John Q. Hammons Hotels, Inc. Reports 2002 Year-End Results, Narrows Losses for the Year
SPRINGFIELD, Mo.--John Q. Hammons Hotels, Inc. JQH today reported on its fourth quarter and year-end 2002 results. Year-to-Date Results: Basic and diluted loss per share before extraordinary item for the twelve months ended January 3, 2003 was $0.19, compared to basic and diluted loss per share before extraordinary item of $0.59 for 2001. After giving effect to the extraordinary item (early retirement of debt), basic and diluted loss per share...
Net loss for the twelve months ended January 3, 2003 was $2.8 million, compared to a net loss of $3.1 million for the same period in 2001. A substantial portion of the loss for the 2002 twelve months can be attributed to the extraordinary item of $1.8 million (net of minority interest) discussed above. The extraordinary item for the 2001 twelve-month period was $0.1 million.
Total revenues for 2002 were $440.4 million, an increase of $3.7 million, or 0.8%, compared to 2001. We produced earnings before interest expense, taxes, depreciation and amortization, minority interest and extraordinary item (EBITDA) for the twelve months ended January 3, 2003 of $121.7 million, up slightly compared to $121.3 million in the 2001 period. EBITDA as a percentage of total revenue decreased slightly compared to the prior year, reflecting franchise termination fees related to hotel brand conversions, increased insurance expense and the temporary disruption of business during conversion periods for the four hotels mentioned below.
Revenue Per Available Room (RevPAR) was $62.68 for 2002, virtually equal to prior year's level of $62.90, while the upscale sector of the industry's RevPAR was down 4.7% as reported by Smith Travel Research. Our RevPAR results for the 2002 period are more than 27% higher than the hotel industry and almost 4% higher than the RevPAR recorded in the upscale hotel sector.
Chairman Comments
"At the end of another difficult year for our industry, we are pleased with our demonstrated ability to weather the downturns in the economy and we are positioned favorably for 2003. In 2002, we successfully refinanced our First Mortgage Notes giving us flexibility to continue our debt reduction and improve our balance sheet. We continued to invest capital in our hotels in addition to changing the brand affiliation of certain hotels to ensure they each remain at the top of their respective markets. We were able to complete these strategic goals while still maintaining our focus on providing an outstanding product, with minimal impact on our performance," stated Mr. John Q. Hammons, Chairman and Chief Executive Officer.
Fourth Quarter Results
Fourth Quarter performance was adversely effected by increasing insurance costs, the conversion of our Albuquerque property to a Marriott from a Crowne Plaza in December and increases in marketing costs directly associated with the conversion of three of our hotels to the Marriott brand (i.e., guest frequency programs) as discussed below.
Net loss was $0.9 million for the 2002 fourth quarter compared to the 2001 net loss of $1.9 million. Basic and diluted loss per share for the three months ended January 3, 2003 was $0.18, compared to basic and diluted loss per share of $0.38 for the fourth quarter of 2001.
Total revenues for the 2002 fourth quarter were $111.9 million, an increase of $7.8 million, or 7.5%, compared to the 2001 fourth quarter. Revenue Per Available Room (RevPAR) was $56.62 for the 2002 fourth quarter, improving slightly from $56.46 in the 2001 fourth quarter.
Total earnings before interest expense, taxes, depreciation and amortization, minority interest and extraordinary item (EBITDA) were $29.5 million for the 2002 fourth quarter, down 3.3% compared to the 2001 EBITDA of $30.5 million.
Financing Activities
During 2002, we reduced debt by $6.7 million, which included $15.1 million borrowed to provide for transaction costs incurred while refinancing our First Mortgage Notes. The current portion of long-term debt as of January 3, 2003 ($13.7 million) is attributable to principal amortization on various individual hotel mortgages and includes a $6 million mortgage (Springdale Hampton Inn), which matures in the fourth quarter of 2003. We intend to refinance that debt prior to maturity. This absence of any significant short-term maturities will allow us to proceed with our intentions of reducing debt and strengthening our balance sheet.
Portfolio Restructuring
During the year, we made significant progress toward our previously stated plans of selectively converting the brands of some of our hotels to franchises considered more upscale in order to take advantage of market opportunities. These properties, located in Bowling Green, Kentucky (from an Independent to the Holiday Inn brand), in Houston, Texas and Coral Springs, Florida (replacing the Radisson brand with the Marriott brand), and in Albuquerque, New Mexico (replacing the Crowne Plaza brand with the Marriott brand) are beginning to produce positive results. Termination fees and temporary disruption of business were factors that inhibited performance for part of 2002 during each property's respective conversion period. The properties' RevPAR's were up substantially for January 2003 and continuing increases over prior year are expected into the future.
Capital Investments
We believe the quality of our assets is an important factor to the success of our company, and have continued to invest in our properties even throughout this difficult time for the industry. In 2002, we spent approximately $29 million in capital improvements, compared to approximately $32 million in 2001.
Operations Outlook
We forecast that our first quarter 2003 year-over-year RevPAR comparisons will remain above last year's levels. January 2003 RevPAR increased 9.4% compared to January 2002, while January 2003 EBITDA from hotel operations increased 14.7% over the same period. We expect first quarter revenues to be 3-4% above 2002 first quarter, and forecast first quarter 2003 EBITDA to increase approximately 2-3% from the same period in 2002. By identifying new sources of revenue, we expect to increase our cash generation and will maintain focus on operational efficiencies. We perceive risks for 2003 to include the ongoing threat of domestic terrorist activities as well as a potential war with Iraq.
Although we are not developing new hotels, Mr. Hammons personally has numerous projects in various stages of development, including properties in Tulsa and Oklahoma City, Oklahoma, and in Bentonville and Hot Springs, Arkansas.
We are a leading independent owner and manager of affordable upscale, full service hotels located primarily in key secondary markets. We own 47 hotels located in 20 states, containing 11,629 guest rooms or suites, and manage nine additional hotels located in five states, containing 2,075 guest rooms or suites. The majority of these 56 hotels operate under the Embassy Suites, Holiday Inn and Marriott trade names. Most of our hotels are located near a state capitol, university, convention center, corporate headquarters, office park or other stable demand generator. For more information about John Q. Hammons Hotels, please visit our website at
- General economic conditions;
- 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 and uncertainties should be considered in evaluating any forward looking statements contained in this press release. 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.
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000'S omitted, except share data)
Three Months Ended(a) Twelve Months Ended(a)
Jan. 3, Dec. 28, Jan. 3, Dec. 28,
2003 2001 2003 2001
---------- ---------- ----------
REVENUES:
Rooms $64,555 $59,772 $270,534 $266,353
Food and beverage 33,472 32,053 117,810 118,042
Meeting room rental,
related party management
fee and other 13,854 12,319 52,036 52,263
---------- ---------- ----------
Total revenues 111,881 104,144 440,380 436,658
OPERATING EXPENSES:
Direct operating costs and
expenses:
Rooms 17,418 15,304 68,917 68,061
Food and beverage 25,239 23,480 91,310 94,690
Other 734 727 3,179 3,288
General, administrative,
sales and management
expenses 34,124 29,889 136,866 131,522
Repairs and maintenance 4,875 4,261 18,387 17,847
Depreciation and
amortization 14,911 21,143 54,202 62,174
---------- ---------- ----------
Total operating costs 97,301 94,804 372,861 377,582
---------- ---------- ----------
INCOME FROM OPERATIONS 14,580 9,340 67,519 59,076
OTHER (INCOME) EXPENSE:
Interest income 262 282 1,018 1,909
Interest expense and
amortization of deferred
financing fees (18,574) (17,529) (71,989) (72,884)
---------- ---------- ----------
LOSS BEFORE MINORITY
INTEREST, PROVISION FOR
INCOME TAXES, AND
EXTRAORDINARY ITEM (3,732) (7,907) (3,452) (11,899)
Minority interest in
losses of partnership 2,834 6,009 2,622 9,044
---------- ---------- ----------
LOSS BEFORE PROVISION FOR
INCOME TAXES AND
EXTRAORDINARY ITEM (898) (1,898) (830) (2,855)
Provision for income
taxes (30) (30) (150) (150)
---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY
ITEM (928) (1,928) (980) (3,005)
Extraordinary Item: Cost
of early extinguishment of
debt, net of applicable tax
benefit and minority
interest (6) - (1,781) (114)
---------- ---------- ----------
NET LOSS $(934) $(1,928) $(2,761) $(3,119)
========== ========== ========== ==========
BASIC AND DILUTED LOSS
PER SHARE:
Loss before extraordinary
item $(0.18) $(0.38) $(0.19) $(0.59)
Extraordinary item (0.00) 0.00 (0.35) (0.02)
---------- ---------- ----------
Per share net loss
allocable to company $(0.18) $(0.38) $(0.54) $(0.61)
========== ========== ========== ==========
BASIC AND DILUTED
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,083,829 5,076,279 5,081,285 5,071,772
========== ========== ========== ==========
(a) The three months ended January 3, 2003, contain 14 weeks, or 98
days, while the three months ended December 28, 2001, contain 13
weeks, or 91 days. Likewise, the twelve months ended January 3,
2003, contain 53 weeks, or 371 days, while the twelve months ended
December 28, 2001, contain 52 weeks, or 364 days.
0
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
(Amounts in thousands except earnings per share and operating data)
Three Months Ended Twelve Months Ended
Jan. 3, Dec. 28, Jan. 3, Dec. 28,
2003 2001 2003 2001
--------- --------- ---------
Reconciliation of Income from
Operations to EBITDA:
Income from Operations $14,580 $9,340 $67,519 $59,076
Depreciation and Amortization 14,911 21,143 54,202 62,174
--------- --------- ---------
EBITDA (a) $29,491 $30,483 $121,721 $121,250
EBITDA Margin (% of Total
Revenue) 26.4% 29.3% 27.6% 27.8%
(a) EBITDA is defined as income before interest expense, income tax
expense, depreciation and amortization, minority interest and
extraordinary item. Management considers EBITDA to be one measure
of the cash flows from operations of the Company before debt
service that provides a relevant basis for comparison, and EBITDA
is presented to assist investors in analyzing the performance of
the Company. This information should not be considered as an
alternative to any measure of performance as promulgated under
accounting principles generally accepted in the United States, nor
should it be considered as an indicator of the overall financial
performance of the Company. The Company's calculation of EBITDA
may be different from the calculation used by other companies and,
therefore, comparability may be limited.
Total Owned Hotels:
Occupancy 57.8% 58.5% 63.8% 62.9%
Average Room Rate $97.95 $96.47 $98.31 $100.07
RevPar (Room Revenue per
available room) $56.62 $56.46 $62.68 $62.90
Jan. 3, Dec. 28, Dec. 29,
2003 2001 2000
Selected Balance Sheet Data
Current Assets $52,020 $60,673 $67,208
Total Assets $859,972 $881,724 $920,884
Current Liabilities Excluding
Debt $40,789 $45,072 $48,387
Current Portion of Debt $13,683 $38,862 $56,258
Total Debt Including Current
Portion $806,342 $813,007 $836,707
Total Cash and Equivalents and
Marketable Securities $35,358 $44,196 $49,171
Net Debt $770,984 $768,811 $787,536