The Company reported net income in the quarter of $3.0 million, compared to net income of $0.9 million for the same period last year resulting in net income per share of $0.10 compared to a net income per share of $0.03 for the same period last year. Adjusted net income for the quarter was $4.8 million compared to $4.4 million in the same period last year. Adjusted net income per share for the quarter was $0.16 as compared to $0.15 achieved in the same period last year.
Butch Kerzner, Chief Executive Officer of the Company, commented, “In 2003 we combined strong earnings performance with some major growth initiatives for the future. Adjusted EPS for the year was $2.36, an increase of 15% over last year. The improvements in our results were driven primarily by Paradise Island, Mohegan Sun and lower interest expense. At Paradise Island, we achieved record gross revenue and EBITDA for the second consecutive year. The Company also benefited this year from an increase in income from Mohegan Sun, as its gross revenue increased following the completion of a major expansion in 2002. We also realized interest savings on decreased levels of debt at a lower average interest rate.”
Butch Kerzner continued, “In addition to posting these strong results, we also made some good progress in our initiatives to grow the businesses: (i) we started Phase III of Atlantis, Paradise Island; (ii) we announced a second Atlantis will be developed in Dubai; (iii) we entered the UK gaming market; (iv) we launched the One&Only brand and continued our efforts to grow this business.”
Paradise Island
The Company’s Paradise Island operations achieved fourth quarter gross revenue of $116.9 million and EBITDA of $23.2 million as compared to $117.7 million and $23.4 million, respectively, in the same period last year.
Atlantis’s revenue per available room (“RevPAR”) for the quarter was $158 as compared to $156 in the same period last year. In the quarter, Atlantis achieved an average occupancy of 73% at a $218 average daily room rate (“ADR”), which compared to an average occupancy of 72% and ADR of $216 in the same period last year.
In the Atlantis Casino, the largest casino in the Caribbean market, table and slot volume were strong in the quarter as table drop increased by 22% from the same period last year. Table win declined slightly in the quarter as 2002 benefited from an exceptionally strong table hold over its New Year period. Slot volume increased by 10% as compared to the same period last year.
During the year, the Company started the construction of the first component of its third phase of development (“Phase III”) on Paradise Island with the development of three new luxurious villas at the One&Only Ocean Club as well as the addition of several new amenities for this property. This expansion to the One&Only Ocean Club is expected to be completed by the summer of 2004. The Company expects to start development of two other components of Phase III in 2004: (i) Marina Village, which includes new restaurants and retail space to be developed around the Atlantis Marina, and (ii) an expansion to Harborside at Atlantis, which will add approximately 120 two-bedroom suites to the existing timeshare project, with an expected completion for each of these projects in 2005. Additional elements of Phase III, including a 1,200-room hotel, a significant expansion to the existing water attractions at Atlantis, Paradise Island and a second golf course on nearby Athol Island, are all in the stage of architectural planning and are expected to be completed by Christmas 2006.
Mohegan Sun
Mohegan Sun reported record fourth quarter slot revenues in the quarter of $201.1 million, an increase of 9% compared to the same period last year. Slot win per unit per day was $356 for the quarter, a 10% increase compared to the same period last year. In the quarter, Mohegan Sun continued to increase its share of the growing Connecticut slots market to nearly 52%. In the quarter, the Connecticut market grew by 6% over the same period last year.
Trading Cove Associates (“TCA”), an entity 50%-owned by the Company, receives payments from the Mohegan Tribal Gaming Authority of 5% of gross operating revenues of the expanded Mohegan Sun operation. The Company recorded income from TCA of $9.1 million in the quarter compared to $6.8 million reported in the same period last year.
One&Only Resorts
The One&Only Ocean Club, the Company’s luxury resort hotel on Paradise Island, The Bahamas, continued to perform strongly. The resort achieved an average occupancy of 75% and an ADR of $633 in the fourth quarter of 2003 as compared to an average occupancy of 72% and an ADR of $627 in the fourth quarter of 2002, and posted its seventh consecutive quarter of record RevPAR, in each case as compared to the prior year quarter. The resort re-opened in October as the property had been closed for four weeks in order to start construction of the One&Only Ocean Club expansion. The property recently hosted the star-studded field of the third annual Michael Jordan Celebrity Invitational, which was broadcast in the United States on NBC on January 24, 2004.
In the quarter, the Company earned management and development fees, net of minority interest, of $4.7 million from its non-Paradise Island luxury resort operations, as compared to $4.5 million in the same period last year. The increase in fees was driven by strong results in Dubai and the Maldives, as the One&Only Royal Mirage and the One&Only Kanuhura achieved RevPAR increases of 24% and 42%, respectively. In Dubai, the One&Only Royal Mirage continued to achieve one of the highest RevPARs in its market and increased RevPAR despite approximately doubling the number of its rooms this year. The fourth quarter of 2002 benefited from development fee income earned following the completion and re-opening of the One&Only LeTouessrok in December 2002.
On a comparable basis in the quarter, which excludes results for those resorts that were not open for all of both periods, the Company experienced an increase in RevPAR of 14% at its non-Paradise Island luxury resort properties over the same period last year.
As previously announced, a major initiative was taken to launch the One&Only brand in Europe in 2003 and the associated advertising costs impacted the earnings of this business in the quarter. The Company reported EBITDA from luxury resort operations, excluding the One&Only Ocean Club, of $2.0 million as compared to $3.9 million of EBITDA for the same period last year. These higher marketing expenses are not expected to continue in 2004.
One&Only Resorts recently re-opened the renovated and expanded 172-room One&Only Palmilla. This luxurious property, positioned on one of the best locations in Los Cabos, Mexico, has been revitalized by an approximately $90 million refurbishment that is accentuated by majestic views of the Sea of Cortez. The One&Only Palmilla had a limited opening for selected guests for New Year that was extremely well received. The renovated resort includes a new restaurant called “C” by the highly regarded restaurateur, Charlie Trotter, of Chicago.
J.T. Kuhlman, Chief Executive Officer of One&Only Resorts commented, “We are pleased to have re-opened the One&Only Palmilla. This property is positioned at the highest end of its competitive set and is expected to be one of our flagship properties in the North American market alongside the One&Only Ocean Club. Early indications have been very encouraging, as we have exceeded our occupancy expectations for the property in January and are now on pace to exceed our anticipated February results.”
In the quarter, the Company announced that it had entered into a land lease with Victoria & Alfred Waterfront (Pty) Limited that would permit it to develop a new 150-room, six-star deluxe, hotel in Cape Town, South Africa. This new One&Only hotel is to be located in The Victoria & Alfred Waterfront, which is part of Cape Town’s waterfront and harbor. The Company will form a partnership in conjunction with a local partner, Matemeku Investments, through which it will own a minority interest in the property. Architectural design work for the new hotel has commenced, and construction is expected to start in 2005 and be completed by the end of 2006.
Atlantis, The Palm
The Company is currently planning the development of Atlantis, The Palm to be located on The Palm, Jumeirah, in Dubai, United Arab Emirates. The first phase of this project is expected to include a 1,000-room resort and an extensive water theme park situated on 1.5 miles of beachfront. It is anticipated that this project will be completed during 2007. This development will be made through a recently formed joint venture with Nakheel LLC (“Nakheel”), a company owned by the Government of Dubai. Nakheel is currently moving forward with the development of infrastructure for The Palm, Jumeirah.
The Palm, Jumeirah, is a $1.5 billion land reclamation project that is believed to be the largest man-made island in the world and ultimately will include multiple resort hotels, luxury homes and condominium developments. Atlantis, The Palm is expected to be the anchor property for The Palm, Jumeirah, a development that is expected to be a catalyst for visitation to Dubai, one of the fastest growing travel and leisure markets in the world.
The Company and Nakheel have each agreed to invest $60 million in the form of equity financing in the project, with the balance of the financing, which may include an equity component, expected to be raised at the local level. As part of the Company’s equity commitment to the project, it expects to invest approximately $20 million in the project in 2004 in order to fund planning and initial development costs.
The Company has agreed with Nakheel to enter into a development services agreement, from which it expects to earn a development fee of $15 million, and a long-term management agreement for the resort. This transaction is subject to various closing conditions, including obtaining all requisite governmental consents and binding commitments for the necessary financing.
The Company recently announced the appointment of veteran hospitality executive George Markantonis to the position of Chief Executive Officer of Atlantis, The Palm.
UK Gaming
The gaming license in Northampton that the Company agreed to acquire from London Clubs was renewed in 2003. The Company has submitted its application for a certificate of consent to the Gaming Board of Great Britain and expects this process to be completed by the end of the first quarter of 2004. The Company ultimately expects to develop and operate a 30,000 square foot facility in Northampton, which is approximately 75 miles northwest of London. The development cost is projected at $15 million and the casino facility is expected to open in 2005.
Liquidity
At the end of the quarter, the Company held $61.7 million in cash and cash equivalents, including $1.4 million in restricted cash. Total interest-bearing debt at the end of the quarter was $400.4 million, comprised primarily of $400.0 million of 8 7/8% Senior Subordinated Notes due 2011, of which $175 million has been swapped from fixed to variable rates.
The Company closed the year with an undrawn Revolving Credit Facility and has commitments from its lenders for approximately $254 million available under this credit facility, which is net of an approximate $46 million guaranty in respect to the redevelopment of the One&Only Palmilla.
As of the end of the year, the Company had advanced approximately $15.4 in the form of mezzanine financing related to the development of a One&Only luxury resort in the Maldives.
In the quarter, the Company paid $20.0 million in connection with its previously announced acquisition of the Club Med assets on Paradise Island. The balance due on this approximately $40.0 million acquisition is expected to be funded in the third quarter of 2004.
In the quarter, excluding the Club Med asset acquisition, the Company incurred $22.7 million in capital expenditures bringing full year expenditures in 2003 to $58.5 million. In the first quarter of 2004, the Company anticipates it will spend between $25 million and $30 million in capital expenditures, mainly on Paradise Island.
As of December 31, 2003, shareholders’ equity was $839.6 million and the Company had 30.2 million Ordinary Shares outstanding. In the quarter, the Company received $27.7 million from the issuance of 1.5 million Ordinary Shares pursuant to the exercise of stock options.
Other Matters
Arising out of the Company’s previously announced restatement of 2001 to correct the accounting treatment for the disposition of Resorts Atlantic City in April 2001, the Company will restate its consolidated financial statements for 2001 and 2002. Such restated consolidated financial statements will be included in the Company’s Form 20-F for 2003, which is expected to be filed with the Securities and Exchange Commission (“SEC”) in the first quarter of 2004, and were summarized in the Company’s Form 6-K filed with the SEC on January 30, 2004.
As a result of the restatements, the Company’s net income will increase by $1.0 million, or $0.03 per share, for the year ended December 31, 2001, and will decrease by $0.6 million, or $0.02 per share, for the year ended December 31, 2002.
Source: Casino City Times
