La Quinta Corporation Announces First Quarter 2005 Financial Results; Adjusted EBITDA Exceeds Expectations; Company Increases Full Year Guidance
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Wednesday April 27, 7:00 am ET
DALLAS, April 27 /PRNewswire-FirstCall/ -- La Quinta Corporation today announced financial results for the first quarter ended March 31, 2005. The Company will hold a conference call today at 11:00 a.m. (EDT) to discuss these results and its business.
"Our first quarter results substantially exceeded our expectations," stated Francis W. ("Butch") Cash, chairman and chief executive officer. "Adjusted EBITDA of $53 million exceeded our guidance of $47 million due to strong top line growth driven by increases in average rate and margin expansion. As a result, we are increasing guidance for the full year."
For the first quarter ended March 31, 2005, the Company reported:
* Total revenues of $171 million, a 33% increase compared to 2004.
* Net loss of $4 million, or ($0.02) per share, versus net loss of
$12 million, or ($0.07) per share, in 2004.
* RevPAR for company owned La Quinta branded hotels of $41.78, a 9%
increase compared to 2004.
* Adjusted EBITDA of $53 million, a 46% increase compared to 2004. 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 9% during the first quarter. The improvement was driven primarily by an average rate increase of 8%. La Quinta hotels in the southern Florida region were particularly strong with RevPAR growth of over 20%. La Quinta hotels in Texas had mixed results, with RevPAR up modestly in Dallas and San Antonio, down in Houston and up over 15% in Austin.
RevPAR for company owned Baymont branded hotels increased approximately 7% during the first quarter. Baymont's improvement was driven primarily by rate increases. Baymont's property management and reservation systems were successfully converted to La Quinta's systems in mid-March, giving guests the option to book with any of the Company's brand offerings electronically or telephonically through an integrated reservations platform.
"We are seeing average daily rate increases for our company owned La Quinta branded hotels across all of our key revenue channels," said David L. Rea, president and chief operating officer. "Our electronic distribution channel showed strong rate and volume increases. Revenues from our proprietary website, LQ.com, increased 59% for the quarter and were driven primarily by volume increases. Third party Internet revenues were up modestly as a result of rate increases. With the systems implementation at Baymont complete, we believe we can leverage our existing systems to improve the RevPAR performance for our Baymont branded hotels."
Earlier this month, the Company merged La Quinta's and Baymont's loyalty programs. Frequency program members are now able to earn and redeem points across the Company's brands through a program that has been enriched with additional airline, hotel and retail reward offerings.
During the first quarter, the Company added one La Quinta and two Baymont franchise hotels to its system of hotels. As of March 31, 2005, the Company had 10,894 La Quinta branded franchise rooms (126 hotels) and 8,155 Baymont branded franchise rooms (95 hotels), including one managed hotel.
In January, the Company completed redevelopment of the La Quinta San Antonio Convention Center. 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 first quarter 2005 increased 33% over the first quarter 2004. Franchise revenue increased 112% for the first quarter 2005. Other revenue (including healthcare interest income and restaurant rental income) decreased 27% for the first quarter 2005. The total revenue increase was primarily the result of company owned La Quinta branded RevPAR increase of 9%, the Baymont acquisition and an increase in franchise revenue, partially offset by reduced interest income from a healthcare note receivable, which was paid off in 2004.
Net loss was $4 million, or ($0.02) per share, for the first quarter 2005, versus a net loss of $12 million, or ($0.07) per share, for the first quarter 2004. The improvement from 2004 to 2005 was primarily the result of improved operating performance at La Quinta owned hotels, an increase in franchise income and the Baymont acquisition.
Adjusted EBITDA for the first quarter 2005 was $53 million, a 46% increase compared to $36 million in the first quarter 2004. The increase in Adjusted EBITDA, which excludes other expense of $2 million principally related to Baymont integration expenses, was primarily driven by revenue increases at comparable company owned hotels, strong cost management and an increase in franchise income, as well as the addition of income from the Baymont acquisition. Adjusted EBITDA margins improved almost 300 basis points to 31.1% for the first quarter 2005, reflecting strong flow through from average rate increases coupled with prudent cost management.
At March 31, 2005, the Company had $80 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 $846 million at March 31, 2005.
Current Outlook
For the second quarter 2005, the Company anticipates company owned La Quinta branded hotel RevPAR to increase approximately 10% compared to the prior year second quarter. The Company anticipates company owned Baymont branded hotel RevPAR to increase approximately 9%. Adjusted EBITDA is anticipated to be approximately $61 million, excluding approximately $1 million for Baymont integration related expenses. Net income is anticipated to be approximately $1 million.
The Company is increasing its full year 2005 RevPAR and Adjusted EBITDA guidance. For the full year 2005, the Company now expects approximately 9% 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 7%, driven by both rate and occupancy increases.
Adjusted EBITDA for the full year 2005 is currently anticipated to be approximately $236 million, an increase of $10 million from prior guidance, and excludes estimated Baymont integration expenses of $3 million. The Company's previously published full year 2005 Adjusted EBITDA guidance included an adverse impact of $2 million assuming the implementation in the second half of 2005 of a new accounting change requiring the expensing of unvested stock options. With the implementation of that accounting change now expected to occur in the first quarter 2006, that $2 million is no longer deducted as an expense from the updated full year 2005 Adjusted EBITDA guidance.
Net loss for 2005 is anticipated to be approximately $1 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.
The franchise pipeline continues to grow with more than 85 contracts currently executed for La Quinta and Baymont branded hotels. The Company anticipates opening at least 50 La Quinta branded hotels and at least 25 Baymont branded hotels during 2005.
"We are pleased to have delivered strong performance in the first quarter," concluded Mr. Cash. "Our ability to improve average rate has exceeded our initial expectations. By continuing to grow revenues at our La Quinta branded hotels and leveraging the recent Baymont systems installation, we believe we can generate additional cash flow to reinvest in growing our company. With continued growth and improvements at La Quinta and the successful integration of Baymont, we believe these brands cover our customers' midprice and economy lodging needs. We are now beginning to consider how to continue enhancing shareholder value by meeting travelers' other lodging needs through the addition of lodging brands and/or real estate." |
