La Quinta Holdings Inc. Reports Results For Both Fourth Quarter And Full Year 2015

IRVING, Texas, Feb. 24, 2016 /PRNewswire/ -- La Quinta Holdings Inc. ("La Quinta" or the "Company") (NYSE: LQ) today reported its fourth quarter and full year 2015 results on a historical basis, as well as the results of operations on a pro forma basis, giving effect to La Quinta's initial public offering (IPO) in 2014 and the related transactions as described below.

Full Year 2015 Highlights:

• Pro Forma Total Adjusted EBITDA increased 4.9 percent to $394.0 million, and Pro Forma Adjusted EBITDA margin increased 30 basis points
• Pro Forma Franchise and Management Segment Adjusted EBITDA increased 8.4 percent to $114.6 million
• Pro Forma Owned Hotel Segment Adjusted EBITDA increased 4.3 percent to $314.3 million
• System-wide comparable RevPAR increased 3.5 percent, ADR increased 2.9 percent and occupancy increased 35 basis points
• Pro Forma Adjusted Earnings per Share increased by $0.05 to $0.54; Historical Earnings per Share was $0.20
• Pro Forma Adjusted Net Income increased 11.3 percent to $70.1 million; Historical Net Income was $26.4 million
• Generated nearly $190 million in free cash flow in 2015; free cash flow represents cash flow from operations of $291 million less capital expenditures of $101 million
• Open and operating franchise unit base grew 6 percent while the development pipeline increased by 10 percent

Fourth Quarter 2015 Highlights

• Pro Forma Total Adjusted EBITDA decreased 2.1 percent to $78.0 million, and Pro Forma Adjusted EBITDA margin decreased 80 basis points
• Pro Forma Franchise and Management Segment Adjusted EBITDA increased 8.9 percent to $27.3 million
• Pro Forma Owned Hotel Segment Adjusted EBITDA decreased 4.0 percent to $60.4 million
• System-wide comparable RevPAR decreased 0.3 percent, ADR increased 1.3 percent and occupancy decreased 102 basis points
• Pro Forma Adjusted Earnings per Share decreased by $0.01 to $0.09; Historical Earnings per Share was $0.06
• Pro Forma Adjusted Net Income decreased 6.3 percent to $11.3 million; Historical Net Income was $7.8 million
• Opened 19 franchised hotels totaling approximately 1,600 rooms, including the seventh location in Mexico, and the first location in Alaska; Increased franchise pipeline to 228 hotels, representing over 20,500 additional rooms, including agreements to develop seven additional locations in Mexico

Overview

Keith A. Cline, President & Chief Executive Officer of La Quinta, said, "During the fourth quarter and throughout 2015, we continued to execute on our strategic priorities of achieving significant new unit growth in franchising, delivering strong and consistent free cash flow, and opportunistically unlocking value from the owned hotel portfolio. We continued to succeed in expanding our geographic presence with the opening of 19 franchised properties in the fourth quarter, including our first location in Alaska. We also continued to grow our pipeline during 2015, with our franchise development activity resulting in the highest number of franchise agreement signings for any year since 2008 with new locations signed in higher RevPAR markets such as New York, Pennsylvania, Virginia, and Oregon. The pipeline is geographically diverse with over 60% in locations outside of the Company's top three states of Texas, Florida, and California, including the growth of our international presence with the execution of new franchise agreements for ten additional locations in Mexico during 2015."

Mr. Cline continued, "During 2015, we successfully grew our system-wide comparable RevPAR by 3.5% and Pro Forma Adjusted EBITDA by 4.9% to $394 million during a year that faced several challenges, including the ongoing pressures from a prolonged and significant pull back in oil prices and production, the transition of our call center, and significant weather disruptions in Texas. The Company's flexible business model of low fixed overhead costs in its owned units allowed for Pro Forma Adjusted EBITDA margin to increase 30 basis points notwithstanding these challenges.  These results translated to free cash flow generation of nearly $190 million in 2015 which was used to fund a portion of both the voluntary debt prepayment of $135 million as well as $100 million in share repurchases.  In the fourth quarter, we acquired 5.3 million shares, bringing the total number of shares repurchased to 6.3 million in 2015."

The results of operations for the Company, on a pro forma basis and on a historical basis, for the three months ended December 31, 2015 include the following highlights ⁽¹⁾ ($ in thousands, except per share amounts):

The results of operations for the Company, on a pro forma basis and on a historical basis, for the full year ended December 31, 2015 include the following highlights (1) ($ in thousands, except per share amounts):

Development

The Company opened 19 franchised hotels with approximately 1,600 rooms in the fourth quarter and achieved net franchise unit growth of 13 hotels with approximately 1,100 rooms. Through December 31, 2015, the Company opened 47 franchised hotels with approximately 3,700 rooms and one temporary location. As of December 31, 2015, the Company had a pipeline of 228 franchised hotels totaling over 20,500 rooms, to be located in the United States, Mexico, Colombia, Nicaragua, Guatemala and Chile. The Company believes this pipeline represents a significant embedded growth opportunity for the brand.

The Company's system-wide portfolio, as of December 31, 2015, is located across 48 states in the U.S., as well as in Canada, Mexico and Honduras. The portfolio includes:

Owned Hotel Portfolio

During the third quarter, the Company entered into a definitive purchase and sale agreement for the sale of 24 of its owned hotels. Of the 24 hotels 11 were sold during the fourth quarter, and the Company expects to close the remaining 13 before the end of the first quarter of 2016. These 24 hotels contributed $9.6 million in adjusted EBITDA for the year ended December 31, 2015.The Company believes that a sale of these assets will have many benefits, including an aggregate sales price with an accretive EBITDA multiple, the opening of several markets to new franchise development as the majority of these hotels will be removed from the La Quinta system, improvement of key operating metrics, and provision of additional available cash.

Balance Sheet and Liquidity

As of December 31, 2015, the Company had approximately $1.7 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.3%, including the impact of an interest rate swap. During the year, as a result of the Company's net debt, defined as total debt less cash, to Pro Forma Adjusted EBITDA ratio dropping below 4.5, the Company realized a 25 basis point reduction in the interest rate for its long-term debt. During the fourth quarter, the Company repurchased 5.3 million of its shares for an aggregate purchase price of $84 million, bringing the total amounts repurchased to approximately 6.3 million shares for an aggregate purchase price of $100 million in 2015.  Total cash and cash equivalents was $86.7 million as of December 31, 2015.

Outlook

Based upon management's current estimates, which reflect expectations of a tough comparison given the Company's very strong results in the first quarter of 2015 and the impact of the pullback of oil prices and production in the second half of 2015, the Company is introducing its guidance for full year 2016:

This outlook does not reflect the impact of any additional sales of owned hotels beyond the 13 remaining properties from the group of 24 properties we have previously discussed.

Webcast and Conference Call

La Quinta Holdings Inc. will host a conference call to discuss fourth quarter and full year 2015 results on Wednesday, February 24, 2016 at 5:00 p.m. Eastern Time. Participants may listen to the live webcast by dialing (877) 407-3982, or (201) 493-6780 for international participants, or by logging onto the La Quinta Investor Relations website at www.lq.com/investorrelations. Participants are encouraged to dial into the call or link to the webcast at least fifteen minutes prior to the scheduled start time.

A replay of the call will be available from approximately 8 p.m. Eastern Time on February 24, 2016 through midnight Eastern Time on March 2, 2016. To access the replay, the domestic dial-in number is (877) 870-5176, the international dial-in number is (858) 384-5517, and the passcode is 13629955. The archive of the webcast will be available on the Company's website for a limited time.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources and other non-historical statements, including the statements in the "Outlook" section of this press release. You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014, as amended, filed with the Securities and Exchange Commission ("SEC"), as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Non-GAAP Financial Measures

We refer to certain non-GAAP financial measures in this press release including Adjusted EBITDA, Adjusted EBITDA margins, Segment Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share on both a pro forma and historical basis. Please see the schedules to this press release for additional information and reconciliations of such non-GAAP financial measures.

About La Quinta Holdings Inc.

La Quinta Holdings Inc. (LQ) is a leading owner, operator and franchisor of select-service hotels primarily serving the upper-midscale and midscale segments. The Company's owned and franchised portfolio consists of more than 880 properties representing approximately 87,400 rooms located in 48 states in the U.S., and in Canada, Mexico and Honduras. These properties operate under the La Quinta Inn & Suites™, La Quinta Inn™ and LQ Hotel^TM brands. La Quinta's team is committed to providing guests with a refreshing and engaging experience. For more information, please visit: www.LQ.com.

From time to time, La Quinta may use its website as a distribution channel of material company information. Financial and other important information regarding the Company is routinely accessible through and posted on our website at www.lq.com/investorrelations. In addition, you may automatically receive email alerts and other information about La Quinta when you enroll your email address by visiting the Email Notification section at www.lq.com/investorrelations.

RECONCILIATIONS

Prior to the consummation of the IPO on April 14, 2014, the Company's business was conducted, and the Company's hotel properties were owned, through multiple entities including (i) the "La Quinta Predecessor Entities" which were entities under common control or otherwise consolidated for financial reporting purposes, and their consolidated subsidiaries and (ii) entities that owned 14 hotels (the "Previously Managed Portfolio") managed by the La Quinta Predecessor Entities. In connection with the IPO, among other transactions, (i) the La Quinta Predecessor Entities were contributed to the Company, (ii) the La Quinta Predecessor Entities purchased the Previously Managed Portfolio, and (iii) the Company effected certain refinancing transactions (together with the IPO, the "IPO Transactions").

The unaudited pro forma financial data for the three months and years ended December 31, 2015 and 2014 are presented as if the IPO Transactions all had occurred on January 1, 2014. The unaudited pro forma combined financial information excludes adjustments that are not expected to have a continuing effect on the Company. Excluded adjustments include the gains and losses related to the debt financing transactions, and the impact of the issuance of vested and unvested restricted stock at the time of the IPO related to long term incentives, as well as the impact of discontinued operations. Accordingly, the unaudited pro forma financial data is not necessarily indicative of our financial position or results of operations had the transactions described above for which we are giving pro forma effect actually occurred on the dates indicated.

The tables below provide a reconciliation of the pro forma financial information, including segment information, for the Company to the Company's historical information, a reconciliation of Adjusted EBITDA to Net Income, both on a pro forma and historical basis, a reconciliation of Free Cash Flow to Net cash provided by operating activities, a reconciliation of Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share to Net Income and Earnings Per Share on a historical basis and a reconciliation of Pro Forma Adjusted EBITDA to Adjusted Pro Forma Net Income with respect to our outlook. We believe this financial information provides meaningful supplemental information because it reflects the combined business of the La Quinta Predecessor Entities and the Previously Managed Portfolio and the ongoing effects of the other IPO Transactions. We further believe the presentation of Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share provides meaningful information because it gives effect to the pro forma adjustments described above and excludes the impact of certain items that are not expected to have an ongoing effect on our operations. This represents how management views the business and reviews our operating performance. It is also used by management when publicly providing the business outlook.  We believe the presentation of Free Cash Flow provides meaningful information because it shows the amount of cash generated by the business that, after capital expenditures, can be used for strategic opportunities. See the definitions of "EBITDA", "Adjusted EBITDA", "Free Cash Flow", "Pro Forma Adjusted Net Income" and "Pro Forma Adjusted Earnings Per Share" for a further explanation of the use of these measures.

LA QUINTA HOLDINGS INC.
DEFINED TERMS

"EBITDA" and "Adjusted EBITDA." Earnings before interest, taxes, depreciation and amortization ("EBITDA") is a commonly used measure in many industries. We adjust EBITDA when evaluating our performance because we believe that the adjustment for certain items, such as restructuring and acquisition transaction expenses, impairment charges related to long-lived assets, non-cash equity-based compensation, discontinued operations, and other items not indicative of ongoing operating performance, including other items relating to the IPO Transactions, provides useful supplemental information to management and investors regarding our ongoing operating performance. We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA and Adjusted EBITDA are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions; and (ii) EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors, lenders and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry.

EBITDA and Adjusted EBITDA are not recognized terms under GAAP, have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss), cash flow or other methods of analyzing our results as reported under GAAP. Some of these limitations are:

• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
• EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;
• EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes;
• EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
• EBITDA and Adjusted EBITDA do not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and
• other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

"Free Cash Flow" We define free cash flow as net cash provided by operating activities less capital expenditures. This Non-GAAP measure is not in accordance with, or an alternative for, measures prepared in accordance with GAAP and may be different from Non-GAAP measures used by other companies. We consider free cash flow to be a liquidity measure that, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors about the amount of cash generated by the business that, after capital expenditures can be used for strategic opportunities including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet, repaying debt, paying dividends and repurchasing stock. Free cash flow should not be construed as an alternative to cash flows from operations or other cash flow measurements determined in accordance with GAAP.

"Free cash flow yield" is defined as cash from continuing operations less capital expenditures as a percentage of market capitalization computed on the last trading day of the quarter. Market capitalization is computed by multiplying the end of period stock price by the end of period shares outstanding.

"Pro Forma Adjusted Net Income" and "Pro Forma Adjusted Earnings Per Share" are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income (loss), earnings per share, or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, the Company's definitions of Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share may not be comparable to similarly titled measures of other companies.

Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share are included to assist investors in performing meaningful comparisons of past, present and future operating results and as a means of highlighting the results of the Company's ongoing operations in a comparable format.

"ADR" or "average daily rate" means hotel room revenues divided by total number of rooms sold in a given period.

"comparable hotels" means hotels that: (i) were active and operating in our system for at least one full calendar year as of the end of the applicable period and were active and operating as of January 1st of the previous year; and (ii) have not sustained substantial property damage or business interruption or for which comparable results are not available. Management uses comparable hotels as the basis upon which to evaluate ADR, occupancy, RevPAR and RevPAR Index on a system-wide basis and for each of our reportable segments.

"occupancy" means the total number of rooms sold in a given period divided by the total number of rooms available at a hotel or group of hotels.

"RevPAR" or "revenue per available room" means the product of the ADR charged and the average daily occupancy achieved.

"RevPAR Index" measures a hotel's fair market share of its competitive set's revenue per available room.

"system-wide" refers collectively to our owned, franchised and managed hotel portfolios.

SOURCE La Quinta Holdings Inc.

Related Links

http://www.LQ.com