| TORONTO, Feb. 25, 2005 - Four Seasons Hotels Inc. (TSX Symbol "FSH.SV";
NYSE Symbol "FS") today reported its results for the fourth quarter of
2004 and for the year ended December 31, 2004.
"2004 marked an important year for Four Seasons. We had a significant
rebound in our profitability that came on the heels of almost three of
the most difficult years in the history of the lodging industry. During
2004, we achieved near record levels of RevPAR(1) growth and entered into
more letters of intent relating to new management opportunities than we
ever have in a single year," said Isadore Sharp, Chairman and Chief Executive
Officer. "We believe that this demonstrates the strength of Four Seasons
market position and strategy, as well as our potential for future growth.
With the hotels and resorts we currently have under construction and the
agreements signed this year, we are confident that we will have 100 properties
under management within the next five to seven years."
Highlights of the Fourth Quarter and Year Ended December 31, 2004:
- RevPAR of worldwide Core Hotels(2) increased
over 15% for the year
ended December 31, 2004, as compared
to 2003.
- Net earnings increased 517.2% for the year
ended December 31, 2004 to
$33.2 million, as compared to
$5.4 million in 2003.
- Net earnings increased 33% for the quarter
ended December 31, 2004 to
$15.6 million, as compared to
$11.7 million for the same period in
2003.
- The gross operating margin(3) of our worldwide
Core Hotels increased
by 240 basis points to 29.3% for
the year ended December 31, 2004, as
compared to 2003.
- Management operations profit margin(4) improved
by 330 basis points to
69.3% for the year ended December
31, 2004, as compared to 2003. We
retained 85% of every dollar of
incremental management fee revenues
earned in 2004 as compared to
management fee revenues earned in 2003.
- Working capital generated by management
operations increased to over
$100 million for the year ended
December 31, 2004, as compared to
$81 million in 2003.
- Cash and cash equivalents increased by over
$100 million to
$272.5 million as at December
31, 2004, as compared to December 31,
2003.
"The fundamentals of our management business model are extremely solid.
We continue to generate significant amounts of cash; more than enough to
satisfy our currently anticipated needs for our management operations growth
program," said Douglas L. Ludwig, Chief Financial Officer and Executive
Vice President. "We are also very pleased with our hotel operating results
and our earnings on a full-year basis. The translation for accounting purposes
of our US dollar fee revenues to Canadian dollars - and some unusual events
at certain hotels, which predominantly affected incentive fees - had a
negative impact on our fourth quarter earnings. However the outlook for
2005 is very encouraging, and if current trends continue, we expect a better
pricing environment in which we expect RevPAR to improve by more than 10%
and our hotel profit margins are anticipated to improve by more than 200
basis points."
"During 2004, we signed 12 letters of intent, more than we have ever
achieved in any single year. The pace of new opportunities continues to
be very strong in 2005," said Kathleen Taylor, President Worldwide Business
Operations. "We are fortunate to work with capital partners and hotel owners
who share our excitement and interest in expanding the Four Seasons brand
to new markets. Both the number and the quality of these projects are exceptional.
They will enhance the Four Seasons brand, which we expect will attract
even more opportunities for the future."
Operating Environment
Seasonality
Four Seasons hotels and resorts are affected by normally recurring seasonal
patterns and, for most of the properties, demand is usually lower in the
period from December through March than the remainder of the year. Typically,
the first quarter is the weakest quarter, and the fourth quarter is the
strongest quarter for the majority of the properties.
Our ownership operations are particularly affected by seasonal fluctuations,
with lower revenue, higher operating losses and lower cash flow in the
first quarter, as compared to the other quarters. As a result, ownership
operations usually incur an operating loss in the first quarter of each
year.
Management operations are also affected by seasonal patterns, both in
terms of revenues and operating results. Urban hotels generally experience
lower revenues and operating results in the first quarter. However, this
negative impact on management revenues is offset to some degree by increased
travel to our resorts in the period.
Hotel Operating Results
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Three months ended
Year ended
December 31, 2004
December 31, 2004
increase over
increase over
(decrease from)
(decrease from)
three months ended
year ended
December 31, 2003
December 31, 2003
(percentage change, (percentage
change,
on US dollar basis) on US dollar
basis)
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Gross Gross
Gross Gross
Operating Operating Operating
Operating
Revenue Profit
Revenue Profit
Region
RevPAR (GOR) (GOP)
RevPAR (GOR) (GOP)
-------------------------------------------------------------------------
Worldwide Core
Hotels
10.7% 10.1% 10.7%
15.5% 14.2% 24.0%
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US Core Hotels 10.6%
9.7% 13.5% 8.7%
7.6% 8.9%
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Other Americas/
Caribbean Core
Hotels
7.7% 6.2% (1.1)%
18.2% 16.5% 30.2%
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Europe Core
Hotels
12.7% 17.1% 20.1%
20.6% 21.3% 31.6%
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Middle East
Core Hotels
12.3% 15.3% 9.0%
52.9% 58.3% 120.6%
-------------------------------------------------------------------------
Asia/Pacific
Core Hotels
10.8% 7.6% 4.6%
31.9% 24.8% 48.6%
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Underlying these operating results:
- RevPAR for worldwide Core Hotels increased
15.5% in 2004, as compared
to 2003, reflecting the improvement
in demand in most of the markets.
Gross operating margins improved
240 basis points from 26.9% in 2003
to 29.3% in 2004. For the fourth
quarter of 2004, RevPAR for worldwide
Core Hotels increased 10.7%, as
compared to the same period in 2003,
and gross operating margins remained
relatively unchanged at 29.5%, as
compared to 29.4% in the fourth
quarter of 2003. During the fourth
quarter of each year, typically
in December, the hotels and resorts
under management accrue the bonus
component of annual compensation for
many of their employees. For many
of the hotels and resorts under
management, this negatively affected
the profit margin in the fourth
quarter of 2004, as compared to
the fourth quarter of 2003, since
there was not a profit component
to the bonus for these hotels and
resorts in 2003.
- Virtually all the US Core Hotels under management
realized RevPAR
improvements in both the fourth
quarter and full year of 2004.
Exceptions for the fourth quarter
included Four Seasons Hotel San
Francisco, where a city-wide labour
dispute during the quarter
disrupted travel to that market,
and Houston, where the area is
absorbing significant new supply.
Hotels under management in Las
Vegas, Los Angeles, New York and
Philadelphia, amongst others,
outperformed the average RevPAR
improvement of the Core Hotels in the
region while hotels under management
in Dallas and The Ritz-Carlton
Chicago had more modest RevPAR
gains. Gross operating margins in
the region improved 90 basis points
for the fourth quarter of 2004,
as compared to the fourth quarter
of 2003, as cost increases,
particularly related to energy,
health care and workers' compensation,
continued to absorb some of the
RevPAR improvement.
- The 8.7% improvement in RevPAR at the US
Core Hotels in 2004, as
compared to 2003 was the result
of occupancy improvements from 68.1%
to 70.5% and a 5% increase in
achieved room rate. On a full-year
basis, gross operating margins
for the region remained at
approximately the same level as
last year.
- Strong RevPAR improvements in the fourth
quarter of 2004 at the hotels
under management in South America
helped to boost the average RevPAR
improvement in the Other Americas/Caribbean
region, as RevPAR for the
other hotels in the region remained
relatively unchanged from the
fourth quarter of 2003. Gross
operating margins in the region
decreased 200 basis points as
improvements in South America were
offset by declines elsewhere in
the region, in particular in Nevis.
Gross operating margins in Nevis
were unusually high in the fourth
quarter of 2003 as a result of
the accrual by the resort of
revenue related to coastal levies
from the government in that quarter.
- RevPAR for the Other Americas/Caribbean region
improved 18.2% in 2004,
as compared to 2003, as a result
of an 810 basis point increase in
occupancy and a 5.7% increase
in achieved room rate. All of the
properties in the region experienced
occupancy improvements.
- For the fourth quarter of 2004, RevPAR increases
in the European
region reflected strong operating
results at the hotels under
management in Paris and London,
primarily driven by achieved room rate
improvements. Gross operating
profits for the region as a whole
increased, primarily due to the
performance at the hotels in Paris and
London.
- On a full-year basis, the 20.6% improvement
in RevPAR in 2004 from
2003 in the European region was
also partially due to the significant
negative impact that the war in
Iraq had on travel in 2003.
- RevPAR improvements in the fourth quarter
of 2004 at the Middle East
Core Hotels were primarily driven
by increased occupancy at our
properties in Amman and Sharm
el Sheikh. Although gross operating
margins in the region declined
slightly in the quarter, as a result of
a decline at Four Seasons Hotel
Cairo at The First Residence, gross
operating profits increased 9%,
as compared to the same period in
2003, primarily as a result of
a larger contribution from Four Seasons
Hotel Amman. In the fourth quarter
of 2003, Four Seasons Hotel Cairo
at The First Residence benefited
from a one-time adjustment to the
shared cost allocations for prior
periods made by the owner of this
mixed-use project. These adjustments
had a positive effect on the
profit margin and incentive management
fees in the fourth quarter
of 2003.
- Occupancy at the Middle East Core Hotels
improved on a full-year basis
from 47.7% in 2003 to 70.5% in
2004, which when combined with a 7.5%
increase in achieved room rate,
resulted in a 52.9% increase in
RevPAR. In 2004, gross operating
profits for the region demonstrated
the strong profitability in the
region with a 120.6% improvement over
2003.
- The majority of the hotels under management
in the Asia/Pacific region
had strong RevPAR improvements
for the fourth quarter of 2004.
Exceptions were the hotels in
Sydney, Tokyo at Chinzan-so and Kuala
Lumpur, which experienced modestly
lower occupancy in the fourth
quarter of 2004, as compared to
the same period in 2003. The hotels
under management in Bali, Bangkok,
Shanghai and Tokyo at Marunouchi
had very strong RevPAR improvements
as a result of both occupancy and
achieved room rate gains. Gross
operating profits increased modestly
reflecting these RevPAR improvements.
Due to the tsunami in Southeast
Asia on December 26, 2004, Four
Seasons Resort Maldives at Kuda Huraa
was closed; however, there was
no material financial impact on the
other Four Seasons properties
in the Asia/Pacific region.
- In 2004, on a full-year basis, a large portion
of the 31.9% increase
in RevPAR at the properties under
management in the Asia/Pacific
region reflected a recovery from
the negative impact of SARS in the
region in 2003. This was particularly
so in our properties in Shanghai
and Singapore. In addition, the
properties in Bali continue to improve
after the lingering impact of
terrorist attacks on that island in
October of 2002.
Financial Review and Analysis
Three months and year ended December 31, 2004 compared to three months
and year ended December 31, 2003
Management Operations
For the three months ended December 31, 2004, management fee revenues
(excluding reimbursed costs(5)) increased 4.0%, or $1.3 million, to $34.4
million, as compared to $33.1 million in the same period last year. The
decline of the US dollar relative to the Canadian dollar reduced our US
dollar- denominated management fee revenues (excluding reimbursed costs)
by $795,000. The US fee revenues are used to pay US dollar expenses, including
interest, and to fund our US dollar investment obligations and are not
typically converted into Canadian dollars.
For the year ended December 31, 2004, management fee revenues (excluding
reimbursed costs) increased 21.0%, or $25.3 million, to $145.8 million,
as compared to $120.5 million for 2003. This increase was the result of
the RevPAR and other revenue increases at the Core Hotels under management
and an increase in fees from recently opened hotels. The decline of the
US dollar relative to the Canadian dollar did not have a material impact
on our US dollar-denominated management fee revenues for the full year
due to the forward contracts then in place.
For the three months ended December 31, 2004, incentive fees were essentially
unchanged from the same period in 2003. Incentive fees were negatively
affected as the result of the translation of US dollar-denominated incentive
fees into Canadian dollars, and by greater compensation costs incurred
at the hotels and resorts and accrued during the fourth quarter. This increased
compensation expense resulted from the majority of the hotels and resorts
exceeding their business plans in 2004, which triggered greater profit
participation for the employees than had been incurred in 2003. In addition,
certain expenditures that were incurred at some of the hotels and resorts
under management during December 2004 to improve longer-term profitability
also resulted in reduced incentive fees. This included capital programs
that negatively affected operations in the fourth quarter of 2004 at certain
hotels, including properties in Scottsdale, Washington D.C. and Las Vegas.
While incentive fee improvement on a full-year basis was strong, it
was negatively affected by lower than expected incentive fees during the
fourth quarter, as discussed above, and hurricane activity in Florida and
the Caribbean in the third quarter.
General and administrative expenses (excluding reimbursed costs) decreased
1.6% to $12.2 million in the fourth quarter of 2004 from $12.4 million
for the same period in 2003. General and administrative expenses (excluding
reimbursed costs) increased 9.2% to $44.8 million for the year ended December
31, 2004 from $41 million for 2003. During 2004, as a result of the improved
economic and business environment, we held several regional and company-wide
management meetings, some of which had been postponed for the past three
years. The cost of these meetings, together with management compensation
relating to profit participation accounted for the majority of the increase.
This management compensation cost was accrued throughout 2004 and there
was not a similar entitlement in 2003.
As a result of the items described above, our management earnings before
other operating items for the fourth quarter of 2004 increased to $22.2
million, as compared to $20.7 million in the fourth quarter of 2003, and
for the year ended December 31, 2004 increased 27.1% to $101 million, as
compared to $79.5 million for the year ended December 31, 2003. Our management
operations profit margin (excluding reimbursed costs) increased to 64.5%
in the fourth quarter of 2004, as compared to 62.5% in the fourth quarter
of 2003, and 69.3% for the full year of 2004, as compared to 66% for the
full year of 2003. We retained 85% of every dollar of incremental management
fee revenues earned in 2004 as compared to management fee revenues earned
in 2003.
Ownership and Corporate Operations(6)
Operating losses from ownership and corporate operations before other
operating items increased $1.8 million to a loss of $3.8 million in the
fourth quarter of 2004, as compared to a loss of $2 million in the fourth
quarter of 2003. The majority of the increase in ownership and corporate
operations loss during the fourth quarter of 2004, as compared to the fourth
quarter of 2003, was attributable to a reversal of lease costs at Four
Seasons Berlin in 2003, which is discussed below, and increased expenses
related to compliance costs, including internal control documentation and
other processes related to the Sarbanes-Oxley Act and other recent US and
Canadian requirements.
Operating results from ownership and corporate operations before other
operating items improved $8.4 million (28.1%) to a loss of $21.6 million
in the year ended December 31, 2004, as compared to a loss of $30.1 million
for 2003.
The Pierre
Operating earnings at The Pierre improved $0.8 million to $1.7 million
in the fourth quarter of 2004, as compared to $0.9 million in the same
period last year. RevPAR at The Pierre increased 8.5% in the fourth quarter
of 2004, as compared to the same period in 2003. The Pierre had committed
a large portion of its rooms to conference business during the fourth quarter
of 2004. The room rates on this business were negotiated prior to the strong
improvement in travel demand in New York and, as a result, The Pierre's
achieved room rates increased more modestly than might otherwise have been
possible in this stronger demand environment. For the year ended December
31, 2004, RevPAR at The Pierre increased 14.6%, as a result of both occupancy
and room rate gains, as compared to 2003, reflecting higher travel demand
in New York. As a result, the operating results at The Pierre improved
$5.6 million to a loss of $4.2 million in 2004, as compared to 2003.
Four Seasons Hotel Vancouver
RevPAR at Four Seasons Hotel Vancouver remained unchanged during the
fourth quarter of 2004, as compared to the same period in 2003. Operating
results at that hotel improved approximately $0.3 million to a loss of
$1 million in the fourth quarter of 2004, as compared to the same period
last year. As a result of occupancy improvements, RevPAR at Four Seasons
Hotel Vancouver increased 8.7% for the year ended December 31, 2004, as
compared to 2003. Consequently, the operating results at that hotel improved
$1.7 million to a loss of $2.8 million in 2004, as compared to 2003.
Berlin
In September 2004, the landlord terminated our lease of Four Seasons
Hotel Berlin, and we ceased managing the hotel. Since reaching our maximum
funding obligation of the stipulated minimum lease payments at Four Seasons
Hotel Berlin in August of 2003, the lease payments had been limited to
the cash flow generated by the hotel. During the fourth quarter of 2003,
lease payments that had been accrued beyond cash flow generated by the
hotel were reversed resulting in $1.4 million of operating earnings in
that period. During the fourth quarter of 2004, operating results were
nil, resulting in a decline of $1.4 million compared to the same period
last year. On a full-year basis, 2004 operating earnings were nil as compared
to an operating loss of $3.8 million for the same period in 2003.
Other Income/Expense, Net
Other income, net for the fourth quarter of 2004 was $6.2 million, as
compared to $178,000 for the same period in 2003. Other expense, net for
the year ended December 31, 2004 was $16.1 million, as compared to $25.8
million for the same period in 2003.
Foreign Exchange
Other income for the fourth quarter of 2004 includes a $6.4 million
net foreign exchange gain, compared to a $2.5 million net foreign exchange
gain for the same period in 2003. Included in other expense for the year
ended December 31, 2004 is a $3.6 million net foreign exchange gain, compared
to a $14.7 million net foreign exchange loss for 2003. These foreign exchange
gains and losses arose from the translation to Canadian dollars at current
exchange rates at the end of each month of our non-Canadian dollar-denominated
net monetary assets which are not included in our designated self-sustaining
subsidiaries; they also reflect local currency foreign exchange gains and
losses on net monetary assets incurred by our designated foreign self-
sustaining subsidiaries. Net monetary assets are the sum of our foreign
currency-denominated monetary assets and liabilities, which consist primarily
of cash and cash equivalents, accounts receivable, long-term receivables
and long-term obligations, as determined under Canadian GAAP.
Redemption of the Liquid Yield Option Notes ("LYONs")
Included in other expense for 2004 was a loss of $14.6 million related
to the redemption of the LYONs during the third quarter of 2004. We also
recognized a gain of $8.2 million relating to the redemption of the equity
component of the LYONs. This gain was recorded in contributed surplus in
the third quarter of 2004. As discussed below under "Financing Activities",
we redeemed all of our LYONs for US$328.73 cash per US$1,000 principal
amount at maturity (the redemption price being the issue price plus interest
that was accrued but unpaid to but excluding September 23, 2004) for an
aggregate payment of US$215.5 million ($275.7 million).
Disposition of Hotel Investments/Settlement of Loan Receivable
During 2004, we sold the majority of our investment in Four Seasons
Hotel Amman, all of our investment in Four Seasons Resort Whistler, all
of our ownership interest in land relating to Four Seasons Resort Scottsdale
and settled our loan receivable from Sedona resulting in a total net loss
of $4.6 million. The majority of the loss was related to the settlement
of the loan receivable from Sedona and legal costs incurred to finalize
the transactions.
Also included in other expense for the year ended December 31, 2004
were legal and other enforcement costs of $0.3 million that were incurred
in connection with the disputes with the owners of Four Seasons hotels
in Caracas and Seattle, as compared to other expenses of $9.5 million for
the same period in 2003. The Seattle dispute was settled in July 2003.
Although the dispute with the owner of the Caracas hotel is outstanding,
future expenses associated with the Caracas dispute are not expected to
be significant. These disputes are more fully described in the Management's
Discussion and Analysis ("MD&A") for the year ended December 31, 2003.
Other expense in 2003 also included an expense of $3.2 million related
to the write-down of our fixed asset investment in the Four Seasons Hotel
Berlin lease to nil.
Net Interest Income/Expense
During the fourth quarter of 2004, we had net interest expense of $187,000,
as compared to net interest income of $962,000 in the fourth quarter of
2003. Net interest expense is a combination of $4.1 million in interest
income and $4.3 million in interest expense in the fourth quarter of 2004,
as compared to $3.7 million and $2.8 million, respectively, for the same
period in 2003. The increase in interest income in comparison to the fourth
quarter of 2003 was primarily attributable to increased cash and cash equivalents
as a result of the issuance of the convertible senior notes in June 2004.
The increase in interest expense was primarily attributable to the variance
in interest costs relating to the convertible senior notes in the fourth
quarter of 2004, as compared to the interest costs relating to the LYONs
in the fourth quarter of 2003. As discussed below in "Liquidity and Capital
Resources", although the convertible senior notes have a 1.875% interest
rate attached to them, for accounting purposes the convertible senior notes
are bifurcated into debt and equity components, and a notional interest
rate is applied to the portion that is allocated to debt. While the notional
interest rate of 5.33% that is applied to the debt component of the convertible
senior notes (as described under "Financing Activities") is lower than
the notional rate of 9.2% that was applied to the LYONS, a larger component
of the convertible senior notes is allocated to debt than was the case
with the LYONS. As a result, for accounting purposes the interest expense
associated with the convertible senior notes is higher than was the case
for the LYONS.
For the year ended December 31, 2004, we had net interest income of
$1.5 million, as compared to $3.4 million in 2003. Net interest income
is a combination of $16.9 million in interest income and $15.4 million
in interest expense in 2004, as compared to $14.4 million and $11 million,
respectively, for 2003.
Income Tax Expense
Our income tax expense during the fourth quarter and full year of 2004
was $4.9 million and $16.3 million, respectively, (effective tax rate of
23.9% and 32.9%, respectively) as compared to an income tax expense of
$4.5 million (effective tax rate of 27.9%) and $6.6 million for the same
periods in 2003 (effective tax rate of 55.2%).
The variation from our expected 24% tax rate is the result of certain
items not being tax effected, including the non-taxable amounts related
to the redemption of the LYONs in 2004 and, in 2004 and 2003, a portion
of the foreign exchange gains and losses, since they will never be realized
for tax purposes. In addition, stock option expense is not deductible for
Canadian tax purposes and, as such, is not tax effected. In 2004, the impact
of these items was partially offset by a reduction in the tax rate related
to the utilization of certain losses, which previously had not been recorded.
Excluding these items, our tax rate would have been our expected 24%.
Net Earnings and Earnings per Share
Net earnings for the quarter ended December 31, 2004 were $15.6 million
($0.43 basic earnings per share and $0.41 diluted earnings per share),
as compared to net earnings of $11.7 million ($0.33 basic earnings per
share and $0.32 diluted earnings per share) for the quarter ended December
31, 2003. Net earnings for the year ended December 31, 2004 were $33.2
million ($0.93 basic earnings per share and $0.89 diluted earnings per
share), as compared to net earnings of $5.4 million ($0.15 basic and diluted
earnings per share) for the year ended December 31, 2003.
Liquidity and Capital Resources
Financing Activities
During 1999, we issued LYONs for US$655.5 million principal amount at
maturity (September 23, 2029) for gross proceeds of US$172.5 million. The
net proceeds of the issuance, after deducting offering expenses and underwriters'
commission, were US$166 million. We were entitled to redeem the LYONs commencing
in September 2004 for cash equal to the issue price plus accrued interest
calculated at 4 1/2% per annum. As discussed above in "Other Income/Expense,
Net", during the third quarter of 2004, we exercised this right and redeemed
all of our LYONs for US$328.73 cash per US$1,000 principal amount at maturity
(the redemption price being the issue price plus interest that was accrued
but unpaid to but excluding September 23, 2004) for an aggregate payment
of US$215.5 million ($275.7 million).
During the second quarter of 2004, we issued US$250 million ($341.1
million) principal amount of convertible senior notes. We used a majority
of the net proceeds from the issue of the convertible senior notes to repay
the LYONs and intend to use the remainder for general corporate purposes,
including the making of investments in, or advances in respect of or to
owners of, properties with a view to obtaining new management agreements
or enhancing existing management agreements. These notes bear interest
at the rate of 1.875% per annum (payable semi-annually in arrears on January
30 and July 30 to holders of record on January 15 and July 15, beginning
January 30, 2005) and will mature on July 30, 2024, unless earlier redeemed
or repurchased. The notes are convertible into our Limited Voting Shares
at an initial conversion rate of 13.9581 shares per US$1,000 principal
amount (equal to a conversion price of approximately US$71.64 ($86.23)
per Limited Voting Share), subject to adjustments including those in which
(i) the Limited Voting Shares have traded for more than 130% of the conversion
price for a specified period, (ii) the notes have a trading price of less
than 95% of the market price of the Limited Voting Shares into which they
may be converted for a specified period, (iii) we call the notes for redemption,
or (iv) specified corporate transactions or a "fundamental change" occur.
We may choose to settle conversion in our Limited Voting Shares, cash or
a combination of our Limited Voting Shares and cash. Holders of the notes
will have the right to require us to purchase for their principal amount
plus accrued and unpaid interest the notes on July 30, 2009, July 30, 2014
and July 30, 2019 and in connection with certain events. Subject to conversion
rights, we will have the right to redeem the convertible senior notes for
their principal amount, plus any accrued and unpaid interest, beginning
August 4, 2009.
In accordance with Canadian GAAP, the convertible senior notes are bifurcated
on our financial statements into a debt component (representing the principal
value of a bond of US$211.8 million ($288.9 million), which was estimated
based on the present value of a US$250 million ($341.1 million) bond maturing
in 2009, yielding 5.33% per annum, compounded semi-annually, and paying
a coupon of 1.875% per annum) and an equity component (representing the
value of the conversion feature of the convertible senior notes).
In connection with the offering of the convertible senior notes, we
entered into a five-year interest rate swap with an initial notional amount
of US$211.8 million ($288.9 million), pursuant to which we agreed to receive
interest at a fixed rate of 5.33% per year and pay interest at six-month
LIBOR, in arrears, plus 0.4904%. In October 2004, we terminated the interest
rate swap agreement and received proceeds of US$9 million ($11.3 million).
The book value of the interest rate swap at the date of termination was
approximately $2 million. The recognition of the resulting gain was deferred
and is being amortized over the next 4.75 years, which would have been
the remaining swap term. This will result in an effective interest rate
for accounting purposes of 4.7% for 2005. Taking into account the net present
value of the termination of the swap, including the $9.3 million gain,
the economic interest cost associated with the convertible senior notes
is less than 1%.
In November 2004, we finalized a new committed bank credit facility
of US$125 million ($150.5 million), which expires September 2007, and replaced
a credit facility of US$100 million ($120.4 million). As at December 31,
2004, no amounts were borrowed under the credit facility. However, approximately
US$10.9 million ($13.1 million) of letters of credit were issued under
the facility. No amounts have been drawn under these letters of credit.
We believe that, absent unusual opportunities, this bank credit facility,
when combined with cash on hand and internally generated cash flow, should
be more than adequate to allow us to finance our normal operating needs
and anticipated investment commitments related to our current growth objectives.
Cash and cash equivalents were $272.5 million as at December 31, 2004,
as compared to $170.7 million as at December 31, 2003.
Long-term obligations (as determined under Canadian GAAP) increased
from $120.1 million as at December 31, 2003 to $303.3 million as at December
31, 2004, primarily as a result of the issuance of the convertible senior
notes in the second quarter, net of the redemption of the LYONs in the
third quarter and foreign exchange translation.
Cash From Operations
During the three months and year ended December 31, 2004, we generated
cash of $39.7 million and $57.4 million from operations, respectively,
as compared to generating cash of $21.9 million and $66 million, respectively,
for the same periods in 2003.
The increase in cash from operations of $17.8 million in the fourth
quarter of 2004, as compared to the same period in 2003, resulted primarily
from the proceeds received on termination of the interest rate swap of
$11.3 million, a decrease in working capital of $3.3 million, an increase
in current income tax received of $3.2 million and an increase in cash
contributed by management operations of $1.7 million, partially offset
by cash used in ownership and corporate operations of $1.7 million.
The decrease in cash from operations of $8.6 million in 2004, as compared
to 2003, resulted primarily from the cash applied to the interest accreted
for accounting purposes of $33.1 million related to the redemption of the
LYONs in the third quarter of 2004 and an increase in working capital of
$26.3 million (primarily as a result of a larger income tax refund that
was received in 2003 and an increase in the accrual related to incentive
fee improvements and improved fees from residential projects), partially
offset by an increase in cash contributed by management operations of $22.3
million, the proceeds received on termination of the interest rate swap
of $11.3 million, a decrease in cash used in ownership and corporate operations
of $9.2 million and a decrease in legal and enforcement costs paid of $8.1
million.
Investing/Divesting Activities
Part of our business strategy is to invest available cash to obtain
management agreements or enhance existing management arrangements. These
investments in, or advances in respect of or to owners of, properties are
made where we believe that the overall economic return to Four Seasons
justifies the investment or advance.
During 2004, we funded $93.6 million in such management opportunities,
including amounts advanced as loans receivable and investments in hotel
properties such as Hampshire, Whistler, Palo Alto, Jackson Hole and Exuma.
This level of investment was consistent with our business plan, with the
investments being made to secure new long-term management agreements or
to enhance existing management arrangements.
During 2004, we also sold the majority of our 8% ownership interest
in Four Seasons Hotel Amman, all of our ownership interest in Four Seasons
Resort Whistler, all of our ownership interest in land relating to Four
Seasons Resort Scottsdale and settled our loan receivable from the property
in Sedona. On a full-year basis, we received total proceeds from asset
dispositions of approximately $58 million and realized a loss of approximately
$4.6 million.
In 2005, we expect to fund approximately US$90 million in respect of
investments in, or advances to, various projects, including Geneva and
Damascus, plus additional funding in Buenos Aires and Exuma and the expansion
of corporate office facilities. We anticipate selling two or more interests
in properties during 2005, from which we expect to receive approximately
$20 million.
Outstanding Share Data
-------------------------------------------------------------------------
Outstanding as at
Designation
February 17, 2005
-------------------------------------------------------------------------
Variable Multiple Voting Shares(a)
3,725,698
-------------------------------------------------------------------------
Limited Voting Shares
32,883,188
-------------------------------------------------------------------------
Options to acquire Limited Voting
Shares:
-------------------------------------------------------------------------
Outstanding
5,801,297
-------------------------------------------------------------------------
Exercisable
2,755,841
-------------------------------------------------------------------------
Convertible Senior Notes issued
June 2004 and due 2024(b)
US$250.2 million(c)
(Canadian equivalent $307.2 million)
-------------------------------------------------------------------------
a) Convertible into Limited
Voting Shares at any time at the option of
the holder
on a one-for-one basis.
b) Details on the convertible
senior notes are more fully described
under "Financing
Activities".
c) This amount is equal to the
issue price of the convertible senior
notes issued
June 2004 and due 2024 plus accrued interest calculated
at 1.875%
per annum. |
Looking Ahead
Based on the travel trends that we experienced in 2004 and that we currently
are observing, if current trends continue, we expect RevPAR, on a US dollar
basis, for worldwide Core Hotels in the first quarter of 2005 and the full
year 2005 to increase by more than 10%, both as compared to their respective
periods in 2004. We expect that this improvement will result from occupancy
and pricing improvements in all geographic regions in 2005. We expect our
full-year gross operating profit under management in our worldwide Core
Hotels to increase more than 200 basis points in 2005.
Additional Information
A summary of consolidated revenues, management earnings, ownership and
corporate operations and net earnings for the past eight quarters can be
found in note 7. Additional information about us (including our most recent
annual information form, MD&A and our audited financial statements
for the year ended December 31, 2003) is available on SEDAR at www.sedar.com.
The financial information presented in this release remains subject
to additional review and final year-end closing procedures performed by
the Company and the completion of the year-end audit by its external auditors.
Four Seasons expects that its audited financial results will be finalized
in March 2005 and the Company will file its financial statements and MD&A
with the securities regulators shortly thereafter.
1. 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
per room occupied
and the average occupancy rate achieved during the
period. RevPAR
does not include food and beverage or other ancillary
revenues generated
by a hotel or resort. RevPAR is the most
commonly used
measure in the lodging industry to measure the
period-over-period
performance of comparable properties.
2. The term "Core Hotels" means
hotels and resorts under management for
the full year
of both 2004 and 2003. However, if a "Core Hotel" has
undergone
or is undergoing an extensive renovation program in one of
those years
that materially affects the operation of the property in
that year,
it ceases to be included as a "Core Hotel" in either year.
Changes from
the 2003/2002 Core Hotels are the additions of Four
Seasons Hotel
Amman, Four Seasons Resort Sharm el Sheikh, Four
Seasons Hotel
Shanghai and Four Seasons Hotel Tokyo at Marunouchi and
the deletion
of Four Seasons Hotel Berlin, Four Seasons Resort Santa
Barbara, Four
Seasons Resort Scottsdale at Troon North and Four
Seasons Hotel
Washington, DC, the last three of which were undergoing
extensive
renovation programs that began in 2004.
3. Gross operating margin represents
gross operating profit as a
percentage
of gross operating revenue.
4. The management operations
profit margin represents management
operations
earnings before other operating items, as a percentage of
management
operations revenue, excluding reimbursed costs.
5. The following table illustrates
the impact of adopting the new
accounting
standard (Canadian Institute of Chartered Accountants
("CICA") Section
1100 - "Generally Accepted Accounting Principles",
as it relates
to the reimbursement of out-of-pocket costs) on a pro
forma basis
in the quarters for 2003 as if the new standard was
applicable
during that time.
-------------------------------------------------------------------------
2003
-------------------------------------------------
(In thousands of
First Second
Third Fourth
Canadian dollars)
Quarter Quarter
Quarter Quarter
-------------------------------------------------------------------------
Revenues:
-------------------------------------------------------------------------
Fee revenues
$29,305 $29,351
$28,823 $33,051
-------------------------------------------------------------------------
Cost reimbursements
previously included
in fee revenues(x)
6,925 7,381
7,395 7,526
-------------------------------------------------------------------------
Additional cost
reimbursements
11,526 11,190
10,469 12,891
-------------------------------------------------------------------------
Total revenues
47,756 47,922
46,687 53,468
-------------------------------------------------------------------------
Operating costs
and expenses:
-------------------------------------------------------------------------
General and
administrative
expenses
9,736 8,901
9,981 12,390
-------------------------------------------------------------------------
Reimbursed costs
18,451 18,571
17,864 20,417
-------------------------------------------------------------------------
Total expenses
28,187 27,472
27,845 32,807
-------------------------------------------------------------------------
Total earnings from
Management operations
before other
operating items
$19,569 $20,450
$18,842 $20,661
-------------------------------------------------------------------------
(x) Marketing and reservation fees
were included in both fee revenues and
general and
administrative expenses in 2003 and earlier years.
6. Included in ownership and
corporate operations are the consolidated
revenues and
expenses from our 100% leasehold interests in The Pierre
in New York,
Four Seasons Hotel Vancouver and Four Seasons Hotel
Berlin (until
the Berlin lease termination on September 26, 2004),
distributions
from other ownership interests in properties that Four
Seasons manages
and corporate overhead expenses related, in part, to
these ownership
interests.
7. Eight Quarter Summary:
-------------------------------------------------------------------------
(In millions of
Canadian dollars
except per
Fourth Third
Second First
share amounts)
Quarter Quarter
Quarter Quarter
-------------------------------------------------------------------------
2004 2003(a) 2004 2003(a) 2004 2003(a) 2004 2003(a)
-------------------------------------------------------------------------
Consolidated
revenues(b)
$84.8 $87.9 $82.7 $72.6 $97.0 $80.8
$75.3 $72.4
-------------------------------------------------------------------------
Earnings (loss)
before other
operating items:
-------------------------------------------------------------------------
Management
operations
22.2 20.7 26.3 18.8 30.1
20.5 22.5 19.6
-------------------------------------------------------------------------
Ownership and
corporate
operations
(3.8) (2.0) (6.4) (9.4) (1.7) (5.5)
(9.7) (13.2)
-------------------------------------------------------------------------
Net earnings
(loss):
-------------------------------------------------------------------------
Total
$15.6 $11.7 $(11.1) $4.4 $17.3 $(1.4) $11.5
$(9.3)
-------------------------------------------------------------------------
Basic earnings
(loss) per
share(c)
$0.43 $0.33 $(0.31) $0.13 $0.49 $(0.04) $0.33 $(0.27)
-------------------------------------------------------------------------
Diluted
earnings
(loss) per
share(c)
$0.41 $0.32 $(0.31) $0.12 $0.46 $(0.04) $0.31 $(0.27)
-------------------------------------------------------------------------
a) In December 2003, the CICA
amended Section 3870 of its Handbook to
require entities
to account for employee stock options using the fair
value-based
method, beginning January 1, 2004. In accordance with one
of the transitional
alternatives permitted under amended Section
3870, in the
fourth quarter of 2003 we prospectively adopted the fair
value-based
method with respect to all employee stock options granted
on or after
January 1, 2003. Accordingly, options granted prior to
that date
continue to be accounted for using the settlement method.
In accordance
with the new standard, however, the reported results
for the first
three quarters of 2003 are required to be restated.
The prospective
application of adopting the fair value-based method
effective
January 1, 2003 resulted in the following restatements:
1st Quarter
2003 - no effect on net loss or basic and diluted loss
per share;
2nd Quarter 2003 - increase in net loss of $0.1 million
and no effect
on basic and diluted loss per share; 3rd Quarter and
4th Quarter
2003 - in each quarter, a decrease in net earnings of
$0.4 million
and a decrease in basic and diluted earnings per share
of $0.01 for
each quarter.
b) As a result of adopting Section
1100, "Generally Accepted Accounting
Principles",
which was issued by the CICA in July 2003, and was
effective
January 1, 2004, we have included the reimbursement of all
out-of-pocket
expenses in both revenues and expenses, instead of
recording
certain reimbursed costs as a "net" amount. As a result of
this change,
consolidated revenues have been restated as follows:
1st Quarter
2003 - increase of $11.3 million; 2nd Quarter 2003 -
increase of
$10.9 million; 3rd Quarter 2003 - increase of
$10.3 million;
4th Quarter 2003 - increase of $12.6 million.
Consolidated revenues is comprised
of the following:
-------------------------------------------------------------------------
(In millions of
Fourth Third
Second First
Canadian dollars)
Quarter Quarter
Quarter Quarter
-------------------------------------------------------
2004 2003 2004 2003 2004
2003 2004 2003
-------------------------------------------------------------------------
Revenues from
Management
Operations
$54.1 $53.5 $54.8 $46.7 $60.1 $47.9
$49.6 $47.8
-------------------------------------------------------------------------
Revenues from
Ownership and
Corporate
Operations
32.5 36.0 29.2 27.0 38.2
34.4 26.8 25.8
-------------------------------------------------------------------------
Distributions
from hotel
investments
0.0 0.0 0.0 0.2
0.4 0.0 0.0 0.0
-------------------------------------------------------------------------
Fees from
Ownership and
Corporate
Operations to
Management
Operations
(1.7) (1.6) (1.3) (1.3) (1.7) (1.5)
(1.1) (1.2)
-------------------------------------------------------------------------
$84.8 $87.9 $82.7 $72.6 $97.0 $80.8
$75.3 $72.4
-------------------------------------------------------------------------
c) Quarterly computations of
per share amounts are made independently on
a quarter-by-quarter
basis and may not be identical to annual
computations
of per share amounts.
|
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of
Three months ended
Years ended
Canadian dollars
December 31,
December 31,
except per share
amounts)
2004 2003
2004 2003
-------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
Consolidated
revenues (note 5)
$ 84,842 $ 87,885 $
339,788 $ 313,580
---------------------------------------------------
---------------------------------------------------
MANAGEMENT OPERATIONS
Revenues:
Fee revenues
$ 34,357 $ 33,051 $
145,831 $ 120,530
Reimbursed costs
(note 1(c))
19,733 20,417
72,716 75,303
---------------------------------------------------
54,090 53,468
218,547 195,833
---------------------------------------------------
Expenses:
General and
administrative
expenses
(12,186) (12,390) (44,783)
(41,008)
Reimbursed costs
(note 1(c))
(19,733) (20,417) (72,716)
(75,303)
---------------------------------------------------
(31,919) (32,807) (117,499)
(116,311)
---------------------------------------------------
22,171 20,661
101,048 79,522
---------------------------------------------------
OWNERSHIP AND
CORPORATE OPERATIONS
Revenues
32,479 36,020
126,726 123,214
Distributions from
hotel investments
- -
398 153
Expenses:
Cost of sales and
expenses
(34,560) (36,395) (142,872)
(147,816)
Fees to Management
Operations
(1,727) (1,603)
(5,883) (5,620)
---------------------------------------------------
(3,808) (1,978) (21,631)
(30,069)
---------------------------------------------------
Earnings before other
operating items
18,363 18,683
79,417 49,453
Depreciation and
amortization
(3,981) (3,592) (15,281)
(15,011)
Other income (expense),
net (note 6)
6,248 178
(16,095) (25,783)
---------------------------------------------------
Earnings from
operations
20,630 15,269
48,041 8,659
Interest income
(expense), net
(187) 962
1,494 3,350
---------------------------------------------------
Earnings before
income taxes
20,443 16,231
49,535 12,009
---------------------------------------------------
Income tax recovery
(expense):
Current
(5,002) (2,833) (11,680)
(2,395)
Future
126 (1,924)
(4,623) (4,460)
Increase in future
income tax assets
- 230
- 230
---------------------------------------------------
(4,876) (4,527) (16,303)
(6,625)
---------------------------------------------------
Net earnings
$ 15,567 $ 11,704 $
33,232 $ 5,384
---------------------------------------------------
---------------------------------------------------
Basic earnings per
share (note 4)
$ 0.43 $
0.33 $ 0.93 $
0.15
---------------------------------------------------
---------------------------------------------------
Diluted earnings
per share (note 4)
$ 0.41 $
0.32 $ 0.89 $
0.15
---------------------------------------------------
---------------------------------------------------
See accompanying notes to consolidated
financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED BALANCE SHEETS
As at As at
December 31, December 31,
(In thousands of Canadian dollars)
2004 2003
-------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$ 272,467 $ 170,725
Receivables
98,143 88,636
Inventory
1,732 2,169
Prepaid expenses
3,588 3,780
-------------------------
375,930 265,310
Long-term receivables
215,517 197,635
Investments in hotel partnerships
and
corporations
158,079 157,638
Fixed assets
72,143 75,789
Investment in management contracts
218,180 203,670
Investment in trademarks and trade
names
5,325 5,757
Future income tax assets (note 3(b))
4,466 13,230
Other assets
36,185 27,631
-------------------------
$ 1,085,825 $ 946,660
-------------------------
-------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 72,716
$ 61,045
Long-term obligations
due within one year
4,533 2,587
-------------------------
77,249 63,632
Long-term obligations (notes 2 and
3)
304,590 117,521
Shareholders' equity (note 4):
Capital stock
379,227 329,274
Convertible notes (note
3)
50,373 178,543
Contributed surplus (note
3(b))
11,402 5,529
Retained earnings
295,218 265,754
Equity adjustment from
foreign currency
translation
(32,234) (13,593)
-------------------------
703,986 765,507
-------------------------
$ 1,085,825 $ 946,660
-------------------------
-------------------------
See accompanying notes to consolidated
financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH PROVIDED
BY OPERATIONS
Three months ended
Years ended
(In thousands of
December 31,
December 31,
Canadian dollars)
2004 2003
2004 2003
-------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
Cash provided by
(used in) operations:
MANAGEMENT OPERATIONS
Earnings before other
operating items
$ 22,171 $ 20,661 $
101,048 $ 79,522
Items not requiring
an outlay of funds
589 377
2,204 1,476
---------------------------------------------------
Working capital
provided by
Management Operations
22,760 21,038
103,252 80,998
---------------------------------------------------
OWNERSHIP AND
CORPORATE OPERATIONS
Loss before other
operating items
(3,808) (1,978) (21,631)
(30,069)
Items not requiring
an outlay of funds
355 189
1,221 467
---------------------------------------------------
Working capital used
in Ownership and
Corporate Operations
(3,453) (1,789) (20,410)
(29,602)
---------------------------------------------------
19,307 19,249
82,842 51,396
Interest received, net
1,722 2,341
9,887 10,426
Interest paid on
redemption of
convertible notes
(note 3(b))
- -
(33,057) -
Proceeds received on
termination of
interest rate swap
(note 3(a))
11,267
- 11,267
-
Current income tax
received
3,212
- 427
-
Change in non-cash
working capital
4,627 1,339
(12,607) 13,709
Other
(397) (1,048)
(1,396) (9,528)
---------------------------------------------------
Cash provided by
operations
$ 39,738 $ 21,881 $
57,363 $ 66,003
---------------------------------------------------
---------------------------------------------------
See accompanying notes to consolidated
financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
Years ended
(In thousands of
December 31,
December 31,
Canadian dollars)
2004 2003
2004 2003
-------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
Cash provided by
(used in):
Operations:
$ 39,738 $ 21,881 $
57,363 $ 66,003
---------------------------------------------------
Financing:
Issuance of
convertible notes
(note 3(a))
- -
329,273
-
Redemption of
convertible notes
(note 3(b))
- -
(242,644) -
Other long-term
obligations
including
current portion
(86) (136)
(105) (200)
Issuance of shares
24,796 3,759
42,824 7,673
Dividends paid
- -
(3,690) (3,622)
---------------------------------------------------
Cash provided by
financing
24,710 3,623
125,658 3,851
---------------------------------------------------
Capital investments:
Long-term receivables
(10,839) 3,052
(21,270) (6,394)
Hotel investments
(1,840) (678)
(48,529) (8,580)
Disposal of hotel
investments (note
6) 2,951
- 49,994
1,529
Fixed assets
(2,946) (13,931)
(8,360) (19,331)
Investments in
trademarks and
trade names and
management contracts
(2,925) (536)
(16,093) (2,116)
Other assets
(6,884) (321)
(10,683) (5,181)
---------------------------------------------------
Cash used in capital
investments
(22,483) (12,414) (54,941)
(40,073)
---------------------------------------------------
Increase in cash and
cash equivalents
41,965 13,090
128,080 29,781
Decrease in cash and
cash equivalents due
to unrealized foreign
exchange loss
(2,421) (3,769) (26,338)
(24,092)
Cash and cash
equivalents,
beginning of period
232,923 161,404
170,725 165,036
---------------------------------------------------
Cash and cash
equivalents,
end of period
$ 272,467 $ 170,725 $ 272,467
$ 170,725
---------------------------------------------------
---------------------------------------------------
See accompanying notes to consolidated
financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF RETAINED
EARNINGS
Years ended
December 31,
(In thousands of Canadian dollars)
2004 2003
-------------------------------------------------------------------------
(Unaudited)
Retained earnings, beginning of period
$ 265,754 $ 264,016
Net earnings
33,232 5,384
Dividends declared
(3,768) (3,646)
-------------------------
Retained earnings, end of period
$ 295,218 $ 265,754
-------------------------
-------------------------
See accompanying notes to consolidated
financial statements.
FOUR SEASONS HOTELS INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
(In thousands of Canadian dollars
except share amounts)
-------------------------------------------------------------------------
In these interim consolidated financial
statements, the words "we", "us",
"our", and other similar words are
references to Four Seasons Hotels Inc.
and its consolidated subsidiaries.
These interim consolidated financial
statements do not include all disclosures
required by Canadian generally
accepted accounting principles ("GAAP")
for annual financial statements
and should be read in conjunction
with our annual consolidated financial
statements for the year ended December
31, 2003.
The financial information presented
in these interim consolidated
financial statements remains subject
to additional review and final
year-end closing procedures performed
by the Company and the completion
of the year-end audit by its external
auditors. We expect that our
audited financial results will be
finalized in March 2005 and will file
our financial statements with the
securities regulators shortly
thereafter.
1. Significant accounting policies:
The significant accounting policies
used in preparing these interim
consolidated financial statements
are consistent with those used in
preparing our annual consolidated
financial statements for the year ended
December 31, 2003, except as disclosed
below:
(a) Stock-based compensation and other
stock-based payments:
In December
2003, the Canadian Institute of Chartered Accountants
("CICA") amended
Section 3870 to require entities to account for
employee stock
options using the fair value-based method, beginning
January 1,
2004. In accordance with one of the transitional
alternatives
permitted under amended Section 3870, we prospectively
adopted in
December 2003 the fair value-based method with respect to
all employee
stock options granted on or after January 1, 2003.
Accordingly,
options granted prior to that date continue to be
accounted
for using the settlement method. In 2003, the prospective
application
of adopting the fair value-based method effective
January 1,
2003 was applied retroactively in our consolidated
financial
statements for the three months and year ended December 31,
2003.
The fair value
of stock options granted in the year ended
December 31,
2004 has been estimated using the Black-Scholes option
pricing model
with the following assumptions: risk-free interest
rates ranging
from 2.96% to 4.39% (2003 - 4.44% to 5.02%);
semi-annual
dividend per Limited Voting Share in 2004 and 2003 of
$0.055; volatility
factor of the expected market price of our Limited
Voting Shares
ranging from 28% to 30% (2003 - 32%); and expected
lives of the
options in 2004 and 2003 ranging between four and seven
years, depending
on the level of the employee who was granted stock
options. For
the options granted in the year ended December 31, 2004,
the weighted
average fair value of the options at the grant dates was
$25.32 (2003
- $18.46). For the options granted in the three months
ended December
31, 2003, the weighted average fair value of the
options at
the grant dates was $23.08. No stock options were granted
during the
three months ended December 31, 2004. For purposes of
stock option
expense and pro forma disclosures, the estimated fair
value of the
options is amortized to compensation expense over the
options' vesting
period.
Section 3870
requires pro forma disclosure of the effect of the
application
of the fair value-based method to employee stock options
granted on
or after January 1, 2002 and not accounted for using the
fair value-based
method. For the three months and year ended
December 31,
2004 and 2003, if we had applied the fair value-based
method to
options granted from January 1, 2002 to December 31, 2002,
our net earnings
and basic and diluted earnings per share would have
been adjusted
to the pro forma amounts indicated below:
(In thousands
of Canadian
Three months ended
Years ended
dollars
except
December 31,
December 31,
per
share amounts) 2004
2003 2004
2003
---------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
Stock option
expense
included
in
compensation
expense
$ (611) $ (368)
$ (2,113) $ (893)
---------------------------------------------------
---------------------------------------------------
Net earnings,
as reported
$ 15,567 $ 11,704 $
33,232 $ 5,384
Additional
expense
that
would
have been
recorded
if all
outstanding
stock
options
granted
during
2002 had
been
expensed (847)
(863) (3,407)
(3,450)
---------------------------------------------------
Pro forma
net
earnings
$ 14,720 $ 10,841 $
29,825 $ 1,934
---------------------------------------------------
Earnings per
share:
Basic, as
reported $
0.43 $ 0.33 $
0.93 $ 0.15
Basic, pro
forma
0.41 0.31
0.84 0.06
Diluted, as
reported
0.41 0.32
0.89 0.15
Diluted, pro
forma
0.39 0.30
0.80 0.05
---------------------------------------------------
(b) Hedging relationships:
The CICA issued
Accounting Guideline No. 13, "Hedging Relationships",
which establishes
requirements for the identification, documentation,
designation
and effectiveness of hedging relationships and was
effective
for fiscal years beginning on or after July 1, 2003.
Effective
January 1, 2004, we ceased designating our US dollar
forward contracts
as hedges of our US dollar revenues. These
contracts
were entered into during 2002, and all of these contracts
matured during
2004. The foreign exchange gains on these contracts
of $14,552,
which were deferred prior to January 1, 2004, were
recognized
in 2004 as an increase of fee revenues over the course of
the year.
Effective January 1, 2004, our US dollar forward contracts
were marked-to-market
on a monthly basis with the resulting changes
in fair values
being recorded as a foreign exchange gain or loss. The
impact of
ceasing to designate our US dollar forward contracts as
hedges of
our US dollar revenues was to decrease net earnings by
$515 and nil,
respectively, for the three months and year ended
December 31,
2004. No further contracts have been entered into
subsequently.
(c) Reimbursed costs:
As a result
of adopting Section 1100, "Generally Accepted Accounting
Principles",
which was issued by the CICA, and was effective
January 1,
2004, we have included the reimbursement of all
out-of-pocket
expenses in both revenues and expenses instead of
recording
certain reimbursed costs as a "net" amount. The change in
the accounting
treatment of reimbursed costs resulted in an increase
of both revenues
and expenses for the three months and year ended
December 31,
2004 of $12,037 and $42,021, respectively (2003 -
$12,891 and
$46,077, respectively), but did not have an impact on
net earnings.
In addition, for the three months and year ended
December 31,
2003, each of fee revenues and general and
administrative
expenses included certain other reimbursed costs of
$7,526 and
$29,226, respectively. These have been reclassified to
reimbursed
costs in both revenues and expenses to conform with the
financial
statement presentation adopted in 2004.
(d) Impairment of long-lived assets:
The CICA issued
Section 3063, "Impairment of Long-Lived Assets",
which establishes
standards for the recognition, measurement and
disclosure
of the impairment of long-lived assets, and replaces the
write-down
provisions of Section 3061, "Property, Plant and
Equipment".
In accordance with Section 3063, long-lived assets, such
as property,
plant and equipment and purchased intangibles subject to
amortization,
are reviewed for impairment whenever events or changes
in circumstances
indicate that the carrying amount of an asset may
not be recoverable.
Recoverability of assets to be held and used is
measured by
a comparison of the carrying amount of an asset to
estimated
undiscounted future cash flows expected to be generated by
the asset.
If the carrying amount of an asset exceeds its estimated
future cash
flows, an impairment charge is recognized equal to the
amount by
which the carrying amount of the asset exceeds the fair
value of the
asset. The implementation of Section 3063, effective
January 1,
2004, did not have an impact on our consolidated financial
statements
for the three months and year ended December 31, 2004.
(e) Accounting for asset retirement
obligations:
The CICA issued
Section 3110, "Accounting for Asset Retirement
Obligations",
which requires companies to record the fair value of an
asset retirement
obligation as a liability in the year in which they
incur a legal
obligation associated with the retirement of tangible
long-lived
assets that result from the acquisition, construction,
development
and/or normal use of the assets. Companies are also
required to
record a corresponding asset that is depreciated over the
life of the
asset. Subsequent to the initial measurement of the asset
retirement
obligation, the obligation will be adjusted at the end of
each period
to reflect the passage of time and changes in the
estimated
future cash flows underlying the obligation. The
implementation
of Section 3110, effective January 1, 2004, did not
have an impact
on our consolidated financial statements for the three
months and
year ended December 31, 2004.
(f) Revenue recognition:
In December
2003, the Emerging Issues Committee ("EIC") of the CICA
issued Abstract
EIC-141, "Revenue Recognition", which provides
revenue recognition
guidance. The implementation of EIC-141,
effective
January 1, 2004, did not have an impact on our consolidated
financial
statements for the three months and year ended December 31,
2004.
(g) Revenue arrangements with multiple
deliverables:
In December
2003, the EIC issued Abstract EIC-142, "Revenue
Arrangements
with Multiple Deliverables", which addresses accounting
for arrangements,
entered into after December 31, 2003, where an
enterprise
will perform multiple revenue generating activities. The
implementation
of EIC-142 did not have an impact on our consolidated
financial
statements for the three months and year ended December 31,
2004.
2. Bank credit facility:
During 2004, we finalized a new committed
bank credit facility of
US$125 million ($150,500), which expires
in September 2007. Borrowings
under this credit facility bear interest
at LIBOR plus a spread ranging
between 0.875% and 2.25%, depending
upon certain criteria specified in
the loan agreement. As at December
31, 2003, we had bank credit
facilities of US$212.5 million ($255,800),
which expired in 2004. As at
December 31, 2004, no amounts were
borrowed under this credit facility.
However, approximately US$10.9 million
($13,100) of letters of credit
were issued under this credit facility
as at December 31, 2004. No
amounts have been drawn under these
letters of credit.
3. Long-term obligations:
As at As at
December 31, December 31,
(In thousands of Canadian dollars)
2004 2003
-------------------------------------------------------------------------
(Unaudited)
Convertible notes, issued in 2004(a)
$ 259,155 $
-
Convertible notes, issued in 1999(b)
- 88,029
Deferred gain on termination of interest
rate swap(a)
8,760
-
Accrued benefit liability and other
obligations 41,208
32,079
-------------------------
309,123 120,108
Less amounts due within one year
(4,533) (2,587)
-------------------------
$ 304,590 $ 117,521
-------------------------
-------------------------
(a) In June 2004, we issued US$250
million ($341,100) principal amount of
convertible
senior notes. The net proceeds of the issuance, after
deducting
offering expenses and underwriters' commission, were
approximately
US$241.3 million ($329,273). These notes bear interest
at the rate
of 1.875% per annum (payable semi-annually in arrears on
January 30
and July 30 to holders of record on January 15 and
July 15, beginning
January 30, 2005), and will mature on July 30,
2024, unless
earlier redeemed or repurchased. The notes are
convertible
into Limited Voting Shares of Four Seasons Hotels Inc. at
an initial
conversion rate of 13.9581 shares per each one thousand US
dollar principal
amount (equal to a conversion price of approximately
US$71.64 ($86.23)
per Limited Voting Share), subject to adjustments
including
those in which (i) the Limited Voting Shares have traded
for more than
130% of the conversion price for a specified period,
(ii) the notes
have a trading price of less than 95% of the market
price of the
Limited Voting Shares into which they may be converted
for a specified
period, (iii) we call the notes for redemption, or
(iv) specified
corporate transactions or a "fundamental change"
occur. In
connection with a "fundamental change" on or prior to
July 30, 2009,
on conversion holders of notes will be entitled to
receive additional
Limited Voting Shares having a value equal to the
aggregate
of the make whole premium they would have received if the
notes were
purchased plus an amount equal to any accrued but unpaid
interest.
We may choose to settle conversion (including any make
whole premium)
in Limited Voting Shares, cash or a combination of
Limited Voting
Shares and cash (at our option).
On or after
August 4, 2009, we may (at our option) redeem all or a
portion of
the notes, in whole or in part, for cash at 100% of their
principal
amount, plus any accrued and unpaid interest. On each of
July 30, 2009,
2014 and 2019, holders may require us to purchase all
or a portion
of their notes at 100% of their principal amount, plus
any accrued
and unpaid interest. We will pay cash for any notes so
purchased
on July 30, 2009. Repurchases made on July 30, 2014 and
July 30, 2019
may be made (at our option) in cash, Limited Voting
Shares or
a combination of cash and Limited Voting Shares. Upon the
occurrence
of certain designated events, we will be required to make
an offer to
purchase the notes at 100% of their principal amount plus
any accrued
and unpaid interest, and, in the case of a "fundamental
change" that
is also a "change of control" occurring on or before
July 30, 2009,
we also will pay a make whole premium. We may choose
to pay the
purchase price (including any make whole premium) for
notes in respect
of which our offer is accepted in (at our option)
cash, Limited
Voting Shares, securities of the surviving entity (if
Four Seasons
Hotels Inc. is not the surviving corporation), or a
combination
of cash and shares or securities.
In accordance
with Canadian GAAP, the notes are bifurcated on our
financial
statements into a debt component (representing the
principal
value of a bond of US$211.8 million ($288,918), which was
estimated
based on the present value of a US$250 million ($341,100)
bond maturing
in 2009, yielding 5.33% per annum, compounded
semi-annually,
and paying a coupon of 1.875% per annum) and an equity
component
(representing the value of the conversion feature of the
notes). Accordingly,
net proceeds have been allocated $288,918 to
long-term
obligations and $50,373 to shareholders' equity. The
offering expenses
and underwriters' commission of approximately
$10,018 relating
to the debt component, are recorded in other assets.
The debt component
of the notes will increase for accounting purposes
at the compounded
interest rate of 5.33%, less the coupon paid of
1.875% per
annum.
In connection
with the offering, we had entered into an interest rate
swap agreement
to July 30, 2009 with an initial notional amount of
US$211.8 million
($288,918), pursuant to which we had agreed to
receive interest
at a fixed rate of 5.33% per annum and pay interest
at six-month
LIBOR in arrears plus 0.4904%. We had designated the
interest rate
swap as a fair value hedge of the notes. As a result,
we were accounting
for the payments under the interest rate swap on
an accrual
basis, which resulted in an effective interest rate (for
accounting
purposes) on the hedged notes of six-month LIBOR in
arrears plus
0.4904%.
In October
2004, we terminated the interest rate swap agreement and
received proceeds
of US$9 million ($11,267). The book value of the
interest rate
swap at the date of termination was $2,024. The gain of
$9,243 was
deferred for accounting purposes and is being amortized
over the next
4.75 years, which would have been the remaining swap
term. During
2004, $483 of the deferred gain was amortized and
recorded as
a reduction of interest expense.
(b) During 1999, we issued US$655.5
million principal amount at maturity
(September
23, 2029) of convertible notes for gross proceeds of
US$172.5 million.
The net proceeds of the issuance, after deducting
offering expenses
and underwriters' commission, were US$166 million.
We were entitled
to redeem the convertible notes commencing in
September
2004 for cash equal to the issue price plus accrued
interest calculated
at 4 1/2% per annum. In September 2004, we
redeemed for
cash all these convertible notes for US$328.73 per each
one thousand
US dollar principal amount at maturity (the redemption
price being
the issue price plus interest that was accrued but
unpaid) for
an aggregate payment of US$215.5 million ($275,701).
In accordance
with Canadian GAAP, we allocated the consideration paid
on the redemption
to the liability and equity components of the
convertible
notes based on their relative fair values at the date of
the redemption.
We recognized a pre-tax accounting loss of $14,611
related to
the debt component of the convertible notes (representing
the difference
between the carrying value of the debt component and
the relative
fair value of the debt component and calculated at the
present value
of the amount due on maturity, using an assumed 25-year
interest rate
of 8.474% per annum, compounding semi-annually). This
loss was recorded
in other expense, net in the consolidated
statements
of operations. In addition, at the interest rate noted
above, we
recognized a pre-tax accounting gain on the extinguishment
of the equity
component of the convertible notes of $8,160. The gain
was recorded
in contributed surplus. The tax impact of the redemption
of both the
liability and equity components of the convertible notes
was a decrease
to future income tax assets and a decrease to
contributed
surplus of $4,141. The net after-tax impact on
shareholders'
equity from the redemption of both the debt and equity
components
of the convertible notes was a reduction of $10,592.
In accordance
with Canadian GAAP, the cash paid on redemption of the
convertible
notes relating to the interest accreted from September
1999 to September
2004, for accounting purposes, of US$25.8 million
($33,057)
on the convertible notes has been recorded in the
consolidated
statements of cash provided by operations. The remaining
cash paid
on redemption of US$189.7 million ($242,644) has been
recorded under
"Financing" in the consolidated statements of cash
flows.
4. Shareholders' equity:
As at December 31, 2004, we have outstanding
Variable Multiple Voting
Shares ("VMVS") of 3,725,698, outstanding
Limited Voting Shares ("LVS")
of 32,882,948 and outstanding stock
options of 4,564,583 (weighted
average exercise price of $59.33).
A reconciliation of the net earnings
and weighted average number of VMVS
and LVS used to calculate basic and
diluted earnings per share is as
follows:
(Unaudited)
Three months ended
(In thousands of
December 31,
Canadian dollars)
2004
2003
-------------------------------------------------------------------------
Net earnings Shares Net earnings
Shares
-------------------------------------------------------------------------
Basic earnings
per share amounts
$ 15,567 36,104,399 $
11,704 35,146,473
Effect of assumed
dilutive conversions:
Stock option plan
- 1,686,109
- 1,489,773
-------------------------------------------------------------------------
Diluted earnings
per share amounts
$ 15,567 37,790,508 $
11,704 36,636,246
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Years ended
(In thousands of
December 31,
Canadian dollars)
2004
2003
-------------------------------------------------------------------------
(Unaudited)
Net earnings Shares Net earnings
Shares
-------------------------------------------------------------------------
Basic earnings
per share amounts
$ 33,232 35,647,986 $
5,384 34,996,389
Effect of assumed
dilutive conversions:
Stock option plan
- 1,666,230
- 870,135
-------------------------------------------------------------------------
Diluted earnings
per share amounts
$ 33,232 37,314,216 $
5,384 35,866,524
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The diluted earnings per share calculation
excluded the effect of the
assumed conversions of 59,000 and
847,876 stock options to LVS, under our
stock option plan, during the three
months and year ended December 31,
2004, respectively (2003 - 1,440,996
and 1,958,842 stock options,
respectively), as the inclusion of
these conversions resulted in an
anti-dilutive effect. In addition,
the dilution relating to the assumed
conversion of our convertible notes
(issued in 1999 and subsequently
redeemed in 2004) (note 3(b)) to 3,463,155
LVS, by application of the
"if-converted method", has been excluded
from the calculation for 2004
and 2003 as the inclusion of this
conversion resulted in an anti-dilutive
effect for the three months and years
ended December 31, 2004 and 2003.
There was no dilution relating to
the convertible senior notes issued in
2004 (note 3(a)) as the contingent
conversion price was not reached
during the periods.
5. Consolidated revenues:
Three months ended
Years ended
(In thousands of
December 31,
December 31,
Canadian dollars)
2004 2003
2004 2003
-------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
Revenues from
Management
Operations
$ 54,090 $ 53,468 $
218,547 $ 195,833
Revenues from
Ownership and
Corporate Operations
32,479 36,020
126,726 123,214
Distribution from
hotel investments
- -
398 153
Fees from Ownership
and Corporate
Operations to
Management Operations
(1,727) (1,603)
(5,883) (5,620)
---------------------------------------------------
$ 84,842 $ 87,885 $
339,788 $ 313,580
---------------------------------------------------
---------------------------------------------------
6. Other income (expense), net:
Included in other income (expense),
net for the year ended December 31,
2004 is the loss on the redemption
of the debt component of our
convertible notes (issued in 1999)
of $14,611 (note 3(b)).
In addition, other income (expense),
net for the three months and year
ended December 31, 2004 includes a
net foreign exchange gain of $6,424
and $3,615, respectively (2003 - net
foreign exchange gain of $2,476 and
a net foreign exchange loss of $14,703,
respectively) related to the
foreign currency translation gains
and losses on unhedged net monetary
asset and liability positions, primarily
in US dollars, euros, pounds
sterling and Australian dollars, and
foreign exchange gains and losses
incurred by our foreign self-sustaining
subsidiaries.
During the year ended December 31,
2004, we sold all of our investment in
Four Seasons Resort Whistler, the
majority of our 8% investment in Four
Seasons Hotel Amman and all our ownership
interest in land relating to
Four Seasons Resort Scottsdale for
proceeds of approximately $50,000, and
exited from our proposed project in
Sedona, resulting in a total net loss
from these transactions of $4,610.
The majority of the loss related to
the settlement of our loan receivable
from Sedona and for legal costs
incurred to finalize the dispositions.
During the three months ended
December 31, 2003, we wrote down our
fixed asset investment in Four
Seasons Hotel Berlin to nil, resulting
in an expense of $3,174.
Also included in other income (expense),
net for the three months and
year ended December 31, 2004 are legal
and enforcement costs of nil and
$273, respectively (2003 - $795 and
$9,475 respectively), in connection
with the disputes with the owners
of the Four Seasons hotels in Caracas
and Seattle.
7. Pension benefit expense:
The pension benefit expense, after
allocation to managed properties, for
the three months and year ended December
31, 2004 was $810 and $3,074,
respectively (2003 - $542 and $2,670,
respectively).
8. Seasonality:
Our hotels and resorts are affected
by normally recurring seasonal
patterns and, for most of the properties,
demand is usually lower in the
period from December through March
compared to the remainder of the year.
Typically, the first quarter is the
weakest quarter and the fourth
quarter is the strongest quarter for
the majority of the properties.
Our ownership operations are particularly
affected by seasonal
fluctuations, with lower revenue,
higher operating losses and lower cash
flow in the first quarter, as compared
to other quarters. As a result,
ownership operations usually incur
an operating loss in the first quarter
of each year.
Management operations are also affected
by seasonal patterns, both in
terms of revenues and operating results.
Urban hotels generally
experience lower revenues and operating
results in the first quarter, as
compared to other quarters. However,
this negative impact on management
revenues is offset, to some degree,
by increased travel to our resorts in
the period.
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA -
CORE HOTELS(1)
Three months ended
December 31,
(Unaudited)
2004 2003
Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties
48 48
-
No. of Rooms
12,784 12,784
-
Occupancy(2)
69.0% 66.0%
3.0pts.
ADR(3)
- in US dollars
$344 $322
6.8%
RevPAR(4) - in US
dollars
$219 $198
10.7%
Gross operating margin(5)
29.5% 29.4%
0.1pts.
United States
No. of Properties
19 19
-
No. of Rooms
6,108 6,108
-
Occupancy(2)
70.6% 67.3%
3.3pts.
ADR(3)
- in US dollars
$358 $340
5.2%
RevPAR(4) - in US
dollars
$255 $230
10.6%
Gross operating margin(5)
26.9% 26.0%
0.9pts.
Other Americas/Caribbean
No. of Properties
7 7
-
No. of Rooms
1,541 1,541
-
Occupancy(2)
62.9% 59.6%
3.3pts.
ADR(3)
- in US dollars
$322 $308
4.5%
RevPAR(4) - in US
dollars
$181 $168
7.7%
Gross operating margin(5)
27.5% 29.5%
(2.0)pts.
Europe
No. of Properties
7 7
-
No. of Rooms
1,331 1,331
-
Occupancy(2)
59.9% 61.1%
(1.2)pts.
ADR(3)
- in US dollars
$526 $470
11.9%
RevPAR(4) - in US
dollars
$337 $299
12.7%
Gross operating margin(5)
30.4% 29.6%
0.8pts.
Middle East
No. of Properties
3 3
-
No. of Rooms
598 598
-
Occupancy(2)
67.8% 59.9%
7.9pts.
ADR(3)
- in US dollars
$168 $163
3.1%
RevPAR(4) - in US
dollars
$113 $101
12.3%
Gross operating margin(5)
42.5% 44.9%
(2.4)pts.
Asia/Pacific
No. of Properties
12 12
-
No. of Rooms
3,206 3,206
-
Occupancy(2)
72.8% 69.8%
3.0pts.
ADR(3)
- in US dollars
$271 $254
6.7%
RevPAR(4) - in US
dollars
$143 $129
10.8%
Gross operating margin(5)
36.3% 37.4%
(1.1)pts.
-----------------------------------------------
(1) The term "Core Hotels" means hotels
and resorts under management for
the full year
of both 2004 and 2003. However, if a "Core Hotel" has
undergone
or is undergoing an extensive renovation program in one of
those years
that materially affects the operation of the property in
that year,
it ceases to be included as a "Core Hotel" in either year.
Changes from
the 2003/2002 Core Hotels are the additions of Four
Seasons Hotel
Amman, Four Seasons Resort Sharm el Sheikh, Four
Seasons Hotel
Shanghai and Four Seasons Hotel Tokyo at Marunouchi and
the deletion
of Four Seasons Hotel Berlin, Four Seasons Resort Santa
Barbara, Four
Seasons Resort Scottsdale at Troon North and Four
Seasons Hotel
Washington, DC, the last three of which are undergoing
extensive
renovation programs that began in 2004.
(2) Occupancy percentage is defined
as the total number of rooms occupied
divided by
the total number of rooms available.
(3) ADR is defined as average daily
room rate calculated as straight
average for
each region.
(4) RevPAR is defined as average room
revenue per available room. RevPAR
is a commonly
used indicator of market performance for hotels and
resorts and
represents the combination of the average daily room rate
per room occupied
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. We report 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
percentage
of gross operating revenue.
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA -
CORE HOTELS(1)
Years ended
December 31,
(Unaudited)
2004 2003
Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties
48 48
-
No. of Rooms
12,784 12,784
-
Occupancy(2)
68.5% 61.9%
6.6pts.
ADR(3)
- in US dollars
$332 $308
7.7%
RevPAR(4) - in US
dollars
$211 $183
15.5%
Gross operating margin(5)
29.3% 26.9%
2.4pts.
United States
No. of Properties
19 19
-
No. of Rooms
6,108 6,108
-
Occupancy(2)
70.5% 68.1%
2.4pts.
ADR(3)
- in US dollars
$346 $330
5.0%
RevPAR(4) - in US
dollars
$244 $225
8.7%
Gross operating margin(5)
25.6% 25.4%
0.2pts.
Other Americas/Caribbean
No. of Properties
7 7
-
No. of Rooms
1,541 1,541
-
Occupancy(2)
64.2% 56.1%
8.1pts.
ADR(3)
- in US dollars
$302 $285
5.7%
RevPAR(4) - in US
dollars
$180 $152
18.2%
Gross operating margin(5)
29.8% 26.7%
3.1pts.
Europe
No. of Properties
7 7
-
No. of Rooms
1,331 1,331
-
Occupancy(2)
63.0% 59.5%
3.5pts.
ADR(3)
- in US dollars
$520 $459
13.5%
RevPAR(4) - in US
dollars
$343 $285
20.6%
Gross operating margin(5)
33.9% 31.2%
2.7pts.
Middle East
No. of Properties
3 3
-
No. of Rooms
598 598
-
Occupancy(2)
70.5% 47.7%
22.8pts.
ADR(3)
- in US dollars
$171 $159
7.5%
RevPAR(4) - in US
dollars
$121 $79
52.9%
Gross operating margin(5)
46.8% 33.6%
13.2pts.
Asia/Pacific
No. of Properties
12 12
-
No. of Rooms
3,206 3,206
-
Occupancy(2)
68.7% 56.7%
12.0pts.
ADR(3)
- in US dollars
$258 $238
8.6%
RevPAR(4) - in US
dollars
$127 $96
31.9%
Gross operating margin(5)
33.5% 28.2%
5.3pts.
-----------------------------------------------
(1) The term "Core Hotels" means hotels
and resorts under management for
the full year
of both 2004 and 2003. However, if a "Core Hotel" has
undergone
or is undergoing an extensive renovation program in one of
those years
that materially affects the operation of the property in
that year,
it ceases to be included as a "Core Hotel" in either year.
Changes from
the 2003/2002 Core Hotels are the additions of Four
Seasons Hotel
Amman, Four Seasons Resort Sharm el Sheikh, Four
Seasons Hotel
Shanghai and Four Seasons Hotel Tokyo at Marunouchi and
the deletion
of Four Seasons Hotel Berlin, Four Seasons Resort Santa
Barbara, Four
Seasons Resort Scottsdale at Troon North and Four
Seasons Hotel
Washington, DC, the last three of which are undergoing
extensive
renovation programs that began in 2004.
(2) Occupancy percentage is defined
as the total number of rooms occupied
divided by
the total number of rooms available.
(3) ADR is defined as average daily
room rate calculated as straight
average for
each region.
(4) RevPAR is defined as average room
revenue per available room. RevPAR
is a commonly
used indicator of market performance for hotels and
resorts and
represents the combination of the average daily room rate
per room occupied
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. We report 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
percentage
of gross operating revenue.
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA - ALL
MANAGED HOTELS
As at
December 31,
(Unaudited)
2004 2003
Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties
63(1) 60
3
No. of Rooms
16,378(1) 15,726
652
United States
No. of Properties
24 24
-
No. of Rooms
7,109 7,145
(36)
Other Americas/Caribbean
No. of Properties
10 9
1
No. of Rooms
2,162 1,929
233
Europe
No. of Properties
10(1) 9
1
No. of Rooms
1,786(1) 1,696
90
Middle East
No. of Properties
5 4
1
No. of Rooms
1,212 847
365
Asia/Pacific
No. of Properties
14 14
-
No. of Rooms
4,109 4,109
-
(1) Since December 31, 2004, we commenced
management of Four Seasons
Hotel Hampshire,
which has 133 rooms. The property is not reflected
in this table.
FOUR SEASONS HOTELS INC.
REVENUES UNDER MANAGEMENT - ALL MANAGED
HOTELS
(Unaudited)
Three months ended
Years ended
(In thousands of
December 31,
December 31,
Canadian dollars)
2004 2003
2004 2003
-------------------------------------------------------------------------
Revenues under
management(1)
$ 738,044 $ 691,886 $ 2,911,992
$ 2,600,430
---------------------------------------------------
---------------------------------------------------
----------------------
(1) Revenues under management consist
of rooms, food and beverage,
telephone
and other revenues of all the hotels and resorts which we
manage. Approximately
68% of the fee revenues (excluding reimbursed
costs) we
earned were calculated as a percentage of the total
revenues under
management of all hotels and resorts.
FOUR SEASONS HOTELS INC.
SCHEDULED OPENING OF PROPERTIES UNDER
CONSTRUCTION OR
IN ADVANCED STAGES OF DEVELOPMENT
Hotel/Resort/Residence Club and Location(1)(2)
Approximate
Number of Rooms
Scheduled 2005/2006 openings
----------------------------
Four Seasons Hotel Alexandria, Egypt(x)
125
Four Seasons Hotel Damascus, Syria
305
Four Seasons Hotel Doha, Qatar(x)
230
Four Seasons Hotel Florence, Italy
120
Four Seasons Hotel Geneva, Switzerland
100
Four Seasons Hotel Hong Kong, People's
Republic of China(x) 395
Four Seasons Resort Lanai at Koele,
HI, USA
100
Four Seasons Resort Lanai at Manele
Bay, HI, USA
250
Four Seasons Resort Langkawi, Malaysia
90
Four Seasons Resort Maldives at Landaa
Giraavaru, Maldives 115
Four Seasons Hotel Mumbai, India
235
Four Seasons Hotel Silicon Valley
at East Palo Alto, CA, USA 200
Four Seasons Residence Club Punta
Mita, Mexico
35
Four Seasons Private Residences Whistler,
B.C., Canada
35
Beyond 2006
-----------
Four Seasons Hotel Baltimore, MD, USA(x)
200
Four Seasons Hotel Beijing, People's
Republic of China
325
Four Seasons Hotel Beirut, Lebanon
235
Four Seasons Resort Bora Bora, French
Polynesia
105
Four Seasons Hotel Dubai, UAE(x)
250
Four Seasons Hotel Istanbul at the
Bosphorus, Turkey
170
Four Seasons Hotel Kuwait City, Kuwait
225
Four Seasons Hotel Moscow, Russia(x)
210
Four Seasons Hotel Moscow Kamenny
Island, Russia(x)
80
Four Seasons Resort Puerto Rico, Puerto
Rico(x)
250
Four Seasons Hotel Seattle, WA, USA(x)
150
Four Seasons Resort Vail, CO, USA
120
(x) Expected to include a residential
component.
----------------------
(1) Information concerning hotels,
resorts and Residence Clubs under
construction
or under development is based upon agreements and
letters of
intent and may be subject to change prior to the
completion
of the project. The dates of scheduled openings have been
estimated
by management based upon information provided by the
various developers.
There can be no assurance that the date of
scheduled
opening will be achieved or that these projects will be
completed.
In particular, in the case where a property is scheduled
to open near
the end of a year, there is a greater possibility that
the year of
opening could be changed. The process and risks
associated
with the management of new properties are dealt with in
greater detail
in our 2003 Annual Report.
(2) We have made an investment in Orlando,
in which we expect to include
a Four Seasons
Residence Club and/or a Four Seasons branded
residential
component. The financing for this project has not yet
been completed
and therefore a scheduled opening date cannot be
established
at this time.
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All dollar amounts referred to in this news release are in Canadian
dollars unless otherwise noted. The financial statements are prepared in
accordance with Canadian GAAP.
This news release contains "forward-looking statements" within the meaning
of federal securities laws, including RevPAR, profit margin and earnings
trends; statements concerning the number of lodging properties expected
to be added in this and future years; expected investment spending; and
similar statements concerning anticipated future events results, circumstances,
performance or expectations that are not historical facts.
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