1997 Annual Report - Four Seasons Hotels and Resorts

ANNUAL INFORMATION FORM(continued)Although Four Seasons will continue to make loans or minority investments to secure long-term management contracts,these investments will only be made in order to expand its management business and where the overall economic returnto Four Seasons justifies the investment and risk profile.Four Seasons works closely with the owners and investors in developing new properties and acquiring existing luxuryproperties to be managed by Four Seasons. To the extent required, Four Seasons makes capital investments to obtain longtermmanagement contracts for these hotels or resorts. However, Four Seasons generally limits its total capital exposureto no more than 20% of the total equity required for the new property and typically can choose to have its ownershipinterest diluted if additional capital is required. The Corporation structures its ownership interests separately from itsmanagement interests so as to enable it to dispose of an ownership interest as sale opportunities arise, without affectingits 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 very importantin the sales and marketing of those services. Four Seasons has a significant number of trade names, trademarks and servicemarks, and significant time and effort are spent each year on surveillance, registration and protection of trade names,trademarks and service marks, which Four Seasons believes have become synonymous in the lodging industry with astandard 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 theRegent name for new development. Carlson now owns and has exclusive right to use the Regent name and relatedtrademarks, service marks and logos and has granted Four Seasons the right to use the Regent name and related marksand logos at Regent properties managed by Four Seasons. 15 The costs associated with the maintenance of the Regent brandand 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 Quarter(In millions of dollars4th Quarter 3rd Quarter 2nd Quarter 1st Quarterexcept per share amounts) 1997 (1) 1996 1997 (1) 1996 1997 (1) 1996 1997 (1) 1996Consolidated revenues $ 71.7 $ 35.2 $ 57.3 $ 29.6 $ 61.4 $ 29.1 $ 49.6 $ 26.8Earnings (loss) beforeother operating items:Hotel management 18.5 16.6 16.0 13.6 14.8 13.3 14.3 12.2Hotel ownership 7.6 2.8 2.7 1.6 5.5 2.4 (0.8) 1.9Net earnings:Total $ 20.3 $ 11.2 $ 1.1 (2) $ 6.5 $ 13.6 $ 7.1 $ 5.8 $ 5.0Basic and fully dilutedearnings per share $ 0.61 $ 0.39 $ 0.03 (2) $ 0.23 $ 0.41 $ 0.24 $ 0.19 $ 0.18(1) Includes the consolidation of the result of The Pierre in New York and the Four Seasons Hotel Vancouver.(2) The 3rd 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 9-1/8% Notes. Excluding this loss, normalized net earnings would have been $13.1 million and normalized basic and fully dilutedearnings per share would have been $0.40 for the 3rd quarter 1997.15 See “Regent Joint Venture” on page 16.24Four Seasons Hotels Inc.