Four Seasons Hotels Inc. reports results for third quarter and nine months ended September 30, 2006
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Four Seasons Hotels Inc. reports results for third quarter and nine months ended September 30, 2006
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Category: Worldwide -
This is a press release selected by our editorial committee and published online for free on 2006-11-10
Four Seasons Hotels Inc. (TSX Symbol "FSH"; NYSE Symbol "FS") today reported its results for the third quarter and nine months ended September 30, 2006.
All amounts disclosed in this news release are in US dollars unless otherwise noted. The consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles. Endnotes can be found at the end of this news release.
Highlights of the Third Quarter and Nine Months ended September 30, 2006
For the third quarter and nine months ended September 30, 2006, as compared to the same periods in 2005:
Hotel and Resort Operating Results:
- For the third quarter, RevPAR(1) increased at our worldwide Core
Hotels(2) by 9.7% and at our US Core Hotels by 8.3%. For the nine
months ended September 30, 2006, RevPAR increased at our worldwide
Core Hotels by 11.2% and at our US Core Hotels by 10.9%.
- For the third quarter, gross operating margins(3) increased at our worldwide Core Hotels by 120 basis points to 30.4% and our US Core Hotels gross operating margins increased by 140 basis points to 28.5%. For the nine months ended September 30, 2006, gross operating margins increased at our worldwide Core Hotels by 180 basis points to 32.3% and our US Core Hotels gross operating margins also increased by 180 basis points to 30.5%.
- For the third quarter, revenues under management increased 15.8% to $699.2 million from $603.8 million. For the nine months ended September 30, 2006, revenues under management increased 13.8% to $2.1 billion from $1.9 billion. We had approximately 17,500 rooms under management in the nine months ended September 30, 2006, as
compared to approximately 17,200 rooms in the same period in 2005. We had approximately 14,300 rooms under management in our Core Hotels for the third quarter and nine months ended September 30, 2006 and 2005.
"Four Seasons offers an experience that is truly one of a kind, because employees in the Company share a very specific focus: to meet the needs, expectations, even the dreams of one type of consumer - the luxury traveler," said Isadore Sharp, Chairman and Chief Executive Officer. "The trust our guest places in us to provide exceptional experiences is reflected in the strong operational and financial results we are announcing this quarter. We remain committed to further solidifying our distinct competitive position in the industry."
Company Operating Results:
- As a result of improved results at properties under our management and, to a lesser extent, an increase in the number of rooms under management, hotel management fees increased 20.7% in the third quarter of 2006. For the nine months ended September 30, 2006, hotel management fees increased 19.9%.
- Base fees increased 12.1% to $20.0 million in the third quarter and 12.6% to $61.4 million for the nine months ended September 30, 2006,principally as a result of RevPAR improvements at our Core Hotels and the contribution from recently opened properties under management.
- As a result of improved profitability and the addition of new properties under our management, incentive fees increased 52.9% to $7.2 million for the third quarter and 38.5% to $29.3 million for the nine months ended September 30, 2006.
- Other fees were essentially unchanged for the third quarter, but improved 33.2% to $13.3 million for the nine months ended September 30, 2006, primarily as a result of an increase in branded residential royalty fees, which will vary from period to period based on the volume of sales closing in those periods, and these fluctuations may be significant.
- Operating earnings before other items(4) increased 41.9% to $16.6 million for the third quarter and 38.5% to $60.8 million for the nine months ended September 30, 2006.
- For the third quarter, net earnings were $10.9 million ($0.30 basic earnings per share and $0.29 diluted earnings per share), compared to a net loss of $11.4 million ($0.31 basic and diluted loss per share)for the third quarter of 2005. In the third quarter of 2005, net loss included foreign exchange losses and asset provisions and write downs totaling approximately $21.1 million.
- For the nine months ended September 30, 2006, net earnings were $33.4 million ($0.91 basic earnings per share and $0.89 diluted earnings per share), as compared to net earnings of $9.5 million for the same period in 2005 ($0.26 basic earnings per share and $0.25 diluted earnings per share).
Adjusted Net Earnings and Adjusted Earnings per Share(x):
- In the third quarter of 2006, other income, net of $0.6 million related primarily to foreign exchange gains, which were offset partially by asset provisions and write downs. In the third quarter of 2005, other expenses, net of $21.1 million related primarily to foreign exchange losses and asset provisions and write downs.
In the nine months ended September 30, 2006, other expenses, net of $7.0 million related primarily to foreign exchange losses. In the nine months ended September 30, 2005, other expenses, net of $32.4 million related primarily to foreign exchange losses, losses on the disposition of assets, and asset provisions and write downs.
(x) Adjusted net earnings is a non-GAAP financial measure and does not have any standardized meaning prescribed by GAAP. It is, therefore,unlikely to be comparable to similar measures presented by other issuers and should not be considered as an alternative to net
earnings, cash flow from operating activities or any other measure of performance prescribed by Canadian GAAP. Our adjusted net earnings may also not be comparable to adjusted net earnings used by other lodging companies, which may be calculated differently.
We consider adjusted net earnings to be a meaningful indicator of our operations, and management uses it as a measure to assess our operating performance. Adjusted net earnings is also used by investors, analysts, and our lenders as a measure of our financial performance. As a result, we have chosen to provide this information.
(xx) In connection with the disposition of The Pierre in the second quarter of 2005, we recorded a tax benefit of approximately $9.2 million in the nine months ended September 30, 2005.
"The financial results reflect both the strong operating environment and our continued efforts to control costs," said John Davison, Chief Financial Officer. "We are very pleased to see these efforts translate into strong earnings growth."
Expanding the Portfolio - New Four Seasons Projects
Our announced pipeline of new Four Seasons properties include thirty- three projects around the world, including nine in the Americas, five in Europe, nine in the Middle East/Africa and ten in Asia/Pacific. Since the beginning of the year, we have added eleven new projects to this list, including Barbados; Cham Island, Vietnam; a second property in Doha, Qatar; Hangzhou, People's Republic of China; Koh Samui, Thailand; Kuwait City, Kuwait; Macau, Special Administrative Region of the People's Republic of China; Seychelles; Shanghai, People's Republic of China; St. Petersburg, Russia and Taipei, Taiwan.
"We believe our development pipeline is the most robust in the luxury sector," said Kathleen Taylor, President Worldwide Business Operations. "Our owners and development partners continue to present us with opportunities for extraordinary projects around the globe, which speaks to the strength of the Four Seasons brand worldwide."
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