Kerzner International Limited Condensed Consolidated Statements of Operations (In thousands of U.S. dollars, except per share data) For the Three Months For the Nine Months Ended September 30, Ended September 30, --------------------- --------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- (Unaudited) (Unaudited) Revenues: Casino and resort revenues $ 147,954 $ 116,801 $ 506,740 $ 443,949 Less: promotional allowances (5,043) (4,406) (18,205) (17,285) ---------- ---------- ---------- ---------- Net casino and resort revenues 142,911 112,395 488,535 426,664 Tour operations 13,891 11,068 40,151 35,140 Management, development and other fees 2,605 3,717 12,061 12,790 Other 1,197 921 3,877 2,940 ---------- ---------- ---------- ---------- 160,604 128,101 544,624 477,534 ---------- ---------- ---------- ---------- Costs and expenses: Casino and resort expenses 85,747 68,545 256,881 226,080 Tour operations 11,365 9,663 33,534 29,565 Selling, general and administrative 33,208 29,532 97,907 91,486 Corporate expenses 10,562 7,536 31,409 26,751 Depreciation and amortization 19,069 14,811 52,245 44,398 Hurricane related expenses - 3,426 - 3,426 Pre-opening expenses 2,886 - 4,634 3,258 UK gaming write-off - - 10,529 - Loss on damaged assets - 1,194 - 1,194 Impairment (gain on sale) of Atlantic City land (1,301) 7,303 (1,301) 7,303 Impairment of notes receivable 3,096 - 28,139 - ---------- ---------- ---------- ---------- 164,632 142,010 513,977 433,461 ---------- ---------- ---------- ---------- Income (loss) from operations (4,028) (13,909) 30,647 44,073 Relinquishment fees - equity in earnings of TCA 9,921 9,066 28,287 26,833 Other income (expense): Interest income 2,441 1,442 7,230 2,832 Interest expense, net of capitalization (11,423) (9,504) (32,582) (26,597) Equity in earnings (losses) of associated companies 5,922 (481) 15,207 6,685 Loss on early extinguishment of debt (27,783) - (27,783) - Other, net (2) 208 10 635 ---------- ---------- ---------- ---------- Other expense, net (30,845) (8,335) (37,918) (16,445) Income (loss) before provision for income taxes and minority and noncontrolling interests (24,952) (13,178) 21,016 54,461 Benefit (provision) for income taxes 15,819 (992) 15,929 (1,473) Minority and noncontrolling interests 4,188 2,972 6,561 6,774 ---------- ---------- ---------- ---------- Net income (loss) $ (4,945) $ (11,198) $ 43,506 $ 59,762 ========== ========== ========== ========== Basic earnings (loss) per share $ (0.14) $ (0.33) $ 1.23 $ 1.89 ========== ========== ========== ========== Weighted average number of shares outstanding - basic 35,649 33,591 35,445 31,621 Diluted earnings (loss) per share $ (0.14) $ (0.33) $ 1.17 $ 1.81 ========== ========== ========== ========== Weighted average number of shares outstanding - diluted 35,649 33,591 37,193 32,942 Kerzner International Limited Reconciliation of Adjusted Net Income to U.S. GAAP Net Income (Loss) (In thousands of U.S. dollars except per share data) (Unaudited) For the Three Months Ended September 30, ------------------------------------------- 2005 2004 --------------------- --------------------- $ EPS $ EPS ---------- ---------- ---------- ---------- Adjusted net income (1) $ 10,575 $ 0.28 $ 3,666 $ 0.11 Hurricane related expenses (2) - - (3,426) (0.10) Pre-opening expenses (3) (2,895) (0.08) - - UK gaming write-off (4) - - - - Loss on damaged assets (2) - - (1,194) (0.03) Gain on sale (impairment) of Atlantic City land (5) 1,301 0.03 (7,303) (0.21) Impairment of notes receivable (6) (3,096) (0.08) - - BLB transaction (costs) gain (7) 888 0.02 (2,941) (0.09) Share of income from remediation at Harborside (8) - - - - Real estate income (9) 372 0.01 - - Loss on early extinguishment of debt (10) (27,783) (0.74) - - Tax benefit related to debt refinancing (11) 15,693 0.42 - - Effect of dilutive shares - - - (0.01) ---------- ---------- ---------- ---------- Net income (loss) $ (4,945) $ (0.14) $ (11,198) $ (0.33) ========== ========== ========== ========== For the Nine Months Ended September 30, ------------------------------------------- 2005 2004 --------------------- --------------------- $ EPS $ EPS ---------- ---------- ---------- ---------- Adjusted net income (1) $ 96,740 $ 2.60 $ 73,867 $ 2.24 Hurricane related expenses (2) - - (3,426) (0.10) Pre-opening expenses (3) (4,795) (0.13) (1,827) (0.06) UK gaming write-off (4) (10,529) (0.28) - - Loss on damaged assets (2) - - (1,194) (0.04) Gain on sale (impairment) of Atlantic City land (5) 1,301 0.04 (7,303) (0.22) Impairment of notes receivable (6) (28,139) (0.75) - - BLB transaction (costs) gain (7) 888 0.02 (4,399) (0.13) Share of income from remediation at Harborside (8) - - 4,044 0.12 Real estate income (9) 130 - - - Loss on early extinguishment of debt (10) (27,783) (0.75) - - Tax benefit related to debt refinancing (11) 15,693 0.42 - - Effect of dilutive shares - - - - ---------- ---------- ---------- ---------- Net income (loss) $ 43,506 $ 1.17 $ 59,762 $ 1.81 ========== ========== ========== ========== (1) Adjusted net income is defined as net income before hurricane related expenses, pre-opening expenses, UK gaming write-off, loss on damaged assets, gain on sale (impairment) of Atlantic City land, impairment of notes receivable, BLB transaction (costs) gain, share of income from remediation at Harborside, real estate income, loss on early extinguishment of debt and tax benefit related to debt refinancing. Adjusted net income is presented to assist investors in analyzing the performance of the Company. Management considers adjusted net income to be useful for (i) valuing companies; (ii) assessing current results; and (iii) basing expectations of future results. This information should not be considered as an alternative to income from continuing operations computed in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), nor should it be considered as an indicator of the overall financial performance of the Company. Adjusted net income is limited by the fact that companies may not necessarily compute it in the same manner, thereby making this measure less useful than net income calculated in accordance with U.S. GAAP. (2) Hurricane related expenses primarily consist of clean up and repair costs and complimentary goods and services to guests associated with Hurricane Frances at the Company's Paradise Island properties. Loss on damaged assets represents the write-off of assets damaged during Hurricane Frances. (3) Pre-opening expenses for the quarter ended September 30, 2005 include costs incurred relating to the Marina Village at Atlantis and the Phase III expansion at Atlantis, Paradise Island. Also included in pre-opening expenses are the costs incurred relating to Atlantis, The Palm, which costs are included as equity in earnings of associated companies in the accompanying condensed consolidated statements of operations. Pre-opening expenses for the nine months ended September 30, 2004 represent costs incurred prior to the June 2004 opening of the One&Only Ocean Club expansion. Pre-opening expenses incurred during the nine months ended September 30, 2004 also include the Company's 50% share of pre-opening expenses related to the One&Only Palmilla's grand reopening event in February 2004. (4) UK gaming write-off relates to all capitalized and deferred costs incurred for the planning and development of all of the Company's proposed gaming projects in the United Kingdom (excluding costs associated with the Northampton project) that were expensed due to the passage of gaming reform legislation in April 2005 that was less favorable than the Company had previously anticipated. (5) During the three months ended September 30, 2005, the Company completed the sale of a portion of its Atlantic City land, for which it had previously recorded an impairment charge, as well as an additional ancillary piece of land, both of which resulted in a total gain of $1.3 million. For the three months ended September 30, 2004, the Company recorded an impairment of $7.3 million to certain of its undeveloped real estate in Atlantic City based on its estimated fair value less costs to sell. This amount excludes a $2.9 million tax benefit that the Company realized during the quarter as a result of this impairment charge. (6) For the three months ended June 30, 2005, the Company recorded an impairment of its subordinated notes receivable due from Reethi Rah, the entity which owns One&Only Maldives at Reethi Rah, after obtaining a third party valuation firm's appraisal of the resort in connection with the consolidation of Reethi Rah under FIN 46R. During the three months ended September 30, 2005, the Company completed the analysis of the fair value of the assets and liabilities of Reethi Rah and accordingly completed its impairment calculation of the Company's notes receivable from Reethi Rah which resulted in the Company recording an additional $3.1 million impairment. This $3.1 million additional impairment of its notes receivable has been excluded from adjusted earnings per share. (7) For the three months ended September 30, 2005, the Company recorded income for its share of BLB's gain associated with Wembley's repurchase of BLB's share ownership in Wembley effective on the date of acquisition. This amount is included within equity in earnings (losses) in the accompanying condensed consolidated statements of operations. For the three and nine months ended September 30, 2004, the Company recorded $2.9 million and $4.4 million, respectively, in equity loss and related expenses associated with its 37.5% investment in BLB. These losses are related to the Company's share of transaction costs incurred in connection with BLB's intended acquisition of Wembley in 2004. Additionally, these amounts include $0.4 million in related foreign currency exchange losses for the nine months ended September 30, 2004. The foreign currency exchange losses are included within corporate expenses in the accompanying condensed consolidated statements of operations. (8) The Company recorded income for its share of remediation related to Harborside at Atlantis ("Harborside"), the Company's 50%-owned timeshare property at Atlantis, Paradise Island, arising primarily from Hurricane Michelle related damages incurred in November 2001. In the second quarter of 2004, the Company recorded its share of an insurance recovery realized by Harborside related to a partial settlement of the Harborside remediation claim, which was recorded net of remediation costs incurred. These amounts are included in equity in earnings of associated companies in the accompanying condensed consolidated statements of operations. (9) Represents income associated with The Residences at Atlantis and the Ocean Club Residences & Marina projects, two of the Company's joint venture real estate-related projects on Paradise Island. (10)Loss on early extinguishment of debt represents costs associated with the September 2005 tender for the Company's 8 7/8% Senior Subordinated Notes. (11)For the three months ended September 30, 2005, the Company realized a tax benefit of $15.7 million related to the refinancing of its 8 7/8% Senior Subordinated Notes. Kerzner International Limited Reconciliation of EBITDA to U.S. GAAP Net Income (Loss) (In thousands of U.S. dollars) (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, --------------------- --------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- EBITDA (1) $ 35,058 $ 24,351 $ 168,274 $ 137,525 Depreciation and amortization (19,069) (14,811) (52,245) (44,398) Hurricane related expenses - (3,426) - (3,426) Pre-opening expenses (2,895) - (4,795) (3,258) UK gaming write-off - - (10,529) - Loss on damaged assets - (1,194) - (1,194) Gain on sale (impairment) of Atlantic City land 1,301 (7,303) 1,301 (7,303) Impairment of notes receivable (3,096) - (28,139) - Other expense, net (30,845) (8,335) (37,918) (16,445) Equity in (earnings) losses of associated companies (5,922) 481 (15,207) (6,685) BLB transaction (costs) gain 888 (2,941) 888 (4,399) Share of income from remediation at Harborside - - - 4,044 Real estate income (372) - (614) - Benefit (provision) for income taxes 15,819 (992) 15,929 (1,473) Minority and noncontrolling interests 4,188 2,972 6,561 6,774 ---------- ---------- ---------- ---------- Net income (loss) $ (4,945) $ (11,198) $ 43,506 $ 59,762 ========== ========== ========== ========== (1) EBITDA is defined as net income (loss) before depreciation and amortization, hurricane related expenses, pre-opening expenses, UK gaming write-off, loss on damaged assets, gain on sale (impairment) of Atlantic City land, impairment of notes receivable, other expense, net (excluding equity in earnings (losses) of associated companies before BLB transaction (costs) gain, share of income from remediation at Harborside, the Company's share of Atlantis, The Palm and One&Only Palmilla pre-opening expenses), real estate income, benefit (provision) for income taxes and minority and noncontrolling interests. Although EBITDA is not a measure of performance under U.S. GAAP, the information is presented because management believes it provides useful information for (i) valuing companies; (ii) assessing current results; and (iii) basing expectations of future results. This information should not be considered as an alternative to any measure of performance as promulgated under U.S. GAAP, nor should it be considered as an indicator of the overall financial performance of the Company. The Company's method of calculating EBITDA may be different from the calculation used by other companies, therefore comparability may be limited. Kerzner International Limited Summary Segment Data - Net Revenue (In thousands of U.S. dollars) (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, --------------------- --------------------- 2005 2004(4) 2005 2004(4) ---------- ---------- ---------- ---------- Destination Resorts(1): Atlantis, Paradise Island Rooms $ 41,753 $ 36,607 $ 150,862 $ 139,924 Casino 30,884 25,457 108,716 98,863 Food and beverage 33,684 27,637 108,236 100,326 Other 16,412 13,753 51,161 50,798 ---------- ---------- ---------- ---------- 122,733 103,454 418,975 389,911 Promotional allowances (5,043) (4,406) (18,205) (17,285) ---------- ---------- ---------- ---------- 117,690 99,048 400,770 372,626 Tour operations 10,375 6,654 27,604 21,313 Harborside fees 933 792 3,043 2,101 ---------- ---------- ---------- ---------- 128,998 106,494 431,417 396,040 Atlantis, The Palm development fees 39 36 335 215 ---------- ---------- ---------- ---------- 129,037 106,530 431,752 396,255 ---------- ---------- ---------- ---------- Gaming: Connecticut fees 237 702 466 702 ---------- ---------- ---------- ---------- One&Only Resorts: One&Only Ocean Club 7,939 6,828 33,663 28,071 One&Only Palmilla 11,462 6,519 46,347 25,967 One&Only Maldives, Reethi Rah 5,820 - 7,755 - Other resorts(2) 1,396 2,187 8,217 9,772 Tour operations 3,516 4,414 12,547 13,827 ---------- ---------- ---------- ---------- 30,133 19,948 108,529 77,637 ---------- ---------- ---------- ---------- Other(3) 1,197 921 3,877 2,940 ---------- ---------- ---------- ---------- $ 160,604 $ 128,101 $ 544,624 $ 477,534 ========== ========== ========== ========== (1) Includes revenue from Atlantis, Paradise Island, Ocean Club Golf Course, the Company's wholly-owned tour operator, PIV, Inc., marketing and development fee income from Harborside and development fee income from Atlantis, The Palm. (2) Includes management, marketing and development fees from the Company's One&Only Resorts properties located in Mauritius, Dubai and the Maldives. (3) Includes revenue not directly attributable to Destination Resorts, Gaming or One&Only Resorts. Relinquishment fees - equity in earnings of TCA related to our Gaming segment are included as a separate component outside of income from operations in the accompanying condensed consolidated statements of operations. (4) Certain amounts for the 2004 periods have been reclassified to conform to the current periods' presentation. Kerzner International Limited Summary Segment Data - EBITDA (In thousands of U.S. dollars) (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, --------------------- --------------------- 2005 2004(4) 2005 2004(4) ---------- ---------- ---------- ---------- Destination Resorts: Atlantis, Paradise Island $ 30,126 $ 19,796 $ 131,990 $ 115,138 Tour operations 2,269 1,283 6,043 4,941 Harborside 933 792 3,043 2,101 Other (1) 3,962 1,545 12,887 4,224 ---------- ---------- ---------- ---------- 37,290 23,416 153,963 126,404 Atlantis, The Palm 29 27 306 197 ---------- ---------- ---------- ---------- 37,319 23,443 154,269 126,601 ---------- ---------- ---------- ---------- Gaming: Connecticut 10,159 9,768 28,754 27,535 United Kingdom (1,022) (245) (3,662) (1,263) BLB 665 1,023 722 1,023 Other (1) (235) (241) (776) (644) ---------- ---------- ---------- ---------- 9,567 10,305 25,038 26,651 ---------- ---------- ---------- ---------- One&Only Resorts: One&Only Ocean Club 1,012 661 10,372 7,698 One&Only Palmilla 973 (2,540) 15,016 (299) One&Only Maldives, Reethi Rah (58) - (4,095) - Other resorts (2) 1,396 2,187 8,217 9,772 Tour operations 246 109 537 580 Direct expenses (2) (2,832) (3,466) (9,706) (11,736) Other (1) (470) 142 844 2,009 ---------- ---------- ---------- ---------- 267 (2,907) 21,185 8,024 ---------- ---------- ---------- ---------- Corporate and other (3) (12,095) (6,490) (32,218) (23,751) ---------- ---------- ---------- ---------- $ 35,058 $ 24,351 $ 168,274 $ 137,525 ========== ========== ========== ========== See definition and management's disclosure regarding EBITDA in the Reconciliation of EBITDA to U.S. GAAP Net Income (Loss). (1) Represents the Company's share of net income (loss) from unconsolidated affiliates (excluding share of income from remediation at Harborside) for its investments in Harborside, Sun Resorts Limited, One&Only Kanuhura and Trading Cove New York. (2) Consists of management, marketing, development and other fees and direct expenses related to the Company's One&Only Resorts segment for its operations located in Mauritius, Dubai and the Maldives. (3) Corporate and other represents corporate expenses not directly attributable to Destination Resorts, Gaming or One&Only Resorts. (4) Certain amounts for the 2004 periods have been reclassified to conform to the current periods' presentation. Kerzner International Limited Paradise Island Summary Segment Data Reconciliation(1) (In thousands of U.S. dollars) (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, --------------------- --------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Paradise Island Revenue: Atlantis, Paradise Island $ 122,733 $ 103,454 $ 418,975 $ 389,911 One&Only Ocean Club 7,939 6,828 33,663 28,071 ---------- ---------- ---------- ---------- 130,672 110,282 452,638 417,982 Promotional allowances (5,043) (4,406) (18,205) (17,285) ---------- ---------- ---------- ---------- $ 125,629 $ 105,876 $ 434,433 $ 400,697 ========== ========== ========== ========== Paradise Island EBITDA(2): Atlantis, Paradise Island $ 30,126 $ 19,796 $ 131,990 $ 115,138 Tour operations 2,269 1,283 6,043 4,941 One&Only Ocean Club 1,012 661 10,372 7,698 ---------- ---------- ---------- ---------- $ 33,407 $ 21,740 $ 148,405 $ 127,777 ========== ========== ========== ========== EBITDA Margin(3) 26.6% 20.5% 34.2% 31.9% (1) This schedule is included to assist investors by presenting the summary segment data for the Paradise Island operations on a comparable basis with the methodology used in earnings releases prior to 2004. (2) See definition and management's disclosure regarding EBITDA in the Reconciliation of EBITDA to U.S. GAAP Net Income. (3) EBITDA margin for the nine months ended September 30, 2005 includes the effect of a $4.4 provision for a new claim from a supplier with respect to a period covering the last five years. Excluding this provision, the EBITDA margin for the nine months ended September 30, 2005 would have been 35.2%. Kerzner International Limited Hotel Operating Performance Data (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, ------------------------------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Atlantis, Paradise Island: Occupancy 81% 77% 85% 83% ADR (1) $ 245 $ 225 $ 284 $ 267 RevPAR (2) $ 198 $ 173 $ 241 $ 222 One&Only Resorts(3): Occupancy 74% 71% 77% 77% ADR (1) $ 324 $ 281 $ 425 $ 369 RevPAR (2) $ 239 $ 199 $ 328 $ 284 One&Only Ocean Club: Occupancy 75% 71% 83% 78% ADR (1) $ 697 $ 636 $ 895 $ 785 RevPAR (2) $ 525 $ 453 $ 741 $ 613 One&Only Palmilla: Occupancy 85% 52% 87% 58% ADR (1) $ 437 $ 388 $ 589 $ 468 RevPAR (2) $ 372 $ 202 $ 510 $ 272 Management believes that the results of operations in the destination resort and luxury hotel industry are best explained by three key performance measures; occupancy, average daily rate ("ADR") and revenue per available room ("RevPAR"). These measures are influenced by a variety of factors including national, regional and local economic conditions, changes in travel patterns and the degree of competition with other destination resorts, luxury hotels and product offerings within the travel and leisure industry. The demand for accommodations at our resorts may also be affected by normal recurring seasonal patterns. (1) ADR represents room revenue divided by the total number of room nights occupied. (2) RevPAR represents room revenue divided by the total number of room nights available. (3) One&Only Resorts represents the consolidated results of the seven properties that the Company markets under its One&Only brand: One&Only Ocean Club, One&Only Palmilla, One&Only Le Saint Geran, One&Only Le Touessrok, One&Only Kanuhura, One&Only Maldives at Reethi Rah and One&Only Royal Mirage. CONTACT: Kerzner International Limited Investor Contact: Omar Palacios Tel: 242-363-6018 E-mail: Omar.Palacios@kerzner.com Media Contact: Lauren Snyder Tel: 242-363-6018 E-mail: Lauren.Snyder@kerzner.com