10-K 1 d10k.txt FORM 10-K 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 December 28, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to __________________ 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 Identification No.) organization) 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 ------------------- ----------------------------------------- Class A Common Stock American Stock Exchange $.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. __ The aggregate market value of the 3,362,865 shares of Class A Common Stock held by non-affiliates of the Registrant was approximately $19,840,904 based on the $5.90 closing price on the American Stock Exchange for such stock on March 1, 2002. Number of shares of the Registrant's Class A Common Stock outstanding as of March 1, 2002: 4,782,179. Documents Incorporated by Reference Portions of the annual report to shareholders for the year ended December 28, 2001 are incorporated by reference into Part II. Portions of the proxy statement for the annual shareholders meeting to be held on May 1, 2002 are incorporated by reference into Part III. PART I Item 1. Business. As used herein, the term "Company" means (i) John Q. Hammons Hotels, Inc., a Delaware corporation, (ii) Hammons, Inc., a Missouri corporation, as predecessor general partner, (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. As used herein, the term "Partnership" means 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. Unless otherwise stated, references to the Company's business and properties refer to the business and properties of the Partnership. Overview The Company is a leading independent owner, manager and developer of affordable upscale hotels in capital city, secondary and airport markets. The Company owns 47 hotels located in 20 states, containing 11,633 guest rooms or suites (the "Owned Hotels"). The Company also manages nine additional hotels located in five states, containing 2,078 guest rooms (the "Managed Hotels"). The Company's Owned Hotels and Managed Hotels (together, the "JQH Hotels") operate primarily under the Holiday Inn and Embassy Suites trade names. Most of the Company's hotels are near a state capitol, university, airport or corporate headquarters, plant or other major facility and generally serve markets with populations of up to 300,000 people (or larger populations in the case of airport markets and many of the markets in which the Company has developed new hotels over the past several years). The JQH Hotels are designed to appeal to a broad range of hotel customers, including frequent business travelers, groups and conventions, as well as leisure travelers. Each of the JQH Hotels is individually designed by the Company, and most contain an impressive multi-storied atrium, with water features and lush plantings, expansive meeting space, large guest rooms or suites and comfortable lounge areas. The Company believes that these design features enhance guest comfort and safety and increase the value perceived by the guest. The JQH Hotels' meeting facilities can be readily adapted to accommodate both larger and smaller meetings, conventions and trade shows. The 17 Holiday Inn JQH Hotels are affordably priced hotels designed to attract the business and leisure traveler desiring quality accommodations, including meeting facilities, in-house restaurants, cocktail lounges and room service. The 17 Embassy Suites JQH Hotels are all-suite hotels which appeal to the traveler needing or desiring greater space and specialized services. The JQH Hotels also include five non-franchise hotels, three Radissons, two Hampton Inn & Suites, two Marriotts, two Homewood Suites, one Crowne Plaza, one Sheraton, four Renaissance Hotels, one Marriott Courtyard and one Marriott Residence Inn. Four of the non-franchise hotels have the word "Plaza" in their names and the other non-franchise hotel is a resort hotel. The Company determines which brand of hotel to develop depending upon the demographics of the market to be served. Management of the JQH Hotels is coordinated from the Company's headquarters in Springfield, Missouri, by its senior management team. Six regional vice presidents and one district director are responsible for supervising a group of hotel 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, significant cost savings are realized due to economies of scale. The Company conducts all of its business operations through the Partnership and its subsidiaries. Mr. Hammons beneficially owns all 294,100 shares of Class B Common Stock of the Company, representing 75.5% of the combined voting power of both classes of the Company's Common Stock. The Company is the sole general partner of the Partnership through its ownership of all 5,076,279 general partner units (the "GP Units"), representing 24.04% of the total equity in the Partnership. Mr. Hammons beneficially owns all 16,043,900 limited partnership units of the Partnership (the "LP Units"), representing 75.96% of the total equity in the Partnership. The Class A Common Stock of the Company represents approximately 23% of the total equity of the Partnership, and the Class B Common Stock and LP Units beneficially owned by Mr. Hammons represent 2 approximately 77% of the total equity in the Partnership. Mr. Hammons is also the beneficial owner of 269,100 shares of Class A Common Stock. The Company's executive offices are located at 300 John Q. Hammons Parkway, Suite 900, Springfield, Missouri 65806 and its telephone number is (417) 864-4300. The Company is a Delaware corporation that was formed on September 29, 1994. Development The Company's past development activity restricts its ability to grow per share income in the short term. Fixed charges for new hotels (such as depreciation and amortization expense and interest expense) exceed new hotel operating cash flow in the first one to three years of operations. As new hotels mature, the Company expects, based on past experience, that the operating expenses for these hotels will decrease as a percentage of revenues, although there can be no assurance that this will continue to occur. The Company announced on September 11, 1998, that it was ceasing new development activity, except for the hotels then under construction, and currently has no hotels under construction. During 2000, the Company's Board of Directors authorized the Company to enter into a five-year management contract with Mr. Hammons whereby the Company would pay a maximum of 1 1/2% of the total development costs of Mr. Hammons' personally developed hotels for the opportunity to manage the hotels upon opening and the right to purchase the hotels in the event they are offered for sale. As part of the management contract, the Company paid approximately $1,455,000 to Mr. Hammons in fiscal 2000 and approximately $487,000 in fiscal 2001. Amortization of these costs will commence upon the opening of the respective hotels. Operations Management of the JQH Hotels network is coordinated by the Company's senior management team at the Company's headquarters in Springfield, Missouri. The management team is responsible for managing the day-to-day financial needs of the Company, including the Company's internal accounting audits. The Company's management team administers insurance plans and business contract review, oversees the financial budgeting and forecasting for the JQH Hotels, analyzes the financial feasibility of new hotel developments, and identifies new systems and procedures to employ within the JQH Hotels to improve efficiency and profitability. The management team also coordinates each JQH Hotel's sales force, designing sales training programs, tracking future business under contract, and identifying, employing and monitoring marketing programs aimed at specific target markets. The management team is indirectly 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 JQH Hotel's daily occupancy, average room rate, rooms revenues and food and beverage revenues. By having the latest information available at all times, management is 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 JQH Hotel. Creating operating, cost and guest service efficiencies in each hotel is a top priority to the Company. With a total of 56 hotels under management, the Company is able to realize significant cost savings due to economies of scale. By leveraging the total hotels/rooms under its management, the Company is able to secure volume pricing from its vendors that is not available to smaller hotel companies. The Company employs a systems trainer who is 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 JQH Hotel to verify that the Company's high level of operating standards are being met. The Company's franchisors maintain rigorous inspection programs in which chain representatives visit their respective JQH 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. 3 Sales and Marketing The Company's marketing strategy is to market the JQH Hotels both through national marketing programs and local sales managers and a director of sales at each of the JQH Hotels. While the Company makes periodic modifications to the concept in order to address differences and maintain a sales organization structure based on market needs and local preferences, it generally utilizes the same major campaign concept throughout the country. The concepts are developed at its management headquarters while the modifications are implemented by the JQH Hotels' regional vice presidents, district director 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 responsible for developing and implementing marketing programs targeted at specific customer segments within each market. The Company requires that each of its sales managers complete an extensive sales training program. The Company's 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. The Company believes that business travelers are attracted to the JQH Hotels because of their convenient locations in state capitals, their proximity to airports or corporate headquarters, plants, convention centers or other major facilities, the availability of ample meeting space and the high level of service relative to other hotel operators serving the same markets. The Company's sales force markets to organizations which consistently produce a high volume of room nights and which have a significant number of individuals traveling in the Company's operating regions. The Company also targets groups and conventions attracted by a JQH Hotel's proximity to convention or trade centers (often adjacent). JQH Hotels' group meetings logistics include flexible space readily adaptable to groups of varying size, high-tech audio-visual equipment and on-site catering facilities. The Company believes that suburban convention centers attract more convention sponsors due to lower prices than larger, more cosmopolitan cities. In addition to the business market, the Company's 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 the Company's atrium hotels appealing. The Company advertises primarily through direct mail, magazine publications, directories, and newspaper advertisements, all of which focus on value delivered to and perceived by the guest. The Company has 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.). The Company's marketing efforts focus primarily on business travelers who account for approximately 50% of the rooms rented in the JQH Hotels. The Company's franchise hotels utilize the centralized reservation systems of its franchisors, which the Company believes are among the more advanced reservation systems in the hotel industry. The franchisors' reservation systems receive reservation requests entered (i) on terminals located at all of their respective franchises, (ii) at reservation centers utilizing 1-800 phone access and (iii) 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. The Company believes that these systems are effective in directing customers to the Company's franchise hotels. Franchise Agreements The Company enters into non-exclusive franchise licensing agreements (the "Franchise Agreements") with franchisors which it believes are the most successful brands in the hotel industry. The term of the individual Franchise Agreement for a hotel typically is 20 years. The Franchise Agreements allow the Company 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 the Franchise Agreements allows the Company the flexibility to continue to develop properties with the brands that have shown success in the past and to operate hotels in conjunction with other brand names. While the Company currently has a good relationship with its franchisors, there can be no assurance that a desirable replacement would be available if any of the Franchise Agreements were to be terminated. 4 Holiday Inn. The Franchise Agreement grants to the Company a nonassignable, non-exclusive license to use the 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. Monthly fees paid by the Company are based on a percentage of gross revenues attributable to room rentals, plus marketing and reservation contributions which are also a percentage of gross revenues. The term of the Franchise Agreement is 20 years with a renewal option in the 15th year. Embassy Suites. The Franchise Agreement grants to the Company a nonassignable, non-exclusive license to use the Embassy Suites' service mark and computerized reservation network. The franchisor maintains the exclusive right to improve and change the reservation system for the purpose of making it more efficient, economical and competitive. Monthly fees paid by the Company are 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 term of the Franchise Agreement is 20 years with a renewal option in the 18th year. Other Franchisors. The franchise agreements with other franchisors not listed above are similar in that they are nonassignable, non-exclusive licenses to use the franchisor's service mark and computerized reservation network. Payments and terms of agreement vary based on specific negotiations with the franchisor. Competition Each of the JQH Hotels competes in its market area with numerous full service lodging brands, especially in the upscale market, and with numerous other hotels, motels 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 JQH Hotels in their respective markets. There is, however, no single competitor or group of competitors of the JQH Hotels that is consistently located nearby and competing with most of the JQH 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 General. 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. In addition, various federal and state regulations mandate certain disclosures and practices with respect to the sales of license agreements and the licensor/licensee relationship. The Company believes that each of the JQH Hotels has the necessary permits and approvals to operate its respective businesses. To supplement the Company's self insurance programs, umbrella, property, auto, commercial liability and worker's compensation insurance is provided to the JQH Hotels under blanket policies. Insurance expenses for the JQH Hotels were approximately $7.3 million, $3.6 million and $1.1 million in 2001, 2000 and 1999, respectively. In the three years ended December 31, 1999, the Company experienced favorable trends in insurance expenses, due to lower rates and better claims experiences, and because it was able to engage in favorable buy-outs of several earlier self-insured years. In 2000 and 2001, the Company's insurance expense increased as the result of the now fully-insured nature of most of the Company's insurance programs and the minimal number of policy years remaining that could be bought out. The Company believes that the JQH Hotels are adequately covered by insurance. Americans with Disabilities Act. The JQH Hotels and any newly developed or acquired hotels must comply with Title III of the Americans with Disabilities Act ("ADA") to the extent that such properties are "public accommodations" and /or "commercial facilities" as defined by the ADA. Compliance with the ADA requirements could require removal of structural barriers to handicapped areas in certain public areas of the JQH Hotels where such removal is readily achievable. Noncompliance could result in a judicial order requiring compliance, an imposition of fines or an award of damages to private litigants. The Company has taken into account an estimate of the expense required to make any changes required by the ADA and believes that such expenses will not have a material adverse effect on the Company's financial condition or results of operations. If required changes involve a greater expenditure than the Company currently anticipates, or if the changes must be made on a more accelerated basis than the Company anticipates, the Company could be adversely affected. The Company believes that its competitors face similar costs to comply with the requirements of the ADA. 5 Asbestos Containing Materials. Certain federal, state and local laws, regulations and ordinances govern the removal, encapsulation or disturbance of Asbestos Containing Materials ("ACMs") when ACMs are in poor condition or in the event of building, 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 associated with ACMs. Based on prior environmental assessments, seven of the Owned Hotels contain ACMs and four of the Owned Hotels may contain ACMs, generally in sprayed-on ceiling treatments or in roofing materials. However, no removal of asbestos from the Owned Hotels has been recommended, and the Company has no plans to undertake any such removal, beyond the removal that has already occurred. The Company believes that the presence of ACMs in the Owned Hotels will not have a material adverse effect on the Company, but there can be no assurance that this will be the case. Environmental Regulations. The JQH 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. The Company does not believe that it is subject to any material environmental liability. 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 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 28, 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. Employees The Company employs approximately 7,000 full time employees, approximately 300 of whom are members of labor unions. The Company believes that labor relations with employees are good. Management The following is a biographical summary of the experience of the executive officers and other key officers of the Company. John Q. Hammons is the Chairman, Chief Executive Officer, a Director and founder of the Company. Mr. Hammons has been actively engaged in the development, management and acquisition of hotel properties since 1959. From 1959 through 1969, Mr. Hammons and a business partner developed 34 Holiday Inn franchises, 23 of which were sold in 1969 to Holiday Inns, Inc. Since 1969, Mr. Hammons has developed 88 hotels on a nationwide basis, primarily under the Holiday Inn and Embassy Suites trade names. Lou Weckstein is President of the Company. Prior to joining the Company in September 2001, Mr. Weckstein served for ten years as Senior Vice President, Hotel Operations, for Windsor Capital Group, a Los Angeles-based hotel management and development company. Prior to Windsor Capital Group, Mr. Weckstein served eight years as Vice President of Operations for Embassy Suites, Inc. Over his career, Mr. Weckstein spent numerous years as Vice President-Operations for Ramada Inns, Inc. and Vice President-Operations for Sheraton Inns, Inc. He began his career in the hospitality industry as a hotel manager in Cleveland, Ohio. 6 Paul E. Muellner is Chief Financial Officer of the Company. Prior to joining the Company in June of 1998, Mr. Muellner was Vice President of Finance for Carnival Hotels. He also served as Operations Controller at Omni Hotels as well as positions with Red Lion Inns and Marriott Corporation. Debra M. Shantz is General Counsel of the Company. She joined the Company in May 1995. Prior thereto, Ms. Shantz was a partner of Farrington & Curtis, P.C. (now Husch & Eppenberger, LLC), a law firm which serves as Mr. Hammons' primary outside counsel, where she practiced primarily in the area of real estate law. Ms. Shantz had been with that firm since 1988. Pat A. Shivers is Senior Vice President and Corporate Controller of the Company. He has been active in Mr. Hammons' hotel operations since 1985. Prior thereto, he had served as Vice President of Product Management in Winegardner & Hammons, Inc., a hotel management company. Steven E. Minton is Senior Vice President, Architecture, of the Company. He has been active in Mr. Hammons' hotel operations since 1985. Prior to that time, Mr. Minton was a project manager with the firm of Pellham and Phillips working on various John Q. Hammons projects. Jacqueline A. Dowdy has been the Secretary and a director of the Company since 1989. She has been active in Mr. Hammons' hotel operations since 1981. She is an officer of several affiliates of the Company. L. Scott Tarwater is Vice President, Sales and Marketing, of the Company. He joined the Company in September 2000 from Windsor Capital Group, in Los Angeles, California, where he served as Senior Vice President, Sales and Marketing, for ten years. Prior to that time, Mr. Tarwater served as Senior Director, Sales and Marketing, for Embassy Suites, Inc., Irving, Texas. John D. Fulton is Vice President, Interior Design, of the Company. He joined the Company in 1989 from Integra/Brock Hotel Corporation, Dallas, Texas, where he had been Director of Design and Purchasing for ten years. Kent S. Foster is Vice President, Human Resources, of the Company. He joined the Company in 1999 from Dayco Products, Inc. in Michigan where he served as Director and Manager, Human Resources. Prior thereto, Mr. Foster served as Assistant Vice President and Director, Human Resources, for Great Southern Savings & Loan Association, Springfield, Missouri. William T. George, Jr., is Vice President, Capital Planning and Asset Management, of the Company. He joined the Company in 1994 from Promus Hotel Corporation, where he had been Director of Capital Refurbishment. Forward-Looking Statements In addition to historical information, this document contains 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. Item 2. Properties. The Company leases its headquarters in Springfield, Missouri, from a Missouri company of which Mr. Hammons is a 50% owner. In 2001, the Company made aggregate annual lease payments of approximately $247,000 to such Missouri company. The Company leases from John Q. Hammons the real estate on which three 7 of the Company's hotels are located. These leases are more fully described in Item 13 "Certain Relationships and Related Transactions." The Company owns the land on which 35 of the Owned Hotels are located, while nine of the Owned Hotels are subject to long-term ground leases. Description of Hotels - General The JQH Hotels are located in 22 states and contain a total of 13,711 rooms. The JQH Hotels operate primarily under the Holiday Inn and Embassy Suites trade names. Most of the JQH 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. Each of the JQH Hotels is individually designed by the Company. Many of the JQH Hotels contain an impressive multi-storied atrium, large indoor water features, lush plantings, expansive meeting space, large guest rooms or suites and comfortable lounge areas. In addition to the visual appeal, the Company believes that an atrium design in which each of the hotel's room doors face into the atrium, combined with glass elevators, achieves a greater level of security for all guests. The Company believes this safety factor is particularly relevant to women, who represent a growing portion of its business clientele. The JQH Hotels also appeal to fitness conscious guests as all of the JQH Hotels have at least one swimming pool and most have exercise facilities. The Company believes that the presence of adjacent convention centers provides incremental revenues for its 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 these JQH Hotels has a restaurant/catering service on its premises which provides an essential amenity to the convention trade. The Company chooses not to lease out the restaurant business to third-party caterers or vendors since it considers the restaurant business an important component of securing convention business. All of the restaurants in the JQH Hotels are owned and managed by the Company specifically to maintain direct quality control over a vital aspect of the convention and hotel business. The Company also derives significant revenue and operating profit from food and beverage sales due to its ownership and management of all of the restaurants in the JQH Hotels. The Company believes that its food and beverage sales are more profitable than its competitors due to the amount of catering business provided to convention and other meetings at the Owned Hotels. The Company retains responsibility for all aspects of the day-to-day management of each of the JQH 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 owned by the Company. The Company typically refurbishes individual hotels every four to six years, and has spent an average per year of approximately $20.0 million in the last four years on the Owned Hotels. During 2002, the Company expects to spend approximately $23.6 million on refurbishment of the Owned Hotels. Owned Hotels The Owned Hotels consist of 47 hotels, which are located in 20 states and contain a total of 11,633 guest rooms or suites. The following table sets forth certain information concerning location, franchise/name, number of rooms/suites, description and opening date for each Owned Hotel:
Number of ------------ Location Franchise/Name Rooms/Suites Description Opening Date -------- -------------- ------------ ----------- ------------ Montgomery, AL Embassy Suites 237 Atrium; 8/95 Meeting 15,000 sq. ft. (c) Space: Tucson, AZ Holiday Inn 299 Atrium; 11/81 Meeting 14,000 sq. ft. Space: Tucson, AZ Marriott 250 Atrium; 12/96 Meeting 11,500 sq. ft. Space:
8 Little Rock, AR Embassy Suites 251 Atrium; 8/97 Meeting 14,000 sq. ft. Space: Springdale, AR Holiday Inn 206 Atrium; 7/89 Meeting 18,000 sq. ft. Space: Convention 29,280 sq. ft. Center: Springdale, AR Hampton Inn & Suites 102 Meeting 400 sq. ft. 10/95 Space: Bakersfield, CA Holiday Inn Select 259 Meeting 9,735 sq. ft. (c) 6/95 Space: Monterey, CA Embassy Suites 225 Atrium; 11/95 Meeting 13,700 sq. ft. Space: Sacramento, CA Holiday Inn 364 Meeting 9,000 sq. ft. 8/79 Space: San Francisco, CA Holiday Inn 279 Meeting 9,000 sq. ft. 6/72 Space: Denver, CO(a) Holiday Inn 256 Atrium; 10/82 (International Airport) Trade Center: 66,000 sq. ft. (b) Denver, CO Holiday Inn (Northglenn) 236 Meeting 20,000 sq. ft. 12/80 Space: Fort Collins, CO Holiday Inn 259 Atrium; 8/85 Meeting 12,000 sq. ft. Space: Coral Springs, FL Radisson Plaza 224 Atrium; 5,326 sq. ft. 5/99 Convention 12,800 sq. ft. Center: St. Augustine, FL Renaissance 300 Atrium; 5/98 Convention 40,000 sq. ft. Center: Tampa, FL Embassy Suites 247 Atrium; 1/98 Meeting 18,000 sq. ft. Space: Cedar Rapids, IA Collins Plaza 221 Atrium; 9/88 Meeting 11,250 sq. ft. Space: Davenport, IA Radisson 221 Atrium; 10/95 Meeting 7,800 sq. ft. (c) Space: Des Moines, IA Embassy Suites 234 Atrium; 9/90 Meeting 13,000 sq. ft. Space: Des Moines, IA Holiday Inn 288 Atrium; 1/87 Meeting 15,000 sq. ft. Space: Topeka, KS Capitol Plaza 224 Atrium; 8/98 Convention 26,000 sq. ft. Center: Bowling Green, KY University Plaza 218 Atrium; 8/95 Meeting 4,000 sq. ft. (c) Space: Branson, MO Chateau on the Lake 301 Atrium; 5/97 Meeting 40,000 sq. ft. Space: Jefferson City, MO Capitol Plaza 255 Atrium; 9/87 Meeting 14,600 sq. ft. Space: Joplin, MO Holiday Inn 262 Atrium; 6/79 Meeting 8,000 sq. ft. Space: Trade Center: 32,000 sq. ft. (b)
Kansas City, MO(a) Embassy Suites 236 Atrium; 4/89 Meeting 12,000 sq. ft. Space: Kansas City, MO Homewood Suites 117 Extended Stay 5/97 Springfield, MO Holiday Inn 188 Atrium; 9/87 Meeting 3,020 sq. ft. Space: Omaha, NE Embassy Suites 249 Atrium; 1/97 Meeting 13,000 sq. ft. Space: Reno, NV Holiday Inn 283 Meeting 8,700 sq. ft. 2/74 Space: Albuquerque, NM Crowne Plaza 311 Atrium; 12/86 Meeting 12,300 sq. ft. Space: Charlotte, NC Renaissance Suites 275 Atrium; 12/99 Meeting 17,400 sq. ft. Space: Greensboro, NC(a) Embassy Suites 219 Atrium; 1/89 Meeting 10,250 sq. ft. Space: Greensboro, NC(a) Homewood Suites 104 Extended Stay 8/96 Raleigh-Durham, NC Embassy Suites 273 Atrium; 9/97 Meeting 20,000 sq. ft. Space: Oklahoma City, OK Renaissance 311 Atrium; 1/00 Meeting 10,150 sq. ft. (c) Space: Portland, OR(a) Holiday Inn 286 Atrium; 4/79 Trade Center: 37,000 sq. ft. (b) Portland, OR(a) Embassy Suites 251 Atrium; 9/98 Meeting 11,000 sq. ft. Space: Columbia, SC Embassy Suites 214 Atrium; 3/88 Meeting 13,000 sq. ft. Space: Greenville, SC Embassy Suites 268 Atrium; 4/93 Meeting 20,000 sq. ft. Space: North Charleston, SC Embassy Suites 255 Atrium; 2/00 Meeting 3,000 sq. ft. (c) Space: Beaumont, TX Holiday Inn 253 Atrium; 3/84 Meeting 12,000 sq. ft. Space: Dallas/Ft. Worth Airport, Embassy Suites 329 Atrium; 8/99 TX (a) Meeting 18,900 sq. ft. Space: Houston, TX(a) Radisson 288 Atrium; 12/85 Meeting 14,300 sq. ft. Space: Mesquite, TX Hampton Inn Suites 160 Meeting 21,200 sq. ft. 4/99 Space: Convention 35,100 sq. ft (c) Center: Charleston, WV Embassy Suites 253 Atrium; 12/97 Meeting 14,600 sq. ft. Space: Madison, WI Marriott 292 Atrium; 10/85 Meeting 15,000 sq. ft. (b) Space: Convention 50,000 sq. ft. Center:
------------------------ 10 (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 are owned by the Company. (c) Large civic center is located adjacent to hotel. Managed Hotels The Managed Hotels consist of nine hotels, three Holiday Inns, one Sheraton, two Embassy Suites, one Marriott Courtyard, one Marriott Residence Inn and one Renaissance, located in five states (Missouri, Nebraska, South Dakota, Tennessee and Texas), and contain a total of 2,078 guest rooms. Mr. Hammons directly owns eight of these nine hotels. The remaining hotel is owned by an entity controlled by Mr. Hammons in which he has a 50% interest. Jacqueline Dowdy, a director and officer of the Company, and Lonnie A. Funk, a former officer of the Company, each own a 25% interest in this entity. There is a convention and trade center adjacent to four of the Managed Hotels. The Company provides management services to the Managed Hotels within the guidelines contained in annual operating and capital plans submitted to the hotel owner for review and approval during the final 30 days of the preceding year. The Company is responsible for the day-to-day operations of the Managed Hotels. While the Company is responsible for the implementation of major refurbishment and repairs, the actual cost of such refurbishments and repairs is borne by the hotel owner. The Company earns an annual management fee of 3% to 5% of the hotel's gross revenues. Each of the Managed Hotels' management contracts is for an initial term of 20 years, which automatically extends for four periods of five years, unless otherwise canceled. The Company has received an option from Mr. Hammons or entities controlled by him to purchase each of the Managed Hotels. Item 3. Legal Proceedings. The Company is not presently involved in any litigation which if decided adversely to the Company would have a material effect on the Company's financial condition. To the Company's knowledge, there is no litigation threatened other than routine litigation arising in the ordinary course of business 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. The Company's Class A Common Stock (the "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 2001 First Quarter $ 6.00 $ 5.19 Second Quarter $ 6.60 $ 5.30 Third Quarter $ 7.00 $ 4.05 Fourth Quarter $ 5.82 $ 3.65 2000 First Quarter $ 5-1/8 $ 3-9/16 Second Quarter $ 5-1/8 $ 4 Third Quarter $ 7-3/16 $4-15/16 Fourth Quarter $ 6-1/2 $ 5-1/8 11 Based on the number of Annual Reports requested by brokers, the Company estimates that it has approximately 1,500 beneficial owners of its Class A Common Stock. On March 1, 2002, there were approximately 250 holders of record of the Class A Common Stock then outstanding. On March 1, 2002, the last reported sale price of the Class A Common Stock on the AMEX was $5.90. On June 22, 2001, we issued shares of Class A Common Stock to four of our directors, in exchange for their services on and attendance at meetings of an ad hoc committee of the Board of Directors formed to evaluate possible corporate financial opportunities. Messrs. Sullivan and Dempsey each received 1,000 shares, and Messrs. Moore and Lopez-Ona each received 600 shares. The shares were issued in reliance on the private placement exemption from registration under the Securities Act of 1933, provided by Section 4(2) of that Act. Item 6. Selected Financial Data. The information required by this item is hereby incorporated by reference to the material appearing in the 2001 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 2001 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 2001 Annual Report to Shareholders under the caption of "Quantitative and Qualitative Disclosures About Market Risk." 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 2001 Annual Report to Shareholders. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The information required by this item with respect to directors 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 1, 2002 (the "Proxy Statement") under the caption "Election of Directors." Information required by this item with respect to executive officers is provided in Item 1 of this report. See "Management." The information included in the Proxy Statement under the caption "16(a) Beneficial Ownership Reports" 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 caption "Executive Compensation." 12 Item 12. Security Ownership of Certain Beneficial Owners and Management. The 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 "Certain Transactions" and "Compensation Committee Interlocks and Insider Participation." PART IV Item 14. Exhibits, Financial Schedules, and Reports on Form 8-K. 14(a)(1) Financial Statements Report of Independent Public Accountants Consolidated Balance Sheets at Fiscal 2001 and 2000 Year-Ends Consolidated Statements of Operations for the 2001, 2000 and 1999 Fiscal Years Ended Consolidated Statements of Changes In Minority Interest and Stockholders Equity for 2001, 2000 and 1999 Fiscal Years Ended Consolidated Statements of Cash Flows for 2001, 2000 and 1999 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. 14(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. 14(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. Set forth below is a list of management contracts and compensatory plans and arrangements required to be filed as exhibits by Item 14(c). 10.5 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 October 31, 2000 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 13 10.18 1994 Employee Stock Option Plan 10.19 1999 Non-Employee Director Stock and Stock Option Plan 14(b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 28, 2001. 14(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. 14(d) Financial Statements None. 14 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 27th day of March, 2002. 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 March 27, 2002.
Signatures Title ---------- ----- /s/ John Q. Hammons Founder, Chairman and CEO of John Q. Hammons Hotels, Inc. ----------------------- John Q. Hammons (Principal Executive Officer) /s/ Paul E. Muellner Chief Financial Officer of John Q. Hammons Hotels, Inc. ----------------------- Paul E. Muellner (Principal Financial and Accounting Officer) /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
15 EXHIBIT INDEX No. Title --- ----- (a)3.1 Restated Certificate of Incorporation of the Company (a)3.2 Bylaws of the Company, as amended (a)3.3 Second Amended and Restated Agreement of Limited Partnership of the Partnership (a)3.4 Certificate of Limited Partnership of the Partnership, filed with the Secretary of State of the State of Delaware (a)3.5 Agreement of Limited Partnership of John Q. Hammons Hotels Two, L.P. (a)3.6 Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of the Partnership (b)3.7 Amendment No. 2 to Second Amended and Restated Agreement of Limited Partnership of the Partnership (a)10.1 1994 Note Indenture (b)10.2 1995 Note Indenture (a)10.3 Holiday Inn License Agreement (a)10.4 Embassy Suites License Agreement (a)10.5 Form of Option Purchase Agreement (a)10.6 Collective Bargaining Agreement between East Bay Hospitality Industry Association, Inc. and Service Employee's International Union 10.6a 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 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 October 31, 2000. (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 10.7c Letter Agreement between John Q. Hammons and William A. Mead dated as of January 27, 2000 (a)10.8 Letter Agreement re: Hotel Financial Services for Certain Hotels Owned and Operated by John Q. Hammons or JQH Controlled Companies (c)10.9a John Q. Hammons Building Lease Agreement - 9th Floor (6000 sq. ft.) 10.9a.1 Lease Renewal for John Q. Hammons Building Lease Agreement - 9th Floor (6000 sq. ft.) effective January 1, 2002 (c)10.9b John Q. Hammons Building Lease Agreement - 7th Floor (2775 sq. ft.) 10.9b.1 Lease Renewal for John Q. Hammons Building Lease Agreement - 7th Floor (2775 sq. ft.) effective January 1, 2002 (c)10.9c John Q. Hammons Building Lease Agreement - 7th Floor (2116 sq. ft.) 10.9c.1 Lease Renewal for John Q. Hammons Building Lease Agreement - 7th Floor (2116 sq. ft.) effective January 1, 2002 (c)10.9d John Q. Hammons Building Lease Agreement - 8th Floor (6000 sq. ft.) 10.9d.1 Lease Renewal for John Q. Hammons Building Lease Agreement - 8th Floor (6000 sq. ft.) effective January 1, 2002 (a)10.11 Triple Net Lease (a)10.12 Lease Agreement between John Q. Hammons and John Q. Hammons Hotels, L.P. (c)10.15a Ground lease between John Q. Hammons and John Q. Hammons-Branson, L.P. - (Chateau on the Lake, Branson, Missouri) (c)10.15b Ground lease between John Q. Hammons and John Q. Hammons-Hotels Two, L.P. - (Little Rock, Arkansas) (a)10.17 Operating Agreement of Rivercenter Plaza Development Co., L.C., an Iowa limited liability company (a)10.18 1994 Stock Option Plan 10.19 1999 Non-Employee Director Stock and Stock Option Plan (Incorporated by reference to the same numbered exhibit in the Company's Annual Report on Form 10-K for the Fiscal Year 16 Ended January 1, 1999.) 12.1 Computations of Ratio of Earnings to Fixed Charges of the Company 13.1 2001 Annual Report to Shareholders (a)21.1 Subsidiaries of the Company 23.1 Consent of Arthur Andersen LLP ------------------------ (a) Incorporated by reference to the same numbered exhibit in the Company's Registration Statement on Form S-1, No. 33-84570. (b) Incorporated by reference to the partnership's Registration Statement on Form S-4, No. 33-99614. (c) Incorporated by reference to the same numbered exhibit in the Company's Annual Report on Form 10-K for the Fiscal Year Ended January 3, 1997. 17