| PARADISE ISLAND, The Bahamas, August 03, 2004 - Kerzner International
Limited (NYSE:KZL) (the "Company"), a leading international developer and
operator of destination resorts, casinos and luxury hotels, today reported
results for the second quarter of 2004. The Company reported net income
in the quarter of $30.1 million, compared to net income of $22.8 million
in the same period last year, resulting in diluted net income per share
of $0.94 compared to $0.78 in the same period last year. Adjusted net income
for the quarter was $29.7 million compared to $24.3 million in the same
period last year. Adjusted net income per share in the quarter was $0.92
compared to $0.83 in the same period last year.
Butch Kerzner, Chief Executive Officer of the Company, commented, "I
am pleased to report record second quarter levels of adjusted net income
and adjusted net income per share of $29.7 million and $0.92, respectively,
representing 22% and 11% increases over the same period last year. Atlantis,
Paradise Island's strong performance drove these record results, as the
property achieved an increase in RevPAR of 6%. Inclusive of the One&Only
Ocean Club, the Paradise Island properties achieved EBITDA of $50.6 million,
marking the first time the property exceeded the $50 million level in the
second quarter."
Since the Company's last earnings release, the Company has announced
the following:
-
The Company has secured three regional casino development projects in the
United Kingdom. In the event that the British government passes gaming
reform legislation, the Company will develop approximately $1.0 billion
of new projects in London, Glasgow and East Manchester.
-
The scope of Atlantis, The Palm was increased from 1,000 to 2,000 rooms
to capitalize on Dubai's strong tourism trends. The estimated development
cost has been increased from $650 million to $1.1 billion. The Company
will increase its equity commitment from $60 million to $100 million.
-
The Company will develop and manage a new $230 million destination casino
in Morocco. The Company, along with local partners, negotiated an agreement
with the Government of the Kingdom of Morocco granting it the exclusive
rights to develop and operate the only casino within a territory that includes
the cities of Casablanca and Rabat.
-
The Company agreed to sell 3.0 million Ordinary Shares at a price of $51.25
to Istithmar PJSC ("Istithmar"), the Company's joint venture partner in
Dubai with respect to the development of Atlantis, The Palm. The Company
expects to realize gross proceeds of $153.8 million in the third quarter
of this year upon the closing of this transaction.
Destination Resorts
Atlantis, Paradise Island
Atlantis, Paradise Island reported net revenue and EBITDA in the quarter
of $140.7 million and $49.6 million, respectively, as compared to $134.2
million and $42.4 million in the same period last year. Strong hotel operating
trends drove these record results.
Atlantis's revenue per available room ("RevPAR") for the quarter was
$243 as compared to $229, representing a 6% increase over the same period
last year. In the quarter, Atlantis achieved an average occupancy of 89%
and a $273 average daily room rate ("ADR"), which compared to an average
occupancy of 85% and an ADR of $268 in the same period last year.
In the Atlantis Casino, the largest casino in the Caribbean market,
table drop in the second quarter declined by 11% over the same period last
year, as certain high end players changed the timing of their visits from
the second quarter to the first. Overall, trends in the casino for the
first six months of 2004 were comparatively better than last year, with
table drop increasing by 7% over the same period last year. For the quarter,
slot volume increased by 13% over the same period last year; however, slot
win decreased by 4% as a result of a lower slot hold due to a different
mix of machines.
As part of the Company's Phase III expansion, the Company commenced
construction of the Marina Village, a 65,000 square foot project, which
includes four new restaurants and retail space around the Atlantis Marina.
This new project is expected to be an attractive destination for all visitors
to Nassau and Paradise Island. The Company also commenced construction
of a second phase of the timeshare development at Atlantis, a joint venture
between the Company and a subsidiary of Starwood Hotels & Resorts Worldwide,
Inc. The first phase of the timeshare development at Atlantis is approximately
98% sold and the second phase will add approximately 116 two-bedroom suites.
These two development projects are expected to be completed by the fourth
quarter of 2005.
Additional elements of the Phase III expansion include 1,500 new hotel
rooms, a significant increase to Atlantis's existing water-themed attractions,
100,000 square feet of additional convention and meeting facilities and
an 18-hole golf course on nearby Athol Island, which lies just east of
Paradise Island. Architectural and development planning for these projects
has progressed, and the Company expects to commence construction later
this year, with a completion date targeted for Christmas 2006 (exclusive
of the third phase of the timeshare development at Atlantis). The Company
has until December 31, 2004 to determine in its discretion not to proceed
or to proceed only partially with the Phase III expansion. The Company's
determination will depend on the assessment of many factors, including
global economic and political conditions, the regional competitive environment,
financing and the Government of The Bahamas' proceeding with its commitments
under the Heads of Agreement.
Atlantis, The Palm, Dubai
In June, the Company and its joint venture partner, Istithmar, announced
that they had entered into an agreement enabling the parties to increase
the scope of Atlantis, The Palm. This agreement will allow the joint venture
to capitalize on both Dubai's strong demand for tourism and the Government
of Dubai's focus on creating tourist attractions. The revised development
plan expects to utilize most of the 120-acre site that lies on The Palm,
Jumeirah. Specifically, the number of hotel rooms will be increased through
the addition of a second 800-room tower, which will bring the total number
of rooms to 2,000. The scale of the marine and entertainment attractions
will also be increased. The development costs will rise from the previously
announced $650 million to an estimated $1.1 billion. In addition, the Company's
equity commitment to this project will increase from $60 million to $100
million with respect to the joint venture's total equity capital of $400
million.
The Company has entered into (1) a long-term management agreement with
the joint venture that entitles it to receive a fixed percentage of the
revenue and gross operating profit generated by Atlantis, The Palm and
(2) a development agreement that entitles it to receive $20 million over
the development period.
Development planning is underway in anticipation of construction, which
is projected to commence in 2005 and be completed by late 2007. This project
is subject to various closing conditions, including obtaining financing
and all requisite governmental consents.
Gaming
Connecticut
In the quarter, results for the Company's Gaming segment were substantially
derived from Mohegan Sun, which reported record second quarter slot revenue
of $208.7 million, an increase of 5% over the same period last year. Slot
win per unit per day was $367 for the quarter, a 2% increase over the same
period last year. In the quarter, Mohegan Sun increased its leading share
of the Connecticut slots market to 52% from the 49% share it achieved in
the same period last year.
Trading Cove Associates ("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 income from
TCA of $9.0 million in the quarter as compared to the $8.8 million earned
in the same period last year.
United Kingdom
In July, the Company announced that it had entered into a binding agreement
with affiliates of Anschutz Entertainment Group for the development and
operation of a casino and hotel resort facility at the Millennium Dome
in London. The Company also announced that it has been appointed the preferred
developer with respect to the development and management of gaming, hotel
and entertainment facilities in two key markets in the United Kingdom.
The proposed sites for these projects are the Scottish Exhibition + Conference
Centre in Glasgow and Sportcity in East Manchester. Over the course of
the next several months, the Company expects to conclude binding agreements
for both of these projects.
These three proposed developments, which are subject to the passage
of gaming reform legislation in the U.K., are expected to meet the 'Resort'
or 'Regional Casino' criteria defined by the Department of Culture, Media
and Sport and the Parliamentary Joint Committee, which recently reviewed
the draft Gambling Bill. The three developments are subject to certain
conditions, including the receipt of applicable regulatory, municipal,
regional and/or other approvals. If all of the necessary conditions are
satisfied by 2005, the Company expects that these development projects
will be completed during 2007. In connection with each project, the Company
will be responsible for the financing, development and operation of a casino
and hotel. The Company estimates the aggregate cost of developing these
facilities at approximately $1 billion.
The Company announced in July that BLB Investors, L.L.C.'s ("BLB") previous
offer to acquire Wembley plc ("Wembley"), a London Stock Exchange-listed
company that owns gaming and racetrack operations in the United States
and race tracks in the United Kingdom, had lapsed. BLB is a joint venture
with the Company and affiliates of Starwood Capital Group, L.L.C. and Waterford
Group, L.L.C. that was formed for the purpose of acquiring the outstanding
shares of Wembley. BLB is a 22.2% shareholder of Wembley and is committed
to working with Wembley to maximize shareholder value. The Company is a
37.5% owner of BLB. In the quarter, the Company recorded an equity loss
in BLB of $1.1 million and incurred $0.4 million in related expenses. The
Company expects to record an additional $3.5 million equity loss related
to its share of transaction costs in the third quarter.
Morocco
In July, the Company, along with two local Moroccan partners, Societe
Maroc Emirates Arabs Unis de Developpement ("SOMED") and Caisse de Depot
et de Gestion ("CDG"), announced an agreement with the Government of the
Kingdom of Morocco for the development of a destination resort casino.
As part of this agreement with the Government, the Company and its local
partners have negotiated exclusive rights to conduct gaming operations
within a territory that includes the cities of Casablanca and Rabat, an
area with a combined population of nearly 5 million. This agreement provides
for a 15-year period of exclusivity, which commences once construction
of the project is complete. In addition, the Company, SOMED and CDG have
entered into a binding agreement with respect to the ownership, development
and management of this resort.
The cost of the project is estimated at $230 million and is expected
to consist of a 600-room hotel, an 18-hole golf course, convention space,
restaurants and a casino. The Company will own a 50% interest in this project,
requiring the Company to commit up to $47 million. SOMED and CDG will provide
the majority of the remaining equity requirement. While the Company has
the right to reduce its initial equity interest in the project, it has
undertaken to hold at least a 34% equity interest in the project. The balance
of the required financing is expected to be raised in the local Moroccan
debt markets. The Company expects to commence construction in 2005 and
complete the project during 2007. The development of this project is subject
to obtaining financing as well as certain other conditions, including the
receipt of all applicable regulatory, municipal, regional and other approvals.
One&Only Resorts
In its One&Only Resorts segment, the Company reported net revenue
and EBITDA of $26.5 million and $2.1 million, respectively, in the quarter
compared to $14.3 million and $1.5 million in the same period last year.
Results in the quarter include $9.9 million and $0.7 million of net revenue
and EBITDA, respectively, from the One&Only Palmilla, whose results
have been consolidated pursuant to the Company's adoption of Financial
Accounting Standards Board Interpretation No. 46R, "Consolidation of Variable
Interest Entities" ("FIN 46R"), beginning January 1, 2004.
The One&Only Ocean Club, the property that is the largest contributor
to the One&Only Resorts segment, continued to show growth. The resort
achieved an average occupancy of 81% and an ADR of $782 in the quarter
compared to an average occupancy of 81% and an ADR of $764, and posted
its ninth consecutive quarter of record RevPAR, in each case compared to
the same prior year quarter. Future results are expected to benefit from
the addition of three new luxury villas, which opened at the end of June
2004. In the quarter, the Company recorded $0.4 million in pre-opening
expenses related to this expansion at the Ocean Club.
Income Taxes
In the quarter, the Company recognized income tax expense of $0.3 million,
which represents federal, state and foreign income tax expense, net of
the release of a portion of the valuation allowance on deferred tax assets.
In the quarter, the Company paid cash taxes of approximately $1.7 million,
most of which represents payments of Connecticut state income taxes.
Liquidity
The Company executed the following financing initiatives to strengthen
its capital structure:
-- An agreement to sell 3.0 million Ordinary Shares at a price of $51.25
per share to Istithmar. The Company expects to realize gross proceeds of
$153.8 million upon the closing of this transaction in the third quarter.
As a part of Istithmar's overall proposed investment in the Company, Istithmar
also entered into agreements with two of the Company's shareholders to
purchase an aggregate of 1.5 million Ordinary Shares at $47.50 per share.
These secondary sales would close simultaneously with Istithmar's proposed
purchase of primary shares from the Company. Accordingly, the average price
per share to be paid by Istithmar for its proposed aggregate acquisition
of 4.5 million Ordinary Shares is $50.
-- An offering in The Bahamas of approximately 0.4 million Ordinary
Shares that resulted in net proceeds of approximately $19.1 million.
-- An increase in the capacity of the Company's Revolving Credit Facility
from $253.5 million to $500.0 million.
-- An issuance of $230 million of 2.375% Convertible Senior Subordinated
Notes due 2024.
At the end of the quarter, the Company held $260.8 million in cash and
cash equivalents, short-term investments and restricted cash. This amount
consisted of $180.6 million in cash and cash equivalents, $74.7 million
in short-term investments and $5.5 million in restricted cash. Total interest-bearing
debt at the end of the quarter was $717.3 million, comprised primarily
of $400 million of 8 7/8% Senior Subordinated Notes due 2011, of which
$150 million is currently swapped from fixed to variable interest rates,
and $230 million of 2.375% Convertible Senior Subordinated Notes due 2024.
Pursuant to FIN 46R, total cash and cash equivalents and debt amounts
include cash and cash equivalents of $8.0 million, including $4.0 million
of restricted cash, and total debt of $86.2 million associated with the
One&Only Palmilla. Interest expense in the quarter also includes $1.2
million related to the One&Only Palmilla.
At the end of the quarter, the Company's Revolving Credit Facility was
undrawn. The Company currently has approximately $500 million in availability
under the amended Revolving Credit Facility. 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 the 50%-owned One&Only Palmilla is excluded.
In the quarter, the Company incurred $26.8 million in capital expenditures,
comprised mainly of Paradise Island-related expenditures and $3.1 million
from the One&Only Palmilla. Total capital expenditures included capitalized
interest of $2.1 million. In the third quarter of 2004, the Company anticipates
it will spend between $30 million and $35 million in capital expenditures,
mainly on Paradise Island.
During the quarter, the Company invested $34.2 million in BLB-related
entities, which was used in part by BLB to complete the acquisition of
its 22.2% equity interest in Wembley and also to increase the Company's
investment in BLB from 25% to 37.5%. At the end of the quarter, the Company's
total investment in BLB was $47.2 million.
In the quarter, the Company advanced $19.0 million in the form of mezzanine
financing related to the development of the One&Only Reethi Rah, the
Company's second luxury resort in the Maldives.
As of June 30, 2004, shareholders' equity was $939.5 million and the
Company had approximately 31.7 million Ordinary Shares outstanding.
Other Matters
Investors should note that this earnings release conforms to the presentation
of segment information adopted in the consolidated financial statements
that were filed as part of the Company's 2003 Form 20-F. This earnings
release reflects the three distinct business segments that management uses
to measure the operating performance of the Company. These three business
segments are: Destination Resorts, Gaming and One&Only Resorts. The
Company's most significant contributor to its profitability is its Destination
Resorts segment, which is driven primarily by Atlantis, Paradise Island,
the Company's flagship property. In order to facilitate comparability to
2003 earnings releases, a reconciliation of the combined Paradise Island
operations, titled Paradise Island Summary Segment Data Reconciliation,
is attached.
Effective January 1, 2004, the Company adopted FIN 46R, which requires
variable interest entities to be consolidated if certain criteria are met.
Under FIN 46R, the Company has determined that the One&Only Palmilla,
a previously unconsolidated 50%-owned equity method investment, should
be consolidated. The implementation of FIN 46R resulted in an increase
in revenue and expenses in 2004; however, it had no impact on consolidated
net income or net income per share.
Kerzner International Limited
Condensed Consolidated Statements of Operations
(In Thousands of U.S. Dollars Except Per Share Data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------- -------------------
2004 2003 (1) 2004
2003 (1)
------------ --------- --------- ---------
(Unaudited)
(Unaudited)
Revenues:
Casino and resort revenues $157,961
$141,851 $327,148 $286,453
Less: promotional
allowances
(5,469) (6,042) (12,879) (12,856)
------------ --------- --------- ---------
Net casino and resort
revenues
152,492 135,809 314,269 273,597
Tour operations
11,235 10,487 24,072
21,545
Management, development
and other fees
3,658 2,183 9,073
5,272
Insurance recovery
- -
- 2,819
Other
934 1,237 2,019
2,377
------------ --------- --------- ---------
168,319 149,716 349,433 305,610
------------ --------- --------- ---------
Expenses:
Casino and resort expenses
78,473 69,527 157,535 138,961
Tour operations
8,961 8,467 19,902
18,071
Selling, general and
administrative
30,311 27,403 61,954
52,177
Corporate expenses
10,458 9,196 19,215
15,792
Depreciation and
amortization
14,630 14,005 29,587
27,633
Pre-opening expenses
396 -
3,258 -
Gain on replacement of
damaged assets
- -
- (2,514)
------------ --------- --------- ---------
143,229 128,598 291,451 250,120
Relinquishment fees -
equity earnings in TCA (1)
9,046 8,845 17,767
17,126
------------ --------- --------- ---------
Income from operations
34,136 29,963 75,749
72,616
Other income (expense):
Interest income
778 1,084 1,390
2,020
Interest expense, net of
capitalization
(8,929) (7,295) (17,093) (14,804)
Equity in earnings
(losses) of associated
companies, net
2,294 (328) 7,166
1,504
Other, net
507 87
427 66
------------ --------- --------- ---------
Other expense, net
(5,350) (6,452) (8,110) (11,214)
Income from continuing
operations before income
taxes and minority
interest
28,786 23,511 67,639
61,402
Benefit (provision) for
income taxes
(295) 160 (481)
(306)
Minority interest
1,651 (154) 3,802
(529)
------------ --------- --------- ---------
Income from continuing
operations
30,142 23,517 70,960
60,567
Income (loss) from
discontinued operations,
net of income tax effect
- (730)
- 1,509
------------ --------- --------- ---------
Net income
$30,142 $22,787 $70,960 $62,076
============ ========= ========= =========
Diluted net income per
share:
Income from continuing
operations
$0.94 $0.80 $2.21
$2.09
Income (loss) from
discontinued operations,
net of income tax effect
- (0.02)
- 0.05
$0.94 $0.78 $2.21
$2.14
============ ========= ========= =========
Weighted average number of
shares outstanding -
diluted
32,232 29,311 32,130
28,998
(1) Relinquishment fees - equity earnings in TCA have
been restated by
$0.2 million for the six months ended
June 30, 2003 in connection
with the restatement of TCA's financial
statements, as described
in our 2003 Form 20-F. In addition,
certain amounts have been
reclassified to conform to the current
period presentation.
Kerzner International Limited
Reconciliation of
Adjusted Net Income to GAAP Net Income
(In Thousands of Dollars Except Per Share Data)
(Unaudited)
For the Three Months
Ended June 30,
-------------------------------------
2004
2003
------------------ ------------------
$ EPS
$ EPS
--------- -------- --------- --------
Adjusted net income (1)
$ 29,728 $ 0.92 $ 24,334 $ 0.83
Insurance recovery (2)
- -
- -
Gain on replacement of damaged
assets (2)
- -
- -
Equity loss and related expenses
(3)
(1,458) (0.04) -
-
Income (loss) from discontinued
operations, net of income tax
effect (4)
- -
(730) (0.03)
Share of income (loss) from
remediation (5)
2,268 0.07 (105)
-
Pre-opening expenses (6)
(396) (0.01) (712) (0.02)
--------- -------- --------- --------
Net income (7)
$ 30,142 $ 0.94 $ 22,787 $ 0.78
========= ======== ========= ========
For the Six Months
Ended June 30,
-------------------------------------
2004
2003
------------------ ------------------
$ EPS
$ EPS
--------- -------- --------- --------
Adjusted net income (1)
$ 70,201 $ 2.18 $ 56,505 $ 1.95
Insurance recovery (2)
- - 2,819
0.10
Gain on replacement of damaged
assets (2)
- - 2,514
0.09
Equity loss and related expenses
(3)
(1,458) (0.04) -
-
Income (loss) from discontinued
operations, net of income tax
effect (4)
- - 1,509
0.05
Share of income (loss) from
remediation (5)
4,044 0.13 (559)
(0.02)
Pre-opening expenses (6)
(1,827) (0.06) (712) (0.03)
--------- -------- --------- --------
Net income (7)
$ 70,960 $ 2.21 $ 62,076 $ 2.14
========= ======== ========= ========
(1) Adjusted net income is defined as net income before
insurance
recovery, gain on replacement of damaged
assets, equity loss and
related expenses, income (loss) from
discontinued operations, net
of income tax effect, share of income
(loss) from remediation and
pre-opening expenses.
Adjusted net income is presented to
assist investors in analyzing
the performance of the Company. Management
considers adjusted net
income to be a useful basis for (i)
the valuation of companies;
(ii) assessing current results; and
(iii) basing expectations of
future results. This information should
not be considered as an
alternative to net 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, though generally
used throughout our
industry, 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
from continuing operations
calculated in accordance with U.S.
GAAP.
(2) Insurance recovery represents a business interruption
settlement
related to the Hurricane Michelle
claim. Gain on replacement of
damaged assets represents insurance
proceeds received in excess of
the net book value of assets damaged
during Hurricane Michelle.
(3) The Company recorded a $1.1 million equity loss associated
with
its 37.5% investment in BLB and $0.4
million in related foreign
currency exchange losses. The foreign
currency exchange losses are
included within corporate expenses
in the accompanying condensed
consolidated statement of operations.
(4) The Company discontinued the operations of its online
gaming
subsidiary, Kerzner Interactive Limited,
in the first quarter of
2003.
(5) The Company recorded income (loss) for its share of
remediation
related to Harborside at Atlantis
("Harborside"), the Company's
50%-owned time share property at Atlantis,
Paradise Island,
arising primarily from damage incurred
from Hurricane Michelle in
November 2001. In the second quarter
of 2004, the Company recorded
its share of an insurance recovery
realized by Harborside related
to the final settlement of the Harborside
remediation claim, which
was recorded net of remediation costs
incurred. These amounts are
included in equity in earnings (losses)
of associated companies,
net in the accompanying condensed
consolidated statements of
operations.
(6) Pre-opening expenses for the quarter ended June 30,
2004 represent
costs incurred prior to the June 2004
opening of the One&Only
Ocean Club expansion. Pre-opening
expenses for the six months
ended June 30, 2004 also include the
Company's 50% share of the
One&Only Palmilla's grand reopening
event held in February 2004.
These amounts are included within
pre-opening expenses in the
accompanying condensed consolidated
statements of operations for
the 2004 periods pursuant to the Company's
adoption of FIN 46R on
January 1, 2004. Pre-opening expenses
incurred during the quarter
and six months ended June 30, 2003
represent our share of
pre-opening expenses related to the
One&Only Palmilla's major
expansion occurring from April 1,
2003 through January 2, 2004.
These amounts are included as a component
of equity in earnings
(losses) of associated companies,
net in the accompanying
condensed consolidated statements
of operations for the 2003
periods.
(7) Net income has been restated by $0.2 million for the
six months
ended June 30, 2003, in connection
with the restatement of TCA's
financial statements, as described
in our 2003 Form 20-F. In
addition, certain amounts have been
reclassified to conform to
current period presentation.
Kerzner International Limited
Reconciliation of EBITDA to GAAP Net Income
(In Thousands of Dollars)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- -------------------
2004 2003 2004
2003
---------- --------- --------- ---------
EBITDA (1)
$ 50,646 $ 44,457 $113,174 $ 97,691
Insurance recovery
- -
- 2,819
Depreciation and
amortization
(14,630) (14,005) (29,587) (27,633)
Pre-opening expenses
(396) (712) (3,258)
(712)
Equity loss and related
expenses
(1,458) - (1,458)
-
Gain on replacement of
damaged assets
- -
- 2,514
Other expense, net
(5,350) (6,452) (8,110) (11,214)
Equity in earnings (losses)
of associated
companies, net
(2,294) 328 (7,166)
(1,504)
Share of income (loss) from
remediation
2,268 (105) 4,044
(559)
Benefit (provision) for
income taxes
(295) 160 (481)
(306)
Minority interest
1,651 (154) 3,802
(529)
Income (loss) from
discontinued operations,
net of income tax effect
- (730)
- 1,509
---------- --------- --------- ---------
Net income
$ 30,142 $ 22,787 $ 70,960 $ 62,076
========== ========= ========= =========
(1) EBITDA is defined as net income before insurance recovery,
depreciation and amortization, pre-opening
expenses, equity loss
and related expenses, gain on replacement
of damaged assets, other
expense, net (excluding equity earnings
(losses) before share of
income (loss) from remediation, our
share of BLB equity loss and
our share of the One&Only Palmilla
pre-opening expenses), benefit
(provision) for income taxes, minority
interest and income (loss)
from discontinued operations, net
of income tax effect.
Although EBITDA is not a measure of
performance under U.S. GAAP,
the information is presented because
management believes it
provides useful information to investors.
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. Certain amounts for the
2003 periods have been
reclassified to conform to current
period presentation.
Kerzner International Limited
Summary Segment Data - Net Revenue
(In Thousands of U.S. Dollars)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- -------------------
2004 2003
2004 2003
--------- --------- -------- --------
Destination Resorts: (1)
Atlantis, Paradise Island
Rooms
$ 50,767 $ 47,688 $103,317 $ 97,177
Casino
31,750 34,343 73,914
70,690
Food and beverage
37,332 33,166 72,689
65,457
Other resort
18,015 16,620 36,537
32,757
--------- --------- -------- --------
137,864 131,817 286,457 266,081
Promotional allowances
(5,469) (6,042) (12,879) (12,856)
--------- --------- -------- --------
132,395 125,775 273,578 253,225
Tour operations
7,615 7,936 14,659
15,922
Insurance recovery
- -
- 2,819
Harborside fees
690 464
1,309 866
--------- --------- -------- --------
140,700 134,175 289,546 272,832
Atlantis, The Palm fees
179 -
179 -
--------- --------- -------- --------
Net revenue
140,879 134,175 289,725 272,832
--------- --------- -------- --------
One&Only Resorts:
One&Only Ocean Club
10,151 10,034 21,243
20,372
One&Only Palmilla
9,946 -
19,448 -
Other resorts (2)
2,789 1,719 7,585
4,405
Tour operations
3,620 2,551 9,413
5,624
--------- --------- -------- --------
26,506 14,304 57,689
30,401
--------- --------- -------- --------
Other (3)
934 1,237 2,019
2,377
--------- --------- -------- --------
$ 168,319 $ 149,716 $349,433 $305,610
========= ========= ======== ========
Certain amounts for the 2003 periods have been reclassified
to conform
to the current period presentation.
(1) Includes revenue from Atlantis, Paradise Island, the
Ocean Club
Golf Course, the Company's wholly
owned tour operator, PIV, Inc.,
marketing and development fee income
from our 50% owned timeshare
development at Atlantis, Paradise
Island and development fee
income from Atlantis, The Palm.
(2) Includes management, marketing and development fees
from the
Company's One&Only Resorts businesses
located in Mauritius, Dubai
and the Maldives. For the three and
six months ended June 30,
2003, other resorts also includes
management and other fees
related to the One&Only Palmilla.
(3) Includes revenue not directly attributable to Destination
Resorts,
Gaming, or One&Only Resorts. Relinquishment
fees - equity earnings
in TCA related to our Gaming segment
are included within income
from operations in the accompanying
condensed consolidated
statements of operations.
Kerzner International Limited
Summary Segment Data - EBITDA
(In Thousands of U.S. Dollars)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- -------------------
2004 2003
2004 2003
---------- ---------- --------- ---------
Destination Resorts:
Atlantis, Paradise Island $ 47,707
$ 41,141 $ 99,000 $ 84,541
Harborside
690 464
1,309 866
Other (1)
1,211 750
2,679 1,448
--------- --------- -------- --------
49,608 42,355 102,988
86,855
Atlantis, The Palm
170 -
170 -
--------- --------- -------- --------
49,778 42,355 103,158
86,855
--------- --------- -------- --------
Gaming:
Connecticut
9,046 8,845 17,767
17,126
United Kingdom
(301) -
(628) -
Other (1)
(256) (199) (403)
(424)
--------- --------- -------- --------
8,489 8,646 16,736
16,702
--------- --------- -------- --------
One&Only Resorts:
One&Only Ocean Club
2,885 3,497 7,037
7,347
One&Only Palmilla
684 -
1,612 -
Other resorts (2)
2,789 1,719 7,585
4,405
Direct expenses (2)
(4,496) (3,632) (7,565) (5,585)
Other (1)
262 (67) 1,867
1,746
--------- --------- -------- --------
2,124 1,517 10,536
7,913
--------- --------- -------- --------
Corporate and other (3)
(9,745) (8,061) (17,256) (13,779)
--------- --------- -------- --------
$ 50,646 $ 44,457 $113,174 $ 97,691
========= ========= ======== ========
See definition and management's disclosure regarding EBITDA
at
Reconciliation of EBITDA to GAAP Net Income. Certain
amounts for
the 2003 periods have been reclassified to conform to
current period
presentation.
(1) Represents the Company's share of net income (loss)
from
unconsolidated affiliates (excluding
share of income (loss) from
remediation and share of the One&Only
Palmilla pre-opening
expenses) for its investments in Harborside,
Sun Resorts Limited,
the One&Only Kanuhura and Trading
Cove New York. Results for the
three and six months ended June 30,
2003 include the Company's
share of net income (loss) from the
One&Only Palmilla prior to the
Company's adoption of FIN 46R.
(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.
Results for the three and six months
ended June 30, 2003 include
management and other fees related
to the One&Only Palmilla.
(3) Corporate and other represents corporate expenses
not directly
attributable to Destination Resorts,
One&Only Resorts or Gaming.
Kerzner International Limited
Paradise Island
Summary Segment Data Reconciliation (1)
(In Thousands of U.S. Dollars)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- -------------------
2004 2003
2004 2003
---------- ---------- --------- ---------
EBITDA:
Atlantis, Paradise Island $ 47,707
$ 41,141 $ 99,000 $ 84,541
One&Only Ocean Club
2,885 3,497 7,037
7,347
--------- --------- -------- --------
$ 50,592 $ 44,638 $106,037 $ 91,888
========= ========= ======== ========
Revenue:
Atlantis, Paradise Island $ 137,864
$ 131,817 $286,457 $266,081
One&Only Ocean Club
10,151 10,034 21,243
20,372
--------- --------- -------- --------
148,015 141,851 307,700 286,453
Promotional allowances
(5,469) (6,042) (12,879) (12,856)
--------- --------- -------- --------
Net revenue
$ 142,546 $ 135,809 $294,821 $273,597
========= ========= ======== ========
(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 the 2003 earnings
releases.
Kerzner
International Limited
Hotel Operating Performance Data
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
2004 2003
2004 2003
---------- --------- --------- --------
Atlantis:
Occupancy
89% 85%
87% 84%
ADR (1)
$273 $268
$285 $278
RevPar (2)
$243 $229
$247 $234
One&Only Ocean Club:
Occupancy
81% 81%
81% 79%
ADR (1)
$782 $764
$844 $821
RevPar (2)
$632 $621
$686 $652
One&Only Palmilla(3):
Occupancy
56% NA
55% 66%
ADR (1)
$538 NA
$551 $441
RevPar (2)
$301 NA
$304 $292
Management believes that 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 Atlantis, Paradise Island, the One&Only
Ocean Club
and the One&Only Palmilla may also be affected by
normal recurring
seasonal patterns leading to lower occupancy levels in
September,
following Labor Day, through mid-December possibly resulting
in lower
revenue, net income and cash flow from operations during
these
periods.
(1) ADR represents room revenue divided by the total number
of
occupied room nights.
(2) RevPAR represents room revenue divided by total room
nights
available.
(3) The One&Only Palmilla was temporarily closed in
April 2003 and
reopened on January 2, 2004 following
the completion of a major
expansion. Thus, for the six months
ended June 30, 2003, the hotel
operating performance data includes
only the results for the
quarter ended March 31, 2003.
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Kerzner International Limited (NYSE: KZL) 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. Atlantis, Paradise Island is a unique destination
resort featuring three interconnected hotel towers built around a 7-acre
lagoon and a 34-acre marine environment that includes the world's largest
open-air marine habitat and is the home to the largest casino in the Caribbean.
The Company also 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. In the United Kingdom, Kerzner is currently
developing a casino in Northampton and received its Certificate of Consent
from the U.K. Gaming Board on March 30, 2004. In its luxury resort hotel
business, the Company manages nine 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.
Additional One&Only properties are either underway or in the planning
stages in the Maldives and South Africa.
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.
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