Four Seasons Hotel (NYSE:FS)
Historical Stock Chart
From Jul 2019 to Jul 2024
![Click Here for more Four Seasons Hotel Charts. Click Here for more Four Seasons Hotel Charts.](/p.php?pid=staticchart&s=NY%5EFS&p=8&t=15)
/FIRST AND FINAL ADD - TO113 - Four Seasons Hotels Inc.
Earnings/
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands of Three months ended Six months ended
dollars except per June 30, June 30,
share amounts) 2004 2003 2004 2003
-------------------------------------------------------------------------
(restated - (restated -
note 1(a)) note 1(a))
Consolidated revenues
(note 5) $ 96,953 $ 80,758 $ 172,231 $ 153,118
---------------------------------------------------
---------------------------------------------------
MANAGEMENT OPERATIONS
Revenues:
Fee revenues $ 41,549 $ 29,351 $ 74,926 $ 58,656
Reimbursed costs
(note 1(c)) 18,517 18,571 34,752 37,022
---------------------------------------------------
60,066 47,922 109,678 95,678
---------------------------------------------------
Expenses:
General and
administrative
expenses (11,469) (8,901) (22,325) (18,637)
Reimbursed costs
(note 1(c)) (18,517) (18,571) (34,752) (37,022)
---------------------------------------------------
(29,986) (27,472) (57,077) (55,659)
---------------------------------------------------
30,080 20,450 52,601 40,019
---------------------------------------------------
OWNERSHIP AND
CORPORATE OPERATIONS
Revenues 38,185 34,415 64,980 60,193
Distributions from
hotel investments 398 -- 398 --
Expenses:
Cost of sales and
expenses (38,633) (38,295) (74,023) (76,097)
Fees to Management
Operations (1,696) (1,579) (2,825) (2,753)
---------------------------------------------------
(1,746) (5,459) (11,470) (18,657)
---------------------------------------------------
Earnings before other
operating items 28,334 14,991 41,131 21,362
Depreciation and
amortization (3,619) (4,064) (7,244) (7,774)
Other income (expense),
net (note 6) (3,011) (12,133) 1,310 (25,041)
---------------------------------------------------
Earnings (loss) from
operations 21,704 (1,206) 35,197 (11,453)
Interest income, net 666 667 1,814 1,350
---------------------------------------------------
Earnings (loss) before
income taxes 22,370 (539) 37,011 (10,103)
---------------------------------------------------
Income tax recovery
(expense):
Current (4,366) (1,759) (7,154) 615
Future (670) 884 (1,049) (1,214)
---------------------------------------------------
(5,036) (875) (8,203) (599)
---------------------------------------------------
Net earnings (loss) $ 17,334 $ (1,414) $ 28,808 $ (10,702)
---------------------------------------------------
---------------------------------------------------
Basic earnings (loss)
per share (note 4) $ 0.49 $ (0.04) $ 0.81 $ (0.31)
---------------------------------------------------
---------------------------------------------------
Diluted earnings (loss)
per share (note 4) $ 0.46 $ (0.04) $ 0.78 $ (0.31)
---------------------------------------------------
---------------------------------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED BALANCE SHEETS
As at As at
June 30, December 31,
(In thousands of dollars) 2004 2003
-------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (note 2) $ 467,230 $ 170,725
Receivables (note 1(b)) 104,452 88,636
Inventory 1,972 2,169
Prepaid expenses 5,026 3,780
-------------------------
578,680 265,310
Long-term receivables 222,888 197,635
Investments in hotel partnerships
and corporations 199,702 157,638
Fixed assets 73,513 75,789
Investment in management contracts 219,343 203,670
Investment in trademarks and trade names 5,662 5,757
Future income tax assets 12,181 13,230
Other assets 35,489 27,631
-------------------------
$1,347,458 $ 946,660
-------------------------
-------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
(note 1(b)) $ 69,562 $ 61,045
Long-term obligations due within one year
(notes 2 and 3) 2,531 2,587
-------------------------
72,093 63,632
Long-term obligations (notes 2 and 3) 410,915 117,521
Shareholders' equity (note 4):
Capital stock 340,722 329,274
Convertible notes (note 3) 228,916 178,543
Contributed surplus 6,436 5,529
Retained earnings 292,705 265,754
Equity adjustment from foreign
currency translation (4,329) (13,593)
-------------------------
864,450 765,507
-------------------------
$1,347,458 $ 946,660
-------------------------
-------------------------
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,
dollars) 2004 2003 2004 2003
-------------------------------------------------------------------------
Cash provided by (used
in) operations:
MANAGEMENT OPERATIONS
Earnings before other
operating items $ 30,080 $ 20,450 $ 52,601 $ 40,019
Items not requiring an
outlay of funds 481 240 995 649
---------------------------------------------------
Working capital
provided by Management
Operations 30,561 20,690 53,596 40,668
---------------------------------------------------
OWNERSHIP AND CORPORATE
OPERATIONS
Loss before other
operating items (1,746) (5,459) (11,470) (18,657)
Items not requiring
an outlay of funds 288 82 506 91
---------------------------------------------------
Working capital used
in Ownership and
Corporate Operations (1,458) (5,377) (10,964) (18,566)
---------------------------------------------------
29,103 15,313 42,632 22,102
Interest received, net 1,834 1,372 5,566 5,268
Current income tax paid (1,488) - (1,704) -
Change in non-cash
working capital (603) 2,639 (12,150) 15,382
Other (124) (4,172) (713) (5,782)
---------------------------------------------------
Cash provided by
operations $ 28,722 $ 15,152 $ 33,631 $ 36,970
---------------------------------------------------
---------------------------------------------------
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,
dollars) 2004 2003 2004 2003
-------------------------------------------------------------------------
Cash provided by
(used in):
Operations: $ 28,722 $ 15,152 $ 33,631 $ 36,970
---------------------------------------------------
Financing:
Long-term obligations
including current
portion (98) (72) 18 (30)
Issuance of shares 7,416 1,375 11,448 1,506
Issuance of
convertible notes
(note 3(a)) 329,273 -- 329,273 --
Dividends paid -- -- (1,833) (1,809)
---------------------------------------------------
Cash provided by
(used in) financing 336,591 1,303 338,906 (333)
---------------------------------------------------
Capital investments:
Increase in
restricted cash
(note 2) (75,000) -- (75,000) --
Long-term
receivables (20,875) (6,245) (19,999) (12,051)
Hotel investments (37,329) 1,959 (38,607) (6,409)
Fixed assets 1,890 (1,395) (2,469) (5,276)
Investments in
trademarks and
trade names and
management
contracts (11,468) (440) (11,835) (656)
Other assets (1,213) (889) (2,322) (3,490)
---------------------------------------------------
Cash used in capital
investments (143,995) (7,010) (150,232) (27,882)
---------------------------------------------------
Increase in net cash
and cash equivalents 221,318 9,445 222,305 8,755
Decrease in net cash
and cash equivalents
due to unrealized
foreign exchange loss (3,357) (10,707) (800) (20,853)
Cash and cash
equivalents,
beginning of period 174,269 154,200 170,725 165,036
---------------------------------------------------
Net cash and cash
equivalents,
end of period $ 392,230 $ 152,938 $ 392,230 $ 152,938
---------------------------------------------------
---------------------------------------------------
Supplemental
disclosure of net
cash and cash
equivalents:
Cash and cash
equivalents $ 467,230 $ 152,938 $ 467,230 $ 152,938
Less restricted cash
(note 2) (75,000) -- (75,000) --
---------------------------------------------------
Net cash and cash
equivalents $ 392,230 $ 152,938 $ 392,230 $ 152,938
---------------------------------------------------
---------------------------------------------------
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 dollars) 2004 2003
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 265,754 $ 264,016
Net earnings (loss) 28,808 (10,702)
Dividends declared (1,857) (1,813)
-------------------------
Retained earnings, end of period $ 292,705 $ 251,501
-------------------------
-------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of dollars except 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 annual consolidated financial
statements for the year ended December 31, 2003.
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, 2003, except as disclosed below:
(a) Stock-based compensation and other stock-based payments:
In December 2003, the Canadian Institute of Chartered Accountants
("CICA") amended Section 3870 to require entities to account for
employee stock options using the fair value-based method, beginning
January 1, 2004. In accordance with one of the transitional
alternatives permitted under amended Section 3870, we prospectively
adopted in December 2003 the fair value-based method with respect to
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. The prospective
application of adopting the fair value-based method effective January
1, 2003 has been applied retroactively in our consolidated financial
statements, and amounts for the three months and six months ended
June 30, 2003 have been restated. The impact of this change for the
three months and six months ended June 30, 2004 was to decrease net
earnings by $494 and $907, respectively (2003 - $144 and $159,
respectively), and to decrease basic earnings per share by $0.01 and
$0.03, respectively (2003 - increase basic loss per share by nil and
$0.01, respectively), and to decrease diluted earnings per share by
$0.01 and $0.02, respectively (2003 - increase diluted loss per share
by nil and $0.01, respectively).
The fair value of stock options granted in the three months and six
months ended June 30, 2004 has been 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 (2003 - 4.44% to 4.46% and 4.44% to 5.02%,
respectively); semi-annual dividend per Limited Voting Share of
$0.055 for both periods (2003 - $0.055 for both periods); volatility
factor of the expected market price of our Limited Voting Shares of
28% and ranging from 28% to 30%, respectively (2003 - 32% for both
periods); and expected lives of the options in 2004 and 2003 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 $24.85 and $25.35,
respectively (2003 - $18.95 and $18.00, respectively). For purposes
of stock option expense and pro forma disclosures, the estimated fair
value of the options is amortized to compensation expense over the
options' vesting period.
Section 3870 requires pro forma disclosure of 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, 2004 and 2003, if we had applied the fair value-based method
to options granted from January 1, 2002 to December 31, 2002, our net
earnings (loss) and basic and diluted earnings (loss) per share would
have been adjusted to the pro forma amounts indicated below:
(Unaudited)
(In thousands of Three months ended Six months ended
dollars except per June 30, June 30,
share amounts) 2004 2003 2004 2003
---------------------------------------------------------------------
Stock option
expense included
in compensation
expense $ (494) $ (144) $ (907) $ (159)
---------------------------------------------------
---------------------------------------------------
Net earnings (loss),
as reported $ 17,334 $ (1,414) $ 28,808 $ (10,702)
Additional expense
that would have
been recorded if
all outstanding
stock options
granted during
2002 had been
expensed (853) (863) (1,712) (1,725)
---------------------------------------------------
Pro forma net
earnings (loss) $ 16,481 $ (2,277) $ 27,096 $ (12,427)
---------------------------------------------------
Earnings (loss)
per share:
Basic,
as reported $ 0.49 $ (0.04) $ 0.81 $ (0.31)
Basic,
pro forma 0.46 (0.07) 0.77 (0.36)
Diluted,
as reported 0.46 (0.04) 0.78 (0.31)
Diluted,
pro forma 0.44 (0.07) 0.74 (0.36)
---------------------------------------------------
(b) Hedging relationships:
In December 2001, the CICA issued an accounting guideline relating to
hedging relationships. The guideline establishes requirements for the
identification, documentation, designation and effectiveness of
hedging relationships and was effective for fiscal years beginning on
or after July 1, 2003. Effective January 1, 2004, we ceased
designating our US dollar forward contracts as hedges of our US
dollar revenues. These contracts were entered into during 2002, and
all of these contracts will mature during 2004. The foreign exchange
gains on these contracts of $14,552, which were deferred prior to
January 1, 2004, are being recognized in 2004 as an increase of fee
revenues over the course of the year. Effective January 1, 2004, our
US dollar forward contracts are being marked-to-market on a monthly
basis with the resulting changes in fair values being recorded as a
foreign exchange gain or loss. The impact of ceasing to designate our
US dollar forward contracts as hedges of our US dollar revenues was
to decrease net earnings by $205 and $376, respectively, for the
three months and six months ended June 30, 2004 and to increase
receivables by $6,631 and accounts payable and accrued liabilities by
$7,165 as at June 30, 2004.
In June 2004, we entered into an interest rate swap agreement that we
have designated as a fair value hedge of the convertible notes issued
in the same month (note 3(a)).
(c) Reimbursed costs:
As a result of adopting Section 1100, "Generally Accepted Accounting
Principles", which was issued by the CICA in July 2003, and was
effective January 1, 2004, we have included the reimbursement of all
out-of-pocket expenses in both revenues and expenses instead of
recording certain reimbursed costs as a "net" amount. The change in
the accounting treatment of reimbursed costs resulted in an increase
of both revenues and expenses for the three months and six months
ended June 30, 2004 of $10,291 and $19,213, respectively (2003 -
$11,190 and $22,716, respectively), but did not have an impact on net
earnings. In addition, for the three months and six months ended June
30, 2003, each of fee revenues and general and administrative
expenses included certain other reimbursed costs of $7,381 and
$14,306, respectively. These have been reclassified to reimbursed
costs in both revenues and expenses to conform with the financial
statement presentation adopted in 2004.
(d) Impairment of long-lived assets:
In December 2002, the CICA issued Section 3063, "Impairment of Long-
Lived Assets". This new section establishes standards for the
recognition, measurement and disclosure of the impairment of long-
lived assets, and replaces the write-down provisions of Section 3061,
"Property, Plant and Equipment". In accordance with Section 3063,
long-lived assets, such as property, plant and equipment and
purchased intangibles subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the asset.
If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized equal to the amount by
which the carrying amount of the asset exceeds the fair value of the
asset. The implementation of Section 3063, effective January 1, 2004,
did not have an impact on our consolidated financial statements for
the three months and six months ended June 30, 2004.
(e) Accounting for asset retirement obligations:
In March 2003, the CICA issued Section 3110, "Accounting for Asset
Retirement Obligations". Section 3110 requires companies to record
the fair value of an asset retirement obligation as a liability in
the year in which they incur a legal obligation associated with the
retirement of tangible long-lived assets that result from the
acquisition, construction, development and/or normal use of the
assets. Companies are also required to record a corresponding asset
that is depreciated over the life of the asset. Subsequent to the
initial measurement of the asset retirement obligation, the
obligation will be adjusted at the end of each period to reflect the
passage of time and changes in the estimated future cash flows
underlying the obligation. The implementation of Section 3110,
effective January 1, 2004, did not have an impact on our consolidated
financial statements for the three months and six months ended June
30, 2004.
(f) Revenue recognition:
In December 2003, the Emerging Issues Committee ("EIC") of the CICA
issued Abstract EIC-141, "Revenue Recognition", which provides
revenue recognition guidance. The implementation of EIC-141,
effective January 1, 2004, did not have an impact on our consolidated
financial statements for the three months and six months ended June
30, 2004.
(g) Revenue arrangements with multiple deliverables:
In December 2003, the EIC issued Abstract EIC-142, "Revenue
Arrangements with Multiple Deliverables", which addresses accounting
for arrangements, entered into after December 31, 2003, where an
enterprise will perform multiple revenue generating activities. The
implementation of EIC-142 did not have an impact on our consolidated
financial statements for the three months and six months ended June
30, 2004.
2. Bank credit facility:
In June 2004, we finalized a committed bank credit facility of
US$100,000, which expires in June 2005 and replaces bank credit
facilities of US$212,500. As at June 30, 2004, no amounts were
borrowed under this credit facility. However, approximately US$14,000
of letters of credit are currently issued under this credit facility.
No amounts have been drawn under these letters of credit. We have
agreed to maintain a minimum cash balance of at least $75,000 in our
account with the agent for the facility while any liabilities are
owing under this facility. As at June 30, 2004, cash and cash
equivalents includes this $75,000 of restricted cash.
3. Long-term obligations:
As at As at
June 30, December 31,
(In thousands of dollars) 2004 2003
---------------------------------------------------------------------
(Unaudited)
Convertible notes, issued in 2004(a) $ 284,155 $ --
Convertible notes, issued in 1999(b) 95,397 88,029
Accrued benefit liability and other
obligations 33,894 32,079
-------------------------
413,446 120,108
Less amounts due within one year (2,531) (2,587)
-------------------------
$ 410,915 $ 117,521
-------------------------
-------------------------
(a) In June 2004, we issued US$250,000 (principal amount) convertible
senior notes. The net proceeds of the issuance, after deducting
offering expenses and underwriters' commission, were approximately
US$241,250. These notes bear interest at the rate of 1.875% per annum
(payable semi-annually in arrears on January 30 and July 30 to
holders of record on January 15 and July 15, beginning January 30,
2005), and will mature on July 30, 2024, unless earlier redeemed or
repurchased. The notes are convertible into Limited Voting Shares of
Four Seasons Hotels Inc. at an initial conversion rate of 13.9581
shares per each one thousand US dollar principal amount (equal to a
conversion price of approximately US$71.64 per Limited Voting Share),
subject to adjustments in certain events, only when (i) the closing
price of the Limited Voting Shares measured over a specified number
of trading days is more than 130% of the conversion price, (ii) the
market price of a note measured over a specified number of trading
days is less than 95% of the closing sale price of the Limited Voting
Shares into which they may be converted, (iii) we call the notes for
redemption, or (iv) certain corporate transactions or a "fundamental
change" has occurred. In connection with a "fundamental change" on or
prior to July 30, 2009, on conversion holders of notes will be
entitled to receive additional Limited Voting Shares having a value
equal to the aggregate of the make whole premium they would have
received if the notes were purchased plus an amount equal to any
accrued but unpaid interest. We may choose to settle conversion
(including any make whole premium) in Limited Voting Shares, cash or
a combination of Limited Voting Shares and cash (at our option).
On or after August 4, 2009, we may (at our option) redeem all or a
portion of the notes, in whole or in part, for cash at 100% of their
principal amount, plus any accrued and unpaid interest. On each of
July 30, 2009, 2014 and 2019, holders may require us to purchase all
or a portion of their notes at 100% of their principal amount, plus
any accrued and unpaid interest. We will pay cash for any notes so
purchased on July 30, 2009. Repurchases made on July 30, 2014 and
July 30, 2019, may be made (at our option) in cash, Limited Voting
Shares or a combination of cash and Limited Voting Shares. Upon the
occurrence of certain designated events, we will be required to make
an offer to purchase the notes at 100% of their principal amount plus
any accrued and unpaid interest, and, in the case of a "fundamental
change" that is also a "change of control" occurring on or before
July 30, 2009, we also will pay a make whole premium. We may choose
to pay the purchase price (including any make whole premium) for
notes in respect of which our offer is accepted in (at our option)
cash, Limited Voting Shares, securities of the surviving entity (if
Four Seasons Hotels Inc. is not the surviving corporation), or a
combination of cash and shares or securities.
In accordance with Canadian GAAP, the notes are bifurcated on our
financial statements into a debt component (representing the
principal value of a bond of US$211,754, which was estimated based on
the present value of a US$250,000 bond maturing in 2009, yielding
5.33% per annum, compounded semi-annually, and paying a coupon of
1.875% per annum) and an equity component (representing the value of
the conversion feature of the notes). Accordingly, net proceeds have
been allocated $288,918 (US$211,754) to long-term obligations and
$50,373 to shareholders' equity. The offering expenses and
underwriters' commission of approximately $10,018 relating to the
debt component, are recorded in other assets. The debt component of
the notes will increase for accounting purposes at the compounded
interest rate of 5.33%, less the coupon paid of 1.875% per annum.
In connection with the offering, we have entered into an interest
rate swap agreement to July 30, 2009 with an initial notional amount
of US$211,754, pursuant to which we have agreed to receive interest
at a fixed rate of 5.33% per annum and pay interest at six-month
LIBOR in arrears plus 0.4904%. We have designated the interest rate
swap as a fair value hedge of the notes. As a result, we are
accounting for the payments under the interest rate swap on an
accrual basis, which results in an effective interest rate (for
accounting purposes) on the hedged notes of six-month LIBOR in
arrears plus 0.4904%.
(b) During 1999, we issued US$655,519 principal amount at maturity
(September 23, 2029) of convertible notes for gross proceeds of
US$172,500. The net proceeds of the issuance, after deducting
offering expenses and underwriters' commission, were US$166,000. As
at June 30, 2004, our consolidated balance sheet includes $95,397
(US$71,170) of convertible notes in long-term obligations and
$178,543 of convertible notes in shareholders' equity. We are
entitled to redeem the convertible notes commencing in September 2004
for cash equal to the issue price plus accrued interest calculated at
4 1/2% per annum. Holders of the notes have conversion rights, which
they can exercise at any time before the maturity date or date of
redemption of the notes, pursuant to which they can require us to
issue to them 5.284 Limited Voting Shares for each one thousand US
dollar principal amount of notes. The holders of notes also can
require us to repurchase the notes in September 2004 for an amount
equal to the issue price plus accrued interest calculated at 4 1/2%
per annum. This right is also available in September 2009 and
September 2014. We have a choice of settling our obligation, in
connection with the conversion or purchase of the notes at the option
of the holder, with cash or Limited Voting Shares.
As described above, we are entitled to redeem all or a portion of the
convertible notes at any time on or after September 23, 2004 for cash
at the issue price plus accrued interest (calculated at 4 1/2% per
annum) to the date of purchase. A cash redemption on September 23,
2004 of all the outstanding convertible notes would require a cash
payment to the convertible note holders of approximately US$215,500,
assuming that none of the holders exercised their right to convert
their convertible notes before the redemption date. In accordance
with Canadian GAAP, we allocate the consideration paid on
extinguishment of the convertible notes to the liability and equity
components based on their relative fair values at the date of the
redemption. Depending on interest rates at the date of redemption, we
expect to recognize a pre-tax accounting loss which could be in the
range of $44,000 to $14,000 related to the debt component of the
convertible notes (representing the difference between the carrying
value of the debt component and the allocated relative fair value of
the debt component - estimated as the present value of these zero-
coupon bonds, yielding an assumed 25-year interest rate ranging from
7.5% to 8.5% per annum, compounding semi-annually). This loss will be
recorded in the statement of operations. In addition, at the interest
rates noted above, we expect to recognize a pre-tax accounting gain
on the extinguishment of the equity component of the convertible
notes which could be in the range of approximately $32,000 to $2,000.
The gain will be recorded directly in retained earnings. The amount
of the gain and loss is extremely sensitive to interest rate changes.
The expected net impact on retained earnings from the extinguishment
of both the debt and equity components of the convertible notes would
be a reduction of approximately $12,000, although the US to Canadian
dollar exchange rates will affect the net impact.
4. Shareholders' equity:
As at June 30, 2004, we have outstanding Variable Multiple Voting Shares
("VMVS") of 3,832,172, outstanding Limited Voting Shares ("LVS") of
31,840,458 and outstanding stock options of 5,498,399 (weighted average
exercise price of $56.19).
A reconciliation of the net earnings (loss) and weighted average number
of VMVS and LVS used to calculate basic earnings (loss) per share and
diluted earnings (loss) per share is as follows:
(Unaudited) Three months ended
(In thousands June 30,
of dollars) 2004 2003
---------------------------------------------------------------------
Net
earnings Shares Net loss Shares
---------------------------------------------------------------------
Basic earnings
(loss) per share:
Net earnings
(loss) $ 17,334 35,484,874 $ (1,414) 34,913,942
Effect of assumed
dilutive
conversions:
Stock option plan -- 1,494,286 -- --
Convertible notes
(issued in 1999) 1,343 3,463,155 -- --
---------------------------------------------------------------------
Diluted earnings
(loss) per share:
Net earnings
(loss) and
assumed dilutive
conversions $ 18,677 40,442,315 $ (1,414) 34,913,942
---------------------------------------------------------------------
---------------------------------------------------------------------
(Unaudited) Six months ended
(In thousands June 30,
of dollars) 2004 2003
---------------------------------------------------------------------
Net
earnings Shares Net loss Shares
---------------------------------------------------------------------
Basic earnings
(loss) per share:
Net earnings
(loss) $ 28,808 35,386,149 $ (10,702) 34,898,392
Effect of assumed
dilutive
conversions:
Stock option plan -- 1,467,988 -- --
Convertible notes
(issued in 1999) 2,647 3,463,155 -- --
---------------------------------------------------------------------
Diluted earnings
(loss) per share:
Net earnings
(loss) and
assumed dilutive
conversions $ 31,455 40,317,292 $ (10,702) 34,898,392
---------------------------------------------------------------------
---------------------------------------------------------------------
The diluted earnings (loss) per share calculation excluded the effect of
the assumed conversions of 858,196 and 1,015,916 stock options to LVS,
under our stock option plan, during the three months and six months ended
June 30, 2004, respectively (2003 - 6,072,700 and 6,072,700 stock
options, respectively), as the inclusion of these conversions resulted in
an anti-dilutive effect. In addition, the dilution relating to the
conversion of our convertible notes (issued in 1999) (note 3(b)) to
3,463,155 LVS, by application of the "if- converted method", has been
excluded from the calculation for 2003 as the inclusion of this
conversion resulted in an anti-dilutive effect for the three months and
six months ended June 30, 2003. There was no dilution relating to the
convertible notes issued in 2004 (note 3(a)) as the contingent conversion
price was not reached during the period.
5. Consolidated revenues:
Consolidated revenues for Four Seasons Hotels Inc. comprise revenues from
Management Operations, revenues from Ownership and Corporate Operations
and distributions from hotel investments, less fees from Ownership and
Corporate Operations to Management Operations.
6. Other income (expense), net:
Included in other income (expense), net for the three months and six
months ended June 30, 2004 is a net foreign exchange loss of $2,969 and a
net foreign exchange gain of $1,661, respectively (2003 - net foreign
exchange loss of $9,235 and $17,502, 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
foreign self-sustaining subsidiaries.
Also included in other income (expense), net for the three months and six
months ended June 30, 2004 are legal and enforcement costs of $56 and
$273, respectively (2003 - $2,889 and $7,500, respectively), in
connection with the disputes with the owners of the Four Seasons hotels
in Caracas and Seattle.
7. Pension benefit expense:
The pension benefit expense, after allocation to managed properties,
for the three months and six months ended June 30, 2004 was $760 and
$1,517, respectively (2003 - $704 and $1,366, respectively).
8. Seasonality:
Our hotels and resorts are affected by normally recurring seasonal
patterns and, for most of the properties, demand is usually lower in the
period from December through March compared to the remainder of the year.
Typically, the first quarter is the weakest quarter and the fourth
quarter is the strongest quarter for the majority of the
Our ownership operations are particularly affected by seasonal
fluctuations, with lower revenue, higher operating losses and lower cash
flow in the first quarter. As a result, ownership operations typically
incur an operating loss in the first quarter of each year.
Management operations are also impacted by seasonal patterns, as revenues
are affected by the seasonality of hotel and resort revenues and
operating results. Urban hotels generally experience lower revenues and
operating results in the first quarter. However, this negative impact on
management revenues is offset, to some degree, by increased travel to our
resorts in the period.
9. Subsequent events:
(a) In July 2004, we sold our 8% interest in Four Seasons Hotel Amman
and our 100% interest in Four Seasons Resort Whistler
(substantially all of which was acquired during the three months
ended June 30, 2004). On a combined basis, we received proceeds
of approximately $47,000, which approximated book value. We
continue to manage the properties under long-term management
contracts.
(b) We have been given notice of termination of the lease of Four
Seasons Hotel Berlin by the landlord. Based on the terms of the
new lease entered into by the landlord, as disclosed to us by the
landlord, we will not exercise our right of first offer in
respect of the lease and, as a result, we will likely cease
managing the hotel before the end of the year. The termination
of the lease will result in the write-off of the net book value
of our investment in the hotel of approximately $1,000.
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA - CORE HOTELS(1)
Three months ended
June 30,
(Unaudited) 2004 2003 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties 51 51 --
No. of Rooms 13,460 13,460 --
Occupancy(2) 69.8% 56.9% 12.9%
ADR(3) - in US dollars $ 329 $ 303 8.5%
RevPAR(4) - in US dollars $ 216 $ 176 22.7%
Gross operating margin(5) 31.2% 27.4% 3.8%
United States
No. of Properties 21 21 --
No. of Rooms 6,587 6,587 --
Occupancy(2) 72.8% 70.4% 2.4%
ADR(3) - in US dollars $ 342 $ 326 4.9%
RevPAR(4) - in US dollars $ 250 $ 231 8.1%
Gross operating margin(5) 28.4% 28.9% (0.5%)
Other Americas/Caribbean
No. of Properties 7 7 --
No. of Rooms 1,534 1,534 --
Occupancy(2) 66.9% 51.1% 15.8%
ADR(3) - in US dollars $ 283 $ 270 4.8%
RevPAR(4) - in US dollars $ 178 $ 136 30.9%
Gross operating margin(5) 31.2% 24.9% 6.3%
Europe
No. of Properties 8 8 --
No. of Rooms 1,535 1,535 --
Occupancy(2) 66.3% 58.1% 8.2%
ADR(3) - in US dollars $ 520 $ 451 15.4%
RevPAR(4) - in US dollars $ 356 $ 272 30.9%
Gross operating margin(5) 38.4% 34.2% 4.2%
Middle East
No. of Properties 3 3 --
No. of Rooms 598 598 --
Occupancy(2) 69.5% 36.4% 33.1%
ADR(3) - in US dollars $ 172 $ 151 13.9%
RevPAR(4) - in US dollars $ 120 $ 57 111.4%
Gross operating margin(5) 46.9% 20.3% 26.6%
Asia/Pacific
No. of Properties 12 12 --
No. of Rooms 3,206 3,206 --
Occupancy(2) 66.7% 35.5% 31.2%
ADR(3) - in US dollars $ 243 $ 220 10.2%
RevPAR(4) - in US dollars $ 117 $ 60 96.7%
Gross operating margin(5) 31.4% 12.7% 18.7%
----------------------------------------------
(1) The term "Core Hotels" means hotels and resorts under management for
the full year of both 2004 and 2003. 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 2003/2002 Core Hotels are the additions of
Four Seasons Hotel Amman, Four Seasons Resort Sharm el Sheikh, Four
Seasons Hotel Shanghai and Four Seasons Hotel Tokyo at Marunouchi
and the deletion of Four Seasons Biltmore Resort (Santa Barbara),
which is undergoing an extensive renovation program in 2004.
(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.
(4) RevPAR is defined as average room revenue per available room. RevPAR
is a commonly used indicator of market performance for hotels and
resorts and represents the combination of the average daily room
rate per room occupied 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. We report
RevPAR as it is the most commonly used measure in the lodging
industry to measure the period-over-period performance of comparable
properties.
(5) Gross operating margin represents gross operating profit as a
percent of gross operating revenue.
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA - CORE HOTELS(1)
Six months ended
June 30,
(Unaudited) 2004 2003 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties 51 51 --
No. of Rooms 13,460 13,460 --
Occupancy(2) 67.3% 58.7% 8.6%
ADR(3) - in US dollars $ 332 $ 309 7.3%
RevPAR(4) - in US dollars $ 210 $ 177 18.4%
Gross operating margin(5) 29.7% 26.1% 3.6%
United States
No. of Properties 21 21 --
No. of Rooms 6,587 6,587 --
Occupancy(2) 70.4% 67.7% 2.7%
ADR(3) - in US dollars $ 345 $ 331 4.1%
RevPAR(4) - in US dollars $ 242 $ 224 8.3%
Gross operating margin(5) 26.4% 26.1% 0.3%
Other Americas/Caribbean
No. of Properties 7 7 --
No. of Rooms 1,534 1,534 --
Occupancy(2) 63.3% 52.4% 10.9%
ADR(3) - in US dollars $ 315 $ 298 5.6%
RevPAR(4) - in US dollars $ 192 $ 154 25.0%
Gross operating margin(5) 33.8% 28.1% 5.7%
Europe
No. of Properties 8 8 --
No. of Rooms 1,535 1,535 --
Occupancy(2) 61.9% 54.5% 7.4%
ADR(3) - in US dollars $ 490 $ 425 15.4%
RevPAR(4) - in US dollars $ 315 $ 243 29.3%
Gross operating margin(5) 33.5% 28.9% 4.6%
Middle East
No. of Properties 3 3 --
No. of Rooms 598 598 --
Occupancy(2) 69.6% 37.1% 32.5%
ADR(3) - in US dollars $ 173 $ 161 7.8%
RevPAR(4) - in US dollars $ 122 $ 64 91.0%
Gross operating margin(5) 48.0% 20.6% 27.4%
Asia/Pacific
No. of Properties 12 12 --
No. of Rooms 3,206 3,206 --
Occupancy(2) 65.2% 49.1% 16.1%
ADR(3) - in US dollars $ 252 $ 237 6.5%
RevPAR(4) - in US dollars $ 119 $ 82 44.4%
Gross operating margin(5) 32.2% 22.2% 10.0%
----------------------------------------------
(1) The term "Core Hotels" means hotels and resorts under management for
the full year of both 2004 and 2003. 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 2003/2002 Core Hotels are the additions of
Four Seasons Hotel Amman, Four Seasons Resort Sharm el Sheikh,
Four Seasons Hotel Shanghai and Four Seasons Hotel Tokyo at
Marunouchi and the deletion of Four Seasons Biltmore Resort
(Santa Barbara), which is undergoing an extensive renovation program
in 2004.
(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.
(4) RevPAR is defined as average room revenue per available room. RevPAR
is a commonly used indicator of market performance for hotels and
resorts and represents the combination of the average daily room
rate per room occupied 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. We report
RevPAR as it is the most commonly used measure in the lodging
industry to measure the period-over-period performance of comparable
properties.
(5) Gross operating margin represents gross operating profit as a
percent of gross operating revenue.
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA - ALL MANAGED HOTELS
As at June 30,
(Unaudited) 2004 2003 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties 63 58 5
No. of Rooms 16,203 15,648 555
United States
No. of Properties 24 23 1
No. of Rooms 7,145 7,250 (105)
Other Americas/Caribbean
No. of Properties 10 8 2
No. of Rooms 2,112 1,746 366
Europe
No. of Properties 11 9 2
No. of Rooms 1,990 1,696 294
Middle East
No. of Properties 4 4 --
No. of Rooms 847 847 --
Asia/Pacific
No. of Properties 14 14 --
No. of Rooms 4,109 4,109 --
FOUR SEASONS HOTELS INC.
REVENUES UNDER MANAGEMENT - ALL MANAGED HOTELS
Three months ended Six months ended
(Unaudited) June 30, June 30,
(In thousands of dollars) 2004 2003 2004 2003
-------------------------------------------------------------------------
Revenues under
management(1) $ 776,939 $ 631,892 $1,475,650 $1,291,140
--------------------------------------------------
--------------------------------------------------
----------------
(1) Revenues under management consist of rooms, food and beverage,
telephone and other revenues of all the hotels and resorts which we
manage. Approximately 65% 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 and Location(1),(2) Approximate
Number of Rooms
Scheduled 2004/2005 Openings
----------------------------
Four Seasons Hotel Beijing, China 325
Four Seasons Hotel Cairo at Nile Plaza, Egypt(x) 375
Four Seasons Hotel Damascus, Syria 300
Four Seasons Hotel Doha, Qatar 235
Four Seasons Hotel Hampshire, England 135
Four Seasons Hotel Hong Kong, Hong Kong(x) 390
Four Seasons Resort Lanai at Koele, HI, USA 100
Four Seasons Resort Lanai at Manele Bay, HI, USA 250
Four Seasons Resort Langkawi, Malaysia 90
Four Seasons Hotel Palo Alto, CA, USA 200
Four Seasons Private Residences Whistler, B.C., Canada 35
Beyond 2005
-----------
Four Seasons Hotel Alexandria, Egypt(x) 120
Four Seasons Hotel Baltimore, MD, USA(x) 200
Four Seasons Hotel Beirut, Lebanon 230
Four Seasons Resort Bora Bora, French Polynesia 100
Four Seasons Hotel Florence, Italy 115
Four Seasons Hotel Geneva, Switzerland 100
Four Seasons Hotel Istanbul at the Bosphorus, Turkey 170
Four Seasons Hotel Kuwait City, Kuwait 225
Four Seasons Hotel Mumbai, India 200
Four Seasons Resort Puerto Rico, Puerto Rico(x) 250
Four Seasons Residence Club Punta Mita, Mexico 35
(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. 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 2003 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. We have also made an investment in Sedona
at Seven Canyons in Arizona in connection with a potential Residence
Club. The developer is working on a plan to finalize that project,
however, there is no certainty that it will come to fruition as a
Four Seasons property or the potential impact of those plans on Four
Seasons' investment.
END FIRST AND FINAL ADD
DATASOURCE: Four Seasons Hotels and Resorts
CONTACT: PRNewswire -- Aug. 10