Kerzner (NYSE:KZL)
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From Jul 2019 to Jul 2024
Kerzner International Limited (NYSE: KZL):
-- 2005 THIRD QUARTER DILUTED NET LOSS PER SHARE OF $0.14
COMPARED TO DILUTED NET LOSS PER SHARE OF $0.33 ACHIEVED LAST
YEAR
-- 2005 THIRD QUARTER ADJUSTED EPS OF $0.28 COMPARED TO $0.11
ACHIEVED LAST YEAR
-- PARADISE ISLAND ACHIEVES RECORD THIRD QUARTER RESULTS
-- KERZNER REFINANCES SENIOR SUBORDINATED NOTES AND INCREASES
REVOLVING CREDIT FACILITY
-- ATLANTIS, THE PALM DEVELOPMENT NEARS COMMENCEMENT; DEVELOPMENT
BUDGET FOR PHASE I INCREASED TO APPROXIMATELY $1.4 BILLION
Kerzner International Limited (NYSE: KZL) (the "Company"), through
its subsidiaries a leading international developer and operator of
destination resorts, casinos and luxury hotels, today reported results
for the third quarter of 2005. The Company reported a net loss in the
quarter of $4.9 million compared to a net loss of $11.2 million in the
same period last year, resulting in diluted net loss per share of
$0.14 compared to diluted net loss per share of $0.33 in the same
period last year.
Adjusted net income in the quarter was $10.6 million compared to
$3.7 million in the same period last year. Adjusted net income per
share in the quarter was $0.28 compared to $0.11 in the same period
last year. Butch Kerzner, Chief Executive Officer of the Company,
commented, "I am pleased to report record third quarter levels of
adjusted EPS. This achievement is largely attributable to our Paradise
Island properties and the improved performance of One&Only Palmilla.
Collectively, the Paradise Island properties achieved record third
quarter EBITDA of $33.4 million. One&Only Resorts also performed
strongly, as RevPAR increased by 20%."
"We have also strengthened our balance sheet by refinancing our
$400 million of senior subordinated debt and increased the borrowing
capacity on our revolving credit facility to $650 million. When
combined with our businesses' free cash flow generation capabilities,
we believe our capital resources are well positioned to undertake
future growth initiatives, including the Phase III expansion project
in The Bahamas; Atlantis, The Palm, Dubai; our planned investment in
Morocco and other projects that may arise."
Destination Resorts
Atlantis, Paradise Island
Atlantis, Paradise Island reported net revenue and EBITDA in the
quarter of $129.0 million and $37.3 million, respectively, as compared
to $106.5 million and $23.4 million, respectively, in the same period
last year. The EBITDA margin in the quarter was 29% as compared to 22%
in the same period last year. Results in the quarter were meaningfully
higher than in the same period last year, as 2004 was negatively
affected by Hurricane Frances and the effects of subsequent hurricanes
that hit the State of Florida, one of our principal source markets.
For comparative purposes, in the third quarter of 2003, net revenue,
EBITDA and EBITDA margin were $114.8 million, $29.9 million and 26%,
respectively.
Atlantis's revenue per available room ("RevPAR") for the quarter
was $198 as compared to $173 during the same period last year. In the
quarter, Atlantis achieved an average occupancy of 81% and a $245
average daily room rate ("ADR"). Results in the quarter benefited from
strong leisure demand.
At the Atlantis Casino, slot win for the third quarter increased
by 24% and 15% over the same period in 2004 and 2003, respectively.
The third quarter of 2003 provides a better comparable period, as 2004
was negatively affected by the aforementioned hurricanes. The resort
benefited from improved levels of play owing to the positive reception
of the new slot games and the ticket-in-ticket-out system, both of
which were introduced last year. In the quarter, table win increased
by 15% and decreased by 16% over the same period in 2004 and 2003,
respectively.
Howard Karawan, President and Managing Director of the Company's
Destination Resorts segment, commented, "Third quarter results
rebounded sharply from the hurricane-affected results of the third
quarter of 2004. As compared to 2003, the most recent period in which
results were not impacted by hurricane activity, all of our key
operating measures for the Paradise Island businesses saw improvement.
In the quarter, Atlantis, Paradise Island's revenue and RevPAR each
increased by 12% as compared to 2003. In the quarter, EBITDA margin
for Atlantis, Paradise Island increased from 26% in 2003 to 29% in
2005."
In July, the Company completed the Marina Village at Atlantis
("Marina Village"), an approximately 75,000 square foot restaurant,
retail and entertainment zone surrounding the Marina at Atlantis
("Atlantis Marina"), which includes five new restaurants and
additional retail space. All of the restaurants except one are open,
and the remaining location is expected to open in mid-November. In the
quarter, food and beverage revenue increased by 22% as compared to the
same period last year, driven by a rebound in business levels from the
previous year and a favorable response to the Marina Village.
The second phase of Harborside at Atlantis, a timeshare joint
venture between the Company and a subsidiary of Starwood Hotels &
Resorts Worldwide, Inc., which consists of 116 two- and three-bedroom
units, was completed in August. Sales trends for this second phase
have remained strong and it is now 32% sold. With this phase, the
total number of units at Harborside increased to 244.
Construction of the 88-unit Ocean Club Residences & Marina project
is proceeding well, with completion expected in early 2007. The cost
of this development, which is being financed primarily from pre-sales
of units, is expected to be approximately $130 million.
The Residences at Atlantis, an approximately 500-unit condo-hotel
project, has already achieved approximately 120 unit sale
reservations, representing roughly 24% of the units available for
sale. The Company is joint venturing with Turnberry Associates, who
will provide sales and marketing expertise, on this project and
expects construction costs, which exclude land costs, to be
approximately $225 million. Construction is expected to commence once
the joint venture has received a sufficient level of reservations and
financing for the development has been secured by the joint venture.
In the quarter, the Company acquired the Hurricane Hole Marina,
which is in close proximity to the Marina Village and includes
frontage on Nassau Harbour, and some additional buildings and
facilities for approximately $28 million. The Company intends to
utilize the Hurricane Hole Marina to accommodate excess demand at the
Atlantis Marina and anticipates significantly upgrading this marina
and bringing it into Atlantis's product offering. This acquisition
includes additional real estate, which the Company plans to use for
new development.
In early November, the Company agreed to acquire an additional
seven and a half acres of beachfront property at the eastern edge of
Cabbage Beach, adjoining Ocean Club Estates, for approximately $15
million. This is one of the few remaining undeveloped beachfront
parcels left on Paradise Island. The Company intends to contribute
this land into the Ocean Club Residences & Marina joint venture and
develop the site through the joint venture.
Construction of the $730 million Phase III development at Paradise
Island is proceeding. This expansion project, which includes a
600-room all-suite hotel and expanded water attractions, is expected
to open in the second quarter of 2007.
Atlantis, The Palm, Dubai
The Company and its partner, Istithmar PJSC ("Istithmar"), have
formed a joint venture to develop Atlantis, The Palm, Dubai
("Atlantis, The Palm"), the Company's second Atlantis-branded resort,
which will be situated at the center of the crescent of The Palm,
Jumeirah on a 125-acre site. Having carefully evaluated various
aspects of the project, including cost, real estate usage and
operating efficiencies, the joint venture has revised the scope of
Atlantis, The Palm. In lieu of developing an 800-room four-star
property adjacent to the five-star Royal Towers, the joint venture has
decided to increase the number of rooms at the five-star Royal Towers
from 1,200 to approximately 1,500. This reconfiguration of the project
program will better enable the resort to meet the growing demand for
five-star accommodation in Dubai and sets aside further developable
land for future expansion. The joint venture has decided to postpone
development of a previously-announced condominium project.
In addition, Nakheel LLC ("Nakheel"), the developer of The Palm,
Jumeirah, has agreed to provide the joint venture with a right to
reclaim and develop an additional 125 acres of land off the crescent
of The Palm, Jumeirah, so as to expand the overall Atlantis, The Palm
site and permit additional phases of development. The joint venture
has also agreed with Nakheel to acquire all of the land on which
Atlantis, The Palm is situated, including the two parcels that are
intended for the condominium project, for a $125 million
payment-in-kind note.
Butch Kerzner commented, "We are pleased to have reached an
agreement with Istithmar that better positions Atlantis, The Palm for
future development that will enable the resort to leverage the
significant attractions that comprise Phase I. In addition to the
1,500-room Royal Towers, Phase I of Atlantis, The Palm will include a
60-acre water park, which is expected to be over twice the size of the
enhanced water park being developed in the Phase III expansion in The
Bahamas. Visitation trends in Dubai are very strong, with occupancy at
Dubai's beach resorts at 88% for the first three quarters of this
year. This agreement enables the joint venture to control substantial
real estate and will provide it with the ability to add additional
elements and room product to Atlantis, The Palm.\"
The budget for this development (exclusive of land cost) has been
increased from $1.2 billion to approximately $1.375 billion. Under the
revised capital structure, the Company has agreed to increase its
equity investment from $125 million to $200 million. Istithmar is also
contributing $200 million in equity. The Company's interest in this
project is 50%.
The joint venture is in the process of working with its senior
lending syndicate to reconfirm their commitment to the existing $700
million, twelve-year term loan facility. An additional amount of
approximately $275 million of subordinated debt is expected to be
raised from members of the senior lending syndicate and institutional
investors. Istithmar has committed to provide $75 million of the
subordinated debt.
The Company has a long-term management agreement with the joint
venture that entitles the Company to receive a base management fee
based on the gross revenues generated by Atlantis, The Palm and an
incentive management fee based on operating income, as defined. The
base management fee is likely to be subordinated to both the senior
and subordinated debt facilities. The Company also has a development
agreement with the joint venture that entitles the Company to receive
$20 million and reimbursement of certain expenses over the development
period.
Construction of Atlantis, The Palm is expected to commence by the
end of the year, with completion scheduled for late 2008. Commencement
of this project is subject to the receipt of all requisite
governmental consents and construction of supporting infrastructure by
Nakheel.
Morocco
Earlier in the year, the Company entered into a joint venture
agreement with Societe Maroc Emirates Arabs Unis de Developpement and
Caisse de Depot et de Gestion, and into related development and
long-term management agreements for the development and operation of a
destination resort casino in Morocco. Based on the current preliminary
designs for the project, the budget is anticipated to be approximately
$300 million, although a more definitive amount will not be available
until further detailed design work has been completed.
The parties anticipate working together over the next several
months to arrange debt and equity financing to fund the project. As a
result of the previously announced budget increase (from $230 million
to $300 million), the need to arrange additional debt and equity
financing and the additional design work required for the project, the
Company expects that there will be material amendments of the project
agreements, and the Company does not intend to proceed with the
development of this project until such amendments are obtained.
Construction is now anticipated to commence in the first half of 2006,
with an expected completion date during the second half of 2008.
No assurances can be given at this time that the additional debt
or equity financing will be obtained or that the likely material
amendments to project documents will be agreed, both of which will be
necessary in order for this project to move forward to construction.
Gaming
Connecticut
In the quarter, Mohegan Sun reported third quarter slot revenue of
$231.4 million, up 4% over the same period last year. Slot win per
unit per day was $405 for the quarter, a 5% increase over the same
period last year. For the quarter, Mohegan Sun's share of the
Connecticut slots market was 51%.
Under a relinquishment agreement between Trading Cove Associates
("TCA") and the Mohegan Tribe, TCA, an entity 50%-owned by the
Company, receives payments from the Mohegan Tribal Gaming Authority of
5% of the gross operating revenues of Mohegan Sun. The Company
recorded relinquishment and other fees from TCA of $10.2 million in
the quarter as compared to $9.8 million in the same period last year.
BLB Investors, L.L.C.
The Company owns a 37.5% interest in BLB Investors, L.L.C.
("BLB"), a joint venture with Starwood Capital Group Global, L.L.C.
and Waterford Group, L.L.C., and accounts for its investment in BLB
under the equity method of accounting. On July 18, 2005, BLB completed
a $464 million acquisition of the U.S. operations of Wembley plc
("Wembley"), which include the Lincoln Park racino in Rhode Island and
three greyhound tracks and one horse racing track in Colorado. BLB's
revenue and net income are driven primarily by Lincoln Park.
In the quarter, Lincoln Park reported net video lottery terminal
(VLT) win of $83.6 million, up 5% over the same period last year.
Lincoln Park achieved net terminal win per unit per day in the quarter
of $303. In the quarter, Lincoln Park recorded VLT revenue of $24.2
million, which represents Lincoln Park's approximate 28.9% share of
net VLT win.
BLB operates Lincoln Park under a master video lottery contract
with the state of Rhode Island that was authorized by legislation
passed by the Rhode Island General Assembly. This contract allows BLB
to increase the number of VLTs at Lincoln Park to 4,752. As of
September 30, 2005, Lincoln Park had 3,002 VLTs in operation; however,
BLB completed Phase I-A of its planned redevelopment of Lincoln Park
on November 4, 2005, which increased the number of VLTs at the
facility to 3,602.
BLB had previously announced that the anticipated redevelopment of
Lincoln Park would have a total cost of approximately $125 million.
Based on the most recent available information, BLB now believes the
total cost will be in excess of this amount. BLB is planning to
commence the remaining phases of the redevelopment of Lincoln Park as
promptly as possible, following receipt of all local governmental
approvals to which the redevelopment is subject.
In the quarter, the Company reported $1.6 million of equity
earnings associated with its investment in BLB, which includes the
Company's share of BLB's gain of $0.9 million associated with
Wembley's repurchase of BLB's ownership in Wembley, effective on the
date of acquisition. The gain is not included in the Company's
adjusted earnings per share.
One&Only Resorts
The Company's luxury resort segment, One&Only Resorts, reported
net revenue of $30.1 million and EBITDA of $0.3 million in the quarter
compared to net revenue of $19.9 million and an EBITDA loss of $2.9
million in the same period last year. On a combined basis for the
branded resorts, One&Only Resorts produced RevPAR of $239 in the
quarter, a 20% increase over the same period last year. On the same
basis, One&Only Resorts achieved third quarter average occupancy and
ADR of 74% and $324, respectively. The primary contributor to the
increase in EBITDA during the quarter was the strong performance of
One&Only Palmilla. The third quarter is traditionally One&Only
Resorts' weakest period of the year. Results in the quarter exclude
One&Only Kanuhura, which was closed in June and reopened in
mid-October.
One&Only Ocean Club achieved record third quarter RevPAR of $525,
representing a 16% increase over the same period last year. In the
quarter, the resort achieved average occupancy and record third
quarter ADR of 75% and $697, respectively, compared to average
occupancy and ADR of 71% and $636, respectively, in the same period
last year. EBITDA at the property was $1.0 million during the quarter
as compared to $0.7 million in the same period last year.
One&Only Palmilla had a strong third quarter, with RevPAR of $372,
which was an 84% increase over the same period last year. The resort
achieved third quarter average occupancy and ADR of 85% and $437,
respectively, compared to average occupancy and ADR of 52% and $388,
respectively, in the same period last year. EBITDA during the quarter
was $1.0 million compared to an EBITDA loss of $2.5 million in the
same period last year. Although the third quarter is traditionally a
low occupancy period for this market, demand for the resort was
strong, and the business outperformed the Company's expectations.
Recently, and for the second year in a row, One&Only Ocean Club
and One&Only Palmilla were named the number one resorts in the
Atlantic and Latin American regions, respectively, in Conde Nast
Traveler magazine's Readers' Choice Awards. JT Kuhlman, the Company's
President and Managing Director of the One&Only Resorts segment,
commented, "We were thrilled to receive these prestigious awards in
2004. To receive them again in 2005 is an honor, especially since the
recipients are selected by the readers of Conde Nast Traveler.
One&Only Ocean Club and One&Only Palmilla winning top honors two years
in a row is a true mark of distinction for the One&Only brand and a
testament to the talent of our dedicated teams."
One&Only Maldives at Reethi Rah, the Company's newest
One&Only-managed property, opened on May 1, 2005. Although the Company
does not have any equity ownership interest in Reethi Rah Resort Pvt
Ltd ("Reethi Rah"), the entity that owns and operates One&Only
Maldives at Reethi Rah, the Company has determined that Reethi Rah is
a variable interest entity that is subject to consolidation in
accordance with the provisions of FASB Interpretation No. 46(R) ("FIN
46R"), "Consolidation of Variable Interest Entities." The Company has
agreements with Reethi Rah that provide for construction financing and
operating loans, as well as management and development agreements. As
of May 1, 2005, when the resort commenced operations, the Company
became the primary beneficiary of Reethi Rah under FIN 46R, resulting
in the consolidation of Reethi Rah's financial statements into the
consolidated financial statements of the Company.
In the quarter, the Company recorded a net loss related to Reethi
Rah of $2.2 million. This loss is after the exhaustion of the
remaining $1.8 million owners' equity capital balance, which is
included in minority and noncontrolling interests in the accompanying
condensed consolidated statements of operations. In the near term, the
Company anticipates Reethi Rah will continue to incur net losses. In
the absence of any increase to the owners' equity capital in future
periods, such losses will be reflected in the Company's results of
operations. If Reethi Rah realizes net income in the future, the
Company will be credited to the extent losses were previously absorbed
by the Company on behalf of Reethi Rah.
In the quarter, the Company completed its analysis of the fair
value of the assets and liabilities of Reethi Rah and accordingly
completed its impairment calculation of the Company's notes receivable
from Reethi Rah, which resulted in the Company recording an additional
$3.1 million impairment. This $3.1 million impairment has been
excluded from the Company's adjusted earnings per share.
The Company reopened One&Only Kanuhura on October 15, 2005, which
had previously been closed for an extensive, four-month renovation
that included the redevelopment of the resort's 18 water villas and
two grand water villas and enhancements to its existing beach villas,
bars, restaurants, public areas and spa.
Liquidity
The Company has recently executed the following financing
initiatives:
-- Completed an offering in the quarter of $400 million of 6 3/4%
Senior Subordinated Notes due 2015 (the "6 3/4% Notes"). In
conjunction with this offering, the Company tendered for all
of its $400 million of 8 7/8% Senior Subordinated Notes due
2011 (the "8 7/8% Notes"). As of September 30, 2005, $3.1
million of the 8 7/8% Notes remained outstanding. An
additional $1.5 million of the 8 7/8% Notes were tendered for
in the fourth quarter, bringing the remaining balance of 8
7/8% Notes on the Company's balance sheet to $1.6 million. The
Company has recorded a loss on early extinguishment of debt of
$27.8 million, or $0.74 per share, which has been excluded
from adjusted earnings per share.
-- Terminated $150 million of fixed-to-variable rate swap
agreements, which results in an increase in fixed rate debt,
in advance of planned variable rate borrowings for growth
initiatives under the Company's Revolving Credit Facility. The
termination of these swap agreements resulted in the
realization of $4.8 million, which reduced the loss on early
extinguishment of the 8 7/8% Notes.
-- Amended and restated the Company's Revolving Credit Facility
on October 31, 2005, increasing the availability under the
facility from $500 million to $650 million and amending
certain pricing and financial covenants.
-- Announced that its Board of Directors had approved a share
repurchase program authorizing the repurchase of up to two
million of the Company's ordinary shares. The Company
subsequently commenced this program and repurchased 612,500
shares in the quarter for $35.7 million.
At September 30, 2005, the Company held $244.3 million in cash and
cash equivalents, short-term investments and restricted cash. This
amount consisted of $113.0 million in cash and cash equivalents, $59.8
million in short-term investments and $71.5 million in restricted
cash. Restricted cash includes $68.0 million of escrowed funds for the
Company's investment in the joint venture developing Atlantis, The
Palm, which is expected to increase an additional $75 million upon
completion of the subordinated debt financing discussed above to
reflect the Company's increased equity commitment to the project.
Total interest-bearing debt at the end of the quarter was $801.9
million, comprised primarily of the Company's newly-issued $400
million of 6 3/4% Notes, $230 million of 2.375% Convertible Senior
Subordinated Notes due 2024, as well as $110 million of financing
related to the One&Only Palmilla and approximately $58.3 million of
non-affiliated debt associated with Reethi Rah. The non-affiliated
debt associated with One&Only Palmilla and Reethi Rah is consolidated
under FIN 46R.
At the end of the quarter, the Company's Revolving Credit Facility
was undrawn. In determining the credit statistics used to measure
compliance with the Company's financial covenants under this facility,
the incremental debt and interest expense associated with the
consolidation of Reethi Rah and the 50%-owned One&Only Palmilla are
excluded.
In the quarter, the Company incurred $70.6 million in capital
expenditures, related primarily to Paradise Island. Total capital
expenditures included capitalized interest of $2.2 million. In the
fourth quarter of 2005, the Company expects to spend between $90
million and $100 million on Paradise Island capital expenditures.
In the quarter, the Company invested $13.2 million in Atlantis,
The Palm. The Company expects to invest between $30 million and $35
million in the project in the fourth quarter of 2005. This investment
will be sourced from escrowed funds, which are classified as
restricted cash on the Company's balance sheet.
As of September 30, 2005, shareholders' equity was $1,147.7
million and the Company had approximately 36.4 million Ordinary Shares
outstanding.
Other Matters
In the quarter, the Company recorded a net income tax benefit of
$15.8 million, which represents a U.S. federal tax benefit and state
and foreign income tax expenses. Included therein is a benefit of
$15.7 million related to the refinancing of its 8 7/8% Notes, which is
not included in the Company's adjusted earnings per share. In the
quarter, the Company paid cash taxes of approximately $0.4 million.
Conference Call Announcement
The Company will hold a conference call at 10:00 a.m. EST today to
discuss these third quarter results. This call can be accessed at the
Company's web site at www.kerzner.com. The call will also be available
on a first-come, first-serve basis by dialing 877.371.3550 (US/Canada)
or 706.679.0864 (international).
Replay of the conference call will be available beginning today at
1:00 p.m. EST, ending at midnight on November 14, 2005. The replay
numbers are 800.642.1687 (US/Canada) and 706.645.9291 (international)
using the following PIN Number: 2081462.
About The Company
Kerzner International Limited (NYSE: KZL), through its
subsidiaries, is a leading international developer and operator of
destination resorts, casinos and luxury hotels. The Company's flagship
brand is Atlantis, which includes Atlantis, Paradise Island, a
2,317-room, ocean-themed destination resort located on Paradise
Island, The Bahamas - a unique property featuring three interconnected
hotel towers built around a seven-acre lagoon and a 34-acre marine
environment that includes the world's largest open-air marine habitat.
The resort is also home to the largest casino in the Caribbean. The
Company recently commenced development of a major expansion that
includes a 600-room all-suite luxury hotel and a significant
enhancement of Atlantis's water-based attractions. Certain parts of
this expansion have already opened, including the Marina Village at
Atlantis, with the remaining elements expected to open in the second
quarter of 2007. The Company is extending its Atlantis brand globally
with the development of Atlantis, The Palm, Dubai, an approximately
1,500-room, water-themed resort expected to open in 2008, currently
being constructed on The Palm, Jumeirah, a multi-billion dollar
leisure and residential development in Dubai. In its gaming segment,
the Company developed and receives certain income derived from Mohegan
Sun in Uncasville, Connecticut, which has become one of the premier
casino destinations in the United States. The Company is also a 37.5%
owner of BLB Investors, L.L.C., which owns Lincoln Park in Rhode
Island and pari-mutuel racing facilities in Colorado. In the U.K., the
Company is currently developing a casino in Northampton and received a
Certificate of Consent from the U.K. Gaming Board in 2004. In its
luxury resort hotel business, the Company manages ten resort hotels
primarily under the One&Only brand. The resorts, featuring some of the
top-rated properties in the world, are located in The Bahamas, Mexico,
Mauritius, the Maldives and Dubai. An additional One&Only property is
currently in the planning stages in South Africa. For more information
concerning the Company and its operating subsidiaries, visit
www.kerzner.com.
This press release contains forward-looking statements, which are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
involve risks and uncertainties which are described in the Company's
public filings with the U.S. Securities and Exchange Commission.
Investor inquiries regarding the Company should be directed to
Omar Palacios at +1.242.363.6018. Media inquiries should be directed
to Lauren Snyder at +1.242.363.6018.
Condensed Consolidated Statements of Operations, Reconciliation of
Adjusted Net Income to GAAP Net Income (Loss), Reconciliation of
EBITDA to U.S. GAAP Net Income, Summary Segment Data - Net Revenue,
Summary Segment Data - EBITDA, Paradise Island Summary Segment Data
Reconciliation and Hotel Operating Performance Data are attached.
-0-
*T
Kerzner International Limited
Condensed Consolidated Statements of Operations
(In thousands of U.S. dollars, except per share data)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Revenues:
Casino and resort
revenues $ 147,954 $ 116,801 $ 506,740 $ 443,949
Less: promotional
allowances (5,043) (4,406) (18,205) (17,285)
---------- ---------- ---------- ----------
Net casino and resort
revenues 142,911 112,395 488,535 426,664
Tour operations 13,891 11,068 40,151 35,140
Management, development
and other fees 2,605 3,717 12,061 12,790
Other 1,197 921 3,877 2,940
---------- ---------- ---------- ----------
160,604 128,101 544,624 477,534
---------- ---------- ---------- ----------
Costs and expenses:
Casino and resort
expenses 85,747 68,545 256,881 226,080
Tour operations 11,365 9,663 33,534 29,565
Selling, general and
administrative 33,208 29,532 97,907 91,486
Corporate expenses 10,562 7,536 31,409 26,751
Depreciation and
amortization 19,069 14,811 52,245 44,398
Hurricane related
expenses - 3,426 - 3,426
Pre-opening expenses 2,886 - 4,634 3,258
UK gaming write-off - - 10,529 -
Loss on damaged assets - 1,194 - 1,194
Impairment (gain on
sale) of Atlantic City
land (1,301) 7,303 (1,301) 7,303
Impairment of notes
receivable 3,096 - 28,139 -
---------- ---------- ---------- ----------
164,632 142,010 513,977 433,461
---------- ---------- ---------- ----------
Income (loss) from
operations (4,028) (13,909) 30,647 44,073
Relinquishment fees -
equity in earnings of TCA 9,921 9,066 28,287 26,833
Other income (expense):
Interest income 2,441 1,442 7,230 2,832
Interest expense, net of
capitalization (11,423) (9,504) (32,582) (26,597)
Equity in earnings
(losses) of associated
companies 5,922 (481) 15,207 6,685
Loss on early
extinguishment of debt (27,783) - (27,783) -
Other, net (2) 208 10 635
---------- ---------- ---------- ----------
Other expense, net (30,845) (8,335) (37,918) (16,445)
Income (loss) before
provision for income
taxes and minority and
noncontrolling interests (24,952) (13,178) 21,016 54,461
Benefit (provision) for
income taxes 15,819 (992) 15,929 (1,473)
Minority and
noncontrolling interests 4,188 2,972 6,561 6,774
---------- ---------- ---------- ----------
Net income (loss) $ (4,945) $ (11,198) $ 43,506 $ 59,762
========== ========== ========== ==========
Basic earnings (loss) per
share $ (0.14) $ (0.33) $ 1.23 $ 1.89
========== ========== ========== ==========
Weighted average number of
shares outstanding -
basic 35,649 33,591 35,445 31,621
Diluted earnings (loss)
per share $ (0.14) $ (0.33) $ 1.17 $ 1.81
========== ========== ========== ==========
Weighted average number of
shares outstanding -
diluted 35,649 33,591 37,193 32,942
Kerzner International Limited
Reconciliation of Adjusted Net Income to U.S. GAAP Net Income (Loss)
(In thousands of U.S. dollars except per share data)
(Unaudited)
For the Three Months
Ended September 30,
-------------------------------------------
2005 2004
--------------------- ---------------------
$ EPS $ EPS
---------- ---------- ---------- ----------
Adjusted net income (1) $ 10,575 $ 0.28 $ 3,666 $ 0.11
Hurricane related
expenses (2) - - (3,426) (0.10)
Pre-opening expenses (3) (2,895) (0.08) - -
UK gaming write-off (4) - - - -
Loss on damaged assets (2) - - (1,194) (0.03)
Gain on sale (impairment)
of Atlantic City land (5) 1,301 0.03 (7,303) (0.21)
Impairment of notes
receivable (6) (3,096) (0.08) - -
BLB transaction (costs)
gain (7) 888 0.02 (2,941) (0.09)
Share of income from
remediation at
Harborside (8) - - - -
Real estate income (9) 372 0.01 - -
Loss on early
extinguishment of
debt (10) (27,783) (0.74) - -
Tax benefit related to
debt refinancing (11) 15,693 0.42 - -
Effect of dilutive shares - - - (0.01)
---------- ---------- ---------- ----------
Net income (loss) $ (4,945) $ (0.14) $ (11,198) $ (0.33)
========== ========== ========== ==========
For the Nine Months
Ended September 30,
-------------------------------------------
2005 2004
--------------------- ---------------------
$ EPS $ EPS
---------- ---------- ---------- ----------
Adjusted net income (1) $ 96,740 $ 2.60 $ 73,867 $ 2.24
Hurricane related
expenses (2) - - (3,426) (0.10)
Pre-opening expenses (3) (4,795) (0.13) (1,827) (0.06)
UK gaming write-off (4) (10,529) (0.28) - -
Loss on damaged assets (2) - - (1,194) (0.04)
Gain on sale (impairment)
of Atlantic City land (5) 1,301 0.04 (7,303) (0.22)
Impairment of notes
receivable (6) (28,139) (0.75) - -
BLB transaction (costs)
gain (7) 888 0.02 (4,399) (0.13)
Share of income from
remediation at
Harborside (8) - - 4,044 0.12
Real estate income (9) 130 - - -
Loss on early
extinguishment of
debt (10) (27,783) (0.75) - -
Tax benefit related to
debt refinancing (11) 15,693 0.42 - -
Effect of dilutive shares - - - -
---------- ---------- ---------- ----------
Net income (loss) $ 43,506 $ 1.17 $ 59,762 $ 1.81
========== ========== ========== ==========
(1) Adjusted net income is defined as net income before hurricane
related expenses, pre-opening expenses, UK gaming write-off, loss
on damaged assets, gain on sale (impairment) of Atlantic City
land, impairment of notes receivable, BLB transaction (costs)
gain, share of income from remediation at Harborside, real estate
income, loss on early extinguishment of debt and tax benefit
related to debt refinancing.
Adjusted net income is presented to assist investors in analyzing
the performance of the Company. Management considers adjusted net
income to be useful for (i) valuing companies; (ii) assessing
current results; and (iii) basing expectations of future results.
This information should not be considered as an alternative to
income from continuing operations computed in accordance with
accounting principles generally accepted in the United States
("U.S. GAAP"), nor should it be considered as an indicator of the
overall financial performance of the Company. Adjusted net income
is limited by the fact that companies may not necessarily compute
it in the same manner, thereby making this measure less useful
than net income calculated in accordance with U.S. GAAP.
(2) Hurricane related expenses primarily consist of clean up and
repair costs and complimentary goods and services to guests
associated with Hurricane Frances at the Company's Paradise Island
properties. Loss on damaged assets represents the write-off of
assets damaged during Hurricane Frances.
(3) Pre-opening expenses for the quarter ended September 30, 2005
include costs incurred relating to the Marina Village at Atlantis
and the Phase III expansion at Atlantis, Paradise Island. Also
included in pre-opening expenses are the costs incurred relating
to Atlantis, The Palm, which costs are included as equity in
earnings of associated companies in the accompanying condensed
consolidated statements of operations. Pre-opening expenses for
the nine months ended September 30, 2004 represent costs incurred
prior to the June 2004 opening of the One&Only Ocean Club
expansion. Pre-opening expenses incurred during the nine months
ended September 30, 2004 also include the Company's 50% share of
pre-opening expenses related to the One&Only Palmilla's grand
reopening event in February 2004.
(4) UK gaming write-off relates to all capitalized and deferred costs
incurred for the planning and development of all of the Company's
proposed gaming projects in the United Kingdom (excluding costs
associated with the Northampton project) that were expensed due to
the passage of gaming reform legislation in April 2005 that was
less favorable than the Company had previously anticipated.
(5) During the three months ended September 30, 2005, the Company
completed the sale of a portion of its Atlantic City land, for
which it had previously recorded an impairment charge, as well as
an additional ancillary piece of land, both of which resulted in a
total gain of $1.3 million. For the three months ended September
30, 2004, the Company recorded an impairment of $7.3 million to
certain of its undeveloped real estate in Atlantic City based on
its estimated fair value less costs to sell. This amount excludes
a $2.9 million tax benefit that the Company realized during the
quarter as a result of this impairment charge.
(6) For the three months ended June 30, 2005, the Company recorded an
impairment of its subordinated notes receivable due from Reethi
Rah, the entity which owns One&Only Maldives at Reethi Rah, after
obtaining a third party valuation firm's appraisal of the resort
in connection with the consolidation of Reethi Rah under FIN 46R.
During the three months ended September 30, 2005, the Company
completed the analysis of the fair value of the assets and
liabilities of Reethi Rah and accordingly completed its impairment
calculation of the Company's notes receivable from Reethi Rah
which resulted in the Company recording an additional $3.1 million
impairment. This $3.1 million additional impairment of its notes
receivable has been excluded from adjusted earnings per share.
(7) For the three months ended September 30, 2005, the Company
recorded income for its share of BLB's gain associated with
Wembley's repurchase of BLB's share ownership in Wembley effective
on the date of acquisition. This amount is included within equity
in earnings (losses) in the accompanying condensed consolidated
statements of operations. For the three and nine months ended
September 30, 2004, the Company recorded $2.9 million and $4.4
million, respectively, in equity loss and related expenses
associated with its 37.5% investment in BLB. These losses are
related to the Company's share of transaction costs incurred in
connection with BLB's intended acquisition of Wembley in 2004.
Additionally, these amounts include $0.4 million in related
foreign currency exchange losses for the nine months ended
September 30, 2004. The foreign currency exchange losses are
included within corporate expenses in the accompanying condensed
consolidated statements of operations.
(8) The Company recorded income for its share of remediation related
to Harborside at Atlantis ("Harborside"), the Company's 50%-owned
timeshare property at Atlantis, Paradise Island, arising primarily
from Hurricane Michelle related damages incurred in November 2001.
In the second quarter of 2004, the Company recorded its share of
an insurance recovery realized by Harborside related to a partial
settlement of the Harborside remediation claim, which was recorded
net of remediation costs incurred. These amounts are included in
equity in earnings of associated companies in the accompanying
condensed consolidated statements of operations.
(9) Represents income associated with The Residences at Atlantis and
the Ocean Club Residences & Marina projects, two of the Company's
joint venture real estate-related projects on Paradise Island.
(10)Loss on early extinguishment of debt represents costs associated
with the September 2005 tender for the Company's 8 7/8% Senior
Subordinated Notes.
(11)For the three months ended September 30, 2005, the Company
realized a tax benefit of $15.7 million related to the refinancing
of its 8 7/8% Senior Subordinated Notes.
Kerzner International Limited
Reconciliation of EBITDA to U.S. GAAP Net Income (Loss)
(In thousands of U.S. dollars)
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
EBITDA (1) $ 35,058 $ 24,351 $ 168,274 $ 137,525
Depreciation and
amortization (19,069) (14,811) (52,245) (44,398)
Hurricane related expenses - (3,426) - (3,426)
Pre-opening expenses (2,895) - (4,795) (3,258)
UK gaming write-off - - (10,529) -
Loss on damaged assets - (1,194) - (1,194)
Gain on sale (impairment)
of Atlantic City land 1,301 (7,303) 1,301 (7,303)
Impairment of notes
receivable (3,096) - (28,139) -
Other expense, net (30,845) (8,335) (37,918) (16,445)
Equity in (earnings)
losses of associated
companies (5,922) 481 (15,207) (6,685)
BLB transaction (costs)
gain 888 (2,941) 888 (4,399)
Share of income from
remediation at Harborside - - - 4,044
Real estate income (372) - (614) -
Benefit (provision) for
income taxes 15,819 (992) 15,929 (1,473)
Minority and
noncontrolling interests 4,188 2,972 6,561 6,774
---------- ---------- ---------- ----------
Net income (loss) $ (4,945) $ (11,198) $ 43,506 $ 59,762
========== ========== ========== ==========
(1) EBITDA is defined as net income (loss) before depreciation and
amortization, hurricane related expenses, pre-opening expenses, UK
gaming write-off, loss on damaged assets, gain on sale
(impairment) of Atlantic City land, impairment of notes
receivable, other expense, net (excluding equity in earnings
(losses) of associated companies before BLB transaction (costs)
gain, share of income from remediation at Harborside, the
Company's share of Atlantis, The Palm and One&Only Palmilla
pre-opening expenses), real estate income, benefit (provision) for
income taxes and minority and noncontrolling interests.
Although EBITDA is not a measure of performance under U.S. GAAP,
the information is presented because management believes it
provides useful information for (i) valuing companies; (ii)
assessing current results; and (iii) basing expectations of future
results. This information should not be considered as an
alternative to any measure of performance as promulgated under
U.S. GAAP, nor should it be considered as an indicator of the
overall financial performance of the Company. The Company's method
of calculating EBITDA may be different from the calculation used
by other companies, therefore comparability may be limited.
Kerzner International Limited
Summary Segment Data - Net Revenue
(In thousands of U.S. dollars)
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
2005 2004(4) 2005 2004(4)
---------- ---------- ---------- ----------
Destination Resorts(1):
Atlantis, Paradise
Island
Rooms $ 41,753 $ 36,607 $ 150,862 $ 139,924
Casino 30,884 25,457 108,716 98,863
Food and beverage 33,684 27,637 108,236 100,326
Other 16,412 13,753 51,161 50,798
---------- ---------- ---------- ----------
122,733 103,454 418,975 389,911
Promotional allowances (5,043) (4,406) (18,205) (17,285)
---------- ---------- ---------- ----------
117,690 99,048 400,770 372,626
Tour operations 10,375 6,654 27,604 21,313
Harborside fees 933 792 3,043 2,101
---------- ---------- ---------- ----------
128,998 106,494 431,417 396,040
Atlantis, The Palm
development fees 39 36 335 215
---------- ---------- ---------- ----------
129,037 106,530 431,752 396,255
---------- ---------- ---------- ----------
Gaming:
Connecticut fees 237 702 466 702
---------- ---------- ---------- ----------
One&Only Resorts:
One&Only Ocean Club 7,939 6,828 33,663 28,071
One&Only Palmilla 11,462 6,519 46,347 25,967
One&Only Maldives,
Reethi Rah 5,820 - 7,755 -
Other resorts(2) 1,396 2,187 8,217 9,772
Tour operations 3,516 4,414 12,547 13,827
---------- ---------- ---------- ----------
30,133 19,948 108,529 77,637
---------- ---------- ---------- ----------
Other(3) 1,197 921 3,877 2,940
---------- ---------- ---------- ----------
$ 160,604 $ 128,101 $ 544,624 $ 477,534
========== ========== ========== ==========
(1) Includes revenue from Atlantis, Paradise Island, Ocean Club Golf
Course, the Company's wholly-owned tour operator, PIV, Inc.,
marketing and development fee income from Harborside and
development fee income from Atlantis, The Palm.
(2) Includes management, marketing and development fees from the
Company's One&Only Resorts properties located in Mauritius, Dubai
and the Maldives.
(3) Includes revenue not directly attributable to Destination Resorts,
Gaming or One&Only Resorts. Relinquishment fees - equity in
earnings of TCA related to our Gaming segment are included as a
separate component outside of income from operations in the
accompanying condensed consolidated statements of operations.
(4) Certain amounts for the 2004 periods have been reclassified to
conform to the current periods' presentation.
Kerzner International Limited
Summary Segment Data - EBITDA
(In thousands of U.S. dollars)
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
2005 2004(4) 2005 2004(4)
---------- ---------- ---------- ----------
Destination Resorts:
Atlantis, Paradise
Island $ 30,126 $ 19,796 $ 131,990 $ 115,138
Tour operations 2,269 1,283 6,043 4,941
Harborside 933 792 3,043 2,101
Other (1) 3,962 1,545 12,887 4,224
---------- ---------- ---------- ----------
37,290 23,416 153,963 126,404
Atlantis, The Palm 29 27 306 197
---------- ---------- ---------- ----------
37,319 23,443 154,269 126,601
---------- ---------- ---------- ----------
Gaming:
Connecticut 10,159 9,768 28,754 27,535
United Kingdom (1,022) (245) (3,662) (1,263)
BLB 665 1,023 722 1,023
Other (1) (235) (241) (776) (644)
---------- ---------- ---------- ----------
9,567 10,305 25,038 26,651
---------- ---------- ---------- ----------
One&Only Resorts:
One&Only Ocean Club 1,012 661 10,372 7,698
One&Only Palmilla 973 (2,540) 15,016 (299)
One&Only Maldives,
Reethi Rah (58) - (4,095) -
Other resorts (2) 1,396 2,187 8,217 9,772
Tour operations 246 109 537 580
Direct expenses (2) (2,832) (3,466) (9,706) (11,736)
Other (1) (470) 142 844 2,009
---------- ---------- ---------- ----------
267 (2,907) 21,185 8,024
---------- ---------- ---------- ----------
Corporate and other (3) (12,095) (6,490) (32,218) (23,751)
---------- ---------- ---------- ----------
$ 35,058 $ 24,351 $ 168,274 $ 137,525
========== ========== ========== ==========
See definition and management's disclosure regarding EBITDA in the
Reconciliation of EBITDA to U.S. GAAP Net Income (Loss).
(1) Represents the Company's share of net income (loss) from
unconsolidated affiliates (excluding share of income from
remediation at Harborside) for its investments in Harborside, Sun
Resorts Limited, One&Only Kanuhura and Trading Cove New York.
(2) Consists of management, marketing, development and other fees and
direct expenses related to the Company's One&Only Resorts segment
for its operations located in Mauritius, Dubai and the Maldives.
(3) Corporate and other represents corporate expenses not directly
attributable to Destination Resorts, Gaming or One&Only Resorts.
(4) Certain amounts for the 2004 periods have been reclassified to
conform to the current periods' presentation.
Kerzner International Limited
Paradise Island Summary Segment Data Reconciliation(1)
(In thousands of U.S. dollars)
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Paradise Island Revenue:
Atlantis, Paradise
Island $ 122,733 $ 103,454 $ 418,975 $ 389,911
One&Only Ocean Club 7,939 6,828 33,663 28,071
---------- ---------- ---------- ----------
130,672 110,282 452,638 417,982
Promotional allowances (5,043) (4,406) (18,205) (17,285)
---------- ---------- ---------- ----------
$ 125,629 $ 105,876 $ 434,433 $ 400,697
========== ========== ========== ==========
Paradise Island EBITDA(2):
Atlantis, Paradise
Island $ 30,126 $ 19,796 $ 131,990 $ 115,138
Tour operations 2,269 1,283 6,043 4,941
One&Only Ocean Club 1,012 661 10,372 7,698
---------- ---------- ---------- ----------
$ 33,407 $ 21,740 $ 148,405 $ 127,777
========== ========== ========== ==========
EBITDA Margin(3) 26.6% 20.5% 34.2% 31.9%
(1) This schedule is included to assist investors by presenting the
summary segment data for the Paradise Island operations on a
comparable basis with the methodology used in earnings releases
prior to 2004.
(2) See definition and management's disclosure regarding EBITDA in the
Reconciliation of EBITDA to U.S. GAAP Net Income.
(3) EBITDA margin for the nine months ended September 30, 2005
includes the effect of a $4.4 provision for a new claim from a
supplier with respect to a period covering the last five years.
Excluding this provision, the EBITDA margin for the nine months
ended September 30, 2005 would have been 35.2%.
Kerzner International Limited
Hotel Operating Performance Data
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------------------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Atlantis, Paradise Island:
Occupancy 81% 77% 85% 83%
ADR (1) $ 245 $ 225 $ 284 $ 267
RevPAR (2) $ 198 $ 173 $ 241 $ 222
One&Only Resorts(3):
Occupancy 74% 71% 77% 77%
ADR (1) $ 324 $ 281 $ 425 $ 369
RevPAR (2) $ 239 $ 199 $ 328 $ 284
One&Only Ocean Club:
Occupancy 75% 71% 83% 78%
ADR (1) $ 697 $ 636 $ 895 $ 785
RevPAR (2) $ 525 $ 453 $ 741 $ 613
One&Only Palmilla:
Occupancy 85% 52% 87% 58%
ADR (1) $ 437 $ 388 $ 589 $ 468
RevPAR (2) $ 372 $ 202 $ 510 $ 272
Management believes that the results of operations in the destination
resort and luxury hotel industry are best explained by three key
performance measures; occupancy, average daily rate ("ADR") and
revenue per available room ("RevPAR"). These measures are influenced
by a variety of factors including national, regional and local
economic conditions, changes in travel patterns and the degree of
competition with other destination resorts, luxury hotels and product
offerings within the travel and leisure industry. The demand for
accommodations at our resorts may also be affected by normal recurring
seasonal patterns.
(1) ADR represents room revenue divided by the total number of room
nights occupied.
(2) RevPAR represents room revenue divided by the total number of room
nights available.
(3) One&Only Resorts represents the consolidated results of the seven
properties that the Company markets under its One&Only brand:
One&Only Ocean Club, One&Only Palmilla, One&Only Le Saint Geran,
One&Only Le Touessrok, One&Only Kanuhura, One&Only Maldives at
Reethi Rah and One&Only Royal Mirage.
*T