Exhibit 99.1
Contacts:
Richard Szymanski
Morgans Hotel Group
212.277.4188
Kate Finn
The Abernathy MacGregor Group
212.371.5999
MORGANS HOTEL GROUP REPORTS FOURTH QUARTER 2008 RESULTS
NEW YORK, NY — February 26, 2009 —Morgans Hotel Group Co. (NASDAQ: MHGC) (“MHG”) today reported financial results for the fourth quarter and year ended December 31, 2008.
Highlights
| | • | | Revenue per available room (“RevPAR”) for Owned Comparable Hotels1 decreased by 17.7% in the fourth quarter from the comparable period in 2007. |
| | • | | RevPAR for System-Wide Comparable Hotels2 decreased by 23.3% (19.1% in constant dollars) in the fourth quarter from the comparable period in 2007. |
| | • | | Adjusted EBITDA for the fourth quarter was $22.2 million, a decrease of 35% from the comparable period in 2007. |
| | • | | EBITDA margins at System-Wide Comparable Hotels during the fourth quarter decreased by 450 basis points over the comparable period in 2007. MHG achieved a 13% reduction in operating expenses at System-Wide Comparable Hotels due to the implementation of plans put into effect beginning the first quarter of 2008 in anticipation of an economic slowdown. |
| | • | | EBITDA at System-Wide Comparable Hotels during the fourth quarter decreased by 32% from the comparable period in 2007, a rate of 1.4 times the related RevPAR percentage change. |
| | • | | RevPAR for Owned Comparable Hotels decreased by 0.7% for the year ended December 31, 2008 from the comparable period in 2007. |
| | | |
| 1 | | “Owned Comparable Hotels” includes all wholly-owned hotels operated by MHG except for hotels under renovation during the period or the relevant comparison period for the prior year and development projects. Owned Comparable Hotels for 2008 excludes Mondrian Los Angeles and Morgans, which were under renovation in 2008, and Royalton, which was under renovation in 2007. |
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| 2 | | “System-Wide Comparable Hotels” includes all hotels operated by MHG except for hotels under renovation during the period or the relevant comparison period for the prior year and development projects. System-Wide Comparable Hotels for 2008 excludes Mondrian Los Angeles and Morgans, which were under renovation in 2008, Royalton, which was under renovation in 2007, the Hard Rock Hotel & Casino in Las Vegas (“Hard Rock”), which was added in February 2007 and under renovation/expansion in 2008, and Mondrian South Beach, which opened in December 2008. |
| | • | | RevPAR for System-Wide Comparable Hotels decreased by 5.3% (3.7% in constant dollars) for the year ended December 31, 2008 from the comparable period in 2007. |
| | • | | Adjusted EBITDA for the year ended December 31, 2008 was $92.7 million, a decrease of 16% from the comparable period in 2007. |
| | • | | Adjusted EBITDA at System-Wide Comparable Hotels decreased by 2% for the year ended December 31, 2008 from the comparable period in 2007. |
| | • | | EBIDTA margins at System-Wide Comparable Hotels increased by 60 basis points for the year ended December 31, 2008 from the comparable period in 2007. |
| | • | | A restructuring plan implemented in October 2008 is projected to result in approximately $10 million in annual cost savings, including an approximately $6 million reduction in corporate expenses. Additional restructurings projected to result in savings of approximately $5 million annually were implemented in January 2009. |
| | • | | MHG extended the $10 million promissory note on the Gale property from February 2009 to February 2010. |
| | • | | In December 2008, MHG received an $11.5 million cash distribution from its London joint venture. |
| | • | | With the completion of the redesigned Mondrian Los Angeles and Morgans properties in September 2008, MHG has no significant deferred capital expenditure requirements at its owned hotels. |
| | • | | Mondrian South Beach, which is 50% owned by MHG, opened in December 2008. Additionally, the joint venture amended its debt agreement to provide for a series of one year debt extensions through 2013, subject to certain conditions. |
| | • | | Mondrian SoHo, Boston Ames and the expansion of Hard Rock are all currently on target to open in the fourth quarter of 2009 or early 2010. |
Fred Kleisner, President and CEO of Morgans Hotel Group, said: “In a very difficult environment, we are taking decisive steps to increase efficiencies and unlock cash flow through highly targeted and sustainable cost savings initiatives. These initiatives allowed us to achieve a very favorable ratio of RevPAR to EBITDA decline while at the same time maintaining the quality of our guest experience, therefore demonstrating our ability to react quickly and effectively to the current environment. From a capital standpoint, we ended the year with approximately $50 million in cash, we have no significant near term consolidated maturities and 3 major hotels that are unleveraged. We are mindful of the continuing economic situation and are fully prepared to take additional steps to further increase efficiencies, preserve cash flow, strengthen liquidity and maximize shareholder value for the long-term.”
Fourth Quarter 2008 Operating Results
RevPAR at Owned Comparable Hotels decreased by 17.7% in the fourth quarter of 2008 compared to the fourth quarter of 2007. RevPAR at System-Wide Comparable Hotels decreased by 23.3% (19.1% in constant dollars) in the fourth quarter of 2008 compared to the fourth quarter of 2007.
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Special items in the fourth quarter of 2008 included a $13.4 million impairment charge on the Mondrian Scottsdale hotel, a $23.8 million impairment loss on the investment in the Hard Rock joint venture and $2.0 million of restructuring and severance charges.
MHG recorded a net loss of $34.5 million in the fourth quarter of 2008 compared to a net loss of $6.1 million in the fourth quarter of 2007 primarily due to these special items.
Operating Results for the Year Ended December 31, 2008
RevPAR at Owned Comparable Hotels decreased by 0.7% in 2008 compared to 2007. RevPAR at System-Wide Comparable Hotels decreased by 5.3% (3.7% in constant dollars) in 2008 compared to 2007.
MHG recorded a net loss of $51.2 million in 2008 compared to a net loss of $14.8 million in 2007 primarily due to the special items discussed above.
Balance Sheet and Liquidity
As of December 31, 2008, consolidated debt excluding the Clift lease obligation was $648.8 million and cash and cash equivalents were $49.2 million. As of December 31, 2008, there were no borrowings outstanding under MHG’s revolving credit facility, which is secured by three owned hotels — Delano, Royalton and Morgans. In addition, MHG has no near-term consolidated maturities, except for the $40 million non-recourse debt at Mondrian Scottsdale which is due in June 2009. We do not intend to invest additional capital at Mondrian Scottsdale in 2009.
As of December 31, 2008, MHG estimates that its total future capital commitments for development projects consisted of approximately $22 million. These include approximately $11 million and $4 million to fund letters of credit posted for the Hard Rock expansion and Boston Ames, respectively. With the re-launch of Mondrian Los Angeles and Morgans in September 2008, all major renovation projects have been completed and there are no significant deferred capital expenditure requirements at our owned hotels.
Additionally, MHG expects to utilize its net operating losses of approximately $60 million to offset future income and gains on the sale of assets as part of its long-term strategy to reduce its ownership interests in hotels.
Development Activity
MHG’s projects currently under construction are the Hard Rock expansion, the Boston Ames and the Mondrian SoHo, all of which are expected to be completed in the fourth quarter of 2009 or early 2010.
2009 Outlook
The global economic downturn has had a significant adverse impact on demand, particularly since the middle of September. Given the continuing uncertainty about the depth and duration of the economic crisis, we are not comfortable defining a specific RevPAR target or range for the year. However, to provide a framework, if we succeed in maintaining a ratio of EBITDA percentage decline to RevPAR percentage decline of between 1.5 and 2 to 1 and if RevPAR for the year were to decline on average 20-25%, we would expect 2009 Adjusted EBITDA to be between $45-60 million.
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Conference Call
MHG will host a conference call to discuss the fourth quarter financial results today at 5:00 PM Eastern time.
The call will be webcast live over the Internet at www.morganshotelgroup.com under the About Us, Investor Overview 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 can also be accessed live over the phone by dialing 888-802-8577 or 973-935-8754 for international callers; the password is 84083956. A replay of the call will be available two hours after the call and can be accessed by dialing 800-642-1687 or 706-645-9291 for international callers; the password is 84083956. The replay will be available from February 26, 2009 through March 5, 2009.
About Morgans Hotel Group
Morgans Hotel Group Co. (NASDAQ: MHGC) operates and owns, or has an ownership interest in, Morgans, Royalton and Hudson in New York, Delano and Shore Club in Miami, Mondrian in Los Angeles and Scottsdale, Clift in San Francisco, and Sanderson and St Martins Lane in London. MHG and an equity partner also own the Hard Rock Hotel & Casino in Las Vegas and related assets. MHG has other property transactions in various stages of completion, including projects in Miami Beach, Florida; SoHo, New York; Las Vegas, Nevada; Palm Springs, California; Boston, Massachusetts; and Dubai, UAE. For more information please visitwww.morganshotelgroup.com.
Forward-Looking and Cautionary Statements
Statements contained in this press release which are not historical facts are forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of words such as “expects,” “plans,” “estimates,” “projects,” “intends,” “believes,” “guidance,” and similar expressions that do not relate to historical matters. These forward-looking statements are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated, due to a number of factors which include, but are not limited to, downturns in economic and market conditions, particularly levels of spending in the business, travel and leisure industries; hostilities, including future terrorist attacks, or fear of hostilities that affect travel; risks related to natural disasters, such as earthquakes and hurricanes; risks associated with the acquisition, development and integration of properties; the seasonal nature of the hospitality business; changes in the tastes of our customers; increases in real property tax rates; increases in interest rates and operating costs; the impact of any material litigation; the loss of key members of our senior management; general volatility of the capital markets and our ability to access the capital markets; and changes in the competitive environment in our industry and the markets where we invest, and other risk factors discussed in MHG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and other documents filed by MHG with the Securities and Exchange Commission 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 MHG 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.
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Income Statement
(In Thousands, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | Three Months | | | Year | |
| | | Ended Dec. 31, | | | Ended Dec. 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Revenues : | | | | | | | | | | | | | | | | |
| Rooms | | $ | 45,538 | | | $ | 54,250 | | | $ | 184,059 | | | $ | 186,752 | |
| Food & beverage | | | 22,862 | | | | 27,699 | | | | 99,254 | | | | 104,271 | |
| Other hotel | | | 2,897 | | | | 3,356 | | | | 12,854 | | | | 13,781 | |
| | | | | | | | | | | | | |
| Total hotel revenues | | | 71,297 | | | | 85,305 | | | | 296,167 | | | | 304,804 | |
| Management fees | | | 3,413 | | | | 4,490 | | | | 18,300 | | | | 18,181 | |
| | | | | | | | | | | | | |
| Total revenues | | | 74,710 | | | | 89,795 | | | | 314,467 | | | | 322,985 | |
| | | | | | | | | | | | | | | | | |
| Operating Costs and Expenses : | | | | | | | | | | | | | | | | |
| Rooms | | | 12,399 | | | | 13,367 | | | | 49,561 | | | | 49,411 | |
| Food & beverage | | | 17,157 | | | | 19,021 | | | | 71,695 | | | | 69,998 | |
| Other departmental | | | 1,660 | | | | 2,107 | | | | 7,461 | | | | 7,923 | |
| Hotel, selling, general and administrative | | | 14,936 | | | | 16,400 | | | | 60,311 | | | | 60,245 | |
| Property taxes, insurance and other | | | 3,728 | | | | 5,527 | | | | 16,957 | | | | 19,017 | |
| | | | | | | | | | | | | |
| Total hotel operating expenses | | | 49,880 | | | | 56,422 | | | | 205,985 | | | | 206,594 | |
| Corporate expenses : | | | | | | | | | | | | | | | | |
| Stock based compensation | | | 3,803 | | | | 3,461 | | | | 15,933 | | | | 19,526 | |
| Other | | | 3,084 | | | | 4,554 | | | | 25,956 | | | | 25,218 | |
| Depreciation and amortization | | | 8,037 | | | | 6,980 | | | | 27,733 | | | | 21,719 | |
| Impairment Loss | | | 13,430 | | | | — | | | | 13,430 | | | | — | |
| | | | | | | | | | | | | |
| Total operating costs and expenses | | | 78,234 | | | | 71,417 | | | | 289,037 | | | | 273,057 | |
| Operating (loss) income | | | (3,524 | ) | | | 18,378 | | | | 25,430 | | | | 49,928 | |
| | | | | | | | | | | | | | | | | |
| Interest expense, net | | | 12,111 | | | | 8,834 | | | | 43,164 | | | | 41,338 | |
| Equity in loss of unconsolidated joint ventures | | | 40,055 | | | | 11,713 | | | | 56,581 | | | | 24,580 | |
| Minority interest in joint ventures | | | 612 | | | | 983 | | | | 3,894 | | | | 3,566 | |
| Other non-operating loss | | | 5,349 | | | | 5,647 | | | | 11,289 | | | | 4,759 | |
| | | | | | | | | | | | | | | | | |
| Net loss before income taxes | | | (61,651 | ) | | | (8,799 | ) | | | (89,498 | ) | | | (24,315 | ) |
| Income taxes benefit | | | (26,079 | ) | | | (2,562 | ) | | | (36,700 | ) | | | (9,060 | ) |
| Net loss before minority interest | | | (35,572 | ) | | | (6,237 | ) | | | (52,798 | ) | | | (15,255 | ) |
| | | | | | | | | | | | | | | | | |
| Minority interest | | | (1,097 | ) | | | (185 | ) | | | (1,617 | ) | | | (459 | ) |
| | | | | | | | | | | | | | | | | |
| Net loss | | $ | (34,475 | ) | | $ | (6,052 | ) | | $ | (51,181 | ) | | $ | (14,796 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted aveage shares outstanding — diluted | | | 29,543 | | | | 32,749 | | | | 31,413 | | | | 33,239 | |
| | | | | | | | | | | | | | | | | |
| Loss per share | | $ | (1.17 | ) | | $ | (0.18 | ) | | $ | (1.63 | ) | | $ | (0.45 | ) |
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| | | (In Actual Dollars) | | | | | | | ( In Constant Dollars, if different) | | | (In Actual Dollars) | | | | | | | (In Constant Dollars, if different) | |
| | | Three Months | | | | | | | Three Months | | | | | | | Year | | | | | | | Year | | | | |
| | | Ended Dec. 31, | | | % | | | Ended Dec. 31, | | | % | | | Ended Dec. 31, | | | % | | | Ended Dec. 31, | | | % | |
| Hotel Operating Statistics | | 2008 | | | 2007 | | | Change | | | 2008 | | | 2007 | | | Change | | | 2008 | | | 2007 | | | Change | | | 2008 | | | 2007 | | | Change | |
| Hudson | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 89.3 | % | | | 93.2 | % | | | -4.2 | % | | | | | | | | | | | | | | | 90.7 | % | | | 91.8 | % | | | -1.2 | % | | | | | | | | | | | | |
| ADR | | $ | 301.91 | | | $ | 348.36 | | | | -13.3 | % | | | | | | | | | | | | | | $ | 283.33 | | | $ | 283.96 | | | | -0.2 | % | | | | | | | | | | | | |
| RevPAR | | $ | 269.61 | | | $ | 324.67 | | | | -17.0 | % | | | | | | | | | | | | | | $ | 256.98 | | | $ | 260.68 | | | | -1.4 | % | | | | | | | | | | | | |
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| Delano | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 68.9 | % | | | 71.0 | % | | | -3.0 | % | | | | | | | | | | | | | | | 79.3 | % | | | 73.0 | % | | | 8.6 | % | | | | | | | | | | | | |
| ADR | | $ | 546.77 | | | $ | 582.64 | | | | -6.2 | % | | | | | | | | | | | | | | $ | 540.16 | | | $ | 557.29 | | | | -3.1 | % | | | | | | | | | | | | |
| RevPAR | | $ | 376.72 | | | $ | 413.67 | | | | -8.9 | % | | | | | | | | | | | | | | $ | 428.35 | | | $ | 406.82 | | | | 5.3 | % | | | | | | | | | | | | |
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| Clift | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 66.0 | % | | | 77.5 | % | | | -14.8 | % | | | | | | | | | | | | | | | 74.8 | % | | | 74.3 | % | | | 0.7 | % | | | | | | | | | | | | |
| ADR | | $ | 241.58 | | | $ | 266.75 | | | | -9.4 | % | | | | | | | | | | | | | | $ | 254.36 | | | $ | 258.92 | | | | -1.8 | % | | | | | | | | | | | | |
| RevPAR | | $ | 159.44 | | | $ | 206.73 | | | | -22.9 | % | | | | | | | | | | | | | | $ | 190.26 | | | $ | 192.38 | | | | -1.1 | % | | | | | | | | | | | | |
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| Mondrian Scottsdale | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 37.4 | % | | | 47.0 | % | | | -20.4 | % | | | | | | | | | | | | | | | 50.8 | % | | | 56.0 | % | | | -9.3 | % | | | | | | | | | | | | |
| ADR | | $ | 160.83 | | | $ | 222.53 | | | | -27.7 | % | | | | | | | | | | | | | | $ | 193.99 | | | $ | 203.32 | | | | -4.6 | % | | | | | | | | | | | | |
| RevPAR | | $ | 60.15 | | | $ | 104.59 | | | | -42.5 | % | | | | | | | | | | | | | | $ | 98.55 | | | $ | 113.86 | | | | -13.4 | % | | | | | | | | | | | | |
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Total Owned — Comparable | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Occupancy | | | 74.8 | % | | | 81.0 | % | | | -7.7 | % | | | | | | | | | | | | | | | 80.6 | % | | | 80.9 | % | | | -0.4 | % | | | | | | | | | | | | |
ADR | | $ | 308.77 | | | $ | 346.65 | | | | -10.9 | % | | | | | | | | | | | | | | $ | 301.53 | | | $ | 302.49 | | | | -0.3 | % | | | | | | | | | | | | |
RevPAR | | $ | 230.96 | | | $ | 280.79 | | | | -17.7 | % | | | | | | | | | | | | | | $ | 243.03 | | | $ | 244.71 | | | | -0.7 | % | | | | | | | | | | | | |
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| St. Martins Lane | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 73.6 | % | | | 76.5 | % | | | -3.8 | % | | | 73.6 | % | | | 76.5 | % | | | -3.8 | % | | | 75.0 | % | | | 77.1 | % | | | -2.7 | % | | | 75.0 | % | | | 77.1 | % | | | -2.7 | % |
| ADR | | $ | 349.02 | | | $ | 524.43 | | | | -33.4 | % | | $ | 410.85 | | | $ | 475.72 | | | | -13.6 | % | | $ | 420.16 | | | $ | 467.07 | | | | -10.0 | % | | $ | 420.16 | | | $ | 432.86 | | | | -2.9 | % |
| RevPAR | | $ | 256.88 | | | $ | 401.19 | | | | -36.0 | % | | $ | 302.39 | | | $ | 363.93 | | | | -16.9 | % | | $ | 315.12 | | | $ | 360.11 | | | | -12.5 | % | | $ | 315.12 | | | $ | 333.74 | | | | -5.6 | % |
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| Sanderson | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 73.4 | % | | | 78.8 | % | | | -6.9 | % | | | 73.4 | % | | | 78.8 | % | | | -6.9 | % | | | 74.1 | % | | | 77.8 | % | | | -4.8 | % | | | 74.1 | % | | | 77.8 | % | | | -4.8 | % |
| ADR | | $ | 409.39 | | | $ | 593.47 | | | | -31.0 | % | | $ | 481.92 | | | $ | 538.35 | | | | -10.5 | % | | $ | 482.85 | | | $ | 539.20 | | | | -10.5 | % | | $ | 482.85 | | | $ | 499.70 | | | | -3.4 | % |
| RevPAR | | $ | 300.49 | | | $ | 467.65 | | | | -35.7 | % | | $ | 353.73 | | | $ | 424.22 | | | | -16.6 | % | | $ | 357.79 | | | $ | 419.50 | | | | -14.7 | % | | $ | 357.79 | | | $ | 388.77 | | | | -8.0 | % |
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| Shore Club | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 55.4 | % | | | 62.4 | % | | | -11.2 | % | | | | | | | | | | | | | | | 64.2 | % | | | 65.1 | % | | | -1.4 | % | | | | | | | | | | | | |
| ADR | | $ | 370.24 | | | $ | 464.03 | | | | -20.2 | % | | | | | | | | | | | | | | $ | 388.21 | | | $ | 435.8 | | | | -10.9 | % | | | | | | | | | | | | |
| RevPAR | | $ | 205.11 | | | $ | 289.55 | | | | -29.2 | % | | | | | | | | | | | | | | $ | 249.23 | | | $ | 283.71 | | | | -12.2 | % | | | | | | | | | | | | |
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System-wide — Comparable | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Occupancy | | | 71.9 | % | | | 77.8 | % | | | -7.6 | % | | | 71.9 | % | | | 77.8 | % | | | -7.6 | % | | | 77.4 | % | | | 78.2 | % | | | -1.0 | % | | | 77.4 | % | | | 78.2 | % | | | -1.0 | % |
ADR | | $ | 326.08 | | | $ | 392.70 | | | | -17.0 | % | | $ | 336.89 | | | $ | 384.53 | | | | -12.4 | % | | $ | 333.84 | | | $ | 348.79 | | | | -4.3 | % | | $ | 333.84 | | | $ | 343.03 | | | | -2.7 | % |
RevPAR | | $ | 234.45 | | | $ | 305.52 | | | | -23.3 | % | | $ | 242.22 | | | $ | 299.16 | | | | -19.1 | % | | $ | 258.39 | | | $ | 272.75 | | | | -5.3 | % | | $ | 258.39 | | | $ | 268.25 | | | | -3.7 | % |
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| Morgans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 86.3 | % | | | 88.5 | % | | | -2.5 | % | | | | | | | | | | | | | | | 81.1 | % | | | 86.4 | % | | | -6.1 | % | | | | | | | | | | | | |
| ADR | | $ | 367.37 | | | $ | 422.48 | | | | -13.0 | % | | | | | | | | | | | | | | $ | 350.72 | | | $ | 342.15 | | | | 2.5 | % | | | | | | | | | | | | |
| RevPAR | | $ | 317.04 | | | $ | 373.89 | | | | -15.2 | % | | | | | | | | | | | | | | $ | 284.43 | | | $ | 295.62 | | | | -3.8 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Royalton | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 90.4 | % | | | 80.9 | % | | | 11.7 | % | | | | | | | | | | | | | | | 88.0 | % | | | 84.7 | % | | | 3.9 | % | | | | | | | | | | | | |
| ADR | | $ | 401.68 | | | $ | 488.45 | | | | -17.8 | % | | | | | | | | | | | | | | $ | 389.73 | | | $ | 384.31 | | | | 1.4 | % | | | | | | | | | | | | |
| RevPAR | | $ | 363.12 | | | $ | 395.16 | | | | -8.1 | % | | | | | | | | | | | | | | $ | 342.96 | | | $ | 325.51 | | | | 5.4 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mondrian LA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 48.0 | % | | | 55.1 | % | | | -12.9 | % | | | | | | | | | | | | | | | 52.0 | % | | | 76.5 | % | | | -32.0 | % | | | | | | | | | | | | |
| ADR | | $ | 333.44 | | | $ | 337.99 | | | | -1.3 | % | | | | | | | | | | | | | | $ | 348.16 | | | $ | 326.82 | | | | 6.5 | % | | | | | | | | | | | | |
| RevPAR | | $ | 160.05 | | | $ | 186.23 | | | | -14.1 | % | | | | | | | | | | | | | | $ | 181.04 | | | $ | 250.02 | | | | -27.6 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Hard Rock (1) (2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 85.6 | % | | | 92.5 | % | | | -7.5 | % | | | | | | | | | | | | | | | 91.7 | % | | | 94.6 | % | | | -3.1 | % | | | | | | | | | | | | |
| ADR | | $ | 148.16 | | | $ | 171.16 | | | | -13.4 | % | | | | | | | | | | | | | | $ | 186.43 | | | $ | 207.47 | | | | -10.1 | % | | | | | | | | | | | | |
| RevPAR | | $ | 126.82 | | | $ | 158.32 | | | | -19.9 | % | | | | | | | | | | | | | | $ | 170.96 | | | $ | 196.27 | | | | -12.9 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mondrian South Beach | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Occupancy | | | 55.0 | % | | | 0.0 | % | | | n/m | | | | | | | | | | | | | | | | 55.0 | % | | | 0.0 | % | | | n/m | | | | | | | | | | | | | |
| ADR | | $ | 288.97 | | | $ | — | | | | n/m | | | | | | | | | | | | | | | $ | 288.97 | | | $ | — | | | | n/m | | | | | | | | | | | | | |
| RevPAR | | $ | 158.91 | | | $ | — | | | | n/m | | | | | | | | | | | | | | | $ | 158.91 | | | $ | — | | | | n/m | | | | | | | | | | | | | |
| | | |
| (1) | | For comparison purposes, includes January 2007 when MHG did not operate the hotel. |
| |
| (2) | | As customary in the gaming industry, we present average occupancy and average daily rate for the Hard Rock including rooms provided on a complimentary basis which is not the practice in the lodging industry |
6
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
We believe that earnings before interest, income taxes, depreciation and amortization (EBITDA) is a useful financial metric to assess our operating performance before the impact of investing and financing transactions and income taxes. It also facilitates comparison between us and our competitors. Given the significant investments that we have made in the past in property, plant and equipment, depreciation and amortization expense comprises a meaningful portion of our cost structure. We believe 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.
We disclose Adjusted EBITDA because we believe it provides a meaningful comparison to our EBITDA as it excludes other non-operating (income) expenses that do not relate to the on-going performance of our assets and excludes the operating performance of assets in which we do not have a fee simple ownership interest. It also excludes stock-based compensation expense.
The use of EBITDA and Adjusted EBITDA has certain limitations. Our 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 our results. Additionally, EBITDA and Adjusted EBITDA do not reflect capital expenditures and other investing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation, interest and income tax expense, capital expenditures and other items both in our reconciliations to our GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance. The term EBITDA is not defined under accounting principles generally accepted in the United States, or 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 our operating performance, you should not consider this data in isolation, or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, our EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as we do.
7
A reconciliation of net income (loss), the most directly comparable U.S. GAAP measures, to EBITDA and Adjusted EBITDA for each of the respective periods indicated is as follows:
EBITDA Reconciliation
(In Thousands)
| | | | | | | | | | | | | | | | | |
| | | Three Months | | | Year | |
| | | Ended Dec. 31, | | | Ended Dec. 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Net income (loss) | | $ | (34,475 | ) | | $ | (6,052 | ) | | $ | (51,181 | ) | | $ | (14,796 | ) |
| Interest expense, net | | | 12,111 | | | | 8,834 | | | | 43,164 | | | | 41,338 | |
| Income tax expense | | | (26,079 | ) | | | (2,562 | ) | | | (36,700 | ) | | | (9,060 | ) |
| Depreciation and amortization expense | | | 8,037 | | | | 6,980 | | | | 27,733 | | | | 21,719 | |
| Proportionate share of interest expense from unconsolidated joint ventures | | | 11,506 | | | | 12,282 | | | | 32,899 | | | | 36,908 | |
| Proportionate share of depreciation expense from unconsolidated joint ventures | | | 2,095 | | | | 3,622 | | | | 10,347 | | | | 10,150 | |
| Proportionate share of depreciation expense of MI of consolidated joint ventures | | | (98 | ) | | | (53 | ) | | | (409 | ) | | | (497 | ) |
| Minority interest | | | (1,097 | ) | | | (185 | ) | | | (1,617 | ) | | | (460 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| EBITDA | | | (28,000 | ) | | | 22,866 | | | | 24,236 | | | | 85,302 | |
| | | | | | | | | | | | | | | | | |
| Add : Other non operating expense (income) | | | 5,349 | | | | 5,647 | | | | 11,289 | | | | 4,759 | |
| Add: Impairment from Mondrian Scottsdale | | | 13,430 | | | | — | | | | 13,430 | | | | — | |
| Add : Other non operating expense (income) from unconsolidated joint ventures | | | 29,154 | | | | 4,081 | | | | 35,490 | | | | 7,310 | |
| Less : Clift | | | (1,569 | ) | | | (1,898 | ) | | | (7,643 | ) | | | (6,755 | ) |
| Add : Stock based compensation | | | 3,803 | | | | 3,461 | | | | 15,933 | | | | 19,526 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Adjusted EBITDA | | $ | 22,167 | | | $ | 34,157 | | | $ | 92,735 | | | $ | 110,142 | |
8
Room Revenue Analysis
(In Thousands, except percentages)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months | | | | | | | Year | | | | |
| | | Ended Dec. 31, | | | % | | | Ended Dec. 31, | | | % | |
| | | 2008 | | | 2007 | | | Change | | | 2008 | | | 2007 | | | Change | |
| Hudson | | $ | 19,968 | | | $ | 24,034 | | | | -17 | % | | $ | 75,722 | | | $ | 76,610 | | | | -1 | % |
| Delano | | | 6,723 | | | | 7,387 | | | | -9 | % | | | 30,417 | | | | 28,923 | | | | 5 | % |
| Clift | | | 5,339 | | | | 6,907 | | | | -23 | % | | | 25,297 | | | | 25,497 | | | | -1 | % |
| Mondrian Scottsdale | | | 1,073 | | | | 1,866 | | | | -42 | % | | | 7,004 | | | | 8,069 | | | | -13 | % |
| | | | | | | | | | | | | | | | | | | |
| Total Owned — Comparable | | | 33,103 | | | | 40,194 | | | | -18 | % | | | 138,440 | | | | 139,099 | | | | 0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Morgans | | | 3,333 | | | | 3,886 | | | | -14 | % | | | 8,813 | | | | 12,190 | | | | -28 | % |
| Royalton | | | 5,611 | | | | 6,107 | | | | -8 | % | | | 21,090 | | | | 13,840 | | | | 52 | % |
| Mondrian LA | | | 3,491 | | | | 4,063 | | | | -14 | % | | | 15,716 | | | | 21,623 | | | | -27 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Owned | | $ | 45,538 | | | $ | 54,250 | | | | -16 | % | | $ | 184,059 | | | $ | 186,752 | | | | -1 | % |
Hotel Revenue Analysis
(In Thousands, except percentages)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months | | | | | | | Year | | | | |
| | | Ended Dec. 31, | | | % | | | Ended Dec. 31, | | | % | |
| | | 2008 | | | 2007 | | | Change | | | 2008 | | | 2007 | | | Change | |
| Hudson | | $ | 24,967 | | | $ | 30,482 | | | | -18 | % | | $ | 97,789 | | | $ | 101,271 | | | | -3 | % |
| Delano | | | 14,113 | | | | 14,707 | | | | -4 | % | | | 62,115 | | | | 56,603 | | | | 10 | % |
| Clift | | | 9,425 | | | | 12,148 | | | | -22 | % | | | 42,066 | | | | 43,337 | | | | -3 | % |
| Mondrian Scottsdale | | | 2,053 | | | | 4,157 | | | | -51 | % | | | 13,788 | | | | 16,736 | | | | -18 | % |
| | | | | | | | | | | | | | | | | | | |
| Total Owned — Comparable | | | 50,558 | | | | 61,494 | | | | -18 | % | | | 215,758 | | | | 217,947 | | | | -1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Morgans | | | 5,894 | | | | 7,224 | | | | -18 | % | | | 19,109 | | | | 24,124 | | | | -21 | % |
| Royalton | | | 7,392 | | | | 8,004 | | | | -8 | % | | | 27,891 | | | | 18,290 | | | | 52 | % |
| Mondrian LA | | | 7,453 | | | | 8,583 | | | | -13 | % | | | 33,409 | | | | 44,443 | | | | -25 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Owned | | $ | 71,297 | | | $ | 85,305 | | | | -16 | % | | $ | 296,167 | | | $ | 304,804 | | | | -3 | % |
9
Hotel EBITDA Analysis
(In Thousands, except percentages)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months | | | | | | | Year | | | | |
| | | Ended Dec. 31, | | | % | | | Ended Dec. 31, | | | % | |
| | | 2008 | | | 2007 | | | Change | | | 2008 | | | 2007 | | | Change | |
| Hudson | | $ | 10,684 | | | $ | 15,507 | | | | -31 | % | | $ | 39,285 | | | $ | 43,075 | | | | -9 | % |
| Delano | | | 4,678 | | | | 4,869 | | | | -4 | % | | | 22,151 | | | | 19,422 | | | | 14 | % |
| Clift | | | 1,569 | | | | 1,898 | | | | -17 | % | | | 7,643 | | | | 6,755 | | | | 13 | % |
| Mondrian Scottsdale — Owned | | | (674 | ) | | | (47 | ) | | | 1334 | % | | | 218 | | | | (523 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Owned Comparable Hotels | | | 16,257 | | | | 22,227 | | | | -27 | % | | | 69,297 | | | | 68,729 | | | | 1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| St Martins Lane | | | 1,733 | | | | 3,345 | | | | -48 | % | | | 7,587 | | | | 9,293 | | | | -18 | % |
| Sanderson | | | 1,055 | | | | 2,262 | | | | -53 | % | | | 4,686 | | | | 5,604 | | | | -16 | % |
| Shore Club | | | 135 | | | | 240 | | | | -44 | % | | | 874 | | | | 901 | | | | -3 | % |
| | | | | | | | | | | | | | | | | | | |
| Joint Venture Comparable Hotels | | | 2,923 | | | | 5,847 | | | | -50 | % | | | 13,147 | | | | 15,798 | | | | -17 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Comparable Hotels | | | 19,180 | | | | 28,074 | | | | -32 | % | | | 82,444 | | | | 84,527 | | | | -2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Morgans | | | 947 | | | | 2,229 | | | | -58 | % | | | 2,968 | | | | 5,920 | | | | -50 | % |
| Royalton | | | 2,005 | | | | 1,129 | | | | 78 | % | | | 6,559 | | | | 3,711 | | | | 77 | % |
| Mondrian LA — Owned | | | 1,540 | | | | 2,199 | | | | -30 | % | | | 8,011 | | | | 15,703 | | | | -49 | % |
| Hard Rock — Joint Venture | | | (264 | ) | | | 2,460 | | | | -111 | % | | | 8,023 | | | | 13,991 | | | | -43 | % |
| Mondrian South Beach — Joint Venture | | | (10 | ) | | | | | | | | | | | (10 | ) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Hotels | | $ | 23,398 | | | $ | 36,091 | | | | -35 | % | | $ | 107,995 | | | $ | 123,852 | | | | -13 | % |
10
Adjusted EBITDA and Debt Analysis
(in thousands)
| | | | | | | | | |
| | | Adjusted EBITDA | | | | |
| | | Twelve Months | | | | |
| | | Ended | | | Debt at | |
| Consolidated Operations | | Dec. 31, 2008 | | | Dec. 31, 2008 | |
| (1)Morgans | | $ | 2,968 | | | $ | — | (2) |
| (1)Royalton | | | 6,559 | | | | — | (2) |
| Hudson | | | 39,285 | | | | 250,000 | |
| Delano | | | 22,151 | | | | — | (2) |
| (1)Mondrian LA | | | 8,011 | | | | 120,000 | |
| Mondrian Scottsdale | | | 218 | | | | 40,000 | |
| Other | | | (7,656 | ) | | | 238,787 | (3) |
| | | | | | | |
| | | | | | | | | |
| Total | | $ | 71,536 | | | $ | 648,787 | |
| | | | | | | | |
| Less: Cash | | | | | | | (49,150 | ) |
| | | | | | | | |
| Net Debt | | | | | | $ | 599,637 | |
| | | | | | | | |
| | | |
| (1) | | Hotel was under renovation in the past twelve months and had rooms out of service. |
| |
| (2) | | Hotel secures revolving credit facility. |
| |
| (3) | | Includes outstanding debt on convertible notes, trust preferred securities, the Gale promissory note and capital lease obligations, excluding Clift. |
| | | | | | | | | | | | | |
| | | | | | | Proportionate Share | | | | |
| | | | | | | of Adjusted EBITDA | | | Proportionate Share | |
| | | | | | | Twelve Months | | | of Debt Dec. 31, | |
| System-Wide Comparable Joint Venture Hotels(1) | | Ownership Percentage | | | Ended Dec. 31, 2008 | | | 2008 | |
| Sanderson and St Martins Lane | | | 50 | % | | $ | 12,273 | | | $ | 74,401 | |
| Shore Club | | | 7 | % | | | 874 | | | | 8,458 | |
| | | |
| (1) | | Includes information only for System-Wide Comparable Hotels. |
11
Balance Sheet (In Thousands)
| | | | | | | | | |
| | | Dec 31, | | | Dec 31, | |
| | | 2008 | | | 2007 | |
| Cash | | $ | 49,150 | | | $ | 122,712 | |
| Restricted cash | | | 21,484 | | | | 28,604 | |
| Property and equipment | | | 555,645 | | | | 535,609 | |
| Goodwill | | | 73,698 | | | | 73,698 | |
| Accounts receivable | | | 14,573 | | | | 13,755 | |
| Prepaid expenses and other assets | | | 9,192 | | | | 11,369 | |
| Investments in joint ventures | | | 56,754 | | | | 110,687 | |
| Deferred tax asset | | | 64,899 | | | | 27,636 | |
| Other assets | | | 14,490 | | | | 19,532 | |
| | | | | | | |
| Total assets | | | 859,885 | | | | 943,602 | |
| | | | | | | | | |
| Long-term debt | | | 648,787 | | | | 649,107 | |
| Capital lease obligations — Clift | | | 81,578 | | | | 80,092 | |
| Accounts payable and accrued expenses | | | 21,032 | | | | 36,126 | |
| Other liabilities | | | 35,655 | | | | 27,979 | |
| Loss from unconsolidated joint ventures in excess of investment | | | 14,563 | | | | 479 | |
| | | | | | | |
| Total liabilities | | | 801,615 | | | | 793,783 | |
| | | | | | | | | |
| Minority interests | | | 18,148 | | | | 19,833 | |
| Stockholders’ equity | | | 40,122 | | | | 129,986 | |
| | | | | | | |
| Total liabilities and equity | | $ | 859,885 | | | $ | 943,602 | |
| | | | | | | |
12
