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La Quinta Corporation Reports 3rd Qtr Net Loss of $9 million
versus Net Loss of $27 million in 2002, RevPAR
for Company Owned Hotels Up 8%
La Quinta Summary Lodging Statistics

 
DALLAS, Oct. 30 - La Quinta Corporation (NYSE: LQI) today announced financial results for the third quarter ended September 30, 2003.

The Company reported the following financial results.  A detailed schedule reconciling net loss to Adjusted EBITDA is included in the supplemental tables.

For the third quarter 2003, La Quinta reported:

  • Revenues of $142 million, a 6% increase compared to 2002.
  • Net loss of $9 million, or ($0.06) per share, versus net loss of $27 million, or ($0.19) per share, in 2002.
  • RevPAR for total company owned hotels of $39.63, an 8% increase compared to 2002.
  • Adjusted EBITDA of $49 million, a 16% increase compared to 2002.
"We are very pleased with our third quarter results," said Francis W.  ("Butch") Cash, President and Chief Executive Officer.  "The emphasis we have placed on guest satisfaction and revenue improvement, coupled with expense management, has driven our strong RevPAR and Adjusted EBITDA performance.  Industry fundamentals are improving, as supply growth remains low amidst strengthening demand."

Operating Results

La Quinta's total company RevPAR increased 8% during the third quarter, with the improvement driven by increased occupancy.  In addition, La Quinta improved its performance relative to its local market competition.  For the quarter, in the Company's top ten markets -- Dallas/Ft. Worth, Houston, Denver, San Antonio, Austin, New Orleans, Atlanta, Orlando, Miami/Ft.  Lauderdale and Phoenix -- RevPAR of La Quinta's direct competitors declined 1% while La Quinta's RevPAR increased 3%.  RevPAR of La Quinta's direct competitors in all markets increased 2% while La Quinta's comparable RevPAR increased 7%.

"We have made substantial improvements in our RevPAR results," said Mr.  Cash.  "RevPAR growth during the quarter exceeded that of our local markets as well as the national averages.  Our customer satisfaction scores have continued to increase over the prior year.  The initiatives we have focused on this year are resulting in strong revenue improvements.  Third quarter 2003 revenues from electronic distribution increased 54% from third quarter 2002 and revenues from our frequent stayer program have now increased to approximately 30% of total revenues."

During the third quarter, franchise rooms increased by 752 rooms (7 hotels).  As of September 30, 2003, La Quinta had nearly doubled the number of franchise rooms to 7,435 compared to September 30, 2002 and continues to anticipate having approximately 9,000 rooms open by the end of this year.

Financial Results

La Quinta reported a net loss of $9 million, or ($0.06) per share, for the third quarter of 2003 compared to a net loss of  $27 million, or ($0.19) per share, for the third quarter of 2002.  La Quinta intends to sell its non-strategic business, TeleMatrix, within the next 12 months.  As a result, the financial results for TeleMatrix and one hotel have been moved to discontinued operations.   In the third quarter of 2003, loss before discontinued operations was ($0.04) per share compared to loss before discontinued operations of ($0.13) per share in the third quarter of 2002.  The decrease in net loss was primarily due to revenue improvements driven by the Company's initiatives and lower impairments taken on property, plant and equipment.  During the third quarter, La Quinta recorded $3 million of non-cash charges for impairments compared to $29 million for the third quarter of 2002.

Adjusted EBITDA for the third quarter was $49 million, a 16% increase compared to the third quarter of 2002 primarily as a result of revenue improvement.  "In addition to driving revenues, our Inn managers did an excellent job of leveraging our revenue growth by reducing cost per occupied room," said Mr. Cash.

At September 30, 2003, La Quinta had total indebtedness of $895 million, cash of $119 million, and short-term investments of $117 million.  Included in total indebtedness is $150 million principal amount of 7.114% Notes issued by La Quinta as part of a 1997 financing.  The Notes are held by a trust, which has issued $150 million of Exercisable Put Option Securities (the "Securities") that pass through payments on the Notes to Securities owners.  The Company currently owns $117 million of the Securities that are classified as short-term investments.  Historically, La Quinta has presented the 7.114% Notes net of the related Securities owned.  Beginning this quarter, the Company will present the related Securities owned separately from the Notes.  Net debt (total indebtedness less cash and short-term investments) at September 30, 2003 was $659 million compared to $679 million at June 30, 2003.

As part of La Quinta's previously announced program to upgrade its lodging portfolio, La Quinta sold one hotel during the third quarter for gross proceeds of approximately $4 million.  As of September 30, 2003, the Company had assets with a net book value of approximately $21 million that it intends to sell.

"The results of our hard work and focused initiatives are reflected in our positive results," said David L. Rea, Executive Vice President and Chief Financial Officer.  "We are encouraged by the improving industry fundamentals and believe the strategic decisions and investments we have made will continue to enhance La Quinta's financial performance."

Current Outlook

For the fourth quarter of 2003, La Quinta currently anticipates total company RevPAR to increase approximately 4% over the fourth quarter of 2002.  Adjusted EBITDA is currently anticipated to be approximately $25 million, reflecting seasonally low demand in the fourth quarter, and net loss per share is currently anticipated to be approximately ($0.12).  The Company continues to anticipate self-funding its 2003 capital expenditures of approximately $60 million.

For the year 2003, La Quinta currently anticipates total company RevPAR to be flat as compared to 2002 and Adjusted EBITDA to be approximately $148 million.  The Company has revised its 2003 RevPAR and Adjusted EBITDA expectations upward to reflect the strong third quarter performance.  The Company anticipates net loss per share to be approximately ($0.63).

La Quinta is in the early stages of budgeting for 2004.  Preliminary expectations for 2004 are for 3% to 4% RevPAR growth, continued growth in franchising, and modest increases in overhead costs.  Capital expenditures for 2004 are anticipated to be approximately $60 million, including $20 million for the redevelopment of our downtown San Antonio property.  The Company will provide further guidance regarding its 2004 outlook when reporting full year 2003 financial results.
 
 

La Quinta Corporation
Schedule A Financial Results (Unaudited)

                                   Three months ended       Nine months ended
    Operating Data:                   September 30,            September 30,
    (In thousands, except
      per share data)               2003        2002         2003        2002
    Revenues
      Lodging                   $140,297   $ 132,682    $ 391,525    $400,204
      Other                        1,270       1,392        3,865      11,344
    Total revenues               141,567     134,074      395,390     411,548
 

    Expenses
      Direct lodging operations   62,595      61,160      177,092     178,284
      Other lodging expenses      18,259      18,629       54,163      52,885
      General and administrative  11,914      12,289       41,011      36,228
      Interest, net               16,203      14,348       46,954      51,510
      Depreciation and
       amortization               32,699      29,241       96,686      91,033
      Impairment of property,
       plant and equipment         3,218      29,187       69,808      29,187
      Other expense (income)         461      (1,771)       7,594     (14,373)

    Total expenses               145,349     163,083      493,308     424,754
    Loss before minority interest,
     income taxes, cumulative
     effect of change in
     accounting principle
     and discontinued operations  (3,782)    (29,009)     (97,918)    (13,206)
      Minority interest           (4,534)     (4,621)     (13,646)    (13,878)
      Income tax benefit (expense) 1,920      15,159       41,353    (186,997)
    Loss before discontinued
     operations and cumulative
     effect of change in
     accounting principle         (6,396)    (18,471)     (70,211)   (214,081) 
Discontinued operations, net       (3,036)     (8,177)      (3,136)    (18,521)
    Loss before cumulative
     effect of change in
     accounting principle         (9,432)    (26,648)     (73,347)   (232,602)
      Cumulative effect of
       change in accounting
        principle                     --          --           --    (248,358)
    Net loss                    $ (9,432)  $ (26,648)   $ (73,347)  $(480,960)
 

    Per Share Data:
    Loss before discontinued
     operations and cumulative
     effect of change in
     accounting principle         $(0.04)     $(0.13)      $(0.49)     $(1.50) 
Discontinued operations, net of tax          (0.02)      (0.06)       (0.02)      (0.13) Cumulative effect of change in accounting principle        --          --           --       (1.73) Net loss per share - basic and assuming dilution  $(0.06)     $(0.19)      $(0.51)  $(3.36)

    Weighted average shares
     outstanding
      Basic                      143,225     143,325      143,116     143,151
      Assuming dilution          143,225     143,325      143,116     143,151

    Prior period results have been reclassified to conform to current period presentation.

                                  Schedule B
                            Other Expense (Income)
                                 (Unaudited)
                                   Three months ended       Nine months ended
                                      September 30,           September 30,
    (In thousands)                 2003          2002       2003         2002
      Provision for loss on
       interest and other
        receivables                 $--        $1,900        $--       $1,900 
Loss (gain) on sale of assets and related costs  34    (3,939)     30    (10,461)
      Loss on early extinguishments
       of debt                       --           558      6,202        1,029
      Gain on settlement             --            29         --       (5,442)
      Other (1)                     427          (319)     1,362       (1,399)
     Total other expense (income)  $461       $(1,771)    $7,594     $(14,373)

    (1) For the three months ended September 30, 2003, other consists primarily of an accrual of lease termination expense, a gain on settlement related to a split dollar life insurance policy and an adjustment of employee retirement plan liability related to on going settlement of obligations under the terminated plan.  Additionally, the nine months ended September 30, 2003 included an adjustment of actuarial assumptions on deferred compensation agreement and changes in net cash surrender values of key man life policies in the healthcare business.
 

                            La Quinta Corporation
                                  Schedule C
                     Supplemental Non-GAAP Financial Data
                                 (Unaudited)
                                    Three months ended    Nine months ended
    Adjusted EBITDA Reconciliation     September 30,         September 30,
    (In thousands)                   2003       2002        2003       2002
    Net loss (per GAAP)           $(9,432) $ (26,648)  $ (73,347) $(480,960)
      Add:
      Depreciation and
       amortization                32,699     29,241      96,686     91,033
      Impairment of property,
       plant and equipment          3,218     29,187      69,808     29,187
      Minority interest             4,534      4,621      13,646     13,878
      Income tax (benefit)
       expense (1)                 (1,920)   (15,159)    (41,353)   186,997
      Cumulative effect of change
       in accounting principle (2)     --         --          --    248,358
      Interest, net                16,203     14,348      46,954     51,510
      Other expense (income) (3)      461     (1,771)      7,594    (14,373)
      Discontinued operations,
       net (4)                      3,036      8,177       3,136     18,521
     Adjusted EBITDA (Non-GAAP)   $48,799    $41,996    $123,124   $144,151

    (1) Income tax expense for the nine months ended September 30, 2002 was $186,997 including net deferred tax expense of $196,520 associated with a non-recurring charge recorded in January 2002 to establish the net deferred tax liability of La Quinta as a result of our legal restructure.
    (2) In January 2002, we adopted the requirements of SFAS 142 and as a result recorded a charge to earnings of approximately $248,358 to reflect an adjustment to goodwill.
    (3) See attached Schedule B for details.
    (4) The Companies have decided to sell one company-owned hotel and TeleMatrix, a non-strategic business.  As a result, the separately identifiable results of operations have been reported as discontinued operations for all periods presented, net of tax.
 

    Adjusted EBITDA Reconciliation
    (Current 2003 Outlook)
    (In millions)

                                          Three Months Ended      Full Year
                                          December 31, 2003            2003
    Net loss (per GAAP)                                $(17)         $ (90)
      Add:
      Depreciation and amortization                      30            127
      Impairment of property, plant
       and equipment                                     --             70
      Minority interest                                   5             18
      Income tax benefit                                (10)           (51)
      Interest, net                                      16             63
      Other expense and discontinued
       operations                                         1             11
    Adjusted EBITDA (Non-GAAP)                          $25           $148
 
 

                            La Quinta Corporation
                                  Schedule D
                        Other Supplemental Information
                                 (Unaudited)

                                      Three months ended    Nine months ended
    Capital Expenditures                 September 30,         September 30,
    (In millions)                     2003          2002    2003          2002

    Capital expenditures                $9           $23     $41           $81
 
 

    Selected Balance Sheet Data
    (In millions)
                                                September 30,   December 31,
                                                     2003            2002
                                                                   (Audited)
    Property, plant and equipment, net             $2,166          $2,302
    Cash and cash equivalents (A)                     119               9
    Investment in securities (B) (1)                  117              56
    Total assets                                    2,621           2,604
    Total indebtedness (C)                            895             721
    Total liabilities                               1,174           1,084
    Minority interest (D)                             206             206

    Total shareholders' equity (E)                  1,241           1,313
    Net debt to total capitalization                   31%             30%
      Equal to (C-B-A)/(E+D+C+-B-A)
    (1) 7.114% Exercisable Put Option Securities (the "Securities") owned by the Company were previously presented as an offset to the $150 million principal amount of the related 7.114% Notes issued by the Company.  The Company has reclassified the Securities as an asset for all periods presented.
 

    Debt Maturity Schedule
    (In millions)

                                                At September 30,
               Year                                     2003
               2003                                       $0
               2004 (1)                                  169
               2005                                      116
               2006                                       20
               2007                                      210
        2008 and thereafter                              380
            Total debt                                   895
    Less: Cash                                           119
    Less: Investment in securities                       117
             Net debt                                  $ 659

    (1) The maturity schedule assumes the $150 million of 7.114% Notes due in 2011 are repaid by the Company at the option of the current holder or due to the Company exercising its call rights.
 

La Quinta Corporation
                                  Schedule E Lodging Statistics (Unaudited)
                         Three months ended              Three months ended
                         September 30, 2003              September 30, 2002
                      Occupancy  Average  RevPAR    Occupancy  Average  RevPAR
                                  Rate                           Rate
    Comparable
     Hotels (1,3)       69.1%    $57.63   $39.84      61.5%    $60.75   $37.34 Company Owned (1)
      Inns              69.0%    $55.12   $38.04      61.2%    $57.67   $35.31
      Inns & Suites     68.9%    $63.73   $43.91      60.6%    $67.76   $41.03
      Total             69.0%    $57.45   $39.63      61.1%    $60.22   $36.77

                                          Change
                                Occupancy  Average  RevPAR
                                            Rate
    Comparable
     Hotels (1,3)                7.6 pts   (5.1)%    6.7%
    Company Owned (1)
      Inns                       7.8 pts   (4.4)%    7.7%
      Inns & Suites              8.3 pts   (5.9)%    7.0%
      Total                      7.9 pts   (4.6)%    7.8%

                          Nine months ended                Nine months ended
                         September 30, 2003               September 30, 2002
                      Occupancy  Average  RevPAR    Occupancy  Average  RevPAR
                                  Rate                           Rate
    Comparable
     Hotels (1,3)       62.4%    $59.87   $37.39      62.4%    $60.89   $38.01 Company Owned (1)
      Inns              61.8%    $56.57   $34.95      61.3%    $57.07   $34.97
      Inns & Suites     63.3%    $67.53   $42.71      63.3%    $69.49   $43.96
      Total             62.2%    $59.56   $37.03      61.8%    $60.30   $37.25

                                         Change
                                Occupancy  Average  RevPAR
                                            Rate
    Comparable
     Hotels (1,3)                0.0 pts   (1.7)%   (1.6)% Company Owned (1)
      Inns                       0.5 pts   (0.9)%   (0.1)%
      Inns & Suites              0.0 pts   (2.8)%   (2.8)%
      Total                      0.4 pts   (1.2)%   (0.6)%
 

    Hotel and Room Count Data
                                September 30, 2003        September 30, 2002
                              Number of    Number of    Number of    Number of
                                Hotels       Rooms        Hotels       Rooms
    Comparable Hotels (2)         274       35,760          274       35,840
    Company-Owned                 280       36,535          287       37,478
    Franchised Hotels              82        7,435           50        3,915
    Total                         362       43,970          337       41,393

    (1) Excludes franchised hotels, hotels held for sale and discontinued operations.
    (2) Comparable hotels for the nine months ended September 30, 2003 and 2002 excludes two hotels that were undergoing redevelopment at the beginning of 2002 and three hotels classified as held for sale as well as one hotel included in discontinued operations, representing 775 rooms in aggregate.
    (3) Comparable hotels for the quarter ended September 30, 2003 and 2002 includes two more hotels than the year-to-date as a result of their reopening in the first quarter 2002.

Dallas based La Quinta Corporation (NYSE: LQI), a leading limited service lodging company, owns, operates or franchises over 350 La Quinta Inns and La Quinta Inn & Suites in 33 states.  Today's news release, as well as other information about La Quinta, is available on the Internet at 

Certain matters discussed in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 

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Contact:
La Quinta Corporation
http://www.LQ.com
Also See: La Quinta Reports 1st Quarter 2003 Net loss of $50 million, Revenues Down 12% / Lodging Statistics / May 2003
La Quinta Reports Loss of $26.6, Compared with a Loss of $11.0 million a Year Earlier; RevPAR for Hotels Open at Least a Year Fell 5% / Lodging Statistics / Nov 2002
La Quinta Announces New Corporate Structure, Will Forego Paired Share REIT Status - Will Facilitate Owning and Operating Hotels / October 2001

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