to a Loss of $14 million a Year Ago; RevPAR Up 9%
Hotel Operating Statistics
|DALLAS, July 29, 2004 - La Quinta Corporation (NYSE: LQI) today announced
financial results for the second quarter ended June 30, 2004.
La Quinta reported the following financial results. A detailed schedule reconciling net loss to Adjusted EBITDA is included in the supplemental tables.
For the second quarter 2004, La Quinta reported:
La Quinta's total company RevPAR increased 9% during the second quarter. The improvement was driven by an occupancy increase of 7 percentage points, partially offset by slightly lower average rates. In addition, La Quinta continued to improve its performance relative to its local market competition. For the quarter, RevPAR of La Quinta's direct competitors in all markets increased 7% while La Quinta's RevPAR increased 9%. La Quinta's RevPAR in its top ten markets increased 10% compared to a RevPAR increase of 7% by La Quinta's direct competitors. As a result, La Quinta continues to expand its RevPAR premium.
"We continue to see strong growth from our Internet distribution channels and we are working closely with our third party distribution partners to optimize our results through those channels," commented Mr. Cash. "Our sales force again generated revenues that exceeded the prior year as the strength of business travel continues to improve. We are also beginning to see changes in our customer mix with the addition of higher rate business travel. As a result, we started to see an increase in our average rates as we ended the quarter."
During the second quarter, franchise rooms increased by 687 rooms (8 hotels). As of June 30, 2004, La Quinta had opened 9,612 franchise rooms (107 hotels) compared to 6,683 franchise rooms (75 hotels) at June 30, 2003. La Quinta continues to expect to open at least 4,000 franchise rooms (50 hotels) this year.
Revenues for the second quarter increased 8% over the second quarter of 2003. The revenue increase was primarily the result of a total company RevPAR increase of 9%, partially offset by the loss of revenue due to the sale of hotels in the second quarter of 2004 and the second half of 2003.
Net loss was $7 million, or ($0.04) per share, for the second quarter of 2004, versus a net loss of $14 million, or ($0.10) per share, for the second quarter of 2003. The improved net loss during the quarter was primarily the result of revenue increases and lower interest and depreciation expenses, partially offset by higher impairment charges and increased direct lodging expenses.
Adjusted EBITDA for the second quarter of 2004 was $46 million, a 10% increase compared to $42 million in the second quarter of 2003. The increase in Adjusted EBITDA was driven primarily by revenue improvement offset by higher labor costs as a result of increased occupancy levels, increased energy costs as a result of higher utility rates, and various corporate expenses.
At June 30, 2004, La Quinta had $315 million in cash and cash equivalents and no borrowings under its $150 million credit facility (other than $20 million in letters of credit). La Quinta's net debt (total indebtedness less cash and the investment in its 7.114% Securities) was $439 million at June 30, 2004.
On July 1, 2004, the Company received an early repayment of $26 million related to a note receivable issued in 2001 in conjunction with a healthcare asset sale. As a result of the early repayment, cash and cash equivalents were approximately $350 million as of July 14, 2004.
Revenues for the first six months of 2004 increased 9% over the first six months of 2003. The revenue increase was primarily the result of a total company RevPAR increase of 10%, partially offset by the loss of revenue due to the sale of hotels in the second quarter of 2004 and the second half of 2003.
Net loss was $19 million, or ($0.11) per share, for the first six months of 2004, versus a net loss of $64 million, or ($0.45) per share, for the first six months of 2003. The improved net loss for the first six months of 2004 was primarily the result of revenue increases and lower impairment charges and depreciation expenses, partially offset by increased direct lodging expenses.
Adjusted EBITDA for the first six months of 2004 was $83 million, a 12% increase compared to $74 million in the first six months of 2003. The increase in Adjusted EBITDA was driven primarily by revenue improvement partially offset by higher direct lodging expenses as a result of increased occupancy levels.
As announced on July 15, 2004, La Quinta has entered into a definitive agreement with The Marcus Corporation to purchase its limited service lodging division for a total of $395 million in cash. As part of the agreement, La Quinta will acquire 86 Baymont Inns & Suites (including one management contract), seven Woodfield Suites and one Budgetel. In addition, La Quinta will acquire all of the trade rights associated with the Baymont, Woodfield Suites and Budgetel brands, and the current Baymont franchise system of 84 hotels (containing 7,074 rooms). The 178 hotels (containing 16,837 rooms) are located across 32 states, with approximately half of the hotels in the Midwest region of the U.S.
"Baymont has a strong brand and real estate in markets we want to penetrate," said Mr. Cash. "We believe we can apply our successful revenue initiatives to enhance the cash flows from the Baymont operations. In addition, we believe we can more aggressively grow the Baymont franchise system."
La Quinta has obtained a committed financing of $150 million as part of this transaction. This financing and existing cash on hand will fund the $395 million purchase price as well as estimated one-time transaction costs of $9 million and integration costs of $12 million. The Company believes there will be opportunities to create value through upgrades and potential cross brand conversions between La Quinta and Baymont. The Company is beginning the process of reviewing the portfolio for these opportunities. For current modeling purposes only, the Company currently estimates the potential capital required to complete these conversions to be between $25 million to $45 million.
"With the announced acquisition of Baymont, we achieved our strategic objective of gaining both quality real estate and a brand that we can grow that will allow us to leverage our existing investments in our people and technology to create shareholder value," said David L. Rea, Executive Vice President and Chief Financial Officer.
La Quinta's guidance for full year 2004 currently anticipates a total company owned La Quinta hotel RevPAR increase of 7%, Adjusted EBITDA of approximately $174 million and a net loss of $51 million. The net loss includes an estimated pretax loss of $25 million on early retirement of the 7.114% Notes, as well as $5 million of estimated integration expenses. Guidance also reflects the loss of approximately $1.6 million of OtheR revenues from early repayment of healthcare receivables. For modeling purposes, guidance reflects the Adjusted EBITDA and earnings impact of the Baymont acquisition for only the full fourth quarter 2004. Estimated 2004 integration expenses of $5 million related to the acquisition and the estimated $25 million loss related to early debt retirement are excluded from Adjusted EBITDA guidance. Capital expenditures for 2004 are currently estimated to be approximately $80 million, which includes $20 million related to a redevelopment project in downtown San Antonio, as well as capitalized integration costs and normal maintenance capital expenditures for Baymont and La Quinta, and excludes the $395 million cost of the acquisition and $9 million of related transaction costs.
La Quinta's guidance for the third quarter of 2004 currently anticipates
total company owned La Quinta hotel RevPAR to increase approximately 5%
over the third quarter of 2003, when the Company reported an industry leading
RevPAR increase of 8% over the third quarter of 2002. The Company anticipates
RevPAR growth in the third quarter of 2004 to be driven by rate increases
rather than occupancy increases. Adjusted EBITDA is currently anticipated
to be approximately $50 million and excludes estimated integration expenses
of $2 million related to the acquisition and the estimated $25 million
loss related to early debt retirement. Net loss is currently anticipated
to be approximately $17 million. Schedules reconciling net loss to Adjusted
EBITDA guidance for the third quarter and full year 2004 are included in
this press release.
Dallas based La Quinta Corporation, a leading limited service lodging company, owns, operates or franchises more than 380 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 http://www.LQ.com.
Certain matters discussed in this press release may constitute "forward- looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.
La Quinta Corporation
|Also See:||La Quinta Corporation Reports 1st Qtr Net loss of $12.2 million versus Net Loss of $50.2 million in 2003; RevPAR for Owned hotels Up 11% / Hotel Operating Statistics / April 2004|
|La Quinta Acquiring 86 Baymont Inns & Suites and the Baymont Franchise System of 84 Hotels for $395 million in Cash / July 2004|