John Q. Hammons Hotels, Inc. Reports 2004 Year-End Financial Results
SPRINGFIELD, Mo. | John Q. Hammons Hotels, Inc. (AMEX:JQH - News) today reported results for the fourth quarter and year end 2004. Total revenues from continuing operations for the twelve months ended December 31, 2004 were $430.8 million, an increase of 4.2% compared to the twelve months ended January 2, 2004. We produced EBITDA from continuing operations for 2004 of $119.7 million, up 12.7% compared to $106.2 million in 2003.
SPRINGFIELD, Mo. | John Q. Hammons Hotels, Inc. (AMEX:JQH - News) today reported results for the fourth quarter and year end 2004.
Year-End Results
Total revenues from continuing operations for the twelve months ended December 31, 2004 were $430.8 million, an increase of 4.2% compared to the twelve months ended January 2, 2004. We produced EBITDA from continuing operations for 2004 of $119.7 million, up 12.7% compared to $106.2 million in 2003. 2003 included an asset impairment charge, discussed below, which had a negative effect on EBITDA from continuing operations of $9.7 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 loss per share for the twelve months ended December 31, 2004 was $0.12, compared to basic and diluted loss per share of $1.39 for the twelve months ended January 2, 2004. Discontinued operations relating to the sale of the Holiday Inn Bakersfield, California, Holiday Inn Denver Northglenn, Colorado and Holiday Inn Bay Bridge, Emeryville, California had a negative effect on basic and diluted loss per share of $1.00, for 2004, compared to $0.20 in 2003.
Net loss for 2004 was $0.6 million, compared to $7.1 million for 2003. Income from continuing operations for 2004 was $4.5 million, up $10.5 million, compared to a loss in 2003. The 2003 results from continuing operations included two items, which, after giving effect to minority interest, had an unfavorable net impact of approximately $5.4 million on the Company's income from continuing operations. One of the items was the recognition of a $2.3 million asset impairment, net of minority interest, due to the decline of the property's fair value. The other item includes $3.1 million for the limited partners' losses we must absorb, due to the inability of the limited partners' net contribution to fall below zero. 2004 includes $3.6 million for the recapture of the limited partners' losses we absorbed in previous quarters before the impact of discontinued operations. An additional $4.2 million must be recaptured before the limited partners can be allocated future earnings.
Revenue Per Available Room (RevPAR) from continuing operations was $67.51 for 2004, up 4.0% from the prior year's level of $64.92. Occupancy from continuing operations for 2004 was 65.7%, up slightly from prior year, while our Average Daily Rate (ADR) from continuing operations was up 2.2% to $102.80.
The following represents a reconciliation of the income from continuing operations, as reported, to income from continuing operations, as adjusted (in thousands):
Three Months Ended Twelve Months Ended
December January December January
31, 2004 2, 2004 31, 2004 2, 2004
----------- -------- ----------- --------
Income (loss) from continuing
operations, as reported ($3,606) ($6,711) $4,505 ($6,034)
Additions (subtractions):
Asset impairment, net $7,366
of expected minority
interest -- 2,334 2,334
Reallocation of minority
interest earnings 2,711 3,059 (3,552) 3,059
----------- -------- ----------- --------
Sub total 2,711 5,393 (3,552) 5,393
----------- -------- ----------- --------
Income (loss) from continuing
operations, as adjusted ($895) ($1,318) $953 ($641)
=========== ======== =========== ========
Fourth Quarter Results
Total revenues from continuing operations for the three months ended December 31, 2004 were $104.7 million, an increase of 5.5% compared to the three months ended January 2, 2004. We produced EBITDA from continuing operations for the 2004 quarter of $25.9 million, up 68.1% compared to $15.4 million in the 2003 quarter. EBITDA from continuing operations for the 2003 quarter includes $9.7 million related to asset impairment. (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 loss per share for the three months ended December 31, 2004 was $0.77, compared to basic and diluted loss per share of $1.47 for the three months ended January 2, 2004. Discontinued operations relating to the sale of the Holiday Inn Bakersfield, California, Holiday Inn Denver Northglenn, Colorado and Holiday Inn Bay Bridge, Emeryville, California had a negative effect on basic and diluted loss per share of $0.08 for the 2004 quarter, compared to $0.16 in the 2003 quarter.
Net loss for the 2004 fourth quarter was $4.0 million, compared to $7.5 million for the 2003 quarter. Loss from continuing operations for the 2004 quarter was $3.6 million, compared to $6.7 million in the 2003 quarter. The 2004 quarter's income from continuing operations was negatively impacted by $2.7 million of the limited partners' losses we absorbed, due to the inability of the limited partners' net contribution to fall below zero. The 2003 quarter was negatively impacted by $5.4 million, for the same reason mentioned above.
Revenue Per Available Room (RevPAR) from continuing operations was $61.88 for the 2004 quarter, up 5.4% from the prior year's level of $58.72. Occupancy from continuing operations for the 2004 quarter was 60.3%, up slightly from prior year, while our Average Daily Rate (ADR) from continuing operations was up 3.9% to $102.67.
Financing and Investing Activities
Since the beginning of 2004, we have reduced total debt by over $15.9 million, including scheduled principal amortization. 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.
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, Missouri; Frisco, Texas; Albuquerque, New Mexico; and Hampton, Virginia. Mr. Hammons opened properties in Junction City, Kansas in September and in North Charleston, South Carolina in October.
- 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted, except share data)
Three Months Ended Twelve Months Ended
REVENUES: Dec. 31, Jan. 2, Dec. 31, Jan. 2,
2004 2004 2004 2004
---------- ---------- ---------- ----------
Rooms
Food and beverage $61,128 $58,019 $266,800 $256,564
Meeting room rental,
related party management
fee and other 30,800 29,275 112,389 108,315
Total revenues 12,773 11,913 51,591 48,596
---------- ---------- ---------- ----------
104,701 99,207 430,780 413,475
OPERATING EXPENSES:
Direct operating costs
and expenses:
Rooms 15,818 15,954 66,712 64,096
Food and beverage 21,827 21,779 84,178 82,524
Other 455 599 2,145 2,584
General, administrative,
sales and management
service expenses 36,132 31,337 139,902 130,980
Repairs and maintenance 4,582 4,440 18,193 17,430
Asset impairment -- 9,700 -- 9,700
Depreciation and
amortization 13,277 13,351 49,519 49,783
---------- ---------- ---------- ----------
Total operating expenses 92,091 97,160 360,649 357,097
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 12,610 2,047 70,131 56,378
OTHER (INCOME) EXPENSE:
Other income -- -- (193) (175)
Interest income (341) (124) (788) (546)
Interest expense and
amortization of deferred
financing fees 16,380 16,770 66,286 68,068
Extinguishment of debt
costs 144 456 144 774
---------- ---------- ---------- ----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE
MINORITY INTEREST AND
PROVISION FOR
INCOME TAXES (3,573) (15,055) 4,682 (11,743)
Minority interest in
losses of partnership -- 8,374 -- 5,859
---------- ---------- ---------- ----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE PROVISION FOR
INCOME TAXES (3,573) (6,681) 4,682 (5,884)
Provision for income
taxes (33) (30) (177) (150)
---------- ---------- ---------- ----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (3,606) (6,711) 4,505 (6,034)
Discontinued operations (429) (799) (5,150) (1,027)
---------- ---------- ---------- ----------
NET LOSS ALLOCABLE TO THE
COMPANY $(4,035) $(7,510) $(645) $(7,061)
========== ========== ========== ==========
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE:
Income from continuing
operations $(0.69) $(1.32) $0.87 $(1.18)
Discontinued operations (0.08) (0.16) (1.00) (0.20)
---------- ---------- ---------- ----------
Net loss allocable to
the Company $(0.77) $(1.47) $(0.12) $(1.39)
========== ========== ========== ==========
BASIC AND DILUTED WEIGHTED
AVERAGE SHARES
OUTSTANDING 5,245,334 5,102,979 5,173,705 5,092,829
========== ========== ========== ==========
JOHN Q. HAMMONS HOTELS, INC.
AND COMPANIES
(Amounts in thousands except earnings per share and operating data)
Three Months Ended Twelve Months Ended
Dec. 31, Jan. 2, Dec. 31, Jan. 2,
2004 2004 2004 2004
---------- -------- --------- ---------
Reconciliation of Income (loss)
from continuing operations to
EBITDA from continuing
operations:
Income (loss) from continuing
operations ($3,606) ($6,711) $4,505 ($6,034)
Provision for income taxes 33 30 177 150
Minority interest in loss of
partnership 0 (8,374) 0 (5,859)
Interest income (341) (124) (788) (546)
Interest expense and
amortization of deferred
financing fees 16,380 16,770 66,286 68,068
Other income 0 0 (193) (175)
Depreciation and amortization 13,277 13,351 49,519 49,783
Extinguishment of debt costs 144 456 144 774
---------- -------- --------- ---------
EBITDA from continuing
operations (a) (b) $25,887 $15,398 $119,650 $106,161
========== ======== ========= =========
EBITDA Margin (% of Total
Revenue) 24.7% 15.5% 27.8% 25.7%
(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 2003 three and twelve
months include an Asset Impairment charge of $9.7 million.
Three Months Ended Twelve Months Ended
Dec. 31, Jan. 2, Dec. 31, Jan. 2,
2004 2004 2004 2004
---------- --------- ---------- --------
Total Owned Hotels:
Occupancy from continuing
operations 60.3% 59.4% 65.7% 64.6%
Average Room Rate from
continuing operations $102.67 $98.82 $102.80 $100.55
RevPAR (Room Revenue per
available room) from
continuing operations $61.88 $58.72 $67.51 $64.92
Dec. 31, Jan. 2, Jan. 3,
2004 2004 2003
---------- --------- ----------
Selected Balance Sheet Data
------------------------------
Current Assets $81,923 $54,022 $52,020
Total Assets $816,499 $822,183 $859,972
Current Liabilities Excluding
Debt $48,836 $41,043 $40,789
Current Portion of Long-Term
Debt $8,378 $7,423 $13,683
Total Long-Term Debt Including
Current Portion $765,204 $781,072 $806,342
Total Cash and Equivalents,
Restricted Cash and
Marketable Securities $93,958 $61,222 $50,368
Net Debt (Total Long-Term Debt
less Total Cash and
Equivalents, Restricted Cash
and Marketable Securities) $671,246 $719,850 $755,974