TORONTO - May 10, 2002 - Four Seasons Hotels Inc. (TSE:FSH) today reported
its results for the first quarter ended March 31, 2002. Net earnings decreased
to $7.7 million ($0.22 basic earnings per share and $0.21 diluted earnings
per share) for the three months ended March 31, 2002, as compared to $17
million ($0.49 basic earnings per share and $0.45 diluted earnings per
share) for the first quarter of 2001.
"Although the operating environment is continuing to improve, overall
demand levels remain well below those experienced last year, which is reflected
in the decline in our quarterly earnings. Although leisure travel demand
is at or approaching last year's levels, corporate business travel demand
is improving more slowly," commented Isadore Sharp, Chairman and Chief
Executive Officer. "We are pleased that we have been able to maintain both
our profitability for our hotel owners and the pace of our new property
openings in the current environment. Already this year we have opened new
Four Seasons properties in Shanghai and Sharm El Sheikh and our development
pipeline continues to be strong. Looking out over the next eighteen months
we expect to open 13 new Four Seasons properties, including new hotels
in Tokyo, Budapest and Miami, and new resorts in Jackson Hole, Provence
at Terre Blanche and Hampshire, England."
SEASONALITY
Four Seasons hotels and resorts are affected by normally recurring
seasonal patterns and, for most of the properties, demand is lower in December
through March than during the remainder of the year. The Company's ownership
operations are particularly affected by seasonal fluctuations, with lower
revenue, operating profit and cash flow in the first quarter; ownership
operations typically incur an operating loss in the first quarter of each
year. Typically the fourth quarter is the strongest quarter for the majority
of the hotels.
Management operations are also seasonal in nature, as fee revenues are
affected by the seasonality of hotel revenues and operating results. Urban
hotels generally experience lower revenues and operating results in the
first quarter which has a negative impact on management revenues. However,
this negative impact on management revenues generally is offset, to some
degree, by increased travel to resorts in those months. As discussed below,
although the resorts under the Company's management experienced a decline
in RevPAR1 during the quarter, this part of the Company's business was
not as severely affected and as such, on a relative basis, offset slightly
more than normal the decline experienced in the urban hotels. In the future,
the negative impact of the urban hotels in this quarter may be offset to
a greater extent as the portfolio of resort properties managed by Four
Seasons increases.
In 2002, this normal seasonality is also heightened by the ongoing impact
from the September 11th terrorist attacks, the war on terrorism and the
weak US economy, which adversely affected the normal decision cycle for
first quarter business travel and meetings and leisure travel.
OPERATING RESULTS
Although travel demand is improving, RevPAR, on a US dollar basis,
for worldwide Core Hotels2 decreased 12%
during the first quarter of 2002, as compared to the same period in 2001.
This decline is consistent with the Company's expectations of a 12% to
15% decline for the quarter. As anticipated, the RevPAR decline was primarily
attributable to lower occupancy levels. The Company is continuing its strategy
of maintaining the high level of product and services it has consistently
provided to its customers. This strategy allows the Company to maintain
its industry-leading service reputation and achieved room rates, which
will set the stage for higher RevPAR results as demand strengthens. While
there was a small decline in achieved room rate during the first quarter
of 2002, as compared to the first quarter of 2001, as a result of a change
in sales mix, with fewer suites and deluxe rooms being sold in the quarter,
the Company continues to expect its achieved room rates to be at or above
the levels realized in both 2000 and 2001 on a full-year basis.
RevPAR on a US dollar basis, in US Core Hotels decreased 12.8% in the
first quarter of 2002, as compared to the same period in 2001. Gross operating
profits for the US Core Hotels declined 23.2% in the first quarter of 2002,
as compared to the first quarter of 2001, as a result of RevPAR declines
and the expected significant cost increases for both insurance and health
care at those hotels. The RevPAR and gross operating profits for
the US Core Hotels reflect increasing improvement in operating results
on a monthly basis during the quarter. The US markets that experienced
the greatest RevPAR declines during the first quarter of 2002 were New
York, Washington, Chicago, Newport Beach and Austin. The difficult conditions
in these urban markets were partially offset by the relatively stronger
RevPAR performance of certain of the Company's resort properties.
RevPAR on a US dollar basis, in Canada/Mexico/Caribbean Core Hotels
decreased 11.2% in the first quarter of 2002, as compared to the same period
in 2001, primarily as a result of the lower business demand levels in the
Vancouver and Mexico City properties. On a US dollar basis, gross operating
profits for these hotels decreased 21% in the first quarter of 2002, as
compared to the first quarter of 2001.
RevPAR on a US dollar basis, in Asia/Pacific Core Hotels decreased
13.1% in the first quarter of 2002, as compared to the same period in 2001.
On a local currency basis, the Asia/Pacific Core Hotels realized a RevPAR
decrease of approximately 9.9%. Reduced international business travel
to Tokyo, Singapore and Sydney and reduced resort travel demand for the
Bali market had the largest impact on this region during the first quarter.
The Asia/Pacific Core Hotels' gross operating profits decreased by 17.9%,
on a US dollar basis, and 15.2%, on a local currency basis, in the first
quarter of 2002, as compared to the first quarter of 2001.
RevPAR on a US dollar basis, in European Core Hotels decreased 7.8%,
and gross operating profits declined 4.8% in the first quarter of 2002,
as compared to the same period in 2001. On a local currency basis, RevPAR
in European Core Hotels decreased by 4.4% and gross operating profits declined
1.5% in the first quarter of 2002, as compared to the first quarter of
2001. Business and leisure travel demand in London, Paris and Milan has
improved more rapidly than in other regions, which contributed to the relative
performance of the European Core Hotels.
The Company's resort portfolio realized a US dollar RevPAR decline
of 5% in the first quarter of 2002, as compared to the first quarter of
2001. The resort occupancies declined on average by 3.1 occupancy points
to 74.3% and the achieved room rates declined by 1% to US$461 in the first
quarter of 2002, as compared to the first quarter of 2001.
Both the resort and urban properties experienced booking patterns with
very short lead times throughout the first quarter of 2002. In most
of the Company's properties, bookings were being made within one to two
weeks of the guest's arrival. This pattern of business and leisure business
has made it more difficult to predict future bookings at this point in
the economic cycle.
MANAGEMENT OPERATIONS
Management fee revenues decreased 21.2% to $36 million in the first
quarter of 2002, as compared to $45.7 million in the first quarter of 2001.
As expected, RevPAR declined on a worldwide basis, largely as a result
of lower occupancy levels. This reduction in RevPAR reduced profitability
of the hotels under management, which negatively affected the Company's
profit-based incentive fees during the first quarter of 2002, as compared
to the first quarter of 2001.
A portion of the decline in fee revenues was caused by the Company
ceasing to manage The Regent Hong Kong during the second quarter of 2001.
During the first quarter of 2001 the fee revenues from The Regent Hong
Kong were $1.3 million. The decline in fee revenues was also attributable
in part to a decrease in incentive fees earned by the Company and a decline
in fees from Four Seasons residential projects. The residential project
sales were negatively affected by lower demand levels caused by the weak
economic conditions in most markets, although average achieved selling
prices of the units increased by 19% in the first quarter of 2002, as compared
to the first quarter of 2001.
Four Seasons management earnings, before other operating items, for
the first quarter of 2002 decreased 29.4% to $20.9 million, as compared
to $29.6 million in the first quarter of 2001. The profit margin on management
operations was 58.1% in the first quarter of 2002, as compared to 64.9%
in the first quarter of 2001. During this quarter, the Company achieved
a reduction in general and administrative expenses of 6% to $15.1 million,
as compared to the same period in 2001.
OWNERSHIP OPERATIONS
Included in ownership earnings are the consolidated revenues and expenses
from the Company's 100% interest in The Pierre in New York, Four Seasons
Hotel Vancouver, Four Seasons Hotel Berlin, distributions from minority
ownership interests in properties that Four Seasons manages and corporate
overhead expenses.
Ownership operations lost $8.1 million, before other operating items,
in the first quarter of 2002, as compared to a loss of $5.2 million in
the first quarter of 2001. The loss in both years is due primarily to the
continued weakness in the New York and Vancouver markets and normal seasonality
of demand levels in the Company's ownership assets.
The weaker economic conditions in New York continued to negatively
affect the Company's ownership interest in The Pierre. The Pierre's RevPAR
declined by 17.4% during the first quarter of 2002, as compared to the
first quarter of 2001. This RevPAR decline consisted of a decline in occupancy
from 60.8% in the first quarter of 2001 to 59.4% in the first quarter of
2002. The Pierre's achieved room rates also declined by 8.2% primarily
because of lower suite occupancy during the quarter. The first quarter
2002 operating loss at The Pierre increased by $1.6 million, as compared
to the first quarter of 2001. Four Seasons Hotel Vancouver also experienced
weak operating conditions, with RevPAR declining 21% for the first quarter
of 2002, as compared to the same period in 2001. The first quarter 2002
operating loss at Four Seasons Hotel Vancouver increased by $1 million,
as compared to the first quarter of 2001.
OTHER INCOME/EXPENSE
The Company incurred a net foreign exchange accounting loss of $1.1
million ($0.02 diluted loss per share) during the first quarter of 2002,
as compared to a net foreign exchange accounting gain of $272,000 during
the first quarter of 2001. This loss resulted from the Company's various
foreign currency net monetary asset positions. Since March 31, 2002, however,
the Canadian dollar has weakened against the Euro and Pound Sterling, and
this trend, if it continues, is expected to result in the Company realizing
a foreign exchange accounting gain in the second quarter of 2002.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense for the first quarter of 2002
was $3.5 million, as compared to $3.9 million for the same period in 2001.
The decrease in depreciation and amortization expense is primarily attributable
to a change in accounting standard relating to goodwill and other intangible
assets which became effective January 1, 2002 and are discussed in note
1(a) to the first quarter consolidated financial statements. This decrease
was partially offset by additional depreciation and amortization expense
on new management contracts. If the new accounting standard had been in
place during the first quarter of 2001, net earnings would have improved
$741,000 or $0.01 per diluted earnings per share because of lower amortization
expense (see reconciliation in note 1(a) to the first quarter consolidated
financial statements).
NET INTEREST INCOME
During the first quarter of 2002, the Company had net interest income
of $2 million, as compared to $1.5 million in the first quarter of 2001.
This increase is due primarily to reduced interest expense resulting from
the redemption of the Company's unsecured debentures in November of 2001,
partially offset by lower interest rates earned on cash reserves.
INCOME TAX EXPENSE
The Company's effective tax rate in both the first quarter of 2002
and 2001 was 24%.
BALANCE SHEET
The primary change to the Company's balance sheet is caused by the
new accounting standard relating to intangible assets.
Under the new accounting requirements intangible assets with indefinite
useful lives are no longer amortized but are subject to an annual impairment
test comparing the asset's carrying value to its fair value. The previous
accounting guidelines compared the asset's carrying value to its net recoverable
value. During the first quarter of 2002, the Company completed its impairment
test relating to its investment in the Regent trade name and determined
that this investment was impaired as at January 1, 2002 under the new fair
value based impairment methodology. As a result, the Company has reduced
retained earnings by $26.4 million, and investment in trademarks and trade
names by $27.1 million and increased future income tax assets by $0.7 million
as at January 1, 2002. (see note 1(a) to the first quarter consolidated
financial statements).
Cash reserves continue to be the single largest asset on the Company's
balance sheet. The Company's cash reserves were $211.7 million as at March
31, 2002, as compared to $210.4 million as at December 31, 2001.
Long-term obligations increased from $119.4 million as at December
31, 2001 to $121.2 million as at March 31, 2002, primarily as a result
of accrued interest on the Company's convertible notes. The Company's debt
position consists primarily of its zero coupon convertible debt that matures
in 2029 and that is redeemable by the Company at any time after September
2004. The convertible debt can be put to the Company at three different
times beginning in September 2004. In all cases, the Company can satisfy
its obligations in respect of this debt on the exercise of the put or call
right by the payment of cash or the issuance of Limited Voting Shares.
CASH FLOW
Notwithstanding the continuing, challenging operating environment,
the Company generated $7.7 million of cash from operations in the first
quarter of 2002, as compared to $31 million in the first quarter of 2001.
The Company did not fund any significant investments during the first quarter
of 2002. The Company expects total capital spending and dividends in 2002
to be approximately the same as in 2001, approximately $73.2 million. During
the remainder of 2002, the Company currently plans to make investments
in Four Seasons projects in Amman, Jackson Hole, Costa Rica and Sao Paulo.
LEASE COMMITMENTS
In addition to the obligations identified on the Company's balance
sheet as at March 31, 2002, the Company's three consolidated hotels are
leasehold interests subject to individual property leases. The Company's
obligations in respect of two of these leases are supported by letters
of credit aggregating $18.2 million. The total annual lease obligations
for these three assets represent annual payments of approximately $16 million
in 2002, funded by each hotel's operating cash flow. These lease expenses
are treated as an expense of the Company's ownership operations and the
future obligations are disclosed in the Company's 2001 Annual Report.
CONTINGENT COMMITMENTS
In connection with certain of its hotel management agreements the Company
provides limited and contingent commitments in lieu of additional equity
or loan commitments. The Company has eight contingent commitments that
represent a maximum annual contingent commitment of $39 million for the
year ended December 31, 2002. To the extent it is called upon to honour
any one of these contingent commitments, the Company generally has either
the right to be repaid from hotel operations and/or has various forms of
security or recourse to the owner of the property. The Company has not
been called upon to fund any of these commitments in the first quarter
of 2002 and does not anticipate funding any amount pursuant to these commitments
during 2002.
CHANGES IN ACCOUNTING POLICIES
Note 1 to the first quarter financial statements outlines the details
of three new accounting standards that became effective January 1, 2002.
These accounting standards relate to the accounting for intangible assets,
foreign currency translation and hedging relationships and stock-based
compensation and other stock-based payments.
NEW UNIT GROWTH
Four Seasons Hotels and Resorts is the world's largest operator of
luxury hotels. The Company currently manages 55 hotels and resorts in 25
countries. The Company has opened two new hotels in 2002; Four Seasons
Hotel Shanghai and Four Seasons Resort Sharm El Sheikh. The Company currently
has 23 new Four Seasons projects under construction or in advanced stages
of development. Of the 23 new properties, 14 will include a residential
component within the project. Please see the schedule attached listing
the properties under construction or in advanced stages of development
and anticipated opening dates for these properties.
LOOKING AHEAD
The Company is maintaining its full year RevPAR guidance of 2% to 3%
growth and revising modestly upward its expected full year diluted earnings
per share guidance of $1.72 to $1.76 from its previous estimate of $1.69
to $1.74. On a quarterly basis, the Company has revised its quarterly estimates
to reduce the second quarter expectations and increase the fourth quarter
expectations primarily due to different timing expectations for residential
and incentive fee revenues.
The following table provides updated quarterly earnings guidance for
the remainder of 2002:
Change in RevPAR Diluted
versus prior year
Earnings Per Share
-----------------
------------------
First Quarter (Actual)
(12%)
$0.21
Second Quarter (Estimate)
(4%) to (6%) $0.46 - $0.47
Third Quarter (Estimate)
8% to 12% $0.35 -
$0.36
Fourth Quarter (Estimate)
17% to 22% $0.70
- $0.72
Full Year of 2002 (Estimate) 2%
to 3% $1.72
- $1.76
CONCLUSION
"Although the first quarter continued to be an extremely challenging
operating environment, our business model has continued to perform well
and the Company remains profitable," commented Douglas L. Ludwig, Chief
Financial Officer and Executive Vice President." In addition, profit margins
remained at relatively high levels, we continue to earn positive returns
on our capital investments and our new openings are on track to support
the future growth of the Company.
During the first quarter the Company extended its bank facilities for
an additional year on terms that are more advantageous to Four Seasons.
We remain focused on maintaining a very strong balance sheet and ensuring
we have the liquidity necessary to permit us to pursue growth opportunities
as they are identified."
FOUR SEASONS HOTELS INC.
CONSOLIDATED BALANCE SHEETS
As at As at
(Unaudited)
March 31, December 31,
(In thousands of dollars)
2002 2001
ASSETS
Current assets:
Cash and cash equivalents $
211,726 $ 210,421
Receivables
70,413 78,450
Inventory
2,859 3,074
Prepaid expenses
7,606 2,492
292,604 294,437
Long-term receivables
202,149 201,453
Investments in hotel
partnerships and
corporations
141,124 141,005
Fixed assets
51,803 50,715
Investment in management
contracts
201,902 201,460
Investment in trademarks
and trade names (note 1(a))
6,599 33,784
Future income tax assets
17,405 17,745
Other assets
40,093 39,782
$ 953,679 $ 980,381
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities
$ 39,152 $ 50,813
Long-term obligations due
within one year
735 1,188
39,887 52,001
Long-term obligations
120,473 118,244
Shareholders'
equity (note 2):
Capital stock
323,623 319,460
Convertible notes
178,543 178,543
Contributed surplus
4,784 4,784
Retained earnings
266,979 285,619
Equity adjustment from
foreign currency
translation
19,390 21,730
793,319 810,136
$ 953,679 $ 980,381
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
(Unaudited)
March 31,
(In thousands of dollars
except per share amounts)
2002 2001
Consolidated
revenues (note 3)
$ 64,581 $ 78,783
MANAGEMENT OPERATIONS
Revenues (note 4)
$ 35,992 $ 45,659
General and administrative
expenses
(15,084) (16,041)
20,908 29,618
OWNERSHIP OPERATIONS
Revenues
29,590 34,255
Distributions from hotel
investments
106 192
Expenses:
Cost of sales and expenses
(36,695) (38,277)
Fees to Management
Operations
(1,107) (1,323)
(8,106) (5,153)
Earnings before other
operating items
12,802 24,465
Depreciation and
amortization
(3,505) (3,939)
Other income (expense), net
(1,141) 272
Earnings from operations
8,156 20,798
Interest income, net
2,010 1,543
Earnings before income
taxes
10,166 22,341
Income tax expense:
Current
(1,380) (4,711)
Future
(1,060) (651)
(2,440) (5,362)
Net earnings
$ 7,726 $ 16,979
Basic earnings per share
$ 0.22 $
0.49
Diluted earnings per share $
0.21 $ 0.45
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH PROVIDED BY OPERATIONS
Three months ended
(Unaudited)
March 31,
(In thousands of dollars)
2002 2001
Cash provided by (used in) operations:
MANAGEMENT OPERATIONS
Earnings before other
operating items
$ 20,908 $ 29,618
Items not requiring an
outlay of funds
370 170
Working capital provided
by Management Operations
21,278 29,788
OWNERSHIP OPERATIONS
Loss before other
operating items
(8,106) (5,153)
Items not requiring an
outlay of funds
- 2,657
Working capital used in
Ownership Operations
(8,106) (2,496)
13,172 27,292
Interest received
5,405 7,313
Interest paid
(287) (3,401)
Current income tax paid
(4,446) (4,446)
Change in non-cash working
capital
(4,993) 1,061
Other
(1,164) 3,225
Cash provided by
operations
$ 7,687 $ 31,044
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
(Unaudited)
March 31,
(In thousands of dollars)
2002 2001
Cash provided by (used in):
Operations:
$ 7,687 $ 31,044
Financing:
Long-term obligations,
including current portion
(640) (51)
Issuance of shares
4,163
288
Dividends paid
(1,815) (1,813)
Cash provided by (used in)
financing
1,708 (1,576)
Capital investments:
Long-term receivables
(608) (21,948)
Hotel investments
(582) (2,042)
Disposal of hotel
investment
- 18,425
Purchase of fixed assets
(2,990) (1,960)
Investment in trademarks,
trade names and management
contracts
(390) (6,610)
Other assets
(3,686) (834)
Cash used in capital
investments
(8,256) (14,969)
Increase in cash and cash
equivalents
1,139 14,499
Increase in cash and cash
equivalents due to
unrealized foreign
exchange gain
166 1,015
Cash and cash equivalents,
beginning of period
210,421 218,100
Cash and cash equivalents,
end of period
$ 211,726 $ 233,614
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Three months ended
(Unaudited)
March 31,
(In thousands of dollars)
2002 2001
Retained earnings,
beginning of period
$ 285,619 $ 202,760
Effect of adoption of new
standard on accounting
for intangible assets
(note 1(a))
(26,366)
-
259,253 202,760
Net earnings
7,726 16,979
Retained earnings, end of
period
$ 266,979 $ 219,739
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC. NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited) (In thousands of dollars except per
share amounts)
These interim consolidated financial statements do not
include all
disclosures required by Canadian generally accepted accounting
principles for annual financial statements and should
be read in
conjunction with the Company's annual consolidated financial
statements for the year ended December 31, 2001.
1. Significant accounting policies:
The significant accounting policies used in preparing
these
interim consolidated financial statements are consistent
with those
used in preparing the Company's annual consolidated financial
statements for the year ended December 31, 2001, except
as disclosed
below:
a. Intangible assets
Effective January 1, 2002, the Company adopted the new
accounting
standard for goodwill and other intangible assets as
established by
the Canadian Institute of Chartered Accountants ("CICA")
without
restatement of prior periods. Intangible assets with
indefinite useful
lives are no longer amortized but are subject to impairment
tests on
at least an annual basis. Potential impairment of an
intangible asset
is determined by comparing the asset's carrying value
to its fair
value. Any loss resulting from impairment tests effective
January 1,
2002 must be recognized as a charge to opening retained
earnings.
Impairment arising subsequent to January 1, 2002 will
be recognized as
a charge to income. Intangible assets which do not have
indefinite
lives are amortized over their useful lives. These intangible
assets
are subject to an annual impairment test comparing carrying
values to
net recoverable amounts.
During the first quarter of 2002, in accordance with the
new
accounting standard, the Company completed its review
of its existing
intangible assets. That review determined that its investment
in the
rights to the Regent trade name, which was transferred
to Carlson
Hospitality Worldwide ("Carlson") in 1997 in exchange
for the
entitlement to receive payments from Carlson based on
a percentage of
gross royalty revenue of new development projects, has
an indefinite
useful life. As required by the new standard, the Company
tested this
intangible asset for impairment as at January 1, 2002
under the new
fair value based impairment methodology, and determined
that its fair
value was less than its carrying amount. As a result,
the Company has
recorded a decrease to retained earnings of $26,366,
a decrease to
investment in trademarks and trade names of $27,042 and
an increase to
future income tax assets of $676.
The Company has determined that none of its other intangible
assets have indefinite lives and accordingly, amortizes
such
intangible assets over their estimated useful lives.
Prior to 2002,
the Company amortized its investment in management contracts
on a
straight-line basis over the terms of the contracts to
a maximum of 40
years. Effective January 1, 2002, as required under the
new accounting
standard, the Company amortizes its investment in management
contracts
over the actual term of the contracts in proportion to
the benefits
received.
For the three months ended March 31, 2001, had the Regent
trade
name transferred to Carlson not been amortized and had
the
amortization of investment in management contracts been
adjusted for
the change in estimated useful lives, the reported net
earnings, basic
earnings per share and diluted earnings per share would
be adjusted as
follows:
Three months ended March 31, 2001
Basic Diluted
Net Earnings Earnings
Earnings Per Share Per Share
Reported amounts
$16,979 $0.49
$0.45
Trade name
amortization
(net
of income tax recovery
of $5)
190 -
-
Management
contract
amortization
(net of income
tax
recovery of $81)
551 0.02
0.01
Adjusted amounts
$17,720 $0.51
$0.46
b. Foreign currency translation and hedging relationships
Effective January 1, 2002, the CICA amended the accounting
standard for foreign currency translation by eliminating
the
requirement to defer and amortize unrealized translation
gains and
losses on long-term foreign currency denominated monetary
items with a
fixed or determinable life. Due to the hedging relationships
established by the Company during 2001 relating to its
long-term
receivables, long-term obligations, investments in self-sustaining
foreign operations and foreign exchange forward contracts,
the
adoption by the Company of the amendment to the standard
on accounting
for foreign currency translation did not have an impact
on the Company
for the three months ended March 31, 2002.
In addition, 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, which will be
effective for
fiscal years beginning on or after July 1, 2002. The
Company has not
yet determined the impact of the implementation of this
guideline on
its 2003 consolidated financial statements.
c. Stock-based compensation and other stock-based payments
Effective January 1, 2002, the CICA issued a new standard
relating
to the accounting for stock-based compensation and other
stock-based
payments. The new accounting standard requires the use
of a fair value
based method to account for stock-based payments to non-employees,
and
for employee awards that are direct awards of stock,
cash or other
assets, or are stock appreciation rights that call for
settlement by
the issuance of equity instruments, granted on or after
January 1,
2002.
As permitted by the new standard, the Company has opted
to
continue to use its existing policy under which no compensation
expense is recorded on the grant of stock options to
employees.
Consideration paid by employees on the exercise of stock
options or
the purchase of shares is recorded as capital stock.
The new
accounting standard does, however, require additional
disclosures for
options granted to employees, including disclosure of
pro forma
earnings and pro forma earnings per share as if the fair
value based
accounting method had been used to account for employee
stock options.
Assuming the Company had accounted for its stock options
issued
under the fair value based method, pro forma net earnings
for the
three months ended March 31, 2002 would have been $7,719
and there
would have been no adjustment to basic and diluted earnings
per share.
In calculating pro forma net earnings and pro forma basic
and diluted
earnings per share, stock options issued prior to January
1, 2002 have
been excluded from the fair value based accounting method.
2. Shareholders' equity:
As at March 31, 2002, the Company has outstanding Variable
Multiple Voting and Limited Voting Shares of 35,142,622
and
outstanding stock options of 5,377,627 (weighted average
exercise
price of $50.78). In addition, the Company has 655,404
convertible
notes outstanding, each of which may be converted into
5.284 Limited
Voting Shares of the Company. The Company, however, has
the right to
acquire for cash the notes that a holder has required
to be so
converted. Holders also have the right to require the
Company to
purchase all or a portion of their notes on September
23, 2004,
September 23, 2009 and September 23, 2014 in consideration
for Limited
Voting Shares having a fair value equal to the issue
price plus
accrued interest to the date of purchase. The Company
has the right to
acquire for cash all or a portion of the notes that a
holder has
required to be so purchased. Also, on or after September
23, 2004, the
Company may redeem for cash all or a portion of the notes.
3. Consolidated revenues:
Consolidated revenues for Four Seasons Hotels Inc. are
comprised
of revenues from Management Operations, revenues from
Ownership
Operations, distributions from hotel investments, less
fees from
Ownership Operations to Management Operations.
4. Revenues under management:
Total revenues under management were $685,938 for the
first
quarter of 2002 ($750,525 for the first quarter of 2001).
Total
revenues under management consist of rooms, food and
beverage,
telephone and other revenues of all the hotels and resorts
which the
Company manages. Approximately 67% of the fee revenues
earned by the
Company were calculated as a percentage of the total
revenues under
management of all hotels and resorts.
5. Seasonality:
The Company's hotels and resorts are affected by normally
recurring seasonal patterns and, for most of the properties,
demand is
lower in December through March than during the remainder
of the year.
The Company's ownership operations are particularly affected
by
seasonal fluctuations, with lower revenue, operating
profit and cash
flow in the first quarter; ownership operations typically
incur an
operating loss in the first quarter of each year. Typically
the fourth
quarter is the strongest quarter for the majority of
the hotels.
Management operations are also seasonal in nature, as
fee revenues
are affected by the seasonality of hotel revenues and
operating
results. Urban hotels generally experience lower revenues
and
operating results in the first quarter which has a negative
impact on
management revenues. However, this negative impact on
management
revenues generally is offset, to some degree, by increased
travel to
resorts in those months and may be offset to a greater
extent as the
portfolio of resort properties managed by the Company
increases.
In 2002, this normal seasonality is also heightened by
the ongoing
impact from the September 11th terrorist attacks, the
war on terrorism
and the weak US economy, which adversely affected the
normal decision
cycle for first quarter business travel and meetings
and leisure
travel. |
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA - CORE HOTELS(1)
Three months ended
March 31,
(Unaudited)
2002 2001 Variance
Worldwide
No. of Properties
45 45
-
No. of Rooms
12,575 12,575 -
Occupancy(2)
64.4% 71.0% (6.6%)
ADR(3) - in US dollars
$294 $303 (3.0%)
- in equivalent Canadian dollars $467
$462 1.1%
RevPAR(4)- in US dollars
$189 $215 (12.0%)
- in equivalent Canadian dollars $301
$328 (8.3%)
Gross operating margin(5)
31.0% 34.4% (3.4%)
United States
No. of Properties
22 22
-
No. of Rooms
6,971 6,971
-
Occupancy(2)
65.8% 72.5% (6.7%)
ADR(3) - in US dollars
$329 $342 (3.9%)
- in equivalent Canadian dollars $523
$522 0.2%
RevPAR(4)- in US dollars
$216 $248 (12.8%)
- in equivalent Canadian dollars $344
$378 (9.0%)
Gross operating margin(5)
28.4% 32.7% (4.3%)
Canada/Mexico/Caribbean
No. of Properties
5 5
-
No. of Rooms
1,341 1,341
-
Occupancy(2)
59.7% 68.1% (8.4%)
ADR(3) - in US dollars
$324 $320 1.3%
- in equivalent Canadian dollars $516
$489 5.6%
RevPAR(4)- in US dollars
$194 $218 (11.2%)
- in equivalent Canadian dollars $308
$333 (7.4%)
Gross operating margin(5)
36.3% 40.8% (4.5%)
Asia/Pacific
No. of Properties
10 10
-
No. of Rooms
2,715 2,715
-
Occupancy(2)
65.8% 72.4% (6.6%)
ADR(3) - in US dollars
$162 $169 (4.4%)
- in equivalent Canadian dollars $257
$258 (0.3%)
RevPAR(4)- in US dollars
$107 $123 (13.1%)
- in equivalent Canadian dollars $169
$187 (9.3%)
Gross operating margin(5)
35.9% 38.0% (2.1%)
Europe/Middle East
No. of Properties
8 8
-
No. of Rooms
1,548 1,548
-
Occupancy(2)
59.4% 63.9% (4.5%)
ADR(3) - in US dollars
$350 $353 (0.7%)
- in equivalent Canadian dollars $557
$538 3.5%
RevPAR(4)- in US dollars
$208 $226 (7.8%)
- in equivalent Canadian dollars $331
$344 (3.9%)
Gross operating margin5
35.4% 34.1% 1.3%
(1) The term "Core Hotels" means hotels and resorts under
management for the full year of both 2002 and 2001.
Changes from the
2001/2000 Core Hotels are the additions of Four
Seasons Resort Nevis
and Four Seasons Hotel Cairo at The First Residence,
and the deletion
of The Regent Jakarta (which closed for repairs
in February 2002
following damage from extensive flooding).
(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 per room occupied.
(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 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.
(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
March 31,
(Unaudited)
2002 2001 Variance
Worldwide
No. of Properties
54 51
3
No. of Rooms
15,041 14,714 327
United States
No. of Properties
23 22
1
No. of Rooms
7,248 6,971 277
Canada/Mexico/Caribbean/South America
No. of Properties
8 6
2
No. of Rooms
1,762 1,553 209
Asia/Pacific
No. of Properties
13 13
-
No. of Rooms
4,062 4,221 (159)
Europe/Middle East
No. of Properties
10 10
-
No. of Rooms
1,969 1,969
-
FOUR SEASONS HOTELS INC.
SCHEDULED OPENING OF HOTELS UNDER CONSTRUCTION
OR IN ADVANCED
STAGES OF DEVELOPMENT
Hotel/Resort/Residence Club
Approximate Scheduled
and Location(1)
Number of Rooms Opening
Four Seasons Hotel Alexandria, Egypt(1)
120 2004
Four Seasons Hotel Amman, Jordan
195 2002
Four Seasons Hotel Beirut, Lebanon
287 2005
Four Seasons Hotel Budapest, Hungary
179 2003
Four Seasons Hotel Nile Plaza, Cairo, Egypt(1)
374 2004
Four Seasons Resort Costa Rica, Costa Rica(1)
179 2004
Four Seasons Hotel Doha, Qatar(1)
235 2004
Four Seasons Resort Exuma, The Bahamas(1)
180 2003
Four Seasons Hotel Florence, Italy
116 2004
Four Seasons Hotel Hampshire, England
134 2003
Four Seasons Hotel Hong Kong, Hong Kong(1)
400 2004
Four Seasons Hotel Istanbul at the
Bosphorus, Turkey
180 2003
Four Seasons Resort Jackson Hole, WY, USA(1)
124 2003
Four Seasons Hotel Miami, FL, USA(1)
222 2003
Four Seasons Hotel Palo Alto, CA, USA
200 2004
Four Seasons Resort Provence at Terre
Blanche, France(1)
15 2003
Four Seasons Resort Puerto Rico, Puerto Rico(1)
250 2005
Four Seasons Residence Club
Punta Mita, Mexico(1)
40 2003
Four Seasons Hotel Riyadh, Saudi Arabia(1)
234 2002
Four Seasons Hotel Sao Paulo, Brazil
125 2003
Four Seasons Residence Club Sedona at
Seven Canyons, AZ, USA(1)
20 2003
Four Seasons Hotel Tokyo at Marunouchi, Japan
58 2002
Four Seasons Resort Whistler, B.C., Canada(1)
271 2004
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.
The dates of scheduled
opening 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. The process and risks associated
with the management of
new properties are dealt with in greater detail
in the Company's
Annual Report. |
All dollar amounts referred to in this press release are Canadian dollars
unless otherwise noted. The financial statements are prepared in accordance
with Canadian generally accepted accounting principles.
This press release contains "forward-looking statements" within the
meaning of federal securities laws, including RevPAR, profit margin and
earning trends; statements concerning the number of lodging properties
expected to be added in future years; expected investment spending; and
similar statements concerning anticipated future events and expectations
that are not historical facts.
(1) RevPAR is defined as average room revenue per available room. RevPAR
is a commonly used indicator of market performance for hotels and represents
the combination of 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.
(2) The term "Core Hotels" means hotels and resorts under management
for the full year of both 2002 and 2001. Changes from the 2001/2000 Core
Hotels are the additions of Four Seasons Resort Nevis and Four Seasons
Hotel Cairo at The First Residence, and the deletion of The Regent Jakarta
(which closed for repairs in February 2002 following damage from extensive
flooding).
|
