Four Seasons Hotels Inc. reports third quarter 2003 results US
RevPAR improved 10.6% in the quarter TORONTO, Nov. 6
/PRNewswire-FirstCall/ -- Four Seasons Hotels Inc. (TSX Symbol
"FSH"; NYSE Symbol "FS") today reported its results for the third
quarter ended September 30, 2003. "Hotels under Four Seasons
management had a strong improvement in operating performance in the
third quarter. Increases in travel demand that began at the end of
the second quarter continued into the fall. This improvement in
demand was reflected in increased occupancy which, when combined
with our clients' recognition of our hallmark service, allowed us
to realize higher room rates in many of our hotels under
management," said Isadore Sharp, Chairman and Chief Executive
Officer. "In addition to the improving operating environment, we
expect our financial results to be bolstered by the addition of new
Four Seasons properties in 2003. By the end of this year, we expect
to have opened four new hotels and resorts. We also reopened the
hotels under management in Jakarta and Prague, both of which had
been closed for repair after sustaining extensive flood damage in
2002." The Company realized net earnings of $4.7 million ($0.14
basic earnings per share and $0.13 diluted earnings per share) for
the three months ended September 30, 2003, as compared to a net
loss of $12.3 million ($0.35 basic and diluted loss per share) for
the third quarter of 2002. The increase in net earnings for the
third quarter of 2003 occurred despite increased losses from
ownership operations and ongoing legal and enforcement costs
relating to the disputes with the owners of the hotels in Seattle
and Caracas, which are discussed below under "Proceedings". The
financial results for the three months ended September 30, 2002
include an asset impairment charge, net of applicable income taxes,
of $17.5 million ($0.50 basic and diluted loss per share) relating
to the Company's investments in Four Seasons hotels in Caracas and
Sydney, as discussed in the Company's 2002 Annual Report. For the
three months ended September 30, 2003, adjusted(1) net earnings
were $5.4 million ($0.16 basic earnings per share and $0.15 diluted
earnings per share), as compared to $4.3 million ($0.12 basic and
diluted earnings per share) for the three months ended September
30, 2002. For the nine months ended September 30, 2003, net loss
was $5.8 million ($0.17 basic and diluted loss per share), as
compared to net earnings of $13.6 million ($0.39 basic earnings per
share and $0.37 diluted earnings per share) for the comparable
period in 2002. The decline in net earnings for the nine months
ended September 30, 2003 is primarily attributable to a non-cash,
unrealized foreign exchange loss for accounting purposes of $17.2
million, which arose as a result of significant movements earlier
this year in the US and Canadian dollars, pound sterling and the
euro, as compared to a non-cash, unrealized foreign exchange gain
for accounting purposes of $4.5 million in the same period in 2002.
Increased losses from ownership operations and legal and
enforcement costs relating to the disputes with the owners of the
hotels in Seattle and Caracas, which are discussed below, also
contributed to the decline. For the nine months ended September 30,
2003, adjusted(1) net earnings were $16.9 million ($0.48 basic
earnings per share and $0.47 diluted earnings per share).
Adjusted(1) net earnings for the nine months ended September 30,
2002 were $28.9 million ($0.82 basic earnings per share and $0.79
diluted earnings per share). "We continue to meet our financial
objective of funding new development opportunities with cash
generated by operations. For the first nine months of this year our
cash flow from operations increased 37% to $44.1 million," said
Douglas L. Ludwig, Chief Financial Officer and Executive Vice
President. "With concrete signs that the major global economies are
recovering, we expect to continue to see solid improvements in cash
generated from our management business." OPERATING ENVIRONMENT
Please see the accompanying "Summary of Hotel Operating Data" for
regional RevPAR(2) and gross operating profit margin(3) statistics
by geographic region. The third quarter includes two months (July
and August) that historically have reflected lower business travel
relative to the balance of the year. However, extending from trends
starting late in the second quarter of this year, the operating
environment continued to strengthen over the course of the third
quarter with increased travel demand coming from the business
sector and continued healthy leisure demand. The improvement in
demand has continued into the fourth quarter. However, consistent
with what the lodging industry is currently experiencing, the time
period in which business is booked continues to be shorter than the
historical norm. Each of the regions in which the Company operates
realized improvements throughout the third quarter. In particular,
the hotels under management in the US generally experienced strong
occupancy and achieved room rate increases during the quarter.
Occupancy at the Company's worldwide Core Hotels(4) increased from
61.9% in July to 64.1% in August to 67.9% in September. While, in
aggregate, occupancy was relatively unchanged in both July and
August on a year-over-year basis, this was the result of some
continued demand weakness in the Asian, Vancouver and Toronto
markets as they continued to recover from the effects of SARS,
which partially offset improvements in the other regions. During
the third quarter, on a worldwide basis, achieved room rates
increased 3.5%, on a US dollar basis, as compared to the same
period last year. There was an increase in demand in virtually all
of the hotels under management in the US during the third quarter
of 2003, as compared to the third quarter of 2002. The majority of
the Four Seasons resorts in the US continued to realize strong
demand reflecting relatively healthy leisure travel, and for the
first time in many quarters there was an improvement in business
travel levels at most city center hotels. Improving demand,
combined with a growing service differential that distinguishes
Four Seasons from other luxury hotel operators resulted in an
increase in achieved daily room rates at the US Core Hotels under
management of 3.1% in the third quarter, from approximately US$311
in 2002 to over US$320 in 2003. Despite a difficult cost
environment with increased health care, insurance and energy costs,
the US Core Hotels realized an improvement in gross operating
profit margin to 22.4% in the third quarter of 2003, as compared to
21.8% for the same period in 2002. Although the Asia/Pacific region
continues to experience some lingering effect from SARS, demand has
improved significantly from the lows of 20% occupancy experienced
in April and May of this year. Occupancy in the region increased
from 53.5% in July 2003 to approximately 62% in both August and
September 2003, compared to approximately 60% and 65%,
respectively, for the same periods last year. The two resorts under
management in Bali continue to experience weak demand relative to
the demand within the region as that market continues its recovery
from the effects of SARS and the terrorist acts in October of last
year. As a result of the severe decline in occupancy and a reduced
demand for suites, achieved room rates in the region declined
during the third quarter of 2003, as compared to the same period in
2002. However, consistent with demand improvements through the
quarter, achieved room rate performance improved on a
month-by-month basis within the quarter. The operating performance
of the Other Americas/Caribbean Core Hotels was similar to the
Asia/Pacific Core Hotels. Although RevPAR declined during the third
quarter of 2003, as compared to 2002, travel demand in Other
Americas/Caribbean Core Hotels improved sequentially month by month
within the quarter. The properties under management in the Other
Americas/Caribbean Core Hotels performed better than the average
for the group. Consistent with the worldwide results, trends at the
Core Hotels under management in Europe and the Middle East improved
during the quarter. On a year-over-year basis, occupancy was weaker
in July, but had solid improvements in August and September. The
Berlin market continues to suffer from an abundance of supply of
high-end hotel rooms. The hotels under management in London,
Dublin, Lisbon, Milan and Cairo all had better demand on a
year-over- year basis. Although Four Seasons Hotel George V Paris
experienced a small decline in occupancy on a year-over-year basis,
it achieved over 80% occupancy during the third quarter of 2003.
Achieved room rates improved during the quarter for Europe/Middle
East Core Hotels, on a US dollar basis. On a local currency basis,
the majority of the properties also experienced achieved room rate
improvements. "We are very pleased with our industry-leading RevPAR
and operating margin performance," said Wolf Hengst, President
Worldwide Hotel Operations. "Our general managers have been with
Four Seasons an average of seventeen years, and we believe their
broad experience and talent provides a tangible advantage as we
manage through changing environments. We also believe that our
performance demonstrates the success of our strategy, which
continues to focus on service and value. These results show that,
now more than ever, travelers need and appreciate the quality of
experience they receive at Four Seasons." MANAGEMENT OPERATIONS
Management fee revenues increased 10.9% to $36.2 million for the
quarter ended September 30, 2003, as compared to the same period in
2002. Contributing to the increase in management fees was an
increase in base management fees as a result of the improved
operating environment at Core Hotels, and increased fees from
recently opened hotels and the Four Seasons Olympic Hotel Seattle
settlement, which is discussed under "Proceedings". The increase in
management fees was moderately offset by declines at certain of the
hotels, including the Canadian and Asian hotels, which had very
weak July and August results as those markets continue to recover
from the impact of SARS on travel and, in the case of Bali, from
the effects of the terrorist acts in October of last year. Fees
from these hotels were $1.4 million lower in the quarter ended
September 30, 2003, as compared to the same period in 2002. For the
nine months ended September 30, 2003 management fees were
essentially unchanged at $109.2 million, as compared to $108.6
million for the same period in 2002. This reflects the improvements
noted above during the third quarter, offset by a decline in
management fees during the first six months of 2003, primarily as a
result of the impact of the war in Iraq and SARS on worldwide
travel demand. General and administrative expenses increased 0.1%
and 3.9% to $17.2 million and $50.1 million for the three months
and nine months ended September 30, 2003, respectively, as compared
to the same periods in 2002. The general and administrative
expenses included a cost of living payroll increase for corporate
employees, which was implemented during the first quarter of 2003.
As there was no cost of living payroll increase for corporate
employees in the first or second quarter of 2002, the nine-month
increase is slightly larger than the quarterly increase. The
Company's management operations earnings before other operating
items for the third quarter of 2003 increased 23.0% to $19.0
million, as compared to $15.5 million for the third quarter of
2002. Management operations earnings before other operating items
for the nine months ended September 30, 2003 were $59.1 million, as
compared to $60.4 million for the same period in 2002. The
management operations profit margin(5) for the quarter ended
September 30, 2003 was 52.5%, as compared to 47.4% for the same
period in 2002, and was 54.1% for the nine months ended September
30, 2003, as compared to 55.6% for the same period in 2002.
OWNERSHIP OPERATIONS(6) Ownership operations losses before other
operating items were $9.2 million in the third quarter of 2003, as
compared to losses of $6.6 million in the third quarter of 2002.
Ownership operations losses before other operating items for the
first nine months of 2003 were $27.8 million, as compared to losses
of $15.0 million for the comparable period in 2002. The majority of
the third quarter losses was generated by The Pierre, which
contributed approximately $5 million to the ownership loss in the
quarter in both 2003 and 2002. Although The Pierre's RevPAR for the
quarter ended September 30, 2003 increased 9.5%, due primarily to
union-mandated increases in labour and health care costs, the
operating performance for the third quarter of 2003 was essentially
unchanged, as compared to the same period in 2002. For the nine
months ended September 30, 2003, The Pierre contributed $10.7
million to the loss, as compared to $5.9 million for the same
period in 2002. For the nine months ended September 30, 2003, The
Pierre's RevPAR declined 2.1%, as compared to the same period in
2002. In addition, the other revenues of the hotel declined, as a
result of a decline in banqueting and ancillary revenues for the
nine months ended September 30, 2003. The combination of these
lower revenues with higher labour costs resulted in the increased
loss from The Pierre during the nine months ended September 30,
2003, as compared to the same period in 2002. Primarily as a result
of travel disruption relating to SARS, Four Seasons Hotel Vancouver
experienced weak operating conditions, with RevPAR, on a local
currency basis, declining 10.8% and 15.3% for the third quarter and
first nine months of 2003, respectively, as compared to the same
periods in 2002. The operating loss at Four Seasons Hotel Vancouver
increased by $1.2 million and $3.1 million in the third quarter and
first nine months of 2003, respectively, as compared to the same
periods in 2002. In addition, Four Seasons Hotel Berlin experienced
a weak third quarter with a RevPAR decline of 6.3% and 5%, on a US
dollar basis, for the three and nine months ended September 30,
2003, respectively, as compared to the same periods in 2002. The
operating loss at Four Seasons Hotel Berlin increased by $629,000
and $2.8 million in the three and nine months ended September 30,
2003, respectively, as compared to the same periods in 2002, as a
result of lower operating profits and increased lease costs. The
Company's obligation to fund any stipulated minimum lease payments
at Four Seasons Hotel Berlin is limited to a maximum of
approximately 11 million euros. The Company reached this maximum
during the third quarter of 2003 and has ceased funding any
stipulated minimum lease payments. The landlord may terminate the
lease if the stipulated minimum lease payments are not paid in full
for a 12 consecutive month period or there is an aggregate
shortfall of six months of the stipulated minimum lease payments at
any time. The Company is in discussions with the landlords of The
Pierre, Four Seasons Hotel Berlin and Four Seasons Hotel Vancouver
to determine what, if any, alternatives may be available to change
or restructure the Company's investments in these hotels. There can
be no assurance that acceptable alternative arrangements will be
agreed upon with respect to any or all of these hotels. OTHER
INCOME/EXPENSE Other expense for the third quarter of 2003 was
$920,000, as compared to other expense of $21.7 million for the
same period in 2002. Other expense for the nine months ended
September 30, 2003 was $26.0 million, as compared to other expense
of $20.1 million for the same period in 2002. Included in other
expense during the third quarter and nine months ended September
30, 2003 are legal and enforcement costs of $1.2 million and $8.7
million, respectively, in connection with the disputes with the
owners of the Four Seasons hotels in Caracas and Seattle. These
disputes are described below under "Proceedings". Other expense for
the quarter and nine months ended September 30, 2002 include an
asset impairment charge for Four Seasons Hotel Caracas and Four
Seasons Hotel Sydney and legal and enforcement costs relating to
the Company's investments in Four Seasons Hotel Caracas and Four
Seasons Olympic Hotel Seattle which, in aggregate, were $23.3
million. The Company expects to incur approximately an additional
$400,000 in legal and enforcement costs for the balance of 2003 in
connection with Four Seasons Hotel Caracas. Other expense for the
third quarter of 2003 also includes a $323,000 non- cash,
unrealized foreign exchange gain, as compared to a $2.1 million
non- cash, unrealized foreign exchange gain for the same period in
2002. For the nine months ended September 30, 2003, the Company
incurred a non-cash, unrealized foreign exchange loss of $17.2
million, as compared to a non-cash, unrealized foreign exchange
gain of $4.5 million for the same period in 2002. The non-cash,
unrealized foreign exchange loss for the nine months ended
September 30, 2003 arose as the result of the translation to
Canadian dollars at the end of each month at current exchange rates
of the Company's non- Canadian dollar-denominated net monetary
assets. Net monetary assets are the sum of the Company's foreign
currency-denominated assets and liabilities which consist primarily
of cash and cash equivalents, accounts receivable, long-term
receivables and long-term obligations, as determined under Canadian
generally accepted accounting principles (GAAP). This accounting
determination indicates that the Company's net US dollar monetary
assets were approximately US$74 million as at September 30, 2003.
From an economic perspective, the Company looks to offset its net
monetary asset position of approximately US$74 million against the
full obligation of its convertible notes. Under Canadian GAAP, the
convertible notes were allocated between long-term obligations and
shareholders' equity. The portion allocated to long-term
obligations and included in net monetary assets was US$46.7
million, and US$125.8 million was allocated to shareholders' equity
at the time of issuance. If the portion of the convertible notes
included in shareholders' equity was revalued at the current
exchange rates, which is not contemplated under Canadian GAAP, the
economic result of this revaluation would have been a non-cash,
unrealized foreign exchange gain of $28.8 million for the first
nine months of 2003, offsetting the non-cash, unrealized foreign
exchange loss otherwise recorded. On this basis, the Company
believes it has an appropriate economic hedge of its net monetary
assets and liabilities. For a further discussion of the convertible
notes see "Liquidity and Capital Resources" below. The Canadian
dollar strengthened by 14.5% (22.9 cents) during the first nine
months of 2003 against the US dollar, causing the majority of the
non- cash, unrealized foreign exchange loss. Although there was
fluctuation during the third quarter, the major foreign currencies
relevant to the Company's assets and liabilities generally ended at
approximately the same levels as the start of the quarter. As a
result there was not a significant gain or loss during the third
quarter. Given fluctuations in currencies to date, it is likely
that there may be a non-cash, unrealized foreign exchange gain or
loss during the fourth quarter. Assuming the Company's US dollar
net monetary asset position remains the same as at September 30,
2003, a one-cent fluctuation in the Canada/US dollar exchange rate
creates approximately a $740,000 non-cash, unrealized foreign
exchange gain or loss, before tax. It is likely that the Company's
net monetary asset positions will change month by month over the
remainder of the year. DEPRECIATION AND AMORTIZATION Depreciation
and amortization expense was $3.6 million for the third quarter of
2003 and $11.4 million for the nine months ended September 30,
2003, as compared to $3.8 million and $11.0 million, respectively,
for the same periods in 2002. The increase in depreciation and
amortization expense for the nine months ended September 30, 2003,
as compared to the same period in 2002, is attributable to
additional depreciation on fixed assets purchased over the past
twelve months and additional amortization on new management
contracts. NET INTEREST INCOME The Company had net interest income
of $1.0 million in the third quarter of 2003, as compared to
$535,000 in the third quarter of 2002. Net interest income is a
combination of $3.8 million interest income and $2.8 million
interest expense, partially offset by $35,000 income relating to
the purchase of forward exchange contracts in the third quarter of
2003, as compared to $4.2 million, $2.7 million and an expense of
$919,000, respectively, for the same period in 2002. For the nine
months ended September 30, 2003, net interest income was $2.4
million, as compared to $3.5 million for the comparable period of
2002. The components of net interest were interest income of $10.6
million and interest expense of $8.3 million, partially offset by
income relating to the purchase of forward exchange contracts of
$121,000, as compared to $13.5 million, $8.3 million and an expense
of $1.7 million, respectively, during the same period in 2002.
INCOME TAX EXPENSE The Company's effective tax rate during the
third quarter of 2003 and 2002 was approximately 24%. A significant
portion of the non-cash, unrealized foreign exchange loss of $17.2
million for the nine months ended September 30, 2003 was not
tax-effected as it will not be realized for tax purposes. As a
result, notwithstanding the loss before income taxes for the nine
months ended September 30, 2003, the Company incurred a tax expense
of $2.1 million. The effective tax rate was 24% for the nine months
ended September 30, 2002. LIQUIDITY AND CAPITAL RESOURCES As of
September 30, 2003, the Company had cash and cash equivalents of
$161.4 million, as compared to $165 million at December 31, 2002.
Long-term obligations were $121.8 million as at September 30, 2003
and $129.1 million as at December 31, 2002. The Company's debt
position consists primarily of that portion of its convertible
notes that is characterized as debt for accounting purposes. The
decrease in long-term obligations was primarily due to the foreign
currency translation of the debt component of the convertible
notes. The Company is 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. If the current
interest rate and general business environment continues, it is
possible that the Company may redeem some or all of the notes.
Holders of the notes have conversion rights, which they can
exercise at any time before the maturity date or date of redemption
of the notes, under which they can require the Company to issue
5.284 Limited Voting Shares for each US$1,000 principal amount of
notes. The holders of notes also can require the Company to
repurchase the notes in September 2004 for an amount equal to the
issue price plus accrued interest calculated at 4 1/2% per annum.
This right also may be exercised in 2009 and 2014. The Company has
a choice of funding its obligation in connection with the
conversion or purchase of the notes at the option of the holder
with cash or shares. The rights of the Company and the noteholders
relating to the convertible notes are more fully described in the
Company's 2002 Annual Report. A cash redemption in September 2004
of all outstanding notes would require a cash payment to the
noteholders of approximately US$215.5 million, assuming that the
holders did not exercise their right to convert their notes before
the redemption date. If all of the notes were to be redeemed, the
Company may replace the financing with a combination of debt and
utilization of existing US dollar cash reserves. During the third
quarter of 2002 the Company, pursuant to its normal course issuer
bid, purchased 337,600 of its Limited Voting Shares through the
facilities of The Toronto Stock Exchange and the New York Stock
Exchange for a total purchase price, including commissions, of
approximately $16.5 million. Of this amount, $8.8 million was paid
in September 2002, with the remaining $7.7 million being paid in
October 2002 upon settlement. No shares were purchased by the
Company in the nine months ended September 30, 2003. CASH FLOW AND
CAPITAL EXPENDITURES The Company generated $44.1 million of cash
from operations during the nine months ended September 30, 2003, as
compared to $32.2 million for the same period in 2002. Cash from
operations improved during the nine months ended September 30, 2003
primarily due to reductions in working capital of $23.7 million and
a reduction in current income tax paid of $10.4 million. For the
nine months ended September 30, 2003, the increase in cash flow was
partially offset by a reduction of $14.3 million in cash provided
by management and ownership operations, an increase of $6.1 million
in legal and enforcement costs paid in connection with the
Company's investments in the Four Seasons hotels in Caracas and
Seattle and a decrease of $1.7 million in net interest received. As
discussed above, the Company spent $16.5 million for share
repurchases made in the third quarter of 2002 pursuant to its
normal course issuer bid. A part of the Company's business strategy
is to invest a portion of available cash to obtain new management
agreements or enhance existing management arrangements. These loans
or investments will only be made where the overall economic return
to the Company is expected to justify the loan or investment.
During the nine months ended September 30, 2003, the Company funded
$37.9 million in new management opportunities. Also during the nine
months ended September 30, 2003, the owners of Four Seasons Hotel
London, The Regent Bangkok, Four Seasons Olympic Hotel Seattle,
Four Seasons Hotel Sydney and Four Seasons Hotel Las Vegas repaid
$19.2 million on outstanding loans and investments. During the
remainder of 2003, the Company expects to make investments in a
number of Four Seasons projects, which are expected to include
Costa Rica, Damascus, Hampshire and Whistler. The Company expects
total capital spending and dividends to its shareholders in 2003 to
be approximately the same as in 2002 (approximately $70 million).
COMMITMENTS As discussed in the Company's 2002 Annual Report, the
Company has certain pension, lease and other commitments. There has
been no material change to these commitments through the third
quarter of 2003, and the Company does not anticipate any material
change in respect of these commitments over the remainder of this
fiscal year, other than the elimination in the quarter of the
guarantee related to the stipulated minimum lease payments for Four
Seasons Hotel Berlin (see discussion under "Ownership Operations").
STOCK OPTION EXPENSE In October, the Accounting Standards Board
approved amendments to CICA Handbook section 3870 Stock-Based
Compensation and Other Stock-Based Payments that requires the
expensing of all stock-based compensation awards for fiscal years
beginning on or after January 1, 2004. The Company has not yet
determined the way in which it will adopt this new requirement. For
the nine months ended September 30, 2003, the Company has applied
its existing accounting policy, under which no compensation expense
is recorded on the grant of stock options to employees.
Consideration paid by employees on the exercise of stock options or
the purchase of shares is recorded as capital stock. For the
quarter ended September 30, 2003, if the Company were to have
adopted the fair value based method, the impact would have been an
increased compensation expense of $1.2 million (2002 - $736,000)
and a decrease in basic and diluted earnings per share of $0.04 and
$0.03, respectively (2002 - an increase in basic and diluted loss
per share of $0.02). For the nine months ended September 30, 2003,
if the Company were to have adopted the fair value based method,
the impact would have been an increased compensation expense of
$3.1 million (2002 - $958,000) and an increase in basic and diluted
loss per share of $0.08 (2002 - a decrease in basic and diluted
earnings per share of $0.03 and $0.02, respectively). PROCEEDINGS
Four Seasons Olympic Hotel Seattle During the second quarter of
2003, the Company and the owner of Four Seasons Olympic Hotel
Seattle settled their disagreement, which was subject to
arbitration, concerning the management of the hotel. Under the
settlement, Four Seasons concluded its management of Four Seasons
Olympic Hotel upon the sale of the hotel, which occurred on August
1, 2003. On closing of the sale of the hotel, the Company received
an initial payment, which included its share of the sale proceeds
as a result of its minority ownership interest in the hotel. The
Company will also receive annual payments over the next several
years which are not materially different from the fees that the
Company would have otherwise earned during this period. The Company
believes that a fair and equitable settlement has been reached and
that the payments under the settlement agreement will, in
aggregate, compensate it for the near-term value of its management
contract as it works to obtain a new management opportunity in
Seattle. A portion of this payment has been included in the third
quarter of 2003. Four Seasons Hotel Caracas The Company is in
dispute with, and has commenced both legal and arbitration
proceedings against, the owner of Four Seasons Hotel Caracas
regarding a variety of matters relating to the completion and
ongoing operation of the hotel, including the default of a US$5
million loan owed to the Company. During the second quarter, the
Company received judgment in the legal proceedings, which involved
the protection of its proprietary materials. The court found
against the owner on all matters, including illegal computer
"hacking" and unlawful and unauthorized use of the Company's
proprietary information, and ordered that the owner pay to the
Company damages totaling US$4.9 million, plus the Company's legal
costs and expenses once determined by the Magistrate reporting to
the court. The Company is continuing to pursue the arbitration
proceeding in respect of the other contractual breaches of the
management contract by the owner. The arbitration hearing was
completed during the quarter and a decision is pending. The Company
is moving to enforce the judgment from the legal proceeding against
the owner. FOUR SEASONS PROPERTIES - RECENT AND EXPECTED OPENINGS
Four Seasons is continuing to expand its international presence
with several new projects. During the next 14 months, the Company
expects to open new hotels and resorts in Exuma, Budapest,
Hampshire (England), Jackson Hole, Cairo, Costa Rica, Damascus,
Doha, Langkawi (Malaysia), Provence (France) and Whistler (British
Columbia). A full list of the Company's properties under
construction or advanced development is provided in a schedule
attached to this press release. "Over the next 14 months, eleven
new Four Seasons projects are expected to be added to the
portfolio, providing us with an expanded base of properties to
support our long-term growth objectives. Our development activity
also remains strong," said Kathleen Taylor, President Worldwide
Business Operations, "We are very pleased to have recently
announced our plans for a Four Seasons project in Mumbai. This will
be our first project in India, and Mumbai is an important market
for our brand. Earlier this year, we announced new projects in Bora
Bora, Baltimore and Kuwait City. We are fortunate to work with many
new development partners who are strong supporters of the Four
Seasons brand." LOOKING AHEAD The Company expects that the
improving economic environment should translate into continued
improvement in travel demand, particularly business travel. The
Company also expects that leisure travel demand, which overall has
been strong relative to business travel, will remain stable. On a
full-year basis, the Company continues to expect its average daily
room rates for 2003 to be comparable with both 2000 and 2002. The
Company also expects its business model to perform at or above
industry levels consistent with past experience. 1. Adjusted net
earnings is equal to net earnings (loss) plus (i) foreign exchange
loss, less (ii) foreign exchange gain, plus (iii) asset impairment
charge, plus (iv) loss on sale of hotel investment, each
tax-effected as applicable. It is included because the Company's
management believes it can assist in the period-over-period
comparability of the Company's financial performance. A
reconciliation of net earnings (loss) to adjusted net earnings is
as follows: (Unaudited) Three months ended Nine months ended (In
thousands of September 30, September 30, dollars) 2003 2002 2003
2002
-------------------------------------------------------------------------
Net earnings (loss) $ 4,748 $ (12,252) $ (5,795) $ 13,594
Adjustments: Foreign exchange loss (gain) (323) (2,092) 17,179
(4,526) Asset impairment charge(x) 1,180 23,307 8,680 23,307 Loss
on sale of hotel investment - 610 - 1,359 Tax effect of adjustments
(156) (5,238) (3,171) (4,834)
--------------------------------------------------- Adjusted net
earnings $ 5,449 $ 4,335 $ 16,893 $ 28,900
---------------------------------------------------
--------------------------------------------------- Adjusted basic
earnings per share $ 0.16 $ 0.12 $ 0.48 $ 0.82
---------------------------------------------------
--------------------------------------------------- Adjusted
diluted earnings per share $ 0.15 $ 0.12 $ 0.47 $ 0.79
---------------------------------------------------
--------------------------------------------------- (x) Includes
legal and enforcement costs. 2. 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 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. The Company reports RevPAR as it is the most commonly
used measure in the lodging industry to measure the
period-over-period performance of comparable properties. 3. Gross
operating margin represents gross operating profit as a percent of
gross operating revenue. 4. The term "Core Hotels" means hotels and
resorts under management for the full year of both 2003 and 2002.
Changes from the 2002/2001 Core Hotels are the additions of Four
Seasons Hotel San Francisco, Four Seasons Hotel Dublin, Four
Seasons Hotel Buenos Aires and Four Seasons Resort Carmelo, and the
deletion of Four Seasons Olympic Hotel Seattle. 5. The management
operations profit margin represents management operations earnings
before other operating items, as a percent of management operations
revenue. 6. Included in ownership operations are the consolidated
revenues and expenses from the Company's 100% leasehold interests
in The Pierre in New York, Four Seasons Hotel Vancouver and Four
Seasons Hotel Berlin, distributions from other ownership interests
in properties that Four Seasons manages and corporate overhead
expenses related, in part, to these ownership interests. All dollar
amounts referred to in this press release are Canadian dollars
unless otherwise noted. The financial statements are prepared in
accordance with Canadian generally accepted accounting principles.
This press release contains "forward-looking statements" within the
meaning of federal securities laws, including RevPAR, profit margin
and earning trends; statements concerning the number of lodging
properties expected to be added in future years; expected
investment spending; and similar statements concerning anticipated
future events and expectations that are not historical facts. These
statements are not guarantees of future performance and are subject
to numerous risks and uncertainties, including the duration and
severity of the current economic slowdown and the pace of the
lodging industry's recovery from the terrorist attacks of September
11, 2001, SARS and the military conflict in Iraq; supply and demand
changes for hotel rooms and residential properties; competitive
conditions in the lodging industry; relationships with clients and
property owners; and the availability of capital to finance growth,
any of which could cause actual results to differ materially from
those expressed in or implied by the statements herein. These
statements are made as of the date of this press release, and the
Company undertakes no obligation to publicly update or revise any
forward- looking statement, whether as a result of new information,
future events or otherwise. The Company will hold a conference call
today at 10:00 a.m. (Eastern Standard Time) to discuss the third
quarter financial results. The details are: To access the call
dial: 1 (800) 396-0424 (U.S.A. and Canada) 1 (416) 620-5690
(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 21162938. 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. With a
history spanning four decades and a portfolio that extends
worldwide, Four Seasons Hotels and Resorts is the world's leading
operator of luxury hotels, currently managing 58 properties in 27
countries. Four Seasons Hotel Miami opened on October 1, 2003, in
the heart of the city's financial district. Further openings in
2003 are expected to include a resort in Great Exuma (The Bahamas)
and the company's first mountain resort in Jackson Hole, Wyoming.
Four Seasons continues to grow, with more than 20 projects under
construction or development in choice locations around the world.
The company has claimed first position on many prestigious lists.
Recent honours include being named to Fortune magazine's list of
100 Best Companies to Work For (for the sixth consecutive year);
and AAA Five Diamond awards (receiving more than other any hotel
company for the 22nd consecutive year). Information on the company
and its 42 years of achievement in the hospitality industry can be
accessed through the Four Seasons Web site at
http://www.fourseasons.com/. FOUR SEASONS HOTELS INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited) (In thousands of Three months
ended Nine months ended dollars except per September 30, September
30, share amounts) 2003 2002 2003 2002
-------------------------------------------------------------------------
Consolidated revenues (note 4) $ 62,298 $ 62,194 $ 193,135 $
207,739 ---------------------------------------------------
--------------------------------------------------- MANAGEMENT
OPERATIONS Revenues $ 36,217 $ 32,647 $ 109,179 $ 108,573 General
and administrative expenses (17,196) (17,178) (50,071) (48,187)
--------------------------------------------------- 19,021 15,469
59,108 60,386 ---------------------------------------------------
OWNERSHIP OPERATIONS Revenues 27,001 30,647 87,194 102,451
Distributions from hotel investments 153 247 153 818 Expenses: Cost
of sales and expenses (35,328) (36,156) (111,769) (114,130) Fees to
Management Operations (1,073) (1,347) (3,391) (4,103)
--------------------------------------------------- (9,247) (6,609)
(27,813) (14,964)
--------------------------------------------------- Earnings before
other operating items 9,774 8,860 31,295 45,422 Depreciation and
amortization (3,645) (3,808) (11,419) (10,952) Other expense, net
(note 5) (920) (21,708) (25,961) (20,084)
--------------------------------------------------- Earnings (loss)
from operations 5,209 (16,656) (6,085) 14,386 Interest income, net
1,038 535 2,388 3,501
--------------------------------------------------- Earnings (loss)
before income taxes 6,247 (16,121) (3,697) 17,887
--------------------------------------------------- Income tax
recovery (expense): Current (177) 2,437 438 (1,950) Future (1,322)
1,432 (2,536) (2,343)
--------------------------------------------------- (1,499) 3,869
(2,098) (4,293) ---------------------------------------------------
Net earnings (loss) $ 4,748 $ (12,252) $ (5,795) $ 13,594
---------------------------------------------------
--------------------------------------------------- Basic earnings
(loss) per share (note 3) $ 0.14 $ (0.35) $ (0.17) $ 0.39
---------------------------------------------------
--------------------------------------------------- Diluted
earnings (loss) per share (note 3) $ 0.13 $ (0.35) $ (0.17) $ 0.37
---------------------------------------------------
--------------------------------------------------- See
accompanying notes to consolidated financial statements. FOUR
SEASONS HOTELS INC. CONSOLIDATED BALANCE SHEETS As at As at
September 30, December 31, (In thousands of dollars) 2003 2002
-------------------------------------------------------------------------
(Unaudited) ASSETS Current assets: Cash and cash equivalents $
161,404 $ 165,036 Receivables 80,021 85,594 Inventory 2,609 2,609
Prepaid expenses 4,209 4,718 ------------------------- 248,243
257,957 Long-term receivables 200,783 207,106 Investments in hotel
partnerships and corporations 145,925 146,362 Fixed assets 68,145
74,593 Investment in management contracts 203,311 222,835
Investment in trademarks and trade names 5,921 6,329 Future income
tax assets 14,926 17,460 Other assets 39,173 37,982
------------------------- $ 926,427 $ 970,624
------------------------- ------------------------- LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and
accrued liabilities $ 47,188 $ 40,362 Long-term obligations due
within one year 2,470 2,668 ------------------------- 49,658 43,030
Long-term obligations (note 2) 119,287 126,386 Shareholders' equity
(note 3): Capital stock 325,515 321,601 Convertible notes 178,543
178,543 Contributed surplus 4,636 4,636 Retained earnings 256,408
264,016 Equity adjustment from foreign currency translation (7,620)
32,412 ------------------------- 757,482 801,208
------------------------- $ 926,427 $ 970,624
------------------------- ------------------------- See
accompanying notes to consolidated financial statements. FOUR
SEASONS HOTELS INC. CONSOLIDATED STATEMENTS OF CASH PROVIDED BY
OPERATIONS (Unaudited) Three months ended Nine months ended (In
thousands of September 30, September 30, dollars) 2003 2002 2003
2002
-------------------------------------------------------------------------
Cash provided by (used in) operations: MANAGEMENT OPERATIONS
Earnings before other operating items $ 19,021 $ 15,469 $ 59,108 $
60,386 Items not requiring an outlay of funds 271 329 852 1,073
--------------------------------------------------- Working capital
provided by Management Operations 19,292 15,798 59,960 61,459
--------------------------------------------------- OWNERSHIP
OPERATIONS Loss before other operating items (9,247) (6,609)
(27,813) (14,964)
--------------------------------------------------- 10,045 9,189
32,147 46,495 Interest received, net 2,817 2,011 8,085 9,737
Current income tax paid - (1,482) - (10,374) Change in non-cash
working capital (3,012) 6,955 12,370 (11,296) Other (2,698) 1,645
(8,480) (2,366) ---------------------------------------------------
Cash provided by operations $ 7,152 $ 18,318 $ 44,122 $ 32,196
---------------------------------------------------
--------------------------------------------------- See
accompanying notes to consolidated financial statements. FOUR
SEASONS HOTELS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three months ended Nine months ended (In thousands of
September 30, September 30, dollars) 2003 2002 2003 2002
-------------------------------------------------------------------------
Cash provided by (used in): Operations: $ 7,152 $ 18,318 $ 44,122 $
32,196 ---------------------------------------------------
Financing: Long-term obligations including current portion (34)
(146) (64) (945) Issuance of shares 2,408 561 3,914 5,448
Repurchase of shares - (8,754) - (8,754) Dividends paid (1,813)
(1,824) (3,622) (3,639)
--------------------------------------------------- Cash provided
by (used in) financing 561 (10,163) 228 (7,890)
--------------------------------------------------- Capital
investments: Long-term receivables 2,605 (14,926) (9,446) (23,077)
Hotel investments (1,493) (3,803) (7,902) (5,485) Disposal of hotel
investments 1,529 (640) 1,529 4,815 Purchase of fixed assets (124)
(3,554) (5,400) (9,284) Investments in trademarks, trade names and
management contracts (924) 840 (1,580) (1,359) Other assets (1,370)
(1,884) (4,860) (7,977)
--------------------------------------------------- Cash provided
by (used in) capital investments 223 (23,967) (27,659) (42,367)
--------------------------------------------------- Increase
(decrease) in cash and cash equivalents 7,936 (15,812) 16,691
(18,061) Increase (decrease) in cash due to unrealized foreign
exchange gain (loss) 530 1,426 (20,323) 575 Cash and cash
equivalents, beginning of period 152,938 207,321 165,036 210,421
--------------------------------------------------- Cash and cash
equivalents, end of period $ 161,404 $ 192,935 $ 161,404 $ 192,935
---------------------------------------------------
--------------------------------------------------- See
accompanying notes to consolidated financial statements. FOUR
SEASONS HOTELS INC. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Unaudited) Nine months ended (In thousands of September 30,
dollars) 2003 2002
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 264,016 $ 259,253 Net
earnings (loss) (5,795) 13,594 Dividends declared (1,813) (1,824)
Repurchase of shares - (12,835) ------------------------- Retained
earnings, end of period $ 256,408 $ 258,188
------------------------- ------------------------- See
accompanying notes to consolidated financial statements. FOUR
SEASONS HOTELS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (In thousands of dollars except per share amounts)
-------------------------------------------------------------------------
These interim consolidated financial statements do not include all
disclosures required by Canadian generally accepted accounting
principles for annual financial statements and should be read in
conjunction with the Company's annual consolidated financial
statements for the year ended December 31, 2002. 1. Significant
accounting policies: The significant accounting policies used in
preparing these interim consolidated financial statements are
consistent with those used in preparing the Company's annual
consolidated financial statements for the year ended December 31,
2002. 2. Bank credit facilities: In 2003, the Company increased
availability under its committed bank credit facilities by
US$12,500, and now has facilities of US$212,500, of which
US$112,500 expires in April 2004 and US$100,000 expires in July
2004. No amounts have been borrowed under these facilities to date;
however, US$39,300 in letters of credit were issued but undrawn as
at September 30, 2003. 3. Shareholders' equity: As at September 30,
2003, the Company has outstanding Variable Multiple Voting Shares
("VMVS") and Limited Voting Shares ("LVS") of 35,090,504 and
outstanding stock options of 5,953,345 (weighted average exercise
price of $53.14). 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: (Unaudited) (In thousands of Three months ended
September 30, dollars) 2003 2002
-------------------------------------------------------------------------
Net earnings Shares Net loss Shares
-------------------------------------------------------------------------
Basic earnings (loss) per share: Net earnings (loss) $ 4,748
35,039,104 $ (12,252) 35,158,001 Effect of assumed dilutive
conversions: Stock option plan - 1,672,051 - -(x)
-------------------------------------------------------------------------
Dilutive earnings (loss) per share: Net earnings (loss) and assumed
dilutive conversions $ 4,748 36,711,155 $ (12,252) 35,158,001
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Unaudited) (In thousands of Nine months ended September 30,
dollars) 2003 2002
-------------------------------------------------------------------------
Net Net loss Shares earnings Shares
-------------------------------------------------------------------------
Basic earnings (loss) per share: Net earnings (loss) $ (5,795)
34,945,812 $ 13,594 35,112,356 Effect of assumed dilutive
conversions: Stock option plan - -(x) - 1,467,630
-------------------------------------------------------------------------
Dilutive earnings (loss) per share: Net earnings (loss) and assumed
dilutive conversions $ (5,795) 34,945,812 $ 13,594 36,579,986
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(x) The effect of assumed conversions to LVS under the Company's
stock option plan was anti-dilutive and was therefore excluded from
the calculation of diluted loss per share. 4. Consolidated
revenues: Consolidated revenues for Four Seasons Hotels Inc.
comprise revenues from Management Operations, revenues from
Ownership Operations and distributions from hotel investments, less
fees from Ownership Operations to Management Operations. 5. Other
expense, net: Included in other expense, net for the three months
and nine months ended September 30, 2003 is a net foreign exchange
gain of $323 and a net foreign exchange loss of $17,179,
respectively (2002 - net foreign exchange gain of $2,092 and
$4,526, 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 the Company's foreign self-sustaining subsidiaries. Also
included in other expense, net for the three months and nine months
ended September 30, 2003 are legal and enforcement costs of $1,180
and $8,680, respectively, in connection with the disputes with the
owners of Four Seasons hotels in Caracas and Seattle. These
disputes are described in detail in the Company's 2002 Annual
Report. Other expense, net for the three months and nine months
ended September 30, 2002 also included an asset impairment charge
and legal and enforcement costs of $23,307 related to the Company's
investments in Four Seasons Hotel Caracas, Four Seasons Hotel
Sydney and Four Seasons Olympic Hotel Seattle. 6. Stock-based
compensation and other stock-based payments: For the three months
and nine months ended September 30, 2003, had compensation expense
for the Company's stock-based compensation plan been determined
based on the fair value at the grant dates for stock options issued
under the plan, pro forma net earnings would have been $3,524 and
pro forma net loss would have been $8,903, respectively (2002 - pro
forma net loss of $12,988 and pro forma net earnings of $12,636,
respectively), pro forma basic earnings per share would have been
$0.10 and pro forma basic loss per share would have been $0.25,
respectively (2002 - pro forma basic loss per share of $0.37 and
pro forma basic earnings per share of $0.36, respectively), and pro
forma diluted earnings per share would have been $0.10 and pro
forma diluted loss per share would have been $0.25, respectively
(2002 - pro forma diluted loss per share of $0.37 and pro forma
diluted earnings per share of $0.35, respectively). In accordance
with Canadian generally accepted accounting principles, in
calculating the pro forma disclosures, only stock options granted
after December 31, 2001 were included in the fair value-based
accounting method. The compensation element of stock options issued
by the Company during the first nine months of 2003 and 2002, based
on the fair value of the options on the date of grant, has been
estimated using a Black-Scholes option pricing model with the
following assumptions: risk-free interest rates in 2003 ranging
from 4.44% to 5.02% (2002 - 4.01% to 5.20%); semi-annual dividend
per Limited Voting Share of $0.055 for both periods; volatility
factors of the expected market price of the Company's Limited
Voting Shares in 2003 of 32% (2002 - 47.4% to 49.8%); 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 during the nine months ended
September 30, 2003 and 2002, the weighted average fair value of
options at the grant date was $27.09 and $34.92, respectively. For
purposes of pro forma disclosures, the estimated fair value of the
options is amortized to compensation expense over the option's
vesting period, which ranges from one to five years. 7. Guarantees
and indemnifications: In February 2003, the Canadian Institute of
Chartered Accountants issued Accounting Guideline No. 14,
"Disclosure of Guarantees" ("AcG-14"), that requires a company to
disclose certain "guarantees" as defined in AcG-14. Other than the
commitments and contingencies discussed in the Company's annual
consolidated financial statements for the year ended December 31,
2002 (please refer to note 14 thereof) and the indemnifications
discussed below, the Company is not aware of any other "guarantees"
pursuant to which it may be required to pay any material amounts,
and accordingly no amounts have been recorded in the consolidated
financial statements in respect thereof. The Company's assessment
of its potential liability could change in the future as a result
of currently unforseen circumstances. In the ordinary course of
their business, the Company and its subsidiaries enter into
agreements. Certain of these agreements may contain indemnification
provisions pursuant to which the parties agree to indemnify one
another if certain events occur (such as future claims for certain
liabilities, including those related to tax or environmental
matters). The terms of these indemnification provisions vary in
their scope and duration. The nature of these indemnification
provisions precludes the Company from making a reasonable estimate
of the maximum potential liability of the Company and its
subsidiaries because, among other things, the amounts would be
dependent on the outcome of future, contingent events, the nature
and likelihood of which cannot be determined at this time. No
amount has been recorded in the consolidated financial statements
with respect to these indemnification provisions. 8. Seasonality:
The Company's hotels and resorts are affected by normally recurring
seasonal patterns and, for most of the properties, demand is lower
in December through March than during the remainder of the year.
Typically, the fourth quarter is the strongest quarter for the
majority of the properties, although this was not true in 2002 as a
result of the difficult economic environment and geopolitical
instability. The Company's ownership operations are particularly
affected by seasonal fluctuations, with lower revenue, operating
profit and cash flow in the first quarter. As a result, ownership
operations typically incur an operating loss in the first quarter
of each year. Management operations are also impacted by seasonal
patterns, 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. However, this negative impact on management revenues is
offset, to some degree, by increased travel to the Company's
resorts in the period. FOUR SEASONS HOTELS INC. SUMMARY OF HOTEL
OPERATING DATA - CORE HOTELS(1) Three months ended September 30,
(Unaudited) 2003 2002 Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 48 48 - No. of Rooms 12,870 12,870 -
Occupancy(2) 64.6% 63.2% 1.4% ADR(3) - in US dollars $291 $281 3.5%
- in equivalent Canadian dollars $401 $439 (8.7%) RevPAR(4) - in US
dollars $188 $178 5.8% - in equivalent Canadian dollars $259 $278
(6.7%) Gross operating margin(5) 24.7% 25.6% (0.9%) United States
No. of Properties 22 22 - No. of Rooms 6,798 6,798 - Occupancy(2)
68.7% 64.0% 4.7% ADR(3) - in US dollars $320 $311 3.1% - in
equivalent Canadian dollars $442 $486 (9.0%) RevPAR(4) - in US
dollars $220 $199 10.6% - in equivalent Canadian dollars $304 $311
(2.4%) Gross operating margin(5) 22.4% 21.8% 0.6% Other
Americas/Caribbean No. of Properties 7 7 - No. of Rooms 1,550 1,550
- Occupancy(2) 60.0% 63.6% (3.6%) ADR(3) - in US dollars $223 $215
3.9% - in equivalent Canadian dollars $308 $336 (8.3%) RevPAR(4) -
in US dollars $134 $137 (1.9%) - in equivalent Canadian dollars
$185 $214 (13.5%) Gross operating margin(5) 19.7% 23.0% (3.3%)
Europe/Middle East No. of Properties 9 9 - No. of Rooms 1,807 1,807
- Occupancy(2) 60.9% 59.5% 1.4% ADR(3) - in US dollars $428 $411
4.0% - in equivalent Canadian dollars $590 $643 (8.2%) RevPAR(4) -
in US dollars $260 $245 6.4% - in equivalent Canadian dollars $359
$383 (6.1%) Gross operating margin(5) 34.7% 37.3% (2.6%)
Asia/Pacific No. of Properties 10 10 - No. of Rooms 2,715 2,715 -
Occupancy(2) 59.6% 63.5% (3.9%) ADR(3) - in US dollars $151 $163
(7.0%) - in equivalent Canadian dollars $209 $254 (17.9%) RevPAR(4)
- in US dollars $90 $103 (12.7%) - in equivalent Canadian dollars
$124 $162 (23.0%) Gross operating margin(5) 26.3% 30.4% (4.1%)
----------------------------------- 1. The term "Core Hotels" means
hotels and resorts under management for the full year of both 2003
and 2002. Changes from the 2002/2001 Core Hotels are the additions
of Four Seasons Hotel San Francisco, Four Seasons Hotel Dublin,
Four Seasons Hotel Buenos Aires and Four Seasons Resort Carmelo,
and the deletion of Four Seasons Olympic Hotel Seattle. 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. RevPAR 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. The Company reports 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) 2003 2002 Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 48 48 - No. of Rooms 12,870 12,870 -
Occupancy(2) 61.6% 64.8% (3.2%) ADR(3) - in US dollars $302 $290
4.0% - in equivalent Canadian dollars $431 $455 (5.3%) RevPAR(4) -
in US dollars $186 $188 (1.2%) - in equivalent Canadian dollars
$265 $295 (10.0%) Gross operating margin(5) 25.9% 29.9% (4.0%)
United States No. of Properties 22 22 - No. of Rooms 6,798 6,798 -
Occupancy(2) 67.9% 67.3% 0.6% ADR(3) - in US dollars $327 $325 0.9%
- in equivalent Canadian dollars $468 $509 (8.2%) RevPAR(4) - in US
dollars $222 $219 1.8% - in equivalent Canadian dollars $318 $343
(7.3%) Gross operating margin(5) 24.7% 27.8% (3.1%) Other
Americas/Caribbean No. of Properties 7 7 - No. of Rooms 1,550 1,550
- Occupancy(2) 55.0% 60.6% (5.6%) ADR(3) - in US dollars $267 $258
3.8% - in equivalent Canadian dollars $382 $404 (5.5%) RevPAR(4) -
in US dollars $147 $156 (5.9%) - in equivalent Canadian dollars
$210 $245 (14.3%) Gross operating margin(5) 25.5% 29.4% (3.9%)
Europe/Middle East No. of Properties 9 9 - No. of Rooms 1,807 1,807
- Occupancy(2) 55.3% 59.5% (4.2%) ADR(3) - in US dollars $421 $378
11.4% - in equivalent Canadian dollars $601 $592 1.5% RevPAR(4) -
in US dollars $233 $225 3.6% - in equivalent Canadian dollars $332
$352 (5.7%) Gross operating margin(5) 31.5% 36.1% (4.6%)
Asia/Pacific No. of Properties 10 10 - No. of Rooms 2,715 2,715 -
Occupancy(2) 53.5% 64.5% (11.0%) ADR(3) - in US dollars $158 $164
(3.4%) - in equivalent Canadian dollars $226 $257 (12.0%) RevPAR(4)
- in US dollars $85 $106 (19.8%) - in equivalent Canadian dollars
$121 $165 (27.0%) Gross operating margin(5) 25.0% 33.2% (8.2%)
------------------------------------ 1. The term "Core Hotels"
means hotels and resorts under management for the full year of both
2003 and 2002. Changes from the 2002/2001 Core Hotels are the
additions of Four Seasons Hotel San Francisco, Four Seasons Hotel
Dublin, Four Seasons Hotel Buenos Aires and Four Seasons Resort
Carmelo, and the deletion of Four Seasons Olympic Hotel Seattle. 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. RevPAR 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. The Company reports 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) 2003 2002 Variance
-------------------------------------------------------------------------
Worldwide No. of Properties 57(1) 55 2 No. of Rooms 15,232(1)
15,181 51 United States No. of Properties 22(1) 23 (1) No. of Rooms
6,798(1) 7,248 (450) Other Americas/Caribbean No. of Properties 8 8
0 No. of Rooms 1,762 1,762 0 Europe/Middle East No. of Properties
13 11 2 No. of Rooms 2,553 2,109 444 Asia/Pacific No. of Properties
14 13 1 No. of Rooms 4,119 4,062 57
------------------------------------ 1. Since September 30, 2003,
the Company has commenced management of Four Seasons Hotel Miami,
which has 221 rooms and is not reflected in this table. FOUR
SEASONS HOTELS INC. REVENUES UNDER MANAGEMENT - ALL MANAGED HOTELS
(Unaudited) Three months ended Nine months ended (In thousands of
September 30, September 30, dollars) 2003 2002 2003 2002
-------------------------------------------------------------------------
Revenues under management(1) $ 617,404 $ 654,166 $1,908,544
$2,092,585 ---------------------------------------------------
---------------------------------------------------
------------------------------------ 1. Revenues under management
consist of rooms, food and beverage, telephone and other revenues
of all the hotels and resorts which the Company manages.
Approximately 69% of the fee revenues earned by the Company were
calculated as a percentage of the total revenues under management
of all hotels and resorts. FOUR SEASONS HOTELS INC. SCHEDULED
OPENING OF PROPERTIES UNDER CONSTRUCTION OR IN ADVANCED STAGES OF
DEVELOPMENT Hotel/Resort/Residence Club and Location(1)(2)
Approximate Number of Rooms Scheduled 2003/2004 Openings
---------------------------- Four Seasons Hotel Gresham Palace
Budapest, Hungary 179 Four Seasons Hotel Nile Plaza, Cairo,
Egypt(x) 374 Four Seasons Resort Costa Rica, Costa Rica(x) 153 Four
Seasons Hotel Damascus, Syria(x) 303 Four Seasons Hotel Doha,
Qatar(x) 235 Four Seasons Resort Great Exuma at Emerald Bay, The
Bahamas(x) 219 Four Seasons Hotel Hampshire, England 135 Four
Seasons Resort Jackson Hole, WY, USA(x) 124 Four Seasons Resort
Langkawi, Malaysia 91 Four Seasons Resort Provence at Terre
Blanche, France 115 Four Seasons Resort Whistler, B.C., Canada 271
Beyond 2004 ----------- Four Seasons Hotel Alexandria, Egypt(x) 123
Four Seasons Hotel Baltimore, MD, USA(x) 200 Four Seasons Hotel
Beirut, Lebanon 234 Four Seasons Resort Bora Bora, French Polynesia
100 Four Seasons Hotel Florence, Italy 118 Four Seasons Hotel
Geneva, Switzerland 110 Four Seasons Hotel Hong Kong, Hong Kong(x)
390 Four Seasons Hotel Istanbul at the Bosphorus, Turkey 170 Four
Seasons Hotel Kuwait City, Kuwait 225 Four Seasons Hotel Mumbai,
India 200 Four Seasons Hotel Palo Alto, CA, USA 200 Four Seasons
Resort Puerto Rico, Puerto Rico(x) 250 Four Seasons Residence Club
Punta Mita, Mexico(x) 35 Four Seasons Private Residences Whistler,
B.C., Canada(x) 35 (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 the Company's Annual
Report. 2. The Company has made investments in Orlando and Sedona
at Seven Canyons in Arizona. The financing for these projects has
not yet been completed and therefore scheduled opening dates cannot
be established at this time. DATASOURCE: Four Seasons Hotels and
Resorts CONTACT: Douglas L. Ludwig, Chief Financial Officer and
Executive Vice President, (416) 441-4320; Barbara Henderson, Vice
President, Taxation and Investor Relations, (416) 441-4329
Copyright