Press Release: Four Seasons Hotels Inc.
August 5, 2002
TORONTO -- Four Seasons Hotels Inc. (TSX Symbol "FSH"; NYSE Symbol "FS") Friday reported its
results for the second quarter ended June 30, 2002. Net earnings decreased 35.7% to $18.1 million ($0.52 basic
earnings per share and $0.48 diluted earnings per share) for the three months ended June 30, 2002, as compared
to $28.2 million ($0.80 basic earnings per share and $0.72 diluted earnings per share) for the comparable period
in 2001.
For the six months ended June 30, 2002, net earnings decreased 42.8% to $25.8 million ($0.74 basic earnings per
share and $0.70 diluted earnings per share), as compared to $45.2 million ($1.29 basic earnings per share and $1.17
diluted earnings per share) for the comparable period in 2001.
"Our results, as expected, continue to reflect a slowdown in the lodging industry globally and, more specifically,
the continued weakness in corporate travel demand. In this challenging environment we are continuing to follow
our established business model and we are doing this profitably. We believe this strategy positions us well for
the expected economic recovery and the period leading up to that recovery," said Isadore Sharp, Chairman and
Chief Executive Officer. "We are introducing more Four Seasons properties to new key markets, enhancing our
ability to attract business to our new and existing properties and continuing to deliver the unparalleled service
our customers expect."
OPERATING RESULTS
During the quarter, those markets that are more dependent upon business travel continued to underperform relative
to other markets in which the Company operates. In addition, certain of the US city centre hotels experienced reduced
Middle Eastern travel demand. However, overall leisure travel demand remained relatively strong, a trend reflected
in the RevPAR results of the majority of the Company's resorts, with the exception of the Company's two resorts
in Bali, which were affected by reduced travel to Indonesia. Generally business travel within Europe was not as
weak as that experienced in the US, and hotels such as Paris and Milan (that typically have a balance of business
and leisure travel) realized RevPAR improvements during the second quarter.
"Although certain of the hotels, including Paris and Milan, and the majority of the resorts under Four Seasons
management are experiencing strong demand levels, the majority of our city centre hotels, particularly within the
US, continue to operate in a challenging environment," said Wolf Hengst, President Worldwide Hotel Operations.
"Booking windows have stayed relatively short, making it difficult to forecast demand levels. As a result,
we remain cautious in our outlook for the remainder of 2002."
RevPAR(1), on a US dollar basis, for worldwide Core Hotels(2) decreased 5.8% during the second quarter of 2002,
as compared to the same period in 2001. This decline was consistent with the Company's expectation of a 4% to 6%
decline for the quarter. The RevPAR decline was attributable primarily to lower occupancy levels and a 2.6% decline
in average daily room rate during the second quarter of 2002, as compared to the same period in 2001. The decline
in average daily room rate was a result of a change in sales mix, with fewer suites and deluxe rooms being sold
in the quarter, combined with a greater proportion of negotiated rate volume business. The Company is continuing
its strategy of maintaining the high level of product and services it has consistently provided to its customers
without compromising room rates within a category. This strategy should allow the Company to maintain its industry-leading
service reputation and average daily room rates in the near term and set the stage for improved RevPAR results
as demand strengthens and as corporate business travel returns to more normal levels.
Worldwide Core Hotels gross operating margin(3) declined 2.3 percentage points from 36.6% in the second quarter
of 2001 to 34.3% in the second quarter of 2002. The decline in gross operating margin was attributable, in part,
to the contraction of hotel revenue, but was also influenced by increases in insurance, energy and employee benefit
costs.
For the first six months of 2002, RevPAR, on a US dollar basis, for worldwide Core Hotels decreased 8.9% and the
gross operating margin declined 2.8 percentage points from 35.6% to 32.8%, as compared to the same period in 2001.
During the second quarter of 2002, RevPAR for US Core Hotels, on a US dollar basis, decreased 7.7% and the gross
operating margin declined 2.8 percentage points to 33% from 35.8%, as compared to the same period in 2001. New
York and Boston continued to be among the most difficult markets as a result of reduced levels of business travel.
For the first six months of 2002, RevPAR for US Core Hotels, on a US dollar basis, decreased 10.2%, and the gross
operating margin declined 3.5 percentage points to 30.8% from 34.3%, as compared to the same period in 2001.
In the second quarter of 2002, RevPAR for Canada/Mexico/Caribbean Core Hotels, on a US dollar basis, decreased
by 5.4% and the gross operating margin declined 2.2 percentage points from 35.4% to 33.2%, as compared to the same
quarter in 2001. For the first six months of 2002, Canada/Mexico/Caribbean Core Hotels experienced a decrease in
RevPAR, on a US dollar basis, of 8.5% and the gross operating margin declined 3.4 percentage points from 38.2%
to 34.8%, as compared to the same period in 2001.
RevPAR for the Europe/Middle East Core Hotels, on a US dollar basis, was essentially flat and the gross operating
margin declined 1 percentage point from 41.4% to 40.4% in the second quarter of 2002, as compared to the same period
in 2001. During the quarter there was a divergence of operating performance within the Europe/Middle East Core
Hotels. Four Seasons hotels in Paris and Milan both experienced occupancy levels in excess of 80% as a result of
strong demand from both leisure and business travelers. Four Seasons hotels in Cairo and Istanbul experienced occupancy
declines of over 15% as a result of generally weak travel demand in those markets.
For the six months ended June 30, 2002, RevPAR for the Europe/Middle East Core Hotels, on a US dollar basis, decreased
3.9% and the gross operating margin improved from 38.0% to 38.2%, as compared to the same period in 2001. The Europe/Middle
East Core Hotels experienced a decrease in RevPAR of 5.1%, on a local currency basis, for the second quarter of
2002, as compared to the same period in 2001. On a local currency basis, RevPAR for Europe/Middle East Core Hotels
decreased 4.7% during the first half of 2002, as compared to the same period in 2001.
For the second quarter of 2002, RevPAR for the Asia/Pacific Core Hotels, on a US dollar basis, decreased 2.2% and
the gross operating margin declined 2.1 percentage points from 37.4% to 35.3%, as compared to the second quarter
of 2001. The Company's properties under management in Tokyo, Sydney and Bangkok performed well relative to other
Four Seasons hotels in the region during the quarter. The hotels and resorts in Singapore and Bali experienced
RevPAR declines in excess of 15% as a result of weak travel demand, particularly from the US.
RevPAR for the Asia/Pacific Core Hotels decreased by 7.9%, on a US dollar basis, for the first six months of 2002,
as compared to the same period in 2001, and the gross operating margin declined 2.1 percentage points from 37.7%
to 35.6%, on a US dollar basis. The Asia/Pacific Core Hotels experienced a RevPAR decrease of 5.9%, on a local
currency basis, during the second quarter of 2002, as compared to the same period in 2001. On a local currency
basis, RevPAR for the Asia/Pacific Core Hotels decreased 8% in the first six months of 2002, as compared to the
same period in 2001.
The Company's worldwide resort portfolio experienced a US dollar RevPAR decline of 3.3% in the second quarter of
2002, as compared to the same period in 2001. Resort occupancies declined on average by 2.9 occupancy points to
72.4%, while the average daily room rate of US$387 was essentially flat, as compared to the second quarter of 2001.
For the six months ended June 30, 2002, the Company's resort portfolio experienced a US dollar RevPAR decline of
4.2%, as compared to the same period in 2001, as occupancies declined on average by 3 percentage points and the
average daily room rate was essentially flat at US$424, as compared to the same period in 2001.
MANAGEMENT OPERATIONS
Management fee revenues decreased 18.2% to $39.9 million for the quarter ended June 30, 2002, and decreased 19.6%
to $75.9 million for the six months ended June 30, 2002, as compared to the same periods in 2001. As expected,
RevPAR declined on a worldwide basis, which reduced profitability of the hotels under management and negatively
affected the Company's profit-based incentive fees during the second quarter of 2002, as compared to the second
quarter of 2001. Incentive fees declined by 35% during the quarter, which represented $3.9 million of the fee decline
experienced during the second quarter of 2002. Reduced incentive fees caused by lower profitability of the hotels
under management accounted for $6.8 million of the fee decline during the first six months of 2002.
A portion of the decline in fee revenues was caused by the Company ceasing to manage The Regent Hong Kong on June
1, 2001. During the second quarter of 2001, the fee revenues from The Regent Hong Kong were $926,000. The decline
in fee revenues was also attributable, in part, to a reduction in fees received from Four Seasons residential projects.
The sales of residential projects were negatively affected by lower demand levels caused by the weakening economic
conditions in the United States, although average achieved selling prices of the units increased by 36% in the
second quarter of 2002, as compared to the second quarter of 2001.
As a result of these reductions in fee revenues and to increases in general and administrative costs, which were
in line with inflation, Four Seasons' management earnings, before other operating items, for the second quarter
of 2002 decreased 28.2% to $24 million, as compared to $33.5 million in the second quarter of 2001. Management
earnings before other operating items for the six months ended June 30, 2002 were $44.9 million, a 28.8% decrease
as compared to $63.1 million for the same period in 2001.
The management operations profit margin (4) for the quarter ended June 30, 2002 declined to 60.1%, as compared
to 68.5% for the same period in 2001, and was 59.2% for the six months ended June 30, 2002, as compared to 66.8%
for the same period in 2001. On a full year basis, the Company expects the profit margin on its management business
to be comparable to the 59.3% profit margin achieved for the full year of 2001.
OWNERSHIP OPERATIONS (5)
Ownership operations losses, before other operating items, were $249,000 in the second quarter of 2002, as compared
to earnings of $721,000 in the second quarter of 2001. The weaker economic conditions in New York continued to
negatively affect the Company's ownership interest in The Pierre. The Pierre's RevPAR declined by 18.9% during
the second quarter of 2002, as compared to the second quarter of 2001, which resulted in a reduction of operating
earnings at this hotel.
Ownership operations losses, before other operating items, for the first six months of 2002 were $8.4 million,
as compared to losses of $4.4 million for the comparable period in 2001. The Pierre accounted for a substantial
portion of this decline year over year, reflecting the particularly difficult conditions in the New York market.
OTHER INCOME/EXPENSE
Other income, net for the second quarter was $2.8 million compared to $3.4 million for the same period in 2001.
The Company realized a net foreign exchange accounting gain in the second quarter of 2002 of $3.6 million, as compared
to a $1.5 million loss in the second quarter of 2001. The Company attempts to minimize the impact of fluctuations
in foreign currencies through the use of foreign exchange forward contracts. The gain in the second quarter of
2002 was the result of a significant strengthening of various currencies against the Canadian and US dollar, relating
primarily to the Company's working capital position and other monetary assets. In light of the unusual volatility
in foreign currencies experienced during the quarter, the Company increased the proportion of its working capital
and other monetary assets that are hedged.
During the second quarter of 2001 the Company recognized a $4.7 million gain relating to the reversal of provisions
in connection with its investment in Four Seasons Hotel Prague, the sale of which closed in the third quarter of
2001.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense for the second quarter of 2002 was $3.6 million and $7.1 million for the
six months ended June 30, 2002, as compared to $3.7 million and $7.7 million respectively, for the same periods
in 2001. The decrease in depreciation and amortization expense was primarily attributable to a change in the accounting
standard relating to goodwill and other intangible assets that became effective January 1, 2002 and is discussed
in note 1(a) to the second quarter consolidated financial statements. This decrease was partially offset by additional
depreciation and amortization expense on new management contracts. If the new accounting standard had been in place
during the second quarter of 2001, net earnings would have reflected an improvement of $729,000 ($0.03 basic earnings
per share or $0.02 diluted earnings per share), as compared to the same period in 2001, due to lower amortization
expense. Similarly, for the six month period ended June 30, 2001, net earnings would have reflected an improvement
of $1.5 million ($0.05 basic earnings per share or $0.03 diluted earnings per share), as compared to the same period
in 2001, as a result of lower amortization expense (see reconciliation in note 1(a) to the second quarter consolidated
financial statements).
NET INTEREST INCOME
Net interest income for the quarter ended June 30, 2002 was $956,000, as compared to net interest income of $3.3
million for the same period in 2001, primarily due to lower interest rates earned on short-term cash deposits,
offset by reduced interest expense resulting from the redemption of $100 million principal amount of unsecured
debentures in November 2001. In addition, higher interest income was realized in the second quarter of 2001 from
interest on receivables relating to the Prague and Scottsdale properties, which were subsequently repaid in 2001.
For the six months ended June 30, 2002, net interest income was $3 million, as compared to net interest income
of $4.8 million for the same period in 2001.
INCOME TAX EXPENSE
The Company's effective tax rate in both the second quarter and the first six months ended June 30 of 2002 and
the comparable periods in 2001 was 24%.
BALANCE SHEET
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. The loans or investments will only be made where the overall economic
return to Four Seasons justifies the investment. As a part of its ongoing balance sheet evaluation, the Company
has reviewed each investment and has determined that the book value of none of these loans or investments is impaired
as at June 30, 2002.
The Company is, however, currently in a dispute with 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 on a US$5 million
loan owed to the Company that is secured by a second mortgage and that is registered against the hotel. Formal
notice of the default has been given to the owner. The dispute has been referred to arbitration and the Company
currently has no reason to believe that its loan is not appropriately secured, provided due process of law is respected.
Due to the ongoing financial difficulties of the owner of the Caracas hotel and the resulting working capital deficiencies
at the hotel, Four Seasons Hotel Caracas ceased taking guest reservations as at June 12, 2002. The Company is pursuing
all available remedies with the objective of protecting its management rights and its loan and allowing the hotel
to resume its operations on a sound financial basis. The Company's total balance sheet exposure to the Caracas
property is $10.9 million.
Cash and cash equivalents continue to be the single largest asset on the Company's balance sheet. The Company's
cash and cash equivalents were $207.3 million as at June 30, 2002, as compared to $210.4 million as at December
31, 2001.
Long-term obligations were $119.4 million as at June 30, 2002 and December 31, 2001. The Company's debt position
consists primarily of its zero coupon convertible debt that matures in 2029 and that is redeemable by the Company
at any time after September 2004 (the terms and conditions of the convertible notes are more fully described in
the Company's 2001 Annual Report).
The Company has investment grade ratings from each of the bond rating agencies that cover the Company. Recently,
Moody's confirmed its investment grade rating and changed its outlook for the Company from "negative"
to "stable". Moody's has indicated that the improvement in the outlook was due to Four Seasons' rebound
from the initial negative impact of the events of September 11th in line with overall industry trends, the reduction
in debt levels and Moody's expectation that the Company is unlikely to face any material impairment with respect
to its on or off-balance sheet hotel-related receivables or investments.
CASH FLOW
The Company generated $6.2 million of cash from operations in the second quarter of 2002 and $13.9 million during
the six months ended June 30, 2002, as compared to $27.6 million and $58.6 million, respectively, for the same
periods in 2001. During the quarter, the Company funded $6.8 million in new management opportunities. The Company
expects total capital spending and dividends in 2002 to be approximately the same as in 2001 (approximately $73.2
million). During the remainder of 2002, the Company expects to make investments in a number of Four Seasons projects,
including Sedona, Jackson Hole, Costa Rica and Sao Paulo.
LEASE AND CONTINGENT COMMITMENTS
As discussed in the Company's 2001 Annual Report, the Company has certain lease and contingent commitments. There
has been no material change to these commitments through the first six months of 2002 and the Company does not
anticipate any material change in respect of these commitments over the remainder of this fiscal year.
CURRENT OPERATING OUTLOOK
The Company expects that the remainder of the year will continue to be challenging due to the ongoing weakness
in corporate travel demand, which continues to negatively affect a number of the Company's key properties. The
recent, significant declines and ongoing volatility in global equity markets are also expected to impede the recovery
of the global economy and corporate profits generally. The uncertainty regarding the timing and extent of recovery
makes it particularly difficult at this time to develop forward-looking information about which one can be confident.
In the current environment, the Company has revised its estimates to reduce the RevPAR and net earnings expectations
over the remainder of the year. On a full-year basis, the Company expects its average daily room rates for 2002
to be comparable with both 2000 and 2001.
Based on these revised assumptions, the Company expects fee revenues on a full year basis to be approximately the
same as those achieved in 2001, as compared to our initial expectation that fee revenues would increase by 5% in
2002. General and administrative expenses are expected to continue to remain generally unchanged compared to 2001
on a full year basis. Accordingly, the Company expects that the management operations profit margin for the full
year 2002 also will remain comparable to the 2001 profit margin of 59.3%.
The continued weak global economic conditions, combined with delays in the start of construction of the Four Seasons
Residence Club Sedona at Seven Canyons, also are expected to result in the fees from the Company's residential
business being $7.4 million below the Company's business plan expectations for 2002.
With the weak economic conditions experienced through June 30, 2002 in New York and their impact on The Pierre,
the Company expects ownership operations losses for the full year 2002 to be approximately $11.5 million, which
is approximately $3 million greater than was anticipated at the beginning of this year.
Accordingly, the Company is revising downwards its expected full year diluted earnings per share guidance to $1.47
to $1.57 from $1.72 to $1.76.
The following table provides updated quarterly earnings guidance for the remainder of 2002:
Change in Worldwide RevPAR Diluted
versus prior year Earnings Per Share
-------------------------------------------------------------------------
First Quarter (Actual) (12%) $0.21
Second Quarter (Actual) (5.8%) $0.48
Third Quarter (Estimate) 2% to 3% $0.24 - $0.28
Fourth Quarter (Estimate) 15% to 17% $0.54 - $0.60
Full Year of 2002 (Estimate) flat to (3%) $1.47 - $1.57
During the quarter, the owner of the Four Seasons Olympic Hotel Seattle began marketing the hotel for sale. The
owner is asserting that the hotel can be sold without the Company's management agreement. The Company strongly
disagrees with the owner's assertion and does not believe the hotel can be sold unencumbered by the Company's management.
The Regent Hotel Jakarta has been closed since February 2002 as a result of damage from extensive flooding. The
timing on the re-opening of the hotel is uncertain pending resolution of discussions with the insurer regarding
the expenses relating to the repairs and interruption of business of the hotel.
For the year ended December 31, 2001, the management fees from Four Seasons Olympic Hotel Seattle and The Regent
Hotel Jakarta represented less than 2.5% of total fee revenues for that year. For the six months ended June 30,
2002, the management fees from Four Seasons Olympic Hotel Seattle and The Regent Hotel Jakarta represented approximately
1.6% of total fee revenues for that period.
NEW UNIT GROWTH
Four Seasons is continuing to expand its international presence with several new projects. To date in 2002, new
Four Seasons properties have opened in Shanghai and Sharm el Sheikh. Later this year, the Company expects to open
Four Seasons hotels in Amman, Riyadh and Tokyo at Marunouchi. Looking out over the next 24 months, the Company
expects to open new Four Seasons hotels and resorts in Budapest, Hampshire, England, Istanbul at the Bosphorus,
Jackson Hole, Exuma and Miami. A full list of the Company's properties under construction or advanced development
is provided in a schedule attached to this press release.
"We continue to expect the pace of openings of our hotels and resorts over the next two years to be very strong,
and are continuing to have the opportunity to consider a number of very exciting new projects," said Kathleen
Taylor, President Worldwide Business Operations. "We continue to see interest in developing and building luxury
projects, and our development partners have been able to continue to secure financing in connection with these
new hotels."
CONCLUSION
"We believe the recent confirmation by Moody's of Four Seasons investment grade rating and a change of outlook
to "stable" from "negative" is consistent with the financial strength of the Company, which
combined with our new unit growth program positions Four Seasons extremely well for the ultimate recovery in business
conditions internationally," said Douglas Ludwig, Chief Financial Officer and Executive Vice President.
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 this and 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 including the impact of the equity markets decline and volatility, the pace of the lodging industry's
recovery from the terrorist attacks of September 11th, 2001 and subsequent uncertainty concerning the potential
for similar events; 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 held a conference call Friday at 10:00 a.m. (Eastern Daylight Time) to discuss the second quarter financial
results. The details are:
To access the call dial: 1 (800) 381-9619 (U.S.A. and Canada)
1 (416) 641-6701 (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 20741061.
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 now extends around the world, Four Seasons Hotels and
Resorts is the world's leading operator of luxury hotels, currently managing 55 properties in 25 countries. In
February 2002, the company opened its first Four Seasons branded property in China - Four Seasons Hotel Shanghai;
and a resort in Sharm el Sheikh, Egypt in May. Four Seasons Hotels and Resorts continues to expand, with over 20
projects in development stages in choice locations around the world. Four Seasons has claimed first position on
many prestigious lists; recent honours include top ranking in the J.D. Powers Guest Satisfaction Survey; AAA Five
Diamond awards (receiving more than other any hotel company for the 21st consecutive year), and the Zagat Survey
2001 (ranked as "Top Hotel Chain in the U.S." and "Top Hotel Chain" internationally). Information
on the Company and its 40 years of achievement in the hospitality industry can be accessed through the Four Seasons
Web site at www.fourseasons.com.
-------------------------------------
(1) 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 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.
(2) The term "Core Hotels" means hotels and resorts under management for
the full year of both 2002 and 2001. Changes from the 2001/2000 Core
Hotels are the additions of Four Seasons Resort Nevis and Four
Seasons Hotel Cairo at The First Residence, and the deletion of The
Regent Jakarta (which closed for repairs in February 2002 following
damage from extensive flooding).
(3) Gross operating margin represents gross operating profit as a percent
of gross operating revenue.
(4) The management operations profit margin represents management
earnings, before other operating items, as a percent of management
operations revenue.
(5) Included in ownership operations earnings (losses) are the
consolidated revenues and expenses from the Company's 100% interest
in The Pierre in New York, Four Seasons Hotel Vancouver, Four Seasons
Hotel Berlin, distributions from minority ownership interests in
properties that Four Seasons manages and corporate overhead expenses.
FOUR SEASONS HOTELS INC.
CONSOLIDATED BALANCE SHEETS
As at As at
(Unaudited) June 30, December 31,
(In thousands of dollars) 2002 2001
-------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 207,321 $ 210,421
Receivables 85,947 78,450
Inventory 2,679 3,074
Prepaid expenses 4,995 2,492
--------------------------
300,942 294,437
Long-term receivables 207,407 201,453
Investments in hotel partnerships
and corporations 136,565 141,005
Fixed assets 51,897 50,715
Investment in management contracts 202,758 201,460
Investment in trademarks and trade names
(note 1(a)) 6,482 33,784
Future income tax assets 14,590 17,745
Other assets 40,867 39,782
--------------------------
$ 961,508 $ 980,381
--------------------------
--------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 36,723 $ 50,813
Long-term obligations due within one year 555 1,188
--------------------------
37,278 52,001
Long-term obligations 118,875 118,244
Shareholders' equity (note 2):
Capital stock 324,347 319,460
Convertible notes 178,543 178,543
Contributed surplus 4,784 4,784
Retained earnings 283,275 285,619
Equity adjustment from foreign
currency translation 14,406 21,730
--------------------------
805,355 810,136
--------------------------
$ 961,508 $ 980,381
--------------------------
--------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three months ended Six months ended
(In thousands of dollars June 30, June 30,
except per share amounts) 2002 2001 2002 2001
-------------------------------------------------------------------------
Consolidated revenues
(note 3) $ 80,964 $ 90,185 $ 145,545 $ 168,968
-----------------------------------------------
-----------------------------------------------
MANAGEMENT OPERATIONS
Revenues (note 4) $ 39,934 $ 48,824 $ 75,926 $ 94,483
General and
administrative expenses (15,925) (15,373) (31,009) (31,414)
-----------------------------------------------
24,009 33,451 44,917 63,069
-----------------------------------------------
OWNERSHIP OPERATIONS
Revenues 42,214 43,291 71,804 77,546
Distributions from
hotel investments 465 225 571 417
Expenses:
Cost of sales
and expenses (41,279) (40,640) (77,974) (78,917)
Fees to Management
Operations (1,649) (2,155) (2,756) (3,478)
-----------------------------------------------
(249) 721 (8,355) (4,432)
-----------------------------------------------
Earnings before other
operating items 23,760 34,172 36,562 58,637
Depreciation and
amortization (3,639) (3,728) (7,144) (7,667)
Other income, net 2,765 3,368 1,624 3,640
-----------------------------------------------
Earnings from operations 22,886 33,812 31,042 54,610
Interest income, net 956 3,268 2,966 4,811
-----------------------------------------------
Earnings before
income taxes 23,842 37,080 34,008 59,421
-----------------------------------------------
Income tax expense:
Current (3,007) (8,298) (4,387) (13,009)
Future (2,715) (601) (3,775) (1,252)
-----------------------------------------------
(5,722) (8,899) (8,162) (14,261)
-----------------------------------------------
Net earnings $ 18,120 $ 28,181 $ 25,846 $ 45,160
-----------------------------------------------
-----------------------------------------------
Basic earnings per share $ 0.52 $ 0.80 $ 0.74 $ 1.29
-----------------------------------------------
-----------------------------------------------
Diluted earnings per share $ 0.48 $ 0.72 $ 0.70 $ 1.17
-----------------------------------------------
-----------------------------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH PROVIDED BY OPERATIONS
Three months ended Six months ended
(Unaudited) June 30, June 30,
(In thousands of dollars) 2002 2001 2002 2001
-------------------------------------------------------------------------
Cash provided by (used in) operations:
MANAGEMENT OPERATIONS
Earnings before other
operating items $ 24,009 $ 33,451 $ 44,917 $ 63,069
Items not requiring
an outlay of funds 374 290 744 460
-----------------------------------------------
Working capital
provided by
Management Operations 24,383 33,741 45,661 63,529
-----------------------------------------------
OWNERSHIP OPERATIONS
Earnings (loss) before
other operating items (249) 721 (8,355) (4,432)
Items not requiring
an outlay of funds - - - 2,657
-----------------------------------------------
Working capital provided
by (used in)
Ownership Operations (249) 721 (8,355) (1,775)
-----------------------------------------------
24,134 34,462 37,306 61,754
Interest received 2,746 3,423 8,151 10,736
Interest paid (138) (140) (425) (3,541)
Current income tax paid (4,446) (4,446) (8,892) (8,892)
Change in non-cash
working capital (13,258) (5,373) (18,251) (4,312)
Other (2,847) (373) (4,011) 2,852
-----------------------------------------------
Cash provided
by operations $ 6,191 $ 27,553 $ 13,878 $ 58,597
-----------------------------------------------
-----------------------------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended Six months ended
(Unaudited) June 30, June 30,
(In thousands of dollars) 2002 2001 2002 2001
------------------------------------------------------------------------
Cash provided by (used in):
Operations: $ 6,191 $ 27,553 $ 13,878 $ 58,597
-----------------------------------------------
Financing:
Long-term obligations
including
current portion (159) (224) (799) (275)
Issuance of shares 724 1,353 4,887 1,641
Dividends paid - - (1,815) (1,813)
-----------------------------------------------
Cash provided by
(used in) financing 565 1,129 2,273 (447)
-----------------------------------------------
Capital investments:
Long-term receivables (7,543) (6,641) (8,151) (28,589)
Hotel investments (1,100) (3,017) (1,682) (5,059)
Disposal of hotel
investments 5,455 - 5,455 18,425
Purchase of fixed assets (2,740) (1,934) (5,730) (3,894)
Investments in trademarks
and trade names and
management contracts (1,809) (746) (2,199) (7,356)
Other assets (2,407) (1,581) (6,093) (2,415)
-----------------------------------------------
Cash used in capital
investments (10,144) (13,919) (18,400) (28,888)
-----------------------------------------------
Increase (decrease) in
cash and cash equivalents (3,388) 14,763 (2,249) 29,262
Decrease in cash due to
unrealized foreign
exchange loss (1,017) (2,678) (851) (1,663)
Cash and cash equivalents,
beginning of period 211,726 233,614 210,421 218,100
-----------------------------------------------
Cash and cash equivalents,
end of period $ 207,321 $ 245,699 $ 207,321 $ 245,699
-----------------------------------------------
-----------------------------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Six months ended
(Unaudited) June 30,
(In thousands of dollars) 2002 2001
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 285,619 $ 202,760
Effect of adoption of new standard on
accounting for intangible assets (note 1(a)) (26,366) -
--------------------------
259,253 202,760
Net earnings 25,846 45,160
Dividends declared (1,824) (1,812)
--------------------------
Retained earnings, end of period $ 283,275 $ 246,108
--------------------------
--------------------------
See accompanying notes to consolidated financial statements.
FOUR SEASONS HOTELS INC.
NOTES TO 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, 2001.
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, 2001, except as disclosed below:
(a) Intangible assets
Effective January 1, 2002, the Company adopted the new accounting
standard for goodwill and other intangible assets as established
by the Canadian Institute of Chartered Accountants ("CICA")
without restatement of prior periods. Intangible assets with
indefinite useful lives are no longer amortized but are subject to
impairment tests on at least an annual basis. Potential impairment
of an intangible asset is determined by comparing the asset's
carrying value to its fair value. Any loss resulting from
impairment tests effective January 1, 2002 must be recognized as a
charge to opening retained earnings. Impairment arising subsequent
to January 1, 2002 will be recognized as a charge to income.
Intangible assets which do not have indefinite lives are amortized
over their useful lives. These intangible assets are subject to an
annual impairment test comparing carrying values to net
recoverable amounts.
During the first quarter of 2002, in accordance with the new
accounting standard, the Company completed its review of its
existing intangible assets. That review determined that its
investment in the rights to the Regent trade name, which was
transferred to Carlson Hospitality Worldwide ("Carlson") in 1997
in exchange for the entitlement to receive payments from Carlson
based on a percentage of gross royalty revenue of new development
projects, has an indefinite useful life. As required by the new
standard, the Company tested this intangible asset for impairment
as at January 1, 2002 under the new fair value based impairment
methodology, and determined that its fair value was less than its
carrying amount. As a result, the Company recorded during the
first quarter of 2002 a decrease to retained earnings of $26,366,
a decrease to investment in trademarks and trade names of $27,042
and an increase to future income tax assets of $676.
The Company has determined that none of its other intangible
assets have indefinite lives and accordingly, amortizes such
intangible assets over their estimated useful lives. Prior to
2002, the Company amortized its investment in management contracts
on a straight-line basis over the terms of the contracts to a
maximum of 40 years. Effective January 1, 2002, as required under
the new accounting standard, the Company amortizes its investment
in management contracts over the actual term of the contracts in
proportion to the benefits received.
For the three months and six months ended June 30, 2001, had the
Regent trade name transferred to Carlson not been amortized and
had the amortization of investment in management contracts been
adjusted for the change in estimated useful lives, the reported
net earnings, basic earnings per share and diluted earnings per
share would be adjusted as follows:
Three months ended Six Months ended
June 30, 2001 June 30, 2001
------------------------------------------------------------------
Basic Diluted Basic Diluted
Earnings Earnings Earnings Earnings
Net Per Per Net Per Per
Earnings Share Share Earnings Share Share
------------------------------------------------------------------
Reported
amounts $28,181 $0.80 $0.72 $45,160 $1.29 $1.17
Trade name
amortization
(net of income
tax recovery of
$5 and $10,
respectively) 190 0.01 0.01 380 0.01 0.01
Management
contract
amortization
(net of income
tax recovery of
$79 and $160,
respectively) 539 0.02 0.01 1,090 0.04 0.02
------------------------------------------------------------------
Adjusted
amounts $28,910 $0.83 $0.74 $46,630 $1.34 $1.20
------------------------------------------------------------------
------------------------------------------------------------------
(b) Foreign currency translation and hedging relationships
Effective January 1, 2002, the CICA amended the accounting
standard for foreign currency translation by eliminating the
requirement to defer and amortize unrealized translation gains and
losses on long-term foreign currency denominated monetary items
with a fixed or determinable life. Due to the hedging
relationships established by the Company during 2001 relating to
its long-term receivables, long-term obligations, investments in
self-sustaining foreign operations and foreign exchange forward
contracts, the adoption by the Company of the amendment to the
standard on accounting for foreign currency translation did not
have an impact on the Company for the six months ended June 30,
2002.
In addition, in December 2001, the CICA issued an accounting
guideline relating to hedging relationships. The guideline
establishes requirements for the identification, documentation,
designation and effectiveness of hedging relationships, which will
be effective for fiscal years beginning on or after July 1, 2002.
The Company has not yet determined the impact of the
implementation of this guideline on its 2003 consolidated
financial statements.
(c) Stock-based compensation and other stock-based payments
Effective January 1, 2002, the CICA issued a new standard relating
to the accounting for stock-based compensation and other stock-
based payments. The new accounting standard requires the use of a
fair value based method to account for stock-based payments to non-
employees, and for employee awards that are direct awards of
stock, cash or other assets, or are stock appreciation rights that
call for settlement by the issuance of equity instruments, granted
on or after January 1, 2002.
As permitted by the new standard, the Company has opted to
continue to use its existing 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. The new
accounting standard does, however, require additional disclosures
for options granted to employees, including disclosure of pro
forma earnings and pro forma earnings per share as if the fair
value based accounting method had been used to account for
employee stock options.
Accordingly, the compensation element of stock options issued by
the Company during the first six months of 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 ranging from 4.29% to 5.20%;
semi-annual dividend per Limited Voting Shares of $0.055;
volatility factors of the expected market price of the Company's
Limited Voting Shares ranging from 47.4% to 49.8%; and expected
lives of the options ranging between 4 and 7 years, depending on
the level of the employee who was granted stock options.
For the three months and six months ended June 30, 2002, assuming
the Company had accounted for its stock options issued under the
fair value based method, pro forma net earnings would have been
$17,905 and $25,624, respectively, pro forma basic earnings per
share would have been $0.51 and $0.73, respectively, and pro forma
diluted earnings per share would have been $0.48 and $0.70,
respectively. In calculating pro forma net earnings and pro forma
basic and diluted earnings per share, stock options issued prior
to January 1, 2002 have been excluded from the fair value based
accounting method.
2. Shareholders' equity:
As at June 30, 2002, the Company has outstanding Variable Multiple
Voting and Limited Voting Shares of 35,162,262 and outstanding stock
options of 5,728,347 (weighted average exercise price of $52.09). In
addition, the Company has 655,404 convertible notes outstanding, each
of which may be converted into 5.284 Limited Voting Shares of the
Company. The Company, however, has the right to acquire for cash the
notes that a holder has required to be so converted. Holders also have
the right to require the Company to purchase all or a portion of their
notes on September 23, 2004, September 23, 2009 and September 23, 2014
in consideration for Limited Voting Shares having a fair value equal
to the issue price plus accrued interest to the date of purchase. The
Company has the right to acquire for cash all or a portion of the
notes that a holder has required to be so purchased. Also, on or after
September 23, 2004, the Company may redeem for cash all or a portion
of the notes.
3. Consolidated revenues:
Consolidated revenues for Four Seasons Hotels Inc. are comprised of
revenues from Management Operations, revenues from Ownership
Operations, distributions from hotel investments, less fees from
Ownership Operations to Management Operations.
4. Revenues under management:
Total revenues under management were $752,481 for the three months
ended June 30, 2002 ($786,649 for the three months ended June 30,
2001), and $1,438,419 for the six months ended June 30, 2002
($1,537,174 for the six months ended June 30, 2001). Total revenues
under management consist of rooms, food and beverage, telephone and
other revenues of all the hotels and resorts which the Company
manages. Approximately 67% of the fee revenues earned by the Company
were calculated as a percentage of the total revenues under management
of all hotels and resorts.
5. 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. The
Company's ownership operations are particularly affected by seasonal
fluctuations, with lower revenue, operating profit and cash flow in
the first quarter; ownership operations typically incur an operating
loss in the first quarter of each year. Typically the fourth quarter
is the strongest quarter for the majority of the hotels.
Management operations are also seasonal in nature, as fee revenues are
affected by the seasonality of hotel 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
those months and may be offset to a greater extent as the portfolio of
resort properties managed by the Company increases.
In 2002, this normal seasonality is also heightened by the ongoing
impact from the September 11th terrorist attacks, the war on terrorism
and the weak US economy, which adversely affected the normal decision
cycle for first and second quarter business travel and meetings and
leisure travel.
FOUR SEASONS HOTELS INC.
SUMMARY OF HOTEL OPERATING DATA - CORE HOTELS(1)
Three months ended
June 30,
(Unaudited) 2002 2001 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties 45 45 -
No. of Rooms 12,575 12,575 -
Occupancy(2) 69.3% 71.7% (2.4%)
ADR(3) - in US dollars $293 $301 (2.6%)
- in equivalent Canadian dollars $455 $463 (1.7%)
RevPAR(4) - in US dollars $203 $216 (5.8%)
- in equivalent Canadian dollars $315 $332 (5.0%)
Gross operating margin(5) 34.3% 36.6% (2.3%)
United States
No. of Properties 22 22 -
No. of Rooms 6,971 6,971 -
Occupancy(2) 72.1% 73.9% (1.8%)
ADR(3) - in US dollars $322 $341 (5.4%)
- in equivalent Canadian dollars $500 $524 (4.5%)
RevPAR(4) - in US dollars $232 $252 (7.7%)
- in equivalent Canadian dollars $360 $387 (6.9%)
Gross operating margin(5) 33.0% 35.8% (2.8%)
Canada/Mexico/Caribbean
No. of Properties 5 5 -
No. of Rooms 1,341 1,341 -
Occupancy(2) 68.3% 70.8% (2.5%)
ADR(3) - in US dollars $252 $257 (1.9%)
- in equivalent Canadian dollars $391 $395 (1.0%)
RevPAR(4) - in US dollars $172 $182 (5.4%)
- in equivalent Canadian dollars $267 $280 (4.6%)
Gross operating margin(5) 33.2% 35.4% (2.2%)
Asia/Pacific
No. of Properties 10 10 -
No. of Rooms 2,715 2,715 -
Occupancy(2) 64.2% 65.9% (1.7%)
ADR(3) - in US dollars $168 $167 0.3%
- in equivalent Canadian dollars $261 $257 1.2%
RevPAR(4) - in US dollars $108 $110 (2.2%)
- in equivalent Canadian dollars $167 $170 (1.4%)
Gross operating margin(5) 35.3% 37.4% (2.1%)
Europe/Middle East
No. of Properties 8 8 -
No. of Rooms 1,548 1,548 -
Occupancy(2) 66.5% 72.6% (6.1%)
ADR(3) - in US dollars $402 $371 8.3%
- in equivalent Canadian dollars $624 $571 9.3%
RevPAR(4) - in US dollars $267 $269 (0.8%)
- in equivalent Canadian dollars $415 $414 0.1%
Gross operating margin(5) 40.4% 41.4% (1.0%)
--------------------------------------
1 The term "Core Hotels" means hotels and resorts under management for
the full year of both 2002 and 2001. Changes from the 2001/2000 Core
Hotels are the additions of Four Seasons Resort Nevis and Four Seasons
Hotel Cairo at The First Residence, and the deletion of The Regent
Jakarta (which closed for repairs in February 2002 following damage
from extensive flooding).
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.
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)
Six months ended
June 30,
(Unaudited) 2002 2001 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties 45 45 -
No. of Rooms 12,575 12,575 -
Occupancy(2) 66.8% 71.3% (4.5%)
ADR(3) - in US dollars $294 $302 (2.8%)
- in equivalent Canadian dollars $461 $463 (0.3%)
RevPAR(4) - in US dollars $196 $215 (8.9%)
- in equivalent Canadian dollars $308 $330 (6.6%)
Gross operating margin(5) 32.8% 35.6% (2.8%)
United States
No. of Properties 22 22 -
No. of Rooms 6,971 6,971 -
Occupancy(2) 69.0% 73.2% (4.2%)
ADR(3) - in US dollars $325 $341 (4.7%)
- in equivalent Canadian dollars $511 $523 (2.3%)
RevPAR(4) - in US dollars $224 $250 (10.2%)
- in equivalent Canadian dollars $352 $383 (7.9%)
Gross operating margin(5) 30.8% 34.3% (3.5%)
Canada/Mexico/Caribbean
No. of Properties 5 5 -
No. of Rooms 1,341 1,341 -
Occupancy(2) 64.0% 69.5% (5.5%)
ADR(3) - in US dollars $286 $288 (0.8%)
- in equivalent Canadian dollars $448 $441 1.7%
RevPAR(4) - in US dollars $183 $200 (8.5%)
- in equivalent Canadian dollars $287 $306 (6.2%)
Gross operating margin(5) 34.8% 38.2% (3.4%)
Asia/Pacific
No. of Properties 10 10 -
No. of Rooms 2,715 2,715 -
Occupancy(2) 65.0% 69.1% (4.1%)
ADR(3) - in US dollars $165 $168 (2.1%)
- in equivalent Canadian dollars $259 $258 0.4%
RevPAR(4) - in US dollars $107 $116 (7.9%)
- in equivalent Canadian dollars $168 $178 (5.6%)
Gross operating margin(5) 35.6% 37.7% (2.1%)
Europe/Middle East
No. of Properties 8 8 -
No. of Rooms 1,548 1,548 -
Occupancy(2) 62.9% 68.3% (5.4%)
ADR(3) - in US dollars $378 $363 4.2%
- in equivalent Canadian dollars $593 $555 6.9%
RevPAR(4) - in US dollars $238 $248 (3.9%)
- in equivalent Canadian dollars $374 $379 (1.4%)
Gross operating margin(5) 38.2% 38.0% 0.2%
--------------------------------------
1 The term "Core Hotels" means hotels and resorts under management for
the full year of both 2002 and 2001. Changes from the 2001/2000 Core
Hotels are the additions of Four Seasons Resort Nevis and Four Seasons
Hotel Cairo at The First Residence, and the deletion of The Regent
Jakarta (which closed for repairs in February 2002 following damage
from extensive flooding).
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.
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
June 30,
(Unaudited) 2002 2001 Variance
-------------------------------------------------------------------------
Worldwide
No. of Properties 55 50 5
No. of Rooms 15,181 14,112 1,069
United States
No. of Properties 23 22 1
No. of Rooms 7,248 6,971 277
Canada/Mexico/Caribbean/South America
No. of Properties 8 6 2
No. of Rooms 1,762 1,553 209
Asia/Pacific
No. of Properties 13 12 1
No. of Rooms 4,062 3,619 443
Europe/Middle East
No. of Properties 11 10 1
No. of Rooms 2,109 1,969 140
FOUR SEASONS HOTELS INC.
SCHEDULED OPENING OF HOTELS UNDER CONSTRUCTION OR
IN ADVANCED STAGES OF DEVELOPMENT
Hotel/Resort/Residence Club and Location(1) Approx. No. Scheduled
of Rooms Opening
Four Seasons Hotel Alexandria, Egypt(x) 120 2004
Four Seasons Hotel Amman, Jordan 195 2002
Four Seasons Hotel Beirut, Lebanon 287 2005
Four Seasons Hotel Budapest, Hungary 179 2003
Four Seasons Hotel Nile Plaza, Cairo, Egypt(x) 374 2004
Four Seasons Resort Costa Rica, Costa Rica(x) 179 2004
Four Seasons Hotel Doha, Qatar(x) 235 2004
Four Seasons Resort Exuma, The Bahamas(x) 180 2003
Four Seasons Hotel Florence, Italy 116 2004
Four Seasons Hotel Hampshire, England 134 2003
Four Seasons Hotel Hong Kong, Hong Kong(x) 400 2004
Four Seasons Hotel Istanbul at the Bosphorus, Turkey 170 2004
Four Seasons Resort Jackson Hole, WY, USA(x) 124 2003
Four Seasons Hotel Miami, FL, USA(x) 222 2003
Four Seasons Hotel Palo Alto, CA, USA 200 2004
Four Seasons Resort Provence at Terre Blanche, France(x) 115 2003
Four Seasons Resort Puerto Rico, Puerto Rico(x) 250 2005
Four Seasons Residence Club Punta Mita, Mexico(x) 35 2005
Four Seasons Hotel Riyadh, Saudi Arabia(x) 234 2002
Four Seasons Hotel Sao Paulo, Brazil 125 2003
Four Seasons Residence Club Sedona at
Seven Canyons, AZ, USA(x) 20 2005
Four Seasons Hotel Tokyo at Marunouchi, Japan 57 2002
Four Seasons Resort Whistler, B.C., Canada(x) 271 2004
(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. The dates of scheduled opening
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. The process and risks associated with the management of new
properties are dealt with in greater detail in the Company's Annual
Report.
SOURCE: Four Seasons Hotels Inc.