AFM Hospitality Corporation (TSX:AFM) announced today, with the release of its year-end fiscal results, that it achieved an overall profit during 2002. Net Income improved CDN $693,000 from a loss of $276,000 to a profit of CDN $417,000 in 2002. Net Income, adjusted for certain one-time non-cash reserves established during the year, increased to CDN $2.2 million. EBITDA (earnings before interest, taxes, depreciation and amortization) increased 80% from CDN $1 million in 2001 to CDN $1.8 million in 2002.
During 2002, AFM Hospitality Corporation has continued to strengthen its balance sheet and improve its ability to grow both in Canada and the United States, particularly in the hotel management division. AFM Hospitality Corporation is a leading North American hospitality services company.
“We are encouraged by our ability to seek out and exploit strategic growth opportunities while both increasing profitability and improving the Company’s balance sheet,” says Lawrence P. Horwitz, Chairman and Chief Executive Officer of AFM Hospitality Corporation. “Of course, the Company’s financial performance is particularly impressive given the continued recession in the United States and the turbulent world events of the past year,” he added.
AFM Hospitality grew overall revenue by 4% to CDN $13.6 million and earnings to CDN $0.06 per share, from a loss of CDN $0.05 per share in 2001. The turnaround in income, coupled with growth of 67% in management services revenues, sets the stage for continued income and balance sheet improvement in 2003 and beyond
Highlights of accomplishments in 2002 include:
* a further increase in shareholders’ equity from CDN $9.9 million to CDN $14.3 million, growth of 44%;
* a CDN $6.0 million improvement in working capital from a deficit of CDN $3.5 million to a surplus of CDN $2.5 million;
* the achievement of CDN $2.2 million in adjusted net income before certain one-time, non-cash reserves;
* the acquisition of the exclusive franchise rights of the Traveller’s Inn hotel brand in Canada and the United States;
* the achievement of net growth of 47 open and/or executed franchise and management agreements;
* the acquisition of eight hotel management contracts in western Canada from RTM Hospitality Management & Development Company Ltd.;
* the acquisition of eight hotel management contracts in western Canada from Traveller’s Inn (Canada) Ltd.;
* the acquisition of ten hotel management contracts in the midwest United States from Heyde Hospitality Inc.;
* the negotiation of the acquisition of the interim asset management and receivership business in the United States from Trigild Services Inc., including more than fifty assignments for financial institutions managing restaurants, hotels and other businesses; and
* the completion of the sale of the Ramada franchise business in Canada, realizing an after-tax gain of CDN $6.2 million.
“The accomplishments and resulting financial performance in 2002 demonstrate that the Company is well positioned in the current economy to continue its strategic growth. This past year brought the best performance in the Company’s history” declared Mr. Horwitz.
The achievements of AFM Hospitality Corporation over the last five years include the following:
* the increase in share capital from CDN $17.5 million to CDN $28.8 million;
* the improvement in shareholders’ equity from a deficit of CDN $800 thousand to a positive equity of CDN $14.3 million;
* the improvement in the Company’s debt/equity ratio from 18.0 to 0.4;
* a decrease in long-term debt from CDN $24 million to CDN $6.2 million;
* the establishment of a new CDN $3.2 million loan facility from a United States financial institution at 2.75% interest only;
* an increase in total annual revenue from CDN $4.4 million to CDN $13.6 million; and
* an increase in the number of open and/or executed units under franchise or management from 74 to 234.
During 2002, the Company was realigned along its three principal operating segments. The Franchise Division is headed by Glen Blake from the Toronto, Ontario office and operates exclusively in Canada. The Management Division is guided by Peter Smith from the Company’s Seattle, Washington office and is active in both Canada and the United States. The Interim Asset Management Division is headed by William Hoffman from the Company’s San Diego, California office and principally operates in the United States. This wide geographical scope in complementary businesses provides the Company wide breadth to maintain profitability despite economic difficulties in any one sector.
“We are exceptionally proud of our employees and the high caliber of our new recruits, particularly at the senior level. We are also proud and gratified for the continued support of our shareholders in carrying out the strategic initiatives of the Company”, added Mr. Horwitz.
In 2003, AFM’s primary focus will be to continue growth by increasing the number of franchise agreements, hospitality management contracts and interim asset management contracts. This growth will be achieved by the continued increase in the number of contracts through solicitation of independent owners and those that are currently branded or managed by other companies. The acquisition of groups or clusters of contracts will continue to be negotiated when an owner can bring several contracts to the Company and will guarantee a minimum income stream. These larger acquisitions of contracts will be purchased with the use of the Company’s shares if the future income stream is determined to be non-dilutive to existing shareholders. AFM Hospitality Corporation also expects to continue pursuing potential acquisitions of complementary businesses.
AFM Hospitality Corporation owns AFM Preferred Alliance Group Inc., AFM Asset Management Inc., AFM Asset Management Services Inc., AFM Hospitality (USA) Corporation, Northwest Lodging International (USA) Inc., Northwest Lodging International (Canada) Inc., Trigild Services, Inc., Special Asset Services, Inc. and Staffing Services International Inc. Through its wholly-owned subsidiaries, it is the exclusive Canadian Master Franchisor for Aston, Best Inns, Hawthorn Suites, Howard Johnson, Knights Inn, La Quinta, Park Plaza, Park Inn, Traveller’s Inn and Villager Lodge. AFM Hospitality Corporation operates or has open and/or executed franchise and management agreements with more than 250 hotels, restaurants and other nationally franchised service businesses throughout North America. The company’s focus is to increase the number of hotels franchised by the respective brands, franchise new brands, build the portfolio of hotel management agreements, provide valuable resources and Hospitality experience to help hotel owners grow their business,and acquire other franchise businesses related to the hospitality industry, while making available property management services. AFM Hospitality Corporation is a publicly traded company listed on the Toronto Stock Exchange (TSX:AFM) and may be reached at www.afmcorp.com.