TEMPLE HOTELS INC. Press Release TEMPLE HOTELS INC. REPORTS 2018 THIRD QUARTER FINANCIAL RESULTS

Transcription

1 TEMPLE HOTELS INC. Press Release TEMPLE HOTELS INC. REPORTS 2018 THIRD QUARTER FINANCIAL RESULTS Mississauga, Ontario, November 6, 2018 Temple Hotels Inc. ( Temple or the Company ) (TSX: TPH) today reported its financial results for the three months ended September 30, 2018 ( 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, 2018, which may be obtained from the Temple website at or the SEDAR website at 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. Q KEY POINTS/HIGHLIGHTS Revenue decreased $0.6 million or 1% during the three months ended September 30, 2018 compared to 2017, primarily due to a decrease within the Fort McMurray of $1.0 million as a result of lower occupancy and the expiry of a long-term lease at the Cortona Residence and a decrease within the Sold Property portfolio of $0.5 million. The decrease was partially offset by increases in revenue within the Other Alberta and Other Canada portfolios of $0.5 million and $0.4 million, respectively. Hotel operating income decreased by $1.3 million or 8% during the three months ended September 30, 2018 compared to 2017, primarily due to a decrease in hotel operating income within the Fort McMurray, Other Canada and Sold Property portfolios of $1.0 million, $0.1 million and $0.1 million, respectively. FFO decreased by $1.1 million during the three months ended September 30, 2018, compared to the three months ended September 30, On a basic per common share basis, FFO decreased by $0.04 per common share, compared to the third quarter of Subsequent to September 30, 2018, Temple redeemed $2.3 million of the principal amount of the Series E debentures outstanding. OPERATING RESULTS Three Months Ended September 30 Nine Months Ended September 30 Total revenue $45,490 $46,106 $125,795 $125,734 Hotel operating income $13,921 $15,190 $33,610 $35,306 Provision for impairment $ - ($235) ($6,785) ($235) Net income (loss) $2,780 $3,355 ($5,798) $495 Cash flow provided by operating activities $7,128 $8,585 $10,402 $10,933 Funds from operations $7,086 $8,170 $12,019 $14,628 Per common share - Net income (loss) - basic and diluted $0.11 $0.13 ($0.23) $ Funds from operations $0.28 $0.32 $0.48 $0.57 Weighted average number of common shares 25,144,881 25,351,516 25,215,194 25,344,724 Occupancy 69% 70% 63% 63% ADR $ $ $ $ RevPar $ $ $90.12 $

2 Operating Activities Net Income - Temple completed the third quarter of 2018 with net income of $2.8 million, compared to net income of $3.4 million during the same period in The decrease in net income is mainly due to a decrease in hotel operating income of $1.3 million, partly offset by a decrease in depreciation and amortization of $0.3 million and an increase in other income of $0.2 million. On a per common share basis, net income was $0.11 for the third quarter of 2018, compared to net income of $0.13 during the third quarter of Occupancy and ADR The decrease in revenue primarily reflects lower occupancy levels within the Fort McMurray segment leading to a decrease in RevPar. Reduced occupancy levels within the Fort McMurray segment partially offset the increase in ADR as a result of the unfavourable market conditions which continue to affect oil-dependent markets in Alberta. In the third quarter of 2018, an increase in ADR within Other Canada and an increase in occupancy within Other Alberta led to an increase in RevPar compared to the third quarter of Cash Provided by Operating Activities Cash provided by operating activities decreased by $1.5 million during the third quarter of 2018, compared to the third quarter of Excluding working capital adjustments, cash provided by operating activities decreased by $1.3 million, compared to Funds from Operations ("FFO") During the third quarter of 2018, FFO decreased by $1.1 million, compared to the third quarter of The decrease in FFO mainly reflects lower hotel operating income of $1.3 million, partially offset by an increase in other income of $0.2 million. On a basic per common share basis, FFO decreased by $0.04 per common share, compared to the third quarter of Liquidity and Financing Activities As of September 30, 2018, the unrestricted cash balance of Temple was $19.5 million and working capital was $13.3 million. Subsequent to September 30, 2018, Temple redeemed $2.3 million of the principal amount of the Series E debentures outstanding. Investing Activities As disclosed in the Statement of Cash Flows in the financial statements, the investing activities of Temple resulted in a net cash outflow of $1.5 million during the third quarter of Investing activities primarily reflect cash outflows related to capital expenditures on hotel properties. Debt Covenants At September 30, 2018, the Company was not in compliance with debt service covenants affecting seven mortgage loans in the aggregate amount of $105.6 million. The loan covenant breaches are expected to be resolved by debt refinancings, loan modification agreements and/or a waiver of the covenant requirements. 2

3 ANALYSIS OF OPERATING RESULTS Analysis of Net Income (Loss) and Comprehensive Net Income (Loss) * Three Months Ended Nine Months Ended September 30 September 30 (Decrease) in Income (Decrease) in Income Revenue Room revenue $34,886 $36,119 ($1,233) $92,418 $93,614 ($1,196) Other hotel revenue 10,604 9, ,377 32,120 1,257 Total revenue 45,490 46,106 (616) 125, , Hotel operating costs 31,569 30,916 (653) 92,185 90,428 (1,757) Hotel operating income 13,921 15,190 (1,269) 33,610 35,306 (1,696) Interest expense 6,796 6,753 (43) 20,782 21, Other expense (income) (305) (71) 234 (312) (1,847) (1,535) Share based compensation General and administrative expenses (19) 2,597 2,511 (86) Depreciation and amortization 4,154 4, ,733 13, ,352 3,151 (799) (2,264) (275) (1,989) Equity income on investment in hotel properties (11) (41) Provision for impairment - (235) 235 (6,785) (235) (6,550) Income tax recovery , ,287 Net income (loss) and comprehensive income (loss) $2,780 $3,355 ($575) ($5,798) $495 ($6,293) Per Common Share Results: Basic and diluted $0.11 $0.13 ($0.23) $0.02 Hotel Revenue Analysis of Total Hotel Revenues Three Months Ended September 30 Nine Months Ended September 30 (Decrease) (Decrease) Fort McMurray Room revenue $ 5,160 $ 6,239 $ (1,079) $ 15,489 $ 17,290 $ (1,801) Other hotel revenue $ 5,531 $ 6,516 $ (985) $ 16,457 $ 18,252 $ (1,795) Other Alberta Room revenue $ 4,730 $ 4,702 $ 28 $ 13,545 $ 13,109 $ 436 Other hotel revenue 3,936 3, ,740 12, $ 8,666 $ 8,205 $ 461 $ 27,285 $ 25,921 $ 1,364 Other Canada Room revenue $ 24,996 $ 24,691 $ 305 $ 63,384 $ 61,387 $ 1,997 Other hotel revenue 6,297 6, ,669 18, $ 31,293 $ 30,893 $ 400 $ 82,053 $ 79,704 $ 2,349 Total - Room revenue $ 34,886 $ 35,632 $ (746) $ 92,418 $ 91,786 $ 632 Other hotel revenue 10,604 9, ,377 32,091 1,286 Total hotel revenue $ 45,490 $ 45,614 $ (124) $ 125,795 $ 123,877 $ 1,918 Total - Sold Property Room revenue $ - $ 487 $ (487) $ - $ 1,828 $ (1,828) Other hotel revenue - 5 (5) - 29 (29) Total hotel revenue $ - $ 492 $ (492) $ - $ 1,857 $ (1,857) Total Room revenue $ 34,886 $ 36,119 $ (1,233) $ 92,418 $ 93,614 $ (1,196) Other hotel revenue 10,604 9, ,377 32,120 1,257 Total hotel revenue $ 45,490 $ 46,106 $ (616) $ 125,795 $ 125,734 $ 61 3

4 During the third quarter of 2018, room revenue decreased by $0.7 million, compared to the third quarter of The decrease is comprised of a $1.1 million (17%) decrease in the Fort McMurray portfolio (of which $0.6 million was due to the expiry of a long-term lease at the Cortona Residence), partly offset by a $0.3 million (1%) increase in the Other Canada portfolio. The decrease in room revenue during the third quarter of 2018, compared to the third quarter of 2017, is largely due to reduced occupancy levels within the Fort McMurray segment as a result of the unfavourable market conditions which continue to affect oil-dependent markets in Alberta and the expiry of a long-term lease at the Cortona Residence, partially offset by increases in RevPar within the Other Alberta and Other Canada segments. As disclosed in the following chart, for the third quarter of 2018, RevPar for the portfolio was $101.80, compared to $ for the third quarter of RevPar for portfolio results generally reflect reduced occupancy levels within the Fort McMurray segment, partly offset by increased ADR levels at the Other Canada segment and an increase in occupancy within the Other Alberta segment. For the nine months ended September 30, 2018, RevPar for the portfolio was $90.12, compared to $88.54 for the nine months ended September 30, Occupancy at the Fort McMurray properties decreased during the third quarter of 2018 compared to the third quarter of 2017, and remains impacted by the unfavourable market conditions in Alberta. Three Months Ended September 30 Occ ADR RevPar Occ ADR RevPar Fort McMurray 48% $ $ % $ $ Other Alberta 58% $ $ % $ $ Other Canada 81% $ $ % $ $ Total 69% $ $ % $ $ Sold Property - $ - $ - 55% $ $ Overall Portfolio 69% $ $ % $ $ Nine Months Ended September 30 Occ ADR RevPar Occ ADR RevPar Fort McMurray 47% $ $ % $ $ Other Alberta 55% $ $ % $ $ Other Canada 73% $ $ % $ $ Total 63% $ $ % $ $ Sold Property - $ - $ - 60% $ $ Overall Portfolio 63% $ $ % $ $ 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, The property transitioned to a hotel and commenced hotel operations on October 22, Other Hotel Revenue During the third quarter of 2018, other hotel revenue in the portfolio increased by $0.6 million or 6%, compared to the third quarter of 2017, comprised of an increase of $0.4 million from the Other Alberta properties primarily due to an increase in food and beverage revenue at the Sheraton Red Deer, an increase of $0.1 million from the Other Canada portfolio and an increase 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 third quarter of 2018, accounting for $3.0 million or 28% of other hotel revenue. During the first nine months of 2018, other hotel revenue for the portfolio increased $1.3 million or 4% compared to the first nine months of 2017, mainly comprised of increases in the Other Alberta and Other Canada properties of $0.9 million and $0.4 million, respectively. 4

5 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 Fort McMurray $1,610 $2,605 29% 40% $4,959 $6,982 30% 38% Other Alberta 1,144 1,191 13% 15% 4,011 3,767 15% 15% Other Canada 11,167 11,298 36% 37% 24,640 24,061 30% 30% Total - $13,921 $15,094 31% 33% $33,610 $34,810 27% 28% Sold Property - $96 - % 20% - $496 - % 27% Total portfolio $13,921 $15,190 31% 33% $33,610 $35,306 27% 28% After accounting for the decrease in total revenues and the increase in hotel operating costs, total operating income decreased by $1.3 million or 8% during the third quarter of 2018, compared to the third quarter of 2017, comprised of a decrease of $1.2 million, or 8% for the portfolio and a decrease of $0.1 million due to the Sold Property. The decrease in operating income reflects a decrease of $1.0 million or 38% for the Fort McMurray segment (of which $0.7 million was due to the expiry of a long-term lease at the Cortona Residence), a decrease of $0.1 million or 1% for the Other Canada segment and a $0.1 million or 4% decrease in operating income for the Other Alberta segment. As disclosed in the preceding chart, the overall profit margin of the entire hotel portfolio decreased from 33% in the third quarter of 2017 to 31% in the third quarter of 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 FOR FURTHER INFORMATION PLEASE CONTACT: K. Rai Sahi, FCA, FCGA, Chief Executive Officer, or Paul Miatello, CA, CPA, Chief Financial Officer Tel: (905) , Fax: (905) , info@morguard.com This press release contains certain statements that could be considered as forward-looking information. The forwardlooking information is subject to certain risks and uncertainties, which could result in actual results differing materially from the forward-looking statements. 5