Royal Host Inc.
TSX : RYL
TSX : RYL.DB.B
TSX : RYL.DB.C
TSX : RYL.DB.D

Royal Host Inc.

August 13, 2013 16:53 ET

Royal Host Inc. Announces Second Quarter Results

HALIFAX, NOVA SCOTIA--(Marketwired - Aug. 13, 2013) - Royal Host Inc. ("Royal Host" or the "Company") (TSX:RYL)(TSX:RYL.DB.B)(TSX:RYL.DB.C)(TSX:RYL.DB.D) today announced results for the three and six months ended June 30, 2013 (the "Second Quarter").

SECOND QUARTER HIGHLIGHTS

($000's except key performance indicators)Key events of the three months ended June 30, 2013 include:

  • The Company sold two select service hotel properties for gross proceeds of $7,615 yielding a pre-tax gain on disposition of properties of $850.
  • Using proceeds from the sale of hotel properties, the Company paid down its secured credit facilities by $4,200, retired $2,190 in principal value of convertible debentures and repurchased 1,111 of the Company's common shares at an average price of $1.00 per share.
  • Invested $1,103 in capital improvements at its hotels compared to $2,912 in the same period in 2012.

For the three months ended June 30, 2013 the Company's revenue declined compared to the same period in the prior year primarily due to the sale of five hotels since March 2012. Also contributing to the drop in revenue was a 5.1% decline in RevPAR on a Comparable Hotel1 basis attributable to both the full service and select service portfolios. In the full service portfolio the Company's largest hotel, the London Hilton, was impacted by a downturn in the local market and several other properties experienced lower demand coinciding with increased supply in their respective markets. In the select service portfolio significant declines were experienced in the Timmins, Ontario market, where the Company has two properties, due to new supply entering the market and a softening in demand by resource companies. Despite the drop in revenue, the Company's efforts to reduce debt levels and contain costs have resulted in improved margins, FFO and a reduced net loss for the three month period ended June 30, 2013 versus the same period in the prior year.

OUTLOOK

The Company has experienced negative cash flow (excluding proceeds received upon hotel dispositions) for several consecutive years. The Company's main focus for the remainder of the year will be to create a corporate and operational structure that is sustainably cash flow positive. This will be pursued, among other ways, by an intense focus on reducing costs at both the corporate and hotel levels, driving additional hotel, tenant and ancillary revenues and reducing debt service expense. We believe there are meaningful process improvements and cost reduction initiatives that can be implemented and sustained to achieve this goal.

For the remainder of the year, we anticipate comparable to positive results from our full service portfolio and negative results from our select service portfolio, in each case compared to the prior year's results and without taking into account the effect of any cost reduction initiatives.

1 Comparable Hotels are hotels which were owned by the Company for the entire current period as well as the comparable period from the prior year whose operations and available rooms are materially consistent for both periods. The six hotels sold by the Company since March 2012 are not included in Comparable Hotel information throughout this MD&A (both financial information and operational Key Performance Indicators). Additionally, the Company's select service hotel in Thunder Bay, Ontario suffered a fire in October 2011 and a flood in May 2012 and had the majority of its rooms out of service from October 2011 until the third quarter of 2012. This property has been excluded from Comparable Hotels.

SELECTED FINANCIAL INFORMATION

The following table provides key financial information for the three and six months ended June 30, 2013 and 2012:


($000's, except as otherwise noted)
Three months
ended June 30


Variance

Six months
ended June 30


Variance

2013 2012 2013 2012
Hospitality Revenue (1) 17,669 19,760 (2,091 ) 34,582 37,167 (2,585 )
Hospitality Expenses excluding depreciation (1)(2) 13,501 15,714 (2,213 ) 27,852 30,851 (2,999 )
Gross Margin (3) (2) 4,168 4,046 122 6,730 6,316 414
Gross Margin % (3) 23.6 % 20.5 % 3.1 % 19.5 % 17.0 % 2.5 %
Other Income (Expense)
Investment Income (Loss) 175 40 135 214 (139 ) 350
Finance Costs (2,535 ) (2,906 ) 371 (5,036 ) (5,520 ) 487
Impairment of Property and Equipment (165 ) (996 ) 831 (165 ) (996 ) 831
Gain on Sale of Property and Equipment (2) 850 (20 ) 870 2,737 150 2,587
Depreciation and Amortization (2,101 ) (2,244 ) 143 (4,196 ) (4,478 ) 282
Corporate Administration (709 ) (806 ) 97 (1,160 ) (1,675 ) 515
Insurance Proceeds, Net of Remediation 48 264 (216 ) 93 1,078 (985 )
Costs
Income Tax Recovery - 823 (823 ) - 1,372 (1,372 )
Net Loss (2) (269 ) (1,799 ) 1,530 (783 ) (3,892 ) 3,109
Basic Income (Loss) per Share ($) (0.02 ) (0.10 ) 0.08 (0.05 ) (0.22 ) 0.17
Diluted Income (Loss) per Share ($) (0.02 ) (0.10 ) 0.08 (0.05 ) (0.22 ) 0.17
FFO (3) 1,147 517 630 841 133 708
Basic FFO per Share 0.07 0.03 0.04 0.05 0.01 0.04
AFFO (3) 464 (253 ) 717 (501 ) (1,319 ) 818
Basic AFFO per Share 0.03 (0.01 ) 0.04 (0.03 ) (0.07 ) 0.04
Number of Shares Outstanding (000's) 16,380 17,586 (1,206 ) 16,380 17,586 (1,206 )
Weighted Average Shares Outstanding 16,516 17,582 (1,066 ) 17,020 17,582 (562 )
(000's)
Closing Share Price ($) $0.98 $1.25 ($0.27 ) $0.98 $1.25 ($0.27 )
As at August 13, 2013, the Company had 16,379,675 shares outstanding.
(1) Hospitality revenue and hospitality expenses have been reclassified for previously reported quarters of 2012 as the result of reclassification of loyalty expenses so that they reduce hospitality revenue rather than being grouped with hospitality expenses. This reclassification will result in changes to hospitality revenue and hospitality expenses throughout this MD&A as well as to any other measures calculated with hospitality revenue as a basis. Gross margin and net loss have not been impacted by this reclassification.
(2) Hospitality expenses, gain on sale of property and equipment, gross margin and net loss have been adjusted throughout this MD&A for previously reported quarters of 2012 and 2013 as the result of a change in accounting policy with respect to inventory. For further details see section titled "Changes in Accounting Policies and Critical Accounting Estimates".
(3) Items represent non-GAAP financial measures.

ROYAL HOST INC.

Royal Host is a diversified hospitality company that delivers shareholder value through hotel ownership, management, investment and franchising. The Company's hotels, which contain approximately 2,611 rooms, are located in four

Provinces and Territories across Canada. Many of the Company's hotels operate under internationally recognized brands such as Travelodge®, Super 8®, Holiday Inn®, and Hilton®. In addition to its real estate holdings, the Company owns and operates the Travelodge Canada franchise business which is currently comprised of over 90 hotels across nine Provinces and Territories.

Royal Host's common shares and convertible debentures are traded on the Toronto Stock Exchange under the trading symbols "RYL", "RYL.DB.B", "RYL.DB.C" and "RYL.DB.D" respectively.

This press release may contain certain forward-looking statements relating, but not limited to, Royal Host's operations, anticipated financial performance, business prospects, and strategies. Forward-looking information typically contains statements with words such as "anticipate", "does not anticipate", "believe", "estimate", "forecast", "intend", "expect", "does not expect", "could", "may", "would", "will", "should", "budgeted", "plan" or other similar terms and expressions suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by such forward-looking statements. Readers are therefore cautioned that Royal Host's expectations, estimates and assumptions, although considered reasonable, may prove to be incorrect and readers should not place undue reliance on forward-looking statements.

Forward-looking statements contained herein are not guarantees of future performance and involve certain risks, uncertainties, and other factors that are difficult to predict, and could result in the outcome of such events being materially different from those intended, planned, anticipated, believed, estimated, or expected in this news release. Such factors and assumptions include, but are not limited to, general economic conditions, levels of travel in Royal Host's key market areas, political conditions and events, competitive pressures, changes in government policy or regulations, and lodging industry conditions. Royal Host does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances, unanticipated events or circumstances, or should its estimates or assumptions change, after the date hereof, except as expressly required by law.

This press release contains registered trademarks that are the exclusive property of their respective owners. None of the owners of these trademarks has any responsibility or liability for any information contained in this press release.

Contact Information

  • Royal Host Inc.
    Michael McFeters
    Chief Financial Officer
    902.470.4515