TORONTO, March 9 /PRNewswire-FirstCall/ -- Four Seasons Hotels Inc.
(TSX Symbol "FSH.SV"; NYSE Symbol "FS") today reported its results
for the three months and full year ended December 31, 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. "This is an excellent time for the lodging
industry. All elements of travel demand are strong, especially
demand for experiences of the highest quality. We are very pleased
with Four Seasons position in the industry and remain focused on
preserving and extending our leadership position," said Isadore
Sharp, Chairman and Chief Executive Officer. "We acknowledge the
impact that some of the recent refinements in our portfolio will
have on our near-term earnings growth, but we believe the changes
we are making, combined with the strength of the Four Seasons brand
and our solid development pipeline, will lead to improved long-term
results." Highlights of the Fourth Quarter and Full Year of 2005(x)
For the three months ended December 31, 2005, and for the full year
ended December 31, 2005, in each case compared to the same period
in 2004: Hotel and Resort Operating Results: - For the three months
ended December 31, 2005, RevPAR(1) of worldwide Core Hotels(2)
increased 7.4%. For the full year ended December 31, 2005, RevPAR
of worldwide Core Hotels increased 11.4%. - For the three months
ended December 31, 2005, RevPAR of US Core Hotels increased 11.5%.
For the full year ended December 31, 2005, RevPAR of US Core Hotels
increased 13.3%. - Excluding the impact of hurricanes on our resort
in Palm Beach and of terrorism in Bali, where applicable, RevPAR of
worldwide Core Hotels increased 8.8% and 11.7% for the three months
and full year ended December 31, 2005, and RevPAR of US Core Hotels
increased 13.0% and 13.7% for the same respective periods. - For
the three months ended December 31, 2005, gross operating
margins(3) at worldwide Core Hotels increased 140 basis points to
29.9%. For the full year ended December 31, 2005, gross operating
margins at worldwide Core Hotels increased 220 basis points to
30.8%. - For the three months ended December 31, 2005, revenues
under management increased 11.9% to $676.7 million. For the full
year ended December 31, 2005, revenues under management increased
14.2% to $2.6 billion. Company Operating Results: - For the three
months ended December 31, 2005, base fees and incentive fees
increased 8.3% and 21.0% respectively. For the full year ended
December 31, 2005, base fees and incentive fees increased 14.8% and
35.4% respectively. These improvements are the result of better
operating results at hotels and resorts under management and fees
generated from our newer properties. - For the three months ended
December 31, 2005, the loss from Ownership Operations (which
includes corporate expenses)(4) increased by $2.2 million to $5.3
million, largely due to the disposition of our leasehold interest
in The Pierre which was effective June 30, 2005. In addition,
corporate expenses for the three month period increased $1.0
million due to foreign exchange and a retirement allowance. For the
full year ended December 31, 2005, the loss from Ownership
Operations increased by $1.4 million to $18.0 million, due
primarily to an increase in corporate expenses related to foreign
exchange and a retirement allowance, offset in part by the
disposition of our leasehold interest in The Pierre effective June
30, 2005. - For the three months ended December 31, 2005, earnings
before other operating items declined 15.7%, due primarily to the
absence of $3.1 million of foreign exchange forward contracts which
were included in fee revenues in 2004, the disposition of The
Pierre described above, and higher general and administrative
costs. The higher general and administrative costs relate primarily
to foreign exchange and a reorganization expense. For the full year
ended December 31, 2005, earnings before other operating items
declined 4.8% due primarily to the absence of $11.2 million of
foreign exchange forward contracts which were included in fee
revenues in 2004 and higher general and administrative costs for
the same reasons as noted for the quarter. - Overall, we recorded a
net loss of $37.8 million ($1.03 basic and diluted loss per share)
in the fourth quarter of 2005, compared to net earnings of $12.8
million ($0.35 basic earnings per share and $0.34 diluted earnings
per share) in the fourth quarter of 2004. We recorded a net loss of
$28.2 million ($0.77 basic and diluted loss per share) for the full
year ended December 31, 2005, compared to net earnings of $25.7
million ($0.72 basic earnings per share and $0.69 diluted earnings
per share) for the same period in 2004. Included in net earnings
for the quarter and year ended December 31, 2005 is a one-time loss
related to the transition of our defined benefit retirement plan to
a defined contribution plan, foreign exchange losses related to the
translation of certain balance sheet items and a write-down of
certain investments. (x) Footnotes can be found after "Forward
Looking Statements". Adjusting for certain items, adjusted net
earnings are detailed below. The details associated with each of
the adjustments included below are described below under "Other
Income/Expense, Net".
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Unaudited (in millions of dollars, Three months ended Years ended
except per share amounts) December 31, December 31,
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2005 2004 2005 2004
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Net earnings (loss) $(37.8) $12.8 $(28.2) $25.7
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Other (income) expense, net: (see discussion below)
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Retirement benefit plan 35.5 - 35.5 -
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Asset provisions and write-downs 25.3 - 31.8 -
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Foreign exchange(gain)loss 4.8 (5.3) 24.6 (3.2)
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(Gain)loss on disposition of assets (9.0) 0.2 (3.2) 3.7
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Other 0.2 - 0.5 0.2
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Loss on redemption of Liquid Yield Option Notes ("LYONs") - - -
11.2
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Other (income) expense, net 56.8 (5.1) 89.2 11.9
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Tax effect of adjustments (12.0) 1.0 (24.6) 0.1
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Adjusted net earnings $7.0 $8.7 $36.4 $37.7
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Adjusted basic earnings per share $0.19 $0.24 $0.99 $1.06
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Adjusted diluted earnings per share $0.19 $0.23 $0.96 $1.01
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Adjusted net earnings is a non-GAAP measure, is not defined by
Canadian 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 Canadian GAAP. Our adjusted net
earnings may also not be comparable to adjusted net earnings used
by other companies, which may be calculated differently. We
consider adjusted net earnings to be a meaningful indicator of our
operations and we use it as a measure to assess our operating
performance. Adjusted net earnings is also used by investors,
analysts, and our lenders as a measure of our financial
performance. As a result, we have chosen to provide this
information. Expanding the Portfolio: - Since the end of the third
quarter of 2005, we have opened new Four Seasons hotels in Geneva,
Damascus and Silicon Valley at East Palo Alto and added a Four
Seasons Tented Camp in The Golden Triangle, in Thailand. - Recently
announced projects include Barbados and Macau, and our second hotel
in each of Shanghai and Taipei. "The addition of new Four Seasons
properties has been, and will continue to be, a key component of
our growth program," said Kathleen Taylor, President Worldwide
Business Operations. "We continue to see a strong pipeline of new
opportunities for Four Seasons and are working actively with our
various capital partners to bring new projects to locations around
the world." Hotel and Resort Operating Results The following tables
highlight our results of operations for our Core Hotels in each of
the regions in which we operate. United States Region
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Results for periods in 2005, as compared to periods in 2004
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Gross Gross Operating Operating Gross RevPAR Revenue(GOR)
Profit(GOP) Operating Margin
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Percentage Percentage Percentage Basis Point $ Change Change Change
Margin Improvement
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Fourth Quarter 276 11.5% 9.4% 16.9% 28.2% 180
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Full Year 273 13.3% 11.6% 22.5% 28.7% 260
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In the fourth quarter of 2005, RevPAR increased 11.5%, which was
primarily attributable to a 7.3% increase in achieved room rates in
the region. Exceptions were Four Seasons Resort Palm Beach, which
was affected by hurricanes in the area, and Four Seasons Hotel
Philadelphia and The Regent Beverly Wilshire, both of which were
undergoing renovations during the quarter. Properties under
management in San Francisco, New York, Houston, Los Angeles, Maui,
Atlanta, and Boston had particularly strong improvements in RevPAR,
relative to the average for the U.S. region. As a result of
improvements in RevPAR, gross operating profits and gross operating
margins increased 16.9% and 180 basis points, respectively, during
the fourth quarter of 2005. For the full year 2005, all of the
properties under management in the region realized RevPAR
improvements with the exception of Four Seasons Hotel Houston,
which, despite a strong fourth quarter, continued to experience
pressure on rates due to supply of hotel rooms in that market. The
increases in RevPAR for 2005 were attributable to a 7.3% increase
in achieved room rates and a 360 basis point improvement in
occupancy. Properties under management in New York, Jackson Hole,
Miami, San Francisco, Aviara, Austin, and Los Angeles realized
particularly strong improvements in RevPAR, relative to the average
for the region. In addition, for the full year 2005, gross
operating profits and gross operating margins improved 22.5% and
260 basis points, respectively, as compared to 2004, which was
primarily attributable to an 11.6% increase in gross operating
revenues.
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Other Americas/Caribbean Region
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Results for periods in 2005, as compared to periods in 2004
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Gross Gross Operating Operating Gross RevPAR Revenue(GOR)
Profit(GOP) Operating Margin
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Percentage Percentage Percentage Basis Point $ Change Change Change
Margin Improvement
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Fourth Quarter 206 8.7% 10.3% 19.7% 24.4% 190
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Full Year 217 13.8% 15.1% 29.9% 28.2% 320
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In the fourth quarter of 2005, all of the properties under
management in the region experienced increases in RevPAR with the
exception of Four Seasons Resort Great Exuma at Emerald Bay, which
had weaker occupancy due to the threat of hurricanes in the area.
On a local currency basis, RevPAR improved 6.0% in the fourth
quarter of 2005. Properties under management in Buenos Aires, Punta
Mita, and Vancouver had particularly strong improvements relative
to the average for the region. As a result of improvements in
RevPAR, gross operating profits and gross operating margins
increased 19.7% and 190 basis points, respectively, in the fourth
quarter of 2005 as compared to the same period in 2004. For the
full year 2005, the 13.8% (10.5% on a local currency basis)
improvement in RevPAR was attributable to a 6.9% increase in
achieved room rates and a 390 basis point improvement in occupancy.
For the full year 2005, all of the properties under management in
the region experienced improvements in RevPAR, leading to increases
in gross operating profits and gross operating margins of 29.9% and
320 basis points, respectively. Properties under management in
Buenos Aires and Exuma had particularly strong improvements in
RevPAR and gross operating profits, as compared to the averages for
the region.
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Europe Region
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Results for periods in 2005, as compared to periods in 2004
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Gross Gross Operating Operating Gross RevPAR Revenue(GOR)
Profit(GOP) Operating Margin
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Percentage Percentage Percentage Basis Point $ Change Change Change
Margin Improvement
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Fourth Quarter 329 (0.9)% (1.1)% 4.3% 32.9% 170
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Full Year 351 4.5% 4.7% 4.5% 34.6% (10)
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RevPAR in the European Core Hotels remained relatively flat in the
fourth quarter of 2005, as compared to the fourth quarter of 2004.
On a local currency basis, however, RevPAR increased 6.0%,
reflecting improved operating results at the hotels under
management in Istanbul, Dublin, and London relative to the other
hotels in the region. Also during the fourth quarter of 2005, gross
operating profits increased 4.3% (10.8% on a local currency basis),
and gross operating margins improved 170 basis points, as compared
to the same period in 2004, due to improvements in overall
occupancy and achieved room rates on a local currency basis. For
the full year ended December 31, 2005, RevPAR increased 4.5% (4.4%
on a local currency basis) primarily due to a 4.1% improvement in
achieved room rates. All of the hotels in the region had improved
operating results, with the exception of the hotels under
management in Lisbon and Canary Wharf, which continue to experience
lower group and corporate demand. While there was a 4.5% increase
in gross operating profits, gross operating margins remained
relatively flat for the full year of 2005, as compared to 2004,
mainly as a result of the lower operating results at Four Seasons
Hotel Lisbon.
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Middle East Region
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Results for periods in 2005, as compared to periods in 2004
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Gross Gross Operating Operating Gross RevPAR Revenue(GOR)
Profit(GOP) Operating Margin
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Percentage Percentage Percentage Basis Point $ Change Change Change
Margin Improvement
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Fourth Quarter 132 15.9% 19.8% 16.9% 33.7% (90)
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Full Year 142 19.3% 24.8% 39.8% 42.4% 450
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In the Middle East region, nearly all of the properties under
management had improvements in RevPAR in the fourth quarter of
2005, which was driven primarily by a 12.7% increase in achieved
room rates, as compared to the same period in 2004. Four Seasons
Hotel Riyadh and Four Seasons Hotel Cairo at First Residence had
particularly strong improvements in RevPAR, as compared to the
average for the region. On a local currency basis, RevPAR improved
11.0% in the fourth quarter of 2005, as compared to the same period
in 2004. With the exception of Four Seasons Resort Sharm El Sheikh,
whose business was affected by bombings in the area, all of the
hotels experienced RevPAR improvements. Gross operating profits
increased 16.9% during the fourth quarter of 2005, as compared to
the same period in 2004. However, gross operating margins declined
slightly (90 basis points), as compared to the same period in 2004.
For the full year of 2005, the 19.3% improvement in RevPAR was
attributable to a 14.5% increase in achieved room rates and a 270
basis point improvement in occupancy. On a local currency basis,
RevPAR improved 15.1% for the full year of 2005. Also for the full
year of 2005, gross operating profits and gross operating margins
improved 39.8% and 450 basis points, respectively, from 2004, as
all of the properties under management in the region had stronger
operating results. The only exception was Four Seasons Hotel Cairo
at First Residence, which, despite a strong fourth quarter,
experienced a slight reduction in occupancy and achieved room rates
during the first three quarters of 2005 due to additional supply in
the city.
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Asia/Pacific Region
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Results for periods in 2005, as compared to periods in 2004
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Gross Gross Operating Operating Gross RevPAR Revenue(GOR)
Profit(GOP) Operating Margin
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Percentage Percentage Percentage Basis Point $ Change Change Change
Margin Improvement
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Fourth Quarter 122 0.1% (1.0)% 2.2% 36.0% 110
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Full Year 118 9.5% 6.5% 13.5% 33.0% 210
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In the Asia/Pacific region, RevPAR remained relatively flat in the
fourth quarter of 2005, as compared to the same period in 2004. On
a local currency basis, RevPAR improved 3.0% for the fourth quarter
of 2005. Achieved room rates improved 2.1% (6.3% on a local
currency basis). However, this was offset by a 110 basis point
decrease in occupancy. In particular, the resorts in Bali
experienced lower demand during the fourth quarter of 2005 (due to
the bombings that occurred in that market in October 2005). Also
during the fourth quarter of 2005, gross operating profits and
margins improved 2.2% and 110 basis points, respectively, mainly as
the result of improved operating results at properties under
management in Jakarta, Singapore, Shanghai, and Chiang Mai. For the
full year 2005, RevPAR improved 9.5% on a US dollar and local
currency basis, as compared to 2004. This improvement was
attributable to a 4.5% increase in achieved room rates and a 260
basis point improvement in occupancy. Virtually all of the
properties under management in the region experienced increases in
RevPAR with the exception of Four Seasons Hotel Bangkok, which had
lower occupancy levels due to a rooms renovation during the year,
and Four Seasons Resort Bali at Jimbaran Bay, which was affected by
bombings in that market in 2005. Gross operating profits and gross
operating margins improved 13.5% and 210 basis points,
respectively, mainly due to improved operating results at the
properties under management in Jakarta, Singapore, Shanghai, and
Chiang Mai.
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Company Operating Results Management Operations Management
Operations Revenues
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Three months ended Dollar Percentage (in millions of dollars)
December 31, Change Change
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2005 2005 2005 2004 over 2004 over 2004
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Hotel management fees Base $19.5 $17.9 $1.6 8.3% Incentive 6.0 5.0
1.0 21.0%
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Subtotal 25.5 22.9 2.6 11.1%
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Other fees(5) 4.1 2.1 2.0 89.7%
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Subtotal 29.6 25.0 4.6 17.8%
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Foreign exchange forward contracts(6) - 3.1 (3.1) (100.0)%
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Reimbursed costs(7) 21.8 16.2 5.6 35.0%
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Management operations revenues $51.4 $44.3 $7.1 15.9%
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Years ended Dollar Percentage (in millions of dollars) December 31,
Change Change
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2005 2005 2005 2004 over 2004 over 2004
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Hotel management fees Base $75.6 $65.9 $9.7 14.8% Incentive 27.5
20.3 7.2 35.4%
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Subtotal 103.1 86.2 16.9 19.6%
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Other fees 14.1 14.6 (0.5) (3.6)%
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Subtotal 117.2 100.8 16.4 16.3%
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Foreign exchange forward contracts - 11.2 (11.2) (100.0)%
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Reimbursed costs 69.1 56.1 13.0 23.2%
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Management operations revenues $186.3 $168.1 $18.2 10.8%
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The increases in management operations revenues for the fourth
quarter and full year of 2005 were the result of the improvements
in revenues and gross operating profits at the worldwide Core
Hotels, resulting primarily from RevPAR and other revenue
increases, as well as fees generated by newer properties and
increases in reimbursed costs. Base Fees Base fees increased $1.6
million (from $17.9 million to $19.5 million) for the quarter ended
December 31, 2005, as compared to the quarter ended December 31,
2004. Of the $1.6 million increase in base fees, base fees from
Core Hotels contributed $1.0 million or 66.2% of the increase. The
increase in base fees from Core Hotels in the three months ended
December 31, 2005 represented a 7.2% increase over the fees
generated from Core Hotels in the fourth quarter of 2004.
Properties that opened in 2004 and 2005 contributed base fees of
$1.9 million and $0.7 million in 2005 and 2004, respectively. The
$1.6 million increase in base fees in the quarter was lower than it
would have otherwise been as the result of a $0.9 million reduction
in base fees from properties no longer under management and
differences in foreign exchange on fees denominated in other than
the US dollar. Base fees increased $9.7 million (from $65.9 million
to $75.6 million) for the year ended December 31, 2005 as compared
to 2004. Of this increase, base fees from Core Hotels contributed
$6.6 million or 68.4% of the increase. The increase in base fees
from Core Hotels in 2005 represented a 12.8% increase over the base
fees generated from Core Hotels in 2004. Properties that opened in
2004 and 2005 contributed base fees of $5.4 million and $1.6
million in 2005 and 2004, respectively. The $9.7 million increase
in base fees in 2005 was lower than it would have otherwise been as
a result of a $0.9 million reduction in base fees from properties
no longer under management. Incentive Fees For the three months
ended December 31, 2005, incentive fees increased $1.0 million, as
compared to the same period in 2004. Due to a one-time charge at
the properties under our management related to the transition of
the retirement benefit plan to a defined contribution format in the
fourth quarter of 2005, incentive fees were reduced by $1.0
million. The incentive fees earned from properties that opened in
2004 and 2005 represented $1.3 million of the increase. Incentive
fees were earned from 37 of the 68 hotels and resorts under
management for the fourth quarter 2005, as compared to 32 of the 63
hotels and resorts under management in 2004. For the full year
2005, incentive fees increased $7.2 million, as compared to 2004.
Incentive fees contributed 26.6% of the total hotel management fee
revenues for the full year 2005, as compared to 23.5% for the full
year 2004. The increase was attributable to improvements in the US,
Middle East, and Other Americas/Caribbean regions, which more than
offset moderate declines in incentive fees from the Europe and
Asia/Pacific regions. The incentive fees earned from properties
that opened in 2004 and 2005 represented $3.2 million of the
increase in incentive fees. In 2005, incentive fees were earned
from 45 of our management agreements (including The Pierre in New
York and Four Seasons Hotel Newport Beach, which are no longer
managed by us), as compared to 35 of our management agreements in
2004. Other Fees For the three months ended December 31, 2005,
other fees, (which include royalty and management fees from our
residential business, fees we earn during the development of our
hotels and resorts, and other miscellaneous fees), increased 89.7%
or $2.0 million, to $4.1 million. The increase in other fees for
the fourth quarter of 2005, as compared to the same period in 2004,
was mainly attributable to royalty fees related to the sale of
residences, as well as an increase in design and procurement fees.
For the full year ended December 31, 2005, other fees declined 3.6%
or $0.5 million, to $14.1 million, as compared to 2004. The decline
was attributable to a $2.0 million decline in residential royalty
fees due to fewer residential sales closing, and a $1.3 million
decline in other miscellaneous fees, offset by a $2.8 million
increase in design and procurement fees. Foreign Exchange Forward
Contracts We reported our financial results in Canadian dollars up
to December 31, 2004 and, as a result, we were subject to foreign
exchange gains and losses on conversion of our US dollar fee
revenues to Canadian dollars. To reduce this currency exposure, we
typically hedged a portion of these fees through foreign exchange
forward contracts. Effective January 1, 2004, we ceased designating
our US dollar foreign exchange forward contracts as hedges of our
US dollar fee revenues. All of the outstanding foreign exchange
forward contracts at that date were entered into in 2002 and had
maturity dates in 2004. For the fourth quarter and full year of
2004, there was a deferred foreign exchange gain of $3.1 million
and $11.2 million, respectively, on these foreign exchange forward
contracts, which was recognized in 2004 as an increase in fee
revenues. We had no such gain for the corresponding periods in
2005, as there were no foreign exchange forward contracts in place
in 2005 that related to the hedge of fee revenues. Management
Operations Expenses
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Three months ended Dollar Percentage (in millions of dollars)
December 31, Change Change
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2005 2005 2005 2004 over 2004 over 2004
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General and administrative expenses 11.6 10.0 1.6 16.0%
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Reimbursed costs 21.8 16.2 5.6 35.0%
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Management operations expenses 33.4 26.2 7.2 27.8%
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Years ended Dollar Percentage (in millions of dollars) December 31,
Change Change
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2005 2005 2005 2004 over 2004 over 2004
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General and administrative expenses 41.2 34.5 6.7 19.4%
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Reimbursed costs 69.1 56.1 13.0 23.2%
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Management operations expenses 110.3 90.6 19.7 21.7%
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The majority of our general and administrative expenses are in
Canadian dollars and, accordingly, a portion of the increase for
the fourth quarter and full year of 2005, as compared to 2004, was
attributable to the US dollar having declined relative to the
Canadian dollar. For the fourth quarter and full year of 2005,
general and administrative expenses (excluding reimbursed costs)
increased 11.7% and 11.5%, respectively, on a Canadian dollar
basis, as compared to the same period in 2004. On a Canadian dollar
basis, the increase in these costs related primarily to an increase
in the number of employees at our corporate offices to handle the
significant unit growth in our portfolio and to the cost of living
increases for corporate employees that were implemented at the
beginning of 2005. In addition, in the fourth quarter of 2005, the
increase in general and administrative expenses was attributable in
part to reorganization costs. Management Operations Earnings As a
result of the items described above, management operations earnings
and management operations profit margin were the following:
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Three months ended Years ended (in millions of dollars) December
31, December 31,
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2005 2004 2005 2004
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Management fee revenues (excluding reimbursed costs and the impact
of foreign exchange forward contracts) $29.6 $25.0 $117.2 $100.8
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Management operations earnings before other operating items
(excluding reimbursed costs and the impact of foreign exchange
forward contracts)(8) $18.0 $15.0 $76.0 $66.3
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Management operations profit margin (excluding reimbursed costs and
the impact of foreign exchange forward contracts)(9) 60.8% 60.2%
64.8% 65.8%
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Management operations revenues $51.4 $44.3 $186.3 $168.1
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Management operations earnings before other operating items $18.0
$18.1 $76.0 $77.5
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Management operations profit margin(10) 35.0% 41.0% 40.8% 46.1%
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Ownership Operations (which includes Corporate Expenses) In the
fourth quarter of 2005, operating losses from ownership operations
before other operating items were $5.3 million, as compared to $3.1
million in the fourth quarter of 2004. The increase was primarily
attributable to The Pierre (which contributed operating earnings of
$1.4 million in the fourth quarter of 2004 and no earnings in the
fourth quarter of 2005 as a result of its disposition), and
increased corporate expenses relating to foreign exchange and a
retirement allowance. Operating losses from ownership operations
before other operating items for the full year 2005 increased $1.4
million to a loss of $18.0 million, as compared to a loss of $16.6
million in 2004. The increased loss for the year was primarily
attributable to increased corporate expenses relating to foreign
exchange and a retirement allowance, partially offset by a decrease
in operating losses of $2.0 million at The Pierre, which was
disposed of on June 30, 2005, and a decrease in operating losses at
Four Seasons Hotel Vancouver of $0.3 million. Ownership Operations
The Pierre In June 2005, we disposed of our interest in The Pierre,
and ceased managing the property on June 30, 2005. This transaction
reduced the ownership operations loss for the year ended December
31, 2005 by $2.0 million, as compared to the same period in 2004.
During the fourth quarter of 2004, operating earnings at The Pierre
were $1.4 million. For the full year 2005, management fees from The
Pierre were $1.2 million, as compared to $2.0 million in 2004. Four
Seasons Hotel Vancouver During the fourth quarter of 2005, RevPAR
at Four Seasons Hotel Vancouver increased 9.6%, on a Canadian
dollar basis, as compared to the same period in 2004, primarily as
a result of an 8.2% increase in achieved room rates. Operating
results at the hotel improved approximately $0.4 million to a loss
of $0.4 million in the fourth quarter of 2005, as compared to the
same period last year. RevPAR at Four Seasons Hotel Vancouver
increased 4.0%, on a Canadian dollar basis, for the full year ended
December 31, 2005, as compared to 2004, as a result of occupancy
improvements. Consequently, the operating results after management
fees at that hotel improved $0.3 million to a loss of $0.5 million
in 2005, as compared to 2004. Corporate Expenses For the three
months and full year ended December 31, 2005, our corporate
expenses increased $1.0 million and $3.5 million to $4.6 million
and $15.1 million, respectively, as compared to $3.6 million and
$11.6 million for the same periods in 2004. The majority of these
costs are in Canadian dollars and, accordingly, some of the
increase was attributable to the US dollar having declined relative
to the Canadian dollar since 2004. The remainder of the increase
for the full year and fourth quarter of 2005 was primarily
attributable to a retirement allowance. Other Income/Expense, Net
For the fourth quarter of 2005, other expense, net was $56.8
million, as compared to other income, net of $5.1 million for the
same period in 2004. For the full year 2005, other expense, net was
$89.2 million, as compared to $11.9 million in 2004. Retirement
Benefit Plan During the fourth quarter of 2005, we transitioned the
majority of our senior executives and hotel and resort general
managers from an unfunded defined benefit retirement plan to a
fully funded defined contribution retirement plan. We made the
change in the retirement plan to improve the certainty and
predictability related to the cost of the retirement benefits. We
do not expect that the change will have a significant impact on our
ongoing annual pension cost. The transition to this defined
contribution format resulted in a funding requirement of $42.2
million, of which $36.0 million was funded in 2005, and a one-time
pre-tax loss of $35.5 million. In addition, as a result of the
costs incurred by our hotels and resorts for the transition of
general manager participants, our incentive fees for 2005 were
reduced by approximately $1.0 million since the funding by the
hotel owners was typically deducted in calculating the amounts upon
which our incentive fees are determined. Asset Provisions and
Write-Downs From time to time, we make investments in hotels and
resorts under our management in the form of equity, loans and
investments in management contracts in order to obtain long-term
management agreements in respect of these projects. In making these
investments, we assess the expected overall economic returns to
Four Seasons, including the value created through our long-term
management agreements. However, for financial reporting purposes
each discreet investment or component of an investment must be
valued only in relation to the cash flow that the particular
investment or component of an investment generates to Four Seasons,
without regard to the ongoing value of the management agreement.
For three months ended December 31, 2005, other expense, net,
includes an expense of $25.3 million relating to the provision for
and the write-down of certain assets, including a provision for
loss of $8.8 million on long-term receivables, a write-down of
$15.9 million on investments in hotel partnerships and corporations
and a write-down of $0.6 million related to investment in
management contracts. For the year ended December 31, 2005, other
expense, net, includes an expense of $31.8 million relating to the
provision for and the write-down of certain assets, including a
provision for loss of $8.8 million on long-term receivables, a
write-down of $17.9 million on investments in hotel partnerships
and corporations and a write-down of $5.1 million on investment in
management contracts. Foreign Exchange Other expense for the fourth
quarter of 2005 included a foreign exchange loss of $4.8 million,
as compared to a gain of $5.3 million for the same period in 2004.
Other expense for the full year ended December 31, 2005 included a
foreign exchange loss of $24.6 million, as compared to a gain of
$3.2 million in 2004. Foreign exchange gains and losses arose
primarily from the translation to Canadian dollars (using current
exchange rates at the end of each quarter) of our foreign
currency-denominated net monetary assets, which are not included in
our designated foreign self-sustaining subsidiaries. They also
reflected local currency foreign exchange gains and losses on net
monetary assets incurred by our designated foreign self-sustaining
subsidiaries. Net monetary assets is the difference between our
foreign currency-denominated monetary assets and our foreign
currency-denominated monetary liabilities in each currency, and
consist primarily of cash and cash equivalents, accounts
receivable, long-term receivables and short-term and long-term
liabilities, as determined under Canadian generally accepted
accounting principles ("GAAP"). As a result of a currency swap
relating to our convertible senior notes, our US net monetary
dollar asset position increased significantly during the second
quarter of 2005. This, combined with the strengthening of the
Canadian dollar relative to the US dollar and the British pound
sterling, resulted in the foreign exchange loss during the full
year and fourth quarter of 2005. Gains and Losses on Disposition of
Assets Other expense, net for the three months ended December 31,
2005 also includes a net gain of $9.0 million, related to the
disposition of certain investments in hotel partnerships and
corporations and the exit from certain management contracts. Other
expense, net for the year ended December 31, 2005 also includes a
net gain of $3.2 million, which related to the disposition of The
Pierre and certain investments in hotel partnerships and
corporations and the exit from certain management contracts.
Included in other expense, net during the year ended December 31,
2004, was a net loss of $3.7 million related to the sale of certain
investments and the settlement of a long-term receivable.
Redemption of the LYONs Included in other expense, net for the year
ended December 31, 2004 is the loss on the redemption of the debt
component of our LYONs (issued in 1999) of $11.2 million. Looking
Ahead Our business objectives for 2006 continue to focus on those
aspects of our business that we believe provide the greatest
potential for maximizing long-term shareholder value. New Openings
In addition to Four Seasons Hotel Silicon Valley at East Palo Alto
and Four Seasons Tented Camp Golden Triangle, Thailand, which both
opened in January 2006, we expect to open nine new hotels and
resorts over the course of 2006 and 2007, and re-open Four Seasons
Resort Maldives at Kuda Huraa. The average term of the management
contracts for these properties is 58 years, and these management
contracts are expected to provide us with significant additional
long-term fee income. During 2006, we expect to fund in the range
of $50.0 million to $75.0 million in connection with obtaining new
or enhancing existing management agreements. Service During 2006,
we intend to maintain our focus on value to our guests by
continuing to deliver our exceptional quality of service, while at
the same time controlling costs. We also intend to focus on
enhancing our premium service quality and rate premiums at each of
the 11 Four Seasons hotels and resorts that opened over the past 24
months and the new Four Seasons projects that are expected to open
in 2006. We expect that the strong economic environment should
translate into continued strength in travel demand, particularly
business travel. We also expect that leisure travel demand will
remain strong. On a full-year basis, we expect our average daily
room rates for 2006 to exceed the rates achieved in 2005. RevPAR
and Margin Improvements If the travel trends that we experienced in
2005 continue and exchange rates remain at current levels, we
expect RevPAR, on a US dollar basis, for worldwide Core Hotels for
the full year 2006 to increase in the range of 8% to 10%, as
compared to 2005. We expect that this improvement will result from
occupancy and pricing improvements. If current trends continue, we
expect the full-year gross operating margins of our worldwide Core
Hotels to increase more than 150 basis points in 2006. Management
Operations As a result of the portfolio refinements, including our
ceasing management of The Pierre and Four Seasons Hotel Newport
Beach in 2005 and, our ceasing management of The Regent Kuala
Lumpur later this year and renovation plans at certain hotels,
including Four Seasons Resort Maui, we expect full year hotel
management fee revenues to grow in line with our full year RevPAR
growth expectations for 2006. Assuming no significant changes to
the US to Canadian dollar exchange rate, we expect our operating
costs (which include the amounts included in general and
administrative expenses in Management Operations together with
corporate expenses included in Ownership Operations) should
increase in the range of 6% to 8% for the full year 2006 as
compared to full year 2005. "As previously noted, we view 2006 as a
transition year. The moderate growth in management fee revenue
expected in 2006 reflects the loss of ongoing fee revenue from The
Pierre, Newport Beach and Kuala Lumpur," said John Davison, Chief
Financial Officer. "As we look beyond 2006, we expect all elements
of our growth program to make a solid contribution to earnings,
including strong fee improvements from existing hotels (in
particular those completing renovation programs), increased fees
from recently opened hotels as they stabilize and the continued
addition of exciting new Four Seasons properties around the world."
Forward Looking Statements This press release contains
"forward-looking statements" within the meaning of applicable
securities laws, including RevPAR, profit margin and earning
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. Various factors and assumptions were
applied or taken into consideration in arriving at these
statements, which do not take into account the effect that
non-recurring or other special items announced after the statements
are made may have on our business. These statements are not
guarantees of future performance and, accordingly, you are
cautioned not to place undue reliance on these statements. These
statements are subject to numerous risks and uncertainties,
including those described in our management's discussion and
analysis and our annual information form. 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, fluctuations in relative exchange rates of various
currencies, supply and demand changes for hotel rooms and
residential properties, competitive conditions in the lodging
industry, the risks associated with our ability to maintain and
renew management agreements and expand the portfolio of properties
that we manage, relationships with clients and property owners 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 press release are qualified by
these cautionary statements. These statements are made as of the
date of this press 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. The information
contained in this news release is a summary of information provided
in our Management's Discussion and Analysis for the period. This
news release and the Management's Discussion and Analysis should be
read in conjunction with our financial statements for the period
that, together with our Management's Discussion and Analysis is
posted on our website at http://www.fourseasons.com/investor and is
available as part of our filings at http://www.sedar.com/.
-------------------- 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), The Pierre in New York (due to its
disposition on June 30, 2005) and Four Seasons Hotel Newport Beach
(due to the owner's decision to manage that property
independently). 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 and corporate overhead expenses related, in
part, to these ownership interests. 5. Other fees include royalty
and management fees from our residential business, fees we earn
during the development of our hotels and other miscellaneous fees.
6. Prior to January 1, 2004, we designated our US dollar foreign
exchange forward contracts as hedges of our US dollar fee revenues.
In 2003, we recorded foreign exchange gains of $5.7 million on
these designated foreign exchange forward contracts as an increase
in fee revenues. Effective January 1, 2004, we ceased designating
our US dollar foreign exchange forward contracts as hedges of our
US dollar fee revenues. All of the outstanding foreign exchange
forward contracts at that date were entered into in 2002 and had
maturity dates in 2004. At January 1, 2004, there was a deferred
foreign exchange gain of $11.2 million on these foreign exchange
forward contracts which was recognized in 2004 as an increase in
fee revenues over the course of 2004. Foreign exchange gains on
foreign exchange forward contracts were recorded as increases in
management operations fee revenues in the quarters of 2004 and 2003
as follows:
---------------------------------------------------------------------
(In millions First Second Third Fourth of US dollars) Quarter
Quarter Quarter Quarter
---------------------------------------------------------------------
2004 $2.7 $2.8 $2.6 $3.1
---------------------------------------------------------------------
2003 $0.5 $1.5 $1.4 $2.3
---------------------------------------------------------------------
7. Reimbursed costs includes the reimbursement of all out-of-pocket
costs, including sales and marketing and advertising fees. 8. This
is a non-GAAP measure and is calculated as management fee revenues
(excluding reimbursed costs and the impact of foreign exchange
forward contracts) less management general and administrative
expenses. 9. This is a non-GAAP measure and is calculated as
management fee revenues (excluding reimbursed costs and the impact
of foreign exchange forward contracts) divided by management
operations earnings before other operating items (excluding
reimbursed costs and the impact of foreign exchange forward
contracts). 10. 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 11:00 a.m. (Eastern Standard Time) to discuss the
fourth quarter and year end financial results. The details are: To
access the call dial: 1 (800) 428-5596 (U.S.A. and Canada) 1 (416)
620-2419 (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 21283422. 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. +
+ + FOUR SEASONS HOTELS INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of Three months ended Years ended US dollars except
December 31, December 31, per share amounts) 2005 2004 2005 2004
-------------------------------------------------------------------------
(Unaudited) (Unaudited) Consolidated revenues (note 4) $ 58,498 $
69,524 $ 248,338 $ 261,267
----------------------------------------------
---------------------------------------------- MANAGEMENT
OPERATIONS Revenues: Fee revenues (note 4(a)) $ 29,559 $ 28,154 $
117,199 $ 112,014 Reimbursed costs 21,832 16,170 69,051 56,062
---------------------------------------------- 51,391 44,324
186,250 168,076 ----------------------------------------------
Expenses: General and administrative expenses (11,583) (9,986)
(41,221) (34,522) Reimbursed costs (21,832) (16,170) (69,051)
(56,062) ---------------------------------------------- (33,415)
(26,156) (110,272) (90,584)
---------------------------------------------- 17,976 18,168 75,978
77,492 ---------------------------------------------- OWNERSHIP
OPERATIONS AND CORPORATE EXPENSES Revenues 7,505 26,615 65,343
97,436 Distributions from hotel investments - - 132 293 Expenses:
Cost of sales and expenses (7,762) (24,678) (65,009) (98,212)
Corporate expenses (4,634) (3,642) (15,128) (11,621) Fees to
Management Operations (398) (1,415) (3,387) (4,538)
---------------------------------------------- (5,289) (3,120)
(18,049) (16,642) ----------------------------------------------
Earnings before other operating items 12,687 15,048 57,929 60,850
Depreciation and amortization (2,675) (3,262) (11,187) (11,779)
Other income (expense), net (note 5) (56,789) 5,120 (89,208)
(11,906) ---------------------------------------------- Earnings
(loss) from operations (46,777) 16,906 (42,466) 37,165 Interest
income (expense), net 1,576 (153) 3,402 1,106
---------------------------------------------- Earnings (loss)
before income taxes (45,201) 16,753 (39,064) 38,271
---------------------------------------------- Income tax recovery
(expense): Current (1,523) (4,099) (1,912) (9,065) Future 8,954 103
12,753 (3,508) ---------------------------------------------- 7,431
(3,996) 10,841 (12,573)
---------------------------------------------- Net earnings (loss)
$ (37,770) $ 12,757 $ (28,223) $ 25,698
----------------------------------------------
---------------------------------------------- Basic earnings
(loss) per share (note 3(a)) $ (1.03) $ 0.35 $ (0.77) $ 0.72
----------------------------------------------
---------------------------------------------- Diluted earnings
(loss) per share (notes 1(d) and 3(a)) $ (1.03) $ 0.34 $ (0.77) $
0.69 ----------------------------------------------
---------------------------------------------- See accompanying
notes to consolidated financial statements. FOUR SEASONS HOTELS
INC. CONSOLIDATED BALANCE SHEETS As at As at December 31, December
31, (In thousands of US dollars) 2005 2004
-------------------------------------------------------------------------
ASSETS Current assets: Cash and cash equivalents $ 242,178 $
226,377 Receivables 69,690 81,541 Inventory 7,326 1,439 Prepaid
expenses 2,950 2,981 ------------------------ 322,144 312,338
Long-term receivables 175,374 179,060 Investments in hotel
partnerships and corporations 99,928 131,338 Fixed assets 64,850
59,939 Investment in management contracts 164,932 181,273
Investment in trademarks and trade names 4,210 4,424 Future income
tax assets 14,439 3,711 Other assets 34,324 30,064
------------------------ $ 880,201 $ 902,147
------------------------ ------------------------ LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and
accrued liabilities $ 54,797 $ 60,415 Long-term obligations due
within one year 4,853 3,766 ------------------------ 59,650 64,181
Long-term obligations (note 2) 273,825 253,066 Shareholders' equity
(note 3): Capital stock 250,430 248,980 Convertible notes 36,920
36,920 Contributed surplus 10,861 8,088 Retained earnings 160,741
192,129 Equity adjustment from foreign currency translation 87,774
98,783 ------------------------ 546,726 584,900
------------------------ $ 880,201 $ 902,147
------------------------ ------------------------ See accompanying
notes to consolidated financial statements. FOUR SEASONS HOTELS
INC. CONSOLIDATED STATEMENTS OF CASH PROVIDED BY OPERATIONS Three
months ended Years ended (In thousands December 31, December 31, of
US dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
(Unaudited) (Unaudited) Cash provided by (used in) operations:
MANAGEMENT OPERATIONS Earnings before other operating items $
17,976 $ 18,168 $ 75,978 $ 77,492 Items not requiring an outlay of
funds 1,449 483 3,711 1,701
---------------------------------------------- Working capital
provided by Management Operations 19,425 18,651 79,689 79,193
---------------------------------------------- OWNERSHIP OPERATIONS
AND CORPORATE EXPENSES Loss before other operating items (5,289)
(3,120) (18,049) (16,642) Items not requiring an outlay of funds
632 291 1,504 943 ----------------------------------------------
Working capital used for Ownership Operations and Corporate
Expenses (4,657) (2,829) (16,545) (15,699)
---------------------------------------------- 14,768 15,822 63,144
63,494 Interest received, net 7,987 1,411 13,520 7,578 Interest
paid on redemption of convertible notes - - - (25,840) Proceeds
received on termination of interest rate swap - 9,000 - 9,000
Amount paid relating to retirement benefit plan transition (note
5(a)) (36,029) - (36,029) - Current income tax received (paid) 521
2,632 (6,376) 546 Change in non-cash working capital 3,167 3,792
(7,308) (9,302) Other (321) (325) (474) (1,082)
---------------------------------------------- Cash provided by
(used in) operations $ (9,907) $ 32,332 $ 26,477 $ 44,394
----------------------------------------------
---------------------------------------------- See accompanying
notes to consolidated financial statements. FOUR SEASONS HOTELS
INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended Years
ended (In thousands December 31, December 31, of US dollars) 2005
2004 2005 2004
-------------------------------------------------------------------------
(Unaudited) (Unaudited) Cash provided by (used in): Operations: $
(9,907) $ 32,332 $ 26,477 $ 44,394
---------------------------------------------- Financing: Issuance
of convertible notes - - - 241,332 Redemption of convertible notes
- - - (189,670) Other long-term obligations including current
portion 1,259 (71) 39 (83) Issuance of shares 54 20,319 7,046
33,870 Dividends paid - - (3,142) (2,811)
---------------------------------------------- Cash provided by
financing 1,313 20,248 3,943 82,638
---------------------------------------------- Capital investments:
Long-term receivables 8,943 (8,882) (10,304) (16,265) Investments
in hotel partnerships and corporations 2,081 (1,508) (8,732)
(36,135) Disposal of hotel partnerships and corporations 11,935
2,418 24,607 38,395 Purchase of fixed assets (5,885) (2,414)
(18,706) (6,583) Investments in trademarks and trade names and
management contracts 11,148 (2,397) 10,473 (12,135) Other assets
288 (5,641) (7,614) (8,506)
---------------------------------------------- Cash provided by
(used in) capital investments 28,510 (18,424) (10,276) (41,229)
---------------------------------------------- Increase in cash and
cash equivalents 19,916 34,156 20,144 85,803 Increase (decrease) in
cash and cash equivalents due to unrealized foreign exchange gain
(loss) 790 7,932 (4,343) 8,475 Cash and cash equivalents, beginning
of period 221,472 184,289 226,377 132,099
---------------------------------------------- Cash and cash
equivalents, end of period $ 242,178 $ 226,377 $ 242,178 $ 226,377
----------------------------------------------
---------------------------------------------- See accompanying
notes to consolidated financial statements. FOUR SEASONS HOTELS
INC. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Years ended
December 31, (In thousands of US dollars) 2005 2004
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 192,129 $ 169,364 Net
earnings (loss) (28,223) 25,698 Dividends declared (3,165) (2,933)
---------------------- Retained earnings, end of period $ 160,741 $
192,129 ---------------------- ---------------------- 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 ("C$"). Effective January 1, 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 2005 and 2004
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. The
implementation of AcG-15, effective January 1, 2005, did not
require us to consolidate any additional interests. (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 effective for
fiscal years beginning on or after October 1, 2004. Accordingly,
effective January 1, 2005, we account for our temporary
investments, which are not controlled but over which we have
significant influence, by the equity method, and consolidate our
temporary investments which are controlled. The change in
accounting for these temporary investments did not have a material
impact on our consolidated financial statements for the three
months and year ended December 31, 2005. (d) Diluted earnings
(loss) 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 was effective for interim and annual
reporting periods beginning on or after October 1, 2005, and is
required to be applied retroactively, with restatement of prior
period diluted earnings (loss) per share. The implementation of
EIC- 155 in 2005 did not have an impact on diluted earnings (loss)
per share in 2005 and 2004, as the effect of the assumed conversion
of our convertible senior notes to 3,489,525 Limited Voting Shares,
by application of the "if-converted method", has been excluded from
the calculations as the inclusion of this conversion resulted in an
anti- dilutive effect for the three months and years ended December
31, 2005 and 2004. (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. As this standard is to be implemented
for non-monetary transactions entered into on or after January 1,
2006, the impact of adoption of this standard will depend upon
future non-monetary transactions. 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 December 31, 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 December 31, 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 December 31, 2005, we have 3,725,698
outstanding Variable Multiple Voting Shares ("VMVS"), 32,915,328
outstanding Limited Voting Shares ("LVS"), and 4,485,463
outstanding stock options (weighted average exercise price of
C$59.25 ($50.81)). (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 December 31, 2005 2004
-------------------------------------------------------------------------
Net loss Shares Net earnings Shares
-------------------------------------------------------------------------
Basic earnings (loss) per share amounts $ (37,770) 36,640,579 $
12,757 36,104,399 Effect of assumed dilutive conversions: Stock
option plan - - - 1,686,109
-------------------------------------------------------------------------
Diluted earnings (loss) per share amounts $ (37,770) 36,640,759 $
12,757 37,790,508
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Years ended December 31, 2005 2004
-------------------------------------------------------------------------
Net loss Shares Net earnings Shares
-------------------------------------------------------------------------
Basic earnings (loss) per share amounts $ (28,223) 36,628,206 $
25,698 35,647,986 Effect of assumed dilutive conversions: Stock
option plan - - - 1,666,230
-------------------------------------------------------------------------
Diluted earnings (loss) per share amounts $ (28,223) 36,628,206 $
25,698 37,314,216
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The diluted earnings (loss) per share calculation excluded the
effect of the assumed conversions of 4,485,463 stock options to
LVS, under our stock option plan, during the three months and year
ended December 31, 2005 (2004 - 59,000 and 847,876 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 and year ended December 31, 2005, all outstanding
stock options were excluded from the calculation of diluted loss
per share for these periods. There was no dilution in 2005 and 2004
relating to the convertible senior notes issued in 2004 (note
1(d)). 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. (b) Stock-based compensation: We use the fair
value-based method to account for all employee stock options
granted or modified 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 December 31, 2005 and 2004, and in the year
ended December 31, 2005. The fair value of stock options granted in
the year ended December 31, 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 year ended December 31, 2004, the weighted
average fair value of the options at the grant dates was C$25.32
($19.46). 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 during
2002, which were not accounted for using the fair value-based
method. For the three months and years ended December 31, 2005 and
2004, if we had applied the fair value-based method to options
granted during 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 Years ended December
31, December 31, 2005 2004 2005 2004
-------------------------------------------------------------------------
Stock option expense included in compensation expense $ (839) $
(501) $ (2,333) $ (1,633)
-------------------------------------------
------------------------------------------- Net earnings (loss), as
reported $ (37,770) $ 12,757 $ (28,223) $ 25,698 Decrease
(increase) in interest expense that would have been recorded if all
outstanding stock options granted during 2002 had been expensed 463
(694) (1,626) (2,622) -------------------------------------------
Pro forma net earnings (loss) $ (37,307) $ 12,063 $ (29,849) $
23,076 ------------------------------------------- Earnings (loss)
per share: Basic, as reported $ (1.03) $ 0.35 $ (0.77) $ 0.72
Basic, pro forma (1.02) 0.33 (0.81) 0.65 Diluted, as reported
(1.03) 0.34 (0.77) 0.69 Diluted, pro forma (1.02) 0.32 (0.81) 0.62
------------------------------------------- 4. Consolidated
revenues: Three months ended Years ended December 31, December 31,
2005 2004 2005 2004
-------------------------------------------------------------------------
Revenues from Management Operations(a) $ 51,391 $ 44,324 $ 186,250
$ 168,076 Revenues from Ownership Operations 7,505 26,615 65,343
97,436 Distributions from hotel investments - - 132 293 Fees from
Ownership Operations to Management Operations (398) (1,415) (3,387)
(4,538) ------------------------------------------- $ 58,498 $
69,524 $ 248,338 $ 261,267
-------------------------------------------
------------------------------------------- (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 year ended December 31,
2004, we recognized $3,058 and $11,201, 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 $603 and a
$497 foreign exchange gain, respectively, for the three months and
year ended December 31, 2004. We did not hedge any of our US dollar
fee revenues during the three months and year ended December 31,
2005. 5. Other income (expense), net: Three months ended Years
ended December 31, December 31, 2005 2004 2005 2004
-------------------------------------------------------------------------
Loss on retirement benefit plan transition(a) $ (35,467) $ - $
(35,467) $ - Asset provisions and write downs(b) (25,231) -
(31,787) - Foreign exchange gain (loss)(c) (4,778) 5,264 (24,632)
3,173 Loss on redemption of convertible notes(d) - - - (11,174)
Gain (loss) on disposition of assets(b) 9,014 (130) 3,175 (3,672)
Legal and enforcement costs (327) (14) (497) (233)
------------------------------------------- $ (56,789) $ 5,120 $
(89,208) $ (11,906) -------------------------------------------
------------------------------------------- (a) During the fourth
quarter of 2005, we transitioned the majority of our senior
executives and hotel and resort general managers from an unfunded
defined benefit retirement plan to a fully funded retirement plan
based on a defined contribution format. The change in the
retirement plan was made to improve the certainty and
predictability related to the cost of the retirement benefits. The
transition to this defined contribution retirement plan resulted in
a cash funding by us in 2005 of $36,029 and a pre-tax accounting
charge of $35,467. During the year ended December 31, 2005, we
incurred a pension expense of $2,001 related to the defined benefit
retirement plan and $2,243 related to the defined contribution
retirement plan. We continue to maintain the unfunded
multi-employer, non- contributory, defined benefit retirement plan
on behalf of four active executives and 14 retired executives and
general managers, as well as the owner of two of our managed
properties. As at December 31, 2005, we have an accrued defined
benefit liability of $25,843 in respect of this plan, which is
included in "Long-term obligations." This accrued defined benefit
liability excludes the defined benefit obligation of the owner of
the two managed properties for their current general managers. (b)
Asset provisions and write downs for the three months and year
ended December 31, 2005 includes a provision for loss of $8,829 on
long- term receivables, a write down of $15,923 and $17,853,
respectively, on investments in hotel partnerships and corporations
and a write down of $479 and $5,105, respectively, on investment in
management contracts. Gain (loss) on disposition of assets for the
three months and year ended December 31, 2005 includes a net gain
of $9,892 and $9,337, respectively, (2004 - net loss of $130 and
$3,672, respectively) on the dispositions of investments in hotel
partnerships and corporations, the settlement of long-term
receivables and the exit from certain management contracts, and a
loss of $878 and $6,162, respectively, on the assignment of leases
and the sale of related assets of The Pierre (note 6). (c) The net
foreign exchange loss in 2005 and the net foreign exchange gain in
2004 related primarily to the foreign currency translation gains
and losses on unhedged net asset and liability positions, primarily
in US dollars, euros, pounds sterling and Australian dollars, and
local currency foreign exchange gains and losses on net monetary
assets incurred by our designated foreign self-sustaining
subsidiaries. In December 2005, we entered into 24 US dollar
foreign exchange forward contracts to convert $21,189 of US dollars
to Canadian dollars at an average exchange rate of 1.16 over the
period ending June 2006. We entered into these contracts to protect
ourselves in the event of a strengthening Canadian currency as it
relates to expenditures incurred by us for our management
operations and corporate expenses, which are denominated primarily
in Canadian dollars. These 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. This resulted in a
$127 foreign exchange loss being recorded in 2005. Effective,
January 1, 2004, we ceased designating our US dollar foreign
exchange forward contracts as hedges of our 2004 US dollar revenue
and, as a result, these 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 (note 4 (a)). (d) The
loss on the redemption of the debt component of our convertible
notes (issued in 1999) of $11,174 are more fully described in our
consolidated financial statements for the year ended December 31,
2004. 6. Guarantees and commitments: As at December 31, 2005, we
had provided certain guarantees in connection with properties under
our management. These include guarantees in respect of four
projects totalling a maximum of approximately $18,500, as well as a
guarantee of $300 for relocation costs for certain employees. We
have lease guarantees in respect of Four Seasons Hotel London, as
well as a lease guarantee in respect of Four Seasons Hotel Prague
(these guarantees are more fully described in our consolidated
financial statements for the year ended December 31, 2004). To the
extent we are called upon to honour any one of these guarantees, we
generally have either the right to be repaid from hotel operations
and/or have various forms or security or recourse to the owner of
the property. We also have four other commitments totalling
approximately $16,000 to four properties under our management. In
addition, during 2005, we assigned our leases and sold the related
assets of The Pierre. 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. In certain
limited circumstances, as a part of our agreement, we may be
required to pay a portion of the purchaser's withdrawal liability,
if any. We believe that the likelihood of our being required to
make a payment is remote, and have not recorded any amount as at
December 31, 2005 in respect of a potential NYC Pension withdrawal
liability. During 2006, we expect to fund $1,700 relating to one of
these commitments. Our assessment of our potential liability for
such matters could change as a result of, among other things, the
associated risks and uncertainties. 7. Seasonality: Our hotels and
resorts are generally affected by normally recurring seasonal
patterns and, for most of the properties, demand is typically lower
in December through March than during the remainder of the year.
Management operations are seasonal in nature, as fee 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, which has a negative
impact on management revenues. However, this negative impact on
management revenues generally is offset, to some degree, by
increased travel to resorts in that quarter and may be offset to a
greater extent as the portfolio of resort properties that we manage
increases. However, seasonality can be affected by specific local
events that can cause and from time to time have caused,
unanticipated disruptions to the operations of certain of the
properties we manage. Our ownership operations are also affected by
seasonal fluctuations, with lower revenue, operating profit and
cash flow in the first quarter; ownership properties typically
incur an operating loss in the first quarter of each year.
Typically, the third quarter has been the strongest quarter for the
Four Seasons Hotel Vancouver. FOUR SEASONS HOTELS INC. SUMMARY OF
HOTEL OPERATING DATA - CORE HOTELS(1) Three months ended December
31, (Unaudited) 2005 2004 Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 51 51 - No. of Rooms 13,450 13,450 -
Occupancy(2) 66.9% 66.4% 0.5pts. ADR(3) - in US dollars $355 $340
4.4% RevPAR(4) - in US dollars $224 $208 7.4% Gross operating
margin(5) 29.9% 28.5% 1.4pts. United States No. of Properties 19 19
- No. of Rooms 5,985 5,985 - Occupancy(2) 69.7% 69.1% 0.6pts.
ADR(3) - in US dollars $388 $361 7.3% RevPAR(4) - in US dollars
$276 $247 11.5% Gross operating margin(5) 28.2% 26.4% 1.8pts. Other
Americas/Caribbean No. of Properties 8 8 - No. of Rooms 1,725 1,725
- Occupancy(2) 63.6% 61.6% 2.0pts. ADR(3) - in US dollars $369 $347
6.4% RevPAR(4) - in US dollars $206 $190 8.7% Gross operating
margin(5) 24.4% 22.5% 1.9pts. Europe No. of Properties 8 8 - No. of
Rooms 1,425 1,425 - Occupancy(2) 62.3% 60.9% 1.4pts. ADR(3) - in US
dollars $504 $513 (1.8)% RevPAR(4) - in US dollars $329 $332 (0.9)%
Gross operating margin(5) 32.9% 31.2% 1.7pts. Middle East No. of
Properties 4 4 - No. of Rooms 850 850 - Occupancy(2) 64.0% 63.4%
0.6pts. ADR(3) - in US dollars $206 $183 12.7% RevPAR(4) - in US
dollars $132 $114 15.9% Gross operating margin(5) 33.7% 34.6%
(0.9)pts. Asia/Pacific No. of Properties 12 12 - No. of Rooms 3,465
3,465 - Occupancy(2) 66.3% 67.4% (1.1)pts. ADR(3) - in US dollars
$243 $238 2.1% RevPAR(4) - in US dollars $122 $122 0.1% Gross
operating margin(5) 36.0% 34.9% 1.1pts.
-------------------------------------------------- (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), The
Pierre in New York (due to its disposition on June 30, 2005) and
Four Seasons Hotel Newport Beach (due to the owner's decision to
manage that property independently). All room numbers in this table
are approximate. (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 per room
occupied. (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) Years ended December 31, (Unaudited) 2005 2004 Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 51 51 - No. of Rooms 13,450 13,450 -
Occupancy(2) 69.0% 66.1% 2.9pts. ADR(3) - in US dollars $349 $328
6.3% RevPAR(4) - in US dollars $226 $203 11.4% Gross operating
margin(5) 30.8% 28.6% 2.2pts. United States No. of Properties 19 19
- No. of Rooms 5,985 5,985 - Occupancy(2) 73.0% 69.4% 3.6pts.
ADR(3) - in US dollars $374 $349 7.3% RevPAR(4) - in US dollars
$273 $241 13.3% Gross operating margin(5) 28.7% 26.1% 2.6pts. Other
Americas/Caribbean No. of Properties 8 8 - No. of Rooms 1,725 1,725
- Occupancy(2) 67.7% 63.8% 3.9pts. ADR(3) - in US dollars $345 $323
6.9% RevPAR(4) - in US dollars $217 $191 13.8% Gross operating
margin(5) 28.2% 25.0% 3.2pts. Europe No. of Properties 8 8 - No. of
Rooms 1,425 1,425 - Occupancy(2) 63.7% 63.5% 0.2pts. ADR(3) - in US
dollars $527 $507 4.1% RevPAR(4) - in US dollars $351 $336 4.5%
Gross operating margin(5) 34.6% 34.7% (0.1)pts. Middle East No. of
Properties 4 4 - No. of Rooms 850 850 - Occupancy(2) 68.3% 65.6%
2.7pts. ADR(3) - in US dollars $210 $184 14.5% RevPAR(4) - in US
dollars $142 $119 19.3% Gross operating margin(5) 42.4% 37.9%
4.5pts. Asia/Pacific No. of Properties 12 12 - No. of Rooms 3,465
3,465 - Occupancy(2) 65.3% 62.7% 2.6pts. ADR(3) - in US dollars
$238 $228 4.5% RevPAR(4) - in US dollars $118 $107 9.5% Gross
operating margin(5) 33.0% 30.9% 2.1pts.
-------------------------------------------------- (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), The
Pierre in New York (due to its disposition on June 30, 2005) and
Four Seasons Hotel Newport Beach (due to the owner's decision to
manage that property independently). All room numbers in this table
are approximate. (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 per room
occupied. (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 December 31, (Unaudited) 2005 2004 Variance
-------------------------------------------------------------------------
Worldwide (1) No. of Properties 68 63 5 No. of Rooms 17,300 16,375
925 United States No. of Properties 23 24 (1) No. of Rooms 6,845
7,110 (265) Other Americas/Caribbean No. of Properties 10 10 - No.
of Rooms 2,165 2,160 5 Europe No. of Properties 12 10 2 No. of
Rooms 1,960 1,785 175 Middle East No. of Properties 7 5 2 No. of
Rooms 1,740 1,210 530 Asia/Pacific No. of Properties 16 14 2 No. of
Rooms 4,590 4,110 480
--------------------------------------------------- (1) Since
December 31, 2005, we commenced management of Four Seasons Tented
Camp, Golden Triangle, Thailand and Four Seasons Hotel Silicon
Valley at East Palo Alto, which have 15 and 200 rooms,
respectively. All room numbers in this table are approximate. FOUR
SEASONS HOTELS INC. REVENUES UNDER MANAGEMENT - ALL MANAGED HOTELS
(Unaudited) Three months ended Years ended (In thousands of
December 31, December 31, US dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Revenues under management(1) $ 676,662 $ 604,791 $ 2,559,746 $
2,240,887 ---------------------------------------------------
---------------------------------------------------
----------------------------- (1) Revenues under management consist
of rooms, food and beverage, telephone and other revenues of all
the hotels and resorts which we manage. Approximately 63% of the
fee revenues (excluding reimbursed costs) we earned were calculated
as a percentage of the total revenues under management of all
hotels and resorts. FOUR SEASONS HOTELS INC. SCHEDULED OPENING OF
PROPERTIES UNDER CONSTRUCTION OR IN ADVANCED STAGES OF DEVELOPMENT
Hotel/Resort and Location(1),(2) Approximate Number of Rooms
Scheduled 2006/2007 openings ---------------------------- Four
Seasons Hotel Alexandria, Egypt(x) 125 Four Seasons Hotel Beirut,
Lebanon 235 Four Seasons Hotel Florence, Italy 120 Four Seasons
Hotel Istanbul at the Bosphorus, Turkey 170 Four Seasons Resort
Lana'i at Koele, Hawaii, USA(3) 100 Four Seasons Hotel Macau,
Special Administrative Region of the People's Republic of China(x)
400 Four Seasons Resort Maldives at Landaa Giraavaru, Maldives 100
Four Seasons Hotel Mumbai, India(x) 235 Four Seasons Hotel Westlake
Village, California, USA 270 Beyond 2007 ----------- Four Seasons
Hotel Bahrain, Bahrain 270 Four Seasons Hotel Baltimore, Maryland,
USA(x) 200 Four Seasons Resort Barbados, Barbados(x) 117 Four
Seasons Hotel Beijing, People's Republic of China 325 Four Seasons
Resort Bora Bora, French Polynesia 105 Four Seasons Hotel Dubai,
United Arab Emirates(x) 375 Four Seasons Hotel Kuala Lumpur,
Malaysia(x) 140 Four Seasons Hotel Marrakech, Morocco(x) 140 Four
Seasons Resort Mauritius, Republic of Mauritius(x) 120 Four Seasons
Hotel Moscow, Russia(x) 215 Four Seasons Hotel Moscow Kamenny
Island, Russia(x) 80 Four Seasons Hotel New Orleans, Louisiana,
USA(x) 240 Four Seasons Resort Puerto Rico, Puerto Rico(x) 250 Four
Seasons Hotel Seattle, Washington, USA(x) 150 Four Seasons Hotel
Shanghai at Pudong, People's Republic of China(x) 190 Four Seasons
Hotel Taipei, Taiwan(x) 275 Four Seasons Hotel Toronto, Ontario,
Canada(x) 265 Four Seasons Resort Vail, Colorado, 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 when the necessary renovations are completed. DATASOURCE: Four
Seasons Hotels and Resorts CONTACT: John Davison, Chief Financial
Officer, (416) 441-6714; Barbara Henderson, Vice President,
Corporate Finance, (416) 441-4329
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