La Quinta Holdings Inc. Reports Strong Results For Both Fourth Quarter And Full Year 2014

Exceeded upper end of guidance range with full year comparable RevPAR Growth of 8.0% and Pro Forma Adjusted EBITDA of $375.5 million - Generated full year Pro Forma Earnings per Share of $0.45 - Opened 45 franchise locations in 2014 and increased pipeline 11% - Repaid $205 million of long-term debt in 2014, including $195 million of voluntary prepayments

IRVING, Texas, Feb. 24, 2015 // PRNewswire // -- La Quinta Holdings Inc. ("La Quinta" or the "Company") (NYSE: LQ) today reported its fourth quarter and full year 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 fourth quarter and full year 2014 on a historical basis.

Fourth Quarter 2014 Highlights:

  • System-wide comparable RevPAR increased 8.4 percent, ADR increased 3.3 percent and occupancy increased 296 basis points
  • Pro forma earnings per share increased by $0.05 to $0.08; historical earnings per share was $(0.03)
  • Pro forma total Adjusted EBITDA increased 3.7 percent to $79.6 million
  • Pro forma net income increased 193.7 percent to $10.7 million; historical net loss was $(4.2) million
  • Pro forma Franchise and Management Segment Adjusted EBITDA increased 11.9 percent to $25.0 million
  • Increased franchise pipeline to 207 hotels, representing over 17,000 additional rooms
  • Voluntarily prepaid an additional $40 million of long-term debt using free cash flow

Full Year 2014 Highlights:

  • System-wide comparable RevPAR increased 8.0 percent, ADR increased 4.4 percent and occupancy increased 220 basis points
  • Pro forma earnings per share increased by $0.12 to $0.45; historical earnings per share was $(2.67)
  • Pro forma total Adjusted EBITDA increased 10.4 percent to $375.5 million
  • Pro forma net income increased 41.3 percent to $56.9 million; historical net loss was $(337.3) million
  • Pro forma Franchise and Management Segment Adjusted EBITDA increased 11.6 percent to $105.7 million
  • Grew franchise unit base by 8% with minimal capital investment

Overview

Wayne B. Goldberg, President & Chief Executive Officer of La Quinta, said, "Our 2014 results demonstrate solid performance delivered across our key metrics, including strong growth in RevPAR, franchise units, Adjusted EBITDA, and Adjusted EBITDA margin. 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 opened an additional 45 franchise properties, bringing total hotels in our system to 867 with approximately 86,500 rooms. 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 December 31, 2014 include the following highlights(1) ($ in thousands, except per share amounts):

             
 

Pro Forma

Historical

 

Three Months Ended December 31,

Three Months Ended December 31,

 

2014

2013

% chg

2014

2013

% chg

Total Revenue

$228,222

$209,016

9.2%

$228,222

$200,509

13.8%

Franchise and Management Segment Adj
EBITDA

25,025

22,358

11.9 %

25,025

13,310

88.0%

Owned Hotels Segment Adj. EBITDA

62,841

59,151

6.2%

62,841

65,638

(4.3)%

Total Adj. EBITDA

79,630

76,784

3.7%

79,630

70,592

12.8%

Total Adj. EBITDA margin

34.9%

36.7%

 

34.9%

35.2%

 

Operating Income Margin

16.3%

14.6%

 

9.7%

13.9%

 

Net Income attributable to La Quinta Holdings' stockholders

10,736

3,656

193.7%

(4,193)

(4,672)

10.3%

Earnings per share – basic and diluted

0.08

0.03

166.7%

(0.03)

(0.04)

25.0%

Adjusted Net Income

     

10,296

(4,672)

    NM(2)

 

_________________

The results of operations for the Company, on a pro forma basis and on a historical basis, for the year ended December 31, 2014 include the following highlights(1) ($ in thousands, except per share amounts):

_________________

 

             
 

Pro Forma

Historical

 

Year Ended December 31,

Year Ended December 31,

 

2014

2013

% chg

2014

2013

% chg

Total Revenue

$988,858

  $909,433

8.7%

  $976,938

   $873,893

11.8%

Franchise and Management Segment Adj
EBITDA

105,731

94,736

11.6%

94,002

55,542

69.2%

Owned Hotels Segment Adj. EBITDA

301,365

270,100

11.6%

312,067

311,809

0.1%

Total Adj. EBITDA

375,549

340,212

10.4%

369,889

326,807

13.2%

Total Adj. EBITDA margin

38.0%

37.4%

 

37.9%

37.4%

 

Operating Income Margin

18.9%

18.1%

 

14.0%

17.8%

 

Net Income attributable to La Quinta Holdings' stockholders

56,872

40,255

41.3%

(337,297)

3,976

    NM(2)

Earnings per share – basic and diluted

0.45

0.33

36.4%

(2.67)

0.03

    NM(2)

Adjusted Net Income

     

37,100

3,976

    NM(2)

 

____________

(1) 

Please see the schedules to this press release for an explanation of the basis of the pro forma presentation and reconciliation of the pro forma financial information and adjusted results of operations. Pro forma information excludes adjustments that are not expected to have a continuing effect on the company, and adjusted information is adjusted for certain special items, in each case as discussed in the schedules attached to this press release. Pro Forma Segment Adjusted EBITDA reflects intercompany fees charged to our owned hotels under new agreements entered into at the time of the IPO as if these fees had been in place for all periods presented.

(2) 

Changes in terms of percentage is not meaningful

 

Comparable hotel statistics

Three months
ended
December 31,
2014

   Variance three 
months ended 
December 31,
2014 vs
2013

Year
ended
   December 31,
2014

Variance year
   ended December 31,
2014 vs
2013

Owned Hotels

       

Occupancy

62.8%

       328 bps

66.5%

       199 bps

ADR

$                 75.88

2.8%

$         78.81

4.6%

RevPAR

$                 47.68

8.5%

$         52.40

7.9%

Franchised Hotels

       

Occupancy

63.1%

       255 bps

67.3%

       248 bps

ADR

$                 85.47

4.0%

$         88.33

4.1%

RevPAR

$                 53.97

8.4%

$         59.41

8.1%

System-wide

       

Occupancy

63.0%

       296 bps

66.8%

       220 bps

ADR

$                 80.10

3.3%

$         83.02

4.4%

RevPAR

$                 50.44

8.4%

$         55.48

8.0%

Development 

Over the last twelve months, the Company opened 45 franchise hotels representing over 4,000 rooms (37 hotels and approximately 3,100 rooms on a net basis), grew its franchise base 8% and increased its pipeline 11%.  During the fourth quarter, the Company opened 14 franchised hotels with approximately 1,050 rooms (13 hotels and approximately 950 rooms on a net basis).  As of December 31, 2014, the Company had a pipeline of 207 franchised hotels, totaling over 17,000 rooms, to be located in the United States, Mexico, Canada, Colombia, Honduras, Nicaragua, and Guatemala, representing significant embedded growth opportunity for the system.

The Company's system-wide portfolio, as of December 31, 2014, consisted of 867 hotels representing approximately 86,500 rooms located predominantly across 47 U.S. states, as well as in Canada and Mexico. This portfolio includes 353 owned and operated hotels and 514 franchised hotels.

         
 

December 31, 2014

December 31, 2013

 

# of hotels

# of rooms

# of hotels

# of rooms

Owned(1)

352

44,800

342

43,500

Joint Venture

1

200

1

200

Previously Managed Hotels(2)

14

1,700

Franchised

514

41,500

477

38,300

Totals

867

86,500

834

83,700

         

 

__________

(1) 

For December 31, 2013, Owned hotels includes 4 hotels designated as assets held for sale, all of which have been sold as of December 31, 2014.     

(2) 

At the time of the IPO, April 14, 2014, we acquired the Previously Managed Hotels; as such they are included in Owned hotels as of December 31, 2014.

Balance Sheet and Liquidity 

During the fourth quarter, the Company made a voluntary prepayment of $40.0 million on its senior secured term loan facility, bringing the total voluntary prepayments in 2014 to $195.0 million. As of December 31, 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 $109.9 million as of December 31, 2014.

Outlook 

Based upon management's current estimates, the Company is introducing its guidance for full year 2015:

   
 

Guidance

RevPAR growth on a system-wide comparable hotel basis       

5.5 percent to 7.0 percent

Adjusted EBITDA

$398 million to $410 million

Interest expense

Approximately $87 million

Franchise hotel openings

50 to 55

Weighted average shares of common stock outstanding

Approximately 131.7 million

Webcast and Conference Call

La Quinta Holdings Inc. will host a conference call to discuss fourth quarter and full year 2014 results on Tuesday, February 24, 2015 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 February 24, 2015 through midnight Eastern Time on March 3, 2015. 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 13600176. The archive of the webcast will be available on the Company's website for a limited time.

Forward-Looking Statements

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 November 19, 2014, filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424(b) of the Securities Act on November 20, 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.

Non-GAAP Financial Measures

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.

About La Quinta Holdings Inc.

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 86,000 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.

From time to time, La Quinta may use its website as a distribution channel of material company information. Financial and other important information regarding the Company is routinely accessible through and posted on our website at www.lq.com/investorrelations. In addition, you may automatically receive email alerts and other information about La Quinta when you enroll your email address by visiting the Email Notification section at www.lq.com/investorrelations.

LA QUINTA HOLDINGS INC.

HISTORICAL STATEMENTS OF OPERATIONS

(unaudited, in thousands)

         
 

Three months ended
December 31,

Year ended
December 31,

 

2014

2013

2014

2013

Revenues:

       

Room revenues

$       197,022

   $      172,405

   $       846,203

   $      757,699

Franchise and other fee-based revenues

21,503

19,334

89,718

79,180

Other hotel revenues

4,727

4,299

19,536

17,949

 

223,252

196,038

955,457

854,828

Brand marketing fund revenues from franchise and managed properties

4,970

4,471

21,481

19,065

Total revenues

228,222

200,509

976,938

873,893

Operating expenses:

       

Direct lodging expenses

93,275

80,307

378,705

344,515

Depreciation and amortization

43,197

41,383

173,145

164,077

General and administrative expenses

41,773

25,070

142,636

74,794

Other lodging and operating expenses

10,860

16,402

56,984

56,068

Marketing, promotional and other advertising expenses

11,991

4,967

62,161

59,193

Impairment loss

5,157

 

201,096

168,129

818,788

698,647

Brand marketing fund expenses from franchise and managed properties

4,970

4,471

21,481

19,065

Total operating expenses

206,066

172,600

840,269

717,712

Operating income

22,156

27,909

136,669

156,181

Other income (expenses):

       

Interest expense, net

(23,685)

(37,869)

(120,945)

(148,615)

Loss on extinguishment of debt, net

(2,030)

Other income (loss)

4,357

(9)

3,261

1,048

Total other income (expenses)

(19,328)

(37,878)

(119,714)

(147,567)

Income (loss) from continuing operations before income taxes

2,828

(9,969)

16,955

8,614

Income tax provision

(6,945)

(1,072)

(28,805)

(3,598)

Recognition of net deferred tax liabilities upon C-corporation conversion

(321,054)

Net Income (Loss) from continuing operations, net of tax

(4,117)

(11,041)

(332,904)

5,016

Income (Loss) on discontinued operations, net of tax

3,808

(503)

(2,495)

Net income (loss)

(4,117)

(7,233)

(333,407)

2,521

(Income) loss from noncontrolling interests in continuing operations, net of tax

(76)

2,561

(3,890)

1,455

(Income) loss from noncontrolling interests in discontinued operations, net of tax

Net (income) loss attributable to noncontrolling interests

(76)

2,561

(3,890)

1,455

Amounts attributable to La Quinta Holdings' stockholders

       

Income (loss) from continuing operations, net of tax

(4,193)

(8,480)

(336,794)

6,471

Income (loss) from discontinued operations, net of tax

3,808

(503)

(2,495)

Net income (loss) attributable to La Quinta Holdings' stockholders

$       (4,193)

$      (4,672)

$    (337,297)

$        3,976

         

Reconciliations

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 months and years ended December 31, 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.

PRO FORMA FINANCIAL INFORMATION AND NET INCOME RECONCILIATION

(unaudited, in thousands)

             
 

Three months ended December 31, 2014

Three months ended December 31, 2013

 

Historical

Adjustments

Pro Forma

Historical

Adjustments

Pro Forma

Revenues:

   

Room revenues

$       197,022

   $                —

   $      197,022

   $      172,405

$             9,167

    $      181,572

Franchise and other fee-based revenues

21,503

21,503

19,334

(546)

18,788

Other hotel revenues

4,727

4,727

4,299

115

4,414

 

223,252

223,252

196,038

8,736

204,774

Brand marketing fund revenues from franchise and managed properties

4,970

4,970

4,471

(229)

4,242

Total revenues

228,222

228,222

200,509

8,507

209,016

Operating expenses:

   

Direct lodging expenses

93,275

93,275

80,307

4,127

84,434

Depreciation and amortization

43,197

(448)

42,749

41,383

33

41,416

General and administrative expenses

41,773

(14,489)

27,284

25,070

145

25,215

Other lodging and operating expenses

10,860

10,860

16,402

1,849

18,251

Marketing, promotional and other advertising expenses

11,991

11,991

4,967

4,967

 

201,096

(14,937)

186,159

168,129

6,154

174,283

Brand marketing fund expenses from franchise and managed properties

4,970

4,970

4,471

(229)

4,242

Total operating expenses

206,066

(14,937)

191,129

172,600

5,925

178,525

Operating income

22,156

14,937

37,093

27,909

2,582

30,491

Other income (expenses):

   

Interest expense, net

(23,685)

256

(23,429)

(37,869)

13,637

(24,232)

Other income (loss)

4,357

4,357

(9)

(9)

Total other income (expenses)

(19,328)

256

(19,072)

(37,878)

13,637

(24,241)

Income (loss) from continuing operations before income taxes

2,828

15,193

18,021

(9,969)

16,219

6,250

Income tax provision

(6,945)

(264)

(7,209)

(1,072)

(1,428)

(2,500)

Income (loss) from continuing operations, net of tax

(4,117)

14,929

10,812

(11,041)

14,791

3,750

Net income (loss) (1)    

(4,117)

14,929

10,812

(11,041)

14,791

3,750

(Income) loss from noncontrolling interests in continuing operations, net of tax

(76)

(76)

2,561

(2,655)

(94)

Net (income) loss attributable to noncontrolling interests(1)

(76)

(76)

2,561

(2,655)

(94)

Amounts attributable to La Quinta Holdings' stockholders

   

Income (loss) from continuing operations, net of tax

(4,193)

14,929

10,736

(8,480)

12,136

3,656

Net income (loss) attributable to La Quinta Holdings' stockholders (1)

$       (4,193)

$           14,929

$      10,736

$      (8,480)

$           12,136

$        3,656

             

 

(1) 

Excludes the impact of the Company's discontinued operations on a historical and pro forma basis for the periods presented.  Refer to the Historical Statements of Operations on page 8.

 

PRO FORMA FINANCIAL INFORMATION AND NET INCOME RECONCILIATION

(unaudited, in thousands)

             
 

Year ended December 31, 2014

Year ended December 31, 2013

 

Historical

Adjustments

Pro Forma

Historical

Adjustments

Pro Forma

Revenues:

   

Room revenues

$       846,203

   $           12,814

   $      859,017

   $      757,699

   $           38,318

   $      796,017

Franchise and other fee-based revenues

89,718

(732)

88,986

79,180

(2,284)

76,896

Other hotel revenues

19,536

159

19,695

17,949

464

18,413

 

955,457

12,241

967,698

854,828

36,498

891,326

Brand marketing fund revenues from franchise and managed properties

21,481

(321)

21,160

19,065

(958)

18,107

Total revenues

976,938

11,920

988,858

873,893

35,540

909,433

Operating expenses:

   

Direct lodging expenses

378,705

5,832

384,537

344,515

19,011

363,526

Depreciation and amortization

173,145

1,125

174,270

164,077

4,845

168,922

General and administrative expenses

142,636

(46,106)

96,530

74,794

51

74,845

Other lodging and operating expenses

56,984

944

57,928

56,068

3,933

60,001

Marketing, promotional and other advertising expenses

62,161

62,161

59,193

59,193

Impairment loss

5,157

5,157

 

818,788

(38,205)

780,583

698,647

27,840

726,487

Brand marketing fund expenses from franchise and managed properties

21,481

(321)

21,160

19,065

(958)

18,107

Total operating expenses

840,269

(38,526)

801,743

717,712

26,882

744,594

Operating income

136,669

50,446

187,115

156,181

8,658

164,839

Other income (expenses):

   

Interest expense, net

(120,945)

26,024

(94,921)

(148,615)

50,482

(98,133)

Loss on extinguishment of debt, net

(2,030)

2,030

Other income (loss)

3,261

3,261

1,048

1,048

Total other income (expenses)

(119,714)

28,054

(91,660)

(147,567)

50,482

(97,085)

Income from continuing operations before income taxes

16,955

78,500

95,455

8,614

59,140

67,754

Income tax provision

(28,805)

(9,377)

(38,182)

(3,598)

(23,504)

(27,102)

Recognition of net deferred tax liabilities upon C-corporation conversion

(321,054)

321,054

Income (loss) from continuing operations, net of tax

(332,904)

390,177

57,273

5,016

35,636

40,652

Net income (loss)(1)

(332,904)

390,177

57,273

5,016

35,636

40,652

(Income) loss from noncontrolling interests in continuing operations, net of tax

(3,890)

3,489

(401)

1,455

(1,852)

(397)

Net (income) loss attributable to noncontrolling interests(1)

(3,890)

3,489

(401)

1,455

(1,852)

(397)

Amounts attributable to La Quinta Holdings' stockholders

   

Income (loss) from continuing operations, net of tax

(336,794)

393,666

56,872

6,471

33,784

40,255

Net income (loss) attributable to La Quinta Holdings' stockholders (1)

$    (336,794)

$         393,666

$      56,872

$        6,471

$           33,784

$      40,255

             

 

(1) 

Excludes the impact of the Company's discontinued operations on a historical and pro forma basis for the periods presented. Refer to the Historical Statements of Operations on page 8.

 

PRO FORMA AND HISTORICAL ADJUSTED EBITDA NON-GAAP RECONCILIATION

(unaudited, in thousands)

         
 

Pro forma

Historical

 

Three months

Three months

Three months

Three months

 

ended

ended

ended

ended

 

December 31,  2014

December 31,  2013

December 31,  2014

December 31,  2013

Operating income

$          37,093

   $          30,491

   $          22,156

   $          27,909

Interest expense, net

(23,429)

(24,232)

(23,685)

(37,869)

Other income (loss)

4,357

(9)

4,357

(9)

Income tax provision

(7,209)

(2,500)

(6,945)

(1,072)

Income from noncontrolling interest

(76)

(94)

(76)

2,561

Income on discontinued operations, net of tax

3,808

Net Income (Loss) Attributable to La Quinta Holdings' stockholders

10,736

3,656

(4,193)

(4,672)

Interest expense

23,438

24,270

23,694

37,898

Income tax provision

7,209

2,500

6,945

1,092

Depreciation and amortization

42,978

41,716

43,426

41,690

Non-controlling interest

76

94

76

(2,561)

EBITDA

84,437

72,236

69,948

73,447

Fixed asset impairment gain

(380)

Income from discontinued operations

(216)

Gain on sale from discontinued operations

(3,020)

Loss on retirement of assets

177

630

177

312

Gain related to casualty disasters

(5,666)

(402)

(5,666)

786

Equity based compensation

3,815

18,304

Other (gains) losses, net

(3,133)

4,320

(3,133)

(337)

Adjusted EBITDA

$          79,630

$          76,784

$          79,630

$          70,592

         

 

PRO FORMA AND HISTORICAL ADJUSTED EBITDA NON-GAAP RECONCILIATION

(unaudited, in thousands)

         
 

Pro forma

Historical

 

Year

Year

Year

Year

 

ended

ended

ended

ended

 

December 31,  2014

December 31,  2013

December 31,  2014

December 31,  2013

Operating income

$        187,115

   $        164,839

   $        136,669

   $        156,181

Interest expense, net

(94,921)

(98,133)

(120,945)

(148,615)

Other income

3,261

1,048

3,261

1,048

Loss on extinguishment of debt, net

(2,030)

Income tax provision

(38,182)

(27,102)

(28,805)

(3,598)

Recognition of net deferred tax liabilities upon C-corporation conversion

(321,054)

Income from noncontrolling interest

(401)

(397)

(3,890)

1,455

Loss on discontinued operations, net of tax

(503)

(2,495)

Net Income (Loss) Attributable to La Quinta Holdings' stockholders

56,872

40,255

(337,297)

3,976

Interest expense

94,970

98,329

120,994

148,806

Income tax provision

38,182

27,102

28,805

3,665

Recognition of net deferred tax liabilities upon C-corporation conversion

321,054

Depreciation and amortization

175,262

170,205

174,137

170,401

Non-controlling interest

401

397

3,890

(1,455)

EBITDA

365,687

336,288

311,583

325,393

Fixed asset impairment loss

5,157

5,308

19,533

(Income) loss from discontinued operations

377

(8,636)

Gain on sale from discontinued operations

(10,714)

Loss on retirement of assets

177

680

177

359

Gain related to casualty disasters

(6,764)

(1,926)

(6,772)

(1,825)

Loss on extinguishment of debt, net

2,030

Equity based compensation

11,850

58,007

Other (gains) losses, net

(558)

5,170

(821)

2,697

Adjusted EBITDA

$        375,549

$        340,212

$        369,889

$        326,807

         

 

PRO FORMA AND HISTORICAL SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION

(unaudited, in thousands)

             
 

Three months ended December 31, 2014

Three months ended December 31, 2013

 

Historical

Adjustments

Pro
Forma

Historical

Adjustments
(1)

Pro
Forma

Revenues:

   

Owned hotels

$      202,497

   $                 —

   $      202,497

   $      177,394

   $             8,592

   $      185,986

Franchise and management

25,025

25,025

13,310

9,048

22,358

Segment revenues

227,522

227,522

190,704

17,640

208,344

Other fee-based revenues from franchise and managed properties

4,970

4,970

4,471

(229)

4,242

Corporate and other

28,751

28,751

22,753

3,631

26,384

Intersegment elimination

(33,021)

(33,021)

(17,419)

(12,535)

(29,954)

Total revenues

$    228,222

$                 —

$    228,222

$    200,509

$             8,507

$    209,016

             

Adjusted EBITDA:

     

Owned hotels

$        62,841

$                 —

$        62,841

$        65,638

$           (6,487)

$        59,151

Franchise and management

25,025

25,025

13,310

9,048

22,358

Segment Adjusted EBITDA

87,866

87,866

78,948

2,561

81,509

Corporate and other

(8,236)

(8,236)

(8,356)

3,631

(4,725)

Total Adjusted EBITDA

$      79,630

$                 —

$      79,630

$      70,592

$             6,192

$      76,784

             

(1) 

Adjustments include (i) reflection of the results of operations of the 14 previously managed hotels which were acquired in connection with the IPO as if the acquisition had occurred on January 1, 2013; and (ii) reflection of franchise and management fees that we charge our owned hotels as if the rates put in place pursuant to new agreements dated April 14, 2014 had been in effect beginning on January 1, 2013. On a historical basis, prior to April 14, 2014, we charged aggregate fees of 2.0% (0.33% license fees for trademark rights and 1.67% management fee for management services) to our owned hotels. Effective April 14, 2014, we terminated the existing franchise and management agreements with our owned hotels and entered into new agreements, which provide for a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of total hotel revenues, which are reflected as revenue in the franchise and management segment. The agreements we entered into with our owned hotels upon effectiveness of the IPO also include a reservations fee of 2.0% of gross room revenues, which is reflected as revenue in corporate and other after April 14, 2014.

 

PRO FORMA AND HISTORICAL SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION

(unaudited, in thousands)

             
 

Year ended December 31, 2014

Year ended December 31, 2013

 

Historical

Adjustments
(1)

Pro
Forma

Historical

Adjustments
(1)

Pro
Forma

Revenues:

   

Owned hotels

$      870,061

   $           10,929

   $      880,990

   $      778,898

   $           35,532

   $      814,430

Franchise and management

94,002

11,729

105,731

55,542

39,194

94,736

Segment revenues

964,063

22,658

986,721

834,440

74,726

909,166

Other fee-based revenues from franchise and managed properties

21,481

(321)

21,160

19,065

(958)

18,107

Corporate and other

116,805

4,633

121,438

97,177

15,920

113,097

Intersegment elimination

(125,411)

(15,050)

(140,461)

(76,789)

(54,148)

(130,937)

Total revenues

$    976,938

$           11,920

$    988,858

$    873,893

$           35,540

$    909,433

Adjusted EBITDA:

     

Owned hotels

$      312,067

$         (10,702)

$      301,365

$      311,809

$         (41,709)

$      270,100

Franchise and management

94,002

11,729

105,731

55,542

39,194

94,736

Segment Adjusted EBITDA

406,069

1,027

407,096

367,351

(2,515)

364,836

Corporate and other

(36,180)

4,633

(31,547)

(40,544)

15,920

(24,624)

Total Adjusted EBITDA

$    369,889

$             5,660

$    375,549

$    326,807

$           13,405

$    340,212

             

 

(1) 

Adjustments include (i) reflection of the results of operations of the 14 previously managed hotels which were acquired in connection with the IPO as if the acquisition had occurred on January 1, 2013; and (ii) reflection of franchise and management fees that we charge our owned hotels as if the rates put in place pursuant to new agreements dated April 14, 2014 had been in effect beginning on January 1, 2013. On a historical basis, prior to April 14, 2014 we charged aggregate fees of 2.0% (0.33% license fees for trademark rights and 1.67% management fee for management services) to our owned hotels. Effective April 14, 2014, we terminated the existing franchise and management agreements with our owned hotels and entered into new agreements, which provide for a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of total hotel revenues, which are reflected as revenue in the franchise and management segment. The agreements we entered into with our owned hotels upon effectiveness of the IPO also include a reservations fee of 2.0% of gross room revenues, which is reflected as revenue in corporate and other after April 14, 2014.

 

PRO FORMA ADJUSTED EBITDA NON-GAAP RECONCILIATION

OUTLOOK: FORECASTED 2015

(unaudited, in thousands)

     
 

Year Ended December 31, 2015

 

Low Case

High Case

Net income Attributable to La Quinta Holdings' stockholders (1)

$71,478

$78,678

Interest expense(2)

87,000

87,000

Income tax provision

47,652

52,452

Depreciation and amortization

177,600

177,600

Non-controlling interest

420

420

EBITDA

384,150

396,150

Share based compensation expense(3)

13,850

13,850

Adjusted EBITDA

$398,000

$410,000

     

 

______________

(1) 

This table provides a reconciliation of forward-looking forecasted Adjusted EBITDA to net income attributable to La Quinta Holdings' stockholders before an adjustment for a certain portion of our share based compensation which reflects the exchange of ownership units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock, 100% of which vest within one year of the IPO.

(2) 

Includes interest expense for $1.9 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.5%, including the impact of an interest rate swap, commitment fees for the undrawn balance of our revolving credit facility, and amortization of deferred financing costs.

(3) 

Reflects share based compensation expense other than compensation expense related to exchange of ownership units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock.

 

ADJUSTED NET INCOME AND

PRO FORMA AND ADJUSTED EARNINGS PER SHARE

NON-GAAP RECONCILIATION

(unaudited, in thousands, except per share data)

 
 

Historical three months

Pro forma three months

Historical three months

Pro forma three months

 

ended

ended

ended

ended

 

December 31,  2014

December 31,  2014

December 31,  2013

December 31,  2013

Net Income Attributable to La Quinta Holdings' stockholders(1)

$          (4,193)

$          10,736

$          (4,672)

$            3,656

Equity- based compensation(2)               

14,489

Adjusted Net Income Attributable to La Quinta Holdings' stockholders

$          10,296

$          10,736

$          (4,672)

$            3,656

Weighted average common shares outstanding, basic      

127,978

127,978

121,996

121,996

          Weighted average common shares outstanding, diluted

129,379

129,379

121,996

121,996

Earnings per share, basic and diluted

$            (0.03)

$               0.08

$            (0.04)

$               0.03

Adjusted Earnings per share, basic and diluted

$             0.08

 

$            (0.04)

 

 

   

(1) 

Includes the impact of the Company's discontinued operations on a historical basis for the periods presented

(2) 

Share based compensation adjustment, which reflects the expense relating to exchanged Units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock, 100% of which vest within one year of the IPO.

 

         
 

Historical year

Pro forma year

Historical year

Pro forma year

 

ended

ended

ended

ended

 

December 31,  2014

December 31,  2014

December 31,  2013

December 31,  2013

Net Income (Loss) Attributable to La Quinta Holdings' stockholders(1)

$       (337,297)

$          56,872

$            3,976

$          40,255

Recognition of net deferred tax liabilities upon C-corporation conversion (2)  

321,054

Equity- based compensation(3)               

46,156

Impairment loss        

5,157

Loss on extinguishment of debt            

2,030

         

Adjusted Net Income Attributable to La Quinta Holdings' stockholders

$          37,100

$          56,872

$            3,976

$          40,255

Weighted average common shares outstanding, basic      

126,156

126,156

121,996

121,996

          Weighted average common shares outstanding, diluted

126,964

126,964

121,996

121,996

Earnings per share, basic and diluted

$             (2.67)

$               0.45

$               0.03

$               0.33

Adjusted Earnings per share, basic and diluted

$               0.29

 

$               0.03

 

 

   

(1)

Includes the impact of the Company's discontinued operations on a historical basis for the periods presented.

(2)

One-time net tax expense, which reflects the establishment of a net deferred tax liability associated with the La Quinta Predecessor Entities becoming owned by La Quinta Holdings Inc., a "C" corporation for income tax purposes.

(3)

Share based compensation adjustment, which reflects the expense relating to exchanged Units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock, 100% of which vest within one year of the IPO.

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:

EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;
EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes;
EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
EBITDA and Adjusted EBITDA do not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and
other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures.
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.

###

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