1998 Annual Report - Four Seasons Hotels and Resorts

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MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTINGThe management of Four Seasons Hotels Inc. is responsible for the preparation and integrity of the financial statements andrelated financial information of the Corporation and the selection of accounting principles appropriate to the Corporation’scircumstances. The consolidated financial statements, notes and other financial information included in the Annual Reportwere prepared in accordance with accounting principles generally accepted in Canada. The statements also include estimatedamounts based on informed judgments of current and future events, for items such as the useful lives of capital assets andprovisions for impairment in the value of assets. These estimates are made with appropriate consideration of the materialityof the amounts involved. The financial information presented elsewhere in the Annual Report is consistent with that in thefinancial statements.Management is also responsible for maintaining a system of internal controls and budgeting procedures which aredesigned to provide reasonable assurance that assets are safeguarded, transactions are executed and recorded in accordancewith management’s authorization, and relevant and reliable financial information is produced. To augment the internalcontrol system, the Corporation maintains a program of internal audits covering significant aspects of the operations.The Corporation’s Audit Committee is appointed by the Board of Directors annually. The Committee meets withthe internal and independent auditors (who have free access to the Audit Committee) and with management, to satisfyitself that each group is properly discharging its responsibilities, and to review the financial statements, the independentauditors’ report and other financial information appearing in the Corporation’s Annual Report. The Audit Committeereports its findings to the Board of Directors for its consideration in approving the financial statements for issuance tothe shareholders.KPMG LLP, the independent auditors appointed by the shareholders of the Corporation, have examined thefinancial statements in accordance with generally accepted auditing standards.Isadore Sharp (Signed)Chairman and Chief Executive OfficerFebruary 17, 1999Douglas L. Ludwig (Signed)Chief Financial Officer,Executive Vice President and TreasurerAUDITORS’ REPORT TO THE SHAREHOLDERSWe have audited the consolidated balance sheets of Four Seasons Hotels Inc. as at December 31, 1998 and 1997 and theconsolidated statements of operations, retained earnings (deficit), cash provided by operations and changes in financialposition for the years then ended. These financial statements are the responsibility of the Corporation’s management.Our responsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with generally accepted auditing standards. Those standards require thatwe plan and perform an audit to obtain reasonable assurance whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.In our opinion, these consolidated financial statements present fairly, in all material respects, the financial positionof the Corporation as at December 31, 1998 and 1997 and the results of its operations and the changes in its financialposition for the years then ended in accordance with generally accepted accounting principles.Toronto, CanadaFebruary 17, 1999KPMG LLP (Signed)Chartered Accountants60Four Seasons Hotels Inc.
CONSOLIDATED STATEMENTS OF OPERATIONSYears ended December 31, 1998 and 1997(In thousands of dollars except per share amounts) 1998 1997Consolidated revenues $ 248,778 $ 240,393H OTEL M ANAGEMENT O PERATIONS:Revenues $ 126,947 $ 105,996General and administrative expenses (47,064) (42,336)79,883 63,660H OTEL O WNERSHIP O PERATIONS:Revenues 126,055 135,308Distributions from hotel investments 2,732 6,354Expenses:Cost of sales and expenses (112,485) (118,978)Fees to Hotel Management Operations (6,956) (7,265)9,346 15,419Earnings before other operating items 89,229 79,079Other operating items:Foreign exchange gain (note 12) 13,969 —Depreciation and amortization (15,164) (15,752)Provision for loss (note 2) (12,728) —Loss on repurchase of debt (note 10(c)) (376) (12,021)Earnings from operations 74,930 51,306Interest expense, net (note 10(f)) (3,802) (8,932)Earnings before income taxes 71,128 42,374Income tax expense (note 13):Current (1,136) (1,421)Deferred (290) (183)(1,426) (1,604)Net earnings $ 69,702 $ 40,770Earnings per share $ 2.06 $ 1.24See accompanying notes to consolidated financial statements.61Four Seasons Hotels Inc.
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