Four Seasons Hit Hard By World Events

TORONTO— Four Seasons Hotels said that it expects earnings for the third and fourth quarter of 2002 to be lower than the guidance provided by the company at the end of the second quarter. The company, based here, said there “remains, significant uncertainty regarding the timing, extent and pace of the economic recovery, making it particularly difficult to develop forward-looking information with confidence.” Four Seasons also said “the continued volatility of the equity markets and the weakening global economy, combined with localized terrorist activities in various areas of the world and broader concerns about terrorism and potential military actions against Iraq, have continued to cause unprecedented volatility in business travel on a global basis. Leisure travel is also being negatively affected in certain areas due to both terrorist acts and adverse economic conditions.” Other negatives affecting the company include a dispute with the owners of the Four Seasons Hotel Caracas has closed that property and the hotels debt and working capital arrangements can be restructured to provide sufficient funds to allow the property to operate on the basis specified in the companys management agreement, said Four Seasons. Moreover, in the third quarter, the Four Seasons Hotel Prague closed because of severe flooding. The Regent Hotel in Jakarta, which was also closed because of flooding in February of this year, has not yet reopened. And the two Four Seasons resorts in Bali are experiencing significant cancellations following the recent acts of terrorism in the area. Meanwhile, Four Seasons reports that the New York market continues to have particular difficulty recovering from the events of and following 9/11. That hits Seasons hard, since it has 100% ownership in The Pierre. As a result, revenues for the third quarter are likely to be approximately $4 million below the levels anticipated by the company in August when the guidance was provided, primarily as a result of reduced base and incentive fees and lower fees from the companys residential projects. The incentive fee variance is the result of reduced incentive fees from several Four Seasons hotels and due principally to the weak travel conditions during the quarter, which worsened in late September, particularly in the resorts under management. Two of the companys properties under management experienced profitability declines over the course of the third quarter, causing them to miss their hurdle targets. This has required the reversal in the third quarter of approximately $1 million of incentive fees booked in the first and second quarter of 2002. The continuing softness of the U.S. economy and ongoing decline in consumer confidence levels have also resulted in fees from residential projects being less than the Companys previous short-term expectations. Hotel ownership losses in the third quarter likely will exceed the levels anticipated by the company at the time guidance was provided by approximately $1 million. The majority of this loss was generated by The Pierre, which experienced an unanticipated decline in profitability resulting in a loss before other operating items even greater than that incurred in the third quarter of 2001.