La Quinta Holdings Inc. Reports Results For Both Fourth Quarter And Full Year 2015

- Generated full year Pro Forma Adjusted Earnings per Share of $0.54

- Signed 107 new franchise agreements in 2015, the largest number of signings since 2008

- Franchise and other fee based revenue grew 11.5 percent for the year and 13.9 percent for the fourth quarter

- Completed a $100 million share repurchase program, acquiring a total of 6.3 million shares

- Repaid $153 million of long-term debt in 2015, including $135 million of voluntary prepayments

Feb 24, 2016, 16:15 ET from La Quinta Holdings Inc.

IRVING, Texas, Feb. 24, 2016 /PRNewswire/ -- La Quinta Holdings Inc. ("La Quinta" or the "Company") (NYSE: LQ) today reported its fourth quarter and full year 2015 results on a historical basis, as well as the results of operations on a pro forma basis, giving effect to La Quinta's initial public offering (IPO) in 2014 and the related transactions as described below.

Full Year 2015 Highlights:

  • Pro Forma Total Adjusted EBITDA increased 4.9 percent to $394.0 million, and Pro Forma Adjusted EBITDA margin increased 30 basis points
  • Pro Forma Franchise and Management Segment Adjusted EBITDA increased 8.4 percent to $114.6 million
  • Pro Forma Owned Hotel Segment Adjusted EBITDA increased 4.3 percent to $314.3 million
  • System-wide comparable RevPAR increased 3.5 percent, ADR increased 2.9 percent and occupancy increased 35 basis points
  • Pro Forma Adjusted Earnings per Share increased by $0.05 to $0.54; Historical Earnings per Share was $0.20
  • Pro Forma Adjusted Net Income increased 11.3 percent to $70.1 million; Historical Net Income was $26.4 million
  • Generated nearly $190 million in free cash flow in 2015; free cash flow represents cash flow from operations of $291 million less capital expenditures of $101 million
  • Open and operating franchise unit base grew 6 percent while the development pipeline increased by 10 percent

Fourth Quarter 2015 Highlights

  • Pro Forma Total Adjusted EBITDA decreased 2.1 percent to $78.0 million, and Pro Forma Adjusted EBITDA margin decreased 80 basis points
  • Pro Forma Franchise and Management Segment Adjusted EBITDA increased 8.9 percent to $27.3 million
  • Pro Forma Owned Hotel Segment Adjusted EBITDA decreased 4.0 percent to $60.4 million
  • System-wide comparable RevPAR decreased 0.3 percent, ADR increased 1.3 percent and occupancy decreased 102 basis points
  • Pro Forma Adjusted Earnings per Share decreased by $0.01 to $0.09; Historical Earnings per Share was $0.06
  • Pro Forma Adjusted Net Income decreased 6.3 percent to $11.3 million; Historical Net Income was $7.8 million
  • Opened 19 franchised hotels totaling approximately 1,600 rooms, including the seventh location in Mexico, and the first location in Alaska; Increased franchise pipeline to 228 hotels, representing over 20,500 additional rooms, including agreements to develop seven additional locations in Mexico

Overview

Keith A. Cline, President & Chief Executive Officer of La Quinta, said, "During the fourth quarter and throughout 2015, we continued to execute on our strategic priorities of achieving significant new unit growth in franchising, delivering strong and consistent free cash flow, and opportunistically unlocking value from the owned hotel portfolio. We continued to succeed in expanding our geographic presence with the opening of 19 franchised properties in the fourth quarter, including our first location in Alaska. We also continued to grow our pipeline during 2015, with our franchise development activity resulting in the highest number of franchise agreement signings for any year since 2008 with new locations signed in higher RevPAR markets such as New York, Pennsylvania, Virginia, and Oregon. The pipeline is geographically diverse with over 60% in locations outside of the Company's top three states of Texas, Florida, and California, including the growth of our international presence with the execution of new franchise agreements for ten additional locations in Mexico during 2015."

Mr. Cline continued, "During 2015, we successfully grew our system-wide comparable RevPAR by 3.5% and Pro Forma Adjusted EBITDA by 4.9% to $394 million during a year that faced several challenges, including the ongoing pressures from a prolonged and significant pull back in oil prices and production, the transition of our call center, and significant weather disruptions in Texas. The Company's flexible business model of low fixed overhead costs in its owned units allowed for Pro Forma Adjusted EBITDA margin to increase 30 basis points notwithstanding these challenges.  These results translated to free cash flow generation of nearly $190 million in 2015 which was used to fund a portion of both the voluntary debt prepayment of $135 million as well as $100 million in share repurchases.  In the fourth quarter, we acquired 5.3 million shares, bringing the total number of shares repurchased to 6.3 million in 2015."

The results of operations for the Company, on a pro forma basis and on a historical basis, for the three months ended December 31, 2015 include the following highlights (1) ($ in thousands, except per share amounts):

Pro Forma

Historical

Three months ended December 31,

Three months ended December 31,

2015

2014

% chg

2015

2014

% chg

Total Revenue

$

228,877

$

228,222

0.3

%

$

228,877

$

228,222

0.3

%

Franchise and Management Segment Adj. EBITDA

27,253

25,025

8.9

%

27,253

25,025

8.9

%

Owned Hotels Segment Adj. EBITDA

60,356

62,841

-4.0

%

60,356

62,841

-4.0

%

Total Adj. EBITDA

77,971

79,630

-2.1

%

77,971

79,630

-2.1

%

Total Adj. EBITDA margin

34.1

%

34.9

%

34.1

%

34.9

%

Operating Income Margin

11.9

%

16.3

%

11.9

%

9.7

%

 

Three Months Ended

Three Months Ended

December 31, 2015

December 31, 2014

% Change

Net Income

Basic and Diluted EPS

Net Income

Basic and Diluted EPS

Net Income

Basic and Diluted EPS

Pro Forma Adjusted Net Income Attributable to La Quinta Holdings' stockholders(1)

$

11,308

$

0.09

$

12,067

$

0.10

-6.3

%

-10.0

%

Historical Net Income Attributable to La Quinta Holdings' stockholders

7,828

0.06

(4,193)

(0.03)

NM(2)

NM(2)

 

The results of operations for the Company, on a pro forma basis and on a historical basis, for the full year ended December 31, 2015 include the following highlights (1) ($ in thousands, except per share amounts):

Pro Forma

Historical

Year ended December 31,

Year ended December 31,

2015

2014

% chg

2015

2014

% chg

Total Revenue

$

1,029,974

$

988,858

4.2

%

$

1,029,974

$

976,938

5.4

%

Franchise and Management Segment Adj. EBITDA

114,610

105,731

8.4

%

114,610

94,002

21.9

%

Owned Hotels Segment Adj. EBITDA

314,278

301,365

4.3

%

314,278

312,067

0.7

%

Total Adj. EBITDA

394,042

375,549

4.9

%

394,042

369,889

6.5

%

Total Adj. EBITDA margin

38.3

%

38.0

%

38.3

%

37.9

%

Operating Income Margin

13.0

%

18.9

%

12.4

%

14.0

%

 

Year ended

Year ended

December 31, 2015

December 31, 2014

% Change

Net Income

Basic and Diluted EPS

Net Income

Basic and Diluted EPS

Net Income

Basic and Diluted EPS

Pro Forma Adjusted Net Income Attributable to La Quinta Holdings' stockholders(1)

$

70,147

$

0.54

$

63,018

$

0.49

11.3

%

10.2

%

Historical Net Income Attributable to La Quinta Holdings' stockholders

26,365

0.20

(336,794)

(2.67)

NM(2)

NM(2)

(1)

Please see the schedules to this press release for a reconciliation of the pro forma financial information and adjusted results of operations. Pro forma information excludes adjustments that are not expected to have a continuing effect on the Company, and adjusted information is adjusted for certain special items, in each case as discussed in the schedules attached to this press release. Pro Forma Segment Adjusted EBITDA reflects intercompany fees charged to our owned hotels under new agreements entered into at the time of the IPO.

(2)

Changes in terms of percentages is not meaningful

 

Comparable hotel statistics

Three months ended December 31, 2015

Variance three months ended December 31, 2015 vs. 2014

Year ended December 31, 2015

Variance year ended December 31, 2015 vs. 2014

Owned Hotels

Occupancy

61.7

%

-157 bps

67.0

%

1 bps

ADR

$

77.86

2.0

%

$

82.05

3.5

%

RevPAR

$

48.06

-0.5

%

$

54.95

3.5

%

Franchised Hotels

Occupancy

63.2

%

-37 bps

68.2

%

76 bps

ADR

$

86.75

0.4

%

$

91.08

2.2

%

RevPAR

$

54.82

-0.2

%

$

62.15

3.4

%

System-wide

Occupancy

62.4

%

-102 bps

67.5

%

35 bps

ADR

$

81.96

1.3

%

$

86.21

2.9

%

RevPAR

$

51.14

-0.3

%

$

58.23

3.5

%

Development

The Company opened 19 franchised hotels with approximately 1,600 rooms in the fourth quarter and achieved net franchise unit growth of 13 hotels with approximately 1,100 rooms. Through December 31, 2015, the Company opened 47 franchised hotels with approximately 3,700 rooms and one temporary location. As of December 31, 2015, the Company had a pipeline of 228 franchised hotels totaling over 20,500 rooms, to be located in the United States, Mexico, Colombia, Nicaragua, Guatemala and Chile. The Company believes this pipeline represents a significant embedded growth opportunity for the brand.

The Company's system-wide portfolio, as of December 31, 2015, is located across 48 states in the U.S., as well as in Canada, Mexico and Honduras. The portfolio includes:

December 31, 2015

December 31, 2014

# of hotels

# of rooms

# of hotels

# of rooms

Owned (1)

340

43,400

352

44,800

Joint Venture

1

200

1

200

Franchised

545

43,900

514

41,500

Totals

886

87,500

867

86,500

(1)

For December 31, 2015, Owned includes 13 hotels (1,500 rooms) designated as assets held for sale, which are subject to a definitive purchase agreement.

Owned Hotel Portfolio

During the third quarter, the Company entered into a definitive purchase and sale agreement for the sale of 24 of its owned hotels. Of the 24 hotels 11 were sold during the fourth quarter, and the Company expects to close the remaining 13 before the end of the first quarter of 2016. These 24 hotels contributed $9.6 million in adjusted EBITDA for the year ended December 31, 2015.The Company believes that a sale of these assets will have many benefits, including an aggregate sales price with an accretive EBITDA multiple, the opening of several markets to new franchise development as the majority of these hotels will be removed from the La Quinta system, improvement of key operating metrics, and provision of additional available cash.

Balance Sheet and Liquidity

As of December 31, 2015, the Company had approximately $1.7 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.3%, including the impact of an interest rate swap. During the year, as a result of the Company's net debt, defined as total debt less cash, to Pro Forma Adjusted EBITDA ratio dropping below 4.5, the Company realized a 25 basis point reduction in the interest rate for its long-term debt. During the fourth quarter, the Company repurchased 5.3 million of its shares for an aggregate purchase price of $84 million, bringing the total amounts repurchased to approximately 6.3 million shares for an aggregate purchase price of $100 million in 2015.  Total cash and cash equivalents was $86.7 million as of December 31, 2015.

Outlook

Based upon management's current estimates, which reflect expectations of a tough comparison given the Company's very strong results in the first quarter of 2015 and the impact of the pullback of oil prices and production in the second half of 2015, the Company is introducing its guidance for full year 2016:

Guidance

RevPAR growth on a system-wide comparable hotel basis

1.0 percent to 3.0 percent

Pro forma Adjusted EBITDA

$367 million to $384 million

Franchise hotel openings

55 to 60

This outlook does not reflect the impact of any additional sales of owned hotels beyond the 13 remaining properties from the group of 24 properties we have previously discussed.

Webcast and Conference Call

La Quinta Holdings Inc. will host a conference call to discuss fourth quarter and full year 2015 results on Wednesday, February 24, 2016 at 5:00 p.m. Eastern Time. Participants may listen to the live webcast by dialing (877) 407-3982, or (201) 493-6780 for international participants, or by logging onto the La Quinta Investor Relations website at www.lq.com/investorrelations. Participants are encouraged to dial into the call or link to the webcast at least fifteen minutes prior to the scheduled start time.

A replay of the call will be available from approximately 8 p.m. Eastern Time on February 24, 2016 through midnight Eastern Time on March 2, 2016. To access the replay, the domestic dial-in number is (877) 870-5176, the international dial-in number is (858) 384-5517, and the passcode is 13629955. The archive of the webcast will be available on the Company's website for a limited time.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources and other non-historical statements, including the statements in the "Outlook" section of this press release. You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014, as amended, filed with the Securities and Exchange Commission ("SEC"), as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Non-GAAP Financial Measures

We refer to certain non-GAAP financial measures in this press release including Adjusted EBITDA, Adjusted EBITDA margins, Segment Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share on both a pro forma and historical basis. Please see the schedules to this press release for additional information and reconciliations of such non-GAAP financial measures.

About La Quinta Holdings Inc.

La Quinta Holdings Inc. (LQ) is a leading owner, operator and franchisor of select-service hotels primarily serving the upper-midscale and midscale segments. The Company's owned and franchised portfolio consists of more than 880 properties representing approximately 87,400 rooms located in 48 states in the U.S., and in Canada, Mexico and Honduras. These properties operate under the La Quinta Inn & Suites™, La Quinta Inn™ and LQ HotelTM brands. La Quinta's team is committed to providing guests with a refreshing and engaging experience. For more information, please visit: www.LQ.com.

From time to time, La Quinta may use its website as a distribution channel of material company information. Financial and other important information regarding the Company is routinely accessible through and posted on our website at www.lq.com/investorrelations. In addition, you may automatically receive email alerts and other information about La Quinta when you enroll your email address by visiting the Email Notification section at www.lq.com/investorrelations.

LA QUINTA HOLDINGS INC.

HISTORICAL STATEMENTS OF OPERATIONS

(unaudited, in thousands)

Three months ended December 31,

Year ended December 31,

2015

2014

2015

2014

Revenues:

Room revenues

$

194,465

$

197,022

$

887,358

$

846,203

Franchise and other fee-based revenues

24,511

21,503

100,069

89,718

Other hotel revenues

4,657

4,727

19,343

19,536

223,633

223,252

1,006,770

955,457

Brand marketing fund revenues from franchise and managed properties

5,244

4,970

23,204

21,481

Total revenues

228,877

228,222

1,029,974

976,938

Operating expenses:

Direct lodging expenses

96,053

93,275

398,828

378,705

Depreciation and amortization

42,692

43,197

174,985

173,145

General and administrative expenses

24,680

41,773

117,354

142,636

Other lodging and operating expenses

14,391

10,860

63,513

56,984

Marketing, promotional and other advertising expenses

12,776

11,991

69,810

62,161

Impairment loss

5,800

50,121

5,157

Loss on sale

4,088

196,392

201,096

878,699

818,788

Brand marketing fund expenses from franchise and managed properties

5,244

4,970

23,204

21,481

Total operating expenses

201,636

206,066

901,903

840,269

Operating income

27,241

22,156

128,071

136,669

Other income (expenses):

Interest expense, net

(20,572)

(23,685)

(86,504)

(120,945)

Loss on extinguishment of debt, net

(2,030)

Other income (loss)

6,334

4,357

7,632

3,261

Total other income (expenses)

(14,238)

(19,328)

(78,872)

(119,714)

Income from continuing operations before income taxes

13,003

2,828

49,199

16,955

Income tax provision

(5,121)

(6,945)

(22,487)

(28,805)

Recognition of net deferred tax liabilities upon C-corporation conversion

(321,054)

Net Income (Loss) from continuing operations, net of tax

7,882

(4,117)

26,712

(332,904)

Income (Loss) on discontinued operations, net of tax

(503)

Net income (loss)

7,882

(4,117)

26,712

(333,407)

Income from noncontrolling interests in continuing operations, net of tax

(54)

(76)

(347)

(3,890)

Income from noncontrolling interests in discontinued operations, net of tax

Net income attributable to noncontrolling interests

(54)

(76)

(347)

(3,890)

Amounts attributable to La Quinta Holdings' stockholders

Income (loss) from continuing operations, net of tax

7,828

(4,193)

26,365

(336,794)

Income (loss) from discontinued operations, net of tax

(503)

Net income (loss) attributable to La Quinta Holdings' stockholders

$

7,828

$

(4,193)

$

26,365

$

(337,297)

 

LA QUINTA HOLDINGS INC.

HISTORICAL STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Year ended December 31,

2015

2014

Cash flows from operating activities:

Net income (loss)

$

26,712

$

(333,407)

Adjustment to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

174,739

172,666

Amortization of other non-current assets

337

957

Amortization of intangible assets

937

1,075

Loss  on extinguishment of debt, net

2,030

Interest expense added to long-term debt

18,601

Amortization of long-term debt reduction

(1,532)

(Gain) loss related to casualty disasters

1,824

(5,591)

Write off of deferred costs

18

Amortization of leasehold interests

(691)

(596)

Amortization of deferred costs

5,559

8,173

Impairment loss

50,121

5,308

Loss on sale or retirement of assets

4,533

177

Equity based compensation

21,603

57,983

Excess tax benefits from equity based compensation

(740)

(132)

Deferred taxes

16,898

22,980

Recognition of net deferred tax liabilities upon C-corporation conversion

321,054

Provision for doubtful accounts

2,198

1,904

Changes in assets and liabilities:

Accounts receivable

(2,255)

(2,853)

Other current assets

(21)

811

Receivables from affiliates

276

Other non-current assets

(1,410)

(510)

Accounts payable

272

(9,494)

Accrued payroll and employee benefits

(4,278)

8,894

Accrued real estate taxes

1,135

993

Accrued expenses and other liabilities

(8,035)

15,693

Other long-term liabilities

1,039

622

Net cash provided by operating activities

290,495

286,082

Cash flows from investing activities:

Acquisitions, net of cash acquired

(77,667)

Capital expenditures

(100,776)

(78,630)

Decrease in restricted cash

103,026

Decrease in investments

67

Insurance proceeds on casualty disasters

7,033

2,120

Purchase of intangible assets, net

Proceeds from sale of assets

37,576

7,053

Payment of franchise incentives

(30)

(400)

Decrease in other non-current assets

1,125

315

Net cash (used in) provided by investing activities

(55,072)

(44,116)

 

LA QUINTA HOLDINGS INC.

HISTORICAL STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)

Year ended December 31,

2015

2014

Cash flows from financing activities:

Proceeds from long-term debt

2,100,000

Repayment of long-term debt

(152,622)

(2,941,302)

Payment of deferred costs

(27,255)

Payment of original issue discount

(10,500)

Proceeds from issuance of common stock, net

697,978

Purchase of treasury stock

(106,167)

(1,533)

Excess tax benefits from equity based compensation

740

132

Distributions to members

(106)

Distributions to noncontrolling interests

(522)

(4,451)

Capital contributions

21,516

Net cash used in financing activities

(258,571)

(165,521)

Increase (decrease) in cash and cash equivalents

(23,148)

76,445

Cash and cash equivalents at the beginning of the year

109,857

33,412

Cash and cash equivalents at the end of the year

$

86,709

$

109,857

 

RECONCILIATIONS

Prior to the consummation of the IPO on April 14, 2014, the Company's business was conducted, and the Company's hotel properties were owned, through multiple entities including (i) the "La Quinta Predecessor Entities" which were entities under common control or otherwise consolidated for financial reporting purposes, and their consolidated subsidiaries and (ii) entities that owned 14 hotels (the "Previously Managed Portfolio") managed by the La Quinta Predecessor Entities. In connection with the IPO, among other transactions, (i) the La Quinta Predecessor Entities were contributed to the Company, (ii) the La Quinta Predecessor Entities purchased the Previously Managed Portfolio, and (iii) the Company effected certain refinancing transactions (together with the IPO, the "IPO Transactions").

The unaudited pro forma financial data for the three months and years ended December 31, 2015 and 2014 are presented as if the IPO Transactions all had occurred on January 1, 2014. The unaudited pro forma combined financial information excludes adjustments that are not expected to have a continuing effect on the Company. Excluded adjustments include the gains and losses related to the debt financing transactions, and the impact of the issuance of vested and unvested restricted stock at the time of the IPO related to long term incentives, as well as the impact of discontinued operations. Accordingly, the unaudited pro forma financial data is not necessarily indicative of our financial position or results of operations had the transactions described above for which we are giving pro forma effect actually occurred on the dates indicated.

The tables below provide a reconciliation of the pro forma financial information, including segment information, for the Company to the Company's historical information, a reconciliation of Adjusted EBITDA to Net Income, both on a pro forma and historical basis, a reconciliation of Free Cash Flow to Net cash provided by operating activities, a reconciliation of Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share to Net Income and Earnings Per Share on a historical basis and a reconciliation of Pro Forma Adjusted EBITDA to Adjusted Pro Forma Net Income with respect to our outlook. We believe this financial information provides meaningful supplemental information because it reflects the combined business of the La Quinta Predecessor Entities and the Previously Managed Portfolio and the ongoing effects of the other IPO Transactions. We further believe the presentation of Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share provides meaningful information because it gives effect to the pro forma adjustments described above and excludes the impact of certain items that are not expected to have an ongoing effect on our operations. This represents how management views the business and reviews our operating performance. It is also used by management when publicly providing the business outlook.  We believe the presentation of Free Cash Flow provides meaningful information because it shows the amount of cash generated by the business that, after capital expenditures, can be used for strategic opportunities. See the definitions of "EBITDA", "Adjusted EBITDA", "Free Cash Flow", "Pro Forma Adjusted Net Income" and "Pro Forma Adjusted Earnings Per Share" for a further explanation of the use of these measures.

PRO FORMA FINANCIAL INFORMATION AND NET INCOME RECONCILIATION

(unaudited, in thousands)

Three months ended December 31, 2015

Three months ended December 31, 2014

Historical

Adjustments

Pro Forma

Historical

Adjustments

Pro Forma

Revenues:

Room revenues

$

194,465

$

$

194,465

$

197,022

$

$

197,022

Franchise and other fee-based revenues

24,511

24,511

21,503

21,503

Other hotel revenues

4,657

4,657

4,727

4,727

223,633

223,633

223,252

223,252

Brand marketing fund revenues from franchise and managed properties

5,244

5,244

4,970

4,970

Total revenues

228,877

228,877

228,222

228,222

Operating expenses:

Direct lodging expenses

96,053

96,053

93,275

93,275

Depreciation and amortization

42,692

42,692

43,197

(448)

42,749

General and administrative expenses

24,680

24,680

41,773

(14,489)

27,284

Other lodging and operating expenses

14,391

14,391

10,860

10,860

Marketing, promotional and other advertising expenses

12,776

12,776

11,991

11,991

Impairment loss

5,800

5,800

Loss on sale

-

-

196,392

196,392

201,096

(14,937)

186,159

Brand marketing fund expenses from franchise and managed properties

5,244

5,244

4,970

4,970

Total operating expenses

201,636

201,636

206,066

(14,937)

191,129

Operating income

27,241

27,241

22,156

14,937

37,093

Other income (expenses):

Interest expense, net

(20,572)

(20,572)

(23,685)

256

(23,429)

Other income (loss)

6,334

6,334

4,357

4,357

Total other income (expenses)

(14,238)

(14,238)

(19,328)

256

(19,072)

Income from continuing operations before income taxes

13,003

13,003

2,828

15,193

18,021

Income tax provision

(5,121)

(5,121)

(6,945)

(264)

(7,209)

Income from continuing operations, net of tax

7,882

7,882

(4,117)

14,929

10,812

Net income

7,882

7,882

(4,117)

14,929

10,812

Income from noncontrolling interests in continuing operations, net of tax

(54)

(54)

(76)

(76)

Net income attributable to noncontrolling interests

(54)

(54)

(76)

(76)

Amounts attributable to La Quinta Holdings' stockholders

Income from continuing operations, net of tax

7,828

7,828

(4,193)

14,929

10,736

Net income attributable to La Quinta Holdings' stockholders

$

7,828

$

$

7,828

$

(4,193)

$

14,929

$

10,736

 

PRO FORMA FINANCIAL INFORMATION AND NET INCOME RECONCILIATION

(unaudited, in thousands)

Year ended December 31, 2015

Year ended December 31, 2014

Historical

Adjustments

Pro Forma

Historical

Adjustments

Pro Forma

Revenues:

Room revenues

$

887,358

$

$

887,358

$

846,203

$

12,814

$

859,017

Franchise and other fee-based revenues

100,069

100,069

89,718

(732)

88,986

Other hotel revenues

19,343

19,343

19,536

159

19,695

1,006,770

1,006,770

955,457

12,241

967,698

Brand marketing fund revenues from franchise and managed properties

23,204

23,204

21,481

(321)

21,160

Total revenues

1,029,974

1,029,974

976,938

11,920

988,858

Operating expenses:

Direct lodging expenses

398,828

398,828

378,705

5,832

384,537

Depreciation and amortization

174,985

174,985

173,145

1,125

174,270

General and administrative expenses

117,354

(5,564)

111,790

142,636

(46,106)

96,530

Other lodging and operating expenses

63,513

63,513

56,984

944

57,928

Marketing, promotional and other advertising expenses

69,810

69,810

62,161

62,161

Impairment loss

50,121

50,121

5,157

5,157

Loss on sale

4,088

4,088

878,699

(5,564)

873,135

818,788

(38,205)

780,583

Brand marketing fund expenses from franchise and managed properties

23,204

23,204

21,481

(321)

21,160

Total operating expenses

901,903

(5,564)

896,339

840,269

(38,526)

801,743

Operating income

128,071

5,564

133,635

136,669

50,446

187,115

Other income (expenses):

Interest expense, net

(86,504)

(86,504)

(120,945)

26,024

(94,921)

Loss on extinguishment of debt, net

(2,030)

2,030

Other income (loss)

7,632

7,632

3,261

3,261

Total other income (expenses)

(78,872)

(78,872)

(119,714)

28,054

(91,660)

Income from continuing operations before income taxes

49,199

5,564

54,763

16,955

78,500

95,455

Income tax provision

(22,487)

(1,748)

(24,235)

(28,805)

(9,377)

(38,182)

Recognition of net deferred tax liabilities upon C-corporation conversion

(321,054)

321,054

Income (loss) from continuing operations, net of tax

26,712

3,816

30,528

(332,904)

390,177

57,273

Net income (loss) (1)

26,712

3,816

30,528

(332,904)

390,177

57,273

Income from noncontrolling interests in continuing operations, net of tax

(347)

(347)

(3,890)

3,489

(401)

Net income attributable to noncontrolling interests  (1)

(347)

(347)

(3,890)

3,489

(401)

Amounts attributable to La Quinta Holdings' stockholders

Income (loss) from continuing operations, net of tax

26,365

3,816

30,181

(336,794)

393,666

56,872

Net income (loss) attributable to La Quinta Holdings' stockholders (1)

$

26,365

$

3,816

$

30,181

$

(336,794)

$

393,666

$

56,872

(1)

Excludes the impact of the Company's discontinued operations on a historical and pro forma basis for the periods presented

 

PRO FORMA AND HISTORICAL ADJUSTED EBITDA NON-GAAP RECONCILIATION

(unaudited, in thousands)

Pro forma

Historical

Three months ended December 31, 2015

Three months ended December 31, 2014

Three months ended December 31, 2015

Three months ended December 31, 2014

Operating income

$

27,241

$

37,093

$

27,241

$

22,156

Interest expense, net

(20,572)

(23,429)

(20,572)

(23,685)

Other income (loss)

6,334

4,357

6,334

4,357

Income tax provision

(5,121)

(7,209)

(5,121)

(6,945)

Income from noncontrolling interest

(54)

(76)

(54)

(76)

Net Income (Loss) Attributable to La Quinta Holdings' stockholders

7,828

10,736

7,828

(4,193)

Interest expense

20,593

23,438

20,593

23,694

Income tax provision

5,121

7,209

5,121

6,945

Depreciation and amortization

42,928

42,978

42,928

43,426

Non-controlling interest

54

76

54

76

EBITDA

76,524

84,437

76,524

69,948

Fixed asset impairment loss

5,800

5,800

Loss on retirement of assets

284

177

284

177

Gain related to casualty disasters

760

(5,666)

760

(5,666)

Equity based compensation

2,350

3,815

2,350

18,304

Other (gains) losses, net

(7,747)

(3,133)

(7,747)

(3,133)

Adjusted EBITDA

$

77,971

$

79,630

$

77,971

$

79,630

 

PRO FORMA AND HISTORICAL ADJUSTED EBITDA NON-GAAP RECONCILIATION

(unaudited, in thousands)

Pro forma

Historical

Year ended December 31, 2015

Year ended December 31, 2014

Year ended December 31, 2015

Year ended December 31, 2014

Operating income

$

133,635

$

187,115

$

128,071

$

136,669

Interest expense, net

(86,504)

(94,921)

(86,504)

(120,945)

Other income (loss)

7,632

3,261

7,632

3,261

Loss on extinguishment of debt, net

(2,030)

Income tax provision

(24,235)

(38,182)

(22,487)

(28,805)

Recognition of net deferred tax liabilities upon C-corporation conversion

(321,054)

Income from noncontrolling interest

(347)

(401)

(347)

(3,890)

Loss on discontinued operations, net of tax

(503)

Net Income (Loss) Attributable to La Quinta

   Holdings' stockholders

30,181

56,872

26,365

(337,297)

Interest expense

86,614

94,970

86,614

120,994

Income tax provision

24,235

38,182

22,487

28,805

Recognition of net deferred tax liabilities upon C-corporation conversion

321,054

Depreciation and amortization

176,263

175,262

176,263

174,137

Non-controlling interest

347

401

347

3,890

EBITDA

317,640

365,687

312,076

311,583

Fixed asset impairment loss

50,121

5,157

50,121

5,308

Loss on sale

4,088

4,088

377

Loss on retirement of assets

445

177

445

177

Gain related to casualty disasters

1,824

(6,764)

1,824

(6,772)

Loss on extinguishment of debt, net

2,030

Equity based compensation

13,250

11,850

18,814

58,007

Severance charges(1)

11,021

11,021

Other (gains) losses, net

(4,347)

(558)

(4,347)

(821)

Adjusted EBITDA

$

394,042

$

375,549

$

394,042

$

369,889

(1)

Charges of $8.0 million of cash and $3.0 million of non-cash, relating to the departure of the Company's former President and Chief Executive Officer were recognized in general and administrative expenses during the year ended December 31, 2015.

 

PRO FORMA AND HISTORICAL SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION

(unaudited, in thousands)

Three months ended December 31, 2015

Three months ended December 31, 2014

Historical

Adjustments

Pro Forma

Historical

Adjustments

Pro Forma

Revenues:

Owned hotels

$

200,040

$

$

200,040

$

202,497

$

$

202,497

Franchise and management

27,253

27,253

25,025

25,025

Segment revenues

227,293

227,293

227,522

227,522

Other fee-based revenues from franchise and managed properties

5,244

5,244

4,970

4,970

Corporate and other

28,607

28,607

28,751

28,751

Intersegment elimination

(32,267)

(32,267)

(33,021)

(33,021)

Total revenues

$

228,877

$

$

228,877

$

228,222

$

$

228,222

Adjusted EBITDA:

Owned hotels

$

60,356

$

$

60,356

$

62,841

$

$

62,841

Franchise and management

27,253

27,253

25,025

25,025

Segment Adjusted EBITDA

87,609

87,609

87,866

87,866

Corporate and other

(9,638)

(9,638)

(8,236)

(8,236)

Total Adjusted EBITDA

$

77,971

$

$

77,971

$

79,630

$

$

79,630

 

PRO FORMA AND HISTORICAL SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION

(unaudited, in thousands)

Year ended December 31, 2015

Year ended December 31, 2014

Historical

Adjustments (1)

Pro Forma

Historical

Adjustments (1)

Pro Forma

Revenues:

Owned hotels

$

911,491

$

$

911,491

$

870,061

$

10,929

$

880,990

Franchise and management

114,610

114,610

94,002

11,729

105,731

Segment revenues

1,026,101

1,026,101

964,063

22,658

986,721

Other fee-based revenues from franchise and managed properties

23,204

23,204

21,481

(321)

21,160

Corporate and other

126,469

126,469

116,805

4,633

121,438

Intersegment elimination

(145,800)

(145,800)

(125,411)

(15,050)

(140,461)

Total revenues

$

1,029,974

$

$

1,029,974

$

976,938

$

11,920

$

988,858

Adjusted EBITDA:

Owned hotels

$

314,278

$

$

314,278

$

312,067

$

(10,702)

$

301,365

Franchise and management

114,610

114,610

94,002

11,729

105,731

Segment Adjusted EBITDA

428,888

428,888

406,069

1,027

407,096

Corporate and other

(34,846)

(34,846)

(36,180)

4,633

(31,547)

Total Adjusted EBITDA

$

394,042

$

$

394,042

$

369,889

$

5,660

$

375,549

(1)

Adjustments include (i) reflection of the results of operations of the 14 previously managed hotels which were acquired in connection with the IPO as if the acquisition had occurred on January 1, 2014; and (ii) reflection of franchise and management fees that we charge our owned hotels as if the rates put in place pursuant to new agreements dated April 14, 2014 had been in effect beginning on January 1, 2014. On a historical basis, prior to April 14, 2014 we charged aggregate fees of 2.0% (0.33% license fees for trademark rights and 1.67% management fee for management services) to our owned hotels. Effective April 14, 2014, we terminated the existing franchise and management agreements with our owned hotels and entered into new agreements, which provide for a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of total hotel revenues, which are reflected as revenue in the franchise and management segment. The agreements we entered into with our owned hotels upon effectiveness of the IPO also include a reservations fee of 2.0% of gross room revenues, which is reflected as revenue in corporate and other after April 14, 2014.

 

ADJUSTED NET INCOME AND

PRO FORMA AND ADJUSTED EARNINGS PER SHARE

NON-GAAP RECONCILIATION

(unaudited, in thousands, except per share data)

Three months ended December 31, 2015

Three months ended December 31, 2014

Net Income

Basic and Diluted Earnings Per Share

Net Income

Basic and Diluted Earnings Per Share

Net Income Attributable to La Quinta Holdings' stockholders

$

7,828

$

0.06

$

(4,193)

$

(0.03)

Pro Forma Adjustments(1)

14,929

0.12

Pro Forma Net Income Attributable to La Quinta Holdings' stockholders

$

7,828

$

0.06

$

10,736

$

0.09

Secondary offering expenses, net of tax (2)

1,331

0.01

Impairment loss, net of tax

3,480

0.03

Pro Forma Adjusted Net Income Attributable to La Quinta Holdings' stockholders

$

11,308

$

0.09

$

12,067

$

0.10

Weighted average common shares outstanding, basic

125,327

127,978

Weighted average common shares outstanding, diluted

125,377

129,379

(1) 

Refer to Pro Forma Financial Information and Net Income Reconciliation on page 11.

(2) 

Expense was recognized in general and administrative expenses during the three months ended December 31, 2014 related to costs incurred in connection with the secondary equity offering by certain selling stockholders.

 

 

Year ended December 31, 2015

Year ended December 31, 2014

Net Income

Basic and Diluted Earnings Per Share (5)

Net Income

Basic and Diluted Earnings Per Share

Net Income (loss) Attributable to La Quinta Holdings' stockholders(1)

$

26,365

$

0.20

$

(336,794)

$

(2.67)

Pro Forma Adjustments(2)

3,816

0.03

393,666

3.12

Loss from discontinued operations, net of tax

503

Pro Forma Net Income Attributable to La Quinta Holdings' stockholders

$

30,181

$

0.23

$

57,375

$

0.45

Secondary offering expenses, net of tax (3)

827

0.01

1,331

0.01

Severance charges, net of tax (4)

6,613

0.05

Impairment loss, net of tax

30,073

0.23

3,094

0.02

Loss on extinguishment of debt, net of tax

1,218

0.01

Loss on sale , net of tax

2,453

0.02

Pro Forma Adjusted Net Income Attributable to La Quinta Holdings' stockholders

$

70,147

$

0.54

$

63,018

$

0.49

Weighted average common shares outstanding, basic

128,272

126,156

Weighted average common shares outstanding, diluted

129,172

126,964

(1) 

Includes the impact of the Company's discontinued operations on a historical basis for the periods presented.

(2) 

Refer to Pro Forma Financial Information and Net Income Reconciliation on page 12.

(3) 

Expense was recognized in general and administrative expenses during the years ended December 31, 2015 and 2014 related to costs incurred in connection with the secondary equity offering by certain selling stockholders.

(4) 

Charges relating to the departure of the Company's former President and Chief Executive Officer  of 4.8 million in cash and $1.8 million in non-cash, net of tax, were recognized in general and administrative expenses during the year ended December 31, 2015

(5) 

Earnings per share presented above is diluted, basic earnings per share is greater by $0.01.

 

CASH FROM OPERATING ACTIVITIES TO FREE CASH FLOW

NON-GAAP RECONCILIATION

 (unaudited, in thousands)

Year ended December 31,

2015

2014

Net cash provided by operating activities

$

290,495

$

286,082

Capital expenditures

(100,776)

(78,630)

Free cash flow

$

189,719

$

207,452

 

PRO FORMA ADJUSTED EBITDA NON-GAAP RECONCILIATION

OUTLOOK: FORECASTED 2016

(unaudited, in thousands)

Year Ended December 31, 2016

Low Case

High Case

Adjusted Pro Forma Net income Attributable to La Quinta Holdings' stockholders (1)

$

67,560

$

77,760

Interest expense (2)

82,000

82,000

Income tax provision

45,040

51,840

Depreciation and amortization

158,000

158,000

Non-controlling interest

500

500

Pro Forma EBITDA

353,100

370,100

Share based compensation expense (3)

13,900

13,900

Pro Forma Adjusted EBITDA

$

367,000

$

384,000

(1)

This table provides a reconciliation of forward-looking forecasted Adjusted EBITDA to adjusted pro forma net income attributable to La Quinta Holdings' stockholders that excludes the impact of certain items that are not expected to have an ongoing effect on our operations.

(2) 

Includes interest expense for $1.7 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.3%, including the impact of an interest rate swap, commitment fees for the undrawn balance of our revolving credit facility, and amortization of deferred financing costs.

(3) 

Reflects share based compensation expense.

 

LA QUINTA HOLDINGS INC. DEFINED TERMS

"EBITDA" and "Adjusted EBITDA." Earnings before interest, taxes, depreciation and amortization ("EBITDA") is a commonly used measure in many industries. We adjust EBITDA when evaluating our performance because we believe that the adjustment for certain items, such as restructuring and acquisition transaction expenses, impairment charges related to long-lived assets, non-cash equity-based compensation, discontinued operations, and other items not indicative of ongoing operating performance, including other items relating to the IPO Transactions, provides useful supplemental information to management and investors regarding our ongoing operating performance. We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA and Adjusted EBITDA are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions; and (ii) EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors, lenders and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry.

EBITDA and Adjusted EBITDA are not recognized terms under GAAP, have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss), cash flow or other methods of analyzing our results as reported under GAAP. Some of these limitations are:

  • EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
  • EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;
  • EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes;
  • EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
  • EBITDA and Adjusted EBITDA do not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations;
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and
  • other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

"Free Cash Flow" We define free cash flow as net cash provided by operating activities less capital expenditures. This Non-GAAP measure is not in accordance with, or an alternative for, measures prepared in accordance with GAAP and may be different from Non-GAAP measures used by other companies. We consider free cash flow to be a liquidity measure that, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors about the amount of cash generated by the business that, after capital expenditures can be used for strategic opportunities including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet, repaying debt, paying dividends and repurchasing stock. Free cash flow should not be construed as an alternative to cash flows from operations or other cash flow measurements determined in accordance with GAAP.

"Free cash flow yield" is defined as cash from continuing operations less capital expenditures as a percentage of market capitalization computed on the last trading day of the quarter. Market capitalization is computed by multiplying the end of period stock price by the end of period shares outstanding.

"Pro Forma Adjusted Net Income" and "Pro Forma Adjusted Earnings Per Share" are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income (loss), earnings per share, or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, the Company's definitions of Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share may not be comparable to similarly titled measures of other companies.

Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share are included to assist investors in performing meaningful comparisons of past, present and future operating results and as a means of highlighting the results of the Company's ongoing operations in a comparable format.

"ADR" or "average daily rate" means hotel room revenues divided by total number of rooms sold in a given period.

"comparable hotels" means hotels that: (i) were active and operating in our system for at least one full calendar year as of the end of the applicable period and were active and operating as of January 1st of the previous year; and (ii) have not sustained substantial property damage or business interruption or for which comparable results are not available. Management uses comparable hotels as the basis upon which to evaluate ADR, occupancy, RevPAR and RevPAR Index on a system-wide basis and for each of our reportable segments.

"occupancy" means the total number of rooms sold in a given period divided by the total number of rooms available at a hotel or group of hotels.

"RevPAR" or "revenue per available room" means the product of the ADR charged and the average daily occupancy achieved.

"RevPAR Index" measures a hotel's fair market share of its competitive set's revenue per available room.

"system-wide" refers collectively to our owned, franchised and managed hotel portfolios.

 

SOURCE La Quinta Holdings Inc.



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