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La Quinta Posts a Loss of $7 million for 2nd Qtr Compared
to a Loss of $14 million a Year Ago; RevPAR Up 9%
Hotel Operating Statistics

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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:

  • Revenues of $145 million, a 8% increase compared to 2003. -- Net loss of $7 million, or ($0.04) per share, versus net loss of $14 million, or ($0.10) per share, in 2003.
  • RevPAR for total company owned hotels of $41.33, a 9% increase compared to 2003.
  • Adjusted EBITDA of $46 million, a 10% increase compared to 2003. 
For the six months ended June 30, 2004, La Quinta reported:
  • Revenues of $277 million, a 9% increase compared to 2003.
  • Net loss of $19 million, or ($0.11) per share, versus net loss of
  • $64 million, or ($0.45) per share, in 2003.
  • RevPAR for total company owned hotels of $39.48, a 10% increase compared to 2003.
  • Adjusted EBITDA of $83 million, a 12% increase compared to 2003.
"We had another quarter of strong RevPAR growth that exceeded our competitors," stated Francis W. ("Butch") Cash, President and Chief Executive Officer. "Our revenue initiatives continue to deliver results. With the recently announced acquisition of Baymont, we will have the opportunity to replicate our success. We look forward to growing the La Quinta and Baymont brands in an industry at the beginning of a recovery cycle."

Operating Results

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.

Financial Results

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.

Baymont Acquisition

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.

Current Outlook

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.
 

La Quinta Corporation
Schedule A
Financial Results
(Unaudited)

                               Three months ended       Six months ended
    Operating Data:                 June 30,                June 30,
    (In thousands,
     except per share data)     2004        2003        2004       2003
    Revenues
      Lodging                 $143,474    $132,878    $274,585    $251,026
      Other                      1,191       1,364       2,377       2,595
    Total revenues             144,665     134,242     276,962     253,621

    Expenses
      Direct lodging
       operations               64,019      59,014     124,954     113,789
      Other lodging expenses    18,976      19,076      37,227      36,849
      General and
       administrative           15,703      14,569      31,876      29,012
      Interest, net             14,756      16,508      30,294      30,751
      Depreciation and
       amortization             30,215      32,381      59,492      63,772
      Impairment of property
       and equipment             7,719       4,578      12,733      66,590
      Other (income) expense      (633)      3,969        (768)      7,133
    Total expenses             150,755     150,095     295,808     347,896
    Loss before minority
     interest, income taxes,
     and discontinued
     operations                 (6,090)    (15,853)    (18,846)    (94,275)
      Minority interest         (4,661)     (4,602)     (9,229)     (9,112)
      Income tax benefit         3,931       6,612       8,960      39,589
    Loss before discontinued
     operations                 (6,820)    (13,843)    (19,115)    (63,798)
      Discontinued operations,
       net                         ---         216         ---        (117)
    Net loss                   $(6,820)   $(13,627)  $ (19,115)   $(63,915)

    Per Share Data:
    Loss before discontinued
     operations                 $(0.04)     $(0.10)     $(0.11)     $(0.45)
      Discontinued operations,
       net                         ---         ---         ---         ---
    Net loss per share - basic
     and assuming dilution      $(0.04)     $(0.10)     $(0.11)     $(0.45)

    Weighted average shares
     outstanding
      Basic                    176,620     143,414     176,444     143,060
      Assuming dilution        176,620     143,414     176,444     143,060

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

                            La Quinta Corporation
                                  Schedule B
                            Other (Income) Expense
                                 (Unaudited)

                                   Three months ended   Six months ended
                                         June 30,           June 30,
    (In millions)                     2004      2003      2004     2003
    Loss on sale of assets and
     related costs                   $ 0.2      $0.1      $0.2     $---
    Loss on early extinguishments
     of debt                           ---       4.3       ---      6.2
    Other (A)                         (0.8)     (0.4)     (1.0)     0.9
    Total other (income) expense     $(0.6)     $4.0     $(0.8)    $7.1

     (A)  During the three months ended June 30, 2004, we recognized income of
          $0.8 million primarily as a result of settlement of litigation
          related to the exit of the healthcare business and refunds of public
          company filing fees partially offset by approximately $0.2 million
          of expense related to the termination and ongoing settlement of the
          La Quinta retirement plan.  During the three months ended June 30,
          2003, we recognized income of approximately $0.4 million primarily
          related to a refund of relocation costs and an adjustment of amounts
          previously accrued for healthcare business exit costs.  During the
          six months ended June 30, 2004, we recognized $1.0 million of income
          primarily as a result of settlement of litigation and return of
          collateral related to the exit of the healthcare business and
          refunds of public company filing fees partially offset by
          approximately $0.4 million of expense related to the termination and
          ongoing settlement of the La Quinta retirement plan.  During the six
          months ended June 30, 2003, we recognized expenses of approximately
          $0.9 million primarily related to an adjustment of actuarial
          assumptions on deferred compensation agreements 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     Six months ended
    Adjusted EBITDA Reconciliation        June 30,             June 30,
    (In millions)                      2004       2003      2004      2003
    Net loss (per GAAP)               $(6.8)    $(13.6)    $(19.1)   $(63.9)
      Add:
      Depreciation and amortization    30.2       32.4       59.5      63.8
      Impairment of property and
       equipment                        7.7        4.6       12.7      66.6
      Minority interest                 4.7        4.6        9.2       9.1
      Income tax benefit               (3.9)      (6.6)      (9.0)    (39.6)
      Interest, net                    14.7       16.5       30.3      30.8
      Other (income) expense (A)       (0.6)       4.0       (0.8)      7.1
      Discontinued operations,
       net of tax (B)                   ---       (0.2)       ---       0.1
    Adjusted EBITDA (Non-GAAP)        $46.0      $41.7      $82.8     $74.0

     (A) See attached Schedule B for details.
     (B) Discontinued operations for the three and six months ended June 30,
         2003 includes three company owned hotels and TeleMatrix, Inc., a
         business component, which were sold during the fourth quarter of
         2003.  The separately identifiable results of operations of the
         components have been reported as results from discontinued
         operations for all periods presented.
 

     Adjusted EBITDA Reconciliation (Current 2004 Outlook)

                                       Three months ended      Full Year
     (In millions)                     September 30, 2004         2004

    Net loss (per GAAP)                       $(17)               $(51)
      Add:
      Depreciation and amortization             30                 127
      Impairment of property and equipment     ---                  13
      Minority interest                          5                  18
      Income tax benefit                       (10)                (27)
      Interest, net                             15                  65
      Other expense (A)                         27                  29
    Adjusted EBITDA (Non-GAAP)                 $50               $ 174

     (A)  Includes the estimated loss on early retirement of the 7.114% Notes
          and estimated 2004 Baymont integration expenses.
 

                            La Quinta Corporation
                                  Schedule D
                        Other Supplemental Information
                                 (Unaudited)

                                        Three months ended  Six months ended
    Capital Expenditures                     June 30,           June 30,
    (In millions)                        2004      2003     2004      2003

    Capital expenditures                 $20       $16      $29       $32
 

     Selected Balance Sheet Data
     (In millions)
                                           June 30,         December 31,
                                             2004               2003
                                                             (Audited)

    Property and equipment, net             $2,100              $2,144
    Cash and cash equivalents (A)              315                 327
    Investment in securities (B) (1)           122                 122
    Total assets                             2,755               2,806
    Total indebtedness (C)                     876                 895
    Total liabilities                        1,147               1,183
    Minority interest (D)                      206                 206
    Total shareholders' equity (E)           1,401               1,417
    Net debt to total capitalization
        Equal to (C-B-A)/(E+D+C-B-A)           22%                 22%

     (1) Investments in securities are the 7.114% Exercisable Put Option
         Securities owned by the Company and which relate to the $150 million
         principal amount of 7.114% Notes issued by the Company.
 

     Debt Maturity Schedule
     (In millions)

                           Year                          At June 30,
                                                            2004
                           2004 (A)                         $150
                           2005                              116
                           2006                               20
                           2007                              210
                           2008                               50
                    2009 and thereafter                      330
                        Total debt                           876
            Less: Cash and cash equivalents                  315
            Less: Investment in securities (B)               122
                         Net debt                           $439

     (A) The maturity schedule assumes the $150 million of 7.114% Notes due
         in 2011 will be redeemed at the option of the current holders or due
         to the Company exercising its repurchase rights and excludes any
         prepayment expense as a result of the early retirement of debt.
     (B) Investments in securities are the 7.114% Exercisable Put Option
         Securities owned by the Company and which relate to the $150 million
         principal amount of 7.114% Notes issued by the Company.
 

La Quinta Corporation
                                  Schedule E
                              Lodging Statistics
                                 (Unaudited)

                Three months ended  Three months ended
                   June 30, 2004      June 30, 2003            Change
                Occ   ADR   RevPAR  Occ   ADR   RevPAR    Occ    ADR  RevPAR

    Comparable
     Hotels
    (A,B)       70.5% $58.77 $41.41 63.6% $59.91 $38.10  6.9 pts (1.9)%  8.7%
    Company
     Owned (A)
      Inns      68.5% $55.65 $38.12 63.2% $56.75 $35.87  5.3 pts (1.9)%  6.3%
      Inns &
       Suites   75.3% $65.88 $49.57 63.7% $67.65 $43.06 11.6 pts (2.6)% 15.1%
      Total     70.4% $58.71 $41.33 63.3% $59.67 $37.78  7.1 pts (1.6)%  9.4%
 

                 Six months ended    Six months ended
                   June 30, 2004       June 30, 2003            Change
                 Occ    ADR  RevPAR  Occ   ADR   RevPAR    Occ    ADR  RevPAR

    Comparable
     Hotels (B) 67.4% $58.69 $39.56 59.0% $61.16 $36.11  8.4 pts (4.0)%  9.6%
    Company
     Owned (C)
      Inns      65.3% $55.33 $36.15 58.2% $57.60 $33.55  7.1 pts (3.9)%  7.8%
      Inns &
       Suites   72.6% $66.24 $48.07 60.3% $69.78 $42.09 12.3 pts (5.1)% 14.2%
      Total     67.4% $58.61 $39.48 58.8% $60.92 $35.82  8.6 pts (3.8)% 10.2%
 

     Hotel and Room Count Data
                               At June 30, 2004         At June 30, 2003
                            Number of   Number of     Number of  Number of
                             Hotels       Rooms        Hotels      Rooms

    Comparable Hotels (B)      274       35,821          274       35,860
    Company Owned (C)          274       35,821          278       36,358
    Franchised Hotels          107        9,612           75        6,683
    Total                      381       45,433          353       43,041

     (A)  Excludes franchised operating statistics and statistics for three
          hotels reported in discontinued operations for the three and six
          months ended June 30, 2003.
     (B)  Comparable hotels for the three and six months ended June 30, 2004
          and 2003 excludes two hotels classified as held for sale,
          representing 250 rooms in aggregate.
     (C)  Excludes three hotels (366) rooms reported in discontinued
          operations for the three and six months ended June 30, 2003.  All
          three hotels were sold in 2003.
 

Source: La Quinta Corporation

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. 

   

 
Contact:

La Quinta Corporation
http://www.LQ.com
 

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


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