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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 28, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to __________________
Commission File Number 1-13486
JOHN Q. HAMMONS HOTELS, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 43-1695093
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
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. __
The aggregate market value of the 3,362,865 shares of Class A Common
Stock held by non-affiliates of the Registrant was approximately $19,840,904
based on the $5.90 closing price on the American Stock Exchange for such stock
on March 1, 2002.
Number of shares of the Registrant's Class A Common Stock outstanding
as of March 1, 2002: 4,782,179.
Documents Incorporated by Reference
Portions of the annual report to shareholders for the year ended
December 28, 2001 are incorporated by reference into Part II. Portions of the
proxy statement for the annual shareholders meeting to be held on May 1, 2002
are incorporated by reference into Part III.
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 47 hotels located in 20 states, containing 11,633 guest rooms or
suites (the "Owned Hotels"). The Company also manages nine additional hotels
located in five states, containing 2,078 guest rooms (the "Managed Hotels"). The
Company's 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 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 17
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, four
Renaissance Hotels, one Marriott Courtyard and one Marriott Residence Inn. 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 hotel general managers in day-to-day operations.
Centralized management services and functions include sales and marketing,
purchasing, financial controls, architecture and design, human resources, legal
and hotel operations. 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 75.5% 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
5,076,279 general partner units (the "GP Units"), representing 24.04% 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
75.96% of the total equity in the Partnership. The Class A Common Stock of the
Company represents approximately 23% of the total equity of the Partnership, and
the Class B Common Stock and LP Units beneficially owned by Mr. Hammons
represent
2
approximately 77% of the total equity in the Partnership. Mr. Hammons is also
the beneficial owner of 269,100 shares of Class A Common Stock.
The Company's executive offices are located at 300 John Q. Hammons
Parkway, Suite 900, Springfield, Missouri 65806 and its telephone number is
(417) 864-4300. The Company is a Delaware corporation that was formed on
September 29, 1994.
Development
The Company's past 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.
The Company announced on September 11, 1998, that it was ceasing new
development activity, except for the hotels then under construction, and
currently has no hotels under construction.
During 2000, the Company's Board of Directors authorized the Company to
enter into a five-year management contract with Mr. Hammons whereby the Company
would pay a maximum of 1 1/2% of the total development costs of Mr. Hammons'
personally developed hotels for the opportunity to manage the hotels upon
opening and the right to purchase the hotels in the event they are offered for
sale. As part of the management contract, the Company paid approximately
$1,455,000 to Mr. Hammons in fiscal 2000 and approximately $487,000 in fiscal
2001. Amortization of these costs will commence upon the opening of the
respective hotels.
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.
Central management utilizes information systems that track each JQH
Hotel's daily occupancy, average room rate, rooms revenues and food and beverage
revenues. 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 56 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.
3
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.
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 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.
4
Holiday Inn. The Franchise Agreement grants to the Company a
nonassignable, non-exclusive license to use the Holiday Inn's 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
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 blanket policies. Insurance expenses for the JQH Hotels were
approximately $7.3 million, $3.6 million and $1.1 million in 2001, 2000 and
1999, respectively. In the three years ended December 31, 1999, the Company
experienced favorable trends in insurance expenses, due to lower rates and
better claims experiences, and because it was able to engage in favorable
buy-outs of several earlier self-insured years. In 2000 and 2001, the Company's
insurance expense increased as the result of the now fully-insured nature of
most of the Company's insurance programs and the minimal number of policy years
remaining that could be bought out. 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.
5
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.
Moisture Related Issues. During fiscal 2000, the Company initiated
claims against certain of its construction service providers, as well as with
its insurance carrier. These claims resulted from costs the Company incurred and
expected to incur in order to address moisture related problems caused by water
intrusion through defective windows at nine of the Company's hotel properties.
In December 2001, the Company initiated legal actions in an effort to collect
claims previously submitted. Subsequent to the filing of the legal action, the
insurance carrier notified the Company that a portion of its claims had been
denied. As of December 28, 2001, the Company had incurred approximately $8.4
million of an estimated $12.0 million of costs to correct the underlying
moisture problem. The Company and its legal counsel will continue to vigorously
pursue collection of these costs; however, in the fourth quarter the Company
recorded additional depreciation expense of approximately $6.1 million to bring
the total charge for the year to $7.6 million (which is the total estimated
impact) to reserve the net historical costs of the hotel property assets
refurbished absent any recoveries. To the extent recoveries are realized, they
will be recorded as a component of other income.
Employees
The Company employs approximately 7,000 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 88 hotels on a nationwide basis, primarily under the
Holiday Inn and Embassy Suites trade names.
Lou Weckstein is President of the Company. Prior to joining the Company
in September 2001, Mr. Weckstein served for ten years as Senior Vice President,
Hotel Operations, for Windsor Capital Group, a Los Angeles-based hotel
management and development company. Prior to Windsor Capital Group, Mr.
Weckstein served eight years as Vice President of Operations for Embassy Suites,
Inc. Over his career, Mr. Weckstein spent numerous years as Vice
President-Operations for Ramada Inns, Inc. and Vice President-Operations for
Sheraton Inns, Inc. He began his career in the hospitality industry as a hotel
manager in Cleveland, Ohio.
6
Paul E. Muellner is Chief Financial Officer 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.
Debra M. Shantz is General 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 and Corporate Controller 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.
L. Scott Tarwater is Vice President, Sales and Marketing, of the
Company. He joined the Company in September 2000 from Windsor Capital Group, in
Los Angeles, California, where he served as Senior Vice President, Sales and
Marketing, for ten years. Prior to that time, Mr. Tarwater served as Senior
Director, Sales and Marketing, for Embassy Suites, Inc., Irving, Texas.
John D. Fulton is Vice President, Interior Design, 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.
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
Management, 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 forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These include statements that are predictive in nature, or which depend
upon or refer to future events or conditions. These statements often include
words such as "believe," "anticipate," "estimate," "expect" or similar
expressions. These statements are based on our current expectations and beliefs
about future events, and are subject to risks and uncertainties about the
Company, our economy and the industry, among other things. These statements are
not guarantees of future performance, and we have no specific intention to
update these statements.
Actual events and results may differ materially from those expressed, due to a
number of factors. Those factors include competition; general economic
conditions; unexpected events, such as the September 11th terrorist attacks; our
ability to repay or refinance our debt; and other factors.
Item 2. Properties.
The Company leases its headquarters in Springfield, Missouri, from a
Missouri company of which Mr. Hammons is a 50% owner. In 2001, the Company made
aggregate annual lease payments of approximately $247,000 to such Missouri
company. The Company leases from John Q. Hammons the real estate on which three
7
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 35 of the Owned Hotels are located, while nine of the Owned Hotels
are subject to long-term ground leases.
Description of Hotels - General
The JQH Hotels are located in 22 states and contain a total of 13,711
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
these 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 approximately $20.0 million in the last four years on the Owned
Hotels. During 2002, the Company expects to spend approximately $23.6 million on
refurbishment of the Owned Hotels.
Owned Hotels
The Owned Hotels consist of 47 hotels, which are located in 20 states
and contain a total of 11,633 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:
Number of
------------
Location Franchise/Name Rooms/Suites Description Opening Date
- -------- -------------- ------------ ----------- ------------
Montgomery, AL Embassy Suites 237 Atrium; 8/95
Meeting 15,000 sq. ft. (c)
Space:
Tucson, AZ Holiday Inn 299 Atrium; 11/81
Meeting 14,000 sq. ft.
Space:
Tucson, AZ Marriott 250 Atrium; 12/96
Meeting 11,500 sq. ft.
Space:
8
Little Rock, AR Embassy Suites 251 Atrium; 8/97
Meeting 14,000 sq. ft.
Space:
Springdale, AR Holiday Inn 206 Atrium; 7/89
Meeting 18,000 sq. ft.
Space:
Convention 29,280 sq. ft.
Center:
Springdale, AR Hampton Inn & Suites 102 Meeting 400 sq. ft. 10/95
Space:
Bakersfield, CA Holiday Inn Select 259 Meeting 9,735 sq. ft. (c) 6/95
Space:
Monterey, CA Embassy Suites 225 Atrium; 11/95
Meeting 13,700 sq. ft.
Space:
Sacramento, CA Holiday Inn 364 Meeting 9,000 sq. ft. 8/79
Space:
San Francisco, CA Holiday Inn 279 Meeting 9,000 sq. ft. 6/72
Space:
Denver, CO(a) Holiday Inn 256 Atrium; 10/82
(International Airport) Trade Center: 66,000 sq. ft. (b)
Denver, CO Holiday Inn (Northglenn) 236 Meeting 20,000 sq. ft. 12/80
Space:
Fort Collins, CO Holiday Inn 259 Atrium; 8/85
Meeting 12,000 sq. ft.
Space:
Coral Springs, FL Radisson Plaza 224 Atrium; 5,326 sq. ft. 5/99
Convention 12,800 sq. ft.
Center:
St. Augustine, FL Renaissance 300 Atrium; 5/98
Convention 40,000 sq. ft.
Center:
Tampa, FL Embassy Suites 247 Atrium; 1/98
Meeting 18,000 sq. ft.
Space:
Cedar Rapids, IA Collins Plaza 221 Atrium; 9/88
Meeting 11,250 sq. ft.
Space:
Davenport, IA Radisson 221 Atrium; 10/95
Meeting 7,800 sq. ft. (c)
Space:
Des Moines, IA Embassy Suites 234 Atrium; 9/90
Meeting 13,000 sq. ft.
Space:
Des Moines, IA Holiday Inn 288 Atrium; 1/87
Meeting 15,000 sq. ft.
Space:
Topeka, KS Capitol Plaza 224 Atrium; 8/98
Convention 26,000 sq. ft.
Center:
Bowling Green, KY University Plaza 218 Atrium; 8/95
Meeting 4,000 sq. ft. (c)
Space:
Branson, MO Chateau on the Lake 301 Atrium; 5/97
Meeting 40,000 sq. ft.
Space:
Jefferson City, MO Capitol Plaza 255 Atrium; 9/87
Meeting 14,600 sq. ft.
Space:
Joplin, MO Holiday Inn 262 Atrium; 6/79
Meeting 8,000 sq. ft.
Space:
Trade Center: 32,000 sq. ft. (b)
Kansas City, MO(a) Embassy Suites 236 Atrium; 4/89
Meeting 12,000 sq. ft.
Space:
Kansas City, MO Homewood Suites 117 Extended Stay 5/97
Springfield, MO Holiday Inn 188 Atrium; 9/87
Meeting 3,020 sq. ft.
Space:
Omaha, NE Embassy Suites 249 Atrium; 1/97
Meeting 13,000 sq. ft.
Space:
Reno, NV Holiday Inn 283 Meeting 8,700 sq. ft. 2/74
Space:
Albuquerque, NM Crowne Plaza 311 Atrium; 12/86
Meeting 12,300 sq. ft.
Space:
Charlotte, NC Renaissance Suites 275 Atrium; 12/99
Meeting 17,400 sq. ft.
Space:
Greensboro, NC(a) Embassy Suites 219 Atrium; 1/89
Meeting 10,250 sq. ft.
Space:
Greensboro, NC(a) Homewood Suites 104 Extended Stay 8/96
Raleigh-Durham, NC Embassy Suites 273 Atrium; 9/97
Meeting 20,000 sq. ft.
Space:
Oklahoma City, OK Renaissance 311 Atrium; 1/00
Meeting 10,150 sq. ft. (c)
Space:
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 11,000 sq. ft.
Space:
Columbia, SC Embassy Suites 214 Atrium; 3/88
Meeting 13,000 sq. ft.
Space:
Greenville, SC Embassy Suites 268 Atrium; 4/93
Meeting 20,000 sq. ft.
Space:
North Charleston, SC Embassy Suites 255 Atrium; 2/00
Meeting 3,000 sq. ft. (c)
Space:
Beaumont, TX Holiday Inn 253 Atrium; 3/84
Meeting 12,000 sq. ft.
Space:
Dallas/Ft. Worth Airport, Embassy Suites 329 Atrium; 8/99
TX (a) Meeting 18,900 sq. ft.
Space:
Houston, TX(a) Radisson 288 Atrium; 12/85
Meeting 14,300 sq. ft.
Space:
Mesquite, TX Hampton Inn Suites 160 Meeting 21,200 sq. ft. 4/99
Space:
Convention 35,100 sq. ft (c)
Center:
Charleston, WV Embassy Suites 253 Atrium; 12/97
Meeting 14,600 sq. ft.
Space:
Madison, WI Marriott 292 Atrium; 10/85
Meeting 15,000 sq. ft. (b)
Space:
Convention 50,000 sq. ft.
Center:
- ------------------------
10
(a) Airport location.
(b) The trade or convention center is located adjacent to hotel and is
owned by Mr. Hammons, except the convention centers in Madison,
Wisconsin and Denver, Colorado, which are owned by the Company.
(c) Large civic center is located adjacent to hotel.
Managed Hotels
The Managed Hotels consist of nine hotels, three Holiday Inns, one
Sheraton, two Embassy Suites, one Marriott Courtyard, one Marriott Residence Inn
and one Renaissance, located in five states (Missouri, Nebraska, South Dakota,
Tennessee and Texas), and contain a total of 2,078 guest rooms. Mr. Hammons
directly owns eight of these nine 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, a former
officer of the Company, each own a 25% interest in this entity. There is a
convention and trade center adjacent to four 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 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") was
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."
Stock Price Per Share
High Low
2001
First Quarter $ 6.00 $ 5.19
Second Quarter $ 6.60 $ 5.30
Third Quarter $ 7.00 $ 4.05
Fourth Quarter $ 5.82 $ 3.65
2000
First Quarter $ 5-1/8 $ 3-9/16
Second Quarter $ 5-1/8 $ 4
Third Quarter $ 7-3/16 $4-15/16
Fourth Quarter $ 6-1/2 $ 5-1/8
11
Based on the number of Annual Reports requested by brokers, the Company
estimates that it has approximately 1,500 beneficial owners of its Class A
Common Stock. On March 1, 2002, there were approximately 250 holders of record
of the Class A Common Stock then outstanding. On March 1, 2002, the last
reported sale price of the Class A Common Stock on the AMEX was $5.90.
On June 22, 2001, we issued shares of Class A Common Stock to four of
our directors, in exchange for their services on and attendance at meetings of
an ad hoc committee of the Board of Directors formed to evaluate possible
corporate financial opportunities. Messrs. Sullivan and Dempsey each received
1,000 shares, and Messrs. Moore and Lopez-Ona each received 600 shares. The
shares were issued in reliance on the private placement exemption from
registration under the Securities Act of 1933, provided by Section 4(2) of that
Act.
Item 6. Selected Financial Data.
The information required by this item is hereby incorporated by
reference to the material appearing in the 2001 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 2001 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 2001 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 2001 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 1, 2002 (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."
12
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the captions
"Security Ownership of Management" and "Security Ownership of Certain Beneficial
Owners."
Item 13. Certain Relationships and Related Transactions.
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the captions
"Certain Transactions" and "Compensation Committee Interlocks and Insider
Participation."
PART IV
Item 14. Exhibits, Financial Schedules, and Reports on Form 8-K.
14(a)(1) Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets at Fiscal 2001 and 2000 Year-Ends
Consolidated Statements of Operations for the 2001, 2000 and 1999
Fiscal Years Ended
Consolidated Statements of Changes In Minority Interest and
Stockholders Equity for 2001, 2000 and 1999 Fiscal Years Ended
Consolidated Statements of Cash Flows for 2001, 2000 and 1999 Fiscal
Years Ended
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 and October 31, 2000
10.7a Employment Agreement between John Q. Hammons Hotels, Inc. and
Lou Weckstein dated as of September 17, 2001
10.7b Employment Agreement between John Q. Hammons Hotels, Inc. and
William A. Mead dated as of January 25, 2000
10.7c Letter Agreement between John Q. Hammons and William A. Mead
dated as of January 27, 2000
13
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 28,
2001.
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.
14
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 27th day of March, 2002.
JOHN Q. HAMMONS HOTELS, INC.
By: /s/ John Q. Hammons
-------------------------------------
John Q. Hammons
Founder, Chairman and CEO
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 27, 2002.
Signatures Title
---------- -----
/s/ John Q. Hammons Founder, Chairman and CEO of John Q. Hammons Hotels, Inc.
- -----------------------
John Q. Hammons (Principal Executive Officer)
/s/ Paul E. Muellner Chief Financial Officer of John Q. Hammons Hotels, Inc.
- -----------------------
Paul E. Muellner (Principal Financial and Accounting Officer)
/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
15
EXHIBIT INDEX
No. Title
--- -----
(a)3.1 Restated Certificate of Incorporation of the Company
(a)3.2 Bylaws of the Company, as amended
(a)3.3 Second Amended and Restated Agreement of Limited Partnership of
the Partnership
(a)3.4 Certificate of Limited Partnership of the Partnership, filed
with the Secretary of State of the State of Delaware
(a)3.5 Agreement of Limited Partnership of John Q. Hammons Hotels
Two, L.P.
(a)3.6 Amendment No. 1 to Second Amended and Restated Agreement of
Limited Partnership of the Partnership
(b)3.7 Amendment No. 2 to Second Amended and Restated Agreement of
Limited Partnership of the Partnership
(a)10.1 1994 Note Indenture
(b)10.2 1995 Note Indenture
(a)10.3 Holiday Inn License Agreement
(a)10.4 Embassy Suites License Agreement
(a)10.5 Form of Option Purchase Agreement
(a)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 06/01/01 to 5/31/06
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 and October 31, 2000. (Incorporated by reference to
the same numbered exhibit in the Company's Annual Report on
Form 10-K for the Fiscal Year Ended December 29, 2000.)
10.7a Employment Agreement between John Q. Hammons Hotels, Inc. and
Lou Weckstein dated as of September 17, 2001. (Incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the Fiscal Quarter Ended September 28, 2001.)
10.7b Employment Agreement between John Q. Hammons Hotels, Inc. and
William A. Mead dated as of January 25, 2000
10.7c Letter Agreement between John Q. Hammons and William A. Mead
dated as of January 27, 2000
(a)10.8 Letter Agreement re: Hotel Financial Services for Certain
Hotels Owned and Operated by John Q. Hammons or JQH Controlled
Companies
(c)10.9a John Q. Hammons Building Lease Agreement - 9th Floor (6000 sq.
ft.)
10.9a.1 Lease Renewal for John Q. Hammons Building Lease Agreement -
9th Floor (6000 sq. ft.) effective January 1, 2002
(c)10.9b John Q. Hammons Building Lease Agreement - 7th Floor (2775 sq.
ft.)
10.9b.1 Lease Renewal for John Q. Hammons Building Lease Agreement -
7th Floor (2775 sq. ft.) effective January 1, 2002
(c)10.9c John Q. Hammons Building Lease Agreement - 7th Floor (2116 sq.
ft.)
10.9c.1 Lease Renewal for John Q. Hammons Building Lease Agreement -
7th Floor (2116 sq. ft.) effective January 1, 2002
(c)10.9d John Q. Hammons Building Lease Agreement - 8th Floor (6000 sq.
ft.)
10.9d.1 Lease Renewal for John Q. Hammons Building Lease Agreement -
8th Floor (6000 sq. ft.) effective January 1, 2002
(a)10.11 Triple Net Lease
(a)10.12 Lease Agreement between John Q. Hammons and John Q. Hammons
Hotels, L.P.
(c)10.15a Ground lease between John Q. Hammons and John Q.
Hammons-Branson, L.P. - (Chateau on the Lake, Branson,
Missouri)
(c)10.15b Ground lease between John Q. Hammons and John Q. Hammons-Hotels
Two, L.P. - (Little Rock, Arkansas)
(a)10.17 Operating Agreement of Rivercenter Plaza Development Co., L.C.,
an Iowa limited liability company
(a)10.18 1994 Stock Option Plan
10.19 1999 Non-Employee Director Stock and Stock Option Plan
(Incorporated by reference to the same numbered exhibit in the
Company's Annual Report on Form 10-K for the Fiscal Year
16
Ended January 1, 1999.)
12.1 Computations of Ratio of Earnings to Fixed Charges of the
Company
13.1 2001 Annual Report to Shareholders
(a)21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
- ------------------------
(a) Incorporated by reference to the same numbered exhibit in the Company's
Registration Statement on Form S-1, No. 33-84570.
(b) Incorporated by reference to the partnership's Registration Statement on
Form S-4, No. 33-99614.
(c) 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.
17