Exhibit 99.1

 

FOR IMMEDIATE RELEASE

LA QUINTA HOLDINGS INC. REPORTS STRONG RESULTS FOR BOTH FOURTH QUARTER AND FULL YEAR 2014

 

•

Exceeded upper end of guidance range with full year comparable RevPAR Growth of 8.0% and Pro Forma Adjusted EBITDA of $375.5 million

 

•

Generated full year Pro Forma Earnings per Share of $0.45

 

•

Opened 45 franchise locations in 2014 and increased pipeline 11%

 

•

Repaid $205 million of long-term debt in 2014, including $195 million of voluntary prepayments

IRVING, Texas (February 24, 2015) – La Quinta Holdings Inc. (“La Quinta” or the “Company”) (NYSE: LQ) today reported its fourth quarter and full year 2014 results on a pro forma basis, giving effect to La Quinta’s initial public offering (IPO) and the related transactions as described below, as well as the results of operations for the fourth quarter and full year 2014 on a historical basis.

Fourth Quarter 2014 Highlights:

 

•

System-wide comparable RevPAR increased 8.4 percent, ADR increased 3.3 percent and occupancy increased 296 basis points

 

•

Pro forma earnings per share increased by $0.05 to $0.08; historical earnings per share was $(0.03)

 

•

Pro forma total Adjusted EBITDA increased 3.7 percent to $79.6 million

 

•

Pro forma net income increased 193.7 percent to $10.7 million; historical net loss was $(4.2) million

 

•

Pro forma Franchise and Management Segment Adjusted EBITDA increased 11.9 percent to $25.0 million

 

•

Increased franchise pipeline to 207 hotels, representing over 17,000 additional rooms

 

•

Voluntarily prepaid an additional $40 million of long-term debt using free cash flow

Full Year 2014 Highlights:

 

•

System-wide comparable RevPAR increased 8.0 percent, ADR increased 4.4 percent and occupancy increased 220 basis points

 

•

Pro forma earnings per share increased by $0.12 to $0.45; historical earnings per share was $(2.67)

 

•

Pro forma total Adjusted EBITDA increased 10.4 percent to $375.5 million

 

•

Pro forma net income increased 41.3 percent to $56.9 million; historical net loss was $(337.3) million

 

•

Pro forma Franchise and Management Segment Adjusted EBITDA increased 11.6 percent to $105.7 million

 

•

Grew franchise unit base by 8% with minimal capital investment

Overview

Wayne B. Goldberg, President & Chief Executive Officer of La Quinta, said, “Our 2014 results demonstrate solid performance delivered across our key metrics, including strong growth in RevPAR, franchise units, Adjusted EBITDA, and Adjusted EBITDA margin. Overall, the lodging industry remains healthy, with a steadily improving economy and strong transient travel demand. La Quinta is extremely well-positioned to continue to capture this demand as we capitalize on our refreshed and upgraded portfolio and our repositioned brand. Over the last twelve months, we have grown our franchise base 8% and opened an additional 45 franchise properties, bringing total hotels in our system to 867 with approximately 86,500 rooms. This unit growth, along with our increased occupancy, allows our geographic reach and customer base to continue to grow. Franchise interest in the La Quinta brand remains robust and our ongoing system growth is further supported by a continued strong pipeline. Furthermore, we have continued to de-lever our balance sheet and we remain focused on our strategic objectives, all of which are designed to increase shareholder value.”

 

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The results of operations for the Company, on a pro forma basis and on a historical basis, for the three months ended December 31, 2014 include the following highlights⁽¹⁾ ($ in thousands, except per share amounts):

 

		Pro Forma												Historical
		Three Months Ended December 31,												Three Months Ended December 31,
		2014				2013				% chg				2014				2013				% chg
Total Revenue		$	228,222			$	209,016				9.2	%		$	228,222			$	200,509				13.8	%
Franchise and Management Segment Adj. EBITDA			25,025				22,358				11.9	%			25,025				13,310				88.0	%
Owned Hotels Segment Adj. EBITDA			62,841				59,151				6.2	%			62,841				65,638				(4.3	)%
Total Adj. EBITDA			79,630				76,784				3.7	%			79,630				70,592				12.8	%
Total Adj. EBITDA margin			34.9	%			36.7	%							34.9	%			35.2	%
Operating Income Margin			16.3	%			14.6	%							9.7	%			13.9	%
Net Income attributable to La Quinta Holdings’ stockholders			10,736				3,656				193.7	%			(4,193	)			(4,672	)			10.3	%
Earnings per share – basic and diluted			0.08				0.03				166.7	%			(0.03	)			(0.04	)			25.0	%
Adjusted Net Income															10,296				(4,672	)			NM	(2)

 

The results of operations for the Company, on a pro forma basis and on a historical basis, for the year ended December 31, 2014 include the following highlights⁽¹⁾ ($ in thousands, except per share amounts):

 

 

 

		Pro Forma												Historical
		Year Ended December 31,												Year Ended December 31,
		2014				2013				% chg				2014				2013				% chg
Total Revenue		$	988,858			$	909,433				8.7	%		$	976,938			$	873,893				11.8	%
Franchise and Management Segment Adj. EBITDA			105,731				94,736				11.6	%			94,002				55,542				69.2	%
Owned Hotels Segment Adj. EBITDA			301,365				270,100				11.6	%			312,067				311,809				0.1	%
Total Adj. EBITDA			375,549				340,212				10.4	%			369,889				326,807				13.2	%
Total Adj. EBITDA margin			38.0	%			37.4	%							37.9	%			37.4	%
Operating Income Margin			18.9	%			18.1	%							14.0	%			17.8	%
Net Income attributable to La Quinta Holdings’ stockholders			56,872				40,255				41.3	%			(337,297	)			3,976				NM	(2)
Earnings per share – basic and diluted			0.45				0.33				36.4	%			(2.67	)			0.03				NM	(2)
Adjusted Net Income															37,100				3,976				NM	(2)

 

(1)

Please see the schedules to this press release for an explanation of the basis of the pro forma presentation and reconciliation of the pro forma financial information and adjusted results of operations. Pro forma information excludes adjustments that are not expected to have a continuing effect on the company, and adjusted information is adjusted for certain special items, in each case as discussed in the schedules attached to this press release. Pro Forma Segment Adjusted EBITDA reflects intercompany fees charged to our owned hotels under new agreements entered into at the time of the IPO as if these fees had been in place for all periods presented.

(2)	Changes in terms of percentage is not meaningful

 

Comparable hotel statistics		Three months ended December 31, 2014				Variance three months ended December 31, 2014 vs. 2013				Year ended December 31, 2014				Variance year ended December 31, 2014 vs. 2013
Owned Hotels
Occupancy			62.8	%			328 bps				66.5	%			199 bps
ADR		$	75.88				2.8	%		$	78.81				4.6	%
RevPAR		$	47.68				8.5	%		$	52.40				7.9	%
Franchised Hotels
Occupancy			63.1	%			255 bps				67.3	%			248 bps
ADR		$	85.47				4.0	%		$	88.33				4.1	%
RevPAR		$	53.97				8.4	%		$	59.41				8.1	%

 

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Comparable hotel statistics		Three months ended December 31, 2014				Variance three months ended December 31, 2014 vs. 2013				Year ended December 31, 2014				Variance year ended December 31, 2014 vs. 2013
System-wide
Occupancy			63.0	%			296 bps				66.8	%			220 bps
ADR		$	80.10				3.3	%		$	83.02				4.4	%
RevPAR		$	50.44				8.4	%		$	55.48				8.0	%

Development

Over the last twelve months, the Company opened 45 franchise hotels representing over 4,000 rooms (37 hotels and approximately 3,100 rooms on a net basis), grew its franchise base 8% and increased its pipeline 11%. During the fourth quarter, the Company opened 14 franchised hotels with approximately 1,050 rooms (13 hotels and approximately 950 rooms on a net basis). As of December 31, 2014, the Company had a pipeline of 207 franchised hotels, totaling over 17,000 rooms, to be located in the United States, Mexico, Canada, Colombia, Honduras, Nicaragua, and Guatemala, representing significant embedded growth opportunity for the system.

The Company’s system-wide portfolio, as of December 31, 2014, consisted of 867 hotels representing approximately 86,500 rooms located predominantly across 47 U.S. states, as well as in Canada and Mexico. This portfolio includes 353 owned and operated hotels and 514 franchised hotels.

 

		December 31, 2014								December 31, 2013
		# of hotels				# of rooms				# of hotels				# of rooms
Owned(1)			352				44,800				342				43,500
Joint Venture			1				200				1				200
Previously Managed Hotels(2)			—				—				14				1,700
Franchised			514				41,500				477				38,300
Totals			867				86,500				834				83,700

 

(1)	For December 31, 2013, Owned hotels includes 4 hotels designated as assets held for sale, all of which have been sold as of December 31, 2014.

(2)	At the time of the IPO, April 14, 2014, we acquired the Previously Managed Hotels; as such they are included in Owned hotels as of December 31, 2014.

Balance Sheet and Liquidity

During the fourth quarter, the Company made a voluntary prepayment of $40.0 million on its senior secured term loan facility, bringing the total voluntary prepayments in 2014 to $195.0 million. As of December 31, 2014, the Company had approximately $1.9 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.5%, including the impact of an interest rate swap. Total cash and cash equivalents was $109.9 million as of December 31, 2014.

 

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Outlook

Based upon management’s current estimates, the Company is introducing its guidance for full year 2015:

 

Webcast and Conference Call

La Quinta Holdings Inc. will host a conference call to discuss fourth quarter and full year 2014 results on Tuesday, February 24, 2015 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, 2015 through midnight Eastern Time on March 3, 2015. 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 13600176. 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 prospectus dated November 19, 2014, filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b) of the Securities Act on November 20, 2014, 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. Please see the schedules to this press release for additional information and reconciliations of such non-GAAP financial measures.

 

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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 850 La Quinta Inn & Suites™ and La Quinta Inn™ branded hotels representing more than 86,000 rooms located in 47 states, as well as Canada and Mexico. 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.

Contacts:

Investor Relations

214-492-6896

investor.relations@laquinta.com

Media:

Phil Denning & Jason Chudoba

203-682-8200

Phil.Denning@icrinc.com

Jason.Chudoba@icrinc.com

 

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LA QUINTA HOLDINGS INC.

EARNINGS RELEASE SCHEDULES

TABLE OF CONTENTS

 

		Page
Historical Statements of Operations of La Quinta Holdings Inc.			7
Reconciliations			8
Pro Forma Financial Information and Net Income			9
Pro Forma and Historical Adjusted EBITDA Non-GAAP			11
Pro Forma and Historical Segment Revenues and Adjusted EBITDA			13
Pro Forma Adjusted EBITDA Non-GAAP – Outlook: Forecasted 2015			15
Net Income and Earnings Per Share Pro Forma and Adjusted Non-GAAP			16
Definitions			17

 

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LA QUINTA HOLDINGS INC.

HISTORICAL STATEMENTS OF OPERATIONS

(unaudited, in thousands)

 

		Three months ended December 31,								Year ended December 31,
		2014				2013				2014				2013
Revenues:
Room revenues		$	197,022			$	172,405			$	846,203			$	757,699
Franchise and other fee-based revenues			21,503				19,334				89,718				79,180
Other hotel revenues			4,727				4,299				19,536				17,949
			223,252				196,038				955,457				854,828
Brand marketing fund revenues from franchise and managed properties			4,970				4,471				21,481				19,065
Total revenues			228,222				200,509				976,938				873,893
Operating expenses:
Direct lodging expenses			93,275				80,307				378,705				344,515
Depreciation and amortization			43,197				41,383				173,145				164,077
General and administrative expenses			41,773				25,070				142,636				74,794
Other lodging and operating expenses			10,860				16,402				56,984				56,068
Marketing, promotional and other advertising expenses			11,991				4,967				62,161				59,193
Impairment loss			—				—				5,157				—
			201,096				168,129				818,788				698,647
Brand marketing fund expenses from franchise and managed properties			4,970				4,471				21,481				19,065
Total operating expenses			206,066				172,600				840,269				717,712
Operating income			22,156				27,909				136,669				156,181
Other income (expenses):
Interest expense, net			(23,685	)			(37,869	)			(120,945	)			(148,615	)
Loss on extinguishment of debt, net			—				—				(2,030	)			—
Other income (loss)			4,357				(9	)			3,261				1,048
Total other income (expenses)			(19,328	)			(37,878	)			(119,714	)			(147,567	)
Income (loss) from continuing operations before income taxes			2,828				(9,969	)			16,955				8,614
Income tax provision			(6,945	)			(1,072	)			(28,805	)			(3,598	)
Recognition of net deferred tax liabilities upon C-corporation conversion			—				—				(321,054	)			—
Net Income (Loss) from continuing operations, net of tax			(4,117	)			(11,041	)			(332,904	)			5,016
Income (Loss) on discontinued operations, net of tax			—				3,808				(503	)			(2,495	)
Net income (loss)			(4,117	)			(7,233	)			(333,407	)			2,521
(Income) loss from noncontrolling interests in continuing operations, net of tax			(76	)			2,561				(3,890	)			1,455
(Income) loss from noncontrolling interests in discontinued operations, net of tax			—				—				—				—
Net (income) loss attributable to noncontrolling interests			(76	)			2,561				(3,890	)			1,455
Amounts attributable to La Quinta Holdings’ stockholders
Income (loss) from continuing operations, net of tax			(4,193	)			(8,480	)			(336,794	)			6,471
Income (loss) from discontinued operations, net of tax			—				3,808				(503	)			(2,495	)
Net income (loss) attributable to La Quinta Holdings’ stockholders		$	(4,193	)		$	(4,672	)		$	(337,297	)		$	3,976

 

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RECONCILIATIONS

Prior to the IPO, 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 the refinancing transactions described below (together with the IPO, the “IPO Transactions”).

The unaudited pro forma financial data for the three months and years ended December 31, 2014 and 2013 are presented as if the IPO Transactions all had occurred on January 1, 2013 for the purposes of the unaudited pro forma combined statements of operations. 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 initial income tax impact of the La Quinta Predecessor Entities and the Previously Managed Portfolio being owned by a “C” corporation, 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, and a reconciliation of Adjusted Net Income and Adjusted Earnings Per Share to Net Income and Earnings Per Share. 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 Adjusted Net Income and Adjusted Earnings Per Share provides meaningful information because it 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. See the definitions of “EBITDA”, “Adjusted EBITDA”, “Adjusted Net Income” and “Adjusted Earnings Per Share” for a further explanation of the use of these measures.

 

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PRO FORMA FINANCIAL INFORMATION AND NET INCOME RECONCILIATION

(unaudited, in thousands)

 

		Three months ended December 31, 2014												Three months ended December 31, 2013
		Historical				Adjustments				Pro Forma				Historical				Adjustments				Pro Forma
Revenues:
Room revenues		$	197,022			$	—			$	197,022			$	172,405			$	9,167			$	181,572
Franchise and other fee-based revenues			21,503				—				21,503				19,334				(546	)			18,788
Other hotel revenues			4,727				—				4,727				4,299				115				4,414
			223,252				—				223,252				196,038				8,736				204,774
Brand marketing fund revenues from franchise and managed properties			4,970				—				4,970				4,471				(229	)			4,242
Total revenues			228,222				—				228,222				200,509				8,507				209,016
Operating expenses:
Direct lodging expenses			93,275				—				93,275				80,307				4,127				84,434
Depreciation and amortization			43,197				(448	)			42,749				41,383				33				41,416
General and administrative expenses			41,773				(14,489	)			27,284				25,070				145				25,215
Other lodging and operating expenses			10,860				—				10,860				16,402				1,849				18,251
Marketing, promotional and other advertising expenses			11,991				—				11,991				4,967				—				4,967
			201,096				(14,937	)			186,159				168,129				6,154				174,283
Brand marketing fund expenses from franchise and managed properties			4,970				—				4,970				4,471				(229	)			4,242
Total operating expenses			206,066				(14,937	)			191,129				172,600				5,925				178,525
Operating income			22,156				14,937				37,093				27,909				2,582				30,491
Other income (expenses):
Interest expense, net			(23,685	)			256				(23,429	)			(37,869	)			13,637				(24,232	)
Other income (loss)			4,357				—				4,357				(9	)			—				(9	)
Total other income (expenses)			(19,328	)			256				(19,072	)			(37,878	)			13,637				(24,241	)
Income (loss) from continuing operations before income taxes			2,828				15,193				18,021				(9,969	)			16,219				6,250
Income tax provision			(6,945	)			(264	)			(7,209	)			(1,072	)			(1,428	)			(2,500	)
Income (loss) from continuing operations, net of tax			(4,117	)			14,929				10,812				(11,041	)			14,791				3,750
Net income (loss)(1)			(4,117	)			14,929				10,812				(11,041	)			14,791				3,750
(Income) loss from noncontrolling interests in continuing operations, net of tax			(76	)			—				(76	)			2,561				(2,655	)			(94	)
Net (income) loss attributable to noncontrolling interests(1)			(76	)			—				(76	)			2,561				(2,655	)			(94	)
Amounts attributable to La Quinta Holdings’ stockholders
Income (loss) from continuing operations, net of tax			(4,193	)			14,929				10,736				(8,480	)			12,136				3,656
Net income (loss) attributable to La Quinta Holdings’ stockholders(1)		$	(4,193	)		$	14,929			$	10,736			$	(8,480	)		$	12,136			$	3,656

 

(1)	Excludes the impact of the Company’s discontinued operations on a historical and pro forma basis for the periods presented. Refer to the Historical Statements of Operations on page 8.

 

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PRO FORMA FINANCIAL INFORMATION AND NET INCOME RECONCILIATION

(unaudited, in thousands)

 

		Year ended December 31, 2014												Year ended December 31, 2013
		Historical				Adjustments				Pro Forma				Historical				Adjustments				Pro Forma
Revenues:
Room revenues		$	846,203			$	12,814			$	859,017			$	757,699			$	38,318			$	796,017
Franchise and other fee-based revenues			89,718				(732	)			88,986				79,180				(2,284	)			76,896
Other hotel revenues			19,536				159				19,695				17,949				464				18,413
			955,457				12,241				967,698				854,828				36,498				891,326
Brand marketing fund revenues from franchise and managed properties			21,481				(321	)			21,160				19,065				(958	)			18,107
Total revenues			976,938				11,920				988,858				873,893				35,540				909,433
Operating expenses:
Direct lodging expenses			378,705				5,832				384,537				344,515				19,011				363,526
Depreciation and amortization			173,145				1,125				174,270				164,077				4,845				168,922
General and administrative expenses			142,636				(46,106	)			96,530				74,794				51				74,845
Other lodging and operating expenses			56,984				944				57,928				56,068				3,933				60,001
Marketing, promotional and other advertising expenses			62,161				—				62,161				59,193				—				59,193
Impairment loss			5,157				—				5,157				—				—				—
			818,788				(38,205	)			780,583				698,647				27,840				726,487
Brand marketing fund expenses from franchise and managed properties			21,481				(321	)			21,160				19,065				(958	)			18,107
Total operating expenses			840,269				(38,526	)			801,743				717,712				26,882				744,594
Operating income			136,669				50,446				187,115				156,181				8,658				164,839
Other income (expenses):
Interest expense, net			(120,945	)			26,024				(94,921	)			(148,615	)			50,482				(98,133	)
Loss on extinguishment of debt, net			(2,030	)			2,030				—				—				—				—
Other income (loss)			3,261				—				3,261				1,048				—				1,048
Total other income (expenses)			(119,714	)			28,054				(91,660	)			(147,567	)			50,482				(97,085	)
Income from continuing operations before income taxes			16,955				78,500				95,455				8,614				59,140				67,754
Income tax provision			(28,805	)			(9,377	)			(38,182	)			(3,598	)			(23,504	)			(27,102	)
Recognition of net deferred tax liabilities upon C-corporation conversion			(321,054	)			321,054				—				—				—				—
Income (loss) from continuing operations, net of tax			(332,904	)			390,177				57,273				5,016				35,636				40,652
Net income (loss)(1)			(332,904	)			390,177				57,273				5,016				35,636				40,652
(Income) loss from noncontrolling interests in continuing operations, net of tax			(3,890	)			3,489				(401	)			1,455				(1,852	)			(397	)
Net (income) loss attributable to noncontrolling interests(1)			(3,890	)			3,489				(401	)			1,455				(1,852	)			(397	)
Amounts attributable to La Quinta Holdings’ stockholders
Income (loss) from continuing operations, net of tax			(336,794	)			393,666				56,872				6,471				33,784				40,255
Net income (loss) attributable to La Quinta Holdings’ stockholders(1)		$	(336,794	)		$	393,666			$	56,872			$	6,471			$	33,784			$	40,255

 

(1)	Excludes the impact of the Company’s discontinued operations on a historical and pro forma basis for the periods presented. Refer to the Historical Statements of Operations on page 8.

 

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PRO FORMA AND HISTORICAL ADJUSTED EBITDA NON-GAAP RECONCILIATION

(unaudited, in thousands)

 

		Pro forma								Historical
		Three months				Three months				Three months				Three months
		ended				ended				ended				ended
		December 31, 2014				December 31, 2013				December 31, 2014				December 31, 2013
Operating income		$	37,093			$	30,491			$	22,156			$	27,909
Interest expense, net			(23,429	)			(24,232	)			(23,685	)			(37,869	)
Other income (loss)			4,357				(9	)			4,357				(9	)
Income tax provision			(7,209	)			(2,500	)			(6,945	)			(1,072	)
Income from noncontrolling interest			(76	)			(94	)			(76	)			2,561
Income on discontinued operations, net of tax			—				—				—				3,808
Net Income (Loss) Attributable to La Quinta Holdings’ stockholders			10,736				3,656				(4,193	)			(4,672	)
Interest expense			23,438				24,270				23,694				37,898
Income tax provision			7,209				2,500				6,945				1,092
Depreciation and amortization			42,978				41,716				43,426				41,690
Non-controlling interest			76				94				76				(2,561	)
EBITDA			84,437				72,236				69,948				73,447
Fixed asset impairment gain			—				—				—				(380	)
Income from discontinued operations			—				—				—				(216	)
Gain on sale from discontinued operations			—				—				—				(3,020	)
Loss on retirement of assets			177				630				177				312
Gain related to casualty disasters			(5,666	)			(402	)			(5,666	)			786
Equity based compensation			3,815				—				18,304				—
Other (gains) losses, net			(3,133	)			4,320				(3,133	)			(337	)
Adjusted EBITDA		$	79,630			$	76,784			$	79,630			$	70,592

 

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PRO FORMA AND HISTORICAL ADJUSTED EBITDA NON-GAAP RECONCILIATION

(unaudited, in thousands)

 

		Pro forma								Historical
		Year				Year				Year				Year
		ended				ended				ended				ended
		December 31, 2014				December 31, 2013				December 31, 2014				December 31, 2013
Operating income		$	187,115			$	164,839			$	136,669			$	156,181
Interest expense, net			(94,921	)			(98,133	)			(120,945	)			(148,615	)
Other income			3,261				1,048				3,261				1,048
Loss on extinguishment of debt, net			—				—				(2,030	)			—
Income tax provision			(38,182	)			(27,102	)			(28,805	)			(3,598	)
Recognition of net deferred tax liabilities upon C-corporation conversion			—				—				(321,054	)			—
Income from noncontrolling interest			(401	)			(397	)			(3,890	)			1,455
Loss on discontinued operations, net of tax			—				—				(503	)			(2,495	)
Net Income (Loss) Attributable to La Quinta Holdings’ stockholders			56,872				40,255				(337,297	)			3,976
Interest expense			94,970				98,329				120,994				148,806
Income tax provision			38,182				27,102				28,805				3,665
Recognition of net deferred tax liabilities upon C-corporation conversion			—				—				321,054				—
Depreciation and amortization			175,262				170,205				174,137				170,401
Non-controlling interest			401				397				3,890				(1,455	)
EBITDA			365,687				336,288				311,583				325,393
Fixed asset impairment loss			5,157				—				5,308				19,533
(Income) loss from discontinued operations			—				—				377				(8,636	)
Gain on sale from discontinued operations			—				—				—				(10,714	)
Loss on retirement of assets			177				680				177				359
Gain related to casualty disasters			(6,764	)			(1,926	)			(6,772	)			(1,825	)
Loss on extinguishment of debt, net			—				—				2,030				—
Equity based compensation			11,850				—				58,007				—
Other (gains) losses, net			(558	)			5,170				(821	)			2,697
Adjusted EBITDA		$	375,549			$	340,212			$	369,889			$	326,807

 

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PRO FORMA AND HISTORICAL SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION

(unaudited, in thousands)

 

		Three months ended December 31, 2014												Three months ended December 31, 2013
		Historical				Adjustments				Pro Forma				Historical				Adjustments(1)				Pro Forma
Revenues:
Owned hotels		$	202,497			$	—			$	202,497			$	177,394			$	8,592			$	185,986
Franchise and management			25,025				—				25,025				13,310				9,048				22,358
Segment revenues			227,522				—				227,522				190,704				17,640				208,344
Other fee-based revenues from franchise and managed properties			4,970				—				4,970				4,471				(229	)			4,242
Corporate and other			28,751				—				28,751				22,753				3,631				26,384
Intersegment elimination			(33,021	)			—				(33,021	)			(17,419	)			(12,535	)			(29,954	)
Total revenues		$	228,222			$	—			$	228,222			$	200,509			$	8,507			$	209,016
Adjusted EBITDA:
Owned hotels		$	62,841			$	—			$	62,841			$	65,638			$	(6,487	)		$	59,151
Franchise and management			25,025				—				25,025				13,310				9,048				22,358
Segment Adjusted EBITDA			87,866				—				87,866				78,948				2,561				81,509
Corporate and other			(8,236	)			—				(8,236	)			(8,356	)			3,631				(4,725	)
Total Adjusted EBITDA		$	79,630			$	—			$	79,630			$	70,592			$	6,192			$	76,784

 

(1)

Adjustments include (i) reflection of the results of operations of the 14 previously managed hotels which were acquired in connection with the IPO as if the acquisition had occurred on January 1, 2013; and (ii) reflection of franchise and management fees that we charge our owned hotels as if the rates put in place pursuant to new agreements dated April 14, 2014 had been in effect beginning on January 1, 2013. On a historical basis, prior to April 14, 2014, we charged aggregate fees of 2.0% (0.33% license fees for trademark rights and 1.67% management fee for management services) to our owned hotels. Effective April 14, 2014, we terminated the existing franchise and management agreements with our owned hotels and entered into new agreements, which provide for a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of total hotel revenues, which are reflected as revenue in the franchise and management segment. The agreements we entered into with our owned hotels upon effectiveness of the IPO also include a reservations fee of 2.0% of gross room revenues, which is reflected as revenue in corporate and other after April 14, 2014.

 

13

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PRO FORMA AND HISTORICAL SEGMENT REVENUES AND ADJUSTED EBITDA RECONCILIATION

(unaudited, in thousands)

 

		Year ended December 31, 2014												Year ended December 31, 2013
		Historical				Adjustments(1)				Pro Forma				Historical				Adjustments(1)				Pro Forma
Revenues:
Owned hotels		$	870,061			$	10,929			$	880,990			$	778,898			$	35,532			$	814,430
Franchise and management			94,002				11,729				105,731				55,542				39,194				94,736
Segment revenues			964,063				22,658				986,721				834,440				74,726				909,166
Other fee-based revenues from franchise and managed properties			21,481				(321	)			21,160				19,065				(958	)			18,107
Corporate and other			116,805				4,633				121,438				97,177				15,920				113,097
Intersegment elimination			(125,411	)			(15,050	)			(140,461	)			(76,789	)			(54,148	)			(130,937	)
Total revenues		$	976,938			$	11,920			$	988,858			$	873,893			$	35,540			$	909,433
Adjusted EBITDA:
Owned hotels		$	312,067			$	(10,702	)		$	301,365			$	311,809			$	(41,709	)		$	270,100
Franchise and management			94,002				11,729				105,731				55,542				39,194				94,736
Segment Adjusted EBITDA			406,069				1,027				407,096				367,351				(2,515	)			364,836
Corporate and other			(36,180	)			4,633				(31,547	)			(40,544	)			15,920				(24,624	)
Total Adjusted EBITDA		$	369,889			$	5,660			$	375,549			$	326,807			$	13,405			$	340,212

 

(1)

Adjustments include (i) reflection of the results of operations of the 14 previously managed hotels which were acquired in connection with the IPO as if the acquisition had occurred on January 1, 2013; and (ii) reflection of franchise and management fees that we charge our owned hotels as if the rates put in place pursuant to new agreements dated April 14, 2014 had been in effect beginning on January 1, 2013. On a historical basis, prior to April 14, 2014 we charged aggregate fees of 2.0% (0.33% license fees for trademark rights and 1.67% management fee for management services) to our owned hotels. Effective April 14, 2014, we terminated the existing franchise and management agreements with our owned hotels and entered into new agreements, which provide for a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of total hotel revenues, which are reflected as revenue in the franchise and management segment. The agreements we entered into with our owned hotels upon effectiveness of the IPO also include a reservations fee of 2.0% of gross room revenues, which is reflected as revenue in corporate and other after April 14, 2014.

 

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PRO FORMA ADJUSTED EBITDA NON-GAAP RECONCILIATION

OUTLOOK: FORECASTED 2015

(unaudited, in thousands)

 

		Year Ended December 31, 2015
		Low Case				High Case
Net income Attributable to La Quinta Holdings’ stockholders(1)		$	71,478			$	78,678
Interest expense(2)			87,000				87,000
Income tax provision			47,652				52,452
Depreciation and amortization			177,600				177,600
Non-controlling interest			420				420
EBITDA			384,150				396,150
Share based compensation expense(3)			13,850				13,850
Adjusted EBITDA		$	398,000			$	410,000

 

(1)

This table provides a reconciliation of forward-looking forecasted Adjusted EBITDA to net income attributable to La Quinta Holdings’ stockholders before an adjustment for a certain portion of our share based compensation which reflects the exchange of ownership units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock, 100% of which vest within one year of the IPO.

(2)	Includes interest expense for $1.9 billion of outstanding indebtedness with a weighted average interest rate of approximately 4.5%, including the impact of an interest rate swap, commitment fees for the undrawn balance of our revolving credit facility, and amortization of deferred financing costs.

(3)	Reflects share based compensation expense other than compensation expense related to exchange of ownership units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock.

 

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ADJUSTED NET INCOME AND

PRO FORMA AND ADJUSTED EARNINGS PER SHARE

NON-GAAP RECONCILIATION

(unaudited, in thousands, except per share data)

 

		Historical three months ended December 31, 2014				Pro forma three months ended December 31, 2014				Historical three months ended December 31, 2013				Pro forma three months ended December 31, 2013
Net Income Attributable to La Quinta Holdings’ stockholders(1)		$	(4,193	)		$	10,736			$	(4,672	)		$	3,656
Equity-based compensation(2)			14,489				—				—				—
Adjusted Net Income Attributable to La Quinta Holdings’ stockholders		$	10,296			$	10,736			$	(4,672	)		$	3,656
Weighted average common shares outstanding, basic			127,978				127,978				121,996				121,996
Weighted average common shares outstanding, diluted			129,379				129,379				121,996				121,996
Earnings per share, basic and diluted		$	(0.03	)		$	0.08			$	(0.04	)		$	0.03
Adjusted Earnings per share, basic and diluted		$	0.08							$	(0.04	)

 

(1)	Includes the impact of the Company’s discontinued operations on a historical basis for the periods presented

(2)	Share based compensation adjustment, which reflects the expense relating to exchanged Units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock, 100% of which vest within one year of the IPO.

 

		Historical year ended December 31, 2014				Pro forma year ended December 31, 2014				Historical year ended December 31, 2013				Pro forma year ended December 31, 2013
Net Income (Loss) Attributable to La Quinta Holdings’ stockholders(1)		$	(337,297	)		$	56,872			$	3,976			$	40,255
Recognition of net deferred tax liabilities upon C-corporation conversion(2)			321,054				—				—				—
Equity-based compensation(3)			46,156				—				—				—
Impairment loss			5,157				—				—				—
Loss on extinguishment of debt			2,030				—				—				—
Adjusted Net Income Attributable to La Quinta Holdings’ stockholders		$	37,100			$	56,872			$	3,976			$	40,255
Weighted average common shares outstanding, basic			126,156				126,156				121,996				121,996
Weighted average common shares outstanding, diluted			126,964				126,964				121,996				121,996
Earnings per share, basic and diluted		$	(2.67	)		$	0.45			$	0.03			$	0.33
Adjusted Earnings per share, basic and diluted		$	0.29							$	0.03

 

(1)	Includes the impact of the Company’s discontinued operations on a historical basis for the periods presented.

(2)	One-time net tax expense, which reflects the establishment of a net deferred tax liability associated with the La Quinta Predecessor Entities becoming owned by La Quinta Holdings Inc., a “C” corporation for income tax purposes.

(3)	Share based compensation adjustment, which reflects the expense relating to exchanged Units that were outstanding under our long-term cash incentive plan at the time of our IPO for shares of La Quinta Holdings Inc. common stock, 100% of which vest within one year of the IPO.

 

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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.

“Adjusted Net Income” and “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 Adjusted Net Income and Adjusted Earnings Per Share may not be comparable to similarly titled measures of other companies.

Adjusted Net Income and 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.

“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.

 

17