Fairmont Hotels & Resorts Inc. Adopts New Operating Performance Measure
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Fairmont Hotels & Resorts Inc. Adopts New Operating Performance Measure
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Category: Worldwide -
This is a press release selected by our editorial committee and published online for free on 2005-11-02
Fairmont Hotels & Resorts Inc. ("FHR" or "the Company") (TSX/NYSE: FHR) announced today that, commencing in the third quarter of 2005, it will begin reporting on operating performance using "Adjusted EBITDA(1)" in addition to EBITDA(1).
Management believes that the inclusion or exclusion of certain items such as gains and losses on asset sales and other non-operating items, is necessary to provide a more accurate measure of our core business operating results and is a more effective means for evaluating period-over-period results of the Company's on-going operations. The use of "Adjusted EBITDA" will also facilitate comparison between FHR and its competitors, most of whom report this earnings measure.
A reconciliation of Adjusted EBITDA and EBITDA to net income for the last ten reported quarters is available below as well as on the Company's investor website at www.fairmontinvestor.com under "Supplemental Financial Information" in Investor Information.
About Fairmont Hotels & Resorts Inc.
FHR is a leading owner/operator of luxury hotels and resorts. FHR's managed portfolio consists of 88 luxury and first-class properties with more than 33,000 guestrooms in the United States, Canada, Mexico, Bermuda, Barbados, United Kingdom, Monaco, Kenya and the United Arab Emirates. FHR owns Fairmont Hotels Inc., North America's largest luxury hotel management company, as measured by rooms under management, with 50 distinctive city center and resort hotels such as The Fairmont San Francisco, The Fairmont Banff Springs and The Savoy, A Fairmont Hotel. FHR also owns Delta Hotels, Canada's largest first-class hotel management company, which manages and franchises 38 city center and resort properties in Canada. In addition to hotel management, FHR holds real estate interests in 27 properties and an approximate 24% investment interest in Legacy Hotels Real Estate Investment Trust, which owns 24 properties. FHR owns FHP Management Company LLC, a private residence club management company that operates Fairmont Heritage Place.
Adjusted EBITDA Reconciliation
(in millions of U.S. Dollars)
1. EBITDA
EBITDA is defined as earnings before interest, taxes and
amortization. Management considers EBITDA to be a meaningful
indicator of operations and uses it as the primary measure to assess
the operating performance of the Company's business segments. EBITDA
provides us with an understanding of the Company's operating results
before the impact of investing and financing transactions and income
taxes. It also facilitates comparisons between the Company and its
competitors.
Adjusted EBITDA
Management adjusts EBITDA when evaluating operating performance
because it believes that the inclusion or exclusion of certain items
such as gains and losses on asset sales and other non-operating
items, is necessary to provide a more accurate measure of our core
business operating results. It is also a means to evaluate period-
over-period results. We adjust our reported EBITDA, as set forth
above, for certain items and refer to this measure as Adjusted
EBITDA. The principal adjustments we make are to eliminate (i) gains
and losses from asset sales; (ii) amortization, interest expense and
income taxes in calculating our earnings from equity investments and
(iii) other non-operating items.
We have chosen to provide this information to investors to enable
them to perform more meaningful comparisons of past, present and
future core business operating results. Adjusted EBITDA may also be
used by investors and analysts in their valuation of the Company.
EBITDA and Adjusted EBITDA are not defined measures of operating
performance under Canadian generally accepted accounting principles.
It is likely that FHR's calculations of EBITDA and Adjusted EBITDA
are different than the calculations used by others.
The tables below provide a reconciliation of net income (loss) to
EBITDA and Adjusted EBITDA:
2005
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For the three months ended
March 31 June 30
Actual Actual
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Net Income (Loss) $ (4.0) $ 34.1
Add back:
Interest expense, net 7.2 6.0
Income tax expense
(recovery) 2.5 (9.3)
Amortization 16.5 16.4
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EBITDA $ 22.2 $ 47.2
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Add back:
Proportionate share
of interest expense,
income taxes and
amortization from
equity investments 8.9 9.3
Stock appreciation
rights(1) 2.3 0.4
Other non-operating
items(2) - 3.3
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Adjusted EBITDA $ 33.4 $ 60.2
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2004
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For the three months ended Year ended
September December December
March 31 June 30 30 31 31
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Net Income (Loss) $ (0.6) $ 29.0 $ 131.8 $ (4.4) $ 155.8
Add back:
Interest expense,
net 10.0 9.0 6.7 7.4 33.1
Income tax expense
(recovery) 5.2 6.5 52.4 (2.2) 61.9
Amortization 19.5 18.0 16.8 19.6 73.9
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EBITDA $ 34.1 $ 62.5 $ 207.7 $ 20.4 $ 324.7
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Add back:
Proportionate
share of interest
expense, income
taxes and
amortization
from equity
investments 10.1 10.0 10.3 11.0 41.4
Stock appreciation
rights(1) - (0.3) 0.5 2.3 2.5
(Gains) losses on
asset sales(3) - (15.4) (144.2) 0.5 (159.1)
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Adjusted EBITDA $ 44.2 $ 56.8 $ 74.3 $ 34.2 $ 209.5
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2003
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For the three months ended Year ended
September December December
March 31 June 30 30 31 31
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Net Income (Loss) $ 12.5 $ 40.1 $ 11.6 $ (13.5) $ 50.7
Add back:
Interest expense, net 5.9 8.3 8.9 10.5 33.6
Income tax expense
(recovery) 7.5 (22.2) 8.9 (5.7) (11.5)
Amortization 16.3 17.2 17.5 16.5 67.5
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EBITDA $ 42.2 $ 43.4 $ 46.9 $ 7.8 $ 140.3
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Add back:
Proportionate share
of interest expense,
income taxes and
amortization from
equity investments 8.4 9.6 9.8 11.4 39.2
Stock appreciation
rights(1) (0.8) - 0.1 0.4 (0.3)
Other non-operating
items(2) - - 7.4 3.7 11.1
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Adjusted EBITDA $ 49.8 $ 53.0 $ 64.2 $ 23.3 $ 190.3
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(1) Reflects gains and (losses) associated with stock appreciation rights
issued prior to the 2001 reorganization of Canadian Pacific Limited.
(2) In the second quarter of 2005, $2.8M of costs are associated with an
uncompleted portfolio acquisition opportunity; in the third and
fourth quarters of 2003, $7.4M and $1.6M are costs related to the
Bermuda hurricane damage, respectively.
(3) In the second quarter of 2004, gain relates to the sale of
undeveloped land; in the third and fourth quarters of 2004, gains and
(losses) relate to the sale of Legacy units, The Fairmont Kea Lani
Maui and The Fairmont Glitter Bay hotels.
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