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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2002

or

For the transition period from                              to                             

Commission file number 1-16017

ORIENT-EXPRESS HOTELS LTD.
(Exact name of registrant as specified in its charter)

441-295-2244
(Registrant's 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 ý    No o

        As of July 31, 2002, 28,340,601 Class A common shares and 20,503,877 Class B common shares of Orient-Express Hotels Ltd. were outstanding, including 18,044,478 Class B shares owned by a subsidiary of Orient-Express Hotels Ltd. and 15,889,201 Class A shares and 2,459,399 Class B shares owned by Sea Containers Ltd.

PART I

Orient-Express Hotels Ltd. and Subsidiaries

Consolidated Balance Sheets

See notes to consolidated financial statements.

2

Orient-Express Hotels Ltd. and Subsidiaries

Statements of Consolidated Operations

See notes to consolidated financial statements.

3

Orient-Express Hotels Ltd. and Subsidiaries

Statements of Consolidated Operations

See notes to consolidated financial statements.

4

Orient-Express Hotels Ltd. and Subsidiaries

Statements of Consolidated Cash Flows

See notes to consolidated financial statements.

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Orient-Express Hotels Ltd. and Subsidiaries

Statements of Consolidated Shareholders' Equity

See notes to consolidated financial statements.

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Orient-Express Hotels Ltd. and Subsidiaries

Notes to Consolidated Financial Statements

1.    Basis of financial statement presentation

(a)

Accounting policies

        Orient-Express Hotels Ltd. (the "Company") is a majority-owned subsidiary of Sea Containers Ltd. ("SCL"). The Company and its subsidiaries are referred to collectively as "OEH".

        For a description of significant accounting policies and basis of presentation, see Notes 1 and 13 to the consolidated financial statements in the 2001 Form 10-K annual report.

        In the opinion of management, all adjustments necessary for a fair statement of the results of operations for the six months ended June 30, 2002 and 2001, which are all of a normal recurring nature, have been reflected in the information provided.

(b)

Net earnings per share

        The number of shares used in computing basic and diluted earnings per share was as follows (in thousands):

        For the six months ended June 30, 2002, the anti-dilutive effect of stock options on 15,857 class A common shares was excluded from the computation of diluted earnings per share.

(c)

Intangible assets

        The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002. Under SFAS No. 142, goodwill is no longer amortized but reviewed for impairment annually, or more frequently if certain indicators arise. The Company has completed the initial step of a transitional impairment test which has indicated no impairment, and is to complete the final step of the transitional impairment test by the end of the fiscal year. Any subsequent impairment losses will be reflected in operating income or loss in the consolidated statements of operations.

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        Components of intangible assets are as follows (dollars in thousands):

        Other intangibles consist primarily of trademarks associated with acquired businesses.

        The following proforma information reconciles the net earnings and earnings per share reported for the three months and six months ended June 30, 2001 to adjusted net earnings and earnings per share which reflect the adoption of SFAS No. 142 (dollars in thousands, except per share amounts):

(d)

Derivative financial instruments

        As reported in Note 1(t) to the financial statements in the Form 10-K annual report for the year ended December 31, 2001, the Company adopted with effect on January 1, 2001, SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137 and No. 138. The initial adoption of SFAS No. 133 resulted in an unrealized loss of $1,333,000 in accumulated other comprehensive income/(loss) as of January 1, 2001. For the six months ended June 30, 2002 and 2001, the change in the fair market value of derivative instruments resulted in a credit to other comprehensive income/(loss) of $1,248,000 and $261,000, respectively.

        The components of comprehensive income/(loss) are as follows (dollars in thousands):

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2.    Acquisitions and investments

        In February 2002, OEH acquired the hotel La Residencia in Mallorca, Spain and the hotel Le Manoir aux Quat'Saisons in Oxfordshire, England and a 50% interest in a group of four restaurants called Le Petit Blanc in England, all for approximately $40,000,000. The price was paid largely with bank mortgage finance.

        In March 2002, OEH acquired for approximately $7,500,000 a 75% share interest in Maroma Resort and Spa near Cancun, Mexico. The purchase price was paid in cash, with $1,000,000 payable in March 2003 which is recorded in other liabilities at June 30, 2002.

        These acquisitions have been accounted for as a purchase in accordance with SFAS No. 141, Business Combinations. The results of these operations have been included in the consolidated financial results of OEH from the date of acquisition. The proforma impact on results, had these acquisitions occurred on January 1, 2002, is not material.

3.    Property, plant and equipment

        The major classes of real estate and other fixed assets are as follows (dollars in thousands):

        At June 30, 2002, the balance under capital lease for land and buildings was $9,097,000 (December 31, 2001—$8,574,000), for machinery and equipment $1,938,000 (December 31, 2001—$1,675,000), and for fixtures and fittings $743,000 (December 31, 2001—$716,000). Accumulated depreciation related to assets under capital lease at June 30, 2002 was $794,000 (December 31, 2001—$520,000).

4.    Long-term debt

        Long-term debt consists of the following (dollars in thousands):

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        Certain credit agreements of OEH have restrictive covenants. At June 30, 2002, OEH was in compliance with these covenants.

        The following is a summary of the aggregate maturities of long-term debt, including obligations under capital leases, at June 30, 2002 (dollars in thousands):

        The interest rates on substantially all of OEH's long-term debt are adjusted regularly to reflect current market rates. Accordingly, the carrying amounts of OEH's long-term debt also approximate fair value.

5.    Income taxes

        Income taxes provided by OEH relate principally to its foreign subsidiaries as pre-tax income is primarily foreign. The provision for income taxes consists of the following (dollars in thousands):

        The Company is incorporated in Bermuda, which does not impose an income tax. OEH's effective tax rate is entirely due to the income taxes imposed by jurisdictions in which OEH conducts business other than Bermuda.

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following represents OEH's net deferred tax liabilities (dollars in thousands):

        The deferred tax assets consist primarily of operating loss carryforwards. The deferred tax liabilities consist primarily of differences between the tax basis of depreciable assets and the adjusted basis as reflected in the financial statements.

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6.    Supplemental cash flow information

        (Dollars in thousands):

        In conjunction with the acquisition of Bora Bora Lagoon Resort in April 2001 and the acquisitions in 2002 (see Note 2), liabilities were assumed relating to non-cash investing and financing activities as follows:

        Non-cash investing and financing activities:

7.    Commitments

        Outstanding contracts to purchase fixed assets were approximately $18,500,000 at June 30, 2002 (December 31, 2001—$6,100,000).

8.    Information concerning financial reporting for segments and operations in different geographical areas

        As reported in the Company's 2001 Form 10-K annual report, OEH has two business segments, (i) hotels and restaurants and (ii) tourist trains and cruises. Financial information regarding these business segments is as follows, with net finance costs appearing net of capitalized interest and interest and related income (dollars in thousands):

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        Financial information regarding geographic areas based on the location of properties is as follows (dollars in thousands):

9.    Related party transactions

        For the six months ended June 30, 2002, OEH paid subsidiaries of SCL $2,994,000 (2001—$2,851,000) for the provision of various services under a shared services agreement between OEH and SCL. These amounts have been settled in accordance with the shared services agreement and are included in selling, general and administrative expenses.

        SCL has guaranteed an aggregate principal amount of $154,404,000 of bank loans to OEH outstanding at June 30, 2002 (December 31, 2001—$171,401,000), including a $2,000,000 bank loan to Eastern & Oriental Express Ltd. in which OEH has a minority shareholder interest.

10.  Subsequent event

        On July 22, 2002, under the Amended and Restated Share Owning Subsidiaries Restructuring Agreement described in Note 9(d) to the Financial Statements in the Company's 2001 Form 10-K annual report, a subsidiary of the Company exercised its purchase option to acquire from SCL 18,044,478 class B common shares of the Company at an aggregate price of $180,445. These shares remain outstanding and may be voted by the subsidiary although they are disregarded for purposes of calculating OEH's earnings per share while the shares are owned by the subsidiary. On the same date under the Agreement, an SCL subsidiary exercised its purchase option to acquire from four OEH subsidiaries 12,900,000 class B common shares of SCL at an aggregate price of $129,000. As a result of these transactions, voting control of the Company passed from SCL to the Company's subsidiary, and OEH no longer owns any shares of SCL.

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Management's Discussion and Analysis of Financial Condition
and Results of Operations

Results of Operations

        OEH's operating results for the three months ended June 30, 2002 and June 30, 2001, expressed as a percentage of revenue, were as follows:

        The revenues and earnings before interest, tax, depreciation and amortization ("EBITDA") of OEH's operations for the three months ended June 30, 2002 and June 30, 2001 are analyzed as follows (dollars in millions):

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        Operating information for OEH's owned hotels for the three months ended June 30, 2002 and June 30, 2001 is as follows:

        Average daily rate is the average amount achieved for the rooms sold. RevPAR is revenue per available room, that is the rooms department revenue divided by the number of available rooms for each night of operation. Same store RevPAR is a comparison based on the operations of the same units in each period, such as by excluding the effect of any acquisitions or major refurbishments.

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        OEH's operating results for the six months ended June 30, 2002 and June 30, 2001, expressed as a percentage of revenue, were as follows:

        The revenues and EBITDA of OEH's operations for the six months ended June 30, 2002 and June 30, 2001 are analyzed as follows (dollars in millions):

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        Operating information for OEH's owned hotels for the six months ended June 30, 2002 and June 30, 2001 is as follows: