Kerzner International Limited (NYSE: KZL): -- 2005 FOURTH QUARTER
DILUTED EPS OF $0.19 COMPARED TO $0.23 ACHIEVED LAST YEAR -- 2005
FULL YEAR DILUTED EPS OF $1.34 COMPARED TO $2.01 ACHIEVED LAST YEAR
-- 2005 FOURTH QUARTER ADJUSTED EPS OF $0.35 COMPARED TO $0.26
ACHIEVED LAST YEAR -- 2005 FULL YEAR ADJUSTED EPS OF $2.92 COMPARED
TO $2.47 ACHIEVED LAST YEAR -- KERZNER REPORTS RECORD FULL YEAR
ADJUSTED NET INCOME, REVENUE AND EBITDA -- ATLANTIS, THE PALM
DEVELOPMENT COMMENCED; DEVELOPMENT BUDGET FOR PHASE I INCREASED TO
APPROXIMATELY $1.5 BILLION Kerzner International Limited (NYSE:
KZL) (the "Company"), through its subsidiaries a leading
international developer and operator of destination resorts,
casinos and luxury hotels, today reported results for the fourth
quarter of 2005. The Company reported net income in the quarter of
$7.1 million, compared to net income of $8.4 million in the same
period last year, resulting in diluted net income per share of
$0.19 compared to diluted net income per share of $0.23 in the same
period last year. Adjusted net income for the quarter was $13.2
million compared to $9.7 million in the same period last year.
Adjusted net income per share in the quarter was $0.35 compared to
$0.26 in the same period last year. Butch Kerzner, Chief Executive
Officer of the Company, commented, "In 2005, we achieved financial
performance records for adjusted net income, revenue and EBITDA,
which were driven by the strong performance of our Paradise Island
operations. These record results, combined with the continued
strong levels of demand for Atlantis and our solid balance sheet,
serve as a powerful foundation for our next wave of growth on
Paradise Island, the Phase III expansion. Phase III is expected to
be completed in stages, with the 600-room, all-suite hotel and the
expanded water attractions open by April 2007. In addition,
construction of our second Atlantis-branded destination resort,
Atlantis, The Palm, has commenced in Dubai, United Arab Emirates
and is expected to be completed by the end of 2008." Destination
Resorts Atlantis, Paradise Island Atlantis, Paradise Island
reported net revenue and EBITDA in the quarter of $124.9 million
and $29.8 million, respectively, as compared to $108.0 million and
$25.1 million, respectively, in the same period last year.
Atlantis's revenue per available room ("RevPAR") for the quarter
was $163 as compared to $162 during the same period last year. In
the quarter, Atlantis achieved an average occupancy of 71% as
compared to 72% in the same quarter last year. In the quarter, the
Company achieved a record fourth quarter average daily room rate
("ADR") of $229 as compared to $224 in the same period last year.
Visitation to the property in the quarter rebounded well after a
slow start in October due to Hurricane Wilma, which affected
customer visits from southern Florida. The increase in net revenue
in the quarter was driven primarily by increases in food and
beverage revenue and casino revenue of 23% and 22%, respectively.
The growth in food and beverage revenue is primarily attributable
to the July 2005 addition of the Marina Village at Atlantis, an
approximately 75,000 square foot restaurant, retail and
entertainment area next to the Marina at Atlantis that includes
five new restaurants. At the Atlantis Casino, slot win increased by
11% in the quarter over the same period last year. Table win
increased by 26% over the same period last year. The Company
experienced a lower table drop, which was more than offset by a
higher table hold percentage, as compared to the same period last
year. Howard Karawan, President of the Company's Destination
Resorts segment, commented, "We reported record results on Paradise
Island in 2005. On a combined basis, Atlantis, Paradise Island and
One&Only Ocean Club exceeded the $600 million gross revenue
threshold for the first time, increasing 10% over last year."
Construction of the $730 million Phase III expansion ("Phase III")
on Paradise Island is proceeding. Development of the 600-room,
all-suite hotel, expanded water attractions and 100,000 square feet
of additional group meeting space is well underway. Completion of
these elements of Phase III is expected by April 2007. The second
phase ("Harborside Phase I-B") of Harborside at Atlantis
("Harborside"), a timeshare joint venture between the Company and a
subsidiary of Starwood Hotels & Resorts Worldwide, Inc., which
consists of 116 two- and three-bedroom units, was completed in
August of 2005. Sales trends for Harborside Phase I-B have remained
strong, and the project is now 37% sold. Including Harborside Phase
I-B, the total number of keys at Harborside is 392. In 2005, the
Company recorded $19.8 million in income from Harborside, which
includes fee income and equity earnings of $3.7 million and $16.1
million, respectively. Construction of the 88-unit Ocean Club
Residences & Marina condominium joint venture project is
proceeding well. The project was approximately 20% complete at the
end of the quarter. The cost of this development, which is being
financed primarily from pre-sales of units, is expected to be
approximately $130 million. Demand for the units has been strong,
with deposits on 59 units received by the joint venture since the
units went on the market in May 2005. The project, which is
comprised of four 22-unit buildings, is expected to be completed in
stages between January and May of 2007. The Company accounts for
this joint venture under the equity method of accounting. The
Company entered into a joint venture with Turnberry Associates to
develop The Residences at Atlantis, a 495-unit condo-hotel project.
Construction is expected to commence once the joint venture has
received a sufficient level of reservations and financing for the
development has been secured by the joint venture. The Company has
consolidated The Residences at Atlantis in its financial statements
pursuant to FASB Interpretation No. 46(R) ("FIN 46R"),
"Consolidation of Variable Interest Entities." In the quarter, the
Company recognized a net loss of $0.9 million, which is
attributable mainly to its share of sales and marketing expenses
and has been excluded from adjusted net income and adjusted net
income per share. Atlantis, The Palm, Dubai The Company and
Istithmar PJSC ("Istithmar") have formed a joint venture to develop
Atlantis, The Palm, Dubai ("Atlantis, The Palm"), the Company's
second Atlantis-branded resort, which will be situated at the
center of the crescent of The Palm, Jumeirah on a 125-acre site.
Phase I of this project is expected to include a 1,500-room
five-star hotel, a 60-acre water park (over twice the size of the
enhanced water park being developed in Phase III on Paradise
Island), an entertainment village and other amenities. Once
complete, this property is expected to be positioned as a leading
attraction for Dubai and the anchor resort for The Palm, Jumeirah,
a multi-billion dollar land reclamation project. The development
costs for Atlantis, The Palm are expected to be approximately $1.5
billion, including the cost of the 125-acre site, which the joint
venture recently agreed to acquire. Construction of Atlantis, The
Palm has recently commenced, with completion scheduled for late
2008. The joint venture anticipates it will utilize approximately
86 acres in Phase I, leaving approximately 39 acres available for
future development. Additionally, the joint venture has secured the
right to reclaim an additional 125 acres of adjacent land should it
be required for future phases of development. This joint venture's
capital structure includes an equity investment of $200 million by
each partner. The remaining project financing will comprise the
existing $700 million senior first lien term loan facility, which
is subject to various conditions, and an additional $275 million of
second lien debt. Istithmar has committed to provide $75 million of
the second lien debt. The joint venture has received a commitment,
subject to various conditions, from third party underwriters for
the remaining $200 million. The joint venture expects to enter into
binding definitive documentation for this second lien financing by
the end of the first quarter of this year. The joint venture also
expects to purchase the 125-acre site on which the property will be
located from the developer of The Palm, Jumeirah in exchange for a
$125 million payment-in-kind note that will be subordinated to the
first and second lien debt. The Company has a long-term management
agreement with the joint venture and is acting as the development
manager for the project. This management agreement entitles the
Company to receive a base management fee based on the gross revenue
generated by Atlantis, The Palm and an incentive management fee
based on operating income. The base management fee is subordinated
to the senior debt facilities. The Company's investment in
Atlantis, The Palm is accounted for under the equity method of
accounting. In the quarter, the Company recorded an equity loss of
$2.0 million, which is excluded from adjusted net income and
adjusted net income per share. These losses are comprised primarily
of the Company's share of pre-opening expenses for this project.
Morocco In 2005, the Company entered into a joint venture agreement
with Societe Maroc Emirates Arabs Unis de Developpement and Caisse
de Depot et de Gestion, and into related development and long-term
management agreements for the development and operation of a
destination resort casino in Morocco, near Casablanca. Based on the
current preliminary designs for the project, the budget is
anticipated to be approximately $300 million. As a result of the
previously announced budget increase, the parties have worked
together for several months to arrange debt and equity financing to
fund the project. Although no assurances can be given at this time,
the Company expects to reach agreement with its Moroccan partners
on amended project documents and proceed with the project, subject
to obtaining third party debt financing. Gaming Connecticut For the
fourth quarter, Mohegan Sun reported slot revenue of $216.2
million, up 4% over the same period last year. Slot win per unit
per day was $379 for the quarter, a 4% increase over the same
period last year. For the quarter, Mohegan Sun's share of the
Connecticut slots market was 53%. Under a relinquishment agreement
between Trading Cove Associates ("TCA") and the Mohegan Tribe, TCA,
an entity 50%-owned by the Company, receives payments from the
Mohegan Tribal Gaming Authority of 5% of the gross operating
revenues of Mohegan Sun. The Company recorded relinquishment and
other fees from TCA of $10.1 million in the quarter as compared to
$9.3 million in the same period last year. BLB Investors, L.L.C.
The Company owns a 37.5% interest in BLB Investors, L.L.C. ("BLB"),
a joint venture with Starwood Capital Group Global, L.L.C. and
Waterford Group, L.L.C., and accounts for its investment in BLB
under the equity method of accounting. On July 18, 2005, BLB
completed a $464 million acquisition of the U.S. operations of
Wembley plc ("Wembley"), which included the Lincoln Park racino in
Rhode Island and three greyhound tracks and one horse racing track
in Colorado. BLB's revenue and net income are driven primarily by
Lincoln Park. In the quarter, Lincoln Park reported net video
lottery terminal (VLT) win of $84.2 million, an increase of 12%
over the same period last year. Lincoln Park achieved net terminal
win per unit per day in the quarter of $269. In the quarter,
Lincoln Park recorded VLT revenue of $24.1 million, which
represented Lincoln Park's approximate 29% share of VLT win. BLB
operates Lincoln Park under a master video lottery contract with
the state of Rhode Island that was authorized by legislation passed
by the Rhode Island General Assembly. This contract allows BLB to
increase the number of VLTs at Lincoln Park to 4,752. As of
December 31, 2005, Lincoln Park had 3,602 VLTs in operation, which
included 600 VLTs that were added to the facility in the quarter as
part of BLB's planned redevelopment of Lincoln Park. The balance of
the expansion project includes the redevelopment of the existing
grandstand area and the construction of a new facility that is
expected to house at least 1,750 VLTs. The new facility will be
located adjacent to the current facility and will contain new
restaurant and entertainment areas and VLTs, some of which will be
repositioned from the current facility. Upon completion of the
redevelopment, Lincoln Park is expected to have 4,752 VLT in
operation. Completion of the redevelopment project is expected in
early 2007. Based on the most recent cost estimates, which indicate
a significant rise in the total development costs of this project,
the Company expects to make an additional equity investment in BLB
of $10 million to $15 million to finance the Company's pro rata
share of these additional costs. In the quarter, the Company
reported $0.4 million of equity earnings associated with its
investment in BLB. One&Only Resorts The Company's luxury resort
segment, One&Only Resorts, reported net revenue of $50.2
million and EBITDA of $15.9 million in the quarter compared to net
revenue of $34.3 million and EBITDA of $8.6 million in the same
period last year. On a combined basis for the branded resorts,
One&Only Resorts produced RevPAR of $445 in the quarter, a 14%
increase over the same period last year. On the same basis,
One&Only Resorts achieved fourth quarter average occupancy and
ADR of 79% and $560, respectively, as compared to occupancy and ADR
of 78% and $500, respectively, in the same period last year. The
primary contributors to the increases in net revenue and EBITDA
during the quarter were the strong performance of One&Only
Palmilla and the inclusion of the results of One&Only Maldives
at Reethi Rah. One&Only Palmilla had a strong fourth quarter,
with RevPAR of $560, a 40% increase over the same period last year.
The resort achieved fourth quarter average occupancy and ADR of 85%
and $658, respectively, compared to average occupancy and ADR of
69% and $582, respectively, in the same period last year. EBITDA
during the quarter was $5.1 million compared to $1.9 million in the
same period last year. In its second full quarter of operation, the
130-room One&Only Maldives at Reethi Rah performed well, with
EBITDA of $3.3 million. RevPAR in the quarter was $508. The resort
achieved fourth quarter average occupancy and ADR of 83% and $610,
respectively. Although the Company does not have any equity
ownership interest in Reethi Rah Resort Pvt Ltd ("Reethi Rah"), the
entity that owns and operates One&Only Maldives at Reethi Rah,
the Company has determined that Reethi Rah is a variable interest
entity that is subject to consolidation in accordance with the
provisions of FIN 46R. The Company has agreements with Reethi Rah
that provide for construction financing and operating loans, as
well as management and development agreements. As of May 1, 2005,
when the resort commenced operations, the Company became the
primary beneficiary of Reethi Rah under FIN 46R, resulting in the
consolidation of Reethi Rah's financial statements into the
consolidated financial statements of the Company. In the quarter,
the Company recorded a net loss related to Reethi Rah of $1.4
million, which includes depreciation and interest expense of $2.9
million and $1.8 million, respectively. In the near term, the
Company anticipates Reethi Rah will continue to incur net losses,
and such losses will be reflected in the Company's results of
operations. If Reethi Rah realizes net income in the future, the
Company will be credited to the extent losses were previously
absorbed by the Company on behalf of Reethi Rah. One&Only Ocean
Club achieved record fourth quarter RevPAR of $623, representing an
11% increase over the same period last year. In the quarter, the
resort achieved average occupancy and record fourth quarter ADR of
79% and $786, respectively, compared to average occupancy and ADR
of 80% and $702, respectively, in the same period last year. EBITDA
at the property was $2.0 million during the quarter as compared to
$2.2 million in the same period last year. The decrease in EBITDA
is primarily due to the closure of one of the hotel's restaurants
in the third quarter of 2005. Liquidity At December 31, 2005, the
Company held $198.1 million in cash and cash equivalents,
short-term investments and restricted cash. This amount consisted
of $115.9 million in cash and cash equivalents, $20.0 million in
short-term investments and $62.3 million in restricted cash.
Restricted cash included $57.2 million of escrowed funds for the
Company's equity investment in the joint venture developing
Atlantis, The Palm. Total interest-bearing debt at the end of the
quarter was $797.2 million, comprised primarily of the Company's
recently-issued $400 million of 6 3/4% Notes due 2015, $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 $55.2 million of non-affiliated debt associated
with Reethi Rah. The non-affiliated debt associated with
One&Only Palmilla and Reethi Rah is consolidated under FIN 46R.
In the quarter, the Company amended its Revolving Credit Facility,
increasing the availability under the facility from $500 million to
$650 million and amending certain pricing and financial covenants.
At the end of the quarter, the Company's Revolving Credit Facility
was undrawn. In determining the credit statistics used to measure
compliance with the Company's financial covenants under this
facility, the incremental debt and interest expense associated with
the consolidation of Reethi Rah and the 50%-owned One&Only
Palmilla and The Residences at Atlantis are excluded. In the
quarter, the Company incurred $78.0 million in capital
expenditures, related primarily to Paradise Island, including
capitalized interest of $2.7 million. In the first quarter of 2006,
the Company expects to spend between $90 million and $100 million
on Paradise Island capital expenditures. In the quarter, the
Company invested $10.6 million in Atlantis, The Palm. The Company
expects to invest approximately $15 million in the project in the
first quarter of 2006. This investment will be sourced from the
remaining escrowed funds, which are currently classified as
restricted cash on the Company's consolidated balance sheet. In the
quarter, the Company closed on the acquisition of an additional
seven and a half acres of beachfront property located at the
eastern edge of Cabbage Beach adjoining Ocean Club Estates. The
Company contributed this land into the Ocean Club Residences &
Marina joint venture and will develop the site through the joint
venture. The Company's share of the acquisition costs was $7.9
million. As of December 31, 2005, shareholders' equity was $1,159.4
million and the Company had approximately 36.5 million Ordinary
Shares outstanding. During the quarter, the Company did not
repurchase any Ordinary Shares under its share repurchase program,
which was authorized in the third quarter of 2005. The Company
currently has approximately 1.4 million shares remaining under this
program. Conference Call Announcement The Company will hold a
conference call at 9:00 a.m. EST today to discuss these fourth
quarter results. This call can be accessed at the Company's web
site at www.kerzner.com. The call will also be available on a
first-come, first-serve basis by dialing 877.371.3550 (US/Canada)
or 706.679.0864 (international). Replay of the conference call will
be available beginning today at 1:00 p.m. EST, ending at midnight
on February 20, 2006. The replay numbers are 800.642.1687
(US/Canada) and 706.645.9291 (international) using the following
PIN Number: 4925268. About The Company Kerzner International
Limited (NYSE: KZL), through its subsidiaries, is a leading
international developer and operator of destination resorts,
casinos and luxury hotels. The Company's flagship brand is
Atlantis, which includes Atlantis, Paradise Island, a 2,317-room,
ocean-themed destination resort located on Paradise Island, The
Bahamas - a unique property featuring three interconnected hotel
towers built around a seven-acre lagoon and a 34-acre marine
environment that includes the world's largest open-air marine
habitat. The resort is also home to the largest casino in the
Caribbean. Development of a major expansion on Paradise Island is
currently underway and will include a 600-room, all-suite luxury
hotel and a significant enhancement of Atlantis's water-based
attractions. Certain parts of this expansion have already opened,
including the Marina Village at Atlantis, with the remaining
elements expected to open by the second quarter of 2007. The
Company is extending its Atlantis brand globally with the
development of Atlantis, The Palm, Dubai, an approximately
1,500-room, water-themed resort expected to open in late 2008,
currently being constructed on The Palm, Jumeirah, a multi-billion
dollar leisure and residential development in Dubai. In its gaming
segment, the Company developed and receives certain income derived
from Mohegan Sun in Uncasville, Connecticut, which has become one
of the premier casino destinations in the United States. The
Company is also a 37.5% owner of BLB Investors, L.L.C., which owns
Lincoln Park in Rhode Island and pari-mutuel racing facilities in
Colorado. In the U.K., the Company is currently developing a casino
in Northampton and received a Certificate of Consent from the U.K.
Gaming Board in 2004. In its luxury resort hotel business, the
Company manages ten resort hotels primarily under the One&Only
brand. The resorts, featuring some of the top-rated properties in
the world, are located in The Bahamas, Mexico, Mauritius, the
Maldives and Dubai. An additional One&Only property is
currently in the planning stages in South Africa. For more
information concerning the Company and its operating subsidiaries,
visit www.kerzner.com. This press release contains forward-looking
statements, which are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve risks and uncertainties which
are described in the Company's public filings with the U.S.
Securities and Exchange Commission. Investor inquiries regarding
the Company should be directed to Omar Palacios at +1.242.363.6018.
Media inquiries should be directed to Lauren Snyder at
+1.242.363.6018. Condensed Consolidated Statements of Operations,
Reconciliation of Adjusted Net Income to GAAP Net Income (Loss),
Reconciliation of EBITDA to U.S. GAAP Net Income, Summary Segment
Data - Net Revenue, Summary Segment Data - EBITDA and Hotel
Operating Performance Data are attached. -0- *T Kerzner
International Limited Condensed Consolidated Statements of
Operations (In thousands of U.S. dollars, except per share data)
For the Three Months For the Year Ended December 31, Ended December
31, ------------------- ------------------- 2005 2004 2005 2004
--------- --------- --------- --------- (Unaudited) (Unaudited)
Revenues: Casino and resort revenues $160,084 $129,302 $666,824
$573,251 Less: promotional allowances (6,034) (5,749) (24,239)
(23,034) --------- --------- --------- --------- Net casino and
resort revenues 154,050 123,553 642,585 550,217 Tour operations
14,373 11,975 54,524 47,115 Management, development and other fees
7,294 7,104 19,355 19,894 Other 1,183 919 5,060 3,859 ---------
--------- --------- --------- 176,900 143,551 721,524 621,085
--------- --------- --------- --------- Costs and expenses: Casino
and resort expenses 88,257 73,600 345,138 299,680 Tour operations
12,469 10,429 46,003 39,994 Selling, general and administrative
38,901 26,848 136,808 118,334 Corporate expenses 11,810 11,850
43,219 38,601 Depreciation and amortization 21,047 14,550 73,292
58,948 Hurricane related expenses - - - 3,426 Pre-opening expenses
3,341 - 7,975 3,258 UK gaming write-off - - 10,529 - Loss on
damaged assets - - - 1,194 (Gain on sale) impairment of Atlantic
City land (132) - (1,433) 7,303 Impairment of notes receivable - -
28,139 - --------- --------- --------- --------- 175,693 137,277
689,670 570,738 --------- --------- --------- --------- Income from
operations 1,207 6,274 31,854 50,347 Relinquishment fees - equity
in earnings of TCA 9,595 9,076 37,882 35,909 Other income
(expense): Interest income 1,900 1,890 9,130 4,722 Interest
expense, net of capitalization (11,505) (10,217) (44,087) (36,814)
Equity in earnings of associated companies 5,316 770 20,523 7,455
Loss on early extinguishment of debt (129) (1,655) (27,912) (1,655)
Other, net 3 723 13 1,358 --------- --------- --------- ---------
Other expense, net (4,415) (8,489) (42,333) (24,934) Income before
provision for income taxes and minority and noncontrolling
interests 6,387 6,861 27,403 61,322 Benefit (provision) for income
taxes 175 1,049 16,104 (424) Minority and noncontrolling interests
580 460 7,141 7,234 --------- --------- --------- --------- Net
income $7,142 $8,370 $50,648 $68,132 ========= ========= =========
========= Diluted earnings per share $0.19 $0.23 $1.34 $2.01
========= ========= ========= ========= Weighted average number of
shares outstanding - diluted 37,825 36,812 37,667 33,884 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 December 31,
---------------------------------- 2005 2004 ------------------
--------------- $ EPS $ EPS -------- -------- ------- -------
Adjusted net income (1) $13,242 $ 0.35 $9,698 $ 0.26 Phase III
amendment write-off (2) - - (500) (0.01) Hurricane related expenses
(3) - - - - Pre-opening expenses (4) (5,241) (0.14) - - UK gaming
write-off (5) - - - - Gain on sale (impairment) of Atlantic City
land (6) 132 - - - Impairment of notes receivable (7) - - - - BLB
transaction (costs) gain (8) - - - - Costs of amendment of credit
facility (9) (856) (0.02) - - Share of income from remediation at
Harborside (10) - - - - Real estate (loss) income (11) (6) - - -
Loss on early extinguishment of debt, net of minority interest (12)
(129) - (828) (0.02) Tax benefit related to debt refinancing (13) -
- - - -------- ------- ------- ------- Net income $ 7,142 $ 0.19
$8,370 $ 0.23 ======== ======= ======= ======= For the Year Ended
December 31, ---------------------------------- 2005 2004
----------------- ---------------- $ EPS $ EPS --------- -------
-------- ------- Adjusted net income (1) $109,982 $ 2.92 $83,565 $
2.47 Phase III amendment write-off (2) - - (500) (0.01) Hurricane
related expenses (3) - - (4,620) (0.14) Pre-opening expenses (4)
(10,036) (0.27) (1,827) (0.06) UK gaming write-off (5) (10,529)
(0.28) - - Gain on sale (impairment) of Atlantic City land (6)
1,433 0.04 (7,303) (0.22) Impairment of notes receivable (7)
(28,139) (0.75) - - BLB transaction (costs) gain (8) 888 0.02
(4,399) (0.13) Costs of amendment of credit facility (9) (856)
(0.02) - - Share of income from remediation at Harborside (10) - -
4,044 0.12 Real estate (loss) income (11) 124 - - - Loss on early
extinguishment of debt, net of minority interest (12) (27,912)
(0.74) (828) (0.02) Tax benefit related to debt refinancing (13)
15,693 0.42 - - --------- ------- -------- ------- Net income $
50,648 $ 1.34 $68,132 $ 2.01 ========= ======= ======== ======= (1)
Adjusted net income is defined as net income before Phase III
amendment write-off, hurricane related expenses, pre-opening
expenses, UK gaming write-off, gain on sale (impairment) of
Atlantic City land, impairment of notes receivable, BLB transaction
(costs) gain, costs of amendment of credit facility, share of
income from remediation at Harborside, real estate (loss) income,
loss on early extinguishment of debt, net of minority interest and
tax benefit related to debt refinancing. Adjusted net income is
presented to assist investors in analyzing the performance of the
Company. Management considers adjusted net income to be useful for
(i) valuing companies; (ii) assessing current results; and (iii)
basing expectations of future results. This information should not
be considered as an alternative to net income computed in
accordance with accounting principles generally accepted in the
United States ("U.S. GAAP"), nor should it be considered as an
indicator of the overall financial performance of the Company.
Adjusted net income is limited by the fact that companies may not
necessarily compute it in the same manner, thereby making this
measure less useful than net income calculated in accordance with
U.S. GAAP. (2) In December 2004, the Company amended the scope of
the Phase III expansion on Paradise Island. The Phase III amendment
write-off represents certain design and other related costs
previously incurred that will no longer be utilized in connection
with the amended plans. The Phase III amendment write-off costs are
included within casino and resort expenses in the accompanying
condensed consolidated statements of operations. (3) Hurricane
related expenses primarily consist of clean up and repair costs and
complimentary goods and services to guests associated with
Hurricane Frances at the Company's Paradise Island properties and
the write-off of assets damaged during Hurricane Frances. (4)
Pre-opening expenses for the quarter and year ended December 31,
2005 include costs incurred relating to the Phase III expansion on
Paradise Island of $3.0 million and $7.7 million, respectively.
Pre-opening expenses for the quarter and year ended December 31,
2005 also include $0.3 million of costs incurred, net of minority
interest relating to a November 2005 launch event at One&Only
Maldives at Reethi Rah. Also included in pre-opening expenses for
the quarter and year ended December 31, 2005 are costs incurred
relating to Atlantis, The Palm of $2.0 million and $2.1 million,
respectively, which are included as equity in earnings of
associated companies in the accompanying condensed consolidated
statements of operations. Pre-opening expenses for the year ended
December 31, 2004 represent costs incurred prior to the June 2004
opening of the One&Only Ocean Club expansion and the Company's
50% share of pre-opening expenses related to One&Only
Palmilla's grand reopening event in February 2004. (5) 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. (6) During the year
ended December 31, 2005, the Company completed the sale of a
portion of its Atlantic City land, for which it had previously
recorded an impairment charge, as well as two additional ancillary
pieces of land, all of which resulted in a total gain of $1.4
million. During the year ended December 31, 2004, the Company
recorded an impairment of $7.3 million to certain of its
undeveloped real estate in Atlantic City based on its estimated
fair value less costs to sell. This amount excludes a $2.9 million
tax benefit that the Company realized during the year as a result
of this impairment charge. (7) For the year ended December 31,
2005, the Company recorded an impairment of its subordinated notes
receivable due from Reethi Rah, the entity which owns One&Only
Maldives at Reethi Rah, after obtaining a third party valuation
firm's appraisal of the resort in connection with the consolidation
of Reethi Rah under FIN 46R. (8) For the year ended December 31,
2005, the Company recorded income for its share of BLB's gain
associated with Wembley's repurchase of BLB's share ownership in
Wembley effective on the date of acquisition. This amount is
included within equity in earnings of associated companies in the
accompanying condensed consolidated statements of operations. For
the year ended December 31, 2004, the Company recorded $4.4 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 year
ended December 31, 2004. The foreign currency exchange losses are
included within corporate expenses in the accompanying condensed
consolidated statements of operations. (9) During the quarter ended
December 31, 2005, the Company amended its revolving credit
facility and wrote off $0.9 million of debt issuance costs
associated with its previous credit facility. This amount is
included within interest expense, net of capitalization in the
accompanying condensed consolidated statements of operations. (10)
The Company recorded income for its share of remediation related to
Harborside at Atlantis, 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. (11) For the year ended
December 31, 2005, real estate (loss) income includes a loss of
$1.7 million, net of minority interest, associated with The
Residences at Atlantis and equity in earnings of $1.8 million
associated with the Ocean Club Residences & Marina, two of the
Company's joint venture real estate-related projects on Paradise
Island. (12) For the year ended December 31, 2005, loss on early
extinguishment of debt represents costs associated with the
September 2005 tender for the Company's 8 7/8% Senior Subordinated
Notes. For the year ended December 31, 2004, loss on early
extinguishment of debt, net of minority interest represents the
Company's 50% share of the write-off of debt issuance costs related
to One&Only Palmilla's senior credit facility, which was
refinanced in December 2004. (13) For the year ended December 31,
2005, the Company realized a tax benefit of $15.7 million related
to the refinancing of its 8 7/8% Senior Subordinated Notes. Kerzner
International Limited Reconciliation of EBITDA to U.S. GAAP Net
Income (In thousands of U.S. dollars) (Unaudited) For the Three
Months For the Year Ended December 31, Ended December 31,
------------------- ------------------- 2005 2004 2005 2004
--------- --------- --------- --------- EBITDA (1) $ 43,285 $
31,170 $211,559 $168,695 Phase III amendment write-off - (500) -
(500) Depreciation and amortization (21,047) (14,550) (73,292)
(58,948) Hurricane related expenses - - - (3,426) Pre-opening
expenses (5,298) - (10,093) (3,258) UK gaming write-off - -
(10,529) - Loss on damaged assets - - - (1,194) Gain on sale
(impairment) of Atlantic City land 132 - 1,433 (7,303) Impairment
of notes receivable - - (28,139) - Other expense, net (4,415)
(8,489) (42,333) (24,934) Equity in earnings of associated
companies (5,316) (770) (20,523) (7,455) BLB transaction (costs)
gain - - 888 (4,399) Share of income from remediation at Harborside
- - - 4,044 Real estate income (954) - (1,568) - Benefit
(provision) for income taxes 175 1,049 16,104 (424) Minority and
noncontrolling interests 580 460 7,141 7,234 --------- ---------
--------- --------- Net income $ 7,142 $ 8,370 $ 50,648 $ 68,132
========= ========= ========= ========= (1) EBITDA is defined as
net income before Phase III amendment write-off, depreciation and
amortization, hurricane related expenses, pre-opening expenses, UK
gaming write-off, loss on damaged assets, gain on sale (impairment)
of Atlantic City land, impairment of notes receivable, other
expense, net (excluding equity in earnings of associated companies
before BLB transaction (costs) gain, share of income from
remediation at Harborside, equity in earnings of Ocean Club
Residences & Marina and the Company's share of Atlantis, The
Palm, One&Only Palmilla and One&Only Maldives at Reethi Rah
pre-opening expenses), real estate income, benefit (provision) for
income taxes and minority and noncontrolling interests. Although
EBITDA is not a measure of performance under U.S. GAAP, the
information is presented because management believes it provides
useful information for (i) valuing companies; (ii) assessing
current results; and (iii) basing expectations of future results.
This information should not be considered as an alternative to any
measure of performance as promulgated under U.S. GAAP, nor should
it be considered as an indicator of the overall financial
performance of the Company. The Company's method of calculating
EBITDA may be different from the calculation used by other
companies, therefore comparability may be limited. Kerzner
International Limited Summary Segment Data - Net Revenue (In
thousands of U.S. dollars) (Unaudited) For the Three Months For the
Year Ended December 31, Ended December 31, -------------------
------------------ 2005 2004 2005 2004 --------- -------- --------
-------- Destination Resorts (1): Atlantis, Paradise Island Rooms $
34,406 $ 34,168 $185,268 $174,093 Casino 37,294 31,347 146,010
130,879 Food and beverage 33,654 27,307 141,890 127,633 Other
17,508 14,911 68,669 65,040 -------- -------- -------- --------
122,862 107,733 541,837 497,645 Promotional allowances (6,034)
(5,749) (24,239) (23,034) -------- -------- -------- --------
116,828 101,984 517,598 474,611 Tour operations 7,421 5,251 35,025
26,564 Harborside fees 612 725 3,655 2,826 -------- --------
-------- -------- 124,861 107,960 556,278 504,001 Atlantis, The
Palm development fees 161 165 496 380 -------- -------- --------
-------- 125,022 108,125 556,774 504,381 -------- -------- --------
-------- Gaming: Connecticut fees 460 233 926 935 -------- --------
-------- -------- One&Only Resorts: One&Only Ocean Club
9,574 9,660 43,237 37,731 One&Only Palmilla 17,218 11,909
63,565 37,875 One&Only Maldives at Reethi Rah 10,430 - 18,185 -
Other resorts (2) 6,061 5,981 14,278 15,753 Tour operations 6,952
6,724 19,499 20,551 -------- -------- -------- -------- 50,235
34,274 158,764 111,910 -------- -------- -------- -------- Other
(3) 1,183 919 5,060 3,859 -------- -------- -------- --------
$176,900 $143,551 $721,524 $621,085 ======== ======== ========
======== (1) Includes revenue from Atlantis, Paradise Island, Ocean
Club Golf Course, the Company's wholly-owned tour operator, PIV,
Inc., marketing and development fee income from Harborside and
development fee income from Atlantis, The Palm. (2) Includes
management, marketing and development fees from the Company's
One&Only Resorts properties located in Mauritius, Dubai and the
Maldives. (3) Includes revenue not directly attributable to
Destination Resorts, Gaming or One&Only Resorts. Relinquishment
fees - equity in earnings of TCA related to our Gaming segment are
included as a separate component outside of income from operations
in the accompanying condensed consolidated statements of
operations. Kerzner International Limited Summary Segment Data -
EBITDA (In thousands of U.S. dollars) (Unaudited) For the Three
Months For the Year Ended December 31, Ended December 31,
------------------- ------------------- 2005 2004(3) 2005 2004(3)
--------- --------- --------- --------- Destination Resorts:
Atlantis, Paradise Island $ 24,947 $ 25,037 $156,937 $140,175 Tour
operations 1,021 980 7,064 5,921 Harborside fees 612 725 3,655
2,826 Harborside equity earnings 3,219 (1,617) 16,106 2,607
-------- -------- -------- -------- 29,799 25,125 183,762 151,529
Atlantis, The Palm 146 149 452 346 -------- -------- --------
-------- 29,945 25,274 184,214 151,875 -------- -------- --------
-------- Gaming: Connecticut 10,054 9,308 38,808 36,843 United
Kingdom (1,148) (1,296) (4,810) (2,559) BLB 363 (34) 1,085 989
Other equity losses (207) (303) (983) (947) -------- --------
-------- -------- 9,062 7,675 34,100 34,326 -------- --------
-------- -------- One&Only Resorts: One&Only Ocean Club
1,969 2,196 12,341 9,894 One&Only Palmilla 5,110 1,865 20,126
1,566 One&Only Maldives at Reethi Rah 3,304 - (791) - Other
resorts (1) 6,061 5,981 14,278 15,753 Tour operations 768 575 1,305
1,155 Direct expenses (4,303) (4,763) (14,009) (16,499) Other
equity earnings 2,969 2,728 3,813 4,737 -------- -------- --------
-------- 15,878 8,582 37,063 16,606 -------- -------- --------
-------- Corporate and other (2) (11,600) (10,361) (43,818)
(34,112) -------- -------- -------- -------- $ 43,285 $ 31,170
$211,559 $168,695 ======== ======== ======== ======== See
definition and management's disclosure regarding EBITDA in the
accompanying reconciliation of EBITDA to U.S. GAAP net income. (1)
Consists of management, marketing, development and other fees for
operations located in Mauritius, Dubai and the Maldives. (2)
Corporate and other represents corporate expenses not directly
attributable to Destination Resorts, Gaming or One&Only
Resorts. (3) Certain amounts for the 2004 periods have been
reclassified to conform to the current periods' presentation.
Kerzner International Limited Hotel Operating Performance Data
(Unaudited) For the Three Months For the Year Ended December 31,
Ended December 31, --------------------- --------------------- 2005
2004 2005 2004 --------- ---------- -------- ----------- Atlantis,
Paradise Island: Occupancy 71% 72% 81% 80% ADR (1) $229 $224 $272
$257 RevPAR (2) $163 $162 $221 $207 One&Only Resorts (3):
Occupancy 79% 78% 78% 77% ADR (1) $560 $500 $462 $403 RevPAR (2)
$445 $391 $359 $311 One&Only Ocean Club: Occupancy 79% 80% 82%
79% ADR (1) $786 $702 $869 $762 RevPAR (2) $623 $563 $712 $600
One&Only Palmilla: Occupancy 85% 69% 86% 61% ADR (1) $658 $582
$606 $500 RevPAR (2) $560 $399 $523 $304 One&Only Maldives at
Reethi Rah (4): Occupancy 83% - 72% - ADR (1) $610 - $436 - RevPAR
(2) $508 - $313 - Management believes that the results of
operations in the destination resort and luxury hotel industry are
best explained by three key performance measures; occupancy,
average daily rate ("ADR") and revenue per available room
("RevPAR"). These measures are influenced by a variety of factors
including national, regional and local economic conditions, changes
in travel patterns and the degree of competition with other
destination resorts, luxury hotels and product offerings within the
travel and leisure industry. The demand for accommodations at our
resorts may also be affected by normal recurring seasonal patterns.
(1) ADR represents room revenue divided by the total number of room
nights occupied. (2) RevPAR represents room revenue divided by the
total number of room nights available. (3) One&Only Resorts
represents the consolidated results of the seven properties that
the Company markets under its One&Only brand: One&Only
Ocean Club, One&Only Palmilla, One&Only Le Saint Geran,
One&Only Le Touessrok, One&Only Kanuhura, One&Only
Maldives at Reethi Rah and One&Only Royal Mirage. (4) Hotel
operating performance data for One&Only Maldives at Reethi Rah
for the year ended December 31, 2005 represents the period from May
1, 2005 (date of opening) through December 31, 2005. *T
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