Press Release: John Q. Hammons Hotels, Inc.
February 14, 2002
SPRINGFIELD, MO -- John Q. Hammons Hotels, Inc. (AMEX:JQH) yesterday reported on its full-year and fourth-quarter
2001 results.
Full-Year Results
Total revenue was $436.7 million for the 2001 year, up slightly compared to the 2000 year total revenue of $436.6
million. Total earnings before interest expense, taxes, depreciation, and amortization (EBITDA) were $121.3 million
for the 2001 year, down 2.8% compared to the 2000 year EBITDA of $124.8 million, reflecting a weak economy and
the sudden impact on travel of the terrorist attacks on September 11.
Basic and diluted loss per share for the 2001 year was ($0.61), compared to basic and diluted loss per share of
($0.16) in 2000. Of the ($0.61) loss in 2001, ($0.36) is attributed to the previously disclosed moisture-related
problems discussed below.
In spite of the weaker economy, the Company continued to surpass the Revenue Per Available Room (RevPAR) performance
of the hotel industry. The Company's RevPAR was $62.90 for the 2001 year, down 0.9% from $63.50 in the 2000 year.
These results are more than 23% higher than the hotel industry and nearly 10% higher than the RevPAR in the upscale
hotel sector.
Fourth-Quarter Results
Total revenue was $104.1 million for the 2001 fourth quarter, down 4.8% compared to the 2000 fourth-quarter total
revenue of $109.4 million. EBITDA was $30.5 million for the fourth quarters of both 2000 and 2001, reflecting an
increased margin performance in 2001 versus the same quarter last year. Basic and diluted loss per share for the
2001 fourth quarter was ($0.38), compared to basic and diluted loss per share of ($0.08) in 2000. Of the ($0.38)
loss in the 2001 fourth quarter, ($0.29) relates to the previously disclosed moisture-related problem discussed
below. Excluding the charge resulting from those moisture-related problems, fourth-quarter 2001 loss per share
increased only $0.01 per share when compared to fourth quarter 2000.
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, previously disclosed in prior SEC filings, 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 31, 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.
Operations
During the fourth quarter of 2001, the Company continued to see decreased demand in most of its markets. This decrease
can be attributed to the lingering effects of September 11th and the residual weakness in the industry. In spite
of this weakness, efforts have been made to increase EBITDA margins, as shown in the fourth-quarter results. We
believe the continued concentration of these efforts will prove beneficial to operations, even if RevPAR remains
slightly depressed. The Company's RevPAR was off historical levels as much as 35% in the week immediately after
the terrorist attacks, but has been trending upward, slightly below prior years' levels. While industry weakness
is still apparent, the Company is beginning to see some recovery, which we expect to continue.
Chairman Comments
John Q. Hammons, Chairman and Chief Executive Officer, stated: ``Although the last quarter was difficult, we remain
encouraged by our performance in relation to last year as well as the industry. Our profit margins are improving
and 2002 is shaping up to be another challenging yet productive year.''
2002 Outlook
The Company remains cautiously optimistic about its performance in the first and second quarters of 2002. January
RevPAR in 2002 was down 7.0% compared to January 2001, yet EBITDA from hotels increased 8.5% over the same period.
First-quarter revenues and EBITDA are expected to be comparable to 2001, and potentially improve as economic recovery
continues. The Company is expected to produce cash as it has historically, which will be used to reduce debt and
further deleverage the Company in 2002. We reduced debt, as planned, by approximately $23.7 million in 2001.
Options are being explored for the refinancing of the two outstanding First Mortgage Notes, due in 2004 and 2005.
The current portion of long-term debt ($38.9 million) is primarily attributable to the Omaha Embassy Suites property
($23.0 million), which the Company plans to refinance prior to its maturity in August 2002.
Although the Company is not developing new hotels, Mr. John Q. Hammons has personally developed three projects
that opened in 2001. Mr. Hammons opened a Renaissance Hotel in Richardson, Texas, on May 18, an Embassy Suites
Hotel in Nashville, Tennessee (Franklin), on August 7, and a Marriott Residence Inn in Springfield, Missouri, on
September 24. The Company manages all of the properties developed by Mr. Hammons' private company.
John Q. Hammons Hotels, Inc. owns, develops and manages hotels, primarily under the Embassy Suites, Marriott and
Holiday Inn brand names. With 56 hotels strategically located near demand generators such as state capitals, universities,
airports, corporate headquarters or office parks in secondary and tertiary markets, John Q. Hammons Hotels are
dominant in their markets. The company's focus is capitalizing on positive operating fundamentals in the upscale,
full-service sector, converting existing hotels to franchise brands and selling mature assets, while reinvesting
the proceeds and reducing debt. For more information about John Q. Hammons Hotels, please visit our website at
www.jqhhotels.com.
NOTE -- FORWARD-LOOKING STATEMENTS: Certain statements in this press release about the Company are 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.
JOHN Q. HAMMONS HOTELS, INC
(Amounts in thousands, except earnings per share and operating data)
Three Months Ended Twelve Months Ended
DEC. 28, DEC. 29, DEC. 28, DEC. 29,
2001 2000 2001 2000
-------- -------- -------- ---------
Total Revenue $104,144 $109,428 $436,658 $436,574
EBITDA $30,483 $30,498 $121,250 $124,778
EBITDA Margin (Percentage of
Total Revenue) 29.3% 27.9% 27.8% 28.6%
Net Loss ($1,928) ($413) ($3,119) ($836)
Loss Per Share -- Basic and
Diluted:
Loss per share ($0.38) ($0.08) ($0.61) ($0.16)
Weighted Average Shares
Outstanding 5,076,279 5,143,400 5,071,772 5,349,988
Hotels Operating Data
Mature Hotels:
Occupancy 58.3% 59.8% 62.7% 65.1%
Average Room Rate $95.82 $97.47 $99.50 $96.90
RevPAR (Room Revenue per
available room) $55.89 $58.27 $62.36 $63.09
New Hotels(1):
Occupancy 62.3% 59.6% 66.4% 59.9%
Average Room Rate $108.38 $110.47 $110.55 $110.68
RevPAR (Room Revenue per
available room) $67.49 $65.79 $73.37 $66.29
Total Owned Hotels:
Occupancy 58.5% 59.8% 62.9% 64.4%
Average Room Rate $96.47 $99.20 $100.07 $98.56
RevPAR (Room Revenue per available
room) $56.46 $59.28 $62.90 $63.50
DEC. 28, DEC. 29, DEC. 31,
2001 2000 1999
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Selected Balance Sheet Data
Current Assets $60,673 $67,208 $71,867
Total Assets $881,724 $920,884 $934,312
Current Liabilities
Excluding Debt $45,072 $48,387 $56,960
Total Debt Including Current
Portion $813,007 $836,707 $828,843
Total Cash and Equivalents and
Marketable Securities $44,196 $49,171 $54,709
Net Debt $768,811 $787,536 $774,134
(1) New Hotels include: Oklahoma City Renaissance and North
Charleston Embassy Suites
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Contact:
John Q. Hammons Hotels, Inc.
Paul Muellner, 417/864-4300