Temple Hotels Inc. Reports 2017 Financial Results
MISSISSAUGA, ON, Feb. 21, 2018 /CNW/ - Temple Hotels Inc. ("Temple" or the "Company") (TSX: TPH) today reported its financial results for the year ended December 31, 2017. The following comments in regard to the financial position and operating results of Temple should be read in conjunction with Management's Discussion & Analysis and the financial statements for the year ended December 31, 2017, which may be obtained from the Temple website at www.templehotels.ca or the SEDAR website at www.sedar.com.
Monetary data in the tables of this press release, unless otherwise indicated, are in thousands of Canadian dollars, except for per common share, average daily rate ("ADR"), and revenue per available room ("RevPar") amounts.
2017 KEY POINTS/HIGHLIGHTS
- Revenue increased by $3.4 million or 2% during the year ended December 31, 2017 compared to 2016, primarily due to an increase in revenue within the Other Canada and Fort McMurray portfolios of $3.8 million and $0.9 million, respectively, partially offset by decreases in revenue of $0.7 million within each of the Sold Property and Other Alberta portfolios.
- During 2017, the ADR and occupancy levels of the Other Canada segment increased by $4.10 and 1%, respectively to $144.04 and 71%, in comparison to 2016. Improved occupancy levels in the Fort McMurray portfolio by 9% to 48%, in comparison to 2016, also contributed to the increase in revenue.
- Hotel operating income decreased by $1.7 million or 4% during the year ended December 31, 2017 compared to 2016, primarily due to a decrease in hotel operating income within the Fort McMurray, Other Alberta and Sold Property portfolios of $1.7 million, $0.8 million and $0.1 million, respectively, offset by an increase in hotel operating income within the Other Canada portfolio of $1.0 million.
- FFO increased by $2.4 million during the year ended December 31, 2017, compared 2016. On a basic per common share basis, FFO decreased by $0.31 per common share, compared to 2016, primarily as a result of an increase in the weighted number of common shares outstanding.
- On September 15, 2017, Temple completed the sale of Holiday Inn Express, Sherwood Park, Alberta, for gross proceeds of $9.7 million.
- On January 3, 2017, the Company repaid the 8.00% Series C convertible debentures in the amount of $22.8 million.
- On June 30, 2017, the Company repaid the 7.75% Series D convertible debentures in the amount of $34.3 million.
- On October 2, 2017, the Series E convertible debentures were extended from their maturity date of September 30, 2017 to September 30, 2020. In addition, as part of the extension, Temple redeemed $2.3 million of the principal amount of the Series E debentures outstanding, and the conversion price decreased from $40.08 to $9.75 per common share of Temple.
- On June 22, 2017, the Company's common shares were consolidated on the basis of one (1) post-consolidation common share for six (6) pre-consolidation common shares.
OPERATING RESULTS
| Year Ended December 31 |
|||
| 2017 |
2016 |
||
| Total revenue |
$165,612 |
$162,236 |
|
| Hotel operating income |
$42,885 |
$44,548 |
|
| Provision for impairment |
($18,607) |
($104,850) |
|
| Net loss |
($23,033) |
($133,177) |
|
| Net loss per common share - basic and diluted |
($0.91) |
($9.81) |
|
| Cash flow provided by operating activities |
$11,873 |
$17,382 |
|
| Funds from operations |
$14,051 |
$11,640 |
|
| Per common share |
|||
| ‑ Funds from operations |
$0.55 |
$0.86 |
|
| Weighted average number of common shares |
25,348,718 |
13,573,459 |
|
| Occupancy |
62% |
59% |
|
| ADR |
$138.88 |
$139.81 |
|
| RevPar |
$85.70 |
$82.71 |
|
Operating Activities
- Net Loss ‑ Temple completed 2017 with a net loss of $23.0 million, compared to a net loss of $133.2 million during 2016. The decrease in net loss is mainly due to a decrease in provision for impairment of $86.2 million, an increase in deferred income tax recovery of $15.1 million, a decrease in depreciation of $6.5 million and a decrease in interest expense of $3.5 million, partially offset by a decrease in hotel operating income of $1.7 million.
- Occupancy and ADR – The increase in revenue primarily reflects the higher occupancy and ADR levels within the Other Canada segment. During 2017, the ADR and occupancy levels of the Other Canada segment increased by $4.10 and 1%, respectively to $144.04 and 71%, in comparison to 2016. Improved occupancy levels in the Fort McMurray portfolio by 9% to 48%, in comparison to 2016, also contributed to the increase in revenue. The increase in revenue was partially offset by lower ADR within the Other Alberta segment the Fort McMurray portfolio in 2017 compared to 2016, as a result of the unfavourable market conditions continuing to affect oil-dependent markets in Alberta.
- Cash Provided by Operating Activities – Cash provided by operating activities decreased by $5.5 million in 2017, compared to 2016. After excluding working capital adjustments, cash provided by operating activities increased by $1.5 million, compared to 2016.
- Funds from Operations ("FFO") – During 2017, FFO increased by $2.4 million, compared to 2016. The increase in FFO mainly reflects a decrease in interest expense as well as higher other income, partially offset by a decrease in hotel operating income due to the factors noted above. On a basic per common share basis, FFO decreased by $0.31 per common share compared to 2016.
- Asset Impairment – During 2017, a non-cash provision for impairment of $17.5 million (net of a recovery of $2.0 million) was recorded to reflect the impact of the economic condition on the carrying value primarily at three of Temple's hotel properties and a recovery of impairment at one hotel.
Liquidity and Financing Activities
As of December 31, 2017, the unrestricted cash balance of Temple was $11.4 million and working capital was $3.8 million.
- On January 3, 2017, the Company fully repaid upon maturity the 8.00% Series C convertible debentures in the amount of $22.8 million.
- On June 30, 2017, the Company fully repaid upon maturity the 7.75% Series D convertible debentures in the amount of $34.3 million.
- On October 2, 2017, the Series E convertible debentures were extended from its maturity date of September 30, 2017 to September 30, 2020. In addition, as part of the extension, Temple redeemed $2.3 million of the principal amount of the Series E debentures outstanding, which represents approximately 5% of the issued and outstanding Series E debentures, and the conversion price decreased from $40.08 to $9.75 per common share of Temple.
- During January 2017, the Company repaid two mortgage loans at two properties in the amount of $10.7 million.
- During June 2017, the Company completed the financing of two properties in the amount of $15.6 million. The loan bears interest at either prime plus 2.50% or bankers' acceptance plus 3.50% for a term of two years.
- During June 2017, the Company extended a mortgage portfolio comprising three loans at their maturing amount of $37.5 million, at prime plus 4.00% for a term of one year.
- During June 2017, the Company refinanced a hotel property located in Sudbury, Ontario, at its maturing amount of $8.4 million, at an interest rate of 4.69% for a term of seven years.
- On August 14, 2017, the Company refinanced a five-loan mortgage portfolio with the incumbent lender. The five loans are cross collateralized and three of the loans were refinanced for a five year term at an interest rate of 5.20% and are not subject to any financial covenants during the first 12 months of the term. As a condition of refinancing, the Company paid down the maturing, aggregate balance by $7.5 million. The fourth mortgage loan of five in the portfolio does not mature until November 2019, and the fifth was subsequently discharged on the disposal of Holiday Inn Express, Sherwood Park, Alberta.
- During November 2017, the Company refinanced a hotel property located in Saskatoon, Saskatchewan, at its maturing amount of $22.7 million, at an interest rate of 6.99% for a term of one year.
- During December 2017, the Company refinanced a hotel property located in Mississauga, Ontario, at its maturing amount of $11.7 million, at an interest rate of prime plus 1.25%, maturing in June 2022. In addition, the Company entered into a credit facility with the incumbent lender for $2.5 million, secured by the hotel property, which as at December 31, 2017, has not been drawn upon.
- During December 2017, the Company refinanced a hotel property located in Regina, Saskatchewan, at its maturing amount of $9.6 million, at an interest rate of 4.72% for a term of three years.
- On September 15, 2017, Temple completed the sale of Holiday Inn Express, Sherwood Park, Alberta, for gross proceeds of $9.7 million and net proceeds of approximately $0.3 million, after repayment of the first mortgage loan and sale costs.
Investing Activities
The investing activities of Temple resulted in a net cash inflow of $5.4 million during 2017. Investing activities primarily reflect the proceeds from the sale of property and equipment and the cash distribution on equity investments, partially offset by cash outflows related to capital expenditures on hotel properties.
Debt Covenants
At December 31, 2017, the Company was not in compliance with debt service covenants affecting seven mortgage loans (December 31, 2016 – nine) in the aggregate amount of $109.3 million (December 31, 2016 – $139.2 million). Management has been working with lenders throughout the year and the remaining loan covenant breaches are expected to be resolved by debt refinancings, loan modification agreements and/or a waiver of the covenant requirements.
ANALYSIS OF OPERATING RESULTS
| Analysis of Net Loss |
||||||
| Year Ended |
||||||
| December 31 |
||||||
| 2017 |
2016 |
Increase/ (Decrease) in Income |
||||
| Revenue |
||||||
| Room revenue |
$120,831 |
$117,692 |
$3,139 |
|||
| Other hotel revenue |
44,781 |
44,544 |
237 |
|||
| Total revenue |
165,612 |
162,236 |
3,376 |
|||
| Hotel operating costs |
122,727 |
117,688 |
(5,039) |
|||
| Hotel operating income |
42,885 |
44,548 |
(1,663) |
|||
| Interest expense |
28,609 |
32,121 |
3,512 |
|||
| Other expense (income) |
(1,236) |
(914) |
322 |
|||
| Share based compensation |
133 |
311 |
178 |
|||
| General and administrative expenses |
3,277 |
3,235 |
(42) |
|||
| Depreciation and amortization |
17,745 |
24,233 |
6,488 |
|||
| (5,643) |
(14,438) |
8,795 |
||||
| Equity income on investment in hotel properties |
1,170 |
1,031 |
139 |
|||
| Provision for impairment |
(18,607) |
(104,850) |
86,243 |
|||
| Change in fair value of financial instruments: gain |
- |
90 |
(90) |
|||
| Deferred income tax recovery (expense) |
47 |
(15,010) |
15,057 |
|||
| Net loss and comprehensive loss |
($23,033) |
($133,177) |
$110,144 |
|||
| Per Common Share Results: |
||||||
| Basic and diluted |
($0.91) |
($9.81) |
||||
Hotel Revenue
| Analysis of Total Hotel Revenues |
|||||||||||||||
| Year Ended December 31 |
|||||||||||||||
| 2017 |
2016 |
Increase/ (Decrease) |
|||||||||||||
| Same Property |
|||||||||||||||
| Fort McMurray |
|||||||||||||||
| Room revenue |
$ |
22,326 |
$ |
20,610 |
$ |
1,716 |
|||||||||
| Other hotel revenue |
1,342 |
2,139 |
(797) |
||||||||||||
| $ |
23,668 |
$ |
22,749 |
$ |
919 |
||||||||||
| Other Alberta |
|||||||||||||||
| Room revenue |
$ |
17,058 |
$ |
17,749 |
$ |
(691) |
|||||||||
| Other hotel revenue |
18,150 |
18,116 |
34 |
||||||||||||
| $ |
35,208 |
$ |
35,865 |
$ |
(657) |
||||||||||
| Other Canada |
|||||||||||||||
| Room revenue |
$ |
79,619 |
$ |
76,841 |
$ |
2,778 |
|||||||||
| Other hotel revenue |
25,260 |
24,251 |
1,009 |
||||||||||||
| $ |
104,879 |
$ |
101,092 |
$ |
3,787 |
||||||||||
| Total ‑ Same Property |
|||||||||||||||
| Room revenue |
$ |
119,003 |
$ |
115,200 |
$ |
3,803 |
|||||||||
| Other hotel revenue |
44,752 |
44,506 |
246 |
||||||||||||
| Total hotel revenue |
$ |
163,755 |
$ |
159,706 |
$ |
4,049 |
|||||||||
| Total ‑ Sold Property |
|||||||||||||||
| Room revenue |
$ |
1,828 |
$ |
2,492 |
$ |
(664) |
|||||||||
| Other hotel revenue |
29 |
38 |
(9) |
||||||||||||
| Total hotel revenue |
$ |
1,857 |
$ |
2,530 |
$ |
(673) |
|||||||||
| Room revenue |
$ |
120,831 |
$ |
117,692 |
$ |
3,139 |
|||||||||
| Other hotel revenue |
44,781 |
44,544 |
237 |
||||||||||||
| Total hotel revenue |
$ |
165,612 |
$ |
162,236 |
$ |
3,376 |
|||||||||
During 2017, Same Property room revenue increased by $3.8 million or 3%, compared to 2016. The increase is comprised of a $2.8 million (4%) increase in the Other Canada portfolio and a $1.7 million (8%) increase in the Fort McMurray portfolio, offset by a $0.7 million (4%) decrease in the Other Alberta portfolio.
The increase in Same Property room revenue during 2017, compared to 2016, is largely due to an increase in occupancy and RevPar for the Other Canada segment and an increase in occupancy and RevPar for the Fort McMurray segment, as 2016 was negatively impacted by wildfires and mandatory evacuation, which led to a period of hotel closures due to the repair and remediation of properties in Fort McMurray, offset by unfavourable market conditions affecting oil‑dependent markets in the Other Alberta segment.
Room Revenue Statistics
As disclosed in the following chart, for the year ended December 31, 2017, RevPar for the Same Property portfolio was $85.81, compared to $82.93 for the year ended December 31, 2016.
RevPar for Same Property portfolio results generally reflect increased occupancy levels across all regions as well as an increase in ADR within the Other Canada segment, partially offset by reduced ADR levels in the Fort McMurray and Other Alberta segments.
| Room Revenue Statistics |
||||||||||||||||
| Year Ended December 31 |
||||||||||||||||
| 2017 |
2016 |
|||||||||||||||
| Occ |
ADR |
RevPar |
Occ |
ADR |
RevPar |
|||||||||||
| Same Property |
||||||||||||||||
| Fort McMurray |
48% |
$ |
138.35 |
$ |
65.92 |
39% |
$ |
152.99 |
$ |
60.29 |
||||||
| Other Alberta |
52% |
$ |
120.09 |
$ |
61.98 |
51% |
$ |
125.42 |
$ |
64.39 |
||||||
| Other Canada |
71% |
$ |
144.04 |
$ |
101.93 |
70% |
$ |
139.94 |
$ |
98.27 |
||||||
| Total – Same Property |
62% |
$ |
139.00 |
$ |
85.81 |
59% |
$ |
139.98 |
$ |
82.93 |
||||||
| Sold Property |
60% |
$ |
131.42 |
$ |
79.01 |
57% |
$ |
133.03 |
$ |
75.70 |
||||||
| Overall Portfolio |
62% |
$ |
138.88 |
$ |
85.70 |
59% |
$ |
139.81 |
$ |
82.71 |
||||||
The above chart does not reflect the operating results for the Cortona Residence, which is 100% leased at an annual net rent of $2.1 million.
Other Hotel Revenue
In 2017, other hotel revenue in the Same Property portfolio increased by $0.2 million or 1%, compared to 2016, mainly comprised of an increase of $1.0 million from the Other Canada portfolio, partially offset by a decrease of $0.8 million from the Fort McMurray portfolio.
Notwithstanding the above, the Sheraton Red Deer was the most significant contributor to other hotel revenue in the Same Property portfolio during 2017, accounting for $13.9 million or 31% of other hotel revenue.
Operating Income and Profit Margin
| Operating Income and Profit Margin |
|||||||||
| Year Ended December 31 |
|||||||||
| Operating Income |
Operating Profit Margin |
||||||||
| 2017 |
2016 |
2017 |
2016 |
||||||
| Same Property |
|||||||||
| Fort McMurray |
$ |
8,298 |
$ |
10,010 |
35% |
44% |
|||
| Other Alberta |
4,986 |
5,782 |
14% |
16% |
|||||
| Other Canada |
29,118 |
28,149 |
28% |
28% |
|||||
| Total ‑ Same Property |
$ |
42,402 |
$ |
43,941 |
26% |
28% |
|||
| Sold Property |
483 |
607 |
26% |
24% |
|||||
| Total portfolio |
$ |
42,885 |
$ |
44,548 |
26% |
27% |
|||
After accounting for the increase in total revenues and the increase in hotel operating costs, total operating income decreased by $1.7 million or 4% in 2017, compared to 2016, comprised of decrease of $1.5 million or 4% for the Same Property portfolio and a decrease of $0.1 million due to the Sold Property. The decrease in Same Property operating income reflects a $1.7 million, or 17%, decrease in operating income for the Fort McMurray segment and a $0.8 million, or 14%, decrease in operating income for the Other Alberta segment, offset by a $1.0 million, or 3%, increase in operating income for the Other Canada segment.
As disclosed in the preceding chart, the overall profit margin of the entire hotel portfolio decreased 1% from 27% to 26% for 2017 as compared to 2016.
ABOUT TEMPLE
Temple is a growth oriented hotel investment company with hotel properties located across Canada. Temple is listed on the Toronto Stock Exchange under the symbols TPH (common shares), TPH.DB.E and TPH.DB.F (convertible debentures). The primary long‑term investment objectives of the Company are to yield stable and growing cash flows and to maximize the long‑term share value of the Company through the active management of its assets, accretive acquisitions, and the performance of value‑added capital improvement programs on selected properties, as deemed appropriate. For further information on Temple, please visit our website at www.templehotels.ca.
This press release contains certain statements that could be considered as forward-looking information. The forward-looking information is subject to certain risks and uncertainties, which could result in actual results differing materially from the forward-looking statements.
SOURCE Temple Hotels Inc.
K. Rai Sahi, FCA, FCGA, Chief Executive Officer, or Paul Miatello, CA, CPA, Chief Financial Officer, Tel: (905) 281-3800, Fax: (905) 281-5890, Email: [email protected]
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