Ryman Hospitality Properties, Inc. quarterly report, Q3 FY2020

Ryman Hospitality Properties, Inc. — Q3 2020 Form 10-Q Summary

Business context and reporting period

Unaudited results for the three and nine months ended September 30, 2020, compared with the corresponding 2019 periods. Ryman is a REIT focused on group-oriented destination hotels, primarily Gaylord Hotels properties managed by Marriott, plus entertainment assets including the Grand Ole Opry, Ryman Auditorium, WSM-AM and Ole Red.

Results were materially affected by COVID-19. Gaylord Texan reopened June 8, 2020; Gaylord Opryland, Gaylord Palms and Gaylord Rockies reopened June 25 at limited capacity; Gaylord National remained closed at September 30. Entertainment venues reopened gradually and at reduced capacity.

Financial performance and key metrics

Metric	Q3 2020	Q3 2019	9M 2020	9M 2019
Total revenue	$70.2 million	$379.8 million	$398.0 million	$1.158 billion
Operating income (loss)	$(103.2) million	$56.5 million	$(239.2) million	$195.8 million
Net income (loss)	$(129.9) million	$20.9 million	$(368.3) million	$89.8 million
Loss available to common stockholders	$(117.7) million	$22.3 million	$(337.7) million	$101.1 million
Diluted EPS	$(2.14)	$0.43	$(6.14)	$1.95
Adjusted EBITDA_re	$(35.3) million	$119.1 million	$(33.6) million	$378.5 million
Adjusted FFO	$(60.3) million	$78.0 million	$(118.6) million	$260.0 million

Revenue declined 81.5% in Q3 and 65.6% for the first nine months. Approximate operating margins were negative 146.9% in Q3 2020 and negative 60.1% for the nine-month period, versus positive 14.9% and 16.9%, respectively, in the prior-year periods.

Hospitality revenue declined 82.3% in Q3 and 65.4% for the nine months. Hospitality operating loss was $78.3 million in Q3 and $154.6 million for the nine months.
Entertainment revenue declined 76.2% in Q3 and 67.5% for the nine months. Entertainment operating loss was $9.1 million in Q3 and $26.6 million for the nine months.
Hospitality occupancy was 14.6% in Q3 and 24.4% for the nine months, compared with 77.1% and 75.8% in 2019. Q3 RevPAR was $26.33, down 81.9%.
Hospitality net definite group room nights booked were negative 70,572 in Q3 and negative 692,844 for the nine months, including approximately 555,000 and 1.886 million cancellations, respectively.
Management reported approximately 583,000 Q3 and 2.003 million year-to-date net room-night cancellations attributable to COVID-19, representing approximately $118 million and $409 million of rooms revenue. Approximately 1.0 million cancelled room nights had been rebooked through September 30.

Cash flow, balance sheet, debt and liquidity

Cash used in operating activities was $112.3 million for the nine months ended September 30, compared with $231.1 million provided in 2019.
Capital expenditures were $124.6 million, primarily for the Gaylord Palms expansion and maintenance capital.
Cash, cash equivalents and restricted cash totaled $100.9 million at September 30, including $52.2 million of unrestricted cash and $48.8 million of restricted cash. Unrestricted cash was $362.4 million at December 31, 2019.
Total debt and finance lease obligations were $2.587 billion, compared with $2.560 billion at December 31, 2019. Debt included $35.0 million drawn on the revolver, $297.7 million under Term Loan A, $378.7 million under Term Loan B, $1.089 billion of senior notes and $793.3 million under the Gaylord Rockies term loan.
Revolver availability was $664.1 million at September 30, subject to applicable borrowing and debt-incurrence conditions. The April 2020 credit agreement amendment requires at least $100 million of unrestricted liquidity and waived specified financial covenants through March 31, 2021, ending April 1, 2021.
The company paid its first-quarter dividend of $0.95 per share, or approximately $52.2 million, and suspended regular quarterly dividends for the remainder of 2020. The amended credit agreement permits dividends needed to maintain REIT status and permits a $0.01 quarterly dividend.
Stockholders’ equity declined to $271.9 million from $644.7 million at year-end 2019; total equity, including noncontrolling interests, was $287.1 million.

Material changes, outlook and unusual items

The company expects fourth-quarter 2020 capital expenditures of approximately $30 million to $40 million and estimated monthly cash needs of approximately $22 million to $24 million, including fully consolidated Gaylord Rockies operating costs and debt service.
Approximately $82 million of non-essential capital projects were deferred. The $80 million Gaylord Rockies expansion was postponed, while the $158 million Gaylord Palms expansion continued and was expected to be completed in April 2021.
The company terminated the proposed $275 million Block 21 acquisition in May 2020 and forfeited a $15.0 million nonrefundable deposit.
A $32.8 million year-to-date credit loss was recorded on held-to-maturity Gaylord National-related bonds, including $7.8 million in Q3. The Series B bond was fully reserved, reducing notes receivable to $70.4 million from $110.1 million at year-end 2019.
A $26.7 million valuation allowance was recorded against taxable REIT subsidiary net deferred tax assets.
COVID-19-related operating costs were approximately $15.0 million in Q3 and $40.1 million for the nine months, net of $1.8 million of CARES Act payroll tax credits.
The Gaylord Rockies joint venture entered a cash sweep period beginning in July 2020, with restrictions on distributions and requirements related to expansion financing. Put rights covering 2.9% of the joint venture were exercised, settled through $2.9 million of cash and approximately $14.0 million of OP Units.
Interest rate swaps covered $1.2 billion of notional debt. The swaps had a net liability fair value of approximately $31.9 million at September 30, and accumulated other comprehensive loss included $31.9 million related to the swaps.

Principal risks and contingencies

Extended or renewed COVID-19 restrictions, reduced travel and group demand, capacity limits, additional closures and delayed rebookings could materially affect revenue, profitability, liquidity and distributions.
The company may need to amend or refinance debt. Failure to maintain liquidity, obtain further covenant relief or refinance maturities could require unfavorable financing, asset sales or other actions.
Debt maturities include approximately $1.210 billion due within one to three years, primarily the $800 million Gaylord Rockies loan and $400 million senior notes due 2023. Contractual obligations totaled $3.272 billion, excluding projected future interest of approximately $434.8 million.
At September 30, 2020, there were no reported debt covenant defaults. However, covenant waivers, minimum liquidity requirements, increased borrowing costs and restrictions on dividends, investments and capital expenditures remain significant constraints.
Additional contingencies include limited guarantees related to the Gaylord Rockies debt, up to $2.5 million of additional Circle funding through December 31, 2021, lease commitments and ordinary-course litigation.

Investor verification checklist

Verify the pace of hotel and entertainment reopening, occupancy recovery, group booking trends and Gaylord National’s reopening status.
Reconcile unrestricted cash, revolver availability and compliance with the $100 million minimum liquidity requirement.
Review debt maturities, covenant relief expiration, refinancing plans, interest-rate exposure and the Gaylord Rockies cash sweep provisions.
Assess whether operating cash flow and available borrowing capacity are sufficient to fund monthly cash needs, capital expenditures and debt service.
Monitor the recovery and collectability assumptions underlying the $38.0 million credit loss reserve on Gaylord National-related notes receivable.
Confirm future dividend decisions, REIT distribution requirements and restrictions under the amended credit agreement.
Evaluate the timing and remaining cost of the Gaylord Palms expansion and the deferred Gaylord Rockies expansion.