/FIRST AND FINAL ADD - TO167 - Four Seasons Hotels Inc. Earnings/
FOUR SEASONS HOTELS INC. NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (In thousands of Canadian dollars except
share amounts)
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In these interim consolidated financial statements, the words "we",
"us", "our", and other similar words are references to Four Seasons
Hotels Inc. and its consolidated subsidiaries. These interim
consolidated financial statements do not include all disclosures
required by Canadian generally accepted accounting principles
("GAAP") for annual financial statements and should be read in
conjunction with our annual consolidated financial statements for
the year ended December 31, 2003. 1. Significant accounting
policies: The significant accounting policies used in preparing
these interim consolidated financial statements are consistent with
those used in preparing our annual consolidated financial
statements for the year ended December 31, 2003, except as
disclosed below: (a) Stock-based compensation and other stock-based
payments: In December 2003, the Canadian Institute of Chartered
Accountants ("CICA") amended Section 3870 to require entities to
account for employee stock options using the fair value-based
method, beginning January 1, 2004. In accordance with one of the
transitional alternatives permitted under amended Section 3870, we
prospectively adopted in December 2003 the fair value-based method
with respect to all employee stock options granted on or after
January 1, 2003. Accordingly, options granted prior to that date
continue to be accounted for using the settlement method. The
prospective application of adopting the fair value-based method
effective January 1, 2003 has been applied retroactively in our
consolidated financial statements, and amounts for the three months
and nine months ended September 30, 2003 have been restated. The
impact of this change for the three months and nine months ended
September 30, 2004 was to increase net loss by $595 and to decrease
net earnings by $1,502, respectively (2003 - decrease net earnings
by $366 and increase net loss by $525, respectively), and to
increase basic and diluted loss per share by $0.01 and to decrease
basic and diluted earnings per share by $0.04, respectively (2003 -
decrease basic and diluted earnings per share by $0.01 and increase
basic and diluted loss per share by $0.01, respectively). The fair
value of stock options granted in the nine months ended September
30, 2004 has been estimated using the Black-Scholes option pricing
model with the following assumptions: risk-free interest rates
ranging from 2.96% to 4.39% (2003 - 4.44% to 5.02%); semi-annual
dividend per Limited Voting Share of $0.055 (2003 - $0.055);
volatility factor of the expected market price of our Limited
Voting Shares ranging from 28% to 30% (2003 - 32%); and expected
lives of the options in 2004 and 2003 ranging between four and
seven years, depending on the level of the employee who was granted
stock options. For the options granted in the nine months ended
September 30, 2004, the weighted average fair value of the options
at the grant dates was $25.35 (2003 - $18.00). No stock options
were granted during the three months ended September 30, 2004 and
2003. For purposes of stock option expense and pro forma
disclosures, the estimated fair value of the options is amortized
to compensation expense over the options' vesting period. Section
3870 requires pro forma disclosure of the effect of the application
of the fair value-based method to employee stock options granted on
or after January 1, 2002 and not accounted for using the fair
value-based method. For the three months and nine months ended
September 30, 2004 and 2003, if we had applied the fair value-based
method to options granted from January 1, 2002 to December 31,
2002, our net earnings (loss) and basic and diluted earnings (loss)
per share would have been adjusted to the pro forma amounts
indicated below: (Unaudited) (In thousands of Canadian Three months
ended Nine months ended dollars except September 30, September 30,
per share amounts) 2004 2003 2004 2003
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Stock option expense included in compensation expense $ (595) $
(366) $ (1,502) $ (525) ------------------------------------------
------------------------------------------ Net earnings (loss), as
reported $(11,143) $ 4,382 $ 17,665 $ (6,320) Additional expense
that would have been recorded if all outstanding stock options
granted during 2002 had been expensed (848) (862) (2,560) (2,587)
------------------------------------------ Pro forma net earnings
(loss) $(11,991) $ 3,520 $ 15,105 $ (8,907)
------------------------------------------ Earnings (loss) per
share: Basic, as reported $ (0.31) $ 0.13 $ 0.50 $ (0.18) Basic,
pro forma (0.34) 0.10 0.43 (0.25) Diluted, as reported (0.31) 0.12
0.48 (0.18) Diluted, pro forma (0.34) 0.10 0.41 (0.25)
------------------------------------------ (b) Hedging
relationships: In December 2001, the CICA issued an accounting
guideline relating to hedging relationships. The guideline
establishes requirements for the identification, documentation,
designation and effectiveness of hedging relationships and was
effective for fiscal years beginning on or after July 1, 2003.
Effective January 1, 2004, we ceased designating our US dollar
forward contracts as hedges of our US dollar revenues. These
contracts were entered into during 2002, and all of these contracts
will mature during 2004. The foreign exchange gains on these
contracts of $14,552, which were deferred prior to January 1, 2004,
are being recognized in 2004 as an increase of fee revenues over
the course of the year. Effective January 1, 2004, our US dollar
forward contracts are being marked-to-market on a monthly basis
with the resulting changes in fair values being recorded as a
foreign exchange gain or loss. The impact of ceasing to designate
our US dollar forward contracts as hedges of our US dollar revenues
was to increase net earnings by $891 and $515, respectively, for
the three months and nine months ended September 30, 2004 and to
increase receivables by $4,413 and accounts payable and accrued
liabilities by $3,731 as at September 30, 2004. In June 2004, we
entered into an interest rate swap agreement that we designated as
a fair value hedge of the convertible notes issued in the same
month (note 3(a)). In October 2004, we terminated the interest rate
swap agreement (note 10). (c) Reimbursed costs: As a result of
adopting Section 1100, "Generally Accepted Accounting Principles",
which was issued by the CICA in July 2003, and was effective
January 1, 2004, we have included the reimbursement of all
out-of-pocket expenses in both revenues and expenses instead of
recording certain reimbursed costs as a "net" amount. The change in
the accounting treatment of reimbursed costs resulted in an
increase of both revenues and expenses for the three months and
nine months ended September 30, 2004 of $10,770 and $29,983,
respectively (2003 - $10,470 and $33,186, respectively), but did
not have an impact on net earnings. In addition, for the three
months and nine months ended September 30, 2003, each of fee
revenues and general and administrative expenses included certain
other reimbursed costs of $7,394 and $21,700, respectively. These
have been reclassified to reimbursed costs in both revenues and
expenses to conform with the financial statement presentation
adopted in 2004. (d) Impairment of long-lived assets: In December
2002, the CICA issued Section 3063, "Impairment of Long-Lived
Assets". This new section establishes standards for the
recognition, measurement and disclosure of the impairment of
long-lived assets, and replaces the write-down provisions of
Section 3061, "Property, Plant and Equipment". In accordance with
Section 3063, long-lived assets, such as property, plant and
equipment and purchased intangibles subject to amortization, are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated
by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized
equal to the amount by which the carrying amount of the asset
exceeds the fair value of the asset. The implementation of Section
3063, effective January 1, 2004, did not have an impact on our
consolidated financial statements for the three months and nine
months ended September 30, 2004. (e) Accounting for asset
retirement obligations: In March 2003, the CICA issued Section
3110, "Accounting for Asset Retirement Obligations". Section 3110
requires companies to record the fair value of an asset retirement
obligation as a liability in the year in which they incur a legal
obligation associated with the retirement of tangible long-lived
assets that result from the acquisition, construction, development
and/or normal use of the assets. Companies are also required to
record a corresponding asset that is depreciated over the life of
the asset. Subsequent to the initial measurement of the asset
retirement obligation, the obligation will be adjusted at the end
of each period to reflect the passage of time and changes in the
estimated future cash flows underlying the obligation. The
implementation of Section 3110, effective January 1, 2004, did not
have an impact on our consolidated financial statements for the
three months and nine months ended September 30, 2004. (f) Revenue
recognition: In December 2003, the Emerging Issues Committee
("EIC") of the CICA issued Abstract EIC-141, "Revenue Recognition",
which provides revenue recognition guidance. The implementation of
EIC-141, effective January 1, 2004, did not have an impact on our
consolidated financial statements for the three months and nine
months ended September 30, 2004. (g) Revenue arrangements with
multiple deliverables: In December 2003, the EIC issued Abstract
EIC-142, "Revenue Arrangements with Multiple Deliverables", which
addresses accounting for arrangements, entered into after December
31, 2003, where an enterprise will perform multiple revenue
generating activities. The implementation of EIC-142 did not have
an impact on our consolidated financial statements for the three
months and nine months ended September 30, 2004. 2. Bank credit
facility: In June 2004, we finalized a committed bank credit
facility of US$100 million ($126,400), which expires in June 2005
and replaces bank credit facilities of US$212.5 million ($268,600).
As at September 30, 2004, no amounts were borrowed under this
credit facility. However, approximately US$14 million ($17,400) of
letters of credit were issued under this credit facility. No
amounts have been drawn under these letters of credit. In September
2004, the bank credit facility was amended by extending the expiry
date to September 2007 and by removing the requirement to maintain
a minimum cash balance of at least $75,000 in our account with the
agent of the facility. In November 2004, we finalized a new
committed bank credit facility of US$125 million ($158,000), which
expires in September 2007, and replaces the credit facility of
US$100 million ($126,400). 3. Long-term obligations: As at As at
September 30, December 31, (In thousands of Canadian dollars) 2004
2003
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(Unaudited) Convertible notes, issued in 2004(a) $ 270,023 $ --
Convertible notes, issued in 1999(b) -- 88,029 Accrued benefit
liability and other obligations 34,725 32,079
-------------------------- 304,748 120,108 Less amounts due within
one year (2,425) (2,587) -------------------------- $ 302,323 $
117,521 -------------------------- -------------------------- (a)
In June 2004, we issued US$250 million ($341,100) (principal
amount) convertible senior notes. The net proceeds of the issuance,
after deducting offering expenses and underwriters' commission,
were approximately US$241.3 million ($329,273). These notes bear
interest at the rate of 1.875% per annum (payable semi-annually in
arrears on January 30 and July 30 to holders of record on January
15 and July 15, beginning January 30, 2005), and will mature on
July 30, 2024, unless earlier redeemed or repurchased. The notes
are convertible into Limited Voting Shares of Four Seasons Hotels
Inc. at an initial conversion rate of 13.9581 shares per each one
thousand US dollar principal amount (equal to a conversion price of
approximately US$71.64 ($90.55) per Limited Voting Share), subject
to adjustments in certain events, only when (i) the closing price
of the Limited Voting Shares measured over a specified number of
trading days is more than 130% of the conversion price, (ii) the
market price of a note measured over a specified number of trading
days is less than 95% of the closing sale price of the Limited
Voting Shares into which they may be converted, (iii) we call the
notes for redemption, or (iv) certain corporate transactions or a
"fundamental change" has occurred. In connection with a
"fundamental change" on or prior to July 30, 2009, on conversion
holders of notes will be entitled to receive additional Limited
Voting Shares having a value equal to the aggregate of the make
whole premium they would have received if the notes were purchased
plus an amount equal to any accrued but unpaid interest. We may
choose to settle conversion (including any make whole premium) in
Limited Voting Shares, cash or a combination of Limited Voting
Shares and cash (at our option). On or after August 4, 2009, we may
(at our option) redeem all or a portion of the notes, in whole or
in part, for cash at 100% of their principal amount, plus any
accrued and unpaid interest. On each of July 30, 2009, 2014 and
2019, holders may require us to purchase all or a portion of their
notes at 100% of their principal amount, plus any accrued and
unpaid interest. We will pay cash for any notes so purchased on
July 30, 2009. Repurchases made on July 30, 2014 and July 30, 2019,
may be made (at our option) in cash, Limited Voting Shares or a
combination of cash and Limited Voting Shares. Upon the occurrence
of certain designated events, we will be required to make an offer
to purchase the notes at 100% of their principal amount plus any
accrued and unpaid interest, and, in the case of a "fundamental
change" that is also a "change of control" occurring on or before
July 30, 2009, we also will pay a make whole premium. We may choose
to pay the purchase price (including any make whole premium) for
notes in respect of which our offer is accepted in (at our option)
cash, Limited Voting Shares, securities of the surviving entity (if
Four Seasons Hotels Inc. is not the surviving corporation), or a
combination of cash and shares or securities. In accordance with
Canadian GAAP, the notes are bifurcated on our financial statements
into a debt component (representing the principal value of a bond
of US$211.8 million ($288,918), which was estimated based on the
present value of a US$250 million ($341,100) bond maturing in 2009,
yielding 5.33% per annum, compounded semi-annually, and paying a
coupon of 1.875% per annum) and an equity component (representing
the value of the conversion feature of the notes). Accordingly, net
proceeds have been allocated $288,918 to long-term obligations and
$50,373 to shareholders' equity. The offering expenses and
underwriters' commission of approximately $10,018 relating to the
debt component, are recorded in other assets. The debt component of
the notes will increase for accounting purposes at the compounded
interest rate of 5.33%, less the coupon paid of 1.875% per annum.
In connection with the offering, we had entered into an interest
rate swap agreement to July 30, 2009 with an initial notional
amount of US$211.8 million ($288,918), pursuant to which we had
agreed to receive interest at a fixed rate of 5.33% per annum and
pay interest at six-month LIBOR in arrears plus 0.4904%. We had
designated the interest rate swap as a fair value hedge of the
notes. As a result, we were accounting for the payments under the
interest rate swap on an accrual basis, which resulted in an
effective interest rate (for accounting purposes) on the hedged
notes of six-month LIBOR in arrears plus 0.4904%. In October 2004,
we terminated the interest rate swap agreement (note 10). (b)
During 1999, we issued US$655.5 million principal amount at
maturity (September 23, 2029) of convertible notes for gross
proceeds of US$172.5 million. The net proceeds of the issuance,
after deducting offering expenses and underwriters' commission,
were US$166 million. We were entitled to redeem the convertible
notes commencing in September 2004 for cash equal to the issue
price plus accrued interest calculated at 4 1/2% per annum. In
September 2004, we redeemed for cash all these convertible notes
for US$328.73 per US$1 thousand principal amount at maturity (the
redemption price being the issue price plus interest that was
accrued but unpaid) for an aggregate payment of US$215.5 million
($275,701). In accordance with Canadian GAAP, we allocated the
consideration paid on the redemption to the liability and equity
components of the convertible notes based on their relative fair
values at the date of the redemption. We recognized a pre-tax
accounting loss of $14,611 related to the debt component of the
convertible notes (representing the difference between the carrying
value of the debt component and the relative fair value of the debt
component and calculated at the present value of the amount due on
maturity, using an assumed 25-year interest rate of 8.474% per
annum, compounding semi-annually). This loss was recorded in other
expense, net in the consolidated statements of operations. In
addition, at the interest rate noted above, we recognized a pre-tax
accounting gain on the extinguishment of the equity component of
the convertible notes of $8,160. The gain was recorded in
contributed surplus. The tax impact of the redemption of both the
liability and equity components of the convertible notes was a
decrease to future income tax assets and a decrease to contributed
surplus of $4,141. The net after-tax impact on shareholders' equity
from the redemption of both the debt and equity components of the
convertible notes was a reduction of $10,592. In accordance with
Canadian GAAP, the cash paid on redemption of the convertible notes
relating to the interest accreted from September 1999 to September
2004, for accounting purposes, of US$25.8 million ($33,057) on the
convertible notes has been recorded in the consolidated statements
of cash provided by operations. The remaining cash paid on
redemption of US$189.7 million ($242,644) has been recorded under
"Financing" in the consolidated statements of cash flows. 4.
Shareholders' equity: As at September 30, 2004, we have outstanding
Variable Multiple Voting Shares ("VMVS") of 3,725,698, outstanding
Limited Voting Shares ("LVS") of 32,114,374 and outstanding stock
options of 5,331,957 (weighted average exercise price of $56.71). A
reconciliation of the net earnings (loss) and weighted average
number of VMVS and LVS used to calculate basic earnings (loss) per
share and diluted earnings (loss) per share is as follows: Three
months ended (Unaudited) September 30, (In thousands of Canadian
dollars) 2004 2003
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Net Net loss Shares earnings Shares
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Basic earnings (loss) per share: Net earnings (loss) $(11,143)
35,709,555 $ 4,382 35,039,104 Effect of assumed dilutive
conversions: Stock option plan -- -- -- 1,565,639
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Diluted earnings (loss) per share: Net earnings (loss) and assumed
dilutive conversions $(11,143) 35,709,555 $ 4,382 36,604,743
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Nine months ended (Unaudited) September 30, (In thousands of
Canadian dollars) 2004 2003
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Net earnings Shares Net loss Shares
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Basic earnings (loss) per share: Net earnings (loss) $ 17,655
35,494,738 $ (6,320) 34,945,812 Effect of assumed dilutive
conversions: Stock option plan -- 1,510,044 -- --
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Diluted earnings (loss) per share: Net earnings (loss) and assumed
dilutive conversions $ 17,665 37,004,782 $ (6,320) 34,945,812
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The diluted earnings (loss) per share calculation excluded the
effect of the assumed conversions of 5,331,957 and 1,015,916 stock
options to LVS, under our stock option plan, during the three
months and nine months ended September 30, 2004, respectively (2003
- 1,383,041 and 5,953,345 stock options, respectively), as the
inclusion of these conversions resulted in an anti-dilutive effect.
As we incurred a net loss for the three months ended September 30,
2004 and for the nine months ended September 30, 2003, all stock
options granted were excluded from the calculation of diluted loss
per share. In addition, the dilution relating to the conversion of
our convertible notes (issued in 1999 and subsequently redeemed in
2004) (note 3(b)) to 3,463,155 LVS, by application of the
"if-converted method", has been excluded from the calculation for
2004 and 2003 as the inclusion of this conversion resulted in an
anti-dilutive effect for the three months and nine months ended
September 30, 2004 and 2003. There was no dilution relating to the
convertible notes issued in 2004 (note 3(a)) as the contingent
conversion price was not reached during the periods. 5.
Consolidated revenues: Consolidated revenues for Four Seasons
Hotels Inc. is comprised of the following: (Unaudited) Three months
ended Nine months ended (In thousands of September 30, September
30, Canadian dollars) 2004 2003 2004 2003
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Revenues from Management Operations $ 54,779 $ 46,687 $164,457
$142,365 Revenues from Ownership and Corporate Operations 29,267
27,001 94,247 87,194 Distribution from hotel investments -- 153 398
153 Fees from Ownership and Corporate Operations to Management
Operations (1,331) (1,264) (4,156) (4,017)
------------------------------------------- $ 82,715 $ 72,577
$254,946 $225,695 -------------------------------------------
------------------------------------------- 6. Other expense, net:
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 $14,611
(note 3(b)). In addition, other expense, net for the three months
and nine months ended September 30, 2004 includes a net foreign
exchange loss of $4,470 and $2,809, respectively (2003 - net
foreign exchange gain of $323 and a net foreign exchange loss of
$17,179, respectively) related to the foreign currency translation
gains and losses on unhedged net monetary asset and liability
positions, primarily in US dollars, euros, pounds sterling and
Australian dollars, and foreign exchange gains and losses incurred
by our foreign self-sustaining subsidiaries. During the 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 $47,000
and settled our loan receivable from Sedona, resulting in a total
net loss of $4,434. The majority of the loss was related to the
settlement of the loan receivable from Sedona and for legal costs
incurred to finalize the dispositions. Also included in other
expense, net for the three months and nine months ended September
30, 2004 are legal and enforcement costs of nil and $273,
respectively (2003 - $1,180 and $8,680 respectively), in connection
with the disputes with the owners of the Four Seasons hotels in
Caracas and Seattle. 7. Pension benefit expense: The pension
benefit expense, after allocation to managed properties, for the
three months and nine months ended September 30, 2004 was $747 and
$2,264, respectively (2003 - $762 and $2,128, respectively). 8.
Lease termination: As at December 31, 2003, our total lease
commitments included future minimum lease payments of approximately
euro 87 million ($142,005) relating to Four Seasons Hotel Berlin.
On September 26, 2004, the landlord terminated our lease of Four
Seasons Hotel Berlin, and we ceased managing the hotel. As a result
of the lease termination, we no longer have any lease commitments
with respect to the hotel. 9. Seasonality: Our hotels and resorts
are affected by normally recurring seasonal patterns and, for most
of the properties, demand is usually lower in the period from
December through March compared to the remainder of the year.
Typically, the first quarter is the weakest quarter and the fourth
quarter is the strongest quarter for the majority of the
properties. Our ownership operations are particularly affected by
seasonal fluctuations, with lower revenue, higher operating losses
and lower cash flow in the first quarter, as compared to other
quarters. As a result, ownership operations usually incur an
operating loss in the first quarter of each year. Management
operations are also impacted by seasonal patterns, as revenues are
affected by the seasonality of hotel and resort revenues and
operating results. Urban hotels generally experience lower revenues
and operating results in the first quarter, as compared to other
quarters. However, this negative impact on management revenues is
offset, to some degree, by increased travel to our resorts in the
period. 10. Subsequent event: In October 2004, we terminated the
interest rate swap agreement and received proceeds of US$9 million
($11,267). The book value of the interest rate swap as at September
30, 2004 was approximately $2,100. The gain of approximately $9,200
will be deferred for accounting purposes and will be amortized over
the next 4.75 years, which would have been the remaining swap term.
FOUR SEASONS HOTELS INC. SUMMARY OF HOTEL OPERATING DATA - CORE
HOTELS(1) Three months ended September 30, (Unaudited) 2004 2003
Variance
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Worldwide No. of Properties 48 48 -- No. of Rooms 12,783 12,783 --
Occupancy(2) 70.1% 64.3% 5.8pts. ADR(3) - in US dollars $318 $291
9.0% RevPAR(4) - in US dollars $208 $181 14.6% Gross operating
margin(5) 27.5% 25.2% 2.3pts. United States No. of Properties 19 19
-- No. of Rooms 6,114 6,114 -- Occupancy(2) 70.9% 69.3% 1.6pts.
ADR(3) - in US dollars $335 $316 6.0% RevPAR(4) - in US dollars
$240 $221 8.2% Gross operating margin(5) 23.0% 22.7% 0.3pts. Other
Americas/Caribbean No. of Properties 7 7 -- No. of Rooms 1,534
1,534 -- Occupancy(2) 67.2% 60.0% 7.2pts. ADR(3) - in US dollars
$240 $231 3.7% RevPAR(4) - in US dollars $155 $134 15.9% Gross
operating margin(5) 22.9% 19.7% 3.2pts. Europe No. of Properties 7
7 -- No. of Rooms 1,331 1,331 -- Occupancy(2) 63.1% 65.1% (0.2)pts.
ADR(3) - in US dollars $520 $465 11.7% RevPAR(4) - in US dollars
$352 $315 11.5% Gross operating margin(5) 35.6% 35.0% 0.6pts.
Middle East No. of Properties 3 3 -- No. of Rooms 598 598 --
Occupancy(2) 75.1% 54.7% 20.4pts. ADR(3) - in US dollars $169 $155
9.3% RevPAR(4) - in US dollars $127 $85 49.4% Gross operating
margin(5) 48.3% 37.8% 10.5pts. Asia/Pacific No. of Properties 12 12
-- No. of Rooms 3,206 3,206 -- Occupancy(2) 71.7% 58.3% 13.4pts.
ADR(3) - in US dollars $254 $219 15.8% RevPAR(4) - in US dollars
$129 $92 40.8% Gross operating margin(5) 33.1% 26.0% 7.1pts.
--------------------------------------------------- (1) The term
"Core Hotels" means hotels and resorts under management for the
full year of both 2004 and 2003. However, if a "Core Hotel" has
undergone or is undergoing an extensive renovation program in one
of those years that materially affects the operation of the
property in that year, it ceases to be included as a "Core Hotel"
in either year. Changes from the 2003/2002 Core Hotels are the
additions of Four Seasons Hotel Amman, Four Seasons Resort Sharm el
Sheikh, Four Seasons Hotel Shanghai and Four Seasons Hotel Tokyo at
Marunouchi and the deletion of Four Seasons Hotel Berlin, Four
Seasons Resort Santa Barbara, Four Seasons Resort Scottsdale at
Troon North and Four Seasons Hotel Washington, DC, the last three
of which are undergoing extensive renovation programs in 2004. (2)
Occupancy percentage is defined as the total number of rooms
occupied divided by the total number of rooms available. (3) ADR is
defined as average daily room rate calculated as straight average
for each region. (4) RevPAR is defined as average room revenue per
available room. RevPAR is a commonly used indicator of market
performance for hotels and resorts and represents the combination
of the average daily room rate per room occupied and the average
occupancy rate achieved during the period. RevPAR does not include
food and beverage or other ancillary revenues generated by a hotel
or resort. We report RevPAR as it is the most commonly used measure
in the lodging industry to measure the period-over-period
performance of comparable properties. (5) Gross operating margin
represents gross operating profit as a percent of gross operating
revenue. FOUR SEASONS HOTELS INC. SUMMARY OF HOTEL OPERATING DATA -
CORE HOTELS(1) Nine months ended September 30, (Unaudited) 2004
2003 Variance
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Worldwide No. of Properties 48 48 -- No. of Rooms 12,783 12,783 --
Occupancy(2) 68.4% 60.5% 7.9pts. ADR(3) - in US dollars $328 $303
8.2% RevPAR(4) - in US dollars $209 $178 17.4% Gross operating
margin(5) 29.2% 26.0% 3.2pts. United States No. of Properties 19 19
-- No. of Rooms 6,114 6,114 -- Occupancy(2) 70.5% 68.4% 2.1pts.
ADR(3) - in US dollars $342 $326 4.9% RevPAR(4) - in US dollars
$241 $223 8.1% Gross operating margin(5) 25.2% 25.1% 0.1pts. Other
Americas/Caribbean No. of Properties 7 7 -- No. of Rooms 1,534
1,534 -- Occupancy(2) 64.6% 55.0% 9.6pts. ADR(3) - in US dollars
$294 $277 6.3% RevPAR(4) - in US dollars $180 $147 22.2% Gross
operating margin(5) 30.7% 25.5% 5.2pts. Europe No. of Properties 7
7 -- No. of Rooms 1,331 1,331 -- Occupancy(2) 64.0% 59.0% 5.0pts.
ADR(3) - in US dollars $518 $454 14.0% RevPAR(4) - in US dollars
$345 $280 23.4% Gross operating margin(5) 35.2% 31.9% 3.3pts.
Middle East No. of Properties 3 3 -- No. of Rooms 598 598 --
Occupancy(2) 71.4% 43.4% 28.0pts. ADR(3) - in US dollars $172 $157
9.0% RevPAR(4) - in US dollars $124 $71 73.0% Gross operating
margin(5) 48.2% 27.9% 20.3pts. Asia/Pacific No. of Properties 12 12
-- No. of Rooms 3,206 3,206 -- Occupancy(2) 67.4% 52.2% 15.2pts.
ADR(3) - in US dollars $254 $230 10.0% RevPAR(4) - in US dollars
$122 $86 42.9% Gross operating margin(5) 32.5% 23.5% 9.0pts.
--------------------------------------------------- (1) The term
"Core Hotels" means hotels and resorts under management for the
full year of both 2004 and 2003. However, if a "Core Hotel" has
undergone or is undergoing an extensive renovation program in one
of those years that materially affects the operation of the
property in that year, it ceases to be included as a "Core Hotel"
in either year. Changes from the 2003/2002 Core Hotels are the
additions of Four Seasons Hotel Amman, Four Seasons Resort Sharm el
Sheikh, Four Seasons Hotel Shanghai and Four Seasons Hotel Tokyo at
Marunouchi and the deletion of Four Seasons Hotel Berlin, Four
Seasons Resort Santa Barbara, Four Seasons Resort Scottsdale at
Troon North and Four Seasons Hotel Washington, DC, the last three
of which are undergoing extensive renovation programs in 2004. (2)
Occupancy percentage is defined as the total number of rooms
occupied divided by the total number of rooms available. (3) ADR is
defined as average daily room rate calculated as straight average
for each region. (4) RevPAR is defined as average room revenue per
available room. RevPAR is a commonly used indicator of market
performance for hotels and resorts and represents the combination
of the average daily room rate per room occupied and the average
occupancy rate achieved during the period. RevPAR does not include
food and beverage or other ancillary revenues generated by a hotel
or resort. We report RevPAR as it is the most commonly used measure
in the lodging industry to measure the period-over-period
performance of comparable properties. (5) Gross operating margin
represents gross operating profit as a percent of gross operating
revenue. FOUR SEASONS HOTELS INC. SUMMARY OF HOTEL OPERATING DATA -
ALL MANAGED HOTELS As at September 30, (Unaudited) 2004 2003
Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 63 57 6 No. of Rooms 16,365 15,198
1,167 United States No. of Properties 24 22 2 No. of Rooms 7,145
6,800 345 Other Americas/Caribbean No. of Properties 10 8 2 No. of
Rooms 2,112 1,746 366 Europe No. of Properties 10 9 1 No. of Rooms
1,786 1,696 90 Middle East No. of Properties 5 4 1 No. of Rooms
1,213 847 366 Asia/Pacific No. of Properties 14 14 -- No. of Rooms
4,109 4,109 -- FOUR SEASONS HOTELS INC. REVENUES UNDER MANAGEMENT -
ALL MANAGED HOTELS (Unaudited) Three months ended Nine months ended
(In thousands of Canadian September 30, September 30, dollars) 2004
2003 2004 2003
-------------------------------------------------------------------------
Revenues under management $ 698,298 $ 617,404 $2,173,948 $1,908,544
---------------------------------------------
---------------------------------------------
------------------------------------------------ (1) Revenues under
management consist of rooms, food and beverage, telephone and other
revenues of all the hotels and resorts which we manage.
Approximately 68% of the fee revenues (excluding reimbursed costs)
we earned were calculated as a percentage of the total revenues
under management of all hotels and resorts. FOUR SEASONS HOTELS
INC. SCHEDULED OPENING OF PROPERTIES UNDER CONSTRUCTION OR IN
ADVANCED STAGES OF DEVELOPMENT Approximate Hotel/Resort/Residence
Club and Location(1)(2) Number of Rooms Scheduled 2004/2005
Openings ---------------------------- Four Seasons Hotel Damascus,
Syria 300 Four Seasons Hotel Doha, Qatar 235 Four Seasons Hotel
Hampshire, England 135 Four Seasons Hotel Hong Kong, Hong Kong(x)
390 Four Seasons Resort Langkawi, Malaysia 90 Four Seasons Hotel
Palo Alto, CA, USA 200 Four Seasons Private Residences Whistler,
B.C., Canada 35 Beyond 2005 ----------- Four Seasons Hotel
Alexandria, Egypt(x) 120 Four Seasons Hotel Baltimore, MD, USA(x)
200 Four Seasons Hotel Beijing, China 325 Four Seasons Hotel
Beirut, Lebanon 230 Four Seasons Resort Bora Bora, French Polynesia
100 Four Seasons Hotel Dubai, UAE(x) 250 Four Seasons Hotel
Florence, Italy 115 Four Seasons Hotel Geneva, Switzerland 100 Four
Seasons Hotel Istanbul at the Bosphorus, Turkey 170 Four Seasons
Hotel Kuwait City, Kuwait 225 Four Seasons Resort Lanai at Koele,
HI, USA 100 Four Seasons Resort Lanai at Manele Bay, HI, USA 250
Four Seasons Hotel Moscow, Russia 210 Four Seasons Hotel Moscow
(Kamenny Island), Russia 80 Four Seasons Hotel Mumbai, India 200
Four Seasons Resort Puerto Rico, Puerto Rico(x) 250 Four Seasons
Residence Club Punta Mita, Mexico 35 Four Seasons Hotel Seattle,
WA, USA(x) 150 (x) Expected to include a residential component.
------------------------------------------------- (1) Information
concerning hotels, resorts and Residence Clubs under construction
or under development is based upon agreements and letters of intent
and may be subject to change prior to the completion of the
project. The dates of scheduled openings have been estimated by
management based upon information provided by the various
developers. There can be no assurance that the date of scheduled
opening will be achieved or that these projects will be completed.
In particular, in the case where a property is scheduled to open
near the end of a year, there is a greater possibility that the
year of opening could be changed. The process and risks associated
with the management of new properties are dealt with in greater
detail in our 2003 Annual Report. (2) We have made an investment in
Orlando, in which we expect to include a Four Seasons Residence
Club and/or a Four Seasons branded residential component. The
financing for this project has not yet been completed and therefore
a scheduled opening date cannot be established at this time. END
FIRST AND FINAL ADD DATASOURCE: Four Seasons Hotels and Resorts
CONTACT: PR Newswire -- Nov. 4
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