UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2017~~2018

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36412

La Quinta Holdings Inc.

(Exact name of registrant as specified in its charter)

Delaware

90-1032961

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

909 Hidden Ridge, Suite 600

Irving, Texas 75038

(Address of principal executive offices) (Zip Code)

(214) 492-6600

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐

		Emerging growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had outstanding 117,~~454~~246,~~534~~097 shares of Common Stock, par value $0.01 per share as of ~~October~~May 273, ~~2017~~2018.

LA QUINTA HOLDINGS INC.

FORM 10-Q TABLE OF CONTENTS

FOR THE PERIOD ENDED ~~SEPTEMBER~~MARCH 3031, ~~2017~~2018

		Page No.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		3
PART I.	FINANCIAL INFORMATION	5
Item 1.	Condensed Consolidated Financial Statements of La Quinta Holdings Inc. (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2826
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4840
Item 4.	Controls and Procedures	4941
PART II.	OTHER INFORMATION	5042
Item 1.	Legal Proceedings	5042
Item 1A.	Risk Factors	5042
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5043
Item 3.	Defaults Upon Senior Securities	5043
Item 4.	Mine Safety Disclosures	5143
Item 5.	Other Information	5143
Item 6.	Exhibits	5144

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q may contain “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, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts included in this Quarterly Report on Form 10-Q, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, business outlook, business trends and other information, may be forward-looking statements. Words such as “estimates,” “expects,” “contemplates,” “will,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “may,” “should” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, estimates and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth under “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2017, as filed with the Securities and Exchange Commission (the “SEC”), as such risk factors may be updated from time to time in our periodic filings with the SEC, and are accessible on the SEC’s website at www.sec.gov, and also include the following:

•

risks related to the pending Spin (as defined herein) and the merger of our management and franchising business with Wyndham Worldwide Corporation (“Wyndham Worldwide”);

•

business, financial, and operating risks inherent to the hospitality industry;

•

macroeconomic and other factors beyond our control can adversely affect and reduce demand for hotel rooms;

•

contraction in the global economy or low levels of economic growth;

•

inability to compete effectively;

•

any deterioration in the quality or reputation of our brand;

•

inability to develop our pipeline;

•

the geographic concentration of our hotels;

•

delays or increased expense relating to our efforts to develop, redevelop, sell or renovate our hotels;

•

inability by us or our franchisees to make necessary investments to maintain the quality and reputation of our brand;

•

inability to access capital necessary for growth;

•

seasonal and cyclical volatility in the hotel industry;

•

inability to maintain good relationships with our franchisees;

•

inability to protect our brand standards;

•

risks resulting from significant investments in owned real estate;

•

failure to keep pace with developments in technology;

•

failures or interruptions in, material damage to, or difficulties in updating, our information technology systems, software or websites;

•

inability to protect our guests’ personal information;

•

failure to comply with marketing and advertising laws;

•

disruptions to our reservation system;

•

failure to protect our trademarks and other intellectual property;

•

risks of doing business internationally;

•

the loss of senior executives or key field personnel;

•

the results of the audits by the Internal Revenue Service;

• our substantial indebtedness; and

• risks related to pursuing the separation of our businesses; and

•

Blackstone’s significant influence over us.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this report apply only as of the date of this report or as of the date they were made and are expressly qualified in their entirety by the cautionary statements included in this report. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

All references to “we”, “us”, “our”, the “Company” or “La Quinta” in this Quarterly Report on Form 10-Q mean La Quinta Holdings Inc. and its subsidiaries, unless the context otherwise requires.

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

La Quinta Holdings Inc.

Condensed Consolidated Balance Sheets (Unaudited)

As of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017

	September 30, 2017			December 31, 2016
	March 31, 2018			December 31, 2017
	(in thousands, except share data)
ASSETS
Current Assets:
Cash and cash equivalents	$	~~180~~113,~~037~~486		$	~~160~~140,~~596~~849
Accounts receivable, net of allowance for doubtful accounts of $4,154 and $4,022		60,649			45,337
Accounts receivable, net of allowance for doubtful accounts of $4,169 and $4,296		74,368			66,183
Assets held for sale		84,~~384~~787			298,~~544~~706
Other current assets		14,~~274~~198			912,~~943~~015
Total Current Assets		~~263~~206,~~344~~839			~~245~~227,~~420~~753
Property and equipment, net of accumulated depreciation		2,~~494~~511,~~402~~783			2,~~456~~506,~~780~~523
Intangible assets, net of accumulated amortization		~~176~~175,~~237~~755			~~177~~175,~~002~~982
Other non-current assets		1752,~~825~~902			1342,~~321~~838
Total Non-Current Assets		2,~~688~~740,~~464~~440			2,~~647~~725,~~103~~343
Total Assets	$	2,~~951~~947,~~808~~279		$	2,~~892~~953,~~523~~096
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	17,514		$	17,514
Accounts payable		4165,~~825~~895			3848,~~130~~757
Accrued expenses and other liabilities		6064,~~624~~126			6459,~~581~~587
Accrued payroll and employee benefits		4342,~~641~~832			3852,~~467~~113
Accrued real estate taxes		2413,~~797~~543			2120,~~400~~782
Total Current Liabilities		~~188~~203,~~401~~910			~~180~~198,~~092~~753
Long-term debt		1,~~673~~667,~~429~~476			1,~~682~~670,~~436~~447
Other long-term liabilities		2544,~~880~~036			2921,~~130~~833
Deferred tax liabilities		~~361~~227,~~118~~314			~~343~~233,~~028~~765
Total Liabilities		2,~~248~~142,~~828~~736			2,~~234~~124,~~686~~798
Commitments and Contingencies
Equity:
Preferred Stock, $0.01 par value; 100,000,000 shares authorized and none outstanding as of September 30, 2017 and December 31, 2016		—			—
Preferred Stock, $0.01 par value; 100,000,000 shares authorized and none outstanding as of March 31, 2018 and December 31, 2017		—			—
Common Stock, $0.01 par value; 2,000,000,000 shares authorized at September 30, 2017 and December 31, 2016, 132,476,865 shares issued and 117,459,877 shares outstanding as of September 30, 2017 and 131,750,715 shares issued and 116,790,470 shares outstanding as of December 31, 2016		1,325			1,318
Common Stock, $0.01 par value; 2,000,000,000 shares authorized at March 31, 2018 and December 31, 2017, 132,475,086 shares issued and 117,342,020 shares outstanding as of March 31, 2018 and 132,478,073 shares issued and 117,345,996 shares outstanding as of December 31, 2017		1,325			1,325
Additional paid-in-capital		1,~~177~~184,~~841~~701			1,~~165~~181,~~651~~639
Accumulated deficit		(~~265~~173,~~216~~886	)		(~~296~~144,~~006~~041	)
Treasury stock at cost, 15,016,988 shares at September 30, 2017 and 14,960,245 shares at December 31, 2016		(210,340	)		(209,523	)
Treasury stock at cost, 15,133,066 shares at March 31, 2018 and 15,132,077 shares at December 31, 2017		(212,479	)		(212,461	)
Accumulated other comprehensive loss		(3,208	)		(6,372	)
Accumulated other comprehensive income (loss)		2,308			(760	)
Noncontrolling interests		2,~~578~~574			2,~~769~~596
Total Equity		~~702~~804,~~980~~543			~~657~~828,~~837~~298
Total Liabilities and Equity	$	2,~~951~~947,~~808~~279		$	2,~~892~~953,~~523~~096

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

La Quinta Holdings Inc.

Condensed Consolidated Statements of Operations (Unaudited)

For the Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017

	Three Months Ended						~~Nine Months Ended~~
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
	March 31, 2018			March 31, 2017
	(in thousands, except per share data)
REVENUES:
Room revenues	$	~~222~~191,~~883~~708		$	~~230~~199,~~081~~744		$	~~643,670~~		$	~~669,422~~
Franchise and other fee-based revenues		3225,~~842~~896			3023,~~026~~978			~~86,995~~			~~80,196~~
Other hotel revenues		4,~~950~~779			4,~~895~~796			~~14,683~~			~~14,744~~
		260,675			265,002			745,348			764,362
		222,383			228,518
Brand marketing fund revenues from franchised properties		76,~~967~~397			75,~~310~~754			~~21,003~~			~~19,276~~
Total Revenues		~~268~~228,~~642~~780			~~272~~234,~~312~~272			~~766,351~~			~~783,638~~
OPERATING EXPENSES:
Direct lodging expenses		~~110~~103,~~387~~875			~~108~~100,~~649~~334			~~315,175~~			~~311,139~~
Depreciation and amortization		3739,~~934~~702			36,~~048~~040			~~110,390~~			~~110,973~~
General and administrative expenses		3441,~~615~~835			2935,~~572~~438			~~105,551~~			~~86,451~~
Other lodging and operating expenses		1715,~~419~~323			14,~~872~~060			~~39,310~~			~~45,848~~
Marketing, promotional and other advertising expenses		1817,~~656~~804			1518,~~566~~536			~~59,370~~			~~55,853~~
Impairment loss		989			1,058			989			100,618
(Gain) loss on sales		(498	)		138
Gain on sales		(1,457	)		(2,048	)		(1,319	)		(2,770	)
		218,041			204,546
		218,543			203,717			629,466			708,112
Brand marketing fund expenses from franchised properties		6,397			5,754
Brand marketing fund expenses from franchised properties		7,967			7,310			21,003			19,276
Total Operating Expenses		224,438			210,300
Total Operating Expenses		226,510			211,027			650,469			727,388
Operating Income		4,342			23,972
Operating Income (Loss)		42,132			61,285			115,882			56,250
OTHER INCOME (EXPENSES):
OTHER INCOME (EXPENSES):
Interest expense, net		(21,456	)		(19,980	)
Interest expense, net		(20,696	)		(20,427	)		(60,929	)		(61,019	)
Other income (expense)		119			(24	)
Other income		834			1,188			741			2,288
Total Other Expenses, net		(21,337	)		(20,004	)
Total Other (Expenses) Income, net		(19,862	)		(19,239	)		(60,188	)		(58,731	)
(Loss) Income Before Income Taxes		(16,995	)		3,968
Income (Loss) Before Income Taxes		22,270			42,046			55,694			(2,481	)
Income tax benefit (expense)		1,927			(2,290	)
Income tax (expense) benefit		(9,862	)		(19,362	)		(24,785	)		1,359
NET (LOSS) INCOME		(15,068	)		1,678
NET INCOME (LOSS)		12,408			22,684			30,909			(1,122	)
Less: net income attributable to noncontrolling interest		(71	)		(89	)
Less: net loss (income) attributable to noncontrolling interest		7			(18	)		(119	)		(138	)
Net (Loss) Income attributable to La Quinta Holdings’ stockholders	$	(15,139	)	$	1,589
Net Income (Loss) attributable to La Quinta Holdings’ stockholders	$	12,415		$	22,666		$	30,790		$	(1,260	)
Earnings (loss) per share:
Earnings (loss) per share:
Basic and diluted	$	(0.13	)	$	0.01
Basic earnings (loss) per share	$	0.11		$	0.20		$	0.27		$	(0.01	)
Diluted earnings (loss) per share	$	0.11		$	0.20		$	0.26		$	(0.01	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

La Quinta Holdings Inc.

Condensed Consolidated Statements of Comprehensive ~~Income~~ (Loss) Income (Unaudited)

For the Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017

	Three Months Ended						~~Nine Months Ended~~
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
	March 31, 2018			March 31, 2017
	(in thousands)
NET INCOME (LOSS)	$	12,408		$	22,684		$	30,909		$	(1,122	)
NET (LOSS) INCOME	$	(15,068	)	$	1,678
Cash flow hedge adjustment, net of tax		13,~~351~~068			1,~~821~~778			~~3,164~~			~~(3,958~~	)
COMPREHENSIVE NET INCOME (LOSS)		13,759			24,505			34,073			(5,080	)
COMPREHENSIVE NET (LOSS) INCOME		(12,000	)		3,456
Comprehensive net loss (income) attributable to noncontrolling interests		7			(18	)		(119	)		(138	)
Comprehensive net income attributable to noncontrolling interests		(71	)		(89	)
Comprehensive net income (loss) attributable to La Quinta Holdings’ Stockholders	$	13,766		$	24,487		$	33,954		$	(5,218	)
Comprehensive net (loss) income attributable to La Quinta Holdings’ Stockholders	$	(12,071	)	$	3,367

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

La Quinta Holdings Inc.

Condensed Consolidated Statements of Equity (Unaudited)

For the ~~Nine~~Three Months Ended ~~September 30~~March 31, ~~2017~~2018 and ~~2016~~2017

		Equity Attributable to La Quinta Holdings Inc. Stockholders
		Common Stock					Treasury Stock			Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total Equity
		Shares			Amount
	(in thousands, except share data)
Balance as of January 1, 2016			124,302,318		$	1,310	$	(107,699	)	$	1,152,155		$	(294,718	)	$	(7,436	)	$	2,900		$	746,512
Net (loss) income			—			—		—			—			(1,260	)		—			138			(1,122	)
Distributions			—			—		—			—			—			—			(316	)		(316	)
Equity-based compensation			766,813			7		—			10,790			—			—			—			10,797
Tax deficit related to equity comp (APIC Pool)			—			—		—			(708	)		—			—			—			(708	)
Repurchase of common stock			(8,277,331	)		—		(100,933	)		—			—			—			—			(100,933	)
Cash flow hedge adjustment			—			—		—			—			—			(3,958	)		—			(3,958	)
Balance as of September 30, 2016			116,791,800		$	1,317	$	(208,632	)	$	1,162,237		$	(295,978	)	$	(11,394	)	$	2,722		$	650,272
Balance as of January 1, 2017			116,790,470		$	1,318	$	(209,523	)	$	1,165,651		$	(296,006	)	$	(6,372	)	$	2,769		$	657,837
Net income			—			—		—			—			301,~~790~~589			—			~~119~~89			301,~~909~~678
Distributions			—			—		—			—			—			—			(~~310~~117	)		(~~310~~117	)
Equity-based compensation			~~741~~705,~~882~~409			7		—			123,~~190~~932			—			—			—			123,~~197~~939
Repurchase of common stock			(727,~~475~~095	)		—		(~~817~~16	)		—			—			—			—			(~~817~~16	)
Cash flow hedge adjustment			—			—		—			—			—			31,~~164~~778			—			31,~~164~~778
Balance as of September 30, 2017			117,459,877		$	1,325		(210,340	)	$	1,177,841		$	(265,216	)	$	(3,208	)	$	2,578		$	702,980
Balance as of March 31, 2017			117,488,784		$	1,325	$	(209,539	)	$	1,169,583		$	(294,417	)	$	(4,594	)	$	2,741		$	665,099
Balance as of January 1, 2018			117,345,996		$	1,325	$	(212,461	)	$	1,181,639		$	(144,041	)	$	(760	)	$	2,596		$	828,298
Cumulative-effect adjustment for the adoption of ASU 2014-09			—			—		—			—			(14,869	)		—			—			(14,869	)
Cumulative-effect adjustment for the adoption of ASU 2018-02														163									163
Net (loss) income			—			—		—			—			(15,139	)		—			71			(15,068	)
Distributions			—			—		—			—			—			—			(93	)		(93	)
Equity-based compensation			405			—		—			3,062			—			—			—			3,062
Repurchase of common stock			(4,381	)		—		(18	)		—			—			—			—			(18	)
Cash flow hedge adjustment			—			—		—			—			—			3,068			—			3,068
Balance as of March 31, 2018			117,342,020		$	1,325		(212,479	)	$	1,184,701		$	(173,886	)	$	2,308		$	2,574		$	804,543

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

La Quinta Holdings Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the ~~Nine~~Three Months Ended ~~September 30~~March 31, ~~2017~~2018 and ~~2016~~2017

	September 30, 2017			September 30, 2016
	March 31, 2018			March 31, 2017
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	30,909		$	(1,122	)
Net (loss) income	$	(15,068	)	$	1,678
Adjustment to reconcile net income (loss) to net cash provided by operating activities:
Adjustment to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		~~110~~39,~~271~~668			~~110~~36,~~914~~004
Amortization of other non-current assets		~~540~~475			~~102~~76
Amortization of intangible assets		~~501~~139			~~562~~167
Gain related to casualty disasters		(~~1,234~~928	)		(~~282~~1,928	)
Amortization of leasehold interests		(~~382~~105	)		(~~503~~131	)
Amortization of deferred costs		41,~~459~~488			41,~~251~~471
Impairment loss		989			100,618
(Gain) loss on sale or retirement of assets		(498	)		138
Gain on sale or retirement of assets		(1,319	)		(2,770	)
Equity-based compensation		3,062			3,939
Equity-based compensation		12,197			10,797
Deferred taxes		(2,424	)		2,651
Deferred taxes		16,386			(11,591	)
Provision for doubtful accounts		316			603
Provision for doubtful accounts		1,541			917
Changes in assets and liabilities:
Accounts receivable		(81,~~340~~555	)		~~(10,233~~214	)
Other current assets		(42,~~331~~183	)		(23,~~265~~183	)
Other non-current assets		(~~3,757~~867	)		~~440~~(562	)
Accounts payable		(52,~~521~~318	)		(46,~~676~~925	)
Accrued payroll and employee benefits		5(9,~~174~~281	)		(565,562	)
Accrued real estate taxes		3(7,~~397~~239	)		4(8,~~166~~423	)
Accrued expenses and other liabilities		(31,~~975~~676	)		63,~~643~~445
Other long-term liabilities		~~2,264~~(144	)		1,~~344~~349
Net cash provided by operating activities		~~159~~8,~~769~~850			~~207~~25,~~256~~021
Cash flows from investing activities:
Capital expenditures		(~~158~~40,~~379~~171	)		(8946,~~767~~178	)
Insurance proceeds on casualty disasters		54,~~685~~000			24,~~965~~557
Proceeds from sale of assets		274,~~846~~447			5622,~~418~~011
Payment of franchise incentives		(1,217	)		(1,013	)
Net cash used in investing activities		(31,724	)		(19,610	)
Net cash used in investing activities		(126,065	)		(31,397	)
Cash flows from financing activities:
Repayment of long-term debt		(134,~~136~~378	)		(134,~~136~~379	)
Purchase of treasury stock		(~~817~~18	)		(~~100,933~~16	)
Distributions to noncontrolling interests		(~~310~~93	)		(~~316~~117	)
Net cash used in financing activities		(144,~~263~~489	)		(~~114~~4,~~385~~512	)
Increase in cash and cash equivalents		19,441			61,474
(Decrease) increase in cash and cash equivalents		(27,363	)		899
Cash and cash equivalents at the beginning of the period		~~160~~140,~~596~~849			86160,~~709~~596
Cash and cash equivalents at the end of the period	$	~~180~~113,~~037~~486		$	~~148~~161,~~183~~495
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the period	$	5619,~~679~~745		$	5719,~~472~~713
Income taxes paid during the period, net of refunds	$	~~13,716~~102		$	~~5,600~~261
SUPPLEMENTAL NON-CASH DISCLOSURE:
Capital expenditures included in accounts payable	$	814,~~467~~791		$	711,~~492~~758
Cash flow hedge adjustment, net of tax	$	3,~~164~~068		$	(31,~~958~~778	)
Receivable for capital assets damaged by casualty disasters	$	65,~~201~~754		$	12,~~865~~725
Accrued deferred incentive costs	$	(400	)	$	(1,013	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

La Quinta Holdings Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of and for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2017~~2018

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

Effective April 14, 2014 (the “IPO Effective Date”), La Quinta Holdings Inc. (“Holdings”) completed its initial public offering (“IPO”) in which Holdings issued and sold 44.0 million shares of its common stock. Holdings was incorporated in the state of Delaware on December 9, 2013. Holdings may also be referred to herein as “La Quinta”, “we”, “us”, “our”, or the “Company”.

We own and operate hotels, some of which are subject to a land lease, located in the United States (“U.S.”) under the La Quinta brand. We also franchise hotels under the La Quinta brand, with franchised hotels currently operating in the U.S., Canada, Mexico, Honduras, Colombia and ~~Colombia~~Chile. All new franchised hotels are La Quinta Inn & Suites in the U.S. and Canada and LQ Hotel in Mexico and in Central and South America. As of ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, total owned and franchised hotels, and the approximate number of associated rooms, were as follows:

September 30, 2017

September 30, 2016

March 31, 2018

March 31, 2017

# of hotels

# of rooms

# of hotels

# of rooms

Owned (1)

~~317~~315

40,~~500~~300

~~325~~318

4140,~~500~~700

Joint Venture

200

Franchised

~~576~~591

4748,~~100~~300

~~567~~570

46,~~300~~500

Totals

~~894~~907

8788,800

~~893~~889

8887,~~000~~400

(1) As of ~~September 30~~March 31, ~~2017~~2018 and ~~2016~~2017, owned hotels includes ~~three~~two and ~~nine~~three hotels, respectively, which met the criteria to be classified as assets held for sale.

OnSpin ~~January 18, 2017, we announced we are pursuing the possibility~~ of ~~separating~~CorePoint ~~our~~Lodging ~~real estate business from our franchise~~ and ~~management~~Merger ~~businesses,~~Agreement ~~which~~with ~~could~~Wyndham prove to be the most logical next step as we continue to execute on our key strategic initiatives and create value for our stockholders. This separation of our businesses could enable greater strategic clarity and allow us to take advantage of growth opportunities that naturally flow from each business model. This could also enable stockholders to own and value each business independently, allowing each company to attract the investor base most appropriate for its distinct investment profile. There is no assurance that the separation of our businesses will occur.Worldwide

On ~~July~~January 2617, ~~2017~~2018, ~~our~~La ~~subsidiary,~~Quinta ~~CorePoint~~Holdings ~~Lodging~~ Inc. and Wyndham Worldwide Corporation, a Delaware corporation (“~~CorePoint~~Wyndham ~~Lodging~~Worldwide”), ~~filed~~entered into a ~~Registration~~definitive ~~Statement~~agreement on(the ~~Form~~“Merger 10Agreement”) ~~(as~~under ~~subsequently~~which ~~amended,~~Wyndham Worldwide will acquire our hotel franchise and hotel management business for $1.95 billion in cash (the “~~Registration Statement~~Merger”). The ~~with~~acquisition is expected to close in the Usecond quarter of 2018.S. ~~Securities~~In connection with the Merger Agreement, on January 17, 2018, we entered into a Separation and ~~Exchange~~Distribution ~~Commission~~Agreement (the “~~SEC~~Separation Agreement”), ~~with~~pursuant ~~respect~~to which, on the terms and subject to the ~~separation~~conditions set forth in the Separation Agreement, immediately prior to the Merger with Wyndham Worldwide, we will, among other things, (i) effect a reclassification and combination of our common stock whereby each share of our common stock will be reclassified and combined into one half of a share of our common stock (par value $0.02) (the “Reverse Stock Split”), (ii) convey our owned real estate ~~business~~assets ~~from~~and certain related assets and liabilities to CorePoint Lodging Inc. (“CorePoint Lodging”) and, (iii) thereafter, distribute (the “Spin”) to our ~~franchise~~common stockholders all of the issued and ~~management~~outstanding ~~businesses~~shares of common stock of CorePoint Lodging, which will become a separate publicly traded company. Under ~~Completion~~the terms of the ~~separation~~Merger isAgreement, ~~subject~~our stockholders will receive $16.80 per share in cash (after giving effect to ~~several~~the ~~conditions~~Reverse Stock Split), ~~including~~and Wyndham Worldwide will repay approximately $715 million of our debt net of cash and set aside a reserve of $240 million for estimated taxes expected to be incurred in connection with the ~~SEC~~Spin. ~~declaring~~Immediately following the ~~Registration~~Spin, ~~Statement~~in ~~effective~~accordance with and ~~final~~subject ~~approval~~to the terms of the ~~transaction~~Merger byAgreement, ~~our~~a ~~board~~wholly-owned subsidiary of ~~directors.~~Wyndham Worldwide will merge with and into Holdings, with Holdings continuing as the surviving company and as a wholly-owned indirect subsidiary of Wyndham Worldwide, and our common stock will be delisted from the New York Stock Exchange.

~~Basis~~The boards of ~~Presentation~~directors of each of Wyndham Worldwide and ~~Use~~La Quinta have approved the Merger Agreement. Our stockholders approved the Merger Agreement at a special meeting of ~~Estimates~~stockholders on April 26, 2018. The Merger is subject to the completion of the Reverse Stock Split and the Spin and certain other customary conditions.

~~The~~Financing ~~accompanying unaudited condensed consolidated financial statements have been prepared~~ in ~~accordance~~connection with ~~accounting principles generally accepted in~~ the ~~United~~Spin ~~States of America (“GAAP”) for interim financial information, the instructions to Form 10-Q~~ and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes required by GAAP for complete annual financial statements. Although we believe the disclosures made are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with Holdings’ consolidated financial statements and notes thereto for the years ended December 31, 2016, 2015 and 2014, which are incorporated by reference in Item 8.01 of our Current Report on Form 8-K filed with the SEC on July 26, 2017. All intercompany transactions have been eliminated. In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.Merger

In connection with the transactions contemplated by the Merger Agreement and the Separation Agreement, including the Merger and Spin, CorePoint Lodging will make a cash payment to La Quinta of approximately $984 million subject to certain adjustments based on the actual amount of net indebtedness of La Quinta (as of immediately prior to the effective time of the Spin) and certain accrued but unpaid expenses incurred in connection with the Spin and the Merger, immediately prior to and as a condition of the Spin. The consummation of the Merger is subject to the consummation of the Spin.

committed to provide a secured mortgage and, in certain circumstances mezzanine credit facility, in an aggregate principal amount of $1.035 billion and a $50 million secured revolving credit facility. The ultimate funding by JPMorgan Chase Bank under the Commitment Letter is subject to certain customary conditions, including, but not limited to, receipt of financial information, delivery of customary documentation relating to CorePoint Lodging and its subsidiaries and consummation of the Spin and the Merger.

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes required by GAAP for complete annual financial statements. Although we believe the disclosures made are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with Holdings’ consolidated financial statements and notes thereto for the years ended December 31, 2017, 2016 and 2015, which are included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2018. All intercompany transactions have been eliminated. In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING STANDARDS

Revenue Recognition — Revenues primarily consist of room rentals, franchise fees and other hotel revenues. We defer athe ~~portion of our~~ revenue from franchisees at the time the franchise agreement is signed and recognize the ~~remainder~~revenue ~~upon~~in the period beginning with the hotel opening and through the initial term of the franchise contract.

Room revenues are derived from room rentals at our owned hotels. We recognize room revenue on a daily basis based on an agreed-upon daily rate after the guest has stayed at one of our hotels. Customer incentive discounts, cash rebates, and refunds are recognized as a reduction of room revenues. A portion of room revenues related to loyalty program members is deferred upon receipt and recognized when the performance obligation is satisfied. Occupancy, hotel, and sales taxes collected from customers and remitted to the taxing authorities are excluded from revenues in the accompanying condensed consolidated statements of operations.

Included in franchise and other fee-based revenues are franchise fee revenues, which primarily consist of revenues from franchisees for application and initial fees, transfer fees, royalty, reservations, and training, as well as fees related to our guest loyalty program (“Returns”). We recognize franchise fee revenue on a gross basis because we (1) are the primary obligor in these arrangements, (2) have latitude in establishing rates, (3) perform the services delivered, (4) have some discretion over supplier selection, and (5) determine the specification of services delivered. The different types of franchise fee revenues are described as follows:

• Upon execution of a franchise agreement, a franchisee is required to pay us an initial fee. We recognize the initial fee as revenue ~~when~~in ~~substantial performance of our obligations to~~ the ~~franchisee~~period beginning with ~~respect to~~ the ~~initial~~hotel fee has been achieved. In most cases, the vast majority of the initial fee is recognized as revenue when each franchise agreement is signed as, after that date, our remaining obligations to the franchisee are limited to (1) pre-opening ~~inspections, for which we defer $2,500,~~ and ~~(2)~~through ~~if mandated by us or agreed to with~~ the ~~franchisee,~~initial ~~preopening~~term ~~training and marketing support related to entry into the La Quinta brand, for which we defer $5,000. These amounts represent an estimate~~ of the ~~value~~franchise ~~provided to the franchisee related to the services provided, and are based on our experience with time, materials, and third-party costs necessary to provide these services~~contract. ~~We recognize the remaining deferred initial fee as revenue when the franchised property opens or if the agreement is terminated as the remaining service obligations have been fulfilled.~~

•

For franchise agreements entered into prior to April 1, 2013, we collect a monthly royalty fee from franchisees generally equal to 4.0% of their room revenues until the franchisee has operated as a La Quinta hotel for twenty-four consecutive months. For U.S. franchise agreements entered into on or after April 1, 2013, the Company collects a monthly royalty fee equal to 4.5% of gross room revenues until the franchisee has operated as a La Quinta for twenty-four consecutive months. Beginning in the twenty-fifth month of operation, the franchisee monthly royalty fee increases by 0.5%. In these cases, the franchisee has the opportunity to earn the additional 0.5% back via rebate by achieving certain defined customer satisfaction results. Royalty fees are recognized on a gross basis in the accompanying condensed consolidated statements of operations. Any rebates of royalty fees are recognized as a reduction of revenue. Pursuant to the franchise agreements with the owned hotels and franchise agreements entered into with franchisees outside of the U.S. on or after April 1, 2013, the Company generally collects a monthly royalty fee equal to 4.5% of gross room revenues throughout the term and does not offer a rebate.

• We receive reservation and technology fees, ~~as well as fees related to Returns,~~ in connection with franchising our La Quinta brand. Such fees are recognized based on a percentage of the franchisee’s eligible hotel room revenues or room count. We also perform certain other services for franchisees such as training and revenue management. Revenue for these services is recognized at the time the services are performed.

•

We receive fees from franchisees related to our Returns loyalty program. These fees are deferred until the performance obligation to the Returns member is satisfied.

Other hotel revenues include revenues generated by the incidental support of hotel operations for owned hotels and other rental income. We record rental income from operating leases associated with leasing space for restaurants, billboards, and cell towers. Rental income is recognized on a straight-line basis over the life of the respective lease agreement.

Brand marketing fund revenues from franchise properties represent fees collected from ~~third~~franchised ~~party franchise~~ hotels related to maintaining our Brand Marketing Fund (“BMF”). We maintain the BMF on behalf of all La Quinta branded hotel properties, including our owned hotels, from which national marketing and advertising campaign expenses are paid. Each La Quinta branded hotel is charged a percentage of its room revenue from which the expenses of the fund are covered. The corresponding expenditures of the BMF fees collected from franchised and managed hotels are presented as brand marketing fund expenses from franchised hotels in our condensed consolidated statements of operations, resulting in no net impact to operating income ~~(loss)~~ or net ~~income~~ (loss) income.

Lodging operations are particularly sensitive to adverse economic and competitive conditions and trends, which could adversely affect the Company’s business, financial condition, and results of operations.

11Customer loyalty program— We administer Returns, which allows members to earn points based on certain dollars spent. Members may redeem points earned for free night certificates, gift cards, airline miles, and a variety of other awards. We account for the economic impact of points earned by accruing an estimate of the performance obligation for unredeemed points as deferred revenue. We estimate the value of the future performance obligation based upon historical experience, including an estimate of “breakage” for points that will never be redeemed. The estimate is based on a calculation that includes assumptions for the redemption rate, redemption type (whether for a free night certificate or other award), rate of redemption at Company-owned hotels versus franchised hotels and the number of points required per stay. The expenses of the Returns program are charged to marketing, promotional and other advertising expenses in the accompanying condensed consolidated statements of operations.

As of March 31, 2018 and December 31, 2017, the total liability for Returns points was approximately $29.6 million and $18.9 million, respectively, of which $10.1 million and $6.5 million are included in accrued expenses and other liabilities, representing the estimated points expected to be redeemed in the next year. The remainder is included within other long-term liabilities in the accompanying consolidated balance sheets.

Actual financial results of the Returns program may vary from our estimate due primarily to variances from assumptions used in the calculation of the obligation for future redemptions and changes in member behavior. These variances are accounted for as changes in estimates and are recorded as a component of revenue as they become known.

Assets held for sale—Long-lived assets are classified as held for sale when all of the following criteria are met:

•	Management, having the authority to approve the action, commits to a plan to sell the asset and does not expect significant changes to the plan or that the plan will be withdrawn;

•	The asset is available for immediate sale in its present condition, and management is actively seeking a buyer;

•	The asset is being actively marketed, at a price reasonable in relation to the current value; and

•	The sale of the asset is probable within one year.

When we identify a long-lived asset as held for sale, depreciation of the asset is discontinued and the carrying value is reduced, if necessary, to the estimated sales price less costs to sell by recording a charge to current earnings. All assets held for sale are monitored through the date of sale for potential adjustments based on offers we are willing to take under serious consideration and continued review of facts and circumstances. Losses on sales are recorded to the extent that the amounts ultimately received for the sale of assets are less than the adjusted book values of the assets. Gains on sales are recognized at the time the assets are sold, provided there is reasonable assurance the sales price will be collected and any future activities to be performed by the Company relating to the assets sold are expected to be insignificant.

Derivative Instruments — We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. We do not enter into derivative financial instruments for trading or speculative purposes.

We record all derivatives at fair value. On the date the derivative contract is entered, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (“cash flow hedge”), a hedge of the fair value of a recognized asset or liability (“fair value hedge”), or an undesignated hedge instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge or net investment hedge are recorded in the condensed consolidated statements of comprehensive income (loss) until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the condensed consolidated statements of cash flows.

which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the condensed consolidated statements of cash flows.

If we determine that we qualify for and will designate a derivative as a hedging instrument at the designation date, we formally document all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions. This process includes matching all derivatives that are designated as cash flow hedges to specific forecasted transactions, linking all derivatives designated as fair value hedges to specific assets and liabilities in our condensed consolidated balance sheets, and determining the foreign currency exposure of net investment of the foreign operation for a net investment hedge.

On a quarterly basis, we assess the effectiveness of our designated hedges in offsetting the variability in the cash flows or fair values of the hedged assets or obligations via use of a statistical regression approach. Additionally, we measure ineffectiveness using the hypothetical derivative method. This method compares the cumulative change in fair value of each hedging instrument to the cumulative change in fair value of a hypothetical hedging instrument, which has terms that identically match the critical terms of the respective hedged transactions. Thus, the hypothetical hedging instrument is presumed to perfectly offset the hedged cash flows. Ineffectiveness results when the cumulative change in the fair value of the hedging instrument exceeds the cumulative change in the fair value of the hypothetical hedging instrument. We discontinue hedge accounting prospectively when the derivative is not highly effective as a hedge, the underlying hedged transaction is no longer probable, or the hedging instrument expires, is sold, terminated or exercised.

Equity-Based Compensation — We recognize the cost of services received in an equity-based payment transaction with an employee as services are received and record either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria.

The measurement objective for these equity awards is the estimated fair value at the grant date of the equity instruments that we are obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. The compensation cost for an award classified as an equity instrument is recognized ratably over the requisite service period. The requisite service period is the period during which an employee is required to provide service for an award to vest. We recognize forfeitures as they occur.

requisite service period. The requisite service period is the period during which an employee is required to provide service for an award to vest. We recognize forfeitures as they occur.

Compensation cost for awards with performance conditions is recognized over the requisite service period if it is probable that the performance condition will be satisfied. If such performance conditions are not considered probable until they occur, no compensation expense for these awards is recognized.

Income Taxes —We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in earnings during the period in which the new rate is enacted. For financial reporting purposes, income tax expense or benefit is based on reported financial accounting income and income taxes related to our taxable subsidiaries.

We evaluate the probability of realizing the future benefits of deferred tax assets and provide a valuation allowance for the portion of any deferred tax assets where the likelihood of realizing an income tax benefit in the future does not meet the more-likely-than-not criteria for recognition.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We accrue interest and, if applicable, penalties for any uncertain tax positions. Our policy is to classify interest and penalties as a component of income tax expense. The Company has open tax years dating back to 2010.

~~Newly~~On ~~Issued~~December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law and the new legislation contains several key tax provisions that affected us, including a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others. We are required to recognize the effect of the tax law changes in the period of enactment, such as re-measuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting ~~Standards~~Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the

In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The purpose of this update is to better align a company’s risk management activities and financial reporting for hedging relationships, simplify the hedge accounting requirements, and improve the disclosure of hedging arrangements. ASU 2017-12 is effective for annual reporting periods, and interim periods beginning after December 31, 2018. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial position, results of operations and related disclosures.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. This update clarifies the changes to terms or conditions of a share-based payment award that require an entity to apply modification accounting. ASU 2017-09 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. Early application is permitted and prospective application is required. We do not expect the implementation of this guidance to have a material impact on our consolidated financial position and results of operations.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides guidance for evaluating whether certain transactions are to be accounted for as an acquisition (or disposal) of either a business or an asset. This standard is applied on a prospective basis. Early adoption is permitted for transactions occurring subsequent to the issuance of ASU 2017-01 and not reported in the financial statements. The guidance is effective for the interim and annual periods beginning after December 15, 2018, on a prospective basis, and earlier adoption is permitted for transactions occurring subsequent to the issuance of ASU 2017-01 and not reported in the financial statements. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. Historically, credit losses have not been material to the Company. We are currently evaluating the impact of this guidance on our financial statements but do not expect the implementation of this guidance to have a material impact on our consolidated financial position and results of operations.

~~uncertainty~~Tax ofAct ~~cash~~was ~~flows~~passed ~~arising~~late ~~from~~in ~~leases. The standard requires~~ the ~~use~~fourth quarter of ~~a modified retrospective transition approach~~2017, ~~which~~and ~~includes~~ongoing aguidance ~~number~~and ofaccounting ~~optional~~interpretation ~~practical~~is ~~expedients~~expected ~~that~~over ~~entities~~the ~~may~~next ~~elect~~12 tomonths, ~~apply.~~we ~~The~~consider ~~guidance~~the isdeferred ~~effective~~tax ~~for~~re-measurements ~~the interim~~ and ~~annual~~other ~~periods~~items ~~beginning~~to ~~after~~be ~~December~~incomplete ~~15,~~due ~~2018.~~to Anthe ~~early~~forthcoming ~~adoption~~guidance isand ~~permitted.~~our ~~The~~ongoing ~~impact~~analysis of ~~this~~final ~~guidance~~year-end isdata ~~expected to increase assets~~ and ~~liabilities~~tax ~~on the Company’s consolidated balance sheet~~positions. We ~~are~~expect ~~currently~~to ~~evaluating~~complete ~~the~~our ~~magnitude~~analysis ofwithin the ~~impact~~measurement ofperiod ~~this~~in ~~guidance~~accordance onwith ~~our~~SAB ~~consolidated financial statements and related disclosures~~118.

InNewly ~~May~~Issued ~~2014,~~Accounting the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The new guidance on revenue from contracts with customers will supersede most current revenue recognition guidance, including industry-specific guidance. The guidance is effective for the interim and annual periods beginning on or after December 15, 2017; early adoption is permitted for annual reporting periods beginning after December 15, 2016. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The Company has formed a project team to evaluate and implement the standard and currently believes the most significant areas of impact of this ASU will be (i) the deferral of initial fees paid by franchisees over their contract life rather than recognition of the majority of the fee upon signing, (ii) the deferral of costs to acquire a customer over the term of the agreement rather than expensing as incurred; and (iii) revenue related to accounting for loyalty programs will be recognized as services are delivered, as opposed to recognized on a gross basis when the points are issued. We are continuing our assessment, which may identify other impacts of the adoption of ASU 2014-09.Standards

~~The~~In ~~guidance~~August ~~also~~2017, ~~requires~~the ~~enhanced~~Financial ~~disclosures~~Accounting ~~regarding~~Standards ~~the~~Board ~~nature,~~(“FASB”) ~~amount,~~issued ~~timing~~Accounting ~~and~~Standards ~~uncertainty~~Update of(“ASU”) ~~revenue~~2017-12, Derivatives and ~~cash~~Hedging ~~flows~~(Topic ~~arising~~815): ~~from~~Targeted anImprovements ~~entity’s~~to ~~contracts~~Accounting ~~with~~for ~~customers~~Hedging Activities. The ~~guidance~~purpose ~~permits~~of ~~the~~this ~~use~~update ofis ~~either~~to better align a ~~retrospective~~company’s orrisk ~~cumulative~~management ~~effect~~activities ~~transition~~and ~~method.~~financial ~~The~~reporting ~~Company~~for ~~currently~~hedging ~~anticipates~~relationships, ~~utilizing~~simplify the ~~modified~~hedge ~~retrospective~~accounting ~~method~~requirements, and improve the disclosure of ~~adoption~~hedging arrangements. ~~Under~~ASU ~~this~~2017-12 ~~method~~is effective for annual reporting periods, ~~the~~and ~~Company~~interim ~~expects~~periods tobeginning ~~record~~after aDecember ~~cumulative~~31, ~~adjustment~~2018. toEarly ~~retained~~adoption ~~earnings~~is ~~and~~permitted. ~~plans~~We toare ~~adopt~~currently evaluating the ~~standard~~impact as of ~~January~~this 1guidance on our consolidated financial position, ~~2018.~~results of operations and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. Historically, credit losses have not been material to the Company. We are currently evaluating the impact of this guidance on our financial position, results of operations and related disclosures but do not expect the implementation of this guidance to have a material impact on our consolidated financial position and results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The guidance is effective for the interim and annual periods beginning after December 15, 2018. An early adoption is permitted. The impact of this guidance is expected to increase assets and liabilities on the Company’s consolidated balance sheet. We are currently evaluating the magnitude of the impact of this guidance on our consolidated financial position, results of operations and related disclosures.

Newly Adopted Accounting Standards

In ~~January~~March ~~2017~~2018, the FASB issued ASU ~~2017~~2018-0305, ~~Accounting~~Income ~~Changes~~Taxes ~~and Error Corrections~~ (Topic ~~250~~740) ~~and~~- ~~Investments—Equity Method and Joint Ventures (Topic 323):~~ Amendments to SEC Paragraphs Pursuant to SEC Staff ~~Announcements~~Accounting Bulletin No. ~~Registrants~~118, ~~are~~which ~~required~~provides toguidance ~~disclose~~from the ~~effect~~SEC ~~that~~allowing ~~recently~~for ~~issued~~the ~~accounting~~recognition ~~standards~~of ~~will~~provisional ~~have~~amounts onin ~~their~~the financial statements ~~when~~for ~~adopted~~the inyear ended December 31, 2017 as a ~~future~~result ~~period~~of the Tax Act that was signed into law in December 2017. InThe ~~cases~~guidance ~~where~~allows for a ~~registrant~~measurement ~~cannot~~period ~~reasonably~~of ~~estimate~~up ~~the~~to ~~impact~~one ofyear from the ~~adoption,~~enactment ~~then~~date ~~additional~~to ~~qualitative~~finalize ~~disclosures~~the ~~should~~accounting berelated ~~considered.~~to Wethe ~~adopted~~Tax ~~this~~Act. ~~standard~~The onCompany ~~January~~has 1,applied ~~2017~~ and itcontinues ~~did~~to ~~not~~apply ~~have~~the aguidance ~~material~~in ~~effect~~this onupdate ~~our~~within its financial statements for the year ended December 31, 2017.

In ~~October~~February ~~2016~~2018, the FASB issued ASU ~~2016~~2018-1602, Income ~~Taxes~~Statement ~~(Topic~~– ~~740):~~Reporting ~~Intra-Entity~~Comprehensive ~~Transfers~~Income of(Topic ~~Assets Other Than Inventory~~220). The ~~new~~ guidance ~~requires~~in ~~that~~ASU ~~entities~~2018-02 ~~recognize~~allows ~~the income tax consequences of~~ an ~~intra-~~entity ~~transfer~~to ofelect anto ~~asset~~reclassify ~~other than inventory when~~ the ~~transfer~~stranded ~~occurs.~~tax ~~The~~effects ~~guidance~~related isto ~~effective~~the ~~for~~Tax ~~annual~~Act ~~reporting~~from ~~periods~~accumulated ~~beginning~~other ~~after~~comprehensive ~~December~~income ~~15,~~into ~~2017,~~retained ~~including interim reporting periods within those annual reporting periods~~earnings. ~~Early~~The ~~adoption~~Company isearly ~~permitted~~adopted ~~but~~this ~~should be in the first interim period. The new~~ guidance ~~should~~as ~~also~~of beJanuary ~~applied~~1, on2018, aand ~~modified~~recorded ~~retrospective basis through~~ a ~~cumulative-effect~~$0.2 million adjustment to retained earnings asfor ofstranded ~~the~~tax ~~beginning~~effects ofrelated ~~the~~to ~~period of adoption. We adopted this standard on January 1, 2017 and it did not have a material effect on~~ our ~~financial~~interest ~~statements~~rate hedge.

In ~~August~~May ~~2016~~2017, the FASB issued ASU ~~No. 2016~~2017-1509, ~~Statement~~Compensation-Stock ofCompensation ~~Cash Flows~~ (Topic ~~230~~718): ~~Classification~~Scope of ~~Certain~~Modification ~~Cash~~Accounting. ~~Receipts~~This ~~and~~update ~~Cash~~clarifies ~~Payments: A Consensus of~~ the ~~FASB~~changes ~~Emerging~~to ~~Issues~~terms ~~Task Force. The amendments provide guidance on eight specific cash flow classification issues: debt prepayment~~ or ~~debt~~conditions ~~extinguishment costs, settlement~~ of ~~zero~~a share-~~coupon~~based ~~debt~~payment ~~instruments~~award ~~or other debt instruments with coupon interest rates~~ that ~~are~~require ~~insignificant~~an inentity ~~relation~~ to ~~the~~apply ~~effective~~modification ~~interest~~accounting. ~~rate~~ASU of2017-09 ~~the~~is ~~borrowing,~~effective ~~contingent~~for ~~consideration~~annual ~~payments~~reporting ~~made after a business combination~~periods, ~~proceeds from the settlement of insurance claims, proceeds from the settlement of corporate~~ and ~~bank-owned~~interim ~~life~~periods ~~insurance policies~~therein, distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017 ~~and interim periods within those fiscal years~~. Early ~~adoption~~application is permitted. Ifand anprospective ~~entity~~application ~~early~~is ~~adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period~~required. ~~An entity that elects early adoption must adopt all of the amendments in the same period.~~ We adopted ~~this standard~~ on January 1, ~~2017~~2018 onand ait ~~retrospective~~did ~~basis.~~not ~~For~~have ~~the~~a ~~nine~~material ~~months~~effect ~~ended September 30, 2016, we reclassified $1.2 million from insurance proceeds~~ on ~~casualty~~our ~~disasters~~financial ~~in cash flows from investing activities to the change in accounts receivable in cash flows from operating activities on the consolidated statement of cash flows~~statements.

In ~~March~~January ~~2016~~2017, the FASB issued ASU ~~2016~~2017-0901, ~~Compensation-Stock~~Business ~~Compensation~~Combinations (Topic ~~718~~805): ~~Improvements~~Clarifying tothe ~~Employee~~Definition ~~Share-Based~~of ~~Payment~~a ~~Accounting~~Business, which ~~simplifies~~provides ~~several~~guidance ~~aspects~~for ~~related~~evaluating towhether ~~the~~certain ~~accounting~~transactions ~~for~~are ~~share-based~~to ~~payment~~be ~~transactions.~~accounted ~~Per~~for ~~ASU~~as ~~2016-09:~~an acquisition (1or disposal) ~~all~~of ~~excess~~either ~~tax~~a ~~benefits~~business ~~and~~or ~~tax~~an ~~deficiencies~~asset. ~~should~~This bestandard ~~recognized~~is asapplied ~~income~~on ~~tax~~a ~~expense~~prospective orbasis. Early ~~benefit~~adoption inis ~~the~~permitted ~~income~~for ~~statement,~~transactions ~~rather~~occurring ~~than~~subsequent into ~~additional~~the ~~paid~~issuance of ASU 2017-in01 ~~capital~~and ~~under~~not ~~current~~reported ~~guidance;~~in ~~(2)~~the ~~excess~~financial ~~tax~~statements. ~~benefits~~The ~~should~~guidance beis ~~classified~~effective ~~along~~for ~~with~~the ~~other~~interim ~~income~~and ~~tax~~annual ~~cash~~periods ~~flows~~beginning asafter anDecember ~~operating~~15, ~~activity~~2017, on ~~the~~a ~~statement~~prospective ofbasis, ~~cash~~and ~~flows,~~earlier ~~rather~~adoption ~~than~~is aspermitted afor ~~separate~~transactions ~~cash~~occurring ~~inflow~~subsequent ~~from~~to ~~financing~~the ~~activities~~issuance of ASU 2017-01 and ~~cash~~not ~~outflow~~reported ~~from~~in ~~operating~~the ~~activities~~financial ~~under~~statements. ~~current~~We ~~guidance;~~adopted ~~(3)~~on ~~cash~~January ~~paid~~1, by2018 anand ~~employer~~it ~~when~~did ~~directly~~not ~~withholding~~have a material effect on our financial statements.

~~shares~~In ~~for~~May ~~tax-withholding~~2014, ~~purposes should be classified as a financing activity; and (4) an entity can make an entity-wide accounting policy election to either estimate~~ the ~~number~~FASB ofissued ~~awards that are expected to vest~~ASU 2014-09, asRevenue ~~under~~from ~~current~~Contracts ~~guidance,~~with orCustomers ~~account~~(Topic ~~for~~606). ~~forfeitures~~La ~~when~~Quinta ~~they~~implemented ~~occur.~~ ASU ~~2016~~2014-09 ~~is effective for annual periods~~, Revenue ~~and~~from ~~interim~~Contracts ~~periods~~with ~~within~~Customers (“ASC ~~those~~606”) ~~annual periods, beginning after December 15, 2016. We adopted this standard~~ on January 1, ~~2017. We~~2018 ~~prospectively~~using ~~applied~~ the ~~guidance~~modified ~~dictating~~retrospective ~~excess~~method ~~tax~~for ~~benefits~~open ~~be recognized on the income statement~~contracts. We ~~retrospectively~~In ~~applied~~accordance ~~the~~with ~~guidance~~this ~~dictating the presentation of excess tax benefits as an operating cash flow. For the nine months ended September 30, 2016, the~~ adoption ofmethod ~~this standard resulted in~~ the ~~excess~~prior ~~tax~~period ~~benefit~~results ~~presented~~will innot ~~operating~~be ~~and~~recast ~~financing~~to ~~activities~~reflect in the ~~consolidated~~new ~~cash~~standard. ~~flow~~We ~~statements~~recorded ~~being~~a ~~eliminated~~net ~~from~~reduction ~~the~~to ~~presentation.~~opening ~~The~~retained ~~adoption~~earnings of ~~this~~approximately ~~standard did not have a material impact on our financial statements~~$14.9 ~~In addition~~million, wenet ~~retrospectively~~of ~~applied the guidance dictating cash paid by an employer when directly withholding shares for~~ tax~~-withholding~~, ~~purposes are classified~~ as aof ~~financing~~January ~~activity~~1, ~~which~~2018 isdue ~~consistent~~to ~~with~~ the ~~Company’s~~cumulative ~~historical presentation, and therefore had no~~ impact toof ~~the~~adopting ~~Company. Finally,~~ASC ~~we elected to account for forfeitures when they occur~~606.

Our operating results are impacted by ASC 606 in the following areas:

Revenue related to our La Quinta Returns loyalty program will be recognized upon point redemption as opposed to when points are issued. Also, as a sponsor of the loyalty program, any points issued for stays at owned hotels will be accounted for as a reduction in revenue from owned hotels as opposed to expense; and the portion of the service obligation expected to be fulfilled at owned hotels will be considered deferred revenue.

Application, initial and transfer fees charged when new franchised hotels enter our system or there is a change of ownership will be recognized over the term of the franchise contract, rather than primarily upon execution of the contract;

Certain customer acquisition costs in the form of commission expense will be deferred and recognized as part of general and administrative expense over the period of expected benefit; and

Certain customer acquisition costs in the form of key money incentives will continue to be recognized as a reduction in revenue. However, the term of amortization will change to the period of expected benefit, as opposed to the specific contractual term.

The net impact to revenues for the quarter ended March 31, 2018 as a result of applying ASC 606 was approximately $0.5 million. The impact to expenses for the quarter ended March 31, 2018 was immaterial.

Contract balances:

With the transition to ASC 606, we recorded an increase to retained earnings of $4.6 million, net of tax, related to net contract acquisition costs related to commission expenses paid to employees. We established an asset of $7.1 million with accumulated amortization of $1.0 million through January 1, 2018. We also recorded a deferred liability tax $1.5 million as a result of this transition. As of March 31, 2018, the asset and accumulated amortization balances were $7.1 million and $1.0 million, respectively, and included within other non-current assets in the accompanying balance sheet.

Additionally, we recorded an increase to retained earnings of $0.5 million, net of tax, related to the amortization of customer acquisition costs in the form of key money incentives. The value, net of accumulated amortization, increased from $4.5 million to $5.2 million as of January 1, 2018. As of March 31, 2018, this balance was $5.1 million and was included within other non-current assets in the accompanying balance sheet.

Balances related to remaining performance obligations:

With the transition to ASC 606, we recorded a decrease to retained earnings of $8.3 million, net of tax, related to our loyalty program. At the time of transition, we established deferred revenue of $29.9 million as of January 1, 2018 related to our loyalty program, of which $10.3 million was considered accrued expense and other liabilities and $19.6 million was considered other long-term liabilities. Of this amount, $18.9 million was considered a points liability under previous accounting policies, with $6.5 million included in accrued expenses and other liabilities and $12.4 million included in other long-term liabilities. As a result, the transition impact was $11.0 million offset by a deferred tax asset of $2.7 million for a net of $8.3 million. As of March 31, 2018, the deferred revenue associated with our loyalty program was $29.6 million, of which $10.1 million was included in accrued expense and other liabilities and $19.5 million was included within other long-term liabilities in the accompanying balance sheet.

Additionally, we recorded a decrease in retained earnings related to initial and transfer fees of $11.7 million, net of tax. As of January 1, 2018, we established deferred revenue related to initial and transfer fees of $16.5 million. Of this amount, $0.9 million was considered deferred revenue under our prior accounting policies. As a result, the transition impact was $15.6 million offset by a deferred tax asset of $3.9 million for a net impact of $11.7 million. As of March 31, 2018, the deferred revenue associated with these fees was $16.4 million and was included in other long-term liabilities.

From time to time, new accounting standards are issued by FASB or other standards setting bodies, which we adopt as of the specified effective date. Unless otherwise discussed, we believe the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

NOTE 3. ASSETS HELD FOR SALE

As of December 31, ~~2016~~2017, ~~five~~three hotels ~~and a restaurant parcel~~ were classified as assets held for sale. The sale of these assets does not represent a major strategic shift and does not qualify for discontinued operations reporting. During the first quarter of ~~2017~~2018, ~~three~~one of these hotels ~~were~~was sold for $224.04 million, net of transaction costs., ~~During~~resulting ~~the~~in ~~third~~a ~~quarter~~gain of ~~2017, we sold one hotel for~~ $50.85 million~~, net of transaction costs~~. The remaining ~~hotel~~two ishotels are expected to be sold before the end of ~~2017~~2018.

~~Additionally,~~As ~~during the first quarter~~ of ~~2017~~March 31, ~~one~~2018 ~~hotel~~and inDecember ~~Waco~~31, ~~Texas~~2017, ~~met~~ the ~~criteria~~carrying toamounts ~~be classified as an asset held for sale. The transfer~~ of ~~title for this property occurred subsequent to~~ the ~~end~~major ofclasses ~~the third quarter~~ of ~~2017. During the second quarter of 2017, we did not sell any hotels or transfer any hotels into~~ assets held for sale. ~~During~~were ~~the third quarter of 2017, one hotel in Morrisville, North Carolina met the criteria to be classified~~ as ~~an asset held for sale. This property is expected to be sold before the end of 2017.~~follows:

As of September 30, 2017 and December 31, 2016, the carrying amounts of the major classes of assets held for sale were as follows:


	March 31, 2018		December 31, 2017
	(in thousands)
Current assets	$	5	$	33
Property and equipment, net		4,747		8,611
Other non-current assets		35		62
Total assets held for sale	$	4,787	$	8,706

	September 30, 2017		December 31, 2016
	(in thousands)
Current assets	$	48	$	64
Property and equipment, net of accumulated depreciation		8,264		29,383
Other non-current assets		72		97
Total assets held for sale	$	8,384	$	29,544

NOTE 4. PROPERTY AND EQUIPMENT

The following is a summary of property and equipment as of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017:

	September 30, 2017			December 31, 2016
	March 31, 2018			December 31, 2017
	(in thousands)
Land	$	~~739~~738,~~990~~474		$	~~740~~738,~~996~~760
Buildings and improvements		2,~~682~~744,~~165~~041			2,~~621~~713,~~924~~860
Furniture, fixtures, equipment and other		~~462~~483,~~885~~211			~~429~~474,~~307~~776
Total property and equipment		3,~~885~~965,~~040~~726			3,~~792~~927,~~227~~396
Less accumulated depreciation		(1,~~491~~536,~~542~~360	)		(1,~~397~~497,~~514~~718	)
Property and equipment, net		2,~~393~~429,~~498~~366			2,~~394~~429,~~713~~678
Construction in progress		~~100~~82,~~904~~417			6276,~~067~~845
Total property and equipment, net of accumulated depreciation	$	2,~~494~~511,~~402~~783		$	2,~~456~~506,~~780~~523

Depreciation and amortization expense related to property and equipment was $3739.97 million and $36.0 million for the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, respectively. ~~Depreciation~~Construction ~~and~~in ~~amortization~~progress ~~expense~~includes ~~related~~capitalized tocosts ~~property~~for ~~and~~ongoing ~~equipment~~projects ~~was~~that have not yet been put into service.

$110.3 million and $110.9 million for the nine months ended September 30, 2017 and 2016, respectively. Construction in progress includes capitalized costs for ongoing projects that have not yet been put into service.

During the third quarter of 2017, two major hurricanes made landfall impacting areas serviced by our hotels. In August 2017, Hurricane Harvey lingered over Texas and parts of Louisiana causing widespread flooding and associated damage. In September 2017, Hurricane Irma made its way up Florida’s west coast causing widespread wind damage, flooding and power outages. Many franchised and owned hotels in affected areas were impacted by the storms, including property damage, damage to infrastructure surrounding the hotels and business interruption. As it relates to our franchise hotels, we anticipate the primary impact will be on the fees we collect from our franchisees, as these fees are typically revenue based. As it relates to our owned hotels, we anticipate that the storms will impact our owned hotel revenues, expenses and gains and losses, as we are the owner/operator of these hotels. Hurricanes Harvey and Irma had a meaningful impact on our business in the third quarter. Due to the damage caused by the hurricanes, as of November 1, 2017 we have eight owned hotels closed and over 3,000 rooms out of service. We are working to reopen the hotels and to restore the out-of-order rooms to service as quickly as possible, but currently estimate that a portion of the rooms and several hotels could be closed for more than 90 days. We are early in the evaluation process of assessing the impact of these natural disasters to our owned portfolio and are currently working with our insurance providers, claims adjusters and construction staff. In the third quarter of 2017, we have recorded estimated net losses of $2.3 million in other lodging and operating expense related to the property damage rendered by these storms.

NOTE 5. LONG-TERM DEBT

Long-term debt as of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017 was as follows:

	September 30, 2017		December 31, 2016
	March 31, 2018		December 31, 2017
	(in thousands)
Current portion of long-term debt	$	17,514	$	17,514
Long-term debt		1,~~673~~667,~~429~~476		1,~~682~~670,~~436~~447
Total long-term debt (1)	$	1,~~690~~684,~~943~~990	$	1,~~699~~687,~~950~~961

(1) As of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, the 30 day United States dollar London Interbank Offering Rate (“LIBOR”) was 1.2388% and 01.7256%, respectively. As of ~~September~~March 3031, ~~2017~~2018, the interest rate, maturity date and principal payments on the Term Facility (as defined below) were as follows:

• During the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018, we made a quarterly scheduled principal ~~payments~~payment of $134.14 million.

• The interest rate for the Term Facility through July 31, 2015 was LIBOR with a floor of 1.0% plus a spread of 3.0%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and as a result the rate decreased to LIBOR with a floor of 1.0% plus a spread of 2.75% for the period from August 1, 2015 to September 30, 2017. ~~Included~~As ~~in the Term Facility as~~ of ~~September~~March 306, ~~2017 and December 31~~2018, ~~2016~~our isfirst anlien ~~unamortized~~net ~~original~~leverage ~~issue~~ratio ~~discount~~was ofgreater ~~$5.6~~than ~~million and $6~~4.750 ~~million,~~to ~~respectively~~1. ~~Included in the Term Facility~~00, and as ofa ~~September 30~~result, ~~2017~~the ~~and~~rate ~~December~~increased ~~31,~~to ~~2016,~~LIBOR iswith ~~the~~a ~~deduction~~floor of ~~debt~~1.0% ~~issuance~~plus ~~costs~~a spread of ~~$15~~3.40% ~~million~~for ~~and~~the ~~$18.5~~period ~~million,~~from ~~respectively.~~March ~~As of September 30~~6, ~~2017~~2018 ~~and~~to ~~December~~March 31, ~~2016, we had $16~~2018.9 ~~million~~Included ~~and~~in ~~$16.2~~the ~~million,~~Term ~~respectively,~~Facility inas ~~accrued~~of ~~interest~~March ~~included~~31, ~~within~~2018 ~~accrued expenses~~ and ~~other~~December ~~liabilities~~31, in2017 ~~the~~is ~~accompanying~~an ~~condensed consolidated balance sheets.~~unamortized

original issue discount of $4.9 million and $5.3 million, respectively. Included in the Term Facility, as of March 31, 2018 and December 31, 2017, is the deduction of debt issuance costs of $13.4 million and $14.4 million, respectively. As of March 31, 2018 and December 31, 2017, we had $16.8 million and $16.2 million, respectively, in accrued interest included within accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

Term Facility

On April 14, 2014, Holdings’ wholly owned subsidiary, La Quinta Intermediate Holdings L.L.C. (the “Borrower”), entered into a new credit agreement (the “Agreement”) with JPMorgan Chase Bank, N.A. (“JPM”), as administrative agent, collateral agent, swingline lender and L/C issuer, J.P. Morgan Securities LLC, Morgan Stanley Senior Funding, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, and Wells Fargo Securities, LLC, as joint lead arrangers and joint book runners, and the other agents and lenders from time to time party thereto.

The Agreement provides for senior secured credit facilities (collectively the “Senior Facilities”) consisting of:

•

$2.1 billion senior secured term loan facility (the “Term Facility”), which will mature in 2021; and

•

$250 million senior secured revolving credit facility (the “Revolving Facility”), $50 million of which is available in the form of letters of credit, which will mature in 2019.

16Interest Rate and Fees—Borrowings under the Term Facility bear interest, at the Borrower’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the JPM prime lending rate, (2) the Federal Funds Effective Rate plus 1/2 of 1.00% and (3) the adjusted LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the Term Facility is 2.00%, in the case of base rate loans, and 3.00%, in the case of LIBOR rate loans, subject to one step-down of 0.25% upon the achievement of a consolidated first lien net leverage ratio (as defined in the Agreement) of less than or equal to 4.50 to 1.00, subject to a base rate floor of 2.00% and a LIBOR floor of 1.00%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and, as a result we realized the step-down of 0.25% after that date. As of March 6, 2018, our consolidated first lien net leverage ratio was greater than 4.50, and as a result we realized a step-up of 0.25% as of that date.

~~Interest Rate and Fees—~~Borrowings under the ~~Term~~Revolving Facility bear interest, at the Borrower’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the JPM prime lending rate, (2) the Federal Funds Effective Rate plus 1/2 of 1.00% and (3) the adjusted LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the ~~Term~~Revolving Facility is 21.0050%, in the case of base rate loans, and 32.0050%, in the case of LIBOR rate loans, subject to ~~one~~three step-~~down~~downs of 0.25% each upon the achievement of a consolidated first lien net leverage ratio ~~(as defined in the Agreement)~~ of less than or equal to 5.00 to 1.00, 4.50 to 1.00, ~~subject~~and 4.00 to 1.00, respectively. As of March 2, 2015, we achieved a ~~base~~consolidated ~~rate~~first ~~floor~~lien net leverage ratio of 2less than 5.00% to 1.00, and aafter ~~LIBOR~~March 2, ~~floor~~2015 we realized the first step-down in margin of 10.0025%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and, as a result we realized the second step-down of 0.25% after that date. As of March 6, 2018, our consolidated first lien net leverage ratio was greater than 4.50, and as a result we realized a step-up in margin of 0.25% as of that date.

Borrowings under the Revolving Facility bear interest, at the Borrower’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the JPM prime lending rate, (2) the Federal Funds Effective Rate plus 1/2 of 1.00% and (3) the adjusted LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the Revolving Facility is 1.50%, in the case of base rate loans, and 2.50%, in the case of LIBOR rate loans, subject to three step-downs of 0.25% each upon the achievement of a consolidated first lien net leverage ratio of less than or equal to 5.00 to 1.00, 4.50 to 1.00 and 4.00 to 1.00, respectively. As of March 2, 2015, we achieved a consolidated first lien net leverage ratio of less than 5.00 to 1.00, and after March 2, 2015 we realized the first step-down in margin of 0.25%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and, as a result we realized the second step-down of 0.25% after that date.

In addition, the Borrower is required to pay a commitment fee to the lenders under the Revolving Facility in respect of the unutilized commitments thereunder. The commitment fee rate is 0.50% per annum subject to a step-down to 0.375%, upon achievement of a consolidated first lien net leverage ratio less than or equal to 5.00 to 1.00. As of March 2, 2015, we achieved a consolidated first lien net leverage ratio of less than 5.00 to 1.00, and after March 2, 2015, the commitment fee rate is 0.375%. The Borrower is also required to pay customary letter of credit fees.

Amortization—Beginning September 2014, the Borrower is required to repay installments on the Term Facility in quarterly installments equal to 0.25% of the original principal amount less any voluntary prepayments on the Term Facility, with the remaining amount payable on the applicable maturity date with respect to the Term Facility.

The Senior Facilities contain certain representations and warranties, affirmative and negative covenants and events of default. If an event of default occurs, the lenders under the Senior Facilities will be entitled to take various actions, including the acceleration of amounts due under the Senior Facilities and actions permitted to be taken by a secured creditor. As of ~~September~~March 3031, ~~2017~~2018, we were in compliance with all applicable covenants under the Senior Facilities.

Letters of Credit

As of ~~September~~both March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, we had $14.94 million ~~and $14.6 million~~, ~~respectively,~~ in letters of credit obtained through our Revolving Facility. In 2014, we were required to pay a fee of 2.63% per annum related to these letters of credit. As of March 2, 2015, we achieved a consolidated first lien net leverage ratio of less than 5.00 to 1.00, and after March 2, 2015 we realized the first step-down in rate of 0.25%, resulting in a reduction of the per annum fee to 2.38%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and, as a result we realized the step-down of 0.25% after that date, for a margin of 2.13%. As of March 6, 2018, our consolidated first lien net leverage ratio increased to greater than 4.50 to 1.00, and as a result we realized a step-up of 0.25% after that date for a margin of 2.38%.

Interest Expense, Net

Net interest expense, including the impact of our interest rate swap (see Note 6), consisted of the following for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Description

~~2017~~2018

~~2016~~2017

~~2017~~

~~2016~~

(in thousands)

Term Facility

1920,~~618~~328

1918,~~153~~739

~~57,437~~

~~57,171~~

Amortization of deferred financing costs

1,~~015~~030

~~985~~999

~~3,021~~

~~2,933~~

Amortization of original issue discount

~~372~~377

~~361~~367

~~1,108~~

~~1,076~~

Other interest

Interest income

(~~316~~287

)

(74128

)

~~(655~~

)

~~(171~~

)

Total interest expense, net

2021,~~696~~456

2019,~~427~~980

~~60,929~~

~~61,019~~

NOTE 6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

During the three ~~and nine~~ months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, derivatives were used to hedge the interest rate risk associated with our variable-rate debt.

Term Facility Interest Rate Swap

On April 14, 2014, the Borrower entered into an interest rate swap agreement with an aggregate notional amount of $850.0 million that expires on April 14, 2019. This agreement swaps the LIBOR rate in effect under the new credit agreement for this portion of the loan to a fixed-rate of 2.0311%, which includes a 1.00% LIBOR floor. Management has elected to designate this interest rate swap as a cash flow hedge for accounting purposes.

Fair Value of Derivative Instruments

The effects of our derivative instruments on our condensed consolidated balance sheets were as follows:

September 30, 2017

December 31, 2016

March 31, 2018

December 31, 2017

Balance Sheet Classification

Fair Value

Balance Sheet Classification

Fair Value

(in thousands)

Cash Flow Hedges:

Interest rate swap

Other ~~long~~non- ~~term~~current ~~liabilities~~assets

42,~~935~~922

Other long- term liabilities

91,~~803~~169

Earnings Effect of Derivative Instruments

The effects of our derivative instruments on our condensed consolidated statements of operations and condensed consolidated statements of comprehensive income (loss), net of the effect for income taxes, were as follows:

Classification of Gain

For the Three Months Ended ~~September~~March 3031,

~~For the Nine Months Ended September 30,~~

(Loss) Recognized

~~2017~~2018

~~2016~~2017

~~2017~~

~~2016~~

(in thousands)

Cash Flow Hedges:

Interest rate swap (1)

Other comprehensive gain ~~(loss)~~

13,~~351~~068

1,~~821~~778

~~3,164~~

~~(3,958~~

)

(1) There were no amounts recognized in earnings related to hedge ineffectiveness or amounts excluded from hedge effectiveness testing during the three ~~and nine~~ months ended ~~September 30~~March 31, ~~2017~~2018 and ~~2016~~2017, respectively.

NOTE 7. FAIR VALUE MEASUREMENTS

The carrying amount and estimated fair values of our financial assets and liabilities, which include related current portions, were as follows:

September 30, 2017

December 31, 2016

March 31, 2018

December 31, 2017

Carrying Amount

Fair Value

Carrying Amount

Fair Value

(in thousands)

Cash and cash equivalents (1)

~~180~~113,~~037~~486

~~160~~140,~~596~~849

Interest rate swaps (2)

42,~~935~~922

91,~~803~~169

Long-term debt (3)(4)

1,~~690~~684,~~943~~990

1,~~710~~692,~~598~~758

1,~~699~~687,~~950~~961

1,~~716~~705,~~815~~592

⁽¹⁾	Classified as Level 1 under the fair value hierarchy.

⁽²⁾	Classified as Level 2 under the fair value hierarchy.

⁽³⁾	Classified as Level 3 under the fair value hierarchy.

18(4) Carrying amount includes deferred debt issuance costs of $13.4 million and $14.4 million as of March 31, 2018 and December 31, 2017, respectively.

~~(4) Carrying~~We ~~amount~~believe ~~includes~~the ~~deferred~~carrying ~~debt~~amounts ~~issuance costs~~ of ~~$15.4~~our ~~million~~cash and ~~$18.5~~cash ~~million~~equivalents approximated fair value as of ~~September 30~~March 31, ~~2017~~2018 and December 31, ~~2016~~2017, ~~respectively~~as applicable. Our estimates of the fair values were determined using available market information and valuation methods appropriate in the circumstances. Considerable judgment is necessary to interpret market data and develop estimated fair values. Proper placement of fair value measurements within the valuation hierarchy is considered each reporting period. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

We believe the carrying amounts of our cash and cash equivalents approximated fair value as of September 30, 2017 and December 31, 2016, as applicable. Our estimates of the fair values were determined using available market information and valuation methods appropriate in the circumstances. Considerable judgment is necessary to interpret market data and develop estimated fair values. Proper placement of fair value measurements within the valuation hierarchy is considered each reporting period. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

The fair values of interest rate swaps are determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each instrument. This analysis reflects the contractual terms of the agreements, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

We estimate the fair value of our long-term debt using discounted cash flow analysis based on current market inputs for similar types of arrangements. The primary sensitivity in these calculations is based on the selection of appropriate discount rates. We estimated the discount rates to be approximately 34.89% and 34.72%, as of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, respectively. Fluctuations in these assumptions will result in different estimates of fair value.

We test long-lived assets for impairment if events or changes in circumstances indicate that the asset might be impaired. The following fair value hierarchy table presents information about assets measured at fair value on a nonrecurring basis and related impairment charges during the periods ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017:

September 30, 2017	Level 1		Level 2		Level 3		Total Fair Value		Impairment Charge
March 31, 2018	Level 1		Level 2		Level 3		Total Fair Value
	(in thousands)
Owned hotels identified for possible sale	$	—	$	—	$	227,816	$	227,816	$	—
Assets held for sale(1)	$	—	$	—	$	4,787	$	4,787
Assets held for sale(1)		—		—		8,384		8,384		—
	$	—	$	—	$	4,787	$	4,787
1 owned hotel(2)		—		—		3,000		3,000		989
	$	—	$	—	$	239,200	$	239,200	$	989

(1)Assets held for sale include three hotels and a restaurant parcel designated as held for sale. As of December 31, 2016 we had five hotels and one restaurant parcel in assets held for sale. During the first nine months of 2017, we sold four of these hotels and added two additional hotels to held for sale. (2)During the third quarter of 2017, we identified a hotel where it became more likely than not that the carrying amount would not be recoverable due to market and economic conditions.

September 30, 2016	Level 1		Level 2		Level 3		Total Fair Value		Impairment Charge
	(in thousands)
Owned hotels identified for possible sale	$	—	$	—	$	227,816	$	227,816	$	94,088
Assets held for sale(1)		—		—		42,939		42,939		5,545
1 owned hotel		—		—		1,150		1,150		985
	$	—	$	—	$	271,905	$	271,905	$	100,618

(1) Assets held for sale include three hotels and a restaurant parcel designated as held for sale in the third quarter of 2015, in addition to the five owned hotels the Company entered into agreements to sell during the third quarter of 2016. The impairment charge for assets held for sale is related to updating the fair value to be net of estimated transaction cost.

⁽¹⁾Assets held for sale include two hotels designated as held for sale. As of December 31, 2017 we had three hotels in assets held for sale and during the first quarter of 2018, we sold one hotel.

March 31, 2017	Level 1		Level 2		Level 3		Total Fair Value
	(in thousands)
Assets held for sale⁽¹⁾	$	—	$	—	$	9,048	$	9,048
Owned hotels identified for possible sale ⁽²⁾		—		—		227,816		227,816
	$	—	$	—	$	236,864	$	236,864

⁽¹⁾	Assets held for sale include three hotels and a restaurant parcel designated as held for sale. During the first quarter of 2017 we added one additional hotel to held for sale.

⁽²⁾

During the first quarter of 2016, we identified approximately 50 hotels where it became more likely than not that the holding period will be significantly shorter than the previously estimated useful lives. These assets did not meet the classification as assets held for sale and the fair value estimate is considered to be Level 3 within the fair value measurement hierarchy. As of March 31, 2018, of the approximately 50 hotels identified for possible sale in the first quarter of 2016, we have sold five and one hotel is classified as an asset held for sale.

Additional hotel sales

In the third quarter of 2017, we entered into an agreement to sell one of our owned hotels, located in Morrisville, North Carolina~~, for $4~~.3 ~~million, net of transaction costs.~~ We classified this hotel as held for sale during the third quarter of 2017, and ~~expect~~it ~~this~~was ~~transaction~~sold ~~to close~~ in the ~~fourth~~first quarter of ~~2017~~2018 for approximately $4.4 million, net of transaction costs, resulting in a gain of $0.5 million.

In the first quarter of 2017, the state of Texas filed an eminent domain lawsuit (The State of Texas v. BRE/LQ TX Properties, L.P., Case No. 0015-01-234, Parcel No. 117) to acquire a portion of land from one of our hotels in Waco, Texas that will result in the hotel’s demolition. We classified this hotel as held for sale during the first quarter and the transfer of title occurred subsequent to the end of the third quarter.

During the third quarter of 2016, we entered into agreements to sell two of our owned hotels, both located in the Houston, Texas area. One of the two hotels was sold in the third quarter for $7.7 million, resulting in a gain on sale of $2.0 million. The remaining hotel met the criteria for assets held for sale as of September 30, 2016, with a fair value of $3.6 million. This hotel was sold during the fourth quarter of 2016 for $5.9 million, net of transaction costs. The inputs used in determining the fair value of these assets are based on estimated selling price, less transaction costs.

In June 2016, we began negotiations to sell two of our owned hotels, located in Elmsford, New York and Wayne, New Jersey. As such, it became more likely than not that the holding period for these hotels will be significantly shorter than the previously estimated useful lives. During the second quarter of 2016, we recorded an impairment charge of $13.7 million to adjust the carrying value of these hotels to their estimated fair value. These hotels did not meet the criteria for classification as assets held for sale as of June 30, 2016. During the third quarter of 2016, we entered into agreements to sell these two hotels for $18.4 million, net of transaction costs. We recorded an additional impairment charge of $0.5 million to adjust the carrying value of these hotels to their estimated fair value including a reduction for transaction costs. The fair value estimate is considered to be Level 3 within the fair value measurement hierarchy. During the third quarter of 2016, these hotels met the criteria for classification as assets held for sale. The inputs used in determining the fair value of these assets are based on estimated selling price, less transaction costs. These hotels were sold during the first quarter of 2017 for approximately $17.9 million, net of transaction costs.

During the first quarter of 2016, we entered into an agreement to sell one of our owned hotels located in Orlando, Florida for approximately $8.0 million, net of estimated transaction costs. We recorded an impairment charge of $3.0 million to adjust the carrying value of this hotel to its estimated fair value. During the first quarter of 2016, this hotel met the criteria for classification within assets held for sale and was sold in the second quarter of 2016 for approximately $8.4 million, resulting in a gain on sale of $0.3 million.

Approximately 50 owned hotels identified as candidates for sale in 2016

In the first quarter of 2016, we identified approximately 50 hotels where it became more likely than not that the holding period will be significantly shorter than the previously estimated useful lives. We recorded an impairment charge of $80.3 million in the first quarter of 2016, to adjust the carrying value of these assets to the lesser of their estimated fair value or carrying value. These assets did not meet the criteria for classification as assets held for sale as of the date of impairment. The fair value estimate is considered to be Level 3 within the fair value measurement hierarchy. The inputs used in determining the fair value of these approximately 50 hotels are based on multiples of room revenues ranging from 3.70 to 1.50 for the identified assets.

During the second quarter of 2016, we entered into agreements to sell four of the approximately 50 hotels identified in the first quarter of 2016. One of the four hotels was sold in the second quarter for $4.6 million, resulting in a gain on sale of $0.4 million. The remaining three hotels met the criteria for assets held for sale as of June 30, 2016. We recorded an additional impairment charge of $0.6 million to adjust the carrying value of these three owned hotels to their estimated fair value including a reduction for transaction costs, with a resulting fair value of approximately $10.4 million. The fair value estimate is considered to be Level 3 within the fair value measurement hierarchy. The inputs used in determining the fair value of these assets are based on estimated selling price, less transaction costs. During the third quarter of 2016, we sold two of the three hotels identified as assets held for sale for approximately $7.3 million.

Additionally, during the third quarter of 2016, we entered into agreements to sell two of the approximately 50 hotels identified in the first quarter of 2016. We recorded an additional impairment charge of $0.4 million to adjust the carrying value of these two owned hotels to their estimated fair value including a reduction for transaction costs, with a resulting fair value of approximately $8.6 million. The fair value estimate is considered to be Level 3 within the fair value measurement hierarchy. The inputs used in determining the fair value of these assets are based on estimated selling price, less transaction costs.

During the first quarter of 2017, we sold one of these hotels for $4.1 million, net of transaction costs. During the third quarter of 2017, we sold one of these hotels for $5.8 million, net of transaction costs. As of September 30, 2017, of the approximately 50 hotels identified as candidates for sale in the first quarter of 2016, we have sold five hotels and one hotel is classified as an asset held for sale.

24 owned hotels identified for sale in 2015

During 2015, we identified a portfolio of 24 hotels where it became more likely than not the hotels would be sold significantly before the end of the previously estimated useful life. We recorded an impairment charge of $42.5 million to adjust the carrying value of these assets to their estimated fair value. The inputs used in determining the fair value for these 24 hotels were based on estimated selling prices ranging from $70.0 million to $75.0 million. During the third quarter of 2015, these assets met the criteria for classification as assets held for sale. In 2015, 11 of these hotels were sold for $34.1 million, net of transaction costs. During the second quarter of 2016, three of these hotels were sold for $9.1 million, net of transaction costs. During the third quarter of 2016, seven of these hotels were sold for $17.4 million, net of transaction costs. The remaining three hotels were sold during the fourth quarter of 2016 for $8.0 million, net of transaction costs.

Additional Impairment

Additionally, during the third quarter of 2017, we identified a hotel where it became more likely than not that the carrying amount would not be recoverable due to a change in market and economic conditions. We recorded an impairment charge of $1.0 million to adjust the carrying value of this hotel to its estimated fair value. The fair value estimate is considered Level 3 within the fair value measurement hierarchy. The inputs used in determining the fair value are based on a combination of historical cash flows and other available market information, such as recent sales prices for similar assets.

Additionally, during the second quarter of 2016, we identified a hotel where it became more likely than not that the carrying amount would not be recoverable due to a change in market and economic conditions. We recorded an impairment charge of $1.0 million to adjust the carrying value of this hotel to its estimated fair value. The fair value estimate is considered Level 3 within the fair value measurement hierarchy. The inputs used in determining the fair value are based on a combination of historical cash flows and other available market information.

NOTE 8. RELATED PARTY TRANSACTIONS

Prior to the IPO Effective Date, Holdings and predecessor entities were owned and controlled by Blackstone Real Estate Partners IV L.P. and affiliates (“BREP IV”) and Blackstone Real Estate Partners V L.P. and affiliates (“BREP V”). BREP IV and BREP V are affiliates of The Blackstone Group L.P. (collectivity, the “Funds” or “Blackstone”). In connection with the IPO, the Funds and other pre-IPO owners contributed their equity interests in the predecessor entities to Holdings in exchange for an aggregate of 81.06 million shares of common stock of Holdings. Holdings then transferred such equity interests to its wholly-owned subsidiary which pledged these interests as security for borrowings under a new credit agreement.

In November 2014 and in April 2015, Blackstone completed two secondary offerings in which it registered and sold 23.0 million and 23.9 million shares of Holdings common stock, respectively. As of ~~September~~March 3031, ~~2017~~2018, Blackstone beneficially owned 2930.90% of Holdings’ shares of common stock outstanding.

As of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, approximately $8281.06 million and $81.68 million, respectively, of the aggregate principal amount of our Term Facility was owned by affiliates of Blackstone. We make periodic interest and principal payments on such debt in accordance with its terms.

We also purchase products and services from entities affiliated with or owned by Blackstone in the ordinary course of operating our business. The fees paid for these products and services were approximately $0.53 million and $0.96 million during the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016, respectively. The fees paid for these products and services were approximately $2.8 million and $3.1 million during the nine months ended September 30,~~ 2017 ~~and 2016~~, respectively.

NOTE 9. COMMITMENTS AND CONTINGENCIES

Environmental — We are subject to certain requirements and potential liabilities under various federal, state and local environmental laws, ordinances, and regulations. Such requirements often impose liability without regard to whether the current or previous owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Although we have incurred and expect to incur remediation and other environmental costs during the ordinary course of operations, we anticipate that such costs will not have a material effect on our financial condition, results of operations, or cash flows.

21Litigation — Three putative class action lawsuits were filed on March 8, 2018, March 9, 2018 and March 19, 2018, by purported stockholders of the Company in the United States District Court for the Northern District of Texas challenging the Merger. The lawsuits are styled Cunha v. La Quinta Holdings Inc., et al., Rosenblatt v. La Quinta Holdings, Inc., et al. and Bushansky v. La Quinta Holdings, Inc., et al (the “Actions”). All of these complaints allege violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended and Rule 14a-9 promulgated thereunder in connection with the Merger. The Rosenblatt complaint names the Company and its directors as defendants; the Cunha complaint names the Company and its directors as well as Merger Sub and

Litigation — On April 25, 2016, a purported stockholder class action lawsuit, captioned Beisel v. La Quinta Holdings Inc. et al., was filed in the U.S. District Court for the Southern District of New York. On July 22, 2016, the court appointed lead plaintiff (“plaintiff”), and, on December 30, 2016, plaintiff filed the operative complaint on behalf of purchasers of the Company’s common stock from November 19, 2014 through February 24, 2016 (the “Class Period”) and on behalf of a subclass who purchased the Company’s common stock pursuant to the Company’s March 24, 2015 secondary public offering (the “March Secondary Offering”). The complaint alleges, among other things, that, in violation of the federal securities laws, the registration statement and prospectus filed in connection with the March Secondary Offering contained materially false and misleading information or omissions and that the Company as well as certain current and former officers made false and misleading statements in earnings releases and to analysts during the Class Period. Plaintiff seeks unspecified compensatory damages and other relief. On February 10, 2017, Defendants filed a motion to dismiss the Complaint. On August 24, 2017, the motion to dismiss was granted with prejudice. Subsequently, on September 20, 2017, plaintiff filed an appeal with the U.S. Court of Appeals for the Second Circuit. The Company believes that the putative class action lawsuit is without merit and intends to defend the lawsuit vigorously; however, there can be no assurance regarding the ultimate outcome of this lawsuit.

Wyndham Worldwide; and the Bushansky complaint names the Company and its directors as defendants. The complaints allege that the proxy statement filed by the Company is materially incomplete and misleading. The complaints seek, among other relief, either an order enjoining the Merger or rescission if the Merger is consummated. The Bushansky complaint also seeks to enjoin the stockholder vote on the Merger. On April 16, 2018, the parties to the Actions (the “Settling Parties”) entered into the confidential Memorandum of Understanding providing for the settlement of the Actions. The Company believes that the lawsuits are without merit and that no further disclosure is required to supplement the proxy statement disclosed in the Company’s definitive merger proxy statement filed with the SEC on March 20, 2018 (as amended or supplemented from time to time, the “proxy statement”) under applicable laws; however, to eliminate the burden, expense and uncertainties inherent in such litigation, and without admitting any liability or wrongdoing, the Company has agreed, pursuant to the terms of the confidential Memorandum of Understanding, to make certain supplemental disclosures to the proxy statement. Nothing in these supplemental disclosures shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth therein. The defendants have vigorously denied, and continue vigorously to deny, that they have committed any violation of law or engaged in any of the wrongful acts that were alleged in the Actions. The confidential Memorandum of Understanding outlines the terms of the Settling Parties’ agreement in principle to settle and release all claims which were or could have been asserted in the Actions.

On April 25, 2016, a purported stockholder class action lawsuit, captioned Beisel v. La Quinta Holdings Inc. et al., was filed in the U.S. District Court for the Southern District of New York. On July 21, 2016, the court appointed lead plaintiff (“plaintiff”), and, on December 30, 2016, plaintiff filed the operative complaint on behalf of purchasers of the Company’s common stock from November 19, 2014 through February 24, 2016 (the “Class Period”) and on behalf of a subclass who purchased the Company’s common stock pursuant to the Company’s March 24, 2015 secondary public offering (the “March Secondary Offering”). The complaint alleges, among other things, that, in violation of the federal securities laws, the registration statement and prospectus filed in connection with the March Secondary Offering contained materially false and misleading information or omissions and that the Company as well as certain current and former officers made false and misleading statements in earnings releases and to analysts during the Class Period. Plaintiff seeks unspecified compensatory damages and other relief. On February 10, 2017, defendants filed a motion to dismiss the complaint. On August 24, 2017, the motion to dismiss was granted with prejudice. Subsequently, on September 20, 2017, plaintiff filed an appeal with the U.S. Court of Appeals for the Second Circuit. On December 29, 2017, plaintiff submitted its appellant brief. Appellate briefing is scheduled to be completed in May 2018. The Company believes that the putative class action lawsuit is without merit and intends to defend the lawsuit vigorously; however, there can be no assurance regarding the ultimate outcome of this lawsuit.

In addition, we are a party to a number of pending claims and lawsuits arising in the normal course of business, including proceedings involving tort and other general liability claims, workers’ compensation and other employee claims and intellectual property claims. We do not consider our ultimate liability with respect to any such claims or lawsuits, or the aggregate of such claims and lawsuits, to be material in relation to our consolidated financial condition, results of operations or our cash flows taken as a whole.

We maintain general and other liability insurance; however, certain costs of defending lawsuits, such as those below the retention or insurance deductible amount, are not covered by or are only partially covered by insurance policies, and our insurance carriers could refuse to cover certain claims in whole or in part. We regularly evaluate our ultimate liability costs with respect to such claims and lawsuits. We accrue costs from litigation as they become probable and estimable.

Casualty Losses — We maintain insurance for property and casualty damage, subject to deductibles and policy terms and conditions, attributable to wind, flood, and earthquakes. We also maintain business interruption insurance.

Tax Contingencies — We are subject to regular audits by federal and state tax authorities. These audits may result in additional tax liabilities. The Internal Revenue Service (the “IRS”) is currently auditing the tax returns of La Quinta Corporation, one of our former REITs prior to the Pre-IPO Transactions, and BRE/LQ Operating Lessee Inc., one of our former taxable REIT subsidiaries prior to the Pre-IPO Transactions, in each case for the tax years ended December 31, 2010 and 2011. We received a draft notice of proposed adjustment from the IRS on January 9, 2014, and the notice of proposed adjustment was issued to us on June 2, 2014. We submitted a timely response to the notice of proposed adjustment and, on July 7, 2014, we received an IRS 30-Day Letter proposing to impose a 100% tax on the REIT totaling $158 million for the periods under audit in which the IRS has asserted that the rent charged for these periods under the lease of hotel properties from the REIT to the taxable REIT subsidiary exceeded an arm’s length rent. In addition, the IRS proposed to eliminate $89 million of net operating loss carryforwards for the taxable REIT subsidiary for the tax years 2006 through 2009; however, in an IRS rebuttal received on September 26, 2014, the IRS conceded its proposed adjustment on this point was incorrect. We disagree with the IRS’ position with respect to rents charged by the REIT to its taxable REIT subsidiary and have appealed the proposed tax and adjustments to the IRS Appeals Office. In determining amounts payable by our taxable REIT subsidiary under the lease, we engaged a third party to prepare a transfer pricing study contemporaneous with the lease which concluded that the lease terms were consistent with an arm’s length rent as required by relevant provisions of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) and applicable Treasury Regulations. Attorneys and others representing the Company conducted preliminary discussions regarding the appeal with the IRS Appeals Office team on March 31, 2015 and April 1, 2015. In response to a supplemental analysis submitted by the IRS economist to IRS Appeals and provided to us on August 18, 2015, we submitted responses dated September 3, 2015 and October 1, 2015. Our most recent meeting with the IRS Appeals Office team occurred on January 25, 2017. Our discussions with IRS Appeals are ongoing. We believe the IRS transfer pricing methodologies applied in the audits contain flaws and that the IRS proposed tax and adjustments are inconsistent with U.S. transfer pricing principles and the U.S. federal tax laws related to REITs. We have concluded that the positions reported on our tax returns under audit by the IRS are, based on their technical merits, more-likely-than-not to be sustained upon examination. Accordingly, as of September 30, 2017, we have not established any reserves related to this proposed adjustment or any other issues reflected on the returns under examination.

22Our most recent meeting with the IRS Appeals Office team occurred on January 25, 2017. In November 2017, IRS Appeals returned the matter to IRS Examination for further factual development. We believe the IRS transfer pricing methodologies applied in the audits contain flaws and that the IRS proposed tax and adjustments are inconsistent with the U.S. federal tax laws related to REITs. We have concluded that the positions reported on our tax returns under audit by the IRS are, based on their technical merits, more-likely-than-not to be sustained upon examination. Accordingly, as of March 31, 2018, we have not established any reserves related to this proposed adjustment or any other issues reflected on the returns under examination. If, however, we are unsuccessful in challenging the IRS, an excise tax would be imposed on the REIT equal to 100% of the excess rent and we could owe additional income taxes, interest and penalties, which could adversely affect our financial condition, results of operations and cash flow and the price of our common stock. Such adjustments could also give rise to additional state income taxes.

On November 25, 2014, we were notified that the IRS intended to examine the tax returns of the same entities subject to the 2010 and 2011 audit in each case for the tax years ended December 31, 2012 and 2013. We have received several draft notices of proposed adjustment proposing a transfer-pricing related assessment of approximately $18 million for 2013 and adjustments to our net operating losses for the years 2006 through 2009. The IRS has since indicated that it will not pursue the transfer-pricing adjustment. On August 8, 2017, the IRS issued a 30-Day Letter, in which it is proposed to disallow net operating loss carryovers originating in tax years 2006-2011 or, in the alternative, tax years 2006-2009, depending upon the outcome of the 2010-2011 examination discussed above. On September 26, 2017, we furnished a timely protest to the IRS exam team. They have since indicated that they intend to furnish a rebuttal to our protest, at which time the matter will be referred to the IRS Appeals Office. Based on our analysis of the NOL notice, we believe the IRS NOL disallowances applied in the 2012-2013 audit contain the same flaws present in the 2010-2011 audit and that the IRS proposed NOL adjustments are inconsistent with the U.S. federal tax laws related to REITs. We have concluded that the positions reported on our tax returns under audit by the IRS are, based on their technical merits, more-likely-than-not to be sustained upon examination. Accordingly, as of ~~September~~March 3031, ~~2017~~2018, we have not established any reserves related to this proposed adjustment or any other issues reflected on the returns under examination.

On November 1, 2016, the IRS notified the Company that it ~~intends~~intended to audit the tax return of one of its subsidiaries, Lodge Holdco II L.L.C., for the short taxable year ended April 13, 2014. ~~The~~In ~~audit~~March is2018, ~~in progress and no issues have been communicated to~~ the ~~Company~~examination ~~at this point. As Lodge Holdco II L.L.C.~~ was ~~treated~~closed ason a ~~partnership for the taxable year ended April 13, 2014, any tax resulting from this examination would be assessed at the partner level rather than against the Company. Accordingly,~~ “no ~~provision~~change” ~~has been recorded for this examination~~basis.

Purchase Commitments — As of ~~September~~March 3031, ~~2017~~2018, we had approximately $6831.51 million of purchase commitments ~~primarily~~ related to certain continuing redevelopment and renovation projects and information technology enhancements.

Franchise Commitments — Under certain franchise agreements, we are committed to provide certain incentive payments, reimbursements, rebates, and other payments to help defray certain costs. Our obligation to fund these commitments is contingent upon certain conditions set forth in the respective franchise agreement. The franchise agreements generally require that, in the event that the franchise relationship is terminated, the franchisee is required to repay any outstanding balance plus any unamortized portion of any incentive payment. As of ~~September~~March 3031, ~~2017~~2018, we had $2529.16 million in outstanding commitments owed to various franchisees for such financial assistance.

NOTE 10. INCOME TAXES

The Company recorded a provision for federal, state and foreign income tax ~~expense~~benefit of approximately $91.9 million and ~~$24.8 million for the three and nine months ended September 30, 2017, respectively. The Company recorded a provision for federal, state and foreign~~ income tax expense of ~~approximately~~ $192.43 million ~~and income tax benefit of $1.4 million~~ for the three ~~and nine~~ months ended ~~September 30~~March 31, ~~2016~~2018 and 2017, respectively. The provision for the three ~~and nine~~ month periods ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, differs from the statutory federal tax ~~rate~~rates of 21% and 35%, respectively, primarily due to the impact of state income taxes and, ~~for 2017,~~ the impact of certain costs relating to the ~~evaluation~~pending separation of aour ~~potential~~franchise ~~spin-off~~and ~~transaction~~management business from our owned real estate assets that are not deductible for income tax purposes.

NOTE 11. EQUITY-BASED COMPENSATION

We issue time-vesting restricted stock awards (“RSAs”), time-vesting restricted stock units (“RSUs”), and performance-based restricted stock units (“PSUs”).

During the three ~~and nine~~ months ended ~~September~~March 3031, 2018 and 2017, we recognized equity-based compensation expense of $3.~~8 million and $12.~~1 million, ~~respectively, excluding related taxes. During the three~~ and ~~nine months ended September 30, 2016, we recognized compensation expense of~~ $3.79 million ~~and $10.8 million~~, respectively, excluding related taxes. Unrecognized compensation expense as of ~~September~~March 3031, ~~2017~~2018 was $1912.54 million, which is expected to be recognized over a weighted-average period of 1.53 years.

As of ~~September~~March 3031, ~~2017~~2018, there were 10.6 million shares of common stock available for future issuance under our Amended and Restated 2014 Omnibus Incentive Plan, including shares issuable pursuant to the units granted under our restricted stock unit awards.

~~RSAs~~No —equity ~~During~~awards ~~the~~were ~~nine months ended September 30, 2017, we~~ issued ~~0.7~~during ~~million~~the ~~RSAs~~three ~~with~~month aperiod ~~weighted~~ended ~~average~~March ~~grant date fair value of $13.74 per share~~31, ~~which generally vest in equal annual installments over three years from the date of grant~~2018.

RSUs — During the nine months ended September 30, 2017, we issued 50 thousand RSUs with a weighted average grant date fair value of $14.29 per unit, which generally vest in equal annual installments over three years from the date of grant. Vested RSUs are settled for common stock.22

PSUs — During the nine months ended September 30, 2017, we issued PSUs that would result in 0.4 million shares being issued at target value to certain of our employees. The performance period for PSUs is generally three years. The calculation of the value of the units granted during the nine months ended September 30, 2017 is based solely on our total shareholder return (“TSR”) relative to the Relative Shareholder Return. The number of shares of common stock issued in exchange for each PSU at the end of the performance period is determined based on defined target amounts for Relative Shareholder Return. Possible payout multiples range from 33% of

target, which represents the threshold and below which no payout is given, and 200% of target, which represents the maximum payout. Vested PSUs are settled with shares of our common stock.

The weighted average grant date fair value of the PSUs granted during the nine months ended September 30, 2017 was $15.79 per unit, which was determined using a Monte Carlo simulation valuation model with the following assumptions:

Expected volatility (1)	27.96	%
Dividend yield (2)	—	%
Risk-free rate (3)	1.54	%
Expected term (in years) (4)	2.82

(1) Expected volatility is calculated as the average of the long-term historical volatility based on the peer companies and our implied volatility.

(2) At the time of the PSU grant, we had no foreseeable plans to pay dividends during the expected term of these performance shares.

(3) Based on the yields of U.S. Department of Treasury instruments with similar expected lives.

(4) As of the grant date.

NOTE 12. EARNINGS PER SHARE

Basic ~~earnings~~ (loss) earnings per share is computed by dividing net ~~income~~ (loss) income available to common stockholders by the weighted average number of shares of common stock outstanding. Diluted (loss) earnings per share is computed by dividing net ~~income~~ (loss) income available to common stockholders by the weighted average number of shares of the Company’s common stock outstanding plus other potentially dilutive securities. Dilutive securities include equity-based awards issued under long-term incentive plans.

The calculations of basic and diluted ~~earnings~~ (loss) earnings per share are as follows:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	For the Three Months Ended March 31,
	2017			2016		2017		2016
	2018			2017
	(in thousands, except per share data)
Numerator:
Net income (loss) attributable to La Quinta Holdings’ stockholders	$	12,415		$	22,666	$	30,790	$	(1,260	)
Net (loss) income attributable to La Quinta Holdings’ stockholders	$	(15,139	)	$	1,589
Denominator:
Weighted average number of shares outstanding, basic		116,~~090~~324			115,~~795~~936		~~116,004~~		~~118,886~~
Weighted average number of shares outstanding, diluted		116,~~849~~324			~~115~~116,~~955~~368		~~116,560~~		~~118,886~~
Basic earnings (loss) per share	$	0.11		$	0.20	$	0.27	$	(0.01	)
Basic and diluted (loss) earnings per share	$	(0.13	)	$	0.01
Diluted earnings (loss) per share	$	0.11		$	0.20	$	0.26	$	(0.01	)

For the three ~~and nine~~ month periods ended ~~September~~March 3031, 2018 and 2017, approximately 0.21 million shares and 0.47 million shares, respectively, were excluded from the computation of diluted shares, as their impact would have been anti-dilutive. ~~For both the three and nine month periods September 30, 2016, approximately 0.7 million shares were excluded from the computation of diluted shares, as their impact would have been anti-dilutive.~~

During March 2016, the Company’s board of directors authorized a program to repurchase an aggregate of up to $100 million of the Company’s common stock (the “Repurchase Program”). Under the Repurchase Program, these repurchases could be made from time to time in the open market, in privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan, at prices that the Company deemed appropriate and subject to market conditions, applicable law and other factors deemed relevant in the Company's sole discretion. The Repurchase Program did not obligate the Company to repurchase any dollar amount or number of shares of common stock and the program could be suspended or discontinued at any time.

The Repurchase Program was completed in May 2016. The Company repurchased 8.1 million shares of common stock at a weighted-average price of $12.27 per share, for an aggregate purchase price, including commissions, of $100 million. The shares repurchased

through the Repurchase Program represented approximately 6.6% of the Company’s total shares of common stock outstanding as of December 31, 2015. The shares of common stock that were repurchased were placed in treasury stock.

NOTE 13. SEGMENTS

Our operating segments are components of the business which are managed discretely and for which discrete financial information is reviewed regularly by our Chief Executive Officer, who is our chief operating decision maker, to assess performance and make decisions regarding the allocation of resources. Our operating and reportable segments are defined as follows:

•

Owned Hotels—This segment derives its earnings from the operation of owned hotel properties located in the United States.

•

Franchise and management—This segment derives its earnings primarily from revenues earned under various franchise and management agreements relating to our owned and franchise hotels, which provide for us to earn compensation for the licensing of our brand to franchisees, as well as for services rendered, such as hotel management and providing access to certain shared services and marketing programs such as reservations, Returns, and property management systems.

Corporate and other includes revenues generated and operating expenses incurred in connection with the overall support and brand management of our owned, managed, and franchised hotels and operations.

The performance of our operating segments is evaluated primarily based upon Adjusted EBITDA, which should not be considered an alternative to net income (loss) or other measures of financial performance or liquidity derived in accordance with GAAP. We define Adjusted EBITDA as our net income (loss) (exclusive of non-controlling interests) before interest expense, income tax expense (benefit), and depreciation and amortization, further adjusted to exclude certain items, including, but not limited to: gains, losses, and expenses in connection with: (i) asset dispositions; (ii) debt modifications/retirements; (iii) non-cash impairment charges; (iv) discontinued operations; (v) equity-based compensation and (vi) other items.

~~The table below shows summarized consolidated financial information by segment for the three and nine months ended September 30, 2017 and 2016:~~23

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
	(in thousands)
Revenues
Owned Hotels	$	229,142		$	236,426		$	661,748		$	688,345
Franchise and management (1)		33,174			32,101			91,318			89,221
Segment revenues		262,316			268,527			753,066			777,566
Other fee-based revenues from franchise properties		7,967			7,310			21,003			19,276
Corporate and other (2)		34,633			33,824			96,032			95,955
Intersegment elimination (3)		(36,274	)		(37,349	)		(103,750	)		(109,159	)
Total revenues	$	268,642		$	272,312		$	766,351		$	783,638
Adjusted EBITDA
Owned Hotels	$	69,295		$	76,662		$	208,955		$	228,154
Franchise and management		33,174			32,101			91,318			89,221
Segment Adjusted EBITDA		102,469			108,763			300,273			317,375
Corporate and other		(8,645	)		(8,026	)		(33,594	)		(26,930	)
Adjusted EBITDA	$	93,824		$	100,737		$	266,679		$	290,445

The table below shows summarized consolidated financial information by segment for the three months ended March 31, 2018 and 2017:

	For the Three Months Ended March 31,
	2018			2017
	(in thousands)
Revenues
Owned Hotels	$	197,555		$	205,635
Franchise and management ⁽¹⁾		27,180			26,714
Segment revenues		224,735			232,349
Other fee-based revenues from franchise properties		6,397			5,754
Corporate and other ⁽²⁾		28,206			28,783
Intersegment elimination ⁽³⁾		(30,558	)		(32,614	)
Total revenues	$	228,780		$	234,272
Adjusted EBITDA
Owned Hotels	$	49,247		$	58,721
Franchise and management		27,180			26,714
Segment Adjusted EBITDA		76,427			85,435
Corporate and other		(12,415	)		(13,485	)
Adjusted EBITDA	$	64,012		$	71,950

(1)

This segment includes intercompany fees which are charged to our owned hotels to reflect that certain functions, such as licensing and management, are included in the franchise and management segment. We charge a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of gross operating revenue for our owned hotels. These fees are charged to Owned Hotels and are eliminated in the accompanying condensed consolidated financial statements.

(2) Includes revenues related to our brand management programs and other cost reimbursements. The portions of these fees that are charged to our owned hotels totaled $1815.57 million and $1816.87 million for the three month periods ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, respectively,. ~~and~~This ~~$52~~includes a reservation fee of 2.50% ~~million~~of gross room revenues, which is reflected in corporate and ~~$55~~other.3 ~~million~~These ~~for~~fees ~~the~~are ~~nine~~charged ~~month~~to ~~periods~~owned ~~ended~~hotels ~~September~~and ~~30,~~are ~~2017~~eliminated ~~and~~in ~~2016,~~the accompanying condensed consolidated financial statements.

25(3) Includes management, license, franchise, BMF, Returns, reservation fees and other cost reimbursements totaling $30.6 million and $32.6 million for the three month periods ended March 31, 2018 and 2017, respectively. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

~~respectively.~~The ~~This~~table ~~includes~~below provides a ~~reservation~~reconciliation ~~fee~~ of ~~2.0%~~net of(loss) ~~gross~~income ~~room~~attributable ~~revenues,~~to ~~which~~La isQuinta ~~reflected~~Holdings’ instockholders ~~corporate~~to EBITDA and ~~other.~~EBITDA ~~These~~to ~~fees~~Adjusted ~~are~~EBITDA ~~charged~~for tothe ~~owned~~three ~~hotels~~month periods ended March 31, 2018 and ~~are~~2017. ~~eliminated~~Adjusted inEBITDA ~~the~~and ~~accompanying~~EBITDA ~~condensed~~should ~~consolidated~~not be considered an alternative to net (loss) income or other measures of financial ~~statements.~~performance or liquidity derived in accordance with GAAP:

(3) Includes management, license, franchise, BMF, Returns, reservation fees and other cost reimbursements totaling $36.3 million and $37.4 million for the three month periods ended September 30, 2017 and 2016, respectively and $103.8 million and $109.2 million for the nine month periods ended September 30, 2017 and 2016, respectively. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

	For the Three Months Ended March 31,
	2018			2017
	(in thousands)
Net (loss) income attributable to La Quinta Holdings’ stockholders	$	(15,139	)	$	1,589
Interest expense		21,744			20,108
Income tax (benefit) expense		(1,927	)		2,290
Depreciation and amortization		39,893			36,257
Noncontrolling interests		71			89
EBITDA		44,642			60,333
(Gain) loss on sales		(498	)		138
Gain related to casualty disasters		(928	)		(1,928	)
Equity-based compensation		2,365			3,943
Amortization of software service agreements		2,467			2,359
Retention plan ⁽¹⁾		2,484			2,550
Reorganization costs ⁽¹⁾		9,894			2,143
Other losses, net ⁽²⁾		3,586			2,412
Adjusted EBITDA	$	64,012		$	71,950

The table below provides a reconciliation of Adjusted EBITDA to EBITDA and EBITDA to net income (loss) attributable to La Quinta Holdings’ stockholders for the three and nine month periods ended September 30, 2017 and 2016. Adjusted EBITDA and EBITDA should not be considered an alternative to net income (loss) or other measures of financial performance or liquidity derived in accordance with GAAP:24

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
	(in thousands)
Net income (loss) attributable to La Quinta Holdings’ stockholders	$	12,415		$	22,666		$	30,790		$	(1,260	)
Interest expense		21,012			20,501			61,584			61,190
Income tax expense (benefit)		9,862			19,362			24,785			(1,359	)
Depreciation and amortization		38,216			36,224			111,231			111,620
Noncontrolling interests		(7	)		18			119			138
EBITDA		81,498			98,771			228,509			170,329
Impairment loss		989			1,058			989			100,618
Gain on sales		(1,457	)		(2,048	)		(1,319	)		(2,770	)
Loss (gain) related to casualty disasters		1,747			(303	)		(1,234	)		(282	)
Equity-based compensation		3,887			3,701			12,186			10,811
Amortization of software service agreements		2,498			2,272			7,145			6,906
Other losses (gains), net (1)		4,662			(2,714	)		20,403			4,833
Adjusted EBITDA	$	93,824		$	100,737		$	266,679		$	290,445

⁽¹⁾

Included cash and non-cash charges associate with the Spin and Merger.

(12) Other losses ~~(gains)~~, net consists of net loss attributable to the BMF (which, over time, runs at a break-even level, but may reflect a profit or loss from period to period), IRS legal defense costs, ~~costs associated with the planned separation of our real estate business from our franchise~~ and ~~management businesses and~~ litigation reserve adjustments.

The following table presents assets for our reportable segments, reconciled to consolidated amounts as of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017:

	September 30, 2017		December 31, 2016
	March 31, 2018		December 31, 2017
	(in thousands)
Total Assets
Owned Hotels	$	2,~~530~~556,~~754~~234	$	2,~~499~~550,~~770~~064
Franchise and management		~~206~~207,~~214~~476		~~198~~201,~~832~~548
Total segments assets		2,~~736~~763,~~968~~710		2,~~698~~751,~~602~~612
Corporate and other		~~214~~183,~~840~~569		~~193~~201,~~921~~484
Total	$	2,~~951~~947,~~808~~279	$	2,~~892~~953,~~523~~096

26The following table presents capital expenditures for our reportable segments, reconciled to our consolidated amounts for the three months ended March 31, 2018 and 2017:

The following table presents capital expenditures for our reportable segments, reconciled to our consolidated amounts for the nine months ended September 30, 2017 and 2016:

	For the Three Months Ended March 31,
	2018		2017
Capital Expenditures
Owned Hotels	$	37,287	$	41,432
Franchise and management		—		—
Total segment capital expenditures		37,287		41,432
Corporate and other		2,884	$	4,746
Total	$	40,171	$	46,178

	For the Nine Months Ended September 30,
	2017		2016
Capital Expenditures
Owned Hotels	$	140,267	$	76,804
Franchise and management		—		—
Total segment capital expenditures		140,267		76,804
Corporate and other		18,112	$	12,963
Total	$	158,379	$	89,767

************

2725

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2017 (the “~~2016~~2017 Form 10-K”), as filed with the ~~Securities and Exchange Commission (the “~~SEC”), as such risk factors may be updated from time to time in our periodic filings with the SEC. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

Our business

We are a leading owner, operator and franchisor of select-service hotels primarily serving the midscale and upper-midscale segments under the La Quinta brand. All new franchised hotels are La Quinta Inn & Suites in the U.S. and Canada and LQ Hotel in Mexico and in Central and South America. Our system-wide portfolio, as of ~~September~~March 3031, ~~2017~~2018, consisted of ~~894~~907 hotels representing approximately 8788,800 rooms located predominantly across 48 U.S. states, as well as in Canada, Mexico, Honduras, Colombia and ~~Colombia~~Chile, of which ~~318~~316 hotels were owned and operated and ~~576~~591 were franchised. We also have a pipeline of ~~252~~259 franchised hotels in the United States, Mexico, Colombia, Nicaragua, Guatemala, ~~Chile~~ and El Salvador. We primarily derive our revenues from owned hotel operations and fees generated from franchised hotels.

All of our long-lived assets are located in the United States and, during the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018, we derived over 99% of our revenue from within the United States.

Recent Developments

Spin of CorePoint Lodging and Merger Agreement with Wyndham Worldwide

On January 1817, ~~2017~~2018, weLa ~~announced~~Quinta weHoldings ~~are~~Inc. ~~pursuing~~and Wyndham Worldwide entered into a definitive agreement (the ~~possibility~~“Merger ofAgreement”) ~~separating~~under ~~our~~which ~~real~~Wyndham ~~estate~~Worldwide ~~business~~will ~~from~~acquire our hotel franchise and hotel management ~~businesses,~~business ~~which~~for ~~could~~$1.95 ~~prove~~billion in cash. The acquisition is expected to beclose in the ~~most~~second ~~logical~~quarter ~~next~~of ~~step~~2018. asUnder wethe ~~continue~~terms toof ~~execute~~the onagreement, our ~~key~~stockholders ~~strategic~~will ~~initiatives~~receive $16.80 per share in cash (after giving effect to the Reverse Stock Split, as defined below), and ~~create~~Wyndham ~~value~~Worldwide ~~for~~will ~~our~~repay ~~stockholders. This~~approximately ~~separation~~$715 million of our ~~businesses~~net ~~could~~debt ~~enable~~and ~~greater~~set ~~strategic~~aside ~~clarity~~a ~~and~~reserve ~~allow~~of us$240 million for estimated taxes expected to ~~take~~be ~~advantage~~incurred ofin ~~growth~~connection ~~opportunities~~with ~~that~~the ~~naturally~~Spin ~~flow~~(as ~~from~~defined ~~each~~below). In ~~business~~connection ~~model~~with the Merger Agreement, on January 17, 2018, we entered into a Separation Agreement with CorePoint Lodging Inc. ~~This~~(“CorePoint ~~could~~Lodging”), ~~also~~pursuant ~~enable~~to ~~stockholders~~which, on the terms and subject to ~~own~~the conditions set forth in the Separation Agreement, immediately prior to the Merger (as defined below), we will, among other things, (i) effect a reclassification and ~~value~~combination of our common stock whereby each ~~business~~share ~~independently~~of our common stock will be reclassified and combined into one half of a share of our common stock (par value $0.02) (the “Reverse Stock Split”), ~~allowing~~(ii) ~~each~~convey ~~company~~our owned real estate assets and certain related assets and liabilities to ~~attract~~CorePoint Lodging and, (iii) thereafter, distribute (the ~~investor~~“Spin”) ~~base~~to ~~most~~our ~~appropriate~~common ~~for~~stockholders ~~its~~all ~~distinct~~of ~~investment~~the ~~profile. There~~issued isand nooutstanding ~~assurance~~shares ~~that~~of ~~the~~common ~~separation~~stock of ~~our~~CorePoint ~~businesses~~Lodging, which will ~~occur~~become a separate publicly traded company. ~~See~~Immediately ~~“Risk~~following ~~Factors—Risks~~the ~~related~~Spin, in accordance with and subject to ~~pursuing~~the terms of the ~~separation~~Merger Agreement, Merger Sub will merge with and into the Registrant, with the Registrant continuing as the surviving company and as a wholly-owned indirect subsidiary of ~~our~~Wyndham ~~businesses~~Worldwide (the “Merger”), inand our ~~2016~~common ~~Form~~stock ~~10-K~~will be delisted from the New York Stock Exchange.

OnThe ~~July~~boards ~~26,~~of ~~2017,~~directors ~~our~~of ~~subsidiary~~each ~~CorePoint~~of ~~Lodging~~Wyndham Worldwide and La Quinta Holdings Inc. ~~(“CorePoint~~have ~~Lodging”),~~approved ~~filed~~the Merger Agreement. Our stockholders approved the Merger Agreement at a ~~Registration~~special ~~Statement~~meeting of stockholders on ~~Form~~April 1026, ~~(as~~2018. ~~subsequently~~The ~~amended,~~Merger is subject to the ~~“Form~~completion ~~10”)~~of ~~with~~the Reverse Stock Split and the ~~SEC~~Spin ~~with~~and ~~respect~~certain other customary conditions. We may be required to ~~the~~pay ~~separation~~to Wyndham Worldwide a termination fee of ~~our~~$37 ~~real~~million ~~estate~~if ~~business~~the ~~from~~Merger Agreement is terminated under certain circumstances, including because our ~~franchise~~board ~~and~~of ~~management~~directors ~~businesses.~~has made an adverse recommendation change in connection with the special meeting of stockholders.

AsThere ~~disclosed~~is inno ~~the~~assurance ~~Form~~that ~~10,~~ the ~~Company’s~~Spin ~~board~~and/or of directors approved a plan to separate La Quinta into two independent, publicly traded companies by executing a spin-off transaction of our real estate business, which will be included in CorePoint Lodging, which will be taxable at both the ~~corporate~~Merger ~~and shareholder levels. CorePoint Lodging currently expects to elect to qualify as a real estate investment trust in 2018. This spin-off transaction, should it be completed,~~ will be effected through a distribution of all of the outstanding shares of CorePoint Lodging’s common stock to existing La Quinta stockholders as of the applicable record date in proportion to their ownership of La Quinta common stockoccur. See La“Risk ~~Quinta’s~~Factors—Risks ~~franchise~~related ~~and management businesses will continue~~ to ~~operate within~~ the ~~current~~pending LaSpin ~~Quinta Holdings Inc. entity,~~ and ~~will~~Merger” ~~maintain~~in ~~the~~our ~~NYSE~~2017 ~~ticker~~Form ~~symbol LQ~~10-K.

~~Completion~~Financing of the spin-off transaction is subject to a number of conditions, including, among others, declaration by the SEC of the effectiveness of CorePoint Lodging’s Form 10, and other customary conditions. In addition, La Quinta may elect not to complete the proposed spin-off if, at any time prior to the distribution, the board of directors of La Quinta determines, that the spin-off is not then in the best interests of La Quinta or its stockholders, that another form of separation transaction is in the best interests of La Quinta or its stockholders, or that market conditions or other circumstances are such that it is not advisable at that time to separate CorePoint Lodging from La Quinta. Approval by La Quinta’s stockholders is not required for completion of the spin-off transaction, although La Quinta’s stockholders have authorized a reverse stock split of La Quinta’s common stock in connection with the ~~spin-off.~~Spin and Merger

28In connection with the transactions contemplated by the Merger Agreement and the Separation Agreement, including the Merger and Spin, CorePoint Lodging will make a cash payment to La Quinta of approximately $984 million subject to certain adjustments based on the actual amount of net indebtedness of the Company (as of immediately prior to the effective time of the Spin)

and certain accrued but unpaid expenses incurred in connection with the Spin and the Merger, immediately prior to and as a condition of the Spin. The consummation of the Merger is subject to the consummation of the Spin.

On January 17, 2018, CorePoint Lodging received a binding commitment letter (the “Commitment Letter”) from JPMorgan Chase Bank, N.A. (“JPMorgan Chase Bank”) pursuant to which, and subject to the conditions set forth therein, JPMorgan Chase Bank committed to provide a secured mortgage and, in certain circumstances mezzanine credit facility, in an aggregate principal amount of $1.035 billion and a $50 million secured revolving credit facility. The ultimate funding by JPMorgan Chase Bank under the Commitment Letter is subject to certain customary conditions, including, but not limited to, receipt of financial information, delivery of customary documentation relating to CorePoint Lodging and its subsidiaries and consummation of the Spin and the Merger.

Hurricane Harvey and Hurricane Irma

During the third quarter of 2017, two major hurricanes made landfall impacting areas serviced by our hotels. In August 2017, Hurricane Harvey lingered over Texas and parts of Louisiana causing widespread flooding and associated damage. In September 2017, Hurricane Irma made its way up Florida’s west coast causing widespread wind damage, flooding and power outages. Many franchised and owned hotels in affected areas were impacted by the storms, including property damage, damage to infrastructure surrounding the hotels and business interruption. As it relates to our franchised hotels, ~~we anticipate~~ the primary impact ~~will~~was be on the amount of fees we ~~collect~~collected from our franchisees during the periods since, as these fees are typically revenue based. As it relates to our owned hotels, ~~we anticipate that~~ the storms impacted and will continue to impact in the near term, our owned hotel revenues, expenses and gains and losses, as we are the owner/operator of these hotels. Hurricanes Harvey and Irma had a meaningful impact on our business in the third ~~quarter.~~and ~~Due~~fourth toquarters ~~the damage caused by the hurricanes, as~~ of ~~November 1,~~ 2017, ~~we have eight owned hotels closed and over 3,000 rooms out of service. We are working to reopen the hotels and to restore the out-of-order rooms to service~~ as ~~quickly~~well as ~~possible, but currently estimate that a portion of~~ the ~~rooms~~first ~~and several hotels could be closed for more than 90 days. In the third~~ quarter of ~~2017, we have recorded estimated net losses of $2~~2018.~~3 million in other lodging and operating expense related to the property damage rendered by these storms.~~

WeAs ~~are~~of ~~early~~March in31, ~~the~~2018, ~~evaluation~~approximately ~~process~~three percent of ~~assessing~~our ~~the~~owned ~~impact~~rooms remain out of ~~these~~service ~~natural~~due ~~disasters~~to ~~and~~hurricane ~~are~~damage. ~~currently~~We ~~working~~continue to work closely with our insurance ~~providers~~adjusters, claims adjusters and construction staff to bring the affected rooms back online as quickly as possible. ~~Insurance~~Property and business interruption insurance claims will be made as determined through the evaluation process; however, ~~insurance~~the ~~proceeds~~timing ~~may~~and ~~not~~amount beof ~~received~~insurance ~~until~~proceeds ~~next~~are ~~year~~uncertain and may not be sufficient to cover all losses. Capital expenditures will be made in order to restore these hotels to pre-hurricane condition and may be larger than normal due to the scope of the damage. Timing differences are likely to exist between the capital expenditures and insurance proceeds reflected in our financial statements.

Strategic Priorities

Beginning in 2016 and continuing in ~~2017~~2018, the Company ishas been focusing on key strategic priorities designed to (1) Drive consistency in our product, (2) Drive consistency in the delivery of an outstanding guest experience, and (3) Drive engagement with our brand by investing in points of differentiation. Our current strategic initiatives in support of these priorities are centered around (1) a continuous review of our owned hotel portfolio to evaluate the position of each hotel within our brand, (2) identifying, testing, and implementing enhancements to the hotel operating model for our owned hotels, and (3) enhancing the La Quinta Returns loyalty program. Possible outcomes from the review of our owned hotel portfolio include, but are not limited to, improving and/or repositioning a hotel through a significant renovation, determining a hotel is appropriately positioned within its market, or disposing of a hotel and/or removing it from the La Quinta brand and opening the market up to potential new franchise development. This review of our owned hotel portfolio has identified approximately 50 properties that, with the appropriate scope of capital investment and renovation, we believe have the opportunity to re-position within a market, capturing occupancy and additional rate while being measured against new, higher-quality competitive sets.

These significant renovations commenced in the fourth quarter of 2016, with the start and completion dates for these projects being staggered ~~over~~through the ~~next~~end ~~several~~of ~~quarters~~2018. The timing of the renovations has been sequenced with the goal of minimizing displacement, and maximizing readiness for peak demand seasons. As of ~~September~~March 3031, ~~2017~~2018, 18the ~~hotel~~construction ~~renovations~~phase ~~have~~of ~~been~~the ~~substantially~~repositioning effort had been completed. for 39 of these hotels.

If a decision is made to dispose of a hotel or groups of hotels from the La Quinta brand, we expect that our revenue and Adjusted EBITDA from owned hotels will decrease and that decrease may be material. Additionally, a decision to dispose of a hotel or groups of hotels may result in an impairment charge related to the reduced holding period of the hotels.

Segments

•

Owned Hotels—This segment derives its earnings from the operation of owned hotel properties located in the United States.

• Franchise and management—This segment derives its earnings primarily from fees earned under various license and franchise hotel agreements relating to our owned and franchised hotels. These agreements provide for us to earn compensation for the licensing of our brand to franchisees, for providing certain services (including hotel management services) and for providing access to certain shared services and marketing programs such as reservations, La Quinta Returns, and property management systems. We do not currently generate, and did not generate over the periods presented, any revenue from the management of hotel operations for third parties. This segment includes intercompany fees, which are charged to our owned portfolio to reflect that certain functions, such as franchise, licensing and management, are included in the franchise and management segment. Franchise agreements with our owned hotels provide for a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of gross operating revenue for our owned hotels. We set the franchise fee on a basis that reflects the services and rights covered by the franchise agreements and because, as a public company with two segments that may be valued differently by investors, we believe it is meaningful to investors to show a franchise fee on our owned portfolio that is consistent with the franchise fee we charge our franchisees. We set the management fee on a basis that reflects current market rates for select service hotels, and the current composition of our owned portfolio and the services to be provided. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

that certain functions, such as franchise, licensing and management, are included in the franchise and management segment. Franchise agreements with our owned hotels provide for a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of gross operating revenue for our owned hotels. We set the franchise fee on a basis that reflects the services and rights covered by the franchise agreements and because, as a public company with two segments that may be valued differently by investors, we believe it is meaningful to investors to show a franchise fee on our owned portfolio that is consistent with the franchise fee we charge our franchisees. We set the management fee on a basis that reflects current market rates for select service hotels, and the current composition of our owned portfolio and the services to be provided. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

Our segment information also reflects corporate and other, which includes revenues generated by and related to operating expenses incurred in connection with the overall support and brand management of our owned, managed and franchised hotels and operations. The franchise agreements with our owned hotels also include a reservation fee of 2.0% of gross room revenues, which is reflected in corporate and other.

We have a business model that involves both ownership of properties and franchising of third-party owned properties. This provides us with diversified revenue and income streams that balance both the advantages and risks associated with these lines of business.

As an owner of hotels, we can capture the full benefit of increases in operating profits during periods of increasing demand or ADR. The cost structure of our typical hotel is more fixed than variable, so as demand and ADR increase over time, the pace of increase in operating profits typically is higher than the pace of increase of revenues. Hotel ownership is, however, more capital intensive than granting franchise agreements to third-party hotel owners, as we are responsible for the costs and capital expenditures for our owned hotels. The profits realized by us in our Owned Hotels segment are generally more significantly affected by economic downturns and declines in revenues than the results of our Franchise hotels. See also “—Key components and factors affecting our results of operations—Expenses” below and “Risk Factors—Risks related to our business and industry” in our ~~2016~~2017 Form 10-K.

As a franchisor of hotels, growth in the number of franchised hotels and earnings from franchises typically results in higher overall returns on invested capital because the capital required to build and maintain franchised hotels is typically provided by the owner of the respective property with minimal or no capital required by us, as franchisor. During periods of increasing demand, we do not, however, share in most of the benefits of increases in profits from franchised hotels because franchisees do not pay us fees based on profits. A principal component of our current growth strategy is to focus our expansion on our franchise business.

For purposes of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the following table sets forth the number of owned and franchised La Quinta branded hotels as of ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017.

	As of September 30,
	As of March 31,
	2017		2016
	2018		2017
Number of Hotels in Operation
Owned hotels (1)		~~318~~316		~~326~~319
Franchised hotels (2)		~~576~~591		~~567~~570
Total Owned and Franchised Hotels		~~894~~907		~~893~~889

(1) Owned Hotels includes 18 properties that are subject to ground leases; we include these 18 properties as owned hotels throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Owned Hotels also include one hotel owned via a joint venture in which we have a controlling interest. At ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, Owned Hotels include ~~three~~two and ~~nine~~three hotels, respectively, which met the criteria to be classified as assets held for sale.

(2) At September 30, 2017 and 2016, Franchised Hotels includes five and eight hotels, respectively, that are temporary franchise agreements related to owned hotels that are in the process of exiting the system.28

30(2) As of both March 31, 2018 and 2017, Franchised Hotels includes four hotels, respectively, that are temporary franchise agreements related to owned hotels that are in the process of exiting the system.

The following table summarizes our owned and franchised hotels as of ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017:

	As of September 30,
	As of March 31,
	2017		2016
	2018		2017
Number of Hotels in Operation
Company Owned Hotels(1)
La Quinta Inn & Suites (interior corridor)		~~178~~181		~~181~~178
La Quinta Inn & Suites (exterior corridor)		3		3
La Quinta Inns (interior corridor)		4541		4746
La Quinta Inns (exterior corridor)		92		95
La Quinta Inns (exterior corridor) (2)		91		92
Total Owned		~~318~~316		~~326~~319
Franchised Hotels
La Quinta Inn & Suites (interior corridor)		~~506~~522		~~480~~492
La Quinta Inn & Suites (exterior corridor)		56		34
La Quinta Inns (interior corridor)		5046		7162
La Quinta Inns (exterior corridor)		4		31
LQ Hotel (interior corridor)		1113		1011
Total Franchised		~~576~~591		~~567~~570
Total Hotels		~~894~~907		~~893~~889

(1) Of the ~~three~~two owned hotels designated as assets held for sale as of ~~September~~March 3031, ~~2017~~2018, one is a La Quinta Inn ~~and Suite~~ (interior corridor) and ~~two~~one ~~are~~is a La Quinta ~~Inns~~Inn (exterior corridor). Of the ~~nine~~three owned hotels designated as assets held for sale as of ~~September~~March 3031, ~~2016~~2017, ~~three~~one ~~are~~is Laa ~~Quinta Inn & Suites (interior corridor), two are~~ La Quinta Inns (interior corridor) and ~~four~~two are La Quinta Inns (exterior corridor).

⁽²⁾	Subsequent to March 31, 2018, one La Quinta Inn was re-branded to a Baymont Inn.

Seasonality

The hotel industry is seasonal in nature. Generally, our revenues are greater in the second and third quarters than in the first and fourth quarters. The timing of holidays can also impact our quarterly results. The periods during which our properties experience higher revenues vary from property to property and depend principally upon location. This seasonality can be expected to cause quarterly fluctuations in revenue, profit margins and net earnings. Additionally, our quarterly results may be further affected by the timing of certain of our marketing production expenditures. Further, the timing of opening of newly constructed or franchised hotels and the timing of any hotel acquisitions or dispositions may cause a variation of revenue and earnings from quarter to quarter.

Inflation

We do not believe that inflation had a material effect on our business during the three ~~and nine~~ month periods ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017. Although we believe that increases in the rate of inflation will generally result in comparable increases in hotel room rates, severe inflation could contribute to a slowing of the U.S. economy. Such a slowdown could result in a reduction in room rates and occupancy levels, negatively impacting our revenues and net income.

Key components and factors affecting our results of operations

Revenues

We primarily derive our revenues from the following sources:

•

Room revenues. Represents revenues derived from hotel operations at owned hotels which are almost exclusively driven by room rentals. These revenues are primarily derived from three categories of guests: leisure, corporate and group.

•

Franchise fees. Represents revenues derived from franchise fees received in connection with the franchising of our brand, and other revenue generated by the incidental support of hotel operations for franchised hotels. Franchise fees consist of an initial fee upon the entry of a new hotel into the system and a monthly royalty fee, generally calculated as a percentage of gross room revenue. As new franchised hotels are established in our franchise system, we expect the franchise fees received from such hotels to increase over time as they establish their presence in the marketplace and stabilize their operations. If a franchise property changes owners, we generally charge a transfer fee.

• Management fees. Represents revenues derived from management fees received in connection with the management of day-to-day hotel operations, and other revenue generated by the incidental support of hotel operations for managed properties.29

31• Management fees. Represents revenues derived from management fees received in connection with the management of day-to-day hotel operations, and other revenue generated by the incidental support of hotel operations for managed properties. Management fees are generally calculated as a percentage of gross room revenue.

Management fees are generally calculated as a percentage of gross room revenue. After the consummation of the IPO Transactions, we no longer have any management fees from third parties.

•

Other hotel revenues. Other hotel revenues include revenues generated by the incidental support of hotel operations for owned hotels, including charges to guests for vending commissions, meeting and banquet room revenue, laundry services, and other rental income from operating leases associated with leasing space for restaurants, billboards and cell towers.

•

Brand marketing fund revenues from franchised and managed properties. These revenues represent the fees collected from our franchised and managed hotels related to our Brand Marketing Fund (“BMF”), which are calculated as a percentage of gross room revenues. The corresponding expenses are presented as other expenses from franchised and managed properties in our condensed consolidated statements of operations, resulting in no impact to operating income (loss) or net income (loss).

Consumer demand for our services is closely linked to the performance of the general economy on both a national and regional basis and is sensitive to business and personal discretionary spending levels. Declines in consumer demand due to adverse general economic conditions, risks affecting or reducing travel patterns, lower consumer confidence and adverse political conditions can lower the revenues and profitability of our owned hotels and the amount of franchise fee revenues we are able to generate from our franchised hotels. As a result, changes in consumer demand and general business cycles can subject, and have subjected, our revenues to significant volatility. See “Risk Factors—Risks related to our business and industry” in our ~~2016~~2017 Form 10-K.

Activities in the oil and gas industry over the past few years have significantly affected demand in the markets defined by STR, Inc. (“STR”), a primary source for third-party market data and industry statistics and forecasts, ~~defines certain markets~~ as “oil tracts.,” ~~Downturns~~significantly inaffecting ~~the oil and gas industry have had a significant impact on demand in oil tracts. Such downturns have negatively impacted~~ our business in those markets, inand ~~the~~additional ~~past.~~acceleration ~~Any~~or ~~such~~deceleration ~~downturns~~of activities in ~~the~~this ~~future~~industry could further affect our business in those markets.

In addition to general economic conditions, our guest satisfaction scores, the location of our hotels, the expenditures that we and our franchisees incur to improve our hotels, our loyalty program and the quality of our service impact our ADR, occupancy rates, RevPAR and RevPAR Index performance (each of which is described below under “—Key indicators of financial condition and operating performance”). Changes in ADR and occupancy have the potential to significantly impact our revenues.

Expenses

We primarily incur the following expenses:

•

Direct lodging expenses and other lodging and operating expenses. Direct lodging and Other lodging and operating expenses reflect the operating expenses of our owned hotels, including both direct and indirect hotel operating expenses. Direct lodging expenses include items such as compensation costs for hotel level management, housekeeping, laundry and front desk staff, supply costs for guest room amenities and laundry, repairs and maintenance, utilities, sales and local marketing, bad debt expenses related to direct-bill corporate customers, and online and offline travel agency commissions. Other lodging and operating expenses include indirect property operating expenses, primarily property taxes and insurance.

•

Depreciation and amortization. These are non-cash expenses that primarily consist of depreciation of fixed assets such as buildings, furniture, fixtures and equipment at our owned hotels, as well as certain corporate assets. Amortization expense primarily consists of amortization of intangibles related to our franchise business, and other leasehold interests, all of which are amortized over their estimated useful lives.

•

General and administrative expenses. General and administrative expenses consist primarily of compensation expense for our corporate staff and personnel supporting our business segments, professional fees (including consulting, audit and legal fees), travel and entertainment expenses, contractual performance obligations and office administrative and related expenses.

• Impairment losses. We hold amortizing and non-amortizing intangible assets and long-lived assets. We evaluate these assets for impairment as further discussed in “—Critical accounting policies and estimates” previously disclosed in our ~~2016~~2017 Form 10-K. These evaluations have, in the past, resulted in impairment losses for certain of these assets based on the specific facts and circumstances surrounding those assets and our estimates of the fair value of those assets. Based on economic conditions, estimated holding periods or other factors at a hotel-specific or system-wide level, we may be required to take additional impairment losses to reflect further declines in our asset and/or investment values.

•

Brand marketing fund expenses from franchised and managed properties. These expenses represent the expenditure of BMF fees collected from our franchised hotels for marketing and other support of the La Quinta brand. The corresponding revenues are presented as other revenues from franchised properties in our condensed consolidated statements of operations, resulting in no impact to operating income or net income.

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•

Marketing, promotional and other advertising expenses. These expenses include advertising costs associated with general promotion of the La Quinta brand and specific advertising and marketing support for our operation and for the operations of our franchisees, which are in addition to the expenditure of BMF fees collected from franchised and managed properties for the same purpose.

Fluctuations in operating expenses at our owned hotels can be related to various factors, including changes in occupancy rates, which directly impact certain variable expenses including labor, supplies, utilities and other operating expenses. However, certain of our expenses are relatively fixed, including rent, property taxes, liability insurance and, to a certain extent, payroll. As market conditions dictate, we take steps to adjust both our variable and fixed costs to levels we feel are appropriate to enhance guest experience, maximize profitability and respond to market conditions without jeopardizing the overall guest experience or the value of our hotels or brand. In addition, changes in depreciation expenses may be impacted by renovations of existing hotels or the disposition of existing hotels through sale or closure. For other factors affecting our costs and expenses, see “Risk factors—Risks related to our business and industry” in our ~~2016~~2017 Form 10-K. General and administrative expenses may also fluctuate from period to period, primarily related to support of the Company’s overall strategic initiatives.

Key indicators of financial condition and operating performance

We use a variety of financial and other information in monitoring the financial condition and operating performance of our business. Some of this information is financial information that is prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America, while other information may be financial in nature and may not be prepared in accordance with GAAP. Our management also uses other information that may not be financial in nature, including statistical information and comparative data that are commonly used within the lodging industry to evaluate hotel financial and operating performance. Our management uses this information to measure the performance of hotel properties and/or our business as a whole. Historical information is periodically compared to our internal budgets, as well as against industry-wide information. We use this information for planning and monitoring our business, as well as in determining management and employee compensation.

Average daily rate (“ADR”) represents hotel room revenues divided by total number of rooms sold in a given period. ADR measures the average room price attained by a hotel or group of hotels, and ADR trends provide useful information concerning pricing policies and the nature of the guest base of a hotel or group of hotels. Changes in room rates have an impact on overall revenues and profitability.

Occupancy represents 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. Occupancy measures the utilization of our hotels’ available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help us determine achievable ADR levels as demand for hotel rooms increases or decreases.

Revenue per available room (“RevPAR”) is defined as the product of the ADR charged and the average daily occupancy achieved. RevPAR does not include other ancillary, non-room revenues, such as food and beverage revenues or parking, telephone or other guest service revenues generated by a hotel, which are not significant for the Company.

As it pertains to owned hotels, RevPAR changes that are driven predominately by occupancy have different implications for overall revenue levels and incremental hotel operating profit than changes driven predominately by ADR. For example, increases in occupancy at a hotel would lead to increases in room revenues, as well as incremental operating costs (including, but not limited to, housekeeping services, utilities and room amenity costs). RevPAR increases due to higher ADR, however, would generally not result in additional operating costs, with the exception of those charged or incurred as a percentage of revenue, such as credit card fees and commissions. As a result, changes in RevPAR driven by increases or decreases in ADR generally have a greater effect on operating profitability at our owned hotels than changes in RevPAR driven by occupancy levels. Changes in RevPAR for our franchised hotels, whether driven by occupancy or ADR, directly impact our franchise revenues, as these revenues are generally based on a percentage of the franchised hotels’ room revenues. Due to seasonality in our business, we review RevPAR by comparing current periods to budget and period-over-period.

RevPAR Index measures a hotel’s or group of hotels’ fair market share of a competitive set’s revenue per available room. RevPAR Index is stated as a percentage and is calculated for each hotel by comparing the hotel’s RevPAR to the aggregate RevPAR of a group of competing hotels generally in the same market. RevPAR Index is a weighted average of the individual property results. We subscribe to STR, which collects and compiles the data used to calculate RevPAR Index, and STR may calculate ADR and RevPAR differently than we and our competitors do. The owner of each La Quinta hotel exercises its discretion in identifying the competitive set of properties for such hotel, considering, subject to STR’s guidelines, such factors as physical proximity, competition for similar customers, services and amenities, quality and average daily rate. We initially review the competitive set makeup of each new hotel that enters our system and review the continuing appropriateness of each hotel’s competitive set on an ongoing basis. Accordingly, while the hotel brands included in the competitive set for any individual La Quinta hotel depend heavily on market-

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specific conditions, the competitive sets for La Quinta hotels most often include one or more of Comfort, Holiday Inn Express and Hampton. Management uses RevPAR Index and changes in RevPAR Index, particularly year-over-year percentage changes, to evaluate the performance of individual or groups of hotels relative to other competing hotels.

Comparable hotels are defined as hotels that were active and operating in our system for at least one full calendar year as of the end of the applicable reporting period and were active and operating as of January 1st of the previous year; except for: (i) hotels that sustained substantial property damage or other business interruption; (ii) owned hotels that become subject to a purchase and sale agreement; or (iii) hotels in which comparable results are otherwise not available. Management uses comparable hotels as the basis upon which to evaluate ADR, occupancy, and RevPAR on a system-wide basis and for each of our reportable segments. We report variances in ADR, occupancy, and RevPAR between periods for the set of comparable hotels existing at the reporting date versus the results of the same set of hotels in the prior period. Of the ~~894~~907 hotels in our system as of ~~September~~March 3031, ~~2017~~2018, ~~810~~847 have been classified as comparable hotels.

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, 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.

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Results of operations

The following table presents hotel operating statistics for our system-wide (owned and franchised) comparable hotels for the applicable periods ⁽¹⁾:

	Three Months Ended September 30, 2017			Variance Three Months 2017 vs. Three Months 2016			Nine Months Ended September 30, 2017			Variance Nine Months 2017 vs. Nine Months 2016
	Three Months Ended March 31, 2018			Variance Three Months 2018 vs. Three Months 2017
Occupancy		7162.69	%	~~116~~-7		bps		~~68.5~~	%		87	~~bps~~
ADR	$	9491.6960			14.34	%	$	~~91.52~~			~~1.4~~	%
RevPAR	$	6757.7659			24.93	%	$	~~62.72~~			~~2.7~~	%

⁽¹⁾	See definition of comparable hotels in “—Key indicators of financial condition and operating performance—Comparable hotels.”

In addition, the following table presents RevPAR Index for our system-wide (owned and franchised) hotels for the applicable periods:

Three Months Ended September 30, 2017

Variance Three Months 2017 vs. Three Months 2016

Nine Months Ended September 30, 2017

Variance Nine Months 2017 vs. Nine Months 2016

Three Months Ended March 31, 2018

Variance Three Months 2018 vs. Three Months 2017

RevPAR Index (1)

9693.87

~~147~~-9 bps

~~96.2~~

~~217 bps~~

(1) Information based on the STR competitive set of hotels existing as of ~~September~~March 3031, ~~2017~~2018.

We experienced ana ~~increase~~decrease in RevPAR Index during the three months ended ~~September~~March 3031, ~~2017~~2018. Beginning in the second half of 2016, we began enacting several key initiatives designed to further improve our RevPAR performance, including taking steps to enhance consistency of product and guest experience and investing in points of differentiation to encourage engagement with the brand. These initiatives ~~have~~ caused incremental expenditures in ~~the~~2017 ~~second~~and ~~half~~continuing ofinto ~~2016 through September 30, 2017~~2018. We expect to incur additional incremental expenditures in the future as these initiatives are implemented.

From ~~September~~March 3031, ~~2016~~2017 to ~~September~~March 3031, ~~2017~~2018, our total number of owned and franchised La Quinta hotels has grown ~~slightly~~ from ~~893~~889 to ~~894~~907 with rooms ~~decreasing~~increasing from 8887,~~000~~400 rooms, to 8788,800 rooms and number of franchised hotels increasing from ~~567~~570 to ~~576~~591. At ~~September~~March 3031, ~~2016~~2017, our franchise pipeline numbered ~~239~~249 hotels with 2123,~~800~~300 rooms, and grew to ~~252~~259 hotels with 2324,~~700~~400 rooms, at ~~September~~March 3031, ~~2017~~2018, while we have opened a net total of ~~nine~~21 franchised hotels over that time period. Each of our pipeline hotels is represented by an executed franchise agreement, and approximately 3029% of the conversions and new construction projects have commenced as of ~~September~~March 3031, ~~2017~~2018.

Three months ended ~~September~~March 3031, ~~2017~~2018 compared with three months ended ~~September~~March 3031, ~~2016~~2017

For the three months ended ~~September~~March 3031, ~~2017~~2018, we experienced, on a system-wide comparable hotels basis, increases in ~~occupancy,~~ ADR and RevPAR compared to the three months ended ~~September~~March 3031, ~~2016~~2017.

3533

The following tables present our overall operating performance, and system-wide and segment occupancy, ADR and RevPAR rates on a comparable hotel statistic basis, in each case, for the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, including the amount and percentage change in these results between the periods:

	For the Three Months Ended September 30,						Increase/(Decrease)
	For the Three Months Ended March 31,						Increase/(Decrease)
(in thousands)	~~2017~~2018			~~2016~~2017			$ change			% change
Revenues
Room revenues	$	~~222~~191,~~883~~708		$	~~230~~199,~~081~~744		$	(78,~~198~~036	)		(34.10	)
Franchise and other fee-based revenues		3225,~~842~~896			3023,~~026~~978			21,~~816~~918			98.40
Other hotel revenues		4,~~950~~779			4,~~895~~796			55(17	)		1(0.14	)
		260,675			265,002			(4,327	)		(1.6	)
		222,383			228,518			(6,135	)		(2.7	)
Brand marketing fund revenues from franchised properties		76,~~967~~397			75,~~310~~754			~~657~~643			911.02
Total Revenues		~~268~~228,~~642~~780			~~272~~234,~~312~~272			(35,~~670~~492	)		(12.3	)
Operating Expenses
Direct lodging expenses		~~110~~103,~~387~~875			~~108~~100,~~649~~334			13,~~738~~541			13.65
Depreciation and amortization		3739,~~934~~702			36,~~048~~040			13,~~886~~662			510.2
General and administrative expenses		3441,~~615~~835			2935,~~572~~438			56,~~043~~397			1718.1
Other lodging and operating expenses		1715,~~419~~323			14,~~872~~060			21,~~547~~263			179.10
Marketing, promotional and other advertising expenses		1817,~~656~~804			1518,~~566~~536			~~3,090~~(732	)		19(3.9	)
Impairment loss		989			1,058			(69	)		(6.5	)
(Gain) loss on sales		(498	)		138			(636	)	NM			(1)
Gain on sales		(1,457	)		(2,048	)		591			(28.9	)
		218,041			204,546			13,495			6.6
		218,543			203,717			14,826			7.3
Brand marketing fund expenses from franchised properties		6,397			5,754			643			11.2
Brand marketing fund expenses from franchised properties		7,967			7,310			657			9.0
Total Operating Expenses		224,438			210,300			14,138			6.7
Total Operating Expenses		226,510			211,027			15,483			7.3
Operating Income		4,342			23,972			(19,630	)		(81.9	)
Operating Income		42,132			61,285			(19,153	)		(31.3	)
Other (Expenses) Income
Interest expense, net		(2021,~~696~~456	)		(2019,~~427~~980	)		(~~269~~1,476	)		17.34
Other income		834			1,188			(354	)		(29.8	)
Other income (expense)		119			(24	)		143		NM			(1)
Total Other Expenses, net		(1921,~~862~~337	)		(1920,~~239~~004	)		(~~623~~1,333	)		36.27
Income Before Income Taxes		22,270			42,046			(19,776	)		(47.0	)
(Loss) Income Before Income Taxes		(16,995	)		3,968			(20,963	)	NM			(1)
Income tax expense		(9,862	)		(19,362	)		9,500			(49.1	)
Income tax benefit (expense)		1,927			(2,290	)		4,217		NM			(1)
Net Income		12,408			22,684			(10,276	)		(45.3	)
Net (Loss) Income		(15,068	)		1,678			(16,746	)	NM			(1)
Less: net loss (income) attributable to noncontrolling interests		7			(18	)		25		NM			(1)
Less: net income attributable to noncontrolling interests		(71	)		(89	)		18			(20.2	)
Net Income Attributable to La Quinta Holdings’ stockholders	$	12,415		$	22,666		$	(10,251	)		(45.2	)
Net (Loss) Income Attributable to La Quinta Holdings’ stockholders	$	(15,139	)	$	1,589		$	(16,728	)	NM			(1)

⁽¹⁾

Fluctuation in terms of percentage change is not meaningful.

Comparable hotel statistics	Three Months Ended March 31, 2018			Variance 2018 vs. 2017
Owned hotels
Occupancy		60.5	%	-245		bps
ADR	$	89.23			4.3	%
RevPAR	$	53.98			0.2	%
Franchised hotels
Occupancy		65.0	%	205		bps
ADR	$	93.56			4.4	%
RevPAR	$	60.81			7.8	%
System-wide
Occupancy		62.9	%	-7		bps
ADR	$	91.60			4.4	%
RevPAR	$	57.59			4.3	%

Comparable hotel statistics	Three Months Ended September 30, 2017			Variance 2017 vs. 2016
Owned hotels
Occupancy		68.7	%	25		bps
ADR	$	87.54			0.0	%
RevPAR	$	60.16			0.4	%
Franchised hotels
Occupancy		74.4	%	204		bps
ADR	$	101.17			2.1	%
RevPAR	$	75.23			5.0	%
System-wide
Occupancy		71.6	%	116		bps
ADR	$	94.69			1.3	%
RevPAR	$	67.76			2.9	%

Revenues

Owned hotels

As of ~~September~~March 3031, ~~2017~~2018, we owned ~~318~~316 hotels, comprising approximately 40,~~700~~500 rooms, located in the United States. Room revenues at our owned hotels for the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017 totaled $~~222~~191.97 million and $~~230~~199.17 million, respectively. The decrease of $78.20 million, or 34.10 percent, was primarily driven by the sale of ~~eight~~three owned hotels between the periods and a decrease in the number of available rooms due to damage caused by hurricanes in the third quarter of 2017. RevPAR at our comparable owned hotels increased 0.42 percent for the three months ended ~~September~~March 3031, ~~2017~~2018 over the prior year period. The increase in RevPAR was driven by an increase in ~~occupancy~~ADR of 254.3 ~~basis points~~percent, ~~while~~offset ~~ADR~~slightly ~~remained~~by ~~constant~~a decrease in occupancy of 245 basis points. Excluding the impact of the owned hotels impacted by the hurricanes and those undergoing significant renovation as part of the repositioning effort, system-wide comparable RevPAR increased 45.09 percent in the ~~third~~first quarter.

Other hotel revenues at our owned hotels for each of the three ~~months~~month periods ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017 totaled $54.08 million ~~and $4~~.~~9 million,~~ ~~respectively.~~ These revenues are related to ancillary hotel services.

Franchise and other fee-based revenues

As of ~~September~~March 3031, ~~2017~~2018, we had ~~576~~591 franchised hotels, comprising approximately 4748,~~100~~300 rooms, located in the United States, Canada, Mexico, Honduras, Colombia and ~~Colombia~~Chile. Franchise and other fee-based revenues for the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017 totaled $3225.89 million and $3024.0 million, respectively. The increase of $21.89 million, or 98.40 percent, was primarily driven by a net increase of ~~nine~~21 hotels to our franchise system from ~~September~~March 3031, ~~2016~~2017 to ~~September~~March 3031, ~~2017~~2018 and an increase in RevPAR at our comparable franchised hotels of 57.08 percent, which was due to an increase in ADR of 24.14 percent and an increase in occupancy of ~~204~~205 basis points.

Operating expenses

Three Months Ended September 30,

Percent change

Three Months Ended March 31,

Percent change

(in millions)

~~2017~~2018

~~2016~~2017

~~2017~~2018 vs. ~~2016~~2017

Direct lodging expenses

~~110~~103.49

~~108~~100.63

13.65

Other lodging and operating expenses

1715.43

14.91

179.10

37In total, direct lodging and other lodging and operating expenses for our owned hotels totaled $119.2 million and $114.4 million, for the three months ended March 31, 2018 and 2017, respectively, resulting in an increase of $4.8 million. The increase in direct lodging expenses for our owned hotels was caused by increases in salaries (including hourly wages) and benefits, increased uninsured loss, increased property taxes, increased contract labor due to difficulty in hiring, and increased travel agency commission costs due to increased volume driven through third party online travel agencies such as Expedia.com, Booking.com, and TripAdvisor. These increases were partially offset by decreases caused by three fewer hotels in the owned hotel portfolio at March 31, 2018 in comparison to the hotels owned at March 31, 2017 and lower insurance provisions at the property level. Additionally, the Company realized a decrease in repairs and maintenance and supplies expenses.

In total, direct lodging and other lodging and operating expenses for our owned hotels totaled $127.8 million and $123.5 million, for the three months ended September 30, 2017 and 2016, respectively, resulting in an increase of $4.3 million. The increase in direct lodging expenses for our owned hotels was caused by increases in salaries (including hourly wages) and benefits, increased travel agency commission costs due to increased volume driven through third party online travel agencies such as Expedia.com, Booking.com, and TripAdvisor and losses due to hurricanes Harvey and Irma. These increases were partially offset by a decrease of eight fewer hotels in the owned hotel portfolio in comparison to the hotels owned at September 30, 2016 and lower insurance provisions at the property level. Additionally, the Company realized a decrease in repairs and maintenance and supplies.

Three Months Ended

March 31,

Percent

change

(in millions)

2018

2017

2018 vs. 2017

Depreciation and amortization

39.7

36.0

10.2

	Three Months Ended September 30,				Percent change
(in millions)	2017		2016		2017 vs. 2016
Depreciation and amortization	$	37.9	$	36.0		5.2

Depreciation and amortization expense for our owned hotels totaled $39.7 million and $36.0 million, respectively, for the three months ended March 31, 2018 and 2017. The increase of $3.7 million, or 10.2 percent, was primarily the result of additional depreciation on certain owned assets in the first quarter of 2018 driven by $211.5 million in capital expenditures between March 31, 2017 and March 31, 2018.

Depreciation and amortization expense for our owned hotels totaled $37.9 million and $36.0 million, respectively, for the three months ended September 30, 2017 and 2016. The increase of $1.9 million, or 5.2 percent, was primarily the result of additional depreciation on certain owned assets in the third quarter of 2017 driven by $212.4 million in capital expenditures between September 30, 2016 and September 30, 2017. This increase was partially offset by the decrease in the number of hotels subject to depreciation. As of September 30, 2017, the owned hotel portfolio subject to depreciation consisted of 315 hotels (318 hotels less three held for sale) as compared to 317 hotels (326 owned hotels less nine held for sale) as of September 30, 2016.

Three Months Ended

March 31,

Percent

change

(in millions)

2018

2017

2018 vs. 2017

General and administrative expenses

41.8

35.4

18.1

	Three Months Ended September 30,				Percent change
(in millions)	2017		2016		2017 vs. 2016
General and administrative expenses	$	34.6	$	29.6		17.1

General and administrative expenses totaled $3441.68 million and $2935.64 million, respectively, for the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017. General and administrative expenses increased for the three months ended ~~September~~March 3031, ~~2017~~2018 compared to the prior year period, primarily as a result of increased costs ~~associated with pursuing the separation~~ of ~~our~~approximately ~~real~~$12.4 ~~estate~~million ~~business~~associated ~~from~~with ~~our~~the ~~franchise~~Spin and ~~management businesses~~Merger. Additionally, corporate salaries and benefits, including healthcare, and corporate bonus expense ~~and stock based compensation~~ increased for the ~~third~~first quarter of ~~2017~~2018. These increases were partially offset by decreases in ~~severance~~equity-based compensation and ~~other~~severance ~~professional services~~expense.

	Three Months Ended September 30,				Percent change
	Three Months Ended March 31,				Percent change
(in millions)	~~2017~~2018		~~2016~~2017		~~2017~~2018 vs. ~~2016~~2017
Marketing, promotional and other advertising expenses	$	1817.78	$	1518.65		19(3.9	)

Marketing, promotional and other advertising expenses, not funded by the BMF collected from our hotels, totaled $1817.78 million and $1518.65 million, respectively, for the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017. The ~~increase~~decrease of $30.17 million, or 193.9 percent, was primarily driven by ~~increased~~decreased spending in broadcast media and costs associated with our loyalty program. These decreases were partially offset by increases in online media spending in order to enhance brand awareness and bookings. In addition, we spent $86.04 million and $75.38 million of BMF fees collected from franchised hotels on similar brand management and other advertising expenses for the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, respectively, which increased due to more funds being available to spend in the BMF.

	Three Months Ended September 30,					Percent change
	Three Months Ended March 31,					Percent change
(in millions)	~~2017~~2018			~~2016~~2017		~~2017~~2018 vs. ~~2016~~2017
Impairment loss	$	1.0		$	1.1		(6.5	)
(Gain) loss on sales	$	(0.5	)	$	0.1	NM	(1)

~~During~~(1)Fluctuation ~~the~~in ~~third~~terms ~~quarter~~ of ~~2017,~~percentage ~~the~~change ~~Company~~is ~~determined~~not ~~that the long lived assets associated with one of our owned hotels were partially impaired due to economic conditions and we recorded an impairment charge of $1.0 million.~~meaningful

During the ~~third~~first quarter of ~~2016~~2018, we ~~entered~~sold ~~into~~one ~~agreements to sell five~~ of our owned hotels for ~~approximately~~a ~~$34.9 million.~~gain ~~In connection with the sale agreements, we recorded an impairment charge~~ of approximately $0.95 million. toThe ~~adjust~~hotel ~~the~~had ~~value~~been ofidentified ~~these~~as ~~assets~~held tofor ~~their~~sale ~~fair~~in ~~value,~~the ~~less~~third ~~transaction~~quarter ~~costs. Additionally, we recorded $0.2 million~~ of ~~additional~~2017 ~~impairment~~and ~~for hotels~~ included in assets held for sale. as of December 31, 2017.

38During the first quarter of 2017, we sold three of our owned hotels for a loss of approximately $0.1 million. These properties were identified as held for sale in the third quarter of 2016.

	Three Months Ended September 30,						Percent change
(in millions)	2017			2016			2017 vs. 2016
Gain on sales	$	(1.5	)	$	(2.0	)		(28.9	)

During the third quarter of 2017, we sold one of our owned hotels for a gain of approximately $1.5 million. The hotel had been identified as held for sale in the third quarter of 2016.

During the third quarter of 2016, we sold 10 of our owned hotels for a gain of approximately $2.0 million. Of the 10 hotels, seven were from the 24 hotels identified as held for sale in the third quarter of 2015. Of the three remaining hotels, two hotels were identified as held for sale in the second quarter of 2016 and the remaining hotel was identified and sold within the third quarter of 2016. The hotels identified as held for sale as of June 30, 2016 were sold at their carrying value which represented fair value less transaction costs.

Other Income (Expenses)

	Three Months Ended September 30,						Percent change
	Three Months Ended March 31,						Percent change
(in millions)	~~2017~~2018			~~2016~~2017			~~2017~~2018 vs. ~~2016~~2017
Interest expense, net	$	(2021.75	)	$	(20.40	)		17.34

Interest expense, net, totaled $2021.75 million and $20.40 million for the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, respectively. The ~~slight~~ increase of 17.34 percent was driven by an increase in our interest rate, which is based on LIBOR. The interest rate also increased 25 basis points from the applicable rate as a result of our net leverage ratio moving above 4.50 to 1.00 during the first quarter of 2018. This increase was partially offset by the reduction in the principal balance of our term loan facility with the application of mandatory payments made each quarter and an increase in interest income in the three months ended ~~September~~March 3031, ~~2017~~2018.

	Three Months Ended September 30,						Percent change
	Three Months Ended March 31,						Percent change
(in millions)	~~2017~~2018			~~2016~~2017			~~2017~~2018 vs. ~~2016~~2017
Income tax expense	$	(9.9	)	$	(19.4	)		(49.1	)
Income tax benefit (expense)	$	1.9		$	(2.3	)	NM	(1)

We compute our income tax expense on a quarterly basis by applying the estimated annual effective tax rate to ~~income~~results from recurring operations and taxable income. The provision for the three month periods ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017 differs from the statutory federal tax ~~rate~~rates of 21% and 35%, respectively, primarily due to the impact of state income taxes and ~~expenses~~costs ~~that~~relating ~~are~~to ~~not deductible for income tax purposes. For 2017,~~ the ~~primary~~pending ~~driver~~separation of ~~this~~our ~~variance~~franchise isand ~~the~~management ~~impact~~business offrom ~~costs~~our ~~relating~~owned toreal ~~the~~estate ~~evaluation~~assets ~~of a potential spin-off transaction~~ that are not deductible for ~~income~~ tax purposes. See “—Critical accounting policies and estimates—Income taxes” previously disclosed in our ~~2016~~2017 Form 10-K.

Segment results

We evaluate our segments’ operating performance using segment Adjusted EBITDA, as described in Note 13: “Segments” in the unaudited condensed consolidated financial statements, included elsewhere in this report. Refer to those financial statements for a reconciliation of Adjusted EBITDA to net income (loss). For a discussion of our definitions of EBITDA and Adjusted EBITDA, how management uses them to manage our business and material limitations on their usefulness, refer to “—Key indicators of financial condition and operating performance.” The following table sets forth revenues and Adjusted EBITDA by segment, reconciled to consolidated amounts, for the three months ended September 30, 2017 and 2016.

	Three Months Ended September 30,
(in thousands)	2017			2016
Revenues
Owned Hotels	$	229,142		$	236,426
Franchised and management (1)		33,174			32,101
Segment revenues		262,316			268,527
Other revenues from franchised properties		7,967			7,310
Corporate and other (2)		34,633			33,824
Intersegment elimination (3)		(36,274	)		(37,349	)
Total revenues	$	268,642		$	272,312
Adjusted EBITDA
Owned Hotels	$	69,295		$	76,662
Franchised and management		33,174			32,101
Segment Adjusted EBITDA		102,469			108,763
Corporate and other		(8,645	)		(8,026	)
Adjusted EBITDA	$	93,824		$	100,737

reconciliation of net income (loss) attributable to La Quinta Holdings’ stockholders to Adjusted EBITDA. For a discussion of our definitions of EBITDA and Adjusted EBITDA, how management uses them to manage our business and material limitations on their usefulness, refer to “—Key indicators of financial condition and operating performance.” The following table sets forth revenues and Adjusted EBITDA by segment, reconciled to consolidated amounts, for the three months ended March 31, 2018 and 2017.

	Three Months Ended March 31,
(in thousands)	2018			2017
Revenues
Owned Hotels	$	197,555		$	205,635
Franchised and management ⁽¹⁾		27,180			26,714
Segment revenues		224,735			232,349
Other revenues from franchised properties		6,397			5,754
Corporate and other ⁽²⁾		28,206			28,783
Intersegment elimination ⁽³⁾		(30,558	)		(32,614	)
Total revenues	$	228,780		$	234,272
Adjusted EBITDA
Owned Hotels	$	49,247		$	58,721
Franchised and management		27,180			26,714
Segment Adjusted EBITDA		76,427			85,435
Corporate and other		(12,415	)		(13,485	)
Adjusted EBITDA	$	64,012		$	71,950

⁽¹⁾

This segment includes intercompany fees which are charged to our owned hotels to reflect that certain functions, such as licensing and management, are included in the franchise and management segment. We charge a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of gross operating revenue for our owned hotels. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

(2) Includes revenues related to our brand management programs and other cost reimbursements. The portion of these fees that were charged to our owned hotels totaled $1815.57 million and $1816.87 million for each of the three month periods ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, respectively. This includes a reservation fee of 2.0% of gross room revenues, which is reflected in corporate and other. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

(3) Includes management, license, franchise, BMF, Returns, reservation fees and other cost reimbursements totaling $3630.36 million and $3732.46 million for each of the three month periods ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, respectively. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

Owned Hotels

Owned Hotels segment revenues decreased, primarily driven by a decrease of ~~eight~~three hotels in the owned hotel portfolio in comparison to the hotels owned at ~~September~~March 3031, ~~2016~~2017. Refer to “Revenues—Owned hotels” within this section for further discussion on the decrease in revenues from our comparable owned hotels. ~~Our~~The significant components of the decrease in our Owned Hotels segment’s Adjusted EBITDA ~~decrease~~were ~~was a result of~~ decreased Owned Hotels segment revenues of approximately $78.30 million, ~~and~~ an increase in recurring direct lodging expenses of approximately $12.8 9 million ~~partially~~and ~~offset~~an byincrease ~~a decrease~~ in ~~other~~recurring lodging and operating expenses of approximately $20.5 3 million. Refer to “Operating expenses” within this section for further discussion of the increase in operating expenses at our owned hotels.

Franchise and management

Franchise and management segment revenues increased by $10.15 million primarily as a result of the net addition of ~~nine~~21 hotels to our franchise system. Additionally, the increase was a result of an increase in RevPAR of 57.08 percent at our comparable franchised hotels. Refer to “Revenues—Franchise and other fee-based revenues” within this section for further discussion of the increase in revenues from our comparable franchised hotels. Our Franchise and management segment’s Adjusted EBITDA increased as a result of the overall increase in Franchise and management segment revenues.

4037

Nine months ended September 30, 2017 compared with nine months ended September 30, 2016

For the nine months ended September 30, 2017, we experienced, on a system-wide comparable hotels basis, increases in occupancy, ADR and RevPAR compared to the nine months ended September 30, 2016.

The following tables present our overall operating performance, and system-wide and segment occupancy, ADR and RevPAR rates on a comparable hotel statistic basis, in each case, for the nine months ended September 30, 2017 and 2016, including the amount and percentage change in these results between the periods:

	Nine Months Ended September 30,						Increase/(Decrease)
(in thousands)	2017			2016			$ change			% change
Revenues
Room revenues	$	643,670		$	669,422		$	(25,752	)		(3.8	)
Franchise and other fee-based revenues		86,995			80,196			6,799			8.5
Other hotel revenues		14,683			14,744			(61	)		(0.4	)
		745,348			764,362			(19,014	)		(2.5	)
Brand marketing fund revenues from franchised properties		21,003			19,276			1,727			9.0
Total Revenues		766,351			783,638			(17,287	)		(2.2	)
Operating Expenses
Direct lodging expenses		315,175			311,139			4,036			1.3
Depreciation and amortization		110,390			110,973			(583	)		(0.5	)
General and administrative expenses		105,551			86,451			19,100			22.1
Other lodging and operating expenses		39,310			45,848			(6,538	)		(14.3	)
Marketing, promotional and other advertising expenses		59,370			55,853			3,517			6.3
Impairment loss		989			100,618			(99,629	)		(99.0	)
Gain on sales		(1,319	)		(2,770	)		1,451			(52.4	)
		629,466			708,112			(78,646	)		(11.1	)
Brand marketing fund expenses from franchised properties		21,003			19,276			1,727			9.0
Total Operating Expenses		650,469			727,388			(76,919	)		(10.6	)
Operating Income (Loss)		115,882			56,250			59,632		NM			(1)
Other Income (Expenses)
Interest expense, net		(60,929	)		(61,019	)		90			(0.1	)
Other income		741			2,288			(1,547	)		(67.6	)
Total Other Expenses, net		(60,188	)		(58,731	)		(1,457	)		2.5
Income (Loss) Before Income Taxes		55,694			(2,481	)		58,175		NM			(1)
Income tax (expense) benefit		(24,785	)		1,359			(26,144	)	NM			(1)
Net Income (Loss)		30,909			(1,122	)		32,031		NM			(1)
Less: net income attributable to noncontrolling interests		(119	)		(138	)		19			(13.8	)
Net Income (Loss) Attributable to La Quinta Holdings’ stockholders	$	30,790		$	(1,260	)	$	32,050		NM			(1)

(1) Fluctuation in terms of percentage change is not meaningful.

Comparable hotel statistics	Nine Months Ended September 30, 2017			Variance 2017 vs. 2016
Owned hotels
Occupancy		67.0	%		-15	bps
ADR	$	86.62			1.0	%
RevPAR	$	58.03			0.8	%
Franchised hotels
Occupancy		70.0	%		188	bps
ADR	$	96.13			1.6	%
RevPAR	$	67.33			4.4	%
System-wide
Occupancy		68.5	%		87	bps
ADR	$	91.52			1.4	%
RevPAR	$	62.72			2.7	%

Revenues

Owned hotels

As of September 30, 2017, we owned 318 hotels, comprising approximately 40,700 rooms, located in the United States. Room revenues at our owned hotels for the nine months ended September 30, 2017 and 2016 totaled $643.7 million and $669.4 million, respectively. The decrease of $25.7 million, or 3.8 percent, was primarily driven by the sale of eight owned hotels between the periods. RevPAR at our comparable owned hotels increased 0.8 percent for the nine months ended September 30, 2017 over the prior year period. The increase in RevPAR was driven by a 1.0 percent increase in ADR and partially offset by a decrease in occupancy of 15 basis points. Excluding the impact of the owned hotels undergoing significant renovation as part of the repositioning effort, system-wide comparable RevPAR increased 3.7 percent for the nine months ended September 30, 2017.

Other hotel revenues at our owned hotels for both the nine months ended September 30, 2017 and 2016 totaled $14.7 million. These revenues are related to ancillary hotel services.

Franchise and other fee-based revenues

As of September 30, 2017, we had 576 franchised hotels, comprising approximately 47,100 rooms, located in the United States, Canada, Mexico, Honduras and Colombia. Franchise and other fee-based revenues for the nine months ended September 30, 2017 and 2016 totaled $87.0 million and $80.2 million, respectively. The increase of $6.8 million, or 8.5 percent, was primarily driven by a net increase of nine hotels to our franchise system from September 30, 2016 to September 30, 2017 and an increase in RevPAR at our comparable franchised hotels of 4.4 percent, which was due to an increase in ADR of 1.6 percent and an increase in occupancy of 188 basis points.

Operating expenses

	Nine Months Ended September 30,				Percent change
(in millions)	2017		2016		2017 vs. 2016
Direct lodging expenses	$	315.2	$	311.1		1.3
Other lodging and operating expenses		39.3		45.8		(14.3	)

In total, direct lodging and other lodging and operating expenses for our owned hotels totaled $354.5 million and $356.9 million, for the nine months ended September 30, 2017 and 2016, respectively, resulting in a decrease of $2.4 million. These expenses decreased primarily due to lower insurance provisions at the property level. Additionally, the Company realized a decrease in expenses as a result of eight fewer hotels in the owned hotel portfolio in comparison to the hotels owned at September 30, 2016 and to reductions in utility costs, repairs and maintenance and supplies. These decreases were partially offset by increases in direct lodging expenses for our owned hotels caused by increases in salaries (including hourly wages) and benefits, contract labor and increased travel agency commission costs due to increased volume driven through third party online travel agencies, such as Expedia.com, Booking.com, and TripAdvisor. In addition, uninsured losses increased for the nine months ended September 30, 2017.

	Nine Months Ended September 30,				Percent change
(in millions)	2017		2016		2017 vs. 2016
Depreciation and amortization	$	110.4	$	111.0		(0.5	)

Depreciation and amortization expense for our owned hotels totaled $110.4 million and $111.0 million, respectively, for the nine months ended September 30, 2017 and 2016. The decrease of $0.6 million, or 0.5 percent, was primarily the result of the decrease of eight hotels in the owned hotel portfolio in comparison to the hotels owned at September 30, 2016 and the suspension of depreciation for assets held for sale. This decrease was partially offset by additional depreciation on certain owned assets in the first nine months of 2017 driven by $212.4 million in capital expenditures between September 30, 2016 and September 30, 2017.

	Nine Months Ended September 30,				Percent change
(in millions)	2017		2016		2017 vs. 2016
General and administrative expenses	$	105.6	$	86.5		22.1

General and administrative expenses totaled $105.6 million and $86.5 million, respectively, for the nine months ended September 30, 2017 and 2016. General and administrative expenses increased for the nine months ended September 30, 2017 compared to the prior year nine month period, primarily as a result of costs associated with the planned separation of our real estate business from our franchise and management businesses. Additionally, corporate salaries and benefits, including healthcare, corporate bonus and stock based compensation increased for the first three quarters of 2017. These increases were partially offset by decreases in severance expense.

	Nine Months Ended September 30,				Percent change
(in millions)	2017		2016		2017 vs. 2016
Marketing, promotional and other advertising expenses	$	59.4	$	55.9		6.3

Marketing, promotional and other advertising expenses, not funded by the BMF collected from our hotels, totaled $59.4 million and $55.9 million, respectively, for the nine months ended September 30, 2017 and 2016. The increase of $3.5 million, or 6.3 percent, was primarily driven by the timing of spending under certain brand programs and increased spending in broadcast and online media in order to enhance brand awareness and bookings. These increases were partially offset by a decrease in advertising production costs. In addition, we spent $21.0 million and $19.3 million of BMF fees collected from franchised hotels on similar brand management and other advertising expenses for the nine months ended September 30, 2017 and 2016, respectively, which increased due to more funds being available to spend in the BMF.

	Nine Months Ended September 30,				Percent change
(in millions)	2017		2016		2017 vs. 2016
Impairment loss		1.0	$	100.6		(99.0	)

During the third quarter of 2017, we determined that the long lived assets associated with one of our owned hotels were partially impaired due to economic conditions and we recorded an impairment charge of $1.0 million.

During the third quarter of 2016, we entered into agreements to sell five of our owned hotels for approximately $34.9 million. In connection with the sale agreements, we recorded an impairment charge of $0.9 million to adjust the value of these assets to their fair value, less transaction costs. Additionally, we recorded $0.2 million of additional impairment for hotels included in assets held for sale.

During the second quarter of 2016, we entered into agreements to sell three of our owned hotels for approximately $10.4 million. The carrying value of these properties had been adjusted to the lesser of their estimated fair value or carrying value in the first quarter of 2016. We recorded $0.6 million in additional impairment related to selling costs. In June 2016, we began negotiations to sell two of our owned hotels for approximately $18.5 million; this resulted in an impairment of $13.7 million. Additionally, during the second quarter of 2016, we identified one owned hotel in which it was determined that the carrying amount would not be recoverable due to a change in market and economic conditions. We recorded an impairment charge of $1.0 million related to this property.

Additionally, during 2016, as part of the strategic review of our owned hotel portfolio, approximately 50 hotels were identified as candidates for sale in the near-term. After considering the shortened holding period and probability of selling these hotels, we determined that the estimated cash flows were less than the carrying value of certain hotels and therefore we reduced the carrying values to their estimated fair value. This resulted in an impairment of approximately $80.3 million. In addition, in the first quarter of 2016, we entered into an agreement to sell one of our owned hotels for approximately $8.6 million. As a result, we recorded $3.0 million in impairment expense related to the excess carrying value over the estimated fair value due to the shortening of the assumed holding period.

	Nine Months Ended September 30,						Percent change
(in millions)	2017			2016			2017 vs. 2016
Gain on sales	$	(1.3	)	$	(2.8	)		(52.4	)

During the nine months ended September 30, 2017, we sold four of our owned hotels for a gain of approximately $1.3 million. These properties were identified as held for sale in the third quarter of 2016 and included in assets held for sale as of December 31, 2016.

During the nine months ended September 30, 2016, we sold 15 of our owned hotels for a gain of approximately $2.8 million. Of the 15 hotels sold, 10 hotels were from the 24 hotels marked as held for sale in the third quarter of 2015.

Other Income (Expenses)

	Nine Months Ended September 30,						Percent change
(in millions)	2017			2016			2017 vs. 2016
Interest expense, net	$	(60.9	)	$	(61.0	)		(0.1	)

Interest expense, net, totaled $60.9 million and $61.0 million, respectively, for the nine months ended September 30, 2017 and 2016. The decrease of $0.1 million, or 0.1 percent, was driven by the reduction in the principal balance of our term loan facility with the application of mandatory payments made each quarter and an increase in interest income. This decrease was partially offset by an increase in our interest rate, which is based on LIBOR.

	Nine Months Ended September 30,					Percent change
(in millions)	2017			2016		2017 vs. 2016
Income tax (expense) benefit	$	(24.8	)	$	1.4	NM	(1)

(1) Fluctuation in terms of percentage change is not meaningful.

We compute our income tax (expense) benefit on a quarterly basis by applying the estimated annual effective tax rate to income from recurring operations and taxable income. The provision for the nine months ended September 30, 2017 and 2016 differs from the statutory federal tax rate of 35% primarily due to the impact of state income taxes and expenses that are not deductible for income tax purposes. For 2017, the primary driver of this variance is the impact of costs relating to the evaluation of a potential spin-off transaction that are not deductible for income tax purposes. See “—Critical accounting policies and estimates—Income taxes” previously disclosed in our 2016 Form 10-K.

Segment results

	Nine Months Ended September 30,
(in thousands)	2017			2016
Revenues
Owned Hotels	$	661,748		$	688,345
Franchise and Management (1)		91,318			89,221
Segment revenues		753,066			777,566
Other revenues from franchised and managed properties		21,003			19,276
Corporate and other (2)		96,032			95,955
Intersegment elimination (3)		(103,750	)		(109,159	)
Total revenues	$	766,351		$	783,638
Adjusted EBITDA
Owned Hotels	$	208,955		$	228,154
Franchise and Management		91,318			89,221
Segment Adjusted EBITDA		300,273			317,375
Corporate and other		(33,594	)		(26,930	)
Adjusted EBITDA	$	266,679		$	290,445

(1) This segment includes intercompany fees which are charged to our owned hotels to reflect that certain functions, such as licensing and management, are included in the franchise and management segment. We charge a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of gross operating revenue for our owned hotels. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

(2) Includes revenues related to our brand management programs and other cost reimbursements. The portion of these fees that were charged to our owned hotels totaled $52.5 million and $55.3 million for each of the nine month periods ended September 30, 2017 and 2016, respectively. This includes a reservation fee of 2.0% of gross room revenues, which is reflected in corporate and other. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

(3) Includes management, license, franchise, BMF, Returns, reservation fees and other cost reimbursements totaling $103.8 million and $109.2 million for each of the nine month periods ended September 30, 2017 and 2016, respectively. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

Owned Hotels

Owned Hotels segment revenues decreased, primarily driven by a decrease of eight hotels in the owned hotel portfolio in comparison to the hotels owned at September 30, 2016. Refer to “Revenues—Owned hotels” within this section for further discussion on the decrease in revenues from our comparable owned hotels. Our Owned Hotels segment’s Adjusted EBITDA decrease was a result of decreased Owned Hotels segment revenues of approximately $26.6 million and an increase in direct lodging expenses of $4.1 million partially offset by a decrease in other lodging and operating expenses of $6.5 million. Refer to “Operating expenses” within this section for further discussion of the increase in operating expenses at our owned hotels.

Franchise and management

Franchise and management segment revenues increased by $2.1 million primarily as a result of the net addition of nine hotels to our franchise system. Additionally, the increase was a result of an increase in RevPAR of 4.4 percent at our comparable franchised hotels. Refer to “Revenues—Franchise and other fee-based revenues” within this section for further discussion of the increase in revenues from our comparable franchised hotels. Our Franchise segment’s Adjusted EBITDA decreased as a result of the overall increase in Franchise segment revenues.

Liquidity and Capital Resources

Overview

As of ~~September~~March 3031, ~~2017~~2018, we had total cash and cash equivalents of $~~180~~113.05 million. Our known liquidity requirements primarily consist of funds necessary to pay for operating expenses and other expenditures, including corporate expenses, taxes, payroll and related benefits, legal costs, operating costs associated with the operation of hotels, interest and scheduled principal payments on our outstanding indebtedness, potential payments related to our interest rate swap, capital expenditures for renovations and maintenance at our owned hotels, costs associated with our Spin and Merger and other purchase commitments.

45In April of 2014, we entered into a new credit agreement to refinance all of our then existing secured debt, which was to mature in July 2014. The credit agreement provides for senior secured credit facilities consisting of a then existing $2.1 billion senior secured term loan facility (of which approximately $1.7 billion was outstanding as of March 31, 2018), which will mature in 2021, and a $250.0 million senior secured revolving credit facility, $50.0 million of which is available in the form of letters of credit, which will mature in 2019. See “—Debt” for a further discussion of our credit agreement.

In ~~April~~addition, following consummation of ~~2014~~the IPO, wefor ~~entered~~federal ~~into~~income atax ~~new~~purposes, ~~credit~~our ~~agreement~~partnership toand ~~refinance~~REIT ~~all~~status ofterminated ~~our~~and ~~then~~we ~~existing~~became ~~secured~~subject ~~debt,~~to ~~which~~additional ~~was~~entity-level totaxes ~~mature~~at the federal and state level and, in ~~July~~our ~~2014.~~second ~~The~~quarter ~~credit~~of ~~agreement~~2014, ~~provides~~we ~~for~~established ~~senior~~the ~~secured~~related ~~credit~~net ~~facilities~~deferred ~~consisting~~tax ofliability aon ~~then~~our ~~existing~~books equal to $2321.1 ~~billion~~million. ~~senior~~In ~~secured~~November ~~term~~2014, ~~loan~~Blackstone ~~facility~~completed ~~(of~~a ~~which~~secondary ~~approximately~~offering ~~$1.7~~in ~~billion~~which ~~was~~it ~~outstanding~~registered asand ofsold ~~September~~23.0 ~~30,~~million ~~2017)~~of the Company’s shares, ~~which~~reducing ~~will~~its ~~mature~~ownership inpercentage ~~2021~~to 45.2%, and acreating ~~$250.0~~an ~~million~~ownership ~~senior~~change ~~secured~~for ~~revolving~~federal ~~credit~~income ~~facility,~~tax ~~$50~~purposes.0 ~~million~~As a result of ~~which~~this issecondary ~~available~~offering inand the ~~form~~resulting ofownership ~~letters~~change ofthe ~~credit,~~Company’s ~~which~~federal net operating losses (“NOLs”) will ~~mature~~be limited under Internal Revenue Code Section 382 with annual limitations that became applicable in 2015 and will continue through 2019. ~~See~~State ~~“—Debt”~~net operating loss carryforwards are also available for ause ~~further~~subject ~~discussion~~to ofsimilar ~~our~~limitations ~~credit~~in ~~agreement~~many cases. We believe it is more likely than not the benefit from the federal net operating losses will not be realized.

In addition, following consummation of the IPO in April of 2014, for federal income tax purposes, our partnership and REIT status terminated and we became subject to additional entity-level taxes at the federal and state level and, in our second quarter of 2014, we established the related net deferred tax liability in our books equal to $321.1 million. In November 2014, Blackstone completed a secondary offering in which it registered and sold 23.0 million of the Company’s shares, reducing its ownership percentage to 45.2%, and creating an ownership change for federal income tax purposes. As a result of this secondary offering and the resulting ownership change the Company’s federal net operating losses (“NOLs”) were limited under Internal Revenue Code Section 382 with annual limitations that became applicable in 2015 through 2019. State net operating loss carryforwards are also available for use subject to similar limitations in many cases.

We finance our business activities primarily with existing cash and cash generated from our operations. We believe that this cash will be adequate to meet anticipated requirements for operating expenses and other expenditures, including corporate expenses, payroll and related benefits, legal costs, and purchase commitments for the foreseeable future. The objectives of our cash management policy are to maintain the availability of liquidity and minimize operational costs.

We and our affiliates, and/or our major stockholders and their respective affiliates, may from time to time purchase our outstanding debt through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

The following table summarizes our net cash flows ~~and key metrics related to our liquidity~~:

	For the Nine Months Ended September 30,						Percent Change
	For the Three Months Ended March 31,						Percent Change
(in millions)	~~2017~~2018			~~2016~~2017			~~2017~~2018 vs. ~~2016~~2017
Net cash provided by operating activities	$	~~159.~~8.9		$	~~207~~25.30			(2264.94	)
Net cash used in investing activities		(~~126~~31.17	)		(3119.46	)	NM	61.7
Net cash used in financing activities		(144.35	)		(~~114.~~4.5	)		~~(87.5~~-	)

Our ratio of current assets to current liabilities was 1.4001 and 1.3615 as of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, respectively.

Operating activities

Net cash provided by operating activities was $~~159.~~8.9 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018, compared to $~~207~~25.30 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017. The $4716.51 million decrease was primarily driven by a decrease in results from operations ~~after accounting for impairment loss~~, its associated tax effect, and other noncash items. This decrease also includes the effects of timing in our various working capital components including other current assets, accrued payroll and employee benefits.

Investing activities

Net cash used in investing activities during the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 was $~~126~~31.17 million, compared to $3119.46 million during the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017. The $9412.71 million increase in cash used in investing activities was primarily attributable to ana ~~increase~~decrease in ~~capital~~proceeds ~~expenditures~~from ~~mainly~~sale ~~due~~of ~~to hotel renovations~~assets.

Financing activities

Net cash used in financing activities during the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 ~~was~~remained constant at $144.35 million, compared to ~~$114.4 million during~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017. ~~The $100.1 million decrease in cash used in financing activities was primarily attributable to share repurchases in the prior year.~~

Capital expenditures

During the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, we made capital expenditures of approximately $~~158~~40.42 million and $8946.82 million, respectively. ~~The increase was a result of the Company’s strategic initiative to drive consistency in our product.~~

As of ~~September~~March 3031, ~~2017~~2018, we had outstanding commitments under capital expenditure contracts of approximately $6831.51 million ~~for~~related ~~capital~~to ~~expenditures at~~ certain ~~owned~~continuing ~~hotels~~redevelopment and ~~for~~renovation projects and information technology enhancements. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.

During the third quarter of 2017, a number of our owned hotels sustained property damage due to Hurricanes Harvey and Irma. We are early in the evaluation process of assessing the impact of these natural disasters and are currently working with our insurance providers, claims adjusters and construction staff. Insurance claims will be made as determined through the evaluation process; however, insurance proceeds may not be received until next year and may not be sufficient to cover all losses. Capital expenditures will be made in order to restore these hotels to pre-hurricane condition and may be larger than normal due to the scope of the damage. Timing differences are likely to exist between the capital expenditures and insurance proceeds reflected in our financial statements.

Debt

In April of 2014, we refinanced all of our existing debt and accrued interest and related fees. As part of the refinancing, we entered into a credit agreement which provides for senior secured credit facilities consisting of:

•

a $2.1 billion senior secured term loan facility, which will mature in 2021; and

•

a $250.0 million senior secured revolving credit facility, which will mature in 2019. The revolving credit facility includes $50 million of borrowing capacity available for letters of credit and borrowing capacity for short-term borrowings referred to as the swing line borrowings.

In addition, the senior secured credit facilities also provide us with the option to raise incremental credit facilities, refinance the loans with debt incurred outside the credit agreement and extend the maturity date of the revolving credit facility and term loans, subject to certain limitations.

Borrowings under the term loans bear interest, at the Borrower’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 1/2 of 1.00% and (3) the LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the term loans is 2.00%, in the case of base rate loans, and 3.00% in the case of LIBOR rate loans, subject to one step-down of 0.25% upon the achievement of a consolidated first lien net leverage ratio (as defined in the credit agreement) of less than or equal to 4.50 to 1.00, subject to a base rate floor of 2.00%, and a LIBOR floor of 1.00%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and, as a result we realized the step-down of 0.25% after that date. As of March 6, 2018, our consolidated first lien net leverage ratio was greater than 4.50 to 1.00, and, as a result we realized a margin step-up of 0.25% after that date.

Borrowings under the revolving credit facility bear interest, at the Borrower’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 1/2 of 1.00% and (3) the LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the revolving credit facility is 1.50%, in the case of base rate loans, and 2.50%, in the case of LIBOR rate loans, subject to three step-downs of 0.25% each upon the achievement of a consolidated first lien net leverage ratio of less than or equal to 5.00 to 1.00, 4.50 to 1.00 and 4.00 to 1.00, respectively. As of March 2, 2015, we achieved a consolidated first lien net leverage ratio of less than 5.00 to 1.00, and after March 2, 2015 we realized the first step-down in margin of 0.25%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and, as a result we realized the second step-down inof 0.25% after that date. As of March 6, 2018, our consolidated first lien net leverage ratio was greater than 4.50 to 1.00, and, as a result we realized a margin step-up of 0.25% after that date.

On April 14, 2014, we entered into an interest rate swap agreement with an aggregate notional amount of $850.0 million that expires on April 14, 2019. This agreement swaps the LIBOR rate in effect under the new credit agreement for this portion of the loan to a fixed-rate of 2.0311%, which includes the 1% LIBOR floor. We have elected to designate this interest rate swap as a cash flow hedge for accounting purposes.

If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to reduce capital expenditures or refinance all or a portion of our existing debt. Our ability to make scheduled principal payments and to pay interest on our debt depends on the future performance of our operations, which is subject to general conditions in or affecting the

4739

hotel industry that are beyond our control. See “Risk Factors—Risks related to our business and industry” and “Risk Factors—Risks relating to our indebtedness” in our ~~2016~~2017 Form 10-K.

Contractual obligations

There have been no significant changes in our contractual obligations since December 31, ~~2016~~2017 and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual obligations” in our ~~2016~~2017 Form 10-K is incorporated herein by reference.

Off-balance sheet arrangements

We do not have off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Under certain franchise agreements, we have committed to provide certain incentive payments, reimbursements, rebates and other payments, to help defray the costs of construction, marketing and other costs associated with opening and operating a La Quinta hotel.

New Accounting Pronouncements

See Note 2 of the notes to our condensed consolidated financial statements for a description of new accounting pronouncements.

Critical accounting policies and estimates

The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the consolidated financial statements and accompanying footnotes. On an ongoing basis, we evaluate these estimates and judgments based on historical experiences and various other factors that are believed to reflect the current circumstances. While we believe our estimates, assumptions and judgments are reasonable, they are based on information presently available. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” ~~incorporated by reference~~ in ~~Item 8.01 of~~ our 2017 Form 810-K filed ~~July~~February 2628, ~~2017~~2018 ~~(the “Recast Form 8-K”)~~ describes the critical accounting estimates used in preparation of our consolidated financial statements. Actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material impact on financial position or results of operations. There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our ~~Recast~~2017 Form 810-K.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk primarily from changes in interest rates, which may impact future income, cash flows and fair value of the Company, depending on changes to interest rates. In certain situations, we may seek to reduce cash flow volatility associated with changes in interest rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged. We enter into derivative financial arrangements to the extent they meet the objective described above, or are required by the terms of our debt facilities, and we do not use derivatives for trading or speculative purposes.

Interest rate risk

We are exposed to interest rate risk under our credit agreement, as the interest is floating rate based on LIBOR, subject to a 1% LIBOR floor. On April 14, 2014, we entered into an interest rate swap agreement with an aggregate notional amount of $850.0 million that expires on April 14, 2019. This agreement swaps the LIBOR rate in effect under the new credit agreement for this portion of the loan to a fixed-rate of 2.0311%, which includes the 1% LIBOR floor. We have elected to designate this interest rate swap as a cash flow hedge for accounting purposes. The 30-day LIBOR rate increased from 01.7256 percent per annum at December 31, ~~2016~~2017 to 1.2388 percent at ~~September~~March 3031, ~~2017~~2018. Changes in interest rates also affect the fair value of our debt.

48The following table sets forth the scheduled maturities and the total fair value as of March 31, 2018 for our financial instruments that were materially affected by interest rate risks (in millions, excluding average interest rate):

The following table sets forth the scheduled maturities and the total fair value as of September 30, 2017 for our financial instruments that were materially affected by interest rate risks (in millions, excluding average interest rate):

	Maturities by period												Carrying			Fair
	2018		2019		2020		2021		2022		Thereafter		value			value
Term Facility	$	13.1	$	17.5	$	17.5	$	1,636.9	$	-	$	-	$	1,685.0		$	1,692.8
Weighted average interest rate ⁽¹⁾														4.832	%

	Maturities by period												Carrying			Fair
	2017		2018		2019		2020		2021		Thereafter		value			value
Term Facility	$	4.3	$	17.5	$	17.5	$	17.5	$	1,634.1	$	-	$	1,690.9		$	1,710.6
Weighted average interest rate (1)														4.384	%

(1) Weighted average interest rate as of ~~September~~March 3031, ~~2017~~2018, which includes the interest rate swap.

Refer to our Note 7: “Fair Value Measurements” in the unaudited condensed consolidated financial statements included elsewhere in this report for further discussion of the fair value measurements of our financial assets and liabilities.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of ~~September~~March 3031, ~~2017~~2018, the Company’s management has evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired controls objectives. Based upon that evaluation, the Company’s principal executive officer and principal financial officer have concluded that, as of ~~September~~March 3031, ~~2017~~2018, the Company’s disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in the internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) of the Company that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of the Company.

4941

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

OnThree ~~April~~putative 25class action lawsuits were filed on March 8, ~~2016~~2018, aMarch ~~purported~~9, ~~stockholder~~2018 ~~class~~and ~~action~~March ~~lawsuit~~19, ~~captioned~~2018, ~~Beisel~~by purported stockholders of the Company in the United States District Court for the Northern District of Texas challenging the Merger. The lawsuits are styled Cunha v. La Quinta Holdings Inc., et al., ~~was~~Rosenblatt ~~filed~~v. inLa ~~the~~Quinta UHoldings, Inc.S, et al. ~~District~~and ~~Court~~Bushansky ~~for~~v. ~~the~~La ~~Southern~~Quinta ~~District~~Holdings, ofInc., ~~New~~et ~~York~~al (the “Actions”). OnAll ~~July~~of ~~22,~~these ~~2016,~~complaints ~~the~~allege ~~court~~violations ~~appointed~~of ~~lead~~Sections ~~plaintiff~~14(a) and 20(~~“plaintiff”~~a), of the Exchange Act and, onRule ~~December~~14a-9 ~~30,~~promulgated ~~2016,~~thereunder ~~plaintiff~~in ~~filed~~connection with the ~~operative~~Merger. The Rosenblatt complaint onnames ~~behalf~~the ofCompany ~~purchasers~~and ofits directors as defendants; the Cunha complaint names the Company’s ~~common~~and ~~stock~~its ~~from~~directors ~~November~~as ~~19,~~well ~~2014~~as ~~through~~Merger ~~February~~Sub ~~24,~~and ~~2016~~Wyndham (Worldwide; and the ~~“Class~~Bushansky ~~Period”)~~complaint names the Company and onits ~~behalf~~directors ofas adefendants. ~~subclass~~The ~~who~~complaints ~~purchased~~allege that the ~~Company’s~~proxy ~~common~~statement ~~stock~~filed ~~pursuant~~by to the Company’s ~~March~~is 24materially incomplete and misleading. The complaints seek, ~~2015~~among ~~secondary~~other ~~public~~relief, ~~offering~~either (an order enjoining the ~~“March~~Merger ~~Secondary~~or ~~Offering”)~~rescission if the Merger is consummated. The Bushansky complaint ~~alleges,~~also ~~among~~seeks ~~other~~to ~~things,~~enjoin ~~that,~~the instockholder ~~violation~~vote ofon the ~~federal~~Merger. ~~securities~~On ~~laws~~April 16, 2018, the ~~registration~~parties ~~statement~~to ~~and~~the ~~prospectus~~Actions ~~filed~~(the in“Settling ~~connection~~Parties”) ~~with~~entered into the ~~March~~confidential ~~Secondary~~Memorandum ~~Offering~~of ~~contained~~Understanding ~~materially~~providing ~~false~~for ~~and~~the ~~misleading~~settlement ~~information~~of orthe ~~omissions~~Actions. ~~and~~The Company believes that the ~~Company~~lawsuits asare ~~well~~without asmerit ~~certain~~and ~~current~~that ~~and~~no ~~former~~further ~~officers~~disclosure ~~made~~is ~~false~~required ~~and~~to ~~misleading~~supplement ~~statements~~the proxy statement disclosed in ~~earnings~~the ~~releases~~Company’s ~~and~~definitive tomerger ~~analysts~~proxy ~~during~~statement filed with the ~~Class~~SEC ~~Period. Plaintiff~~on ~~seeks~~March ~~unspecified~~20, ~~compensatory~~2018 ~~damages~~(as ~~and~~amended ~~other~~or ~~relief.~~supplemented Onfrom ~~February~~time ~~10,~~to ~~2017~~time, ~~defendants~~the ~~filed~~“proxy astatement”) ~~motion~~under applicable laws; however, to ~~dismiss~~eliminate the ~~complaint.~~burden, Onexpense ~~August~~and 24uncertainties inherent in such litigation, ~~2017~~and without admitting any liability or wrongdoing, the ~~motion~~Company has agreed, pursuant to ~~dismiss~~the ~~was~~terms ~~granted~~of ~~with~~the ~~prejudice.~~confidential ~~Subsequently~~Memorandum of Understanding, onto ~~September~~make ~~20,~~certain ~~2017,~~supplemental ~~plaintiff~~disclosures ~~filed~~to the proxy statement. Nothing in these supplemental disclosures shall be deemed an ~~appeal~~admission ~~with~~of the ~~U.S.~~legal ~~Court~~necessity or materiality under applicable laws of ~~Appeals~~any ~~for~~of the ~~Second~~disclosures ~~Circuit~~set forth therein. The ~~Company~~defendants ~~believes~~have vigorously denied, and continue vigorously to deny, that ~~the~~they ~~putative~~have ~~class~~committed ~~action~~any ~~lawsuit~~violation isof ~~without~~law ~~merit~~or ~~and~~engaged ~~intends~~in toany ~~defend~~of the ~~lawsuit~~wrongful ~~vigorously;~~acts ~~however,~~that ~~there~~were ~~can~~alleged bein nothe ~~assurance~~Actions. ~~regarding~~The ~~the~~confidential ~~ultimate~~Memorandum ~~outcome~~of Understanding outlines the terms of ~~this~~the ~~lawsuit~~Settling Parties’ agreement in principle to settle and release all claims which were or could have been asserted in the Actions.

Item 1A.

Risk Factors

There have been no material changes to our principal risks that we believe are material to our business, results of operations and financial condition from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017, which is accessible on the SEC’s website at www.sec.gov.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
7/1/17-7/31/17		—	$	—		—	$	—
1/1/18-1/31/18		989	$	18.47		—	$	—
8/1/17-8/31/17		2,468		15.37		—		—
2/1/18-2/28/18		—		—		—		—
9/1/17-9/30/17		168		15.75		—		—
3/1/18-3/31/18		—		—		—		—
Total		~~2,636~~989	$	1518.3947		—	$	—

(1) ~~Includes~~All ~~2,468~~of ~~shares~~these ~~for the period from August 1 through August 31, and 168~~ shares ~~from~~were ~~the period September 1 through September 30, respectively,~~ repurchased to satisfy tax withholding obligations incurred upon the vesting of restricted stock awarded under the Company’s Amended and Restated 2014 Omnibus Incentive Plan.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.Other Information

None.

Item 6.

Exhibits

The following is a list of all exhibits filed or furnished as part of this report:

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of January 17, 2018, by and among Wyndham Worldwide Corporation, WHG BB Sub, Inc. and La Quinta Holdings Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on January 18, 2018 (File no. 001-36412))
2.2	Separation and Distribution Agreement, dated as of January 17, 2018, by and between La Quinta Holdings Inc. and CorePoint Lodging Inc. (incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed on January 18, 2018 (File no. 001-36412))
10.1	Employee Matters Agreement, dated as of January 17, 2018, by and between La Quinta Holdings Inc. and CorePoint Lodging Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 18, 2018 (File no. 001-36412))
10.2	La Quinta Holdings Inc. Project Longhorn Retention Bonus Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 2, 2018 (File no. 001-36412))
31.1	Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LA QUINTA HOLDINGS INC.
	(Registrant)
Date: November 1, 2017	By:	/s/ Keith A. Cline
Date: May 8, 2018	By:	/s/ Keith A. Cline
		Keith A. Cline
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: November 1, 2017	By:	/s/ James H. Forson
Date: May 8, 2018	By:	/s/ James H. Forson
		James H. Forson
		Executive Vice President, Chief Financial Officer, and Treasurer
		(Principal Financial and Accounting Officer)

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Filing Compare · La Quinta Holdings Inc.