Dallas, Texas (August 1, 2002) - La Quinta® Corporation (NYSE: LQI) today announced financial results for the second quarter ended June 30, 2002. La Quinta will hold a conference call today to discuss these results and other matters.
“We are pleased to report lodging results in line with our previously-issued guidance,” said Francis W. (“Butch”) Cash, President and Chief Executive Officer. “Although due primarily to easing comparisons, we are also pleased to report we expect to see positive increases in RevPAR and EBITDA for the second half of 2002.”
*Second quarter revenues were $145.6 million, a 16.6% decline compared to 2001.
*Second quarter Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was $56.9 million, a 27.0% decline compared to 2001.
*Second quarter net income available to common shareholders was $5.5 million, or $0.04 per share in 2002, versus a net loss of $17.0 million, or ($0.12) per share, in 2001.
*Excluding non-recurring items, La Quinta reported a net loss of $1.2 million, or ($0.01) per share, in the second quarter of 2002 versus net income of $13.9 million, or $0.10 per share, in the second quarter of 2001. Significant non-recurring items included gains on sale of assets and other income and expenses.
*Cash earnings were $33.8 million, or $0.24 per share, in the second quarter of 2002, versus $49.2 million, or $0.34 per share, in the second quarter of 2001.A detailed schedule reconciling earnings available to common shareholders to recurring earnings, cash earnings and EBITDA is included in the supplemental tables.
RevPAR for comparable hotels declined 8.5% to $39.38 during the second quarter. Occupancy for comparable hotels declined 2.9 percentage points to 66.0% during the second quarter, reflecting reduced lodging demand. ADR for comparable hotels fell 4.4% to $59.70 during the second quarter, primarily reflecting a change in business mix in response to reduced demand. Lodging EBITDA for the second quarter was $54.8 million, a 16.3% decrease over the same period last year. For every dollar of lodging revenue decline, La Quinta’s impact on lodging EBITDA was only $0.65 due to cost savings.
“While pleased with our continued success at controlling hotel operating costs, we are not satisfied with our revenue performance and are committed to improving it,” said Mr. Cash. “We have a number of initiatives underway to improve revenues, including the recent rollout of our new website. We are two-thirds complete with renovating our Inns under our Gold Medal Lite program and, as a result, are seeing improvements in guest satisfaction. We recently launched a new ad campaign - Stay Three Times, Get a Free Night. - to drive repeat business. At the same time, we are actively recruiting new Returns® Club members by providing express enrollment at the front desk. In the fall, we will introduce our new and improved Returns Club program and additional electronic booking channels. In addition, we have recently made changes in the leadership of our sales and marketing organization. While we have one of the highest occupancies in our segment and continue to perform in line with the overall industry, we are taking action to improve our revenue performance.”
“During the second quarter, we opened 606 franchise rooms, for a total of 3,876 franchise rooms,” continued Mr. Cash. “We recently celebrated the opening of our 50th franchise property in Stockbridge, Georgia. We continue to attract quality owner/operators to La Quinta and are off to one of the fastest franchising starts in lodging history. With our pipeline of over 4,000 rooms approved, we anticipate having approximately 6,000 franchise rooms (80 franchise hotels) open by year-end.”
During the second quarter, La Quinta repaid $163 million of debt, including the entire remaining balance on its bank term loan. At June 30, 2002, total indebtedness was $812 million of which $24 million matures in 2002. The Company had no current borrowings under its $225 million revolving line of credit at June 30, 2002. La Quinta’s cash position was $131 million at June 30, 2002.
As part of the Company’s previously-announced program to upgrade its lodging portfolio, La Quinta sold two hotels during the second quarter for gross proceeds of $5 million and recorded a loss of approximately $1 million after previously recorded impairments of $4 million. As of June 30, 2002, the Company had 14 properties with a net book value of $35 million remaining to be sold under this program.
La Quinta also sold healthcare assets during the second quarter for gross proceeds of $147 million and recorded a gain of approximately $5 million after previously recorded impairments of $43 million. As of June 30, 2002, the Company had healthcare assets with a net book value of $51 million remaining to be sold.
“The sale of assets continues to add to our significant cash position,” said David L. Rea, Executive Vice President and Chief Financial Officer. “With proceeds from additional asset sales, availability under our revolver, cash on hand and the cash flow generated by our lodging operations, we have the financial flexibility to reinvest in our existing hotels, handle near-term debt maturities and expand our lodging business.”
The Company recorded a net gain from non-recurring items of $10 million during the second quarter of 2002. This amount reflects $4 million of gains on asset sales and a $6 million settlement of obligations and receivables related to properties previously sold. This amount is net of severance expense resulting from headcount reductions in La Quinta’s San Antonio reservations center as well as changes made in La Quinta’s management.
Given the prolonged weakness in business travel, lodging demand for business travel is not expected to significantly recover in the second half of 2002. As a result, La Quinta currently anticipates full year 2002 total company RevPAR growth to be down approximately 3%. Lodging EBITDA is currently anticipated to be approximately $185 million. The change from previous guidance primarily reflects lowered expectations for a lodging demand recovery and additional investments in our frequent stayer program, which will have a positive impact on future periods. The Company maintains its goal of returning La Quinta towards its late 1990s same-store EBITDA levels; however, the slower-than-expected recovery this year will delay the beginning of the three-year growth period to next year. Full year EPS is currently anticipated to be approximately ($3.24), reflecting significant non-recurring items from the first and second quarters. Recurring EPS is currently anticipated to be approximately ($0.11) for the full year. Cash EPS is currently anticipated to be approximately $0.76 for the full year. Capital expenditures for the year are currently anticipated to be approximately $120 million.
“During the second half of 2002, we expect to see RevPAR growth of approximately 5% and lodging EBITDA increases of approximately 10% with the improvements weighted towards the fourth quarter,” said Mr. Cash. “The year-over-year improvements we are expecting to see in the second half of 2002 are primarily due to easing comparisons, given the dramatic weakness in the second half of 2001, as well as increases in leisure travel.”
For the third quarter of 2002, La Quinta currently anticipates total company RevPAR to increase approximately 2%. Lodging EBITDA is currently anticipated to be approximately $49 million in the third quarter, down slightly from last year. EPS is currently anticipated to be approximately ($0.01) and cash EPS is currently anticipated to be approximately $0.21 in the third quarter.
As previously announced, at 11:00AM (EDT) on August 1, 2002, La Quinta will hold a conference call and audio webcast to discuss its financial results and operating strategy. In addition, La Quinta may answer one or more questions concerning business and financial matters affecting the Company. Some of the Company’s responses to these questions, as well as other matters which may be discussed during the conference call, may contain or constitute information that has not been previously disclosed.
Simultaneous with the conference call, an audio web cast of the call will be available via a link on the La Quinta website, www.laquinta.com, in the Investor Relations-Audio/Webcasts section. The conference call can be accessed by dialing 800-257-1836 (International: 303-262-2175). An access code is not required. A replay of the call will be available at the same Internet address or by dialing 800-405-2236 (International: 303-590-3000) and entering the access code of 488350. The replay will be available from 1:00 PM (EDT) on August 1, 2002 through 1:00 PM (EDT) on August 7, 2002.