| Aug 1, 2003 - Four Seasons
Hotels Inc. (TSX Symbol "FSH"; NYSE Symbol "FS") today reported its results
for the second quarter ended June 30, 2003.
"Although travel demand trends improved toward
the end of the second quarter and these improvements are continuing, the
period was severely affected by the challenges that existed earlier in
the year, the war in Iraq, terrorist alerts and Severe Acute Respiratory
Syndrome (SARS)," said Isadore Sharp, Chairman and Chief Executive Officer.
"However, we remain very confident about our strategic plans for the short
and long term and our ability to increase our competitive advantage by
adding Four Seasons properties in new markets. The success of our customer
service-focused strategy continues to be demonstrated in our market share
leadership and our ability to maintain industry-leading room rates."
For the three months ended June 30, 2003, net
loss was $1.3 million ($0.04 basic and diluted loss per share), as compared
to net earnings of $18.1 million ($0.52 basic earnings per share and $0.48
diluted earnings per share) for the comparable period in 2002. The decline
in net earnings is primarily attributable to a non-cash, unrealized foreign
exchange loss for accounting purposes in the second quarter of 2003, which
arose as a result of unprecedented movements in the US and Canadian dollars,
pound sterling and the euro, as compared to an unrealized foreign exchange
gain for accounting purposes in the same period in 2002. Increased losses
from ownership operations and legal and other enforcement costs relating
to the disputes with the owners of the hotels in Seattle and Caracas, which
are discussed below, also contributed to the decline. For the six months
ended June 30, 2003, net loss was $10.5 million ($0.30 basic and diluted
loss per share), as compared to net earnings of $25.8 million ($0.74 basic
earnings per share and $0.70 diluted earnings per share) for the comparable
period in 2002.
Excluding the foreign exchange loss and legal
and other enforcement cost items and the tax effect thereof, adjusted(1)
net earnings would have been $8.9 million ($0.26 basic earnings per share
and $0.25 diluted earnings per share) in the second quarter of 2003 and
adjusted(1) net earnings would have been $11.4 million ($0.33 basic earnings
per share and $0.32 diluted earnings per share) for the six months ended
June 30, 2003.
Cash flow from operations improved by $9 million
to $15.2 million in the second quarter of 2003, as compared to $6.2 million
in the same period in 2002 ($0.43 per share in the second quarter of 2003,
as compared to $0.18 per share in the same period in 2002). For the six
months ended June 30, 2003 cash flow from operations also improved to $37.0
million, as compared to $13.9 million in the same period in 2002 ($1.06
per share for the first six months of 2003, as compared to $0.40 per share
in the same period in 2002).
"We are very pleased with the solid improvements
in cash flow from operations. Despite the very difficult conditions in
which we have been operating, we are meeting our objective of funding new
development commitments with cash from operations," said Douglas Ludwig,
Chief Financial Officer and Executive Vice President. "Although it is too
early to know with any degree of confidence whether this is the beginning
of sustainable improvement in travel demand, we are seeing some improvements
in near-term travel bookings. Four Seasons should be well situated for
the recovery whenever it occurs, with a strong balance sheet and a stronger
competitive advantage."
OPERATING ENVIRONMENT
Overall, operating statistics for the quarter
reflect improving results as the quarter progressed. Travel in April was
most affected by the war in Iraq, while the effects of SARS were the most
pronounced in May. On a regional basis, Europe was the most affected by
the war in Iraq, while Asia and Canada were most affected by SARS. RevPAR(2),
on a US dollar basis, for worldwide Core Hotels(3) for the month of June,
was down 1.0%, as compared to a reduction of 7.1% and 13.7% for the months
of May and April, respectively, in each case as compared to the corresponding
months in 2002. This trend was reflected in each of the regions in which
the Company operates with the exception of Asia, where the impact of SARS
on travel in the region was particularly pronounced.
Over the course of the quarter, there was a modest
improvement in business travel demand. Generally, although still below
historical levels, leisure travel demand continues to be strong relative
to business and group travel demand. The majority of business travel and,
to a lesser extent, group and leisure travel continues to be booked with
extremely short lead times.
Severe Acute Respiratory Syndrome (SARS)
During the second quarter of 2003, SARS had a
major impact on travel in Asia and Canada. The disruption in travel associated
with SARS was more profound in those regions than any event previously
experienced by the Company, with occupancy levels declining to between
the mid-teens to mid-20% range at the hotels and resorts most affected
by the outbreak, including Singapore, Bali, Shanghai, Chiang Mai, Vancouver
and Toronto.
The impact of SARS on travel demand appears to
have peaked in May, as there was a modest improvement during June in occupancy
levels at the majority of the affected hotels and resorts. Travel demand
in those markets appears to be improving and the majority of the major
airlines in Asia have announced increases in flight capacity with the expectation
that capacity will return to more normal levels by late September.
Core Hotel Operating Statistics(4)
RevPAR, on a US dollar basis, for worldwide Core
Hotels decreased 7.4% during the second quarter of 2003, as compared to
the same period in 2002. As discussed below, RevPAR performance varied
significantly among regions, with the US outperforming the other regions.
The RevPAR decline for worldwide Core Hotels was attributable principally
to lower occupancy levels caused by travel disruption relating to the war
in Iraq, SARS and lower demand. The decline in occupancy was offset partially
by a 6.3% increase, on a US dollar basis, in average daily room rate during
the second quarter of 2003, as compared to the same period in 2002. Four
Seasons continues to operate at or above market occupancy levels in most
locations. Maintaining the high level of product and service consistently
provided to guests generally has allowed the Company to maintain, or in
some cases, improve its room rates. The Company currently expects its full
year achieved room rates to be at, or near, the record levels set in 2000
and maintained in 2001 and 2002.
Gross operating margin(5) for worldwide Core Hotels
declined 5.2 percentage points from 33.3% in the second quarter of 2002
to 28.1% in the second quarter of 2003. The decline in gross operating
margin was attributable, in part, to the contraction of hotel revenue caused
by the significant external factors affecting the quarter as discussed
above. The operating profit margins were also affected by increases in
employee heath care costs, insurance and energy.
For the first six months of 2003, RevPAR, on a
US dollar basis, for worldwide Core Hotels decreased 4.4% and the gross
operating margin declined 5.3 percentage points from 31.6% to 26.3%, as
compared to the same period in 2002, for the reasons described above.
During the second quarter of 2003, RevPAR for
US Core Hotels, on a US dollar basis, decreased 2.0% and the gross operating
margin declined 3.9 percentage points to 28.6% from 32.5%, as compared
to the same period in 2002. Four Seasons Hotel Houston and hotels in the
northeast including Philadelphia, Washington, New York, Boston and Atlanta
were among the most difficult markets as a result of reduced levels of
business travel during the second quarter of 2003, as compared to the same
period in 2002. The hotels in San Francisco, Las Vegas and Chicago and
the resorts in Hawaii and Palm Beach experienced relatively strong RevPAR
improvements during the quarter.
For the first six months of 2003, RevPAR for US
Core Hotels, on a US dollar basis, decreased 2.0%, and the gross operating
margin declined 4.5 percentage points to 25.7% from 30.2%, as compared
to the same period in 2002.
In the second quarter of 2003, RevPAR for Other
Americas/Caribbean Core Hotels, on a US dollar basis, decreased by 12.8%,
as compared to the same period in 2002. On a local currency basis, RevPAR
in Other Americas/Caribbean Core Hotels declined 11.6% in the second quarter
of 2003, as compared to the same period in 2002. During the quarter, the
hotels in Toronto and, to lesser extent, Vancouver experienced a dramatic
decline in occupancy compared to the same period in 2002 as a result of
SARS. The gross operating margin in Other Americas/Caribbean Core Hotels
declined 5.5 percentage points from 30.4% to 24.9%, as compared to the
same quarter in 2002. For the first six months of 2003, Other Americas/Caribbean
Core Hotels experienced a decrease in RevPAR, on a US dollar basis, of
7.5%, as compared to the same period in 2002. On a local currency basis,
RevPAR in Other Americas/Caribbean Core Hotels declined 2.1% in the first
six months of 2003, as compared to the same period in 2002. For the first
six months of 2003, the gross operating margin in Other Americas/Caribbean
Core Hotels declined 4.0 percentage points from 32.1% to 28.1%, as compared
to the same period in 2002.
During the second quarter of 2003, RevPAR for
the Europe/Middle East Core Hotels, on a US dollar basis, decreased by
1.0%, as compared to the same period in 2002. The Europe/Middle East Core
Hotels experienced a decrease in RevPAR of 16.0%, on a local currency basis,
for the second quarter of 2003, as compared to the same period in 2002.
Virtually all of the hotels in Europe/Middle East experienced softer travel
demand as a result of the war in Iraq. Occupancy for the region was 41.4%
during April, increasing to 56.7% during May and to 65.7% in June (as compared
to 59.9%, 64.9% and 66%, respectively, for the same months in 2002). Achieved
room rate declined 2.3%, on a local currency basis, but increased 15.2%,
on a US dollar basis. The gross operating margin for the Europe/Middle
East Core Hotels declined 4.0 percentage points from 38.3% to 34.3% in
the second quarter of 2003, as compared to the same period in 2002.
For the six months ended June 30, 2003, RevPAR
for the Europe/Middle East Core Hotels, on a US dollar basis, increased
1.9%, as compared to the same period in 2002. On a local currency basis,
RevPAR for Europe/Middle East Core Hotels decreased 12.9% during the first
half of 2003, as compared to the same period in 2002. The gross operating
margin for Europe/Middle East Core Hotels decreased from 35.5% in the second
quarter of 2002 to 29.6% in the second quarter of 2003.
For the second quarter of 2003, RevPAR for the
Asia/Pacific Core Hotels, on a US dollar basis, decreased 43.1%, as compared
to the second quarter of 2002. While the properties in Singapore
and Bali were the hardest hit by travel disruptions relating to SARS, all
of the hotels in the region were negatively affected. The Asia/Pacific
Core Hotels experienced a RevPAR decrease of 46.4%, on a local currency
basis, during the second quarter of 2003, as compared to the same period
in 2002. The gross operating margin declined 17.2 percentage points from
34.3% in the second quarter of 2002 to 17.1% in the second quarter of 2003.
RevPAR for the Asia/Pacific Core Hotels decreased
by 23.3%, on a US dollar basis, for the first six months of 2003, as compared
to the same period in 2002, and the gross operating margin declined 10.2
percentage points from 34.5% to 24.3%. On a local currency basis, RevPAR
for the Asia/Pacific Core Hotels decreased 27.7% in the first six months
of 2003, as compared to the same period in 2002.
The Company's worldwide resort portfolio included
in the Core Hotels (the "Core Resorts") experienced a US dollar RevPAR
decline of 4.2% in the second quarter of 2003, as compared to the same
period in 2002. For the six months ended June 30, 2003, the Core Resorts
experienced a US dollar RevPAR decline of 3.0%, as compared to the same
period in 2002. The decline in the second quarter and six months ended
June 30, 2003 was primarily a result of RevPAR declines in the Asian resorts
in Bali and Chiang Mai due to concerns about terrorism and SARS.
"Crisis environments can cause companies to scale
back. We have seen a number of our competitors do so in the area of service.
Four Seasons, however, has made a conscious decision that our service will
never falter," said Wolf Hengst, President Worldwide Hotel Operations.
"Our general managers and hotel employees continue to work hard to deliver
Four Seasons service and the Four Seasons experience in a cost effective
manner. With the average length of service of our general managers being
over sixteen years with Four Seasons, they have the demonstrated ability
to handle times of crisis in a way that we believe enhances our service
reputation while also maximizing the efficiency of the properties' longer-term
operating results."
MANAGEMENT OPERATIONS
Management fee revenues decreased 8.0% to $36.7
million for the quarter ended June 30, 2003, and decreased 3.9% to $73
million for the six months ended June 30, 2003, as compared to the same
periods in 2002. As discussed above, RevPAR declined on a worldwide basis,
which reduced profitability of the hotels under management and negatively
affected the Company's profit-based incentive fees during the second quarter
of 2003, as compared to the second quarter of 2002. Fees from the hotels
and resorts under management that were most affected by the disruption
in travel related to SARS declined $2.4 million during the second quarter
of 2003, as compared to the same period in 2002. Incentive fees declined
by 20.9% or $1.5 million during the quarter, as compared to the same period
in 2002.
Reduced incentive fees caused by lower profitability
of the hotels under management accounted for $2.5 million of the fee decline
during the first six months of 2003. The decline in incentive fees was
due most significantly to reduced fees from hotels in Asia, where business
was dramatically disrupted as a result of SARS, as well as from certain
hotels in Europe and the US. In addition, fees from the Company's residential
business declined $901,000 and $805,000, respectively, during the three
and six months ended June 30, 2003, as compared to the same periods in
2002, as a result of fewer residential units being sold.
General and administrative expenses increased
1.9% in the second quarter of 2003, and 6% in the first six months of 2003,
as compared to the same periods in 2002. Those increases in general and
administrative expenses included a cost of living payroll increase for
corporate employees, which was implemented during the first quarter of
2003. There was no cost of living payroll increase for corporate employees
in the first or second quarter of 2002.
Four Seasons' management earnings before other
operating items for the second quarter of 2003 decreased 14.6% to $20.5
million, as compared to $24 million for the same period in 2002. Management
earnings before other operating items for the six months ended June 30,
2003 were $40.1 million, a 10.8% decrease as compared to $44.9 million
for the same period in 2002.
The management operations profit margin(6) for
the quarter ended June 30, 2003 was 55.8%, as compared to 60.1% for the
same period in 2002, and was 54.9% for the six months ended June 30, 2003,
as compared to 59.2% for the same period in 2002.
OWNERSHIP OPERATIONS(7)
Ownership operations losses before other operating
items were $5.4 million in the second quarter of 2003, as compared to losses
of $249,000 in the second quarter of 2002. Ownership operations losses
before other operating items for the first six months of 2003 were $18.6
million, as compared to losses of $8.4 million for the comparable period
in 2002.
The Pierre's RevPAR declined 3.6% and 7.2% in
the second quarter and first six months of 2003, respectively, as compared
to the same periods in 2002. This decrease in RevPAR was a result of reductions
in occupancy and achieved room rates. The Pierre's achieved room rates
declined primarily due to the result of an increase in group business beyond
what has historically been the case and lower suite occupancy during the
quarter. Group business typically generates a lower room rate than other
types of business. In addition, banqueting business continued to be lower
than 2002, although banquet bookings for the last half of 2003 have improved
when compared to the level of banqueting business undertaken in the last
half of 2002. An improvement in travel demand in New York would be expected
to have a positive impact on the results of The Pierre.
Primarily as a result of travel disruption relating
to SARS, Four Seasons Hotel Vancouver also experienced weak operating conditions,
with RevPAR, on a local currency basis, declining 22.4% and 18.3% for the
second quarter and first six months of 2003, respectively, as compared
to the same periods in 2002. The operating loss at Four Seasons Hotel Vancouver
increased by $1.2 million and $1.9 million in the second quarter and first
six months of 2003, respectively, as compared to the same periods in 2002.
The operating loss at Four Seasons Hotel Berlin
increased by $1.2 million and $2.1 million in the second quarter and first
six months of 2003, respectively, as compared to the same periods in 2002,
as a result of increased lease costs at the property and lower operating
profits. The Company's obligation to fund any stipulated minimum lease
payments at Four Seasons Hotel Berlin is limited to a maximum of approximately
(euro) 11 million, of which the remaining balance is approximately (euro)
400,000 at June 30, 2003. The Company is not obligated to fund any further
stipulated minimum lease payments in excess of the (euro) 11 million. However,
the landlord may terminate the lease if the stipulated minimum lease payments
are not paid in full for a 12 consecutive month period or there is an aggregate
shortfall of six months of the stipulated minimum lease payments at any
time.
The Company is in discussions with the landlords
of The Pierre, Four Seasons Hotel Berlin and Four Seasons Hotel Vancouver
to determine what, if any, alternatives may be available to reduce Four
Seasons' financial exposure.
OTHER INCOME/EXPENSE
Other expense for the second quarter was $12.1
million, as compared to other income of $2.8 million for the same period
in 2002. The Company incurred a net foreign exchange accounting loss in
the second quarter of 2003 of $9.2 million, as compared to a net foreign
exchange accounting gain of $3.6 million in the second quarter of 2002.
The unrealized foreign exchange loss arose as
the result of the translation to Canadian dollars at the end of each month
at current exchange rates of the Company's non-Canadian dollar net monetary
assets. Net monetary assets are the sum of the Company's foreign currency
denominated assets and liabilities which consist primarily of cash and
cash equivalents, accounts receivable, long-term receivables and long-term
obligations, as determined under Canadian generally accepted accounting
principles (GAAP). This accounting determination indicates that the Company's
net US dollar monetary assets were approximately US$71 million as at June
30, 2003. The Canadian dollar strengthened by 7.8% (11.4 cents) during
the second quarter of 2003 and by 14.2% (22.4 cents) for the six months
ended June 30, 2003 against the US dollar causing the majority of the unrealized
foreign exchange loss for the second quarter of 2003 and a significant
portion of the unrealized foreign exchange loss for the first six months
of 2003.
From an economic perspective the Company looks
to offset its net monetary asset position of approximately US$71 million
against the full obligation of its convertible notes. Under Canadian GAAP
the convertible notes were allocated between long-term obligations and
shareholders' equity. The portion allocated to long-term obligations and
included in net monetary assets was US$46.7 million, and US$125.8 million
was allocated to shareholders' equity at the time of issuance. If the portion
of the convertible notes included in shareholders' equity was revalued
at the current exchange rates, which is not contemplated under Canadian
GAAP, the economic result of this revaluation would have been an unrealized
foreign exchange gain of $14.3 million in the second quarter of 2003 and
$28.2 million for the first six months of 2003, offsetting the net foreign
exchange accounting loss otherwise recorded. On this basis, the Company
believes it has an appropriate economic hedge of its net monetary assets
and liabilities. For a further discussion of the convertible notes see
"Liquidity and Capital Resources" below.
Also included in other expense during the second
quarter of 2003 are legal and other enforcement costs totaling $2.9 million,
in connection with the disputes with the owners of the Four Seasons hotels
in Caracas and Seattle, as compared to nil for the same period in 2002.
These disputes are described below under "Proceedings". The Company expects
to incur approximately an additional $1.6 million in legal and other fees
for the balance of 2003 in connection with these issues.
Other expense for the six months ended June 30,
2003 was $25 million, as compared to other income of $1.6 million for the
same period in 2002. The Company incurred a net foreign exchange accounting
loss in the first half of 2003 of $17.5 million and legal and other enforcement
costs of $7.5 million relating to the two disputes noted above, as compared
to a $2.4 million foreign exchange gain and no legal and other enforcement
costs during the same period in 2002.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense for the
second quarter of 2003 was $4.1 million and $7.8 million for the six months
ended June 30, 2003, as compared to $3.6 million and $7.1 million, respectively,
for the same periods in 2002. The increase in depreciation and amortization
is attributable to additional depreciation on fixed assets purchased over
the past twelve months and additional amortization on new management contracts.
NET INTEREST INCOME
Net interest income for the quarter ended June
30, 2003 was $667,000, as compared to net interest income of $956,000 for
the same period in 2002. For the six months ended June 30, 2003, net interest
income was $1.3 million, as compared to net interest income of $3 million
for the same period in 2002. The decline in net interest income is primarily
due to lower interest rates earned on short-term cash deposits.
INCOME TAX EXPENSE
A significant portion of the non-cash, unrealized
foreign exchange loss of $9.2 million in the second quarter of 2003 and
$17.5 million for the six months ended June 30, 2003 was not tax-effected
as it will not be realized for tax purposes. As a result, notwithstanding
the loss before income taxes in the second quarter of 2003 and for the
six months ended June 30, 2003, the Company incurred a tax expense of $875,000
and $599,000, respectively. The effective tax rate was 24% for both the
second quarter and six months ended June 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $152.9
million as at June 30, 2003, as compared to $165 million as at December
31, 2002. Approximately $20.9 million of this decrease in cash reserves
was due to an unrealized decline in value related to the translation of
foreign-denominated deposits into Canadian dollars, due to the appreciation
in the Canadian dollar relative to various foreign currencies since December
31, 2002.
Long-term obligations decreased from $129.1 million
as at December 31, 2002 to $119.5 million as at June 30, 2003. The Company's
debt position consists primarily of the portion of its zero coupon convertible
debt that is characterized as debt for accounting purposes. The zero coupon
convertible debt matures in 2029 and is redeemable by the Company at any
time after September 2004 (the terms and conditions of the convertible
notes are more fully described in the Company's 2002 Annual Report). The
decrease in long- term obligations was primarily due to the foreign currency
translation of the debt component of the convertible notes.
The Company is entitled to redeem the convertible
notes commencing in September of 2004 for cash equal to the issue price
plus accrued interest calculated at 4-1/2% per annum. If the current interest
rate and general business environment continues, it is possible that the
Company may redeem or the noteholders may put the notes to the Company
in September of 2004. If this were to occur, the Company would replace
the financing with a combination of debt and utilization of existing US
dollar cash reserves. Such a redemption in September of 2004 would require
a cash payment to the noteholders of approximately US$215.5 million. Noteholders
also have certain conversion rights and, under certain conditions, can
require the Company to repurchase the notes as more fully described in
the Company's 2002 Annual Report.
CASH FLOW AND CAPITAL EXPENDITURES
The Company generated $15.2 million of cash from
operations in the second quarter of 2003 and $37.0 million during the six
months ended June 30, 2003, as compared to $6.2 million and $13.9 million,
respectively, for the same periods in 2002. Cash from operations improved
quarter-over-quarter and year-over-year, primarily due to reductions in
working capital ($15.9 million in the second quarter and $33.6 million
for the six months) and a reduction in current income tax paid ($4.4 million
and $8.9 million, respectively). For the three and six months ended June
30, 2003, the increases in cash flow were partially offset by $8.8 million
and $15.2 million reductions, respectively, in cash provided by management
and ownership operations, $4.2 million and $5.8 million increases, respectively,
in legal and other enforcement costs paid in connection with the Company's
investments in the Four Seasons hotels in Caracas and Seattle and $1.2
million and $2.5 million decreases, respectively, in net interest received.
A part of the Company's business strategy is to
invest a portion of available cash to obtain new management agreements
or enhance existing management arrangements. These loans or investments
will only be made where the overall economic return to Four Seasons is
expected to justify the loan or investment. During the quarter and for
the six months ended June 30, 2003, the Company funded $20.1 million and
$33.7 million, respectively, in new management opportunities. Also during
the quarter, the owners of Four Seasons Hotel London and The Regent Bangkok
repaid $13.9 million on outstanding loans and investments. The Company
expects total capital spending and dividends in 2003 to be approximately
the same as in 2002 (approximately $70 million). During the remainder of
2003, the Company expects to make investments in a number of Four Seasons
projects, which may include Buenos Aires, Costa Rica, Damascus, Hampshire
and Whistler.
COMMITMENTS
As discussed in the Company's 2002 Annual Report,
the Company has certain pension, lease and other commitments. There has
been no material change to these commitments through the second quarter
of 2003, and the Company does not anticipate any material change in respect
of these commitments over the remainder of this fiscal year, other than
the elimination of the guarantee related to the stipulated minimum lease
payments for Four Seasons Hotel Berlin (see discussion under "Ownership
Operations").
The Company is continuing to apply its existing
accounting 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 Company recognizes
that the granting of options to employees represents
a cost, but believes that
it is prudent to wait for the anticipated releases
from the various accounting
bodies regarding the required accounting treatment
of stock based compensation
prior to changing its method of accounting. For
the quarter ended June 30,
2003, if the Company were to have adopted the
fair value based method, the
impact would have been an increased compensation
expense of $1.0 million (2002
- $215,000) and an increase in basic and diluted
loss per share of $0.03 (2002
- $0.01 and nil, respectively). For the six months
ended June 30, 2003, if the
Company were to have adopted the fair value based
method, the impact would have
been an increased compensation expense of $1.9
million (2002 - $222,000) and an increase in basic and diluted loss per
share of $0.06 (2002
- $0.01 and nil, respectively).
PROCEEDINGS
Four Seasons Olympic Hotel Seattle
During the quarter, the Company and the owner
of Four Seasons Olympic Hotel Seattle settled their disagreement, which
was subject to arbitration, concerning the management of the hotel. Under
the settlement, Four Seasons will conclude its management of Four Seasons
Olympic Hotel upon sale of the hotel, which is expected to occur today.
On closing of the sale of the hotel, the Company will receive an initial
payment, which includes its share of the sale proceeds as a result of its
minority ownership interest in the hotel. The Company will also receive
annual payments over the next several years which are not materially different
from the fees that the Company would have otherwise earned during this
period. The Company believes that a fair and equitable settlement has been
reached and that the payments under the settlement agreement will, in aggregate,
compensate it for the near-term value of its management contract as it
works to obtain a new management opportunity in Seattle.
Four Seasons Hotel Caracas
The Company is in dispute with, and has commenced
both legal and arbitration proceedings against, the owner of Four Seasons
Hotel Caracas regarding a variety of matters relating to the completion
and ongoing operation of the hotel, including the default of a US$5 million
loan owed to the Company. During the quarter, the Company received judgment
in the legal proceedings, which involved the protection of its proprietary
materials. The court found against the owner on all matters, including
illegal computer "hacking" and unlawful and unauthorized use of the Company's
proprietary information, and ordered that the owner pay to the Company
damages totaling US$4.9 million, plus the Company's legal costs and expenses
once determined by the Magistrate reporting to the court. The Company is
continuing to pursue the arbitration proceeding in respect of the other
contractual breaches of the management contract by the owner. The arbitration
hearing is now scheduled for the end of September. The Company is moving
to enforce the judgment from the legal proceeding against the owner and
to complete the arbitration.
FOUR SEASONS PROPERTIES - RECENT AND EXPECTED
OPENINGS
In the second quarter of 2003, the Company reopened
Four Seasons Hotel Prague, which was closed for repairs after sustaining
flood damage in August of 2002. The Regent Hotel Jakarta, which has also
been closed as a result of flood damage, is currently under repair and
is expected to reopen in August of this year. During the next 18 months,
the Company expects to open new hotels and resorts in Exuma, Budapest,
Hampshire, Jackson Hole, Miami, Nile Plaza (Cairo), Costa Rica, Damascus,
Doha, Langkawi (Malaysia), Provence at Terre Blanche and Whistler. Please
see the schedule attached listing the properties under construction or
in advanced stages of development and anticipated opening dates for these
properties.
"We look forward to the opening of many new Four
Seasons projects over the next 18 months. In addition to these and the
other projects under construction or in advanced stages of development,
we continue to have a very active pipeline of potential projects," commented
Kathleen Taylor, President Worldwide Business Operations. "Development
activity remains strong, as our capital partners continue to bring a variety
of exciting potential projects to Four Seasons. In the second quarter,
we added Baltimore, Bora Bora and Kuwait City to our list of projects under
construction or in advanced stages of discussion."
LOOKING AHEAD
Over the past 18 months, in one of the worst environments
for the hospitality industry in history, the Company has been successfully
opening new Four Seasons properties in carefully selected markets, maintaining
and enhancing market share, maintaining room rates and effectively controlling
costs in a manner that does not impact the guest experience. In addition,
management has focused on increasing the RevPAR and profitability of the
existing Four Seasons properties. The Company believes that these factors
provide the greatest potential contribution to long-term cash flow and
intends to continue to pursue this strategy, which it believes provides
the greatest potential contribution to long-term cash flow.
Four Seasons expects to open 12 new managed properties
over the course of the next 18 months. The average term of the management
contracts for these properties is almost 70 years and these properties
are expected to provide the Company with significant long-term fee income.
Total capital spending is expected to be approximately
US$45 million to US$55 million in 2003, including investments funded or
planned for Buenos Aires, Costa Rica, Damascus, Whistler, Hampshire and
Jackson Hole. When these investments are made in respect of Hampshire and
Whistler and the hotels are opened (which currently is scheduled for late-2003
and mid-2004, respectively), the Company would expect to have letters of
credit released totaling $20.2 million, that secure the commitment of the
Company to invest in these properties, as disclosed under "Other Commitments"
in the Company's 2002 Annual Report.
As a result of continuing global economic concerns
and uncertainty about future events, it is extremely difficult to forecast
with any accuracy occupancy levels for the balance of 2003. As such, the
Company is continuing to not give a specific forecast for earnings per
share for 2003 or any quarter thereof at this time. The Company expects
its full year achieved room rates to be at, or near, the record levels
set in 2000 and that were maintained in 2001 and 2002, and in general,
consistent with past experience, the Company expects its business model
to perform at or above industry levels.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
(In thousands of dollars
June 30,
June 30,
except per share amounts) 2003
2002 2003
2002
Consolidated
revenues
(note 4)
$ 69,823 $ 80,964 $ 130,837 $ 145,545
-------------------------------------------
-------------------------------------------
MANAGEMENT
OPERATIONS
Revenues
$ 36,732 $ 39,934 $ 72,962 $
75,926
General and administrative expenses
(16,220) (15,925) (32,875) (31,009)
20,512 24,009 40,087
44,917
OWNERSHIP
OPERATIONS
Revenues
34,415 42,214 60,193
71,804
Distributions from hotel investments
- 465
- 571
Expenses:
Cost of sales and expenses (38,468) (41,279)
(76,441) (77,974)
Fees to Management
Operations
(1,324) (1,649) (2,318)
(2,756)
(5,377) (249) (18,566)
(8,355)
Earnings
before other
operating items
15,135 23,760 21,521
36,562
Depreciation and amortization (4,064)
(3,639) (7,774) (7,144)
Other income (expense),
net (note 5)
(12,133) 2,765 (25,041)
1,624
Earnings
(loss)
from operations
(1,062) 22,886 (11,294)
31,042
Interest income, net
667 956
1,350 2,966
Earnings (loss) before
income taxes
(395) 23,842 (9,944)
34,008
Income
tax recovery (expense):
Current
(1,759) (3,007) 615
(4,387)
Future
884 (2,715) (1,214)
(3,775)
(875) (5,722) (599)
(8,162)
Net earnings (loss)
$ (1,270) $ 18,120 $ (10,543) $ 25,846
Basic
earnings (loss)
per share (note 3)
$ (0.04) $ 0.52 $ (0.30)
$ 0.74
Diluted
earnings (loss)
per share (note 3)
$ (0.04) $ 0.48 $ (0.30)
$ 0.70
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)
2003 2002
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$ 152,938 $ 165,036
Receivables
77,699 85,594
Inventory
2,618 2,609
Prepaid expenses
5,061 4,718
238,316 257,957
Long-term
receivables
199,382 207,106
Investments in hotel partnerships and
corporations
147,755 146,362
Fixed assets
70,102 74,593
Investment in management contracts
203,756 222,835
Investment in trademarks and trade names
6,041 6,329
Future income tax assets
16,570 17,460
Other assets
37,889 37,982
$ 919,811 $ 970,624
----------------------------
----------------------------
LIABILITIES
AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities
$ 50,016 $
40,362
Long-term obligations due within
one year
2,428 2,668
52,444 43,030
Long-term
obligations (note 2)
117,107 126,386
Shareholders' equity (note 3):
Capital stock
323,107 321,601
Convertible notes
178,543 178,543
Contributed surplus
4,636 4,636
Retained earnings
251,660 264,016
Equity adjustment from foreign
currency translation
(7,686) 32,412
750,260 801,208
$ 919,811 $ 970,624
----------------------------
----------------------------
See
accompanying notes to consolidated financial statements.
FOUR
SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH PROVIDED BY OPERATIONS
Three months ended Six months ended
(Unaudited)
June 30,
June 30,
(In thousands of dollars) 2003
2002 2003
2002
Cash
provided by (used in)
operations:
MANAGEMENT
OPERATIONS
Earnings before other
operating items
$ 20,512 $ 24,009 $ 40,087 $
44,917
Items not requiring an
outlay of funds
178 374
581 744
Working
capital provided by
Management Operations
20,690 24,383 40,668
45,661
OWNERSHIP
OPERATIONS
Loss before other operating
items
(5,377) (249) (18,566)
(8,355)
------------------------------------------
15,313 24,134 22,102
37,306
Interest
received, net
1,372 2,608
5,268 7,726
Current income tax paid
- (4,446)
- (8,892)
Change in non-cash working
capital
2,639 (13,258) 15,382
(18,251)
Other
(4,172) (2,847) (5,782)
(4,011)
------------------------------------------
Cash
provided by operations $ 15,152 $ 6,191
$ 36,970 $ 13,878
See
accompanying notes to consolidated financial statements.
FOUR
SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended Six months ended
(Unaudited)
June 30,
June 30,
(In thousands of dollars) 2003
2002 2003
2002
Cash
provided by (used in):
Operations:
$ 15,152 $ 6,191 $ 36,970 $
13,878
------------------------------------------
Financing:
Long-term obligations
including current portion (72)
(159) (30)
(799)
Issuance of shares
1,375 724
1,506 4,887
Dividends paid
- -
(1,809) (1,815)
Cash provided by (used in)
financing
1,303 565
(333) 2,273
Capital
investments:
Long-term receivables (6,245)
(7,543) (12,051) (8,151)
Hotel investments
1,959 (1,100) (6,409)
(1,682)
Disposal of hotel
investments
- 5,455
- 5,455
Purchase of fixed assets (1,395)
(2,740) (5,276) (5,730)
Investments in trademarks
and trade names and
management contracts
(440) (1,809) (656)
(2,199)
Other assets
(889) (2,407) (3,490)
(6,093)
Cash used in capital investments (7,010)
(10,144) (27,882) (18,400)
Increase (decrease) in cash
and cash equivalents 9,445 (3,388) 8,755
(2,249)
Decrease in cash due to
unrealized foreign exchange
loss
(10,707) (1,017) (20,853)
(851)
Cash and cash equivalents,
beginning of period
154,200 211,726 165,036
210,421
Cash and cash equivalents,
end of period
$ 152,938 $ 207,321 $ 152,938 $ 207,321
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)
2003 2002
Retained
earnings, beginning of period $
264,016 $ 259,253
Net earnings (loss)
(10,543) 25,846
Dividends declared
(1,813) (1,824)
Retained
earnings, end of period
$ 251,660 $ 283,275
See
accompanying notes to consolidated financial statements.
FOUR
SEASONS HOTELS INC.
NOTES
(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, 2002.
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, 2002.
2. Bank credit facilities:
In 2003, the Company
increased availability under its committed bank credit facilities by US$12,500,
and now has facilities of US$212,500, of which US$112,500 expires in April
2004 and US$100,000 expires in July 2004. No amounts have been borrowed
under these facilities to date; however, US$39,300 in letters of credit
were issued but undrawn as at June 30, 2003.
3. Shareholders' equity:
As at June 30, 2003,
the Company has outstanding Variable Multiple Voting Shares ("VMVS") and
Limited Voting Shares ("LVS") of 34,972,949 and outstanding stock options
of 6,072,700 (weighted average exercise price of $52.51).
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:
Three months ended
(Unaudited)
June 30,
(In thousands of dollars)
2003
2002
Net loss Shares Net earnings
Shares
Basic earnings (loss) per
share:
Net earnings (loss) $ (1,270)
34,913,942 $ 18,120 35,148,288 Effect of assumed dilutive
conversions:
Stock option plan
- -
- 1,795,869
Convertible notes
- -
1,256 3,463,155
Dilutive earnings (loss)
per share:
Net earnings (loss) and
assumed dilutive
conversions
$ (1,270) 34,913,942 $ 19,376 40,407,312
Six months ended
(Unaudited)
June 30,
(In thousands of dollars)
2003
2002
Net loss Shares Net earnings
Shares
Basic earnings (loss)
per share:
Net earnings (loss) $ (10,543) 34,898,392
$ 25,846 35,089,156
Effect of
assumed dilutive
conversions:
Stock option plan
- -
- 1,903,181
Convertible notes
- -
2,544 3,463,155
Dilutive
earnings (loss)
per share:
Net earnings (loss) and
assumed dilutive
conversions
$ (10,543) 34,898,392 $ 28,390 40,455,492
4.
Consolidated revenues:
Consolidated revenues
for Four Seasons Hotels Inc. comprise revenues from Management Operations,
revenues from Ownership Operations and distributions from hotel investments,
less fees from Ownership Operations to Management Operations.
5. Other income (expense):
Included in other
income (expense) for the three months and six months ended June 30, 2003
is a net foreign exchange loss of $9,235 and $17,502, respectively (2002
- net foreign exchange gain of $3,575 and $2,434, respectively) related
to the foreign currency translation gains and losses on unhedged net asset
and liability positions, primarily in US dollars, euros, pounds sterling
and Australian dollars, and foreign exchange gains and losses incurred
by the Company's foreign self-sustaining subsidiaries.
Also included in other
income (expense) for the three months and six months ended June 30, 2003
are legal and other enforcement costs of $2,889 and $7,500, respectively
(2002 - nil for both periods) in connection with the disputes with the
owners of Four Seasons hotels in Caracas and Seattle. These disputes are
described in detail in the Company's 2002 Annual Report.
6. Stock-based compensation
and other stock-based payments
For the three months
and six months ended June 30, 2003, had compensation expense for the Company's
stock-based compensation plan been determined based on the fair value at
the grant dates for stock options issued under the plan, pro forma net
loss would have been $2,347 and $12,505, respectively (2002 - pro forma
net earnings of $17,905 and $25,624, respectively), pro forma basic loss
per share would have been $0.07 and $0.36, respectively (2002 - pro forma
basic earnings per share of $0.51 and $0.73, respectively), and pro forma
diluted loss per share would have been $0.07 and $0.36, respectively (2002
- pro forma diluted earnings per share of $0.48 and $0.70, respectively).
In accordance with Canadian generally accepted accounting principles, in
calculating the pro forma disclosures, only stock options granted after
December 31, 2001 were included in the fair value-based accounting method.
The compensation element
of stock options issued by the Company during the first six months of 2003
and 2002, based on the fair value of the options on the date of grant,
has been estimated using a Black-Scholes option pricing model with the
following assumptions: risk-free interest rates in 2003 ranging from 4.44%
to 5.02% (2002 - 4.29% to 5.20%); semi-annual dividend per Limited Voting
Share of $0.055 for both periods; volatility factors of the expected market
price of the Company's Limited Voting Shares in 2003 ranging from 44.7%
to 47.3% (2002 - 47.4% to 49.8%); 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 during the six months
ended June 30, 2003 and 2002, the weighted average fair value of options
at the grant date was $27.09 and $36.16, respectively. For purposes of
pro forma disclosures, the estimated fair value of the options is amortized
to compensation expense over the option's vesting period, which ranges
from one to five years.
7. Guarantees and
Indemnifications:
In February 2003,
the Canadian Institute of Chartered Accountants issued Accounting Guideline
No. 14, "Disclosure of Guarantees" ("AcG-14"), that requires a company
to disclose certain "guarantees" as defined in AcG-14. Other than the commitments
and contingencies discussed in the Company's annual consolidated financial
statements for the year ended December 31, 2002 (please refer to note 14
thereof) and the indemnifications discussed below, the Company is not aware
of any other "guarantees" pursuant to which it may be required to pay any
material amounts, and accordingly no amounts have been recorded in the
consolidated financial statements in respect thereof. The Company's assessment
of its potential liability could change in the future as a result of currently
unforseen circumstances.
In the ordinary course
of their business, the Company and its subsidiaries enter into agreements.
Certain of these agreements may contain indemnification provisions pursuant
to which the parties agree to indemnify one another if certain events occur
(such as future claims for certain liabilities, including those related
to tax or environmental matters). The terms of these indemnification provisions
vary in their scope and duration. The nature of these indemnification provisions
precludes the Company from making a reasonable estimate of the maximum
potential liability of the Company and its subsidiaries because, among
other things, the amounts would be dependent on the outcome of future,
contingent events, the nature and likelihood of which cannot be determined
at this time. No amount has been recorded in the consolidated financial
statements with respect to these indemnification provisions.
8. 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. Typically, the fourth quarter is the
strongest quarter for the majority of the properties, although this was
not true in 2002 as a result of the difficult economic environment and
geopolitical instability.
The Company's ownership
operations are particularly affected by seasonal fluctuations, with lower
revenue, operating profit and 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 fee 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 the Company's resorts in
the period.
FOUR SEASONS
HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA - CORE HOTELS(1)
Three months ended
June 30,
(Unaudited)
2003 2002 Variance
Worldwide
No. of Properties
49 49
-
No. of Rooms
13,320 13,320 -
Occupancy(2)
59.2% 68.0% (8.8%)
ADR(3) - in US dollars
$310 $292 6.3%
- in equivalent Canadian dollars $433
$452 (4.3%)
RevPAR(4) - in US dollars
$184 $198 (7.4%)
- in equivalent Canadian dollars $256
$307 (16.6%)
Gross operating margin(5)
28.1% 33.3% (5.2%)
United States
No. of Properties
23 23
-
No. of Rooms
7,248 7,248 -
Occupancy(2)
69.9% 71.6% (1.7%)
ADR(3) - in US dollars
$323 $322 0.2%
- in equivalent Canadian dollars $451
$499 (9.7%)
RevPAR(4) - in US dollars
$226 $230 (2.0%)
- in equivalent Canadian dollars $315
$357 (11.8%)
Gross operating margin(5)
28.6% 32.5% (3.9%)
Other Americas/Caribbean
No. of Properties
7 7
-
No. of Rooms
1,550 1,550 -
Occupancy(2)
51.1% 62.8% (11.7%)
ADR(3) - in US dollars
$267 $249 7.1%
- in equivalent Canadian dollars $373
$386 (3.5%)
RevPAR(4) - in US dollars
$136 $156 (12.8%)
- in equivalent Canadian dollars $190
$243 (21.5%)
Gross operating margin(5)
24.9% 30.4% (5.5%)
Europe/Middle East
No. of Properties
9 9
-
No. of Rooms
1,807 1,807 -
Occupancy(2)
54.6% 63.6% (9.0%)
ADR(3) - in US dollars
$440 $382 15.2%
- in equivalent Canadian dollars $615
$593 3.7%
RevPAR(4) - in US dollars
$241 $243 (1.0%)
- in equivalent Canadian dollars $336
$377 (10.9%)
Gross operating margin(5)
34.3% 38.3% (4.0%)
Asia/Pacific
No. of Properties
10 10
-
No. of Rooms
2,715 2,715 -
Occupancy(2)
38.3% 64.2% (25.9%)
ADR(3) - in US dollars
$159 $166 (4.5%)
- in equivalent Canadian dollars $222
$258 (14.0%)
RevPAR(4) - in US dollars
$61 $107 (43.1%)
- in equivalent Canadian dollars $85
$166 (48.7%)
Gross operating margin(5)
17.1% 34.3% (17.2%)
1 The term "Core Hotels" means hotels and resorts under management
for
the full year of both 2003 and 2002. Changes from the 2002/2001 Core Hotels
are the additions of Four Seasons Hotel San Francisco, Four Seasons Hotel
Dublin, Four Seasons Hotel Buenos Aires and Four Seasons Resort Carmelo.
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.
The Company reports 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)
2003 2002 Variance
Worldwide
No. of Properties
49 49
-
No. of Rooms
13,320 13,320 -
Occupancy(2)
60.0% 65.3% (5.3%)
ADR(3) - in US dollars
$304 $292 4.1%
- in equivalent Canadian dollars $442
$458 (3.6%)
RevPAR(4) - in US dollars
$182 $191 (4.4%)
- in equivalent Canadian dollars $265
$299 (11.5%)
Gross operating margin(5)
26.3% 31.6% (5.3%)
United States
No. of Properties
23 23
-
No. of Rooms
7,248 7,248 -
Occupancy(2)
67.1% 68.2% (1.1%)
ADR(3) - in US dollars
$324 $325 (0.3%)
- in equivalent Canadian dollars $470
$510 (7.7%)
RevPAR(4) - in US dollars
$217 $222 (2.0%)
- in equivalent Canadian dollars $316
$348 (9.3%)
Gross operating margin(5)
25.7% 30.2% (4.5%)
Other Americas/Caribbean
No. of Properties
7 7
-
No. of Rooms
1,550 1,550 -
Occupancy(2)
52.4% 59.2% (6.8%)
ADR(3) - in US dollars
$293 $281 4.3%
- in equivalent Canadian dollars $425
$441 (3.5%)
RevPAR(4) - in US dollars
$154 $166 (7.5%)
- in equivalent Canadian dollars $223
$261 (14.5%)
Gross operating margin(5)
28.1% 32.1% (4.0%)
Europe/Middle East
No. of Properties
9 9
-
No. of Rooms
1,807 1,807 -
Occupancy(2)
52.4% 59.4% (7.0%)
ADR(3) - in US dollars
$417 $361 15.6%
- in equivalent Canadian dollars $606
$567 7.0%
RevPAR(4) - in US dollars
$219 $214 1.9%
- in equivalent Canadian dollars $318
$337 (5.7%)
Gross operating margin(5)
29.6% 35.5% (5.9%)
Asia/Pacific
No. of Properties
10 10
-
No. of Rooms
2,715 2,715 -
Occupancy(2)
50.4% 65.0% (14.6%)
ADR(3) - in US dollars
$162 $164 (1.1%)
- in equivalent Canadian dollars $236
$258 (8.5%)
RevPAR(4) - in US dollars
$82 $107 (23.3%)
- in equivalent Canadian dollars $119
$167 (29.0%)
Gross operating margin(5)
24.3% 34.5% (10.2%)
1 The term "Core Hotels" means hotels and resorts under management
for
the full year of both 2003 and 2002. Changes from the 2002/2001 Core Hotels
are the additions of Four Seasons Hotel San Francisco, Four Seasons Hotel
Dublin, Four Seasons Hotel Buenos Aires and Four Seasons Resort Carmelo.
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.
The Company reports 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)
2003 2002 Variance
Worldwide
No. of Properties
58 55
3
No. of Rooms
15,682 15,181 501
United
States
No. of Properties
23 23
-
No. of Rooms
7,248 7,248 -
Other
Americas/Caribbean
No. of Properties
8 8
-
No. of Rooms
1,762 1,762 -
Europe/Middle
East
No. of Properties
13 11
2
No. of Rooms
2,553 2,109 444
Asia/Pacific
No. of Properties
14 13
1
No. of Rooms
4,119 4,062 57
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) 2003
2002 2003
2002
Revenues
under
management(1)
$ 631,892 $ 752,481 $1,291,140 $1,438,419
1
Revenues under management consist of rooms, food and beverage,
telephone and other revenues of all the hotels and resorts which the Company
manages. Approximately 70% of the fee revenues earned by the Company 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 2003/2004 Openings
Four Seasons Hotel Gresham Palace Budapest, Hungary
179
Four Seasons Hotel Nile Plaza, Cairo, Egypt(x)
374
Four Seasons Resort Costa Rica, Costa Rica(x)
148
Four Seasons Hotel Damascus, Syria(x)
300
Four Seasons Hotel Doha, Qatar(x)
235
Four Seasons Resort Great Exuma at Emerald Bay,
The Bahamas(x)
219
Four Seasons Hotel Hampshire, England
135
Four Seasons Resort Jackson Hole, WY, USA(x)
124
Four Seasons Resort Langkawi, Malaysia
100
Four Seasons Hotel Miami, FL, USA(x)
221
Four Seasons Resort Provence at Terre Blanche, France
115
Four Seasons Resort Whistler, B.C., Canada
271
Beyond
2004
Four Seasons Hotel Alexandria, Egypt(x)
120
Four Seasons Hotel Baltimore, MD, USA(x)
200
Four Seasons Hotel Beirut, Lebanon
234
Four Seasons Resort Bora Bora, French Polynesia
100
Four Seasons Hotel Florence, Italy
118
Four Seasons Hotel Geneva, Switzerland
110
Four Seasons Hotel Hong Kong, Hong Kong(x)
390
Four Seasons Hotel Istanbul at the Bosphorus, Turkey
170
Four Seasons Hotel Kuwait City, Kuwait
300
Four Seasons Hotel Palo Alto, CA, USA
200
Four Seasons Resort Puerto Rico, Puerto Rico(x)
250
Four Seasons Residence Club Punta Mita, Mexico(x)
36
Four Seasons Private Residences Whistler, B.C., Canada(x)
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 the Company's Annual Report.
2 The Company has made investments in Orlando and Sedona at Seven
Canyons in Arizona. The financing for these projects has not yet been completed
and therefore scheduled opening dates cannot be established at this time.
1.
Adjusted net earnings is equal to net earnings (loss) plus
(i) foreign exchange loss, less (ii) foreign exchange gain, plus (iii)
legal and other enforcement costs relating to the disputes with the owners
of the hotels in Seattle and Caracas, each tax-effected as applicable.
A reconciliation of net earnings (loss) to adjusted net earnings is as
follows:
Three months ended Six months ended
(Unaudited)
June 30,
June 30,
(In thousands of dollars) 2003
2002 2003
2002
Net earnings (loss) $ (1,270)
$ 18,120 $(10,543) $ 25,846 Adjustments:
Foreign exchange loss
(gain)
9,235 (3,575) 17,502
(2,434)
Legal and other
enforcement costs
(Seattle and Caracas) 2,889
- 7,500
-
Tax effect of adjustments (1,908)
858 (3,015)
584
Adjusted net earnings $ 8,946
$ 15,403 $ 11,444 $ 23,996
Adjusted basic earnings
per share
$ 0.26 $ 0.44 $
0.33 $ 0.68
-------------------------------------------
-------------------------------------------
Adjusted diluted earnings
per share
$ 0.25 $ 0.41 $
0.32 $ 0.65
-------------------------------------------
-------------------------------------------
2.
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.
The Company reports RevPAR as it is the most commonly used measure in the
lodging industry to measure the period-over-period performance of comparable
properties.
3. The term "Core Hotels" means hotels and resorts under management
for
the full year of both 2003 and 2002. Changes from the 2002/2001 Core Hotels
are the additions of Four Seasons Hotel San Francisco, Four Seasons Hotel
Dublin, Four Seasons Hotel Buenos Aires and Four Seasons Resort Carmelo.
4. Core Hotel Operating Statistics are attached as schedules titled
"Summary of Hotel Operating Data - Core Hotels"
5. Gross operating margin represents gross operating profit as a
percent
of gross operating revenue.
6. The management operations profit margin represents management
operations earnings, before other operating items, as a percent of management
operations revenue.
7. Included in ownership operations are the consolidated revenues
and
expenses from the Company's 100% leasehold interests in The Pierre in New
York, Four Seasons Hotel Vancouver and Four Seasons Hotel Berlin, distributions
from other ownership interests in properties that Four Seasons manages
and corporate overhead expenses.
+ + +
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.
With a history spanning four decades and a portfolio
that extends across the globe, Four Seasons Hotels and Resorts is the world's
leading operator of luxury hotels, currently managing 58 properties in
27 countries.
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