Ryman Hospitality Properties, Inc. quarterly report, Q2 FY2020

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

Business context and reporting period

Ryman Hospitality Properties, Inc. is a REIT focused on group-oriented destination hotels and entertainment assets. Its portfolio includes five Gaylord Hotels properties, other Marriott-managed hotels, the 62.1%-owned Gaylord Rockies joint venture, and entertainment assets including the Grand Ole Opry, Ryman Auditorium, Ole Red and WSM-AM. This unaudited filing covers the quarter and six months ended June 30, 2020, compared with the same periods in 2019.

The results were severely affected by COVID-19. Gaylord Hotels operations were suspended in late March; Gaylord Texan reopened June 8, and Gaylord Opryland, Gaylord Palms and Gaylord Rockies reopened June 25. Gaylord National remained closed at quarter-end. Most entertainment assets were also temporarily closed, while the Grand Ole Opry and Ryman Auditorium remained closed for public performances.

Financial results and key metrics

Metric	Three months ended June 30, 2020	Three months ended June 30, 2019	Six months ended June 30, 2020	Six months ended June 30, 2019
Total revenue	$14.7 million	$407.7 million	$327.7 million	$778.5 million
Operating income (loss)	$(140.7) million	$85.3 million	$(136.0) million	$139.3 million
Net income (loss)	$(187.7) million	$46.3 million	$(238.4) million	$69.0 million
Net income (loss) available to common stockholders	$(173.5) million	$49.4 million	$(220.0) million	$78.8 million
Diluted EPS	$(3.16)	$0.95	$(4.00)	$1.52
Adjusted EBITDA_re, excluding noncontrolling interest	$(63.1) million	$135.8 million	$(3.9) million	$245.0 million
Adjusted FFO available to common stockholders	$(90.7) million	$104.3 million	$(58.3) million	$182.1 million

Second-quarter revenue fell 96.4% year over year, while six-month revenue declined 57.9%. Hospitality revenue declined 97.1% in the quarter and 57.4% for the six-month period; Entertainment revenue declined 91.4% and 62.2%, respectively.

Second-quarter Hospitality occupancy was 1.7%, compared with 78.0% in 2019; six-month occupancy was 29.4%, compared with 75.2%.
Second-quarter Hospitality RevPAR was $3.05, down 98.1%; six-month RevPAR was $59.20, down 60.9%.
Net definite group room nights booked were negative 206,518 in the quarter and negative 622,272 for the six months, reflecting substantial cancellations.
COVID-19-related operating costs were approximately $10.9 million in the quarter and $25.0 million for the six months, net of $1.8 million in CARES Act payroll tax credits.
The company recorded a $19.1 million second-quarter and $25.0 million six-month credit loss on Gaylord National-related held-to-maturity bonds. The notes receivable carrying value declined to $82.5 million from $110.1 million at year-end 2019.
Other losses included the forfeiture of a $15.0 million nonrefundable deposit after termination of the proposed Block 21 acquisition.

Cash flow, liquidity, debt and capital allocation

Operating cash flow was $(110.8) million for the six months ended June 30, 2020, compared with $138.6 million provided in 2019.
Investing cash flow was $(88.2) million, including $83.1 million of property and equipment expenditures.
Financing cash flow was $(84.1) million, including $102.3 million of dividends paid and $25.0 million of revolver borrowings.
Cash, cash equivalents and restricted cash totaled $137.3 million at June 30, including $82.4 million of unrestricted cash, versus $420.4 million at December 31, 2019.
Total debt and finance lease obligations were $2.576 billion, compared with $2.560 billion at year-end 2019. Major obligations included the $700 million revolver, $300 million Term Loan A, $500 million Term Loan B, $1.1 billion of senior notes and the $800 million Gaylord Rockies term loan.
The amended credit facility provided $674.1 million of revolver availability at June 30, 2020, subject to applicable conditions, and required unrestricted liquidity of at least $100 million.
Financial covenants were waived through March 31, 2021, with additional restrictions on borrowing, investments, dividends, repurchases and capital expenditures. The company reported no debt covenant defaults at quarter-end.
The regular quarterly dividend was suspended after payment of the $0.95-per-share first-quarter dividend. The credit agreement permits dividends necessary to maintain REIT status and permits up to $0.01 per share per quarter, subject to board approval.
Management expects $50 million to $65 million of 2020 capital expenditures and estimated third-quarter monthly cash needs of approximately $20 million to $30 million, including Gaylord Rockies operating costs and debt service.

Material changes versus the prior comparable period

COVID-19 closures caused an unprecedented collapse in hotel occupancy, group bookings, room revenue, food and beverage revenue and entertainment activity.
Hospitality operating income shifted from $79.1 million of profit to a $100.1 million loss in the second quarter; Entertainment shifted from $14.7 million of profit to a $12.5 million loss.
The company’s total stockholders’ equity declined to $393.7 million from $644.7 million at December 31, 2019, while accumulated deficit increased to $711.8 million.
The company adopted the expected-credit-loss standard, recording a $5.3 million beginning-retained-earnings adjustment and additional credit loss reserves during 2020.
Substantially all 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 summer 2021.
The proposed $275 million Block 21 acquisition was terminated, resulting in the loss of the $15.0 million deposit.
The company amended both its corporate credit facility and the Gaylord Rockies loan to obtain covenant relief and greater operating flexibility.

Guidance, outlook, commentary and risks

Management stated that its short-term priorities are to safely reopen assets, rebook cancelled hotel business, contain costs and preserve liquidity. It did not provide a full-year revenue or earnings forecast. Management believes available cash and revolver capacity will fund short-term commitments until operations recover to pre-pandemic levels, but this conclusion depends on continued access to the credit facility and the pace of reopening.

Approximately 741,000 room nights were cancelled or experienced attrition in the quarter and approximately 1.42 million during the six months, representing estimated revenue of $149 million and $292 million, respectively.
Management emphasized that it is prioritizing customer relationships and rebooking over aggressively collecting cancellation and attrition fees.
Key risks include a prolonged or renewed pandemic, further property closures, restrictions on group gatherings, weak consumer and group demand, higher reopening costs, reduced margins, reliance on Marriott, and inability to refinance or amend debt agreements.
The temporary covenant waiver expires March 31, 2021, unless terminated earlier. Management expected to seek further amendments or mitigating actions if it cannot satisfy covenants afterward.
Gaylord Rockies debt is generally non-recourse but is subject to limited repayment and carry guarantees, customary carve-outs and potential completion obligations if an expansion proceeds.
The company has substantial contractual obligations, including $2.609 billion of long-term debt commitments, $601.6 million of operating lease commitments and $51.0 million of construction commitments listed in the filing.

Most important facts for investors to verify

Actual reopening status, occupancy, group bookings and cash burn after June 30, 2020, particularly at Gaylord National and the entertainment venues.
Compliance with the $100 million minimum unrestricted liquidity requirement and the amount of revolver capacity remaining.
Progress toward restoring positive operating cash flow and meeting debt service obligations before the covenant waiver expires.
Whether the suspended dividend remains limited to the minimum amount permitted for REIT status.
Potential additional impairment or credit losses on the Gaylord National bond receivables and other assets.
Timing, cost and funding of the Gaylord Palms expansion and any future Gaylord Rockies expansion.
Actual recovery in group travel demand, cancellation and attrition collections, and rebooking activity.