Holloway Lodging Corporation reports 2014 first quarter results and declares quarterly dividend

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HALIFAX, May 13, 2014 /CNW/ - Holloway Lodging Corporation (TSX: HLC) ("Holloway") today announced financial results for the three months ended March 31, 2014.  All amounts are in Canadian dollars unless otherwise indicated.  Readers should refer to Holloway's unaudited interim consolidated condensed financial statements as at March 31, 2014 and its management discussion and analysis which is available on Holloway's website at www.hlcorp.ca and on SEDAR at www.sedar.com.

FIRST QUARTER OVERVIEW AND OUTLOOK

Holloway had a great first quarter. We increased our occupancy, ADR, RevPar, margins, profits and, most importantly, cash flow. These increases were broad-based with improvements coming in all of the regions in which we operate. Our Western Canadian hotels performed particularly well with strong demand coming from oil and gas companies, forestry companies and ongoing infrastructure projects. The following are certain highlights from the quarter:

 
(in millions where indicated except percentages and per room measures) Q1, 2014 Q1, 2013 $ Increase % Increase
         
Hotel revenues $15.4 M $14.7 M $0.7 M 4.8%
Revenue per available room $87.93 $84.77 $3.16 3.7%
Hotel operating income per available room before depreciation $34.22 $31.85 $2.37 7.4%
Hotel operating income margin 36.1% 34.9% - 1.2 ppt
Funds from operations $3.2 M $2.6 M $0.6 M 23.1%
Adjusted funds from operations $2.9 M $2.4 M $0.5 M 20.8%

We expect our positive results to continue in coming months. Western Canada remains very busy with resource development, infrastructure projects and strong economic growth. The improvements in natural gas prices over the last several months are expected to generate additional demand for accommodations and we are excited about that prospect. In Eastern Canada and the U.S., we expect stable operating results.

In our year-end MD&A, we identified hotel acquisitions as an area of focus for the Company. Since the beginning of 2014, we sold our Holiday Inn Express® in Kamloops, BC and entered into an agreement to acquire the Days Inn® in Whitecourt, AB. Because the sale price of the Kamloops property and the acquisition price of the Whitecourt property are the same, we view this as trading hotels but will be receiving substantially more NOI from the hotel being acquired than we are giving up at the hotel being sold. The acquisition of the Whitecourt property is expected to close in late May or early June 2014. We also acquired, in April 2014, the 10% interest in the Holiday Inn Express® in Stellarton, NS that we did not already own. We entered into an agreement in May 2014 to acquire all of the issued and outstanding common shares of Royal Host Inc. The combined business would have generated more than $120 million of revenue and more than $34 million of NOI in 2013. Pursuant to the arrangement agreement, Royal Host shareholders will receive, for each Royal Host share they own, a combination of $1.00 in cash and 0.1 of a Holloway common share.

As always, we will continue to be opportunistic in repurchasing our shares, reducing our debt and acquiring hotels.

DIVIDEND DECLARATION

On May 13, 2014, the Board of Directors declared a quarterly dividend of $0.035 per share, representing an annual dividend of $0.14 per share.  The dividend will be payable on June 13, 2014 to shareholders of record on May 30, 2014.

SUMMARY OF OPERATING RESULTS

The following table provides a summary of the operating results for the three months ended March 31, 2014 and 2013.

 
  Three months ended
(in $000's except number of shares and per share results) March 31, 2014 March 31, 2013
Hotel revenues 15,351 14,698
Hotel expenses 9,817 9,563
Hotel operating income before depreciation and amortization 5,534 5,135
Hotel depreciation and amortization 2,290 2,219
Income from hotel operations 3,244 2,916
Other expenses 2,332 2,475
Reversal of impairment of asset held-for-sale (1,217) -
Income before income taxes 2,129 441
Provision for income taxes 570 147
Net income for the periods 1,559 294
     
Weighted average basic and diluted shares outstanding 17,930,002 18,642,969
Basic and diluted income per share 0.09 0.02
     
Reconciliation to funds from operations (FFO)    
Add / (deduct):    
Depreciation and amortization on real property 2,280 2,201
Provision for income taxes 570 147
Reversal of impairment of asset held-for-sale (1,217) -
Loss (gain) on disposal of property and equipment 38 (4)
Loss on disposal of minority interest investments in hotel properties - 10
FFO - basic and diluted 3,230 2,648
Basic and diluted FFO per share 0.18 0.14
     
Reconciliation to adjusted funds from operations (AFFO)    
Add/(deduct):    
Depreciation and amortization - corporate and other assets 25 19
Accretion of mortgages, loan due to a related party, and deferred financing fees 41 44
Fair value adjustment of derivative liability - (4)
Share-based compensation 75 101
FF&E reserve (468) (448)
AFFO - basic and diluted 2,903 2,360
Basic and diluted AFFO per share 0.16 0.13
     
Dividends per share 0.035 0.035

Holloway Lodging Corporation
Holloway is a real estate corporation focused on acquiring, owning and operating select and limited service lodging properties and a small complement of full service hotels primarily in secondary, tertiary and suburban markets.  Holloway currently owns 17 hotels with 1,718 rooms.  Holloway's shares trade on the Toronto Stock Exchange under the symbol HLC.

This press release contains forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to Holloway's future outlook and anticipated events or results and may include statements regarding Holloway's future financial position, business strategy, financial results, plans and objectives In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts.   Forward looking-information is subject to certain factors, including risks and uncertainties, that could cause actual results to differ materially from what Holloway currently expects and there can be no assurance that such statements will prove to be accurate.  Some of these risks and uncertainties are described under "Risk Factors" in Holloway's Annual Information Form ("AIF"), dated March 3, 2014 which is available at www.sedar.com.  Holloway does not intend to update or revise any such forward-looking information should its assumptions and estimates change. 

SOURCE Holloway Lodging Corporation

For further information:

Michael Rapps, Chairman, at (416) 855-1925 or Jane Rafuse, Chief Financial Officer, at (902) 404-3499.