UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2012
or
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-16017
ORIENT-EXPRESS HOTELS LTD.
(Exact name of registrant as specified in its charter)
Bermuda |
|
98-0223493 |
(State or other jurisdiction |
|
(I.R.S. Employer |
of incorporation or |
|
Identification No.) |
organization) |
|
|
|
|
|
22 Victoria Street P.O. Box HM 1179 Hamilton HMEX, Bermuda |
|
|
(Address of principal executive offices) |
|
(Zip Code) |
441-295-2244
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act).
Large Accelerated Filer x |
|
Accelerated Filer o |
|
|
|
Non-Accelerated Filer o |
|
Smaller Reporting Company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of April 27, 2012, 102,891,537 Class A common shares and 18,044,478 Class B common shares of Orient-Express Hotels Ltd. were outstanding. All of the Class B shares are owned by a subsidiary of Orient-Express Hotels Ltd.
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Orient-Express Hotels Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
|
|
March 31, |
|
December 31, |
|
Assets |
|
|
|
|
|
Cash and cash equivalents |
|
66,516 |
|
90,104 |
|
Restricted cash |
|
15,190 |
|
13,214 |
|
Accounts receivable, net of allowances of $678 and $602 |
|
50,947 |
|
44,972 |
|
Due from unconsolidated companies |
|
10,616 |
|
10,754 |
|
Prepaid expenses and other |
|
28,081 |
|
20,176 |
|
Inventories |
|
46,056 |
|
44,499 |
|
Assets of discontinued operations held for sale |
|
16,869 |
|
38,251 |
|
Real estate assets |
|
31,210 |
|
32,021 |
|
|
|
|
|
|
|
Total current assets |
|
265,485 |
|
293,991 |
|
|
|
|
|
|
|
Property, plant and equipment, net of accumulated depreciation of $305,672 and $289,185 |
|
1,211,931 |
|
1,174,119 |
|
Property, plant and equipment of consolidated variable interest entities |
|
185,213 |
|
185,788 |
|
Investments in unconsolidated companies |
|
61,016 |
|
60,012 |
|
Goodwill |
|
165,237 |
|
161,460 |
|
Other intangible assets |
|
19,318 |
|
19,465 |
|
Other assets |
|
40,115 |
|
36,034 |
|
|
|
|
|
|
|
|
|
1,948,315 |
|
1,930,869 |
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
Working capital loans |
|
133 |
|
|
|
Accounts payable |
|
26,647 |
|
28,998 |
|
Accrued liabilities |
|
93,091 |
|
87,617 |
|
Deferred revenue |
|
47,164 |
|
30,881 |
|
Liabilities of discontinued operations held for sale |
|
781 |
|
1,781 |
|
Current portion of long-term debt and obligations under capital leases |
|
66,185 |
|
77,058 |
|
Current portion of long-term debt of consolidated variable interest entities |
|
1,765 |
|
1,784 |
|
|
|
|
|
|
|
Total current liabilities |
|
235,766 |
|
228,119 |
|
|
|
|
|
|
|
Long-term debt and obligations under capital leases |
|
470,895 |
|
466,830 |
|
Long-term debt of consolidated variable interest entities |
|
88,319 |
|
88,745 |
|
Liability for pension benefit |
|
8,921 |
|
8,642 |
|
Other liabilities |
|
25,571 |
|
26,145 |
|
Deferred income taxes |
|
95,040 |
|
94,036 |
|
Deferred income taxes of consolidated variable interest entities |
|
60,881 |
|
61,072 |
|
Liability for uncertain tax positions |
|
5,044 |
|
4,755 |
|
|
|
|
|
|
|
|
|
990,437 |
|
978,344 |
|
Commitments and contingencies (Note 17) |
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Shareholders equity: |
|
|
|
|
|
Preferred shares $0.01 par value (30,000,000 shares authorized, issued Nil) |
|
|
|
|
|
Class A common shares $0.01 par value (240,000,000 shares authorized): |
|
|
|
|
|
Issued - 102,870,147 (2011 - 102,625,857) |
|
1,028 |
|
1,026 |
|
Class B common shares $0.01 par value (120,000,000 shares authorized): |
|
|
|
|
|
Issued - 18,044,478 (2011 - 18,044,478) |
|
181 |
|
181 |
|
|
|
|
|
|
|
Additional paid-in capital |
|
977,136 |
|
975,330 |
|
Retained earnings |
|
30,592 |
|
46,263 |
|
Accumulated other comprehensive loss |
|
(53,342 |
) |
(72,289 |
) |
Less: Reduction due to class B common shares owned by a subsidiary - 18,044,478 |
|
(181 |
) |
(181 |
) |
|
|
|
|
|
|
Total shareholders equity |
|
955,414 |
|
950,330 |
|
Non-controlling interests |
|
2,464 |
|
2,195 |
|
|
|
|
|
|
|
Total equity |
|
957,878 |
|
952,525 |
|
|
|
|
|
|
|
|
|
1,948,315 |
|
1,930,869 |
|
See notes to condensed consolidated financial statements.
Orient-Express Hotels Ltd. and Subsidiaries
Statements of Condensed Consolidated Operations (unaudited)
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Revenue |
|
108,852 |
|
100,153 |
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
Cost of services |
|
54,299 |
|
50,396 |
|
Selling, general and administrative |
|
52,739 |
|
48,247 |
|
Depreciation and amortization |
|
11,028 |
|
10,992 |
|
|
|
|
|
|
|
Total expenses |
|
118,066 |
|
109,635 |
|
|
|
|
|
|
|
Gain on disposal of property, plant and equipment |
|
|
|
606 |
|
|
|
|
|
|
|
Losses from operations |
|
(9,214 |
) |
(8,876 |
) |
|
|
|
|
|
|
Interest expense, net |
|
(7,461 |
) |
(9,311 |
) |
Foreign currency, net |
|
865 |
|
963 |
|
|
|
|
|
|
|
Net finance costs |
|
(6,596 |
) |
(8,348 |
) |
|
|
|
|
|
|
Losses before income taxes and earnings from unconsolidated companies, net of tax |
|
(15,810 |
) |
(17,224 |
) |
|
|
|
|
|
|
(Provision for)/benefit from income taxes |
|
(248 |
) |
4,739 |
|
|
|
|
|
|
|
Losses before losses from unconsolidated companies |
|
(16,058 |
) |
(12,485 |
) |
|
|
|
|
|
|
Losses from unconsolidated companies, net of tax of $(14) and $(233) |
|
(32 |
) |
(532 |
) |
|
|
|
|
|
|
Net losses from continuing operations |
|
(16,090 |
) |
(13,017 |
) |
|
|
|
|
|
|
Net earnings/(losses) from discontinued operations, net of tax of $405 and $Nil |
|
690 |
|
(1,663 |
) |
|
|
|
|
|
|
Net losses |
|
(15,400 |
) |
(14,680 |
) |
|
|
|
|
|
|
Net earnings attributable to non-controlling interests |
|
(271 |
) |
(227 |
) |
|
|
|
|
|
|
Net losses attributable to Orient-Express Hotels Ltd |
|
(15,671 |
) |
(14,907 |
) |
|
|
|
|
|
|
|
|
$ |
|
$ |
|
|
|
|
|
|
|
Basic losses per share: |
|
|
|
|
|
Net losses from continuing operations |
|
(0.16 |
) |
(0.13 |
) |
Net earnings/(losses) from discontinued operations |
|
0.01 |
|
(0.02 |
) |
Basic net losses per share attributable to Orient-Express Hotels Ltd |
|
(0.15 |
) |
(0.15 |
) |
|
|
|
|
|
|
Diluted losses per share: |
|
|
|
|
|
Net losses from continuing operations |
|
(0.16 |
) |
(0.13 |
) |
Net earnings/(losses) from discontinued operations |
|
0.01 |
|
(0.02 |
) |
Diluted net losses per share attributable to Orient-Express Hotels Ltd |
|
(0.15 |
) |
(0.15 |
) |
|
|
|
|
|
|
Dividends per share |
|
|
|
|
|
See notes to condensed consolidated financial statements.
Orient-Express Hotels Ltd. and Subsidiaries
Statements of Condensed Consolidated Comprehensive Income (unaudited)
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Net losses |
|
(15,400 |
) |
(14,680 |
) |
Net earnings attributable to non-controlling interests |
|
(271 |
) |
(227 |
) |
|
|
|
|
|
|
Net losses attributable to Orient-Express Hotels Ltd |
|
(15,671 |
) |
(14,907 |
) |
|
|
|
|
|
|
Other comprehensive income, net of tax: |
|
|
|
|
|
Foreign currency translation adjustments, net of tax of $Nil and $Nil |
|
19,645 |
|
17,097 |
|
Change in fair value of derivatives, net of tax (benefit)/provision of $(87) and $1,423 |
|
(520 |
) |
4,561 |
|
Change in pension liability, net of tax of $Nil and $Nil |
|
(178 |
) |
|
|
|
|
|
|
|
|
Total other comprehensive income, net of tax |
|
18,947 |
|
21,658 |
|
|
|
|
|
|
|
Comprehensive income |
|
3,276 |
|
6,751 |
|
See notes to condensed consolidated financial statements.
Orient-Express Hotels Ltd. and Subsidiaries
Statements of Condensed Consolidated Cash Flows (unaudited)
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
Net losses |
|
(15,400 |
) |
(14,680 |
) |
Less: Net earnings/(losses) from discontinued operations, net of tax |
|
690 |
|
(1,663 |
) |
|
|
|
|
|
|
Net losses from continuing operations |
|
(16,090 |
) |
(13,017 |
) |
Adjustment to reconcile net losses to net cash (used in)/provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
11,028 |
|
10,992 |
|
Amortization of finance costs |
|
1,275 |
|
931 |
|
Undistributed losses of unconsolidated companies |
|
46 |
|
765 |
|
Tax on losses of unconsolidated companies |
|
(14 |
) |
(233 |
) |
Share-based compensation |
|
1,937 |
|
1,572 |
|
Change in deferred income tax |
|
(8,265 |
) |
(6,274 |
) |
Gain from disposal of property, plant and equipment |
|
|
|
(606 |
) |
Increase/(decrease) in provisions for uncertain tax positions |
|
289 |
|
(2,056 |
) |
Other non-cash items |
|
413 |
|
378 |
|
Change in assets and liabilities net of effects from acquisition of subsidiaries: |
|
|
|
|
|
Increase in receivables, prepaid expenses and other |
|
(9,442 |
) |
(2,324 |
) |
Increase in due from unconsolidated companies |
|
(742 |
) |
(1,268 |
) |
Increase in escrow and prepaid customer deposits |
|
(1,828 |
) |
(1,992 |
) |
Increase in inventories |
|
(629 |
) |
(926 |
) |
Decrease in real estate assets |
|
810 |
|
1,076 |
|
Increase in payables, accrued liabilities, and deferred revenue |
|
14,056 |
|
15,271 |
|
|
|
|
|
|
|
Net cash (used in)/provided by operating activities from continuing operations |
|
(7,156 |
) |
2,289 |
|
Net cash used in operating activities from discontinued operations |
|
(952 |
) |
(1,251 |
) |
|
|
|
|
|
|
Net cash (used in)/provided by operating activities |
|
(8,108 |
) |
1,038 |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Capital expenditures |
|
(19,618 |
) |
(14,408 |
) |
Acquisitions and investments, net of cash acquired |
|
(687 |
) |
(6,643 |
) |
Restricted cash proceeds |
|
|
|
1,558 |
|
Releases of restricted cash |
|
(148 |
) |
(5,333 |
) |
Proceeds from sale of property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities from continuing operations |
|
(20,453 |
) |
(24,826 |
) |
Net cash provided by/(used in) investing activities from discontinued operations |
|
11,066 |
|
(228 |
) |
|
|
|
|
|
|
Net cash used in investing activities |
|
(9,387 |
) |
(25,054 |
) |
Orient-Express Hotels Ltd. and Subsidiaries
Statements of Condensed Consolidated Cash Flows (unaudited) (continued)
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Proceeds from working capital loans |
|
162 |
|
|
|
Payments on working capital loans |
|
|
|
(1,109 |
) |
Issuance of common shares |
|
|
|
|
|
Issuance costs of common shares |
|
|
|
(157 |
) |
Share options exercised |
|
2 |
|
|
|
Issuance of long-term debt, net of issuance costs |
|
2,279 |
|
(458 |
) |
Principal payments under long-term debt |
|
(9,200 |
) |
(8,515 |
) |
|
|
|
|
|
|
Net cash used in financing activities from continuing operations |
|
(6,757 |
) |
(10,239 |
) |
Net cash used in financing activities from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
(6,757 |
) |
(10,239 |
) |
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
653 |
|
949 |
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(23,599 |
) |
(33,306 |
) |
|
|
|
|
|
|
Cash and cash equivalents at beginning of year (includes $ 219 (2012), $479 (2011) of discontinued operations cash) |
|
90,323 |
|
150,829 |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period (includes $ 208 (2012), $ 378 (2011) of discontinued operations cash) |
|
66,724 |
|
117,523 |
|
See notes to condensed consolidated financial statements.
Orient-Express Hotels Ltd. and Subsidiaries
Statements of Condensed Consolidated Total Equity (unaudited)
|
|
Preferred |
|
Class A |
|
Class B |
|
Additional |
|
Retained |
|
Accumulated |
|
Common |
|
Non- |
|
Total |
|
|
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2012 |
|
|
|
1,026 |
|
181 |
|
975,330 |
|
46,263 |
|
(72,289 |
) |
(181 |
) |
2,195 |
|
952,525 |
|
Issuance of class A common shares in public offering, net of issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based compensation |
|
|
|
|
|
|
|
1,806 |
|
|
|
|
|
|
|
|
|
1,806 |
|
Share options exercised |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses on common shares |
|
|
|
|
|
|
|
|
|
(15,671 |
) |
|
|
|
|
271 |
|
(15,400 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
18,947 |
|
|
|
(2 |
) |
18,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2012 |
|
|
|
1,028 |
|
181 |
|
977,136 |
|
30,592 |
|
(53,342 |
) |
(181 |
) |
2,464 |
|
957,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2011 |
|
|
|
1,023 |
|
181 |
|
968,492 |
|
134,043 |
|
(38,585 |
) |
(181 |
) |
1,922 |
|
1,066,895 |
|
Issuance of class A common shares in public offering, net of issuance costs |
|
|
|
|
|
|
|
(157 |
) |
|
|
|
|
|
|
|
|
(157 |
) |
Share based compensation |
|
|
|
|
|
|
|
1,563 |
|
|
|
|
|
|
|
|
|
1,563 |
|
Share options exercised |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses on common shares |
|
|
|
|
|
|
|
|
|
(14,907 |
) |
|
|
|
|
227 |
|
(14,680 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
21,658 |
|
|
|
(1 |
) |
21,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2011 |
|
|
|
1,024 |
|
181 |
|
969,898 |
|
119,136 |
|
(16,927 |
) |
(181 |
) |
2,148 |
|
1,075,279 |
|
See notes to condensed consolidated financial statements.
Orient-Express Hotels Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. Basis of financial statement presentation
In this report Orient-Express Hotels Ltd. is referred to as the Company, and the Company and its subsidiaries are referred to collectively as OEH.
FASB means Financial Accounting Standards Board. ASC means the Accounting Standards Codification of the FASB and ASU means an Accounting Standards Update of the FASB.
a) Accounting policies
The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for reporting on Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. In the opinion of the management of the Company, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, operating results and cash flows have been included in these condensed consolidated financial statements.
Interim results are not necessarily indicative of results that may be expected for the year ending December 31, 2012.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Companys periodic filings, including the Companys Annual Report on Form 10-K for the year ended December 31, 2011. See Note 1 to the consolidated financial statements in the 2011 Form 10-K for additional information regarding significant accounting policies.
For interim income tax reporting purposes, the Company generally determines its best estimate of an annual effective tax rate and applies that rate on a year-to-date basis applicable to its ordinary income. The Companys estimated annual effective tax rate excludes significant, unusual or infrequently occurring items, jurisdictions for which a reliable estimate cannot be made or where the estimated benefit of losses cannot be recognized, and certain other items excluded pursuant to the U.S. GAAP authoritative guidance. The income tax expense (or benefit) related to all other items is individually computed and recognized when the items occur.
The accounting policies used in preparing these condensed consolidated financial statements are the same as those applied in the prior year, except for escrow and prepaid customer deposits described below and changes made to ASC-codified items as described below.
Escrow and prepaid customer deposits
OEH has reclassified an item it had previously reported within investing activities in the condensed consolidated statements of cash flows for the periods presented. Escrow and prepaid customer deposits previously classified as investing activities from continuing operations have been presented in cash flows from operating activities. The amounts of reclassification are $1,992,000 for the three months ended March 31, 2011. The reclassification has no impact on changes in cash or cash equivalents or on the statements of condensed consolidated operations or statements of condensed consolidated total equity for the periods presented.
Recent accounting pronouncements
In September 2011, the FASB issued new guidance related to annual goodwill impairment assessments that gives companies the option to perform a qualitative assessment before calculating the fair value of the reporting unit. Under this guidance, if this option is selected, a company is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. This guidance became effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In May 2011, the FASB issued guidance on fair value measurement and disclosure requirements. The amendments in this update result in a convergence in the fair value measurement and disclosure requirements under U.S. GAAP with those required under International Financial Reporting Standards (IFRS). Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entitys use of a nonfinancial asset that is different from the assets highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. On January 1, 2012, the Company adopted this guidance, the impact of which did not materially affect the Companys condensed consolidated financial statements as of and for the three months ended March 31, 2012.
In June 2011, the FASB issued guidance concerning the presentation of comprehensive income in the financial statements. Under the amendments to the existing guidance, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. Under either option, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The amendments eliminate the option to present the components of other comprehensive income as part of the statement of changes in total equity. The amendments in this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This guidance is effective for fiscal years and interim periods beginning after December 15, 2011 and requires retrospective application. The FASB subsequently deferred the effective date of certain provisions of this standard pertaining to the reclassification of items out of accumulated other comprehensive income, pending the issuance of further guidance on that matter. OEH adopted this guidance as of January 1, 2012, and has presented total comprehensive income as separate statements of condensed consolidated comprehensive income. There was no other impact on OEHs financial statements.
Accounting pronouncements to be adopted
In December 2011, the FASB issued accounting guidance that requires companies to provide new disclosures about offsetting assets and liabilities and related arrangements for financial instruments and derivatives. The provisions of this guidance are effective for annual reporting periods beginning on or after January 1, 2013, and are required to be applied retrospectively. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.
(b) Net losses per share
The number of shares used in computing basic and diluted losses per share was as follows:
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Basic |
|
102,717 |
|
102,432 |
|
Effect of dilution |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
102,717 |
|
102,432 |
|
For the three months ended March 31, 2012 and 2011, all share options and share-based awards were excluded from the calculation of the diluted weighted average number of shares because OEH incurred a net loss in these periods and the effect of their inclusion would be anti-dilutive.
The average number of share options and share-based awards excluded from the weighted average shares outstanding were as follows:
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Share options |
|
3,011,890 |
|
2,783,536 |
|
Share-based awards |
|
657,434 |
|
646,036 |
|
|
|
|
|
|
|
|
|
3,669,324 |
|
3,429,572 |
|
The number of share options and share-based awards at March 31, 2012 was 3,667,989 (March 31, 2011 - 3,470,064).
2. Discontinued operations
At March 31, 2012, Bora Bora Lagoon Resort, French Polynesia, is the only property classified as held for sale. Keswick Hall, Charlottesville, Virginia, was sold on January 23, 2012. At December 31, 2011 both Bora Bora Lagoon Resort and Keswick Hall were classified as held for sale.
For the three months ended March 31, 2012, the results of operations of Bora Bora Lagoon Resort and Keswick Hall have been presented as discontinued operations. In addition to Bora Bora Lagoon Resort and Keswick Hall, discontinued operations for the three months ended March 31, 2011 also include the results of operations Hôtel de la Cité, Carcassonne, France, which was sold on August 1, 2011.
(a) Assets sold: Keswick Hall
On January 23, 2012, OEH completed the sale of the property and operations of Keswick Hall for consideration of $22,000,000, of which $12,000,000 was paid in cash and $10,000,000 was settled directly to the bank as a reduction in the debt facility secured by the property. The hotel was a part of OEHs hotels and restaurants segment. The disposal resulted in a gain of $2,075,000, which is reported within earnings from discontinued operations, net of tax.
The following is a summary of net assets sold and the gain recorded on sale:
|
|
January 23, 2012 |
|
|
|
$000 |
|
|
|
|
|
Property, plant and equipment, net |
|
18,590 |
|
Net working capital surplus |
|
401 |
|
|
|
|
|
Net assets |
|
18,991 |
|
|
|
|
|
Consideration: |
|
|
|
Cash |
|
12,000 |
|
Reduction in debt facility on sale of hotel |
|
10,000 |
|
Less: Working capital adjustment |
|
(430 |
) |
Less: Costs to sell |
|
(504 |
) |
|
|
|
|
|
|
21,066 |
|
|
|
|
|
Gain on sale |
|
2,075 |
|
Result of discontinued operations of Keswick Hall were as follows:
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Revenue |
|
427 |
|
3,837 |
|
|
|
|
|
|
|
Losses before tax and gain on sale |
|
(918 |
) |
(950 |
) |
Gain on sale |
|
2,075 |
|
|
|
|
|
|
|
|
|
Earnings/(losses) before tax |
|
1,157 |
|
(950 |
) |
Tax provision |
|
(405 |
) |
|
|
|
|
|
|
|
|
Net earnings/(losses) from discontinued operations |
|
752 |
|
(950 |
) |
(b) Assets held for sale: Bora Bora Lagoon Resort
As previously reported, OEH is selling its investment in Bora Bora Lagoon Resort, which is included in the hotels and restaurants segment. The property sustained damage as a result of a cyclone in February 2010 and is currently closed. OEH has entered into an agreement to sell the hotel and is in the process of completing the sale in the first half of 2012. This property is classified as held for sale and the results have been presented as discontinued operations for all periods presented.
Summarized operating results of the properties held for sale as at March 31, 2012 and 2011, excluding Keswick Hall presented above, are as follows:
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Revenue |
|
|
|
425 |
|
|
|
|
|
|
|
Losses before tax |
|
(62 |
) |
(713 |
) |
Tax provision |
|
|
|
|
|
|
|
|
|
|
|
Net losses from discontinued operations |
|
(62 |
) |
(713 |
) |
The above table includes the results of Hôtel de la Cité, which was held for sale at March 31, 2011 and sold on August 1, 2011.
Assets and liabilities of the properties classified as held for sale consisted of the following:
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
Current assets |
|
5 |
|
3,305 |
|
Other assets |
|
|
|
4,741 |
|
Property, plant and equipment |
|
16,864 |
|
30,205 |
|
|
|
|
|
|
|
Total assets held for sale |
|
16,869 |
|
38,251 |
|
|
|
|
|
|
|
Total liabilities held for sale |
|
(781 |
) |
(1,781 |
) |
3. Variable interest entities
OEH analyzes its variable interests, including loans, guarantees and equity investments, to determine if an entity is a variable interest entity (VIE). In that assessment, OEHs analysis includes both quantitative and qualitative considerations. OEH bases its quantitative analysis on the forecast cash flows of the entity, and its qualitative analysis on a review of the design of the entity, organizational structure including decision-making ability, and relevant financial agreements. In accordance with the guidance for the consolidation of a VIE, OEH also uses its qualitative analysis to determine if OEH is the primary beneficiary of the VIE through the assessment of the powers to direct activities that most significantly impact economic performance of the VIE.
Charleston Place Hotel
OEH holds a 19.9% equity investment in Charleston Center LLC, owner of Charleston Place Hotel. OEH has also made a number of loans to the hotel. On evaluating its various variable interests in the hotel, OEH concluded that it is the primary beneficiary of this VIE because OEH is expected to absorb a majority of the entitys residual gains and losses and has the power to direct the activities that impact the VIEs performance, based on the current organizational structure.
The carrying amount of consolidated assets and liabilities of Charleston Center LLC included within OEHs condensed consolidated balance sheets as of March 31, 2012 and December 31, 2011 are summarized as follows:
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
Current assets |
|
7,626 |
|
8,167 |
|
Property, plant and equipment |
|
185,213 |
|
185,788 |
|
Goodwill |
|
40,395 |
|
40,395 |
|
Other assets |
|
2,332 |
|
2,185 |
|
|
|
|
|
|
|
Total assets |
|
235,566 |
|
236,535 |
|
|
|
|
|
|
|
Current liabilities |
|
(20,142 |
) |
(20,240 |
) |
Third-party debt, including $ 1,765 and $ 1,784 current portion |
|
(90,084 |
) |
(90,529 |
) |
Deferred income taxes |
|
(61,072 |
) |
(61,072 |
) |
|
|
|
|
|
|
Total liabilities |
|
(171,298 |
) |
(171,841 |
) |
|
|
|
|
|
|
Net assets (before amounts payable to OEH of $91,977 and $ 92,263) |
|
64,268 |
|
64,694 |
|
The third-party debt of Charleston Center LLC is secured by its net assets and is non-recourse to its members, including OEH. The hotels separate assets are not available to pay the debts of OEH and the hotels separate liabilities do not constitute obligations of OEH. This non-recourse obligation is presented separately on the condensed consolidated balance sheet.
4. Acquisitions
No acquisitions occurred during the three months ended March 31, 2012 and 2011.
5. Investments in unconsolidated companies
Investments represent equity interests of 50% or less and in which OEH exerts significant influence but does not consolidate. OEH does not have effective control of these unconsolidated companies and, therefore, accounts for these investments using the equity method. These investments include the rail and hotel joint venture operations in Peru, the Hotel Ritz, Madrid, Eastern and Oriental Express Ltd. and the Buzios land joint venture.
Summarized financial data for OEHs unconsolidated companies are as follows:
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
Current assets |
|
71,639 |
|
70,536 |
|
Property, plant and equipment, net |
|
353,203 |
|
344,576 |
|
Other assets |
|
5,209 |
|
5,536 |
|
|
|
|
|
|
|
Total assets |
|
430,051 |
|
420,648 |
|
|
|
|
|
|
|
Current liabilities |
|
180,238 |
|
195,529 |
|
Long-term debt |
|
41,302 |
|
17,346 |
|
Other liabilities |
|
100,057 |
|
99,643 |
|
|
|
|
|
|
|
Total shareholders equity |
|
108,454 |
|
108,130 |
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
430,051 |
|
420,648 |
|
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Revenue |
|
32,345 |
|
28,157 |
|
|
|
|
|
|
|
Earnings from operations before net finance costs |
|
3,062 |
|
1,170 |
|
|
|
|
|
|
|
Net earnings/(losses) |
|
413 |
|
(1,286 |
) |
Included in unconsolidated companies are OEHs hotel and rail joint ventures in Peru, under which OEH and the other 50% participant must contribute equally additional equity capital needed for the businesses. If the other participant does not meet this obligation, OEH has the right to dilute the other participant and obtain a majority equity interest in the affected joint venture company. OEH also has rights to purchase the other participants interests, which rights are exercisable in limited circumstances such as the participants bankruptcy.
The carrying amounts that relate to OEHs unconsolidated companies are as follows:
|
|
Investment |
|
Due from unconsolidated |
|
Guarantees |
|
Shareholder loans |
|
Total |
| ||||||||||
|
|
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
|
|
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peru hotel joint venture |
|
16,266 |
|
16,212 |
|
(332 |
) |
599 |
|
|
|
|
|
|
|
|
|
15,934 |
|
16,811 |
|
Peru rail joint venture |
|
35,826 |
|
35,001 |
|
4,657 |
|
4,917 |
|
|
|
|
|
|
|
|
|
40,483 |
|
39,918 |
|
Hotel Ritz, Madrid |
|
|
|
|
|
1,372 |
|
2,657 |
|
|
|
|
|
17,086 |
|
15,829 |
|
18,458 |
|
18,486 |
|
Eastern and Oriental Express Ltd. |
|
3,398 |
|
3,298 |
|
4,919 |
|
2,581 |
|
|
|
|
|
|
|
|
|
8,317 |
|
5,879 |
|
Buzios land joint venture |
|
5,412 |
|
5,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,412 |
|
5,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,902 |
|
59,904 |
|
10,616 |
|
10,754 |
|
|
|
|
|
17,086 |
|
15,829 |
|
88,604 |
|
86,487 |
|
OEHs maximum exposures to loss as a result of its involvement with its unconsolidated companies are as follows:
|
|
Investment |
|
Due from unconsolidated |
|
Guarantees |
|
Shareholder loans |
|
Total |
| ||||||||||
|
|
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
|
|
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peru hotel joint venture |
|
16,266 |
|
16,212 |
|
(332 |
) |
599 |
|
|
|
|
|
|
|
|
|
15,934 |
|
16,811 |
|
Peru rail joint venture |
|
35,826 |
|
35,001 |
|
4,657 |
|
4,917 |
|
8,691 |
|
9,052 |
|
|
|
|
|
49,174 |
|
48,970 |
|
Hotel Ritz, Madrid |
|
|
|
|
|
1,372 |
|
2,657 |
|
11,105 |
|
10,151 |
|
17,086 |
|
15,829 |
|
29,563 |
|
28,637 |
|
Eastern and Oriental Express Ltd. |
|
3,398 |
|
3,298 |
|
4,919 |
|
2,581 |
|
|
|
3,000 |
|
|
|
|
|
8,317 |
|
8,879 |
|
Buzios land joint venture |
|
5,412 |
|
5,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,412 |
|
5,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,902 |
|
59,904 |
|
10,616 |
|
10,754 |
|
19,796 |
|
22,203 |
|
17,086 |
|
15,829 |
|
108,400 |
|
108,690 |
|
The reason that the maximum exposure to loss for the Peru rail joint venture and Hotel Ritz, Madrid, exceeds the carrying amounts is because of guarantees which are discussed below. OEH does not expect that it will be required to fund these guarantees relating to these joint venture companies.
The Company has guaranteed, through 2016, $8,691,000 of the debt obligations of the rail joint venture in Peru and contingently guaranteed through 2016, $11,050,000 of its debt obligations. The Company has also guaranteed the rail joint ventures contingent obligations relating to the performance of its governmental rail concessions, currently in the amount of $4,932,000 through April 2012. The Company has contingently guaranteed, through 2018, $12,085,000 of debt obligations of the joint venture in Peru that operates four hotels and, through 2014, a further $8,370,000 of its debt obligations. The contingent guarantees for each Peruvian joint venture may only be enforced in the event there is a change in control of the relevant joint
venture, which would occur only if OEHs ownership of the economic and voting interests in the joint venture falls below 50%, an event which has not occurred.
Long-term debt obligations of the rail joint venture in Peru at March 31, 2012 totaling $17,554,000 have been classified within current liabilities of the joint venture in its stand-alone financial statements, as it was out of compliance with a leverage covenant and a debt service coverage ratio covenant in its loan facilities. Discussions with the lenders to bring the joint venture into compliance are continuing.
Long-term debt obligations of the Hotel Ritz, Madrid, in which OEH has a 50% equity investment, at March 31, 2012 totaling $91,223,000 have been classified within current liabilities in the joint ventures stand-alone financial statements as it was out of compliance with the debt service coverage ratio covenant in its first mortgage loan facility, although a six-month waiver (expiring August 21, 2012) of the non-compliance had been received from the lender. Discussions with the lender to bring the hotel into long-term compliance are continuing. OEH and its joint venture partner have each guaranteed $9,988,000 of the debt obligations, and $1,117,000 of a working capital loan facility.
6. Property, plant and equipment
The major classes of property, plant and equipment are as follows:
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
Land and buildings |
|
1,096,918 |
|
1,058,757 |
|
Machinery and equipment |
|
196,292 |
|
189,289 |
|
Fixtures, fittings and office equipment |
|
206,210 |
|
197,197 |
|
River cruise ship and canal boats |
|
18,183 |
|
18,061 |
|
|
|
|
|
|
|
|
|
1,517,603 |
|
1,463,304 |
|
Less: Accumulated depreciation |
|
(305,672 |
) |
(289,185 |
) |
|
|
|
|
|
|
|
|
1,211,931 |
|
1,174,119 |
|
The major classes of assets under capital leases included above are as follows:
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
Freehold and leased land and buildings |
|
4,795 |
|
4,461 |
|
Machinery and equipment |
|
950 |
|
828 |
|
Fixtures, fittings and office equipment |
|
449 |
|
443 |
|
|
|
|
|
|
|
|
|
6,194 |
|
5,732 |
|
Less: Accumulated depreciation |
|
(1,620 |
) |
(1,505 |
) |
|
|
|
|
|
|
|
|
4,574 |
|
4,227 |
|
The depreciation charge on property, plant and equipment for the three months ended March 31, 2012 was $10,904,000 (2011 - $10,923,000)
As of March 31, 2012, the property, plant and equipment of Charleston Center LLC, a consolidated VIE, of $185,213,000 (December 31, 2011 - $185,788,000) is separately disclosed on the balance sheet. See Note 3.
For the three months ended March 31, 2012, OEH capitalized interest in the amount of $905,000. For the year ended December 31, 2011, capitalized interest amounted to $863,000. All amounts capitalized were recorded in property, plant and equipment.
7. Goodwill
The changes in the carrying amount of goodwill for the three months ended March 31, 2012 are as follows:
|
|
Hotels and |
|
Trains and |
|
Total |
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2012 |
|
153,605 |
|
7,855 |
|
161,460 |
|
Foreign currency translation adjustment |
|
3,695 |
|
82 |
|
3,777 |
|
|
|
|
|
|
|
|
|
Balance as at March 31, 2012 |
|
157,300 |
|
7,937 |
|
165,237 |
|
The gross goodwill amount at January 1, 2012 was $191,700,000 and the accumulated impairment at that date was $30,240,000. All impairments to that date related to hotel and restaurant operations.
The assessment and, if required, the determination of goodwill impairment to be recognized uses a discounted cash flow analysis to compute the fair value of the reporting unit. When determining the fair value of a reporting unit, OEH is required to make significant judgments that OEH believes are reasonable and supportable considering all available internal and external evidence at the time. However, these estimates and assumptions are, by their nature, highly judgmental. Fair value determinations are sensitive to changes in the underlying assumptions and factors including those relating to estimating future operating cash flows to be generated from the reporting unit which are dependent upon internal forecasts and projections developed as part of OEHs routine, long-term planning process, available industry/market data (to the extent available), OEHs strategic plans, estimates of long-term growth rates taking into account OEHs assessment of the current economic environment and the timing and degree of any economic recovery, estimation of the useful life over which the cash flows will occur, and market participant assumptions. The assumptions with the most significant impact to the fair value of the reporting unit are those related to future operating cash flows which are forecast for a five-year period from managements budget and planning process, the terminal value which is included for the period beyond five years from the balance sheet date based on the estimated cash flow in the fifth year and a terminal growth rate, and pre-tax discount rates.
Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair values of OEHs reporting units may include such items as (i) a prolonged weakness in the general economic conditions in which the reporting units operate and therefore negatively impacting occupancy and room rates, (ii) an economic recovery that significantly differs from OEHs assumptions in timing and/or degree, (iii) volatility in the equity and debt markets which could result in a higher discount rate, (iv) shifts or changes in future travel patterns from the OEHs significant demographic markets that have not been anticipated, (v) changes in competitive supply, (vi) political and security instability in countries where OEH operates and (vii) deterioration of local economies due to the uncertainty over currencies or currency unions and other factors which could lead to changes in projected cash flows of OEHs properties as customers reduce their discretionary spending. If the assumptions used in the impairment analysis are not met or materially change, OEH may be required to recognize additional goodwill impairment losses which may be material to the financial statements.
There were no triggering events in the three months ended March 31, 2012 that would have required OEH to assess the carrying value of goodwill.
8. Other intangible assets
Other intangible assets consist of the following as of March 31, 2012:
|
|
Favorable |
|
Internet |
|
Tradenames |
|
Total |
|
Carrying amount: |
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2012 |
|
13,460 |
|
1,609 |
|
7,100 |
|
22,169 |
|
Foreign currency translation adjustment |
|
(61 |
) |
52 |
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
Balance as at March 31, 2012 |
|
13,399 |
|
1,661 |
|
7,100 |
|
22,160 |
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization: |
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2012 |
|
1,972 |
|
732 |
|
|
|
2,704 |
|
Charge for the year |
|
90 |
|
34 |
|
|
|
124 |
|
Foreign currency translation adjustment |
|
(10 |
) |
24 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
Balance as at March 31, 2012 |
|
2,052 |
|
790 |
|
|
|
2,842 |
|
|
|
|
|
|
|
|
|
|
|
Net book value: |
|
|
|
|
|
|
|
|
|
As at December 31, 2011 |
|
11,488 |
|
877 |
|
7,100 |
|
19,465 |
|
|
|
|
|
|
|
|
|
|
|
As at March 31, 2012 |
|
11,347 |
|
871 |
|
7,100 |
|
19,318 |
|
Favorable lease intangible assets are amortized over the terms of the leases, which are between 19 and 60 years. Internet sites are amortized over 10 years. Tradenames have an indefinite life and therefore are not amortized, but are assessed for impairment annually or when events indicate that impairment may have occurred.
Amortization expense for the three months ended March 31, 2012 was $124,000 (2011 - $69,000). Estimated amortization expense for each of the years ended December 31, 2012 to December 31, 2017 is $496,000.
9. Long-term debt and obligations under capital lease
(a) Long-term debt
Long-term debt consists of the following:
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
Loans from banks and other parties collateralized by property, plant and equipment payable over periods of one to 20 years, with a weighted average interest rate of 4.15% and 4.32%, respectively |
|
531,946 |
|
538,730 |
|
Obligations under capital lease |
|
5,134 |
|
5,158 |
|
|
|
|
|
|
|
|
|
537,080 |
|
543,888 |
|
Less: Current portion |
|
66,185 |
|
77,058 |
|
|
|
|
|
|
|
|
|
470,895 |
|
466,830 |
|
In connection with the renovation of El Encanto hotel, OEH entered into a loan agreement in August 2011 for $45,000,000 to be drawn as construction progresses. During the three months ended March 31, 2012, OEH borrowed $2,661,000 (December 31, 2011 - $Nil) under this facility. The loan has a maturity of three years, with two one-year extensions.
At March 31, 2012, one of OEHs subsidiaries had not complied with certain financial covenants in a loan facility. The $2,777,000 outstanding on this loan has been classified as current and OEH expects to rectify this non-compliance in the second quarter of 2012. In addition, two unconsolidated joint venture companies were out of compliance with certain financial covenants in their loan facilities. See Note 5.
Most of OEHs loan facilities relate to specific hotel or other properties and are secured by a mortgage on the particular property. In most cases, the Company is either the borrower or the subsidiary owning the property is the borrower, with the loan guaranteed by the Company.
The loan facilities generally place restrictions on the property-owning companys ability to incur additional debt and limit liens, and restrict mergers and asset sales, and include financial covenants. Where the property-owning subsidiary is the borrower, the financial covenants relate to the financial performance of the property financed and generally include covenants relating to interest coverage, debt service, and loan-to-value and debt-to-EBITDA tests. Most of the facilities under which the Company is the borrower or the guarantor also contain financial covenants which are based on the performance of OEH on a consolidated basis. The covenants include a quarterly interest coverage test and a quarterly net worth test.
The following is a summary of the aggregate maturities of consolidated long-term debt, including obligations under capital lease, at March 31, 2012:
Year ending December 31, |
|
$000 |
|
|
|
|
|
2013 |
|
128,227 |
|
2014 |
|
130,032 |
|
2015 |
|
181,269 |
|
2016 |
|
2,447 |
|
2017 |
|
1,504 |
|
2018 and thereafter |
|
27,416 |
|
|
|
|
|
|
|
470,895 |
|
The debt of Charleston Center LLC, a consolidated VIE, of $90,084,000 (December 31, 2011 - $90,529,000) is non-recourse to OEH and separately disclosed on the consolidated balance sheet. See Note 3.
10. Other liabilities
The major balances in other liabilities are as follows:
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
Interest rate swaps (see note 19) |
|
6,539 |
|
7,511 |
|
Long-term accrued interest on subordinated debt at Charleston Place Hotel |
|
14,290 |
|
14,139 |
|
Cash-settled stock appreciation rights plan |
|
242 |
|
111 |
|
Deferred lease incentive |
|
505 |
|
489 |
|
Contingent consideration on acquisition of Grand Hotel Timeo and Villa SantAndrea |
|
3,995 |
|
3,895 |
|
|
|
|
|
|
|
|
|
25,571 |
|
26,145 |
|
11. Income taxes
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Provision/(benefit) for income taxes |
|
248 |
|
(4,739 |
) |
The Company is incorporated in Bermuda, which does not impose an income tax. OEHs effective tax rate is significantly affected by its mix of income and loss in various jurisdictions as there is significant variation in the income tax rates imposed and also by the effect of losses in jurisdictions for which it is expected that the tax benefit of losses will not be recognizable at year-end. As described in Note 1, OEH forecasts its effective tax rate for the year and that rate is applied to interim results. Other items, however, are computed individually and recognized when the items occur. The significant components of these other items which cause variations in OEHs customary relationship between income tax expense and pre-tax income for the three months ended March 31, 2012 and 2011 include the following:
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Exchange rate movements on deferred tax |
|
816 |
|
362 |
|
|
|
|
|
|
|
Deferred tax on derivatives |
|
|
|
59 |
|
|
|
|
|
|
|
Changes in uncertain tax positions |
|
56 |
|
(928 |
) |
|
|
|
|
|
|
Changes in interest and penalties |
|
233 |
|
(1,128 |
) |
|
|
|
|
|
|
Other |
|
52 |
|
|
|
12. Pensions
Components of net periodic pension benefit cost are as follows:
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Service cost |
|
|
|
|
|
Interest cost on projected benefit obligation |
|
286 |
|
353 |
|
Expected return on assets |
|
(210 |
) |
(334 |
) |
Net amortization and deferrals |
|
223 |
|
202 |
|
|
|
|
|
|
|
Net periodic benefit cost |
|
299 |
|
221 |
|
During the three months ended March 31, 2012, $480,000 (2011 - $465,000) of contributions were made to OEHs defined benefit pension plan. OEH anticipates contributing an additional $778,000 to fund the plan in 2012 for a total of $1,258,000.
13. Supplemental cash flow information and restricted cash
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
Interest |
|
6,771 |
|
6,582 |
|
|
|
|
|
|
|
Income taxes |
|
8,233 |
|
3,533 |
|
Restricted cash
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
Cash deposits required to be held with banks to support OEHs payment of interest and principal |
|
9,754 |
|
9,606 |
|
Collateral to support derivatives with negative mark-to-market position |
|
|
|
|
|
Escrow deposits from purchasers of units at Porto Cupecoy which will be released to OEH as sales close |
|
2,890 |
|
2,890 |
|
Prepaid customer deposits which will be released to OEH under its revenue recognition policy |
|
2,546 |
|
718 |
|
|
|
|
|
|
|
|
|
15,190 |
|
13,214 |
|
14. Accumulated other comprehensive loss
The accumulated balances for each component of other comprehensive loss are as follows:
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
Foreign currency translation adjustments, net of tax of $Nil and $Nil |
|
(32,966 |
) |
(52,611 |
) |
Derivative financial instruments net of tax benefit of $(1,057) and $(970) |
|
(6,960 |
) |
(6,440 |
) |
Pension liability, net of tax of $2,189 and $2,161 |
|
(13,416 |
) |
(13,238 |
) |
|
|
|
|
|
|
|
|
(53,342 |
) |
(72,289 |
) |
15. Share-based compensation plans
On March 9, 2012, OEH granted under the 2009 Share Award and Incentive Plan share options on 31,700 class A common shares vesting on March 9, 2015. On the same day, it also granted under the 2009 Share Award and Incentive Plan deferred shares without performance criteria covering 3,300 class A common shares vesting on January 30, 2015 and 104,000 class A common shares vesting on March 9, 2015, and deferred shares with performance criteria covering 386,000 class A common shares vesting on March 9, 2015. The share price at the date of the award of deferred shares was $9.95 per share.
The fair value of share-based compensation awards issued in the three months ended March 31, 2012 was $2,608,266 (2011 - $2,105,000).
The weighted-average fair value of the share options and share-based awards granted under the 2009 plan on the grant date was $4.97 per share (2011 - $12.65).
Estimated fair value of share options on the grant date in the quarter using the Black-Scholes option pricing model was based on the following assumptions:
Expected share price volatility |
|
58 |
% | |
Risk-free interest rate |
|
1.69 |
% | |
Expected annual dividends per share |
|
$ |
|
|
Expected life of stock options |
|
8 years |
| |
Estimates of fair values of deferred share awards granted in the quarter with performance and market conditions were made using the Monte Carlo valuation model, and estimates of fair values of deferred share awards without performances and market conditions issued were made using the Black-Scholes valuation model based on the following assumptions:
Expected share price volatility |
|
59 |
% | |
Risk-free interest rate |
|
0.47 |
% | |
Expected annual dividends per share |
|
$ |
|
|
Expected life of awards |
|
3 years |
| |
Expected volatilities are based on historical volatility of the Companys class A common share price and other factors. The expected life is based on historical data and represents the period of time that options or awards are likely to be
outstanding. The risk-free rate for periods within the expected life is based on the U.S. Treasury yield curve in effect at the time of grant.
The total compensation related to unvested awards outstanding at March 31, 2012, to be recognized over the period April 1, 2012 to March 31, 2015, was $11,310,000. OEH recognized equity compensation expense of $1,937,000 in the three months ended March 31, 2012 (2011 - $1,572,000).
Previously awarded cash-settled stock appreciation rights have been recorded as other liabilities with a fair value of $242,000 at March 31, 2012 (December 31, 2011 - $111,000). See Note 10.
16. Fair values of financial instruments
Certain methods and assumptions were used to estimate the fair value of each class of financial instruments. The carrying amount of cash and cash equivalents, accounts receivable, working capital facilities, accounts payable and accrued liabilities approximates fair value because of the short maturity of those instruments. The fair value of OEHs long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to OEH for debt of the same remaining maturities, and is classified as Level 2 in the fair value hierarchy.
The estimated fair values of OEHs financial instruments (other than derivative financial instruments) as of March 31, 2012 are as follows:
|
|
March 31, 2012 |
| ||
|
|
Carrying |
|
Fair value |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
66,516 |
|
66,516 |
|
|
|
|
|
|
|
Accounts receivable |
|
50,947 |
|
50,947 |
|
|
|
|
|
|
|
Working capital facilities |
|
133 |
|
133 |
|
|
|
|
|
|
|
Accounts payable |
|
26,647 |
|
26,647 |
|
|
|
|
|
|
|
Accrued liabilities |
|
93,091 |
|
93,091 |
|
|
|
|
|
|
|
Long-term debt, including current portion, excluding obligations under capital leases |
|
531,946 |
|
525,810 |
|
|
|
|
|
|
|
Long-term debt, including current portion, held by a consolidated VIE |
|
90,084 |
|
91,689 |
|
17. Commitments and contingencies
Outstanding contracts to purchase property, plant and equipment were approximately $28,886,000 at March 31, 2012 (December 31, 2011 - $15,432,000). Additionally, outstanding contracts for project-related costs on the Porto Cupecoy development were approximately $439,000 at March 31, 2012 (December 31, 2011 - $499,000).
As part of the consideration for the acquisition in January 2010 of Grand Hotel Timeo and Villa SantAndrea, OEH agreed to pay the vendor a further 5,000,000 (equivalent to $7,064,000 at date of acquisition) if, by 2015, additional rooms are constructed at Grand Hotel Timeo and certain required permits are granted to expand and add a swimming pool to Villa SantAndrea. In the three months ended March 31, 2011, 1,500,000 ($2,040,000) of this amount was paid to the vendor as the appropriate permits to add a swimming pool to Villa SantAndrea were obtained. See Note 10.
In May 2010, OEH settled litigation for infringement of its Cipriani trademark in Europe. An amount of $3,947,000 was paid by the defendants to OEH on March 2, 2010 with the balance of $9,833,000 being payable in installments over five years with interest. The remaining payments, totaling $7,528,000 at March 31, 2012, have not been recognized by OEH because of the uncertainty of collectability.
The Company and certain of its subsidiaries are parties to various legal proceedings arising in the normal course of business. The outcome of each of these matters cannot be absolutely determined, and the liability that the relevant parties may ultimately incur with respect to any one of these matters in the event of a negative outcome may be in excess of amounts currently accrued for with respect to these matters.
18. Information concerning financial reporting for segments and operations in different geographical areas
OEHs segment information has been prepared in accordance with accounting guidance. OEH has three reporting segments, (i) hotels and restaurants, (ii) tourist trains and cruises, and (iii) real estate and property development, which are grouped into various geographical regions. At March 31, 2012, hotels are located in the United States, Caribbean, Mexico, Europe, southern Africa, South America, Southeast Asia, Australia and South Pacific, a restaurant is located in New York, tourist trains operate in Europe, Southeast Asia and Peru, a river cruise ship operates in Myanmar and five canal boats in France, and real estate developments are located in the Caribbean and Southeast Asia. Segment performance is evaluated based upon segment net earnings before interest expense, foreign currency, tax (including tax on earnings from unconsolidated companies), depreciation and amortization (segment EBITDA). Segment information is presented in accordance with the accounting policies described in Note 1. The chief operating decision maker is the Chief Executive Officer.
Financial information regarding these business segments is as follows:
Three months ended March 31, |
|
2012 |
|
2011 |
| |
|
|
|
|
|
| |
Revenue: |
|
|
|
|
| |
Hotels and restaurants |
|
|
|
|
| |
Owned hotels |
- Europe |
|
15,788 |
|
14,680 |
|
|
- North America |
|
29,065 |
|
27,287 |
|
|
- Rest of world |
|
49,069 |
|
44,943 |
|
Hotel management/part ownership interests |
|
1,067 |
|
1,089 |
| |
Restaurants |
|
3,866 |
|
3,341 |
| |
|
|
98,855 |
|
91,340 |
| |
Tourist trains and cruises |
|
8,183 |
|
7,158 |
| |
Real estate |
|
1,814 |
|
1,655 |
| |
|
|
108,852 |
|
100,153 |
| |
|
|
|
|
|
| |
Depreciation and amortization: |
|
|
|
|
| |
Hotels and restaurants |
|
|
|
|
| |
Owned hotels |
- Europe |
|
4,557 |
|
4,541 |
|
|
- North America |
|
2,381 |
|
2,314 |
|
|
- Rest of world |
|
2,846 |
|
2,998 |
|
Restaurants |
|
202 |
|
191 |
| |
|
|
9,986 |
|
10,044 |
| |
Tourist trains and cruises |
|
1,042 |
|
948 |
| |
|
|
11,028 |
|
10,992 |
| |
|
|
|
|
|
| |
Segment EBITDA: |
|
|
|
|
| |
Hotels and restaurants |
|
|
|
|
| |
Owned hotels |
- Europe |
|
(7,604 |
) |
(6,858 |
) |
|
- North America |
|
7,191 |
|
5,717 |
|
|
- Rest of world |
|
14,199 |
|
11,555 |
|
Hotel management/part ownership interests |
|
(744 |
) |
(220 |
) | |
Restaurants |
|
339 |
|
148 |
| |
|
|
13,381 |
|
10,342 |
| |
Tourist trains and cruises |
|
(322 |
) |
(836 |
) | |
Real estate |
|
(1,524 |
) |
(1,044 |
) | |
Central overheads |
|
(9,767 |
) |
(7,717 |
) | |
Gain on disposal |
|
|
|
606 |
| |
|
|
1,768 |
|
1,351 |
| |
|
|
|
|
|
| |
Segment EBITDA/net losses reconciliation: |
|
|
|
|
| |
Segment EBITDA |
|
1,768 |
|
1,351 |
| |
Less: |
|
|
|
|
| |
Depreciation and amortization |
|
11,028 |
|
10,992 |
| |
Interest expense, net |
|
7,461 |
|
9,311 |
| |
Foreign currency, net |
|
(865 |
) |
(963 |
) | |
Provision for/(benefit from) income taxes |
|
248 |
|
(4,739 |
) | |
Share of benefit from income taxes of unconsolidated companies |
|
(14 |
) |
(233 |
) | |
Losses from continuing operations |
|
(16,090 |
) |
(13,017 |
) | |
|
|
|
|
|
| |
Losses from unconsolidated companies, net of tax: |
|
|
|
|
| |
Hotels and restaurants |
|
|
|
|
| |
Hotel management/part ownership interests |
|
(960 |
) |
(810 |
) | |
Tourist trains and cruises |
|
928 |
|
278 |
| |
|
|
(32 |
) |
(532 |
) | |
|
|
|
|
|
| |
Capital expenditure: |
|
|
|
|
| |
Hotels and restaurants |
|
|
|
|
| |
Owned hotels |
- Europe |
|
4,429 |
|
5,894 |
|
|
- North America |
|
9,822 |
|
3,352 |
|
|
- Rest of world |
|
3,596 |
|
3,361 |
|
Restaurants |
|
301 |
|
346 |
| |
|
|
18,148 |
|
12,953 |
| |
Tourist trains and cruises |
|
1,027 |
|
1,214 |
| |
Real estate |
|
443 |
|
241 |
| |
|
|
19,618 |
|
14,408 |
|
Financial information regarding geographic areas based on the location of properties is as follows:
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
Europe |
|
21,337 |
|
19,200 |
|
North America |
|
34,745 |
|
32,283 |
|
Rest of world |
|
52,770 |
|
48,670 |
|
|
|
|
|
|
|
|
|
108,852 |
|
100,153 |
|
19. Derivatives and hedging activities
Risk management objective of using derivatives
OEH enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which is determined by interest rates. OEHs derivative financial instruments are used to manage differences in the amount, timing and duration of OEHs known or expected cash receipts and payments principally related to its investments and borrowings.
Cash flow hedges of interest rate risk
OEHs objective in using interest rate derivatives is to add certainty and stability to its interest expense and to manage its exposure to interest rate movements. To accomplish this objective, OEH primarily uses interest rate swaps as part of its interest rate risk management strategy. An interest rate swap is a transaction between two parties in which each agrees to exchange, or swap, interest payments where the interest payment amounts are tied to different interest rates or indices for a specified period of time and are based on a notional amount of principal. During the three months ended March 31, 2012 interest rate swaps were used to hedge the variable cash flows associated with existing variable interest rate debt.
Derivative instruments are recorded on the balance sheet at fair value. The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in other comprehensive income/(loss) and is subsequently reclassified into earnings in the period that the hedged forecast transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
As of March 31, 2012 and December 31, 2011, OEH had the following outstanding interest rate derivatives stated at their notional amounts that were designated as cash flow hedges of interest rate risk:
|
|
March 31, |
|
December 31, |
| ||
|
|
000 |
|
000 |
| ||
|
|
|
|
|
| ||
Interest Rate Swaps |
|
A$ |
10,650 |
|
A$ |
10,800 |
|
Interest Rate Swaps |
|
|
132,676 |
|
|
148,332 |
|
Interest Rate Swaps |
|
$ |
113,987 |
|
$ |
117,765 |
|
Non-derivative financial instruments net investment hedges
OEH uses certain of its debt denominated in foreign currency to hedge portions of its net investments in foreign operations against adverse movements in exchange rates. OEHs designates its euro-denominated indebtedness as a net investment hedge of long-term investments in its euro-functional subsidiaries. These contracts are included in non-derivative hedging instruments. The fair values of non-derivative hedging instruments were $49,581,000 at March 31, 2012 and $45,919,000 at December 31, 2011, both being liabilities of OEH.
Non-designated hedges of interest rate risk
Derivatives not designated as hedges are used to manage OEHs exposure to interest rate movements but do not meet the strict hedge accounting requirements of the authoritative guidance. As of March 31, 2012, OEH had interest rate options of 43,312,500 and $54,600,000 (December 31, 2011 - 43,593,750 and $54,880,000).
The table below presents the fair value of OEHs derivative financial instruments as well as their classification as of March 31, 2012 and December 31, 2011.
|
|
Derivatives Instruments |
| ||||
|
|
Balance sheet location |
|
Fair value as of |
|
Fair value as of |
|
|
|
|
|
|
|
|
|
Derivatives designated in a cash flow hedging relationship: |
|
|
|
|
|
|
|
Interest Rate Swaps |
|
Other assets |
|
|
|
|
|
Interest Rate Swaps |
|
Accrued liabilities |
|
(4,191 |
) |
(3,443 |
) |
Interest Rate Swaps |
|
Other liabilities |
|
(6,539 |
) |
(7,511 |
) |
|
|
|
|
|
|
|
|
Total |
|
|
|
(10,730 |
) |
(10,954 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
Interest Rate Options |
|
Other Assets |
|
39 |
|
60 |
|
Interest Rate Swap |
|
Accrued liabilities |
|
|
|
|
|
Interest Rate Swap |
|
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
39 |
|
60 |
|
The table below (in which OCI means other comprehensive income) presents the effect of OEHs derivative financial instruments on the statements of condensed consolidated operations and the statements of condensed consolidated comprehensive income for the three months ended March 31, 2012 and 2011:
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Interest rate swaps designated as hedging instruments: |
|
|
|
|
|
Beginning accumulated other comprehensive income |
|
(6,440 |
) |
(8,745 |
) |
|
|
|
|
|
|
Amount of (loss)/gain recognized in OCI (effective portion) |
|
(1,818 |
) |
3,792 |
|
|
|
|
|
|
|
Amount of loss reclassified from accumulated OCI into interest income (effective portion) |
|
1,211 |
|
2,192 |
|
|
|
|
|
|
|
Deferred tax on OCI movement |
|
87 |
|
(1,423 |
) |
|
|
|
|
|
|
Change in fair value of derivatives, net of tax |
|
(520 |
) |
4,561 |
|
|
|
|
|
|
|
Ending accumulated other comprehensive income |
|
(6,960 |
) |
(4,184 |
) |
|
|
|
|
|
|
Amount of (loss)/gain recognized in interest expense on derivatives (ineffective portion) |
|
(129 |
) |
56 |
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
Amount of (loss)/gain recognized in interest expense |
|
(21 |
) |
238 |
|
At March 31, 2012, the amount recorded in other comprehensive income which is expected to be reclassified to interest expense in the next 12 months is $3,606,961.
Credit-risk-related contingent features
OEH has agreements with each of its derivative counterparties that contain provisions under which, if OEH defaults on any of its indebtedness, OEH could also be declared in default in respect of its derivative obligations.
As of March 31, 2012, the fair value of derivatives in a net liability position, which includes accrued interest and an adjustment for non-performance risk, related to these agreements was $10,730,284. If OEH breached any of these provisions, it would be required to settle its obligations under the agreements at their termination value of $11,071,336.
Fair value measurements
Derivatives are recorded in the consolidated balance sheet at fair value. The valuation process for the derivatives uses observable market data provided by third-party sources. Interest rate swaps are valued by using yield curves derived from observable interest rates to project future swap cash flows and then discount these cash flows back to present values. Interest rate caps are valued using a model that projects the probability of various levels of interest rates occurring in the future using observable volatilities. OEH incorporates credit valuation adjustments to reflect both its own and its respective counterpartys non-performance risk in the fair value measurements.
In the determination of fair value of derivative instruments, a credit valuation adjustment is applied to OEHs derivative exposures to take into account the risk of the counterparty defaulting with the derivative in an asset position and, when the derivative is in a liability position, the risk that OEH may default. The credit valuation adjustment is calculated by determining the total expected exposure of the derivatives (incorporating both the current and potential future exposure) and then applying each counterpartys credit spread to the applicable exposure. For interest rate swaps, OEHs own credit spread is applied to the counterpartys exposure to OEH and the counterpartys credit spread is applied to OEHs exposure to the counterparty, and then the net credit valuation adjustment is reflected in the determination of the fair value of the derivative instrument. The credit spreads used as inputs in the fair values calculations represent implied credit default swaps obtained from a third-party credit data provider. Some of the inputs into the credit valuation adjustment are not observable and, therefore, they are considered to be Level 3 inputs. Where credit valuation adjustment exceeds 20% of the fair value of the derivatives, Level 3 inputs are assumed to have a significant impact on the fair value of the derivatives in their entirety and the derivative is classified as Level 3. OEH reviews its fair value hierarchy classifications quarterly. Transfers between levels are made at the fair value on the actual date of the transfer if the event or change in circumstances caused the transfer can be identified.
The following tables summarize the valuation of OEHs financial liabilities by the fair value hierarchy at March 31, 2012 and December 31, 2011:
|
|
March 31, 2012 |
| ||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
Assets at fair value: |
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
|
|
39 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities at fair value: |
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
|
|
(10,730 |
) |
|
|
(10,730 |
) |
Net liabilities |
|
|
|
(10,691 |
) |
|
|
(10,691 |
) |
|
|
December 31, 2011 |
| ||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
Assets at fair value: |
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
|
|
60 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities at fair value: |
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
|
|
(10,954 |
) |
|
|
(10,954 |
) |
Net liabilities |
|
|
|
(10,894 |
) |
|
|
(10,894 |
) |
The tables below present a reconciliation of the beginning and ending balances of derivatives having fair value measurements based on significant unobservable inputs (Level 3) for the three months ended March 31, 2012 and 2011:
|
|
Beginning |
|
Transfers |
|
Realized |
|
Unrealized |
|
Purchases, |
|
Ending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning |
|
Transfers |
|
Realized |
|
Unrealized |
|
Purchases, |
|
Ending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives at fair value: |
|
(277 |
) |
(1,184 |
) |
222 |
|
1,473 |
|
222 |
|
456 |
|
The transfers out of Level 3 in 2011 represented new swaps as at December 31, 2010 with a fair value close to zero where the credit valuation adjustment was previously greater than 20% of the fair value.
The amount of total losses for the three months ended March 31, 2012 included in earnings that are attributable to the change in unrealized gains or losses relating to those liabilities still held was $Nil (2011 - $Nil)
20. Related party transactions
OEH manages under long-term contract the tourist train owned by Eastern and Oriental Express Ltd., an equity method investee of the Company. The amount due to OEH from Eastern and Oriental Express Ltd. at March 31, 2012 is $4,919,000 (December 31, 2011 - $2,581,000).
OEH manages under long-term contracts the Hotel Monasterio, Machu Picchu Sanctuary Lodge, Las Casitas del Colca and Hotel Rio Sagrado owned by its 50/50 joint venture with local Peruvian interests, as well as the 50/50 owned Peru Rail and Ferrocarril Transandino rail operations, and provides loans, guarantees and other credit accommodation to these joint ventures.
See Note 5. In the three months ended March 31, 2012, OEH earned management and guarantee fees of $1,474,000 (2011-$1,341,000). The amount due to OEH from its joint venture Peruvian operations at March 31, 2012 was $4,325,000 (December 31, 2011 - $5,516,000).
OEH manages under a long-term contract the Hotel Ritz in Madrid, Spain, in which OEH holds a 50% interest and which is accounted for under the equity method. For the three months ended March 31, 2012, OEH earned $214,000 (2011-$212,000) in management fees, which are recorded in revenue, and $156,000 (2011 - $111,000) in interest income which is recorded in net finance costs. The amount due to OEH from the Hotel Ritz at March 31, 2012 was $18,458,000 (December 31, 2011 - $18,486,000).
21. Subsequent event
OEHs Peru hotel joint venture has completed the sale of Las Casitas del Colca for $5,590,000 on April 17, 2012.
ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking statements
Forward-looking statements concerning the operations, performance, financial condition, plans and prospects of OEH are based on the current expectations, assessments and assumptions of management, are not historical facts, and are subject to various risks and uncertainties.
Forward-looking statements can be identified by the fact that they do not relate only to historic or current facts, and often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe or other words of similar meaning.
Actual results could differ materially from those anticipated in the forward-looking statements due to a number of factors, including those described in this Form 10-Q quarterly report for the quarter ended March 31, 2012 and in Item 1Business, Item 1ARisk Factors, Item 7Managements Discussion and Analysis, Item 7AQuantitative and Qualitative Disclosures about Market Risk, and Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters in the Companys 2011 Form 10-K annual report.
Investors are cautioned not to place undue reliance on forward-looking statements which are not guarantees of future performance. OEH undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
Introduction
OEH has three business segments, namely (1) hotels and restaurants, (2) tourist trains and cruises and (3) real estate and property development.
Hotels consist of 38 deluxe hotels (excluding Keswick Hall which was sold on January 23, 2012, and Bora Bora Lagoon Resort which was held for sale at March 31, 2012 and accounted for as a discontinued operation), 32 of which are wholly or majority owned or, in the case of Charleston Place Hotel, owned by a consolidated variable interest entity. The owned hotels are referred to in this discussion as owned hotels of which 11 were located in Europe, six in North America and 15 in the Rest of the World. One owned hotel is scheduled to re-open in early 2013 after renovation.
The other six hotels, in which OEH has unconsolidated equity interests and which it operates under management contracts, are referred to in this discussion as hotel management interests. One of these hotels is scheduled to open in 2012 after redevelopment. Additionally, one of these hotels, Las Casitas del Colca in Peru, was sold on April 17, 2012, for $5.6 million.
OEH currently owns and operates the stand-alone restaurant 21 Club in New York, New York.
The hotel held for sale at March 31, 2012, as previously reported, was Bora Bora Lagoon Resort in French Polynesia. The results of this property have been reflected as discontinued operations for all periods presented. OEH has entered into an agreement to sell the hotel and expects to complete the sale in the second quarter of 2012.
OEHs 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 cruise ship and five canal boats.
OEHs active real estate projects are in St. Martin, French West Indies, and Koh Sumai, Thailand.
Results of Operations
Three months ended March 31, 2012 compared to three months ended March 31, 2011
OEHs operating results for the three months ended March 31, 2012 and 2011, expressed as a percentage of revenue, were as follows:
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
Hotels and restaurants |
|
91 |
|
91 |
|
Tourist trains and cruises |
|
7 |
|
7 |
|
Real estate and property development |
|
2 |
|
2 |
|
|
|
|
|
|
|
|
|
100 |
|
100 |
|
Expenses |
|
|
|
|
|
Cost of services |
|
50 |
|
50 |
|
Selling, general and administrative |
|
49 |
|
48 |
|
Depreciation and amortization |
|
10 |
|
11 |
|
Gain on disposal of property, plant and equipment |
|
|
|
|
|
Net finance costs |
|
6 |
|
8 |
|
|
|
|
|
|
|
Losses before income taxes |
|
(15 |
) |
(17 |
) |
Benefit from income taxes |
|
|
|
5 |
|
Losses from unconsolidated companies |
|
|
|
(1 |
) |
|
|
|
|
|
|
Net losses from continuing operations |
|
(15 |
) |
(13 |
) |
Earnings/(losses) from discontinued operations |
|
1 |
|
(2 |
) |
|
|
|
|
|
|
Net losses |
|
(14 |
) |
(15 |
) |
Segment EBITDA, defined as segment net earnings from continuing operations before interest, foreign currency, tax (including tax on unconsolidated companies), depreciation and amortization (segment EBITDA), of OEHs operations for the three months ended March 31, 2012 and 2011 is analyzed as follows (dollars in millions):
Three months ended March 31, |
|
2012 |
|
2011 |
| |
|
|
|
|
|
| |
Segment EBITDA: |
|
|
|
|
| |
Hotels and restaurants |
|
|
|
|
| |
Owned hotels: |
- Europe |
|
(7.6 |
) |
(6.9 |
) |
|
- North America |
|
7.2 |
|
5.7 |
|
|
- Rest of the world |
|
14.2 |
|
11.6 |
|
Hotel management and part-ownership interests |
|
(0.7 |
) |
(0.2 |
) | |
Restaurants |
|
0.3 |
|
0.1 |
| |
|
|
|
|
|
| |
|
|
13.4 |
|
10.3 |
| |
Tourist trains and cruises |
|
(0.3 |
) |
(0.8 |
) | |
Real estate and property development |
|
(1.5 |
) |
(1.0 |
) | |
Gain on disposal of property, plant and equipment |
|
|
|
0.6 |
| |
Central overheads |
|
(9.8 |
) |
(7.7 |
) | |
|
|
|
|
|
| |
|
|
1.8 |
|
1.4 |
|
The foregoing segment EBITDA reconciles to net losses as follows (dollars in millions):
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Net losses |
|
(15.4 |
) |
(14.7 |
) |
Add: |
|
|
|
|
|
Depreciation and amortization |
|
11.0 |
|
11.0 |
|
Interest expense, net |
|
7.5 |
|
9.3 |
|
Foreign currency, net |
|
(0.8 |
) |
(1.0 |
) |
Provision for/ (benefit from) income taxes |
|
0.2 |
|
(4.7 |
) |
Earnings/(losses) from discontinued operations, net of tax |
|
(0.7 |
) |
1.7 |
|
Share of benefit from income taxes of unconsolidated companies |
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
1.8 |
|
1.4 |
|
Operating information for OEHs owned hotels for the three months ended March 31, 2012 and 2011 is as follows:
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Average Daily Rate (in dollars) |
|
|
|
|
|
Europe |
|
423 |
|
423 |
|
North America |
|
440 |
|
402 |
|
Rest of the world |
|
379 |
|
348 |
|
Worldwide |
|
402 |
|
373 |
|
|
|
|
|
|
|
Rooms Available (in thousands) |
|
|
|
|
|
Europe |
|
49 |
|
48 |
|
North America |
|
64 |
|
63 |
|
Rest of the world |
|
120 |
|
118 |
|
Worldwide |
|
233 |
|
229 |
|
|
|
|
|
|
|
Rooms Sold (in thousands) |
|
|
|
|
|
Europe |
|
16 |
|
14 |
|
North America |
|
41 |
|
41 |
|
Rest of the world |
|
79 |
|
76 |
|
Worldwide |
|
136 |
|
131 |
|
|
|
|
|
|
|
Occupancy (percentage) |
|
|
|
|
|
Europe |
|
33 |
|
29 |
|
North America |
|
64 |
|
65 |
|
Rest of the world |
|
66 |
|
64 |
|
Worldwide |
|
58 |
|
57 |
|
|
|
|
|
|
|
RevPAR (in dollars) |
|
|
|
|
|
Europe |
|
134 |
|
124 |
|
North America |
|
280 |
|
258 |
|
Rest of the world |
|
249 |
|
224 |
|
Worldwide |
|
233 |
|
212 |
|
|
|
|
|
|
|
Change % |
| ||
Three months ended March 31, |
|
2012 |
|
2011 |
|
Dollars |
|
Local |
|
|
|
|
|
|
|
|
|
|
|
Same Store RevPAR (in dollars) |
|
|
|
|
|
|
|
|
|
Europe |
|
134 |
|
124 |
|
8 |
% |
11 |
% |
North America |
|
280 |
|
258 |
|
9 |
% |
9 |
% |
Rest of the world |
|
249 |
|
224 |
|
11 |
% |
13 |
% |
Worldwide |
|
233 |
|
212 |
|
10 |
% |
11 |
% |
Average daily rate is the average amount achieved for the rooms sold. RevPAR is revenue per available room, which is the rooms revenue divided by the number of available rooms. Same store RevPAR is a comparison based on the operations of the same units in each period, by excluding the effect of any hotel acquisitions in the period or major refurbishments where a property is closed for the whole of the period. There were no properties excluded from the same store data.
Overview
The net loss attributed to OEH for the three months ended March 31, 2012 was $15.7 million ($0.15 per common share) on revenue of $108.9 million, compared with a net loss of $14.9 million ($0.15 per common share) on revenue of $100.2 million in the prior year first quarter. OEHs increased revenue reflects the improved business conditions in the global lodging industry. The first quarter is a traditional loss-making period for OEH because a number of its properties are closed for the winter, the Venice Simplon-Orient-Express train does not operate for most of the quarter and tourist arrivals are low in locations with poor winter weather. RevPAR of owned hotels on a same store basis increased from $212 in the first quarter of 2011 to $233 in the first quarter of 2012, a 10% increase when measured in U.S. dollars and 11% in local currency. These gains have resulted from a combination of occupancy and average daily rate increases. Occupancy was 58% in the first quarter of 2012, compared to 57% for the same period in the prior year. Average daily rate increased to $402 in the first quarter of 2012, compared to $373 for the same period in the prior year. As business conditions in the global lodging industry continue to improve, OEH expects pricing to follow the growth in occupancy as demand increases. OEHs strategy is to increase revenue, manage its costs and preserve profit margins.
The net loss from continuing operations for the three months ended March 31, 2012 was $16.1 million, an increase of $3.1 million compared with net loss of $13.0 million in the three months ended March 31, 2011. The increased loss in the three months ended March 31, 2012 was mainly attributable to a $2.1 million increase in central overheads. No impairments were recorded in continuing operations for the three months ended March 31, 2012 or 2011.
Revenue
Three months ended March 31, |
|
2012 |
|
2011 |
| |
|
|
|
|
|
| |
Hotels and restaurants |
|
|
|
|
| |
Owned hotels |
- Europe |
|
15,788 |
|
14,680 |
|
|
- North America |
|
29,065 |
|
27,287 |
|
|
- Rest of the world |
|
49,069 |
|
44,943 |
|
Hotel management/part ownership interests |
|
1,067 |
|
1,089 |
| |
Restaurants |
|
3,866 |
|
3,341 |
| |
|
|
|
|
|
| |
|
|
98,855 |
|
91,340 |
| |
Tourist trains and cruises |
|
8,183 |
|
7,158 |
| |
Real estate |
|
1,814 |
|
1,655 |
| |
|
|
|
|
|
| |
|
|
108,852 |
|
100,153 |
|
Total revenue increased by $8.7 million, or 9%, from $100.2 million in the three months ended March 31, 2011 to $108.9 million in the three months ended March 31, 2012.
Owned Hotels: The change in revenue at owned hotels is analyzed on a regional basis as follows:
Europe
Revenue increased by $1.1 million, or 7%, from $14.7 million for the three months ended March 31, 2011 to $15.8 million for the three months ended March 31, 2012, driven by the Italian properties. Average daily rate remained flat at $423 for the three months ended March, 31, 2012 and 2011. Occupancy increased 4% from 29% in the three months ended March 31, 2011 to 33% in the three months ended March 31, 2012. On a same store basis, RevPAR in local currency increased by 11%, and in U.S. dollars this translated into an increase of 8%. Exchange rate movements caused revenue to decrease by $0.5 million in the three months ended March 31, 2012 compared with the same period in 2011.
North America
Revenue increased by $1.8 million, or 7%, from $27.3 million in the three months ended March 31, 2011 to $29.1 million in the three months ended March 31, 2012, generated by revenue growth at Charleston Place Hotel and La Samanna. Same store RevPAR increased 9% from $258 in the three months ended March 31, 2011 to $280 in the three months ended March 31, 2012. Average daily rate increased from $402 in the three months ended March 31, 2011 to $440 in the three months ended March 31, 2012. Occupancy decreased by 1%, from 65% in the three months ended March 31, 2011 to 64% in the three months ended March 31, 2012.
Rest of the World
Revenue increased by $4.2 million, or 9%, from $44.9 million in the three months ended March 31, 2011 to $49.1 million in the three months ended March 31, 2012. Exchange rate movements across the region caused revenue to decrease by $1.6 million compared to the same period in 2011. Same store RevPAR in U.S. dollars for the three months ended March 31, 2012 increased 11% from $224 in the three months ended March 31, 2011 to $249 for the three months ended March 31, 2012, an increase of 13% when measured in local currency. Average daily rate increased by 9% from $348 in the three months ended March 31, 2011 to $379 in the three months ended March 31, 2012. Occupancy increased 2% from 64% in the three months ended March 31, 2011 to 66% in the three months ended March 31, 2012.
Revenue at OEHs hotels in South America collectively increased by $3.0 million, or 12%, from $24.4 million in the three months ended March 31, 2011 to $27.4 million in the three months ended March 31, 2012, mostly from revenue growth at the Brazilian properties. Exchange rate movements caused revenue to decrease by $0.8 million. Same store RevPAR for the three months ended March 31, 2012 increased 16% from $303 in the three months ended March 31, 2011 to $352 for the three months ended March 31, 2012. Occupancy increased 6% from 67% for the three months ended March 31, 2011 to 73% for the three months ended March 31, 2012.
Southern Africa revenue remained flat at $8.8 million in the three months ended March 31, 2012 and 2011.
Revenue at OEHs Australian property decreased by $0.1 million, or 2%, from $4.4 million in the three months ended March 31, 2011 to $4.3 million in the three months ended March 31, 2012.
Revenue for the Asian properties increased by $1.2 million, or 16%, from $7.3 million in the three months ended March 31, 2011 to $8.5 million in the three months ended March 31, 2012, with revenue growth coming principally from Napasai and The Governors Residence. Exchange rate movements caused revenue to decrease by $0.1 million in the three months ended March 31, 2012 compared with the same period in 2011. Same store RevPAR in U.S. dollars for the three months ended March 31, 2012 increased $26, or 15%, from $170 in the three months ended March 31, 2011 to $196 for the three months ended March 31, 2012. Occupancy decreased 1% from 68% in the three months ended March 31, 2011 to 67% in the three months ended March 31, 2012.
Hotel Management and Part-Ownership Interests: Revenue remained flat at $1.1 million in the three months ended March 31, 2012 and 2011.
Restaurants: Revenue increased by $0.6 million, or 18%, from $3.3 million in the three months ended March 31, 2011 to $3.9 million in the three months ended March 31, 2012, reflecting growth in both the number of covers and average check.
Trains and Cruises: Revenue increased by $1.0 million, or 14%, from $7.2 million in the three months ended March 31, 2011 to $8.2 million in the three months ended March 31, 2012. The increase in the period resulted from operating growth of $1.1 million, offset by exchange rate movements of $0.1 million.
Real Estate: Two condominiums were delivered at Porto Cupecoy generating revenue of $1.8 million for the three months ended March 31, 2012. Sales contracts were signed on a further six units in the three months ended March 31, 2012.
Cost of services
Cost of services increased by $3.9 million from $50.4 million in the three months ended March 31, 2011 to $54.3 million in the three months ended March 31, 2012. Cost of services was 50% of revenue in the three months ended March 31, 2012 and 2011. Exchange rate movements caused cost of services to decrease by $1.2 million in the three months ended March 31, 2012 compared with the same period in 2011.
Selling, general and administrative expenses
Selling, general and administrative expenses increased by $4.5 million from $48.2 million in the three months ended March 31, 2011 to $52.7 million in the three months ended March 31, 2012. Exchange rate movements caused these expenses to decrease by $1.2 million in the three months ended March 31, 2012 compared with the same period in 2011. Selling, general and administrative expenses were 49% of revenue in the three months ended March 31, 2012 and 48% in the three months ended March 31, 2011.
Depreciation and amortization
Depreciation and amortization remained flat at $11.0 million in the three months ended March 31, 2012 and 2011. Exchange rate movements caused depreciation to decrease by $0.3 million compared to the same period in 2011.
Segment EBITDA
Three months ended March 31, |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Hotels and restaurants |
|
|
|
|
|
Owned hotels - Europe |
|
(7,604 |
) |
(6,858 |
) |
- North America |
|
7,191 |
|
5,717 |
|
- Rest of the world |
|
14,199 |
|
11,555 |
|
Hotel management/part ownership interests |
|
(744 |
) |
(220 |
) |
Restaurants |
|
339 |
|
148 |
|
|
|
|
|
|
|
|
|
13,381 |
|
10,342 |
|
Tourist trains and cruises |
|
(322 |
) |
(836 |
) |
Real estate |
|
(1,524 |
) |
(1,044 |
) |
Gain on disposal of property, plant and equipment |
|
|
|
606 |
|
Central overheads |
|
(9,767 |
) |
(7,717 |
) |
|
|
|
|
|
|
|
|
1,768 |
|
1,351 |
|
The European hotels collectively reported a segment EBITDA loss of $7.6 million for the three months ended March 31, 2012 compared to a loss of $6.9 million in the same period in 2011. This increase in segment EBITDA loss results mainly from a write-off of fixed assets at Grand Hotel Europe of $0.4 million. As a percentage of European hotels revenue, the European segment EBITDA margin loss increased slightly from 47% for the three months ended March 31, 2011 to 48% for the three months ended March 31, 2012.
Segment EBITDA in the North American hotels region increased by 26% from $5.7 million in the three months ended March 31, 2011, to $7.2 million in the three months ended March 31, 2012. This segment EBITDA growth is mainly from Charleston Place Hotel contributing $0.7 million and Maroma Resort and Spa contributing $0.5 million due primarily from increases in average daily rate. As a percentage of North American hotels revenue, the North American segment EBITDA margin increased from 21% in 2011 to 25% in 2012.
Segment EBITDA in the Rest of the World hotels region increased by 22% from $11.6 million in the three months ended March 31, 2011, to $14.2 million in the three months ended March 31, 2012. This segment EBITDA growth is mainly from the Brazilian hotels contributing $1.5 million due primarily from increases in average daily rate. As a percentage of Rest of the World hotels revenue, the segment EBITDA margin for the three months ended March 31, 2012 increased to 29%, compared to 26% for the same period in 2011.
Central overheads increased by $2.1 million, or 27%, from $7.7 million in the three months ended March 31, 2011 to $9.8 million in the three months ended March 31, 2012. The variance includes compensation cost increase of $1.1 million and share option expense increase of $0.4 million. As a percentage of revenue, central overheads increased from 8% in the three months ended March 31, 2011 to 9% in the three months ended March 31, 2012.
Gain on disposal of property, plant and equipment
In March 2011, OEH agreed to assign its purchase and development agreements previously made with the New York Public Library relating to the site of the Donnell branch of the Library adjacent to OEHs 21 Club restaurant. This assignment resulted in a gain, net of costs, of $0.6 million in the three months ended March 31, 2011.
Losses from operations before net finance costs
Losses from operations increased by $0.3 million from a loss of $8.9 million in the three months ended March 31, 2011 to a loss of $9.2 million in the three months ended March 31, 2012, due to the factors described above.
Net finance costs
Net finance costs were $8.3 million for the three months ended March 31, 2011 and $6.6 million for the three months ended March 31, 2012. The three months ended March 31, 2011 included a foreign exchange gain of $1.0 million compared to a foreign exchange gain of $0.9 million in the three months ended March 31, 2012. Net interest expense decreased by $1.8 million, or 19%, from $9.3 million in the three months ended March 31, 2011 to $7.5 million in the three months ended March 31, 2012. This decrease is mainly due to $0.9 million of interest that was capitalized at El Encanto, compared with $Nil in the prior year comparative period.
Provision for income taxes
The provision for income taxes increased by $4.9 million, from a credit of $4.7 million in the three months ended March 31, 2011 to a charge of $0.2 million in the three months ended March 31, 2012.
The provision for income taxes for the three months ended March 31, 2012 included a provision of $0.3 million in respect of OEHs liability for uncertain tax positions, compared to a benefit of $2.1 million in respect of the liability in the three months ended March 31, 2011.
Losses from unconsolidated companies
Losses from unconsolidated companies, net of tax, decreased by $0.5 million from $0.5 million in the three months ended March 31, 2011 to $Nil in the three months ended March 31, 2012. The tax benefit associated with earnings from unconsolidated companies was $0.2 million in 2011 and $Nil in 2012.
Earnings from discontinued operations
The earnings from discontinued operations for the three months ended March 31, 2012 were $0.7 million compared with a loss of $1.7 million for the three months ended March 31, 2011. Earnings from discontinued operations for the three months ended March 31, 2012 include a gain of $2.1 million on the disposal of Keswick Hall, which was sold on January 23, 2012, offset by operating losses of $0.9 million and a tax provision of $0.4 million. Losses from Bora Bora Lagoon Resort for the three months ended March 31, 2012 were $0.1 million.
The losses from discontinued operations for the three months ended March 31, 2011 included operating losses of $1.0 million from Keswick Hall, $0.6 million from Hôtel de la Cité, which was sold in August 2011, and losses of $0.1 million from Bora Bora Lagoon Resort.
Liquidity and Capital Resources
Working Capital
OEH had cash and cash equivalents of $66.5 million at March 31, 2012, $23.6 million less than the $90.1 million at December 31, 2011. In addition, OEH had restricted cash of $15.2 million (December 31, 2011 - $13.2 million). At March 31, 2012, there were undrawn amounts available to OEH under committed short-term lines of credit of $4.3 million (December 31, 2011 - $4.4 million) and undrawn amounts available to OEH under secured revolving credit facilities of $Nil (December 31, 2011 - $Nil), bringing total cash availability at March 31, 2012 to $70.8 million, excluding the restricted cash of $15.2 million.
Current assets less current liabilities, including the current portion of long-term debt, resulted in a working capital balance of $29.7 million at March 31, 2012, a decrease from $65.9 million at December 31, 2011. The main factors that contributed to the decrease in working capital were increases in accrued liabilities and deferred revenues, as well as the use of cash in operations.
Cash Flow
Operating Activities. Net cash used in operating activities for the three months ended March 31, 2012 was $8.1 million compared to cash provided by operating activities of $1.0 million for the three months ended March 31, 2011. The decrease was mainly due to cash used in operations and increases in current asset balances.
Investing Activities. Cash used in investing activities decreased by $15.7 million to $9.4 million for the three months ended March 31, 2012, compared to $25.1 million for the three months ended March 31, 2011. The significant movement is mainly attributable to the sale of Keswick Hall in Charlottesville, Virginia for net proceeds of $11.1 million, after payment of $10.0 million of bank debt secured by the property.
Capital expenditure of $19.6 million during the quarter included $1.0 million at Hotel Cipriani, $8.0 million at El Encanto, $0.9 million at the two new Sicilian properties, $1.1 million at Hotel Splendido, $1.1 million La Samanna, $1.2 million at Inn at Perry Cabin and $0.9 million on the Venice Simplon-Orient-Express.
Financing Activities. Cash used in financing activities for the three months ended March 31, 2012 was $6.8 million compared to $10.2 million for the three months ended March 31, 2011, a decrease of $3.4 million. The main factor that contributed to this is the issuance of long term debt of $2.3 million, net of issuance costs.
Capital Commitments
There were $28.9 million of capital commitments outstanding as of March 31, 2012 (December 31, 2011- $15.4 million). Additionally, outstanding contracts for project-related costs on the Porto Cupecoy development amounted to $0.4 million at March 31, 2012 (December 31, 2011 - $0.5 million).
OEH agreed in January 2010 to pay the vendor of the two Sicilian hotels a further $7.1 million if, by 2015, additional rooms are constructed at Grand Hotel Timeo and certain required permits are granted to expand and add a swimming pool to Villa SantAndrea. In February 2011, OEH paid $2.0 million of the contingent liability as the appropriate permits to add a swimming pool to Villa SantAndrea were granted. OEH has provided $4.0 million for the expected remaining liability for this contingency.
Indebtedness
At March 31, 2012, OEH had $537.1 million (December 31, 2011 - $543.9 million) of consolidated debt, including the current portion and excluding debt held by consolidated variable interest entities, largely collateralized by OEH assets with a number of commercial bank lenders which is repayable over periods of 1 to 20 years with a weighted average interest rate of 4.15%. See Note 9 to the Financial Statements regarding the maturity of long-term debt.
Debt of consolidated variable entities at March 31, 2012 comprised $90.1 million (December 31, 2011 - $90.5 million), including the current portion, of debt obligations of Charleston Center LLC, owner of the Charleston Place Hotel in which OEH has a 19.9% equity investment.
Including debt of consolidated variable entities, approximately 51% of the outstanding principal was drawn in European euros and the balance primarily in U.S. dollars. At March 31, 2012, 49% of borrowings of OEH were in floating interest rates.
Liquidity
During the nine months ending December 31, 2012, OEH will have approximately $58.9 million of scheduled debt repayments including capital lease payments. OEH is negotiating with existing lenders to refinance and extend the maturity on approximately $24.4 million of debt that falls due in the remainder of the year.
Additionally, OEHs capital commitments at March 31, 2012 amounted to $28.9 million. OEH expects to incur costs of a further $1.6 million to complete its Porto Cupecoy development, funded by sales proceeds as units are transferred to purchasers.
OEH expects to fund its working capital requirements, debt service and capital expenditure commitments for the foreseeable future from cash resources, operating cash flow, available committed borrowing facilities, issuing new debt or equity securities, rescheduling loan repayments or capital commitments, and disposing of non-core assets and developed real estate. During 2011, for example, two loans totaling $131.5 million were refinanced with two new loans totaling $126.1 million, both of which mature in three years. The $5.4 million repayment was funded out of cash resources. In addition, OEH signed a new $45.0 million loan facility providing partial funding for the completion of El Encanto, scheduled to reopen in early 2013. The loan has a term of three years, with two one-year extensions. Also in 2011, total gross proceeds of $41.9 million were received upon the assignment of purchase and development agreements relating to OEHs proposed New York hotel project in April 2011, and upon the exercise of a call option in December 2011 by the assignee for excess development rights over the 21 Club restaurant. Also in 2011, OEH completed the sale of the property and operations of Hôtel de la Cité in Carcassonne, France for a cash consideration of 9.0 million ($12.9 million). On January 23, 2012, OEH completed the sale of Keswick Hall, Virginia, for gross proceeds of $22.0 million.
OEH has several loan facilities with commercial banks, most of which relate to specific hotel or other properties and are secured by a mortgage on the particular property. In most cases, the Company is either the borrower or the subsidiary owning the property is the borrower and the loan is guaranteed by the Company.
The loan facilities generally place restrictions on the property-owning companys ability to incur additional debt and limit liens, and to effect mergers and asset sales, and include financial covenants. Where the property-owning subsidiary is the borrower, the financial covenants relate to the financial performance of the property financed and generally include covenants relating to interest coverage, debt service, and loan-to-value and debt-to-EBITDA ratio tests. Most of the facilities under which the Company is the borrower or the guarantor also contain financial covenants which are based on OEHs performance on a consolidated basis. The covenants include a quarterly interest coverage test and a quarterly net worth test.
At March 31, 2012, one OEH subsidiary was out of compliance with financial covenants in a $2.8 million loan facility. This non-compliance is expected to be rectified in the second quarter of 2012. In addition, two unconsolidated joint venture companies were out of compliance as follows:
· the unconsolidated Peru rail joint venture in which OEH has a 50% interest was out of compliance with a leverage covenant in a loan of $8.8 million, which is non-recourse to and not credit-supported by OEH while it remains a 50% owner of the
joint venture, and was out of compliance with a debt-service-coverage ratio in a second loan of $8.7 million, which is guaranteed by OEH. Discussions with the banks are ongoing to bring the joint venture back into compliance; and
· the Hotel Ritz, Madrid, 50% owned by OEH, was out of compliance at December 31, 2011 with the debt-service-coverage ratio in its first mortgage loan facility amounting to $91.2 million at March 31, 2012. Subsequent to December 31, 2011, a six-month waiver of the non-compliance was received from the lender, which expires on August 21, 2013. Although the loan is otherwise non-recourse to and not credit-supported by OEH or its joint venture partner in the hotel, they have each provided separate partial guarantees of $10.0 million, as of March 31, 2012, while discussions continue with the lender as to how to bring the hotel into long-term compliance.
OEH recognizes the risk that a property-specific or group consolidated loan covenant could be breached. In order to minimize this risk, OEH regularly prepares cash flow projections which are used to forecast covenant compliance under all loan facilities. If there is any likelihood of potential non-compliance with a covenant, OEH takes proactive steps to meet with the lending bank to seek an amendment to, or a waiver of, the financial covenant at risk. Obtaining an amendment or waiver may result in an increase in the borrowing costs.
Many of OEHs bank loan facilities include cross-default provisions under which a failure to pay principal or interest by the borrower or guarantor under other indebtedness in excess of a specified threshold amount would cause a default under the facilities. Under OEHs largest loan facility, the specified cross-default threshold amount is $25.0 million.
In order to assure that OEH has sufficient liquidity in the future, OEHs cash flow projections and available funds are discussed with the Companys board of directors and OEHs advisors to consider the most appropriate way to develop OEHs capital structure and generate additional sources of liquidity. The options available to OEH will depend on the current economic and financial environment and OEHs continued compliance with financial covenants. Options currently available to OEH include increasing the leverage on certain under-leveraged assets, issuing equity or debt instruments and disposing of non-core assets and sales of developed real estate.
Recent Accounting Pronouncements
As of March 31, 2012, OEH had adopted all the relevant standards that impacted the accounting for annual goodwill impairment assessments, presentation of comprehensive income and fair value measurement and disclosure, as reported in Note 1 to the Financial Statements.
Accounting pronouncements to be adopted
In December 2011, the FASB issued accounting guidance that requires companies to provide new disclosures about offsetting assets and liabilities and related arrangements for financial instruments and derivatives. The provisions of this guidance are effective for annual reporting periods beginning on or after January 1, 2013, and are required to be applied retrospectively. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.
Critical Accounting Policies
For a discussion of these, see under the heading Critical Accounting Policies in Item 7 Managements Discussion and Analysis in the Companys 2011 Form 10-K annual report.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
OEH is exposed to market risk from changes in interest rates and foreign currency exchange rates. These exposures are monitored and managed as part of OEHs overall risk management program, which recognizes the unpredictability of financial markets and seeks to mitigate material adverse effects on consolidated earnings and cash flows. OEH does not hold market rate sensitive financial instruments for trading purposes.
The market risk relating to interest rates arises mainly from the financing activities of OEH. Earnings are affected by changes in interest rates on borrowings, principally based on U.S. dollar LIBOR and EURIBOR, and on short-term cash investments. If interest rates increased by 10%, with all other variables held constant, annual net finance costs of OEH would have increased by approximately $0.8 million on an annual basis based on borrowings at March 31, 2012.
OEHs properties match foreign currency earnings and costs to provide a natural hedge against currency movements. In addition, a significant proportion of the guests at OEH hotels located outside of the United States originate from the United States. When a foreign currency in which OEH operates devalues against the U.S. dollar, OEH has considerable flexibility to increase prices in local currency, or vice versa. Management believes that when these factors are combined, OEH does not face a material exposure to its net earnings from currency movements, although the reporting of OEHs revenue and costs translated into U.S. dollars can, from period to period, be materially affected.
OEH management uses a sensitivity analysis to assess the potential impact on net earnings of changes in foreign currency financial instruments from hypothetical changes in the foreign currency exchange rates. The primary assumption used in this model is a hypothetical 10% weakening or strengthening of the foreign currencies against the U.S. dollar. At March 31, 2012, as a result of this analysis, OEH management determined that the impact on foreign currency financial instruments of a 10% weakening of foreign currency exchange rates in relation to the U.S. dollar would decrease OEHs net earnings by approximately $2.3 million consisting of Russian ruble $0.9 million, Mexican peso $0.5 million and Thai baht $0.9 million.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
The Companys management, under the supervision and with the participation of its interim chief executive officer and chief financial officer, has evaluated the effectiveness of OEHs disclosure controls and procedures (as defined in SEC Rule 13a-15(e)) as of March 31, 2012. OEH previously reported a material weakness in internal control over financial reporting (as defined in SEC Rule 13a-15(f)) relating to the accounting for income taxes in Item 9A Controls and Procedures of the Companys Annual Report on Form 10-K for the year ended December 31, 2011. Specifically, OEH did not maintain effective controls over the preparation and review of the calculations and related supporting documentation for certain tax assets and liabilities and the current and deferred income tax expense recorded in accordance with U.S. generally accepted accounting principles. This material weakness was not remediated during the first quarter of 2012 and, accordingly, the Companys management has concluded that OEHs disclosure controls and procedures were not effective as of March 31, 2012.
Remediation Plan for Material Weakness Related to Accounting for Income Taxes
During the first quarter of 2012, OEH has taken steps to remediate this material weakness and will take further actions to improve internal controls over OEHs accounting for income taxes and generally to strengthen its controls, including the following:
· enhance policies, procedures and formal communications between the tax department and the financial reporting group relating to tax account reconciliation, analysis and review,
· commence and progress certain year end tax analysis and reporting activities in periods earlier in the year in order to provide additional analysis and reconciliation time during the financial close period,
· recruit additional resources in the preparation and review of the provision of income taxes,
· establish procedures to integrate and enhance communications with subsidiary finance and accounting personnel regarding the requirements for tax jurisdiction-specific information, and
· enhance the training of tax accounting personnel, particularly with respect to the application of U.S. generally accepted accounting principles.
OEH anticipates the actions described above will strengthen OEHs internal control over financial reporting relating to the accounting for income taxes and will, over time, address the related material weakness identified as of December 31, 2011. However, because the remedial actions have only recently been undertaken and remain to be fully implemented, the Companys management anticipates it will not be able to conclude that the material weakness has been remediated until, at the earliest, the end of OEHs fiscal year ending December 31, 2012.
Changes in Internal Control over Financial Reporting
There have been no changes in OEHs internal control over financial reporting during the three months ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, OEHs internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 5. Other Information
On January 1, 2012, OEH adopted guidance which requires presentation of the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements and eliminates the option to present components of other comprehensive income as part of the statements of consolidated total equity. (See Note 1 to the Financial Statements.) The following presents the retrospective application of guidance for the three years ended December 31, 2011:
Orient-Express Hotels Ltd. and Subsidiaries
Statements of Consolidated Comprehensive Income
Year ended December 31, |
|
2011 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Net losses |
|
(87,596 |
) |
(62,580 |
) |
(68,737 |
) |
Net earnings attributable to non-controlling interests |
|
(184 |
) |
(179 |
) |
(60 |
) |
|
|
|
|
|
|
|
|
Net losses attributable to Orient-Express Hotels Ltd |
|
(87,780 |
) |
(62,759 |
) |
(68,797 |
) |
|
|
|
|
|
|
|
|
Other comprehensive (loss)/income, net of tax: |
|
|
|
|
|
|
|
Foreign currency translation adjustments, net of tax of $Nil, $Nil and $Nil |
|
(32,577 |
) |
(1,916 |
) |
22,733 |
|
Change in fair value of derivatives, net of tax (benefit)/provision of ($1,802), $112 and $Nil |
|
2,305 |
|
2,530 |
|
(2,642 |
) |
Change in pension liability, net of tax of $644, ($555) and $50 |
|
(3,432 |
) |
615 |
|
305 |
|
|
|
|
|
|
|
|
|
Total other comprehensive (loss)/income, net of tax |
|
(33,704 |
) |
1,229 |
|
20,396 |
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
(121,484 |
) |
(61,530 |
) |
(48,401 |
) |
ITEM 6. Exhibits
The index to exhibits appears below, on the page immediately following the signature page to this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
ORIENT-EXPRESS HOTELS LTD. | |
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Martin OGrady |
|
|
|
Martin OGrady |
|
|
|
Vice President - Finance and Chief Financial Officer |
Dated: May 9, 2012
EXHIBIT INDEX
3.1 - Memorandum of Association and Certificate of Incorporation of the Company, filed as Exhibit 3.2 to the Companys Form 8-K/A Current Report on June 15, 2011 and incorporated herein by reference.
3.2 - Bye-Laws of the Company, filed as Exhibit 3.2 to the Companys Form 8-K Current Report on June 15, 2007 and incorporated herein by reference.
3.3 - Rights Agreement dated as of June 1, 2000, and amended and restated as of April 12, 2007, between the Company and Computershare Trust Company, N.A., as rights agent, filed as Exhibit 1 to Amendment No. 1 to the Companys Registration Statement on Form 8-A dated April 23, 2007, for the Companys preferred share purchase rights, and incorporated herein by reference.
3.4 - Amendment No. 1 dated December 10, 2007 to amended and restated Rights Agreement (Exhibit 3.3), filed as Exhibit 4.2 to the Companys Form 8-K Current Report on December 10, 2007 and incorporated herein by reference.
3.5 - Amendment No. 2 dated May 27, 2010 to amended and restated Rights Agreement (Exhibit 3.3), filed as Exhibit 4.2 to the Companys Form 8-K Current Report on May 27, 2010 and incorporated herein by reference.
31 - Rule 13a-14(a)/15d-14(a) Certifications.
32 - Section 1350 Certification.
101 - Interactive Data File.
Exhibit 31
ORIENT-EXPRESS HOTELS LTD.
Rule 13a-14(a)/15d-14(a) Certification
I, J. Robert Lovejoy, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Orient-Express Hotels Ltd. for the quarter ended March 31, 2012;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Dated: May 9, 2012 |
/s/ J. Robert Lovejoy |
|
J. Robert Lovejoy |
|
Chairman and Interim Chief Executive Officer |
ORIENT-EXPRESS HOTELS LTD.
Rule 13a-14(a)/15d-14(a) Certification
I, Martin OGrady, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Orient-Express Hotels Ltd. for the quarter ended March 31, 2012;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Dated: May 9, 2012 |
/s/ Martin OGrady |
|
Martin OGrady |
|
Vice President Finance and Chief Financial Officer |
Exhibit 32
ORIENT-EXPRESS HOTELS LTD.
Section 1350 Certification
The undersigned hereby certify that this report of Orient-Express Hotels Ltd. for the periods presented fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the report.
/s/ J. Robert Lovejoy |
|
/s/ Martin OGrady |
J. Robert Lovejoy |
|
Martin OGrady |
Chairman and Interim Chief Executive Officer |
|
Vice President Finance and Chief Financial Officer |
Dated: May 9, 2012
A signed original of this written certification has been provided to Orient-Express Hotels Ltd. and will be retained by Orient-Express Hotels Ltd. and furnished to the U.S. Securities and Exchange Commission or its staff upon request.
Long-term debt and obligations under capital lease (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2012
|
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Long-term debt and obligations under capital lease | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt and obligations under capital lease |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the aggregate maturities of long-term debt including obligations under capital lease |
|
Investments in unconsolidated companies (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2012
|
Dec. 31, 2011
|
|
Summarized financial data for OEH's unconsolidated companies | ||
Current assets | $ 71,639 | $ 70,536 |
Property, plant and equipment, net | 353,203 | 344,576 |
Other assets | 5,209 | 5,536 |
Total assets | 430,051 | 420,648 |
Current liabilities | 180,238 | 195,529 |
Long-term debt | 41,302 | 17,346 |
Other liabilities | 100,057 | 99,643 |
Total shareholders' equity | 108,454 | 108,130 |
Total liabilities and shareholders' equity | 430,051 | 420,648 |
Revenue | 32,345 | 28,157 |
Earnings from operations before net finance costs | 3,062 | 1,170 |
Net earnings/(losses) | $ 413 | $ (1,286) |
Equity method investments | Maximum
|
||
Schedule of Equity Method Investments | ||
Ownership percentage | 50.00% |
Derivatives and hedging activities (Tables)
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2012
|
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Derivatives and hedging activities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of notional amounts of outstanding interest rate derivatives that were designated as cash flow hedges |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of derivative financial instruments |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of effect of derivative financial instruments on the statements of consolidated operations and statement of consolidated comprehensive income |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of valuation of assets and liabilities by the fair value hierarchy |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of beginning and ending balances of liabilities having fair value measurements based on significant unobservable inputs (Level 3) |
|
Commitments and contingencies (Details 2) (Infringement litigation of "Cipriani", USD $)
|
1 Months Ended | |
---|---|---|
Mar. 31, 2010
Y
|
Mar. 31, 2012
|
|
Infringement litigation of "Cipriani"
|
||
Litigation settlement | ||
Amount received from defendants | $ 3,947,000 | |
Amount receivable from defendants in installments | 9,833,000 | |
Period for receivable amount from defendants in installments (in years) | 5 | |
Amount receivable from defendants not yet recognized | $ 7,528,000 |
Investments in unconsolidated companies (Details 2) (USD $)
|
3 Months Ended | 3 Months Ended | 3 Months Ended | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2012
|
Dec. 31, 2011
|
Mar. 31, 2012
Hotel and rail joint ventures in Peru
|
Mar. 31, 2012
Rail joint venture in Peru
|
Dec. 31, 2011
Rail joint venture in Peru
|
Mar. 31, 2012
Rail joint venture in Peru
Debt obligations guarantee through 2016
|
Mar. 31, 2012
Rail joint venture in Peru
Debt obligations contingent guarantee through 2016
|
Mar. 31, 2012
Rail joint venture in Peru
Governmental rail concessions, performance guarantee through April 2012
|
Mar. 31, 2012
Rail joint venture in Peru
Contingent guarantees
|
Mar. 31, 2012
Rail joint venture in Peru
Contingent guarantees
Minimum
|
Mar. 31, 2012
Hotel joint venture in Peru
|
Dec. 31, 2011
Hotel joint venture in Peru
|
Mar. 31, 2012
Hotel joint venture in Peru
Additional debt obligations contingent guarantee through 2018
|
Mar. 31, 2012
Hotel joint venture in Peru
Additional debt obligations contingent guarantee through 2014
|
Mar. 31, 2012
Hotel joint venture in Peru
Contingent guarantees
|
Mar. 31, 2012
Hotel joint venture in Peru
Contingent guarantees
Minimum
|
Mar. 31, 2012
Hotel joint venture in Peru
Additional debt obligations contingent guarantee through 2016
hotel
|
Mar. 31, 2012
Eastern and Oriental Express Ltd.
|
Dec. 31, 2011
Eastern and Oriental Express Ltd.
|
Mar. 31, 2012
Hotel Ritz, Madrid
|
Dec. 31, 2011
Hotel Ritz, Madrid
|
Mar. 31, 2012
Hotel Ritz, Madrid
Contingent guarantees
|
Mar. 31, 2012
Hotel Ritz, Madrid
First mortgage loan facility
|
Mar. 31, 2012
Buzios land joint venture
month
|
Dec. 31, 2011
Buzios land joint venture
|
|
Carrying amounts that relate to OEH's unconsolidated companies | |||||||||||||||||||||||||
Investment | $ 60,902,000 | $ 59,904,000 | $ 35,826,000 | $ 35,001,000 | $ 16,266,000 | $ 16,212,000 | $ 3,398,000 | $ 3,298,000 | $ 5,412,000 | $ 5,393,000 | |||||||||||||||
Due from unconsolidated company | 10,616,000 | 10,754,000 | 4,657,000 | 4,917,000 | (332,000) | 599,000 | 4,919,000 | 2,581,000 | 1,372,000 | 2,657,000 | |||||||||||||||
Shareholder loans | 17,086,000 | 15,829,000 | 17,086,000 | 15,829,000 | |||||||||||||||||||||
Total assets | 88,604,000 | 86,487,000 | 40,483,000 | 39,918,000 | 15,934,000 | 16,811,000 | 8,317,000 | 5,879,000 | 18,458,000 | 18,486,000 | 5,412,000 | 5,393,000 | |||||||||||||
Maximum exposures to loss | |||||||||||||||||||||||||
Investment | 60,902,000 | 59,904,000 | 35,826,000 | 35,001,000 | 16,266,000 | 16,212,000 | 3,398,000 | 3,298,000 | 5,412,000 | 5,393,000 | |||||||||||||||
Due from unconsolidated company | 10,616,000 | 10,754,000 | 4,657,000 | 4,917,000 | (332,000) | 599,000 | 4,919,000 | 2,581,000 | 1,372,000 | 2,657,000 | |||||||||||||||
Guarantees | 19,796,000 | 22,203,000 | 8,691,000 | 9,052,000 | 3,000,000 | 11,105,000 | 10,151,000 | ||||||||||||||||||
Shareholder loans | 17,086,000 | 15,829,000 | 17,086,000 | 15,829,000 | |||||||||||||||||||||
Maximum exposures to loss, amount | 108,400,000 | 108,690,000 | 49,174,000 | 48,970,000 | 15,934,000 | 16,811,000 | 8,317,000 | 8,879,000 | 29,563,000 | 28,637,000 | 5,412,000 | 5,393,000 | |||||||||||||
OEH and the other participant to the joint ventures, equity participation percentage | 50.00% | ||||||||||||||||||||||||
Debt obligations guaranteed | 8,691,000 | 11,050,000 | 4,932,000 | 12,085,000 | 8,370,000 | 9,988,000 | |||||||||||||||||||
Number of hotels operated by joint venture | 4 | ||||||||||||||||||||||||
Contingency triggering event | Entity ownership of the economic and voting interests in the joint venture falls below 50% | Entity ownership of the economic and voting interests in the joint venture falls below 50% | |||||||||||||||||||||||
Equity method investment ownership percentage | 50.00% | 50.00% | 50.00% | 50.00% | 50.00% | 50.00% | |||||||||||||||||||
Period of waiver of the non compliance of the debt service coverage ratio covenant (in months) | 6 | ||||||||||||||||||||||||
Long-term debt obligations of OEH's unconsolidated companies | |||||||||||||||||||||||||
Long-term debt default amount classified in current liabilities | $ 17,554,000 | $ 1,117,000 | $ 91,223,000 |
Related party transactions (Details) (USD $)
|
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2012
|
Mar. 31, 2011
|
Dec. 31, 2011
|
|
Eastern and Oriental Express Ltd.
|
|||
Related party transactions | |||
Due from related party | $ 4,919,000 | $ 2,581,000 | |
Hotel and rail joint ventures in Peru
|
|||
Related party transactions | |||
Due from related party | 4,325,000 | 5,516,000 | |
Management and guarantee fees earned | 1,474,000 | 1,341,000 | |
Rail joint venture in Peru
|
|||
Related party transactions | |||
Ownership percentage | 50.00% | ||
Hotel joint venture in Peru
|
|||
Related party transactions | |||
Ownership percentage | 50.00% | ||
Hotel Ritz, Madrid
|
|||
Related party transactions | |||
Due from related party | 18,458,000 | 18,486,000 | |
Ownership percentage | 50.00% | 50.00% | |
Management and guarantee fees earned | 214,000 | 212,000 | |
Loan interest and net finance costs | $ 156,000 | $ 111,000 |
Fair values of financial instruments (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2012
|
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Fair values of financial instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of estimated fair values of financial instruments (other than derivative financial instruments) |
|
Discontinued operations (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Keswick Hall
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the net assets sold and gain on Sale |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Results of Discontinued Operations |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bora Bora Lagoon Resort
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Results of Discontinued Operations Classified as Held-for-Sale |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Assets and Liabilities Classified as Held-for-Sale |
|
Subsequent event (Details) (Las Casitas del Colca, Hotel joint venture in Peru, USD $)
|
1 Months Ended |
---|---|
Apr. 30, 2012
|
|
Las Casitas del Colca | Hotel joint venture in Peru
|
|
Subsequent event | |
Sale of discontinued operation | $ 5,590,000 |
Derivatives and hedging activities (Details)
|
Mar. 31, 2012
USD ($)
|
Dec. 31, 2011
USD ($)
|
Mar. 31, 2012
Interest Rate Swaps
USD ($)
|
Mar. 31, 2012
Interest Rate Swaps
AUD
|
Mar. 31, 2012
Interest Rate Swaps
EUR (€)
|
Dec. 31, 2011
Interest Rate Swaps
USD ($)
|
Dec. 31, 2011
Interest Rate Swaps
AUD
|
Dec. 31, 2011
Interest Rate Swaps
EUR (€)
|
Mar. 31, 2012
Interest Rate Options
USD ($)
|
Mar. 31, 2012
Interest Rate Options
EUR (€)
|
Dec. 31, 2011
Interest Rate Options
USD ($)
|
Dec. 31, 2011
Interest Rate Options
EUR (€)
|
---|---|---|---|---|---|---|---|---|---|---|---|---|
Derivatives and hedging activities | ||||||||||||
Interest rate derivatives | $ 113,987,000 | 10,650,000 | € 132,676,000 | $ 117,765,000 | 10,800,000 | € 148,332,000 | ||||||
Fair value of non-derivative hedging instruments | 49,581,000 | 45,919,000 | ||||||||||
Notional amounts of derivatives not designated as hedges | $ 54,600,000 | € 43,312,500 | $ 54,880,000 | € 43,593,750 |
Property, plant and equipment (Details 2) (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2012
|
Dec. 31, 2011
|
---|---|---|
Assets under capital leases | ||
Assets under capital leases, gross | $ 6,194 | $ 5,732 |
Less: Accumulated depreciation | (1,620) | (1,505) |
Assets under capital leases, net | 4,574 | 4,227 |
Land and buildings
|
||
Assets under capital leases | ||
Assets under capital leases, gross | 4,795 | 4,461 |
Machinery and equipment
|
||
Assets under capital leases | ||
Assets under capital leases, gross | 950 | 828 |
Fixtures, fittings and office equipment
|
||
Assets under capital leases | ||
Assets under capital leases, gross | $ 449 | $ 443 |
Derivatives and hedging activities (Details 4) (Recurring basis, USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2012
|
Dec. 31, 2011
|
---|---|---|
Level 2
|
||
Assets at fair value: | ||
Derivative financial instruments | $ 39 | $ 60 |
Liabilities at fair value: | ||
Derivative financial instruments | (10,730) | (10,954) |
Total | (10,691) | (10,894) |
Fair Value
|
||
Assets at fair value: | ||
Derivative financial instruments | 39 | 60 |
Liabilities at fair value: | ||
Derivative financial instruments | (10,730) | (10,954) |
Total | $ (10,691) | $ (10,894) |
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