 |
Search -
Finance Home -
Yahoo! -
Help |  |
|
Search -
Finance Home -
Yahoo! -
Help | |
|
Quotes & Info
|
| OEH > SEC Filings for OEH > Form 10-Q on 6-Nov-2009 | All Recent SEC Filings |
6-Nov-2009
Quarterly Report
Introduction
OEH has three business segments, namely (1) hotels and restaurants, (2) tourist trains and cruises and (3) real estate and property development. Hotels currently consist of 39 deluxe hotels. Thirty-five of these hotels are wholly or majority owned (except Charleston Place Hotel), and are referred to in this discussion as "owned hotels." As explained in Note 3 to the financial statements, OEH holds a 19.9% equity investment in Charleston Center LLC, owner of Charleston Place Hotel, which OEH manages and has consolidated into its financial statements effective December 31, 2008. The other four hotels, in which OEH has unconsolidated equity interests and operate under management contracts, are referred to in this discussion as "hotel management interests." Of the owned hotels, 11 are located in Europe, seven in North America and 17 in the rest of the world.
On June 2, 2009, OEH sold the Lapa Palace Hotel in Lisbon, Portugal at a price of $42.0 million, of which $15.7 million is deferred until 2010, which resulted in a gain of $5.0 million (or $0.08 per share). In June 2009, OEH decided to sell Windsor Court Hotel in New Orleans. The sale of the property occurred on October 2, 2009 for cash consideration of $44.25 million. The operation of these two hotels was not material to OEH's consolidated financial statements, and accordingly, pro forma data have not been presented. In December 2007, OEH decided to sell its investment in Bora Bora Lagoon Resort. The results of these three hotels have been presented as discontinued operations for all of the interim periods presented.
OEH currently owns and operates the restaurants '21' Club in New York and La Cabana in Buenos Aires. In September 2009, OEH decided to sell its investment in La Cabana restaurant and its results have been presented as discontinued operations for all the interim periods presented.
OEH's tourist trains and cruises segment operates six tourist trains - four of which are owned and operated by OEH, one in which OEH has an equity interest and exclusive management contracts, and one in which OEH has an equity investment - and a river cruiseship and five canalboats.
For a discussion of OEH's liquidity, see under the heading "Liquidity and Capital Resources" below. On May 4, 2009, the Company completed a public offering through underwriters in the United States of 25,875,000 newly issued class A common
shares including 3,375,000 shares covered by the underwriters' over-allotment option in the offering which was exercised in full. OEH is using the net proceeds, approximately $140.9 million, primarily for debt reduction and general corporate purposes.
For a discussion of the impact of foreign exchange rate movements on OEH's results of operations and financial condition and the change of application of accounting policy for Porto Cupecoy, see Item 7 - Management's Discussion and Analysis in the Company's 2008 Form 10-K annual report.
Results of Operations
Three months Ended September 30, 2009 compared to
Three months Ended September 30, 2008
OEH's operating results for the three months ended September 30, 2009 and 2008, expressed as a percentage of revenue, were as follows:
Three months ended September 30, 2009 2008
% %
Revenue
Hotels and restaurants 84 82
Tourist trains and cruises 15 16
Real estate 1 2
100 100
Expenses
Depreciation and amortization 8 5
Operating 50 46
Selling, general and administrative 31 28
Impairment of fixed assets 7 0
Net finance costs 2 8
Earnings before income taxes 2 13
Provision for income taxes (5 ) (4 )
Earnings from unconsolidated companies 1 3
Net (losses)/earnings from continuing operations (2 ) 12
Net losses from discontinued operations, net of tax (7 ) (8 )
Net (losses)/earnings as a percentage of revenue (9 ) 4
|
Segment net earnings before interest, foreign currency, tax (including tax on unconsolidated companies), depreciation and amortization ("segment EBITDA") of OEH's operations for the three months ended September 30, 2009 and 2008 are analyzed as follows (dollars in millions):
Three months ended September 30, 2009 2008 Segment EBITDA: Owned hotels: Europe $ 25.6 $ 35.9 North America (0.1 ) 0.3 Rest of the World 4.7 6.7 Hotel management interests (0.1 ) 4.7 Restaurants (0.5 ) (0.3 ) Tourist trains and cruises 7.7 10.2 Real estate (0.8 ) (0.2 ) Impairment of fixed assets (9.8 ) 0.0 Central overheads (7.4 ) (6.2 ) Total segment EBITDA $ 19.3 $ 51.1 |
The foregoing segment EBITDA reconciles to net (losses)/earnings as follows (dollars in millions):
Three months ended September 30, 2009 2008 Net (losses)/earnings $ (13.0 ) $ 6.4 Add: Depreciation and amortization 11.0 8.9 Net finance costs 3.1 13.4 Provision for income taxes 7.3 6.7 Loss from discontinued operations, net of tax 10.3 14.1 Share of provision for income taxes of unconsolidated companies 0.6 1.6 Segment EBITDA $ 19.3 $ 51.1 |
Management evaluates the operating performance of OEH's segments on the basis of segment EBITDA and believes that segment EBITDA is a useful measure of operating performance because segment EBITDA is not affected by non-operating factors such as leverage and the historic cost of assets. EBITDA is a financial measure commonly used in OEH's industry. OEH's segment EBITDA, however, may not be comparable in all instances to EBITDA as disclosed by other companies. Segment EBITDA should not be considered as an alternative to earnings from operations or net earnings (as determined in accordance with U.S. generally accepted accounting principles) as a measure of OEH's operating performance, or as an alternative to net cash provided by operating, investing and financing activities (as determined in accordance with U.S. generally accepted accounting principles) as a measure of OEH's ability to meet cash needs.
Operating information for OEH's owned hotels for the three months ended September 30, 2009 and 2008 is as follows:
Three months
ended
September 30,
2009 2008
Average Daily Rate (in dollars)
Europe 797 962
North America 273 308
Rest of the world 282 279
Worldwide 458 517
Rooms Available (in thousands)
Europe 82 82
North America 67 66
Rest of the world 119 109
Worldwide 268 257
Rooms Sold (in thousands)
Europe 48 55
North America 36 41
Rest of the world 55 66
Worldwide 139 162
Occupancy (percentage)
Europe 59 67
North America 54 62
Rest of the world 46 61
Worldwide 52 63
RevPAR (in dollars)
Europe 470 639
North America 147 193
Rest of the world 130 167
Worldwide 238 324
Change %
Local
Dollars Currency
Same Store RevPAR (in dollars)
Europe 470 639 -26 % -18 %
North America 193 282 -31 % -31 %
Rest of the world 145 180 -19 % -18 %
Worldwide 280 379 -26 % -20 %
|
Average daily rate is the average amount achieved for the rooms sold. RevPAR is revenue per available room, that is the rooms revenue divided by the number of available rooms for each night
of operation. Occupancy is the number of rooms sold divided by the number of available rooms. Same store RevPAR is a comparison based on the operations of the same units in each period, such as by excluding the effect of any acquisitions or major refurbishments. The same store data excludes the following operations:
Hotel das Cataratas Charleston Place Hotel
Lapa Palace Windsor Court
Bora Bora Lagoon Resort The Governor's Residence
La Residence D'Angkor
|
Overview
The net loss for the three months ended September 30, 2009 was $13.0 million ($0.17 per common share) on revenue of $142.2 million, compared with net earnings of $6.4 million ($0.15 per common share) on revenue of $170.9 million in the third quarter of the prior year. OEH's revenue in the current quarter was adversely affected by the global economic downturn. Costs continue to be under tight control.
Excluding discontinued operations, the net loss for the three months ended September 30, 2009 was $2.7 million compared with net earnings of $20.6 million in the three months ended September 30, 2008.
Revenue
Three months ended September 30, 2009 2008
(dollars in thousands)
Revenue:
Hotels and restaurants
Owned hotels
Europe $ 67,535 $ 88,117
North America 19,897 13,184
Rest of the world 29,113 33,437
Hotel management/part ownership interests 1,109 2,426
Restaurants 2,151 2,899
119,805 140,063
Tourist trains and cruises 20,682 27,424
Real estate 1,688 3,454
$ 142,175 $ 170,941
|
Total revenue decreased by $28.7 million, or 17%, from $170.9 million in the three months ended September 30, 2008 to $142.2 million in the three months ended September 30, 2009. Revenue in the three months ended September 30, 2009 included $10.0 million at Charleston Place Hotel, which is consolidated for the
first time in the current year. The remaining hotels and restaurants revenue decreased by $30.3 million, or 22%, from $140.1 million in the three months ended September 30, 2008 to $109.8 million in the three months ended September 30, 2009. Tourist trains and cruises revenue decreased by $6.7 million, or 25%, from $27.4 million for the three months ended September 30, 2008 to $20.7 million for the three months ended September 30, 2009.
The decrease in hotel revenue was due primarily to the combination of lower occupancy and lower average rates across the group.
The revenue from restaurants decreased by $0.7 million, or 26%, from $2.9 million in the three months ended September 30, 2008 to $2.2 million for the three months ended September 30, 2009.
For owned hotels overall, same store RevPAR in U.S. dollars decreased by 26% in the three months ended September 30, 2009 compared to the three months ended September 30, 2008. Measured in local currencies this decrease was 20%.
The change in revenue at owned hotels is analyzed on a regional basis as follows:
Europe
Revenue decreased by $20.6 million, or 23%, from $88.1 million for the three months ended September 30, 2008 to $67.5 million for the three months ended September 30, 2009. Difficult trading conditions across Europe caused average daily rates to fall by 17% from $962 in the three months ended September 30, 2008 to $797 in the three months ended September 30, 2009, and occupancy to fall from 66% in the three months ended September 30, 2008 to 59% in the three months ended September 30, 2009. On a same store basis, RevPAR in local currency decreased by 18%, and in U.S. dollars this translated into a decrease of 26%.
Exchange rate movements caused revenue to fall by $6.0 million in the three months ended September 30, 2009 compared with the same period in 2008.
North America
Revenue increased by $6.7 million, or 51%, from $13.2 million in the three months ended September 30, 2008 to $19.9 million in the three months ended September 30, 2009. The 2009 revenue included $10.0 million at Charleston Place Hotel, which OEH consolidated from January 1, 2009 for the first time. The remainder of revenue in the North America region fell by $3.3 million, or 25%, in the three months ended September 30, 2009 to $9.9 million.
Following the outbreak of H1N1 (swine flu) in Mexico, occupancy at Maroma Resort & Spa declined from 48% in the three months ended September 30, 2008 to 22% in the same period in 2009. Revenue at this hotel fell by $1.7 million, or 59%, from $2.8 million in the three months ended September 30, 2008 to $1.1 million in the three months ended September 30, 2009.
On a same store basis, excluding Charleston Place Hotel, RevPAR decreased by 31%. Average occupancy across the North American properties was 54% compared to 67% in the same period in 2008. Average daily rates fell by 15% from $421 in the three months ended September 30, 2008 to $359 in the three months ended September 30, 2009.
Rest of the World
Revenue decreased by $4.3 million, or 13%, from $33.4 million in the three months ended September 30, 2008 to $29.1 million in the three months ended September 30, 2009. Exchange rate movements across the region were responsible for $1.5 million of the revenue fall and a decline in average room rates and occupancy caused overall revenue to drop by $2.8 million.
Revenue at OEH's hotels in South America collectively decreased by $1.2 million, or 10%, from $12.5 million in the three months ended September 30, 2008 to $11.3 million in the three months ended September 30, 2009. Had exchange rates remained the same for the three months of 2009 compared to the three months of 2008, South American revenue would have decreased by $0.3 million for the three months ended September 30, 2009 compared to the three months ended September 30, 2008.
Southern Africa revenue decreased by $2.8 million, or 29%, from $10.0 million in the three months ended September 30, 2008 to $7.2 million in the three months ended September 30, 2009. Revenue at OEH's two Australian properties decreased by $0.4 million, or 6%, to $5.6 million in the three months ended September 30, 2009; $0.3 million, was due to the depreciation of the Australian dollar against the U.S. dollar.
The RevPAR on a same store basis for the Rest of the World region decreased by 18% in local currencies in the three months ended September 30, 2009 compared to the three months ended September 30, 2008. This translates to a 19% decrease when expressed in U.S. dollars.
Hotel Management and Part-Ownership Interests: Revenue decreased by $1.3 million from $2.4 million in the three months ended September 30, 2008 to $1.1 million in the three months ended September 30, 2009. The 2008 revenue included $0.9 million in respect of Charleston Place Hotel, which is included within OEH's consolidated earnings with effect from January 1, 2009. Excluding this hotel from the prior year, revenue from hotel management and part ownership interests decreased by $0.5 million from $1.6 million in the three months ended September 30, 2008 to $1.1 million in the three months ended September 30, 2009.
Restaurants: Revenue decreased by $0.7 million, or 26%, from $2.9 million in the three months ended September 30, 2008 to $2.2 million in the three months ended September 30, 2009. La Cabana was accounted for as discontinued operations for the first time during the three months ended September 30, 2009 and was excluded from both years.
Trains and Cruises: Revenue decreased by $6.7 million, or 25%, from $27.4 million in the three months ended September 30, 2008 to $20.7 million in the three months ended September 30, 2009. Venice Simplon-Orient-Express revenue decreased by $3.2 million from $9.7 million in the three months ended September 30, 2008 to $6.5 million in the three months ended September 30, 2009. Fewer day train services were operated in the United Kingdom in the three months ended September 30, 2009 than in the prior year, resulting in a revenue decrease of $2.5 million compared with the same period in the prior year.
Real Estate: Although two condominiums at Porto Cupecoy were sold during the three months ended September 30, 2009, no revenue was recognized following OEH's decision to change the application of its accounting policy in respect of the Porto Cupecoy development in the fourth quarter of 2008. Revenue of $3.5 million was recognized in the three months ended September 30, 2008 at Porto Cupecoy under the percentage completion method of accounting. Two villas at Napasai were sold during the three months ended September 30, 2009 for $1.7 million. There was no revenue at Keswick Hall in the three months ended September 30, 2009 or in the three months ended September 30, 2008.
Depreciation and amortization
Depreciation and amortization increased by $2.1 million from $8.9 million in the three months ended September 30, 2008 to $11.0 million in the three months ended September 30, 2009. The 2009 depreciation charge includes an expense of $1.9 million in respect of Charleston Place. Excluding this charge, depreciation was $0.2 million higher in 2009 than in the prior period.
Operating expenses
Operating expenses decreased by $7.6 million from $78.3 million in the three months ended September 30, 2008 to $70.7 million in the three months ended September 30, 2009. Operating expenses in 2009 include an expense of $4.6 million in respect of Charleston Place. The remaining operating expenses were $12.2 million lower in 2009 than in the comparable 2008 period. Operating expenses were 46% of revenue in the three months ended September 30, 2008 and 50% of revenue in the three months ended September 30, 2009. Excluding Charleston Place Hotel's revenue and expenses, operating expenses in 2009 still represented 50% of revenue.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased by $3.1 million from $47.4 million in the three months ended September 30, 2008 to $44.3 million in the three months ended September 30, 2009. The 2009 costs include an expense of $3.5 million in respect of Charleston Place Hotel. The remaining selling, general and administrative expenses were $6.6 million lower in 2009 than in the prior period, $0.9 million of which was due to exchange rates for the three months ended September 30, 2009 compared with exchange rates in the same period in 2008. Selling, general and administrative expenses were 28% of revenue in the three months ended September 30, 2008 and 31% of revenue in the three months ended September 30, 2009. Excluding Charleston Place Hotel's revenue and expenses, selling, general and administrative expenses in 2009 were also 31% of revenue in 2009.
Impairment of fixed assets
In the three months ended September 30, 2009, OEH identified a non-cash property, plant and equipment impairment charge of $9.8 million in respect of its Lilianfels Blue Mountains hotel. The carrying value of the assets was written down to the fair value based on the management's best estimate.
Segment EBITDA
Three months ended September 30 2009 2008
(dollars in thousands)
Segment EBITDA:
Hotels and restaurants
Owned hotels
Europe $ 25,595 $ 35,905
North America (68 ) 300
Rest of the world 4,704 6,681
Hotel management/part ownership interests (141 ) 4,664
Restaurants (494 ) (269 )
29,596 47,281
Tourist trains and cruises 7,686 10,247
Real estate (740 ) (223 )
Impairment of fixed assets (9,809 ) -
Central overheads (7,418 ) (6,195 )
$ 19,315 $ 51,110
|
Segment EBITDA for the three months ended September 30, 2009 decreased by 62% from $51.1 million in 2008 to $19.3 million in 2009. Segment EBITDA decreased in 2009 mainly due to a challenging trading period and an impairment of fixed assets of $9.8 million. Segment EBITDA margins (calculated as segment EBITDA as a percentage of revenue) decreased by 16% from 30% for the three months ended September 30, 2008, to 14% for the three months ended September 30, 2009.
The European hotels collectively reported a segment EBITDA of $25.6 million in 2009 compared to $35.9 million in the same period in 2008. As a percentage of European hotels revenue, the European segment EBITDA margin fell from 41% in 2008 to 38% in 2009.
With the inclusion of Charleston Place Hotel from January 1, 2009, segment EBITDA in the North American hotel region decreased from $0.3 million in the three months ended September 30, 2008 to $(0.1) million in the three months ended September 30, 2009. Excluding Charleston Place Hotel, segment EBITDA in the North American region decreased by $2.2 million, from $0.3 million in the three months ended September 30, 2008, to $(1.9) million in the three months ended September 30, 2009.
Segment EBITDA in the Rest of the World hotel region decreased by 30% from $6.7 million in the three months ended September 30, 2008 to $4.7 million in the three months ended September 30, 2009. The segment EBITDA margin for the three months ended September 30, 2009 was 16%, compared to a margin of 20% for the same period in 2008.
Earnings from operations before net finance costs
Earnings from operations decreased by $30.1 million from a profit of $36.4 million in the three months ended September 30, 2008 to a profit of $6.3 million in the three months ended September 30, 2009, due to the factors described above.
Net finance costs
Net finance costs were $13.4 million for the three months ended September 30, 2008 and $3.1 million for the three months ended September 30, 2009. The three months ended September 30, 2008 included a foreign exchange loss of $2.5 million compared to a foreign exchange gain of $4.7 million in the three months ended September 30, 2009. Excluding these foreign exchange items, net interest expense decreased by $3.1 million, or 29%, from $10.9 million in the three months ended September 30, 2008 to $7.8 million in the three months ended September 30, 2009, primarily due to lower interest rates in the three months ended September 30, 2009 compared to the same period in the prior year.
Provision for income taxes
The provision for income taxes increased by $0.6 million, from a provision of $6.7 million in the three months ended September 30, 2008 to a provision of $7.3 million in the three months ended September 30, 2009.
The provision for income taxes for the three months ended September 30, 2009 included a deferred tax charge of $1.6 million arising in respect of Brazilian fixed asset timing differences, following movements in the exchange rate between the dollar and Brazilian real, and a deferred tax benefit of $2.9 million arising in respect of fixed asset timing differences, following an impairment of $9.8 million in the book value of fixed assets in Australia.
The provision for income taxes of $7.3 million for the three months ended September 30, 2009 included a tax provision of $0.3 million in respect of OEH's liability for uncertain tax positions under ASC 740, "Income Taxes" (formerly FIN 48), compared to a provision of $0.1 million in respect of the liability in the three months ended September 30, 2008.
Earnings from unconsolidated companies
Earnings from unconsolidated companies net of tax decreased by $2.8 million, from $4.2 million in the three months ended September 30, 2008 to $1.4 million in the three months ended September 30, 2009. The 2008 earnings included $1.6 million in respect of Charleston Place Hotel, which is included within OEH's consolidated earnings with effect from January 1, 2009. Excluding this hotel from the prior year, earnings from unconsolidated companies net of tax decreased by $1.2 million from $2.6 million in the three months ended September 30, 2008 to $1.4 million in the three months ended September 30, 2009. The tax cost associated with earnings from unconsolidated companies, excluding Charleston Place Hotel, was $0.9 million in 2008 and $0.6 million in 2009.
Loss from discontinued operations
The loss from discontinued operations consisted of the losses arising from Bora Bora Lagoon Resort, Windsor Court Hotel and La Cabana restaurant which are being held for sale, and the earnings of the Lapa Palace Hotel, which was sold during the three months ended June 30, 2009 including the gain arising on that sale.
Bora Bora Lagoon Resort's net loss decreased from $11.2 million for the three months ended September 30, 2008 to $4.1 million for the three months ended September 30, 2009. The 2008 and 2009 losses include impairment charges of $12.0 million and $4.5 million for this property, respectively.
. . .
|
|
