Press Release: La Quinta Corporation
August 2, 2002
DALLAS, TX -- La Quinta® Corporation (NYSE: LQI) yesterday announced financial results for the second quarter
ended June 30, 2002. La Quinta held a conference call yesterday to discuss these results and other matters.
"We are pleased to report lodging results in line with our previously- issued guidance," said Francis
W. ("Butch") Cash, President and Chief Executive Officer. "Although due primarily to easing comparisons,
we are also pleased to report we expect to see positive increases in RevPAR and EBITDA for the second half of 2002."
-- Second quarter revenues were $145.6 million, a 16.6% decline
compared to 2001.
-- Second quarter Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) was $56.9 million, a 27.0% decline compared to
2001.
-- Second quarter net income available to common shareholders was
$5.5 million, or $0.04 per share in 2002, versus a net loss of
$17.0 million, or ($0.12) per share, in 2001.
-- Excluding non-recurring items, La Quinta reported a net loss of
$1.2 million, or ($0.01) per share, in the second quarter of 2002
versus net income of $13.9 million, or $0.10 per share, in the
second quarter of 2001. Significant non-recurring items included
gains on sale of assets and other income and expenses.
-- Cash earnings were $33.8 million, or $0.24 per share, in the second
quarter of 2002, versus $49.2 million, or $0.34 per share, in the
second quarter of 2001.
A detailed schedule reconciling earnings available to common shareholders to recurring earnings, cash earnings
and EBITDA is included in the supplemental tables.
Lodging Results
RevPAR for comparable hotels declined 8.5% to $39.38 during the second quarter. Occupancy for comparable hotels
declined 2.9 percentage points to 66.0% during the second quarter, reflecting reduced lodging demand. ADR for comparable
hotels fell 4.4% to $59.70 during the second quarter, primarily reflecting a change in business mix in response
to reduced demand. Lodging EBITDA for the second quarter was $54.8 million, a 16.3% decrease over the same period
last year. For every dollar of lodging revenue decline, La Quinta's impact on lodging EBITDA was only $0.65 due
to cost savings.
"While pleased with our continued success at controlling hotel operating costs, we are not satisfied with
our revenue performance and are committed to improving it," said Mr. Cash. "We have a number of initiatives
underway to improve revenues, including the recent rollout of our new website. We are two-thirds complete with
renovating our Inns under our Gold Medal Lite program and, as a result, are seeing improvements in guest satisfaction.
We recently launched a new ad campaign -- Stay Three Times, Get a Free Night. -- to drive repeat business. At the
same time, we are actively recruiting new Returns® Club members by providing express enrollment at the front
desk. In the fall, we will introduce our new and improved Returns Club program and additional electronic booking
channels. In addition, we have recently made changes in the leadership of our sales and marketing organization.
While we have one of the highest occupancies in our segment and continue to perform in line with the overall industry,
we are taking action to improve our revenue performance."
"During the second quarter, we opened 606 franchise rooms, for a total of 3,876 franchise rooms," continued
Mr. Cash. "We recently celebrated the opening of our 50th franchise property in Stockbridge, Georgia. We continue
to attract quality owner/operators to La Quinta and are off to one of the fastest franchising starts in lodging
history. With our pipeline of over 4,000 rooms approved, we anticipate having approximately 6,000 franchise rooms
(80 franchise hotels) open by year-end."
Financial Position
During the second quarter, La Quinta repaid $163 million of debt, including the entire remaining balance on its
bank term loan. At June 30, 2002, total indebtedness was $812 million of which $24 million matures in 2002. The
Company had no current borrowings under its $225 million revolving line of credit at June 30, 2002. La Quinta's
cash position was $131 million at June 30, 2002.
As part of the Company's previously-announced program to upgrade its lodging portfolio, La Quinta sold two hotels
during the second quarter for gross proceeds of $5 million and recorded a loss of approximately $1 million after
previously recorded impairments of $4 million. As of June 30, 2002, the Company had 14 properties with a net book
value of $35 million remaining to be sold under this program.
La Quinta also sold healthcare assets during the second quarter for gross proceeds of $147 million and recorded
a gain of approximately $5 million after previously recorded impairments of $43 million. As of June 30, 2002, the
Company had healthcare assets with a net book value of $51 million remaining to be sold.
"The sale of assets continues to add to our significant cash position," said David L. Rea, Executive
Vice President and Chief Financial Officer. "With proceeds from additional asset sales, availability under
our revolver, cash on hand and the cash flow generated by our lodging operations, we have the financial flexibility
to reinvest in our existing hotels, handle near-term debt maturities and expand our lodging business."
The Company recorded a net gain from non-recurring items of $10 million during the second quarter of 2002. This
amount reflects $4 million of gains on asset sales and a $6 million settlement of obligations and receivables related
to properties previously sold. This amount is net of severance expense resulting from headcount reductions in La
Quinta's San Antonio reservations center as well as changes made in La Quinta's management.
Outlook for 2002
Given the prolonged weakness in business travel, lodging demand for business travel is not expected to significantly
recover in the second half of 2002. As a result, La Quinta currently anticipates full year 2002 total company RevPAR
growth to be down approximately 3%. Lodging EBITDA is currently anticipated to be approximately $185 million. The
change from previous guidance primarily reflects lowered expectations for a lodging demand recovery and additional
investments in our frequent stayer program, which will have a positive impact on future periods. The Company maintains
its goal of returning La Quinta towards its late 1990s same-store EBITDA levels; however, the slower-than-expected
recovery this year will delay the beginning of the three-year growth period to next year. Full year EPS is currently
anticipated to be approximately ($3.24), reflecting significant non-recurring items from the first and second quarters.
Recurring EPS is currently anticipated to be approximately ($0.11) for the full year. Cash EPS is currently anticipated
to be approximately $0.76 for the full year. Capital expenditures for the year are currently anticipated to be
approximately $120 million.
"During the second half of 2002, we expect to see RevPAR growth of approximately 5% and lodging EBITDA increases
of approximately 10% with the improvements weighted towards the fourth quarter," said Mr. Cash. "The
year- over-year improvements we are expecting to see in the second half of 2002 are primarily due to easing comparisons,
given the dramatic weakness in the second half of 2001, as well as increases in leisure travel."
For the third quarter of 2002, La Quinta currently anticipates total company RevPAR to increase approximately 2%.
Lodging EBITDA is currently anticipated to be approximately $49 million in the third quarter, down slightly from
last year. EPS is currently anticipated to be approximately ($0.01) and cash EPS is currently anticipated to be
approximately $0.21 in the third quarter.
Conference Call and Where You Can Find Additional Information
As previously announced, at 11:00AM (EDT) on August 1, 2002, La Quinta held a conference call and audio webcast
to discuss its financial results and operating strategy. Simultaneous with the conference call, an audio web cast
of the call was made available via a link on the La Quinta website, www.laquinta.com
, in the Investor Relations-Audio/Webcasts section. The conference call can be accessed by dialing 800-257-1836
(International: 303-262-2175). An access code is not required. A replay of the call will be available at the same
Internet address or by dialing 800-405-2236 (International: 303-590-3000) and entering the access code of 488350.
The replay will be available from 1:00 PM (EDT) on August 1, 2002 through 1:00 PM (EDT) on August 7, 2002.
About La Quinta Corporation
Dallas-based La Quinta Corporation, a mid-scale limited service lodging company, owns, operates or franchises over
330 La Quinta Inns and La Quinta Inn & Suites in 33 states. Today's news release, as well as other information
about La Quinta, is available on the Internet at www.LQ.com .
Certain matters discussed in this press release may constitute "forward- looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "anticipates,"
"expects," "intends," "estimates," "projects" and other similar expressions,
which are predictions of or indicate future events and trends, typically identify forward-looking statements. Our
forward-looking statements are subject to a number of risks and uncertainties which could cause actual results
or the timing of certain events to differ materially from those projected in or contemplated by the forward-looking
statements. Accordingly, we cannot assure you that the expectations set forth in these forward-looking statements
will be attained. Some of the factors that could cause actual results or the timing of certain events to differ
from those described in these forward- looking statements include, without limitation, our ability to successfully
grow the revenues and profitability of our lodging business and franchising program; our ability to realize sustained
labor or other cost savings; the availability and costs of insurance for our properties and business; competition
within the lodging industry, including in the franchising of the La Quinta® brand; our ability to generate
attractive rates of return on new lodging investments; the cyclicality of the lodging business; the continued unpredictable
results of the events of September 11, 2001 on our business; the effects of the general economic slowdown, including
decreases in consumer confidence and business spending, which may continue to adversely affect our business and
industry; interest rates; the ultimate outcome of litigation filed against us; the availability of capital for
corporate purposes including for debt repayment, acquisitions and capital expenditures; the conditions of the capital
markets in general; our ability to continue to successfully sell healthcare assets or additional lodging assets;
and other risks detailed from time to time in our filings with the Securities and Exchange Commission, including,
without limitation, the risks described in our Joint Annual Report on Form 10-K for the year ended December 31,
2001 entitled "Certain Factors You Should Consider About Our Companies, Our Businesses and Our Securities".
We disclaim any intention or obligation to update or revise any forward- looking statements, whether as a result
of new information, future events or otherwise.
Supplemental Schedules
Financial Results A
Supplemental Financial Data B
Other Supplemental Information C
Summary Lodging Statistics D
La Quinta Corporation
Schedule A
Financial Results
(Unaudited)
Three months ended Six months ended
Operating Data June 30, June 30,
(In thousands, except
per share data) 2002 2001 2002 2001
Revenues
Lodging $ 142,308 $158,694 $274,026 $311,690
Other 3,332 16,008 9,952 51,986
Total revenues 145,640 174,702 283,978 363,676
Expenses
Direct lodging operations 59,395 64,668 117,439 127,089
Other lodging expenses 18,538 19,335 38,268 39,137
General and administrative 10,835 12,788 25,277 24,761
Interest, net 18,580 23,829 37,176 58,286
Depreciation and amortization 32,663 29,697 62,422 59,244
Amortization of goodwill --- 5,526 --- 11,212
Impairment of real estate
assets, mortgages and notes
receivable --- 33,767 --- 60,608
Other (9,942) (2,848) (12,602) 7,226
Total expenses 130,069 186,762 267,980 387,563
Income (loss) before minority
interest, income taxes, and
cumulative effect of change in
accounting principle 15,571 (12,060) 15,998 (23,887)
Minority interest (4,631) (196) (9,257) (365)
Income tax expense (5,424) (217) (202,096) (393)
Income (loss) before cumulative
effect of change in accounting
principle 5,516 (12,473) (195,355) (24,645)
Cumulative effect of change
in accounting principle --- --- (258,957) 856
Net income (loss) 5,516 (12,473) (454,312) (23,789)
Preferred stock dividends --- 4,500 --- 9,000
Net income (loss) available to
common shareholders 5,516 $(16,973)$(454,312) $(32,789)
Net income (loss) per
paired common share:
Basic $0.04 $(0.12) $(3.18) $(0.23)
Diluted $0.04 $(0.12) $(3.18) $(0.23)
Weighted average shares
outstanding:
Basic 143,143 143,034 143,062 142,992
Diluted 144,974 143,034 143,062 142,992
La Quinta Corporation
Schedule B
Supplemental Financial Data
(Unaudited)
Neither EBITDA, recurring net (loss) income available to common shareholders or cash earnings are intended to represent any measure of performance in accordance with generally accepted accounting principles ("GAAP"). EBITDA, recurring net income and cash earnings are included herein because management believes that certain investors find them to be useful tools for measuring the Company's performance. Cash earnings is a non-GAAP measure of cash flow generated by the Company to support its maintenance capital expenditures, debt reduction and growth initiatives.
Recurring Net Income (Loss),
Cash Earnings & EBITDA Three months ended Six months ended
Reconciliation June 30, June 30,
(In thousands) 2002 2001 2002 2001
Net income (loss)
available to common
shareholders (per GAAP) $5,516 $(16,973) $(454,312) $(32,789)
Add:
Cumulative effect of
change in accounting
principle --- --- 258,957 (856)
Non-recurring
restructuring
income tax charge --- --- 196,520 ---
Other, net (6,732)(A) 30,919 (8,276)(B) 67,834
Recurring net (loss) income
available to common
shareholders (Non-GAAP) (1,216) 13,946 (7,111) 34,189
Add:
Depreciation and
amortization 32,663 29,697 62,422 59,244
Amortization of goodwill --- 5,526 --- 11,212
Deferred income tax
benefit 2,322 (C) --- 1,174 (D) ---
Cash Earnings (Non-GAAP) 33,769 49,169 56,485 104,645
Add:
Minority interest 4,631 196 9,257 365
Dividends/distributions
to shareholders --- 4,500 --- 9,000
Current income tax
(benefit) expense (108) 217 76 393
Interest expense 18,580 23,829 37,176 58,286
Total EBITDA (Non-GAAP) $56,872 $77,911 $102,994 $172,689
Recurring net (loss)
income per paired
common share (Basic) $ (0.01) $0.10 $(0.05) $0.24
Cash earnings per paired
common share (Basic) $0.24 $0.34 $0.40 $0.73
(A) Other for the three months ended June 30, 2002 is comprised of net
pre-tax income of $9,942,000 less the related tax provision of
$3,210,000.
(B) Other for the six months ended June 30, 2002 is comprised of net
pre-tax income of $12,602,000 less the related tax provision of
$4,326,000.
(C) Deferred income tax benefit for the three months ended June 30, 2002
was $5,532,000 less $3,210,000 associated with non-recurring items.
(D) Deferred income tax benefit for the six months ended June 30, 2002
was $5,500,000 less $4,326,000 associated with non-recurring items.
Three months ended Six months ended
EBITDA by Segment June 30, June 30,
(In thousands) 2002 2001 2002 2001
Lodging $ 54,787 $65,478 $96,815 $127,151
Other 2,085 12,433 6,179 45,538
Total EBITDA $ 56,872 $77,911 $102,994 $172,689
Three months ended Six months ended
Capital Expenditures June 30, June 30,
(In thousands) 2002 2001 2002 2001
Capital expenditures $ 29,252 $25,654 $58,362 $41,505
La Quinta Corporation
Schedule C
Other Supplemental Information
(Unaudited)
Capitalization Schedule
(In millions, except for percentages) June 30, December 31,
2002 2001
Cash $(131) $(138)
Total indebtedness 812 1,000
Minority interest 207 7
Equity 1,373 2,025
Total capitalization 2,261 2,894
Net debt to total capitalization 30% 30%
Summary Balance Sheet Data
(In millions) June 30, December 31,
2002 2001
Property, Plant and Equipment, net $2,397 $2,540
Cash and cash equivalents 131 138
Total assets 2,791 3,215
Total indebtedness 812 1,000
Total liabilities 1,211 1,184
Minority interest 207 7
Total shareholders' equity 1,373 2,025
Debt Maturity Schedule
(In millions) June 30, 2002
Notes Bank Bonds and
Year Payable Notes (C) Mortgages (C) Total
2002 $24 $ --- $ --- $24
2003 (A) 169 --- --- 169
2004 (B) 218 --- --- 218
2005 116 --- --- 116
2006 20 --- --- 20
2007 and thereafter 265 --- --- 265
Total debt $812 $ --- $ --- $812
(A) Assumes $141 million of Notes due in 2026 are put to the Company.
(B) Assumes $143 million of Notes due in 2011 are put to the Company.
(C) The Company repaid all bank notes and bonds and mortgages during the
first half of 2002.
La Quinta Corporation
Schedule D
Summary Lodging Statistics
(Unaudited)
Occupancy Percentage (Occ), Average Daily Rate (ADR) and Revenue per
Available Room (RevPAR) Data
Three months ended Three months ended
June 30, 2002 June 30, 2001 Change
Occ ADR RevPAR Occ ADR RevPAR Occ ADR RevPAR
Comparable
Hotels
(A,B) 66.0% $59.70 $39.38 68.9% $62.48 $43.06 -2.9 pts -4.4% -8.5%
Company-
Owned (A) 65.4% $59.64 $39.00 68.3% $61.80 $42.21 -2.9 pts -3.5% -7.6%
Six months ended Six months ended
June 30, 2002 June 30, 2001 Change
Occ ADR RevPAR Occ ADR RevPAR Occ ADR RevPAR
Comparable
Hotels
(A,B) 62.5% $60.36 $37.72 66.9% $63.06 $42.16 -4.4 pts -4.3% -10.5%
Company-
Owned (A) 62.2% $60.33 $37.49 66.3% $62.47 $41.44 -4.1 pts -3.4% -9.5%
Hotel and Room Count Data
June 30, 2002 June 30, 2001
Number of Number of Number of Number of
Hotels Rooms Hotels Rooms
Comparable Hotels (A,B) 284 36,912 284 36,868
Company-Owned (A) 289 37,717 297 38,468
Franchised Hotels 50 3,876 3 283
Total 339 41,593 300 38,751
(A) Excludes franchised operating statistics.
(B) Comparable hotels exclude four hotels that were undergoing
redevelopment last year, representing 529 rooms in aggregate, and
one new, 276 room hotel also under development last year. All
5 properties are now open.
SOURCE: La Quinta Corporation