Dallas, Texas (May 8, 2002) - La Quinta® Corporation (NYSE: LQI) (“La Quinta” or the “Company”) today announced financial results for the first quarter ended March 31, 2002. La Quinta will hold a conference call today to discuss these results and other matters.
La Quinta’s operating results continued to be impacted by the slowdown in travel and a decline in lodging demand. La Quinta’s results were also affected by the sale of certain healthcare assets.
“We are pleased to report lodging EBITDA results slightly ahead of our previously-issued guidance,” said Francis W. (“Butch”) Cash, President and Chief Executive Officer. “In addition, our franchise program had a strong quarter, growing by 32 hotels. We also continued our success at selling healthcare assets and improving our balance sheet. We are, however, cautious about lodging results for the first half of 2002.”
First quarter total revenue was $138.7 million, a 27% decline compared to 2001 * First quarter total Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was $46.5 million, a 51% decline compared to 2001 * First quarter earnings available to common shareholders were negative $459.8 million, or ($3.22) per share in 2002, versus negative $15.8 million, or ($0.11) per share, in 2001 * Excluding non-recurring items, recurring earnings were negative $7.0 million, or ($0.05) per share, in the first quarter of 2002 versus $20.2 million, or $0.14 per share, in the first quarter of 2001. Significant non-recurring expenses included the write-off of goodwill associated with a new goodwill accounting standard, deferred tax liability charges associated with the restructuring, gains on sale of assets and other income and expenses * Cash earnings were $22.7 million, or $0.16 per share, in the first quarter of 2002, versus $55.5 million, or $0.39 per share, in the first quarter of 2001
A detailed schedule reconciling earnings available to common shareholders to EBITDA, recurring earnings and cash earnings is included in the supplemental tables.
RevPAR for comparable hotels declined 12.6% to $36.09 during the first quarter. Occupancy for comparable hotels declined 5.7 percentage points to 59.1% during the first quarter, reflecting reduced lodging demand. ADR for comparable hotels fell 4.1% to $61.09 during the first quarter, primarily reflecting a change in business mix in response to reduced demand. Lodging EBITDA for the first quarter was $42.0 million, a 31.9% decrease over the same period last year.
“Our Inn managers continued to do a good job of controlling costs at the property level,” said Mr. Cash. “As expected, we did see increases in selected corporate costs during the first quarter. We believe our increased spending in information systems and sales and marketing will position us for the return in travel which is currently expected later this year. We also initiated a quality assurance program this quarter to ensure consistency and quality in our product and service. With the overhead reductions made in the fourth quarter of 2001, we anticipate full year corporate expenses will decline slightly from last year.”
“The La Quinta brand continues to be well received by the franchise community,” continued Mr. Cash. “During the first quarter, we opened 32 franchise hotels, for a total of 43 franchise properties (3,270 rooms) open. Our 31-hotel franchise agreement with Hospitality Associates announced at the beginning of the year underscores our strength as a lodging brand and franchisor. Our pipeline consists of 34 franchise agreements (3,000 rooms) approved. We are on target to meet our goal of having 80 franchise hotels open by year-end.”
During the first quarter, the Company opened one redeveloped company-owned property at the Dallas/Fort Worth Airport. As part of the Company’s previously-announced program to upgrade its lodging portfolio, La Quinta sold three hotels and excess land during the first quarter for gross proceeds of $7.8 million and recorded a gain of approximately $0.3 million after previously recorded impairments of $5.6 million. As of March 31, 2002, the Company had 16 properties with a net book value of $45.5 million remaining to sell under this program.
Healthcare revenues and EBITDA for the first quarter declined 81% and 87%, respectively, from the same period last year to $7.0 million and $4.4 million. The decrease is primarily the result of the impact of the sale of certain healthcare assets.
On April 15, 2002, the Company announced it had received year-to-date gross proceeds of approximately $146 million from the sale of certain assisted living facilities. In addition, the Company announced it had received a $13 million nonrefundable deposit on a 180-day option to purchase its investment in 12 other assisted living facilities.
“With the sales announced in April, the remaining net book value of our healthcare assets has been reduced to less than $100 million,” said David L. Rea, Executive Vice President and Chief Financial Officer. “Healthcare operating results are not expected to be financially material to La Quinta going forward. As a result, after this quarter, we will no longer report healthcare results separately. We are pleased with our continued success at selling healthcare assets at their net book value and anticipate substantially completing the healthcare asset sale program by the end of 2002.”
During the first quarter, La Quinta repaid $25 million of debt. At March 31, 2002, total indebtedness was $975 million of which $33 million matures in 2002. The Company had no current borrowings under its $225 million revolving line of credit at March 31, 2002. La Quinta’s cash position was $135 million at March 31, 2002 and $255 million at April 30, 2002, reflecting proceeds from recently completed asset sales.
“The sale of healthcare assets continues to add to our significant cash position,” said Mr. Rea. “With the proceeds from asset sales and the cash flow generated by our lodging operations, we have the ability to reinvest in our existing hotels, and expand our lodging business through strategic acquisitions.”
As previously announced, the Company incurred two one-time non-cash expenses during the first quarter of 2002. As a result of implementing a new goodwill accounting standard, the Company recognized a non-recurring expense of $259 million to reflect a write-down to goodwill. In addition, La Quinta recorded a non-recurring expense of $197 million to establish a net deferred tax liability in conjunction with the completion of its restructuring.