Temple Hotels Inc. Reports 2018 First Quarter Financial Results

MISSISSAUGA, ON, May 7, 2018 /CNW/ – Temple Hotels Inc. (“Temple” or the “Company”) (TSX: TPH) today reported its financial results for the three months ended March 31, 2018. 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 three months ended March 31, 2018, 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.

Q1 2018 KEY POINTS/HIGHLIGHTS

• On February 23, 2018, the Company entered into a credit facility with Morguard Corporation (“Morguard”), a related party, in the amount of $35.0 million (“Credit Facility B”), for a term of three years, and bears interest at the rate of 6.5% per annum. As at March 31, 2018, the amount drawn on Credit Facility B was $35.0 million.
• Subsequent to March 31, 2018, the Company fully repaid the 7% Series F convertible debentures in the amount of $34.4 million.
• Revenue increased $1.0 million or 3% during the three months ended March 31, 2018 compared to 2017, primarily due to increases in revenue within the Other Canada, Other Alberta, and Fort McMurray portfolios of $0.6 million, $0.6 million and $0.4 million, respectively, partially offset by a decrease within the Sold Property portfolio of $0.6 million.
• Hotel operating income increased by $0.1 million or 2% during the three months ended March 31, 2018 compared to 2017, primarily due to an increase in hotel operating income within the Other Alberta and Other Canada portfolios of $0.2 million and $0.2 million, respectively, partly offset by a decrease in hotel operating income within the Sold Property and Fort McMurray portfolios of $0.2 million and $0.1 million, respectively.
• FFO increased by $0.2 million during the three months ended March 31, 2018, compared to the three months ended March 31, 2017. On a basic per common share basis, FFO increased by $0.01 per common share, compared to the first quarter of 2017.

OPERATING RESULTS

 

Operating Activities

• Net Loss ‑ Temple completed the first quarter of 2018 with a net loss of $4.7 million, compared to a net loss of $5.6 million during the same period in 2017. The decrease in net loss is mainly due a decrease in depreciation of $0.9 million, an increase in hotel operating income of $0.1 million, and a decrease in interest expense of $0.1 million, partly offset by an increase in other expense of $0.2 million and an increase in deferred income tax expense of $0.2 million. On a per common share basis, the net loss was $0.19 for the first quarter of 2018, compared to $0.22 during the first quarter of 2017.

• Occupancy and ADR – The increase in hotel operating income primarily reflects higher ADR and occupancy levels within the Other Canada segment as well as higher occupancy levels within the Other Alberta and Fort McMurray segments. In the first quarter of 2018, the occupancy levels at all the Company’s segments increased, leading to an increase in RevPar at all segments in comparison to the first quarter of 2017. Reduced ADR levels within the Other Alberta and Fort McMurray segments partially offset the increase in occupancy as a result of the unfavourable market conditions which continue to affect oil-dependent markets in Alberta.

• Cash Provided by Operating Activities ‑ Cash provided by operating activities increased by $5.6 million during the first quarter of 2018, compared to the first quarter of 2017. Excluding working capital adjustments, cash provided by operating activities decreased by $0.1 million, compared to 2017.

• Funds from Operations (“FFO”) ‑ During the first quarter of 2018, FFO increased by $0.2 million, compared to the first quarter of 2017. On a basic per common share basis, FFO increased by $0.01 per common share, compared to the first quarter of 2017.

Liquidity and Financing Activities

As of March 31, 2018, the unrestricted cash balance of Temple was $48.2 million and working capital was $39.3 million.

• On February 23, 2018, the Company entered into Credit Facility B with Morguard in the amount of $35.0 million. As at March 31, 2018, the amount drawn on Credit Facility B was $35.0 million.
• Subsequent to March 31, 2018, the Company fully repaid the 7% Series F convertible debentures in the amount of $34.4 million.
• Subsequent to March 31, 2018, the Company borrowed an additional $17.0 million under its existing revolving loan agreement with Morguard (“Credit Facility A”) and the Company used the proceeds to repay a second mortgage secured by three properties in Nova Scotia, in the amount of $16.0 million which had an interest rate of 5.0%.
• During the three months ended March 31, 2018, 99,684 common shares were purchased for cash consideration of $0.3 million at a weighted average price of $2.60 per common share under the normal course issuer bid.

Investing Activities

The investing activities of Temple resulted in a net cash ouflow of $3.3 million during the first quarter of 2018. Investing activities primarily reflect cash outflows related to capital expenditures on hotel properties.

Debt Covenants

At March 31, 2018, the Company was not in compliance with debt service covenants affecting seven mortgage loans (December 31, 2017 – seven) in the aggregate amount of $108.0 million (December 31, 2017 – $109.3 million). The 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

 

Hotel Revenue

 

During the first quarter of 2018, Same Property room revenue increased by $1.2 million or 5%, compared to the first quarter of 2017. The increase is comprised of a $0.5 million (10%) increase in the Fort McMurray portfolio, a $0.4 million (3%) increase in the Other Canada portfolio, and a $0.3 million (9%) increase in the Other Alberta portfolio.

The increase in Same Property room revenue during the first quarter of 2018, compared to the first quarter of 2017, is largely due to an increase in occupancy and RevPar at all the Company’s segments. Reduced ADR levels within the Other Alberta and Fort McMurray segments partially offset the increase in occupancy as a result of the unfavourable market conditions which continue to affect oil-dependent markets in Alberta. 

Room Revenue Statistics

As disclosed in the following chart, for the three months ended March 31, 2018, RevPar for the Same Property portfolio was $75.93, compared to $72.24 for the three months ended March 31, 2017. RevPar for Same Property portfolio results generally reflect increased occupancy levels at all the Company’s segments.

Occupancy at the Fort McMurray properties increased during the first quarter of 2018 compared to the first quarter of 2017, but is still impacted by the unfavourable market conditions in Alberta. Over time, it is expected that those involved in the rebuilding will create demand for accommodation, putting upward pressure on occupancy rates.

 

The above chart does not reflect the operating results for the Cortona Residence, which was 100% leased at an annual net rent of $2.1 million until April 30, 2018.

Other Hotel Revenue

During the first quarter of 2018, other hotel revenue in the Same Property portfolio increased by $0.3 million or 3%, compared to the first quarter of 2017, comprised of an increase of $0.2 million from the Other Alberta properties and an increase of $0.2 million from the Other Canada portfolio, partly offset by a decrease of $0.1 million from the Fort McMurray portfolio.

Notwithstanding the above, the Sheraton Red Deer was the most significant contributor to other hotel revenue in the overall portfolio during the first quarter of 2018, accounting for $3.9 million or 35% of other hotel revenue.

Operating Income and Profit Margin

 

After accounting for the increase in total revenues and the increase in hotel operating costs, total operating income increased by $0.1 million or 2% during the first quarter of 2018, compared to the first quarter of 2017, comprised of an increase of $0.3 million, or 4% for the Same Property portfolio and a decrease of $0.2 million due to the Sold Property. The increase in Same Property operating income reflects an increase of $0.2 million or 17% in operating income for the Other Alberta segment and a $0.2 million or 3% increase in operating income for the Other Canada segment, partially offset by a decrease of $0.1 million or 4% for the Fort McMurray segment.

As disclosed in the preceding chart, the overall profit margin of the entire hotel portfolio was unchanged at 20% for the first quarter of 2018 and 2017.

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) and TPH.DB.E (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.

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