TORONTO, Nov. 10 /PRNewswire-FirstCall/ -- Four Seasons Hotels Inc.
(TSX Symbol "FSH.SV"; NYSE Symbol "FS") today reported its results
for the three months ended September 30, 2005. Effective the first
quarter of 2005, we adopted US dollars as our reporting currency.
All amounts disclosed in this news release (including amounts for
prior periods) are in US dollars unless otherwise noted. For
additional details related to the quarter, please refer to our
Management's Discussion and Analysis, which is posted on our
website at http://www.fourseasons.com/investor and is available as
part of our public filings at http://www.sedar.com/. Summary of the
Third Quarter of 2005 For the three months ended September 30,
2005, in each case compared to the same period in 2004: Hotel
Operating Results: - RevPAR(1) of worldwide Core Hotels(2)
increased 13.2%, with RevPAR of US Core Hotels increasing 16%. -
Gross operating margins(3) at worldwide Core Hotels increased 290
basis points to 29.7%, and increased at US Core Hotels 410 basis
points to 27.9%. - Revenues under management increased 13.1% in the
quarter to $603.8 million. "The results for the third quarter
reflect the continued strong demand for luxury travel and for Four
Seasons hotels and resorts worldwide. The hotels and resorts under
our management continue to deliver very strong operating results.
This success is translating into improved management fees from
properties under management and exciting new projects for our
pipeline," said Isadore Sharp, Chairman and Chief Executive
Officer. "The fundamentals of our business are strong, even though
this quarter's results do not have the benefit of the foreign
exchange forward contracts and certain residential fees included in
the third quarter of 2004. With ten new properties opened and the
addition of 16 new hotels under development since the beginning of
2004, combined with the maintenance of a strong balance sheet, we
believe we are very well positioned for continued long-term
growth." Company Results: - Management operations revenues
increased 2.6%, or $1.1 million, to $43.0 million in the third
quarter of 2005, as compared to $41.9 million for the same period
in 2004. Hotel management fee revenues, which includes base and
incentive fees, increased 21.3% in the quarter, as compared to the
same period in 2004. Base management fees increased 17.6% and
incentive fees increased 37.4%, reflecting better operating results
at hotels under management, as well as the addition of new
properties. - Loss from ownership operations and corporate
expenses(4) improved by $1.2 million due primarily to the
disposition of our leasehold interest in The Pierre effective June
30, 2005. - Earnings before other operating items declined 19.3%,
due primarily to the impact of lower residential royalty fees,
foreign exchange forward contracts(5) included in fee revenues in
2004 and higher general and administrative costs in the quarter.
General and administrative costs were higher primarily due to the
strengthening Canadian dollar relative to our US dollar reporting
currency and an accrual related to a new long-term incentive plan.
Excluding the impact of the foreign exchange forward contracts of
$2.6 million in the third quarter of 2004, earnings before other
operating items were 2.5% lower in the third quarter of 2005 than
in 2004. - In the quarter, we recorded a foreign exchange loss of
$10.3 million related to our US net monetary asset position.
Combined with other net foreign exchange losses, we recorded an
overall foreign exchange loss of $16.2 million in the third quarter
of 2005, compared to a foreign exchange loss of $3.4 million
recorded in the third quarter of 2004. - We have entered into an
arrangement for a new Four Seasons property in Kuala Lumpur. We
anticipate reaching an agreement with the owner of The Regent hotel
in that city to transition out of our current management of that
hotel. As a result, we wrote off the unamortized portion of the
1992 Regent acquisition purchase price previously allocated to The
Regent Kuala Lumpur management contract in the amount of $4.6
million. - Overall, we recorded a loss of $11.4 million ($0.31
basic and diluted loss per share) in the third quarter of 2005,
compared to a loss of $8.5 million ($0.24 basic and diluted loss
per share) in the third quarter of 2004. - Adjusting for other
expense, net, earnings were: Three months ended (Unaudited)
September 30, (In thousands of US dollars) 2005 2004
---------------------------------------------------------------------
Net loss $ (11,441) $ (8,522) Other expense, net(x) 21,064 18,089
Tax effect of adjustments (1,517) (525) ---------------------------
Adjusted net earnings $ 8,106 $ 9,042 ---------------------------
--------------------------- Adjusted basic earnings per share $
0.22 $ 0.25 --------------------------- ---------------------------
Adjusted diluted earnings per share $ 0.22 $ 0.24
--------------------------- --------------------------- (x) Other
expense, net for the three months ended September 30, 2005 included
a foreign exchange loss of $16.2 million and $4.9 million relating
primarily to the write-down of The Regent Kuala Lumpur management
contract. For the three months ended September 30, 2004, other
expense, net included a foreign exchange loss of $3.4 million, a
loss incurred on the redemption of convertible notes of $11.2
million and an impairment charge of $3.5 million relating to the
disposition of two hotel investments and the settlement of a loan
receivable. Adjusted net earnings is not defined by Canadian
generally accepted accounting principles (GAAP) and should not be
considered as an alternative to net earnings, cash flow from
operating activities or any other measure of performance prescribed
by GAAP. Our adjusted net earnings may also not be comparable to
adjusted net earnings used by other companies, which may be
calculated differently. Given the volatility of foreign exchange
rates and the amounts periodically recorded as gains or losses on
the disposition of investments, repayment of long-term receivables
and impairment charges on investments or long-term receivables, we
consider adjusted net earnings to be a meaningful indicator of our
base business and as a result, we have chosen to provide this
information to investors. Expanding and Refining the Portfolio: -
In the third quarter, we opened Four Seasons Hotel Hong Kong, which
represents our return to one of the world's great cultural and
business centers. We also reopened the newly renovated Manele Bay
Hotel in Lana'i as a Four Seasons resort. - We have recently added
projects in Mauritius, Kuala Lumpur, Bahrain and New Orleans to our
announced pipeline of new Four Seasons hotels and resorts. "Our
development pipeline remains both strong and diverse," said
Kathleen Taylor, President Worldwide Business Operations. "The
announced projects in our pipeline represent an incremental
increase of almost 30% on the existing base of rooms under our
management. The quality of these new projects is consistent with
the Four Seasons industry leading product standards, and we
continue to field new inquiries for exciting projects around the
world." Subsequent to Quarter End: - We sold our minority equity
interests in three properties for an aggregate of $13.6 million, an
amount that approximates book value. - We received repayment of
$19.5 million of long-term receivables and accrued interest. - We
opened the 103 room Four Seasons Hotel des Bergues Geneva after an
extensive ten-month renovation. - A record six Four Seasons
properties received top honours in the Conde Nast Traveler's
Readers' Choice Awards. John Davison, Chief Financial Officer said,
"Our strong operating results, continued growth and expansion and
our repatriation of capital all represent good progress toward our
long-term goals. We are pleased with the state of our business and
we believe the outlook is strong, even though we have recently
experienced some strong headwinds, particularly foreign exchange."
Expanding and Refining the Portfolio Over the past years, we have
focused on refining our portfolio of hotels and resorts with a view
to strengthening the quality of our management portfolio and
improving our long term financial performance. These refinements
include strategic divestitures of properties, significant
enhancements to established properties, and the opening of new Four
Seasons properties. These openings increased the number of
properties and rooms under management to 67 and approximately
17,000, respectively. Most recently: - Four Seasons Hotel Hong Kong
is the most important new luxury property to open in that city in
many years. It sets a new quality standard in an exciting time in
Hong Kong's history and will strengthen the Four Seasons brand in
China and throughout the Asia/Pacific region. - The newly renovated
Manele Bay Hotel in Lana'i, Hawaii has been re-branded and opened
as a Four Seasons resort. Hawaii is one of the most popular resort
destinations for our guests and the hotel has already won awards in
many categories. - Projects in Mauritius, Bahrain, Kuala Lumpur and
New Orleans were added to our announced pipeline of new Four
Seasons hotels and resorts under development, bringing the total
number of rooms currently under construction or in advanced stages
of development to approximately 5,000. - We recently completed a
$40 million enhancement of Four Seasons Hotel Washington, D.C. The
property has just been awarded the prestigious Mobil Five-Star
award and is the only five-star hotel to be added to the coveted
lodging category in North America. - We have entered into an
agreement to manage a new 140 room Four Seasons hotel in Kuala
Lumpur and we anticipate reaching an agreement with the owner of
the existing Kuala Lumpur hotel to transition out of managing that
Regent property. - As described in our second quarter release, the
owner of Four Seasons Hotel Newport Beach, The Irvine Company,
decided to independently manage their hotel. Four Seasons agreed to
cease managing that hotel on October 31, 2005 for a monetary
payment. - At the same time, Four Seasons continues to expand its
presence in California with the introduction of new hotels in
Silicon Valley and Westlake Village near Los Angeles, expected in
2006. - At the end of the second quarter, we completed the
disposition of our interest in The Pierre, which was a significant
milestone toward our long-term strategic objective of reducing
exposure to real estate. Hotel and Resort Operating Results
-------------------------------------------------------------------------
Results for three months ended September 30, 2005, as compared to
three months ended September 30, 2004
-------------------------------------------------------------------------
Gross Gross Operating Operating Gross Operating RevPAR Revenue
Profit Margin
---------------------------------------------------------- Basis
Percentage Percentage Percentage Point Region US$ Change Change
Change Margin Improvement
-------------------------------------------------------------------------
Worldwide Core Hotels $226 13.2% 12.0% 24.2% 29.7% 290
-------------------------------------------------------------------------
US Core Hotels $274 16.0% 15.2% 35.2% 27.9% 410
-------------------------------------------------------------------------
Other Americas/ Caribbean Core Hotels $183 15.4% 15.1% 33.8% 18.2%
260
-------------------------------------------------------------------------
Europe Core Hotels $381 8.9% 6.9% 8.4% 37.6% 50
-------------------------------------------------------------------------
Middle East Core Hotels $128 7.2% 10.7% 14.0% 39.7% 120
-------------------------------------------------------------------------
Asia/Pacific Core Hotels $119 8.5% 5.4% 16.2% 33.1% 310
-------------------------------------------------------------------------
Underlying these operating results: - The third quarter operating
results at the properties under our management reflect continued
strong luxury travel demand. Our customer mix consists of business
travelers, groups (including corporate and incentive) and leisure
travelers. Although the third quarter is not seasonally the
strongest quarter, demand in each of these categories of customers
improved in 2005. - RevPAR improvements for US Core Hotels were
mainly as a result of an 8.1% increase in achieved room rates in
the region. Exceptions were Four Seasons Hotel Houston, which
continues to experience pressure on rates due to increased supply
in that market, and Four Seasons Hotel Philadelphia, which is
currently undergoing a rooms renovation. Properties under
management in New York, Miami, Jackson Hole and Austin, as well as
all of the properties under management in California, realized
particularly strong improvements in RevPAR, relative to the average
for the US region. - Other Americas/Caribbean Core Hotels
experienced increases in RevPAR as a result of improved demand and
an 8.7% increase in achieved room rates. Properties under
management in Buenos Aires and Punta Mita experienced strong RevPAR
improvements relative to the average for the region. - RevPAR in
the Europe Core Hotels reflects strong operating results at the
hotels under management in Istanbul, Dublin, Paris and Prague
relative to the other hotels in the region. The Lisbon hotel
continued to experience RevPAR and gross operating profit declines
in the quarter due to additional supply in that market. In
addition, the hotels under management in London had lower RevPAR
results due to a decrease in demand following the terrorist
activities in that market in July, although this decrease in demand
was partially offset by increases in achieved room rates. - The
Middle East Core Hotels' RevPAR improvement was driven primarily by
a 10.1% increase in achieved room rates. Demand in Sharm el Sheikh
was lower following the terrorist activities in that market during
the quarter, but has since rebounded, although not to the level of
business prior to the terrorist activities. - Nearly all of the
Asia/Pacific Core Hotels had RevPAR improvements, which were
primarily driven by a 4.3% increase in achieved room rates. The
main exception was Four Seasons Hotel Bangkok, which is currently
undergoing a rooms renovation. Company Operating Results Management
Operations Management Operations Revenues ($000's)
--------------------------------------------- Three months Ended
September 30, Dollar Percentage 2005 2004 Change Change
--------------------------------------------- Hotel management fees
Base $ 18,085 $ 15,382 $ 2,703 17.6% Incentive 4,817 3,505 1,312
37.4% --------------------------------------------- Subtotal 22,902
18,887 4,015 21.3% Other fees(6) 3,470 6,439 (2,969) (46.1%)
Foreign exchange forward contracts - 2,625 (2,625) (100.0%)
Reimbursed costs(7) 16,617 13,943 2,674 19.2%
--------------------------------------------- Management operations
revenues $ 42,989 $ 41,894 $ 1,095 2.6%
---------------------------------------------
--------------------------------------------- Management operations
revenues increased 2.6% to $43.0 million. Base management fees,
which are typically earned as a percentage of the gross revenues of
our properties under management, increased 17.6% or $2.7 million to
$18.1 million. This increase was attributable to new properties
added to the portfolio and to increases in fees at existing
properties that were generally in line with increases in RevPAR.
While base management fees increased in all regions in which we
operate, the largest contributor to the improvement was the US
region. Incentive management fees are typically earned based on the
profitability of the properties under management, but may vary
depending on the specific terms of the relevant management
agreement. These fees increased 37.4% or $1.3 million to $4.8
million. The increase in incentive management fees was attributable
both to fees on new properties and to increasing fees on existing
properties. Five of the ten new properties opened since the
beginning of 2004 contributed fees in the third quarter and
accounted for approximately 50% of the overall increase. The
balance of the increase was primarily attributable to strong
improvements in the US region, which more than offset moderate
declines in these fees from Europe and Asia/Pacific. During the
quarter, 37 of the hotels and resorts under management accrued
incentive fees, as compared to 33 during the same period last year.
Other fees, which include royalty and management fees from our
residential business, fees we earn during the development of our
properties and other miscellaneous fees, declined 46.1% to $3.5
million. The largest component of this comparative decline was
attributable to certain residential royalty fees booked in the
third quarter of 2004, which were primarily attributable to
projects in Whistler, San Francisco and Exuma. The timing of sales
of residential real estate can make quarter over quarter
comparisons difficult. In 2002, we entered into a series of foreign
exchange forward contracts to minimize the impact of the
fluctuation of the US/Canadian dollar exchange rate on our US
dollar management fees. Those contracts expired at the end of 2004.
The value of those contracts recorded as part of fee revenues was
$2.6 million in the third quarter last year, and nil in the third
quarter this year. Reimbursed costs increased $2.7 million. The
increase was attributable to higher revenues under management and a
growing portfolio of properties. General and administrative
expenses (excluding reimbursed costs) increased $2.6 million to
$10.4 million over the amounts in the second quarter of 2004. The
increase in general and administrative expenses is attributable to
the implementation of a long-term incentive plan, increased
staffing and foreign exchange. Including reimbursed costs, general
and administrative expenses increased 24.1% to $27.1 million in the
third quarter of 2005, as compared to $21.8 million for the same
period in 2004. As a result of lower other fees and higher general
and administrative costs as described above, our management
operations earnings before other operating items (excluding the
impact of foreign exchange forward contracts) for the third quarter
of 2005 declined 8.8% to $15.9 million, as compared to $17.5
million in the third quarter of 2004. Our management operations
profit margin(8) (excluding reimbursed costs and the impact of
foreign exchange forward contracts) declined to 60.4% in the third
quarter of 2005, as compared to 69.0% in the third quarter of 2004.
Our management operations earnings before other operating items
(including the impact of foreign exchange forward contracts) for
the three months ended September 30, 2005 were $15.9 million, as
compared to $20.1 million for the same period in 2004. Our
management operations profit margin (including reimbursed costs and
the impact of foreign exchange forward contracts) was 37.0% in the
third quarter of 2005, as compared to 48.0% in the third quarter of
2004. Ownership Operations and Corporate Expenses Operating results
from ownership operations and corporate expenses improved $1.2
million to a loss of $3.6 million, as compared to a loss of $4.8
million in the third quarter of 2004. This improvement was
primarily as a result of our disposition of our interest in The
Pierre at the end of June 2005. The loss in 2004 related to The
Pierre was $3.0 million. This improvement was reduced by an
increase in corporate general and administrative expenses
attributable to ownership operations and corporate expenses, which
increase was primarily related to foreign exchange and a retirement
allowance. Other Expense, Net Other expense, net increased $3.0
million to $21.1 million. Other expense for the third quarter of
2005 included a $16.2 million foreign exchange loss, which arose
primarily as a result of a loss on the translation of our US dollar
and our pound sterling net monetary assets into Canadian dollars.
Our US dollar net asset position at September 30, 2005 was
approximately $215 million, and our pounds sterling position was
approximately pound sterling 26 million. During the third quarter,
the Canadian dollar relative to the US dollar strengthened from an
exchange rate of 1.23 to 1.17 and relative to pounds sterling
strengthened from 2.25 to 2.08. Further fluctuations in rates of
exchange between currencies will result in future foreign exchange
gains or losses. When the Regent hotel chain was acquired in 1992,
a portion of the purchase price of that acquisition was allocated
to the management contracts that we assumed, which included 12
Regent branded properties and Four Seasons properties in New York,
Bali and Milan. As a result of our agreement to manage a new Four
Seasons property in Kuala Lumpur, and in anticipation of reaching
an agreement with the owner of The Regent hotel in that city to
transition out of our management of that hotel, we wrote off our
investment in The Regent Kuala Lumpur management contract of $4.6
million during the quarter, representing the unamortized portion of
the amount allocated to the management contract for that property
in 1992. Income Tax Expense For the three months ended September
30, 2005, we had an income tax expense of $0.7 million, as compared
to income tax expense of $2.5 million for the same period in 2004.
The variation from our expected 24% tax rate is the result of
certain items included in other expense, net, not being tax
effected (including a portion of our foreign exchange losses). Net
Loss and Loss per Share For the reasons outlined above, net loss
for the quarter ended September 30, 2005 was $11.4 million ($0.31
basic and diluted loss per share), as compared to net loss of $8.5
million ($0.24 basic and diluted loss per share) for the quarter
ended September 30, 2004. Other Retirement Benefit Plan As
disclosed in our second quarter of 2005 Management's Discussion and
Analysis, subject to the approval of our Board, we anticipate
replacing the "defined benefit" retirement plan for the majority of
the plan participants with a fully-funded plan based on a "defined
contribution" format later this year. Our upfront cash funding
requirements relating to this new arrangement, assuming exchange
rates remain at current levels, is expected to remain within the
$35 million to $40 million range reported in the second quarter. If
a new plan is implemented this year on the basis of the structure
currently proposed, we have estimated that the transition would
result in a one-time after tax accounting charge in the range of
$22 million to $26 million. We do not expect that the proposed
change in plans will have a significant impact on our ongoing
annual pension cost. The new plan should, however, increase the
certainty and predictability of the costs and nature of the
retirement benefits. Assuming the defined contribution plan is
implemented in the fourth quarter of 2005, we expect incentive
management fees for 2005 would be reduced by approximately $1
million. Looking Ahead Assuming the travel trends that we
experienced in the first nine months of 2005 continue, and based on
current demand reflected in our reservation activity, we expect
RevPAR for worldwide Core Hotels in the fourth quarter of 2005 and
the full year 2005 to increase by approximately 5% and
approximately 11%, respectively, as compared to the corresponding
periods in 2004. Our RevPAR statistics are for Core Hotels and are
expressed on a US dollar basis. As a result of the US dollar being
relatively stronger in particular to the Euro and pound sterling to
date in the fourth quarter of 2005, our RevPAR expectations for the
Core Hotels in Europe may be exceeded on a local currency basis.
The fourth quarter outlook also reflects a flat RevPAR in
Asia/Pacific, primarily as a result of a significant decline in
demand in Bali following the recent terrorist activities in that
market. If current trends continue, we expect gross operating
margins of our worldwide Core Hotels to increase approximately 200
basis points for the full year, reflecting modest gross operating
margin improvement in the fourth quarter as a result of the factors
noted above. Based on these RevPAR and gross operating margin
assumptions, and assuming no significant change to the US/Canadian
dollar exchange rates, we expect earnings from operations before
other operating items to be in the range of $55 million to $60
million for the full year of 2005.
---------------------------------- (1) 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. (2) 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). (3)
Gross operating margin represents gross operating profit as a
percentage of gross operating revenue. (4) Included in ownership
operations and corporate expenses are the consolidated revenues and
expenses from our 100% leasehold interests in Four Seasons Hotel
Vancouver, The Pierre in New York (until the lease disposition on
June 30, 2005), and Four Seasons Hotel Berlin (until the lease
termination on September 26, 2004), distributions from other
ownership interests in properties that Four Seasons manages. Also
included are corporate overhead expenses. (5) Effective January 1,
2004, we ceased designating our US dollar foreign exchange 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 $11.2
million, which were deferred prior to January 1, 2004, were
recognized in 2004 as an increase of fee revenues over the course
of the year. (6) Other fees include royalty and management fees
from our residential business, fees we earn during the development
of our hotels and other miscellaneous fees. (7) Reimbursed costs
includes the reimbursement of all out-of-pocket costs, including
sales and marketing and advertising fees. (8) The management
operations profit margin represents management operations earnings
before other operating items, as a percentage of management
operations revenue. ++++++ The financial statements are prepared in
accordance with Canadian generally accepted accounting principles.
++++++ We will hold a conference call today at 11 a.m. (Eastern
Standard Time) to discuss the third quarter financial results. The
details are: To access the call dial: 1 (800) 377-5794 (U.S.A. and
Canada) 1 (416) 641-6700 (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 21264891. 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. ++++++ 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, our Management's Discussion and Analysis for this quarter 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. FOUR SEASONS HOTELS
INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months
ended Nine months ended (In thousands of US dollars September 30,
September 30, except per share amounts) 2005 2004 2005 2004
-------------------------------------------------------------------------
Consolidated revenues (note 4) $ 52,204 $ 63,259 $ 189,840 $
191,743 ------------------------------------------------
------------------------------------------------ MANAGEMENT
OPERATIONS Revenues: Fee revenues (note 4(a)) $ 26,372 $ 27,951 $
87,640 $ 83,860 Reimbursed costs 16,617 13,943 47,219 39,892
------------------------------------------------ 42,989 41,894
134,859 123,752 ------------------------------------------------
Expenses: General and administrative expenses (10,445) (7,856)
(29,638) (24,536) Reimbursed costs (16,617) (13,943) (47,219)
(39,892) ------------------------------------------------ (27,062)
(21,799) (76,857) (64,428)
------------------------------------------------ 15,927 20,095
58,002 59,324 ------------------------------------------------
OWNERSHIP OPERATIONS AND CORPORATE EXPENSES Revenues 9,749 22,383
57,838 70,821 Distributions from hotel investments - - 132 293
Expenses: Cost of sales and expenses (8,253) (23,451) (57,247)
(73,535) Corporate expenses (4,588) (2,772) (10,494) (7,978) Fees
to Management Operations (534) (1,018) (2,989) (3,123)
------------------------------------------------ (3,626) (4,858)
(12,760) (13,522) ------------------------------------------------
Earnings before other operating items 12,301 15,237 45,242 45,802
Depreciation and amortization (2,575) (3,102) (8,512) (8,517) Other
expense, net (notes 4(a) and 5) (21,064) (18,089) (32,419) (17,026)
------------------------------------------------ Earnings (loss)
from operations (11,338) (5,954) 4,311 20,259 Interest income
(expense), net 616 (102) 1,826 1,259
------------------------------------------------ Earnings (loss)
before income taxes (10,722) (6,056) 6,137 21,518
------------------------------------------------ Income tax
recovery (expense): Current 2,925 364 (389) (4,966) Future (note
5(b)) (3,644) (2,830) 3,799 (3,611)
------------------------------------------------ (719) (2,466)
3,410 (8,577) ------------------------------------------------ Net
earnings (loss) $ (11,441) $ (8,522) $ 9,547 $ 12,941
------------------------------------------------
------------------------------------------------ Basic earnings
(loss) per share (note 3(a)) $ (0.31) $ (0.24) $ 0.26 $ 0.36
------------------------------------------------
------------------------------------------------ Diluted earnings
(loss) per share (note 3(a)) $ (0.31) $ (0.24) $ 0.25 $ 0.35
------------------------------------------------
------------------------------------------------ See accompanying
notes to consolidated financial statements. FOUR SEASONS HOTELS
INC. CONSOLIDATED BALANCE SHEETS As at As at (Unaudited) September
30, December 31, (In thousands of US dollars) 2005 2004
-------------------------------------------------------------------------
ASSETS Current assets: Cash and cash equivalents $ 221,472 $
226,377 Receivables 82,742 81,541 Inventory 708 1,439 Prepaid
expenses 3,083 2,981 --------------------------- 308,005 312,338
Long-term receivables 195,805 179,060 Investments in hotel
partnerships and corporations 124,601 131,338 Fixed assets 59,716
59,939 Investment in management contracts 168,408 181,273
Investment in trademarks and trade names 4,317 4,424 Future income
tax assets 7,953 3,711 Other assets 35,657 30,064
--------------------------- $ 904,462 $ 902,147
--------------------------- --------------------------- LIABILITIES
AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and
accrued liabilities $ 39,528 $ 60,415 Long-term obligations due
within one year 3,592 3,766 --------------------------- 43,120
64,181 Long-term obligations (note 2) 275,005 253,066 Shareholders'
equity (note 3): Capital stock 250,372 248,980 Convertible notes
36,920 36,920 Contributed surplus 9,930 8,088 Retained earnings
200,139 192,129 Equity adjustment from foreign currency translation
88,976 98,783 --------------------------- 586,337 584,900
--------------------------- Subsequent events (note 9) $ 904,462 $
902,147 --------------------------- --------------------------- See
accompanying notes to consolidated financial statements. FOUR
SEASONS HOTELS INC. CONSOLIDATED STATEMENTS OF CASH PROVIDED BY
OPERATIONS Three months ended Nine months ended (Unaudited)
September 30, September 30, (In thousands of US dollars) 2005 2004
2005 2004
-------------------------------------------------------------------------
Cash provided by (used in) operations: MANAGEMENT OPERATIONS
Earnings before other operating items $ 15,927 $ 20,095 $ 58,002 $
59,324 Items not requiring an outlay of funds 1,173 474 2,262 1,218
------------------------------------------------ Working capital
provided by Management Operations 17,100 20,569 60,264 60,542
------------------------------------------------ OWNERSHIP
OPERATIONS AND CORPORATE EXPENSES Loss before other operating items
(3,626) (4,858) (12,760) (13,522) Items not requiring an outlay of
funds 296 275 872 652
------------------------------------------------ Working capital
used for Ownership Operations and Corporate Expenses (3,330)
(4,583) (11,888) (12,870)
------------------------------------------------ 13,770 15,986
48,376 47,672 Interest received, net 1,018 1,987 5,533 6,167
Interest paid on redemption of convertible notes - (25,840) -
(25,840) Current income tax paid (1,442) (827) (6,897) (2,086)
Change in non-cash working capital 3,733 (3,888) (10,475) (13,094)
Other (24) (219) (153) (757)
------------------------------------------------ Cash provided by
(used in) operations $ 17,055 $ (12,801) $ 36,384 $ 12,062
------------------------------------------------
------------------------------------------------ See accompanying
notes to consolidated financial statements. FOUR SEASONS HOTELS
INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended Nine
months ended (Unaudited) September 30, September 30, (In thousands
of US dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Cash provided by (used in): Operations: $ 17,055 $ (12,801) $
36,384 $ 12,062 ------------------------------------------------
Financing: Issuance of convertible notes - - - 241,332 Redemption
of convertible notes - (189,670) - (189,670) Other long-term
obligations including current portion 278 (28) (1,220) (12)
Issuance of shares 156 5,032 6,992 13,551 Dividends paid (1,584)
(1,420) (3,142) (2,811)
------------------------------------------------ Cash provided by
(used in) financing (1,150) (186,086) 2,630 62,390
------------------------------------------------ Capital
investments: Decrease in restricted cash - 55,204 - - Long-term
receivables (4,507) 7,317 (19,247) (7,383) Hotel investments
(1,368) (6,181) (10,813) (34,627) Disposal of hotel investments
(note 5(b)) - 35,977 12,672 35,977 Purchase of fixed assets (4,761)
(2,252) (12,821) (4,169) Investments in trademarks and trade names
and management contracts (202) (1,019) (675) (9,738) Other assets
(1,042) (1,130) (7,902) (2,865)
------------------------------------------------ Cash provided by
(used in) capital investments (11,880) 87,916 (38,786) (22,805)
------------------------------------------------ Increase
(decrease) in cash and cash equivalents 4,025 (110,971) 228 51,647
Increase (decrease) in cash and cash equivalents due to unrealized
foreign exchange gain (loss) (1,189) 2,638 (5,133) 543 Cash and
cash equivalents, beginning of period 218,636 292,622 226,377
132,099 ------------------------------------------------ Cash and
cash equivalents, end of period $ 221,472 $ 184,289 $ 221,472 $
184,289 ------------------------------------------------
------------------------------------------------ See accompanying
notes to consolidated financial statements. FOUR SEASONS HOTELS
INC. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Nine months ended
(Unaudited) September 30, (In thousands of US dollars) 2005 2004
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 192,129 $ 169,364 Net
earnings 9,547 12,941 Dividends declared (1,537) (1,367)
--------------------------- Retained earnings, end of period $
200,139 $ 180,938 ---------------------------
--------------------------- 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 is expected to 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(b)). 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 nine months ended September 30, 2005. (d)
Diluted earnings per share: 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 nine months ended September 30, 2005, there would have
been no additional dilution for either period. (e) Non-monetary
transactions: In June 2005, the CICA issued Section 3831,
"Non-Monetary Transactions", which introduces new requirements for
non-monetary transactions entered into on or after January 1, 2006.
The amended requirements will result in non-monetary transactions
being measured at fair values unless certain criteria are met, in
which case, the transaction is measured at carrying value. We are
currently evaluating the impact on our 2006 consolidated financial
statements. 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 September 30, 2005, no amounts were borrowed
under this credit facility. However, approximately $1,600 of
letters of credit were issued under this credit facility as at
September 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
September 30, 2005, we have 3,725,698 outstanding Variable Multiple
Voting Shares ("VMVS"), 32,913,488 outstanding Limited Voting
Shares ("LVS"), and 4,540,843 outstanding stock options (weighted
average exercise price of C$59.33 ($50.59)). (a) Earnings (loss)
per share: A reconciliation of the net earnings (loss) and weighted
average number of VMVS and LVS used to calculate basic and diluted
earnings (loss) per share is as follows: Three months ended
September 30, 2005 2004
---------------------------------------------------------------------
Net loss Shares Net loss Shares
---------------------------------------------------------------------
Basic and diluted loss per share amounts $(11,441) 36,638,577 $
(8,522) 35,709,555
---------------------------------------------------------------------
---------------------------------------------------------------------
Nine months ended September 30, 2005 2004
---------------------------------------------------------------------
Net Net earnings Shares earnings Shares
---------------------------------------------------------------------
Basic earnings per share amounts $ 9,547 36,624,036 $ 12,941
35,494,738 Effect of assumed dilutive conversions: Stock option
plan - 1,314,393 - 1,510,044
---------------------------------------------------------------------
Diluted earnings per share amounts $ 9,547 37,938,429 $ 12,941
37,004,782
---------------------------------------------------------------------
---------------------------------------------------------------------
The diluted earnings (loss) per share calculation excluded the
effect of the assumed conversions of 4,540,843 and 693,056 stock
options to LVS, under our stock option plan, during the three
months and nine months ended September 30, 2005, respectively (2004
- 5,331,957 and 1,015,916 stock options, respectively), as the
inclusion of these options would have resulted in an anti-dilutive
effect. As we incurred a net loss for the three months ended
September 30, 2005 and 2004, all outstanding stock options were
excluded from the calculation of diluted loss per share for these
periods. In addition, the dilution relating to the conversion of
our convertible notes (issued in 1999 and subsequently redeemed in
September 2004) to 3,463,155 LVS, by application of the
"if-converted method", has been excluded from the calculation for
2004 as the inclusion of this conversion resulted in an
anti-dilutive effect for the three months and nine months ended
September 30, 2004. There was no dilution relating to the
convertible senior notes issued in 2004, as the contingent
conversion price was not reached during the periods. (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 ended September 30, 2005
and 2004, and in the nine months ended September 30, 2005. The fair
value of stock options granted in the nine months ended September
30, 2004 was estimated using the Black-Scholes option pricing model
with the following assumptions: risk-free interest rates ranging
from 2.96% to 4.39%; semi-annual dividend per LVS of C$0.055;
volatility factor of the expected market price of our LVS of 28% to
30%; 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 nine months ended
September 30, 2004, the weighted average fair value of the options
at the grant dates was C$25.35 ($19.09). 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 nine months ended September 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 (loss) and basic and
diluted earnings (loss) per share would have been adjusted to the
pro forma amounts indicated below: Three months ended Nine months
ended September 30, September 30, 2005 2004 2005 2004
-------------------------------------------------------------------------
Stock option expense included in compensation expense $ (486) $
(455) $ (1,494) $ (1,132)
-------------------------------------------
------------------------------------------- Net earnings (loss), as
reported $(11,441) $ (8,522) $ 9,547 $ 12,941 Additional expense
that would have been recorded if all outstanding stock options
granted during 2002 had been expensed (717) (648) (2,089) (1,928)
------------------------------------------- Pro forma net earnings
(loss) $(12,158) $ (9,170) $ 7,458 $ 11,013
------------------------------------------- Earnings (loss) per
share: Basic, as reported $ (0.31) $ (0.24) $ 0.26 $ 0.36 Basic,
pro forma (0.33) (0.26) 0.20 0.31 Diluted, as reported (0.31)
(0.24) 0.25 0.35 Diluted, pro forma (0.33) (0.26) 0.20 0.30
------------------------------------------- 4. Consolidated
revenues: Three months ended Nine months ended September 30,
September 30, 2005 2004 2005 2004
-------------------------------------------------------------------------
Revenues from Management Operations(a) $ 42,989 $ 41,894 $134,859
$123,752 Revenues from Ownership Operations 9,749 22,383 57,838
70,821 Distributions from hotel investments - - 132 293 Fees from
Ownership Operations to Management Operations (534) (1,018) (2,989)
(3,123) ------------------------------------------- $ 52,204 $
63,259 $189,840 $191,743
-------------------------------------------
------------------------------------------- (a) Effective January
1, 2004, we ceased designating our US dollar foreign exchange
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 nine months ended
September 30, 2004, we recognized $2,625 and $8,143, respectively,
of the deferred gain in fee revenues. In addition, effective
January 1, 2004, the US dollar foreign exchange 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 expense, net. This resulted in a
$1,014 foreign exchange gain and a $106 foreign exchange loss,
respectively, for the three months and nine months ended September
30, 2004. We did not hedge any of our US dollar fee revenues during
the three months and nine months ended September 30, 2005. 5. Other
expense, net: (a) Foreign exchange loss: During the three months
and nine months ended September 30, 2005, we recorded a net foreign
exchange loss of $16,172 and $19,854, respectively (2004 - $3,419
and $2,091, 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. (b) Other: When the Regent hotel chain was acquired
in 1992, a portion of the purchase price of that acquisition was
allocated to the management contracts that we assumed, which
included 12 Regent branded properties and Four Seasons properties
in New York, Bali and Milan. As a result of our agreement to manage
a new Four Seasons property in Kuala Lumpur, and in anticipation of
reaching an agreement with the owner of The Regent hotel in that
city to transition out of our management of that hotel, we wrote
off our investment in The Regent Kuala Lumpur management contract
of $4,617 in the three months ended September 30, 2005,
representing the unamortized portion of the amount allocated to the
management contract for that property in 1992. 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 $5,284
during the nine months ended September 30, 2005. 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 a 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 expense,
net, during the three months ended March 31, 2005. Included in
other expense, net for the three months and nine months ended
September 30, 2004 is the loss on the redemption of the debt
component of our convertible notes (issued in 1999) of $11,174. The
redemption of these convertible notes are more fully described in
our consolidated financial statements for the year ended December
31, 2004. In addition, during the three months ended September 30,
2004, we sold the majority of our investment in Four Seasons Hotel
Amman and all of our investment in Four Seasons Resort Whistler for
proceeds of approximately $36,000 and settled our loan receivable
from Sedona, resulting in a total net loss of $3,391. 6. Pension
benefit expense: The pension benefit expense, after allocation to
managed properties, for the three months and nine months ended
September 30, 2005 was $1,134 and $2,351, respectively (2004 - $571
and $1,705, 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 $44,600. These contractual obligations and
other commitments are more fully described in our 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 decrease in guarantees and other
commitments of $1,000. In addition, we expect to fund approximately
$28,000 over the next 15 months in connection with an expansion of
our corporate office which is currently underway. In addition to
the guarantees and other commitments described above, we also have
a commitment related to the sale of The Pierre (note 5(b)). 8.
Seasonality: Our hotels and resorts are generally 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 generally
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. 9. Subsequent
events: 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 began to manage this property as an
independent hotel. At the time of transition, we received a payment
in an amount that exceeded the net book value of our investment in
the management contract. In October 2005, we sold our minority
equity interests in three properties for aggregate gross proceeds
of $13,591, which approximated our book value. In addition, we also
received repayment of $19,530 of long-term receivables and accrued
interest. FOUR SEASONS HOTELS INC. SUMMARY OF HOTEL OPERATING DATA
- CORE HOTELS(1) Three months ended September 30, (Unaudited) 2005
2004 Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 52 52 - No. of Rooms 13,802 13,802 -
Occupancy(2) 71.1% 67.8% 3.3pts. ADR(3) - in US dollars $332 $311
7.0% RevPAR(4) - in US dollars $226 $200 13.2% Gross operating
margin(5) 29.7% 26.8% 2.9pts. United States No. of Properties 20 20
- No. of Rooms 6,274 6,274 - Occupancy(2) 74.9% 69.9% 5.0pts.
ADR(3) - in US dollars $361 $334 8.1% RevPAR(4) - in US dollars
$274 $236 16.0% Gross operating margin(5) 27.9% 23.8% 4.1pts. Other
Americas/Caribbean No. of Properties 8 8 - No. of Rooms 1,724 1,724
- Occupancy(2) 69.1% 65.7% 3.4pts. ADR(3) - in US dollars $273 $251
8.7% RevPAR(4) - in US dollars $183 $158 15.4% Gross operating
margin(5) 18.2% 15.6% 2.6pts. Europe No. of Properties 8 8 - No. of
Rooms 1,492 1,492 - Occupancy(2) 68.2% 65.1% 3.1pts. ADR(3) - in US
dollars $535 $507 5.5% RevPAR(4) - in US dollars $381 $350 8.9%
Gross operating margin(5) 37.6% 37.1% 0.5pts. Middle East No. of
Properties 4 4 - No. of Rooms 847 847 - Occupancy(2) 66.4% 68.0%
(1.6)pts. ADR(3) - in US dollars $196 $178 10.1% RevPAR(4) - in US
dollars $128 $120 7.2% Gross operating margin(5) 39.7% 38.5%
1.2pts. Asia/Pacific No. of Properties 12 12 - No. of Rooms 3,465
3,465 - Occupancy(2) 67.6% 65.9% 1.7pts. ADR(3) - in US dollars
$234 $225 4.3% RevPAR(4) - in US dollars $119 $110 8.5% Gross
operating margin(5) 33.1% 30.0% 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) Nine months ended September
30, (Unaudited) 2005 2004 Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 52 52 - No. of Rooms 13,802 13,802 -
Occupancy(2) 69.9% 66.0% 3.9pts. ADR(3) - in US dollars $346 $323
7.1% RevPAR(4) - in US dollars $227 $201 13.2% Gross operating
margin(5) 30.9% 28.4% 2.5pts. United States No. of Properties 20 20
- No. of Rooms 6,274 6,274 - Occupancy(2) 74.2% 69.5% 4.7pts.
ADR(3) - in US dollars $365 $341 6.8% RevPAR(4) - in US dollars
$269 $236 14.0% Gross operating margin(5) 28.7% 25.7% 3.0pts. Other
Americas/Caribbean No. of Properties 8 8 - No. of Rooms 1,724 1,724
- Occupancy(2) 69.2% 64.5% 4.7pts. ADR(3) - in US dollars $341 $314
8.4% RevPAR(4) - in US dollars $225 $192 17.6% Gross operating
margin(5) 29.4% 25.8% 3.6pts. Europe No. of Properties 8 8 - No. of
Rooms 1,492 1,492 - Occupancy(2) 64.2% 64.4% (0.2)pts. ADR(3) - in
US dollars $535 $504 6.0% RevPAR(4) - in US dollars $359 $337 6.4%
Gross operating margin(5) 35.2% 36.0% (0.8)pts. Middle East No. of
Properties 4 4 - No. of Rooms 847 847 - Occupancy(2) 69.7% 66.4%
3.3pts. ADR(3) - in US dollars $212 $184 15.4% RevPAR(4) - in US
dollars $146 $121 20.3% Gross operating margin(5) 45.3% 39.0%
6.3pts. Asia/Pacific No. of Properties 12 12 - No. of Rooms 3,465
3,465 - Occupancy(2) 64.9% 61.2% 3.7pts. ADR(3) - in US dollars
$236 $224 5.7% RevPAR(4) - in US dollars $116 $102 13.4% Gross
operating margin(5) 31.8% 29.3% 2.5pts.
---------------------------------------- (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 September 30,
(Unaudited) 2005 2004 Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 67(1) 63 4 No. of Rooms 17,268(1)
16,378 890 United States No. of Properties 24 24 - No. of Rooms
7,144 7,109 35 Other Americas/Caribbean No. of Properties 10 10 -
No. of Rooms 2,162 2,162 - Europe No. of Properties 11 10 1 No. of
Rooms 1,919 1,786 133 Middle East No. of Properties 6 5 1 No. of
Rooms 1,444 1,212 232 Asia/Pacific No. of Properties 16 14 2 No. of
Rooms 4,599 4,109 490 ---------------------------------------- (1)
Since September 30, 2005, we ceased management of Four Seasons
Hotel Newport Beach, which had 295 rooms and we commenced
management of Four Seasons Hotel des Bergues Geneva, which has 103
rooms. These changes are not reflected in this table. FOUR SEASONS
HOTELS INC. REVENUES UNDER MANAGEMENT - ALL MANAGED HOTELS
(Unaudited) Three months ended Nine months ended (In thousands of
September 30, September 30, US dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Revenues under management $ 603,838 $ 534,038 $1,883,084 $1,636,095
---------------------------------------------------
---------------------------------------------------
---------------------------------------- (1) Revenues under
management consist of rooms, food and beverage, telephone and other
revenues of all the hotels and resorts which we manage.
Approximately 62% 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 Approximate Hotel/Resort/Residence
Club and Location(1)(2) Number of Rooms Scheduled 2005/2006
openings ---------------------------- Four Seasons Hotel Damascus,
Syria 305 Four Seasons Resort Lana'i at Koele, HI, USA(3) 100 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 Bahrain, Bahrain 250
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 Kuala Lumpur, Malaysia(x) 140 Four Seasons Hotel
Kuwait City, Kuwait 225 Four Seasons Hotel Marrakech, Morocco(x)
140 Four Seasons Resort Mauritius, Republic of Mauritius(x) 90 Four
Seasons Hotel Moscow, Russia(x) 210 Four Seasons Hotel Moscow
Kamenny Island, Russia(x) 80 Four Seasons Hotel New Orleans, LA,
USA(x) 240 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. (3)
The Lodge at Koele is currently managed by Four Seasons and is
expected to be rebranded as Four Seasons Resort Lana'i at Koele in
2006. DATASOURCE: Four Seasons Hotels and Resorts CONTACT: John
Davison, Chief Financial Officer, (416) 441-6714; Barbara
Henderson, Vice President, Corporate Finance, (416) 441-4329
Copyright