| PARADISE ISLAND, The Bahamas - Aug. 9, 2005 -- Kerzner International
Limited (NYSE: KZL): 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 2005. The Company reported net income in the quarter of $10.5 million
compared to net income of $30.1 million in the same period last year, resulting
in diluted net income per share of $0.28 compared to diluted net income
per share of $0.94 in the same period last year.
Adjusted net income in the quarter was $37.0 million compared to $29.7
million in the same period last year. Adjusted net income per share in
the quarter was $0.98 compared to $0.92 in the same period last year. Adjusted
earnings per share primarily excludes $25.0 million, or approximately $0.67
per share, attributable to an impairment charge against the Company's subordinated
notes receivable from the entity that owns the One&Only Maldives at
Reethi Rah Island.
Adjusted net income also excludes $1.4 million of pre-opening expenses,
most of which is associated with the opening of Marina Village at Atlantis
("Marina Village"). Adjusted net income includes a $4.8 million, or $0.13
per share, provision that the Company has taken to reflect a new claim
from a supplier with respect to a period covering the last five years.
Butch Kerzner, Chief Executive Officer of the Company, commented, "I
am pleased to report that EBITDA in the quarter was $56.0 million, a 10%
increase over the same period last year. This increase was largely attributable
to Atlantis, Paradise Island and our One&Only operations. Collectively,
the Paradise Island properties achieved record second quarter EBITDA of
$51.2 million in the quarter. One&Only Resorts achieved EBITDA of $4.4
million in the quarter compared to $1.6 million during the same period
last year, with the increase driven largely by the outstanding performance
of the One&Only Palmilla."
Mr. Kerzner further commented, "We recently introduced two additions
to Atlantis, Marina Village, a 75,000 square foot restaurant, retail and
entertainment zone surrounding our marina, and the next phase of Harborside
at Atlantis, our timeshare product. Marina Village has been extremely well
received by our customers, adding an exciting new venue to Paradise Island.
I am pleased that in our effort to continue to look toward further development
of Paradise Island, we acquired for $23 million the Hurricane Hole Marina,
which is in close proximity to Marina Village and includes frontage on
the Nassau Harbour. We expect to upgrade this marina significantly and
bring it into our product offering, as during many times of the year, we
face capacity constraints at our marina. The acquisition also gives us
a further seven acres of land for new development. We are confident that
with all we are doing at Atlantis, our undeveloped land will continue to
appreciate in value and will provide us with many years of future development
potential."
Destination Resorts
Atlantis, Paradise Island
Atlantis, Paradise Island reported net revenue and EBITDA in the quarter
of $145.0 million and $53.2 million, respectively, as compared to $140.7
million and $49.6 million in the same period last year. These results represent
3% and 7% increases in net revenue and EBITDA, respectively. As noted above,
the Atlantis, Paradise Island results include a provision of $4.8 million,
or $0.13 per share, related to a new claim from a supplier with respect
to a period covering the last five years. The Company is currently negotiating
this claim with the supplier.
Atlantis's revenue per available room ("RevPAR") for the quarter was
$256 as compared to $243, representing a 5% increase over the same period
last year. In the quarter, Atlantis achieved an average occupancy of 87%
and a $294 average daily room rate ("ADR"), which compares to an average
occupancy of 89% and an ADR of $273 in the same period last year. Atlantis
benefited from strong booking patterns and leisure travel demand, resulting
in an 8% increase in ADR. The improved room pricing environment on Paradise
Island yielded an increase in profitability, as the EBITDA margin for the
properties (including the One&Only Ocean Club and excluding the aforementioned
$4.8 million provision) increased to 38.2% from 35.5% in the same period
last year. Despite the timing of Easter, which fell in the first quarter
of 2005, and a major group booking that did not repeat in 2005, occupancy
decreased by only 2% in the quarter.
At the Atlantis Casino, slot win for the second quarter increased by
33% over the same period last year, as the property 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 decreased by 11% over the same period last year
due primarily to a decrease in rated play and a lower table hold.
Howard Karawan, President of the Company's Destination Resorts segment,
commented, "These second quarter results demonstrate the combined effect
on profitability that strong leisure demand, constrained room supply and
an increase in flight options to the destination have on our business.
Hotel and casino margins were up over the same period last year, which
reflects the improved pricing dynamic for the business and continued operating
improvements."
Two significant milestones with respect to the Company's Phase III expansion
were recently achieved. In July, the Company completed construction of
Marina Village, which includes five new restaurants and retail space around
the Atlantis Marina. This achievement was followed in August by the completion
of the second phase of timeshare development at Harborside at Atlantis.
Both of these projects were completed on time and on budget. At Marina
Village, all restaurants but one are currently in operation and the remaining
location will open in mid-September. The second phase of Harborside at
Atlantis, a joint venture between the Company and a subsidiary of Starwood
Hotels & Resorts Worldwide, Inc., includes 116 two- and three-bedroom
units that increase the number of keys at the development to 392. Sales
trends for this second phase have remained strong, as the development is
now 27% sold. The joint venture recorded net timeshare sales of $22.5 million
during the quarter. Mr. Karawan commented, "Our timeshare development has
been performing extremely well. Average sales price per key is up approximately
40% over the first phase of Harborside. Based on current trends, we expect
to start the preliminary designs for the next phase of timeshare development
by the end of this year."
Planning for Atlantis Phase III was recently finalized and the Company's
budget has increased to $730 million (exclusive of the Harborside at Atlantis
timeshare projects, the condo-hotel, a proposed golf course on nearby Athol
Island and Ocean Club Residences & Marina). Construction is now underway
and most aspects of the project, including the 600-room all-suite hotel,
are anticipated to open in April 2007.
The Company has recently commenced development of the Ocean Club Residences
& Marina project, an 88-unit joint venture condominium project at Ocean
Club Estates. The project cost of approximately $130 million is being financed
primarily from pre-sales of units. The Company has executed purchase contracts
and deposits for 34 of the 44 units currently available for sale. Based
on the strong demand for these residences, the Company expects to commence
sales of an additional 22 units during the third quarter.
The Company also commenced pre-sales of the condo-hotel units in the
second quarter. This development, in which the Company is joint venturing
with Turnberry Associates, will include approximately 500 units at a total
development cost of approximately $250 million. Mr. Karawan commented,
"Although we have not yet begun a comprehensive marketing effort, we have
already received deposits on approximately 20% of the units, representing
almost $90 million in sales. This is very encouraging, and if we secure
sufficient pre-sales, we expect to commence construction of this development
in the next few months. The condo-hotel would add yet another product offering
to Atlantis."
Atlantis, The Palm, Dubai
The Company and its partner, Istithmar PJSC ("Istithmar"), closed in
July a syndicated $700 million, twelve-year term loan facility, which will
support the joint venture's construction of Atlantis, The Palm, an approximately
2,000-room destination resort to be located on The Palm, Jumeirah in Dubai.
The financing received strong support from the financial community, attracting
both local and international banks. The remainder of the estimated $1.2
billion project will be financed through equity commitments from the Company
and Istithmar.
The Company's equity commitment to this project is $125 million, representing
a 25% equity interest. As part of the transaction, the Company has entered
into 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 Company has also entered into 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 fourth
quarter of this year, with completion scheduled for late 2008. This project
is subject to all requisite governmental consents and construction of supporting
infrastructure by the developer of The Palm, Jumeirah.
The joint venture partners are currently considering the development
of an approximately 900-unit condominium project. The profits from such
venture would be used to redeem a portion of Istithmar's investment in
Atlantis, The Palm, resulting in an increase in the Company's stake in
Atlantis, The Palm from 25% up to a maximum of 50%.
Morocco
In the quarter, the Company entered into a joint venture agreement with
Societe Maroc Emirates Arabs Unis de Developpement and Caisse de Depot
et de Gestion and related development and long-term management agreements
for the development and operation of a destination resort casino. Based
on the current preliminary designs for the project, the budget is now 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 budget increase, 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
unless 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 either the additional debt
or equity financing will be obtained or 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, results for the Company's Gaming segment were primarily
derived from Mohegan Sun, which reported second quarter slot revenue of
$220.3 million, up 6% over the same period last year. Slot win per unit
per day was $390 for the quarter, a 6% 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 $9.7 million in the quarter as compared to $9.0 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. On July 18, 2005, BLB completed its approximately $464 million
acquisition of Wembley plc's ("Wembley") U.S. operations, which include
the Lincoln Park racino in Rhode Island and three greyhound tracks and
one horse racing track in Colorado. Lincoln Park generates approximately
85% of the U.S. operations' revenue.
BLB exchanged its 22% interest, acquired in 2004 and valued at $116
million, in Wembley as partial consideration for the acquisition. The balance
of the acquisition price was financed on a non-recourse basis by a consortium
of banks that underwrote a $495 million senior secured credit facility,
which includes a $125 million revolving credit facility that will be used
primarily to finance a proposed redevelopment of Lincoln Park.
BLB will operate Lincoln Park under a master video lottery contract
with the state of Rhode Island that was recently authorized by legislation
passed by the Rhode Island General Assembly. Lincoln Park currently has
3,002 video lottery terminals ("VLTs"). Under its contract, BLB will be
entitled to increase the number of VLTs to 4,752. The contract provides
for up to a 15-year term during which Lincoln Park will be entitled to
28.85% of the net terminal income on the existing 3,002 VLTs and 26% on
the additional 1,750 VLTs.
BLB is planning to commence the redevelopment of Lincoln Park as promptly
as possible, following receipt of all local governmental approvals to which
the redevelopment is subject. BLB expects the redevelopment to be completed
in 2007 at a cost of $125 million.
In the quarter, the Company recorded a $5.3 million decrease to its
investment in BLB and a corresponding decrease to shareholders' equity.
This unrealized loss primarily reflects the change in fair value of the
Company's share of Wembley's stock held by BLB and is classified as other
comprehensive loss, a separate component of shareholders' equity.
The Company accounts for the results of operations from BLB under the
equity method.
One&Only Resorts
In its luxury resort segment, the Company's One&Only Resorts operations
reported net revenue of $36.1 million and EBITDA of $4.4 million in the
quarter compared to net revenue of $26.5 million and EBITDA of $1.6 million
in the same period last year. On a combined basis for the seven branded
resorts, One&Only Resorts produced RevPAR of $307 in the quarter, a
9% increase over the same period last year. On the same basis, One&Only
Resorts achieved second quarter average occupancy and ADR of 75% and $411,
respectively. The primary reason for the significant increase in EBITDA
during the quarter was the strong performance of the One&Only Palmilla.
The One&Only Ocean Club achieved record second quarter RevPAR of
$811, a 28% increase over the same period last year, mainly driven by the
continued success of the property's three luxury villas and strong demand
for the property. The resort achieved second quarter average occupancy
and record ADR of 86% and $942, respectively, compared to average occupancy
and ADR of 81% and $782, respectively, in the same period last year. EBITDA
at the property was $4.2 million during the quarter, an increase of 45%
over the same period last year.
The One&Only Palmilla had a very good second quarter, with RevPAR
of $523, a 70% increase over the prior year period. The resort achieved
second quarter average occupancy and ADR of 87% and $604, respectively,
compared to average occupancy and ADR of 60% and $508, respectively, in
the same period last year. EBITDA during the quarter was $5.2 million compared
to $1.0 million last year. Although the third quarter is traditionally
a low occupancy period for this market, demand for the resort has continued
to be robust, and the business is performing well ahead of the Company's
expectations.
The One&Only Maldives at Reethi Rah Island, the Company's newest
One&Only-managed property in the Maldives, opened on May 1, 2005. This
new 130-key all-villa resort, located on a private island in the Indian
Ocean, compliments the Company's other managed resort in the region, the
One&Only Maldives at Kanuhura Island. The development of this property
resulted in the reclamation of a substantial portion of the island, increasing
its size from approximately 20 acres to over 100 acres. Along with the
130 villas, the resort features 40 swimming pools, 37 of which are private
villa pools with carved lava stone aqua beds overlooking the sea, a world-class
spa, an orchid farm and several fine dining options. Unfortunately, due
to the effects of the tsunami in December 2004, construction was delayed
and the property opened during the low season. Consequently, results of
operations are expected to remain soft until the high season begins in
October.
Although the Company does not have any equity ownership interest in
Reethi Rah Resort Pvt Ltd ("Reethi Rah"), the entity that owns and operates
the One&Only Maldives at Reethi Rah Island, 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 consolidation of Reethi Rah's
financial statements in the consolidated financial statements of the Company.
Reethi Rah incurred net losses totaling $8.2 million for the period
from May 1, 2005 to June 30, 2005. Of this amount, $5.0 million exhausted
the owners' equity capital (as estimated by the Company as of May 1, 2005)
and is included in minority and noncontrolling interests in the accompanying
condensed consolidated statements of operations for the three months ended
June 30, 2005. The balance of $3.2 million is reflected as a reduction
to the Company's consolidated net income for this period. In the near term,
the Company anticipates that Reethi Rah will incur additional 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 of the losses previously absorbed by the Company on behalf
of Reethi Rah as required under FIN 46R.
In connection with the consolidation of Reethi Rah, the Company recently
obtained an appraisal of the resort by a third party valuation firm that
led the Company to conclude that its subordinated notes receivable from
Reethi Rah were impaired by approximately $25 million, which has been written
off in the quarter.
In June 2005, the One&Only Maldives at Kanuhura Island closed for
an extensive, four-month renovation, which will include 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.
The resort is expected to re-open in mid-October 2005.
Liquidity
At the end of the quarter, the Company held $378.6 million in cash and
cash equivalents, short-term investments and restricted cash. This amount
consisted of $243.0 million in cash and cash equivalents, $119.4 million
in short-term investments and $16.2 million in restricted cash. Restricted
cash includes $12.5 million of deposits related to the Ocean Club Residences
& Marina condominium project. Total interest-bearing debt at the end
of the quarter was $819.9 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, $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
$78.9 million of debt associated with Reethi Rah. The non-affiliated debt
associated with the One&Only Palmilla and Reethi Rah is consolidated
under FIN 46R and there is recourse to the Company only to the extent of
$29 million with regard to the Reethi Rah debt.
At the end of the quarter, the Company's Revolving Credit Facility was
undrawn. The Company currently has approximately $500 million in availability
under this 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 Reethi Rah and the 50%-owned One&Only Palmilla are excluded.
In the quarter, the Company incurred $31.3 million in capital expenditures,
related primarily to Paradise Island. Total capital expenditures included
capitalized interest of $2.6 million. In the third quarter of 2005, the
Company expects to spend between $95 million and $100 million on Paradise
Island capital expenditures and the acquisition of the Hurricane Hole Marina
assets and related real estate ("Hurricane Hole"). In August, the Company
completed the approximately $23 million acquisition of Hurricane Hole.
In the quarter, the Company advanced $28.0 million in the form of mezzanine
financing related to Reethi Rah, resulting in total advances, net of repayments,
as of June 30, 2005 of $97.5 million. This total does not reflect the previously
discussed $25.0 million impairment charge. The Company expects to fund
approximately $7 million of additional subordinated debt financing related
to operating loans in 2005.
In the quarter, the Company invested $16.4 million in Atlantis, The
Palm. The Company has already funded approximately $7 million in the third
quarter of 2005 and does not currently anticipate any further investments
this year as the project begins to use its recently-arranged credit facilities.
As of June 30, 2005, shareholders' equity was $1,178.2 million and the
Company had approximately 36.3 million Ordinary Shares outstanding.
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,
-------------------- -------------------
2005 2004 (a) 2005
2004
---------- --------- --------- ---------
(Unaudited) (Unaudited)
Revenues:
Casino and resort revenues $170,082
$157,961 $358,786 $327,148
Less: promotional
allowances
(5,392) (5,468) (13,162) (12,879)
---------- --------- --------- ---------
Net casino and resort
revenues
164,690 152,493 345,624 314,269
Tour operations
13,267 11,235 26,260
24,072
Management, development
and other fees
3,270 3,658 9,456
9,073
Other
1,055 934 2,680
2,019
---------- --------- --------- ---------
182,282 168,320 384,020 349,433
---------- --------- --------- ---------
Costs and expenses:
Casino and resort expenses
86,399 78,474 171,134 157,535
Tour operations
11,100 8,961 22,169
19,902
Selling, general and
administrative
32,531 30,312 64,699
61,954
Corporate expenses
11,257 10,458 20,847
19,215
Depreciation and
amortization
17,492 14,631 33,176
29,587
Pre-opening expenses
1,256 396 1,748
3,258
UK gaming write-off
- - 10,529
-
Impairment of notes
receivable
25,043 -
25,043 -
---------- --------- --------- ---------
185,078 143,232 349,345 291,451
---------- --------- --------- ---------
Income (loss) from operations (2,796)
25,088 34,675 57,982
Relinquishment fees - equity
in earnings of TCA
9,688 9,045 18,366
17,767
Other income (expense):
Interest income
2,568 779 4,789
1,390
Interest expense, net of
capitalization
(10,777) (8,929) (21,159) (17,093)
Equity in earnings of
associated companies
5,120 2,466 9,285
7,166
Other, net
6 509
12 427
---------- --------- --------- ---------
Other expense, net
(3,083) (5,175) (7,073) (8,110)
Income before provision for
income taxes and minority
and noncontrolling
interests
3,809 28,958 45,968
67,639
Benefit (provision) for
income taxes
1,814 (295)
110 (481)
Minority and noncontrolling
interests
4,878 1,479 2,373
3,802
---------- --------- --------- ---------
Net income
$ 10,501 $ 30,142 $ 48,451 $ 70,960
========== ========= ========= =========
Diluted earnings per share $
0.28 $ 0.94 $ 1.29 $
2.21
========== ========= ========= =========
Weighted average number of
shares outstanding - diluted 37,537
32,232 37,583 32,130
(a) Certain amounts have been reclassified to conform
to the current
period's presentation.
Kerzner International Limited
Reconciliation of Adjusted Net
Income to U.S. GAAP Net Income
(In
thousands of U.S. dollars except per share data)
(Unaudited)
For the Three Months
Ended June 30,
----------------------------------------
2005
2004
------------------- -------------------
$ EPS
$ EPS
--------- -------- --------- --------
Adjusted net income(a)
$ 36,952 $ 0.98 $ 29,728 $
0.92
Pre-opening expenses (b)
(1,408) (0.03) (396)
(0.01)
UK gaming write-off (c)
- -
- -
Impairment of notes
receivable (d)
(25,043) (0.67)
- -
BLB equity loss and related
expenses (e)
- -
(1,458) (0.04)
Share of income from
remediation at Harborside
(f)
- -
2,268 0.07
--------- -------- --------- --------
Net income
$ 10,501 $ 0.28 $ 30,142 $
0.94
========= ======== ========= ========
For the Six Months
Ended June 30,
----------------------------------------
2005
2004
------------------- -------------------
$ EPS
$ EPS
--------- -------- --------- --------
Adjusted net income(a)
$ 85,923 $ 2.29 $ 70,201 $
2.18
Pre-opening expenses (b)
(1,900) (0.05) (1,827)
(0.06)
UK gaming write-off (c)
(10,529) (0.28)
- -
Impairment of notes
receivable (d)
(25,043) (0.67)
- -
BLB equity loss and related
expenses (e)
- -
(1,458) (0.04)
Share of income from
remediation at Harborside
(f)
- -
4,044 0.13
--------- -------- --------- --------
Net income
$ 48,451 $ 1.29 $ 70,960 $
2.21
========= ======== ========= ========
(a) Adjusted net income is defined as net income before
pre-opening expenses, UK gaming write-off, impairment
of notes
receivable, BLB equity loss and related expenses and
share of income
from remediation at Harborside.
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.
(b) Pre-opening expenses for the quarter ended June 30,
2005
include costs incurred relating to Marina Village at
Atlantis, costs
incurred relating to the Phase III expansion at Atlantis,
Paradise
Island and costs incurred relating to Atlantis, The Palm,
which are
included within equity in earnings of associated companies
in the
accompanying Condensed Consolidated Statements of Operations.
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 incurred during
the six months
ended June 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.
(c) 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.
(d) For the three months ended June 30, 2005, the Company
recorded
an impairment of its subordinated notes receivable due
from Reethi Rah
Resort Pvt Ltd ("Reethi Rah"), the entity which owns
the One&Only
Maldives at Reethi Rah Island, after obtaining a third
party valuation
firm's appraisal of the resort in connection with the
consolidation of
Reethi Rah under FIN 46R.
(e) For the three months ended June 30, 2004, the Company
recorded
$1.5 million 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 three
months ended June 30, 2004. The foreign currency exchange
losses are
included within corporate expenses in the accompanying
Condensed
Consolidated Statements of Operations.
(f) 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.
Kerzner International Limited
Reconciliation of EBITDA to U.S. GAAP Net Income
(In thousands of U.S. dollars)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
2005 2004
2005 2004
--------- --------- --------- ---------
EBITDA (a)
$ 55,955 $ 50,816 $132,974 $113,174
Depreciation and
amortization
(17,492) (14,631) (33,176) (29,587)
Pre-opening expenses
(1,408) (396) (1,900)
(3,258)
UK gaming write-off
- -
(10,529 ) -
Impairment of notes
receivable
(25,043) -
(25,043) -
Other expense, net
(3,083) (5,175) (7,073)
(8,110)
Equity in earnings of
associated
companies
(5,120) (2,466) (9,285)
(7,166)
BLB equity loss and related
expenses
- (1,458)
- (1,458)
Share of income from
remediation at Harborside
- 2,268
- 4,044
Benefit (provision) for
income taxes
1,814 (295)
110 (481)
Minority and noncontrolling
interests
4,878 1,479
2,373 3,802
--------- --------- --------- ---------
Net income
$ 10,501 $ 30,142 $ 48,451 $ 70,960
========= ========= ========= =========
(a) EBITDA is defined as net income before depreciation
and
amortization, pre-opening expenses, UK gaming write-off,
impairment of
notes receivable, other expense, net (excluding equity
earnings before
BLB equity loss and related expenses, share of income
from remediation
at Harborside, the Company's share of Atlantis, The Palm
and the
One&Only Palmilla pre-opening expenses), 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. Certain amounts for the three months
ended June 30,
2004 have been reclassified to conform to the current
period's
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,
-------------------- --------------------
2005 2004(d) 2005
2004(d)
-------- -------- -------- --------
Destination Resorts(a):
Atlantis, Paradise
Island
Rooms
$ 53,399 $ 50,767 $109,109 $103,317
Casino
32,760 31,488 77,832
73,406
Food and beverage
36,372 37,332 74,552
72,689
Other
16,847 18,277 34,749
37,045
-------- -------- -------- --------
139,378 137,864 296,242
286,457
Promotional allowances
(5,392) (5,468) (13,162) (12,879)
-------- -------- -------- --------
133,986 132,396 283,080
273,578
Tour operations
9,923 7,615 17,229
14,659
Harborside fees
1,099 690
2,110 1,309
-------- -------- -------- --------
145,008 140,701 302,419
289,546
Atlantis, The Palm
development fees
95 179
296 179
-------- -------- -------- --------
145,103 140,880 302,715
289,725
-------- -------- -------- --------
Gaming:
Connecticut fees
6 -
229 -
-------- -------- -------- --------
One&Only Resorts:
One&Only Ocean Club
12,452 10,151 25,724
21,243
One&Only Palmilla
16,317 9,946 34,885
19,448
One&Only Maldives,
Reethi Rah
1,935 -
1,935 -
Other resorts(b)
2,070 2,789
6,821 7,585
Tour operations
3,344 3,620
9,031 9,413
-------- -------- -------- --------
36,118 26,506 78,396
57,689
-------- -------- -------- --------
Other (c)
1,055 934
2,680 2,019
-------- -------- -------- --------
$182,282 $168,320 $384,020 $349,433
======== ======== ======== ========
(a) 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.
(b) Includes management, marketing and development fees
from the
Company's One&Only Resorts properties located in
Mauritius, Dubai and
the Maldives.
(c) 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.
(d) 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 Six Months
Ended June 30, Ended June 30,
------------------ --------------------
2005 2004(d) 2005
2004(d)
-------- -------- --------- ---------
Destination Resorts:
Atlantis, Paradise Island $44,906
$45,575 $101,864 $ 95,342
Tour operations
2,080 2,132 3,774
3,658
Harborside
1,099 690
2,110 1,309
Other (a)
5,130 1,211 8,683
2,679
------- ------- -------- --------
53,215 49,608 116,431
102,988
Atlantis, The Palm
89 170
277 170
------- ------- -------- --------
53,304 49,778 116,708
103,158
------- ------- -------- --------
Gaming:
Connecticut
9,694 9,045 18,595
17,767
United Kingdom
(2,118) (691) (2,640)
(1,018)
Other (a)
468 (256) (484)
(403)
------- ------- -------- --------
8,044 8,098 15,471
16,346
------- ------- -------- --------
One&Only Resorts:
One&Only Ocean Club
4,192 2,885 9,360
7,037
One&Only Palmilla
5,198 995 14,043
2,241
One&Only Maldives, Reethi
Rah
(4,037) -
(4,037) -
Other resorts (b)
2,070 2,789 6,821
7,585
Tour operations
69 126
291 471
Direct expenses (b)
(2,871) (5,470) (6,874)
(8,270)
Other (a)
(250) 262 1,314
1,867
------- ------- -------- --------
4,371 1,587 20,918
10,931
------- ------- -------- --------
Corporate and other (c)
(9,764) (8,647) (20,123) (17,261)
------- ------- -------- --------
$55,955 $50,816 $132,974 $113,174
======= ======= ======== ========
See definition and management's disclosure regarding EBITDA
in the
Reconciliation of EBITDA to U.S. GAAP Net Income.
(a) Represents the Company's share of net income (loss)
from
unconsolidated affiliates (excluding share of income
from remediation
at Harborside and BLB equity loss and related expenses)
for its
investments in Harborside, Sun Resorts Limited, the One&Only
Maldives
at Kanuhura Island, Ocean Club Residences & Marina,
BLB and Trading
Cove New York.
(b) 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.
(c) Corporate and other represents corporate expenses
not directly
attributable to Destination Resorts, Gaming or One&Only
Resorts.
(d) Certain amounts for the 2004 period have been reclassified
to
conform to the current periods' presentation.
Kerzner International Limited
Paradise Island
Summary Segment Data Reconciliation (a)
(In thousands of U.S. dollars)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
2005 2004
2005 2004
--------- --------- --------- ---------
Paradise Island Revenue:
Atlantis, Paradise Island $139,378
$137,864 $296,242 $286,457
One&Only Ocean Club
12,452 10,151 25,724
21,243
-------- -------- -------- --------
151,830 148,015 321,966
307,700
Promotional allowances
(5,392) (5,468) (13,162) (12,879)
-------- -------- -------- --------
$146,438 $142,547 $308,804 $294,821
======== ======== ======== ========
Paradise Island EBITDA(b):
Atlantis, Paradise Island $ 44,906
$ 45,575 $101,864 $ 95,342
Tour operations
2,080 2,132
3,774 3,658
One&Only Ocean Club
4,192 2,885
9,360 7,037
-------- -------- -------- --------
$ 51,178 $ 50,592 $114,998 $106,037
======== ======== ======== ========
EBITDA Margin(c)
34.9% 35.5%
37.2% 36.0%
(a) 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.
(b) See definition and management's disclosure regarding
EBITDA in
the Reconciliation of EBITDA to U.S. GAAP Net Income.
(c) EBITDA margin for the three and six months ended June
30,
2005, includes the effect of a $4.8 million provison
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 three
and six
months ended June 30, 2005 would have been 38.2% and
38.8%,
respectively.
Kerzner
International Limited
Hotel Operating Performance Data
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June
30,
--------------------- ---------------------
2005 2004
2005 2004
--------- ---------- -------- -----------
Atlantis, Paradise
Island:
Occupancy
87% 89%
87% 87%
ADR (a)
$294 $273
$302 $285
RevPAR (b)
$256 $243
$262 $247
One&Only Resorts(c):
Occupancy
75% 78%
79% 80%
ADR (a)
$411 $361
$473 $409
RevPAR (b)
$307 $281
$374 $327
One&Only Ocean Club:
Occupancy
86% 81%
87% 81%
ADR (a)
$942 $782
$982 $844
RevPAR (b)
$811 $632
$851 $686
One&Only Palmilla:
Occupancy
87% 60%
87% 61%
ADR (a)
$604 $508
$664 $502
RevPAR (b)
$523 $307
$580 $307
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.
(a) ADR represents room revenue divided by the total number
of
room nights occupied.
(b) RevPAR represents room revenue divided by the total
room
nights available.
(c) 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 Maldives at Kanuhura
Island, One&Only
Maldives at Reethi Rah Island and One&Only Royal
Mirage. |
About The Company
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 - a unique property 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. 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 water-based attractions.
Certain parts of this expansion have already opened, including Marina Village
at Atlantis, with the remaining elements expected to open by early 2007.
The Company is extending its Atlantis brand globally with the development
of Atlantis, The Palm, Dubai, an approximately 2,000-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.
|
