Morgans Hotel Group Co. (NASDAQ:MHGC) (the “Company” or “Morgans”)
today reported financial results, in constant dollars where
applicable, for the quarter ended March 31, 2016.
First Quarter 2016 Operating
Results
Adjusted EBITDA, defined below, excluding the
Company’s ownership interests in TLG and Mondrian SoHo, which the
Company no longer held effective during the first quarter of 2015,
was $8.1 million in the first quarter of 2016, compared to $9.5
million for the same period in 2015, a decrease of
14.5%. Adjusted EBITDA for the first quarter of 2015,
including the ownership interests in TLG and Mondrian SoHo, was
$9.7 million.
RevPAR at System-Wide Comparable Hotels
decreased by 4.2% in the first quarter of 2016 as compared to the
same period in 2015, due to a 7.7% decrease in average daily rate
(“ADR”) offset by a 3.8% increase in occupancy. System-Wide
Comparable Hotels room revenues plus resort and facility fees,
which are not included in RevPAR, decreased by 2.3% quarter over
quarter.
RevPAR from System-Wide Comparable Hotels in New
York decreased 5.0% in the first quarter of 2016 as compared to the
same period in 2015, due to a 5.6% decrease in ADR slightly offset
by a 0.7% increase in occupancy. RevPAR at Hudson decreased
6.8% during the first quarter of 2016 as compared to the same
period in 2015, driven by a 7.0% ADR decrease primarily due to new
supply in New York City. Including facility fees, room
revenues at Hudson decreased 4.2% quarter over
quarter.
RevPAR from System-Wide Comparable Hotels in
Miami decreased 16.0% in the first quarter of 2016 as compared to
the first quarter of 2015 driven by an 18.3% decrease in ADR.
Delano South Beach experienced a RevPAR decrease of 9.7% during the
first quarter of 2016 as compared to the same period in 2015, due
to a 15.0% decrease in ADR, which was primarily the result of new
supply in South Beach. Including resort fees, rooms revenues
at Delano decreased 7.2% quarter over quarter.
Clift’s RevPAR increased 7.9% in the first
quarter of 2016 as compared to the first quarter of 2015 due to a
5.2% increase in occupancy and a 2.6% increase in
ADR.
RevPAR from System-Wide Comparable Hotels in
London, which includes Sanderson and Mondrian London, increased
9.8% during the first quarter of 2016 as compared to the same
period in 2015, driven by an 11.9% increase in occupancy. St
Martins Lane continues to be non-comparable, as the hotel was under
major renovation in the first half of 2015.
Management fees decreased by $0.9 million in the
first quarter of 2016 as compared to the same period in 2015 due
primarily to the loss of Mondrian SoHo in April 2015 and the sale
of TLG in January 2015. On a comparable basis, management
fees decreased $0.2 million, or 6.9%.
Corporate expenses, excluding stock compensation
expenses, decreased by $1.5 million, or 27.0% in the first quarter
of 2016 as compared to the same period in 2015 primarily due to
open positions and cost controls.
The Company recorded a net loss of $8.9 million
in the first quarter of 2016 compared to a net loss of $12.8
million in the first quarter of 2015, primarily as a result of an
impairment that the Company recorded in the first quarter of
2015.
Balance Sheet
The Company’s consolidated debt as of March 31,
2016, net of deferred financing costs of $4.0 million, was $574.3
million, which includes $101.9 million of capital lease obligations
primarily related to Clift. Outstanding Series A preferred
securities and undeclared dividends totaled $133.9
million.
At March 31, 2016, the Company had approximately
$11.9 million in cash and cash equivalents and $15.3 million in
restricted cash.
As of March 31, 2016, the Company had
approximately $443.2 million of remaining Federal tax net operating
loss carryforwards to offset future income.
Announced Sale of the
Company
Separately, on May 9, 2016, and as described in
the Form 8-K filed with the SEC on May 9, 2016, the Company entered
into a definitive agreement under which the Company will be
acquired by SBEEG Holdings LLC (“SBE”), a leading global lifestyle
hospitality company. Under the terms of the agreement, SBE
will acquire all of the outstanding shares of the Company’s common
stock for $2.25 per share in cash. As part of the
transaction, affiliates of The Yucaipa Companies (“Yucaipa”) will
exchange $75.0 million of Series A preferred securities, accrued
preferred dividends, and warrants for $75.0 million in preferred
shares and an interest in the common equity in the acquirer and,
following the closing, the leasehold interests in three restaurants
in Las Vegas currently held by Morgans. The transaction,
which was approved by the Company’s Board of Directors, is expected
to close in the third or fourth quarter, and is subject to
regulatory approvals, the assumption or refinancing of the
Company’s mortgage loan agreements, and customary closing
conditions, including approval of the transaction by the Company’s
shareholders. Morgans shareholders representing approximately 29%
of the Company’s outstanding shares of common stock have signed
voting agreements in support of this transaction, including OTK
Associates, Pine River Capital Management and Vector Group Ltd.
Affiliates of Yucaipa have also signed a voting agreement in
respect of their Series A preferred securities and warrants.
Investor Conference Call
In light of the Company’s announcement of the proposed
acquisition by SBE, the Company’s first quarter earnings call,
previously scheduled for today at 5:00 PM Eastern Time, has been
cancelled.
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
periods ended March 31, 2016 and 2015 exclude St Martins Lane in
London, which was under major renovation in the first half of 2015,
Mondrian SoHo, which the Company no longer managed effective April
27, 2015, and Delano Las Vegas and 10 Karaköy, both of which are
licensed/franchised hotels.
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 in 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, risks
related to our pending acquisition by SBE.
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 level of
debt under its outstanding debt agreements, the Company’s
obligations under its preferred equity instruments, its ability to
restructure or refinance the current outstanding debt and preferred
equity instruments, the Company’s ability to generate sufficient
cash to repay or redeem outstanding debt and preferred equity
instruments or make payments on guarantees as they may become due;
the impact of any dividend payments or accruals on the Company’s
preferred equity instruments 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; the impact of restructuring charges
on the Company’s liquidity; general volatility of the Company’s
stock price, 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 certain of its
operations; the Company’s history of losses; the Company’s
liquidity position; 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,
outbreaks of contagious diseases, terrorist attacks, the threat of
terrorist attacks and similar disasters, including a downturn in
travel, hotels, dining and entertainment resulting therefrom; 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 sustain the
quality of the properties 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 and the timing of
receipt of anticipated termination fees; 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 and travel industry that are beyond the Company’s
control; the Company’s ability to maintain state of the art
information technology systems and protect such systems from
cyber-attacks; 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;
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; and other risk factors discussed in
the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2015, which was filed with the Securities and Exchange
Commission (the “SEC”) on March 14, 2016, 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.
Important Information About the
Transaction and Where to Find It
In connection with the proposed transaction,
Morgans will file with the SEC a proxy statement. Morgans may also
file other documents with the SEC regarding the proposed
transaction. MORGANS STOCKHOLDERS ARE URGED TO READ THE PROXY
STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED WITH THE
SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS,
CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED
MATTERS. Morgans stockholders may obtain free copies of the
proxy statement (when available) and other documents filed with the
SEC by Morgans through the web site maintained by the SEC at
www.sec.gov or by contacting the Morgans investor relations
department by writing or telephoning us at: Morgans Hotel Group
Co., 475 Tenth Avenue, New York, New York 10018, Attention:
Investor Relations, telephone (212) 277-4100.
Participants in the
Solicitation
Morgans and its directors and executive officers
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. Information about the
directors and executive officers of Morgans is contained in
Morgans’ Form 10-K for the year ended December 31, 2015 and its
proxy statement filed on April 15, 2016, which are filed with the
SEC. Information regarding the identity of the potential
participants, and their direct or indirect interests in the
transaction, by security holdings or otherwise, will be set forth
in the proxy statement and other materials to be filed with SEC in
connection with the transaction.
|
|
|
|
|
|
Income Statements |
|
(In thousands, except per share amounts) |
|
|
|
|
Three Months |
|
|
|
|
Ended March
31, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
Revenues
: |
|
|
|
|
Rooms |
|
$ |
25,244 |
|
|
$ |
25,796 |
|
|
Food and
beverage |
|
|
20,432 |
|
|
|
21,571 |
|
|
Other
hotel |
|
|
2,198 |
|
|
|
1,931 |
|
|
|
Total hotel
revenues |
|
|
47,874 |
|
|
|
49,298 |
|
|
Management
fee-related parties and other income |
|
|
3,149 |
|
|
|
4,008 |
|
|
|
Total revenues |
|
|
51,023 |
|
|
|
53,306 |
|
|
|
|
|
|
|
|
|
|
|
Operating
Costs and Expenses : |
|
|
|
|
Rooms |
|
|
9,458 |
|
|
|
8,884 |
|
|
Food and
beverage |
|
|
13,844 |
|
|
|
14,677 |
|
|
Other
departmental |
|
|
1,144 |
|
|
|
996 |
|
|
Hotel
selling, general and administrative |
|
|
10,151 |
|
|
|
10,152 |
|
|
Property
taxes, insurance and other |
|
|
4,543 |
|
|
|
3,883 |
|
|
|
Total hotel operating
expenses |
|
|
39,140 |
|
|
|
38,592 |
|
|
Corporate
expenses : |
|
|
|
|
|
|
|
|
Stock based
compensation |
|
|
115 |
|
|
|
344 |
|
|
|
Other |
|
|
4,148 |
|
|
|
5,684 |
|
|
Depreciation and amortization |
|
|
5,651 |
|
|
|
5,637 |
|
|
Restructuring and development costs |
|
|
699 |
|
|
|
2,097 |
|
|
|
Total operating costs
and expenses |
|
|
49,753 |
|
|
|
52,354 |
|
|
|
Operating
income |
|
|
1,270 |
|
|
|
952 |
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
11,162 |
|
|
|
11,827 |
|
|
Impairment
loss and equity in income of unconsolidated joint ventures
|
|
|
(2 |
) |
|
|
3,890 |
|
|
Impairment
loss on intangible asset |
|
|
366 |
|
|
|
- |
|
|
Gain on
asset sales |
|
|
(2,005 |
) |
|
|
(3,708 |
) |
|
Other
non-operating expenses |
|
|
543 |
|
|
|
1,655 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax
expense |
|
|
(8,794 |
) |
|
|
(12,712 |
) |
|
|
Income tax
expense |
|
|
128 |
|
|
|
126 |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(8,922 |
) |
|
|
(12,838 |
) |
|
|
|
|
|
|
|
|
Net loss attributable
to noncontrolling interest |
|
|
18 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to Morgans Hotel Group |
|
$ |
(8,904 |
) |
|
$ |
(12,824 |
) |
|
|
|
|
|
|
|
|
Preferred stock
dividends and accretion |
|
|
(4,467 |
) |
|
|
(3,910 |
) |
|
|
|
|
|
|
|
|
Net loss attributable
to common stockholders |
|
$ |
(13,371 |
) |
|
$ |
(16,734 |
) |
|
|
|
|
|
|
|
|
Loss per
share: |
|
|
|
|
|
Basic and
diluted attributable to common stockholders |
$ |
(0.38 |
) |
|
$ |
(0.49 |
) |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and
diluted |
|
34,739 |
|
|
|
34,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Hotel Operating
Statistics |
( In Actual Dollars) |
|
|
( In Constant Dollars, if
different) |
|
|
|
|
|
|
|
|
Three Months |
|
|
Three Months |
|
|
|
|
|
Ended March 31, |
% |
|
Ended March 31, |
% |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Change |
|
|
2016 |
|
|
|
2015 |
|
|
Change |
|
BY
REGION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
York Comparable Hotels (1) |
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
76.6 |
% |
|
|
76.1 |
% |
|
|
0.7 |
% |
|
|
|
|
|
|
ADR |
|
$ |
164.11 |
|
|
$ |
173.88 |
|
|
|
-5.6 |
% |
|
|
|
|
|
|
RevPAR |
|
$ |
125.71 |
|
|
$ |
132.32 |
|
|
|
-5.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Coast Comparable Hotels (2) |
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
92.9 |
% |
|
|
88.0 |
% |
|
|
5.6 |
% |
|
|
|
|
|
|
ADR |
|
$ |
289.58 |
|
|
$ |
283.40 |
|
|
|
2.2 |
% |
|
|
|
|
|
|
RevPAR |
|
$ |
269.02 |
|
|
$ |
249.39 |
|
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami Comparable Hotels (3) |
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
85.8 |
% |
|
|
83.4 |
% |
|
|
2.9 |
% |
|
|
|
|
|
|
ADR |
|
$ |
347.39 |
|
|
$ |
425.44 |
|
|
|
-18.3 |
% |
|
|
|
|
|
|
RevPAR |
|
$ |
298.06 |
|
|
$ |
354.82 |
|
|
|
-16.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Comparable
Hotels |
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
83.2 |
% |
|
|
81.1 |
% |
|
|
2.6 |
% |
|
|
|
|
|
|
ADR |
|
$ |
252.39 |
|
|
$ |
276.82 |
|
|
|
-8.8 |
% |
|
|
|
|
|
|
RevPAR |
|
$ |
209.99 |
|
|
$ |
224.50 |
|
|
|
-6.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Comparable Hotels (4) |
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
72.6 |
% |
|
|
64.9 |
% |
|
|
11.9 |
% |
|
|
72.6 |
% |
|
|
64.9 |
% |
|
|
11.9 |
% |
|
|
ADR |
|
$ |
279.31 |
|
|
$ |
301.03 |
|
|
|
-7.2 |
% |
|
$ |
279.31 |
|
|
$ |
284.52 |
|
|
|
-1.8 |
% |
|
|
RevPAR |
|
$ |
202.78 |
|
|
$ |
195.37 |
|
|
|
3.8 |
% |
|
$ |
202.78 |
|
|
$ |
184.65 |
|
|
|
9.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
System-wide Comparable
Hotels (5) |
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
81.4 |
% |
|
|
78.4 |
% |
|
|
3.8 |
% |
|
|
81.4 |
% |
|
|
78.4 |
% |
|
|
3.8 |
% |
|
|
ADR |
|
$ |
256.48 |
|
|
$ |
280.23 |
|
|
|
-8.5 |
% |
|
$ |
256.48 |
|
|
$ |
277.91 |
|
|
|
-7.7 |
% |
|
|
RevPAR |
|
$ |
208.77 |
|
|
$ |
219.70 |
|
|
|
-5.0 |
% |
|
$ |
208.77 |
|
|
$ |
217.88 |
|
|
|
-4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
New York Comparable Hotels for the periods ended March 31,
2016 and 2015 consist of Hudson, Morgans and Royalton in New
York. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
West Coast Comparable Hotels for the periods ended March 31,
2016 and 2015 consist of Mondrian Los Angeles and Clift in San
Francisco. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
Miami Comparable Hotels for the periods ended March 31, 2016
and 2015 consist of Delano South Beach, Mondrian South Beach and
Shore Club in Miami Beach, Florida. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
International Comparable Hotels for the periods ended March
31, 2016 and 2015 consists of Sanderson and Mondrian London.
St Martins Lane in London is non-comparable, as the hotel was under
major renovation in the first half of 2015. |
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
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, 2016 and 2015
exclude St Martins Lane in London, which was under renovations in
the first half of 2015, and Mondrian SoHo, which effective April
27, 2015, the Company no longer managed. |
|
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|
|
|
|
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|
|
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|
|
|
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|
|
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|
|
|
|
|
|
|
Selected Hotel Operating Statistics |
( In Actual Dollars) |
|
|
( In Constant Dollars, if
different) |
|
|
|
|
|
|
|
|
Three Months |
|
|
Three Months |
|
|
|
|
|
|
Ended March 31, |
% |
|
Ended March 31, |
% |
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Change |
|
|
2016 |
|
|
|
2015 |
|
|
Change |
|
BY
OWNERSHIP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned Comparable Hotels (1) |
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
81.7 |
% |
|
|
79.7 |
% |
|
|
2.5 |
% |
|
|
|
|
|
|
ADR |
|
|
$ |
235.25 |
|
|
$ |
249.06 |
|
|
|
-5.5 |
% |
|
|
|
|
|
|
RevPAR |
|
|
$ |
192.20 |
|
|
$ |
198.50 |
|
|
|
-3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Venture Comparable Hotels (2) |
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
86.4 |
% |
|
|
86.1 |
% |
|
|
0.3 |
% |
|
|
|
|
|
|
ADR |
|
|
$ |
306.72 |
|
|
$ |
350.57 |
|
|
|
-12.5 |
% |
|
|
|
|
|
|
RevPAR |
|
|
$ |
265.01 |
|
|
$ |
301.84 |
|
|
|
-12.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed Comparable Hotels (3) |
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
80.4 |
% |
|
|
75.7 |
% |
|
|
6.2 |
% |
|
|
80.4 |
% |
|
|
75.7 |
% |
|
|
6.2 |
% |
|
|
ADR |
|
|
$ |
271.50 |
|
|
$ |
303.39 |
|
|
|
-10.5 |
% |
|
$ |
271.50 |
|
|
$ |
298.01 |
|
|
|
-8.9 |
% |
|
|
RevPAR |
|
|
$ |
218.29 |
|
|
$ |
229.67 |
|
|
|
-5.0 |
% |
|
$ |
218.29 |
|
|
$ |
225.59 |
|
|
|
-3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
System-wide Comparable
Hotels |
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
81.4 |
% |
|
|
78.4 |
% |
|
|
3.8 |
% |
|
|
81.4 |
% |
|
|
78.4 |
% |
|
|
3.8 |
% |
|
|
ADR |
|
|
$ |
256.48 |
|
|
$ |
280.23 |
|
|
|
-8.5 |
% |
|
$ |
256.48 |
|
|
$ |
277.91 |
|
|
|
-7.7 |
% |
|
|
RevPAR |
|
|
$ |
208.77 |
|
|
$ |
219.70 |
|
|
|
-5.0 |
% |
|
$ |
208.77 |
|
|
$ |
217.88 |
|
|
|
-4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned Hotels |
|
|
|
|
|
|
|
|
|
|
Hudson |
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
77.1 |
% |
|
|
76.9 |
% |
|
|
0.3 |
% |
|
|
|
|
|
|
ADR |
|
|
$ |
144.02 |
|
|
$ |
154.90 |
|
|
|
-7.0 |
% |
|
|
|
|
|
|
RevPAR |
|
|
$ |
111.04 |
|
|
$ |
119.12 |
|
|
|
-6.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delano
South Beach |
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
80.7 |
% |
|
|
76.0 |
% |
|
|
6.2 |
% |
|
|
|
|
|
|
ADR |
|
|
$ |
544.70 |
|
|
$ |
640.50 |
|
|
|
-15.0 |
% |
|
|
|
|
|
|
RevPAR |
|
|
$ |
439.57 |
|
|
$ |
486.78 |
|
|
|
-9.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clift |
|
|
|
|
|
|
|
|
|
|
|
Occupancy |
|
|
92.8 |
% |
|
|
88.2 |
% |
|
|
5.2 |
% |
|
|
|
|
|
|
ADR |
|
|
$ |
273.79 |
|
|
$ |
266.95 |
|
|
|
2.6 |
% |
|
|
|
|
|
|
RevPAR |
|
|
$ |
254.08 |
|
|
$ |
235.45 |
|
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Owned Comparable Hotels for the periods ended March 31, 2016
and 2015 consist of Hudson, Delano South Beach, and Clift in San
Francisco. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
Joint Venture Comparable Hotels for the periods ended March
31, 2016 and 2015 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, 2016
and 2015 consist of Morgans, Royalton, Shore Club, Mondrian Los
Angeles, Sanderson, and Mondrian London. Managed hotels that
are non-comparable for the periods presented are St Martins Lane in
London, which was under renovations in the first half of 2015 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 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, miscellaneous litigation and settlement
costs and proceeds, and other expenses that relate to the financing
and investing activities of the Company;
- Restructuring and development costs. Restructuring costs
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, and proxy
contests. Development costs include 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. 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.
Additionally, the Company may incur non-cash impairment charges
related to its intangible assets;
- 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 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 |
|
|
|
Ended March
31, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to Morgans Hotel Group Co. |
|
$ |
(8,904 |
) |
|
$ |
(12,824 |
) |
|
Interest expense,
net |
|
|
11,162 |
|
|
|
11,827 |
|
|
Income tax
expense |
|
|
128 |
|
|
|
126 |
|
|
Depreciation and
amortization expense |
|
|
5,651 |
|
|
|
5,637 |
|
|
Proportionate share of
interest expense |
|
|
|
|
from
unconsolidated joint ventures |
|
|
389 |
|
|
|
729 |
|
|
Proportionate share of
depreciation expense |
|
|
|
|
from
unconsolidated joint ventures |
|
|
106 |
|
|
|
371 |
|
|
Net income attributable
to noncontrolling interest |
|
|
(18 |
) |
|
|
(28 |
) |
|
Proportionate share of
loss from unconsolidated joint |
|
|
|
|
ventures not
recorded due to negative investment balances |
|
|
(324 |
) |
|
|
(862 |
) |
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
8,190 |
|
|
|
4,976 |
|
|
|
|
|
|
|
Other non operating
expense |
|
|
543 |
|
|
|
1,655 |
|
|
Other non operating
expense from unconsolidated |
|
|
|
|
joint
ventures |
|
|
177 |
|
|
|
407 |
|
|
Restructuring and
development costs |
|
|
699 |
|
|
|
2,097 |
|
|
Impairment
loss on receivables and other assets from unconsolidated
joint ventures and managed hotels |
|
|
- |
|
|
|
3,892 |
|
|
Impairment
loss on intangible asset |
|
|
366 |
|
|
|
- |
|
|
Stock based
compensation expense |
|
|
115 |
|
|
|
344 |
|
|
Gain on asset
sales |
|
|
(2,005 |
) |
|
|
(3,708 |
) |
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
|
$ |
8,085 |
|
|
$ |
9,663 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA,
excluding ownership in The Light Group and Mondrian SoHo
|
|
$ |
8,085 |
|
|
$ |
9,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel and F&B EBITDA Analysis
(1) |
|
|
|
|
(In
thousands, except percentages) |
|
|
|
|
|
|
Three Months |
|
|
|
|
|
Ended March
31, |
|
% |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson |
$ |
(2,262 |
) |
|
$ |
(1,108 |
) |
|
|
-104 |
% |
|
Delano
South Beach |
|
7,132 |
|
|
|
8,173 |
|
|
|
-13 |
% |
|
Clift |
|
2,946 |
|
|
|
2,485 |
|
|
|
19 |
% |
|
|
Owned Comparable Hotels
(2) |
|
7,816 |
|
|
|
9,550 |
|
|
|
-18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mondrian
South Beach - Joint Venture |
|
350 |
|
|
|
535 |
|
|
|
-35 |
% |
|
Mondrian
SoHo (3) |
|
- |
|
|
|
112 |
|
|
|
-100 |
% |
|
Las Vegas
restaurant leases (4) |
|
917 |
|
|
|
1,155 |
|
|
|
-21 |
% |
|
|
Other Hotel and F&B
EBITDA |
|
1,267 |
|
|
|
1,802 |
|
|
|
-30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Hotel and F&B
EBITDA |
$ |
9,083 |
|
|
$ |
11,352 |
|
|
|
-20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Hotel and F&B
EBITDA , excluding Mondrian SoHo |
$ |
9,083 |
|
|
$ |
11,240 |
|
|
|
-19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
|
|
|
|
Ended March
31, |
|
% |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson |
$ |
8,876 |
|
|
$ |
9,416 |
|
|
|
-6 |
% |
|
Delano
South Beach |
|
7,765 |
|
|
|
8,500 |
|
|
|
-9 |
% |
|
Clift |
|
8,603 |
|
|
|
7,880 |
|
|
|
9 |
% |
|
|
Total Owned Hotels |
$ |
25,244 |
|
|
$ |
25,796 |
|
|
|
-2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned F&B Revenue Analysis |
|
|
|
|
(In
thousands, except percentages) |
|
|
|
|
|
|
Three Months |
|
|
|
|
|
Ended March
31, |
|
% |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson
(1) |
$ |
2,749 |
|
|
$ |
2,961 |
|
|
|
-7 |
% |
|
Delano
South Beach |
|
6,368 |
|
|
|
7,138 |
|
|
|
-11 |
% |
|
Clift |
|
3,200 |
|
|
|
2,959 |
|
|
|
8 |
% |
|
Las Vegas
restaurant leases (2) |
|
6,320 |
|
|
|
6,533 |
|
|
|
-3 |
% |
|
Sanderson
food and beverage (3) |
|
1,795 |
|
|
|
1,980 |
|
|
|
-9 |
% |
|
|
Total Owned
F&B |
$ |
20,432 |
|
|
$ |
21,571 |
|
|
|
-5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned Revenue Analysis |
|
|
|
|
(In
thousands, except percentages) |
|
|
|
|
|
|
Three Months |
|
|
|
|
|
Ended March
31, |
|
% |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson |
$ |
12,643 |
|
|
$ |
13,438 |
|
|
|
-6 |
% |
|
Delano
South Beach |
|
14,944 |
|
|
|
16,184 |
|
|
|
-8 |
% |
|
Clift |
|
12,172 |
|
|
|
11,163 |
|
|
|
9 |
% |
|
Las Vegas
restaurant leases (2) |
|
6,320 |
|
|
|
6,533 |
|
|
|
-3 |
% |
|
Sanderson
food and beverage (3) |
|
1,795 |
|
|
|
1,980 |
|
|
|
-9 |
% |
|
|
Total Owned Hotels and
F&B |
$ |
47,874 |
|
|
$ |
49,298 |
|
|
|
-3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The primary bar at Hudson was closed from April 2015
through October 2015. |
|
|
|
|
|
|
(2) Reflects revenues from the leasehold interests in three
food and beverage venues at Mandalay Bay in Las Vegas. |
|
|
|
|
|
|
(3) 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
increased 2.7% for the three months ended December 31, 2015
compared to the same period in 2014 and decreased 0.9% for the year
ended December 31, 2015 compared to the same period in
2014. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheets |
|
(In
thousands) |
|
|
|
March 31, 2016 |
|
December 31,
2015 |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Property
and equipment, net |
|
$ |
261,682 |
|
|
$ |
265,678 |
|
|
Goodwill |
|
|
53,691 |
|
|
|
54,057 |
|
|
Investments in and advances to unconsolidated joint ventures |
|
|
100 |
|
|
|
100 |
|
|
Cash and
cash equivalents |
|
|
11,917 |
|
|
|
45,925 |
|
|
Restricted cash |
|
|
15,291 |
|
|
|
12,892 |
|
|
Accounts
receivable, net |
|
|
7,526 |
|
|
|
8,325 |
|
|
Prepaid
expenses and other assets |
|
|
6,464 |
|
|
|
8,897 |
|
|
Deferred
tax asset, net |
|
|
128,975 |
|
|
|
128,645 |
|
|
Other
assets, net |
|
|
32,371 |
|
|
|
33,516 |
|
|
Total assets |
|
$ |
518,017 |
|
|
$ |
558,035 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
Debt and
capital lease obligations, net of deferred financing costs of $4.0
million and $3.7 million, respectively |
|
$ |
574,304 |
|
|
$ |
602,630 |
|
|
Accounts
payable and accrued liabilities |
|
|
33,208 |
|
|
|
33,599 |
|
|
Deferred
gain on asset sales |
|
|
115,373 |
|
|
|
117,378 |
|
|
Other
liabilities |
|
|
13,866 |
|
|
|
13,866 |
|
|
Total liabilities |
|
|
736,751 |
|
|
|
767,473 |
|
|
|
|
|
|
|
|
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 March
31, 2016 and December 31, 2015, respectively |
|
|
72,219 |
|
|
|
71,025 |
|
|
Common
stock, $0.01 par value; 200,000,000 shares authorized; 36,277,495
shares issued at March 31, 2016 and December 31, 2015,
respectively |
|
|
363 |
|
|
|
363 |
|
|
Additional paid-in capital |
|
|
236,334 |
|
|
|
236,730 |
|
|
Treasury
stock, at cost, 1,513,234 and 1,541,381 shares of common stock at
March 31, 2016 and December 31, 2015, respectively |
|
|
(16,775 |
) |
|
|
(17,257 |
) |
|
Accumulated other comprehensive loss |
|
|
(1,593 |
) |
|
|
(1,131 |
) |
|
Accumulated deficit |
|
|
(509,861 |
) |
|
|
(499,765 |
) |
|
Total Morgans Hotel Group Co.
stockholders’ deficit |
|
|
(219,313 |
) |
|
|
(210,035 |
) |
|
Noncontrolling interest |
|
|
579 |
|
|
|
597 |
|
|
|
|
|
|
|
|
|
|
|
|
Total deficit |
|
|
(218,734 |
) |
|
|
(209,438 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’
deficit |
|
$ |
518,017 |
|
|
$ |
558,035 |
|
|
|
|
|
|
|
|
|
|
Contacts:
Investors
Richard Szymanski
Morgans Hotel Group Co.
212.277.4188
Media
Stephanie Pillersdorf
Sard Verbinnen & Co
212.687.8080
Grafico Azioni Morgans Hotel Grp. Co. (NASDAQ:MHGC)
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