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Press release from CNW Group

Temple Hotels Inc. reports 2013 first quarter results

Monday, May 13, 2013

Temple Hotels Inc. reports 2013 first quarter results

16:00 EDT Monday, May 13, 2013

WINNIPEG, May 13, 2013 /CNW/ - Temple Hotels Inc. ("Temple") (TSX: TPH) today reported its financial results for the quarter ended March 31, 2013.  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 quarter ended March 31, 2013, 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 share, average daily rate ("ADR"), and revenue per available room ("RevPAR") amounts. 

HIGHLIGHTS

Substantial Growth of the Hotel Portfolio

Temple achieved strong growth in revenue, operating income, FFO and AFFO in Q1-2013. Since January 1, 2012, Temple has more than doubled the size of its hotel portfolio by acquiring full ownership of nine hotels as well as 50% equity interests in two additional hotels.

Financial and Operating Results

  Three Months Ended March 31
  2013 2012
Total revenue $32,179 $21,542
Operating income $11,339 $7,957
Net income $136 $319
Cash flow from operating activities, excluding working capital adjustments $4,025 $3,981
Funds from operations $3,465 $1,781
Adjusted funds from operations $3,740 $3,046
Payout Ratio    
- FFO 106% 145%
- AFFO 98% 85%
Occupancy 67% 70%
ADR $156.35 $159.07
RevPar $105.18 $111.57

Key Points - Q1-2013 Compared to Q1-2012

  • Operating income increased by $3.38 million in Q1-2013, compared to Q1-2012, comprised of $0.45 million or 6% increase for same properties and $2.93 million increase attributable to new acquisitions.
  • Fort McMurray same property operating income increased by $0.54 million or 12%.
  • Same property RevPar increased by 7.3% from $110.44 to $118.51.
  • Net income decreased by $0.18 million to $0.14 million after incurring a one-time charge of $1.09 million on the acquisition of hotel properties.
  • The weighted average interest rate for mortgage debt declined from 5.76% in Q1-2012 to 5.21% in Q1-2013. The weighted average interest rate for total debt declined from 6.46% to 5.87% during the same period.
  • Excluding working capital adjustments, cash flow from operations increased marginally by $0.04 million or 1% compared to Q1-2012.
  • During Q1-2013 Funds From Operations (FFO) increased by $1.68 million or 94.6% compared to Q1-2012.  Adjusted Funds From Operations (AFFO) increased by $0.69 million or 22.8%.
  • Dividends declared represented 106% of FFO and 98% of AFFO during Q1-2013, compared to 145% and 85% during Q1-2012.

Financing Activities

During Q1-2013, Temple raised $38 million of gross proceeds from an offering of 7% Series F convertible debentures.

As consideration for part of the $87.25 million purchase price on the acquisition of three hotel properties in Nova Scotia on March 1, 2013, Temple issued two million common shares to the vendor, at an agreed price of $6.25 per share for total proceeds of $12.5 million.

On April 30, 2013, the Series B convertible debentures, including accrued interest, were redeemed in full with a cash payment in the total amount of $20.7 million.

On May 8, 2013, Temple issued, by way of private placement, 1,448,495 shares at a price of $5.40 per share for total gross proceeds of $7.82 million.

Major Capital Improvements

One of the ongoing strategic initiatives of Temple is to undertake major renovation and upgrade projects at select hotel properties in order to maximize the income potential of the properties. During Q1-2013, Temple invested $2.89 million in capital expenditures, including $2.3 million in regard to the guest room, lobby and meeting room refurbishments at the Radisson Hotel and Suites.

Major capital expenditure programs are also planned for the Hilton Garden Inn, Saskatoon Inn & Conference Centre and Holiday Inn South. The capital expenditure program for the Saskatoon Inn & Conference Centre is expected to be completed over a period of approximately three years at an estimated cost of approximately $10 million and will primarily consist of guest room, lobby and meeting room refurbishment and exterior re-cladding of the building.  For the three other hotels, the capital expenditure programs consist primarily of guest room and lobby refurbishments with an estimated cost in the range of $3.0 to $3.5 million and an estimated completion period of approximately 24 months.

Outlook

The acquisition of the $42 million Acclaim Hotel - Calgary Airport is expected to be completed in the fourth quarter of 2013 and other potential hotel acquisitions are under consideration.  For the remainder of 2013, Temple will also remain focused on achieving earnings growth from its existing hotel portfolio, through increased operational efficiencies and accretive capital improvements at the Sheraton Red Deer and Radisson Hotel & Suites.  Earnings growth for the second and third quarters should also reflect the stronger spring and summer demand for our hotel facilities.

FINANCIAL AND OPERATING STATISTICS          
  March 31   December 31
   2013   2012 
BALANCE SHEET          
  Total Assets $  595,152    $  493,789 
  Total Debt $  447,014    $  371,782 
             
  Three Months Ended
  March 31
  2013   2012
           
DIVIDENDS/DISTRIBUTIONS          
  Amount - total $ 3,657   $ 2,584 
    - per share/unit $  0.135    $  0.120 
           
KEY PERFORMANCE INDICATORS          
Operations:          
  Occupancy   67%     70%
  ADR $ 156.35   $ 159.07
  RevPar $ 105.18   $ 111.57
  Operating profit margin   35%     37%
           
Operating results:          
  Total revenue $  32,179    $  21,542 
  Operating income $  11,339    $  7,957 
  Net income (loss) $  136    $  319 
           
Cash flows:          
  Cash flow from operating activities, excluding working capital adjustments $  4,025    $  3,981 
  FFO $  3,465    $  1,781 
  AFFO $  3,740    $  3,046 
             
Payout ratio          
  FFO     106%           145% 
  AFFO      98%           85% 
           
Financing:          
  Weighted average interest rate of debt     5.87%       6.46%
  Weighted average interest mortgages       5.21%         5.76%
             
PER SHARE/UNIT AMOUNTS     Basic       Basic
             
  Net income (loss) $ 0.01   $ 0.01
  Cash from operating activities, excluding working capital adjustments $ 0.15   $ 0.19
  FFO $ 0.13   $ 0.08
  AFFO $ 0.14   $ 0.14

Q1-2013 COMPARED TO Q1-2012

Analysis of Net income
  Three Months Ended      
  March 31      
          Increase/
  2013   2012   (Decrease)
Revenue                
  Room revenue $  22,647   $  14,793   $ 7,854
  Other hotel revenue    9,532      6,749       2,783
  Total revenue   32,179     21,542      10,637
Hotel operating costs   20,840     13,585      7,255
Operating income   11,339     7,957      3,382
Interest expense, net     6,448     5,825        623
General and administrative expenses     1,447     245      1,202
Depreciation and amortization    3,525      2,078     1,447
      (81)     (191)        110
                 
Equity income on investment in hotel properties   124      -        124
Change in fair value of financial instruments: gain (loss)   (179)     347      (526)
Income taxes (expense) recovery     272     163      109
Net income $  136   $ 319   $  (183)
Per Share/Unit Results:                
  Basic $  0.01   $ 0.01      
  Diluted $  0.01   $ 0.01      

Overall Results

Loss, before equity income, change in fair value of financial instruments and income taxes, decreased by $0.11 million during Q1-2013 compared to Q1-2012. The decrease reflects an increase in operating income of $3.38 million, largely offset by an increase in interest expense (net), general and administrative expenses and depreciation and amortization of $0.62 million, $1.20 million and $1.45 million respectively.

After providing for equity income, change in fair value of financial instruments and income taxes, Temple completed Q1-2013 with net income of $0.14 million, compared to a net income of $0.32 million during Q1-2012, representing a decrease in income of $0.18 million.

On a per share/unit basis, net income stayed constant at $0.01 per share during Q1-2013 compared to Q1-2012.  There has been a 27% increase in the weighted average number of shares/units outstanding since March 31, 2012.

Revenue

Analysis of Total Hotel Revenues
  Three Months Ended March 31   Increase/
  2013   2012   (Decrease)
Total - Same Properties                
  Room revenue $  14,277   $  13,807   $  470
  Other hotel revenue   6,674     6,690      (16)
  Total Hotel Revenue     20,951       20,497       454
Total - Newly Acquired Properties                
  Room revenue $  8,370   $  986   $  7,384
  Other hotel revenue     2,858     59     2,799
  Total Hotel Revenue $  11,228   $  1,045   $  10,183
Total                
  Room revenue $  22,647   $  14,793   $  7,854
  Other hotel revenue   9,532     6,749      2,783
  Total hotel revenue $  32,179   $  21,542   $ 10,637

During Q1-2013, total room revenue increased by $7.85 million or 53%, compared to Q1-2012, comprised of an increase of $0.47 million or 3% in "same property" revenue and incremental revenue of $7.38 million from new hotel acquisitions.  The increase in room revenue for the "same property" portfolio is comprised of an increase of $0.49 million or 6% for the Fort McMurray same property portfolio, partially offset by a decrease of $0.02 million for the "Other" hotels in the same property portfolio.

As disclosed in the following chart, RevPar for the same property portfolio was $118.51 during Q1-2013, compared to $110.44 during Q1-2012.  RevPar for the Fort McMurray "same property" portfolio continued to improve during Q1-2013 with the portfolio achieving RevPar of $142.05, compared to $129.01 during Q1-2012.

RevPar for the newly acquired properties during Q1-2012 was $122.89 and reflects only the Radisson Hotel & Suites in Fort McMurray, which was the only property acquired in Q1-2012. In comparison, RevPar for the Radisson Hotel & Suites was $67.50 in Q1-2013, which reflects the loss of a significant number of room nights while the property underwent a scheduled major renovation.

Total RevPar in Q1-2013 for all newly acquired properties was $90.36 and reflects the reduced RevPar experienced at the Radisson Hotel & Suites as well as lower RevPar results at the more recently acquired properties, which have comparatively lower room rates.

Room Revenue Statistics
  Three Months Ended March 31
  2013   2012
  Occ     ADR     RevPar   Occ     ADR     RevPar
Same Properties                              
  Fort McMurray       77%   $  183.72   $  142.05       76%   $  169.56   $  129.01
  Other       66%   $  144.46   $  94.98      65%   $  140.31   $  91.86
Total - Same Properties       72%   $  165.68   $  118.51      71%   $  156.03   $  110.44
Newly Acquired Properties       63%   $  144.50   $  90.36     64%   $  192.77   $  122.89
  Overall Portfolio       67%   $  156.35   $  105.18      70%   $  159.07   $  111.57

Hotel Operating Costs

Analysis of Hotel Operating Costs
  Three Months Ended March 31 
        Increase/
  2013   2012   (Decrease)
Total - Same properties                
    Operating expenses $ 11,453   $ 11,389   $  64
    Property taxes and insurance         681     769     (88)
    Asset and property management fees        796     769         27
  $ 12,930   $ 12,927   $  3
Total - Newly Acquired Properties                
    Operating expenses $  6,965   $  589   $  6,376
    Property taxes and insurance   553        32       521
    Asset and property management fees   392         37        355
  $  7,910   $  658   $  7,252
Total                
    Operating expenses $ 18,418   $  11,978   $  6,440
    Property taxes and insurance    1,234     801       433
    Asset and property management fees     1,188     806     382
    Total hotel operating costs $ 20,840   $ 13,585   $  7,255

During Q1-2013, hotel operating costs increased by $7.26 million, compared to Q1-2012, comprised almost entirely by incremental costs of $7.25 million for new hotel acquisitions.

Operating Income and Profit Margin
  Three Months Ended
  Operating Income   Profit Margin
          Increase/        
  2013   2012   (Decrease)   2013   2012
Same Properties                        
  Fort McMurray $  5,026   $  4,483   $  543     59%       56%
  Other      2,995      3,087      (92)    24%     25%
    Total - Same Properties $  8,021   $  7,570   $  451     38%      37%
                         
Newly Acquired Properties $  3,318   $  387   $  2,931    30%    31%
Total portfolio $  11,339   $  7,957   $  3,382      35%    37%

Total operating income increased by $3.38 million or 43% during Q1-2013, compared to Q1-2012, comprised of an increase of $0.45 million or 6% for the "same property" portfolio and $2.93 million which is attributable to new hotel acquisitions.  The increase in "same property" operating income reflects a $0.54 million increase for the Fort McMurray "same property" portfolio, partially offset by a decrease in operating income for the other same property portfolio.

The overall profit margin of the entire hotel portfolio decreased from 37% during Q1-2012, to 35% during    Q1- 2013. The decline in overall profit margin is mainly attributable to a decrease in the proportionate contribution from hotels in Fort McMurray as additional hotels are acquired outside of Fort McMurray. The hotels in Fort McMurray have a substantially higher profit margin compared to the other Temple hotels.

COMPARISON TO PRIOR QUARTER

Analysis of Net Income - Q1-2013 vs Q4-2012
          Increase/
  Q1-2013   Q4-2012   (Decrease)
Revenue                
  Room $  22,647   $  19,657   $  2,990
  Other    9,532     10,132     (600)
  Total revenue   32,179     29,789     2,390
Hotel operating costs   20,840     19,353     1,487
Operating income   11,339     10,436     903
Interest expense, net   6,448     5,334     1,114
General and administrative expenses   1,447     394     1,053
Depreciation and amortization   3,525     3,089     436
    (81)     1,619     (1,700)
Equity income (loss) on investment in hotel properties   124     (26)     150
Change in fair value of financial instruments: Gain (loss)   (179)     (348)     169
Income taxes recovery (expense)   272     (926)     1,198
Net income $  136   $  319   $ (183)

Income before equity income (loss), change in fair value of financial instruments and income taxes, decreased by $1.70 million during Q1-2013, compared to Q4-2012.  The decrease mainly reflects an increase in general and administrative expenses, interest expense (net) and depreciation and amortization, partially offset by an increase in operating income.

General and administrative expenses increased by $1.05 million compared to Q4-2012 mainly as a result of transaction costs expensed as part of the hotel acquisitions in Q1-2013.

Interest expense (net) increased by $1.11 million compared to Q4-2012 comprised mainly of an increase in mortgage loan interest as a result of hotel acquisitions; an increase in convertible debenture interest as a result of the Series F convertible debenture offering that closed in February 2013; and accretion charges of $0.43 million which began to be recorded in January 2013 as a result of the conversion of Temple to a corporation.

During Q1-2013 compared to Q4-2012, operating income increased by $0.90 million or 9%, comprised of an increase of $0.30 million in "same property" operating income and $0.60 of operating income attributable to new hotels.  The increase in "same property" operating income reflects quarterly variations throughout the entire same property hotel portfolio including an increase in Fort McMurray and a decrease at the Sheraton Red Deer and Days Inn Lloydminster.

Overall, after reflecting income tax expense, equity income (loss); the loss associated with the change in fair value financial instruments and income taxes, the net income decreased by $0.18 million, during Q1-2013 compared to Q4-2012.

ABOUT TEMPLE

Temple is a real estate investment company 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 objective of Temple is to provide shareholders with stable dividends from investment in a diversified portfolio of hotel properties and related assets.  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.

The Toronto Stock Exchange has not reviewed or approved the contents of this press release and does not accept responsibility for the adequacy or accuracy of this press release.

 

SOURCE: Temple Hotels Inc.

For further information:

Arni Thorsteinson, Chief Executive Officer, or Gino Romagnoli, Investor Relations
Tel: (204) 475-9090, Fax: (204) 452-5505, Email: info@templehotels.ca

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