Kerzner International Limited
Condensed Consolidated Statements of Operations
(In Thousands of U.S. Dollars Except Per Share
Data)
For the Three For the Nine
Months
Months
Ended September 30, Ended September 30,
------------------- --------------------
2004 2003 (1) 2004
2003 (1)
--------- --------- --------- ----------
(Unaudited) (Unaudited)
Revenues:
Casino and resort
revenues
$ 116,801 $ 117,679 $ 443,949 $ 404,132
Less: promotional
allowances
(4,406) (5,014) (17,285) (17,870)
--------- --------- --------- ----------
Net casino and resort
revenues
112,395 112,665 426,664 386,262
Tour operations
11,068 8,645 35,140
30,190
Management, development
and other fees
3,717 2,402 12,790
7,674
Other
921 1,338 2,940
3,715
--------- --------- --------- ----------
128,101 125,050 477,534 427,841
--------- --------- --------- ----------
Expenses:
Casino and resort expenses
68,545 65,116 226,080 204,077
Tour operations
9,663 7,403 29,565
25,474
Selling, general and
administrative
29,532 24,527 91,486
76,704
Corporate expenses
7,536 8,134 26,751
23,926
Depreciation and
amortization
14,811 13,904 44,398
41,537
Hurricane related expenses
3,426 -
3,426 -
Insurance recovery
- -
- (2,819)
Pre-opening expenses
- -
3,258 -
Loss (gain) on damaged
assets
1,194 -
1,194 (2,514)
Impairment of Atlantic
City land
7,303 -
7,303 -
--------- --------- --------- ----------
142,010 119,084 433,461 366,385
--------- --------- --------- ----------
Income (loss) from operations (13,909)
5,966 44,073 61,456
Relinquishment fees - equity
earnings in TCA (1)
9,066 9,455 26,833
26,581
Other income (expense):
Interest income
1,442 615 2,832
2,635
Interest expense, net of
capitalization
(9,504) (7,113) (26,597) (21,917)
Equity in earnings
(losses) of associated
companies, net
(481) (1,382) 6,685
122
Other, net
208 (627) 635
(561)
--------- --------- --------- ----------
Other expense, net
(8,335) (8,507) (16,445) (19,721)
Income (loss) from continuing
operations before income
taxes and minority interest
13,178) 6,914 54,461
68,316
Provision for income taxes
(992) (64) (1,473)
(370)
Minority interest
2,972 (133) 6,774
(662)
--------- --------- --------- ----------
Income (loss) from continuing
operations
(11,198) 6,717 59,762
67,284
Income (loss) from discontinued
operations, net of income
tax effect
- (204)
- 1,305
--------- --------- --------- ----------
Net income (loss)
$(11,198) $ 6,513 $ 59,762 $ 68,589
========= ========= ========= ==========
Diluted net income (loss)
per share:
Income (loss) from
continuing operations
$ (0.32) $ 0.22 $ 1.81 $
2.29
Income from discontinued
operations, net of income
tax effect
- -
- 0.05
--------- --------- --------- ----------
$ (0.32) $ 0.22 $ 1.81 $
2.34
========= ========= ========= ==========
Weighted average number of
shares outstanding - diluted 34,791
30,075 32,997 29,323
(1) Relinquishment fees - equity
earnings in TCA have been
restated
by $0.2 million for the nine months ended September
30,
2003 in connection with the restatement of TCA's financial
statements,
as described in our 2003 Form 20-F. These amounts
have
also been reclassified from income (loss) from
operations.
In addition, certain other 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 U.S. Dollars Except Per Share Data)
(Unaudited)
For the Three Months
Ended September 30,
------------------------------------
2004
2003
------------------ -----------------
$ EPS
$ EPS
--------- -------- -------- --------
Adjusted net income (1)
$ 3,666 $ 0.11 $ 8,074 $ 0.27
Hurricane related expenses (2)
(3,426) (0.10) -
-
Insurance recovery (3)
- -
- -
Pre-opening expenses (4)
- - (1,165)
(0.05)
(Loss) gain on damaged assets (3) (1,194)
(0.03) -
-
Equity loss and related
expenses (5)
(2,941) (0.09) -
-
Share of income (loss) from
remediation at Harborside (6)
- - (192)
-
Impairment of Atlantic City
land (7)
(7,303) (0.21) -
-
Income (loss) from discontinued
operations, net of income tax
effect (8)
- - (204)
-
--------- -------- -------- --------
Net income (loss) (9)
$(11,198) $ (0.32) $ 6,513 $ 0.22
========= ======== ======== ========
For the Nine Months
Ended September 30,
------------------------------------
2004
2003
------------------ -----------------
$ EPS
$ EPS
--------- -------- -------- --------
Adjusted net income (1)
$ 73,867 $ 2.24 $64,579 $ 2.20
Hurricane related expenses (2)
(3,426) (0.10) -
-
Insurance recovery (3)
- - 2,819
0.10
Pre-opening expenses (4)
(1,827) (0.06) (1,877) (0.06)
(Loss) gain on damaged assets (3) (1,194)
(0.04) 2,514 0.09
Equity loss and related
expenses (5)
(4,399) (0.13) -
-
Share of income (loss) from
remediation at Harborside (6)
4,044 0.12 (751)
(0.03)
Impairment of Atlantic City
land (7)
(7,303) (0.22) -
-
Income (loss) from discontinued
operations, net of income tax
effect (8)
- - 1,305
0.04
--------- -------- -------- --------
Net income (loss) (9)
$ 59,762 $ 1.81 $68,589 $ 2.34
========= ======== ======== ========
(1) Adjusted net income is defined
as net income before hurricane
related
expenses, insurance recovery, pre-opening expenses,
(loss)
gain on damaged assets, equity loss and related
expenses,
share of income (loss) from remediation at
Harborside,
impairment of Atlantic City land and income (loss)
from
discontinued operations, net of income tax effect.
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
income
from continuing operations calculated in accordance
with
U.S. GAAP.
(2) Hurricane related expenses
primarily consisted of clean up and
repair
costs and complimentary goods and services to guests
associated
with Hurricane Frances at the Company's Paradise
Island
properties.
(3) Insurance recovery represents
a business interruption
settlement
related to the Company's Hurricane Michelle claim.
Gain
on damaged assets represents insurance proceeds received
in excess
of the net book value of assets damaged during
Hurricane
Michelle. Loss on damaged assets represents the
write-off
of assets damaged during Hurricane Frances.
(4) 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 for
the
nine months ended September 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
nine
months ended September 30, 2003 represent the Company's
share
of pre-opening expenses related to the One&Only
Palmilla's
major expansion, which spanned nine months from
April
1, 2003 to 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.
(5) For the quarter and nine
months ended September 30, 2004, the
Company
recorded $2.9 million and $4.4 million, respectively,
in equity
losses 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. 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.
(6) 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 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 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.
(7) The Company recorded a loss
on the impairment of undeveloped
real
estate in Atlantic City based on its estimated fair value
less
costs to sell.
(8) The Company discontinued
the operations of its online gaming
subsidiary,
Kerzner Interactive Limited, in the first quarter
of 2003.
(9) Net income (loss) has been
restated by $0.2 million for the
nine
months ended September 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 U.S. Dollars)
(Unaudited)
For the Three For the Nine
Months
Months
Ended September 30, Ended September 30,
------------------- --------------------
2004 2003
2004 2003
--------- --------- --------- ----------
EBITDA (1)
$ 24,351 $ 29,300 $137,525 $ 126,991
Hurricane related expenses
(3,426) - (3,426)
Insurance recovery
- -
- 2,819
Depreciation and amortization (14,811)
(13,904) (44,398) (41,537)
Pre-opening expenses
- (1,165) (3,258) (1,877)
Equity loss and related
expenses
(2,941) - (4,399)
-
(Loss) gain on damaged assets (1,194)
- (1,194) 2,514
Impairment of Atlantic City
land
(7,303) - (7,303)
-
Other expense, net
(8,335) (8,507) (16,445) (19,721)
Equity in earnings (losses)
of associated companies, net
481 1,382 (6,685)
(122)
Share of income (loss) from
remediation at Harborside
- (192) 4,044
(751)
Provision for income taxes
(992) (64) (1,473)
(370)
Minority interest
2,972 (133) 6,774
(662)
Income (loss) from
discontinued operations, net
of income tax effect
- (204)
- 1,305
--------- --------- --------- ----------
Net income (loss)
$(11,198) $ 6,513 $ 59,762 $ 68,589
========= ========= ========= ==========
(1) EBITDA is defined as net
income before hurricane related
expenses,
insurance recovery, depreciation and amortization,
pre-opening
expenses, equity loss and related expenses, (loss)
gain
on damaged assets, impairment of Atlantic City land,
other
expense, net (excluding equity earnings (losses) before
share
of income (loss) from remediation at Harborside and our
share
of the One&Only Palmilla pre-opening expenses),
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 For the Nine
Months
Months
Ended September 30, Ended September 30,
------------------- --------------------
2004 2003 2004
2003
--------- --------- --------- ----------
Destination Resorts: (1)
Atlantis, Paradise Island
Rooms
$ 36,607 $ 37,370 $139,924 $ 134,547
Casino
25,618 32,304 99,532
102,994
Food and beverage
27,637 27,911 100,326
93,368
Other resort
13,592 14,506 50,129
47,263
--------- --------- --------- ----------
103,454 112,091 389,911 378,172
Promotional allowances
(4,406) (5,014) (17,285) (17,870)
--------- --------- --------- ----------
99,048 107,077 372,626 360,302
Tour operations
6,654 7,163 21,313
23,085
Harborside fees
792 546 2,101
1,412
--------- --------- --------- ----------
106,494 114,786 396,040 384,799
Atlantis, The Palm fees
36 -
215 -
--------- --------- --------- ----------
Net revenue
106,530 114,786 396,255 384,799
--------- --------- --------- ----------
Gaming:
Connecticut fees
702 -
702 -
--------- --------- --------- ----------
One&Only Resorts:
One&Only Ocean Club
6,828 5,588 28,071
25,960
One&Only Palmilla
6,519 -
25,967 -
Other resorts (2)
2,187 1,856 9,772
6,262
Tour operations
4,414 1,482 13,827
7,105
--------- --------- --------- ----------
19,948 8,926 77,637
39,327
--------- --------- --------- ----------
Other (3)
921 1,338 2,940
3,715
--------- --------- --------- ----------
$128,101 $125,050 $477,534 $ 427,841
========= ========= ========= ==========
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 properties located in Mauritius,
Dubai
and the Maldives. For the three and nine months ended
September
30, 2003, other resorts also includes management,
development
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
as a separate component outside of income (loss) 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 For the Nine
Months
Months
Ended September 30, Ended September 30,
------------------- --------------------
2004 2003 2004
2003
--------- --------- --------- ----------
Destination Resorts:
Atlantis, Paradise Island $
19,801 $ 27,062 $115,138 $ 108,254
Tour operations
1,284 1,323 4,941
4,672
Harborside
792 546 2,101
1,412
Other (1)
1,545 920 4,224
2,368
--------- --------- --------- ----------
23,422 29,851 126,404 116,706
Atlantis, The Palm
27 -
197 -
--------- --------- --------- ----------
23,449 29,851 126,601 116,706
--------- --------- --------- ----------
Gaming:
Connecticut
9,768 9,455 27,535
26,581
United Kingdom
(312) (141) (940)
(141)
Other (1)
782 (308) 379
(732)
--------- --------- --------- ----------
10,238 9,006 26,974
25,708
--------- --------- --------- ----------
One&Only Resorts:
One&Only Ocean Club
661 34
7,698 7,381
One&Only Palmilla
(2,540) -
(299) -
Other resorts (2)
2,187 1,856 9,772
6,262
Tour operations
108 (104) 580
(25)
Direct expenses (2)
(3,464) (3,423) (11,736) (9,087)
Other (1)
142 (635) 2,009
1,111
--------- --------- --------- ----------
(2,906) (2,272) 8,024
5,642
--------- --------- --------- ----------
Corporate and other (3)
(6,430) (7,285) (24,074) (21,065)
--------- --------- --------- ----------
$ 24,351 $ 29,300 $137,525 $ 126,991
========= ========= ========= ==========
See definition and management's disclosure regarding
EBITDA in the
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 at Harborside, equity loss and related
expenses
and share of the One&Only Palmilla pre-opening
expenses)
for its investments in Harborside, Sun Resorts
Limited,
the One&Only Kanuhura, BLB and Trading Cove New York.
Results
for the three and nine months ended September 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 nine months ended
September
30, 2003 include management, development and other
fees
related to the One&Only Palmilla.
(3) Corporate and other represents
corporate expenses not directly
attributable
to Destination Resorts, Gaming or One&Only
Resorts.
Kerzner International Limited
Paradise
Island Summary Segment Data Reconciliation (1)
(In Thousands of U.S. Dollars)
(Unaudited)
For the Three For the Nine
Months
Months
Ended September 30, Ended September 30,
------------------- --------------------
2004 2003 2004
2003
--------- --------- --------- ----------
EBITDA:
Atlantis, Paradise Island $
19,801 $ 27,062 $115,138 $ 108,254
Tour operations
1,284 1,323 4,941
4,672
One&Only Ocean Club
661 34
7,698 7,381
--------- --------- --------- ----------
$ 21,746 $ 28,419 $127,777 $ 120,307
========= ========= ========= ==========
Revenue:
Atlantis, Paradise Island $103,454
$112,091 $389,911 $ 378,172
One&Only Ocean Club
6,828 5,588 28,071
25,960
--------- --------- --------- ----------
110,282 117,679 417,982 404,132
Promotional allowances
(4,406) (5,014) (17,285) (17,870)
--------- --------- --------- ----------
Net revenue
$105,876 $112,665 $400,697 $ 386,262
========= ========= ========= ==========
(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 For the Nine
Months
Months
Ended September 30, Ended September 30,
------------------- --------------------
2004 2003 2004
2003
--------- --------- --------- ----------
Atlantis, Paradise Island:
Occupancy
77% 79%
83% 82%
ADR (1)
$ 225 $ 225 $
267 $ 261
RevPAR (2)
$ 173 $ 177 $
222 $ 215
One&Only Ocean Club(3):
Occupancy
71% 82%
78% 80%
ADR (1)
$ 636 $ 563 $
785 $ 753
RevPAR (2)
$ 453 $ 462 $
613 $ 603
One&Only Palmilla(4):
Occupancy
55% NA
59% 66%
ADR (1)
$ 365 NA
$ 459 $ 441
RevPAR (2)
$ 202 NA
$ 272 $ 292
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 Atlantis, Paradise Island,
the One&Only Ocean
Club and the One&Only Palmilla may also be
affected by normal
recurring seasonal patterns, which lead 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 the total room
nights
available.
(3) The One&Only Ocean Club
was temporarily closed for eleven days
following
Hurricane Frances. These eleven days have been
excluded
from the number of available room nights used in the
calculation
of occupancy and RevPAR for the three and nine
months
ended September 30, 2004.
(4) The One&Only Palmilla
was temporarily closed on April 1, 2003
and
reopened on January 2, 2004 following the completion of a
major
expansion. Thus, for the nine months ended September 30,
2003,
the hotel operating performance data includes only the
results
for the quarter ended March 31, 2003. |
