La Quinta(R) Announces Fourth Quarter and Full Year 2002 Financial Results
DALLAS, Feb. 25 /PRNewswire-FirstCall/ -- La Quinta Corporation
The company reported the following financial results, which included the impact from healthcare asset sales. A detailed schedule reconciling earnings available to common shareholders to EBITDA and other non-GAAP measures is included in the supplemental tables.
For the fourth quarter 2002, La Quinta reported:
- Revenues of $116 million, a 6.8% decline compared to 2001.
- Net loss available to common shareholders of $27 million, or ($0.18) per share, versus net loss of $257 million, or ($1.79) per share, in 2001.
- EBITDA of $26 million, a 22.8% decline compared to 2001.
For the year 2002, La Quinta reported:
- Revenues of $537 million, a 17.2% decline compared to 2001.
- Net loss available to common shareholders of $508 million, or ($3.55) per share, versus net loss of $300 million, or ($2.10) per share, in 2001.
- EBITDA of $171 million, a 36.9% decline compared to 2001.
"2002 was an extremely challenging year for the lodging industry and La Quinta," said Francis W. ("Butch") Cash, President and Chief Executive Officer. "Economic and war concerns continue to weigh heavily on the minds of both business and leisure travelers. We believe, however, the investments we have made in our product and our people will lead to stronger guest loyalty and improved RevPAR."
Lodging Results
RevPAR for comparable and total company-owned hotels declined 0.4% and 1.1%, respectively, during the fourth quarter. RevPAR was impacted by occupancy declines, which were partially offset by improvements in average daily rates. Lodging EBITDA for the fourth quarter was $27 million, a 10.2% decrease over the same period last year.
"Our top ten markets - Dallas/Ft. Worth, Houston, Denver, San Antonio, Austin, New Orleans, Atlanta, Orlando, Miami/Ft. Lauderdale and Phoenix -- which account for approximately 40% of our owned room portfolio, continue to face lackluster demand," said Mr. Cash. "RevPAR of our direct competitors in these markets was down approximately 10% for the year in 2002. While our results were about the same as our competitors in these markets, we were able to maintain a RevPAR premium in 2002. When these markets do recover, we expect to benefit from our strong presence."
"In 2002, we took a number of steps to strengthen La Quinta. We launched our enhanced frequent stayer program as well as our new, user-friendly website
"We have also continued to increase La Quinta's market presence through franchising," said Mr. Cash. "During the fourth quarter, we opened 1,868 franchise rooms and, with additional rooms opened at the beginning of this year, have met our goal of opening 6,000 franchise rooms. With our pipeline of 3,000 rooms already approved, we anticipate having approximately 10,000 franchise rooms open by year-end."
Financial Position
At December 31, 2002, total indebtedness was $665 million. La Quinta had cash of $10 million and $198 million available under its revolver (net of $27 million in letters of credit) at December 31, 2002. The revolver matures on May 31, 2003. The Company has an option to extend the maturity of the revolver, subject to certain conditions. As of February 24, 2003, our borrowings under the revolver were $33 million in addition to $23 million in letters of credit. During the fourth quarter, La Quinta repurchased 705,100 shares of its common stock at an average price of $4.79.
As part of the Company's previously-announced program to upgrade its lodging portfolio, La Quinta sold three hotels during the fourth quarter for gross proceeds of $6 million and recorded a small loss after previously recorded impairments of $9 million. As of December 31, 2002, the Company had lodging-related assets with a net book value of $25 million remaining to be sold.
During the fourth quarter, the Company recorded $7.9 million of net impairments and a $0.2 million gain for a total of $7.7 million of other charges.
Current Outlook
La Quinta anticipates the current difficult environment will continue during the first half of 2003 as soft economic conditions and uncertainty surrounding a war with Iraq will continue to negatively impact lodging demand. La Quinta anticipates a stronger second half of 2003 as its local markets stabilize and the Company begins to benefit from its revenue enhancement programs.
The Company's guidance does not reflect the impact of U.S. military action in Iraq and terrorist activities. La Quinta anticipates full year 2003 total company RevPAR growth to be approximately flat. EBITDA is anticipated to be within a range of approximately $155 to $160 million, reflecting the sale of healthcare assets, cost pressures and investments in revenue initiatives. These investments, primarily related to the Company's sales force, frequent stayer program and information systems, have increased La Quinta's 2003 cost structure but are expected to produce benefits over future periods. Full year earnings are anticipated to be a loss within a range of approximately $22 to $26 million, or ($0.15) to ($0.18) per share.
The Company anticipates having free cash flow available for debt reduction for the year 2003. Cash earnings are anticipated to be within a range of approximately $78 to $84 million for the full year. The Company has reduced its previous 2003 capital expenditures guidance to approximately $60 million.
For the first quarter of 2003, La Quinta anticipates a total company RevPAR decline of approximately 6%. EBITDA is anticipated to be approximately $31 million. EPS is anticipated to be approximately ($0.07). Cash earnings are anticipated to be approximately $12 million. First quarter guidance reflects current lower demand levels as a result of war concerns and the absence of the positive impact from the Salt Lake City Winter Olympics and New Orleans Super Bowl during the first quarter 2002, as well as cost increases during the first quarter 2003, primarily related to revenue initiatives that should positively impact future periods.
"While the lodging environment remains difficult, we believe we are well-positioned to handle the current challenges," said Mr. Cash. "For 2003, we anticipate funding our capital expenditures through operating cash flow and having free cash flow available for debt service. In terms of operations, our investments in product and people are resulting in strong guest satisfaction improvements. Forecasting beyond 2003 is a difficult exercise given the limited visibility and uncertainties affecting the lodging industry. We remain focused, however, on our long-term strategy of returning our hotels towards historic levels of profitability, growing our franchising business and expanding La Quinta through potential lodging acquisitions. While the timing of achieving these long-term goals is not clear, we believe the tools and the people we have in place will enable us to meet the current challenges and position us for success."
Conference Call and Where You Can Find Additional Information
As previously announced, at 11:00AM (EST) on February 25, 2003, La Quinta will hold a conference call and audio webcast to discuss its financial results for 2002 and business outlook. La Quinta may answer one or more questions concerning business and financial matters affecting the Company, which may contain or constitute information that has not been previously disclosed.
Simultaneous with the conference call, an audio webcast of the call will be available via a link on the La Quinta website,
In addition, La Quinta will present at the CIBC World Markets 12th Annual Gaming, Lodging, Travel and Leisure Conference in New York City on Wednesday, February 26, 2003, at 9:45 a.m. (EST). A live webcast and replay of the presentation will be available via a link on the La Quinta website,
About La Quinta Corporation - Dallas-based La Quinta Corporation
Supplemental Schedules
Financial Results A
Other Expenses B
Supplemental Non-GAAP Financial Data C
Other Supplemental Information D
Lodging Statistics E
La Quinta Corporation
Schedule A
Financial Results
Three months ended Twelve months ended
Operating Data December 31, December 31,
(In thousands, except 2002 2001 2002 2001
per share data) (Audited)
Revenues
Lodging $114,925 $116,626 $524,295 $574,837
Other 1,289 7,952 12,633 73,479
Total revenues 116,214 124,578 536,928 648,316
Expenses
Direct lodging
operations 55,954 58,971 234,753 251,246
Other lodging expenses 16,322 16,391 75,205 74,573
General and
administrative 17,820 15,404 55,729 51,153
Interest, net 13,492 19,197 65,021 98,327
Depreciation and
amortization 33,024 29,186 125,029 117,552
Amortization of goodwill -- 4,904 -- 21,412
Impairment of property,
plant and equipment,
mortgages and other
notes receivable 7,947 33,471 37,134 115,347
Impairment of goodwill -- -- 8,000
Paired share intangible
write-off -- 169,421 -- 169,421
Other (248) 31,143 (14,621) 31,428
144,311 378,088 586,250 930,459
Loss before minority
interest, income taxes,
and cumulative effect
of change in accounting
principle (28,097) (253,510) (49,322) (282,143)
Minority interest (4,644) (100) (18,522) (585)
Income tax benefit
(expense) 5,948 1,537 (180,952) (488)
Loss before cumulative
effect of change in
accounting Principle (26,793) (252,073) (248,796) (283,216)
Cumulative effect of
change in accounting
principle -- -- (258,957) 856
Net loss (26,793) (252,073) (507,753) (282,360)
Preferred stock dividends -- (4,500) -- (18,000)
Net loss available to
common shareholders $(26,793) $(256,573) $(507,753) $(300,360)
Net loss per paired
common share:
Basic $(0.18) $(1.79) $(3.55) $(2.10)
Diluted $(0.18) $(1.79) $(3.55) $(2.10)
Weighted average shares
outstanding:
Basic 142,622 143,005 143,017 143,011
Diluted 142,622 143,005 143,017 143,011
Prior period results have been reclassified to conform to current period
presentation.
La Quinta Corporation
Schedule B
Other Expenses
Three months ended Twelve months ended
December 31, December 31,
(In thousands) 2002 2001 2002 2001
Restructuring:
Employee severance and
related employment costs(1) $-- $20,610 $861 $22,450
Write-off of debt costs and
other prepayment expenses(2) -- 202 -- 202
Professional, external
consulting and other fees(3) -- 6,240 -- 7,136
Restructuring and related
Expenses -- 27,052 861 29,788
Other:
Provision for loss on
interest and other
receivables(4) -- 4,780 1,900 14,713
Bad debt recoveries(5) (7) (828) (22) (3,178)
(Gain) loss on sale
of assets (6) 165 (185) (10,296) (10,133)
(Gain) loss on early
extinguishments of debt(7) 3 (849) 1,032 (935)
(Gain) on settlement(8) -- -- (5,442)
Other(9) (409) 1,173 (2,654) 1,173
Other (248) 4,091 (15,482) 1,640
Total other (income)
Expenses $(248) $31,143 $(14,621) $31,428
(1) During the three months ended December 31, 2001, the Companies
incurred approximately $20.6 million of employee severance and related
costs of which $18.7 was incurred primarily as a result of our
decision to exit the healthcare business and $1.9 million was incurred
as a result of our decision to eliminate approximately 60 corporate
positions in the lodging segment. Employee severance and related
costs for the year ended December 31, 2002 were incurred as a result
of our decision to eliminate 70 positions in our lodging reservations
call center and enter into severance agreements with other lodging
management employees. In 2001 we incurred $22.5 million of severance
and related costs of which $19.4 million was incurred as a result of
our decision to exit the healthcare business and $3.1 million was
incurred as a result of our decision to eliminate 60 corporate
positions in the lodging segment and enter into severance agreements
with two former senior executives.
(2) During the three months and year ended December 31, 2001 we recorded a
charge of $202,000 related to accelerated amortization of debt
issuance costs and other expenses associated with early repayment of
debt.
(3) During the three months and year ended December 31, 2001 we incurred
approximately $6.2 million of professional fees in connection with the
legal restructuring of the companies. The remainder of the amount
incurred in 2001 represents professional fees of approximately
$950,000 of which $697,000 was incurred in connection with costs
savings initiatives in the lodging segment and $253,000 was incurred
in connection with our decision to exit the healthcare business.
(4) We recorded provisions of approximately $4.8 million, $1.9 million and
$14.7 million during the three months ended December 31, 2001 and the
years ended December 31, 2002 and 2001; respectively, on working
capital and other receivables related to the healthcare business that
management considered uncollectible.
(5) Amounts relate to recovery of healthcare receivables previously
written off.
(6) We recognized a loss of $165,000 and a gain of $185,000 during the
three months ended December 31, 2002 and 2001; respectively, as a
result of the sale of property, plant and equipment. During the years
ended December 31, 2002 and 2001, we recognized gains of
$10,296,000 and $10,133,000; respectively, as a result of the sale of
property, plant and equipment and repayment of mortgages receivable.
(7) During the three months and year ended December 31, 2002 we recorded
net losses on extinguishment of debt of $3,000 and $1,032,000;
respectively, in connection with the repayment of principal on notes
payable and the prepayment of our term loan. During the three months
and year ended December 31, 2001 we recorded net gains on
extinguishment of debt of $849,000 and $935,000, respectively.
(8) During the year ended December 31, 2002 we recorded a gain of
$5,442,000 as a result of a settlement of obligations and receivables
related to healthcare properties previously sold.
(9) During the three months and year ended December 31, 2002, we recorded
$409,000 and $2,654,000 of other income; respectively, primarily
related to adjustments made to reduce previously recorded estimated
costs to the exit the healthcare business of approximately $2,185,000
and to record a gain on proceeds from a key man life insurance policy
of $469,000. During the three months and year ended December 31,
2001, we recorded $1,173,000 of expense related to the termination of
the La Quinta Retirement Plan effective December 31, 2000.
La Quinta Corporation
Schedule C
Supplemental Non-GAAP Financial Data
(Unaudited)
Earnings Before Other
Charges, Cash Earnings
& EBITDA Reconciliation Three months ended Twelve months ended
December 31, December 31,
2002 2001 2002 2001
(In thousands, except per
share data)
Net (loss) income available
to common shareholders
(per GAAP) $(26,793) $(256,573) $(507,753) $(300,360)
Add:
Cumulative effect of change
in accounting principle -- -- 258,957 (856)
Nonrecurring restructuring
income tax charge -- -- 196,520
Impairment of goodwill -- -- 8,000
Paired share intangible
write-off -- 169,421 -- 169,421
Other 5,677(1) 64,614 11,277(2) 146,775
Earnings before other
charges (Non-GAAP) (21,116) (22,538) (32,999) 14,980
Add:
Depreciation and
Amortization 33,024 29,186 125,029 117,552
Amortization of goodwill -- 4,904 -- 21,412
Deferred income tax benefit (3,854)(3) -- (4,108)(4)
Cash earnings (Non-GAAP) 8,054 11,552 87,922 153,944
Add:
Minority interest 4,644 100 18,522 585
Preferred stock dividends -- 4,500 -- 18,000
Current income tax expense
(benefit) (72)(5) (1,537) (224)(6) 488
Interest expense 13,492 19,197 65,021 98,327
Total EBITDA (Non-GAAP) $26,118 $ 33,812 $171,241 $271,344
Weighted average shares
outstanding (Basic) 142,622 143,005 143,017 143,011
(1) Other for the three months ended December 31, 2002 is comprised of net
pre-tax expense of $7,699 less $2,022 of tax-related items.
(2) Other for the year ended December 31, 2002 is comprised of net pre-tax
expense of $22,513 less $11,236 of tax-related items.
(3) Deferred income tax benefit for the three months ended December 31,
2002 is $5,190 less net deferred tax benefit of $1,336 associated with
non-recurring items.
(4) Deferred income tax benefit for the year ended December 31, 2002 is
$9,166 less net deferred tax benefit of $5,058 associated with
non-recurring items.
(5) The current tax benefit for the three months ended December 31, 2002
is $758 less current tax benefit of $686 associated with nonrecurring
items.
(6) The current tax benefit for the year ended December 31, 2002 is $6,402
less current tax benefit of $6,178 associated with nonrecurring items.
Three months ended Twelve months ended
EBITDA by Segment December 31, December 31,
(In thousands) 2002 2001 2002 2001
Lodging $26,644 $29,656 $165,536 $210,059
Other (526) 4,156 5,705 61,285
Total EBITDA $26,118 $33,812 $171,241 $271,344
La Quinta Corporation
Schedule D
Other Supplemental Information
Three months ended Twelve months ended
Capital Expenditures December 31, December 31,
2002 2001 2002 2001
(In thousands) (Audited)
Capital expenditures $36,772 $27,549 $118,605 $93,286
Capitalization Schedule
December 31, December 31,
2002 2001
(In millions, except for
percentages)
Cash and cash equivalents $10 $138
Total indebtedness 665 1,000
Minority interest 206 7
Total shareholders' equity 1,313 2,025
Total capitalization 2,174 2,894
Net debt to total
Capitalization 30% 30%
Balance Sheet Data
December 31, December 31,
2002 2001
(In millions) (Audited)
Property, plant and
equipment, net $2,310 $2,540
Cash and cash equivalents 10 138
Total assets 2,548 3,215
Total indebtedness 665 1,000
Total liabilities 1,028 1,184
Minority interest 206 7
Total shareholders' equity 1,313 2,025
Debt Maturity Schedule
(In millions)
Year ended December 31, Notes Payable
2003(1) $107
2004(2) 158
2005 116
2006 20
2007 210
2008 and thereafter 54
Total debt $665
(1) Assumes $90 million of 7.82% Notes due in 2026 are put to the Company.
(2) Assumes $94 million of 7.114% Notes due in 2011 are put to the
Company.
La Quinta Corporation
Schedule E
Lodging Statistics
(Unaudited)
Occupancy Percentage (Occ), Average Daily Rate (ADR) and Revenue per
Available Room (RevPAR) Data
Three months ended Three months ended
December 31, 2002 December 31, 2001
Occ ADR RevPAR Occ ADR RevPAR
Comparable Hotels(1,2,3) 51.4% $58.78 $30.21 52.9% $57.37 $30.33
Company Owned (1)
Inns 51.0% $55.67 $28.36 52.6% $54.37 $28.59
Inns & Suites 53.2% $67.75 $36.07 55.0% $67.44 $37.12
Total 51.5% $58.87 $30.34 53.2% $57.69 $30.68
Change
Occ ADR RevPAR
Comparable Hotels(1,2,3) (1.5) pts 2.5% (0.4)%
Company Owned(1)
Inns (1.6) pts 2.4% (0.8)%
Inns & Suites (1.8) pts 0.5% (2.8)%
Total (1.7) pts 2.0% (1.1)%
Three months ended Three months ended
December 31, 2002 December 31, 2001
Occ ADR RevPAR Occ ADR RevPAR
Comparable Hotels(1,2,3) 59.5% $60.13 $35.79 62.8% $61.58 $38.66
Company Owned (1)
Inns 58.7% $56.77 $33.32 61.6% $57.39 $35.34
Inns & Suites 60.7% $69.11 $41.98 64.3% $71.88 $46.21
Total 59.2% $59.99 $35.53 62.2% $60.98 $37.95
Change
Occ ADR RevPAR
Comparable Hotels(1,2,3) (3.3) pts (2.4)% (7.4)%
Company Owned (1)
Inns (2.9) pts (1.1)% (5.7)%
Inns & Suites (3.6) pts (3.9)% (9.2)%
Total (3.0) pts (1.6)% (6.4)%
Hotel and Room Count Data
December 31, 2002 December 31, 2001
Number of Number of Number of Number of
Hotels Rooms Hotels Rooms
Comparable Hotels (1,2) 279 36,328 279 36,307
Company-Owned (1) 284 37,133 292 37,916
Franchised Hotels 65 5,783 11 1,153
Total 349 42,916 303 39,069
(1) Excludes franchise property operating statistics.
(2) Comparable hotels for the twelve months ended December 31, 2002
exclude four hotels that were undergoing redevelopment in 2001,
representing 529 rooms in aggregate, and one new, 276 room, hotel
under development in 2001. All five properties are now open.
(3) Comparable hotels for the three months ended December 31, 2002 include
one more hotel than the twelve months ended December 31, 2002 as a
result of one 127 room hotel that opened in September 2001.