La Quinta Corporation Announces Fourth Quarter and Full Year 2004 Financial Results
biz.yahoo.com
Thursday February 24, 6:55 am ET
Results Exceed RevPAR and Adjusted EBITDA Guidance
DALLAS, Feb. 24 /PRNewswire-FirstCall/ -- La Quinta Corporation today announced financial results for the fourth quarter and full year ended December 31, 2004. The Company will hold a conference call today at 11:00 a.m. (EST) to discuss these results and its business.
"We are very pleased with our fourth quarter results," stated Francis W. ("Butch") Cash, chairman and chief executive officer of La Quinta Corporation. "Adjusted EBITDA of $43 million exceeded our expectations of $41 million due to strong rate growth from our La Quinta hotels. RevPAR growth for company owned La Quinta branded hotels was 7%, exceeding our guidance of 4%. Our recently acquired company owned Baymont hotels performed better than anticipated, with RevPAR growth of approximately 10%, exceeding our guidance of 6%."
For the fourth quarter ended December 31, 2004, the Company reported:
Total revenues of $159 million, a 32% increase compared to 2003. * Net loss of $13 million, or ($0.08) per share, versus net loss of
$10 million, or ($0.07) per share, in 2003.
RevPAR for company owned La Quinta branded hotels of $35.91, a 7% increase compared to 2003.
Adjusted EBITDA of $43 million, a 30% increase compared to 2003.
For the year ended December 31, 2004, the Company reported:
* Total revenues of $593 million, a 15% increase compared to 2003.
* Net loss of $45 million, or ($0.25) per share, versus net loss of
$84 million, or ($0.58) per share, in 2003.
* RevPAR for total company owned La Quinta branded hotels of $39.12, an
8% increase compared to 2003.
* Adjusted EBITDA of $180 million, a 16% increase compared to 2003.
The Company's full year results include the impact of the Baymont acquisition beginning September 3, 2004. Additional information regarding the historical data of Baymont is set forth below under the heading "Historical Data of Baymont." A detailed schedule reconciling net loss to Adjusted EBITDA is included in the supplemental tables.
Operating Results
RevPAR for company owned La Quinta branded hotels increased 7% during the fourth quarter. The improvement was driven primarily by an average rate increase of 4%. RevPAR for company owned Baymont branded hotels increased approximately 10% during the fourth quarter. Baymont's improvement was driven by both rate and occupancy increases.
"Our call center, GDS and proprietary website all reported growth in revenues for the quarter," reported David L. Rea, president and chief operating officer. "The largest gain was reported by our proprietary LQ.com website, which reported a 63% increase in revenues. In addition, our sales force again made a significant contribution during the fourth quarter, with our corporate account revenues increasing 22%."
For the full year 2004, RevPAR for company owned La Quinta branded hotels increased 8%. La Quinta branded hotels continue to hold a healthy RevPAR premium among direct local competitors, as tracked by Smith Travel Research. Baymont branded hotels improved their RevPAR performance but continue to operate at a slight RevPAR discount among direct local competitors. The Company believes it can improve Baymont's RevPAR performance as La Quinta's systems and programs are implemented.
"We are on schedule to complete the installation of La Quinta's systems in every Baymont hotel," continued Mr. Rea. "By the end of March, Baymont will be operating on the same property management and reservation systems that have improved La Quinta's revenues. Once the systems integration is complete at Baymont, we will begin to more clearly position our brands with the consumer through product upgrades and cross brand conversions."
Unit Growth
During the fourth quarter, La Quinta branded franchise rooms increased by 1,176 rooms (16 hotels). In addition, since acquiring the brand in September 2004, we were able to open 534 Baymont branded franchise rooms (6 hotels). As of December 31, 2004, the Company had 10,910 La Quinta branded franchise rooms (125 hotels) and 7,941 Baymont branded franchise rooms (93 hotels), including one managed hotel.
The franchise pipeline going into 2005 is strong with more than 80 executed contracts for La Quinta and Baymont branded hotels. The Company anticipates that most of the La Quinta branded hotels opening in 2005 will be new construction and most of the Baymont branded hotels opening will be conversions from other brands. The Company anticipates accelerating its growth by opening at least 50 La Quinta branded hotels and at least 25 Baymont branded hotels during 2005.
Consistent with the Company's growth strategy to enter key strategic markets, on December 9, 2004, the Company acquired three hotels in the greater Boston area, marking the Company's entry into the Boston market. The hotel in Somerville, Massachusetts has been branded as a La Quinta Inn & Suites, and following renovations, the remaining hotels will be branded under the La Quinta and Baymont flags.
In January 2005, the Company completed the redevelopment of the very first La Quinta ever built. Located in downtown San Antonio -- next to the Convention Center, the Riverwalk and the Alamo -- the 14-story, 350-room hotel is a showcase for our chain.
Financial Results
Total revenues for the fourth quarter of 2004 increased 32% over the fourth quarter of 2003. Franchise fee revenue increased 91% for the fourth quarter 2004. Other revenue (including healthcare interest income and restaurant rental income) decreased 22% for the fourth quarter 2004. The total revenue increase was primarily the result of the Baymont acquisition, an increase in franchise fees, and company owned La Quinta branded RevPAR increase of 7%, partially offset by reduced interest income from a healthcare note receivable, which was paid off in the third quarter of 2004.
Net loss was $13 million, or ($0.08) per share, for the fourth quarter of 2004, versus a net loss of $10 million, or ($0.07) per share, for the fourth quarter of 2003. The net loss increased during the quarter primarily due to increased impairment expenses of $8 million recognized during the quarter for hotels that we expect to sell in 2005. We will reflect 17 hotels (including one property subject to full condemnation proceedings) as discontinued operations as of January 2005.
Adjusted EBITDA for the fourth quarter of 2004 was $43 million, excluding other expense of $3 million primarily related to integration expense, a 30% increase compared to $33 million in the fourth quarter of 2003. The increase in Adjusted EBITDA was driven by revenue increases at comparable company owned hotels and increases in franchise fees, as well as the addition of income from the Baymont acquisition. Overall margins were relatively flat in the quarter, reflecting the current dilutive effect of Baymont's lower operating margins.
Total revenues for the year ended December 31, 2004 increased 15% over the same period in 2003. Franchise fee revenue increased 80% for the full year 2004. Other revenue decreased 12% for the full year 2004. The total revenue increase was primarily the result of the Baymont acquisition, an increase in franchise fees, and company owned La Quinta branded RevPAR increase of 8%, partially offset by the loss of revenues due to the sale of company owned La Quinta branded hotels in the second quarter of 2004 and in the second half of 2003, and reduced interest income due to the early repayment of a healthcare note receivable.
Net loss was $45 million, or ($0.25) per share, for the year ended December 31, 2004, versus a net loss of $84 million, or ($0.58) per share, for 2003. The improved net loss was primarily the result of revenue improvement and a $46 million reduction in impairment charges, partially offset by a $15 million increase in loss on early retirement of debt.
Adjusted EBITDA for the year ended December 31, 2004 was $180 million, a 16% increase compared to $155 million for the same period in 2003. The increase in Adjusted EBITDA was driven primarily by the addition of income from the Baymont acquisition, an increase in franchisee fees, and revenue improvement from company owned La Quinta branded hotels.
At December 31, 2004, the Company had $103 million in cash and cash equivalents and no borrowings under its $150 million credit facility, other than $20 million in letters of credit. The Company's net debt (total indebtedness less cash and cash equivalents) was $823 million at December 31, 2004.
Current Outlook
For the first quarter of 2005, the Company anticipates company owned La Quinta branded hotel RevPAR to increase approximately 7%. The Company anticipates company owned Baymont branded hotel RevPAR to increase approximately 9% compared to the prior year first quarter. Adjusted EBITDA is anticipated to be approximately $47 million, excluding estimated integration expenses of $3 million. Net loss is anticipated to be approximately $10 million.
The Company is increasing its full year 2005 RevPAR and Adjusted EBITDA guidance from preliminary guidance issued on October 28, 2004, as a result of stronger pricing power with the La Quinta brand, stronger performance from the Baymont brand and the acquisition of three hotels last December. For the full year 2005, the Company expects approximately 7% RevPAR growth for company owned La Quinta branded hotels, driven primarily by rate increases. Expectations for company owned Baymont branded hotels are for a RevPAR increase of approximately 9%, driven by both rate and occupancy increases.
Adjusted EBITDA for the full year 2005 is currently anticipated to be approximately $226 million and excludes estimated integration expenses of $3 million. Included in the current guidance are the following expense items: $2 million of expenses for the adoption in the third quarter of 2005 of stock option expense accounting as well as a $4 million reduction in Adjusted EBITDA for the effect of reclassifying income from hotels that the Company now intends to sell in 2005 (or are subject to full condemnation) that will be accounted for as discontinued operations effective January 2005. These expenses were not reflected in the preliminary 2005 guidance given in October 2004.
General and administrative expenses for the full year 2005 are anticipated to increase approximately $15 million to $77 million, which includes approximately $2 million in stock option expense. Approximately two-thirds of the expected increase in general and administrative expense in 2005 is due to anticipated increases in franchising related expenses, such as advertising, which are offset by increases in related franchise fee revenues. Net loss is anticipated to be approximately $9 million. Capital expenditures for 2005 are anticipated to be approximately $120 million, which includes funding for the redevelopment of the La Quinta Arlington Convention Center property, conversions between the La Quinta and Baymont brands, corporate capital expenditures, and maintenance capital expenditures for our owned Baymont and La Quinta hotels.
"I could not be prouder of our employees' accomplishments in 2004," concluded Mr. Cash. "We completed a significant acquisition of strategic importance at an attractive cash flow multiple and per room value. We did so without losing focus on continuing to grow the core La Quinta business. As a result, we had a terrific year. As the hotel industry continues to strengthen, we will remain focused on our strategic levers to improve cash flows from our existing hotels, grow our income stream through franchising and explore external growth opportunities. We believe that executing these levers, combined with our strong balance sheet and excellent management team and systems, will further enhance shareholder value |
