Fairmont Hotels & Resorts Inc.
Consolidated Balance Sheets (Stated in millions of U.S.
dollars)
(Unaudited)
ASSETS
December 31 December 31
2003 2002
------------ ------------
Current assets
Cash and cash equivalents
$ 31.7 $
49.0
Accounts receivable
64.1
47.0
Inventory
14.2
12.5
Prepaid expenses and other
24.6
10.9
------------ ------------
134.6 119.4
Investments in partnerships and
corporations
53.1
68.9
Investment in Legacy Hotels
Real Estate
Investment Trust
105.9
96.4
Non-hotel real estate
95.1
88.8
Property and equipment
1,656.2 1,441.1
Goodwill
132.0 123.0
Intangible assets
216.7 201.7
Other assets and deferred charges
(note 4) 109.4
83.7
------------ ------------
$ 2,503.0 $ 2,223.0
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable
and accrued liabilities $ 121.3
$ 101.3
Taxes payable
2.7
5.3
Dividends payable
3.2
2.4
Current portion
of long-term debt (note 6) 117.8
72.3
------------ ------------
245.0 181.3
Long-term debt
539.8 463.2
Other liabilities
91.4
82.8
Future income taxes (note 7)
80.9
96.4
------------ ------------
957.1 823.7
------------ ------------
Shareholders' equity (note 8)
1,545.9 1,399.3
------------ ------------
$ 2,503.0 $ 2,223.0
------------ ------------
------------ ------------
Fairmont Hotels & Resorts Inc.
Consolidated Statements of Income (Stated in millions of U.S. dollars)
(Unaudited)
Three months ended Year ended
December 31 December
31
2003 2002 2003
2002
-------- -------- -------- --------
Revenues
Hotel ownership operations
$ 122.4 $ 109.1 $ 584.9 $ 516.6
Management operations
9.8 10.5 37.6
36.1
Real estate activities
4.9 6.0
36.3 37.9
-------- -------- -------- --------
Operating revenues
137.1 125.6 658.8
590.6
Other revenues from managed
and franchised properties
7.8 6.7
32.6 27.7
-------- -------- -------- --------
144.9 132.3 691.4
618.3
Expenses
Hotel ownership operations
107.2 92.3 460.9
367.9
Management operations
6.7 2.3
22.5 14.4
Real estate activities
7.1 0.2
23.6 26.4
-------- -------- -------- --------
Operating expenses
121.0 94.8 507.0
408.7
Other expenses from managed
and franchised properties
9.5 7.2
35.1 29.0
-------- -------- -------- --------
130.5 102.0 542.1
437.7
Income (loss) from equity
investments and other
(4.5) 2.5 (6.9)
17.7
-------- -------- -------- --------
Operating income before
undernoted items
9.9 32.8 142.4
198.3
Amortization
16.5 10.5 67.5
52.4
Other (income) expenses, net
2.1 0.8
2.1 (4.9)
Reorganization and
corporate expenses
- 0.9
- 2.2
Interest expense, net
10.5 5.6
33.6 19.1
-------- -------- -------- --------
Income (loss) before
income tax expense and
non-controlling interest
(19.2) 15.0 39.2
129.5
-------- -------- -------- --------
Income tax expense (recovery)
Current
3.8 3.0
12.8 12.0
Future (note 7)
(9.5) 1.1 (24.3)
23.8
-------- -------- -------- --------
(5.7) 4.1 (11.5)
35.8
-------- -------- -------- --------
Non-controlling interest
- (0.1)
- 1.2
-------- -------- -------- --------
Net income (loss)
$ (13.5) $ 11.0 $ 50.7 $
92.5
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of
common shares outstanding
(in millions) (note 8)
Basic
79.1 78.6 79.2
78.4
Diluted
79.1 79.6 80.0
79.7
Basic earnings (loss)
per common share
$ (0.17) $ 0.14 $ 0.64 $
1.18
Diluted earnings (loss)
per common share
$ (0.17) $ 0.14 $ 0.63 $
1.16
Fairmont Hotels & Resorts Inc.
Consolidated Statements of Cash Flows (Stated in millions of U.S. dollars)
(Unaudited)
Three months ended Year ended
December 31 December
31
2003 2002
2003 2002
--------- --------- --------- ---------
Cash provided by (used in)
Operating activities
Net income (loss)
$ (13.5) $ 11.0 $ 50.7 $
92.5
Items not affecting cash
Amortization of property
and
equipment
15.7 9.9
64.8 50.0
Amortization of intangible
assets 0.8 0.6
2.7 2.4
(Income) loss from equity
investments and
other
4.5 (2.5) 6.9
(17.7)
Future income taxes
(9.5) 1.1 (24.3)
23.8
Non-controlling interest
- (0.1)
- 1.2
Distributions from investments
2.3 7.2
6.7 15.1
Other
(2.6) (13.9) (11.6)
(22.3)
Change in non-hotel real estate
5.9 (0.2) 13.3
6.9
Changes in non-cash working capital
items (note 10)
19.2 20.5 (0.3)
(10.5)
--------- --------- --------- ---------
22.8 33.6 108.9
141.4
--------- --------- --------- ---------
Investing activities
Additions to property and
equipment
(31.7) (18.7) (87.2)
(84.3)
Acquisitions, net of cash
acquired (note 3)
- (136.0) 6.0
(136.0)
Issuance of notes receivable
(3.0) -
(31.3) -
Collection of notes receivable
7.2 -
7.2 -
Investments in Legacy Hotels Real
Estate Investment Trust
- (31.9)
- (37.8)
Investments in partnerships and
corporations
(0.9) -
(1.6) (8.9)
Other
- (1.0)
- (1.0)
--------- --------- --------- ---------
(28.4) (187.6) (106.9) (268.0)
--------- --------- --------- ---------
Financing activities
Issuance of long-term debt
1.2 141.4 162.7
238.4
Repayment of long-term debt
(272.7) (6.0) (423.9)
(43.9)
Net proceeds from issuance of
convertible notes
262.5 -
262.5 -
Issuance of common shares
0.4 4.2
1.0 4.7
Repurchase of common shares
- -
(16.8) (73.2)
Dividends paid
- -
(4.8) (3.2)
--------- --------- --------- ---------
(8.6) 139.6 (19.3)
122.8
--------- --------- --------- ---------
Effect of exchange rate changes
on cash
(3.5) (0.4)
- 0.1
--------- --------- --------- ---------
Decrease in cash
(17.7) (14.8) (17.3)
(3.7)
Cash - beginning of period
49.4 63.8 49.0
52.7
--------- --------- --------- ---------
Cash - end of period
$ 31.7 $ 49.0 $ 31.7
$ 49.0
--------- --------- --------- ---------
--------- --------- --------- ---------
Fairmont Hotels & Resorts Inc.
Consolidated Statements of Retained Earnings (Deficit)
(Stated in millions of U.S. dollars)
(Unaudited)
Three months ended Year ended
December 31 December
31
2003 2002
2003 2002
--------- --------- --------- ---------
Balance - Beginning of period
$ 94.8 $ 29.9 $ 38.5
$ (19.6)
Net income (loss)
(13.5) 11.0 50.7
92.5
--------- --------- --------- ---------
81.3 40.9 89.2
72.9
Repurchase of common shares
(note 8)
- -
(5.5) (30.4)
Dividends
(3.2) (2.4) (5.6)
(4.0)
--------- --------- --------- ---------
Balance - End of period
$ 78.1 $ 38.5 $ 78.1
$ 38.5
--------- --------- --------- ---------
--------- --------- --------- ---------
Fairmont Hotels & Resorts Inc.
Notes to Consolidated Financial Statements
(Stated in millions of U.S. dollars)
(Unaudited)
1. Fairmont Hotels & Resorts
Inc. ("FHR") has operated and owned hotels
and resorts
for 116 years and currently manages properties principally under the Fairmont
and Delta brands. At December 31, 2003, FHR managed or franchised 82 luxury
and first-class hotels. FHR owns 83.5% of Fairmont Hotels Inc. ("Fairmont"),
which at December 31, 2003, managed 43 luxury properties in major city
centers and key resort destinations throughout Canada, the United States,
Mexico, Bermuda, Barbados and the United Arab Emirates. Delta Hotels Limited
("Delta"), a wholly owned subsidiary of FHR, managed or franchised 39 Canadian
hotels and resorts at December 31, 2003.
As at December
31, 2003, FHR had hotel ownership interests ranging from approximately
20% to 100% in 23 properties, located in Canada, the United States, Mexico,
Bermuda and Barbados. FHR also has an approximate 35% equity interest in
Legacy Hotels Real Estate Investment Trust ("Legacy"), which owns 24 hotels
and resorts across Canada and the United States. FHR also owns real estate
properties that are suitable for either commercial or residential development,
as well as a vacation ownership product, which has commenced construction
at its first location in Acapulco, Mexico.
Results for
the three months ended December 31, 2003 are not necessarily indicative
of the results that may be expected for the full year due to seasonal and
short-term variations. Revenues are typically higher in the second and
third quarters versus the first and fourth quarters of the year in contrast
to fixed costs such as amortization and interest, which are not significantly
impacted by seasonal or short-term variations.
2. These interim consolidated
financial statements do not include all
disclosures
as required by Canadian generally accepted accounting principles for annual
consolidated financial statements and should be read in conjunction with
the audited consolidated financial statements for the year ended December
31, 2002 presented in the annual report. The accounting policies used in
the preparation of these interim consolidated financial statements are
consistent with the accounting policies used in the December 31, 2002 audited
consolidated financial statements, except as discussed below.
Long-lived
assets
Effective
January 1, 2003, FHR adopted the new recommendations of The Canadian Institute
of Chartered Accountants ("CICA") with respect to accounting for the impairment
of long-lived assets. This standard requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Long-lived
assets are grouped at the lowest level for which identifiable cash flows
are largely independent, when testing for and measuring impairment. Under
the new standard, a two-step process is used to assess the impairment of
long-lived assets held for use, with the first step determining when impairment
is recognized and the second step measuring the amount of the impairment.
Impairment losses are recognized when the carrying amount of long-lived
assets exceeds the sum of the undiscounted cash flows expected to result
from their use and eventual disposition and are measured as the amount
by which the long-lived asset's carrying amount exceeds its fair value.
Adoption of this new standard did not have an impact on FHR's financial
position, results of operations or cash flows.
Also effective
January 1, 2003, FHR adopted the new CICA recommendations relating to the
disposal of long-lived assets and discontinued operations. Subject to certain
criteria, long-lived assets and any associated assets or liabilities that
management expects to dispose of by sale are classified as held for sale.
The related results of operations from these assets classified as held
for sale are reported in discontinued operations if certain criteria are
met, with reclassification of prior years' related operating results. Assets
to be disposed of are reported at the lower of the carrying amount and
fair value less costs to sell. Adoption of this new standard did not have
an impact on FHR's financial position, results of operations or cash flows.
Asset Retirement
Obligations
Effective
January 1, 2003, FHR adopted the new recommendations of the CICA with respect
to accounting for asset retirement obligations. This standard requires
that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate
of fair value can be made. The associated asset retirement costs are capitalized
as part of the carrying amount of the long-lived asset and subsequently
amortized over the asset's useful life. Adoption of this new standard resulted
in an increase to property and equipment and other liabilities of $0.7.
Stock-based
Compensation
Effective
January 1, 2003, FHR prospectively adopted, the new recommendations of
the CICA with respect to accounting for stock-based compensation. This
standard requires that compensation expense be recognized in the consolidated
statements of income using the fair value based method for stock options
granted in 2003 onward. Adoption of this new standard resulted in
an increase to hotel ownership expenses in 2003 of $0.4 and contributed
surplus of $0.4. Proforma disclosures of net earnings and earnings
per share have been provided as if the fair value based accounting method
had been used to account for stock-based compensation for any options granted
after January 1, 2002 and but before January 1, 2003.
Vacation Ownership
Revenues related
to vacation ownership are recognized when a minimum of 10% of the purchase
price for the vacation ownership interest has been received in cash, the
period of cancellation with refund has expired, receivables are deemed
collectible, and certain minimum sales and construction levels have been
attained. Revenues related to projects still under construction are recognized
under the percentage-of-completion method. For sales that do not meet these
criteria, revenue is deferred.
3. Acquisition
In February
2003, FHR acquired the remaining 50% equity interest in The Fairmont Copley
Plaza Boston from entities controlled by Prince Alwaleed Bin Talal Bin
Abdulaziz Al Saud of Saudi Arabia. The total purchase price for 100% of
The Fairmont Copley Plaza Boston, including the 50% already owned, was
approximately $117.0 and was satisfied by the issuance of one million common
shares at a fair market value of $21.49 per share, the assumption of a
mortgage at $64.5 and cash paid of $30.7. FHR purchased the initial 50%
equity interest in the hotel in July 2001 for cash. The acquisition was
accounted for using the step purchase method, and 100% of the results of
the hotel have been included in the consolidated statements of income from
February 10, 2003. The mortgage, secured by substantially all assets and
an assignment of auxiliary rents of The Fairmont Copley Plaza Boston, is
due March 5, 2007 and bears interest at floating rates based on LIBOR plus
225 basis points. FHR has entered into an interest rate contract to cap
the LIBOR rate at 6.5%.
The total
cost of the hotel, including the 50% interest already owned, less cash
acquired of $14.8, has been allocated to the identifiable tangible assets
acquired and liabilities assumed on the basis of their respective estimated
fair values on the acquisition date, as follows:
Land
$ 25.1
Building
77.8
Furniture, fixtures and equipment
2.5
Long-term debt
(64.5)
Current assets
3.2
Current liabilities
(6.8)
$ 37.3
4. Other assets and deferred
charges at December 31, 2003, includes $2.4
in cash which
is held in reserve. This cash is to be used for certain capital expenditures.
5. On December 8, 2003, FHR issued
$270.0 of convertible senior notes
("Convertible
Notes"). The Convertible Notes mature on December 1, 2023 and bear interest
of 3.75% per annum. Interest is payable semiannually in arrears on June
1 and December 1 of each year. FHR may call the Convertible Notes in exchange
for cash any time after January 20, 2009 for a price equal to 100% of the
principal amount of Convertible Notes plus accrued and unpaid interest.
Holders may put the Convertible Notes to FHR in exchange for cash on January
20, 2009, December 1, 2013 and 2018 at a purchase price equal to 100% of
the principal amount of the Convertible Notes plus accrued and unpaid interest.
Upon occurrence of certain events, holders of the Convertible Notes will
have the right to convert them to common shares at an initial conversion
price of approximately $37.73 per common share. The Convertible Notes are
senior unsecured obligations and rank equally with all existing and future
unsecured and unsubordinated indebtedness.
The Convertible
Notes have been allocated between debt and equity elements classified separately
on the balance sheet. Upon issuance $19.2 was recorded as other equity
and $250.8 was recorded as long-term debt.
6. Borrowings under a bank credit
facility that expires on September 10,
2004 are classified
as current debt. FHR is currently negotiating a new bank facility.
7. A $24.4 recovery of future
income tax was recorded in June 2003 as a
result of
a favorable tax reassessment.
8. Shareholders' equity
December 31,
2003 2002
------------ ------------
Common shares
$ 1,202.2 $ 1,191.5
Other equity
(note 5)
19.2
-
Contributed
surplus
142.3 141.9
Foreign currency
translation adjustments
104.1 27.4
Retained earnings
78.1 38.5
------------ ------------
$ 1,545.9 $ 1,399.3
------------ ------------
The diluted
weighted-average number of common shares outstanding is calculated as follows:
Three months ended Year ended
December 31 December 31
2003 2002 2003 2002
-------- ------- ------- -------
(in millions) (in millions)
Weighted-average
number of common
shares
outstanding - basic
79.1 78.6 79.2 78.4
Stock options
(1)
0.8 1.0 0.8
1.3
-------- ------- ------- -------
Weighted-average
number of common
shares
outstanding - diluted
79.9 79.6 80.0 79.7
-------- ------- ------- -------
(1) The calculation
of diluted loss per common share for the three
months ended December 31, 2003 excludes stock options as the impact of
these exercises would be anti-dilutive.
Effective
October 8, 2003, FHR received regulatory approval for the repurchase for
cancellation of up to approximately 3.9 million or 5% of its outstanding
common shares. For the year ended December 31, 2003, FHR repurchased 747,100
shares (nil for the fourth quarter) for total consideration of $16.8 ($nil
for the fourth quarter), of which, $11.3 was charged to common shares and
$5.5 was charged to retained earnings. During the year ended December 31,
2003, FHR issued 73,755 shares (26,118 shares in the fourth quarter) pursuant
to the Key Employee Stock Option Plan. $1.0 ($0.4 for the fourth quarter)
was credited to common shares for proceeds from options exercised. At December
31, 2003, 79,106,277 common shares were outstanding (2002 - 78,779,622).
During the
year ended December 31, 2003, 107,000 (nil in the fourth quarter) stock
options were granted. Compensation expense for these options has been recognized
using the fair value based method.
Assuming FHR
elected to recognize the cost of its stock-based compensation based on
the estimated fair value of stock options granted after January 1, 2002
but before January 1, 2003, net income and basic and diluted earnings per
share would have been:
Three months ended Year ended
December 31, December 31,
2003 2002 2003 2002
-------- ------- ------- -------
Reported net
income (loss)
$ (13.5) $ 11.0 $ 50.7 $ 92.5
Net income
(loss) assuming
fair
value method used
$ (13.7) $ 11.0 $ 50.1 $ 92.1
Assuming fair
value method used
Basic earnings
(loss) per share $ (0.17) $ 0.14 $
0.64 $ 1.17
Diluted earnings
(loss) per share $ (0.17) $ 0.14 $ 0.63 $
1.16
The weighted-average
fair value of options granted during 2003 was Cdn$10.12 (2002 - Cdn$12.73)
per option.
9. In September 2003, FHR's two
owned properties in Bermuda suffered
extensive
damage from Hurricane Fabian. FHR has insurance coverage for both property
damage and business interruption, subject to deductible amounts and uninsured
costs. For the year ended December 31 2003, hotel ownership expenses include
a charge of $9.0 ($1.6 for the fourth quarter) related to FHR's insurance
deductible and uninsured costs.
10. Changes in non-cash working capital:
Three months ended Year ended
December 31 December 31
2003 2002 2003 2002
-------- ------- ------- -------
Decrease (increase)
in current assets
Accounts receivable
$ 3.4 $ 14.7 $ 4.3 $ 1.2
Inventory
(0.3) (0.9) -
(0.9)
Prepaid expenses
and other
4.8 8.6 3.9
(2.1)
Increase (decrease)
in
current
liabilities
Accounts payable
and
accrued
liabilities
8.4 (1.8) (8.9) (11.9)
Taxes payable
2.9 (0.1) 0.4
3.2
-------- ------- ------- -------
$ 19.2 $ 20.5 $ (0.3) $(10.5)
-------- ------- ------- -------
11. In February 2003, FHR completed
a $120.0 financing secured by
substantially
all assets and an assignment of auxiliary rents of The Fairmont Kea Lani
Maui. The mortgage is due March 1, 2006 and bears interest at the greater
of 4.25% and LIBOR plus 310 basis points. FHR has entered into an interest
rate contract to cap the LIBOR rate at 9.0%.
12. Guarantees
Significant
guarantees that have been provided to third parties include the following:
Debt guarantees
FHR has provided
guarantees totaling $12.0 related to debts incurred by certain hotels in
which FHR holds a minority equity interest. In the event that one of these
hotels fails to meet certain financial obligations, the lenders may draw
upon these guarantees. The term of these guarantees are equal to the terms
of the related debts, which are all due on demand. FHR has collateral security
on the underlying hotel assets if the guarantees are drawn upon. No amounts
have been recorded in the financial statements for amounts that may be
potentially owed under these guarantees.
Business dispositions
In the sale
of all or a part of a business, FHR may agree to indemnify against claims
related to the period the business was owned by FHR, in the areas of tax
and environmental matters. The terms of such indemnification agreements
are subject to certain actions that are under the control of the acquirer
and the amount of the indemnification is not limited. The nature of these
indemnification agreements prevents FHR from estimating the maximum potential
liability that it could be required to pay to counter parties. FHR has
accruals in its financial statements of approximately $9 related to potential
claims under the indemnifications made to date.
Director and
officer indemnification agreements
FHR has entered
into indemnification agreements with its current and former directors and
officers to indemnify them, to the extent permitted by law, against any
and all charges, costs, expenses, amounts paid in settlement and damages
incurred by the directors and officers as a result of any lawsuit or any
other judicial, administrative or investigative proceeding in which the
directors and officers are sued as a result of their service. These indemnification
claims will be subject to any statutory or other legal limitation period.
The nature of the indemnification agreements prevents FHR from making a
reasonable estimate of the maximum potential amount it could be required
to pay to counter parties. FHR has purchased directors' and officers' liability
insurance. No amount has been recorded in the financial statements with
respect to these indemnification agreements as no claims are outstanding
at this date.
Other indemnification
agreements
In the normal
course of operations, FHR may provide indemnification agreements, other
than those listed above, to counterparties that would require FHR to compensate
them for costs incurred as a result of changes in laws and regulations
or as a result of litigation claims or statutory sanctions that may be
suffered by the counter party as a consequence of the transaction. The
terms of these indemnification agreements will vary based upon the contract.
The nature of the indemnification agreements prevents FHR from making a
reasonable estimate of the maximum potential amount it could be required
to pay to counter parties. No amount has been recorded in the financial
statements with respect to these indemnification agreements.
13. Derivative financial instruments
such as swaps, options and forward
contracts
are used by FHR in the management of its foreign currency and interest
rate exposures. FHR's policy is to not use derivative financial instruments
for trading or speculative purposes.
At the inception
of a hedge, FHR documents the relationship between the hedging instruments
and the hedged items. This process includes linking the derivatives to
specific assets and liabilities on the balance sheet or to specific firm
commitments or forecasted transactions. FHR assesses the effectiveness
of the hedge at the inception and throughout the contract period by considering
factors such as the term of the instrument, the notional settlement amount
of the derivative as compared to the dollar amount of the item being hedged
and any other applicable factors. At the end of each period, FHR records
any changes in fair value related to the portion of the derivative instruments
that is no longer deemed to be effective or does not meet the criteria
of a hedge in the consolidated statement of income.
FHR designates
its interest rate instruments as hedges of the interest expense on the
underlying debt. Interest expense on the underlying debt is adjusted to
include the payments made or received under the interest rate instruments.
Foreign exchange translation gains or losses on foreign currency denominated
derivative financial instruments used to hedge anticipated foreign currency
cash flows are recognized as adjustments to revenues or expenses, as applicable,
when the cash flows are recorded.
At December
31, 2003, FHR had outstanding, two interest rate hedges to cap LIBOR at
6.5% on the mortgage secured by The Fairmont Copley Plaza Boston and to
cap LIBOR at 9.0% on the mortgage secured by The Fairmont Kea Lani Maui.
At December 31, 2003, the fair market value of the interest rate hedge
agreements approximates their carrying value.
At December
31, 2003, FHR had outstanding, several forward foreign currency contracts.
The aggregate fair value of these contracts outstanding at December 31,
2003 was a liability of $7.6, which was expensed in 2003. These contracts
mature in the first quarter of 2004.
14. Certain of the prior period figures
have been reclassified to conform
with the presentation
adopted for 2003.
15. Segmented Information
FHR has five
reportable operating segments in two core business activities, ownership
and management operations. The segments are hotel ownership, investment
in Legacy, real estate activities, Fairmont and Delta. Hotel ownership
consists of real estate interests ranging from approximately 20% to 100%
in 23 properties. The investment in Legacy consists of an approximate 35%
equity interest in Legacy, which owns 24 hotels and resorts across Canada
and the United States. Real estate activities consists primarily of two
large undeveloped land blocks in Toronto and Vancouver. Fairmont is a North
American luxury hotel and resort management company and Delta is a Canadian
first-class hotel and resort management company.
The performance
of all segments is evaluated primarily on earnings before interest, taxes
and amortization ("EBITDA"), which is defined as income before interest,
taxes, amortization, other income and expenses and reorganization and corporate
expenses. EBITDA includes income from investments and other. Amortization,
other income and expenses, reorganization and corporate expenses, interest
and income taxes are not allocated to the individual segments. All transactions
among operating segments are conducted at fair market value.
The following
tables present revenues, EBITDA, total assets and capital expenditures
for FHR's reportable segments:
Three months ended December 31, 2003
Ownership
Management
--------------------------- ---------------
Real
Inter-
estate
segment
Hotel
acti-
elimi-
Ownership Legacy vities Fairmont Delta nation (a) Total
---------- ------- -------- ------- ------ --------- -----
Operating
revenues
$ 122.4 $ - $ 4.9 $ 10.9
$ 2.9 $ (4.0) $ 137.1
Other
revenues
from
managed
and
franchised
properties
- -
- 5.8 2.0
- 7.8
------
144.9
Income (loss)
from
equity
investments
and
other (0.1) (4.4)
- - -
- (4.5)
EBITDA
11.1 (4.4) (2.2) 5.0
2.1 (1.7) 9.9
Total
assets
(b) 1,916.5 105.9 101.8 350.8
75.8 (47.8) 2,503.0
Capital
expenditures
29.9 -
- 1.8 -
- 31.7
Three months ended December 31, 2002
Ownership
Management
--------------------------- ---------------
Real
Inter-
estate
segment
Hotel
acti-
elimi-
Ownership Legacy vities Fairmont Delta nation (a) Total
---------- ------- -------- ------- ------ --------- -----
Operating
revenues
$ 109.1 $ - $ 6.0
11.0 2.8 $ (3.3) $ 125.6
Other
revenues
from
managed
and
franchised
properties
- -
- 4.9 1.8
- 6.7
--------
132.3
Income (loss)
from
equity
investments
and
other 3.0 (0.5)
- - -
- 2.5
EBITDA
16.5 (0.5) 5.8
9.6 1.9 (0.5) 32.8
Total
assets
(b) 1,879.9 96.4 95.0
285.8 66.0 (200.1) 2,223.0
Capital
expenditures
18.1 -
- 0.6 -
- 18.7
Year ended December 31, 2003
Ownership
Management
--------------------------- ---------------
Real
Inter-
estate
segment
Hotel
acti-
elimi-
Ownership Legacy vities Fairmont Delta nation (a) Total
---------- ------- -------- ------- ------ --------- -----
Operating
revenues
$ 584.9 $ - $ 36.3 $ 44.2 $11.7
$(18.3) $ 658.8
Other
revenues
from
managed
and
franchised
properties
- -
- 24.4 8.2
- 32.6
--------
691.4
Income (loss)
from
equity
investments
and
other 1.7 (8.6)
- - -
- (6.9)
EBITDA
107.4 (8.6) 12.7 24.8
8.7 (2.6) 142.4
Total
assets
(b) 1,916.5 105.9 101.8 350.8
75.8 (47.8) 2,503.0
Capital
expenditures
84.2 -
- 3.0 -
- 87.2
Year ended December 31, 2002
Ownership
Management
--------------------------- ---------------
Real
Inter-
estate
segment
Hotel
acti-
elimi-
Ownership Legacy vities Fairmont Delta nation (a) Total
---------- ------- -------- ------- ------ --------- -----
Operating
revenues
$ 516.6 $ - $ 37.9 $ 41.3 $11.4
$(16.6) $ 590.6
Other
revenues
from
managed
and
franchised
properties
- -
- 19.8 7.9
- 27.7
--------
618.3
Income from
equity
investments
and
other 11.3 6.4
- - -
- 17.7
EBITDA
143.4 6.4 11.5
30.2 8.1 (1.3) 198.3
Total
assets
(b) 1,879.9 96.4 95.0
285.8 66.0 (200.1) 2,223.0
Capital
expenditures
80.1 -
- 4.2 -
- 84.3
(a) Revenues
represent management fees that are charged by Fairmont of $3.9 (2002 -
$3.2) and $18.0 (2002 - $16.3) for the three months and year ended December
31, 2003 respectively, and Delta of $0.1 (2002 - $0.1) and $0.3 (2002 -
$0.3) for the three months and year ended December 31, 2003 respectively,
to the hotel ownership operations, which are eliminated on consolidation.
EBITDA represents expenses not reimbursed relating to marketing and reservation
services performed by FHR under the terms of its hotel management and franchise
agreements. Total assets represent the elimination of inter-segment loans
net of corporate assets.
(b) Hotel
ownership assets include $48.5 (2002 - $64.7) of investments accounted
for using the equity method.
16. Related Party Transactions
In August
2003, FHR entered into a long-term, incentive-based management contract
with Legacy for The Fairmont Olympic Hotel, Seattle. This transaction was
recorded at the exchange value, which is the amount established and agreed
to by the related parties. In connection with FHR securing the management
contract on this property and another under a similar arrangement, FHR
has agreed to pay Legacy an aggregate amount of $18.0 over a three-year
period. These amounts have been accounted for as intangible assets and
are amortized over the life of the management contracts. The amortization
expense is being applied to reduce revenues from management operations.
The current portion of the liability has been recorded in accounts payable
and accrued liabilities, while the long-term portion has been recorded
as other liabilities. At December 31, 2003, FHR has a liability due to
Legacy of $11.0 in connection with various management contracts with Legacy.
In connection
with Legacy's acquisition of The Fairmont Olympic Hotel, Seattle, FHR entered
into a reciprocal loan agreement with Legacy for $19.0. The loan matures
October 2013 and bears interest at normal commercial rates payable quarterly
in arrears. In the event that either FHR or Legacy does not make its required
interest or principal payments, the other party is not required to make
its payment either. If such payment has already been made, it must be returned.
The loans meet all the requirements for the right of setoff and are presented
on a net basis in the financial statements. FHR also has a 25% participation
amounting to $10.9 in the first mortgage on The Fairmont Olympic Hotel,
Seattle. This loan is due July 2006 and bears interest at the same rate
as the lender. This loan is classified in other assets and deferred charges.
In addition, at December 31, 2003, FHR has a receivable from Legacy of
$8.7, which has been classified as a loan receivable and is included in
prepaid expenses and other. This loan matures on July 31, 2004 and bears
interest at the bankers' acceptance rate plus 2.75%.
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