Exhibit 99.1
Morgans Hotel Group Co. Announces
Fourth Quarter and Year End 2005 Results
NEW YORK--(BUSINESS WIRE)--March 27, 2006--Morgans Hotel Group
Co.(NASDAQ: MHGC):
2005 Highlights
-- Owned Hotels Produce RevPAR Growth of 17.3%
-- Operating Income Rises 40.4%
-- Adjusted EBITDA Increases 19.3%
Morgans Hotel Group Co. (NASDAQ: MHGC), a fully integrated
hospitality company that operates boutique hotels in gateway cities
under well-known brands such as Delano and Mondrian, today reported
fourth quarter and full year 2005 financial results.
Fourth quarter 2005 revenue per available room (RevPAR) for owned
hotels, all of which are comparable, increased 12.6% over the same
period in 2004. Total revenues, which include food and beverage, other
hotel revenues and management fees, increased 7.9% to $70.1 million as
compared to $65.0 million in the fourth quarter of 2004. Adjusted
earnings before interest, taxes depreciation and amortization
(Adjusted EBITDA) increased by 8.8% to $22.5 million as compared to
$20.7 million in the fourth quarter of 2004. Included in Adjusted
EBITDA in the fourth quarter of 2005 was $0.5 million in severance
charges and $0.4 million in reserves for prior period payroll taxes at
the Company's London joint venture. Included in the 2004 fourth
quarter Adjusted EBITDA was $0.6 million in income due to settlements
of prior period legal expenses. Excluding these items in both years'
quarters, Adjusted EBITDA increased by 16%.
Net loss for the fourth quarter of 2005 was $4.1 million compared
to a net loss of $2.4 million in the fourth quarter of 2004. In
addition to the items affecting Adjusted EBITDA above, the results
were negatively impacted by $2.2 million for the Company's 50% share
of a write-off of financing costs in connection with the refinancing
of debt in the London joint venture. A reconciliation of operating
income and net loss, calculated in accordance with U.S. generally
accepted accounting principles, to Adjusted EBITDA is included in the
accompanying tables.
For the full year 2005, RevPAR for owned hotels was up 17.3% over
the full year 2004. Total revenues increased 11.1% to $260.3 million
as compared to $234.4 million in the full year 2004. Adjusted EBITDA
improved 19.3% to $79.5 million as compared to $66.6 million in 2004.
Net loss for the full year 2005 was $33.2 million compared to a net
loss of $31.6 million for the full year 2004.
In February 2006, the Company completed its initial public
offering selling 18.0 million shares, including 3.0 million shares
from existing stockholders. The Company received net proceeds of
approximately $275.0 million. The proceeds were used to improve the
Company's debt-to-equity ratio by repaying a portion of outstanding
debt and preferred equity interests. Additionally, the Company will
use the proceeds to finance a portion of the acquisition of the James
Hotel Scottsdale and for general corporate purposes, including hotel
renovations.
Mr. W. Edward Scheetz, President and Chief Executive Officer
stated, "We are pleased with our progress in 2005 and look forward to
executing our growth plans for the remainder of 2006 and beyond. We
are also confident that our recent IPO will give us the financial
flexibility we need to expand the Morgans Hotel Group's brands and
further establish our position as the leader in the fast growing
boutique segment of the lodging industry."
Fourth Quarter Operating Results
RevPAR for the Company's owned hotels was $247.60 for the fourth
quarter 2005, a 12.6% increase over the comparable period in 2004. The
increase in RevPAR was driven by an increase of 18.4% for the
Company's three New York hotels. The growth was partially offset by
the impact from Hurricane Wilma in October which affected RevPAR at
the Delano in Miami for the fourth quarter 2005. Excluding Miami,
RevPAR at the Company's remaining five owned hotels increased
approximately 15.0%.
The RevPAR growth for the Company's owned hotels was derived
solely from average daily rate (ADR) growth, which increased by 13.5%,
or $38.72, to $326.22 for the fourth quarter of 2005 from $287.50 for
the fourth quarter of 2004. Occupancy for the Company's owned
portfolio was 75.9% in the fourth quarter 2005 as compared to 76.5% in
the fourth quarter of 2004.
Hotel operating margins, defined as hotel revenues less hotel
operating expenses, as a percentage of hotel revenues increased to
36.4% in the fourth quarter of 2005 from 32.1% in the fourth quarter
of 2004. The margin growth has been driven by the company's ability to
increase ADR due to the high occupancies in its markets.
At the Company's unconsolidated hotels, the London hotels
rebounded from the July terrorist bombings to post a RevPAR increase
of 4.1%. RevPAR at the Shore Club in Miami declined due to Hurricane
Wilma.
Full Year 2005 Company Highlights
RevPAR for owned hotels increased 17.3% to $224.19 for the full
year 2005 over the full year 2004. The Company achieved RevPAR growth
across all of its geographic markets. In particular, the Company's
three New York City hotels had RevPAR growth of 22.9% for the full
year 2005 as compared to the full year 2004.
The RevPAR growth at the Company's owned hotels for the full year
2005 was due to strong ADR growth, which increased 11.0%, or $27.73,
to $280.24 as compared to the full year 2004. Occupancy for the
Company's owned portfolio increased to 80.0% for the full year 2005
from 75.7% in the full year 2004. All six of the Company's owned
hotels experienced occupancy increases for the full year 2005 as
compared to the full year 2004.
Hotel operating margins, increased to 35.0% for the full year 2005
as compared 31.7% for the full year 2004. The margin growth was driven
by the company's ability to increase ADR due to high occupancies in
its markets.
Mr. Scheetz continued, "2005 was a year of strong operational
performance with double digit revenue and operating profit growth.
Results for full year 2005 also demonstrate the strength of our
locations with all U.S. markets significantly outperforming the
industry average. The Company's RevPAR growth, led by a significant
rise in rate across our total portfolio, is indicative of the
favorable demand by consumers of the unique luxury experience we
provide and our position in high barrier-to-entry markets."
Balance Sheet and Financing
After giving effect to the IPO, the Company's pro forma adjusted
debt at December 31, 2005 was $472.6 million. Cash and cash
equivalents were $58.9 million and additional cash reserves designated
for renovation projects were $15.0 million, resulting in net debt of
$398.7 million. The Company's weighted average debt maturity has
increased to 4.4 years and its weighted average interest rate is now
5.7%. The Company also has an undrawn $125 million revolving credit
facility.
Development Activity
In December 2005, the Company agreed to purchase the James Hotel,
a 194-room boutique hotel in Scottsdale, Arizona for $47.5 million. At
that time, the Company paid 10% of the purchase price to the seller.
The purchase is expected to close by the end of April 2006 and the
hotel will be re-branded as Mondrian Scottsdale. The Company intends
to upgrade the hotel with the repositioning expected to be completed
by the end of the fourth quarter of 2006.
In January 2006, the Company entered into a 50/50 joint venture
with Boyd Gaming Corporation (NYSE: BYD) to develop two flagship
hotels in Las Vegas bearing the Company's Delano and Mondrian brands.
The project is expected to be completed in 2010.
In January 2006, Morgans Hotel Group completed the acquisition of
the property across from Delano Miami for approximately $14.3 million.
The Company expects to convert the property into additional guest
rooms and additional guest facilities and have the property in
operation by the end of 2007.
Mr. Scheetz concluded, "We are committed to expanding our brands
in new markets and are off to a strong start with Las Vegas and
Scottsdale. We will continue to provide our guests an innovative,
dynamic and exciting venue for their lodging, dining and relaxation
experiences. Our improved results in 2005 reflect our customer's
appreciation and loyalty to our product and we intend to build on this
in every market where we operate. As we execute our plan, we believe
we can profitably expand Morgans Hotels over time to many additional
locations in major markets to achieve the highest possible return on
invested capital for our shareholders."
Guidance For 2006
The statements below are the Company's outlook or forecast for the
Company's business for the fiscal year ending December 31, 2006. Based
upon the Company's expectations for continued improvement of the U.S.
economy, moderate supply growth, further rate improvement in the
Luxury lodging and consumer service sectors, recent joint-venture
announcements, along with planned expense increases, the Company is
issuing the following guidance for the full year 2006:
RevPAR Growth: 8.0% to 10.0%
Total Revenues: $280 million to $290 million
Adjusted EBITDA: $85 million to $90 million
The first quarter is typically the Company's slowest quarter,
while the fourth quarter is the typically the strongest. Adjusted
EBITDA for 2006 includes costs of approximately $2.0 million related
to public company's expenses and excludes stock compensation expense.
The Company expects its first quarter results to be below the prior
year as the first quarter in 2005 was positively influenced by "The
Gates" exhibition in New York City and the first quarter of 2006 will
include public company costs and a special promotional initiative.
The Company anticipates spending approximately $20 to $25 million
for upgrades of hotels and the re-branding of Mondrian Scottsdale. In
addition, maintenance capital expenditures for 2006 are estimated to
be approximately $10 to $12 million.
Conference Call
The Company will host a conference call to discuss the financial
results for the fourth quarter and year ended December 31, 2005, today
at 5:00 PM Eastern time. Hosting the call will be Mr. W. Edward
Scheetz, President and Chief Executive Officer, and Mr. Richard
Szymanski, Chief Financial Officer.
The call will be webcast live over the Internet at
www.morganshotelgroup.com under the About Us, Investor Relations
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 (800) 289-0572 or (913) 981-5543 for
international callers.
A replay of the call will be available one hour after the call and
can be accessed by dialing (888) 203-1112 or (719) 457-0820 for
international callers; the password is 4447806. The replay will be
available from March 27, 2006 through April 3, 2006.
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; the completion of transactions and
the integration of properties with our existing business; 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; 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 Morgans Hotel Group Co.'s
Annual Report on Form 10-K and other documents filed by the Company
with the Securities and Exchange Commission from time to time. All
forward-looking statements in this press release are made as of today,
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.
About Morgans Hotel Group
Based in New York City, Morgans Hotel Group Co. (Nasdaq: MHGC)
operates hotels such as the Hudson, Morgans and the Royalton in New
York, the Delano in Miami, the Mondrian in Los Angeles, Clift in San
Francisco, and the Sanderson and St Martins Lane in London, and the
Shore Club in Miami. From its founding in 1984, Morgans Hotel Group
has defined the boutique hotel sector and continues to be an innovator
and leader in the sector.
Morgans Hotel Group, Co.
Income Statement
Three Months Ended % Full Year Ended %
Dec-05 Dec-04 Change Dec-05 Dec-04 Change
------ ------ ------ ------ ------ ------
Revenues:
Rooms 42,822 37,988 13% 153,675 131,367 17%
Food & beverage 21,536 20,992 85,573 82,475
Other hotel 3,064 3,517 11,622 11,725
------ ------ ------- -------
Total hotel revenues 67,422 62,497 8% 250,870 225,567 11%
Management fees 2,681 2,495 9,479 8,831
------ ------ ------- -------
Total revenues 70,103 64,992 8% 260,349 234,398 11%
Operating Costs and
Expenses:
Rooms 10,298 10,371 39,666 37,070
Food & beverage 14,023 13,619 54,294 51,876
Other departmental 1,529 841 4,546 3,452
Hotel, selling, general
and administrative 13,250 14,407 51,346 48,944
Property taxes, insurance
and other 3,806 3,171 13,331 12,619
------ ------ ------- -------
Total hotel operating
expenses 42,906 42,409 1% 163,183 153,961 6%
Corporate expenses 5,603 2,780 17,982 15,375
Depreciation 5,920 6,740 26,215 27,348
------ ------ ------- -------
Total operating costs
and expenses 54,429 51,929 5% 207,380 196,684 5%
Operating income 15,674 13,063 20% 52,969 37,714 40%
Interest expense, net 15,799 15,393 75,257 67,173
Equity in loss of
unconsolidated joint
ventures 3,024 451 7,593 2,958
Minority interest 949 889 4,087 3,833
Other non-operating
(income) loss (276)(1,497) (1,574) (5,482)
------ ------ ------- -------
Pre tax loss (3,822)(2,173) -76% (32,394)(30,768) -5%
Income taxes 248 224 822 827
------ ------ ------- -------
Net loss (4,070)(2,397) -70% (33,216)(31,595) -5%
Morgans Hotel Group, Co.
Hotel Operating Statistics
Three Months Ended % Full Year Ended %
Dec-05 Dec-04 Change Dec-05 Dec-04 Change
------ ------ ------ ------ ------ ------
Morgans
Occupancy 81.7% 88.1% -7.3% 83.4% 82.0% 1.7%
ADR 367.04 306.43 19.8% 295.41 253.73 16.4%
RevPAR 299.87 269.96 11.1% 246.37 208.06 18.4%
Royalton
Occupancy 83.9% 87.5% -4.1% 86.2% 82.3% 4.7%
ADR 397.38 333.93 19.0% 315.74 279.53 13.0%
RevPAR 333.40 292.19 14.1% 272.17 230.05 18.3%
Hudson
Occupancy 83.9% 82.8% 1.3% 85.3% 80.0% 6.6%
ADR 313.70 262.81 19.4% 246.79 210.54 17.2%
RevPAR 263.19 217.61 20.9% 210.51 168.43 25.0%
Delano
Occupancy 64.7% 60.8% 6.3% 72.1% 66.2% 8.9%
ADR 473.48 506.17 -6.5% 474.47 473.23 0.3%
RevPAR 306.25 307.95 -0.6% 342.09 313.28 9.2%
Mondrian
Occupancy 71.2% 70.2% 1.4% 79.5% 75.3% 5.6%
ADR 298.04 278.05 7.2% 300.79 277.85 8.3%
RevPAR 212.20 195.19 8.7% 239.13 209.22 14.3%
Clift
Occupancy 61.8% 66.2% -6.6% 68.7% 66.5% 3.3%
ADR 240.93 218.05 10.5% 220.72 211.30 4.5%
RevPAR 148.89 144.35 3.1% 151.63 140.51 7.9%
Total Owned
Occupancy 75.9% 76.5% -0.8% 80.0% 75.7% 5.7%
ADR 326.22 287.50 13.5% 280.24 252.51 11.0%
RevPAR 247.60 219.94 12.6% 224.19 191.15 17.3%
St. Martins Lane
Occupancy 80.3% 78.5% 2.3% 73.6% 75.4% -2.4%
ADR 354.41 345.68 2.5% 359.03 349.80 2.6%
RevPAR 284.59 271.36 4.9% 264.25 263.75 0.2%
Sanderson
Occupancy 76.0% 78.9% -3.7% 69.6% 73.0% -4.7%
ADR 433.54 404.92 7.1% 437.80 410.75 6.6%
RevPAR 329.49 319.48 3.1% 304.71 299.85 1.6%
Shore Club
Occupancy 52.3% 60.7%-13.8% 63.6% 61.6% 3.2%
ADR 370.86 349.30 6.2% 348.90 326.77 6.8%
RevPAR 193.96 212.03 -8.5% 221.90 201.29 10.2%
Total Joint Venture
Occupancy 66.3% 70.1% -5.4% 68.0% 68.3% -0.4%
ADR 381.01 361.99 5.3% 372.86 354.15 5.3%
RevPAR 252.61 253.75 -0.5% 253.54 241.88 4.8%
Total Company
Occupancy 73.4% 74.8% -1.9% 76.9% 73.7% 4.3%
ADR 339.10 305.94 10.8% 301.60 277.42 8.7%
RevPAR 248.90 228.84 8.8% 231.93 204.46 13.4%
Morgans Hotel Group, Co.
Hotel Operating Margins
Three Months Ended % Full Year Ended %
Dec-05 Dec-04 Change Dec-05 Dec-04 Change
------ ------ ------ ------ ------ ------
Total hotel revenues 67,422 62,497 8% 250,870 225,567 11%
Total hotel operating
expenses 42,906 42,409 1% 163,183 153,961 6%
Hotel operating
margins 24,516 20,088 22% 87,687 71,606 22%
Margin - % of Total
hotel revenues 36.4% 32.1% 35.0% 31.7%
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.
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 consider 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
the 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.
A reconciliation of net income (loss) and operating 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:
Morgans Hotel Group, Co.
EBITDA Reconciliation
Three Months Ended % Full Year Ended %
Dec-05 Dec-04 Change Dec-05 Dec-04 Change
------ ------ ------ ------ ------ ------
Net income (loss) (4,070) (2,397) (33,216)(31,595)
Interest expense,net 15,799 15,393 75,257 67,173
Income tax expense 248 224 822 827
Depreciation and
amortization expense 5,920 6,740 26,215 27,348
Proportionate share of
interest expense
from unconsolidated joint
ventures 4,191 1,836 10,669 7,694
Proportionate share of
depreciation expense
from unconsolidated joint
ventures 1,605 1,632 6,390 5,754
Proportionate share of
depreciation expense
of minority interests in
consolidated joint
ventures (115) (115) (482) (610)
------ ------ ------ ------
EBITDA (1) 23,578 23,313 85,655 76,591
Other non operating
expense (income) (276) (1,497) (1,574) (5,482)
Less : Clift (809) (1,139) (4,629) (4,530)
------ ------ ------ ------
Adjusted EBITDA (1) 22,493 20,677 8.8% 79,452 66,579 19.3%
(1) EBITDA and Adjusted EBITDA do not include intercompany fees or
cost allocation to the hotels
Morgans Hotel Group, Co.
Reconciliation of Operating Income to Adjusted EBITDA
Three Months Ended Full Year Ended
Dec-05 Dec-04 Dec-05 Dec-04
------ ------ ------ ------
Operating Income 15,674 13,063 52,969 37,714
Depreciation 5,920 6,740 26,215 27,348
EBITDA from joint ventures 2,774 3,023 9,466 10,495
Minority interest (1,066) (1,010) (4,569) (4,448)
Other non-operating income
(loss) 276 1,497 1,574 5,482
------- ------- ------- -------
EBITDA 23,578 23,313 85,655 76,591
Other non-operating (income)
loss (276) (1,497) (1,574) (5,482)
Less : Clift (809) (1,139) (4,629) (4,530)
------- ------- ------- -------
Adjusted EBITDA 22,493 20,677 79,452 66,579
Morgans Hotel Group, Co.
EBITDA Analysis
Three Months Ended % Full Year Ended %
Dec-05 Dec-04 Change Dec-05 Dec-04 Change
------ ------ ------ ------ ------ ------
Morgans 1,788 1,509 18% 4,918 3,921 25%
Royalton 2,579 1,876 37% 6,692 4,605 45%
Hudson 11,544 8,845 31% 34,171 24,844 38%
Delano 3,425 3,277 5% 16,852 15,650 8%
Mondrian 3,305 2,432 36% 15,856 13,608 17%
Clift 809 1,139 -29% 4,629 4,530 2%
------- ------- ----- ------- -------- ------
Total Owned 23,450 19,078 23% 83,118 67,158 24%
St Martins Lane 1,725 1,756 -2% 5,459 5,773 -5%
Sanderson 908 1,080 -16% 3,272 4,053 -19%
Shore Club 141 187 -25% 735 669 10%
------- ------- ----- ------- -------- ------
Total Joint
Venture 2,774 3,023 -8% 9,466 10,495 -10%
Management Fees 2,681 2,495 7% 9,479 8,831 7%
Corporate Expenses (5,603) (2,780) 102% (17,982) (15,375) 17%
------- ------- ----- ------- -------- ------
Total Company 23,302 21,816 7% 84,081 71,109 18%
Less Clift (809) (1,139) -29% (4,629) (4,530) 2%
------- ------- ----- ------- -------- ------
Adjusted EBITDA 22,493 20,677 9% 79,452 66,579 19%
CONTACT: Investor Relations:
ICR
Brad Cohen, 888-277-4158
or
Media:
Rubenstein
Rick Matthews, 212-843-8267