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FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
(In thousands of US dollars
September 30,
September 30,
except per share amounts)
2005 2004
2005 2004
-------------------------------------------------------------------------
Consolidated revenues
(note 4)
$ 52,204 $ 63,259 $ 189,840
$ 191,743
------------------------------------------------
------------------------------------------------
MANAGEMENT OPERATIONS
Revenues:
Fee revenues
(note 4(a))
$ 26,372 $ 27,951 $ 87,640
$ 83,860
Reimbursed costs
16,617 13,943
47,219 39,892
------------------------------------------------
42,989 41,894 134,859
123,752
------------------------------------------------
Expenses:
General and
administrative expenses
(10,445) (7,856) (29,638)
(24,536)
Reimbursed costs
(16,617) (13,943) (47,219)
(39,892)
------------------------------------------------
(27,062) (21,799) (76,857)
(64,428)
------------------------------------------------
15,927 20,095
58,002 59,324
------------------------------------------------
OWNERSHIP OPERATIONS
AND CORPORATE EXPENSES
Revenues
9,749 22,383
57,838 70,821
Distributions from hotel
investments
- -
132 293
Expenses:
Cost of sales and expenses
(8,253) (23,451) (57,247)
(73,535)
Corporate expenses
(4,588) (2,772) (10,494)
(7,978)
Fees to Management
Operations
(534) (1,018) (2,989)
(3,123)
------------------------------------------------
(3,626) (4,858) (12,760)
(13,522)
------------------------------------------------
Earnings before other
operating items
12,301 15,237
45,242 45,802
Depreciation and
amortization
(2,575) (3,102) (8,512)
(8,517)
Other expense, net
(notes 4(a) and 5)
(21,064) (18,089) (32,419)
(17,026)
------------------------------------------------
Earnings (loss) from
operations
(11,338) (5,954)
4,311 20,259
Interest income (expense),
net
616 (102)
1,826 1,259
------------------------------------------------
Earnings (loss) before
income taxes
(10,722) (6,056)
6,137 21,518
------------------------------------------------
Income tax recovery
(expense):
Current
2,925 364
(389) (4,966)
Future (note 5(b))
(3,644) (2,830) 3,799
(3,611)
------------------------------------------------
(719) (2,466) 3,410
(8,577)
------------------------------------------------
Net earnings (loss)
$ (11,441) $ (8,522) $ 9,547
$ 12,941
------------------------------------------------
------------------------------------------------
Basic earnings (loss) per
share (note 3(a))
$ (0.31) $ (0.24) $
0.26 $ 0.36
------------------------------------------------
------------------------------------------------
Diluted earnings (loss)
per share (note 3(a))
$ (0.31) $ (0.24) $
0.25 $ 0.35
------------------------------------------------
------------------------------------------------
See accompanying notes to consolidated
financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED BALANCE SHEETS
As at As at
(Unaudited)
September 30, December 31,
(In thousands of US dollars)
2005 2004
-------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents
$ 221,472 $ 226,377
Receivables
82,742 81,541
Inventory
708 1,439
Prepaid expenses
3,083 2,981
---------------------------
308,005 312,338
Long-term receivables
195,805 179,060
Investments in hotel partnerships
and
corporations
124,601 131,338
Fixed assets
59,716 59,939
Investment in management contracts
168,408 181,273
Investment in trademarks and trade
names
4,317 4,424
Future income tax assets
7,953 3,711
Other assets
35,657 30,064
---------------------------
$ 904,462 $ 902,147
---------------------------
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 39,528
$ 60,415
Long-term obligations
due within one year
3,592 3,766
---------------------------
43,120 64,181
Long-term obligations (note 2)
275,005 253,066
Shareholders' equity (note 3):
Capital stock
250,372 248,980
Convertible notes
36,920 36,920
Contributed surplus
9,930 8,088
Retained earnings
200,139 192,129
Equity adjustment from
foreign currency
translation
88,976 98,783
---------------------------
586,337 584,900
---------------------------
Subsequent events (note 9)
$ 904,462 $ 902,147
---------------------------
---------------------------
See accompanying notes to consolidated
financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH PROVIDED
BY OPERATIONS
Three months ended Nine months ended
(Unaudited)
September 30,
September 30,
(In thousands of US dollars)
2005 2004
2005 2004
-------------------------------------------------------------------------
Cash provided by (used in)
operations:
MANAGEMENT OPERATIONS
Earnings before other
operating items
$ 15,927 $ 20,095 $ 58,002
$ 59,324
Items not requiring an
outlay of funds
1,173 474
2,262 1,218
------------------------------------------------
Working capital provided by
Management Operations
17,100 20,569
60,264 60,542
------------------------------------------------
OWNERSHIP OPERATIONS
AND CORPORATE EXPENSES
Loss before other
operating items
(3,626) (4,858) (12,760)
(13,522)
Items not requiring an
outlay of funds
296 275
872 652
------------------------------------------------
Working capital used for
Ownership Operations and
Corporate Expenses
(3,330) (4,583) (11,888)
(12,870)
------------------------------------------------
13,770 15,986
48,376 47,672
Interest received, net
1,018 1,987
5,533 6,167
Interest paid on redemption
of convertible notes
- (25,840)
- (25,840)
Current income tax paid
(1,442) (827)
(6,897) (2,086)
Change in non-cash working
capital
3,733 (3,888) (10,475)
(13,094)
Other
(24) (219)
(153) (757)
------------------------------------------------
Cash provided by (used in)
operations
$ 17,055 $ (12,801) $ 36,384
$ 12,062
------------------------------------------------
------------------------------------------------
See accompanying notes to consolidated
financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended Nine months ended
(Unaudited)
September 30,
September 30,
(In thousands of US dollars)
2005 2004
2005 2004
-------------------------------------------------------------------------
Cash provided by (used in):
Operations:
$ 17,055 $ (12,801) $ 36,384
$ 12,062
------------------------------------------------
Financing:
Issuance of convertible
notes
- -
- 241,332
Redemption of convertible
notes
- (189,670)
- (189,670)
Other long-term
obligations including
current portion
278 (28)
(1,220) (12)
Issuance of shares
156 5,032
6,992 13,551
Dividends paid
(1,584) (1,420) (3,142)
(2,811)
------------------------------------------------
Cash provided by (used in)
financing
(1,150) (186,086) 2,630
62,390
------------------------------------------------
Capital investments:
Decrease in restricted
cash - 55,204
- -
Long-term receivables
(4,507) 7,317 (19,247)
(7,383)
Hotel investments
(1,368) (6,181) (10,813)
(34,627)
Disposal of hotel
investments (note
5(b)) -
35,977 12,672
35,977
Purchase of fixed assets
(4,761) (2,252) (12,821)
(4,169)
Investments in trademarks
and trade names
and
management contracts
(202) (1,019)
(675) (9,738)
Other assets
(1,042) (1,130) (7,902)
(2,865)
------------------------------------------------
Cash provided by (used in)
capital investments
(11,880) 87,916 (38,786)
(22,805)
------------------------------------------------
Increase (decrease) in cash
and cash equivalents
4,025 (110,971)
228 51,647
Increase (decrease) in cash
and cash equivalents due to
unrealized foreign exchange
gain (loss)
(1,189) 2,638
(5,133) 543
Cash and cash equivalents,
beginning of period
218,636 292,622 226,377
132,099
------------------------------------------------
Cash and cash equivalents,
end of period
$ 221,472 $ 184,289 $ 221,472 $
184,289
------------------------------------------------
------------------------------------------------
See accompanying notes to consolidated
financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF RETAINED
EARNINGS
Nine months ended
(Unaudited)
September 30,
(In thousands of US dollars)
2005 2004
-------------------------------------------------------------------------
Retained earnings, beginning of period
$ 192,129 $ 169,364
Net earnings
9,547 12,941
Dividends declared
(1,537) (1,367)
---------------------------
Retained earnings, end of period
$ 200,139 $ 180,938
---------------------------
---------------------------
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
is expected to 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(b)). 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 nine months ended September 30, 2005.
(d) Diluted earnings per share:
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 nine months ended September 30, 2005, there
would have
been no additional dilution for either period.
(e) Non-monetary transactions:
In June 2005,
the CICA issued Section 3831, "Non-Monetary
Transactions",
which introduces new requirements for non-monetary
transactions
entered into on or after January 1, 2006. The amended
requirements
will result in non-monetary transactions being measured
at fair values
unless certain criteria are met, in which case, the
transaction
is measured at carrying value. We are currently
evaluating
the impact on our 2006 consolidated financial statements.
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 September 30, 2005, no amounts were borrowed
under this
credit facility. However, approximately $1,600 of letters
of credit
were issued under this credit facility as at September 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 September 30, 2005, we have 3,725,698
outstanding Variable
Multiple Voting Shares ("VMVS"), 32,913,488
outstanding Limited
Voting Shares ("LVS"), and 4,540,843
outstanding stock options
(weighted average exercise price of
C$59.33 ($50.59)).
(a) Earnings (loss) per share:
A reconciliation
of the net earnings (loss) and weighted average
number of
VMVS and LVS used to calculate basic and diluted earnings
(loss) per
share is as follows:
Three months ended
September 30,
2005
2004
---------------------------------------------------------------------
Net loss Shares Net loss
Shares
---------------------------------------------------------------------
Basic and
diluted loss
per
share amounts $(11,441) 36,638,577
$ (8,522) 35,709,555
---------------------------------------------------------------------
---------------------------------------------------------------------
Nine months ended
September 30,
2005
2004
---------------------------------------------------------------------
Net
Net
earnings Shares earnings
Shares
---------------------------------------------------------------------
Basic earnings
per
share
amounts $ 9,547
36,624,036 $ 12,941 35,494,738
Effect of
assumed
dilutive
conversions:
Stock option plan
- 1,314,393
- 1,510,044
---------------------------------------------------------------------
Diluted earnings
per
share
amounts $ 9,547
37,938,429 $ 12,941 37,004,782
---------------------------------------------------------------------
---------------------------------------------------------------------
The diluted
earnings (loss) per share calculation excluded the effect
of the assumed
conversions of 4,540,843 and 693,056 stock options to
LVS, under
our stock option plan, during the three months and nine
months ended
September 30, 2005, respectively (2004 - 5,331,957 and
1,015,916
stock options, respectively), as the inclusion of these
options would
have resulted in an anti-dilutive effect. As we
incurred a
net loss for the three months ended September 30, 2005 and
2004, all
outstanding stock options were excluded from the
calculation
of diluted loss per share for these periods. In addition,
the dilution
relating to the conversion of our convertible notes
(issued in
1999 and subsequently redeemed in September 2004) to
3,463,155
LVS, by application of the "if-converted method", has been
excluded from
the calculation for 2004 as the inclusion of this
conversion
resulted in an anti-dilutive effect for the three months
and nine months
ended September 30, 2004. There was no dilution
relating to
the convertible senior notes issued in 2004, as the
contingent
conversion price was not reached during the periods.
(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 ended
September
30, 2005 and 2004, and in the nine months ended September
30, 2005.
The fair value of stock options granted in the nine months
ended September
30, 2004 was estimated using the Black-Scholes option
pricing model
with the following assumptions: risk-free interest
rates ranging
from 2.96% to 4.39%; semi-annual dividend per LVS of
C$0.055; volatility
factor of the expected market price of our LVS of
28% to 30%;
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 nine months
ended September
30, 2004, the weighted average fair value of the
options at
the grant dates was C$25.35 ($19.09). 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 nine months ended
September
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
(loss) and basic and diluted earnings (loss) per
share would
have been adjusted to the pro forma amounts indicated
below:
Three months ended Nine months ended
September 30, September
30,
2005 2004
2005 2004
-------------------------------------------------------------------------
Stock option expense included
in compensation expense
$ (486) $ (455) $ (1,494) $ (1,132)
-------------------------------------------
-------------------------------------------
Net earnings (loss),
as reported
$(11,441) $ (8,522) $ 9,547 $ 12,941
Additional expense that would
have been recorded if all
outstanding stock options
granted during 2002 had been
expensed
(717) (648) (2,089)
(1,928)
-------------------------------------------
Pro forma net earnings (loss)
$(12,158) $ (9,170) $ 7,458 $ 11,013
-------------------------------------------
Earnings (loss) per share:
Basic, as reported
$ (0.31) $ (0.24) $ 0.26
$ 0.36
Basic, pro forma
(0.33) (0.26) 0.20
0.31
Diluted, as reported
(0.31) (0.24) 0.25
0.35
Diluted, pro forma
(0.33) (0.26) 0.20
0.30
-------------------------------------------
4. Consolidated revenues:
Three months ended Nine months ended
September 30, September
30,
2005 2004
2005 2004
-------------------------------------------------------------------------
Revenues from Management
Operations(a)
$ 42,989 $ 41,894 $134,859 $123,752
Revenues from Ownership
Operations
9,749 22,383 57,838
70,821
Distributions from hotel
investments
- -
132 293
Fees from Ownership Operations
to Management Operations
(534) (1,018) (2,989)
(3,123)
-------------------------------------------
$ 52,204 $ 63,259 $189,840 $191,743
-------------------------------------------
-------------------------------------------
(a) Effective January 1, 2004, we ceased
designating our US dollar
foreign exchange
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 nine months ended
September
30, 2004, we recognized $2,625 and $8,143, respectively, of
the deferred
gain in fee revenues. In addition, effective January 1,
2004, the
US dollar foreign exchange 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 expense, net. This resulted in a $1,014 foreign
exchange gain
and a $106 foreign exchange loss, respectively, for the
three months
and nine months ended September 30, 2004. We did not
hedge any
of our US dollar fee revenues during the three months and
nine months
ended September 30, 2005.
5. Other expense, net:
(a) Foreign exchange loss:
During the
three months and nine months ended September 30, 2005, we
recorded a
net foreign exchange loss of $16,172 and $19,854,
respectively
(2004 - $3,419 and $2,091, 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.
(b) Other:
When the Regent
hotel chain was acquired in 1992, a portion of the
purchase price
of that acquisition was allocated to the management
contracts
that we assumed, which included 12 Regent branded
properties
and Four Seasons properties in New York, Bali and Milan.
As a result
of our agreement to manage a new Four Seasons property in
Kuala Lumpur,
and in anticipation of reaching an agreement with the
owner of The
Regent hotel in that city to transition out of our
management
of that hotel, we wrote off our investment in The Regent
Kuala Lumpur
management contract of $4,617 in the three months ended
September
30, 2005, representing the unamortized portion of the
amount allocated
to the management contract for that property in
1992.
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 $5,284
during the nine months ended September 30, 2005. 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 a 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 expense, net,
during the
three months ended March 31, 2005.
Included in
other expense, net for the three months and nine months
ended September
30, 2004 is the loss on the redemption of the debt
component
of our convertible notes (issued in 1999) of $11,174. The
redemption
of these convertible notes are more fully described in our
consolidated
financial statements for the year ended December 31,
2004.
In addition,
during the three months ended September 30, 2004, we
sold the majority
of our investment in Four Seasons Hotel Amman and
all of our
investment in Four Seasons Resort Whistler for proceeds of
approximately
$36,000 and settled our loan receivable from Sedona,
resulting
in a total net loss of $3,391.
6. Pension benefit expense:
The pension benefit expense, after
allocation to managed properties,
for the three months and nine months
ended September 30, 2005 was
$1,134 and $2,351, respectively (2004
- $571 and $1,705, 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 $44,600. These
contractual obligations and other
commitments are more fully described
in our 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
decrease in guarantees and other commitments
of $1,000. In addition, we
expect to fund approximately $28,000
over the next 15 months in
connection with an expansion of our
corporate office which is currently
underway.
In addition to the guarantees and other
commitments described above,
we also have a commitment related
to the sale of The Pierre (note 5(b)).
8. Seasonality:
Our hotels and resorts are generally
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 generally 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.
9. Subsequent events:
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 began to manage this
property as an independent
hotel. At the time of transition,
we received a payment in an amount
that exceeded the net book value of
our investment in the management
contract.
In October 2005, we sold our minority
equity interests in three
properties for aggregate gross proceeds
of $13,591, which
approximated our book value. In addition,
we also received repayment
of $19,530 of long-term receivables
and accrued interest.
FOUR
SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA -
CORE HOTELS(1)
Three months ended
September 30,
(Unaudited)
2005 2004 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties
52 52
-
No. of Rooms
13,802 13,802
-
Occupancy(2)
71.1% 67.8% 3.3pts.
ADR(3)
- in US dollars
$332 $311
7.0%
RevPAR(4)
- in US dollars
$226 $200
13.2%
Gross operating margin(5)
29.7% 26.8% 2.9pts.
United States
No. of Properties
20 20
-
No. of Rooms
6,274 6,274
-
Occupancy(2)
74.9% 69.9% 5.0pts.
ADR(3)
- in US dollars
$361 $334
8.1%
RevPAR(4)
- in US dollars
$274 $236
16.0%
Gross operating margin(5)
27.9% 23.8% 4.1pts.
Other Americas/Caribbean
No. of Properties
8 8
-
No. of Rooms
1,724 1,724
-
Occupancy(2)
69.1% 65.7% 3.4pts.
ADR(3)
- in US dollars
$273 $251
8.7%
RevPAR(4)
- in US dollars
$183 $158
15.4%
Gross operating margin(5)
18.2% 15.6% 2.6pts.
Europe
No. of Properties
8 8
-
No. of Rooms
1,492 1,492
-
Occupancy(2)
68.2% 65.1% 3.1pts.
ADR(3)
- in US dollars
$535 $507
5.5%
RevPAR(4)
- in US dollars
$381 $350
8.9%
Gross operating margin(5)
37.6% 37.1% 0.5pts.
Middle East
No. of Properties
4 4
-
No. of Rooms
847 847
-
Occupancy(2)
66.4% 68.0% (1.6)pts.
ADR(3)
- in US dollars
$196 $178
10.1%
RevPAR(4)
- in US dollars
$128 $120
7.2%
Gross operating margin(5)
39.7% 38.5% 1.2pts.
Asia/Pacific
No. of Properties
12 12
-
No. of Rooms
3,465 3,465
-
Occupancy(2)
67.6% 65.9% 1.7pts.
ADR(3)
- in US dollars
$234 $225
4.3%
RevPAR(4)
- in US dollars
$119 $110
8.5%
Gross operating margin(5)
33.1% 30.0% 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)
Nine months ended
September 30,
(Unaudited)
2005 2004 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties
52 52
-
No. of Rooms
13,802 13,802
-
Occupancy(2)
69.9% 66.0% 3.9pts.
ADR(3)
- in US dollars
$346 $323
7.1%
RevPAR(4)
- in US dollars
$227 $201
13.2%
Gross operating margin(5)
30.9% 28.4% 2.5pts.
United States
No. of Properties
20 20
-
No. of Rooms
6,274 6,274
-
Occupancy(2)
74.2% 69.5% 4.7pts.
ADR(3)
- in US dollars
$365 $341
6.8%
RevPAR(4)
- in US dollars
$269 $236
14.0%
Gross operating margin(5)
28.7% 25.7% 3.0pts.
Other Americas/Caribbean
No. of Properties
8 8
-
No. of Rooms
1,724 1,724
-
Occupancy(2)
69.2% 64.5% 4.7pts.
ADR(3)
- in US dollars
$341 $314
8.4%
RevPAR(4)
- in US dollars
$225 $192
17.6%
Gross operating margin(5)
29.4% 25.8% 3.6pts.
Europe
No. of Properties
8 8
-
No. of Rooms
1,492 1,492
-
Occupancy(2)
64.2% 64.4% (0.2)pts.
ADR(3)
- in US dollars
$535 $504
6.0%
RevPAR(4)
- in US dollars
$359 $337
6.4%
Gross operating margin(5)
35.2% 36.0% (0.8)pts.
Middle East
No. of Properties
4 4
-
No. of Rooms
847 847
-
Occupancy(2)
69.7% 66.4% 3.3pts.
ADR(3)
- in US dollars
$212 $184
15.4%
RevPAR(4)
- in US dollars
$146 $121
20.3%
Gross operating margin(5)
45.3% 39.0% 6.3pts.
Asia/Pacific
No. of Properties
12 12
-
No. of Rooms
3,465 3,465
-
Occupancy(2)
64.9% 61.2% 3.7pts.
ADR(3)
- in US dollars
$236 $224
5.7%
RevPAR(4)
- in US dollars
$116 $102
13.4%
Gross operating margin(5)
31.8% 29.3% 2.5pts.
----------------------------------------
(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
September 30,
(Unaudited)
2005 2004 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties
67(1) 63
4
No. of Rooms
17,268(1) 16,378 890
United States
No. of Properties
24 24
-
No. of Rooms
7,144 7,109
35
Other Americas/Caribbean
No. of Properties
10 10
-
No. of Rooms
2,162 2,162
-
Europe
No. of Properties
11 10
1
No. of Rooms
1,919 1,786
133
Middle East
No. of Properties
6 5
1
No. of Rooms
1,444 1,212
232
Asia/Pacific
No. of Properties
16 14
2
No. of Rooms
4,599 4,109
490
----------------------------------------
(1) Since September 30, 2005, we ceased
management of Four Seasons Hotel
Newport Beach,
which had 295 rooms and we commenced management of
Four Seasons
Hotel des Bergues Geneva, which has 103 rooms. These
changes are
not reflected in this table.
FOUR SEASONS HOTELS INC.
REVENUES UNDER MANAGEMENT - ALL MANAGED
HOTELS
(Unaudited)
Three months ended Nine
months ended
(In thousands of
September 30,
September 30,
US dollars)
2005 2004
2005 2004
-------------------------------------------------------------------------
Revenues under
management
$ 603,838 $ 534,038 $1,883,084
$1,636,095
---------------------------------------------------
---------------------------------------------------
----------------------------------------
(1) Revenues under management consist
of rooms, food and beverage,
telephone
and other revenues of all the hotels and resorts which we
manage. Approximately
62% 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
Approximate
Hotel/Resort/Residence Club and Location(1)(2)
Number of Rooms
Scheduled 2005/2006 openings
----------------------------
Four Seasons Hotel Damascus, Syria
305
Four Seasons Resort Lana'i at Koele,
HI, USA(3)
100
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 Bahrain, Bahrain
250
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 Kuala Lumpur, Malaysia(x)
140
Four Seasons Hotel Kuwait City, Kuwait
225
Four Seasons Hotel Marrakech, Morocco(x)
140
Four Seasons Resort Mauritius, Republic
of Mauritius(x) 90
Four Seasons Hotel Moscow, Russia(x)
210
Four Seasons Hotel Moscow Kamenny
Island, Russia(x)
80
Four Seasons Hotel New Orleans, LA,
USA(x)
240
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.
(3) The Lodge at Koele is currently
managed by Four Seasons and is
expected to
be rebranded as Four Seasons Resort Lana'i at Koele in
2006.
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, our Management's Discussion and Analysis
for this quarter 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. |
