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La Quinta Holdings Inc.$19.56$.08.41%

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 La Quinta Holdings Inc. Reports Third Quarter 2017 Results
   Wednesday, November 01, 2017 4:20:20 PM ET

RevPAR Increased 2.9 percent; Franchise and other Fee-based Revenue Grew 9.4 percent

Company Reports Fifth Consecutive Quarter of Market Share Gains

La Quinta Holdings Inc. ("La Quinta" or the "Company") (LQ ) today reported results for the quarter ended September 30, 2017.

Third Quarter 2017 Highlights

-- Grew system-wide comparable RevPAR 2.9 percent; excluding the impact of the owned hotels undergoing significant renovation as part of the repositioning effort, RevPAR grew 4.0 percent

-- Increased RevPAR Index by 147 bps, the fifth consecutive quarter of market share growth

-- Increased franchise and other fee-based revenue 9.4 percent

-- Opened nine franchised hotels, totaling over 700 rooms, including locations in Brooklyn, New York and Anchorage, Alaska

-- Completed 8 renovations as part of the Company’s owned hotel repositioning effort, including completion of the Company’s downtown San Antonio location

-- Increased franchise pipeline to 252 hotels, representing approximately 23,700 additional rooms, and continued to expand the brand’s footprint with 16 new franchise agreements including locations in downtown Nashville, Tennessee, Santa Cruz, California, and the Beacon Hill neighborhood of Kansas City, Missouri

-- Continued to generate strong cash flow

-- Reported Net Income of $12.4 million and Adjusted Net Income of $15.9 million; Net Income per Share was $0.11 and Adjusted Earnings per Share was $0.14

Overview

"La Quinta’s third quarter results demonstrate the momentum we are building in our business, as we execute on our key strategic initiatives to deliver a consistent product, to consistently deliver an outstanding guest experience and to drive engagement with our brand. We saw impressive gains in RevPAR and guest satisfaction scores this quarter, which resulted in our fifth consecutive quarter of market share gains," said Keith A. Cline, President and Chief Executive Officer of La Quinta. "We completed the renovation of eight additional hotels in our repositioning program during the third quarter and continue to be encouraged by the positive response from our guests. We also added to a strong pipeline that will allow us to further expand our reach into new markets and take advantage of our unique growth opportunity in the industry."

Mr. Cline continued, "Like many others in our industry, La Quinta was impacted by the devastation caused by Hurricanes Harvey and Irma. As of today, we still have eight owned and two franchised hotels closed and over 3,000 rooms out of service across Texas, Florida and Georgia. We anticipate that these closures will have a meaningful impact on our owned hotel business in the fourth quarter. Our teams are working diligently to get rooms back in service as quickly as possible. I am so proud of our team members who continue to work tirelessly, despite their own personal situations, to serve our guests, help those in need and support their communities."

Financial Overview

For the third quarter of 2017, the Company grew system-wide comparable RevPAR 2.9 percent over the same period of 2016, driven by 5.0 percent growth in its franchise locations and 0.4 percent growth in its owned hotels. Excluding the impact of the owned hotels undergoing significant renovation as part of the repositioning effort, system-wide comparable RevPAR increased 4.0 percent in the third quarter. The Company grew franchise and other fee-based revenue 9.4 percent in the third quarter of 2017 over the prior year period and reported its fifth consecutive quarter of market share growth, as evidenced by a 147 basis point improvement in RevPAR index over the prior year period.

For the third quarter of 2017, the Company reported net income of $12.4 million and adjusted net income of $15.9 million. Net Income per Share was $0.11 and Adjusted Earnings per Share was $0.14.

Total Adjusted EBITDA for the third quarter of 2017 was $93.8 million. Total Adjusted EBITDA for the third quarter of 2017 as compared to the prior year quarter was affected by the sale of owned hotels in 2016 and early 2017. These hotels contributed revenues of approximately $6.7 million and total Adjusted EBITDA of approximately $1.7 million in the third quarter of 2016, which did not recur in 2017. Total Adjusted EBITDA was also impacted by competitive wage pressures as well as an elevated presence of third-party booking agents in the Company’s channel mix as compared to the prior year.

Hurricanes Harvey and Irma had a meaningful impact on the Company’s business in the third quarter. Due to the damage caused by the hurricanes, the Company currently has eight owned and two franchised hotels closed and over 3,000 rooms out of service. The Company is working to reopen the hotels and to restore the out-of-order rooms to service as quickly as possible, but currently estimates that a portion of the rooms and several hotels could be closed for more than 90 days.

The Company expects to generate approximately $5 million less Adjusted EBITDA than it had previously projected in the fourth quarter of 2017 due to the impact of Hurricanes Harvey and Irma and is updating its guidance below to reflect these revised expectations.

The Company’s system-wide portfolio, as of September 30, 2017, is located across 48 states in the U.S., as well as in Canada, Mexico, Honduras and Colombia. The portfolio includes:

                September 30, 2017                                              September 30, 2016
                # of hotels                     # of rooms                      # of hotels                     # of rooms
Owned                          317                             40,500                          325                             41,500
Joint Venture                  1                               200                             1                               200
Franchised                     576                             47,100                          567                             46,300
Totals                         894                             87,800                          893                             88,000
As of September 30, 2017 and 2016, Owned included three hotels (400 rooms) and nine hotels (1,100 rooms), respectively, designated as assets held for sale, which are subject to definitive purchase agreements
As of September 30, 2017 and 2016, Franchised included five hotels (600 rooms) and eight hotels (1,100 rooms), respectively, under temporary franchise agreements related to formerly owned hotels which are in the process of leaving the system

The results of operations for the Company for the three months ended September 30, 2017 and 2016 include the following highlights ($ in thousands, except per share amounts):

                                             Three Months Ended September 30,
                                             2017                       2016                       % Change
Total Revenue                                $           268,642        $           272,312                    -1.3        %
Franchise and Management Segment Adj. EBITDA             33,174                     32,101                     3.3         %
Owned Hotels Segment Adj. EBITDA                         69,295                     76,662                     -9.6        %
Total Adj. EBITDA                                        93,824                     100,737                    -6.9        %
Total Adj. EBITDA margin                                 34.9        %              37.0        %
Operating Income                                         42,132                     61,285                     -31.3       %
Operating Income Margin                                  15.7        %              22.5        %
Adj. Operating Income                                    47,975                     60,295                     -20.4       %
Adj. Operating Income Margin                             17.9        %              22.1        %
2016 results include approximately $6.7 million of total revenues and approximately $1.7 million of total Adjusted EBITDA from hotels sold in 2016 and 2017
                                                                      Three Months            Three Months
                                                                      Ended                   Ended
                                                                      September 30, 2017      September 30, 2016      % Change
                                                                      Net          Diluted    Net          Diluted    Net          Diluted
                                                                      Income       EPS        Income       EPS        Income       EPS
Net Income Attributable to La Quinta Holdings’ stockholders           $   12,415   $   0.11   $   22,666   $   0.20       -45.2 %      -45.0 %
Adjusted Net Income Attributable to La Quinta Holdings’ stockholders  $   15,921   $   0.14   $   22,072   $   0.19       -27.9 %      -26.3 %

The results of operations for the Company for the nine months ended September 30, 2017 and 2016 include the following highlights ($ in thousands, except per share amounts):

                                             Nine Months Ended September 30,
                                             2017                     2016                     % Change
Total Revenue                                $          766,351       $          783,638                  -2.2       %
Franchise and Management Segment Adj. EBITDA            91,318                   89,221                   2.4        %
Owned Hotels Segment Adj. EBITDA                        208,955                  228,154                  -8.4       %
Total Adj. EBITDA                                       266,679                  290,445                  -8.2       %
Total Adj. EBITDA margin                                34.8       %             37.1       %
Operating Income (Loss)                                 115,882                  56,250        NM
Operating Income Margin                                 15.1       %             7.2        %
Adj. Operating Income                                   132,516                  154,098                  -14.0      %
Adj. Operating Income Margin                            17.3       %             19.7       %
2016 results include approximately $26 million of total revenues and approximately $8 million of total Adjusted EBITDA from hotels sold in 2016 and 2017
Change in terms of percentage is not meaningful
                                                                      Nine Months Ended       Nine Months Ended
                                                                      September 30, 2017      September 30, 2016           % Change
                                                                      Net          Diluted    Net             Diluted      Net           Diluted
                                                                      Income       EPS        (Loss)          EPS          (Loss)        EPS
                                                                                              Income                       Income
Net Income (Loss) Attributable to La Quinta Holdings’ stockholders    $   30,790   $   0.26   $   (1,260 )    $   (0.01 )  NM            NM
Adjusted Net Income Attributable to La Quinta Holdings’ stockholders  $   40,770   $   0.34   $   57,449      $   0.49         -29.0 %       -30.6 %
Change in terms of percentage is not meaningful.
Comparable hotel statistics  Three Months     Variance            Nine Months      Variance
                             Ended            Three Months        Ended            Nine Months
                             September 30,    Ended               September 30,    Ended
                             2017             September 30,       2017             September 30,
                                              2017 vs. 2016                        2017 vs. 2016
Owned hotels
Occupancy                           68.7   %  25             bps         67.0   %         -15     bps
ADR                          $      87.54            0.0     %    $      86.62            1.0     %
RevPAR                       $      60.16            0.4     %    $      58.03            0.8     %
Franchised hotels
Occupancy                           74.4   %  204            bps         70.0   %         188     bps
ADR                          $      101.17           2.1     %    $      96.13            1.6     %
RevPAR                       $      75.23            5.0     %    $      67.33            4.4     %
System-wide
Occupancy                           71.6   %  116            bps         68.5   %         87      bps
ADR                          $      94.69            1.3     %    $      91.52            1.4     %
RevPAR                       $      67.76            2.9     %    $      62.72            2.7     %
              Three Months     Variance three   Nine Months      Variance Nine
              Ended            months ended     Ended            Months Ended
              September 30,    September 30,    September 30,    September 30,
              2017             2017 vs. 2016    2017             2017 vs. 2016
RevPAR Index         96.8   %  147 bps                 96.2   %  217 bps
Information based on the STR competitive set of hotels existing as of September 30, 2017.

Development

During the third quarter of 2017, the Company opened a total of nine franchised hotels (over 700 rooms), excluding one temporary location, and terminated four franchised hotels, resulting in a net increase of six franchised hotels during the third quarter. The elevated level of franchise terminations was in keeping with the Company’s overall strategy to drive consistency in its product. As of September 30, 2017, the Company had a pipeline of 252 franchised hotels totaling approximately 23,700 rooms, to be located in the United States, Mexico, Colombia, Nicaragua, Guatemala, Chile, and El Salvador.

Owned Hotel Portfolio

As of September 30, 2017, the Company had three hotels held for sale. During the third quarter of 2017, we closed on the sale of one hotel and entered into an agreement to sell an owned hotel located in Morrisville, North Carolina. In addition, during the third quarter, construction progressed on the portfolio of approximately 50 owned hotels which the Company believes have the opportunity to be repositioned upward within their markets in order to drive enhanced guest experience and revenue growth. Late in the second quarter and throughout the third quarter, several of these hotels emerged from construction and are currently being reintroduced to their markets as being significantly improved.

Balance Sheet and Liquidity

As of September 30, 2017, the Company had approximately $1.7 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.4%, including the impact of an interest rate swap. Total cash and cash equivalents was $180.0 million as of September 30, 2017.

Outlook

Based upon management’s current estimates, the Company is updating its guidance for the full year 2017:

                                                       Updated Guidance              Prior Guidance
RevPAR growth on a system-wide comparable hotel basis  2.0 percent to 3.0 percent    0.0 percent to 2.0 percent
Adjusted EBITDA                                        $320 million to $335 million  $320 million to $340 million

Please see the schedules to this press release for a reconciliation of Adjusted EBITDA to Adjusted Net Income (Loss) Attributable to La Quinta Holdings’ stockholders. A reconciliation of Adjusted EBITDA to the closest GAAP financial measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to impairment charges, gains or losses on sales of assets, and other non-recurring items excluded from these non-GAAP financial measures. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could have a potentially unpredictable, and potentially significant, impact on its future GAAP financial results.

Webcast and Conference Call

The Company will host a conference call for investors and other interested parties beginning at 5:30 p.m. Eastern Time on Wednesday, November 1, 2017. The call may be accessed by dialing (844) 395-9252, or (478) 219-0505 for international participants, and enter passcode 97212983. Participants may also access the live call via webcast by visiting the Company’s 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.

The replay of the call will be available from approximately 8 a.m. Eastern Time on November 2, 2017 through midnight Eastern Time on November 9, 2017. To access the replay, the domestic dial-in number is (855) 859-2056, the international dial-in number is (404) 537-3406, and the passcode is 97212983. 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 and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements related to the Company’s expectations regarding the performance of its business, its financial results, its liquidity and capital resources, the outcome of the Company’s strategic initiatives and the potential separation of its businesses 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission ("SEC"), as such factors may be updated from time to time in the Company’s 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 the Company’s filings with the SEC. The Company undertakes 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

The Company refers to certain non-GAAP financial measures in this press release including Adjusted EBITDA, Adjusted EBITDA margins, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Operating 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 for historical periods.

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 890 properties representing approximately 87,500 rooms located in 48 states in the U.S., and in Canada, Mexico, Honduras and Colombia. These properties operate under the La Quinta Inn & Suites(TM), La Quinta Inn(TM) and LQ Hotel(TM) 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 its 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.

Contacts:
Investor Relations              Media
Kristin Hays                    Teresa Ferguson
214-492-6896                    214-492-6937
investor.relations@laquinta.com Teresa.Ferguson@laquinta.com
LA QUINTA HOLDINGS INC.
BALANCE SHEETS
(in thousands, except share data)
                                                                                  September 30, 2017        December 31, 2016
ASSETS                                                                            (unaudited)
Current Assets:
Cash and cash equivalents                                                         $         180,037         $        160,596
Accounts receivable, net of allowance for doubtful accounts of $4,154 and $4,022            60,649                   45,337
Assets held for sale                                                                        8,384                    29,544
Other current assets                                                                        14,274                   9,943
Total Current Assets                                                                        263,344                  245,420
Property and equipment, net of accumulated depreciation                                     2,494,402                2,456,780
Intangible assets, net of accumulated amortization                                          176,237                  177,002
Other non-current assets                                                                    17,825                   13,321
Total Non-Current Assets                                                                    2,688,464                2,647,103
Total Assets                                                                      $         2,951,808       $        2,892,523
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt                                                 $         17,514          $        17,514
Accounts payable                                                                            41,825                   38,130
Accrued expenses and other liabilities                                                      60,624                   64,581
Accrued payroll and employee benefits                                                       43,641                   38,467
Accrued real estate taxes                                                                   24,797                   21,400
Total Current Liabilities                                                                   188,401                  180,092
Long-term debt                                                                              1,673,429                1,682,436
Other long-term liabilities                                                                 25,880                   29,130
Deferred tax liabilities                                                                    361,118                  343,028
Total Liabilities                                                                           2,248,828                2,234,686
Commitments and Contingencies
Equity:
Preferred Stock, $0.01 par value; 100,000,000 shares authorized and none                    --                       --
outstanding as of September 30, 2017 and December 31, 2016
Common Stock, $0.01 par value; 2,000,000,000 shares authorized at                           1,325                    1,318
September 30, 2017 and December 31, 2016; 132,476,865 shares issued
and 117,459,877 shares outstanding as of September 30, 2017 and
131,750,715 shares issued and 116,790,470 shares outstanding
as of December 31, 2016
Additional paid-in-capital                                                                  1,177,841                1,165,651
Accumulated deficit                                                                         (265,216  )              (296,006  )
Treasury stock at cost, 15,016,988 shares at September 30, 2017 and 14,960,245              (210,340  )              (209,523  )
shares at December 31, 2016
Accumulated other comprehensive loss                                                        (3,208    )              (6,372    )
Noncontrolling interests                                                                    2,578                    2,769
Total Equity                                                                                702,980                  657,837
Total Liabilities and Equity                                                      $         2,951,808       $        2,892,523
LA QUINTA HOLDINGS INC.
STATEMENTS OF OPERATIONS
(in thousands)
                                                                  Three Months Ended              Nine Months Ended
                                                                  September 30,                   September 30,
                                                                  2017             2016           2017           2016
                                                                  (unaudited)
REVENUES:
Room revenues                                                     $   222,883      $   230,081    $  643,670     $  669,422
Franchise and other fee-based revenues                                32,842           30,026        86,995         80,196
Other hotel revenues                                                  4,950            4,895         14,683         14,744
                                                                      260,675          265,002       745,348        764,362
Brand marketing fund revenues from franchised properties              7,967            7,310         21,003         19,276
Total Revenues                                                        268,642          272,312       766,351        783,638
OPERATING EXPENSES:
Direct lodging expenses                                               110,387          108,649       315,175        311,139
Depreciation and amortization                                         37,934           36,048        110,390        110,973
General and administrative expenses                                   34,615           29,572        105,551        86,451
Other lodging and operating expenses                                  17,419           14,872        39,310         45,848
Marketing, promotional and other                                      18,656           15,566        59,370         55,853
advertising expenses
Impairment loss                                                       989              1,058         989            100,618
Gain on sales                                                         (1,457  )        (2,048  )     (1,319  )      (2,770  )
                                                                      218,543          203,717       629,466        708,112
Brand marketing fund expenses from franchised properties              7,967            7,310         21,003         19,276
Total Operating Expenses                                              226,510          211,027       650,469        727,388
Operating Income (Loss)                                               42,132           61,285        115,882        56,250
OTHER INCOME (EXPENSES):
Interest expense, net                                                 (20,696 )        (20,427 )     (60,929 )      (61,019 )
Other income                                                          834              1,188         741            2,288
Total Other Expenses, net                                             (19,862 )        (19,239 )     (60,188 )      (58,731 )
Income (Loss) Before Income Taxes                                     22,270           42,046        55,694         (2,481  )
Income tax (expense) benefit                                          (9,862  )        (19,362 )     (24,785 )      1,359
NET INCOME (LOSS)                                                     12,408           22,684        30,909         (1,122  )
Less: net loss (income) attributable to noncontrolling interests      7                (18     )     (119    )      (138    )
Net Income (Loss) Attributable to La Quinta Holdings’             $   12,415       $   22,666     $  30,790      $  (1,260  )
Stockholders

RECONCILIATIONS

The tables below provide a reconciliation of EBITDA and Adjusted EBITDA to Net Income (Loss), a reconciliation of Adjusted Operating Income to Operating Income, a reconciliation of Adjusted Net Income and Adjusted Earnings Per Share to Net (Loss) Income and Earnings Per Share, and a reconciliation of Adjusted EBITDA to Adjusted Net Income with respect to the Company’s outlook. The Company believes this financial information provides meaningful supplemental information. The Company further believes the presentation of Adjusted EBITDA, Adjusted Operating Income, Adjusted Net Income and Adjusted Earnings Per Share provides meaningful information because it excludes the impact of certain special items and/or certain items that are not expected to have an ongoing effect on its operations. This represents how management views the business and reviews its operating performance. It is also used by management when publicly providing the business outlook.

"EBITDA" and "Adjusted EBITDA." Earnings before interest, taxes, depreciation and amortization ("EBITDA") is a commonly used measure in many industries. The Company adjusts EBITDA when evaluating its performance because the Company believes 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, provides useful supplemental information to management and investors regarding its ongoing operating performance. The Company believes that EBITDA and Adjusted EBITDA provide useful information to investors about it and its financial condition and results of operations for the following reasons: (i) EBITDA and Adjusted EBITDA are among the measures used by the Company’s management team to evaluate its 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 the Company’s 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 (loss) income, cash flow or other methods of analyzing the Company’s results as reported under GAAP. Some of these limitations are:

-- EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, the Company’s working capital needs;

-- EBITDA and Adjusted EBITDA do not reflect the Company’s interest expense, or the cash requirements necessary to service interest or principal payments, on its indebtedness;

-- EBITDA and Adjusted EBITDA do not reflect the Company’s tax expense or the cash requirements to pay its 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 the Company considers not to be indicative of its 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 the Company’s 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 the Company to reinvest in the growth of its business or as measures of cash that will be available to the Company to meet its obligations.

"Adjusted EBITDA margin" represents the ratio of Adjusted EBITDA to total revenues.

"Adjusted operating income (loss)" represents the Company’s reported operating income (loss), adjusted to exclude the impact of items not indicative of ongoing operating performance. Adjusted operating income (loss) is presented to provide additional perspective on underlying trends in the Company’s operating results.

"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 in a comparable format.

ADJUSTED EBITDA NON-GAAP RECONCILIATION
(unaudited, in thousands)
                                             Three Months       Three Months       Nine Months        Nine Months
                                             Ended              Ended              Ended              Ended
                                             September 30,      September 30,      September 30,      September 30,
                                             2017               2016               2017               2016
Operating income                             $      42,132      $      61,285      $      115,882     $      56,250
Interest expense, net                               (20,696 )          (20,427 )          (60,929 )          (61,019 )
Other income                                        834                1,188              741                2,288
Income tax (expense) benefit                        (9,862  )          (19,362 )          (24,785 )          1,359
(Loss) income from noncontrolling interest          7                  (18     )          (119    )          (138    )
Net Income (Loss) attributable to La Quinta         12,415             22,666             30,790             (1,260  )
Holdings’ Stockholders
Interest expense                                    21,012             20,501             61,584             61,190
Income tax expense (benefit)                        9,862              19,362             24,785             (1,359  )
Depreciation and amortization                       38,216             36,224             111,231            111,620
Noncontrolling interest                             (7      )          18                 119                138
EBITDA                                              81,498             98,771             228,509            170,329
Impairment loss                                     989                1,058              989                100,618
Gain on sales                                       (1,457  )          (2,048  )          (1,319  )          (2,770  )
Loss (gain) related to casualty disasters           1,747              (303    )          (1,234  )          (282    )
Equity-based compensation                           3,887              3,701              12,186             10,811
Amortization of software service agreements         2,498              2,272              7,145              6,906
Other losses (gains), net                           4,662              (2,714  )          20,403             4,833
Adjusted EBITDA                              $      93,824      $      100,737     $      266,679     $      290,445
SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION
(unaudited, in thousands)
                                                     Three Months        Three Months        Nine Months          Nine Months
                                                     Ended               Ended               Ended                Ended
                                                     September 30,       September 30,       September 30,        September 30,
                                                     2017                2016                2017                 2016
Revenues
Owned Hotels                                         $      229,142      $      236,426      $      661,748       $      688,345
Franchise and management                                    33,174              32,101              91,318               89,221
Segment revenues                                            262,316             268,527             753,066              777,566
Other fee-based revenues from franchised properties         7,967               7,310               21,003               19,276
Corporate and other                                         34,633              33,824              96,032               95,955
Intersegment elimination                                    (36,274 )           (37,349 )           (103,750 )           (109,159 )
Total revenues                                       $      268,642      $      272,312      $      766,351       $      783,638
Adjusted EBITDA
Owned Hotels                                         $      69,295       $      76,662       $      208,955       $      228,154
Franchise and management                                    33,174              32,101              91,318               89,221
Segment Adjusted EBITDA                                     102,469             108,763             300,273              317,375
Corporate and other                                         (8,645  )           (8,026  )           (33,594  )           (26,930  )
Total Adjusted EBITDA                                $      93,824       $      100,737      $      266,679       $      290,445
ADJUSTED OPERATING INCOME NON-GAAP RECONCILIATION
(unaudited, in thousands)
                           Three Months       Three Months       Nine Months         Nine Months
                           Ended              Ended              Ended               Ended
                           September 30,      September 30,      September 30,       September 30,
                           2017               2016               2017                2016
Operating income           $      42,132      $      61,285      $      115,882      $      56,250
Impairment loss                   989                1,058              989                 100,618
Retention plan                    2,923              --                 8,487               --
Reorganization costs              3,388              --                 8,477               --
Gain on sales                     (1,457 )           (2,048 )           (1,319  )           (2,770  )
Adjusted operating income  $      47,975      $      60,295      $      132,516      $      154,098
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
NON-GAAP RECONCILIATION
(unaudited, in thousands, except per share data)
                                                     Three Months Ended                  Three Months Ended
                                                     September 30, 2017                  September 30, 2016
                                                     Net Income        Diluted           Net Income        Diluted
                                                                       Earnings                            Earnings
                                                                       Per                                 Per
                                                                       Share                               Share
Net Income attributable to La Quinta Holdings’       $     12,415      $    0.11         $     22,666      $    0.20
Stockholders
Impairment loss                                            989              0.01               1,058            0.01
Retention plan                                             2,923            0.02               --               --
Reorganization costs                                       3,388            0.03               --               --
Gain on sales                                              (1,457 )         (0.01   )          (2,048 )         (0.02   )
Tax impact of adjustments                                  (2,337 )         (0.02   )          396              --
Adjusted Net Income attributable to La Quinta        $     15,921      $    0.14         $     22,072      $    0.19
Holdings’ Stockholders
Weighted average common shares outstanding, basic                           116,090                             115,795
Weighted average common shares outstanding, diluted                         116,849                             115,955
                                                       Nine Months Ended                 Nine Months Ended
                                                       September 30, 2017                September 30, 2016
                                                       Net Income        Diluted         Net (Loss) Income      Diluted
                                                                         Earnings                               (Loss)
                                                                         Per                                    Earnings
                                                                         Share                                  Per
                                                                                                                Share
Net Income (Loss) attributable to La Quinta Holdings’  $     30,790      $    0.26       $        (1,260   )    $    (0.01   )
Stockholders
Impairment loss                                              989              0.01                100,618            0.85
Retention plan                                               8,487            0.07                --                 --
Reorganization costs                                         8,477            0.07                --                 --
Gain on sales                                                (1,319 )         (0.01   )           (2,770   )         (0.02   )
Tax impact of adjustments                                    (6,654 )         (0.06   )           (39,139  )         (0.33   )
Adjusted Net Income attributable to La Quinta          $     40,770      $    0.34       $        57,449        $    0.49
Holdings’ Stockholders
Weighted average common shares outstanding, basic                             116,004                                118,886
Weighted average common shares outstanding, diluted                           116,560                                118,956
ADJUSTED EBITDA NON-GAAP RECONCILIATION
OUTLOOK: FORECASTED 2017
(unaudited, in thousands)
                                                                      Year Ending December 31, 2017
                                                                      Low Case                                         High Case
Adjusted Net income attributable to La Quinta Holdings’ Stockholders  $                                      41,820    $                                      50,820
Interest expense                                                                                             84,000                                           84,000
Income tax provision                                                                                         27,880                                           33,880
Depreciation and amortization                                                                                150,000                                          150,000
Noncontrolling interest                                                                                      300                                              300
Share based compensation expense                                                                             16,000                                           16,000
Adjusted EBITDA                                                       $                                      320,000   $                                      335,000
This table provides a reconciliation of forward-looking forecasted Adjusted EBITDA to Adjusted 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 the Company’s operations.
Includes interest expense for $1.7 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.4%, including the impact of an interest rate swap, commitment fees for the undrawn balance of the Company’s revolving credit facility, and amortization of deferred financing costs.
Includes the amortization of software service agreements.
Reflects equity based compensation expense.

LA QUINTA HOLDINGS INC.

CERTAIN DEFINED TERMS

"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: were active and operating in the Company’s 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; except for (i) hotels that sustained substantial property damage or other business interruption, (ii) owned hotels that become subject to a purchase and sale agreement, or (iii) hotels in which comparable results are otherwise 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 the Company’s 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 the Company’s owned, franchised and managed hotel portfolios.

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