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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 January 2, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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
organization) Identification No.)
300 John Q. Hammons Parkway, Ste. 900
Springfield, Missouri 65806
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (417) 864-4300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Class A Common Stock American Stock Exchange
$0.01 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.
------
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes No X
---- ------
The aggregate market value of the 3,206,203 shares of Class A Common
Stock held by non-affiliates of the Registrant was approximately $19,493,714
based on the $6.08 closing price on the American Stock Exchange for such stock
on June 30, 2003 (the last business day of the registrant's most recently
completed second fiscal quarter).
Number of shares of the Registrant's Class A Common Stock outstanding
as of March 25, 2004: 4,834,129.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to shareholders for the year ended
January 2, 2004 are incorporated by reference into Part II. Portions of the
proxy statement for the annual shareholders' meeting to be held on May 11, 2004
are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS.
We use the terms we, us, our and other similar references to mean (i)
John Q. Hammons Hotels, Inc., a Delaware corporation, (ii) Hammons, Inc., a
Missouri corporation, (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. References to the term "Partnership" mean 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.
OVERVIEW
We are a leading independent owner and manager of upscale, full service
hotels located primarily in secondary markets. We own and manage 47 hotels
located in 20 states, containing 11,630 guest rooms or suites. We also manage
thirteen additional hotels located in seven states, containing 3,094 guest rooms
or suites. The majority of these existing 60 hotels operate under the Embassy
Suites Hotels, Holiday Inn and Marriott trade names. Most of our hotels are
located in or near a state capital, university, convention center, corporate
headquarters, office park or other stable demand generator.
We own and operate upscale hotels designed to appeal to a broad range
of hotel customers, including frequent business travelers, groups, conventions
and leisure travelers. Our in-house design staff individually designed each of
our hotels and most hotels contain an impressive multi-storied atrium, large
indoor water fountains, lush plantings and comfortable lounge areas. In
addition, our hotels typically include expansive exterior meeting facilities
that can be readily adapted to accommodate both large and small meetings,
conventions or trade shows. Our 19 Embassy Suites Hotels are all-suite hotels
which appeal to the traveler needing or desiring greater space and specialized
services. Our 17 Holiday Inn hotels are affordably priced and designed to
attract value-conscious leisure travelers desiring quality accommodations. In
addition, we own or manage 19 hotels operating under leading brands including
Marriott, Radisson and Sheraton.
We coordinate management of our hotels from our headquarters in
Springfield, Missouri, by our senior executive team. Six regional vice
presidents supervise a group of 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, we realize significant
cost savings due to economies of scale.
We currently have no hotels under construction and no plans to develop
new hotels for the foreseeable future. During 2000, we entered into a five-year
management contract with John Q. Hammons whereby we will provide internal
administrative, architectural design, purchasing and legal services to Mr.
Hammons in conjunction with the development of hotels in an amount not to exceed
1.5% of the total development costs of any single hotel. In exchange, we have
the opportunity to manage the hotel upon opening and a right of first refusal to
purchase the hotel in the event it is offered for sale. These costs are
amortized over a five-year contract period, beginning upon the opening of the
hotels.
Although we are not developing new hotels, Mr. Hammons has personally
completed several projects, including new hotels in Tulsa and Oklahoma City, OK
and Rogers and Hot Springs, AR, all of which we currently manage under the
management agreement described above. Mr. Hammons also has numerous other
projects in various stages of development, which we intend to manage upon
completion, including properties in St. Charles, Missouri; Junction City,
Kansas; Frisco, Texas; Albuquerque, New Mexico and North Charleston, South
Carolina.
In general, we have financed our operations through internal cash flow,
loans from financial institutions, the issuance of public and private debt and
equity and the issuance of industrial revenue bonds. Our principal uses of cash
are to pay operating expenses, to service debt and to fund capital expenditures.
FORWARD-LOOKING STATEMENTS
This Form 10-K contains "forward looking statements" within the meaning
of Section 21E of the Securities Exchange Act of 1934, regarding, among other
things, our operations outlook, business strategy, prospects and financial
position. These statements contain the words "believes," "anticipates,"
"estimates," "expects," "projects,"
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"forecasts," "intends," "may," "will," and similar words. These forward looking
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results to be materially different from any future results
expressed or implied by such forward looking statements. Such factors include,
among others:
- general economic conditions, including the duration and
severity of the current economic slowdown and the pace at
which the lodging industry adjusts to the continuing war on
terrorism;
- the impact of any serious communicable diseases on travel;
- competition;
- changes in operating costs, particularly energy and labor
costs;
- unexpected events, such as the September 11, 2001 terrorist
attacks;
- risks of hotel operations, such as hotel room supply exceeding
demand, increased energy and other travel costs and general
industry downturns;
- seasonality of the hotel business;
- cyclical over-building in the hotel and leisure industry;
- requirements of franchise agreements, including the right of
some franchisors to immediately terminate their respective
agreements if we breach certain provisions; and
- costs of complying with applicable state and federal
regulations.
These risks are uncertainties and, along with the risk factors
discussed below, should be considered in evaluating any forward looking
statements contained in this Form 10-K.
We undertake no obligation to update or revise publicly any
forward-looking statement, whether as a result of new information, future events
or otherwise, other than as required by law.
RISKS RELATING TO OUR BUSINESS
WE MAY BE ADVERSELY AFFECTED BY THE LIMITATIONS IN OUR FRANCHISE
AGREEMENTS.
Approximately 90% of our hotels operate pursuant to franchise
agreements with nationally recognized hotel brands. The franchise agreements
generally contain specific standards for, and restrictions and limitations on,
the operation and maintenance of a hotel in order to maintain uniformity within
the franchisor system. Standards are often subject to change over time.
Compliance with any such new standards could cause us to incur significant
expenses or capital expenditures.
If we do not comply with standards or terms of the franchise
agreements, our franchise licenses could be cancelled after the applicable cure
period. While none of our franchisors has ever terminated or failed to renew one
of our agreements, terminating or changing the franchise affiliation of a hotel
could require us to incur significant expenses or capital expenditures.
Moreover, the loss of a franchise license could have a material adverse effect
upon the operations or the underlying value of the hotel covered by the
franchise because of the loss of associated name recognition, marketing support
and centralized reservation systems provided by the franchisor.
Our current franchise agreements terminate at various times and have
differing remaining terms. Although some are subject to renewal, many of our
franchise agreements are set to expire before the notes mature. As a condition
to renewal, the franchise agreements frequently contemplate a renewal
application process, which may require substantial capital improvements to be
made to the hotel. Significant unexpected capital expenditures could adversely
affect our cash flow and our ability to make payments on our indebtedness.
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MR. HAMMONS' CONTROL OF US CREATES POTENTIAL FOR SIGNIFICANT CONFLICTS
OF INTEREST.
Through his ownership of all of our Class B Common Stock, and 269,100
shares of our Class A Common Stock, Mr. Hammons controls our activities. In
addition, since Mr. Hammons beneficially owns all of the LP Units, representing
75.87% of the total Partnership units, he will decide any matters submitted to a
vote of the Partnership partners. Certain decisions concerning our operations or
financial structure may present conflicts of interest between Mr. Hammons and
our other shareholders or holders of our notes. In addition, Mr. Hammons, as the
holder of all of the LP Units, may suffer different and/or more adverse tax
consequences than we do upon the sale or refinancing of some of the owned hotels
as a result of unrealized gains attributable to certain owned hotels. Therefore,
it is unlikely that an owned hotel will be sold or refinanced if such a
transaction would result in an adverse tax consequence to Mr. Hammons if we are
unable to make sufficient distributions to Mr. Hammons to pay those taxes,
regardless of whether such a sale or refinancing might otherwise be in our best
interest.
Mr. Hammons also (1) owns hotels that we manage; (2) owns an interest
in a hotel management company that provides accounting and other administrative
services for all of our hotels; (3) owns a 50% interest in the entity from which
we lease our corporate headquarters; (4) has an agreement whereby we pay up to
1.5% of his internal development costs for new hotels in exchange for the
opportunity to manage the hotels and to purchase them under certain
circumstances; (5) leases space to us in two trade centers owned by him that
connect with two of our hotels; (6) has the right to require the redemption of
his LP Units; (7) utilizes our administration and other services for his outside
business interests, for which he reimburses us; (8) supplements the compensation
of two of our employees; and (9) owns the real estate underlying one of our
hotels, which we lease from him. We describe these arrangements in further
detail under "Certain Relationships and Related Transactions." In the event that
Mr. Hammons experienced material adverse changes in his outside business
interests, we could receive negative publicity as the result of his close ties
to us, and it is possible the market price of our stock and the rating of our
debt could be affected.
WE DEPEND ON CERTAIN KEY MEMBERS OF OUR EXECUTIVE MANAGEMENT.
We are dependent on certain key members of our executive management, a
loss of whose services could have a material effect on our business and future
operations. Some of our executive officers, including our president, Lou
Weckstein, spend a portion of their time performing services for Mr. Hammons
unrelated to our business.
COMPLIANCE WITH ENVIRONMENTAL LAWS MAY ADVERSELY AFFECT OUR FINANCIAL
CONDITION.
Our hotel properties are subject to various federal, state and local
environmental laws. Under these laws, courts and governmental agencies have the
authority to require an owner of a contaminated property to clean up the
property, even if the owner did not know of and was not responsible for the
contamination. In addition to the costs of cleanup, contamination can affect the
value of a property and, therefore, an owner's ability to borrow funds using the
property as collateral. Under environmental laws, courts and government agencies
also have the authority to require a person who sent waste to a waste disposal
facility, like a landfill or an incinerator, to pay for the cleanup of that
facility if it becomes contaminated and threatens human health or the
environment. Court decisions have established that third parties may recover
damages for injury caused by contamination. For instance, a person exposed to
asbestos while staying in a hotel may seek to recover damages if he suffers
injury from the asbestos.
We could be responsible for the costs discussed above if one or more of
our properties are found to be contaminated or to have caused contamination. The
costs to clean up contaminated property, to defend against a claim or to comply
with environmental laws, could be material and could affect our financial
performance. In addition, under the laws of many states, contamination on a
property may give rise to a lien on the property for cleanup costs. In several
states, this lien has priority over all existing liens including those of
existing mortgages.
Real property pledged as security to a lender may be subject to
unforeseen environmental liabilities. Historic uses of some of our properties
have involved industries or businesses which could have used or produced
hazardous materials or generated hazardous waste. In the regular course of
business, our hotels might use and store small quantities of paints, paint
thinners, lubricants, pool supplies, and commercial cleaning compounds which, in
some instances, may be subject to federal and state regulations. Small
quantities of waste oil, medical waste, and other waste materials may also be
generated at some of our properties. Additionally, some of our properties
contain or may have contained underground or above ground storage tanks which
are regulated by federal, state and local environmental laws.
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All of our properties have been subject to environmental site
assessments, or ESAs, prepared by independent third-party professionals. These
ESAs were intended to evaluate the environmental conditions of these properties
and included a site visit, a review of certain records and public information
concerning the properties, the preparation of a written report and, in some
cases, invasive sampling. We obtained the ESAs before we acquired or built most
of our hotels to help us identify whether we might be responsible for clean-up
costs or other environmental liabilities. The ESAs on our properties did not
reveal any environmental conditions that are likely to have a material adverse
effect on our business, assets, results of operations or liquidity. However,
ESAs do not always identify all potential problems or environmental liabilities.
Consequently, we may have material environmental liabilities of which we are
unaware. Moreover, it is possible that future laws, ordinances or regulations
could impose material environmental liabilities, or that the current
environmental condition of our properties could be adversely affected by third
parties or by the condition of land or operations in the vicinity of the
properties.
ASPECTS OF OUR OPERATIONS ARE SUBJECT TO GOVERNMENT REGULATION, AND
CHANGES IN GOVERNMENT REGULATIONS MAY HAVE SIGNIFICANT EFFECTS ON OUR BUSINESS.
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. We believe that
our hotels are substantially in compliance with these requirements or, in the
case of liquor licenses, that they have or will promptly obtain the appropriate
licenses. Compliance with, or changes in, these laws could reduce the revenue
and profitability of our hotels and could otherwise adversely affect our
revenues, results of operations and financial condition.
Under the Americans with Disabilities Act, or ADA, all public
accommodations are required to meet federal requirements related to access and
use by disabled persons. These requirements became effective in 1992. Although
significant amounts have been and continue to be invested in ADA-required
upgrades to our hotels, a determination that our hotels are not in compliance
with the ADA could result in a judicial order requiring compliance, imposition
of fines or an award of damages to private litigants.
MOISTURE RELATED ISSUES RELATED TO DEFECTIVE WINDOWS AT SOME OF OUR
PROPERTIES HAVE AFFECTED OUR OPERATING RESULTS, AND, IF THE PROBLEMS ARE MORE
WIDESPREAD THAN CURRENTLY APPARENT, COULD ADVERSELY AFFECT OUR FUTURE RESULTS OF
OPERATIONS.
We discovered water intrusion through defective windows at some of our
hotels. The sealant at the base of the windows provided by several manufacturers
had shrunk. This shrinkage allowed moisture into the space between the exterior
and interior walls. Because of the Exterior Finish Insulation Systems, or EFIS,
used in the construction of our hotels, there is no escape path for any moisture
that does leak in. The EFIS construction provides a "stucco" finish and is
commonly used throughout the lodging industry. We conducted an inspection of all
of our properties, and found shrinkage at 16 hotels, of which 14 had sustained
water intrusion damage related to the moisture, including six hotels with severe
damage.
During fiscal 2000, we initiated claims against certain of our
construction service providers, as well as with our insurance carrier. These
claims resulted from costs we incurred and expected to incur to address moisture
related problems caused by water intrusion through defective windows. In
December 2001, we initiated legal actions in an effort to collect claims
previously submitted. Subsequent to the filing of the legal action, the
insurance carrier notified us that a portion of our claims had been denied. As
of January 2, 2004, we had incurred approximately $11.8 million of an estimated
$12.3 million of costs to correct the underlying moisture problem. During the
third quarter of 2003, summary judgment was granted to our insurance carrier in
one action, which is currently on appeal. Summary judgment was also granted to
one of our window manufacturers and we are in the process of appealing that
decision. We plan to continue to vigorously pursue collection of these costs,
although there can be no assurance that we will be successful.
We have paid or reserved all costs incurred and expected to be incurred
in connection with the 16 hotels at which we discovered problems. Virtually all
of our properties include the same type of windows. While we have found no
evidence of any water damage in any other locations, problems could develop with
the windows in other hotels in the future. If such problems were to become
widespread, and we were unable to collect from the manufacturers or our
insurance carrier, the cost would be significant and could adversely impact our
cash flow and results of operations.
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RISKS RELATED TO OUR DEBT
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL
HEALTH.
We have a substantial amount of indebtedness. As of January 2, 2004, we
had total indebtedness of $781.1 million. Our substantial indebtedness could,
among other things:
- increase our vulnerability to general adverse economic and
industry conditions;
- limit our ability to obtain other financing to fund future
working capital, capital expenditures and other general
corporate requirements;
- require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, reducing the
availability of our cash flow to fund working capital and
other expenditures;
- limit our flexibility in planning for, or reacting to, changes
in our business and industry;
- place us at a competitive disadvantage compared to our
competitors that have less debt; and
- along with the financial and other restrictive covenants in
our indebtedness, limit, among other things, our ability to
borrow additional funds.
THE TERMS OF OUR DEBT PLACE RESTRICTIONS ON US, WHICH REDUCE
OPERATIONAL FLEXIBILITY AND CREATE DEFAULT RISKS.
The documents governing the terms of our notes and some of the mortgage
debt on our properties that are not part of the collateral hotels contain
covenants that place restrictions on us and certain of our activities,
including:
- acquisitions, mergers and consolidations;
- the incurrence of additional indebtedness;
- the incurrence of liens;
- capital expenditures;
- the payment of dividends; and
- transactions with affiliates.
The restrictive covenants in the indenture and the documents governing
our mortgage debt reduce our flexibility in conducting our operations and will
limit our ability to engage in activities that may be in our long-term best
interest. In addition, certain covenants in the mortgage debt documents for some
of the non-collateral hotel properties require us to meet financial performance
tests. Our failure to comply with these restrictive covenants constitutes an
event of default that, if not cured or waived, could result in the acceleration
of the debt which we may be unable to repay.
TO SERVICE OUR INDEBTEDNESS, WE REQUIRE A SIGNIFICANT AMOUNT OF CASH.
OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness and
to fund planned capital expenditures will depend on our ability to generate cash
in the future. This, to a certain extent, is subject to general economic,
financial, competitive and other factors that are beyond our control.
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WE CANNOT ASSURE YOU THAT WE WILL CONTINUE TO RECEIVE REVENUES FROM
HOTELS WE MANAGE.
We receive a portion of our revenues from managing hotels Mr. Hammons
owns. We have management agreements with respect to the hotels owned by Mr.
Hammons. Each of the management agreements with the 13 hotels owned by Mr.
Hammons or entities controlled by Mr. Hammons are terminable within either 30 or
60 days. We cannot assure you that we will continue to receive revenues with
respect to any of these hotels.
RISKS RELATED TO THE LODGING INDUSTRY
THE LODGING INDUSTRY IS HIGHLY COMPETITIVE.
Competitive factors in the lodging industry include, among others,
reasonableness of room rates, quality of accommodations, service levels and
convenience of locations. We generally operate in areas that contain numerous
other competitors. There can be no assurance that demographic, geographic or
other changes in markets will not adversely affect the convenience or
desirability of the locales in which our hotels operate, competing hotels will
not pose greater competition for guests than presently exists, or that new
hotels will not enter such locales. New or existing competitors could offer
significantly lower rates or greater conveniences, services or amenities or
significantly expand, improve or introduce new facilities in markets in which we
compete, adversely affecting our operations.
INTERNATIONAL EVENTS, INCLUDING THE CONTINUED THREAT OF TERRORISM AND
THE ONGOING WAR AGAINST TERRORISM, HAVE AFFECTED AND WILL CONTINUE TO AFFECT OUR
INDUSTRY AND OUR RESULTS OF OPERATIONS.
The terrorist attacks of September 11, 2001, caused a significant
decrease in our hotels' occupancy and average daily rate due to disruptions in
business and leisure travel patterns, and concerns about travel safety. Our
occupancy and revenue per available room (RevPAR) were below historical levels
by as much as 26 percentage points and 35%, respectively, in the week
immediately after the terrorist attacks and have rebounded to prior years'
levels since. Additional similar events could have further material adverse
effects on the hotel industry and our operations.
WE ARE SUBJECT TO THE RISKS OF HOTEL OPERATIONS.
Our hotels are subject to all of the risks common to the hotel
industry. These risks could adversely affect hotel occupancy and the rates that
can be charged for hotel rooms as well as hotel operating expenses, and
generally include, among others:
- competition from other hotels;
- increases in supply of hotel rooms that exceed increases in
demand;
- increases in energy costs and other travel expenses that
reduce business and leisure travel;
- adverse effects of declines in general and local economic
activity;
- adverse effects of a downturn in the hotel industry; and
- risks associated with the ownership of hotels and real estate,
as discussed below.
WE WILL ALSO ENCOUNTER RISKS THAT MAY ADVERSELY AFFECT REAL ESTATE
OWNERSHIP IN GENERAL.
Our investments in hotels are subject to the numerous risks generally
associated with owning real estate, including among others:
- adverse changes in general or local economic or real estate
market conditions;
- changes in zoning laws;
- changes in traffic patterns and neighborhood characteristics;
- increases in assessed valuation and tax rates;
- increases in the cost of property insurance;
- governmental regulations and fiscal policies;
- the potential for uninsured or underinsured property losses;
- the impact of environmental laws and regulations; and
- other circumstances beyond our control.
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Moreover, real estate investments are relatively illiquid, and
generally cannot be sold quickly. We may not be able to vary our portfolio
promptly in response to economic or other conditions. The inability to respond
promptly to changes in the performance of our investments could adversely affect
our financial condition.
OPERATIONS
Our management team at our headquarters in Springfield, Missouri,
coordinates management of our hotel network. This management team is responsible
for managing our day-to-day financial needs, including internal accounting
audits, insurance plans and business contract review, and oversees the financial
budgeting and forecasting for our hotels, as well as analyzing the financial
feasibility of new hotel developments and identifying new systems and procedures
to employ within our hotels to improve efficiency and profitability. The
management team also coordinates the sales force for each of our hotels,
designing sales training programs, tracking future business under contract, and
identifying, employing and monitoring marketing programs aimed at specific
target markets, and is 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 of our
hotel's daily occupancy, average room rate, rooms revenues and food and beverage
revenues. By having the latest information available at all times, we are 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 hotel.
Creating operating, cost and guest service efficiencies in each hotel
is a top priority. With a total of 60 hotels under management, we believe we are
able to realize significant cost savings due to economies of scale. By
leveraging the total hotels/rooms under management, we are able to secure volume
pricing from vendors not available to smaller hotel companies. We employ a
systems trainer 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 of our hotels to verify
that our high level of operating standards are being met. Our franchisors
maintain rigorous inspection programs in which chain representatives visit their
respective 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.
We conduct all of our business operations through the Partnership and
its subsidiaries. Mr. Hammons beneficially owns all 294,100 shares of our Class
B Common Stock, and 269,100 shares of our Class A Common Stock, representing
76.7% of the combined voting power of both classes of our common stock. We are
the sole general partner of the Partnership through our ownership of all
5,102,979 General Partner units, representing 24.13% of the total equity in the
Partnership. Mr. Hammons beneficially owns all 16,043,900 limited partnership
units of the Partnership, or the LP Units, representing 75.87% of the total
equity in the Partnership. Our Class A Common Stock represents approximately 23%
of the total equity of the Partnership, and the Class A Common Stock, Class B
Common Stock and LP Units beneficially owned by Mr. Hammons represent
approximately 79% of the total equity in the Partnership.
Our executive offices are located at 300 John Q. Hammons Parkway, Suite
900, Springfield, Missouri 65806 and our telephone number is (417) 864-4300. We
are a Delaware corporation formed on September 29, 1994. Our website address is
WWW.JQHHOTELS.COM. We post all of our Form 10-K, Form 10-Q and Form 8-K filings
on our website as promptly as practicable after filing with the SEC.
SALES AND MARKETING
We market our hotels through national marketing programs and local
sales managers and a director of sales at each of our hotels. While we make
periodic modifications to our marketing concept in order to address differences
and maintain a sales organization structure based on market needs and local
preferences, we generally utilize the same major campaign concept throughout the
country. We develop the concepts at our management headquarters, while
modifications are implemented by our hotels' regional vice presidents 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
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responsible for developing and implementing marketing programs targeted at
specific customer segments within each market. We require that each of our sales
managers complete an extensive sales training program.
Our 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. We believe that business travelers are attracted
to our hotels because of their convenient locations in state capitals, their
proximity to corporate headquarters, plants, convention centers or other major
facilities, the availability of ample meeting space and our high level of
service. Our sales force markets to organizations which consistently produce a
high volume of room nights and which have a significant number of individuals
traveling in our operating regions. We also target groups and conventions
attracted by our hotels' proximity to convention or trade centers which are
often adjacent to our hotels. Our hotels' group meetings logistics include
flexible space readily adaptable to groups of varying size, high-tech
audio-visual equipment and on-site catering facilities. We believe that suburban
convention centers attract more convention sponsors due to lower prices than
larger, more cosmopolitan cities. In addition to the business market, our
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 our atrium hotels appealing.
We advertise primarily through direct mail, magazine publications,
directories and newspaper advertisements, all of which focus on value delivered
to and perceived by the guest. We have 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.). Our marketing efforts focus primarily on
business travelers who we estimate account for approximately 50% of the rooms
rented in our hotels.
Our franchise hotels utilize the centralized reservation systems of our
franchisors, which we believe are among the more advanced reservation systems in
the hotel industry. The franchisors' reservation systems receive reservation
requests entered (1) on terminals located at all of their respective franchises,
(2) at reservation centers utilizing 1-800 phone access and (3) 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. We believe that these systems are effective in directing
customers to our franchise hotels.
FRANCHISE AGREEMENTS
We enter into non-exclusive franchise licensing agreements with
franchisors we believe are the most successful brands in the hotel industry. The
term of an individual franchise agreement for a hotel typically is 20 years. Our
franchise agreements allow us 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 our franchise agreements allows
us the flexibility to continue to develop properties with the brands that have
shown success in the past or to operate hotels in conjunction with other brand
names.
Holiday Inn. Our franchise agreements grant us a nonassignable,
non-exclusive license to use 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. We
pay monthly fees based on a percentage of gross revenues. The initial terms of
each of our Holiday Inn franchise agreements is 20 years with varying renewal
options and extension terms.
Embassy Suites Hotels. Our franchise agreements grant us a
nonassignable, non-exclusive license to use the Embassy Suites Hotels service
mark and computerized reservation network. The franchisor maintains the right to
improve and change the reservation system for the purpose of making it more
efficient, economical and competitive. We pay monthly fees 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 initial term of
each of our Embassy Suites Hotels franchise agreements is 20 years with varying
renewal options and extension terms.
Other Franchisors. The franchise agreements with other franchisors not
listed above are similar to those described above in that they are
nonassignable, non-exclusive licenses to use the franchisor's service mark and
computerized reservation network. Payments and terms of agreements vary based on
specific negotiations with the franchisor.
9
COMPETITION
Each of our hotels competes in its market area with numerous other full
service hotels operating under various lodging brands 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 our hotels in their respective markets. There is, however,
no single competitor or group of competitors of our hotels that is consistently
located nearby and competing with most of our 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
Insurance. To supplement our self insurance programs, we provide
umbrella, property, auto, commercial liability and worker's compensation
insurance to our hotels under blanket policies. Insurance expenses for our
hotels were approximately $13.3 million, $13.3 million and $11.4 million in
2003, 2002 and 2001, respectively. Our insurance expenses have increased over
the past three years as the result of increases in costs in all almost all lines
of our coverage.
Regulations. 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. We
believe that each of our hotels has the necessary permits and approvals to
operate their respective businesses.
Our hotels and any newly developed or acquired hotels must comply with
Title III of the Americans with Disabilities Act, or the ADA, to the extent that
such properties are "public accommodations" and/or "commercial facilities" as
defined by the ADA. Noncompliance could result in a judicial order requiring
compliance, an imposition of fines or an award of damages to private litigants.
Certain federal, state and local laws, regulations and ordinances
govern the removal, encapsulation or disturbance of Asbestos Containing
Materials, or ACMs, when ACMs are in poor condition or when property with ACMs
is undergoing building, repair, 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 or
other damage associated with ACMs. Several of the owned hotels contain or may
contain ACMs, generally in sprayed-on ceiling treatments, floor tiles or in
roofing materials. Several of our hotels have implemented asbestos management
plans. Moreover, in each hotel with confirmed or potential ACMs, no removal of
asbestos from the owned hotels has been recommended and we have no plans to
undertake any additional removal, beyond the removal that has already occurred.
Our 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. See "Risk Factors - Risks Relating to Our Business - Compliance
with environmental laws may adversely affect our financial condition" for a more
detailed description of environmental regulations affecting our business.
EMPLOYEES
We employ over 6,000 full time employees, approximately 225 of whom are
members of labor unions. We believe that labor relations with employees are
good.
ITEM 2. PROPERTIES.
We lease our headquarters in Springfield, Missouri, from a Missouri
company of which Mr. Hammons is a 50% owner. In 2003, we made aggregate annual
lease payments of approximately $253,400 to that company. We own the land on
which 37 of our hotels are located, while 10 of our hotels are subject to
long-term ground leases. Our owned hotels are pledged as collateral for our
long-term debt. We lease from Mr. Hammons the real estate on which one of these
hotels is located. We describe these leases under "Certain Relationships and
Related Transactions - Mr. Hammons."
10
DESCRIPTION OF HOTELS - GENERAL
Our hotels are located in 20 states and contain a total of 11,630 rooms
and suites. A majority of our hotels operate under the Holiday Inn, Embassy
Suites Hotels and Marriott trade names. Most of our 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.
We believe that the presence of adjacent convention centers provides
incremental revenues for our 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 our hotels has a
restaurant/catering service on its premises which provides an essential amenity
to the convention trade. We choose not to lease out the restaurant business to
third-party caterers or vendors since we consider the restaurant business an
important component of securing convention business. We own and manage all of
the restaurants in our hotels specifically to maintain direct quality control
over a vital aspect of the convention and hotel business. We also derive
significant revenue and operating profit from food and beverage sales due to our
ownership and management of all of the restaurants in our hotels. We believe
that our food and beverage sales are more profitable than those of our
competitors due to the amount of catering business provided to conventions at
our hotels.
We retain responsibility for all aspects of the day-to-day management of
each of our 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 we own. We typically refurbish individual hotels every
four to six years. We have spent an average per year of approximately $23.0
million in the last five years on the owned hotels and expect to spend
approximately $30.8 million in 2004 on refurbishment of the owned hotels
(including approximately $5.7 million related to planned hotel franchise
conversions of some of our properties).
OWNED HOTELS
The following table sets forth certain information concerning location,
franchise/name, number of rooms/suites, description and opening date for each of
our hotels:
NUMBER OF OPENING
LOCATION FRANCHISE/NAME ROOMS/SUITES DESCRIPTION DATE
- -------- -------------- ------------ ----------- ----
Montgomery, AL................... Embassy Suites 237 Atrium; Meeting Space: 15,000 sq. ft. (c) 8/95
Tucson, AZ....................... Holiday Inn 301 Atrium; Meeting Space: 14,000 sq. ft. 11/81
Tucson, AZ....................... Marriott 250 Atrium; Meeting Space: 11,500 sq. ft. 12/96
Little Rock, AR.................. Embassy Suites 251 Atrium; Meeting Space: 14,000 sq. ft. 8/97
Springdale, AR................... Holiday Inn 206 Atrium; Meeting Space: 18,000 sq. ft. 7/89
Convention Center: 29,280 sq. ft.
Springdale, AR................... Hampton Inn & Suites 102 Meeting Space: 400 sq. ft. 10/95
Bakersfield, CA.................. Holiday Inn Select 258 Meeting Space: 9,735 sq. ft. (c) 6/95
Monterey, CA..................... Embassy Suites 225 Atrium; Meeting Space: 13,700 sq. ft. 11/95
Sacramento, CA................... Holiday Inn 362 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 256 Atrium; Trade Center: 66,000 sq. ft. (b) 10/82
(International Airport)
Denver, CO....................... Holiday Inn (Northglenn) 235 Meeting Space: 20,000 sq. ft. 12/80
Fort Collins, CO................. Holiday Inn 258 Atrium; Meeting Space: 12,000 sq. ft. 8/85
Coral Springs, FL................ Marriott 224 Atrium; Meeting Space: 5,326 sq. ft. 5/99
Convention Center: 12,800 sq. ft.
St. Augustine, FL................ Renaissance 301 Atrium; Meeting Space: 9,000 sq. ft. (c) 5/98
Tampa, FL........................ Embassy Suites 247 Atrium; Meeting Space: 18,000 sq. ft. 1/98
Cedar Rapids, IA................. Collins Plaza 221 Atrium; Meeting Space: 11,250 sq. ft. 9/88
Davenport, IA.................... Radisson 221 Atrium; Meeting Space: 7,800 sq. ft. (c) 10/95
Des Moines, IA................... Embassy Suites 234 Atrium; Meeting Space: 13,000 sq. ft. 9/90
Des Moines, IA................... Holiday Inn 288 Atrium; Meeting Space: 15,000 sq. ft. 1/87
11
NUMBER OF OPENING
LOCATION FRANCHISE/NAME ROOMS/SUITES DESCRIPTION DATE
- -------- -------------- ------------ ----------- ----
Topeka, KS....................... Capitol Plaza 224 Atrium; Meeting Space: 7,000 sq. ft. (c) 8/98
Bowling Green, KY................ Holiday Inn 218 Atrium: Meeting Space: 4,000 sq. ft. (c) 8/95
Branson, MO...................... Chateau on the Lake 301 Atrium; Meeting Space: 40,000 sq. ft. 5/97
Jefferson City, MO............... Capitol Plaza 255 Atrium; Meeting Space: 14,600 sq. ft. 9/87
Joplin, MO....................... Holiday Inn 262 Atrium; Meeting Space: 8,000 sq. ft. 6/79
Trade Center: 32,000 sq. ft.(b)
Kansas City, MO (a).............. Embassy Suites 236 Atrium; Meeting Space: 12,000 sq. ft. 4/89
Kansas City, MO (a).............. Homewood Suites 117 Extended Stay 5/97
Springfield, MO.................. Holiday Inn 188 Atrium; Meeting Space: 3,020 sq. ft. 9/87
Omaha, NE........................ Embassy Suites 249 Atrium; Meeting Space: 13,000 sq. ft. 1/97
Reno, NV......................... Holiday Inn 284 Meeting Space: 8,700 sq. ft. 2/74
Albuquerque, NM.................. Marriott 310 Atrium; Meeting Space: 12,300 sq. ft. 12/86
Charlotte, NC.................... Renaissance Suites 275 Atrium; Meeting Space: 17,400 sq. ft. 12/99
Greensboro, NC (a)............... Embassy Suites 219 Atrium; Meeting Space: 10,250 sq. ft. 1/89
Greensboro, NC (a)............... Homewood Suites 104 Extended Stay 8/96
Raleigh-Durham, NC............... Embassy Suites 273 Atrium; Meeting Space: 20,000 sq. ft. 9/97
Oklahoma City, OK................ Renaissance 311 Atrium; Meeting Space: 10,150 sq. ft. (c) 1/00
Portland, OR (a)................. Holiday Inn 286 Atrium; Trade Center: 37,000 sq. ft. (b) 4/79
Portland, OR (a)................. Embassy Suites 251 Atrium; Meeting Space: 11,000 sq. ft. 9/98
Columbia, SC .................... Embassy Suites 214 Atrium; Meeting Space: 13,000 sq. ft. 3/88
Greenville, SC................... Embassy Suites 268 Atrium; Meeting Space: 20,000 sq. ft. 4/93
North Charleston, SC (a)......... Embassy Suites 255 Atrium; Meeting Space: 3,000 sq. ft. (c) 2/00
Beaumont, TX..................... Holiday Inn 253 Atrium; Meeting Space: 12,000 sq. ft. 3/84
Dallas, Ft. Worth Airport, TX (a) Embassy Suites 329 Atrium; Meeting Space: 18,900 sq. ft. 8/99
Houston, TX (a).................. Marriott 287 Atrium; Meeting Space: 14,300 sq. ft. 12/85
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; Meeting Space: 14,600 sq. ft. 12/97
Madison, WI...................... Marriott 292 Atrium; Meeting Space: 15,000 sq. ft. (b) 10/85
Convention Center: 50,000 sq. ft.
(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 we own.
(c) Large civic center is located adjacent to hotel.
MANAGED HOTELS
The managed hotels consist of 13 hotels, including two Holiday Inns, one
Sheraton, four Embassy Suites, two Marriott Courtyards, one Marriott Residence
Inn, two Renaissance properties, and one non-franchised hotel, located in seven
states (Arkansas, Missouri, Nebraska, Oklahoma, South Dakota, Tennessee and
Texas), and contain a total of 3,094 guest rooms. Mr. Hammons directly owns 12
of these 13 hotels. The remaining hotel is owned by an entity controlled by Mr.
Hammons in which he and Jacqueline Dowdy, a director and officer of our general
partner, each own a 50% interest. There is a convention and trade center
adjacent to seven of our managed hotels.
We provide management services to the managed hotels within the guidelines
contained in the annual operating and capital plans submitted to the hotel owner
for review and approval during the final 30 days of the preceding year. We are
responsible for the day-to-day operations of the managed hotels. While we are
responsible for the implementation of major refurbishment and repairs, the
actual cost of such refurbishments and repairs is borne by the hotel owner. We
earn annual management fees of 3% to 4% of the hotel's revenues. Each of the
management contracts with the 13 hotels owned by Mr. Hammons or entities
controlled by Mr. Hammons are terminable within either 30 or 60 days.
ITEM 3. LEGAL PROCEEDINGS.
12
We are not presently involved in any litigation which if decided adversely
to us would have a material effect on our financial condition. To our knowledge,
there is no litigation threatened, other than routine litigation arising in the
ordinary course of business or 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.
Our 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
------ ------
2003
First Quarter $ 5.80 $ 4.84
Second Quarter $ 6.18 $ 4.60
Third Quarter $ 6.95 $ 5.67
Fourth Quarter $ 7.15 $ 6.50
2002
First Quarter $ 6.50 $ 5.60
Second Quarter $ 7.00 $ 6.15
Third Quarter $ 6.38 $ 5.92
Fourth Quarter $ 5.92 $ 5.08
Based on the number of Annual Reports requested by brokers, we estimate
that we have approximately 1,100 beneficial owners of our Class A Common Stock.
On February 27, 2004, there were approximately 250 holders of record of our
Class A Common Stock. On February 27, 2004, the last reported sale price of our
Class A Common Stock on the AMEX was $9.50.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is hereby incorporated by reference
to the material appearing in the 2003 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 2003 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 2003 Annual Report to Shareholders under the
caption of "Quantitative and Qualitative Disclosures About Market Risk."
13
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 2003 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
We maintain a system of disclosure controls and procedures designed to
provide reasonable assurance that information we are required to disclose in the
reports that we file or submit under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported, within the time
periods specified in Securities and Exchange Commission rules and forms. Our
management, with the participation of our chief executive officer and our chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures as of January 2, 2004. Based on that evaluation, our chief executive
officer and chief financial officer have concluded that, as of such date, our
disclosure controls and procedures were effective at the reasonable assurance
level.
There have been no changes in our internal control over financial
reporting that occurred during the quarter ended January 2, 2004, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item with respect to directors, the audit
committee and the "audit committee financial expert" 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 11, 2004 (the "Proxy
Statement") under the caption "Election of Directors." Information required by
this item with respect to executive officers is hereby incorporated by reference
to the material appearing in the Proxy Statement under the caption "Election of
Directors--Management." The information included in the Proxy Statement under
the captions "Election of Directors--Corporate Governance and Other
Matters--Code of Ethics" and "Section 16(a) Beneficial Ownership Reporting
Compliance" 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 captions "Election of
Directors--Corporate Governance and Other Matters--Director Compensation" and
"Executive Compensation" (but excluding the "Report of the Compensation
Committee" and "Comparative Company Performance").
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This table summarizes share and exercise price information about our
equity compensation plans as of January 2, 2004.
EQUITY COMPENSATION PLAN INFORMATION
(a) (b) (c)
--- --- ---
WEIGHTED-
AVERAGE
NUMBER OF SECURITIES EXERCISE NUMBER OF SECURITIES
TO BE ISSUED UPON PRICE OF REMAINING AVAILABLE FOR
EXERCISE OF OUTSTANDING FUTURE ISSUANCE UNDER
OUTSTANDING OPTIONS, OPTIONS, EQUITY COMPENSATION PLANS
WARRANTS AND WARRANTS (EXCLUDING SECURITIES
PLAN CATEGORY RIGHTS(1) AND RIGHTS REFLECTED IN COLUMN(a)) (1)
--------------------- ----------- ---------------------------
Equity compensation plans approved by security holders...... 1,904,350 $5.80 512,450
Equity compensation plans not approved by security
holders.................................................. 290,000 $5.26 210,000
--------- -------
Total....................................................... 2,194,350 $5.73 722,450
========= =======
(1) Number of shares is subject to adjustment for changes in capitalization
for stock splits and stock dividends and similar events.
14
The other 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 "Executive
Compensation--Certain Transactions" and "Executive Compensation--Compensation
Committee Interlocks and Insider Participation."
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the caption "Ratification
of Appointment of Independent Auditors--Fees Billed to Company by Deloitte &
Touche LLP for Fiscal 2002 and 2003."
PART IV
ITEM 15. EXHIBITS, FINANCIAL SCHEDULES, AND REPORTS ON FORM 8-K.
15(a)(1) FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheets at Fiscal 2003 and 2002 Year-Ends
Consolidated Statements of Operations for the 2003, 2002 and 2001
Fiscal Years Ended
Consolidated Statements of Changes In Minority Interest and
Stockholders Equity for 2003, 2002 and 2001 Fiscal Years Ended
Consolidated Statements of Cash Flows for 2003, 2002 and 2001 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.
15(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.
15(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.
15
SET FORTH BELOW IS A LIST OF MANAGEMENT CONTRACTS AND COMPENSATORY PLANS
AND ARRANGEMENTS REQUIRED TO BE FILED AS EXHIBITS BY ITEM 15(c).
10.4 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 November 1, 2001
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
10.7d Employment Agreement between John Q. Hammons Hotels, Inc. and
Paul E. Muellner dated as of December 1, 2003
10.14 1994 Employee Stock Option Plan
10.15 1999 Non-Employee Director Stock and Stock Option Plan
15(b) REPORTS ON FORM 8-K
A Form 8-K was filed on November 12, 2003 to furnish the third quarter
earnings press release.
15(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.
15(d) FINANCIAL STATEMENTS
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Springfield, Missouri, on the 1st day of April, 2004.
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 April 1, 2004.
Signatures Title
---------- -----
/s/ John Q. Hammons Founder, Chairman and CEO of John Q. Hammons Hotels, Inc.
- ------------------------ (Principal Executive Officer)
John Q. Hammons
/s/ Paul E. Muellner Chief Financial Officer of John Q. Hammons Hotels, Inc.
- ------------------------ (Principal Financial and Accounting Officer)
Paul E. Muellner
/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
16
EXHIBIT INDEX
NO. TITLE
--- -----
3.1 Restated Certificate of Incorporation of the Company (Incorporated by
reference to Exhibit 3.3 of the Limited Partnership's Registration
Statement on Form S-4, Registration Number 333-89856-01)
3.2 Bylaws of the Company, as amended (Incorporated by reference to Exhibit
3.4 of the Limited Partnership's Registration Statement on Form S-4,
Registration Number 333-89856-01)
3.3 Second Amended and Restated Agreement of Limited Partnership of the
Partnership (Incorporated by reference to Exhibit 3.1 of the Limited
Partnership's Registration Statement on Form S-4, Registration Number
333-89856-01)
3.4 Certificate of Limited Partnership of the Partnership, filed with the
Secretary of State of the State of Delaware (Incorporated by reference
to Exhibit 3.2 of the Limited Partnership's Registration Statement on
Form S-4, Registration Number 333-89856-01)
3.5 Articles of Incorporation of John Q. Hammons Hotels Finance Corporation
III (Incorporated by reference to Exhibit 3.5 of the Limited
Partnership's Registration Statement on Form S-4, Registration Number
333-89856-01)
3.6 By-laws of John Q. Hammons Hotels Finance Corporation III (Incorporated
by reference to Exhibit 3.6 of the Limited Partnership's Registration
Statement on Form S-4, Registration Number 333-89856-01)
4.1 Indenture dated May 21, 2002 among the Limited Partnership and John Q.
Hammons Hotels Finance Corporation III and Wachovia Bank, National
Association, as trustee (Incorporated by reference to Exhibit 4.1 of
the Limited Partnership's Registration Statement on Form S-4,
Registration Number 333-89856-01)
4.2 Form of Global Note evidencing the 8-7/8% First Mortgage Notes due 2012
(Incorporated by reference to Exhibit 4.2 of the Limited Partnership's
Registration Statement on Form S-4, Registration Number 333-89856-01)
10.1 Letter Agreement re: Hotel Financial Services for Certain Hotels Owned
and Operated by John Q. Hammons or John Q. Hammons Controlled Companies
(Incorporated by reference to Exhibit 10.7 to the Registration
Statement of the Company on Form S-1, No. 33-84570)
(a)10.2 Holiday Inn License Agreement
(a)10.3 Embassy Suites License Agreement
(a)10.4 Form of Option Purchase Agreement
(a)10.5 Collective Bargaining Agreement between East Bay Hospitality Industry
Association, Inc. and Service Employee's International Union
10.6 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 (Incorporated by reference to Exhibit 10.6a from
the Company's Annual Report on Form 10-K for the Fiscal Year Ended
December 28, 2001)
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
November 1, 2001 (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 (Incorporated by reference to
Exhibit 10.7b from the Company's Annual Report on Form 10-K for the
Fiscal Year Ended December 28, 2001)
10.7c Letter Agreement between John Q. Hammons and William A. Mead dated as
of January 27, 2000 (Incorporated by reference to Exhibit 10.7c from
the Company's Annual Report on Form 10-K for the Fiscal Year Ended
December 28, 2001)
10.7d Employment Agreement between John Q. Hammons Hotels, Inc. and Paul E.
Muellner dated as of December 1, 2003
10.8 John Q. Hammons Building Lease Agreement - 9th Floor (6000 sq. ft.)
(Incorporated by reference to Exhibit 10.7a of the Registration
Statement of the Company on Form S-1, No. 33-84570)
10.8a Lease Renewal for John Q. Hammons Building Lease Agreement - 9th Floor
(6000 sq. ft.)
17
effective January 1, 2002 (Incorporated by reference to Exhibit 10.9a.1
from the Company's Annual Report on Form 10-K for the Fiscal Year Ended
December 28, 2001)
10.8b John Q. Hammons Building Lease Agreement - 7th Floor (2775 sq. ft.)
(Incorporated by reference to Exhibit 10.7b of the Limited
Partnership's Registration Statement on Form S-4, Registration Number
333-89856-01)
10.8c Lease Renewal for John Q. Hammons Building Lease Agreement - 7th Floor
(2775 sq. ft.) effective January 1, 2002 (Incorporated by reference to
Exhibit 10.9b.1 from the Company's Annual Report on Form 10-K for the
Fiscal Year Ended December 28, 2001)
10.8d John Q. Hammons Building Lease Agreement - 7th Floor (2116 sq. ft.)
(Incorporated by reference to Exhibit 10.7c of the Limited
Partnership's Registration Statement on Form S-4, Registration Number
333-89856-01)
10.8e Lease Renewal for John Q. Hammons Building Lease Agreement - 7th Floor
(2116 sq. ft.) effective January 1, 2002 (Incorporated by reference to
Exhibit 10.9c.1 from the Company's Annual Report on Form 10-K for the
Fiscal Year Ended December 28, 2001)
10.9 John Q. Hammons Building Lease Agreement - 8th Floor (6000 sq. ft.).
(Incorporated by reference to Exhibit 10.7d of the Limited
Partnership's Registration Statement on Form S-4, Registration Number
333-89856-01)
10.9a Lease Renewal for John Q. Hammons Building Lease Agreement - 8th Floor
(6000 sq. ft.) effective January 1, 2002 (Incorporated by reference to
Exhibit 10.9d.1 from the Company's Annual Report on Form 10-K for the
Fiscal Year Ended December 28, 2001)
(a)10.10 Triple Net Lease
(a)10.11 Lease Agreement between John Q. Hammons and John Q. Hammons Hotels,
L.P.
10.12 Ground lease between John Q. Hammons and John Q. Hammons-Branson, L.P.
- (Chateau on the Lake, Branson, Missouri) (Incorporated by reference
to Exhibit 10.10 of the Limited Partnership's Registration Statement on
Form S-4, Registration Number 333-89856-01)
10.13 1994 Stock Option Plan (Incorporated by reference to Exhibit 10.12 of
the Limited Partnership's Registration Statement on Form S-4,
Registration Number 333-89856-01)
10.14 1999 Non-Employee Director Stock and Stock Option Plan (Incorporated by
reference to the Exhibit 10.19 in the Company's Annual Report on Form
10-K for the Fiscal Year Ended January 1, 1999)
12.1 Computation of Historical Ratio of Earnings to Fixed Charges of the
Company
13.1 2003 Annual Report to Shareholders
21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
31.1 Certification Statement of Chief Executive Officer pursuant to Rules
13a-14(a) and 15d-14(a) of the Securities and Exchange Act, as amended
31.2 Certification Statement of Chief Financial Officer pursuant to Rules
13a-14(a) and 15d-14(a) of the Securities and Exchange Act, as amended
32 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of
Sarbanes-Oxley Act of 2002, as amended
- ------------------------
(a) INCORPORATED BY REFERENCE TO THE SAME NUMBERED EXHIBIT IN THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1, NO. 33-84570.
18