9. The management operations profit margin represents management
operations earnings before other operating items, as a percent of
management operations revenue. 10. 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. 11. Depreciation and management fees related
to The Pierre for the quarters of 2004 and first and second
quarters of 2005.
---------------------------------------------------------------------
Management Fees, including (In millions of US dollars) Depreciation
reimbursed costs
---------------------------------------------------------------------
First Quarter 2004 $0.4 $0.5
---------------------------------------------------------------------
Second Quarter 2004 $0.5 $0.9
---------------------------------------------------------------------
Third Quarter 2004 $0.4 $0.5
---------------------------------------------------------------------
Fourth Quarter 2004 $0.5 $1.1
---------------------------------------------------------------------
Full Year 2004 $1.8 $3.0
---------------------------------------------------------------------
First Quarter 2005 $0.5 $0.7
---------------------------------------------------------------------
Second Quarter 2005 $0.4 $1.1
---------------------------------------------------------------------
(+)(+)(+) All dollar amounts referred to in this news release are
US dollars unless otherwise noted. The financial statements are
prepared in accordance with Canadian generally accepted accounting
principles. (+)(+)(+) This news release contains "forward-looking
statements" within the meaning of applicable 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. These statements are not guarantees of future performance
and are subject to numerous risks and uncertainties, including
those described in our annual information form and in this news
release. Those risks and uncertainties include adverse factors
generally encountered in the lodging industry; the risks associated
with world events, including war, terrorism, international
conflicts, natural disasters, extreme weather conditions, and
infectious diseases; general economic conditions, supply and demand
changes for hotel rooms and residential properties, competitive
conditions in the lodging industry, relationships with clients and
property owners, currency fluctuations and the availability of
capital to finance growth. Many of these risks and uncertainties
can affect our actual results and could cause our actual results to
differ materially from those expressed or implied in any
forward-looking statement made by us or on our behalf. All
forward-looking statements in this news release are qualified by
these cautionary statements. These statements are made as of the
date of this news release and, except as required by applicable
law, we undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise. Additionally, we undertake no
obligation to comment on analyses, expectations or statements made
by third parties in respect of Four Seasons, its financial or
operating results or its securities or any of the properties that
we manage or in which we may have an interest. (+)(+)(+) We will
hold a conference call today at 11 a.m. (Eastern Daylight Time) to
discuss the second quarter financial results. The details are: To
access the call dial: 1 (800) 289-6406 (U.S.A. and Canada) 1 (416)
641-6654 (outside U.S.A. and Canada) To access a replay of the
call, which will be available for one week after the call, dial: 1
(800) 558-5253, Reservation Number 21251495. A live web cast will
also be available by visiting http://www.fourseasons.com/investor.
This web cast will be archived for one month following the call.
(+)(+)(+) Dedicated to continuous innovation and the highest
standards of hospitality, Four Seasons invented luxury for the
modern traveller. From elegant surroundings of the finest quality,
to caring, highly personalised 24-hour service, Four Seasons
embodies a true home away from home for those who know and
appreciate the best. The deeply instilled Four Seasons culture is
personified in its employees - people who share a single focus and
are inspired to offer great service. Founded in 1960, Four Seasons
has followed a targeted course of expansion, opening hotels in
major city centers and desirable resort destinations around the
world. Currently with 65 hotels in 29 countries, and more than 20
properties under development, Four Seasons will continue to lead
luxury hospitality with innovative enhancements, making business
travel easier and leisure travel more rewarding. For more
information on Four Seasons, visit http://www.fourseasons.com/.
FOUR SEASONS HOTELS INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands of Three months ended Six months ended US
dollars except June 30, June 30, per share amounts) 2005 2004 2005
2004
-------------------------------------------------------------------------
Consolidated revenues (note 4) $ 74,539 $ 71,363 $ 137,636 $
128,484 ---------------------------------------------------
--------------------------------------------------- MANAGEMENT
OPERATIONS Revenues: Fee revenues (note 4(a)) $ 32,241 $ 30,582 $
61,268 $ 55,909 Reimbursed costs 16,058 13,630 30,602 25,949
--------------------------------------------------- 48,299 44,212
91,870 81,858 ---------------------------------------------------
Expenses: General and administrative expenses (9,459) (8,442)
(19,193) (16,680) Reimbursed costs (16,058) (13,630) (30,602)
(25,949) ---------------------------------------------------
(25,517) (22,072) (49,795) (42,629)
--------------------------------------------------- 22,782 22,140
42,075 39,229 ---------------------------------------------------
OWNERSHIP AND CORPORATE OPERATIONS Revenues 27,572 28,106 48,089
48,438 Distributions from hotel investments 132 293 132 293
Expenses: Cost of sales and expenses (28,549) (28,436) (54,900)
(55,290) Fees to Management Operations (1,464) (1,248) (2,455)
(2,105) --------------------------------------------------- (2,309)
(1,285) (9,134) (8,664)
--------------------------------------------------- Earnings before
other operating items 20,473 20,855 32,941 30,565 Depreciation and
amortization (2,908) (2,664) (5,937) (5,415) Other income
(expense), net (notes 4(a) and 5) (8,645) (2,216) (11,355) 1,063
--------------------------------------------------- Earnings from
operations 8,920 15,975 15,649 26,213 Interest income, net 828 490
1,210 1,361 ---------------------------------------------------
Earnings before income taxes 9,748 16,465 16,859 27,574
--------------------------------------------------- Income tax
recovery (expense): Current (1,390) (3,214) (3,314) (5,330) Future
(note 5) 7,428 (493) 7,443 (781)
--------------------------------------------------- 6,038 (3,707)
4,129 (6,111) ---------------------------------------------------
Net earnings $ 15,786 $ 12,758 $ 20,988 $ 21,463
---------------------------------------------------
--------------------------------------------------- Basic earnings
per share (note 3(a)) $ 0.43 $ 0.36 $ 0.57 $ 0.61
---------------------------------------------------
--------------------------------------------------- Diluted
earnings per share (note 3(a)) $ 0.42 $ 0.34 $ 0.55 $ 0.58
---------------------------------------------------
--------------------------------------------------- See
accompanying notes to consolidated financial statements. FOUR
SEASONS HOTELS INC. CONSOLIDATED BALANCE SHEETS As at As at
(Unaudited) June 30, December 31, (In thousands of US dollars) 2005
2004
-------------------------------------------------------------------------
ASSETS Current assets: Cash and cash equivalents $ 218,636 $
226,377 Receivables 83,660 81,541 Inventory 1,028 1,439 Prepaid
expenses 3,935 2,981 ------------------------- 307,259 312,338
Long-term receivables 192,964 179,060 Investments in hotel
partnerships and corporations 120,074 131,338 Fixed assets 53,658
59,939 Investment in management contracts 171,652 181,273
Investment in trademarks and trade names 4,241 4,424 Future income
tax assets 11,136 3,711 Other assets 34,378 30,064
------------------------- $ 895,362 $ 902,147
------------------------- ------------------------- LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and
accrued liabilities $ 48,544 $ 60,415 Long-term obligations due
within one year 3,513 3,766 ------------------------- 52,057 64,181
Long-term obligations (note 2) 257,593 253,066 Shareholders' equity
(note 3): Capital stock 250,216 248,980 Convertible notes 36,920
36,920 Contributed surplus 9,095 8,088 Retained earnings 211,580
192,129 Equity adjustment from foreign currency translation 77,901
98,783 ------------------------- 585,712 584,900
------------------------- Subsequent event (note 9) $ 895,362 $
902,147 ------------------------- ------------------------- See
accompanying notes to consolidated financial statements. FOUR
SEASONS HOTELS INC. CONSOLIDATED STATEMENTS OF CASH PROVIDED BY
OPERATIONS (Unaudited) Three months ended Six months ended (In
thousands of June 30, June 30, US dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Cash provided by (used in) operations: MANAGEMENT OPERATIONS
Earnings before other operating items $ 22,782 $ 22,140 $ 42,075 $
39,229 Items not requiring an outlay of funds 504 354 1,089 744
--------------------------------------------------- Working capital
provided by Management Operations 23,286 22,494 43,164 39,973
--------------------------------------------------- OWNERSHIP AND
CORPORATE OPERATIONS Loss before other operating items (2,309)
(1,285) (9,134) (8,664) Items not requiring an outlay of funds 300
212 576 377 ---------------------------------------------------
Working capital used in Ownership and Corporate Operations (2,009)
(1,073) (8,558) (8,287)
--------------------------------------------------- 21,277 21,421
34,606 31,686 Interest received, net 2,848 1,349 4,515 4,180
Current income tax paid (2,349) (1,095) (5,455) (1,259) Change in
non-cash working capital 2,205 (444) (14,208) (9,206) Other (16)
(91) (129) (538)
--------------------------------------------------- Cash provided
by operations $ 23,965 $ 21,140 $ 19,329 $ 24,863
---------------------------------------------------
--------------------------------------------------- See
accompanying notes to consolidated financial statements. FOUR
SEASONS HOTELS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three months ended Six months ended (In thousands of
June 30, June 30, US dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Cash provided by (used in): Operations: $ 23,965 $ 21,140 $ 19,329
$ 24,863 ---------------------------------------------------
Financing: Issuance of convertible notes - 241,332 - 241,332 Other
long-term obligations including current portion (1,630) (72)
(1,498) 16 Issuance of shares 1,219 5,459 6,836 8,519 Dividends
paid - - (1,558) (1,391)
--------------------------------------------------- Cash provided
by (used in) financing (411) 246,719 3,780 248,476
--------------------------------------------------- Capital
investments: Increase in restricted cash - (55,204) - (55,204)
Long-term receivables 5,725 (15,365) (14,740) (14,700) Hotel
investments (2,265) (27,476) (9,445) (28,446) Disposal of hotel
investments (note 5) 7,326 - 12,672 - Purchase of fixed assets
(4,453) 1,391 (8,060) (1,917) Investments in trademarks and trade
names and management contracts (342) (8,441) (473) (8,719) Other
assets (6,809) (893) (6,860) (1,735)
--------------------------------------------------- Cash used in
capital investments (818) (105,988) (26,906) (110,721)
--------------------------------------------------- Increase
(decrease) in net cash and cash equivalents 22,736 161,871 (3,797)
162,618 Decrease in net cash and cash equivalents due to unrealized
foreign exchange loss (2,264) (2,228) (3,944) (2,095) Cash and cash
equivalents, beginning of period 198,164 132,979 226,377 132,099
--------------------------------------------------- Net cash and
cash equivalents, end of period $ 218,636 $ 292,622 $ 218,636 $
292,622 ---------------------------------------------------
--------------------------------------------------- Supplemental
disclosure of net cash and cash equivalents: Cash and cash
equivalents $ 218,636 $ 348,575 $ 218,636 $ 348,575 Less restricted
cash - (55,953) - (55,953)
--------------------------------------------------- Net cash and
cash equivalents $ 218,636 $ 292,622 $ 218,636 $ 292,622
---------------------------------------------------
--------------------------------------------------- See
accompanying notes to consolidated financial statements. FOUR
SEASONS HOTELS INC. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Six months ended (Unaudited) June 30, (In thousands of US dollars)
2005 2004
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 192,129 $ 169,364 Net
earnings 20,988 21,463 Dividends declared (1,537) (1,367)
------------------------- Retained earnings, end of period $
211,580 $ 189,460 -------------------------
------------------------- See accompanying notes to consolidated
financial statements. FOUR SEASONS HOTELS INC. NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands of US
dollars except per 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 most recently prepared annual consolidated
financial statements for the year ended December 31, 2004. 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,
2004, except as disclosed below: (a) Change in reporting currency:
We have historically prepared our consolidated financial statements
in Canadian dollars. Effective for the three months ended March 31,
2005, we have adopted US dollars as our reporting currency. With
the majority of our management fee revenues in US dollars,
reporting in US dollars should reduce the volatility on reported
results relating to the impact of fluctuations in the rate of
exchange between the US and Canadian dollar relating to these
revenues and, as a result, we believe it will provide our financial
statement users with more meaningful information. We have not
changed the functional currency of Four Seasons Hotels Inc., which
remains Canadian dollars, or the functional currencies of any of
its subsidiaries. The consolidated financial statements in Canadian
dollars have been translated to US dollars using the foreign
exchange rates applicable at each balance sheet date for assets and
liabilities, and the weighted average exchange rates of the
corresponding quarters for the consolidated statements of
operations, consolidated statements of cash provided by operations
and consolidated statements of cash flows. Equity transactions have
been translated to US dollars at the historical exchange rates with
opening equity accounts on January 1, 2003 translated at the
exchange rate on that date. Any resulting exchange gain or loss was
charged or credited to "Equity adjustment from foreign currency
translation" included as a separate component of shareholders'
equity. (b) Variable interest entities: The Canadian Institute of
Chartered Accountants ("CICA") issued Accounting Guideline No. 15,
"Consolidation of Variable Interest Entities" ("AcG-15"), which
establishes 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.
Effective January 1, 2005, we adopted AcG-15 and have concluded
that we do not have to consolidate any interest under AcG-15. (c)
Investments in hotel partnerships and corporations: In conjunction
with the issuance of Section 3475, "Disposal of Long- Lived Assets
and Discontinued Operations", the CICA eliminated the exception
from consolidation for a temporary controlled subsidiary. Beginning
January 1, 2005, we were required to either equity account or
consolidate our temporary investments in which we have over a 20%
equity interest. In March 2005, we sold the majority of our equity
interest in Four Seasons Residence Club Scottsdale at Troon North,
and in April 2005, we sold the majority of our equity interest in
Four Seasons Hotel Shanghai (note 5). As a result of the sales, our
equity interests in each property were reduced to less than 20%.
The change in accounting for these temporary investments did not
have a material impact on our consolidated financial statements for
the three months and six months ended June 30, 2005. 2. Long-term
obligations: (a) Bank credit facility: We have a committed bank
credit facility of $125,000, which expires in September 2007. As at
June 30, 2005, no amounts were borrowed under this credit facility.
However, approximately $4,000 of letters of credit were issued
under this credit facility as at June 30, 2005. No amounts have
been drawn under these letters of credit. (b) Currency and interest
rate swap: In April 2005, we entered into a currency and interest
rate swap agreement to July 30, 2009, pursuant to which we have
agreed to receive interest at a fixed rate of 5.33% per annum on an
initial notional amount of $215,842 and pay interest at a floating
rate of six-month Canadian Bankers Acceptance in arrears plus 1.1%
per annum on an initial notional amount of C$269.2 million. On July
30, 2009, we will pay C$311.8 million and receive $250,000 under
the swap. We have designated the swap as a fair value hedge of our
convertible senior notes, which were issued in 2004. 3.
Shareholders' equity: As at June 30, 2005, we have 3,725,698
outstanding Variable Multiple Voting Shares ("VMVS"), 32,909,488
outstanding Limited Voting Shares ("LVS"), and 4,544,843
outstanding stock options (weighted average exercise price of
C$59.32 ($48.13)). (a) Earnings per share: 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: Three
months ended June 30, 2005 2004
---------------------------------------------------------------------
Net Net earnings Shares earnings Shares
---------------------------------------------------------------------
Basic earnings per share amounts $ 15,786 36,624,440 $ 12,758
35,484,874 Effect of assumed dilutive conversions: Stock option
plan - 1,325,607 - 1,494,286 Convertible notes (issued in 1999 and
redeemed in September 2004) - - 989 3,463,155
---------------------------------------------------------------------
Diluted earnings per share amounts $ 15,786 37,950,047 $ 13,747
40,442,315
---------------------------------------------------------------------
---------------------------------------------------------------------
Six months ended June 30, 2005 2004
---------------------------------------------------------------------
Net Net earnings Shares earnings Shares
---------------------------------------------------------------------
Basic earnings per share amounts $ 20,988 36,616,645 $ 21,463
35,386,149 Effect of assumed dilutive conversions: Stock option
plan - 1,454,426 - 1,467,988 Convertible notes (issued in 1999 and
redeemed in September 2004) - - 1,978 3,463,155
---------------------------------------------------------------------
Diluted earnings per share amounts $ 20,988 38,071,071 $ 23,441
40,317,292
---------------------------------------------------------------------
---------------------------------------------------------------------
The diluted earnings per share calculation excluded the effect of
the assumed conversions of 693,056 and 59,000 stock options to LVS,
under our stock option plan, during the three months and six months
ended June 30, 2005, respectively (2004 - 858,196 and 1,015,916
stock options, respectively), as the inclusion of these conversions
would have resulted in an anti-dilutive effect. There was no
dilution relating to the convertible senior notes issued in 2004,
as the contingent conversion price was not reached during the
period. In June 2005, the Emerging Issues Committee of the CICA
issued Abstract EIC-155, "The Effect of Contingently Convertible
Instruments on Diluted Earnings per Share", which requires the
application of the "if-converted method" to account for the
potential dilution relating to the conversion of contingently
convertible instruments, such as our convertible senior notes.
EIC-155 will be effective for periods beginning on or after October
1, 2005. If we had adopted EIC-155 for the three months and six
months ended June 30, 2005, there would have been no additional
dilution for either period. (b) Stock-based compensation: We use
the fair value-based method to account for 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. There were no stock options granted in the three
months and six months ended June 30, 2005. The fair value of stock
options granted in the three months and six months ended June 30,
2004 was estimated using the Black-Scholes option pricing model
with the following assumptions: risk-free interest rates ranging
from 3.86% to 4.39% and 2.96% to 4.39%, respectively; semi-annual
dividend per LVS of C$0.055 for both periods; volatility factor of
the expected market price of our LVS of 28% and 28% to 30%,
respectively; and expected lives of the options ranging between
four and seven years, depending on the level of the employee who
was granted stock options. For the options granted in the three
months and six months ended June 30, 2004, the weighted average
fair value of the options at the grant dates was C$24.85 and
C$25.35, respectively ($18.29 and $18.94, respectively). For
purposes of stock option expense and pro forma disclosures, the
estimated fair value of the options are amortized to compensation
expense over the options' vesting period. Pro forma disclosure is
required to show 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 six months ended June 30, 2005 and
2004, 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: Three months ended Six
months ended June 30, June 30, 2005 2004 2005 2004
---------------------------------------------------------------------
Stock option expense included in compensation expense $ (515) $
(364) $ (1,008) $ (677) -------------------------------------------
------------------------------------------- Net earnings, as
reported $ 15,786 $ 12,758 $ 20,988 $ 21,463 Additional expense
that would have been recorded if all outstanding stock options
granted during 2002 had been expensed (681) (628) (1,372) (1,280)
------------------------------------------- Pro forma net earnings
$ 15,105 $ 12,130 $ 19,616 $ 20,183
------------------------------------------- Earnings per share:
Basic, as reported $ 0.43 $ 0.36 $ 0.57 $ 0.61 Basic, pro forma
0.41 0.34 0.54 0.57 Diluted, as reported 0.42 0.34 0.55 0.58
Diluted, pro forma 0.40 0.32 0.52 0.55
------------------------------------------- 4. Consolidated
revenues: Three months ended Six months ended June 30, June 30,
2005 2004 2005 2004
---------------------------------------------------------------------
Revenues from Management Operations(a) $ 48,299 $ 44,212 $ 91,870 $
81,858 Revenues from Ownership and Corporate Operations 27,572
28,106 48,089 48,438 Distributions from hotel investments 132 293
132 293 Fees from Ownership and Corporate Operations to Management
Operations (1,464) (1,248) (2,455) (2,105)
------------------------------------------- $ 74,539 $ 71,363
$137,636 $128,484 -------------------------------------------
------------------------------------------- (a) Effective January
1, 2004, we ceased designating our US dollar forward contracts as
hedges of our US dollar fee revenues. These contracts were entered
into during 2002, and all of these contracts matured during 2004.
The foreign exchange gains on these contracts of $11,201, which
were deferred prior to January 1, 2004, were recognized in 2004 as
an increase of fee revenues over the course of the year. During the
three months and six months ended June 30, 2004, we recognized
$2,798 and $5,518, respectively, of the deferred gain in fee
revenues. We did not hedge any of our US dollar fee revenues during
the three months and six months ended June 30, 2005. In addition,
effective January 1, 2004, the 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 and
was included in other income (expense), net. This resulted in a
$692 and $1,120 foreign exchange loss, respectively, for the three
months and six months ended June 30, 2004. 5. Other income
(expense), net: Included in other income (expense), net for the
three months and six months ended June 30, 2005 is a net foreign
exchange loss of $3,289 and $3,682, respectively (2004 - net
foreign exchange loss of $2,185 and net foreign exchange gain of
$1,328, 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 designated foreign self-sustaining subsidiaries. On June 30,
2005, we finalized the assignment of our leases and the sale of the
related assets in The Pierre for net proceeds of $4,520. The net
book value of our assets in The Pierre was approximately $7,800
and, after deducting disposition costs, we recorded a loss on sale
of $5,023. As a result of the sale, we also recorded a tax benefit
of approximately $9,200, which is included in future income tax
recovery. As part of the sale of The Pierre, in accordance with
statutory provisions, the purchaser agreed to assume a portion of
our contribution history with a multi-employer pension fund for the
unionized hotel employees (the "NYC Pension"). This permitted us to
withdraw from the NYC Pension without incurring a withdrawal
liability estimated at $10,700. If the purchaser withdraws as the
result of the lease cancellation by the landlord in certain
circumstances in 2008 or 2011, we have agreed to indemnify the
purchaser for that portion of the withdrawal liability relating to
their assumption of our contribution history. The amount of any
potential future liability resulting from this indemnity is not
determinable at this time as it would be based upon future events
related to the NYC Pension. If the purchaser withdraws from the NYC
Pension prior to 2011 in any circumstances other than those
described above and does not pay its withdrawal liability, we
remain secondarily liable for our withdrawal liability up to an
amount of $10,700. We have been indemnified by the purchaser for
any such liability. We believe that the likelihood of our being
required to make a payment is remote, and have not recorded any
amount as at June 30, 2005 in respect of a potential NYC Pension
withdrawal liability. In March 2005, we sold the majority of our
equity interest in Four Seasons Residence Club Scottsdale at Troon
North for gross proceeds of $5,346, which approximated book value.
As a result of the sale, our equity interest in the residence club
was reduced to approximately 14%. In April 2005, we sold
approximately 53% of our equity interest in Four Seasons Hotel
Shanghai for gross proceeds of $9,500 (cash of $4,241 and a loan
receivable of $5,259), which approximated book value, and reduced
our interest in the hotel to approximately 10%. As a result of the
sale, we revalued this US dollar investment at March 31, 2005 at
current exchange rates and recorded a loss of $1,930, which was
included in other income (expense), net, during the three months
ended March 31, 2005. 6. Pension benefit expense: The pension
benefit expense, after allocation to managed properties, for the
three months and six months ended June 30, 2005 was $596 and
$1,217, respectively (2004 - $559 and $1,134, respectively). 7.
Guarantees and other commitments: We have provided certain
guarantees and have other similar commitments typically made in
connection with properties under our management totalling a maximum
of $47,000. These contractual obligations and other commitments are
more fully described in the consolidated financial statements for
the year ended December 31, 2004. Since December 31, 2004, we have
reduced two of our bank guarantees, reduced two of our other
commitments, and extended one new bank guarantee and two other
commitments to two properties under our management, resulting in a
net increase in guarantees and other commitments of $1,900. In
addition, we expect to fund approximately $21,000 over the next 18
months in connection with an expansion of our corporate office
which is currently underway. 8. Seasonality: Our hotels and resorts
are affected by normally recurring seasonal patterns, and demand is
usually lower in the period from December through March than during
the remainder of the year for most of our urban properties.
However, December through March is typically a period of relatively
strong demand at our resorts. As a result, our management
operations are 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. This
negative impact on management revenues from those properties is
offset to some degree by increased travel to our resorts in the
period. 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. With the disposition of our leasehold interest in The
Pierre at the end of the second quarter of 2005 (note 5), we have
substantially reduced the exposure to seasonality in our ownership
operations. 9. Subsequent event: In August 2005, we finalized an
agreement with the owner of Four Seasons Hotel Newport Beach
pursuant to which, effective October 31, 2005, the owner will begin
to manage this property as an independent hotel. At the time of
transition, we will receive a payment in an amount that will exceed
the net book value of our investment in the management contract.
FOUR SEASONS HOTELS INC. SUMMARY OF HOTEL OPERATING DATA - CORE
HOTELS(1) Three months ended June 30, (Unaudited) 2005 2004
Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 52 52 -- No. of Rooms 13,802 13,802 --
Occupancy(2) 71.4% 67.5% 3.9pts. ADR(3) - in US dollars $339 $320
5.8% RevPAR(4) - in US dollars $232 $206 12.8% Gross operating
margin(5) 33.1% 30.4% 2.7pts. United States No. of Properties 20 20
-- No. of Rooms 6,274 6,274 -- Occupancy(2) 76.3% 71.0% 5.3pts.
ADR(3) - in US dollars $350 $331 5.7% RevPAR(4) - in US dollars
$271 $239 13.6% Gross operating margin(5) 30.7% 27.8% 2.9pts. Other
Americas/Caribbean No. of Properties 8 8 -- No. of Rooms 1,724
1,724 -- Occupancy(2) 73.4% 67.4% 6.0pts. ADR(3) - in US dollars
$313 $300 4.4% RevPAR(4) - in US dollars $225 $191 17.6% Gross
operating margin(5) 31.1% 26.0% 5.1pts. Europe No. of Properties 8
8 -- No. of Rooms 1,492 1,492 -- Occupancy(2) 69.6% 70.1% (0.5)pts.
ADR(3) - in US dollars $560 $538 4.1% RevPAR(4) - in US dollars
$402 $385 4.6% Gross operating margin(5) 39.1% 40.9% (1.8)pts.
Middle East No. of Properties 4 4 -- No. of Rooms 847 847 --
Occupancy(2) 70.0% 65.4% 4.6pts. ADR(3) - in US dollars $216 $183
18.3% RevPAR(4) - in US dollars $152 $119 28.3% Gross operating
margin(5) 47.1% 38.5% 8.6pts. Asia/Pacific No. of Properties 12 12
-- No. of Rooms 3,465 3,465 -- Occupancy(2) 62.8% 60.7% 2.1pts.
ADR(3) - in US dollars $230 $216 6.7% RevPAR(4) - in US dollars
$113 $99 14.1% Gross operating margin(5) 32.3% 29.2% 3.1pts.
------------------------------------------------ (1) The term "Core
Hotels" means hotels and resorts under management for the full year
of both 2005 and 2004. 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 2004/2003 Core Hotels are the additions of Four Seasons
Resort Jackson Hole, Four Seasons Hotel Miami, Four Seasons Resort
Great Exuma at Emerald Bay, Four Seasons Hotel Prague, Four Seasons
Hotel Riyadh and Four Seasons Hotel Jakarta, and the deletions of
Four Seasons Resort Maldives at Kuda Huraa (due to its temporary
closure caused by the tsunami) and The Pierre in New York (due to
its disposition on June 30, 2005). (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. It is a
non-GAAP measure. We use RevPAR because it is a commonly used
indicator of market performance for hotels and resorts and
represents the combination of the average daily room rate and the
average occupancy rate achieved during the period. RevPAR does not
include food and beverage or other ancillary revenues generated by
a hotel or resort. RevPAR is the most commonly used measure in the
lodging industry to measure the period-over-period performance of
comparable properties. Our calculation of RevPAR may be different
than the calculation used by other lodging companies. (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) Six months ended June 30,
(Unaudited) 2005 2004 Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 52 52 -- No. of Rooms 13,802 13,802 --
Occupancy(2) 69.2% 65.2% 4.0pts. ADR(3) - in US dollars $349 $327
6.9% RevPAR(4) - in US dollars $228 $201 13.2% Gross operating
margin(5) 31.5% 29.2% 2.3pts. United States No. of Properties 20 20
-- No. of Rooms 6,274 6,274 -- Occupancy(2) 73.8% 69.2% 4.6pts.
ADR(3) - in US dollars $364 $343 6.0% RevPAR(4) - in US dollars
$266 $236 13.0% Gross operating margin(5) 29.0% 26.6% 2.4pts. Other
Americas/Caribbean No. of Properties 8 8 -- No. of Rooms 1,724
1,724 -- Occupancy(2) 69.2% 63.9% 5.3pts. ADR(3) - in US dollars
$364 $338 7.7% RevPAR(4) - in US dollars $247 $208 18.4% Gross
operating margin(5) 33.6% 29.7% 3.9pts. Europe No. of Properties 8
8 -- No. of Rooms 1,492 1,492 -- Occupancy(2) 62.2% 64.0% (1.8)pts.
ADR(3) - in US dollars $533 $503 6.1% RevPAR(4) - in US dollars
$348 $331 5.0% Gross operating margin(5) 34.0% 35.4% (1.4)pts.
Middle East No. of Properties 4 4 -- No. of Rooms 847 847 --
Occupancy(2) 71.3% 65.6% 5.7pts. ADR(3) - in US dollars $218 $186
17.2% RevPAR(4) - in US dollars $155 $122 26.9% Gross operating
margin(5) 47.5% 39.2% 8.3pts. Asia/Pacific No. of Properties 12 12
-- No. of Rooms 3,465 3,465 -- Occupancy(2) 63.5% 58.8% 4.7pts.
ADR(3) - in US dollars $236 $222 6.7% RevPAR(4) - in US dollars
$115 $99 16.4% Gross operating margin(5) 31.2% 28.9% 2.3pts.
------------------------------------------------ (1) The term "Core
Hotels" means hotels and resorts under management for the full year
of both 2005 and 2004. 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 2004/2003 Core Hotels are the additions of Four Seasons
Resort Jackson Hole, Four Seasons Hotel Miami, Four Seasons Resort
Great Exuma at Emerald Bay, Four Seasons Hotel Prague, Four Seasons
Hotel Riyadh and Four Seasons Hotel Jakarta, and the deletions of
Four Seasons Resort Maldives at Kuda Huraa (due to its temporary
closure caused by the tsunami) and The Pierre in New York (due to
its disposition on June 30, 2005). (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. It is a
non-GAAP measure. We use RevPAR because it is a commonly used
indicator of market performance for hotels and resorts and
represents the combination of the average daily room rate and the
average occupancy rate achieved during the period. RevPAR does not
include food and beverage or other ancillary revenues generated by
a hotel or resort. RevPAR is the most commonly used measure in the
lodging industry to measure the period-over-period performance of
comparable properties. Our calculation of RevPAR may be different
than the calculation used by other lodging companies. (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 June 30,
(Unaudited) 2005 2004 Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 66(1) 63 3 No. of Rooms 16,834(1)
16,217 617 United States No. of Properties 24(1) 24 -- No. of Rooms
7,109(1) 7,109 -- Other Americas/Caribbean No. of Properties 10 10
-- No. of Rooms 2,162 2,162 -- Europe No. of Properties 11 11 --
No. of Rooms 1,919 1,990 (71) Middle East No. of Properties 6 4 2
No. of Rooms 1,444 847 597 Asia/Pacific No. of Properties 15 14 1
No. of Rooms 4,200 4,109 91
------------------------------------------------ (1) Since June 30,
2005, we ceased management of The Pierre in New York, which had 201
rooms. FOUR SEASONS HOTELS INC. REVENUES UNDER MANAGEMENT - ALL
MANAGED HOTELS (Unaudited) Three months ended Six months ended (In
thousands of June 30, June 30, US dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Revenues under management(1) $ 677,683 $ 571,869 $1,279,246
$1,102,059 ---------------------------------------------------
---------------------------------------------------
------------------ (1) Revenues under management consist of rooms,
food and beverage, telephone and other revenues of all the hotels
and resorts which we manage. Approximately 66% 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 Approximate and Location(1)(2) Number
of Rooms Scheduled 2005/2006 openings ----------------------------
Four Seasons Hotel Damascus, Syria 305 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
Maldives at Landaa Giraavaru, Maldives 100 Four Seasons Hotel
Mumbai, India(x) 235 Four Seasons Residence Club Punta Mita, Mexico
35 Four Seasons Hotel Silicon Valley at East Palo Alto, CA, USA 200
Four Seasons Hotel Westlake Village, California, USA 270 Beyond
2006 ----------- Four Seasons Hotel Alexandria, Egypt(x) 125 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) 300 Four Seasons Hotel Florence, Italy
120 Four Seasons Hotel Istanbul at the Bosphorus, Turkey 170 Four
Seasons Hotel Kuwait City, Kuwait 225 Four Seasons Hotel Marrakech,
Morocco(x) 140 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 Hotel Toronto, Ontario, Canada(x) 265
Four Seasons Resort Vail, CO, USA(x) 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 at the time of this report. 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 2004 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. END FIRST AND FINAL ADD DATASOURCE: Four
Seasons Hotels and Resorts CONTACT: PRNewswire -- Aug. 11
Copyright