Second Quarter Results

Basic and diluted earnings per share before extraordinary item for the three months ended June 28, 2002 were $0.12, compared to basic earnings per share of $0.13 and diluted earnings per share of $0.12 for the second quarter of 2001.  The extraordinary item in the second quarter of 2002 was related to the refinancing of a significant portion of our mortgage debt and greatly contributed to the basic and diluted loss per share of $0.20 for the second quarter.   

Total revenues for the 2002 second quarter were $115.2 million, a decrease of $1.8 million, or 1.5% compared to the 2001 second quarter. Although the lingering economic slowdown adversely affected our performance, we continue to surpass the industry�s Revenue Per Available Room (RevPAR) performance.  For example, our RevPAR was $67.58 for the 2002 second quarter, down 0.9% from $68.22 in the 2001 second quarter, compared to an industry decrease of 4.8%.  In addition, it should be noted that in July 2002, we completed the conversion of two properties from the Radisson brand to the Marriott brand.  The Company�s RevPAR for the quarter would have exceeded prior year by 2.1% after excluding these properties� results during their renovation periods.   

Total earnings before interest expense, taxes, depreciation, and amortization (EBITDA) were $34.0 million for the 2002 second quarter, down 1.7% compared to the 2001 EBITDA of $34.6 million.  EBITDA as a percentage of total revenue was virtually equal to prior year, reflecting continued cost control measures implemented as business volume decreased.  

Year-to-Date Results

Basic and diluted earnings per share before extraordinary item for the six months ended June 28, 2002 were $0.17, compared to basic earnings per share of $0.18 and diluted earnings per share of $0.17 for the first half of 2001.  After giving effect to the extraordinary item (early retirement of debt), basic and diluted loss per share for the first half of 2002 was $0.15.

Total revenues for the 2002 first half were $222.6 million, a decrease of $9.7 million, or 4.2% compared to the same period in 2001. Revenue Per Available Room (RevPAR) was $64.72 for the 2002 first half, down 3.6% from $67.15 in the 2001 first half. These results are more than 29% higher than the hotel industry and 5% higher than the RevPAR in the upscale hotel sector.

Total earnings before interest expense, taxes, depreciation, and amortization (EBITDA) were $65.1 million for the 2002 first half, down 3.7% compared to the 2001 EBITDA of $67.6 million.  EBITDA as a percentage of total revenue was up slightly compared to prior year, once again reflecting cost control measures implemented as business volume decreased.  

Bond Refinancing

On April 22, we announced a cash tender offer to permit a proposed refinancing of the two outstanding First Mortgage Notes, due in 2004 and 2005.  After the successful tender offer, we concluded the process by refinancing our $300m 8 7/8% First Mortgage Notes due 2004, our $90m  9 3/4% First Mortgage Notes due in 2005 and five construction loans.  The new issuance was comprised of $510 million of First Mortgage Notes at 8 7/8% due in 2012.  The refinancing established a debt maturity schedule which we believe will prove favorable for the Company into the future.  The existing current portion of long-term debt ($8.3 million) is attributable only to principal amortization on various mortgages.  The next maturities of $29 million occur in the fourth quarter of 2003.  

Chairman Comments

�Our refinancing extends looming maturities and provides flexibility for future debt reduction.  With this transaction now complete and industry stability slowly returning, we are in a great position to accelerate our cash production.  We closed the refinancing at an ideal time, capitalizing on the market�s receptiveness to our high quality hotel assets in strategic locations,� stated Mr. John Q. Hammons, chairman and chief executive officer.

Product Improvements

In accordance with our previously stated plans, we are selectively converting the brands of some of our hotels to franchises considered more upscale, in order to take advantage of market opportunities.  In April 2002, we completed the planned conversion of our Bowling Green University Plaza from an independent hotel to a Holiday Inn.  In addition, the conversions of our Houston and Coral Springs properties from the Radisson brand to the Marriott brand were completed in early July.

Operations Outlook

During the first half of 2002, we continued to see softness in business transient demand in most of our markets compared to the same periods in 2001.  Regardless of this weakness, efforts are still being made to improve EBITDA margins, as shown in our results over the last nine months.  We believe the concentration of these efforts will continue to prove beneficial to operations, particularly when RevPAR gains occur.  As previously stated, we believe that our RevPAR will continue to trend upward as the economy recovers. July RevPAR in 2002 was up 1.0% compared to July 2001, while EBITDA from hotel operations increased 1.2% over the same period.  We expect third quarter revenues to be 1-2% above 2001 third quarter, and forecast EBITDA to be approximately 2-4% above 2001 for the same period.  We should continue to generate cash and will focus on operational efficiencies.  

Although we are not developing new hotels, Mr. Hammons is personally developing two projects that will open in 2003 and 2004.  Mr. Hammons is developing a Renaissance Hotel in Tulsa, Oklahoma, and an Embassy Suites in Bentonville, Arkansas.  The Company will manage these two properties personally developed by Mr. Hammons.  
 
 
 

Certain statements in this press release contain �forward-looking statements� within the meaning of Section 21E of the Securities Exchange Act of 1934, regarding, among other things, our business strategy, prospects and financial position.