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Morgans Hotel Group Reports a 3rd Qtr Loss of $28.6 million Compared with an
 $8.9 million Loss in the Year-ago Quarter, RevPAR  Drops 32.2%,
Occupancy Down 8.9%

Takes Impairment charge of $17.2 million Related to its Las Vegas Joint Venture at Echelon

Restructures
Agreement with Mezzanine Lender for Hudson Hotel -

NEW YORK--Morgans Hotel Group Co. (NASDAQ: MHGC) (“MHG” or the “Company”) today reported financial results for the third quarter ended September 30, 2009.

  • On October 15, 2009, MHG announced that an affiliate of The Yucaipa Companies, LLC (“Yucaipa”) invested $75 million in MHG in the form of preferred securities. The capital infusion will significantly strengthen MHG’s balance sheet and provide long-term financing for growth. Combined with the recent amendment to MHG’s credit line in August 2009, MHG has added approximately $200 million of liquidity in the last two months.
  • On October 15, 2009, MHG announced that it has entered into an agreement with one of its lenders to effectively extend the mezzanine loan on the Hudson hotel property in New York City.
  • On August 5, 2009, MHG announced the successful amendment of its revolving credit facility. This includes, among other things, the elimination of the leverage test, a reduction of the debt service coverage ratio to 0.90x from 1.75x, and an adjustment to the borrowing base test that is expected to allow MHG to access substantial liquidity for the life of the credit facility.
  • Revenue per available room (“RevPAR”) for System-Wide Comparable Hotels decreased 30.6% in constant dollars in the third quarter from the comparable period in 2008. Adjusted EBITDA for the third quarter was $9.4 million, a decrease of 55.7% from the comparable period in 2008.
  • As a result of cost reduction plans, EBITDA at System-Wide Comparable Hotels during the third quarter declined at a rate of 1.9 times the related RevPAR percentage change, beating industry norms.
  • MHG achieved a 16.2% reduction in operating expenses at System-Wide Comparable Hotels and a 30.3% reduction in corporate expenses in the third quarter of 2009 from the comparable period in 2008.
  • In July, Hard Rock opened the new Paradise Tower, consisting of 490 rooms. The casino expansion, pool expansion and south tower, consisting of 374 suites, are projected to open in late 2009 or early 2010.
  • Boston Ames and Mondrian SoHo are currently targeted to open in November 2009 and the middle of 2010, respectively.

Fred Kleisner, CEO of Morgans Hotel Group, said: “We are confident that Morgans Hotel Group is well positioned to continue to navigate the current economic challenges through 2009 and beyond, and will benefit from improving demand. We have made great progress in cleaning up our balance sheet and adding approximately $200 million in liquidity. We have irreplaceable assets in 24-hour gateway markets that we believe will rebound faster and stronger as a recovery emerges. While we cannot predict when the recovery will come, we do know that historically, the 24-hour gateway markets on which this company is built have come back stronger than other markets. We have a clear growth strategy to extend our portfolio of properties with high-margin, long-term management agreements. We will continue to be diligent about taking the steps necessary to strengthen the Company, and most importantly, to build long-term shareholder value.”

Third Quarter 2009 Operating Results

RevPAR at System-Wide Comparable Hotels decreased by 32.2% (30.6% in constant dollars) in the third quarter of 2009 compared to the third quarter of 2008. Occupancy declined by 8.9% and average daily rate (“ADR”) declined by 25.5% (23.8% in constant dollars) compared to the same period in the prior year.

MHG recorded a net loss of $27.8 million in the third quarter of 2009, which includes non-cash impairment charges of $29.1 million. Excluding impairment charges, net of $11.6 million of tax, our net loss was $10.3 million compared to a net loss of $9.3 million in the third quarter of 2008.

Given the current economic environment, MHG recorded non-cash impairment charges of $29.1 million consisting of $17.2 million related to MHG’s investment in the Las Vegas joint venture at Echelon and $11.9 million related to the property across the street from Delano in South Beach. The costs related primarily to the plans and drawings for these development projects. While MHG has not made any formal decisions regarding the future of these projects, we do not expect to develop these projects in the near future.

Balance Sheet and Liquidity

As of September 30, 2009, consolidated debt excluding the Clift lease obligation was $661.3 million and cash and cash equivalents were $34.1 million.

MHG’s pro forma liquidity position as of September 30, 2009, giving effect to the net proceeds of $71.0 million from the Yucaipa transaction as if it had occurred on that date, was approximately $195.0 million. This is comprised of a pro forma cash balance of approximately $105.1 million and $89.9 million of availability under the revolving credit line, which is net of $23.5 million of outstanding borrowings and $9.8 million of letters of credit posted under the line.

On August 5, 2009, MHG announced that it had successfully completed an amendment to its existing line of credit. Among other things the amendment:

  • Eliminated the corporate leverage test;
  • Reduced the corporate fixed charge coverage test to 0.90x from 1.75x;
  • Amended the borrowing base tests so that, among other changes, a minimum of 35% of appraised value on the New York properties securing the facilities will be available; and
  • Modified a variety of other provisions at the subsidiary level that could have triggered technical defaults.

The facility’s size was reduced from $220 million to $125 million. MHG believes that, without the amendment, it would have had limited availability, if any, under the facility for the remainder of the term. The facility is secured by three of MHG’s hotels: Delano, Royalton and Morgans. The interest rate is LIBOR plus 3.75% with a LIBOR floor of 1.0% and the maturity is October 5, 2011.

On October 15, 2009, MHG issued to Yucaipa $75 million of preferred securities. The preferred securities have an 8% dividend rate for the first five years, a 10% rate for years six through seven, and a 20% rate for years thereafter. MHG has the option to accrue any and all dividend payments. MHG also has the option to redeem the preferred securities at any time without any pre-payment penalty.

In addition, MHG issued to Yucaipa warrants to purchase 12.5 million shares of MHG’s common stock at an exercise price of $6.00 per share, subject to certain anti-dilution adjustments, and exercisable utilizing a cashless exercise method only, resulting in a net share issuance. As a result of the cashless exercise method, the number of shares issuable on exercise will depend on the price of the common stock at that time. Based on the shares of MHG’s common stock outstanding today, the maximum number of shares issuable under these warrants would never represent more than 29.99% of MHG’s outstanding shares. These warrants will expire in 7.5 years.

Also on October 15, 2009, MHG announced that it had entered into an agreement with one of its lenders which holds, among other loans, the mezzanine loan on MHG’s Hudson hotel property in New York City. The Hudson mezzanine loan was to mature on July 12, 2010 and provided for a 15-month extension at MHG’s option, subject to satisfaction of certain conditions. Under the new agreement, MHG paid an aggregate of $11.2 million to (i) reduce the principal balance of the mezzanine loan from $32.5 million to $26.5 million, (ii) acquire interests in $4.5 million of certain of MHG’s other debt obligations, (iii) pay fees, and (iv) obtain a forbearance from the mezzanine lender until October 12, 2013 from exercising any remedies resulting from a maturity default, subject only to maintaining certain interest rate caps and making an additional aggregate payment of $1.3 million to purchase additional interests in certain of our other debt obligations prior to October 11, 2011. MHG believes these transactions will have the practical effect of extending the Hudson mezzanine loan by three years and three months beyond its scheduled maturity of July 12, 2010. The mezzanine lender also has agreed to cooperate with MHG in its efforts to seek an extension of the $217 million Hudson mortgage loan, which is also set to mature on July 12, 2010, and to consent to certain refinancings and other modifications of the Hudson mortgage loan.

In June 2009, the $40 million non-recourse mortgage and mezzanine loans at Mondrian Scottsdale matured and were not repaid. MHG is continuing to operate Mondrian Scottsdale and is discussing various options with the lenders. MHG does not intend to commit significant monies toward the repayment or restructuring of the loans or the funding of operating deficits.

As of September 30, 2009, MHG estimates that its total future capital commitments for development projects for the next 12 months are approximately $11 million, primarily to fund the outstanding letters of credit at Hard Rock.

Additionally, MHG intends to utilize its tax net operating losses of approximately $114 million to offset future income, including potential gains on the sale of assets or interest therein 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 between the fourth quarter of 2009 and the middle of 2010.

In September 2009, MHG announced that it had secured a long-term management agreement for the San Juan Water and Beach Club Hotel, a 78 room beachfront hotel in Isla Verde, Puerto Rico. The owners intend to obtain development rights to build a Morgans branded hotel including a 30,000 square foot casino. MHG assumed management of the property as of October 18, 2009. San Juan Water and Beach Club Hotel will remain open and operating as an independent hotel until it ultimately becomes a Morgans Hotel Group branded property.

2009 Outlook

The global economic downturn has had a significant adverse impact on the hotel industry, particularly since the middle of September 2008. 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, we can provide a framework for Adjusted EBITDA given certain RevPAR declines. For example, if RevPAR for the year were to decline on average 25-30%, we would expect 2009 Adjusted EBITDA to be between $40-50 million. This is based on a ratio of EBITDA percentage decline to RevPAR percentage decline between 1.5 and 2.0 times, which is consistent with the ratio we have achieved over the past four quarters.

Conference Call

MHG will host a conference call to discuss the third 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 Corporate Info, 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 conference ID is 36578865. 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 conference ID is 36578865. The replay will be available from October 26, 2009 through November 2, 2009.

Definitions

“Owned Comparable Hotels” includes all wholly-owned hotels operated by MHG except for hotels under renovation during the current or the prior year and development projects. Owned Comparable Hotels for 2009 excludes Mondrian Los Angeles and Morgans, which were under renovation in 2008.

“System-Wide Comparable Hotels” includes all hotels operated by MHG except for hotels under renovation during the current or the prior year and development projects. System-Wide Comparable Hotels for 2009 excludes Mondrian Los Angeles and Morgans, which were under renovation in 2008, the Hard Rock Hotel & Casino in Las Vegas (“Hard Rock”), which has been under renovation and expansion since 2008, and Mondrian South Beach, which opened in December 2008.

“Adjusted EBITDA” is adjusted earnings before interest, taxes, depreciation and amortization as further defined below.

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 South Beach, Mondrian in Los Angeles, Scottsdale and South Beach, 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 SoHo, New York; Las Vegas, Nevada; Palm Springs, California; Boston, Massachusetts; and Dubai, UAE. For more information please visit www.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, 2008, 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.

Income Statement  
 
 
 
(In thousands, except per share amounts)









Three Months
Nine Months


Ended Sept. 30,
Ended Sept. 30,


2009
2008
2009
2008




(as adjusted) (1)




(as adjusted) (1)

Revenues :







Rooms
$ 32,524
$ 45,500
$ 92,003
$ 138,521
Food & beverage
18,795
23,269
57,664
76,392
Other hotel
2,351
3,133
7,355
9,957
Total hotel revenues
53,670
71,902
157,022
224,870
Management and other fees
3,998
5,799
11,311
14,887
Total revenues
57,668
77,701
168,333
239,757








 
Operating Costs and Expenses :







Rooms
10,770
12,097
31,313
37,162
Food & beverage
14,721
16,817
43,836
54,538
Other departmental
1,562
1,792
4,722
5,801
Hotel, selling, general and administrative
12,863
15,003
36,968
45,375
Property taxes, insurance and other
4,683
5,447
13,193
13,229
Total hotel operating expenses
44,599
51,156
130,032
156,105
Corporate expenses :







Stock based compensation
3,231
4,780
8,805
12,130
Other
5,276
7,575
16,490
22,872
Depreciation and amortization
7,528
7,587
23,159
19,696
Restructuring, development and disposal costs
494
2,957
2,037
4,124
Total operating costs and expenses
61,128
74,055
180,523
214,927
Operating (loss) income
(3,460)
3,646
(12,190)
24,830








 
Interest expense, net
13,098
10,791
36,599
32,760
Equity in loss of unconsolidated joint ventures
2,262
7,617
4,700
16,526
Impairment loss
29,134
-
29,134
-
Other non-operating loss
869
516
1,934
1,816








 
Pre tax loss
(48,823)
(15,278)
(84,557)
(26,272)

Income tax benefit


(20,189)
(6,336)
(35,700)
(11,304)
Net loss
(28,634)
(8,942)
(48,857)
(14,968)








 
Net loss (income) attributable to noncontrolling interest
817
(388)
399
(2,731)








 
Net loss attributable to common stockholders
$ (27,817)
$ (9,330)
$ (48,458)
$ (17,699)








 
Weighted average shares outstanding - diluted
29,737
31,231
29,941
31,953








 
Loss per share attributable to common stockholders
$ (0.94)
$ (0.30)
$ (1.62)
$ (0.55)








 
(1) 2008 income statement adjustment is due to the Company's adoption of a new standard on January 1, 2009, which clarifies the accounting for the Company's convertible notes payable.
Hotel Operating Statistics   ( In Actual Dollars)   ( In Constant Dollars, if different)   (In Actual Dollars)   (In Constant Dollars, if different)
(In thousands, except per share amounts)
Three Months  

Three Months  

Nine Months  

Nine Months  


Ended Sept. 30,
%
Ended Sept. 30,
%
Ended Sept. 30,


Ended Sept. 30,



2009   2008
Change
2009   2008
Change
2009   2008
Change
2009   2008
Change
Royalton























Occupancy
89.3%
91.8%
-2.7%






85.5%
87.2%
-1.9%





ADR
$261.60
$ 383.22
-31.7%






$254.44
$385.57
-34.0%





RevPAR
$233.61
$ 351.80
-33.6%






$217.55
$336.22
-35.3%





























 
Hudson























Occupancy
91.1%
95.7%
-4.8%






82.6%
91.2%
-9.4%





ADR
$190.29
$ 282.99
-32.8%






$182.58
$277.22
-34.1%





RevPAR
$173.35
$ 270.82
-36.0%






$150.81
$252.82
-40.3%





























 
Delano























Occupancy
56.9%
77.1%
-26.2%






62.3%
82.8%
-24.8%





ADR
$382.54
$ 415.06
-7.8%






$482.93
$538.31
-10.3%





RevPAR
$217.67
$ 320.01
-32.0%






$300.87
$445.72
-32.5%





























 
Clift























Occupancy
78.7%
86.3%
-8.8%






65.5%
77.8%
-15.8%





ADR
$193.36
$ 250.49
-22.8%






$196.78
$258.01
-23.7%





RevPAR
$152.17
$ 216.17
-29.6%






$128.89
$200.73
-35.8%





























 
Mondrian Scottsdale























Occupancy
30.8%
44.1%
-30.2%






42.1%
55.4%
-24.0%





ADR
$ 92.73
$ 133.75
-30.7%






$136.65
$201.52
-32.2%





RevPAR
$ 28.56
$ 58.98
-51.6%






$ 57.53
$111.64
-48.5%





























 
























 
Total Owned - Comparable























Occupancy
77.9%
85.4%
-8.8%






72.5%
83.0%
-12.7%





ADR
$210.36
$ 291.30
-27.8%






$219.58
$308.15
-28.7%





RevPAR
$163.87
$ 248.77
-34.1%






$159.20
$255.76
-37.8%





























 
























 
St. Martins Lane























Occupancy
80.0%
71.9%
11.3%
80.0%
71.9%
11.3%
72.8%
75.4%
-3.4%
72.8%
75.4%
-3.4%
ADR
$325.57
$ 442.14
-26.4%
$306.08
$359.74
-14.9%
$308.01
$444.60
-30.7%
$308.01
$352.08
-12.5%
RevPAR
$260.46
$ 317.90
-18.1%
$244.86
$258.65
-5.3%
$224.23
$335.23
-33.1%
$224.23
$265.47
-15.5%
























 
Sanderson























Occupancy
74.9%
72.0%
4.0%
74.9%
72.0%
4.0%
69.1%
74.3%
-7.0%
69.1%
74.3%
-7.0%
ADR
$393.59
$ 505.04
-22.1%
$370.03
$410.92
-10.0%
$374.62
$507.57
-26.2%
$374.62
$401.95
-6.8%
RevPAR
$294.80
$ 363.63
-18.9%
$277.15
$295.86
-6.3%
$258.86
$377.12
-31.4%
$258.86
$298.65
-13.3%
























 

Shore Club

























Occupancy


42.7%
63.5%
-32.8%






50.4%
67.1%
-24.9%





ADR
$238.41
$ 295.58
-19.3%






$308.79
$393.18
-21.5%





RevPAR
$101.80
$ 187.69
-45.8%






$155.63
$263.82
-41.0%





























 
System-wide - Comparable























Occupancy
73.4%
80.6%
-8.9%
73.4%
80.6%
-8.9%
69.5%
79.7%
-12.8%
69.5%
79.7%
-12.8%
ADR
$234.85
$ 315.24
-25.5%
$231.54
$303.67
-23.8%
$245.51
$340.12
-27.8%
$245.51
$326.46
-24.8%
RevPAR
$172.38
$ 254.08
-32.2%
$169.95
$244.76
-30.6%
$170.63
$271.08
-37.1%
$170.63
$260.19
-34.4%
























 
Morgans























Occupancy
92.0%
83.0%
10.8%






85.1%
78.5%
8.4%





ADR
$228.71
$ 404.02
-43.4%






$223.99
$341.31
-34.4%





RevPAR
$210.41
$ 335.34
-37.3%






$190.62
$267.93
-28.9%





























 
Mondrian LA























Occupancy
71.8%
61.4%
16.9%






63.1%
53.4%
18.2%





ADR
$265.44
$ 353.72
-25.0%






$267.96
$352.60
-24.0%





RevPAR
$190.59
$ 217.18
-12.2%






$169.08
$188.29
-10.2%





























 
Hard Rock (1)























Occupancy
89.0%
92.4%
-3.7%






90.0%
93.6%
-3.8%





ADR
$133.30
$ 190.00
-29.8%






$143.03
$197.39
-27.5%





RevPAR
$118.64
$ 175.56
-32.4%






$128.73
$184.76
-30.3%





























 
























 

(1)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

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 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.

The Company’s management has historically used adjusted EBITDA (Adjusted EBITDA) when evaluating the operating performance for the total Company as well as for individual properties or groups of properties because we believe the Company’s core business model is that of an owner and operator of hotels, and the inclusion or exclusion of certain recurring and non-recurring 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 (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. We exclude the following items from EBITDA to arrive at Adjusted EBITDA:

  • Other non-operating expenses (income), such as executive terminations not related to restructuring initiatives discussed below, costs of financings and litigation and settlement costs and other items that relate to the financing and investing activities of our assets and not to the on-going operating performance of our assets, both consolidated and unconsolidated;
  • Restructuring, development and disposal costs: these charges primarily relate to losses on asset disposals as part of major renovation projects and the write-off of abandoned development projects resulting primarily from events generally outside management’s control such as the tightening of the credit markets. We reasonably believe that a substantial portion of these items will not recur in future years and that these charges do not relate to the ongoing operating performance of our assets as measured by Adjusted EBITDA.
  • Impairment loss: these charges do not relate to the ongoing operating performance of our assets as measured by Adjusted EBITDA. To the extent that the current economic conditions continue, we may incur additional non-cash impairment charges related to assets under development or investments in joint ventures. These adjustments are necessary to provide the most accurate measure of core operating results as a means to evaluate comparative results.
  • The EBITDA related to leased hotels to more accurately reflect the operating performance of assets in which we have a fee simple ownership interest; and
  • The stock-based compensation expense recognized, as this is not necessarily an indication of the operating performance of our assets.

We believe Adjusted EBITDA provides management and our investors with a more accurate financial metric by which to evaluate our performance as it eliminates the impact of costs incurred related to investing and financing transactions. Internally, the Company’s management utilizes Adjusted EBITDA to measure the performance of our core on-going hotel operations and is used extensively during our annual budgeting process. Management also uses Adjusted EBITDA as a measure in determining the value of acquisitions, expansion opportunities, and dispositions and borrowing capacity. 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. 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

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, except per share amounts)
Three Months
Nine Months


Ended Sept. 30,
Ended Sept. 30,


2009

2008


2009
2008




(as adjusted)(1)




(as adjusted)(1)









 
Net loss
$ (27,817)
$ (9,330)
$ (48,458)
$ (17,699)
Interest expense, net
13,098
10,791
36,599
32,760
Income tax benefit
(20,189)
(6,336)
(35,700)
(11,304)
Depreciation and amortization expense
7,528
7,587
23,159
19,696

Proportionate share of interest expense from unconsolidated joint ventures


5,801
9,080
18,408
21,393

Proportionate share of depreciation expense from unconsolidated joint ventures


2,107
2,119
6,111
8,252

Proportionate share of depreciation expense of minority interests in consolidated joint ventures


(83)
(126)
(249)
(311)
Net income attributable to noncontrolling interest
(947)
(295)
(1,615)
(551)

Proportionate share of loss from unconsolidated joint ventures not recorded due to negative investment balances


(4,023)
-
(13,681)
-








 
EBITDA
(24,525)
13,490
(15,426)
52,236








 
Add : Other non operating expense
869
516
1,934
1,816

Add : Other non operating expense from unconsolidated joint ventures


828
2,103
1,388
6,336
Add: Restructuring, development and disposal costs
494
2,957
2,037
4,124
Add: Impairment loss
29,134
-
29,134
-
Less : EBITDA from Clift, a leased hotel
(618)
(2,620)
(82)
(6,074)
Add : Stock based compensation
3,231
4,780
8,805
12,130








 
Adjusted EBITDA
$ 9,413
$ 21,226
$ 27,790
$ 70,568








 
(1) 2008 income statement adjustment is due to the Company's adoption of a new standard on January 1, 2009, which clarifies the accounting for the Company's convertible notes payable.
Room Revenue Analysis   Three Months  
  Nine Months  
(In thousands, except percentages)
Ended Sept. 30,

%


Ended Sept. 30,
%


2009   2008
Change
2009   2008
Change












 
Royalton
$ 3,609
$ 5,434
-34%
$ 9,979
$ 15,479
-36%
Hudson
12,988
20,056
-35%
33,323
55,753
-40%
Delano
3,885
5,709
-32%
15,933
23,694
-33%
Clift
5,184
7,222
-28%
12,932
19,958
-35%
Mondrian Scottsdale
497
1,054
-53%
2,970
5,931
-50%

Total Owned - Comparable


26,163
39,475
-34%
75,137
120,815
-38%












 
Morgans
2,207
1,288
71%
5,930
5,480
8%
Mondrian LA
4,154
4,737
-12%
10,936
12,226
-11%












 
Total Owned
$ 32,524
$ 45,500
-29%
$ 92,003
$ 138,521
-34%












 












 












 












 
Hotel Revenue Analysis
Three Months


Nine Months

(In thousands, except percentages)
Ended Sept. 30,
%
Ended Sept. 30,
%


2009
2008
Change
2009
2008
Change












 
Royalton
$ 4,740
$ 6,766
-30%
$ 13,877
$ 20,499
-32%
Hudson
17,728
26,047
-32%
45,648
72,822
-37%
Delano
8,230
11,929
-31%
33,275
48,002
-31%
Clift
8,395
11,585
-28%
22,115
32,640
-32%
Mondrian Scottsdale
1,243
2,171
-43%
6,127
11,735
-48%
Total Owned - Comparable
40,336
58,498
-31%
121,042
185,698
-35%












 
Morgans
4,224
3,585
18%
12,038
13,215
-9%
Mondrian LA
9,110
9,819
-7%
23,942
25,957
-8%












 
Total Owned
$ 53,670
$ 71,902
-25%
$ 157,022
$ 224,870
-30%
Hotel EBITDA Analysis  
 
 
 


(In thousands, except percentages)











Three Months


Nine Months


Ended Sept. 30,
%
Ended Sept. 30, %


2009
2008
Change
2009 2008 Change










 
Royalton
$ 364
$ 1,704
-79%
$ 421 $ 4,554 -91%
Hudson
3,668
10,262
-64%
7,999 28,601 -72%
Delano
1,809
3,197
-43%
10,429 17,473 -40%
Clift
618
2,620
-76%
82 6,074 -99%
Mondrian Scottsdale
(819)
(633)
29%
(725) 892 n/m
Owned Comparable Hotels
5,640
17,150
-67%
18,206 57,594 -68%










 
St Martins Lane
1,294
1,728
-25%
3,358 5,854 -43%
Sanderson
882
1,234
-29%
2,085 3,631 -43%
Shore Club
(17)
136
-113%
245 739 -67%
Joint Venture Comparable Hotels
2,159
3,098
-30%
5,688 10,224 -44%










 
Total System-Wide Comparable Hotels
7,799
20,248
-61%
23,894 67,818 -65%










 
Morgans - Owned
93
295
-68%
(187) 2,021 -109%
Mondrian LA - Owned
3,143
2,734
15%
7,630 6,471 18%
Hard Rock - Joint Venture
1,117
2,329
-52%
2,944 8,287 -64%
Mondrian South Beach - Joint Venture
(848)
-
n/m
(1,178) - n/m










 
Total Hotels
$ 11,304
$ 25,606
-56%
$ 33,103 $ 84,597 -61%
Adjusted EBITDA and Debt Analysis  
 
 
(In thousands)











 


Adjusted





EBITDA





Twelve Months





Ended
Debt at

Consolidated Operations
Sept. 30, 2009
Sept 30, 2009







 
Morgans (1)
760



Royalton
2,426



Delano
15,107



Revolving Credit Facility
-
23,508

Sub - total
18,293
23,508







 
Hudson
18,683
255,608

Mondrian LA (1)
9,170
120,500

Mondrian Scottsdale
(1,399)
40,021

Management Fees
14,723



Corporate Expenses
(19,574)



Other Debt (2)
-
221,622







 
Total
39,896
661,259







 
Less: Cash


(34,114)

Net Debt


627,145







 






 
(1)Hotel was under renovation in the past twelve months and had rooms out of service






 

(2)Includes outstanding debt on convertible notes, trust preferred securities, the Gale promissory notes and excludes capital lease obligations at the Clift







 




Proportionate





Share of





Adjusted EBITDA
Proportionate




Twelve Months
Share of


Ownership
Ended
Debt
Joint Venture Comparable Hotels (1)
Percentage
Sept. 30, 2009
Sept. 30, 2009






 
Sanderson and St. Martins Lane
50%
8,231
80,273
Shore Club
7%
380
8,364






 
(1)Includes information only for System-Wide Comparable Hotels that are owned by joint ventures
Balance Sheet  
 
(In thousands)





Sept. 30,
Dec 31,


2009
2008




(as adjusted) (1)
ASSETS:



Property and equipment, net
$ 529,961
$ 555,645
Goodwill
73,698
73,698
Investments in and advances to unconsolidated joint ventures
40,040
56,754
Cash and cash equivalents
34,114
49,150
Restricted cash
18,078
21,484
Accounts receivable, net
6,653
6,673
Related party receivables
13,127
7,900
Prepaid expenses and other assets
10,449
9,192
Deferred tax asset
92,948
61,005
Other, net
17,878
13,963
Total assets
$ 836,946
$ 855,464




 
LIABILITIES and EQUITY:



Long-term debt and capital lease obligations, net
$ 744,058
$ 717,179
Accounts payable and accrued liabilities
29,784
26,711
Distributions and losses in excess of investment in unconsolidated joint ventures
12,430
14,563
Other liabilities
26,667
35,655
Total liabilities
812,939
794,108




 
Total Morgans Hotel Group Co. stockholders’ equity
8,045
43,423
Noncontrolling interest
15,962
17,933
Total equity
24,007
61,356




 
Total liabilities and equity
$ 836,946
$ 855,464




 
(1) 2008 balance sheet adjustment is due to the Company's adoption of a new standard on January 1, 2009, which clarifies the accounting for the Company's convertible notes payable.

 
.
Contact: 
 
Morgans Hotel Group Co.
Richard Szymanski
212-277-4188

.
.
 
Also See: Morgans Hotel Group Co. and Boyd Gaming Corporation Assemble Team of Designers and Architects for the new Mondrian and Delano hotels at Echelon in Las Vegas / June 2007
.

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