UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 8, 2015
Morgans Hotel Group Co.
(Exact name of registrant as specified in its charter)
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Delaware |
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001-33738 |
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16-1736884 |
(State or other Jurisdiction
of Incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
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475 Tenth Avenue
New York, NY |
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10018 |
(Address of Principal Executive Offices) |
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(Zip Code) |
Registrants telephone number, including area code: (212) 277-4100
Not applicable
(Former
name or former address if changed since last report.)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. |
Results of Operations and Financial Condition. |
On May 8, 2015, Morgans Hotel Group
Co. (the Company) issued a press release announcing its financial results for the quarter ended March 31, 2015. A copy of the press release is furnished as Exhibit 99.1 hereto and is hereby incorporated by reference into this
Item 2.02.
The information contained in this current report on Form 8-K, including Exhibit 99.1, shall not be deemed
filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended, regardless of any general incorporation language in any such
filing.
Item 9.01. |
Financial Statements and Exhibits. |
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Exhibit
Number |
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Description |
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99.1 |
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Press Release dated May 8, 2015. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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MORGANS HOTEL GROUP CO. |
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Date: May 8, 2015 |
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By: |
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/s/ Richard Szymanski |
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Name: |
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Richard Szymanski |
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Title: |
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Chief Financial Officer |
EXHIBIT INDEX
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Exhibit
Number |
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Description |
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99.1 |
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Press Release dated May 8, 2015. |
Exhibit 99.1
Contacts:
Investors
Richard Szymanski
Morgans
Hotel Group Co.
212.277.4188
Media
Daniel Gagnier/
Nathaniel Garnick
Sard
Verbinnen & Co
212.687.8080
MORGANS HOTEL GROUP REPORTS FIRST QUARTER 2015 RESULTS
NEW YORK, NY May 8, 2015 Morgans Hotel Group Co. (NASDAQ: MHGC) (the Company) today reported financial results for the
first quarter ended March 31, 2015.
First Quarter Highlights
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Adjusted EBITDA, defined below, was $9.7 million in the first quarter of 2015, which is flat as compared to the same period in 2014. |
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Excluding the sale of The Light Group (TLG), as discussed below, Adjusted EBITDA was $9.6 million for the first quarter of 2015, an increase of $1.8 million, or 23.4%, from the same period in 2014.
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Operating margins at the Companys Owned Hotels and leased food and beverage operations increased by approximately 225 basis points during the first quarter of 2015 as compared to the same period in 2014, primarily
as a result of cost saving initiatives implemented in May 2014. |
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Revenue per available room (RevPAR) for System-Wide Comparable Hotels decreased by 4.0% during the first quarter of 2015 as compared to the first quarter of 2014. System-Wide Comparable Hotels room
revenues plus resort fees decreased 0.6% during the first quarter of 2015 as compared to the same period in 2014. |
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In January 2015, the Company completed the sale of its 90% equity interest in TLG for net proceeds of $32.8 million (the TLG Equity Sale). |
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In March 2015, the Company announced its continued global expansion plans with the signing of a long-term management agreement for Delano Dubai, currently scheduled to open in 2017 as the third hotel in the Delano
portfolio and the first international Delano. |
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In May 2015, the Company signed a long-term management agreement for Mondrian Dubai which is currently expected to open in 2018 and will be the Companys third international Mondrian hotel. |
Jason T. Kalisman, Interim Chief Executive Officer, stated, In the first quarter, we made substantial progress on our long-term strategic objectives by
continuing to focus on managing our costs and maximizing the productivity of our spaces. We continue to believe in the strength and value of our properties and in the markets where we operate, and are taking meaningful steps to extend and monetize
our brands in top locations around the world. We recently announced plans for two new hotels that expand our geographic footprint in the Middle East Delano Dubai and Mondrian Dubai
in addition to Mondrian Doha, underscoring the popularity of our core brands and the Morgans platform. While overall revenues declined in the first quarter due to currency pressure and excess supply, particularly in New York and Miami,
we were pleased with bottom line results and the effectiveness of our cost management programs.
First Quarter 2015 Operating Results
Adjusted EBITDA for the first quarter of 2015 was $9.7 million, which was flat compared to the same period in 2014. Excluding TLG, Adjusted EBITDA was $9.6
million for the first quarter of 2015, an increase of $1.8 million, or 23.4%, from the same period in 2014.
EBITDA at the Companys Owned Hotels
experienced an 11.9% increase during the first quarter of 2015 as compared to the same period in 2014, due primarily to an EBITDA increase at Clift, an owned hotel subject to a 99-year lease.
RevPAR at System-Wide Comparable Hotels decreased by 4.0% in the first quarter of 2015 as compared to the same period in 2014, due to a 2.0% decrease in
average daily rate (ADR) and a 2.1% decrease in occupancy. System-Wide Comparable Hotels room revenues plus resort fees, implemented at certain hotels in the second half of 2014, decreased 0.6% during the first quarter of 2015 as
compared to the same period in 2014 due to increased supply in New York and Miami and the stronger U.S. dollar.
RevPAR from System-Wide Comparable Hotels
in New York decreased 14.8% for the quarter ended March 31, 2015 as compared to the same period in 2014, due to a 9.6% decrease in ADR and a 5.8% decrease in occupancy. RevPAR at Hudson decreased by 14.3% during the first quarter of 2015 as
compared to the same period in 2014, primarily as a result of an increase in competitive room supply and the strong U.S. dollar, which weakened demand, particularly in the leisure segment. Hudsons room revenues plus resort fees decreased by
7.0% during the first quarter of 2015 as compared to the same period in 2014.
RevPAR from System-Wide Comparable Hotels in Miami decreased 3.9% in the
first quarter of 2015 as compared to the first quarter of 2014. Delano South Beach experienced a RevPAR decrease of 7.3% during the first quarter of 2015 as compared to the same period in 2014, primarily due to new competitive supply in South Beach.
While occupancy at Delano South Beach decreased by 11.5%, ADR increased by 4.8% during the first quarter of 2015 as compared to the same period in 2014. Delanos room revenues plus resort fees decreased 3.5% in the first quarter of 2015 as
compared to the same period in 2014.
The Companys System-Wide Comparable Hotels on the West Coast generated 10.5% RevPAR growth in the first
quarter of 2015 as compared to 2014, with a 7.6% RevPAR increase at Mondrian Los Angeles and a 12.8% RevPAR increase at Clift due to a favorable demand to supply ratio.
The Companys managed hotels in London Sanderson, St Martins Lane, and Mondrian London are non-comparable during 2015 due to a major
renovation of Sanderson and St Martins Lanes guestrooms and public spaces during 2014, and the opening of Mondrian London on September 30, 2014.
Management fees decreased $1.4 million, or 25.7%, during the first quarter of 2015 as compared to the same period in 2014. Excluding TLG, management fees
increased $0.5 million during the first quarter of 2015, or 13.7%, from the same period in 2014, primarily due to the addition of Mondrian London, Delano Las Vegas and 10 Karaköy.
Hotel operating expenses decreased $1.7 million, or 4.3%, during the first quarter of 2015 as compared to the
same period in 2014, primarily due to cost-saving initiatives implemented in May 2014. As a result, operating margins at the Companys Owned Hotels and leased food and beverage operations increased by approximately 225 basis points during the
first quarter of 2015 as compared to the same period in 2014.
Corporate expenses, excluding stock compensation expense, decreased $0.3 million, or 4.3%,
during the first quarter of 2015 as compared to the same period in 2014, due primarily to savings resulting from a workforce reduction of our corporate office employees implemented in March 2014 and the TLG Equity Sale completed in January 2015.
Interest expense decreased by $4.2 million, or 26.1%, during the first quarter of 2015 as compared to the same period in 2014, primarily due to an exit
fee the Company paid in February 2014 related to the repayment and refinancing of the mortgage debt on Hudson and the elimination of interest expense related to the convertible notes, which were fully repaid and retired in October 2014.
The Company recorded a net loss of $12.8 million in the first quarter of 2015 compared to a net loss of $24.1 million in the first quarter of 2014 primarily
as a result of increased operating income and lower interest expense.
Balance Sheet and Liquidity
The Companys total consolidated debt at March 31, 2015 was $605.9 million, which includes $100.3 million of capital lease obligations related
primarily to Clift.
At March 31, 2015, the Company had approximately $38.1 million in cash and cash equivalents and $16.1 million in restricted
cash.
On January 23, 2015, the Company completed the TLG Equity Sale to Hakkasan Holdings LLC for $32.8 million, net of closing costs. As a result,
the Company recognized a $1.7 million gain on sale for the three months ended March 31, 2015.
As of March 31, 2015, the Company had
approximately $409.1 million of remaining Federal tax net operating loss carryforwards to offset future income, including gains on asset sales.
Development
In March 2015, the Company signed a 20-year
management agreement, with four five-year renewal options, for Delano Dubai, which is currently scheduled to open in 2017 as the third hotel in the Delano portfolio and the brands first international location. Delano Dubais 110-key
deluxe hotel apartment property will be situated on Dubais beachfront island in Palm Jumeirah and will form part of a contemporary mixed-used resort development. There are no capital commitments or cash flow guarantees required under this
agreement.
In May 2015, the Company signed a long-term management agreement for Mondrian Dubai, which is currently anticipated to open in 2018. Located
in the Burj Khalifa region of Dubai, Mondrian Dubai expects to have 235-rooms, of which approximately one third are expected to be condo hotel units. There are no capital commitments or cash flow guarantees required under this agreement. Mondrian
Dubai will mark the Companys third international Mondrian hotel on the heels of Mondrian London, which opened in September 2014, and Mondrian Doha, which is currently expected to open in late 2015.
Investor Conference Call
The Company will host a conference call to review its first quarter 2015 results on Monday, May 11, 2015 at 9:00 AM 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 (877) 545-1403 (within U.S.) or (719) 325-4929 (outside U.S.)
and providing the following passcode: 6025231. A playback of the conference call will be available beginning at 12:00 PM Eastern time, Monday, May 11, 2015, through May 18, 2015. To access the playback, please dial (888) 203-1112
(within U.S.) or (719) 457-0820 (outside U.S.) and enter passcode 6025231.
Additional Definitions
Adjusted EBITDA means adjusted earnings before interest, taxes, depreciation and amortization, as further defined below. During the third quarter
of 2014, the Company changed its definition of Adjusted EBITDA to include the operating results of Clift, an owned hotel. Management believes the inclusion of Clift, which is subject to a 99-year lease and accounted for as a financing, is a more
accurate depiction of the Companys operating results and is consistent with the Companys presentation of Clift in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Prior periods have
been restated to include Clifts operating results in Adjusted EBITDA.
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, development projects and hotels no longer managed by the Company. System-Wide Comparable Hotels for the quarters ended March 31, 2015 and 2014 and exclude
Sanderson and St Martins Lane in London, which were both under major renovations during 2014, Mondrian London, which opened on September 30, 2014, Delano Las Vegas, a licensed hotel, 10 Karaköy, a franchised hotel, and Mondrian SoHo, which
the Company no longer manages, 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
industrys 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 has expanded its brand through Delano in Las Vegas, a licensed hotel, and 10 Karaköy in
Istanbul, Turkey, a franchised hotel. 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. 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 our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our 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 Companys 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 our 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 Companys 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 Companys ability to access the capital markets and the ability of our joint ventures to do the foregoing; the impact of financial and other covenants in the Companys loan
agreements and other debt instruments that limit the Companys ability to borrow and restrict its operations; the Companys history of losses; the Companys ability to compete in the boutique or lifestyle hotel
segments of the hospitality industry and changes in the competitive environment in the Companys industry and the markets where it invests; the Companys 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 Companys international operations, such as global economic conditions, political or economic
instability, compliance with foreign regulations and satisfaction of international business and workplace requirements; the Companys 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 Companys 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 Companys; our ability to comply with complex U.S. and
international regulations, including regulations related to the environment, labor, food and beverage operations and data privacy; ability to maintain effective and competitive technology platforms; ownership of a substantial block of our 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 our preferred securities on our cash flow and the value of our common stock; the impact of any
strategic alternatives considered by the special transaction committee of our Board of Directors and/or pursued by the Company; and other risk factors discussed in the Companys 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)
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Three Months
Ended March 31, |
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2015 |
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2014 |
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Revenues: |
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Rooms |
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$ |
25,796 |
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$ |
26,994 |
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Food and beverage |
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21,417 |
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21,921 |
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Other hotel |
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2,085 |
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1,162 |
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Total hotel revenues |
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49,298 |
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50,077 |
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Management fee-related parties and other income |
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4,008 |
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5,391 |
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Total revenues |
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53,306 |
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55,468 |
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Operating Costs and Expenses: |
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Rooms |
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8,884 |
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8,892 |
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Food and beverage |
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14,583 |
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15,311 |
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Other departmental |
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1,090 |
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|
772 |
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Hotel selling, general and administrative |
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10,152 |
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11,586 |
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Property taxes, insurance and other |
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3,883 |
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3,774 |
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Total hotel operating expenses |
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38,592 |
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40,335 |
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Corporate expenses: |
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Stock based compensation |
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344 |
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1,944 |
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Other |
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5,684 |
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5,938 |
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Depreciation and amortization |
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5,637 |
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8,402 |
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Restructuring and disposal costs |
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1,949 |
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7,243 |
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Development costs |
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148 |
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698 |
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Total operating costs and expenses |
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52,354 |
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64,560 |
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Operating income (loss) |
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952 |
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(9,092 |
) |
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Interest expense, net |
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11,827 |
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15,998 |
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Impairment loss and equity in income of unconsolidated joint ventures |
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3,890 |
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(2 |
) |
Gain on asset sales |
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(3,708 |
) |
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(2,005 |
) |
Other non-operating expenses |
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1,655 |
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|
696 |
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Loss before income tax expense |
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(12,712 |
) |
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(23,779 |
) |
Income tax expense |
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|
126 |
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|
|
163 |
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Net loss |
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(12,838 |
) |
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(23,942 |
) |
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Net loss (income) attributable to noncontrolling interest |
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14 |
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(193 |
) |
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Net loss attributable to Morgans Hotel Group |
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$ |
(12,824 |
) |
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$ |
(24,135 |
) |
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Preferred stock dividends and accretion |
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(3,910 |
) |
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(4,367 |
) |
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Net loss attributable to common stockholders |
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$ |
(16,734 |
) |
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$ |
(28,502 |
) |
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Loss per share: |
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|
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Basic and diluted attributable to common stockholders |
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$ |
(0.49 |
) |
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$ |
(0.85 |
) |
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Weighted average common shares outstanding - basic and diluted |
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|
34,388 |
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|
33,651 |
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Selected Hotel Operating Statistics |
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( In Actual Dollars) |
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( In Constant Dollars, if different) |
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Three Months
Ended March 31, |
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% |
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Three Months
Ended March 31, |
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% |
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2015 |
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|
2014 |
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Change |
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2015 |
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2014 |
|
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Change |
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BY REGION |
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|
Northeast Comparable Hotels (1) |
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Occupancy |
|
|
76.1 |
% |
|
|
80.8 |
% |
|
|
-5.8 |
% |
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|
|
|
|
|
|
|
|
|
|
|
ADR |
|
$ |
173.88 |
|
|
$ |
192.28 |
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|
|
-9.6 |
% |
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|
|
|
|
|
|
|
|
|
|
RevPAR |
|
$ |
132.32 |
|
|
$ |
155.36 |
|
|
|
-14.8 |
% |
|
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|
|
|
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West Coast Comparable Hotels (2) |
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|
|
|
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|
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|
|
|
|
Occupancy |
|
|
88.0 |
% |
|
|
83.9 |
% |
|
|
4.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
ADR |
|
$ |
283.40 |
|
|
$ |
268.96 |
|
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR |
|
$ |
249.39 |
|
|
$ |
225.66 |
|
|
|
10.5 |
% |
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
Miami Comparable Hotels (3) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
83.4 |
% |
|
|
85.2 |
% |
|
|
-2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
ADR |
|
$ |
425.44 |
|
|
$ |
433.53 |
|
|
|
-1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR |
|
$ |
354.82 |
|
|
$ |
369.37 |
|
|
|
-3.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Comparable Hotels (4) |
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|
|
|
Occupancy |
|
|
81.1 |
% |
|
|
82.8 |
% |
|
|
-2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
ADR |
|
$ |
276.82 |
|
|
$ |
282.55 |
|
|
|
-2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR |
|
$ |
224.50 |
|
|
$ |
233.95 |
|
|
|
-4.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Comparable Hotels (5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
System-wide Comparable Hotels (6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
81.1 |
% |
|
|
82.8 |
% |
|
|
-2.1 |
% |
|
|
81.1 |
% |
|
|
82.8 |
% |
|
|
-2.1 |
% |
ADR |
|
$ |
276.82 |
|
|
$ |
282.55 |
|
|
|
-2.0 |
% |
|
$ |
276.82 |
|
|
$ |
282.55 |
|
|
|
-2.0 |
% |
RevPAR |
|
$ |
224.50 |
|
|
$ |
233.95 |
|
|
|
-4.0 |
% |
|
$ |
224.50 |
|
|
$ |
233.95 |
|
|
|
-4.0 |
% |
(1) |
Northeast Comparable Hotels for the periods ended March 31, 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 March 31, 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 March 31, 2015 and 2014 consist of Delano South Beach, Mondrian South Beach and Shore Club in Miami Beach, Florida. |
(4) |
United States Comparable Hotels for the periods ended March 31, 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 the Company no longer managed, is non-comparable for
the periods presented. |
(5) |
The Company has no International Comparable Hotels for the periods ended March 31, 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. |
(6) |
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 March 31, 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
agreement, and Mondrian SoHo, which effective April 27, 2015, the Company no longer managed. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Hotel Operating Statistics |
|
( In Actual Dollars) |
|
|
|
|
|
( In Constant Dollars, if different) |
|
|
|
Three Months
Ended March 31, |
|
|
% |
|
|
Three Months
Ended March 31, |
|
|
% |
|
|
|
2015 |
|
|
2014 |
|
|
Change |
|
|
2015 |
|
|
2014 |
|
|
Change |
|
BY OWNERSHIP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned Comparable Hotels (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
79.7 |
% |
|
|
82.4 |
% |
|
|
-3.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
ADR |
|
$ |
249.06 |
|
|
$ |
254.07 |
|
|
|
-2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR |
|
$ |
198.50 |
|
|
$ |
209.35 |
|
|
|
-5.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Venture Comparable Hotels (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
86.1 |
% |
|
|
88.4 |
% |
|
|
-2.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
ADR |
|
$ |
350.57 |
|
|
$ |
345.47 |
|
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR |
|
$ |
301.84 |
|
|
$ |
305.40 |
|
|
|
-1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed Comparable Hotels (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
82.4 |
% |
|
|
82.1 |
% |
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
ADR |
|
$ |
304.54 |
|
|
$ |
315.19 |
|
|
|
-3.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR |
|
$ |
250.94 |
|
|
$ |
258.77 |
|
|
|
-3.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
System-wide Comparable Hotels |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
81.1 |
% |
|
|
82.8 |
% |
|
|
-2.1 |
% |
|
|
81.0 |
% |
|
|
82.8 |
% |
|
|
-2.2 |
% |
ADR |
|
$ |
276.82 |
|
|
$ |
282.55 |
|
|
|
-2.0 |
% |
|
$ |
275.77 |
|
|
$ |
281.73 |
|
|
|
-2.1 |
% |
RevPAR |
|
$ |
224.50 |
|
|
$ |
233.95 |
|
|
|
-4.0 |
% |
|
$ |
223.37 |
|
|
$ |
233.27 |
|
|
|
-4.2 |
% |
|
|
|
|
|
|
|
Owned Hotels |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
76.9 |
% |
|
|
81.3 |
% |
|
|
-5.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
ADR |
|
$ |
154.90 |
|
|
$ |
170.96 |
|
|
|
-9.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR |
|
$ |
119.12 |
|
|
$ |
138.99 |
|
|
|
-14.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delano South Beach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
76.0 |
% |
|
|
85.9 |
% |
|
|
-11.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
ADR |
|
$ |
640.50 |
|
|
$ |
611.33 |
|
|
|
4.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR |
|
$ |
486.78 |
|
|
$ |
525.13 |
|
|
|
-7.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clift |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
88.2 |
% |
|
|
83.2 |
% |
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
ADR |
|
$ |
266.95 |
|
|
$ |
250.81 |
|
|
|
6.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR |
|
$ |
235.45 |
|
|
$ |
208.67 |
|
|
|
12.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Owned Comparable Hotels for the periods ended March 31, 2015 and 2014 consist of Hudson, Delano South Beach, and Clift in San Francisco. |
(2) |
Joint Venture Comparable Hotels for the periods ended March 31, 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. |
(3) |
Managed Comparable Hotels for the periods ended March 31, 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 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 our 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 Companys 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 Companys 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 our 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 other expenses that relate to the financing and investing activities of the Company; |
|
|
|
Restructuring and disposal costs, which include expenses incurred related to the Companys 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 project and unconsolidated joint venture. The Company may incur additional non-cash impairment charges related to assets under development, wholly-owned assets, or our investments in
joint ventures. The Company believes these adjustments are necessary to provide the most accurate measure of core operating results as a means to evaluate comparative results; |
|
|
|
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, as this is not necessarily an indication of the operating performance of the Companys assets; and |
|
|
|
Gains recognized on asset sales, as the Company believes that including them in Adjusted EBITDA is not consistent with reflecting the ongoing performance of its assets. In addition, the Company believes material gains
or losses from the net book value of disposed assets is not particularly meaningful given that the depreciated asset value on which the gains are calculated often does not reflect market value of the 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 Companys 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 our performance as it eliminates the impact of costs incurred related to investing and financing transactions. Internally, the Companys 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 inventive 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 Companys 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 Companys 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 Companys 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 under 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 Companys operating performance, you should not consider this data in isolation, or as a substitute for the Companys 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 |
|
|
|
Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
Net loss attributable to Morgans Hotel Group Co. |
|
$ |
(12,824 |
) |
|
$ |
(24,135 |
) |
Interest expense, net |
|
|
11,827 |
|
|
|
15,998 |
|
Income tax expense |
|
|
126 |
|
|
|
163 |
|
Depreciation and amortization expense |
|
|
5,637 |
|
|
|
8,402 |
|
Proportionate share of interest expense from unconsolidated joint ventures |
|
|
729 |
|
|
|
1,145 |
|
Proportionate share of depreciation expense from unconsolidated joint ventures |
|
|
371 |
|
|
|
391 |
|
Net income attributable to noncontrolling interest |
|
|
(28 |
) |
|
|
(53 |
) |
Proportionate share of loss from unconsolidated joint ventures not recorded due to negative investment balances |
|
|
(862 |
) |
|
|
(1,459 |
) |
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
4,976 |
|
|
|
452 |
|
|
|
|
Other non operating expenses |
|
|
1,655 |
|
|
|
696 |
|
Other non operating expense from unconsolidated joint ventures |
|
|
407 |
|
|
|
616 |
|
Restructuring and disposal costs |
|
|
1,949 |
|
|
|
7,243 |
|
Development costs |
|
|
148 |
|
|
|
698 |
|
Impairment loss on hotel development project |
|
|
3,892 |
|
|
|
|
|
Stock based compensation expense |
|
|
344 |
|
|
|
1,944 |
|
Gain on asset sales |
|
|
(3,708 |
) |
|
|
(2,005 |
) |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
9,663 |
|
|
$ |
9,644 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA, Excluding The Light Group |
|
$ |
9,578 |
|
|
$ |
7,763 |
|
|
|
|
|
|
|
|
|
|
Hotel EBITDA Analysis (1)
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
|
|
|
Ended March 31, |
|
|
% |
|
|
|
2015 |
|
|
2014 |
|
|
Change |
|
Hudson |
|
$ |
(1,108 |
) |
|
$ |
(858 |
) |
|
|
29 |
% |
Delano South Beach |
|
|
8,173 |
|
|
|
7,950 |
|
|
|
3 |
% |
Clift |
|
|
2,485 |
|
|
|
1,445 |
|
|
|
72 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned Comparable Hotels (2) |
|
|
9,550 |
|
|
|
8,537 |
|
|
|
12 |
% |
|
|
|
|
Mondrian South Beach - Joint Venture |
|
|
535 |
|
|
|
474 |
|
|
|
13 |
% |
Mondrian SoHo (3) |
|
|
112 |
|
|
|
220 |
|
|
|
-49 |
% |
Las Vegas restaurant leases (4) |
|
|
1,155 |
|
|
|
1,264 |
|
|
|
-9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Hotel and F&B EBITDA |
|
|
1,802 |
|
|
|
1,958 |
|
|
|
192 |
% |
|
|
|
|
Total Hotel and F&B EBITDA |
|
$ |
11,352 |
|
|
$ |
10,495 |
|
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
For joint venture hotel, represents the Companys share of the respective hotels EBITDA, after management fees. |
(2) |
Reflects the Companys 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 Companys
share of Mondrian SoHos 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 which the Company acquired in August 2012. The three venues were re-concepted and renovated and opened in
December 2012, February 2013 and July 2013, respectively. |
Owned Hotel Room Revenue Analysis
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
% |
|
|
|
2015 |
|
|
2014 |
|
|
Change |
|
Hudson |
|
$ |
9,416 |
|
|
$ |
10,836 |
|
|
|
-13 |
% |
Delano South Beach |
|
|
8,500 |
|
|
|
9,168 |
|
|
|
-7 |
% |
Clift |
|
|
7,880 |
|
|
|
6,990 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Owned Hotels |
|
$ |
25,796 |
|
|
$ |
26,994 |
|
|
|
-4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned Hotel Revenue Analysis
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
% |
|
|
|
2015 |
|
|
2014 |
|
|
Change |
|
Hudson |
|
$ |
13,438 |
|
|
$ |
14,561 |
|
|
|
-8 |
% |
Delano South Beach |
|
|
16,184 |
|
|
|
16,457 |
|
|
|
-2 |
% |
Clift |
|
|
11,162 |
|
|
|
10,333 |
|
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Owned Hotels |
|
$ |
40,784 |
|
|
$ |
41,351 |
|
|
|
-1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheets
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015 |
|
|
December 31, 2014 |
|
ASSETS: |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
273,567 |
|
|
$ |
277,825 |
|
Goodwill |
|
|
54,057 |
|
|
|
54,057 |
|
Investments in and advances to unconsolidated joint ventures |
|
|
6,600 |
|
|
|
10,492 |
|
Assets held for sale |
|
|
|
|
|
|
34,284 |
|
Cash and cash equivalents |
|
|
38,091 |
|
|
|
13,493 |
|
Restricted cash |
|
|
16,094 |
|
|
|
13,939 |
|
Accounts receivable, net |
|
|
10,807 |
|
|
|
10,475 |
|
Related party receivables |
|
|
3,393 |
|
|
|
3,560 |
|
Prepaid expenses and other assets |
|
|
7,510 |
|
|
|
8,493 |
|
Deferred tax asset, net |
|
|
77,994 |
|
|
|
77,204 |
|
Other assets, net |
|
|
44,304 |
|
|
|
47,422 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
532,417 |
|
|
$ |
551,244 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES and STOCKHOLDERS DEFICIT: |
|
|
|
|
|
|
|
|
Debt and capital lease obligations, net |
|
$ |
605,895 |
|
|
$ |
605,743 |
|
Accounts payable and accrued liabilities |
|
|
34,008 |
|
|
|
32,524 |
|
Accounts payable and accrued liabilities of assets held for sale |
|
|
|
|
|
|
1,128 |
|
Deferred gain on asset sales |
|
|
123,393 |
|
|
|
125,398 |
|
Other liabilities |
|
|
15,308 |
|
|
|
13,866 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
778,604 |
|
|
|
778,659 |
|
|
|
|
Redeemable noncontrolling interest |
|
|
|
|
|
|
5,042 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
Total Morgans Hotel Group Co. stockholders deficit |
|
|
(246,709 |
) |
|
|
(233,006 |
) |
Noncontrolling interest |
|
|
522 |
|
|
|
549 |
|
|
|
|
|
|
|
|
|
|
Total deficit |
|
|
(246,187 |
) |
|
|
(232,457 |
) |
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interest and stockholders deficit |
|
$ |
532,417 |
|
|
$ |
551,244 |
|
|
|
|
|
|
|
|
|
|
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