Ryman Hospitality Properties, Inc. — Form 10-Q Summary
Business Context and Reporting Period
Unaudited results cover the three months ended March 31, 2014, compared with the three months ended March 31, 2013. Ryman operates as a REIT through an operating partnership and primarily owns four group-oriented destination resorts, the Inn at Opryland, and Opry and entertainment assets. Marriott manages the hotel properties.
Financial Results and Key Metrics
| Metric | Q1 2014 | Q1 2013 | Change |
|---|---|---|---|
| Total revenue | $246.5 million | $222.1 million | 11.0% |
| Operating income (loss) | $32.8 million | $(2.2) million | Improved |
| Operating margin | 13.3% | (1.0)% | Improved |
| Net income | $20.7 million | $53.8 million | (61.6)% |
| Fully diluted EPS | $0.32 | $0.81 | (60.5)% |
| Operating cash flow | $29.8 million | $(46.9) million | Improved |
| Capital expenditures | $17.5 million | $10.1 million | Increased |
- Hospitality revenue increased 10.8% to $232.2 million, while Opry and Attractions revenue increased 13.7% to $14.2 million.
- Hospitality operating income increased 71.0% to $40.0 million. Hospitality occupancy rose to 70.4% from 67.5%, ADR increased 2.1% to $177.44, RevPAR increased 6.5% to $124.97, and Total RevPAR increased 10.8% to $318.60.
- Net income declined despite improved operations because Q1 2013 included a $66.3 million income-tax benefit, primarily from the REIT conversion and tax-position resolutions. The Q1 2014 tax benefit was $0.5 million.
- Interest expense increased to $15.7 million from $13.3 million, primarily reflecting the 5% senior notes issued in April 2013.
- At March 31, 2014, unrestricted cash was $55.4 million, restricted cash was $10.7 million, total assets were $2.41 billion, and stockholders’ equity was $749.1 million.
- Total debt and capital lease obligations were $1.154 billion, including $506.0 million under the credit facility, $297.2 million carrying value of convertible notes, and $350.0 million of 5% senior notes.
- The company reported $488.1 million of availability under its $1 billion credit facility and compliance with all debt covenants.
Material Changes Versus the Prior Comparable Period
- Revenue growth was driven by increased premium corporate and association group business, higher outside-the-room spending, and stronger banquet revenue.
- Hotel occupancy increased by 2.9 percentage points, while in-the-year, for-the-year cancellations decreased 75.5%.
- Net definite group room nights booked declined 45.1% to 250,000, partly because Q1 2013 included a record booking comparison.
- Operating expenses declined 4.8%, primarily because the $15.0 million of REIT conversion costs incurred in Q1 2013 did not recur and depreciation and amortization declined by $4.0 million. These benefits were partly offset by a $7.3 million increase in hotel operating expenses.
- Opry and Attractions moved from a $0.1 million operating loss to $0.6 million of operating income.
- Cash flow from continuing operations improved from $46.9 million used in Q1 2013 to $30.1 million provided in Q1 2014, primarily due to improved earnings and less adverse working-capital activity.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expects 2014 capital expenditures of approximately $46 million to $48 million, including maintenance capital and the Gaylord Texan rooms renovation.
- The Gaylord Texan renovation removed approximately 10,600 room nights from service during the quarter and was expected to be completed in the third quarter of 2014.
- The company planned quarterly dividends of $0.55 per share for July 2014, October 2014, and January 2015, subject to board approval. The April 2014 dividend totaled approximately $27.9 million.
- In April 2014, the company repurchased and cancelled $56.3 million principal amount of convertible notes for $120.2 million, funded with cash and credit-facility borrowings. It expected a second-quarter 2014 loss on debt extinguishment of approximately $1.6 million. After the transaction and a $15.3 million conversion expected to settle in June 2014, $232.2 million principal amount remained outstanding.
- The convertible notes were convertible through September 29, 2014 under the indenture. Management stated that available cash and credit capacity should address potential conversion-related liquidity needs.
- The company faces hospitality-sector risks, including economic conditions, concentration in group meetings and a limited geographic footprint, reliance on Marriott’s management performance, cancellations and attrition, and the ability to maintain cash flow sufficient to fund debt service and dividends.
- The Pension Benefit Guaranty Corporation disputed the company’s position regarding whether the Marriott management transition constituted a cessation of pension-plan operations. Possible outcomes include litigation, prefunding or security requirements, settlement, or legislative relief; the company did not believe a material obligation was currently required.
- A 100-basis-point increase in LIBOR would increase annual interest expense on credit-facility borrowings by approximately $5.1 million, based on the March 31, 2014 balance.
Important Facts for Investors to Verify
- Whether improved occupancy, RevPAR, Total RevPAR, margins, and group demand continue after the strong Q1 comparison.
- The pace and cost of the Gaylord Texan renovation and its effect on available room nights and 2014 capital spending.
- Remaining convertible-note obligations, cash versus stock settlement decisions, related warrant dilution, and refinancing requirements.
- Actual cash generation relative to dividends, capital expenditures, interest expense, and scheduled or potential debt repayments.
- The resolution and potential funding impact of the PBGC pension matter.
- Marriott’s ability to sustain booking growth, control operating costs, and realize the expected benefits of the management transition and REIT structure.