MORGANS HOTEL GROUP CO. NEW YORK, Nov. 4, 2015 /PRNewswire/ -- Morgans Hotel Group Co. (NASDAQ: MHGC) (the "Company" or "Morgans") today reported financial results for the quarter ended September 30, 2015. The Company's Board of Directors (the "Board") also announced that it is executing on a new strategic plan to create long-term value and is in the process of engaging a new President and Chief Executive Officer. Pursuant to the strategic plan, the Company will initiate shortly a broker-marketed monetization of Hudson New York and Delano South Beach.
The Company also announced today that Michael Olshan and Adam Stein have joined Morgans' Board replacing Martin Edelman and John Brecker, who have resigned. Olshan is currently managing partner of O-CAP Management LLC and founding member of OTK Associates, which owns approximately 13% of Morgans' common stock. Adam Stein is a portfolio manager at Pine River Capital Management, which owns approximately 9% of Morgans' common stock.
Third Quarter 2015 Highlights
-- Adjusted EBITDA was $10.0 million in the third quarter of 2015 as
compared to $9.7 million, excluding the Company's ownership interests in
The Light Group ("TLG") and Mondrian SoHo, for the same period in 2014,
an increase of 3.5%.
-- Revenue per available room ("RevPAR") for System-Wide Comparable Hotels
decreased 1.2% during the third quarter of 2015 as compared to the third
quarter of 2014. System-Wide Comparable Hotels' room revenues plus
resort and facility fees, implemented at certain hotels in the second
half of 2014, increased 1.9% during the third quarter of 2015 as
compared to the same period in 2014.
-- During the third quarter of 2015, the Company settled certain
outstanding litigation, resulting in the receipt of approximately $7.8
million in cash, with an additional settlement resulting in $10.0
million received in early October 2015.
Strategic Plan
On May 13, 2014, Morgans announced that its Board had authorized the exploration of a broad range of value-creating initiatives to maximize value for stockholders. After an extensive analysis of various alternatives, the Board has taken the following immediate steps:
-- Developed and begun implementing a new strategic plan;
-- Engaging a new full-time, New York City based President and CEO; and
-- Increased stockholder alignment on the Board.
The new strategic plan includes:
-- Pursuing the monetization of Hudson New York and Delano South Beach;
-- Deleveraging the Company's balance sheet, reducing its weighted average
cost of capital, and increasing its financial flexibility by taking
steps to retire its highest-cost and most restrictive securities;
-- Maximizing the value of Morgans' iconic brands by clearly defining each
of its brand lines, thoughtfully pursuing new license and management
agreements for these brands, and strategically extending brands and
building scale in defined target markets;
-- Driving profitable revenue growth for our owners and partners by
implementing new marketing systems, operational efficiencies and profit
improvement programs portfolio-wide;
-- Strengthening the management team to support growth initiatives while
maintaining a lean and efficient corporate structure; and
-- Building on our culture of transparency and accountability and ensuring
open communications with stockholders and other key stakeholders.
Pursuant to the plan, the Company is in the process of engaging a leading professional commercial real estate services firm, to assist with the monetization of Hudson New York and Delano South Beach. The Company expects the marketing process to commence in the fourth quarter of 2015 and to be completed by the second quarter of 2016.
"We are very pleased to be able to share our new, comprehensive strategic plan - which is designed to transform Morgans into a stronger, better-capitalized and more focused company with an emphasis on enhancing the significance of our brands, increasing our financial flexibility and realizing maximum value for the Company's stockholders," said Howard M. Lorber, Chairman of Morgans. "I am pleased to welcome Michael and Adam to our Board, and want to thank Marty and John for their significant time and contributions."
Third Quarter 2015 Operating Results
Adjusted EBITDA, defined below, was $10.0 million in the third quarter of 2015 as compared to $9.7 million excluding the Company's ownership interests in TLG, which were sold in January 2015, and Mondrian SoHo, which the Company no longer held ownership interest in effective March 6, 2015, for the same period in 2014, an increase of 3.5%. Adjusted EBITDA, for the third quarter of 2014 including the ownership interests in TLG and Mondrian SoHo, was $11.0 million.
RevPAR at System-Wide Comparable Hotels decreased by 1.2% in the third quarter of 2015 as compared to the same period in 2014, due to a 2.5% decrease in average daily rate ("ADR") partially offset by a 1.3% increase in occupancy. System-Wide Comparable Hotels' room revenues plus resort and facility fees, implemented at certain hotels in the second half of 2014, increased 1.9% during the third quarter of 2015 as compared to the same period in 2014.
RevPAR from System-Wide Comparable Hotels in New York decreased 3.9% for the quarter ended September 30, 2015 as compared to the same period in 2014, due to a 4.3% decrease in ADR slightly offset by a 0.4% increase in occupancy. RevPAR at Hudson decreased 4.6% during the third quarter of 2015 as compared to the same period in 2014, driven primarily by a 5.4% ADR decrease. Hudson's room revenues plus facility fees were even with the prior year's quarter.
RevPAR from System-Wide Comparable Hotels in Miami decreased 3.6% in the third quarter of 2015 as compared to the third quarter of 2014. Delano South Beach experienced a RevPAR decrease of 4.5% during the third quarter of 2015 as compared to the same period in 2014, driven by a 12.9% decline in ADR partially offset by a 9.7% increase in occupancy. Delano's room revenues plus resort fees increased 1.9% in the third quarter of 2015 as compared to the same period in 2014. EBITDA at Delano South Beach increased 17.1% quarter over quarter due primarily to a 13.2% increase in food and beverage revenues.
The Company's System-Wide Comparable Hotels on the West Coast generated 4.7% RevPAR growth in the third quarter of 2015 as compared to 2014, driven by Clift, which experienced a 6.4% RevPAR increase quarter over quarter. Clift's EBITDA increased 19.5% for the three months ended September 30, 2015 as compared to the same period in 2014.
The Company's managed hotels in London are non-comparable between 2015 and 2014 due to major renovations at Sanderson and St Martins Lane in 2014 and 2015, which are now complete, as well as the opening of Mondrian London on September 30, 2014. For the three months ended September 30, 2015, Sanderson and St Martins Lane generated RevPAR growth of 19.5% in the third quarter of 2015 as compared to 2014.
Excluding TLG, management fees increased $0.1 million, or 3.1%, during the third quarter of 2015 as compared to the same period in 2014, primarily due to the addition of Mondrian London, Delano Las Vegas and 10 Karaköy, which was partially offset by the termination of the Mondrian SoHo management agreement in April 2015.
Interest expense decreased $0.9 million, or 6.9%, during the third quarter of 2015 as compared to the same period in 2014, primarily due to the elimination of interest expense related to the Company's convertible notes, which were repaid in October 2014.
The Company recorded a net loss of $7.5 million in the third quarter of 2015 compared to a net loss of $10.1 million in the third quarter of 2014, primarily as a result of increased operating income and lower interest expense.
Balance Sheet
The Company's total consolidated debt at September 30, 2015 was $606.2 million, which included $101.1 million of capital lease obligations related primarily to Clift.
At September 30, 2015, the Company had approximately $38.8 million in cash and cash equivalents and $15.8 million in restricted cash.
During the third quarter of 2015, the Company settled litigation related to Mondrian Istanbul and Delano Marrakech, resulting in the receipt of approximately $7.8 million in cash. In early October 2015, the Company received an additional $10.0 million related to the settlement of Mondrian SoHo legal matters.
As of September 30, 2015, the Company had approximately $443 million of remaining Federal tax net operating loss carryforwards to offset future income. As of September 30, 2015, the Company estimates that the tax basis of Delano South Beach is approximately $66 million and the tax basis of Hudson is approximately $141 million.
Development
The Company has signed management agreements for five hotels in various stages of development, including two hotels under construction consisting of Mondrian Doha, scheduled to open in 2016, and Delano Dubai, scheduled to open in 2017.
Investor Conference Call
The Company will host a conference call to review its third quarter 2015 results, new strategic plan and Board of Director changes on Wednesday, November 4, 2015 at 5:00 PM Eastern time. The call will be webcast live over the Internet and will be accessible at www.morganshotelgroup.com under the Investors section. Participants should follow the instructions provided on the website for the download and installation of audio applications necessary to join the webcast.
The call will also be accessible live over the phone by dialing (888) 812-8594 (within U.S.) or (913) 312-1499 (outside U.S.) and providing the following passcode: 994602. A playback of the conference call will be available beginning at 8:00 PM Eastern time, Wednesday, November 4, 2015, through November 11, 2015. To access the playback, please dial (888) 203-1112 (within U.S.) or (719) 457-0820 (outside U.S.) and enter passcode 994602.
Additional Definitions
"Adjusted EBITDA" means adjusted earnings before interest, taxes, depreciation and amortization, as further defined below.
"EBITDA" means earnings before interest, income taxes, depreciation and amortization.
"Owned Hotels" means Hudson in New York, Delano South Beach in Miami Beach and Clift in San Francisco, which the Company leases under a long-term lease.
"System-Wide Comparable Hotels" means all Morgans Hotel Group branded hotels operated by the Company, except for hotels added or under major renovation during the current or the prior year period, development projects and hotels no longer managed by the Company. System-Wide Comparable Hotels for the quarters ended September 30, 2015 and 2014 exclude Sanderson and St Martins Lane in London, which were both under major renovations during 2014, Mondrian London, Delano Las Vegas and 10 Karaköy, all of which are newly opened hotels in 2014, and Mondrian SoHo, which the Company no longer managed effective April 27, 2015.
About Morgans Hotel Group
Morgans Hotel Group Co. (NASDAQ: MHGC) is widely credited as the creator of the first "boutique" hotel and a continuing leader of the hotel industry's boutique sector. Morgans Hotel Group operates Delano in South Beach, Mondrian in Los Angeles, South Beach and London, Hudson in New York, Morgans and Royalton in New York, Clift in San Francisco, Shore Club in South Beach and Sanderson and St Martins Lane in London. Morgans Hotel Group has ownership interests or owns several of these hotels. Morgans Hotel Group also licenses its brand through Delano in Las Vegas and 10 Karaköy in Istanbul, Turkey. Morgans Hotel Group has other hotels in various stages of development to be operated under management or franchise agreements, including a Mondrian property in Doha, Qatar and a Delano in Dubai. For more information please visit www.morganshotelgroup.com.
Forward-Looking and Cautionary Statements
This press release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," "could," "project," "predict," "continue" or other similar words or expressions. These forward-looking statements reflect the Company's current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause its actual results to differ materially from those expressed in any forward-looking statement. Forward-looking statements in this press release include, without limitation, statements regarding the Company's expectation related to its ability to grow in the future and expected hotel openings and its development efforts, including the opening of new hotels in the future.
Important risks and factors that could cause the Company's actual results to differ materially from those expressed in any forward-looking statements include, but are not limited to economic, business, competitive market and regulatory conditions such as: a downturn in economic and market conditions, both in the U.S. and internationally, particularly as it impacts demand for travel, hotels, dining and entertainment; the Company's levels of debt, its ability to refinance its current outstanding debt, repay outstanding debt or make payments on guaranties as they may become due, general volatility of the capital markets and the Company's ability to access the capital markets and the ability of its joint ventures to do the foregoing; the impact of financial and other covenants in the Company's loan agreements and other debt instruments that limit the Company's ability to borrow and restrict its operations; the Company's history of losses; the Company's ability to compete in the "boutique" or "lifestyle" hotel segments of the hospitality industry and changes in the competitive environment in the Company's industry and the markets where it invests; the Company's ability to protect the value of its name, image and brands and its intellectual property; risks related to natural disasters, terrorist attacks, the threat of terrorist attacks and similar disasters; risks related to the Company's international operations, such as global economic conditions, political or economic instability, compliance with foreign regulations and satisfaction of international business and workplace requirements; the Company's ability to timely fund the renovations and capital improvements necessary to maintain its properties at the quality of the Morgans Hotel Group and associated brands; risks associated with the acquisition, development and integration of properties and businesses; the risks of conducting business through joint venture entities over which the Company may not have full control; the Company's ability to perform under management agreements and to resolve any disputes with owners of properties that the Company manages but does not wholly own; potential terminations of management agreements; the impact of any material litigation, claims or disputes, including labor disputes; the seasonal nature of the hospitality business and other aspects of the hospitality industry that are beyond the Company's control; the Company's ability to comply with complex U.S. and international regulations, including regulations related to the environment, labor, food and beverage operations and data privacy; the Company's ability to maintain effective and competitive technology platforms; ownership of a substantial block of the Company's common stock by a small number of investors and the ability of such investors to influence key decisions; the impact of any dividend payments or accruals on the Company's preferred securities on its cash flow and the value of its common stock; the impact of any strategic plans established by the Company's Board of Directors, including a broker-marketed monetization of our owned real estate assets; the impact of recent changes in the Company's Board of Directors; and other risk factors discussed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which was filed with the Securities and Exchange Commission (the "SEC") on March 13, 2015, and other documents filed by the Company with the SEC from time to time. All forward-looking statements in this press release are made as of the date hereof, based upon information known to management as of the date hereof, and the Company assumes no obligations to update or revise any of its forward-looking statements even if experience or future changes show that indicated results or events will not be realized.
Income Statements
(In thousands, except per share amounts)
Three Months Nine Months
Ended September 30, Ended September 30,
2015 2014 2015 2014
---- ---- ---- ----
Revenues :
Rooms $30,352 $30,648 $87,139 $90,760
Food and beverage 17,617 18,252 58,607 61,177
Other hotel 2,033 1,195 6,256 3,665
----- ----- ----- -----
Total hotel revenues 50,002 50,095 152,002 155,602
Management fee-related parties and
other income 3,204 5,259 10,720 16,509
----- ----- ------ ------
Total revenues 53,206 55,354 162,722 172,111
Operating Costs and Expenses :
Rooms 9,579 9,231 27,877 27,536
Food and beverage 13,247 14,102 41,652 44,251
Other departmental 1,125 800 3,344 2,369
Hotel selling, general and
administrative 9,980 9,992 30,550 32,347
Property taxes, insurance and other 4,061 3,756 12,355 11,687
----- ----- ------ ------
Total hotel operating expenses 37,992 37,881 115,778 118,190
Corporate expenses :
Stock based compensation 508 348 1,430 3,096
Other 4,739 6,778 14,764 17,931
Depreciation and amortization 5,586 6,811 16,786 21,894
Restructuring and disposal costs 1,307 1,145 3,849 12,369
Development costs 457 564 1,062 3,928
Loss on receivables from
unconsolidated joint venture - - 550 -
--- --- --- ---
Total operating costs and expenses 50,589 53,527 154,219 177,408
Operating income (loss) 2,617 1,827 8,503 (5,297)
Interest expense, net 12,090 12,984 35,872 41,917
Impairment loss and equity in income
of unconsolidated joint ventures (2) (3) 3,886 (7)
Gain on asset sales (2,005) (2,005) (7,799) (6,015)
Other non-operating (income) expenses (112) 824 3,095 1,950
---- --- ----- -----
Loss before income tax expense (7,354) (9,973) (26,551) (43,142)
Income tax expense 156 122 451 351
--- --- ---
Net loss (7,510) (10,095) (27,002) (43,493)
Net loss (income) attributable to
noncontrolling interest 15 (48) 42 (504)
--- --- ---
Net income (loss) attributable to
Morgans Hotel Group $(7,495) $(10,143) $(26,960) $(43,997)
Preferred stock dividends and
accretion (4,263) (3,594) (12,248) (11,948)
Net loss attributable to common
stockholders $(11,758) $(13,737) $(39,208) $(55,945)
Loss per share:
Basic and diluted attributable to
common stockholders $(0.34) $(0.40) $(1.14) $(1.64)
Weighted average common shares
outstanding -basic and diluted 34,618 34,267 34,500 34,047
Selected Hotel Operating Statistics ( In Actual Dollars) ( In Constant Dollars, if different) ( In Actual Dollars) ( In Constant Dollars, if different)
Three Months Three Months Nine Months Nine Months
Ended September 30, % Ended September 30, % Ended September 30, % Ended September 30, %
2015 2014 Change 2015 2014 Change 2015 2014 Change 2015 2014 Change
---- ---- ------ ---- ---- ------ ---- ---- ------ ---- ---- ------
BY REGION
New York Comparable Hotels (1)
Occupancy 94.1% 93.7% 0.4% 87.8% 89.5% -1.9%
ADR $236.39 $247.05 -4.3% $222.72 $239.46 -7.0%
RevPAR $222.44 $231.49 -3.9% $195.55 $214.32 -8.8%
West Coast Comparable Hotels (2)
Occupancy 95.1% 94.3% 0.8% 91.5% 89.8% 1.9%
ADR $298.47 $287.45 3.8% $287.02 $276.69 3.7%
RevPAR $283.84 $271.07 4.7% $262.62 $248.47 5.7%
Miami Comparable Hotels (3)
Occupancy 62.4% 60.1% 3.8% 72.4% 72.8% -0.5%
ADR $239.47 $258.05 -7.2% $333.60 $346.92 -3.8%
RevPAR $149.43 $155.09 -3.6% $241.53 $252.56 -4.4%
United States Comparable Hotels (4)
Occupancy 85.3% 84.2% 1.3% 84.3% 84.8% -0.6%
ADR $254.01 $260.42 -2.5% $266.97 $275.61 -3.1%
RevPAR $216.67 $219.27 -1.2% $225.06 $233.72 -3.7%
International Comparable Hotels (5)
Occupancy
ADR
RevPAR
System-wide Comparable Hotels (6)
Occupancy 85.3% 84.2% 1.3% 85.3% 84.2% 1.3% 84.3% 84.8% -0.6% 84.3% 84.8% -0.6%
ADR $254.01 $260.42 -2.5% $254.01 $260.42 -2.5% $266.97 $275.61 -3.1% $266.97 $275.61 -3.1%
RevPAR $216.67 $219.27 -1.2% $216.67 $219.27 -1.2% $225.06 $233.72 -3.7% $225.06 $233.72 -3.7%
International Non-Comparable Hotels (7)
Occupancy 85.8% 72.7% 18.0% 85.8% 72.7% 18.0% 77.0% 59.8% 28.8% 77.0% 59.8% 28.8%
ADR $376.66 $400.85 -6.0% $372.29 $367.69 1.3% $359.82 $407.35 -11.7% $359.82 $373.90 -3.8%
RevPAR $323.17 $291.42 10.9% $319.42 $267.31 19.5% $277.06 $243.60 13.7% $277.06 $223.59 23.9%
(1) New York Comparable Hotels for the periods ended September 30, 2015 and 2014 consist of Hudson,
Morgans and Royalton in New York. Mondrian SoHo, which effective April 27, 2015 the Company no
longer managed, is non-comparable for the periods presented.
(2) West Coast Comparable Hotels for the periods ended September 30, 2015 and 2014 consist of Mondrian Los
Angeles and Clift in San Francisco. Delano Las Vegas, which opened in September 2014, is non-
comparable as this hotel is subject to a license agreement and managed by affiliates of MGM Resorts
International ("MGM").
(3) Miami Comparable Hotels for the periods ended September 30, 2015 and 2014 consist of Delano South
Beach, Mondrian South Beach and Shore Club in Miami Beach, Florida.
United States Comparable Hotels for the periods ended September 30, 2015 and 2014 consist of Hudson,
Morgans, Royalton, Mondrian Los Angeles, Clift, Delano South Beach, Mondrian South Beach and Shore
Club. Delano Las Vegas is non-comparable as this hotel opened in September 2014 and is subject to a
license agreement and managed by affiliates of MGM. Mondrian SoHo, which effective April 27, 2015
(4) the Company no longer managed, is non-comparable for the periods presented.
(5) The Company has no International Comparable Hotels for the periods ended September 30, 2015 and 2014.
Sanderson and St Martins Lane in London are non-comparable, as they both were under major renovation
during 2014. Mondrian London, which opened on September 30, 2014, is also non-comparable. 10
Karaköy, which opened in November 2014 and is subject to a franchise agreement is non-comparable.
System-Wide Comparable Hotels include all Morgans Hotel Group branded hotels operated by the Company,
except for hotels added or under major renovation during the current or the prior year, development
projects and discontinued operations. System-Wide Comparable Hotels for the periods ended September
30, 2015 and 2014 exclude Sanderson and St Martins Lane in London, which both were under renovations
during 2014, Delano Las Vegas, which opened in September 2014, is non-comparable as this hotel is
subject to a license agreement and managed by affiliates of MGM, Mondrian London, which opened on
September 30, 2014, 10 Karaköy, which opened in November 2014 and is subject to a franchise
(6) agreement, and Mondrian SoHo, which effective April 27, 2015, the Company no longer managed.
As discussed above, the Company had no International Comparable Hotels for the periods ended September
30, 2015 and 2014 due to renovations or no operating results during the prior year period. These
non-comparable hotel operating statistics reflect our International hotels operating performance for
Sanderson and St Martins Lane, which were both open during the 2014 renovations. Not included in
these operating statistics are Mondrian London, which was not open for a meaningful period of time
during the third quarter of 2014, and 10 Karaköy, which opened in November 2014, is subject to a
(7) franchise agreement.
Selected Hotel Operating Statistics ( In Actual Dollars) ( In Constant Dollars, if different) ( In Actual Dollars) ( In Constant Dollars, if different)
Three Months Three Months Nine Months Nine Months
Ended September 30, % Ended September 30, % Ended September 30, % Ended September 30, %
2015 2014 Change 2015 2014 Change 2015 2014 Change 2015 2014 Change
---- ---- ------ ---- ---- ------ ---- ---- ------ ---- ---- ------
BY OWNERSHIP
Owned Comparable Hotels (1)
Occupancy 91.5% 90.5% 1.1% 87.4% 88.4% -1.1%
ADR $249.60 $256.24 -2.6% $252.99 $262.37 -3.6%
RevPAR $228.38 $231.90 -1.5% $221.11 $231.94 -4.7%
Joint Venture Comparable Hotels (2)
Occupancy 63.3% 65.9% -3.9% 75.6% 76.4% -1.0%
ADR $200.81 $190.06 5.7% $272.86 $267.07 2.2%
RevPAR $127.11 $125.25 1.5% $206.28 $204.04 1.1%
Managed Comparable Hotels (3)
Occupancy 79.9% 77.8% 2.7% 81.1% 80.7% 0.5%
ADR $273.22 $283.61 -3.7% $291.84 $302.70 -3.6%
RevPAR $218.30 $220.65 -1.1% $236.68 $244.28 -3.1%
System-wide Comparable Hotels
Occupancy 85.3% 84.2% 1.3% 85.3% 84.2% 1.3% 84.3% 84.8% -0.6% 84.3% 84.8% -0.6%
ADR $254.01 $260.42 -2.5% $254.01 $260.42 -2.5% $266.97 $275.61 -3.1% $266.97 $275.61 -3.1%
RevPAR $216.67 $219.27 -1.2% $216.67 $219.27 -1.2% $225.06 $233.72 -3.7% $225.06 $233.72 -3.7%
Owned Hotels
Hudson
Occupancy 95.7% 94.9% 0.8% 89.1% 90.5% -1.5%
ADR $219.90 $232.50 -5.4% $204.78 $221.46 -7.5%
RevPAR $210.44 $220.64 -4.6% $182.46 $200.42 -9.0%
Delano South Beach
Occupancy 63.3% 57.7% 9.7% 69.7% 72.4% -3.7%
ADR $341.17 $391.87 -12.9% $485.90 $503.70 -3.5%
RevPAR $215.96 $226.11 -4.5% $338.67 $364.68 -7.1%
Clift
Occupancy 96.5% 97.2% -0.7% 92.5% 91.9% 0.7%
ADR $287.76 $268.49 7.2% $271.12 $257.06 5.5%
RevPAR $277.69 $260.97 6.4% $250.79 $236.24 6.2%
(1) Owned Comparable Hotels for the periods ended September 30, 2015 and 2014 consist of Hudson, Delano
South Beach, and Clift in San Francisco.
(2) Joint Venture Comparable Hotels for the periods ended September 30, 2015 and 2014 consist of
Mondrian South Beach. Mondrian SoHo is non-comparable for the periods presented as effective
March 6, 2015, the Company no longer held any equity interests in the Mondrian SoHo joint venture.
Managed Comparable Hotels for the periods ended September 30, 2015 and 2014 consist of Morgans,
Royalton, Shore Club, and Mondrian Los Angeles. Managed hotels that are non-comparable for the
periods presented are Sanderson and St Martins Lane in London, which both were under renovations
during 2014, Mondrian London, which opened on September 30, 2014, and Mondrian SoHo, which
(3) effective April 27, 2015, the Company no longer managed.
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
The Company believes that EBITDA is a useful financial metric to assess its operating performance before the impact of investing and financing transactions and income taxes. It also facilitates comparison between the Company and its competitors. Given the significant investments that the Company and its joint ventures have made in the past in property and equipment, depreciation and amortization expense comprises a meaningful portion of its cost structure. The Company believes that EBITDA will provide investors with a useful tool for assessing the comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures.
The Company's management has historically used Adjusted EBITDA when evaluating the operating performance for the entire Company as well as for individual properties or groups of properties because it believes the Company's core business model is that of an owner and operator of hotels, and the inclusion or exclusion of certain items is necessary to provide the most accurate measure of on-going core operating results and to evaluate comparative results period over period. As such, Adjusted EBITDA excludes other non-operating expense (income) that does not relate to the on-going performance of the Company's assets. The Company excludes the following items from EBITDA to arrive at Adjusted EBITDA:
-- Other non-operating expenses, such as costs, associated with
discontinued operations and previously owned hotels, both consolidated
and unconsolidated, transaction costs related to business acquisitions,
changes in the fair value of debt and equity instruments, miscellaneous
litigation and settlement costs and proceeds, and other expenses that
relate to the financing and investing activities of the Company;
-- Restructuring and disposal costs, which include expenses incurred
related to the Company's corporate restructuring initiatives, such as
professional fees, litigation and settlement costs, executive
terminations and severance costs related to such restructuring
initiatives, including the March 2014 corporate office termination plan
and proxy contests, and gains or losses on asset disposals as part of
major renovation projects or restructuring;
-- Development costs, including transaction costs related to the
acquisition or termination of projects, internal development payroll and
other costs and pre-opening expenses incurred related to new concepts at
existing hotel and the development of new hotels, and the write-off of
abandoned development projects previously capitalized;
-- Impairment losses on development projects and unconsolidated joint
ventures. The Company may incur additional non-cash impairment charges
related to assets under development, wholly-owned assets, or its
investments in joint ventures, including impairment related to
uncollectible receivables from development projects and unconsolidated
joint ventures;
-- EBITDA related to hotels and food and beverage entities reported as
discontinued operations to more accurately reflect the operating
performance of assets in which the Company expects to have an ongoing
direct or indirect ownership interest;
-- Stock based compensation expense, which is non-cash; and
-- Gains or losses recognized on asset sales and disposed assets.
The Company also makes an adjustment to EBITDA for hotels in which its percentage ownership interest has changed to facilitate period-over-period comparisons and to more accurately reflect the operating performance of assets based on its actual ownership. In this respect, the Company's method of calculating Adjusted EBITDA may change from prior periods, and calculations of Adjusted EBITDA could continue to vary from quarter to quarter to reflect changing ownership interests.
The Company believes Adjusted EBITDA provides management and its investors with a more accurate financial metric by which to evaluate its performance as it eliminates the impact of costs incurred related to investing and financing transactions. Internally, the Company's management utilizes Adjusted EBITDA to measure the performance of its core on-going operations and is used extensively during its annual budgeting process. Management also uses Adjusted EBITDA as a measure in determining the value of acquisitions, expansion opportunities, and dispositions and borrowing capacity, and evaluating executive incentive compensation. Adjusted EBITDA is a key metric which management evaluates prior to execution of any strategic investing or financing opportunity.
The Company has historically reported Adjusted EBITDA to its investors and believes that this continued inclusion of Adjusted EBITDA provides consistency in its financial reporting and enables investors to perform more meaningful comparisons of past, present and future operating results and to evaluate the results of its core on-going operations.
The use of EBITDA and Adjusted EBITDA has certain limitations. The Company's presentation of EBITDA and Adjusted EBITDA may be different from the presentation used by other companies and therefore comparability may be limited. Depreciation expense for various long-term assets, interest expense, income taxes and other items have been and will be incurred and are not reflected in the presentation of EBITDA or Adjusted EBITDA. Each of these items should also be considered in the overall evaluation of the Company's results. Additionally, EBITDA and Adjusted EBITDA do not reflect capital expenditures and other investing activities and should not be considered as a measure of the Company's liquidity. The Company compensates for these limitations by providing the relevant disclosure of its depreciation, interest and income tax expense, capital expenditures and other items in its reconciliations to its financial measures in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") and/or in its consolidated financial statements, all of which should be considered when evaluating its performance. The term EBITDA is not defined under U.S. GAAP and EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. In addition, EBITDA is impacted by reorganization of businesses and other restructuring-related charges. When assessing the Company's operating performance, you should not consider this data in isolation, or as a substitute for the Company's net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP.
A reconciliation of net loss, the most directly comparable U.S. GAAP measure, to EBITDA and Adjusted EBITDA for each of the respective periods indicated is as follows:
EBITDA Reconciliation
(In thousands) Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2015 2014 2015 2014
---- ---- ---- ----
Net loss attributable
to Morgans Hotel Group
Co. $(7,495) $(10,143) $(26,960) $(43,997)
Interest expense, net 12,090 12,984 35,872 41,917
Income tax expense 156 122 451 351
Depreciation and
amortization expense 5,586 6,811 16,786 21,894
Proportionate share of
interest expense
from unconsolidated
joint ventures 392 1,156 1,502 3,444
Proportionate share of
depreciation expense
from unconsolidated
joint ventures 110 257 598 1,182
Net income attributable
to noncontrolling
interest (15) (25) (56) (98)
Proportionate share of
loss from
unconsolidated joint
ventures not recorded
due to negative
investment balances
(1,055) (1,331) (2,967) (4,130)
------ ------ ------ ------
EBITDA 9,769 9,831 25,226 20,563
Other non operating
(income) expense (112) 824 3,095 1,950
Other non operating
expense from
unconsolidated
joint ventures 70 263 949 1,481
Restructuring and
disposal costs 1,307 1,145 3,849 12,369
Development costs 457 564 1,062 3,928
Impairment loss on
development project
and unconsolidated
joint venture - - 4,442 -
Stock based
compensation expense 508 348 1,430 3,096
Gain on asset sales (2,005) (2,005) (7,799) (6,015)
------ ------ ------ ------
Adjusted EBITDA $9,994 $10,970 $32,254 $37,372
====== ======= ======= =======
Adjusted EBITDA,
excluding ownership in
The Light Group and
Mondrian SoHo $9,994 $9,653 $31,513 $30,650
====== ====== ======= =======
Hotel and F&B EBITDA Analysis (1)
(In thousands, except percentages)
Three Months Nine Months
Ended September 30, % Ended September 30, %
------------------- -------------------
2015 2014 Change 2015 2014 Change
---- ---- ------ ---- ---- ------
Hudson $5,789 $6,547 -12% $11,387 $13,907 -18%
Delano South Beach 2,043 1,745 17% 14,088 13,956 1%
Clift 3,482 2,915 19% 8,236 6,341 30%
----- ----- --- ----- ----- ---
Owned Comparable Hotels (2) 11,314 11,207 1% 33,711 34,204 -1%
Mondrian South Beach -
Joint Venture (480) (386) -24% (23) 106 -122%
Mondrian SoHo (3) - 733 -100% 112 1,878 -94%
Las Vegas restaurant
leases (4) 772 527 46% 2,589 1,798 44%
--- --- --- ----- ----- ---
Other Hotel and F&B EBITDA 292 874 133% 2,678 3,782 171%
Total Hotel and F&B EBITDA $11,606 $12,081 -4% $36,389 $37,986 -4%
========================== ======= ======= ======= =======
Total Hotel and F&B EBITDA ,
excluding Mondrian SoHo $11,606 $11,348 2% $36,277 $36,108 0%
============================= ======= ======= ======= =======
(1) For joint venture hotels, represents the Company's share of the respective hotels' EBITDA, after management fees.
(2) Reflects the Company's comparable owned hotels.
(3) Effective March 6, 2015, the Company no longer holds any equity ownership in Mondrian SoHo, and effective April 27, 2015, the Company no longer managed this hotel. For 2015, EBITDA reflects the Company's share of Mondrian SoHo's
EBITDA, after management fees, for the period from January 1, 2015 through March 5, 2015.
(4) Reflects EBITDA from the leasehold interests in three food and beverage venues at Mandalay Bay in Las Vegas.
Owned Hotel Room Revenue Analysis
(In thousands, except percentages)
Three Months Nine Months
Ended September 30, % Ended September 30, %
------------------- -------------------
2015 2014 Change 2015 2014 Change
---- ---- ------ ---- ---- ------
Hudson $16,990 $17,676 -4% $43,735 $47,443 -8%
Delano South Beach 3,853 4,036 -5% 17,927 19,324 -7%
Clift 9,509 8,936 6% 25,477 23,993 6%
----- ----- --- ------ ------ ---
Total Owned Hotels $30,352 $30,648 -1% $87,139 $90,760 -4%
======= ======= === ======= ===
Owned F&B Revenue Analysis
(In thousands, except percentages)
Three Months Nine Months
Ended September 30, % Ended September 30, %
------------------- -------------------
2015 2014 Change 2015 2014 Change
---- ---- ------ ---- ---- ------
Hudson $3,371 $3,872 -13% $10,709 $11,823 -9%
Delano South Beach 3,789 3,346 13% 15,688 15,417 2%
Clift 2,481 2,350 6% 7,484 7,720 -3%
Las Vegas restaurant leases (1) 5,931 6,245 -5% 18,419 19,176 -4%
Sanderson food and beverage (2) 2,045 2,439 -16% 6,307 7,041 -10%
----- ----- --- ----- ----- ---
Total Owned F&B $17,617 $18,252 -3% $58,607 $61,177 -4%
======= ======= === ======= ===
Owned Revenue Analysis
(In thousands, except percentages)
Three Months Nine Months
Ended September 30, % Ended September 30, %
------------------- -------------------
2015 2014 Change 2015 2014 Change
---- ---- ------ ---- ---- ------
Hudson $21,376 $22,064 -3% $57,671 $60,932 -5%
Delano South Beach 8,159 7,611 7% 35,184 35,354 0%
Clift 12,491 11,736 6% 34,421 33,099 4%
Las Vegas restaurant leases (1) 5,931 6,245 -5% 18,419 19,176 -4%
Sanderson food and beverage (2) 2,045 2,439 -16% 6,307 7,041 -10%
----- ----- --- ----- ----- ---
Total Owned Hotels and F&B $50,002 $50,095 0% $152,002 $155,602 -2%
======= ======= === ======== ===
(1) Reflects revenues from the leasehold interests in three food and beverage venues at Mandalay Bay in Las Vegas.
(2) Reflects food and beverage revenue from Sanderson in London, which the Company owns and operates under a lease agreement. In constant dollars, food and beverage revenues declined 9.7% for the three months ended September 30, 2015 compared to
the same period in 2014 and 2.2% for the nine months ended September 30, 2015 compared to the same period in 2014.
Balance Sheets
(In thousands)
September 30, December 31,
2015 2014
---- ----
(unaudited)
ASSETS
Property and
equipment, net $268,073 $277,825
Goodwill 54,057 54,057
Investments in and
advances to
unconsolidated joint
ventures 100 10,492
Cash and cash
equivalents 38,769 13,493
Restricted cash 15,813 13,939
Accounts receivable,
net 9,788 10,475
Related party
receivables 2,692 3,560
Prepaid expenses and
other assets 7,658 8,493
Deferred tax asset,
net 77,766 77,204
Assets held for sale - 34,284
Other assets, net 40,050 47,422
------ ------
Total assets $514,766 $551,244
======== ========
LIABILITIES AND
STOCKHOLDERS'
DEFICIT
Debt and capital
lease obligations $606,211 $605,743
Accounts payable and
accrued liabilities 34,361 32,524
Accounts payable and
accrued liabilities
on assets held for
sale - 1,128
Deferred gain on
asset sales 119,383 125,398
Other liabilities 13,866 13,866
------ ------
Total liabilities 773,821 778,659
Redeemable
noncontrolling
interest - 5,042
Commitments and
contingencies
Preferred stock,
$0.01 par value;
liquidation
preference $1,000
per share,
40,000,000 shares
authorized; 75,000
shares issued at
September 30, 2015
and December 31,
2014, respectively 69,857 66,724
Common stock, $0.01
par value;
200,000,000 shares
authorized;
36,277,495 shares
issued at September
30, 2015 and
December 31, 2014,
respectively 363 363
Additional paid-in
capital 237,849 241,001
Treasury stock, at
cost, 1,650,440 and
1,899,707 shares of
common stock at
September 30, 2015
and December 31,
2014, respectively (18,993) (23,279)
Accumulated other
comprehensive loss (971) (254)
Accumulated deficit (547,653) (517,561)
-------- --------
Total Morgans Hotel
Group Co.
stockholders'
deficit (259,548) (233,006)
Noncontrolling
interest 493 549
--- ---
Total deficit (259,055) (232,457)
Total liabilities,
redeemable
noncontrolling
interest and
stockholders'
deficit $514,766 $551,244
======== ========
Contacts:
Investors
Richard Szymanski
Morgans Hotel Group Co.
212.277.4188
Media
Daniel Gagnier/
Nathaniel Garnick
Sard Verbinnen & Co
212.687.8080
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/morgans-hotel-group-reports-third-quarter-2015-results-300172638.html
SOURCE Morgans Hotel Group Co.
