Ryman Hospitality Properties, Inc. — 2019 Form 10-K Summary
Business context and reporting period
Ryman Hospitality Properties, Inc. is a self-advised REIT focused on group-oriented destination hotels and entertainment assets. The filing covers the fiscal year ended December 31, 2019; it is an annual filing rather than a standalone 2019 fourth-quarter filing. Hospitality generated approximately 89% of revenue and Entertainment 11%. Marriott manages the company’s principal hotels and several Nashville attractions.
The portfolio included four owned Gaylord Hotels resorts with 8,114 rooms, the 1,501-room Gaylord Rockies resort through a 62.1% joint venture interest, the Inn at Opryland, the AC Hotel, and entertainment assets including the Grand Ole Opry, Ryman Auditorium, WSM-AM and Ole Red.
Key financial metrics
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Total revenue | $1.605 billion | $1.275 billion | +25.8% |
| Operating income | $267.5 million | $214.3 million | +24.9% |
| Operating margin | 16.7% | 16.8% | Approximately flat |
| Net income | $128.3 million | $264.7 million | -51.5% |
| Net income available to common stockholders | $145.8 million | $264.7 million | -44.9% |
| Diluted earnings per share | $2.81 | $5.14 | -45.3% |
| Cash flow from operating activities | $354.7 million | $321.9 million | +10.2% |
| Capital expenditures | $152.5 million | $188.2 million | -$35.7 million |
| Total debt | $2.560 billion | $2.442 billion | +$118.1 million |
| Unrestricted cash | $362.4 million | $103.4 million | +$259.0 million |
| Revolver availability | $699.1 million | Not clearly provided in the filing text | Not comparable |
Operating income benefited from higher hotel and entertainment revenue, but earnings declined because 2018 included a $131.4 million gain from remeasuring the pre-existing Gaylord Rockies investment. Interest expense increased by $56.7 million to $131.6 million, principally because Gaylord Rockies debt was consolidated beginning in 2019. The 2019 net margin available to common stockholders was approximately 9.1%, compared with approximately 20.8% in 2018.
Hospitality revenue rose 26.0% to $1.421 billion and Hospitality operating income rose 6.2% to $263.2 million. Entertainment revenue increased 24.4% to $183.1 million and Entertainment operating income increased 63.8% to $45.4 million. Consolidated occupancy was 75.8%, ADR was $199.26, RevPAR was $151.09 and Total RevPAR was $385.20. Net definite group room nights booked declined 10.1% to 2.216 million, although management reported the highest room-night inventory on the books in company history.
Dividends declared increased to $3.60 per share from $3.40 per share. Cash dividends paid were $183.3 million. Total assets were $4.088 billion and stockholders’ equity was $644.7 million at year-end.
Material changes versus the prior comparable period
- Gaylord Rockies operated for a full year and was consolidated beginning January 1, 2019; it contributed $226.6 million of revenue and $235.6 million of operating expenses, including significant depreciation and amortization.
- Gaylord Rockies ownership increased from 61.2% at December 31, 2018 to 62.1% on July 31, 2019.
- SoundWaves at Gaylord Opryland opened its outdoor facilities in 2019 after the indoor facilities opened in December 2018.
- Entertainment results benefited from Ole Red Gatlinburg, a full year of Ole Red Nashville operations, and higher attendance and retail revenue at the Grand Ole Opry and Ryman Auditorium. Opry City Stage was permanently closed in 2018.
- The company refinanced its debt, including issuing $700 million of 4.75% senior notes due 2027, extending the revolver maturity to 2024, increasing Term Loan A to $300 million with maturity in 2025, and refinancing Gaylord Rockies with an $800 million term loan due 2023, subject to extension options.
- The company completed a public offering of approximately 3.5 million shares for net proceeds of approximately $283 million.
- The company adopted ASC 842 leases in 2019, recording approximately $100.9 million of operating lease assets and liabilities at adoption, before considering the prior straight-line lease liability.
Guidance, outlook, commentary, risks and unusual items
Management planned a 2020 dividend of $3.80 per share, subject to board approval. Expected 2020 capital expenditures were approximately $260 million to $290 million, including Gaylord Palms and Gaylord Rockies expansions and Gaylord National renovations. The company also expected to spend $275 million at closing for the proposed Block 21 acquisition in Austin, Texas, including assumed mortgage debt and the earnest money deposit.
Block 21 was under agreement for $275 million, including approximately $141 million of assumed mortgage debt, with closing expected in late first or early second quarter 2020 subject to customary conditions. The transaction involved a nonrefundable $15 million deposit and required lender and Marriott-related consents.
Gaylord Palms was undergoing a $158 million expansion expected to add 303 rooms and 90,000 square feet of meeting space, with completion expected in summer 2021. The company and its partner also announced an $80 million, 317-room Gaylord Rockies expansion expected to be completed in early 2022. Circle, a 50% entertainment joint venture, launched its network on January 1, 2020; the company could be required to contribute up to an additional $11 million through December 31, 2021.
- Leverage and refinancing risk are significant. Total debt was approximately $2.6 billion, including approximately $0.8 billion associated with Gaylord Rockies. Contractual debt obligations totaled approximately $2.586 billion, with approximately $1.205 billion scheduled in 2023 and approximately $1.0 billion thereafter.
- Approximately $1.5 billion of variable-rate debt was indexed to LIBOR at year-end 2019. The company disclosed risks from LIBOR discontinuation and future benchmark replacement.
- Debt agreements impose leverage, fixed-charge coverage and debt-service coverage tests, as well as restrictions on dividends, additional debt, investments, asset sales and acquisitions. The company reported compliance with all debt covenants at December 31, 2019.
- The business is concentrated in group meetings and geographically concentrated markets, making results sensitive to economic downturns, convention demand, competition, travel disruptions, labor costs, weather, natural disasters, terrorism, pandemics and other events.
- Marriott manages substantially all hotel operations, creating dependence on one third-party manager and exposure to management fees, performance, brand and contract restrictions.
- The company’s REIT status requires compliance with complex income, asset, ownership and distribution tests. Failure to qualify could result in corporate-level taxation and reduced distributions.
- The company holds Gaylord National bonds with a $110.1 million carrying value; their valuation depends on long-term assumptions regarding occupancy, ADR, capitalization rates, discount rates and Washington-area economic conditions.
- Legal proceedings were described as ordinary-course matters, and management believed they were adequately insured and would not materially affect the financial statements.
Most important facts for an investor to verify
- Reconcile reported revenue and operating growth with the effect of consolidating Gaylord Rockies and determine the underlying same-store performance.
- Review debt maturities, secured collateral, variable-rate exposure, interest-rate swaps, covenant headroom and the 2023 maturity concentration.
- Assess whether projected 2020 cash flow can fund the planned $260 million to $290 million of capital expenditures, $3.80-per-share dividend and Block 21 funding requirements.
- Confirm the status, financing and integration prospects of the Block 21 acquisition and the consent requirements involving its lender and Marriott.
- Evaluate the performance and remaining capital requirements of Gaylord Rockies, Gaylord Palms, SoundWaves, Circle and the planned expansions.
- Review the sustainability of group bookings, occupancy, ADR, RevPAR and cancellation or attrition fee collections, particularly given the 10.1% decline in net definite group room nights booked.
- Examine REIT qualification, taxable income, dividend coverage and the tax characterization of distributions, including the 2019 return-of-capital component.
- Assess valuation sensitivity for the Gaylord National bonds and other Level 3 estimates, as well as the impact of pension, lease and tax assumptions.