MISSISSAUGA, ON, Feb. 22, 2017 /CNW/ - Temple Hotels Inc.
("Temple" or the "Company") (TSX: TPH) today reported its financial
results for the year ended December 31,
2016. 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, 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.
2016 KEY POINTS/HIGHLIGHTS
- Net operating income decreased by $3.9
million or 8% during the year ended December 31, 2016 compared to 2015, primarily due
to decreases of net operating income within the Fort McMurray, Other Alberta and Sold Property
portfolios of $3.4 million,
$2.4 million and $0.4 million respectively, offset by an increase
in net operating income within the Other Canada portfolio of
$2.3 million.
- FFO increased by $0.7 million and
AFFO increased by $1.3 million during
the year ended December 31, 2016,
compared to the year ended December 31,
2015. On a basic per common share basis, FFO and AFFO
decreased by $0.09 and $0.04 per common share, respectively, compared to
2015.
- During 2016, a non-cash provision for impairment of
$104.9 million was recorded to
reflect the impact of the economic downturn on the carrying value
of properties primarily located in Alberta.
- On December 14, 2016, the Company
completed a rights offering at $0.6769 per common share resulting in the
issuance of 73,866,155 common shares for net proceeds of
$49.6 million (the "Rights
Offering"). Temple used the proceeds of the Rights Offering to
repay the Series C convertible debentures, and will use the
remaining funds to repay certain other debt and for general
corporate purposes and working capital.
- As a result of its participation in the Rights Offering,
Morguard Corporation's ownership of Temple increased from 38.9% to
55.9%.
- Subsequent to December 31, 2016,
the Company repaid the Series C convertible debentures in the
amount of $22.8 million.
- All nine Fort McMurray
properties 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.
OPERATING RESULTS
|
|
|
Year Ended December
31
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Total
revenue
|
|
|
$162,236
|
|
$177,753
|
Operating
income
|
|
|
$44,548
|
|
$48,451
|
Provision for
impairment
|
|
|
($104,850)
|
|
($64,750)
|
Net loss
|
|
|
($133,177)
|
|
($55,456)
|
Net loss per common
share - basic and diluted
|
|
|
($1.64)
|
|
($1.17)
|
|
|
|
|
|
|
Cash flow provided by
operating activities
|
|
|
$17,382
|
|
$16,085
|
Funds from
operations
|
|
|
$11,616
|
|
$10,881
|
Adjusted funds from
operations
|
|
|
$7,694
|
|
$6,349
|
|
|
|
|
|
|
Per common
share
|
|
|
|
|
|
‑ Funds from
operations
|
|
|
$0.14
|
|
$0.23
|
‑ Adjusted funds from
operations
|
|
|
$0.09
|
|
$0.13
|
|
|
|
|
|
|
Weighted average
number of common shares
|
|
|
81,440,753
|
|
47,598,591
|
|
|
|
|
|
|
Occupancy
|
|
|
59%
|
|
62%
|
ADR
|
|
|
$139.81
|
|
$142.89
|
RevPar
|
|
|
$82.71
|
|
$88.40
|
Operating Activities
- Occupancy and ADR – The decrease in Same Property
operating income reflects the lower ADR and occupancy levels within
the Fort McMurray and Other
Alberta segments, in 2016 compared to 2015, as a result of the
unfavourable market conditions continuing to affect oil-dependent
markets in Alberta as well as a
result of wildfires and mandatory evacuation in Fort McMurray. The decrease in Same Property
operating income was partially offset by higher ADR and occupancy
levels in the Other Canada segment. In 2016, the occupancy levels
of the Other Canada segment increased by two percentage points, to
70%, in comparison to 2015. In addition, ADR in the Other Canada
segment increased by $1.26, to
$139.94, in comparison to 2015.
- Cash Provided by Operating Activities ‑ Cash provided by
operating activities increased by $1.3
million in 2016, compared to 2015. After excluding working
capital adjustments, cash provided by operating activities
increased by $0.4 million, compared
to 2015.
- Funds from Operations ("FFO") and Adjusted Funds from
Operations ("AFFO") ‑ During 2016, FFO increased by
$0.7 million and AFFO increased by
$1.3 million, compared to 2015. On a
basic per common share basis, FFO and AFFO decreased by
$0.09 and $0.04 per common share, respectively, compared to
2015. The increase in FFO and AFFO mainly reflects a decrease in
interest expense and general and administrative expenses as well as
higher interest and other income, partially offset by a decrease in
operating income due to the factors noted above.
- Net Loss ‑ Temple completed 2016 with a net loss of
$133.2 million or $1.64 per common share, compared to a net loss of
$55.5 million or $1.17 per common share during 2015. The increase
in net loss is mainly due to an increase in deferred income tax
expense of $36.9 million from the
reversal of the deferred tax asset, an increase in provision for
impairment of $40.1 million, a
decrease in gain on sale of property and equipment of $9.1 million, and a decrease in net operating
income of $3.9 million, partially
offset by a decrease in depreciation of $7.7
million and a decrease in interest expense of $3.4 million.
- Asset Impairment ‑ 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, a non‑cash adjustment for asset
impairment in the aggregate amount of $104.9
million, on twelve hotels in Alberta and three in Other Canada, was
recorded in 2016.
- Deferred Income Tax Asset – Temple has $170.0 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 December 31, 2016, the
unrestricted cash balance of Temple was $67.9 million and working capital was
$57.4 million.
- During the fourth quarter of 2016, Temple completed a Rights
Offering resulting in net proceeds of $49.6
million and the issuance of 73,866,155 common shares. The
completion of the Rights Offering enables Temple to further reduce
indebtedness and improve its working capital position.
- During the second quarter of 2016, Temple entered into a
revolving loan agreement with Morguard Corporation 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 December 31, 2016, the Company
was not in compliance with debt service covenants affecting nine
mortgage loans in the aggregate amount of $139.2 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 in 2016. During the year ended December 31, 2016, capital expenditures on hotel
properties amounted to $6.5 million,
of which $3.5 million related to
renovation and upgrade programs at two properties. With major
capital expenditures programs substantially complete, capital
expenditures in 2016 were lower than 2015. 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
Loss
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
December
31
|
|
|
2016
|
|
2015
|
|
Increase/
(Decrease)
in Income
|
Revenue
|
|
|
|
|
|
|
|
Room
revenue
|
|
$117,692
|
|
$129,963
|
|
($12,271)
|
|
Other hotel
revenue
|
|
44,544
|
|
47,790
|
|
(3,246)
|
|
Total
revenue
|
|
162,236
|
|
177,753
|
|
(15,517)
|
|
|
|
|
|
|
|
Hotel operating
costs
|
|
117,688
|
|
129,302
|
|
11,614
|
Hotel operating
income
|
|
44,548
|
|
48,451
|
|
(3,903)
|
|
|
|
|
|
|
|
Interest
expense
|
|
32,121
|
|
35,567
|
|
3,446
|
Interest and other
income
|
|
(914)
|
|
(373)
|
|
541
|
Share based
compensation
|
|
311
|
|
389
|
|
78
|
General and
administrative expenses
|
|
3,235
|
|
3,792
|
|
557
|
Depreciation and
amortization
|
|
24,233
|
|
31,978
|
|
7,745
|
|
|
(14,438)
|
|
(22,902)
|
|
8,464
|
|
|
|
|
|
|
|
Equity income on
investment in hotel properties
|
|
1,031
|
|
1,032
|
|
(1)
|
Gain on sale of
property and equipment
|
|
-
|
|
9,071
|
|
(9,071)
|
Provision for
impairment
|
|
(104,850)
|
|
(64,750)
|
|
(40,100)
|
Change in fair value
of financial instruments: gain (loss)
|
|
90
|
|
201
|
|
(111)
|
Deferred income tax
recovery (expense)
|
|
(15,010)
|
|
21,892
|
|
(36,902)
|
|
|
|
|
|
|
|
Net loss
|
|
($133,177)
|
|
($55,456)
|
|
($77,721)
|
Per Common Share
Results:
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
($1.64)
|
|
($1.17)
|
|
|
Hotel Revenue
Analysis of Total
Hotel Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December
31
|
|
|
|
|
|
|
Increase/
|
|
|
|
2016
|
|
2015
|
|
(Decrease)
|
Same
Property
|
|
|
|
|
|
|
|
|
|
|
Fort
McMurray
|
|
|
|
|
|
|
|
|
|
|
|
Room
revenue
|
|
|
$
|
20,610
|
|
$
|
27,563
|
|
$
|
(6,953)
|
|
Other hotel
revenue
|
|
|
|
2,139
|
|
|
2,127
|
|
|
12
|
|
|
|
$
|
22,749
|
|
$
|
29,690
|
|
$
|
(6,941)
|
Other
Alberta
|
|
|
|
|
|
|
|
|
|
|
|
Room
revenue
|
|
|
$
|
20,241
|
|
$
|
23,970
|
|
$
|
(3,729)
|
|
Other hotel
revenue
|
|
|
|
18,154
|
|
|
19,355
|
|
|
(1,201)
|
|
|
|
$
|
38,395
|
|
$
|
43,325
|
|
$
|
(4,930)
|
Other
Canada
|
|
|
|
|
|
|
|
|
|
|
|
Room
revenue
|
|
|
$
|
76,841
|
|
$
|
73,820
|
|
$
|
3,021
|
|
Other hotel
revenue
|
|
|
|
24,251
|
|
|
22,953
|
|
|
1,298
|
|
|
|
$
|
101,092
|
|
$
|
96,773
|
|
$
|
4,319
|
Total ‑ Same
Property
|
|
|
|
|
|
|
|
|
|
|
|
Room
revenue
|
|
|
$
|
117,692
|
|
$
|
125,353
|
|
$
|
(7,661)
|
|
Other hotel
revenue
|
|
|
|
44,544
|
|
|
44,435
|
|
|
109
|
|
Total hotel
revenue
|
|
|
$
|
162,236
|
|
$
|
169,788
|
|
$
|
(7,552)
|
Total ‑ Sold
Property
|
|
|
|
|
|
|
|
|
|
|
|
Room
revenue
|
|
|
$
|
-
|
|
$
|
4,610
|
|
$
|
(4,610)
|
|
Other hotel
revenue
|
|
|
|
-
|
|
|
3,355
|
|
|
(3,355)
|
|
Total hotel
revenue
|
|
|
$
|
-
|
|
$
|
7,965
|
|
$
|
(7,965)
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Room
revenue
|
|
|
$
|
117,692
|
|
$
|
129,963
|
|
$
|
(12,271)
|
|
Other hotel
revenue
|
|
|
|
44,544
|
|
|
47,790
|
|
|
(3,246)
|
|
Total hotel
revenue
|
|
|
$
|
162,236
|
|
$
|
177,753
|
|
$
|
(15,517)
|
During 2016, room revenue decreased by $12.3 million or 9%, compared 2015. The decrease
reflects a $7.7 million decrease in
Same Property room revenue and a decrease of $4.6 million due to the disposition of a property
in 2015. The decrease in Same Property room revenue is comprised of
a $7.0 million (25%) decrease in the
Fort McMurray portfolio and a
$3.7 million (16%) decrease in the
Other Alberta portfolio, offset by a $3.0
million (4%) increase in the Other Canada portfolio.
The decrease in Same Property room revenue during 2016, compared
to 2015, is largely due to closure and subsequent repair and
remediation of properties as a result of the wildfire affecting the
Fort McMurray segment as well as
unfavourable market conditions affecting oil‑dependent markets in
the Other Alberta segment, offset by favourable market conditions
for the Other Canada 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
resulted 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. As at December 31,
2016, $0.6 million has been
received and/or confirmed by the insurers and recognized in
interest and other income. Due to the complex and uncertain nature
of the settlement negotiations process, the Company has not
recognized any additional provision in the financial statements for
the year ended December 31, 2016.
Room Revenue Statistics
As disclosed in the following chart, for the year ended
December 31, 2016, RevPar for the
Same Property portfolio was $82.71,
compared to $88.61 for the year ended
December 31, 2015.
RevPar for Same Property portfolio results generally reflect
reduced ADR and occupancy levels in the Fort McMurray and Other Alberta segments,
offset by increased ADR in the Other Canada segment. RevPar for the
Fort McMurray segment reflects the
closure of eight properties due to the wildfires discussed above
and summarized in the preceding table.
Occupancy at the Fort McMurray
properties has been adversely affected by delayed rebuilding
efforts in the region, due to the time required to complete the
clean-up and insurance claim processes. Over time, it is expected
that those involved in the rebuilding will create demand for
accommodation, putting upward pressure on occupancy rates.
Room Revenue
Statistics
|
|
|
Year Ended December
31
|
|
|
2016
|
|
2015
|
|
|
Occ
|
|
|
ADR
|
|
RevPar
|
|
Occ
|
|
|
ADR
|
|
RevPar
|
Same
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fort
McMurray
|
|
39%
|
|
$
|
152.99
|
|
$
|
60.29
|
|
49%
|
|
$
|
169.92
|
|
$
|
83.93
|
Other
Alberta
|
|
52%
|
|
$
|
126.22
|
|
$
|
65.60
|
|
59%
|
|
$
|
131.42
|
|
$
|
77.90
|
Other
Canada
|
|
70%
|
|
$
|
139.94
|
|
$
|
98.27
|
|
68%
|
|
$
|
138.68
|
|
$
|
94.09
|
Total – Same
Property
|
|
59%
|
|
$
|
139.81
|
|
$
|
82.71
|
|
62%
|
|
$
|
142.05
|
|
$
|
88.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold
Property
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
53%
|
|
$
|
160.55
|
|
$
|
85.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall
Portfolio
|
|
59%
|
|
$
|
139.81
|
|
$
|
82.71
|
|
62%
|
|
$
|
142.89
|
|
$
|
88.40
|
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 2016, other hotel revenue decreased by $3.2 million or 7%, compared to 2015, mainly
comprised of a decrease of $3.3
million from the Sold Property and a decrease of
$1.2 million from the Other Alberta
properties, partially offset by a $1.3
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 2016, accounting for $13.7
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
|
|
|
|
2016
|
|
|
2015
|
|
2016
|
|
2015
|
Same
Property
|
|
|
|
|
|
|
|
|
|
|
Fort
McMurray
|
|
$
|
10,010
|
|
$
|
13,398
|
|
44%
|
|
45%
|
Other
Alberta
|
|
|
6,389
|
|
|
8,759
|
|
17%
|
|
20%
|
Other
Canada
|
|
|
28,149
|
|
|
25,834
|
|
28%
|
|
27%
|
Total ‑ Same
Property
|
|
$
|
44,548
|
|
$
|
47,991
|
|
27%
|
|
28%
|
|
|
|
|
|
|
|
|
|
|
|
Sold
Property
|
|
$
|
-
|
|
$
|
460
|
|
-
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
Total
portfolio
|
|
$
|
44,548
|
|
$
|
48,451
|
|
27%
|
|
27%
|
After accounting for the decrease in total revenues and the
decrease in hotel operating costs, total operating income decreased
by $3.9 million or 8% in 2016,
compared to 2015, comprised of decrease of $3.5 million or 7% for the Same Property
portfolio and a decrease of $0.4
million due to the Sold Property. The decrease in Same
Property operating income reflects a $3.4
million, or 25%, decrease in operating income for the
Fort McMurray segment and a
$2.4 million, or 27%, decrease in
operating income for the Other Alberta segment, offset by a
$2.3 million, or 9%, increase in
operating income for the Other Canada segment.
As disclosed in the preceding chart, the overall profit margin
of the entire hotel portfolio was 27% for 2016 and 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.D, 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.