John Q. Hammons Hotels, Inc. Reports Diluted Earnings Per Share of $0.57 for the First Nine Months of 2004
SPRINGFIELD, Mo. | John Q. Hammons Hotels, Inc. (AMEX:JQH - News) today reported results for the third quarter and first nine months of 2004.
SPRINGFIELD, Mo. | John Q. Hammons Hotels, Inc. (AMEX:JQH - News) today reported results for the third quarter and first nine months of 2004.
Year-to-Date Results
Total revenues from continuing operations for the 2004 nine months ended October 1, 2004 were $336.2 million, an increase of 3.9% compared to the 2003 nine months ended October 3, 2003. We produced EBITDA from continuing operations for the 2004 nine months of $92.3 million, consistent with the 2003 nine months. The 2004 period included an asset impairment charge, discussed below, which had a negative effect on EBITDA from continuing operations of $3.2 million. (See attached table for reconciliation of income from continuing operations to EBITDA from continuing operations and for our definition of EBITDA from continuing operations).
Basic and diluted earnings per share for the nine months ended October 1, 2004 were $0.66 and $0.57, respectively, compared to basic and diluted earnings per share of $0.09 for the nine months ended October 3, 2003. Discontinued operations relating to the sale of the Holiday Inn Bakersfield, California had a negative effect on basic and diluted earnings per share of $0.22 and $0.19, respectively, for the 2004 nine months, compared to $0.01 in the 2003 nine months.
Net income for the 2004 nine month period was $3.4 million, up $3.0 million compared to $0.4 million for the same period in 2003. Income from continuing operations for the 2004 nine month period was $4.5 million, up $4.0 million, compared to 2003 nine months. The 2004 results included two items, which, after giving effect to minority interest, had a favorable net impact of approximately $2.8 million on the Company's income from continuing operations. One of the items was the recognition of a $0.8 million asset impairment, net of minority interest, due to our decision to sell certain non-strategic hotels and reflects the difference between the net book value, less selling costs, and the current estimated fair market value of these hotels. The other item includes $3.5 million for the recapture of the limited partners' losses we absorbed in previous quarters. An additional $4.6 million must be recaptured before the limited partners can be allocated future earnings.
Revenue Per Available Room (RevPAR) from continuing operations was $68.40 for the 2004 nine months, up 3.8% from the prior year's level of $65.91. Occupancy from continuing operations for the 2004 nine months was 66.9%, up 2.0%, while our Average Daily Rate (ADR) from continuing operations was up 1.7% to $102.27.
The following represents a reconciliation of the income from continuing operations, as reported, to income from continuing operations, as adjusted (in thousands):
Three Months Nine Months
Ended Ended
October October October October
1, 3, 1, 3,
2004 2003 2004 2003
------- ------- ------- -------
Income from continuing operations, as
reported $1,834 $213 $4,521 $517
Additions (subtractions):
Asset impairment, net $2,426 of
expected minority interest -- -- 771 --
Reallocation of minority interest
earnings (1,416) -- (3,539) --
------- ------- ------- -------
Sub total (1,416) -- (2,768) --
------- ------- ------- -------
Income from continuing operations, as
adjusted $418 $213 $1,753 $517
======= ======= ======= =======
Executive Comments
"As expected, we are reaping the benefits of a recovery in the economy and the industry, improving on our already solid performance," stated Mr. John Q. Hammons, Chairman and Chief Executive Officer.
Third Quarter Results
Total revenues from continuing operations for the three months ended October 1, 2004 were $110.4 million, an increase of 2.5% compared to the three months ended October 3, 2003. We produced EBITDA from continuing operations for the 2004 quarter of $32.0 million, up $0.7 million compared to $31.3 million in the 2003 quarter. (See attached table for reconciliation of income from continuing operations to EBITDA from continuing operations and for our definition of EBITDA from continuing operations).
Basic and diluted earnings per share for the three months ended October 1, 2004 were $0.32 and $0.27, respectively, compared to basic and diluted earnings per share of $0.03 for the three months ended October 3, 2003. Discontinued operations relating to the sale of the Holiday Inn Bakersfield, California had a negative effect on basic and diluted earnings per share of $0.03 for the 2004 quarter, compared to $0.01 in the 2003 quarter.
Net income for the 2004 third quarter was $1.7 million, compared to net income of $0.2 million for the 2003 quarter. Income from continuing operation for the 2004 quarter was $1.8 million, up $1.6 million, compared to 2003 nine months. The 2004 quarter was positively impacted by $1.4 million of the limited partners' losses we absorbed in previous quarters due to the inability of the limited partners' net contribution to fall below zero.
Revenue Per Available Room (RevPAR) from continuing operations was $69.84 for the 2004 quarter, up 3.3% from the prior year's level of $67.62. Occupancy from continuing operations for the 2004 quarter was 68.1%, up 0.6% from prior year, while our Average Daily Rate (ADR) from continuing operations was up 2.6% to $102.49.
Financing and Investing Activities
Since the beginning of 2003, we have reduced total debt by over $39 million, including scheduled principal amortization. In the 2004 nine month period, we have reduced debt by almost $14 million. We utilized the proceeds from the sale of Holiday Inn Bakersfield, California to pay down debt, in addition to regularly scheduled principal payments. Our current portion of long-term debt ($8.4 million) is attributable to scheduled principal amortization on various individual hotel mortgages.
Operations Outlook
As expected, the industry has continued to recover throughout 2004, generating RevPAR and EBITDA above our 2003 levels. This recovery should continue to enhance our cash generation and produce favorable results as we focus on operational efficiencies into 2005. We expect to produce fourth quarter results above prior year's levels, which should allow us to exceed 2003 full-year results.
Although we are not developing new hotels, Mr. Hammons personally has numerous projects in various stages of development, which we will manage upon completion, including properties in St. Charles and Springfield, Mo.; Frisco, Texas; Albuquerque, N.M.; and Hampton, Va. Mr. Hammons opened properties in Junction City, Kan., in September and in North Charleston, S.C., in October.
John Q. Hammons Hotels, Inc. is a leading independent owner and manager of affordable upscale, full service hotels located primarily in key secondary markets. We own 46 hotels located in 20 states, containing 11,370 guest rooms or suites, and manage 14 additional hotels located in nine states, containing 3,158 guest rooms or suites. The majority of these 60 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. A copy of this press release announcing our earnings as well as other financial information will be available in the Investor Relations section of our website at www.jqhhotels.com.
NOTE - FORWARD-LOOKING STATEMENTS: This press release 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 "believe," "anticipate," "estimate," "expect," "forecast," "project," "intend," "may," and similar words. These forward-looking statements are not guarantees of future performance, and 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 speed and strength of the economic recovery;
- 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, or outbreaks of war;
- 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.
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(000's omitted, except share data)
Three Months Ended Nine Months Ended
October 1, October 3, October 1, October 3,
2004 2003 2004 2003
---------- ---------- ---------- -----------
REVENUES:
Rooms $72,267 $69,975 $212,320 $204,616
Food and beverage 25,614 25,760 84,072 81,374
Meeting room rental,
related party
management fee and
other 12,524 11,983 39,789 37,653
---------- ---------- ---------- -----------
Total revenues 110,405 107,718 336,181 323,643
OPERATING EXPENSES:
Direct operating costs
and expenses:
Rooms 18,610 17,161 53,002 49,988
Food and beverage 20,434 19,836 64,737 62,903
Other 577 693 1,757 2,065
General,
administrative, sales
and management service
expenses 34,225 34,261 107,085 102,960
Repairs and maintenance 4,564 4,512 14,060 13,388
Asset impairment -- -- 3,197 --
Depreciation and
amortization 13,402 12,658 37,094 37,407
---------- ---------- ---------- -----------
Total operating
expenses 91,812 89,121 280,932 268,711
---------- ---------- ---------- -----------
INCOME FROM OPERATIONS 18,593 18,597 55,249 54,932
OTHER INCOME (EXPENSE):
Other income 193 -- 193 175
Interest income 171 143 448 477
Interest expense and
amortization of
deferred financing
fees (17,090) (17,411) (51,225) (52,617)
Extinguishment of debt
costs -- (318) -- (318)
---------- ---------- ---------- -----------
INCOME FROM CONTINUING
OPERATIONS BEFORE
MINORITY INTEREST AND
PROVISION FOR INCOME
TAXES 1,867 1,011 4,665 2,649
Minority interest in
earnings of
partnership -- (768) -- (2,012)
---------- ---------- ---------- -----------
INCOME FROM CONTINUING
OPERATIONS BEFORE
PROVISION FOR INCOME
TAXES 1,867 243 4,665 637
Provision for income
taxes (33) (30) (144) (120)
---------- ---------- ---------- -----------
INCOME FROM CONTINUING
OPERATIONS 1,834 213 4,521 517
Discontinued operations (171) (50) (1,131) (68)
---------- ---------- ---------- -----------
NET INCOME ALLOCABLE TO
THE COMPANY $1,663 $163 $3,390 $449
========== ========== ========== ===========
BASIC EARNINGS (LOSS) PER
SHARE:
Income from continuing
operations $0.35 $0.04 $0.88 $0.10
Discontinued operations (0.03) (0.01) (0.22) (0.01)
---------- ---------- ---------- -----------
Net earnings
allocable to Company $0.32 $0.03 $0.66 $0.09
========== ========== ========== ===========
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING 5,195,095 5,094,778 5,149,828 5,089,445
========== ========== ========== ===========
DILUTED EARNINGS (LOSS)
PER SHARE:
Income from continuing
operations $0.30 $0.04 $0.76 $0.10
Discontinued operations (0.03) (0.01) (0.19) (0.01)
---------- ---------- ---------- -----------
Net earnings
allocable to Company $0.27 $0.03 $0.57 $0.09
========== ========== ========== ===========
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 6,113,229 5,384,894 5,961,429 5,262,806
========== ========== ========== ===========
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
(Amounts in thousands except earnings per share and operating data)
Three Months Ended Nine Months Ended
October October October October
1, 3, 1, 3,
2004 2003 2004 2003
--------- --------- --------- --------
Reconciliation of Income from continuing operations to EBITDA from
continuing operations:
Income from continuing
operations $1,834 $213 $4,521 $517
Provision for income taxes 33 30 144 120
Minority interest in earnings
of partnership 0 768 0 2,012
Interest expense and
amortization of deferred
financing fees 17,090 17,411 51,225 52,617
Interest income (171) (143) (448) (477)
Other income (193) 0 (193) (175)
Depreciation and amortization 13,402 12,658 37,094 37,407
Extinguishment of debt costs 0 318 0 318
--------- --------- --------- --------
EBITDA from continuing
operations (a) (b) $31,995 $31,255 $92,343 $92,339
========= ========= ========= ========
EBITDA Margin (% of Total
Revenue) 29.0% 29.0% 27.5% 28.5%
(a) EBITDA from continuing operations is defined as income from
continuing operations before interest income and expense, income
tax expense, depreciation and amortization, minority interest,
extinguishment of debt costs and other income. Management
considers EBITDA to be one measure of operating performance for
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.
(b) EBITDA from continuing operations for the 2004 nine months
includes an Asset Impairment charge of $3.2 million.
Three Months Ended Nine Months Ended
October October October October
1, 3, 1, 3,
2004 2003 2004 2003
--------- --------- --------- --------
Total Owned Hotels:
Occupancy from continuing
operations 68.1% 67.7% 66.9% 65.6%
Average Room Rate from
continuing operations $102.49 $99.88 $102.27 $100.54
RevPAR (Room Revenue per
available room) from
continuing operations $69.84 $67.62 $68.40 $65.91
Oct. 1, Jan. 2, Jan. 3,
2004 2004 2003
--------- --------- ---------
Selected Balance Sheet Data
-------------------------------
Current Assets $92,927 $54,022 $52,020
Total Assets $830,790 $822,183 $859,972
Current Liabilities Excluding
Debt $62,341 $41,043 $40,789
Current Portion of Long-Term
Debt $8,412 $7,423 $13,683
Total Long-Term Debt Including
Current Portion $767,148 $781,072 $806,342
Total Cash and Equivalents,
Restricted Cash and
Marketable Securities $101,546 $61,222 $50,368
Net Debt (Total Long-Term Debt
less Total Cash and
Equivalents, Restricted Cash
and Marketable Securities) $665,602 $719,850 $755,974
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