Fairmont Hotels & Resorts Inc.
Consolidated Balance Sheets
(Stated in millions of U.S. dollars)
ASSETS
September 30 December 31
2005 2004
------------ ------------
(Unaudited)
Current assets
Cash and cash equivalents
$ 86.2 $
99.1
Accounts receivable
100.4 90.2
Taxes recoverable (note
5)
28.2
-
Inventory
14.8 15.5
Prepaid expenses and other
14.4 11.2
------------ ------------
244.0 216.0
Investments in partnerships and
corporations (note 3)
93.7 90.7
Investment in Legacy Hotels Real Estate
Investment Trust
68.9 70.0
Non-hotel real estate
106.0 100.3
Property and equipment
1,449.4 1,435.5
Goodwill
164.8 162.8
Intangible assets (notes 3, 4 and 7)
287.0 245.0
Other assets and deferred charges
(notes 3 and 4)
118.0 82.3
------------ ------------
$ 2,531.8 $ 2,402.6
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 151.2
$ 127.9
Taxes payable
3.1 31.3
Dividends payable
- 4.6
Current portion of long-term
debt
4.3 4.1
------------ ------------
158.6 167.9
Long-term debt
505.3 398.0
Other liabilities
101.1 95.7
Future income taxes
130.4 90.6
------------ ------------
895.4 752.2
------------ ------------
Shareholders' Equity (note 8)
1,636.4 1,650.4
------------ ------------
$ 2,531.8 $ 2,402.6
------------ ------------
------------ ------------
Fairmont Hotels & Resorts Inc.
Consolidated Statements of Income
(Stated in millions
of U.S. dollars, except per share amounts)
(Unaudited)
Three months ended Nine months ended
September 30
September 30
2005 2004
2005 2004
---------- ---------- ---------- ----------
Revenues
Hotel ownership operations
(note 10 (d))
$ 193.2 $ 180.3 $ 519.4
$ 516.3
Management operations
15.2 12.0
42.3 33.1
Real estate activities
(note 6)
19.3 4.8
28.8 26.2
---------- ---------- ---------- ----------
227.7 197.1
590.5 575.6
Other revenues from managed
and franchised properties
12.4 10.4
34.6 28.2
---------- ---------- ---------- ----------
240.1 207.5
625.1 603.8
Expenses
Hotel ownership operations
131.4 120.5
380.6 364.0
Management operations
4.1 4.3
14.5 13.0
Real estate activities
3.6 5.6
12.4 18.8
General and administrative
3.8 8.4
22.1 20.5
Other (note 12)
11.2 -
14.5 -
Amortization
17.2 16.8
50.1 54.3
---------- ---------- ---------- ----------
171.3 155.6
494.2 470.6
Other expenses from managed
and franchised properties
12.4 10.4
34.2 28.6
---------- ---------- ---------- ----------
183.7 166.0
528.4 499.2
Income from equity investments
5.6 5.2
1.8 1.2
---------- ---------- ---------- ----------
Operating income
62.0 46.7
98.5 105.8
Interest expense, net
6.0 6.7
19.2 25.7
Gain on sales of
investments and hotel assets
- (144.2)
- (144.2)
---------- ---------- ---------- ----------
Income before income
tax expense (recovery)
56.0 184.2
79.3 224.3
Income tax expense (recovery)
Current (note 5)
(48.7) 44.5
(58.0) 50.0
Future
35.7 7.9
38.2 14.1
---------- ---------- ---------- ----------
(13.0) 52.4
(19.8) 64.1
Net income
$ 69.0 $ 131.8 $
99.1 $ 160.2
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
common shares outstanding
(in millions) (note 8)
Basic
73.9 78.4
75.0 78.9
Diluted
74.9 79.3
76.0 79.7
Basic income
per common share
$ 0.93 $ 1.68 $
1.32 $ 2.03
Diluted income
per common share
$ 0.92 $ 1.66 $
1.30 $ 2.01
Fairmont Hotels & Resorts Inc.
Consolidated Statements of Cash Flows
(Stated in millions of U.S. dollars)
(Unaudited)
Three months ended Nine months ended
September 30
September 30
2005 2004
2005 2004
---------- ---------- ---------- ----------
Cash provided by (used in)
Operating activities
Net income
$ 69.0 $ 131.8 $
99.1 $ 160.2
Items not affecting cash
Amortization of
property and equipment
16.7 16.0
48.3 52.1
Amortization of
intangible assets
0.5 0.8
1.8 2.2
Income from
equity investments
(5.6) (5.2)
(1.8) (1.2)
Future income taxes
35.7 7.9
38.2 14.1
Tax recovery (note 5)
(28.2) -
(42.8) -
Unrealized foreign
exchange gain
(15.7) (13.3) (7.6)
(3.1)
Gain on sales of investments
and hotel assets
- (144.2)
- (144.2)
Other
3.5 5.8
2.2 7.8
Distributions
1.4 4.2
5.4 4.2
Changes in non-hotel
real estate
(4.6) (0.7)
(2.5) (0.4)
Changes in non-cash working
capital items (note 9)
4.4 52.0
(3.0) 15.7
---------- ---------- ---------- ----------
77.1 55.1
137.3 107.4
---------- ---------- ---------- ----------
Investing activities
Additions to property
and equipment
(11.2) (14.2) (51.4)
(58.2)
Proceeds from sale of
property and equipment
- -
8.8 -
Investments in partnerships
and corporations
- (1.9) (11.2)
(4.9)
Sales of investments
and hotel assets
3.0 443.6
3.0 443.6
Collection of loans receivable
- 0.1
- 9.0
Issuance of loans receivable
(0.3) -
(33.1) (7.0)
Investments in intangible assets
(5.3) -
(32.0) -
---------- ---------- ---------- ----------
(13.8) 427.6 (115.9)
382.5
---------- ---------- ---------- ----------
Financing activities
Issuance of long-term debt
24.7 -
104.5 82.7
Repayment of long-term debt
(1.3) (313.9) (5.8)
(379.5)
Issuance of common shares
0.1 0.3
2.9 0.9
Repurchase of common shares
(65.6) (46.4) (126.3)
(51.8)
Dividends paid
(4.5) (3.2)
(9.1) (6.4)
---------- ---------- ---------- ----------
(46.6) (363.2) (33.8)
(354.1)
---------- ---------- ---------- ----------
Effect of exchange
rate changes on cash
(0.4) 0.5
(0.5) 0.3
---------- ---------- ---------- ----------
Increase (decrease) in cash
16.3 120.0
(12.9) 136.1
Cash and cash equivalents
- beginning of period
69.9 47.8
99.1 31.7
---------- ---------- ---------- ----------
Cash and cash equivalents
- end of period
$ 86.2 $ 167.8 $
86.2 $ 167.8
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fairmont Hotels & Resorts Inc.
Consolidated Statements of Retained Earnings
(Stated in millions of U.S. dollars)
(Unaudited)
Three months ended Nine months ended
September 30
September 30
2005 2004
2005 2004
---------- ---------- ---------- ----------
Balance
- Beginning of period
$ 179.0 $ 101.1 $ 189.2
$ 78.1
Net income
69.0 131.8
99.1 160.2
---------- ---------- ---------- ----------
248.0 232.9
288.3 238.3
Repurchase of
common shares (note 8)
(34.5) (18.2) (70.3)
(20.4)
Dividend
- -
(4.5) (3.2)
---------- ---------- ---------- ----------
Balance - End of period
$ 213.5 $ 214.7 $ 213.5
$ 214.7
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fairmont Hotels & Resorts Inc.
Notes to Consolidated Financial Statements
(Stated in millions of U.S. dollars) (Unaudited)
1. Fairmont Hotels & Resorts
Inc. ("FHR" or the "Company") has operated
and owned
hotels and resorts for over 118 years and currently manages
properties,
principally under the Fairmont and Delta brands. As at
September
30, 2005, FHR managed or franchised 88 luxury and
first-class
hotels. FHR owns Fairmont Hotels Inc. ("Fairmont") which,
as at September
30, 2005, managed 50 luxury properties in major city
centers and
key resort destinations throughout Canada, the United
States, Mexico,
Bermuda, Barbados, United Kingdom, Monaco, Kenya and
the United
Arab Emirates. Delta Hotels Limited ("Delta"), a
wholly-owned
subsidiary of FHR, managed or franchised 38 Canadian
hotels and
resorts as at September 30, 2005.
In addition
to hotel and resort management, as at September 30, 2005,
FHR had hotel
ownership interests ranging from approximately 15% to
100% in 27
properties, located in Canada, the United States, Mexico,
Bermuda, Barbados,
Monaco, Kenya and the United Arab Emirates. FHR
also has an
approximate 24% equity interest in Legacy Hotels Real
Estate Investment
Trust ("Legacy") as at September 30, 2005, 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 a vacation ownership
product.
Results for
the three and nine months ended September 30, 2005 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 certain equity investments usually produce losses
without tax
benefits.
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, 2004. The accounting
policies used
in the preparation of these interim consolidated
financial
statements are consistent with the accounting policies used
in the December
31, 2004 audited consolidated financial statements,
except as
discussed below.
Liabilities
and equity
On January
1, 2005, FHR adopted the Canadian Institute of Chartered
Accountants'
("CICA") new accounting requirements on the
classification
of financial instruments as liabilities or equity. The
CICA amended
its disclosure requirements surrounding the presentation
of financial
instruments that may be settled in cash or by an
issuer's own
equity instruments, at the issuer's discretion, as
liabilities.
Adoption of this new standard did not have an impact on
the Company's
financial statements.
Determining
whether an arrangement contains a lease
In 2004, the
Emerging Issues Committee issued Abstract 150,
"Determining
whether an Arrangement Contains a Lease" ("EIC 150"). An
entity may
enter into certain arrangements comprising a transaction
or a series
of related transactions that does not take the legal form
of a lease
but conveys a right to use a tangible asset (e.g., an item
of property,
plant or equipment) in return for a payment or series of
payments.
The Company is required to adopt the recommendations of EIC
150 for affected
transactions commencing December 9, 2004. Adoption
of this new
standard did not have an impact on the Company's
financial
statements.
Variable interest
entities
Effective
January 1, 2005, the Company adopted Accounting Guideline
No. 15, "Consolidation
of Variable Interest Entities" ("AcG-15"),
which established
criteria to identify variable interest entities
("VIE") and
the primary beneficiary of such entities. Entities that
qualify as
VIEs must be consolidated by their primary beneficiary.
Adoption of
this new standard did not have an impact on the Company's
financial
statements.
3. In May 2005, FHR entered into
long-term contracts to manage five
properties
in Kenya. FHR invested $10.0 in connection with the five
management
contracts. A portion of the investment was funded as a
loan and a
portion of the investment financed the acquisition of an
approximate
15% interest in a corporation owned jointly with Kingdom
Hotels Investments
and IFA Hotels & Resorts. The corporation holds an
ownership
interest in five Kenyan properties known as The Norfolk
Hotel, Mount
Kenya Safari Club, The Aberdare Country Club, The Ark
and the Mara
Safari Club. Based on the relative fair value of the
management
contracts, the investment interest and the loan, $5.7 of
the $10.0
was allocated to the management contracts. The investment
of $3.1 is
accounted for using the equity method due to significant
influence
through contractual arrangements. $1.2 was allocated to the
loan, which
has a face value of $5.0, bears no interest and is
payable in
2020.
4. In January 2005, FHR entered
into a long-term contract to manage The
Savoy in London,
England. In 2004, FHR agreed to commit approximately
$63.0 to obtain
the management contract and provide loans to the
hotel's owners.
As at September 30, 2005, FHR had funded $54.3 of the
total commitment,
of which $22.8 related to the management contract,
and $31.5
related to a loan receivable, due in 2015 and bearing
interest at
7.75%.
5. In the quarter ended June
30, 2005, the Company reached a favorable
tax settlement
with the Canada Revenue Agency and recorded a $14.6
recovery of
current income taxes. During the quarter ended
September
30, 2005, the Company recorded an additional tax recovery
of $26.1,
net of taxes payable of approximately $2.1 on interest
income, to
reflect the final assessment.
6. In July 2005, FHR disposed
of a parcel of land in Vancouver for net
proceeds and
an after-tax gain of $17.9.
7. In July 2005, FHR entered
into a long-term management contract
related to
The Fairmont Newport Beach. FHR invested $3.3 in
connection
with this transaction.
8. Shareholders' equity
September 30, December 31,
2005 2004
------------ ------------
Common shares
$ 1,104.4 $ 1,163.1
Other equity
19.2 19.2
Treasury stock
- (5.6)
Contributed
surplus
143.9 142.4
Foreign currency
translation adjustments
155.4 142.1
Retained earnings
213.5 189.2
------------ ------------
$ 1,636.4 $ 1,650.4
------------ ------------
------------ ------------
The diluted
weighted-average number of common shares outstanding is
calculated
as follows:
Three months ended Nine months ended
September 30
September 30
2005 2004
2005 2004
---------- ---------- ---------- ----------
(in millions) (in millions)
Weighted-average
number
of common
shares
outstanding
- basic 73.9
78.4 75.0
78.9
Stock options
1.0 0.9
1.0 0.8
---------- ---------- ---------- ----------
Weighted-average
number
of common shares
outstanding - diluted 74.9
79.3 76.0
79.7
---------- ---------- ---------- ----------
Effective October
29, 2004, FHR may repurchase for cancellation up to
10% of its
outstanding common shares. The amounts and timing of
repurchases
are at FHR's discretion. During the nine months ended
September
30, 2005, FHR repurchased 3,925,600 shares (2,076,300
during the
third quarter). Also, an additional 166,100 shares that
were classified
as treasury stock at December 31, 2004, were
cancelled
in 2005. Total consideration relating to the repurchase
amounted to
$126.3 ($65.6 for the third quarter), of which $59.0 was
charged to
common shares ($31.1 for the third quarter) and $67.3 was
charged to
retained earnings ($34.5 for the third quarter). Of the
$5.6 of treasury
stock outstanding at December 31, 2004, $2.6 was
reclassified
to common shares and $3.0 to retained earnings in 2005.
During the
nine months ended September 30, 2005, FHR issued 146,690
shares (6,637
for the third quarter) pursuant to the Key Employee
Stock Option
Plan for which $2.9 was credited to common shares
($0.1 for
the third quarter) for proceeds from options exercised. At
September
30, 2005, 72,448,338 common shares were outstanding
(December
31, 2004 - 76,393,348).
During the
nine months ended September 30, 2005, 320,000 stock
options were
granted (20,000 in the third quarter), and the cost of
this stock-based
compensation was recorded based on the estimated
fair value
of these options. 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 Nine months ended
September 30
September 30
2005 2004
2005 2004
---------- ---------- ---------- ----------
Reported net
income $ 69.0
$ 131.8 $ 99.1 $
160.2
Net income
assuming fair
value
method used $
68.9 $ 131.7 $ 98.8 $
159.9
Assuming fair
value
method
used
Basic earnings
per share $ 0.93 $ 1.68
$ 1.32 $ 2.03
Diluted earnings
per
share
$ 0.92 $ 1.66 $
1.30 $ 2.01
9. Changes in non-cash working
capital:
Three months ended Nine months ended
September 30
September 30
2005 2004
2005 2004
---------- ---------- ---------- ----------
Decrease (increase)
in current
assets
Accounts receivable
$ 11.6 $ (5.9) $
(6.9) $ (31.1)
Inventory
0.9 0.1
0.9 (1.2)
Prepaid expenses
and other 3.5
6.6 (2.7)
(1.3)
Increase (decrease)
in current
liabilities
Accounts payable
and
accrued
liabilities
(0.5) 2.9
20.7 -
Taxes payable
(11.1) 48.3
(15.0) 49.3
---------- ---------- ---------- ----------
$ 4.4 $ 52.0 $
(3.0) $ 15.7
---------- ---------- ---------- ----------
10. Segmented Information
FHR has five
reportable segments in two core business activities,
ownership
and management operations. The segments are hotel
ownership,
investment in Legacy, real estate activities, Fairmont and
Delta. Results
of individual properties have been aggregated into
their respective
reportable segments. Hotel ownership consists of
real estate
interests ranging from approximately 15% to 100% in
27 properties.
The investment in Legacy consists of an approximate
24% equity
interest in Legacy, which owns 24 hotels and resorts
across Canada
and the United States. Real estate activities consist
primarily
of two undeveloped land blocks in Toronto and Vancouver and
a vacation
ownership product. Fairmont is an international 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 by management primarily
on earnings
before interest, taxes and amortization ("EBITDA"), which
management
defines as income before interest, income taxes and
amortization.
EBITDA includes income or loss from equity investments.
General and
administrative expenses, other, gain on sales of
investments
and hotel assets, 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 September 30, 2005
-------------------------------------------------------
Ownership
Management
-------------------------------- ---------------------
Hotel
Real estate
Ownership Legacy activities Fairmont
Delta
--------- --------- --------- --------- ---------
Operating
revenues
(d) $ 193.2 $
- $ 19.3 $ 16.8 $
4.0
Other revenues
from
managed
and
franchised
properties
- -
- 9.4
3.0
Income from
equity
investments
1.6 4.0
- -
-
EBITDA (b)
57.8 4.0
15.7 13.6
3.1
Total
assets
(c) 1,925.2
68.9 108.4
468.2 83.6
Capital
expenditures
8.1 -
- 3.1
-
General
and
adminis- Inter-
trative segment
and elimina-
other (e) tion (a) Total
-------------------------------
Operating
revenues
(d) $ - $
(5.6) $ 227.7
Other revenues
from
managed
and
franchised
properties
- -
12.4
----------
240.1
Income from
equity
investments
- 5.6
EBITDA (b)
(15.0) -
79.2
Total
assets
(c) -
(122.5) 2,531.8
Capital
expenditures
- -
11.2
Three months ended September 30, 2004
------------------------------------------------------
Ownership
Management
-------------------------------- ---------------------
Hotel
Real estate
Ownership Legacy activities Fairmont
Delta
--------- --------- --------- --------- ---------
Operating
revenues
(d) $ 180.3 $
- $ 4.8 $ 14.1
$ 3.5
Other revenues
from
managed
and
franchised
properties
- -
- 8.2
2.2
Income from
equity
investments
1.5 3.7
- -
-
EBITDA (b)
55.7 3.7
(0.8) 11.4
1.9
Total
assets
(c) 2,028.1
70.8 99.1
340.0 77.1
Capital
expenditures
12.0 -
- 2.2
-
General
and
adminis- Inter-
trative segment
and elimina-
other (e) tion (a) Total
-------------------------------
Operating
revenues
(d) $ - $
(5.6) $ 197.1
Other revenues
from
managed
and
franchised
properties
- -
10.4
---------
207.5
Income from
equity
investments
- -
5.2
EBITDA (b)
135.8 -
207.7
Total
assets
(c) -
(195.1) 2,420.0
Capital
expenditures
- -
14.2
Nine months ended September 30, 2005
-----------------------------------------------------
Ownership
Management
-------------------------------- ---------------------
Hotel
Real estate
Ownership Legacy activities Fairmont
Delta
--------- --------- --------- --------- ---------
Operating
revenues
(d) $ 519.4 $
- $ 28.8 $ 47.7 $
10.1
Other revenues
from
managed
and
franchised
properties
- -
- 26.2
8.4
Income (loss)
from
equity
investments
3.7 (1.9)
- -
-
EBITDA (b)
127.0 (1.9)
16.4 36.3
7.0
Total
assets
(c) 1,925.2
68.9 108.4
468.2 83.6
Capital
expenditures
44.0 -
- 7.4
-
General
and
adminis- Inter-
trative segment
and elimina-
other (e) tion (a) Total
-------------------------------
Operating
revenues
(d) $ - $ (15.5)
$ 590.5
Other revenues
from
managed
and
franchised
properties
- -
34.6
---------
625.1
Income (loss)
from
equity
investments
- -
1.8
EBITDA (b)
(36.6) 0.4
148.6
Total
assets
(c) -
(122.5) 2,531.8
Capital
expenditures
- -
51.4
Nine months ended September 30, 2004
------------------------------------------------------
Ownership
Management
-------------------------------- ---------------------
Hotel
Real estate
Ownership Legacy activities Fairmont
Delta
--------- --------- --------- --------- ---------
Operating
revenues
(d) $ 516.3 $
- $ 26.2 $ 40.2 $
9.6
Other revenues
from
managed
and
franchised
properties
- -
- 20.9
7.3
Income (loss)
from
equity
investments
2.0 (0.8)
- -
-
EBITDA (b)
137.5 (0.8)
7.4 30.9
6.0
Total
assets
(c) 2,028.1
70.8 99.1
340.0 77.1
Capital
expenditures
55.5 -
- 2.7
-
General
and
adminis- Inter-
trative segment
and elimina-
other (e) tion (a) Total
-------------------------------
Operating
revenues
(d) $ - $ (16.7)
$ 575.6
Other revenues
from
managed
and
franchised
properties
- -
28.2
---------
603.8
Income (loss)
from
equity
investments
- -
1.2
EBITDA (b)
123.7 (0.4)
304.3
Total
assets
(c) -
(195.1) 2,420.0
Capital
expenditures
- -
58.2
(a) Operating
revenues include management fees that are charged by
Fairmont of
$5.4 (2004 - $5.5) and $15.1 (2004 - $16.4) for the three
and nine months
ended September 30, 2005, respectively, and Delta of
$0.2 (2004
- $0.1) and $0.4 (2004 - $0.3) for the three and nine
months ended
September 30, 2005, respectively, to the hotel ownership
operations,
which are eliminated on consolidation. EBITDA includes
expenses not
reimbursed relating to marketing and reservation
services performed
by FHR under the terms of its hotel management and
franchise
agreements. Total assets have been reduced for the
elimination
of inter-segment loans net of corporate assets.
(b) A reconciliation
of aggregate EBITDA of the reportable segments
to net income
is as follows:
Three months ended Nine months ended
September 30
September 30
2005 2004
2005 2004
---------- ---------- ---------- ----------
EBITDA
$ 79.2 $ 207.7 $
148.6 $ 304.3
Amortization
(17.2) (16.8) (50.1)
(54.3)
Interest expense,
net (6.0)
(6.7) (19.2) (25.7)
Income tax
(expense)
recovery
13.0 (52.4)
19.8 (64.1)
---------- ---------- ---------- ----------
Net income
$ 69.0 $ 131.8 $
99.1 $ 160.2
---------- ---------- ---------- ----------
(c) Hotel ownership
assets include $93.6 (2004 - $69.6) of
investments
accounted for using the equity method.
(d) A breakdown
of the Company's hotel ownership operations revenues
are as follows:
Three months ended Nine months ended
September 30
September 30
2005 2004
2005 2004
---------- ---------- ---------- ----------
Rooms revenue
$ 103.2 $ 100.7 $ 272.8
$ 287.4
Food and beverage
revenue 62.3
55.9 176.1
163.9
Other
27.7 23.7
70.5 65.0
---------- ---------- ---------- ----------
$ 193.2 $ 180.3 $ 519.4
$ 516.3
---------- ---------- ---------- ----------
(e) In 2004,
General and administrative and other includes general
and administrative
expenses as well as gain on sales of investments
and hotel
assets of $144.2.
11. FHR recorded
pension and other post employment benefit expenses
as follows:
Three months ended Nine months ended
September 30
September 30
2005 2004
2005 2004
---------- ---------- ---------- ----------
Pension
$ 0.5 $ (0.1) $
1.4 $ 0.9
Other post-employment
benefits
0.1 0.1
0.3 0.2
---------- ---------- ---------- ----------
$ 0.6 $
- $ 1.7 $ 1.1
---------- ---------- ---------- ----------
12. During
the third quarter, the Company recorded a provision of
$11.2 related
to outstanding legal obligations associated with a
predecessor
company of Fairmont. During the second quarter, the
Company undertook
certain development activities related to a major
portfolio
acquisition, which the Company did not complete. A total of
$3.3 was expensed
relating to transaction costs in the second
quarter.
13. Certain
of the prior period figures have been reclassified to
conform with
the presentation adopted for 2005.
(xx) Index of supplementary financial and
operating information to follow (xx)
Fairmont Hotels & Resorts Inc.
Index
of Supplementary Financial and Operating Information
Page
----
Comparable operating statistics for
the
three and nine months ended September
30, 2005
ii
2004 hotel ownership revenues and EBITDA
adjusted for assets sales
iv
2005 portfolio seasonality information
v
Comparable operating statistics for
hotel
portfolio as of September 30, 2005
vi
Summary of hotel portfolio at
September 30, 2005 and 2004
viii
Fairmont Hotels & Resorts Inc.
Comparable operating statistics for
the three and nine months ended
September 30, 2005
-------------------------------------------------------------------------
Three months ended
September 30
September 30
Nine months ended
-------------------------------------------------------------------------
2005 2004 Variance 2005
2004 Variance
-------------------------------------------------------------------------
OWNED
HOTELS
-------------------------------------------------------------------------
Worldwide
14 properties/
6,746 rooms
-------------------------------------------------------------------------
RevPAR
$148.87 $138.53 7.5% $133.13
$123.95 7.4%
-------------------------------------------------------------------------
ADR
219.19 207.65 5.6% 205.02
194.06 5.6%
-------------------------------------------------------------------------
Occupancy
67.9% 66.7% 1.2
64.9% 63.9% 1.0
points
points
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Canada
7 properties/
3,336 rooms
-------------------------------------------------------------------------
RevPAR
$186.11 $173.78 7.1% $133.52
$125.19 6.7%
-------------------------------------------------------------------------
ADR
239.58 220.81 8.5% 195.77
180.95 8.2%
-------------------------------------------------------------------------
Occupancy
77.7% 78.7% (1.0)
68.2% 69.2% (1.0)
points
points
-------------------------------------------------------------------------
-------------------------------------------------------------------------
U.S.
3 properties/
1,574 rooms
-------------------------------------------------------------------------
RevPAR
$142.60 $118.11 20.7% $166.82 $147.42
13.2%
-------------------------------------------------------------------------
ADR
190.58 192.60 (1.0%) 225.02
224.54 0.2%
-------------------------------------------------------------------------
Occupancy
74.8% 61.3% 13.5
74.1% 65.7% 8.4
points
points
-------------------------------------------------------------------------
-------------------------------------------------------------------------
International
4 properties /
1,836 rooms
-------------------------------------------------------------------------
RevPAR
$86.59 $91.97 (5.8%) $103.62 $101.64
1.9%
-------------------------------------------------------------------------
ADR
195.57 185.61 5.4% 202.62
192.36 5.3%
-------------------------------------------------------------------------
Occupancy
44.3% 49.6% (5.3)
51.1% 52.8% (1.7)
points
points
-------------------------------------------------------------------------
-------------------------------------------------------------------------
FAIRMONT MANAGED
HOTELS(1)
-------------------------------------------------------------------------
Worldwide
39 hotels/
19,142 rooms
-------------------------------------------------------------------------
RevPAR
$147.63 $131.44 12.3% $131.54 $118.42
11.1%
-------------------------------------------------------------------------
ADR
205.35 190.57 7.8% 196.33
180.51 8.8%
-------------------------------------------------------------------------
Occupancy
71.9% 69.0% 2.9
67.0% 65.6% 1.4
points
points
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Canada
20 properties/
10,095 rooms
-------------------------------------------------------------------------
RevPAR
$149.35 $137.64 8.5% $113.58
$105.08 8.1%
-------------------------------------------------------------------------
ADR
196.85 184.41 6.7% 169.86
156.16 8.8%
-------------------------------------------------------------------------
Occupancy
75.9% 74.6% 1.3
66.9% 67.3% (0.4)
points
points
-------------------------------------------------------------------------
-------------------------------------------------------------------------
U.S.
14 properties/
6,817 rooms
-------------------------------------------------------------------------
RevPAR
$159.61 $133.84 19.3% $160.54 $141.56
13.4%
-------------------------------------------------------------------------
ADR
219.27 208.50 5.2% 229.14
218.61 4.8%
-------------------------------------------------------------------------
Occupancy
72.8% 64.2% 8.6
70.1% 64.8% 5.3
points
points
-------------------------------------------------------------------------
-------------------------------------------------------------------------
International
5 properties /
2,230 rooms
-------------------------------------------------------------------------
RevPAR
$105.20 $97.85 7.5% $123.85
$108.62 14.0%
-------------------------------------------------------------------------
ADR
201.88 168.84 19.6% 211.16
178.39 18.4%
-------------------------------------------------------------------------
Occupancy
52.1% 58.0% (5.9)
58.7% 60.9% (2.2)
points
points
-------------------------------------------------------------------------
-------------------------------------------------------------------------
DELTA MANAGED
HOTELS(1)
-------------------------------------------------------------------------
Worldwide
27 properties/
8,175 rooms
-------------------------------------------------------------------------
RevPAR
$89.17 $77.25 15.4% $74.36
$65.60 13.4%
-------------------------------------------------------------------------
ADR
115.22 103.51 11.3% 107.87
97.92 10.2%
-------------------------------------------------------------------------
Occupancy
77.4% 74.6% 2.8
68.9% 67.0% 1.9
points
points
-------------------------------------------------------------------------
(1) Includes hotels owned by Fairmont
Hotels & Resorts Inc.
Comparable hotels and resorts are considered to be properties
that were wholly-owned by or 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 Kea Lani
Maui (sold July 2004), The Fairmont Glitter Bay
(sold July 2004)
Fairmont Managed:
The Fairmont Southampton; The Fairmont Monte Carlo,
The Savoy, A Fairmont Hotel, The Norfolk Hotel,
Mount Kenya Safari Club, The Aberdare Country Club,
The Ark, Mara Safari Club, The Fairmont Glitter
Bay, The Fairmont New Orleans, The Fairmont Newport
Beach, The Plaza
Delta Managed:
Delta Meadowvale, Delta Kitchener and Delta
franchised hotels
Fairmont Hotels & Resorts Inc.
2004 hotel ownership revenues and
EBITDA adjusted for assets sales
2004
--------------------------------------------
First Second Third Fourth
Revenues
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- --------
(In millions of US dollars)
Hotel ownership revenues
adjusted for sold hotels
$ 131.1 $ 157.1 $ 176.7 $ 137.9 $ 602.8
Add: hotels sold
24.3 23.4 3.6
- 51.3
--------------------------------------------
Hotel ownership revenues
$ 155.4 $ 180.5 $ 180.3 $ 137.9 $ 654.1
--------------------------------------------
2004
--------------------------------------------
First Second Third Fourth
EBITDA
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- --------
(In millions of US dollars)
Hotel ownership EBITDA
adjusted for sold hotels
$ 25.4 $ 37.9 $ 54.2 $ 22.6
$ 140.1
Add: hotels sold
9.8 8.7 1.5
- 20.0
--------------------------------------------
Hotel ownership EBITDA
35.2 46.6 55.7
22.6 160.1
Gain on sales of
investments and hotels sales
- - 144.2
(0.5) (143.7)
EBITDA contribution (deduction)
from other segments
(1.1) 15.9 7.8
(1.7) 20.9
--------------------------------------------
Total EBITDA
34.1 62.5 207.7
20.4 324.7
Deduct (Add):
Amortization
19.5 18.0 16.8
19.6 73.9
Interest expense, net
10.0 9.0 6.7
7.4 33.1
Income tax expense
(recovery), net
5.2 6.5 52.4
(2.2) 61.9
--------------------------------------------
Net Income (loss)
$ (0.6) $ 29.0 $ 131.8 $ (4.4) $ 155.8
--------------------------------------------
Fairmont Hotels & Resorts Inc.
2005 portfolio seasonality information
First Second Third Fourth
Quarter Quarter Quarter Quarter
Year
-------- -------- -------- --------
--------
2005 quarterly
Adjusted EBITDA(1)
range guidance
$195 - $205
Mid-point of range
17% 30% 39%
14% million
Tax rate(2)
(excludes gain on
land sale, tax
recovery and legal
provision)
- 21% 27%
23%
29%
Notes:
(1) Given the seasonality
of FHR's portfolio, the information above
provides insight into the estimated quarterly breakdown of FHR's
Adjusted EBITDA.
(2) The tax rate
will be dependent upon the geographical source of
earnings in any one quarter. Quarterly tax rates vary
significantly throughout the year due to the seasonality of FHR's
earnings and differing tax rates in various jurisdictions. In the
first quarter, FHR's hotels in non-taxable jurisdictions typically
generate losses and equity investments usually produce non-taxable
losses. This results in an unusual income tax rate in the first
quarter.
Assumptions:
- The estimates above are based on the current portfolio and do
not anticipate any acquisitions or dispositions.
- An exchange rate of C$1.25/U.S.$1.00 has been assumed for the
year.
- Readers should note that the above information is qualified by
the forward-looking statement outlined in the Company's public
filings.
Fairmont
Hotels & Resorts Inc.
Operating statistics for comparable
hotels as of September 30, 2005
-------------------------------------------------------------------------
First Second First Second
Third Fourth 2004
Quarter Quarter Quarter Quarter Quarter Quarter
Full
2005 2005 2004
2004 2004 2004
Year
-------------------------------------------------------------------------
OWNED HOTELS
-------------------------------------------------------------------------
Worldwide
-------------------------------------------------------------------------
RevPAR $128.41
$121.88 $116.64 $116.37 $138.53 $102.88 $118.63
-------------------------------------------------------------------------
ADR
202.22 192.43 189.14 184.22
207.65 180.19 190.85
-------------------------------------------------------------------------
Occupancy 63.5%
63.3% 61.7% 63.2%
66.7% 57.1% 62.2%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Canada
-------------------------------------------------------------------------
RevPAR $101.18
$112.21 $ 93.86 $106.23 $173.78 $ 84.76 $114.93
-------------------------------------------------------------------------
ADR
166.38 170.27 154.37 156.93
220.81 149.14 174.01
-------------------------------------------------------------------------
Occupancy 60.8%
65.9% 60.8% 67.7%
78.7% 56.8% 66.0%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
U.S.
-------------------------------------------------------------------------
RevPAR $190.55
$167.85 $169.12 $155.34 $118.11 $144.87 $146.78
-------------------------------------------------------------------------
ADR
265.89 221.20 259.42 220.38
192.60 235.16 227.09
-------------------------------------------------------------------------
Occupancy 71.7%
75.9% 65.2% 70.5%
61.3% 61.6% 64.6%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
International
-------------------------------------------------------------------------
RevPAR $124.58
$100.11 $111.96 $101.10 $ 91.97 $ 99.81 $101.18
-------------------------------------------------------------------------
ADR
202.98 208.76 186.04 207.08
185.61 185.79 190.69
-------------------------------------------------------------------------
Occupancy 61.4%
48.0% 60.2% 48.8%
49.6% 53.7% 53.1%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
FAIRMONT
MANAGED
HOTELS(1)
-------------------------------------------------------------------------
Worldwide
-------------------------------------------------------------------------
RevPAR $117.44
$129.05 $105.43 $118.23 $131.72 $106.13 $115.44
-------------------------------------------------------------------------
ADR
192.72 189.82 173.54 176.36
190.54 178.35 180.30
-------------------------------------------------------------------------
Occupancy 60.9%
68.0% 60.8% 67.0%
69.1% 59.5% 64.1%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Canada
-------------------------------------------------------------------------
RevPAR $ 81.84
$108.17 $ 75.18 $101.20 $137.64 $ 85.61 $100.18
-------------------------------------------------------------------------
ADR
145.86 158.57 130.30 146.22
184.41 144.21 153.43
-------------------------------------------------------------------------
Occupancy 56.1%
68.2% 57.7% 69.2%
74.6% 59.4% 65.3%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
U.S.
-------------------------------------------------------------------------
RevPAR $158.24
$163.75 $143.88 $146.77 $134.55 $134.07 $137.79
-------------------------------------------------------------------------
ADR
241.69 227.99 228.66 218.65
207.66 226.41 220.11
-------------------------------------------------------------------------
Occupancy 65.5%
71.8% 62.9% 67.1%
64.8% 59.2% 63.5%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
International
-------------------------------------------------------------------------
RevPAR $149.23
$117.60 $120.44 $107.70 $ 97.85 $112.17 $109.52
-------------------------------------------------------------------------
ADR
218.94 210.52 179.05 187.35
168.84 184.00 179.81
-------------------------------------------------------------------------
Occupancy 68.2%
55.9% 67.3% 57.5%
58.0% 61.0% 60.9%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
DELTA
MANAGED
HOTELS(1)
-------------------------------------------------------------------------
Worldwide
-------------------------------------------------------------------------
RevPAR $ 59.30
$ 74.18 $ 53.98 $ 65.43 $ 77.25 $ 60.95 $
64.43
-------------------------------------------------------------------------
ADR
100.53 105.74 92.47 96.40
103.51 100.52 98.53
-------------------------------------------------------------------------
Occupancy 59.0%
70.2% 58.4% 67.9%
74.6% 60.6% 65.4%
-------------------------------------------------------------------------
(1) Includes hotels owned by
Fairmont Hotels & Resorts Inc.
Comparable hotels and resorts are considered to be properties
that were wholly-owned by or 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 Kea Lani Maui
(sold July 2004); The Fairmont Glitter Bay
(sold July 2004)
Fairmont Managed: The Fairmont
Southampton, The Fairmont Monte Carlo,
The Savoy, A Fairmont Hotel, The Norfolk Hotel, Mount
Kenya Safari Club, The Aberdare Country Club, The Ark,
Mara Safari Club, The Fairmont Glitter Bay, The
Fairmont New Orleans, The Fairmont Newport Beach, The
Plaza
Delta Managed:
Delta Meadowvale, Delta Kitchener and Delta franchised
hotels
Fairmont Hotels & Resorts Inc.
Summary of Hotel Portfolios
----------------------------------------------
September 30
----------------------------------------------
2005 2004
----------------------------------------------
OWNED HOTELS
----------------------------------------------
Worldwide
----------------------------------------------
No. of Properties
15 15
----------------------------------------------
No. of Rooms
7,339 7,343
----------------------------------------------
----------------------------------------------
Canada
----------------------------------------------
No. of Properties
7 7
----------------------------------------------
No. of Rooms
3,336 3,336
----------------------------------------------
----------------------------------------------
U.S. and International
----------------------------------------------
No. of Properties
8 8
----------------------------------------------
No. of Rooms
4,003 4,007
----------------------------------------------
----------------------------------------------
FAIRMONT MANAGED
HOTELS (1)
----------------------------------------------
Worldwide
----------------------------------------------
No. of Properties
50 44
----------------------------------------------
No. of Rooms
22,525 21,643
----------------------------------------------
----------------------------------------------
Canada
----------------------------------------------
No. of Properties
21 21
----------------------------------------------
No. of Rooms
10,418 10,422
----------------------------------------------
----------------------------------------------
U.S. and International
----------------------------------------------
No. of Properties
29 23
----------------------------------------------
No. of Rooms
12,107 11,221
----------------------------------------------
----------------------------------------------
DELTA MANAGED HOTELS(1)
----------------------------------------------
Worldwide
----------------------------------------------
No. of Properties
38 38
----------------------------------------------
No. of Rooms
11,243 11,163
----------------------------------------------
----------------------------------------------
(1) Includes hotels owned by
Fairmont Hotels & Resorts Inc.
1. Revenue per available room
("RevPAR") is calculated as room revenue
divided by
the number of room nights available. Management considers
RevPAR to
be a meaningful indicator of hotel operations because it
measures the
period-over-period change in room revenues relative to
the number
of room nights available. Investors and analysts also use
it as a measure
of the Company's operating performance. However,
RevPAR is
not a defined measure of operating performance under
Canadian Generally
Accepted Accounting Principles ("GAAP"). It is
likely that
FHR's calculation of RevPAR is different than the
calculations
used by others.
2. Comparable information is
considered to be information for properties
that were
wholly-owned or fully open under FHR management for at
least the
entire current and prior year. Comparable information also
excludes properties
under major renovation that would have a
significant
adverse effect on the properties' primary operations. We
present these
results on a comparable basis because we believe that
doing so provides
investors and management with useful information
for evaluating
the period-to-period performance of our hotels. When
presenting
comparable information for this quarter, the following
properties
have been excluded:
Owned hotels
------------
- The Fairmont Kea Lani Maui (sold July 2004)
- The Fairmont Glitter Bay (sold July 2004)
- The Fairmont Southampton (reopened April 2004 after hurricane
damage repairs)
Fairmont Managed Hotels
-----------------------
- The Fairmont Southampton (reopened April 2004 after hurricane
damage repairs)
- The Fairmont Monte Carlo (assumed management December 2004)
- The Savoy, A Fairmont Hotel (assumed management January 2005)
- The Plaza (ceased management April 2005)
- The Norfolk Hotel, Mount Kenya Safari Club, The Aberdare
Country Club, The Ark and the Mara Safari Club (assumed
management May 2005)
- The Fairmont Glitter Bay (ceased management in June 2005)
- The Fairmont Newport Beach (assumed management July 2005)
- The Fairmont New Orleans (closed in September 2005 due to
hurricane damage)
Delta Managed Hotels
--------------------
Delta Meadowvale (assumed management September 2004)
Delta Kitchener (assumed management June 2005)
Delta franchised properties
3. EBITDA is defined as earnings
before interest, taxes and
amortization.
Management considers EBITDA to be a meaningful
indicator
of operations and uses it as the primary measure to assess
the operating
performance of the Company's business segments. EBITDA
provides us
with an understanding of the Company's operating results
before the
impact of investing and financing transactions and income
taxes. It
also facilitates comparisons between the Company and its
competitors.
Management
adjusts EBITDA when evaluating operating performance
because it
believes that the inclusion or exclusion of certain items
such as gains
and losses on asset sales and other non-operating
items, is
necessary to provide a more accurate measure of our core
business operating
results. It is also a means to evaluate period-
over-period
results. We adjust our reported EBITDA, as set forth
above, for
certain items and refer to this measure as Adjusted
EBITDA. The
principal adjustments we make are to eliminate (i) gains
and losses
from asset sales; (ii) amortization, net interest expense
and income
taxes in calculating our earnings from equity investments
and (iii)
other non-operating items.
We have chosen
to provide this information to investors to enable
them to perform
more meaningful comparisons of past, present and
future core
business operating results. Adjusted EBITDA may also be
used by investors
and analysts in their valuation of the Company.
EBITDA and
Adjusted EBITDA are not defined measures of operating
performance
under Canadian generally accepted accounting principles.
It is likely
that FHR's calculations of EBITDA and Adjusted EBITDA
are different
than the calculations used by others.
The table below
provides a reconciliation of Adjusted EBITDA and
EBITDA to
net income:
---------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------
(In millions
of dollars) 2005
2004 2005 2004
---------------------------------------------------------------------
Net income
$ 69.0 $ 131.8 $ 99.1 $ 160.2
Add (Deduct):
Interest expense,
net
6.0 6.7
19.2 25.7
Income tax
expense (recovery) (13.0) 52.4
(19.8) 64.1
Amortization
17.2 16.8 50.1
54.3
---------------------------------------------------------------------
EBITDA
79.2 207.7 148.6
304.3
Add (Deduct):
(Gains) losses
on asset sales (17.9) (144.2)
(17.9) (159.6)
Proportional
amortization,
interest expense
and income
taxes included
in the results
of equity
investments
8.5 10.3 26.7
30.4
Stock appreciation
rights (3.2)
0.5 (0.5) 0.2
Other non-operating
items 11.2
- 14.5
-
---------------------------------------------------------------------
Adjusted EBITDA
$ 77.8 $ 74.3 $ 171.4 $ 175.3
--------------------------------------------------------------------- |
