La Quinta Corporation (NYSE: LQI) today announced financial results for the fourth quarter ended December 31, 2002. La Quinta will hold a conference call today to discuss these results and its business.
The company reported the following financial results, which included the impact from healthcare asset sales. A detailed schedule reconciling earnings available to common shareholders to EBITDA and other non-GAAP measures is included in the supplemental tables.
For the fourth quarter 2002, La Quinta reported:
* Revenues of $116 million, a 6.8% decline compared to 2001.
* Net loss available to common shareholders of $27 million, or ($0.18) per share, versus net loss of $257 million, or ($1.79) per share, in 2001.
* EBITDA of $26 million, a 22.8% decline compared to 2001.
For the year 2002, La Quinta reported:
* Revenues of $537 million, a 17.2% decline compared to 2001.
* Net loss available to common shareholders of $508 million, or ($3.55) per share, versus net loss of $300 million, or ($2.10) per share, in 2001.
* EBITDA of $171 million, a 36.9% decline compared to 2001.
“2002 was an extremely challenging year for the lodging industry and La Quinta,” said Francis W. (“Butch”) Cash, President and Chief Executive Officer. “Economic and war concerns continue to weigh heavily on the minds of both business and leisure travelers. We believe, however, the investments we have made in our product and our people will lead to stronger guest loyalty and improved RevPAR.”
Lodging Results: RevPAR for comparable and total company-owned hotels declined 0.4% and 1.1%, respectively, during the fourth quarter. RevPAR was impacted by occupancy declines, which were partially offset by improvements in average daily rates. Lodging EBITDA for the fourth quarter was $27 million, a 10.2% decrease over the same period last year.
“Our top ten markets - Dallas/Ft. Worth, Houston, Denver, San Antonio, Austin, New Orleans, Atlanta, Orlando, Miami/Ft. Lauderdale and Phoenix - which account for approximately 40% of our owned room portfolio, continue to face lackluster demand,” said Mr. Cash. “RevPAR of our direct competitors in these markets was down approximately 10% for the year in 2002. While our results were about the same as our competitors in these markets, we were able to maintain a RevPAR premium in 2002. When these markets do recover, we expect to benefit from our strong presence.”
“In 2002, we took a number of steps to strengthen La Quinta. We launched our enhanced frequent stayer program as well as our new, user-friendly website www.LQ.com. In addition, we improved the quality of our product through our Gold Medal® Lite renovation program. We know we are doing the right things, because our guests are telling us so. Guest satisfaction ratings improved each quarter in 2002. We believe we are positively positioned for when the economy improves, business travel increases and our specific markets rebound.”
“We have also continued to increase La Quinta’s market presence through franchising,” said Mr. Cash. “During the fourth quarter, we opened 1,868 franchise rooms and, with additional rooms opened at the beginning of this year, have met our goal of opening 6,000 franchise rooms. With our pipeline of 3,000 rooms already approved, we anticipate having approximately 10,000 franchise rooms open by year-end.”
Financial Position: At December 31, 2002, total indebtedness was $665 million. La Quinta had cash of $10 million and $198 million available under its revolver (net of $27 million in letters of credit) at December 31, 2002. The revolver matures on May 31, 2003. The Company has an option to extend the maturity of the revolver, subject to certain conditions. As of February 24, 2003, our borrowings under the revolver were $33 million in addition to $23 million in letters of credit. During the fourth quarter, La Quinta repurchased 705,100 shares of its common stock at an average price of $4.79. As part of the Company’s previously-announced program to upgrade its lodging portfolio, La Quinta sold three hotels during the fourth quarter for gross proceeds of $6 million and recorded a small loss after previously recorded impairments of $9 million. As of December 31, 2002, the Company had lodging-related assets with a net book value of $25 million remaining to be sold. During the fourth quarter, the Company recorded $7.9 million of net impairments and a $0.2 million gain for a total of $7.7 million of other charges.
Current Outlook: La Quinta anticipates the current difficult environment will continue during the first half of 2003 as soft economic conditions and uncertainty surrounding a war with Iraq will continue to negatively impact lodging demand. La Quinta anticipates a stronger second half of 2003 as its local markets stabilize and the Company begins to benefit from its revenue enhancement programs. The Company’s guidance does not reflect the impact of U.S. military action in Iraq and terrorist activities. La Quinta anticipates full year 2003 total company RevPAR growth to be approximately flat. EBITDA is anticipated to be within a range of approximately $155 to $160 million, reflecting the sale of healthcare assets, cost pressures and investments in revenue initiatives. These investments, primarily related to the Company’s sales force, frequent stayer program and information systems, have increased La Quinta’s 2003 cost structure but are expected to produce benefits over future periods. Full year earnings are anticipated to be a loss within a range of approximately $22 to $26 million, or ($0.15) to ($0.18) per share. The Company anticipates having free cash flow available for debt reduction for the year 2003. Cash earnings are anticipated to be within a range of approximately $78 to $84 million for the full year. The Company has reduced its previous 2003 capital expenditures guidance to approximately $60 million.
For the first quarter of 2003, La Quinta anticipates a total company RevPAR decline of approximately 6%. EBITDA is anticipated to be approximately $31 million. EPS is anticipated to be approximately ($0.07). Cash earnings are anticipated to be approximately $12 million. First quarter guidance reflects current lower demand levels as a result of war concerns and the absence of the positive impact from the Salt Lake City Winter Olympics and New Orleans Super Bowl during the first quarter 2002, as well as cost increases during the first quarter 2003, primarily related to revenue initiatives that should positively impact future periods.“While the lodging environment remains difficult, we believe we are well-positioned to handle the current challenges,” said Mr. Cash. “For 2003, we anticipate funding our capital expenditures through operating cash flow and having free cash flow available for debt service. In terms of operations, our investments in product and people are resulting in strong guest satisfaction improvements. Forecasting beyond 2003 is a difficult exercise given the limited visibility and uncertainties affecting the lodging industry. We remain focused, however, on our long-term strategy of returning our hotels towards historic levels of profitability, growing our franchising business and expanding La Quinta through potential lodging acquisitions. While the timing of achieving these long-term goals is not clear, we believe the tools and the people we have in place will enable us to meet the current challenges and position us for success.”
Dallas-based La Quinta Corporation (NYSE: LQI), a leading limited service lodging company, owns, operates or franchises over 350 La Quinta Inns and La Quinta Inn & Suites in 33 states. Today`s news release, as well as other information about La Quinta, is available on the Internet at www.LQ.com.