Compared to Last Year; Eliminates 60 Corporate Positions
|DALLAS, Feb. 25, 2002 - La Quinta® Corporation (NYSE: LQI)
today announced financial results for the fourth quarter and full year
ended December 31, 2001. La Quinta will hold a conference call today
to discuss these results and other matters.
La Quinta’s operating results continued to be impacted by the slowdown in travel and a decline in lodging demand resulting from the U.S. economic downturn and the September 11 terrorist attacks, which were partially offset by continuing cost control measures. La Quinta’s results were also affected by the sale of certain healthcare assets to reduce debt.
Fourth quarter total revenue was $125.5 million, a 28.4% decline compared to 2000. Full year total revenue was $651.4 million, a 20.1% decline compared to 2000.
Fourth quarter total Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was $34.8 million, a 55.3% decline compared to 2000. Full year total EBITDA was $274.5 million, a 35.4% decline compared to 2000. A detailed schedule reconciling earnings available to common shareholders to EBITDA is included in the supplemental tables.
Fourth quarter earnings available to common shareholders were ($256.6) million, or ($1.79) per share in 2001, versus ($49.1) million, or ($0.34) per share, in 2000. Full year earnings available to common shareholders were ($300.4) million, or ($2.10) per share, in 2001 versus ($352.2) million, or ($2.48) per share, in 2000.
Excluding non-recurring items, recurring earnings were ($22.5) million, or ($0.16) per share, and ($0.9) million, or ($0.01) per share, for the fourth quarter of 2001 and 2000, respectively. Significant non-recurring expenses include the write-off of the paired share REIT goodwill, impairment on real estate assets, mortgages and notes receivable, provision for loss on equity securities and other non-recurring expenses. A detailed schedule reconciling earnings available to common shareholders to recurring earnings is included in the supplemental tables.
Excluding non-recurring items, recurring earnings were $15.0 million, or $0.10 per share, and $49.8 million, or $0.35 per share, for the full year of 2001 and 2000, respectively. Significant non-recurring expenses include the write-off of the paired share REIT goodwill, impairment on real estate assets, mortgages and notes receivable, provision for loss on equity securities and other non-recurring expenses. A detailed schedule reconciling earnings available to common shareholders to recurring earnings is included in the supplemental tables.
Lodging related revenues for the fourth quarter were $116.4 million, a decrease of 14.0% compared to last year. The decrease is due to a decline in average daily rates (ADR) and occupancy. Occupancy for comparable hotels declined 5.8 percentage points to 53.2% during the fourth quarter, reflecting lower demand from business and leisure travelers. ADR for comparable hotels fell 5.2% to $57.72 during the fourth quarter, primarily reflecting a change in the mix of business in response to reduced demand. As a result, revenue per available room (RevPAR) for comparable hotels declined 14.6% to $30.68 during the fourth quarter. For the full year, lodging revenues declined 5.0% to $574.2 million. Occupancy for comparable hotels declined 1.4 percentage points to 62.4% and ADR fell 2.8% to $61.22. RevPAR for comparable hotels declined 4.9% to $38.19 for the full year.
Lodging EBITDA for the fourth quarter was $29.6 million, a 26.4% decrease over the same period last year. For the full year, lodging EBITDA declined 7.8% from last year to $209.5 million.
Commenting on La Quinta’s fourth quarter, Francis W. (“Butch”) Cash, President and Chief Executive Officer, said, “We continued to feel the effects in the fourth quarter of the travel slowdown and resulting decline in lodging demand. Many airport and urban locations underperformed the overall portfolio while “drive-to” markets and highway locations outperformed.”
“Our continued focus on cost management helped to limit our lodging EBITDA decline in the fourth quarter,” said Mr. Cash. “Our hotel managers did an excellent job of adjusting staffing levels without impacting guest satisfaction. Also, effective January 1, 2002, we implemented a company-wide wage freeze and a voluntary 10% salary reduction for the executive team that will help control our largest cost—labor.”
“After completing a detailed review of our corporate infrastructure, we have identified ways to do more with less. As a result, in the fourth quarter we eliminated 60 corporate positions and one executive position, comprising 12% percent of our corporate headcount, and realigned other positions so that our corporate staff can better service the hotel operations they support. After recording a one-time charge of $3.8 million in the fourth quarter, we expect these changes will produce labor savings of approximately $5 million in 2002. In addition, the Company has identified several million dollars of non-labor related savings. These cost initiatives will be partially offset by increased spending on product and service quality control programs and information system capabilities as we continue to enhance our business.”
“We are also seeing positive results from hotels that have undergone renovation in the Gold Medal Lite program,” continued Mr. Cash. “As a result, we are accelerating the program to complete work on the remaining 122 Inns by early 2003. We want these hotels positioned for the return in demand that is anticipated later this year.”
“We are very pleased with the progress we have made in our franchising program,” said Mr. Cash. “At the end of the fourth quarter, we had 11 franchise properties (1,000 rooms) open and 29 franchise agreements (2,300 rooms) approved. In January, we announced the signing of a franchise agreement with Hospitality Associates to open 31 hotels (2,038 rooms) by mid-year. The Hospitality Associates transaction increases our presence in the West and Pacific Northwest and brings two new states-Montana and Idaho-into our national distribution. With the success of our franchising program, we have increased our franchise growth goal to having 80 properties (6,000 rooms) open by the end of 2002.”
During the fourth quarter, the Company opened two redeveloped company-owned properties in Dallas, Texas and San Antonio, Texas. For the year, La Quinta also sold six hotels and lodging-related properties for gross proceeds of $13.9 million and recorded a gain of approximately $85,000 after previously recorded impairments of $11.0 million. After conducting a review of its lodging portfolio based on certain market, financial, and service quality benchmarks, La Quinta has identified an additional 19 hotels which it intends to sell. For the year, the Company recorded $45.4 million of impairments related to these 19 properties bringing their net book value to $52.7 million.
Healthcare revenues for the fourth quarter were $9.1 million, a 77.2% decrease over the same period last year. Fourth quarter EBITDA for the healthcare segment declined 86.0% from last year to $5.3 million. For the full year, healthcare revenues declined 63.4% to $77.3 million and healthcare EBITDA declined 67.1% to $65.1 million. The decrease in healthcare revenues and EBITDA is primarily the result of the impact of the sale of certain healthcare assets.
During the fourth quarter, La Quinta received approximately $83 million in gross proceeds from the sale of certain healthcare assets and receipt of mortgage repayments. The Company recorded a $616,000 gain related to these transactions. La Quinta had previously recorded impairment charges of approximately $10 million related to these assets. The remaining healthcare portfolio at December 31, 2001 had a net book value of $235.9 million after impairments.
During the fourth quarter, La Quinta repaid $54 million of debt due in the fourth quarter and prepaid $43 million of debt with later maturities. At December 31, 2001, total indebtedness was $1 billion of which $35 million matures in 2002. La Quinta’s cash position at the end of the year was $137.7 million with no current borrowings under the Company’s $225 million revolving line of credit.
David L. Rea, Executive Vice President and Chief Financial Officer, said, “Over the past year, we have substantially strengthened La Quinta’s balance sheet. With the reduction of almost $600 million of debt, we have decreased our annual interest expense by 45% over last year. Our net debt-to-total capitalization has been reduced from 40% to 30%.”
“Our balance sheet is supported by strong cash flow,” said Mr. Rea. “For the full year, La Quinta generated over $140 million in cash flow from operations. Combined with our cash balances, proceeds from potential asset sales, and availability under our line of credit, we believe La Quinta is in good financial shape to continue managing through this challenging environment as well as to pursue growth opportunities.”
On December 20, 2001, shareholders approved the corporate restructuring that would make La Quinta Properties, Inc. a subsidiary of La Quinta Corporation. On January 2, 2002, the restructuring became effective. The Company recorded a non-cash charge of $169.4 million during the fourth quarter of 2001 to write-off intangibles associated with its grandfathered paired-share REIT structure which will eliminate approximately $4.7 million of amortization expense on an annual basis going forward. La Quinta also incurred $6.2 million of professional fees and other expenses related to the restructuring during the fourth quarter of 2001.
In the first quarter of 2002, La Quinta anticipates recording a one-time non-cash charge of approximately $196 million to establish a net deferred tax liability in conjunction with the completion of the restructuring. In addition, beginning in the first quarter, the Company will begin recognizing an income tax expense which is currently estimated to be at a 38% effective tax rate for 2002. At December 31, 2001, the Company, on a consolidated basis, had approximately $340 million of net operating loss tax carryforwards available to shield future taxable income.
Outlook for 2002
“Another challenging year lies ahead for the lodging industry, especially during the first half,” said Mr. Cash. “Industry RevPAR is currently expected to be slightly negative for the year with the first half of the year showing continued negative RevPAR performance. Assuming the U.S. economy shows meaningful improvement during the first half of the year, the second half of the year should lead to positive RevPAR growth for the industry.”
For the first quarter of 2002, La Quinta currently anticipates a RevPAR decline of approximately 12%. The first quarter 2002 comparison is expected to be the Company’s toughest because of the positive RevPAR gains we reported in the first quarter of 2001. Lodging EBITDA is currently anticipated to decline to approximately $40 million in the first quarter. La Quinta anticipates incurring expenses related to various marketing programs and information systems enhancements in first quarter 2002 that were not in first quarter 2001. EPS is currently anticipated to be between ($3.15) and ($3.25) in the first quarter.
On January 1, 2002, La Quinta implemented Statement of Financial Accounting Standards No. 142 regarding accounting for goodwill and other intangibles. As a result, in the first quarter of 2002, La Quinta expects to record a charge of approximately $259.0 million to reflect a write-down of goodwill which will eliminate approximately $16.5 million of goodwill amortization on an annual basis going forward. Excluding non-recurring charges, recurring EPS is currently anticipated to be a slight loss for the first quarter. Assuming a gradual improvement in the business climate, La Quinta currently anticipates full year 2002 RevPAR growth to be flat over the prior year with negative RevPAR growth in the first half of the year and positive growth in the second half. Lodging EBITDA is currently anticipated to be flat over the prior year. Healthcare EBITDA is anticipated to continue to decline as assets are sold. Full year EPS is currently anticipated to be between ($3.10) and ($3.20) reflecting the non-cash charges previously mentioned. Excluding non-recurring charges, recurring EPS is currently anticipated to be approximately $0.04 to $0.09 for the full year. Capital expenditures for the year are anticipated to be approximately $120 million.
“Over the course of 2001, we made significant financial and strategic
changes in order to grow La Quinta and enhance shareholder value,” said
Mr. Cash. “Management’s goal is to increase La Quinta’s lodging EBITDA
by at least 50% from its current $209 million level over the next three
years. During that time period, we believe we can increase company-owned
hotel EBITDA back towards its historic levels, redeploy our capital in
investments that can generate attractive rates of return, and continue
to grow our franchising program.” “With the foundation we have laid in
2001, we are optimistic about the future of La Quinta,” said Mr. Cash.
“As the economy recovers, we expect lodging demand will return. Industry
analysts are currently forecasting little supply growth over the next several
years. RevPAR growth should follow these positive lodging fundamentals.
La Quinta has a strong balance sheet, significant cash flow, a valuable
lodging brand with a loyal customer base and a management team with a proven
track record. We believe La Quinta is well-positioned to deliver
on its future growth plans.”
Dallas-based La Quinta Corporation (NYSE: LQI), a mid-scale limited service lodging company, owns, operates or franchises over 300 La Quinta Inns® and La Quinta Inn & Suites® in 32 states.
Certain matters discussed in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
La Quinta Corporation
|Also See||La Quinta Announces New Corporate Structure, Will Forego Paired Share REIT Status - Will Facilitate Owning and Operating Hotels / October 2001|
|The Meditrust Companies Agree to Acquire La Quinta Inns for $3.0 Billion / Jan 1998|