Fairmont Hotels & Resorts Inc. (“FHR” or the “Company”) (TSX/NYSE: FHR) today announced financial results for the fourth quarter and year ended December 31, 2002. All amounts are expressed in U.S. dollars. FHR expects to release its 2002 annual report in early March and will hold its annual general meeting at 10:00 a.m. on April 17, 2003 at The Fairmont Royal York in Toronto.
FHR`s financial results for the year ended December 31, 2001 contain substantial non-recurring items related to the reorganization of Canadian Pacific Limited (“CPL”), including the operating results of CPL`s four discontinued businesses, reorganization expenses and CPL corporate expenses. CPL`s reorganization became effective October 1, 2001. Given the inclusion of these non-recurring charges, management does not consider the prior year`s net income and earnings per share (“EPS”) to be comparable with the current period. Management has prepared a proforma 2001 statement of net income including proforma EPS, which is available on FHR`s investor website, www.fairmont.com/investor.
“We are pleased to report EBITDA(1) of $198.3 million in 2002, which is at the high end of our expectations. This represents a 21.6% improvement over 2001 levels, which we expect to be the largest EBITDA growth among major hoteliers this year,” said William R. Fatt, Chief Executive Officer of FHR. On a comparable basis, revenue per available room (“RevPAR”) for our owned hotels decreased 1.3%, while RevPAR at the Fairmont managed properties was down 2.0%. These results are anticipated to be ahead of overall industry performance.”
Continued Mr. Fatt, “Our hotel portfolio continues to benefit from our balanced customer mix and geographical diversity. FHR`s strength in the leisure segment has helped mitigate the effect of prolonged weakness in corporate demand. FHR`s resorts represent about 70% of the company`s earnings. Our Canadian properties account for approximately half of our annual EBITDA and Canadian economic performance has been very strong. In addition, extensive investments in renovations over the past few years are beginning to generate substantial returns.”
“The acquisition of The Fairmont Orchid, Hawaii, and the addition of The Fairmont Washington, D.C. management contract in December 2002 expanded the Fairmont portfolio to 41 properties in six countries. We look forward to strengthening the positioning and overall performance of these two properties,” added Mr. Fatt.
Fourth Quarter Consolidated Results: Operating revenues increased to $125.6 million, up 28.6% from $97.7 million in 2001. Fourth quarter EBITDA more than doubled to $32.8 million from $14.4 million in 2001, meeting management`s expectation of $24.5 - $34.5 million. EBITDA benefited from a $5.8 million gain on the sale of real estate in Bermuda, which was included in our guidance, while no gains on land sales were realized in the same period last year.
Income from continuing operations was $11.0 million compared to income from continuing operations of $49.6 million in 2001. In 2001, income from continuing operations included an income tax recovery of $51.4 million that related primarily to tax benefits realized on expenses incurred to complete the CPL reorganization and the impact of various favorable tax reassessments. For the quarter, EPS from continuing operations was $0.14, which met management`s EPS expectation of $0.10 - $0.15.
Fourth Quarter Hotel Ownership Operations: Revenues from hotel ownership improved 22.0% to $109.1 million compared to 2001. FHR`s strength in the leisure segment combined with its recently renovated properties has softened the impact of weaker corporate travel caused by a sluggish global economy and the potential for U.S. military action. The acquisition of The Fairmont Orchid, Hawaii closed in mid-December and therefore had a minimal impact on fourth quarter earnings.
RevPAR increased 12.6% compared to the fourth quarter of 2001, resulting from a 6.3 point increase in occupancy and stable average daily rate (“ADR”). The Canadian owned hotels showed the greatest RevPAR increase at 16.8%, driven by improvements in both occupancy and ADR. RevPAR increased by 9.8% at FHR`s U.S. and International comparable portfolio, resulting from a 7.2 point rise in occupancy notwithstanding a 4.4% drop in ADR. In addition, the two Bermuda properties showed significant improvement with combined RevPAR increases of 42.3%. These hotels were not included in the comparable portfolio due to the impact of significant renovations in 2001.
Fourth Quarter Management Operations / Fairmont / Revenues under management of $323 million increased 19.2% over 2001 as a result of the addition in 2002 of long-term management contracts for The Fairmont Dubai, the Sheraton Suites Calgary Eau Claire, The Fairmont Sonoma Mission Inn & Spa and The Fairmont Washington, D.C. as well as RevPAR improvements at almost all other hotels. Management fee revenues increased to $11.0 million from $9.3 million in 2001, consistent with the increase in revenues under management. Incentive fee revenues were relatively unchanged from 2001.
RevPAR improved 9.3% during the fourth quarter, driven by an increase in occupancy of 3.5 points and a 3.0% rise in ADR to $158.17. The Canadian comparable hotels and the U.S. and International portfolio experienced RevPAR growth of 11.4% and 6.8%, respectively.
Delta - In the fourth quarter of 2002, revenues under management increased 4.3% to $72 million from $69 million in 2001 resulting in management fee revenues increasing to $2.8 million compared to $2.2 million in 2001. During the quarter, Delta posted an 8.9% RevPAR increase, resulting from a 2.3 point improvement in occupancy and a 4.5% rise in ADR. The Delta Sun Peaks Resort in Kamloops, British Columbia opened in December and the Delta St. Eugene Mission Resort in Cranbrook, British Columbia opened in January 2003.
Year-End Consolidated Results / Operating revenues increased 9.9% to $590.6 million for the year ended December 31, 2002. The improvement in revenues was attributable to 2002 portfolio additions as well as returns realized from capital investments made to properties in 2000 and 2001. EBITDA of $198.3 million was up 21.6% and was positively impacted by land sale gains of $11.5 million in 2002 and approximately $3.7 million in first quarter cost reductions. Income from continuing operations was $92.5 million compared to a loss from continuing operations of $28.2 million in the prior period. EPS from continuing operations was $1.18 in 2002, which met management`s guidance of $1.14-$1.19. This compared to a loss from continuing operations of $0.43 per share in 2001. These improvements are attributable to improved operating performance in 2002 and non-recurring charges related to the CPL reorganization in 2001.
Year-End Hotel Ownership Operations / Revenues from hotel ownership of $516.6 million improved 5.5% compared to 2001. Superior performance at the renovated hotels not included in the comparable set, particularly the two Bermuda properties, was the main contributor to this growth. RevPAR for the comparable owned hotels declined 1.3% from $114.14 in 2001 resulting mainly from a 2.3% drop in ADR. It is anticipated that the newly acquired properties and improving returns on the Company`s renovated hotels will drive results.
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