La Quinta Holdings Inc. Reports Results For Third Quarter 2015

  • Generated Pro Forma Adjusted Earnings per Share of $0.19
  • Achieved Pro Forma Total Adjusted EBITDA Growth of 4.5%
  • Commenced a $100 million share repurchase program, acquiring a total of $16 million of shares as of September 30, 2015, and a total of $50 million of shares through October 23, 2015

IRVING, Texas, Oct. 28, 2015 // PRNewswire // -- La Quinta Holdings Inc. ("La Quinta" or the "Company") (NYSE: LQ) today reported its third quarter 2015 results on a historical basis, as well as the results of operations on a pro forma basis, giving effect to La Quinta's initial public offering (IPO) in 2014 and the related transactions as described below.

Third Quarter 2015 Highlights:

  • Pro Forma Total Adjusted EBITDA increased 4.5 percent to $114.2 million, and Pro Forma Adjusted EBITDA margin increased 60 basis points
  • Pro Forma Adjusted Net Income increased 18.2 percent to $24.8 million; Historical Net Income was $17.1 million
  • Pro Forma Adjusted Earnings per Share increased by $0.03 to $0.19; Historical Earnings per Share was $0.13
  • System-wide comparable RevPAR increased 2.1 percent, ADR increased 3.0 percent and occupancy decreased 64 basis points
  • Pro Forma Franchise and Management Segment Adjusted EBITDA increased 8.3 percent to $31.5 million
  • Opened 8 franchised hotels totaling over 600 rooms and increased franchise pipeline to 221 hotels, representing approximately 19,500 additional rooms, including the addition of key developments in Mexico, Miami, Philadelphia, and the first location in Alaska
  • Signed the highest year-to-date number of franchise agreements since 2008
  • Pro Forma Owned Hotels Segment Adjusted EBITDA decreased 1.0 percent to $87.1 million
  • Repurchased 1.0 million shares for an aggregate purchase price of $16 million as part of a $100 million share repurchase program
  • Entered into a definitive purchase and sale agreement to sell 24 owned hotels

Overview

Keith A. Cline, Interim President & Chief Executive Officer of La Quinta, said, "During the third quarter, we continued to execute on our growth strategies. We expanded our geographic presence with the opening of 8 franchise properties, including locations in New York, Oregon, Washington and Illinois. We continued to grow our pipeline, with our franchise development activity in the first three quarters of 2015 resulting in the highest number of franchise agreement signings during the first nine months of the year since 2008. Our international presence continues to grow with the execution of new franchise agreements for two additional locations in Mexico. We are also expanding into our 48th state, with the signing of a franchise agreement for our first location in Alaska."

Mr. Cline continued, "We once again grew our RevPAR, franchise pipeline, and system-wide units. We accelerated a portion of our share repurchase program due to recent market activity, acquiring 1.0 million shares in the third quarter with available cash. In addition, we entered into a definitive purchase and sale agreement to sell 24 of our owned hotels, which we expect to have an accretive EBITDA multiple, despite the fact that most of the properties will be removed from our system. In an environment of ongoing strong industry fundamentals, we remain focused on growing our business and delivering long-term 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, 2015 include the following highlights (1) ($ in thousands, except per share amounts):

 

   

Pro Forma

   

Historical

   
   

Three Months Ended September 30,

   

Three Months Ended September 30,

   
   

2015

   

2014

   

% chg

   

2015

   

2014

   

% chg

   

Total Revenue

 

$

279,103

   

$

271,118

     

2.9

%

 

$

279,103

   

$

271,118

     

2.9

%

 

Franchise and Management Segment Adj. EBITDA

   

31,460

     

29,054

     

8.3

%

   

31,460

     

29,054

     

8.3

%

 

Owned Hotels Segment Adj. EBITDA

   

87,098

     

87,951

     

-1.0

%

   

87,098

     

87,951

     

-1.0

%

 

Total Adj. EBITDA

   

114,231

     

109,297

     

4.5

%

   

114,231

     

109,297

     

4.5

%

 

Total Adj. EBITDA margin

   

40.9

%

   

40.3

%

           

40.9

%

   

40.3

%

         

Operating Income Margin

   

18.9

%

   

22.0

%

           

18.9

%

   

20.0

%

         
                                                   
   

Three Months
Ended

   

Three Months
Ended

         
   

September 30, 2015

   

September 30, 2014

   

% Change

   
   

Net

Income

   

Basic

and

Diluted

EPS

   

Net

Income

   

Basic

and

Diluted

EPS

   

Net

Income

   

Basic

and

Diluted

EPS

   

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

 

$

24,816

   

$

0.19

   

$

20,997

   

$

0.16

     

18.2

%

   

18.8

%

 

Historical Net Income Attributable to La Quinta Holdings' stockholders

   

17,058

     

0.13

     

12,817

     

0.10

     

33.1

%

   

30.0

%

 

 

   

(1)

Please see the schedules to this press release for a 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.

 

Comparable hotel statistics

 

Three months
ended
September 30,
2015

   

Variance three

months ended

September 30,

2015 vs.

2014

 

Owned Hotels

               

Occupancy

   

69.6

%

 

-142 bps

 

ADR

 

$

83.34

     

4.0

%

RevPAR

 

$

57.97

     

2.0

%

Franchised Hotels

               

Occupancy

   

73.0

%

 

30 bps

 

ADR

 

$

95.61

     

1.8

%

RevPAR

 

$

69.84

     

2.3

%

System-wide

               

Occupancy

   

71.1

%

 

-64 bps

 

ADR

 

$

89.02

     

3.0

%

RevPAR

 

$

63.33

     

2.1

%

Development

The Company opened 8 franchised hotels with over 600 rooms in the third quarter and achieved net franchise unit growth of 6 hotels with approximately 400 rooms. Through September 30, 2015, the Company opened 28 franchised hotels with approximately 2,100 rooms. As of September 30, 2015, the Company had a pipeline of 221 franchised hotels totaling approximately 19,500 rooms, to be located in the United States, Mexico, Canada, Colombia, Nicaragua, Guatemala and Chile. The Company believes this pipeline represents a significant embedded growth opportunity for the brand.

The Company's system-wide portfolio, as of September 30, 2015, consisted of 884 hotels representing approximately 87,600 rooms located across 47 U.S. states, as well as in Canada, Mexico and Honduras. This portfolio includes 352 owned and operated hotels and 532 franchised hotels.

   

September 30, 2015

   

September 30, 2014

 
   

# of hotels

   

# of rooms

   

# of hotels

   

# of rooms

 

Owned (1)

   

351

     

44,600

     

352

     

44,800

 

Joint Venture

   

1

     

200

     

1

     

200

 

Franchised

   

532

     

42,800

     

501

     

40,500

 

Totals

   

884

     

87,600

     

854

     

85,500

 

 

   

(1)

For September 30, 2015, Owned includes 24 hotels (2,800 rooms) designated as assets held for sale, which are subject to a definitive purchase agreement.

Owned Hotel Portfolio

During the quarter, the Company entered into a definitive purchase and sale agreement for the sale of 24 of its owned hotels, and expects to close the sale before year-end. The Company believes that a sale of these assets will have many benefits, including an aggregate sales price with an accretive EBITDA multiple, the opening of several markets to new franchise development as the majority of these hotels will be removed from the La Quinta system, improvement of key operating metrics, and provision of additional available cash.

Balance Sheet and Liquidity

As of September 30, 2015, the Company had approximately $1.7 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.3%, including the impact of an interest rate swap. During the quarter, as a result of the Company's net debt, defined as total debt less cash, to Pro Forma Adjusted EBITDA ratio dropping below 4.5, the Company realized a 25 basis point reduction in the interest rate for its long-term debt. Total cash and cash equivalents was $117.6 million as of September 30, 2015.

As previously announced in September, the Board of Directors approved a program to repurchase an aggregate of up to $100 million of the Company's common stock, The Company had previously announced that the Board of Directors had approved moving forward with a $200 million program which would commence once the Company's net debt to Pro Forma Adjusted EBITDA ratio falls below 4.0 times. However, given recent market activity, the Company and the Board of Directors have decided to accelerate a portion of the program. In the third quarter, the Company acquired 1.0 million shares for an aggregate purchase price of $16 million. Since the end of the third quarter, the Company has acquired additional shares, bringing the total to approximately 3.0 million shares for an aggregate purchase price of $50 million.

Outlook

Based upon management's current estimates, the Company is reconfirming its September guidance for full year 2015 as shown in the table below, except for an update regarding the expected number of shares outstanding, which now takes into account the Company's repurchase activity. With the share repurchase activity considered, the Company now expects weighted average shares outstanding to be 130.0 million shares compared to the prior expectation of 131.7 million.

   

Guidance

RevPAR growth on a system-wide comparable hotel basis

 

3.5 percent to 4.5 percent

Pro Forma Adjusted EBITDA

 

$393 million to $400 million

Interest expense

 

Approximately $87 million

Franchise hotel openings

 

50 to 55

Weighted average shares of common stock outstanding

 

Approximately 130.0 million

 Webcast and Conference Call

La Quinta Holdings Inc. will host a conference call to discuss third quarter 2015 results on Wednesday, October 28, 2015 at 5:00 p.m. Eastern Daylight 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 28, 2015 through midnight Eastern Time on November 11, 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 13582658. 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 Annual Report on Form 10-K for the year ended December 31, 2014, as amended, filed with the Securities and Exchange Commission ("SEC"), 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 on both a pro forma and historical basis. 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 880 properties representing approximately 87,600 rooms located in 47 US states, Canada, Mexico and Honduras. These properties operate under the La Quinta Inn & Suites™, La Quinta Inn™ and LQ Hotel™ brands. 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

September 30,

   

Nine months ended

September 30,

 
   

2015

   

2014

   

2015

   

2014

 

Revenues:

                               

Room revenues

 

$

238,758

   

$

234,658

   

$

692,893

   

$

649,181

 

Franchise and other fee-based revenues

   

28,504

     

25,224

     

75,558

     

68,215

 

Other hotel revenues

   

5,173

     

5,078

     

14,686

     

14,809

 
     

272,435

     

264,960

     

783,137

     

732,205

 

Brand marketing fund revenues from franchise andmanaged properties

   

6,668

     

6,158

     

17,960

     

16,511

 

Total revenues

   

279,103

     

271,118

     

801,097

     

748,716

 

Operating expenses:

                               

Direct lodging expenses

   

105,268

     

101,076

     

302,775

     

285,430

 

Depreciation and amortization

   

44,363

     

45,086

     

132,293

     

129,948

 

General and administrative expenses

   

31,761

     

32,251

     

92,674

     

100,863

 

Other lodging and operating expenses

   

17,165

     

15,589

     

49,122

     

46,124

 

Marketing, promotional and otheradvertising expenses

   

19,230

     

16,639

     

57,034

     

50,170

 

Impairment loss

   

1,823

     

     

44,321

     

5,157

 

Loss on sale

   

85

     

     

4,088

     

 
     

219,695

     

210,641

     

682,307

     

617,692

 

Brand marketing fund expenses from franchise and managed properties

   

6,668

     

6,158

     

17,960

     

16,511

 

Total operating expenses

   

226,363

     

216,799

     

700,267

     

634,203

 

Operating income

   

52,740

     

54,319

     

100,830

     

114,513

 

Other income (expenses):

                               

Interest expense, net

   

(20,970)

     

(24,495)

     

(65,932)

     

(97,260)

 

Loss on extinguishment of debt, net

   

     

     

     

(2,030)

 

Other income (loss)

   

719

     

(795)

     

1,298

     

(1,096)

 

Total other income (expenses)

   

(20,251)

     

(25,290)

     

(64,634)

     

(100,386)

 

Income from continuing operations before income taxes

   

32,489

     

29,029

     

36,196

     

14,127

 

Income tax provision

   

(15,406)

     

(16,162)

     

(17,366)

     

(21,860)

 

Recognition of net deferred tax liabilities uponC-corporation conversion

   

     

     

     

(321,054)

 

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

   

17,083

     

12,867

     

18,830

     

(328,787)

 

Income (Loss) on discontinued operations, net of tax

   

     

     

     

(503)

 

Net income (loss)

   

17,083

     

12,867

     

18,830

     

(329,290)

 

Income from noncontrolling interests in continuingoperations, net of tax

   

(25)

     

(50)

     

(293)

     

(3,814)

 

Income from noncontrolling interests in discontinuedoperations, net of tax

   

     

     

     

 

Net income attributable to noncontrolling interests

   

(25)

     

(50)

     

(293)

     

(3,814)

 

Amounts attributable to La Quinta Holdings' stockholders

                               

Income (loss) from continuing operations, net of tax

   

17,058

     

12,817

     

18,537

     

(332,601)

 

Income (loss) from discontinued operations, net of tax

   

     

     

     

(503)

 

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

 

$

17,058

   

$

12,817

   

$

18,537

   

$

(333,104)

 

RECONCILIATIONS

Prior to the consummation of the IPO on April 14, 2014, 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 certain refinancing transactions (together with the IPO, the "IPO Transactions").

The unaudited pro forma financial data for the three and nine months ended September 30, 2015 and 2014 are presented as if the IPO Transactions all had occurred on January 1, 2014. 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 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, a reconciliation of Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share to Net Income and Earnings Per Share on a historical basis and a reconciliation of Pro Forma Adjusted EBITDA to Adjusted Pro Forma Net Income with respect to our outlook. 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 Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share provides meaningful information because it gives effect to the pro forma adjustments described above and 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", "Pro Forma Adjusted Net Income" and "Pro Forma 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

September 30, 2015

   

Three months ended

September 30, 2014

 
   

Historical

   

Adjustments

   

Pro Forma

   

Historical

   

Adjustments

   

Pro Forma

 

Revenues:

                                               

Room revenues

 

$

238,758

   

$

   

$

238,758

   

$

234,658

   

$

   

$

234,658

 

Franchise and other fee-based revenues

   

28,504

     

     

28,504

     

25,224

     

     

25,224

 

Other hotel revenues

   

5,173

     

     

5,173

     

5,078

     

     

5,078

 
     

272,435

     

     

272,435

     

264,960

     

     

264,960

 

Brand marketing fund revenues fromfranchise and managed properties

   

6,668

     

     

6,668

     

6,158

     

     

6,158

 

Total revenues

   

279,103

     

     

279,103

     

271,118

     

     

271,118

 

Operating expenses:

                                               

Direct lodging expenses

   

105,268

     

     

105,268

     

101,076

     

     

101,076

 

Depreciation and amortization

   

44,363

     

     

44,363

     

45,086

     

(31)

     

45,055

 

General and administrative expenses

   

31,761

     

     

31,761

     

32,251

     

(5,393)

     

26,858

 

Other lodging and operating expenses

   

17,165

     

     

17,165

     

15,589

     

     

15,589

 

Marketing, promotional and otheradvertising expenses

   

19,230

     

     

19,230

     

16,639

     

     

16,639

 

Impairment loss

   

1,823

     

     

1,823

     

     

     

 

Loss on sale

   

85

     

     

85

     

     

     

 
     

219,695

     

     

219,695

     

210,641

     

(5,424)

     

205,217

 

Brand marketing fund expenses fromfranchise and managed properties

   

6,668

     

     

6,668

     

6,158

     

     

6,158

 

Total operating expenses

   

226,363

     

     

226,363

     

216,799

     

(5,424)

     

211,375

 

Operating income

   

52,740

     

     

52,740

     

54,319

     

5,424

     

59,743

 

Other income (expenses):

                                               

Interest expense, net

   

(20,970)

     

     

(20,970)

     

(24,495)

     

625

     

(23,870)

 

Other income (loss)

   

719

     

     

719

     

(795)

     

     

(795)

 

Total other income (expenses)

   

(20,251)

     

     

(20,251)

     

(25,290)

     

625

     

(24,665)

 

Income from continuing operationsbefore income taxes

   

32,489

     

     

32,489

     

29,029

     

6,049

     

35,078

 

Income tax provision

   

(15,406)

     

     

(15,406)

     

(16,162)

     

2,131

     

(14,031)

 

Income from continuing operations, net of tax

   

17,083

     

     

17,083

     

12,867

     

8,180

     

21,047

 

Net income

   

17,083

     

     

17,083

     

12,867

     

8,180

     

21,047

 

Income from noncontrolling interests in continuing operations, net of tax

   

(25)

     

     

(25)

     

(50)

     

     

(50)

 

Net income attributable to noncontrolling

   interests

   

(25)

     

     

(25)

     

(50)

     

     

(50)

 

Amounts attributable to La QuintaHoldings' stockholders

                                               

Income from continuing operations,net of tax

   

17,058

     

     

17,058

     

12,817

     

8,180

     

20,997

 

Net income attributable to La QuintaHoldings' stockholders

 

$

17,058

   

$

   

$

17,058

   

$

12,817

   

$

8,180

   

$

20,997

 

 

PRO FORMA FINANCIAL INFORMATION AND NET INCOME RECONCILIATION

(unaudited, in thousands)

 
   

Nine months ended

September 30, 2015

   

Nine months ended

September 30, 2014

 
   

Historical

   

Adjustments

   

Pro Forma

   

Historical

   

Adjustments

   

Pro Forma

 

Revenues:

                                               

Room revenues

 

$

692,893

   

$

   

$

692,893

   

$

649,181

   

$

12,814

   

$

661,995

 

Franchise and other fee-based revenues

   

75,558

     

     

75,558

     

68,215

     

(732)

     

67,483

 

Other hotel revenues

   

14,686

     

     

14,686

     

14,809

     

159

     

14,968

 
     

783,137

     

     

783,137

     

732,205

     

12,241

     

744,446

 

Brand marketing fund revenues from franchise and managed properties

   

17,960

     

     

17,960

     

16,511

     

(321)

     

16,190

 

Total revenues

   

801,097

     

     

801,097

     

748,716

     

11,920

     

760,636

 

Operating expenses:

                                               

Direct lodging expenses

   

302,775

     

     

302,775

     

285,430

     

5,832

     

291,262

 

Depreciation and amortization

   

132,293

     

     

132,293

     

129,948

     

1,573

     

131,521

 

General and administrative expenses

   

92,674

     

(5,564)

     

87,110

     

100,863

     

(31,617)

     

69,246

 

Other lodging and operating expenses

   

49,122

     

     

49,122

     

46,124

     

944

     

47,068

 

Marketing, promotional and otheradvertising expenses

   

57,034

     

     

57,034

     

50,170

     

     

50,170

 

Impairment loss

   

44,321

     

     

44,321

     

5,157

     

     

5,157

 

Loss on sale

   

4,088

     

     

4,088

     

     

     

 
     

682,307

     

(5,564)

     

676,743

     

617,692

     

(23,268)

     

594,424

 

Brand marketing fund expenses fromfranchise and managed properties

   

17,960

     

     

17,960

     

16,511

     

(321)

     

16,190

 

Total operating expenses

   

700,267

     

(5,564)

     

694,703

     

634,203

     

(23,589)

     

610,614

 

Operating income

   

100,830

     

5,564

     

106,394

     

114,513

     

35,509

     

150,022

 

Other income (expenses):

                                               

Interest expense, net

   

(65,932)

     

     

(65,932)

     

(97,260)

     

25,768

     

(71,492)

 

Loss on extinguishment of debt, net

   

     

     

     

(2,030)

     

2,030

     

 

Other income (loss)

   

1,298

     

     

1,298

     

(1,096)

     

     

(1,096)

 

Total other income (expenses)

   

(64,634)

     

     

(64,634)

     

(100,386)

     

27,798

     

(72,588)

 

Income from continuing operationsbefore income taxes

   

36,196

     

5,564

     

41,760

     

14,127

     

63,307

     

77,434

 

Income tax provision

   

(17,366)

     

(1,748)

     

(19,114)

     

(21,860)

     

(9,113)

     

(30,973)

 

Recognition of net deferred tax liabilitiesupon C-corporation conversion

   

     

     

     

(321,054)

     

321,054

     

 

Income (loss) from continuingoperations, net of tax

   

18,830

     

3,816

     

22,646

     

(328,787)

     

375,248

     

46,461

 

Net income (loss) (1)

   

18,830

     

3,816

     

22,646

     

(328,787)

     

375,248

     

46,461

 

Income from noncontrolling interests in continuing operations, net of tax

   

(293)

     

     

(293)

     

(3,814)

     

3,489

     

(325)

 

Net income attributable tononcontrolling interests  (1)

   

(293)

     

     

(293)

     

(3,814)

     

3,489

     

(325)

 

Amounts attributable to La Quinta Holdings' stockholders

                                               

Income (loss) from continuingoperations, net of tax

   

18,537

     

3,816

     

22,353

     

(332,601)

     

378,737

     

46,136

 

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

 

$

18,537

   

$

3,816

   

$

22,353

   

$

(332,601)

   

$

378,737

   

$

46,136

 

 

   

(1)

Excludes the impact of the Company's discontinued operations on a historical and pro forma basis for the periods presented

 

PRO FORMA AND HISTORICAL ADJUSTED EBITDA NON-GAAP RECONCILIATION

(unaudited, in thousands)

 
   

Pro forma

   

Historical

 
   

Three months

ended

September 30,

2015

   

Three months

ended

September 30,

2014

   

Three months

ended

September 30,

2015

   

Three months

ended

September 30,

2014

 

Operating income

 

$

52,740

   

$

59,743

   

$

52,740

   

$

54,319

 

Interest expense, net

   

(20,970)

     

(23,870)

     

(20,970)

     

(24,495)

 

Other income (loss)

   

719

     

(795)

     

719

     

(795)

 

Income tax provision

   

(15,406)

     

(14,031)

     

(15,406)

     

(16,162)

 

Income from noncontrolling interest

   

(25)

     

(50)

     

(25)

     

(50)

 

Net Income (Loss) Attributable to La QuintaHoldings' stockholders

   

17,058

     

20,997

     

17,058

     

12,817

 

Interest expense

   

20,988

     

23,875

     

20,988

     

24,500

 

Income tax provision

   

15,406

     

14,031

     

15,406

     

16,162

 

Depreciation and amortization

   

44,985

     

45,321

     

44,985

     

45,352

 

Non-controlling interest

   

25

     

50

     

25

     

50

 

EBITDA

   

98,462

     

104,274

     

98,462

     

98,881

 

Fixed asset impairment loss

   

1,823

     

     

1,823

     

 

Loss on sale

   

85

     

     

85

     

 

Gain related to casualty disasters

   

393

     

(108)

     

393

     

(108)

 

Equity based compensation

   

3,320

     

3,207

     

3,320

     

8,600

 

Severance charges(1)

   

11,021

     

     

11,021

     

 

Other (gains) losses, net

   

(873)

     

1,924

     

(873)

     

1,924

 

Adjusted EBITDA

 

$

114,231

   

$

109,297

   

$

114,231

   

$

109,297

 

 

   

(1) 

Charges of $8.0 million of cash and $3.0 million of non-cash, relating to the departure of the Company's former President and Chief Executive Officer were recognized in general and administrative expenses during the three months ended September 30, 2015.

 

PRO FORMA AND HISTORICAL ADJUSTED EBITDA NON-GAAP RECONCILIATION

(unaudited, in thousands)

 
   

Pro forma

   

Historical

 
   

Nine months

ended

September 30,

2015

   

Nine months

ended

September 30,

2014

   

Nine months

ended

September 30,

2015

   

Nine months

ended

September 30,

2014

 

Operating income

 

$

106,394

   

$

150,022

   

$

100,830

   

$

114,513

 

Interest expense, net

   

(65,932)

     

(71,492)

     

(65,932)

     

(97,260)

 

Other income (loss)

   

1,298

     

(1,096)

     

1,298

     

(1,096)

 

Loss on extinguishment of debt, net

   

     

     

     

(2,030)

 

Income tax provision

   

(19,114)

     

(30,973)

     

(17,366)

     

(21,860)

 

Recognition of net deferred tax liabilities uponC-corporation conversion

   

     

     

     

(321,054)

 

Income from noncontrolling interest

   

(293)

     

(325)

     

(293)

     

(3,814)

 

Loss on discontinued operations, net of tax

   

     

     

     

(503)

 

Net Income (Loss) Attributable to La Quinta

   Holdings' stockholders

   

22,353

     

46,136

     

18,537

     

(333,104)

 

Interest expense

   

66,021

     

71,532

     

66,021

     

97,300

 

Income tax provision

   

19,114

     

30,973

     

17,366

     

21,860

 

Recognition of net deferred tax liabilities uponC-corporation conversion

   

     

     

     

321,054

 

Depreciation and amortization

   

133,335

     

132,288

     

133,335

     

130,711

 

Non-controlling interest

   

293

     

325

     

293

     

3,814

 

EBITDA

   

241,116

     

281,254

     

235,552

     

241,635

 

Fixed asset impairment loss

   

44,321

     

5,157

     

44,321

     

5,308

 

Loss on sale

   

4,088

     

     

4,088

     

377

 

Loss on retirement of assets

   

161

     

     

161

     

 

Gain related to casualty disasters

   

1,064

     

(1,098)

     

1,064

     

(1,106)

 

Loss on extinguishment of debt, net

   

     

     

     

2,030

 

Equity based compensation

   

10,900

     

8,036

     

16,464

     

39,703

 

Severance charges(1)

   

11,021

     

     

11,021

     

 

Other (gains) losses, net

   

3,400

     

2,570

     

3,400

     

2,312

 

Adjusted EBITDA

 

$

316,071

   

$

295,919

   

$

316,071

   

$

290,259

 

 

   

(1) 

Charges of $8.0 million of cash and $3.0 million of non-cash, relating to the departure of the Company's former President and Chief Executive Officer were recognized in general and administrative expenses during the nine months ended September 30, 2015.

 

PRO FORMA AND HISTORICAL SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION

(unaudited, in thousands)

 
   

Three months ended September 30, 2015

   

Three months ended September 30, 2014

 
   

Historical

   

Adjustments

   

Pro

Forma

   

Historical

   

Adjustments

   

Pro

Forma

 

Revenues:

                                               

Owned hotels

 

$

245,558

   

$

   

$

245,558

   

$

241,266

   

$

   

$

241,266

 

Franchise and management

   

31,460

     

     

31,460

     

29,054

     

     

29,054

 

Segment revenues

   

277,018

     

     

277,018

     

270,320

     

     

270,320

 

Other fee-based revenues from franchiseand managed properties

   

6,668

     

     

6,668

     

6,158

     

     

6,158

 

Corporate and other

   

34,757

     

     

34,757

     

34,026

     

     

34,026

 

Intersegment elimination

   

(39,340)

     

     

(39,340)

     

(39,386)

     

     

(39,386)

 

Total revenues

 

$

279,103

   

$

   

$

279,103

   

$

271,118

   

$

   

$

271,118

 

Adjusted EBITDA:

                                               

Owned hotels

 

$

87,098

   

$

   

$

87,098

   

$

87,951

   

$

   

$

87,951

 

Franchise and management

   

31,460

     

     

31,460

     

29,054

     

     

29,054

 

Segment Adjusted EBITDA

   

118,558

     

     

118,558

     

117,005

     

     

117,005

 

Corporate and other

   

(4,327)

     

     

(4,327)

     

(7,708)

     

     

(7,708)

 

Total Adjusted EBITDA

 

$

114,231

   

$

   

$

114,231

   

$

109,297

   

$

   

$

109,297

 

 

PRO FORMA AND HISTORICAL SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION

(unaudited, in thousands)

 
   

Nine months ended September 30, 2015

   

Nine months ended September 30, 2014

 
   

Historical

   

Adjustments

(1)

   

Pro

Forma

   

Historical

   

Adjustments

(1)

   

Pro

Forma

 

Revenues:

                                               

Owned hotels

 

$

711,451

   

$

   

$

711,451

   

$

667,564

   

$

10,929

   

$

678,493

 

Franchise and management

   

87,357

     

     

87,357

     

68,977

     

11,729

     

80,706

 

Segment revenues

   

798,808

     

     

798,808

     

736,541

     

22,658

     

759,199

 

Other fee-based revenues from franchiseand managed properties

   

17,960

     

     

17,960

     

16,511

     

(321)

     

16,190

 

Corporate and other

   

97,862

     

     

97,862

     

88,054

     

4,633

     

92,687

 

Intersegment elimination

   

(113,533)

     

     

(113,533)

     

(92,390)

     

(15,050)

     

(107,440)

 

Total revenues

 

$

801,097

   

$

   

$

801,097

   

$

748,716

   

$

11,920

   

$

760,636

 

Adjusted EBITDA:

                                               

Owned hotels

 

$

253,922

   

$

   

$

253,922

   

$

249,226

   

$

(10,702)

   

$

238,524

 

Franchise and management

   

87,357

     

     

87,357

     

68,977

     

11,729

     

80,706

 

Segment Adjusted EBITDA

   

341,279

     

     

341,279

     

318,203

     

1,027

     

319,230

 

Corporate and other

   

(25,208)

     

     

(25,208)

     

(27,944)

     

4,633

     

(23,311)

 

Total Adjusted EBITDA

 

$

316,071

   

$

   

$

316,071

   

$

290,259

   

$

5,660

   

$

295,919

 

 

   

(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, 2014; 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, 2014. 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.

 

ADJUSTED NET INCOME AND

PRO FORMA AND ADJUSTED EARNINGS PER SHARE

NON-GAAP RECONCILIATION

(unaudited, in thousands, except per share data)

 
   

Three months ended September 30, 2015

   

Three months ended September 30, 2014

 
                                 
   

Net Income

   

Basic and

Diluted

Earnings

Per

Share

   

Net Income

   

Basic and

Diluted

Earnings

Per

Share

 

Net Income Attributable to La Quinta Holdings' stockholders

 

$

17,058

   

$

0.13

   

$

12,817

   

$

0.10

 

Pro Forma Adjustments(1)

   

     

     

8,180

     

0.06

 

Pro Forma Net Income Attributable to La Quinta Holdings' stockholders

 

$

17,058

   

$

0.13

   

$

20,997

   

$

0.16

 

Severance charges, net of tax (2)

   

6,613

     

0.05

     

     

 

Impairment loss, net of tax

   

1,094

     

0.01

     

     

 

Loss on sale, net of tax

   

51

     

     

     

 

Pro Forma Adjusted Net Income Attributable to La Quinta Holdings' stockholders

 

$

24,816

   

$

0.19

   

$

20,997

   

$

0.16

 

Weighted average common shares outstanding, basic

           

129,858

             

127,734

 

Weighted average common shares outstanding, diluted

           

130,914

             

128,494

 

 

   

(1) 

Refer to Pro Forma Financial Information and Net Income Reconciliation on page 8.

(2) 

Charges relating to the departure of the Company's former President and Chief Executive Officer  of $4.8 million in cash and $1.8 million in non-cash, net of tax, were recognized in general and administrative expenses during the three months ended September 30, 2015

 

   

Nine months ended September 30, 2015

   

Nine months ended September 30, 2014

 
                                 
   

Net Income

   

Basic and

Diluted

Earnings

Per

Share

   

Net Income

   

Basic and

Diluted

Earnings

Per

Share

 

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

 

$

18,537

   

$

0.14

   

$

(332,601)

   

$

(2.65)

 

Pro Forma Adjustments(2)

   

3,816

     

0.03

     

378,737

     

3.02

 

Loss from discontinued operations, net of tax

   

     

     

503

     

 

Pro Forma Net Income Attributable to La Quinta Holdings' stockholders

 

$

22,353

   

$

0.17

   

$

46,639

   

$

0.37

 

Secondary offering expenses, net of tax (3)

   

827

     

0.01

     

     

 

Severance charges, net of tax (4)

   

6,613

     

0.05

     

     

 

Impairment loss, net of tax

   

26,593

     

0.21

     

3,094

     

0.02

 

Loss on sale , net of tax

   

2,453

     

0.02

     

     

 

Pro Forma Adjusted Net Income Attributable to La Quinta Holdings' stockholders

 

$

58,839

   

$

0.46

   

$

49,733

   

$

0.39

 

Weighted average common shares outstanding, basic

           

129,264

             

125,542

 

Weighted average common shares outstanding, diluted

           

130,543

             

126,084

 

 

   

(1) 

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

(2) 

Refer to Pro Forma Financial Information and Net Income Reconciliation on page 9.

(3) 

Expense was recognized in general and administrative expenses during the nine months ended September 30, 2015 related to costs incurred in connection with the secondary equity offering by certain selling stockholders.

(4) 

Charges relating to the departure of the Company's former President and Chief Executive Officer  of 4.8 million in cash and $1.8 million in non-cash, net of tax, were recognized in general and administrative expenses during the nine months ended September 30, 2015

 

PRO FORMA ADJUSTED EBITDA NON-GAAP RECONCILIATION

OUTLOOK: FORECASTED 2015

(unaudited, in thousands)

 
   

Year Ended December 31, 2015

 
   

Low Case

   

High Case

 

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

 

$

69,660

   

$

73,860

 

Interest expense (2)

   

87,000

     

87,000

 

Income tax provision

   

46,440

     

49,240

 

Depreciation and amortization

   

176,200

     

176,200

 

Non-controlling interest

   

500

     

500

 

Pro Forma EBITDA

   

379,800

     

386,800

 

Share based compensation expense (3)

   

13,200

     

13,200

 

Pro Forma Adjusted EBITDA

 

$

393,000

   

$

400,000

 

 

   

(1) 

This table provides a reconciliation of forward-looking forecasted Adjusted EBITDA to adjusted pro forma net income attributable to La Quinta Holdings' stockholders that excludes the impact of certain items that are not expected to have an ongoing effect on our operations, including the severance charges incurred in the third quarter described above and for a certain portion of our equity 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 vested within one year of the IPO.

(2) 

Includes interest expense for $1.7 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.3%, 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.

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.

"Pro Forma Adjusted Net Income" and "Pro Forma 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 Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share may not be comparable to similarly titled measures of other companies.

Pro Forma Adjusted Net Income and Pro Forma 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 in a comparable format.

"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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