La Quinta Holdings Inc. Reports Strong Third Quarter 2014 Results

- Generated RevPAR Growth of 8.9%

- Achieved Pro forma Adjusted EBITDA Growth of 13.6%

- Increases Full Year 2014 Guidance

Oct 22, 2014, 16:01 ET from La Quinta Holdings Inc.

IRVING, Texas, Oct. 22, 2014 /PRNewswire/ -- La Quinta Holdings Inc. (NYSE: LQ) today reported its third quarter 2014 results on a pro forma basis, giving effect to La Quinta's initial public offering (IPO) and the related transactions as described below, as well as the results of operations for the third quarter 2014 on a historical basis.

Third Quarter 2014 Highlights:

  • Pro forma total Adjusted EBITDA increased 13.6 percent to $109.3 million, and Pro forma Adjusted EBITDA margin increased 130 basis points
  • Pro forma net income increased 17.9 percent to $21.0 million; historical net income was $12.8 million
  • Pro forma earnings per share increased to $0.16; historical earnings per share was $0.10
  • System-wide comparable RevPAR increased 8.9 percent, ADR increased 4.6 percent and occupancy increased 282 basis points
  • Pro forma Franchise and Management Segment Adjusted EBITDA increased 12.4 percent to $29.1 million
  • Grew existing franchise base by 8% over the last twelve months with minimal capital investment.  Increased franchise pipeline to 196 hotels, including over 16,000 additional rooms.
  • Opened 500th franchise property, bringing total system room count to over 85,000
  • Maintained commitment to balance sheet de-levering strategy by voluntarily paying down an additional $75 million of long-term debt with free cash flow. Year to date voluntary debt pay downs total $155 million.
  • Raises full year 2014 guidance

Overview

Wayne B. Goldberg, President & Chief Executive Officer of La Quinta, said, "Our third quarter results demonstrate another quarter of solid performance delivered across our key metrics, including strong RevPAR, franchise unit, and EBITDA growth, and EBITDA margin expansion. Overall, the lodging industry remains healthy, with a steadily improving economy and strong transient travel demand. La Quinta is extremely well-positioned to continue to capture this demand as we capitalize on our refreshed and upgraded portfolio and our repositioned brand. Over the last twelve months, we have grown our franchise base 8% and, in the third quarter, opened our 500th franchise property.  This unit growth, along with our increased occupancy, allows our geographic reach and customer base to continue to grow. Franchise interest in the La Quinta brand remains robust and our ongoing system growth is further supported by a continued strong pipeline. Furthermore, we have continued to de-lever our balance sheet and we remain focused on our strategic objectives, all of which are designed to increase shareholder value."

The results of operations for the Company, on a pro forma basis and on a historical basis, for the three months ended September 30, 2014 include the following highlights(1) ($ in thousands, except per share amounts):

Pro Forma

Historical

Three Months Ended September 30,

Three Months Ended September 30,

2014

2013

% chg

2014

2013

% chg

Total Revenue

$271,118

$246,488

10.0 %

$271,118

$238,035

13.9 %

Franchise and Management Segment Adj. EBITDA

29,054

25,859

12.4 %

29,054

15,233

    NM(2)

Owned Hotels Segment Adj. EBITDA

87,951

76,565

14.9%

87,951

88,997

    NM(2)

Total Adj. EBITDA

109,297

96,238

13.6 %

109,297

93,747

16.6 %

Total Adj. EBITDA margin

40.3 %

39.0 %

40.3 %

39.4 %

Operating Income Margin

22.0%

21.7 %

20.0 %

21.7 %

Net Income attributable to La Quinta Holdings' stockholders

20,997

17,812

17.9%

12,817

22,570

(43.2) %

Earnings per share – basic and diluted

0.16

0.15

6.6%

0.10

0.19

(47.4) %

Adjusted Net Income

18,237

22,570

(19.2) %

 

(1)

Please see the schedules to this press release for an explanation of the basis of the pro forma presentation and 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 as if these fees had been in place for all periods presented.

(2)

Changes in terms of percentage is not meaningful.

 

Comparable hotel statistics

Three months ended September 30, 2014

Variance 2014 vs. 2013

Owned Hotels

Occupancy

70.9 %

       306 bps

ADR

$                 80.04

4.5 %

RevPAR

$                 56.78

9.2 %

Franchised Hotels

Occupancy

72.6 %

       252 bps

ADR

$                 93.25

4.9 %

RevPAR

$                 67.67

8.7 %

System-wide

Occupancy

71.7 %

       282 bps

ADR

$                 85.91

4.6 %

RevPAR

$                 61.56

8.9 %

Development

Over the last twelve months, the Company has grown its franchise base 8% and, in the third quarter, opened its 500th franchise property.  During the third quarter, the Company opened 7 franchised hotels with over 600 rooms and achieved net system-wide growth of 6 hotels with approximately 500 rooms.  The Company has opened 31 franchised hotels with approximately 3,000 rooms through September 30, 2014 and, consistent with a recent history of over 40% of annual franchise hotel openings occurring in the fourth quarter, remains on track to open 45 to 50 hotels in 2014. As of September 30, 2014, the Company had a pipeline of 196 franchised hotels totaling over 16,000 rooms, to be located in the United States, Mexico, Canada, Colombia, Honduras, Nicaragua, and Guatemala.

The Company's system-wide portfolio, as of September 30, 2014, consisted of 854 hotels representing approximately 85,500 rooms located predominantly across 47 U.S. states, as well as in Canada and Mexico. This portfolio includes 353 owned and operated hotels and 501 franchised hotels.

 

September 30, 2014

September 30, 2013

# of hotels

# of rooms

# of hotels

# of rooms

Owned (1)

352

44,800

355

45,200

Joint Venture

1

200

1

200

Previously Managed Hotels(2)

14

1,700

Franchised

501

40,500

466

37,300

Totals

854

85,500

836

84,400

 

(1)

For September 30, 2013, Owned hotels includes 17 hotels designated as assets held for sale, all of which have been sold as of September 30, 2014.

(2)

At the time of the IPO, April 14, 2014, we acquired the Previously Managed Hotels; as such they are included in Owned hotels as of September 30, 2014.

Balance Sheet and Liquidity

During the quarter, the Company made a voluntary prepayment of $75.0 million on its senior secured term loan facility, for a total of $155.0 million of voluntary prepayments in 2014. As of September 30, 2014, the Company had approximately $1.9 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.5%, including the impact of an interest rate swap. Total cash and cash equivalents was $108.5 million as of September 30, 2014.

Outlook

Based upon management's current estimates, the Company is increasing its guidance for full year 2014 and is expecting:

Updated Guidance

Prior Guidance

RevPAR growth on a system-wide comparable hotel basis

7.0 percent to 7.5 percent

6.0 percent to 7.0 percent

Pro forma Adjusted EBITDA

$370 million to $375 million

$367 million to $372 million

Capital expenditures

$75 million to $79 million

$71 million to $77 million

Franchise hotel openings

45 to 50

45 to 50

Webcast and Conference Call

La Quinta Holdings Inc. will host a conference call to discuss third quarter 2014 results on Wednesday, October 22, 2014 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 October 22, 2014 through midnight Eastern Time on November 5, 2014. 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 13591706. 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 prospectus dated April 8, 2014, filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424(b) of the Securities Act on April 9, 2014, 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. 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 850 La Quinta Inn & Suites™ and La Quinta Inn™ branded hotels representing more than 85,000 rooms located in 47 states, as well as Canada and Mexico. La Quinta's team is committed to providing guests with a refreshing and engaging experience. For more information, please visit: www.LQ.com.

 

 

LA QUINTA HOLDINGS INC.

HISTORICAL STATEMENTS OF OPERATIONS

(unaudited, in thousands)

Three months ended September 30,

Nine months ended September 30,

2014

2013

2014

2013

Revenues:

Room revenues

$       234,658

$      205,741

$       649,181

$      585,294

Franchise and other fee-based revenues

25,224

22,226

68,215

59,846

Other hotel revenues

5,078

4,657

14,809

13,650

264,960

232,624

732,205

658,790

Brand marketing fund revenues from franchise and managed properties

6,158

5,411

16,511

14,594

Total revenues

271,118

238,035

748,716

673,384

Operating expenses:

Direct lodging expenses

101,076

91,567

285,430

264,208

Depreciation and amortization

45,086

41,484

129,948

122,694

General and administrative expenses

32,251

12,989

100,863

49,724

Other lodging and operating expenses

15,589

13,346

46,124

39,666

Marketing, promotional and other advertising expenses

16,639

21,560

50,170

54,226

Impairment loss

5,157

210,641

180,946

617,692

530,518

Brand marketing fund expenses from franchise and managed properties

6,158

5,411

16,511

14,594

Total operating expenses

216,799

186,357

634,203

545,112

Operating income

54,319

51,678

114,513

128,272

Other income (expenses):

Interest expense, net

(24,495)

(38,228)

(97,260)

(110,746)

Loss on extinguishment of debt, net

(2,030)

Other income (loss)

(795)

591

(1,096)

1,057

Total other income (expenses)

(25,290)

(37,637)

(100,386)

(109,689)

Income from continuing operations before income taxes

29,029

14,041

14,127

18,583

Income tax provision

(16,162)

(1,006)

(21,860)

(2,526)

Recognition of net deferred tax liabilities upon C-corporation conversion

(321,054)

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

12,867

13,035

(328,787)

16,057

Income (Loss) on discontinued operations, net of tax

9,941

(503)

(6,303)

Net income (loss)

12,867

22,976

(329,290)

9,754

Income from noncontrolling interests in continuing operations, net of tax

(50)

(406)

(3,814)

(1,106)

Income from noncontrolling interests in discontinued operations, net of tax

Net income attributable to noncontrolling interests

(50)

(406)

(3,814)

(1,106)

Amounts attributable to La Quinta Holdings' stockholders

Income (loss) from continuing operations, net of tax

12,817

12,629

(332,601)

14,951

Income (loss) from discontinued operations, net of tax

9,941

(503)

(6,303)

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

$       12,817

$      22,570

$    (333,104)

$        8,648

 

RECONCILIATIONS

Prior to the IPO, 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 the refinancing transactions described below (together with the IPO, the "IPO Transactions").

The unaudited pro forma financial data for the three-month and nine month periods ended September 30, 2014 and 2013 are presented as if the IPO Transactions all had occurred on January 1, 2013 for the purposes of the unaudited pro forma combined statements of operations. 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 initial income tax impact of the La Quinta Predecessor Entities and the Previously Managed Portfolio being owned by a "C" corporation, 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, and a reconciliation of Adjusted Net Income and Adjusted Earnings Per Share to Net Income and Earnings Per Share. 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 Adjusted Net Income and Adjusted Earnings Per Share provides meaningful information because it 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. See the definitions of "EBITDA", "Adjusted EBITDA", "Adjusted Net Income" and "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 September 30, 2014

Three months ended September 30, 2013

Historical

Adjustments

Pro Forma

Historical

Adjustments

Pro Forma

Revenues:

Room revenues

$       234,658

$                —

$      234,658

$      205,741

$             9,112

$      214,853

Franchise and other fee-based revenues

25,224

25,224

22,226

(547 )

21,679

Other hotel revenues

5,078

5,078

4,657

116

4,773

264,960

264,960

232,624

8,681

241,305

Brand marketing fund revenues from franchise and managed properties

6,158

6,158

5,411

(228)

5,183

Total revenues

271,118

271,118

238,035

8,453

246,488

Operating expenses:

Direct lodging expenses

101,076

101,076

91,567

5,002

96,569

Depreciation and amortization

45,086

(31)

45,055

41,484

1,549

43,033

General and administrative expenses

32,251

(5,393)

26,858

12,989

(143)

12,846

Other lodging and operating expenses

15,589

15,589

13,346

423

13,769

Marketing, promotional and other advertising expenses

16,639

16,639

21,560

21,560

210,641

(5,424)

205,217

180,946

6,831

187,777

Brand marketing fund expenses from franchise and managed properties

6,158

6,158

5,411

(228)

5,183

Total operating expenses

216,799

(5,424)

211,375

186,357

6,603

192,960

Operating income

54,319

5,424

59,743

51,678

1,850

53,528

Other income (expenses):

Interest expense, net

(24,495)

625

(23,870)

(38,228)

13,848

(24,380)

Other income (loss)

(795)

(795)

591

591

Total other income (expenses)

(25,290)

625

(24,665)

(37,637)

13,848

(23,789)

Income from continuing operations before income taxes

29,029

6,049

35,078

14,041

15,698

29,739

Income tax provision

(16,162)

2,131

(14,031)

(1,006)

(10,889)

(11,895)

Income from continuing operations, net of tax

12,867

8,180

21,047

13,035

4,809

17,844

Net income  (1)                     

12,867

8,180

21,047

13,035

4,809

17,844

Income from noncontrolling interests in continuing operations, net of tax.

(50)

(50)

(406)

374

(32)

Net income attributable to noncontrolling interests (1)

(50)

(50)

(406)

374

(32)

Amounts attributable to La Quinta Holdings' stockholders

Income from continuing operations, net of tax

12,817

8,180

20,997

12,629

5,183

17,812

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

$       12,817

$             8,180

$      20,997

$      12,629

$             5,183

$      17,812

(1)

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

 

 

PRO FORMA FINANCIAL INFORMATION AND NET INCOME RECONCILIATION

(unaudited, in thousands)

Nine months ended September 30, 2014

Nine months ended September 30, 2013

Historical

Adjustments

Pro Forma

Historical

Adjustments

Pro Forma

Revenues:

Room revenues

$       649,181

$           12,814

$      661,995

$      585,294

$           29,151

$      614,445

Franchise and other fee-based revenues

68,215

(732)

67,483

59,846

(1,738)

58,108

Other hotel revenues

14,809

159

14,968

13,650

349

13,999

732,205

12,241

744,446

658,790

27,762

686,552

Brand marketing fund revenues from franchise and managed properties

16,511

(321)

16,190

14,594

(729)

13,865

Total revenues

748,716

11,920

760,636

673,384

27,033

700,417

Operating expenses:

Direct lodging expenses

285,430

5,832

291,262

264,208

14,884

279,092

Depreciation and amortization

129,948

1,573

131,521

122,694

4,812

127,506

General and administrative expenses

100,863

(31,617)

69,246

49,724

(94)

49,630

Other lodging and operating expenses

46,124

944

47,068

39,666

2,084

41,750

Marketing, promotional and other advertising expenses

50,170

50,170

54,226

54,226

Impairment loss

5,157

5,157

617,692

(23,268)

594,424

530,518

21,686

552,204

Brand marketing fund expenses from franchise and managed properties

16,511

(321)

16,190

14,594

(729)

13,865

Total operating expenses

634,203

(23,589)

610,614

545,112

20,957

566,069

Operating income

114,513

35,509

150,022

128,272

6,076

134,348

Other income (expenses):

Interest expense, net

(97,260)

25,768

(71,492)

(110,746)

36,845

(73,901)

Loss on extinguishment of debt, net

(2,030)

2,030

Other income (loss)

(1,096)

(1,096)

1,057

1,057

Total other income (expenses)

(100,386)

27,798

(72,588)

(109,689)

36,845

(72,844)

Income from continuing operations before income taxes

14,127

63,307

77,434

18,583

42,921

61,504

Income tax provision

(21,860)

(9,113)

(30,973)

(2,526)

(22,076)

(24,602)

Recognition of net deferred tax liabilities upon C-corporation conversion

(321,054)

321,054

Income (loss) from continuing operations, net of tax

(328,787)

375,248

46,461

16,057

20,845

36,902

Net income (loss) (1)

(328,787)

375,248

46,461

16,057

20,845

36,902

Income loss from noncontrolling interests in continuing operations, net of tax

(3,814)

3,489

(325)

(1,106)

803

(303)

Net income attributable to noncontrolling interests (1)

(3,814)

3,489

(325)

(1,106)

803

(303)

Amounts attributable to La Quinta Holdings' stockholders

Income (loss) from continuing operations, net of tax

(332,601)

378,737

46,136

14,951

21,648

36,599

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

$    (332,601)

$         378,737

$      46,136

$      14,951

$           21,648

$      36,599

 

(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

Three months

Three months

Three months

ended

ended

ended

ended

September 30,  2014

September 30,  2013

September 30,  2014

September 30,  2013

Operating income

$          59,743

$          53,528

$          54,319

$          51,678

Interest expense, net

(23,870)

(24,380)

(24,495)

(38,228)

Other income (loss)

(795)

591

(795 )

591

Income tax provision

(14,031)

(11,895)

(16,162)

(1,006)

Income from noncontrolling interest

(50)

(32)

(50)

(406)

Income on discontinued operations, net of tax

9,941

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

20,997

17,812

12,817

22,570

Interest expense

23,875

24,438

24,500

38,290

Income tax provision

14,031

11,895

16,162

969

Depreciation and amortization

45,321

43,357

45,352

41,796

Non-controlling interest

50

32

50

406

EBITDA

104,274

97,534

98,881

104,031

Income from discontinued operations

(1,533)

Gain on sale from discontinued operations

(7,694)

(Gain) loss on retirement of assets

(4)

Gain related to casualty disasters

(108)

(506)

(108)

(739)

Equity based compensation

3,207

8,600

Other (gains) losses, net

1,924

(790)

1,924

(314)

Adjusted EBITDA

$        109,297

$          96,238

$        109,297

$          93,747

 

 

 

PRO FORMA AND HISTORICAL ADJUSTED EBITDA NON-GAAP RECONCILIATION

(unaudited, in thousands)

Pro forma

Historical

Nine months

Nine months

Nine months

Nine months

ended

ended

ended

ended

September 30,  2014

September 30,  2013

September 30,  2014

September 30,  2013

Operating income

$       150,022

$        134,348

$        114,513

$        128,272

Interest expense, net

(71,492)

(73,901)

(97,260)

(110,746)

Other income (loss)

(1,096)

1,057

(1,096)

1,057

Loss on extinguishment of debt, net

(2,030)

Income tax provision

(30,973)

(24,602)

(21,860)

(2,526)

Recognition of net deferred tax liabilities upon C-corporation conversion

(321,054)

Income from noncontrolling interest

(325)

(303)

(3,814)

(1,106)

Loss on discontinued operations, net of tax

(503)

(6,303)

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

46,136

36,599

(333,104)

8,648

Interest expense

71,532

74,059

97,300

110,908

Income tax provision

30,973

24,602

21,860

2,573

Recognition of net deferred tax liabilities upon C-corporation conversion

321,054

Depreciation and amortization

132,288

128,489

130,711

128,711

Non-controlling interest

325

303

3,814

1,106

EBITDA

281,254

264,052

241,635

251,946

Fixed asset impairment loss

5,157

5,308

19,913

(Income) loss from discontinued operations

377

(8,420)

Gain on sale from discontinued operations

(7,694)

Loss on retirement of assets

51

47

Gain related to casualty disasters

(1,098)

(1,524)

(1,106)

(2,611)

Loss on extinguishment of debt, net

2,030

Equity based compensation

8,036

39,703

Other (gains) losses, net

2,570

849

2,312

3,034

Adjusted EBITDA

$        295,919

$        263,428

$        290,259

$        256,215

 

 

 

PRO FORMA AND HISTORICAL SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION

(unaudited, in thousands)

Three months ended September 30, 2014

Three months ended September 30, 2013

Historical

Adjustments

Pro Forma

Historical

Adjustments (1)

Pro Forma

Revenues:

Owned hotels

$      241,266

$                 —

$      241,266

$      211,569

$             8,057

$      219,626

Franchise and management

29,054

29,054

15,233

10,626

25,859

Segment revenues

270,320

270,320

226,802

18,683

245,485

Other fee-based revenues from franchise and managed properties

6,158

6,158

5,411

(228)

5,183

Corporate and other 

34,026

34,026

26,733

4,297

31,030

Intersegment elimination

(39,386)

(39,386)

(20,911)

(14,299)

(35,210)

Total revenues

$    271,118

$                 —

$    271,118

$    238,035

$             8,453

$    246,488

Adjusted EBITDA:

Owned hotels

$        87,951

$                 —

$        87,951

$        88,997

$         (12,432)

$        76,565

Franchise and management

29,054

29,054

15,233

10,626

25,859

Segment Adjusted EBITDA

117,005

117,005

104,230

(1,806 )

102,424

Corporate and other

(7,708)

(7,708)

(10,483)

4,297

(6,186)

Total Adjusted EBITDA

$    109,297

$                 —

$    109,297

$      93,747

$             2,491

$      96,238

 

(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, 2013; 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, 2013. 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.

 

 

 

PRO FORMA AND HISTORICAL SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION

(unaudited, in thousands)

Nine months ended September 30, 2014

Nine months ended September 30, 2013

Historical

Adjustments (1)

Pro Forma

Historical

Adjustments (1)

Pro Forma

Revenues:

Owned hotels

$      667,564

$           10,929

$      678,493

$      601,504

$           26,940

$      628,444

Franchise and management

68,977

11,729

80,706

42,232

30,146

72,378

Segment revenues

736,541

22,658

759,199

643,736

57,086

700,822

Other fee-based revenues from franchise and managed properties

16,511

(321)

16,190

14,594

(729 )

13,865

Corporate and other

88,054

4,633

92,687

74,424

12,289

86,713

Intersegment elimination

(92,390)

(15,050)

(107,440)

(59,370)

(41,613)

(100,983)

Total revenues

$    748,716

$           11,920

$    760,636

$    673,384

$           27,033

$    700,417

Adjusted EBITDA:

Owned hotels

$      249,226

$         (10,702)

$      238,524

$      246,171

$         (35,222)

$      210,949

Franchise and management

68,977

11,729

80,706

42,232

30,146

72,378

Segment Adjusted EBITDA

318,203

1,027

319,230

288,403

(5,076 )

283,327

Corporate and other

(27,944)

4,633

(23,311)

(32,188)

12,289

(19,899)

Total Adjusted EBITDA

$    290,259

$             5,660

$    295,919

$    256,215

$             7,213

$    263,428

 

(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, 2013; 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, 2013. 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.

 

 

 

PRO FORMA ADJUSTED EBITDA NON-GAAP RECONCILIATION

OUTLOOK: FORECASTED 2014

(unaudited, in thousands)

Year Ended December 31, 2014

Low Case

High Case

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

$     50,551

$      53,551

Interest expense (2)

96,503

96,503

Income tax provision

33,988

35,988

Depreciation and amortization

174,515

174,515

Non-controlling interest

420

420

EBITDA

355.977

360,977

Fixed asset impairment loss

5,157

5,157

Share based compensation expense (3)

11,071

11,071

Other (gains) losses, net

(2,205)

(2,205)

Adjusted EBITDA

$    370,000

$    375,000

 

(1)

This table provides a reconciliation of forward-looking forecasted Adjusted EBITDA to net income attributable to La Quinta Holdings' stockholders before adjustments which include (i) one-time net tax expense, which reflects the establishment of a net deferred tax liability associated with the La Quinta Predecessor Entities becoming owned by La Quinta Holdings Inc., a "C" corporation for income tax purposes, (ii) certain of our share based compensation which reflects the exchange of ownership units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock, 80% of which vest within one year of the IPO, and (iii) loss on extinguishment of the historical debt that was refinanced on April 14, 2014.

(2)

Includes interest expense for $1.9 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.5%, including the impact of an interest rate swap.

(3)

Reflects share based compensation expense other than compensation expense related to exchange of ownership units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock.

 

 

 

ADJUSTED NET INCOME AND

PRO FORMA AND ADJUSTED EARNINGS PER SHARE

NON-GAAP RECONCILIATION

(unaudited, in thousands, except per share data)

Historical three months

Pro forma three months

Historical three months

Pro forma three months

ended

ended

ended

ended

September 30,  2014

September 30,  2014

September 30,  2013

September 30,  2013

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

$          12,817

$          20,997

$          22,570

$          17,812

Equity- based compensation(2)               

5,420

Adjusted Net Income Attributable to La Quinta Holdings' stockholders

$          18,237

$          20,997

$          22,570

$          17,812

Weighted average common shares outstanding, basic      

127,734

127,734

121,996

121,996

Weighted average common shares outstanding, diluted

128,494

128,494

121,996

121,996

Earnings per share, basic and diluted

$               0.10

$               0.16

$               0.19

$               0.15

Adjusted Earnings per share, basic and diluted

$               0.14

$               0.19

 

(1)

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

(2)

Share based compensation adjustment, which reflects the expense to exchange Units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock, 80% of which vest within one year of the IPO.

 

Historical nine months

Pro forma nine months

Historical nine months

Pro forma nine months

ended

ended

ended

ended

September 30,  2014

September 30,  2014

September 30,  2013

September 30,  2013

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

$       (333,104)

$          46,136

$            8,648

$          36,599

Recognition of net deferred tax liabilities upon C-corporation conversion (2)  

321,054

Equity- based compensation(3)               

31,667

Impairment loss        

5,157

Loss on extinguishment of debt            

2,030

Adjusted Net Income Attributable to La Quinta Holdings' stockholders

$          26,804

$          46,136

$            8,648

$          36,599

Weighted average common shares outstanding, basic      

125,542

125,542

121,996

121,996

Weighted average common shares outstanding, diluted

126,084

126,084

121,996

121,996

Earnings per share, basic and diluted

$              (2.65)

$               0.37

$               0.07

$               0.30

Adjusted Earnings per share, basic and diluted

$               0.21

$               0.07

 

(1)

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

(2)

One-time net tax expense, which reflects the establishment of a net deferred tax liability associated with the La Quinta Predecessor Entities becoming owned by La Quinta Holdings Inc., a "C" corporation for income tax purposes.

(3)

Share based compensation adjustment, which reflects the expense to exchange Units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock, 80% of which vest within one year of the IPO.

 

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.

"Adjusted Net Income" and "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 Adjusted Net Income and Adjusted Earnings Per Share may not be comparable to similarly titled measures of other companies.

Adjusted Net Income and 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.

"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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