MISSISSAUGA, ON, Nov. 10, 2016 /CNW/ – Temple Hotels Inc. (“Temple” or the “Company”) (TSX: TPH) today reported its financial results for the three months ended September 30, 2016 (“third quarter”). 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 and nine months ended September 30, 2016, 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.
Q3 2016 KEY POINTS/HIGHLIGHTS
- Net operating income increased by $2.0 million or 15% during the three months ended September 30, 2016 compared to 2015, primarily due to increases of net operating income within the Other Canada and Fort McMurray portfolios of $1.8 million and $0.5 million respectively, partly offset by a decrease in net operating income within the Other Alberta portfolio of $0.3 million.
- FFO and AFFO increased by $3.7 million during the three months ended September 30, 2016, compared to the three months ended September 30, 2015. On a basic per common share basis, FFO was unchanged and AFFO increased by $0.02 per common share, compared to the third quarter of 2015.
- As at September 30, 2016, all nine Fort McMurray properties had been reopened following the mandatory evacuation, repair and remediation due to the wildfires that impacted the region during the second quarter of 2016. Temple’s Fort McMurray portfolio consists of 889 rooms in nine properties. Eight of the nine Fort McMurray properties had been reopened at various dates during the second quarter. The Radisson Hotel & Suites, which sustained greater fire, smoke and water damage, reopened on September 12, 2016.
- Subsequent to September 30, 2016, Temple announced that it has filed a rights offering circular (the “Rights Offering”) for gross proceeds of up to $50.0 million. Temple intends to use the proceeds of the Rights Offering to repay the Series C convertible debentures as well as certain other debt and for general corporate purposes and working capital.
OPERATING RESULTS
|
Three Months Ended September 30 |
Nine Months Ended September 30 |
||||||
|
2016 |
2015 |
2016 |
2015 |
||||
|
Total revenue |
$45,280 |
$46,355 |
$123,001 |
$137,808 |
|||
|
Operating income |
$16,052 |
$14,003 |
$36,133 |
$40,332 |
|||
|
Recovery of (provision for) impairment |
– |
($50,857) |
($43,574) |
($50,857) |
|||
|
Net income (loss) |
$1,390 |
($33,097) |
($67,968) |
($39,997) |
|||
|
Cash flow provided by operating activities |
($1,482) |
$4,976 |
$11,142 |
$14,939 |
|||
|
Funds from operations |
$7,858 |
$4,174 |
$11,250 |
$11,035 |
|||
|
Adjusted funds from operations |
$6,682 |
$2,953 |
$8,283 |
$7,617 |
|||
|
Per common share |
|||||||
|
â Funds from operations |
$0.10 |
$0.10 |
$0.14 |
$0.27 |
|||
|
â Adjusted funds from operations |
$0.09 |
$0.07 |
$0.11 |
$0.18 |
|||
|
Weighted average number of shares |
78,046,853 |
41,251,027 |
77,978,612 |
41,179,332 |
|||
|
Occupancy |
61% |
68% |
56% |
64% |
|||
|
ADR |
$141.51 |
$143.72 |
$139.14 |
$143.84 |
|||
|
RevPar |
$86.33 |
$97.02 |
$78.52 |
$92.20 |
|||
Operating Activities
- Occupancy and ADR â The increase in Same Property operating income reflects the higher ADR and occupancy levels within the Other Canada segment. In the third quarter of 2016, the occupancy levels of the Other Canada segment increased by two percentage points, to 80%, in comparison to the third quarter of 2015. In addition, ADR in the Other Canada segment increased by $4.89, to $147.76, in comparison to the third quarter of 2015. The increase in Same Property operating income was partially offset by reduced ADR levels within the Fort McMurray and Other Alberta segments, as a result of the unfavourable market conditions continuing to affect oil-dependent markets in Alberta as well as a result of the impact of wildfires and mandatory evacuation in Fort McMurray.
- Cash Provided by Operating Activities â Cash provided by operating activities increased by $1.6 million during the third quarter of 2016, compared to the third quarter of 2015. After excluding working capital adjustments, cash provided by operating activities increased by $3.2 million, compared to 2015.
- Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”) â During the third quarter of 2016, FFO and AFFO increased by $3.7 million, compared to the third quarter of 2015. On a basic per common share basis, FFO was unchanged and AFFO increased by $0.02 per common share, compared to the third quarter of 2015. The increase AFFO mainly reflects an increase in operating income, due to the factors noted above.
- Net Income â Temple completed the third quarter of 2016 with a net income of $1.4 million, compared to a net loss of $33.1 million during the same period in 2015. The increase in net income is mainly due to a decrease in provision for impairment of $50.9 million, a decrease in depreciation of $2.7 million, an increase in hotel operating income of $2.0 million, and a decrease in net interest expense of $1.0 million partially offset by an decrease in income tax recovery of $13.4 million and a decrease in gain on sale of property and equipment of $9.1 million. On a per common share basis, the net income was $0.02 for the third quarter of 2016, compared to a net loss per common share of $0.80 during the third quarter of 2015.
- Asset Impairment â The economic downturn in Alberta has resulted in decreased occupancy levels and room rates for certain hotel properties. Evidence that the occupancy and room rate declines may be prolonged, as well as the lower common share trading price, mandated the completion of an impairment review and recoverability analysis in accordance with IFRS. As a result of the analysis, for the three and nine months ended September 30, 2016, a nonâcash adjustment for asset impairment in the aggregate amount of $nil and $43.6 million, respectively, on nine hotels in Alberta and three in Other Canada was recorded.
- Deferred Income Tax Asset â Temple has $30.7 million relating to temporary tax differences that have not been recognized, as it is not probable that the deferred income tax asset will be realized.
Liquidity and Financing Activities
As of September 30, 2016, the unrestricted cash balance of Temple was $13.5 million and working capital was $7.9 million.
- During the second quarter of 2016, Temple entered into a revolving loan agreement with Morguard Corporation (“Morguard”) for $6.0 million, secured by a first mortgage charge against Nomad Hotel, and bearing interest at prime plus 2.00%.
- In response to the economic downturn in Alberta, in January 2016, the Company suspended the payment of dividends in order to preserve liquidity and reduce debt.
- At September 30, 2016, the Company was not in compliance with debt service covenants affecting 14 mortgage loans in the aggregate amount of $199.9 million. The loan covenant breaches are expected to be resolved by debt refinancings, loan modification agreements and/or a waiver of the covenant requirements.
Investing Activities
Temple invested in hotel renovation programs with the objective of enhancing the quality and competitive position of its hotel properties through the third quarter of 2016. During the first nine months of 2016, capital expenditures on hotel properties amounted to $5.3 million, of which $3.5 million related to renovation and upgrade programs at two properties. With major capital expenditures programs substantially complete, capital expenditures are expected to be lower than prior year during the remainder of 2016. Management believes that the major capital expenditures programs, undertaken over the past several quarters, will serve to enhance the competitive position of Temple’s renovated hotel properties.
ANALYSIS OF OPERATING RESULTS
|
Analysis of Net income (loss) |
||||||||||||
|
Three Months Ended |
Nine Months Ended |
|||||||||||
|
September 30 |
September 30 |
|||||||||||
|
2016 |
2015 |
Increase/ |
2016 |
2015 |
Increase/ |
|||||||
|
Revenue |
||||||||||||
|
Room revenue |
$35,426 |
$35,911 |
($485) |
$91,005 |
$102,592 |
($11,587) |
||||||
|
Other hotel revenue |
9,854 |
10,444 |
(590) |
31,996 |
35,216 |
(3,220) |
||||||
|
Total revenue |
45,280 |
46,355 |
(1,075) |
123,001 |
137,808 |
(14,807) |
||||||
|
Hotel operating costs |
29,228 |
32,352 |
3,124 |
86,868 |
97,476 |
10,608 |
||||||
|
Hotel operating income |
16,052 |
14,003 |
2,049 |
36,133 |
40,332 |
(4,199) |
||||||
|
Interest expense, net |
7,944 |
8,988 |
1,044 |
23,659 |
26,999 |
3,340 |
||||||
|
Share based compensation |
70 |
110 |
40 |
243 |
285 |
42 |
||||||
|
General and administrative |
||||||||||||
|
expenses |
812 |
1,000 |
188 |
2,485 |
2,820 |
335 |
||||||
|
Depreciation and amortization |
6,136 |
8,799 |
2,663 |
18,639 |
25,088 |
6,449 |
||||||
|
1,090 |
(4,894) |
5,984 |
(8,893) |
(14,860) |
5,967 |
|||||||
|
Equity income on investment |
||||||||||||
|
in hotel properties |
435 |
269 |
166 |
913 |
807 |
106 |
||||||
|
Gain on sale of property |
||||||||||||
|
and equipment |
– |
9,071 |
(9,071) |
– |
9,071 |
(9,071) |
||||||
|
Provision for impairment |
– |
(50,857) |
50,857 |
(43,574) |
(50,857) |
7,283 |
||||||
|
Change in fair value of financial |
||||||||||||
|
instruments: gain (loss) |
– |
61 |
(61) |
90 |
127 |
(37) |
||||||
|
Income tax recovery (expense) |
(135) |
13,253 |
(13,388) |
(16,504) |
15,715 |
(32,219) |
||||||
|
Net income (loss) |
$1,390 |
($33,097) |
$34,487 |
($67,968) |
($39,997) |
($27,971) |
||||||
|
Per Common Share Results: |
||||||||||||
|
Basic and diluted |
$0.02 |
($0.80) |
($0.87) |
($0.97) |
||||||||
Hotel Revenue
|
Analysis of Total Hotel Revenues |
||||||||||||||||||
|
Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||||
|
Increase/ |
Increase/ |
|||||||||||||||||
|
2016 |
2015 |
(Decrease) |
2016 |
2015 |
(Decrease) |
|||||||||||||
|
Same Property |
||||||||||||||||||
|
Fort McMurray |
||||||||||||||||||
|
Room revenue |
$ |
6,811 |
$ |
7,288 |
$ |
(477) |
$ |
15,701 |
$ |
22,716 |
$ |
(7,015) |
||||||
|
Other hotel revenue |
455 |
484 |
(29) |
1,681 |
1,667 |
14 |
||||||||||||
|
$ |
7,266 |
$ |
7,772 |
$ |
(506) |
$ |
17,382 |
$ |
24,383 |
$ |
(7,001) |
|||||||
|
Other Alberta |
||||||||||||||||||
|
Room revenue |
$ |
5,387 |
$ |
5,983 |
$ |
(596) |
$ |
15,887 |
$ |
18,716 |
$ |
(2,829) |
||||||
|
Other hotel revenue |
3,509 |
3,675 |
(166) |
13,021 |
13,785 |
(764) |
||||||||||||
|
$ |
8,896 |
$ |
9,658 |
$ |
(762) |
$ |
28,908 |
$ |
32,501 |
$ |
(3,593) |
|||||||
|
Other Canada |
||||||||||||||||||
|
Room revenue |
$ |
23,228 |
$ |
21,601 |
$ |
1,627 |
$ |
59,417 |
$ |
56,550 |
$ |
2,867 |
||||||
|
Other hotel revenue |
5,890 |
5,601 |
289 |
17,294 |
16,409 |
885 |
||||||||||||
|
$ |
29,118 |
$ |
27,202 |
$ |
1,916 |
$ |
76,711 |
$ |
72,959 |
$ |
3,752 |
|||||||
|
Total â Same Property |
||||||||||||||||||
|
Room revenue |
$ |
35,426 |
$ |
34,872 |
$ |
554 |
$ |
91,005 |
$ |
97,982 |
$ |
(6,977) |
||||||
|
Other hotel revenue |
9,854 |
9,760 |
94 |
31,996 |
31,861 |
135 |
||||||||||||
|
Total hotel revenue |
$ |
45,280 |
$ |
44,632 |
$ |
648 |
$ |
123,001 |
$ |
129,843 |
$ |
(6,842) |
||||||
|
Total â Sold Property |
||||||||||||||||||
|
Room revenue |
$ |
– |
$ |
1,039 |
$ |
(1,039) |
$ |
– |
$ |
4,610 |
$ |
(4,610) |
||||||
|
Other hotel revenue |
– |
684 |
(684) |
– |
3,355 |
(3,355) |
||||||||||||
|
Total hotel revenue |
$ |
– |
$ |
1,723 |
$ |
(1,723) |
$ |
– |
$ |
7,965 |
$ |
(7,965) |
||||||
|
Total |
||||||||||||||||||
|
Room revenue |
$ |
35,426 |
$ |
35,911 |
$ |
(485) |
$ |
91,005 |
$ |
102,592 |
$ |
(11,587) |
||||||
|
Other hotel revenue |
9,854 |
10,444 |
(590) |
31,996 |
35,216 |
(3,220) |
||||||||||||
|
Total hotel revenue |
$ |
45,280 |
$ |
46,355 |
$ |
(1,075) |
$ |
123,001 |
$ |
137,808 |
$ |
(14,807) |
||||||
During the third quarter of 2016, room revenue decreased by $0.5 million or 1%, compared to the third quarter of 2015. The decrease reflects a decrease of $1.0 million due to the disposition of a property in 2015, offset by a $0.5 million increase in Same Property room revenue. The increase in Same Property room revenue is comprised of a $1.6 million (8%) increase in the Other Canada portfolio, offset by a $0.5 million (7%) decrease in the Fort McMurray portfolio and a $0.6 million (10%) decrease in the Other Alberta portfolio.
The increase in Same Property room revenue during the third quarter of 2016, compared to the third quarter of 2015, is largely due to favourable market conditions for the Other Canada segment which experienced an 8% increase over the third quarter of 2015, partially offset by the repair and remediation of properties as a result of the wildfire affecting the Fort McMurray segment as well as unfavourable market conditions affecting oilâdependent markets in the Other Alberta segment.
Insurance Recoveries
Temple maintains insurance coverage based on industry best practices and insurance standards, and include Liability, Property, Boiler and Machinery insurance programs that extend for Building, Contents and Loss of Revenue.
On May 3, 2016, Fort McMurray and the surrounding areas were placed under a mandatory evacuation due to uncontrolled wildfires that extensively damaged the city. The evacuation order, which ended on June 4, 2016, prompted the closure, repair and environmental remediation of all the Company’s properties in Fort McMurray. The Company’s hotels sustained limited damage at eight of its nine hotels. Certain hotels began receiving guests for emergency and restoration services on May 5, 2016, and eight hotels were reopened at various dates during the second quarter of 2016. The Radisson Hotel & Suites, which sustained greater fire, smoke and water damage, reopened on September 12, 2016. The Cortona lease revenues were not impacted by the business interruption. The events in Fort McMurray will result in an insurance claim under the Company’s business interruption policy. Recoveries under this policy are only recognized at the earlier of when proceeds have been received or when confirmation has been given by the insurer of the amount of any settlement. Because of the complex and uncertain nature of the settlement negotiations process, the Company has not recognized any provision in the financial statements for the three and nine months ended September 30, 2016.
Room Revenue Statistics
As disclosed in the following chart, for the three months ended September 30, 2016, RevPar for the Same Property portfolio was $99.32, compared to $97.89 for the three months ended September 30, 2015.
For the nine months ended September 30, 2016, RevPar for the Same Property portfolio was $85.50, compared to $92.60 for the nine months ended September 30, 2015.
The third quarter increase in RevPar for the Same Property portfolio results generally reflects increased ADR in the Other Canada segment, partially offset by reduced ADR and occupancy levels in Fort McMurray and Other Alberta segments.
|
Room Revenue Statistics |
||||||||||||||||
|
Three Months Ended September 30 |
||||||||||||||||
|
2016 |
2015 |
|||||||||||||||
|
Occ |
ADR |
RevPar |
Occ |
ADR |
RevPar |
|||||||||||
|
Same Property |
||||||||||||||||
|
Fort McMurray |
53% |
$ |
154.00 |
$ |
81.46 |
52% |
$ |
169.59 |
$ |
88.29 |
||||||
|
Other Alberta |
57% |
$ |
121.33 |
$ |
69.37 |
60% |
$ |
128.11 |
$ |
77.04 |
||||||
|
Other Canada |
80% |
$ |
147.76 |
$ |
118.09 |
78% |
$ |
142.87 |
$ |
110.81 |
||||||
|
Total â Same Property |
69% |
$ |
143.94 |
$ |
99.32 |
68% |
$ |
143.24 |
$ |
97.89 |
||||||
|
Sold Property |
– |
$ |
– |
$ |
– |
46% |
$ |
163.24 |
$ |
75.69 |
||||||
|
Overall Portfolio |
69% |
$ |
143.94 |
$ |
99.32 |
68% |
$ |
143.72 |
$ |
97.02 |
||||||
|
Room Revenue Statistics |
||||||||||||||||
|
Nine Months Ended September 30 |
||||||||||||||||
|
2016 |
2015 |
|||||||||||||||
|
Occ |
ADR |
RevPar |
Occ |
ADR |
RevPar |
|||||||||||
|
Same Property |
||||||||||||||||
|
Fort McMurray |
39% |
$ |
157.97 |
$ |
61.53 |
53% |
$ |
174.35 |
$ |
93.01 |
||||||
|
Other Alberta |
55% |
$ |
126.12 |
$ |
68.71 |
62% |
$ |
131.72 |
$ |
81.22 |
||||||
|
Other Canada |
71% |
$ |
141.23 |
$ |
100.55 |
70% |
$ |
137.90 |
$ |
96.93 |
||||||
|
Total â Same Property |
61% |
$ |
140.98 |
$ |
85.50 |
65% |
$ |
143.16 |
$ |
92.60 |
||||||
|
Sold Property |
– |
$ |
– |
$ |
– |
53% |
$ |
160.55 |
$ |
85.03 |
||||||
|
Overall Portfolio |
61% |
$ |
140.98 |
$ |
85.50 |
64% |
$ |
143.84 |
$ |
92.20 |
||||||
|
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
During the third quarter of 2016, other hotel revenue decreased by $0.6 million or 6%, compared to the third quarter of 2015, mainly comprised of a decrease of $0.7 million from the Sold Property and a decrease of $0.2 million from the Other Alberta properties, partially offset by a $0.3 million increase in the Other Canada portfolio. The decrease in other revenue for the Other Alberta portfolio mainly reflects decreased economic activity in hotel markets that are directly or indirectly related to the oil industry.
Notwithstanding the above, the Sheraton Red Deer was the most significant contributor to other hotel revenue in the Same Property portfolio during the third quarter of 2016, accounting for $2.5 million or 25% of other hotel revenue.
During the first nine months of 2016, other hotel revenue decreased by $3.2 million or 9%, compared to the first nine months of 2015, comprised of a decrease of $3.3 million from the Sold Property and a decrease of $0.8 million from the Other Alberta properties, partially offset by a $0.9 million increase in the Other Canada portfolio.
Operating Income and Profit Margin
|
Operating Income and Profit Margin |
|||||||||||||||
|
Three Months Ended September 30 |
Nine Months Ended September 30 |
||||||||||||||
|
Operating Income |
Operating Profit Margin |
Operating Income |
Operating Profit Margin |
||||||||||||
|
2016 |
2015 |
2016 |
2015 |
2016 |
2015 |
2016 |
2015 |
||||||||
|
Same Property |
|||||||||||||||
|
Fort McMurray |
$4,238 |
$3,690 |
58% |
47% |
$8,204 |
$12,136 |
47% |
50% |
|||||||
|
Other Alberta |
$1,370 |
$1,654 |
15% |
17% |
$4,992 |
$6,691 |
17% |
21% |
|||||||
|
Other Canada |
$10,444 |
$8,815 |
36% |
32% |
$22,937 |
$21,019 |
30% |
29% |
|||||||
|
Total â Same Property |
$16,052 |
$14,159 |
35% |
32% |
$36,133 |
$39,846 |
29% |
31% |
|||||||
|
Sold Property |
$ – |
($156) |
– |
(9%) |
$ – |
$486 |
– |
6% |
|||||||
|
Total portfolio |
$16,052 |
$14,003 |
35% |
30% |
$36,133 |
$40,332 |
29% |
29% |
|||||||
After accounting for the decrease in total revenues and the decrease in hotel operating costs, total operating income increased by $2.0 million or 15% during the third quarter of 2016, compared to the third quarter of 2015, comprised of an increase of $1.9 million or 13% for the Same Property portfolio and an increase of $0.1 million due to the Sold Property. The increase in Same Property operating income mostly reflects a $1.6 million, or 18%, increase in operating income for the Other Canada segment and a $0.5 million increase in operating income for the Fort McMurray segment. The operating profit margin within the Fort McMurray segment increased to 58% during the third quarter of 2016, compared to 47% during the third quarter of 2015, reflecting a decrease in variable costs due to decreased occupancy.
For the first nine months of 2016, total operating income decreased by $4.2 million, or 10%, compared to the first nine months of 2015, which was comprised of a decrease of $3.7 million or 9% for the Same Property portfolio and a decrease of $0.5 million for Sold Property. The decrease in Same Property operating income reflects a $3.9 million, or 32%, decrease in operating income for the Fort McMurray segment and a $1.7 million, or 25%, decrease in operating income for the Other Alberta segment offset by a $1.9 million, or 9%, increase for the Other Canada segment.
As disclosed in the preceding chart, the overall profit margin of the entire hotel portfolio was 35% for the third quarter of 2016, compared to 30% for the third quarter of 2015. For the nine months ended September 30, 2016, the overall profit margin was 29%, compared to 29% for the nine months ended September 30, 2015.
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.C, TPH.DB.D, TPH.DB.E and TPH.DB.F (convertible debentures). The primary longâterm investment objectives of the Company are to yield stable and growing cash flows and to maximize the longâterm share value of the Company through the active management of its assets, accretive acquisitions, and the performance of valueâadded 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.
