.83......... 7.23......... 7.68
Capitol Plaza Holiday Inn 26 6/1/98 - 5/31/01
<PAGE>
Section 31. SIGNATURES:
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
this day of , 1999.
FOR THE UNION: FOR THE EMPLOYER:
Hotel Employees and Holiday Inn -
Restaurant Employees Capitol Plaza Sacramento
Union Local 49
by: /s/ Joseph A. McLaughlin by:
Joseph A. McLaughlin Robert Niehaus
President-Business Manager Regional Vice President
by: /s/ Rebecca Garcia by:
Rebecca Garcia Jerry Temple
Secretary-Treasurer General Manager
Capitol Plaza Holiday Inn 27 6/1/98 - 5/31/01
<PAGE>
ADDENDUM "A"
------------
It is hereby agreed between the Capitol Plaza Holiday Inn and Hotel
Employees and Restaurant Employees Union Local 49 that the Gift Shop be
suspended from the Collective Bargaining Agreement until such time as the Gift
Shop returns under the business operation of the Capitol Plaza Holiday Inn, or
there is a change in management from that which is in the contract at the time
this contract is signed.
ADDENDUM "B"
------------
SCHEDULES
- ---------
1. After your scheduled day off you must call in to check your schedule
(6:30 am - 4 pm the day before you are due back).
2. On-call personnel must phone in each day that you are placed on call
between the hours of 6:30 am and 7:30 am. (The day of on-call status.)
3. Housekeeping personnel must not report to work without checking their
schedule prior to coming in.
4. Employees switching days off must get 5 days prior written approval.
5. Request for days off must be given 5 days in advance. You must receive
prior approval from the Housekeeping Manager.
ADDENDUM "C"
------------
Reference Section 24(b) - Dues Deduction.
FOR THE UNION: FOR THE EMPLOYER:
Hotel Employees and Restaurant CAPITOL PLAZA
Employees Union Local 49 HOLIDAY INN
by: /s/ Joseph A. McLaughlin by:
Joseph A. McLaughlin Robert Niehaus
President-Business Manager Regional Vice President
by: /s/ Rebecca Garcia by:
Rebecca Garcia Jerry Temple
Secretary-Treasurer General Manager
Capitol Plaza Holiday Inn 28 6/1/98 - 5/31/01
<PAGE>
ADDENDUM "C"
------------
Hotel Employees and Restaurant Employees International Union, AFL-CIO
- ---------------------------------------------------
(Print name of Employee)
- --------------------------------------------------- -------------------------
(Print name of Employer) (Date)
I hereby request and accept membership in the Hotel Employees and Restaurant
Employees International Union, Local _______, AFL-CIO, and designate and
authorize it and any subordinate body of the International Union with which it
is affiliated, to represent me in collective bargaining in all matters relating
to my wages, hours and conditions of employment, and to negotiate and execute
agreements covering same. In making this request and in accepting membership, I
hereby agree to be bound by the Constitution, laws, rules, policies and/or
regulations of the above International Union, the local union, and Joint Board
with which the local union is affiliated, if any, and any other affiliated local
union and/or Joint Board to which I may hereafter transfer or become a member
of. You may refrain from becoming a member by still paying union dues and
initiation fees, or an amount in lieu of dues and initiation fees which
represent the Union's cost germane to representing employees. For more
information, write Department B, HEREIU, 1219 28th Street, NW, Washington, DC
20007.
* * * * * *
I hereby authorize and direct my above-mentioned employer to deduct from my
wages, each and every month, dues, initiation fees, or reinstatement fees (not
exceeding initiation fees) which I am required to pay as a condition of
maintaining membership in good standing of said union, which I assign to said
union, and I direct that same be forwarded each month to said union. This
authorization and direction shall be irrevocable for a period of one (1) year or
until the termination of the collective bargaining agreement between my employer
and said union, whichever occurs sooner, and I agree and direct that this
authorization and direction shall be automatically renewed, and shall be
irrevocable for the successive periods of one (1) year each or for the period
of each succeeding applicable collective bargaining agreement between my
employer and said union whichever shall be shorter, unless written notice is
given by me to the employer and said local not more than twenty (20) days and
not less than ten (10) days prior to the expiration of each period of one (1)
year, or the expiration of each applicable agreement between my employer and
said union, whichever occurs sooner.
If you do not wish the above to apply, but prefer to pay your dues and
initiation fees and other voluntary charges, if any, referred to above to the
office of the local union every month, initial here.
--------
*SEE IMPORTANT INFORMATION ----------------------------------------------
ON REVERSE SIDE (Signature of Employee)
- ---------------------------------- -----------------------------------------
(Telephone Number) (Address)
- ---------------------------------- -----------------------------------------
(Type of Work) (Social Security No.)
<PAGE>
EXHIBIT 12.1
JOHN Q. HAMMONS HOTELS, INC.
HISTORICAL RATIO OF EARNINGS TO FIXED CHARGES
(000's omitted)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
------------- ------------- --------------- --------------- ----------------
HISTORICAL EARNINGS:
<S> <C> <C> <C> <C> <C>
Income (loss) before minority interest,
provision for income taxes,
extraordinary item and cumulative effect
of change in accounting principle........ $18,729 $18,524 $ 8,791 $ 338 $ (973)
Add:
Interest, amortization of deferred
financing fees and other fixed
charges (excluding interest
capitalized)............................. 28,904 36,337 45,086 58,257 63,456
------- ------- ------- ------- -------
Historical earnings.................... $47,633 $54,861 $53,877 $58,595 $62,483
======= ======= ======= ======= =======
FIXED CHARGES:
Interest expense and
amortization of deferred
financing fees........................... $28,447 $35,620 $44,325 $57,286 $62,209
Interest capitalized...................... 5,270 7,162 10,259 6,163 6,770
Interest element of rentals............... 457 717 761 971 1,247
------- ------- ------- ------- -------
Fixed charges.......................... $34,174 $43,499 $55,345 $64,420 $70,226
------- ------- ------- ------- -------
RATIO OF EARNINGS TO FIXED CHARGES
(A)......................................
1.39 1.26 0.97 0.91 0.89
======= ======= ======= ======= =======
</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>
EXHIBIT 13.1
[LOGO]
John Q. Hammons Hotels & Resorts
annual report 1999
<PAGE>
1999 annual report
Financial highlights.
(in thousands, except per share amounts, ratios and hotel data)
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
OPERATING RESULTS
Total Revenues $356,448 $326,130 $302,274
OTHER DATA
EBITDA $104,540 $ 95,029 $ 87,897
SHARE DATA
EBITDA per share/LP Unit $ 4.73 $ 4.25 $ 3.93
Operating Cash Flow per share $ 1.91 $ 1.69 $ 1.95
(EBITDA less interest expense)
SELECTED BALANCE SHEET DATA
Total Assets $934,312 $876,486 $816,733
Total Debt, including Current Portion $828,843 $759,716 $695,791
Minority Interest of Holders of
Limited Partner Units $ 25,251 $ 27,392 $ 39,399
Equity $ 13,855 $ 17,847 $ 18,508
OPERATING DATA
Number of Hotels 45 42 45
Number of Rooms 11,067 10,293 11,108
Average Occupancy 62.9% 62.1% 62.9%
Average Daily Room Rate (ADR) $ 94.87 $ 91.38 $ 82.38
Room Revenue per Available
Room (RevPAR) $ 59.64 $ 56.79 $ 51.84
</TABLE>
<PAGE>
Tilling the soil.
The finest hotels. The best locations. The most resilient markets. The highest
standards.
Sowing the seeds.
Six impressive additions. One unwavering philosophy.
Increasing the yield.
Improving operations. Streamlining the portfolio. Advancing technology.
Reinvesting in the company.
The end of the day.
Renewing the focus. Working harder. Creating a greater return.
Hard work and persistence will bring a bountiful harvest to everyone at the
table.
<PAGE>
A letter to the shareholders.
[PICTURE]
In 1998, John Q. Hammons Hotels, Inc. (the "Company") planted the seeds of
success for the Company's long-term growth and increased performance. In the
ensuing months, we will remain true to our goals and believe that our strategy
will bring a bountiful harvest in the year 2000, taking the form of enhanced
shareholder value and increased earnings.
Reviewing 1999, it is clear that our work is helping the Company grow to its
full potential:
. We have constructed the finest hotels in the country and placed them in
rapidly growing markets where they have established dominance.
. We have taken steps to improve the quality and performance of existing
hotels and have sold properties not performing up to our standards.
. We have invested in our people and technologies to ensure the finest
service in the industry.
. We have reinvested in the company to take advantage of our undervalued
stock.
As we move into the 21st century, John Q. Hammons Hotels, Inc. owns and manages
more than 50 hotels, with all properties located in resilient markets and ranked
among the top three performers in each market.
Set to Grow.
In the spring of 2000, John Q. Hammons Hotels, Inc. will complete a five-year
period of development that has reduced the average age of our hotel portfolio to
less than seven years.
Adding to our already impressive portfolio of properties, we opened the Hampton
Inn & Suites in Mesquite, Texas, on April 15, 1999; the Radisson Resort Hotel in
Coral Springs, Florida, on May 1, 1999; the Embassy Suites Outdoor World at
Dallas/Ft. Worth International Airport in Grapevine, Texas, on August 3, 1999;
and the Renaissance Suites Hotel in Charlotte, North Carolina, on December 22,
1999.
Our hotels are located in markets that are experiencing rapid growth, enabling
each property to take advantage of emerging markets and secure the dominant
position in their respective locations.
Demand generators such as major international airports, state capitals, colleges
and universities, downtown convention centers and major corporate headquarters
make our properties less susceptible to market fluctuations. These locations
also offer a ready market for meeting space, which drives high occupancy levels,
solid average daily rates, and high revenue per available room (RevPAR).
With the addition of the new properties, our hotels offer a total of 1.6 million
square feet of convention and meeting space--more than any other hotel
management company in the United States.
In June, the company sold the Holiday Inn Express Hotel and Conference Center in
Joliet, Illinois. We extended our relationship with Marriott International in
July, adding the World Golf Village Resort Hotel and Convention Center in St.
Augustine, Florida, to our portfolio of hotels that fly the Renaissance flag.
The World Golf Village Renaissance Resort was connected to the Renaissance
reservation system on July 19, 1999.
Following the first quarter 2000 opening of the Embassy Suites in North
Charleston, South Carolina, and the Renaissance Myriad Center in Oklahoma City,
Oklahoma, the Company has no additional development plans for the near future.
Overall, our hotel portfolio is among the top industry performers, increasing
revenue and EBITDA in each of the past six years. And we continually review
these items to ensure we are maximizing returns in all the markets we serve.
2
<PAGE>
Season After Season.
Without question, new full-service hotels that offer modern amenities
consistently outperform the industry average. John Q. Hammons Hotels, Inc. is
committed to keeping our hotels updated so we continue to outperform industry
standards.
Each property is constructed to meet the most discriminating standards, ensuring
that the property will hold its value and withstand the wear of daily
operations, time and weather for many years to come.
We have also made significant investments in our mature properties to ensure
that these hotels continue to meet the highest standards for quality furnishings
and deluxe amenities.
In May, we signed an agreement with CAIS Internet, a Washington, D.C.-based
developer of high-speed Internet technology. CAIS is equipping each of our
hotels with its OverVoice technology, which will allow our guests to access the
Internet and their email at 175 times the speed of a standard 56K modem.
Along with signature design elements such as the atrium lobby, luxury amenities,
personal service desks, business centers, and audiovisual support services, John
Q. Hammons Hotels, Inc. offers superior value for our guests.
It is little wonder that our properties are consistently ranked among the top
performers by their respective franchisers.
Only the Best Work on Our Crew.
In addition to our impressive hotels, we uphold the highest standards for our
people. Among our 8,000 employees are many who have served the company for more
than 25 years.
Our employees take pride in their work and are fully committed to the ideals of
service and attention to detail that have been the hallmark of John Q. Hammons
Hotels, Inc. for more than 40 years.
Through ongoing training, recognition programs and promoting from within, we
continually strive to let our people know how important they are to our future.
As a result, John Q. Hammons Hotels, Inc. enjoys one of the lowest turnover
rates in the industry--an important measure of success in today's competitive
labor market.
In 1999, we strengthened our already solid management team by adding two senior
executives--Vice President of Human Resources Kent Foster and Southern Regional
Vice President Tom Harwell--and promoting District Director Veanne Stocking to
the position of Rocky Mountain Regional Vice President.
Kent Foster has more than 14 years of experience in human resources. The
creation of a human resources position provides our company with the strategic
focus that will help us retain and attract the best employees in the industry.
Prior to joining John Q. Hammons Hotels, Inc., Foster served as a member of
negotiating teams involved in discussions with the United States Steel Workers
of America and the United Auto Workers of America.
Tom Harwell brings more than 18 years of experience in the hotel and hospitality
industry. For the past five years he has served as vice president of operations
for Lane Hospitality in Houston.
As we enter the new millennium, John Q. Hammons Hotels, Inc. is stronger than
ever. Our core company strategies remain true to the vision of our founder and
we are committed to attaining our goals.
Bottom line, John Q. Hammons Hotels, Inc.'s properties perform better and
operate more profitably than our competition. We invite you to share in our
success.
Sincerely,
/s/John Q. Hammons /s/ Kenneth J. Weber
John Q. Hammons Kenneth J. Weber
Founder Executive Vice President
Chairman & CEO Chief Financial Officer
[PICTURE] [PICTURE]
3
<PAGE>
1999 annual report
[PICTURE]
The atrium at Embassy Suites Outdoor World
Grapevine, Texas
4
<PAGE>
The John Q. Hammons team.
[PICTURE]
Seated: Kenneth Weber, John Q. Hammons
First Row: Debra Mallonee Shantz, Kent Foster, Lonnie Funk, Paul Muellner,
Jacqueline Dowdy, Steve Minton
Second Row: Bill George, John Fulton, Pat Shivers, Bob Fugazi, Bill Mead
Third Row: Joe Morrissey, Tom Harwell, Bob Niehaus, Veanne Stocking, Mark
Gundlach
5
<PAGE>
1999 annual report
[PICTURE]
The ballroom at the Radisson Resort Coral Springs
Coral Springs, Florida
6
<PAGE>
Tilling the soil.
More than 40 years ago, John Q. Hammons set out to build the finest hotels in
the country and to manage these hotels to the highest standards.
Mr. Hammons' core philosophy is simple and unwavering:
. Select markets that are primed for growth.
. Choose locations that offer multiple attractions to drive revenues.
. Build hotels using the finest quality materials and construction
methods.
. Affiliate with well-known brands.
Today, the Company that bears his name has amassed a portfolio of hotels and
resorts that consistently outperforms the industry and individual properties
that are at the top of their respective market segments.
John Q. Hammons Hotels, Inc. owns and/or manages 50 hotels in 20 states,
representing 12,203 rooms and more than 1.6 million square feet of meeting
space. The average age of our portfolio is less than seven years.
Our hotels rank in the top three performers in market penetration in every
market we serve. Eighteen of our hotels are number one in their respective
markets.*
Each of our markets themselves is a strong performer, offering multiple revenue
generators such as state capitals, major universities, corporate headquarters,
airports and major office and business parks. These characteristics of a
community drive meeting, room, and food and beverage revenues.
We specifically target markets that offer an environment less susceptible to
economic downturns. This enables each of our properties to tap several different
sources in order to drive meetings business.
Over the years, our hotels have been recognized by our franchise partners, and
throughout the industry, for their stellar performance and quality. In the past,
our properties have received Torchbearer honors and Awards of Excellence from
Bass Hotels & Resorts Worldwide and the Pinnacle and Rose Awards from Promus
Hotel Corporation. The tradition continued in 1999 with the World Golf Village
Renaissance Resort being awarded the Renaissance Conversion of the Year and
Tuscon Marriott winning the Market Excellence Award as well as Franchise Hotel
of the Year.
<TABLE>
<CAPTION>
JOHN Q. HAMMONS HOTELS, INC. 1999 2000
<S> <C> <C>
OWNED HOTELS
Number of Hotels 45 47
Number of Rooms 11,067 11,633
MANAGED HOTELS
Number of Hotels 5 6
Number of Rooms 1,136 1,356
TOTAL
Number of Hotels 50 53
Number of Rooms 12,203 12,989
</TABLE>
*Rank based on 1999 Smith Travel Research.
7
<PAGE>
1999 annual report
[WORLD GOLF VILLAGE RENAISSANCE RESORT]
World Golf Village Renaissance Resort
St. Augustine, Florida
8
<PAGE>
[PHOTO]
Sowing the seeds.
In 1998, John Q. Hammons Hotels, Inc. elected to suspend new development in an
effort to generate greater returns for our investors. At that time, the Company
had five hotels under development, all of which will be open by first quarter
2000.
In April, John Q. Hammons Hotels, Inc. opened the Hampton Inn & Suites Rodeo
Center in Mesquite, Texas. The largest Hampton Inn & Suites property in the
world, the hotel features 160 rooms and suites and more than 21,000 square feet
of meeting space. It is located adjacent to the Rodeo Arena and is the premier
meeting and convention center hotel in the eastern Dallas/Ft. Worth area.
After opening in May, the Radisson Resort Hotel in Coral Springs, Florida, near
Boca Raton, has quickly become a center for meetings and social events in this
affluent south Florida community. The hotel features a 30,000-square-foot
conference center, 224 rooms, and is located adjacent to the Tournament Players
Club at Heron Bay and near the Sawgrass Mills Outlet Mall.
In August, the Embassy Suites Outdoor World at Dallas/Ft. Worth International
Airport opened and achieved full occupancy in less than one month. Located in
Grapevine, Texas, this 329-suite hotel features more than 21,000 square feet of
meeting space and is connected to the 200,000-square-foot Bass Pro Shops(R)
Outdoor World.
In December, we opened the first Renaissance hotel built since the brand's
acquisition by Marriott Corporation in 1997-the Renaissance Suites Hotel in
Charlotte, North Carolina. Located adjacent to the Charlotte Coliseum and near
Douglas International Airport, the hotel features 275 suites and more than
30,000 square feet of meeting space.
In January 2000, construction of the 15-story Renaissance Oklahoma City Hotel
will complete a $300 million downtown redevelopment project that includes a
major sports arena and expansion of the 100,000-square-foot Myriad Convention
Center, connected to the hotel by an enclosed walkway.
Opening in February 2000, the Embassy Suites Charleston in North Charleston,
South Carolina, adjoins the new Charleston Area Convention Center Complex and
offers 255 suites. When combined with the Convention Center Complex, the hotel
offers more than 135,000 square feet of meeting space.
By creating the strongest hotel portfolio in the industry and allowing that
portfolio to reach its full potential, John Q. Hammons Hotels, Inc. is well-
positioned to generate greater earnings and profits.
<TABLE>
<S> <C> <C> <C>
[MESQUITE] [CORAL SPRINGS] [DALLAS/FT. WORTH] [CHARLOTTE]
</TABLE>
9
<PAGE>
1999 annual report
[PICTURE APPEARS HERE]
Chateau on the Lake
Branson, Missouri
10
<PAGE>
[PICTURE APPEARS HERE]
Increasing the yield.
We continually monitor the performance of our individual hotels, as well as
overall operations, to ensure that our portfolio and our Company are reaching
peak performance.
In 1998, we sold the Holiday Inn Hotel & Convention Center in Fresno,
California, and in 1999, we sold the Holiday Inn Express in Joliet, Illinois,
closing the sale on this property in June.
In July 1999, we added the World Golf Village Resort Hotel & Convention Center
in St. Augustine, Florida, to our portfolio of hotels that fly the Renaissance
flag, re-christening the property as the World Golf Village Renaissance Resort.
The hotel was connected to the Renaissance reservation system on July 19.
The World Golf Village Renaissance Resort is a Mobil Four-Star resort with 300
elegant guest rooms and suites and more than 40,000 square feet of meeting
space. Located adjacent to the World Golf Hall of Fame in the heart of World
Golf Village, the resort overlooks "The Slammer and the Squire," a Sam Snead-
and Gene Sarazen-designed championship 18-hole golf course that annually hosts
the Senior PGA Tour's Liberty Mutual Legends of Golf tournament.
Our hotels are designed for business travelers and feature a soothing and secure
atrium design, oversized guest rooms with dual-line telephones and modem ports,
corporate business centers, audiovisual equipment, and technical support.
To ensure that we continue to meet the needs of business traveler guests, John
Q. Hammons Hotels, Inc. signed an agreement in May with Washington, D.C.-based
CAIS Internet to equip all of our hotels with their OverVoice technology. This
technology supplements our existing PBX systems allowing our guests access to
the Internet at 175 times the speed of a 56K modem.
In 1998, we joined with Food Insights, Inc. to create a centralized food
purchasing and monitoring program that has saved John Q. Hammons Hotels, Inc.
more than $900,000 to date and has greatly improved the profitability and
overall quality of our food and beverage departments.
As stated in last year's annual report, John Q. Hammons Hotels, Inc.'s board of
directors authorized the Company to repurchase up to $3 million in outstanding
Company stock, which we believe to be undervalued. During the 1999 Fiscal Year,
the Company acquired 744,200 shares of stock at an average price of $4.03 per
share. We believe this stock repurchase represents a solid investment for the
Company and we will continue this investment in the future.
11
<PAGE>
1999 annual report
[PICTURE APPEARS HERE]
Renaissance Charlotte Suites Hotel
Charlotte, North Carolina
12
<PAGE>
The end of the day.
Forty years ago, our founder set forth on a mission to create the finest and
best-located hotels in the country. As his vision has grown into a portfolio of
high-performing properties in resilient markets, the Company he started has set
forth on a new mission focused on increasing the yield for our shareholders.
Two years ago, we renewed our focus on achieving these goals. We have stayed
true to this objective and steadfast on a commitment to increasing shareholder
value. We are allowing our upstart hotels to mature without the burden of
additional development. We continue to streamline operations by improving our
technology and service in order to maintain the level of service expected by the
modern business traveler. And we continue to hire and train only the very best
employees in the hospitality industry.
At the end of the day, we remain ever optimistic that our hard work will pay off
and create even greater returns in the years to come.
[PICTURE OF OKLAHOMA CITY APPEARS [PICTURE OF NORTH CHARLESTON APPEARS HERE]
HERE]
Opening in 2000
13
<PAGE>
1999 annual report
[PICTURE OF EMBASSY SUITES APPEARS HERE]
The atrium at the Embassy Suites Greenville
Greenville, South Carolina
14
<PAGE>
[PHOTO APPEARS HERE]
The harvest.
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 45 hotels located in 19
states containing 11,067 guest rooms and suites (the "Owned Hotels") and manages
five additional hotels located in two states containing 1,136 guest rooms (the
"Managed Hotels"). On December 31, 1999, the Company was at various stages of
development on two upscale hotels which opened during the first quarter of 2000
(the "Scheduled Hotels"). The Company will suspend development after the
completion of the Scheduled Hotels. The Company's existing 50 Owned Hotels and
Managed Hotels (together, the "JQH Hotels") operate primarily under the Embassy
Suites and Holiday Inn trade names. Most of the Company's hotels are near a
state capital, 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 reinvesting 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 hotels' 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 multistoried atrium, expansive meeting space, large
guest rooms or suites, and comfortable lounge areas. The JQH Hotels meeting
facilities can be readily adapted to accommodate both large and small meetings,
conventions, and trade shows. The 14 Embassy Suites JQH Hotels are all-suite
hotels, which appeal to the traveler needing or desiring greater space and
specialized services. The 17 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. Six regional vice
presidents and one district director 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.
15
<PAGE>
1999 annual report
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, until February 28, 2000,
when it began trading on the American Stock Exchange 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 Class A Common
Stock for the period indicated, as reported by the New York Stock Exchange
Composite Tape:
<TABLE>
<CAPTION>
1998 HIGH LOW
<S> <C> <C>
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
1999 HIGH LOW
FIRST QUARTER $ 5 1/2 $ 3 9/16
SECOND QUARTER $ 4 7/16 $ 3 1/2
THIRD QUARTER $ 4 1/2 $ 3 3/4
FOURTH QUARTER $ 4 3/16 $ 3 5/16
</TABLE>
On March 10, 2000, the last reported sales price of the Class A Common Stock on
the AMEX was $4.00. On March 10, 2000, the Company had approximately 2,500
holders of Class A Common Stock on record.
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
The selected consolidated financial information of the Company for the 1999,
1998, 1997, 1996, and 1995 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 next should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this report. The Company's fiscal year ends on the
Friday nearest December 31.
16
<PAGE>
Selected Consolidated Financial Information
(in thousands, except per share amounts, ratios and hotel data)
<TABLE>
<CAPTION>
Fiscal year ended 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
REVENUES
Rooms (a) $ 229,807 $ 211,989 $ 195,296 $ 171,206 $148,432
Food and beverage 101,231 91,982 86,183 79,580 70,840
Meeting room rental and other (b) 25,410 22,159 20,795 18,061 15,907
--------- --------- --------- --------- --------
Total revenues 356,448 326,130 302,274 268,847 235,179
--------- --------- --------- --------- --------
OPERATING EXPENSES
Direct operating costs and expenses (c)
Rooms 59,507 54,600 50,265 43,610 38,543
Food and beverage 68,799 64,174 62,383 57,956 54,228
Other 3,667 3,389 3,385 2,929 2,521
General, administrative, sales, and
management service expenses (d, e) 104,876 95,500 85,766 74,646 64,234
Repairs and maintenance 15,059 13,438 12,578 11,528 10,131
Depreciation and amortization 45,669 45,580 34,781 24,034 18,346
--------- --------- --------- --------- --------
Total operating expenses 297,577 276,681 249,158 214,703 188,003
--------- --------- --------- --------- --------
INCOME FROM OPERATIONS 58,871 49,449 53,116 54,144 47,176
Other (income) expenses
Interest expense and amortization of
deferred financing fees, net 62,209 57,286 44,325 35,620 28,447
Gain on property disposition (f) (2,365) (8,175) ---- ---- ----
--------- --------- --------- --------- --------
INCOME (LOSS) BEFORE MINORITY INTEREST,
PROVISION FOR INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (g)(m) (973) 338 8,791 18,524 18,729
Minority interest in (earnings) losses of partnership 698 (242) (6,302) (13,280) (13,427)
--------- --------- --------- --------- --------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES,
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (275) 96 2,489 5,244 5,302
Provision for income taxes (h) (150) (120) (75) (105) (107)
--------- --------- --------- --------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ (425) $ (24) $ 2,414 $ 5,139 $ 5,195
========= ========= ========= ========= ========
BASIC AND DILUTED INCOME (LOSS) PER SHARE OF
COMMON STOCK BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ (0.07) $ --- $ 0.38 $ 0.81 $ 0.82
========= ========= ========= ========== ========
</TABLE>
17
<PAGE>
1999 annual report
Continued
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Other Data
EBITDA (i) $ 104,540 $ 95,029 $ 87,897 $ 78,178 $ 65,522
Net Cash provided by operating
activities 41,254 43,494 27,769 72,052 44,037
Net Cash used in investing
activities (100,216) (92,925) (193,271) (136,296) (78,085)
Net Cash provided by financing
activities 62,456 53,703 161,014 68,916 66,113
MARGIN AND RATIO DATA
EBITDA margin (% of total revenue) (i) 29.3% 29.1% 29.1% 29.1% 27.9%
Earnings to fixed charges ratio (j) 0.89x 0.91x 0.97x 1.26x 1.39x
OPERATING DATA
Owned Hotels:
Number of Hotels 45 42 45 39 37
Number of Rooms 11,067 10,293 11,108 9,666 9,312
Average Occupancy 62.9% 62.1% 62.9% 64.7% 67.1%
Average Daily Room Rate (ADR) $ 94.87 $ 91.38 $ 82.38 $ 76.16 $ 71.68
Room Revenue per Available Room
(RevPAR)(k) $ 59.64 $ 56.79 $ 51.84 $ 49.25 $ 48.09
Increase in Yield (l) 5.0% 9.5% 5.3% 2.4% 4.8%
BALANCE SHEET DATA
Total Assets $ 934,312 $876,486 $ 816,733 $ 658,072 $542,371
Total Debt, including current
portion 828,843 759,716 695,791 531,143 458,094
Minority interest of holders of
the LP units 25,251 27,392 39,399 33,662 23,082
Equity 13,855 17,847 18,508 16,094 10,955
</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, one hotel
sold December 31, 1998, and one hotel sold June 16, 1999.
(g) The 1995 Fiscal Year does not include a $0.3 million extraordinary charge
related to prepayment fees on early debt retirement in connection with the
Note Offerings and Common Stock Offering. The 1998 and 1999 Fiscal Years do
not include a $2.2 million and a $0.2 million, respectively, extraordinary
charge related to early extinguishment of debt.
(h) The Company has been taxed as a C Corporation on its portion of the
Partnership's earnings.
(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 Company adopted a new accounting pronouncement in 1999 which requires
cost of start up activities, including pre-opening expenses, to be expensed
as incurred. The 1999 Fiscal Year does not include a $1.8 million charge
related to the change in accounting principle.
18
<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 December 31, 1999 ("1999"), January 1,
1999 ("1998"), and January 2, 1998 ("1997"). 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 nonalcoholic 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 1995 through 1999, the Company's total revenues grew at an annual
compounded growth rate of 10.9%, from $235.2 million to $356.4 million.
Occupancy for the Owned Hotels during that period decreased 4.2 percentage
points from 67.1% to 62.9%. However, the Owned Hotels' average daily room rate
(ADR) increased by 32.4% from $71.68 to $94.87 during that period. Room revenue
per available room (RevPAR) increased by 24.0% from $48.09 to $59.64.
In general, hotels opened during the period from 1995 to 1999 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 1999, the New Hotels included four hotels opened in 1999 and four hotels
opened in 1998. The remainder of the Owned Hotels, excluding the New Hotels, are
defined as Mature Hotels. In 1999, the Mature Hotels included 37 hotels opened
prior to 1998. 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.
19
<PAGE>
1999 annual report
Results of Operations of the Company
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
OWNED HOTELS
Average Occupancy 62.9% 62.1% 62.9% 64.7% 67.1%
Average Daily Room Rate (ADR) $ 94.87 $ 91.38 $ 82.38 $ 76.16 $ 71.68
Room Revenue per Available Room
(RevPAR) $ 59.64 $ 56.79 $ 51.84 $ 49.25 $ 48.09
Available Rooms (a) 3,853,403 3,733,166 3,767,387 3,476,279 3,087,700
Number of Hotels 45 42 45 39 37
MATURE HOTELS
Average Occupancy 64.7% 64.1% 63.8% 64.8% 67.1%
Average Daily Room Rate (ADR) $ 93.60 $ 86.50 $ 79.80 $ 76.06 $ 71.68
Room Revenue per Available Room
(RevPAR) $ 60.57 $ 55.41 $ 50.90 $ 49.29 $ 48.09
Available Rooms (a) 3,332,718 3,012,845 3,388,896 3,454,899 3,087,700
Number of Hotels 37 32 37 37 37
NEW HOTELS
Average Occupancy 51.0% 54.1% 55.3% 42.2% ----
Average Daily Room Rate (ADR) $ 105.25 $ 115.55 $ 108.97 $ 100.49 ----
Room Revenue per Available Room
(RevPAR) $ 53.70 $ 62.54 $ 60.21 $ 42.42 ----
Available Rooms (a) 520,685 720,321 378,491 21,380 ----
Number of Hotels 8 10 8 2 ----
PERCENTAGES OF TOTAL REVENUES
REVENUES
Rooms 64.5% 65.0% 64.6% 63.7% 63.1%
Food and beverage 28.4% 28.2% 28.5% 29.6% 30.1%
Meeting room rental and other 7.1% 6.8% 6.9% 6.7% 6.8%
---------- ---------- ---------- ----------- ---------
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0%
---------- ---------- ---------- ----------- ---------
OPERATING EXPENSES
Direct operating costs and expenses
Rooms 16.7% 16.7% 16.6% 16.2% 16.4%
Food and beverage 19.3% 19.7% 20.6% 21.6% 23.0%
Other 1.0% 1.0% 1.1% 1.1% 1.1%
General, administrative, sales, and
management service expenses 29.4% 29.3% 28.4% 27.8% 27.3%
Repairs and maintenance 4.2% 4.1% 4.2% 4.3% 4.3%
Depreciation and amortization 12.8% 14.0% 11.5% 8.9% 7.8%
---------- ---------- ---------- ----------- ---------
Total operating expenses 83.4% 84.8% 82.4% 79.9% 79.9%
---------- ---------- ---------- ----------- ---------
Income from Operations 16.6% 15.2% 17.6% 20.1% 20.1%
========== ========== ========== =========== =========
</TABLE>
(a) Available rooms represent the number of rooms available for rent multiplied
by the number of days in the period reported or, in the case of New Hotels,
the 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 1995,
1997, 1998, and 1999 Fiscal Years each contained 52 weeks, or 364 days.
20
<PAGE>
1999 FISCAL YEAR COMPARED TO 1998 FISCAL YEAR
Total revenues increased to $356.4 million in 1999 from $326.1 million in 1998,
an increase of $30.3 million, or 9.3%. Of total revenues recognized in 1999,
64.5% were revenues from rooms, compared to 65.0% in 1998. Revenues from food
and beverage represented 28.4% of total revenues recognized in 1999, compared to
28.2% in 1998, and revenues from meeting room rental and other represented 7.1%
of total revenues compared to 6.8% in 1998.
Rooms revenues increased to $229.8 million in 1999 from $212.0 million in 1998,
an increase of $17.8 million, or 8.4%, as a result of the addition of four
hotels opened in 1999, a full year of operation for the four hotels opened in
1998, and an increase in the average daily room rate (ADR) of the Mature Hotels.
Average daily room rates (ADR) of Mature Hotels increased to $93.60 in 1999 from
$86.50 in 1998. The occupancy in the Mature Hotels was a 0.6 percentage point
increase to 64.7% in 1999, compared to 64.1% in 1998. The Mature Hotels' room
revenue per available room (RevPAR) improved to $60.57 in 1999 from $55.41 in
1998, an increase of $5.16 or 9.3%. In 1999, the New Hotels included eight
hotels, which generated a revenue per available room (RevPAR) of $53.70, down
14.1% from the 1998 revenue per available room (RevPAR) of $62.54, when ten New
Hotels were opened. 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 $101.2 million in 1999 from $92.0
million in 1998, an increase of $9.2 million, or 10.0%. This increase was
primarily due to revenues associated with the New Hotels.
Meeting room rental and other revenues increased to $25.4 million in 1999 from
$22.2 million in 1998, an increase of $3.2 million, or 14.4%. This increase was
primarily due to the additional meeting space in the New Hotels.
Direct operating costs and expenses for rooms increased to $59.5 million in 1999
from $54.6 million in 1998, an increase of $4.9 million, or 9.0%. As a
percentage of rooms revenue, these expenses increased slightly to 25.9% in 1999
from 25.8% in 1998. 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 $68.8
million in 1999 from $64.2 million in 1998, an increase of $4.6 million, or
7.2%, but decreased slightly as a percentage of food and beverage revenues to
68.0%, from 69.8% in 1998. The dollar increase was due to costs associated with
the higher volume of sales associated with the New Hotels.
Direct operating costs and expenses for other were $3.7 million in 1999 and $3.4
million in 1998, an 8.8% increase. As a percentage of meeting room rental and
other revenues, these expenses were 14.4% in 1999 and 15.3% in 1998.
General, administrative, sales and management service expenses increased to
$104.9 million in 1999 from $95.5 million in 1998, an increase of $9.4 million,
or 9.8%. Increases in these expenses were primarily attributable to the
Company's adoption of a new accounting pronouncement in 1999 which requires cost
of startup activities, including pre-opening expenses, to be expensed as
incurred. Pre-opening expenses approximated $4.2 million in 1999. In addition, 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 slightly to 29.4% in 1999, from 29.3% in 1998.
Repairs and maintenance expenses increased to $15.1 million in 1999 from $13.4
million in 1998, an increase of $1.7 million, or 12.7%, and increased slightly
as a percentage of revenues to 4.2% from 4.1% in 1998.
Depreciation and amortization increased slightly by $0.1 million, or 0.2%, to
$45.7 million in 1999 from $45.6 million in 1998. As a percentage of total
revenues, these expenses decreased to 12.8% in 1999 from 14.0% in 1998. The
dollar increase was a direct result of the increased level of capital
expenditures for the newer hotels.
Income from operations increased to $58.9 million in 1999 from $49.4 million in
1998, an increase of $9.5 million, or 19.2%. As a percentage of total revenues,
income from operations was 16.6% in 1999 compared to 15.2% in 1998, due
primarily to the reduction of depreciation and amortization as a percentage of
revenue in 1999.
Interest expense and amortization of deferred financing fees, net increased to
$62.2 million in 1999 from $57.3 million in 1998, an increase of $4.9 million or
8.6%. The increase was attributable to debt associated with the financing of the
New Hotels.
Income (loss) before minority interest, provision for income taxes,
extraordinary item and cumulative effect of change in accounting principle was a
$1.0 million loss in 1999 compared to $0.3 million of income in 1998, a decrease
of $1.3 million. The 1999 results include a $2.4 million gain on the sale of
property and equipment in June 1999 of one Holiday Inn, and the 1998 results
include an $8.2 million gain on sales in connection with the sale of six Holiday
Inns in February of 1998 and one Holiday Inn in December of 1998.
Net loss for 1999 was $1.0 million, compared to $0.7 million in 1998. In 1999,
the Company recognized an extraordinary item of $0.1 million related to debt
restructuring, compared to $0.6 million in 1998. The Company's 1999 results
also reflect a $0.5 million cumulative effect of change in accounting principle
to expense unamortized pre-opening costs.
21
<PAGE>
1999 annual report
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 opened. In general, management believes the
New Hotels are more insulated from the effects of the new supply than are the
Mature Hotels, since the New Hotels utilize franchise brands that are considered
to be 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 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.
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 1998 and one Holiday Inn in December 1998.
22
<PAGE>
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 December 31, 1999, the Company had $49.7 million of cash and equivalents and
also had $5.0 million of marketable securities, compared to $46.2 million in
cash and cash equivalents and $6.5 million of marketable securities at the end
of 1998. Such amounts are available for completion of New Hotels and other
working capital requirements of the Company.
Net cash provided by operating activities decreased to $41.3 million at the end
of 1999 from $43.5 million at the end of 1998, a decrease of $2.2 million, or
5.1%, primarily as the Company decreased its trade payables.
The Company incurred net capital expenditures of $123.6 million and $131.2
million, respectively, for 1999 and 1998. Capital expenditures typically include
capital improvements on existing hotel properties and expenditures for
development of New Hotels. Capital expenditures in 1999 included $107.5 million
for New Hotel development and $16.1 million for existing hotels. During 1998,
capital expenditures for existing hotels and New Hotel development were $19.7
million and $111.5 million, respectively. During 2000, the Company expects
capital expenditures to approximate $48.7 million, representing approximately
$19.1 million for capital improvements on existing hotels and approximately
$29.6 million for continued New Hotel development.
At the end of 1999, total debt was $828.8 million compared with $759.7 million
in 1998. The increase is attributable to the hotels opened during 1999 as well
as two Scheduled Hotels under construction at the end of 1999. The current
portion of long-term debt was $16.6 million at the end of 1999, compared with
$42.3 million at the end of 1998.
The Company estimates that building, pre-opening and other costs of the two
Scheduled Hotels will require aggregate funding of approximately $24.4 million
from the Company (net of $52.9 million included in construction in progress and
other assets at year end). The Company has obtained loans and commitments of
approximately $51.0 million (approximately $30.0 million of which had been drawn
at year end) on the Scheduled Hotels and expects the remaining 2000 capital
requirements to be funded by cash, cash flow from operations and refinancing of
certain existing hotels.
Based on 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 2000 capital requirements for the currently planned
projects and normal recurring capital improvement projects.
Consistent with the authorization by the Board of Directors, the Company
purchased 744,200 shares of Class A Common Stock during 1999, at an approximate
average price of $4.03 per share. The Board of Directors authorized the Company
to purchase an additional $3.0 million shares of Class A Common Stock during
2000.
The Company did not distribute or accrue any amounts in 1999 to its partner for
income taxes, but distributed or accrued $10.6 million in 1998. Distributions by
the Company must be made in accordance with the provisions of the Indentures.
Year 2000
The Company implemented a program over the past several years to define and
minimize the risks related to transitioning to the year 2000 and beyond. The
program developed appropriate action steps, while instituting a series of
management processes to coordinate and manage the process. The process included
corporate oversight and provided for consistent attention to progress made
against planned activities with periodic assessments made by independent parties
and reports to the Board of Directors. The Company's approach was to subdivide
the program into five distinct areas: 1) Corporate Systems; 2) Hotel Systems; 3)
Embedded Systems; 4) Time Keeping and Payroll Systems; and 5) Vendor Compliance.
Each of these categories was broken into several subcategories (hardware and
software systems, critical and noncritical systems, and compliance testing). The
Company analyzed and monitored progress in each subcategory of each category.
To date the program has been successful and the Company has transitioned all of
its systems to the new millennium. No significant problems were identified in
any of the five areas, and the Company believes the risk related to future
exposure for Year 2000 issues is minimal. The cost associated with the Year 2000
initiative in 1999 was approximately $0.6 million, including the cost for
scheduled hardware and software upgrades.
23
<PAGE>
1999 annual report
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 these 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.
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 December 31, 1999:
<TABLE>
<CAPTION>
Expected Maturity Date (in millions) 2000 2001 2002 2003 2004 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%
$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 $ 6 $ 14 $ 31 $ 38 $ 6 $ 224 $ 319 $ 319
Average interest rate (b) 8.4% 8.2% 8.7% 8.8% 8.5% 8.6% 8.6%
Other variable-rate debt obligations $ 10 $ 33 $ 1 $ 16 $ 29 $ 31 $ 120 $ 120
Average interest rate (c) 8.8% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8%
</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 December 31, 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 $90.0 million First Mortgage
notes. The fair value of the First Mortgage note issues is estimated
by obtaining quotes from brokers.
24
<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 December 31, 1999, and January 1,
1999, and the related consolidated statements of operations, changes in minority
interest and stockholdersO equity and cash flows for each of the three fiscal
years ended December 31, 1999, January 1, 1999, and January 2, 1998. These
financial statements are the responsibility of the Company' 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 December 31, 1999, and
January 1, 1999, and the results of their operations and their cash flows for
each of the three fiscal years ended December 31, 1999, January 1, 1999, and
January 2, 1998, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, effective in
the first quarter of fiscal 1999, the Company changed its method of accounting
for costs of start-up activities, including pre-opening expenses.
/s/ Arthur Andersen LLP
Cincinnati, Ohio
February 10, 2000
25
<PAGE>
1999 annual report
JOHN Q. HAMMONS HOTELS, INC. AND COMPANIES
Consolidated Balance Sheets
(000s omitted, except share data)
<TABLE>
<CAPTION>
ASSETS
FISCAL YEAR END 1999 1998
<S> <C> <C>
CASH AND EQUIVALENTS (restricted cash of $1,323 and
$860 in 1999 and 1998, respectively) (Note 2) $ 49,727 $ 46,233
MARKETABLE SECURITIES (Note 2) 4,982 6,533
RECEIVABLES
Trade, less allowance for doubtful accounts of $226 and
$206 in 1999, and 1998, respectively 11,677 8,852
Management fees (Note 3) 63 62
Construction reimbursements and other 2,370 5,269
INVENTORIES 1,349 1,205
PREPAID EXPENSES AND OTHER 1,699 1,089
---------- ---------
TOTAL CURRENT ASSETS 71,867 69,243
---------- ---------
PROPERTY AND EQUIPMENT, at cost (Notes 2, 5, and 6)
Land and improvements 55,818 47,982
Buildings and improvements 683,462 605,586
Furniture, fixtures and equipment 270,146 239,648
Construction in progress 53,462 63,078
---------- ---------
1,062,888 956,294
Less-accumulated depreciation and amortization (227,411) (194,860)
---------- ---------
835,477 761,434
DEFERRED FINANCING COSTS, FRANCHISE FEES
AND OTHER, net (Notes 2, 4, and 5) 26,968 45,809
---------- ---------
Total Assets $ 934,312 $ 876,486
========== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
26
<PAGE>
JOHN Q. HAMMONS HOTELS, INC. AND COMPANIES
CONSOLIDATED BALANCE SHEETS
(000s omitted, except share data)
<TABLE>
<CAPTION>
LIABILITIES AND EQUITY
FISCAL YEAR END 1999 1998
<S> <C> <C>
LIABILITIES
Current portion of long-term debt (Note 5) $ 16,569 $ 42,256
Accounts payable, including construction payables of
approximately $350 and $2,203, respectively 11,877 13,141
Accrued expenses
Payroll and related benefits 7,720 6,843
Sales and property taxes 10,368 9,558
Insurance (Notes 2 and 3) 7,576 10,061
Interest 12,873 12,540
Utilities, franchise fees, and other 6,546 5,568
Accrued distribution ---- 2,936
-------- --------
Total current liabilities 73,529 102,903
Long-term debt (Note 5) 812,274 717,460
Other obligations and deferred revenue (Note 2) 9,403 10,884
-------- --------
TOTAL LIABILITIES 895,206 831,247
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 6)
MINORITY INTEREST OF HOLDERS OF LIMITED
PARTNER UNITS (Note 1) 25,251 27,392
STOCKHOLDERS' EQUITY (Notes 1 and 6)
Preferred stock, $.01 par value, 2,000,000 shares
authorized, none outstanding ---- ----
Class A Common Stock, $.01 par value, 40,000,000 shares authorized
at December 31, 1999, and January 1, 1999, and 6,042,000 shares
issued at December 31, 1999, and January 1, 1999, and 5,308,120
and 6,042,000 shares outstanding at December 31, 1999, and
January 1, 1999, respectively 60 60
Class B Common Stock, $.01 par value, 1,000,000 shares authorized,
294,100 shares issued and outstanding 3 3
Paid-in capital 96,373 96,373
Retained deficit, net (79,584) (78,589)
Less: Treasury stock, at cost; 733,880 shares at December 31, 1999 (2,997) ----
-------- --------
TOTAL EQUITY 13,855 17,847
-------- --------
TOTAL LIABILITIES AND EQUITY $934,312 $876,486
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
27
<PAGE>
1999 annual report
JOHN Q. HAMMONS HOTELS, INC. AND COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000s omitted, except share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES (Note 9)
Rooms $ 229,807 $ 211,989 $ 195,296
Food and beverage 101,231 91,982 86,183
Meeting room rental and other 25,410 22,159 20,795
---------- ---------- ----------
Total revenues 356,448 326,130 302,274
---------- ---------- ----------
OPERATING EXPENSES (Notes 3, 4, and 6)
Direct operating costs and expenses
Rooms 59,507 54,600 50,265
Food and beverage 68,799 64,174 62,383
Other 3,667 3,389 3,385
General, administrative, sales, and management
service expenses 104,876 95,500 85,766
Repairs and maintenance 15,059 13,438 12,578
Depreciation and amortization (Note 9) 45,669 45,580 34,781
---------- ---------- ----------
Total operating expenses 297,577 276,681 249,158
---------- ---------- ----------
INCOME FROM OPERATIONS (Note 9) 58,871 49,449 53,116
OTHER (INCOME) EXPENSE
Interest expense and amortization of deferred financing
fees, net of $3,161, $3,794, and $1,279 of interest
income in 1999, 1998, and 1997, respectively
(Note 2(e)) 62,209 57,286 44,325
Gain on sales of property and equipment (Note 9) (2,365) (8,175) ----
---------- ---------- ----------
INCOME (LOSS) BEFORE MINORITY INTEREST, PROVISION FOR INCOME
TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (973) 338 8,791
Minority interest in (earnings) losses of partnership
(Note 1) 698 (242) (6,302)
---------- ---------- ----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES,
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (275) 96 2,489
Provision for income taxes (Note 2(j)) (150) (120) (75)
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (425) (24) 2,414
Extraordinary item; cost of early extinguishment of
debt, net of applicable tax benefit (Note 5) (55) (637) ----
---------- ---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (480) (661) 2,414
Cumulative effect of change in accounting principle,
net of applicable tax benefit (Note 2) (515) ---- ----
---------- ---------- ----------
NET INCOME (LOSS) (Note 1) $ (995) $ (661) $ 2,414
========== ========== ==========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE (NOTE 2(n))
Earnings (loss) before extraordinary item and cumulative
effect of change in accounting principle $ (.07) $ ---- $ .38
Extraordinary item (.01) (.10) ----
Cumulative effect of change in accounting principle (.08) ---- ----
---------- ---------- ----------
Earnings (loss) allocable to the Company $ (.16) $ (.10) $ .38
========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 6,067,659 6,336,100 6,336,100
========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
28
<PAGE>
JOHN Q. HAMMONS HOTELS, INC. AND COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN
MINORITY INTEREST AND STOCKHOLDERS' EQUITY (1)
(000s omitted)
<TABLE>
<CAPTION>
MINORITY INTEREST STOCKHOLDERS' EQUITY
CLASS A CLASS B COMPANY RETAINED
COMMON COMMON PAID-IN DEFICIT AFTER TREASURY
STOCK STOCK CAPITAL REORGANIZATION STOCK TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, Year end 1996 $ 33,662 $ 60 $ 3 $ 96,373 $(80,342) $ -- $ 16,094
Distributions (Note 1(b)) (565) -- -- -- -- -- --
Net income allocable to the Company -- -- -- -- 2,414 -- 2,414
Minority interest in earnings of the
partnership 6,302 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
BALANCE, Year end 1997 39,399 60 3 96,373 (77,928) -- 18,508
Distributions (Note 1(b)) (10,637) -- -- -- -- -- --
Net loss allocable to the Company -- -- -- -- (661) -- (661)
Minority interest in losses of the
partnership after extraordinary
item of $1,612 (1,370) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
BALANCE, Year end 1998 27,392 60 3 96,373 (78,589) -- 17,847
Net loss allocable to the Company -- -- -- -- (995) -- (995)
Minority interest in losses of partnership,
after extraordinary item and
cumulative effect of change in
accounting principle of $1,443 (2,141) -- -- -- -- -- --
Treasury stock purchased -- -- -- -- -- (2,997) (2,997)
-------- -------- -------- -------- -------- -------- --------
BALANCE, Year end 1999 $ 25,251 $ 60 $ 3 $ 96,373 $(79,584) $ (2,997) $ 13,855
======== ======== ======== ======== ======== ======== ========
</TABLE>
(1) For the periods presented, there are no elements of other
comprehensive income as defined by the Financial Accounting Standards,
No. 130 Reporting Comprehensive Income.
------------------------------
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
29
<PAGE>
1999 annual report
JOHN Q. HAMMONS HOTELS, INC. AND COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s omitted)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (995) $ (661) $ 2,414
Adjustments to reconcile net income (loss) to cash provided by operating
activities
Minority interest in earnings (losses) of partnership (698) 242 6,302
Depreciation, amortization, and loan cost amortization 47,655 48,448 37,662
Extraordinary item (Note 5) 55 637 --
Cumulative effect of change in accounting principle (Note 2) 515 -- --
Gain on sales of property and equipment (Note 9) (2,365) (8,175) --
--------- --------- ---------
44,167 40,491 46,378
Changes in certain assets and liabilities
Receivables 73 (2,742) (4,826)
Inventories (144) (112) (187)
Prepaid expenses and other (610) 297 542
Accounts payable (1,264) 1,909 (18,745)
Accrued expenses 513 668 3,730
Other obligations and deferred revenue (1,481) 2,983 877
--------- --------- ---------
Net cash provided by operating activities 41,254 43,494 27,769
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (123,620) (131,183) (179,385)
Proceeds from sales of property and equipment (Note 9) 6,500 43,577 --
Franchise fees and other 15,353 (11,528) (3,499)
(Purchase) sale of marketable securities, net 1,551 6,209 (10,387)
--------- --------- ---------
Net cash used in investing activities (100,216) (92,925) (193,271)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Loan financing fees (738) (2,521) (3,069)
Proceeds from borrowings 104,477 260,771 186,684
Repayments of debt (35,350) (196,846) (22,036)
Distributions (2,936) (7,701) (565)
Purchase of treasury stock (2,997) -- --
--------- --------- ---------
Net cash provided by financing activities 62,456 53,703 161,014
--------- --------- ---------
Increase (decrease) in cash and equivalents 3,494 4,272 (4,488)
CASH AND EQUIVALENTS, beginning of period 46,233 41,961 46,449
--------- --------- ---------
CASH AND EQUIVALENTS, end of period $ 49,727 $ 46,233 $ 41,961
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized $ 63,312 $ 58,733 $ 43,399
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
Note receivable from sale of property and equipment (Note 9) $ -- $ 11,900 $ --
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
30
<PAGE>
JOHN Q. HAMMONS HOTELS, INC. AND COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted, except share data)
1. Basis of Presentation
(a) ENTITY MATTERS--The accompanying consolidated financial statements
include the accounts of John Q. Hammons Hotels, Inc. and John Q.
Hammons Hotels, L.P. and subsidiaries (collectively the Company or, as
the context may require, John Q. Hammons Hotels, Inc. only). As of
fiscal year end 1999, 1998, and 1997, the Company had 45, 42, and 45,
hotels, respectively, in operation of which 29 in 1999, 28 in 1998,
and 35 in 1997 operated under the Holiday Inn and Embassy Suites trade
names. The Company's hotels are located in 19 states throughout the
United States.
The Company was formed in September 1994 and had no operations or
assets prior to its initial public offering of 6,042,000 Class A
Common Shares at $16.50 per share on November 23, 1994. Immediately
prior to the initial public offering, Mr. John Q. Hammons (JQH)
contributed approximately $5 million in cash to the Company in
exchange for 294,100 shares of Class B Common Stock (which represents
approximately 72% of the voting control of the Company). The Company
contributed the approximate $96 million of net proceeds from the Class
A and Class B Common Stock offerings to John Q. Hammons Hotels, L.P.
(JQHLP) in exchange for an approximate 28% general partnership
interest.
As the sole general partner of JQHLP, the Company exercises control
over all decisions as set forth in the partnership agreement. The net
income (loss) allocable to the Company reported in the accompanying
consolidated statements of operations include the Company's
approximate 28% share of all JQHLP earnings (losses). The approximate
72% minority interest attributable to the portion of the partnership
not owned by the Company has been reflected as minority interest in
the accompanying consolidated financial statements.
All significant balances and transactions between the entities and
properties have been eliminated.
(b) PARTNERSHIP AND OTHER MATTERS--A summary of selected provisions of the
partnership agreement as well as certain other matters are summarized
as follows:
Allocation of Income, Losses and Distributions:
----------------------------------------------
Pretax income, losses and distributions of JQHLP will generally be
allocated prorata between the Company, as general partner, and the
limited partner interest beneficially owned by JQH based on their
respective approximate 28% and 72% ownership interests in JQHLP.
However, among other things, to the extent the limited partners were
not otherwise committed to provide further financial support and
pretax losses reported for financial reporting purposes were deemed to
be of a continuing nature, the balance of the pretax losses would be
allocated only to the Company, with any subsequent pretax income also
to be allocated only to the Company until such losses had been offset.
In addition, with respect to distributions, in the event JQHLP has
taxable income, distributions are to be made in an aggregate amount
equal to the amount JQHLP would have paid for income taxes had it been
a C Corporation during the applicable period. Aggregate tax
distributions will first be allocated to the Company, if applicable,
with the remainder allocated to the limited partners. There were no
distributions for taxes for the fiscal year ended 1999. Distributions
for taxes approximated $10,637 and $565 for the fiscal years ended
1998 and 1997, respectively.
31
<PAGE>
1999 annual report
Additional Capital Contributions:
--------------------------------
In the event proceeds from the sale of the original 20 hotel
properties (or applicable replacement collateral) which secure the
$300 million First Mortgage notes (1994 notes) (Note 5) are
insufficient to satisfy amounts due on the 1994 notes, JQH and
Hammons, Inc. (as general partners at the time the 1994 notes were
secured) are severally obligated to contribute up to $135 million and
$15 million, respectively, to satisfy amounts due, if any. In the
event proceeds from the sale of the original eight hotel properties
(or applicable replacement collateral) which secure the $90 million
First Mortgage notes (1995 notes) (Note 5) are insufficient to satisfy
amounts due on the 1995 notes, JQH is obligated to contribute up to
$45 million to satisfy amounts due, if any. In addition, with respect
to the original eleven hotel properties contributed by JQH concurrent
with the public equity offering, JQH is obligated to contribute up to
$50 million in the event proceeds from the sale of these hotel
properties (or applicable replacement collateral) are insufficient to
satisfy amounts due on the then outstanding mortgage indebtedness
related to these properties.
Redemption of Limited Partner Interests:
---------------------------------------
Subject to certain limitations, the limited partners of JQHLP have the
right to require redemption of their limited partner interests at any
time subsequent to November, 1995. Upon redemption, the limited
partners receive, at the sole discretion of the Company, one share of
its Class A Common Stock for each limited partner unit tendered or the
then cash equivalent thereof.
Additional General Partner Interest:
-----------------------------------
Upon the issuance by the Company of additional shares of its common
stock, including shares issued upon the exercise of its stock options
(Note 8), the Company will be required to contribute to JQHLP the net
proceeds received and JQHLP will be required to issue additional
general partner units to the Company in an equivalent number to the
additional shares of common stock issued.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH AND EQUIVALENTS--Cash and equivalents include 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.
Restricted cash consists of certain funds maintained in escrow for
property taxes and certain other obligations.
(b) MARKETABLE SECURITIES--Marketable securities consist of available-for-
sale commercial paper and government agency obligations which mature
or will be available for use in operations in 2000. These securities
are valued at current market value, which approximates cost. Realized
gains and losses in 1999 and 1998, determined using the specific
identification method, were nominal.
(c) INVENTORIES--Inventories consist of food and beverage items. These
items are stated at the lower of cost, as determined by the first-in,
first-out valuation method, or market.
(d) DEFERRED FINANCING COSTS, FRANCHISE FEES AND OTHER--Franchise fees
paid to the respective franchisors of the hotel properties are
amortized on a straight-line basis over 10 to 20 years which
approximates the terms of the respective agreements. Costs of
obtaining financing are capitalized and amortized over the respective
terms of the debt.
32
<PAGE>
The components of deferred financing costs, franchise fees, and other
are summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR END 1999 1998
<S> <C> <C>
Deferred financing costs $ 23,647 $ 23,534
Franchise fee 5,142 5,254
Less-accumulated amortization (12,874) (10,851)
-------- --------
15,915 17,937
Note receivable, related to sale of hotel and a component of replacement
collateral for 1995 first mortgage notes (Note 9) -- 11,900
Restricted cash deposits, interest bearing, related to sales of hotels, and a component
of replacement collateral for 1994 and 1995 First Mortgage notes (Note 9) 102 6,266
Deposits 10,738 7,017
Pre-opening expenses (Note 2(q)) -- 1,819
Other, net 213 870
-------- --------
$ 26,968 $ 45,809
======== ========
</TABLE>
In October 1997, the Company entered into an irrevocable stand-by
letter of credit agreement with a bank for approximately $5.6 million.
The letter of credit replaced the restricted cash deposit which was
required by and maintained with an insurance carrier. In November
1999, the letter of credit amount was amended to approximately $1.9
million. The letter of credit expires in October 2000.
(e) PROPERTY AND EQUIPMENT--Property and equipment are stated at cost
(including interest, real estate taxes, and certain other costs
incurred during development and construction) less accumulated
depreciation and amortization. Buildings and improvements are
depreciated using the straight-line method while all other property is
depreciated using both straight-line and accelerated methods. The
estimated useful lives of the assets are summarized as follows:
LIVES IN YEARS
Land improvements 5-25
New buildings and improvements 5-40
Purchased buildings 25
Furniture, fixtures, and equipment 3-10
Construction in progress includes development and construction costs
of certain hotel developments. Costs associated with hotel development
construction in progress approximated $53 million in 1999, and $59
million in 1998, with the remainder representing refurbishments of
operating hotels.
The Company periodically reviews the carrying value of these assets
and other long-lived assets and impairments are recognized when the
expected undiscounted future cash flows are less than the carrying
amount of the asset. Based on its most recent analysis, the Company
believes no impairments exist at December 31, 1999.
Interest costs, construction overhead and certain other carrying costs
are capitalized during the period hotel properties are under
construction. Interest costs capitalized were $6,770, $6,163, and
$10,259 for the fiscal years ended 1999, 1998, and 1997, respectively.
Construction in progress is recorded at the lower of cost or market.
Costs incurred for prospective hotel projects ultimately abandoned are
charged to operations in the period such plans are finalized. Costs of
significant improvements are capitalized, while costs of normal
recurring repairs and maintenance are charged to expense as incurred.
The accompanying 1999 consolidated financial statements include the
land costs for 33 of the operating hotel properties. Land for 10 of
the remaining 12 operating hotel properties is leased by the Company
from unrelated parties over long-term leases. Land for the remaining
two operating hotel properties is leased by the Company from a related
party over long-term leases. Rent expense for all land leases was
$1,109, $1,008, and $464 for the fiscal years ended 1999, 1998, and
1997, respectively.
33
<PAGE>
1999 annual report
(f) PAR OPERATING EQUIPMENT--A hotel's initial expenditures for the
purchase of china, glassware, silverware, linens, and uniforms are
capitalized into furniture, fixtures, and equipment and amortized on a
straight-line basis over a three to five year life. Costs for
replacement of these items are charged to operations in the period the
items are placed in service.
(g) ADVERTISING--The Company expenses the cost of advertising associated
with operating hotels as incurred. Advertising expense for 1999, 1998,
and 1997 was approximately $26,834, $23,571, and $21,405,
respectively.
(h) PENSIONS AND OTHER BENEFITS--The Company contractually provides
retirement benefits for certain union employees at two of its hotel
properties under a union-sponsored defined benefit plan and a defined
contribution plan. Contributions to these plans, based upon the
provisions of the respective union contracts, approximated $77, $70,
and $66 for the fiscal years ended 1999, 1998, and 1997, respectively.
Effective January 1996, the Company implemented an employee savings
plan (a 401(k) plan). The Company matches a percentage of an
employee's contribution. The Company's matching contributions are
funded currently. The cost of the matching program and administrative
costs charged to income were approximately $258, $591, and $381 in
1999, 1998, and 1997, respectively. The Company does not offer any
other post-employment or post-retirement benefits to its employees.
(i) SELF-INSURANCE--The Company became fully insured for liability and
workers' compensation effective November 1999 and October 1998,
respectively. The Company became self-insured for medical coverage
effective January 1999. Estimated costs related to these self-
insurance programs are accrued based on known claims and projected
settlements of unasserted claims. Subsequent changes in, among others,
assumed claims, claim costs, claim frequency, as well as changes in
actual experience, could cause these estimates to change.
(j) INCOME TAXES--The Company's provision for income taxes for fiscal
1999, 1998, and 1997 is summarized as follows:
1999 1998 1997
Currently payable $ 150 $ 120 $ 75
Deferred -- -- --
----- ----- -----
Provision for income taxes $ 150 $ 120 $ 75
===== ===== =====
A reconciliation between the statutory federal income tax rate and the
effective tax rate is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
AMOUNT RATE AMOUNT RATE AMOUNT RATE
<S> <C> <C> <C> <C> <C> <C>
Provision (benefit) for income taxes
at the federal statutory rate $ (94) (34)% $ 33 34% $ 846 34%
Tax provision (benefit) allocable
to general partner 94 34 (33) (34) (846) (34)
Provision for state franchise taxes 150 55 120 125 75 3
------ ------ ------ ------ ------ ------
Provision for income taxes $ 150 55% $ 120 125% $ 75 3%
====== ====== ====== ====== ====== ======
</TABLE>
34
<PAGE>
At December 31, 1999, and January 1, 1999, the net deferred tax
liability consisted of the following:
<TABLE>
<CAPTION>
DEFERRED TAX ASSETS: 1999 1998
<S> <C> <C>
Estimated allocated tax basis in excess of the Company's
proportionate share of the book value of JQHLP's net assets $ 5,150 $ 6,100
Deferred tax liabilities (1) (1)
------- -------
5,149 6,099
Valuation allowance 5,150 (6,100)
------- -------
Net deferred tax liability $ (1) $ (1)
======= =======
</TABLE>
The realization of the estimated deferred tax asset resulting from
estimated tax basis in excess of the Company's proportionate share of
the book value of JQHLP's net assets is dependent upon, among others,
prospective taxable income allocated to the Company, disposition of
the hotel properties subsequent to the end of a property's respective
depreciable tax life, and the timing of subsequent conversions, if
any, of limited partnership units in JQHLP into common stock of the
Company. Accordingly, a valuation allowance has been recorded in an
amount equal to the estimated deferred tax asset associated with the
differences between the Company's basis for financial reporting and
tax purposes. Adjustments to the valuation allowance, if any, will be
recorded in the periods in which it is determined the asset is
realizable.
(k) REVENUE RECOGNITION--The Company recognizes revenues from its rooms,
catering,and restaurant facilities as earned on the close of business
each day.
(l) USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
(m) FISCAL YEAR--The Company's fiscal year ends on the Friday nearest
December 31 which includes 52 weeks in 1999, 1998, and 1997.
The periods ended in the accompanying consolidated financial
statements are summarized as follows:
YEAR FISCAL YEAR END
1999 December 31, 1999
1998 January 1, 1999
1997 January 2, 1998
(n) EARNINGS (LOSS) PER SHARE--In 1997, the Company adopted Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS
128). In accordance with SFAS 128, basic earnings (loss) per share are
computed by dividing net income (loss) by the weighted average number
of common shares outstanding during the year. Diluted earnings (loss)
per share are computed similar to basic except the denominator is
increased to include the number of additional common shares that would
have been outstanding if dilutive potential common shares had been
issued.
Options to purchase shares of common stock were outstanding during
fiscal years 1999, 1998, and 1997 (Note 8). The options were not
included in the computation of diluted earnings per share since the
options' exercise prices were greater than the average market price of
the common shares and the options would be antidilutive.
Since there are no dilutive securities, basic and diluted earnings
(loss) per share are identical, thus a reconciliation of the numerator
and denominator is not necessary.
(o) SEGMENTS--The Company operates in one reportable segment, hospitality
services.
(p) RECLASSIFICATIONS--Certain reclassifications have been reflected in
1997 to conform with the current period presentation.
35
<PAGE>
1999 annual report
(q) ACCOUNTING PRONOUNCEMENTS--In April 1998, the American Institute of
Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" (SOP 98-5), which
requires costs of start-up activities, including pre-opening expenses,
to be expensed as incurred. Prior to January 1, 1999, the Company's
practice was to defer these expenses until a hotel had commenced
operations, at which time the costs, other than advertising costs
which were expensed upon opening, were amortized over a one year
period. The Company adopted the provisions of this statement in the
first quarter of fiscal 1999 and, as a result, cumulative unamortized
pre-opening costs of $0.5 million were charged to expenses net of $1.3
million of minority interest. Pre-opening expenses in 1999
approximated $4,161 and are included in general, administrative, sales
and management service expenses in the accompanying consolidated
statements of operations.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. This
statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. In June 1999, the FASB issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of SFAS 133"
(SFAS 137). SFAS 137 amends SFAS 133's effective date. SFAS 137 states
the statement is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. Upon adoption of this statement, the
Company anticipates no impact on its reported consolidated financial
position, results of operations, cash flows or related disclosures.
3. RELATED PARTY TRANSACTIONS
(a) HOTEL MANAGEMENT FEES--In addition to managing the hotel properties
included in the accompanying consolidated financial statements, the
Company provides similar services for other hotel properties owned or
controlled by JQH which included five properties at December 31, 1999.
A management fee of approximately 3% to 5% of gross revenues (as
defined) is paid to the Company by these hotels which aggregated
approximately $844, $715, and $643 for the fiscal years ended 1999,
1998, and 1997, respectively.
(b) ACCOUNTING AND ADMINISTRATIVE SERVICES--The hotels have contracted for
accounting and other administrative services with Winegardner &
Hammons, Inc. (WHI), a company related by common ownership. The
accounting and administrative charges expensed by the hotel
properties, included in administrative expenses, were approximately
$1,440, $1,388, and $1,411 for the fiscal years ended 1999, 1998, and
1997, respectively.
In 1999, the Company negotiated a new contract with WHI to continue to
provide accounting and administrative services through June 2002.
Charges for these services provided by WHI will approximate $35 per
year for each hotel property for the duration of the agreement.
(c) INSURANCE COVERAGE--To supplement the Company's self-insurance
programs, umbrella, property, auto, commercial liability, workers'
compensation and, commencing in 1999, medical insurance is provided to
the hotel properties under a blanket commercial policy purchased by
the Company or WHI, covering hotel properties owned by JQHLP, JQH or
managed by WHI. Generally, premiums allocated to each hotel property
are based upon factors similar to those used by the insurance provider
to compute the aggregate group policy premium. Insurance expense for
the properties included in operating expenses was approximately
$1,088, $2,158, and $6,196 for the fiscal years ended 1999, 1998, and
1997, respectively. During fiscal 1999 and 1998, the Company realized
continued favorable trends in insurance expense as a result of claim
experience and rate improvements and favorable buyouts of several
prior self-insured years.
(d) ALLOCATION OF COMMON COSTS--The Company and its general partner incur
certain hotel management expenses incidental to the operations of all
hotels beneficially owned or controlled by JQH. These costs
principally include the compensation and related benefits of certain
senior hotel executives. Commencing in May of 1993, these costs were
allocated by the Company to hotels not included in the accompanying
consolidated statements, based on the respective number of rooms of
all hotels owned or controlled by JQH. These costs approximated $132,
$145, and $131 for the fiscal years ended 1999, 1998, and 1997,
respectively. Management considers these allocations to be reasonable.
36
<PAGE>
(e) TRANSACTIONS WITH STOCKHOLDERS AND DIRECTORS--Advances to JQH as of
December 31, 1999 approximated $366.0 million. No amounts were due
from JQH as of January 1, 1999.
In fiscal 1998, JQH assumed approximately $0.3 million in costs
incurred associated with new developments. No such costs were assumed
by JQH in fiscal 1999.
During 1996, the Company entered into an agreement with a director
relating to certain financial advisory services. The Company
recognized approximately $17 and $180 in expense for the fiscal years
ended 1998 and 1997, respectively, under this agreement. No such
services were rendered in fiscal 1999.
(f) SUMMARY OF RELATED PARTY EXPENSES--The following summarizes expenses
reported as a result of activities with related parties:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING 1999 1998 1997
<S> <C> <C> <C>
Expenses included within general, administrative, sales
and management service expenses:
Accounting and administrative $1,440 $1,388 $1,411
Rental expenses (Note 6) 787 800 465
Financial advisory services from a director -- 17 180
------ ------ ------
$2,227 $2,205 $2,056
====== ====== ======
Allocated insurance expense from the pooled coverage included
within various operating categories:
Insurance other than medical $1,088 $2,158 $6,196
====== ====== ======
Medical, self-insured, commencing in 1999 $5,368 $ -- $ --
====== ====== ======
</TABLE>
4. FRANCHISE AGREEMENTS
As of year end 1999 and 1998, 40 of the 45 and 36 of the 42, respectively,
operating hotel properties included in the accompanying consolidated balance
sheets have franchise agreements with national hotel chains which require each
hotel to remit to the franchisor monthly fees equal to approximately 3% to 5% of
gross room revenues, as defined. Franchise fees expensed under these contracts
were $8,478, $8,110, and $7,165 for the fiscal years ended 1999, 1998, and 1997,
respectively.
As part of the franchise agreement, each hotel also pays additional advertising,
reservation and maintenance fees to the franchisor which range from 1% to 3.5%
of gross room revenues, as defined. The amount of expense related to these fees
included in the consolidated statements of operations as a component of sales
expense was approximately $7,720, $7,083, and $6,497 for the fiscal years ended
1999, 1998, and 1997, respectively.
37
<PAGE>
1999 annual report
5. LONG-TERM DEBT
The components of long-term debt are summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR END 1999 1998
<S> <C> <C>
1994 First Mortgage notes, interest at 8.875%, interest only payable February 15 and
August 15, principal due February 15, 2004, secured by a First Mortgage lien on the
original 20 hotel properties (or applicable replacement collateral) and additional
capital contributions of up to $150 million by JQH and an entity under his control. (Note 1(b)) $300,000 $300,000
1995 First Mortgage notes, interest at 9.75%, interest only payable April 1 and October 1,
principal due October 1, 2005, secured by a First Mortgage lien on the original six hotel
properties (or applicable replacement collateral), a Second Mortgage lien on the original two
hotel properties and additional capital contributions of up to $45 million by JQH. (Note 1(b)) 90,000 90,000
Development bonds, interest rates ranging from variable interest rate approximates 85% of the
bond equivalent yield of 13 week U.S. Treasury bills (not to exceed 12%), to fixed interest
rates at 7.125%, payable in scheduled installments through August 2015, certain of the obligations
subject to optional prepayments by the bondholders, secured by certain hotel facilities, fixtures
and an assignment of rents. 13,959 14,443
Mortgage notes payable to banks, insurance companies and a state retirement plan, variable
interest rates at prime to LIBOR plus 3.25% with certain instruments subject to a ceiling rate
and a floor rate, fixed rates ranging from 7.57% to 9.5%, payable in scheduled installments through
April 2027, secured by certain hotel facilities, fixtures, an assignment of rents, and certain other real
property controlled by JQH, with certain instruments subject to cross-collateralization provisions
and, with respect to approximately $394,007 of mortgage notes, a personal guarantee of JQH. 416,130 344,369
Other notes payable, variable interest rate at prime plus 1% and fixed rates ranging from
6.8% to 8.1%, payable in scheduled installments through March 2003, secured by certain hotel
improvements, furniture, fixtures and related equipment and, with respect to approximately
$750 of notes, a personal guarantee of JQH. 8,754 10,904
-------- --------
828,843 759,716
Less-current portion (16,569) (42,256)
-------- --------
$812,274 $717,460
======== ========
</TABLE>
The indenture agreements relating to the 1994 and 1995 notes include certain
covenants which, among others, limit the ability of JQHLP and its restricted
subsidiaries (as defined) to make distributions, incur debt and issue preferred
equity interests, engage in certain transactions with its partners, stockholders
or affiliates, incur certain liens, engage in mergers or consolidations and
achieve certain interest coverage ratios, as defined. In addition, certain of
the other credit agreements include subjective acceleration clauses and limit,
among others, the incurrence of certain liens and additional indebtedness. The
1994 and 1995 notes and certain other obligations include scheduled prepayment
penalties in the event the obligations are paid prior to their scheduled
maturity.
The Company paid off or refinanced approximately $28,000 and $133,000 of long-
term debt in 1999 and 1998, respectively. In connection with these transactions,
the Company incurred approximately $200 and $2,200, respectively, in charges
related to the early extinguishment of debt of which $55 and $637, respectively,
is allocable to the Company with the remaining charges applied to the minority
interest. The Company's debt extinguishment charges have been reflected in the
accompanying 1999 and 1998 consolidated statements of operations as an
extraordinary item.
38
<PAGE>
Scheduled maturities of long-term debt are summarized as follows:
FISCAL YEAR ENDING YEAR END 1999
2000 $ 16,569
2001 46,878
2002 31,559
2003 53,810
2004 335,032
Thereafter 344,995
--------
$828,843
========
6. COMMITMENTS AND CONTINGENCIES
(a) OPERATING LEASES--The hotel properties lease certain equipment and
land from unrelated parties under various lease arrangements. In
addition, the Company leases certain parking spaces at one hotel for
the use of its patrons and is billed by the lessor based on actual
usage. Rent expense for these leases was approximately $3,508, $2,715,
and $1,819 for the fiscal years ended 1999, 1998, and 1997,
respectively, which has been included in general, administrative,
sales and management service expenses.
Included in the accompanying consolidated financial statements are the
operating results of trade centers located in Joplin, Missouri, and
Portland, Oregon. Both of the trade centers are owned by JQH. The
lease agreement for the Joplin trade center stipulates nominal rentals
for each of the fiscal years ended 1999, 1998, and 1997, and for each
ensuing year through 2014. The lease agreement for the Portland
facility extends through 2004 and requires minimum annual rents of
$300 to JQH. In addition, the Company leases office space in
Springfield, Missouri, from a partnership (of which JQH is a partner)
for annual payments of approximately $234 through December 2001. The
Company has also entered into land leases with JQH for two operating
hotel properties. Subject to the Company exercising purchase options
provided under these agreements, these leases extend through 2036 and
2045, respectively, and require aggregate minimum annual payments of
approximately $270. Rent expense for these related party leases was
approximately $787, $800, and $465 for the fiscal years ended 1999,
1998, and 1997, respectively.
The minimum annual rental commitments for these noncancelable
operating leases at December 31, 1999, are as follows:
FISCAL YEAR ENDING JQH OTHER TOTAL
2000 $ 570 $ 1,837 $ 2,407
2001 570 1,387 1,957
2002 570 882 1,452
2003 570 820 1,390
2004 570 803 1,373
Thereafter 10,235 52,070 62,305
------- ------- -------
$13,085 $57,799 $70,884
======= ======= =======
(b) Hotel Development--In 2000, the Company plans to complete construction
and open two New Hotels. The total estimated aggregate development and
construction costs for these hotels are expected to exceed $70
million.
(c) STOCK REPURCHASE--On December 1, 1998, the Board of Directors
authorized the Company to repurchase up to $3,000 of the outstanding
stock at market prices during fiscal 1999. On November 30, 1999, the
Board of Directors authorized the Company to repurchase up to an
additional $3,000 of the outstanding stock at market prices during
fiscal 2000. At December 31, 1999, the Company has repurchased $2,997
of the total authorized to be repurchased.
(d) LEGAL MATTERS--The Company is party to various legal proceedings
arising from its consolidated operations. Management of the Company
believes that the outcome of these proceedings, individually and in
the aggregate, will have no material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
39
<PAGE>
1999 annual report
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of marketable securities and long-term debt approximate their
respective historical carrying amounts except with respect to the 1994 and 1995
First Mortgage notes for which fair market value was approximately $408 million
at 1999 and 1998. The fair value of the First Mortgage notes issued is estimated
by obtaining quotes from brokers.
8. STOCK OPTIONS
Concurrent with the sale of equity securities in November 1994, the Company
adopted a stock option plan for its employees. The plan authorizes the issuance
of up to 2,416,800 shares of Class A Common Stock. Options granted under the
plan in 1994 were at fair market value as of the date of the grant
(approximately $16.50 per share). In June 1998, the options outstanding under
the initial stock option grant were cancelled. Concurrent with this
cancellation, new options were granted under the provisions of the 1994 stock
option plan at fair market value as of the date of the grant ($7.38 per share),
and are generally exercisable over periods not exceeding 10 years. (See Note
1(b) Additional General Partner Interest.)
A summary of the changes in options outstanding during 1999 and 1998 is as
follows:
NUMBER OF SHARES OPTION PRICE PER SHARE
Outstanding at January 2, 1998 750,000 $ 16.50
Granted 829,100 7.38
Exercised -- --
Cancelled or expired (839,600) 7.38-16.50
----------- -----------
Outstanding at January 1, 1999 739,500 7.38
Granted -- --
Exercised -- --
Expired (118,000) 7.38
----------- -----------
Outstanding at December 31, 1999 621,500 $ 7.38
=========== ===========
Exercisable at December 31, 1999 155,375 $ 7.38
=========== ===========
The Company accounts for this option plan under APB Opinion No. 25, under which
no compensation cost has been recognized. In accordance with Financial
Accounting Standards Board Statement No. 123, (SFAS No. 123) "Accounting for
Stock-Based Compensation," the Company is required, at a minimum, to report pro
forma disclosures of expense for stock-based awards based on their fair values.
Had compensation cost been determined consistent with SFAS No. 123, the
Company's net loss and diluted loss per share for the years ended December 31,
1999, and January 1, 1999, would have been as follows:
1999 1998
NET LOSS
As reported $ (995) $ (661)
Pro forma (1,153) (771)
DILUTED LOSS PER SHARE
As reported $ (.16) $ (.10)
Pro forma (.19) (.12)
Given that disclosures under SFAS No. 123 are not applicable to options granted
prior to January 1, 1995, and given the Company granted no options in 1997,
there is no additional pro forma compensation expense to be disclosed for 1997.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1998:
Dividend yield 0%
Expected volatility 33.5%
Risk-free interest rate 5.67%
Expected lives 7.5 years
At December 31, 1999, the options granted in 1998 under the 1994 plan to
employees have an exercise price of $7.38, a fair value of $3.59 per option and
remaining contractual lives of 9 years.
40
<PAGE>
9. SALES OF PROPERTY AND EQUIPMENT
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. Certain of these hotels served as
collateral under the 1994 and 1995 First Mortgage notes (Note 5). Under the
terms of these indentures, the Company provided replacement collateral in
accordance with the indenture provisions.
On December 31, 1998, the Company completed the sale of a hotel property to an
unrelated party for $16.1 million, resulting in a gain of approximately $8
million. The net book value of the hotel's property and equipment at the time of
the sale was approximately $8 million. In addition to the cash received upon
closing, the sales price included a note receivable for $11.9 million. Proceeds
for the balance of the note receivable were received during fiscal 1999. This
hotel served as collateral under the 1995 First Mortgage notes (Note 5). Under
the terms of this indenture, the Company provided replacement collateral in
accordance with the indenture provisions.
On June 16, 1999, the Company completed the sale of a hotel to an unrelated
party for $6.5 million, resulting in a gain of approximately $2.4 million. The
net book value of the hotel's property and equipment at the time of the sale was
approximately $3.6 million. The hotel served as collateral under the 1994 First
Mortgage notes (Note 5). Under the terms of this indenture, the Company provided
replacement collateral in accordance with the indenture provisions.
Summary unaudited operating results for the eight hotels sold for each of the
three years ended 1999, 1998, and 1997, as applicable, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING 1999 1998 1997
<S> <C> <C> <C>
Revenues $1,003 $12,122 $38,064
====== ======= =======
Income (loss) from operations, including depreciation and
amortization of $210, $1,315, and $3,578, respectively $ (22) $ 439 $ 2,264
====== ======= =======
</TABLE>
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS FIRST SECOND THIRD FOURTH
<S> <C> <C> <C> <C>
1999
Total revenues $ 83,595 $ 90,452 $ 89,206 $ 93,195
Income from operations 13,694 15,770 12,814 16,593
Net income (loss) allocable to the Company (938) 982 (1,047) 8
Basic and diluted earnings (loss) per share (0.15) 0.16 (0.17) --
Weighted average shares 6,228,747 6,103,591 6,029,958 5,834,660
1998
Total revenues $ 78,952 $ 81,811 $ 82,663 $ 82,704
Income from operations 11,132 12,788 12,842 12,687
Net income (loss) allocable to the Company (969) (367) (578) 1,253
Basic and diluted earnings (loss) per share (0.15) (0.06) (0.09) 0.20
Weighted average shares 6,336,100 6,336,100 6,336,100 6,336,100
</TABLE>
41
<PAGE>
1999 annual report
John Q. Hammons Hotels, Inc. Portfolio
<TABLE>
<S> <C> <C>
EMBASSY SUITES SHERATON CORPORATE ADDRESS
Sioux Falls, South Dakota* John Q. Hammons Hotels, Inc.
Charleston, West Virginia 300 John Q. Hammons Parkway
Columbia, South Carolina RADISSON Suite 900
Dallas (D/FW North), Texas Coral Springs, Florida Springfield, MO 65806
Des Moines, Iowa Davenport, Iowa Telephone: (417) 864-4300
Greensboro, North Carolina Houston (Hobby Airport), Texas Web site: www.jqhhotels.com
Greenville, South Carolina
Kansas City (International Airport), Missouri MARRIOTT INDEPENDENT AUDITORS
Lincoln, Nebraska* (Opens 2000) Madison, Wisconsin Arthur Andersen LLP
Little Rock, Arkansas Tucson, Arizona Cincinnati, Ohio
Montgomery, Alabama
North Charleston, South Carolina (Opened 2000) CROWNE PLAZA TRANSFER AGENT
Omaha, Nebraska Albuquerque, New Mexico First Union National Bank of North
Portland (Airport), Oregon Carolina
Raleigh/Durham, North Carolina HOLIDAY INN Shareholder Services Group
Seaside (Monterey Bay), California Bakersfield, California (Holiday Inn Select) 230 South Tryon Street
Tampa, Florida Beaumont, Texas Charlotte, North Carolina 28288-1153
Denver (International Airport), Colorado Toll Free (800) 829-8432
HAMPTON INN & SUITES Denver (Northglenn), Colorado Local (704) 374-6531
Mesquite, Texas Emeryville (Bay Bridge), California Fax (704) 383-8030
Springdale, Arkansas Fort Collins, Colorado
Joplin, Missouri 10-K AVAILABILITY
HOMEWOOD SUITES Portland (International Airport), Oregon The Company will furnish to any
Greensboro, North Carolina Rapid City, South Dakota* shareholder, without charge, a
Kansas City (International Airport), Missouri Reno, Nevada copy of the Company's Annual Report
Sacramento, California or Form 10-K as filed with the
RESORTS Sioux Falls, South Dakota* Securities and Exchange Commission
Chateau on the Lake, Branson, Missouri Springdale, Arkansas for the year ended December 31, 1999,
World Golf Village Renaissance Resort, Springfield (North), Missouri upon written request to:
St. Augustine, Florida Springfield (University Plaza), Missouri*
Tucson (International Airport), Arizona Investor Relations
INDEPENDENTS West Des Moines, Iowa John Q. Hammons Hotels, Inc.
University Plaza, Bowling Green, Kentucky 300 John Q. Hammons Parkway
Collins Plaza, Cedar Rapids, Iowa COURTYARD BY MARRIOTT Suite 900
Capitol Plaza, Jefferson City, Missouri Springfield, Missouri* (Opens 2000) Springfield, MO 65806
Capitol Plaza, Topeka, Kansas
DAYS INN * Managed Hotel
RENAISSANCE Springfield, Missouri* (closed 12/31/99)
Charlotte, North Carolina
Oklahoma City, Oklahoma (Opened 2000)
</TABLE>
42
<PAGE>
Board of Directors
<TABLE>
<S> <C> <C>
JOHN Q. HAMMONS JACQUELINE A. DOWDY WILLIAM J. HART
Founder, Chairman & Secretary Partner, Husch & Eppenberger, LLC
Chief Executive Officer John Q. Hammons Hotels, Inc.
John Q. Hammons Hotels, Inc. JOHN E. LOPEZ-ONA
DANIEL L. EARLEY President, Anvil Capital
KENNETH J. WEBER President, Clermont Savings Bank
Executive Vice President & JAMES F. MOORE
Chief Financial Officer DONALD H. DEMPSEY Chairman, Champion Products, Inc.
John Q. Hammons Hotels, Inc. Executive Vice President &
Chief Financial Officer DAVID C. SULLIVAN
Equity Inns, Inc. Chairman, ResortQuest International
</TABLE>
Committees of the Board
AUDIT COMMITTEE COMPENSATION COMMITTEE
John E. Lopez-Ona, Chairman William J. Hart, Chairman
Donald H. Dempsey James F. Moore
James F. Moore David C. Sullivan
Officers
<TABLE>
<S> <C> <C>
JOHN Q. HAMMONS JOHN D. FULTON TOM C. HARWELL
Founder, Chairman & Vice President Regional Vice President
Chief Executive Officer Design & Construction Southern Region
Houston, Texas
KENNETH J. WEBER WILLIAM T. GEORGE, JR.
Executive Vice President & Vice President JOE M. MORRISSEY
Chief Financial Officer Capital Planning & Asset Protection Regional Vice President
Midwest Region
LONNIE A. FUNK PAUL E. MUELLNER Kansas City, Missouri
Senior Vice President Vice President
Operations Corporate Controller WILLIAM A. MEAD
Regional Vice President
JACQUELINE A. DOWDY KENT S. FOSTER Eastern Region
Secretary Vice President Greensboro, North Carolina
Human Resources
STEVEN E. MINTON, AIA ROBERT A. NIEHAUS
Senior Vice President DEBRA MALLONEE SHANTZ Regional Vice President
Architecture Corporate Counsel Western Region
Sacramento, California
PAT A. SHIVERS ROBERT J. FUGAZI
Senior Vice President Regional Vice President VEANNE J. STOCKING
Administration & Control Central Region Regional Vice President
Dallas, Texas Rocky Mountains
Ft. Collins, Colorado
</TABLE>
43
<PAGE>
[LOGO OF JOHN Q. HAMMONS]
300 JOHN Q. HAMMONS PARKWAY . SUITE 900 . SPRINGFIELD, MO 65806 .
(417) 864-4300 . www.jqhhotels.com
<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.
/s/ Arthur Andersen LLP
Cincinnati, Ohio
March 29, 2000
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 49,727
<SECURITIES> 4,982
<RECEIVABLES> 14,110
<ALLOWANCES> 226
<INVENTORY> 1,349
<CURRENT-ASSETS> 71,867
<PP&E> 1,062,888
<DEPRECIATION> 227,411
<TOTAL-ASSETS> 934,312
<CURRENT-LIABILITIES> 73,529
<BONDS> 812,274
0
0
<COMMON> 63
<OTHER-SE> 13,782
<TOTAL-LIABILITY-AND-EQUITY> 934,312
<SALES> 0
<TOTAL-REVENUES> 356,448
<CGS> 0
<TOTAL-COSTS> 131,973
<OTHER-EXPENSES> 165,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,209
<INCOME-PRETAX> (275)
<INCOME-TAX> (150)
<INCOME-CONTINUING> (425)
<DISCONTINUED> 0
<EXTRAORDINARY> (55)
<CHANGES> (515)
<NET-INCOME> (995)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
