Three months ended
March 31, 2004
2004 2003
Variance
OWNED HOTELS
Worldwide
RevPAR
$139.34 $123.39
12.9%
ADR
215.21 203.03
6.0%
Occupancy
64.7% 60.8% 3.9 points
Canada
RevPAR
$93.86 $86.27
8.8%
ADR
154.37 141.25
9.3%
Occupancy
60.8% 61.1% (0.3 points)
U.S. and International
RevPAR
$181.01 $157.35
15.0%
ADR
264.80 260.10
1.8%
Occupancy
68.4% 60.5% 7.9 points
FAIRMONT MANAGED
HOTELS
Worldwide
RevPAR
$106.93 $95.17
12.4%
ADR
174.79 166.26
5.1%
Occupancy
61.2% 57.2% 4.0 points
Canada
RevPAR
$75.18 $66.42
13.2%
ADR
130.30 119.37
9.2%
Occupancy
57.7% 55.6% 2.1 points
U.S. and International
RevPAR
$138.49 $123.71
11.9%
ADR
214.26 210.29
1.9%
Occupancy
64.6% 58.8% 5.8 points
DELTA MANAGED HOTELS
Canada
RevPAR
$53.37 $46.87
13.9%
ADR
92.29 82.99
11.2%
Occupancy
57.8% 56.5% 1.3 points
Comparable hotels and resorts are considered
to be properties that were fully open under FHR management for at least
the entire current and prior period. Comparable hotels and resorts statistics
exclude properties under major renovation that would have a significant
adverse effect on the properties' primary operations. The following properties
were excluded:
Owned:
The Fairmont Southampton; The Fairmont Copley Plaza
Boston
Fairmont Managed: The Fairmont
Southampton; The Fairmont Olympic Hotel,
Seattle; The Fairmont Turnberry Isle Resort & Club,
Miami
Delta Managed:
None
FHR's 2003 quarterly operating statistics
for its 2004 comparable hotel portfolios are available on the Company's
website (http://www.fairmont.com/investor).
1. EBITDA is defined as earnings
before interest, taxes and amortization. Income from investments and other
is included in EBITDA. Management considers EBITDA to be a meaningful indicator
of hotel operations and uses it as the primary measurement of operating
segment profit and loss. However, it is not a defined measure of operating
performance under Canadian generally accepted accounting principles ("Canadian
GAAP"). It is likely that FHR's calculation of EBITDA is different than
the calculations used by other entities. EBITDA is represented on
the consolidated statements of income as "operating income before undernoted
items".
Reconciliation of EBITDA to net income
(loss):
Three months ended
March 31
In millions of dollars
2004 2003
EBITDA
$ 34.1 $ 42.2 Deduct:
Amortization
19.5 16.3
Interest expense, net
10.0 5.9
Income tax expense
5.2 7.5
Net income (loss)
$ (0.6) $ 12.5
2. Operating revenues excludes
other revenues from managed and franchised properties (consists of direct
and indirect costs relating primarily to marketing and reservation services
that are reimbursed by hotel owners on a cost recovery basis). Management
considers that the exclusion of such revenues provides a meaningful measure
of operating performance, however, it is not a defined measure of operating
performance under Canadian GAAP. It is likely that FHR's calculation of
operating revenues is different than the calculation used by other entities.
Fairmont Hotels & Resorts Inc.
Consolidated Balance Sheets (Stated in millions of U.S. dollars)
(Unaudited)
ASSETS
March 31 December 31
2004
2003
------------ -------------
Current assets
Cash and cash equivalents
$ 69.2 $
31.7
Accounts receivable
62.7
64.1
Inventory
14.6
14.2
Prepaid expenses and other
14.8
24.6
------------ ------------
161.3 134.6
Investments in partnerships and corporations
51.6
53.1
Investment in Legacy Hotels Real Estate
Investment Trust
98.4 105.9
Non-hotel real estate
94.6
95.1
Property and equipment
1,653.3 1,656.2
Goodwill
131.6 132.0
Intangible assets
216.7 216.7
Other assets and deferred charges
115.4 109.4
------------ ------------
$ 2,522.9 $ 2,503.0
------------ ------------
------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 131.9
$ 124.0
Dividends payable
-
3.2
Current portion of long-term
debt
77.5 117.8
------------ ------------
209.4 245.0
Long-term debt (note 3)
596.8 539.8
Other liabilities
91.2
91.4
Future income taxes
83.4
80.9
------------ ------------
980.8 957.1
------------ ------------
Shareholders' Equity (note 4)
1,542.1 1,545.9
------------ ------------
$ 2,522.9 $ 2,503.0
------------ ------------
------------ ------------
Fairmont Hotels & Resorts Inc.
Consolidated Statements of Income
(Stated in millions of U.S. dollars,
except per share amounts)
(Unaudited)
Three months ended March 31
2004
2003
------------ -------------
Revenues
Hotel ownership operations
$ 155.4 $
140.4
Management operations
9.5
8.6
Real estate activities
3.3 18.9
------------ -------------
Operating revenues
168.2 167.9
Other revenues from managed
and
franchised properties
8.9
7.0
------------ -------------
177.1 174.9
Expenses
Hotel ownership operations
116.7 105.5
Management operations
6.6
4.0
Real estate activities
2.9
9.6
------------ -------------
Operating expenses
126.2 119.1
Other expenses from managed
and
franchised properties
9.1
6.9
------------ -------------
135.3 126.0
Loss from equity investments and other
(7.7) (6.7)
------------- -------------
Operating income before undernoted
items
34.1
42.2
Amortization
19.5
16.3
Interest expense, net
10.0
5.9
------------ -------------
Income before income tax expense
4.6 20.0
------------ -------------
Income tax expense
Current
2.9
5.3
Future
2.3
2.2
------------ -------------
5.2
7.5
------------ -------------
Net income (loss)
$ (0.6) $
12.5
------------ -------------
Weighted average number of common shares
outstanding (in millions) (note
4)
Basic
79.1
79.3
Diluted
79.1
80.0
Basic earnings (loss) per common
share $ (0.01)
$ 0.16
Diluted earnings (loss) per common
share $ (0.01)
$ 0.16
Fairmont Hotels & Resorts Inc.
Consolidated Statements of Cash Flows (Stated in millions of U.S. dollars)
(Unaudited)
Three months ended March 31
2004
2003
------------ ------------
Cash provided by (used in)
Operating activities
Net Income (loss)
$ (0.6) $
12.5
Items not affecting cash
Amortization of property
and equipment
18.8
15.6
Amortization of intangible
assets
0.7
0.7
Loss from equity investments
and other
7.7
6.7
Future income taxes
2.3
2.2
Other
2.5
2.7
Changes in non-hotel real estate
(0.2)
7.4
Changes in non-cash working capital
items
(note 5)
9.0 (11.7)
------------ ------------
40.2
36.1
------------ ------------
Investing activities
Additions to property and equipment
(19.8) (15.8)
Acquisitions, net of cash acquired
-
6.0
Investments in partnerships and corporations
- (0.1)
Collection of loans receivable
8.8
-
Issuance of loans receivable
(5.0)
-
------------ ------------
(16.0) (9.9)
------------- ------------
Financing activities
Issuance of long-term debt
79.9 123.5
Repayment of long-term debt
(63.6) (142.5)
Issuance of common shares
0.3
-
Repurchase of common shares
- (5.0)
Dividends paid
(3.2) (2.4)
------------ ------------
13.4 (26.4)
------------ ------------
Effect of exchange rate changes on
cash
(0.1)
1.5
------------ ------------
Increase in cash
37.5
1.3
Cash and cash equivalents
- beginning of period
31.7
49.0
------------ ------------
Cash and cash equivalents - end of
period $ 69.2
$ 50.3
------------ ------------
------------ ------------
Fairmont Hotels & Resorts Inc.
Consolidated Statements of Retained Earnings
(Stated in millions of U.S. dollars)
(Unaudited)
Three months ended March 31
2004
2003
------------ ------------
Balance - Beginning of period
$ 78.1 $
38.5
Net income (loss)
(0.6) 12.5
------------ ------------
77.5
51.0
Repurchase of common shares
- (1.2)
------------ ------------
Balance - End of period
$ 77.5 $
49.8
------------ ------------
------------ ------------
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 over 116 years and currently manages properties principally under the
Fairmont and Delta brands. At March 31, 2004, FHR managed or franchised
83 luxury and first-class hotels. FHR owns 83.5% of Fairmont Hotels Inc.
("Fairmont"), which at March 31, 2004, managed 44 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 March 31, 2004.
In addition
to hotel and resort management, as at March 31, 2004, 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, and has developed a vacation
ownership product.
Results for
the three months ended March 31, 2004 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. The income
tax rate is also higher in the first quarter as hotels in non-taxable jurisdictions
typically generate losses and equity investments usually produce non-taxable
losses.
2. These interim consolidated
financial statements do not include all
disclosures
as required by Canadian generally accepted accounting principles ("GAAP")
for annual consolidated financial statements and should be read in conjunction
with the audited consolidated financial statements for the year ended December
31, 2003 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, 2003 audited
consolidated financial statements, except as discussed below.
Hedging Relationships
Effective
January 1, 2004, FHR implemented new guidance on accounting for hedging
relationships. The new guidelines specify the circumstances in which hedge
accounting is appropriate, including the identification, documentation,
designation and effectiveness of hedges and also the discontinuance of
hedge accounting. The adoption of this accounting guidance did not have
a material impact on operations or financial statement presentation.
Generally
Accepted Accounting Principles and General Standards of Financial Statement
Presentation The Canadian Institute of Chartered Accountants has issued
new accounting standards surrounding GAAP and financial statement presentation.
These standards lay out a framework for the application of GAAP and the
fair presentation of financial standards in accordance with GAAP and are
effective for years beginning January 1, 2004. No changes to financial
statement presentation were required as FHR was already in full compliance
with these new standards.
3. In March 2004, FHR entered
into a new $400 unsecured credit facility
due March
2007. The interest rate is floating and is calculated based on the borrowers
choice of prime rate, bankers acceptance or LIBOR plus a spread.
4. Shareholders' equity
March 31, December 31,
2004
2003
------------ ------------
Common shares
$ 1,202.5 $ 1,202.2
Other equity
19.2
19.2
Contributed
surplus
142.3 142.3
Foreign currency
translation adjustments 100.6
104.1
Retained earnings
77.5
78.1
------------ ------------
$ 1,542.1 $ 1,545.9
------------ ------------
The diluted
weighted-average number of common shares outstanding is calculated as follows:
Three months ended March 31
2004
2003
------------ ------------
(in millions)
Weighted-average
number of common
shares
outstanding - basic
79.1
79.3
Stock options(1)
0.8
0.7
------------ ------------
Weighted-average
number of common
shares
outstanding - diluted
79.9
80.0
------------ ------------
(1) The calculation
of diluted loss per common share for the three months ended March 31, 2004
excludes stock options as the impact of these exercises would be anti-dilutive.
Under a normal
course issuer bid, FHR may repurchase for cancellation up to approximately
3.9 million, or approximately 5% of its outstanding common shares. During
the three months ended March 31, 2004, FHR did not repurchase any shares.
During the three months ended March 31, 2004, FHR issued 17,190 shares
pursuant to the Key Employee Stock Option Plan. $0.3 was credited to common
shares for proceeds from options exercised. At March 31, 2004, 79,123,467
common shares were outstanding (2003 - 79,532,172).
During the
three months ended March 31, 2004, 10,000 stock options were granted. 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
March 31
2004
2003
------------ ------------
Reported net
income (loss)
$ (0.6) $
12.5
Net income
(loss) assuming fair value
method
used
(0.7) 12.3
Basic earnings
(loss) per share
(0.01) 0.16
Diluted earnings
(loss) per share
(0.01) 0.15
5. Changes in non-cash working
capital:
Three months ended
March 31
2004
2003
------------ ------------
Decrease (increase)
in current assets
Accounts receivable
$ 0.7 $
(9.7)
Inventory
(0.4) (0.8)
Prepaid expenses
and other
1.0 (0.9)
Increase (decrease)
in current
liabilities
Accounts payable
and accrued liabilities
7.7 (0.3)
------------ ------------
$ 9.0 $
(11.7)
------------ ------------
6. 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 and a vacation ownership
product. 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,
income taxes and amortization. EBITDA includes income from investments
and other. Amortization, 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 March 31, 2004
Ownership Management
--------------------------- -------------
Inter-
Real
segment
Hotel
estate Fair-
elimina-
Ownership Legacy activities mont Delta tion (a)
Total
--------- ------- --------- ------ ------- ------- ---------
Operating
revenues
$ 155.4 $ - $ 3.3 $ 12.5
$ 2.5 $ (5.5) $ 168.2
Other
revenues
from
managed
and
franchised
properties
- -
- 6.5 2.4
- 8.9
--------
177.1
Loss from
equity
investments
and
other (0.4) (7.3)
- - -
- (7.7)
EBITDA(b)
32.8 (7.3) 0.4
6.9 1.5 (0.2)
34.1
Total
assets(c)
1,904.9 98.4 102.2 360.1
75.1 (17.8) 2,522.9
Capital
expenditures
19.6 -
- 0.2 -
- 19.8
Three months ended March 31, 2003
Ownership Management
--------------------------- -------------
Inter-
Real
segment
Hotel
estate Fair-
elimina-
Ownership Legacy activities mont Delta tion (a)
Total
--------- ------- --------- ------ ------- ------- ---------
Operating
revenues
$ 140.4 $ - $ 18.9 $ 10.4
$ 3.1 $ (4.9) $ 167.9
Other
revenues
from
managed
and
franchised
properties
- -
- 4.8 2.2
- 7.0
--------
174.9
Loss from
equity
investments
and
other (0.4) (6.3)
- - -
- (6.7)
EBITDA(b)
29.6 (6.3) 9.3
7.0 2.5 0.1
42.2
Total
assets(c)
1,983.5 97.8 89.8
328.6 69.5 (206.2) 2,363.0
Capital
expenditures
15.6 -
- 0.2 -
- 15.8
(a) Revenues
represent management fees that are charged by Fairmont of $5.4 (2003 -
$4.8) for the three months ended March 31, 2004 and Delta of $0.1 (2003
- $0.1) for the three months ended March 31, 2004, 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) The following
costs are not allocated to the individual segments in evaluating net income
(loss):
Three months ended
March 31
2004
2003
------------ ------------
Amortization
$ 19.5 $
16.3
Interest expense, net
10.0
5.9
Income taxes
5.2
7.5
(c) Hotel ownership
assets include $49.3 (2003 - $46.7) of investments accounted for using
the equity method.
7. As required under the terms
and conditions of the 3.75% convertible
senior notes
due 2023, the debt and the common shares issuable upon conversion of the
shares have been registered on a Form F-10 with the SEC on April 6, 2004.
8. At March 31, 2004, FHR has
a payable to Legacy of $9.0 in connection
with various
management contracts, and reciprocal loan agreements with Legacy for $86.6.
A subsidiary of FHR has a 25% participation amounting to $10.8 in the first
mortgage on The Fairmont Olympic Hotel, Seattle. |
