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:
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):
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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.
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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:
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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.
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.
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.
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.
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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.
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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:
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.
The upper-midscale La Quinta by Wyndham brand is a bright spot in every travelers' journey.