Four Seasons Hotel (NYSE:FS)
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9. The management operations profit margin represents management
operations earnings before other operating items, as a percent of
management operations revenue.
10. Included in ownership and corporate operations are the consolidated
revenues and expenses from our 100% leasehold interests in The Pierre
in New York, Four Seasons Hotel Vancouver and Four Seasons Hotel
Berlin (until the Berlin lease termination on September 26, 2004),
distributions from other ownership interests in properties that Four
Seasons manages and corporate overhead expenses related, in part, to
these ownership interests.
11. Depreciation and management fees related to The Pierre for the
quarters of 2004 and first and second quarters of 2005.
---------------------------------------------------------------------
Management Fees,
including
(In millions of US dollars) Depreciation reimbursed costs
---------------------------------------------------------------------
First Quarter 2004 $0.4 $0.5
---------------------------------------------------------------------
Second Quarter 2004 $0.5 $0.9
---------------------------------------------------------------------
Third Quarter 2004 $0.4 $0.5
---------------------------------------------------------------------
Fourth Quarter 2004 $0.5 $1.1
---------------------------------------------------------------------
Full Year 2004 $1.8 $3.0
---------------------------------------------------------------------
First Quarter 2005 $0.5 $0.7
---------------------------------------------------------------------
Second Quarter 2005 $0.4 $1.1
---------------------------------------------------------------------
(+)(+)(+)
All dollar amounts referred to in this news release are US dollars unless
otherwise noted. The financial statements are prepared in accordance with
Canadian generally accepted accounting principles.
(+)(+)(+)
This news release contains "forward-looking statements" within the meaning of applicable securities laws, including RevPAR, profit margin and earnings trends; statements concerning the number of lodging properties expected to be added in this and future years; expected investment spending; and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in our annual information form and in this news release. Those risks and uncertainties include adverse factors generally encountered in the lodging industry; the risks associated with world events, including war, terrorism, international conflicts, natural disasters, extreme weather conditions, and infectious diseases; general economic conditions, supply and demand changes for hotel rooms and residential properties, competitive conditions in the lodging industry, relationships with clients and property owners, currency fluctuations and the availability of capital to finance growth. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. All forward-looking statements in this news release are qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, we undertake no obligation to comment on analyses, expectations or statements made by third parties in respect of Four Seasons, its financial or operating results or its securities or any of the properties that we manage or in which we may have an interest.
(+)(+)(+)
We will hold a conference call today at 11 a.m. (Eastern Daylight Time)
to discuss the second quarter financial results. The details are:
To access the call dial: 1 (800) 289-6406 (U.S.A. and Canada)
1 (416) 641-6654 (outside U.S.A. and Canada)
To access a replay of the call, which will be available for one week
after the call, dial: 1 (800) 558-5253, Reservation Number 21251495.
A live web cast will also be available by visiting
http://www.fourseasons.com/investor.
This web cast will be archived for one month following the call.
(+)(+)(+)
Dedicated to continuous innovation and the highest standards of hospitality, Four Seasons invented luxury for the modern traveller. From elegant surroundings of the finest quality, to caring, highly personalised 24-hour service, Four Seasons embodies a true home away from home for those who know and appreciate the best. The deeply instilled Four Seasons culture is personified in its employees - people who share a single focus and are inspired to offer great service. Founded in 1960, Four Seasons has followed a targeted course of expansion, opening hotels in major city centers and desirable resort destinations around the world. Currently with 65 hotels in 29 countries, and more than 20 properties under development, Four Seasons will continue to lead luxury hospitality with innovative enhancements, making business travel easier and leisure travel more rewarding. For more information on Four Seasons, visit http://www.fourseasons.com/.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands of Three months ended Six months ended
US dollars except June 30, June 30,
per share amounts) 2005 2004 2005 2004
-------------------------------------------------------------------------
Consolidated revenues
(note 4) $ 74,539 $ 71,363 $ 137,636 $ 128,484
---------------------------------------------------
---------------------------------------------------
MANAGEMENT OPERATIONS
Revenues:
Fee revenues
(note 4(a)) $ 32,241 $ 30,582 $ 61,268 $ 55,909
Reimbursed costs 16,058 13,630 30,602 25,949
---------------------------------------------------
48,299 44,212 91,870 81,858
---------------------------------------------------
Expenses:
General and
administrative
expenses (9,459) (8,442) (19,193) (16,680)
Reimbursed costs (16,058) (13,630) (30,602) (25,949)
---------------------------------------------------
(25,517) (22,072) (49,795) (42,629)
---------------------------------------------------
22,782 22,140 42,075 39,229
---------------------------------------------------
OWNERSHIP AND
CORPORATE OPERATIONS
Revenues 27,572 28,106 48,089 48,438
Distributions from
hotel investments 132 293 132 293
Expenses:
Cost of sales and
expenses (28,549) (28,436) (54,900) (55,290)
Fees to Management
Operations (1,464) (1,248) (2,455) (2,105)
---------------------------------------------------
(2,309) (1,285) (9,134) (8,664)
---------------------------------------------------
Earnings before other
operating items 20,473 20,855 32,941 30,565
Depreciation and
amortization (2,908) (2,664) (5,937) (5,415)
Other income (expense),
net (notes 4(a) and 5) (8,645) (2,216) (11,355) 1,063
---------------------------------------------------
Earnings from
operations 8,920 15,975 15,649 26,213
Interest income, net 828 490 1,210 1,361
---------------------------------------------------
Earnings before
income taxes 9,748 16,465 16,859 27,574
---------------------------------------------------
Income tax recovery
(expense):
Current (1,390) (3,214) (3,314) (5,330)
Future (note 5) 7,428 (493) 7,443 (781)
---------------------------------------------------
6,038 (3,707) 4,129 (6,111)
---------------------------------------------------
Net earnings $ 15,786 $ 12,758 $ 20,988 $ 21,463
---------------------------------------------------
---------------------------------------------------
Basic earnings per
share (note 3(a)) $ 0.43 $ 0.36 $ 0.57 $ 0.61
---------------------------------------------------
---------------------------------------------------
Diluted earnings per
share (note 3(a)) $ 0.42 $ 0.34 $ 0.55 $ 0.58
---------------------------------------------------
---------------------------------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED BALANCE SHEETS
As at As at
(Unaudited) June 30, December 31,
(In thousands of US dollars) 2005 2004
-------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 218,636 $ 226,377
Receivables 83,660 81,541
Inventory 1,028 1,439
Prepaid expenses 3,935 2,981
-------------------------
307,259 312,338
Long-term receivables 192,964 179,060
Investments in hotel partnerships
and corporations 120,074 131,338
Fixed assets 53,658 59,939
Investment in management contracts 171,652 181,273
Investment in trademarks and trade names 4,241 4,424
Future income tax assets 11,136 3,711
Other assets 34,378 30,064
-------------------------
$ 895,362 $ 902,147
-------------------------
-------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 48,544 $ 60,415
Long-term obligations due within one year 3,513 3,766
-------------------------
52,057 64,181
Long-term obligations (note 2) 257,593 253,066
Shareholders' equity (note 3):
Capital stock 250,216 248,980
Convertible notes 36,920 36,920
Contributed surplus 9,095 8,088
Retained earnings 211,580 192,129
Equity adjustment from foreign
currency translation 77,901 98,783
-------------------------
585,712 584,900
-------------------------
Subsequent event (note 9)
$ 895,362 $ 902,147
-------------------------
-------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH PROVIDED BY OPERATIONS
(Unaudited) Three months ended Six months ended
(In thousands of June 30, June 30,
US dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Cash provided by (used
in) operations:
MANAGEMENT OPERATIONS
Earnings before other
operating items $ 22,782 $ 22,140 $ 42,075 $ 39,229
Items not requiring an
outlay of funds 504 354 1,089 744
---------------------------------------------------
Working capital
provided by
Management Operations 23,286 22,494 43,164 39,973
---------------------------------------------------
OWNERSHIP AND CORPORATE
OPERATIONS
Loss before other
operating items (2,309) (1,285) (9,134) (8,664)
Items not requiring
an outlay of funds 300 212 576 377
---------------------------------------------------
Working capital used
in Ownership and
Corporate Operations (2,009) (1,073) (8,558) (8,287)
---------------------------------------------------
21,277 21,421 34,606 31,686
Interest received, net 2,848 1,349 4,515 4,180
Current income tax paid (2,349) (1,095) (5,455) (1,259)
Change in non-cash
working capital 2,205 (444) (14,208) (9,206)
Other (16) (91) (129) (538)
---------------------------------------------------
Cash provided by
operations $ 23,965 $ 21,140 $ 19,329 $ 24,863
---------------------------------------------------
---------------------------------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three months ended Six months ended
(In thousands of June 30, June 30,
US dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Cash provided by
(used in):
Operations: $ 23,965 $ 21,140 $ 19,329 $ 24,863
---------------------------------------------------
Financing:
Issuance of
convertible notes - 241,332 - 241,332
Other long-term
obligations including
current portion (1,630) (72) (1,498) 16
Issuance of shares 1,219 5,459 6,836 8,519
Dividends paid - - (1,558) (1,391)
---------------------------------------------------
Cash provided by (used
in) financing (411) 246,719 3,780 248,476
---------------------------------------------------
Capital investments:
Increase in
restricted cash - (55,204) - (55,204)
Long-term receivables 5,725 (15,365) (14,740) (14,700)
Hotel investments (2,265) (27,476) (9,445) (28,446)
Disposal of hotel
investments (note 5) 7,326 - 12,672 -
Purchase of fixed
assets (4,453) 1,391 (8,060) (1,917)
Investments in
trademarks and
trade names and
management contracts (342) (8,441) (473) (8,719)
Other assets (6,809) (893) (6,860) (1,735)
---------------------------------------------------
Cash used in capital
investments (818) (105,988) (26,906) (110,721)
---------------------------------------------------
Increase (decrease)
in net cash and
cash equivalents 22,736 161,871 (3,797) 162,618
Decrease in net cash
and cash equivalents
due to unrealized
foreign exchange loss (2,264) (2,228) (3,944) (2,095)
Cash and cash
equivalents,
beginning of period 198,164 132,979 226,377 132,099
---------------------------------------------------
Net cash and cash
equivalents,
end of period $ 218,636 $ 292,622 $ 218,636 $ 292,622
---------------------------------------------------
---------------------------------------------------
Supplemental disclosure
of net cash and cash
equivalents:
Cash and cash
equivalents $ 218,636 $ 348,575 $ 218,636 $ 348,575
Less restricted cash - (55,953) - (55,953)
---------------------------------------------------
Net cash and cash
equivalents $ 218,636 $ 292,622 $ 218,636 $ 292,622
---------------------------------------------------
---------------------------------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Six months ended
(Unaudited) June 30,
(In thousands of US dollars) 2005 2004
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 192,129 $ 169,364
Net earnings 20,988 21,463
Dividends declared (1,537) (1,367)
-------------------------
Retained earnings, end of period $ 211,580 $ 189,460
-------------------------
-------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of US dollars except per share amounts)
-------------------------------------------------------------------------
In these interim consolidated financial statements, the words "we", "us",
"our", and other similar words are references to Four Seasons Hotels Inc.
and its consolidated subsidiaries. These interim consolidated financial
statements do not include all disclosures required by Canadian generally
accepted accounting principles ("GAAP") for annual financial statements
and should be read in conjunction with our most recently prepared annual
consolidated financial statements for the year ended December 31, 2004.
1. Significant accounting policies:
The significant accounting policies used in preparing these interim
consolidated financial statements are consistent with those used in
preparing our annual consolidated financial statements for the year ended
December 31, 2004, except as disclosed below:
(a) Change in reporting currency:
We have historically prepared our consolidated financial statements
in Canadian dollars. Effective for the three months ended March 31,
2005, we have adopted US dollars as our reporting currency. With the
majority of our management fee revenues in US dollars, reporting in
US dollars should reduce the volatility on reported results relating
to the impact of fluctuations in the rate of exchange between the US
and Canadian dollar relating to these revenues and, as a result, we
believe it will provide our financial statement users with more
meaningful information. We have not changed the functional currency
of Four Seasons Hotels Inc., which remains Canadian dollars, or the
functional currencies of any of its subsidiaries.
The consolidated financial statements in Canadian dollars have been
translated to US dollars using the foreign exchange rates applicable
at each balance sheet date for assets and liabilities, and the
weighted average exchange rates of the corresponding quarters for the
consolidated statements of operations, consolidated statements of
cash provided by operations and consolidated statements of cash
flows. Equity transactions have been translated to US dollars at the
historical exchange rates with opening equity accounts on January 1,
2003 translated at the exchange rate on that date. Any resulting
exchange gain or loss was charged or credited to "Equity adjustment
from foreign currency translation" included as a separate component
of shareholders' equity.
(b) Variable interest entities:
The Canadian Institute of Chartered Accountants ("CICA") issued
Accounting Guideline No. 15, "Consolidation of Variable Interest
Entities" ("AcG-15"), which establishes criteria to identify variable
interest entities ("VIE") and the primary beneficiary of such
entities. Entities that qualify as VIEs must be consolidated by their
primary beneficiary. Effective January 1, 2005, we adopted AcG-15 and
have concluded that we do not have to consolidate any interest under
AcG-15.
(c) Investments in hotel partnerships and corporations:
In conjunction with the issuance of Section 3475, "Disposal of Long-
Lived Assets and Discontinued Operations", the CICA eliminated the
exception from consolidation for a temporary controlled subsidiary.
Beginning January 1, 2005, we were required to either equity account
or consolidate our temporary investments in which we have over a 20%
equity interest. In March 2005, we sold the majority of our equity
interest in Four Seasons Residence Club Scottsdale at Troon North,
and in April 2005, we sold the majority of our equity interest in
Four Seasons Hotel Shanghai (note 5). As a result of the sales, our
equity interests in each property were reduced to less than 20%. The
change in accounting for these temporary investments did not have a
material impact on our consolidated financial statements for the
three months and six months ended June 30, 2005.
2. Long-term obligations:
(a) Bank credit facility:
We have a committed bank credit facility of $125,000, which expires
in September 2007. As at June 30, 2005, no amounts were borrowed
under this credit facility. However, approximately $4,000 of letters
of credit were issued under this credit facility as at June 30, 2005.
No amounts have been drawn under these letters of credit.
(b) Currency and interest rate swap:
In April 2005, we entered into a currency and interest rate swap
agreement to July 30, 2009, pursuant to which we have agreed to
receive interest at a fixed rate of 5.33% per annum on an initial
notional amount of $215,842 and pay interest at a floating rate of
six-month Canadian Bankers Acceptance in arrears plus 1.1% per annum
on an initial notional amount of C$269.2 million. On July 30, 2009,
we will pay C$311.8 million and receive $250,000 under the swap. We
have designated the swap as a fair value hedge of our convertible
senior notes, which were issued in 2004.
3. Shareholders' equity:
As at June 30, 2005, we have 3,725,698 outstanding Variable Multiple
Voting Shares ("VMVS"), 32,909,488 outstanding Limited Voting Shares
("LVS"), and 4,544,843 outstanding stock options (weighted average
exercise price of C$59.32 ($48.13)).
(a) Earnings per share:
A reconciliation of the net earnings and weighted average number of
VMVS and LVS used to calculate basic and diluted earnings per share
is as follows:
Three months ended June 30,
2005 2004
---------------------------------------------------------------------
Net Net
earnings Shares earnings Shares
---------------------------------------------------------------------
Basic earnings per
share amounts $ 15,786 36,624,440 $ 12,758 35,484,874
Effect of assumed
dilutive conversions:
Stock option plan - 1,325,607 - 1,494,286
Convertible notes
(issued in 1999
and redeemed in
September 2004) - - 989 3,463,155
---------------------------------------------------------------------
Diluted earnings per
share amounts $ 15,786 37,950,047 $ 13,747 40,442,315
---------------------------------------------------------------------
---------------------------------------------------------------------
Six months ended June 30,
2005 2004
---------------------------------------------------------------------
Net Net
earnings Shares earnings Shares
---------------------------------------------------------------------
Basic earnings per
share amounts $ 20,988 36,616,645 $ 21,463 35,386,149
Effect of assumed
dilutive conversions:
Stock option plan - 1,454,426 - 1,467,988
Convertible notes
(issued in 1999
and redeemed in
September 2004) - - 1,978 3,463,155
---------------------------------------------------------------------
Diluted earnings per
share amounts $ 20,988 38,071,071 $ 23,441 40,317,292
---------------------------------------------------------------------
---------------------------------------------------------------------
The diluted earnings per share calculation excluded the effect of the
assumed conversions of 693,056 and 59,000 stock options to LVS, under
our stock option plan, during the three months and six months ended
June 30, 2005, respectively (2004 - 858,196 and 1,015,916 stock
options, respectively), as the inclusion of these conversions would
have resulted in an anti-dilutive effect. There was no dilution
relating to the convertible senior notes issued in 2004, as the
contingent conversion price was not reached during the period.
In June 2005, the Emerging Issues Committee of the CICA issued
Abstract EIC-155, "The Effect of Contingently Convertible Instruments
on Diluted Earnings per Share", which requires the application of the
"if-converted method" to account for the potential dilution relating
to the conversion of contingently convertible instruments, such as
our convertible senior notes. EIC-155 will be effective for periods
beginning on or after October 1, 2005. If we had adopted EIC-155 for
the three months and six months ended June 30, 2005, there would have
been no additional dilution for either period.
(b) Stock-based compensation:
We use the fair value-based method to account for all employee stock
options granted on or after January 1, 2003. Accordingly, options
granted prior to that date continue to be accounted for using the
settlement method.
There were no stock options granted in the three months and six
months ended June 30, 2005. The fair value of stock options granted
in the three months and six months ended June 30, 2004 was estimated
using the Black-Scholes option pricing model with the following
assumptions: risk-free interest rates ranging from 3.86% to 4.39% and
2.96% to 4.39%, respectively; semi-annual dividend per LVS of C$0.055
for both periods; volatility factor of the expected market price of
our LVS of 28% and 28% to 30%, respectively; and expected lives of
the options ranging between four and seven years, depending on the
level of the employee who was granted stock options. For the options
granted in the three months and six months ended June 30, 2004, the
weighted average fair value of the options at the grant dates was
C$24.85 and C$25.35, respectively ($18.29 and $18.94, respectively).
For purposes of stock option expense and pro forma disclosures, the
estimated fair value of the options are amortized to compensation
expense over the options' vesting period.
Pro forma disclosure is required to show the effect of the
application of the fair value-based method to employee stock options
granted on or after January 1, 2002 and not accounted for using the
fair value-based method. For the three months and six months ended
June 30, 2005 and 2004, if we had applied the fair value-based method
to options granted from January 1, 2002 to December 31, 2002, our net
earnings and basic and diluted earnings per share would have been
adjusted to the pro forma amounts indicated below:
Three months ended Six months ended
June 30, June 30,
2005 2004 2005 2004
---------------------------------------------------------------------
Stock option expense
included in compensation
expense $ (515) $ (364) $ (1,008) $ (677)
-------------------------------------------
-------------------------------------------
Net earnings, as reported $ 15,786 $ 12,758 $ 20,988 $ 21,463
Additional expense that
would have been recorded
if all outstanding stock
options granted during
2002 had been expensed (681) (628) (1,372) (1,280)
-------------------------------------------
Pro forma net earnings $ 15,105 $ 12,130 $ 19,616 $ 20,183
-------------------------------------------
Earnings per share:
Basic, as reported $ 0.43 $ 0.36 $ 0.57 $ 0.61
Basic, pro forma 0.41 0.34 0.54 0.57
Diluted, as reported 0.42 0.34 0.55 0.58
Diluted, pro forma 0.40 0.32 0.52 0.55
-------------------------------------------
4. Consolidated revenues:
Three months ended Six months ended
June 30, June 30,
2005 2004 2005 2004
---------------------------------------------------------------------
Revenues from Management
Operations(a) $ 48,299 $ 44,212 $ 91,870 $ 81,858
Revenues from Ownership
and Corporate Operations 27,572 28,106 48,089 48,438
Distributions from hotel
investments 132 293 132 293
Fees from Ownership and
Corporate Operations to
Management Operations (1,464) (1,248) (2,455) (2,105)
-------------------------------------------
$ 74,539 $ 71,363 $137,636 $128,484
-------------------------------------------
-------------------------------------------
(a) Effective January 1, 2004, we ceased designating our US dollar
forward contracts as hedges of our US dollar fee revenues. These
contracts were entered into during 2002, and all of these contracts
matured during 2004. The foreign exchange gains on these contracts of
$11,201, which were deferred prior to January 1, 2004, were
recognized in 2004 as an increase of fee revenues over the course of
the year. During the three months and six months ended June 30, 2004,
we recognized $2,798 and $5,518, respectively, of the deferred gain
in fee revenues. We did not hedge any of our US dollar fee revenues
during the three months and six months ended June 30, 2005. In
addition, effective January 1, 2004, the US dollar forward contracts
were marked-to-market on a monthly basis with the resulting changes
in fair values being recorded as a foreign exchange gain or loss and
was included in other income (expense), net. This resulted in a $692
and $1,120 foreign exchange loss, respectively, for the three months
and six months ended June 30, 2004.
5. Other income (expense), net:
Included in other income (expense), net for the three months and six
months ended June 30, 2005 is a net foreign exchange loss of $3,289 and
$3,682, respectively (2004 - net foreign exchange loss of $2,185 and net
foreign exchange gain of $1,328, respectively) related to the foreign
currency translation gains and losses on unhedged net monetary asset and
liability positions, primarily in US dollars, euros, pounds sterling and
Australian dollars, and foreign exchange gains and losses incurred by our
designated foreign self-sustaining subsidiaries.
On June 30, 2005, we finalized the assignment of our leases and the sale
of the related assets in The Pierre for net proceeds of $4,520. The net
book value of our assets in The Pierre was approximately $7,800 and,
after deducting disposition costs, we recorded a loss on sale of $5,023.
As a result of the sale, we also recorded a tax benefit of approximately
$9,200, which is included in future income tax recovery.
As part of the sale of The Pierre, in accordance with statutory
provisions, the purchaser agreed to assume a portion of our contribution
history with a multi-employer pension fund for the unionized hotel
employees (the "NYC Pension"). This permitted us to withdraw from the NYC
Pension without incurring a withdrawal liability estimated at $10,700.
If the purchaser withdraws as the result of the lease cancellation by the
landlord in certain circumstances in 2008 or 2011, we have agreed to
indemnify the purchaser for that portion of the withdrawal liability
relating to their assumption of our contribution history. The amount of
any potential future liability resulting from this indemnity is not
determinable at this time as it would be based upon future events related
to the NYC Pension.
If the purchaser withdraws from the NYC Pension prior to 2011 in any
circumstances other than those described above and does not pay its
withdrawal liability, we remain secondarily liable for our withdrawal
liability up to an amount of $10,700. We have been indemnified by the
purchaser for any such liability.
We believe that the likelihood of our being required to make a payment is
remote, and have not recorded any amount as at June 30, 2005 in respect
of a potential NYC Pension withdrawal liability.
In March 2005, we sold the majority of our equity interest in Four
Seasons Residence Club Scottsdale at Troon North for gross proceeds of
$5,346, which approximated book value. As a result of the sale, our
equity interest in the residence club was reduced to approximately 14%.
In April 2005, we sold approximately 53% of our equity interest in Four
Seasons Hotel Shanghai for gross proceeds of $9,500 (cash of $4,241 and a
loan receivable of $5,259), which approximated book value, and reduced
our interest in the hotel to approximately 10%. As a result of the sale,
we revalued this US dollar investment at March 31, 2005 at current
exchange rates and recorded a loss of $1,930, which was included in other
income (expense), net, during the three months ended March 31, 2005.
6. Pension benefit expense:
The pension benefit expense, after allocation to managed properties, for
the three months and six months ended June 30, 2005 was $596 and $1,217,
respectively (2004 - $559 and $1,134, respectively).
7. Guarantees and other commitments:
We have provided certain guarantees and have other similar commitments
typically made in connection with properties under our management
totalling a maximum of $47,000. These contractual obligations and other
commitments are more fully described in the consolidated financial
statements for the year ended December 31, 2004. Since December 31, 2004,
we have reduced two of our bank guarantees, reduced two of our other
commitments, and extended one new bank guarantee and two other
commitments to two properties under our management, resulting in a net
increase in guarantees and other commitments of $1,900.
In addition, we expect to fund approximately $21,000 over the next 18
months in connection with an expansion of our corporate office which is
currently underway.
8. Seasonality:
Our hotels and resorts are affected by normally recurring seasonal
patterns, and demand is usually lower in the period from December through
March than during the remainder of the year for most of our urban
properties. However, December through March is typically a period of
relatively strong demand at our resorts.
As a result, our management operations are affected by seasonal patterns,
both in terms of revenues and operating results. Urban hotels generally
experience lower revenues and operating results in the first quarter.
This negative impact on management revenues from those properties is
offset to some degree by increased travel to our resorts in the period.
Our ownership operations are particularly affected by seasonal
fluctuations, with lower revenue, higher operating losses and lower cash
flow in the first quarter, as compared to the other quarters. With the
disposition of our leasehold interest in The Pierre at the end of the
second quarter of 2005 (note 5), we have substantially reduced the
exposure to seasonality in our ownership operations.
9. Subsequent event:
In August 2005, we finalized an agreement with the owner of Four Seasons
Hotel Newport Beach pursuant to which, effective October 31, 2005, the
owner will begin to manage this property as an independent hotel. At the
time of transition, we will receive a payment in an amount that will
exceed the net book value of our investment in the management contract.
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA - CORE HOTELS(1)
Three months ended
June 30,
(Unaudited) 2005 2004 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties 52 52 --
No. of Rooms 13,802 13,802 --
Occupancy(2) 71.4% 67.5% 3.9pts.
ADR(3) - in US dollars $339 $320 5.8%
RevPAR(4) - in US dollars $232 $206 12.8%
Gross operating margin(5) 33.1% 30.4% 2.7pts.
United States
No. of Properties 20 20 --
No. of Rooms 6,274 6,274 --
Occupancy(2) 76.3% 71.0% 5.3pts.
ADR(3) - in US dollars $350 $331 5.7%
RevPAR(4) - in US dollars $271 $239 13.6%
Gross operating margin(5) 30.7% 27.8% 2.9pts.
Other Americas/Caribbean
No. of Properties 8 8 --
No. of Rooms 1,724 1,724 --
Occupancy(2) 73.4% 67.4% 6.0pts.
ADR(3) - in US dollars $313 $300 4.4%
RevPAR(4) - in US dollars $225 $191 17.6%
Gross operating margin(5) 31.1% 26.0% 5.1pts.
Europe
No. of Properties 8 8 --
No. of Rooms 1,492 1,492 --
Occupancy(2) 69.6% 70.1% (0.5)pts.
ADR(3) - in US dollars $560 $538 4.1%
RevPAR(4) - in US dollars $402 $385 4.6%
Gross operating margin(5) 39.1% 40.9% (1.8)pts.
Middle East
No. of Properties 4 4 --
No. of Rooms 847 847 --
Occupancy(2) 70.0% 65.4% 4.6pts.
ADR(3) - in US dollars $216 $183 18.3%
RevPAR(4) - in US dollars $152 $119 28.3%
Gross operating margin(5) 47.1% 38.5% 8.6pts.
Asia/Pacific
No. of Properties 12 12 --
No. of Rooms 3,465 3,465 --
Occupancy(2) 62.8% 60.7% 2.1pts.
ADR(3) - in US dollars $230 $216 6.7%
RevPAR(4) - in US dollars $113 $99 14.1%
Gross operating margin(5) 32.3% 29.2% 3.1pts.
------------------------------------------------
(1) The term "Core Hotels" means hotels and resorts under management for
the full year of both 2005 and 2004. However, if a "Core Hotel" has
undergone or is undergoing an extensive renovation program in one of
those years that materially affects the operation of the property in
that year, it ceases to be included as a "Core Hotel" in either year.
Changes from the 2004/2003 Core Hotels are the additions of Four
Seasons Resort Jackson Hole, Four Seasons Hotel Miami, Four Seasons
Resort Great Exuma at Emerald Bay, Four Seasons Hotel Prague, Four
Seasons Hotel Riyadh and Four Seasons Hotel Jakarta, and the
deletions of Four Seasons Resort Maldives at Kuda Huraa (due to its
temporary closure caused by the tsunami) and The Pierre in New York
(due to its disposition on June 30, 2005).
(2) Occupancy percentage is defined as the total number of rooms occupied
divided by the total number of rooms available.
(3) ADR is defined as average daily room rate calculated as straight
average for each region.
(4) RevPAR is defined as average room revenue per available room. It is a
non-GAAP measure. We use RevPAR because it is a commonly used
indicator of market performance for hotels and resorts and represents
the combination of the average daily room rate and the average
occupancy rate achieved during the period. RevPAR does not include
food and beverage or other ancillary revenues generated by a hotel or
resort. RevPAR is the most commonly used measure in the lodging
industry to measure the period-over-period performance of comparable
properties. Our calculation of RevPAR may be different than the
calculation used by other lodging companies.
(5) Gross operating margin represents gross operating profit as a
percentage of gross operating revenue.
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA - CORE HOTELS(1)
Six months ended
June 30,
(Unaudited) 2005 2004 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties 52 52 --
No. of Rooms 13,802 13,802 --
Occupancy(2) 69.2% 65.2% 4.0pts.
ADR(3) - in US dollars $349 $327 6.9%
RevPAR(4) - in US dollars $228 $201 13.2%
Gross operating margin(5) 31.5% 29.2% 2.3pts.
United States
No. of Properties 20 20 --
No. of Rooms 6,274 6,274 --
Occupancy(2) 73.8% 69.2% 4.6pts.
ADR(3) - in US dollars $364 $343 6.0%
RevPAR(4) - in US dollars $266 $236 13.0%
Gross operating margin(5) 29.0% 26.6% 2.4pts.
Other Americas/Caribbean
No. of Properties 8 8 --
No. of Rooms 1,724 1,724 --
Occupancy(2) 69.2% 63.9% 5.3pts.
ADR(3) - in US dollars $364 $338 7.7%
RevPAR(4) - in US dollars $247 $208 18.4%
Gross operating margin(5) 33.6% 29.7% 3.9pts.
Europe
No. of Properties 8 8 --
No. of Rooms 1,492 1,492 --
Occupancy(2) 62.2% 64.0% (1.8)pts.
ADR(3) - in US dollars $533 $503 6.1%
RevPAR(4) - in US dollars $348 $331 5.0%
Gross operating margin(5) 34.0% 35.4% (1.4)pts.
Middle East
No. of Properties 4 4 --
No. of Rooms 847 847 --
Occupancy(2) 71.3% 65.6% 5.7pts.
ADR(3) - in US dollars $218 $186 17.2%
RevPAR(4) - in US dollars $155 $122 26.9%
Gross operating margin(5) 47.5% 39.2% 8.3pts.
Asia/Pacific
No. of Properties 12 12 --
No. of Rooms 3,465 3,465 --
Occupancy(2) 63.5% 58.8% 4.7pts.
ADR(3) - in US dollars $236 $222 6.7%
RevPAR(4) - in US dollars $115 $99 16.4%
Gross operating margin(5) 31.2% 28.9% 2.3pts.
------------------------------------------------
(1) The term "Core Hotels" means hotels and resorts under management for
the full year of both 2005 and 2004. However, if a "Core Hotel" has
undergone or is undergoing an extensive renovation program in one of
those years that materially affects the operation of the property in
that year, it ceases to be included as a "Core Hotel" in either year.
Changes from the 2004/2003 Core Hotels are the additions of Four
Seasons Resort Jackson Hole, Four Seasons Hotel Miami, Four Seasons
Resort Great Exuma at Emerald Bay, Four Seasons Hotel Prague, Four
Seasons Hotel Riyadh and Four Seasons Hotel Jakarta, and the
deletions of Four Seasons Resort Maldives at Kuda Huraa (due to its
temporary closure caused by the tsunami) and The Pierre in New York
(due to its disposition on June 30, 2005).
(2) Occupancy percentage is defined as the total number of rooms occupied
divided by the total number of rooms available.
(3) ADR is defined as average daily room rate calculated as straight
average for each region.
(4) RevPAR is defined as average room revenue per available room. It is a
non-GAAP measure. We use RevPAR because it is a commonly used
indicator of market performance for hotels and resorts and represents
the combination of the average daily room rate and the average
occupancy rate achieved during the period. RevPAR does not include
food and beverage or other ancillary revenues generated by a hotel or
resort. RevPAR is the most commonly used measure in the lodging
industry to measure the period-over-period performance of comparable
properties. Our calculation of RevPAR may be different than the
calculation used by other lodging companies.
(5) Gross operating margin represents gross operating profit as a
percentage of gross operating revenue.
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA - ALL MANAGED HOTELS
As at
June 30,
(Unaudited) 2005 2004 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties 66(1) 63 3
No. of Rooms 16,834(1) 16,217 617
United States
No. of Properties 24(1) 24 --
No. of Rooms 7,109(1) 7,109 --
Other Americas/Caribbean
No. of Properties 10 10 --
No. of Rooms 2,162 2,162 --
Europe
No. of Properties 11 11 --
No. of Rooms 1,919 1,990 (71)
Middle East
No. of Properties 6 4 2
No. of Rooms 1,444 847 597
Asia/Pacific
No. of Properties 15 14 1
No. of Rooms 4,200 4,109 91
------------------------------------------------
(1) Since June 30, 2005, we ceased management of The Pierre in New York,
which had 201 rooms.
FOUR SEASONS HOTELS INC.
REVENUES UNDER MANAGEMENT - ALL MANAGED HOTELS
(Unaudited) Three months ended Six months ended
(In thousands of June 30, June 30,
US dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Revenues under
management(1) $ 677,683 $ 571,869 $1,279,246 $1,102,059
---------------------------------------------------
---------------------------------------------------
------------------
(1) Revenues under management consist of rooms, food and beverage,
telephone and other revenues of all the hotels and resorts which we
manage. Approximately 66% of the fee revenues (excluding reimbursed
costs) we earned were calculated as a percentage of the total
revenues under management of all hotels and resorts.
FOUR SEASONS HOTELS INC.
SCHEDULED OPENING OF PROPERTIES UNDER CONSTRUCTION OR
IN ADVANCED STAGES OF DEVELOPMENT
Hotel/Resort/Residence Club Approximate
and Location(1)(2) Number of Rooms
Scheduled 2005/2006 openings
----------------------------
Four Seasons Hotel Damascus, Syria 305
Four Seasons Hotel Geneva, Switzerland 100
Four Seasons Hotel Hong Kong, People's Republic of China(x) 395
Four Seasons Resort Lanai at Koele, HI, USA 100
Four Seasons Resort Lanai at Manele Bay, HI, USA 250
Four Seasons Resort Maldives at Landaa Giraavaru, Maldives 100
Four Seasons Hotel Mumbai, India(x) 235
Four Seasons Residence Club Punta Mita, Mexico 35
Four Seasons Hotel Silicon Valley at East Palo Alto, CA, USA 200
Four Seasons Hotel Westlake Village, California, USA 270
Beyond 2006
-----------
Four Seasons Hotel Alexandria, Egypt(x) 125
Four Seasons Hotel Baltimore, MD, USA(x) 200
Four Seasons Hotel Beijing, People's Republic of China 325
Four Seasons Hotel Beirut, Lebanon 235
Four Seasons Resort Bora Bora, French Polynesia 105
Four Seasons Hotel Dubai, UAE(x) 300
Four Seasons Hotel Florence, Italy 120
Four Seasons Hotel Istanbul at the Bosphorus, Turkey 170
Four Seasons Hotel Kuwait City, Kuwait 225
Four Seasons Hotel Marrakech, Morocco(x) 140
Four Seasons Hotel Moscow, Russia(x) 210
Four Seasons Hotel Moscow Kamenny Island, Russia(x) 80
Four Seasons Resort Puerto Rico, Puerto Rico(x) 250
Four Seasons Hotel Seattle, WA, USA(x) 150
Four Seasons Hotel Toronto, Ontario, Canada(x) 265
Four Seasons Resort Vail, CO, USA(x) 120
(x) Expected to include a residential component.
------------------------------------------------
(1) Information concerning hotels, resorts and Residence Clubs under
construction or under development is based upon agreements and
letters of intent and may be subject to change prior to the
completion of the project. The dates of scheduled openings have been
estimated by management based upon information provided by the
various developers at the time of this report. There can be no
assurance that the date of scheduled opening will be achieved or that
these projects will be completed. In particular, in the case where a
property is scheduled to open near the end of a year, there is a
greater possibility that the year of opening could be changed. The
process and risks associated with the management of new properties
are dealt with in greater detail in our 2004 Annual Report.
(2) We have made an investment in Orlando, in which we expect to include
a Four Seasons Residence Club and/or a Four Seasons branded
residential component. The financing for this project has not yet
been completed and therefore a scheduled opening date cannot be
established at this time.
END FIRST AND FINAL ADD
DATASOURCE: Four Seasons Hotels and Resorts
CONTACT: PRNewswire -- Aug. 11