Ryman Hospitality Properties, Inc. — Q1 2017 Form 10-Q Summary
Business context and reporting period
Unaudited results cover the three months ended March 31, 2017, compared with the three months ended March 31, 2016. Ryman operates as a REIT focused on group-oriented destination hotels and entertainment assets. Its portfolio includes four Gaylord Hotels resorts managed by Marriott, related overflow hotels and attractions, and the Grand Ole Opry, Ryman Auditorium and WSM-AM.
Financial performance and key metrics
| Metric | Q1 2017 | Q1 2016 | Change |
|---|---|---|---|
| Total revenue | $276.0 million | $261.5 million | 5.6% |
| Operating income | $47.1 million | $38.8 million | 21.3% |
| Operating margin | 17.0% | 14.8% | Up 220 basis points |
| Net income | $32.6 million | $26.3 million | 23.8% |
| Fully diluted EPS | $0.63 | $0.51 | 23.5% |
| Net margin | 11.8% | 10.1% | Up approximately 170 basis points |
| Operating cash flow | $38.3 million | $53.3 million | Down $14.9 million |
- Revenue growth was led by rooms revenue of $103.4 million, food and beverage revenue of $126.2 million and entertainment revenue of $21.9 million. Entertainment revenue increased 26.5%.
- Hospitality revenue increased 4.1% to $254.2 million, while hospitality operating income increased 14.8% to $52.2 million.
- Hospitality occupancy was 72.7%, ADR was $190.33, RevPAR was $138.28 and Total RevPAR was $339.99. Net definite group room nights booked increased 21.5% to 387,724.
- Cash flow from operations declined primarily because of unfavorable working-capital changes, including higher trade receivables and lower accounts payable and accrued liabilities.
- Investing cash outflows were $53.9 million, including $37.7 million of property and equipment purchases and a $16.3 million investment in the Gaylord Rockies joint venture.
- Financing cash outflows were $9.6 million, including $38.9 million of dividends, partially offset by $33.0 million of net credit-facility borrowings.
- Unrestricted cash was $34.0 million at March 31, 2017, compared with $59.1 million at December 31, 2016. Restricted cash was $19.2 million.
- Total debt and capital lease obligations were $1.537 billion, compared with $1.503 billion at year-end 2016. The weighted-average borrowing rate was 4.4%.
- The company reported $281.5 million of availability under its revolving credit facility and was in compliance with all debt covenants.
Material changes versus the prior comparable period
- Gaylord National revenue increased 15.3%, driven by 9.2 percentage points of occupancy improvement and higher outside-the-room spending, including inauguration-related banquets. The comparison benefited from a winter storm that reduced first-quarter 2016 occupancy.
- Gaylord Texan revenue increased 5.7%, with occupancy up 6.6 percentage points and RevPAR up 11.0%.
- Gaylord Palms revenue declined 2.8%, primarily due to lower banquet revenue and lower attrition and cancellation fee collections.
- Gaylord Opryland revenue declined 0.9%; a room renovation placed approximately 18,250 room nights out of service. The renovation was expected to be completed in September 2017.
- Entertainment operating income increased to $3.2 million from $1.0 million, reflecting higher shows, attendance, ancillary activity and benefits from the 2016 Wildhorse Saloon renovation.
- Operating expenses increased 2.8%, less than the 5.6% revenue increase, producing operating-margin expansion. Property taxes increased 20.5% in the hospitality segment due primarily to anticipated higher property valuations from reappraisals.
- The 2017 period included $0.2 million of preopening costs, while the 2016 period had none. The company recorded a $0.6 million tax provision versus an $0.9 million tax benefit in the prior-year quarter.
Guidance, outlook, risks and unusual items
- Management expected 2017 capital expenditures of approximately $200 million to $230 million, including maintenance capital, Gaylord Texan expansion, Gaylord Opryland room renovations and commencement of the proposed waterpark.
- The company announced a proposed approximately $90 million luxury indoor/outdoor waterpark adjacent to Gaylord Opryland, targeted to open in 2018 and expected to be funded with cash and revolving-credit borrowings.
- Management planned to continue quarterly dividends of $0.80 per share in July 2017, October 2017 and January 2018, subject to board approval. The first-quarter dividend was paid on April 14, 2017.
- Management intended to refinance the $400 million term loan B, extend the revolving-credit facility and add a $200 million term loan A. The proposed transactions were subject to customary conditions and were not assured of completion.
- Gaylord Rockies is expected to open in late 2018. Ryman owns a 35% interest, has invested approximately $86.5 million, and provided construction-loan and mezzanine-debt guarantees. No liability had been recorded for these guarantees at March 31, 2017.
- Ryman expects to rely on Marriott to manage hotel operations and generate occupancy and revenue. Key risks include economic conditions, group and convention demand, geographic concentration, interest-rate increases, refinancing availability, REIT qualification, dividend funding and execution of development projects.
- A 100-basis-point increase in LIBOR would have increased annual interest expense by approximately $4.2 million on revolving borrowings and $3.9 million on term-loan B borrowings, based on balances outstanding at March 31, 2017.
- Ordinary-course litigation was deemed immaterial by management. The filing reported no material changes to the risk factors previously disclosed in the 2016 Form 10-K.
Most important facts for an investor to verify
- Whether the proposed 2017 debt refinancing was completed and how it affected interest rates, maturities, leverage and revolving-credit availability.
- Actual 2017 capital spending versus the $200 million to $230 million plan and the related effect on cash flow and borrowing.
- Progress, cost and opening timing for the Gaylord Opryland waterpark, Gaylord Rockies and other expansion projects.
- Whether the strong group-booking trend and improved Gaylord National and Gaylord Texan results continued after the favorable first-quarter comparisons.
- The financial exposure from Gaylord Rockies construction, completion, interest and mezzanine-debt guarantees, including any subsequently recorded liability.
- Dividend sustainability relative to adjusted funds from operations, maintenance capital expenditures and REIT taxable income.
- Exposure to variable interest rates and the company’s ability to refinance debt maturing in 2021 and thereafter.