1998 Annual Report - Four Seasons Hotels and Resorts

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ANNUAL INFORMATION FORM(continued)Although Four Seasons will continue to make loans or minority investments to secure long-term managementcontracts, these investments will be made in order to expand its management business and where the overall economicreturn to Four Seasons justifies the investment and risk profile.Four Seasons works closely with the owners and investors in developing new properties and acquiring existingluxury properties to be managed by Four Seasons. To the extent required, Four Seasons will make loans or minorityinvestments to secure long-term management contracts, but these investments will only be made in order to expandits management business and where the overall economic return to Four Seasons justifies the investment and riskprofile. However, Four Seasons generally limits its total capital exposure to no more than 20% of the total equityrequired for the new property and typically can choose to have its ownership interest diluted if additional capital isrequired. The Corporation attempts to structure its ownership interests separately from its management interests so as toenable it to dispose of an ownership interest as sale opportunities arise, without affecting its management interests.I N T E L L E C T U A LP ROPERTYIn the highly competitive service industry in which Four Seasons operates, trade names and trademarks are veryimportant in the sales and marketing of those services. Four Seasons has a significant number of trade names, trademarksand service marks, and significant time and effort are spent each year on surveillance, registration and protection of tradenames, trademarks and service marks, which Four Seasons believes have become synonymous in the lodging industry witha standard of attention to detail and an unwavering dedication to excellence.Four Seasons and Carlson have entered into an arrangement pursuant to which Carlson has acquired rights to the Regentname for new development. Carlson now owns and has exclusive right to use the Regent name and related trademarks, servicemarks and logos and has granted Four Seasons the right to use the Regent name and related marks and logos at Regent propertiesmanaged by Four Seasons. 13 The costs associated with the maintenance of the Regent brand and marks are the obligation of Carlson.S E L E C T E D C O N S O L I D A T E D F I N A N C I A L I N F O R M A T I O NTwo-Year Summary by Quarter4th Quarter 3rd Quarter 2nd Quarter 1st Quarter(In millions of dollars except per share amounts) 1998 (1) 1997 1998 (1) 1997 1998 (1) 1997 1998 (1) 1997Consolidated revenues $ 75.9 $ 71.9 $ 59.2 $ 57.3 $ 63.0 $ 61.6 $ 50.7 $ 49.6Earnings (loss) before other operating items:Hotel management 23.5 18.5 20.3 16.0 19.2 14.8 16.9 14.3Hotel ownership 8.3 7.8 1.0 2.7 4.4 5.7 (4.3) (0.8)Net earnings:Total $ 27.4 (2) $ 20.3 $ 16.7 (3) $ 1.1 (4) $ 17.9 $ 13.6 $ 7.7 $ 5.8Basic earnings per share $ 0.81 (2) $ 0.61 $ 0.49 (3) $ 0.03 (4) $ 0.53 $ 0.41 $ 0.23 $ 0.19(1) Excludes the 25% proportionately consolidated results of The Ritz-Carlton Hotel Chicago which was disposed of effective January 1, 1998.(2) The fourth quarter 1998 amounts include a foreign exchange gain of $7.8 million and a provision for loss of $6.9 million (total of $0.02 per share). Excludingthese items, normalized net earnings would have been $26.5 million and normalized basic earnings per share would have been $0.79 for the fourth quarter 1998.(3) The third quarter 1998 amounts included a foreign exchange gain of $6.2 million, a provision for loss of $5.8 million and a loss on repurchase of debt of$0.4 million. These items did not have a significant effect on net earnings or basic earnings per share for the third quarter 1998.(4) The third quarter 1997 amounts include the effect of an accounting loss of $12.0 million ($0.37 per share) relating to the Corporation’s repurchase ofUS$101.5 million of its 91/8% Notes. Excluding this loss, normalized net earnings would have been $13.1 million and normalized basic earnings per sharewould have been $0.40 for the third quarter 1997.13 See “Regent Joint Venture” on page 18.26Four Seasons Hotels Inc.
F IVE-YEARREVIEW(In millions of dollars except per share amounts) 1998 1997 1996 1995 1994Statements of Operations Data:Consolidated revenues (1) $ 248.8 $ 240.4 $ 121.0 $ 135.8 $ 129.0Hotel Management OperationsRevenues $ 126.9 $ 106.0 $ 94.7 $ 88.5 $ 79.9Hotel management earnings before other operating items 79.9 63.7 55.7 51.8 45.9Hotel Ownership OperationsRevenues 126.1 135.3 17.6 42.5 43.1Distribution from hotel investments 2.7 6.4 9.4 6.2 7.3Hotel ownership earnings before other operating items 9.3 15.4 8.9 15.1 14.6Earnings before other operating items 89.2 79.1 64.6 66.9 60.5Foreign exchange gain (2) 14.0 — — — —Depreciation and amortization (15.2) (15.8) (14.0) (16.9) (16.9)Provision for loss (3) (12.7) — — (95.0) —Loss on repurchase of debt (4) (0.4) (12.0) — — —Earnings (loss) from operations (5) 74.9 51.3 50.6 (45.0) 43.6Interest expense, net (3.8) (8.9) (18.8) (25.7) (27.2)Earnings (loss) before taxes (6) 71.1 42.4 31.8 (70.7) 9.6Income tax expense (1.4) (1.6) (2.0) (3.9) (2.8)Net earnings (loss) $ 69.7 $ 40.8 $ 29.8 $ (74.6) $ 6.8Earnings (loss) per share:Basic $ 2.06 $ 1.24 $ 1.04 $ (2.62) $ 0.24Weighted average number of shares (millions) (7) 33.8 32.8 28.7 28.4 27.9Changes in Financial Position:Cash provided by operations $ 75.0 $ 64.8 $ 43.7 $ 38.7 $ 44.8Long-term receivables (66.3) (35.9) 0.4 (32.9) (10.4)Disposal of long-term receivables — — — 13.2 —Investments (41.7) (17.7) (21.1) (14.6) (11.8)Disposal of hotel investments, net 12.8 13.0 4.3 65.7 51.7Capital expenditures (13.9) (10.5) (1.3) (2.4) (1.6)Dividends (3.5) (3.2) (3.0) (3.1) (3.1)Balance Sheet Data:Total assets $ 545.1 $ 453.2 $ 385.3 $ 381.6 $ 491.5Total debt 165.0 140.2 240.0 267.6 308.6Shareholders’ equity 330.4 254.5 88.1 57.2 137.227Four Seasons Hotels Inc.
Page 5 and 6: focus at all levels, including corp
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CORPORATE GOVERNANCEG E N E R A LOn
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FOUR SEASONS HOTELS AND RESORTS FOU
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